The greatest benefits of time-of-use pricing come from avoided costs of peaking power and T&D capacity—but only if hourly retail prices accurately model the true costs of delivered energy,...
California's Transmission Takeover: Avoiding a Showdown at the FERC
Krajecki continues. "So to do that, they have to track each customer and who is serving them."
In the ERCOT plan, certainly is the key word. Under the yet-to-be tested customer registration system, which falls entirely under the jurisdiction of ERCOT, information on every single customer in the state, from load profiles to switching activity, will run through the ERCOT system. The utility will submit to ERCOT meter data for each individual customer, allowing the organization that historically has been known as a reliability council to determine how much load each supplier serves.
The Wholesale Side
Of course, electronic data transactions under restructuring are not limited to the retail side, and neither are ERCOT's activities. The council orchestrates wholesale activities as well, residing at the epicenter of the chaotic three-day window of spot purchases and sales, and playing the crucial role of balancing supply and demand at two-second intervals for a commodity that must be used as soon as it is produced.
"In that three-day window is when it really gets sort of intense," says Dave Nuttal, vice president, power systems, at Altra Energy Technologies, which has introduced a power transaction management system that interfaces with ERCOT. While the system handles long-term contracts as well, its peak period of use is during those crucial three days: the day before, the day of, and the day after (settlement time) the electricity is used.
Interestingly, while Texas has taken the centralized approach to customer data, its wholesale approach is closer in similarity to California's free market foray than it is to, say, the approach taken by PJM Interconnection. Under ERCOT's zonal pricing model, says Nuttal, prices change every 15 minutes. "It's almost like a sort of stock market, except it's 15-minute prices instead of just continuously changing prices," he says. By contrast, PJM's system is "more driven by a central decision making authority, which is PJM, who decide what generators are going to run at what levels.
"... There's a difference of philosophy. Can the market produce lower prices then some computer-based optimization [such as PJM uses]? That may be true, because if competition is effective, then the prices will tend to come down. If competition isn't effective, like in California, then the prices go up."
But don't be too quick to compare Texas with California, says Nuttal. "There's a huge distinction between California and ERCOT, and the difference is that in California, they were terribly short of in-state generation," he notes.
Could Centralization Spread?
For sure, both centralized and free market philosophies can be found in the wholesale realm, but why did Texas opt for such a unique approach on the retail customer side of the data equation?
"The intent was to clean up the settlement process," says Krajecki, explaining that studies on other markets found that data flows were the most glitch-prone part of settlements. In an effort at cutting down on the large margin of error resulting from data handling by myriad participants, ERCOT decided to have all information flow through its own system.
Centralizing data for 10 million customers, however,