Regulatory Updates by Region

ERCOT Regulatory Highlights: April 2016

This month…

  • The Public Utility Commission (PUC) received comments on Project No. 45572 which was opened to review the parameters of the Operating Reserve Demand Curve (ORDC).
  • Several proposals for modifications to the 2016 Ancillary Services Methodology have been introduced.
  • The PUC conditionally approved the acquisition of the Oncor transmission and distribution system by Hunt. 
  • ERCOT continues work on the future Ancillary Services Overhaul.
ERCOT and the PUC

Resource Adequacy at ERCOT

Last year, the PUC discussed a memo filed by Commissioner Anderson related to the performance of the ORDC during summer 2015.  In his memo, Anderson states that he believes it is time to “examine how it has functioned and whether there is a need for minor adjustments to improve its efficiency.”  Stakeholders disagree as to whether or not the ORDC should be modified.  In February, the PUC opened Project No. 45572 to review the parameters of the ORDC.  PUC staff requested reply comments on the different stakeholder proposals, and 15 entities filed reply comments.  It is likely the PUC will discuss the ORDC in upcoming open meetings.

2016 Ancillary Services Methodology

While the ERCOT Board approved the ERCOT Ancillary Services Methodology changes for 2016, several new proposals recently have surfaced.  Some generators filed a Nodal Operating Guide Revision Request (NOGRR) that would increase the minimum amount of Responsive Reserve Service (RRS) procured to 2750 MW.  That NOGRR was introduced at an ERCOT working group and was rejected by the Reliability and Operations Subcommittee (ROS) at ERCOT in early April. 

The other proposal is from ERCOT staff and would change the Reserve Discount Factor by one percent.  ERCOT uses a RDF multiplier (0.99 most times, 0.98 on days when temperature is over 95ᵒ) to account for system-wide capability that is historically undeliverable during periods of high system demand.  Analysis of unannounced testing of the RDF indicated that more power plants than expected are meeting their capability with their telemetered value.  As a result, ERCOT proposed to eliminate the RDF for all times the temperature is below 95ᵒ and change the factor to 0.99 from 0.98 when it is over 95ᵒ.  The RDF change was approved by ROS in April and will be implemented ten days after a market notice is issued by ERCOT.  In addition, ERCOT wants to procure an extra 200 MW of RRS during four peak hours a day for July and August. ERCOT’s proposed schedule for the additional RRS would be July 2016.  The RRS proposal will be discussed in the stakeholder process during April and ultimately requires Board approval.

Hunt/Oncor Filing at the PUC

Oncor filed the proposal to transfer Oncor transmission and distribution system from Energy Future Holdings (EFH) to Hunt.  Hunt’s Sharyland utility is structured as a Real Estate Investment Trust (REIT), and the Oncor assets are also to be structured in this manner, but in a separate entity from Sharyland.  A REIT involves the assets being held in a trust and receiving rental payments from the utility subsidiary that operates the assets. A hearing was held in mid-January and on March 17 Chairman Nelson filed a memo with her thoughts on tax issues and public interest.  On March 24, the Commissioners approved a final order approving the transfer to Hunt but imposing some conditions.  It is not known whether or not Hunt will decide to proceed with the purchase given the conditions imposed by the PUC. 

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 hired the Brattle Group to perform a cost/benefit analysis (CBA) of the NPRR.  The final CBA was released at the end of December and an update to the CBA was filed in March.  The update used lower natural gas prices to reflect current conditions. 

Some stakeholders were hoping to capture some of the benefits of the overhaul without changing the entire AS Market and filed a competing NPRR.  However, after some discussion, the NPRR was withdrawn, leaving the AS Overhaul as filed by ERCOT.

As a reminder, ERCOT has committed to implement the Ancillary Services Overhaul proposal no earlier than three years after Board approval of the NPRR.  In recent weeks, ERCOT has discussed phasing in the changes.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – April 5

Commercial Operations Subcommittee – April 5

Wholesale Market Subcommittee – April 6

Reliability and Operations Subcommittee – April 7

Protocol Revision Subcommittee – April 14

ERCOT Board Meeting – April 19

Technical Advisory Committee – April 28

Public Utility Commission Open Meeting – April 14

All data provided in this report is intended for general information use only.  Direct Energy does not guarantee the completeness or accuracy of this data, nor does Direct Energy assume any liability for any loss that may result from the reliance by any person or entity on this information.

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