ERCOT NEWS: December Board Meeting Highlights

TOPICS:

• Winter generation readiness, long-term outlook reviewed by ERCOT board
• The long-term outlook indicates shortage of reserves
• Potential short-term options for additional capacity under review
• Board approves special-case price cap methodology and 12 protocol changes
• Nodal market redesign marks one-year anniversary
• Texas ranked first in competitive markets for fifth consecutive year
• 2012 board members approved at annual membership meeting
• Overview of long-term forecast methodology, assumptions released

Winter generation readiness, long-term outlook reviewed by ERCOT board

Dec. 15, 2011, AUSTIN – The Board of Directors for the Electric Reliability Council of Texas (ERCOT), the state grid operator and manager of the wholesale electric market, discussed the generation outlook for the upcoming winter and in the long term at December’s monthly board meeting, Dec. 12-13. 

The near-term forecast does not indicate a problem in meeting demand during the winter season unless there is a simultaneous occurrence of extreme weather and higher-than-normal planned and forced generation outages, CEO Trip Doggett said.  

Several initiatives are underway to ensure generation owners are prepared for winter, in case there is a repeat of the extreme temperatures experienced in February, Vice President of Grid Operations and System Planning Kent Saathoff noted in his report.  

ERCOT has requested an affidavit from generators confirming they have completed winter weatherization and has begun spot checks of winter preparedness and weatherization at generation sites.  ERCOT has also reviewed the emergency operations plans for generators, including weatherization. 

In the event of natural gas restrictions, 49 units representing 7,371 megawatts (MW) have residual fuel oil stored for the upcoming winter, according to ERCOT’s recent survey of generation owners.  Almost half can operate on 100 percent fuel oil for two days or more. 

In addition, ERCOT system operators conducted a winter storm drill Nov. 30-Dec. 1 with 42 energy schedulers and 16 transmission operators, simulating a scenario similar to the Feb. 2 freeze event. 

The long-term outlook indicates shortage of reserves

The long-term outlook is “much more pessimistic,” Doggett told board members in his update.  The capacity, demand and reserves report for 2012-2022 indicates a need for additional generation in the coming years and definitive actions to address supply shortfalls as early as summer 2012, Doggett said. 

The report shows a 5 percent decrease in the reserves for 2012 and 2013 – including 1 percent due to increased load and 4 percent due to reduced generation.  [A high-level review of the forecast and methodology is available on the ERCOT website:  2012 Long-Term Demand and Energy Forecast .] 

“We need to continue the dialogue on a number of things we’re trying to put in place by this summer,” Doggett said.  Demand response is one area that holds promise to address the capacity shortage in the short term, he noted. 

Potential short-term options for additional capacity under review

Betty Day, vice president of business integration, summarized potential options to increase resource adequacy for next summer including:

•  1,500 MW from “mothballed” units could potentially return to service with three-months notice;  700 MW is available with at least one-month notice;
• 160-250 MW in demand response is potentially available but requires a Public Utility Commission rule change and protocol changes on a short timeline. 

Finally, ERCOT plans to gather additional information on the amount of private network capacity that might be available for summer peak.  ERCOT previously counted 5,000 MW of private unit capacity for 2011, but the 2012 forecast reduced the amount by 700 MW based on availability during August. 

John Dumas, director of wholesale market operations, also reported on market enhancements under consideration:

• Non-spinning reserve pricing proposals, including three protocol changes approved by the board Dec. 12 and scheduled to take effect Jan. 1, 2012;
• Look-ahead SCED functions, including a protocol change passed by the board Dec. 12 representing phase 1 of a larger plan for additional enhancements;
• Market design improvements under review, such as changing the power balance penalty cost, implementing an offer floor for committed resources, and moving 500 MW from non-spin service to responsive-reserve service.
• Emergency interruptible load service enhancements; proposed  market rule changes under review;
• Feasibility of implementing pilots, such as a fast-response regulation service and a 30-minute emergency interruptible load service. 

ERCOT plans to release two additional reports prior to summer, including a preliminary summer assessment in mid-February and a final summer report in mid-April.  Like this year’s winter outlook, the summer seasonal assessments will be more reflective of most-current projections, rather than the long-term planning outlook which reflects a normal-weather scenario based on the past 15 years. 

Board approves special-case price cap methodology and 12 protocol changes

Board action included approval of a methodology for setting shadow-price caps for transmission constraints not resolvable by security-constrained economic dispatch or SCED – a software system designed to dispatch power at the lowest price offered.   The board heard several presentations, including an appeal from a market participant opposed to the new methodology, prior to voting to approve the recommendation from the Technical Advisory Committee, making it effective Jan. 1, 2012. 

