News Release

January 16, 2013

Statement of ERCOT CEO Trip Doggett regarding Jan. 7, 2013, letter from NERC CEO Gerry W. Cauley

ERCOT understands the concerns expressed by Mr. Cauley on behalf of the North American Electric Reliability Corporation (NERC). In recent years, ERCOT’s long-term Capacity, Demand and Reserves report has indicated that planning reserve margins could drop well below our 13.75 percent target within the coming years. In fact, our December 2012 report indicates that the planning reserve margin could fall to 13.2 percent as soon as this coming summer and will continue to tighten over time without investment in new generation resources and demand response in this region.

We take this issue very seriously, and the staff and Board of ERCOT consider electric reliability and future resource adequacy our top priorities. ERCOT and the Public Utility Commission of Texas (PUC) recognize our critical role in ensuring the lights stay on in a variety of conditions. Electricity is vital to our economy and our way of life, and we continue to explore policy and market-based solutions to address future resource adequacy concerns.

Addressing these issues calls for decisive action. Since we began work with the PUC on this issue about two years ago, we have focused on solutions that ensure our actions do not artificially lower prices and discourage new generation investment, offer options during shortage and emergency conditions, and provide information that helps policymakers make well-informed decisions. As part of this process, the PUC has increased the system-wide offer cap to help encourage new investment, and ERCOT has revised protocols to enable it to call certain units into service if they are needed to ensure reliability. Last winter, ERCOT also issued its first Seasonal Assessment of Resource Adequacy to evaluate near-term seasonal reliability risks associated with resource adequacy.

While resource adequacy is an important indicator, ongoing electric reliability relies on balancing electric supply and demand every second of every day. We have a variety of tools to help maintain a reliable and stable grid in a wide range of conditions. Those tools include further development of voluntary demand response options for those rare days when extreme weather and power plant outages result in tight operating reserves that threaten reliability. We also have expanded our communication capabilities to improve consumer awareness and encourage conservation during tight conditions, and we appreciate that help during those rare occasions.

There is still work to be done on this complex issue, and there are no simple solutions. The PUC, which oversees ERCOT and the Texas electric market, also remains focused on future resource adequacy within the ERCOT region. We will continue to work with the PUC, NERC, Texas Reliability Entity and ERCOT market participants to ensure that the Texas electric market meets the challenges ahead.?

NOTE TO READERS: This statement was provided in response to press inquiries beginning Jan. 9, 2013. Following is a link to the Jan. 7 letter from the North American Electric Reliability Corporation.

Letter to ERCOT CEO Trip Doggett from NERC CEO Gerry W. Cauley

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The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to more than 25 million Texas customers -- representing about 90 percent of the state’s electric load. As the independent system operator for the region, ERCOT schedules power on an electric grid that connects more than 46,500 miles of transmission lines and 600+ generation units. It also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for nearly 8 million premises in competitive choice areas.. ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature. Its members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities, transmission and distribution providers and municipally owned electric utilities.

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