So the median person signing up for that plan has to be ready to liquidate half their cash on an electric bill. If you’re below the median you’re even more screwed.
And I'm sure to all this you'll say "I made an informed choice and I should have that choice," but I think that's a highly debatable concept that depends a lot on the details – one of those critical details is the maximum rate.
But if we use the numbers above, that person is also saving $800 per year in a typical year. So even with the emergency liquidation, I'm not convinced they're worse off when we measure them across 5 or 10 years.
I can save a bunch of money on mortgage interest by buying a house in cash, too.
But of course that option isn’t realistic for the vast majority of people.
The piece of data I’m missing is how often a huge spike in costs like the one described happens. It’s unpredictable, it could happen any day for any reason.
Like I’ve said a couple of times, I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible. If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.
And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.
That’s another good analogy because everywhere else in our society, price gouging due to emergencies is illegal.
> But of course that option isn’t realistic for the vast majority of people.
Your own numbers had it as doable but unpleasant. Should I not use those?
> I’m doubtful that most people with these variable plans sincerely knew that a spike that high was even possible.
That's a problem but it's a separate issue from whether they're better off financially.
> If you bought a variable rate mortgage to save money you wouldn’t expect it to ever be adjusted to 200% APR.
That would be pretty surprising, yeah, but if it was only affecting the payment for one month then it could still be a better deal overall.
> And the truth of the matter is that a $2,000+ electric bill isn’t reflecting anything close to the actual cost of generating the electricity, just like paying $50 for a roll of toilet paper during the pandemic wouldn’t reflect the real cost of producing the item plus a reasonable profit margin.
That's not true at all. It's not gouging.
The underlying principle of the Texas grid is that power plants that are almost never used get 0 dollars for months or years on end, and then they make all their money in a short window. The reason wholesale prices are allowed to go that high is to encourage those power plants to exist, because otherwise those power plants would not be built. That huge price is paying for years of maintenance and deprecation.
i paid my $2,300.00 monthly electrical bill without complaint. (usual about $75)
the upside and downside were understood.