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RMR Task Force

RMR Task Force. Decision Points for ERCOT Technical Advisory Committee April 3, 2003. Six Issues to be Resolved. Criteria/Process RMR Categories Compensation Level Cost Allocation Transmission Planning Process Economic Trade-Offs. Process.

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RMR Task Force

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  1. RMR Task Force Decision Points for ERCOT Technical Advisory Committee April 3, 2003

  2. Six Issues to be Resolved • Criteria/Process • RMR Categories • Compensation Level • Cost Allocation • Transmission Planning Process • Economic Trade-Offs

  3. Process • RMR TF provided options for the six concerns to PRS • PRS reviewed and made recommendations • TAC considers PRS recommendations and decides on high level options for the open issues (Decision Points) • TAC decisions guide language finalization • PRR returns for TAC/BOD approval in May

  4. Decision Point • Criteria/Process • Allows for multi-year contracts if significant capital expenditures required • CCGTs treated as a single unit unless separate operation possible • Qualification for RMR Applicant • Applicant attestation that resource is uneconomic to remain in service • Unavailable at least 180 days

  5. Decision Point • Criteria/Process • Treatment of RMR Applicant • Non-selected applicant prohibited from future use unless reinstated during suspension period • ERCOT not accept schedules or bids during suspension period • ERCOT may reinstate under certain circumstances • Owner may petition PUC for reinstatement

  6. Decision Point • Criteria/Process • RMR Replacement Options • ERCOT to report on cost-effective replacement options 90 days after execution • If a cost-effective replacement option exists, ERCOT will establish an implementation timeline

  7. PRS Recommendation • Non-selected RMR applicant would not be prohibited from operating in the market after ERCOT rejects the application • Fits with the “Cost Plus” methodology • Accept other provisions

  8. Decision Point • RMR Categories • Short-term RMR Need (180 days during off-peak season only) • Annual RMR Need

  9. PRS Recommendation • Accept both seasonal and annual RMR concepts and reflect in pricing

  10. Decision Point • Compensation Level Proposals – Short-Term Contract • Owner compensated for costs avoided by seasonal mothballing • Owner provides cost information to ERCOT

  11. Decision Point • Compensation Level Proposals – Annual Contract • Proxy Price • Uses existing structure with lower payment components (Standby Price at 55% of SCGT; Change in fuel heat rate calculation)

  12. Decision Point • Compensation Level Proposals • “Cost Plus” • Initial monthly payments based on estimate of eligible costs then adjusted to actual • 10% Incentive Factor applied to non-fuel eligible costs • Eligible Costs include labor, materials and supplies to operate the unit • Eligible Costs do not include return on equity, G&A, allocated general plant, taxes, interest expense, etc. • Fuel also based on estimate of cost with true-up • Eliminates start-up payment

  13. PRS Recommendation • Adopt short-term pricing at cost • Adopt “cost plus” methodology

  14. Decision Points • Cost Allocation • Options Available • Proposal to allocate local congestion costs, including RMR, on a more local basis • Continue ERCOT-wide uplift of all congestion costs, except for CSC congestion

  15. PRS Recommendation • RMR TF not to address the cost allocation issue

  16. Resolved Issue • Transmission Planning Process • Reviewed the developing ERCOT transmission planning process • Provided input concerning openness and communication • Reported to TAC • ERCOT already implementing with announcement of transmission planning meetings

  17. Issue Being Addressed • Economic Trade-Offs • Reviewed RMR/OOM Pricing • Goal is to align incentives between market and OOM/RMR • RMR should not be an economic alternative to OOM or the market • ERCOT should not have an incentive to overly rely on RMR • RMR TF concluded OOMC needs to be addressed • Evaluating proposals

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