Bill Text: TX SB7 | 2023-2024 | 88th Legislature | Comm Sub
Bill Title: Relating to the reliability of the ERCOT power grid.
Spectrum: Partisan Bill (Republican 5-0)
Status: (Engrossed - Dead) 2023-05-26 - House appoints conferees-reported [SB7 Detail]
Download: Texas-2023-SB7-Comm_Sub.html
88R31129 CXP-D | ||
By: Schwertner, et al. | S.B. No. 7 | |
(Hunter) | ||
Substitute the following for S.B. No. 7: No. |
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relating to the reliability of the ERCOT power grid. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. The heading to Section 39.159, Utilities Code, | ||
as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, | ||
Regular Session, 2021, is amended to read as follows: | ||
Sec. 39.159. POWER REGION RELIABILITY AND DISPATCHABLE | ||
GENERATION. | ||
SECTION 2. Section 39.159, Utilities Code, as added by | ||
Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular | ||
Session, 2021, is amended by adding Subsections (d), (e), and (f) to | ||
read as follows: | ||
(d) The commission shall require the independent | ||
organization certified under Section 39.151 for the ERCOT power | ||
region to consider implementing an ancillary services program to | ||
procure dispatchable reliability reserve services on a day-ahead | ||
and real-time basis to account for market uncertainty. The program | ||
to be considered may: | ||
(1) determine the quantity of services necessary based | ||
on historical variations in generation availability for each season | ||
based on a targeted reliability standard or goal, including | ||
intermittency of non-dispatchable generation facilities and forced | ||
outage rates, for dispatchable generation facilities; | ||
(2) develop criteria for resource participation that | ||
require a resource to: | ||
(A) be capable of running for at least four hours | ||
at the resource's high sustained limit or for more than four hours | ||
as the organization determines is needed; | ||
(B) be online and dispatchable not more than two | ||
hours after being called on for deployment; and | ||
(C) have the dispatchable flexibility to address | ||
inter-hour operational challenges; and | ||
(3) reduce the amount of reliability unit commitment | ||
by the amount of dispatchable reliability reserve services procured | ||
under this section. | ||
(e) The independent organization certified under Section | ||
39.151 for the ERCOT power region may implement programs described | ||
by Subsections (d) and (f) simultaneously. | ||
(f) The commission shall require the independent | ||
organization certified under Section 39.151 for the ERCOT power | ||
region to develop and implement a program to ensure minimum | ||
generation performance during times of high reliability risk due to | ||
low operating reserves. The program must: | ||
(1) apply to each electric power generation resource | ||
in the ERCOT power region that enters into a signed generator | ||
interconnection agreement after January 1, 2026; | ||
(2) be independently evaluated by the wholesale | ||
electric market monitor, including a historical analysis; | ||
(3) allow entities, at the portfolio level, to meet | ||
the performance requirements by supplementing or contracting with | ||
on-site or off-site resources, including battery energy storage | ||
resources and load resources; | ||
(4) provide penalties for failing to comply with the | ||
performance requirements and financial incentives for exceeding | ||
those requirements, except that penalties may not apply to resource | ||
unavailability due to planned maintenance outages or physical | ||
transmission outages or during hours when the resource would not be | ||
expected to perform based on the resource type; and | ||
(5) exempt battery energy storage resources from the | ||
generation performance requirements. | ||
SECTION 3. Subchapter D, Chapter 39, Utilities Code, is | ||
amended by adding Section 39.1591 to read as follows: | ||
Sec. 39.1591. REPORT ON DISPATCHABLE AND NON-DISPATCHABLE | ||
GENERATION FACILITIES. Not later than December 1 of each year, the | ||
commission shall file a report with the legislature that: | ||
(1) includes: | ||
(A) the estimated annual costs incurred under | ||
this subchapter by dispatchable and non-dispatchable generators to | ||
guarantee that a firm amount of electric energy will be provided for | ||
the ERCOT power grid; and | ||
(B) as calculated by the independent system | ||
operator, the cumulative annual costs that have been incurred in | ||
the ERCOT market to facilitate the transmission of dispatchable and | ||
non-dispatchable electricity to load and to interconnect | ||
transmission level loads; | ||
(2) documents the status of the implementation of this | ||
subchapter, including whether the rules and protocols adopted to | ||
implement this subchapter have materially improved the | ||
reliability, resilience, and transparency of the electricity | ||
market; and | ||
(3) includes recommendations for any additional | ||
legislative measures needed to empower the commission to implement | ||
market reforms to ensure that market signals are adequate to | ||
preserve existing dispatchable generation and incentivize the | ||
construction of new dispatchable generation sufficient to maintain | ||
reliability standards for at least five years after the date of the | ||
report. | ||
SECTION 4. Subchapter D, Chapter 39, Utilities Code, is | ||
amended by adding Section 39.166 to read as follows: | ||
Sec. 39.166. RELIABILITY PROGRAM. (a) The commission may | ||
not require retail customers or load-serving entities in the ERCOT | ||
power region to purchase credits designed to support a required | ||
reserve margin or other capacity or reliability requirement until: | ||
(1) the independent organization certified under | ||
Section 39.151 for the ERCOT power region and the wholesale | ||
electric market monitor complete an updated assessment on the cost | ||
to and effects on the ERCOT market of the proposed reliability | ||
program; and | ||
(2) the independent organization certified under | ||
Section 39.151 for the ERCOT power region begins implementing real | ||
time co-optimization of energy and ancillary services in the ERCOT | ||
