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“By December 2026, the Commission must evaluate and report to the legislature on aspects of the cost allocation of ancillary and reliability services in the ERCOT power region. 1 As part of this evaluation, ERCOT must use data to compare the current method of allocating costs of ancillary and reliability services to certain alternative cost allocation methods with input from the Technical Advisory Committee (TAC). Ultimately, the Commission must examine the net savings to consumers of the different cost allocation methods following certain parameters laid out in the statute. This memorandum initiates the Commission’ s project to fulfill the statutory requirements.”

“PURA identifies one methodology for allocating ancillary and reliability services costs among electric generating facilities and load-serving entities that the Commission must consider for use as a baseline. The Commission may also identify other allocation methodologies for use as a baseline in addition to or in lieu of the method described in PURA. Once the Commission has chosen the method(s) to be studied, ERCOT will analyze whether the methodologies would result in net savings to consumers compared with the current cost allocation methodology in which all costs are allocated to load-serving entities.”

“Before filing the scope and roadmap for this project, Commission Staff requests responses to the following questions for public comment. Please frame all responses assuming that ERCOT has implemented Real-Time Co-optimization plus Batteries (RTC+B).”

“Staff seeks comments in response to the following questions: 

1) PURA § 39.1593(a) states that the Commission shall direct ERCOT to compare different cost allocation methods to determine if a new method would “result in a net savings to consumers in the ERCOT power region compared to allocating all costs of ancillary and reliability services to load to ensure reliability.” 

1. When evaluating net savings to consumers, if ancillary service (AS) and reliability service costs are allocated to generators, how should the evaluation estimate downstream impacts on bilateral Power Purchase Agreements (PPAs) given that PPA details are often confidential? 
2. When evaluating net savings to consumers, if AS and reliability service costs are allocated to generators, how should the evaluation estimate downstream impacts on AS or energy offers in day-ahead or real-time? 
3. How would energy prices likely be affected by allocating costs to generators? 

2) PURA § 35.004(h) states that the Commission shall require ERCOT “to modify the design, procurement, and cost allocation of ancillary services for the region in a manner consistent with cost-causation principles and on a nondiscriminatory basis.” 

1. What should the Commission consider when assessing whether the design, procurement, and cost allocation of AS are each consistent with cost-causation principles? 
2. For purposes of cost-causation, should loads be classified into different groups? If so, how? 
3. What should the Commission consider when assessing whether the design, procurement, and cost allocation of AS are each non-discriminatory? 

3) PURA § 39.1593(b)(1) describes an alternative cost-allocation method the Commission must consider for use as a basis for comparison. This method would: allocate the cost of ancillary and reliability services . . . on a semiannual basis among electric generation facilities and load-serving entities in proportion to their contribution to unreliability during the times of highest reliability risk due to low operating reserves by season, as determined by the commission based on a number of hours adopted by the commission for that season[.I 

1. How do “the times of highest reliability risk due to low operating reserves” relate to the risks that AS are procured to mitigate? 
2. What, if any, credit issues would arise if costs were allocated on a semiannual basis?

4) PURA § 39.1593(b)(2) allows the Commission to choose “another method” for allocating AS and reliability service costs as a basis for comparison. a. What other methods for allocating AS and reliability service costs should the Commission consider? Please describe why the Commission should consider such methods, including why the methods should be considered in addition to or in lieu of the method detailed in PURA § 39.1593(b)(1) 

5) What “reliability services” should the Commission include in the evaluation? 

6) What additional issues related to the evaluation should the Commission consider as it defines the project to implement PURA § 39.1593? 

7) How should cost allocation and cost-causation be incorporated into the development and design of new ancillary and reliability services?”

Questions for Comment (09/03/2025)
Project 58555
(ERCOT ANCILLARY AND RELIABILITY SERVICES COST ALLOCATION STUDY PURSUANT TO PURA §39.1593)