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UH, YOU CAN PROCEED WHEN YOU'RE READY, BOB.[1. Call General Session to Order]
SO, GOOD AFTERNOON, MEMBERS OF THE RELIABILITY AND MARKETS COMMITTEE AND GUESTS.THIS IS BOB FLEXON, COMMITTEE CHAIR.
WELCOME TO THE DECEMBER 18TH TO 19TH 2023.
RELIABILITY AND MARKETS COMMITTEE MEETING.
I'VE JOINED THE MEETING BY TELECONFERENCE AND ERCOT.
LEGAL HAS CONFIRMED TO ME THAT A QUORUM IS PRESENT AND IN PERSON.
I HEREBY CALL THIS MEETING TO ORDER.
THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON ERCOT WEBSITE.
WE'LL RECESS TODAY FOLLOWING AGENDA ITEM 12, AND WE RESUMED TOMORROW AT 8:30 AM AND BOARDROOM B FOR THOSE ATTENDING IN PERSON TOMORROW.
WE'LL BEGIN WITH AGENDA ITEM 13, A REPORT FROM THE INDEPENDENT MARKET MONITOR, FOLLOWED BY COMMITTEE CONSIDERATION OF THE 2024 ERCOT METHODOLOGIES FOR DETERMINING MINIMUM ANCILLARY SERVICE REQUIREMENTS.
BEFORE WE, BEFORE WE BEGIN, I'D LIKE TO ASK PEC INTERIM CHAIR KATHLEEN JACKSON IF SHE WOULD LIKE TO CALL AN OPEN MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS TO ORDER.
THERE'S NOT A QUORUM OF COMMISSIONERS PRESENT, SO YOU CAN PROCEED, BOB, WE'LL LET YOU KNOW IF THAT CHANGES.
SO BEFORE MOVING ON TO TODAY'S BUSINESS, I'D LIKE TO HIGHLIGHT THAT THE ANTITRUST ADMONITION AND SECURITY MAP ARE INCLUDED WITH POST-IT MEETING MATERIALS.
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 DECEMBER 11TH AND PROVIDED INSTRUCTIONS TO THE PUBLIC FOR COMMENTING IN PERSON.
TO DATE, NO ONE HAS EXPRESSED AN INTEREST IN COMMENTING.
IS THAT STILL CORRECT, JOHN? YES.
[3. October 16, 2023 General Session Meeting Minutes]
NEXT IS AGENDA ITEM THREE, OCTOBER 16TH, 2023.GENERAL SESSION MEETING MINUTES.
THERE IS A DRAFT IN THE MEETING MATERIALS.
DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION TO APPROVE? SO MOVED.
ANY OPPOSED OR ABSTENTIONS? WE'LL CONSIDER THE MINUTES PASSED THEN.
[4. Annual Committee Self-Evaluation Survey Results]
IS AGENDA ITEM FOUR.THAT'S THE ANNUAL COMMITTEE SELF-EVALUATION SURVEY RESULTS.
FOLLOWING THE OCTOBER MEETING BOARD MEMBERS WHO SERVED ON THE R AND M COMMITTEE DURING 2023 WERE ASKED TO COMPLETE A COMMITTEE.
SELF-EVALUATION SURVEY RESULTS HAVE BEEN COMPILED AND ARE INCLUDED IN THE MEETING MATERIALS.
TO FACILITATE TODAY'S DISCUSSION, WOULD ANYONE LIKE TO COMMENT ON THE SURVEY RESULTS? I WOULD SAY THAT MY REVIEW OF THE SURVEY RESULTS, I THINK WE'RE ALL IN AGREEMENT THAT SPLITTING OUT TECHNOLOGY WAS A POSITIVE STEP.
THE AGENDAS WERE BECOMING TOO LONG AND TOO THICK TO BE ABLE TO GET THROUGH EVERYTHING.
SO I THINK THAT WAS A VERY GOOD CHANGE THAT WE HAD DURING THE COURSE OF THE YEAR.
AND I THINK THE OTHER ITEM WAS THAT WE WANNA MAKE SURE WE LEAVE AMPLE TIME FOR DISCUSSION, PARTICULARLY ON TOPICS THAT HAVE, UH, MAYBE OPPOSING OR DIFFERENT VIEWS.
AND I THINK IT'S VERY HEALTHY FOR US TO MAKE SURE WE ADEQUATELY HEAR ALL PARTIES AND THEIR PERSPECTIVES IN ORDER TO MAKE THE BEST DECISIONS FOR THE STATE.
SO I FOUND THE SURVEY HELPFUL AND I THINK, UH, WE'RE MOVING IN THE RIGHT DIRECTION.
IS THERE ANYBODY ELSE WHO WOULD LIKE TO COMMENT? NO, THAT WAS A GOOD SUMMARY, BOB.
[5. Report on Annual Technical Advisory Committee (TAC) and Subcommittee Structural/Procedural Review]
SO, SO ANNUALLY THE TECHNICAL ADVISORY COMMITTEE REVIEWS THE STRUCTURE PROCESS AND GOALS FOR THE COMMITTEES, AND ITS SUBCOMMITTEES TAX CHAIR CLIFF LANG WILL REPORT THE RESULTS OF TAX REVIEW FOR 2023.SO, CLIFF, I PRESUME YOU'RE NEARING THE PODIUM, SO PLEASE PROCEED WHEN READY.
UH, HOPE EVERYONE'S MONDAY AFTERNOON IS GOING WELL.
WE DID OUR, UH, ANNUAL TECH AND SUBCOMMITTEE, STRUCTURAL AND PROCEDURAL REVIEW OVER THE COURSE OF THE LAST COUPLE MONTHS.
WANTED TO COME TO YOU THIS AFTERNOON TO REPORT THE RESULTS OF THAT.
IN SUMMARY, THE WAY THAT WE HANDLE THIS PROCESS IS THAT WE REACH OUT TO OUR SUBCOMMITTEES AND TO OUR WORKING GROUPS AND TASK FORCES AND ASK THEM TO DO THEIR OWN SELF-ASSESSMENTS.
WE WANNA MAKE SURE THAT WE'RE DOING THINGS IN A MANNER THAT RESULTS IN EFFICIENT AND EFFECTIVE OPERATION OF THE DIFFERENT COMMITTEES, SUBCOMMITTEES, AND TASK FORCES.
