ERCOT 4CP - June 2013 Review

The Electric Reliability Council of Texas (ERCOT) has a unique capacity cost allocation program to recover transmission costs for the ERCOT grid. This cost allocation method is referred to as 4CP because it refers to the four critical peaks, namely the peak hour on the ERCOT grid for each summer month. Transmission costs are allocated to each interval metered commercial and industrial customer based on their measured demand during the ERCOT peak hours that occur in June, July, August, and September. At the end of the summer, each customer is assigned a tag based on their usage during each peak hour. This tag is found by multiplying the customer's demand during each monthly peak hour by 25% and summing the results for all four months.  The tag then takes effect in the following year for billing purposes.

Generally speaking, each 1 Megawatt (MW) of capacity tag for ERCOT 4CP results in an additional annual cost of approximately $25,000. For customers with large loads or a low opportunity cost of interruption, it makes sense to try to predict when the ERCOT monthly system peak hour will occur and proactively shed load to get a lower capacity tag. There are several services out there that offer prediction services as to when ERCOT peak hours may occur. Thomas Engineering is one company that offers such a service and Energy Tariff Experts recommends them. Since the total cost avoidance opportunity comes out to ~ $25,000 and it's based on coincident demands over four months, then 1 MW of coincident demand in each summer month costs ~ $6,250 (25k/4). In most months, customers can be expected to curtail at least four times for a period of 2.5 hours. As a result, customers must have an opportunity cost of curtailment below $625 (($6,250/(2.5 x 4)) per hour per 1 MW of demand for managing a 4CP tag to make economic sense.

ERCOT 4CP June 13.png

Although ERCOT doesn't release final information regarding the exact monthly system peaks until the fall, the preliminary data from ERCOT is good enough for any ERCOT 4CP participant to see how they did for June.  Luckily, June 2013 got off to a slow start and didn't get hot until the last week. The graph at the right shows the ERCOT daily peak system loads for each day in June. The last week was a scorcher and the monthly peak occurred on June 27th in the hour ending at 17:00.

ERCOT 4CP June 13_1.png

Calling the ERCOT system peak load can be quite difficult. Although the ERCOT system peaks on the hottest days, the weather in Houston and Dallas determines which days set peaks. If there are thunderstorms in either city, its unlikely that the day will set a system peak for the month. The graph to the right shows the load profile for ERCOT system demands for each day in June 2013. The three highest days have been color coded for ease of viewing. You'll note that the days with the potential to set monthly peaks really don't begin to separate until the early afternoon.


ERCOT 4CP June 13_2.png

Its nearly impossible to make an accurate potential peak day prediction for ERCOT before noon on any day that is very hot. The second graphic shows the highest load days in June, zoomed in just to show the afternoon hours. You'll note that the separation between the top three days was not very large and either of the top two days could have ended up setting the peak for June. July isn't done yet, but the week of July 8th sure was hot so we may or may not have set the peak for July.