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Texas PUC Staff Issues Questions On Cost Allocation For Ancillary, Reliability Services; Allocation To Generators vs. Load
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Staff of the Texas PUC have issued for public comment a series of questions concerning the cost allocation of ancillary and reliability services in the ERCOT power region
The PUC must report to the legislature on cost allocation issues by December 2026
Staff sought stakeholder comment on the following:
1) PURA § 39.1593(a) states that the Commission shall direct ERCOT to compare
different cost allocation methods to determine if a new method would “result in a net
savings to consumers in the ERCOT power region compared to allocating all costs of
ancillary and reliability services to load to ensure reliability.”
a. When evaluating net savings to consumers, if ancillary service (AS) and
reliability service costs are allocated to generators, how should the evaluation
estimate downstream impacts on bilateral Power Purchase Agreements (PPAs)
given that PPA details are often confidential?
b. When evaluating net savings to consumers, if AS and reliability service costs
are allocated to generators, how should the evaluation estimate downstream
impacts on AS or energy offers in day-ahead or real-time?
c. How would energy prices likely be affected by allocating costs to generators?
2) PURA § 35.004(h) states that the Commission shall require ERCOT “to modify the
design, procurement, and cost allocation of ancillary services for the region in a manner
consistent with cost-causation principles and on a nondiscriminatory basis.”
a. What should the Commission consider when assessing whether the design,
procurement, and cost allocation of AS are each consistent with cost-causation
principles?
b. For purposes of cost-causation, should loads be classified into different
groups? If so, how?
c. What should the Commission consider when assessing whether the design,
procurement, and cost allocation of AS are each non-discriminatory?
3) PURA § 39.1593(b)(1) describes an alternative cost-allocation method the
Commission must consider for use as a basis for comparison. This method would:
allocate the cost of ancillary and reliability services . . . on a semiannual
basis among electric generation facilities and load-serving entities in
proportion to their contribution to unreliability during the times of
highest reliability risk due to low operating reserves by season, as
determined by the commission based on a number of hours adopted by
the commission for that season[.]
a. How do “the times of highest reliability risk due to low operating reserves”
relate to the risks that AS are procured to mitigate?
b. What, if any, credit issues would arise if costs were allocated on a semiannual
basis?
4) PURA § 39.1593(b)(2) allows the Commission to choose “another method” for
allocating AS and reliability service costs as a basis for comparison.
a. What other methods for allocating AS and reliability service costs should the
Commission consider? Please describe why the Commission should consider
such methods, including why the methods should be considered in addition to
or in lieu of the method detailed in PURA § 39.1593(b)(1).
5) What “reliability services” should the Commission include in the evaluation?
6) What additional issues related to the evaluation should the Commission consider as it
defines the project to implement PURA § 39.1593?
7) How should cost allocation and cost-causation be incorporated into the development
and design of new ancillary and reliability services?
Project 58555
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September 3, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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