Approved Aug, 29 by commissioners, the new standard is intended to give the agency better visibility going forward on the ERCOT system’s reliability needs and could open the door to future reforms.
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As per a legislative mandate, the Texas Public Utility Commission has created a reliability standard for the ERCOT region that considers frequency, duration and magnitude of potential outages.
Approved Aug, 29 by commissioners, the new standard is intended to give the agency better visibility going forward on the ERCOT system’s reliability needs and could open the door to future reforms. “As we enhance our grid to support the future of Texas, it’s critical we clearly define the standard at which we expect the market and system to operate,” said PUC Chairman Thomas Gleeson.
Under the commission’s action, the ERCOT grid will need to meet three criteria to remain in compliance with the reliability standard:
- Frequency – In the ERCOT region, a grid outage resulting from inadequate power supply to meet demand must be expected to occur no more than once per ten years on average.
- Duration – A potential grid outage resulting from inadequate power supply must be expected to last less than 12 hours.
- Magnitude – The amount of electricity lost during any hour of a potential outage resulting from inadequate power supply must be expected to be less than the amount of electricity that can be safely rotated during an outage.
The rule also establishes a process to regularly assess ERCOT reliability. Under it, ERCOT must conduct a probability-based assessment every three years to determine whether the power system is meeting the reliability standard and whether it is expected to continue meeting it. If ERCOT determines the system is failing the standard, the organization must then make recommendations to the PUC to correct deficiencies and that outlines the potential cost of those corrections. ERCOT’s independent market monitor also must conduct an independent review of the deficiencies and agency staff must provide their own recommendations.
The PUC would then review ERCOT’s assessment, the IMM’s review, commission staff recommendations and public comments to determine whether any market design changes may be necessary. The process is set to begin in January 2025.
Senate Bill 3, as passed by the 87th Texas Legislature, calls for the adoption of the reliability standard.
VALUE OF LOST LOAD
Commissioners on Aug. 29 also approved a new “Value of Lost Load,” which is a regulatory estimate of the value of electric reliability to consumers. ERCOT deploys the Value of Lost Load in is algorithms as part of its technical market operations.
Using results from a survey of consumers in the ERCOT region and an ERCOT analysis, the PUC’s commissioners approved a VOLL of $35,000 per megawatt-hour. As recently as 2022, the VOLL was set at $5,000 per mWh, according to a 2023 IMM report. All else equal, a higher VOLL increases overall ERCOT market costs.
More information related to the development of the reliability standard is available in PUC Docket No. 54584. More information related to the VOLL is available in PUC Docket No. 55837.