The state of the ERCOT market is… not good

The Independent Market Monitor for ERCOT came out swinging in the recent assessment of the health of Texas’ electric market.

The annual State of the Market report from the IMM showed how the winter storm outages in 2021 and subsequent regulatory actions have raised costs. The IMM also showed how many of the market changes made thus far have done little to increase reliability. Electricity costs are soaring in Texas and while some of that is attributable to high gas prices, much of it is a direct result of (a) the catastrophic outages in Texas during Winter Storm Uri and (b) actions taken by the PUCT and ERCOT since then.

The biggest takeaway straight from the IMM: “While we continue to believe that an energy-only market can be successful and adapt to changing system needs, it is not compatible with ERCOT’s current conservative operational posture.”

She left no ambiguity here. The actions taken by the PUCT and ERCOT leadership, if continued, effectively mean the end of Texas’ competitive energy-only market. 

At a press conference in July 2021, PUCT Chair Peter Lake was asked if a “capacity market was on the table.” He said it was not. “That was not addressed in legislation by the 87th legislature,” he noted at the time.

Yet the IMM report confirms what many people thought was happening in spite of assurances to the contrary: Texas’ energy-only market has been replaced by an unvetted, ill-conceived, half-baked capacity market.
Lake and interim ERCOT CEO Brad Jones have been routinely describing the procurement of massive amounts of reserve capacity, even when they aren’t needed, as “conservative.” The IMM is not a fan…