Current through Reg. 50, No. 13; March 28, 2025
(a) Purpose. The purpose of this section is
to establish the standards that the commission will apply in monitoring the
activities of entities participating in the wholesale electricity markets,
including markets administered by the Electric Reliability Council of Texas
(ERCOT), and enforcing the Public Utility Regulatory Act (PURA) and ERCOT
procedures relating to wholesale markets. The standards contained in this rule
are necessary to:
(1) protect customers from
unfair, misleading, and deceptive practices in the wholesale markets, including
ERCOT-administered markets;
(2)
ensure that ancillary services necessary to facilitate the reliable
transmission of electric energy are available at reasonable prices;
(3) afford customers safe, reliable, and
reasonably priced electricity;
(4)
ensure that all wholesale market participants observe all scheduling,
operating, reliability, and settlement policies, rules, guidelines, and
procedures established in the ERCOT procedures;
(5) clarify prohibited activities in the
wholesale markets, including ERCOT-administered markets;
(6) monitor and mitigate market power as
authorized by the Public Utility Regulatory Act (PURA) §39.157(a) and
prevent market power abuses;
(7)
clarify the standards and criteria the commission will use when reviewing
wholesale market activities;
(8)
clarify the remedies for non-compliance with the Protocols relating to
wholesale markets; and
(9)
prescribe ERCOT's role in enforcing ERCOT procedures relating to the
reliability of the regional electric network and accounting for the production
and delivery among generators and all other market participants and monitoring
and obtaining compliance with operating standards within the ERCOT regional
network.
(b)
Application. This section applies to all market entities, as defined in
subsection (c) of this section.
(c)
Definitions. The following words and terms when used in this section have the
following meaning, unless the context indicates otherwise:
(1) Artificial congestion--Congestion created
when multiple foreseeable options exist for scheduling, dispatching, or
operating a resource, and a market participant chooses an option that is not
the most economical, that foreseeably creates or exacerbates transmission
congestion, and that results in the market participant being paid to relieve
the congestion it caused.
(2)
Efficient operation of the market--Operation of the markets administered by
ERCOT, consistent with reliability standards, that is characterized by the
fullest use of competitive auctions to procure ancillary services, minimal cost
socialization, and the most economical utilization of resources, subject to
necessary operational and other constraints.
(3) ERCOT procedures--Documents that contain
the scheduling, operating, planning, reliability, and settlement procedures,
standards, and criteria that are public and in effect in the ERCOT power
region, including the ERCOT Protocols, ERCOT Operating Guides, and Other
Binding Documents as amended from time to time but excluding ERCOT's internal
administrative procedures. The Protocols generally govern when there are
inconsistencies between the Protocols and the Operating Guides, except when
ERCOT staff, consistent with subsection (i) of this section, determines that a
provision contained in the Operating Guides is technically superior for the
efficient and reliable operation of the electric network.
(4) Excess Revenue--Revenue in excess of the
revenue that would have occurred absent a violation of PURA §39.157 or
this section.
(5) Market
entity--Any person or entity participating in the ERCOT-administered wholesale
market, including, but not limited to, a load serving entity (including a
municipally owned utility and an electric cooperative,) a power marketer, a
transmission and distribution utility, a power generation company, a qualifying
facility, an exempt wholesale generator, ERCOT, and any entity conducting
planning, scheduling, or operating activities on behalf of, or controlling the
activities of, such market entities.
(6) Market participant--A market entity other
than ERCOT.
(7) Reliability
Monitor--A person or entity selected by the commission to monitor compliance
with all state reliability-related laws, rules, and ERCOT procedures including
protocols, processes and any other operating standards applicable to the ERCOT
Region.
(8) Resource--Facilities
capable of providing electrical energy or load capable of reducing or
increasing the need for electrical energy or providing short-term reserves into
the ERCOT system. This includes generation and load resources.
