In comments in a proceeding reviewing the appropriate level for establishing the reliability standard in ERCOT, NRG Energy, Inc. cited actual experience which has diverged greatly from a 2014 Brattle forecast, and said that the PUC should have Brattle update its conclusions based on new data.

We're not sure why Brattle's new forecast would be any more on the mark than its 2014 guess.

Specifically, NRG noted that, in Brattle's report presented to ERCOT and the Commission on January 31, 2014, titled Estimating the Economically Optimal Reserve Margin in ERCOT, the Brattle Group estimated the Economically Optimal Reserve Margin (EORM) to be 10.2% and the Equilibrium Reserve Margin of 11.5% for the ERCOT market.

"Although it has been less than three years since Brattle published these estimates, much has changed in the ERCOT-market. For example, Brattle assumed 15,160 MW of installed wind capacity and 124 MW of installed solar capacity in 2016 based on the latest Capacity, Demand, and Reserves report (CDR) at the time. The May 2016 update of the CDR shows approximately 26,213 MW of installed wind capacity and 2,953 MW of installed solar capacity in ERCOT for the summer of 2018," NRG said

"In addition, the prior estimates of the EORM and the Equilibrium Reserve Margin did not fully consider the growing trends in 4CP response driven by transmission rate cost avoidance, which was first formally estimated by ERCOT after Brattle completed their 2014 study," NRG said

"Regardless of whether the Commission selects the EORM or the Equilibrium Reserve Margin as reliability metrics to assess resource adequacy risks in ERCOT, NRG suggests that the Commission direct a 'refresh' of these two metrics given the substantial change in market fundamentals that impacts evaluation of resource adequacy in ERCOT," NRG said

We're all for having accurate information in deciding state policy, but what NRG requests isn't adding factual information into the record -- it's having Brattle take a second guess at future grid conditions, after it whiffed badly on the first one.

Rather than "refreshing" assumptions only to result in second set of assumptions which may or may not be borne out, we think Brattle's significant miss on wind and solar installations shows the problem with deciding policy and market design on "assumptions."

Obviously, Brattle didn't see (or discounted it if did see) the growth for wind and solar in Texas. We don't fault them for that, nobody can predict the future.

They have more to answer, though, in ignoring growing 4CP avoidance, which any broker could have attested to. Indeed, Brattle has been quick to dismiss such activity (price-driven demand response as a whole, saying it would take "years" for ERCOT to achieve several thousand MWs of price responsive demand), while market conditions suggest customers are being proactive in managing demand in response to higher price caps (no, not in government-run eastern-style DR programs, but through individual customer choices in response to a catalog of stimuli that is not easily captured by so-called analysts)

In any case, what we do object to is holding Brattle (or any other similar consultant) as some soothsayer that is an "expert" when it comes to predicting the future, and that their recommendations have an associated gravitas of being "right."

NRG's observations about how Brattle missed the mark should cause pause about relying on so-called expert analysts to predict future market outcomes, which in turn are used to change current market design.

Consider Brattle's musings from its 2012 report, in which Brattle downplayed small customer demand response and expressed skepticism of smart thermostat adoption, particularly via the use of REPs as a channel to provision the devices to customers. Brattle in 2012 noted concerning smart thermostats that, "these advanced controls may cost $300 per customer and may not be cost-effective in many cases. Even if they are cost effective, many customers may not want to front the cost, and neither will REPs if customers do not sign a multi-year contract." We'll let you judge how that has played out

Indeed, if Brattle's assumptions are departing from reality, how much faith can we have when Brattle describes as "modest" the capacity market costs associated with mandated reserves margins

Texas should make market design decisions based on fundamental principles of free enterprise, namely choice, rather than hiring a consultant to fulfill the role of Soviet five-year planners.