How We Got Here

The Development of ERCOT Resource Adequacy Issues

Any opinions voiced in the articles linked below are those of the article authors only, and not necessarily endorsed by Competitive Assets

2009

On  December 18, 2009, ERCOT reported that the region’s reserve margins are forecast to remain above the 12.5 percent target minimum through 2013, but drop below the desired reserves beginning in 2014.

2010

PUCT Opened Project No. 37897 to start addressing the capacity inadequacy issue

2011

1/1/2011—Nodal Market Started

2/1/2011—Rolling Blackout

6/22/11 Workshop on  Environomental Regulation and Reserve Adequacy

TEW v6n15: Environmental Regulatioins and Resource Adequacy in ERCOT

6/29/11 Workshop on Resource Adequacy and Shortage Pricing

TEW v6n17  PUCT Workshop on Generation Adequacy in ERCOT – June 29-30, 2011 Part II

TEW v6n18  PUCT Workshop on Generation Adequacy in ERCOT – August 22, 2011 Part III

TEW v6n21  Generation Adequacy – Summary of Comments in Project No. 37897

8/22/11 Workshop on the Factors Affecting Pricing during Reliability Deployments by ERCOT

12/7/11 Memo-Anderson

12/22/11 Memo-Anderson

 

2012

2/23/12 Workshop on Resource Adequacy and Shortage Pricing
Started discussing increasing System Wide Offer Cap (SWOC)

3/6/12 Memo-Nelson

3/21/12 Memo-Anderson

4/11/12 Memo-Nelson

5/1/12 Memo-Anderson

5/16/12 Memo-Anderson 1

5/16/12 Memo-Anderson 2

6/1/12 ERCOT`s Submission of the Brattle Group`s ERCOT  Investment Incentives and Resource Adequacy` Report

6/1/12 Memo-Nelson

6/25/12 Submission of Technical Advisory Committee Recommendation Regarding Changes to the Power Balance Penalty Curve

6/28/12 Memo-Nelson

7/3/12 Order Adopting New §25.508 Relating to Resource and Reserve Adequacy and Shortage Pricing

8/13/12 PUCT Closed Project No. 37897 and Open New Project No. 40000

8/16/12 Memo-Nelson

9/6/12 Workshop on Resource Adequacy

9/11/12 Brattle Group Follow-up/Updated Summary Table to Resource Adequacy Proposals Discussed at the September 6, 2012 Workshop

9/12/12 Memo-Anderson

9/12/12 Memo-Pablos

9/19/12 ERCOT Report on Reserve Margin Analysis

9/24/12 ERCOT Back Cast Analysis of Impact of Proposed System-wide Offer Cap Changes on Peaker Net Margin and Credit Issues

9/27/12 Memo-Anderson

9/27/12 ERCOT Report on Process Considerations and Roadmap for Resolution of Policy Issues

10/4/12 Memo-Pablos

10/22/12 ERCOT Update Report on Reserve Margin Analysis and Response to `Implementation Schedule` in Brattle Group`s Composite Policy Options

10/25/12 `Composite’ Policy Options” for the October 25, 2012 Workshop

11/13/12 Memo-Anderson
11/13/12 Memo-Pablos

12/22/12 A revised chart describing certain activities to be undertaken by the commission staff and ERCOT staff relating to resource adequacy

 

2013

1/22/13 Presentation regarding Potential Implementation of Scarcity Pricing Proposal offered by Professor Hogan

1/24/13 Workshop

2/12/13 Memo-Anderson

2/13/13  ERCOT Analysis of the `Interim Solution B` Proposal Discussed at the January 24, 2013 Commission Workshop on Scarcity Pricing Alternatives

2/14/13 Commissioner Pablos Resigned

2/28/13 Memo-Nelson

3/22/13 ERCOT Corrected Response to the Commission`s Request for Additional Analysis of the `Interim Solution b` Scarcity Pricing Proposal Discussed at the January 24, 2013 Workshop

3/27/13 Memo-Nelson

4/9/13 Memo-Anderson

5/3/13 ERCOT Supplemental Analysis of Issues in ORDC B+ White Paper

5/17/13 ERCOT Impact Analysis Estimating Cost and Timeline for Implementation of ORDC B+ proposal

6/18/13 Value of Lost Load Literature Review and Macroeconomic Analysis Prepared for ERCOT by London Economics International LLC

6/25/13 Report on ORDC B+ Economic Equilibrium Planning Reserve Margin Estimates Prepared by the Brattle Group

6/27/13 Workshop

7/3/13 Copy of Presentation Given by Professor William W. Hogan  at 6/27/13 Workshop

