| (a) Applicability. This section applies to all affiliated power generation companies (PGCs) as defined in this section in Texas. This section does not apply to electric utilities subject to the Public Utility Regulatory Act (PURA) §39.102(c) until the end of the utility's rate freeze. It is recognized that certain commission orders issued during 2001 have effectively delayed competition in the service territories of Southwestern Electric Power Company (SWEPCO) and Entergy Gulf States, Inc. (EGSI). This section shall apply to auctions conducted after 2001 by SWEPCO and/or EGSI only when competition is implemented in their respective service territories. (b) Purpose. The purpose of this section is to promote competitiveness in the wholesale market through increased availability of generation and increased liquidity by requiring electric utilities and their affiliated PGCs to sell at auction entitlements to at least 15% of the affiliated PGC's Texas jurisdictional installed generation capacity, describing the form of products required to be auctioned, prescribing the auction process, and prescribing a true- up procedure, in accordance with PURA §39.262(d)(2). (c) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context indicates otherwise: (1) Affiliated power generation company (PGC)--Any affiliated power generation company that is unbundled from the electric utility in accordance with PURA §39.051. (2) Assigned units--The PGC-specific generating units that form the block of capacity from which an entitlement is sold. (3) Auction start date--The date on which an auction begins. (4) Business day--Any day on which the affiliated PGC's corporate offices are open for business and that is not a banking holiday. (5) Capacity auction product--One of the following: "baseload", "gas-intermediate", "gas-cyclic", or "gas-peaking". Each capacity auction product is further described in subsections (f) and (g) of this section. (6) Close of business--5:00 p.m., central prevailing time. (7) Congestion zone--An area of the transmission network that is bounded by commercially significant transmission constraints or otherwise identified as a zone that is subject to transmission constraints, as defined by an independent organization. (8) Credit rating--A credit rating on an entity's senior unsecured debt, the entity's corporate credit rating, or the entity's issuer rating. (9) Daily gas price--The index posting for the date of flow in the Financial Times energy publication "Gas Daily" under the heading "Daily Price Survey" for East-Houston- Katy, Houston Ship Channel. For EGSI gas entitlements in the eastern congestion zone, the daily gas price will utilize the "Gas Daily" index posting for Henry Hub. For EGSI gas entitlements in the western congestion zone, the daily gas price will be an average of the "Gas Daily" index posting for East-Houston-Katy, Houston Ship Channel. (10) Day-ahead--The day preceding the operating day. (11) Entitlement or capacity entitlement--The right to purchase and receive, under the applicable capacity auction master agreement, a block of 25 megawatts (MW) of electrical capacity and energy from the assigned units for a specific capacity auction product for one calendar month. (12) Forced outage--An unplanned component failure or other condition that requires the unit be removed from service before the end of the next weekend. (13) Holder--A person or entity that has acquired ownership of an entitlement under the terms of the applicable capacity auction Master Agreement. (14) Installed generation capacity--All potentially marketable electric generation capacity owned by an affiliated PGC, including the capacity of: (A) Generating facilities that are connected with a transmission or distribution system; (B) Generating facilities used to generate electricity for consumption by the person owning or controlling the facility; and (C) Generating facilities that will be connected with a transmission or distribution system and operating within 12 months. (15) Master Agreement or Agreement--The applicable Capacity Auction EEI/NEMA Master Power Purchase & Sale Agreement. (16) Starts--Direction by the holder of an entitlement to dispatch a previously idle entitlement. (17) Texas jurisdictional installed generation capacity--The amount of an affiliated PGC's installed generation capacity properly allocable to the Texas jurisdiction. Such allocation shall be calculated pursuant to an existing commission-approved allocation study, or other such commission-approved methodology, and may be adjusted as approved by the commission to reflect the effects of divestiture or the installation of new generation facilities. (d) General requirements. Subject to the qualifications for auction entitlements and the auction process described in subsections (e) and (h) of this section, each affiliated PGC subject to this section shall sell at auction capacity entitlements equal to at least 15% of the affiliated PGC's Texas jurisdictional installed generation capacity. Divestiture of a portion of an affiliated PGC's Texas jurisdictional installed generation capacity will be counted toward satisfaction of the affiliated PGC's capacity auction requirement only if the divestiture is made pursuant to a commission order in a business combination proceeding pursuant to PURA §14.101, and after the transfer of the assets and operations to a third party. (e) Product types and characteristics. (1) Available entitlements and amounts. The following products, defined separately in subsection (f) of this section for Electric Reliability Council of Texas, Inc. (ERCOT) and in subsection (g) of this section for non-ERCOT areas, shall be auctioned as capacity entitlements under subsection (d) of this section. Upon showing of good cause by the affiliated PGC and approval by the commission, an affiliated PGC may propose to auction entitlements different from those described in this section, including unit-specific capacity. Each affiliated PGC shall auction an amount of each applicable product in proportion to the amount of Texas jurisdictional installed generating capacity on the affiliated PGC's system that are the respective type of generating units. An affiliated PGC that owns generation in multiple congestion zones shall auction entitlements for delivery in each congestion zone. The amount of each product auctioned in each zone shall be in proportion to the amount of the respective type of generating units located in that zone, but the total shall not be less than 15% of the affiliated PGC's Texas jurisdictional installed generation capacity. The available