Jun 19, 2023 Reliability and Markets Committee Meeting

SO I THINK WE CAN PROBABLY JUST VOTE ON THIS PARTICULAR ITEM RIGHT NOW IS I'LL MOVE.

SO CARLOS MOVED IT, JOHN SECONDED IT, SO IT'S APPROVED.

THANKS CAITLIN.

SO YOU TO GO ON TO THE, WELL, WERE THERE ANY, UM, ANY NO VOTES OR ABSTENTIONS? ANY NO VOTES.

GO TO THE, UH, VVC M R R OH 31 FOR VARIABLE COST AND FUEL ADD.

WE'LL

[4.1.3 VCMRR031, Clarification Related to Variable Costs in Fuel Adders]

ALL RIGHT, SO THIS, UH, V C M R R, UH, RELATED TO VARIABLE COSTS AND FUEL LADDERS.

IT, IT DEFINES VARIABLE COSTS AND CLARIFIES THAT ALL THE COSTS USED TO CALCULATE FUEL LADDERS SHOULD BE BASED ON VARIABLE COSTS.

MY UNDERSTANDING IS PREVIOUSLY THE, THE PROTOCOL SAID FIXED COSTS COULD NOT BE USED IN VERIFIABLE COSTS, BUT THERE IS SOME DELEGATION TO THE VERIFIABLE COST MANUAL ON EXACTLY WHAT COULD BE INCLUDED IN FUEL ADDERS.

SO THIS KIND OF REMOVES THAT DELEGATION AND THEN PUTS IT IN THE, THE VERIFIABLE COST MANUAL AGAIN, THAT, UM, THE,

[00:10:01]

THE FUEL ADDER COST SHOULD BE BASED ONLY ON VARIABLE COSTS.

WE DID RECOMMEND THIS, THERE WAS ONE NO VOTE FROM THE GENERATION SEGMENT, AND THAT IS FROM AN ENTITY THAT USES VERIFIABLE COSTS, AND THAT HAS ALWAYS ARGUED AT THE COMMISSION AND ERCOT THAT ALL ACTUAL FUEL COSTS SHOULD BE INCLUDED, WHETHER THEY'RE FIXED OR VARIABLE.

UM, SO THAT WAS SORT OF CONSISTENT WITH THE POSITION THEY, THEY'VE TAKEN AT ERCOT IN THE P U C BEFORE.

WE DID WANNA POINT OUT THERE WERE A NUMBER OF ABSTENTIONS TO THIS 10, UM, FROM DIFFERENT SEGMENTS, COOPERATIVE, INDEPENDENT GENERATOR AND MUNICIPAL.

I THINK THOSE WERE DUE TO SOME HESITANCY TO, UM, JUST CONTINUE THAT POLICY OF HAVING ONLY VARIABLE COSTS INCLUDED.

UM, WITHOUT FURTHER DISCUSSION HERE AND AT THE BOARD AND P U C, UM, RIGHT NOW, ESPECIALLY WITH THE AMOUNT OF RUCKS WE'RE SEEING, WE'RE SEEING THIS DISCUSSION OF WHAT IS INCLUDED IN THE FUEL COSTS BE VERY KIND OF ELEVATED AND IMPORTANT.

SO WE DID GET A LOT OF ABSTENTIONS ON THIS ONE, BUT OVERALL, IT WAS A APPROVED ATT LEVEL.

IT WAS APPROVED, YES, ALL ALL OF THESE WERE APPROVED.

THERE'S JUST ONES WITH, UM, OPPOSING HER ABSTENTIONS CANNAN.

UM, I, I WOULD JUST SAY THAT, UM, THIS ISSUE ALSO HAS GONE TO THE COMMISSION, AND THE COMMISSION RULED IN FAVOR OF, UH, AN OUTCOME THAT'S CONSISTENT WITH THIS VERIFIABLE, UH, COST MANUAL REVISION.

UM, THE LANGUAGE ESSENTIALLY NOW ALIGNS AS CAITLYN SAID, WITH THE PROTOCOLS WHERE, UH, UH, WE ARE NOT SUPPOSED TO, UM, MAKE PEOPLE WHOLE TO FIX COSTS.

AND THAT IS BOTH ALIGNED WITH, UM, PROCEEDINGS AT THE COMMISSION, OUR PROTOCOLS, AND, UM, UH, THE GENERAL SENTIMENT THAT, UH, MARGINAL COSTS SHOULD INCLUDE ONLY VARIABLE COSTS.

NPR R 1169, EXPANSION OF GENERATION RESOURCES QUALIFIED TO PROVIDE FIRM FUEL SUPPLY SERVICES.

SO WITH THAT, ANY QUESTIONS FROM THE COMMITTEE? NOT A MOTION TO APPROVE JOHN, APPROVE CARLOS.

SECOND.

ALL IN FAVOR? AYE.

AYE.

ANY ABSTENTIONS OR NO VOTES? WE WILL CONSIDER IT PASSED.

SO NOW WE'LL MOVE ON TO

[4.1.2 NPRR1169, Expansion of Generation Resources Qualified to Provide Firm Fuel Supply Service in Phase 2 of the Service]

WE'LL BEGIN THAT CAITLYN WITH YOU FOR THE TAC REPORT.

ALL RIGHT, THANK YOU.

UM, SO AS YOU KNOW, THE F F F SS IS A PRODUCT DESIGNED TO ASSIST IN GENERATION RELIABILITY IN THE EVENT OF NATURAL GAS CURTAILMENT OR OTHER FUEL SUPPLY DISRUPTION.

UM, SO WHAT WE ARE TRYING TO ACHIEVE HERE IS REALLY A BALANCE BETWEEN EXPANDING THAT POOL OF GENERATORS THAT QUALIFY, UM, BECAUSE THAT WOULD KIND OF INCREASE COMPETITION AND OFFERS AND THE COST OF THE SERVICE WOULD GO DOWN AND ALSO INCREASE THE AMOUNT YOU COULD PROCURE.

BUT TRYING TO BALANCE THAT WITH MAINTAINING REQUIREMENTS THAT MITIGATE RISKS OF CURTAILMENT ESPECIALLY.

UM, AND SO THIS WOULD EXPAND THE POOL TO INCLUDE RESOURCES WHERE THE GENERATION ENTITY HAS FIRM TRANSPORTATION AGREEMENTS ON A QUALIFYING PIPELINE.

SPECIFICALLY THE SOURCE OF DEBATE THAT WE'RE GONNA TALK ABOUT HERE IS THE DEFINITION OF QUALIFYING PIPELINE AND HOW TO MAKE SURE YOU HAVE A PIPELINE THAT WON'T BE CURTAILED BY ESPECIALLY HUMAN NEEDS CUSTOMERS AS THAT'S PRIORITIZED AHEAD OF ELECTRIC GENERATION.

[4.1.2.1 Calpine Comments on NPRR1169 ]

UM, SO WE DID RECOMMEND APPROVAL OF THIS ONE WITH CALPINE'S COMMENTS, AND WE DID THAT AT OUR REGULAR TECH MAY TECH MEETING.

UM, AND, AND CALPINE AND KINDER MORGAN, I BELIEVE WILL BE PRESENTING RIGHT AFTER THIS.

BUT FOLLOWING THAT MEETING, THE COMMISSION HAD A ROBUST DISCUSSION ON THIS POLICY AT THEIR MAY 25TH MEETING.

SO IN LIGHT OF THAT, WE REVISITED THIS, WE ADDED IT TO THE AGENDA OF A SPECIAL MEETING IN JUNE.

AT THAT MEETING, WE WOULDN'T HAVE BEEN ABLE TO CHANGE THE VOTE, UM, AS WE APPROVED IT, BUT WE WANTED TO KIND OF DISCUSS IF ADDITIONAL CLARIFYING COMMENTS WERE NEEDED.

WE HAD A ROBUST DISCUSSION, BUT WE DIDN'T ULTIMATELY HAVE A FURTHER VOTE.

AND THE THINKING AGAIN, WAS, YOU KNOW, THIS BODY AND THE COMMISSION COULD TAKE OUR ORIGINAL INPUT AND HAVE FURTHER DISCUSSION ON IT, UM, FOR THE POLICY GOALS.

AND SO OUR ORIGINAL VOTE WAS TO RECOMMEND THIS WITH THAT, THAT CALPINE DEFINITION, REALLY TRYING TO ACHIEVE THAT BALANCE OF HAVING MORE ELIGIBLE SUPPLIERS WHILE MITIGATING THE RISK.

UM, AND I, I BELIEVE CALPINE WILL PRESENT THEIR DEFINITION, BUT WE THOUGHT THAT IT ACCOMPLISHED LOWERING THE RISK OF CURTAILMENT, UH, INCLUDES, YOU KNOW, PREVIOUS PERFORMANCE HISTORY DURING URI, WHICH WE THOUGHT WAS A RELEVANT DATA SET.

UM, AND SO WE DID VOTE TO APPROVE THIS, AND WE HAD ONE ABSTENTION FROM THE GENERATOR SEGMENT.

UH, THE CALPINE POSITION.

SO I GUESS AT THIS POINT, UH, WE'LL HAVE BRIAN SAMS PRESENT,

[00:15:01]

OKAY, GOOD MORNING OR GOOD AFTERNOON, SORRY.

UH, BRIAN SAMS ON BEHALF OF CALPINE, AND, UH, JUST AS I, I GET MY BEARINGS HERE, YOU CAN SEE LIKE JUST THE AMOUNT OF, OF RED LINE HERE SHOWS THAT THERE'S BEEN A VERY ROBUST DISCUSSION ABOUT THIS TOPIC.

AND I WANT TO, UH, BEGIN BY SAYING THANK YOU TO, UH, THE ERCOT BOARD, UH, STAKEHOLDERS, THE COMMISSION FOR, FOR REALLY, UH, DIGGING IN ON THIS.

UM, I ALSO WANNA ESPECIALLY, UH, THANK ERCOT STAFF AND THEIR OUTSIDE COUNSEL, UH, WHO'VE WORKED WITH US OVER THE PAST SEVERAL MONTHS.

SO THIS NPR R HAS BEEN PRETTY CHALLENGING BECAUSE WE'RE TRYING TO NAVIGATE STANDARDS FROM MULTIPLE REGULATORY AGENCIES.

AND I THINK IN A RECENT OPEN MEETING, COMMISSIONER ADAMS MCNA MCADAMS, UH, DESCRIBED THE NPR R AS A MAZE, AND THAT'S A PRETTY APT DESCRIPTION.

MY GOAL HERE TODAY IS TO EXPLAIN HOW THE TAC ENDORSED CALPINE COMMENTS ESTABLISH A PERFORMANCE STANDARD FOR THE INTRASTATE SYSTEM THAT CAN RESULT IN INCREASED PARTICIPATION IN THE FIRM FUEL SERVICE.

UH, THE CALPINE PROPOSED STANDARD BRINGS ADDITIONAL CAPACITY TO THE PRODUCT, WHILE ALSO REQUIRING A LEVEL OF PERFORMANCE THAT HAS WORKED WITHOUT CURTAILMENT, INCLUDING UNDER RAILROAD COMMISSION CURTAILMENT PRIORITIES AND THROUGH YURI.

AND IT, IT DOES THIS, UM, THROUGH, UH, AMENDING THE DEFINITION OF QUALIFYING PIPELINE SUCH THAT, THAT THAT PIPELINE IS EITHER AN INTERSTATE PIPELINE REGULATED BY FERC, AN INTRASTATE PIPELINE THAT IS NOT A GAS UTILITY AND WOULD NOT BE SUBJECT TO, UH, RAILROAD COMMISSION CURTAILMENT RULES, OR IS AN INTRASTATE PIPELINE THAT IS OWNED OR OPERATED BY A GAS UTILITY AND EITHER PROVIDES ONLY TRANSMISSION SERVICE.

SO IT'S NOT THE TYPE OF PIPELINE THAT, UH, YOU MIGHT HAVE SEEN SOME CURTAILMENT NOTICES AROUND, UH, THE DECEMBER TIME PERIOD THAT HAD BOTH TRANSMISSION AND DISTRIBUTION SERVICE.

SINCE THIS IS ONLY A TRANSMISSION, UH, PIPELINE, IT, IT THAT PAST PERFORMANCE, UM, WHERE THERE WAS CURTAILMENT WOULD, WOULD BE ELIMINATED BECAUSE, UM, IT, ITS, WE WOULD FALL UNDER THE DISTRIBUTION CATEGORY.

NEXT, IT REQUIRES A PIPELINE TO CERTIFY TO THE GENERATION ENTITY THAT IF IT REDUCES FIRM DELIVERIES TO CUSTOMERS PURSUANT TO A RAILROAD COMMISSION CURTAILMENT RULE, THAT IT HAS TO HAVE SUFFICIENT CAPACITY, INCLUDING SUFFICIENT PIPELINE PRESSURE TO PROVIDE FIRM SERVICE, UH, FOR THE VOLUME OF GAS THAT'S REQUIRED FOR, UH, A FIRM FUEL AWARD.

IT ALSO REQUIRES ANY PIPELINE THAT DID CURTAIL GAS DELIVERIES PURSUANT TO A RAILROAD COMMISSION CURTAILMENT RULE, UM, SINCE JANUARY 1ST, 2021 TO, TO NOT, UH, BE ELIGIBLE TO, TO PROVIDE THIS SERVICE.

AND THAT'S AN IMPORTANT DISTINCTION BECAUSE IT INCLUDES YURI, UH, BOTH ATTACK AND ERCOT ENDORSED.

NPR ALSO REQUIRE A QUALIFYING PIPELINE BE REGISTERED AS A CRITICAL LOAD AND NOT PARTICIPATE IN E R OR A LOAD CURTAILMENT PROGRAM.

I, I KNOW THAT JOHN ARNOLD, WHO'S THE ATTORNEY, UH, FOR KINDER MORGAN AND ENTERPRISE IS ALSO ONLINE AND IS GONNA FOLLOW ME.

AND HE'S GOT A, A SHORT PRESENTATION THAT PROVIDES ADDITIONAL RE UH, DETAIL REGARDING THE STANDARD.

SO AFTER, UM, AFTER THAT MAY, UM, OPEN MEETING THAT I THINK CAITLYN REFERENCED, UH, CALPINE FILED SUBSEQUENT COMMENTS

[00:20:01]

ON JUNE 13TH TO ADDRESS REALLY HOW THE INTER SYSTEM, INTER INTERSTATE SYSTEM MIGHT BRING COMPETITIVE PRESSURE TO THE INTRASTATE SYSTEM.

AND OUR COMMENTS DO TWO THINGS.

UH, THEY MAKE SOME MINOR CLARIFICATIONS.

UM, THE, THAT ALSO SAY THAT A GENERATION RESOURCE THAT OWNS AN INTRASTATE PIPELINE CAN MEET THE DEFINITION OF QUALIFYING PIPELINE.

ERCOT RESPONDED TO THOSE COMMENTS AND SAID THAT THEY FELT LIKE THE CHANGES THAT WE HAD PROVIDED WEREN'T NEEDED.

AND WHILE WE SEE A LOT OF VALUE IN THEIR FEEDBACK AND APPRECIATE HAVING THEIR POINT OF VIEW AND PERSPECTIVE ON THAT ISSUE IN THE, IN THE RECORD, THE SECOND ASPECT OF OUR COMMENTS, EXCEPT THE INTERSTATE SYSTEM FROM THE QUALIFYING FORCE MAJEURE PROVISION, AND WE BELIEVE THAT, UH, UH, UNLESS THE, UM, INTERSTATE SYSTEM CAN BE EXEMPTED, UH, THEY WON'T BE ELIGIBLE TO PARTICIPATE IN THE PRODUCT.

AND THE REASON FOR THAT IS THAT FERC REGULATED PIPELINES HAVE TARIFFS ON FILE WITH FERC THAT REQUIRE TARIFF AMENDMENTS, INCLUDING CHANGES TO THE AUDIT PROVISIONS THAT ARE PART OF THE FORCE MAJEURE LANGUAGE.

SO AFTER DISCUSSING THESE CHANGES WITH OUR INTERSTATE PIPELINE PIPELINE PARTNERS, UH, WE JUST DON'T BELIEVE THAT IT'S FEASIBLE THAT FERC REGULATED PIPELINES WILL QUALIFY WITHOUT BEING EXEMPTED.

THE ONE THING I REALLY WANNA MAKE CLEAR TO YOU ALL IS THAT, UM, UH, UNDER THE ERCOT PROPOSED COMMENTS, A LIKELY OUTCOME FROM PHASE TWO IS THAT THE MARKET WILL NOT SEE ANY ADDITIONAL CAPACITY FROM NATURAL GAS RESOURCES THAT USE FIRM TRANSPORT AND STORAGE TO IMPROVE FUEL SECURITY.

AND THE REASONS FOR THAT ARE EITHER THAT THEY USE INTRASTATE PIPELINES THAT WON'T BE ABLE TO MEET THE CONFIGURATION OUT OUTLINED IN THE ERCOT COMMENTS, OR THAT THEY USE INTRA OR IN, EXCUSE ME, THAT THEY USE INTER-STATE PIPELINES THAT WON'T INCLUDE ALL OF THE QUALIFYING FORCE MAJEURE STANDARDS AND THUS WON'T QUALIFY.

UM, SO D DESPITE ALL OF OUR COMMENTARY HERE, IF THE BOARD CHOOSES TO ADOPT THE ERCOT STAFF COMMENTS, WE STILL THINK THAT PHASE TWO HAS VALUE, IT PROVIDES EXPERIENCE.

AND AFTER THIS NEXT AUCTION, WE'LL KNOW, UH, IF THERE IS ADDITIONAL QUALIFYING CAPACITY, IT ALSO SENDS A, A SIGNAL FOR WHAT MIGHT QUALIFY AND IF THERE'S A DESIRE FOR FURTHER REVISION IN PHASE THREE, WE BELIEVE THAT THE STAKEHOLDER COMMENTS AND OVERALL RECORD THAT WE'VE PUT INTO, YOU KNOW, THE, THIS NPR UH, WERE ARE GONNA BE INFORMATIVE FOR FUTURE DISCUSSION.

SO I I, I THREW A LOT AT YOU ALL RIGHT THERE.

AND, UM, I'M HAPPY TO TAKE ANY QUESTIONS.

I KNOW THAT JOHN HAS, HAS, UM, COMMENTS TOO, UH, QUESTIONS FOR, FOR BRIAN.

NO, I THINK YOU SUMMARIZED IT REALLY WELL, BRIAN, PARTICULARLY, YOU KNOW, YOUR POSITION ON IT AND IF THERE IS A PHASE THREE OF WHAT THAT WOULD LOOK LIKE, COULD LOOK LIKE AS WELL.

SO APPRECIATE THAT.

SO NOW I HAVE JOHN ARNOLD OF LOCK LORD, WHO'S CONNECTED VIA WEBEX TO PRESENT AGENDA ITEM 4.1, 0.2 0.2, KINDER MORGAN, INC AT ENTERPRISE PRODUCT COMMENTS ON NPR R 1169.

OKAY,

[4.1.2.2 Kinder Morgan, Inc. and Enterprise Products Comments on NPRR1169]

JOHN, PLEASE CONFIRM YOU'RE ON THE WEBEX AND READY? UH, YES I AM.

CAN YOU HEAR ME OKAY? VERY CLEARLY.

VERY GOOD.

EXCELLENT.

UM, THANK YOU VERY MUCH FOR THE OPPORTUNITY TO APPEAR HERE AND OFFER THESE BRIEF COMMENTS.

UM, I'D LIKE TO ECHO BRIAN'S SENTIMENTS AS WELL, UM, IN TERMS OF EXPRESSING APPRECIATION FOR ALL OF THE INVESTMENT OF TIME AND RESOURCES, UH, FROM ERCOT, FROM THE COMMISSION AND FROM THE STAKEHOLDERS, AND OF COURSE FROM THE BOARD.

UM, SO BY WAY BACKGROUND, MY NAME IS JOHN ARNOLD.

I'M A PARTNER IN THE ENERGY AND INFRASTRUCTURE GROUP AT LOCK LORD.

UM, I'VE PRACTICED BEFORE BOTH THE PUBLIC UTILITY COMMISSION, THE ROADWAY COMMISSION FOR AN EXCESS OF 20 YEARS, MORE PARTICULARLY THOUGH, AND OBVIOUSLY OVER THE LAST TWO YEARS I'VE BEEN HEAVILY INVOLVED REPRESENTING, UH, A SIGNIFICANT AMOUNT OF THE, THE GAS PIPELINE IN STORAGE INDUSTRY IN TEXAS IN COMMERCIAL AND REGULATORY MATTERS, AND MOST PARTICULARLY OBVIOUSLY, IN THE DEVELOPMENT OF THE FIRM FUEL SUPPLY SERVICE.

UM, IF YOU WOULD PLEASE NICOLE, MOVE TO SLIDE TWO.

UH, SO WITH RESPECT TO US BOLSTERING THE COMMENTS THAT BRIAN OFFERED, UM, IT'S IMPORTANT TO START FROM THE STANDPOINT OF UNDERSTANDING THE IMPACT OF THE RAILROAD COMMISSION'S CURTAILMENT RULE.

AND CAITLIN MENTIONED THIS AS WELL.

THE PRINCIPLE CONCERN HAS BEEN THAT WITH RESPECT TO THE PRIORITIES THAT ARE DESCRIBED IN THAT RULE, IN THE EVENT OF A CURTAILMENT GENERATION, RESOURCES ARE ONLY THE SECOND HIGHEST PRIORITY AFTER HUMAN NEEDS CUSTOMERS.

I THINK MANY RIGHTFULLY PROBABLY BELIEVE THAT THOSE TWO PRIORITIES SHOULD BE ON PAR, BUT UNDER THAT RULE, THEY ARE NOT.

AND IN FACT, THE LAST CLASS OF CUSTOMERS TO BE CURTAILED WOULD BE THE HUMAN NEEDS CUSTOMERS AND

[00:25:01]

GENERATION RESOURCES, IF THEY HAD TO BE CUT, WOULD BE CUT BEFORE THAT.

HOWEVER, THERE'S A COUPLE OF THINGS THAT ARE FUNDAMENTAL ABOUT THE RULE THAT SHOULD BE EXPLAINED.

THE FIRST OF WHICH HAS ALWAYS BEEN TRUE WITH RESPECT TO THE IMPACT OF THE CURTAILMENT RULE.

SO THE, THE NEW CURTAILMENT RULE IS A, UH, MEMORIALIZATION OF LESSONS LEARNED FROM THE EMERGENCY ORDER DURING URI AND THEN THE PRIOR ORDER 49.

AND THAT IS THIS, AND THIS IS BEDROCK IN THE TEXAS COMMON LAW, BUT THE ROLE OF COMMISSION CURTAILER RULE DOES NOT ALLOW A PIPELINE TO CURTAIL GAS THAT IT DOES NOT OWN.

AND UNDER THIS CURRENT FIRM FUEL SUPPLY SERVICE PROPOSAL, THE GENERATION RESOURCES REQUIRED TO OWN THAT GAS, SO IN TRANSIT IN THE PIPELINE, THE PIPELINE WILL NOT BE ABLE TO CURTAIL ANY OF THAT GENERATION RESOURCES, UH, GAS THAT HAS BEEN ORDERED FROM STORAGE.

SECONDLY, AND THIS IS ALSO A VERY IMPORTANT FEATURE THAT NEEDS TO BE WELL UNDERSTOOD UNDER THIS NEW CURTAILMENT RULE.

BY WAY OF DIRECT CONTRAST TO THE ORDER OF THE COMMISSION DURING URI, IT IS THE UTILITY, THE PIPELINE UTILITY, NOT THE RAILROAD COMMISSION THAT DECIDES WHEN IT NEEDS TO CURTAIL.

IT DOES SO BY EVALUATING IT, ITS INABILITY TO MEET ALL OF ITS FIRM COMMITMENTS, BUT WHAT THAT MEANS IS IT CAN'T BE IMPOSED EXTERNALLY ON THAT UTILITY PIPELINE FOR CIRCUMSTANCES THAT ARE OCCURRING ON OTHER SYSTEMS. ALSO MEANS THAT DURING, DURING URI, UH, AND EDIT, UNLIKE ERIE, EXCUSE ME, THAT TEMA CANNOT BE IMPOSED BY THE RAILROAD COMMISSION UNDER THIS NEW RULE.

WE THINK THAT THOSE ARE THINGS THAT DRAMATICALLY LIMIT THE RISK RELATIVE TO THE PERCEPTION OF THAT RISK AS IT OCCURRED DURING YEAR.

NEXT SLIDE PLEASE.

SO TO TO, JUST TO BRIEFLY ECHO BRIAN'S COMMENTS, WE BELIEVE THAT THIS IS AN IMPORTANT PROPOSAL TO LIMIT THE RISK WITHOUT DISQUALIFYING WHAT IS THE PRINCIPLE SOURCE OF GAS FOR GENERATION RESOURCES IN TEXAS? JUST BY WAY OF EXAMPLE, MY CLIENTS REPRESENT ABOUT 50% OF THE GAS DELIVERY IN TEXAS TO GENERATION RESOURCES, BUT WOULD EFFECTIVELY BE DISQUALIFIED BECAUSE OF THE PHYSICAL CONFIGURATION OF THE, OF THE SYSTEM.

WHAT THIS PROPOSAL DOES IS, IS IT ELIMINATES A PHYSICAL PROXY FOR PERFORMANCE AND IMPOSES ACTUAL PERFORMANCE STANDARDS.

BRIAN MENTIONED SUFFICIENT TRANSPORT CAPACITY EVEN WITH CURTAILMENT, AND WE KNOW THAT THAT CAPACITY CAN BE MEASURED, UM, THAT THOSE STATISTICS AND INFORMATION HAVE BEEN PRESENTED TO THE COMMISSION.

THERE HAS TO BE SUFFICIENT PIPELINE PRESSURE TO MAKE THE DELIVERIES.

NEXT SLIDE.

AND FINALLY, THIS, A WARRANTY THAT THE PIPELINE DID NOT CURTAIL GAS DELIVERY TO GENERATION RESOURCES DURING YOUR, AND THIS IS NOT JUST A, A ROTE EXPRESSION OF PERFORMANCE DURING THAT TIME.

IT ALSO REPRESENTS THAT THE, THE PERFORMANCE OF DELIVERY OF GAS MOLECULES FROM STORAGE OCCURRED UNDER CIRCUMSTANCES THAT ARE FAR, FAR MORE HARSH THAN THEY WOULD BE NOW WHEN BOTH THE GENERATION SIDE AND THE GAS DELIVERY SIDE HAVE BEEN SIGNIFICANTLY MORE WEATHERIZED AND HARDENED WITH RESPECT TO MEETING THOSE OBLIGATIONS.

AND WITH RESPECT TO THE ACCOUNTABILITY TO ERCOT, WE BELIEVE THAT IT WOULD BE APPROPRIATE IN THIS PROPOSAL TO ADD THAT THE GENERATION RESOURCE CERTIFIES ERCOT THAT THE PIPELINE'S WARRANTY IS ACCURATE.

IN OTHER WORDS, ERCOT MAY NOT BE ABLE TO VERIFY THE PIPELINE'S REPRESENTATION IN ITS UNDERLYING CONTRACT, BUT THE GENERATION RESOURCE CAN AND SHOULD.

FINALLY, LEMME JUST SAY THIS, UM, THIS IS NOT EXISTENTIAL FOR, FOR KENDRA MORGAN OR ENTERPRISE, UM, I ECHO BRIAN'S SENTIMENTS IN THAT WE THINK THIS IS USEFUL WITH RESPECT TO HELPING ERCOT AND THE PUBLIC UTILITY COMMISSION, UM, DEVELOPED GREATER FLUENCY IN THESE MATTERS.

BUT BY WAY OF EXAMPLE, MORGAN JUST ANNOUNCED THE SIX AND A HALF BILLION CUBIC FEET EXPANSION OF THE MARKHAM STORAGE FACILITY ALONG THE GULF COAST.

THAT WAS DONE WITHOUT LEVERAGING THIS PROGRAM AS PART OF THE EXPECTATIONS OF THE GAS STORAGE SERVICE IT WOULD PROVIDE.

SO KINDER MORGAN ENTERPRISE ARE HERE, THEY'RE GOING TO CONTINUE TO BE HERE AND MAKING THE SYSTEM MORE ROBUST, CONTINUING TO INVEST IN THIS PRODUCT.

BUT THEY WANTED TO PARTICIPATE TODAY IN TRYING TO GET THIS PROPOSAL THROUGH THE ERCOT BOARD.

THEY REALLY BELIEVE IT'S SIMPLY THE RIGHT THING TO DO WITH RESPECT TO A RELIABLE PROPOSAL THAT CREATES THE LARGEST POOL OF OPTIONS FOR THE FIRM FUEL SUPPLY SERVICE.

I'M HAPPY TO ANSWER ANY QUESTIONS.

THANK YOU, JOHN.

QUESTIONS FOR, FOR JOHN? OKAY, BOB, I HAD ONE QUESTION.

THEY'RE LEGALLY PROHIBITED FROM DOING THAT, OR IS THAT BECAUSE THEY HAVE CHOSEN NOT TO IMPLEMENT THEIR RULES IN THAT WAY? NO, IT IS BECAUSE THE POWER TO INVOKE A CURTAILMENT UNDER THE NEW COMMISSION, RULE COMMISSION IS GIVEN TO THE GAS UTILITY RATHER THAN TO THE COMMISSION.

UM, THIS IS JIMMY FEL WITH THE PUC.

YOU SAID THAT CUR CURTAILMENT CANNOT BE IMPOSED ON A UTILITY PIPELINE, UH, FOR CIRCUMSTANCES OCCURRING ON OTHER COMMISSIONS BY THE RAILROAD COMMISSION.

IS THAT BECAUSE

[00:30:01]

THEY, IN THE DEFINITION AND STANDARDS OF THE RULE, IF, IF YOU GO BACK TO SLIDE TWO, NICOLE MM-HMM.

, IF, IF YOU'LL SEE THE QUOTED LANGUAGE UNDER THE RULE, WHEN A GAS UTILITY DETERMINES THAT ITS ABILITY TO DELIVER GAS MAY BECOME AN ADEQUATE TO SUPPORT CONTINUOUS SERVICE, THAT IS THE DEFINITION OF A CURTAILMENT EVENT.

IT IS NOT SOMETHING THAT THE COMMISSION DOES.

AND THAT WAS VERY MUCH BY DESIGN IN INCLUDING, UM, COMMENTS IN THE PREAMBLE, MAKING SURE THAT IT WAS CLEAR THAT THAT WAS IN FACT THE COMMISSION'S INTENT.

BUT AGAIN, I GO BACK TO THE QUESTION THAT THAT IS A DECISION THAT THE RAILROAD COMMISSION HAS MADE THAT, UH, THAT HAS GIVEN THAT AUTHORITY TO THE UTILITY, BUT THEY STILL COULD DO IT THEMSELVES IF THEY CHOSE TO GO REOPEN UP THAT RULE AND, AND MAKE THAT CHANGE THE WAY THE INDUSTRY OPERATES.

IS THAT CORRECT? THEY WOULD CHANGE THE RULE TO YES.

UM, SAY THAT AGAIN? THEY WOULD HAVE TO CHANGE THE RULE TO DO THAT.

THIS RULE, THE NEW RULE SUPPLANTS ORDER 4 89 IN THE EMERGENCY ORDER.

THIS IS NOW THE EMBODIMENT OF THE RAILROAD COMMISSION'S AUTHORITY ON THIS MATTER.

AND IF THEY WANTED TO DO SOMETHING DIFFERENT, THEY WOULD'VE TO CHANGE THIS RULE.

? I THINK, UM, CHAD AND CANON, YOU GONNA PRESENT ERCOT COMMENTS? YES.

OTHER QUESTIONS FOR JOHN

[4.1.2.3 ERCOT Comments on NPRR1169]

THE POLICY DIRECTION THAT THIS COMMITTEE AND THE BOARD AND ULTIMATELY THE COMMISSION GIVES TO THE INDUSTRY.

I THINK KALAN WILL GO UP TO THE PODIUM AND I'LL STAY HERE.

SO WE'RE, WE'RE NOT GONNA GO THROUGH THE ENTIRE SLIDE DECK, UM, BECAUSE IT LAYS A LOT OF BACKGROUND INFORMATION FOR THE FIRM FUEL SUPPLY SERVICE PROGRAM, BUT I DO WANNA OFFER SOME INITIAL OPENING COMMENTS AND THEN MAYBE HIGHLIGHT ONE OR TWO THINGS IN THE PRESENTATION.

FIRST, I JUST WANNA EMPHASIZE, YOU KNOW, HOW MUCH WE HAVE APPRECIATED THE DISCUSSION WITH THE STAKEHOLDERS.

YOU KNOW, CALPINE JOHN REPRESENTING KINDER MORGAN ENTERPRISE, UM, TAC THE COMMISSION WHO HAS TALKED ABOUT THIS FOR FOUR OPEN MEETINGS, AND WE'LL TALK ABOUT IT AGAIN AT THEIR NEXT OPEN MEETING.

IT'S BEEN A GREAT DISCUSSION BECAUSE IT'S SOMETHING THAT WE NEED TO DO AS AN INDUSTRY, WHICH IS LEARN MORE HOW TO WORK WITH THE GAS INDUSTRY, WHICH IS CRITICALLY IMPORTANT TO OUR GENERATION RESOURCES.

BUT HERE TODAY WE'RE TALKING ABOUT PHASE TWO OF THIS PROGRAM.

WE JUST STARTED PHASE ONE LAST WINTER, AND YOU'RE GONNA HEAR ABOUT THE SETTLEMENT OUTCOME LATER THIS AFTERNOON WHEN CANAN PRESENTS THAT FOR PHASE ONE.

THIS PROGRAM IS ABOUT PROVIDING GRID RELIABILITY AND RESILIENCY DURING EXTREME COLD WEATHER EVENTS.

AND IT COMPENSATES GENERATION RESOURCES WITH A PREMIUM PRICE TO MEET OUR HIGHER RESILIENCY STANDARD.

THIS PHASE TWO EXPANDS THE PROGRAM TO PRIMARILY INCLUDE FIRM FUEL SUPPLY ARRANGEMENTS WITH NATURAL GAS STORAGE AND PIPELINES OWN AND OPERATED BY THIRD PARTIES.

THE DISAGREEMENT BETWEEN TAC CALPINE, KINDER MORGAN AND ENTERPRISE ON THE ONE SIDE AND ERCOT ON THE OTHER SIDE, IS AROUND THE DEFINITION OF A QUALIFYING PIPELINE.

EVERYTHING ELSE IN THE TAC RECOMMENDATION ERCOT IS SUPPORTIVE OF.

IT REALLY COMES DOWN TO THIS FOUNDATIONAL DEFINITION OF THE PIPELINES AND HOW DO THEY QUALIFY IN THIS PROGRAM.

FOR PHASE TWO ERCOT DEFINITION EXCLUDES INTRASTATE PIPELINES THAT SERVE HIGHER PRIORITY CUSTOMERS, WHICH ARE THE HUMAN NEEDS CUSTOMERS AND THE LOCAL DISTRIBUTION SYSTEMS WHO SERVE HUMAN NEEDS CUSTOMERS FROM QUALIFYING TO PROVIDE THIS SERVICE.

