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Will the Texas Market Succeed, Where so Many Others Have Now Failed?

Will the Texas Market Succeed, Where so Many Others Have Now Failed?. Jay Zarnikau Frontier Associates LLC and The University of Texas Austin, Texas Parviz Adib Public Utility Commission of Texas September 2007. The Texas (ERCOT) Market.

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Will the Texas Market Succeed, Where so Many Others Have Now Failed?

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  1. Will the Texas Market Succeed, Where so Many Others Have Now Failed? Jay Zarnikau Frontier Associates LLC and The University of Texas Austin, Texas Parviz Adib Public Utility Commission of Texas September 2007

  2. The Texas (ERCOT) Market • Wholesale competition gradually introduced over a number of decades. • Retail competition introduced through legislation in 1999. Full customer choice permitted in January 2002. • Price-to-Beat (PTB) regulated transitional default pricing for customers who do not exercise their right to choice expired in January 2007.

  3. Some Key Metrics • Retail price trends • Retail customer switching and competition in the retail segment • Degree of competition in the wholesale market • Demand response

  4. The Controversy over Retail Prices

  5. The Controversy over Retail Prices

  6. The Controversy over Retail Prices

  7. Restructuring has increased the sensitivity of retail electricity prices to the price of natural gas (the marginal fuel)

  8. Customer Switching Activity

  9. Retail Competition • Over 100 REPs are serving some loads (including some industrial energy consumers that serve as their own REP). • Currently, there are 15 to 18 REPs serving residential customers in the larger service areas opened to competition. • Three REPs have more than 500,000 customers. • Eight REPs have more than 100,000 customers. • Fifteen REPs have more than 50,000 customers. • Twenty five REPs have more than 20,000 customers. • Fifty REPs have more than 2,700 customers.

  10. Wholesale Competition: New Generation Entry

  11. Generation Market Share in ERCOT(As of December 2006)

  12. Dwindling Reserve Margins • In 2006, ERCOT published its official CDR (Capacity, Demand and Reserves table) with 3 variables: • “High” Reserve Margin – all Mothballed units returned to service • “Low” Reserve Margin – no Mothballed units returned to service • Reserve Margin w/ Publicly Announced Thermal Units

  13. Restructuring Affects Demand Response

  14. Very Limited Demand Response

  15. The Challenges Ahead • Still struggling with resource adequacy (like most restructured markets) • The market will transition to a nodal structure from its present zonal structure • Can we achieve greater demand response? • Can we reduce supplier concentration? • Retail prices: Can we resist the temptation to interfere with the market?

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