The Texas Public Utility Commission’s staff has recommended not moving forward with the proposed performance credit mechanism (PCM) market design for ERCOT as it currently is designed, setting up an interesting decision for the PUC in its final open meeting of the year.
A day after the commissioners agreed to delay any decision until that Dec. 19 meeting, staff said in a Dec. 13 filing that the PCM market tool results in “minimal” additional resource adequacy value under its current design parameters. They also said alternative design choices would result in the PCM not complying with state law, and market modifications likely will be needed to achieve the PUC’s chosen reliability standard in the long term (55000).
“We intend to bring this back on the 19th and make a decision on where to go forward from there with the PCM,” PUC Chair Thomas Gleeson said during the commission’s Dec. 12 meeting.
“There’s still a lot up in the air, right?” Commissioner Lori Cobos said. She referenced ERCOT’s stand-alone dispatchable reliability reserve service still under development, the Real-time Co-optimization plus Batteries project, and important questions surrounding the ancillary service demand curves, all of which are to be brought online before the PCM.
“You have to put those into a structure then and put them into operation and be able to get this analysis to be able to understand whether [they’re] working or not,” Cobos said.
Gleeson said during a conference in September the PCM should be placed on the back end of other market changes.
“We have a number of tools at our disposal. We should try to see if we can meet our reliability goals with those tools before we look to implement something that’s new and novel and that we don’t really know how it interacts with the rest of our market,” he said at the time. (See “Market Participants Pan PCM,” PUC’s Gleeson at Texas Clean Energy Summit: Smooth Tenure Turns ‘Interesting’.)
The commission in August directed ERCOT and the Independent Market Monitor to complete updated assessments on the PCM’s cost to and effects on the market and file a report on the costs and benefits of continuing the program. Staff then reviewed the assessments before making their recommendation.
Staff said the ERCOT assessment, conducted with the Energy and Environmental Economics (E3) consulting firm, recommended refinements to the PCM’s design be considered so the tool could have a more substantive impact on reliability before eliminating it as a potential option.
The IMM found the PCM to be a “novel form of a capacity market” in that it settles based on after-the-fact availability rather than ex-ante based on expected availability. Staff noted the monitor also concluded the PCM would provide a new source of revenue for generators that would increase ERCOT’s capacity margin and the costs to customers but reduce shortage revenues.
The monitor said the PCM’s net costs are likely to exceed $1 billion annually in the short term because its cost cap provision is likely to bind. Eventually, the higher capacity margins would reduce the frequency of shortage pricing, with the net costs falling to $350 million to $725 million per year. Without the cost cap, those costs would range from $930 million to $2 billion, the IMM said.
The PCM was selected as ERCOT’s new market design in 2023 by the PUC, then under the chairmanship of Peter Lake. In February 2024, ERCOT and E3 filed a strawman design with 37 parameter decisions, leading to months of workshops and stakeholder discussion.
The mechanism would reward thermal generators with credits based on their performance during a determined number of scarcity hours. Those credits must be bought by load-serving entities, based on their load during those same hours, or exchanged by LSEs and generators in a voluntary forward market. (See Texas PUC Submits Reliability Plan to Legislature.)
Two New TEF Applications
The commission approved two more applications for Texas Energy Fund (TEF) loans identified by staff and advanced them for due diligence (56896).
The NRG Energy and WattBridge Energy IPP Holdings projects represent 1,231 MW of potential new generation and replace an apparently fraudulent project submitted by a company with suspect backing that left a nearly 1,300-MW hole in the fund’s portfolio. (See Texas PUC Rejects Possible ‘Fraudulent’ Loan Application.)
The additions bump the TEF’s In-ERCOT Generation Loan Program portfolio to 18 applications offering 9.72 GW of potential new generation. They are seeking $5.34 billion in loaned funds. The Texas legislature has allocated $5 billion to the fund.
The NRG application is for a new 721-MW natural gas combined cycle unit at its Cedar Bayou plant near Houston. WattBridge submitted applications for four projects totaling 1,600 MW. The company uses 48-MW aeroderivative gas turbines.
The TEF was established by state law and voters in 2023 and offers a low-interest (3%) loan and grant program of up to $7.2 billion for dispatchable, primarily thermal, generation. The fund has four separate programs.
Entergy Resiliency Plan Approved
The commission approved Entergy Texas’s “Future Ready” resiliency plan, a $335 million, three-year proposal consisting of six resiliency measures that begins next year. Each of the measures is intended to prevent, withstand, mitigate or more promptly recover from the risks posed by one or more specified and defined resiliency events to the utility’s transmission or distribution system, Entergy said (56735).
Entergy hopes to gain PUC approval of $137 million in projects and to seek conditional approval and include $198 million of additional resiliency projects under the TEF’s Outside ERCOT Grant Program. Once it’s up and running, the program will award grants for infrastructure modernization, weatherization, reliability and resiliency improvements, and vegetation management.
Entergy also is making a second attempt to secure funds from the U.S. Department of Energy’s Grid Resilience and Innovation Partnerships program to help with its $107.5 million infrastructure and grid hardening project in Port Arthur, Texas. The utility’s staff told commissioners they are negotiating with the DOE over a $54 million cost-sharing portion of the plan.
An administrative law judge found a settlement reached between Entergy and PUC staff, the Office of Public Utility Counsel and several consumer groups to be in the public interest.
Glotfelty Closes His Last Meeting
Commissioner Jimmy Glotfelty was given the honor of adjourning the open meeting with a ceremonial gavel honoring his 3½-year tenure on the PUC. It was the commissioner’s last meeting after announcing Dec. 4 he would step down. (See Texas PUC’s Glotfelty to Resign from Commission.)
“This has been a wonderful opportunity, serving with you all and serving with the prior commissioners that have come before us,” Glotfelty said. “It has been a proud time in my career. It’s my hope that we’ve done it with honor and that we have done it knowing the gravity of our decisions can mean life and death.”
“Thank you for all the work you did on my nuclear project. I appreciate you getting it started for me so I can take it over,” joked Gleeson, who will pick up Glotfelty’s role leading the PUC’s advanced nuclear reactor effort. “We’re definitely going to miss you. You’re leaving a big hole up at this dais with you walking out.”
Glotfelty then gaveled the meeting to a close. “I announce us adjourned,” he said.
PUC Hires External Affairs Chief
Gleeson opened the meeting by announcing Lucy Nashed’s hiring as the agency’s new chief of external affairs. She will oversee the PUC’s external-facing divisions (communications, government relations, public engagement, utility outreach and consumer protection) and their strategy and day-to-day operations.
Nashed previously directed communications for Texans for Lawsuit Reform over eight years. The organization advocates for a “fair and efficient” legal system and against “abusive and unnecessary litigation.”
The commissioners also passed a motion requesting the Office of the Attorney General to intervene in Rio Grande Electric Cooperative’s petition from a declaratory order from FERC. The cooperative requests FERC not to assert jurisdiction over public utilities not presently under the Federal Power Act after RGEC disconnected from WECC and interconnected with ERCOT (EL25-23).
The cooperative said that while some of its distribution lines served by its WECC transmission facilities cross state lines to serve end-users in New Mexico, the energy is carried by RGEC’s non-jurisdictional distribution facilities and would not constitute wholesale transmission in interstate commerce.
