The operator of Texas' main electric grid released a semi-annual report of the forecast demand and supply of electricity, and while the outlook has improved from six months ago, Texas is still facing a shortage of generating capacity in the coming years, meaning electric rates are likely to spike as demand outstrips supply.

This again confirms that now is the time to shop for a low electric rate, while low rates are still available.

The Electric Reliability Council of Texas (ERCOT), which manages 85% of Texas' electric load, released its May 2012 Capacity, Demand and Reserves (CDR) report which examines forecast electric demand and available generating capacity over the next 10 years.

Because forecasting electric demand is not an exact science, and because power plants may unexpectedly trip offline due to unforeseen mechanical problems, grid operators require a "reserve" margin -- or an extra cushion of capacity beyond what is needed to meet forecast peak demand, as an insurance against unforeseen outages or demand above the forecast level.

In ERCOT, this reserve margin is 13.75%. If the reserve margin is below this level, the potential for rolling power outages due to capacity shortages is likely.

ERCOT's latest CDR report shows that for the summer of 2013, the reserve margin is now expected to be above the 13.75% level needed for reliability, at 14.3%. This level is barely above the minimum target, and means supplies will be tight, and high electric prices can be expected.

Still, the 14.3% forecast for the summer of 2013 is good news, because in ERCOT's December 2011 CDR report, the summer 2013 reserve margin was forecast at only 12.1%, below the level needed to avoid rolling power outages.

Furthermore, the forecast reserve margin for the summer of 2014 is now 9.8%. While still well below the minimum target of 13.75%, indicating potential power shortages in 2014, it is an improvement from the earlier forecast of 7.6%.

These improving reserve margins show that several measures taken by the Public Utility Commission of Texas to improve the efficiency of the wholesale electric market are working, and investors are responding with new generating capacity or returning mothballed plants to service. While a reliability violation is still forecast for 2014, new or returning resources tend to be added "just in time" under the ERCOT market design because investors, not customers, bear the risk of building new power plants, and bringing a plant online before it's needed means losing money. As shown with the 2013 reserve margin now being above the minimum level needed for reliability, as the forecast year moves closer, more and more capacity is typically committed, boosting the reserve margin.

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