Skip to main content

Impact of the Performance Credit Mechanism (PCM): Implications for Investors

We are pleased to present highlights from our recent ERCOT Market Summit presentation on the Impact of Performance Credit Mechanism (PCM): Implications for Investors. This document presents preliminary analysis of the impact surrounding implementation of the PCM in ERCOT. This is an abbreviated version of our recently published policy note available to our subscribers.

  • On January 23rd 2023, the Texas Public Utilities Commission (PUCT) voted 5-0 to formally recommend the adoption of a Performance Credit Mechanism (PCM) in ERCOT:
    • The recommendation comes after 1.5 years of debate over ERCOT market redesign measures, stemming from the 87th Legislature passing Senate Bill 3 to increase reliability in ERCOT following Winter Storm Uri
    • The PCM is a novel market design, put forward among others by Energy and Environmental Economics (E3) in a November 2022 report for the PUCT, analyzing several market redesign options
  • The PCM retroactively rewards generators based on availability during high reliability risk hours, with payment determined by an administratively-set curve
  • There is still much uncertainty regarding policy design:
    •  Which technologies will be eligible for PCM payments? Will demand response be eligible?
    • How will high reliability risk hours be determined?
    •  How will ERCOT determine the demand curve and how volatile will resulting prices be?
    • What second order effects are likely to result from a PCM? Will it affect the ORDC or ancillary services?
  • It is still highly uncertain whether the PCM will be implemented:
    • Governor Greg Abbott expressed support for the PCM in a letter on January 10th to the PUCT
    • Senators on the Business and Commerce Committee have expressed dissatisfaction with the PCM design as a response to Senate Bill 3
    • It is unclear what position the Legislature will take on the PCM before the current  88th Texas Legislative session ends in May 2023.


More in-depth analysis to come from Aurora on the PCM in our upcoming April 2023 Power and Renewables Market Forecast release. All PCM analysis in this deck has been marked preliminary

For more information contact Ben Bramley

Download a redacted sample of the report below:

Sign up to receive our latest public insights straight to your inbox

Sign Up