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[1. Call General Session to Order]
MORNING.MEMBERS OF THE ERCOT BOARD OF DIRECTORS AND GUESTS, I AM PAUL FOSTER, ERCOT, BOARD CHAIR.
WELCOME TO THE AUGUST 31ST, 2023 BOARD OF DIRECTORS MEETING.
I HEREBY CALL THIS MEETING TO ORDER.
THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON ERCOT WEBSITE.
UM, WE'LL WAIT UNTIL, UH, WE DON'T HAVE A QUORUM RIGHT NOW FOR THE P U C, BUT WE'LL CALL THAT TO ORDER WHEN, WHEN THAT OCCURS.
BEFORE MOVING ON TODAY'S BUSINESS, I'D LIKE TO HIGHLIGHT THAT THE AN ANTITRUST ADMONITION AND SECURITY MAP ARE INCLUDED WITH POSTED MEETING MATERIALS.
I ALSO WANNA WELCOME NEW BOARD MEMBER LINDA KANO, UH, WHOSE TERM BEGAN JULY 1ST.
THIS IS HER FIRST BOARD MEETING, AND, UH, WE LOOK FORWARD TO WORKING WITH HER.
I WOULD ALSO LIKE TO SAY THANK YOU TO THE BOARD SELECTION COMMITTEE.
THEY DID A GREAT JOB, AGAIN, FINDING SUCH A WELL-QUALIFIED BOARD MEMBER WHO WILL COMPLIMENT OUR OVERALL QUALIFICATIONS AND EXPERTISE ON THE BOARD.
THE FIRST ORDER OF BUSINESS ON TODAY'S AGENDA IS ITEM TWO.
NOTICE OF PUBLIC COMMENT, IF ANY.
TODAY'S MEETING AGENDA WAS POSTED PUBLICLY ON AUGUST 24TH AND PROVIDED INSTRUCTIONS FOR THE PUBLIC FOR COMMENTING IN PERSON DATE.
NO ONE HAS EXPRESSED INTEREST IN COMMENTING.
IS THAT STILL THE CASE, CHAD? THAT IS THE CORRECT.
[3. Consent Agenda]
TO AGENDA ITEM THREE, CONSENT AGENDA.I WILL TURN IT OVER TO CHAD TO PROVIDE THE BUDGET.
IM BUDGET IMPACTS OF THE REVISION REQUESTS.
I'LL ALSO NOTE THAT FOR N O G R R TWO 15 ERCOT IS REQUESTING THAT THE MOTION INCLUDE A RECOMMENDED EFFECTIVE DATE OF NOVEMBER 1ST, 2023 FOR ALL SECTIONS EXCEPT GRAY BOX TO PARAGRAPH THREE OF SECTION 11.1 AND PARAGRAPH ONE OF SECTION 11.2, WHICH WILL BE EFFECTIVE UPON SYSTEM IMPLEMENTATION.
ALSO FOR N O G R R 2 49, ERCOT IS REQUESTING THAT THE MOTION INCLUDE A RECOMMENDED EFFECTIVE DATE OF APRIL 1ST, 2024.
THIRD FOR O B D R R OH FOUR SEVEN ERCOT IS REQUESTING THAT THE MOTION INCLUDE A RECOMMENDED EFFECTIVE DATE OF UPON COMMISSION APPROVAL.
CHAD? OKAY, THANK YOU, CHAIRMAN.
ON THE CONSENT AGENDA, THERE ARE 27 REVISION REQUESTS.
UH, ERCOT SPONSORED MOST OF THEM.
UH, MOST OF THE REVISION REQUESTS DO NOT HAVE A BUDGET OR STAFFING IMPACT.
HOWEVER, SIX OF THE REVISION REQUESTS DO HAVE A BUDGET IMPACT.
AND THE AGGREGATE DOLLAR AMOUNT RANGES BETWEEN 1.57, UH, 1.575 MILLION TO 2.4 MILLION.
THE LARGEST DOLLAR IMPACT IS ASSOCIATED WITH NOER G TWO 15, WHICH IS THE LIMIT USE OF REMEDIAL ACTION SCHEMES WITH THE BUDGET IMPACT OF 1 MILLION TO 1.5 MILLION.
THE ONLY REVISION REQUEST WITH A STAFFING IMPACT IS ALSO NO G TWO 15, WHICH HAS A HALF FULL-TIME EQUIVALENT IN THE OPERATION STABILITY ANALYSIS DEPARTMENT.
AND AS THE CHAIRMAN INDICATED, UH, THE MOTION WILL NEED TO INCLUDE CHANGES TO THOSE EFFECTIVE DATES.
UH, PART OF THAT IS BASED UPON CHANGES IN THE TIMELINE THAT THE COMMISSION NOW EXPECTS FOR REVISION REQUEST APPROVAL AS WELL.
AND SO WITH THOSE DETAILS, UH, I'LL TURN IT BACK OVER TO THE, TO THE CHAIRMAN FOR THE MOTION.
UH, FIRST DOES ANY BOARD MEMBER HAVE ANY COMMENT OR QUESTION? UH, WITH RESPECT TO THE CONSENT AGENDA, UM, I WOULD ENTERTAIN A MOTION FOR APPROVAL OF THE CONSENT AGENDA.
I MOVE APPROVAL OF THE CONSENT AGENDA WITH THE, UH, RESPECTED DATE CHANGES THAT WERE RECOMMENDED, UH, BY BY THE TEAM.
UM, IF THERE'S NO FURTHER DISCUSSION, I'LL IN OH, ALRIGHT.
[4. June 20, 2023 General Session Meeting Minutes]
AGENDA ITEM FOUR, UH, JUNE, 2023, GENERAL SESSION MEETING MINUTES.THERE'S A DRAFT IN THE MEETING MATERIALS.
DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION WITH RESPECT TO THE MINUTES? I'LL MOVE TO APPROVE THE MINUTES.
SECOND AND A SECOND, BUT JULIE, ALL ALL IN FAVOR? AYE.
[5. CEO Update]
AGENDA ITEM FIVE IS THE C E O UPDATE.GOOD MORNING AND, UH, THANK YOU CHAIRMAN.
UM, WHAT I WANTED TO COVER TODAY IN MY C E O UPDATE WAS,
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UM, A FEW DIVERSE TOPICS.WANTED TO SHARE SOME PERSPECTIVES ON, UH, THIS SUMMER.
IT'S NOT GONNA BE A FULL SUMMER DEBRIEF.
WE WILL DO THAT IN OUR OCTOBER BOARD MEETING.
UM, WE'RE STILL IN SUMMER, AS MANY OF YOU CAN FEEL OUTSIDE.
UH, BUT SEASONALLY, WE ACTUALLY, SEPTEMBER IS THE, UH, THE LAST MONTH OF OUR SUMMER SEASON.
SO WE'LL DO A FULL UPDATE IN OCTOBER, BUT I'D LIKE TO SHARE SOME PERSPECTIVES AS WELL AS SOME PERSPECTIVES ON RECENT ACTIVITIES IN THE LAST, UH, COUPLE OF WEEKS.
I'D LIKE TO THEN REVIEW BRIEFLY WHERE WE'RE PABLO.
LET ME INTERRUPT INTER INTERRUPT YOU FOR ONE MOMENT, UH, TO CALL A P E C MEETING TO WORK.
THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS WILL COME TO ORDER TO CONSIDER MATTERS THAT HAVE BEEN DULY POSTED WITH THE SECRETARY OF STATE FOR AUGUST 31ST, 2023.
I'M KATHLEEN JACKSON, AND I'M JOINED TODAY BY COMMERS WILL MCADAMS AND COMMISSIONER LORI KOBOS.
SO, I'LL, UH, LIKE I SAID, I'LL REVIEW A LITTLE BIT OF PERSPECTIVES ON THE SUMMER AND RECENT ACTIVITIES.
I'M GOING TO TALK THROUGH SOME OF THE MARKET DESIGN INITIATIVES THAT WE'RE CALLING KIND OF THE BIG FIVE SUITE OF INITIATIVES THAT ARE ON OUR PLATE RIGHT NOW, AND THE, UH, IMPORTANCE AND TIMING OF EACH OF THOSE.
I'M GONNA BRIEFLY REVIEW WHERE WE STAND WITH THE CURRENT SET OF E P A RULES THAT ERCOT AND OTHER, UH, ISOS, UH, AND ENERGY COMPANIES AROUND THE COUNTRY ARE DEALING WITH RIGHT NOW.
I THINK IT'S IMPORTANT TO KEEP THAT IN THE FRONT OF US BECAUSE WE'RE, IT'S NOT JUST, YOU KNOW, LOCAL ISSUES AND, UH, CHALLENGES WE'RE WORKING THROUGH.
WE'RE DEALING WITH SOME OF THESE BROADER FEDERAL ISSUES AS WELL.
UH, THEN I'D LIKE TO, YOU KNOW, SPEND A COUPLE MINUTES ON, ON SOME KEY MESSAGING AROUND KIND OF MARKET EVOLUTIONS.
AND, UH, I'D LIKE TO SHARE SOME PERSPECTIVES ON THE MARKET OVERALL AND THEN FINISH UP WITH AN UPDATE ON OUR COMMUNICATIONS TODAY.
SO, WHAT I'D LIKE TO START WITH IS, IS, UH, FIRST A VERY BIG THANK YOU, A SINCERE AND HEARTFELT THANK YOU TO ALL TEXANS, BECAUSE THESE LAST COUPLE OF WEEKS WE HAVE ASKED FOR A LOT FROM TEXANS THROUGH CONSERVATION, UH, VOLUNTARY CONSERVATION ASKS AND CONSERVATION APPEALS.
AND THE DIFFERENCE BETWEEN THOSE TWO, WHEN WE DO A VOLUNTARY CONSERVATION ASK, WE DO THAT BECAUSE WE THINK THAT THERE'S A POSSIBILITY OF HAVING LOW RESERVES LATER IN THAT DAY.
AND WE WANT TO TRY TO AVOID GETTING INTO, UH, AN EMERGENCY SITUATION WITH EMERGENCY OPERATIONS.
WHEN WE ELEVATE THAT TO AN APPEAL, WE HAVE A MUCH HIGHER BELIEF THAT WE'RE GOING TO BE IN A LOW RESERVE SITUATION.
AND SO WE'RE, AGAIN, THOUGH WE'RE NOT IN EMERGENCY OPERATIONS AT THAT TIME, WE'RE TRYING TO AVOID DOING SO.
AND OVER THE LAST 10, 11 DAYS, WE'VE ASKED TEXANS QUITE A BIT TO CONSERVE ENERGY DURING, UH, BROAD PERIODS IN THE AFTERNOON AND EARLY EVENINGS.
AND SO THE IMPACT OF THOSE CALLS AND THE IMPACT OF THE RESPONSE FROM TEXANS HAS BEEN NOTHING SHORT OF TREMENDOUS.
WE HAVE SEEN EACH OF THE DAYS THAT WE HAVE MADE THOSE CALLS OF, UH, MATERIAL AND MEANINGFUL IMPACT ON THE ENERGY DEMAND DURING THAT DAY, AND HAS CONTRIBUTED IN EACH OF THOSE DAYS TO US BEING ABLE TO GET THROUGH A TIGHT PERIOD OF OPERATIONS WITHOUT HAVING TO GO INTO EMERGENCY OPERATIONS.
SO I WANNA START WITH A BIG THANK YOU TO ALL THE TEXANS WHO DID THAT.
AND, UH, AND ALSO A BIG THANK YOU TO THE TEAMS ACROSS, UH, THE, THE PUBLIC UTILITY COMMISSION AND ERCOT AND OTHERS THAT HAVE BEEN HELPFUL IN TERMS OF GETTING THE MESSAGING OUT AND COMMUNICATING AND MANAGING THESE, UH, MORE DIFFICULT SITUATIONS.
THIS SUMMER SO FAR HAS BEEN ONE OF, UH, QUITE, YOU KNOW, REMARKABLE AS IT RELATES TO THE, UH, THE, THE CHALLENGES, UH, THE NUMBER OF RECORDS THAT WE HAVE SET.
WE HAVE SET 10 NEW ALL TIME RECORDS THROUGHOUT THIS SUMMER.
UH, THE LOAD GROWTH FROM PEAK TO PEAK FROM LAST SUMMER TO THIS SUMMER IS ABOUT 5,000 MEGAWATTS OF PEAK LOAD GROWTH, WHICH WHEN YOU THINK ABOUT THAT, THAT'S, UH, ABOUT A 7% LOAD GROWTH FROM ONE YEAR TO THE NEXT, UH, AT A PEAK LEVEL, WHICH IS A TREMENDOUS, TREMENDOUS NUMBER.
UM, OVER THE LAST 20 YEARS OR SO, YOU CAN LOOK AT THE ENERGY INFORMATION ADMINISTRATION, UH, AT THE FEDERAL GOVERNMENT LEVEL, GO TO THEIR WEBSITE, AND YOU CAN LOOK AT THE KIND OF DATA ON HOW ENERGY GROWTH HAS PROGRESSED IN THE UNITED STATES.
AND ON AVERAGE OVER THE LAST 20 YEARS, ENERGY GROWTH HAS PROGRESSED AT ABOUT 1% A YEAR, YEAR OVER YEAR FOR THE LAST 20 YEARS.
SO SEEN 7% PEAK GROWTH, UH, BETWEEN TWO SUMMERS REALLY SHOWS A COUPLE OF THINGS.
ONE, THAT THE TEXAS ECONOMY CONTINUES TO BE BOOMING, AND THIS IS A, A GREAT OUTCOME FOR THE STATE OF TEXAS.
IT'S BRINGING OPPORTUNITY, IT'S BRINGING JOBS, IT'S BRINGING PEOPLE TO THIS GREAT STATE, BUT IT'S ALSO BRINGING DEMANDS.
IT'S BRINGING DEMANDS ON INFRASTRUCTURE AT EVERY LEVEL.
HIGHWAYS, SCHOOLS, HEALTHCARE SYSTEMS, AND THE ENERGY INFRASTRUCTURE NEEDS TO BE ABLE TO KEEP UP WITH THAT TYPE OF GROWTH.
AND SO WHAT WE DO HERE EVERY DAY IS A CRITICAL ELEMENT IN, IN ENSURING THAT THAT PART OF THE INFRASTRUCTURE THAT WE KEEP EVERY POLICY MAKER AND EVERY REGULATOR AWARE OF WHAT'S NEEDED TO CONTINUE TO SERVE THIS GREAT STATE RELIABLY DURING THESE INCREDIBLE PERIODS OF GROWTH.
I DON'T THINK ANYBODY EXPECTS THE GROWTH TO SLOW DOWN MEANINGFULLY.
SO WE NEED TO BE POSITIONED TO
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LEAN INTO THAT AND TO SUPPORT THAT GROWTH AS WE MOVE FORWARD.WE, UM, WE'RE ABLE TO LAUNCH A NEW PRODUCT THIS YEAR, E C R S, IT'S ERCOT CONTINGENCY RESERVE SERVICE.
IT HAS BEEN VERY COMPLIMENTARY TO THE, UH, OTHER ANCILLARY SERVICES THAT WE HAVE.
NONS SPIN IS THE OTHER ONE THAT WE KIND OF KEEP OFFLINE FOR RESERVE PURPOSES.
AND, UM, E C R S IS SOMETHING THAT'S AN OFFLINE ANCILLARY SERVICE THAT COMPLIMENTS THE ONLINE NATURE OF OUR NONS SPEND SERVICE.
AND AS DAN DESCRIBED YESTERDAY IN HIS, UH, OPERATIONS UPDATE, EACH OF THESE ANCILLARY SERVICES SERVE SPECIFIC PURPOSES AROUND HELPING TO MANAGE THE POTENTIAL FOR ERROR IN FORECASTS OR IMMEDIATE CHANGES IN THE CIRCUMSTANCES ON THE GRID, LIKE A POWER PLANT TRIPPING OFFLINE, OR A LOAD FORECAST BEING MATERIALLY DIFFERENT THAN WHAT WAS EXPECTED.
AND WE USE THESE, HAVE BEEN USING THESE TOOLS PRETTY REGULARLY THROUGHOUT THIS SUMMER AND OVER THE LAST COUPLE WEEKS QUITE A BIT TO HELP MANAGE THOSE CHANGES IN CIRCUMSTANCES.
AND WHETHER, YOU KNOW, IT'D BE BECAUSE OF THE WIND NOT COMING UP AS QUICK AS WE EXPECTED OR CLOUD COVER COMING IN OVER WEST TEXAS, WE'RE ABLE TO HAVE NOW AN ADDITIONAL SET OF TOOLS THAT CAN RAPIDLY STEP IN AND FILL IN AND MAKE SURE THAT WE'RE MANAGING THAT OPERATIONAL FLEXIBILITY NEED THAT IS GETTING MORE COMPLICATED IN A, IN A VERY CONSISTENT WAY.
THE, UM, LAST SEVEN, EIGHT DAYS HAVE BEEN A LITTLE BIT OF A DIFFERENT STORY.
SO THROUGHOUT THE SUMMER, THROUGHOUT ALL OF THESE PEAKS, UM, WE HAVE HAD THE BENEFIT OF HAVING VERY CONSISTENT PERFORMANCE ACROSS THE INTERMITTENT RENEWABLE ENERGY FLEET.
WHAT WE'VE SEEN IS A PATTERN THROUGHOUT THE WEEKS WHERE WE'VE HAD STRONG WIND PERFORMANCE, AND THEN ON THE WEEKENDS WHEN THE LOAD TENDS TO DECLINE A LITTLE BIT, THAT'S WHEN WE'VE SEEN THE EBB IN THE WIND PERFORMANCE, UH, ON THE WEEKENDS.
BUT IT'S ALIGNED WELL WITH THE DEMAND PROFILE.
AND THROUGHOUT THIS SUMMER, WE HAVE SEEN VERY STRONG AND STEADY PERFORMANCE BY THE THERMAL DISPATCHABLE FLEET AS WELL, THE CONVENTIONAL POWER PLANTS.
AND SO HAVING THAT STRONG BASE OF, OF CONVENTIONAL GENERATION PERFORMING, HAVING THE RENEWABLES PERFORMING CONSISTENTLY THROUGHOUT THE MAJORITY OF THE SUMMER, AS WE WENT THROUGH ALL OF THESE NEW PEAK DEMAND RECORD SETTING DAYS AND THAT INCREDIBLE GROWTH, WE'RE ABLE TO MEET THOSE DEMANDS FAIRLY CONSISTENTLY WITHOUT TOO MUCH CHALLENGE.
BUT THAT CHANGED ON, UH, ON AUGUST 17TH, THE, UH, A LITTLE OVER A WEEK AGO WHEN WE HAD A CONSERVATION CALL THAT DAY.
AND, UH, WHAT HAPPENED ON AUGUST 17TH IS WE HAD A VERY HIGH DEMAND DAY, JUST LIKE WE DID THROUGH THE REST OF THE SUMMER.
BUT WHAT WAS DIFFERENT THAT DAY IS THAT WE HAD VERY LOW WIND PERFORMANCE THAT DAY.
AND SO WE ENDED UP CALLING A CONSERVATION CALL FOR THAT DAY.
AND DURING THE COURSE OF THAT RAMP PERIOD WHERE THE, AS THE SOLAR IS RAMPING DOWN AND WE'RE WAITING FOR THE WIND TO COME UP, AND WE HAD A LOW WIND, UH, EXPECTATION FOR THAT DAY, WE LEVERAGED ALL OF THE AVAILABLE ANCILLARY SERVICES THAT OUR CONTROL ROOM HAS IN ORDER TO MANAGE THAT RAMP, INCLUDING USING ONE OF THE PRODUCTS THAT WE GENERALLY RESERVE TO THE VERY END OF RIGHT BEFORE YOU GET INTO AN EMERGENCY OPERATION SITUATION, WHICH IS OUR EMERGENCY RESERVE SERVICES, WHICH IS WHERE WE ASK THE, AT THE LAST STAGE, THOSE WHO WE HAVE PAID TO HAVE LOAD AVAILABLE TO TAKE OFFLINE, WE CALL THEM ON THEM TO TAKE THAT LOAD OFFLINE.
AND THEN AT THE SAME TIME, WE CALLED OUT TO OUR TRANSMISSION OPERATORS AND WE ASKED THEM TO REDUCE VOLTAGE ON THE DISTRIBUTION SYSTEM FOR A PERIOD OF TIME TO HELP MANAGE THE DEMAND.
AT THAT POINT IN TIME ON THAT DAY, WE CAME, YOU KNOW, WITHIN ABOUT 600 MEGAWATTS OR SO OF WHAT WOULD BE THE, UH, REQUIREMENT TO ENTER INTO EMERGENCY OPERATIONS, AND THAT'S AGAINST THE PEAK DEMAND OF ALMOST 85,000 MEGAWATTS THAT DAY.
SO IT WAS A VERY TIGHT MARGIN THAT DAY.
SINCE THAT POINT, WE HAVE SEEN, UM, SEVERAL, WE'VE HAD, UH, SEVEN, SEVEN, I BELIEVE VOLUNTARY CONSERVATION AND THE APPEALS SINCE THAT DAY, INCLUDING THAT DAY, AND THE STORY OF ACROSS MOST OF THOSE, THEY WERE, LAST THURSDAY THROUGH THIS SUNDAY, WE HAD SIX IN A ROW, SIX IN A ROW, THURSDAY, FRIDAY SA I'M SORRY, FOUR IN A ROW WHERE WE ASKED FOR CONSERVATION.
AND, AND IT WAS A SIMILAR STORYLINE.
WE HAD A, UH, SIX SITUATION WHERE WE HAD RELATIVELY HIGH DEMAND AGAIN AND VERY CONSISTENT LOW WIND PERFORMANCE DURING THOSE DAYS.
AND WE WERE FORTUNATE DURING THOSE DAYS, WE HAD CONSISTENT, UH, GOOD THERMAL, UH, GENERATION UNITS DURING THOSE FOUR DAYS.
AND SO WE WERE ABLE WITH, UH, THE, WITH THE CONSERVATION THAT WE SAW FROM TEXANS TO BE ABLE TO GET BY DURING THOSE, UH, FOUR DAYS.
AND THEN THIS WEEK WE'VE HAD TWO CONSERVATION CALLS.
WE HAD ONE YESTERDAY AND THE DAY BEFORE, AND THE CIRCUMSTANCES WERE A LITTLE BIT DIFFERENT.
IF YOU RECALL, THE, THE, THE LOAD AND THE DEMAND HAS COME DOWN A LITTLE BIT.
THE, THE TEMPERATURES, EVEN THOUGH STILL HIGH IN THE HIGH NINETIES AND, AND, AND LOW HUNDREDS IN SOME PARTS OF THE STATE WERE STILL NOT AS HIGH AS THEY'VE BEEN CONSISTENTLY ACROSS THE WHOLE STATE.
BUT WHAT WAS DIFFERENT IS THAT THESE LAST COUPLE DAYS WE HAD MORE THERMAL OUTAGES AND COMING OFF OF A LONG STRETCH OF A VERY HIGH DEMAND AND HIGH UTILIZATION, IT'S NOT SURPRISING TO SEE, YOU KNOW, SOME, SOME MECHANICAL BREAKAGES HAPPENING ON SOME OF THE DISPATCHABLE GENERATION FLEET.
AND SO THAT'S WHAT WE EXPERIENCED AT THE FIRST PART OF THIS WEEK.
AND SO ON TUESDAY AND WEDNESDAY, THE CIRCUMSTANCE
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THERE WAS, WE HAD CONTINUED LOW WIND PERFORMANCE DURING THOSE TWO DAYS PLUS ADDITIONAL THERMAL DISPATCHABLE UNITS BEING OUT MAKING FOR A TIGHT SITUATION.AND SO TO STEP BACK, WHAT, WHAT THIS REALLY KIND OF ALL, YOU KNOW, LOOKS LIKE, THERE'S REALLY THREE PRIMARY VARIABLES THAT KIND OF DRIVE OUR RELIABILITY ON ANY GIVEN DAY.
IT'S THE DEMAND, HOW MUCH DEMAND WE'RE, WE'RE CALLING ON THE SYSTEM AND EXPECTING IT'S THE AVAILABLE PERFORMANCE OF THE TRADITIONAL THERMAL DISPATCHABLE GENERATION FLEET.
AND IT'S THE AVAILABILITY OF THE INTERMITTENT RENEWABLE GENERATION FLEET.
AND THE COMBINATION OF THOSE THREE CONTRIBUTE MEANINGFULLY TO WHETHER OR NOT WE'RE GONNA HAVE ENOUGH SUPPLY TO MEET DEMAND.
AND WHEN YOU HAVE A CHALLENGE WITH ONE OR EVEN TWO OF THOSE, SOMETIMES THINGS CAN BE JUST FINE.
WHEN YOU HAVE ISSUES WITH ALL THREE OF THEM, YOU CAN HAVE VERY TIGHT CONDITIONS.
AND SO WHAT WE'VE BEEN EXPERIENCING THROUGHOUT THIS SUMMER HAS BEEN SOME COMBINATIONS OF THOSE THREE AT POINTS IN TIME.
AND THAT'S, THAT'S WHY IT'S SO CRITICAL THAT WE HAVE THESE TOOLS AVAILABLE TO US TO MANAGE THESE VERY QUICKLY EVOLVING SITUATIONS AND CIRCUMSTANCES.
SO I'LL PAUSE THERE BEFORE MOVING ON IF THERE'S ANY QUESTIONS ON JUST THESE LAST COUPLE OF WEEKS OR WHAT WE'VE SEEN THIS SUMMER.
WHAT I'D LIKE TO DO IS JUST SPEND A COUPLE OF MINUTES ON THE, UM, BIG FIVE AS I LIKE TO REFER TO THOSE, THE, UM, MARKET DESIGN INITIATIVES THAT WE ARE WORKING ON.
UM, AND I'M GONNA HAVE THIS SLIDE UP, WHICH KINDA SHOWS THE OVERALL TIMING OF HOW THESE ARE GONNA BE MOVING FORWARD, BECAUSE THERE'S, THE TIMING OF THIS IS, IS A, IS A BIG DRIVER FOR A LOT OF THE CONVERSATIONS THAT WE'RE HAVING AND A LOT OF THE DECISIONS WE'RE NEEDING TO MAKE.
I'M GONNA START WITH THE, UH, WITH THE RELIABILITY STANDARD, BECAUSE RELIABILITY STANDARD IS REALLY KIND OF THE, ONE OF THE FIRST ONES OUT OF THE GATE HERE.
SO I WON'T GO INTO DETAILS AS TO WHERE WE ARE IN TERMS OF THE PROGRESS, BUT THE RELIABILITY STANDARD REALLY HAS THREE KEY ELEMENTS THAT WE'RE FOCUSING ON RIGHT NOW.
ONE OF THEM IS THE PARAMETERS OF THAT RELIABILITY STANDARD.
SO WHAT'S GONNA BE THE LOSS OF LOAD EXPECTATION, WHICH IS THE FREQUENCY THAT WE WANNA SET AS A PARAMETER OF, OF WHAT WOULD BE ACCEPTABLE IN TERMS OF LOSS OF LOAD.
HOW BIG OF A LOSS OF LOAD COULD WE EVER EXPECT TO SEE, UH, UNDER A, UH, AN EXTREME SITUATION? AND WHAT DO THE DURATION BE? HOW LONG WOULD THAT, UH, EVENT BE? THOSE THREE KEY PARAMETERS ARE BEING WORKED THROUGH A LOT OF MODELING SCENARIOS WITH DIFFERING INPUTS AND WEATHER AND DIFFERING RESOURCE MIXES TO DETERMINE WHAT WOULD BE THE RIGHT COMBINATION OF THOSE THREE.
NOW, ONCE WE HAVE THAT SET OF PARAMETERS AND WE SAY, OKAY, THIS IS A REASONABLE SET OF PARAMETERS, THEN YOU HAVE TO EVALUATE THAT IN TERMS OF THE COST TO ACHIEVE THAT.
SO THE COST OF GETTING TO THOSE PARAMETERS, YOU NEED A VARIABLE, WHICH IS THE COST OF NEW ENTRANTS, WHICH IS ESSENTIALLY THE MARGINAL COST TO DEVELOP THE NEW, THE NEXT LOW COST UNIT TO SERVE ENERGY IN THE MARKET.
THAT CONE IT'S REFERRED TO AS CONE, OR COST OF NEW ENTRANT, IS SOMETHING THAT CAN BE DEVELOPED THROUGH A STUDY WHERE YOU GO OUT AND YOU UNDERSTAND THE COST OF THE SUPPLY CHAIN, THE MATERIALS, THE LABOR, AND THE REGIONAL COST TO DEVELOP THOSE UNITS HERE IN TEXAS.
SO WE'RE GONNA DO A STUDY TO DEVELOP CONE, AND THAT WORK IS GOING, IS GONNA BE GOING ON OVER THE COURSE OF THE BALANCE OF THIS YEAR AND INTO THE FIRST PART OF NEXT YEAR.
THAT HELPS TO DEVELOP WHAT THE COST TO ACHIEVE THOSE THREE PARAMETERS IN THE RELIABILITY STANDARD, BECAUSE IT WILL TELL YOU WHEN YOU HAVE A RELIABILITY STANDARD, IT'LL SAY, WELL, YOU NEED THIS RESOURCE MIX IN YOUR, UH, IN YOUR FLEET IN ORDER TO BE ABLE TO ACHIEVE THAT RELIABILITY STANDARD CONSISTENTLY AND SO TO THE DELTA BETWEEN WHERE WE ARE TODAY.
AND TO ACHIEVE THAT FLEET, YOU NEED THE COST OF NEW ENTRANTS TO KNOW WHAT IT WOULD COST TO BUILD THE FLEET TO GET THERE.
AND THEN YOU WOULD TAKE A LOOK AT THAT COST AND YOU WOULD SAY, WELL, IS THAT A REASONABLE COST FOR THE RELIABILITY THAT I'M GETTING? AND THE WAY TO ANSWER THAT QUESTION IS THROUGH THE THIRD MAJOR PARAMETER THAT WE'RE WORKING ON, WHICH IS THE VOL, THE VALUE OF LOST LOAD.