entitlements for the months of March, April, May, October, and November of each year may be reduced in proportion to the average annual planned outage rate for the group of generating units associated with each type of entitlement. Entitlements shall be for system capacity. (2) Forced outages. For any given congestion zone: (A) For all entitlements except those described in subparagraph (B) of this paragraph, if all units providing capacity to an entitlement product experience a forced outage or an emergency condition prevents or restricts the ability of an affiliated PGC to dispatch a particular entitlement product, the entitlements of that product may be reduced in proportion to the percentage reduction in capacity of the units assigned to that entitlement; provided that such reductions in availability of any single entitlement do not exceed 2.0% of the total monthly energy available from the entitlement. (B) For entitlements that are supported by two or fewer generating units, if one or more of the units providing capacity to an entitlement product experiences a forced outage or an emergency condition that prevents or restricts the ability of an affiliated PGC to dispatch a particular entitlement product, the entitlements of that product may be reduced in proportion to the percentage reduction in capacity of the units assigned to that entitlement; provided that such reductions in availability of any single entitlement do not exceed the most recent three-year rolling average of the forced outage rate for the unit(s) supporting the entitlement. The three-year rolling average of the forced outage rate applicable to entitlements under this subparagraph shall be included in the notice of capacity available for auction, under subsection (h)(2)(B)(ii)(II) of this section. (C) Notification of any such reductions will take place as soon as possible, but in any event, at least one hour prior to the hour-ahead scheduling period applicable to when the reduction is to take place. (3) Planned outage. The total MW reduction for planned outages is determined by calculating the average MW of monthly planned outage for the generating plants associated with a product over the previous three calendar years, multiplied by 12. The resulting planned outage hours are then rounded down to the nearest whole entitlement (25 MW block). These "outage entitlements" can then be removed from any of the five specified outage months (March, April, May, October, and November) in any combination. (4) Generation units offered. If an affiliated PGC changes the assignment of a power generation unit to one of the four available product entitlements (baseload, gas- intermediate, gas-cyclic, or gas-peaking), then the affiliated PGC shall file with the commission the proposed changes in its assignment of each of its power generation units to one of the four available product entitlements and the resulting amount of each type of entitlement to be auctioned. As part of this filing, the affiliated PGC shall provide planned outage histories for the years 1998, 1999, and 2000 for each generating unit to be used to calculate the average annual planned outage rate for each group of generating units. Interested parties shall have 30 days in which to provide comments on the affiliated PGC's proposed changed assignments. If no comments are received, the affiliated PGC's proposed assignment shall be deemed appropriate. If any party objects to the affiliated PGC's proposed assignments, then the commission shall determine the appropriate assignment considering the manner in which the affiliated PGC expects to use such generation units. (5) Obligations of affiliated PGC. The affiliated PGC shall dispatch entitlements only as directed by the holder of the entitlement in accordance with the applicable product description. The affiliated PGC may not refuse to dispatch the entitlement and may not curtail the dispatch of an entitlement unless expressly authorized by this section or by the applicable Master Agreement, or unless directed to do so by the independent organization in order to alleviate a system emergency. The affiliated PGC shall specify in its notice provided pursuant to subsection (h)(2)(B) of this section the point on the transmission system where energy from each entitlement is delivered to the entitlement holder. (6) Entitlement holder receives no possessory interest or obligations. (A) No possessory interest. The entitlements sold at auction shall include no possessory interest in the unit or units from which the power is produced. (B) No possessory obligations. The entitlements sold at auction shall include no obligation of a possessory owner of an interest in the unit or units from which the power is produced. (C) Scheduling. The entitlement holder shall have the right to designate the dispatch of the entitlement, subject to other provisions of this subsection and the scheduling limitations provided for in the applicable Agreement. (7) Credit requirements. (A) Standards. Entities submitting bids and all entitlement holders shall satisfy one of the following credit standards: (i) The entity holds an investment grade credit rating (BBB- or Baa3 from Standard and Poor's or Moody's respectively or an equivalent); (ii) The entity provides an escrowed deposit equal to the capacity price for the shorter of the duration of the entitlement or three months plus the amount that would be paid to exercise the entitlement for the shorter of the duration of the entitlement or three months at the assumed dispatch provided in either subsection (h)(6)(A)(iii) or subsection (h)(6)(C)(vi) of this section; (iii) The entity provides a letter of credit or surety bond equal to the capacity price for the shorter of the duration of the entitlement or three months plus the amount that would be paid to exercise the entitlement for the shorter of the duration of the entitlement or three-months at the assumed dispatch provided in either subsection (h)(6)(A)(iii) or subsection (h)(6)(C)(vi) of this section, irrevocable for the duration of the entitlement; (iv) The entity provides a guaranty from another entity with an investment grade credit rating; or (v) The entity makes other suitable arrangements with the affiliated PGC, provided that the affiliated PGC makes such arrangements available on a non-discriminatory basis. (B) Unsecured credit. To be eligible for unsecured credit, entities submitting bids shall satisfy the criteria in either clause (i), (ii), or (iii) of this subparagraph, with the amount of unsecured credit to be provided to such entities to be determined as follows: Cont'd... |
