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Excerpts from Staff Memo:
{***} During the August 15, 2024, open meeting, Commission Staff (Staff) provided a verbal update about the ongoing Value of Lost Load (VOLL) study for the ERCOT region and committed to filing a memo discussing the results of the VOLL survey and any resulting recommendations ahead of the August 29, 2024, open meeting. ERCOT recently filed the final VOLL study, which included a report on the results of the survey of consumers in the ERCOT region (Report) conducted by ERCOT’ s contractor, The Brattle Group (Brattle), and survey administrator subcontractor, Plan Beyond. 1 This memo provides Staff’s recommendations related to adoption of a VOLL for use in planning studies and the upcoming Performance Credit Mechanism cost-benefit analysis. {***}

Staff Recommendation
{***} Based on the results of the survey of consumers in the ERCOT region and other estimates described in this memo, Staff recommends that VOLL be set at $30,000 per MWh. The VOLL estimate of $35,685 per MWh described in the Report suggests that the interim VOLL of $25,000 per MWh may understate the true VOLL for the ERCOT region. As such, Staff finds this analysis supports an increase from the previously approved interim value. However, based on Staff’ s review of the Report, Brattle’ s estimate of the ERCOT-wide VOLL may overstate the true value because the VOLL estimate of $666,907 per MWh for Small C&I consumers is at the high end of the distribution of estimates from similar studies. Since the ERCOT-wide VOLL estimate is calculated as a load-share weighted average of the individual consumer class estimates, over-estimation of any one class will drive up the ERCOT-wide VOLL estimate. The Report states that the 95% confidence interval for the ERCOT-wide VOLL estimate ranges from approximately $25,000 to $53,000 per MWh. Given Staff’ s opinion that VOLL is likely over-estimated for Small C&I consumers, which in turn drives up the ERCOT-wide VOLL estimate, Staff recommends the Commission take a more conservative approach and select a value on the lower end of this range. Finally, Staff reiterates that this updated VOLL will be used only for the purpose of cost benefit analyses in ERCOT planning models. It will not be used to update the ORDC or change any other current market design elements. {***}

On the same day, ERCOT in a filing with the Texas PUC recommends that the value of lost load, for purposes of planning activities including the reliability standard, be set at ~$35,000 per MWh, which reflects an average across the ERCOT market for a 1-hour outage duration.

ERCOT’s recommendation is based on a VOLL study and report from Brattle which is included with ERCOT’s filing.

The VOLL study, which included surveys of customers, reports that, by customer class, the 1-hour VOLL is about $4,000 per MWh for residential customers, $667,000 per MWh for small C&I customers, and $23,000 per MWh for medium/large C&I customers.

An interim VOLL of $25,000 had been set by the PUC pending completion of the study.

Staff Recommendation Memo on VOLL  (08/22/2024)
ERCOT Value Of Lost Load Study Final Report – Pages 1-100  (08/22/2024)
ERCOT Value Of Lost Load Study Final Report – Pages 101-102  (08/22/2024)
Project 55837  (11/15/2023)
Review Of Value Of Lost Load In The ERCOT Market