News Release

September 07, 2006

ERCOT at a Glance: News Update - September 7, 2006

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ERCOT ISO Celebrates Tenth Year This Month

Monday, Sept. 11, marks the 10th anniversary of the day that ERCOT was designated an independent system operator, becoming the first electric industry ISO in the United States.

Although ERCOT's roots extend back to World War II, 1996 was the year that ERCOT assumed its role of independent grid operator, ensuring open access to the power grid and reliability of the electric supply, following restructuring of the wholesale electric market in the ERCOT Region.  On August 21, 1996, the Public Utility Commission (PUCT) endorsed an electric utility joint task force recommendation that ERCOT become an ISO to ensure an impartial, third-party organization was overseeing equitable access to the power grid among the competitive market participants.  On September 11, the ERCOT board of directors restructured its organization and initiated operations as a not-for-profit ISO.  Today, ERCOT is one of nine ISOs in North America.

In 1999, the Texas Legislature unbundled the investor-owned utilities to allow customer choice in those areas.  ERCOT was assigned the responsibility for ensuring open access to transmission and distribution systems, maintaining the reliability of the electric supply, facilitating retail market registration and switching, and managing wholesale market settlement.

Some of the achievements in the ERCOT region since 1996 include:

  • 26,000 megawatts (MW) of new gas-fired generation capacity installed
  • 7,500 MW of inefficient, high-heat-rate units mothballed
  • More than $2.2 billion invested in transmission improvements
  • 700 miles of 345 kV lines added
  • Ranked most competitive retail market in the U.S., and third most competitive in the world
  • 55 retail electric providers active.

ERCOT employees will celebrate the 10th anniversary at the quarterly employee meeting September 22.

Emergency Plan Revised to Improve Communications

The Technical Advisory Committee approved changes today to the Emergency Electric Curtailment Plan (EECP) to improve advance communications of system conditions during certain electric events.

Following the April 17 use of the curtailment plan, including rotating outages, ERCOT staff and several market participant committees evaluated "lessons learned" and recommended changes to the emergency plan to ensure more accurate and timely communications to the market.

For the first time, system operators will have clear "triggers" for each step of the emergency plan.  The steps will be tied to the amount of physical responsive reserves available.  In addition, a reserve discount factor has been implemented, based on ERCOT staff studies of the percent of generating capacity that is historically undeliverable during periods of high system demand.  This discount should give a more accurate picture of the total resources available to respond to system disturbances.

In the past, the emergency steps were dependent on grid frequency.  ERCOT operators and stakeholders agreed that once a decline in frequency begins, the situation may not allow time for advance notice to the market or time for a public appeal for conservation, as was the case on April 17.

Under the revised operating guide, effective Oct. 1, the EECP has been reduced from four to three steps, and the notice to the media asking for voluntary conservation has been moved to the first step.  The step that was removed was the media appeal, which was formerly step 3.

The three steps of the EECP are designed to reduce demand on the system during an electric event to prevent an uncontrolled, widespread blackout:

  • Step 1 -- Public conservation.  A public media appeal for voluntary conservation is issued.
  • Step 2 -- Interruptible load shed.  Large industrial customers who have contracted to voluntarily have their service interrupted are shut down.
  • Step 3 -- Rotating outages.  ERCOT instructs transmission and distribution companies and local utilities to implement controlled load shed or "rolling outages," typically rotating every 15 minutes to a different location.

Protocol Revision Request 682, with a recommended effective date of Oct. 1, was also approved to support the changes in the operating guides.  The board will be asked to approve the PRR at the next board meeting, September 19, which will finalize the new EECP steps.

Retail Retail Transactions for Choice Top 20 Million

Retail transactions for electric provider switching topped 20 million August 25.  The transaction total, at 20,196,200 as of today, marks the number of transactions completed since the opening of the retail market pilot program on July 31, 2001.

ERCOT serves as the central hub of the retail transaction process that supports over 6 million customers in the competitive choice areas of Texas.  Today, four and a half years after customer choice was extended to all investor-owned utility service areas, 32 percent of residential customers are being served by a competitive retail electric provider.

