Texas Increases ERCOT Offer Cap Effective August 1

The Public Utility Commission of Texas today approved an increase in the ERCOT high system-wide offer cap effective August 1, 2012 (Docket 37897).

Under the PUCT's ruling, the high SWOC will be $4,500/MWh starting August 1, 2012, to be in effect until changed by the Commission. The high SWOC is currently $3,000/MWh.

Chairman Donna Nelson and Commissioner Rolando Pablos voted for the increase effective August 1.

Commissioner Kenneth Anderson abstained, reiterating his prior concerns about the short lead-time for the increase.

All three Commissioners agreed to direct ERCOT to make conforming changes to the Power Balance Penalty Curve (PBPC) consistent with TAC's most recent recommendation.

TAC's recommendation for a revised PBPC had been as follows:

MW Violation         PBPC Level
<5                      $250
5 to <10                $300
10 to <20               $400
20 to <30               $500
30 to <40              $1,000
40 to <50              $2,250
50 to <100             $3,000
100 to <150            $3,500
150 to <200            $4,000
200 or more            $4,501

While discussing the increased offer cap's impact on collateral requirements in the market, Anderson suggested a shorter settlement timeline in ERCOT, especially given the wide deployment of advanced meters. This could reduce collateral requirements as well as the market's credit exposure.

While Anderson noted that a shorter settlement period may create a misalignment between retail billing collections and wholesale billing obligations, he noted that REPs can at least borrow against receivables, whereas collateral posted with ERCOT just sits there, unusable to REPs.

Anderson also said, with respect to REPs' ability to invoke the change in law provision to adjust fixed price contracts with <50 kW customers as a result of the higher offer cap, his view of whether this provision can be used has "softened."

Previously, Anderson had said that he believed REPs would be within their legal right to invoke the provision, but Anderson now noted that stakeholders had offered a variety of interpretations in comments filed with the PUCT.

Though not cited specifically by Anderson, several stakeholders, including some REPs, argued that any costs resulting from a higher SWOC did not meet the change in law standard, which states that the change in law must, "impose new or modified fees or costs on a REP that are beyond the REP's control" (see prior story for discussion)