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Texas PUC Staff File Draft Proposal For Adoption To Eliminate Small-Fish-Swim-Free Rule, Address Exemption Sought By Batteries, Effective Date, IMM Mitigation Approach
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The Staff of the Texas PUC have filed a draft proposal for adoption that would eliminate the small-fish-swim-free rule in ERCOT
The small fish rule, at 16 TAC § 25.504(c), currently provides that a single generation entity that controls less than 5% of the installed generation capacity in ERCOT, as defined by rule, excluding uncontrollable renewable resources, is deemed not to have ERCOT-wide market power.
Staff's recommended proposal for adoption would decline to maintain the small fish rule, and would decline to provide a similar exemption for energy storage resources, as sought by some storage owners
Staff's draft preamble agrees with energy storage resource (ESR) owners that, "on its face, higher offers from ESRs and other resources could be viewed as a signal of potential market power abuse."
"However, the commission declines to modify the proposed rule to preserve the exemption for ESRs as recommended by SEIA and LESA or otherwise preserve a limited scope exemption," the draft states
"Suppliers, regardless of size or technology, should be prohibited from engaging in market power abuse," the draft preamble states
"Removing the small fish rule does not automatically assume ESRs are attempting to withhold supply or manipulate prices (i.e.,
engaging in market power abuse)," the draft preamble states
The draft preamble further states, "The commission acknowledges that different resource technologies may require different offering profiles for legitimate reasons, such as state of charge management. Offers from ESRs may be appear high relative to other offers due to their perceived opportunity cost and state of charge management. Additionally, the IMM acknowledged that ERCOT’s primary mechanism to mitigate against market power in real time does not account for all market conditions. These factors are taken into consideration in how the IMM and the commission monitor for and evaluate potential instances of market power abuse. Hence, the removal of this rule does not inherently suggest that entities that control less than 5% of the installed generation capacity in ERCOT, including ESRs, and that submit high offers are engaging in market power abuse."
Staff's draft proposal for adoption would set the effective date for the revised rule, eliminating the small fish provision, as June 1, 2026, to allow stakeholders sufficient time to adjust to RTC+B
A June 1, 2026 effective date is likely significantly later than the earliest possible effective date (the earliest possible effective date depends on the date that the rule is adopted)
Under the Texas rulemaking process, rules can be effective 20 days after the rule's adoption and submission to the Texas register
Consideration of the rule changes are scheduled for the PUC's Nov. 6 open meeting, though the PUC may not necessarily vote at such time
Staff's recommended order declines to modify the rule at this time to specify the methods that the IMM will use to investigate and measure market power abuse with regards to specific technologies, or otherwise.
The draft preamble states, "the IMM has already acknowledged the difficulties surrounding evaluating uncompetitive behavior with regards to certain technologies at the August 21, 2025 open meeting. If there are additional issues not yet considered, the commission expects the IMM to take these into consideration -- as it deems appropriate -- when investigating potential market power abuse. And, if it does not, commission enforcement discretion serves as a necessary backstop to alleviate commenter concerns."
Staff's draft order would decline to codify the IMM's proposed three-step approach to market power mitigation
Use of the three-step approach is a recent recommendation from the IMM’s 2024 State of the Market Report that has not been fully evaluated by the commission, and is also beyond the noticed scope of the rulemaking, the draft preamble states
Project 58379
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October 31, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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