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Winds of Change in Texas

Rising gas prices spark a rush to wind farms, straining grid capacity and raising larger issues about market design.
Fortnightly Magazine - April 1 2003

of MISO with Southwest Power Pool (SPP).

Carl Monroe, vice president of operations with SPP, and soon to be vice president of market operations for the merged company, notes that in the Texas panhandle, it is SPP that now provides RTO-type functions. Eventually, he explains, that role will be filled by the company created by the merger of SPP and MISO. "The transmission owners and utilities are expected to join that resulting company," he adds.

But more importantly, as Monroe explains, Texas is now served by two different interconnections, the ERCOT interconnection and the Eastern Interconnection.

"There are only two ties between those," he adds, "and they're both back-to-back DC ties, so that the effect on Texas if ERCOT changes its method would be how those DC ties are treated and coordinated with the two markets."

"Now from the PUCT perspective," Monroe says, "they might want similarities between the two markets for reasons to have Texas treated the same way with the two markets, but from ERCOT's perspective, any interaction with SPP presently and with MISO in the future-it's not necessary that those be the same."

Monroe adds, "The main concern for the Texas utilities and MISO is in making changes that would impose requirements on the Texas utilities that they may not be able to fulfill being a part of a FERC-regulated RTO."

Adjacent to MISO, the California ISO (CAISO) has been going through its own metamorphosis.

"We're changing our design to be in concert with standard market design and to have more flavor of what the Eastern ISOs-specifically New York-have," says Ziad Alaywan, CAISO's director of market operations.

Addressing California's notorious "phantom congestion," or gaming, which also recently became a concern for Texas, Alaywan says, "We have made some changes to fix some of the gaming, or what people thought was gaming" as a result of Enron and others.

"There are a lot of similarities between the Texas market structure and California's," notes Alaywan. "There's the zonal approach that Texas adopted-the notion that congestion is separate from a forward energy market. … We don't have a day-ahead energy market. We are going to have one in about a year."

He adds, "Texas deals with congestion just exactly the same way we deal with congestion here in California. We're changing that. The changes are to adopt the New York ISO model in terms of congestion and in terms of a forward energy market because we think there's some problem with it."

So will there be drastic changes to ERCOT? Word on the street is that ERCOT eventually will lean toward an LMP-PJM model. Meanwhile, tension runs high as other national decisions concerning SMD also ride in the wake of any ERCOT decision. With all the overriding issues and short timelines, both statewide and national, the situation in Texas could be akin to "changing the tires on a moving car," as one ERCOT consultant was overheard saying at a PUC open meeting.

  1. See Rulemaking Proceeding on Wholesale Market Design Issues in ERCOT, Tex. PUC Project No. 26376, memorandum of Eric S. Schubert,