Regulatory Updates by Region

ERCOT Regulatory Highlights: May 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).
  • ERCOT released the May Capacity, Demand, and Reserves Report and the Summer Seasonal Assessment of Resource Adequacy.
  • Several proposals for modifications to the 2016 Ancillary Services Methodology have been introduced and approved.
  • After conditional approval by the PUC of the transfer of ownership of Oncor to Hunt, Hunt filed for a motion for rehearing.
  • PUC to open rulemaking and investigate changing the Emergency Response Service (ERS) program.
  • 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.”  In February, the PUC opened Project No. 45572 to review the parameters of the ORDC.  Stakeholders disagree as to whether or not the ORDC should be modified and interested parties have weighed in on possible changes.    PUC staff filed a memo with possible next actions including allowing ERCOT to gather more data, ordering ERCOT to perform additional analysis, and/or holding a workshop.  It is likely the PUC will discuss the ORDC in upcoming open meetings.

ERCOT Releases Reserve Margin Forecast and Summer Seasonal Assessment

ERCOT released the May version of the Capacity, Demand, and Reserve Report (CDR) this week.  The current reserve margin target is 13.75 percent.  The CDR indicates that the reserve margin will remain above the 13.75 target through the 10 years of the projection (2017 – 2026).   A few uncertainties are not accounted for in the CDR, including the proposed 2019 integration of Lubbock Power and Light.  In addition, ERCOT also continues to analyze anticipated impacts of environmental regulations and acknowledges the possibility that several units included in the CDR may be retired within the next several years.  ERCOT also released the Summer Seasonal Assessment of Resource Adequacy (SARA) for summer 2016.  ERCOT indicates that with the expected weather for this summer they will have sufficient installed generating capacity to meet the forecasted demand.  There is a risk of entering an Energy Emergency Alert in scenarios with extreme load (such as experienced in summer 2011) combined with transmission outages, low wind output, or extreme generation outages

2016 Ancillary Services Methodology Changes

Stakeholders recently approved ERCOT’s proposal to change the Reserve Discount Factor (RDF) by one percent.  ERCOT uses a RDF multiplier 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.  This change became effective May 2.

In addition, 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 previously 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. 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 PUCT’s conditional approval of the acquisition of Oncor.  The rehearing request addresses many of the key conditions imposed by the final order with the implication that the deal “will not close” if some of these terms are imposed.  Among the critical items was the tax handling of the REIT.  The Commissioners will take up the motion for rehearing at the May 19 open meeting.  If the motion is not granted, then the Hunt acquisition likely will not occur

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. 

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. 

Several stakeholders have made an effort to reject the ERCOT proposal, however they were unsuccessful.  ERCOT will ask stakeholders to vote on this issue at the May Protocol Revision Subcommittee meeting, and have indicated that if it is rejected there, they will appeal the rejection to TAC. 

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 months, ERCOT has discussed phasing in the changes.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – May 3

Commercial Operations Subcommittee – May 11

Wholesale Market Subcommittee – May 4

Reliability and Operations Subcommittee – May 5

Protocol Revision Subcommittee – May 12

Technical Advisory Committee – May 26

ERCOT Board Meeting – June 14

Public Utility Commission Open Meeting – May 4 and 19

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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