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Financial Marketers Appeal Resettlement of ERCOT Market
May 25, 2011
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Two financial marketers, Longhorn Energy LP and West Oaks Energy LLC, have appealed, to the PUCT, ERCOT's resettlement of Operating Days December 1, 2010 through February 1, 2011 (Docket 39433).
Pending their appeal, the financial marketers sought a suspension of the resettlement, and stated that they have been informed ERCOT will not oppose a suspension pending final resolution. Financial marketers also sought waiver of the alternative dispute resolution process normally required.
The resettlement, approved by ERCOT's Board in April, relates to LMPs and Settlement Point Prices for de-energized electrical buses.
As provided for in the market rules during the relevant Operating Days, for de-energized buses for which there were no electrical buses within the same station, the LMP and Settlement Point Price were determined using the system lambda.
The resettlement would instead determine the relevant LMPs for de-energized buses by using the average LMPs of electrical buses that were energized in that interval in the next connected stations.
The financial marketers argued that under Section 4.5.3 and 6.3 of the ERCOT Protocols, LMP and Settlement Point Prices cannot be altered retroactively unless they are shown to have been, "significantly affected by a software or data error."
Although ERCOT characterized the issue as a "data error," financial marketers disputed this characterization, and said ERCOT's desire to have defined certain "physical transmission elements" as electrical buses in its Network Operations Model, and its failure to have done so under the Protocols as they existed during the relevant Operating Days, does not constitute a "data error."
"While ERCOT may believe that its Protocols did not yield the most economically efficient outcomes on those days, the solution is not to retroactively resettle the market, but to modify the Protocols and pricing model so that different outcomes can be achieved in the future," the financial marketers said.
"Changing over 60 days of market results is likely to result in a decline in virtual trading and liquidity that would allow generators to regain market power, undercutting one of the major reasons for instituting virtual trading to begin with," financial marketers claimed.
"Furthermore, it would provide an opportunity for market manipulation issues resulting from the lack of competition faced by generators," financial marketers continued.
"Generators would have the ability to raise their offer prices, and load-serving entities would be forced to pay a higher price for energy," financial marketers said.
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