PUCT Perspective on RA

PUCT Perspective

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

  • Group Urges PUCT to Continue Working on Resource Adequacy
    Copyright 2014 by Competitive Assets, LLC.  All rights reserved
    Calling forecasts “educated guesses,” the Texas Reliability Assurance Market Advocates filed a new statement in time for 2/21/14 PUCT open-meeting discussion. In it, they dispute that urgency in resolving resource adequacy in Texas has diminished and warn that waiting to address these issues until near-term planning reserves are insufficient will lead to high transition costs and threatened reliability. The group lists several factors that may affect reliability in the next few years, including the growth of business, plant retirements (up to 9,000MW), new federal regulations, and transmission constraints. Moreover, potential outages fall disproportionately on residential and small business customers, the group says, adding that going to a 15% reserve margin could be achieved at relatively low cost. “Rather than turning away from the volumes of expert analysis on reliability and resource adequacy that have been produced over the past several years because a series of assumptions have changed, TRAM Advocates recommend that the Commission continue its research and deliberations on resource adequacy by proceeding forward with the cost-benefit analysis previously planned by the Commission.”
  • Feb 7, 2014: Texas To Consider Target Power Margin Review Amid Push To Drop Capacity Market Talk
  • Feb 6, 2014: Studies Prove Texas Grid Is Healthy, Commissioner Says
  • Feb 5, 2014: Anderson Suggests Texas Commission Study Reliability Standard Prior to Comparing Costs of Resource Adequacy Alternatives
  • Feb 3, 2014: Brattle Economists Analyze Economically-Optimal Planning Reserve Margin For Texas Power Market
  • Brattle Group Report: The Economically Optimal Reserve Margin in ERCOT Would Be 10.2%
    Copyright 2014 by Competitive Assets, LLC. All rights reserved
    According to the much-awaited Brattle Group report, filed in Project No. 40000, related to resource adequacy, the economically optimal reserve margin in ERCOT would be 10.2%. This is lower than the 14.1% reserve margin needed to meet the typical one-in-ten Loss of Load Expectation (LOLE) target; BG estimates that going from 10.2% to 14.1% would increase the total system costs by about $100 million, or a small amount in the annual $35 billion market. The report presents a range of possible reserve margin targets, including “the 11.5% equilibrium reserve margin that the current energy-only market design is likely to achieve,” and which exceeds the 10.2% risk-neutral, economically optimal reserve margin. This means that the “current market design will support sufficient reserve margins from an economic perspective,” concludes the report. The authors touch on the correlation between the reserve margin and capacity: “If reserve margins are low and prices are high, suppliers will build because they expect to earn more than their investment costs. Those newly built plants will increase the average reserve margin and thereby suppress energy prices.” The report does not rule out going to a capacity market, which the authors believe would cost an extra $400 million annually, but getting there may be hindered by a contentious process and even litigation. They also acknowledge ERCOT’s recently released preliminary load forecast, which may decrease the urgency in addressing resource adequacy issues.
  • Feb 3, 2014: Brattle: Current Texas Energy-Only Market Can Maintain Optimal Reserve Margin
  • Feb 3, 2014: In Grid Debate, New Info Doesn’t Sway Opinions
  • Jan 31, 2014: Texas Power Capacity Market Debate Falls On Doorstep Of State Legislators
  • Jan 31, 2014: Report: Texas Can Wait To Address Threat Of Power Shortages
  • Jan 31, 2014: New Report Will Figure In Debate Over Electricity Reserves
  • Jan 30, 2014:Texas Power Play: War Of Words Heating Up
    Copyright 2014 by Competitive Assets, LLC. All rights reserved
  • The Texas Energy Report published details about a letter, sent to state lawmakers by “a group called Texans for Reliable Power (TRP), founded by power generating companies seeking major changes in the state’s competitive electric market.” In the letter, TRP calls statements by its opponents “downright wrong or grossly misleading.” Among the most vocal opponents of these changes in Texas – i.e., capacity markets – have been many large industrial customers, the Texas Public Policy Foundation, and some environmental groups.
  • Jan 24, 2014: New Forecast Challenges Views On Texas Electricity Crunch
  • Jan 24, 2014: New Forecast Should Drive Stake Through The Heart Of Proposed Energy Tax
  • Jan 23, 2014 PUCT Chairman Proposes Postponing ERCOT Resource Adequacy Workshop and Asks for More Comments
