Current through Reg. 50, No. 13; March 28, 2025
(a)
Purpose. The purpose of this section is to define the responsibilities and
authority of the independent market monitor (IMM) for the ERCOT wholesale
markets, establish the standards for funding the IMM, specify the staffing
requirements and qualifications for the IMM, and establish ethics standards for
the IMM. This section also specifies the relationship of the IMM to the
commission, to ERCOT, and to market participants. The IMM shall operate under
the commission's supervision and oversight, but the IMM shall offer independent
analysis to the commission to assist in making judgments in the public
interest.
(b) Definitions. The
following words and terms when used in this section shall have the following
meaning, unless the context indicates otherwise:
(1) Independent Market Monitor
(IMM)--Depending on the context, the office of the IMM or the director of the
IMM and its staff.
(2) Market--The
course of commercial activity by which the exchange of goods or services is
effected. As used in this section, the term may refer to an entire market or a
portion of a market.
(3) Market
participant--Any person or entity participating in the power region's wholesale
markets, or engaging in any activity that is in whole or in part the subject of
the ERCOT protocols, regardless of whether the person or entity has executed an
agreement with ERCOT. This definition includes, but is not limited to, a
load-serving entity (including a municipally-owned utility and an electric
cooperative), a retail electric provider, a qualified scheduling entity, a
power marketer, a transmission and distribution utility, a power generation
company, a qualifying facility, an exempt wholesale generator, a load acting as
a resource, and any entity conducting planning, scheduling, or operating
activities on behalf of such market participants.
(c) Objectives of market monitoring. The IMM
shall monitor wholesale market activities so as to:
(1) Detect and prevent market manipulation
strategies and market power abuses; and
(2) Evaluate the operations of the wholesale
market and the current market rules and proposed changes to the market rules,
and recommend measures to enhance market efficiency.
(d) Responsibilities of the IMM. The IMM
shall gather and analyze information and data as needed for its market
monitoring activities. The duties and responsibilities of the IMM may include:
(1) Monitoring all markets in the power
region for energy, capacity services, and congestion revenue rights, and the
ERCOT protocols and related procedures and practices that affect supply,
demand, and the efficient functioning of such markets;
(2) Developing and regularly monitoring
market screens and indices to identify abnormal events in the power region's
wholesale markets;
(3) Analyzing
events that fail the screens and other abnormal activities and market events,
using computer simulation and advanced quantitative tools as
necessary;
(4) Developing and
regularly monitoring performance measures to evaluate market participants' and
ERCOT's compliance with the ERCOT protocols and operating guides;
(5) Assessing the effectiveness of ERCOT's
management of the energy, ancillary capacity services, and congestion rights
markets operated by ERCOT, and evaluating the effectiveness of congestion
management by ERCOT;
(6) Conducting
market power tests and other analyses related to market power
determination;
(7) Analyzing the
ERCOT protocols and other market rules and proposed changes to those rules to
identify opportunities for strategic manipulation and other economic
inefficiencies, as well as potential areas of improvement;
(8) Conducting investigations of specific
market events;
(9) Providing expert
testimony services relating to the IMM's independent analysis, findings, and
expertise, as part of the commission staff's case in enforcement proceedings
initiated by the executive director in accordance with §
22.246 of this title (relating to
Administrative Penalties) or other commission proceedings;
(10) Maintaining a market oversight website
to share market information with the public;
(11) Preparing market monitoring reports as
required under subsection (k) of this section;
(12) Recommending to the commission measures
to enhance the efficiency of the wholesale market and methods to correct market
design flaws it has identified; and
(13) Performing any additional duties
required by the commission within the scope of the Public Utility Regulatory
Act §39.1515.
(e)
Authority of the IMM.
(1) The IMM has the
authority to conduct monitoring, analysis, reporting, and related activities
but has no enforcement authority.
(2) The IMM has the authority to question a
market participant about activities that may violate commission rules or ERCOT
protocols or may be potential market manipulations. The IMM may inform a market
participant that its activities may be in violation of commission rules or
ERCOT protocols or operating guides, subject to the restrictions established by
subsection (j)(2) of this section.
(3) The IMM has the authority to require
submission of any information and data it considers necessary to fulfill its
monitoring and investigative responsibilities by ERCOT and by market
participants. Market participants and ERCOT shall provide complete, accurate,
and timely responses to all IMM requests for documents, data, information, and
other materials.
