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RULE §25.503Oversight of Wholesale Market Participants

(a) Purpose. The purpose of this section is to establish the standards that the commission will apply in monitoring the activities of entities participating in the wholesale electricity markets, including markets administered by the Electric Reliability Council of Texas (ERCOT), and enforcing the Public Utility Regulatory Act (PURA) and ERCOT procedures relating to wholesale markets. The standards contained in this rule are necessary to:

  (1) protect customers from unfair, misleading, and deceptive practices in the wholesale markets, including ERCOT-administered markets;

  (2) ensure that ancillary services necessary to facilitate the reliable transmission of electric energy are available at reasonable prices;

  (3) afford customers safe, reliable, and reasonably priced electricity;

  (4) ensure that all wholesale market participants observe all scheduling, operating, reliability, and settlement policies, rules, guidelines, and procedures established in the ERCOT procedures;

  (5) clarify prohibited activities in the wholesale markets, including ERCOT-administered markets;

  (6) monitor and mitigate market power as authorized by the Public Utility Regulatory Act (PURA) §39.157(a) and prevent market power abuses;

  (7) clarify the standards and criteria the commission will use when reviewing wholesale market activities;

  (8) clarify the remedies for non-compliance with the Protocols relating to wholesale markets; and

  (9) prescribe ERCOT's role in enforcing ERCOT procedures relating to the reliability of the regional electric network and accounting for the production and delivery among generators and all other market participants and monitoring and obtaining compliance with operating standards within the ERCOT regional network.

(b) Application. This section applies to all market entities, as defined in subsection (c) of this section.

(c) Definitions. The following words and terms when used in this section have the following meaning, unless the context indicates otherwise:

  (1) Artificial congestion--Congestion created when multiple foreseeable options exist for scheduling, dispatching, or operating a resource, and a market participant chooses an option that is not the most economical, that foreseeably creates or exacerbates transmission congestion, and that results in the market participant being paid to relieve the congestion it caused.

  (2) Efficient operation of the market--Operation of the markets administered by ERCOT, consistent with reliability standards, that is characterized by the fullest use of competitive auctions to procure ancillary services, minimal cost socialization, and the most economical utilization of resources, subject to necessary operational and other constraints.

  (3) ERCOT procedures--Documents that contain the scheduling, operating, planning, reliability, and settlement procedures, standards, and criteria that are public and in effect in the ERCOT power region, including the ERCOT Protocols, ERCOT Operating Guides, and Other Binding Documents as amended from time to time but excluding ERCOT's internal administrative procedures. The Protocols generally govern when there are inconsistencies between the Protocols and the Operating Guides, except when ERCOT staff, consistent with subsection (i) of this section, determines that a provision contained in the Operating Guides is technically superior for the efficient and reliable operation of the electric network.

  (4) Excess Revenue--Revenue in excess of the revenue that would have occurred absent a violation of PURA §39.157 or this section.

  (5) Market entity--Any person or entity participating in the ERCOT-administered wholesale market, including, but not limited to, a load serving entity (including a municipally owned utility and an electric cooperative,) a power marketer, a transmission and distribution utility, a power generation company, a qualifying facility, an exempt wholesale generator, ERCOT, and any entity conducting planning, scheduling, or operating activities on behalf of, or controlling the activities of, such market entities.

  (6) Market participant--A market entity other than ERCOT.

  (7) Reliability Monitor--A person or entity selected by the commission to monitor compliance with all state reliability-related laws, rules, and ERCOT procedures including protocols, processes and any other operating standards applicable to the ERCOT Region.

  (8) Resource--Facilities capable of providing electrical energy or load capable of reducing or increasing the need for electrical energy or providing short-term reserves into the ERCOT system. This includes generation and load resources.

(d) Standards and criteria for enforcement of ERCOT procedures and PURA. The commission will monitor the activities of market entities to determine if such activities are consistent with ERCOT procedures; whether they constitute market power abuses or are unfair, misleading, or deceptive practices affecting customers; and whether they are consistent with the proper accounting for the production and delivery of electricity among generators and other market participants. When reviewing the activities of a market entity, the commission will consider whether the activity was conducted in a manner that:

  (1) adversely affected customers in a material way through the use of unfair, misleading, or deceptive practices;

  (2) materially reduced the competitiveness of the market, including whether the activity unfairly impacted other market participants in a way that restricts competition;

  (3) disregarded its effect on the reliability of the ERCOT electric system; or

  (4) interfered with the efficient operation of the market.

(e) Guiding ethical standards. Each market participant is expected to:

  (1) observe all applicable laws and rules;

  (2) schedule, bid, and operate its resources in a manner consistent with ERCOT procedures to support the efficient and reliable operation of the ERCOT electric system; and

  (3) not engage in activities and transactions that create artificial congestion or artificial supply shortages, artificially inflate revenues or volumes, or manipulate the market or market prices in any way.

(f) Duties of market entities.

  (1) Each market participant must be knowledgeable about ERCOT procedures.

  (2) A market participant must comply with ERCOT procedures and any official interpretation of the Protocols issued by ERCOT or the commission.

