Regulatory Updates by Region

ERCOT Regulatory Highlights: July 2017

This month…

  • The PUC opens a project to review the Price Formation paper filed by NRG/Calpine.

  • Independent Market Monitor (IMM) Reviews State of the Market Report with the ERCOT Board.

  • Another motion for rehearing was filed in the acquisition of Oncor by NextEra.

  • The ERCOT Board approved the System Administration Fee for 2018 – 2019.

ERCOT and the PUC

Resource Adequacy

Back in 2015, Commissioner Anderson filed a memo about resource adequacy, and subsequently the PUC opened Project No. 45572 to review the parameters of the ORDC.  Comments and stakeholder work product  were filed by interested parties.  The PUC did not act on any of the proposals. 

In May of this year, NRG and Calpine filed a paper called Priorities for the Evolution of an Energy-Only Electricity Market Design in ERCOT under the same project.  The paper is a collaboration between William Hogan and Susan Pope.  In it, they call for a number of proposed adjustments to the market in ERCOT.  Findings are broken out into three categories:  1) System-Wide Price Formation (Marginal Losses, ORDC Enhancements), 2) Locational Scarcity Pricing (Out-of-Market Actions to Manage Transmission Constraints, Dispatch and Pricing for Local Reserve Scarcity), and 3) Transmission Planning and Cost Recovery (Transmission Planning, Transmission Cost Recovery).

The PUC opened Project No. 47199 to begin discussion of the proposals in the paper.  After several requests to move the comment period back, the PUC decided to first hold a workshop to review the proposals in the paper.  The workshop is scheduled for August 10.

Independent Market Monitor (IMM) Reviews State of the Market Report with the ERCOT Board

David Patton with Potomac Economics, the IMM for ERCOT, reviewed the IMM State of the Market Report for 2016.  In summary there were lower prices: $24.62/MWh, down 8 percent from 2015 with low natural gas prices: $2.45/MMBTU, down 4.7 percent from 2015.  System-wide shortages were rare with approximately 4 hours over $1000/MWh.  Energy demand was higher, with a record peak demand of 71,110 MW, up 1.8 percent from 2015 and an average demand up 0.7 percent.  There were small contributions from Reserve and Reliability Adders which were $0.27 & $0.13/MWh respectively.  Finally, congestion costs increased by 40 percent.

Patton said the quantity of Reliability Unit Commitment (RUC) activity is a concern.  While it is not a significant cost to loads, it is a commentary about the performance of the market.  Twelve percent of hours have a RUC instruction.  Patton believes this is a signal that the market requirements are not satisfying market needs and something is missing, specifically locational price signals.  He also indicated that the net revenue earned for combined cycle and combustion turbines compared to what is needed to break even is way below the estimated cost of new entry.  He reminded the Board that the year net revenue meets the needs of generators will not be “at” the cost of new entry, it would likely be several times that cost.  

Of the recommendations made in the report, Patton prioritized implementing a real-time co-optimization of energy and ancillary services (highest priority) followed by modifying the real-time market to better commit load and fast-starting generating resources and evaluating the need for a local reserve product. 

PUC Consideration of NextEra Acquisition of Oncor

Oncor and NextEra Energy jointly filed for the regulatory approval of NextEra Energy’s acquisition of Oncor.  The initial filing was made on October 31, 2016, and the PUC has 180 days to rule on the transaction and determine if it is in the public interest.  A hearing was held February 21 – 23.   At the March 30 open meeting, all three commissioners expressed that they did not believe that the acquisition was in the public interest.  A final order to that effect was approved on April 13.  NextEra filed a Motion for Rehearing which the Commission denied.  They then filed a second Motion for Rehearing, and the Commission also denied that motion at the June 29 open meeting.  

2018-2019 Budget and Fee

At the last budget cycle, ERCOT committed to try to keep the System Admin Fee flat for four years.  The second two years in that cycle are 2018 – 2019 and the fee will remain flat.  They indicate that moving forward it will be more challenging because labor costs are increasing faster than load growth (load growth is tied to the fee).  The budget approved by the ERCOT Board will keep the ERCOT system administration fee at $0.5550 for 2018 and 2019.

Upcoming ERCOT and PUC Meetings:

Retail Market Subcommittee – July 11

Wholesale Market Subcommittee – July 12

Reliability and Operations Subcommittee – July 13

Commercial Operations Subcommittee – July 19

Protocol Revision Subcommittee – July 20

Technical Advisory Committee – July 27

ERCOT Board Meeting – August 8

Public Utility Commission Open Meeting – July 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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