At the January 17, 2019 Open Meeting, the Public Utility Commission of Texas (Commission) addressed several highly contested issues, including storage, Operating Reserve Demand Curve, Real-Time Co-optimization, and Marginal Losses. First, in Project No. 48023, Rulemaking to Address the Use of Non-Traditional Technologies in Electric Delivery Service (the Battery Project), dealing with utility ownership of battery storage, the Commission decided to defer further action until Texas Legislature’s regular session concludes. This decision comes after 63 comments were filed with the Commission, expressing widely varying views on whether a transmission and distribution utility within ERCOT may legally own and operate battery storage facilities. The Commission previously submitted through its Scope of Competition Report a request for the Legislature to enact legislation clarifying this legal point.

While the Commission will not be moving forward with the Battery Project for the foreseeable future, it has decided to open a new project to address how Electric Vehicles (EVs) affect the electric system. Chairman Walker noted that some issues might need to be jointly addressed with the Texas Commission on Environmental Quality (TCEQ). The project will be used to discuss a variety of issues, such as location of and payment for charging stations, and wholesale market impacts. Project No. 49125 has been opened to consider and review these changes..

The Commission also acted upon issues related to ERCOT market performance ahead of another summer where high demand may strain capacity reserves and transmission elements. Chairman Walker filed a memo proposing changes to the Operating Reserve Demand Curve (ORDC), the implementation of Real-time Co-optimization (RTC), and to not proceed with Marginal Losses. These issues have been before the Commission since NRG and Calpine filed the report, Priorities for the Evolution of an Energy-Only Electricity Market Design in ERCOT, written by William W. Hogan and Susan L. Pope, suggesting numerous market changes, with the Commission. Addressing those proposals, the Commission took Comments from interested parties in four different projects and held a workshop. At yesterday’s Open Meeting, the Commission addressed concerns regarding price formation and the reserve margin within ERCOT by directing ERCOT to implement a .25 standard deviation shift in the loss of load probability (LOLP) calculation using a single blended ORDC curve as soon as possible and in the Spring of 2020 implement an additional .25 standard deviation shift. This change should increase the frequency in which ERCOT applies the ORDC price adder to wholesale market prices, effectively resulting in higher wholesale market revenues and securing higher reserve capacity levels for the peak summer season.

On the other hand, the Commission has decided to defer implementation of Marginal Losses, but to implement the RTC proposal. Marginal losses refers to billing generation facilities for the electric line losses caused by their distance from customers, while RTC denotes the acquisition of ancillary services needed to support reliable electric system operation simultaneously with coordinating the real time operation of all power plants connected to the system. In discussing the proposals,

Commissioner D’Andrea expressed his agreement with Chairman Walker’s proposals, and added that those who say the Commission should do nothing to enhance wholesale market efficiency and competitive opportunities, and that occasional rotating outages are fine, tend to underprice the risk of damage to Texas’ “open-for-business” Reputation.

Overall, these decisions are seen as a move by the Commission to support the vitality of ERCOT’s energy-only market while also increasing generation investment and providing regulatory certainty. The Commission characterizes these changes as relatively modest regulatory adjustments designed to enhance the ability of competitive market forces to set prices and incentive investment so as to promote the public interest.

For more information on the status of these projects or how the Commission’s recent decisions could impact your business, please contact Maria Factoni.