Did the introduction of a nodal market structure impact wholesale electricity prices in the Texas (ERCOT) market?
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Regression analysis suggests that zonal averages of locational marginal prices under the nodal market are about 2 % lower than the balancing energy prices that would occur under the previous zonal market structure in ERCOT. The estimates for the nodal market price effects are found after controlling for such factors as natural gas prices, total system load levels, non-dispatchable generation levels, the treatment of local congestion costs, and the treatment of the revenues received by the market from the auctioning of transmission rights. Our finding is limited to periods which are not characterized by price spikes in the wholesale market.
KeywordsElectricity market restructuring Deregulation Locational marginal pricing ERCOT
JEL ClassificationL51 L11 L94 Q48
The authors would like to thank Dan Jones of Potomac Economics for discussions during the course of this work. We also wish to thank two anonymous referees and providing exceptionally detailed and valuable comments on earlier drafts.
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