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RULE §25.503Oversight of Wholesale Market Participants

"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

  (3) Providing expert advice, analysis, reports, and testimony services relating to the Reliability Monitor's analysis and findings as part of the commission staff's case in enforcement proceedings.

(l) Selection of the Reliability Monitor. The commission may select an entity to act as the Reliability Monitor. If the commission selects an entity other than ERCOT to act as the Reliability Monitor, the Reliability Monitor must be independent from ERCOT and is not subject to the supervision of ERCOT with respect to its monitoring and investigative activities. If the commission selects an entity other than ERCOT to act as the Reliability Monitor, the commission and ERCOT will enter into a contract with the selected entity. In selecting the Reliability Monitor, the commission must consider whether the Reliability Monitor satisfies the following criteria:

  (1) Independence, objectivity, and the absence of potential conflicts of interest;

  (2) Experience performing compliance monitoring of reliability-related laws;

  (3) Familiarity with the ERCOT Region and understanding of reliability-related ERCOT protocols, procedures, and other operating standards;

  (4) Ability to manage confidential information appropriately; and

  (5) Cost effectiveness.

(m) Funding of the Reliability Monitor. ERCOT must fund the operations of the Reliability Monitor from the fee authorized by PURA §39.151.

(n) Standards for record keeping.

  (1) A market participant who schedules through a qualified scheduling entity (QSE) that submits schedules to ERCOT on behalf of more than one market participants must maintain records to show scheduling, offer, and bidding information for all schedules, offers, and bids that its QSE has submitted to ERCOT on its behalf, by interval.

  (2) All market participants and ERCOT must maintain records relative to market participants' activities in the ERCOT-administered markets to show:

    (A) information on transactions, as defined in §25.93(c)(3) of this title (relating to Quarterly Wholesale Electricity Transaction Reports), including the date, type of transaction, amount of transaction, and entities involved;

    (B) information and documentation of all planned, maintenance, and forced generation and transmission outages including all documentation necessary to document the reason for the outage;

    (C) information described under this subsection including transaction information, information on pricing, settlement information, and other information that would be relevant to an investigation under this section, and that has been disclosed to market publications and publishers of surveys and price indices, including the date, information disclosed, and the name of the employees involved in providing the information as well as the publisher to whom it was provided; and

    (D) reports of the market participant's financial information given to external parties, including the date, financial results reported, and the party to whom financial information was reported, if applicable.

  (3) After the effective date of this section, all records referred to in this subsection except verbal dispatch instructions (VDIs) must be kept for a minimum of three years from the date of the event. ERCOT must keep VDI records for a minimum of two years. All records must be made available to the commission for inspection upon request.

  (4) A market participant must, upon request from the commission, provide the information referred to in this subsection to the commission, and may, if applicable, provide it under a confidentiality agreement or protective order pursuant to §22.71(d) of this title (relating to Filing of Pleadings, Documents, and Other Material).

(o) Investigation. The commission staff may initiate an informal fact-finding review based on a complaint or upon its own initiative to obtain information regarding facts, conditions, practices, or matters that it may find necessary or proper to ascertain in order to evaluate whether any market entity has violated any provision of this section.

  (1) The commission staff will contact the market entity whose activities are in question to provide the market entity an opportunity to explain its activities. The commission staff may require the market entity to provide information reasonably necessary for the purposes described in this subsection.

  (2) If the market entity asserts that the information requested by commission staff is confidential, the information must be provided to commission staff as confidential information related to settlement negotiations or other asserted bases for confidentiality pursuant to §22.71(d)(4) of this title.


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