Texas Staff, NRG Seeks Approval of Voluntary Mitigation Plan

Staff of the Public Utility Commission of Texas and NRG Texas Power, LLC, and its generation affiliates operating in the ERCOT market, have sought Commission approval of a Voluntary Mitigation Plan governing the offering practices that NRG can use when offering its generation resources into the ERCOT real-time energy market.

Consistent with PURA, the plan would provide NRG an absolute defense against an allegation pursuant to PURA § 39.157(a) and P.U.C. SUBST. R. 25.503(g)(7) of an abuse of market power through economic withholding, with respect to the specific behaviors addressed by the plan.

The plan addresses NRG's offer strategy for five different technology types: nuclear, solid-fuel (coal and lignite), non-quick start natural gas, quick start natural gas, and wind.

"Core elements" of the plan are patterned after the conduct test in the mitigation mechanism for broad constrained areas that has been used in the Midwest ISO for a number of years.

To address structural differences between MISO and ERCOT, the primary conduct thresholds applied to each generation resource in the plan are reduced from the MISO thresholds. For example, for non-quick start natural gas-fired resources, the thresholds in the plan are set at the lower of 200 percent of or $50 per MWh over the relevant reference level as defined in the plan.

Several of the offer strategies are based on formulas; specific Energy Offer Curve procedures can be found one pages 11-13 of the linked filing (click here)

Notably, the Plan also provides that up to 12 percent of the difference between the high sustained limit and the low sustained limit for each natural gas-fired unit (5 percent for each coal/lignite units) may be offered no higher than the higher of $500 per MWh or 50 times the natural gas price, and up to 3 percent of the difference between the high sustained limit and the low sustained limit for each natural gas-fired unit may be offered no higher than the system-wide offer cap.

"These caps are intended to accommodate potential legitimate fluctuations in marginal cost that may exceed the base offer caps, such as operational risks, short-term fluctuations in fuel costs or availability, or other factors. However, the Plan contains a requirement that these offers, if offered in any hour of an operating day, must be offered in the same price/quantity pair for all hours of the operating day," the Independent Market Monitor said in an affidavit in support of the plan.

"This provision, along with the quantity limitations, significantly reduces the potential for tuning these offers in response to particular market conditions and significantly increases the likelihood that such offers, if offered, are based on legitimate marginal cost considerations," the IMM said.