The Gist

The HCAP effectively sets the highest price in ERCOT (though it is possible for regional prices to go higher than HCAP due to congestion, the excess is usually minor).  HCAP was initially set at $2250/MWh at nodal market implementation in December 2010 and rose in steps until it reached $9000/MWh on 6/1/15.  During the Winter Storm Uri event many entities went bankrupt and the high (relative to other North American markets) HCAP was deemed to be a main cause of the insolvencies. In the wake of Winter Storm Uri the Public Utility Commission decided that an offer cap of $9000/MWh had caused too many problems.  They debated and decided to lower it to $5000 with a corresponding increase in the Minimum Contingency Limit to 3000MW (from 2000MW). These two changes were deemed by a Brattle study to leave net energy cost roughly the same as the status quo, on an annual basis.

Important Actions

• 12/2/21 PUC lowers HCAP to $5000/MWh after significant comment and discussion.
• 1/1/22 HCAP of $5000/MWh goes into effect.

Reference

Amendment to substantive rule 25.505

Rule adopting an HCAP of $5000/MWh

Phase 1 language including MCL of 3000MW

Related Topics

Meeting Notes

WMS 1/5/22 -Implementation details discussion/presentation

WMWG 12/17/21 -Implementation details discussion/presentation

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