THIS ELIMINATES THE LOWER PRIORITIZATION RISK OF GENERATION RESOURCES AND THE RAILROAD COMMISSION'S CURTAILMENT RULE THAT WE'VE JUST HEARD BRIAN AND JOHN TALK ABOUT THIS RISK DOES NOT EXIST ON THE INTERSTATE PIPELINE SIDE BECAUSE THOSE GAS UTILITIES WILL PRO RATA REDUCE SERVICE TO ALL CUSTOMERS IF THERE IS A CURTAILMENT EVENT.

ERCOT DEFINITION IS CONSISTENT WITH THE PC'S GUIDANCE ON THIS ISSUE.

FOR THE LAST FOUR OPEN MEANING DISCUSSIONS, IT HAS THE POTENTIAL TO INCENT CHANGES IN THE INDUSTRY.

IT MAINTAINS THE HIGHEST RELIABILITY STANDARD FOR THIS PRODUCT.

AND MOST IMPORTANTLY, IT ALLOWS US TO LEARN FROM THE INDUSTRY IN THIS NEXT PROCUREMENT CYCLE, WHICH BEGINS AUGUST 1ST.

AND WE CAN MAKE CHANGES AS NECESSARY GOING FORWARD IN FUTURE YEARS IF IT DOES NOT GIVE US THE RESULTS WE WANT.

AND I DON'T DISAGREE WITH BRIAN THAT THERE IS THE POTENTIAL HERE THAT WE GET ZERO MEGAWATTS OFFERED FOR THIS PHASE TWO EXPANSION, BUT WE WILL LEARN SOMETHING BASED UPON

[00:35:01]

SO AT THE END OF THE DAY, THIS IS A RISK MANAGEMENT DECISION AS WE TRY TO UNDERSTAND THE PERFORMANCE OF THE GAS INDUSTRY AND PROVIDING FIRM SERVICE TO GENERATION RESOURCES.

HISTORICALLY, ERCOT HAS NOT HAD A STRONG RELATIONSHIP WITH THE GAS INDUSTRY AND THIS PHASE TWO PRODUCT ALLOWS US TO LEARN HOW THEY WILL RESPOND TO THIS POLICY, RECOGNIZING THAT THIS IS A HIGH PREMIUM SERVICE AND THERE IS MONEY TO BE MADE HERE.

ERCOT STAFF RECOMMENDS THAT THE RMM COMMITTEE AND THE ERCOT BOARD ADOPTS ITS COMMENTS TO NPR 1169 AS ALLOWS US TO BE STEADY WITH DELIBERATE RECOGNITION IN MOVING THE PROGRAM FORWARD IN INCREMENTAL STEPS AND GAIN THE KNOWLEDGE FROM THE INDUSTRY THAT SUPPORTS CONTINUED EVOLUTION OF THIS PROGRAM.

NOW I WANNA TURN TO THE PRESENTATION AND THERE'S BEEN A LOT OF DISCUSSION OF THE LAST SEVERAL MONTHS AROUND THE FUEL SURVEYS THAT ERCOT HAS DONE AS WE TRIED TO UNDERSTAND THE WILLINGNESS OF THE GENERATION FLEET TO OFFER INTO THIS PROGRAM AS UNDER VARIOUS ITERATIONS OF THE DEFINITION, WE, WE INITIALLY STARTED AND CAN ON, IF YOU CAN GO TO, I DON'T KNOW WHAT EXACTLY SLIDE, I THINK IT'S SLIDE NINE IN THE PRESENTATION, BUT, UM, RIGHT THERE.

SEPTEMBER 1ST, AND THEN THE LIMITED BECAUSE SOME OF THESE RESOURCES BY THEIR GAS ON A PORTFOLIO BASIS, THAT, THAT IS ANOTHER RESTRICTION ON THE Y AXIS.

WHEN WE INITIALLY STARTED EARLIER THIS YEAR, WE HAD ERCOT DEFINITION THAT'S IN FRONT OF YOU TODAY, AND WE HAD, UM, A DIFFERENT VERSION OF QUALIFYING PIPELINE TO TRY TO UNDERSTAND WHAT THE INTRASTATE WILLINGNESS WOULD BE.

AND THERE WAS A LOT OF MEGAWATTS THAT WERE OFFERED INTO THE FUEL SURVEY, AND ALL IT REALLY SHOWED YOU WAS A WILLINGNESS THAT THERE'S A LOT OF INTEREST IN THIS PROGRAM.

IT WAS NOT TO GIVE ANY TYPE OF CERTAINTY THAT YOU WOULD ACTUALLY SEE THOSE MEGAWATTS OFFERED INTO THE PROGRAM.

AS WE MOVE FORWARD AFTER THE TAC RECOMMENDATION FOR QUALIFYING PIPELINE, WE WENT BACK OUT WITH A FUEL SURVEY AND WE KIND OF CONSTRAINED OUR ASS INSTEAD OF FOCUSING ON WILLINGNESS FOCUSED ON WHAT RESOURCE COULD ACTUALLY OFFER IN.

AND THESE ARE THE RESULTS THAT YOU SEE ON, ON SLIDE 10.

SO YOU WENT FROM, YOU KNOW, 10,000 MEGAWATTS OF EXCESS WILLINGNESS DOWN TO MAYBE A THOUSAND MEGAWATTS OF WHAT COULD BE ACTUALLY THERE AND COULD OFFER IN UNDER TAX RECOMMENDATION, WHERE IT ALLOWS THE EXPANSION OF THE INTEREST RATE PIPELINE TO COME IN IF YOU GET THOSE CERTIFICATIONS THAT BRIAN AND JOHN REFERENCED TO.

SO THIS WOULD BE YOUR POSSIBLE MAX POTENTIAL.

UNDER THE INTRASTATE DEFINITION, BASED UPON CURRENT INFORMATION THAT WE GOT FROM THE RESOURCES AS OF LAST WEEK UNDER TAX RECOMMENDATION, WE DID NOT GO BACK OUT AND ASK THE SAME QUESTION FOR ERCOT DEFINITION BECAUSE AT THE END OF THE DAY, WE DON'T KNOW HOW THE INDUSTRY WILL RESPOND TO THE DEFINITION AND WE NEED TO TEST AND SEE HOW THEY WILL SET THOSE EXPECTATIONS GOING FORWARD WITH ERCOT DEFINITION.

AND I WOULD COME BACK TO THE CONSERVATIVE DECISION MAKING TO EXPAND THIS PROGRAM, THAT ERCOT VERSION IS TAKING ONE STEP FORWARD TAX VERSION IS PROBABLY TAKING TWO STEPS FORWARD.

THEY BOTH DEAL WITH THE RISK ERCOT VERSION, ELIMINATES THIS PRIORITY RISK TAX VERSION, OPENS UP THE POTENTIAL THAT THE GAS UTILITY IN SOME FUTURE WINTER WEATHER EVENT MIGHT ACTUALLY HAVE TO CURTAIL THOSE GENERATION RESOURCES.

WE DO THINK THAT'S A LOW RISK, BUT IT IS A RISK THAT'S PRESENTED WITH TAX RECOMMENDATION.

NOW, WITH RESPECT TO CALPINE'S MOST RECENT COMMENTS WHERE THEY'RE FOCUSED ON THE INTERSTATE SIDE OF IT, WHICH IS THOSE PIPELINES THAT ARE REGULATED BY FERC, UH, WE DON'T SUPPORT THOSE CHANGES BECAUSE IT WOULD CHANGE THE UNIFORMITY OF WHAT WE'RE TRYING TO ACCOMPLISH WITH THE DEFINITION, BOTH CREATING THE INDUSTRY BOTH ON THE INTERSTATE AND THE INTERSTATE FROM A CONTRACTUAL STAIN FRAMEWORK THAT HAS THE SAME PRINCIPLES.

IF THE INTERSTATE PIPELINES HAVE TO GO TO FERC AND CHANGE THEIR TARIFFS, AND WE DON'T KNOW FOR CERTAIN WHETHER THEY WILL OR NOT, THEN THEY'VE HAD THAT EXPECTATION FOR MANY MONTHS BECAUSE THAT FRAMEWORK OF WHAT WE'VE OFFERED IN AS FAR AS A QUALIFYING FORCE MAJEURE PROVISION HAS BEEN THERE FOR MANY MONTHS AS WE'VE TALKED TO THE INDUSTRY.

AND IF THEY'RE NOT ABLE TO DO THAT WITHIN THIS TIMEFRAME, THEN THEY KNOW THAT'S THE EXPECTATIONS WE'VE SET WITH OUR DEFINITION AND THEY CAN MOVE FORWARD THROUGH THAT PROCESS AND MAKE THE APPROPRIATE TARIFF CHANGES.

AGAIN, WE'RE COMING BACK TO WHAT IS THE PURPOSE OF THIS PROGRAM, WHICH WAS ORIGINATED UNDER SENATE BILL THREE IN THE LAST LEGISLATIVE SESSION.

A HIGH RELIABILITY SERVICE WITH A HIGH PREMIUM.

SO WE HAVE TO SET A HIGH STANDARD AND WE HAVE TO WORK WITH THE GAS INDUSTRY TO UNDERSTAND WHAT WE'RE PUTTING FORWARD AND MAKE CHANGES APPROPRIATELY GOING FORWARD.

NOW STOP THERE AND SEE IF CANAN WANTS TO OFFER ANYTHING ELSE.

I, I MEAN, UH, FOR THE MOST PART, UH, CHAD COVERED EVERYTHING WHERE OUR POSITION IS AND, AND THE LOGIC, UM, I MEAN, IT JUST COMES DOWN TO DO YOU PUT THIS OTHER, UH, PRIORITY BETWEEN THE PROGRAM THAT WE'RE DESIGNING OR,

[00:40:01]

OR, OR NOT.

AND, UM, OUR RECOMMENDATION IS DON'T PUT THIS ADDITIONAL, UH, UH, FACTOR, UH, THAT COULD COST US THE GAS SUPPLY AHEAD OF, UM, WHAT WE PROCURE.

UM, IN THE END, UH, TO ME, THE OTHER ISSUE HERE IS THAT, UH, WE ARE TRYING TO PUSH FORWARD MORE RELIABLE GAS SUPPLY IN AREAS OF THE STATE THAT DID NOT HAVE IT.

AND WHAT IS ALREADY, ALREADY HAPPENED DURING URI IS NOT AS HIGH A PRIORITY AS EXPANDING, UM, DUPLICATIVE OR, UH, BACKUP FUEL FOR AREAS THAT WERE NOT ABLE TO PERFORM DURING THE WINTER EVENT.

SO THAT'S THE OTHER ELEMENT THAT IS ALWAYS IN THE BACK OF MY MIND AS I THINK ABOUT THIS PROGRAM.

JOHN CANAN ISN'T ANOTHER ONE OF THE OBJECTIVES HERE TO HAVE A LEVEL PLAYING FIELD WITH THOSE GENERATORS WHO HAVE CHOSEN OTHER METHODS OF FIRM FUEL, LIKE ONSITE FUEL OIL, OR EVEN ONSITE GAS STORAGE.

SO, UH, I, I THINK, UH, THAT IS AN IMPORTANT, UH, ELEMENT AND, UM, IN, IN A SINGLE CLEARING PRICE AUCTION, WE WOULD ACHIEVE THAT IF WE STARTED KIND OF STRATIFYING PRODUCTS AND PRICES THAT MAY NOT HAPPEN AND WE MIGHT START TILTING MORE TOWARDS ONE SIDE OR THE OTHER OF THOSE TWO PRODUCTS.

I GUESS MY POINT IS THAT PEOPLE WHO HAVE ALREADY INVESTED THE COST ASSOCIATED WITH HAVING THE FUEL PHYSICALLY ON SITE, UM, WOULD BE AT A DISADVANTAGE RELATIVE TO SOMEONE WHO'S GOT IT ALL IN A VARIABLE COST, EVEN IF IT'S IN A, YOU KNOW, SOME OF FIXED FIXED AGREEMENT KIND OF FORMAT.

IT'S THAT, THAT IS A RISK THAT, THAT WE FACE.

I THINK IF WE, THE, IF THE MARKET'S DESIGNED PROPERLY AND THE THE PEOPLE THAT MADE THE INVESTMENT CLEAR, THE THE MARKET, IT WOULD STILL ACHIEVE THE OBJECTIVE THAT, THAT YOU'RE, UH, POINTING OUT.

BUT IF WE MISS THAT, UM, AND CLEAR THE MARKET TOO LOW, THAT INVESTMENT COULD BE SUNK.

YEAH, I GUESS I'M, I'M MAKING THE POINT THAT WE SHOULD REWARD PEOPLE WHO HAVE MADE THE INVESTMENT.

UH, I THINK THERE IS THAT RISK.

UM, BUT I, I DO WANNA MAKE CLEAR THAT WORKING WITH THE COMMISSION, WE COULD MANAGE THAT, THAT RISK THAT YOU'RE POINTING OUT, BUT YOU WOULD HAVE TO BE CAREFUL IN YOUR APPROACH ON THAT.

UH, CAN I, CAN YOU EXPLAIN THIS SLIDE THAT'S ON THE SCREEN A LITTLE BIT FURTHER? SO WE, UH, SENT OUT A, UH, A SURVEY AND, UM, THERE ARE, UH, WE ASKED FOR THREE PRODUCTS, A 48 HOUR PRODUCT, A 72 HOUR PRODUCT, AND A 96 HOUR PRODUCT.

SO THE, AS AS CHAD POINTED OUT BEFORE, I'M GONNA WORK MY WAY FROM THE BOTTOM UP.

NOW, THE CERTAIN, UH, UH, DELIVERY, UM, IS AT, AT THE VERY BOTTOM, UH, WHAT, WHAT WE WERE, UH, WHAT, WHAT THE RESOURCES SAID THAT THEY COULD BRING TO THE TABLE.

UM, AS YOU LOOK AT, UM, UH, THE, THE MIDDLE PART, THAT ONE, UM, ESSENTIALLY IS, UH, IT LACKS SOME ELEMENTS, UH, AS, AS WE MOVE UP IN TERMS OF CERTAINTY OF, OF DELIVERY, AND THOSE ARE THE KIND OF THE MIDDLE NUMBERS.

AND THEN LASTLY, THE, THE VERY TOP SET IS, UH, VERY LIMITED DELIVERY IN TERMS OF WHAT WE COULD GET.

CHAD, DO YOU WANT TO ADD ANYTHING, UH, TO THAT? YEAH, I MEAN, I THINK AS THE DEFINITIONS INDICATED AT THE BOTTOM, IT KIND OF GIVES YOU THE PERSPECTIVE OF, OF HOW THE RESOURCES WERE INTERPRETING THE QUESTION AND HOW WE PUT 'EM INTO THOSE THREE RESPECTIVE, UH, BUCKETS GOING TO THE DURATION WE'VE ALWAYS THOUGHT, AND WE GOT INPUT FROM THE INDUSTRY THAT RIGHT NOW IT'S A 48 HOUR SERVICE, AND THERE'S THE POTENTIAL TO EXPAND THAT HORIZON, AND YOU SEE THAT REFLECTED IN THE AVAILABLE CAPACITY THAT COULD GO 72 HOURS OR 96 HOURS.

SO THAT'S AGAIN, ANOTHER DATA POINT IN THE EVOLUTION OF THIS PROGRAM.

UH, MAYBE IT'S A PHASE THREE OR PHASE FOUR WHERE WE WANNA CHANGE THE DURATION OF WHAT WE'RE ASKING FOR AS FAR AS THE PRODUCT.

UM, BUT WHEN YOU LOOK AT THE CURRENT AVAILABLE QUALIFIED, THIS IS THE RESPONSES WE GOT BACK FROM THE RESOURCES, WHICH SHOWS A LITTLE BIT OVER A THOUSAND, THE ABILITY WHERE THEY DON'T HAVE THE, THE FIRM FUEL CONTRACT RELATIVE TO, UH, NPR 1169 IN PLACE.

AND SO THIS SECOND BUCKET LACKS THE CONTRACT.

I'M NOT SURE IF THEY'LL BE ABLE TO SECURE IT, BUT THERE'S THE POTENTIAL TO SECURE THAT, WHICH IS SOMETHING THAT WOULD HAVE TO BE DONE HERE PRETTY SOON IN THE NEXT COUPLE MONTHS, BECAUSE AGAIN, WE'RE GOING OUT WITH THE RFP IN AUGUST AND THE, IT'S DUE BY

[00:45:01]

WHAT IS THE GOAL FOR CAPACITY? WHAT ARE WE TRYING TO ACHIEVE WITH FIRM FUELS? SO, UM, THE GOAL IS, UH, UH, A LITTLE BIT OF A, OF A CHALLENGE.

SO EVERY AMOUNT THAT YOU PROCURE DOES TWO, UH, HAS TWO BENEFITS.

ONE, IT, UH, ENSURES, UH, ALTERNATE FUEL SUPPLY WHEN GAS MIGHT BE, UH, VERY TIGHT ON THE SYSTEM.

BUT THE OTHER THING IS THAT BY, IN SO DOING, YOU'RE FREEING UP GAS FOR OTHER RESOURCES AS WELL.

SO, UM, UH, THERE, THERE'VE BEEN SOME STUDIES THAT THAT WOULD SAY, ULTIMATELY YOU WANTED TO GET AS HIGH AS 19,000 MEGAWATTS, BUT I WOULDN'T SAY THAT THAT'S THE END GOAL.

IT'S ABOUT WHAT YOU CAN PROCURE AND WHAT'S KIND OF AVAILABLE AND FUNCTIONAL CURRENTLY.

THE OTHER KEY THING OF EVEN PROCURING A SMALLER AMOUNT IS IT CREATES A MARKET AND A PRICE SIGNAL FOR ADDITIONAL INVESTMENT IN THIS SPACE.

SO I I, I THINK IT'S ALL THREE OF THOSE DIMENSIONS.

UM, BUT IF YOU WERE TO LOOK KIND OF AT A YURI CASE, UH, WHEN WE DID, UH, SURVEYS AROUND, UH, THE RESOURCES THAT, UM, UH, TRIPPED OFF FOR WEATHER OR FOR FUEL, UM, AND TRIED TO ESTIMATE WHAT IF, IF THEY HADN'T TRIPPED OFF FOR WEATHER, DID THEY HAVE ENOUGH FUEL? THAT NUMBER CAME IN AROUND 19,000 MEGAWATTS.

PEGGY, THANK YOU.

UH, KAN, CAN YOU PULL UP SLIDE 14 FROM THE APPENDIX? SO I, I, OH, SORRY.

IS IS THIS THE ONE YOU WANTED? YEAH, IT IS.

IT, EVERYONE'S TOUCHED ON THIS, BUT I WANNA JUST DIG INTO IT A LITTLE BIT DEEPER SO THAT THE BOARD MEMBERS UNDERSTAND THERE HAS BEEN A LOT OF PROCESS AROUND THIS.

THERE'S BEEN WORKSHOPS STARTING IN THE FALL, MULTIPLE ROUNDS OF WRITTEN COMMENTS ON THIS GREAT DIALOGUE, WHICH WAS VERY IMPORTANT TO GET UNDERWAY WITH THE GAS INDUSTRY.

AND, UH, BUT MOST IMPORTANTLY TO ME IS THERE HAVE BEEN FOUR COMMISSION PUBLIC DISCUSSIONS ON THIS TOPIC AT ERCOT REQUEST BECAUSE ERCOT STAFF WAS STRUGGLING WITH WHAT THE DEFINITION OF QUALIFYING PIPELINE SHOULD BE AND TRIED TO GET GUIDANCE ON THIS.

SO A LOT OF HISTORY HAS ALREADY TAKEN PLACE, AND I'VE LISTENED TO ALL THAT DISCUSSION, AND THE PC HAS BEEN CLEAR THAT THEY WANT TO PROCEED CAUTIOUSLY.

UH, AND, AND I UNDERSTAND THAT AND CAN SUPPORT THAT.

THERE'S A LOT OF COSTS WITH THIS PROGRAM, AND WE'VE JUST FINISHED PHASE ONE, AND AS WE'RE GONNA SEE LATER IN TODAY, YOU KNOW, THERE'S A REPORT ON WHAT HAPPENED IN PHASE ONE AND, YOU KNOW, IT HAD PROBLEMS AND, AND YOU KNOW, YOU'RE GONNA LEARN EVERY TIME THROUGH EVERY WINTER, THIS PHASE ONE, PHASE TWO, AND I'M A HUNDRED PERCENT CONVINCED THAT THESE PROGRAMS ARE GONNA BE CHANGING FOR THE NEXT FEW YEARS ON A YEARLY BASIS.

SO IT'S NOT A DECISION THAT'S BEING MADE HERE IN CONCRETE.

I THINK WE ARE GONNA, UH, NEXT YEAR WE WILL BE REVISITING THIS.

UM, I THINK IT'S ALSO IMPORTANT TO NOTE THAT ERCOT HAS VERY LITTLE EXPERIENCE DEALING WITH NATURAL GAS INDUSTRY AND, UH, THERE'S NOT A LOT OF TRANSPARENCY ON THE INTERSTATE SIDE, SO THEY HAVE TO RELY ON THE INDUSTRY AND THE MARKETS TO HELP US GET TO WHERE WE WANNA BE.

AND KINDER MORGAN AND ENTERPRISE HAVE BEEN VERY HELPFUL IN THAT PROCESS, BUT THEY'RE NOT THE ENTIRE INTERSTATE MARKETS.

UH, WE ARE CAUGHT ISSUED TWO SURVEYS AND GOT CONFLICTING INFORMATION.

UH, WE NEED THE MARKETS HELP TO GET THERE ON THE NATURAL GAS SIDE, MORE SO THAN OTHER SIDES BECAUSE WE DON'T HAVE EXPERIENCE IN IT.

AND SO, UM, WE'VE GOTTA DESIGN THE PROTOCOLS IN A WAY THAT WE'RE COMFORTABLE FIT THE WHOLE MARKET AND, YOU KNOW, NOT JUST TWO LARGE PIPELINES.

SO THAT'S, THAT'S ONE OF THE CHALLENGES.

UH, AND SO GOING FORWARD, YOU KNOW, REALLY ENCOURAGE IT.

WE REALLY ENCOURAGE THE MARKET TO HELP US GET TO WHERE WE NEED TO BE ON THESE ISSUES.

UH,

[00:50:01]

I ALSO WANNA POINT OUT, THERE WAS A LOT OF DISCUSSION AT THE PUC MEETINGS ABOUT ELIMINATING CURTAILMENT RISK.

AND THAT SHOULDN'T BE THE GOAL.

WE'RE NEVER GONNA ELIMINATE CURTAILMENT RISK.

THERE'S CURTAILMENT RISK IN PHASE ONE.

THERE'S CURTAILMENT RISK ON INTERSTATE PIPELINES, THERE'S CURTAILMENT RISK ON INTRASTATE PIPELINES.

AND SO IN MAKING THESE POLICY CALLS, WE NEED TO, YOU KNOW, EVALUATE THAT RISK AND TRY TO GET THE BALANCE RIGHT.

BUT WE'RE FOOLING OURSELVES IF WE THINK WE'RE GONNA ALWAYS ELIMINATE CURTAILMENT RISK.

AND SO TO ME, THAT'S NOT THE PROPER FO FOCUS.

UH, AND FINALLY, I JUST WANNA REITERATE WHAT SOME OTHERS HAVE SAID ABOUT THE PROCESS TO DATE AND, AND HOW HELPFUL IT HAS BEEN.

I WISH, UH, I WISH WE, WHEN WE HAD STARTED THIS PROCESS, WE KNEW ERCOT KNEW WHAT THEY KNEW KNOW TODAY, YOU KNOW, IT, IT, IT TOOK A LOT OF WORK TO GET TO WHERE WE ARE TODAY, WE, AND WHERE WE ARE.

THE PROCESS HAS BEEN EXTREMELY HELPFUL, AND IT'S VERY POSSIBLE THAT A YEAR FROM NOW WE CAN, NO ONE WILL COME IN UNDER THIS PHASE, AND WE MAY PICK UP EXACTLY WHERE WE ARE TODAY WITH THET DEFINITION IF, IF THE BOARD DECIDES NOT TO, NOT TO PROVE THAT.

UM, BUT THAT PROCESS HASN'T BEEN HELPFUL AND I THINK IT'S SOMETHING WE'RE GONNA BUILD ON OVER THE NEXT FEW YEARS.

THANKS, PEGGY.

THANKS.

ARE THERE QUESTIONS OR COMMENTS, CARLOS? UH, YEAH, JUST ONE, ONE QUESTION.

THIS IS ABOUT PRICE SIGNALS AS WELL FOR INVESTMENT.

AND, UH, OUT OF THE TWO APPROACHES, WHICH ONE DO YOU THINK WOULD GENERATE MORE INVESTMENT IN STORAGE IN STATE? SO, I, I, THERE'S GONNA BE LESS OFFERS AND AS CHAZ POINTED OUT IN THE ERCOT PROPOSAL, UM, THAT COULD CLEAR I, WE ARE GONNA HAVE TO, AND, AND THE COMMISSION IN PHASE ONE PUT COST CONTROLS AROUND THE PROGRAM.

THAT WILL PROBABLY NEED TO HAPPEN AGAIN, UH, UN UNDER PHASE TWO.

UH, BUT THAT'S GONNA BE A LESS LIQUID MARKET LIKELY TO CLEAR CLOSER TO THE CAPS THAT, THAT THE COMMISSION, UM, THAT IS, IS GONNA CONTEMPLATE FOR THIS.

UM, I THINK THE, UH, ALTERNATE PROPOSAL OR THE TAC PROPOSAL WOULD HAVE A LITTLE BIT MORE LIQUIDITY TO IT, AND THEN, UM, THAT MIGHT, UH, HAVE A LOWER CLEARING PRICE POTENTIALLY, OR THE SAME CLEARING PRICE THAT PHASE ONE DID.

SO TO ME, UM, IT IT'S MORE ABOUT WHAT YOU WANT TO SIGNAL YOU WANT THAN, UH, I, I DON'T NECESSARILY SEE ONE BEING THAT MUCH BETTER AT A PRICE SIGNAL THAN THAN THE OTHER AT, AT THIS POINT.

ANY OPPOSED? ABSTENTIONS.

WELL, I THINK THERE'S BEEN VERY GOOD DISCUSSION.

SOUNDS LIKE THE PROCESS HAS BEEN VERY GOOD, VERY OPEN, AND I THINK WHERE WE'RE FALLING OUT FROM A COMMITTEE STANDPOINT IS, I THINK AS CHAD SAID, THERE'S A STEP FORWARD AND THERE'S TWO STEPS FORWARD.

I THINK THE PROPOSALS AND FEEDBACK FROM CALPINE AND KINDER MORGAN AND ENTERPRISE ARE ALL VERY HELPFUL AND I THINK MAY MAKE A LOT OF SENSE FOR US GOING FORWARD IN THE FUTURE.

I THINK FOR NOW, AS WE LEARN, I THINK AS PEGGY DESCRIBED, IT'S PROBABLY GOOD TO TAKE A STEP AT A TIME TO DO THIS.

SO I WOULD PROPOSE THAT WE, WE RECOMMEND APPROVAL OF NPR R 1169 AS RECOMMENDED BY TAC IN THE 5 23 23 TAC REPORT AMENDED BY THE JUNE 12TH, 2023 COMMENTS BY ERCOT.

THAT'S MY PROPOSAL, AND IT'S ANY OTHER DISCUSSION OR MOTION TO APPROVE? I'LL MOVE IT.

SO WE'LL CONSIDER IT PASSED AS DESCRIBED.

THANK YOU, CANAN.

BUT YOU CAN STAY THERE, CANON, BECAUSE YOU'RE UP NEXT FOR AGENDA

[5. Recommendation regarding Day-Ahead Market Price Correction for Certain Days in FebruaryMarch 2023 – Inclusion of ESR CLRs in Load Zone Pricing]

ITEM.

UM, FIVE CONAN'S GOING PRESENT THE RECOMMENDATION REGARDING DAY AHEAD MARKET PRICE CORRECTION FOR CERTAIN DAYS IN FEBRUARY AND MARCH, 2023, INCLUSION OF THE E SR C L R AND LOAD ZONE PRICING.

FOLLOWING CONAN'S PRESENTATION, THE COMMITTEE WILL VOTE ON A RECOMMENDATION TO THE BOARD.

CANON.

[00:55:09]

AND ALSO GREATER THAN $20,000 OR 20%, AND ALSO GREATER THAN $2,000.

UM, SO THE ERCOT STAFF IS RECOMMENDING THAT THE, UH, R AND M COMMITTEE RECOMMEND APPROVAL OF A SET OF, UH, PRICE CORRECTIONS, UM, THAT, UH, UH, IMPACT BOTH THE, UH, THE DAY AHEAD MARKET, UH, ON CERTAIN OPERAT OPERATING DAYS IN FEBRUARY AND MARCH.

UH, AND THE, UH, TEMPLATE IS ATTACHED.

THE, THE BOARD DECISION TEMPLATE IS, IS ATTACHED, UM, THE KEY DETERMINANTS, UH, OR THE KEY FACTORS FOR CONSIDERATION HERE, THAT IS THAT WE INCORRECTLY INCORPORATED ENERGY STORAGE, RESOURCE CHARGING, WHICH MAKES IT A LOAD AT THAT TIME, UH, IN THE CALCULATION OF THOSE LOAD ZONE PRICING.

AND THAT'S THE MAIN CAUSE OF NEEDING TO DO THIS.

UH, THIS PRICE CORRECTION, THE ERROR WAS INTRODUCED DURING, UH, MARKET MANAGEMENT SYSTEM UPGRADE.

UH, ERCOT, UH, HAD IMPLEMENTED ADDITIONAL, UH, I'M SORRY.

SO IN, IN RESPONSE TO THIS, ERCOT HAS IMPLEMENTED ADDITIONAL MMS MODEL VALIDATION STEPS, SO TO ENSURE THAT THIS DOESN'T HAPPEN AGAIN IN THE FUTURE.

AND, UM, THE LAST KIND OF POINT I WANNA MAKE IS THE, UH, CORRECTION IS RELATIVELY SMALL.

IT HIT OUR TRIGGER, UM, UH, NUMBERS TO BRING IT TO THE BOARD.

UH, BUT THE HIGHEST PAYMENT ON, ON A PARTICULAR DAY IS $305,000, AND THE HIGHEST, UH, UH, CHARGE TO AN ENTITY IS, UH, $299,000.

UM, SO THAT KIND OF GIVES YOU A LITTLE BIT OF FLAVOR OF, OF THE MAGNITUDE.

SO THAT'S, UM, THAT, THOSE, THOSE ARE THE CRUX ISSUES HERE.

I'M GONNA SPEND A LITTLE BIT MORE TIME ON, ON EACH OF THESE.

SO, UM, WE DISCOVERED THIS ERROR ON MARCH 9TH, UH, AND THE, UH, AND, AND, AND DISCOVERED THAT IT IMPACTED THE LOAD ZONE CALCULATION.

AND I SAID DAY AHEAD MARKET, BUT IT'S BOTH THE DAY AHEAD AND, AND REALTIME MARKET.

UM, WE SENT OUT A MARKET NOTICE, UM, AND, UH, WE WENT THROUGH THAT.

WE, UH, UH, WERE NOT ABLE TO CORRECT, UH, THE, ALL THE FULL SUITE OF PRICES BECAUSE OF THE TIMELINES THAT ARE IN THE, UH, IN, IN THE PROTOCOLS.

SO THAT TRIGGERS WHETHER WE BRING THAT TO THE BOARD OR NOT.

AND AT THAT POINT WE DO AN ANALYSIS ON THE MAGNITUDE OF THE ERROR, AND IF IT HITS A CERTAIN THRESHOLD, WE BRING THAT TO THE BOARD.

UM, LET'S SEE.

SO, AND I'VE KIND OF WALKED THROUGH ALL OF THIS, BUT AGAIN, UM, THE ERROR WAS RELATED TO THE METHOD IN WHICH MMS DETERMINES IF AN ELECTRICAL BUS IS ASSOCIATED WITH A BATTERY OR, UH, IF, IF IT'S ACTUALLY A LOAD.

AND BATTERIES, THE WAY WE MODEL THEM RIGHT NOW, BECAUSE WE DON'T HAVE THE SINGLE MODEL, IS WHEN THEY'RE CHARGING, WE MODEL THEM AS A LOAD.

AND WHEN THEY'RE DISCHARGING, WE MODEL THEM AS A GENERATOR THAT, UH, UH, LOAD ZONE PRICE SHOULD NOT HAVE BEEN CALCULATED THAT WAY.

BATTERIES PAY A NODAL PRICE, UH, FOR CHARGING BY, UH, BY OUR RULES.

AND, AND THAT IS, UM, IN MY OPINION, THE, THE CORRECT WAY.

YOU DON'T WANT TO NECESSARILY TACK ALL THE OTHER CHARGES ONTO THE PRICE THAT THEY PAY.

UM, SO, SO WE CALCULATE THAT DIFFERENTLY.

UM, ONCE WE DISCOVERED THIS, WE IMPLEMENTED, UH, A FIX.

UM, AND, UH, THE DAYS THAT WERE IMPACTED ON THE REAL TIME SIDE WERE LIMITED TO FEBRUARY 8TH THROUGH MARCH 7TH.

AND THE IMPACT, UH, FOR TO THE DAY AHEAD MARKET WAS LIMITED TO FEBRUARY 9TH THROUGH MARCH 8TH.

UM, WE DID SEND OUT A MARKET NOTICE AS SOON AS WE FIGURED OUT THE, THE IMPACTS.

AND AS I SAID EARLIER, WE HAVE IMPLEMENTED STEPS TO PREVENT THIS FROM HAPPENING AGAIN.

I, UM, THE, THE THRESHOLD THAT, UH, EXISTS IN THE PROTOCOLS FOR US TO BRING THAT TO YOU ARE DEFINED IN SECTION 63, PARENTHESES SEVEN B, AND, UH, THAT'S WHAT, THERE'S ONE FOR THE REALTIME MARKET, ONE FOR THE DAY AHEAD MARKET.

THAT'S WHY THERE'S THESE TWO THINGS.

AND, AND THE THRESHOLDS ARE 2%

[01:00:01]

UM, AND, UH, SO THOSE ARE THE DAYS THAT THAT, THAT WE ARE BRINGING TO YOU FOR CORRECTION.

UM, HERE ARE THE KIND OF, UH, UH, COUNTERPARTIES MEETING THE CRITERIA.

UH, AND THEN HERE IS THE DATA ON THE CHANGE IN SETTLEMENT CHARGES.

UH, LIKE I SAID ON THE, UH, 18TH IS, IS THE FEBRUARY 18TH IS IS A HIGH DAY.

UM, AND, UH, THE MARCH 2ND IS, IS A LOW DAY, UH, I'M SORRY, I I SAID THAT INCORRECTLY.

UH, FEBRUARY 18TH IS A, A HIGH ERCOT PAYOUT DAY, AND MARCH 2ND IS THE HIGH ERCOT CHARGES, THE MARKET PARTICIPANT DAY.

UM, I, I CAN WALK YOU THROUGH AN EXAMPLE IF YOU LIKE, THAT'S IN, IN THE APPENDIX, BUT THE ACTION THAT WE'RE ASKING FOR FROM R AND M IS TO RECOMMEND TO THE BOARD THAT WE MAKE THIS PRICE CORRECTION.

