by L.M. (Wooty) Sixel, August 13, 2019

The heat wave blanketing Texas drove wholesale power prices to record levels Tuesday as triple-digit temperatures strained electricity supplies, spurred calls for energy conservation and drew the Texas power grid perilously close to rolling power outages.

Wholesale electricity prices in Houston soared to $9,000 per megawatt hour for more than an hour Tuesday afternoon and as high as $9,100 per megawatt hour in other parts of Texas, reflecting transmission congestion costs that allow prices to exceed the $9,000 statewide price cap. In comparison, prices were about $19 per megawatt hour at 8 a.m. Tuesday.

The surging wholesale prices are likely to lead to higher prices on retail electric bills for consumers and businesses in the future.

The state grid manager the Electric Reliability Council of Texas alerted power generators Tuesday afternoon that power reserves were in such short supply — dipping below 2,300 megawatts — that an emergency condition already existed or was imminent and called for conservation measures. The alert raised concerns whether Texas would have enough power to get through the hot afternoon or whether the state would have to resort to extreme measures such as rolling blackouts.

Houston’s heat index was 107 degrees Fahrenheit at 2 p.m. Tuesday, according to the National Weather Service. Power demand peaked at 74,181 megawatts, just slightly below Monday’s record of 74,531 megawatt.

When power reserves are so tight and demand so intense, a malfunction in just one generating unit could be enough to trigger temporary blackouts, said Campbell Faulkner, chief data analyst for the commodities trading firm OTC Global Holdings. The grid was headed for shortages Monday until 7,000 megawatts of wind power came online, Faulkner said.

Prices peaked Monday at about $6,500 per megawatt hour.

“We got bailed out by wind,” said Faulkner.

Late afternoon wind energy also relieved the tight power reserves and prices Tuesday.

Generating capacity sank low enough Tuesday to trigger hefty price adders authorized by Texas regulators. On Tuesday, the upward price adjustments contributed thousands of dollars to the price of each megawatt of power, often boosting power prices to the maximum level of $9,000 per megawatt hour.

The Public Utility Commission agreed this spring to increase the amount generators could charge for producing power during periods of peak demand. If operating reserves dip below 2,000 megawatts the price adders would increase the price of power to $9,000 per megawatt hour, the highest price allowed in Texas.

Price adders are lower when operating reserves range between 2,000 megawatts and 7,000 megawatts, but they can boost wholesale prices by hundreds of dollars per megawatt hour.

Power companies lobbied for the change, telling the utility commission that unless the upward price adjustments were made, generators would have little incentive to build new power plants or fix up old ones to accommodate population growth and increasing electricity demand. Another upward price adjustment is scheduled to go into effect next year.

In the first 10 days of August, the upward price adjustments have added about $30 per megawatt hour to the base price of electricity in Texas, according to the research firm S&P Global Platts. When the weather was milder in July, price adders boosted average electricity prices about $6.50 per megawatt hour over the course of the month.

Most consumers buy fixed power plans, and the price spikes this week are likely to show up in those plans when customers renew.

ERCOT on Tuesday called on consumers and businesses to reduce electricity use through 7 p.m. and suggested turning up thermostats, using fans, limiting the use of large appliances, shutting off pool pumps and closing blinds and drapes.

By 5:30 p.m., the emergency had passed and ERCOT canceled the conservation measures, according to ERCOT’s website.

Please find the article linked here and full coverage in the email below: Power demand, prices soar with temperatures