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ERCOT PROGRESS REPORT

ERCOT PROGRESS REPORT. Board of Directors Austin, Texas October 15, 2002. Votes. Mediated Settlement with Frontera/APX Bylaws and Board Procedures Amendments Protocol Revisions (and Appeal) Budget Approval Foreign Corporate Guarantee. Updates . Frontera Settlement Retail Transactions

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ERCOT PROGRESS REPORT

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  1. ERCOT PROGRESS REPORT Board of Directors Austin, Texas October 15, 2002

  2. Votes • Mediated Settlement with Frontera/APX • Bylaws and Board Procedures Amendments • Protocol Revisions (and Appeal) • Budget Approval • Foreign Corporate Guarantee

  3. Updates • Frontera Settlement • Retail Transactions • Other Activities • Retail Mechanics (Monte Jones) • Reliability and grid operations (Sam Jones)

  4. Frontera/APX • Protocols were not totally clear in certain situations -- as a result: • Frontera expected to be paid as bid (OOMC) • Even though there was no “market solution” • ERCOT contends that protocol’s intent was to cover variable costs plus a premium (10%) • Frontera requested ADR to resolve issues

  5. Frontera/APX (Cont’d) • Unique circumstances existed: • ERCOT’s reliability needs (OOMC) were the primary reason for starting up the plant (92% of the time) over five months • Third party revenues were derived from ERCOT’s commitments, not the reverse • The plant had economic value to the merchant market, beyond ERCOT’s needs

  6. Frontera/APX (Cont’d) • Based on these factors, ERCOT offered an alternative approach: • Variable costs would be paid by ERCOT • Third party revenues would be shared in the same proportion as the ratio of variable to total costs • No fixed costs or premium would be allowed • Frontera would retain 100% of OOME payments

  7. Frontera/APX (Cont’d) • A settlement agreement is proposed: • That is fair to Frontera and to the ERCOT market • That covers six months of (past) operations, and • That identifies the need for future protocol changes that reflect these unique circumstances • Thereby establishing a context for future market discussions regarding reliability service

  8. Retail Transactions • Total transactions now exceed 2.5 million • Sample data indicate that success rate is improving rapidly • 814 transactions were within protocols >95% of the time • 867 transactions were even better • ETS will enable 100% sample evaluation

  9. Transactions

  10. Other Activities • Taylor dedication scheduled to coincide with November Board meeting • January Board meeting will be a retreat • ISO CEOs to meet in Austin on October 24th and 25th • Disaster Recovery project proceeding well

  11. Disaster Recovery Goals • Provide continued transaction processing in the event of site disaster • Ensure “high availability” of critical applications in event of system failure • Allow for data (disk storage) capacity growth • Isolate application development and testing

  12. 2002 2003 Disaster Recovery Milestones 8-02 12-02 4-03 9-02 10-02 11-02 1-03 2-03 3-03 5-03 6-03 7-03 Order/Install EMC#2 Equipment Migrate – Blue Building to Taylor Data Center Select Fiber Type & Vendor Negotiate Network Terms & Conditions Order Network Implement Network Identify New / Upgrade Servers Purchase & Install Servers Relocate EMC#1 From Taylor To Met Center Disaster Recovery Taylor to Austin Go-Live

  13. Grid Operations and Reliability • Seven RMR contracts signed with AEP • Congestion reductions via new or improved transmission will reduce RMR demands • None of Reliant’s tendered plants are needed through 12/31/02 • Additional RMR discussions are pending

  14. Conclusions • Steady progress continues • Feld Group continues to match current staff capabilities with expanding requirements • Generation and transmission planning are receiving increased emphasis in order to maintain reliability in an increasingly dynamic market

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