No Support for Eliminating Texas Small-Fish-Swim-Free Rule

A petition by Raiden Commodities to eliminate the current Small-Fish-Swim-Free rule in the ERCOT market was opposed by a diverse group of stakeholders, and of the publicly available comments at publication time, Raiden's petition had no support from any commenting party.

Raiden Commodities had petitioned the Public Utility Commission of Texas for a rulemaking to eliminate the current Subst. R. §25.504(c), which currently provides that entities with less than 5% of ERCOT installed capacity do not have ERCOT-wide market power.

Industrials, a cooperative, and generators all opposed this request.

Texas Industrial Energy Consumers, "does not believe that the complaints raised in the petition justify eliminating the small fish swim free rule or generally revisiting the Commission's current wholesale market rules at this time. "

"Absent a structural flaw, competition among resources and efficient market outcomes will curb the ability of any market participant to sustain artificially high prices. As the Commission noted when it originally adopted Rule 25.504(c), '[an] entity's attempts to raise prices above competitive levels will be subject to considerable risk that it will simply price itself out of the market, a risk that will increase over time as load becomes more responsive to high prices in the ERCOT spot market.' The Commission's reasons for approving the rule in the current form, as explained in the Final Order, appear to still hold true," TIEC said.

Also opposing Raiden's petition, in separately filed comments, were South Texas Electric Cooperative, Inc., Texas Competitive Power Advocates, GDF SUEZ, and Luminant.

Texas Competitive Power Advocates said, "Since the adoption of the rule in 2006, neither ERCOT nor the independent market monitor (IMM) have made any finding that suggests the small fish rule is not working or that any small fish entity has committed market power abuse"

"Raiden would have the Commission force all generation to submit offers at short-run marginal costs in an energy-only market, even entities too small to persistently wield ERCOT-wide market power. Generators may, at times, have a legitimate basis for submitting offers above short-run marginal costs, but they also have every incentive to submit offers over the long run that avoid pricing themselves out of the market. Indeed, it is the presence of higher prices in the energy-only market that is the signal intended to incentivize new resource investment and encourage demand response. The small fish exemption provides small generators the flexibility to submit higher-priced offers without fear of an accusation of ERCOT-wide market power abuse," Texas Competitive Power Advocates said