The movement towards restructuring in the electric industry in the United States intensifies the need for a carefully-crafted market design. Currently ERCOT is the only ISO using a zonal commercial model. The zonal model provides market participants with the ability to commit their units based on a submitted portfolio schedule; however, this model introduces several operational challenges, including constraint and deployment oscillation. By providing a useful description of some of the problems encountered within the ERCOT market and the design revisions suggested to resolve the issues, this paper can be a useful resource to policymakers in potential RTOs, especially those who are in the process of determining a market model.

Bid price overlap refers to the phenomenon that down bids are higher than up bids in a market. The ERCOT market is a bilateral market and only about five percent of energy required by the system is purchased through the ERCOT balancing energy market. The ERCOT market deploys both balancing energy up and balancing energy down services, and overlapped balancing bids exist in the market. This study provides a thorough investigation into various types of balancing bid overlap and reveals the crux of the problem. It offers solid conclusions for ERCOT power market administrators to guide market behavior by looking through the superficial phenomena and focusing on the real problem underneath. This study may be the first documentation and analysis on bid price overlap and thus provides interesting conclusions to market players in various fields.