Insuring a Small Retail Electric Provider’s Procurement Cost Risk in Texas

Chi Keung Woo, Jay Zarnikau, Asher Tishler, Kang Hua Cao*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


Motivated by the relatively infrequent but very large price spikes in the day-ahead and real-time energy markets operated by the Electric Reliability Council of Texas, this paper proposes an insurance that a small and risk-averse retailer in Texas (i.e., a retail electric provider (REP)) may buy to prevent financial insolvency caused by inadequate risk management. It also demonstrates the insurance’s practical design, pricing, and implementation. As participation in the REP’s procurement auction is voluntary, the insurance is mutually beneficial for the REP and the insurance seller. Hence, the proposed insurance is a newly developed wholesale market product that deserves consideration by REPs in Texas and competitive retailers elsewhere.

Original languageEnglish
Article number393
Issue number1
StatePublished - Jan 2023


FundersFunder number
Education University of Hong Kong04564
Faculty of Liberal Arts and Social Sciences, Education University of Hong Kong


    • ERCOT
    • electricity markets
    • insurance
    • retail service provider
    • spot price spike


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