UM, AS AFTER WE HAVE THE, UH, SUBCOMMITTEES TASK FORCES AND WORKING GROUPS WORK THEIR WAY THROUGH THE PROCESS, THEN TAC HOLDS A MEETING, UH, ON AN OFF CYCLE TYPE BASIS, SO NOT AS PART OF OUR NORMAL, UH, TAC MEETING CYCLE.
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WE DID THAT IN MID-OCTOBER TO GO AHEAD AND TALK ABOUT WHAT THE FINDINGS FROM THE DIFFERENT SUBCOMMITTEES.AND YOU CAN SEE HERE WE'VE GOT THREE DIFFERENT AREAS, UH, THAT WE'VE SOLICITED STAKEHOLDER INPUT ON, UH, ALIGNMENT OF TAC GOALS AND APPROVED REVISION REQUESTS, THE TASK FORCE ASSESSMENT, AND THEN WE LOOK AT MEETING EFFICIENCY AS WELL.
AND THEN AFTER THAT OFF CYCLE TTAC MEETING, WE DO DISCUSS THIS A LITTLE BIT DEEPER AT OUR NORMAL, UH, TAC MEETING AND ENDORSE THAT, WHICH IS WHAT WE DID ON OCTOBER 24TH.
THIS DATA HERE IS SOMETHING THAT ERCOT STAFF COMPILES.
UM, IT SHOWS HOW OUR ATTACK GOALS, UH, ALIGN WITH THE ERCOT STRATEGIC PLAN OB OBJECTIVES.
UM, AND YOU CAN SEE HERE HOW THEY, HOW THEY ALIGN VERY NEATLY WITH THEM.
UH, APPROXIMATELY 88% OF THEM REALLY ALIGN WITH ENHANCEMENT OF OPERATING CAPABILITIES.
SO WE'RE LOOKING AT OPERATIONAL ISSUES AS WELL AS MARKET ISSUES.
SO THE COMPETITIVE SOLUTIONS SIDE, SO WE REALLY ARE, ARE FOCUSED QUITE A BIT IN MAKING SURE THAT WE DO ALIGN BOTH THE OPERATIONS AND THE MARKET SIDE WITH ERCOT STRATEGIC PLAN OBJECTIVES.
THE OTHER TWO ASPECTS ARE OPTIMIZING ERCOT RESOURCES AND IMPROVING INFORMATION EXCHANGE, WHICH ARE MUCH, UH, SMALLER, UH, TARGETS OVERALL FOR US.
UH, BASED ON ON THIS, THIS YEAR'S EFFORTS OUTSIDE OF DOING THE REVISION REQUEST, UM, ANALYSIS THAT WE DO AND, AND THE INFORMATION THAT WE BRING TO THE COMMITTEE AND TO THE BOARD, WE HAD A NUMBER OF ADDITIONAL TAC ENDORSEMENTS AND APPROVALS THAT WE HAD DONE THIS YEAR AS WELL.
UH, FIRST OF WHICH WAS THE FORMATION OF THE CREDIT FINANCE SUBGROUP.
UM, AS YOU RECALL, YOU DISBANDED THE CREDIT WORKING GROUP, AND SO WE NEEDED A METHOD TO BE ABLE TO PROVIDE THAT INPUT AS IT PERTAINS TO THE CREDIT SIDE OF THINGS.
UH, SO TAC DID FORM THE CREDIT FINANCE SUBGROUP, UH, AND THEY'VE, THEY'VE GOTTEN OFF, OFF AND RUNNING, UH, VERY WELL THIS YEAR.
UM, THE BRIDGING SOLUTION AS DISCUSSED AT THE PUBLIC UTILITY COMMISSION WAS A CONCERN ERCOT HAD BROUGHT, UH, TO TAC, UH, SOME SUGGESTION SUGGESTED TO RDC ENHANCEMENTS.
UH, WE DID TALK THROUGH THOSE.
WE ACTUALLY ASKED ERCOT TO PROVIDE A LITTLE BIT MORE INFORMATION AND ULTIMATELY ENDED UP, UH, ENDORSING THE VERSION THAT WAS ORIGINALLY PROPOSED BY ERCOT.
UH, WE ALSO, IN, IN THE INTEREST OF EFFICIENCY, UM, DID APPROVE THE SUSPENSION OF THE 2024 BUSINESS AND RESIDENTIAL ANNUAL VALIDATION.
UM, THIS FALL WE ENDORSED THE CPS SAN ANTONIO SOUTH RELIABILITY RPG PROJECT, UH, WHICH YOU ENDORSED AS WELL AND APPROVED AS WELL.
DID HAVE A NUMBER OF, UH, REVIEWS AND CHANGES TO THE OTHER BINDING DOCUMENTS LIST.
AND THAT'S A, A PRETTY REGULAR OCCURRENCE FOR TAC UH, IN THE INTEREST OF ADVANCING THE REAL-TIME CO-OP OPTIMIZATION AND THE BATTERY, UH, STORAGE, UH, ISSUES THAT ARE OUT THERE.
WE DID ESTABLISH A REAL-TIME CO-OP OPTIMIZATION PLUS BATTERIES TASK FORCE.
UH, THEY'VE GOT A LOT OF WORK AHEAD OF THOSE FOLKS, UM, BUT VERY PROUD OF THE WORK THAT THEY'VE DONE SO FAR.
AGAIN, WE DO HAVE, UH, ELEMENTS THAT WE, UH, DO UNDERTAKE EACH YEAR.
AND SO THE, UH, APPROVING REVISIONS TO THE MAJOR TRANSMISSION ELEMENTS LIST IS ONE OF THOSE.
SO THAT WAS DONE THIS FALL AS WELL.
WE ALSO ENDORSED THE 2024 ANCILLARY SERVICES METHODOLOGY, UH, AND ASKED ERCOT TO COME BACK AND, UH, REVIEW THOSE BY APRIL 30TH, UH, 2024 AFTER WE HAD SOME NON UNANIMOUS, UH, DISCUSSIONS ON THIS PARTICULAR ISSUE AND FOR WHICH YOU'LL BE DISCUSSING THOSE TOMORROW MORNING.
