For congestion pricing, the ERCOT region is divided into four zones, namely the
North, West, South and the Houston zones, and five Commercially Significant
Constraints (“CSCs”) inter-zonal interfaces. The inter-zonal congestion is
usually managed using (1) balancing energy, because it is effective and
efficient, or (2) unit-specific deployments of local generators.

ERCOT market participants who transact business across congestion zones can
hedge congestion charges in the balancing energy market by acquiring
Transmission Congestion Rights (“TCR”). A TCR or Pre-assigned Congestion Rights
(“PCRs”) represents the cost of one MW (Shadow Price) flowing in one direction
on a CSC during a particular hour over a given time period. Both TCRs and PCRs
entitle the holder to payments corresponding to the inter-zonal congestion
price.

ERCOT determines the number of available TCRs based on the summer peak flow
limits for the CSCs and offers them at annual and monthly auctions while some
TCRs are pre-assigned to certain Non Opt-in entities (NOIEs), such as municipal
utilities and cooperatives, at 15% of the auction clearing price, because of
long term contractual obligations.

In 2008 the TCR annual auction prices are significantly lower than the value of
congestion in real-time due to the inability of participants to forecast the
inter-zonal congestion costs accurately.

Recently ERCOT completed an analysis of load flow data to determine the expected
operating limits and CSC constraints using the Steady State Working Group (SSWG)
data set which was developed by ERCOT using UPLAN electricity model.

2009 CSCs

For 2009 ERCOT Board has approved five transmission interfaces as CSCs for the
four commercial pricing zones. These CSCs are summarized below.

• CSC # 1 (West to North) and CSC # 5 (North to West) are defined as the
  following lines:
  
  
  • Graham – Cook Field 345 kV
  
  
  • Jacksboro – Bowman 345 kV
  
  
  • Graham – Tonkawa 345 kV
  
  
  • Bowman – Graham 345 kV
  
  
  • Commanche Switch – Red Creek 345 kV
  
  
  • Graham – Long Creek 345 kV


• CSC # 2 (South to North) and CSC # 3 (North to South):
  
  
  • Temple - Lake Creek 345 kV
  
  
  • Temple Pecan Creek – Tradinghouse 345 kV


• CSC # 4 – North to Houston
  
  
  • Singleton- Obrien 345 kV
  
  
  • Singleton – TH Wharton 345 kV
    

LCG Offering

Deliverables

• Summary of input assumptions of the ERCOT system including generation,
  loads, fuel prices and transmission 


• Annual and monthly TCR values for each of the five interfaces


• The average, standard deviation and volatility of the TCR values


• Histogram of the TCR values for all CSCs


• The average, standard deviation and volatility of peak and off-peak
  zonal prices (in implied heat rate)


• Two hours' consultation

Note that there is a discrepancy between the TCR auction values and the
real-time zonal prices due to forecasting errors. LCG can simulate both
real-time (nodal) and day-ahead markets using UPLAN to estimate auction values.

Contact