SO THE VALUE OF LOST LOAD IS ESSENTIALLY A SURVEY DONE ACROSS MULTIPLE CUSTOMER CLASSES TO UNDERSTAND HOW THE VARIOUS CUSTOMERS WOULD VALUE THE, THE LOSS OF LOAD AT AT POINTS IN TIME.
AND THEN THE AGGREGATE OF THAT COMES UP WITH A VALUE FOR LOST LOAD.
AND YOU USE THAT TO COMPARE AGAINST THE COST TO ACHIEVE A STANDARD.
AND SO YOU NEED EACH OF THESE COMPONENTS TO HAVE THE FULL PICTURE TO UNDERSTAND, IS THIS THE RIGHT STANDARD? IS THIS A REASONABLE COST TO DO SO BASED ON THE VALUE OF LOST LOAD? AND THEN YOU EVALUATE WHERE DO WE STAND TODAY IN TERMS OF OUR ABILITY TO ACHIEVE THAT, AND WHAT DO WE EXPECT IN TERMS OF THE ABILITY TO ACHIEVE THAT IN A PERIOD OF TIME IN THE FUTURE? AND THAT'S A VERY IMPORTANT ASPECT OF IT BECAUSE YOU CAN BE MEETING OF A RELIABILITY STANDARD TODAY, BUT YOU HAVE TO LOOK AT THE EVOLVING CHANGE IN THE RESOURCE MIX, THE EXPECTED RETIREMENTS, THE EXPECTED ADDITIONS OF DIFFERENT TYPES OF RESOURCES IN THE, IN THE, UH, GENERATION FLEET,
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AS WELL AS THE AVAILABILITY OF OTHER TOOLS IN ORDER TO SAY, OKAY, IN THREE YEARS, WOULD I BE MEETING THAT STANDARD WITH WHAT THE, THE GRID IS GONNA LOOK LIKE IN THREE YEARS? AND IF NOT, THEN THE MARKET TODAY HAS TO START SENDING THE SIGNALS TO CREATE THE GRID OF THREE YEARS FROM NOW.AND SO IT'S A VERY IMPORTANT CONSIDERATION TO, TO UNDERSTAND NOT ONLY WHERE WE ARE TODAY, BUT WHERE IT IS THAT WE WANT TO BE DOWN THE ROAD.
AND SO THIS RELIABILITY STANDARD WORK IS GONNA SET THE FRAMEWORK FOR THAT EVALUATION AND FOR THAT CONVERSATION AND TO UNDERSTAND WHETHER THE MARKET RULES THAT WE HAVE AND THE MARKET DESIGNS AND INCENTIVES THAT ARE IN PLACE TODAY ARE ADEQUATE TO MEET THOSE, THOSE RELIABILITY EXPECTATIONS NOW AND INTO THE FUTURE.
SO THAT WORK IS GOING ON AND IT WILL BE, UH, DRIVEN LARGELY TO BE COMPLETION THROUGH THE FIRST PART OF NEXT YEAR, THE FIRST HALF OF NEXT YEAR.
THEN WE'VE GOT THE TERMS OF CHANGES ACTUALLY THAT WE'RE MAKING TO OUR SYSTEMS. WE'VE GOT THE O R D C CHANGE, WHICH IS THE OPERATING RESERVE DEMAND CURVE CHANGE.
THAT'S A FAIRLY QUICK CHANGE THAT WE CAN MAKE WITH, UH, SOME PARAMETER CHANGES WITHIN OUR SYSTEMS. SO WE'VE GOTTEN DIRECTION TO DEVELOP THOSE RULES AND AROUND HOW THAT'S GOING TO WORK.
AND WITH, UH, THE APPROVAL FROM THE BOARD AS WELL AS FROM THE COMMISSION, WE WOULD BE ABLE TO PUT THE O R D C CHANGES INTO EFFECT BY NOVEMBER OF THIS YEAR AND HAVE THAT IN PLACE FOR THE WINTER.
THE VALUE OF THE O R D C CHANGE IS THAT IT BRINGS DOLLARS INTO THE MARKET THAT ARE LARGELY GONNA BE TARGETED TO RESOURCES THAT ARE AVAILABLE DURING TIMES OF SCARCITY.
AND SO WHEN WE'VE DONE BACKCASTING TO LOOK AT THE IMPACT OF THAT AND WHAT KINDS OF RESOURCES WOULD BE ABLE TO EARN THOSE DOLLARS BY BEING ONLINE, IT'S LARGELY DISPATCHABLE RESOURCES THAT CAN DO SO BECAUSE WHEN THE RE WHEN THE MARGINS GET TIGHTER, YOU TEND TO FIND MORE OF THE RESOURCES THAT ARE PROVIDING, UH, ENERGY AT THAT TIME TO BE DISPATCHABLE RESOURCES.
SO ON AVERAGE, ABOUT 80% OF THE DOLLARS THAT WE ESTIMATED THE O R D C CHANGE COULD INCUR, WOULD'VE FLOWN TO FLOWED TOWARDS, UH, DISPATCHABLE RESOURCES.
SO THE BENEFIT OF THAT IS THOSE DISPATCHABLE RESOURCES IN THE CURRENT MARKET WOULD HAVE AN ADDITIONAL REVENUE SOURCE TO HELP SUSTAIN THEIR OPERATIONS TODAY.
AND GOING FORWARD, IF THIS WERE TO REMAIN IN PLACE FOR A LONG PERIOD OF TIME, IT WOULD REPRESENT POTENTIALLY A LONGER TERM REVENUE THAT COULD BE USED FOR LONG-TERM PLANNING, AND IT COULD POTENTIALLY HELP THE INCENTIVIZATION OF DEVELOPING DISPATCHABLE RESOURCES THAT COULD EARN THOSE DOLLARS IN THE LONG TERM.
BUT IT WOULD NEED TO BE A MECHANISM THAT THE MARKET COULD PLAN ON AND EXPECT TO STAY FOR YEARS TO COME.
AS IT IS STRUCTURED TODAY BY LEGISLATION, IT NEEDS TO BE PULLED OUT AS A BRIDGE SOLUTION AT THE TIME OF P C M IMPLEMENTATION.
SO IF WE DEVELOP THE P C M TOOL, AND I'LL TALK ABOUT THAT SHORTLY, THEN THE O R D C, WHICH WAS APPROVED TO MOVE FORWARD AS A BRIDGE TOWARDS DEVELOPING P C M WOULD HAVE TO BE REMOVED.
AND SO ITS REAL BENEFIT WILL BE MORE IN THE SHORT TERM HELPING UNITS THAT NEED REVENUE TO MEET, TO BE, TO STAY VIABLE TODAY, THIS YEAR AND NEXT YEAR, TO BE ABLE TO EARN THOSE REVENUES DURING THOSE PERIODS OF TIME DURING THAT BRIDGE PERIOD.
AND SO THAT WOULD BE, ITS, ITS VALUE AND THAT'S OF GREAT VALUE THAT THE GRID COULD USE RIGHT NOW.
SO IT, IT HAS GREAT VALUE FOR THE ERCOT MARKET.
THEN FOLLOWING THE O R D C, UM, THE D R R SS IS A NEW ANCILLARY SERVICE.
IT'S THE DISPATCHABLE RELIABILITY RESERVE SERVICE, WHICH ADDS ANOTHER TOOL INTO THE FLEET OF, UH, ANCILLARY SERVICES THAT WE'LL HAVE.
IT REQUIRES RESOURCES THAT PROVIDE THIS SERVICE TO BE ABLE TO COME ONLINE IN TWO HOURS AND BE ABLE TO OPERATE FOR FOUR HOURS, UH, AT A MINIMUM.
AND ONE OF THE DRIVERS OF THIS IS TO KIND OF FILL IN THAT GAP.
OUR NONS SPIND SERVICE HAS A 30 MINUTE RAMP UP TIME.
OUR E C R S HAS A 10 MINUTE RAMP UP TIME.
AND SO THOSE ARE REALLY MORE TUNED TOWARDS SHORT-TERM CHANGES IN THE FORECAST.
THE D R R SS IS REALLY DESIGNED TO HELP REDUCE LONGER TERM LOOKING FORWARD, WHERE WE SEE GAPS IN THE COMMITMENTS OF RESOURCES, AND WE'RE GONNA NEED RESOURCES AT A POINT IN TIME.
WE COULD CALL ON THIS ANCILLARY SERVICE AND ASK THESE RESOURCES TO TURN ON AND FILL IN THOSE TIMES IN THE FUTURE.
TODAY WE USE THE RELIABILITY UNIT COMMITMENT OFTEN IN ORDER TO FILL IN THOSE GAPS IN THE FUTURE.
AND ONE OF THE CHARACTERISTICS AND DESIGN REQUIREMENTS OF THIS NEW ANCILLARY SERVICE IS THAT WE HAVE TO REDUCE OUR AMOUNT OF RUCKING BY THE AMOUNT OF THE D R R S THAT WE PURCHASE.
SO IT'S DIRECTLY INTENDED TO HELP OFFSET THE AMOUNT OF RUCKING THAT'S GOING ON IN THE MARKET TODAY AND TO FILL IN THAT FUTURE PERIOD IN TIME THAT WE ARE CALLING ON UNITS IN ORDER TO MAKE SURE WE HAVE ENOUGH COMMITMENTS FOR, UH, TO MEET SUPPLY AND DEMAND.
SO THE D R R SS IS REALLY PART OF THAT OPERATIONAL FLEXIBILITY SUITE OF TOOLS.
IT WILL HAVE A LIMITED AMOUNT OF MEGAWATTS THAT WILL BE PURCHASED EACH DAY, AND THE BENEFIT WILL BE FOR A LIMITED AMOUNT OF MEGAWATTS THAT GET THOSE DOLLARS ON ANY GIVEN DAY WHEN WE PURCHASE IT.
SO IT'S NOT REALLY INTENDED TO BE PART
[00:25:01]
OF A LONG-TERM RESOURCE ADEQUACY SOLUTION BECAUSE OF ITS NARROW SCOPE AND NARROW DEFINITION, BUT IT IS SUPPOSED TO BE HELPFUL TO OUR OPERATIONAL FLEXIBILITY NEEDS AS WE OPERATE THE GRID MOVING FORWARD.THE TIMETABLE FOR THAT, IT HAS TO BE DEVELOPED AND READY TO BE OPERATING BY DECEMBER ONE OF NEXT YEAR.
THEN P C M PUT THE PERFORMANCE CREDIT MECHANISM.
WE'VE TALKED A LOT ABOUT THAT, SO I WON'T GO INTO THE SUBSTANCE OF IT, BUT IT'S, IT'S EFFECTIVELY THAT IS WAS INTENDED TO BE, UH, MORE THE RELIABILITY ORIENTED, UH, CHANGE INTO THE MARKET TO CREATE A REVENUE SOURCE THAT INCENTIVIZES RELIABILITY, UH, RESOURCES TO BE ABLE TO DELIVER DURING SCARCE PERIODS OF TIME.
SO THE CONCEPT BEHIND IT IS THAT WE WOULD DEFINE SCARCITY HOURS OVER THE COURSE OF THE YEAR, AND GENERATORS COULD SELL IN A COMMITMENT TO SERVE THOSE SCARCITY HOURS.
THEY WOULD SELL IN PERFORMANCE CREDITS AND THEN LOAD WOULD PAY FOR THOSE PERFORMANCE CREDITS WHEN THOSE SCARCITY HOURS WERE HELD.
AND SO IT WOULD CREATE ESSENTIALLY A DIRECT REVENUE STREAM TO DRIVE RELIABILITY DURING THOSE SCARCE PERIODS OF TIME AND DO SO OVER A LONG PERIOD OF TIME THAT, UH, UH, INVESTORS COULD PLAN AROUND AND COULD USE THAT EXPECTED REVENUE IN ORDER TO MAKE INVESTMENTS TO BUILD MORE OF THE TYPE OF RESOURCES THAT, UH, THAT THE MARKET NEEDS TO, TO BRING DISPATCH RESOURCES ONLINE.
AND SO THE P C M AS CONTEMPLATED, WE'VE GOT SOME KEY STEPS AHEAD OF US.
WE'RE GONNA NEED TO WORK THROUGH SOME OF THE DEFINITIONS AND, AND SOME OF THE DESIGN DECISIONS THAT ARE KIND OF FUNDAMENTAL TO HOW THIS WILL WORK.
THERE WERE SEVERAL KEY CHANGES THAT TOOK PLACE TO P C M DURING THE, UH, LEGISLATIVE PROCESS AND IN AND IN HOUSE BILL 1500, UH, THERE WERE NEW PARAMETERS APPLIED TO P C M THAT WE'RE GONNA HAVE TO WORK THROUGH HOW THOSE PARAMETERS WILL TRANSLATE INTO DESIGNS AND INTO PROTOCOLS.
SO EFFECTIVELY OVER THE NEXT, UH, THROUGH THE BALANCE OF THIS QUARTER AND INTO THE START OF NEXT QUARTER, WE'RE GONNA BE WORKING ON GETTING THOSE PARAMETERS AND DECISIONS THAT NEED TO BE MADE DEFINED CLEARLY.
WE'LL BE HOSTING WORKSHOPS WITH THE MARKET PARTICIPANTS TO HELP WORK THROUGH THAT.
THEN WE EXPECT TO START WORKING ON THAT FUNDAMENTAL DESIGN THROUGH NEXT YEAR.
AND THEN AS WE GET THE DESIGN FAR ENOUGH WHERE WE UNDERSTAND HOW P C M WILL ACTUALLY WORK AND WHAT IT'LL COST TO ACHIEVE IT, WE NEED TO DO A COST STUDY AND DO THAT IN PARTNERSHIP WITH THE INDEPENDENT MARKET MONITOR.
AND THEN WE HAVE TO EVALUATE THAT COST STUDY TO MAKE SURE THAT THE COST OF IMPLEMENTING P C M AND OF RUNNING P C M IN THE MARKET IS WORTHWHILE AND IT MEETS THE, THE, THE, THE COST REASONABLE TEST AS PART OF A LONG-TERM SOLUTION AND PART OF A LONG-TERM MARKET CHANGE.
IF IT DOES, THEN WE CAN GO AHEAD AND DEVELOP THE TECHNICAL AND, UH, THE TECHNICAL CHANGES TO THE SYSTEMS IN ORDER TO OPERATE IT AND THEN DEVELOP THE PROTOCOLS.
SOME OF THE ADDITIONAL, UH, REQUIREMENTS THAT HAVE COME IN ON P C M HAVE PUSHED OUT THE TIMETABLE TO BE ABLE TO DO THIS.
IN ADDITION, LAYERING ON THE NEED TO DEVELOP A BRAND NEW ANCILLARY SERVICE THROUGHOUT NEXT YEAR HAS ALSO CREATED ADDITIONAL TIME PRESSURES ON BEING ABLE TO DEVELOP P C M UNDER THE ORIGINAL TIMETABLES THAT WE TALKED ABOUT TOWARDS THE END OF LAST YEAR AND THE BEGINNING OF THIS YEAR.
AND SO RIGHT NOW WE'RE LOOKING AT THE P C M OVERALL BEING, UH, DEVELOPED AND FINISHED IN, UH, 2026 LIKELY.
SO THE TIMETABLE IS ALIGNING A LITTLE MORE CLOSELY WITH THE R T C T TIMETABLE VERSUS EARLIER WE WERE TALKING ABOUT P C M BEING ABLE TO BE FINISHED CLOSER TO THE END OF 2025.
WE PROBABLY ARE GONNA NEED TO SEE A DELAY OF ABOUT A, A YEAR ON THAT BASED ON THE OTHER CHANGES AND THE OTHER, UH, INITIATIVES THAT HAVE TO BE DEVELOPED IN, UH, IN AT THE SAME TIME.
AND THEN THE LAST INITIATIVE THAT WE'VE GOT IS THE REAL TIME CO-OP OPTIMIZATION.
AND, AND WE TALKED ABOUT THAT YESTERDAY, AND I WON'T GO INTO THE VALUE OF THAT, BUT THAT DEVELOPMENT WINDOW IS REALLY OVER THIS EXACT PERIOD OF TIME THAT WE'RE GONNA BE DEVELOPING THE P C M AS WELL.
AND, UH, WE TALKED ABOUT 1186, THE SHORT TERM STATE OF CHARGE CHANGE.
THE EXPECTATION IS THAT WE HAVE THE TECHNOLOGY CHANGES RELATED TO THAT DONE BEFORE THE SUMMER OF 2024, SO THAT WE CAN ALLOCATE THE RESOURCES INTO DEVELOPING, UH, THE REAL-TIME CO-OP OPTIMIZATION PLUS BATTERY SOLUTION THAT, UH, THAT WE'RE NOW DESIGNING.
SO I JUST WANTED TO KIND OF GO OVER THE, KIND OF THE BIG PICTURE ON THESE INITIATIVES, HOW THE TIMETABLES, UH, OVERLAP WITH EACH OTHER AND REALLY KIND OF WHAT ARE THE DRIVERS BEHIND THESE.
UM, SO THAT IF THERE'S ANY QUESTIONS OR ANY CLARITY THAT WE CAN, YOU KNOW, OFFER, UH, I'D BE HAPPY TO DO SO AT THIS TIME.
UH, PABLO, THANKS FOR THE REPORT AND UH, ALSO I ECHO YOUR COMMENTS FOR THE ERCOT TEAM.
CONGRATULATIONS ON ALL THE GREAT WORK THEY'VE DONE AND BEST WISHES TO CONTINUE AS WE, UH, WORK THROUGH THE SUMMER.
UH, ON THE CONE STUDY, ONE OF THE DEFICIENCIES I'VE SEEN IN, IN MOST CONE STUDIES IS THAT THEY REALLY ONLY CALCULATE THE COST AT THE POINT WHERE IT INTERCONNECTS AND THEY, IT LEAVES OUT ALL THE COST IT TAKES TO CONDITION THE POWER, GET IT TO THE ULTIMATE CONSUMER TO GIVE IT INERTIA, TO MAKE IT RELIABLE.
AND SO, AND THAT'S PRIMARILY THE, THE CHALLENGE THAT THE RENEWABLES HAVE.
IT'S THIS CONE STUDY GONNA TAKE IT ALL THE WAY TO THAT CONSUMER COST VERSUS JUST THE INTERCONNECT COST.
[00:30:01]
IT'LL INCLUDE THE TRANSMISSION, YOU KNOW, WHATEVER IT TAKES TO CONDITION THE POWER, THE BACKUP, AND SO FORTH SO THAT YOU HAVE A TRULY RELIABLE POWER SUPPLY AT THE, AT THE METER.I, I THINK THAT'S A, AN EXCELLENT, EXCELLENT POINT.
AND, UM, AND YOU'RE RIGHT THAT HISTORICALLY, AND, AND WOODY, I'LL ASK IF YOU WANT TO MAYBE WEIGH IN ON THIS HERE IN A SECOND.
HISTORICALLY, CONE STUDIES HAVE VERY, BEEN VERY LIMITED FOCUSED ON JUST THE INDIVIDUAL, YOU KNOW, COMBUSTION TURBINE, YOU KNOW, THE COST TO DEVELOP AND CITE A COMBUSTION TURBINE AT A LOCATION AND NOT FACTOR IN SOME OF THE BROADER COST.
I THINK WE'RE GONNA, WE'RE GONNA NEED TO EVALUATE, UH, BOTH, I THINK WE'RE GONNA HAVE TO EVALUATE WHAT IS THAT, YOU KNOW, SPECIFIC AND NARROW DEFINITION OF CONE.
SO FOR THE PURPOSES OF ELEMENTS OF THE STUDY, WE CAN BE CONSISTENT AND HAVE CONSISTENCY IN COMPARING THAT WITH OTHERS, UH, COMPARABLE OPTIONS POTENTIALLY.
BUT I THINK TO THE, TO THE BROADER POINT, WE NEED TO UNDERSTAND WHAT THE TOTAL IMPACT IS ON THE MARKET AND, AND WOOD, IF YOU WANT TO ADD TO THAT.
AND WE ARE VERY EARLY IN THE SCOPING OF WHAT THE CONE WILL LOOK LIKE, SO WE'LL HAVE A CHANCE TO, TO SHAPE THAT, THAT ANALYSIS TO INCLUDE SOME OF THOSE THINGS.
ANY OTHER QUESTIONS, MR. CHAIRMAN, IF I MAY, THERE'S A GREAT POINT.
UM, BILL, IT, ONE OF THE FEATURES OF THIS SCHEDULE IS THAT VOL AND CONE ARE GONNA BE WORKING SOMEWHAT CONCURRENTLY AND, UM, AS WE DISCUSSED YESTERDAY, UH, THE SUBS, SECRETNESS CONDENSERS THAT ARE NOW GONNA BE NECESSARY FOR WEST TEXAS AT OVER A BILLION DOLLARS IN COST.
WHAT'S THE OVERALL BUNDLED COST TO THE SYSTEM TO CONTINUE THE PROVISION OF RELIABLE AND ADEQUATE POWER? UM, SO THEORETICALLY BETWEEN THE TWO STUDIES, WE SHOULD HAVE A COMPREHENSIVE VIEW OF WHAT THE OVERALL NUMBER IS, WHAT THE CONSUMERS ARE WILLING TO PAY, AND THEN ULTIMATELY WHAT THE, UH, THE MARGINAL PRODUCTION COST OF POWER, UH, DICTATES, WHICH IS BASED ON NATURAL GAS, WHICH IS BASED ON, UH, UH, PEAKER PLANTS, INTERNAL COMBUSTION ENGINES.
BUT, BUT ULTIMATELY THE COMMISSION IN THE ERCOT BOARD SHOULD HAVE A MORE UNIVERSAL VIEW ABOUT ALL THESE COSTS THAT ARE BEING FED IN, UH, TO THE ULTIMATE CONSUMER.
UM, ONE QUESTION I HAD FOR YOU, PABLO, WE WERE JUST TALKING ABOUT CONE STUDIES.
SO MISO HAS A COMBINATION, UH, A COLLABORATIVE APPROACH ON CONE STUDIES BETWEEN THEIR, UH, I M M AND I S O STAFF, UH, IN TERMS OF CONDUCTING THAT, UH, P J M HAS AN EXTERNAL, UH, FIRM THAT'S RIGHT, THAT ASSISTS WITH, THAT'S WHICH APPROACH ARE, ARE YOU LOOKING TO AS A GUIDING POINT HERE? WE'RE GONNA BE PARTNERING WITH AN OUTSIDE FIRM TO HELP WITH THE CONE STUDY, I BELIEVE IS THE STRATEGY THAT WE'RE DOING.
SO MORE ALONG THE LINES OF THE WAY P G M HAS BEEN DOING THAT.
BUT I, I EXPECT THE, THROUGH THE PROCESS AND THE WAY OUR MARKET WORKS, WE ALWAYS, YOU KNOW, HAVE THE OPPORTUNITIES TO GAIN THE INSIGHTS OF THE INDEPENDENT MARKET MONITOR AS WELL AS MARKET PARTICIPANTS.
AND I KNOW THAT THEY'LL HAVE TO BE A, THEY WILL BE A PART OF THAT PROCESS AND A PART OF THOSE CONVERSATIONS WORKING WITH AN EXTERNAL PARTNER.
UH, TO, TO BILL'S POINT AND COMMISSIONER MCADAM'S POINT, I, BASED ON MY CONVERSATIONS WITH THE NORTHEASTERN MARKETS, UM, OR WITH BRATTLE, THAT'S DONE SOME OF THE STUDIES WITH THE NORTHEASTERN MARKETS THAT SOME, SOME COMPONENT OF TRANSMISSION IS TAKEN INTO ACCOUNT IN CONE.
BUT I THINK TO GET A FULL PICTURE OF WHAT KIND OF TRANSMISSION YOU REALLY NEED IS, IT IS PROBABLY A TRANSMISSION DELIVERABILITY STUDY.
IS, IS I WHAT I'M THINKING BASED ON THE INFORMATION WE'VE GOTTEN IN THE PAST.
AND, AND IN ORDER TO REALLY UNDERSTAND KIND OF THE, THE OVERALL IMPACT ON THE MARKET OF A CHANGING RESOURCE MIX, YOU HAVE TO FACTOR IN THE TRANS A COMPREHENSIVE TRANSMISSION PLAN INTO THAT.
THAT IS, UH, SOMETHING THAT WE'VE BEEN TALKING ABOUT IN, UM, IN TERMS OF HOW WE'RE GONNA DO THAT, BOTH FOR THE SHORT TERM AND LONG TERM.
UH, AND, AND IT'S REALLY, AS WE THINK ABOUT IT, THE OPPORTUNITY TO DEVELOP A LONG-TERM TRANSMISSION PLAN THAT REFLECTS, YOU KNOW, THE LONG-TERM GROWTH EXPECTATIONS OF THE STATE, AS WELL AS WHAT WE CAN SEE CLEARLY IN TERMS OF THE GENERATION RESOURCE CHANGES THAT ARE COMING TODAY, AS WELL AS COMING INTO THE FUTURE.
WE WOULD BE VERY, VERY WELL SERVED TO PUT TOGETHER A MORE COMPREHENSIVE TRANSMISSION PLAN THAT REALLY KIND OF, UH, OPENS THE, OPENS THE DOOR AND, AND PAS THE WAY FOR UNDERSTANDING WHERE INVESTMENTS ARE GONNA BE NEEDED SO THAT WE CAN GIVE AMPLE NOTICE TO PLAN, UH, HOW TO MANAGE THE COST OF THAT MOST EFFECTIVELY IDEALLY DO SO IN, IN, UH, SYSTEMIC AND, AND, AND CLEAR STEPS ALONG A FIVE, 10 AND 15 YEAR PATH THAT DOES IT VERY EFFICIENTLY.
'CAUSE SOMETIMES DOING, YOU KNOW, A PLAN WITH A THREE TO FIVE YEAR HORIZON COULD LEAD TO STEPS THAT MAY NOT BE THE MOST ECONOMIC.
IF YOU KNOW THAT 10 YEARS DOWN THE ROAD, YOU'RE GONNA HAVE A NEED FOR A CAPACITY IN THE TRANSMISSION GRID TO BE ABLE TO MANAGE BOTH THE GROWTH AND THE RESOURCE CHANGES THAT ARE COMING WITH THAT KIND OF AN OUTLOOK.
SO AGREE COMPLETELY THAT THE TRANSMISSION PLANNED PART PORTION OF THIS IS GONNA BE A CRITICAL PART TO DESCRIBE THE OVERALL COST
[00:35:01]
PROFILE.SO LET ME, UH, I'LL MOVE ALONG QUICKLY HERE.
I JUST WANTED TO KEEP IN FRONT OF THE, UH, THE BOARD WHERE WE ARE WITH OUR E P A RULES.
WE'VE GOT REALLY KIND OF FIVE KEY RULES HERE THAT ARE MOVING IN PARALLEL THE COAL COMBUSTION RESIDUAL RULE, WHICH REGULATES, UH, COAL COMBUSTION AT, AT INACTIVE GENERATING UNITS.
AND IT ALSO REQUIRES AND ESTABLISHES, YOU KNOW, GROUNDWATER MONITORING CORRECTIVE ACTION REQUIREMENTS THAT IS, UH, STILL AN ACTIVE RULE.
COMMENTS WERE FILED BY ERCOT THIS JULY ON THIS RULE, AND WE EXPECT A FINAL RULE IN APRIL OF NEXT YEAR.
WE'VE GOT THE GREENHOUSE GAS RULE, UH, AND WHAT I'LL DO IS HERE, I'LL KIND OF SHOW HOW THESE ARE OVERLAPPING IN TERMS OF TIMETABLES.
TO GIVE YOU A PERSPECTIVE, THE GREENHOUSE GAS RULE PROPOSES A SIGNIFICANTLY LOWER C O TWO EMISSIONS FOR BOTH COAL AND GAS UNITS.
IT REQUIRES THE UTILIZATION OF CARBON SEQUESTRATION OR GREEN HYDROGEN IN THE FIRING OF GAS PLANTS.
WE FILED COMMENTS IN THE GREENHOUSE GAS RULE JUST ON AUGUST 8TH OF THIS YEAR.
THERE'S A FINAL RULE EXPECTED BY JUNE OF NEXT YEAR.
IF THIS, UH, GOES INTO EFFECT AS IT'S PROPOSED, THE STATE PLANTS FOR MEETING THESE REQUIREMENTS WITH EXISTING PLANTS WILL NEED TO BE DUE TO E P A IN 2026, AND THEN THE E P A WOULD APPROVE THOSE PLANS OR REJECT THOSE PLANS BY 2027.
THIS ONE HAS ONE OF THE MORE SIGNIFICANT IMPACTS, UH, TO THE FLEET THAT WE COULD MEASURE, UH, ALL GAS COMBUSTION THAT HAS A CAPACITY GREATER THAN 300 MEGAWATTS, UH, AND A CAPACITY FACTOR HIGHER THAN 50% WOULD HAVE TO COMPLY AND MEET THE REQUIREMENTS OF THE CARBON SEQUESTRATION AND OR, UH, ABILITY TO FIRE WITH, UH, GREEN HYDROGEN.
AND THE ALL OF THE FACILITIES, UH, INCLUDING THE COAL FACILITIES, WHICH ARE NOT CONTEMPLATED TO REALLY BE ABLE TO, TO MEET THESE REQUIREMENTS WOULD'VE A COMPLIANCE DEADLINE IN 2030.
UM, THE IMPACT POTENTIALLY OF THAT, THAT WE'VE, UH, PUT FORWARD IN OUR STANDARDS IS, HAS BEEN COMMUNICATED IN TERMS OF THE NUMBER OF MEGAWATT HOURS THAT POTENTIALLY WOULD BE REDUCED DURING A COMPLIANCE PERIOD.
