1. PRS Rejection of NPRR 784 - Mitigated Offer Caps for RMR Units
PRS Advocate Presentation
by Katie Coleman for Texas Industrial Energy Consumers

2. NPRR 784 Overview
NPRR 784 would only apply when generator offers are mitigated because there is inadequate competition.
When there is adequate competition, RMR units will be offered at $9,000/MWh under either the status quo or NPRR 784.
When there is inadequate competition, RMR Units are currently subject to the same offer mitigation as other units. Greens Bayou 5 (GBY5) would likely be offered at around $50-$60/MWh.
NPRR 784 would instead require all RMR units to be offered at the highest possible price that would still allow SCED to dispatch the unit for congestion. Estimates are in the $ /MWh range for GBY5.

3. PRS Concerns with NPRR 784 Punitive to Loads.
Customers are paying more than $60 million for the Greens Bayou 5 RMR unit to maintain local reliability until the Houston Import Project is in service. Customers should not be forced to pay $ /MWh (to the RMR unit and all other generators in the area) to use the unit for that purpose.
Incentivizes Retirements by Providing Scarcity Pricing in Non-Scarcity Conditions.
NPRR 784 creates an incentive for a generator to retire a marginal unit if it believes the unit will set scarcity prices for other units through a high mitigated offer cap. Generators would be able to do with an RMR unit what they cannot do otherwise because of market power protections. This also creates local market power concerns.
Prevents RMR Unit from Solving Other Constraints.
NPRR 784 also precludes an GBY5 from being used to solve any constraint other than Singleton-Zenith. GBY5 was put under an RMR contract to solve multiple other constraints. NPRR 784 would prevent loads from getting the fair value of the contract.

4. Responses to Proponents’ Arguments
Current RMR mitigated offer caps do not undermine competition.
NPRR 784 only applies in non-competitive situations by definition. RMR units are dispatched last (and at $9,000/MWh) when there is competition.
If dispatching the unit last were the sole objective, the RMR unit could be priced at the lowest offer that would still put it last. Instead, the NPRR prices the unit at the highest offer possible while still making the unit visible to SCED to address congestion.
This is an effort to inappropriately create scarcity pricing in a non-competitive, non-scarce situation.

5. Responses to Proponents’ Arguments
NPRR 784 is not necessary to minimize RMR run-time and uplift.
The RMR contract already limits the periods where GBY5 can be used to minimize costs to customers, so it is not clear that putting the unit last provides significant incremental benefits.
If there are significant benefits, those could be obtained by pricing the RMR unit at the lowest possible price needed to put it at the end of the bid stack. It is not necessary to price the unit at $ /MWh.
There has been no analysis to show that running the unit less often and at a higher price will maximize revenue offsets for the RMR contract. Running the unit more often, and at a lower price, could provide a greater revenue offset.

6. Responses to Proponents’ Arguments
NPRR 784 is not justified by resource adequacy objectives.
GBY5 is an RMR for local reliability, not system-wide capacity. This type of need can be addressed either through transmission or generation.
The Houston Import Project is the “exit strategy” for the GBY5 RMR. Setting high prices in non-competitive conditions between now and 2018 will not incentivize new resources because a transmission solution is already underway. Customers should not be punished with high prices purely due to regulatory lead time in building transmission.
Historically, high prices in Houston have correlated with suppressed prices in the North Zone, which undermines signals to develop new resources outside of Houston.