Smitherman: ERCOT Market Design Contains Correct Incentives

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February 16, 2011  

PUCT Chairman Barry Smitherman, during a Texas Senate hearing on the rolling outages earlier this month, said that ERCOT's current market design sends the correct signals to plants to be online when needed most, so plants can take advantage of any potential scarcity pricing which results during shortages.

Asked by one lawmaker regarding whether, during declared crisis situations, the PUCT should establish a rule that fixes a constant, "stable" price paid to generators, Smitherman replied that such a design could have unintended consequences.

Smitherman also reiterated, consistent with earlier statements, that initial indications show that no manipulation occurred during the weather event, though the PUCT is conducting a thorough investigation.  Smitherman noted that many of the units that were offline were lower-cost solid fuel units, which would be the type of capacity that would not be withheld as such capacity would most benefit from any scarcity pricing.

ERCOT also reported that as many as 82 generation units were offline during some period of time from about midnight Feb. 2 through early afternoon, though not all 82 were offline at the same coincident time.

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