Texas' electric grid operator hopes new rules taking effect Monday will give it a better handle on wholesale power spikes that played a role in the recent shutdown of several electric retailers.
The board for the Electric Reliability Council of Texas on Friday approved a revision to give it greater flexibility in handling some power line congestion, which occurs when generated power exceeds transmission capacity in a certain area.
Congestion was blamed at least partly for several recent price spikes in the so-called balancing market, in which ERCOT buys electricity at 15-minute intervals to keep supply and demand in balance. The change approved Friday relaxes some restrictions on where ERCOT can buy power and the price it can pay, which it hopes will allow more precise control of congestion.
"We were using a tool to fix certain problems that was not particularly effective," said Dan Jones, the independent market monitor for ERCOT. "There will still be problems with congestion, but we can now handle it more effectively."
The balancing market wholesale price typically is around $100 per megawatt-hour, but price spikes into the thousands are expected during the hottest summer days, when Texans crank up their air conditioners and pool pumps.
Prices have surged to more than $4,000 in parts of the state for several hours at a time in the past two months, including shortly after midnight on one occasion, when demand typically is low, and at other times when temperatures were nowhere near summer highs.
Those high spot-market prices exposed a number of small electric retailers to much higher operating costs.
ERCOT requires those companies to post collateral equal to three times the value of their wholesale power purchases. The price spikes caused the companies' collateral requirements to shoot up. When they couldn't come up with the extra funds they went into default and ERCOT moved their customers to other providers.
Nearly 30,000 customers of three companies — National Power, PreBuy Electric and E-tricity — were transferred to providers of last resort, retailers designated to take over customer accounts from companies that go out of business.
A fourth company, Riverway Power, filed for bankruptcy protection this week and continues to serve its 6,500 customers, but asked a judge to let it terminate contracts with about 5,000 customers on fixed-rate plans.
One cause appears to be congestion at a few key points in the grid, including a power line near the Sandow power plant in Milam County and another smaller line north of Bryan.
The problems were intensified by unplanned power plant outages in certain areas. Jones and ERCOT officials said they could not disclose which plants were experiencing problems.
The wholesale power price spikes don't show up directly on customer bills, which have climbed steeply this year anyway due to the increase in the price of natural gas, a key power plant fuel in Texas.
But Jones said market bids for power purchases in ERCOT have increased in part because traders are expecting some price spikes to continue because of congestion.
"That's how customers on month-to-month plans might start to be affected by this," Jones said.
The board for the Electric Reliability Council of Texas on Friday approved a revision to give it greater flexibility in handling some power line congestion, which occurs when generated power exceeds transmission capacity in a certain area.
Congestion was blamed at least partly for several recent price spikes in the so-called balancing market, in which ERCOT buys electricity at 15-minute intervals to keep supply and demand in balance. The change approved Friday relaxes some restrictions on where ERCOT can buy power and the price it can pay, which it hopes will allow more precise control of congestion.
"We were using a tool to fix certain problems that was not particularly effective," said Dan Jones, the independent market monitor for ERCOT. "There will still be problems with congestion, but we can now handle it more effectively."
The balancing market wholesale price typically is around $100 per megawatt-hour, but price spikes into the thousands are expected during the hottest summer days, when Texans crank up their air conditioners and pool pumps.
Prices have surged to more than $4,000 in parts of the state for several hours at a time in the past two months, including shortly after midnight on one occasion, when demand typically is low, and at other times when temperatures were nowhere near summer highs.
Those high spot-market prices exposed a number of small electric retailers to much higher operating costs.
ERCOT requires those companies to post collateral equal to three times the value of their wholesale power purchases. The price spikes caused the companies' collateral requirements to shoot up. When they couldn't come up with the extra funds they went into default and ERCOT moved their customers to other providers.
Nearly 30,000 customers of three companies — National Power, PreBuy Electric and E-tricity — were transferred to providers of last resort, retailers designated to take over customer accounts from companies that go out of business.
A fourth company, Riverway Power, filed for bankruptcy protection this week and continues to serve its 6,500 customers, but asked a judge to let it terminate contracts with about 5,000 customers on fixed-rate plans.
One cause appears to be congestion at a few key points in the grid, including a power line near the Sandow power plant in Milam County and another smaller line north of Bryan.
The problems were intensified by unplanned power plant outages in certain areas. Jones and ERCOT officials said they could not disclose which plants were experiencing problems.
The wholesale power price spikes don't show up directly on customer bills, which have climbed steeply this year anyway due to the increase in the price of natural gas, a key power plant fuel in Texas.
But Jones said market bids for power purchases in ERCOT have increased in part because traders are expecting some price spikes to continue because of congestion.
"That's how customers on month-to-month plans might start to be affected by this," Jones said.
Source: Houston Chronicle |By TOM FOWLER
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