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The Best Little Nodal Market in Texas

Sweating the details for 2009.

Fortnightly Magazine - September 2007

such, congestion costs will be assigned to the resources that caused the congestion. The difference between the nodal LMP (at the injection point) and the zonal price paid by load would represent the congestion rent.

• Congestion Revenue Rights. Tradable congestion revenue rights (CRRs) will be auctioned by ERCOT and pre-assigned CRRs (PCRRs) approved by the PUCT—mainly for non-opt-in, municipally owned utilities and electric cooperatives. ERCOT will auction three types of CRRs: point-to-point (PTP) options, PTP obligations, and flowgate rights (FGR). PTP options entitle the holder to the positive difference in LMPs between the sink and source. PTP obligations, like options, also entitle a CRR holder to revenues when the value of the CRR is positive, in addition to the obligation to pay the negative difference. FGRs entitle the holder to the difference in LMPs in a designated direction for flowgates defined by ERCOT Protocols. According to the TNM Protocols, FGRs initially would be available only for flowgates in the McCamey area and allocated to wind generating resources (WGRs). 2

• Financial Trading Hubs. The TNM Protocols have identified six trading hubs in ERCOT to be used as settlement locations to establish reference prices for offers and bids into the day-ahead market, common points for bilateral trades and CRR definition: North 345 kV, South 345 kV, Houston 345 kV, West 345 kV, ERCOT 345 and ERCOT 345 Bus trading hubs. 3,4

• Day-ahead Market. The day-ahead energy market (DAEM) will be established and operated by ERCOT. Participation in the DAEM will be voluntary for market participants with the possible exception of RMR resources or other reliability needs to be determined by ERCOT. Qualified Scheduling Entities may also submit bilateral or self-schedules to be cleared in the day-ahead period. The resulting day-ahead schedules and prices become binding. The DAEM is cleared using security-constrained unit commitment and security-constrained economic dispatch applications to meet energy demand while minimizing production costs from supply offers. The day-ahead market will be based on the Enhanced-Hybrid Day-ahead Market (E-HDAM) framework, assimilating aspects of integrated and auction day-ahead market models. The E-HDAM will be implemented no later than 12 months after the initiation of the TNM, while the auction model will be applied in the interim.

The E-HDAM will be a daily forward financial energy market where hourly market clearing prices for energy are calculated for each hour of the next operating day based on the DAEM LMPs. As shown in Table 3 (see p. 24), the E-HDAM borrows features from both the integrated day-ahead model (IDAM) and hybrid day-ahead model (HDAM). As shown in the table, resources may submit three-part supply offers for delivery at the node scheduled through their QSEs. The TNM market design includes a multi-settlement system for procuring energy and ancillary services whereby a separate market clearing price would be set for each service procured in the same period.

• Ancillary Services. The wholesale market redesign rulemaking calls for the simultaneous optimization of ancillary services by ERCOT. Ancillary services traded in the DAEM will include Regulation Up service, Regulation Down service, Responsive Reserve service, and Non-Spin