Regulatory Updates by Region

ERCOT Regulatory Highlights: June 2016

This month…

  • Modifications to the 2016 Ancillary Services Methodology have been introduced and approved at the TAC level.

  • After conditional approval by the PUC of the transfer of ownership of Oncor to Hunt, Hunt filed for a motion for rehearing, then asked the PUC to vacate the final order without prejudice.

  • The PUC opened a rulemaking to investigate changing the Emergency Response Service (ERS) program.

  • NRG’s Greens Bayou Unit 5 is now under Reliability Must Run contract with ERCOT.

  • ERCOT stakeholders rejected the Future Ancillary Services Overhaul.

ERCOT and the PUC

2016 Ancillary Services Methodology Changes

ERCOT proposes to procure an extra 200 MW of RRS during four peak hours a day (2:00 – 6:00 p.m.) in July and August. ERCOT’s proposed effective date for this change is July 1, 2016. The RRS proposal has been approved by the ERCOT Technical Advisory Committee and ultimately requires Board approval in June.

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 would also have been structured in this fashion, 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. On March 24, the Commissioners approved a final order approving the transfer to Hunt but imposing some conditions. Hunt filed a motion for rehearing of the PUC’s conditional approval of the acquisition of Oncor.  However, prior to the final commission ruling on the motion for rehearing, Hunt asked the PUC to vacate the March 24 order and dismiss the proceeding without prejudice. The PUC denied Hunt’s motion for rehearing and Hunt has announced it will not proceed with the acquisition.

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. It is possible the PUC will discuss the ORDC in upcoming open meetings.

PUC to Open 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.  No filings have been made yet in the rulemaking.

Reliability Must Run (RMR) Possibility for Greens Bayou

NRG filed a Notice of Suspension of Operation with ERCOT for Greens Bayou unit 5 and ERCOT issued a final determination that the unit was needed for reliability.  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. Because the contract is longer than one year, it requires ERCOT Board approval. 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.  NRG indicated that Greens Bayou will be unavailable beginning June 27.

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. 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. 

In May, stakeholders voted to reject the overhaul. The only possible step left for this NPRR is to have another party appeal the rejection to the ERCOT Board, ERCOT indicated they will not appeal beyond the TAC level. If the NPRR is not revived, market participants will likely begin to see ERCOT propose incremental changes to the current AS suite to achieve the reliability goals set forth in the overhaul.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – June 7

Wholesale Market Subcommittee – June 8

Reliability and Operations Subcommittee – June 9

ERCOT Board Meeting – June 14

Protocol Revision Subcommittee – June 16

Commercial Operations Subcommittee – Cancelled

Technical Advisory Committee – June 30

Public Utility Commission Open Meeting – June 9 and 29

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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