The 2010 State of the Market Report contains comparative data on wholesale market prices for each of ERCOT”s four zones, and ERCOT as a whole. As this table demonstrates, prices increased in all zones from 2009 to 2010. Note the extraordinary prices of 2008 — they resulted from very high natural gas prices and congestion on the grid.
The Independent Market Monitor — a position created by the Texas Legislature in 2005 to act as a watchdog of the state”s wholesale electricity market — recently issued its annual State of the Market Report for 2010. The report was unusual in that it addressed the final year of the “zonal” system, which ERCOT has used to manage the wholesale electricity market since the beginning of deregulation 10 years ago. In late 2010, however, ERCOT transitioned to a new “nodal” system (you can read about the transition here).
Predictably, the thick IMM report includes lots of charts and figures. The IMM also repeats the troubling assertion that wholesale energy prices are too low, despite finding an increase in average wholesale electricity prices. In 2009 the megawatt/hour price (on a load-weighted average basis) was $34.03. In 2010, it went to $39.04. The report attributes a 16 percent increase in natural gas prices for much of this increase.
The IMM argues that despite this jump, that wholesale energy prices should be even greater in order to support new investments in power plants. The IMM said only once in the last four years were prices sufficiently high for that purpose. That year was 2008, when the price of wholesale energy shot up nearly 37 percent partially as a consequence of insufficient management of transmission line congestion by ERCOT.
From a consumer perspective, one questions how the experience of that summer, in which wholesale energy prices reached in excess of $4,000 per MWh at times, can ever be viewed positively. Five retail electric companies went belly-up, thousands of Texans were dumped to high-cost default service, and complaints abounded about high cost electric bills.
You can read the IMM”s report here. A word of caution: it”s a bit technical. You can also read more about the IMM, the zonal and nodal systems, and the history of the state”s wholesale electricity market in The Story of ERCOT, released earlier this year by the Texas Coalition for Affordable Power. Here’s a link.
Is a policy analyst for TCAP, a coalition of cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.