ERCOT Reliability and Markets Committee Meeting Notes - 12/18 and 12/19

Agenda

1.     Call General Session to Order

2.     Notice of Public Comment, if Any

3.     October 16, 2023 General Session Meeting Minutes

4.     Annual Committee Self-Evaluation Survey Results

4.1.  The facilitator introduced the group’s self-survey and agreed that splitting the agenda to allow more thoughtful discussion was positive.

5.     Report on Annual Technical Advisory Committee (TAC) and Subcommittee Structural/Procedural Review

5.1.  Presentation posted and given by TAC leadership. He summarized the subcommittee and working group review process. The process of bringing information about the objections and abstentions was highlighted.

5.2.  TAC leadership noted the lack of consensus in the AS Methodology discussion, which resulted in an agreement to revisit this methodology by April.

6.     Recommendations regarding R&M Committee Charter Revision Requests for Board Approval

6.1.  TAC Report regarding Non-Unanimous and Other Selected Revision Requests Recommended by TAC for Board Approval

6.1.1.     ERCOT presentation posted and given.

6.1.2.     NPRR1172, Fuel Adder Definition, Mitigated Offer Caps, and RUC Clawback

6.1.2.1.         Presentation posted and given by TAC leadership, summarizing the debate.

6.1.2.2.         ERCOT supports this revision and explained that there was some disagreement about how switchable units would be treated and that the main issue was with the clawback, and whether this would reduce the number of RUC’s.

6.1.2.3.         Board members asked about the financial impact of these changes, and ERCOT responded that if this reduces RUC, it could lower the cost to the market, but they would have to look back over time to determine the impacts. ERCOT stated that they would like to, at least, have data through the summer to assess.

6.1.2.4.         TAC leadership agreed with ERCOT that there is a combination of related price factors, like RUC and ORDC price floors, that work together.

6.1.2.5.         Recommended for approval

7.     Recommendations regarding Regional Planning Group (RPG) Tier 1 Transmission Projects

7.1.  West Texas Synchronous Condenser RPG Project

7.1.1.     ERCOT presentation posted and given.

7.1.2.     Recommended for approval

7.2.  TNMP – Silverleaf and Cowpen 345/138-kV Stations RPG Project

7.2.1.     ERCOT presentation posted and given.

7.2.2.     The Board asked how much of an increase in load this project could accommodate. ERCOT responded that up to 13MW additional committed load in addition to the current load, but did not have a specific timeline that it would be served.

7.2.3.     Recommended for approval

8.     Recommendation regarding Real-Time Market Price Correction – Security Constrained Economic Dispatch (SCED) Error

8.1.  ERCOT presentation posted and given, regarding a proposed market price correction. The correction was driven by the max number of market transactions being reached in SCED and DAM. These generated errors in offer submissions in some instances, but not in others.

8.1.1.     All of the threshold requirements were met: largest value to specific counterparty, change in settlement charge. There were some credit issues and DAM offer issues. ERCOT did not make credit corrections, but some market participants did have to adjust the credit. There also were some communication challenges during this event, and ERCOT is gathering information from Market Participants about credit collateral and how ERCOT communicates with stakeholder to facilitate DAM offer submissions.

8.2.  Recommended for approval

9.     Break

10.  Committee Briefs

10.1.               System Planning and Weatherization Update

10.1.1. ERCOT presentation posted and given. They noted that, while the majority of new generation interconnection are for ESR’s, there are 7,700MW of new natural gas in the queue.

10.1.1.1.      VOLL and CONE studies – EROCT is in the process of studying VOLL with LBNL and Brattle. They have filed a plan for the VOLL survey with the PUC. The CONE study is being contracted currently and should start in the New Year, with completion in June.

10.2.               System Operations Update

10.2.1. ERCOT presentation posted and given.

10.2.1.1.      The grid hit new September and October peaks this year, and the September peak was only slight belon the all-time peak from August.

10.2.1.2.      NOGRR 245 likely will come before the Board in February (this is the timeline ERCOT has conveyed to stakeholders) without consensus.

10.2.1.3.      A Board member asked whether the resource capacity plan would be recalculated periodically, and ERCOT responded that it would, based on updated conditions and expected forced outages, among other things.

10.2.1.4.      During the discussion it was noted that a future problem can begin to manifest if the load growth continues without a comparable growth in dispatchable generation, in part because you don’t have headroom to allow outages. It was also noted that some of the planned generator outages have run longer than expected, for which the “penalty” is that they are not able to participate in the market.

