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Exelon, Calpine Seek to Eliminate RUC Clawback in ERCOT, Except for RMR Units
September 22, 2011
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Exelon and Calpine have submitted to ERCOT Nodal Protocol Revision Request 416, Removal of the Reliability Unit Commitment (RUC) Clawback Charge for Resources Other than Reliability Must-Run Units.
NPRR 416 would, "remove[] the 50% and 100% Reliability Unit Commitment (RUC) Clawback Charge for units with Three-Part Supply Offers in the Day-Ahead Market (DAM)," Exelon and Calpine said. However, it would leave intact the language intended to hold RMR Units at costs for energy revenues.
Exelon and Calpine claimed that the existence of the RUC clawback, "is leading to inefficient scheduling of units, inefficient RUC selection in the DAM and hourly market."
At a high level, the RUC clawback requires that resources that were offered in, but not selected by, the DAM and that are selected in the RUC must surrender 50% of any profits over cost in the RUC-committed hours to the market; and that resources that were not offered in the DAM and that are selected in the RUC must surrender 100% of any profits during RUC-committed hours over cost to the market.
The intention of the RUC clawback is to incent generation to participate in the voluntary DAM and prevent gaming of the RUC to ensure payment for running self-scheduled units.
However, Exelon and Calpine said that, "[t]he voluntary nature of the Texas Nodal Market design gives loads who do not wish to participate in the DAM a free option to purchase power at a discount due to the clawback while a generator wishing to cover MWs resulting in Forced Outage or derate face penalties against its forward sales resulting in negative outcomes on overall profit and loss. The clawback encourages generators to leverage workarounds that exist in the Protocols to avoid this exposure. There is, ultimately, an inherent inequity between loads and generation that is due specifically to the clawback."
Exelon and Calpine noted that eliminating the RUC clawback had been proposed by Dr. David Patton in testimony on behalf of PUCT Staff filed in November 2005 in Docket 31540, which established the nodal protocols.
However, the proposal was not adopted, with the TXU Energy, Wholesale, and Power Companies as well as Reliant Energy, Inc. opposing elimination of the clawback.
In rebuttal testimony and a brief filed in Docket 31540, Reliant had said that, "Dr. Patton's proposed removal of the RUC clawback provisions is unacceptable because it would eliminate necessary and valuable incentives designed to encourage early commitment of resources."
Likewise, the TXU companies had said in Docket 31540 that, "[t]he RUC clawback, although it is part of the RUC design, is an important part of the DAM design, too. If a unit owner does not offer the unit into the DAM, then it will have to give ERCOT 100% of any profits it receives from the market during RUC-committed hours. This is a powerful incentive for unit owners to submit an offer into the DAM."
"But the RUC clawback's effect on the DAM does not stop there," TXU continued. "If the unit owner offers his unit into the DAM but it is not selected in the DAM, and the unit is then committed by the RUC, then the unit owner will have to give ERCOT 50% of the profits it receives from the market during RUC-committed hours. This gives the unit owner a disincentive to economically withhold the unit by submitting the unit into the DAM at an unreasonably high price."
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