Market Information System Grid and Market Conditions

News Release

September 16, 2008

ERCOT withdraws fee increase request


The Electric Reliability Council of Texas (ERCOT), grid operator for most of the state, is withdrawing its request for a fee increase filed last June with the Public Utility Commission (PUC) in light of the recently announced delay in the nodal market implementation. 

"During ERCOT’s 2009 budget review process, we specified that the bulk of the $0.15 increase in the fee was driven by the assumption that the nodal program would be completed and nodal markets fully functional by Dec. 1, 2008," President and CEO Bob Kahn said.   

"The revised nodal schedule currently being developed suggests implementation will be delayed, so ERCOT management reviewed the revenue requirements for 2009," Kahn said.  "We concluded that the current fee of $0.4171 is sufficient to fund base operations until the new nodal budget and schedule are developed, after which updated 2009 operating costs can be more accurately predicted." 

The Board of Directors approved the 2009 budget in May 2008 with a $0.1527 increase (37 percent) in the system administration fee, from $0.4171 to $0.5698 per megawatt hour (MWh).  ERCOT filed the budget with the PUC (Docket #35785) June 17, 2008 for review and approval of the fee.  ERCOT plans to withdraw the fee filing today. 

Management’s conclusion that the system administration fee can remain unchanged for 2009 hinges on approximately $42 million of revenue requirement reductions in three primary categories:

  • Operating expenses, $29 million -- ERCOT labor and costs to support the nodal program will continue to be charged to the nodal program into 2009, rather than ceasing at Dec. 1, 2008
  • Project expenditures, $6 million -- Projects scheduled to enhance the completed and operational nodal market will not be undertaken on the timeline contemplated in the 2009 budget
  • Debt repayments, $7 million -- Additional incremental debt will either be avoided or repayment deferred until the nodal market is operational. 

Additional Background

The system administration fee is assessed on wholesale energy transactions and becomes part of the overall cost of electricity.  The approximate impact on an average household using 1000 kilowatt-hours/month is $0.42 per month under the current fee.   

The nodal surcharge, which is separate from the system administration fee, is assessed to generation owners.  The nodal surcharge is currently approved at $0.169 per MWh, approximately $0.17 per month for an average household using 1000 kilowatt-hours/month.  A request for an increase in the nodal surcharge is not expected to be filed until after the nodal budget and schedule are developed. 

The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to more than 26 million Texas customers -- representing about 90 percent of the state’s electric load. As the independent system operator for the region, ERCOT schedules power on an electric grid that connects more than 46,500 miles of transmission lines and 710+ generation units. It also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for nearly 8 million premises in competitive choice areas.

ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature. Its members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities, transmission and distribution providers and municipally owned electric utilities.