Regulating Electricity Spot Markets during Extreme Events: The 2021 Texas Case

Danielian, Armen (2025): Regulating Electricity Spot Markets during Extreme Events: The 2021 Texas Case. Published in: Utilities Policy , Vol. 93, (April 2025): p. 101891.

Abstract

This paper discusses the economic and legal challenges of price regulation in spot electricity markets during extreme events, taking the 2021 Texas winter storm as an example. The dual role of spot electricity prices (resource allocation and overall system reliability) in ERCOT's energy-only market resulted in allocating system reliability costs to load-shed consumers and spot electricity buyers, implying that complementary tools for covering system reliability costs should be sought. Further nuances are highlighted through a comparative qualitative analysis of value-of-lost-load pricing and anti-gouging legislation in the event context.

• Item Type: MPRA Paper
• Language: English
• Keywords: Value of lost load; Anti-gouging laws; Extreme events; ERCOT; Electricity spot market design; Price regulation; System reliability
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D47 - Market Design; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices

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