1. (a) Applicability. The performance requirements set forth in this section apply to an electric generation facility in the ERCOT region:

   1. (1) for which an original standard generation interconnection agreement is signed on or after January 1, 2027; and
   2. (2) that has been in operation for at least one year prior to the beginning of a season.

2. (b) Definitions. The following words and terms, when used in this section, have the following meanings unless the context indicates otherwise.

   1. (1) Baseline period--A daily set of hours encompassing all seasonal morning and evening ramp hours, as determined by ERCOT, and any additional high-risk hours identified in each season as part of ERCOT's annual North American Electric Reliability Corporation (NERC) Probabilistic Assessment.
   2. (2) Electric generation facility--A generation resource, as that term is defined in the ERCOT protocols.
   3. (3) Distribution energy storage resource--A distribution energy storage resource, as that term is defined in the ERCOT protocols.
   4. (4) Distribution generation resource--A distribution generation resource, as that term is defined in the ERCOT protocols.
   5. (5) Energy storage resource--An energy storage resource, as that term is defined in the ERCOT protocols.
   6. (6) In operation--The date when ERCOT approves the electric generation facility for commercial operation.
   7. (7) Interval--Each instance in which security constrained economic dispatch (SCED) runs.
   8. (8) Load resource--A load resource, as that term is defined in the ERCOT protocols.
   9. (9) Low operation reserve hour--An hour within the baseline period when the physical responsive capability (PRC) falls below 3,000 MW for at least 15 minutes.
   10. (10) Owner or operator--A resource entity that owns or operates an electric generation facility represented by a qualified scheduling entity.
   11. (11) Qualified scheduling entity (QSE)--A qualified scheduling entity, as that term is defined in the ERCOT protocols, that represents an electric generation facility on behalf of an owner or operator for operational and settlement purposes.
   12. (12) Season--Winter (December 1 through February 29), Spring (March 1 through May 31), Summer (June 1 through September 30), and Fall (October 1 through November 30).
   13. (13) Seasonal average generation capability--The seasonal rated capacity of the electric generation facility at the beginning of the relevant season multiplied by the lesser of 0.75 and the average of the ratio of real-time telemetered high sustained limit (HSL) to the seasonal rated capacity of the electric generation facility across all intervals of the same season during the prior five years.
   14. (14) Seasonal rated capacity--The maximum generating capability of an electric generation facility, expressed in MW, that an electric generation facility can sustain under expected ambient conditions for a given season, as determined by ERCOT at the start of that season, according to the value that the electric generation facility reported to ERCOT.
   15. (15) Self-generator--An entity registered with the commission as a self-generator.
   16. (16) Settlement-only generator--A settlement-only generator, as that term is defined in the ERCOT protocols.

3. (c) Pre-season calculation and notices.

   1. (1) Seasonal average generation capability calculation.

      1. (A) ERCOT must calculate the seasonal average generation capability for each electric generation facility subject to the performance requirements under this section using the following formula:
         Attached Graphic
         

         1. (i) Where:
         2. (ii) SAGC = seasonal average generation capability.
         3. (iii) HSL = high sustained limit.
         4. (iv) SRC = seasonal rated capacity.
         5. (v) The first term in the minimum function calculates the ratio of real-time telemetered HSL and SRC across all intervals (i) that occurred during the prior five years of the same season ( denotes the total number of such intervals); if less than five years of operating data exists, all available data from the same season must be used. The minimum of this ratio and 0.75 is multiplied by the SRC at the start of the compliance season (SRC_t) to determine SAGC. The second term in the minimum function (0.75) effectively creates an upper bound on the resulting SAGC.
      2. (B) The seasonal average generation capability must be specific to each electric generation facility and not a uniform value applied to all electric generation facilities.
   2. (2) Notice of seasonal average generation capability. Prior to each season, ERCOT must notify the QSE representing an electric generation facility of the facility's seasonal average generation capability for the upcoming season.
   3. (3) Notice of baseline period. Prior to each season, ERCOT must provide public notice of the baseline period for the upcoming season.