SO CANON, THIS WAS TRIGGERED BY A SOFTWARE UPGRADE, AND CAN YOU JUST TALK ABOUT THE CONTROLS AROUND TESTING UPGRADES TO MITIGATE THIS IN THE FUTURE? SO, UM, WE, WE TEST, UH, OF WIDE VARIETY OF, OF UPGRADES, BUT, UM, BOTH THE ENVIRONMENT IN WHICH WE TEST IT AND UM, THE, THE ITEMS THAT WE TEST, UH, SOMETIMES LIMITS OUR ABILITY TO, UH, CAPTURE THESE TYPES OF ACTIVITIES.

TO ME, UM, UH, WE, WE ARE ARE CHANGING OUR PROCESSES.

WE WILL, UH, LIKE I SAID, DO AN ADDITIONAL VALIDATION EVERY TIME WE GET AN UPGRADE ON, UH, VALIDATING THAT THIS IS CALCULATIONS BEING DONE RIGHT.

UM, SO, UH, I'M VERY CONFIDENT THAT THIS ERROR WILL NOT FLOW THROUGH AGAIN.

HOWEVER, I THINK, UM, AS, UH, JANET HAS SHARED WITH THE BOARD, UH, STEPS NEED TO BE TAKEN THAT ARE MORE HOLISTIC, THAT LOOK KIND OF ACROSS ALL THE BUSINESS UNITS TO LIMIT, UM, UH, THESE TYPES OF ERRORS.

THE OTHER THING IS THERE'S ALSO A VENDOR INVOLVED HERE AND, UM, THEIR, THEIR SYSTEMS AND THE WAY THEY ARE DOING THE WORK MATTERS, UH, BECAUSE THE WAY I LOOK AT IT KIND OF TESTING IS YOUR LAST LINE OF DEFENSE.

THERE'S A LOT OF OTHER STEPS THAT WE NEED TO TAKE BETWEEN, UH, GETTING THE TESTING.

WE CAN'T RELY ON THAT CATCHING EVERYTHING TO HAVE AN ENVIRONMENT OF, UH, REDUCED ERRORS AND, UM, QUALITY.

AND I'M GONNA JUST TURN THE MICROPHONE OVER TO JAN CUZ HE'S LEADING THE, UM, THE QUALITY ASSURANCE, UH, INITIATIVE.

YOU KNOW, I WANT TO SEPARATE A COUPLE OF THINGS.

ONE IS, UM, CHANGE MANAGEMENT, RIGHT? THAT IS SOFTWARE CHANGE MANAGEMENT.

AS YOU KNOW, WE, WE CHANGE OUR SYSTEMS A FAIR AMOUNT AND ALSO THE DATA IS ALSO CHANGING BECAUSE OF NEW MODELS COMING IN AND MORE INFORMATION COMING IN.

SO ON ON THAT CHANGE MANAGEMENT ASPECT, A LOT OF TESTING THAT HAPPENS IS IN THE, YOU KNOW, BUSINESS AND IT AREA BECAUSE THE TESTING OF THE FUNCTIONS IS ACTUALLY BOTH BUSINESS AND IT, UM, ONE OF THE THINGS THAT JP IS DRIVING FORWARD IS, UM, MORE AUTOMATED TESTING.

OKAY? SO THAT YOU, YOU WOULD'VE PROBABLY HEARD SOME OF THOSE TYPE OF THINGS COME OUT THE BUDGET REQUEST AS WELL IN ADDITION TO THE ADDITIONAL EYE TEST SYSTEM.

UM, SO THESE ARE THINGS THAT ARE HAPPENING AS WE SPEAK.

AND THEN THERE IS A COUPLE OF OTHER EFFORTS, WHICH IS MORE AT THE STRATEGIC LEVEL.

UM, THE FIRST ONE WE HAVE IS MORE OF AN INTERNAL EFFORT.

AND WE HAVE WHAT WE WANT IS NOT A, A FRAGMENTED APPROACH TO QUALITY, BUT RATHER A CONCERTED UPWARD EFFORT ON QUALITY, UH, AND FOCUSED ON CONTINUOUS IMPROVEMENT AND NOT JUST CHANGE MANAGEMENT, IT IS ALSO OUR REGULAR OPERATIONS.

UM, SO WE ARE TALKING TO THE DIFFERENT VPS FOCUSED ON, YOU KNOW, OUR CORE BUSINESS AND TRYING TO FIND OUT WHAT IS IT THAT WE ARE WORRIED ABOUT AND, AND WHY IS IT MAYBE WE FEEL COMFORTABLE ABOUT NOT WORRYING TOO MUCH IN THE SENSE THAT WHAT MEASUREMENTS DO WE HAVE IN PLACE AND THAT WE ARE REGULARLY MEASURING AND REPORTING

[01:05:01]

THAT TELL US THAT WE ARE OPERATING AT THE EXPECTED LEVEL OF QUALITY.

SO THAT'S AN INTERNAL EFFORT AND WE ARE GATHERING THAT TYPE OF INFORMATION AND I THINK WE WILL HAVE IT READY IN THE NEXT COUPLE OF MONTHS TO MAYBE ANOTHER MONTH AFTER THAT.

UM, SO THAT'S, THAT'S ONE EFFORT THAT'S HAPPENING.

NOW, THE, THE SECOND EFFORT IS THERE'S AN RFP THAT ACTUALLY WENT OUT, OR IT'S GOING TO GO OUT TODAY, AND WE ARE TRYING TO ENGAGE A VENDOR TO COME ON BOARD AND LOOK AT OUR VALUE CHAIN PROPOSITION.

UM, YOU KNOW, WHAT IS IT THAT WE ARE DOING ACROSS DIFFERENT PARTS.

NOW, THIS INCLUDES CORPORATE FUNCTIONS AS WELL, NOT JUST OUR CORE BUSINESSES.

UM, AND BASED ON MAPPING THOSE PROCESSES THAT SUPPORT OUR, OUR VALUE PROPOSITION, UH, WE WANT TO TAKE THAT TO HOW CAN WE IMPROVE OUR PROCESSES AND HOW DO WE PUT SOMETHING IN PLACE THAT WILL CONTINUALLY IMPROVE OUR PROCESSES.

UM, AND AT THE SAME TIME WE'LL ASK FOR SOME, UH, INPUT FROM THE VENDOR IN TERMS OF WHETHER WE NEED TO MAKE SOME ORGANIZATIONAL CHANGES OR ANYTHING ELSE THAT WILL GIVE US THAT CENTRALIZED FUNCTION OF QUALITY.

SO BOTH OF THESE EFFORTS, THE PURPOSE IS TO GATHER INFORMATION, INFORM, AND THEN MAKE SOME DECISION IN TERMS OF WHICH DIRECTION WE WANT TO GO.

OKAY, CARLOS, HOW DID, HOW DID WE FIND OUT ABOUT THE, THE ISSUE? WAS IT THE, A MARKET PARTICIPANT? WAS IT US? WAS IT THE VENDOR? NO, ON, ON, ON THIS ONE.

IT, IT WAS, IT WAS US.

WE DISCOVERED THIS ONE, UM, ON, UH, THERE WAS, THERE WERE SOME OUTCOMES THAT WERE NOT MAKING SENSE FOR THE, UH, LOAD ZONE PRICES AND THE TEAM DUG DEEPER, UH, AND, AND FOUND THIS, UH, MISTAKE.

UM, SO, SO THAT, THAT, THAT'S THE ANSWER TO, TO THE QUESTION.

UM, I DID WANNA LET JP ALSO, SINCE THE TESTING AND STUFF LIKE THAT FALLS WITH HIM.

I DON'T KNOW IF I MISSED ANYTHING IN MY ANSWERS THAT YOU WOULD WANT TO ADD TO, OR, OR FOLLOW UP WITH ON THANKS, KENNAN.

MAYBE THE ONLY THING I WOULD ADD IS THAT THIS, UM, WHEN WE DID THE MARKET UPDATE, AS KENAN SAID, WE DID DO END-TO-END TESTING, RIGHT? BUT THIS BUG WAS INTRODUCED AS PART OF, UH, ANOTHER BUG FIX THAT WAS BEEN DONE.

OKAY? AND WHEN THAT BUG WAS FIXED, YOU ONLY TEST WHAT A TEST MIGHT THINK IS APPROPRIATE TO THAT BUG.

OKAY? BUT AT THAT TIME IT DID INTRODUCE A PROBLEM SOMEWHERE ELSE.

AND THIS FOR ME, AGAIN, REINFORCES WHY WE WANT TO DO MORE AUTOMATION TESTING SO THAT WHEN YOU HAVE A LOT OF THIS END-TO-END AUTOMATION, WE JUST RUN IT ALL THE TIME, RIGHT? AND THEY'LL CATCH THIS THING VERSUS SOMEBODY MAKING AN ENGINEERING DECISION ON WHAT EXACTLY TO TEST.

CAUSE YOU CAN'T TEST EVERYTHING ALL THE TIME CAUSE YOU JUST SLOW DOWN DELIVERY.

SO THE ANSWER IS, YOU KNOW, AND THIS IS WHY YOU SEE FOR ME, A LOT OF PRESENTATIONS AROUND WHY I WANT TO FOCUS ON AUTOMATION.

SO I JUST ADD THAT BACK TO YOU, KENNAN.

NO, AND, AND I THINK THAT'S A REALLY IMPORTANT POINT TO THE, AS AN ANSWER TO WHAT BOB ORIGINALLY ASKED, WHICH I DON'T FEEL I, I DID A GREAT JOB ANSWERING.

BUT THAT END TO END TESTING, TO FIND A WAY TO REPETITIVELY DO THAT AND DO THAT MORE CONSISTENTLY ENDS UP BEING REALLY IMPORTANT, I THINK, TO, TO CATCH THESE, UH, THESE TYPES OF ERRORS.

NOW, JP, WHAT YOU SAID MAKES A LOT OF SENSE TO BE MUCH MORE DYNAMIC TESTING.

AND THEN, UH, CHRISTIE'S GONNA HELP ME OUT AND I'LL, UH, I'LL DRIVE SOME OF THE SLIDES ON THE PROJECT ITSELF.

ANY OTHER QUESTIONS FOR CANAN? SO IF NOT, I'LL MAKE A MOTION THAT THE COMMITTEE RECOMMEND THAT THE BOARD DETERMINE DAY AHEAD, SETTLEMENT POINT PRICES AND DAY AHEAD MARKET CLEARING PRICES FOR CAPACITY FOR CERTAIN OPERATING DAYS IN FEBRUARY AND MARCH, 2023, THAT WERE SIGNIFICANTLY AFFECTED BY INCORRECT DATA BEING USED IN THE CALCULATION OF DAY AHEAD, MARKET LOAD DISTRIBUTION FACTORS AND SHOULD BE CORRECTED.

AND TWO DIRECT ERCOT STAFF TO CORRECT THE IMPACT OF PRICES FOR THE OPERATING DAYS AT ISSUE.

NEED A MOTION TO APPROVE CARLOS? SECOND.

SECOND, JULIE, ALL IN FAVOR? AYE.

AYE.

ANY OPPOSED? OR RETENTIONS? SO MOVED.

OKAY, I GET SCARED.

, THANK YOU FOR AGENDA

[6. Real-Time Co-Optimization (RTC) Update]

ITEM NUMBER SIX.

KON AND KRISTY WILL PRESENT THE REAL TIME CO-OP OPTIMIZATION UPDATE.

SO, UM, I TURNED THIS OFF AND I FORGOT TO TURN IT BACK ON.

UM, SO WE WANT TO, UH, TALK ABOUT BOTH, UH, AS, AS PART OF THIS, UH, PROVIDE A OVERVIEW OR A, A REFRESH ON THE ACTUAL CONCEPT.

[01:10:02]

UM, SO, UH, THE, THE MAIN THINGS WE WANNA KINDA, UH, SHARE WITH YOU IS, UH, THE MECHANICS OF REALTIME OPTIMIZATION AND HOW THAT BENEFITS THE SYSTEM.

UM, SOME SHARE WITH YOU SOME INSIGHTS ON THE COST OF DELIVERING REAL TIME OPTIMIZATION.

AND LASTLY, UM, YOU KNOW, WITH EVERYTHING ELSE GOING ON, TALK ABOUT SOME OF THE RISKS AND, AND, UH, DYNAMICS SO THAT WE'RE GONNA HAVE TO BE COGNIZANT OF AS WE TRY AND MOVE THIS PROJECT FORWARD WITH EVERYTHING ELSE THAT'S GOING ON ALSO.

SO, UM, AS FAR AS REALTIME CO OPTIMIZATION GOES, IT'S A KEY MARKET DESIGN FEATURE THAT HAS BEEN IN PLACE IN MOST OTHER INDEPENDENT SYSTEM OPERATORS OR ORGANIZED MARKETS IN NORTH AMERICA.

AND WE'RE ONE OF, WE'RE THE ONE THAT, THAT DOESN'T HAVE THIS.

UM, IT HAS BEEN, UH, ON OUR RADAR FOR 10 YEARS.

UH, BUT DUE TO THE COMPLEXITY OF IMPLEMENTING, UH, REALTIME CO-OP OPTIMIZATION, WE'VE KIND OF STRUGGLED TO FIND THE WINDOW AND THE FUNDING TO, TO GET IT DONE.

UM, THE COMMISSION ACTUALLY, WHEN WE WENT INTO THE NODAL MARKET, UH, INSTRUCTED, UH, US TO DO REALTIME CO-OP OPTIMIZATION, BUT THERE WAS NEVER A DATE.

AND AS WE, UH, TURNED TO DELIVER ALL THE OTHER CHANGES, UH, THAT, THAT DID NOT MATERIALIZE UNTIL THE COMMISSION KIND OF REGED THAT WE DELIVER REALTIME CO-OP OPTIMIZATION, UH, ABOUT, I GUESS THAT WOULD BE FOUR YEARS AGO.

UM, ERCOT IS IN POSITION TO BEGIN WORK ON, UH, REALTIME CO-OP OPTIMIZATION STARTING THIS JULY.

UM, SO JUST A LITTLE BIT OF BACKGROUND ON WHAT REALTIME CO-OP OPTIMIZATION IS AND, AND HOW IT WORKS, UH, TO SET THE KIND OF STAGE I NEED TO TELL YOU HOW WE MANAGE ANCILLARY SERVICES AND ENERGY IN THE REAL TIME TODAY.

SO WHAT WE DO IS WE TAKE THE ANCILLARY SERVICE CAPACITY AND WE PUT IT BEHIND, UM, UH, WHAT WE CALL A, UH, HASSLE OR THE, UH, AS, AND SCED IS NOT ALLOWED TO TOUCH IT.

SO THE SECURITY CONSTRAINED ECONOMIC DISPATCH SEES ONLY A PART OF A RESOURCE THAT WAS, UM, UH, AWARDED THE ANCILLARY SERVICE.

AND REALLY, UM, WHAT, UH, REALTIME COOP OPTIMIZATION ASKS IS IF THAT, UH, WAS BEING CARRIED ON THE LOWEST COST RESOURCE ON THE SYSTEM.

IF I TOOK MORE ENERGY FROM THAT, INSTEAD OF BLOCKING SCED FROM BEING ABLE TO ACCESS IT AND MOVE THAT AS OBLIGATION ONTO A MORE EXPENSIVE RESOURCE, I ACTUALLY WOULD BE ABLE TO, UM, UH, THERE, THERE'S AN ALGORITHM THAT WOULD GET ME TO SYSTEM BENEFIT.

I'D BE, I'D BE ABLE TO SERVE THE SYSTEM AT A LESS EXPENSIVE RATE AND, UH, NOT, AND, AND ACTUALLY MAKE THE TRANSITION IN A PROFITABLE WAY TO THE TWO RESOURCES WHERE THE EXCHANGE IS IS HAPPENING.

SO, UM, WE, I'VE, I KIND OF KEPT THREE EXAMPLES IN HERE, BUT HERE'S THE FIRST ONE, AND GENERATOR ONE IS THE LEAST EXPENSIVE RESOURCE ON THE SYSTEM, AND IT HAS A STEADY OFFER OF, UH, 30, UH, MEGAWATT, $30 PER MEGAWATT HOUR.

SO IT'S JUST KIND OF GOT A, A VERY SHALLOW, UH, UH, SUPPLY CURVE.

AND THEN WE HAVE A GENERATOR TWO HERE, WHICH HAS A KIND OF INCREMENTALLY INCREASING SUPPLY CURVE THAT RUNS FROM $70 TO A HUNDRED DOLLARS.

SO WHAT HAPPENS IS, UM, IF I DON'T HAVE REAL TIME CO-OP OPTIMIZATION, I WILL MOVE UP THE INEXPENSIVE RESOURCE AS FAR AS I CAN.

BUT IF I NEED MORE ENERGY, I HAVE TO RESPECT THIS ANCILLARY SERVICE THAT'S BEEN SET ASIDE AND I MOVE TO THE OTHER RESOURCE AND THEN START MOVING UP THAT RESOURCE.

AND IN THIS INSTANCE, I MOVED TO ITS OFFER CURVE WHERE IT WAS AT A HUNDRED DOLLARS.

UM, BUT THERE IS AN OPPORTUNITY TO, UH, SWITCH WHERE THAT ANCILLARY SERVICE RESIDES.

TAKE ALL OF THE ENERGY YOU CAN FROM THE LESS EXPENSIVE RESOURCE AND PUT ME AT A LOWER POINT ON THE OFFER, OFFER CURVE OF THE SECOND RESOURCE.

AND IN, IN SO DOING, I

[01:15:01]

CAN GET A LOWER SYSTEM WIDE, UH, PRICE.

AND THAT'S THE DIFFERENCE BETWEEN, UH, THE $70 SYSTEMWIDE PRICE VERSUS THE, UH, A HUNDRED DOLLARS ONE.

SO THIS IS THE, THIS IS THE BASIC PREMISE.

AND, UH, ACTUALLY, UM, SO THAT, SO THAT'S THE ECONOMIC JUSTIFICATION.

THERE'S ALSO A RELIABILITY JUSTIFICATION IN THAT BETWEEN THE DAY AHEAD WHEN WE AWARD ANCILLARY SERVICES AND REAL TIME SYSTEM TOPOLOGY CAN CHANGE.

UM, AND THAT COULD BE A RESULT OF, UH, POTENTIALLY THE MIX OF GENERATORS, UH, CHANGING SOME GENERATORS MIGHT TRIP OFFLINE, UH, OR TRANSMISSION LINES MIGHT GO OUT OF SERVICE, OR I MIGHT GET MY EXPECTED LOAD FORECASTS AND INTERMITTENT RESOURCE FORECASTS WRONG.

SO BY CO-OP OPTIMIZING IN REAL TIME, THERE'S ALSO A RELIABILITY BENEFIT AS I MOVE THE ANCILLARY SERVICE AND ENERGY AWARDS AROUND TO DEAL WITH THINGS LIKE CONGESTION, UH, AT, AT THE LEAST COST.

GO AHEAD.

HOW DEPENDENT IS RTC ON THE INPUTS FROM THE MARKET PARTICIPANTS? AND HOW FAR IN ADVANCE DO YOU NEED THAT REAL DATA? SO IT ULTIMATELY IS VERY DEPENDENT ON, UH, THE INPUTS FROM THE RESOURCES.

BUT, UM, AND, AND THE NETWORK TOPOLOGY INPUTS AND EVERYTHING LIKE THAT, THOSE ARE NOT ANYTHING NEW THAT WE'RE DEALING WITH.

HOWEVER, UM, IN THE DAY AHEAD, MARK IT, DO YOU NEED IT TO CLEAR AT, AT A DIFFERENT POINT IN TIME DURING THE DAY THAT BE FULLY, I HAVE ALL THE DATA YOU NEED FOR THE, THE FOLLOWING DAY? UH, NO.

IN FACT, UM, DAY AHEAD, I USUALLY DON'T HAVE ALL THE DAY I NEED FOR THE FOLLOWING DAY.

BUT, UM, SO WHAT HAPPENS IS I DO AN INITIAL RUN AND AWARD THE ANCILLARY SERVICES, BUT THEN IN REAL TIME, I CAN REDISTRIBUTE THOSE AWARDS, UH, IN THIS KIND OF, UH, LEAST COST, UH, WAY THAT ALSO RECOGNIZES, UH, A POSITIVE OUTCOME FOR THE GENERATORS IN QUESTION, WHAT IS REAL TIME? EVERY FIVE MINUTES WHEN SKIT IS UPDATING? IT'S, I THAT'S, UH, GREAT, UH, QUESTION BECAUSE ESSENTIALLY WHAT REALTIME CO OPTIMIZATION DOES, AS, UH, MATT MARINAS LIKES TO TELL ME, IS IT RE AWARDS, UH, EVERY SKID RUN, THE ANCILLARY SERVICE ENERGY, UH, AWARDS.

SO THAT'S EXACTLY WHAT, UH, HOW, HOW IT ENDS UP WORKING.

COULD I, UM, IS GEN TWO IN THIS EXAMPLE, IS HE OBLIGATED TO PICK UP THAT ANCILLARY SERVICE? UM, WHAT'S, WHAT'S HIS INCENTIVE TO DO THAT? SO HIS INCENTIVE IS THAT IN THIS AWARD, HE ACTUALLY, IT IS A MORE PROFITABLE AWARD FOR HIM OR HER, THEM IS, THAT IS A HUNDRED DOLLARS CLEARING PRICE OR IT, IT, UM, THE ANCILLARY SERVICE AWARD PLUS THE ENERGY AWARD MAKE HIM EITHER INDIFFERENT OR BETTER OFF RELATIVE TO, UH, WHERE HE WOULD'VE BEEN, WHERE THE GENERATOR WOULD'VE BEEN, UH, WOULD WITHOUT THE AWARD.

NOW, THIS ADDITIONAL EFFICIENCY DOES, UM, AND GENERATORS HAVE BROUGHT THIS UP, UM, THE SYSTEM COSTS GO DOWN.

SO IF YOU'RE NOT IN THIS EXCHANGE, UM, YOU MAY END UP SEEING A LOWER ENERGY PRICE IF YOU'RE, IF YOU'RE THE REST OF THE GENERATORS.

I THINK THAT'S A IMPORTANT POINT TO, TO SHARE.

BUT CANNAN, THERE'S NO, IS THERE, I GUESS WHERE I WAS THINKING ABOUT IT, THERE'S NO GUARANTEE THAT GEN TWO GETS THE ANCILLARY SERVICE OR SOMEONE ELSE, ANOTHER GENERATOR MAY GET THAT.

REAL TIME CO-OP OPTIMIZATION.

SO THIS IS A EXTREMELY OVERSIMPLIFIED EXAMPLE WHERE THERE'S ONLY TWO GENERATORS.

I MEAN, SO GENERATION TWO, YEAH, IN THE SIMPLE EXAMPLE'S, JUST GONNA GET THE LOWER CLEARING PRICE, WHICH IS GOOD FOR CONSUMERS, NOT SO GOOD FOR HIM THAT THAT'S CORRECT.

UM, NOW WHAT THERE'S, UM, THE, THIS EXCHANGE OF ENERGY AND ANCILLARY SERVICES HAS A, WHAT ARE CALLED PENALTY CURVES OR DEMAND CURVES.

AND THE EXCHANGE ONLY HAPPENS IF A PARTICULAR PRICE POINT IS MET.

AND THAT'S THE WAY, UM, UH, GENERATOR TWO WITH THAT, WITH, WITH THE, UH, PENALTY CURVES WOULD STILL, UM, POTENTIALLY COME OUT AHEAD.

THE PENALTY CURVES ARE GONNA BE DERIVED FROM, UH, THE OPERATING RESERVE DEMAND CURVE, KINDA SCARCITY ADDERS.

AND SO, UM, THAT'S, THAT'S A REALLY IMPORTANT POINT.

AND AS WE GO THROUGH THIS DESIGN, UH, WE WILL HAVE TO MAKE SURE THAT WE HONOR THE, UH, OPERATING RESERVE DEMAND CURVE PRICE EXPECTATIONS AS WE DEVELOP

[01:20:01]

SO, UH, ONE OTHER INTERESTING SIDEBAR IS IF, UH, I HAVE A REALLY LARGE FLEET, I ACTUALLY CAN CO OPTIMIZE ON MY OWN WITHIN MY FLEET.

SO FOR EXAMPLE, DAY AHEAD, I MIGHT HAVE BEEN AWARDED, UH, ON, UH, A PARTICULAR RESOURCE.

AND IF IT'S LESS EXPENSIVE FOR ME TO MOVE THAT SOMEWHERE ELSE, UH, I, I, I DO THAT.

AND WE SEE, UM, RESOURCE, UH, RESOURCE OWNERS MOVE THE OBLIGATION, EXCUSE ME, UH, BETWEEN THE RESOURCES IN THEIR PORTFOLIO.

UH, UNFORTUNATELY, IF YOU'RE A ONE RESOURCE, UH, ENTITY, THEN THAT, UH, THAT OPPORTUNITY DOESN'T COME YOUR WAY.

BUT WITH REAL TIME CO-OP OPTIMIZATION, YOU WOULD ALSO BE ABLE TO TAKE ADVANTAGE OF THAT, UM, UH, EXCHANGE.

HOW DID THEY DEAL WITH CONSTRAINTS, THEN THE, UH, THE CONGESTION CONSTRAINTS AND THINGS LIKE THAT AGAIN.

SO NOW THAT SCED CAN SEE MORE ENERGY, IT HAS ACTUALLY MORE WAYS TO SOLVE THAT CONGESTION THAN THEY WOULD, THAN THE ENGINE WOULD WHEN YOU KEEP SOME OF THAT CAPACITY BEHIND THIS ANCILLARY SERVICE RESTRICTION.

IS EXTREMELY ILLIQUID, MARK.

SO, UM, NOW I'M GONNA GET A LITTLE BIT MORE INTO THE PROJECT SIDE OF, UH, REALTIME CO-OP OPTIMIZATION, BUT THESE, THIS ALSO IS, UH, UH, RE REPEAT OF SOME OF THE QUESTIONS YOU ALREADY ASKED ME.

THERE'S ANSWERS HERE AS WELL.

SO, UM, UH, TRANSITIONING TO REALTIME CO OPTIMIZATION HAS THIS RIPPLE EFFECT IN OTHER AREAS OF ERCOT PRICING AND, UH, OPERATIONS.

UM, SO, UH, THE ENERGY PROCUREMENT AND, AND PRICE, CURRENTLY, YOU HAVE A DAY AHEAD REALTIME, UH, PRICES, AND THEN, UH, THE REALTIME PRICE HAS A AFTER DISPATCH ADDER, THAT IS O R D C.

IN OTHER WORDS, SCAD DISPATCHES THE RESOURCE NOT ON THE O R D C ADDER.

IT DISPATCHES ITS O IT ONLY ON, UH, ITS OFFER CURVE BE BECAUSE WE'RE PUTTING THE PENALTY CURVES INTO THE EQUATION.

NOW, O R D C WILL PRICE OUT EVERY FIVE MINUTES.

SO ONE OF THE ADVANTAGES OF GOING TO REALTIME CO-OP OPTIMIZATION IS THE PRICE THAT I'M SETTLING AND THE PRICE THAT I'M DISPATCHING ON ARE ALIGNED.

CURRENTLY, THAT'S NOT THE CASE.

UM, SO, UH, CURRENTLY I KIND OF PROCURE, UH, IN THE DAY AHEAD ONLY UNDER REAL TIME CO-OP OPTIMIZATION, AS, AS Y'ALL HAD ASKED.

UM, I PROCURE AGAIN, UH, IN REAL TIME.

UM, THERE IS, UH, UH, UH, CHANGE IN AS, UH, DEPLETION INCREASE OR NOT DELIVERABLE, THE O OPERATOR CAN, UH, REPRO, PROCURE OR PROCURE WITH A TWO HOUR LEAD TIME.

THIS HAPPENS AUTOMATICALLY, UM, WITH REALTIME CO-OP OPTIMIZATION, UH, RELI, WE'VE TALKED A LOT ABOUT RUCK, UM, REALTIME CO-OP OPTIMIZATION WILL IMPROVE THE AMOUNT OF RUCK WE HAVE TO DO FOR LOCAL CONGESTION.

WE'RE DOING TWO TYPES OF RELIABILITY UNIT COMMITMENT RIGHT NOW.

ONE IS MORE OF A SYSTEM-WIDE CAPACITY BASIS, AND WE ALSO DO, UH, RELIABILITY UNIT COMMITMENT FOR LOCAL ISSUES.

UM, REAL-TIME COMPENSATION WILL IMPROVE THE, UH, RUCK FOR LOCAL ISSUES.

UM, AND I NEED TO MAKE THAT DISTINCTION BECAUSE THERE'S OTHER WORK TO DO IF WE WANNA, UH, IMPROVE THE OUTCOME FOR SYSTEM-WIDE.

LAST, WHEN YOU SAY THE WORD IMPROVE, YOU MEAN REDUCE THE, THE TOTAL QUANTITY OR REDUCE THE PRICE OF RUCK? IT WOULD BE, UM, BOTH.

WE WOULD REDUCE THE TOTAL QUANTITY AND THEN, UM, ESSENTIALLY BY DOING THAT, UM, RELIABILITY UNIT COMMITMENT IS CHARGED ON A SHORT BASIS.

SO IF I'M PROCURING LESS, IT COSTS LESS AND THEN LESS IS CHARGED TO THE LSCS THAT, THAT WE'RE SHORT.

UM, AND THEN THIS LAST ONE, UH, IT DOESN'T HAPPEN VERY OFTEN, BUT IF WE ARE UNABLE TO PROCURE SUFFICIENT ANCILLARY SERVICES, WE CAN ISSUE WHAT IS CALLED A SECONDARY ANCILLARY SERVICE MARKET.

OR, UH, SASM.

WE, WE LOVE TO TALK IN ACRONYMS, UM, AND WE HAVE DONE THAT.

UH, IN SOME INSTANCES IT

[01:25:01]

IT'S AN EXTREMELY ILLIQUID MARKET, AND SHORT LOADS USUALLY GET A BIG CHARGE UNDER, UM, UH, REAL TIME OPTIMIZATION.

I WOULD NOT NEED TO ISSUE THIS SECONDARY ANCILLARY SERVICE MARKET.

I WOULD GET TO REPRO PROCURE IN A MUCH MORE LIQUID MARKET.

UM, SO THAT REDUCES A LOT OF RISK TO LOAD SERVING ENTITIES OR GENERATORS THAT WERE UNABLE TO DELIVER THE ANCILLARY SERVICE THAT HAVE TO REPLACE THEIR UNDELIVERED, UH, QUANTITIES.

SO, UM, UH, AND I'VE, I'VE ALLUDED TO A LOT OF THESE, BUT THERE ARE, UH, SIGNIFICANT RELIABILITY BENEFITS, UH, TO REAL TIME CO-OP OPTIMIZATION.

UM, AGAIN, I'M REPLACING AND REPLENISHING ANCILLARY SERVICES EVERY FIVE MINUTES.

UH, I EFFECTIVELY MANAGE RESOURCE SPECIFIC CAPABILITIES, UM, THAT THAT CAN CHANGE, UM, UH, IN, IN REAL TIME.

UH, I CAN DYNAMICALLY ADJUST, UH, ANCILLARY SERVICE QUANTITIES.

UH, I CAN BETTER MANAGE AND REDUCE TRANSMISSION CONGESTION.

I CAN PRIORITIZE ANCILLARY SERVICES TO PRESERVE THE MOST CRITICAL CAPACITY.

AND LASTLY, I CAN AUTOMATE, UH, MANY PROCESSES THAT MAY MUST BE MANAGED MANUALLY IN THE CONTROL ROOM.

UM, SO THOSE ARE ALL, UM, UH, OPERATIONAL BENEFITS OF REALTIME CO-OP OPTIMIZATION.

THERE ARE ROOT SIGNIFICANT ECONOMIC BENEFITS TO REALTIME CO-OP OPTIMIZATION AS WELL.

UM, NOW IN, UH, THE INDEPENDENT MARKET MONITOR RELEASED A REPORT IN 2018 ON THE QUANTITY, UH, THE, THE BENEFITS AND HOW MUCH THIS SAVED, THESE NUMBERS HAVE ONLY IMPROVED OVER TIME.

SO, UM, PRICES WERE ENERGY AND AN ANCILLARY SERVICE.

PRICES WERE RELATIVELY LOW IN 2018 RELATIVE TO THE LAST, UH, COUPLE YEARS AND THE YEAR THAT WE'RE IN.

BUT THEY SAW, UH, 1.6 BILLION REDUCTION IN TOTAL ENERGY COSTS, UM, THAT IS EQUIVALENT TO $4 A MEGAWATT HOUR, UM, AN 11.6 MILLION REDUCTION IN PRODUCTION COSTS TO SERVE LOAD, UM, UH, SIGNIFICANT ANCILLARY SERVICE, UH, SAVINGS, UH, REGULATION UP ANCILLARY SERVICES SAVINGS WERE, UH, EQUATED TO BE 4.3 MILLION.

UM, REDUCTION IN CONGESTION COSTS WERE 257 MILLION, AND ANCILLARY SERVICE COSTS WERE REDUCED BY 155 MILLION.

UM, SO WHEN THE COMMISSION WAS REVIEWING THIS AND TRYING TO DECIDE IF THEY WANTED TO GO AHEAD OR NOT, THE, UH, THE ECONOMIC VALUE PROPOSITION WAS PRETTY OVERWHELMING.

NOW, CAN I, CAN I ASK YOU A QUICK QUESTION? ABSOLUTELY.

CAN YOU DEFINE WHAT CONGESTION COSTS ARE? YES.

SO, UM, IF I HAVE A LIMIT BETWEEN, UH, UH, A LOAD POINT AND A GENERATOR, IN OTHER WORDS, THERE'S A TRANSMISSION LIMIT ON HOW MUCH POWER I CAN MOVE ACROSS, UH, FROM POINT, UH, POINT A TO POINT B, WHAT HAPPENS IS I START TRYING TO RE-DISPATCH THE SYSTEM TO HONOR THAT CONSTRAINT.

UM, AND THAT USUALLY COSTS MORE.

IN OTHER WORDS, UH, SKE SAY, OKAY, I CAN'T GO PAST A HUNDRED MEGAWATTS ON THIS LINE, SO I'M GONNA START RE DISPATCHING THIS SYSTEM.

AND OFTENTIMES THAT, UH, UNIT THAT WAS GONNA USE THE, THAT LINE OR THE COMBINATIONS OF UNITS THAT WERE GONNA USE THAT LINE ARE CHEAPER THAN THE ALTERNATIVE.

SO BY A, UM, BEING ABLE TO RELAX THAT ANCILLARY SERVICE AWARD AND MAYBE LET, UH, SOME OTHER RESOURCE THAT'S IN THE LOAD POCKET POSSIBLY RAMP UP A LITTLE BIT, YOU CAN, UH, SOLVE THE CONGESTION, UH, ISSUE AT A LOWER COST THAN YOU DO TODAY.

BUT IT'S THAT LIMIT THAT THE TRANSMISSION SYSTEM PLACES ON HOW POWER CAN MOVE THROUGH THE GRID TO SERVE LOAD IS REALLY WHAT THAT'S FOCUSED ON, THAT CONGESTION COST.

