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SPEER Again Pushes To Allow Retail Customers In ERCOT To Participate In Energy Market (DR) Independent Of Retail Provider

Again Proposes Uplift To Pay DR, To Avoid Implementation Issues With Adding Back Load To REPs Under LMP-G


October 3, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

In comments on the Hogan-Pope whitepaper on price formation issues in ERCOT's energy market, the South-central Partnership for Energy Efficiency as a Resource (SPEER) again advocated for allowing demand response providers in ERCOT to be able to participate in the market without taking on the obligation of being a QSE for a customer's entire load (e.g. their REP or LSE)

"SPEER's position is that ... [o]ne of the major shortcomings of the existing wholesale market is the inability of loads of all sizes to effectively participate in the energy market independent, and particularly to do so independent of their retail electric provider (REP). The Commission should address this shortcoming through market reforms that would eliminate significant barriers to loads directly participating in the real-time energy market with the assistance of a demand response service provider," SPEER said

"The integration of load participation into the energy-only market through third-party (non- REP) demand response providers and the removal of other impediments to loads' direct participation in the market should be included within the scope of potential reforms under consideration to address price-formation in ERCOT. SPEER submits that the expansion of the energy market to allow and encourage greater competition from loads, including loads participating independently or through demand response providers could be undertaken in addition to other changes adopted to support efficient price-formation in the energy-only market," SPEER said

SPEER discussed several changes to accommodate participation by load in the market independent of their LSE (REP).

SPEER said that a customer who is under contract with its REP to receive bill credits or incentives for responding to a curtailment request should not simultaneously be eligible to receive credit from a third-party DR provider for the same service.

"The most thorough solution to avoid double payment would be to modify the Texas Standard Electronic Transactions (TX SET) or create a new registration process that would track each customer's Demand Response Provider of Record, just as the Retail Electric Provider (REP) of Record is tracked today. This solution was proposed as a part of the Loads in SCED Version 2 proposal presented to TAC in 2015. This would, however, be a very costly solution and would be unappealing to many market participants," SPEER said

"Alternative low-cost solutions are clearly possible. For example, REPs are currently required to report to ERCOT which of their customers are enrolled on some type of retail product that provides an incentive for the customer to reduce or shift their usage from higher-cost to lower-cost time periods (for example, peak-time rebates, time-of-use, real-time pricing, etc.). This reporting could be leveraged to create a process for REP DR providers to register customers they are already granting credit for demand response, so ERCOT could prevent a third-party demand response provider from registering the same resource. Such a process could provide the necessary safeguard at a low cost," SPEER said

SPEER also discussed compensating third-party DR at LMP-G

"Stakeholders in ERCOT strongly support compensating demand response at a value equal to what has come to be known 'LMP minus G.' One way to say this is, a load reduction saves a load the energy cost it would have paid for what it would have consumed. It should not, therefore, be paid to release energy it never bought. In SPEER's view, the most precise settlement approach to enable third-party loads to participate in SCED was the one outlined in 2015 by the Loads in SCED subgroup of the Demand Side Working Group at ERCOT. This proposal would have funded the real-time energy payments to DR providers by increasing the load obligation of the DR customers' LSE to balance the load reduction made by the third-party provider. However, this would also require changes to ERCOT's settlement system, to begin charging REPs for a load amount different than the simple sum of the REP's customers metered consumption. This approach, in the view of some market participants, also raised issues under certain customer protection rules that might need to be addressed by the Commission. As already mentioned, this element would be costly for every LSE interacting with Texas SET, whether its customers participated in demand response or not. In light of these daunting hurdles, market participants were not motivated to pursue adoption of the reforms as presented to TAC in 2015," SPEER said

"In response, SPEER has proposed a simplified proposed approach, which seeks to avoid the system changes required to TX SET and ERCOT settlement systems, and also to avoid potential conflicts with Commission rules. This solution would compensate third-party DR providers for load reductions in SCED at LMP minus G, but it would not require that the load reduction be added to the REP's load responsibility, and the system changes that would imply. Rather, this solution would require an uplift charge to be assigned to loads (presumably on a load-ratio-share basis), to cover the cost of payments to third-party DR providers. SPEER suggests that although uplift charges are generally undesirable, system savings and efficiency should more than make up for this allocation. The importance of enabling direct customer or third-party load participation in the market is important enough to price-formation in ERCOT to warrant serious consideration of this proposal at this time," SPEER said

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