WE HAD BEST CASE SCENARIO, UH, IMPACTS OF UPWARDS OF 9,000 MEGAWATT HOURS FOR SEVERAL HOURS DURING THE COURSE OF A YEAR.
AND ON WORST CASE SCENARIO, IT'S OVER A MILLION MEGAWATT HOURS OF IMPACT OVER SEVERAL HUNDRED HOURS DURING AN OPERATING PERIOD.
SO IF YOU THINK ABOUT EVEN THE BEST CASE SCENARIO, LOSING 10 OVER 10% OF THE CAPACITY OF YOUR GENERATING FLEET DURING A PEAK PERIOD IN THE SUMMER WOULD BE CATASTROPHIC.
AND THAT'S UNDER THE BEST CASE SCENARIOS.
LIKELY SCENARIOS ARE ACTUALLY MUCH WORSE, BUT IT'S GONNA REQUIRE FURTHER ANALYSIS BY THE GENERATING FLEET IN TEXAS TO REALLY ANALYZE THE TOTAL IMPACT OF THIS BASED ON HOW THIS RULE WOULD MOVE FORWARD.
IN ADDITION, WE'VE GOT THE GOOD NEIGHBOR RULE.
THIS REQUIRES LOWER NO EMISSION FOR COAL AND GAS UNITS, UH, TO MITIGATE POLLUTANTS TO DOWNWIND DOWNWIND STATES.
UH, THE GOOD NEIGHBOR RULE, WE FILED COMMENTS ON THAT LAST SUMMER IN JUNE, MADE DECLARATIONS THIS MARCH AND APRIL, AND WE HAVE PUT FORTH, UH, TEXAS PUT FORTH A STATE IMPLEMENTATION PLAN ON HOW THEY WOULD COMPLY WITH THAT RULE.
THAT PLAN WAS REJECTED, HOWEVER, THE REJECTION BY E P A WAS THEN STAYED BY THE FIFTH CIRCUIT COURT.
AND SO AT THIS POINT IN TIME, THE GOOD NEIGHBOR RULE, UH, DEADLINES DO NOT APPLY TO THE STATE OF TEXAS.
AND SO THAT'S GONNA HAVE TO WORK ITS WAY THROUGH THE COURTS TO DETERMINE WHETHER OR NOT THE FEDERAL IMPLEMENTATION PLAN WILL END UP, UH, APPLYING OR NOT.
THEN YOU'VE GOT THE MATS RULE, WHICH IS THE MERCURY AND AIR TOXIC STANDARD RULE.
THIS PROPOSES PARTICULATE MATTER EMISSION STANDARDS FOR COAL GENERATORS AND MERCURY EMISSION STANDARDS FOR LIGNITE FIRE GENERATORS.
WE FILED COMMENTS ON THAT IN JUNE OF THIS YEAR, AND WE EXPECT A FINAL RULE ON THAT IN MARCH OF NEXT YEAR.
THE, THE PROPOSED COMPLIANCE DATE FOR THAT WOULD BE IN 2027.
AND THEN LAST, THERE'S A TEXAS REGIONAL HAYES FEDERAL IMPLEMENTATION PLAN, WHICH PUTS LIMITS ON S O TWO AND PARTICULATE MATTER EMISSIONS IN ORDER TO MEET AIR VISIBILITY REQUIREMENTS AT NATIONAL PARKS AND WILDERNESS AREAS.
WE FILED COMMENTS ON THIS RULE IN AUGUST OF 2023.
WE EXPECT A FINAL RULE IN NOVEMBER OF 23 WITH COMPLIANCE BEGINNING IN 2025 AND FURTHER DEADLINES IN 27 AND IN 29.
AND SO WHAT'S IMPORTANT TO NOTE IS THAT IF A UNIT IS IMPACTED BY THIS, IT DOES NOT NECESSARILY IMPLY THAT IT'S GOING TO HAVE TO SHUT DOWN OR THAT IT'S GONNA HAVE TO CHANGE OR EVEN REDUCE ITS OPERATIONS.
THAT'S GONNA NEED TO BE AN ANALYSIS ON A RESOURCE BY RESOURCE BASIS.
BUT WHAT'S IMPORTANT TO UNDERSTAND IS THAT THIS COMPILATION AND PORTFOLIO OF RULES DOES HAVE A SIGNIFICANT AND MATERIAL EFFECT ON THE COAL AND GAS GENERATION FLEET THAT IS SERVING TEXAS TODAY.
AND MEANINGFUL CHANGES TO THAT FLEET COULD HAVE MEANINGFUL CHANGES TO THE RELIABILITY POTENTIAL OF THAT FLEET.
AND TODAY'S WHAT'S BEING PROPOSED AS THE ALTERNATIVES TO THE
[00:40:01]
OPERATIONS AS WE EXPERIENCE THEM TODAY, THINGS LIKE CARBON SEQUESTRATION AND UTILIZING GREEN HYDROGEN DO NOT YET MEET THE ECONOMIC TEST OR ARE VIABLY AT SCALE, THEN PROVEN TO BE ABLE TO DELIVER THE EQUIVALENT OUTPUT FOR THESE UNITS.AND SO WHILE THE DATES IN SOME CASES SEEM LONG-TERM DOWN THE ROAD, THEY'RE REALLY NOT.
AND THE VIABILITY AND DEVELOPMENT OF THESE TECHNOLOGIES TO BE READY TO SUBSTITUTE FOR WHAT WE ARE USING TODAY HAS NOT YET BEEN PROVEN.
AND THE RISK BEHIND THAT IS SOMETHING THAT WE HAVE TO KEEP IN FRONT OF US AND CONTINUE TO ADVOCATE FOR THE BEST INTEREST OF TEXAS AND THE TEXAS ECONOMY, UM, AS WE MOVE FORWARD.
AND THAT IS WHAT OUR CUT IS DOING IN PARTNERING WITH DEGENERATING FLEET TO DO SO.
SO I'LL PAUSE THERE IF THERE'S ANY QUESTIONS ON THE, ON THE E P A AND PABLO, I'M GLAD YOU DID THIS ANALYSIS.
UM, ONE OF THE THINGS I NOTICED AS A FORMER POLICY MAKER IS THAT ONE PLUS ONE PLUS ONE PLUS ONE PLUS ONE DOESN'T EQUAL FIVE.
WHEN YOU ADD THIS MUCH WEIGHT TO, UH, AN OPERATOR OF A THERMAL PLANT, IT'S ALMOST LIKE THEY LOOK AT THE INVESTMENT REQUIRED TO KEEP THE PLANT OPEN AND THEY JUST SAY, I GIVE UP.
AND SO THEY, THEY DETERMINED THAT IT'S MORE COST EFFECTIVE TO SHUT IT DOWN AND EXIT THE BUSINESS THAN IT IS TO REINVEST.
SO I THINK IT'S, I I'M GLAD YOU BROUGHT THIS SLIDE UP BECAUSE I THINK IT'S IMPORTANT FOR THE TEXAS CONSUMER TO KNOW THAT WE'VE GOT 72 GIGAWATTS OVER HALF OF OUR FLEET TODAY IS THESE PLANTS, THESE TYPES OF PLANTS, AND THESE RULES WILL TAKE A SUBSTANTIAL AMOUNT OF THAT OFFLINE WITHIN A SHORT PERIOD, AND THERE'S NO REPLACEMENT THAT PROVIDES RELIABLE COST EFFECTIVE POWER.
SO I APPRECIATE YOU BRINGING THIS UP AND CONTINUE TO CONTINUING TO MONITOR IT.
ONE OF THE THINGS THAT, THAT I THINK WE ALL NEED TO KEEP IN MIND IS THAT THE COMPOUND NATURE OF OF TAKING AND STACKING MULTIPLE RULES ON TOP OF EACH OTHER BECAUSE IT'S, IT'S PRETTY DEADLY WHEN YOU'RE THE OWNER AND TRYING TO MAKE AN INVESTMENT DECISION ON WHETHER YOU KEEP A PLAN OPEN OR NOT.
THAT COULD BE TOUGH FOR TEXANS.
MANY OF THESE RULES DO APPLY TO THE EXACT SAME RESOURCES.
SO THE ANALYSIS THAT THEY HAVE TO GO THROUGH TO UNDERSTAND WHETHER THEY COULD COMPLY WITH 1, 2, 3, OR THE COMBINATION IS, IS A VERY COMPLEX ANALYSIS AND COULD LEAD TO VERY, VERY, UH, UH, DETRIMENTAL DECISIONS BY THOSE OPERATORS.
COMMISSIONER MR. CHAIR, IF, IF, IF I MAY, ONE THING THAT I'D LIKE TO KNOW FROM CHAD'S PERSPECTIVE IS ONCE, UH, HOUSE BILL 26 27, THE ULTIMATE, UH, FINANCING MECHANISM RULES ARE APPROVED AT THE PUBLIC UTILITY COMMISSION TO LOAN, UH, MONEY OUT FOR NEW DISPATCHABLE GENERATION FACILITIES.
THERE'S GONNA BE A NEED FOR AIR PERMITS FOR THOSE, UH, FACILITIES THAT'LL BE IMPACTED BY EACH ONE OF THESE RULES, UM, OR AT LEAST THE CLOUD OF EACH ONE OF THESE RULES FOR THE T C E Q.
AND ONE THING THAT WE'RE FINDING IN THE REST OF THE COUNTRY IS THAT FEDERAL AGENCIES AREN'T NECESSARILY COORDINATING WELL TOGETHER.
US FISH AND WILDLIFE AND E P A, UH, ALONG WITH FERC ARE NOT ON THE SAME PAGE IN TERMS OF WHAT SYSTEM NEEDS ARE.
DOES ERCOT HAVE STANDING TO AT LEAST FILE BRIEFS, UH, FOR CONSIDERATION BY T C E Q COMMISSIONERS WHEN CONSIDERING CONTESTED CASES ON AIR PERMITS FOR OUR GENERATORS THAT WILL NATURALLY BE COMING AS WE NEED REPLACEMENT VALUE MEGAWATTS COMING INTO THE SYSTEM? OR DO WE GENERALLY STAY OUT OF THAT? AS OF RIGHT NOW, WE DON'T ACTIVELY GET INVOLVED IN THOSE TYPE OF APPLICATIONS.
I MEAN, I THINK AT THE END OF THE DAY, THE THESE ARE ALL PROPOSED RULES AND WE'RE WAITING FOR THE FINAL DECISIONS FROM E P A TO COME OUT AND THEN THERE'LL BE A DISCUSSION AMONG THE STATE LEADERSHIP, THOSE AGENCIES ERCOT ABOUT WHAT THE IMPACT IS GOING FORWARD.
OBVIOUSLY WITH, UH, THE GOOD NEIGHBOR RULE, UH, WORKING WITH THE STATE, THE, THE STATE HAS CHALLENGED THAT BECAUSE, UH, E P A REJECTED THE STATE IMPLEMENTATION PLAN.
SO WE ARE AGGRESSIVELY MONITORED IN THIS.
WE'VE FILED COMMENTS IN EVERY ONE OF THAT.
WE COORDINATE WITH T C Q, BUT WE DON'T DIRECTLY INTERVENE IN THOSE PERMANENT APPLICATIONS.
THAT'S SOMETHING WE CAN THINK ABOUT GOING FORWARD.
THE ONE THING I WOULD SAY IS THAT FROM AN I S O R T O PERSPECTIVE, WE ARE ACTIVELY ENGAGING WITH THE DEPARTMENT OF ENERGY AND THE E P A TO MAKE SURE THAT THEY UNDERSTAND OUR RISK AS OPERATORS ON THE SYSTEM.
IN FACT, WE HAVE A, UH, MEETING WITH THEM NEXT WEEK TO CONTINUE THAT DIALOGUE.
SO THE COMMUNICATION CHANNELS ARE OPEN WITH D O E AND E P A.
WE HOPE THAT THEY HEAR US BOTH IN OUR PUBLIC COMMENTS THAT MANY OF THE GRID OPERATORS HAVE FILED, BUT WE'LL, WE'RE OBVIOUSLY CONTINUING THAT DIALOGUE WITH THEM SO THAT THEY CLEARLY UNDERSTAND THAT IT'S NOT JUST A TEXAS ISSUE, IT'S A US ISSUE AS THE, THE ENTIRE GRID IS TRANSFORMING AND WE NEED THESE DISPATCHABLE RESOURCES AS WE GO THROUGH THIS TRANSFORMATION.
AND, AND, AND THE ONLY, THIS WAS FOR MORE FOR P U C EDIFICATION AS WELL.
DO WE NEED TO START CONSIDERING CREATING SOME
[00:45:01]
TYPE OF MECHANISM BETWEEN THE T C E Q AND THE PUBLIC UTILITY COMMISSION WITH ERCOT AS THAT DATA SUPPORT ROLE TO, UM, TO NOT NECESSARILY INTERVENE, BUT SOME TYPE OF COMMUNICATION MES MECHANISM TO DEMONSTRATE THE NEED OF SOME OF THESE FACILITIES THAT QUITE POSSIBLY WILL BE IN NON-ATTAINMENT AREAS, EITHER IN NEW GREENFIELD PROJECTS OR TO REPLACE OLDER RETIRING UNITS IF ULTIMATELY WE GET THE COMPENSATION PACKAGE RIGHT OR THE REVENUE STREAM RIGHT, UH, TO SIGNAL THAT INVESTMENT.SO AT, AT JUST FOOD FOR THOUGHT.
BUT YEAH, AND WE'RE HAPPY TO PARTICIPATE IN THAT CONVERSATION AND WORK ON THOSE PROCESSES.
SO I WILL QUICKLY, UH, UH, SHARE A COUPLE OF VIEWS AND SLIDES THAT I'VE BEEN, UH, COMMUNICATING AS I'VE, UH, TALKED WITH, UM, AUDIENCES, UH, ACROSS THE STATE AND, AND BOTH, UH, IN THE BUSINESS COMMUNITY AND IN THE ENERGY COMMUNITY.
AND, AND REALLY THE, THE INTENT HERE IS TO, TO DISCUSS THE, THE RAPIDITY OF CHANGE AND HOW, HOW THE IMPACT OF THAT IS FLOWING DOWN INTO THE ERCOT OPERATIONS AND GRID AND THE CHALLENGES THAT THAT SPEED OF CHANGE IS CREATING FOR GRID OPERATORS ALL OVER THE COUNTRY.
BUT REALLY, TEXAS IS UNIQUE IN A LOT OF WAYS BECAUSE WE CHANGE FASTER HERE THAN MOST GRIDS IN THE UNITED STATES DO.
AND WE'VE GOT THE BENEFIT OF OF HAVING THAT INCREDIBLE ECONOMIC GROWTH.
BUT WE HAVE THE, THE, THE PARTNERING BENEFIT OF ONE OF THE MOST COMPETITIVE MARKETS FOR ELECTRIC INFRASTRUCTURE AND ELECTRIC, UH, BUSINESSES ANYWHERE IN THE COUNTRY.
AND WHAT THAT'S DONE IS IT'S CREATED AN ENVIRONMENT WHERE IF IT CAN BE, UH, ECONOMICALLY BUILT AND IT CAN BE PROFITABLE AND IT CAN DRIVE, UH, GROWTH, IT WILL COME AND BE DONE IN TEXAS.
AND THAT'S WHAT WE HAVE SEEN OVER THE LAST 20 YEARS.
20 YEARS AGO, THE RESOURCE MIX THAT WE DEALT WITH WAS 97% BASED ON TRADITIONAL CONVENTIONAL THERMAL DISPATCHABLE GENERATORS.
AND 23 YEARS LATER THAT, UH, THAT FLEET MAKES UP JUST OVER 50% OF OUR CURRENT MIX WITH NOW WIND, SOLAR, AND BATTERIES MAKING UP THE BALANCE.
WE'VE SEEN A 45% INCREASE IN THE PEAK IN THE DEMAND, THE PEAK DEMAND ACROSS THOSE 23 YEARS.
AND THAT PACE OF INCREASING OF DEMAND IS ACTUALLY ACCELERATING AS WE MOVE FORWARD.
AND SO THE SOLUTIONS THAT WE'RE HAVING TO DEVELOP AND, AND THE THINGS THAT WE TALK ABOUT, I WANTED TO BRING UP A COUPLE OF THESE SLIDES TO GIVE PERSPECTIVE ON HOW THIS IS AFFECTING THE OVERALL OPERATIONS OF THE GRID BECAUSE WE DELVE INTO SPECIFIC INITIATIVES LIKE 1186 AND HOW DO WE DEAL WITH ONE RESOURCE.
BUT WHAT WE'RE REALLY TRYING TO DO IS DEAL, DEAL WITH THE COMPLEXITY OF THE ENTIRE SYSTEM HERE, WHAT THE TOP CHART SHOWS IS WHAT THE GRID LOOKED LIKE WHEN WE BECAME THE VERY FIRST I S O BACK IN 1996, WE CAUGHT IN, IN AUGUST OF 1996, BECAME THE COUNTRY'S FIRST INDEPENDENT SYSTEM OPERATOR.
AND EFFECTIVELY WHAT YOU SEE ON THE LEFT, THERE WAS DISPATCHABLE GENERATION ON THE RIGHT.
YOU SAW THE LOAD AND IF ERCOT HAD AN UNDERSTANDING OF WHAT THE WEATHER WAS GONNA BE THAT DAY, A REASONABLE WEATHER FORECAST, A REASONABLE UNDERSTANDING OF THE AVAILABILITY OF THE DISPATCHABLE FLEET, THEY WOULD BE ABLE TO MATCH THE LOAD EXPECTATIONS FOR THAT DAY.
AND THOSE WERE THE, THE MAIN, YOU KNOW, DRIVERS OF WHAT WE HAD TO DEAL WITH AT THAT POINT IN TIME.
AND AT THE TOP, THAT LITTLE 60 HERTZ REALLY IS THE, THE MOST CRITICAL PIECE THAT THAT IS.
WE DON'T BUILD THE GENERATORS, WE DON'T OPERATE THE GENERATORS, WE DON'T CONTROL THE LOAD.
UH, WHAT WE DO IS WE BALANCE THE GRID, WE MAKE SURE WE KEEP THAT FREQUENCY AND BALANCE SO THAT WE CAN CONTINUE TO ALLOW POWER TO FLOW FROM GENERATORS TO, UH, CONSUMERS.
TODAY THAT PICTURE IS SIGNIFICANTLY DIFFERENT AND IT'S CHANGING EVERY YEAR IN A MEANINGFUL WAY.
THE COMPLEXITY ON THE SUPPLY SIDE HAS EVOLVED TO INCLUDE NOW INTERMITTENT RESOURCES.
WE NOW HAVE THAT INTRODUCTION OF ENERGY STORAGE AT THE BOTTOM, WHICH PERFORMS AS BOTH SUPPLY AND DEMAND ON THE CUSTOMER SIDE.
WE NOW HAVE THE ADVENT OF PRICE RESPONSIVE LOAD AND CUSTOMERS LIKE CRYPTOCURRENCY, MINERS THAT ARE LARGE AND FLEXIBLE THAT CAN BE DEVELOPED IN A MATTER OF MONTHS AND SHORT YEARS VERSUS BEING ABLE TO DEVELOP LARGE, LARGE INDUSTRIAL LOADS OVER SEVERAL YEARS.
HISTORICALLY, WE COULD PLAN THE TRANSMISSION NEEDS OF THE SYSTEM IN A TIMETABLE THAT ALIGNED WITH THE DEVELOPMENT OF LARGE LOADS.
TODAY WE CAN'T TODAY LOADS ARE COMING ONLINE IN 12, 18, 24 MONTHS, MUCH FASTER THAN THE TRANSMISSION GRID CAN BE ADAPTED IN ORDER TO BE ABLE TO SERVE THEM.
AND THROUGHOUT, WE NOW HAVE TERMS ON HERE LIKE INERTIA AND STABILITY AND MODELING.
WE HAVE TO BE ABLE TO MODEL THINGS AT A PACE THAT WE COULD NEVER EXPECT TO NEED TO DO 20 YEARS AGO BECAUSE OF THE COMPLEXITY OF THE RESOURCES ON BOTH SIDES OF THIS, UH, OF THIS DIAGRAM.
AS WE LOOK AHEAD TO WHAT'S COMING, WE'VE HAD A LITTLE BIT OF A DISCUSSION YESTERDAY WITH WOODY IN TERMS OF WHAT WAS COMING IN OVER THE LAST 60 DAYS.
THIS IS A PERSPECTIVE ON WHAT'S COMING OVER THE NEXT SEVERAL YEARS.
SO OVER 287,000 MEGAWATTS OF INTEREST EXPRESSED IN DEVELOPING GENERATION IN THE ERCOT GRID OF THAT OVER 243,000 OF IT IS IN TWO RESOURCES IN SOLAR AND BATTERIES.
[00:50:01]
THERE'S ONLY ABOUT 12,000 MEGAWATTS OF EXPECT OF EXPRESSED INTEREST IN DEVELOPING THERMAL, UH, DISPATCHABLE GENERATION.AND SO WHEN YOU LOOK AT THAT PICTURE AND YOU SEE, OKAY, WELL WE KNOW THAT THE MAJORITY OF THIS WILL NOT DEVELOP, BUT THIS TELLS YOU WHERE THE MOMENTUM IS.
THIS TELLS YOU WHERE WE ARE GOING.
WHEN YOU LOOK AT THIS IN THE CONTEXT OF THE E P A RULES THAT WE JUST DISCUSSED.
AND WHEN YOU LOOK AT THIS IN THE CONTEXT OF THE ECONOMIC SIGNALS THAT THIS MARKET IS SENDING, THIS IS THE CONVERSATION WE NEED TO BE HAVING TODAY AND INTO THE FUTURE.
BECAUSE IN ORDER TO MEET THE NEEDS OF THIS GRID, WHAT WE NEED MORE THAN ANYTHING IS BALANCE.
WE NEED BALANCE AND FLEXIBILITY.
THOSE ARE THE TWO OPERATIVE WORDS THAT WHEN YOU TALK WITH GRID OPERATORS AROUND THE WORLD TODAY, THOSE ARE THE TERMS THAT YOU ARE HEARING THEM TALK ABOUT.
YOU NEED TO BE ABLE TO HAVE AND TAKE ADVANTAGE OF THE BENEFITS OF WHAT RENEWABLES ARE BRINGING, TAKE ADVANTAGE OF THE BENEFITS OF WHAT BATTERIES ARE BRINGING, AND CONTINUE TO RELY ON THE BENEFITS OF WHAT CONVENTIONAL DISPATCHABLE GENERATORS ARE BRINGING.
YOU NEED TO HAVE THAT BALANCE BECAUSE THE GROWTH AND DEMAND IS FIRM.
IT NEEDS TO BE SERVED, IT NEEDS TO BE SERVED, WHETHER IT'S EXTREME HEAT OR EXTREME COLD, AND YOU CANNOT HAVE GAPS IN THE ABILITY TO SERVE THAT DEMAND GOING FORWARD.
SO IN ORDER TO BE ABLE TO MEET THAT, YOU NEED TO DEVELOP ALL OF THE RESOURCE TYPES IN ORDER TO BE ABLE TO MEET THOSE OBLIGATIONS.
THIS IS TY US THAT WE'RE OUT OF BALANCE.
WE NEED TO FIGURE OUT HOW TO GET BACK IN BALANCE.
WHEN YOU LOOK HISTORICALLY, THE STORY HAS BEEN THE SAME OVER THE LAST THREE YEARS.
YOU CAN TAKE A LOOK AT WHAT'S BEEN GROWING ON THE GRID AND IT'S NOT ANY DIFFERENT THAN WHAT WE SEE LOOKING INTO THE FUTURE.
SO I'LL CLOSE WITH AS I DO A QUICK UPDATE ON OUR COMMUNICATIONS.
UM, WE HAVE SEEN TREMENDOUS, UH, UPTAKE IN AND RESPONSE TO OUR LAUNCHING OF THE TEXAS ADVISORY NOTIFICATION SYSTEM.
IT'S ERCOT.COM/TEXANS, TX A AND SS.
IF YOU GO THERE, PLEASE SIGN UP, PUT YOUR EMAIL IN, YOU'LL GET COMMUNICATIONS FROM ERCOT TO WHAT'S HAPPENING ON THE GRID.
AND IT'S BEEN A VERY HELPFUL, UH, TOOL.
WE'VE HAD OVER 6.7 MILLION VIEWS ON OUR WEBSITE JUST ON THE WEEKEND OF AUGUST 24TH THROUGH AUGUST 27TH.
AND WE'VE, UH, SIGNED UP OVER 12,000 MORE PEOPLE, UH, THROUGH THAT SITE.
IT'S BEEN A VERY HELPFUL TOOL AND WE'RE DOING EVERYTHING WE CAN TO CONTINUE TO IMPROVE THE TRANSPARENCY, THE FREQUENCY, AND THE CLARITY OF OUR COMMUNICATIONS.
AND THEN AT THE END, LIKE I ALWAYS DO, I LIKE TO THANK A GROUP WITHIN THE ORGANIZATION THAT HAS HAD A MEANINGFUL IMPACT SINCE OUR LAST BOARD MEETING.
AND TODAY I'D LIKE TO THANK ALL OF THE PEOPLE THAT PARTICIPATED IN THE DEVELOPMENT OF THE STRATEGIC PLAN THAT'S GETTING READY TO GET LAUNCHED EXTERNALLY HERE IN THE NEXT, UH, COUPLE OF MONTHS.
SO WE HAD, UH, THE STRATEGIC PLANNING TEAM ITSELF AS WELL AS A LOT OF PEOPLE FROM THE COMMUNICATIONS TEAM.
AND AS YOU'VE ENGAGED IN THAT WORK AS WELL, YOU KNOW, THE AMOUNT OF WORK THAT WENT INTO DEVELOPING THE NEXT FIVE YEAR PLAN THAT IS GONNA HELP GUIDE THE INVESTMENTS AND THE FOCUS FOR ERCOT IN ORDER TO CONTINUE TO MEET THE EXPECTATIONS OF TEXANS AROUND THE STATE.
AND I'LL PAUSE THERE AND UH, I'LL CLOSE MY REMARKS WITH THAT AND IF THERE'S ANY QUESTIONS, I'D BE HAPPY TO TAKE THEM.
BOB PABLO, JUST GOING BACK TO THE ENVIRONMENTAL SLIDE YOU HAD.
COMMISSIONER MCADAMS QUESTION MADE ME THINK OF SOMETHING ON THAT.
SO WE HAVE THE LOAN, POTENTIALLY OF THE LOAN PROGRAM TO INCENTIVIZE NEW GENERATION COMING IN.
AND WITH THE GREENHOUSE GAS RULE, THESE PLANTS WILL BE VERY YOUNG WHEN THAT RULE TAKES PLACE.
SO ANYTHING THAT'S MORE THAN 300 MEGAWATTS FOR A COMBINED CYCLE PLAN AS AN EXAMPLE, THEY WOULD HAVE TO BUILD IN THEIR THOUGHTS AND PLANS SEQUESTRATION, WHICH PROBABLY COSTS MORE THAN THE PLAN ITSELF AND SEQUESTERED TO WHERE WOULD BE AN OPEN QUESTION AS WELL.
SO THAT'S A, A HUGE COMPLEXITY TO GETTING NEW GENERATION IN WITH OR WITHOUT A LOAN PROGRAM.
IS THAT A FAIR WAY TO THINK ABOUT THAT? IT, IT'S A VERY FAIR WAY, AND IT'S ONE OF OUR BIGGEST CONCERNS.
WE TALK A LOT ABOUT THE IMPACT THAT THIS HAS TO THE EXISTING GENERATION FLEET, BUT FRANKLY, I THINK ONE OF THE MORE CONCERNING IMPACTS IS TO THE FUTURE GENERATION FLEET AND HOW AN INVESTOR CAN MAKE A DECISION TO INVEST HUNDREDS OF MILLIONS OF DOLLARS INTO A RESOURCE THAT IS GONNA REQUIRE TO LEAN ON TECHNOLOGIES THAT HAVE NEITHER BEEN PROVEN OPERATIONALLY, TECHNICALLY OR ECONOMICALLY.
I, I DON'T KNOW HOW THAT GETS DONE.
AND SO I THINK IT'S A VERY SERIOUS CONSIDERATION AND CONCERN.
JUST ONE ADDITIONAL POINT ON THAT.
IT, THE 300 MEGAWATTS IS FOR THE EXISTING FLEET, SO THE REQUIREMENT GOING FORWARD FOR CARBON CAPTURE AND HYDROGEN APPLIES TO ANY NEW UNIT REGARDLESS OF SIZE.
SO EVEN MORE OF A SUBSTANTIAL IMPACT.
IT'S, YEAH, IT'S MORE CARLOS, I WOULD ADD TO BOB'S POINT, THEORIZATION OF THAT INVESTMENT DEPENDS ON THE AVAILABILITY OF GREEN HYDROGEN.
SO IF YOU DON'T HAVE IT, YOU CAN'T AMORTIZE ANY OTHER QUESTIONS OR COMMENTS? PABLO, ARE THERE ANY TASK FORCES UNDERWAY THAT YOU WOULD LIKE TO COMMENT ABOUT THAT MIGHT, UM, HELP ADD TO THE GENERATION FLEET, ANY TASK
[00:55:01]
FORCES TO, TO HELP WITH THE, THE GENERATION FLEET? UM, DOES A D E R HAVE ROLE PLAY? OH, OF COURSE, YES.UH, WE, WE ARE WORKING ON, UM, THE, THE AGGREGATE, AGGREGATE DISTRIBUTED ENERGY RESOURCE TASK FORCE IS ONE THAT IS, UH, WE HEARD A LITTLE BIT FROM KANAN ABOUT YESTERDAY, WHERE WE ARE BUILDING THE CAPABILITY TO LEVERAGE DISTRIBUTED RESOURCES, BOTH ON THE LOAD AND SUPPLY SIDE TO ACTUALLY OPERATE AND INTEGRATE WITH THE ERCOT GRID.
