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Texas PUC Staff Says Commission May Wish To Examine Retail Mass Transition Issues, Collateral As Part Of Summer 2018 Review

Starts Review By Proposing Questions On Wholesale Price Formation

August 24, 2018

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

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In a proposed process to begin a review of the Summer 2018 ERCOT Market Performance, Staff of the Public Utility Commission of Texas noted that the PUC may wish to address lessons learned and issues related to retail mass transitions and market participant collateral, in addition to other issues, including wholesale price formation

In a memo to Commissioners, Staff said, "Staff contemplates that, in this project [48551], the Commission may wish to address lessons learned and issues identified during the Summer of 2018, including those related to retail mass transitions, market participant collateral, wholesale price formation, and grid readiness."

Of these issues, Commission Staff has first proposed questions for comment relating to wholesale price formation, so that the Commission may have sufficient time to address the broader market design issues that the Commission left pending for the summer 2018. As August comes to a close, staff recommends that the Commission begin identifying issues for further analysis once data for the entirety of the summer is available.

Specifically, Staff recommends publication in the Texas Register of the attached draft notice. The proposed notice requests comment in two phases: (1) a general policy question for comment due by September 14, 2018; and (2) a set of more empirically-oriented questions and a request for analysis of market performance on specific dates for comment by October 18, 2018. Staff currently is working with ERCOT staff and the Independent Market Monitor to produce a set of data and other information that will help to inform the second set of questions. Staff anticipates that such information will be available in the first week of October 2018.

Staff further recommends that the Commission hold a Commission-led workshop in October 2018.

Staff's proposed questions include:

• Did the current scarcity pricing mechanism produce sufficient revenue during periods of resource scarcity to ensure long-term resource adequacy in the ERCOT region? If the current scarcity pricing mechanism did not produce sufficient revenue to ensure long-term resource adequacy, what specific modifications to that mechanism, within the context of an energy-only market, would improve the effectiveness of the scarcity pricing mechanism in ensuring long-term resource adequacy?

• Did the Operating Reserves Demand Curve (ORDC) as currently constituted perform as expected through the summer peak demand period?

• Did observed levels of capacity, operating reserves, and demand during the summer peak demand period validate or invalidate the estimates contained in the Capacity, Reserves, and Demand (CDR) Report published in December 2017? Did observed levels of capacity, operating reserves, and demand during the summer peak demand period validate or invalidate the estimates contained in the final Seasonal Assessment of Resource Adequacy (SARA) published in April 2018?

• What role did wind generation resources (WGRs) or other intermittent resources play in price formation during periods of resource scarcity during the summer of 2018? If WGRs or other intermittent resources had an adverse impact on price formation, what policy directives or market rules are needed to mitigate this impact?

• What impact did ERCOT forecasts of wind generation and demand have on prices or price formation during the summer peak demand period? If ERCOT demand or wind forecasts had an adverse impact on prices or price formation during the summer peak demand period, how might this impact be mitigated?

• What impact did demand response, including response to potential Four Coincident-Peak days, have on prices or price formation during the summer peak demand period?

• Provide a review of wholesale price formation on each of the following days, including empirical data analysis, narrative commentary, and, where appropriate, identification of policy directives or market rule changes that would improve price formation: a. July 19, 2018; b. July 23, 2018; c. August 2, 2018; d. Other day(s) of your choosing that you find to be instructive in the analysis of 2018 ERCOT Market Performance.

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