Pivotal Supplier Test

1
Pivotal Supplier Test

• Staff Strawman Proposal for ERCOT UBES Market
• Background Presentation for Technical Workshop
• August 3, 2005

2
Significant points

• Tests generation-controlling entities, not QSEs
• Only tests spinning and quick-start capacity
• Tests 12-month period

3
Basic steps

• Count the number of intervals a generation entity
  was pivotal
• Total UBES offers entitys imputed UBES offer
• Pivotal if result is less than UBES actually
  deployed
• Compare number of pivotal intervals to threshold

4
Imputed UBES offers

• Calculate entitys excess spinning capacity for
  each hour
• Identify available units (committed, quick-start)
• Find maximum MW (HSL) planned MW for each unit
  sum up for all available units
• Multiply excess spinning capacity by common
  adjustment factor
• System UBES offers / System excess spinning
  capacity

5
Threshold

• Test sample quantities for pivotal frequency,
  look at trend
• Re-stablished each 12-month test period
• Deterministic, based on
• Observed market data
• Formula and standard statistical method

6
Threshold test quantities

• Calculate average offer stack
• Use 21 equal increments, ranging from 0 to 100
  of average stack
• Test each quantity against data for each interval
  during 12-month period
• Total offers test MW MW deployed?
• Count number of intervals test quantity was
  pivotal

7
Pivotal frequency curve
8
Find the trend line

• Apply single-variable linear regression to the 21
  data points
• of pivotal intervals ?0 ?1 MW
• Find the x intercept (in MW)

9
Find the threshold

• Test the MW associated with x-intercept against
  data for each interval during 12-month period
• Number of intervals this quantity was pivotal is
  the threshold for the test period

10
Compliance with 25.503(g)(7)

• Optional automatic calculation of UBES offers for
  an entity failing the PST

11
Outcomes

• Preferred outcome entity with market power has a
  neutral effect on competitive prices
• Acceptable outcome entity with market power
  submits UBES offers at short-run marginal cost

12
Automatic offers

• Quantity all excess spinning capacity (net of AS
  obligations)
• Price curve proportionally the same as the
  competitive market

13
Automatic offers

• Effect is to enlarge the competitive offer stack
• Avoids price distortions that would result if
  entity with market power were simply required to
  be a price taker
• Considered not to be withholding of UBES (ex ante
  safe harbor)

14
Original UBES offer stack
15
Parsed offer stack
16
Revised pivotal offer
17
New UBES offer stack