Vistra Submits "Ideas" For Policy Response Options Addressing ERCOT Weather Event:

-- Increase Financial Requirements For Retail Providers

-- "Restrict" Griddy-style Indexed Rates For Mass Market

-- Require Munis, Co-ops To Introduce Retail Choice As Condition Of Any Socialized Financial Assistance

-- Forward Resource Adequacy Procurement

March 5, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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Vistra Corp. has shared with Texas lawmakers, "ideas that should be considered to address the impacts of the mid-February storm."

"You will note that the list provided is long, covers a wide range of concepts and ideas, and raises issues that would need to be addressed in some cases through legislation, and in some cases through regulation, either by the Public Utility Commission of Texas or the Railroad Commission of Texas. The concepts are described at a high level, and details will matter. This list is our attempt at brainstorming ideas, but we stand ready, and look forward to, discussing these ideas with you and our fellow stakeholders," Vistra said in a letter to the PUC sharing the listing with Commissioners

The listed policy concepts, "are not mutually exclusive; some may be alternatives for others listed, or otherwise complimentary or additive," Vistra said

The most notable ideas impacting, or with respect to, the retail market are as follows (all text below is a direct quote from Vistra's list, quotation marks omitted in most instances for brevity):

Retail Financial Standards:

Increase creditworthiness and collateral requirements for retail electric providers

ERCOT Financial Integrity:

Modify ERCOT certification standard to require sufficient financial backing to support power market exchange clearing functions while insuring against uplift risk from defaults. Establish standards for financial market expertise at ERCOT governance and leadership levels.

Protect Small Customers from Wholesale-Tied Prices:

Restrict Griddy-style rates for residential/small commercial customers. Variable/month-to-month rates should remain permissible under Public Utility Commission rules

Predicate Municipally Owned Utility (MOU)/Electric Cooperative (EC) Debt Forgiveness on Competitive Retail Opt-In

"MOUs and ECs that seek and utilize socialized financial assistance have demonstrated an inability to manage risks associated with serving customers. Those risks are best borne by private investors, and not customers," Vistra said in the ideas list. "Requiring these MOUs and ECs to open to retail competition would help to ensure customers are protected from significant price risks, while providing the added benefit of customer choice," Vistra said

Set Wholesale Price to Reflect Cost of Thermal Resources During Off-Peak Periods

Account for the cost of dispatchable generation by setting price at thermal marginal price at low-sustained level (LSL) operation, when intermittent resources are over-supplied during low demand periods, to reflect the reliability provided by the thermal resources.

Reduce Cap and Extend Demand Curve for Dispatchable Resources

Change the shape of the Operating Reserve Demand Curve (ORDC) with lower overall price cap and longer tail, paid to dispatchable resources in order to reduce volatility while maintaining reliability incentives

Forward Resource Adequacy:

Procure resource adequacy either annually or seasonally on forward basis through ERCOT-administered or bilateral market, tied to risk-weighted reliability standards and analysis

Generation Reserve Requirement for Renewables

Increase generation reserve purchases* and assign incremental costs to intermittent renewables. Costs to be allocated based on expected reliability of renewable megawatts produced and included in renewables bids. *Generation reserves includes ancillary services procured by ERCOT to maintain reliable electric system; could include other constructs

Dispatchable Portfolio Standard

Legislative mandate to purchase minimum amount of energy from dispatchable resources.

Winter Fuel Storage Incentive

Provide market incentive (e.g., seasonal resource adequacy qualifications) to weatherize fuel and fuel handling facilities

Reassess Black Start Needs

Review black start contracting requirements and plans. Provide financial incentives for generators that can operate on dual fuel sources

Mandate Firm Fuel Recoverability

Ensure that ERCOT appropriately compensates for firm fuel contracts through verifiable cost and mitigated offer processes

Increase Customer Protections and Gas Market Oversight

Strengthen affiliate rules for gas pipelines and gas marketers. Apply general prohibition on market manipulation or exercise of market power to natural gas industry. Clarify that Railroad Commission complaints regarding discrimination can be pursued for past events, not just prospectively.

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