wholesale market. | ||
(b) The assessment required under Subsection (a) must | ||
include: | ||
(1) an evaluation of the cost of new entry and the | ||
effects of the proposed reliability program on consumer costs and | ||
the competitive retail market; | ||
(2) a compilation of detailed information regarding | ||
cost offsets realized through a reduction in costs in the energy and | ||
ancillary services markets and use of reliability unit commitments; | ||
(3) a set of metrics to measure the effects of the | ||
proposed reliability program on system reliability; | ||
(4) an evaluation of the cost to retain existing | ||
dispatchable resources in the ERCOT power region; | ||
(5) an evaluation of the planned timeline for | ||
implementation of real time co-optimization for energy and | ||
ancillary services in the ERCOT power region; and | ||
(6) anticipated market and reliability effects of new | ||
and updated ancillary service products. | ||
(c) The commission may not implement a reliability program | ||
described by Subsection (a) unless the commission by rule | ||
establishes the essential features of the program, including | ||
requirements to meet the reliability needs of the power region, and | ||
the program: | ||
(1) requires the independent organization certified | ||
under Section 39.151 for the ERCOT power region to procure the | ||
credits centrally in a manner designed to prevent market | ||
manipulation by affiliated generation and retail companies; | ||
(2) limits participation in the program to | ||
dispatchable resources with the specific attributes necessary to | ||
meet operational needs of the ERCOT power region; | ||
(3) ensures that a generator cannot receive credits | ||
that exceed the amount of generation bid into the forward market by | ||
that generator; | ||
(4) ensures that an electric generating unit can | ||
receive a credit only for being available to perform in real time | ||
during the tightest intervals of low supply and high demand on the | ||
grid, as defined by the commission on a seasonal basis; | ||
(5) establishes a penalty structure, resulting in a | ||
net benefit to load, for generators that bid into the forward market | ||
but do not meet the full obligation; | ||
(6) provides the wholesale electric market monitor | ||
with the authority and resources necessary to investigate potential | ||
instances of market manipulation by any means, including by | ||
financial or physical actions; | ||
(7) ensures that any program reliability standard | ||
reasonably balances the incremental reliability benefits to | ||
customers against the incremental costs of the program based on an | ||
evaluation by the wholesale electric market monitor; | ||
(8) establishes a single ERCOT-wide clearing price for | ||
the program and does not differentiate payments or credit values | ||
based on locational constraints; | ||
(9) does not assign costs, credit, or collateral for | ||
the program in a manner that provides a cost advantage to | ||
load-serving entities who own, or whose affiliates own, generation | ||
facilities; | ||
(10) requires sufficient secured collateral so that | ||
other market participants do not bear the risk of non-performance | ||
or non-payment; | ||
(11) ensures that the cost of all credits paid to | ||
dispatchable resources is allocated to loads based on an hourly | ||
load ratio share; and | ||
(12) removes any market changes implemented as a | ||
bridge solution for the program not later than the first | ||
anniversary of the date the program was implemented. | ||
(d) The commission and the independent organization | ||
certified under Section 39.151 for the ERCOT power region may not | ||
adopt a market rule for the ERCOT power region associated with the | ||
implementation of a reliability program described by Subsection (a) | ||
that provides a cost advantage to load-serving entities who own, or | ||
whose affiliates own, generation facilities. | ||
(e) The commission and the independent organization | ||
certified under Section 39.151 for the ERCOT power region shall | ||
ensure that the net cost imposed on the ERCOT market for the credits | ||
does not exceed $1 billion annually, less the cost of any interim or | ||
bridge solutions that are lawfully implemented, except that the | ||
commission may adjust the limit: | ||
(1) proportionally according to the highest net peak | ||
demand year-over-year with a base year of 2026; and | ||
(2) for inflation with a base year of 2026. | ||
(f) The wholesale electric market monitor biennially shall: | ||
(1) evaluate the incremental reliability benefits of | ||
the program for consumers compared to the costs to consumers of the | ||
program and the costs in the energy and ancillary services markets; | ||
and | ||
(2) report the results of each evaluation to the | ||
legislature. | ||
SECTION 5. (a) Not later than September 1, 2024, the | ||
Public Utility Commission of Texas shall implement the changes in | ||
law made by Section 39.159(f), Utilities Code, as added by this Act. | ||
(b) The Public Utility Commission of Texas shall require the | ||
independent organization certified under Section 39.151, Utilities | ||
Code, for the ERCOT power region to implement the program required | ||
by Section 39.159(d), Utilities Code, as added by this Act, not | ||
later than December 1, 2024. | ||
(c) The Public Utility Commission of Texas is required to | ||
prepare the portions of the report required by Sections 39.1591(2) | ||
and (3), Utilities Code, as added by this Act, only for reports due | ||
on or after December 1, 2024. | ||
(d) Not later than December 31, 2024, the wholesale electric | ||
market monitor described by Section 39.1515, Utilities Code, shall | ||
submit to the legislature recommendations regarding the | ||
implementation of the program required by Section 39.159(f), | ||
Utilities Code, as added by this Act. | ||
SECTION 6. This Act takes effect immediately if it receives | ||
a vote of two-thirds of all the members elected to each house, as | ||
provided by Section 39, Article III, Texas Constitution. If this | ||
Act does not receive the vote necessary for immediate effect, this | ||
Act takes effect September 1, 2023. |