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NPRR385, Security Violation Analysis and Reporting and Negative Price Floor

This document discusses the procedural history and solutions for the issue of negative revenues and extreme negative pricing in the ERCOT market. It explores the implications and potential implementation of price floors in DAM and Real-Time pricing.

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NPRR385, Security Violation Analysis and Reporting and Negative Price Floor

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  1. NPRR385, Security Violation Analysis and Reporting and Negative Price Floor WMS Meeting February 15, 2012

  2. Negative Revenue by Resource thru Sept

  3. Negative Revenue by Resource thru Sept

  4. Negative Revenue by Resource thru Sept

  5. Negative Revenue by Resource thru Sept

  6. Negative Revenue by Resource thru Sept

  7. Negative Revenue by Resource thru Sept

  8. Negative Revenue by Month thru Dec 10, 2011

  9. DAM SPPs lower than $- 250

  10. NPRR385 Procedural History • Submitted by Luminant, June, 2011 • Approved unanimously by PRS on 7/21/11 as amended by the 6/21/11 Luminant comments which removed the price floor for DAM • At the 8/18/11 meeting, PRS reviewed the 8/11/11 ERCOT comments. • ERCOT proposed separating the reporting portions of NPRR385 from the negative price floor concept • Expressed concern about changing only the SPP while leaving the SCED Base Point and 5 minute LMPs unchanged • Concern about lessening the incentives for Generation Resources to comply with economic dispatch orders in Real Time • Concern about the disconnect between DAM and RT SPPs • At the 8/18/11 meeting, PRS unanimously voted to table NPRR385 • At the 9/22/11 meeting, PRS unanimously voted to table NPRR385 • ERCOT 10/12/11 comments removed the constraint reporting from the NPRR385, no changes to the negative price floor proposal

  11. Procedural History – continued • At the 10/12/11 meeting, WMS unanimously voted to recommend that PRS table NPRR385 to allow further discussion • At the 10/13/11 meeting, ROS voted to recommend that PRS table NPRR385 to allow further discussion • At the November, 2011 meetings NPRR385 was recommended to table by ROS and WMS • At the 12/7/11 meeting, WMS reviewed NPRR385 and noted to instruct QMWG to create a list of constraints for which modifications to the Shadow Price caps are needed and to bring this list to WMS • At the 12/2/11 meeting, QMWG discussed the reasons and possible solutions to the extreme negative prices at Resource Nodes. ERCOT staff agreed to look at possible systems solutions to identifying which shadow prices to limit • At the 1/6/12 meeting, QMWG reviewed the system and operational options presented by ERCOT and agreed to have a special meeting to discuss the topic • QMWG special meeting, 2/6/12 – Identified list of issues and possible solutions. Brought this list to QMWG on 2/8/12.

  12. Extreme Negative Pricing Triggers • Resources asked to stay online at LSL by ERCOT for reliability at negative price. • Resources with insufficient ramp to resolve constraint in a single SCED run experience negative prices much lower than their offers: • Planned Transmission Outages - topology change; • Forced Transmission Outages - topology change; and • Delayed active management of violated constraints.

  13. Solutions Discussed • When Resources are requested to stay online at negative prices, ERCOT can issue manual overrides which settle as Emergency Base Points on the Resource offer curve. • LMPs / SPPs still distorted. Protects Resources but distorts market incentives? Increased uplift. • Pre-positioning of Resources prior to Planned Outages by Resource limit overrides or constraint limit adjustment. • Precise Planned Outages? Using constraint limit adjustment only advisable if done systematically. Does not address effect of Forced Outages or delayed active management. • Maximum Shadow price set for specific export constraints. • Identification with changing topology? Daily? Each SCED Run? Does not address Forced Outages or delayed active management.

  14. Solutions Discussed • Make-whole for specific Resources. • Make-whole to EOC? MOC? $0 or $-250? • Make-whole during negative pricing periods or across entire day? Real-Time? DAM? PTP Obligations? CRRs? Trades? • Partially protects Resources but distorts market incentives? • Floor prices in DAM SPPs and Real-Time LMPs at Resource Nodes (affects SPP & HUB price calculations). • Floor prices in DAM and Real Time? CRR impacts? • All transactions settled using SPPs as calculated using floor prices when necessary. • Maintains proper market incentives.

  15. What’s next? • ERCOT looked but did not identify any areas of concern between CRR Auction and DAM Pricing. • ERCOT Operations pre-positioning policy in place. Some automated pre-positioning benefit expected from la~SCED. Concerns over timing reported in Transmission Outages. • Should Bid Floors be considered? Under another NPRR? • Impact analysis: • Implementing price floors at DAM SPP, Real-Time LMP and HUB price calculations? • Price corrections for floor prices at the end of the day? • Settlement implements floor prices? • Any changes required for CRR Auction? CRR Results?

  16. WMS Recommendation • Recommend Approval to PRS as amended by WMS 20120215. • WMS changes…. • Price floors implementation consideration: • when DAM and RT Prices determined and published. • when DAM prices are determined and published; RT prices corrected immediately following the operating day. • Floor Pricing impacts enforced in Settlement. • Phased approach using b) or c) until a) is implemented.

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