ERCOT Highlights Competition’s Price and Innovation Benefits for Consumers

Average wholesale electricity prices in the Electric Reliability Council of Texas (ERCOT) have once again dropped, providing even more benefits for consumers coping with the economic downturn, according to ERCOT’s 2009 State of the Market Report. Prices fell 56 percent from 2008’s average price to $34.03 per megawatt-hour (MWh), the lowest price experienced by any U.S. electricity market.
 
A combination of factors contributed to this drop, but all are offshoots of a competitive electricity market. Natural gas, which accounts for 42 percent of energy produced, has decreased in cost over the past year. Competition enables consumers to take advantage of this price drop by shopping for lower-cost competitively priced electricity instead of being locked into one contract with a monopoly provider. At the same time, the Texas market has continued increasing the amount of clean energy alternatives. Texas leads the nation in installed wind power capacity and set a record in 2009 when wind briefly hit a peak of 20 percent of the entire state energy mix.
 
Competition’s benefits go far beyond price, however, and are creating new technological innovations in the Lone Star state. ERCOT is transitioning from a zonal congestion-management system to a nodal system which will increase the utilization of transmission resources, help further integrate clean energy like wind and solar, create more accurate indicators for where new generation is required, and reduce disparities between day-ahead and real-time energy prices.
 
Texas is widely considered to be one of the strongest electricity markets, and this report once again underscores how a well-structured market with effective oversight delivers economic and environmental benefits to consumers.

Joel Malina | August 9, 2010