NOTICE DATE:  June 17, 2008

NOTICE TYPE:  M-A061708-01 Operations

CLASSIFICATION: Public

SHORT DESCRIPTION:  Market Clearing Price for Energy (MCPE) and Shadow Price Caps

INTENDED AUDIENCE:  All Market Participants

DAY AFFECTED:  June 17, 2008

LONG DESCRIPTION:  The ERCOT Technical Advisory Committee (TAC) and Wholesale Market Subcommittee (WMS) held a joint emergency meeting on Friday, June 13, 2008 to consider the direction from the Public Utility Commission of Texas (PUCT) to limit Balancing Energy Service prices in the ERCOT Region. On Tuesday, June 17, 2008, the ERCOT Board of Directors (Board) met and approved the recommendation from TAC and WMS to implement the Potomac Economics proposal changing the Shadow Price Cap and instituting a price cap on MCPEs. The Board directed ERCOT to implement the Potomac Economics proposal as quickly as possible but no later than end of day June 18, 2008.   

ERCOT Staff is targeting implementing the proposal at 1700 CPT on June 17, 2008.  ERCOT will send a follow up market notice when the proposal has been implemented.

Once implemented: (1) the Shadow Price Cap for Commercially Significant Constraints (CSCs) will change from $5,600 per MW to $5,000 per MW; and (2) the MCPE will be capped at the system-wide offer cap, which is currently the high system-wide offer cap (HCAP) of $2,250 per MWh. Also, the MCPE will be limited to the Balancing Energy Service offer cap floor of -$1,000.  When the MCPE is capped or limited, any non-zero Shadow Price for CSCs will be recalculated based on the capped or limited MCPE.

ACTION REQUIRED: There is no action required by ERCOT Market Participants. The HCAP for Balancing Energy Service and Ancillary Services remains unchanged at $2,250 per MWh. (See ERCOT Protocols §6.11.3(6)(d).

ADDITIONAL INFORMATION:   The directive requires ERCOT, on a forward-going basis, to expeditiously make revisions consistent with the newly-clarified Commission intent that the MCPE should not rise above the current offer cap of $2,250 per MWh.  To implement this directive, ERCOT will change the Shadow Price Cap in the Balancing Energy Service clearing software to $5,000.  Balancing Energy Service clearing will be allowed to programmatically solve up to the Shadow Price Cap of $5,000 for intervals where one or more CSCs are constrained.  If any zonal MCPE exceeds $2,250, ERCOT will adjust the MCPE to $2,250 after market clearing.  For intervals with no constrained CSCs, Balancing Energy Service clearing will programmatically stop at $2,250.

The MCPE is the price charged or paid for Balancing Energy Service procured from or provided to ERCOT in a Congestion Management Zone. The Shadow Price is the price related to a congested CSC and is used to settle Transmission Congestion Rights (TCRs).

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 e-mail at [log in to unmask].

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