(d) Standards and criteria for
enforcement of ERCOT procedures and PURA. The commission will monitor the
activities of market entities to determine if such activities are consistent
with ERCOT procedures; whether they constitute market power abuses or are
unfair, misleading, or deceptive practices affecting customers; and whether
they are consistent with the proper accounting for the production and delivery
of electricity among generators and other market participants. When reviewing
the activities of a market entity, the commission will consider whether the
activity was conducted in a manner that:
(1)
adversely affected customers in a material way through the use of unfair,
misleading, or deceptive practices;
(2) materially reduced the competitiveness of
the market, including whether the activity unfairly impacted other market
participants in a way that restricts competition;
(3) disregarded its effect on the reliability
of the ERCOT electric system; or
(4) interfered with the efficient operation
of the market.
(e)
Guiding ethical standards. Each market participant is expected to:
(1) observe all applicable laws and
rules;
(2) schedule, bid, and
operate its resources in a manner consistent with ERCOT procedures to support
the efficient and reliable operation of the ERCOT electric system;
and
(3) not engage in activities
and transactions that create artificial congestion or artificial supply
shortages, artificially inflate revenues or volumes, or manipulate the market
or market prices in any way.
(f) Duties of market entities.
(1) Each market participant must be
knowledgeable about ERCOT procedures.
(2) A market participant must comply with
ERCOT procedures and any official interpretation of the Protocols issued by
ERCOT or the commission.
(A) If a market
participant disagrees with any provision of the Protocols or any official
interpretation of the Protocols, it may seek an amendment of the Protocols as
provided for in the Protocols, appeal an ERCOT official interpretation to the
commission, or both.
(B) A market
participant appealing an official interpretation of the Protocols or seeking an
amendment to the Protocols must comply with the Protocols unless and until the
interpretation is officially changed or the amendment is officially
adopted.
(C) A market participant
may be excused from compliance with ERCOT instructions or Protocol requirements
only if such non-compliance is due to communication or equipment failure beyond
the reasonable control of the market participant; if compliance would
jeopardize public health and safety or the reliability of the ERCOT
transmission grid, or create risk of bodily harm or damage to the equipment; if
compliance would be inconsistent with facility licensing, environmental, or
legal requirements; if required by applicable law; or for other good cause. A
market participant is excused under this subparagraph only for so long as the
condition continues.
(3)
Whenever the Protocols require that a market participant make its "best effort"
or a "good faith effort" to meet a requirement, or similar language, the market
participant must act in accordance with the requirement unless:
(A) it is not technically possible to do
so;
(B) doing so would jeopardize
public health and safety or the reliability of the ERCOT transmission grid, or
would create a risk of bodily harm or damage to the equipment;
(C) doing so would be inconsistent with
facility licensing, environmental, or legal requirements; or
(D) other good cause exists for excusing the
requirement.
(4) When a
market participant is not able to comply with a Protocol requirement or
official interpretation of a requirement, or honor a formal commitment to
ERCOT, the market participant has an obligation to notify ERCOT immediately
upon learning of such constraints and to notify ERCOT when the problem ceases.
A market participant who does not comply with a Protocol requirement or
official interpretation of a requirement, or honor a formal commitment to
ERCOT, has the burden to demonstrate, in any commission proceeding in which the
failure to comply is raised, why it cannot comply with the Protocol requirement
or official interpretation of the requirement, or honor the
commitment.
(5) The commission
staff may request information from a market participant concerning a
notification of failure to comply with a Protocol requirement or official
interpretation of a requirement, or honor a formal commitment to ERCOT. The
market participant must provide a response that is detailed and reasonably
complete, explaining the circumstances surrounding the alleged failure, and
must provide documents and other materials relating to such alleged failure to
comply. The response must be submitted to the commission staff within five
business days of a written request for information, unless commission staff
agrees to an extension.
