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ERCOT Reserve Margin Projected Above or At Target Through 2017, When Including Available Mothballed Generation

October 24, 2012

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Copyright 2010-12 Energy Choice Matters

ERCOT is projected to exceed or meet the target reserve margin through 2017 when including available mothballed capacity not included in the Capacity, Demand and Reserves report, the Texas Industrial Energy Consumers said in comments to the Public Utility Commission of Texas

"Despite historical CDR projections that have consistently predicted that reserves would fall below the target reserve margin two to three years in the future, the actual reserve margin in ERCOT has never dropped below 13.75% since competition began, and has never been anywhere near 8% [Brattle's assumed energy-only market equilibrium]. Once again, despite dire predictions last year, the CDR update filed by ERCOT on October 22, 2012 now indicates that there will be reserves sufficient to meet ERCOT's target well into the future," TIEC said.

Specifically, TIEC said that when available mothballed generation is appropriately included in ERCOT's October 22 reserve margin forecast update, using the May CDR as a baseline (such mothballed capacity was included ERCOT's September update), the resource adequacy forecast is as follows:

Year       New Reserve Margin
2013            19.4%
2014            16.2%
2015            14.1%
2016            14.6%
2017            13.7%
2018            12.6%

Though not explicit, Matters presumes that TIEC derived the above numbers using Moody's "Low" economic forecast, as ERCOT did in the October 22 update on which the TIEC data is based.

"Recent reports by private analysts confirm that ERCOT's most recent CDR revisions are better aligned with reality and the expectations of investors and the market," TIEC added.

"For example, a report published by a major equity research firm [UBS] on October 5, 2012 projects much healthier reserve margins based on more recent load growth trends and new resource addition estimates," TIEC said. "Again, including available mothballed generation, the report shows reserves in excess of 14% through 2016."

"These data and analyses demonstrate that there is no real reserve margin issue until well into the future. The energy-only market is working, and with the additional [energy-only] refinements recommended in the Brattle Report, the market will operate even more efficiently," TIEC said.

"The Commission should rely on real-world experience and analysis by those making investments rather than hypothetical models, and should place more faith in the dynamics of a well-functioning competitive energy market than the Brattle Presentation suggests," TIEC said.

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