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Texas regulators, stakeholders debate must-run rules

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Texas regulators, stakeholders debate must-run rules

Texas regulators and power market stakeholders on Dec. 14 brainstormed how best to limit the Electric Reliability Council of Texas Inc.'s use of reliability must-run, or RMR, contracts and how to price their services when needed.

Julia Harvey, the Public Utility Commission of Texas' director of wholesale market policy, conducted a rulemaking workshop for Project No. 46369, with topics including the use of RMR capacity in various ERCOT capacity calculations, the timeline for evaluating RMR and must-run alternative studies, and the approval process for RMR contracts.

The workshop resulted from ERCOT's signing an RMR agreement in June for NRG Energy Inc.'s 371-MW Greens Bayou 5 natural gas-fired generator to operate for the summer months, starting this July and continuing through June 2018, mainly to cope with a transmission constraint in the northwest area of the ERCOT Houston region.

Bill Barnes, NRG's director of regulatory affairs, said his company is "balanced" with about 12,000 MW of peak load through its retail arm, including Reliant, and about 10,000 MW of generation.

"RMR is a symptom of a larger problem within the ERCOT wholesale market structure," Barnes said. "Our primary objective is to ensure healthy and sustainable retail and wholesale electricity markets. We believe RMR represents a disruption to both. The presence of RMR indicates the market has failed to retain and attract sufficient resources to meet ERCOT's reliability criteria. The best solution to RMR is to not have any."

But Katie Coleman, an attorney representing Texas Industrial Energy Consumers, said, "We don't necessarily agree that an RMR contract represents market failure."

Instead, TIEC views the need for an RMR unit as a problem with delays in transmission planning, Coleman said.

Certain stakeholders advocated excluding RMR units' capacity from a generating company's fleet total for purposes of determining market power and for excluding RMR units' capacity from the amount available long term in ERCOT's "Capacity, Demand, and Reserves report," which is issued twice a year.

Longer notice period debated

Stakeholders also advocated a variety of scenarios for the notice period between when a resource owner issues a "notice of suspension of operations," which is currently 90 days before the proposed date of discontinued operations. A PUCT strawman proposal suggested lengthening this to 180 days, but some stakeholders advocated shorter periods.

"Extending it to 180 days is unnecessary," Exelon Corp. Regulatory Affairs Manager Marka Shaw said. "We think 45 days should be enough to know if a unit is needed."

In contrast, Cyrus Reed, conservation director at the Lone Star Chapter of the Sierra Club, supported the 180-day notice period, which he said could provide enough time for ERCOT to not only consider whether an RMR unit is needed but also whether sufficient must-run alternative resources might exist to eliminate the need of an RMR unit.

ERCOT Vice President for Commercial Operations Kenan Ögelman said, "Why can't you let the market know as far in advance as possible? If you do know the date, do you not know it 180 days in advance?"

TIEC's Coleman noted that CPS Energy, owned by the city of San Antonio, let the market know of a unit's planned closure two years in advance.

"We think the [180-day notice] proposal in the strawman rule is a reasonable compromise," Coleman said. "We had members who considered putting in for the [must-run alternative] process, but it was too quick. We do think there's value in giving the process additional time."

Fuel price swings, politics can change profitability

But Greg Thurnher, Shell Energy North America (US) LP's general manager for regulatory policy, said changing situations can make a shorter timeline more appropriate.

"In the last six weeks, we've seen natural gas prices swings and political changes that put a lot of units in or out of the market," Thurnher said.

NRG's Barnes said a decision to suspend a unit's operations "is never easy."

"It's always in flux," Barnes said. "Any decision you want to make should be on the best and most recent and most accurate information. It's always in flux in this type of market, and it always will be."

Mark Watson is a reporter for S&P Global Platts which, like S&P Global Market Intelligence, is a division of S&P Global Inc.