(6) A
market participant's bids of energy and ancillary services must be from
resources that are available and capable of performing, and must be feasible
within the limits of the operating characteristics indicated in the resource
plan, as defined in the Protocols, and consistent with the applicable ramp
rate, as specified in the Protocols.
(7) All statements, data and information
provided by a market participant to market publications and publishers of
surveys and market indices for the computation of an industry price index must
be true, accurate, reasonably complete, and must be consistent with the market
participant's activities, subject to generally accepted standards of
confidentiality and industry standards. Market participants must exercise due
diligence to prevent the release of materially inaccurate or misleading
information.
(8) A market entity
has an obligation to provide accurate and factual information and must not
submit false or misleading information, or omit material information, in any
communication with ERCOT or with the commission. Market entities must exercise
due diligence to ensure adherence to this provision throughout the
entity.
(9) A market participant
must comply with all reporting requirements governing the availability and
maintenance of a generating unit or transmission facility, including outage
scheduling reporting requirements. A market participant must immediately notify
ERCOT when capacity changes or resource limitations occur that materially
affect the availability of a unit or facility, the anticipated operation of its
resources, or the ability to comply with ERCOT dispatch instructions.
(10) A market participant must comply with
requests for information or data by ERCOT as specified by the Protocols or
ERCOT instructions within the time specified by ERCOT instructions, or such
other time agreed to by ERCOT and the market participant.
(11) When a Protocol provision or its
applicability is unclear, or when a situation arises that is not contemplated
under the Protocols, a market entity seeking clarification of the Protocols
must use the Nodal Protocol Revision Request (NPRR) process provided in the
Protocols. If the NPRR process is impractical or inappropriate under the
circumstances, the market entity may use the process for requesting formal
Protocol clarifications or interpretations described in subsection (i) of this
section. This provision is not intended to discourage day to day informal
communication between market participants and ERCOT staff.
(12) A market participant operating in the
ERCOT markets or a member of the ERCOT staff who identifies a provision in the
ERCOT procedures that produces an outcome inconsistent with the efficient and
reliable operation of the ERCOT-administered markets must call the provision to
the attention of ERCOT staff and the appropriate ERCOT subcommittee. All market
participants must cooperate with the ERCOT subcommittees, ERCOT staff, and the
commission staff to develop Protocols that are clear and consistent.
(13) A market participant must establish and
document internal procedures that instruct its affected personnel on how to
implement ERCOT procedures according to the standards delineated in this
section. Each market participant must establish clear lines of accountability
for its market practices.
(g) Prohibited activities. Any act or
practice of a market participant that materially and adversely affects the
reliability of the regional electric network or the proper accounting for the
production and delivery of electricity among market participants is considered
a "prohibited activity." The term "prohibited activity" in this subsection
excludes acts or practices expressly allowed by the Protocols or by official
interpretations of the Protocols and acts or practices conducted in compliance
with express directions from ERCOT or commission rule or order or other legal
authority. The term "prohibited activity" includes, but is not limited to, the
following acts and practices that have been found to cause prices that are not
reflective of competitive market forces or to adversely affect the reliability
of the electric network:
(1) A market
participant must not schedule, operate, or dispatch its generating units in a
way that creates artificial congestion.
(2) A market participant must not execute
pre-arranged offsetting trades of the same product among the same parties, or
through third party arrangements, which involve no economic risk and no
material net change in beneficial ownership.
(3) A market participant must not offer
reliability products to the market that cannot or will not be provided if
selected.
(4) A market participant
must not conduct trades that result in a misrepresentation of the financial
condition of the organization.
(5)
A market participant must not engage in fraudulent behavior related to its
participation in the wholesale market.
(6) A market participant must not collude
with other market participants to manipulate the price or supply of power,
allocate territories, customers or products, or otherwise unlawfully restrain
competition. This provision should be interpreted in accordance with federal
and state antitrust statutes and judicially-developed standards under such
statutes regarding collusion.
