The Electric Reliability Council of Texas — the ISO managing the wholesale electricity market for approximately 90% of Texas's electric load.

When did ERCOT switch to nodal pricing?

December 1, 2010, replacing the four-zone market with thousands of individual settlement points.

Is ERCOT regulated by FERC?

No. ERCOT operates entirely within Texas and is regulated by the Public Utility Commission of Texas (PUCT).

What Is ERCOT Nodal Pricing? The Texas Wholesale Electricity Market Explained

Quick Answer

ERCOT uses a nodal pricing market design where electricity prices are calculated at each individual bus (node) on the Texas transmission grid. An ERCOT LMP reflects System Lambda (energy) plus congestion; unlike some other markets, it does not include a marginal-loss component. ERCOT switched from a four-zone market to nodal pricing on December 1, 2010.

Why Nodal?

The zonal market masked local congestion, resulting in out-of-merit dispatch and uplift costs. Nodal pricing exposes the true locational cost at each point on the grid, improving dispatch efficiency and price transparency.

Settlement Points

Each generator, load zone, and trading hub has its own settlement point price. Over 700 resource nodes for individual generators, plus four load zones (Houston, North, South, West) and financial hubs.

Two Markets

Day-Ahead Market (DAM) — Forward market, financially binding hourly prices
Real-Time Market (RTM) — Physical dispatch, 5-minute prices

ERCOT's Unique Position

ERCOT operates entirely within Texas and is regulated by the PUCT rather than FERC. It is the only US ISO that operates as an island without significant interstate power flows.

Frequently Asked Questions