Texas electricity retailers fight for access to ERCOT computer capacity

by Ann de Rouffignac
OGJ Online

HOUSTON, July 30 -- With a troubled pilot program set to begin Tuesday, Texas electricity retailers asked state regulators to settle a dispute over access to the independent system operator's limited computer capacity.

Two big retailers filed papers claiming it could take up to 8 months to switch customers from the incumbent utilities, under a scheme proposed by the Public Utility Commission staff, despite reported improvements by top officials at the Electric Reliability Council of Texas Inc.

Regulators came up with an allocation system after retailers began jockeying for position over whose customers would be served first, once it became clear ERCOT's computers couldn't handle the backlog in a timely fashion.

Shell Energy Services Co. and New Power Co. claim to have the largest number of customers and want capacity allocated by market share. Smaller retailers want each retailer to receive the same number of switches regardless of number of customers.

The Texas retail electricity pilot, scheduled to begin June 1, has since been rescheduled three times. Under ERCOT's latest proposal the pilot is set to begin Tuesday. Problems surfaced after retailers complained the independent system operator's computers weren't functioning correctly and couldn't properly switch customers participating in the pilot program from utilities to new suppliers.

About 82,000 out of a possible 250,000 customers have signed up to participate in the pilot. Participation in the pilot was limited to 5% of the market. To date, ERCOT can only process and switch two customers/day/retailer. That rate is supposed to ramp up to 10/day, then 100/day and finally 21,000/day.

In a interview, Tom Noel, CEO of ERCOT, said the backlogged customers should be switched to new suppliers by the end of August, and all of those customers would start receiving power from their new retail electric provider by the end of September. (OGJ Online, July 25.)

In a joint July 26 filing, New Power, Purchase, NY, and Shell Energy, an affiliate of Shell Oil Co., Houston, said that "assertion is incorrect -- simple arithmetic demonstrates the error in reasoning." The companies said it would take twice the time or until the end of September, even if ERCOT achieves the rate of processing customers previously announced. But it could be as long as 8 months under one proposal.

They asserted their early marketing efforts to sign up customers and ensure the success of the pilot should be "rewarded." Smaller retailers argued against "preferential" allocation of ERCOT's computer switching capacity.

'Big dogs eat first'?
"New Power and Shell may argue that equal allocation means, 'big dogs eat first.' This is not true. Equal allocation means 'all dogs eat at the same time,'" claimed AES NewEnergy Inc., a unit of AES Corp., Arlington, Va., and Green Mountain Energy Co., Austin.

To settle the dispute over how to allocate ERCOT's limited ability to switch customers from utilities to alternate suppliers, the PUC staff proposed a three tier plan that would group retailers based on the number of customers enrolled.

Retailers assigned to a tier would be allotted the same number of switches. Those retailers with the highest number of customers would be assigned to the tier with the highest number of switches. Because of the number of customers that New Power and Shell have enrolled, they would be placed in the highest tier and would be allocated 30% of ERCOT's 1,320/day of switching capacity, according to documents filed by New Power and Shell.

"Using staff's proposed allocation percentage and assuming a total switching rate of 1,320 per day, it will take over 8 months to switch our existing customers," the filing stated. Shell and New Power said together they have signed up 75% of the customers participating in the pilot.

Green Mountain said the commission shouldn't favor one retailer over another because of the "neutrality issue," said Todd Kimbrough, manager of government affairs at Green Mountain. "We must maintain a policy of equal allocation."

Earlier, this month Shell and New Power pointed out errors produced by ERCOT's computer problems concerning the switching of customers. Shell asked state regulators to delay the pilot until the computer problems could be solved. Other retailers urged the PUC to allow it to go forward. The ERCOT board met July 25 and agreed systems were ready to allow the test of the competitive market to begin.