Texas PUC Adopts Changes To Low Price Cap In ERCOT, Rejects Make-Whole Cost Allocation Recommendations From Retail Providers
June 24, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
The following story is brought free of charge to readers byEC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com
The Texas PUC adopted without modification a draft proposal for adoption to modify the value of the low system-wide offer cap (LCAP) in ERCOT by eliminating a provision that ties the value of the LCAP to the natural gas price index, and replacing it with a provision that ensures resource entities are able to recover their actual marginal costs when the LCAP is in effect.
Specifically, under the adopted rule change, "The low system-wide offer cap (LCAP) will be set at $2,000 per MWh and $2,000 per MW per hour."
As under the current rules, if the LCAP is triggered due to peaker net margin being reached, "ERCOT will continue to apply the operating reserve demand curve and the reliability deployment price adder for the remainder of that calendar year. Energy prices, exclusive of congestion prices, will not exceed the LCAP plus $1 for the remainder of that calendar year."
The adopted rule change provides for a make-whole payment as follows: "Reimbursement for Operating Losses when the LCAP is in Effect. When the system-wide offer cap is set to the LCAP, ERCOT must reimburse resource entities for any actual marginal costs in excess of the larger of the LCAP or the real-time energy price for the resource. ERCOT must utilize existing settlement processes to the extent possible to verify the resource entity's costs for reimbursement."
PUC Chairman Peter Lake noted that the change was adopted to correct an acute and immediate issue for this summer, and that the Commission will continue to address scarcity pricing rules on a broader basis as part of implementing SB 3.
The PUC did not adopt provisions related to the recovery of such make-whole payments, with the preamble stating that the issue is better addressed at ERCOT
The Texas Energy Association for Marketers had said in comments to the PUC that uplift should not be the mechanism used to collect funds for make-whole reimbursement. TEAM had recommended that the rule, "should make clearer that those who were counterparties to the settlements for procurement of real-time energy should bear the additional costs of those settlements, and that the funds collected by ERCOT to reimburse resource entities with operating losses incurred while the LCAP is in effect should be collected from those counterparties."
TEAM had proposed rule language that stated, "funds for reimbursement to be collected from the market participants that procured the real-time energy that was priced above $2,000."