Regulatory Updates by Region

ERCOT Regulatory Highlights: September 2015

This month…

  • ERCOT released the Final Fall and Preliminary Winter Seasonal Assessment for Resource Adequacy.
  • ERCOT filed the Board-approved ERCOT Budget and associated System Administrative Fee for approval at the PUC.  A hearing was held on August 19th.
  • ERCOT provided an overview of the Operating Reserve Demand Curve performance for this summer.
  • ERCOT continues work on the Ancillary Services Overhaul with the next step being the completion of the cost benefit analysis.
  • The Independent Market Monitor released the 2014 State of the Market Report.
  • ERCOT announced that Bill Magness will succeed Trip Doggett as CEO.


ERCOT and the PUC

Resource Adequacy at ERCOT

The Final Fall Seasonal Assessment of Resource Adequacy (SARA) and the Preliminary Winter SARA were released by ERCOT on September 1.  As expected for both, ERCOT believes there will be sufficient generating capacity on the grid to serve forecasted peak loads.  Several wind projects and a combined-cycle gas generator recently became operational and are included in the new assessments.  ERCOT’s meteorologist also posted his forecast for fall and winter noting “there continues to be strong signals that the fall 2015 weather pattern will trend cooler and wetter”. 

ERCOT 2016-2017 Budget and Fee

In July ERCOT filed the Board-approved ERCOT 2016/2017 budget and associated System Administrative Fee at the Public Utility Commission of Texas for approval.  Under the proposal, the System Administrative Fee would increase from the current $0.465/MWh to $0.555/MWh.  The PUC held a hearing on the budget on August 19th.  ERCOT requests an effective date of January 1, 2016 for the fee increase.

Operating Reserve Demand Curve (ORDC) Performance for Summer 2015

At the ERCOT Board meeting, ERCOT staff presented a report on ORDC Performance.  The ORDC performed as expected during the two-week period of hotter than normal weather.  The presentation included Hour Ending 17 data.  ERCOT indicated that the higher ORDC adders occurred on days when reserves were more stressed.  Key drivers for stressing reserves included plant outages or derations, the amount of wind on the grid, and load.  ERCOT concluded that the ORDC was working as designed because it was reflecting scarcity.  They also indicated that higher ORDC prices on one day were reflected in DAM prices on the next day. 

Ancillary Services Overhaul

In late 2013 ERCOT announced its intention to overhaul the Ancillary Service Markets.  ERCOT filed NPRR667 which proposes the changes to the AS Markets.  ERCOT also hired the Brattle Group to perform a cost/benefit analysis (CBA) of the NPRR.  ERCOT expects the CBA to be completed by late October 2015.  They scheduled a review of the CBA with stakeholders on November 9, and then will allow for comments from stakeholders.  They will incorporate comments and release a “polished” NPRR late this year.

As a reminder, ERCOT has committed to implement the Ancillary Services Overhaul proposal no earlier than three years after Board approval of the NPRR.

Independent Market Monitor (IMM) Releases State of the Market (SOM) Report for 2014

The ERCOT IMM released the 2014 State of the Market report at the end of July.  The SOM is a required annual report to assess the incentives provided by market rules and procedures, look at the conduct of market participants, and assess the effectiveness of the Scarcity Pricing Mechanism.  Key findings were that the ERCOT wholesale market performed competitively in 2014, the ERCOT-wide load-weighted average of real-time energy increased by 21 percent from the previous year to $40.64, and total congestion revenue increased 52 percent from 2013 to $708 million.  Higher energy prices were the result of higher natural gas prices, increased loads and a slight increase in periods of scarcity.  Prices reached the system-wide offer cap (of $5000/MWh at the time) a total of 1.56 hours.  There were no instances of energy prices rising to the cap after the June 1 switch to the system-wide offer cap to $7000/MWh.  That switch was also concurrent with the implementation of the Operating Reserve Demand Curve.

The IMM also reports that net revenues provided by the market in 2014 were below the amount estimated to support new greenfield generation of any type (coal, nuclear, combined-cycle, combustion turbine).  The IMM observes that despite the lack of net revenues, the reserve margins in ERCOT are expected to exceed the target for the next several years.

Finally, the IMM makes several recommendations for improvements to current market design, including the eventual move to real-time co-optimization and the need for load deployment to be reflected in real-time energy and ancillary service prices.

New ERCOT CEO Announced

Following the last Board meeting, ERCOT announced Bill Magness to succeed Trip Doggett as CEO upon Doggett’s retirement at the end of this year.  Magness, who has been a vice president, general counsel and corporate secretary since September 2010, became senior vice president for Governance, Risk and Compliance for the ERCOT in January 2015.  Prior to joining ERCOT, Mr. Magness was a partner in the law firm of Casey, Gentz & Magness, where he represented ERCOT in numerous cases before the Texas PUC, and was lead counsel in utility commission proceedings in 16 states and the U.S. Virgin Islands. He has worked on utility issues for more than 20 years, held executive management positions at the Texas PUC and at a start-up telecommunications company, and served as a federal prosecutor early in his career.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – September 1

Wholesale Market Subcommittee – September 2

Reliability and Operations Subcommittee – September 3

Commercial Operations Subcommittee – September 9

Protocol Revision Subcommittee – September 10

Technical Advisory Committee – September 24

ERCOT Board Meeting – October 13

Public Utility Commission Open Meeting – September 11 and 24

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