COMMENT Rick Perry
Governor

09-32
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Barry T. Smitherman
Chairman

CFTC
Received ion

W OF
Public Utility Commission of Texas

Ss °

November 16, 2009 SB 5

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Chairman Gary Gensler S 3
Commodity Futures Trading Commission P=] gs
Three Lafayette Centre a on
1155 21" Street, NW 3 FP

Washington, DC 20581 fo Et

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“RE: Notice of Intent, Pursuant to the Authority in Section 2(h)(7) of the Commodity 2. 2

Exchange Act and Commission Rule 36.3(c)(3), To Undertake a Determination Whether
Certain Contracts Offered for Trading on the IntercontinentalExchange, Inc. Perform
Significant Price, Discovery Functions (Comment Files:69-01'1; 09-012,-09-027, 09-032).

Dear Chairman Gensler:

Thave been following with interest the receht actions of the Commodity Futures Trading
Commission (CFTC) and the comments on whether certain electricity contracts perform
significant price discovery functions. In that regard, I wanted to provide you with some
background information on the electric market in :Fexas and-the-Electric Reliability Council of
Texas (ERCOT), which is different from: other Independent System Operators (ISOs) ‘in the
country. : Cr reo ne A :

ERCOT is located wholly-within the State of Texas. In accordance with Texas state law,
the Public Utility Commission of Texas (PUCT) has certified ERCOT as the independent
organization to ensure nondiscriminatory access to the transmission and distribution systems, to
ensure the reliability and adequacy of the regional electrical network;’‘and to perform other
essential market functions. While ERCOT performs many of the same functions and is often
grouped with other ISOs in the U.S., it is not regulated by the Federal Energy Regulatory
Commission (FERC) in, the same manner as the other ISOs. Instead, ERCOT is directly
responsible and accountable to the PUCT.' : MPO Ps cee

ERCOT currently facilitates the market with respect to balancing. energy, ancillary
services, and transmission congestion rights. After implementation of the nodal market expected
late next year, ERCOT will also facilitate a day-ahead market. With respect to these market
activities, ERCOT is subject to. PUCT regulatory oversight and close scrutiny by the PUCT’s
independent wholesale electric market monitor.” Just‘as FERC Staff commented regarding the

': Publi¢ Utility Regulatory Act, TEX. UTIL. CODE ANN, §'39:151(Vernion 1998°& Supp. 2009) (PURA) ~
(available at http://www.puc.state.tx.us/rules/statutes/Pura09. pdf).
2 PURA § 39.1515.
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® 1701 N. Congress Avenue PO Box 13326 Austin, TX 78711 512/936-7000. Fax! 512/936-7003: web site: www.puc.state.tx.us

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comprehensive regulation that they provide to the FERC-regulated RTOs and ISOs, the PUCT
provides similar oversight and detailed regulation of ERCOT and all its market functions.

Thank you for soliciting comments on this matter, and I hope you find my clarification
helpful. Feel free to contact me should you have any questions or want to discuss this matter
further.

Sincere]; .

Barry T. Smitherman
Chairman

ce: Michael Dunn, Commissioner
Jill E. Sommers, Commissioner
Bart Chilton, Commissioner
Scott D. O’Malia, Commissioner
Dan M. Berkovitc, General Counsel
Ananda K. Radhakrishnan, Director