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ERCOT Report Finds That Alternative A/S Cost Allocation Methods Would Not Reduce Consumer Costs
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ERCOT formally filed at the Texas PUC a report on ERCOT's ancillary and reliability services cost allocation study, which finds that, "After a thorough evaluation of each of the three alternative allocation methods, the study found that none of the three alternative methods would be expected to result in a net savings for electricity consumers in the ERCOT Region compared to the base case."
Under the current market design in the ERCOT Region, the costs of Ancillary Services and reliability services are allocated primarily to load on a Load Ratio Share basis
Per PUC direction, ERCOT studied three allocation method alternatives to evaluate in comparison to the current allocation methodology
• Method A: In accordance with PURA § 39.1593(b)(1), costs of Ancillary Services and reliability services are allocated among dispatchable generation, non-dispatchable generation, and load based on the risk drivers for each service during high reliability-risk hours. Settlement of the allocated costs occurs on a semi-annual basis.
• Method B: Costs of each Ancillary Service and reliability service are allocated among dispatchable generation, non-dispatchable generation, and load based on the risk drivers for each service during all hours, with the allocation reflecting hourly operational risk drivers. Settlement of the allocated costs occurs on a daily basis.
• Method C: Costs of each Ancillary Service and reliability service are charged first to Qualified Scheduling Entities (QSEs) that are short on capacity proportional to each QSE’s share of the total capacity shortfall for each interval, with any residual amount allocated to all QSEs by Load Ratio Share. Settlement of the allocated costs occurs on a daily basis.
Based on the study, ERCOT's report stated, "All three methods reallocate costs among Market Participants, but reallocation by itself does not lower the quantity of AS and RS procured or reduce the price paid."
"Any consumer savings would be indirect; realizing substantial cost savings for these services would require changes that reduce the system’s underlying need for AS and RS," ERCOT's report said
"Methods A and B create only limited incentives to reduce the need for these services; Method C creates a stronger incentive for Market Participants to avoid capacity-short positions through bilateral trading; this changes who bears the cost but does not reduce the overall need for AS and RS. However, because the system was capacity short in only approximately 0.3% of intervals in 2024-2025, the cost still largely falls on load and accordingly the outcome closely resembles the status quo, but with greater implementation costs," ERCOT's report stated
ERCOT's report is here
Project 58555
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September 1, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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