SO, UM, THERE'S ADDITIONAL, UH, UH, SCOPE, UH, TO THE RTC PROGRAM, UH, IN CONSIDERING, UH, THE, THE IMPLEMENTATION, UH, THE PROLIFERATION OF BATTERIES, UM, UH, NEEDS TO BE ADDRESSED.

UM, ERCOT, UH, I'M SORRY, RTC WILL TOUCH ALMOST EVERY MAJOR SYSTEM IN

[01:30:01]

ERCOT.

SO, UM, WE HAVE, UH, DECIDED TO, IN CONJUNCTION WITH RTC, CREATE A PROJECT THAT ADDS BOTH THE SINGLE MODEL TO, UH, THE SINGLE MODEL, UH, OF A BATTERY.

INSTEAD OF THIS KIND OF CONTROLLABLE LOAD AND GENERATION ELEMENT, WE'RE GONNA MOVE TO, UH, LIMITED DURATION RESOURCE TYPE MODEL.

UM, SO THAT IMPLEMENTING THAT WILL BE PART OF THIS PROGRAM AS WELL AS, UM, OPTIMIZING STATE OF CHARGE, WHICH AGAIN, IS A ISSUE WITH, UH, THE PROLIFERATION OF, UH, STORAGE DEVICES.

SO I THINK HERE I TURN IT OVER TO YOU, RIGHT, KRISTY? RIGHT, THANKS.

COME ON.

SO AS PART OF OUR CHANGE MANAGEMENT PROCESS, UM, BEFORE WE KICK OFF ANY PROJECT EFFORT, WE DO AN IMPACT ANALYSIS SO THAT WE UNDERSTAND BOTH THE RESOURCES AND THE SYSTEMS THAT WILL BE IMPACTED.

SO WE DEVELOPED AN IMPACT ANALYSIS FOR THE SCOPE THAT CANON JUST MENTIONED FOR RTC, UM, SINGLE MODEL IN THE STATE OF CHARGE EFFORTS.

AND WHAT WE CAME UP WITH WITH THAT IMPACT ANALYSIS IS ABOUT 50, OR IT'S APPROXIMATELY 50 MILLION FOR THAT PROJECT.

AND WE BELIEVE, UM, RIGHT NOW WE ANTICIPATE A GO-LIVE SOMETIME IN 2026, WHICH WOULD BE BETWEEN MAJOR RELEASES, OF COURSE, WITH E M S LATER THIS YEAR.

AND THEN OUR NEXT BIG SYSTEM UPGRADE WOULD BE THE, UH, UPGRADE OF OUR MARKET MANAGEMENT SYSTEM.

SO THERE'S A WINDOW OF OPPORTUNITY TO GET THIS EFFORT UNDERWAY AND DELIVERED IN THAT TIMEFRAME.

WHAT WE DID IS WE TOOK A LOOK AT THE PEOPLE RESOURCES THAT ARE NEEDED FOR THAT EFFORT, AND WE REALLY FOCUSED ON THE PLANNING HORIZON.

IT'S ABOUT A 10 MONTH PLANNING HORIZON.

ONCE WE KICK OFF THAT PROJECT, WE TOOK INTO ACCOUNT, UM, THEIR STAFFING, WHAT THEY'RE CURRENTLY WORKING ON, WHAT'S IN OUR ROADMAP OF PROJECTS THAT ARE COMING ALONG.

UM, THE TEAMS ARE VERY BUSY WITH OTHER CRITICAL EFFORTS, BUT WE REALLY DO THINK THERE'S THAT WINDOW OF OPPORTUNITY WHERE WE CAN GET THIS KICKED OFF AND THAT WE CAN MANAGE THROUGH OUR PROCESSES, UH, THE CAPACITY OF THOSE RESOURCES TO BE ABLE TO DO THE WORK.

WE DO HAVE SOME AREAS OF CONCERNS AND WE CONTINUE TO WORK WITH RESOURCE MANAGERS.

UM, BUT AGAIN, WE WANNA HIGHLIGHT THE RISK OF THE BOARD.

UM, THE PRIMARY RISK TO THE PROJECT RIGHT NOW IS MAINTAINING STAFF AVAILABILITY DURING THIS LONG EFFORT PROJECT.

SO WE HAVE ALREADY INITIATED STARTING THE WORK ON THE REALTIME COOPTATION PROGRAM CONTROL PROJECT.

UH, WE'RE PLANNING TO RESTART WITH BUSINESS REQUIREMENTS IN JULY.

THE DELIVERY WINDOW, AGAIN, AS I MENTIONED, WE'RE TARGETING IN 2026.

ONCE WE GET THROUGH OUR PLANNING EFFORT, WE WOULD RETURN TO THE BOARD AND BE ABLE TO CLOSE IN AND TELL YOU WHAT THAT WINDOW LOOKS LIKE.

UH, ONCE WE GET MORE DETAILED PLANS ON THE EFFORT, AND WE PLAN TO COME BACK TO YOU, UH, WITH EACH BOARD MEETING TO GIVE YOU UPDATES ON WHERE WE ARE ON MOVING THE PROJECT FORWARD.

ANY QUESTIONS? SO, KRISTY, WHAT'S THE, IN THE, KIND OF THE APPROVAL PROCESS FOR THE COST OF DESIGN AND IMPLEMENTATION OF THIS? SO WE HAVE AN ORDER FROM THE COMMISSION THAT DIRECTED US TO MOVE FORWARD WITH THE EFFORT.

AND SO WE TOOK IT, YOU KNOW, THROUGH THE PROTOCOL PROCESS, THE PROTOCOLS HAVE ALREADY BEEN WRITTEN.

THERE WILL BE SOME THAT'LL NEED TO BE REVISITED, UM, JUST BECAUSE THINGS HAVE CHANGED, UM, SINCE WE WROTE THOSE INITIAL PROTOCOLS.

UM, BUT I FEEL LIKE THAT'S OUR, WE'VE ALREADY BEEN GIVEN THAT APPROVAL, UM, AND THEN IT NOW BECOMES PART OF OUR INTERNAL ERCOT EXECUTIVE CHANGE MANAGEMENT PROCESS, UM, AS THE PROJECT IS INITIATED AND ENGAGED THROUGH THE PHASES OF THE PROJECT.

SO HOW WE'VE DONE SOME, I GUESS, HIGH LEVEL SCOPING OF COST.

YES, THAT'S WHATEVER IT WAS, THE 50 MILLION OR WHATEVER, RIGHT? SO THEN WE WOULD EXPECT TO HEAR BACK FROM YOU AS THAT COST GETS REFINED IN FUTURE MEETINGS.

CORRECT.

CHRISTIE? UM, I HATE THREE YEAR PROJECTS.

UM, BUT NEVERTHELESS, I MEAN, WHAT IS IT THAT CONTRIBUTES TO THE TIME THAT IT TAKES TO DO THIS? IS IT THE COMPLEXITY, THE AMOUNT OF RESOURCE AVAILABLE? WHAT, WHAT ARE THE, WHAT ARE THE PARAMETERS HERE THAT YOU'RE LOOKING AT? YEAH, I WOULD SAY IT'S, UM, THE COMPLEXITY.

UM, THERE'S ALSO A TIMELINE FOR MARKET PARTICIPANT TESTING.

UM, JP WHAT WOULD YOU SAY FROM YOUR PERSPECTIVE, FROM THE IT PERSPECTIVE WOULD BE DRIVING

[01:35:01]

KIND OF THE LONGEST POLL IN THE TENT? YEAH, I, UM, I THINK THE MAIN, THE MAIN THING IS ALL THE PROCESS CHANGES, RIGHT? RIGHT.

THE CO OPTIMIZATION ITSELF.

LIKE IF WE JUST LOOK AT IT, I THINK WE HAD THIS DISCUSSION, RIGHT? I MEAN, YES, WE DO THE SAME THING IN THE DAY AHEAD MARKET.

SO HOW DIFFICULT CAN IT BE IN REAL TIME, RIGHT? IF THAT'S A BACKGROUND OF YOUR QUESTION.

BUT, BUT THERE IS ALL THESE PROTOCOL CHANGES ACROSS THE BOARD.

LIKE FOR EXAMPLE, IN CANNAN SAID, WE ARE PART OF THE GOOD, GOOD THING THAT HAPPENS IS THIS HAS GOES AWAY, BUT ALL THAT IS NOT TRIVIAL THAT ALL THAT PROCESS HAVE TO GO, THE SETTLEMENTS THAT ASSOCIATED WITH THAT HAVE TO BE REMOVED, NEW THINGS HAVE TO BE ADDED.

SO THERE ARE A LOT OF PROCESS STUFF THAT NEEDS TO HAPPEN, RIGHT? AND THEN THERE IS THIS MARKET PARTICIPANT TEST WINDOW WHERE THEY NEED TO BE COMFORTABLE WITH THIS NEW WAY OF RUNNING THINGS.

SO ALL THAT IS TIME, RIGHT? SO IT'S NOT JUST TERMS OF EFFORT, BUT THERE'S ALSO A TIME WINDOW FOR ALL OF THESE THINGS TO BAKE IN.

SO THERE WILL BE A WHOLE BUNCH OF NPRS ASSOCIATED WITH THIS.

AND THOSE I DIDN'T HEAR YOU WAS PROBABLY NPRS WRITTEN, RIGHT? UM, CANNAN, CANNAN MAY ELUDE TO THAT, BUT ALL THE NPRS RELATED TO OUR RTC ALREADY, ALREADY WRITTEN.

BUT TRANSLATING THAT INTO REQUIREMENTS, OR MANY OF THEM ARE DONE ALREADY, BUT THE NEW THING WITH THE SOC ARE NEEDS TO BE INCORPORATED.

NOW, IF, IF, IF I COULD LIKE KIND OF PUT ALL THE PIECES TOGETHER, WHAT I WOULD SAY IS AT, FROM A OVERALL SYSTEM STANDPOINT, THIS PROJECT TOUCHES ALMOST ALL OF OUR SYSTEMS. THERE'S HARDLY ANYTHING IT DOESN'T TOUCH.

UM, SO THAT, AND, AND THAT'S ALSO ONE OF THE REASONS WHY WE HAVE TO LOOK FOR THESE WINDOWS.

I CAN'T BE DOING AN EMS UPDATE, UH, UH, AND, UH, MISS INCORPORATING RTC IN THERE.

SO THIS TOUCHES THE ENERGY MANAGEMENT SYSTEM.

IT TOUCHES THE MARKET MANAGEMENT SYSTEM, AND IT TOUCHES SETTLEMENTS.

UM, AND THAT IS REALLY, SINCE NODAL, THIS IS THE FIRST PROJECT THAT HAS BEEN THAT BROAD IN TERMS OF ITS APPLICATION.

NOW WE HAVE DONE, UH, MOST OF THE PROTOCOL REVISIONS, WE ARE, UH, NOT FINISHED WITH THE REQUIREMENTS WHEN WE PAUSED ON THIS.

SO THERE'S A LOT OF REQUIREMENTS STILL TO WRITE.

AND THEN THAT THOSE REQUIREMENTS HAVE TO TURN INTO CODE AND THEY'RE GONNA TOUCH AGAIN, LIKE I SAID, ALL THOSE SYSTEMS. SO THAT'S THE PART THAT MAKES IT, UH, SUCH A LONG PROCESS, UH, FOR US CANON.

UM, YES SIR, DO WE GET ANY ABILITY TO LEARN FROM THE OTHER RTOS OR ISOS THAT, UH, HAVE IMPLEMENTED REALTIME CO-OP OPTIMIZATION OR ANY ABILITY TO PIGGYBACK ON THEIR, UH, SYSTEM, UM, CODE ALGORITHMS AND SUCH? THERE'S ALWAYS, UH, AN OPPORTUNITY TO LEARN AND, UM, THE VENDOR ALSO HAS, HAS EXPERIENCE.

SO THERE IS THAT OPPORTUNITY.

HOWEVER, UM, SAY DIFFERENT FROM PJM, OUR MARKET MANAGEMENT SYSTEMS AND OUR ENERGY MANAGEMENT SYSTEMS ARE TWO DIFFERENT VENDORS.

SCED VERSUS RIGHT NOW, IT HAPPENS AS A SEPARATE RUN THAT I THEN PILE ON TO THE SETTLEMENT POINT PRICE, BUT NOT THE DISPATCH PRICE.

SO, SO IS THIS REALLY, IF WE ALL USED SIEMENS, WE WOULD BE ABLE TO DO IT MUCH QUICKER, BUT THE FACT THAT A SIEMENS AND A GE SYSTEM MAKE IT, UH, THAT YOU HAVE TO REDO IT ALL YOURSELF, IF, IF SIEMENS HAD A SYSTEM, IF, IF, YEAH, THAT'S RIGHT.

IF THEY, WELL, I, I, I WOULD SAY IT'S JUST THAT WE HAVE TO WORK WITH BOTH GE AND SIEMENS AND THE SIEMENS SYSTEM HAS TO TALK TO THE GE SYSTEM.

UM, THERE'S PROS AND CONS TO THAT ARRANGEMENT, BUT IT IS A LITTLE BIT MORE COMPLICATED.

CAN, ON, ON THE APPENDIX SLIDE, GOING FROM SLIDE, UH, 14 TO 16, JUST MAKE SURE I UNDERSTAND HOW O R D C SHOWS UP HERE ON 14 AS THE WAY IT WORKS TODAY.

AND THEN ON 16, YOU DON'T SEE O R D C ANYWHERE.

IS THAT EMBEDDED IN THE ANCILLARY SERVICE? IT IS, IT IS.

UM, IN THESE, DO YOU SEE IT THE VERY BOTTOM, UH, THE AS DEMAND CURVES, THAT IS, UM, THE EXCHANGE OF AS TO ENERGY WILL HAPPEN REF, UH, RESPECTING THESE AS DEMAND CURVES, WHICH WILL PRICE OUT LIKE, UH, LIKE O R D C.

BUT THE INTERESTING THING IS, IT'S ALMOST, FOR EXAMPLE, RESPONSIVE RESERVE IS SOMETHING WE DEPLOY AT THE VERY END.

SO THE PENALTY FOR MAKING THE CHANGE IN RESPONSIVE RESERVES TENDS TO BE THE MOST EXPENSIVE.

THEN IF YOU GO DOWN, YOU LOOK AT THE NEXT MOST VALUABLE ANCILLARY SERVICE.

SO EACH ANCILLARY SERVICE WILL HAVE A DEMAND CURVE THAT GOVERNS THE PRICE POINTS AT WHICH WE MAKE THAT EXCHANGE.

SO THE OUTCOME IN PRICING WILL BE THE SAME AS O R D C, BUT IT HAPPENS ALL WITHIN

[01:40:01]

SO FOR THE GENERATING UNIT THAT'S JUST PARTICIPATING IN THE CLEARING PLACE OF THE MARKET, ARE THEY STILL ELIGIBLE OF THE RIGHT WORD FOR O R D C OR IS IT NO LONGER PART OF THEIR COMPENSATION IN A TIGHT MARKET? ALL, ALL RESOURCES PROVIDING ENERGY OR ANCILLARY SERVICES ARE ELIGIBLE FOR, FOR THE PRICE THAT RESULTS FROM THE PENALTY CURVE.

SO FOR EXAMPLE, I WOULD NOT, THE SYSTEM WOULDN'T ALLOW ME TO MAKE A CHANGE EXCHANGE RS FOR ENERGY UNLESS THE PRICE WAS, AND I'M MAKING THIS NUMBER UP, LET'S SAY $4,000 MM-HMM.

SO THAT MEANS SYSTEM LAMBDA PRICES OUT AT 4,000 JUST LIKE O R D C DOES.

IF I'M LEFT WITH THAT, THAT MUCH RESERVES, YOU KNOW, I'M THAT SHORT ON RESERVES ON THE SYSTEM.

ANY OTHER QUESTIONS FOR CANON OR CHRISTIE? WELL, THIS CERTAINLY ECONOMICALLY IT'S JUSTIFIED, OBVIOUSLY A COMPLEX PROJECT, BUT CERTAINLY WORTH PURSUING.

JOHN, I'M, I'M, I'M JUST WONDER, THESE TWO THINGS ARE OBVIOUSLY NOT COM NOT RELATED, BUT ON ONE HAND THIS POTENTIALLY LOWERS THE PRICE OF ENERGY INTO THE MARKETPLACE, WHICH IS A GOOD THING.

ON THE OTHER HAND, WE HAVE OTHER INITIATIVES THAT ARE TRYING TO GIVE MORE VALUE TO GENERATORS TO INCENT THEM TO BUILD MORE DISPATCHABLE GENERATION.

HOW DO THESE TWO THINGS END UP INTERSECTING OR DO THEY INTERSECT? AND ARE WE GONNA SEND A DIFFERENT MESSAGE TO THE MARKETPLACE ABOUT WHAT WE WANT THEM TO GO DO? I MEAN, IT'S PROBABLY A PABLO QUESTION MORE THAN ANYTHING ELSE.

I, I CAN TAKE A QUICK SHOT AT THAT AND THEN I'LL PROBABLY NEED PABLO'S HELP ON THE BACKEND.

SO, UM, THE OTHER THING I WOULD JUST EMPHASIZE IS THAT, UM, RTC WILL MAKE SURE THAT THE RIGHT MORE OF THE RIGHT RESOURCES ARE AWARDED, UH, IN, IN THIS EXCHANGE.

SO IF, FOR EXAMPLE, WE NEED MORE, UH, QUICK RESPONSE OR SOMETHING LIKE THAT, UH, UH, REALTIME COMPENSATION BETTER ALIGNS WITH THAT.

BUT ULTIMATELY YOU NEED A PACKAGE OF ITEMS TO MEET LONG-TERM RESOURCE ADEQUACY, WHICH I THINK IS THE PART THAT THIS DOESN'T ADDRESS AT ALL.

UM, COUPLED WITH THIS EFFICIENCY TO REALLY GET TO THE FINAL MARKET THAT YOU WANT.

UM, AND PABLO, I'LL HAND THE MIC OFF OVER TO YOU.

WELL, I WOULD JUST SAY THAT IF YOU THINK ABOUT THE TWO, THE TWO SEPARATELY AND THEN TOGETHER, ONE, YOU WANT THE MARKET TO ALWAYS BE EFFICIENT.

YOU WANT, YOU WANT TO HAVE EFFICIENT SIGNALS, UM, AND YOU WANNA OPERATE THE MARKET EFFICIENTLY SO THAT THE, UH, OVERALL EXECUTION AND BENEFIT TO CONSUMERS IS, IS OPTIMIZED THROUGH THAT LENS.

LONG-TERM RESOURCE ADEQUACY IS NOT GOING TO BE SOLVED BY DOLLARS FLOWING THROUGH AN INEFFICIENT MARKET.

THAT'S NOT GONNA BE GIVE A CONSISTENT, STEADY SIGNAL, UH, BECAUSE AT ANY POINT IN TIME, THOSE EFFICIENCIES OR INEFFICIENCIES COULD BE CHANGED OR MODIFIED BASED ON IMPROVEMENTS TO MARKET CONDITIONS.

SO YOU DON'T WANT AN, YOU DON'T WANT AN, NOT AN INCORRECT, BUT LET'S SAY A LESS OPTIMAL WAY OF RUNNING THE MARKET, BE THE TOOL YOU'RE LEANING ON TO SEND LONG-TERM REVENUE RELIABILITY SIGNALS TO THE MARKET.

SO WE BELIEVE THAT YOU CAN HAVE BOTH A MARKET THAT'S OPERATING EFFICIENTLY AND SENDING THE CORRECT AND OPTIMAL COST SIGNALS TO THE MARKET FOR THE BENEFIT OF CONSUMERS AND SEND UNIQUE AND DISCREET PRICE SIGNALS THAT VALUE RELIABILITY AND WOULD INCENTIVIZE LONG TERM BUILDING OF RESOURCES.

AND WE THINK THAT WE CAN HAVE BOTH OF THOSE IN, UH, WORKING TOGETHER.

THAT MAY BE TRUE IN THE LONG TERM, BUT WE NEED TO THINK ABOUT WHAT THE SHORTER TERM IMPACT IS.

BECAUSE WHAT YOU MIGHT DO IN THE VERY SHORT TERM IS DRIVE SOME OF THE LESS EFFICIENT PRODUCERS RIGHT OUT OF BUSINESS AT A TIME WHEN YOU, YOU STILL NEED THEM.

SO YOU MAY HAVE TO COME UP WITH YET A THIRD PRODUCT THAT INCENSE THOSE GUYS TO STICK AROUND WHILE THE MARKET IS RESTABILIZING.

THAT'S EXACTLY RIGHT.

AND WE'RE, WE'RE HAVING TO DEAL WITH THAT CONCERN ANYWAY IN ALL OF OUR MARKET REDESIGN KIND OF PORTFOLIO CONSIDERATIONS BECAUSE OF THAT RISK THAT EXISTS, WE NEED ALL THE UNITS TO REMAIN AVAILABLE DURING A TRANSITION PERIOD, AND THEN WE WANT THE INEFFICIENT UNITS TO RETIRE AT THE RIGHT TIME SO THAT WE HAVE THE OPTIMAL FLEET DELIVERY AND ENERGY.

[01:45:01]

SO NOW WE'LL NOW TAKE

[7.1 System Planning and Weatherization Update]

UP AGENDA ITEM SEVEN, WHICH IS THE COMMITTEE BRIEFS, AND WE'LL START WITH WOODY DICKERSON'S PRESENTATION OF THE SYSTEM PLANNING AND WEATHERIZATION UPDATE, WHICH IS AGENDA ITEM 7.1.

WOODY WILL ALSO PRESENT THE NEXT ITEM AGENDA ITEM 7.11, WHICH IS THE RELIABILITY STANDARD STUDY, PRELIMINARY RESULTS.

ALL RIGHT, GOOD AFTERNOON, WOODY RICKSON SYSTEM PLANNING, WEATHERIZATION UPDATE.

SO TODAY WE'LL LOOK AT UM, SEVEN KEY TAKEAWAYS.

WE GO THROUGH THIS AND I'LL TOUCH ON EACH OF THOSE AS WE GO THROUGH.

UH, THE FIRST THING I WANNA LOOK, WANT YOU GUYS TO SEE IS THE ELEMENTS SUBMITTED FOR OPERATIONAL MODELING.

UM, SEVEN DSRS.

SO THAT'S DISTRIBUTION, CONNECTED ENERGY STORAGE BATTERIES SEVEN IN MAY AND 10 IN JUNE.

SO THAT'S A LITTLE BIT OF A NEW TREND THAT'S PEOPLE CONNECTING BATTERIES AT THE DISTRIBUTION LEVEL.

AND I THINK WHAT YOU'RE GONNA SEE GOING INTO THE FUTURE IS MORE AND MORE OF THAT.

I THINK THAT SEVEN TO 10 TO 12 TO 15 KIND OF NUMBER IS GONNA START SHOWING UP THERE EVERY SINGLE MONTH.

AS WE, AS WE LOOK AT WHAT'S IN THE GENERATION INTERCONNECTION QUEUE AND LOOK WHAT GETS CONNECTED, I THINK WE'RE GONNA SEE MORE AND MORE OF THAT.

SO I WANTED TO, UH, I WANTED TO POINT THAT OUT BECAUSE I THINK THAT'S KIND OF AN INTERESTING TREND.

AND THOSE AREN'T GONNA BE VERY BIG CUZ THEY'RE OFF THE, AT THE DISTRIBUTION LEVEL.

BUT, UM, IT DOES SHOW THAT THESE NEW RESOURCES SHOWING UP AT THE DISTRIBUTION LEVEL, WHICH MEANS THAT ERCOT AND TSPS AND DSPS ARE GONNA HAVE TO SPEND MORE TIME WORKING TOGETHER, GET THAT STUFF ACCOUNTED FOR IN OUR OPERATIONAL AND PLANNING MODELS.

WHAT DO, WHAT'S THE AGGREGATE CAPACITY OF THOSE? IF YOU DON'T, OFF THE TOP OF YOUR HEAD? NO, I DON'T.

I DIDN'T CATCH THAT.

UM, THOSE ARE TYPICALLY LESS THAN 10 MEGAWATTS APIECE, SO.

THIS TRANSMISSION PLANNING STAFFING CHALLENGE.

AND ARE THEY SCHEDULABLE OR CAN YOU SEND A SCD MESSAGE TO THEM OR? YES.

YEAH, THEY'RE IN SCAD.

THEY'RE IN SCAD, YEAH.

UM, WE TALKED ABOUT THIS A LITTLE BIT EARLIER WITH THE BUDGET DISCUSSION.

I WANTED TO INCLUDE IT HERE AS WELL.

UM, SO THE CHART THERE GOES BACK TO 2017 AND IT SHOWS THE TOTAL NUMBER OF POSITIONS IN PLANNING VERSUS THE NUMBER OF POSITIONS FILLED AND THE NUMBER OF OPEN POSITIONS.

AND YOU CAN SEE IN 2022 AND 2023, WE'VE HAD A LARGE NUMBER OF OPEN POSITIONS.

UM, THE OTHER THING I WOULD POINT OUT THERE IS THAT CURRENTLY 40% OF OUR TRANSMISSION STAFF IS NEW, SO WE'RE LOSING A LOT OF THE KNOWLEDGE THAT WE HAD, UM, ABOUT ERCOT, ERCOT PLANNING THAT'S BEING REPLACED WITH NEW PEOPLE.

SO WE, WE'VE LOST SOME OF THAT AND WE ALSO TEND TO HAVE THESE VACANT POSITIONS THAT, UM, TAKE MANY MONTHS TO, TO FILL.

SO I WANTED TO POINT THAT OUT BECAUSE I DO THINK THAT'S A, THAT'S A CHALLENGE.

THAT'S SOMETHING THAT'S NOT JUST IN, NOT JUST IN TRANSMISSION PLANNING.

I THINK, UH, DAN'S GONNA HAVE SOME OF THOSE SAME KINDS OF, OF ISSUES IN SOME OF HIS AREAS TOO.

BUT, UH, HOW DO YOU, HOW DO YOU HANDLE THAT? UM, I THINK THE EDP IS, IS ONE WAY THAT, UH, THAT WE CAN FILL THAT INSTEAD OF TRYING TO GO OUT AND FIND A 10 YEAR VETERAN, YOU BUILD YOUR OWN.

UM, AND IT'S A, IT'S A LITTLE BIT SLOWER PROCESS, BUT I DO THINK THAT'S, THAT'S ONE WAY THAT, THAT YOU HANDLE THAT.

UM, AND I THINK ONCE AGAIN, I THINK THAT WHEN YOU BRING THESE NEW PEOPLE IN, THAT HAVING THEM HAVE SOME FACE-TO-FACE TIME WITH, WITH EXIST EXISTING STAFF IS AN IMPORTANT PART OF THAT DEVELOPMENT.

AND WE'RE GONNA HAVE TO CONTINUE TO, TO EMPHASIZE THAT EVEN THOUGH IT MAY NOT BE THE MOST POPULAR THING, IT'S SOMETHING WE'RE GONNA HAVE TO CONTINUE TO DO.

ANY QUESTIONS ON THOSE FIRST TWO? AND, AND WOODY, I ASSUME THAT AS PART OF THIS YOU CAN MAKE SORT OF PROFESSIONAL QUALIFICATION, YOU KNOW, FOR THEM TO GET THEIR ENGINEERING CERTIFICATION AND ALL THAT KIND OF STUFF.

YOU CAN BUILD THAT INTO THE PROGRAM AS PART OF THE INCENTIVE.

YEAH, THE, LIKE A PROFESSIONAL ENGINEERING LICENSE.

UH, THEY CONTINUE TO DOMINATE.

YES, YES, WE CAN, WE CAN PROVIDE, UH, HELP WITH THAT.

ARCHIVE HAS SOME PROGRAMS THAT, UH, THIS IS WHAT'S COME IN FROM THE GENERATION INTERCONNECTION QUEUE IN THE LAST 60 DAYS.

IT KIND OF, ONCE AGAIN, WE SEE BATTERIES, 66% OF WHAT'S COME IN HAVE BEEN BATTERIES.

SO,

[01:50:01]

UH, YOU SEE THE WIND AND DECREASING QUITE A BIT FROM WHAT WE WOULD HAVE SEEN A COUPLE OF YEARS AGO.

AND SOLAR REMAINS STRONG.

BUT I THOUGHT THAT WAS INTERESTING THAT IN THE LAST, UH, 60 DAYS, UM, THE, HOW MANY BATTERIES HAVE BEEN COMING IN, UM, MAY SAW THE RELEASE OF THREE DIFFERENT RESOURCE ADEQUACY ASSESSMENTS.

AND I'VE GOT, UH, PETE WARNKIN HERE.

HE'S OUR, OUR MANAGER OF RESOURCE ADEQUACY, UM, THE FIRST OF THE CDR, THE CAPACITY, DEMAND AND RESERVES, AND WE'LL LOOK AT THAT.

THE SECOND WAS THE SARAH REPORT.

UM, I'M NOT GONNA COVER THE SARAH IN THIS.

UH, THAT WILL BE SOMETHING DAN COVERS IN HIS SUMMER.

LOOK AHEAD.

SO HE TOOK MY SARAH REPORT.

AND THEN, UH, I'M ALSO GONNA TALK A LITTLE BIT ABOUT THE PROBABILISTIC RESERVE MODEL RESULTS FOR THE SUMMER OF 2023.

SO CAPACITY, DEMAND, AND RESERVES REPORT.

NOW KEEP IN MIND THE CDR LOOKS AT, NOT THIS SUMMER, BUT NEXT SUMMER.

SO THIS IS THE 2024 RESERVE MARGIN.

WE WERE AT 39.9%.

AND KEEP IN MIND THAT THAT RESERVE MARGIN IS WITHOUT E LCCS.

THAT'S A, UH, THIS, THIS WEIGHT, IT'S AN AVERAGE WEIGHTING FOR, FOR WIND AND SOLAR.

UM, THAT 39.9 HAS GONE DOWN TO 34.1.

AND, UH, THAT'S NOT UNCOMMON.

AS WE GET CLOSER TO THE ACTUAL SEASONS, WE TYPICALLY SEE SOME OF THESE DEVELOPERS PUSH THROUGH PROJECTS ANOTHER YEAR.

AND SO THAT'S NOT UNCOMMON, NOT UNEXPECTED, BUT THAT DOES SHOW US 34.1% RESERVE MARGIN FOR NEXT SUMMER.

UM, THAT IS, UM, LOOKS LIKE A RELATIVELY HEALTHY RESERVE MARGIN.

UM, WE'LL TALK ABOUT WHAT THAT REALLY MEANS WHEN WE TALK ABOUT THE RELIABILITY STANDARD STUDY HERE IN A LITTLE BIT, UH, PROBABILISTIC RESERVE MODEL.

SO I'M SKIPPING THE SARAH LOOKING AT THE PROBABILISTIC RESERVE MODEL.

SO THIS IS A MODEL WE'VE IN, WE, UH, INCORPORATED OR, UH, DEVELOPED INTERNALLY PERFORMS MONTE CARLO SIMULATIONS FROM A, A FUTURE CAPACITY AVAILABLE FOR OPERATING RESERVES.

UH, WE CALL THAT K FOUR.

UH, THE MODEL GENERATES 10,000 K FOUR OUTCOMES FOR A RANGE OF SUMMER, SUMMER DAY HOURS FROM 1:00 PM TO 9:00 PM RATHER THAN JUST A SINGLE HOUR LIKE WE LOOK AT IN THE SARAH.

THE VERY VARIATIONS, UH, COME FROM RANDOM SAMPLING OF PROBABILITY DISTRIBUTIONS.

UH, SOME OF THOSE DISTRIBUTIONS INCLUDE PEAK DEMAND, UNPLANNED THERMAL OUTAGES, WIND OUTPUT, SOLAR OUTPUT, AND THERE'S SOME OTHER THINGS WE TALK WE'LL TALK ABOUT AS WELL.

UH, BASED ON THE RANGE OF HOURLY OUTCOMES, THE MODEL REPORTS, THE PROBABILITY THAT CAPACITY IS NOT GONNA BE ENOUGH TO COVER LOAD.

SO THAT'S THE, THAT'S WHAT WE'RE LOOKING FOR.

WIND IS CAPACITY, NOT COVER LOAD, AND THE MODEL ACCOUNTS FOR, UH, RESOURCES AVAILABLE PRIOR TO AND AFTER EAS HAVE BEEN DECLARED.

SO WHEN WE DECLARE AN EEA, THERE'S SOME ADDITIONAL RESOURCES THAT YOU HAVE ACCESS TO.

IT DOES INCLUDE THOSE AS WELL.

SO IF YOU LOOK AT, UM, THIS RESERVE MODEL IN THE MIDDLE, YOU'LL SEE, UH, THIS PROBABILISTIC RESERVE MODEL DOING THE MONTE CARLO SIMULATIONS.

AND THEN YOU HAVE ALL THESE DIFFERENT INPUTS TO THE MODEL.

UH, FOR EXAMPLE, THIS WIND, YOU HAVE A RANDOM DRAW OF WIND THAT HAS A CORRELATED PROBABILITY OF DISTRIBUTIONS FROM 41 DIFFERENT WEATHER YEARS.

SO THE WAY I THINK ABOUT THIS IS I WANNA DO A MONTE CARLO SIMULATION.

AND SO I GO GET A CARD OUT OF THE WIND DECK, AND THEN I GO GET ANOTHER CARD OUT OF THE SOLAR DECK, AND I GET ANOTHER CARD OUT OF FOUR FROM THE FORCED OUTAGE DECK THAT TELLS ME HOW MANY OF MY THERMAL RESOURCES I'M GONNA HAVE ACCESS TO.

AND I GET ALL THESE DIFFERENT PLACES, I GET DIFFERENT CARDS, DIFFERENT RANDOM DRAWS OUT OF THOSE, AND THEN I HAVE 15 YEARS OF, UH, PEAK LOAD DATA OVER HERE.

I'M GONNA TAKE A CARD OUT OF THAT.

AND PRICE RESPONSIVE DEMAND DEMAND GETS FACTORED IN AND EA AND PRE EA RESOURCES GET FACTORED IN.

AND SO I, I GET THESE RANDOM DRAWS TOGETHER AND I MAKE A RUN, AND THE RUN GIVES ME ONE OF THESE COLUMNS IN THESE K FOUR RESULTS.

SO I GET ONE OUTCOME, THEN I GO BACK AND DO THE WHOLE PROCESS AGAIN, AND I DO 10,000 RUNS AND I END UP WITH A PROBABILITY DISTRIBUTION, AND THEN I CAN USE THAT PROBABILITY DISTRIBUTION TO GIVE ME AN IDEA OF WHAT THE PROBABILITY OF HAVING AN EEA IS GIVEN THAT SET OF LOAD AND THAT SET OF RESOURCES.

SO WHAT DO YOU THINK THIS QUESTION CAME UP WHEN YOU PITCHED THIS TO THE PUC, BUT THIS DATA SET IS FOR A SEASON, RIGHT? SO THIS

[01:55:01]

WOULD BE LIKE THE SUMMER WEATHER DECK AND THEN THE WINTER WEATHER DECK WOULD BE A DIFFERENT THIS IS, YES, THAT'S RIGHT.

