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Texas Generators, Large Users Seek Increase In ERCOT Offer Caps, Including Current $2,000/MWh Real-Time Cap, With Some DAM Cap Proposals At $9,000/MWh
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Various stakeholders, in comments in a Texas PUC quinquennial review of the system-wide offer cap in ERCOT, have recommended increases in both the real-time and day-ahead offer caps
The Texas Energy Buyers Alliance called for the high price cap (HCAP) to rise from the current $5,000 per MWh [DAM] to $7,000 per MWh in two years, and then to $9,000 per MWh two years after that
Separately, Texas Industrial Energy Consumers said that the HCAP should be increased to an amount closer to Value of Lost Load.
TIEC noted that the VOLL in ERCOT is estimated at approximately $35,000/MWh
TIEC said, "When the HCAP is set far below VOLL, the market cannot produce prices that reflect the true cost of scarcity to consumers, and provides no room for consumers or REPs to risk-differentiate themselves by voluntarily curtailing load as prices rise."
TIEC further said, "Since the HCAP was reduced, ERCOT has increasingly relied on additional out-of-market reserve procurement and other administrative interventions to manage reliability, effectively substituting the market responses that a higher offer cap would incentivize with administrative action that is less efficient and flexible".
TIEC said, "The relatively low HCAP also harms reliability of the system by diluting generator performance incentives. A generator that sells forward must replace undelivered energy at the real-time price, but a cap far below the true cost of scarcity limits the consequence of failure. This, in turn, reduces incentives to invest in reliability and resiliency attributes such as weatherization, fuel security, maintenance, and other measures that improve performance. In effect, a low HCAP socializes scarcity risk away from suppliers and onto the system, increasing costs for all customers."
In terms of a specific level for the HCAP, TIEC said, "the Commission should take a measured, phased approach, such as increasing the HCAP to $7,500/MWh within the next two years, then to $9,000/MWh over the following period before the next quinquennial review."
Separately, Vistra Corporate Services Company said that the current $2,000/MWh real-time market (RTM) offer cap is "too low" and should be increased to at least $5,000/MWh.
Vistra said that in increasing the RTM offer cap to at least $5,000/MWh, the selected cap should also, "preserv[e] sufficient headroom below the overall scarcity price cap"
"Increasing the offer cap would give energy- and emissions-limited resources more room to reflect opportunity costs and would provide a more reasonable cushion during fuel price spikes," Vistra said
However, Vistra said that the offer cap should not be set at the Value of Lost Load (VOLL).
"Instead, VOLL should anchor scarcity valuation for planning purposes," Vistra said
Vistra said that the ERCOT market should retain a separate, lower (lower than VOLL) overall "scarcity price cap" to manage the, "financial and political risks," associated with extreme pricing during reliability events.
Vistra said that, "Assuming that scarcity price cap is retained below VOLL, the Ancillary Service Demand Curves (ASDCs) could still structurally rise to include VOLL, so the curves can establish the ordering among products and preserve scarcity pricing without making the offer cap and/or scarcity price cap equal to VOLL."
If the scarcity price cap will continue to be higher than the RTM offer cap, Vistra supports an increase in the DAM offer cap, "to accommodate the full range of potential pricing outcomes in RTM."
Separately, Shell Energy North America (US) LP supports increasing the High System-Wide Offer Cap (HCAP) for both energy and ancillary service offers and real time system lambda price cap to at least $9,000/MWh
Shell said, "Shell Energy recommends increasing the $2,000/MWh real-time offer cap by adjusting both caps consistently if the Commission increases HCAP. If HCAP is increased, the cap in DAM must follow it or positions will not be fully hedgeable. At a minimum, if HCAP is increased, the RTM cap should be increased by the same amount."
Separately, Base Power Company suggested that a move back to $9,000/MWh or a higher value for the maximum price under the Ancillary Service Demand Curves (ASDCs) may be appropriate.
Generally, those parties favoring a higher HCAP, or other changes meant to reduce the current mitigation of various price signals, noted the various reforms and other policies (including operational, regulatory, and market changes) adopted by the PUC to prevent the recurrence of a Winter Storm Uri situation
TIEC and others also noted the credit impacts on market participants -- including REPs -- from a higher HCAP.
TIEC said, "Higher scarcity prices will require higher credit support. Today, when a reliability event is likely, market participants are required to post significant additional credit to ERCOT to backstop their market exposure. This can impose a hardship on large customers like TIEC members as well as smaller independent retail electric providers. While this is a concern, it must be balanced against the benefits of accurate scarcity pricing—stronger investment signals, more robust demand response, improved forward hedging, and less reliance on out-of-market interventions. At the same time, it is important for the market to be appropriately collateralized during these events to prevent uplift scenarios like those that occurred during Winter Storm Uri. TIEC believes that a measured increase to the HCAP over time, as proposed above, is a reasonable approach to balancing these considerations and allowing the market to adjust, but would be open to further discussion on this item and potential changes to the credit requirements that still ensure appropriate collateralization."
In separate comments, ERCOT did not take a position on the level of the offer caps, but noted the credit impacts
ERCOT stated, "the SWCAP programs are not only price-formation and reliability instruments but are also the primary inputs that determine market-wide credit exposure and accordingly the collateral that the market must carry to absorb a severe system scarcity event. Raising the SWCAP or ECAP [Emergency Offer Cap], or constricting the EPP’s [[Emergency Pricing Program]] trigger or duration, would inherently and proportionally increase market-wide financial stress exposure. This is not a matter of forecast or judgment; it follows mechanically from how scarcity-priced exposure accrues and from how ERCOT’s stress-testing framework (currently under development and described further below) measures it. For that reason, any change to price or offer caps or the duration of such programs should include a companion credit-exposure impact study and consideration of concurrent recalibration of existing credit obligations."
ERCOT said, "Available liquidity is effectively fixed in the days surrounding a system stress event. Raising the cap or extending the EPP [Emergency Pricing Program] duration therefore increases the denominator (i.e., potential exposure) while the numerator (i.e., available liquidity) holds constant. Every affected Market Participant’s coverage ratio falls, more Market Participants cross below the framework’s high-risk threshold, and the aggregate stress exposure that the ERCOT market must be prepared to absorb rises. The mitigation required—collateral or potentially credit insurance—is itself a function of exposure at default, so it rises in lockstep."
The Texas Public Power Association (TPPA) said that the PUC's review of the offer caps should be delayed until the PUC's Reliability Assessment is complete
Separately, Texas Electric Cooperatives, Inc. said that for any proposed offer cap changes, the PUC should first conduct studies to establish the quantitative benefits of any change.
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September 17, 2026
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Reporting by Paul Ring • ring@energychoicematters.com
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