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E-Tag History In Wholesale Energy Markets

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Patrick McGarry's picture
Senior Director / Customer Success PCI

Patrick recently joined PCI as a Senior Director in May, 2019. He owns over 32 years of experience in commodity trading and owns an extensive record working closely with energy market...

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  • Sep 21, 2021
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This post will cover the history and evolution of NERC Tags to e-Tags in the North American wholesale electricity market.

To truly understand e-Tag history and the evolution of physical energy transactions, you need to travel back to the early 90s when Federal Energy Regulatory Commission (FERC) created the Energy Policy Act of 1992. The NERC e-Tag story involves the evolution of energy software as well as deregulated energy markets.

1992 Energy Policy Act

The Energy Policy Act established goals, standards and altered utility rules to boost clean energy and enhance overall energy efficiency in the United States.

The Act attempted to enhance competition in the electric power industry by lifting legal barriers in generation markets. The EPA also provided tax incentives and other subsidies to environmentally clean and cost-efficient generation technologies.

The Energy Policy Act of 1992 was the first significant step toward electric deregulation in North America, followed by FERC Orders 888 and 889 in 1996, which laid the groundwork for formalized deregulation of the industry and led to the creation of the Open Access Same-Time Information System (OASIS) network.

FERC Order 888 & 889

On April 24, 1996, FERC enacted Orders 888 and 889 to safeguard and promote generation competition and ensure that external users of the transmission system were treated fairly.

Federal Energy Regulatory Commission

Order 888 = Open Access

The primary goal of Order 888 was to develop and promote competition in the generation market by ensuring that transmission customers were treated fairly. FERC suggested six steps to achieve this goal:

  • Require all jurisdictional utilities (within the United States) to file an open-access transmission tariff (OATT)
  • Require investor-owned utilities (IOU’s) to unbundle wholesale generation and power marketing from transmission services functionally
  • Create Independent System Operators (ISO’s) and operating guidelines
  • Encourage reciprocity for non-jurisdictional (i.e., municipalities and cooperatives) utilities[3]
  • Allow utilities to recover stranded costs
  • Identify ancillary services and comparable services to operate the bulk power system properly

Order 889 = Standard of Conduct

Order 889 provided considerable detail about how all electrical market participants should interact with transmission providers. For example, it defined the structure and purpose of OASIS “nodes,” which are secure, web-based interfaces to each transmission system’s market offerings and transmission availability notifications.

Each OASIS node became a single point of market information distribution and a customer gateway for transmission service requests (TSR), even for connected power marketers who wanted access to their parent company’s transmission.

Thanks to the introduction of OASIS nodes, energy could now be scheduled across several power systems. As a result, physical trading volume exploded and resulted in instances where transmission system operators could not determine all transactions affecting their local system or take any corrective efforts to avoid situations that could cause the power grid to be damaged or collapse.

As a result of this new challenge created by deregulation, e-Tag’s history began soon after the NERC Tag was developed.

The NERC Tag

By establishing the NERC Tagging application, the North American Electric Reliability Corporation (NERC) stepped in to handle this new problem that jeopardized the North American power grid.

Power Grid

NERC Tags recorded the entire transaction from start to finish. This process allowed them to connect all the transmission legs collected from different OASIS nodes and establish how the overall schedule affected transmission systems and what transmission priorities were employed in the schedule. It also allowed them to decide which schedules should be shortened to reduce the transmission system burden.

Introduced in 1997, the first NERC tag was based on an Excel spreadsheet. Power marketers and schedulers completed the form.

After creating a NERC Tag in the spreadsheet, the data was distilled into a compact CSV formatted data packet emailed to all the participants indicated on the NERC tag.

NERC quickly decided that it did not want to be involved in any further software development or maintenance after introducing the NERC Tag spreadsheet and packet emailer.

e-Tagging History

E-tag’s history started in 1999 due to the cumbersome manual process of creating and emailing NERC tags.

Data transfer now occurred over an internet connection and made real-time use much more manageable. As a result, physical trading volumes began to soar.

With the introduction of real-time tagging, NERC began gathering real-time and near-future data on energy transactions scheduled across the North American power grid. The information from approved transactions was transferred to the Interchange Distribution Calculator (IDC), which created a virtual study model of the Eastern Interconnection.

software development

Although NERC developed the initial e-Tag, they gladly opened the market to energy software developers. As a result, there were a lot of e-Tagging software companies at first.

The e-Tag was created so that different programs might have different graphical user interfaces (GUIs). Still, they had to interact with each other effectively “under the hood” when transmitting, receiving, and processing e-Tags.

Within the first several years, the number of e-Tag software options shrank to only a few prominent vendors. This decline was because complying with the NERC e-Tag Specifications became prohibitively expensive for any software business that did not already have a considerable market share or appropriate financial support.

By 2007, only one e-Tagging solution provider remained.

 

 
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Thank Patrick for the Post!
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Matt Chester's picture
Matt Chester on Sep 21, 2021

Is there an equivalent to the e-tagging system used in other countries/markets? 

Patrick McGarry's picture
Patrick McGarry on Sep 21, 2021

E-Tagging is for interchanges between balancing authorities in North America: Mexico, US and Canada

E-Tags are required for any power flow between Mexico and US, which is physically limited to the following 2 cases:

Import/exports between Mexico national interconnected system (SIN) and ERCOT: there are multiple interface nodes in the border

Import/exports between Baja California Sur and CAISO: very limited interfaces

Import/exports between Mexico and Guatemala do not require a NERC E-tag. Any transactions within Mexico do not require E-Tags.

So, basically, e-tags are only needed if you are buying/selling power with a counterparty in the US

Richard Brooks's picture
Richard Brooks on Sep 21, 2021

It should be noted that the e-tag standard is a key part of the Coordinate Interchange standard (WEQ-004) that was developed by the North American Energy Standards Board (NAESB) Wholesale Electric Quadrant (WEQ). The e-tag functional spec, version 1.8.4 dated 2/19/2020 is also maintained by NAESB: https://www.naesb.org/member_login_check.asp?doc=weq_etag_specification_v184_021820.pdf

 

Patrick McGarry's picture
Patrick McGarry on Sep 21, 2021

Thank you Richard!

John Simonelli's picture
John Simonelli on Sep 27, 2021

It was a quantum leap in identifying and tracking the movement of scheduled energy transactions between and across BA’s.  Over time the major market software providers for the various ISO/RTOs incorporated the E-tag into their market clearing software which could then seamlessly schedule resources based on market rules to accommodate transactions.

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