Texas PUC Approves 50% Increase in Wholesale Price Cap

In a bid to spur the construction of new power plants and offset a power crunch, the regional grid operator has forecast, the Public Utility Commission (PUC) of Texas last week voted to raise the wholesale price cap for electricity prices on Aug. 1 by 50%, to $4,500/MWh from $3,000/MWh.

The move comes amid opposition from consumer groups that say the increase will set prices soaring in the power-strapped state. Proponents argued that the price cap is rarely reached; in 2011, when the state experienced a cold snap and record heat in summer and was forced to implement rolling blackouts, the price cap was reached for a total of 28 hours.

PUC Chair Donna Nelson and Commissioner Rolando Pablos voted to approve the increase while Commissioner Kenneth Anderson, Jr. abstained. The commission did not address whether electricity retailers could pass the increases in wholesale prices on to their customers, saying instead it would take that up on a case-by-case basis. The PUC is now expected to study whether to raise the wholesale cap to $9,000/MWh by 2015.

Regional grid operator the Electric Reliability Council of Texas (ERCOT) earlier this year said it expected its reserve margins to plunge to 9.8% as soon as 2014, to 6.9% in 2015, and to a negative margin by 2022—well below the grid operator’s 13.75% target for electric generation capacity that exceeds the forecast peak demand on the grid. A report released in June by the Brattle Group concluded that tripling peak wholesale prices to $9,000/MWh by 2015 would only raise the region’s reserve margin to 10% above peak demand.

Sources: POWERnews, PUC, ERCOT

—Sonal Patel, Senior Writer (@POWERmagazine.com)