TOPICS:

• Board Approves Market Changes To Impose Price Cap
• A.D. Patton Selected As Independent Board Member

BOARD APPROVES MARKET CHANGES TO IMPOSE PRICE CAP

The ERCOT Board of Directors voted unanimously Tuesday to implement a system change to prevent the market clearing price for energy (MCPE) from rising above the current offer cap of $2,250 per megawatt-hour (MWh) 

The changes, scheduled to be in place by 5 pm today, include reducing the shadow price cap from $5,600 to $5,000/MWh and imposing an MCPE cap of $2,250/MWh and MCPE floor of ($1000)/MWh.  

The MCPE is the price charged or paid for balancing energy service procured from or provided to ERCOT in a congestion management zone. The shadow price is the price related to a congestion constraint CSC and is used to settle Transmission Congestion Rights. 

The Public Utility Commission’s (PUC) Independent Market Monitor, Dan Jones of Potomac Economics, recommended the changes to produce MCPEs that remain within the bounds of the applicable offer caps and floors established by the PUC (Substantive Rule, 25.505(g) relating to resource adequacy).   

 In an emergency open meeting June 11, the PUC directed two ERCOT stakeholder committees – the Wholesale Market Subcommittee (WMS) and the Technical Advisory Committee (TAC) – to review the issue.  WMS and TAC convened a joint emergency meeting  last week and reviewed the Potomac Economics proposal in addition to two others from Reliant Energy and Dr. Shmuel Oren. WMS and TAC voted unanimously to recommend implementation of the Potomac Economics proposal. 

This is the second market rule change approved by the board this month to lessen the recent price volatility in the state’s balancing energy market.  In a June 6 emergency meeting, the board approved a protocol change designed to allow more efficient management of transmission congestion.   

PRESENTATIONS AND REPORTS

Texas Nodal Market Implementation Program Update

ERCOT is working to develop a revised nodal program schedule that is realistic and achievable.

CEO Bob Kahn said that ERCOT will not present a new schedule for the nodal launch until after confirmation that the Common Information Model (CIM) importer is delivered and working.  It was previously scheduled for May delivery but has been delayed until late June or July.  The CIM importer is a highly-specialized set of computer programs that move data from the Network Model Management System into the Energy Management System.   

Market Operations Report

• Balancing energy price data showed significant upward price pressure from increasing natural gas prices along with congestion issues
• Natural gas prices increased 37 percent in April, compared to April 2007, and 46.7 percent in May, compared to the previous year
• Market volume (energy consumption) increased 4 percent from April 2007 to April 2008 and 9.6 percent from May 2007 to May 2008
• One new retail electric provider was added in May (Acacia Energy, Inc.) and seven qualified scheduling entities were added (Sempra Energy Trading, Suez Energy Marketing, Shell Energy, Acacia Energy, LQA, Enernoc, and the City of Garland)  

Grid Operations Report

• West to North zone congestion was recorded on 26 days in April, compared to 5 days in April 2007.  South to North congestion was recorded on 11 days, compared to zero last year; North to Houston congestion totaled 15 days, compared to 12 days last year. North to South congestion totaled 16 days, and North to West, 4 days.
• Significant system events were recorded on three days in April: a loss of 345 kV line and autotransformer at Oklaunion on April 3; a loss of a 138 kV line and switch at Breckenridge due to a tornado on April 9; and a loss of a unit, a direct current tie, and autotransformer due to storms in the North Texas area on April 10.
• The load forecast performance error for mid-term load forecast was 2.45 for April.  The error for 2008 year-to-date is 3.16, compared to 3.55 in 2007, 3.79 in 2006 and 4.56 in 2005.  
• ERCOT System Operations conducted a drill May 12-14 to simulate a category 4 hurricane along the Texas coast, making landfall at San Antonio Bay and causing multiple transmission outages and generation shortages. Sixteen transmission operators and 27 qualified scheduling entities from across the ERCOT region participated in the drill conducted from ERCOT’s operator training center in Taylor. Backup emergency plans and communications with ERCOT were tested as well as simulated restoration activities.  

2008 Market Participant Survey

Opinion Dynamics presented results from its follow-up and expansion of the 2006 Market Participant Survey.  The market’s perceived areas of strength are:

• Performance of corporate objectives
• Provision of timely and accurate data
• Every aspect of ERCOT staff performance across virtually all functional areas.  

Areas for strategic consideration are:

• Improvements in market’s understanding of the role of committees and governance in setting spending priorities
• Web site improvements
• Increased help desk training.  

A.D. PATTON SELECTED AS INDEPENDENT BOARD MEMBER

Alton D. “A.D.” Patton has been selected as an ERCOT independent board member (unaffiliated with any market participants) and began his three-year-term this month.  He was selected unanimously by the board’s nominating committee and approved in an email vote of ERCOT’s 220 corporate members, completed June 11. 

Patton is professor emeritus of electrical engineering at Texas A&M University with 35 years experience as a faculty member, including four years as head of the electrical engineering department.  He is also president of Associated Power Analysts Inc. in College Station, an engineering consulting service providing electric power system analysis, power system reliability and failure analysis.   

“I am very pleased to welcome Dr. Patton to the board.  With all of his experience and industry respect, he will certainly be an asset to our board,” Chairman Mark Armentrout said.  “ERCOT is fortunate to add him as a board member.” 

Patton was a former director and past board member of the Center for Space Power at the Texas Engineering Experiment Station. 

He has a bachelor’s degree from the University of Texas at Austin, a master’s from the University of Pittsburgh, and doctorate from Texas A&M University, all in electrical engineering. 

Patton fills the position vacated by Carolyn Gallagher who completed her elected term in March.