    Copyright 2014 by Competitive Assets, LLC. All rights reserved
  • On the eve of the 1/23/14 open meeting, the PUCT Chair Donna Nelson filed a memo (643) in Project No. 40000, related to resource adequacy, suggesting that – before proceeding with decisions in this project – the Brattle Group study the cost of the various market designs and the Commission postpone its planned workshop/hearing until mid-May. In addition, she proposed asking for comments on the parameters of such a study, to be filed by 2/7/14, with a discussion set for 2/21/14. The memo describes four market scenarios, which the Brattle Group would analyze: (a) the current market design (with the system-wide offer cap at $9,000/MWh); (b) an energy market, with the Operating Reserve Demand Curve (ORDC) and a “forward reliability market;” (c) same as (b), with a 14% reserve margin; and (d) same as (a), with a backstop designed to achieve a 14% reserve margin (e.g., Supplemental Reserve Service, as proposed by the Texas Industrial Energy Consumers). The Commission will discuss this, and several related projects, at the 1/23/14 open meeting, including on Capacity, Demand, and Reserves; Demand Response; and the feasibility of instituting real-time co-optimization in ERCOT.
  • Jan 22, 2014: Texas Lt. Governor Candidate Todd Staples Asks PUCT to Reject Capacity Market
  • Jan 22, 2014: Preliminary Revised ERCOT Load Forecast Shows Reserve Margin Above 16% Until 2019
  • Updated Report Regarding Real-Time Co-Optimization of Energy and Ancillary Services in ERCOT Filed by ERCOT and IMM
    Copyright 2014 by Competitive Assets, LLC. All rights reserved
    On 1/17/14, ERCOT and the Independent Market Monitor (IMM) jointly filed an Updated Report Regarding Real-Time Co-Optimization of Energy and Ancillary Services in the ERCOT Markets. Based on a request by Commissioners, this report adds additional information to the report originally filed by ERCOT and the IMM on 12/12/13. In this update, they describe what they see as “the different benefits of the two approaches under consideration for Real-Time Co-optimization of energy and AS: the “minimum” approach, which co-optimizes on a single-interval basis; and the “maximum” approach which would incorporate a multi-interval Real-Time Commitment and Real-Time Dispatch.” The report concludes that “implementation of the recently-approved ORDC will address the operating reserve shortage pricing aspect of “minimum” real-time co-optimization. Additional market efficiency value can be gained from the added functionality afforded by the “maximum” approach including multi-interval SCED – namely the enabling of SCED dispatch of additional resources to contribute to price formation.” They also note that an additional option could be considered: – a market construct with multi-interval Real-Time Commitment and Dispatch incorporating the already-approved reserve price adder based on ORDC, while foregoing the more complex challenges of real-time energy and AS co-optimization. A table is provided comparing various features.
  • Jan 9, 2014: Next Texas Resource Adequacy Open Meeting/Workshop Pushed to March
  • More Comments Filed in ERCOT Resource Adequacy Project
    Copyright 2013 by Competitive Assets, LLC. All rights reserved
    On 12/23/13, seven parties filed reply comments in PUCT Project No. 40000, related to resource adequacy. The Sierra Club and Texas Industrial Energy Consumers oppose a capacity market and question whether the Commission has the authority to make a market change; Environmental Defense Fund and Demand Response (DR) Coalition support a capacity market in the belief that it would lead to greater development of DR; and NRG, Texas Reliability Assurance Market Advocates, and STEC all support a forward capacity market. They state that the PUCT has statutory authority to make this change, with some arguing that it would be similar in concept to the current Ancillary Services market. The Commission will discuss at its 1/9/14 open meeting whether to reschedule a resource adequacy workshop, currently planned for the end of January. At the last open meeting, concerns were raised that some of the information (e.g., the Brattle Group report or Capacity, Demand, and Reserves report) might not be ready in time for the workshop.
  • Dec 16, 2013: New Round of Comments filed in Texas ERCOT Resource Adequacy Project
    Copyright 2013 by Competitive Assets, LLC. All rights reserved