7/18/13 ERCOT Initial Response to Commission’s Request for Implementation Estimates Regarding Real-time Co-optimization of Energy and Ancillary Services

7/19/13 Memo-Anderson

7/23/13 ERCOT Responses to Commission`s Request for Analyses of Additional ORDC B+ Scenarios

7/25/13 Memo-Anderson (corrected from 7/19/13)

8/9/13 Memo-Nelson

8/21/13 Brandy Marty was appointed to PUCT as the 3rd Commissioner

8/29/13 Memo-Anderson 1, Memo-Anderson 2

8/29/13

PUCT Decides Steps to Move Forward in Addressing Resource Adequacy at ERCOT.  At the 8/29/13 open meeting, the Commission laid out a path for how to proceed in Project No. 40000, related to resource adequacy:
•Direct ERCOT staff to draft Protocol language for the implementation of the Operating Reserve Demand Curve (ORDC), with the specific inputs decided later
•Stakeholders to file comments on the following questions by 9/23/13:

  1. Should the Economically Optimal Reserve Margin (EORM) be a mandate;
  2. What standard is to be used in deciding the above question (e.g., one-in-ten years);
  3. Are we using correct assumptions/inputs in the Capacity, Demand, and Reserves (CDR) report;
  4. What is the most effective way to meet the EORM (using a cost/benefit analysis (CBA));
  5. Do we need to do a formal CBA?

•A workshop on the reserve margin issues on 10/8/13;
•Discuss ORDC inputs either at the next meeting or whenever Commissioner Marty has completed her review of the relevant materials and is ready to make decisions.

9/5/13: ERCOT Impact Assessment Of Real-Time Energy & Ancillary Services Co-Optimization

9/13/13 

PUCT Instructs ERCOT How to Proceed with the Implementation of the Operating Reserve Demand Curve
Copyright 2013 by Competitive Assets, LLC.  All rights reserved

At the 9/12/13 open meeting, the Commission instructed ERCOT staff to use the following inputs, when drafting Protocol language for the implementation of the Operating Reserve Demand Curve (ORDC):

  • Value of Lost Load (VOLL) – $9,000MWh
  • Value of X (i.e., minimum contingency level) – 2000MW
  • Remove the existing Ancillary Services offer floors
  • The curve to be a continuous one, generated by the cumulative distribution function method.

ERCOT staff said that the draft Protocol revision may be ready by the end of next week, and the Commissioners noted that they see no reason to delay consideration of the ORDC by ERCOT stakeholders.  In further developments:

  • Comments on the reserve margin questions/issues were to be submitted by 9/23/13;
  • A workshop on the reserve margin is scheduled for 10/8/13;
  • ERCOT staff may be able to “shadow” the ORDC by publishing a non-binding adder in about three-to-four weeks;
  • The Brattle Group will be working on an analysis of the economic equilibrium reserve margin; and
  • ERCOT staff were asked to do a cost/benefit analysis of the Real-Time Co-optimization (RTC) (with one Commissioner commenting that the ORDC may provide 85% of the benefits of RTC).

9/19/13: ERCOT Proposes Protocol Revisions For ORDC B+ Implementation

9/23/13More comments in Project No. 40000, related to resource adequacy filed in response to questions the Commission posed at the 8/29/13 open meeting. A summary of the comments can be found in the Texas Electric Watch Issues v8n18 and v8n18-Sup.

9/27/13: ERCOT Stakeholders Working on Implementing Real-Time Reserve Price Adder Based on Operating Reserve Demand Curve at the 9/26/13 Resource Adequacy Task Force (RATF) meeting.

9/30/13: PUCT Staff files Agenda for October 8 Workshop for Resource Adequacy Project

10/1/13: Battle Over Power Capacity In Texas Heats Up

10/3/13: PUCT Requests More Comments in Project No. 40000
Copyright 2013 by Competitive Assets, LLC.  All rights reserved

At the 10/3/13 open meeting, the Commission asked interested parties to comment on the questions asked in a CPS 10/1/13 filing (485) in Project No. 40000, related to resource adequacy.  The deadline for comments is 10/11/13.  The Commission is also holding a workshop in this project on 10/8/13. 

