Feds Seeking to Assert Control Over ERCOT Resource Adequacy

Apparently in the vein of never letting a crisis go to waste, a federally-sanctioned, non-representative, quasi-government agency has inserted itself into the ERCOT resource adequacy debate, requesting, since it has no authority to demand, that ERCOT provide it with certain information, but with the request serving more to bully ERCOT into preferred policy outcomes.

Specifically, Gerry Cauley, President and CEO of the North American Electric Reliability Corporation, requested in a January 7 letter to Trip Doggett, ERCOT President and Chief Executive Officer, that ERCOT, "should consider additional potential solutions to address resource adequacy and provide a plan outlining the measures it is taking to increase reserve margins and ensure reliability." [emphasis added]

"It is essential to send the right reliability signals to prospective generation," Cauley said, in a thinly veiled statement that NERC deems ERCOT's -- and the Public Utility Commission of Texas' -- current market-driven resource adequacy approach inadequate.

"Capacity resources in ERCOT have drifted to a level below the Planning Reserve Margin target and are projected to further diminish through the ten-year period covered in the assessment. It is clear to me that these levels imply higher reliability risks especially the potential for firm load shed, and ERCOT will need more resources as early as summer 2013 in order to maintain a sufficient reserve margin," Cauley said.

Here, it must be stressed that NERC has no jurisdiction whatsoever over the level of resource adequacy, particularly in ERCOT (some regional reliability councils such as RFC have adopted planning reserve margin standards).

Notably, Cauley cites no reliability rules or other provisions associated with his request (other than a provision for NERC to report -- and only report -- on bulk power system adequacy), and only cites generic concerns about "reliability."

However, these "reliability" concerns are simply manufactured. Although firm load shed is not at all desirable, and has been stated by Texas policymakers as unacceptable, ERCOT's experience with firm load shed has proven that resource inadequacy does not harm or otherwise impact the reliable operation of the bulk power system. Controlled load sheds have proven to preserve the integrity of the grid, and therefore, there is no "reliability" issue at hand. NERC is inserting itself in a policy debate about resource adequacy -- one clearly outside of its intended mission as well as its specifically enumerated powers.

"It is essential that NERC understand how ERCOT plans to remedy NERC's concerns. Therefore, I am requesting that you report to NERC, no later than April 30, 2013, ERCOT's plan to address the declining reserve margin and projected capacity shortfall, including a discussion of the risks to reliability if new resources are not constructed or acquired in the short term," Cauley requested.

ERCOT should respectfully inform NERC that it answers to the concerns of Texas policymakers and ratepayers.