(7) A
market participant must not engage in market power abuse. Withholding of
production, whether economic withholding or physical withholding, by a market
participant who has market power, constitutes an abuse of market
power.
(h) Defenses. The
term "prohibited activity" in subsection (g) of this section excludes acts or
practices that would otherwise be included, if the market entity establishes
that its conduct served a legitimate business purpose consistent with prices
set by competitive market forces; and that it did not know, and could not
reasonably anticipate, that its actions would inflate prices, adversely affect
the reliability of the regional electric network, or adversely affect the
proper accounting for the production and delivery of electricity; or, if
applicable, that it exercised due diligence to prevent the excluded act or
practice. The defenses established in this subsection may also be asserted in
instances in which a market participant is alleged to have violated subsection
(f) of this section. A market entity claiming an exclusion or defense under
this subsection, or any other type of affirmative defense, has the burden of
proof to establish all of the elements of such exclusion or defense.
(i) Official interpretations and
clarifications regarding the Protocols. A market entity seeking an
interpretation or clarification of the Protocols must use the NPRR process
contained in the Protocols whenever possible. If an interpretation or
clarification is needed to address an unforeseen situation and there is not
sufficient time to submit the issue to the NPRR process, a market entity may
seek an official Protocol interpretation or clarification from ERCOT in
accordance with this subsection.
(1) ERCOT
must develop a process for formally addressing requests for clarification of
the Protocols submitted by market participants or issuing official
interpretations regarding the application of Protocol provisions and
requirements. ERCOT must respond to the requestor within ten business days of
ERCOT's receipt of the request for interpretation or clarification with either
an official Protocol interpretation or a recommendation that the requestor take
the request through the NPRR process.
(2) ERCOT must designate one or more ERCOT
officials who will be authorized to receive requests for clarification from,
and issue responses to market participants, and to issue official
interpretations on behalf of ERCOT regarding the application of Protocol
provisions and requirements.
(3)
The designated ERCOT official must provide a copy of the clarification request
to commission staff upon receipt. The ERCOT official must consult with ERCOT
operational or legal staff as appropriate and with commission staff before
issuing an official Protocol clarification or interpretation.
(4) The designated ERCOT official may decide,
in consultation with the commission staff, that the language for which a
clarification is requested is ambiguous or for other reason beyond ERCOT's
ability to clarify, in which case the ERCOT official shall inform the
requestor, who may take the request through the NPRR process provided for in
the Protocols.
(5) All official
Protocol clarifications or interpretations that ERCOT issues in response to a
market participant's formal request or upon ERCOT's own initiative must be sent
out in a market bulletin with the appropriate effective date specified to
inform all market participants, and a copy of the clarification or
interpretation must be maintained in a manner that is accessible to market
participants. Such response must not contain information that would identify
the requesting market participant.
(6) A market participant may freely
communicate informally with ERCOT employees, however, the opinion of an
individual ERCOT staff member not issued as an official interpretation of ERCOT
pursuant to this subsection may not be relied upon as an affirmative defense by
a market participant.
(j) Role of ERCOT in enforcing operating
standards. ERCOT must monitor material occurrences of non-compliance with ERCOT
procedures, which means occurrences that have the potential to impede ERCOT
operations or represent a risk to system reliability. Non-compliance indicators
monitored by ERCOT must include, but are not limited to, material occurrences
of failing resource performance measures as established by ERCOT, failure to
follow dispatch instructions within the required time, failure to meet
ancillary services obligations, failure to submit mandatory bids or offers, and
other instances of non-compliance of a similar magnitude.
(1) ERCOT must keep a record of all such
material occurrences of non-compliance with ERCOT procedures and must develop a
system for tracking recurrence of such material occurrences of
non-compliance.
(2) ERCOT must
promptly provide information to and respond to questions from market
participants to allow the market participant to understand and respond to
alleged material occurrences of non-compliance with ERCOT procedures. However,
this requirement does not relieve the market participant's operator from
responding to the ERCOT operator's instruction in a timely manner and shall not
be interpreted as allowing the market participant's operator to argue with the
ERCOT operator as to the need for compliance.