4. (d) Performance requirement. Each season, an electric generation facility must operate or be available to operate at or above the facility's seasonal average generation capability when called on for dispatch during a low operation reserve hour that occurs within a baseline period. The low operation reserve hours are limited to a maximum of 15 hours per season. There is no performance requirement in a season that does not experience a low operation reserve hour. The performance requirements set forth in this subsection do not apply to:

   1. (1) an energy storage resource;
   2. (2) a resource that operates as a must-run alternative unit, as that term is defined in the ERCOT protocols;
   3. (3) a resource that operates as a reliability must-run unit, as that term is defined in the ERCOT protocols;
   4. (4) a resource that is contracted with ERCOT to provide capacity under ERCOT Protocol Section 6.5.1.1;
   5. (5) a settlement-only generator;
   6. (6) a self-generator; or
   7. (7) an electric generation facility that is co-located with a load in a private use network provided that more than 50% of the electric generation facility's nameplate capacity is dedicated to serving the load within the private use network.

5. (e) Firming.

   1. (1) Firming to meet performance requirement. The owner or operator of an electric generation facility may satisfy the facility's performance requirements under this section by entering into a trade arrangement with a firming resource. A trade arrangement may be for a firming resource represented by the same QSE that represents the electric generation facility that is subject to the performance requirements or for a firming resource represented by a QSE that is different from the QSE that represents the electric generation facility that is subject to the performance requirements. Firming resources may be located on-site at the electric generation facility or off-site. The following resource types are eligible to provide firming service:

      1. (A) another electric generation facility;
      2. (B) an energy storage resource;
      3. (C) a distribution generation resource that is registered with ERCOT;
      4. (D) a distribution energy storage resource that is registered with ERCOT; or
      5. (E) a load resource.

   2. (2) Capacity available to provide firming service.

      1. (A) An electric generation facility, including an existing electric generation facility that is not subject to the performance requirements under this section, may provide firming service equal to the facility's average high sustained limit in a given hour, across all intervals in which the facility was available (i.e., showing any status other than OUT), less the facility's own seasonal average generation capability.
      2. (B) An energy storage resource, a distribution generation resource that is registered with ERCOT, and a distribution energy storage resource that is registered with ERCOT may provide firming service equal to the resource's average high sustained limit in a given hour, across all intervals in which the facility was available (i.e., showing any status other than OUT).
      3. (C) A load resource may provide firming service equal to its average consumption in a low operation reserve hour, adjusted for any ERCOT deployments, less its low power consumption in that hour.
   3. (3) Firming obligation. A QSE representing a firming resource that provides firming service for an electric generation facility that is subject to the performance requirements under this section assumes a firming obligation, including the financial penalties associated with the performance requirements for that obligation.
   4. (4) Disclosure to ERCOT. A QSE that satisfies the performance requirements under this section by providing firming service to an electric generation facility through a trade arrangement must disclose the arrangement to ERCOT and provide ERCOT with any additional information reasonably required for ERCOT to perform its duties under this section, including confirmation by both parties to the arrangement.

6. (f) Financial penalty and financial incentive.

   1. (1) Financial penalty. ERCOT must impose a financial penalty on a QSE representing an electric generation facility that fails to satisfy its performance requirements under this section. The QSE representing a firming resource that assumes a firming obligation is subject to a financial penalty if the firming resource fails to satisfy the performance requirements subject to the obligation.

      1. (A) A financial penalty imposed by ERCOT must be 20% of the system-wide offer cap that is in effect for each MWh of deficiency.
      2. (B) In seasons in which more than 15 low operation reserve hours occur during the seasonal baseline period, only the 15 low operation reserve hours with the lowest levels of PRC are subject to the financial penalty under this section.

   2. (2) Financial penalty exemption.

      1. (A) An electric generation facility is exempt from assignment of a financial penalty under this section if the facility is unavailable during the applicable hour due to:

         1. (i) a planned maintenance outage, opportunity outage, or derate that was approved by ERCOT;
         2. (ii) a transmission outage;
         3. (iii) a market suspension, as that term is defined in the ERCOT protocols; or
         4. (iv) a derate or outage to satisfy environmental compliance requirements.
      2. (B) A switchable generation resource that is committed to a neighboring independent system operator or regional transmission operator for the applicable hour is exempt from assignment of a financial penalty under this section for that hour.
      3. (C) The portion of capacity of an electric generation facility that is awarded energy or ancillary services in the day ahead market is exempt from assignment of a financial penalty during the applicable hour.
      4. (D) An electric generation facility that is awarded an ancillary service or reliability service that has an associated penalty or claw back for failure to perform during the applicable hour is exempt from assignment of a financial penalty under this section for the portion of capacity that is awarded an ancillary service or reliability service.
      5. (E) A firming obligation assumed by a firming resource through a trade arrangement with the owner or operator of an electric generation facility that is subject to the performance requirements under this section is not eligible for a financial penalty exemption for the hour that the resource has taken on that obligation.