    At least 28 parties filed initial comments in PUCT Project No. 40000, related to resource adequacy. The comments on specific questions about capacity markets had been requested at the PUCT open meeting in November by Chairman Nelson and Commissioner Anderson. The filings provide responses to such fundamental questions as whether the Commission has statutory authority to undertake a major market redesign, the efficacy and costs of capacity markets, the likelihood of regulatory uncertainty, effect on the retail market, proposals for alternatives, and others. Considering what type of a capacity market might be appropriate, one commenter stated: “As an extreme example, a ten-year forward market would model reserves needed based on a forecast 10 years ahead and assign obligations to Load Serving Entities (LSEs) on that basis. There is little likelihood that such outcomes will be accurate. Looking one year ahead is likely to be much more accurate. The problem with shorter forward markets is that they do not align with construction decisions for many resources.” This is just one of many questions the Commission will be addressing at the 1/29-30/14 workshop. Replies to comments are due on 12/23/13.
  • PUCT Staff’s Analysis Disputes NRG’s Study on Capacity Markets
    Copyright 2013 by Competitive Assets, LLC. All rights reserved
    On 12/9/13, Commissioner Anderson filed his staff’s analysis of the Charles River Associates study on resource adequacy and outages in ERCOT (573), which was commissioned by NRG and recently filed in Project No. 40000 (449). The staff’s analysis consists of three parts: an executive summary; methodology review; and an appendix, with details of mathematical assumptions used in CRA’s study. The filing asks interested parties to “critique this analysis” and file responses in Project No. 40000, in an effort to improve accuracy of the information available to the PUCT Commissioners, as they address resource adequacy issues in ERCOT.The executive summary of the Analysis of Charles River Associates Capacity Market Study states: “The CRA Study grossly overstates the direct cost per event of electric service interruption in its evaluation of the energy market construct. This is the value that CRA uses in its economic model to determine the effect on the Texas gross state product. In calculating the direct cost per event, CRA ignores warnings from the authors of a referenced national study and uses summer weekday afternoon cost values for every time period of the year. Ignoring yet another warning from the same national study, CRA fails to account for a significantly higher load profile for afternoon and evening periods, which also inflates its numbers. The inflation is so great that the CRA Study uses $85,000/MWh as an overall average cost per un-served MWh (or $85 per un-served kWh), for every time period of the day, season of the year, business type and residential consumer. Finally, CRA assumes an 8.4% reserve margin by way of incorrect assumptions and basic math errors for the energy market in 2016, to determine the total amount of un-served energy in a year, and it carries these errors throughout all years of the study. The net effect of these errors and omissions is to increase the cost estimate of an energy market by at least a factor of ten (likely, by a factor of at least 40). Some, but not all, of the errors also affect CRA’s results for the energy plus capacity market.” Commissioner Anderson’s web page also contains a breakdown of Capacity Market Costs Allocated by Meter, posted on 12/9/13.
  • Dec 9, 2013: PUC Commissioner Says NRG Overstated Costs On Power Study
  • Dec 9, 2013: PUCT Commissioner Anderson Staff Analysis: CRA/NRG Study On Capacity Market “Savings” Filled With Errors, Omissions And Incorrect Assumptions
  • New Developments on ERCOT Electric Market Changes
    Copyright 2013 by Competitive Assets, LLC. All rights reserved
    Today, on 11/25/13, the Texas Senate Committee on Natural Resources, chaired by Senator Fraser, is holding a hearing on resource adequacy issues facing the Texas electric market. There will be invited testimony only. The hearing was scheduled after several PUCT open meetings this summer and fall, during which Commissioners debated vastly differing visions of how to address resource adequacy, with little agreement in sight. On 11/22/13, the PUCT staff filed a Notice of Workshop and Request for Comments (564) in Project No. 40000, related to resource adequacy. As discussed at the 11/15/13 open meeting, a workshop has been scheduled for 1/29-30/14, with comments on Commission’s questions due on 12/16/13, and replies on 12/23/13. The questions – which reflect two very different perspectives – may be found at: http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/40000_522_771540.PDF (by Chairman Nelson) and http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/40000_559_773656.PDF (by Commissioner Anderson).
  • Nov 15, 2013: Debating the future of Texas electricity in Dallas
  • Nov 15, 2013 Report: PUCT Open Meeting 11/15/13
    Copyright 2013 by Competitive Assets, LLC.  All rights reserved

