Anderson: Energy-Only Not A "Broken" System, As Texas PUC Considers Efficiency Improvements

As the Public Utility Commission of Texas held a workshop on potential enhancements to improve the efficiency of the ERCOT energy-only market, Commissioner Kenneth Anderson emphasized that the market is not "broken" and has performed well

"I do think it's important, speaking for myself obviously, to note that, as I think even the study [filed in the project] indicated, we're not talking about a broken system here, I think the energy-only market in ERCOT has been doing pretty well," Anderson said

The focus, Anderson said, is on potential improvements and enhancements to improve efficiency and scarcity pricing. Now is a good time to consider potential measures, Anderson said, since it's been some six years since nodal went live

Commissioner Brandy Marty Marquez, while stating that she has not reached a conclusion, highlighted the current surplus of generation, as well as oft-speculated retirements which do not appear despite alleged economic stress under the current market

"Part of what I'm wrestling with is that we do have so much surplus," Marquez said

"If somebody asked me today, just speaking for today only, what the biggest problem is with our market, it would be that we have too much power," Marquez said

"We have been talking about the same retirements since I came on the Commission in 2013," Marquez said

"Investors seem very optimistic about investing in Texas. We have so many meetings all the time with investors who are interested," Marquez said

As a result, Marquez said that if the market does see 1-2 retirements, she expects investors will be quick to enter.

Still, Marquez emphasized, "I'm not sold either way, I'm just talking this out."

Anderson further noted that the trend of generators pairing their business with large load serving entities can change the economics for such generation, with the benefits from such integration accruing to the retail book offsetting any challenges in wholesale prices, though Anderson cited a lack of transparency into the issue

Regarding co-optimization, Anderson said that ERCOT's preliminary estimate of the implementation cost at $40 million (see story here), and taking four to five years to implement, was, "troubling", as Anderson had hoped that the process would be simpler given the use of co-optimization in other RTOs

On the other hand, if the need arises for additional $50 million RMR agreements, such money could have instead paid for co-optimization, Anderson noted

Anderson was also hesitant, given the price and length of time for co-optimization, to move forward without an analysis of quantifiable benefits.

Regarding transmission cost recovery and ERCOT's current postage stamp approach, Anderson highlighted that such design was emphasized at the creation of the market to facilitate growth of the competitive market, with transmission built and treated much as highways are.

"A change in that system just strikes me as almost anti-competitive," Anderson said

Anderson said that the experience with participant-funded transmission has been that no transmission gets built, limiting access and benefiting the incumbent.