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ERCOT Regulatory Highlights, provided by PBPA member Pumpjack Power

For the month of July, 2020…

•The ERCOT Board approved a new transmission project near Corpus Christi.

•ERCOT continues to provide observations on load destruction from COVID-19.

•ERCOT announced the selection of two new independent board members.

•Stakeholders Continue to Debate Wholesale Storage Load Definition.

•ERCOT provided an overview of summer operations and credit for the Board.

•The Independent Market Monitor provided market design recommendations. ERCOT Released Resource Adequacy Reports on May 13

Corpus Christi North Shore Transmission Improvement Regional Planning Group Project. AEP submitted a project to ERCOT driven by reliability needs based on large industrial load additions of 1085 MW north of Corpus Christi. These loads are scheduled to come on line between 2021 and 2023. The estimated capital requirement is $218.5 million. The ERCOT Board approved the project with an urgent status. The project will proceed to the Public Utility Commission for a Certificate of Convenience and Necessity, where the PUC will consider routing and other items for the project.

ERCOT Observations on Load Destruction from COVID-19. ERCOT began providing observations on load impacts from COVID-19 at the April 1 TAC meeting. ERCOT is providing an updated load impact analysis on a weekly basis and it can be found on the Trending Topics section of the ERCOT website. The latest update includes all data, and incorporates all the way through June. While April data showed some significant decreases of load, those decreases moderated significantly through the month of May, and even more so through June.

Nominating Committee Report. At the June Board meeting, ERCOT Board Chair Craven Crowell announced Sally Talberg, Ray Hepper, and Terry Bulger (second term) as independent board member selections made by the nominating committee. They must be approved by ERCOT member vote, and the Public Utility Commission. The approval process takes several months.

Stakeholders Continue to Debate Wholesale Storage Load Definition. In a series of workshops, ERCOT stakeholders continue to debate NPRR1020, which was filed by Tesla to add a new definition of Integrated Battery Storage Systems (IBSS) and modify the Wholesale Storage Load definition to include IBSS. Multiple parties have filed comments on the proposal and filed alternative proposals. The debate is ongoing.

2020 Summer Operations and Markets and Credit. Dan Woodfin provided the ERCOT Board with an update on anticipated operations. ERCOT is expecting an all-time peak demand of 75,200 MW this year, which is slightly lower than originally expected because of COVID-19 impacts on load, but still higher than the peak record set last year. The summer planning reserve margin is 12.6% which means there is still a possibility to enter into an Energy Emergency Alert (EEA). With an 8.6 % reserve margin last summer, there was a higher possibility of entering into an EEA last year than this year.

ERCOT sees no wide-area reliability concerns related to transmission, but there may be congestion in far west Texas due to high load and solar generation, and there continues to be a possibility for export constraints from the panhandle and areas of west Texas and the valley due to high winds.

Mark Ruane, Director of Settlements, Retail, and Credit at ERCOT, noted that the Operating Reserve Demand Curve (ORDC) contains a further shift of 0.25 standard deviation over last year. This was implemented on March 1, 2020. If similar conditions arise in 2020 as 2019, it will result in higher and more frequent adders relative to the 2019 ORDC.

From a credit standpoint, Ruane indicated that there are several risk factors impacting credit risk for the summer.

•Potential degradation of Counter-Party credit quality associated with COVID-related economic slowdown.

•Potential degradation of the credit quality of Counter-Parties in the oil and gas sector.

•Increased Counter-Party credit risk associated with the heightened risk of high prices during summer.

•Cyber-attacks on ERCOT Market Participants.

There has been one default of a trader with no resulting uplift and one downgrade of an oil and gas entity leading to loss of unsecured credit. In addition, there are weakened financial positions noted in year-end 2019 financial statements for a number of other Counter-Parties.

The Independent Market Monitor ERCOT State of the Market Report Recommendations. The Independent Market Monitor (IMM) released its State of the Market annual report at the end of May. Details of the eight recommendations for wholesale markets can be found in this presentation link.

1. Remove Reliability Unit Commitment (RUC) opt-out

2. Eliminate 2% rule

3. Change transmission cost allocation

4. Include shadow price of AS constraints in clearing prices

5. Modifications to Reliability Deployment Price Adder (RDPA)

  • Reliability MWs, not market MWs
  • Adjust Emergency Response Service (ERS) restoration time (already implemented)
  • Remove ERS deployed MWs from ORDC reserve calculations

6. Local (zonal) RDPA

7. Mitigated offer changes

  • Commitment costs for RUC intervals
  • Opportunity costs
  • Ensure no fixed/non-marginal costs included in fuel adder

8. Implement transmission demand curves

Upcoming ERCOT and PUC Meetings:

Wholesale Market Subcommittee – July 8 (Webex)

Reliability and Operations Subcommittee – July 9 (Webex)

Retail Market Subcommittee – July 14 (Webex)

Real-Time Co-optimization Task Force – July 15, and 22 (Webex)

Protocol Revision Subcommittee – July 16 (Webex)

Battery Energy Storage Task Force – July 23 (Webex)

Technical Advisory Committee – July 29 (Webex)

ERCOT Board Meeting – August 11 (via webcast)

Public Utility Commission Open Meeting – July 2 and 31 (via webcast)

All data provided in this report is intended for general information use only. Pumpjack Power does not guarantee the completeness or accuracy of this data, nor does Pumpjack Power assume any liability for any loss that may result from the reliance by any person or entity on this information. For more information on Pumpjack Power, please visit www.pumpjackpower.com.