Changes to the Texas Electric Market to Improve Reliability

by Mike Moyer, Power Market Compliance Services Specialist

In February 2021, Texas experienced an unprecedented and historical eight-day period of winter weather, winter storm Uri. Most areas of the state saw 5 to 6 consecutive days of record temperatures as well as record snowfall. ERCOT experienced a 48.6% loss of peak generation during the time demand mirrored the profile of a hot summer day. Rotating outages began as ERCOT issued an EEA Level 3 alert. Reliability in the Texas market became a major issue addressed by the Governor and the Texas Legislature.

Over the past 12 months, the Public Utility Commission of Texas (PUCT) has worked alongside the Texas Legislature and the Electric Reliability Council of Texas (ERCOT) to improve the reliability of the electric market. The 87th Texas legislative session passed multiple bills to deal with energy-related issues encountered during winter storm Uri. The new legislation provided more directives to both, the PUCT and ERCOT.

Some of the changes that have come out of the new legislation include:

  • Expanding the number of PUCT commissioners from 3 to 5 members.
  • Raising the minimum amount of generation that would trigger the higher price offer cap to 3,000 MW from 2,300 and lowered the offer cap to $5,000 a MW/hour from $9,000.
  • Provides for a new faster frequency response ancillary service product.
  • Offers Emergency Response Services that could provide for payments to energy customers when shut down in a power emergency.
  • Municipal providers, Coops and Retail electric providers would be required to procure commitments for sufficient capacity to serve forecast peak load.
  • The new Chairman of the PUCT directed ERCOT to improve communication with PUCT staff and to work to identify more concise metrics needed to improve reliability.

These changes along with the requirement for the PUCT to provide Emergency Operating Plans and weather emergency preparedness surveys for Generators and Utilities to the state Lieutenant Governor, Speaker of the House and members of the legislature by September 30 of an even number year.

An entity must now file its first Emergency Operating Plan (EOP) under section 25.53 of the substantive rules applicable to electric service providers by April 15, 2022, to both the PUCT and ERCOT. Beginning in 2023, an entity must annually update its information in the EOP by March 15. An affidavit must be included from the highest-ranking officer with authority over the entity affirming the EOP. The required information in the EOP is outlined in the rule. This will be an ongoing requirement.

Under section 25.55, a generation entity must have completed the winter weather emergency preparation survey in the format provided by ERCOT by December 1, 2021. The survey was to be submitted to both the PUCT and ERCOT. During 2022, ERCOT will inspect generation entities that experienced an outage during the winter storm Uri. Transmission systems and facilities are included under this rule and will be inspected as well. This section also includes the annual winter/summer Declarations of Completion of Generation Resource Weatherization preparations. These are also signed off by the highest-ranking officer and will be an ongoing requirement.

These changes in the Texas electric markets have been initiated to help meet its long-term reliability needs without having to bring in power from outside the state and keeping rates cost efficient to the consumer. In the 2020 census, Texas added some 4 million people in the last 10 years. With this growing trend, the ERCOT market will have to continue to make changes to keep up with the increase in demand.