Members Push Back Against Revamped TAC Structure, Conservative Ops

ERCOT stakeholders, somewhat overlooked in the political and regulatory sausage-making taking place in the aftermath of February’s winter storm, took advantage of two opportunities to express themselves last week.

First, they pushed back against interim CEO Brad Jones’ plan to convert the Technical Advisory Committee into an officer-level group. TAC members then critiqued ERCOT’s use of ancillary services and reliability unit commitments to create additional operating reserves and reduce the risk of emergency situations this summer. (See ERCOT Stakeholders Sign Off on More Ancillary Services.)

“I view the ancillary services [procurement] as a completely political move to ensure we don’t have scarcity again this year,” Luminant’s Ian Haley said during Wednesday’s virtual TAC meeting, speaking to some members’ view that Texas political leadership wants to avoid another grid emergency while the legislature is still in session.

But there’s little doubt that ERCOT’s governance structure is under the microscope right now. That’s why Jones addressed the TAC on Point No. 36 in his 60-point roadmap to grid reliability: “Ensure the Technical Advisory Committee is comprised of senior-level members from each member organization to promote timely decision-making.”

“If you don’t think TAC is in the crosshairs, you’re not paying close attention,” Jones said. “There is a significant level of focus on TAC and the reliability of TAC in the future. I sense that; I feel it; and I want to ensure TAC has every opportunity to succeed.”

Jones, who sat before the TAC six years ago as the grid operator’s COO, said that with eight new independent directors — politically appointed and likely without ERCOT ties — joining the board as soon as Sept. 1, he’s hoping they will recognize the value the committee provides. Under new Texas law, the board will exclude market participant representatives.

“It’s uncertain to me what support the board will want from a stakeholder-led TAC,” he said. “I hope to put TAC in the best position to survive and thrive.”

Jones said a committee composed of officer-level representatives will have a big-picture view and be able to make quicker decisions without checking in with their superiors.

Several TAC members noted they are already relied upon to make those decisions and that they represent market segments, not companies, but Jones held firm.

“Do you believe that with a group of eight board members — who have not been around ERCOT before and with a government that has lost some level of confidence in the stakeholder process — do you believe TAC can continue to fill that role without raising its profile?” Jones asked.

“Absolutely,” said Morgan Stanley’s Clayton Greer, a long-time TAC member.

“I have a concern with that,” Jones said.

“It’s style or substance,” Greer responded. “If they want substance, they’ve got it. If they want style, I’m not very stylish.”

Jones suggested the committee could become an advisory group, saying he has heard concerns about the lack of stakeholder involvement in ERCOT’s governance structure. He said his end goal is to have the TAC “valued by the new board,” but how that is achieved is up to the committee’s members.

“We can’t assume we can do things like we have in the past,” Jones said.

“I think TAC will become more important than it’s even been,” Reliant Energy Retail Services’ Bill Barnes said. “Those [independent] board members are going to need to hear from TAC. These are billion-dollar decisions. The market is designed to promote competition. It’s complicated; it’s technical. Every decision we make at TAC affects the market in a certain way.”

TAC Chair Clif Lange, of South Texas Electric Cooperative, said he will work with ERCOT staff to further the discussion in a series of workshops.

TAC Asks for More Data on AS Procurement

TAC members left staff with a short list of to-dos following their discussion on ERCOT’s use of conservative operations during the summer.

The committee asked staff to report back with the number of times the additional resources have kept the grid out of emergency situations this summer; whether the high rate of generator forced outages has continued into July; and the market costs for procuring additional ancillary services.

“As we’ve said, we’re going to operate in a more conservative manner, but we’re also committed to working with stakeholders to make sure the market works,” said Jeff Billo, ERCOT’s director of forecasting and ancillary services.

Since June, the grid operator has been maintaining at least 6.5 GW of operating reserves by more than doubling greater amounts of ancillary services, with the costs uplifted to load. Billo said the grid operator’s goal is to keep 65 GW of generation online and available into September.

“It’s giving us 50 cents in one pocket and taking $2 out of the other pocket in energy costs,” Haley said, noting that Luminant is one of the largest ancillary service providers. “We do still think this is a very bad idea.”

Just Energy’s Eric Blakey took off his vice chair’s hat to stand up for the retailer electric providers (REPs) “who get the calls during outages.”

“We seem to be doing this without any consideration of the costs. ‘Oh, the REPs will take care of that,’” he said. “I’m not sure that’s going to be a sustainable market design. ERCOT needs to realize they’re taking dollars out of the market. We need help from ERCOT to identify the cost increase so we can work with the commission to get that recovery.”