AND AS WE SEE THOSE RESOURCES CONTINUE TO GROW, THEY COULD BECOME ACTUALLY, UH, THEY HAVE THE POTENTIAL TO BE A, A MEANINGFUL PART OF THE, UM, OF THE OPERATIONS OF THE GRID IN THE FUTURE.
AND SO THAT'S, AS WE LOOK AHEAD AND TRY TO LOOK AROUND THE CORNER TO WHAT A GRID OPERATOR SHOULD LOOK LIKE AND WHAT THEY SHOULD BE ABLE TO DO, BEING ABLE TO LEVERAGE RESOURCES IN THE DISTRIBUTION SYSTEM THAT CAN OFFER RESILIENCE AND RELIABILITY OPPORTUNITIES IS A, IS A CRITICAL SHIFT AND INVESTMENT OPPORTUNITY AHEAD OF US.
SO THAT'S CERTAINLY ONE AREA THAT WE'RE GONNA WORK ON.
AND, AND THERE'S ALSO, IT'S NOT ON THE SIDE OF ADDING SUPPLY, BUT I THINK IT'S JUST AS IMPORTANT.
WE ARE GO, WE ARE BEGINNING SOME WORK WITH, UH, TEXAS A AND M RIGHT NOW.
AND THIS WAS LED UNDER THE DIRECTION OF, UH, CHAIR JACKSON AND HER FOCUS ON ENERGY EFFICIENCY AND DEMAND RESPONSE.
WE'VE RETAINED, UH, TEXAS A M TO HELP US THINK THROUGH HOW COULD WE SCOPE OUT THE POTENTIAL IMPACT THAT ENERGY EFFICIENCY, UH, COULD, UH, HAVE ON THE STATE OF TEXAS.
AND SO WE'RE, THE SCOPE THAT WE'RE WORKING ON WITH THEM IS TAKING A LOOK AT RESIDENTIAL, COMMERCIAL AND INDUSTRIAL ELECTRIC DEMAND RESPONSE.
AND SO THE ABILITY TO BRING DEMAND RESPONSE AT ALL LEVELS, BRINGING IN CONSUMERS, BRINGING IN THE LARGE, CONTINUING TO BRING IN LARGE INDUSTRIALS AND COMMERCIAL THAT HAS THE POTENTIAL TO BE DEVELOPED AND BE A MEANINGFUL IMPACT ON RELIABILITY.
WE ALSO WANNA TAKE A LOOK AT THE POTENTIAL FOR THE USE OF ENERGY STORAGE TO SHIFT DEMAND PEAKS, AND THEN ALSO LOOK AT RESIDENTIAL SOLAR.
WE KNOW THAT RESIDENTIAL SOLAR IS GROWING ACROSS THE STATE OF TEXAS QUICKLY, AND BEING ABLE TO UNDERSTAND THE IMPACT OF THAT AND BE ABLE TO PLAN THAT IN CONJUNCTION WITH STORAGE COULD HAVE A MEANINGFUL IMPACT.
SO WHAT WE'RE DOING WITH, WITH A AND M IS WE'RE WANTING TO UNDERSTAND THE POTENTIAL OF THOSE AREAS, AND THAT WAY WE COULD UNDERSTAND THE MAGNITUDE OF WHAT IT COULD REPRESENT, WHAT POTENTIALLY THE COST OF IT WOULD BE IF WE WERE TO ADVANCE AND INCENTIVIZE THE DEVELOPMENT OF THAT.
AND THEN WE CAN USE THAT TO COMPARE AGAINST OTHER OPTIONS TO HELP DRIVE RELIABILITY, SUPPLY SIDE OPTIONS, TRANSMISSION OPTIONS, AND THEN THE DEMAND SIDE OPTIONS, WHICH WE REALLY NEED TO BE LOOKING AT ALL THREE OF THEM.
THIS IS NOT JUST A STORY ABOUT HOW DO WE BUILD MORE GENERATION.
THIS IS A DISCUSSION ABOUT HOW DO WE ADDRESS RELIABILITY NEEDS OF THE GRID, AND WE HAVE TO LOOK AT ALL THREE COMPONENTS IN ORDER TO CONSIDER THAT FULLY.
THANK YOU FOR BRINGING THAT UP, JULIE.
SO YOU, YOU TALKED ABOUT THE VARIOUS CHALLENGES AND, UM, I THINK ONE OF THE GREAT THINGS THAT YOU'VE, UH, ENGAGED WITH AND WORKED WITH THE COMMISSION ON IS, UM, THE WORKFLOW AND THEN RECOGNIZING THAT WE HAVE MANY THINGS GOING ON AT THE SAME TIME, THAT ALONG THE WAY THERE WILL BE MANY DECISION POINTS AND ACTUALLY IDENTIFYING THE MILESTONES AND THE, UM, UM, UM, BENCHMARKS AND THE METRICS THAT WE NEED KIND OF ALONG THE WAY.
SO, UM, YOU KNOW, THE OVERVIEWS THAT YOU GAVE TO THE COMMISSION AS WELL AS, UM, THE WORK SCHEDULES FOR EACH ONE OF THE VARIOUS INITIATIVES AND KIND OF RECOGNIZING THAT IT'S DATA DRIVEN AND THAT WE NEED TO BE EXECUTING TO THE, TO A PROCESS.
SO VERY MUCH IDENTIFIED THE CHALLENGES, BUT I THINK WE'RE VERY WELL POSITIONED BECAUSE OF A LOT OF THE WORK THAT'S ONGOING BETWEEN ERCOT AND THE COMMISSION IS, AGAIN, TO KIND OF DEFINE THAT PROCESS, MAKE SURE THAT ALONG THE WAY WE ARE CONTINUING TO GET STAKEHOLDER INPUT AND ENGAGEMENT AND KIND OF HOLD ALL OF US KIND OF ACCOUNTABLE FOR THOSE END GOALS.
THANK YOU FOR, THANK YOU FOR THAT, FOR THAT, THE ENCOURAGEMENT ON THAT AND THE, THAT THAT PROCESS DEFINITION AND THE CLARITY HOPEFULLY THAT, THAT WILL PROVIDE TO ALL STAKEHOLDERS AS TO WHAT'S AHEAD OF US, WHAT ARE THE KEY DECISION POINTS AHEAD OF US.
WE'LL CONTINUE TO IMPROVE THE QUALITY OF THE COMMUNICATIONS, UH, BETWEEN ERCOT, THE COMMISSION AND, UH, THE STAKEHOLDERS.
UH, WELL, SIR, I PROMISE LAST QUESTION.
I GET TEXTS FROM PEOPLE, UH, ON BEHALF OF ONE OF MY FELLOW COMMISSIONERS WHO'S NOT ABLE TO BE HERE TODAY.
UM, PABLO, DO YOU BELIEVE A TASK FORCE STRUCTURE WOULD BE A USEFUL TOOL FOR THE NUCLEAR INITIATIVE THAT THE GOVERNOR HAS, UH, IMPOSED ON US? UM, I DO.
I WAS REALLY EXCITED TO SEE THAT PROCLAMATION AND, AND DIRECTION, UH, TO CHAIR JACKSON AND TO, UH, COMMISSIONER GOTTY.
I THINK IT'S AN EXCITING OPPORTUNITY FOR THE STATE OF TEXAS.
I THINK PUTTING TOGETHER A TASK FORCE OF THE KEY STAKEHOLDERS THAT WOULD HAVE TO PARTICIPATE IN THAT ACROSS THE, IN THE ELECTRIC INDUSTRY, BUT ACROSS THE, YOU KNOW, THE ENVIRONMENTAL, THE LAND USE, UH, THERE, THERE'S SO MANY CONSIDERATIONS WHEN YOU THINK ABOUT HOW, HOW IT'S GONNA, WHAT IT'S GONNA TAKE TO, TO TURN TEXAS INTO THE LEADER IN THE
[01:00:01]
NUCLEAR RENAISSANCE THAT IT CAN BE.IT'S AN EXCITING OPPORTUNITY, AND WE SHOULD ABSOLUTELY THINK THROUGH A COMPREHENSIVE TASK FORCE THAT CAN HELP GUIDE THIS SO THAT IT'S, UM, CLEAR AND TRANSPARENT WHAT WE'RE TRYING TO ACCOMPLISH, BUT IT'S ALSO FOCUSED AND IT CAN MOVE QUICKLY BECAUSE AS WE KNOW, THE TIMETABLES AROUND NUCLEAR, THERE'S LONGER DURATION TIMETABLES AROUND THE LICENSING CAPABILITIES.
THERE'S A LOT OF COMPLEXITY IN THE SAFETY, UH, CONSIDERATIONS OF DEVELOPING NUCLEAR.
SO EVERYTHING THAT WE CAN DO TO TRY TO ADDRESS THOSE POTENTIAL HURDLES EARLY SO THAT WE CAN GET OURSELVES SET ON A PATH TO LEAD THE COUNTRY IN THAT DEVELOPMENT, I THINK IS A, A UNIQUE AND IMPORTANT OPPORTUNITY FOR US.
UM, IT'S A GREAT PRESENTATION AND, UM, UM, I JUST, I WANT YOU TO KNOW THAT WE WE'RE PROUD OF THE WORK THAT ERCOT AND THE COMMISSION OR IS DOING, AND WE'RE VERY SUPPORTIVE.
UH, THIS IS, I THINK, KIND OF A WAKE UP CALL TO ALL OF US TO LET US KNOW THE, THE, THE FUTURE IS, IS NOT CLEAR.
AND, UM, AND HOW WE GET THERE IS NOT CLEAR, AND WE HAVE A LOT OF WORK TO DO.
[6. Independent Market Monitor (IMM) Report]
IS AGENDA ITEM SIX, INDEPENDENT MARKET MONITOR REPORT.UH, I M M DIRECTOR CARRIE BIVENS IS HERE WITH US TO PRESENT THIS ITEM.
CARRIE BIVINS WITH POTOMAC ECONOMICS.
I HAVE A BRIEF UPDATE FOR YOU TODAY.
AS PABLO MENTIONED, OBVIOUSLY WE'RE STILL IN THE THICK OF THINGS WITH SUMMER AND A LOT OF THE MARKET EVENTS THAT WE'VE EXPERIENCED POST DATE, THE POSTING OF THIS PRESENTATION.
UM, BUT, UH, I THINK THERE'S STILL SOME INTERESTING THINGS TO TALK ABOUT WITH REGARDS TO PRICES.
JUST IN WHAT WE SAW IN JUNE AND JULY, JUNE IN PARTICULAR, THIS IS ON IMPLIED HEAT RATES.
SO AGAIN, UH, IMPLIED HEAT RATES TAKE THE EFFECT OF NATURAL GAS PRICES OUT SO THAT WE CAN MORE REASONABLY COMPARE YEAR OVER YEAR WHAT THE IMPACT OF, UH, THE MARKET OUTCOMES ARE.
AND WE SAW IN JUNE THAT THOSE HEAT RATES WERE UP QUITE SUBSTANTIALLY FROM 2022, UM, ALTHOUGH THEY WERE DOWN IN JULY.
I WANNA TALK A LITTLE BIT ABOUT PEAKER NET MARGIN.
THAT IS A, UH, PROXY THAT'S IN THE PROTOCOLS AND IN AND P C SUBSTANTIVE RULES THAT APPROXIMATES THE FIXED COST RECOVERY OF A PEAKING UNIT.
AND SO IT'S A WAY OF LOOKING AT WHAT ARE THE NET REVENUES THAT ARE BEING GENERATED, UH, ABOVE AND BEYOND THE OPERATING COSTS OF A PEAKER UNIT TO SEE, UH, HOW THAT DOES THAT COMPARE WITH COST OF NEW ENTRY.
AND I CAN SAY AS OF TODAY, THE PEAKER NET MARGIN IS ACTUALLY 197,000.
UH, COST OF NEW ENTRY VALUE IS 1 0 5.
SO WE'RE QUITE SUBSTANTIALLY OVER COST OF NEW ENTRY.
IN FACT, WE HAVE EXCEEDED THAT METRIC FOR OF THE LAST FIVE YEARS.
FOR PEAKER NET MARGIN, UH, 197 IS THE HIGHEST IT'S EVER BEEN, UM, EXCEPT FOR 2021 BECAUSE OF THE EFFECTS OF WINTER STORM URI.
UM, IT'S HIGHER THAN 167 WAS THE NUMBER FOR THE END OF 2022.
AND SO THAT GIVES YOU AN IDEA OF WHERE WE STAND WITH REGARDS TO MARKET OUTCOMES IN 2023, ANCILLARY SERVICES COSTS ARE UP, UM, PARTICULARLY WITH THE ADDITION OF E C R SS.
THOSE, UM, COSTS HAVE, ARE HIGHER THAN ANY OF THE OTHER SERVICES, HIGHER THAN NON SPEN AND HIGHER THAN RESPONSIVE RESERVE SERVICE.
AND WE TALKED A LITTLE BIT ABOUT LOAD NO SECRET THAT, UH, HUGE LOAD GROWTH THIS YEAR.
I WANTED TO SHOW IT A LITTLE BIT BY ZONE.
AND YOU CAN SEE, UH, ON PEAK AND ON AVERAGE, THE MOST OF THE GROWTH HAS BEEN IN THE HOUSTON AND THE SOUTH ZONE, NOT SO MUCH, AT LEAST FOR JUNE AND, UH, JULY AND THE NORTH OR THE WEST.
NOW, TRANSMISSION CONGESTION HAS BEEN GROWING OVER THE PAST SEVERAL YEARS.
HOWEVER, WHAT WE'RE SEEING THIS YEAR IS A LITTLE BIT DIFFERENT.
UM, WE'RE AT A 1.6 BILLION AS OF AUGUST 14TH.
IT WAS 2.8 BILLION ALL OF LAST YEAR.
AND, UH, WE DID SEE IN AUGUST, AT LEAST AS OF AUGUST 14TH, THAT IS THE HIGHEST MONTHLY ACCUMULATION OF CONGESTION RENT.
WE DID SEE SIGNIFICANT CONGESTION, UH, PARTICULARLY IN THE SOUTH ZONE, AND, UM, THAT HAS CONTRIBUTED TO THAT HIGH MONTHLY ACCUMULATION FOR AUGUST.
HOWEVER, WE ARE MUCH TRENDING MUCH LOWER THAN LAST YEAR, AND I THINK THIS IS PREDICTABLE RESULT GIVEN THE LOWER NATURAL GAS PRICES IN 2023 WHEN THE COST OF RE DISPATCHING GENERATORS IS LOWER.
WHENEVER YOU HAVE CONGESTION, YOUR CONGESTION RUN IS LOWER.
AND SO THIS IS ACTUALLY BREAKING A CYCLE THAT WE'VE SEEN OVER THE LAST SEVERAL YEARS OF
[01:05:01]
INCREASING CONGESTION COSTS.AND, AND LASTLY, I WANTED TO SHOW THE RELIABILITY UNIT COMMITMENT HOURS.
UH, WE'RE ACTUALLY SEEING A DECREASE IN 2023 OVER 2022.
AND, UH, I ATTRIBUTE THAT TO THE INCREASED NONS SPEND.
PROCUREMENT ERCOT IS BUYING MORE NONS SPEND STARTING IN 2023, AND THAT HAS THE EFFECT OF HAVING MORE GENERATION AVAILABLE FOR THAT R MARGIN.
AND ERCOT DOESN'T NEED A R AS OFTEN.
AND SO WE'RE SEEING, UM, WE'RE SEEING THAT TREND FOR 2023.
WE SAW VERY FEW RUCKS IN AUGUST, UM, AS MOST GENERATORS WERE ONLINE AND SELF COMMITTED BECAUSE OF THE HIGH, UH, PRICES THAT WE WERE EXPECTING IN THOSE TIMES.
THAT CONCLUDES MY PRESENTATION.
ANY QUESTIONS, CARRIE, THIS JULIE ENGLAND.
UH, I REALLY APPRECIATE YOUR ANALYSIS.
I HAD A QUESTION, THOUGH, ON THE ANCILLARY SERVICES PAGE, IS RUCK IS CONSIDERED AN ANCILLARY SERVICE, CORRECT? NO, IT'S NOT.
BUT HOW DOES RUCK, SINCE, UM, E C R S IS REPLACING RUCK, SO TO SPEAK? HOW DOES THE RUCK PRICING COMPARE TO THE E C R S PRICING? UM, I DON'T KNOW IF I WOULD QUANTIFY E C R SS AS REPLACING RUCK.
UM, ALTHOUGH WE HAVE SEEN WITH E C R S BECAUSE IT IS MORE RESERVE MEGAWATTS THAN WE HAD BEFORE, BECAUSE WE HAVE MORE RESERVES, WE HAVE MORE RESOURCES ON THE SYSTEM, UH, ONLINE, AND SO THAT IS DECREASING THE NEED TO RUCK.
UH, I DON'T THINK THAT WAS AT LEAST, YOU KNOW, YEARS AGO WHEN THE E C R S N P R WAS APPROVED, THAT WAS NOT A STATED BENEFIT OR A DESIRED OUTCOME OF THE E C R S PROCUREMENT.
WELL, CAN YOU SAY, MAKE SOME COMMENTS OR ADD SOME COLOR TO, AS RT GOES DOWN, OTHER ANCILLARY SERVICES ARE USED? WHAT'S THE OVERALL COST IMPACT TO THE MARKET? OKAY.
I WOULD SAY DEFINITELY INCREASE.
I MEAN, OUR RUCK MAY COAL IS THE, UM, THE, THE ACTUAL, YOU KNOW, DIRECT SETTLEMENT IMPACTS OF RUCK ARE NOT THAT SIGNIFICANT.
THEY HAVE INDIRECT OTHER IMPACTS THAT ARE, UM, CAN BE CONSIDERED, BUT AS FAR AS THE DIRECT SETTLEMENT IMPACT, THE RUCK IS MUCH LOWER THAN THE ADDITION OF THE E C R S COSTS.
BILL, UH, CARRIE, THANKS FOR THE PRESENTATION TODAY.
UH, CAN YOU GO BACK TO SLIDE TWO FOR A MINUTE? YOUR SLIDE TWO.
SO, THEORETICALLY, SINCE WE'VE HAD, UM, A PEAKER NET MARGIN THAT IS HIGHER THAN THE, THAN THE NEW ENTRY VALUE, UH, OVER FIVE YEARS, SOMEBODY SHOULD HAVE PLANTED SOME CAPITAL IN THE GRANT AND BUILT A NEW PLANT.
HOW DO WE RECONCILE THIS CHART VERSUS THE FACT THAT WE'VE HAD REALLY NO NET NEW PEAKER CAPACITY ADDED? RIGHT.
WE, WE HAVE HAD SOME, BUT I WOULD SAY THAT CERTAINLY THE MARKET SIGNALS ARE THERE FOR COST OF NEW ENTRY.
UH, AGAIN, THAT'S FOR THE LAST FIVE YEARS, PEAKER NET MARGIN HAS CLEARED OVER CONE.
UM, ONE POTENTIALITY IS THAT THAT CONE VALUE 1 0 5 IS TOO SMALL.
UM, ALTHOUGH 1 97 I THINK IS HIGHER THAN ANY ANYBODY, UH, AT ESTIMATE OF CONE AT THIS POINT.
UM, SO I THINK WE'RE STILL IN THAT TRANSITION PERIOD OF SEEING HOW THOSE MARKET OUTCOMES ARE GOING TO, HOW THE MARKET IS GONNA RESPOND TO THEM.
SOME OF IT IS THAT BECAUSE WE'RE GETTING SO MANY IN SOLAR AND BATTERIES, UM, THOSE ARE THE MOST ECONOMIC UNITS GIVEN THE ENERGY ONLY MARKET DESIGN.
RIGHT NOW, WE'RE SEEING THAT, YOU KNOW, BECAUSE IT'S HOT IN SUMMER AND PRICES ARE HIGH, WHEN, YOU KNOW, AIR CONDITIONING USE IS UP, THEN THAT INCENTIVIZES THE, UH, SOLAR.
AND BECAUSE WE HAVE PRICE VOLATILITY AMONGST THE HOURS IN THE DAY, UM, BETWEEN WIND AND SOLAR, WE GET A LOT OF BATTERIES.
SO WE HAVE TO THINK THE, THIS IS LIKE AN ANNUAL KIND OF LOOK AT COST OF NEW ENTRY.
BUT IF WE ALSO LOOK AT WHAT IS THE ACTUAL INCENTIVES THAT WE'RE SEEING IN THE MARKET, IT MAKES A LOT OF SENSE TO ME THAT SOLAR AND BATTERIES ARE ATTRACTIVE TO COME TO TEXAS.
UM, I WOULD EXPECT THAT WE'RE GONNA SEE MORE, UH, NATURAL GAS RESOURCES BUILT AS WELL, JUST GIVEN THESE OUTCOMES.
UM, YOU KNOW, INVESTORS DON'T TEND TO LEAVE TONS OF MONEY ON THE TABLE FOR TOO LONG, SO, UM, I'M OPTIMISTIC THAT WE'RE GONNA SEE SOME RESULTS.
YEAH, WHEN YOU LOOK AT THE INTERCONNECT QUEUE, IT DOESN'T REALLY BACK UP WHAT THIS CHART SAYS.
AND SO I, AND WE NEED THAT DISPATCHABLE THERMAL POWER IN ORDER TO HAVE A RELIABLE MARKET, A RELIABLE GRID, AND IT, THE CAPITAL MARKETS ARE TELLING US THAT SOMETHING'S NOT RIGHT ABOUT THIS ANALYSIS.
AND SO THAT'S, THAT'S SOMETHING WE NEED TO KEEP IN MIND.
I THINK SOME OF IT HAS TO DO WITH REGULATORY UNCERTAINTY.
UM, THERE'S A LOT OF CHANGES THAT ARE HAPPENING AT THE REGULATORY LEVEL, AT THE LEGISLATIVE LEVEL, AND THAT'S BEEN GOING ON FOR SEVERAL YEARS.
AND SO IT'S HARD TO MAKE THOSE HUGE CAPITAL INVESTMENTS WITHOUT KNOWING WHERE IS IT GONNA SETTLE.
AND SO HAVING, WHEN WE SEE THAT SETTLE HERE OVER THE NEXT COUPLE YEARS, I THINK IS GONNA MAKE A BIG DIFFERENCE.
WELL SEE THAT, THAT'S ANOTHER THING IS THAT THE, THE COST OF REGULATORY UNCERTAINTY NEEDS TO BE PART OF CONE AND SOMEWHERE DOWN THE LINE.
AND OF COURSE, THAT'S PRETTY HARD TO DO.
THAT'S VERY CHALLENGING, AND I'M NOT, I'M NOT BEING CRITICAL OF OF THE REPORT.
[01:10:01]
YOU SOMEWHERE THE, THE, THE CONSUMER NEEDS TO KNOW THAT THE CAPITAL MARKETS ARE NOT PR NOT APPRECIATING THIS POWER, THIS TYPE OF RESOURCE BECAUSE OF REGULATORY UNCERTAINTY OR COST TO CAPITAL, WHATEVER IT IS.THERE IS JUST SOMETHING'S NOT WORKING.
WELL, OR SOMETHING'S WORKING TOO WELL.
I MEAN, IT'S PRETTY CLEAR THE FEDS ARE TRYING TO DRIVE ALL THE THERMAL POWER OUT OF THE SYSTEM.
THAT'S, THAT'S, THAT'S A GOOD SUMMARY.
ECONOMIC SIGNALS IS OBVIOUSLY ONLY ONE PART OF THE EQUATION.
COMMISSIONER COBOSS, UH, THANK YOU, CHAIRMAN.
SO CARRIE, YOU KNOW, I THINK RECOGNIZING, AS YOU, YOU ALLUDED TO, UM, IT'S GONNA BE REALLY IMPORTANT FOR ERCOT TO CONDUCT A NEW CONE STUDY.
'CAUSE 1 0 5 IS, IS PRETTY LOW.
AND, AND, AND GETTING THAT UPDATED NUMBER IS GONNA BE CRITICALLY IMPORTANT.
AND, AND I THINK EVEN PROBABLY UPDATING THAT CONE FIGURE IN THE INTERIM AND, AND HAVING SOME KIND OF A PROCESS WHERE IT'S NOT JUST UPDATED ONCE AND IT STAYS THAT FIGURE FOR, YOU KNOW, THE NEXT 20 YEARS.
I THINK MANY MARKETS WILL DO A QUA QUADRENNIAL REVIEW WHERE THEY'LL HAVE IT DONE EVERY FIVE YEARS, AND IN THE INTERIM, THEY DO INTERIM UPDATES BECAUSE THIS CODE NUMBER DRIVES A LOT OF, UM, A A LOT OF DIFFERENT POLICY DECISIONS OR OBSERVATIONS.
SO TO YOUR POINT ABOUT, UM, PEAKER NET MARGIN BEING THE HIGHEST RIGHT NOW SINCE OUTSIDE OF 2021, DO YOU THINK ANY OF THIS MONEY, I MEAN IT, THE C EXCEEDING THE COST OF DE ENTRY NOT ONLY DRIVES OR SHOULD DRIVE, UM, YOU KNOW, IT JUST, IT'S A SIGNAL OF REVENUES THAT ARE IN THE MARKET FOR NEW GENERATION BUILDOUT, BUT COULD YOU ALSO LOOK AT IT FROM THE LENS OF GENERATION RETENTION? BECAUSE WE'RE HAVING A LOT OF DISCUSSION ABOUT E P A IMPACT TO THE MARKET, UM, FROM YOUR PERSPECTIVE, YOU KNOW, WE'VE PUT A LOT OF MONEY IN THE MARKET OVER THE LAST FIVE YEARS.
I MEAN, I KNOW YOU'RE NOT A, FROM YOUR PERSPECTIVE, DOES THAT, DOES THAT HELP WITH RETAINING OUR EXISTING GENERATION? OH, ABSOLUTELY.
IT, IT'S NOT JUST, IT'S NOT JUST ATTRACTING NEW RESOURCES, IT'S ALSO GONNA RETAIN EXISTING RESOURCES TO THE EXTENT THAT THEIR ECONOMIC DECISIONS, SOMETIMES DECISIONS TO RETIRE HAVE, UH, OTHER REASONS.
UH, MAYBE THEY'RE DRIVEN BY, UM, OUTSIDE FACTORS OR REGULATORY ITEMS, OR THEY CAN BE DRIVEN BY, UM, SIMPLY THE PLANTS ARE TOO OLD AND TOO EXPENSIVE TO FIX, EVEN UNDER A HIGH, HIGH REVENUE SITUATION.
AND, AND TO BILL'S POINT EARLIER ABOUT POWER COMPANIES MAKING POWER GENERATION COMPANIES MAKING BUSINESS DECISIONS TO RETIRE THEIR PLANTS EARLIER BECAUSE THEY SEE THE E P A REGULATIONS COMING DOWN THE PIKE, YOU KNOW, THESE E P A REGULATIONS THAT ARE BEING CONSIDERED RIGHT NOW, THE, UM, AND I GUESS THE RULES WILL BE SORT OF FINALIZED NEXT YEAR, MOSTLY IN 24 WITH COMPLIANCE STATES IN 25.
AND SO IT'LL BE INTERESTING TO SEE, BECAUSE I KNOW WHEN, UM, WE HAD THE E P A REGULATIONS, THE LAST ROUND OF THEM UNDER THE OBAMA ADMINISTRATION, THERE WAS A LOT OF DECISIONS TO RETIRE, MADE A LOT EARLIER THAN WHAT I BELIEVE WE'RE SEEING NOW.
SO I'M WONDERING IF, YOU KNOW, WHAT, WHAT THE TRUE IMPACT OR WHAT, WHAT'S, YOU KNOW, TO KIND OF KEEP IT A TAB ON, YOU KNOW, HOW ARE, HOW ARE, HOW IS THE ADDITIONAL REVENUE THAT'S BEING PUT IN THE MARKET HELPING TO WARD AGAINST BUSINESS DECISIONS TO CLOSE DOWN PLANS IN EXPECTATION OF E P A REGULATIONS? YEAH, NO, VERY GOOD POINT.
AND, UH, I THINK IT'S ALL GONNA COME DOWN TO HOW THOSE, ALL THOSE MANY RULES SHAKE OUT WHAT THE CAPITAL COSTS ARE OF COMPLYING WITH THEM WITH REGARDS TO THAT.
AND AS FAR AS WHAT THE FUTURE PRICES ARE LOOKING LIKE, YOU KNOW, IT'S GONNA COME DOWN TO A DECISION ABOUT WHETHER OR NOT THE FUTURE PRICES ARE SUBSTANTIAL ENOUGH IN ORDER TO COVER THOSE CAPITAL COSTS.
UM, AND I DO WANNA MENTION THAT, YOU KNOW, WE HAVE A LOT OF THOUGHTS ABOUT THESE MARKET OUTCOMES, ESPECIALLY IN AUGUST.
I MEAN, IT, IT IS REALLY BEEN A TREMENDOUS MONTH.
WE'RE STILL, UH, ANALYZING A LOT OF THOSE THINGS.
WE'RE GONNA ALSO COME BACK TO Y'ALL NEXT, YOU KNOW, WITH A SUMMER REVIEW FOR THAT.
BUT ALSO WE HAVE SOME THOUGHTS THAT WE'LL START BRINGING UP AT THE WORKING GROUP LEVEL AS FAR AS RESERVES GO, AND HOW THE E C R S ROLLOUT IMPLEMENTATION, ALL OF THAT HAS GONE, AND HOW THAT HAS IMPACTED THE PRICES AND IMPACTED THE OUTCOMES.
SO, UH, I THINK WE'RE KIND DEFINITELY IN THIS STAGE OF THE MARKET IS REACTING DIFFERENTLY THAN IT'S REACTED IN THE PAST.
AND SO WE'RE GONNA HAVE TO, YOU KNOW, THE MARKET AS A WHOLE IS GONNA HAVE TO SETTLE OUT AND SEE WHAT, WHAT ARE THE LONG-TERM EFFECTS OF THESE IN ORDER TO MAKE THOSE KINDS OF DECISIONS HERE OVER THE NEXT FEW YEARS.
