Texas Bills Would Allow Customers To Directly Contract With Demand Response Providers (No REP Intermediary)

Several Texas bills have been introduced which would allow a customer to provide demand response in ERCOT by contracting directly with a demand response provider, rather than through a retail electric provider

H.B. No. 2687 provides that the PUC shall, "ensure that customers in all customer classes have the option to contract for participation in demand response either directly with one or more demand response providers, including retail electric providers, with scheduling entities qualified by the independent system operator, or with a combination of entities consisting of the independent system operator and one or more demand response providers."

Under H.B. No. 2687, "demand response provider" means, "a competitive energy services provider that aggregates customer load reduction capabilities, including reliability demand response capability, and offers those capabilities into an electricity market or program."

While there is no statutory prohibition on customers directly contracting with a demand response provider currently, because ERCOT QSEs generally represent either load (LSE) or a resource entity, any demand response provider would need to assume additional obligations (such as being the entity responsible for serving the customer's entire load). While H.B. No. 2687's language is not explicit, the intent appears to be to allow a mechanism similar to how demand response is treated in other RTOs, where a demand response provider is not responsible for a customer's entire load, only a certain reduction.

H.B. No. 2820 contains the same language described above as H.B. No. 2687 but also would add the requirement that, "A customer is entitled ... to participation in demand response programs through demand response providers."

H.B. No. 2687 further provides that the PUC shall, "provide opportunities for demand response providers and customers to participate in wholesale energy markets and ancillary services markets on a comparable basis with other resources, while accommodating differences in operational capabilities of various customer loads among customer classes, including differences related to availability, dispatch notification timelines, curtailment response times, ramp rates, curtailment duration, and times required to return to service following an outage."

H.B. No. 2687 also directs the PUC to, "promote development of demand response participation by customers in all customer classes," and "remove barriers to demand response participation for demand response providers and for customers in all customer classes."

H.B. No. 2687 would also allow the PUC to increase the amount of ancillary services required to be procured by LSEs, and also authorize the PUC to obtain emergency response services in addition to ancillary services as appropriate to prevent rolling blackout conditions

Specifically, H.B. No. 2687 would provide, "If the commission or independent organization certified under Section 39.151 for the ERCOT power region determines that changes in the amounts of existing ancillary service obligations required by load serving entities are needed: (1) the commission by rule may address the imbalance; and (2) the independent organization may make changes to its ancillary service obligations through a stakeholder process to address the imbalance."

Furthermore, under H.B. No. 2687, "The commission by rule shall establish a process for obtaining emergency response services in addition to ancillary services as appropriate to prevent rolling blackout conditions caused by shortages of supply in the ERCOT power region."

H.B. No. 2687 provides that such rules must include:

(1) parameters for estimating the amount of emergency response service capacity necessary to prevent blackout conditions; and

(2) mechanisms for equitably sharing the costs of:

(A) contracting for reserve capacity to be available; and

(B) power provided to prevent blackout conditions.

H.B. No. 2687 provides that the total cost for ensuring the emergency response services does not exceed $100 million annually.