Texas Electric Market Reporter
May 16, 2003
Volume 6, Issue No. 9
Published by the Offices of John Laakso
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IN THIS ISSUE (with approximate page numbers)
Numbers at the end of each article headline refer to the PUCT Docket or Project.
TEXAS SPOTLIGHT
Texas PUC Publishes Wholesale Market Design Rule ---p. 2
Texas House Grinds To A Halt ---p. 5
The End Of Session Scramble Begins --p. 6
Transmission Key To Continued Growth Of Wind-Generated Power In Texas --p. 7
CEI Hosts Successful New Energy Technology Conference --p. 8
SWEPCO Retail Competition Delayed Until 2007 --p. 9
CenterPoint And Utility Choice Square Off --p. 11
Utilities Do Not Have Evidentiary Burden Of Imputed Capacity Cost In Fuel Cases --p. 12
PUCT NOTES FOR THE MAY 9 DECISION MEETING
Retail Market Oversight Activities --p. 12
LCRA TSC Transmission and Transformation Rates to Change --p. 13
CPL’s Plan of Divestiture Request Dismissed --p. 13
Oncor Wholesale Transmission Rate Increase Approved --p. 13
Rule on Quantification of Stranded Costs of Nuclear Generation Assets Approved --p. 14
Oversight of Independent Organizations in the Competitive Market --p. 14
Competitive Metering Rule Deferred --p. 14
Energy Services Rule Published --p. 14
ERCOT NOTES
Technical Advisory Committee (TAC) Holds Unusual 1½ Day Meeting --p. 14
PRS Holds Three Meetings in Preparation for May 8 TAC meeting --p. 15
Retail Market Subcommittee Approves Move-In Move-Out Team and Competitive Metering Task Force Recommendations --p. 15
ERCOT RMS’s Profiling Working Group Worked IDR Issues --p. 16
The Competitive Metering Working Group (COMET) Team #1 (Equipment / Hardware) Completed Recommendations --p. 16
Mass Customer Transfer Task Force Increases Number of Scenarios --p. 16
Day Ahead Market Task Force (DAM-TF) Works to Evaluate a Near-Term Day-Ahead Market Design --p. 17
LEGISLATIVE NOTES
Bills Die in House Committee --p. 17
Lack of Quorum Kills House Bills --p. 17
Electric Bills Analysis and Tracking Service Still Available --p. 18
MARKET MISCELLANY
SPS Files Fuel Factor Case --p. 18
Texas Commercial Customers Return --p. 18
Green Mountain Expands into Commercial Market Segment --p. 18
Texas Genco Capacity Auction Request Severed from Generic Docket --p. 18
TEAM Members Want Their Money Back --p. 19
CPL Is No More --p. 19
AEP North to Transfer More Transmission to LCRA TSC --p. 19
EPE to Offer Off Peak Irrigation Rate --p. 19
Calpine And Brazos Sign Agreement --p. 20
Energy Efficiency Grants Deadline Approaches --p. 20
ExxonMobil May Construct Cogeneration Plant In Beaumont --p. 20
CPS Warns Customers Of Higher Summer Bills --p. 20
NEW PUCT INITIATED PROJECTS/DOCKETS --p. 21
CONFERENCES, ETC. --p. 21
THE TEXAS ELECTRIC CALENDAR --p. 21
TEXAS SPOTLIGHT
Texas PUC Publishes Wholesale Market Design Rule (26376)
By Kelso King and John Laakso
During discussion of the Wholesale Market Design rulemaking at its May 9 Decision Meeting, the Public Utility Commission of Texas (PUCT) considered a comparison of the costs and benefits of modifying the existing Texas wholesale market design by implementing a nodal system. Commissioners ultimately voted to publish the proposed rule after agreeing to perform a cost/benefit analysis within the timeframe proposed by Chairman Klein. The majority of the discussion centered on a memo filed by Commissioner Perlman concerning problems to be solved, necessary changes to existing rules, and a proposed path forward. Chairman Klein hoped that the proposed rule would focus parties’ attention on the necessary components of a nodal model since she thought the rule parameters were well defined in the preamble. She also asked for comments from the parties on the proposed timeframe and emphasized that it is important that the rule provide the market with the PUCT’s proposed direction. The PUCT staff will identify preliminary activities that will need to occur after the end of the rulemaking, including identification of both stakeholder and ERCOT activities. The Chairman had filed a preliminary work plan and timeline addressing some of these components. Her anticipated time to implement a Texas nodal model is March 2006. PUCT staff is to obtain informal comments on the various action items prior to adoption of the rule.