UM, A COUPLE OTHER ITEMS THAT YOU'LL HAVE ON YOUR AGENDA HERE THIS AFTERNOON, INCLUDING THE ENDORSEMENT OF THE WEST TEXAS SYNCHRONOUS CONDENSER RPG PROJECT AND THE TEXAS NEW MEXICO SILVER LEAF AND COW PEN RPG PROJECT AS WELL.
SO IT'S BEEN A BUSY YEAR FOR TAC UM, AND ITS, UH, SUBCOMMITTEES AS FAR AS TASKING OUR SUBCOMMITTEES AND OUR WORKING GROUPS AND TASK FORCES TO DO THEIR SELF-ASSESSMENTS.
THERE'S A NUMBER OF QUESTIONS THAT WE REALLY PUT OUT THERE FOR THEM TO TAKE A LOOK AT, AND YOU CAN SEE THOSE ON THE SCREEN.
I THINK PROBABLY THE MOST IMPORTANT IS ACTUALLY THE LAST ONE ON THE LIST.
AND THAT IS, IS THE GROUP STILL NECESSARY? AND SO I WOULD, I WOULD, I WOULD ARGUE THAT SHOULD PROBABLY BE FIRST ON THE LIST, AND THAT'S REALLY WHAT WE WANT THEM TO DO.
IF TASK OR IN YOUR SCOPE IS NOT NECESSARY, THEN MAYBE THE GROUP IS NOT NECESSARY.
BUT IF, IF WE ANSWER THAT FIRST QUESTION, THEN WE START LOOKING THROUGH THE REST OF THE ITEMS ON HERE.
SO WE LOOK AT THEIR SCOPE, WE LOOK AT THEIR PROCEDURES, WE MAKE SURE THAT THEY'RE STILL VALID.
DO WE NEED TO REVISE THEM IN ANY WAY? WE ASK THEM TO LOOK AT THEIR OPEN, OPEN ACTION ITEMS LIST TO MAKE SURE THAT WHAT'S ON THERE IS STILL SOMETHING THAT THEY NEED TO BE LOOKING AT.
WE WANNA MAKE SURE THAT IT'S TIMELY, THAT IT'S IMPORTANT, UM, AND THAT IT'S NOT SOMETHING THAT HAS FALLEN WAY INTO THE PAST THAT NO LONGER NEEDS TO BE ON THERE.
HOW OFTEN ARE THEY MEETING? ARE THEY MEETING OFTEN ENOUGH? IS IT A GOOD USE OF NOT ONLY THE TIME OF ERCOT STAFF, BUT IS A GOOD USE OF STAKEHOLDER TIME AS WELL? WE WANNA MAKE SURE THAT WE'RE NOT HOLDING THEM TOO FREQUENTLY OR THAT WE'RE HOLDING THEM TOO RARELY TO NECESSARILY A BENE BE A BENEFIT TO ANY PARTY IN PARTICULAR.
[00:10:01]
AND THEN LASTLY, WE WANNA MAKE SURE THAT THE WORKING GROUPS AND TASK FORCE THAT WE DO HAVE ESTABLISHED ARE ALIGNED WITH THE APPROPRIATE SUBCOMMITTEE.MAYBE IT'S NO LONGER A FIT FOR ROS, MAYBE IT NEEDS TO BE UNDER WMS. AND SO WE ASKED THEM TO LOOK AT THAT AS WELL.
SO IN SHORT, AFTER WE WENT THROUGH THIS WHOLE PROCESS, WE CONCLUDED THAT THE CURRENT STRUCTURE OF TAC AND THE SUBCOMMITTEES IS STILL NECESSARY AND EFFECTIVE.
UH, AS YOU KNOW, WE HAD PREVIOUSLY GONE THROUGH THIS EXERCISE OVER THE COURSE OF THE PAST COUPLE YEARS AND MADE SOME FAIRLY SIGNIFICANT CHANGES.
SO NOT SURPRISINGLY, WE DIDN'T SEE ANYTHING IN THIS PARTICULAR ROUND, UM, THAT REALLY NEEDED SOME STRONG TWEAKS.
UH, WE DID ASK OUR SUBCOMMITTEES WHEN WORKING GROUPS AND TASK FORCES TO CONTINUE TO REVIEW THEIR SCOPES, UH, AND OPEN ACTION ITEMS TO MAKE SURE THAT WE ARE KEEPING RELEVANT ITEMS ON THOSE LISTS, AND TO MAKE SURE THAT OUR SCOPES ALIGN WITH THE OBJECTIVES THAT WE HAVE FOR THEM.
THERE'S A NUMBER OF ADDITIONAL SLIDES IN THE DECK.
I'M NOT GONNA NECESSARILY WALK THROUGH THOSE.
UH, BUT IF YOU HAVE ANY QUESTIONS ON THOSE OR ANYTHING ELSE THAT I PRESENTED, UH, OPEN TO THOSE QUESTIONS.
ON THE, IN THE APPENDIX OF THE TECH GOALS ARE THE TOP THREE RANKED.
I WOULDN'T NECESSARILY ARGUE THAT WE'VE, WE RANK 'EM.
BUT, UH, YOU KNOW, THERE'S NO PARTICULAR RANKING TO ANY OF THE GOALS THAT WE HAVE IN THERE.
BUT THOSE ARE OBVIOUSLY VERY IMPORTANT GOALS TO US.
ANY OTHER QUESTIONS FOR YEAH, ALSO IN THE, IN THE APPENDIX, UH, THE MAJORITY OF YOUR COMMENTS ARE AROUND THE NPRR.
DO YOU THINK THAT THAT MAY REQUIRE MAYBE CHANGING THE PROCESS OR, YOU KNOW, HOW, HOW TO IMPROVE THAT? SO, AS FAR AS NRR ARE CONCERNED, SO, UM, SO WE HAVE HAD SOME DISCUSSIONS IN TERMS OF HOW TO IMPROVE THE, THE NPRR PROCESS, IN PARTICULAR, HOW TO GET MORE RELEVANT INFORMATION TO, UH, THE R AND M AND TO THE BOARD.
AND SO, UH, WE DO EXPECT TO BE ABLE TO PROVIDE ADDITIONAL INFORMATION THROUGH THE NPRR FORMS THAT WE USE, UH, TO GIVE YOU A MORE FULSOME UNDERSTANDING OF, OF OUR DISCUSSIONS IN THAT REGARD.