(4) The IMM may
require that each market participant designate one or more points of contact
that can answer questions the IMM may have regarding a market participant's
operations or market activities.
(f) Selection of the IMM. ERCOT and the
commission shall contract with an entity selected by the commission to act as
the commission's wholesale market monitor. The IMM shall be established as an
office independent from ERCOT, and is not subject to the supervision of ERCOT
with respect to its monitoring and investigative activities.
(g) Funding of the IMM. The budget and
expenditures of the IMM are subject to commission supervision and oversight.
Financial controls and reporting procedures shall be implemented by the IMM and
ERCOT to ensure that expenditures are consistent with the budget that was
approved by the commission, and with this section.
(1) ERCOT shall fund the operations of the
IMM using money from the rate authorized by PURA §39.151.
(2) The funding of the IMM shall be
sufficient to ensure that the IMM has the resources and expertise necessary to
monitor the wholesale electric market effectively, as determined by the
commission.
(3) ERCOT shall
maintain separate accounts of expenditures in support of the IMM.
(4) ERCOT shall directly assign costs arising
from the IMM function to the IMM whenever possible. To the extent overhead and
shared expenses cannot be directly assigned, ERCOT shall allocate such expenses
to the IMM based on appropriate cost causation factors. ERCOT shall maintain
all records and work papers necessary to substantiate all direct charges and
allocations to the IMM.
(h) Staffing requirements and qualification
of IMM director and staff.
(1) The director
of the IMM shall have the qualifications necessary to oversee performance of
the duties and responsibilities in subsection (c) of this section. The staff of
the IMM shall have the qualifications needed to perform the market monitoring
functions in subsection (c) of this section. The IMM director and staff shall
be subject to background security checks as determined by the
commission.
(2) The staff of the
IMM shall collectively possess a set of technical skills necessary to perform
market monitoring functions, which typically includes economics, with a focus
on market analysis and market competitiveness; power engineering; statistics
and programming; and modeling, with a focus on optimization modeling.
(i) Ethics standards governing the
IMM director and staff.
(1) During the period
of a person's service with the IMM, the IMM director and an IMM employee shall
not:
(A) have a professional or financial
interest in a market participant or an affiliate of a market participant; or
own shares in a company that provides consulting services to a market
participant;
(B) serve as an
officer, director, partner, owner, employee, attorney, or consultant for ERCOT
or a market participant or an affiliate of a market participant;
(C) directly or indirectly own or control
securities in a market participant, an affiliate of a market participant, or
direct competitor of a market participant or affiliate, except that it is not a
violation of this rule if the IMM director or an IMM employee indirectly owns
an interest in a retirement system, institution or fund that in the normal
course of business invests in diverse securities independently of the control
of the IMM director or employee; or
(D) accept a gift, gratuity, or entertainment
from ERCOT, a market participant, affiliate of a market participant, or an
employee or agent of a market participant or affiliate of a market
participant.
(2) The IMM
director or an IMM employee shall not directly or indirectly solicit, request
from, suggest, or recommend to a market participant or affiliate of a market
participant, or an employee or agent of a market participant or affiliate of a
market participant, the employment of a person by a market participant or
affiliate.
(3) The commission may
impose post employment restrictions for the IMM and its employees.
(j) Confidentiality standards
governing the IMM director and staff.
(1) The
IMM shall protect confidential information and data in accordance with the
confidentiality standards established in PURA, the ERCOT protocols, commission
rules, and other applicable laws. The requirements related to the level of
protection to be afforded information protected by these laws and rules are
incorporated in this section.
(2)
Unless otherwise notified by the commission legal staff, the IMM may not
communicate with a market participant or with an ERCOT board member, officer,
or employee, or with any other entity concerning a particular subject matter
once the commission legal staff notifies the IMM that the subject matter is the
subject of an investigation or enforcement proceeding.
(k) Reporting requirement. All reports
prepared by the IMM shall reflect the IMM's independent analysis, findings, and
expertise. The IMM shall provide periodic updates to market participants
regarding the operation of the ERCOT wholesale market. In addition, the IMM
shall prepare and submit to the commission the following reports:
(1) Daily, monthly, and quarterly reports on
prices and congestion;
(2) An
annual report on the state of the market, which will include an assessment of
the competitiveness of the market; an assessment of the efficiency of ERCOT's
management of the balancing energy, ancillary services, and congestion rights
markets; an evaluation of the effectiveness of congestion management by ERCOT;
an evaluation of whether there are inappropriate incentives, flaws,
inefficiencies, and opportunities for manipulation in the market design; and
any recommendations for improving the market design; and
(3) Periodic or special reports on market
conditions or specific events as directed by the commission.
