The Texas interconnection is one of three power systems in the contiguous US, though Texas interconnection itself is quite isolated and very little electricity flows between it and the other two interconnections. It was regulated as recently as 1995, when the state legislature voted in favor of deregulation and allowing for wholesale competition. The Electric Reliability Council of Texas [ERCOT] was then made responsible for creating and implementing a suitable market structure that would facilitate competition among power producers, ensure fair access to the power system, and guarantee reliability of transmission.
Scheduling generation in the Texas interconnection occurs through a series of markets, though participation in any one market is not mandatory. Power producers and retailers first have the option of negotiating bilateral contracts to schedule supply over an extended period of time. Successful contracts are then relayed to ERCOT, which verifies whether the grid can accommodate the agreed upon schedules. Before any
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In this example, the prices for each of the four zones are identical between 9am and 10pm, when demand for power is high throughout the state. But during the early morning and late at night, the prices are different, which is especially noticeable in the West zone. The West zone has both the smallest population and highest concentration of wind power capacity. It is often the case that wind farms are more active at night, but there is insufficient demand for electricity in the West zone and not enough transmission capacity to carry the power to other parts of the state. As a result, the price for power in the West zone is frequently lowered until producers appropriately adjust their output. In this instance, the price often becomes negative in the West, indicating that the power producers are paying for the right to generate