Nodal History
On December 1st, 2010, the Texas electricity Grid changed to a revolutionary new design that took it from what the industry knows as “Zonal” to “Nodal”. The development of this project began back in September of 2003 when the Public Utility Commission of Texas (PUCT) required the implementation of a new market design. From 2003 to 2010, a lot of work was done to create a market that serves Texas electricity customers better than ever.
How It Works
This means that generators, utilities, retail electric providers and customers will buy and sell power based on a much more specific region of the state and have costs (such as congestion charges) distributed much more fairly as well.
With this new way of managing the power grid, resources such as cheap wind power in the West Zone, cheap nuclear power in the South Zone and cheap coal power in the Houston electricity zone will be cheaper to distribute nearby and more expensive to distribute farther away.
With the old system, there was no way to send electrons from one generator to an area any more precise than the whole zone (e.g., West Texas). With the new system, for example, the STP Nuclear facilities 90 miles southwest of Houston can dispatch generation to a specific node(s) in Houston rather than simply the entire Houston Zone. With the new nodal system, power generation will benefit all of the customers, including residential and small commercial, and as a result of generation facilities being dispatched into the market and onto the grid at a much more nodal level as opposed to just turning on a generation unit for an entire zone. Why? Because the congestion costs will be reduced, and that affects everyone that buys power in deregulated markets.
How has the Zonal to Nodal transition affected your electric bill?
For most consumers, it hasn’t. The PUC of Texas ordered that any customer under 50 Kilo-Watts of demand should not have any additional charges passed-through. So, while over time you will see the market reflect the costs or savings associated with Nodal, nothing is going to change on your bill. However, for customers that have a demand greater than 50 KiloWatts (which translates into a monthly usage of approximately 15,000 KiloWatt-Hours or $1,000 – $1,500/month depending on your electric rate plan), there will be changes to your bill.
Most energy providers have a “change in law” provision for customers over 50KW. This Public Utility Commission of Texas has agreed that Zonal to Nodal constitutes a change in law giving Retail Electric Providers the right to pass-through this added cost. Good thing too, because if that didn’t happen many providers would have gone out of business in 2010 (as it was, some still did as a result of unpreparedness for costs related to Nodal). Different Retail Electric Providers in Texas will be accounting for nodal costs differently on their bills. Some of the differences are related to what type of energy product you are on (MCPE with or without fixed adders, fixed price with pass through, heat rate with pass-through, etc).
Nodal Specific Terms You Should Know:
RUC (Reliability Unit Commitment) – This is the cost incurred as a result of ERCOT ordering specific electricity generation units that are offline to turn on to maintain grid reliability when there isn’t enough generation online to meet demand. The cost is paid to ERCOT directly by a QSE (Qualified Scheduling Entity) at a formulaic rate that is inherently higher than where economic offers have recently cleared for other generation already online. The charges paid by the QSE are passed on to the Retail Electric Providers and are either absorbed or passed-through on your bill, depending on how your electric company has prepared for Nodal or depending on your preference if you want it passed through or included in your Kwh rate.
Trade Hub to Load Zone – This is often referred to generically as “Nodal Charge”. This is basically the price difference between energy price at the source (the generator) and energy price at the destination (the load zone, which is an average price of nodes in a zone).
In conclusion: Zonal to Nodal & You
The shift of the Texas energy market from a zonal to nodal design was one of the most influential changes since the actual deregulation of the Texas market in 2002. This change is yet another way that Texas customers can experience innovation when it comes to buying electricity. And if you are looking for the best rates contact us!