ERCOT panel advances proposal for third year in #CRR auctions RSS Feed

ERCOT panel advances proposal for third year in CRR auctions

The Electric Reliability Council of Texas Wholesale Market Subcommittee on Wednesday endorsed a proposal for adding a third year to its congestion revenue rights market and referred issues related to reliability-must-run pricing and day-ahead market resettlements to other stakeholder groups.

On the CRR proposal, the WMS voted to endorse Nodal Protocol Revision Request 808, which adds a third year forward to the existing two-year CRR long-term auction process and revises the percentages of transmission capacity sold in that auction.

A congestion revenue right is a financial instrument that entitles its owner to be charged or paid when ERCOT’s transmission grid experiences congestion in the day-ahead or real-time markets.

Eric Goff, Citi Energy director of regulatory affairs, said adding the third year “is very important to allow for congestion hedging.”

“We have long-term deals that are what makes this market function as it does, and being able to mitigate that risk to a greater degree is very important,” Goff said. “It … allows a market participant to enter or exit from a CRR position as a situation progresses. … It provides price transparency with very low risk.”

Currently, ERCOT’s long-term CRR auction sequence provides for four auctions, each for a consecutive set of six-month CRRs, and the new proposal would add another two auctions for the next two consecutive sets of six-month CRRs.

The current percentages of available transmission capacity offered in the long-term auction sequence are 60%, 45%, 30% and 15% of the available physical capacity. NPRR 808 would change those percentages to 60%, 50%, 40%, 30%, 20% and 10%.

The percentages for the fifth and sixth set of six-month CRRs are relatively low, said the NPRR’s sponsor, Clayton Greer, Morgan Stanley vice president for commodities, “but at least it establishes some price points in the market so somebody can trade basis.”

The next step for the revision request is consideration by ERCOT’s Technical Advisory Committee, then the ERCOT Board of Directors.

ERCOT’s reliability-must-run pricing rules came into question over the summer, as ERCOT approved an RMR contract in June for NRG Texas’ 371-MW Greens Bayou-5 natural gas-fired generator in northeastern Houston to operate for the summer months, starting in July and continuing through June 2018, mainly to cope with a transmission constraint in the northwest area of the ERCOT Houston region.

The contract is estimated to cost about $60 million, even without it being dispatched to resolve congestion issues.

As the Greens Bayou-5 unit is in a noncompetitive, transmission-constrained load pocket, NRG would be paid for energy under current rules at its mitigated offer cap, which would be in the range of $50/MWh to $70/MWh. In August, the ERCOT board rejected a proposal to raise that price to $300/MWh so that an RMR unit’s price would be above any other resource capable of relieving a congested constraint, because $300/MWh might act as an incentive that would “lead … to a cascade of RMRs,” according to one board member.

Read full article at Platts