Suggested Solution to the PUC's Concerns Regarding Local Congestion

In a memo from Parvis Adib dated Oct. 31 (copy attached), the PUC describes
a serious concern on the part of the Commission regarding market abuse
through relieving Local Congestion under the current Protocols. John Meyer
has asked me to draft a suggested solution to this concern. I am
recommending the following solution and believe it should be very easy to
implement.

THE PROBLEM: Gaming whereby an entity deliberately and chronically places
itself in a situation to create local congestion in order to profit from
instructions to decrement its energy deliveries.

The current language states that when a resource is instructed to
decrement its energy deliveries and a Market Solution does not exist the
resource's QSE will pay the minimum of the MCPE for that zone or 0. The
trouble with this approach is that if the MCPE is negative the QSE is
rewarded for having a resource causing local congestion. If the situation
persisted over time this could encourage inefficient generation to be built
on the same area so that it can profit by having its output reduced or even
turned off.

Note that this would only happen in a situation where the local congestion
is located within a zone that is also susceptible to CSC congestion as well
and the QSEs in such a zone are decremented most of the time which leads to
high incidence of negative MCPE for the zone. This does not appear likely
but could occur if a zone is relatively small; i.e., dominated by QSEs that
are few in number and that consistently overschedule across a CSC zone with
the anticipation that they will always be instructed to decrement energy in
real time.

RECOMMENDED SOLUTION :

Do not compensate or charge a resource that is instructed to decrement its
energy deliveries by ERCOT when a Market Solution does not exist in
relieving local congestion. However, the resource must obey the
instruction in order to maintain system reliability.

Please give me your comments on this solution concept before Dec. 1. I am
recommending that we add this as an item to vote on at the RUG meeting
scheduled for Dec. 6. I will also draft the recommended language changes
(very minor) to sections 6 and 7 and distribute it prior to the meeting.

Manny

(See attached file: Adib103100)

(See attached file: stoft-game.pdf)

(See attached file: stoft-intra-zonal.pdf)

- Adib103100
- stoft-game.pdf
- stoft-intra-zonal.pdf