Anderson: More Than 1,000 MW of Texas Quick Start Units Will Close on Financing if Operating Reserves Demand Curve Adopted

The Public Utility Commission of Texas deferred until its next open meeting a decision on adopting an Operating Reserves Demand Curve (ORDC) for the ERCOT market, as Commissioner Kenneth Anderson said that the delay, particularly from a potential rulemaking process, could impede over 1,000 MW of new quick-start generation which Anderson said otherwise could come online as soon as the fall of 2014.

"I believe that if we adopt the ORDC in some form, that there are more than 1,000 MW of quick start units that will close on financing this fall," Anderson reported, based on discussions with investors and lenders.

Anderson said that this is a conservative number, and thinks that the potential new build that could quickly close on financing as a result of the ORDC is "substantially higher."

Such units could come online as soon as the fall of 2014, Anderson said.

Accordingly, Anderson favored adopting an ORDC at Friday's open meeting, proposing that the Commission agree on the direction to provide to ERCOT, with implementation accomplished through nodal protocol revision requests, which are subject to the stakeholder process.

Chairman Donna Nelson, however, was not convinced that directing ERCOT to implement the ORDC, absent a Commission rule, would be speedier than first conducting a rulemaking where specific language is adopted. Nelson cited the tendency of controversial matters to languish at the ERCOT stakeholder process, though Anderson countered that when Commission direction is clear, such matters are quickly resolved.

Nelson, however, wished to study how quickly a rulemaking could be conducted, and accordingly would not join a vote to approve the ORDC at Friday's meeting. Nelson also wanted the specific words for any ORDC to be first ironed out at the Commission.

Regarding the benefits of the ORDC, Anderson said that it specifically targets the true problem in ERCOT, which is not installed capacity, but a relatively small amount of shortage hours.

Anderson noted that while he typically cites the problem as 160 hours, that is hyper-conservative, and that even under the 2011 weather, the problem was under 50 hours.

Accordingly, "[t]here is a fundamental mistake in equating installed capacity with reliability," Anderson said. Anderson noted that in each of the two occasions during which ERCOT has been forced to rely on rolling outages in the past 10 years, the system had installed capacity "well above" a 16% reserve margin.

"There is not a direct connection between installed capacity and reliability," Anderson said.

Anderson noted that the ORDC will support quick-start and flexible units -- those that are needed to address the relatively small number of shortage hours.