Brattle Group to Prepare Composite Resource Adequacy Policy Alternatives for Texas

The Brattle Group is to prepare for ERCOT and the Public Utility Commission of Texas an estimate of demand response achievable in the market and two "composite" detailed policy alternatives to address resource adequacy, one that highlights the major components of an energy-only option, and one that highlights the major components of a forward capacity market option.

The analyses are to be filed by October 15, and will inform the Commission's discussion at the previously reported October 25 open meeting/workshop.

Specifically, Brattle is to prepare an estimate of how much demand response can be achieved, and how quickly, in the ERCOT market. "The Brattle Group's analysis would be based upon an assessment of the successes and failures of Demand Response efforts in other parts of the country, including a survey of the leading programs that curtail small customers voluntarily through air conditioning-cycling programs. The survey will not only quantify the penetration rates and total amounts achieved, but also will identify the factors that determine program success and consider how any lessons-learned might apply to Texas," ERCOT said.

During Friday's open meeting, Commissioner Kenneth Anderson suggested that a project be opened to fully consider all aspects of the steps necessary to further encourage the development of price responsive loads, whether as part of ancillary services at ERCOT, deployed by Transmission and Distribution Utilities (TDUs), or created through innovative products offered by retail electric providers and other load-serving entities. Anderson said that this review should occur regardless of which resource adequacy approach the Commission adopts.

Anderson said that the review would not be limited to examining loads in SCED, but should also include a review of programs using an administrative demand curve, with the goal of getting loads to engage in price formation, not price reversal.

In a memo, Anderson said that ERCOT, the stakeholders, and the IMM should be directed to develop an Integrated Proxy Demand Curve (IPDC) that takes prices above a certain point, say $500, $700 or $1000, to the HCAP and that can be used in conjunction with the Power Balance Penalty Curve (PBPC).

Brattle is to also produce detailed resource adequacy policy alternatives that build upon the proposals submitted to the Commission in Project No. 40000. To further crystallize the alternatives before the Commission, the Brattle Group will develop two "composite" proposals: one that highlights the major components of an energy-only option, and one that highlights the major components of a forward capacity market option. The composite alternatives will include elements of the proposals filed in Project No. 40000, together with additional components suggested by the Brattle Group's analysis and those specifically desired to be reviewed by Commissioners. As it develops the composite alternatives, the Brattle Group will consult with the Commission, ERCOT, the Independent Market Monitor and stakeholders.

Anderson also said that the ERCOT settlement timeline needs to be shortened, ideally to a range of 3-5 days. Anderson noted that this would reduce credit exposure of the overall market, while also reducing collateral requirements for market participants.

In stakeholder discussions at ERCOT, a 10-day settlement timeline has been proposed, which would maintain the current level of accuracy in the settlement data.

Chairman Donna Nelson expressed support for accelerated settlements but has not reached a conclusion on the appropriate length.