Regulatory Updates by Region

ERCOT Regulatory Highlights: November 2016

This month…

  • Reserve Margin Target options are back up for discussion at the PUC.

  • ERCOT Releases Winter Seasonal Assessment of Resource Adequacy.

  • Commissioners approved a proposed rule for publication for Emergency Response Service (ERS) changes with comments due in December.

  • Numerous Reliability Must Run (RMR) items changed this month, including Board approval of new procedures and reconsideration of the NRG and Calpine RMR determinations.

ERCOT and the PUC

Resource Adequacy at ERCOT

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.   On September 15, 2016 PUC staff filed a memo with a summary of options and potential steps forward.  The Commissioners asked ERCOT to consider the costs associated with several changes, 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 would like to see the Expected Unserved Energy (EUE) for both as well.  EUE is the average amount of energy unserved as a result of resource insufficiency.  ERCOT filed an outline for a plan on calculating the EORM every other year, with the first study completed in 2018 and the Commissioners instructed them to move forward with the plan.  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.

ERCOT Releases Winter Seasonal Assessment of Resource Adequacy

ERCOT released the final winter Seasonal Assessment of Resource Adequacy (SARA) and the preliminary spring SARA on November 1.  For both seasons, they anticipate sufficient capacity to meet the seasonal peaks (they are estimating peaks of slightly over 58,000 MW for both winter and spring).  Since the release of the preliminary winter SARA, 407 MW in additional peak capacity (gas, wind, and solar) has been added and the total generation resource capacity expected to be available for peak demand has increased to nearly 82,000 MW.  While ERCOT does not anticipate system-wide reliability issues, they do indicate there is a possibility of regionalized impacts if there are multiple resource outages during extreme weather conditions.

PUC Rulemaking on Emergency Response Service

In May, Commissioner Anderson filed a memo asking to open a rulemaking on the ERCOT Emergency Response Service (ERS).  In response, PUC staff opened Project No. 45927 – Rulemaking Regarding Emergency Response Service.  PUC staff filed a memo suggesting three different options:  The Commissioners decided they would not proceed with the concept of day-ahead procurement of ERS.  In October, the Commissioners approved a proposed rule for publication which was published in the Texas Register on October 21 and comments on the proposed rule are due November 21.  The proposal 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 addition, ERCOT staff also shared some guiding parameters for how ERS could be used in local congestion situations.  They will be considering availability issues and ways to implement any rule changes with minimal system changes as well as making sure parameters for how to solve local congestion are defined.

Reliability Must Run (RMR) Issues

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 total contract amount resulted in approximately $65 million to the market over two years.  These costs are allocated to all load on a load-ratio share basis over the term of the contract. 

After the NRG RMR contract was approved, stakeholders considered, and the ERCOT Board approved numerous changes to how RMR status is considered.  One change is the planning studies/load forecast used to determine the need for an RMR a unit.  Another change is how capital costs paid to an RMR resource to improve the plant to keep it functional might be recovered by ERCOT/loads if the RMRed resource enters market activity again. 

Immediately following the approval of the changes, ERCOT used the new criteria to evaluate the reliability need for Greens Bayou unit 5 and found that it is still needed for the first half of 2017 summer, but not for August and September, or for June 2018.  The contract has not been modified yet to reflect these findings, and may not be modified until more is known about other plants scheduled to come on line in 2017.

On August 11, Calpine filed a Notice of Suspension of Operations (NOS) for the Capitol Cogen Resource.  It has a Season Net Max Sustainable Rating of 280 MW in the summer.  Calpine proposes to decommission and retire the unit as of February 1, 2017.  ERCOT issued an initial determination that 115 MW of the units would be needed for reliability.  ERCOT also used the new evaluation criteria on the Calpine resource and found this set of generators was now NOT needed for reliability.  No RMR contract will be needed.

Finally, 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.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – November 1

Wholesale Market Subcommittee – November 2

Reliability and Operations Subcommittee – November 3

Commercial Operations Subcommittee – November 9

Protocol Revision Subcommittee – November 10

Technical Advisory Committee – December 1

ERCOT Board Meeting and ERCOT Annual Meeting – December 13

Public Utility Commission Open Meeting – November 10

[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.

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