10/6/13: PUCT New Commissioner’s Mission: Affordable, Reliable Power

10/7/13: Changes In ERCOT Electricity Market Carry Risks

10/8/13: Workshop on Resource Adequacy Project

10/8/13: Texas Power Providers Seek Fees To Insure Generation Reserves

10/8/13: Debate Over State’s Power Reserves Raises More Questions

10/8/13: PUCT Workshop on Resource Adequacy Project 10/8/13
Copyright 2013 by Competitive Assets, LLC.  All rights reserved

On 10/8/13, the PUCT held a workshop in Project No. 40000, on resource adequacy, to discuss whether the reserve margin should be a target or a mandate and how best to maintain adequate reserves.  The afternoon session focused on presentations from: (a) ERCOT staff on revisions to the forecasting model, resulting in lower load forecasts and somewhat higher reserve margin (i.e., 16.7% in 2014 and 16.1% in 2015); (b) the Sierra Club on the need to incorporate energy efficiency, Demand Response, distributed generation, renewables, and other new technologies into the forecasting methodology; and (c) the Texas Industrial Energy Consumers (TIEC), whose representative noted ERCOT is the best price-responsive market in the US and that a 10-year Capacity, Demand, and Reserves (CDR) report might not be too useful beyond five years.  The Commission made no decisions, although the new Commissioner Marty expressed concern about sufficient reserves to enable business growth.  At one point, Commissioner Anderson alluded to possible changes to the Emergency Response Service (ERS), and explained how ERS can bid into the market.  Also, at the workshop, ERCOT staff reported that they will start producing indicative prices for the Operating Reserve Demand Curve (ORDC) on 10/19/13.  The information will  be posted to the Market Information System (MIS) page. On the same day, Representative Turner filed comments, cautioning the Commission before proceeding with a capacity market, without doing a thorough cost/benefit analysis.  The Commission, perhaps for the first time, delved into the pros/cons of a capacity market and considered differing viewpoints of various market participants.  Read more about this debate in the latest issue of the Texas Electric Watch, including why the Independent Market Monitor does not believe that the centralized, forward capacity market is the way to go. If you are interested in purchasing this TEW issue, please click here. If you are interested in subscribing the Texas Electric Watch, please click here or call Competitive Assets at 512-581-0151.

10/15/13: PUCT Commissioner Marty Testifies on Generation Adequacy Issues before a Senate Committee
Copyright 2013 by Competitive Assets, LLC.  All rights reserved
On 10/15/ 13, the Texas Senate Business and Commerce Committee met to discuss its interim work and hear testimony from several state agencies, including the PUCT.  The Austin American Statesman (AAS) is reporting that the new PUCT Commissioner Brandy Marty indicated her preference for a quick resolution of the generation adequacy issue – perhaps as early as next year: “Certainly one option would be to make the decision to adopt a mandatory reserve margin and not be able to build anything around that until we have the information on what that exactly should look like,” Marty said.”  Laylan Copelin of AAS writes that “her remarks … are likely to be interpreted as favoring redesigning the existing wholesale electricity market – a prospect that critics have warned could raise electricity rates.” The article continues: “After the Tuesday’s hearing, Marty said the industry and consumers should not assume that the ultimate solution would be the capacity market favored by most owners of power plants.  “I think people’s minds go there because of the model we’ve seen, but Texas tends to do what’s best for Texas and there are going to be components from several different markets,” she said. “I don’t know yet because we are waiting for information.”
At the 10/8/13 PUCT workshop on resource adequacy, the Chairman was inquiring about how much time would be needed before the effectiveness of the Operating Reserve Demand Curve (ORDC) solution, currently under development at ERCOT,  could be evaluated.  One participant suggested that it would take at least twelve months after the implementation – i.e., not until the summer of 2015 – to see the full effect. 

10/17/13: PUCT Workshop on Investigating Potential Impacts of an Increase in the System-Wide Offer Cap on Retail Markets
Copyright 2013 by Competitive Assets, LLC.  All rights reserved

On 10/17/13, the PUCT staff held a workshop in Project No. 41641, Project to Investigate Potential Impacts of an Increase in the System-Wide Offer Cap on Retail Markets.  Previously, on 10/7/13, parties filed comments, responding to staff’s questions on mitigating potential impacts, possibly increasing capital requirements on REPs, impact of peak load events on some REPs, and any other impacts.  At the workshop – which ran only about 30 minutes – there were several questions about Interval Data Recorder (IDR) meters, since one of the ways to lessen impact on the retail market would be a shortened settlement timeline.  Participants pointed out that IDR data are provided monthly, so data estimation would have to become more prevalent with a shorter timeline.  Switching such meters to Advanced Metering Systems (AMS) would be costly to REPs and their large customers, many of whom maintain entire systems, based on IDR.  The staff were also cautioned that, while going to a five-day settlement timeline is manageable, anything shorter than that will have to be very carefully evaluated. 

