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Texas PUC Staff "Support" Eliminating Small Fish Swim Free Rule
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Staff of the Texas PUC have voiced support for the elimination of one of the key designs of the original ERCOT energy-only market
Specifically, PUC Staff have, in a chart concerning Staff recommendations and in labeling whether Staff supports, disagrees, or is neutral on recommendations from the ERCOT Independent Market Monitor's most recent annual IMM state of the market report, listed "support" next to the IMM's recommendation to, "eliminate the 'small fish' rule"
Staff's narrative concerning the IMM's recommendation regarding the small fish swim free rule is more reserved, however, with Staff more narrowly recommending that the Commission re-consider the rule
The small fish swim free rule, at 16 TAC § 25.504(c), provides that a generator that has less than 5% market share is deemed not to have
ERCOT-wide market power.
As such, these small fish can bid at levels, such as above marginal cost, without de jure concern about being alleged to be exercising market power through such bids (in practice, while some small fish have used the rule, other non-legal concerns, including the potential for negative press or other attention, have led the small fish rule to be utilized less than perhaps originally anticipated as a means of driving shortage pricing, though instances of small fish bidding above marginal cost do still occur)
The IMM has said that the small fish rule was adopted prior to ERCOT having what the IMM termed "effective" shortage pricing under the ORDC
The IMM said that implementation of the ORDC has resulted in the small fish rule being "unnecessary"
Staff said in response to the IMM small fish recommendation, "Staff agrees that it is time to re-evaluate this rule."
Staff intends to open a project in 2025 to address the small fish rule, subject to resource availability and other legislative priorities
If the PUC were to revise the small fish swim free rule, Staff recommends approving the changes prior to the RTC+B go-live, which is targeted for December 2025
Staff also listed "support" next to the IMM's recommendation to change the allocation of transmission costs by ceasing use of the 4CP method, although Staff noted that the matter is a policy question for the PUC
The IMM has said that 4CP allocation no longer reflects the drivers of new transmission needs. Additionally, the IMM has said that demand response from entities seeking to avoid 4CP charges is "likely" inconsistent with real-time market signals and can "significantly" distort market outcomes
Staff supports moving away from 4CP for transmission cost allocation
Staff suggested that an alternative to 4CP could be developed which still complies with PURA's requirement for a postage-stamp transmission rate and that such rate be based on total demand
"Changes in ERCOT grid topology and upcoming initiatives which will result in
significant transmission build out warrant that it may be time to re-examine the TCOS [transmission cost of service] allocation," Staff said
"Staff understands that this topic
is controversial and may benefit from the Commission determining what, if any, next steps should
be taken on these issues," Staff said
Staff recommended discussing the 4CP issue in the fall of 2025
Staff said that the 4CP issue is closely linked to an IMM recommendation to re-evaluate the eligibility for certain sites, including certain data centers and crypto-currency mines, for net metering
The IMM has specifically urged reconsideration of net metering for any loads behind the meter of unaffiliated entities, as net metering for these loads may disincentivize flexible loads from instead registering as Controllable Load Resources (CLRs).
"Loads that can be turned on and off quickly, such as data centers and crypto-currency mines, should be incented to be dispatchable in real time through CLR participation rather than reducing their consumption to avoid transmission cost allocation and other load charges. This would help support price formation and provide better congestion management," the IMM has said
PUC Staff said, "Staff agrees that net metering among unaffiliated load and generation should be
reconsidered."
Similar to 4CP, Staff noted that the net metering question is controversial, and described the matter as a policy question for the PUC. Staff recommended discussing the net metering issue in tandem with the 4CP issue in the fall of 2025
Staff's recommendations described above were made as Staff offered its opinion on all of the IMM's recommendations in the state of the market report, reflecting a new approach by Staff to formally offer Staff's views on the IMM recommendations
Project 34677
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Also Urge Reconsideration Of Use Of 4CP For Transmission Cost Allocation
Re-evaluate Net Metering Eligibility For Unaffiliated Loads (Data Centers & Crypto Miners), Staff Agrees
September 20, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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