Texas PUC To Consider Recommendations For ERCOT Energy-Only Market Improvements

The Public Utility Commission of Texas will open a project to consider recommendations for improvements in the ERCOT energy-only market design, prompted by a paper filed by Calpine and NRG Energy

As more fully detailed in a story by RetailEnergyX.com, the changes proffered by the paper generally fall into four categories:

• Operating Reserve Demand Curve (ORDC) adjustments

• Adoption of marginal losses

• Issues surrounding co-optimization and local scarcity

• Transmission planning and cost allocation

Commissioners directed Staff to open a project to consider the report and potential improvements

However, Commissioner Kenneth Anderson said that he would not plan on taking up suggestions for changes in cost allocation of transmission, because, among other reasons, Anderson believes it would require a change to law, and because Anderson believes departing from the current methodology (postage stamp rate) would be a move towards participant funding, which gets no transmission or little transmission built [note: these comments ostensibly address assignment of transmission costs to market participants, rather than transmission cost recovery rate design (e.g. 4CP) which was also raised in the report]

With regards to transmission planning, Anderson did note the difference between the time horizons for transmission planning and the much quicker time it takes for a developer to build a new power plant in ERCOT. "That has created, I think, a bias," Anderson said. Still, Anderson said that no good solution to address this issue is apparent

The other three categories do merit a review, Anderson said.

Including marginal cost of transmission losses in ERCOT’s energy market dispatch and pricing is a, "no brainer," Anderson said, subject to implementation costs

Commissioner Brandy Marty Marquez said that the policy reasons for the adoption of marginal losses are clear, but observed that opening up SCED is never easy.

Anderson noted that issues concerning local scarcity and ORDC changes are meant to address issues arising from RMR and RUC, which are ongoing issues that ERCOT and stakeholders have been addressing, but said that the Commission will probably need to, "pick this up," in order to get the ball moving a little faster.

Marquez also emphasized that the PUC should take care to consider the changes together, and to clearly define what problem the PUC is seeking to solve: is it more efficiency in the market, is it an imbalance of generation assets, is it a lack of money in the market?

Noting that some 90% of power in ERCOT is transacted bilaterally, and that many of the proposed changes would carry economic consequences, Anderson stressed that the Commission will be mindful that, for changes that appear to have ready consensus and should be adopted relatively quickly, market participants will need time to plan for the changes before an effective date.