"prohibited activity" includes, but is not limited to, the following
acts and practices that have been found to cause prices that are not
reflective of competitive market forces or to adversely affect the
reliability of the electric network:
(1) A market participant must not schedule, operate,
or dispatch its generating units in a way that creates artificial
congestion.
(2) A market participant must not execute pre-arranged
offsetting trades of the same product among the same parties, or through
third party arrangements, which involve no economic risk and no material
net change in beneficial ownership.
(3) A market participant must not offer reliability
products to the market that cannot or will not be provided if selected.
(4) A market participant must not conduct trades that
result in a misrepresentation of the financial condition of the organization.
(5) A market participant must not engage in fraudulent
behavior related to its participation in the wholesale market.
(6) A market participant must not collude with other
market participants to manipulate the price or supply of power, allocate
territories, customers or products, or otherwise unlawfully restrain
competition. This provision should be interpreted in accordance with
federal and state antitrust statutes and judicially-developed standards
under such statutes regarding collusion.
(7) A market participant must not engage in market
power abuse. Withholding of production, whether economic withholding
or physical withholding, by a market participant who has market power,
constitutes an abuse of market power.
(h) Defenses. The term "prohibited activity" in subsection
(g) of this section excludes acts or practices that would otherwise
be included, if the market entity establishes that its conduct served
a legitimate business purpose consistent with prices set by competitive
market forces; and that it did not know, and could not reasonably
anticipate, that its actions would inflate prices, adversely affect
the reliability of the regional electric network, or adversely affect
the proper accounting for the production and delivery of electricity;
or, if applicable, that it exercised due diligence to prevent the
excluded act or practice. The defenses established in this subsection
may also be asserted in instances in which a market participant is
alleged to have violated subsection (f) of this section. A market
entity claiming an exclusion or defense under this subsection, or
any other type of affirmative defense, has the burden of proof to
establish all of the elements of such exclusion or defense.
(i) Official interpretations and clarifications regarding
the Protocols. A market entity seeking an interpretation or clarification
of the Protocols must use the NPRR process contained in the Protocols
whenever possible. If an interpretation or clarification is needed
to address an unforeseen situation and there is not sufficient time
to submit the issue to the NPRR process, a market entity may seek
an official Protocol interpretation or clarification from ERCOT in
accordance with this subsection.
(1) ERCOT must develop a process for formally addressing
requests for clarification of the Protocols submitted by market participants
or issuing official interpretations regarding the application of Protocol
provisions and requirements. ERCOT must respond to the requestor within
ten business days of ERCOT's receipt of the request for interpretation
or clarification with either an official Protocol interpretation or
a recommendation that the requestor take the request through the NPRR
process.
(2) ERCOT must designate one or more ERCOT officials
who will be authorized to receive requests for clarification from,
and issue responses to market participants, and to issue official
interpretations on behalf of ERCOT regarding the application of Protocol
provisions and requirements.
(3) The designated ERCOT official must provide a copy
of the clarification request to commission staff upon receipt. The
ERCOT official must consult with ERCOT operational or legal staff
as appropriate and with commission staff before issuing an official
Protocol clarification or interpretation.
(4) The designated ERCOT official may decide, in consultation
with the commission staff, that the language for which a clarification
is requested is ambiguous or for other reason beyond ERCOT's ability
to clarify, in which case the ERCOT official shall inform the requestor,
who may take the request through the NPRR process provided for in
the Protocols.
(5) All official Protocol clarifications or interpretations
that ERCOT issues in response to a market participant's formal request
or upon ERCOT's own initiative must be sent out in a market bulletin
with the appropriate effective date specified to inform all market
participants, and a copy of the clarification or interpretation must
be maintained in a manner that is accessible to market participants.
Such response must not contain information that would identify the
requesting market participant.
(6) A market participant may freely communicate informally
with ERCOT employees, however, the opinion of an individual ERCOT
staff member not issued as an official interpretation of ERCOT pursuant
to this subsection may not be relied upon as an affirmative defense
by a market participant.
(j) Role of ERCOT in enforcing operating standards.
ERCOT must monitor material occurrences of non-compliance with ERCOT
procedures, which means occurrences that have the potential to impede
ERCOT operations or represent a risk to system reliability. Non-compliance
indicators monitored by ERCOT must include, but are not limited to,
material occurrences of failing resource performance measures as established
by ERCOT, failure to follow dispatch instructions within the required
time, failure to meet ancillary services obligations, failure to submit
mandatory bids or offers, and other instances of non-compliance of
a similar magnitude.
(1) ERCOT must keep a record of all such material occurrences
of non-compliance with ERCOT procedures and must develop a system
for tracking recurrence of such material occurrences of non-compliance.
(2) ERCOT must promptly provide information to and
respond to questions from market participants to allow the market
participant to understand and respond to alleged material occurrences
of non-compliance with ERCOT procedures. However, this requirement
does not relieve the market participant's operator from responding
to the ERCOT operator's instruction in a timely manner and shall not
be interpreted as allowing the market participant's operator to argue
with the ERCOT operator as to the need for compliance.
(3) ERCOT must keep a record of the resolution of such
material occurrences of non-compliance and of remedial actions taken
by the market participant in each instance.
(4) ERCOT must promptly provide information to and
respond to questions posed by the Reliability Monitor and the commission.
(5) ERCOT must provide to the Reliability Monitor and
the commission the support and cooperation the commission determines
is necessary for the Reliability Monitor and the commission to perform
their functions.
(6) If directed by the commission, ERCOT must assume
all or part of the duties and responsibilities of the Reliability
Monitor under subsection (k) of this section. ERCOT must assume these
duties and responsibilities, including establishing appropriate safeguards
to prevent conflicts of interest and ensure the independence and objectivity
of ERCOT personnel with respect to the duties and responsibilities
assumed, in the manner prescribed by the commission.
(k) Responsibilities of the Reliability Monitor. The
Reliability Monitor must gather and analyze information and data as
needed for its reliability monitoring activities. The Reliability
Monitor works under the direction and supervision of the commission.
The Reliability Monitor must protect confidential information and
data in accordance with the confidentiality standards established
in PURA, the ERCOT protocols, commission rules, and other applicable
laws. The requirements related to the level of protection to be afforded
information protected by these laws and rules are incorporated into
this section. The duties and responsibilities of the Reliability Monitor
may include, but are not limited to:
(1) Monitoring, investigating, auditing, and reporting
to the commission regarding compliance with reliability-related ERCOT
procedures, including Protocols, Operating Guides, and Other Binding
Documents, the reliability-related provisions of the commission's
rules, and reliability-related provisions of PURA by market entities;
(2) Providing reliability-related subject-matter advice,
expertise, and assistance to the commission in the conduct of the
commission's oversight and enforcement activities; and
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