UH, YOU KNOW, I KNOW THAT ONE OF THE THINGS THAT YOU HAVE ASKED IS MORE INFORMATION PERTAINING TO OPPOSING VOTES AND ABSTENTIONS IN THAT REGARD.
AND SO THE INTENTION IS TO GET MORE OF THAT INFORMATION INTO THE REVISION REQUEST FORMS TO BE ABLE TO GIVE THAT INFORMATION TO YOU IN ADVANCE AND ALLOW YOU TO HAVE, UH, SOME TIME TO DIGEST THAT BEFORE IT ACTUALLY COMES UP FOR DISCUSSION.
UH, IT EITHER R AND M OR THE BOARD.
OTHER QUESTIONS OR COMMENTS FOR CLIFF? WELL, CLIFF, UM, THIS IS YOUR LAST MEETING AS CHAIR OF TACK.
WE APPRECIATE YOUR SUPPORT AND WORK OVER THE PAST YEAR AND DEFINITELY A VERY GOOD PARTNER TO WORK WITH AND APPRECIATE THE COOPERATIVE SPIRIT AND, AND ALL THE CONTRIBUTIONS, UH, THAT YOU'VE MADE.
UH, ALONG WITH TAC I APPRECIATE THE COMMENT.
SO IT'S, IT'S BITTERSWEET TO LEAVE, BUT, UM, IT'S BEEN ENJOYABLE AS WELL.
THANK Y'ALL FOR ALL THE SUPPORT AND ALL THE HELP THAT Y'ALL PROVIDED US AS WELL.
[6. Recommendations regarding R&M Committee Charter Revision Requests for Board Approval]
SO NEXT, NEXT UP IS AGENDA ITEM SIX, THAT'S RECOMMENDATIONS REGARDING THE R AND M COMMITTEE.CHARTER REVISION REQUEST FOR BOARD APPROVAL.
THERE IS ONE REVISION REQUEST UNDER THIS ITEM, WHICH IS
CLIFF LANG, AGAIN WILL PRESENT THE TAC REPORT AND KENAN GELMAN IS AVAILABLE ON BEHALF OF ERCOT STAFF TO PROVIDE ANY OPINION THE COMMITTEE MAY REQUEST.
SO, CLIFF, PLEASE PROCEED WITH TAX REPORT ON NPRR 1172.
SO, UH, THIS SPECIFIC NPRR HAD, UH, I BELIEVE IT WAS FIVE OPPOSING VOTES AND TWO ABSTENTIONS.
AND SO WANTED TO WALK THROUGH THAT, UM, IN PARTICULAR TO KIND OF HIGHLIGHT WHAT THE MECHANICS OF THIS NPRR DO, BUT ALSO AT THE SAME TIME SHARE WITH YOU THE PARTICULARS IN TERMS OF WHY FOLKS EITHER ABS UH, OPPOSED OR ABSTAINED ON THIS PARTICULAR REVISION REQUEST.
UM, THE LANGUAGE IN 1172 REMOVES THE MITIGATED OFFER.
CAP MULTIPLIERS, UH, CREATES A 100% CLAWBACK FOR RUCK AND SETS THE THREE PART OFFERS CONSTRUCTED BY ERCOT AT 100% OF THE APPROVED VERIFIABLE COSTS OR GENERIC COSTS.
UM, IT WAS SUBMITTED BY A COALITION OF CONSUMER GROUPS.
YOU CAN SEE THOSE LISTED UNDER THE SPONSOR LINE IN THIS SLIDE RIGHT HERE.
UM, AND THE BUSINESS CASE, TALKING A LITTLE BIT ABOUT THAT, IT'S REALLY A TWO-PRONGED BUSINESS CASE.
SO WE HAD THE FIRST PRONG OF IT WAS REALLY DESIGNED TO ADDRESS WHAT THEY BELIEVED WERE INEFFICIENCIES IN THE PROTOCOLS THAT EXISTED BY HAVING THE MITIGATED OFFER CAP MULTIPLIERS.
UM, WE NOW HAVE OTHER MECHANISMS TO ADDRESS WHAT THE MITIGATED OFFER CAP MULTIPLIERS WERE ORIGINALLY MEANT TO DO.
MORE SPECIFICALLY, WE NOW HAVE AN ORDC
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FUEL LADDER AND THE EXCEPTIONAL PRO, UH, COST PROCESS.BECAUSE THESE TWO MECHANISMS EXIST AND ARE MORE SURGICAL THAN THE MITIGATED OFFER CAP MULTIPLIERS, THEN THEY'RE NO LONGER NEEDED.
UM, THE SECOND PRONG OF THE BUSINESS CASE ADDRESSED THE RUCK CLAWBACK.
AS NOTED AS NOTED IN THE BUSINESS CASE.
THEY BELIEVE THAT INCREASING THE CLAWBACK TO 100% FOR ALL INSTANCES OF RUCK WOULD ENCOURAGE SELF-COMMITMENT AND REDUCE THE NEED FOR RUCK WHILE STILL ALLOWING RESOURCES TO RECOVER THEIR FUEL COSTS.
UM, IN TERMS OF THE OPPOSING VOTES, THEY WERE LARGELY FOCUSED ON THE RUCK CLAWBACK CHARGES.
THERE WAS VERY LITTLE FEEDBACK IN TERMS OF THE MITIGATED OFFER CAP MULTIPLIERS.
THEY REALLY FOCUSED ON, ON THE NEED TO INCREASE THE CLAWBACK PERCENTAGE TO 100%.
A LITTLE BIT OF BACKSTORY BEFORE WE GET, UH, INTO THE OPPOSING VOTES.
UH, CURRENTLY, IF A RESOURCE HAS SUBMITTED A THREE PART OFFER IN THE DAY AHEAD MARKET, THE, UH, THE RUT CLAWBACK PERCENTAGES ARE REDUCED.
AND THAT WAS REALLY DONE, UH, AT THE START OF THE MARKET TO PROVIDE AN INCENTIVE FOR GENERATORS TO PROVIDE, UH, OFFERS INTO THE DAY AHEAD MARKET AND THEREBY IMPROVE DAM LIQUIDITY.
THOSE OPPOSING THIS DID NOT NECESSARILY BELIEVE THAT INCREASING THE RUT CLAWBACK WOULD PROVIDE THE INCENTIVE TO SELF COMMIT.
