RT Pricing Power Procurement (LMP) vs Indexed NG Procurement

Historically, ERCOT real time pricing, whether it was MCPE (Marginal Clearing Price Energy) or LMP (Locational Marginal Prices), has provided on average the lowest cost of procurement. There will be the occasional price spike for any number of reasons with a gut-wrenching, shocking monthly bill (or several). The aftermath will cause angst and second-guessing as to why prices weren’t fixed and price spike risk avoided. That’s why only the most risk-tolerant and sophisticated loads find this structure appealing. They understand that they save on their energy spend. IPP would procure via LMP if it was our spend, given specific criteria (for instance, the delta between the forward curve of wholesale power vs. the assumption of the path of LMP (for which there is no forward curve), the level of power prices, and the prospects for reasonable safety margins of capacity in seasonal stress times – summer, base load maintenance, etc.).