NOW WHAT WE WERE TALKING ABOUT WITH THE PUC THE OTHER DAY WAS A DIFFERENT SET OF MONTE CARLO SIMULATIONS THAT HAD TO DO WITH THE RELIABILITY, UH, STANDARD MODEL.

THIS IS A LITTLE BIT DIFFERENT MODEL.

SO THIS IS THE PROBABIL PROBABILISTIC RESERVE MODEL.

AND SO FOR THIS SUMMER, OOPS, FOR THIS SUMMER, YOU SEE ACROSS THE, UH, THE BOTTOM HERE, 1:00 PM TO 9:00 PM AND YOU SEE THAT, UH, THE YELLOW BAR IS A CAPACITY FOR OPERATING RESERVES EQUAL TO OR LESS THAN A THOUSAND MEGAWATT EA.

THIS IS A LOAD SHED, AND THIS IS YOUR PROBABILITY PERCENTAGE HERE.

SO TYPICALLY WHEN WE FIRST STARTED, IF I'D RUN THIS, IF WE'D HAD THIS MODEL, WE RUN THIS MODEL THREE YEARS AGO, THE BARS WOULD'VE PEAKED AT FOUR OR 5:00 PM.

NOW WHAT'S CHANGED IN THE LAST THREE YEARS HAS BEEN THIS HUGE INFLUX OF SOAR.

SOAR HAS TAKEN THE RISK OUT OF FOUR AND 5:00 PM OR MOST OF THE RISK OUT.

YOU'LL SEE RISK ARE VERY SMALL AT 5:00 PM UM, BUT WHAT'S HAPPENED IS WHEN THE SUN SETS, WE SEE THIS INCREASE NOW.

AND SO WE SEE A ABOUT 11% PROBABILITY OF HAVING SOME KINDA LOAD SHED ISSUE ON A PEAK DAY, ON THE PEAK DAY THIS SUMMER.

SO ANY QUESTIONS ABOUT THAT? A A IS THERE ANY ANTICIPATION OR LIKE EDUCATED GUESTS THAT BATTERIES WILL EITHER PUSH THAT OUT LATER OR PUSH IT DOWN FOR A ONE HOUR, HOUR OR TWO HOUR BATTERY, YOU KNOW, EIGHT TO NINE, IT COULD SATISFY SOME OF THAT? OR, I MEAN, IS THERE A EDUCATED GUESS THAT WE'RE LEARNING FROM THE INDUSTRY ON WHAT WE MIGHT EXPECT WITH THESE, UH, NEW, YOU KNOW, THOUSANDS OF GIGAWATTS OF BATTERIES? YEAH, SO THIS SIMULATION INCLUDES 720 MEGAWATTS OF BATTERIES AVAILABLE IN A GIVEN HOUR.

THERE'S 3,800 MEGAWATTS OF MEGAWATTS, NOT MEGAWATT HOURS, BUT MEGAWATT CAPACITY ON THE SYSTEM.

SO THAT 720 IS, YOU KNOW, IS GONNA BE SPREAD OUT OVER MULTIPLE HOURS.

SOME OF THOSE BATTERIES ARE SUPPLYING ANCILLARY SERVICES, SO THEY'RE NOT AVAILABLE TO SUPPLY LOAD.

SOME OF THEM WILL BE AVAILABLE.

SO WE'RE REALLY IN A LEARNING PROCESS ON THE BATTERIES RIGHT NOW.

BUT THE IDEA IS THAT BATTERY ENERGY FROM BATTERIES WILL START SHOWING UP TO MAKE UP FOR THE, WHEN THE SUN GOES DOWN AND THAT SOLAR RAMP, THAT'S WHERE WE EXPECT THOSE BATTERIES TO BE THE MOST, UH, THE, THE PLACE IN THE MARKET WHERE THOSE THINGS WILL WANT TO BE AND EXPORTING THEIR POWER.

SO THE MORE OF THOSE WE GET, LIKE WE SAW IN SOME OF THESE PREVIOUS SLIDES, THE BETTER OFF THAT WILL BE.

AND IT'LL BE REALLY INTERESTING TO SEE, UM, YOU KNOW, RUN THAT MODEL AGAIN AND PUT IN 6,000 MEGAWATTS OF BATTERIES AND SEE IF THAT, UH, SEE WHAT THAT DOES TO THAT, THAT PERCENT PROBABILITY, SEE IF IT GOES DOWN.

THANKS.

THAT'S MY LAST SLIDE.

LET'S SEE.

ANYBODY HAS ANY QUESTIONS? ALL RIGHT, THANK YOU.

OH, I HAVE ONE MORE, I'M SORRY.

I LEFT DAVID OUT WEATHERIZATION AND INSPECTION.

SO JUNE, UH, THIS IS THE JUNE UPDATE.

SO, UM, WE HAVE CREWS OUT TODAY DOING INSPECTIONS, SUMMER INSPECTIONS TODAY, WE'RE AHEAD OF SCHEDULE ON RESOURCES AS FAR AS THE MINIMUM REQUIRED FROM THE PUC.

WE WILL BE RIGHT ON TARGET FOR THE, FOR THE TRANSMISSION INSPECTIONS.

UM, WE'VE GOT LIKE 500 INSPECTIONS PLANNED FOR THIS SUMMER.

AND, UH, THE CUMULATIVE INSPECTIONS TO DATE ARE WELL OVER A THOUSAND WELL AHEAD OF, OF THE REQUIRED RATE.

SO, UH, WE'RE ON TRACK.

THE GRAPH THERE JUST SHOWS YOU THE, THE ORANGE BARS REPRESENT THE, THE PACE AND THE BLUE BARS REPRESENT WHERE WE ARE.

AND THAT WILL GO UP AGAIN, THIS WHEN WE FINISH THIS JUNE AND DAN, THAT'S BOTH WINTER AND SUMMER IN THESE NUMBERS HERE.

MAKE SURE I DON'T HAVE ANOTHER ONE HERE.

RELIABILITY STANDARD, UH, PRELIMINARY RESULTS.

OH, I'M BACK.

ALL

[7.1.1 Reliability Standard Study Preliminary Results]

RIGHT.

SO THIS IS THE, UH, PRELIMINARY MODELING RESULTS FOR THE RELIABILITY STANDARD STUDY.

SO THESE ARE, THIS IS THE, UH,

[02:00:02]

THE RELIABILITY STANDARD THAT WE'RE LOOKING AT FOR ERCOT TO HAVE GOING INTO THE FUTURE.

IN THE PAST WE'VE HAD A UN UNOFFICIAL 13.75% FLAT RESERVE MARGIN TYPE STANDARD.

THIS WILL BE A, UH, AN OFFICIAL RESERVE MARGIN.

UH, WE'VE TALKED ABOUT THIS BEFORE.

UM, THIS IS THE, THE, THE PROCESS WE'RE USING IS A, IS A THREE-PART THREE-PRONGED PROCESS.

UH, AND WE'LL, WE'LL TALK ABOUT THAT AS WE GO THROUGH.

SO THE SIMULATION YEAR THAT WE'RE USING IS 2026.

WE'VE SIMULATED 24 DIFFERENT RESERVE MARGIN LEVELS, RANGING FROM 9% UP TO 28%.

SO WE STARTED WITH THE NOVEMBER, 2022 C D R AND THAT C D R INCLUDES A RESERVE MARGIN ESTIMATE FOR 2026.

AND THAT ESTIMATE, UH, DOES NOT INCLUDE E LCCS, THE EFFECTIVE LOAD CARRYING CAPACITY OF WIND AND SOLAR.

SO WHEN YOU PUT THOSE IN, YOU END UP WITH A, ABOUT AN 18% RESERVE MARGIN FOR 2026.

SO WE WANT OUR STUDY TO HAVE A BROADER RESERVE MARGIN LOOK THAN JUST THAT 18%.

AND SO WE ACTUALLY RETIRED SOME GENERATION FROM THE STUDY FOR THE PURPOSES OF HAVING A BROADER RESERVE MARGIN.

SO THAT MEANS THAT WE HAD A RESERVE MARGIN THAT STARTED AT 9% AND WENT IN INCREMENTS ALL THE WAY UP TO 28%.

SO WE HAD 24 DIFFERENT LEVELS FROM NINE TO 28% TO LOOK AT, UH, EACH LEVEL GOT A MONTE CARLO SIMULATION PERFORMED, AND THE INITIAL RUNS, UH, SOMEWHAT REFLECT BUT NOT FULLY REFLECT THE WEATHERIZATION STANDARDS THAT WE HAVE.

SO THE QUESTION IS THERE, HOW DO YOU TREAT THE WEATHERIZATION STANDARD THAT WE HAD? CUZ THESE RESULTS HAVE, UH, OUTAGES IN THEM THAT WERE BASED BEFORE THE WEATHERIZATION STANDARD WAS IN PLACE.

SO DO YOU INCLUDE ALL OF IT? DO YOU INCLUDE SOME OF IT? DO YOU MODIFY IT? AND SO THAT'S, UH, THAT'S ANOTHER THING THAT WE'LL TALK ABOUT AS WE GO THROUGH THIS.

SO THE FRAMEWORK IS THE FREQUENCY, MAGNITUDE, AND DURATION.

SO WHEN WE HAD OUR UNOFFICIAL 13.75, THAT WAS JUST A FREQUENCY, THAT WAS A ONE IN 10 YEAR EVENT, 13.75% RESERVE MARGIN.

UH, THIS LOOKS AT WHAT THE FREQUENCY IS, WHAT THE MAGNITUDE OF EVENTS ARE, AND WHAT THE DURATION OF THE EVENTS ARE.

SO WE, IT'S A BROADER SCOPE NOW THAN WHAT WE, WHAT WE'VE HAD IN THE PAST.

SO RESERVE MARGIN VERSUS LOSS OF LOAD EVENT AND FREQUENCY.

SO THE FOLLOWING THE FIVE SLIDES AFTER THIS RELATE THOSE THREE, THOSE THREE ITEMS. SO ON THE, ON THE LEFT HAND COLUMN THERE, YOU'LL SEE WHAT THE RESERVED MARGIN IS.

AND SO THESE ARE, REMEMBER I SAID WE HAD 24 DIFFERENT LEVELS.

THESE NEXT FIVE SLIDES ARE FIVE OF THE 24 LEVELS.

WE HAD THE LOWEST ONE, THE HIGHEST ONE AND THREE IN THE MIDDLE.

SO THE FIRST ONE IS 9.36 RESERVE MARGIN, WHICH EQUATES TO AN EVENT EVERY 0.6 YEARS.

SO THAT'D BE MULTIPLE EVENTS A YEAR.

UM, THE BOTTOM THERE YOU'LL SEE 28.4% RESERVE MARGIN THAT WOULD EQUATE TO ONE EVENT EVERY 142 YEARS.

SO WE'VE GOT A PRETTY ROBUST RESERVE MARGIN ON THAT END.

AND SO AS WE GO THROUGH THESE, WE'LL KEEP THOSE IN MIND.

NOW EACH SLIDE WILL REPRESENT EACH OF THE NEXT FIVE SLIDES REPRESENTS A DIFFERENT FREQUENCY.

AND THEN THE GRAPH, THE, THE, THE AXES ON THE GRAPHS OF THE NEXT FIVE SLIDES WILL REPRESENT A MAGNITUDE AND A DURATION FOR EACH ONE OF THOSE FREQUENCIES.

SO THAT'S HOW WE REPRESENTED OUR THREE ARE THREE PILLARS OF THE FRAMEWORK.

SO THE FIRST ONE IS MAGNITUDE VERSUS DURATION.

AT A FREQUENCY OF ONE EVENT EVERY 0.6 YEARS, THIS IS THAT LOWEST RESERVE MARGIN, 9.36% RESERVE MARGIN.

UM, EACH OF THE BLUE DOTS YOU SEE THERE IS AN EVENT THAT OCCURRED, A LOAD SHED EVENT THAT OCCURRED DURING THIS SIMULATION.

SO ACROSS THE BOTTOM YOU'LL SEE A MAGNITUDE AND ON THE SIDE YOU'LL SEE THE DURATION.

AND SO YOU CAN PICK A, PICK AN EVENT.

SO THIS ONE EVENT OUT HERE ON THE FAR RIGHT OCCURRED WITH A DURATION OF 16 HOURS IN A MAGNITUDE OF ABOUT 26,000 MEGAWATTS.

SO THAT'S A PRETTY IMPACTFUL EVENT.

SO THE TAKEAWAY

[02:05:01]

HERE IS THAT A SINGLE METRIC FOR EVENT FREQUENCY, LIKE LOSS OF LOAD WILL RESULT IN A SET OF EVENTS WITH A WIDE DURATION OF MAGNITUDE, DURATION AND MAGNITUDE.

SO YOU COULD HAVE AN EVENT DOWN HERE THAT IS ONE, YOU KNOW, 10 MEGAWATTS IN ONE HOUR, OR YOU COULD HAVE ONE THAT'S WAY OUT HERE.

AND SO THOSE ALL OCCUR AT THAT SAME RESERVE MARGIN.

AND THIS IS, AS YOU GO THROUGH THESE, THIS SET OF SLIDES, YOU'LL SEE THIS, THE NUMBER OF EVENTS AS YOU INCREASE THE RESERVE MARGIN DECREASE AS YOU GO THROUGH.

SO THIS IS 9.36 RESERVE MARGIN, ONE EVENT EVERY 0.6 YEARS.

NOW WE'LL MOVE TO THE NEXT ONE, WHICH IS ONE EVENT EVERY 2.7 YEARS.

THIS IS A 13.5% RESERVE MARGIN.

I'LL GO BACK AND FORTH BETWEEN THESE TWO.

AND YOU CAN SEE THE NUMBER OF EVENTS DECREASES AND THE MAGNITUDE OF THEM DECREASE AS WELL.

YOU GOT STUFF OVER 25,000 MEGAWATTS AND OVER 20 HOURS, OOPS.

AND HERE YOU HAVE STUFF THAT'S JUST OVER 20 AND MAYBE 16 HOURS.

AND SO YOU SEE AS YOU INCREASE THE RESERVE MARGIN, THE MAGNITUDE AND DURATION BOTH GO DOWN, WHICH IS WHAT YOU WOULD EXPECT AS YOU ADD MORE TO THE RESERVE MARGIN.

THE NEXT ONE IS YOUR ONE IN 10.

THIS IS KIND OF THE INDUSTRY STANDARD.

THIS IS WHAT A LOT OF PEOPLE HAVE LOOKED AT IN THE PAST TO BE A, A GOOD STANDARD FOR A RELIABILITY MARGIN.

ONE IN 10 YEARS.

IT'S ABOUT AN 18.46% RESERVE MARGIN, WHICH IF YOU REMEMBER 18% RESERVE MARGIN IS ABOUT WHAT WE EXPECT TO HAVE IN 2026.

IF NOTHING RETIRES.

IF EVERYTHING WE THINK IS GONNA BE BUILT AND NOTHING RETIRES, WE HAVE ABOUT AN 18% RESERVE MARGIN IN 2026, ALTHOUGH IN 2027 IT'LL GO DOWN IN 2028 IT'LL GO DOWN.

SO IT'S A DOWNWARD TREND.

BUT IF YOU JUST LOOK AT 2026, IT ENDS UP RIGHT AT ABOUT 18%.

SO WHAT CAN YOU, WHAT CAN WE LEARN FROM THIS? UH, THE MAIN THING IS THE JUSTIFICATION FOR DOING THIS ENTIRE RELIABILITY STANDARD STUDY THAT EVEN AT A ONE IN 10, WHICH IS A, A INDUSTRY STANDARD RESERVE MARGIN, YOU'VE GOT EVENTS THAT HAVE SOME PRETTY EXTREME DURATIONS IN MAGNITUDES.

YOU'VE GOT EVENTS HERE THAT ARE, UH, MAGNITUDE OF CLOSE TO 20,000 MEGAWATTS AND A DURATION OF, OF ALMOST 15 HOURS.

AND SO THAT'S THE THING TO KEEP IN MIND WHEN YOU THINK ABOUT A ONE IN 10 RESERVE MARGIN.

YES MA'AM.

IF AN OUTAGE ISN'T ROTATING, IT'S NOT TOLERABLE TO HAVE A LONGER EVENT.

WHAT DO THIS, THIS GRAPH GOES UP TO 25 HOUR DURATION.

IS THAT JUST FOR ILLUSTRATIVE PURPOSES? HAVE YOU MODELED LONGER EVENTS? NO, THAT'S THE, THE EVENTS DIDN'T GO PAST THAT.

SO WE DIDN'T HAVE ANY DOTS.

ANY EVENTS.

YEAH, NO EVENTS WERE PRODUCED.

AND THAT'S A REALLY GOOD QUESTION BECAUSE YOU THINK ABOUT YURI AND YURI WAS A 20,000 MEGAWATT EVENT THAT LASTED 70 SOMETHING HOURS.

SO WHY ISN'T THAT ON THEIR GRAPH? WHY DIDN'T IT SHOW UP? AND THAT GOES BACK TO THE WEATHERIZATION EFFECT.

SO WHEN WE MODELED THIS, WE TOOK URI OUT OF THE RESULTS BECAUSE IF WE HAD INCLUDED IT, IT WOULD'VE COMPLETELY NEGATED ANY OF THE WEATHERIZATION WORK THAT WE DID.

NOW, THE, THE 2011 RESULTS, THE OUTAGES THAT OCCURRED IN 2011 ARE STILL IN HERE.

AND THAT WAS A PRETTY EXTREME WINTER EVENT.

SO THOSE ARE REPRESENTED, BUT WE HAD TO FIGURE OUT A WAY TO ACCOUNT FOR THE EFFECTIVENESS OF THE MILLIONS OF DOLLARS THAT HAD BEEN SPENT TO WEATHERIZE THE SYSTEM.

AND SO WE DIDN'T FEEL LIKE WE COULD JUST COMPLETELY LEAVE IT OUT, THAT WOULD'VE SKEWED THE RESULTS.

AND SO THAT'S HOW THIS WAS TREATED.

SO ANY, ANY QUESTIONS ABOUT THAT? MY QUESTION ABOUT DURATION, CAN, CAN YOU TALK A LITTLE BIT ABOUT, OKAY, NONE, NONE ARE ACCEPTABLE, BUT WHAT MIGHT BE MILDLY TOLERATED IN TERMS OF DURATION? WELL, I THINK ONE OF, I, THERE'S SEVERAL, SEVERAL THINGS HERE.

UM, SUMMER EVENTS TEND TO HAVE A SHORT DURATION BECAUSE THEY'RE GONNA BE OVER THOSE FEW HOURS WHEN YOU EITHER HAVE PEAK LOAD OR THE SUN GOES DOWN AND THEN THE LOAD FALLS DOWN.

AND SO YOU HAVE A TWO OR THREE HOUR DURATION.

SO MOST OF THESE EXTREME EVENTS YOU SEE ON HERE ARE WINTER, THESE ARE WINTER EVENTS.

SO THAT'S THE FIRST THING TO KEEP IN MIND.

THE SECOND THING TO KEEP IN MIND IS THAT DURATION OF AN EVENT, A LONGER DURATION MIGHT BE MORE TOLERABLE IF IT'S A ROTATING OUTAGE.

[02:10:02]

WE FOUND THAT OUT DURING ERIE.

SO WHAT'S THE MAXIMUM AMOUNT OF LOAD THAT WE CAN ROTATE? AND IT'S AROUND 14 OR 15,000 MEGAWATTS.

SO IF YOU GET ABOVE 14 OR 15,000 MEGAWATTS, THOSE ARE NO LONGER CONSIDERED ROTATING OUTAGES.

THOSE ARE CONSIDERED CONTINUOUS.

SOME, SOME PEOPLE ARE GONNA BE OUT.

AND SO I THINK THAT ALSO CHANGES HOW LONG IS IT ACCEPTABLE TO HAVE A, UH, HOUSEHOLD OUT FOR 20 HOURS IF IT'S NOT ROTATING DURING A WINTER STORM? AND I THINK THOSE ARE THE KINDS OF QUESTIONS THAT, UH, THAT WE'RE GONNA HAVE TO GET SOME FEEDBACK ON.

AND SO THE IDEA IS WE BRING THESE RESULTS TO THE P TO THE PUBLIC UTILITY COMMISSION AND THEY ASK THOSE SAME KINDS OF QUESTIONS AND THEN THEY COME BACK AND THEY SAY, I THINK THE LIMIT ON DURATION SHOULD BE X AND THE LIMIT ON, UH, MAGNITUDE SHOULD BE Y AND THE FREQUENCY SHOULD BE Z.

AND WE PLUG THOSE BACK IN TO THIS STUDY AND WE COME BACK WITH A RESERVE MARGIN AND SAY, OKAY, IF THAT'S, IF, IF THOSE ARE THE LIMITS.

AND I THINK THIS WILL TAKE A LOT OF ITERATION BACK AND FORTH CUZ THEY'LL, THEY'LL GIVE US SOMETHING AND WE'LL COME BACK.

THEY'LL, WE'LL SAY IT'S GONNA TAKE 10,000 MEGAWATTS OF NEW CAPACITY TO BE ABLE TO DO THAT.

AND THEY'LL COME BACK AND SAY, WELL, HOW, WHAT CAN WE GET FOR 8,000 MEGAWATTS? AND WE'LL GO BACK AND FORTH AND EVENTUALLY WE'LL COME UP WITH, UH, A NUMBER THAT CAN BE PLUGGED IN FOR MARKET DESIGN.

HEY WOODY, COULD YOU TALK A LITTLE BIT ABOUT YOUR ASSUMPTION ON THE RETIREMENTS OF THERMAL RESOURCES IN THIS MODEL IN CONTRAST TO WHAT THE E THREE MODELING HAD FOR EXPECTED RETIREMENTS BY 2026? YEAH, SO FOR THESE PRELIMINARY RESULTS, UH, WE DON'T HAVE A HARD ASSUMPTION FOR RETIREMENTS.

WHAT WE DID WAS WE TOOK OUT 8,000 MEGAWATTS OF COAL AND SOME OF THE OLDER GAS AS WELL.

AND THAT WAS JUST TO GIVE US A RANGE OF NINE TO 28% RESERVE MARGIN SO WE COULD GET THESE PRELIMINARY RESULTS.

AND SO, UM, THAT WILL BE SOMETHING THAT ULTIMATELY WE'RE GONNA HAVE TO MAKE A PREDICTION ON WHAT WE THINK THE, UH, THE NUMBER OF MEGAWATTS WE GET THAT GET RETIRED.

SO YOU WOULD SUBTRACT THAT NUMBER OF MEGAWATTS OUT AND THEN YOU WOULD ADD BACK IN THIS INCREMENTAL, WE USED A GAS TURBINE TO BUILD THAT RESERVE MARGIN BACK UP TO A LEVEL WHERE YOU GET AN ACCEPTABLE DURATION AND, AND FREQUENCY AND MAGNITUDE.

BUT THIS IS, THIS SCENARIO SHOWED NO THERMAL RETIREMENTS, IS THAT CORRECT? THIS SCENARIO SHOWED 8,000 MEGAWATTS OF THERMAL RETIREMENTS.

BUT TO GET BACK UP TO THIS 18.6, 18.46 RESERVE MARGIN.

OKAY, I SEE WHAT THE CONFUSION IS.

IF NOTHING HAD RETIRED, WE WOULD HAVE ABOUT AN 18% RESERVE MARGIN.

IT WOULD LOOK ABOUT LIKE THIS.

FOR THIS STUDY THOUGH, WE TOOK 8,000 MEGAWATTS OUT AND REPLACED IT WITH 8,000 MEGAWATTS OF CTS TO GET IT RIGHT BACK TO THIS SAME AMOUNT.

SO WHAT IS THE, THE PROBABILITY DISTRIBUTION THAT YOU WOULD SEE HERE, HOW MUCH DIFFERENT WOULD IT BE IF WE'D LEFT THE OLD GEN IN AND HAD 8,000 MEGAWATTS OF, OF CTS THERE? THERE PROBABLY WOULD BE SOME DIFFERENCE, BUT IT'S NOT GONNA BE NEAR AS SIGNIFICANT A DIFFERENCE AS IF IT HAD BEEN WIND THAT WOULD BEEN REPLACED BY A CT OR, OR SOLAR THAT HAD BEEN REPLACED BY CTS.

SO THE MAKEUP OF THAT 18.46% RESERVE MARGIN DOES HAVE SOME BEARING.

SO ANOTHER WAY TO SAY THIS IS WITH THE 18.46 RESERVE MARGIN, DISPATCHABLE IS ABOUT EVEN WITH WHERE IT IS TODAY.

SO YOU TAKE IT OUT EIGHT, YOU'VE ASSUMED EIGHT COMING OUT BECAUSE OF RETIREMENTS FOR PROBABLY FOR REGULATORY PURPOSES IN ECONOMICS AND THEN YOU'VE ADDED BACK AN EQUIVALENT AMOUNT OF NEW GAS TURBINE.

WHEN YOU GOT TO 8,000, THAT WAS THIS SCENARIO.

SO YOU COULD LOOK AT THIS GRAPH, A PROXY FOR THIS GRAPH.

THIS COULD BE A PROXY FOR WHAT WE WOULD SEE IN 2026 IF NOTHING RETIRES.

SOMETHING PRETTY CLOSE TO THIS.

BUT WOODY, IN YOUR MODELING OVERVIEW, YOU SAID YOU HAD 742 MEGAWATTS OF CTS COMING IN.

IS THAT PER YEAR OR HOW DO YOU GET TO THE 8,000 VERSUS THE MODELING OVERVIEW OF THE C? WELL, WE ADD IN THE INCREMENTS OF 742 EACH TO EACH GET EACH TO THE DIFFERENT 24 DIFFERENT RESERVE MARGIN LEVELS.

WE JUST ADD 'EM IN.

WE, IT'S 24 24 POTENTIAL SCENARIOS THAT COULD OCCUR IN 2026.

I'M NOT, THAT DIDN'T ANSWER YOUR QUESTION.

NO, I'M SORRY.

I'M JUST WONDERING.

IT SAYS IN, YOU ADDED 7 42 MEGAWATTS OF CAPACITY TO BUILD UP THE RESOURCE.

RIGHT.

I'M TRYING TO UNDERSTAND THE 7 42 ON SLIDE THREE VERSUS THE 8,000 LIKE YOU JUST REFERENCED.

LET'S LOOK AT, UH, I GOT A SLIDE HERE.

THE 7 42 IS ADDED IN EACH INCREMENTAL SCENARIO THAT THEY RAN.

[02:15:01]

SO IN ONE SCENARIO IT WAS JUST 7 42, THE NEXT WAS 1,484 THE NEXT ONE WAS 2100 IF YOU GO.

AND SO THE 24 BUILT ITS WAY UP TO THE DIFFERENT OPERATING MARGINS.

AND THIS ONE WE'RE LOOKING AT IS THE ONE THAT WAS 8,000.

SO THIS IS, THESE ARE OUR, UH, HERE'S YOUR 9.36.

HERE'S THE ONE WE'RE LOOKING AT.

18.46.

AND HERE'S THE LAST ONE WE'LL LOOK AT.

28.4.

SO THESE ARE ALL THE DIFFERENT, THE 24 DIFFERENT, UH, SCENARIOS WE LOOKED AT.

AND THESE ARE THE NUMBER OF CTS THAT WERE ADDED TO CHANGE IT FROM 9.36 ALL THE WAY TO 28.4%.

AND THIS IS, UH, THE, THE CAPACITY THAT WAS ADDED MM-HMM.

BASED ON SUMMER RATINGS.

SO THE FIRST ONE, WE DIDN'T ADD ANYTHING FOR THIS ONE.

WE'VE ADDED 7,744 MEGAWATTS, BUT ALL OF THESE STARTED WITH AN 8,000 MEGAWATT RETIREMENT.

SO WE CORRECTED 8,000 MEGAWATTS OFF FROM THE VERY BEGINNING AND ADDED IN INCREMENTS FOR EACH OF THE 24 DIFFERENT SCENARIOS.

DOES THAT MAKE SENSE? YEP, TOTALLY.

GOT IT.

DID, DID I ANSWER YOUR ? YEP.

YEAH, NO, THE, THE RIGHT HAND COLUMN WAS MY QUESTION.

AND IT'S THERE.

THERE COULD HAVE BEEN ANY, ANY, UH, DISCUSSIONS.

RIGHT? I MEAN, THIS IS, UH, A LITTLE FLOW CHART THAT TO DESCRIBE THAT YOU START OFF WITH A 42.4% RESERVE MARGIN.

YOU CONVERT THE EL LCCS AND IT DROPS IT DOWN TO 18.7%.

THAT'S, IF NOTHING RETIRES, YOU RETIRE 8,000 MEGAWATTS AND IT GOES DOWN TO 9.36%.

AND THEN WE INCREMENTALLY ADD UP LIKE WE SHOWED ON THAT OTHER CHART TO GET BETWEEN NINE AND 28% RESERVE MARGINS TO DO THE PRELIMINARY ANALYSIS.

SO THAT'S A BIG ASSUMPTION THAT THE MARKET'S GOING TO BUILD.

WELL, YEAH, IT IS.

THERE'S A LOT OF ASSUMPTIONS THAT GO INTO THAT.

BUT THE PURPOSE OF THE STUDY WAS TO PROVIDE A RANGE OF RESERVE MARGINS, WHICH REPRESENT THE FREQUENCY OF OUTAGES, JUST TO GIVE US SOME PRELIMINARY RESULTS SO WE'D KNOW WHERE TO START ITERATING.

BUT IT CERTAINLY GIVES US A GOOD INDICATION OF WHAT WE NEED.

YEAH, RIGHT.

IT IT SETS THE TARGET.

SO THIS WHOLE EXERCISE IS AROUND SETTING THE TARGET.

ARE SOME EVENTS, THESE 1% EVENTS, AND YOU CAN THINK OF THESE 1% EVENTS AS BEING ONE IN A HUNDRED YEAR EVENTS.

AND THEN THE TARGET WILL BE CHARACTERIZED BY THE AMOUNT OF RESOURCES NEEDED TO ACHIEVE IT.

ALL RIGHT, SO THIS IS THE THIRD OF THE, OF THE FIVE 18.46.

LET'S GO UP ONE MORE AND YOU'LL SEE 23.43% RESERVE MARGIN.

YOU'LL NOTICE THE NUMBER OF EVENTS DECREASE ONCE AGAIN, GOING BACK TO 10, ONE IN 10 FREQUENCY.

NOW WE'RE AT ONE IN 27 FREQUENCY, OR ONE IN 28 FREQUENCY.

AND YOU'LL SEE THE NUMBER OF RESERVE MAR THE NUMBER OF EVENTS BOTH DECREASE BOTH IN MAGNITUDE AND THEY DECREASE IN FREQUENCY, WHICH IS EXACTLY WHAT YOU WOULD EXPECT IS YOU ADD MORE DISPATCHABLE GENERATION TO THE SYSTEM.

AND THEN THE LAST ONE IS KINDA THE EXTREME ONE, ONE IN 143 YEAR EVENT.

THAT'S THE HIGHEST WE LOOK AT IN THIS PRELIMINARY STUDY.

AND YOU SEE, UH, FEWER AND FEWER EVENTS.

BUT YOU'LL ALSO NOTICE THAT EVEN AT THIS LOW FREQUENCY, YOU'VE GOT AN EVENT HERE THAT IS A, UH, MAYBE A SEVEN OR 8,000 MEGAWATT EVENT THAT LASTS FOR EIGHT HOURS.

I MEAN, THAT'S, THAT'S NOT A, A MINOR EVENT.

SO EVEN AT THESE REALLY LOW FREQUENCIES, YOU'VE GOT SOME MAJOR EVENTS.

AND SO THAT BRINGS UP ANOTHER QUESTION THAT, UH, SO IF YOU THINK ABOUT THESE PROBABILITIES, YOU'VE GOT THESE TAIL EVENTS WAY DOWN HERE AT THE TAIL OF THESE DISTRIBUTIONS, HOW DO YOU TREAT THOSE TAIL EVENTS? AND THAT'S WHAT THIS NEXT THING IS GONNA LOOK AT.

SO, UH, WE TALKED ABOUT A, A 1% DURATION OF MAGNITUDE EXCEEDANCE PROBABILITY.

SO THIS IS, THIS GRAPH IS OUR ONE IN 10 GRAPH.

I, IF I TAKE ALL THE EVENTS AND, AND RANK THEM FROM MOST IMPACTFUL TO LEAST IMPACTFUL, TOP TO BOTTOM.

AND THEN I SAY, I'M GOING, I'M WILLING TO OVERLOOK THE 1% WORST TAIL EVENTS.

WHAT YOU HAVE LEFT IS INSIDE THE GREEN BOX.

AND SO FOR A, FOR A, A FREQUENCY OF ONE IN EVERY 10 YEARS, THAT LEAVES YOU WITH A, UH, A DURATION OF SOMEWHERE AROUND 13 HOURS AND A MAGNITUDE OF SOMETHING AROUND 14,000 MEGAWATTS.

AND THAT 14,000 MEGAWATTS JUST HAPPENS TO COINCIDE WITH THE MAXIMUM THAT WE CAN ROTATE.

BUT WHAT THAT MEANS IS THAT THERE

[02:20:01]

THESE ARE THE, THE WORST EVENTS THAT YOU COULD EXPECT TO SEE IN A HUNDRED YEARS.

YOU'RE NOT BUILDING YOUR STANDARD TO COVER THOSE.

YOU'RE WILLING TO SAY, I'M GONNA CHOP THE, THE DISTRIBUTION OFF AT 99%.

SO WHAT I, IS IT FOLLOWING A NORMAL DISTRIBUTION OR DOES IT FOLLOW A DIFFERENT TYPE OF DISTRIBUTION? IT HAS, IT WAS A NORMAL DISTRIBUTION.

I THINK, UH, WE WERE SOMEWHAT LIMITED IN THE NUMBER OF RUNS THAT WE MADE, JUST A THOUSAND MONTE CARLO RUNS.

I THINK IF YOU, IF YOU MAKE MORE RUNS, I THINK IT'S GONNA, IT'S GONNA SMOOTH OUT A LITTLE BIT MORE.

BUT THERE ARE SOME SLIDES IN THE APPENDIX THAT SHOW THAT IT'S GENERALLY DECREASING, BUT THERE ARE SOME PLACES IN THE END WHERE IT BOUNCES AROUND A LITTLE BIT.

SO THE TREATMENT OF THE TAIL EVENTS IS GONNA BE IN AN IMPORTANT DIRECTION WE GET FROM THE PUC ON HOW TO SET THESE NUMBERS, UH, THE NEXT OH, ABSOLUTELY.

BECAUSE IF YOU'RE GONNA TRY TO COVER THE 1%, YOU'RE GONNA HAVE TO PUT A LOT MORE GENERATION ON THE SYSTEM TO COVER THOSE.

UM, YOU COULD TAKE IT EVEN FURTHER.

THIS IS, ONCE AGAIN, THIS IS THE ONE IN TENS ZOOMED IN A LITTLE BIT, BUT THIS IS YOUR ONE IN 10 FREQUENCY, AND THIS IS ONE 1% EXCEEDANCE PROBABILITY.

SO WE'RE GONNA IGNORE THESE ONE IN A HUNDRED YEAR EVENTS.

OR MAYBE YOU DO A 2% AND YOU WOULD DISREGARD THESE ONE IN 50 YEAR OR A 5%, AND THESE WOULD BE DISREGARDED.

