Wholesale Operations Assessment Year 1

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Wholesale Operations Assessment Year 1
Kent Saathoff GCPA Fall Conference October 2, 2002
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Wholesale Market Operations
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Transmission and Schedules in ERCOT

• Transmission
• ERCOT system is a common carrier for all
  wholesale transactions
• Not reserved for any particular transaction or
  schedule
• Paid for by Distribution Companies on a load
  ratio share basis
• Schedules
• Schedules from QSEs tell ERCOT what the market
  will do
• All schedules flow no curtailments
• Transmission congestion handled by redispatch
  (Balancing Energy, RMR and OOM deployment)

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Source of Operational Challenges

• System design had to be completed no later than
  August 1, 2000 to meet June 1, 2001 SB 7 schedule
  for start of pilot
• Protocols not finalized until November 2000 by
  stakeholders, March 2001 by PUCT
• ERCOT structure unlike any other (CAISO, PJM, New
  England, New York), particularly with retail
  responsibilities
• Overall Result Not all operating tools fully
  functional Numerous workarounds and PIPs

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Wholesale Operation Challenges

• Frequency Control did not meet NERC CPS 1 and CPS
  2 standards ERCOT unique paradigm
• Consultant found ERCOT system was reliable
• Obtained revised parameters for CPS1 and
  exemption from CPS 2 standards from NERC
• Transmission Congestion
• All tools not yet functional (state estimator,
  optimization)
• Over 250 million in congestion costs since July
  2001 no longer internalized
• Wind generation in west Texas
• New transmission has not kept up with new
  generation boom
• Now incorporating RMR units into operations

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Ongoing Market Redesign

• Over 200 Protocol changes since March 2001
  approval
• Address unforeseen consequences of Protocols in
  actual operation
• About half require system changes
• Direct assignment of congestion costs
• Zonal congestion costs direct assigned starting
  2/15/02
• Local (intrazonal) costs direct assignment in
  process
• LMP?
• Revisit Balanced Schedule Requirement
• Relaxed Balanced Schedules
• Unbalanced Schedules
• Creation of spot market/power exchange

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Wholesale Successes

• ERCOT has operated reliably since commencement of
  single control area operation on July 31, 2001
• There is no shortage of generating capacity in
  ERCOT
• Wholesale prices, both bilateral contracts and
  ERCOT procured Ancillary Services, have been
  reasonable
• Transmission is being built to address congestion
  issues

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Load Participation

• Over 400 MW providing Responsive Reserve
• Another 400 MW in registration/qualification
  process
• System changes to accommodate participation in
  Non-Spinning Reserve, Replacement Reserve and
  Balancing Energy in testing
• System changes to accommodate Balancing Up Load
  (BUL) in progress
• Market prices may not be at levels to encourage
  load participation

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Questions?