    The 11/15/13 PUCT open meeting was light in the number of decisions made, but made up for it in the intensity of the discussions, as the three Commissioners addressed resource adequacy issues.  And this was just the procedural issues!  To find out more, please subscribe to Texas Electric Policy News. If you are interested in purchasing this TEPN issue, 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.
  • Alert: PUCT Commissioner Anderson Asks Parties to Address A Number of Questions Regarding Implementation Of A Mandatory Reserve Margin For Generation Capacity In ERCOT
    Copyright 2013 by Competitive Assets, LLC.  All rights reserved
    On 11/15/13, PUCT Commissioner Ken Anderson filed a memo detailing 38 questions he would like considered in the upcoming workshop on Resource Adequacy in Texas.  The questions are about alternatives to an energy-only market in ERCOT and implementation of a mandatory reserve margin, and cover 4 broad topics:  1) Questions of General Applicability, 2) Backstop Generation as an Ancillary Emergency Reserve Service in EOM, 3) Reserve Margin Obligation on Load Serving Entities (LSEs), and 4) Centralized Forward Capacity Market.  The Commission is discussing this topic in Project 40000 at their open meeting today, 11/15/13.
  • Nov 14, 2013 Fraser Tells PUCT to Back Off Electricity Market
    Copyright 2013 by Competitive Assets, LLC.  All rights reserved

