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Texas PUC's Anderson Focused on Potential for Unhedgeable Uplift as ERCOT Studies Multi-Interval Real-Time Market

November 20, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Texas Public Utility Commissioner Kenneth Anderson expressed concerns with potential uplift costs under a multi-interval real-time market (MIRTM) in ERCOT, particularly as LSEs such as retail providers cannot hedge such uplift.

The MIRTM would expand the real-time market from its current single 5-minute interval to a time horizon extending from the present to "X" minutes in the future, divided into 5 minute intervals. Currently, ERCOT contemplates a horizon of "X" as equal to 30 minutes but "X" will be subject to stakeholder discussion. Prices will be calculated for all 5-minute intervals in the "X" time horizon; however, only the price for the first interval shall be binding.

Furthermore, commitment instructions to resources in any interval in the "X" time horizon will be binding, which creates the potential for uplift, as resources committed based on forecasted future conditions would be eligible for make-whole payments if actual real-time binding prices left them insufficiently compensated.

Anderson acknowledged theoretical efficiencies under a multi-interval real-time market and said that while a multi-interval real-time market is probably necessary to get loads in SCED, which Anderson said has value because of the transparency, "I have real concerns about the uplift piece, and that's what I'll be focused on."

"To me, the benefits of going forward have to really and clearly ... exceed that [uplift] cost, by a significant factor, not just 1.1 to 1 ... it's going to have to be a big number," Anderson said

Anderson noted that while a multi-interval real-time market may generally create benefits in the aggregate through market efficiency, "you have to factor in that prices in the market at least are hedgeable, so loads as well as generation can hedge out their price risk. Those uplift charges are not hedgeable."

"In the aggregate, it may seem like a good thing to do, but if [the costs are] not hedgeable ... it ends up being a tax," as individual stakeholders must bear the unhedgeable cost, Anderson said

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