NOTICE DATE: February 14, 2021

NOTICE TYPE: M-A021421-01 Operations

SHORT DESCRIPTION: Notice of U.S. Department of Energy Section 202(c) Order affecting the ERCOT Region

INTENDED AUDIENCE: ERCOT Market Participants

DAYS AFFECTED: February 14, 2021 through February 19, 2021

LONG DESCRIPTION: Today, ERCOT requested an emergency order from the U.S. Secretary of Energy (“Secretary”) pursuant to Section 202(c) of the Federal Power Act (“FPA”) due to the expected impact of the extreme cold weather event on electric demand and generator availability and the likelihood that ERCOT will need to resort to rotating outages on one or more days in the next week.  The Secretary granted ERCOT’s request and issued an order finding that an electric reliability emergency exists within the State of Texas that requires intervention in order to preserve the reliability of the bulk electric power system.  The order authorizes certain electric generating units located within the ERCOT interconnection to operate up to their maximum generation output in certain limited circumstances, notwithstanding federal air quality or other permit limitations.  The order is effective immediately and will remain effective through Friday, February 19, 2021.  A copy of the order is attached to this Market Notice.

More specifically, the order provides the following two allowances for any generator identified as a "Specified Resource" under the Order :

• Allowance 1: With respect to any Specified Resource that is an ERCOT Generation Resource or Settlement Only Generator whose operator notifies ERCOT that the unit is unable, or expected to be unable, to produce at its maximum output due to an emission or effluent limit in any federal environmental permit, ERCOT shall ensure that such Specified Resource is only allowed to exceed any such limit during a period for which ERCOT has declared an Energy Emergency Alert (EEA) Level 2 or Level 3. This incremental amount of restricted capacity would be offered at a price no lower than $1,500/MWh. Once ERCOT declares that such an EEA Level 2 or 3 event has ended, the unit is required to immediately return to operation within its permitted limits;
• Allowance 2: With respect to any Specified Resource that is an ERCOT Generation Resource whose operator notifies ERCOT that the unit is offline or would need to go offline due to an emission or effluent limit in any federal environmental permit, and to which ERCOT has issued a Reliability Unit Commitment (RUC) instruction, the operator may make all of the unit’s capacity available to ERCOT for dispatch during a period for which ERCOT has declared an EEA Level 2 or Level 3. This incremental amount of restricted capacity would be offered at a price no lower than $1,500/MWh. Once ERCOT declares that such an EEA Level 2 or Level 3 event has ended, the unit is required to immediately return to operating at a level below the higher of its minimum operating or the maximum output allowable under the permitted limit.

Any Resource Entity that intends to utilize either Allowance 1 or Allowance 2 identified above must notify ERCOT in advance of using the allowance.  The notification should be sent to Pete Warnken, ERCOT Manager of Resource Adequacy, at pete.warnken@ercot.com, and should include the following information for each Generation Resource or Settlement Only Generator designated for the allowance:

• Which Generation Resource or Settlement Only Generator is being designated for the allowance,
• The amount of incremental capacity from the generator that is expected to be made available during the EEA Level 2 or higher condition,
• The fuel type of the generator,
• The anticipated category or categories of emissions, effluent, or other limitations under one or more federal environmental permits that results in a limitation on the output of the generator (e.g., SOx, NOx, Hg, waste water),
• Which of the above two allowances under the DOE order is being selected for each such generator, and
• For any Generation Resource designated for Allowance 2, confirmation that the capacity is available for RUC by ERCOT at any time after providing the notification. 

Following ERCOT's receipt of each designation, ERCOT will notify DOE that the generator has been designated for an allowance pursuant to the order. As provided in the Secretary's order, the generator's authorization to operate beyond a permitted limit is subject to the approval of the DOE. If the DOE rejects the Resource's classification as a Specified Resource pursuant to the order, or at any time determines that the Resource is no longer approved as a Specified Resource, the generator will no longer be eligible for the allowance permitted under the order. The order indicates that the DOE will maintain an updated list of Specified Resources on its website.

For any generator that has been designated under Allowance 2, ERCOT will issue a RUC instruction committing the designated unit through Friday, February 19, 2021.  The timing of that instruction is within ERCOT’s sole discretion.  The instruction may be withdrawn if necessary to maintain local reliability, or if directed by the DOE.

In accordance with the order, to ensure that Generation Resources observe federal emissions or other limits outside of an EEA Level 2 or 3 condition, each Qualified Scheduling Entity (QSE) for a Generation Resource designated under Allowance 1 or 2 above must telemeter a High Sustained Limit (HSL) that reflects the higher of the maximum output level under the federal permit restriction and the Low Sustained Limit (LSL).  The QSE must also ensure that the High Emergency Limit (HEL) value for the Resource reflects only the additional capacity that would be available in an EEA Level 2 or 3.  Once an EEA Level 2 or 3 is declared and until ERCOT has declared that the EEA Level 2 has ended, the QSE must update the telemetered HSL to reflect the maximum output capability of the Resource.  During any EEA Level 2 or 3 condition, the QSE must ensure that all of the additional capacity made available under the allowance is offered at a price that is no lower than $1,500/MWh. After ERCOT declares the EEA Level 2 or 3 condition has ended, the QSE must again update the HSL telemetry to reflect the higher of the maximum output level under the federal permit restriction and the Resource’s LSL.  Through the end of the day on Friday, February 19, 2021, the telemetered HEL value should reflect the maximum output capability of the Resource.

To ensure that Settlement Only Generators observe federal emissions or other limits outside of an EEA Level 2 or 3 condition, each QSE for a SOG designated under Allowance 1 or 2 above must ensure that the SOG operates within the limits of the permit under all conditions other than EEA Level 2 or 3. Once an EEA Level 2 or 3 condition is declared, the SOG may increase its output to a level that may result in a permit exceedance. After ERCOT declares the EEA Level 2 or 3 condition has ended, the SOG must reduce its output to a level that complies with the federal permit restriction.

Failure of a QSE or Resource Entity to adhere to the conditions of the allowances established in the Secretary's order may result in liability under federal law for violating the restrictions established in the relevant permits.

The Department of Energy has informed ERCOT that it will perform an event assessment after the cold weather event has concluded, and that this assessment will include an evaluation of individual generator permit exceedances during the event as well as revenue resulting from the use of these exceedences. ERCOT requests that each Resource Entity retain all records pertaining to such exceedances, including the type and volume of any exceedance, for the purposes of this assessment.  Each Resource Entity should consider that it may be required to provide such information, or any other information relevant to its operations within the above allowance, to ERCOT and/or DOE as part of DOE’s event assessment.

ERCOT will host a WebEx at 10:00 p.m. today, February 14, 2021, to answer questions regarding the effect and application of the Section 202(c) Order.  Details are as follows:

Webex URL: https://ercot.webex.com/

Meeting Number: 182 828 5850

Meeting Password: DOE

CONTACT: If you have any questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Services phone number at (512) 248-3900 or contact ERCOT Client Services via email at ClientServices@ercot.com.

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