For your first question: in the TX power market, power producing companies contribute to a fund which will cover for losses if any participant defaults.
Even with that little detail, the rest of your comment seems spot-on. These power producers did not have enough incentive to deal with big problems, because the short term profits mattered more than potential future losses. That’s explicitly at the philosophical core of the TX power market, which is opposed to mandates, and relied on desire for profits and pressure from peers (peers that don’t want to pay extra into that fund) to encourage good behavior.
It’s unclear if that fund will be sufficient to cover all the losses. May yet need a bailout, which is indeed socialization of the losses.
Even with that little detail, the rest of your comment seems spot-on. These power producers did not have enough incentive to deal with big problems, because the short term profits mattered more than potential future losses. That’s explicitly at the philosophical core of the TX power market, which is opposed to mandates, and relied on desire for profits and pressure from peers (peers that don’t want to pay extra into that fund) to encourage good behavior.
It’s unclear if that fund will be sufficient to cover all the losses. May yet need a bailout, which is indeed socialization of the losses.