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System-Wide Offer Cap and Scarcity Pricing Mechanism Methodology

System-Wide Offer Cap and Scarcity Pricing Mechanism Methodology. What is the issue?. Public Utilities Commission of Texas 25.505 requires ERCOT to set the Peaker Net Margin (PNM) threshold annually starting in 2014.

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System-Wide Offer Cap and Scarcity Pricing Mechanism Methodology

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  1. System-Wide Offer Cap and Scarcity Pricing Mechanism Methodology Wholesale Market Subcommittee

  2. What is the issue? • Public Utilities Commission of Texas 25.505 requires ERCOT to set the Peaker Net Margin (PNM) threshold annually starting in 2014. • The value has to be set to three times the cost of new entry of new generation plants • http://www.puc.texas.gov/agency/rulesnlaws/subrules/electric/25.505/25.505.pdf • §25.505 (g) (6) (C) • “At the beginning of the annual resource adequacy cycle, the system-wide offer cap shall be set equal to the HCAP and, except for increases authorized in this section, maintained at this level as long as the PNM during an annual resource adequacy cycle is less than or equal to a threshold of $300,000 per MW in 2012 and 2013, or the threshold set by ERCOT for a subsequent year. For 2014 and each subsequent year, ERCOT shall set the PNM threshold at three times the cost of new entry of new generation plants. “ • The Other Binding Document “System-Wide Offer Cap and Scarcity Pricing Mechanism Methodology” language needs to be updated to capture this PUCT mandate.

  3. Current CONE and PNM Methodology • The 2012 Brattle Report calculated the cost of new entry (CONE) for a CT in ERCOT at $105,000 per MW. • http://www.ercot.com/content/news/presentations/2012/Brattle%20ERCOT%20Resource%20Adequacy%20Review%20-%202012-06-01.pdf • Page 48 Table 10 • With these assumptions, the PNM for 2014 would be $315,000 per MW.

  4. Proposed Language Change in OBD • The current OBD language is located at http://www.ercot.com/content/mktrules/obd/documents/System-Wide%20Offer%20Cap%20and%20Scarcity%20Pricing%20Mechanism%20Methodo.zip • $300,000/MW-yr in the OBD will be changed to PNM threshold and the following language will be added. • The PNM threshold will be set to $300,000 per MW-yr for 2013. For 2014 and each subsequent year, ERCOT shall set the PNM threshold at three times the cost of new entry of new generation plants. The cost of new entry of generation plants is identified as $105,000 based on the analysis prepared by Brattle dated June 1, 2012. Therefore, the PNM for 2014 and each subsequent year, will be set to $315,000 per MW-yr

  5. Questions?

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