Anderson: "Back of The Envelope" Calculation Shows $3.6 Billion in Costs When Applying PJM-Style Capacity Market to ERCOT July 30, 2012 Email This Story Copyright 2010-12 Energy Choice Matters
Imposing a PJM-style capacity market on ERCOT load (through their retail electric providers or LSE) would have resulted in annual capacity costs to load of $3.6 billion, using 2010 & 2011 capacity prices, Commissioner Kenneth Anderson of the Public Utility Commission of Texas said during a workshop Friday.
"A back of the envelope that I've been doing. If, for example, you imposed a PJM capacity market in ERCOT, if you averaged the 2010 and 2011 prices on a megawatt basis, you would have had, for an annual payment [from] load, an annual cost, north of $3.6 billion ... and that's before anybody pays for energy," Anderson said.
Anderson noted that in the only two instances in which ERCOT has previously had to involuntarily shed load in recent memory, the reserve margin was in excess of the levels currently being debated as a potential mandate that load would be required to meet.
Specifically, Anderson noted that in April 2006, ERCOT had a reserve margin of 16.4%, and in February 2011, ERCOT had a reserve margin between 15.9% and 17.5% (depending on which snapshot is used). Anderson also said that in 1989, at HL&P, there were rolling brownouts despite an HL&P reserve margin of 30%.
"A reserve margin, whether it's mandated or market-driven, [but] particularly if we mandate it ... doesn't guarantee you that you're going to avoid load shed. The two times we've had it [load shed], we've been in excess of any reserve margin that I think we'd go to under a mandate," Anderson said.
"This is an economic issue," Anderson continued. "We can get a 20% reserve margin, mandate it, pay for it, [and] it'd be billions and billions, and you still may not actually accomplish what you're trying to accomplish."