Texas electricity wholesalers profited from congestion

Ann de Rouffignac
OGJ Online

HOUSTON, Nov. 27, 2001 — Certain Texas wholesale electricity market participants have made money by "consistently" overscheduling load and generation across known transmission constraints, state regulators concluded.

In a cautiously worded analysis, the oversight division of the Texas Public Utility Commission examined scheduling behavior for15 days in August when payments to specific market participants approached $86 million to keep them from running powers plant or to reduce scheduled load. Three of six scheduling coordinators received 91% of the imbalance payments during the 15 days, the report said.

When a generator overschedules, it means the Electric Reliability Council of Texas, the grid operator, must pay schedulers to turn off power plants or reduce load to keep the transmission lines from becoming overloaded or congested.

By deliberately overscheduling, certain market participants benefit at the expense of all other players. The ERCOT market rules contain no penalties for overscheduling. ERCOT spreads these extra costs among all market participants.

While only a few companies benefited from overscheduling, the cost was borne by all ERCOT wholesale market participants. Unless the costs are absorbed by the companies, retail customers will ultimately bear the cost.

Some public power companies such as Public Service of San Antonio complained about these costs in recent legislative committee oversight hearings and in correspondence with the PUC.

Even though the report found consistent patterns of overscheduling by individual market participants, the PUC staff said overscheduling could be 'rational behavior'. The QSEs [or schedulers] may overschedule load in order to minimize the risks associated with uncertain market clearing prices for balancing energy," the report said.

One market participant said the pattern of overscheduling amounted to "gaming" or manipulating market rules to increase profits. "The patterns on overscheduling show they figured it out. It's pretty clear there was gaming," he said.

PUC spokesman Terry Hadley said the commission is not "quite ready to use the 'G' word yet. But we will be meeting with several QSEs [schedulers] next week about scheduling."

ERCOT is developing an alternative method for allocating congestion costs called 'direct assignment' to avoid excessive imbalance charges from being shared by all market participants. The method assigns the costs of congestion to those participants that caused it.

But ERCOT observers are not sure that direct assignment will fix all the overscheduling problems. "In the end it will be a numbers game," a market participant said. "How much do you make by overscheduling versus how much of the congestion costs are assigned to you."

Consumer advocates are also wary direct assignment won't eliminate market abuse. "Our concern is that the PUC may let bad behavior slide because they are expecting direct assignment of congestion costs to reduce the potential for gaming," said Janee Briesemeister, senior policy analyst with Consumers Union.

"Even during the pilot there should be zero tolerance for companies manipulating the market rules to increase profits."

Contact Ann de Rouffignac at annd@pennwell.com

Sponsored by FLSmidth
Recommend this article Recommend this article () You recommended this article You recommended this article ()
Follow Power Engineering on Twitter

Products Showcase

Dynamic Fluoride Ion cleaning DFIC of industrial natural gas turbines Hi-Tech Furnace Systems

Dynamic Fluoride Ion Cleaning of IGT Parts

The Dynamic Fluoride Ion Cleaning (DFIC) Process from Hi-Tech Furnace Systems is able to clean deep, narrow cracks of oxides by cycling between negative, atmospheric, and positive pressure.

Latest News

Shutterstock coal production trucks

Weekly Coal Production

The Weekly Coal Production shows how much coal is being produced across the U.S.

Federal Reserve Bank of Dallas Weekly Economic Indicators financial business

The Federal Reserve Bank of Dallas' Economic Indicators

The Federal Reserve Bank of Dallas offers a glimpse into how the markets are doing domestical...

Kvaerner awarded contract for gas-fired power plant in Delaware

Kvaerner North American Construction Inc. and its joint venture partner, Parsons Brinckerhoff...

Canadian Solar purchases two solar projects

Canadian Solar Inc. has acquired a majority interest in two utility-scale solar power project...

Operators Restart Unit 2 at PPL Susquehanna

Unit 2 at the PPL Susquehanna nuclear power plant near Berwick, Pa. resumed generating electr...

Settlement agreement limits cost recovery at Edwardsport

The Indiana Utility Regulatory Commission (IURC) on Dec. 27 modified and approved a settlemen...

Toshiba in talks to sell portion of Westinghouse nuclear unit

Toshiba Corp is in talks  to sell up to 16% of its stake in the Westinghouse Electric Co...

Utah nixes nuclear waste storage facility

Plans to park radioactive waste at a storage facility in Utah have been officially called off.

Archived Articles

2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013

Buyers Guide Categories

Current Magazine Issue

08/01/2013
Volume 117, Issue 8
1308PE_C1_digital

Buyers Guide Product Listings

Transmission Services

Blattner Energy is a diversified electrical gen...

Sargent & Lundy Engineering & Design Services

Our experience and capabilities for power deliv...

Buyers Guide Company Listings

SuperPower Inc

Develops high temperature, superconducting wire and devices for electric power generation, transmission, distribution and strorage, including power cables, transformers, fault current limiters, SMES and more.

Tech Products Inc

A global source for quality identification products including pole tags, transmission tower (aerial) markers and substation signs. Our focus is on making the best product.

Realtime Utility Engineers

Leading consulting engineering firm providing substation and transmission line engineering services to electric utilities, generation and wind developers nationwide. Complete project delivery of any scope and size.

Baldwin Filters

Manufacturer of air, oil, hydraulic, fuel, transmission, and coolant filters.

Power Industry Wire News

The Surfrider Foundation Celebrates California's Plastic Bag Ban

The Surfrider Foundation Celebrates California's Plastic Bag Ban

Vectren Corp. Closes Sale of Its Wholly Owned Coal Mining Subsidiary, Vectren Fuels

Vectren Corp. Closes Sale of Its Wholly Owned Coal Mining Subsidiary, Vectren Fuels

Hawaii Energy Offers State's First-Ever Energy Efficiency Auction

Hawaii Energy Offers State's First-Ever Energy Efficiency Auction

Virtu Investments' Third Apartment Fund Oversubscribed at $48 Million

Virtu Investments' Third Apartment Fund Oversubscribed at $48 Million

Top Industrial Market News Stories for the Fourth Week of August 2014, an Industrial Info News Alert

Top Industrial Market News Stories for the Fourth Week of August 2014, an Industrial In...

Power Engineering

Article Archives for Power Engineering Magazine

Continuing Education

Professional Development Hours

To access a course listing associated to a specific topic listed below, click on the topic of choice from the list below.

Latest Energy Jobs

View more Job Listings >>