    The Dallas Morning News is reporting that Senator Fraser yesterday sent a letter to PUCT Chairman Nelson, requesting PUCT “not take any further action that would result in changes to the fundamental design of the Texas market before the appropriate legislative bodies have had the opportunity to provide clear guidance in the form of instruction or statute.”  As one of the co-authors of Senate Bill 7, the legislation that restructured the retail electric industry in Texas to make it competitive, Senator Fraser noted that current Commission lacks the institutional knowledge that would have made them aware that the Legislature deliberately applied free market economic principles to design the energy only market that ERCOT currently uses.  He further states that “[i]t certainly was not envisioned [that] the law would give the agency unprecedented power to do whatever they wanted under the pretext of ensuring ‘resource adequacy’.”  He states that because the proposed plan for a capacity market could cost as much as $4 billion per year, he “cannot justify a potential hike of this magnitude imposed upon [his 800,000 constituents] by an appointed board, unaccountable to the voters.”
  • Nov 12, 2013 PUCT Staff Asks For Comments on its Investigation of the Feasibility of the Institution of Full Co-Optimization in ERCOT Energy Markets Copyright 2013 by Competitive Assets, LLC.  All rights reserved
    On 11/8/13, the PUCT staff filed (2) a list of questions in Project No. 41837 – Investigation of the Feasibility of the Institution of Full Co-Optimization in ERCOT Energy Markets, noting that they will ask for the Commission’s input and approval at the 11/15/13 open meeting:

    1. What is the comparative value of proceeding with implementation of some form of real-time co-optimization, in light of the potential costs and disruption to other ongoing projects?
    2. What are the arguments in favor of implementing the minimum approach, the maximum approach, a subset of the maximum approach, or an alternative approach, particularly with regard to single or multi-interval dispatch and the configuration of ancillary services?
    3. To what extent does the Operating Reserve Demand Curve, currently being implemented by ERCOT, approximate the benefits of the various forms of real-time co-optimization, such that additional market enhancement becomes unnecessary?
    4. How would the implementation of co-optimization affect ERCOT’s potential redesign of ancillary services products in terms of project duration and material interaction between the two efforts?
    5. What other issues should the Commission consider in evaluating the need for implementation of real-time co-optimization?