    (A) If a market participant disagrees with any provision of the Protocols or any official interpretation of the Protocols, it may seek an amendment of the Protocols as provided for in the Protocols, appeal an ERCOT official interpretation to the commission, or both.

    (B) A market participant appealing an official interpretation of the Protocols or seeking an amendment to the Protocols must comply with the Protocols unless and until the interpretation is officially changed or the amendment is officially adopted.

    (C) A market participant may be excused from compliance with ERCOT instructions or Protocol requirements only if such non-compliance is due to communication or equipment failure beyond the reasonable control of the market participant; if compliance would jeopardize public health and safety or the reliability of the ERCOT transmission grid, or create risk of bodily harm or damage to the equipment; if compliance would be inconsistent with facility licensing, environmental, or legal requirements; if required by applicable law; or for other good cause. A market participant is excused under this subparagraph only for so long as the condition continues.

  (3) Whenever the Protocols require that a market participant make its "best effort" or a "good faith effort" to meet a requirement, or similar language, the market participant must act in accordance with the requirement unless:

    (A) it is not technically possible to do so;

    (B) doing so would jeopardize public health and safety or the reliability of the ERCOT transmission grid, or would create a risk of bodily harm or damage to the equipment;

    (C) doing so would be inconsistent with facility licensing, environmental, or legal requirements; or

    (D) other good cause exists for excusing the requirement.

  (4) When a market participant is not able to comply with a Protocol requirement or official interpretation of a requirement, or honor a formal commitment to ERCOT, the market participant has an obligation to notify ERCOT immediately upon learning of such constraints and to notify ERCOT when the problem ceases. A market participant who does not comply with a Protocol requirement or official interpretation of a requirement, or honor a formal commitment to ERCOT, has the burden to demonstrate, in any commission proceeding in which the failure to comply is raised, why it cannot comply with the Protocol requirement or official interpretation of the requirement, or honor the commitment.

  (5) The commission staff may request information from a market participant concerning a notification of failure to comply with a Protocol requirement or official interpretation of a requirement, or honor a formal commitment to ERCOT. The market participant must provide a response that is detailed and reasonably complete, explaining the circumstances surrounding the alleged failure, and must provide documents and other materials relating to such alleged failure to comply. The response must be submitted to the commission staff within five business days of a written request for information, unless commission staff agrees to an extension.

  (6) A market participant's bids of energy and ancillary services must be from resources that are available and capable of performing, and must be feasible within the limits of the operating characteristics indicated in the resource plan, as defined in the Protocols, and consistent with the applicable ramp rate, as specified in the Protocols.

  (7) All statements, data and information provided by a market participant to market publications and publishers of surveys and market indices for the computation of an industry price index must be true, accurate, reasonably complete, and must be consistent with the market participant's activities, subject to generally accepted standards of confidentiality and industry standards. Market participants must exercise due diligence to prevent the release of materially inaccurate or misleading information.

  (8) A market entity has an obligation to provide accurate and factual information and must not submit false or misleading information, or omit material information, in any communication with ERCOT or with the commission. Market entities must exercise due diligence to ensure adherence to this provision throughout the entity.

  (9) A market participant must comply with all reporting requirements governing the availability and maintenance of a generating unit or transmission facility, including outage scheduling reporting requirements. A market participant must immediately notify ERCOT when capacity changes or resource limitations occur that materially affect the availability of a unit or facility, the anticipated operation of its resources, or the ability to comply with ERCOT dispatch instructions.

  (10) A market participant must comply with requests for information or data by ERCOT as specified by the Protocols or ERCOT instructions within the time specified by ERCOT instructions, or such other time agreed to by ERCOT and the market participant.

  (11) When a Protocol provision or its applicability is unclear, or when a situation arises that is not contemplated under the Protocols, a market entity seeking clarification of the Protocols must use the Nodal Protocol Revision Request (NPRR) process provided in the Protocols. If the NPRR process is impractical or inappropriate under the circumstances, the market entity may use the process for requesting formal Protocol clarifications or interpretations described in subsection (i) of this section. This provision is not intended to discourage day to day informal communication between market participants and ERCOT staff.

  (12) A market participant operating in the ERCOT markets or a member of the ERCOT staff who identifies a provision in the ERCOT procedures that produces an outcome inconsistent with the efficient and reliable operation of the ERCOT-administered markets must call the provision to the attention of ERCOT staff and the appropriate ERCOT subcommittee. All market participants must cooperate with the ERCOT subcommittees, ERCOT staff, and the commission staff to develop Protocols that are clear and consistent.

  (13) A market participant must establish and document internal procedures that instruct its affected personnel on how to implement ERCOT procedures according to the standards delineated in this section. Each market participant must establish clear lines of accountability for its market practices.

(g) Prohibited activities. Any act or practice of a market participant that materially and adversely affects the reliability of the regional electric network or the proper accounting for the production and delivery of electricity among market participants is considered a "prohibited activity." The term "prohibited activity" in this subsection excludes acts or practices expressly allowed by the Protocols or by official interpretations of the Protocols and acts or practices conducted in compliance with express directions from ERCOT or commission rule or order or other legal authority. The term Cont'd...

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