Struggling with how to respond to emergencies, such as last summer’s Texas heatwave, The Public Utility Commission (PUC) set a floor under wholesale electricity prices for power reserves that could be called upon in the event of such an emergency.   Commission Chairwoman Donna Nelson suggested a rate of $325 per megawatt-hour for nonspinning reserves, but Commissioner Anderson favored a range of $120 to $180 per megawatt-hour.  Nonspinning reserves are generating units that can be started within 30 minutes in the event of an emergency.  During peak demand, wholesale energy prices can range from $40 per megawatt-hour to $3000 per megawatt-hour, which is the state’s cap.   The floor price would tell electric generators approximately what price they can expect to pay when they need to deploy nonspinning reserves.

Industry officials are concerned that the new floor price will not generate revenues necessary to attract private investment that would lead to the construction of more power plants.  If this is the case, ERCOT might consider a formula to raise prices without having to come back before the PUC. Central Texans will likely not see their rates affected by this decision, because they are served by publicly owned utility companies.

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