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STEC Raises Issue Of Texas Entities Paying For Reserves Being Able To Rely On Them During Emergency

December 04,2017



In comments to the Texas PUC concerning potential energy-only market changes, South Texas Electric Cooperative, Inc. said, "the ERCOT structure and non-market requirements for reserves penalize any entity that retains reserves, does not let that entity benefit from its reserves in an emergency, and allows others to free ride in the use of reserves in an emergency without paying any premium."

"If an entity does carry reserves, it is penalized for doing so—both by market prices and because in an emergency situation, that load is not able to keep its reserves for itself. Any available capacity in the market first goes to serve transmission level customers. However, no payment for the carrying costs of that capacity is paid to the entities that have borne the cost of maintaining capacity for shortages, and those entities are not permitted access to their own capacity for their own loads," STEC said

"Ironically, if reserves were part of the market, and entities could differentiate products to customers based on their ability to provide service during what would otherwise be an outage or emergency, some customers would pay for that service and some would not. Those that are willing to pay for reserves and reliability should have the benefit of those reserves and reliability. Those that by default are given reserves, but have not paid for those reserves, such as transmission voltage level customers, should be made to pay make whole charges that are reimbursed to those generators that made reserves available, so that other customers are not subsidizing free riders. A market-based approach for reserves would reward those that value reliability during shortage conditions and have invested in that reliability," STEC said

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