ERCOT pilots extended for more evaluation, biennial budget approved

AUSTIN, TX, July 23, 2013 — The Electric Reliability Council of Texas (ERCOT) Board of Directors at its July 16, 2013, meeting took action to support continuing electric reliability and grid stability during a variety of conditions.

Moving pilot projects forward

“The Public Utility Commission of Texas (PUC) authorized ERCOT last year to conduct pilots so we can explore new tools and services,” said ERCOT CEO Trip Doggett. “Pilots provide a chance for staff and market participants to learn how emerging technologies or new services might be used to support future grid and market operations.”

Fast-Responding Regulation Service pilot, initially approved in November 2012, will continue through February 2014. Maintaining ERCOT system frequency at 60 Hz is necessary for grid stability, and this can become a challenge when electricity use changes rapidly, wind power output fluctuates suddenly, or power plants trip off-line without warning. Resources that can add or subtract power to or from the grid to address this issue provide regulation service through ERCOT’s ancillary services market. Facilities, such as new battery storage, that are able to offer that service immediately following significant frequency changes can help ERCOT maintain, or quickly restore, necessary frequency levels.

Since eligible resources began providing this Fast-Responding Regulation Service in February 2013, it has worked successfully numerous times. ERCOT operators have found that this can be a useful tool, and initial observations indicate the service reduced the rate of change in frequency by 31 percent. The extension of the pilot will give ERCOT and market participants more time to explore options to incorporate this service into the market most effectively.

30-minute Emergency Response Service (ERS) pilot, which was approved initially in June 2012 and later extended through September 2013, will now continue through January 2014.

Since last summer, this pilot has enabled participants to enter agreements to reduce their electric use within 30 minutes when needed by ERCOT, compared to the 10-minute service required by ERCOT’s conventional ERS program. The pilot is open to electric users — either as individual customers or as part of an aggregated group of consumers — who can reduce demand on the ERCOT grid by at least 100 kilowatts, about the amount 20 homes use during peak demand. ERCOT may call upon these resources during the early stages of a grid emergency when operating reserves, the amount of electricity available on the grid that exceeds user demand, drop below 2,300 MW. During the first four contract periods, 937 unique sites have submitted offers to participate in the pilot, including the first residential consumers to participate in ERCOT’s demand response programs designed to support reliability. ERCOT has conducted seven unannounced tests to ensure participants will respond when needed, and performance typically has exceeded the amount committed.

Reserve margin action postponed

The board was scheduled to consider a recommendation from ERCOT’s Technical Advisory Committee (TAC) to increase ERCOT’s planning reserve margin and the percentage of installed wind power capacity it counts in long-term forecasts. However, Chairman Craven Crowell raised concerns about timing and asked staff to review the formulas used for these proposals.

“The planning reserve margin and the load-carrying capability of wind are directly related to ongoing proceedings at the PUC on resource adequacy,” Crowell told the board. “I am concerned that action today on this planning reserve margin would only complicate the work of the policymakers.” 

Regarding the studies and methodology used to arrive at the recommendation, Crowell said, “While we may all support the process and model used, I think in this particular case, prudence would call that we should take a second look at this so that we can reassure the Board and the stakeholder community that we are getting it right.” 

ERCOT staff will revisit the assumptions in the loss-of-load probability study upon which the recommendation was based and plans to report back to the board in the fall.

Biennial budget approved

The board in July also approved a two-year budget for ERCOT, Inc., that focuses on attracting, developing and retaining high-quality staff; maintaining and building upon technical infrastructure needed to manage the grid and market effectively; and implementing market and regulatory initiatives.

“If we are to ensure the continued success of ERCOT, we must be able to make necessary investments in the sophisticated technology that we must use and, of course, in the smart people who run those systems,” said Chairman Crowell. “This is what is required to run a world-class electric system that supports a vibrant and growing economy.”

Most of ERCOT’s budget comes from a system administration fee, which is included in wholesale power bills. The proposed budget includes a 4.8-cent-per-megawatt hour (MWh) increase in that fee, which has remained at or below 41.7 cents per MWh for the past nine years.

“The ERCOT board and management are acutely aware that it’s the consumers of Texas who pay the bills around here and that we must remain focused on running a lean but effective organization that not only meets but exceeds the performance expectations of those we serve,” Crowell said.

The $190.9 million budget request for 2014 includes $136.2 million in operating expenses and $17.7 million in debt service coverage, while the $195 million budget proposed for 2015 includes $138.8 million in operating expenses and $19.1 million in debt service coverage.

Crowell noted that ERCOT management and staff had saved millions of dollars by “actively managing vendor relationships, driving costs down through competitive processes, and a detailed review of every new project and hiring decision.”  

ERCOT plans to submit the proposed budget to the PUC in September. This will be the first biennial budget submitted for approval under new rules established in recent PUC Sunset legislation.

Bylaws approved

The board approved proposed amendments to its corporate bylaws that will update and streamline the bylaws, remove obsolete text, revise the way abstentions are counted at TAC meetings, and enable the Board to make determinations of how corporate “affiliates” are defined in specific situations. ERCOT seeks votes on those bylaws from Corporate Members, and submits the bylaws changes approved by its Corporate Members to the PUC for final approval. Unless sufficient votes are cast to pass the proposals prior to a scheduled meeting of Corporate Members, final voting will occur during a meeting of Corporate Members on Aug. 8.

Other June board meeting updates

Chief Executive Officer Report

ERCOT CEO Trip Doggett provided several updates, which included:

  • Mild weather so far this year, with the exception of June 2013, has affected revenues unfavorably. Although the year-to-date budget reflects a $1.7 million unfavorable balance, ERCOT expects to make up most of that shortfall by the end of 2013. 
  • The 83rd legislative session included very few bills related to ERCOT or the competitive electric market, with the exception of the PUC Sunset bill.
  • The Taylor High School Beginners Learning Alternative Designs for Energy program has received numerous accolades during its first two years, including a $112,000 grant from theState Energy Conservation Office.
  • Seventeen interns are engaged in numerous meaningful projects in ERCOT this summer, from network modeling to market analysis.

Independent Market Monitor Report

Dan Jones from Potomac Economics provided an update on electric prices, energy use, heat rate, congestion costs, ancillary services and wind production for the past two months.

Technical Advisory Committee (TAC) recommendations

The board approved 10 Nodal Protocol Revision Requests and one Planning Guide Revision Request that were presented unopposed by TAC. The board also approved the implementation of a seven-day settlement timeline of the real-time market, with TAC support, revised credit parameters endorsed by TAC and recommended for approval by the board’s Finance and Audit Committee, and a revised methodology for setting shadow price caps and power balance penalties in the Security-Constrained Economic Dispatch. The TAC Chair also presented a report on a project to evaluate concerns and administrative functions that can reverse wholesale prices during scarcity conditions when they should be highest.

The next ERCOT board meeting is scheduled for Sept. 17.