Thread by @douglewinenergy

The final @PUCTX meeting of 2021 is tmrw & Cmsrs may make some decisions on market redesign that could add billions in customer costs. The previous🧵summarized proposed Phase 1 changes. This one focuses on the items in Phase 2 & summarizes comments
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interchange.puc.texas.gov/search/documen…

https://twitter.com/douglewinenergy/status/1469469726250311681

There are 3 major proposals in the Phase II Market Design Proposals section:
- Load Serving Entity Obligation (LSEO)
-Dispatchable Energy Credits (DECs) (aka Dispatchable Portfolio Standard)
-Backstop Reliability Service (BRS)

I'll explain each below
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The Load Serving Entity Obligation would require each retail electric provider (REP, e.g. TXU, Reliant, etc), municipal utility, & co-op (any entity that serves customers) to purchase capacity ahead of when it will be delivered. This is essentially a form of a capacity market

Capacity markets are more expensive than markets like Texas' & don't necessarily increase reliaibility. We had LOTS of capacity during the outages but most of that capacity either couldn't get fuel, froze, or both.
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utilitydive.com/news/californi…

It's important to note that a capacity vs. energy only market is not a binary choice. There are capacity products in the ERCOT market and capacity markets contain energy markets, too. It's more like a dial and we're almost certainly going to procure more capacity in ERCOT...

...but that does not mean we have to abandon the energy only market & the lower prices it brings. An alternative to the LSEO is a Dispatchable Portfolio Standard & Dispatchable Energy Credits. Modeled on the Renewable Portfolio Standard, this proposal was put fwd by Cmsr McAdams.

The DEC system would require load serving entities to buy either (1) new thermal generation or (2) storage with a minimum of 2 hours deployment. Lots of commenters had concerns with this but it garnered far more support than the LSEO.
More details here:
interchange.puc.texas.gov/Documents/5237…

Worth stopping here and saying we don't know yet with any certainty what any of these would cost. All of these proposals need more analysis (there has been no transparent analysis at all). The ballpark estimates we have from Brattle Group put LSEO well over a billion annually.

The most support for Phase 2 items from commenters was for Backstop Reliability Service. Orginally Cmsr Cobos' idea (Strategic Reserve Service), now it's BRS. This would provide capacity payments to old power plants that would be available in emergencies.
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Power plants in the program would likely get capacity payment + $5000MWh if called. I think this will be adopted soon, if not Thursday, but key question remains: what size should it be? Commenters varied widely. If it's 5+GW, it will be very expensive.
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If the Railroad Cmsn creates a strong winterization standard, the BRS could be small. If gas supply is not winterized, it's likely the BRS would have to be very large. Customers would pay for reliability instead of the oil & gas industry that made $11b in one week #txenergy

I'll add on to this thread later to highlight some of the comments. If you are a commenter in the docket, please reply to this with a brief summary and I'll retweet it.
Docket is here: interchange.puc.texas.gov/search/filings…
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PUCT Open Meeting is tomorrow at 9:30CT. A lot on the agenda so don't know when they'll get to market redesign (it's item 28 on the agenda below) but i'll tweet about it when they do.

Agenda and stream here: adminmonitor.com/tx/puct/open_m…
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