   3. (3) Financial incentive. ERCOT must provide a financial incentive to the QSE representing an electric generation facility that is subject to the performance requirements of this section if the electric generation facility operates or is available to operate above the seasonal average generation capability when called on for dispatch during a low operation reserve hour that occurs within a baseline period, as required under subsection (d) of this section.

      1. (A) The total financial incentives provided under this subsection each season must not exceed the total financial penalties imposed each season for low operation reserve hours occurring within the baseline period. No financial incentives may be awarded in a season in which no financial penalties are imposed by ERCOT.

      2. (B) A financial incentive provided to the QSE representing an eligible electric generation facility must be based on the total financial penalties imposed divided by the sum of all MWh exceeding the performance requirements of eligible electric generation facilities and allocated to the QSE representing an eligible electric generation facility based on the facility's share of the MWh that exceed the performance requirements. The financial incentive that is provided to the QSE representing an eligible electric generation facility must not exceed $1,000 per MWh that exceed the performance requirements. The financial incentive must be calculated using the following formula:
         Attached Graphic
         

         1. (i) Where:
         2. (ii) FI_j= financial incentive provided to the QSE representing an eligible electric generation facility (j).
         3. (iii) TFP (Total Financial Penalties) = the sum of all financial penalties imposed by ERCOT during a season.
         4. (iv) &dgrj= MWh exceeding the performance requirement by an eligible electric generation facility (j).
         5. (v) ∆ = the sum of all &dgrj for each eligible electric generation facility.
      3. (C) An electric generation facility that is not subject to the performance requirements under this section is not eligible for assignment of a financial incentive for that facility's performance under this subsection.
      4. (D) An electric generation facility that also serves as a firming resource to satisfy the performance requirements of another electric generation facility is not eligible for assignment of a financial incentive for any over-performance used to satisfy its firming obligation as a firming resource.
      5. (E) If the amount of financial penalties collected from QSEs representing electric generation facilities under subsection (f)(1) of this section exceeds the amount paid out in financial incentives, any excess funds must be allocated to load serving entities based on each load serving entity's average load ratio share across the season.

7. (g) Tracking Mechanism. ERCOT must develop a tracking mechanism that allows a QSE representing an electric generation facility that is subject to the performance requirements under this section to meet those performance requirements with a firming resource that assumes a firming obligation for that electric generation facility.

   1. (1) ERCOT must develop processes to confirm a trade arrangement by which a firming resource assumes a firming obligation.
   2. (2) If ERCOT is unable to confirm a trade arrangement by which a firming resource assumes a firming obligation, ERCOT must notify the parties to the arrangement.
   3. (3) The obligation to meet the performance requirements and the risk for financial penalty under this section remains with the original electric generation facility required to meet the performance requirements if ERCOT cannot confirm the trade arrangement by which the firming resource assumes a firming obligation for the electric generation facility subject to the performance requirements.

8. (h) Financial settlement. ERCOT must settle with the QSE that represents the electric generation facility that is subject to the performance requirements under this section or the QSE that represents the firming resource that assumes a firming obligation under this section. After each season, ERCOT must:

   1. (1) notify the QSE representing an electric generating facility under this section if the electric generation facility was long or short, net of trade arrangements disclosed to ERCOT during the low operation reserve hours that occurred within the baseline period in the prior season;
   2. (2) impose financial penalties on the QSEs representing electric generating facilities that are net short; and
   3. (3) provide financial incentives to the QSEs representing electric generating facilities that are net long in a season in which financial penalties are imposed.
9. (i) Post-season report. Not later than 75 days after each season in which there were low operation reserve hours and the performance requirements were triggered, ERCOT must file a post-season report with the commission summarizing qualifying hours, settled financial penalties and financial incentives, and predominant causes for exemptions. ERCOT may file the post-season report with the quarterly reports that ERCOT is required to file under §25.362(i)(3) (relating to Electric Reliability Council of Texas (ERCOT) Governance).
10. (j) Protocols. ERCOT must develop protocols in consultation with commission staff to implement this rule before the effective date that the statute requires an electric generation facility to begin complying with the performance requirements set forth in this section. The protocols developed by ERCOT must identify how performance will be validated for a distribution generation resource, an energy storage resource, and a load resource that assumes a firming obligation.

Source Note:The provisions of this §25.65 adopted to be effective January 8, 2026, 51 TexReg 68.