NOTICE DATE: September 7, 2023

NOTICE TYPE: M-C090723-01 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: September 7 and 8, 2023

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 concerns about ERCOT’s ability to meet load and minimum reserve requirements today and tomorrow on account of abnormally high demand associated with hot weather.

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 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 2100 Central Daylight Time (CDT) on Friday, September 8, 2023. A copy of the order is attached to this Market Notice.

More specifically, the order provides the following two allowances for any qualifying generator:

Allowance 1: For any 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 emissions or other limit in any federal environmental permit, the unit will be allowed to exceed any such limit only between the hours of 1700 and 2100 on Thursday, September 7, 2023, and 1700 and 2100 on Friday, September 8, 2023, and only if ERCOT has declared an Energy Emergency Alert (EEA) Level 2 or Level 3 that remains in effect during all or any part of either such period. This incremental amount of restricted capacity would be offered at a price no lower than $1,500/MWh. Once ERCOT issues a declaration indicating that it is no longer in an EEA Level 2 or 3, or at 2100, whichever occurs first, the unit would be required to return to operation within its permitted limits as expeditiously as possible. And at all other times, the unit would be required to operate within its permitted limits.

Allowance 2: For any Generation Resource whose operator notifies ERCOT that the unit will be offline at any point between the hours of 1700 and 2100 on Thursday, September 7, 2023, and 1700 and 2100 on Friday, September 8, 2023, or would need to go offline during either such period, due to an emissions or other limit in any federal environmental permit, if ERCOT has declared or expects to declare an EEA Level 2 or Level 3 that is expected to be in effect during all or any part of that period, then ERCOT may issue a Reliability Unit Commitment (RUC) instruction in advance of that period or during that period directing the unit operator to bring the unit online, or to keep the unit online, and to operate at the minimum level at which the Resource can be sustainably operated. If ERCOT issues the instruction in advance of either such period, then ERCOT shall endeavor to commit the unit at a time that allows the unit to reach its Low Sustained Limit (LSL) no earlier than the beginning of that period or the start of any EEA Level 2, whichever is expected to occur last. An operator subject to a RUC instruction described in this allowance would be allowed to make all of the unit’s capacity available to ERCOT for dispatch during any period between the hours of 1700 and 2100 on Thursday, September 7, 2023 and 1700 and 2100 on Friday, September 8, 2023 for which ERCOT has declared an Energy Emergency Alert (EEA) Level 2 or Level 3. This capacity would be offered at a price no lower than $1,500/MWh. Once ERCOT issues a declaration indicating that it is no longer in an EEA Level 2 or 3, or at 2100, whichever occurs first, the unit would be required to return to operation within its permitted limits as expeditiously as possible unless the unit is subject to a subsequent RUC instruction that complies with the terms specified under this allowance.

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 Kristi Hobbs, Vice President of System Planning and Weatherization, at [log in to unmask], and should include the following information for each Generation Resource or Settlement Only Generator designated for the allowance:

the name and unit code of the Generation Resource or Settlement Only Generator 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 3 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, wastewater),
which of the above two allowances is being selected for each such generator, and
for any Generation Resource designated under 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 the Department of Energy (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 generator's eligibility for the allowance pursuant to the order, or at any time determines that the generator is no longer eligible for an allowance, the generator will no longer be eligible for the allowance permitted under the order. The order indicates that the DOE will maintain on its website an updated list of generators that have requested operation under either of the allowances.

For any Generation Resource that has been designated under Allowance 2, ERCOT will, if necessary, issue one or more RUC instructions committing the designated unit for any part of the period authorized. The timing of any RUC instruction is within ERCOT’s sole discretion. The instruction may be withdrawn if necessary to maintain local reliability, to conform with the DOE’s order, or if directed by the DOE.

In accordance with the order, to ensure that Generation Resources observe federal emissions or other limits at all times outside of the specific time periods and circumstances authorized under Allowance 1 and 2, each Qualified Scheduling Entity (QSE) for a Generation Resource designated under Allowance 1 or 2 above must, at any such time, telemeter a High Sustained Limit (HSL) that reflects the higher of the maximum output level under the federal permit restriction and the 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 within any of the time periods authorized under Allowance 1 and 2, and until the earlier of ERCOT’s declaration that it is no longer in an EEA Level 2 or 3 condition or 2100, the QSE must update the telemetered HSL to reflect the maximum output capability of the Resource. During any EEA Level 2 or 3 condition that occurs during either of the periods authorized under Allowance 1 and 2, 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. The QSE bears full responsibility to ensure its offer complies with this offer floor; ERCOT systems will not automatically apply such a floor. Once ERCOT declares that it is no longer in an EEA Level 2 or 3 condition, or at 2100, whichever occurs first, the QSE must update the HSL telemetry to again reflect the higher of the maximum output level under the federal permit restriction and the Resource’s LSL.

Settlement Only Generators must observe federal emissions and other limits outside of the specific time periods and circumstances described under Allowance 1. Once an EEA Level 2 or 3 condition is declared during the period identified under Allowance 1, the SOG may increase its output to a level that may result in a permit exceedance. Once ERCOT declares that it is no longer in an EEA Level 2 or 3 condition, or at 2100, whichever occurs first, 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.

Paragraph E of the Secretary’s order requires ERCOT to provide certain information, including information concerning exceedances of environmental limits, by October 6, 2023. Paragraph E also requires ERCOT to provide more comprehensive information, including any updates to exceedance information, emissions data, fuel data, previous emissions reporting data, and any other information requested by the DOE. Any QSE that designates a unit for operation under either Allowance 1 or 2 must provide the information required by the Secretary’s order to facilitate ERCOT’s compliance with its reporting responsibilities under the order.

In the event of any conflict between this Market Notice and the Secretary’s order, the Secretary’s order governs.

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 [log in to unmask].

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