Proposed ERCOT Rule Change Potentially Benefits Competition, Consumers

Written on: March 27, 2017

Large scale electricity consumers could more directly compete with large scale electricity generators — and as a result, consumers overall could benefit.

At least, that’s a promising outcome under proposed rules gaining momentum at the Electric Reliability Council of Texas, which is the organization that oversees the state’s principal power grid.

As part of its day-to-day responsibilities, ERCOT oversees a specialized market under which big generators and large-scale energy consumers obtain payments for standing ready with extra power or standing ready to curtail usage. ERCOT oversees this “ancillary services” market as a tool to preserve grid stability.

Ancillary services come in various forms and the rules governing them are set by consumer, generator and other stakeholder representatives at ERCOT. On March 1 a key stakeholder panel endorsed changes to one form of ancillary services known as “responsive reserve service.”

At issue are how energy consumers — typically big industrial consumers — participate in this aspect of  the ancillary services market. Under current rules, ERCOT is barred from procuring on a daily basis more than 50 percent of responsive reserve service from electricity customers. The rest must be obtained from electricity generators. The thinking here is that big industrial energy users may not possess the same ability as generators to quickly respond to ERCOT’s reliability instructions.

Now, flash forward to ERCOT’s “Wholesale Market Subcommittee” meeting on March 1. It was then that the committee endorsed NPRR 815 (that’s ERCOT speak for Nodal Protocol Revision Request 815) to relax the 50-percent limit.  Many of the expert stakeholders insisted during the meeting that no real need exists to limit the participation of big industrial consumers.  ERCOT staff also said that in some instances energy consumers actually provide more agile response to grid instructions than do generators.

The Wholesale Market Subcommittee endorsed NPRR 815 by a vote of 20-4. But that’s not to say it’s not a done deal. Although the March 1 vote signals new momentum, the rule still requires separate endorsements from other ERCOT stakeholder panels before it goes to the full ERCOT board. That probably won’t happen until this summer, at the earliest.

The Texas Coalition for Affordable Power believes this rule change provides a two-fold benefit for consumers. For some large-scale industrial consumers (and potentially certain commercial class consumers with an ability to quickly curtail usage), it creates economic incentives to promote system reliability.  It also should create more competition in this important segment of ERCOT’s ancillary services market — and by extension, may put downward pressure on overall electricity prices.

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