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Price Spikes Hit Ercot

Posted in Ercot,Price Spikes,Retail by Cheryl Morgan on the May 30th, 2008

Prices in the Texas electricity market have been causing concern of late. According to this article in the Wall Street Journal, prices in the spot market exceeded $2,000/MWh at times on seven out of the past ten days, and on May 23rd briefly went above $4,000/MWh. Most of the supply in Texas is under long term contracts, so there should be no danger of a California-like collapse. However, the going is still tough for some retailers. Texas has fairly low entry requirements to the retail market, and already two small supply companies, National Power Co. Inc. and Pre-Buy Electric LLC, have defaulted on some contracts leading to 15,000 customers being transferred to other retailers under “supplier of last resort” agreements. Other supply companies are thought to be vulnerable. The situation is sufficiently serious for the Texas Public Utility Commission to hold an emergency meeting yesterday to find out what could be done to help vulnerable customers.

As yet no explanation has been provided for the price spikes. As the WSJ article notes, demand is nowhere near what is expected at the summer peak. Prices of this level could therefore be expected to continue, and even increase, for months to come.

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