posted on Wednesday, August 23, 2006 5:38 PM
by
Tracy Davis
PUCT Approves Increased Bid Cap, Disclosure Requirements for ERCOT
In order to encourage the development of new generating capacity and to make the Electric Reliability Council of Texas's (ERCOT) operations more transparent, on August 10 the Public Utility Commission of Texas (PUCT) unanimously approved a wide-ranging PUCT staff proposal to address the projected decline of generation reserve margins in ERCOT. To encourage investment in new generating facilities, the PUCT plan proposes to gradually increase ERCOT's energy bid cap to $3000/MWh (up from $1000/MWh) by 2009, after ERCOT implements a nodal pricing market. In addition, during the development of the proposal, PUCT staff considered establishing formal capacity markets, but rejected that approach in favor of an energy-only market, after determining that installed capacity markets do not offer market-based incentives for investment and would impose an unwanted layer of regulation. The PUCT also cited the high costs of capacity markets to consumers, a fight that is currently being played out in other regions of the country [See, e.g., Capacity Market Redesign: New England Settlement Approved, PJM Proceeding Continues].
Related to the increased bid cap, the PUCT plan also increases and expedites the amount of market information that is publicly disclosed. In approving the plan, the PUCT expressly linked increasing publicly available information with the increase in the bid cap. The PUCT expects greater transparency in information flows will help police market power abuses that may accompany the increased bid cap.
The PUCT plan also adds several other features to the ERCOT market, including a definition of the term "market power" consistent with the definition commonly used by courts, and a requirement for more frequent reports from ERCOT on supply and demand issues.