Twelve Nodal Protocol Revision Requests (NPRRs) and one Planning Guide Revision Request (PGRR) were approved including:

• NPRR 351  – Security Constrained Economic Dispatch (SCED) Look-Ahead (LA) Step 1: Pricing: Calculate Non-Binding Prices and Base Points for Initial Research into SCED LA and Allow Consumers to Have a Forward Price Projection;
• NPRR 377 – Alternate Inputs to Base Point Deviation Charge;
• NPRR 395  – Congestion Revenue Rights Auction Offer Award Disclosure;
• NPRR 398  – Changes to Resource Category Minimum-Energy Generic Heat Rates;
• NPRR 399  – Updates to Protocol Sections Related to Settlements and Billing;
• NPRR 401  – Clarification of Timing for a Generation Resource to Be Considered Self-Committed;
• NPRR 403  – Revised First Available Switch Date Calculation for Texas Standard Electronic Transaction v4.0 Release;
• NPRR 404  – Clarification of Form of Notice of Suspension of Operations;
• NPRR 406  – Clarification of the Timeline for Calculating the Value of X at Minimum Energy Level;
• NPRR 426  – Standing Non-Spin Deployment in the Operating Hour for Generation Resources Providing On-Line Non-Spin;
• NPRR 427  – Energy Offer Curve Requirements for Generation Resources Assigned Regulation Up and Responsive Reserve Service;
• NPRR 428  – Energy Offer Curve Requirements for Generation Resources Assigned Non-Spin Responsibility;
• PGRR 009 – New Planning Guide Section 6.8, Resource Registration Procedures.   

Board members also approved revisions to the board’s policies and procedures to address recent rule modifications by the Public Utility Commission related to ERCOT governance and oversight (P.U.C. Subst. R. Section 25.362).  In addition, the compensation guidelines for unaffiliated directors were changed to an $87,000 flat annual retainer with deductions for any missed board meetings.  The compensation is equal to the current maximum compensation cap levels, but provides more predictability for the budget and better structure for payments and incentives. 

The board also voted to accept the 2012 key performance indicators and the 2011 service organization control audit, as recommended by the board’s human resources and governance committee and finance and audit committee.   

Nodal market redesign marks one-year anniversary

CEO Trip Doggett reported that ERCOT had passed the one-year anniversary of the nodal market launch, and that the new systems were working as expected or better with no major design issues.  Operations staff has noted improved system dispatch, ancillary services monitoring, and congestion management, he said. 

Other highlights in the CEO’s report included: 

• $18.3 million favorable budget variance expected at year-end;

• Analysis of the load reduction on Aug. 4 from the emergency interruptible service –  loads under contract to shut down in grid emergencies – averaged almost 500 megawatts;
• ERCOT received “very favorable” results on an on-site spot audit last month by the Federal Energy Regulatory Commission, North American Electric Reliability Corporation and the Texas Reliability Entity. 

Texas ranked first in competitive markets for fifth consecutive year

Doggett also noted that Texas was number one for the fifth consecutive year in the Annual Baseline Assessment of Choice in Canada and the US.  Texas was the only state to receive an excellent in both the residential and the commercial/industrial segments.   The benchmarking report from DEFG management consulting firm noted that Texas residential customers had twice as many product/service choices when compared to two years ago. 

Staff reports included:

• CEO Update
• Grid Operations and Planning  
• Wholesale Market Operations
• Commercial Market Operations
• Business Integration
• Financial Summary
• External Affairs  
• Information Technology and Facilities
• Facilities Update
• 2012-2016 Strategic Plan 

 The board’s next meeting is scheduled for Jan. 17, 2012. 

ALSO ONLINE

Archived broadcasts of ERCOT board meetings
Dec. 12, 13 Board of Directors Meeting
Dec. 12 Finance and Audit Committee meeting 
Dec. 12 HR and Governance Committee meeting  

2012 board members approved at annual membership meeting

The 2012 board of directors was approved at the 41^st annual ERCOT membership meeting Dec. 13.  CEO Trip Doggett recognized the three new unaffiliated board members, recently confirmed by the Public Utility Commission: Craven Crowell, Karl V. Pfirrmann, and Judy W. Walsh.  They are scheduled to begin their three-year terms Jan. 1, 2012.  

Doggett thanked Chair Laura Doll for her service to ERCOT and the board.   Doll announced her plans to leave the board last September to pursue a career opportunity in California.  

The 2012 Technical Advisory Committee members were also announced at the meeting. 

Rep. Byron Cook, chair of the House Committee on State Affairs, delivered the keynote address.  

Overview of long-term forecast methodology, assumptions released

A report providing a high-level overview of the methodology, assumptions, and data used in creating 2012 long-term demand and energy forecast is available on the ERCOT website.    

Findings and graphs in the report include:

• Energy for 2002-2011 grew at a compound annual growth rate of 2 percent.
• Peak demand for 2002-2011 grew at a slightly faster rate of 2.2 percent.
• Forecasted annual growth rates for 2012-2021 are 2.5 percent. 

Forecast uncertainties reviewed are weather, economics, energy efficiency, demand response, onsite renewable energy technologies and electric vehicles. 

The forecast is based on a set of econometric and neural network models describing the hourly load in the ERCOT region as a function of certain economic (e.g., non-farm payroll employment) and weather variables (e.g., heating and cooling degree days).   A total of 864 neural network models were developed for the forecast.  

Economic and demographic data, including a county-level forecast, are obtained on a monthly basis from Moody’s Economy.com. Historical monthly economic and demographic data for each county are provided back to 1990. Fifteen years of historical weather data was provided by Telvent/DTN for 20 weather stations in ERCOT.