10/18/13:ERCOT Files Back Cast Analysis Regarding Proposal In GDF Suez Energy’s Comments
Copyright 2013 by Competitive Assets, LLC.  All rights reserved
On 10/18/13 ERCOT filed a Back Cast Analysis regarding a proposal made by GDF Suez Energy NA in their comments in PUCT Project No. 40000.  The Commission is scheduled to discuss the adoption of an Operating Reserve Demand Curve on November 15, 2013, and has requested comments from interested parties by November 4, 2013. The Commission requested the ERCOT Back Cast analysis before the November 4th deadline so it could be evaluated by parties who plan to comment.The Back Cast reviews the impact of the Value of Lost Load at $18,000 and $25,000, using 3 scenarios.  The analysis found that the estimated additional Peaker Net Margin would have ranged in 2011 from $157,333/MW to $378,764/MW, and in 2012 from $27,173/MW to $78,509/MW.  Also reported are the Energy Weighted Average Price Adder P_S and the Energy Weighted Average Offline Reserve Price P_NS.

10/25/13: The Commission Charts a Path on Reserve Margin
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At the 10/25/13 open meeting, the Commission delved into a discussion on whether to have the planning reserve margin (PRM) be a mandate or a target.  Chairman Nelson – in a somewhat surprising move – asked that the Commission decide this question today.  Commissioner Anderson opposed making the decision and said that he did not “appreciate the surprise.”  Commissioner Marty was leaning toward the Chair’s position during a discussion, which at times became quite heated and contentious.After a recess, and an agreement on the schedule to consider resource adequacy further (through January 2014), Chairman Nelson again pushed for a vote on the mandate/target determination for the reserve margin.  There was an additional discussion, partly about the appropriate reliability standard and also on whether the Commission would be locking itself into the future approval of a capacity market with this vote (this was a question Commissioner Marty wanted resolved before voting).  The Chairman then repeated that she wants a vote and got confirmation from Commissioner Marty on her support for the reserve margin to be a mandate. Commissioner Anderson made a strong statement in opposition to the vote at this time and the approval of the reserve margin as a mandate, saying that this was a slippery slope toward destroying “the economic engine that is Texas.”  Chairman Nelson stated that she is making this move so that the economy of Texas would not suffer from unreliable power supply and that it is a balancing act.
When asked whether she wants to proceed with a vote today, the Chair briefly said “No.”  It appears, however, that the intent may have been to put everybody on notice that there are at least two votes to designate ERCOT’s reserve margin as a mandate.  (Some other press outlets have interpreted the entire discussion as a positive vote (i.e., 2-1) on the mandated reserve margin; while others have not drawn this conclusion.)
The latest issue of the Texas Energy Policy News “PUCT Open Meeting 10/25/13 Excerpt of Discussion on Reserve Margin“ summarizes only what at times was a heated and contentious debate about this topic and clarifies the final outcome. If you are interested in purchasing just the Excerpt, please click here. If you are interested in subscribing the Texas Electric Policy News, please click here or call Competitive Assets at 512-581-0151. In addition, a full report on Today’s Open Meeting is available and if you are interested in purchasing this full TEPN issue, please click here.

10/29/13: Texas Senators Voice Different Opinions Regarding PUCT’s Decision to Change ERCOT Market
Copyright 2013 by Competitive Assets, LLC.  All rights reserved

The Austin American-Statesman is reporting that Senator Troy Fraser, who is one of the original state Legislators who supported deregulation of the Texas wholesale electricity market, has expressed an opinion that the Public Utility Commission lacks authority to shift the market design from an energy-only market to a capacity market.  As the chairman of the Senate Committee on Natural Resources, he stated that “he intends to convene a hearing to question the three members of the utility commission about their 2-to-1 decision last week to begin mandating the level of electricity reserves, a first step to possibly redesigning the market.”  At this time the hearing has not yet been scheduled.
The article goes on to say that “State Sen. John Carona, R-Dallas, wrote the utility commission last summer supporting its efforts to address the issue.  On Monday (10/28/13), Carona – who is chairman of the Senate Business and Commerce Committee – repeated his support. “The Public Utility Commission is charged with the responsibility of ensuring that adequate energy resources are available for Texas consumers,” Carona said by email. “I have encouraged the Commission to examine the issue closely and do what is necessary to meet this challenge.” Carona concluded that the commission’s decision to ensure an adequate reserve margin “is a move in the right direction” to help the Texas economy and he would work with Senate colleagues to be sure the utility commission has authority to do what it needs to do.”

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    ERCOT's Technical Advisory Committee (TAC) Meeting 8/25/16

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