Texas regulators to mull proposed electric reliability standard, cost-of-new entry study

Texas regulators may make some key decisions July 25 about reliability standards for the Electric Reliability Council of Texas to address a maximum level of power outages in terms of frequency, magnitude and duration, about which stakeholders submitted 27 sets of comments ahead of the July 16 deadline.

The Public Utility Commission of Texas on June 13 submitted a Proposal for Publication for a new rule, 16 Texas Administrative Code Section 25.508, relating to Reliability Standard for the Electric Reliability Council of Texas.

The new rule defines the following:

• Exceedance tolerance: The maximum acceptable percentage of simulations in which the modeled ERCOT system has a loss of load event that exceeds the threshold established in the rule
• Loss of load event: When system load exceeds available resource capacity to serve load, resulting in involuntary load shed
• Transmission operator: As defined by ERCOT, an entity under the PUCT that owns or operates transmission facilities in the ERCOT grid
• Weatherization effectiveness: An assumed percentage reduction in the amount of weather-related unplanned outages for thermal generation resources included in the model, due to compliance with weatherization standards

In addition to soliciting comments generally about the proposed rule, the PUC asked stakeholders to discuss the pros and cons of "enshrining an exceedance tolerance for magnitude and duration in the commission's rule." The PUC also asked whether exceedance tolerances should be updated more frequently than reliability standards.

Views differ on standards

The proposed rule sets the reliability standard based on three criteria:

• Frequency: Expected LOLE should be less than 0.1 days per year on average.
• Duration: Maximum expected length of LOLE must be less than 12 hours, with a 1% exceedance tolerance.
• Magnitude: Largest expected instantaneous level of load shed during a LOLE must be less than the maximum megawatts of load shed that can be safely rotated during a LOLE, as determined by ERCOT (consulting with PUC staff and transmission operators), with a 0.25% exceedance tolerance.

Several commenters, including ERCOT staff, the Texas Competitive Power Association and Texas Electric Cooperatives, approved the use of exceedance tolerances in the rule, but these same entities suggested exceedance tolerances updates occur more frequently than reliability standards.

Potomac Economics, ERCOT's independent market monitor, recommended not using magnitude or duration as reliability standards and instead focus on expected unserved energy. If exceedance tolerances are used, they should not apply for magnitude or duration, Potomac Economics said.

"Ultimately, the justification for establishing a reliability standard is that it is extremely valuable to satisfy the demand for electricity," Potomac Economics said. "This value is commonly referred to as the Value of Lost Load (VOLL). ... A standard easiest to align with an assumed VOLL is a standard based on EUE."

The proposed rule directs ERCOT to start Jan. 1, 2026, to assess whether its bulk power system is meeting the reliability standard and whether it is likely to continue to meet the reliability standard for three years after the assessment. The assessment must be done at least once every five years.

But the Texas Public Power Association said ERCOT should complete – rather than initiate -- its reliability standard assessment of the grid by Jan. 1, 2026.

"TPPA also recommends that the assessment review be the same number of years as the cadence on which the assessment will occur (i.e., if the assessment is to occur every five years, then the assessment should evaluate every year for the next five years)," TPPA said.

Surging cost of new entry

Several commenters discussed the cost-of-new entry study The Brattle Group recently finalized for ERCOT and the PUC, in support of developing a reliability standard. The CONE study used two technologies as a standard type of generation to be developed in ERCOT: a set of 6 GE Vernova LM6000 aeroderivative natural gas-fired combustion turbines and a combination of 200 MW of solar PV generation with 100 MW of battery storage.

The Brattle Group study concluded the gas-fired option would have a CONE of about $293,000/MW-year, while the solar-plus-battery option would have a CONE of about $263,000/MW-year. For context, ERCOT currently operates on an assumption of CONE equaling about $105,000/MW-year.

PUC staff and the Office of Public Utility Counsel, the agency that represents residential and small commercial consumers, said they favored the use of a different type of gas-fired resource, a frame combustion turbine, which would set the CONE value at $162,000/MW-year.

"Staff notes that different technologies have distinct CONE values, and different technologies are expected to earn varying revenues in excess of their operating costs at different times of the year," PUC staff said. "This makes the choice of reference technology important within the context of the reliability standard. Staff"s objective is to ensure that the market design provides the necessary price signals to incentivize investment in the market so that the Commission's chosen reliability standard may be achieved."