-----Original Message-----
From: 	Twiggs, Thane  
Sent:	Wednesday, October 17, 2001 12:13 PM
To:	Gilbert-smith, Doug; Jester, Larry; Curry, Mike; Wagner, Joseph; Portz, David; Ochsner, Preston; Forney, John M.; Day, Smith L.; Herndon, Rogers; Benke, Terrell
Cc:	Nicolay, Christi L.; Ryall, Jean; Steffes, James D.
Subject:	ERCOT Update


The ERCOT Board approved the congestion zones for next year, 2001. The ERCOT Board accepted the 3 CSC 4 CM Zone model for use in commercial congestion management for 2002.  Effective date is January 1, 2002.  The three CSC's are Graham-Parker 345 kV DCKT, Sandow-Temple 345 kV DCKT and STP-DOW 345 kV DCKT.  The four CM Zones are West02, North02, South02 and Houston02.  A power point presentation along with a map is available at ftp://ftp.ercot.com/CSCDATA/csc.htm.  

Current Congestion Cost and Outlook.  The congestion charges that have been incurred are 55.6 million or 137 million depending on the methodology used to calculate the charge. If you look purely at the scheduled MWs then it is 137 MM based upon the ERCOT protocols. The actual cost to redispatch and clear congestion as of Sept. 22, 2001 was 55.6 MM. Both obviously are very high considering it is for one month of operation. 
When the 20 MM trigger was hit August 14, 2001, ERCOT has 6 month by Protocol and reaffirmed in the commission order to implement the full zonal model. This means that there will no longer be an uplift of interzonal congestion, rather a direct assignment of the charge. The charge may be partially offset by the TCR that will be auctioned. The PUCT has indicated an interest to move to direct assignment prior to the development and implementation of a TCR instrument as a hedge.  I am chairing the congestion management working group that is deciding the TCR issue and will be dealing with the local congestion issues when that trigger has been hit.  I will attach a copy of the current draft of the TCR white paper.  In short, the TCR is a financial option that can be purchased as hedge against zonal congestion.  There is no physical requirement for the TCR in that you do not have to physically schedule to receive the benefit of the TCR.  There will be an auction on or about the 4th of February, 2002 and the full zonal implementation will take place February 15, 2002.  The tentative schedule is as follows:
?	10/5/01 - Distribute draft TCR White Paper
?	10/22/01 - Review and edit draft TCR White Paper
?	10/30/01 - Distribute TCR White Paper to WMS
?	11/1/01 - WMS Meeting; vote on PRR
?	11/8/01 - TAC Meeting
?	11/19/01 - Board Meeting
?	12/4/01 - ERCOT issues notice of TCR Auction
?	2/15/02 - First effective date of TCRs and direct assignment of CSC Congestion Costs
 
Capacity Auction.  The capacity auction workshops have begun to rework that capacity rule and problems experienced with the last round.  There was an initial discussion on the problems that were experienced with credit and how the standard was one-way and the buyers of capacity were left without recourse.  There was a subsequent conference call with the credit professionals to discuss the issues ( I did not participate) and there will be an additional meeting on the 19th.  The purpose of the short-term meeting are to rectify issues such as credit and documents prior to the March and July 2002 auctions.  Substantive issues such as the actual products, zone determination and the auction process will be part of a rulemaking prior to the September 2002 auction which includes annual products. 

Protocol Implementation.  ERCOT is in the process of determining what should be included in the Phase II design which will begin January 2001.  There is a priority list that is currently under review by ERCOT vendors to determine lead times of Phase II items in an attempt to deliver Phase II items ASAP.  Parviz Adib from MOD stressed that there are certain issues that the PUCT expects to be addressed in Phase II.  Issues that do not require major system changes might still be doable in Phase II if the PRR Process is started immediately.  There is a placeholder in the Protocols related to BULs and loads acting as resources.

Mechanism for Simultaneous Procurement of Ancillary Services.   The PUCT has expressed concern that there could be price reversals associated with the ancillary services market (if it is assumed that the various ancillary services have different levels of value to the market).  The Board had approved a contingency plan to allow price modifications in the early markets, however the plan has not been implemented.  The WMS discussed, at length, the issue of simultaneously clearing all three markets - non-spinning, regulation, and responsive reserve.  A task force was formed to initially identify the principles for developing a mechanism for simultaneous procurement of ancillary services issue.  It was suggested that a consultant be hired to develop Protocol language once the principles are identified.  The first task force meeting was cancelled and has not been rescheduled.  

Demand-Side Task Force.  Jay Zarnikau reported on activities of the Demand-Side Task Force that is addressing Balancing Up Load (BUL) Market Issues and other demand-side issues.  The PUCT expects the full functionality to be in place on January 1, 2002.  The DSTF met last on October 1st (third meeting).  The DSTF completed a draft status report on Demand-Side Resources and Demand Responsiveness.  It was noted that the work of the DSTF is not complete and has not been approved by any ERCOT Committee or the Board.  However, ERCOT was required to file a report on these issues in the STF Report.  The report reviews the policy considerations that have prompted interest in the demand side of ERCOT's market, reviews the PUCT's directive, reviews the role of demand-side resources in ERCOT's markets, and identifies the issues and impediments that the DSTF is presently addressing.  It also summarizes the options discussed by the DSTF to date.  The PUCT staff has suggested that ERCOT hire a consultant, such as Eric Hirsch, to provide more resources for this effort.  The group expects to wrap up BUL issues and address direct load control issues at its next meeting.

Unit Specific Deployments.  At the next WMS meeting October 24, 2001, there will be a discussion regarding unit specific deployments and ERCOT will discuss the issues and the difficult that participants are having to meet the ramp rates of the deployments.  The WMS will develop a list of issues and case studies for ERCOT to discuss.  The WMS also briefly discussed PRR 282 related to defining OOME as an Instructed Deviation.