UM, TO SEND THAT INVESTMENT SIGNAL TO THE CAPITAL MARKETS.
'CAUSE I THINK THAT REGULATORY UNCERTAINTY, AS YOU NOTED, IS A LARGE PIECE OF,
[01:15:01]
OF WHAT WE'RE FACING WITH RESPECT TO INVESTMENT, BECAUSE WE HAVE A LOT OF ITEMS ON OUR PLATE RIGHT NOW AS PABLO LAID ON HIS PRESENTATION AND MAKING SURE THAT WE ALL KEEP OUR HANDS ON THE STEERING WHEEL AND GET ALL THAT DONE AND, AND PUT OUT EXPECTATIONS ON IMPLEMENTATION TIMELINES AND DELIVERABLES IS GONNA BE CRITICALLY IMPORTANT.UM, YES, GARY, UM, QUICK QUESTION.
WE'VE BEEN WATCHING OVER THE SUMMER, UM, YOU KNOW, YOU SPOKE ABOUT THE INCREASE IN MONEY GOING INTO THE MARKET, AND WE'VE SEEN THAT, AND I KNOW YOUR I M M REPORT MENTIONED THE AMOUNT FROM THE O R D C CHANGES, BUT WE'RE SEEING A SPIKE IN PRICES DURING THE DAYS WHEN WE HAVE PLENTY OF RESERVE, AND THERE'S RIGHT, THERE'S NO NEED FOR THAT.
CAN YOU EXPLAIN WHY THAT MIGHT BE THE CASE? YEAH, AGAIN, THAT'S WHAT WE'RE STILL EVALUATING AS WE LOOK AT ALL THESE DAYS THAT HAVE HAPPENED, PARTICULARLY IN AUGUST, ALTHOUGH THERE WAS A COUPLE IN, IN JULY AND, AND JUNE AS WELL.
AND THEN WE'RE GONNA BRING SOME RECOMMENDATIONS TO THE WORKING GROUP LEVEL.
UM, I THINK WHAT WE'RE GONNA SEE, AND JUST KIND OF, I GUESS AS A PREVIEW SINCE YOU ASKED THE QUESTION, IS THAT WE'RE GONNA PROBABLY HAVE SOME RECOMMENDATIONS ON CHANGING THE RESERVE METHODOLOGY FOR NEXT YEAR BECAUSE OF SOME OF THESE OUTCOMES THAT WE'VE SEEN, AND BECAUSE WE ARE SEEING A DISCONNECT BETWEEN THE LEVELS OF RESERVES AND THE PRICING OUTCOMES IN CERTAIN SCENARIOS.
UH, KERRY, THIS IS GREAT ANALYSIS.
I, I THINK IT'S GONNA BE IMPORTANT FOR US NOW THAT WE, UH, UM, HAVE BEEN SO SUCCESSFUL IN COPING AND OVERCOMING THE CHALLENGES OF THE SUMMER THAT WE START THINKING ABOUT HOW THIS, UH, WILL OVERLAY INTO WINTER MONTHS, AGAIN, WITH THOSE LOAD GROWTH TRENDS THAT WE'VE ALL BEEN SEE, UH, OBSERVING CREEPING UPWARDS, UM, AND IN WHICH ZONES, SO, UH, IN OCTOBER AND, AND CERTAINLY AT THE COMMISSION, UH, BUT I, I BELIEVE AT THE ERCOT BOARD LEVEL TOO, UM, ANY FORWARD ANALYSIS YOU CAN DO WITH THE TRENDS THAT YOU'RE SEEING IN SUMMER AND TRY TO EXTRAPOLATE THAT FOR WINTER MM-HMM.
LOOK, UH, EXTRAPOLATING INTO THE FUTURE IS ALWAYS A CHALLENGE.
IT'S, IT'S RISKY, BUT IT'S, IT GIVES US SOMETHING TO LOOK TOWARD.
UH, RATHER THAN JUST OBSERVING THROUGH, UH, EXPERIENCE.
UM, AND TO ADD ON TOP OF COMMISSIONER MCADAM'S COMMENTS, YOU KNOW, THE, THE TWO ZONES THAT YOU SAID ARE EXPERIENCING IN THE LA THE LARGEST LOAD INCREASES HOUSTON AND, AND SOUTH ZONE.
UM, YOU KNOW, THE COMMISSION ORDER TRANSMISSION INTO THE SOUTH ZONE THAT'S GONNA BE COMING ONLINE, I BELIEVE IN 24 AND 26.
SO WE'RE A FEW YEARS OUT STILL.
AND, AND PRESUMABLY, YOU KNOW, ACCORDING TO SOME OF THE UTILITIES DOWN THERE, MAYBE MORE TRANSMISSION WILL BE NEEDED BECAUSE OF THE, UM, LARGE DEMAND, UM, INCREASE DOWN THERE ON THE PORTS AND, AND JUST ECONOMIC GROWTH.
SO TRANSMISSION'S GONNA BE A VITAL PIECE OF, OF MEETING RELIABILITY INTO THE SOUTH ZONE AND, AND ALSO THE HOUSTON ZONE.
SO IN YOUR ANALYSIS, IF YOU COULD SORT OF, IF YOU CAN EXTRAPOLATE SOME OR ADD SOME OF THAT TRANSMISSION IMPACT IN THERE AND HOW THAT WOULD BE HELPFUL, UM, INTO MEETING THE, UH, MAINTAINING RELIABILITY IN THESE HIGH GROWTH AREAS.
WE HAVE SEEN A LOT OF SOUTH TO HOUSTON TYPE CONGESTION THIS SUMMER.
UM, AND I THINK AS, UM, WAS MENTIONED PREVIOUSLY, MAYBE YESTERDAY, UM, YOU KNOW, THE, THE VALLEY USED TO BE AN IMPORT CONSTRAINT AND NOW IT'S REALLY AN EXPORT CONSTRAINT BECAUSE WE'RE SEEING A LOT OF COASTAL WIND AND THINGS AND, UH, GENERATION RESOURCES DOWN IN THE SOUTH THAT ARE EITHER ABLE TO REACH HOUSTON OR ABLE TO REACH THE NORTHERN PART OF THE SOUTH ZONE, UH, WHERE A LOT OF THE, UH, LOAD GROWTH HAS BEEN.
YEAH, WE CAN REPORT ON THAT AS WELL.
ANY OTHER COMMENTS OR QUESTIONS? OOPS, ANY OTHER COMMENTS OR QUESTIONS? THANK YOU, KERRY.
[7. TAC Report]
TIME, I'D LIKE TO INVITE KAITLYN SMITH, VICE CHAIR OF THE TECH TECH TECHNICAL ADVISORY COMMITTEE, WHO IS CONNECTED VIA TELECONFERENCE TO PRESENT AGENDA ITEM SEVEN, THE TAC REPORT.THERE ARE FOUR REVISION REVISION REQUESTS AS VOTING ITEMS UNDER THE TTAC REPORT TODAY.
ONE OF THESE N P R R 1186, A TAC RECOMMENDATION OPPOSITION WAS FILED BY EOLIAN LP.
PURSUANT TO THE BOARD POLICIES AND PROCEDURES, ATTACK ADVOCATE WAS APPOINTED TO PRESENT TAC POSITION ON N P R R 1186, AND THAT IS BILL BARNES OF RELIANT
[01:20:01]
ENERGY RETAIL SERVICES.I'LL ASK CAITLIN TO TAKE UP THE OTHER THREE REVISION REQUESTS FIRST BEFORE WE MOVE TO N P R R 1186, AT WHICH TIME WE'LL HEAR FROM EOLI N LP, THE TAC ADVOCATE, AND ERCOT STAFF.
WE'LL ALSO HEAR FROM R AND M COMMITTEE CHAIR BOB FLEXON REGARDING THE COMMITTEE'S RECOMMENDATIONS ON THESE FOUR REVISION RE FOUR REVISION REQUESTS.
CAN, CAN SOMEBODY CONFIRM THAT YOU CAN HEAR ME IN THE, THE VOLUME AND AUDIO IS OKAY? WE HEAR YOU.
I'M KAITLYN SMITH OF JUPITER POWER.
I'M VICE CHAIR OF THE TECHNICAL ADVISORY COMMITTEE.
UH, THANK YOU FOR THE OPPORTUNITY TO PRESENT THIS MORNING, AND ESPECIALLY THANK YOU FOR THE ABILITY TO PRESENT VIRTUALLY.
I HAVE A, UH, SEVEN WEEK OLD BABY THAT WE BROUGHT HOME FROM THE NICU THREE WEEKS AGO, SO I'M NOT QUITE BACK IN PERSON YET.
UM, AND THANK YOU TO BRIAN SANDS, WHO IS IN TECH'S INDEPENDENT GENERATOR SEGMENT, AND HE SERVED AS OUR TECH REPRESENTATIVE TO PRESENT THE REPORT IN PERSON TO R M YESTERDAY.
WE CAN GO TO SLIDE TWO AS WE DO AT EACH BOARD MEETING.
UM, I'LL BE PRESENTING A SUMMARY OF THE TECH MEETINGS, SO THAT HAVE OCCURRED SINCE THE LAST BOARD MEETING, AS WELL AS THE, THOSE OPPOSED VOTING OR UNOPPOSED, UM, OR THE VOTING ITEMS WITH THE, THE OPPOSITION, UH, TECH MET IN JUNE, JULY, AND AUGUST.
WE HAVE THE SEPARATE VOTING ITEMS FOR YOU TODAY FROM THOSE MEETINGS FOR NON UNANIMOUS REVISION REQUESTS, INCLUDING THE ONE ALREADY MENTIONED THAT RECEIVED AN APPEAL FROM A STAKEHOLDER AND SUBSEQUENT
THE OTHER VOTING ITEMS ARE N P R R 1165.
UM, OTHER BIDING DOCUMENT REVISION REQUEST OH 48 ON THE O R D C, UM, AND A VERIFIABLE COST MANUAL REVISION REQUEST OH 34.
SLIDE THREE AND FOUR ARE THE, UM, UNOPPOSED REVISION REQUESTS, THE LIST OF THE, THE 27 UNOPPOSED REVISION REQUESTS.
SO I BELIEVE WE CAN GO TO SLIDE FIVE NOW, AND THIS IS A SUMMARY OF THE VOTING ITEMS FOR YOU TODAY, AS WELL AS A SUMMARY OF THE HIGHLIGHTS FROM THE JUNE, JULY, AND AUGUST TAG MEETINGS.
HERE IS THE, UM, FIRST VOTING ITEM, N P R R 1165 REVISIONS TO REQUIREMENTS OF PROVIDING AUDITED FINANCIAL STATEMENTS AND PROVIDING INDEPENDENT AMOUNT.
UH, THIS N P R R ELIMINATES THE ABILITY OF A COUNTERPARTY TO AVOID POSTING INDEPENDENT AMOUNTS BASED ON THEIR OWN FINANCIAL STATEMENT OR A PARENT OR THIRD PARTY FINANCIAL STATEMENT.
THE THINKING IS THAT IF WE HAD MAINTAINED THE ABILITY TO AVOID POSTING INDEPENDENT AMOUNTS, THIS WOULD BE INCONSISTENT WITH THE IMPLEMENTATION OF N P R R 1112, WHICH WILL BE EFFECTIVE OCTOBER ONE OF THIS YEAR, AND ELIMINATE UNSECURED CREDIT EXTENDED TO OUR CUT COUNTERPARTIES.
WE DID VOTE TO RECOMMEND THIS OTHER JULY MEETING.
THIS HAD ONE OPPOSING, UM, VOTE IN THE MUNICIPAL SEGMENT, AND THE OPPOSING VOTE NOTED THAT THEY SUPPORTED EFFORTS TO IMPROVE CREDIT WORTHINESS, BUT IN THIS CASE, THEY DID NOT BELIEVE THAT THE COST OUTWEIGHED, UM, THE BENEFITS.
ESSENTIALLY, THEY DID AN INDEPENDENT COST ESTIMATE AND ASSESSED THE YEARLY COST OF POSTING COLLATERAL, ALL THE COSTS ASSOCIATED, AND NOT JUST THE ONE TIME POSTING REQUIREMENT.
AND THEN THEY FOUND THAT THEY DIDN'T BELIEVE THE COST THAT RESULTED WITH A PRUDENT USE OF CUSTOMER FUNDS, ONE WEIGHED AGAINST THE BENEFIT TO THE MARKET.
I CAN PAUSE HERE FOR, FOR QUESTIONS OR COMMENT.
I BELIEVE, UM, SLIDE SEVEN IS N P R R 1186 OR NINE SIX.
AND SO WE ARE, WE ARE SKIPPING THAT.
UM, HERE'S SLIDE EIGHT, O B G R R, UM, 48 IMPLEMENTATION OF OPERATING RESERVE DEMAND CURVE.
THIS OTHER BINDING DOCUMENT ADDS TWO PRICE FLOORS TO THE O R D C ONE AT LEVELS BELOW 6,500 MEGAWATTS.
UM, AND ANOTHER ONE BETWEEN, UM, THE 6,500 MEGAWATTS AND 7,000 MEGAWATTS.
YOU'LL RECALL THAT, UM, THIS WAS THE BRIDGING SOLUTION, AND SO THIS IS THE IMPLEMENTATION OF IT.
I PRESENTED THIS IN APRIL, UM, AS THE TECH RECOMMENDATION OF BRIDGING SOLUTIONS.
WE HAD HAD A NUMBER OF TECH WORKSHOPS ON THIS IN THE SPRING, AS
[01:25:01]
WELL AS DISCUSSION IN AT TECH MEETINGS.THEN THE, THE BOARD RECOMMENDED IT, UM, AND THEN THE P U C EARLY THIS MONTH APPROVED IT AT, AT THEIR AUGUST 3RD OPEN MEETING.
SO THIS OTHER BINDING DOCUMENT REVISION REQUEST IS REALLY THE IMPLEMENTATION OF THAT BRIDGING SOLUTION.
THERE WERE SEVEN OPPOSING VOTES FROM THE CONSUMER SEGMENT, SO THE CONSUMER SEGMENT DID UNANIMOUSLY OPPOSE.
THIS WAS CONSISTENT WITH THEIR PAST VOTES AND PAST DISCUSSION.
UM, AND, AND WE DID HEAR IN, AT THE PAST R AND M MEETING IN APRIL, I BELIEVE, FROM THE RESIDENTIAL CONSUMER ADVOCATE, MORE OF THIS POSITION THAT CONCERN WAS THE COST VERSUS WHAT RELIABILITY BENEFIT WE MAY SEE FROM THESE PARTICULAR FLOOR LEVELS.
AND THE CONSUMERS AT THAT TIME HAD FILED SOME ALTERNATE SOLUTIONS AND, AND MORE DISCUSSION ON THAT, MAYBE EXPLORING OTHER OR D C SOLUTIONS OR SERVICE PROPOSALS.
ALL RIGHT, I CAN MOVE ON TO THE NEXT SLIDE.
THIS IS THE VERIFIABLE COST MANUAL REVISION REQUEST.
UM, V C M R R OH 34, EXCLUDING ROCK APPROVED FUEL COSTS FROM FUEL ADDERS.
UM, THIS PROVIDES THAT ACTUAL FUEL PURCHASES THAT WERE USED TO DETERMINE THE REC GUARANTEE SHALL NOT ALSO BE INCLUDED WHEN CALCULATING FUEL LADDERS.
UM, WE DID HAVE ONE NO VOTE FROM THE GENERATION SEGMENT.
THIS IS THE ENTITY THAT HAS, HAS ALWAYS ARGUED THAT THE COMMISSION OR CAUGHT THAT ALL ACTUAL FUEL COSTS, WHETHER FIXED OR VARIABLE SHOULD BE INCLUDED.
AND THEN WE ADDITIONALLY HAD THREE ABSTENTIONS FROM THE GENERATION SEGMENT.
WE CAN MOVE ON TO THE NEXT SLIDE HERE.
WE HAVE THE HIGHLIGHTS FROM OUR, OUR THREE SUMMARY MEETINGS JUNE, JULY, AND AUGUST.
UM, THE FIRST WAS SUSPENSION OF 2024 BUSINESS AND RESIDENTIAL ANNUAL VALIDATION.
UM, WE APPROVED THIS TO ACCOMMODATE RESOURCE CONSTRAINTS AND REDUCE COSTS.
THE SECOND ITEM IS THE C P S SAN ANTONIO SOUTH RELIABILITY REGIONAL PLANNING GROUP PROJECT.
UM, TACK DID ENDORSE OPTION FIVE FOR THIS PROJECT, AS WE RECOMMENDED BY ERCOT AS WELL.
THE LAST ITEM ON THE SLIDE IS THE OTHER BINDING DOCUMENTS LIST, UH, TECH APPROVED REVISIONS TO THE OTHER BINDING DOCUMENTS LIST.
WE'VE REMOVED THE ANNUAL LOAD DATA REQUEST PROCEDURES, AND THIS IS PART OF A, A LARGER EFFORT TO STREAMLINE APPROVAL PROCESSES, UM, AND KIND OF INCORPORATE ALL THE OTHER BINDING DOCUMENTS INTO THE EXISTING PROTOCOLS AND GUIDES AND REMOVE THE UNNECESSARY ITEMS FROM THE OTHER BINDING DOCUMENTS LIST SO THAT WE HAVE KIND OF A, A CLEANER EVERYTHING IN THE PROTOCOLS OR GUIDES.
THIS LAST SLIDE, UM, IS AN IMPORTANT ONE THAT WE'VE HEARD DISCUSSION ON FROM ERCO ALREADY.
UH, TECH IN AUGUST APPROVED THE FORMATION OF THE R T C PLUS B TASK FORCE.
WE, A FEW YEARS AGO HAD THE R T C TASK FORCE, UM, AND WE ARE NOW FORMING THIS REAL TIME CO-OP OPTIMIZATION PLUS BATTERY TASK FORCE TO COORDINATE AND REVIEW, UH, THE NECESSARY ERCOT AND MARKET PARTICIPANT ACTIVITIES AS WE SUPPORT SUCCESSFUL IMPLEMENTATION OF THIS.
AND KIND OF OUR, OUR RESTARTING THE IMPLEMENTATION OF R T C.
SO I BELIEVE WE CAN RETURN TO SLIDE SEVEN.
SO I THINK CAITLYN, AT THAT POINT, MAYBE WE'LL PAUSE FOR A MINUTE AND, UH, TAKE UP THE THREE REVISION REQUESTS THAT ARE NOT, ARE NOT 1186 AND SEE IF BOB FLEXON AS R AND M CHAIR WANTS TO COMMENT ON THOSE, ON THE COMMITTEE'S ACTIONS.
YESTERDAY ON THOSE THREE THAT YOU'RE REFERRING TO, CHAD, WE WENT THROUGH 'EM AND WE AGREED AND SUPPORTED TAX RECOMMENDATION AS WELL.
SO THE COMMITTEE REVIEWED AND APPROVED AND BRING IT FORWARD TO THE BOARD FOR APPROVAL.
IS THAT A MOTION YOU WOULD LIKE TO MAKE? YES.
SO WE HAVE A MOTION AND A SECOND.
UM, AND THIS IS, THIS IS FOR ALL THREE.
UM, AND, AND NOW WE'LL TAKE UP, UH, 1186.
SO CAITLYN, PLEASE PROCEED WITH N P R R 1186.
AFTERWARD, WE'LL HEAR FROM TAC ADVOCATE, BILL BARNES.
ALSO STEPHANIE SMITH ON BEHALF OF EOL EOLIAN
[01:30:01]
AND DAN WOODFIN ON BEHALF OF ERCOT.WE'LL ALSO HEAR FROM BOB FLEXING AGAIN REGARDING THE, UH, R AND M COMMITTEE'S RECOMMENDATION.
KAYLA AND, AND KAILYN, I'LL ASK YOU TO SPEAK UP A LITTLE MORE IF YOU COULD JUST, OKAY.
IS IS THIS BETTER? I THINK SO.
SO WE ARE NOW AT N P R R 1186 IMPROVEMENTS PRIOR TO THE R T C PLUS B PROJECT FOR BETTER E S R STATE OF CHARGE.
UM, THIS INTRODUCES CHANGES TO IMPROVE, UH, THE AWARENESS ACCOUNTING MONITORING OF STATE OF CHARGE FOR AN ENERGY STORAGE RESOURCE.
AND THIS APPLIES TO THE INTERIM PERIOD BEFORE R T C GOES LIVE.
I KNOW WE HAVE OTHER SPEAKERS, SO I WILL COVER THE TECH VOTE QUICKLY.
THERE WERE THREE OPPOSING VOTES, UM, FROM THREE DIFFERENT SEGMENTS, THE CONSUMER INDEPENDENT GENERATOR AND, UH, RETAIL SEGMENT, AND FIVE ABSTENTIONS FROM THE CONSUMER INDEPENDENT POWER MARKETER AND INDEPENDENT REPS SEGMENTS AS WELL.
THE OPPOSING VOTES ATTACK WERE BASED ON CONCERN REGARDING CONSEQUENCES ARISING FROM THIS N P R R RELATED TO, UH, PARTICIPATION OF ENERGY STORAGE RESOURCES, ESPECIALLY IN
AS, AS YOU'LL HEAR A LOT OF THET DISCUSSION RELATED BACK TO N P R R 10 96, WHICH SET DURATION REQUIREMENTS FOR ENERGY STORAGE RESOURCES PROVIDING NONS SPIN AND E C R S.
SO THESE ARE VERY TECHNICAL DISCUSSIONS ON DURATION AND STATE OF CHARGE THAT BECAME CONFLATED AND OPPONENTS OF THIS N P R R FEEL THAT IS PROBLEMATIC AND RESULTS IN FURTHER LIMITING THE CAPACITY THAT ENERGY STORAGE RESOURCES CAN CONTRIBUTE TO NON AND E C R S, UM, OPPONENTS.
WERE ALSO CONCERNED THAT THIS IS NOT TECHNOLOGY NEUTRAL.
POLICY TECH DID VOTE FOR THIS N P R R AND AS THE, THE CHAIRMAN HAS ALREADY LAID OUT FOLLOWING TECH, THERE WAS AN APPEAL FROM OLIAN.
SO TECH LEADERSHIP, WE DID APPOINT A TECH ADVOCATE TO SPEAK, UH, FURTHER TO TAX'S POSITION ON THIS N P R R.
AND THAT'S BILL BARNES FROM N R G ERCOT.
ADDITIONALLY FILED COMMENTS AND THERE WAS THAT ROBUST DISCUSSION YESTERDAY AT R AND M.
AND WITH THAT, I WILL TURN IT OVER TO THOSE SPEAKERS.
UH, BILL BARNES, YOU WANNA COME FORWARD AS THE TAC ADVOCATE, AND OF COURSE, A LOT OF US HEARD THE, THE ROBUST DISCUSSION YESTERDAY, SO FEEL FREE TO EITHER DO THE SAME THING TWICE OR DO SOMETHING MORE ABBREVIATED.
SO N P R 1186, THE SEQUEL
I'M A PROUD CARD CARRYING MEMBER OF THE TECHNICAL ADVISORY COMMITTEE IN THE INDEPENDENT REP SEGMENT.
AND MY ROLE TODAY IS TO, UH, COLLECTIVELY SUMMARIZE THE ACTIONS OF TAC REGARDING N P R 1186, WHICH IS ADMITTEDLY A CHALLENGING ROLE FOR THIS N P R BECAUSE IT IS QUITE COMPLEX AND TECHNICAL.
AND AS YOU GUYS PROBABLY KNOW, UM, TAC MEMBERS TEND TO HAVE DIFFERING OPINIONS.
SO I'M GOING TO SUMMARIZE, UH, OUR VIEWS, UH, AND THE REASONING FOR AFFIRMATIVELY VOTING IN A FAVOR OF THE N P R R IN TERMS OF, UH, WHAT THE N P R IT DOES DOES ITSELF.
I THINK YOU'RE GONNA HEAR FROM OTHER SPEAKERS, UM, IAN AND THEN ERCOT THAT ARE, UM, MUCH MORE IN THE WEEDS ON THE TECHNICAL DETAILS OF THE N P R R.
SO, UH, I THINK THEY'RE BETTER EQUIPPED TO ANSWER YOUR QUESTIONS ON SPECIFICALLY WHAT IT DOES, BUT AT A HIGH LEVEL, IT IMPROVES THE AWARENESS, UH, AND THE ENABLES, UH, COMPLIANCE, UH, MONITORING FOR THE OPERATIONS OF, OF ESRS REL, UM, RELATIVE TO THEIR STATE OF CHARGE TO PROVIDE THE ANCILLARY SERVICES, UH, THAT THEY MAY HAVE SOLD.
PROCEDURAL HISTORY OF THE N P R ITSELF.
UM, BACK IN NOVEMBER OF LAST YEAR, ERCOT STAFF BEGAN TO, UH, BRING TO LIGHT ISSUES RELATED TO THE OPERATIONS, UM, PERFORMANCE AND, UH, INSUFFICIENCY OF STATE OF CHARGE TO PROVIDE FULL ANCILLARY SERVICE, UH, DEPLOYMENT.
UM, LAST NOVEMBER IN THE STAKEHOLDER PROCESS AT, UH, VARIOUS WORKING GROUPS, INCLUDING THE RELIABILITY AND OPERATIONS SUBCOMMITTEE, IN JANUARY OF, UH, 2023, ERCOT PROVIDED GUIDANCE IN THE BUSINESS PRACTICE MANUAL, WHICH, UH, SETS EXPECTATIONS FOR HOW THE CURRENT OPERATING PLAN AND STATE OF CHARGE SHOULD BE REPRESENTED.
INEVITABLY, ERCOT FILED THE N P R ITSELF, 1186
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TO ELEVATE THOSE, UM, COMPLIANCE REQUIREMENTS SO THAT THEY'RE ACTUALLY BINDING AND ENFORCEABLE.THE PROTOCOL, UH, REVISION SUBCOMMITTEE FIRST HEARD THE N P R R IN JULY VOTED TO TABLE TO ALLOW FOR FURTHER DISCUSSION AND NEGOTIATIONS AMONGST THE PARTIES, WHICH TOOK PLACE.
THERE WERE NUMEROUS COMPROMISES AND REVISIONS TO THE N P R THAT ERCOT STAFF, UH, ULTIMATELY AGREED TO.
AND STAKEHOLDERS, UH, VOTED THROUGH AT THE AUGUST P R SS MEETING AT THE OC OR AUGUST TAC MEETING ON THE 22ND.
WE, UH, ULTIMATELY VOTED 88% IN FAVOR TO RECOMMEND APPROVAL OF THE N P R R.
THE OPPOSING VOTES WERE FROM THE CONSUMER INDEPENDENT GENERATOR AND INDEPENDENT REP SEGMENT, AND THERE WERE FIVE ABSTENTIONS FROM THE CONSUMER INDEPENDENT POWER MARKETER AND I REP SEGMENT.
SO BEFORE I GET INTO THE, THE SUMMARY OF THE POSITIONS OF THE TECHNICAL ADVISORY COMMITTEE, I DID WANNA ACKNOWLEDGE, UM, THE QUALITY AND THE HARD WORK, UH, BY STAKEHOLDERS PUT INTO, UH, THE DISCUSSION ON THIS N P R.
THERE WERE NUMEROUS SETS OF COMMENTS FILED THAT REALLY ELEVATED AND ADVANCED THE DISCUSSIONS ON THE TECHNICAL ASPECTS OF THIS ISSUE AND HELPED EDUCATE AND INFORM, UH, STAKEHOLDERS AS WE DISCUSSED THIS OVER THE SUMMER.
JUST WANTED TO CALL OUT OLIAN JUPITER BROADREACH PLUS POWER KEY CAPTURE, HUNT AND ERCOT STAFF FOR, UM, SPENDING A LOT OF TIME AND HARD WORK PREPARING HIGH QUALITY COMMENTS THAT, UM, INFORMED OUR DISCUSSIONS IN TERMS OF FACTORS THAT INFLUENCED SUPPORTIVE TAC MEMBERS, UH, IN THE VOTE ITSELF.
UH, THE FIRST AND FOREMOST WAS THAT ERCOT STAFF, UM, PRESENTED A, A PRETTY CLEAR EXPLANATION OF OF, OF WHY THEY DO NOT HAVE SUFFICIENT VISIBILITY, UH, AND TRANSPARENCY INTO STATE OF CHARGE FOR ESRS THAT ARE PROVIDING, UH, ANCILLARY SERVICES.
IN PARTICULAR, THE DURATION LIMITS THAT WERE APPROVED IN N P R 10 96 RELATIVE TO E C R SS AND NONS SPEND, WHICH ARE TWO HOUR AND FOUR HOUR, UH, DEPLOYMENT REQUIREMENTS.
THOSE ARE REQUIREMENTS THAT ARE, UH, THAT ERCOT STAFF, UM, PRESENTED AND WERE ADOPTED IN N P R 10 96.
AND I THINK IN PRACTICE, UH, WE HAVE SEEN, UH, THE LAST FEW WEEKS, INCLUDING LAST NIGHT, UH, E C R S DEPLOYMENT THAT SPANS OVER TWO HOURS.
SO THAT NEED IS, IS PRETTY APPARENT.
N P R 1186 IS ALSO CONSISTENT WITH, UH, THE THEME OF PROCESS IN RULE CHANGES.
ERCOT HAS ADOPTED SINCE WINTER STORM UY, WHICH IS CONSERVATIVE OPERATIONS.
THAT IS PRESERVING OPERATIONAL FLEXIBILITY.
WHEN YOU'RE PROVIDING AN ANCILLARY SERVICE, YOU'RE PROVIDING A HIGHER PRIORITY PRODUCT.
AND SO THE ABILITY AND THE, THE CERTAINTY IN DELIVERING ALL OF THE MEGAWATTS AND CAPABILITIES THAT YOU'VE SOLD IN THAT PRODUCT, INCLUDING THE DURATION LIMITS THAT ARE THE, THE RULES OF THE ROAD ARE IMPORTANT.
