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Texas PUC Staff Recommend Commission Consider Elimination Of ERCOT Low Offer Cap, Peaker Net Margin
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Staff of the Texas PUC have recommended that the Commission consider the elimination of peaker net margin and the low system-wide offer cap (LCAP)
Under current rules, if peaker net margin exceeds three times the cost of new entry (CONE), the system-wide offer cap is set at LCAP for the remainder of the calendar year, and energy prices in ERCOT shall not exceed LCAP plus $1 for the remainder of the calendar year
The LCAP is currently $2,000 per MWh, versus the normally applicable high cap of $5,000 per MWh
Staff, in a memo related to setting CONE, stated that "some stakeholders" have suggested that the PUC should eliminate peaker net margin and LCAP, with such stakeholders citing the PUC's adoption of the emergency pricing program for the ERCOT market as providing similar consumer protection.
As previously reported, under the emergency pricing program, the ERCOT market cap is set equivalent to the LCAP during certain emergency conditions as defined in the rule (see details here)
"Staff recommends that the Commission study this recommendation during the review of system-wide offer cap programs the Commission will conduct in 2026," Staff said
Staff, in a memo addressing setting the value for CONE, noted that establishing CONE would impact the peaker net margin and thus the current LCAP trigger described above
Staff's memo also affirms the administrative nature of CONE-based market designs, as Staff's memo demonstrates that the following must be considered in establishing an administrative value for CONE:
• The specific technology used for the basis of CONE
• Whether multiple technologies and CONE values should be established
• Unique CONEs for different geographic areas
• The frequency of CONE and CONE study updates
Staff recommended using the Frame Combustion Turbine CONE that Brattle included as a sensitivity in its study, which would set the CONE value at $162/kW-year. This constitutes a 54% (8%) increase over the existing nominal (inflation-adjusted) CONE value, compared to a 179% (95%) under Brattle’s value.
Project 54584
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July 3, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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