(3) ERCOT must keep a record of the
resolution of such material occurrences of non-compliance and of remedial
actions taken by the market participant in each instance.
(4) ERCOT must promptly provide information
to and respond to questions posed by the Reliability Monitor and the
commission.
(5) ERCOT must provide
to the Reliability Monitor and the commission the support and cooperation the
commission determines is necessary for the Reliability Monitor and the
commission to perform their functions.
(6) If directed by the commission, ERCOT must
assume all or part of the duties and responsibilities of the Reliability
Monitor under subsection (k) of this section. ERCOT must assume these duties
and responsibilities, including establishing appropriate safeguards to prevent
conflicts of interest and ensure the independence and objectivity of ERCOT
personnel with respect to the duties and responsibilities assumed, in the
manner prescribed by the commission.
(k) Responsibilities of the Reliability
Monitor. The Reliability Monitor must gather and analyze information and data
as needed for its reliability monitoring activities. The Reliability Monitor
works under the direction and supervision of the commission. The Reliability
Monitor must 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 into this section. The duties and responsibilities of the
Reliability Monitor may include, but are not limited to:
(1) Monitoring, investigating, auditing, and
reporting to the commission regarding compliance with reliability-related ERCOT
procedures, including Protocols, Operating Guides, and Other Binding Documents,
the reliability-related provisions of the commission's rules, and
reliability-related provisions of PURA by market entities;
(2) Providing reliability-related
subject-matter advice, expertise, and assistance to the commission in the
conduct of the commission's oversight and enforcement activities; and
(3) Providing expert advice, analysis,
reports, and testimony services relating to the Reliability Monitor's analysis
and findings as part of the commission staff's case in enforcement
proceedings.
(l)
Selection of the Reliability Monitor. The commission may select an entity to
act as the Reliability Monitor. If the commission selects an entity other than
ERCOT to act as the Reliability Monitor, the Reliability Monitor must be
independent from ERCOT and is not subject to the supervision of ERCOT with
respect to its monitoring and investigative activities. If the commission
selects an entity other than ERCOT to act as the Reliability Monitor, the
commission and ERCOT will enter into a contract with the selected entity. In
selecting the Reliability Monitor, the commission must consider whether the
Reliability Monitor satisfies the following criteria:
(1) Independence, objectivity, and the
absence of potential conflicts of interest;
(2) Experience performing compliance
monitoring of reliability-related laws;
(3) Familiarity with the ERCOT Region and
understanding of reliability-related ERCOT protocols, procedures, and other
operating standards;
(4) Ability to
manage confidential information appropriately; and
(m) Funding of the Reliability Monitor. ERCOT
must fund the operations of the Reliability Monitor from the fee authorized by
PURA §39.151.
(n) Standards
for record keeping.
(1) A market participant
who schedules through a qualified scheduling entity (QSE) that submits
schedules to ERCOT on behalf of more than one market participants must maintain
records to show scheduling, offer, and bidding information for all schedules,
offers, and bids that its QSE has submitted to ERCOT on its behalf, by
interval.
(2) All market
participants and ERCOT must maintain records relative to market participants'
activities in the ERCOT-administered markets to show:
(A) information on transactions, as defined
in §
25.93(c)(3) of
this title (relating to Quarterly Wholesale Electricity Transaction Reports),
including the date, type of transaction, amount of transaction, and entities
involved;
(B) information and
documentation of all planned, maintenance, and forced generation and
transmission outages including all documentation necessary to document the
reason for the outage;
(C)
information described under this subsection including transaction information,
information on pricing, settlement information, and other information that
would be relevant to an investigation under this section, and that has been
disclosed to market publications and publishers of surveys and price indices,
including the date, information disclosed, and the name of the employees
involved in providing the information as well as the publisher to whom it was
provided; and
(D) reports of the
market participant's financial information given to external parties, including
the date, financial results reported, and the party to whom financial
information was reported, if applicable.