    The filing also contains a notice of workshop in the project, scheduled for 1/28/14, with comments being due on 1/3/14 (and replies on 1/17/14).

  • Comments Filed at PUCT to Address Raising the Value of Lost Load (VOLL) in the Operating Reserve Demand Curve (ORDC) Copyright 2013 by Competitive Assets, LLC.  All rights reserved
    On 11/4/13, comments were filed in P.U.C. Project No. 40000, related to resource adequacy.  The Commission had requested responses to a 10/18/13 suggestion (509) by GDF Suez to raise the Value of Lost Load (VOLL) in the Operating Reserve Demand Curve (ORDC) to $25,000/MWh, while keeping the Minimum Contingency Level (MCL) at 2000MW (and a price cap of $9,000/MWh).  In the comments, the following views were expressed:

    • - Potomac Economics, the Independent Market Monitor (IMM), believes that, based on the information available, it is unclear whether $9K, $18K, or $25K “are appropriate values to use as VOLL for the types of customers who would be subject to rotating outages in short-supply conditions.”  The IMM also reviews the effect of higher VOLL on the overall prices and possibility of non-market actions during the Energy Emergency Alert (EEA);
    • - CPS Energy and Austin Energy recommend rejecting GDF Suez’s proposal, based on procedural objections and the uncertainty it would create because of the $9K price cap.  Instead, they urge the Commission to design the ORDC, using first principles, and focus on the development of the real-time co-optimization;
    • - White Camp Solar generally opposes the ORDC as a subsidy to generators, including the GDF Suez proposal, but does suggest several adjustments to the ORDC;
    • - Luminant’s analysis shows that adjustments to VOLL would have only minimal impact on the Peaker Net Margin.  There are, however, remaining issues that the Commission ought to address: (a) the Emergency Response Service (ERS), when deployed, should be excluded from available reserves to avoid price suppression; and (b) Reliability Unit Commitment (RUC) and Online Reliability Must Run (RMR) should be excluded from available reserves to mitigate price suppression and to avoid interfering with price formation;
    • - The Texas Industrial Energy Consumers (TIEC) calculate that agreeing with GDF Suez’ suggestion would result in “true VOLL” at 1375MW of $50K-$75K, which is too high (and even VOLL at $9K may be too high).  TIEC states that “the Commission should avoid modifying the ORDC without strong quantitative analysis demonstrating that the proposed change is consistent with efficient market design principles;”
    • - NRG Energy repeats its contention that the ORDC: (a) does not solve resource adequacy; (b) its main purpose ought to be improvement to the accuracy of scarcity pricing in the real-time market; and (c) cannot simultaneously deliver both market efficiency and resource adequacy; 
    • - Frontier Associates recommend “adopting $9,000/MWh as the ERCOT standard VOLL for all future implementations of ORDC, unless or until credible research provides a more suitable value;”
    • - Concerned about the generators’ ability to hedge, LS Power Associates suggests “… a larger operating reserve holdback, which we believe needs to be coupled with a release curve that has a gentle slope,” with rare price spikes to the cap, but more frequent higher prices;
    • - The Texas Public Policy Foundation filed a correction to its previous comments, estimating that “the total cost of transition to competition” was $9.5 billion; and
    • - The Texas Demand Response Coalition asks that the PUCT further clarify that “… the ORDC reserve calculation should subtract out the amount of ERS deployment that is instructed by ERCOT, allowing the quantity of available reserves to represent pre-ERS deployment reserves.”
  • Oct 31, 2013: Debate Intensifies On State’s Power Reserve Needs
  • Oct. 29, 2013 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.”
  • Updated:  The Commission Charts a Path on Reserve Margin
    Copyright 2013 by Competitive Assets, LLC.  All rights reserved
    By now, it has been widely reported that the PUCT, at its 10/25/13 open meeting, 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 the question at the meeting.  Commissioner Anderson opposed making the decision, noting that it is a precursor to a capacity market, which is opposed by some of the state’s largest employers.  The newly appointed Commissioner Marty sided with the Chairman during the discussion, which at times became quite heated and contentious.
    The Texas Tribune is reporting that “State Sen. Troy Fraser, R-Horseshoe Bay, who co-authored legislation that deregulated Texas’ electric market in 1999, said the Commissioners should wait for more information before solidifying their opinions, calling the vote a “severe miscalculation” that is “putting the cart before the horse.”  Fraser also questioned the PUC’s authority to overhaul the market, and said he would soon meet with his colleagues to discuss the legislature’s role: “I don’t think it was ever envisioned that the PUC would change the market,” he told the Tribune. “That’s a huge decision, and it should not be made by an agency.  It should be made by the Legislature.”
  • Oct 28, 2013: Electricity, But At What Cost For Texas?
  • Oct 25, 2013: Texas PUC Vote Signals Support For Market Shift
  • Oct 25, 2013: Vote To Require Spare Power On Texas Grid Spurs Debate
  • Oct 28, 2013: Government Knows Best: Texas Capitulates to Capacity Owners, Adopts Mandated Reserve Margin
  • ALERT:  The Commission Charts a Path on Reserve Margin
    Copyright 2013 by Competitive Assets, LLC.  All rights reserved
    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.
  • 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. 
  • Oct 15, 2013: 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.
  • Oct 15, 2013: PUC Member Hints At Adopting Mandatory Power Reserves
  • Oct 15, 2013: Key Decision On Possible Changes To Texas Power Market May Come In Early ’14, Official Says
  • Oct 9, 2013: Texas Utility Commission To Weigh Changes To Market
  • Report: ERCOT Planning Reserve Margin Workshop 10/8/13
    Copyright 2013 by Competitive Assets, LLC.  All rights reserved
    The debate about resource adequacy and what type of a market construct to have in ERCOT continued during the October workshop at the PUCT.  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.
  • Oct 8, 2013:PUCT Workshop on Resource Adequacy Project 10/8/13
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    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.      
  • Oct 6, 2013: PUCT New Commissioner’s Mission: Affordable, Reliable Power
  • Oct 7, 2013: PUCT Staff Posts Final Agenda for Today’s (10/8/13) Workshop on Resource Adequacy Project
  • Oct 3, 2013: PUCT Requests More Comments in Project No. 40000
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    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.
  • 9/23/13: More 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.
  • 9/12.13: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).

 

  • Sept. 12, 2013: Texas Advances Operating Reserves Demand Curve, Sets Major Parameters, NPRR to Be Issued Next Week
  • August 29, 2013: 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:

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

A workshop on the reserve margin issues on 10/8/13 to 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.

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  • ERCOT Monitor Reports---New Issues

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    ERCOT’s Wholesale Market Subcommittee (WMS) Meeting 4/9/14

    At its 4/9/14 meeting, the Wholesale Market Subcommittee (WMS) discussed the possibility of asking the PUCT to raise the offer cap to $9,000kWh this year, instead of on 6/1/15. The subcommittee also reviewed a number of NPRRs and changes to the Congestion Revenue Right (CRR) Activity Calendar.

    For more about the meeting, Please click here.

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    ERCOT’s Board of Directors (BOD) Meeting 4/8/14

    At its April meeting, the ERCOT Board skirted controversy with the consideration of NPRR533 and the Houston Import Project, but in the end both were approved without too much discussion. The Board also reviewed a number of NPRRs and heard a report from the Independent Market Monitor on higher prices this winter.

    For more about the meeting, Please click here.

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