Regulatory Updates by Region

ERCOT Regulatory Highlights: October 2016

This month…

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

  • Stakeholders filed comments regarding changing the Emergency Response Service (ERS) program and Commissioners provided guidance for how to move ahead.

  • Numerous Reliability Must Run (RMR) items were discussed this month, including TAC approval of new procedures.

  • Calpine filed a Notice of Suspension of Operations for resources in the Houston Load Zone and in an initial determination, ERCOT indicates the units are needed for reliability.

ERCOT and the PUC

Resource Adequacy at ERCOT

In February, in response to a memo filed in 2015 by Commissioner Anderson, the PUC opened Project No. 45572 to review the parameters of the ORDC.  Comments were filed by interested parties.  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.  It is still unclear how and if 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.   On September 15, PUC staff filed a memo with a summary of options and potential steps forward.  At the subsequent open meeting, the Commissioners discussed 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.  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.  They asked ERCOT to look at the cost of moving to this plan and report back.

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.

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.    Comments were filed in July.  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.  Instead, at the direction of the Commissioners, PUC staff released a draft rule for discussion at the next open meeting.  The draft rule 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.

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 approved an 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 (MRA) resources to provide an acceptable solution to reliability concerns that would be solved by the RMR unit.  ERCOT issued a Request for Proposals on July 8 for MRA resources that in whole, or in aggregate could replace GB5. ERCOT received eight offers from four QSEs, representing a combined capacity total of 385.9 Megawatts (MW) for four of the five contract months and 300.9 MW for the other contract month.  Upon review of the offers, ERCOT determined that several of the offers did not qualify as eligible MRA Resources and therefore were not considered in the final evaluation.  In the evaluation of the remaining eligible offers, ERCOT determined that they did not provide an acceptable solution to the reliability concern necessary to replace the need for the RMR Unit. 

As a result of this RMR, several market changes are being discussed by stakeholders.  Potential changes include how capital costs might be recovered by ERCOT if those costs are paid to an RMRed resource when the resource either retires or enters market activity again.  Another area of discussion is the planning studies/load forecast used to determine the need for an RMR a unit.  The NPRRs related to RMR were approved at the Technical Advisory Committee and will be considered by the ERCOT Board in October.  If approved, they will become effective October 12, 2016.

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.   The initial schedule for the rulemaking shows a final rule by May 2017.

Calpine files Notice of Suspension of Operations

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 units as of February 1, 2017.  ERCOT issued an initial determination that 115 MW of the units would be needed for reliability.  Calpine was required to respond with cost estimates for RMR units, but instead their filing included several statements questioning the ability for the units to be on RMR based on the contractual needs of the Private Use Network customer they serve, but indicated they are willing to enter into an RMR agreement if it is determined it is within the rules.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – Cancelled

Reliability and Operations Subcommittee – October 6

ERCOT Board Meeting – October 11

Commercial Operations Subcommittee – October 12

Protocol Revision Subcommittee – October 13

Wholesale Market Subcommittee – October 17

Technical Advisory Committee – October 27

Public Utility Commission Open Meeting – October 7 and 28

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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