What are Ancillary Services in the Texas Electricity Market

Ancillary services refers to the set of resources ERCOT has at its deposal to regulate the balance of supply and demand on the electricity grid.   They fall into four categories: Regulation Service – Up, Regulation Service – Down, Responsive Reserve Service, and Non-spinning Reserve Service.

Regulation service up & down are generation resources ERCOT can call on in realtime to balance the supply and demand on the grid to keep it stable.    If the grid is close to experiencing an emergency imbalance, Responsive Reserve Service, and Non-spinning Reserve Service can be called upon to come online within minutes.

Most of the time these resources are not needed, and they set idle.  When they are called upon, they can be quite expensive.

The cost of Ancillary Services are not passed along to residential customers.  However, commercial electricity customers could have the cost of ancillary services pass thru to them on their bill depending on how much power they use and what their agreement is with their electricity provider.  Commercial users with a peak demand of under 50KW are not subject to these pass-through fees.

Ancillary services are not a part of the market many people paid attention to prior to winter storm Uri in 2021.  But they came under closer scrutiny after many commercial electricity users had huge costs passed through to them on their bills after the price of Ancillary services spiked to $25,000 per megawatt hour during the emergency.

Because of this, ancillary services became the target of legislation in the 2021 Texas legislative session.  HB3, among other things, included language that changed the way ERCOT handles ancillary services and lowered the maximum price cap during emergencies to prevent a repeat of what occurred in 2021.