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Flash: Texas Defers Action on Wholesale Price Caps to Harmonize with Other Potential Market Changes

By: Energy Choice Matters |

The Public Utility Commission of Texas this morning elected not to act, at this time, on a proposal for adoption that would raise the ERCOT high system-wide offer cap to $9,000/MWh effective June 1, 2015, as commissioners believed that any change in the offer cap should be made in concert with potential other wholesale market design changes to ensure resource adequacy.

A full report of the Commission’s discussion at today’s meeting will follow Monday.

In a memo in advance of today’s open meeting, Commissioner Kenneth Anderson noted:

“If, however, my colleagues decide to move toward a centralized forward capacity market (CFCM) construct, then we will need to reconsider the whole issue of the HCAP [high cap]. While I recognize and agree with those who would still like to see most resource revenue come from the energy market, and recognize that ‘over the long-run’ a certain equilibrium should occur that should smooth our consumer costs as demonstrated by Brattle, I fear that in the early years of a CFCM, Texas might very well get the worst of both worlds with very high capacity prices coupled with very high energy prices. I am particularly concerned that this could occur in 2015, 2016 and 2017 because of time that it will take to set the CFCM in place, which in turn is likely to create market uncertainty. Furthermore, the first CFCM auction is unlikely to be held much before late 2014 at the earliest. The result is that no additional new generation not already announced would likely be on-line before 2017. The resulting combination of very high capacity and energy prices would be a disaster Texas consumers and for the Texas economy!”

The PUCT is to hold a workshop/open meeting on October 25 to address various market design changes comprehensively.