(l) Communication between the IMM
and the commission.
(1) The personnel of the
IMM may communicate with commission staff on any matter without
restriction.
(2) The IMM shall:
(A) Immediately report directly to the
commission any potential market manipulations, including market power abuse,
and any discovered or potential violations of commission rules or ERCOT
protocols or operating guides;
(B)
Periodically report abnormal bids, offers, operational activities, and market
behavior that have not been reported in accordance with paragraph (1) of this
subsection or subsection (k) of this section.
(C) Regularly communicate with the commission
and commission staff, and keep the commission updated regarding its activities,
findings, and observations;
(D)
Coordinate with the commission to identify priorities; and
(E) Coordinate with the commission to assess
the resources and methods for monitoring the wholesale market effectively,
including consulting needs.
(m) ERCOT's responsibilities and support
role. ERCOT and the IMM shall jointly develop procedures and interfaces to
ensure that the IMM director and staff have full access to ERCOT's operations
centers, staff, and records relating to operations, settlement, and
reliability. ERCOT shall designate liaisons to facilitate communications with
the IMM on ERCOT's operations and information technology.
(1) ERCOT shall develop and operate an
information system to collect and to store data required by the ERCOT
protocols, and shall provide adequate communication equipment and necessary
software packages to enable the IMM to establish electronic access to the
information system and to facilitate the development and application of
quantitative tools necessary for the market monitoring function. Data from
ERCOT's source systems must be capable of being replicated in near real time
and available for query by the IMM until data are archived and archived data
are accessible for high-speed information searches. When an IT system failure
prohibits "near real time" replication of data, ERCOT shall replicate the data
as expeditiously as possible. Data archives must be designed to accommodate
remote access by the IMM and the commission staff at any time.
(2) On an ongoing basis, ERCOT shall
implement necessary procedures for the accurate collection and storage of data
in the data archives and accurate communication of those data for use by the
commission staff and the IMM.
(3)
The IMM may review the catalogs describing information and data, and may review
data collection verification criteria developed by ERCOT. The IMM may propose
changes, additions, or deletions to the catalogs and criteria to facilitate the
market monitoring function. In so doing, the IMM may require database items or
evaluation criteria for inclusion in the pertinent catalogs.
(4) ERCOT shall establish procedures to
ensure that the IMM may access all data maintained by ERCOT relating to
operations, settlements, and reliability.
(5) ERCOT may provide administrative support
and goods and services to the IMM, such as office space, payroll, and related
services, and information technology support.
(n) Liability of the IMM. The IMM, and its
directors, officers, employees and agents, shall not be liable to any person or
entity for any act or omission, other than an act or omission constituting
gross negligence or intentional misconduct, arising under or relating to this
section, including but not limited to liability for any financial loss, loss of
economic advantage, opportunity cost, or actual, direct, indirect or
consequential damages of any kind resulting from or attributable to any such
act or omission of the IMM as long as such act or omission arose from or
related to matters within the scope of the IMM's authority.
(o) Contractual Provisions.
(1) Effective July 1, 2007, ERCOT shall
include the following provision in any new or re-negotiated agreement it has
with an entity that engages in any activity that is in whole or in part the
subject of the ERCOT Protocols: The IMM, and its directors, officers,
employees, and agents, shall not be liable to any person or entity for any act
or omission, other than an act or omission constituting gross negligence or
intentional misconduct, including but not limited to liability for any
financial loss, loss of economic advantage, opportunity cost, or actual,
direct, indirect, or consequential damages of any kind resulting from or
attributable to any such act or omission of the IMM, as long as such act or
omission arose from or is related to matters within the scope of the IMM's
authority arising under or relating to PURA §39.1515 and Public Utility
Commission Substantive Rule §25.365, relating to Independent Market
Monitor.
(2) Not later than 15
months after this subsection takes effect, ERCOT shall include the provision
set out in paragraph (1) of this subsection in every agreement it has with an
entity that engages in any activity that is in whole or in part the subject of
the ERCOT Protocols.
