To borrow a visual from my one of my more exciting experiences as a truck driver in the oil fields, ERCOT’s Nodal restructuring project has slid off the road and landed firmly in the ditch with the dirty side up and the wheels spinning.

In a press release sent out the day before Thanksgiving, ERCOT said, “The Electric Reliability Council of Texas (ERCOT), grid operator for most of the state, submitted a preliminary schedule and budget for the nodal market implementation to the Public Utility Commission today with a new "go live" date of December 2010 and a cost estimate of $660 million.”

The $660 million is a more than doubling of the current budget of $319 million, a number that was increased from $263 million at the start of 2008. If the new number is correct, it will add $.38/megawatt-hour to the cost of power in Texas. According to ERCOT, they’re currently working on a cost/benefit analysis to make sure it still makes sense to proceed.

One rumor from a fairly informed source says that ERCOT is contemplating junking the current project for one of two options - 1) start over from scratch or 2) buy a model from one of the other ISOs that has already implemented a nodal market and try to make that work.

The rumors of the troubles at ERCOT have been swirling around for several months. Apparently there have been ongoing and serious problems with the software behind the common information model (CIM), with missed delivery schedules and poor quality code. Additionally, the program has not been able to retain quality resources due to lack of appropriate compensation, especially for the level of experience and skill that they need to make the project successful.

From what I’ve heard, many of the contractors and vendors involved are heading toward the door at the end of the year, throwing their hands up in frustration with the mess.

Consider for a minute the proposed new budget and timeline. Since the start of the program in earnest, let’s say June 2006 when they first awarded contracts to vendors, and according to ERCOT’s latest status report, they’ve spent right at $300 million through September 2008 - that’s 27 months. Now they are proposing spending an additional $341 million in the next 25 months. Based on those numbers, the rumor that they will blow up the project and start over with something different sounds pretty much spot-on.

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