Regulatory Updates by Region

ERCOT Regulatory Highlights: September 2016

This month…

  • Reserve Margin Target discussions and other market design issues remain on hold at the PUC.

  • ERCOT filed the Seasonal Assessment of Resource Adequacy for Fall.

  • Numerous stakeholders filed comments regarding changing the Emergency Response Service (ERS) program and PUC staff seeks further direction from Commissioners.

  • NRG’s Greens Bayou Unit 5 (GB5) is now under Reliability Must Run contract with ERCOT.  ERCOT issued an RFP for Must Run Alternatives (MRA) to GB5 in July.  Final MRA decisions will be made this month.

  • 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.

  • The PUC is investigating Alternative Ratemaking Mechanisms.

  • The PUC Approved a Proposal for Publication Related to Distributed Generation Interconnection Agreements.

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 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.    PUC staff filed a memo in June of this year asking for any additional comments on the Reserve Margin Target or addressing previous open meeting discussions.  Only a few market participants weighed in again in comments file in July.  The PUC plans to discuss the topic again in September or later in the year. 

ERCOT releases Fall Seasonal Assessment of Resource Adequacy

On September 1, ERCOT released its Seasonal Assessment of Resource Adequacy (SARA) and the Preliminary Winter SARA.  In both, ERCOT expects to have sufficient systemwide installed capacity to serve forecasted peak demands.  The forecasted peak for fall is 54,437 MW with near-normal temperatures across most of ERCOT, and near-normal or above-normal rainfall.  The forecasted peak for winter 58,591 MW, which would exceed the current all-time winter demand record set in February 2011.

Since the release of the Preliminary Fall SARA, four gas-fired combustion turbine units and three wind project began operation.  The total addition is about 900 MW of fall capacity for peak demand.  Three of the gas units are switchable units and can connect to either ERCOT or the Southwest Power Pool.  ERCOT also expects that 1,189 MW of planned winter-rated capacity will be added by the start of the winter season.

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:  1) hold a workshop and/or proceed with a draft rule that either has minor changes or moves to Day-Ahead procurement of ERS, 2) instruct ERCOT to hold a pilot project of Day-Ahead procurement to further inform the rulemaking process, or 3) do nothing at this time in anticipation of other ways that load could participate in the market. 

Reliability Must Run (RMR) for Greens Bayou and Must Run Alternative RFP

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.  Proposals were due August 24.  ERCOT will provide notice of MRA awards on September 30.  The first required day for the MRA resources would be June 1, 2017.

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. 

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.  On September 1, ERCOT filed an initial determination that the units (115 MW) are needed for reliability.  Next steps are for ERCOT to file a final determination and propose a contract if the final determination verifies the initial determination. 

Consultant Releases Report to the PUC on Alternative Ratemaking Mechanisms

In June, a report summarizing alternative ratemaking mechanisms used in other states to set regulated electric utility rates was released by Christensen Associates Energy Consulting.  The report was in response to a request of the Texas Legislature that the PUC review ratemaking mechanisms adopted by other states that serve as alternatives to traditional cost-of-service ratemaking.  The PUC opened Project No. 46046 to consider the report findings and held a hearing in August.  Many market participants indicated that changes to ratemaking would be very disruptive.  The PUC indicated that the review was responsive to the Legislative directive and no changes are imminent.

PUC Approves Proposal for Publication Related to Distributed Generation Interconnection Agreements

The PUC has approved for publication a proposed rule allowing certain entities other than the end-use customer to execute a distributed generation (DG) Interconnection Agreement (IA) with a Transmission Service Provider (TSP).  The proposal would allow for an end-use customer, a premises owner, a generator, or a person who has been assigned ownership rights to enter into an IA. This amendment reflects the current state of financing, installing, and operating small-scale DG in the Texas market today.  Comments have been filed, and no request for a hearing was made.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – Cancelled this month

Wholesale Market Subcommittee – September 7

Reliability and Operations Subcommittee – September 8

Commercial Operations Subcommittee – September 14

Protocol Revision Subcommittee – September 15

Technical Advisory Committee – September 29

ERCOT Board Meeting – October 9

Public Utility Commission Open Meeting – September 8 and 22

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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