Power companies, analysts see 'poor outcome' coming from ERCOT rule change

As Texas prepares for a long stretch of triple-digit temperatures, the Electric Reliability Council of Texas board of directors is feeling heat for an outage scheduling rule approved on April 28 despite protests from stakeholders.

Neil McAndrews, an energy market consultant who lives in Austin, told S&P Global Commodity Insights that he was disappointed but not surprised the board endorsed the staff recommendation. McAndrews predicted it will lead to higher costs, increased uncertainty and more forced outages.

“A small understanding of the issues often results in a poor outcome,” McAndrews said. “The ERCOT BOD did not understand that the command-and-control limits proposed by ERCOT flies in the face of aging generation units with increasing failure rates. They voted for limiting planned outages to some abstract number that is theoretical and not based on the risk in the supply of generation.”

He calls it “government intervention at its most meddlesome.”

The ERCOT board of directors approved NPRR 1108, “ERCOT Shall Approve or Deny All Resource Outage Requests.”

Previously, generation outage requests submitted within 45 days or less of the actual outage required ERCOT approval. NPRR 1108 will now require all requests to be approved regardless of timeline, making planned outages more restrictive.

NRG Retail and Generation director of communications Pat Hammond referred questions about ERCOT’s move to Michele Richmond, executive director for Texas Competitive Power Advocates, the trade association that represents independent generators and power marketers in ERCOT, said ERCOT’s announcement has been a concern for its members.

NRG, based in Houston, is focused on energy generation and retail electricity by using natural gas generation, coal generation, oil generation, nuclear generation, wind generation, utility scale generation and distributed solar generation. It has 6 million retail customers in 24 U.S. states, including Texas, Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Jersey, New York, Pennsylvania and Ohio, as well as the District of Columbia and eight provinces in Canada.

“TCPA has filed comments in the PUC proceeding related to this new policy,” Hammond said.

TCPA includes 11 companies representing more than 52,000 megawatts of generating capacity in ERCOT and approximately 90% of the non-wind generation.

“While we are awaiting a decision from the ERCOT board on the methodology that will ultimately be used to determine how many outages will be allowed, the lack of any floor in allowed outages continues to raise concerns for generators,” Richmond told Houston Daily. “Stakeholders made recommendations to improve the methodology and that will be presented to the board along with the methodology recommended by ERCOT staff.”

She said there is legitimate reason for apprehension, since the ERCOT fleet, particularly the thermal dispatchable resources, is being run harder and more frequently than ever before. That increases the need for planned outages and accelerates the triggering of manufacturer-required maintenance.

With near-record heat forecast for the rest of June, and the always simmering summer ahead, ERCOT said Friday it expects to sufficient generation to meet demand. 

University of Houston Energy Fellow Ed Hirs said he is not convinced, in part because the grid operator undercounts the total number of consumers in the state.

“Since 2010, the Texas economy has grown from 1.25 trillion to 1.99 trillion last year,” Hirs told KXXV-TV. “The amount of natural gas, coal, and nuclear generation on the ERCOT grid has actually shrunk during that time.”