System Planning Director Addresses Long-Term Reliability at Legislative Hearing

Additional generation must be added to the ERCOT Region soon to maintain system reliability, Director of System Planning Bill Bojorquez told members of the Texas Legislature Wednesday.  Testifying before a joint hearing of the House Committee on Regulated Industries and the House Committee on Energy Resources, Bojorquez stated that ERCOT projects reserve margins to be near or below minimum levels beginning in 2007.  He also recommended that additional fuel diversity is needed to lessen the region's high dependence on a single fuel -- natural gas -- which is vulnerable to supply disruption, such as hurricanes or depleted supplies during harsh winters, and susceptible to volatile pricing.  The hearing focused primarily on the recent announcements of proposed new nuclear generation plants in the region.

Bojorquez's testimony also included graphics showing the regional growth of electric energy consumption, 20-year load and generation maturity scenarios, committed and uncommitted generation planned in the region, and three graphs of the load shape with fuel mix on a spring, summer and winter day.

Former Contractor Sentenced for Role in Conspiracy

John Benito Cavazos, a non-employee former contractor, was sentenced Tuesday for his role in the 2004 criminal conspiracy to defraud ERCOT through a web a web of shell companies paid for services not rendered.  Cavazos, who has already returned $8,700 in restitution, according to the Texas Attorney General's office, was sentenced to four years deferred adjudication probation.

Former employees Ken Shoquist and Chris Uranga were sentenced in Williamson County District Court last month.  Shoquist paid $120,000 in restitution to ERCOT and was sentenced to eight years.  Uranga received seven years and was ordered to repay $505,000.

Sentencing of Chris Douglas, a former ERCOT manager, is scheduled for October 2.

Proceedings against the sixth and final indicted individual, Steve Wallace, are still pending.  Wallace is scheduled for a hearing in Travis County on September 11 and in Williamson County on September 22.

Potomac Selected as Independent Market Monitor

The Public Utility Commission (PUC) of Texas selected Potomac Economics of Fairfax, VA, to serve as the independent market monitor for the ERCOT, PUC officials announced last month.

Under authority and direction by the PUC, Potomac will analyze operation of the wholesale electric market in the ERCOT region and market rules to detect opportunities for strategic manipulation of the market.  The independent market monitor will also conduct investigations into irregular market events, support the PUC's enforcement activities, and work with the PUC and ERCOT to identify enhancements to the design of the wholesale electricity market.

Potomac Economics has served the PUC in an advisory capacity on market design and operation issues in the past.  Potomac Economics also provides services to other electric grids around the country, including those in New York, New England and the Midwest.

Senate Bill 408, approved by the Texas Legislature in 2005, directed the PUC to hire a wholesale electric market monitor "to detect and prevent market manipulation strategies and recommend measures to enhance the efficiency of the wholesale market," (Public Utilities Regulatory Act, Sec. 39.1515).

State of the Market Report Available on PUC Web Site

Potomac Economics' "2005 State of the Market Report for the ERCOT Wholesale Electricity Markets" concluded that the wholesale market should function more efficiently under the nodal market design, and in the long term, "these enhancements to overall market efficiency should translate into substantial savings for consumers."

The executive summary for the 186-page report states, "We find improvements in a number of areas over the results in prior years that can be attributed to changes in the market rules or operation of the markets" but generally confirms its previous opinion that "current market rules and procedures are resulting in systematic inefficiencies."  The report states that their remaining recommendations will be addressed by the introduction of a nodal market design, which is being developed for implementation in 2009.

The report states the wholesale market should function more efficiently under the nodal market design by providing better incentives for building new generation where it is most needed and facilitating more efficient dispatch of generation through transparent, competitively managed procedures.

The July 2006 report is now available on the PUC Web site.

ERCOT Meeting Calendar

September 2006 Calendar

The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to more than 25 million Texas customers -- representing about 90 percent of the state’s electric load. As the independent system operator for the region, ERCOT schedules power on an electric grid that connects more than 46,500 miles of transmission lines and 650+ generation units. It also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for nearly 8 million premises in competitive choice areas.

ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature. Its members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities, transmission and distribution providers and municipally owned electric utilities.

Contact

media@ercot.com

512-275-7432