UH, THIRD IS N P R 11 A SIX IS A TEMPORARY SOLUTION.
IT WAS WIDELY ACKNOWLEDGED THAT THIS IS A HALF STEP FORWARD IN TERMS OF IMPROVING THE MODELING AND DISPATCH, UH, AND ENFORCEMENT CAPABILITIES OF ERCOT SO THAT THE ESR IS PROVIDING THE NECESSARY STATE OF CHARGE TO MEET THEIR OBLIGATIONS, BUT THAT THERE IS A, UH, BRIGHTER FUTURE AND MUCH MORE SOPHISTICATED SOLUTION ON THE HORIZON WITH R T C PLUS B THAT WILL BETTER ACCOMMODATE THE OPERATIONAL FLEXIBILITY OF THESE RESOURCES.
UH, AND I THINK WE SEE WITH THE CREATION OF THE R T C PLUS B TASK FORCE, WE WILL HAVE A DEDICATED FORM TO DISCUSS THESE ISSUES IN MORE DETAIL.
AND THEN LASTLY, ON THE SUPPORTING SIDE, UM, THAT THE E S R COMMUNITY ITSELF WAS SPLIT, THERE WERE SOME, UH, E S R OPERATORS THAT SUPPORTED THIS AS A TEMPORARY SOLUTION.
THERE WAS A, A SPECIFIC QUESTION YESTERDAY AT THE RELIABILITY OF MARKETS COMMITTEE.
UH, THE, THE P R S BALLOT WAS, WAS ROUGHLY SPLIT WITH BROAD REACH KEY CAPTURE AND ANJI IN SUPPORT JUPITER PLUS POWER AND, AND EOLIAN WERE OPPOSED.
UH, THERE WERE ALSO FAVORABLE COMMENTS FILED BY HUNT ENERGY.
AND THEN THE CONCERNS, UH, CONCERNS, UM, MAINLY WERE, COULD BE SUMMARIZED AS, UH, THE, THE LACK OF, UM, FULLY MAXIMIZING THE OPERATIONAL FLEXIBILITY OF ESRS AND THE UNIQUE, UNIQUE CHARACTERISTICS THAT THEY POSSESS.
UM, THE, THE FACT THAT DURING GRID EMERGENCIES THAT SOME OF THE ENERGY THAT ESRS COULD BE PROVIDED DUE THE DURATION LIMITS WOULD BE HELD BACK BEHIND THE HASSLE OR RESERVED FOR A LATER PERIOD OF TIME TO MEET THAT TWO OR FOUR HOUR DURATION LIMIT.
AND I THINK
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WHEN WE ARE IN EITHER THE EMERGENCY CONDITION OR NEAR EMERGENCY CONDITION, WE COULD RELAX THOSE DURATION REQUIREMENTS, RELEASE THAT ENERGY, UH, TO, TO THE MARKET RIGHT NOW TO, TO, UH, SERVE, UM, THAT POWER FOR THE NEXT HOUR OR SO.IF WE THINK THAT, UM, AN E E A OR A GRID EMERGENCY IS, IS ONLY GONNA LAST A FEW HOURS, WE COULD USE THAT ENERGY NOW INSTEAD OF, UM, RESERVING IT.
AND I THINK DAN WILL TOUCH ON THAT.
NEXT, UH, ALSO CONCERNS WERE THAT THE 1186 WAS RUSHED PREMATURE AND, UM, THAT THERE WAS HOPE FOR A MORE ROBUST, UH, COMPROMISE, WHICH I THINK WE ARE SEEING WITH, UH, THE LONGER TERM SOLUTION IN R T C PLUS B AND RECOGNIZING THAT THIS IS INDEED JUST A TEMPORARY SOLUTION.
UH, AND THEN CONCERNS ABOUT ANY DELAY TO THE REALTIME CO OPTIMIZATION, WHICH I THINK UNA UH, ATTACK IS UNANIMOUS IN THAT ASPECT.
WE WANNA GET TO R T C PLUS B AS SOON AS POSSIBLE FOR ALL THE BENEFITS IT PROVIDES INCLUDING, UH, INCREASED FLEXIBILITY FOR OUR E S R OPERATION.
AND WITH THAT, I WILL PAUSE FOR ANY QUESTIONS FROM BOARD MEMBERS.
ANY QUESTIONS FOR MR. BARNES? NO, WE, I APPRECIATE ALL THE ANSWERS THAT WERE PROVIDED YESTERDAY.
UM, NEXT, UM, I BELIEVE STEPHANIE IS COMING BACK TO PRESENT THE EOLIAN LP TAC RECOMME RECOMMENDATION OPPOSITION.
THANK YOU FOR YOUR TIME TODAY.
DON'T WORRY, I'VE SUBSTANTIALLY REVISED MY STATEMENT, SO THERE'S GONNA BE LOTS OF NEW, UH, MATERIAL TO TRY TO CLARIFY SOME OF THE QUESTIONS THAT WE DISCUSSED YESTERDAY.
I'M THE CHIEF OPERATING OFFICER AND ONE OF THE OWNERS OF OLIAN.
IN THE PAST THREE YEARS, WE HAVE INVESTED HUNDREDS OF MILLIONS OF DOLLARS INTO ERCOT MARKET INTO THE ERCOT MARKET, AND WE OPERATE THREE OF THE LARGEST MERCHANT BATTERIES ON THE GRID TODAY, ALL OF WHICH HAVE BEEN TESTED AND QUALIFIED BY ERCOT TO PROVIDE MULTI-HOUR DURATION ANCILLARY SERVICE PRODUCTS SUCH AS E C R S AND NONS SPIN.
OUR INVESTMENT IN THE MARKET WAS BASED ON ANTICIPATING THE EXACT KIND OF DAY THAT WE EXPERIENCED YESTERDAY, AUGUST 30TH, YESTERDAY AT 7:50 PM WHEN WE HAD THERMAL OUTAGES APPROACHING 11 GIGAWATTS P R C RESERVES APPROACHING THREE GIGAWATTS AND E AND E E A LEVELS.
ENERGY STORAGE WAS DEPLOYING MORE THAN 1.6 GIGAWATTS, MUCH OF IT THROUGH R R SS AND E C R S ANCILLARY SERVICES FOR ALMOST TWO HOURS.
WITHOUT THIS 1.6 GIGAWATTS, ERCOT WOULD HAVE BEEN AT AN E E A LEVEL TWO ENERGY STORAGE DIRECTLY IMPROVED THE RELIABILITY OF ERCOT GRID LAST NIGHT.
THIS RESOURCE WAS NOT BUILT ON SUBSIDIES OR MANDATES.
THIS RESOURCE, THE PRODUCT OF BILLIONS OF DOLLARS OF COLLECTIVE INVESTMENT BY DOZENS OF COMPANIES, WAS BUILT IN THE LAST FEW YEARS BY PRIVATE INVESTORS AND INDEPENDENT COMPANIES BASED ON A FUNDAMENTAL TRUST IN THE BASIC RULES OF THE MARKET.
AND ON THE BACK OF TECHNICAL ANALYSIS SHOWING THAT FAST RAMPING HIGHLY FLEXIBLE DISPATCHABLE UNITS WOULD BE CRITICAL TO ENSURING RELIABILITY.
LAST NIGHT, ENERGY STORAGE RESOURCES HELD UP OUR SIDE OF THAT MARKET.
WILL ERCOT HOLD UP THE OTHER? MY GOAL TODAY IS TO EXPLAIN WHY N P R 1186 IS NOT READY FOR PASSAGE BY THE BOARD.
WHILE WE BELIEVE THAT SOME FEATURES OF 1186 ARE GOOD, WE BELIEVE THAT MANY OTHERS REQUIRE WORK AND NEED TO BE REMANDED.
SINCE THE URGENCY OF 1186 IS PREDICATED ON RELIABILITY, I'D LIKE TO START THERE FIRST.
UH, CORRELATED CHARGING IS ONE OF THE ISSUES.
1186 REQUIRES ALL STORAGE UNITS TO MEET A STATE OF CHARGE REQUIREMENT AT THE TOP OF EACH HOUR.
WHILE ERCOT MAINTAINS THIS IS NOT MANDATED BY 1186.
AS A BATTERY OPERATOR, I CAN TELL YOU THAT THE PRACTICAL IMPACT IS THAT CORRELATED CHARGING IS ALMOST CERTAIN TO OCCUR IN ORDER TO MEET TOP OF THE HOUR CHARGING OBLIGATIONS, WHICH WILL NEGATIVELY IMPACT RELIABILITY AND COUNTER THE BENEFIT BATTERIES PROVIDE TO THE MARKET.
ERCOT HAS NOT YET STUDIED THE IMPACT OF CHARGING ALL E S R RESOURCES TO MEET TOP OF THE HOUR STATE OF CHARGE REQUIREMENTS.
WE DON'T YET KNOW WHETHER THERE WILL BE COST IMPLICATIONS TO CONSUMERS OR IF IT WILL CREATE GRID CONDITIONS THAT LEAD TO RELIABILITY CONCERNS.
EVENTS UNFORTUNATELY DON'T ALWAYS START AT THE TOP OF AN HOUR AND EVEN THOUGH WE HAVE HOURLY PRODUCTS, WE DON'T WANT ALL BATTERIES CHARGING AT THE SAME TIME TO MEET A REQUIREMENT AT THE TOP OF AN HOUR AS THAT COULD LEAD TO UNINTENDED CONSEQUENCES, ESPECIALLY DURING TIGHT CONDITIONS.
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STRANDED CAPACITY.THIS IS WHERE WE START TO DEVIATE ON THE IMPACTS OF 1186 FOR ONE HOUR PRODUCTS VERSUS MULTI-HOUR PRODUCTS UNDER 1186, BATTERIES MUST MAINTAIN A STATE OF CHARGE PRIOR TO THE FIRST HOUR.
THAT IS TWO TIMES ITS ANCILLARY SERVICE OBLIGATION FOR E C R S AND FOUR TIMES ITS ANCILLARY SERVICE OBLIGATION FOR THIS STATE OF CHARGE SITS IN THE BATTERY.
IT CANNOT BE USED BY EITHER THE BATTERY OWNER WHO IS NOT PAID FOR THIS CAPACITY OR, OR CAUGHT EVEN WHEN NEEDED MOST.
TO BE CLEAR, THIS EFFECTIVELY DERATES THE CAPACITY OF A BATTERY BY 50% FOR E C R S AND 75% FOR NONS SPEND.
THERE IS NO COMPENSATION FOR THIS D RATING AND IT WILL CERTAINLY IMPACT ASSET VALUE AND FUTURE INVESTMENT IN LONGER DURATION BATTERIES.
I'M CONCERNED IN THE DISCUSSION YESTERDAY AT R AND M AND PERHAPS THROUGH THIS PROCESS THAT THERE HAS BEEN A MISUNDERSTANDING ABOUT THE IMPACTS OF THIS N P R R ON E C R SS AND NONS SPIN.
SO I'D LIKE TO PROVIDE A VERY SIMPLE EXAMPLE FOR THE STATE'S SAKE OF CLARITY.
IF I'M AWARDED 25 MEGAWATTS OF NONS SPIN IN HOUR 18, I HAVE NO NONS SPIN AWARD IN HOURS 19, 20 OR 21 UNDER 1186, I AM REQUIRED TO SHOW 100 MEGAWATTS OF STATE OF CHARGE AT THE TOP OF HOUR 18.
EVEN THOUGH I HAVE BEEN AWARDED AND PAID FOR ONLY 25 MEGAWATTS OF NONS SPIN, I WOULD BE REQUIRED UNDER AND 1186 TO WITHHOLD FROM THE MARKET 75 MEGAWATT HOURS FOR THE ENTIRE HOUR.
BECAUSE ANCILLARY SERVICES ARE SOLD IN HOURLY INCREMENTS I HAVE SOLD AND ERCOT HAS BOUGHT ONLY 25 MEGAWATT HOURS OF ENERGY FOR ONE HOUR HOUR 18, EVEN IF THERE'S A MULTI-HOUR DEPLOYMENT OF THE SERVICE ERCOT HAS PAID FOR AND HAS A CALL ON THAT 25 MEGAWATT HOURS OF ENERGY FOR THAT SINGLE HOUR.
ERCOT IN THE MARKET GOT WHAT IT PAID FOR.
BUT UNDER 11 86, 75 MEGAWATT HOURS THAT ERCOT DID NOT PAY FOR IN THIS EXAMPLE IS ENTIRELY LOST TO THE MARKET.
ERCOT CANNOT DEPLOY IT AND I CANNOT MAKE IT AVAILABLE TO THE MARKET TO PROVIDE EITHER ENERGY OR ANCILLARY SERVICES.
BUT WHAT ABOUT DURATION? YOU MAY SAY, AS I THINK A BOARD MEMBER DID YESTERDAY, BUT WAIT, ERCOT PAID FOR A SERVICE WITH A FOUR HOUR DURATION.
ERCOT SELLS ANCILLARY SERVICE ONLY IN HOURLY INCREMENTS BY CONFLATING DURATION WITH STATE OF CHARGE MANAGEMENT.
1186 RESULTS IN WITHHOLDING THIS ADDITIONAL 75 MEGAWATT HOURS FOR NO REASON.
ERCOT CANNOT DEPLOY THE UNIT BEYOND THE AWARDED AMOUNT IN HOUR 18.
EVEN IF THERE IS A MULTI-HOUR DEPLOYMENT OF THE SERVICE, THIS ENERGY IS SIMPLY WASTED WITH 1186 ERCOT IS NOW EFFECTIVELY MANAGING THE OPERATIONS OF MY BATTERIES.
AND I THINK I HEARD PABLO SAY IN HIS PRESENTATION, ERCOT DOESN'T OPERATE THE GENERATORS.
SO I THINK WE NEED TO TRY TO MAKE SOME CHANGES TO MAKE SURE THAT'S NOT HAPPENING.
ERCOT PROPOSED POINT OF REMAND FOR 1186 CLEARLY ACKNOWLEDGES ITS UNDERSTANDING OF THIS ISSUE.
WHILE IT ADDRESSES THE ABILITY OF ERCOT TO UTILIZE THE STRANDED CAPACITY IN A TO BE DEFINED SCARCITY EVENT, IT DOES NOT ADDRESS THE UNPAID DE-RATING THAT OCCURS FOR THE BATTERY OWNERS IN ALL OTHER CASES, OR THE ENERGY 1186 ADMINISTRATIVELY REQUIRES BATTERIES TO WITHHOLD FROM ERCOT.
ADDITIONALLY, SCARCITY EVENTS WOULD HAVE TO BE VERY CAREFULLY DEFINED, IDEALLY WITH REASONABLE AMOUNTS OF STUDY TO ENSURE NO FURTHER UNINTENDED CONSEQUENCES TO THE MARKET.
FOR EXAMPLE, CORRELATED CHARGING THAT PUTS THE MARKET CLOSE TO A SCARCITY EVENT WHERE ERCOT THEN MUST PULL THE STRANDED CAPACITY.
THIS CONCERN OVER UNINTENDED UNINTENDED CONSEQUENCES IS A VERY REAL ONE.
ON THE NIGHT OF AUGUST 17TH, ERCOT RESERVES DROPPED BELOW 3000 MEGAWATTS.
BATTERIES PROVIDED 1800 MEGAWATTS THAT SAME NIGHT, LIKELY AVOIDING AN EMERGENCY EVENT.
IF ALL OF THESE BATTERIES SUDDENLY HAD TO CHARGE AT THE SAME TIME, ERCOT WOULD'VE BEEN AN E EEA THREE IMMEDIATELY.
SIMILAR EVENTS OCCURRED ON AUGUST 20TH, 23RD, 24TH, 25TH, 29TH.
AND AS I MENTIONED EARLIER LAST NIGHT, AS PABLO NOTED THIS MORNING, THERE ARE A MYRIAD OF CHALLENGES FROM EXTREME LOAD GROWTH TO PROPOSED E E P A RULES TO ENERGY TRANSITION ISSUES.
THE LAST THING WE NEED IS TO REDUCE BATTERY PARTICIPATION AND INVESTMENT.
THERE HAS BEEN DISCUSSION AROUND MAKING SURE THE MARKET IS GETTING WHAT IT PAID FOR.
WE COULD NOT AGREE, AGREE MORE.
AS I JUST EXPLAINED THOUGH, WE BELIEVE THAT THE REQUIREMENTS OF 1186 IMPOSE ARBITRARY ADMINISTRATIVE STANDARDS THAT WILL INSTEAD MEAN THAT BATTERIES ARE NOT ABLE TO DEPLOY THE PRODUCTS FOR WHICH THEY'RE PAID BECAUSE
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IT IS EITHER HELD AS STRANDED CAPACITY OR THEY'RE REQUIRED TO CHARGE AT THE TOP OF HOURS IN MULTI-HOUR DEPLOYMENTS RATHER THAN DEPLOYING INTO THEIR ANCILLARY SERVICE OBLIGATIONS.ANOTHER CLEAR ISSUE FROM OUR DISCUSSIONS YESTERDAY WAS ERCOT CONCERN AROUND BATTERIES BIDDING INTO E C R S AND NONS SPIN FOR SEVERAL CONSECUTIVE HOURS.
THIS IS THE POINT THAT NEEDS CLARIFICATION.
IDEALLY THROUGH A HOLISTIC CLARIFICATION OF HOW ALL ANCILLARY SERVICES WILL BE DEPLOYED, IT IS OUR BELIEF THAT FROM ALL THE WORK DONE IN 10 96, THAT E C R S IS MEANT TO BE DEPLOYED OVER TWO HOURS AND NONS SPEND OVER FOUR.
DAN MENTIONED THIS POINT AND HIS PRESENTATION YESTERDAY CONFIRMING THAT E C R S AND NONS SPIND WERE DESIGNED IN THIS WAY TO COVER PERIODS OF UNEXPECTED ISSUES UNTIL OTHER RESOURCES COULD BE BROUGHT ONTO THE SYSTEM.
WE BELIEVE THAT BATTERIES BID INTO THE MARKET FOR CONSECUTIVE HOURS STANDING READY TO PROVIDE CAPACITY FOR DEPLOYMENT OF TWO CONSECUTIVE HOURS FOR E C R S AND FOUR CONSECUTIVE HOURS OF NONS SPIN WHEN CALLED UPON BY ERCOT.
ERCOT INTERPRETATION SEEMS TO BE THAT BATTERIES SHOULD DEPLOY 24 7 THROUGHOUT ALL CONSECUTIVE HOURS IN WHICH THEY HAVE BID FOR E C R S OR NONS SPIN.
THIS IS A FUNDAMENTAL ISSUE AND MUST BE CLARIFIED UNTIL THIS IS CLARIFIED.
E S R MARKET PARTICIPANTS, LIKE ALL OTHER PARTICIPANTS, UNDERSTAND THAT IN A ONE HOUR MARKET, E C R SS AND NONS SPIND CAN CURRENTLY BE DEPLOYED FOR LONGER THAN TWO OR FOUR HOURS.
IT IS THE RESPONSIBILITY OF MARKET PARTICIPANTS TO BID ACCORDING TO WHAT THEY CAN DELIVER WITH THEIR ASSESSMENT OF WHETHER THERE IS A LIKELIHOOD OF DEPLOYMENT, HOW LONG THAT DEPLOYMENT WILL BE SUSTAINED AND THE MAGNITUDE OF THAT DEPLOYMENT.
THAT IS HOW A MARKET FUNCTIONS PARTICIPANTS BID ACCORDING TO THEIR ABILITY AND MUST PAY FOR NON-PERFORMANCE.
PERHAPS STEMING FROM THIS POINT, THERE'S BEEN AN ARGUMENT ADVANCED THAT THE STRANDED POWER PROBLEM CAUSED BY 1186 IS REALLY A DISAGREEMENT WITH N P R 10 96.
SO 1186 SHOULD BE ALLOWED TO MOVE FORWARD AND YOU SHOULD, WE SHOULD GO BACK AND TRY TO FIX 10 96.
BUT IF THIS BOARD APPROVES 1186, YOU ARE COMPOUNDING THE SINS OF 10 96 BY CONFLATING THE CONCEPT OF DURATION AND STATE OF CHARGE MANAGEMENT.
N P R R 10 96 ALREADY RESTRICTS HOW MUCH AN A STORAGE RESOURCE CAN OFFER INTO NONS SPEND AND E C R S.
NOW, 1186 WOULD REQUIRE BATTERIES TO WITHHOLD TWO TIMES OR FOUR TIMES THE AMOUNT AWARDED TO PROVIDE THESE SERVICES.
THIS WITHHOLDING DOES NOT ENHANCE KO'S ABILITY TO DEPLOY THESE SERVICES FOR MULTIPLE HOURS.
THIS ENERGY IS SIMPLY LOST TO ERCOT, LOST TO THE MARKET AND LOST TO BATTERY STORAGE PROVIDERS.
PLEASE DON'T COMPOUND THE PROBLEMS OF 10 96 BY ENSHRINING THEM IN 1186.
PABLO SAID THIS MORNING THAT WHAT ERCOT NEEDS MOST IS BALANCE AND FLEXIBILITY.
BATTERIES OFFER MORE FLEXIBILITY THAN ANY OTHER OPERATING RESOURCE TODAY.
THEY CAN PROVIDE ENERGY OR DEMAND WHEN ERCOT NEEDS EITHER IN A MATTER OF SECONDS.
TO REDUCE THAT PARTICIPATION NOW IS IN FACT THE OPPOSITE OF WHAT'S NEEDED.
UM, WE ARE ALSO CONCERNED ABOUT THE DISCRIMINATORY NATURE OF 1186 THAT, UH, IT DISCRIMINATES AGAINST STORAGE IN A NUMBER OF WAYS.
THE MOST EGREGIOUS BEING THE MEASUREMENT OF COMPLIANCE OBLIGATIONS ON A PER RESOURCE FIVE MINUTE SC INTERVAL BASIS FOR NON-PERFORMANCE RELATED ISSUES.
EFFECTIVELY, A SINGLE BATTERY CAN BE FINED $25,000 FOR FAILURE TO PROVIDE TO MAINTAIN A STATE OF CHARGE AS DIRECTED BY ERCOT FOR EACH FIVE MINUTE INTERVAL WITHOUT ANY ACTUAL PERFORMANCE ISSUES OCCURRING.
IT DOESN'T MATTER WHETHER AN E SR'S QUEASY MANAGES THE ISSUE THROUGH ANOTHER ASSET IN ITS PORTFOLIO UNDER 1186, THERE IS STILL A COMPLIANCE ISSUE FOR A FAILURE TO DELIVER THAT NEVER HAPPENED.
ALL ERCOT RESOURCES QUEASY MANAGE THEIR OBLIGATIONS ACROSS PORTFOLIOS AND PRODUCTS.
IT'S A MARKET FUNDAMENTAL PENALIZING BATTERIES AFTER THEY HAVE DONE SO IS BLATANTLY DISCRIMINATORY AND WILL ONLY RESULT IN A CHILLING EFFECT ON FUTURE INVESTMENT AND NEGATIVE ECONOMIC IMPACT ON BATTERIES OPERATING AND IN CONSTRUCTION LEADING TO A REDUCTION IN ASSET VALUE.
I WILL REITERATE THAT ERCOT ALREADY HAS ENFORCEMENT TOOLS THAT APPLY EQUALLY TO ALL RESOURCES IF THEY FAIL TO PERFORM.
THESE INCLUDE FINANCIAL PENALTIES FOR NON-PERFORMANCE AND SSM BATTERY INVESTMENTS WERE MADE WITH ALL OF THESE COMPLIANCE ITEMS IN MIND.
AND WE STRONGLY BELIEVE THAT ERCOT HAS WHAT IT NEEDS IN THESE TOOLS TO ENFORCE ISSUES OF NON-PERFORMANCE ON ANCILLARY SERVICE OBLIGATIONS.
ESRS ARE WILLING TO PROVIDE ERCOT WITH STATE OF CHARGE FOR SITUATIONAL AWARENESS.
THIS HAS NEVER BEEN DISPUTED AND THIS WILL ADDRESS MOST OF THE ISSUES RAISED IN OUR COTS PRESENTATION.
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RESOURCES SHOULD BE HELD TO THE SAME RESPONSIBILITIES AS EVERY OTHER RESOURCE.IF YOU DO NOT DELIVER ON YOUR OBLIGATIONS, YOU GET PENALIZED.
HOWEVER, COMPLIANCE SHOULD BE BASED ON PERFORMANCE, NOT A PUNISHMENT FOR A PERCEIVED RISK THAT NEVER RESULTS IN AN ACTUAL PERFORMANCE ISSUE.
I'D LIKE TO TOUCH ON SOME OF THE PROCESS ISSUES AS WELL.
I'VE PERSONALLY BEEN INVOLVED IN EVERY MEETING SINCE THIS URGENT N P R R WAS FILED IN THE MORNING OF THE FIRST WORKSHOP ON JUNE 22ND, AND I'VE SPENT COUNTLESS HOURS WORKING WITH TWO OF THE LARGEST BATTERY COMPANIES IN ERCOT TO FIND COMPROMISES, COMPROMISES, WHICH FRANKLY HAVE BEEN TO THE DETRIMENT OF OUR BATTERIES AND THE GROWING BATTERY INDUSTRY IN TEXAS.
THROUGHOUT THAT PERIOD, ERCOT HAS MADE SEVERAL REVISIONS, BUT ONLY ONE MINOR CHANGE WAS IN RESPONSE TO STAKEHOLDER FEEDBACK.
ACCORDING TO ERCOT LAST FILING, THEY STARTED WORKING ON THIS ISSUE IN NOVEMBER, 2022, MORE THAN EIGHT MONTHS BEFORE THEY FILED 1186 AS A PROPOSAL REQUIRING URGENT CONSIDERATION AND APPROVAL.
MUCH OF THAT PERIOD WAS SPENT WORKING WITHOUT STAKEHOLDER INPUT OR PERHAPS THE PARTICIPATION OF THE SELECT VIEW.
ERCOT JUSTIFICATION FOR URGENCY AT THE TIME 1186 WAS FILED WAS PERSONNEL LIMITATIONS AROUND THE CODING OF PARAMETERS DUE TO THE SCHEDULE FOR UPCOMING PROJECTS, INCLUDING R T C PLUS B.
FOLLOWING IAN'S COMMENTS OF JULY 6TH, ERCOT ADDED A RELIABILITY ARGUMENT IN ORDER TO MEET THE LEGAL REQUIREMENT FOR URGENT STATUS.
THE JUSTIFICATION AND SUBSTANCE OF THIS N P R R HAS SHIFTED WITH EVERY FILING, INCLUDING THE COMMENTS ERCOT FILED MONDAY.
WHAT WE HAVE ASKED FOR THROUGHOUT THIS VERY, VERY BRIEF PROCESS IS A FULSOME AND COLLABORATIVE STAKEHOLDER PROCESS TO ENSURE THAT THE N P R R DOES NOT RESULT IN UNINTENDED RELIABILITY CONSEQUENCES, OR HAVE DISCRIMINATORY IMPACTS AS THE URGENT TIMEFRAME HAS NOT ALLOWED FOR THAT COLLABORATIVE PROCESS.
GIVEN THE VERY SHORT TIMELINE, BATTERY OPERATORS WHO WERE NOT INCLUDED IN ERCOT SIX MONTH PRE-FILING DEVELOPMENT ACTIVITIES WERE PLAYING CATCH UP TO UNDERSTAND THE INTENT AND IMPLICATION OF ALL THE PROVISIONS OF 1186.
AS HAS BEEN NOTED, A HANDFUL OF BATTERY OPERATORS SUPPORT 1186.
AS AN INCREMENTAL STEP, I WOULD NOTE THAT BATTERY OPERATORS SOMETIMES HAVE DIFFERENT INCENTIVES DUE TO THE SIZE AND DURATION OF THE BATTERIES IN THEIR PORTFOLIO, AS WELL AS THEIR TRADING STRATEGIES.
I WOULD ALSO NOTE THAT JUPITER PLUS POWER AND OLIAN OPERATORS OF MOST OF THE LONGER DURATION MEGAWATTS CURRENTLY ON THE SYSTEM ALL OPPOSE 1186 AND HAVE WORKED TOGETHER TO FIND BRIDGE SOLUTIONS WITHOUT SUCH A HIGH COST.
WE STILL DO NOT UNDERSTAND THE PROBLEM ERCOT IS TRYING TO SOLVE HERE, BECAUSE WE BELIEVE 10 96 SUFFICIENTLY ADDRESSES THE ISSUES ABOUT WHETHER A BATTERY IS CAPABLE OF MEETING ITS ANCILLARY SERVICE REQUIREMENTS.
10 96 CLEARLY DEFINED THE CAPABILITY STORAGE RESOURCES NEEDED TO PROVIDE E C R SS AND NONS SPIN.
THIS WAS DEFINED AFTER EIGHT MONTHS OF EXTENSIVE AND SOMETIMES CONTENTIOUS WORK BY STAKEHOLDERS IN ERCOT.
FOLLOWING P U C APPROVAL OF 10 96, ERCOT UNILATERALLY PROPOSED WITH ONLY PERFUNCTORY STAKEHOLDER INPUT AND NO P U C OVERSIGHT, A NUMBER OF STATE OF CHARGE RESTRICTIONS IN ITS BUSINESS PRACTICE MANUAL ERCOT CLAIMS OF A LACK OF COMPLIANCE BY STORAGE RESOURCES ON WHICH 1186 IS PREDICATED REFERENCES FAILURES TO THOSE BY THOSE ESRS TO FOLLOW.
ERCOT UNILATERALLY DETERMINED STATE OF CHARGE EXPECTATIONS IN THE BUSINESS PRACTICE MANUAL.
THIS CHANGED THE INTENT OF 10 96 AND ADOPTED NEW POLICY, WHICH WAS NOT APPROVED BY THE P E C.
