ERCOT Won't Award Contracts for Must-Run Alternative Resources To Replace Greens Bayou

ERCOT said that it will not award any contracts for Must-Run Alternative (MRA) Resources that had been sought to eliminate the need for the Greens Bayou Unit 5 RMR contract, as ERCOT said that the proposals contained in the MRA responses did not provide an acceptable solution to the reliability concern which prompted the need for the Greens Bayou RMR agreement

Pursuant to Protocols Section 3.14.1.5, Potential Alternatives to RMR Agreements, on July 13, 2016, ERCOT had issued a Request for Proposal (RFP) to procure one or more potential Must-Run Alternative (MRA) Resources with the prospect of eliminating the need for the existing Reliability Must-Run (RMR) Agreement with NRG Texas Power LLC (NRG) for Greens Bayou Unit 5.

More specifically, paragraph (2) of Section 3.14.1.5 states that ERCOT may negotiate a contract for an MRA Resource(s) that:

• Technically provides an acceptable solution to the reliability concern that would otherwise be solved by the RMR Unit(s) -- in this case, the Greens Bayou Unit 5 during the months of June 2017 through September 2017, and June 2018;

• Will provide a more cost-effective alternative to continued service by the RMR Unit (evaluated over the exit strategy period); provided, however, that no proposed MRA Resource will be considered if it does not provide at least $1 million in annual savings over the projected net annualized costs for the RMR Unit, and

• Satisfies objective financial criteria to demonstrate that the seller is reasonably able to fulfill its performance obligations as determined by ERCOT.

Proposals (offers) from Qualified Scheduling Entities (QSEs) were due to ERCOT on August 24, 2016. ERCOT received eight offers from four QSEs, representing a combined capacity total of 385.9 Megawatts (MW) for four of the five contract months and 300.9 MW for the other contract month.

Upon review of the offers, ERCOT determined that several of the offers did not qualify as eligible MRA Resources and therefore were not considered in the final evaluation.

In the evaluation of the remaining eligible offers, ERCOT determined that they did not provide an acceptable solution to the reliability concern necessary to replace the need for the RMR Unit.

Additionally, ERCOT said that it is important to note that -- even assuming that all offers were eligible and evaluated with the total combined capacity of 385.9 MW for four of the five contract months, and 300.9 MW for the other contract month -- it would still not provide an acceptable solution to the reliability concern necessary to replace the need for the RMR Unit

As such, ERCOT will not award any contracts for MRA Resources designed to eliminate the need for the June 2, 2016 RMR Agreement with NRG.