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ERCOT Opposes Potentially Costly Change

August 8, 2016 By Cheryl Kaften

Proposed rule changes for the Lone Star State’s power grid — revisions that some feared would lead to higher wholesale electric prices around Houston — have been rejected by a key stakeholder panel of the  Electric Reliability Council of Texas (ERCOT), the Texas Coalition for Affordable Power (TCAP) reported on August 3.

The NRG Texas Power proposal, known officially as “Nodal Protocol Revision Request 784” (or NPRR 784), was taken up on July 28 by ERCOT’s Technical Advisory Committee.

Had it received the panel’s endorsement, the proposals would have increased the pricing of electricity from certain older, near-retirement generation plants. NRG Texas Power, the Houston wholesale power operator of such a unit, wanted the changes. They were opposed by consumer advocates and others.

NPRR 784 would have changed ERCOT’s rules for reliability-must-run” generation units. These are older power plants that otherwise face retirement, but which ERCOT has determined should remain temporarily operational in order to prevent transmission system overloads.

 In June, ERCOT announced that it had executed a reliability-must-run agreement with NRG, so that it would continue operating its legacy Greens Bayou Unit 5 through the summer. NRG had asked to retire Greens Bayou Unit 5, but ERCOT determined the unit was needed for reliability purposes.

Payments for RMR service are based on costs identified in the ERCOT rules. Under NPRR 784, however, those rules would have been adjusted in such a way as to ensure that RMR units are dispatched only after the dispatch of all other relevant generation units needed to prevent transmission system overloads at the spot.

In practical terms, the change could increase tenfold the dispatch price for Greens Bayou Unit 5, according to estimates. Increases in wholesale power prices eventually impact electricity prices paid by end-use consumers.

Proponents of NPRR 784 said it would have ensured the “right” price signals are sent to the wholesale power market when RMR units are needed.

But not everyone agreed. Katie Coleman, an attorney with Texas Industrial Energy Consumers, told TCAP, “We have concerns about the incentive this creates for a generating company with a fleet of units in a certain area to retire units and get high pricing for its other units.”

ERCOT commented, “It’s expected that the grid congestion that prompted ERCOT to enter into the Greens Bayou Unit 5 RMR contract will be relieved in 2018, after the completion of new transmission lines for the Houston Import Project.”

NRG, which opposed the Houston Import Project, has said it would appeal the Technical Advisory Committee’s NPRR 784 decision. The full ERCOT board is expected to consider that appeal on August 9.

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