Regulatory Updates by Region

ERCOT Regulatory Highlights: March 2016

This month…

  • The Public Utility Commission (PUC), opened a Project No. 45572 to review the parameters of the Operating Reserve Demand Curve.
  • ERCOT released the Final Spring Seasonal Assessment of Resource Adequacy (SARA) on March 1.
  • Several Proposals are looking at modifications to the 2016 Ancillary Services Methodology.
  • Oncor and Hunt seek PUC approval of the acquisition of the Oncor transmission and distribution system by Hunt. 
  • ERCOT continues work on the future Ancillary Services Overhaul and a competing NPRR has been filed to modify the Current Ancillary Services.

ERCOT and the PUC

Resource Adequacy at ERCOT

Last year, the Public Utility Commission discussed a memo filed by Commissioner Anderson related to the performance of the Operating Reserve Demand Curve (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.  Stakeholder proposals, along with position papers and ERCOT analysis were filed under that project.  PUC staff has requested reply comments on the different proposals, and those comments are due on March 11. 

ERCOT Released the Final Spring SARA

ERCOT released the final spring Seasonal Assessment of Resource Adequacy (SARA) on March 1.  They also released the preliminary summer SARA.  Both reports indicate there will be sufficient reserves to meet the forecasted loads for the spring and summer; however, extreme conditions in the summer increase the risk of ERCOT declaring an Energy Emergency Alert (EEA).  ERCOT indicates that, for the summer, there are expected new installed capacity additions which include 1,068 MW of gas-fired generation and 723 MW of wind with a summer peak capacity contribution of 174 MW. The unit outage forecast is 3,245 MW, developed from historical summer season outage data gathered since the start of the Texas Nodal Market in December 2010.

2016 Ancillary Services Methodology

While the ERCOT Board approved the ERCOT Ancillary Services Methodology changes for 2016, several new proposals have recently surfaced.  One set of 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 has not been considered at the Subcommittee level. 

The other proposal is from ERCOT 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 proposes 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.  In addition, they would procure one percent worth of MW of the RDF in RRS.  ERCOT’s proposed schedule would implement the plan in July 2016.

Hunt/Oncor Filing at the PUC

Last September, Oncor filed the proposal with the PUC to transfer Oncor transmission and distribution system from Energy Future Holdings (EFH) to a newly formed company owned by the Hunt family of Dallas.  Hunt’s Sharyland utility is structured as a Real Estate Investment Trust (REIT), and the Oncor assets are also to be structured in this fashion, but in a separate entity from Sharyland.  A REIT involves the assets being held in an investment trust (the REIT) that only receives rental payments from an affiliated utility company that is responsible for operating the assets. The PUC must make a determination on the transaction by March 27, 2016.  A hearing was held in January.  The PUC is looking closely at the tax treatment for the REIT that avoids a corporate-level tax.  They want to determine if ratepayers should benefit from certain tax savings, and if so, for how much. The PUC cannot change rates in this proceeding.  In response to PUC concerns, Hunt offered a partial reduction of rates through an allowable REP-administered credit.   In addition, Hunt agrees to file a new rate case filing in 2017.  

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.  Stakeholders provided comments to the CBA in late January and ERCOT held a workshop on February 1.  Comments on the NPRR were inconsistent and some stakeholders supported making changes to the Current Ancillary Services rather than wholesale changes.  As a result, a competing NPRR was filed by a market participant.  NPRR756 will now proceed through the stakeholder process as well. 

As a reminder, ERCOT has committed to implement the Ancillary Services Overhaul proposal no earlier than three years after Board approval of the NPRR.  It is unclear that a similar commitment would be made for changes to the current services.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – March 1

Wholesale Market Subcommittee – March 2

Reliability and Operations Subcommittee – March 3

Commercial Operations Subcommittee – Cancelled for March

Protocol Revision Subcommittee – March 10

Technical Advisory Committee – March 31

ERCOT Board Meeting – April 19

Public Utility Commission Open Meeting – March 3 and 24

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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