SO IT'S JUST A, IT'S A, IT'S A VALUE JUDGMENT THAT HAS TO BE MADE, AND IT WILL DETERMINE, ULTIMATELY, IT WILL DETERMINE HOW MANY MEGAWATTS OF NEW DISPATCHABLE GENERATION HAVE TO BE ADDED TO THE CURRENT MIX OF GENERATION TO SET THE STANDARDS.

SO EFFECTIVELY, THE WAY THAT YOU KIND OF THINK THROUGH SETTING PARAMETERS AROUND A STANDARD THEN IS YOU, YOU'VE, THE WAY YOU'VE DONE THIS IS YOU START WITH ESSENTIALLY A FREQUENCY WHICH IS ALIGNED WITH THE RESERVE MARGIN.

AND THEN YOU SAY, OKAY, FOR A ONE IN 10, IF WE THINK THAT'S A REASONABLE FREQUENCY, HOW TO DETERMINE THE BOUNDS OF DURATION AND MAGNITUDE EFFECTIVELY ARE DONE THROUGH A EXCEEDANCE PROBABILITY, YOU WOULD SAY, I WANNA COVER OFF MY RISK OF HAVING ONLY ONE OR 2% LIKELIHOOD OF HAVING AN EVENT IN A ONE IN 10 PERIOD.

AND THAT THEN SETS THE BOUNDS FOR WHAT YOU SHOULD EXPECT IN TERMS OF THE MAXIMUM DURATION YOU SHOULD ACCEPT AND THE MAXIMUM MAGNITUDE OF AN OUTAGE THAT YOU WOULD GET.

AND THOSE TWO COMP, THOSE TWO INPUTS WOULD THEN SET THE REMAINING PARAMETERS.

THEY WOULD SET THE DURATION, AND THEY WOULD SET THE MAGNITUDE.

IS THAT A GOOD WAY OF THINKING OF THIS WOODY? YES.

START WITH, BUT THAT'S MAKING THE ASSUMPTION THAT WEATHERIZATION IS A HUNDRED PERCENT COVERAGE.

I MEAN, SO THE REAL QUESTION IS TO HOW WOULD YOU FACTOR IN LA LACK OF WEATHERIZATION? SO WE, I THINK YOU HAVE TO THINK ABOUT THE 2011 EVENT.

THE 2011 EVENT WAS A PRETTY SIGNIFICANT EVENT, AND IT, IT HAPPENED BECAUSE OF LACK OF WEATHERIZATION.

WE DIDN'T HAVE WEATHERIZATION IN 2011.

UM, AND THAT'S IN THE NUMBERS THAT HAS LEFT IN.

BUT WHAT WE DIDN'T LEAVE IN WAS THE EXTREME LACK OF WEATHER WEATHERIZATION THAT WE SAW IN 2021.

SO I'S I AGREE.

IT'S A, IT'S A REAL DRIVER.

UM, AND IF, IF WE'RE COMPLETELY WRONG ON THAT, AND I THINK WE HAVE WINTER STORM ELLIOT LAST YEAR AS SOME INDICATION OF HOW EFFECTIVE OUR, OUR WEATHERIZATION WAS.

UM, WE, WE DID SEE SOME PROBLEMS, BUT NOT ANYWHERE NEAR WHAT WE SAW DURING WINTER STORM URI, EVEN THOUGH THE TWO STORMS WEREN'T NECESSARILY THAT COMPARABLE.

THEY HAD PRETTY, THE, THE COLDEST PART OF ELLIOT WAS PRETTY CLOSE TO THE COLDEST PART OF, OF URI, JUST SOME OF THE OTHER CIRCUMSTANCES WERE DIFFERENT.

THEY DIDN'T LAST AS LONG.

IT WASN'T COLD AS LONG BEFORE THINGS LIKE THAT.

BUT, BUT TO CLEAR, BUT TO ADD A LITTLE BIT TO THAT, THE DATA SET, THAT'S AN INPUT, WHICH IS HISTORICAL OUTAGES ASSOCIATED WITH HISTORICAL WEATHER, INCLUDES ALL OF THE OUTAGES THAT WERE CAUSED BY WEATHER ISSUES.

SO THE MODELING IS USING AN ASSUMPTION THAT THERE WILL BE WEATHERIZATION FAILURES, BECAUSE THAT'S THE INPUT DATA SET INTO THE MONTE CARLO SUBSET.

THE ONLY, THE ONLY EVENT NOT INCLUDED IS YURI, BUT ALL THE OTHER ONES THAT HAD OUTAGES ASSOCIATED TO WEATHER ARE IN THE DATA SET.

SO THEY'RE DRIVING.

SO THEY'RE INCLUDING THAT FACTOR.

IN THIS, I THINK YOU'RE GONNA GET, UH, VERY, VERY DIFFERENT RESULTS.

SO IF WE THINK, IF WE THINK WIN, IF WE THINK WINTER STORM YURI WAS A ONE AND 120 YEAR STORM THAT OCCURRED WHEN OUR WEATHERIZATION EFFORTS WERE AT THEIR LOWEST, AND THOSE OUTAGES, SHOULD THEY BE INCLUDED

[02:25:01]

BUT THAT, THAT'S CERTAINLY SOMETHING THAT COULD BE ADDED BACK IN.

AND WE COULD, WE COULD DO AS SENSITIVITY TO SEE THAT IF WE NEEDED TO.

IF WE, OR IF WE THINK THAT'S SOMETHING WE WANNA LOOK AT, THEN THAT'S SOMETHING WE COULD ADD BACK IN.

BUT IT'S GONNA MOVE ALL IT'S GOING.

THE, THE NUMBER OF EVENTS WILL GREATLY INCREASE AND THEY WILL MOVE FURTHER AND FURTHER TO THE RIGHT.

AND UP IN ALL THESE, ACTUALLY, MY THOUGHT WAS MORE ALONG THE LINES OF YOUR, SINCE YOUR AUDITING WEATHERIZATION, YOU HA YOU HAVE A QUASI QUANTITATIVE MEASURE OF HOW MUCH WEATHERIZATION COVERAGE YOU HAVE.

THAT COULD BE AN INPUT INTO FUTURE MODELING.

THAT'S WHAT I WAS THINKING ABOUT.

THAT'S TRUE TOO.

WE COULD CREATE DATA SETS THAT MODELED WEATHERIZATION IMPACTS BASED ON OUR CURRENT, CUZ WE DON'T HAVE A LOT OF HISTORICAL DATA POST WEATHERIZATION.

NO, WE DON'T.

SO WE WOULD HAVE TO CREATE SOME ASSUMPTIONS ON HOW SYSTEMS WOULD PERFORM BASED ON WEATHERIZATION USING ASSUMPTIONS AND COULD USE THAT IN THE, AS A MODELING INPUT POTENTIALLY.

THAT'S RIGHT.

AND I DON'T KNOW, PETE, ANYTIME, IF YOU WANNA WEIGH IN ON THAT, PETE'S OUR MODELING EXPERT HERE.

I'VE GOT HIM HERE TO ANSWER ANY ADDITIONAL QUESTIONS.

SO WHAT WE DO IN THE MODEL IS WE'VE SET UP A CURVE AND IT SHOWS WHAT THE CORRELATION IS BETWEEN LOW TEMPERATURE AND THERMAL OUTAGES.

AND THE IDEA IS TO BUILD UP THAT CURVE BASED ON PAST WEATHER EVENTS.

SO THAT RELATIONSHIP GETS MORE ACCURATE AS YOU GET MORE WEATHER EVENTS TO, TO IMPROVE IT.

SO, YOU KNOW, THE IDEA WOULD BE TO TAKE ELLIOT AND ANY OTHER EVENTS AND, UH, YOU KNOW, BUILD THAT INTO THAT, INTO THAT CURVE.

AND THE MODEL ALSO INCLUDES TEMPERATURES.

SO IT DOES THIS ON A, YOU KNOW, A RANDOM BASIS.

IT'S AGAINST A, YOU KNOW, PROBABILITY DISTRIBUTION.

SO WE'LL SELECT A LOW TEMPERATURE, FOR EXAMPLE, LET'S SAY IT'S, YOU KNOW, FIVE DEGREES.

AND THEN BASED ON THIS CORRELATION CURVE, IT WILL TELL YOU, YOU KNOW, HOW MUCH, UH, YOU KNOW, UH, UN UNPLANNED THERMAL OUTAGES ARE ASSOCIATED WITH THAT LOW TEMPERATURE LEVEL.

AND THEN THAT WILL DRIVE THE MODEL RESULTS AT THAT POINT.

SO, SO YEAH, WE CERTAINLY CAN ADD IN, UM, YOU KNOW, URI YOU INTO THAT CURVE, BUT AGAIN, BECAUSE THAT WAS SO EXTREME, THE, THE CURVE JUST IS, I, I WOULD CALL IT UN, YOU KNOW, NOT WELL BEHAVED, YOU KNOW, IT GOES LIKE THIS AND THEN IT JUST SKYROCKETS AND, YOU KNOW, IS THAT REALISTIC TO HAVE IN THIS CURVE WITH WEATHERIZATION, YOU KNOW, IN PLACE? YOU KNOW, I, I WOULD ARGUE, NO, BUT I, AGAIN, I THINK YOU HAVE TO BUILD THE, THIS RELATIONSHIP UP OVER TIME AGAIN AS WE GET MORE EXPERIENCE WITH, YOU KNOW, EXTREME WEATHER EVENTS AND THEN HAVE THE WEATHERIZATION IN PLACE.

SO YEAH, I THINK IT'S AN ITERATIVE PROCESS OVER TIME, YOU KNOW, TO IMPROVE HOW WE MODEL WEATHERIZATION.

SO ONE OF THE THING I WANTED TO POINT OUT HERE, WHEN WE'RE THINKING ABOUT THIS, I MEAN, THE PURPOSE OF THIS IS TO SET A RELIABILITY STANDARD THAT INCLUDES THESE DIFFERENT, UH, MEASUREMENTS, CAPACITY, FREQUENCY OR, UH, MAGNITUDE, DURATION OF FREQUENCY.

BUT I THINK, UH, AN IMPORTANT THING TO REMEMBER, AND IF YOU JUST LOOK AT THIS PARTICULAR GRAPH, THIS ONE IN 10 YEAR FREQUENCY, THIS IS BASED ON AN 18% RESERVE MARGIN.

THESE NUMBERS WILL BE DIFFERENT FOR DIFFERENT MIXES OF GENERATION AT 18%.

AND I THINK THE EXTREME THAT YOU WOULD THINK OF IS IF OUR 18% WAS MADE UP OF JUST SOLAR GENERATION, NOTHING ELSE, JUST SOLAR, THIS PROBABILITY DISTRIBUTION WOULD BE ONCE A DAY.

GOT A CRITICAL LOAD, THEY MAY HAVE LIMITATIONS ON WHETHER OR NOT THEY CAN ROTATE THAT OR INCLUDE THAT IN THE ROTATION BECAUSE THERE'S A CRITICAL LOAD.

AND SO, AS DIFFERENT AMOUNTS OF WIND, SOLAR BATTERIES, COAL, GAS, NUCLEAR, ALL THESE DIFFERENT GENERATION TECHNOLOGIES, THE DIFFERENT MIXES WILL PRODUCE A DIFFERENT EVENT, UM, SET DIFFERENT SET OF EVENTS.

AND SO THIS, THIS STUDY IS, THIS IS THE FIRST TIME WE'RE DOING IT, BUT I ANTICIPATE WE'LL CONTINUE DOING THIS EVERY YEAR.

AND, YOU KNOW, WE'LL BE DOING THIS IN 2035, SAYING, OKAY, NEXT YEAR WE GOTTA ADD 500 MEGAWATTS OF SOMETHING IN ORDER TO MAINTAIN THAT, THAT FREQUENCY, DURATION, AND MAGNITUDE BECAUSE OF WHAT WE, WE EXPECT TO HAVE.

AND SO THIS IS, IT'S GONNA ALWAYS BE DIFFERENT, AND WE'LL HAVE TO RECALCULATE IT ALL THE TIME.

SO NEXT STEPS.

UM, WHATY REAL QUICK.

YES, MA'AM.

QUESTION ON, UM, YOU SAID 14,000 WAS REALLY THE LOAD SHED BEING ABLE TO ROTATE, RIGHT? WHAT SETS THAT? LIKE, WHAT DO YOU NEED MORE OF TO HAVE THAT EVER BE HIGHER? SO WE NEED MORE, UM, MORE SEGMENTATION IN THE DISTRIBUTION SYSTEM SO THAT YOU CAN ROTATE SMALLER AND SMALLER PIECES OF THE DISTRIBUTION SYSTEM.

I THINK RIGHT NOW, TSVS WOULD TELL YOU THAT, UM, A LOT OF THEIR DISTRIBUTION LOAD IS CAUGHT WITH, UH, CRITICAL LOADS THAT CAN'T BE LOCATED.

SO IF YOU THINK ABOUT A DISTRIBUTION FEEDER, IT MAY HAVE TWO, THREE MEGAWATTS ON IT, AND IF IT'S

[02:30:01]

AND SO, UH, MORE SEGMENTATION IN THE DISTRIBUTION SYSTEM, THAT MEANS MORE MONEY HAS TO BE SPENT IN THE DISTRIBUTION SYSTEM TO DO THAT.

THAT DIFFERENT BY ? YES.

IT'S ALL IS.

AND THERE'S A, BUT 14,000 IS ABOUT THE, THE SURVEY THAT, THAT, THAT DAN'S GROUP DID EARLIER THIS YEAR, PUT THAT LIMIT AT AROUND 14,000 MEGAWATTS.

IF YOU GO MUCH ABOVE THAT, THEN SOME OF THESE PEOPLE AREN'T ROTATING ANYMORE.

THEY'RE JUST STUCK OFF.

AND OF COURSE, YURI WAS 20,000, AND WE ACTUALLY SAW THAT.

SO NEXT STEPS, UM, WE'RE WORKING WITH PC STAFF, WE'RE WORKING WITH THE COMMISSIONERS, GET MORE, MORE FEEDBACK ON THIS AND COME BACK WITH ANOTHER SET OF, OF RESULTS.

I THINK THE NEXT STEP HERE, WE WILL, UM, WE'RE GOING TO BRING BACK A SET OF SCENARIOS AT THE NEXT OPEN MEETING FOR THE COMMISSION TO LOOK AT, AND WE'RE GONNA SAY, OKAY, THESE ARE THE ONES WE THINK ARE NEXT SET TO BE LOOKING TO, TO, TO RUN THE MODEL ON.

AND WE'LL START A LITTLE MORE, INSTEAD OF JUST 1,050 MONTE CARLO SIMULATIONS, IT'LL, WE'LL BUMP THAT UP AND WE'LL GET A LITTLE MORE, UH, ROBUST MODELING FOR THOSE SCENARIOS, UM, STILL THAT TALK ABOUT THE WEATHERIZATION STANDARD.

UM, AND THERE'S SEVERAL, THESE ARE PETE'S LIST HERE OF, OF SOME OF THE KNOCKING OFF THE ROUGH, ROUGH EDGES ON THAT PRELIMINARY MODELING.

SO ANY, ANY QUESTIONS ABOUT ANY OF THOSE? YEAH.

WHAT DO YOU, GREAT EXERCISE AND GREAT EXPLANATIONS OF THIS ON SLIDE 18, NOW THAT I UNDERSTAND THE SLIDE BETTER.

UM, SO YOU HAVE THE, IN THE BREAKOUT BOX THERE ABOUT THE 2026 MARGIN.

SO THERE'S AN ASSUMPTION IN THERE YOU MADE ABOUT, BASICALLY THE RETIREMENTS EQUAL THE ADDITIONS, RIGHT? THE 8,000 OF ON ECONOMIC UNITS LEFT AND 8,000 OF CTS CAME INTO THE MARKET.

SO WHEN WE THINK ABOUT WHAT ACTUALLY WILL COME INTO THE MARKET BY 2026, I'LL TAKE THE UNDER ON THAT.

UM, SO I THINK WHEN YOU, WHEN IT'S PRESENTED, I GUESS, HOW DO YOU THINK ABOUT, YOU KNOW, REALISTICALLY SOMEBODY SHOULD, I DON'T THINK SHOULD WALK AWAY THINKING, OH, YOU KNOW, LOOKS LIKE IN, YOU KNOW, OUR ONE IN 10 EVENT FOR BY 2026, WE'VE GOT 18%, YOU KNOW, RESERVE MARGIN, YOU KNOW, WE'RE IN, WE'RE IN OKAY SHAPE.

BUT THAT'S REALLY A HUGE ASSUMPTION IN THERE ABOUT WHAT THE GENERATION MIX LOOKS LIKE.

AND WE'RE NOT GONNA HAVE THAT LEVEL OF CTS COMING TO THE MARKET BY 2026, RIGHT? UNLESS SOMETHING CHANGES IN HOW WE ACTUALLY INCENTIVIZE BRINGING THAT IN.

IS, AM I THINKING ABOUT THAT THE RIGHT WAY? NO, THAT'S EXACTLY RIGHT.

UM, YOU'VE GOT TWO VARIABLES.

UM, WHAT NEW DISPATCH WILL GENERATIONAL WILL SHOW UP BASED ON MARKET INCENTIVES AND WHAT EXISTING GENERATION WILL HANG AROUND UNTIL 2026 MM-HMM.

MM-HMM.

AND SO WE'RE GONNA, THE NEXT SET OF RUNS THAT WE MAKE WILL INCLUDE, UH, SENSITIVITIES ON BOTH OF THOSE.

WE'LL, WE'LL MODEL SOME OF IT GONE, HALF OF IT GONE, NONE OF IT GONE AND REPLACED.

AND SO WE CAN SEE EXACTLY WHAT THE DIFFERENCES ARE BETWEEN CTS AND OLD STEAM THAT MIGHT RETIRE.

SO THAT WILL BE AN IMPORTANT THING THAT WE HAVE TO LOOK AT.

I THINK TO YOUR, TO YOUR POINT BOB, WHAT, WHAT WE HAVE TO DO THEN, THIS IS THE, THIS IS REALLY LIKE STEP ONE AND MULTIPLE STEPS OF GETTING TO A RELIABILITY STANDARD.

SO ONCE WE'VE GOT A STANDARD ESTABLISHED AND WE SAID, THIS IS WHAT WE THINK IS REASONABLE, IT REFLECTS THE PRIORITY OF ELECTRICITY SERVICE IN, IN TEXAS, AND, UM, AND WE THINK THAT THE, WELL FORGET THE COST PER SECOND, JUST THAT IT'S A REASONABLE STANDARD, THEN WE HAVE TO LOOK AT, WELL, WHAT ARE THE MECHANISMS IN THE MARKET AVAILABLE TO DRIVE TOWARDS ACHIEVING THAT STANDARD? AND SO WE WOULD BE LOOKING AT THE TOOLS LIKE THE O R D C CURVE, THE ANCILLARY SERVICES THAT WE PURCHASE ON A REGULAR BASIS.

AND IF WE WERE TO DEVELOP A PERFORMANCE CREDIT MECHANISM, HOW ALL OF THOSE TOOLS COULD BE UTILIZED TO DELIVER THE RESOURCES THAT DELIVER THE RELIABILITY STANDARD.

AND THAT'S THE WORK THAT IS REALLY THE COMPLEX WORK, I THINK, AHEAD OF US THAT HAS TO FOLLOW THIS INITIAL BASELINE WORK.

YEP.

YOU'VE GOT THE EPA THAT'S PASSED PROMULGATED A NUMBER OF REGULATIONS THAT COULD SHOOT, IT COULD TAKE 15 GIGAWATTS OF COAL OFFLINE AND IN LESS THAN FOUR YEARS.

BOB, I, I'M WITH YOU.

I WOULD TAKE THE UNDER, I MEAN, ABSENT ANY MARKET REDESIGN, YOU'RE GONNA HAVE A BUNCH OF FACTORS IN PLAY THAT WOULD MAKE THIS 18% RESERVE FACTOR ALMOST IMPOSSIBLE TO ACHIEVE.

NUMBER ONE IS YOU'RE GONNA CONTINUE TO HAVE NON DISPATCHABLE RESOURCES PUSHING THE MARKET DOWN, UH, TO MAKE, UH, DISPATCHABLE RESOURCES LESS ECONOMIC.

[02:35:01]

AND THERE'S NOTHING TO MAKE THAT UP.

IT COULD TAKE SOME OF THOSE STEAMERS OFFLINE.

SO I, I COULD SEE A DISPATCHABLE MARKET IN 2026 THAT'S FIVE OR SIX GIGAWATTS LOWER THAN WHERE IT IS TODAY, AND WE'D REALLY HAVE A PROBLEM ABSENT MARKET REDESIGN.

THAT'S WHAT WE'RE HOPING IS THAT WE GET THE MARKET RIGHT MARKET REDESIGN TO HELP US OUT.

THAT'S THE, THAT'S THE PATH WE'RE ON.

BUT I AGREE WITH YOU.

I'VE GOT ONE MORE SLIDE THAT I THINK YOU MIGHT FIND INTERESTING TOO.

UM, I CAN FIND IT HERE.

THIS IS AN ANOTHER IMPORTANT PIECE OF THIS.

SO, UM, THIS IS YOUR, UH, DURATION ON THE Y AXIS.

SO THIS IS HOW LONG OUTAGES LAST, AND THEN YOU HAVE YOUR FREQUENCY PLOTTED ON THE X AXIS.

SO THOSE ARE ALL OUR 24 DIFFERENT SCENARIOS.

AND AS YOU INCREASE RESERVE MARGIN AND THE FREQUENCY DECREASES, YOU'LL NOTICE THAT THE BLUE ARE THE WINTER EVENTS AND THE GREEN ARE THE SUMMER EVENTS.

AND IF YOU GET ABOVE ONE IN 20 YEARS, SUMMER EVENTS GO AWAY.

IT'S ALL WINTER EVENTS.

SO THAT'S ANOTHER IMPORTANT ASPECT TO THIS WHOLE STUDY, IS THAT SUMMER EVENTS REALLY ARE OUR ISSUE HERE.

IT'S THOSE, IT'S THOSE WINTER EVENTS.

SO YOU COULD HAVE NO SUMMER EVENT AND YOU COULD STILL HAVE WINTER EVENTS THAT HAVE A DURATION OF OVER 12 HOURS AT A PRETTY HIGH RESERVE MARGIN.

IS THAT DRIVEN BY OUTAGES, THAT DIFFERENTIAL MORE WINTER FORCED OUTAGES THAN SUMMER? IS IT DRIVEN BY, I THINK IT'S MORE DRIVEN BY THE WEATHER THAT YOU COULD HAVE 12 TO 15.

I WAS THINKING OF EXTREME WEATHER AND FORCED OUTAGES BEING CORRELATED, BUT YEAH.

WELL, I JUST, THE, THE, THE LOAD COULD STAY HIGH FOR AN EXTENDED PERIOD OF TIME.

IN THE SUMMER, THE LOAD IS ONLY GONNA STAY HIGH FOR A FEW HOURS AND HIS LOAD'S GONNA DROP OFF.

I MEAN, IT'D BE BE REALLY, REALLY RARE IN THE SUMMER TO HAVE 80,000 MEGAWATTS FOR MORE THAN A FEW HOURS, WHERE IN THE WINTER, WHAT, WHAT WE SAW IN URI WAS CONTINUOUS MM-HMM.

SUN CAME OUT, IT STILL STAYED COLD MM-HMM.

AND SO I THINK THAT'S WHAT DRIVES IT MORE THAN ANYTHING.

THIS IS PETE.

UH, JUST ONE OTHER COMMENT.

WE DO INCLUDE THE IMPACT OF, UH, FUEL LIMITATION.

SO THAT'S SOMETHING THAT YOU WON'T SEE IN THE SUMMER.

MM-HMM.

GENERALLY SPEAKING.

THAT'S, THAT'S IT, UNLESS YOU GUYS HAVE ANY OTHER QUESTIONS.

NO, THANKS WOODY.

WITH CHAD'S PERMISSION, I'D LIKE TO RECESS THE MEETING UNTIL THREE O'CLOCK.

WARNING.

DAN WOODFIN WILL PRESENT THE SYSTEM OPERATIONS UPDATE AGENDA ITEM 7.2, AND THEN AFTER THAT, DAN WILL PRESENT AGENDA ITEM 7.2 0.1, INVERTER BASED RESOURCES AND LARGE LOAD RIDE THROUGH EVENTS, BACKGROUND AND MITIGATION, DAN.

WE'LL RECONVENE AND WE'LL START WITH, UH,

[7.2 System Operations Update]

WE DID HAVE A, A ONE TIME, WE GOT OVER ONE OF THE LIMITS IN MARCH, BUT GOT BACK UNDER IT VERY QUICKLY.

GOOD AFTERNOON.

AGAIN, I'M GONNA QUICKLY GO THROUGH KIND OF THE, THE EVERY MEETING, UH, SYSTEM OPERATIONS REPORT.

UM, REALLY THERE'S NOTHING MUCH TO TAKE AWAY FROM THIS.

UH, IT, EVERYTHING LOOKS GOOD AT THIS POINT.

ALL THE OPERATIONAL METRICS ARE TRENDING WELL.

OUR ANCILLARY SERVICES HAVE BEEN PERFORMING WELL.

UM, BUT WE CAN QUICKLY RUN THROUGH THIS.

THE, UM, APRIL, UM, PEAK WAS QUITE A BIT HIGHER THAN LAST YEAR'S APRIL PEAK, AND THEN MAY CALM DOWN A LITTLE BIT.

UM, AS WE HAD AN ACTUAL SPRING IN TEXAS THIS YEAR, OUR FORECAST PERFORMANCE, AS YOU RECALL, THIS YEAR, WE'VE SWITCHED TO MORE OF A NET LOAD FORECAST PERFORMANCE.

SO IT'S LOAD MINUS WIND, MINUS SOLAR ERRORS.

SO WE'RE LOOKING AT THE, THAT, THAT NET ERROR, AND IT'S BEEN HOLDING RIGHT IN AT AROUND THAT 2000 MEGAWATT MARK.

SO WE'VE SWITCHED TO MORE OF A MEGAWATT MA, UH, MOUNT RATHER THAN A PERCENTAGE AMOUNT.

SO IT'S BEEN HOLDING OUT, UP RIGHT AROUND THERE.

UM, FREQUENCY CONTROL ALSO HAS BEEN GOOD.

WE'VE BEEN IN THAT 20 174%, 175% RANGE FOR QUITE A WHILE.

OUR TRANSMISSION LIMIT CONTROL, THIS IS LOOKING AT OUR INTERCONNECTION, RELIABILITY, OPERATING LIMITS, SO KIND OF THE BIG IMPORTANT, UH, LIMITS.

UM, IT'S BEEN DOING WELL.

WE HAVEN'T HAD ANY EXCEEDANCES THAT GO ANYWHERE NEAR THE 30 MINUTE THRESHOLD FOR, UH, A NERC VIOLATION.

[02:40:01]

AS FAR AS ANCILLARY SERVICES GO, UH, WE ARE STAYING WITHIN OUR, OUR PRESCRIBED, UH, UH, EXHAUSTION RATE ON REGULATION.

SO WE HAVEN'T RUN OUT TOO OFTEN ON THOSE EITHER UP OR DOWN.

WE'VE HAD FOUR EVENTS IN WHICH WE DEPLOYED RESPONSIVE RESERVE, UH, ALL OF THEM UNIT TRIPS IN EACH CASE.

THE RESPONSIVE RESERVE GOT THE FREQUENCY BACK UP.

UH, IN PLENTY OF TIME EVERYTHING WAS GOOD IN NON SPITTING RESERVE.

WE DEPLOYED, UH, QUITE A FEW TIMES, UM, IN BETWEEN MARCH AND MAY.

IN EACH CASE, IT WAS, AS WE WERE LOOKING AHEAD OVER THE NEXT 30 MINUTES, UH, DID WE NEED MORE CAPACITY TO BE ONLINE TO COVER THE RAMP? UH, AS YOU CAN SEE, THE TIME OF ON MOST OF THOSE, MOST OF THEM WAS AROUND 8:00 PM SEVEN 8:00 PM SO IT WAS WHEN THE SUN WAS GOING DOWN.

SO BASICALLY, WE'RE STARTING UP THAT NONS SPEND TO COVER THE, THE SOLAR DOWN RAMP AT THE SAME TIME, ESPECIALLY DURING THE SPRING.

SOME OF THOSE COLD DAYS, THE LOAD'S GOING UP A LITTLE BIT AT THAT TIMEFRAME.

SO EVERYTHING, EVERYTHING WAS WORKING WELL WITH NONS SPEND.

WE, UH, IMPLEMENTED ECRS, AND SO WE'LL START ADDING AN ECRS TYPE DEPLOYMENT ON PROBABLY BY THE NEXT MEETING.

SO, UM, I'LL PAUSE FOR A MINUTE THERE AND SEE IF ANYBODY HAS ANY QUESTIONS ABOUT THAT STANDARD REPORT BEFORE GOING ON.

UM, SO BACK IN FEBRUARY, IT'S KIND OF THE NORMAL REPORT.

[7.2.1 Inverter-Based Resource and Large Load Ride Through Events: Background and Mitigation]

WE MENTIONED THAT WE HAD A COUPLE OF EVENTS IN THE ODESSA AREA WHERE BECAUSE OF A LIGHTNING STRIKE ON THE SYSTEM, WE LOST SOME GENERATION QUITE A BIT.

UM, NERC HAS BEEN DOING IN INVESTIGATION.

I THINK WE WERE ALL, THAT WAS ALREADY ONGOING AT THAT POINT IN TIME.

THERE'S BEEN A LOT OF, UH, PRESENTATIONS MADE ABOUT THIS IN THE, THE INDUSTRY.

UM, WANTED TO FOLLOW BACK UP WITH YOU, AS I HAD PROMISED TO DO, AND KIND OF GO A LITTLE MORE OF A DEEP DIVE INTO WHAT'S GOING ON ON THOSE EVENTS AND JUST THE GENERAL ISSUES AROUND INVERTER BASE RESOURCES, LARGE LOAD RIDE THROUGH EVENTS, AND GENERALLY THE, THE MODELING WE'RE DOING AND SOME OF THE MITIGATION THAT, UH, THAT WE'RE GONNA BE DOING.

UH, WE HAVE SEVERAL DIFFERENT INITIATIVES GOING ON THAT WILL HELP TO MITIGATE THIS, AND WE WANTED TO DISCUSS THOSE.

ALTHOUGH THOSE ARE NOT IN FRONT OF YOU THIS MONTH.

THEY WILL BE COMING IN FRONT OF YOU TO BE APPROVED OVER THE NEXT FEW MONTHS.

AND SO WE WANT TO KIND OF DO THIS PRESENTATION AS A BACKGROUND OR AHEAD OF TIME, SO, YOU KNOW, FROM AN EDUCATIONAL PERSPECTIVE, AND SO THAT, UH, THEY, WE DON'T HAVE TO TAKE AS MUCH TIME ON THOSE WHEN THEY COME BEFORE YOU FOR APPROVAL.

UM, SO THERE, THE, I GUESS AS GENERAL AS I GO THROUGH THIS PRESENTATION, THE FIRST THING I WANT TO TALK ABOUT IS SOME MODELING AND, UH, UH, HOW WE OPERATE THE GRID FOR, UH, STABILITY PERSPECTIVE.

HOW WE LIMIT FLOWS ACROSS THE GRID FROM, UH, TO MAKE SURE THAT THE SYSTEM STAYS STABLE FROM A TRANSMISSION PERSPECTIVE.

WE'VE HAD THESE SEVERAL EVENTS THAT, THAT I MENTIONED THAT HAVE, WERE EITHER INVERTER BASED RESOURCES OR LARGE LOADS, HAVEN'T RIDDEN THROUGH A, LIKE A LIGHTNING STRIKE ON THE SYSTEM OR A, A FAULT OF, BECAUSE OF EQUIPMENT FAILURE.

AND, UH, THAT KIND OF BEHAVIOR, THAT KIND OF LACK OF RIDE THROUGH ISN'T SHOWING UP IN OUR DYNAMIC STUDIES.

IT'S EITHER NOT MODELED IN THE STUDIES OR, UH, OR THE MODELS AREN'T CORRECT AS PROVIDED BY THE GENERATORS.

AND SO WANNA TALK THROUGH THAT.

AND THEN FINALLY, I'LL, I'LL COVER SOME OF THOSE SOLUTIONS THAT WE'VE, WE'VE BEEN TALKING ABOUT.

SO IN GENERAL, WHEN WE'RE TRANSFERRING POWER FROM GENERATION TO LOAD ACROSS THE SYSTEM, WE LIMIT THOSE FLOWS IN A WAY THAT DOESN'T OVERLOAD ANY OF THE TRANSMISSION LINES.

IN FACT, IT'S SO THAT IF WE LOSE ONE OF THE TRANSMISSION LINES AND THE POWER REDISTRIBUTES IN GETTING FROM THE GENERATORS TO THE LOAD, NOTHING'S, UH, OVERLOADED IN THAT CASE EITHER.

SO IT'S NOT OVERLOADED WITH ALL LINES IN SERVICE, AND IT'S NOT FOR ANY SINGLE LINE BEING OUT.

IT ALSO DOESN'T RESULT IN ANY KIND OF OVERLOAD.

SO WE GENERALLY LIMIT THAT.

THIS IS BASICALLY THE DISCUSSION CANON HAD THIS MORNING IN RESPONSE TO THE QUESTION ABOUT TRANSMISSION CONGESTION.

UM, AND IF IT, YOU DO SEE AN OVERLOAD, WE'RE GONNA BACK OFF OF THE CHEAPER GENERATION, INCREASE A LITTLE BIT MORE EXPENSIVE GENERATION IF NEEDED IN ORDER TO MAKE SURE THAT OVERLOAD DOESN'T OCCUR.

UM, SO GENERALLY WE DO THAT BECAUSE OVERLOADS, BUT WE ALSO HAVE TO DO IT BECAUSE OF VOLTAGE STABILITY OR, OR TRANSIENT

[02:45:01]

STABILITY ON THE SYSTEM.

AND SO IT'S NOT JUST A MATTER OF NOT OVERLOADING THE LINES, IT'S ALSO A MATTER OF NOT, UH, CAUSING ANY KIND OF INSTABILITY ON THE SYSTEM.

AND SO TO IDENTIFY THOSE PLACES AND, AND A LOT OF THE PLACES ON THE SYSTEM THAT WE'RE TRANSFERRING GENERATION FROM TO, TO, TO LOAD, WE DON'T HAVE A STABILITY ISSUE.

THE, THE, THE, THE OVERLOADS OF THE LINE, IF WE'RE MAINTAINING THAT EVERYTHING'S GOOD.

BUT IN SOME CASES, WE'LL IDENTIFY A LOCATION WHERE IF YOU'RE TRANSFERRING A LOT OF GENERATIONS, SAY FROM THE PANHANDLE TO THE EAST TEXAS, IF YOU TRANSFER TOO MUCH IT, THAT, THAT THE SYSTEM MAY BECOME IN UNSTABLE.

AND IDENTIFYING THOSE AND THEN DECIDING WHAT THE LIMITS ARE REQUIRES VERY COMPLEX MODELING AND SIMUL AND COMPUTER SIMULATIONS OF THE SYSTEM.

