I agree that wholesale electricity is not a product that should be easily available (or, at least, should not be marketable) to individual consumers. However, I do not see the systemic risk. Griddy could go bankrupt because of this. However, Griddy's debtors in this are the generators that were able to continue operation. These generators did not face a significant increase in cost to supply electricity (or, at least, any such increase was not the driving force behind the increase in electrical cost; which was driven by other generators going offline). While I am sure that these generators would prefer to have their windfall they are not reliant on it. In fact, they should know that this windfall comes with a significant counterparty risk, and will likely avoid depending on it until they see how that risk plays out.
Good point, but part of the ‘reason’ for the price to go so high is to incentivise the generation of electricity as much as possible in such a time of need. If consumers are allowed to participate in the wholesale market to such a degree that that significantly raise the counterparty risk once the price goes above some level, that incentive is weakened. The last thing you want in the current situation is for the remaining generators to shut off because they don’t think anyone will be able to pay.
Bankruptcy does not simply eliminate all debt. It is likely that the money available to the generators at the end of this would be somewhere between what they would have gotten at "normal" market rates, and what they are owed given the actual spot price.
The story here would be different if the driving force behind the increase in electricity cost was an increase in the cost of inputs (such as the cost of gas). This did happen a bit at the margins (spinning up expensive to operate generators), but for the most part, generators went offline not because of the expense of staying online; but rather because they were incapable of operating. The decisions about electricity supply during this emergency were not made during the emergency; but during the decade prior, when the equitment was not outfitted to prepare for such an emergency.
In theory, allowing high spot prices provides a free market incentive to make such preparations. However, in practice, the free market is simply not good at dealing with the long tail events like this.
Left to its own devices, it prefers the safe options of sitting out the potential long-tail event over the risky option of investing in preparing for a long tail event that may never come.
This is why the mechanism for preparing for this type of event, should be regulation.
