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Texas PUC Commissioners All Commit To "Load-Side Reliability Mechanism"

Commissioner Says ERCOT Price Cap Should Be "Much Lower" In A Market In Which Load Is Guaranteeing That Resources Will Be In The Market

December 3, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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During a workshop yesterday, all of the Commissioners of the Texas PUC agreed to commit to studying and developing a "load-side reliability mechanism" in some form or fashion

The "reliability mechanism needs to come on the load side," all Commissioners agreed

Commissioners did not agree on a specific load-side reliability mechanism, which could range from the more targeted dispatchable generation portfolio standard (story here), to the broader LSE obligation

Commissioners generally agreed that a load-side reliability mechanism should be designed based upon the following principles, among others:

• There should be forward pricing for at least one year

• Market power concerns must be adequately addressed

• The program should build on the existing REC framework as much as possible

• The mechanism should be self-correcting, insofar as the cure for high prices is high prices as the market drives equilibrium

• The mechanism should pay more for higher performance

• There shall be equal penalties for non-compliance (load) and non-performance (generation), which should equate to the Cost of New Entry

• Any penalty should offset the cost of ancillary services, and be used to procure additional generation

Commissioners said that they still need to figure out the appropriate sizing for the program. Chairman Peter Lake said that his original LSE proposal (100% of each LSE's load ratio share of forecast net load peak) was too big, and that his original version of the LSE obligation is not the right answer

Commissioners generally agreed that the mechanism should have a dynamic sizing tool, based on seasonal net peak load

In seeking stakeholder comment, Commissioners will encourage stakeholders to draw upon all of the iterations of a load-side reliability mechanism proposed to date, and suggest the best mechanism in light of each's specific designs.

Commissioner Jimmy Glotfelty said that, as the PUC guarantees that resources will be in the market due to a load-side obligation, then the ERCOT market price cap should be reduced

"If we're requiring entities to provide a certain amount of resources in the market, what is the need for a scarcity pricing mechanism? If we got to 100% load serving entity obligation, I would say you could put the price cap at $500 or $1,000 ... There's no reason to have both [mechanisms]," Glotfelty said

"If we're guaranteeing that the resources are going to be in the market, then the need for scarcity pricing becomes very thin," Glotfelty said

In such case, "a price cap becomes something that should go down much lower," Glotfelty said

Lake agreed in "principle" regarding the price cap, and said that such concern can be incorporated into periodic review of ORDC. Commissioner Lori Cobos said the need for operational reliability must still be considered

While the load-side reliability mechanism is being developed, three of the Commissioners support some form of backstop mechanism in the interim

With Commissioners agreeing that the reliability mechanism shall be on the load-side, Commissioners agreed that they will not pursue curtailment or a generation firming requirement as a means of reliability (while not foreclosing any operational concerns which may prompt curtailment)

Docket 52373

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