SO WE DO THESE STUDIES THAT YOU HAVE TO MODEL NOT ONLY THE TRANSMISSION NETWORK, BUT ALSO THE CONTROL SYSTEMS OF EACH INDIVIDUAL POWER PLANT, AND HOW DO THEY RESPOND IF THE VOLTAGE DIPS, HOW DO THEY RESPOND, UH, IF THERE'S A, UH, UH, SOME OTHER KIND OF THING THAT GOES ON IN THE SYSTEM, REALLY, WHAT IS THE, WHAT IS THEIR CONTROL SYSTEM DO? HOW DO THEY INTERACT WITH THE POWER SYSTEM? AND ALSO HOW DO THEY INTERACT WITH EACH OTHER? AND SO THAT REQUIRES THIS VERY COMPLEX MODELING, AND WE DO THOSE KIND OF SIMULATIONS.

AND THEN ONCE WE DO IDENTIFY THE LOCATIONS AND ALSO CALCULATE WHAT THOSE LIMITS ARE, THEN THOSE LIMITS ARE USED IN OUR MARKET MODEL, JUST LIKE THE OVERLOADS OF THE TRANSMISSION LINES ARE, TO MAKE SURE THAT WE'RE USING THE LEAST EXPENSIVE GENERATION THAT WE CAN USE TO SERVE THE LOAD IN SUCH A WAY THAT DOESN'T EITHER CAUSE OVERLOADS OF THE TRANSMISSION LINES OR CAUSE SOME KIND OF INSTABILITY.

AND THE GRAPHIC HERE SHOWS SOME OF THESE BROAD, UH, AREAS WHERE WE HAVE WHAT'S CALLED THESE GENERIC TRANSMISSION CONSTRAINTS, THOSE LIMITATIONS ON THE, UH, BECAUSE OF STABILITY OR BECAUSE OF, OF, OF VOLTAGE ISSUES.

THERE IS AN EXPORT COMING OUT OF THE PANHANDLE.

THERE'S A WEST TEXAS EXPORT IMPORT INTO HOUSTON, AND THEN BOTH AN IMPORT AND AN EXPORTED INTO THE VALLEY.

AND THEN THERE WERE NUMEROUS OTHERS, AS WE TALKED ABOUT IN THE BUDGET DISCUSSION THIS MORNING.

THERE'S ACTUALLY 19 OF THESE, UH, LOCATIONS.

SO THE, UH, ODESSA EVENTS THAT I MENTIONED EARLIER ARE ACTUALLY, UH, THERE'S BEEN A COUPLE OF THEM IN THE ODESSA AREA AND ONE OTHER UP IN THE PANHANDLE THAT HAVE HAPPENED ON THE ERCOT SYSTEM.

BUT THE ONES THAT HAVE OCCURRED ON THE ERCOT SYSTEM ARE JUST A, A SUBSET OF ALL THE ONES THAT HAVE DIS, UH, HAPPENED NATIONALLY.

AND YOU CAN SEE THOSE IN THE GRAPH THERE, THAT GOING BACK TO 2016, UH, IN CALIFORNIA AREA, THEY HAD THE BLUE CUT FIRE.

SO THIS IS AN EVENT WHERE THERE WAS A, A FAULT ON THE SYSTEM DURING A FIRE.

THEY LOST A LOT OF INVERTER BASED RESOURCES, PRIMARILY SOLAR BECAUSE OF THAT.

UH, AND THERE HAVE BEEN SEVERAL OTHERS, UH, SINCE THEN.

AS YOU CAN SEE, THE ONES THAT ARE CIRCLED IN RED ARE THE ONES THAT HAPPENED IN ERCOT.

UM, THERE'VE ALSO BEEN NUMEROUS OTHER SMALLER EVENTS THAT KIND OF DIDN'T HIT THE RADAR FOR THESE, FOR AS MANY MEGAWATTS TRIPPING OFFLINE, BOTH INVERTER BASED RESOURCES AND ALSO LOADS.

UH, WE'VE HAD, UH, FIVE EVENTS JUST IN THE ERCOT AREA IN WHICH, UH, LARGE LOADS, PRIMARILY IN WEST TEXAS HAVE TRIPPED OFFLINE, UH, DURING SOME KIND OF, UH, FAULT LIGHTNING STRIKE OR EQUIPMENT FAULT.

AND, UH, AS I'LL TALK ABOUT IN A MINUTE, THE, THE MAGNITUDE OF THESE, THE NUMBER OF MEGAWATTS LOST ARE SUCH THAT IT'S NOT JUST, UH, THE, YOU KNOW, WE, WE, WE DON'T KNOW EXACTLY WHAT LOADS FELL OFF BECAUSE OF THAT, BUT WE KNOW THAT IT HAS TO BE A COMBINATION OF, UH, DATA CENTERS, UH, OIL AND GAS LOADS, JUST BECAUSE OF THE MAGNITUDE OF IT.

THERE'S NOT ENOUGH, UH, UH, KIND OF RESIDENTIAL LOAD, ESPECIALLY WHEN SOME OF THEM HAVE HAPPENED, UH, TO, TO MAKE, TO EXPLAIN ALL OF IT.

AND SO THE, THE, THE, THE, THIS CONTROL SYSTEM MODELS THAT WE HAVE, THAT WE USE FOR THE STABILITY STUDIES DON'T SHOW THIS KIND OF BEHAVIOR.

AND THERE'S MULTIPLE REASONS FOR THAT.

ONE IS THE MAY NOT THE, THE MODELS WHICH THE GENERATORS PROVIDE TO US TO DO THESE SIMULATIONS MAY NOT BE ACCURATE AND SHOW THAT IT MAY ALSO BE THAT THE PARTICULAR PHENOMENON THAT GOES, GOES, IS GOING ON, ISN'T EVEN INCLUDED IN THOSE SIMULATION MODELS.

AND WE NEED TO EXPAND THE KIND OF SIMULATIONS THAT WE'RE RUNNING IN ORDER TO CAPTURE THOSE

[02:50:01]

EVENTS.

UM, BUT IT'S ALSO TRUE THAT THE STABILITY STUDIES THAT I TALKED ABOUT EARLIER, UH, ARE, WHICH ARE DESIGNED TO DECIDE WHEN WE NEED TO LIMIT FLOWS ACROSS THE SYSTEM, AREN'T MEANT THAT THE REDUCING THOSE FLOWS ISN'T GOING TO PREVENT THESE KIND OF EVENTS FROM OCCURRING.

THEY'RE MORE A FUNCTION OF YOU'VE GOTTA, UH, DESIGN THE, UH, PLANT CONTROLS TO NOT, NOT TRIP DURING OR, OR, OR BLOCK OR WHATEVER DURING, DURING THE EVENTS.

AND I'LL TALK MORE ABOUT THAT IN A MINUTE.

UM, AND SO I'M GONNA NEXT MOVE ON TO TALK MORE ABOUT WHAT DO I MEAN BY THEY DON'T RIDE THROUGH, UH, THESE EVENTS? UM, SO YOU HAVE A LIGHTNING STRIKE ON THE SYSTEM, OR YOU HAVE SOME PIECE OF EQUIPMENT IN A SUBSTATION SAY, WHERE YOU KNOW IT HAS A PROBLEM.

THERE'S AN ARC TO GROUND.

A LOT OF POWER FLOWS INTO THAT ARC, UH, AND THE VOLTAGE IN THE AREA ACROSS HOPEFULLY A SMALL AREA, BUT IT COULD BE A BIG AREA.

THE VOLTAGE ON THE POWER SYSTEM GETS DEPRESSED DURING THE, THESE RIDE THROUGH EVENTS.

UM, AND THE WEAKER THE GRID IS IN THAT AREA, THE WIDER THE EFFECTS OF THIS LOW VOLTAGE IS, AND YOU CAN SEE THIS IN THE GRAPHIC HERE, THAT, THAT THIS IS FOR A PARTICULAR FAULT IN THE ODESSA AREA.

UM, ONE IS GOOD, ONE MEANS YOU'RE RIGHT AT A HUNDRED PERCENT VOLTAGE WHAT OF WHAT, WHAT THE TARGET VOLTAGE IS 60% SIX.

THE RED IS BAD.

IT MEANS THE VOLTAGE DIPPED A LOT DURING THAT FAULT.

AND YOU CAN SEE THAT, THAT A SINGLE FAULT AT A SINGLE LOCATION ON THE SYSTEM HAD AN EFFECT OVER A WIDE AREA OF WEST TEXAS, ESPECIALLY KIND OF FURTHER OUT ON THE TAIL WHERE THERE YOU'RE EVEN FURTHER FROM A SYNCHRONOUS GENERATION, YOU STARTED SEEING REALLY LOW VOLTAGES.

UM, AND SO THE, THE THE, WHEN THIS OCCURS, WE NEED THE GENERATION IN THAT AREA TO RIDE THROUGH THE EVENT, TO, TO CONTINUE TO PRODUCE POWER, TO CONTINUE TO SUPPORT VOLTAGE.

SO PROVIDING WHAT'S CALLED REACTIVE POWER TO SUPPORT THE VOLTAGE ON THE SYSTEM, AND ALSO TO STAY IN SYNC WITH THE, THE FREQUENCY, UH, OF THE GRID.

WHAT WE HAVE SEEN IN, IN, IN WHAT WE SAW IN THE ODESSA EVENT, WHICH WE'LL TALK ABOUT IN A MINUTE, IS THAT THERE WERE SOME SUBSET OF THE GENERATORS THAT DIDN'T DO ANY OF THESE THREE THINGS OR ANY ONE OF THESE THREE THINGS.

THEY EITHER STOPPED PROVIDING REAL POWER.

WELL, IF ENOUGH GENERATION STOPS PROVIDING REAL POWER THAT CAUSES FREQUENCY PROBLEMS ON THE GRID, IF ENOUGH OF THEM START, STOP PROVIDING VOLTAGE SUPPORT, THEN THE VOLTAGE IN THE AREA GETS DEPRESSED FURTHER.

AND THEN THAT MAY AFFECT OTHER GENERATORS AND CAUSE THEM NOT TO, TO RIDE THROUGH.

AND THEN SOME OF THEM ACTUALLY, BECAUSE THE THE, THEY'RE TRYING TO READ THE VOLTAGE WAVE FORM AND STAY SYNCHRONIZED TO IT, THEY MAY ACTUALLY LOSE SYNCHRONISM WITH THE GRID AND START, AND, AND THAT CAN CAUSE ISSUES AS WELL.

AND SO THERE, THERE'S MULTIPLE THINGS THAT CAN GO WRONG THERE.

NOW, THE GENERATORS IN THE GENERALLY ERCOT HAS HAD A VOLTAGE RIDE THROUGH REQUIREMENT SINCE, UH, 2008.

UH, SOME, SOME VERY EARLY WIND FARMS WERE EXISTED FROM THIS.

BUT GENERALLY FOR THIS KIND OF EVENT, OUR PERFORMANCE REQUIREMENTS HAVE BEEN THAT, THAT THE, THE INVERTER BASED RESOURCES, AND IN FACT, ALL GENERATORS ARE SUPPOSED TO RIDE THROUGH THE EVENTS THAT WE HAD IN ODESSA.

UM, BUT THEY DIDN'T.

AND WE'VE BEEN DOING A LOT OF INVESTIGATING AS TO WHY THAT IS.

OKAY, DAN? YES.

CAN, CAN WE, UH, IN THE FUTURE, UH, EITHER ERCOT AS A PROTOCOL OR THE PUC IN OUR RULES, UM, MANDATE, OR I DON'T KNOW WHAT THE RIGHT WORD IS, BUT UH, UH, I GUESS MANDATE GRID FORMING INVERTERS THAT WOULD, UH, SOLVE THIS PROBLEM, BUT ALSO ALWAYS ADD MORE, UH, WAVE FORM TO THE SYSTEM OR INERTIA? YEAH, SO WE, WE, WE, UM, CAN I COME BACK TO THAT? CAUSE I, I, I ACTUALLY WOULD AM GOING TO TALK ABOUT THAT, I THINK.

UM, BUT IT MIGHT BE EASIER TO DO IT IN THE CON IN A DIFFERENT CONTEXT.

UM, THE, UM, SO TALKING MORE ABOUT THE ODESSA EVENT, UM, IN THIS CASE, WE HAD A FAULT IN, IN THE ODESSA AREA.

UM, THAT HAPPENED ON JUNE 4TH OF, OF LAST YEAR.

UH, WE LOST OVER 2,500 MEGAWATTS OF GENERATION.

UH, 844 OF THAT WAS SYNCHRONOUS GENERATORS.

SO THERE WAS ONE

[02:55:01]

GENERATOR IN WEST TEXAS, ONE GENERATOR DOWN IN THE VALLEY THAT THAT TRIPPED OFF LINE.

AND THEN ABOUT 1700 MEGAWATTS OF, OF SOLAR GENERATION THAT, THAT, THAT, UH, STOPPED PRODUCING REAL POWER.

UH, DURING THE EVENT, BECAUSE OF THAT LOSS OF GENERATION, FREQUENCY ACTUALLY DIPPED DOWN.

SO POWER, WE HAD SAME AMOUNT OF LOAD ON THE SYSTEM, LESS MEGAWATTS FREQUENCY DIPPED, OUR RESPONSIVE RESERVE ACTIVATED, EVERYTHING WAS OKAY.

UM, BUT, UM, WE'RE KIND OF PUSHING THE LIMIT.

IF YOU RECALL, WE BUY RESPONSIVE RESERVE TO COVER THE LOSS OF TWO OF THE NUCLEAR PLANTS, WHICH IS, UH, ABOUT THIS MAGNITUDE OF MEGAWATTS.

AND SO WE DON'T WANT MORE THAN THAT TRIPPING OFFLINE.

UM, WE HAVE BEEN WORKING WITH EACH OF THE, THE REALLY, A LOT OF THE SOLAR PLANTS THAT TRIPPED OFF WERE FROM THREE MANUFACTURERS.

WE'VE BEEN WORKING WITH THEM INDIVIDUALLY AND THEIR ORIGINAL EQUIPMENT MANUFACTURERS TO GET THEM TO COME UP WITH MITIGATION PLANS FOR, FOR WHAT WENT WRONG IN, IN EACH CASE.

SO SOME OF THEM, UH, ACTUALLY STOPPED PRODUCING POWER.

SOME OF THEM, UH, DIDN'T RIDE THROUGH FROM A VOLTAGE PERSPECTIVE, SOME LOST SYNCHRONISM.

ALL THE, ALL THE DIFFERENT THINGS THAT I MENTIONED.

THEY'VE, UH, WE HAD SOME OF THEM THAT DID EACH ONE OF THOSE.

AND SO WE'VE BEEN HAVING TO WORK INDIVIDUALLY WITH THE, THE PLANTS TO, TO MAKE SURE THAT THEY'RE NOT GONNA HAVE THAT PROBLEM AGAIN.

ALSO, ANYBODY ELSE THAT HAS PLANTS THAT MAYBE WASN'T AFFECTED BY THIS EVENT, UM, UH, WE'VE BEEN COMMUNICATING OUT SO THAT THEY'VE, THEY'VE GOT THE SAME KIND OF EQUIPMENT THEY NEED TO DO THE SAME KIND OF TUNING THAT WE DID, UH, OR THAT WE'VE BEEN WORKING WITH THEM ON.

UM, AND SO THAT'S KIND OF WHAT'S BEEN GOING ON ON ODESSA THE LOAD EVENT.

UH, ON, ON DECEMBER 7TH, WE HAD, UH, MULTIPLE FAULTS IN THE ODESSA AREA, INCLUDING ONE THREE PHASE FAULT.

AND NOW THIS ONE, THIS IS REALLY A MORE SEVERE TYPE OF FAULT AND LASTED LONGER THAN WHAT, UH, WHAT EVEN WENT ON WITH ODESSA.

UH, IT HAPPENED, UH, IN THE MIDDLE OF THE NIGHT.

SO THERE WAS NO SOLAR ONLINE, SO WE DIDN'T SEE ANY SOLAR PLANT, ANY SOLAR MEGAWATTS GOING AWAY.

WE, IF IT HAD HAPPENED IN THE AFTERNOON, WE MIGHT HAVE SEEN MORE, UH, SOLAR PLANTS TRIPPING OFF.

WHAT WE DID SEE THOUGH, WAS REDUCTION IN LOAD OF ABOUT 1600 MEGAWATTS.

UM, AND, AND THIS IS THE BIGGEST EVENT, WE'VE SEEN OTHERS LIKE THIS, BUT THAT THOSE, THAT LOAD THAT WAS LOST AND WAS A MIX OF DATA CENTER LOAD, OIL AND GAS AND OTHER THERMAL, UH, OTHER INDUSTRIAL LOADS, THE MAGNITUDE OF IT IS SUCH THAT IT COULDN'T HAVE POSSIBLY BEEN JUST LIKE RESIDENTIAL COMMERCIAL TYPE LOAD.

IT HAD TO BE, UH, THESE, UH, OIL AND GAS LOADS AND THEN DATA CENTER, UH, LOADS.

UM, WE ALSO HAD A COUPLE OF SMALL THERMAL GENERATORS TRIP THAT WEREN'T PRODUCING THAT MUCH AT THIS POINT.

IN THIS CASE, NOW, GENERATION LOAD TRIPPED OFF.

AND SO FREQUENCY WENT HIGH, AND WE GOT IT BACK TO 60 HERTZ.

IT TOOK ABOUT 12 MINUTES TO GET IT BACK DOWN TO 60 HERTZ.

SO IN THIS CASE, WE'RE, WE'VE BEEN WORKING ON, UH, COMING UP WITH SOME INTERCONNECTION PROCESS FOR LARGE LOADS THAT WE PUT IN PLACE SO THAT WE MAKE SURE THAT FOR LARGE LOADS, WE GET MODELS OF THE SIMULATION TO, IN ORDER TO DO THE SIMULATIONS THAT WE'VE, UH, BEEN, UM, THAT I TALKED ABOUT EARLIER, MAKE SURE THAT THEY'VE GOT THINGS TUNED RIGHT.

AND WE KIND OF, AS PART OF THAT INTERCONNECTION PROCESS, CAN, UH, INVESTIGATE WHAT, WHAT THE PROBLEMS MIGHT BE AHEAD OF TIME.

AND SO THAT, THAT'S ONE OF THE THINGS THAT WE'RE GOING TO BE COMING OUT WITH, UH, SHORTLY.

AND THIS, THIS KIND OF EVENT IS, IS WHY THAT'S NEEDED.

SO, UH, WHAT ARE ALL THE MITIGATION THINGS THAT WE'RE, ACTIVITIES THAT WE'RE, WE'RE WORKING ON? NOW, ONE OF THESE IS THIS NOER 2 45, AND WHAT THAT REALLY IS IS THERE HAVE BEEN, THERE'S BEEN A LOT OF WORK IN THE INDUSTRY BECAUSE OF ALL THOSE YELLOW BAR EVENTS THAT I I TALKED ABOUT EARLIER, UH, BOTH IN IN CALIFORNIA AND AND HERE IN TEXAS.

AND THEN THERE'VE BEEN OTHERS GLOBALLY, UH, WHERE, AND SO I E E E, THE INSTITUTE OF ELECTRICAL ELECTRONIC ENGINEERS HAS COME UP WITH STANDARD ON WHAT TO DO, UH, HOW, HOW INVERTERS SHOULD BE DESIGNED.

NOT ONLY WHAT THE GENERAL PERFORMANCE REQUIREMENT IS, BUT HOW SPECIFIC THINGS SHOULD BE TUNED AND HOW, WHAT WHAT SHOULD BE MODELED IN STUDIES AND THOSE KIND OF THINGS.

SO THEY'VE PUT OUT THESE STANDARDS, AND OUR GOAL IS TO ADOPT SOME FOR THE RELEVANT ONES OF THOSE INTO THIS NOER.

THERE'S BEEN A LOT OF DISCUSSION ABOUT IT IN THE STAKEHOLDER COMMUNITY.

IN FACT, UH, ONE OF THE THINGS I FORGOT TO MENTION EARLIER

[03:00:01]

IS DURING THE ODESSA EVENT, OR SINCE THE ODESSA EVENT, WE FORMED A, A INVERTER BASED RESOURCE TASK FORCE.

IT WAS TEMPORARY IN NATURE AT FIRST.

NOW IT'S BECOMING A WORKING GROUP.

I THINK THAT'S GONNA DEAL WITH, UH, INVERT BASED RESOURCE GETTING NOT ONLY GET ERCOT STAFF, THE GENERATOR OWNERS OF INVERTER BASED RESOURCES, BUT ALSO THE, THE, UH, EQUIP UH, EQUIPMENT MANUFACTURERS TOGETHER TO GET ENGAGED IN HOW DO WE SOLVE SOME OF THESE ISSUES.

WE'VE GOT A LOT OF MEGAWATTS OF THIS.

WE'VE GOTTA SOLVE, SOLVE THE PROBLEM.

UH, AND SO NORE 2 45 IS WORKING THROUGH THE, THAT STAKEHOLDER PROCESS.

UM, THERE'S A LOT OF DISCUSSION ABOUT HOW, WHETHER WE WILL ALLOW GRANDFATHERING OR NOT, WHAT REQUIREMENTS SHOULD BE PUT IN PLACE ON THAT.

AND SO WE'RE KIND OF WORKING THROUGH THAT.

UM, AND THAT SHOULD BE COMING TOWARD THE BOARD BEFORE THE BOARD BY OCTOBER.

WE'RE TAKING A PRETTY STRONG STANCE THAT THAT NEEDS TO BE PUSHED FORWARD VERY QUICKLY.

UM, SO THAT'S THE FIRST MITIGATION THING, UM, THAT WILL HELP WITH THE ACTUAL IBR PERFORMANCE, UH, AND ALSO SOME OF THE MODELING.

NOW, UM, THE SECOND PROJECT THAT'S GOING ON IS, IS A WEST TEXAS, UH, SYNCHRONOUS CONDENSER PROJECT.

SO A SYNCHRONOUS CONDENSER IS LIKE A SYNCHRONOUS GENERATOR, BUT IT DOESN'T HAVE A PRIME MOVE.

IT DOESN'T HAVE A STEAM TURBINE OR SOMETHING LIKE THAT.

IT'S LIKE A BIG MOTOR.

AND IF WE HAVE A FAULT ON THE SYSTEM, IT'LL CONTINUE TO TURN.

IT'S GOT A LOT OF, YOU KNOW, METAL TURNING.

IT'LL CONTINUE TO TURN IT APPROXIMATELY 60 HERDS AND PUT OUT REACTIVE POWER TO HELP SUPPORT THE VOLTAGE AND DO IT IN A WAY THAT'S VERY STRONG.

AND SO IT REALLY STRENGTHENS THE WEST TEXAS GRID.

AND SO THIS HAS BEEN PROPOSED, UH, IT'S WORKING THROUGH THE PLANNING PROCESS.

AND, UH, I THINK, UH, IT WAS ACTUALLY PRESENTED LAST, THE RECOMMENDATION ON THIS WAS PRESENTED BY WOODY'S GROUP LAST WEEK TO THE REGIONAL PLANNING GROUP.

AND SO THEN, UH, THAT THAT'LL BE, UH, COMING OUT AS A, AS A, THE INDIVIDUAL TOS WILL BE ADOPTING THAT AND THEN, UH, BASED ON WHO, WHO'S GONNA BUILD EACH ONE OF THEM.

AND THEN THOSE PROJECTS WILL BE COMING TO THE BOARD.

BUT WE'VE ALREADY SAID THIS IS THE RIGHT THING TO DO.

WE NEED TO DO THIS PROJECT, UH, AS A RECOMMENDATION.

THE, UM, AND TO GET TO THE COMMISSIONER FELDS QUESTION, UH, AS PART OF THAT, KIND OF A FOLLOW ON TO THAT, THAT THAT'S ENOUGH TO SOLVE THE, UH, KIND OF THE, UM, IT'LL STRENGTHEN THE SYSTEM SUFFICIENTLY FOR THE EXISTING AMOUNT OF BRS THAT WE WE HAVE ON THE SYSTEM.

UM, BUT AS WE, AS THE CONTINUE TO GROW, WHAT DO WE, WHAT DO WE DO TO MAKE SURE THAT THE SYSTEM STAYS STRONG? AND SO WE ARE ALSO LOOKING AT, AT, AT PUTTING, AT LEAST ALLOWING, MAKING SURE THAT IT'S UNDERSTOOD THAT ESPECIALLY BATTERIES THAT ARE PUT IN PLACE ON THE SYSTEM CAN PROVIDE, UH, UM, GOOD FORMING CAPABILITY AS OPPOSED TO BEING GRID FOLLOWING.

AND THAT'S KIND OF A TERM OF ART, BUT IT'S, IT BASICALLY MEANS THAT, THAT THEY DON'T, THEY WILL HELP MORE IN THIS KIND OF SITUATION.

UH, AND BATTERIES ARE UNIQUELY CAP, UH, CAPABLE OF DOING THIS BECAUSE EVEN WHEN THEY'RE NOT PRODUCING REAL POWER, THEY HAVE THE CAPABILITY OF, OF, UM, PROVIDING THIS KIND OF GRID SUPPORT.

UM, AND SO WE'RE LOOKING AT AT LEAST ALLOWING IT.

AND THEN THE QUESTION WILL BE AT WHAT POINT DO WE START TO, UH, REQUIRE IT? AND GIVEN THAT IT'S KIND OF A NEW TECHNOLOGY, WE, THAT'S, THAT'S A LITTLE GONNA BE INTERESTING TO FIGURE OUT HOW TO DO BECAUSE OF THE, UH, UM, KIND OF THE LIMITED NATURE OF, OF SUPPLIERS THAT ARE, HAVE THAT CAPABILITY AT THIS POINT.

UM, THERE ARE ALSO A NUMBER OF NEW MARKET DEVELOPMENT, UH, RULES THAT ARE UNDER DEVELOPMENT.

UH, WE'RE GONNA REQUIRE ADDITIONAL BENCHMARKING FOR, UH, UH, WHEN A I B R WANTS TO CHANGE SOME OF THE SETTINGS ON ITS PLANT OR MAKE PHYSICAL CHANGES, WE WANNA MAKE SURE THAT THEY'RE TELLING US AND THE TRANSMISSION OPERATORS BEFORE THEY MAKE THOSE CHANGES SO THAT WE CAN STUDY THEM AND MAKE SURE THAT THEY STILL WORK, THEY STILL, UH, RESULT IN A STABLE GRID BEFORE THOSE, THOSE PARAMETERS ARE, UH, UH, MADE IN THE FIELD.

WHAT, WHAT WE SAW IN ODESSA EVENT IN SOME CASES IS SOME OF THE BRS HAD MADE CHANGES, BUT THEY HADN'T CHANGED THE MODELS THAT WE USED FOR ALL OUR STUDIES.

THEY HADN'T TOLD US ABOUT 'EM.

AND SO THAT'S SOME, ONE OF THE THINGS THAT WE, UH, ONE OF THE RULES THAT WERE CHANGES THAT WE'RE MAKING, UM, WE'RE ALSO, I MENTIONED, I ALREADY TALKED ABOUT THIS ONE, THE, THE REQUIRING, UH, INTERCONNECTION STUDIES FOR ALL LO LARGE LOADS

[03:05:01]

OVER A CERTAIN AMOUNT.

THAT'S SOMETHING THAT WE'RE GONNA BE, UH, UH, FILING FAIRLY SHORTLY.

AND, UH, THEN ALSO WE'RE GONNA BE, UH, DOING ANOTHER, UH, PROTOCOL CHANGE THAT REQUIRES, UH, DATA, A CERTAIN KIND OF DATA MONITORING EQUIPMENT THAT'S FAST ENOUGH SO THAT WE CAN USE IT TO MONITOR BRS AND THE LARGE LOADS TO SEE IF THE PARAMETERS THEY'RE GIVING US AND, AND MAKE SURE THAT WE CAN TUNE THOSE.

THERE'S NOT A, THERE, WE HAVE SOME REQUIREMENTS ABOUT PUTTING THAT KIND OF, UH, DATA MONITORING EQUIPMENT IN THE FIELD, BUT THIS WILL BEEF THAT UP SO THAT IT SAYS AT THESE LOCATIONS, WE NEED THAT, THAT KIND OF MONITORING EQUIPMENT.

AND THEN WE ALREADY, WE TALKED ABOUT THIS A LOT THIS MORNING ACTUALLY, THAT PART OF, PART OF THE MITIGATION FOR THIS IS MORE CAPABILITY INTERNAL TO ERCOT, BOTH IN THE PLANNING AND OPERATIONS GROUP TO DO STABILITY STUDIES, TO TUNE MODELS, AND TO, UH, UH, DO MORE NEAR MISS TYPE ANALYSES WHEN, WHEN WE DO SEE SOMETHING GO WRONG.

SO I THINK THAT'S IT, AND I'D BE HAPPY TO ANSWER QUESTIONS.

HEY, DAN, ON REQUIRING INTERCONNECTION STUDIES ON ALL LARGE LOADS OVER A CERTAIN AMOUNT, I'M ASKING THIS QUESTION CAUSE I KNOW I'M GONNA GET A CALL ON IT.

MM-HMM.

, SO, THANKS.

UM, IS, IS THAT ON ALL INSTALLED? I MEAN, INTERCONNECTED LOADS EXISTING TODAY OR ON ALL FUTURE LOADS OVER A CERTAIN AMOUNT? I, I, WELL, THE, SO IT, IT'LL, IT'LL BE DISCUSSED THROUGH THE STAKEHOLDER PROCESS, BUT I THINK FOR, FOR ALL FUTURE LOADS.

AS WITH MOST PROTOCOL CHANGES, WHEN, WHEN DOES IT BECOME THE FUTURE? YOU KNOW, IS IT ONES THAT HAVE ALREADY BEEN FILED OR, YOU KNOW, THERE'S ALWAYS QUESTION ABOUT THAT.

BUT, UM, I THINK FOR ALL FUTURE ONES, WE'LL NEED TO HAVE THAT AND, AND THEN WE'LL HAVE TO WORK WITH THE TRANSMISSION OPERATORS TO MAKE SURE THAT WE'VE IMPROVED THE, THE LOAD MODELING ON ALL THE EXISTING ONES AS WELL.

FUTURE LOADS OR MAYBE LOADS THAT DON'T RIDE THROUGH AN EVENT.

WELL, I REALLY APPRECIATE THE, UH, HEADS UP ON ADOPTION OF NEW TECHNOLOGY THAT'LL HELP STABILIZE THE GRID.

SO IF YOU WANT TO CONTINUE TO DO THAT AND MAYBE EVEN LAY IT OUT ON A TIMELINE AND SHOW US, YOU KNOW, THE GRID FORMING INVERTER ADOPTION OVER TIME, THAT'D BE GREAT.

HEY, WOULD, HOW DO YOU KNOW IF THEY'LL RIDE THROUGH AN EVENT? WELL, LIKE SOME OF THE EVENTS DAN TALKED ABOUT, YEP.

WE'D HAVE TO DO SOME INVESTIGATION THERE WHERE WE SEE 1600 MEGAWATTS TO FALL OFF, FIND OUT WHERE THOSE FELL OFF.

SO, SO WHEN YOU SEE A PROBLEM GO THROUGH, IT'S LIKE, HEY, YOU DIDN'T RIDE THROUGH AN EVENT.

YOU NEED TO INSTALL THE PROPER MITIGATION TECHNOLOGY TO DO THAT.

THAT COULD BE PART OF WHAT WE BRING OUT.

MAKES SENSE.

HAS THE NEXT THREE ITEMS. FIRST AGENDA ITEM 7.3, COMMERCIAL MARKETS UPDATE, FOLLOWED BY AGENDA ITEM 7.3 0.1, FIRM FUEL SUPPLY, SETTLEMENT UPDATE, AND AGENDA 7.4, MARKET CREDIT UPDATE.

AND DAN, REMIND ME, WHAT'S THE STANDARD FOR, WHAT'S THE SIZE OF A LARGE LOAD? HOW DO YOU DEFINE THAT? 75 MEGAWATTS? YEAH, 75.

SO THEY'RE GONNA GET CAUGHT UP IN INTERCONNECTION QUEUE AS WELL, OR IS IT A SEPARATE THAT'S THE PLAN, YES.

ANY OTHER QUESTIONS FOR, FOR DAN? OKAY.

ALL RIGHT, THANKS DAN.

CANAN

[7.3 Commercial Markets Update]

ALL RIGHT, CANAN, THANK YOU.

UH, SO, UH, FOR THE MARKET, UH, OVERSIGHT OR UPDATE, UH, I WANTED TO GIVE AN UPDATE ON ADR.

UM, I ALSO WANTED TO, UH, SHARE WITH YOU SOME ESTIMATED PRICE RESPONSE DURING WINTER STORM ELLIOT.

UM, AND THEN I THINK WE HAVE SOME, UH, ACTUALLY, I, I THINK THAT'S IT.

AND THEN WE'LL GET INTO THE OTHER ITEMS AS SEPARATE PRESENTATIONS.

UM, SO I, I THINK, UH, OUR ANALYSIS SHOWED THAT WE DID SEE AROUND, UM, UH, TWO TO 3000 MEGAWATTS OF PRICE RESPONSIVE DEMAND, UH, DURING WINTER STORM ELLIOT.

UM, NOW I THINK WE ARE, UH, STILL WORKING THROUGH THIS ANALYSIS, UM, BECAUSE, UH, THE MAIN WAY WE DO THIS IS WE KIND OF SET A BASELINE CONSUMPTION AND THEN, UH, WE TR FOR, FOR EASY IDS THAT DECREASE THEIR CONSUMPTION THAT

[03:10:01]

WE KNOW AREN'T PART OF SOME OTHER PROGRAM, WE KIND OF, UH, PUT THEM IN THIS BUCKET.

SO IT'S A LOT OF STATISTICAL FILTERING AND, AND THINGS LIKE THAT.

UH, THAT, BUT I DID WANT TO GIVE THIS, UM, UH, SHARE, SHARE THIS DATA, BUT I ALSO WANT TO CAVEAT IT WITH, WE KEEP WORKING ON THIS TO GET IT BETTER.

UM, SO, UH, I, I JUST WOULD WANNA MAKE SURE YOU KNEW THAT WE WEREN'T NECESSARILY SATISFIED WITH THIS AND WE NEED TO GET MORE SOPHISTICATED, UH, ON THIS FRONT.

UM, THE, UH, THE, THE METHODOLOGY, LIKE I SAID, UM, KIND OF TRIES TO TAKE LOAD THAT'S NOT PART OF SOME OTHER PROGRAM AND THEN ASSUMES THAT WE'RE, UH, IT, IT'S RESPONDING TO PRICE, THAT'S A REASONABLE, UH, ASSUMPTION, BUT THERE'S A LOT OF OTHER PROGRAMS OUT THERE THAT WE STILL NEED TO FILTER THROUGH.

THERE'S PROGRAMS THAT ARE GROWING.

UM, SO, UH, OUR WORK WITH REPS AT THE END OF THE YEAR TO UNDERSTAND WHAT THEY DID IN TERMS OF MAYBE DISPATCHING DEMAND RESPONSE AND THINGS LIKE THAT ARE ALSO IMPORTANT AS WE TRY AND GET TO A PERFECT, UH, UNDERSTANDING OF, UH, HOW DEMAND PRICE RESPONSE OF DEMAND IS, IS WORKING.

