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NRG Energy filed an alternative proposal to the Texas PUC stating that ERCOT could alternatively procure day-ahead demand response from retail electric providers (REPs).

NRG suggested that, in place of ERS, ERCOT could develop day-ahead demand response products tailored to different groups in the retail market; specifically, (1) large non-residential customers; (2) small and mid-sized non-residential customers or aggregations of these customers; and (3) aggregations of residential customers.

NRG proposed that ERCOT would establish for each DR product the desired amount of megawatts to be procured, as well as the characteristics for each product.

Under the alternative proposal, ERCOT would, on a daily basis, procure each product from REPs or other LSEs.

Prices would be set through clearing prices, “with no annual fixed dollar funding limit,” NRG suggested.

The products would be, “deployed by REPs or LSEs, not ERCOT, during scarcity events.” 

NRG explained that performance requirements could individually be developed in recognition of each customer group’s characteristics and to maximize participation. For example, residential aggregations would not be subject to telemetry requirements. 

NRG said that the day-ahead REP demand response products would, “target resource adequacy as their reliability goal[.]”

“While many details would need to be worked out, NRG offers this initial concept for the Commission to consider to significantly increase demand response participation in the retail market and better match the design of retail demand response products to the reliability needs of the ERCOT system.” 

Numerous parties, both REPs and other stakeholders, noted that determining the amount of A/S to be procured on a dynamic basis would present hedging challenges for retail electric providers (as the ultimate future exposure to A/S responsibility would be unknown), and could hinder the availability of fixed rate contracts in the retail market. Retail electric providers’ fixed price products would also have higher risk premiums under dynamic A/S determinations, several REPs said.

Several commenters suggested fixing a portion of the A/S requirement in advance, with additional quantities determined on a more dynamic basis.

Shell Energy North America said, “The final AS requirement quantity for procurement in Day Ahead Market (DAM), should be set at least five days before the DAM so that the market has the ability to adjust hedges as we approach extreme scenarios. If it is infeasible to finalize the amounts five days before DAM due to approaching extreme weather, then an estimate should be published a week ahead of DAM and the requirement should be finalized two days before DAM.”

“NRG would support a hybrid approach that combines the current annual [A/S] assessment with a dynamic refinement of AS amounts throughout the year. For example, ERCOT could post an indicative range of AS amounts annually (e.g., with expected minimum and maximum procurement amounts), and then adjust those amounts dynamically closer to real-time, within a preestablished bandwidth, as more accurate forecasts for the operating day enable a more refined assessment of the amount of AS needed to match expected grid conditions.”

“[D]ynamic ancillary service procurement can offer significant potential benefits to customers (and REPs) and should be pursued to the extent feasible, while reasonably managing risk to the retail market through notice and transparency.” 

In comments Calpine said “providing a ‘range’ of AS may disincentivize retail entities from hedging in advance of an operating period, since the quantity of AS may not be set. If an entity does not hedge, ERCOT collateral requirements should reflect this choice, so as not to expose other consumers to periods when more AS are procured at a potentially higher price.” 

View all comments here.

Calpine Comments (10/21/2024)
NRG Comments  (10/21/2024)
TIEC Comments (10/21/2024)
ERCOT’s Request For Approval

ERCOT’S Request For Approval Of 2025 ERCOT Methodologies For Determining Minimum Ancillary Service Requirements 

Project 55845 (Opened 01/19/2024)
Review Of Ancillary Services In The ERCOT Market