Wholesale Market Rule Monitoring and Enforcement by the Public Utility Commission of Texas

1. Wholesale Market Rule Monitoring and Enforcementby the Public Utility Commission of Texas Danielle Jaussaud PUCT Wholesale Market Oversight March 23, 2005

2. PURA Authority • ERCOT direct enforcement authority: PURA section 39.151(d) requires ERCOT to establish and enforce procedures, subject to Commission rules and oversight, relating to reliability and market accounting. • Commission authority: PURA Chapters 35 and 39 allow the Commission to regulate various aspects of the wholesale and retail markets and to oversee ERCOT’s activities and fees. • Commission may delegate authority to ERCOT to enforce operating standards: PURA section 39.151(i).

3. Monitoring and Enforcement actors • ERCOT Compliance acts as monitor and enforcement authority over Market Participants’ activities with respect to Protocol and Op. Guides requirements • The Commission has authority to monitor and enforce compliance with PURA and Commission Rules as well as Protocol requirements

4. Commission Authority • The Commission authority extends over: • Protocol requirements, including activities that have a reliability impact as well as activities that have a market impact • Commission rule requirements • Statutory requirements

5. Commission Compliance Actors • The Commission’s Wholesale Market Oversight Department (WMO) and the Commission’s Legal and Enforcement Division (LED) together act as market monitor and determine whether a formal enforcement action should be implemented

6. Commission and ERCOT Coordination • Commission Staff endeavor to work in cooperation with ERCOT Compliance whenever a market rule violation has occurred that potentially affects grid reliability

7. How this cooperation works • Information sharing • If an incident involving a potential Protocol violation is not resolved at Operator level, and an incident report is issued, ERCOT Compliance informs Commission Staff • MP’s response to ERCOT is also shared with Commission Staff

8. Commission Enforcement Action • If MP’s response and Remedial Action Plan (RAP) are sufficient to address ERCOT Compliance’s reliability concerns, Commission Staff may still recommend enforcement action if: • A market rule has been violated • A statute or Commission rule has been violated • Reliability impact is addressed but market impact is not

9. Commission Enforcement Action • The Commission Staff may implement a formal enforcement action if: • ERCOT Compliance cannot resolve issue through an adequate and timely RAP • Efforts at informal resolution have not been successful • Immediate action is needed to prevent or remedy a Protocol violation or Commission rule violation

10. Commission Rules • MPs should be aware of the following Commission Rules: • SR section 25.503: Oversight of Wholesale Market Participants • SR sections 25.272, 25.273: Affiliate Code of Conduct

11. Things to Remember Under SR 25.503: • Ignorance of a market rule is not a defense. MPs must be familiar with and abide by all market rules • If a rule is open to interpretation, the safe way is to seek a clarification through a Protocol Revision Request or through a Request for Clarification submitted to ERCOT. Self serving interpretations may not protect you from an investigation

12. Things to Remember • Insufficient training of MP’s personnel is not a defense. MPs must be able to show that they have exercised due diligence • In order to establish a defense, MP’s must be able to show that the act was unintentional and that the impact of their action was not forseeable • Any act or practice that materially and adversely affects reliability or the market may trigger an investigation into potential market manipulation

13. Questions?