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ERCOT Board Adopts Changes To RMR Study Process, Other RMR Provisions

October 12, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The ERCOT Board of Directors yesterday approved several nodal protocol revision requests (NPRRs), including NPRR 788, relating to RMR Study Modifications

Adopted NPRR 788 modifies the requirement for Reliability Must-Run (RMR) studies to use processes consistent with ERCOT planning studies. In addition, this NPRR introduces a new requirement that a potential RMR Unit must have a meaningful impact on the expected transmission overload to be considered for an RMR Agreement.

"The current Protocol language requires use of a Load forecast which is inconsistent with ERCOT planning studies. Additionally, this NPRR limits entry into RMR Agreements for Resources that have a low impact on identified reliability deficiencies, a feature missing from current Protocol language, but important when considering the benefits of entering an RMR Agreement," the business case for NPRR 788 states

NPRR 788 specifically provides that, for the RMR study, "ERCOT shall use a Load forecast consistent with current Regional Transmission Plan assumptions and methodologies for the appropriate season(s). If additional new Generation Resources meet the criteria in Planning Guide Section 6.9, Addition of Proposed Generation Resources to the Planning Models, ERCOT shall update the base case to include those additional Generation Resources with the appropriate seasonal rating."

NPRR 788 also establishes, for purposes of RMR analysis, the criteria ERCOT shall use to identify a performance deficiency that is materially impacted by the Generation Resource

The Board also adopted NPRR 795, addressing the provisions for refunds of capital contributions made in connection with an RMR agreement. This NPRR creates a mechanism by which capital expenditures funded by ERCOT under an RMR agreement may be refunded subsequent to the termination of the RMR agreement

If the Generation Resource returns to commercial operations, the refund is based on depreciated book value of the capitalized expenditures. Otherwise the refund is based on the salvage value associated with the capitalized expenditures.

The business case for NPRR 795 states, "This NPRR ensures that the capital value provided by ERCOT as part of an RMR Agreement accrues to the market. This NPRR is intended to minimize undue subsidization of potentially uneconomic Generation Resources that have been contracted under RMR Agreements."

Specifically, NPRR 795 provides, at the end of the RMR agreement, if the Resource Entity chooses not to have the Generation Resource participate in energy or Ancillary Service markets, the QSE representing the Resource Entity shall repay, in a lump sum payment, the positive salvage value associated with the contributed capital expenditures, as estimated at the time of the RMR agreement.

If the Resource Entity chooses to have the Generation Resource participate in the energy or Ancillary Service markets at any time after the termination date of the RMR agreement, the QSE representing the Resource Entity shall repay, in a lump sum payment, 100% of the remaining book value of the capitalized equipment and capitalized installation charges based on straight-line depreciation over the estimated life of the capitalized component(s) as of the termination date of the RMR agreement in accordance with GAAP or IAS standards for electric utility equipment, plus 10% of the value of any accelerated tax depreciation associated with the capital contribution taken by the Resource Entity during the term of the RMR agreement, less any remaining positive salvage value associated with the contributed capital expenditures that was previously repaid.

The Board also adopted NPRR 793, addressing clarifications to RMR RUC Commitment and Other RMR Cleanups. This NPRR provides clarification and alignment with current operational and financial practices as well as NPRR442, Energy Offer Curve Requirement for Generation Resources Providing Reliability Must-Run Service. This NPRR also provides a means of operating an RMR Resource to ensure the RMR Resource is not unintentionally Reliability Unit Commitment (RUC)-committed before other Resources.

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