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ERCOT stakeholders to revisit paying power generators to ramp down

Houston — Generators required by the Electric Reliability Council of Texas to ramp down for grid reliability may be compensated under a proposal ERCOT's board has asked stakeholders to reconsider, in response to an appeal of the proposal's failure in committee.

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At issue is Nodal Protocol Revision Request 649, which addresses ERCOT's out-of-merit dispatch overrides of generators' plans to produce at their high sustainable limit.

The NPRR was sponsored by ERCOT staff partly to settle an appeal to the Public Utility Council of Texas by Odessa-Ector Power Partners of ERCOT's denial of resettlement of payments to Odessa-Ector over the period of November 15, 16 and 20, 2012. On May 14, 2014, a PUCT administrative law judge issued a proposed order granting the appeal. On July 16, 2014, ERCOT filed a motion to settle the matter in Odessa-Ector's favor.

Odessa-Ector's losses as a result of those days' out-of-merit dispatch overrides were documented to exceed $300,000, ERCOT said in its NPRR documentation.



Filed in September 2014, NPRR 649 spent more than a year under discussion in various stakeholder groups before finally being taken up by the Technical Advisory Committee on November 19, 2015, where by roll-call vote 56% supported the measure, but TAC rules require the support of at least a two-thirds majority before it could be considered passed.

Opponents said that since ERCOT implemented a nodal market in December 2010, out-of-merit dispatch orders to ramp down generation have been rare and do not justify the estimated project cost of $150,000 to $200,000. They also expressed concern that generators would be paid more than their cost for ramping down, essentially paying for lost-opportunity cost, rather than out-of-pocket costs.

On December 7, Koch Ag & Energy Solutions, which owns Odessa-Ector, appealed the TAC decision, but that was not soon enough to be considered by the ERCOT board at its December meeting.

On Tuesday, the ERCOT board granted Koch Ag & Energy Solutions' appeal and remanded the issue to the Technical Advisory Committee to either muster the necessary supermajority in support of the proposal, or to pass an alternative approach by supermajority, or, if no recommendation passes, to be prepared to present arguments against such a proposal. The board also directed ERCOT staff to file comments suggesting alternatives that might satisfy at least two-thirds of the TAC membership. TAC must have accomplished this work in time for the ERCOT board's April 19 meeting.

Katie Coleman, who represents Air Liquide, told the board, "I think we're going to continue to have concerns about paying generators for what we view as lost profits, as compared to documented financial losses, but we're willing to have more discussion about that at TAC in the stakeholder process."

ERCOT board member Nick Fehrenbach, Dallas' manager of regulatory affairs and utility franchising, emphasized that the proposal advocates paying "lost opportunity cost -- not financial losses."

"ERCOT took an action from a reliability standpoint that resulted in a generator not being able to earn profits on high prices that day," Fehrenbach said. "They didn't put out a cost that they were not allowed to recover. Nowhere else in the protocols do we pay any market participant opportunity cost. ... I don't have a problem with them being able to recover out-of-pocket costs, but when we start offering opportunity costs, we open a very slippery slope. Are we going to start paying generators when we have to derate transmission lines and they can't get their power to market because they're located in a bad spot? I certainly hope not."

--Mark Watson, markham.watson@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com