10.3.               Commercial Markets Update

10.3.1. ERCOT presentation posted and given.

10.3.2. Real-Time Co-optimization Update

10.3.2.1.      ERCOT presentation posted and given, on RTC implementation and Ancillary Services. The spike in AS during August 2023 was due to the number of scarcity events and high demand that month, with resulted in a higher clearing price, not just a result of ECRS procurements. The Board discussed that the amount of reserves being carried may result in a higher cost because we are paying the price to hold them out of the market. The Board was trying to figure out which AS products are having a greater impact.

10.4.               Market Credit Update

10.4.1. ERCOT presentation posted and given.

10.4.1.1.      Board members asked questions about the additional collateralization, which has resulted in overall market participant-wide excess collateral. The opportunity cost of this additional collateral is higher with the current higher interest rates.

10.4.1.2.      Since taking out the capability of market participants to use unsecured credit in October, it was suggested that it cost market participants more to obtain credit that it did before that change.

10.5.               Revision Request Status Update

10.5.1. ERCOT presentation posted and given.

11.  Future Agenda Items

Meeting recessed to 2^nd day.

12.  Other Business

12.1.               Recess General Session until 8:30 a.m., Tuesday, December 19, 2023

12.2.               Reconvene General Session

13.  Independent Market Monitor (IMM) Report

13.1.               Presentation posted and given by the IMM.

13.2.               They noted that the market is sending strong signals for new dispatchable generation, but also discussed the process of procurement of AS on the system, which is meant to cover uncertainties.

13.3.               The presenter spoke to the difference between VOLL and the top of the ORDC, which is $5,000/MWh. In their calculations, they’ve assumed a $20,000/MWh for VOLL. They then examined the cost of ECRS derived from this VOLL and found the cost of ECRS to be 50x higher than what these numbers calculate to be ($12M vs $600+M).

13.4.               The IMM also pointed out that the $12B cost of ECRS since implementation can be assuaged, so that these costs don’t continue. They proposed an alternate probabilistic way of calculating necessary reserves that balance cost and reliability.

14.  Recommendation regarding 2024 ERCOT Methodologies for Determining Minimum Ancillary Service Requirements

14.1.               ERCOT Recommendation regarding 2024 ERCOT Methodologies for Determining Minimum Ancillary Service Requirements

14.1.1. ERCOT presentation posted and given, which talks though the changes in AS procurement procedures over the last 15 years, and the changes from the previous year. They use a statistical analysis to determine what quantity to buy at a given time.

14.2.               TAC Endorsement of ERCOT Recommendation regarding 2024 ERCOT Methodologies for Determining Minimum Ancillary Service Requirements

14.2.1. Presentation posted and given by LCRA to share the TAC discussion. The initial vote to approve the methodology failed, but the methodology was then endorsed with an agreement to revisit the methodology by April, which would discuss potential changes to procurement amounts.

14.3.               RMC members asked various questions.

14.3.1. One commissioner asked about whether TAC members agreed with the IMM recommendations, in particular the recommendations about changing amounts of 10-minute and 30-minutes products. TAC members did agree with IMM recommendations, and RMC discussed these, and whether it should be possible for the associated costs to be passed to customers. The IMM stated that there is a smaller price distortion with the use of the 30-minute products.

14.3.2.  One Board member asked the IMM how they are determining reliability, since the commission is still working to define this. The IMM answered that they used a probabilistic analysis to examine reliability.

14.3.3. Another question was asked about the difference between $12B cost of ECRS that the IMM has identified and the $600M cost that ERCOT has identified. The difference between these numbers is that the $12B accounts for the energy price increase in the real time energy price, and the cost of energy procurement that results from the scarcity. The $600M is the cost of actually buying the reserves that were paid to the suppliers.

14.3.4. One Board member noted that a certain take away is that ERCOT needs to get to RTC as soon as possible. The IMM agreed, but noted that adjusting ECRS in the interim is necessary, so that units that can be online at the system cost instead of being held offline because they sold ERCOT ECRS.

14.3.5. Commissioners noted that they are going to initiate an AS study in 2024 that will inform the AS methodology for 2025. In the meantime, they encouraged the re-evaluation of AS that will occur at TAC to really look at the cost of ECRS and AS.

15.  Adjournment