1,876 Pages: Texas’s ISO Rules (central planning, mother-may-I system)

For each of the next six years, ERCOT shall develop models for annual planning purposes that contain, as much as practicable, information consistent with the Network Operations Model…. ERCOT shall develop models for Congestion Revenue Right (CRR) Auctions that contain, as much as practicable, information consistent with the Network Operations Model.

In these Protocols, unless the context clearly otherwise requires:
(a) The singular includes the plural and vice versa; (b) The present tense includes the future tense, and the future tense includes the present tense; (c) Words importing any gender include the other gender; (d) The words “including,” “includes,” and “include” are deemed to be followed by the words “without limitation;” (e) The word “shall” denotes a duty; (f) The word “will” denotes a duty, unless the context denotes otherwise; (g) The word “must” denotes a condition precedent or subsequent; (h) The word “may” denotes a privilege or discretionary power; (i) The phrase “may not” denotes a prohibition….

From the general to the specific, the Independent System Operator (ISO) known as the Electric Reliability Council of Texas (ERCOT) is all about central planning. The legal entity controlling just about the entire state is far afield from private companies with their own control areas deciding the what-when-where-how much of power generation, purchases, transmission, distribution, and sales.

In a social media exchange with economist Vernon Smith (July 21), I asked: “… do you see RTOs/ISOs as free market?” He replied:

No. I would have tried a different structure in which the RTO/ISOs were a joint venture of the users operating under rules such as he who invests gets property in the capacity added by the investment….”

I then asked:

Are RTOs central planning entities subject to the Mises/Hayek/Lavoie critique of access, pricing, and service quality? Is the ‘knowledge problem’ and ‘fatal conceit’ a defining issue for RTOs/ISOs compared to a private sector, unregulated approach to power coordination?

His answer: “I don’t know.”

I answered:

The ‘ERCOT Nodal Protocols‘ document is 1,876 pages. I think there is a lot of central planning in here for Texas’s 26 million captive ISOers, even enough to get Hayek to have spilled his coffee.

(F. A. Hayek’s worldview, peculiarly, is being used to promote electricity planning as a necessary means for a competitive retail market.)

So what is in the ERCOT rulebook? How would the same be done under private business management in a free, entrepreneurial electricity industry? That question awaits analysis. But what is quoted below (in blue) smacks of one-size-fits-all central planning with the Texas Legislature and Public Utility Commission of Texas in charge, not the private sector.

ERCOT Planning Guide

The quotations atop this post indicate just how interventionism tries to anticipate and govern complexity. The classical liberal adage “simple rules for a complex world,” is long lost in the planners’ complex rules for a complex world.

The ERCOT Nodal Protocols–all 1,876 pages worth (as of April 2021)– will only enlarge as the Texas post-freeze reforms take shape. But here is a flavor of the regime from the first several hundred pages, beginning with purpose.

Functions of ERCOT

ERCOT is the Independent Organization certified by the Public Utility Commission of Texas (PUCT) for the ERCOT Region. The major functions of ERCOT, as the Independent Organization, are to:

(a) Ensure access to the ERCOT Transmission Grid and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms; (b) Ensure the reliability and adequacy of the ERCOT Transmission Grid; (c) Ensure that information relating to a Customer’s choice of Retail Electric Provider (REP) in Texas is conveyed in a timely manner to the persons who need that information; and (d) Ensure that electricity production and delivery are accurately accounted for among the Generation Resources and Settlement Only Generators (SOGs) and wholesale buyers and sellers, and Transmission Service Providers (TSPs) and Distribution Service Providers (DSPs), in the ERCOT Region.

(2) ERCOT is the Control Area Operator (CAO) for the ERCOT interconnection and performs all Control Area functions as defined in the Operating Guides and the North American Electric Reliability Corporation (NERC) policies.
(3) ERCOT procures Ancillary Services to ensure the reliability of the ERCOT System.

