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Computer glitch leads to high power prices in Texas

By Reuters
Houston, 13 Aug 2001

A temporary outage in the computer system used in Texas to keep enough electricity flowing, caused prices to rocket to California-like levels, but a power grid official on Friday said the prices would be invalidated because of the glitch.

The Electric Reliability Council of Texas said prices in its real-time market reached $1 000 per megawatt-hour (MWh) after the computer system that controls it went out for about four hours Thursday, ERCOT COO Sam Jones said.

When it came back on, the system did not let everyone at the same time, which is required under ERCOT`s rules, he said.

"It probably would not have a substantial price impact," Jones said. "Since it was not a fair market, we have declared it an invalid market."

The $1 000 price was reached in two 15-minute intervals in one zone which accounts for about 5% of the total power bought on any given day, he said. ERCOT, a non-profit entity that manages most of the Texas power grid, ordinarily sees high prices in the $20-$50 MWh range.

The market in question, called the balancing market, is a real-time operation in which ERCOT buys power every 15 minutes to make sure the grid`s load is balanced throughout the day. Too much or too little power on it could lead to blackouts.

This is not the first time high prices have hit ERCOT, which has gone to great lengths to ensure Texas residents that their situation is very different from that of California. A botched deregulation attempt there led to massive price spikes, blackouts and financial ruin for the state`s two biggest investor-owned utilities.

ERCOT started the Texas retail deregulation pilot program on 31 July, after it was delayed two months because the required software was not ready. Full-scale deregulation starts 1 January 2002.

Prices in the day-ahead power market hit the $1 000 cap on the first day, which ERCOT officials attributed to the fact that some parties did not get their bids in on time. Other days since have seen day-ahead prices reach $500/MWh.

Cause for concern?

One deregulation watchdog said that operational problems like the computer failure and the appearance of high prices are cause for concern.

"I have always thought there is gaming potential in this market, and there is in any market. Gaming involves the players knowing the rules and exploiting any loophole in the rules. Whether we`re seeing that now, I am not prepared to say," said Janee Briesemeister, a senior policy analyst with Consumer`s Union in Austin.

Legitimate bids that have garnered high prices are proving the wisdom of a legislatively imposed price cap of $1 000/MWh, she said.

The intricate dance of bidding requires all parties to submit theirs by the same deadline. ERCOT buys power it needs to keep the grid healthy by paying the lowest price at which it can get enough power to meet the demand. All participants are then paid that so-called market-clearing price.

Jones said the pilot program was designed to work out the kinks in the system before the whole state moves to retail deregulation.

"We are new. We have only been running at full volume for about two weeks and occasionally there is going to be issues with the system`s maturity," Jones said.

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Reuters News Service

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