Chapter 11 - Texas: The Most Robust Competitive Market in North America

Abstract

This chapter describes the much more successful experience of the Texas market, widely acknowledged as the most “robust” competitive market in North America. The restructuring of Texas' Electric Reliability Council of Texas (ERCOT) market benefited from a confluence of positive factors, including a phased approach where the restructuring of the wholesale market preceded the retail choice, ample generating capacity at the outset of retail competition, and an intrastate market where a single state-level regulatory authority wielded near-exclusive jurisdiction over the implementation of the state's plan. The competitive electricity market within the ERCOT has avoided the market meltdown suffered in California. After 10 years under the restructured wholesale market and more than 3 years of experience with retail competition in Texas, it is far too early to determine whether the new market structure will remain viable in the long term. A number of challenges, however, remain as Texas seeks to implement more efficient means of managing transmission congestion and ensuring resources adequacy. Some of the key features of the market structure are presently being reexamined, including educating consumers about their choices, managing transmission congestion in an efficient manner, which minimizes subsidies and sends appropriate price signals, and ensuring long-term resource adequacy.