AS SUGGESTED IN THE BUSINESS CASE, MANY RESOURCES USE THE DAM TO MAKE THEIR COMMITMENT DECISIONS AND WILL NORMALLY RUN IN REAL TIME TO PROTECT THOSE DAM COMMITMENTS AND AVOID, UH, BEING EXPOSED TO REAL TIME MARKET PRICES.
UM, IF THEY'RE NOT AWARDED IN THE DAM, THE THOUGHT WAS FROM THOSE IN OPPOSITION, THEY EXPRESS THAT THE LACK OF AWARDS IS INDICATIVE THAT THE MARKET JUST DOES NOT SUPPORT THE OPERATION OF THAT UNIT.
AND SO, BEING THAT HISTORICALLY, THE DAY AHEAD MARKET IS TYPICALLY HIGHER THAN THE REAL-TIME MARKET, IF THE DAY AHEAD MARKET'S NOT GONNA SUPPORT THE OPERATION OF THE UNIT, IT'S NOT LIKELY THAT THE REAL-TIME MARKET WOULD AS WELL.
AND SO IN MOST INSTANCES, UH, IF NOT SELECTED IN THE DAM, UH, A GENERATOR IS MORE THAN LIKELY NOT GONNA OPERATE IN THE REALTIME MARKET.
UH, THE ISSUES FURTHER COMPOUNDED AND EXACERBATED BY ERCOT, UH, CONSERVATIVE OPERATING POSTURE.
UH, THE MARKET STRUCTURE DOES NOT SUPPORT BASED ON THE WAY THAT IT'S STRUCTURED RIGHT NOW, DOES NOT SUPPORT THE LEVEL OF RESERVES, UH, THAT ERCOT DESIRES THROUGH ECONOMIC COMMITMENT.
AND ALL THOSE, UH, THOSE IN OPPOSITION WERE HOPEFUL THAT THE RECENT ORDC CHANGES WOULD IMPROVE THE ECONOMIC SIGNALS TO COMMIT.
SO THE PRICES AREN'T THERE RIGHT NOW, BUT WITH THE ORDC CHANGES, THEY MAY BE THERE IN THE FUTURE.
AND WE HAVE JUST A FEW MONTHS OF OPERATING, UH, WITH THE ORDC SIGNALS, UH, THE MODIFIED RDC SIGNALS IN PLACE.
AND THEN LASTLY, THE, UH, IN TERMS OF THOSE THAT WERE OPPOSING THE NPRR, UH, THE, THE CONCERN WAS REALLY ABOUT LONG-TERM RESOURCE ADEQUACY AND THE ABILITY FOR UNITS THAT WERE MOSTLY ON THE MARGIN AT THIS POINT IN TIME, BEING ABLE TO ECONOMICALLY OPERATE IN THE FUTURE.
SO THE RU CLAWBACK GAVE AN OPPORTUNITY FOR AN, OR RATHER, THE REDUCED RU CLAWBACK PERCENTAGES PROVIDED AN OPPORTUNITY FOR THOSE RESOURCES IF R TO BE ABLE TO MAINTAIN OR HOLD ON SOME OF THOSE MONIES THAT THEY WOULD'VE RECEIVED POTENTIALLY IN PROFITS, AND BE ABLE TO HOPE THAT THOSE RE UH, THOSE REVENUES WOULD ALLOW THAT UNIT TO BE ECONOMICALLY VI VIABLE ON A GOING FORWARD BASIS.
AND THESE USE RESOURCES ARE TYPICALLY THOSE THAT ARE, UH, GENERALLY OLDER, TYPICALLY LONG LEAD TIME TYPE UNITS, UM, AND GENERALLY ON THE MARGIN IN MOST INSTANCES.
AND SO THE COMBINATION OF THOSE DIFFERENT ITEMS IS REALLY THE, THE SUMMATION OF THE, THE REASONS THAT THOSE IN OPPOSITION, UH, DECIDED TO VOTE AGAINST, UH, THIS PARTICULAR NPRR.
KENNAN, WOULD YOU LIKE TO, UH, COMMENT, UH, ON ERCOT PERSPECTIVE? SURE.
UM, SO, UH, I THINK FIRST OF ALL, CLIFF ACCURATELY, UH, SUMMARIZED THE DEBATE.
UM, ULTIMATELY, UH, AS ERCOT LOOKED AT THIS, UH, WE SUPPORT THE NPRR AND THAT'S, UH, RECORDED IN AT BOTH TAC UH, AND IN IN THE PROCESS FOR THIS NPRR.
UM, UH, I WOULD AGREE THAT THERE WAS, UH, KIND OF A MISUNDERSTANDING OF HOW SWITCHABLE UNITS WERE GONNA BE TREATED, BUT THAT WAS RESOLVED AT, AT TAC AND THE PRIMARY, UH, DIS, UH, DISAGREEMENT OR ISSUE IN QUESTION AS ABOUT THE CLAWBACK.
UM, ULTIMATELY FROM A ERCOT STANDPOINT, UH, WE KIND OF AGREED WITH WHAT THE IMM HAD POSITED ON THIS ISSUE, AND THAT, UH, THE INCENTIVES, UH, BETTER ALIGN WITH A 100% CLAW BACK IN TERMS OF,
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UH, REDUCING THE NUMBER OF RUCKS.HAVING SAID THAT, I THINK IT'S IMPORTANT THAT WE MONITOR THIS AND MAKE SURE IT'S WORKING AS, AS EXPECTED GOING FORWARD.
UM, BUT, UH, ERCOT DOES SUPPORT, UH, THIS NPRR FROM A DOLLARS AND CENTS POINT OF VIEW.
WHAT IS THE DOLLAR IMPACT TO THE MARKET OF MOVING TO A HUNDRED PERCENT CLAWBACK? SO, UM, LIKE WHAT WOULD IT HAVE DONE IN 2023 OR 2022? SO, SO E THE THE NUMBERS ARE DEPENDENT ON, UH, A BEHAVIORAL CHANGE AND, AND, UH, PRICING CHANGE ULTIMATELY, UM, KIND OF RUCK MAKE HOLE, UH, IS, UH, IF I REMEMBER CORRECTLY, UH, IN THE, YOU KNOW, TENS OF MILLIONS OF DOLLARS, THE RUCK SHORT LOAD TENDS TO PAY FOR, FOR, FOR THAT.
