This Nodal Protocol Revision Request (NPRR) revises existing rules for resubmitting Ancillary Service (AS) offers in the Adjustment Period to provide for resubmitting those AS offers not awarded in the previous markets at the higher of the Day-Ahead Market (DAM) Market Clearing Price for Capacity (MCPC) for the corresponding AS or the Resource’s offer price for the corresponding AS in the DAM.
This AS resubmission provision was carried forward from the current Zonal Protocols where the provision was meant to mitigate against possible manipulation in the AS market. AS offers in the Zonal market are on a portfolio basis and there is no co-optimization of energy and AS in the Zonal market. However, AS offers in the Nodal market are Resource-specific and the Nodal DAM co-optimizes energy and AS. Due to co-optimization, awarded AS offers linked to energy in DAM are guaranteed to be paid the opportunity cost of providing AS instead of being awarded energy in DAM. Thus, linked AS offers in Nodal DAM should exclude any opportunity costs and, therefore, could be close to zero.
On the other hand, Nodal Supplemental AS Market (SASM) is an AS-only market with no co-optimization with energy. If SASM is cleared with resubmitted linked DAM AS offers under the current rules, then the clearing price for AS will certainly not account for any opportunity cost of providing AS instead of energy. As a result, QSEs with linked AS offers in the DAM will have a strong economic incentive to expire those offers prior to any SASM. SASM are typically needed for additional AS, and QSEs expiring their AS offers will be counter-productive.
This revision addresses these issues by changing the current rules for resubmitting AS offers in the Adjustment Period to provide for resubmitting those AS offers not awarded in the previous markets at the higher of the DAM MCPC for the corresponding AS or the Resource’s offer price in the DAM.
In addition, the current AS offer resubmission rules are difficult to implement as part of the offer validation process -- ERCOT is still struggling to implement this complex resubmission rule. This revision changes the resubmission rules to make them simpler because the DAM AS offers are the only reference for resubmission.