Topic: Weatherization of Generation, Restructuring of PURA
Weatherization: Discussion was limited (6 minutes), but Chairman Lake wanted to ensure that weatherization was completed for this winter. Staff’s proposal was adopted by Commissioners.
Wholesale Market Design changes: This topic was discussed for over three hours. Chairman Lake submitted a letter to the record in Docket 52373 as a starting point for commissioners to discuss. The letter offers his ideas but was acknowledged as a starting point that was likely flawed and needed a lot of changes (letter here: http://interchange.puc.texas.gov/Documents/52373_182_1160885.PDF).
In a short, commissioners are not close to agreement on a number of substantive changes to wholesale market changes, but all are eager to make decisions.
Key elements of his letter and reactions from other commissioners follows:
- Commissioners agreed that changes to the ORDC and price cap were necessary. The high cap (HCAP) was proposed to drop to $4500 and the MCL (minimum contingency level, the point at which ERCOT’s administrative pricing kicks in and sets prices and caps) from 2000 MW to 3000 MW. The net effect of this change is less money earned during scarcity by generators but also less risk of loss during outages, and less incentive for loads to shed as demand response. The IMM’s recommendation was to reduce the HCAP to “a lower value in the range of $5000.” (IMM comments: http://interchange.puc.texas.gov/Documents/52373_178_1160003.PDF)
- Chairman Lake proposed to impose an obligation on all loads to show that they had purchased physical power (not just a financial equivalent or hedge but actual power) for three years in advance. This is by far the most significant change proposed by any commissioner. Lake added that he would require loads to purchase specific percentages of their loads over the three-year period with lower percentages in the back years. Verification of this load obligation would be required. Commissioners McAdams and Cobos expressed concerns about this proposal, especially with respect to impacts on industrial loads and small REPs. McAdams said he would vote no on any proposal that threatened independent REPs.
- Formation of a “capacity market” is highly unlikely. All commissioners view ERCOT’s energy-only market as a positive. Some of the proposals, however, are surrogates for obligations to pay for power, possibly power that loads would not consume. A three-year forward purchase obligation requires a lot of guesswork about consumption, for example.
- Commissioners acknowledged that they lacked good economic impact data for their proposals. The IMM offered its own recommendations for changes, and those numbers had economic rationalizations. To ensure that the balances struck in the existing market are not upset, a significant amount of data will need to be analyzed and applied to calculations to all of the proposed changes. Two decades of a proven market, albeit flawed in a small degree, requires research before changes are made.
- New ancillary services are proposed to be offered, including a new winter ancillary product that pays generators more for an assurance that they would run during peak winter periods. Expansion of ancillary services for generators would allow for easier calculations of limited impacts.
- Demand response is being reviewed for expansion with a recommendation to upgrade hardware and software. Lake characterized the requirement for gathering and managing the massive amount of data necessary to expand DR as an “extraordinarily large project” in terms of cost and complexity.
- Commissioner Glotfelty believed strongly that ERCOT should have a reliability standard. This means applying an expectation of outages to occur based on the infrastructure deployed (1 in 10 years, e.g.). He also wanted to add a requirement that the market pay for voltage that doesn’t exist today. He has been a staunch advocate for leveraging technology and deploying battery and other new advances to solve reliability problems.
- Commissioner Cobos emphasized the need to expand solar + storage that can assist with the duck curve (expected to arise as huge solar additions are completed). The policies that require amending involve the length of time the storage can perform (shorten the period so more can participate). Chairman Lake suggested that the expansion of ancillary services would be the best route to get it done. Lake does not want to ask ERCOT to build more services from scratch than have already been proposed. The new ECRS service may take three years to be implemented, so commissioners were concerned about the length of time to see improvements and incentives.