Regulatory Updates by Region

ERCOT Regulatory Highlights: December 2016

This month…

  • ERCOT is moving forward with different Reserve Margin Target options.

  • The Emergency Response Service (ERS) proposed rule comments were filed in November, reply comments were filed in early in December.

  • The Reliability Must Run (RMR) rulemaking continues, a workshop is scheduled for December.

  • The PUC continues to discuss Distributed Generation Interconnection rules.

  • The PUC set a schedule for the review of the acquisition of Oncor by NextEra.

ERCOT and the PUC

Resource Adequacy at ERCOT

ERCOT will move forward with the new reserve margin target types as described in Project No. 42302, including removing the 0.1 Loss of Load Expectation metric and replacing it with both the Economically Optimal Reserve Margin and the Market Equilibrium Reserve Margin.[1]  They anticipate the first study to be completed in 2018.  They are still considering how or if to alter the current Capacity, Demand, and Reserve (CDR) Report format in the interim.  The next CDR will be released using the current protocol parameters in mid-December 2016.

PUC Rulemaking on Emergency Response Service

Based on a request from Commissioner Anderson, the PUC opened Project No. 45927 – Rulemaking Regarding Emergency Response Service (ERS).  In October, the Commissioners approved a proposed rule for publication which was published in the Texas Register on October 21 and comments were filed November 21 and reply comments were filed December 5.  The proposed rule includes language that would allow ERCOT to use ERS to help solve local congestion.  It also includes language that would release ERS resources which are selected to provide Must Run services to replace a Reliability Must Run (RMR) unit from their current contract at ERCOT. 

In reply comments, ERCOT and the Independent Market Monitor (IMM) both suggest that ERS for local congestion should only be deployed during a transmission emergency.  ERCOT goes further and says that it should be restricted to when prices are at or near the price cap.  With several competing language scenarios proposed by commenters, it is likely the PUC will hold a workshop for the rulemaking.

Reliability Must Run (RMR) Issues

The PUC opened Project No. 46369 to consider changing the timeline for a Notice of Suspension of Operation/RMR review from 90 days to 180 days as well as reviewing the timing for when alternatives to an RMR agreement are considered.  Staff also asked for comments on several topics including what resources should be eligible for RMR (wind, private use network), and whether the Board should approve all RMR contracts rather than just the ones that are longer than one year. Numerous entities filed comments on the draft rule, and a workshop is scheduled for December 14.  The initial schedule for the rulemaking shows a final rule by May 2017.

In reply comments, the IMM clarified several of its comments on the proposal.  They indicate that ERCOT should only enter into a contract for RMR or Must Run Alternatives (MRA) if the economic value of improved reliability is greater than costs that would be paid for the service.  The IMM also supports moving toward a probabilistic analysis for evaluating the likelihood of a reliability concern when a resource suspends operations. 

PUC Discusses Rule Related to Distributed Generation Interconnection Agreements

The PUC discussed a proposed rule allowing certain entities other than the end-use customer to execute a distributed generation (DG) Interconnection Agreement (IA) with a Transmission Service Provider (TSP).  The proposal would allow for an end-use customer, a premises owner, a generator, or a person who has been assigned ownership rights to enter into an IA. This amendment reflects the current state of financing, installing, and operating small-scale DG in the Texas market today.  Commissioners plan to make a final decision at the December 16 open meeting.  Chairman Nelson has indicated concerns that the rule relates to companies the PUC has no control or jurisdiction over and at the December 1 open meeting said she is likely to oppose the changes.

PUC Consideration of NextEra Acquisition of Oncor

Oncor and NextEra Energy jointly filed for the regulatory approval of NextEra Energy’s acquisition of Oncor.  The initial filing was made on October 31, 2016, and the PUC has 180 days to rule on the transaction and determine if it is in the public interest.  The PUC approved the Preliminary Order in Docket No. 46238.  The deadline for decision is April 29, 2017.  A hearing is scheduled for February 21 – 24.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – December cancelled, January 10

Wholesale Market Subcommittee – December cancelled, January 11

Reliability and Operations Subcommittee – December cancelled, January 12

Commercial Operations Subcommittee – December cancelled, January 18

Protocol Revision Subcommittee – December 1, January 19

Technical Advisory Committee – December 1, January 28

ERCOT Board Meeting and ERCOT Annual Meeting – December 13

Public Utility Commission Open Meeting – December 1, and 16

[1] For reference, the Economically Optimal Reserve Margin (EORM) calculation balances the cost of building additional capacity with the reliability-related benefits of that capacity, identifying the economically-efficient or optimal level of planning reserves.  The EORM reflects the amount of capacity that would minimize total system costs.  Market Equilibrium Reserve Margin is the estimated market equilibrium and represents the long-run level of investment anticipated given the cost of new entry and expected energy margins.

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.


[1] For reference, the Economically Optimal Reserve Margin (EORM) calculation balances the cost of building additional capacity with the reliability-related benefits of that capacity, identifying the economically-efficient or optimal level of planning reserves.  The EORM reflects the amount of capacity that would minimize total system costs.  Market Equilibrium Reserve Margin is the estimated market equilibrium and represents the long-run level of investment anticipated given the cost of new entry and expected energy margins.

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