Commissioner Perlman noted that since his wholesale market design “decision tree” had been filed near the beginning of this process, some of the “branches” of the tree could now be disregarded. In his view, there are four recurring problems: 1) operational issues, e.g., minimizing category 4 costs, providing more unit specific bidding information and minimizing regulation deployment; 2) direct assignment of local congestion, which has been a small, but increasing portion of the ERCOT wholesale market (local congestion costs have increased by 174 percent); 3) forward and day ahead markets that increase liquidity and price transparency in the ERCOT; and 4) generation siting and transmission planning, a long-term problem concerning the provision of proper price signals. An important question is whether ERCOT's current market structure can be revised to address these issues or whether an entirely new market design, such as that contained in the proposed rule, must be implemented. He thought that local congestion is the biggest obstacle to the current market design, and might be the deciding factor concerning the ability to retain the current market design. His memo stated that the existing wholesale model could be adapted to address these problems and ameliorate the rationale for moving to a nodal model. A cost/benefit analysis would favor the current system if stakeholders were able to agree on incremental improvements and a methodology to directly assigned local congestion costs. Retaining the current market design requires the consensus of market participants on a proposal. Thus, he wanted ERCOT to work on a parallel path to a nodal system in case agreement cannot be reached.
While the PUCT has been looking for a solution to the direct assignment of local congestion cost for over a year, the proposed rule reflects the fact that no proposals have been acceptable and that stakeholders have not reached an agreement. Although PUCT staff believes its proposal is cheaper than implementing a nodal system, it has encountered a great deal of opposition from stakeholders. Chairman Klein noted that some of the solutions move much of the way toward a nodal system. The nodal principles included in the rule are more market-driven and less regulatory intensive than the current system. She was concerned about the message that is being sent by this process, and wants to avoid more confusion, delay or setbacks.
Commissioner Perlman wants to subject current and future models to a rigorous cost/benefit analysis since Texas has good empirical data upon which to conduct this analysis. He does not have enough information to decide which option is best, but this can be accomplished quickly. He asserted that every stakeholder, except independent generators, has recommended conducting a cost/benefit analysis prior to adopting the rule. Parties should spend the next six months fleshing out what the specific proposal is and then compare the current model to the nodal model and determine which has a higher net present value. Chairman Klein wanted parties to provide cost/benefit estimates, especially the costs of the enhancements that the ERCOT wholesale market subcommittee (WMS) is currently considering. She also wants parties to comment on the cost/benefit estimates contained in the preamble of the rule. Commissioner Perlman had envisioned a more rigorous cost/benefit analysis than the one contained in the rule, but had only two basic changes to the proposal. ERCOT should continue to improve the market and adopt all aspects proposed by Staff as components of a Texas nodal model.
Commissioner Parsley thought that the positions were not far apart, and believed something that would be agreeable could be crafted within the timeframe proposed by the Chairman. She agreed with the need to perform a rigorous cost/benefit analysis, but wanted it done within the January 2004 timeframe proposed by Chairman Klein. In addition, parties have requested that the market design be done prior to developing protocols, rather than simultaneously. She wanted market participants to present a Texas nodal model in January 2004 so that there would be something upon which to perform a cost/benefit analysis. This would allow implementation by March 2006. The California Independent System Operator is spending six months designing the market, doing a cost/benefit analysis for six months, and then developing protocols.
