Industrials Propose ERCOT NPRR to Address Pricing of Certain Proxy Energy Offer Curves At Price Cap
October 03,2014
The Texas Industrial Energy Consumers have submitted to ERCOT Nodal Protocol Revision Request 662, which would address the pricing of certain proxy energy offer curves at the price cap.
NPRR 662 addresses proxy Energy Offer Curves generated by ERCOT for a Resource that does not submit an Energy Offer Curve or submits an incomplete Energy Offer Curve.
Under the NPRR, for a Resource without an Energy Offer Curve, a monotonically increasing proxy Energy Offer Curve will be created such that the last point on the curve (the Resource’s High Sustained Limit (HSL)) is offered at $1,500 per MW. For a Resource with an incomplete Energy Offer Curve (typically cogeneration facilities that update their HSL, but not their offer curve), a proxy Energy Offer Curve will be created to extend the offer price from the last point on the submitted Energy Offer Curve up to the Resource’s HSL.
TIEC said that the Protocols currently create an offer at the System-Wide Offer Cap (SWCAP) for certain energy without an associated Energy Offer Curve.
"This has the effect of withholding energy from Security-Constrained Economic Dispatch (SCED) until prices reach the cap, which can cause irregular pricing outcomes and may signal scarcity when scarcity conditions do not exist," TIEC averred.
"At times, the energy subject to this treatment has totaled several hundred MWs," TIEC said.
"The Independent Market Monitor (IMM) has repeatedly identified creating 'proxy offers' at the cap as an issue that needs to be addressed," TIEC said. "In the 2012 State of the Market Report, the IMM stated that 'Whatever … future market design changes may entail, we recommend stakeholder consideration of the following … Modify the Protocols related to proxy offer curve provisions such that all unoffered capacity is not automatically priced at the system-wide offer cap.' (2012 SOM Report at xxix-xxx). In the recently released 2013 State of the Market Report, the IMM likewise noted 'We continue to recommend modifying the Protocols related to proxy offer curve provisions such that all unoffered capacity is not automatically priced at the system-wide offer cap . . . During 2013, the average amount of capacity priced in this manner exceeded 180 MW.' (2013 SOM Report at xxvii). "
"This issue was also discussed in conjunction with NPRR568, Real-Time Reserve Price Adder Based on Operating Reserve Demand Curve, when the Reliability Unit Commitment (RUC) offer floor was reduced to $1,000, and Texas Industrial Energy Consumers (TIEC) committed to submit this NPRR. (Note that the RUC Offer Floor was raised again to $1,500 through the NPRR626, Reliability Deployment Price Adder (formerly 'ORDC Price Reversal Mitigation Enhancements'), compromise discussed by the Technical Advisory Committee (TAC) on August 28, 2014.) This concern is heightened with the upcoming SWCAP increase to $9,000. In general, there are very few market generation offers above approximately $1,500, which provides a better proxy for an HSL offer. This is consistent with the recent revisions to the RUC offer floor, which were set at $1,500 as a result of NPRR626 in order to keep RUC energy out of SCED until most market offers are exhausted," TIEC said.