This week California is set to restart a day-ahead electricity auction, which it abandoned after a poor structure and widespread manipulation by Enron and others led to price spikes and bankruptcy filings for some utilities.
As the Wall $treet Journal notes this morning:
The new “day ahead” energy market will line up electricity resources for delivery the next day. The market will have a price cap of $2,500 a megawatt hour, about 50 times the going price of electricity in California today. Even a high price is unlikely to wreck the market this time because the state is being divided into more than 3,000 separate pricing points called “nodes.” So high prices in one place won’t necessarily spill over into another.
The price tag is about $200 million for this switch.
Texas power market officials are watching this closely because they’re trying to do something similar, create a day-ahead market and a nodal system. The Texas system isn’t expected to start until Dec. 2010, however, and is already waaaaay over budget. The new price tag is $584 million (plus allowances brings it to $660 million). A bill is being considered in the Texas legislature this session to kill the plan.