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Texas PUC Commissioners To Decide On ERCOT Market, Scarcity Pricing Changes By Nov/Dec D'Andrea: "Somewhat Inclined" PUC Needs To Do Something

REPs: Current Thinking Is ORDC Change Isn't Change In Law Allowing Change To Fixed Price

REPs Facing "Pretty Tight Squeeze" If Not Enough Lead Time Provided For Any Change

Walker: "2019 Is Going To Be Harder"

Walker: Must Consider Greater Customer Interplay In ERCOT Market

October 26, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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During a workshop on potential changes to the ERCOT market, particularly regarding scarcity pricing, Texas PUC Commissioners agreed that the Commission should decide in November or December 2018 whether to adopt any changes, and what such changes, if any, would be.

Chairman DeAnn T. Walker said during the workshop, "It's my belief that if we do make any type of adjustments, I would like to make them either in November or December, so there is time to address them. So I'd like us to go ahead and move forward with anything that we may do, or if we're not going to do anything, make that decision too."

Her fellow Commissioners agreed with such timeframe for a decision.

"I agree if we're going to do something, we should do it soon," said Commissioner Arthur C. D'Andrea

"I think I'm somewhat inclined that we need to do something, I'll kind of leave it there, but that's where I am now, and I'm open to all sorts of things in that range," D'Andrea said

Among changes under consideration proposed by generators are various changes to the Operating Reserve Demand Curve (ORDC), including:

• Increasing the Loss of Load Probability by shifting the mean by 1 standard deviation

• Changing the minimum contingency level ("X"), such as by setting "X" equal to 2,600 MW.

• Simplifying the ORDC calculation by eliminating the seasonal and time of day variation in the LOLP determination.

"2019 is going to be harder," Walker added, saying that no steel-in-the-ground is coming, while everyone wants to move to Texas, adding more load

"I also believe that our system, and the whole dynamics of the market, are changing," Walker said

"Customers are taking more and more control, especially bigger customers -- like the Buc-ee's, and Walmarts, and H-E-B, and stuff like that -- are taking more and more control of how they interplay in the market," Walker said

Noting that the grid could look different in less than five years as this process accelerates, Walker said, "I think we need to figure in how that may impact too."

During the workshop, Catherine Webking, on behalf of the Texas Energy Association for Marketers, said that, "If we're talking about changing on an ORDC curve, as you all are well aware, under fixed price retail contracts, there's right now, the current thinking I think is that, that [ORDC change] is not a change that would be able to be reflected in fixed price contracts."

"So you end up with a pretty tight squeeze on REPs," Webking said, unless a long enough lead time is provided for REPs to reflect any change in contracts, because generators supplying REPs will consider the ORDC change a change in law and change the REPs' wholesale pricing

"There's got to be some accommodation," for REPs' retail contracts, Webking said

During the discussion, D'Andrea mused, tongue in cheek, "make the generators commit to not doing that to you in exchange for ..." before trailing off to chuckles from the audience

Walker also discussed preparations for next summer. Walker reported that she is getting an earlier start than last year on various preparations for the summer, including coordination of generator and transmission outages, and coordination of pipeline outages.

Of note, Walker cited the recent credit requirement changes which took effect in ERCOT right before the summer. "I think it was the right thing to do, but I just want ERCOT credit working groups to touch on that and see if there's any other things that may need to happen on that, or if we're set."

Walker also noted the previously reported single POLR drop which occurred in May, noting that the TDSPs were implementing the drop in different ways, and that stakeholders have worked to bring uniformity to the process, with a test of the mass transition process upcoming

Walker also cited the need to get final resolution before the summer on the availability of switchable units, with Walker calling the issue, "frustrating."

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