(4) ERCOT is the central counterparty for all transactions settled by ERCOT pursuant to these Protocols and is deemed to be the sole buyer to each seller, and the sole seller to each buyer, of all energy, Ancillary Services, Reliability Unit Commitments (RUCs), Emergency Response Service (ERS), and other products or services for which ERCOT may pay or charge a Market Participant, except for those products or services procured
through bilateral transactions between Market Participants and those products or services that are self-arranged by Market Participants.
(5) ERCOT is the PUCT-appointed Program Administrator of the Renewable Energy Credits (RECs) Program.
(6) These Protocols are intended to implement the above-described functions. In the exercise of its sole discretion under these Protocols, ERCOT shall act in a reasonable, nondiscriminatory manner.
(7) Nothing in these Protocols may be construed as causing TSPs, DSPs, or Resources to transfer any control of their Facilities to ERCOT.

(8) ERCOT may not profit financially from its activities as the Independent Organization in the ERCOT Region. ERCOT may not use its discretion in the procurement of Ancillary Service capacity or deployment of energy to influence, set or control prices.
(9) Notwithstanding any other provision in these Protocols, ERCOT shall take any action, and shall direct any Market Participant to take any action, that ERCOT deems necessary to ensure that any Entity in the ERCOT Region that is not a “public utility” as defined in the Federal Power Act (FPA), including ERCOT, does not become such a public utility.
ERCOT’s authority includes, but is not limited to, the authority to order the disconnection of any Transmission Facilities connecting the ERCOT Region to another Control Area and the authority to deny or curtail Electronic Tags (e-Tags) over any Direct Current Tie (DC Tie). A Market Participant shall comply with any ERCOT directive provided under this section. ERCOT shall provide notice of any action pursuant to this provision by posting an operations message to the ERCOT website and issuing a Market Notice.

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Interconnection of New or Existing Generation
(1) Interconnection of new Generation Resources or Settlement Only Generators (SOGs) to the ERCOT Transmission Grid must be in accordance with the Protocols, the Planning Guide, the Nodal Operating Guide and Other Binding Documents. For existing Generation Resources and SOGs which connect to a new Point of Interconnection (POI) or which utilize more than one POI to the ERCOT Transmission Grid, any Protocol or Other Binding Document requirements applicable to Generation Resources and SOGs which are based upon the execution date of the Standard Generation Interconnection Agreement (SGIA) shall be applied to the date of the first executed SGIA with the following exceptions:

(a) For a new POI, existing Generation Resources and Settlement Only Transmission Self-Generators (SOTSGs) shall comply with the requirements in Section 3.15, Voltage Support, and Nodal Operating Guide Section 2.9, Voltage Ride-Through Requirements for Generation Resources, based upon the execution date of the most recent SGIA.
(b) For more than one POI, existing Generation Resources and SOTSGs shall comply with the requirements in Section 3.15 and Nodal Operating Guide Section 2.9 based upon the execution date of the SGIA relative to the POI where the Generation Resource is electrically connected.

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Good Utility Practice
Any of the practices, methods, and acts engaged in, or approved by, a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods, and acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method, or act, to the exclusion of all others, but rather is intended to include acceptable practices, methods, and acts generally accepted in the region. (p. 113)

3.1 Outage Coordination
3.1.1 Role of ERCOT
(1) …. ERCOT may reject an Outage schedule under certain circumstances, as set forth in these Protocols.
(2) ERCOT’s responsibilities with respect to Outage Coordination include:
(a) Approving or rejecting requests for Planned Outages and Maintenance Outages of Transmission Facilities for Transmission Service Providers (TSPs) in coordination with and based on information regarding all Entities’ Planned Outages and Maintenance Outages; (b) Assessing the adequacy of available Resources, based on planned and known Resource Outages, relative to forecasts of Load, Ancillary Service requirements, and reserve requirements; (c) Coordinating and approving or rejecting schedules for Planned Outages of Resources scheduled to occur within 45 days after request;

Each TSP shall provide to ERCOT a plan for Planned Outages, Maintenance Outages and Rescheduled Outages in an ERCOT-provided format for the next 12 months updated monthly. Planned Outage, Maintenance Outage, and Rescheduled Outage scheduling data for Transmission Facilities must be kept current. Updates must identify all changes to any previously proposed Planned Outages, Maintenance Outages, or Rescheduled
Outages and any additional Planned Outages, Maintenance Outages, or Rescheduled Outages anticipated over the next 12 months. ERCOT shall coordinate in-depth reviews of the 12-month plan with each TSP at least twice per year. [3.1.3.1 (1), p. 195]

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(1) If ERCOT believes it cannot meet the applicable reliability standards and has exercised reasonable options, ERCOT may contact the TSP for more information prior to its withdrawal of the approval for a Planned Outage, Maintenance Outage, or Rescheduled Outage. ERCOT shall inform the affected TSP both orally and in written or electronic form as soon as ERCOT identifies a situation that may lead to the withdrawal of ERCOT’s approval. If ERCOT withdraws its approval, the TSP may submit a new request for approval of the Planned Outage or Maintenance Outage schedule provided the new request meets the submittal requirements for Outage Scheduling.