UM, CAN I ANSWER ANY QUESTIONS ON THIS SLIDE? CUZ I'M GONNA PIVOT AFTER THIS ONE TO A DIFFERENT TOPIC.

CAN I JUST ASK, WHAT IS THE GREEN LINE? IS THAT, THAT'S A, UH, LIKE AN AFFIRMATIVE WAY TO SHOW THE REDUCTION VERSUS THE YES, IT'S THE RECIPROCAL.

THAT WAS A MUCH BETTER WAY TO SAY, SAY IT.

CAN ON THAT, THAT DROP ON MONDAY, THE 26TH THOUSAND MEGAWATTS THAT LOOK LIKE IT RESPONDED TO YOU, UM, YES.

DO YOU HAVE INDICATION DO, IN YOUR VIEW, IS THAT CRYPTO THAT'S RESPONDING? THAT'S NOT A PART OF A, UH, I TH THIS IS, UH, MORE THAN, MORE THAN CRYPTO.

UM, IT IS, UH, O OTHER, UH, OTHER PROGRAMS AS WELL, BUT, UM, UH, I, I BELIEVE THAT'S A PLAYER IN, IN THIS RESPONSE.

SO THE, THE NEXT THING I WANTED TO SHARE, UH, WITH, WITH THE BOARD WAS AN UPDATE ON THE AGGREGATE DIS DISTRIBUTION ENERGY RESOURCE PILOT, UM, UH, UL ULTIMATELY, WE STILL DON'T HAVE ANY ACTIVE PARTICIPANTS IN, IN THE PROGRAM.

UM, AND THE MAIN REASON FOR THIS, AND I JUST GOT AN UPDATE THIS MORNING ON THIS, IS WE'RE STILL NOT, UH, GETTING TELEMETRY AT THE LEVEL IT NEEDS TO BE TO, UH, PARTICIPATE IN THE PROGRAM.

WE ARE, UH, ITERATING WITH THE PARTICIPANTS.

WE BELIEVE THERE IS A PATH FORWARD TO SOLVING THIS.

WE JUST HAVEN'T GOTTEN WHERE WE NEED TO GET.

UM, SO WE'LL KEEP PLUGGING AWAY AT THAT.

UM, MOST, MORE IMPORTANTLY, OR EQUALLY IMPORTANTLY, THE PARTICIPANTS KEEP PLUGGING AWAY AT IT AND IT'S, UH, YOU KNOW, UH, GONNA BE KIND OF A, A TEAM EFFORT TO GET IT ACROSS THE LINE.

BUT ULTIMATELY, YOU KNOW, SOLVING THIS TELEMETRY ISSUE IS THE KEY TO MAKING THIS WORK, UH, ON A GOING FORWARD BASIS.

UM, THE OTHER THING ON THIS SLIDE THAT I JUST WANTED TO SHARE, BECAUSE I HAVE TO ACTUALLY GO BACK TO THE TEAM AND AND ASK THEM IS I WAS LIKE LOOKING AT THIS GOING, UH, ERCOT WIDE ENERGY, 10.1 MEGAWATTS, ER WORKOUT WIDE NONS SPIN 3.3.

I WAS LIKE GOING, WHY IS THAT? AND THEN I WAS REMINDED, I HAD AN AHA MOMENT, I WAS REMINDED IT'S BECAUSE IT'S MOSTLY BATTERIES AND FOR NONS SPIN, IT'S NOT WHAT YOU CAN DO OVER AN HOUR, BUT WHAT YOU CAN DO OVER FOUR HOURS AND THAT EXPLAINS THAT DIFFERENCE.

IT'S NOT ALL BATTERIES, BUT, BUT BATTERIES ARE A REALLY SIGNIFICANT, UH, PART OF, OF THE PROCESS.

SO THAT'S THE REASON WHY YOU NEED A LOT OF POTENTIAL ENERGY TO GET A, UH, UH, A REDUCED PARTICIPATION IN NONS SPAN, CUZ YOU HAVE TO MAINTAIN THE, UH, UH, DISCHARGE OVER A FOUR HOUR TIME PERIOD.

ANY QUESTIONS I CAN ANSWER ON, ON THIS ONE? ON THE AGGREGATED DEVICES? CAN YOU EXPLAIN THE HVAC? I, I, YEAH.

SO THERE ARE, UM, THERE ARE SOME, UH, ENTITIES THAT ARE OFFERING IN ADDITION TO BATTERIES, UH, THE ABILITY TO CURTAIL H V A C AS AS PART OF THE PROGRAM.

SO IT'S

[03:15:01]

PARDON? ENERGY YEAH.

AND TRYING TO CONTROL HOUSE AND, AND, UM, THERE ARE SOME NORTH STONE ENTITIES THAT ARE, UH, RETAIL ELECTRIC PROVIDERS THAT ARE ALSO GOING FOR A COMBINATION, UH, WITH THIS.

SO ONE QUESTION I HAVE ABOUT THIS PROJECT IS I'M NOT, UM, CLEAR ON WHERE IT'S IN THE PECKING ORDER OF RTC AND PCM AND ALL THE OTHER THINGS WE'RE DOING.

CAN YOU KIND OF PUT THAT IN PERSPECTIVE FOR US SO WE DON'T WALK AWAY THINKING THIS IS IN THE TOP FIVE? SO IF, IF YOU LOOK AT, UM, I, I THINK YOU HAVE TO LOOK AT THIS FROM MULTIPLE DIMENSIONS, SO I'M GONNA TRY AND SHARE ALL OF THOSE.

IF IT IS TOTAL AMOUNT OF ERCOT RESOURCES, UH, BEING DEDICATED TO THIS, IT WOULDN'T BE, UH, IN THE TOP FIVE.

BUT IF YOU THINK ABOUT A FUTURE POTENTIAL RESOURCE FOR THE GRID, IT'S REALLY SIGNIFICANT BECAUSE WHAT WE'RE SEEING IS MORE AND MORE PEOPLE, UH, INSTALLING, UH, ON THE DISTRIBUTION SYSTEM, RELATIVELY SMALL, UH, UH, GENERATORS OR RELATIVELY SMALL RESPONSE THAT MAY BE MORE EFFECTIVELY DISPATCHED AS AN AGGREGATION VERSUS AS INDIVIDUAL, UH, RESOURCES.

THEY WOULD ALMOST BECOME WHITE NOISE, UH, AT LEAST FROM A ISO STANDPOINT.

SO TO BE ABLE TO BOTH, UH, COMMUNICATE TO ERCOT THE POTENTIAL THAT'S OUT THERE TO BE DISPATCHED AND REALIZE THAT POTENTIAL, UH, THIS ENDS UP BEING A VERY IMPORTANT FUTURE STATE, BUT IT ISN'T ONE OF OUR TOP EXPENDITURE ITEMS, UH, TODAY.

UM, WHEN WE, UH, TAKE THE, THIS PILOT INFORMATION AND TRY AND GROW IT INTO A REGULAR MARKET, UH, UH, PROGRAM, UH, IT IS, HAS A POTENTIAL TO BE ONE OF THE KEYS TO MEETING OUR RELIABILITY OBJECTIVES AND, UH, RESOURCE ADEQUACY OBJECTIVES IN THE FUTURE.

AND I BELIEVE BOTH COMMISSIONERS NEXT TO YOU HAVE COMMUNICATED THAT INTEREST, UH, UH, IN THE PAST FOUR MONTHS OR SO.

AND, AND JULIA, I WOULD JUST ADD THAT IF YOU LOOK AT IT JUST IN OUR CURRENT STACK, WE'RE USING A LOT OF OUR EXISTING PLATFORMS TO RUN THIS PILOT TODAY.

SO WE'RE LEVERAGING, WE'RE KIND OF FITTING IT INTO OUR CURRENT TECHNOLOGY STACK, BUT THAT TECHNOLOGY STACK IS NOT OPTIMIZED TO DISTRIBUTED RESOURCES.

SO I WOULD THINK OF THIS AS THE NEXT ITERATION OF THE BIG PROJECTS THAT MAY BE COMING DOWN THE ROAD.

SO RIGHT NOW WE'RE LOOKING AT RTC, WE'RE LOOKING AT PERFORMANCE CREDIT MECHANISM, POTENTIALLY WE'RE LOOKING AT THE NEW ANCILLARY SERVICE D R R S, THAT'S OUR SUITE OF WORK.

AND IN ADDITION TO THE OTHER PROJECTS THAT WE TALKED ABOUT DURING THE BUDGET, THAT'S THE CURRENT SUITE, THIS WOULD REPRESENT POTENTIALLY ONE OF THE NEXT BIG PROJECTS THAT WOULD BE COMING IF WE WERE TO FIND THAT THE RESULTS OF THE PILOT MADE IT WORTHWHILE TO SCALE IT LARGER.

WELL, GIVEN THE FACT THAT GRID'S GETTING MORE AND MORE DISTRIBUTED AND DECENTRALIZED, UM, THE IDEA OF MORE INDUSTRY STANDARD CONNECTIONS, JUST LIKE WE HAVE INDUSTRY STANDARD CONNECTIONS IS GONNA MAKE A LOT OF SENSE.

SO I HOPE SOME OF THOSE THOUGHTS COME TOGETHER.

THAT'S EXACTLY RIGHT.

I'LL GO AHEAD AND WITH SOME HELP JUMP TO THE, JUMP TO THE NEXT ONE.

UM, THAT'S, UH, THE CONCLUSION OF, UH, THIS PRESENTATION.

[7.3.1 Firm Fuel Supply Settlement Update]

UH, BUT WHAT HAPPENED IS THAT WE SAW CERTAIN RESOURCES NOT BEING AVAILABLE, UM, WHEN, UH, WE DECLARED THEM, UH, THAT, THAT THE CONDITIONS WERE RIPE, THAT WE MIGHT, UH, DEPLOY THEM.

SO, UM, JUST, UH, UH, AS, AS A LITTLE BIT OF BACKGROUND, WE HAVE, UH, KIND, UH, IMPLEMENTED THE FIRST PHASE OF FIRM FUEL.

AND WE HAD TWO DEPLOYMENTS IN THE, UH, IN THE WINTER SEASON, UH, THAT WE JUST WENT THROUGH.

AND, UM, I MEAN, I WOULD SAY THAT BY AND LARGE, UH, RESOURCES PERFORMED WELL AND PROVIDED VALUE IN THAT WE HAD RESOURCES THAT, UH, WOULD NOT HAVE BEEN ABLE TO ACCESS, UH, NATURAL GAS, BUT WERE ABLE TO RUN, UH, BECAUSE THERE WAS ONSITE, UH, FUEL AVAILABLE.

UM, UH, SO, UH, THE, UH, TOTAL PROCUREMENT AT THE BEGINNING OF THE PERIOD, UH, THAT I WOULD WANNA SHARE WITH YOU WAS 52.8 MILLION.

[03:20:03]

AND AS A RESULT OF NOT BEING AVAILABLE FOR THOSE TIME PERIODS, THE PROTOCOLS DICTATE THAT WE CLAW BACK THE PAYMENTS THAT, THAT WE HAVE MADE TO THEM.

AND THOSE CLAWBACKS WERE MATERIAL.

UM, UH, AS, AS YOU CAN SEE HERE, UM, THAT AMOUNTED TO, UH, 25.7 MILLION OR, UH, ROUGHLY, UH, HALF THE, UH, PAYMENTS THAT, THAT WE MADE.

UM, WE ALSO, UH, HAVE A PROGRAM WHERE, UH, ONCE WE'VE DEPLOYED THEM, UH, IF WE WANT TO DEPLOY THEM AGAIN, WE NEED TO PAY FOR THE FUEL FOR THEM.

UM, A LOT OF THE DEPLOYMENT HAPPENED RELATIVELY EARLY IN THE WINTER SEASON, AND TO ENSURE THAT WE WOULD HAVE THEM AGAIN FOR DEPLOYMENT, WE PAID, UH, 4.8 UH, MILLION IN, UH, UH, FUEL COSTS TO REPLENISH THE FUEL SO THAT WE WOULD HAVE THEM FOR ANOTHER, UH, UH, DEPLOYMENT.

UM, SO ULTIMATELY AFTER FUEL COSTS AND CLAWBACKS AND, AND SO FORTH, THE NET ALLOCATION TO THE QUALIFIED SCHEDULING, SCHEDULING ENTITIES ON THIS LOAD RATIO SHARE BASIS WAS, UH, 31.3 MILLION.

SO, UM, AGAIN, UH, I THINK I'VE PRETTY MUCH GONE OVER MOST OF THESE.

UH, BUT, UH, I WANTED TO MAKE SURE, UH, WE REMEMBERED THAT WE PROCURED ABOUT 2,940 MEGAWATTS OF THIS SERVICE, UH, JUST UNDER 3000 MEGAWATTS.

UM, I, AGAIN, THERE WAS, UH, YOU KNOW, I THINK I HAD GOTTEN QUESTIONS ABOUT PHASE TWO AND THINGS LIKE THAT THIS OPERATED, UH, WITH SOME CAPS AROUND IT THAT THE COMMISSION, UH, WORKED WITH US AND THE IMM TO INSTALL.

SO, UH, THE CLEARING PRICE WAS PRETTY MUCH AT, AT THE CAP.

UM, AND, UH, THAT DROVE A LOT OF THE PRICING.

UM, SO, UH, I, I WANTED TO MAKE SURE THAT THAT DYNAMIC, YOU WERE AWARE OF THAT BECAUSE, UM, WE, WE KIND OF TALKED ABOUT THAT IN REGARDS TO PHASE TWO.

SO THAT, UH, THINKING ABOUT HOW THAT'S GONNA WORK, UH, AND, AND, UH, CREATING THAT BALANCE BETWEEN ATTRACTING INVESTMENT, BUT, UM, YOU KNOW, NOT CLEARING AT ONE REALLY, REALLY HIGH BID OR SOMETHING LIKE THAT IS REALLY IMPORTANT.

AS WE MOVE THIS PROGRAM THROUGH THE GEARS INTO PHASE TWO AND POSSIBLY PHASE THREE KENAN, WHAT WAS OUR PROCUREMENT GOAL? WAS THAT, WAS IT THE 2,900 MEGAWATT, OR WAS IT IT WAS, UH, 3000 MEGAWATTS, SO WE WERE JUST UNDER THE GOAL.

UM, UH, BUT THIS, THE, THIS WAS THE AMOUNT THAT FELL WITHIN THE PRICE CONTROLS THAT WE HAD WORKED OUT.

DO YOU, THE PRESENTATION DOESN'T SAY WHAT HAPPENED, YOU KNOW, WHY DO WE KNOW WHAT, WHAT HAPPENED IN TERMS OF THE YEAH, WHY THE, UH, GENERATORS WEREN'T HAD PROBLEMS THAT THE, THE SERVICE WASN'T AVAILABLE.

SO I, I CAN, I CAN SPEND A LITTLE BIT MORE TIME.

UM, THE, ON THAT, THE KEY THING THAT HAPPENED WAS THAT WHEN WE, UH, DECLARE, UH, UH, THE CONDITIONS ARE SUFFICIENT TO, UH, POTENTIALLY DISPATCH THE RESOURCE, THEY HAVE TO SHOW THAT THEY'RE AVAILABLE TO OUR SYSTEMS AND THE RESOURCES MISSED OR FAILED TO SHOW THAT THEY WERE AVAILABLE TO BE DISPATCHED.

NOW, ULTIMATELY, WHEN WE, UH, SO THEY WEREN'T AVAILABLE FOR ALL THE HOURS NOW, THE HOURS THAT WE DISPATCHED THEM, ACTUALLY WHEN, UH, PUSH CAME TO SHOVE, MOST OF THE RESOURCES DISPATCHED, THERE WAS ONE RESOURCE THAT FAILED TO PERFORM ON BOTH OCCASIONS.

UM, BUT THE, IT'S, IT'S NOT SUFFICIENT TO JUST ONLY ON THOSE INSTANCES WE TELL YOU TO RUN, FOR YOU TO RUN, YOU ALSO HAVE TO SHOW THAT YOU'RE CAPABLE OF RUNNING IN CASE SOMETHING ELSE HAPPENS THE REST OF THE TIME WHEN YOU'RE EXPECTED TO BE THERE.

UM, BROADLY, UH, I THINK BECAUSE IT WAS A NEW PROGRAM, THERE WAS, UH, PROCEDURAL, UH, MISSTEPS WHERE THEY WEREN'T SHOWN AS AVAILABLE THERE PROBABLY, WELL, THERE, THERE WERE ALSO SOME THAT JUST WERE ON OUTAGE OR, UH, SOMETHING HAPPENED TO THE UNIT THAT MADE THEM PHYSICALLY UNAVAILABLE.

DO, DO WE KNOW FOR THOSE SEVEN OF THE EIGHT, WHY DO THOSE SEVEN OF THE EIGHT THAT DIDN'T SHOW THEY WERE AVAILABLE, DO WE KNOW WHY? UM, WE HAVE BEEN IN COMMUNICATION, UH, WITH, WITH THOSE ENTITIES?

[03:25:01]

SO I WOULD THINK IT WAS A COMBINATION OF, UH, PHYSICAL UNAVAILABILITY AND JUST, UH, NOT FOLLOWING THE PROCEDURES TO SHOW THAT YOU WERE AVAILABLE DURING THE, UH, DURING THE INTERVALS WHERE YOU WERE REQUIRED TO DO SO.

KANAN, HOW DOES THE, SO WE DO CALLBACK.

IS THERE ANY CREDIT RISK ON THE CLAWBACK OR, UM, THERE ISN'T.

UH, WE USUALLY WAIT TO SEE PERFORMANCE TO DETERMINE THE, SO WE DIDN'T CHARGE, MAYBE THIS IS A BETTER WAY TO SAY IT.

UH, IT WAS, OOPS, I WAS IN THIS SLIDE RIGHT HERE.

SO ULTIMATELY, UH, I LOOKED AT WHAT HAPPENED DURING THE PROCUREMENT P PERIOD AND CHARGED AND PAID ENTITIES AFTER I NETTED ALL OF THIS OUT.

SO THE NON-PERFORMANCE DIDN'T LEAD TO, UM, UH, A CREDIT ISSUE, UM, IF THERE WERE PENALTIES AND THAT TYPE OF THING THAT COULD, UH, IMPACT CREDIT.

SO YOU'RE SAYING THEY WERE NEVER, YOU GET PAID ONCE YOU PERFORM? YEAH.

SO, SO WE, I LOOK BACK AND, AND PAY AFTER WE FIGURED OUT, OKAY, THAT'S A, THAT'S A GOOD WAY TO DO IT.

THE PROCESS.

UM, SO THIS IS JUST, UH, SHARING WITH YOU THE ACTUAL LANGUAGE THAT, THAT DROVE THIS.

UM, I, I PUT THIS OUT HERE BECAUSE, UH, WE ARE, UH, UH, ALWAYS GONNA REVIEW THESE ITEMS AND MAKE SURE WE ARE REALLY THINKING ABOUT THIS, UH, FROM A FUNCTIONAL STANDPOINT.

UM, ULTIMATELY WE BELIEVE THAT TH THESE ARE GOOD STANDARDS.

UH, PART OF THE REASON WHY, UH, WE THINK THAT IS THERE'S ACTUALLY GONNA BE YEARS POSSIBLY WHERE WE DON'T DEPLOY THESE OR HAVE AN EVENT AT ALL, UM, BUT WOULD STILL PAY THE UNITS.

SO HAVING, UH, SOMETHING THAT'S RELATIVELY STRICT ON THE PAYBACK AROUND LACK OF AVAILABILITY, UH, ENDS UP BEING IMPORTANT BECAUSE, UH, YOU COULD HAVE A MILE MILD WINTER OR A COUPLE OF MILD WINTERS AND NOTHING, UH, NO, NO EVENT HAPPENS.

UH, WE DON'T, WE DON'T CALL ANYTHING THAT WOULD TRIGGER, UH, THEM SHOWING AVAILABILITY AND, AND THE, THE PAYMENT WOULD BE RECEIVED.

SO, UM, UH, ULTIMATELY WE THINK THIS IS, UM, UH, UH, STILL THE APPROPRIATE SET OF RULES WE ARE ASKING OURSELVES AND HAVING GAUGE THE MARKET ON, UH, IF THERE IS A RESOURCE THAT, UH, DOESN'T PERFORM FOR, UH, REPEATED ITERATIONS, SHOULD THEY BE SOMEHOW DISQUALIFIED AND THEN HAVE A ROAD BACK TO BEING REQUALIFIED IF THEY CAN DEMONSTRATE, UM, UH, YOU KNOW, IMPROVEMENTS IN WHATEVER WAS WAS WRONG WITH THE UNIT.

THAT'S AN OPEN QUESTION THAT WE'RE ENGAGING THE MARKET ON AT THIS POINT.

UM, THIS IS, UH, JUST A BREAKDOWN OF THE, UH, UH, OF THE SETTLEMENTS.

AND THAT CONCLUDES THIS PRESENTATION.

UM, THE LAST OF THESE THREE IS, UH, THE MARKET CREDIT UPDATE.

I HAVE ONE MORE, RIGHT? IF I, OH, I'M ALL SET UP.

THANK YOU, .

UM, THE, THE LAST, MY LAST PRESENT, I GUESS THIS ISN'T THE LAST, OVER THE NEXT TWO DAY CONTINUUM, BUT,

[7.4 Market Credit Update]

UM, AND WHAT I WANTED TO SHARE WITH YOU, UH, IS THAT THERE HAVE BEEN NO, UH, DEFAULTS OR UNUSUAL, UH, COLLATERAL CALL ACTIVITY, UH, LEADING INTO THIS, UM, MARKET-WIDE AVERAGE, UH, TOTAL POTENTIAL EXPOSURE INCREASED SLIGHTLY, UH, FROM 1.70, 1.07 BILLION IN MARCH TO, UH, 1.09 BILLION IN APRIL.

UM, THAT WILL, UH, HAVE A TENDENCY TO INCREASE OVER THE REST

[03:30:01]

OF THE SUMMER AS THE FORWARD LOOKING PRICES, UH, INCREASE.

SO, UM, I WAS JUST, UH, UH, IN, IN, UH, TOMORROW'S, UH, PRESENTATION TO THE BOARD, UH, I HAVE KIND OF, UH, UH, INDICATIVE FORWARD PRICING CURVE THAT I JUST UPDATED TODAY.

AND THE, IF YOU, IF I WAS USING TODAY, UH, ON AVERAGE, THE PRICE ACROSS THE BOARD INCREASED BY ABOUT $10.

THAT WOULD DRIVE AN INCREASE IN, UH, TOTAL POTENTIAL EXPOSURE.

UM, THIS AVERAGE DISCRETIONARY COLLATERAL INCREASED FROM 3.31 BILLION IN MARCH, UH, I'M SORRY, DECREASED FROM 3.31 BILLION IN MARCH TO 3.09 BILLION IN APRIL.

WHAT WE MEAN BY AVERAGE DISCRETIONARY COLLATERAL IS, UM, FOLKS KEEP EXTRA COLLATERAL WITH US AS THEY MOVE THROUGH DIFFERENT MARKET POSITIONS AND THINGS LIKE THAT, SO THEY DON'T HAVE TO KEEP POSTING COLLATERAL, BUT THEY'LL ALSO, FROM TIME TO TIME, PULL THAT COLLATERAL DOWN AND UP.

SO WE LIKE TO TRACK HOW MUCH, UH, UH, DISCRETIONARY COLLATERAL WE KEEP, UM, AND, UH, THAT THOSE NUMBERS ARE SHARED HERE.

LET ME, UM, I'M GONNA GO INTO THE MEAT OF THE PRESENTATION UNLESS THERE'S I SOME QUESTIONS.

UM, SO WE ARE IN THE PROCESS OF, UH, PUTTING FORWARD ADDITIONAL PROTOCOL REVISION REQUESTS TO ALIGN THE MARKET WITH, UM, SOME OF THE DECISIONS THAT WE'VE ALREADY MADE.

AND THE, UM, ONE OF THE INTERESTING ONES IS N P R R, UH, 10 67, UM, WHERE, UH, UH, WE ARE REPLACING, UH, THIS ONE WAS SOMETHING THAT WE PROPOSED TO THE MARKET, AND WE ARE REPLACING IT WITH, UM, A NEW N P R R 1175 THAT FOCUSES ON REVISIONS TO MARKET ENTRY AND FINANCIAL QUALIFICATIONS.

THIS IS SOMETHING THAT, UM, WE'VE DISCUSSED WITH YOU IN THE PAST ABOUT LOOKING AT, UH, MARKET PARTICIPANTS KIND OF BEHAVIOR AND, AND OTHER JURISDICTIONS AS PART OF THINKING ABOUT WHAT, WHAT THEY'RE DOING.

UM, AND WE ALSO WILL, UH, UH, ULTIMATELY PUT FORWARD AN N P R R THAT WILL ADDRESS CREDIT SCORING.

THAT WAS CREDIT SCORING WAS PART OF THE ORIGINAL 10 67 THAT WE PULLED DOWN.

WE'RE PUTTING FORWARD A MORE SIMPLIFIED VERSION, AND THEN CREDIT SCORING WILL BE PART OF, UH, A FUTURE IN P R R.

UM, THE OTHER THING, UH, IN, IN P R R 1175, UH, THAT, THAT WE HAVE IS, UM, UH, IT ALLOWS ERCOT TO SUSPEND OR TERMINATE, UH, QUALIFIED SCHEDULING ENTITY OR C R R ACCOUNT HOLDER THAT IS DETERMINED TO POSE UNREASONABLE CREDIT RISK.

SO IT'S EMPOWERING ERCOT TO LOOK AT ACTIVITY AND, UH, THERE'S ADDITIONAL AUTHORITY THERE.

UM, THESE ARE NOT BEFORE THE BOARD, UM, AND, BUT THEY'RE WORKING THEIR WAY THROUGH THE, UH, STAKEHOLDER PROCESS.

WE'RE GONNA GO BACK TO AGENDA ITEM EIGHT, FUTURE AGENDA ITEMS. SO, UM, WE, WE HAVE OUR REGULAR, UH, UH, WHAT'S, WHAT'S A REGULAR, UH, UH, FREQUENCY OF, UH, ADDITIONAL, UH, FOLLOW UP INFORMATION THAT WE SHARE WITH THE BOARD.

SO, UM, IN, IN ADDITION TO THE OTHER TWO, THERE'S NPR R 1165.

THIS IS, UH, REVISION REQUIREMENTS OF PROVIDING AUDITED FINANCIAL STATEMENTS AND IN, UH, PROVIDING INDEPENDENT AMOUNTS, UM, IN ORDER TO ALIGN OUR PROTOCOLS WITH THE, UH, REMOVAL OF UNSECURED COLLATERAL THAT HAPPENED, UH, PREVIOUSLY.

THAT WILL HASN'T TAKEN ACCOUNT EFFECT YET.

I BELIEVE IT TAKES EFFECT IN OCTOBER, UH, OF THIS YEAR.

UM, THERE WAS A PROVISION THAT ALLOWED A PARENTAL GUARANTEE THAT WAS ALSO, UH, UNSECURED COLLATERAL.

UH, THIS N P R R UH, ADJUSTS THAT SO THAT THERE ISN'T THAT FORM OF UNSECURED COLLATERAL, UH, IN, IN THE MARKET.

AND THEN LASTLY, THERE'S N P R 1146.

UH, THIS ONE IS CREDIT CHANGES, UH, TO, UH, APPROPRIATELY REFLECT, UH, UH, TAO EXPOSURE.

UM, THIS ONE IS ALSO, UH, IS TABLED AT PS CURRENTLY AND BE BEING DISCUSSED AT THE CREDIT, UH, GROUP THAT, UH, IS PART OF TAC.

UM, WE, UH, CURRENTLY, UH, DO NOT SUPPORT THIS N P R R.

IT KIND OF CREATES A TIERED CREDIT

[03:35:01]

REQUIREMENT.

AND OUR POSITION IS THAT THE CREDIT STANDARDS SHOULD APPLY UNIFORMLY TO, UH, ALL MARKET PARTICIPANTS.

UM, THE MAIN, UH, INTEREST IN THIS IS ABOUT, UH, DC T EXPORTS AND IMPORTS THAT DON'T NECESSARILY HAVE THE SAME, WHAT'S THE BEST WAY TO SAY THAT? THIS, THIS SAME TIME CONTINUUM OF ACTIVITY.

AND, UH, THEY ARE ADVOCATING THAT THERE SHOULD BE A DIFFERENT WAY TO CALCULATE THEIR CREDIT REQUIREMENTS.

UM, I THINK THERE ARE SEVERAL SEGMENTS THAT ARE VERY INTERESTED IN THIS.

UH, BUT LIKE I SAY, AT, AT THIS POINT, ERCOT IS UNWILLING TO SUPPORT THIS N P R R.

OH AND I, I DID, UH, I DID SOMETHING I TRY NOT TO DO, WHICH IS SAID T AO, BUT IT DOES SAY HERE THAT THAT'S TRADING ACTIVITY ONLY.

SO IT'S JUST, UH, UH, I SHOULDN'T HAVE USED THAT ACRONYM.

I APOLOGIZE.

UM, SO, UH, THE OTHER ACTIVITY HAPPENING IS THAT WE ARE MAKING CHANGES IN COLLATERAL FORMS. WE REVIEW ALL THE ERCOT BOARD APPROVED FORMS AND, UM, ARE TRYING TO ALIGN THOSE WITH BOTH NPRS THAT HAVE PASSED ALREADY.

AND, UM, WE WILL, UH, CONTINUE TO ALIGN THEM WITH OTHER NPRS THAT THAT PASS.

THE MAIN THING THAT'S DRIVING, UH, THE CURRENT ONE IS N P R R, UH, 1112.

UM, ANY QUESTIONS ON, ON THIS? THAT CONCLUDES MY, UH, PRESENTATION.

THANKS, KENAN.

I THINK YOU'LL BE BACK UP THERE VERY BRIEFLY.

SO THE NEXT ITEM

[Items 7.5 & 7.6]

IS REPORTS FOR Q AND A.

SO THIS, UM, ITEM 7.5 TECHNOLOGY AND PROJECTS UPDATE AND REVISION REQUEST STATUS UPDATE 7.6 IS AN OPPORTUNITY FOR THE COMMITTEE AND STAFF TO DISCUSS ANY QUESTIONS OR COMMENTS ABOUT EITHER REPORT.

SO THE QUESTION FOR THE COMMITTEE IS TO SEE WHETHER ANYONE WOULD LIKE TO COMMENT OR QUESTION ANY OF THE ITEMS IN 7.5 OR 7.6.

I THINK THEY ARE STRAIGHTFORWARD, AND JP WAS DOING THE WALK OF, UH, VICTORY WITH ALL GREEN DOTS.

NEXT IS PROJECTS EARLIER.

SO, SO THAT WILL CANAL,

[8. Future Agenda Items]

SO, UM, WHAT THIS DOES IS, UH, TELL YOU THAT IN, IN AUGUST, UH, WE WOULD BE, UH, REVIEWING AGAIN, OPEN REVISION REQUESTS, UH, REVIEW COMPANY OPERATION AND PLANNING REPORTS, UM, AND, UH, LET'S SEE AND, AND REVIEW THE IMPLEMENTATION OF PROGRESS AND PROJECTS.

UH, BEFORE YOU.

THE ONE OTHER THING I WOULD ADD TO THIS LIST THAT, UM, UH, I, I FORGOT TO PUT ON IS THAT TOMORROW THE IMM WILL PRESENT THE STATE OF THE MARKET REPORT, UM, AND AUGUST, UH, BOARD WE WOULD, UH, FOLLOW UP ON THAT AND SHARE WITH YOU ERCOT STAFF'S TAKE ON THOSE ITEMS. UM, UH, KIND OF, UH, WHAT WE WOULD, WE TEND TO TALK ABOUT IS WHAT IS KIND OF WITHIN OUR RESPONSIBILITY TO WORK ON WHAT MIGHT BE, UH, RESIDE WITH THE COMMISSION AND, UM, UH, YOU KNOW, WHAT OUR VIEWPOINT ON, ON THE RECOMMENDATIONS, UM, BROADLY, WE TEND TO, UH, AGREE WITH A LOT OF THOSE RECOMMENDATIONS.

THE PRIORITIES MAY BE THINGS THAT WE, UH, WE MAY DISAGREE WITH, AND THEN SOME OF THE ITEMS TEND TO BE GOVERNED BY, UH, COMMISSION DECISIONS THAT HAVE BEEN MADE IN THE PAST.

AND WE TEND TO NOT TRY AND DRIVE THOSE

[03:40:01]

TYPES OF CHANGES SINCE THOSE RESIDE IN AND THE COMMISSION PURVIEW.

BUT THAT IS, UM, WHAT IS, UH, EXPECTED TO HAPPEN AT THE NEXT, UH, R AND M MEETING.

UH, WHEN, WHEN IN, IN AUGUST WHEN WE MEET.

JUST TO CLARIFY THAT, IS THERE ON ROW 13? WHAT'S THAT? IS IT, IS IT ON HERE AND I MISSED IT.

YEAH, SORRY.

IT IS THERE ON ROW 13.

THERE IT IS.

YEP.

I HAD A COMMENT ABOUT THE NEXT MEETING.

UH, COULD WE REVIEW FOR ON TRACK FOR NO FURTHER UNSECURED CREDIT IN OCTOBER? I THINK THAT WAS ONE OF THE ACTIONS WE TOOK LAST YEAR.

SO THIS SUSPENSION OF UNSECURED CREDIT GOES EFFECTIVE OCTOBER.

SO AS AN AGENDA ITEM, JUST REVIEW THE GUEST STATUS OF THAT IMPLEMENTATION.

UH, WE CAN ABSOLUTELY DO THAT.

UM, I MEAN, I CAN TELL YOU THAT AT THIS POINT IT IS ON TRACK, UH, TO BE IMPLEMENTED AND WE WILL GIVE A FORMAL PRESENTATION ON THAT.

FOR EXAMPLE, ARE WE SEEING A DE DECREASE IN UNSECURED CREDIT ALREADY IN RESPONSE TO THAT? OKAY.

I, THAT, THAT, I'M, I'M NOT SURE.

I WOULD EXPECT THAT, THAT'S MY QUESTION FOR AUGUST.

THAT DID NOT GO DOWN SINCE IT'S A FREE FREEWAY TO MEET THE OBLIGATION, BUT, UH, I, I HAVE NOT LOOKED AT THE DATA.

IT VERY WELL COULD, SO THERE'LL BE A LOT OF COLLATERAL CALLS AS WE GET TO OCTOBER ONE.

IT, UH, I MEAN, AGAIN, IT'S, UH, THEY, THEY COULD FOR EXAMPLE, UH, DEPENDING ON PRICING AND CONDITIONS FROM THEIR, UH, THEIR UH, UN YOU KNOW, THEIR POSITION, THEIR EXTRA CAPITAL, BE ABLE TO COVER THAT FOR EXAMPLE.

SO THAT THEN THERE MAY NOT BE A COLLATERAL CALL.

YEAH, IT KIND OF DEPENDS ON CIRCUMSTANCES, BUT THERE IS THAT RISK THAT, THAT, THAT WOULD HAPPEN.

I, I DON'T WANNA SAY THAT THERE WOULDN'T BE MORE, MORE COLLATERAL CALLS.