And in Texas, all customer information flows through ERCOT.
Texas thinks it has the right formula for retail choice.
When queried on the wisdom of its restructuring plan relative to California's restructuring woes, Texas likes to point to the new generation capacity coming online, and a supply-demand balance much more favorable than California's.
But if you're looking for electric restructuring Texas-style, forget capacity; plenty of regions are siting new plants. Instead, look no further than the mundane topic of how customer data is exchanged among utilities and competitive retail suppliers, for no other state has taken the approach that Texas has embraced. After all, there is no single solution to making electric retail choice work, and the Lone Star State realizes the devil is in the details, such as switching processes, load profiles, the nuts and bolts of data exchange, and so on.
In actuality, however, it's not how customer data is exchanged (not much talk of EDI or XML in this article), but is handling that exchange of information. Unlike any other state, that "who" is the state's reliability council and independent system operator, the Electric Reliability Council of Texas (ERCOT). Unlike most states, where exchange of data such as customer load profiles is largely a function of the utility, Texas has created a more centralized system, wherein all such information passes directly through ERCOT.
"ERCOT set a precedent, really, in the way they handle customer data," says Jim Krajecki, manager at Structure Consulting Group. "At the ERCOT level, they're actually going to track each individual resident in Texas - all 10 million of them or so - and actually know which [supplier] is assigned to each customer. Nowhere else that I know of is that being done."
Structure Consulting is certainly familiar with Texas's approach to customer data, for it has been serving as a consultant to ERCOT since October 1999, assisting in areas ranging from customer care to customer registration systems. One indication of just how heavily involved ERCOT is with the retail side of competition is the mere fact that it has even created its own customer care component. Taking on a role normally assigned to the utility, ERCOT has established its own call center to handle such customer matters as problems with the switching process. The customer care component will handle such issues as supplier switching without customer consent, or slamming. To that end, the issuance of a postcard notifying a customer of a switch is left to none other than the state's ISO - ERCOT.
It might seem strange for an ISO or reliability council to become so intimately involved with retail customer issues, and so it's not surprising that ERCOT needed a lot of help in creating its new customer care component. "ERCOT as an organization É just didn't have quite the background," says Krajecki, explaining his company's role in helping to set up a customer care component that will serve 10 million end-users.
"ERCOT took the approach of, 'Okay, we're going to centralize as much of the data collection as possible,'" 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, certainly will have its own set of challenges. "Obviously, this approach puts a lot of pressure on internal systems from a performance standpoint, because you're just dealing with vast amounts of data," points out Structure Consulting principal Lelon Winstead.
The question becomes, then, is the new approach better? Having consulted extensively in ERCOT, Krajecki may be biased, but he offers some insight. "I definitely think Texas has probably the best retail deregulation program out there." In terms of the customer data approach, the idea, he says, is to get the most accurate settlement in the end.
If ERCOT's customer data approach is successful, other regions conceivably would pay heed, chanting the clichŽ that there's no need to reinvent the wheel. But there is, in fact, a problem with applying ERCOT's approach outside of ERCOT: Like its own customer data approach, ERCOT itself, by definition, is unique. ERCOT, unlike most ISOs, is entirely self-contained. "The reason [ERCOT] could do this was because they're fully located inside of Texas," observes Krajecki.
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