Electricity Restructuring The Texas Story

by Kiesling, Lynne L.; Kleit, Andrew N.

• ISBN13: 9780844742823
• ISBN10: 0844742821
• Format: Paperback
• Copyright: 2009-12-16
• Publisher: Aei Press

Summary

In the early 1990s, the U.S. electricity industry was plagued by cost overruns and stagnant productivity. Many states turned to deregulation to promote innovation and cut costs, a strategy that had worked for the telecommunications, trucking, natural gas, and airline industries. Yet, after the California energy market's infamous meltdown in 2000-2001 triggered the recall election of Governor Gray Davis, deregulation lost popular and political support. Plans to introduce competition and retail choice in electricity markets were stalled or abandoned nationwide-in every state but Texas.

Author Biography

L. Lynne Kiesling is a senior lecturer in the department of economics at Northwestern University, and in the Social Enterprise at Kellogg (SEEK) Program in the Kellogg School of Management at Northwestern University. Andrew N. Kleit is a Professor of energy and environmental economics and directs the program in Energy Business and Finance at the Pennsylvania State University.

Table of Contents

List of Illustrations	p. ix
Preface	p. xi
Introduction	p. 1
Why Does ERCOT Have Only One Regulator?	p. 9
Federal Jurisdiction and ERCOT	p. 9
ERCOT's Jurisdiction in Modem Restructured Electricity Markets	p. 12
Tensions between FERC and the States	p. 15
Market Power, Antitrust Law, and the Filed-Rate Doctrine	p. 17
Market Power and Capacity Assurance	p. 20
Conclusion	p. 21
Laying the Groundwork for Power Competition in Texas	p. 22
Prelude to Restructuring	p. 22
1995 Legislative Changes	p. 25
Implementing Wholesale Competition	p. 27
Legislative Activity in 1997 and 1999: Senate Bill 7	p. 28
Issues Moving Forward	p. 36
Evolution of Wholesale Market Design in ERCOT	p. 40
Evolution of Wholesale Market Design in ERCOT	p. 41
The Main Players	p. 43
The ERCOT Wholesale Market, 1999-2002	p. 45
Resource-Specific Offer Curves and Nodal Pricing of Resources: Texas Nodal Rulemaking, 2002-3	p. 54
The Decision-Making Process and the Three Groups, 2003-5	p. 55
Nodal Market Design Revisited: Nineteen More Months of Analysis, Debate, and Discussion	p. 58
Conclusion	p. 68
Achieving Resource Adequacy in Texas via an Energy-Only Electricity Market	p. 70
The Resource Adequacy Debate	p. 71
The Political Evolution of the ERCOT Market	p. 74
How the PUCT Chose the Energy-Only Approach	p. 76
Details of the ERCOT Energy-Only Market	p. 81
Challenges in the Transition to a Sustainable Energy-Only Approach	p. 90
Conclusion: Why an Energy-Only Approach in Texas?	p. 92
Texas Transmission Policy, Jess Totten	p. 94
The Role and Regulation of Transmission	p. 94
Texas and Federal Transmission Policies Compared	p. 97
Transmission Investment and Cost Recovery	p. 103
ERCOT Development and Governance	p. 105
Conclusion	p. 111
Distributed Generation Drives Competitive Energy Services in Texas	p. 112
Modern Origins of Distributed Generation	p. 113
Distributed Generation Technologies and Potential	p. 114
Institutions That Affect DG and Competition	p. 121
Project Development Issues	p. 129
Conclusion	p. 136
Competitive Performance of the ERCOT Wholesale Market	p. 138
Mechanics of Trading in the ERCOT Wholesale Market	p. 138
Trends in Generation Capacity and Load: Implications for Market Performance	p. 141
Assessing the Competitiveness of the Wholesale Market	p. 144
Conclusion	p. 153
Retail Restructuring and Market Design in Texas	p. 154
Prelude to Senate Bill 7	p. 155
SB 7's Retail Market Design	p. 156
Performance of the PTB Fuel Factor Adjustment Analyzed	p. 165
Current Snapshot: Outcomes and Consequences of Retail Competition	p. 170
Conclusion	p. 172
Market Monitoring, ERCOT Style	p. 174
The Distrust behind Market Monitoring	p. 174
The Structure of Market Monitoring in ERCOT	p. 178
The 2003 Ice Storm and the Resulting Bid Mitigation Program	p. 182
The TXU Matter	p. 184
Conclusion	p. 188
Notes	p. 191
Index	p. 227
About the Authors	p. 2xx
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