$47 Million Market Resettlement

ERCOT staff told the committee that about $47 million will be uplifted to the market for an incorrect dispatch instruction that ordered a generating resource to ramp down Feb. 17-19.

Staff said the error will result in a resettlement on a load-ratio share following the market participant’s dispute resolution. The resource was paid $4 million for Feb. 17, $28.4 million for Feb. 18 and almost $15 million for Feb. 19, said Kenan Ögelman, ERCOT’s head of commercial operations. “The amounts are significant.”

The error took place after the ERCOT grid nearly collapsed during the winter storm, when prices were held at $9,000/MWh in an effort to keep all available generation online.

ERCOT will post market notices for each resettlement.

Members Side with PUC Order

Members voted to approve a nodal protocol revision request (NPRR1086) that aligns ERCOT protocols with the Public Utility Commission’s recent order to eliminate the market’s pricing mechanism link to natural gas prices (51871).

The measure adds a provision to ensure a resource, through its qualified scheduling entity (QSE), can recover its marginal costs during scarcity pricing situations while the low systemwide offer cap (LCAP) is in effect.

The PUC in June approved a rulemaking that revises the grid operator’s pricing mechanism by eliminating a provision that ties the LCAP value to the natural gas price index and replaces it with a make-whole provision. (See “Commission Nixes Gas Index Link,” Texas PUC Briefs: June 24, 2021.) Previously, the LCAP had been set daily to the higher of $2,000/MWh or 50 times the natural gas price index, as calculated by ERCOT. The PUC order eliminates the gas price index component and sets the LCAP at $2,000/MWh without an alternate calculation.

The TAC first rejected a proposed amendment modifying a multiplier that decreased costs allocated to capacity-short QSEs and increased costs spread to all loads. Katie Coleman, who advocates for Texas Industrial Energy Consumers, filed comments saying the smaller multiplier does not meet the PUC’s directive that the make-whole costs are allocated “in a manner that encourages market participants to fully hedge their loads.”

“But for the LCAP, entities that are not hedged would be exposed to any costs above $2,000/MWh but below $9,000/MWh,” Coleman wrote.

The amendment failed, 12-13 with four abstentions, over concerns the language would result in more costs shifted to loads. The TAC then approved the NPRR by a 20-3 margin, with six abstentions.

Southern Cross Directive Passes

The committee approved six revision requests, taking separate votes on two of them when some members said they would abstain.

Luminant and CPS Energy abstained from a vote on NPRR1083, which passed 27-0 and prohibits uplift charges to QSEs acting as central counterparty clearinghouses in wholesale market transactions or regulated as derivatives clearing organizations as defined by the Commodity Exchange Act.

Shell Energy North America abstained from NRR1073 over concerns that another NPRR under development would provide a better approach. NPRR1073 prevents a market participant from exiting the market to escape uplift charges and then trying to re-enter under a different name.

The committee’s unanimously approved combination ballot included the latest in a series of directives tied to Southern Cross Transmission, a proposed HVDC line in East Texas that would ship more than 2 GW of energy between the Texas grid and Southeastern markets. (See “Members Debate Southern Cross’ Bid to be Merchant DC Tie Operator,” ERCOT Technical Advisory Committee Briefs: Feb. 22, 2018.)

Directive 9 required staff to evaluate whether the Southern Cross project would require any modifications to existing or additional ancillary services. In a white paper, staff said NPRR1034, approved in February, gives ERCOT authority to establish limits on DC tie transfers and to curtail their schedules when necessary to address the risk of unacceptable frequency deviations. They found there was no need for other ancillary service changes to accommodate the Southern Cross DC tie.

The combination ballot also included an NPRR, single changes to the planning (PGRR) and retail market (RMGRR) guides, and a system-change request (SCR):

• • NPRR1079: separates ERCOT contingency reserve service, which will come in a future release, from fast frequency reserve project language being added to the 48-hour day-ahead market report requirements.
  • PGRR091: gives interconnecting entities 60 days to complete an application for a full interconnection study.
  • RMGRR165: gives ERCOT additional discretion in scheduling and conducting a mass transition project for defaulting REPs and involving volunteer REPs accepting their customers.
  • SCR815: aligns market guides, streamlines processes, increases transparency and tracking, and improves communication among market participants in the MarkeTrak tool used to resolve retail market issues.