Required under Senate Bill 3 adopted during the 87th Texas Legislature, the new “Emergency Pricing Program” rules address two interworking pricing caps in the ERCOT wholesale power market.
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The PUC has adopted new rules limiting emergency power prices in the ERCOT market. The new rules include recommendations from city groups and have taken effect in time for the current winter season.
Required under Senate Bill 3 adopted during the 87th Texas Legislature, the new “Emergency Pricing Program” rules address two interworking pricing caps in the ERCOT wholesale power market. The first, the High Systemwide Offer Cap, bars generators from offering power at prices higher than $5,000 per megawatt hour. However, under the adopted rules, if prices remain at that high cap for 12 hours during a 24-hour period, then the second cap —a “Low Systemwide Offer Cap” of $2,000 — goes into effect for a limited period, replacing the high cap.
The Texas Legislature reformed the emergency pricing rules after Winter Storm Uri in 2021 led to several days of prices of the High Systemwide Offer Cap, then set at $9,000 per mWh. As a result, consumers were saddled with billions of dollars in excess costs and several power companies went bankrupt.
The Public Utility Commission issued a Proposal for Publication on September 14, received comments from 12 parties — including city groups — and then adopted final rules last month. The rules went into effect immediately.
Details of the New Rules
- ERCOT must issue a public notice upon activation or deactivation of the Emergency Pricing Program.
- Emergency pricing concludes either 24 hours after activation of the Emergency Pricing Program or 24 hours after the end of an ERCOT Energy Emergency Alert — whichever is later.
- Generators must follow a review process to recover verifiable fuel costs that they incur above the emergency cap. Under the rules, generators must file with ERCOT a reimbursement request, and most provide fuel purchase contracts and other documentation.
- Reimbursement costs will be recovered by Load Serving Entities within ERCOT, on a load ratio-share basis.
- ERCOT must file a preliminary report to the PUC within 10 days of any activation of the Emergency Pricing Program, and a final report within 90 days.
City Involvement in the Rulemaking
Commission Staff initially proposed a minimum Emergency Pricing Program duration of 72 hours, regardless of grid conditions. The Steering Committee of Cities Served by Oncor and the Texas Coalition for Affordable Power — two city groups — filed comments urging that the PUC instead retain authority to adjust the duration of the event. The city groups made the recommendation out of concern that an unnecessarily long EPP could result in excessive generator cost recoveries. Although the final rule did not grant the PUC discretion to adjust the EPP, it shortened the minimum EPP duration and therefore addressed cities’ verifiable cost concerns.
The PUC also addressed transparency concerns raised by cities by adopting a requirement that ERCOT release an initial report about the emergency event within 10 working days of the event — as opposed to the 60 days proposed in the draft rules.