Regulatory Updates by Region

ERCOT Regulatory Highlights: October 2017

This month…

  • Interested parties file alternatives in the PUC Price Formation project in response to the NRG/Calpine paper.
  • Reliability Must Run Rulemaking adopted by the PUC.
  • The acquisition of Oncor by Sempra continues.
  • ERCOT stakeholders reach compromise on funding for Congestion Revenue Rights.
  • Several entities have announced plans for plant retirements in the last month.

ERCOT and the PUC

Resource Adequacy

In May of this year, NRG and Calpine filed a paper, authored by Susan Pope and William Hogan, called Priorities for the Evolution of an Energy-Only Electricity Market Design in ERCOT.  The paper calls for a number of proposed adjustments to the market in ERCOT.  Findings are broken out into three categories:  1) System-Wide Price Formation, 2) Locational Scarcity Pricing, and 3) Transmission Planning and Cost Recovery.

The PUC opened Project No. 47199 to begin discussion of the price formation and the locational scarcity pricing aspects of the paper, real-time co-optimization, and other recommendations made by the Independent Market Monitor in the State of the Market Report.  The PUC held a workshop on August 10 and has another planned for October 13. 

At the invitation of the PUC, interested parties could file alternatives to the proposals in the Pope/Hogan paper.  Several parties had different approaches to address pricing in ERCOT.  Vistra proposed a pricing mechanism to address how locational marginal prices currently do not recognize the costs of traditional dispatchable resources when renewables are on the margin, and also proposed that new generation help fund some of the costs to interconnect with the grid.  Other proposals included more robust load participation in the market, enhancements to the ORDC, and the implementation of real-time co-optimization. 

Original work product to the PUC under a previous project to review different parameter changes to the Operating Reserve Demand Curve (ORDC) may continue to play out in this discussion, as changes to the ORDC are included in the Pope/Hogan paper.


Reliability Must Run (RMR) Rulemaking

The PUC opened Project No. 46369 to consider changing the timeline for a Notice of Suspension of Operation/RMR review as well as reviewing the timing for when alternatives to an RMR agreement are considered.  In October, the PUC approved the final rule.  The rule extends the required Notice of Suspension of Operations (NOS) from 90 to 150 days, unless the NOS is seasonal, then it remains at 90 days. If the resource is not needed, it can be suspended prior to the 150 days with ERCOT approval. It also allows ERCOT to consider the economic value of lost load when deciding whether to consider an RMR or Must Run Alternative (MRA) contract, and each decision requires Board approval.  Stakeholders at ERCOT will have to develop protocol language to implement the rule.  The rule takes effect January 1, 2018.


Potential Sempra Acquisition of Oncor

Following the PUC rejection of merger/acquisition of Oncor by NextEra (which has been appealed to the courts in Texas), and the withdrawal of Berkshire Hathaway from a possible offer, the latest suitor for Oncor is Sempra.  Sempra and Oncor filed a joint application under Docket No. 47675 on October 5.  Sempra filed 47 regulatory commitments as a part of the filing.  Those commitments include having Oncor’s headquarters remain in Dallas, preserving board independence for Oncor, and keeping strong ring-fence provisions.  The timeline for the PUC to complete its due diligence and final decision will likely result in an early 2018 ruling.


Stakeholders Debate Fully Funding Congestion Revenue Rights

As submitted, NPRR821 would have eliminated the CRR deration process for all paths.  Currently, CRR holders may not be paid in full for two reasons.  One is that, market-wide, there is not enough congestion rent collected to pay CRR holders.  The other is that a specific transmission path can physically transmit less energy than was sold in the CRR auction.  For the first kind of lower payment, stakeholders developed a CRR balancing account, funded by money that would normally be distributed to loads.  For the most part, that balancing account pays CRR holders that are shorted due to low congestion rent back at the end of the month.  Several parties want all CRRs to be fully funded and discontinue the deration of lines.  An ERCOT estimate showed that an additional $20 million would have been needed from the CRR balancing account to fully fund CRRs over the last two years.

A group of stakeholders proposed a compromise that would not de-rate lines with a resource node and load zone or resource node and hub as a source and sink.  These two types of source/sink lines comprise about 15 percent of the CRRs sold.  This version of the NPRR was approved at the Technical Advisory Committee and will be considered by the ERCOT Board next.


Notices of Suspension of Operation – Mothball announcements

In the last month, several entities have announced the intent to suspend operations of generation resources.  In September, Talen Energy filed a Notice of Suspension of Operations (NOS) for Barney Davis unit 1, a 300 MW unit near Corpus Christi.  The proposed last day of operation is December 31, 2017.  Denton filed two NOS for Spence units 4 and 5, which are 57 and 61 MW respectively.  The proposed last day of operation for the Spence units would be January 3, 2018.  Finally, Luminant announced plans to retire Monticello Power Plant, which is approximately 1800 MW for the combined units. The proposed last day would be January 4, 2018.  Each of these NOS filings will be considered under the current Reliability Must Run rules at ERCOT.  The new RMR rule approved by the PUC is effective January 1, 2018.  ERCOT will conduct an RMR study to see if any of the proposed retirements will require an RMR contract, or the opportunity for a Must Run Alternative contract.  ERCOT has 60 days to determine if any of the units are needed for reliability.


Upcoming ERCOT and PUC Meetings:

Wholesale Market Subcommittee – September 27 (moved to accommodate GCPA conference)

Reliability and Operations Subcommittee – cancelled

Retail Market Subcommittee – October 10

Commercial Operations Subcommittee – October 11

Protocol Revision Subcommittee – October 12

ERCOT Board Meeting – October 17

Technical Advisory Committee – October 26

Public Utility Commission Open Meeting – October 11 and 26 and workshop on October 13



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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