ERCOT: Brattle Omits "Critical" Implementation Steps for Market Design Changes; Says Cannot Endorse Brattle's Six-Month Estimate Absent Specific Design

In developing its composite proposals on resource adequacy in Texas, Brattle omitted "critical" steps required for implementation of any "significant change" in market structure, ERCOT said in comments to the Public Utility Commission of Texas yesterday.

Notably, ERCOT, in assisting in the development of a September memo from Commissioner Rolando Pablos, had previously identified critical steps that would have to be considered in the successful implementation of any significant change in market structure and rules. Despite ERCOT working with Brattle to develop information for the Pablos memo, these implementation steps were omitted from Brattle's composite report.

Furthermore, ERCOT said that it, "cannot agree that the six-month schedule offered by Brattle for implementation of either policy composite is reasonable," until the details or a chosen policy option are more clearly defined.

The omission is yet another example of Brattle reports ignoring specific data and direction from market administrators and regulators, possibly in order to support Brattle's favored policy option, which is typically a capacity market (Brattle endorsed the capacity market in PJM, and though it has been more deft as to recommendations in Texas, Brattle has called a centralized capacity market the "best" option for "reliability" in Texas).

Brattle has a history with omitting key metrics from reports concerning capacity markets.

As Matters previously reported, the Maryland Public Service Commission, the New Jersey Board of Public Utilities, the Delaware Public Service Commission, and the District of Columbia Public Service Commission previously wrote to the PJM Board of Managers that a Brattle report which was intended to be a performance assessment of the Reliability Pricing Model was, "deficient in its attempt to satisfy its obligation to 'report on the performance of RPM.'"

The Organization of PJM States, Inc. later approved a resolution to, "support in principle that the Brattle Group's Performance Assessment of PJM's Reliability Pricing Model dated August 26, 2011, is deficient in its attempt to satisfy its obligation to report on the performance of RPM." The Public Utilities Commission of Ohio, individually from the OPSI resolution, also expressed views similar to those of the Maryland, New Jersey, Delaware, and District of Columbia commissions.

Without addressing each and every criticism of Brattle by the four state regulators (see prior story for more detail), the four state commissions said that the Brattle RPM report, whose explicit purpose and scope demanded a detailed review of and response to the PJM Independent Market Monitor's (IMM) concerns about RPM, barely mentioned the IMM's long-running concerns and efforts.

"We are, quite frankly, bewildered at the disconnect between the [Brattle] Performance Assessment and the IMM's efforts regarding these issues," the state commissions said.

"This failure to address the concerns the IMM has identified, at length, calls into question the efficacy of the performance assessment of the RPM," the state commissions said.

"The performance assessment is the opportunity for consumers to evaluate whether they are getting value for the billions of dollars a year they pay for capacity. Because of the failure of the [Brattle] study to address the concerns of the IMM, we still have no answer to this question," the state commissions said [italics in original].

Link to State Commissions' letter

Now a Brattle report on composite resource adequacy options in Texas omits key implementation steps.

This is notable because there is consensus, except among the most rabid capacity market proponents, that the centralized capacity market -- Brattle's self-labeled "best" option -- will take longer to implement. Commissioner Kenneth Anderson has consistently cited the implementation time in discussing drawbacks of the capacity market approach during open meetings, questioning whether a capacity market could be implemented in time to prevent forecast shortages.

Rather than addressing the specific steps outlined by ERCOT as necessary for implementation, Brattle's composite report includes an estimate that "Implementation" activities would take six months for either of the two composite policy options presented, either energy-only with administrative support, or a capacity market.

Matters does not claim to know how long implementation of either solution would take (and ERCOT itself states that any timeline would depend on specific policies adopted); however, Brattle's glossing over of the specific implementation steps previously published by ERCOT, when at a high level the capacity market has been characterized as taking longer to implement, raises concern, to Matters, that the omission of specific implementation steps was done to shield the capacity market from appearing less favorable, in terms of an implementation timeline, than an energy-only approach.

"ERCOT is extremely sensitive to representations made by any party assuming a set schedule for ERCOT to implement potentially very complex (and still undefined) projects, particularly those that involve changes to information systems or development of new processes with market-wide impacts. For this reason, when ERCOT prepared the implementation sections of the charts included in Commissioner Pablos' September 12, 2012, memorandum, ERCOT staff specifically identified critical steps that would have to be considered in the successful implementation of any significant change in market structure and rules," ERCOT noted. These steps included:

• Requirements Finalization

• Vendor Selection

• Vendor Contract

• Functional Design Finalization

• Detailed Design Finalization

• Test Plan & Test Scripts

• Testing

• Develop Operating Procedures/Training

• Staffing Plan for support

"These steps were not included in the 'Implementation Schedule' charts submitted by Brattle Group on October 19, 2012, and ERCOT notes that this omission does not mean that such tasks would not be required to complete a major project," ERCOT said.

"The recent report by Navigant Consulting regarding the implementation of the ERCOT nodal market highlighted the importance of ERCOT carefully assessing the requirements of any major project before announcing firm timelines or completion dates. ERCOT is mindful of the need to implement high priority market design changes quickly, and has worked successfully with stakeholders to move changes related to resource adequacy through its processes efficiently over the past several months. ERCOT also must adhere to a well-defined and properly phased process for developing and implementing market rules and systems changes," ERCOT said.

"Until the details or a chosen policy option are more clearly defined, ERCOT cannot agree that the six-month schedule offered by Brattle for implementation of either policy composite is reasonable. As the details emerge, ERCOT will work diligently to implement new resource adequacy policies, but implementation should not be driven by a timeline that is not yet supported by sufficient facts," ERCOT said.