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Texas PUC Report: Pay-As-Bid, Other Wholesale Pricing Alternatives Would Increase Costs To Small Customers
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A report prepared for the Texas PUC concludes that various alternatives to a uniform clearing price (UCP) mechanism in ERCOT, including pay-as-bid (PAB), would increase costs to customers, including residential customers
Statute had directed the PUC to develop a report on alternative wholesale pricing mechanisms; specifically, (i) a pay-as-bid (PAB) mechanism in which some or all resources receive the price respectively offered, (ii) separated markets determined by dispatchability, with a UCP or a PAB pricing mechanism, or (iii) a combination of the two.
The report states, "Moving to a PAB mechanism, separate markets, or a hybrid of the two would result in customers facing higher costs, particularly residential and small commercial customers."
The report examined the following cases:
Case A: Current ERCOT market design, UCP;
Case B: UCP for non-subsidized resources, PAB for subsidized resources;
Case C: PAB for all resources;
Case D: Separate UCP markets for dispatchable and non-dispatchable resources; and
Case E: Separate PAB markets for dispatchable and non-dispatchable resources.
The report states that the estimated increases in annual wholesale market costs under the alternative scenarios range from +$0.4 billion (Case D) to +$10.4 billion (Case E).
The report concluded that the following increases in costs would occur under the alternatives:
Case B: +14%
Case C: +30%
Case D: +1%
Case E: +34%
The report further noted qualitative considerations, including the cost to switch pricing mechanisms and to update necessary systems, the complexity and time to implement the changes, and what the study said would be a reduction in market transparency under the alternatives
The report states, "The extensive qualitative and quantitative analyses presented in the report indicate that none of the alternative market designs proposed would meet the stated goal of reducing costs to residential and small commercial customers. In fact, the results demonstrate that each alternative would produce higher costs, and as such, the findings of this study suggest that ERCOT should retain its current market design. The behavioral changes resulting from switching to a PAB mechanism are likely to introduce several adverse effects such as higher market costs, reduced efficiency, and decreased transparency."
The report was prepared by consultants retained by ERCOT, and PUC Staff and ERCOT agree with the study’s findings
Market Manipulation Report
The PUC also posted an annual market manipulation report, covering the period November 1, 2024 through October 31, 2025
The report notes that the Independent Market Monitor reported to the Commission or Commission Staff no instances of potential market manipulation during the 12-month reporting period.
Per the report, the IMM did not report on any violations of statutory provisions, Commission rules, ERCOT Nodal Protocols, or Other Binding Documents concerning market manipulation during the 12-month reporting period.
The report states that there were no formal investigations into market manipulation that were opened as a result of reporting from the IMM during the 12-month period addressed by the report. The Commission also did not institute a formal investigation on its own motion.
Project 58847
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December 1, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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