Texas PUC Rescinds Prior Order That Past ERCOT Prices Be Corrected To Reflect Scarcity Pricing During Weather Event
February 16, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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Update #2, 5:15 p.m. ET Feb. 16
The Texas PUC issued a further order on ERCOT pricing, and rescinded its prior directive that past ERCOT prices during the weather event be corrected to reflect scarcity pricing
The PUC's latest order affirms that, on a prospective basis, adjustments are needed to ERCOT prices to ensure they accurately reflect the scarcity conditions in the market. The PUC continues to direct ERCOT to ensure that firm load that is being shed in EEA3 is accounted for in ERCOT’s scarcity pricing signals.
"However, the Commission determines that its directive to ERCOT in its order dated February 15 to also correct any past prices to account for load shed in EEA3 should be and is hereby rescinded and directs ERCOT to not correct any such past practices," the PUC ordered
PUC Docket No. 51617
Separately, ERCOT said that it does not have a time certain for when it will exit emergency conditions
Update, Feb. 16.
ERCOT issued a market notice (M-C021521-01) the evening of Feb. 15 explaining how ERCOT intends to implement certain directives under the PUC's order reported in our earlier story below
As noted, the order requires ERCOT to "ensure that firm load that is being shed in EEA3 is accounted for in ERCOT’s scarcity pricing signals." This directive is based on the Commission’s observation in the order that energy prices of less than $9,000/MWh during load-shed conditions are "inconsistent with the fundamental design of the ERCOT Market."
"ERCOT will implement the pricing outcomes directed by the order by making an administrative adjustment to the Generation To Be Dispatched value in the Real-Time Reliability Deployment Price Adder process during all intervals in which ERCOT has directed firm Load shed. This adjustment will be equal to the cumulative MW ERCOT has directed for Load shed during each Security-Constrained Economic Dispatch (SCED) interval," ERCOT said in the notice
"To make use of existing system functionality and strictly for purposes of the Real-Time Reliability Deployment Price Adder process, this cumulative MW value will be entered in as a Real-Time Block Load Transfer import (RTBLTIMPORT) and will appear in any associated Market-facing reports as such. This change has already been implemented and will operate prospectively until the Commission directs otherwise," ERCOT said in the notice
Separately, ERCOT said that weather and more generation outages last night brought load shed to 18,500 MW.
"In response to the weather-induced electricity crisis currently affecting Texas, the Public Utility Commission of Texas met in an emergency open meeting this evening [Feb. 15] to address concerns that certain pricing mechanisms were not generating an optimal response to the challenge," the PUC said in a news release
"In its order, the Commission directed the Electric Reliability Council of Texas to modify pricing models to more accurately reflect the scarcity conditions in the market," the PUC said
"Specifically, the Commission directed ERCOT to ensure that firm load being shed in ERCOT’s Energy Emergency Alert Level 3 operating condition is accounted for in ERCOT’s scarcity pricing," the PUC said
"The decision was spurred by ERCOT’s discovery that energy prices across the system were clearing at less than the current system-wide offer cap of $9,000 established by Commission rule. When notified, the Commissioners agreed that energy prices across the system clearing as low as approximately $1,200 during the first day of the weather crisis was inconsistent with the fundamental design of the ERCOT market. Because energy prices should reflect scarcity of the supply, the market price for the energy needed to serve load being shed in the face of scarcity should also be at its highest," the PUC said
In the order, the PUC said that, "Utilities Code § 39.151(d) gives the Commission 'complete authority' over ERCOT, the
independent organization certified by the Commission pursuant to § 39.151."
"Further, 16 TAC
§ 25.501(a) provides that ERCOT determines market clearing prices of energy and other ancillary
services in the ERCOT market unless 'otherwise directed by the commission,'" the order states
"Pursuant to this authority, the Commission determines that adjustments are needed to ERCOT prices to ensure they accurately reflect the scarcity conditions in the market. Accordingly, the Commission directs ERCOT to ensure that firm load that is being shed in EEA3 is accounted for in ERCOT’s scarcity pricing signals. The Commission further directs ERCOT to correct any past prices such that firm load that is being shed in EEA3 is accounted for in ERCOT’s scarcity pricing signals," the order states
The PUC also ordered the suspension of the low system-wide offer cap (LCAP) in the scarcity pricing mechanism due to abnormal fuel prices
"ERCOT has informed the Commission that generator revenues are approaching the peaker net margin (PNM) threshold established in 16 TAC § 25.505(g)(6). That threshold is currently $315,000/MW-year. As provided in §25.505(g)(6)(D), once the PNM threshold is achieved, the system-wide offer cap is set at the low system-wide offer cap (LCAP), which is is 'the greater of' either '(i) $2,000 per MWh and $2,000 per MW per hour; or (ii) 50 times the natural gas price index value determined by ERCOT, expressed in dollars per MWh and dollars per MW per hour.' Due to exceptionally high natural gas prices at this time, if the LCAP is calculated as '50 times the natural gas price index value,' it may exceed the high system-wide offer cap (HCAP) of $9,000 per MWh and $9,000 per MW per hour. 16 TAC § 25.505(g)(6)," the PUC said in its order
"This outcome would be contrary to the purpose of the rule, which is to protect consumers from substantially high prices in years with substantial generator revenues. It would make little sense to expose consumers to prices that are higher than the usual maximum price after a generator revenue threshold has been achieved. Given the need to ensure appropriate energy prices to both consumers and generators during this system emergency, the Commission finds that, in accordance with 16 TAC §§ 22.5(a) and 25.3(b), a public emergency exists and good cause exists for granting an exception to 16 TAC § 25.505(g)(6)(A). On this basis, and because of the aforementioned concerns with the application of the LCAP, the Commission orders that ERCOT shall suspend any use of the LCAP until after the Commission’s regularly-scheduled next open meeting, and that ERCOT shall continue to use the HCAP as the system-wide offer cap until that time," the PUC said in its order