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Consulting firms CRA International Inc. and Resero Consulting have provided an updated cost-benefit analysis for the proposed Electric Reliability Council of Texas (ERCOT) nodal market conversion. The firms were retained by the Public Utility Commission of Texas (PUCT) to prepare an update on the 2004 Cost-Benefit Assessment (CBA) of the Texas nodal market and to analyze the incremental costs and benefits given changes that have transpired since the 2004 assessment and the PUCT's subsequent decision to implement a nodal market.

The new analysis, titled "Update on the ERCOT Nodal Market Cost-Benefit Analysis," was developed by the same consulting team that conducted the 2004 analysis. Despite rising conversion costs, the new analysis shows a potential consumer cost savings of $5.6 billion from shifting to fully locational pricing of wholesale electricity in ERCOT.

The proposed nodal design would allow for spot energy prices at a much more granular level that better reflect actual costs for producing and delivering energy to various locations on the grid.

The updated 2008 cost-benefit analysis concluded the following:

- Energy savings have declined somewhat since the 2004 CBA, partly because of new transmission upgrades that have been completed and lower forecasts for growth in electricity demand;

- The overall production cost savings resulting from a Texas nodal market are estimated to be $520 million (vs. an estimate of nearly $675 million in 2004);

- In comparison, net costs yet to be spent to complete and operate the Texas nodal market through year 2020 are estimated to be $222 million; and

- During the first 10 years of operation of the Texas nodal market, the savings to consumers are estimated to be approximately $5.6 billion (vs. an estimate of $7.3 billion in 2004).

To read the report, visit puc.state.tx.us.

SOURCE: CRA International

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