| (a) Definitions. The following terms, when used in
this section, have the following meanings, unless the context indicates
otherwise:
(1) Generation entity -- an entity that owns or controls
a generation resource.
(2) Generation resource -- a generator capable of providing
energy or ancillary services to the ERCOT grid and that is registered
with ERCOT as a generation resource.
(3) Load entity -- an entity that owns or controls
a load resource.
(4) Load resource -- a load capable of providing ancillary
service to the ERCOT system or energy in the form of demand response
and is registered with ERCOT as a load resource.
(5) Resource entity -- an entity that is a generation
entity or a load entity.
(b) Scarcity pricing mechanism (SPM). ERCOT will administer
the SPM. The SPM will operate as follows:
(1) The SPM will operate on a calendar year basis.
(2) For each day, the peaking operating cost (POC)
will be 10 times the natural gas price index value determined by ERCOT.
The POC is calculated in dollars per megawatt-hour (MWh).
(3) For the purpose of this section, the real-time
energy price (RTEP) will be measured as an average system-wide price
as determined by ERCOT.
(4) Beginning January 1 of each calendar year, the
peaker net margin will be calculated as: ∑((RTEP - POC) * (number
of minutes in a settlement interval / 60 minutes per hour)) for each
settlement interval when RTEP - POC >0.
(5) Each day, ERCOT will post at a publicly accessible
location on its website the updated value of the peaker net margin,
in dollars per megawatt (MW).
(6) System-Wide Offer Caps.
(A) The low system-wide offer cap (LCAP) will be set
at $2,000 per MWh and $2,000 per MW per hour.
(B) The high system-wide offer cap (HCAP) will be $5,000
per MWh and $5,000 per MW per hour.
(C) The system-wide offer cap will be set equal to
the HCAP at the beginning of each calendar year and maintained at
this level until the peaker net margin during a calendar year exceeds
a threshold of three times the cost of new entry of new generation
plants.
(D) If the peaker net margin exceeds the threshold
established in subparagraph (C) of this paragraph during a calendar
year, the system-wide offer cap will be set to the LCAP for the remainder
of that calendar year. In this event, ERCOT will continue to apply
the operating reserve demand curve and the reliability deployment
price adder for the remainder of that calendar year. Energy prices,
exclusive of congestion prices, will not exceed the LCAP plus $1 for
the remainder of that calendar year.
(7) Reimbursement for Operating Losses when the LCAP
is in Effect. When the system-wide offer cap is set to the LCAP, ERCOT
must reimburse resource entities for any actual marginal costs in
excess of the larger of the LCAP or the real-time energy price for
the resource. ERCOT must utilize existing settlement processes to
the extent possible to verify the resource entity's costs for reimbursement.
(c) Development and implementation. ERCOT must use
a stakeholder process, in consultation with commission staff, to develop
and implement rules that comply with this section. Nothing in this
section prevents the commission from taking actions necessary to protect
the public interest, including actions that are otherwise inconsistent
with the other provisions in this section.
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