Texas Denies Petition to Eliminate Small-Fish-Swim-Free Rule

The Public Utility Commission of Texas denied a petition to eliminate or otherwise modify the small-fish-swim-free exemption under Subst. R. §25.504(c).

Subst. R. §25.504(c) currently provides that entities with less than 5% of ERCOT installed capacity do not have ERCOT-wide market power.

Commissioners agreed that small fish cannot exercise market power because of entry by competitors

"To the extent somebody is a small fish and exercises market power and bids above short-run marginal cost, others will enter the market, so it is a short-term issue, and one that I think the market handles well," said Chairman Donna Nelson

Though not specifically addressed by the Commission, this is even more true now than when the rule was originally adopted in 2006, due to the ubiquitous deployment of smart meters which facilitates real-time price responsive load. Specifically, if any entity is dissatisfied with pricing in the real-time market (and cannot find alternative supply-side generation at a cheaper price), it should be contracting with retail providers to purchase generation from REP customers' curtailments, as paying a REP $1000/MWh for curtailments will be advantageous to paying $7000/MWh spot prices, and will also serve to curb such $7000/MWh bidding behavior in the future.

Project No. 42424