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ERCOT panel advances market changes driven by mid-February winter storm

Highlights

Limits ancillary services to systemwide cap

Load-shedding to be considered in pricing

A key Electric Reliability Council of Texas panel on June 23 advanced rule changes arising from the deadly mid-February winter storm – changes that affect the prices of energy and ancillary services such as frequency response service.

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ERCOT's Technical Advisory Committee approved unanimously, with three abstentions, Nodal Protocol Revision Request 1080, which limits the ancillary service prices to the systemwide offer cap, which normally is $9,000/MWh, but which falls to $2,000/MWh when the cumulative profits of a hypothetical gas turbine plant reaches $315,000 in a year, such as occurred during this February's deadly winter storm.

"NPRR 1080 will prevent future extreme ancillary service prices such as cleared in the day-ahead market during [winter storm] Uri," a Public Utility Commission of Texas staff written comment on the proposal states.

AS prices seen at $25,000/MW

During certain hours of the storm, the market clearing prices for capacity for AS "were as high as over $25,000/MW," the PUC staff said, even though the systemwide cap was $9,000. These extreme AS prices resulted from the day-ahead market algorithm's "consideration of resource opportunity costs" and penalties for failure to perform.

Potomac Economics, ERCOT's independent market monitor, maintains that AS resources procured to reduce the probability of losing load should not exceed the estimated $9,000/MWh value of lost load, which is equal to the high systemwide offer cap, or HCAP.

The other major rule change advanced June 23 was NPRR 1081, requiring that the real-time on-line reliability deployment price adder be adjusted to consider when firm load shedding is implemented.

ERCOT and its stakeholders established the real-time on-line reliability deployment price adder – RTORDPA – as a way to compensate the market when generation that is priced out of the energy market is deployed for reliability purposes.

Randa Stephenson, Lower Colorado River Authority vice president for wholesale markets and supply, on June 23 described the RTORDPA as a "plug" designed to ensure that the market clearing price equals the $9,000/MWh estimated value of lost load during Energy Emergency Alert Level 3 events with firm load shedding.

Capacity vs. energy an issue

While supporting in concept the idea that load shedding should be considered when setting market clearing prices, Stephenson questioned NPRR 1081's requirement that the RTORDPA be "clawed back" from ancillary service resources once those AS resources have been deployed.

"We really think capacity is a different product from energy," Stephenson said.

Thus, taking back an energy payment (RTORDPA) from an ancillary service resource -- contracted as capacity in reserve to provide energy -- disincentivizes resources from participating in ERCOT's ancillary services market, Stephenson said.

Kenan Ogelman, ERCOT vice president for commercial operations, said his staff understands "the intent of LCRA's comments," but thinks the change requires further discussion by stakeholders before it can be adopted, while the PUC has directed ERCOT to act quickly on the substance of NPRR 1081.

The committee failed to approve NPRR 1081 as amended by LCRA and instead unanimously approved, with four abstentions, the revision request that retains the RTORDPA "claw-back" language.

The next step is approval by the ERCOT Board of Directors, which plans to meet June 28.