Priority Power Management Seeks PUCT Action on ERCOT West Zone Congestion "Crisis"

Calling the dramatic increase in congestion costs in the ERCOT West Zone a "crisis," Priority Power Management, LLC filed a request with the Public Utility Commission of Texas for an emergency inquiry into the extreme levels of congestion costs in the west load zone.

"[W]hat started as an apparently routine rise in congestion costs in April 2012 continued to worsen through August 2012 and has now become a crisis, as costs have reached unprecedented levels at an alarming rate," Priority Power Management (PPM) said.

PPM's letter follows an earlier request for action from the City of Seymour, reported by Matters earlier this month.

"Congestion costs of this magnitude could, if they continue, affect the economic viability of the West Texas region, discouraging investment in new businesses, curtailing economic development, and stopping the creation of new jobs," said John J. Bick, Managing Principal of Priority Power Management.

"Moreover, and more generally, congestion costs of this magnitude, unabated on a day-in, day-out basis, appear to be indicative of a significant malfunction in the nodal market's structure or function. A failure of this severity could, if it continues, become a threat to the integrity of the competitive market in the West Zone," PPM said.

PPM said that simple average West Zone Trading Hub/Load Zone basis differentials have grown from $1.61 per MWh in February 2012 to as high as $27.08 per MWh for August 2012 (month to date through August 22, 2012). On an average basis, the basis differentials have escalated steadily through August 2012, with a slight dip in May, when it appears certain outage related constraints may have been resolved, PPM said. However, since May, costs have continued to rise dramatically, PPM said.

The west load zone congestion costs are more than 2400% of the average of all other ERCOT load zones, PPM said.

PPM said that though numerous potential causes have been discussed by ERCOT, the IMM, and stakeholders, a definitive determination of the full cause has not been made. The increased costs could be partially due to transmission facility outages in April and May, 2012, or to constraints in the West Zone related to CREZ projects. On the other hand, the escalating costs could be partly due to problems with or the limits of the auto transformer at the Odessa North substation and could, in the area northwest of Odessa, be exacerbated by growth in the oil and gas industry load. At the same time, the costs could be the result of low generation output resulting from low wind conditions. And, there could also be issues with transformer outages or capacity limits in the San Angelo area.

Moreover, while on July 18, 2012, a mitigation plan was approved by ERCOT for the Odessa North constraint, and on August 5, 2012, ERCOT established a $2,000 Shadow Price Cap for the West Zone, PPM said that these actions do not alleviate the serious impact of the congestion costs on customers in the short term. "[T]he only solutions appear to be long term solutions that provide no immediate relief," PPM said.

"To that end, PPM respectfully requests that the Commission help bring this crisis under control by considering the issue in its next open meeting. PPM respectfully requests that the Commission give notice of the West Load Zone congestion cost issue in Project No. 31600 (or in any more appropriate existing generic project or docket focused on monitoring the nodal market or in a new generic project or docket established to monitor the nodal market), and, after deliberating in open meeting, request ERCOT to take immediate action to investigate the causes of the West Load Zone congestion cost crisis and to propose remedial measures that can be immediately implemented."