PUCT Directs ERCOT to Study, Report on Amount of RRS, RUC Floor

PUCT Commissioners yesterday directed ERCOT to study several measures meant to ensure that proper price signals are sent in the energy-only market, including the amount of Responsive Reserve Service (RRS), and the floor for energy bids for units that are committed under Reliability Unit Commitment (RUC) for capacity.

These issues, among others, had been outlined in a memo from Commissioner Kenneth Anderson concerning measures which should be evaluated with the intent to adopt changes prior to next summer (11/11). The Commission directed ERCOT to proceed on the issues without substantive modification to the proposal set forth by Anderson.

Among the issues to be studied by ERCOT is the expansion of Responsive Reserves, and moving an amount of capacity from Non-Spinning Reserve Service (NSRS) to Responsive Reserves. Furthermore, subject to the Power Balance Penalty Curve (PBPC), these additional Responsive Reserves should be offered into SCED at the system-wide offer cap (SWOC).

Additionally, ERCOT was directed to study and recommend a price floor for units that are RUCed for capacity. Specifically, ERCOT is to address whether this floor for RUC capacity should be priced at the SWOC, or whether a floor of $500, or some price floor above $500, for these units is appropriate. As part of this evaluation, ERCOT, should address the issue of whether and how the RUC clawback should be adjusted.

The Commission also directed ERCOT to study, and report back to the Commission, the merits of changes to the magnitude and shape of the PBPC. This study is to inform the Commission as to (1) where on the offer curve the PBPC should start, (2) how quickly prices should rise as the energy supply is depleted, and (3) the magnitude of the highest price on the PBPC (the PBPC cap).

The Commission also reviewed, and further opined on, items which had already achieved consensus and have moved into the implementation stage (such as the previously reported NSRS price floors).

Of note is that the Commission discussed the process under which ERCOT would be able to bring mothballed units back for Reliability Must-Run service for capacity reasons, similar to the action taken this past summer. While Anderson's memo suggested that any recall would be involuntary, Chairman Donna Nelson said that any recall of mothballed units should be agreed to by the unit owners, and that ERCOT should not compel a unit to run. This issue will be further explored as the enabling Nodal Protocol Revision Request, which was recently filed (12/5), is discussed at ERCOT

Commissioners also noted that they hope that the possibility that a unit might be recalled for RMR purposes, under which it will be subject to a clawback, will encourage mothballed units to voluntarily return to service.

The Commission also agreed on additional issues suggested by Anderson for further study by Commission Staff, but with such issues given lower priority mainly because, due to logistical reasons (required system or rule changes), they cannot be implemented before next summer. These include (1) raising the SWOC, (2) issues related to impacts from a unit's low sustained limit (LSL), (3) the adequacy of compensation for RUCs made to provide local reliability and transmission relief, and (4) eliminating the "cap" on Peaker Net Margin (PNM) (actually an automatic reduction in the SWOC if the PNM reaches $175,000).

Anderson did note that some stakeholders have suggested that the Commission should raise the system-wide offer cap, but at the same time these stakeholders have raised concerns with adjusting the cap under the Power Balance Penalty Curve. Though not having reached a decision on the issue, Anderson believes that any adjustment to the SWOC appears to necessitate a change in the PBPC cap.

Anderson said that he has no particular problem raising, or eliminating, the SWOC or adjusting the cap on peaker net margin.