UM, SO I, I THINK IT'S A MATTER OF IF THIS REDUCES RUCK, IT CAN REDUCE THE COST TO THE MARKET.
BUT IF THAT'S NOT THE CASE, UM, THERE COULD BE EVEN AN INCREASE IN RUCK.
AND THE, THE ISSUE WITH RELIABILITY UNIT COMMITMENT IS IT'S VERY, UH, SITUATION DEPENDENT.
UM, AND SO, UH, I I, I, I CAN GET YOU THE EXACT NUMBERS FOR, FOR THE, UM, FOR A LOOK BACK, BUT, UM, I WOULD JUST SAY THAT RELIABILITY UNIT COMMITMENT TENDS TO BE THE LEAST EXPENSIVE WAY TO PROCURE THESE UNITS.
THAT'S NOT NECESSARILY A GOOD THING.
IT HAS GOOD AND BAD ASPECTS TO IT.
OTHER QUESTIONS FOR KENAN, FOR CLIFF? WELL, KENAN, WHAT'S A REASONABLE NUMBER OF MONTHS IF WE IMPLEMENTED THIS? WOULD IT, UH, WOULD YOU LIKE, BEFORE WE LOOK BACK AND SEE IF IT'S EFFECTIVE? SO AGAIN, CLIFF LAID THIS OUT REALLY WELL, BUT IT'S KIND OF, UH, WHAT YOU WOULD WANT TO DO IS COMPARE HOW THOSE ORDC FLOORS ARE WORKING RELATIVE TO HOW, UM, UH, THIS CLAWBACK MIGHT BE IMPACTING SOME OF THE RESOURCES IN QUESTION.
SO, I MEAN, I WOULD WANT TO GO THROUGH, UH, A SUMMER, UH, WITH THIS, BUT THAT MIGHT NOT BE, YOU KNOW, RESOURCE OWNERS MIGHT WANNA RAISE THE QUESTION SOONER THAN THAT.
OUR PLAN WOULD BE TO START KIND OF TRACKING THIS IMMEDIATELY, BUT I THINK THE DATA SET WILL BE SOMEWHAT LIMITED, UH, UNTIL YOU HAVE A WHOLE YEAR UNDER YOUR BELT.
I THINK STAKEHOLDERS GENERALLY WANNA UNDERSTAND WHAT THE IMPACTS ARE.
IT'S GONNA BE, IT'S GONNA BE SOMEWHAT DIFFICULT TO BE ABLE TO COMPARE APPLES TO APPLES, THOUGH, YOU KNOW, WITH THE ORDC CHANGES.
AND IN EFFECT, IT'S GONNA BE, YOU'RE GONNA SEE BEHAVIORAL CHANGES THAT MAYBE YOU WOULDN'T HAVE OTHERWISE.
SO, UH, IN TERMS OF THE EFFECT OF THE RUT CLAWBACK, IT MAY BE MAYBE DIFFICULT, IF NOT, MAYBE EVEN IMPOSSIBLE TO BE ABLE TO CAPTURE, CAPTURE THAT DELTA OR WHATEVER.
UM, BUT I MEAN, IDEALLY, UM, IF THE RDC ADDERS DO HAVE THE EFFECT THAT WE HOPE THEY DO, UM, IT'LL BE SOMEWHAT OF A MOOTED POINT.
OTHER QUESTIONS OR COMMENTS? SO THERE'S NO FURTHER COMMENTS.
I'LL ENTERTAIN A MOTION TO RECOMMEND THE BOARD RECOMMEND APPROVAL OF NPRR 1172 AS RECOMMENDED BY TAC, GET A MOTION TO APPROVE.
ANY OPPOSED TO ABSTENTIONS? HEARING NONE WILL CONSIDER THAT APPROVED.
[7. Recommendations regarding Regional Planning Group (RPG) Tier 1 Transmission Projects]
STEP UP IS AGENDA ITEM SEVEN, RECOMMENDATIONS REGARDING REGIONAL PLANNING GROUP TIER ONE TRANSMISSION PROJECTS.THERE ARE TWO RPG PROJECTS UNDER THIS ITEM.
WEST TESTA, I'M SORRY, WEST TEXAS SYNCHRONOUS CONDENSER, RPG PROJECT AND TNMP, SILVERLEAF AND CAL PEN.
THE 3 3 45 1 38 KV STATIONS, RPG PROJECT, ERCOT STAFF RECOMMENDATIONS IS TO APPROVE THE PROJECTS INCLUDE A RECOMMENDATION FOR THE BOARD TO DESIGNATE THE TN TT NMP PROJECT AS CRITICAL FOR RELIABILITY.
CHRISTIE HOBBS WILL PRESENT THE RECOMMENDATIONS AFTER WHICH TODAY'S AGENDA NOTICES THE RECOMMENDATIONS FOR A VOTE.
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ALL RIGHT, THANK YOU BOB, AND GOOD AFTERNOON EVERYONE.THE FIRST REGIONAL PLANNING GROUP PROJECT THAT IS UP IS THE WEST TEXAS SYNCHRONOUS CONDENSER CONDENSER PROJECT, UM, WHICH INCLUDES THREE TIER ONE PROJECTS, UH, THAT WE'VE WRAPPED UP AS ONE PRESENTATION FOR YOU ALL TO CONSIDER BECAUSE OF THEIR LIKENESS.
UM, AS BOB TEED UP FOR ME, UM, AT THE END, WHAT I'LL BE ASKING YOU FOR ON THIS PARTICULAR PROJECT IS TO ENDORSE THE PROJECT BASED OFF OF BOTH THE NERC AND THE ERCOT PLANNING CRITERIA.
SO JUST A LITTLE REFRESHER ON WHAT A TIER ONE PROJECT IS, AND WE'VE GOT PROTOCOLS THAT ARE IN PLACE THAT TELL US WHICH PROJECTS ARE COTT, HAS TO REVIEW, WHICH PROJECTS ARE CAUGHT, MUST GIVE A INDEPENDENT REVIEW AND RECOMMENDATION ON, AND THEN WHICH ONES WOULD MOVE FORWARD FOR YOUR CONSIDERATION AS WELL, SINCE THIS PROJECT IS OVER A MILLION DOLLARS, AND THAT IS WHY IT IS IN FRONT OF YOU TODAY.