According to PUCT staff, stakeholders are concerned about the cost/benefit and want more detailed information. Staff still needs to address timing, to provide certainty to market participants, and to emphasize the performance of the cost/benefit analysis. As a result, Staff wanted an additional question in the preamble concerning whether it is appropriate to require ERCOT to file a cost/benefit analysis that supports the manner in which ERCOT chooses to implement the rule when it files the protocols to implement the rule. Staff suggested that this would provide a clear indication to parties that the PUCT will be moving toward a nodal model, while asking market participants to develop the details.
Since parties are not likely to accept the staff proposal, Staff wants comments on whether it is possible to salvage the current system by addressing the concerns identified by Commissioner Perlman. Chairman Klein thought that a cost/benefit analysis would omit quantification of benefits from a nodal system. This would be addressed as part of the study included in the final protocol filing. Staff was not optimistic that stakeholders will be able to solve the local congestion problem, but believed it might be possible with an additional two months of time.
Chairman Klein was willing to conduct further cost/benefit analyses if they can occur within the proposed timeframe. She was willing to insert Staff's additional question, but not the ancillary question concerning whether the existing system can be salvaged. She noted that that the rule would be considered for adoption by the PUCT on July 24, 2003. Commissioner Perlman thought that the development of a high-level market design, based on the rule as adopted, could occur between July 2003 and January 2004. The parties could then develop market protocols between January 2004 and July 2004, simultaneous with the cost/benefit analysis, and file the protocols on July 1, 2004.
The Commissioners revised subsection (d) to clarify that ERCOT should file a Protocols petition with the PUCT by July 1, 2004 as well as a cost/benefit analysis of the proposed Texas nodal wholesale market design. Chairman Klein was still concerned about creating uncertainty, adding that one year from now the PUCT could still change its mind and that she does not want to arrive at July 1, 2004 and be confronted with a “go/no go” decision. She emphasized that the most important part is implementation by March 2006 and did not encourage comments that suggested that implementation by then was not possible, but was willing to entertain an alternative solution. While the staff proposal addresses the direct assignment of local congestion, Commissioner Parsley was not willing to assign local congestion to load. In conclusion, the Commissioners accepted changes proposed by Staff and agreed to: 1) include the additional preamble question, 2) revise proposed Section (d) concerning the development of a Texas nodal model, and 3) revise proposed Section (e) concerning implementation. The rule was approved for publication consistent with the PUCT's discussion.
Texas House Grinds to a Halt
By John Laakso
The Texas House Parliamentarian received letters on May 12 that gave notice that more than 50 Democratic House members would be absent on that Monday. An official absence notification locks down the voting machines to prevent other members from voting for the absent member. In addition, enough Representatives were absent so that when it was time for House Speaker Craddick to call the House to order, a quorum was not present. As a result, all House business came to a halt and did not resume until May 16. Reaction to the walkout followed party lines. While Democrats supported the walkout, Republicans were understandably angry over the lack of a quorum. Governor Perry, who denounced the walkout, did not address what would happen if necessary legislation does not pass the House. However, Speaker Craddick understood that the governor would "call us right back" for a special session to address needed legislation. While the House has finished its appropriations bill, many other bills that would raise revenue are still in the pipeline on the House side. Lieutenant Governor Dewhurst is looking at ways that the Senate can pick up some of the slack.
While some Democrats have been unhappy since the beginning of the session when seniority was removed as a criterion for appointment to the House Appropriations Committee, it was the highly political U.S. Congressional Redistricting bill that apparently precipitated the walkout. The walkout was on the day that the House was to consider a redistricting bill reportedly supported by U.S. House Majority Leader DeLay. Representative Sylvester Turner, a Democrat who did not go to Oklahoma, said that passing the budget is the number one issue for Texas, not congressional redistricting. "This has been a very tough session with some big issues. But the number one issue is that we have to pass a budget. If you don't do that, you won't have anything. This is not a chicken and egg question. Now we're dealing with an issue that has stopped the Legislature - congressional redistricting. All of us agree that this should not be on the calendar. All of us ask the leadership to pull congressional redistricting off this calendar.” As for the absent Democrats, he said, "If congressional redistricting is removed from the calendar, they will be back by Thursday." When Speaker Craddick announced that was not an option that he would consider, the stage was set for a walkout that lasted until Friday morning.