The Public Utility Commission of Texas (PUCT) approved two proposals to raise system-wide energy price offer caps at an open meeting held on April 12, 2012. The proposals aim to ease growing generation resource adequacy concerns in the Electric Reliability Council of Texas (ERCOT) power market, which is one of the few major energy-only electric power markets that exist worldwide and represents about 85 percent of electric power usage in Texas.

The overarching goal of the PUCT in approving these two price cap hikes is to ensure adequate electric power supply in ERCOT as forecasts for reserve margins, or the difference between available generating capacity and expected peak system load, grow increasingly narrow. The target reserve margin for the ERCOT region is 13.75 percent. Projections from ERCOT representatives indicate that reserve margins for the remainder of 2012 may be tight but should exceed the target reserve, while reserve margins may dip below that target in 2014 (potentially around 7 percent) depending on various uncertainties, such as environmental regulations and gas prices.

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