THOSE CLAIMS ARE THE BASIS OF ERCOT ASSERTION THAT 1186 MEETS THE REQUIREMENTS FOR URGENCY AND THE BASIS OF ITS CLAIMS THAT BATTERIES ARE CAUSING RELIABILITY CONCERNS.
SO WE NOW FIND OURSELVES IN A SITUATION WHERE ERCOT IS CLAIMING COMPLIANCE AND RELIABILITY ISSUES ON THE BASIS OF NON-COMPLIANCE WITH A SET OF STATE OF CHARGE REQUIREMENTS, IT DEVELOPED UNILATERALLY OUTSIDE THE STAKEHOLDER PROCESS AND WITHOUT THE APPROVAL OF THE P U C.
THE REQUIREMENTS IN THE BUSINESS PRACTICE MANUAL ARE NOT A CLARIFICATION OF 10 96, BUT RATHER A FAR MORE RESTRICTIVE SET OF REQUIREMENTS, WHICH ALTERS THE INTENT AND POLICY SET IN 10 96.
THAT IS LIKELY WHY ERCOT IS NOW TRYING TO CODIFY THOSE SAME STATE OF CHARGE REQUIREMENTS IN 1186.
FOR ME, THAT SETS A DANGEROUS PRECEDENT IN THE MARKET, ESPECIALLY CONSIDERING THAT THERE IS STRONG DEFERENCE TO ANY ASSERTION BY ERCOT OF RELIABILITY ISSUES.
IN THIS INSTANCE, WE HAVE HIGHLIGHTED WHERE 1186 IS IN FACT LIKELY TO NEGATIVELY IMPACT RELIABILITY IN A NUMBER OF PLACES.
THIS N P R R ALSO DISCOURAGES DEVELOPMENT OF LONGER DURATION ENERGY STORAGE.
CARRIE SAID TODAY THAT INVESTORS DON'T LIKE TO LEAVE MONEY ON THE TABLE OR WORRY ABOUT REGULATORY UNCERTAINTY AS AN INVESTOR, I CAN CONFIRM THAT AND MOST OF YOU CAN TOO.
E C R S AND NONS SPEND WERE MEANT
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TO INCENTIVIZE NEW INVESTMENT IN LONGER DURATION STORAGE TO PROVIDE THESE PRODUCTS.HOWEVER, 1186 DISCOURAGES PARTICIPATION IN E C R S AND NONS SPEND BY TAKING THE QUALIFICATION CRITERIA OF 10 96 AND MAKING IT AN OPERATIONAL REQUIREMENT AT ALL TIMES.
A 100 MEGAWATT TWO HOUR BATTERY WILL QUALIFY TO PROVIDE 100 MEGAWATTS OF E C R S PER 10 96, BUT IT, BUT 1186 ENSURES THE OPERATOR OF THE BATTERY WILL NEVER BE PAID THE VALUE OF THE TWO HOUR DURATION BECAUSE THE TOP OF THE HOUR CHARGING REQUIREMENT MAKES THE SECOND HOUR OF DURATION IRRELEVANT.
THE BATTERY MUST ALWAYS RECHARGE FULLY AT THE TOP OF THE HOUR.
THIS IS LIKE THE GOVERNMENT MANDATING A CAR, HAVE A 50 GALLON TANK OF GAS FOR GAS, BUT NEVER ALLOWING THE FUEL LEVEL TO GO BELOW HALF EMPTY.
THE EXTRA COST AND WEIGHT ARE NOT VALUABLE SINCE THE EXTRA GAS IS NEVER USED, IT'S JUST CARRIED AROUND.
IT'S MORE EFFICIENT TO HAVE A 25 GALLON DO 25 GALLON TANK AND REFILL IT BEFORE IT'S EMPTY.
BACK TO BATTERIES 1186 MAKES IT MORE EFFICIENT TO HAVE A 100 MEGAWATT ONE HOUR BATTERY AND PROVIDE ONE HOUR SERVICES BECAUSE AT LEAST THE OPERATOR CAN USE THE FULL CAPABILITY OF THE BATTERY IN EACH HOUR.
THUS, 1186 DISCOURAGES INVESTMENT IN LONGER DURATION BATTERIES.
AND I JUST WANNA NOTE THAT REDUCTION OF BATTERIES AND E C R S AND NONS SPIN WILL ALSO INCREASE PRICES BY REDUCING COMPETITION IN THE ANCILLARY SERVICES MARKET AND REQUIRING THERMAL RESOURCES, WHICH CANNOT RAMP AS FAST AS BATTERIES IN MOST CASES, TO SIT IN ANCILLARY SERVICES PROCURED IN THE DAY AHEAD MARKET, WHICH REDUCES THEIR PARTICIPATION IN THE REAL-TIME ENERGY MARKET AND OVERALL ENERGY SUPPLY.
THE ERCOT MARKET HAS BEEN A LEADER AND INNOVATOR AS LONG AS I CAN REMEMBER.
AS THE TEXAN, I GREW UP THINKING THAT OVERREGULATION ONLY STIFLES MARKET FUNDAMENTALS THAT ALLOW SUCH INNOVATION THAT'S A CORTEX IN VALUE AND I THINK 1186 RUNS A FOUL OF THAT VALUE.
ALMOST EVERY EVERY REGULATORY CHOICE CREATES AN INCENTIVE OR A DISINCENTIVE 1186 DISINCENTIVIZES LONGER DURATION BATTERIES, WHICH IS COUNTER TO THE NEEDS OF THE GRID AND THUS COUNTER TO WHAT IS BEST FOR ERCOT CONSUMERS.
I'VE SHARED WITH YOU MY UNDERSTANDING OF WHERE THINGS STAND WITH 1186.
UNFORTUNATELY, I DON'T HAVE ALL THE FACTS.
FOR EXAMPLE, WE DON'T KNOW WHETHER THE CASES OF NON-COMPLIANCE ERCOT MENTIONS ARE ALL TIED TO ITS EXPECTATIONS SET FORTH IN THE BUSINESS PRACTICE MANUAL.
WHETHER THESE FAILURES ARE ACTUALLY FAILURE FAILURES TO DELIVER ON ANCILLARY SERVICE OBLIGATIONS.
WHETHER THESE CASES ARE NUMEROUS AND OCCURRING ACROSS THE FLEET OF STORAGE RESOURCES ON THE ERCOT SYSTEM, OR JUST THE RESULT OF A FEW BAD ACTORS.
WHETHER THESE FAILURES ARE RELATED TO ONE HOUR PRODUCTS LIKE REG AND R R S OR LONGER DURATION PRODUCTS LIKE E C R S AND SPEN, OR WHETHER THE E S R UH, STORAGE RESOURCES QUEASY WERE ABLE TO MOVE THE ANCILLARY SERVICE OBLIGATIONS TO ANOTHER QUALIFIED RESOURCE, WHICH IS SPECIFICALLY ALLOWED UNDER THE ERCOT PROTOCOLS AND APPLIED TO ALL RESOURCE TYPES.
GIVEN THIS KNOWLEDGE GAP, I UNFORTUNATELY CANNOT GIVE YOU THE FACTS THAT YOU NEED TO MAKE AN INFORMED AND REASONED DECISION ON 1186.
BECAUSE WE STORAGE PROVIDERS AND STAKEHOLDERS DON'T HAVE ALL THE FACTS, THE FACTS WE DO HAVE MAKE US VERY UNCOMFORTABLE WITH THE PROSPECT THAT 1186 WILL IMPAIR RATHER THAN ENHANCE RELIABILITY FOR MANY REASONS, WHICH I'VE TRIED TO OUTLINE FOR YOU TODAY, BUT EQUALLY AS IMPORTANT, NOT HAVING ALL THE FACTS WILL MOST CERTAINLY LEAD TO UNDISCOVERED AND UNINTENDED CONSEQUENCES.
MUCH OF THE DISCUSSION IN THE R AND M MEETING YESTERDAY ASKED WHETHER 1186 IS A GOOD BRIDGE TO R T C PLUS B AS WRITTEN.
WE BELIEVE THAT THE COST TO BOTH THE MARKET TO BATTERY OWNERS AND TO FUTURE INVESTMENT IN LONGER DURATION BATTERIES IS SIMPLY TOO HIGH, AND WE URGE YOU TO REMAND 1186 IN ITS ENTIRETY TO TAC FOR FURTHER COLLABORATION BETWEEN ERCOT AND MARKET PARTICIPANTS.
IN CLOSING, I WANNA BE CLEAR THAT WE ARE COMMITTED TO FINDING A SOLUTION TO ERCOT CONCERNS THAT DO THAT DOESN'T PULL DOWN MUCH NEEDED RAMPING CAPACITY OUT OF THE SYSTEM.
WE JUST DON'T BELIEVE 1186 IS THE WAY TO DO IT.
IF THE COST IS UNINTENDED CONSEQUENCES AND IMPAIRED RELIABILITY, THAT IS JUST TOO HIGH AND WE ASK YOU TO REMAND 1186 IN FULL.
I JUST WANNA NOTE A COUPLE DIRECTORS YESTERDAY ASKED FOR A COMPARISON AND WE DID PUT SOMETHING TOGETHER LAST NIGHT, WHICH WE CAN HAND AROUND.
IF THAT'S HELPFUL, YOU CAN LET US KNOW, AND NOW I'M HAPPY TO TAKE QUESTIONS IF YOU'D LIKE.
DOES ANYBODY HAVE ANY QUESTIONS OR COMMENTS? BOB, I I WOULD LIKE TO SEE THE HANDOUT.
[02:05:01]
OH YEAH, THANKS STEPHANIE.WILL YOU MAKE SURE THAT, UH, YOU OR JULIANA SEND THIS ELECTRONICALLY TO US SO THAT WE CAN POST IT ON THE WEBSITE SO THAT EVERYBODY CAN SEE IT? JULIANA SENDING IT NOW.
NO, I JUST NEED TO DIGEST THIS SO WE CAN PROCEED.
ALRIGHT, SO WHY DON'T WE MOVE ON TO, UH, DAN AND YOUR PRESENTATION, UH, ON BEHALF OF OUR CO THANK YOU, STEPHANIE.
YEAH, SO, SO, UM, YOU KNOW, WE HAVE AN INCREASING NUMBER OF BATTERIES ON THE SYSTEM AND INCREASING DEPENDENCE ON THE BATTERY AND PROVIDING BATTERIES IN PROVIDING OUR RELIABILITY STUDY SERVICES.
UH, WE WANNA FACILITATE THOSE RESOURCES, RELIABILITY, PARTICIPATING IN THE MARKET.
UM, RIGHT NOW WHEN WE'RE OPERATING THE GRID, WE DON'T KNOW HOW MUCH GAS THEY'VE GOT.
WE KNOW HOW MUCH GAS THEY'VE GOT IN THE TANK, BUT WE DON'T KNOW HOW LONG IT'S GONNA LAST AND HOW, SO THAT'S REALLY WHAT WE'RE TRYING TO DO WITH THIS N P R R.
AND SO I DON'T THINK I CAN REBUT EVERYTHING SHE SAID.
UH, I DON'T THINK ANY OF US WERE ABLE TO ABSORB THAT.
BUT WHAT I'D LIKE TO DO, I THINK RATHER THAN TRY TO GO THROUGH IT, I'D OFFER TO ANSWER QUESTIONS THAT YOU MAY HAVE ABOUT WHAT SHE SAID AND, UM, OUR POSITION ON THOSE THINGS.
SO DAN, I MEAN, TO ME THE MOST FUNDAMENTAL QUESTION WAS UNDERSTANDING.
SO THEY HAVE THE ONE HOUR COMMITMENT AND ANCILLARY SERVICE FOR 20, FOR THE 25 MEGAWATT EXAMPLE THAT THEY CAN'T UTILIZE THE OTHER 75 MEGAWATTS.
SO IF, IF, IF WE ARE, UH, BY, IF, IF IF NONS SPEND, WELL, LET'S TALK ABOUT E C R S.
IF E C R S IS A TWO HOUR PRODUCT, THEN THEY HAVE TO HAVE ENOUGH ENERGY IN RESERVE TO PROVIDE THAT RESERVE THAT WE'RE WE'RE BUYING.
AND SO THEY HA IF IT'S A TWO HOUR PRODUCT, WHICH IS KIND OF ASKED AND ANSWER, THAT WAS 10 96, THEY HAVE TO HAVE ENOUGH IN THE TANK TO, TO PROVIDE, IF THEY'RE SELLING A HUNDRED MEGAWATTS, THEY HAVE TO START THE TIME WITH 200 MEGAWATT HOURS, AND THEN BY THE END OF THAT HOUR, THEY FIRST HOUR, THEY STILL HAVE TO HAVE A HUNDRED MEGAWATT HOURS IN THE TANK TO BE ABLE TO PROVIDE A HUNDRED MEGAWATTS FOR THE SECOND HOUR AS WELL.
AND SO, UM, THAT'S SO SORRY, DAN, SO THEY DON'T HAVE TO TOP IT UP BACK TO 200 HOURS AT THE END OF HOUR ONE.
IF THEY'RE SELLING IN THE SECOND HOUR, THEN THEY DO.
BUT AS FAR AS WHAT THEY'RE SELLING IN THE FIRST HOUR, FOR THE FIRST HOUR THAT HAS TO LAST FOR TWO HOURS, THEY WOULD HAVE TO HAVE A HUNDRED MEGAWATT HOURS IN THE TANK AT THAT TIME.
THEN IF THEY CHOOSE TO OFFER IN TO THE SECOND HOUR, THEY WOULD HAVE TO.
AND WE, WE HAVE BEEN CAREFUL NOT TO SAY THEY HAVE TO CHARGE BACK UP, BUT THEIR OBLIGATION GOES BACK UP TO 200 MEGAWATT HOURS SO THAT THEY'D BE ABLE TO PROVIDE WHAT WE'RE BUYING IN THAT HOUR FOR TWO HOURS.
AND SO THEY CAN MOVE THAT TO SOMETHING ELSE IN THEIR PORTFOLIO OR, OR WHATEVER.
I THINK THAT'S THE IMPORTANT POINT, IS THAT THEY CAN POINT TO ANY RESOURCE AT THE TOP OF THE HOUR THAT HAS THE CAPACITY TO DELIVER ON THE OBLIGATION THAT THEY'RE GETTING PAID FOR.
SO THERE'S NO, 1186 DOESN'T MAKE ANY REQUIREMENT TO CHARGE.
IT MAKES A REQUIREMENT TO HAVE THE ENERGY AVAILABLE IN THE BATTERY TO DELIVER ON THE OBLIGATION THAT THEY'RE BEING PAID FOR.
SO THEY CAN MOVE THAT OBLIGATION AROUND EVERY HOUR.
BUT IF THEY SELL THE SAME BATTERY HOUR AFTER HOUR, AFTER HOUR AFTER HOUR, IT WOULD CREATE A PROBLEM.
WHICH IS, SO I MAKE A COMMENT.
SO, UM, I, YOU KNOW, I AGREE WITH WHAT YOU SAID IS WE'RE EXPECTING THEM TO BE ABLE TO DELIVER
WHILE I REALLY FOUND THE PRESENTATION INTERESTING, IT WAS BASICALLY GOING UNDER THE COVERS TO BE ABLE TO SHOW US ALL OF THE DECISIONS THEY MIGHT HAVE TO MAKE.
BUT THAT'S NOT WHAT WE'RE INVOLVED IN.
WE'RE NOT INVOLVED IN HOW THEY DECIDE TO DELIVER, WHAT THEIR ISSUES ARE, WHAT KIND OF TECHNOLOGIES THEY NEED.
WE SUPPORT ALL THE WORK THAT THEY DO TO DELIVER, BUT THEY NEED TO DELIVER AND WE NEED TO HAVE CONFIDENCE THAT THEY'RE GONNA DELIVER BECAUSE WE NEED TO DELIVER POWER TO THE CONSUMER.
SO WHILE I RESPECT ALL OF THE LONG CONVERSATION, IT WASN'T HELPFUL IN GIVING ME CONFIDENCE THAT THEY CAN DELIVER.
IN FACT, IT GAVE ME A WHOLE LOT OF INFORMATION SAYING THEY'RE STRUGGLING.
[02:10:02]
JUST WHAT I HEARD.YEAH, I REALLY LIKE THE, UH, THE CAR ANALOGY ACTUALLY.
I THINK THAT'S A, THAT'S A USEFUL ANALOGY.
SO IF, IF A BATTERY OFFERS IN FOR ONE HOUR, JUST A ONE HOUR OFFER, AND WE EXPECT THEM TO BE ABLE TO DRIVE 50 MILES, THAT'S THE, THAT'S THE PRODUCT THAT THEY'RE BUYING OR THE PRODUCT THAT THEY'RE SELLING IS THE ABILITY TO DRIVE 50 MILES WHEN THEY GET IN THE CAR, WE LOOK AT THE GAS TANK AND SAY, YOU DON'T HAVE ENOUGH GAS TO GO 50 MILES, WE HIRED YOU TO GO 50 MILES.
YOU DON'T HAVE ENOUGH GAS TO GO 50 MILES.
THAT'S, THAT'S THE PRODUCT THAT THEY'RE SELLING.
WE'RE ALSO NOT ASSUMING THAT THEY'RE GONNA STAY, THAT EVERYONE'S GONNA STAY THIS WAY.
I MEAN, BATTERIES ARE IMPROVING CONSTANTLY.
THERE IS PLENTY OF MONEY BEING INVESTED.
WE'RE NOT IN A STAGNANT STATE.
THE PROBLEMS OF TODAY ARE NOT GONNA BE THE PROBLEMS OF TOMORROW, BUT THEY SHOULD BE ABLE TO DELIVER WHAT THEY COMMIT TO DELIVER SO THAT WE CAN RELY ON PROVIDING THE CONSUMER THE ELECTRICITY THEY NEED.
I'M SYMPATHETIC WITH THEM, BUT THAT JUST MEANS THAT THEY NEED TO ADJUST WHAT THEY'RE COMMITTING TO.
10 96 CLEARLY STATES THAT E C R S IS A TWO HOUR PRODUCT.
IF YOU SELL US SOMETHING IN E C R S, IT'S SUPPOSED TO LAST TWO HOURS AND NONS SPEND IS A FOUR HOUR PRODUCT.
SO WOODY, LET ME ASK JUST A QUICK QUESTION.
SO IF A HUNDRED MEGAWATT BATTERY, YOU'VE GOT A TWO HOUR COMMITMENT, END OF HOUR AND YOU COMMIT IT FOR THE FULL A HUNDRED MEGAWATTS END OF HOUR ONE, YOU'RE DOWN TO 50, YOU'VE GOT ENOUGH FOR THAT SECOND HOUR ARE, DO THEY, ARE THEY OKAY OR DO THEY HAVE TO HAVE RECHARGING AT THAT TOP OF THE HOUR TO GET BACK TO THE A HUNDRED MEGAWATT HOUR? SO IF THEY HAVE A 50 HOUR, A 50 MEGAWATT HOUR COMMITMENT PER HOUR, THEY SOLD US TWO HOURS.
FOR TWO HOURS AND THEY START AT A HUNDRED AND AT THE END OF END OF THE SECOND HOUR, END OF HOUR ONE, WHAT DOES THAT AFTER END OF HOUR ONE, THEY'RE AT 50 AND THEY DON'T HAVE ANYTHING AFTER THAT, THEN THEY'RE FINE.
THERE'S NO CHARGING REQUIREMENT OR ANYTHING.
NOT IF THERE'S NOT ANOTHER CONSECUTIVE BID THAT COMES IN AFTER THAT FIRST TWO HOUR PERIOD.
AND THAT'S THE, AND THAT'S THE, AND THAT'S REALLY THE PROBLEM WE HAVE HERE.
THE REAL PROBLEM WE HAVE HERE IS EVERYTHING WE'VE EVER DONE HAS BEEN FOR POWER, NOT POWER OVER TIME, IT'S JUST POWER.
WE LOOK AT GAS TURBINES AND WE SAY, YOU'VE GOT, YOU'VE GOT THE ABILITY TO RUN FOR AS MANY HOURS AS YOU CONTRACT, BUT NOW WE'VE GOT A NEW TYPE OF RESOURCE.
AND I, AND I WOULD AGREE, THEY DID GREAT LAST NIGHT.
I MEAN, THERE'S NO DOUBT WE LIKE BATTERIES AND WE LIKE HAVING THEM, BUT THEY HAVE ANOTHER ASPECT TO 'EM THAT WE HAVE TO ACCOUNT FOR AND WE'RE NOT GEARED TO ACCOUNT FOR IT RIGHT NOW.
AND THE FASTEST WAY WE CAN GET TO BE IN A PLACE WHERE WE CAN TAKE THAT INTO ACCOUNT IS RTC PLUS B.
HOW DO WE GET THERE THE FASTEST? AND THIS REMAND PASSING 1186 AND HAVING THIS REMAND IS THE FASTEST WAY TO GET TO THE BEST SOLUTION.
IT'S NOT PERFECT, BUT IT'S THE FASTEST WAY TO GET TO THE BEST SOLUTION.
AND I THINK THE REMAND IS AN IMPORTANT PART.
UM, WHAT THE REMAN WILL DO IS IT'LL ALLOW THOSE BATTERIES TO FULLY EXHAUST AND NOT STRAND ANY ENERGY WHEN WE'RE IN SCARCITY CONDITIONS.
AND I WOULD ALSO REMIND YOU GUYS THAT E C R S AND NONS SPEND ARE REALLY MEANT FOR WHAT HAPPENED LAST NIGHT.
THE PRIMARY PURPOSE OF E C R S AND NONS SPIN IS FOR OTHER CONTINGENCIES.
IT'S NOT FOR SCARCITY, IT'S JUST THAT DURING SCARCITY CONDITIONS WE EMPTY OUR RESERVES OUT.
SO WE LACKED HAVING THOSE BATTERIES LAST NIGHT.
BUT THE REAL PURPOSE OF ANCILLARY SERVICES ARE FOR FORECASTING ERRORS AND BIG UNIT TRIPS AND REPLACING OTHER ANCILLARY SERVICES.
SO THAT'S AN IMPORTANT PART TO KEEP IN MIND AS WELL, IS THAT, UH, SCARCITY CONDITIONS, HOW YOU USE THESE ENDEARING SCARCITY OR KIND OF A BYPRODUCT, NOT THE PRIMARY PURPOSE.
SO WHAT DO YOU THINK? THAT WAS VERY HELPFUL AND I AGREE.
I MEAN, WE'RE ALL ON THE SAME TEAM FORT, WE'RE FORTUNATELY WE HAVE THE BATTERIES, BUT I GUESS YOU CLARIFIED IT FOR ME THAT, SO THEY HAVE THE TWO HOUR COMMITMENT AND THEY'VE USED 50% OF THEIR BATTERY AFTER HOUR ONE.
THEY DON'T HAVE TO DO ANYTHING DIFFERENT BECAUSE THEY'VE GOT THE ENERGY RESERVES FOR THE SECOND HOUR.
ARE WE SUPPOSED TO TAKE AWAY THAT AFTER IMPLEMENTING
[02:15:01]
1186, WE COULD GO THROUGH AUGUST, 2023 AGAIN AND GET THERE AS MUCH BATTERY RESOURCE GENERATION THAT WE HAD? ABSOLUTELY.SO 1186, EVEN WITH THE REMAND WOULD CHANGE NOTHING ABOUT WHAT HAPPENED LAST NIGHT.
WE WOULD GET THE FULL PERFORMANCE THAT WE GOT LAST NIGHT AND ON ON SOME OF THESE, THE PREVIOUS NIGHTS.
1186 DOESN'T CHANGE THAT ONE BIT.
WHAT? BUT IF YOU GUYS REMEMBER FROM THE PRESENTATION YESTERDAY, THERE WAS A CHART, IT WAS KIND OF A CONFUSING CHART, BUT IT HAD A LINE AND IT HAD RED DOTS AND BLUE DOTS.
THOSE WERE INSTANCES IN TIME WHEN IF WE HAD HAD TO USE E C R S, THERE WASN'T ENOUGH ENERGY THERE TO ACTUALLY USE IT IF WE'D HAD TO USE IT.
SO WE BOUGHT A PRODUCT THAT WE COULDN'T CASH IN.
AND THAT'S WHAT 1186 FIXES BUYING A PRODUCT.
THE MARKET BUYS A PRODUCT THAT CAN'T BE CASHED IN.
YOU CAN'T USE IT IN TI AT TIMES BECAUSE THE BATTERIES AREN'T FULLY CHARGED.
AND THERE ARE WAYS THE BATTERIES COULD, THEY CAN POINT TO OTHER RESOURCES.
I MEAN, THAT'S A PERFECTLY FINE WAY OF DOING IT.
OR THEY CAN GO AHEAD AND KEEP THEIR STATE OF CHARGE UP.
THEY HAVE OPTIONS OR THEY COULD SELL INTO ANCILLARY SERVICES THAT DON'T REQUIRE A TWO HOUR OR A FOUR HOUR COMMITMENT.
BUT WE HAVE TWO HOUR AND FOUR HOUR PRODUCTS FOR A REASON.
WE HAVE GRID ISSUES THAT REQUIRE TWO HOUR AND FOUR HOUR SOLUTIONS.
SO WE NEED TO MAKE SURE THAT WHEN WE BUY THINGS IN THOSE MARKETS THAT THEY'RE ABLE TO DELIVER.
AND THAT'S REALLY THE BOTTOM LINE.
ONE QUESTION IN TERMS OF, UH, POTENTIAL EXCEPTIONS TO THE REMAND, AND THAT IS REG UP BREAKDOWN SERVICE THAT BATTERIES PROVIDE.
UH, IS THAT SOMETHING THAT MAKES SENSE OR NOT? I THINK BATTERIES ARE MAYBE THE MOST IDEAL SUITED THING FOR, FOR REG UP AND REG DOWN.
I DON'T THINK THERE'S ANY CHANGES TO TO THAT.
DOES THAT, DOES THAT ANSWER YOUR QUESTION IN TERMS OF, UH, THE ABILITY TO, TO GO INTO THE DISCHARGE MODEL OR TO TAKE THAT INTO CONSIDERATION AS FAR AS THEIR, UH, CAPACITY? GO AHEAD.
THOSE ARE JUST ONE HOUR PRODUCTS ANYWAY.
SO THERE'S NOT AS MUCH DEBATE ABOUT THE THE, I DON'T THINK I MAY FIND OUT IF THERE IS, BUT, UH OH, STEPHANIE, HI.
IF IT'S OKAY, I JUST, I THINK IT'S REALLY IMPORTANT TO CLARIFY SOMETHING THAT I THINK MIGHT HAVE BEEN CONFUSING ABOUT WHAT WOODY SAID.
IF WE HAVE TWO HOURS OF OBLIGATION FOR E C R S AND NO OBLIGATION IN THE THIRD HOUR, WE DO HAVE TO CHARGE UP FOR THE SECOND HOUR UNDER 1186 AS IT'S CURRENTLY WRITTEN, THERE IS NO DEPLOYMENT OFF RAMP.
SO WE'RE IN THE MIDDLE OF A DEPLOYMENT FOR TWO HOURS OF SERVICE, WHICH WE HAVE, BUT THAT'S WHY THEY'RE, THEY'RE SAYING WE HAVE TO CHARGE BACK UP.
THAT'S WHY THE COALITION I WAS PART OF RECOMMENDED A DEPLOYMENT OFF RAMP AT THE SUGGESTION ACTUALLY FROM OUR EXECUTIVE MEETING SO THAT WE WOULDN'T HAVE TO CHARGE BACK UP FOR HOUR TWO.
SO THAT'S AN IMPORTANT CLARIFICATION.
SO A BATTERY BIDS IN FOR IF A BATTERY BIDS IN TO, UH, E C R S FOR A TWO HOUR COMMITMENT, AND AT 59 MINUTES INTO THE HOUR WE CALL ON 'EM TO RUN.
SO THEY'RE 59 MINUTES INTO THEIR ONE HOUR AND WE SAY WE NEED E C R S.
THEY'RE STILL COMMITTED TO, THEY STILL HAVE TO RUN AND HAVE A STATE OF CHARGE SUFFICIENT TO LAST TWO HOURS.
'CAUSE THAT'S THE PRODUCT THEY SOLD US.
I MEAN, SO AGAIN, JUST LET ME ASK THE QUESTION.
HOW YOU MEET THE COMMITMENT, IS YOUR INTERNAL DECISION, THE FACT THAT YOU HAVE TO RECHARGE? IS YOUR DECISION IN HOW YOU MANAGE YOUR RESOURCES? IS THERE SOMETHING WRONG WITH THAT? I MEAN, THAT'S HOW I SEE IT.
DON'T DRAG US INTO YOUR OPERATIONS.
I, THAT'S, I'M JUST LOOKING, OH, SORRY.
I MEAN, I THINK, I THINK IN THE FUTURE, THE R T C B THERE, WE COULD POSSIBLY MOVE TO MORE OF AN HOURLY THING WHERE WE CAN MOVE THINGS AROUND, BUT WE DON'T HAVE THAT CAPABILITY NOW.
AND THE CHANGES THAT YOU'RE SUGGESTING COULD PUSH R T C BACK SUBSTANTIALLY.
AND SO THIS IS, I WOULD CONSIDER THIS TO BE A BRIDGE
[02:20:01]
SOLUTION.THIS IS THE BEST WAY TO GET TO THE BEST SOLUTION THE FASTEST.
IF I COULD RESPOND, UM, WHAT THE BOARD MEMBER, WHAT, UM, YOU, YOU, YOU SAID WE SHOULD BE REQUIRED TO MEET OUR COMMITMENTS.
I THINK WHAT THE, THE PROBLEM WITH 1186 DOES IS IT EFFECTIVELY TELLS ME HOW TO OPERATE MY BATTERY TO MEET MY COMMITMENTS.
AND BUT I SORRY, SORRY TO INTERRUPT YOU, BUT THAT'S WHAT I'M DISAGREEING WITH.