ERCOT shall evaluate requests, approve, or reject Transmission Facilities Planned Outages and Maintenance Outages according to the requirements of this section. ERCOT may approve Outage requests provided the Outage in combination with other proposed Outages does not cause a violation of applicable reliability standards. ERCOT shall reject Outage requests that do not meet the submittal timeline specified in Section 3.1.5.12, Submittal Timeline for Transmission Facility Outage Requests. ERCOT shall consider the following factors in its evaluation: [3.1.5.11, p. 209]

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If ERCOT believes it cannot meet applicable reliability standards and has exercised all other reasonable options, and the delayed initiation of, or early termination of, one or more approved or accepted Resource Outages not addressed by Section 3.1.4.6, Outage Coordination of Potential Transmission Emergency Conditions, could resolve the situation, then ERCOT shall issue an Advance Action Notice (AAN) pursuant to Section 6.5.9.3.1.1, Advance Action Notice.

If insufficient capacity to meet the need described in the AAN is made available through the processes described in paragraphs (2) and (3) above, ERCOT may contact QSEs having Resources with a Resource Status of OUT in the most recently submitted COP to determine if it is feasible for the Outage of those Resources to be ended by the time of the possible Emergency Condition described in the AAN. ERCOT may issue an OSA to the QSE for any Resource that the QSE agrees can feasibly be returned to service during the
period of the possible Emergency Condition described in the AAN.

ERCOT must perform a planning assessment to determine whether to issue an AAN or OSA. The planning assessment may not assume total renewable production lower than the sum of the selected Wind-powered Generation Resource Production Potential (WGRPP) and PhotoVoltaic Generation Resource Production Potential (PVGRPP) forecasts for each hour less any reasonably expected severe weather impacts. The available capacity in ERCOT’s planning assessment must include targeted reserve levels and include forecasted capacity available through DC Tie imports or curtailment of DC Tie exports, forecasted capacity provided from Settlement Only Distributed Generators (SODGs) and Settlement Only Transmission Generators (SOTGs), and forecasted capacity from price-responsive Demand based on information reported to ERCOT in accordance with Section 3.10.7.2.1, Reporting of Demand Response.

Opportunity Outages for Resources are a special category of Planned Outages that may be approved by ERCOT when a specific Resource has been forced Off-Line due to a Forced Outage and the Resource has been previously accepted for a Planned Outage during the next eight days.
(2) When a Forced Outage occurs on a Resource that has an accepted or approved Outage scheduled within the following eight days, the Resource may remain Off-Line and start the accepted or approved Outage earlier than scheduled. The QSE must give as much notice as practicable to ERCOT.
(3) Opportunity Outages of Transmission Facilities may be approved by ERCOT when a specific Resource is Off-Line due to a Forced, Planned or Maintenance Outage. A TSP may request an Opportunity Outage at any time.
(4) When an Outage occurs on a Resource that has an approved Transmission Facilities Opportunity Outage request on file, the TSP may start the approved Outage as soon as practical after receiving authorization to proceed by ERCOT. ERCOT must give as much notice as practicable to the TSP

Minimum ERCOT Planning Reserve Margin Criterion

The minimum ERCOT PRM criterion is approved by the ERCOT Board. ERCOT shall periodically review and recommend to the ERCOT Board any changes to the minimum ERCOT PRM to help ensure adequate reliability of the ERCOT System. ERCOT shall update the minimum PRM on the first day of the month following ERCOT Board approval unless otherwise directed by the ERCOT Board. ERCOT shall post the revised minimum PRM to the ERCOT website prior to implementation.

This is only a sampling of a vast set of prescriptions that are intended to get to the holy grail of retail competition when individual customers can sign up with commodity providers for their power. But central planning for freedom is an oxymoron, and the Texas ISO crash after years of depleting the reserve fund speaks for itself.

Much analysis remains to be done.