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ERCOT
– 2010 – Preparing for the
Nodal Market Structure
By Tom Allen, Director, Government
and Regulatory Affairs, GDF SUEZ NA
Finalizing the Market Structure:
The Future is Here
We’ve
come a long way since 2002, when the competitive retail market
opened in Texas and enabled customer choice for over 6.5 million
consumers in ERCOT. And it’s now been almost seven years of
progress since September 2003, when the PUCT ordered ERCOT to
develop a nodal market structure for increased system
efficiencies.
The idea was simple: To provide Texas
consumers in the competitive electricity market the best
delivery system possible so consumers would have more choices in
products and prices while reducing costly congestion on the
transmission system and improving system reliability. The idea
of 2003 is becoming a reality today.
Milestones
April 1,
2010, was a milestone in the preparation for a new energy future
in Texas as nodal day-ahead market trials began. With less than
230 days remaining until the “go live” date for nodal, over 256
market participants out of 276 – representing 99.9 percent of
ERCOT generation – have qualified for the market trials, and the
integrated trials with full functionality are scheduled to begin
May 1.
And in an effort to optimize the nodal structure and
provide retail consumers the ability to make informed decisions
about their own energy usage, new metering technologies are
being researched, tested and deployed. ONCOR and CenterPoint
Energy have now installed over 1.13 million of their planned 6
million Advanced Metering Systems (AMS) to retail consumers in
their respective service territories.
Leadership
The
seven-year development of the nodal market design has had some
expected political and regulatory challenges and debates. Given
the complexity and magnitude of technical issues, it takes
strong leadership to get the job done. ERCOT’s 2009 addition of
a no-nonsense Senior Vice President and Chief Technical Officer
sent a signal to the legislature and market participants that
nodal will be “on-line and on time.” And Chairman Barry T.
Smitherman’s recent announcement that he will remain at the
pro-competition, pro-consumer PUCT and not seek the new ERCOT
CEO position should add a sense of regulatory certainty to the
implementation of the nodal market design.
Considering where
regulators, elected officials, consumers and stakeholders began
in 2003, we have now successfully run 95 yards on the 100-yard
dash to nodal. In other words, we are almost there.
Challenges Remain - 8 Months to Nodal
Retail and wholesale
market Issues will continue to be argued in the stakeholder
process at ERCOT and in rulemaking before the PUCT. Ongoing
debates before policymakers will focus on matters surrounding
wind integration, the design of new ancillary services, resource
adequacy, non-wind renewable technology carve-outs for
technologies and, most importantly, who pays for it all. It is
likely that more issues will be added to the regulatory policy
mix, too.
On a political note, beginning in May 2010, the
Texas Sunset Advisory Commission, a 12-member body of elected
officials from the Texas legislature, will hold hearings on the
effectiveness of both ERCOT and the PUCT. Given earlier debates
about the costs and benefits of nodal, this scheduled review of
state agencies and entities (each reviewed every 12 years) will
certainly increase public awareness during the summer,
attracting media attention to the ongoing transition to a
successful nodal market.
A Better Energy Future
But Texas
consumers, stakeholders, policymakers and regulators need to
stay on course. Few can argue with the benefits that the
competitive electricity market has provided consumers in terms
of the breadth of choice, pricing options and attracting new
investment and innovative technologies for the future.
Since
1998, the Texas competitive electricity market has brought over
$40 billion in new generation technologies and reduced air
emissions, thereby making Texas cleaner through increased
efficiencies. Vigorous competition has led a to robust retail
market; now, over 29 different providers offer more than 138
different rate plans for consumers. And according to the Annual
Baseline Assessment of Choice in Canada and the United States
(ABACCUS), Texas has ranked No. 1 in commercial/industrial
retail markets for the past two years and No. 1 in residential
market design for the past three years.
The hard work and
preparation is paying off, and consumers will continue to see
benefits from a competitive electricity market with a more
efficient nodal design.
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