Regulatory Updates by Region

ERCOT Regulatory Highlights: July 2016

This month…

  • Modifications to the 2016 Ancillary Services Methodology go into effect July 1.
  • The Independent Market Monitor filed the State of the Market Report for ERCOT.
  • The PUC requested comments regarding changing the Emergency Response Service (ERS) program.
  • NRG’s Greens Bayou Unit 5 (GB5) is now under Reliability Must Run contract with ERCOT.  ERCOT will issue an RFP for Must Run Alternatives to GB5 in July.
  • The Future Ancillary Services Overhaul rejection was not appealed to the Board.

ERCOT and the PUC

2016 Ancillary Services Methodology Changes

ERCOT proposed to procure an extra 200 MW of RRS during four peak hours a day (2:00 – 6:00 p.m.) in July and August.  The RRS proposal was approved by the ERCOT Board in June.  The effective date for this change is July 1, 2016. 

State of the Market Report Filed

The ERCOT State of the Market Report was filed in June by the Independent Market Monitor (IMM).  The IMM found the market performed competitively.  Recommendations included implementing real-time co-optimization of energy and ancillary services, modifying the real-time market software,  pricing future ancillary services based on the shadow price of procuring the service, and asking the PUC to evaluate policies and programs that create incentives for loads to reduce consumption for reasons unrelated to real-time energy prices, including (a) the need for and structure of Emergency Response Service (ERS), and (b) the allocation of transmission costs.  Of note, the IMM indicates profitability analysis of coal and nuclear units may cast doubt on whether they will continue to operate, thus placing into question the current Capacity, Demand, and Reserves report which shows ample reserve margins. 

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.”  In February, the PUC opened Project No. 45572 to review the parameters of the ORDC.  The Independent Market Monitor reported at the June Board meeting that the ORDC was working properly and not showing significant scarcity pricing during periods with robust reserves.  Last week’s PUC open meeting agenda excluded the ORDC project item for the first time in months.  It is unclear how the PUC will proceed.

Also related to resource adequacy, in past years the PUC discussed reviewing the Reserve Margin Target for ERCOT.  In 2014, Project No. 42302 was opened for comments on the topic.    PUC staff filed a memo in June of this year asking for any additional comments on the Reserve Margin Target or addressing previous open meeting discussions.  Comments are due July 18 and the PUC will discuss the topic again in September or later in the year. 

PUC Opens Rulemaking on Emergency Response Service

Commissioner Anderson filed a memo asking to open a rulemaking on the ERCOT Emergency Response Service (ERS).  In the memo, and in a discussion at the open meeting, Anderson shared his intent to move the ERS market into a competitive Day-Ahead Market product.    Anderson believes the change would allow ERCOT and ERS participants to have more flexibility in how the procure and provide service.  In response, PUC staff opened Project No. 45927 – Rulemaking Regarding Emergency Response Service.    Staff requested comments from interested parties on various topics related to changing the ERS rule.  Comments are due July 15.

Reliability Must Run (RMR) Possibility for Greens Bayou

NRG filed a Notice of Suspension of Operation with ERCOT for Greens Bayou unit 5 (GB5) and ERCOT issued a final determination that the unit was needed for reliability.  The ERCOT Board has approved the RMR agreement for the unit.  ERCOT signed the RMR agreement on June 1, with contract dates of July 2016 – June 2018 and operations limited to July – September 2016, June – September 2017, and June 2018.    The contract indicates RMR energy and standby prices of approximately $65 million to the market over two years.  These costs will be allocated to all load on a load-ratio share basis over the term of the contract.  ERCOT can negotiate for Must Run Agreement resources to provide an acceptable solution to reliability concerns that would be solved by the RMR unit.  They have indicated they will issue a Request for Proposals on July 8 for MRA resources that in whole, or in aggregate could replace GB5.  Proposals are due August 19.  The first required day for the MRA resources would be June 1, 2017.

Ancillary Services Overhaul

In late 2013 ERCOT announced its intention to overhaul the Ancillary Service Markets.  ERCOT filed NPRR667 which proposed changes to the AS Markets.  In May, stakeholders voted to reject the overhaul.  No entity filed an appeal of the TAC decision on the NPRR to the Board so the NPRR remains rejected. 

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – cancelled

Wholesale Market Subcommittee – July 6

Reliability and Operations Subcommittee – July 7

Commercial Operations Subcommittee – July 13

Protocol Revision Subcommittee – July 14

Technical Advisory Committee – July 28

ERCOT Board Meeting – August 9

Public Utility Commission Open Meeting – July 20

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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