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Texas Commission Directs ERCOT to Perform Backcast Analysis of Resource Adequacy Options
September 13, 2012
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Copyright 2010-
The Public Utility Commission of Texas this afternoon directed ERCOT to perform a backcast analysis of the resource adequacy approaches proposed in the Brattle report, including the filed stakeholder proposals which fall within or tweak the Brattle-outlined mechanisms, to determine the additional revenue that the various options would have produced for generators had the mechanisms been in place for 2011-12.
Additionally, ERCOT is to run a backcast analysis for 2012 under the current energy-only market design but with higher price caps of $4,500, $6,000, $7,500, and $9,000 as being contemplated in the long-term resource adequacy rule.
ERCOT is to file the backcast analyses with the Commission by close of business on September 24.
The Commission's decision to order the backcasts, and defer any substantive decision on certain resource adequacy questions, came as a majority of Commissioners were not prepared, today, to endorse requiring the ERCOT market to meet a mandatory reserve margin, which then immediately implicates what design would be required to attain such a mandate.
In a memo filed in advance to today's open meeting, Commission Rolando Pablos said that he was, "opposed to rushing into a decision that could potentially undo approximately ten years of work on the existing market without a more careful review of the implications associated with the proposed solutions."
"Since late last year, the Commission, in conjunction with ERCOT and the stakeholders, has taken swift steps to implement measures to improve scarcity price signals, which have yielded positive near-term results that provide the Commission with some additional time to make a well-reasoned decision," Pablos said, while agreeing that the matter is still urgent.
"I am also interested in seeing the impacts of the higher system-wide offer caps that the Commission will be considering at the September 28, 2012 open meeting irrespective of the Brattle Study's conclusion that ERCOT will not meet the target reserve margin with a $9,000 system-wide offer cap," Pablos said.
During the open meeting, Pablos said that if the Commission immediately voted to adopt a mandated reserve margin, it would appear that such a decision would lead to the adoption of a centralized capacity market (Brattle Option 5), due to various weaknesses identified with respect to a non-centralized capacity obligation placed on LSEs (Option 4). Pablos said adopting a centralized capacity market today based on the current record, "concerns me," because the consequences of such a policy are not fully known.
Commissioner Kenneth Anderson also welcomed the backcasting, noting that he has some preliminary ideas of how to implement a form of Option 2 (energy-only with price adders and/or additional reserves which has been called organized "withholding") or Option 3 (energy-only with limited backstop procurements) while keeping the basic framework of the current market, but does not have information on the costs of such an approach, or how much additional revenue would be available to generators.
Chairman Donna Nelson said that she has a "high hurdle" in adopting Option 2, due to concerns about signals the withholding would send, and regulatory uncertainty. A criticism by opponents of Option 2 is that the withholding would be subject to political pressure to release such withheld generation in order to lower prices.
Nelson further said that the Texas Industrial Energy Consumers' proposal for a backstop procurement limited to demand response resources, which has been categorized as falling within Option 3, is essentially a capacity market exclusively for demand response, and noted that the Texas market has historically been neutral with respect to resource types.
Nelson said that if the Commission could develop an option that assures reliability comparable to the current level of service, and avoids a centralized capacity market or LSE-based capacity obligation, that would be her preference, but she has a real question of how high energy prices in an energy-only design would need to go to assure a more "comfortable" reserve margin.
The Commission also directed ERCOT, ERCOT Staff and Commission Staff to develop workplans for the various resource adequacy alternatives, to be discussed at the next open meeting.
Copyright 2010-
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