(3) After the effective date of this section,
all records referred to in this subsection except verbal dispatch instructions
(VDIs) must be kept for a minimum of three years from the date of the event.
ERCOT must keep VDI records for a minimum of two years. All records must be
made available to the commission for inspection upon request.
(4) A market participant must, upon request
from the commission, provide the information referred to in this subsection to
the commission, and may, if applicable, provide it under a confidentiality
agreement or protective order pursuant to §
22.71(d) of this
title (relating to Filing of Pleadings, Documents, and Other
Material).
(o)
Investigation. The commission staff may initiate an informal fact-finding
review based on a complaint or upon its own initiative to obtain information
regarding facts, conditions, practices, or matters that it may find necessary
or proper to ascertain in order to evaluate whether any market entity has
violated any provision of this section.
(1)
The commission staff will contact the market entity whose activities are in
question to provide the market entity an opportunity to explain its activities.
The commission staff may require the market entity to provide information
reasonably necessary for the purposes described in this subsection.
(2) If the market entity asserts that the
information requested by commission staff is confidential, the information must
be provided to commission staff as confidential information related to
settlement negotiations or other asserted bases for confidentiality pursuant to
§
22.71(d)(4) of
this title.
(3) If after conducting
its fact-finding review, the commission staff determines that a market entity
may have violated this section, the commission staff may request that the
commission initiate a formal investigation against the market entity pursuant
to §
22.241 of this title (relating to
Investigations).
(4) If, as a
result of its investigation, commission staff determines that there is evidence
of a violation of this section by a market entity, the commission staff may
request that the commission initiate appropriate enforcement action against the
market entity. A notice of violation requesting administrative penalties or
disgorgement of excess revenues must comply with the requirements of §
22.246 of this title (relating to
Administrative Penalties). Adjudication of a notice of violation requesting
both an administrative penalty and disgorgement of excess revenues may be
conducted within a single contested case proceeding. Additionally, for alleged
violations that have been reviewed in the informal procedure established by
this subsection, the commission staff must include as part of its prima facie
case:
(A) a statement either that--
(i) the commission staff has conducted the
investigation allowed by this section; or
(ii) the market entity has failed to comply
with the requirements of paragraph (5) of this subsection;
(B) a summary of the evidence indicating to
the commission staff that the market entity has violated one of the provisions
of this section;
(C) a summary of
any evidence indicating to the commission staff that the market entity
benefited from the alleged violation or materially harmed the market;
and
(D) a statement that the staff
has concluded that the market entity failed to demonstrate, in the course of
the investigation, the applicability of an exclusion or affirmative defense
under subsection (h) of this section.
(5) A market entity subject to an informal
fact-finding review or a formal investigation by the commission staff has an
obligation to fully cooperate with the investigation, to make its company
representatives available within a reasonable period of time to discuss the
subject of the investigation with the commission staff, and to respond to the
commission staff's requests for information within a reasonable time frame as
requested by the commission staff.
(6) The procedure for informal fact-finding
review established in this subsection does not prevent any person or commission
staff from filing a formal complaint with the commission pursuant to §
22.242 of this title (relating to
Complaints) or pursuing other relief available by law.
(7) If, in the course of its investigation
under this subsection, commission staff determines that formal enforcement
action is not warranted, the commission staff may work with the market entity
to ensure any issues of concern are addressed and appropriate remedial actions
have been taken.
(p)
Remedies. If the commission finds that a market entity is in violation of this
section, the commission may seek or impose any legal remedy it determines
appropriate for the violation involved, provided that the remedy of
disgorgement of excess revenues will be imposed for violations and continuing
violations of PURA §39.157 and may be imposed for other violations of this
section.
