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Enron Mail |
Please find attached the PUCT order approving, with modifications, the ERCO=
T=20 Protocols. What follows is a brief summary of many of the points that=20 directly affect the ERCOT market. I will provide a complete summary and=20 timeline for response or request for rehearing on any of the issues later= =20 this week. Two of the most noticeable departures from the Protocols was for the=20 Commission to ask for a review of the balanced schedule requirement and a= =20 departure from the current bilateral market to an LMP type market. The=20 Commission directed ERCOT to respond with the technical feasibility of=20 relaxing or eliminating the balanced schedule requirement. The other=20 departure from the ERCOT protocols by the Commission is in reference to loc= al=20 or intrazonal congestion. The Commission states that if direct assignment = of=20 the local congestion to the generating resources is not possible, they will= =20 consider other market options such as an LMP model. The Commission will=20 review both of these market concepts in September 2001.=20 The ERCOT Protocol Review Subcommittee will take the ordered protocols and= =20 start the process of Protocol Revision. Each of the revisions have been=20 assigned a completion date by the PUCT and can be found in schedule 4=20 attached. The PUCT approved the ERCOT petition and Ordered the that the Protocols=20 should take effect June 1, 2001. The Commission state that the Protocols a= re=20 fundamentally sound, however there are certain provisions that are boxed=20 (cannot take effect until the ERCOT system can accommodate them) as provide= d=20 for in the Protocol Implementation Plan. ERCOT was directed to initiate a= =20 process to implement the boxed provisions as soon as possible. As for the= =20 rest of the changed required by the PUCT, a timeline was attached for the= =20 implementation of the protocol revisions. Under the Protocols as filed, ERCOT had =01&sole discretion=018 for its con= duct,=20 however, the PUCT will require ERCOT to exercise its discretion in a=20 =01&reasonable, nondiscriminatory manner.=018 Ancillary Services. The Protocols require ERCOT to procure the following= =20 Ancillary Services sequentially through an Auction: regulation down,=20 regulation up, responsive reserves and non-spinning reserves. The PUCT is= =20 concerned that the process results in the possibility of price reversals=20 where the clearing price for some A/S may be higher than other higher grade= =20 A/S services which may create incentives to game the system. The PUCT=20 directed ERCOT to amend the Protocols such that it will procure A/S through= =20 use of simultaneous optimization for assignment of resources to A/S product= s,=20 and will set prices for each A/S to the corresponding shadow price. The PU= CT=20 also ordered to ERCOT to amend the protocols such that it will use a two=20 settlement system for the procurement of A/S. The day ahead period=20 procurement will settle and announce at 13:30 with the second to take place= =20 during the adjustment period for each hour. Until the system is capable of= =20 the two-settlement system, ERCOT must amend the system to only allow downwa= rd=20 adjustment of prices for unselected A/S bids and allow unselected bids by a= =20 QSE to be withdrawn only in descending order of bid prices. The wrinkle he= re=20 is that the ERCOT system purges unselected bids and will require a manual= =20 tracking of the bids. A =01&spot check=018 for the activity has been discu= ssed. =20 Finally, ERCOT is to consider and report whether or not ERCOT should make= =20 conditional selections of A/S bids (from a QSE portfolio) and then possible= =20 deselect based on location and not price after the QSE resource plans are= =20 published. Market Solution. Under the ERCOT protocols, a Market Solution for reducing= =20 congestion exists when at least three unaffiliated resources have available= =20 capacity and the ability to submit a bid to ERCOT to solve a circumstance o= f=20 local congestion and no one bidder is essential to solve the congestion. T= he=20 PUCT would like the protocol amended to require that a =01&market solution= =018=20 exists only when at least three bids are received from unaffiliated resourc= es. Out of Merit Order (OOM) Service. The PUCT directs ERCOT to use the same= =20 ratcheting sown mechanism for out of merit order capacity payments to out o= f=20 merit order energy payments that are based on the 18,000 heat rates. Reliability Must-Run Service. The PUCT would like to have additional=20 incentives for generation entities to enter into RMR service contracts and= =20 that once covered, the until will be efficiently utilized. As such, ERCOT = is=20 to amen the Protocols to give an RMR unit owner the additional option for= =20 retaining 10% of net positive margins for energy generated in excess of the= =20 amount that the unit is obligated to produce under its RMR contract. Uninstructed Deviations. In order to encourage =01&good price chasing=018 = and=20 discourage =01&bad price chasing,=018 ERCOT was ordered to amend the Protoc= ols to=20 apply the ex ante MCPE for balancing energy set ten minutes for the beginni= ng=20 of a settlement interval to all instructed deployment of balancing energy= =20 during the settlement interval and use the second subsequent interval ex=20 poste MCPE, which will be set five minutes after the end of the first=20 settlement interval, for uninstructed deviations during the first load=20 interval. Bid Caps. During the transition period, until July 4, 2004, there shall b= e=20 a generation resource bid cap of $1,000 per MWh for energy that ERCOT=20 procures. The bid cap does not apply to load resources. ERCOT was also=20 directed to develop and submit for possible approval a bid cap on capacity= =20 bids for generation resource offering to provide replacement reserve servic= e. Balance Schedule Requirement. The current Protocols require QSEs submit a= =20 balanced schedule, however, the PUCT intends to consider in September, 2001= ,=20 the policy implications of the balanced schedule requirement, and whether t= he=20 requirement should be relaxed or eliminated. ERCOT was also directed to=20 report on the technical implications of relaxing or eliminating the balance= d=20 schedule requirement. Inter-zonal Congestion. ERCOT shall amend the Protocols to convert to the= =20 direct assignment of inter-zonal congestion costs, and base direct assignme= nt=20 of inter-zonal congestion costs on an adjustable commercial model that=20 employs operational shift factors on the CSCs. The Commission will also=20 require ERCOT to publish advisory updates or forecasts of the shift factors= =20 corresponding to CSCs to reflect predicted operating conditions and=20 contingencies. ERCOT's obligation to guarantee full zone-to-zone- congesti= on=20 cost insurance to those who acquire TCRs in proportions based on forecasted= =20 shift factors, shall be eliminated. The result of this is that a TCR=20 portfolio that provides a full hedge of inter-zonal congestion cost based o= n=20 the forecasted shift factors will not guarantee a full hedge against the=20 actual congestion charges. The Commission does not like ERCOT to be in the= =20 business of insuring transmission users against changes in shift factors. = =20 The Commission also feels that =01&use-it-or-loose-it=018 feature will resu= lt in=20 inefficient usage of the transmission system. As such the Commission direc= ts=20 ERCOT to amends the protocols to define TCRs as pure financial instruments= =20 and eliminate =01&use it or loose it=018. As for the TCR Auction, a single= round=20 combinatorial auction is more appropriate. Bids can take the form of=20 price-quantity pairs for TCR portfolios or single TCRs. Preassigned TCRs. MOUs and Coops that own or have a long-term annual=20 capacity and energy commitment from a specific =01&remote=018 generation re= source=20 shall be preassigned TCRs. Other Stakeholders argued that the preassigning= =20 of TCRs reduces the amount available to the market and increases congest=20 costs borne by other market participants. The Protocols, however, will be= =20 changed to state that the preassigned TCRs are subject to change or=20 elimination at any time upon ERCOT Board of Directors approvals or Commissi= on=20 Order.=20 Intrazonal Congestion. ERCOT shall amend the Protocols to require direct= =20 assignment in intrazonal congestion management costs through a usage fee=20 based on the flow over the congested intrazonal interfaces. The usage fee= =20 shall apply to the generation resources that cause the congestion fee. The= =20 net revenues from the usage fee shall be distributed, or credited against= =20 uplift charges. However, the Commission advises that to the extent feasibl= e=20 under the zonal, portfolio-based model embodied in the Protocols, ERCOT sha= ll=20 promptly notify the commission, so that the Commission can promptly conside= r=20 ordering the implementation of other alternative congestion management=20 methods, particularly locational marginal pricing. Thane Thomas Twiggs Enron Corp 1400 Smith Street Houston, Texas 77002 713-853-3199 Voice 713-408-4463 Mobile 713-646-8272 Fax 877-968-8967 Digital Pager or 8779688967@skytel.com <<Timeline-Final Order1.ppt<< - 23220fo.doc - 23220fo, Attachment 5.xls - 23220fo, Attachment 6.xls - 23220fo, Attachment 7.doc - 23220fo, Attachment 8.doc
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