I'M NOT TELLING YOU HOW YOU MAY TODAY BE RESTRICTED, BUT IN CERTAIN PATHWAYS, BECAUSE OF WHAT, HOW YOU'VE DECIDED TO MANAGE YOUR BUSINESS, THINGS WILL CHANGE OR YOU MAY CHANGE YOUR OPERATIONS.
UM, THIS IS GIVING YOU A TARGET TO HIT IS NOT TELLING YOU A PATHWAY.
AND WHAT YOU'RE TELLING ME IS THAT YOU HAVE DIFFICULTY WITH ALTERNATE PATHWAYS, WHICH MAKES ME CONCERNED ABOUT YOUR RELIABILITY TO DELIVER ON WHAT YOU'RE COMMITTING TO.
YOU ARE ACTUALLY TELLING ME YOU HAVE TOO MANY RESTRICTIONS IN, IN WHAT YOU'RE UNABLE TO DO TODAY.
SO I THINK YOU NEED TO ADJUST THE COMMITMENT TO WHAT YOU CAN DELIVER AND CONTINUE TO DEVELOP SO THAT YOU HAVE MORE DEGREES OF FREEDOM.
I, I MEAN, I'M NOT TRYING TO TELL YOU WHAT TO DO, I'M JUST SAYING DON'T PULL US INTO YOUR OPERATIONAL DECISIONS.
WE'RE JUST TRYING TO MAKE SURE THAT YOU CAN DELIVER ON YOUR COMMITMENT SO WE CAN DELIVER TO THE CONSUMER HOW YOU DO IT IS REALLY YOUR CHOICE AND IT'S YOUR BUSINESS DECISION.
I HAVE A QUESTION ALONG THAT SAME LINES.
IT OCCURS TO ME JUST LISTENING TO THIS CONVERSATION THAT IT MAY WELL BE THAT BATTERIES ARE BIDDING ON THE WRONG ANCILLARY SERVICE.
UM, AND, AND I I GUESS THIS'S A QUESTION FOR DAN OR FOR WOODY.
I MEAN, I THINK I HEARD YOU SAY THAT, YOU KNOW, REG UP AND REG DOWN WOULD BE MORE APPROPRIATE SERVICES THAN SOMETHING THAT'S GOT A SPECIFIED TIME COMMITMENT ASSOCIATED WITH IT.
YEAH, I WOULD THINK REG UP AND REG DOWN ARE LIKE THE BATTERIES HAVE AN INHERENT ADVANTAGE THERE BECAUSE THEY'RE BOTH A LOAD AND A GENERATOR AND IT'S A ONE HOUR PRODUCT.
I MEAN, I, THEY ARE REALLY CUSTOM MADE FOR THAT, BUT THEY'RE ANCILLARY SERVICE.
THEY'RE NOT AS PREMIUM IN TERMS OF PRICE.
WELL, WE'RE, WE'RE ACTUALLY SEEING 60% OF THE REG UP AND RESPONSIVE BEING PROVIDED BY BATTERIES AND ONLY 13% SO FAR.
BUT WHY WOULD A RATIONAL BATTERY PROVIDER BID ON E C R SS EXCEPT THAT THEY'RE GETTING A HIGHER PRICE? MAY I RESPOND TO THAT? I THINK I CAN SHED SOME LIGHT.
UH, THAT REG IS A PERFECT PRODUCT FOR ONE HOUR BATTERIES.
THERE IS LESS PARTICIPATION IN E C R S AND NONS SPIN BECAUSE THERE ARE FEWER LONGER DURATION BATTERIES ON THE MARKET.
SO FOR EXAMPLE, ONE OF MY BATTERIES IS THREE AND A HALF HOURS OF TIME THAT IT CAN RUN THAT BATTERY WAS DESIGNED TO PARTICIPATE IN E C R S AND NONS SPIN THE TROUBLE WITH WHAT 1186 IS DOING.
IT'S NOT GIVING US A REASONABLE TARGET TO AM A, IT'S OVERDOING THE REGULATORY FRAMEWORK TO REQUIRE US TO BASICALLY DE-RATE OR DEVALUE OUR ASSET BY HALF.
AND I'VE HEARD A LOT OF DISCUSSION IN A LOT OF CONTEXT ABOUT MAKING SURE WE'RE NOT PUNISHING PEOPLE WHO'VE INVESTED AND TAKEN A RISK IN BUILDING INFRASTRUCTURE THAT'S VERY EXPENSIVE IN TEXAS AND THAT WE WANT TO INCENTIVIZE MORE LONGER DURATION BATTERIES TO PROVIDE MORE STABILITY ON THE MARKET.
SO IF YOU ARE ASKING US TO NOT BID INTO E C R S, WHICH WAS LARGELY DESIGNED TO MAKE IT A GOOD PRODUCT FOR BATTERIES, WHEREAS SOMETHING LIKE R R S, WHICH IS COMING DOWN THE, THE PIKE SOON IS NOT FOR BATTERIES.
WE WILL NOT PARTICIPATE IN THAT.
BUT THIS IS A PRODUCT THAT BATTERIES SHOULD BE PARTICIPATING IN.
AND YOU'RE, WHAT YOU'RE SAYING IS BECAUSE OF AN ADMINISTRATIVE NEED TO HOLD TWICE AS MUCH POWER AT AN ARBITRARY TIME POINT, YOU ARE REDUCING THE VALUE BY HALF AND YOU'RE NOT GETTING THE BENEFIT OF THE SYSTEM.
AND THE TROUBLE IS BECAUSE ERCOT ONLY HAS ONE HOUR PRODUCTS, SO WE WOULD LIKE TO DEPLOY FOR TWO HOURS.
THAT'S WHAT WE'RE TRYING TO DO.
BUT 1186 DOESN'T ACTUALLY LET US DO THAT.
EVEN IF WE BID FOR TWO CONSECUTIVE HOURS, WE HAVE TO RECHARGE.
SO I'M STILL CONFUSED BECAUSE I JUST HEARD SOMETHING COMPLETELY OPPOSITE ERCOT STAFF.
SO NOW I'VE GOTTA THINK ONE OF YOU IS LYING.
WELL, I WOULDN'T SAY IT THAT WAY, JOHN, BUT I'M CONFUSED TOO FOR THE SAME REASON.
BECAUSE MY MAIN CONCERN, AND MAYBE I'M MORE SYMPATHETIC TO THE BATTERY SIDE, BUT AFTER WOODY'S EXPLANATION THAT IF YOU HAVE A TWO HOUR COMMITMENT AND YOU'RE HALFWAY THROUGH YOUR COMMITMENT, YOU'RE FINE.
RIGHT? SO IF YOU'VE SOLD A TWO HOUR PRODUCT AS LONG AS YOU'VE GOT THE TWO HOURS, YOU'RE FINE.
[02:25:01]
HEAR WHAT I THOUGHT AT ONE POINT THAT YOU HAD TO RECHARGE AT THE TOP OF THE SECOND HOUR.CAN I TRY TO CLARIFY MAYBE BECAUSE I
AT EACH HOUR, THE FULL AMOUNT OF THAT NEXT TWO HOUR OBLIGATION RESIDES WITH WHATEVER RESOURCE THE QUEASY POINTS TO.
SO IF BATTERY A, THE UNIT IS POINTED TO IN THE FIRST HOUR AND DEPLOYED AND BATTERY A IS ALSO POINTED TO IN THE SECOND HOUR BATTERY A NEEDS TWO FULL HOURS BECAUSE THE SECOND HOUR THEY'RE GETTING PAID TO DELIVER TWO FULL HOURS.
EVERY HOUR THAT THEY'RE GETTING PAID IS WITH THE EXPECTATION THAT THAT MEGAWATT COMMITMENT CAN GO FOR TWO FULL HOURS.
SO IF THE SAME RESOURCE GETS POINTED TO HOUR AFTER HOUR AFTER HOUR AND A DEPLOYMENT OCCURS, THAT CREATES A SITUATION THAT STEPHANIE DESCRIBES THEY'D HAVE TO STOP AND RECHARGE.
'CAUSE THAT RESOURCE KEEPS GETTING POINTED TO THEY CAN DO WHATEVER THEY WANT IN TERMS OF MANAGING THEIR CHOICES.
THEY CAN POINT TO DIFFERENT RESOURCES, BUT IF THEY POINT TO THE SAME RESOURCE AND IT DOESN'T HAVE THE, THE BATTERY, THE EXPECTATION, THEN IT WOULD BE NONCOMPLIANT.
SO PABLO, EACH HOUR IS A TWO HOUR COMMITMENT? YES.
AND SO WHEN BATTERIES CONTINUE TO SELL HOUR AFTER HOUR, AFTER HOUR AFTER HOUR, 12 STRAIGHT HOURS, WHAT WE'RE TRYING TO MAKE SURE IS THAT WHAT THEY'RE POINTING TO AT THE TOP OF THOSE HOURS CAN DELIVER THE FULL TWO HOUR OBLIGATION.
IF THEY WANNA RECHARGE, THAT'S THEIR CHOICE.
IF THEY WANNA POINT A DIFFERENT RESOURCE, THAT'S THEIR CHOICE.
AND IT'S THE SAME REQUIREMENT FOR A GAS TURBINE.
IF A GAS TURBINE IN THERE, IT'S THE EXACT SAME OBLIGATION AND WE, AND ONE HOUR AND 59 MINUTES WE SAY DEPLOY, THEY'VE GOTTA RUN TWO HOURS IF THEY SOLD US A TWO HOUR PRODUCT OR HAVE TO BE ABLE TO RUN TWO HOURS.
AND SO IT'S THE SAME, IT'S NOT DISCRIMINATORY.
CAN I ASK YOU A QUESTION? IS OUR, YOU'RE SAYING TO RECHARGE, JUST BUY ANOTHER BATTERY? I MEAN I'M JUST BEING, YOU KNOW, YOU SAID ARBITRARY, YOU'RE SAYING A LOT OF WORDS, BUT THE BOTTOM LINE IS COMMITMENT TO DELIVER.
EXCUSE ME, AND OH, SORRY I INTERRUPTED.
I'M TRYING TO GET A CLARIFICATION.
WHAT, WHAT I'M HEARING FROM THE MEMBER IS WE DON'T HAVE A SYSTEM THAT UNDERSTANDS POWER OVER TIME.
AND YOU ALSO COMMENTED ON THAT THIS IS REALLY IMPORTANT BECAUSE OUR FUTURE IS MORE POWER OVER TIME.
1186 WILL NOT GET US TO POWER OVERTIME.
DOES R T C PLUS BATTERIES GET US TO POWER TIME? YES.
SO WHAT I WOULD REALLY LIKE TO UNDERSTAND FROM THE COLLECTIVE GROUP IS WHAT IS THE FASTEST PATH TO GET TO R T C SINCE THAT IS OUR FUTURE? WELL, I WOULD SAY WE HAVE A RELIABILITY ISSUE TODAY.
THE MARKET IS BUYING A SERVICE THAT ISN'T ALWAYS ABLE TO DELIVER.
SO WE'VE GOTTA FIX THAT 1186, WELL, 10 96 WITH 1186 FIXES THAT PROBLEM AND IT DOESN'T DELAY R T C.
SO I WOULD SAY THAT TO FIX THE RELIABILITY PROBLEM AND GET TO THE BEST SOLUTION, AND WE WANT TO USE BATTERIES, I MEAN BATTERIES ARE THE FUTURE.
WE WANT TO USE THEM, WE WANT TO USE 'EM EFFICIENTLY.
WE, WE WANNA RELY ON 'EM, WE WANT TO INCORPORATE 'EM IN EVERY ASPECT OF THE AIRCON MARKET.
I MEAN, WE CAN SEE THE FUTURE.
YOU GUYS ARE THE FUTURE, BUT WE CAN'T KEEP, WE CAN'T KEEP BUYING A SURFACE THAT ISN'T CAPABLE OF ALWAYS BEING DELIVERED.
AND THIS WILL FIX THAT AND ALLOW US TO GET TO THIS POWER OVER TIME IN OUR SYSTEMS, WHICH IS YOU HAVE TO HAVE THAT IN ORDER TO INCORPORATE BATTERIES.
AND THAT'S, THAT'S THE GOAL HERE.
I'D LOVE TO RESPOND IF, IF IT'S OKAY BECAUSE I THINK WHAT YOU'VE JUST OUTLINED IS EXACTLY WHY THIS CREATES A PERVERSE INCENTIVE THAT YOU'RE ONLY GONNA WANNA BUILD ONE HOUR BATTERIES BECAUSE WHAT PABLO JUST TOLD YOU IS, I SHOULD NEVER BID TWO OR THREE HOURS, EVEN THOUGH MY BATTERY IS CAPABLE OF PROVIDING OVER THREE HOURS OF SERVICE AND I SHOULD MOVE IT AROUND.
I DO HAVE MULTIPLE BATTERIES IN TEXAS THAT ARE ALL VERY LARGE AND MERCHANT, BUT THAT IS VERY INEFFICIENT.
AND I ACTUALLY AM SELLING A TWO HOUR PRODUCT, BUT BECAUSE EVERYTHING IS ON A ONE HOUR BASIS, I NEVER DELIVER TWO HOURS FROM ANY FACILITY BECAUSE 1186 REQUIRES ME TO ALWAYS BE BACK UP AT TWO HOURS AT THE TOP OF AN HOUR.
SO THAT IS WHY I'M, I, I'M HAVING TROUBLE EX I'M I'M EXPLAINING 'CAUSE I UNDERSTAND NOT EVERYONE IS AS DEEP UNFORTUNATELY AS I
[02:30:01]
AM AT THIS POINT.BUT THIS IS A SCENARIO WHERE ERCOT IS NOT GETTING THE BEST OUTTA BATTERIES AND BATTERY OPERATORS WHO HAVE INVESTED HEAVILY IN NEW FACILITIES ARE GOING TO IMMEDIATELY LOSE ASSET VALUE.
AND YOU ARE GONNA HAVE A SITUATION WHERE NOBODY WANTS TO BUILD MORE THAN A ONE HOUR BATTERY.
SO I WOULD AGREE THAT WE'RE NOT GETTING THE BEST OUT OF BATTERIES.
OUR SYSTEMS DON'T GET THE BEST OUTTA BATTERIES.
I WANT TO GET TO A PLACE WHERE WE CAN, WHAT WE'RE PROPOSING IS THE FASTEST WAY TO GET THERE.
AND WE'RE MAKING SOME COMPROMISES HERE.
WE'RE MAKING SOME COMPROMISES FOR BATTERIES TO USE SOME OF THAT ENERGY AND DEPLETE THAT STATE OF CHARGE WITHIN THE HOUR.
NOT AS MUCH AS YOU'RE ASKING, BUT 1186 DOES ALLOW YOU TO USE SOME OF THAT ENERGY, WHICH IS NOT EQUIVALENT TO THE WAY WE WOULD TREAT A GT.
BUT IT ONLY IMPACTS ONE HOUR PRODUCTS EFFECTIVELY.
SO, BUT WE SELL TWO AND FOUR HOUR PRODUCTS AS WELL.
AND THAT'S, THESE ARE THE ISSUES THAT WE'VE BEEN RAISING.
THAT'S, I MEAN, WE KEEP TALKING ABOUT ONE HOUR THINGS, BUT WE SELL A LOT OF ANCILLARY SERVICES THAT AREN'T ONE HOUR.
YOU, IF YOU SELL IT TO US, WE EXPECT TWO HOURS OR WE EXPECT FOUR HOURS.
AND YOU HAVE TO BE ABLE TO DELIVER THAT BECAUSE OUR ENTIRE ANCILLARY SERVICE METHODOLOGY THAT THE BOARD APPROVED IS BASED ON THE ANALYSIS THAT USES TWO HOUR, FOUR HOUR, AND ONE HOUR PRODUCTS.
THAT'S TRUE, BUT BECAUSE OF THE ERCOT SYSTEM, I CAN ONLY BID IN ONE HOUR INCREMENTS.
SO EVEN THOUGH I'VE GOT TWO HOURS FOR E C R S, I CAN ONLY BID ONE HOUR AT A TIME.
AND THIS CREATES THIS PROBLEM.
AND SO IF, IF YOU CHOOSE, SO I HAVE, I HAVE A CLARIFYING QUESTION.
IF YOU DON'T, IF YOU DON'T MIND IF I, SO, UM, THIS IS MEANT WE'RE GONNA CONTINUE TO IMPROVE.
THIS IS MEANT AS A TRANSITION STEP.
IT'S MEANT TO TRANSITION TO SOLVE SOME IMMEDIATE ISSUES.
SECOND, ERCOT AND TCC SUPPORT THIS, RIGHT? YES.
SO WE'VE GONE THROUGH THIS ANALYSIS.
SO WE'VE, THE, THIS DISCUSSION THAT YOU'VE BEEN PRESENTING TO US HAS BEEN VETTED AND AGAIN, IT'S A, IT'S A TRANSITION SOLUTION.
SO THIS IS NOT A PERMANENT RESTRICTION ON THE INDUSTRY, ON THE BATTERY INDUSTRY.
ANYWAY, THANK YOU FOR THE CLARIFICATION.
IT IS FOR THE NEXT THREE YEARS THOUGH IT'S A LONG PERIOD OF TRANSITION, IT WILL BE COSTLY.
SO I THINK FOR THE CHAIRMAN AND CHAD FOR WHERE WE CAME OUT AT R M R M AND I, THE MORE DISCUSSION HAS BEEN HELPFUL AS WELL, WAS THAT WE WERE SUPPORTING OUR COMPOSITION TO REMAND THE PORTION OF 1186 THAT DEALS WITH SCARCITY.
WE THINK THAT WAS A VERY VALUABLE POINT AND ACCEPTING WHERE WE ARE ON THE REMAINDER OF 1186 AS LOCKING THAT PIECE OF IT IN.
I THINK THE DISCUSSION WITH STEPHANIE HAS BEEN VERY HELPFUL.
I JUST ENCOURAGE AS WE FOCUS ON THE SCARCITY PIECE, IF WE SEE SOMETHING TO MAKE SOMETHING ELSE BETTER, THAT WE'RE, WE'RE GONNA GRAB ONTO THAT.
BUT THE RECOMMENDATION FROM R AND M THAT I'M PROPOSING IS TO GO WITH WHAT WE CONCLUDED YESTERDAY, REMAND THE SCARCITY PIECE.
SO CHAD, IS THAT, YEAH, SO, UM, THE, THE ENTIRE N P R WILL GET REMANDED WITH INSTRUCTIONS FROM THE BOARD TO TAC TO FOCUS ON THE SCARCITY DEPLOYMENT ISSUE, CORRECT? YEAH.
SO THAT WOULD BE THE R AND M RECOMMENDATION.
AND I, I GUESS I'M HEARING IS THAT A MOTION? THAT'S A MOTION.
IS THERE FURTHER DISCUSSION? SO I WOULD UH, LOOK FOR A SECOND.
ANY OPPOSED? ALRIGHT STEPHANIE, THANK YOU VERY MUCH FOR YOUR TIME AND INPUT AND I THINK WE WANTED TO GO BACK TO THE VOTE ON THE THREE REVISION REQUESTS BECAUSE I DO BELIEVE COURTNEY WANTS TO ABSTAIN ON THE O B D R R.
SO WE WILL NOTE THAT ABSTENTION IN THE RECORD FOR THAT ONE.
[8. Formation of Technology and Security (T&S) Committee]
IS AGENDA ITEM EIGHT, FORMATION OF THE TECHNOLOGY AND SECURITY.UH, WE'LL CALL IT THE T N SS COMMITTEE AS SET FORTH IN THE MEMO INCLUDED IN THE MEETING MATERIALS.
AS PART OF THE BOARD'S ONGOING REVIEW OF ITS OVERALL COMMITTEE STRUCTURE, THE BOARD HAS BEEN DISCUSSING THE FORMATION OF A NEW T N S COMMITTEE TO ASSUME RESPONSIBILITIES FOR FROM THE R AND M COMMITTEE FOR OVERSIGHT OF TECHNOLOGY RELATED FUNCTIONS AS WELL AS PHYSICAL AND CYBERSECURITY CURRENTLY OVERSEEN DIRECTLY BY THE BOARD.
WE BELIEVE CREATING THIS NEW T N S COMMITTEE AND ASSIGNING
[02:35:01]
IT SOME OF THE R AND M COMMITTEES AND BOARD'S EXISTING DUTIES WILL ACHIEVE A BETTER BALANCE OF WORK AMONG THE BOARD'S COMMITTEES AND MORE PRACTICAL OVERALL GOVERNANCE STRUCTURE.THERE'S AN INITIAL DRAFT T N S COMMITTEE, CHARTER AND THE MEETING MATERIALS, WHICH THE T N S COMMITTEE WILL REVIEW AT ITS FIRST MEETING IN OCTOBER.
WE WILL TAKE UP COMMITTEE ASSIGNMENTS LATER UNDER THE H R G REPORT.
DOES ANYONE HAVE ANY COMMENTS OR QUESTIONS REGARDING THIS? I WILL ENTERTAIN A MOTION TO, UH, ESTABLISH A NEW TECH TECHNOLOGY AND SECURITY COMMITTEE CHARGED WITH OVERSIGHT OF INFORMATION TECHNOLOGY AND SECURITY FUNCTIONS AS SET FORTH IN THE MEETING MATERIALS.
DO I HEAR A MOTION? SO MOVED AND A SECOND.
ALL IN FAVOR? ANY OPPOSED? THANK YOU.
AND, AND CHAIRMAN, JUST TO ADD A COMMENT FOR PUBLIC AWARENESS WHEN WE MOVE FORWARD IN OCTOBER, WE NOW HAVE FOUR COMMITTEES AND WE WILL RUN TWO COMMITTEES CONCURRENTLY.
SO FOR THOSE ATTENDING THE GENERAL PUBLIC THAT WHEN YOU SHOW UP FOR THOSE COMMITTEES, WE'LL HAVE THIS BOARDROOM DIVIDED AND WE'LL BE RUNNING COMMITTEE MEETINGS CONCURRENTLY GOING FORWARD.
JUST WANNA MAKE SURE EVERYBODY'S AWARE OF THOSE EXPECTATIONS GOING FORWARD.
YOU PROBABLY HAVE THREE COMMITTEES THAT AT ONES AND R AND M ON THE OTHER SIDE.
[9. Finance and Audit (F&A) Committee Report]
NEXT WE HAVE THE COMMITTEE REPORTS AND, UH, FIRST BILL WILL PRESENT, UH, AGENDA ITEM NINE, THE FINANCE AND AUDIT COMMITTEE REPORT, WHICH HAS ONE ASSOCIATED VOTING ITEM, THE ACCEPTANCE OF 2022 ERCOT 4 0 1 K SAVINGS PLAN, AUDIT REPORT.BILL, UH, THANK YOU MR. CHAIRMAN.
I WILL, UH, NOT DUPLICATE, UH, A FULL REPORT, UH, DUE TO THE FACT THAT ALL THE DIRECTORS WERE IN THE COMMITTEE MEETING YESTERDAY.
SO I WILL GO STRAIGHT TO THE, UM, UH, ACTION ITEM.
AND THAT IS I MOVE THAT THE BOARD ACCEPT THE AUDITED FINANCIAL STATEMENTS OF KOTS 4 0 1 K PLAN AS OF DECEMBER 31ST, 2022, AS PRESENTED IN DRAFT FORM BY BAKER TILLY AND AS RECOMMENDED BY THE FINANCE AND AUDIT COMMITTEE.
DO I HAVE A SECOND? ALL RIGHT.
[10. Human Resources and Governance (HR&G) Committee Report]
HIGG WILL PRESENT AGENDA ITEM 10, THE R AND G COMMITTEE REPORT, WHICH HAS THREE ASSOCIATED VOTING ITEMS. ARE YOU? YES.UH, THE FIRST ITEM IS WE, UH, DISCUSSED FOR LOGISTICAL PURPOSES MOVING THE, UH, ANNUAL MEETING OF THE MEMBERS FROM DECEMBER 19TH, THE DATE THAT WAS PREVIOUSLY ESTABLISHED IN DECEMBER 18TH.
SO ON BEHALF OF THE GOVERNANCE COMMITTEE, I MOVE TO MAKE THAT CHANGE ALL.
SO THAT IS, SHOULD WE VOTE ALL TOGETHER ONE? SHOULD WE TAKE 'EM ALL TOGETHER? YEAH, WE CAN DO 'EM AS ONE, ONE.
VOTE FOR ALL THREE ITEMS IF YOU WANT.
UH, THE SECOND VOTING ITEM IS THAT, UH, THE HUMAN RESOURCES AND GOVERNMENT GOVERNANCE COMMITTEE, UH, MOVED TO, UH, CHANGE ONE OF THE OFFICER TITLES OR TWO OF THE OFFICER TITLES.
WOODY WICKERSON WILL BE SENIOR VICE PRESIDENT, CHIEF OPERATING OFFICER, AND CHRISTIE HOBBS AS VICE PRESIDENT OF SYSTEM PLANNING AND WEATHERIZATION.
EACH OF THOSE WILL BE EFFECTIVE SEPTEMBER 1ST, 2023.
AND THE THIRD RECOMMENDATION IS TO, UH, APPROVE, UH, THE MEMBERSHIP AND EACH COMMITTEE DESIGNATION, UH, FOR THE, THE FOUR COMMITTEES THAT WE WILL NOW HAVE EFFECTIVE SEPTEMBER 1ST, 2023 IS SET FORTH IN THE ATTACHMENT IN THE BOARD A IN THE BOARD TEMPLATE.
SO, UH, I MOVE TO THE, UH, ON BEHALF OF THE HUMAN RESOURCES GOVERNMENT COMMITTEE TO MAKE THOSE CHANGE THOSE MOTIONS.
DO I HAVE A SECOND, COURTNEY? THANK YOU.
ANYTHING ELSE, PEGGY? ALL RIGHT.
[11. Reliability and Markets (R&M) Committee Report]
R AND M COMMITTEE REPORT.UM, UH, BOB FLEXON WILL PRESENT AT THAT IS AGENDA ITEM 11.
THERE'S TWO ITEMS FOR APPROVAL.
THE FIRST ONE DEALS WITH THE MODIFICATIONS TO THE LETTER OF CREDIT AND SURETY BOND STANDARD FORMS AND THE REPEAL OF THE GUARANTEE AGREEMENT STANDARD FORM.
THE SECOND IS A TIER ONE TRANSMISSION PROJECT, C P S ENERGY, SAN ANTONIO SOUTH RELIABILITY REGIONAL PLANNING GROUP PROJECT OPTION FIVE, WHICH WAS SELECTED.
UM, THESE ITEMS HAVE BEEN APPROVED BY TAC AS WELL, SO LOOKING FOR MOTION TO APPROVE THESE TWO ITEMS. OKAY, SO MOTION, I'LL MOVE IT BY BOB, THAT IS, THAT'S TAKEN UP BOTH OF THESE ITEMS TOGETHER.
[02:40:01]
YES.UH, DO I HAVE A SECOND, JOHN? UH, ALL IN FAVOR? AYE.
SO BOTH OF THOSE MOTIONS PASS.
ANYTHING ELSE FROM R AND M? THAT'S IT, UNLESS YOU WANNA DO 1186.
UM, AND THE LAST ITEM BEFORE WE MOVE INTO EXECUTIVE SESSION IS AGENDA ITEM 12, OTHER BUSINESS.
WOULD ANY BOARD MEMBER LIKE TO RAISE ANY OTHER BUSINESS? ALL RIGHT.
[Convene Executive Session]
THIS TIME THE BOARD WILL ADJOURN GENERAL SESSION AND CONVENE AN EXECUTIVE SESSION.THERE ARE TWO VOTING ITEMS BEING DISCUSSED IN EXECUTIVE SESSION.
SO GENERAL SESSION WILL RECONVENE AT THE CONCLUSION OF EXECUTIVE SESSION.
WE'LL TAKE A FIVE MINUTE YOU WANNA DO LUNCH IS HERE.
SO IF WE WANT TO GET LUNCH, YOU CAN COME BACK IN FOR EXECUTIVE SESSION.
WE'LL, WE WILL BRING LUNCH IN AND EAT AT THE TABLE, UH, BEFORE CONVENING IN EXECUTIVE SESSION.
UH, CHAIR JACKSON, DO YOU JUST WANT TO, I HEREBY, UH, CLOSE OUT THE PUBLIC UTILITY COMMISSION MEETING.
SORRY, I DIDN'T, UH, GOOD AFTERNOON.
I'M PAUL FOSTER ERCOT, BOARD CHAIR.
THE GENERAL SESSION OF THIS MEETING IS NOW RECONVENED.
UM, B U C DOES NOT NEED TO CONVENE A MEETING.
[13. Vote on Matters from Executive Session]
ITEMS FROM EXECUTIVE SESSION.FIRST, I'LL ENTERTAIN A MOTION TO APPROVE THE SELECTION OF BAKER TILLY AS THE 2023 ERCOT 4 0 1 K SAVINGS PLAN.
AUDITOR, UH, MR. CHAIR, UH, ON BEHALF OF FINANCE AND UH, F AND A COMMITTEE, I APPROVE, I, UM, MOVE THAT WE, UH, APPROVE THE HIRING OF BAKER TILLY AS A 2023 ERCOT 4 0 1 K SAVINGS PLAN, AUDITOR.
UH, SECOND, I'LL ENTERTAIN A MOTION, UH, TO APPROVE THE CONTRACT MATTER DISCUSSED DURING EXECUTIVE SESSION UNDER AGENDA ITEM E S 2.12.
UH, MR. CHAIR, I, UH, MAKE THAT MOTION ON BEHALF OF THE F AND A COMMITTEE AND THE, UH, FULL MOTION IS ON PAGE 16 OF THE EXECUTIVE SESSION MATERIALS.
DO I HAVE A SECOND, JULIE? ALL IN FAVOR? AYE.
THE ME THIS MEETING OF ERCOT BOARD OF DIRECTORS IS NOW ADJOURNED AND THE WEBCAST WILL BE CONCLUDED.