Texas electricity grid operator ERCOT on December 1 released perhaps the most frightening outlook for state residents in its 12-year history–and the most bullish indicator yet for state power producers such as NRG Energy NRG , Exelon EXC , Calpine CPN , and privately held Luminant. In its semiannual reliability report, ERCOT forecast reserve margins falling to 3.55% as soon as 2015, suggesting sky-high power prices and likely blackouts.
With power prices likely to reach ERCOT’s $3,000/MWh ceiling more often, profits could turn up significantly for incumbent producers. ERCOT average power prices typically range between $40/MWh and $80/MWh. Alternatively, fixing the dire outlook with a capacity market like in the Mid-Atlantic and Northeast would add a fixed profit stream for Texas-based power producers. Not surprisingly, rolling forward power prices for July and August jumped more than 6% on December 1, the biggest move this year, excluding the one-off spikes during the August heat wave.
Find the full article at the Toronto Star.
Is a policy analyst consultant for TCAP, a coalition of political subdivisions in Texas that purchase electricity in the deregulated market for their own governmental use. Because energy costs are typically a significant budget item to our members, TCAP is consistently looking for ways to save our members money, through cost-saving contracts, energy efficiency or demand response programs.