Electric Company Reporting

Market Clearing Price Energy (MCPE) - MCPE consists of a floating price (a price that goes up and down depending upon the current market) and the required balancing of power at a particular Congestion Zone of ERCOT.  Congestion Zones are formed by the level of Commercially Significant Constraint (CSC) - A constraint in the ERCOT Transmission Grid that is found to result in Congestion which constrains the free flow of energy to a commercially cost significant amount. MCPE pricing has a availability portion of its makeup that is not completely definable. The MCPE price is established by ERCOT every 15 minutes. When sold by an Electric Company\REP, the Retail Electric Provider price is this wholesale price plus an “adder”.      

The MCPE rate is formed as: MCPE price + Adder = Price of Retail Electric Power     

This adder consists of the pass-through ERCOT charges for system reliability, costs associated with services that relate to system integrity and the margin for the REP’s overhead and profit. MCPE is, basically, a “cost in addition to” pricing of energy. If the cost of raw material remains fairly constant, this pricing is the most economic over time. Raw material price spikes as well as Congestion Zone issues, however, can defeat the economy of MCPE pricing. However, Texas has less of a problem with congestion issues compared to other problem states like California due to a self-sufficient power grid and fair warnings from the California brownout failures.     Pricing strategies are dependent upon the cost of raw material (natural gas coal, nuclear, and wind power) and the wholesale electricity into retail electricity delivered to the commercial facility. Examples include a floating index based upon spot natural gas prices, hybrid formulations allowing a floating pricing agreement to be converted to a fixed price contract based on some defined criteria, and a time-certain period of floating prices on one part of a contract’s term and the balance covered under a fixed price. How the proposal is styled is not as important as the net effect of the pricing.To speak to a consultant about MCPE pricing for commercial business please contact Electricity Bid.  ��

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This entry was posted on Sunday, January 14th, 2007 at 10:45 pm and is filed under Texas Electric Companies. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.