A LITTLE BIT OF HISTORY ON THE WEST TEXAS PROJECT, UH, YOU MAY HAVE RECALLED BACK IN AUGUST, WOODY WAS HERE TO GIVE YOU AN OVERVIEW OF A STUDY THAT WE HAD JUST COMPLETED AT THE BEGINNING OF THE SUMMER.
THAT STUDY WAS THE ASSESSMENT OF SYNCHRONOUS CONDENSERS TO STRENGTHEN THE WEST TEXAS SYSTEM.
WHAT OUR INDEPENDENT STUDY PRODUCED, UH, WAS A RECOMMENDATION TO INSTALL SIX DIFFERENT SYNCHRONOUS CONDENSERS AT VARIOUS 3 45 KV SUBSTATIONS IN THE WEST TEXAS AREA.
WHAT IS A SYNCHRONOUS CONDENSER? BASICALLY IT'S A LARGE MOTOR, UM, THAT IS, GIVES THE ABILITY TO REINFORCE THE GRID THROUGH THREE DIFFERENT MEANS.
THE FIRST IS PROVIDING SYSTEM INERTIA.
SECOND IS THROUGH DYNAMIC VOLTAGE SUPPORT AND THIRD SYSTEM STRENGTH SUPPORT.
IT'S VERY MUCH SIMILAR TO ACTUALLY HAVING A SYNCHRONOUS GENERATING UNIT ON THE SYSTEM, BUT IT'S NOT PUTTING MEGAWATTS ONTO THE SYSTEM.
IT GIVES YOU THAT SAME EFFECT.
WE PRESENTED OUR KEY FINDINGS, UM, TO YOU ALL, AND THEN AFTER, UH, OUR PROJECT OR OUR ASSESSMENT, THE WIND ELECTRIC TRANSMISSION COMPANY, LCRA AND ENCORE, ALL SUBMITTED REGIONAL PLANNING GROUP PROJECTS TO COME FORWARD FOR CONSIDERATION AND REVIEW.
NOW, THE PURPOSE OF THESE PROJECTS IS TO REDUCE THE RELIABILITY RISK AND STRENGTHEN THE WEST TEXAS SYSTEM.
AS YOU'VE ALL BEEN FOLLOWING IN OUR INTERCONNECTION QUEUE AND WHAT IS COMING ONTO THIS SYSTEM, WE'VE SEEN A TREMENDOUS GROWTH IN THE WEST TEXAS REGION OF INVERTER BASED RESOURCES.
WE'VE ALSO SEEN VERY FEW SYNCHRONOUS GENERATORS HOOKING UP TO THE SYSTEM IN THOSE AREAS.
IN FACT, AS WE LOOK OUT, UM, OUR PROJECTIONS BY THE END OF 2025 IS TO HAVE OVER 42 GIGAWATTS OF THAT INVERTER BASED RESOURCES IN THAT REGION.
SO WHAT'S THE CONCERN? WHAT ARE, WHAT RISK ARE WE TRYING TO MITIGATE? WHAT WE'VE OBSERVED IS THAT THERE ARE FAULTS THAT HAPPEN IN THE REGION CAN RESULT IN WIDESPREAD LOAD VOLTAGE, AND THEN WE SEE THE RISK OF A LARGE NUMBER OF THESE EMBITTER BASED RESOURCES TRIPPING OFF AT THE SAME TIME, WHICH PUTS AN UNDUE BURDEN AND SWING ON THE SYSTEM THAT COULD CASCADE THROUGH AND HAVE A RIPPLING EFFECT TO THE BROADER SYSTEM.
OUR REVIEW, UM, IDENTIFIED THE NEED FOR THIS PROJECT TO LIMIT THE NUMBER OF INVERTER BASED RESOURCES THAT WOULD BE SUBJECT TO CONDITIONS THAT COULD RESULT IN A LARGE UNIT TRIPS, AS WELL AS PROVIDE RESILIENCE AND REDUCE THE MODEL UNCERTAINTY.
OUR RECOMMENDATION IS FOR THESE SIX SYNCHRONOUS CONDENSERS AT THESE VARIOUS SUBSTATIONS, UM, WITH THESE DIFFERENT SPECIFICATIONS TO BE INSTALLED TO INCREASE THAT SYSTEM STRENGTH IN THE AREA.
SO WITH THAT, WE WILL BE LOOKING FOR YOUR RECOMMENDATION TO THE BOARD TO ENDORSE THIS PROJECT BASED ON THE ERCOT AND NERC PLANNING CRITERIA.
JUST A COUPLE QUESTIONS, A COUPLE QUESTIONS.
UH, WITH RESPECT TO THE OVERALL SYSTEM, I MEAN, WE DEFINITELY HAVE TO DO THESE AND DEFINITELY SUPPORT 'EM, BUT, UH, HOW MUCH OF THIS DO WE NEED TO DO THROUGHOUT THE ERCOT GRID TO ENSURE THAT WE HAVE ENOUGH GRID FORMING RESOURCES IN THE INVERTER BASED, UH, UM, AREAS THAT WE HAVE IN THE, IN THE STATE? I THINK OUR, YOU KNOW, OUR CURRENT STUDIES HAVE REALLY SHOWN THE NEED IN
[00:30:01]
THIS AREA AND AREN'T SHOWING IT IN OTHER AREAS.BUT WOODY OR SOMEWHAT, PLEASE CORRECT ME IF I'M WRONG.
WE HAVE SYNCHRONOUS GENERATION IN MOST OF THE REST OF THE STATE, AND THAT NEGATES THE NEED FOR, FOR THESE TYPE OF RESOURCES AS MUCH IN THOSE AREAS.
IT'S JUST REALLY A LACK OF, OF THOSE SYNCHRONOUS GENERATORS IN THE WEST TEXAS AREA.
ANY OTHER QUESTIONS OR COMMENTS? YOU NEED A MOTION? I'LL, YEAH.
SO THERE ARE NO FURTHER COMMENTS.
AND SO IS THERE A SECOND? SECOND.
ANY OPPOSED OR ABSTENTIONS? OKAY, SO CHRISY, YOU'RE GONNA COVER THE TNMP AS WELL? YES, I AM.
