Issues

PRR731

Summary
Action
Voting Record
Background
Key Documents

Summary

Title	Fuel Oil Index Price (FOIP)
Next Group
Next Step
Status	Approved on 11/13/2007
Effective Dates	12/01/2007

Action

Date	Gov Body	Action Taken	Next Steps
11/13/2007	BOARD	Approved
10/05/2007	TAC	Recommended for Approval	Board of Directors consideration
09/20/2007	PRS	Recommended for Approval	TAC consideration
08/23/2007	PRS	Recommended for Approval	PRS consideration of the Impact Analysis

Date

Gov Body

Action Taken

Next Steps

11/13/2007

BOARD

Approved

10/05/2007

TAC

Recommended for Approval

Board of Directors consideration

09/20/2007

PRS

Recommended for Approval

TAC consideration

08/23/2007

PRS

Recommended for Approval

PRS consideration of the Impact Analysis

Voting Record

Date	Gov Body	Motion	Result
11/13/2007	BOARD	To approve as recommended by TAC.	Passed
10/05/2007	TAC	To recommend approval of PRR731 as recommended by the PRS	Passed
09/20/2007	PRS	To forward this PRR and its IA to TAC	Passed
08/23/2007	PRS	To recommend approval of the PRR language as amended by Austin Energy comments and PRS.	Passed

Date

Gov Body

Motion

Result

11/13/2007

BOARD

To approve as recommended by TAC.

Passed

10/05/2007

TAC

To recommend approval of PRR731 as recommended by the PRS

Passed

09/20/2007

PRS

To forward this PRR and its IA to TAC

Passed

08/23/2007

PRS

To recommend approval of the PRR language as amended by Austin Energy comments and PRS.

Passed

Background

Status:	Approved
Date Posted:	Jul 2, 2007
Sponsor:	TXU Wholesale
Urgent:	No
Sections:	2, 6.8.1.11, 6.8.2.2, 6.8.2.3
Description:	This Protocol Revision Request (PRR) adds Fuel Oil Index Price (FOIP) definition in Protocol Section 2 and revises language in Sections 6.8.1.11, Section 6.8.2.2 and Section 6.8.2.3 to allow the use of FOIP to meet verifiable cost documentation requirements.
Reason:	The current ERCOT Protocols allow the use of a published natural gas price index to satisfy the verifiable cost documentation requirements for Ancillary Services payments to Qualified Scheduling Entities (QSEs). However, on many occasions, Market Participants (MPs) may be required to utilize fuel oil in lieu of natural gas (due to fuel curtailments, gas deliverability issues, or economics) to provide necessary Ancillary Services to ERCOT. Since the current ERCOT Protocols contain no direction on the proper pricing of fuel oil, ERCOT has assumed, for purposes of verifiable cost documentation that the only permissible index that can be used for verifiable fuel costs is natural gas prices as reflected by a published natural gas price index. Clearly, use of a natural gas price index does not properly compensate a MP for fuel oil used in the provision of Ancillary Services. Furthermore, use of an average inventory cost of fuel oil does not properly reflect the true cost of replacement of the fuel oil. Instead, it is more appropriate to use a FOIP, which accurately represents the price paid by a MP to replace fuel oil burned to provide Ancillary Services since such fuel oil must be replaced quickly at the prevailing market price in order to maintain adequate system reliability. Finally, use of a FOIP for the ERCOT zonal market design is consistent with the concept of a Fuel Oil Price (FOP) in the ERCOT Nodal Protocols (see Section 2, Definitions and Acronyms and Section 4, Day-Ahead Operations of the Nodal Protocols). This PRR addresses this issue by adding a Fuel Oil Index Price (FOIP) definition and changing the language in several Section 6 Protocols related only to documentation of verifiable costs associated with payments for Ancillary Services.