Energy Insider Blog

According to a recent report issued by ERCOT, transmission constraints, which have caused significant congestion cost increases for end users in the West Zone(e.g. Midland, Odessa)  since March of 2012, are likely to spread to the Houston and South Zones (e.g. Brownsville, McAllen) of ERCOT in 2013.

Congestion occurs when the available transmission capacity on a particular pathway reaches its limits for safe operation and forces ERCOT to dispatch power plants Out-Of-Merit dispatch (OOM). OOM is the dispatch of a generator out of economic order to resolve a transmission constraint., Such action ultimately results in higher power prices at the sink (node with high demand). If an ERCOT end user has not locked congestion, such costs/credits will be passed through to them.

In 2013, end use customers who need budget certainty should consider locking in what the industry commonly calls "congestion" or "Trading Hub to Load Zone basis" in order to protect against the possibility of increased congestion costs.  Locking in this cost component for a fixed price product is similar to buying insurance on a home, it provides end use customers who have a need for a high degree of budget certainty with peace of mind that a Fixed Price product can provide.

The higher congestion costs in the West Zone have been driven primarily by the explosion of activity in the Permian Basin and ERCOT has indicated that South Zone congestion costs could increase as the Eagle Ford Shale continues to be developed.  In addition, there are only two high-voltage circuits to carry power into the growing South Zone.  Given the limited transmission capability in the South Zone, congestion, and hence the cost of retail power, may also increase as demand increases.  ERCOT has approved two projects scheduled for completion before the summer 2016 peak season that will improve the capability to import power into the region and serve growing electric demand in the Brownsville area.

ERCOT expects transmission congestion in the Houston area in 2013. Even though transmission upgrades are scheduled, some paths used to deliver power to the area will be out of service while they undergo improvements.

ERCOT recently released a  Report on Existing and Potential Electric System Constraints and Needs, which identifies both near and long term challenges facing the  ERCOT region from the grid operator's perspective, an can be found at  

http://www.ercot.com/content/news/presentations/2013/2012%20Constraints%20and%20Needs%20Report.pdf