IF YOU GIMME ONE SECOND TO GET OVER TO THAT ONE.
THE SECOND PROJECT, UH, THAT'S UP FOR YOUR CONSIDERATION IS, UH, A TRANSMISSION PROJECT TO TIER ONE PROJECT FROM THE SILVERLEAF AND CAL PENN STATIONS, AGAIN, OUT IN THE FAR WEST TEXAS AREA.
UH, WE'VE INDEPENDENTLY REVIEWED THAT AND WE'RE MAKING OUR RECOMMENDATION BASED ON THE NERC AND THE ERCOT PLANNING CRITERIA.
WE'LL ALSO BE ASKING YOU AS A PART OF YOUR VOTE TO DESIGNATE THIS PROJECT AS CRITICAL AS PER THE, UH, COMMISSION RULES, UM, SO THAT IT CAN MOVE FORWARD ON AN EXPEDITED TIMELINE.
SAME REQUIREMENTS FOR A TIER ONE PROJECT.
THIS ONE IS OVER, UH, A HUNDRED MILLION DOLLARS.
IT'S ALSO GONNA REQUIRE CCN OVER AT THE COMMISSION.
UM, THAT'S THE REASON THAT IT'S IN FRONT OF YOU TODAY.
QUICK OVERVIEW OF THE PROJECT.
THIS WAS ONE THAT TEXAS NEW MEXICO POWER SUBMITTED TO US BACK IN MAY OF 23.
UH, WE PROCEEDED WITH OUR INDEPENDENT REVIEW AND PRESENTING IT TO THE REGIONAL PLANNING GROUP.
AND TO TAC REALLY IT'S LOOKING TO AGAIN, ADDRESS RELIABILITY RISK IN THAT FAR WEST ZONE.
UM, WE SEE THE POTENTIAL FOR THERMAL OVERLOADS AS WELL AS VOLTAGE VIOLATIONS BECAUSE OF THE INCREASE.
WE'VE GOT CONFIRMED LOAD, UM, THAT'S COMING ON IN THAT REGION.
MAINLY DATA CENTERS AND LARGE OIL AND GAS LOADS THAT WILL BE CONNECTING TO THE SYSTEM.
AND IT SHOWS THE NEED, UM, FOR THIS PROJECT TO KEEP US OUT OF THE RELIABILITY RISK IT WAS PRESENTED T AND AS CLIFF NOTED, UM, THE UNANIMOUSLY, UM, ENDORSE THE PROJECT AS WELL.
AS WE WENT THROUGH AND WE TOOK A LOOK AT THE DIFFERENT NERC PLANNING CRITERIA, UH, WE SAW THAT THE PROJECT WAS NEEDED, UM, IN FUTURE YEARS TO SATISFY SEVERAL CATEGORIES OF A CRITERIA FOR PRE-CON CONTINGENCY LOADING, AS WELL AS A LOSS OF VARIOUS ELEMENTS.
IF THOSE WOULDN'T BE IN PLACE, WE'D SEE THERMAL OVERLOADS AS WELL AS, UH, VOLTAGE VIOLATIONS.
OUR RECOMMENDATION, UH, COMES TO YOU FOR CONSTRUCTION OF SEVERAL NEW 3 45 SUBSTATIONS, AS WELL AS CON UH, LOOPING SOME EXISTING LINES TO PROVIDE RESILIENCY WITH THE NEW STATIONS.
UM, THE ONE THAT WE ENDED UP RECOMMENDING, UH, WE CHOSE BECAUSE NOT ONLY, UM, DID IT ADDRESS FOR THE ROYAL LIABILITY VIOLATIONS THAT ARE LISTED HERE, UM, BUT IT IMPROVED THE LONG-TERM LOAD TRANSFER CAPABILITY FOR THE AREA WHICH WE SEE AS THAT REGION IS ON THE FAR WEST OF THE STATE.
IT'S ON THE EDGE, UM, AND MAKING SURE AS THE LOAD CONTINUES TO GROW, UM, THAT WE'RE ABLE TO RELIABLY SERVE THE NEW LOAD IN THE AREA.
SO OUR RECOMMENDATION IS TO ENDORSE THE NEW PROJECT BASED ON BOTH NERC INTER COTT PLANNING CRITERIA, AS WELL AS TO DESIGNATE IT AS CRITICAL TO RELIABILITY.
AND WE SEE A NEED FOR THIS PROJECT TO BE ON, UM, THE SUMMER 2027.
UM, SO THIS WILL HELP EXPEDITE THE PROCESS TO KEEP IT MOVING FORWARD, UH, TO BE ABLE TO RELIABLY SERVE THAT LOAD THAT'LL BE COMING ONLINE BY THEN.
DOES ANY COMMITTEE MEMBERS HAVE ANY COMMENTS REGARDING THE TNMP, LEAFING CAL PENN STATION'S RPG PROJECT? QUESTIONS OR COMMENTS? MY QUESTION HAS TO DO, CHRISTIE, WITH ANTICIPATED GROWTH, THESE ADDED SUBSTATIONS AND THE OTHER PROJECTS WERE JUST APPROVED WILL COVER US.
HOW FAR OUT IN TIME DO YOU BELIEVE?
[00:35:02]
2030.HOW FAR ON THIS ONE, ROBERT? APPROXIMATELY.
I'M GONNA MAKE SURE THE EXPERTS THAT ARE DOING THIS STUDY SO I DON'T QUOTE WRONG, UH, YES.
ROBERT COLEN, UH, ERCOT FOR THIS PROJECT IN THIS AREA IN PARTICULAR, UH, YOU'LL BE ABLE TO SERVE THE CURRENT COMMITTED LOAD, UM, THAT, THAT IS IN THAT AREA.
UH, AND FROM THE 3 45 INTO THE 1 38 NETWORK, YOU'D BE ABLE TO SEE ANYWHERE FROM, YOU KNOW, 1100 TO 1300 MEGAWATTS OF ADDITIONAL TRANSFER INTO THAT AREA.
SO ALL DEPENDS ON HOW MUCH LOAD AND HOW FAST IT GETS COMMITTED IN THAT AREA.
SO I COULDN'T GIVE YOU A TIMELINE OF, OF WHEN IT WOULD BE, BUT THAT'S ONE OF THE, YEAH, BIG, BIG IMPACTS IS YOU COULD SERVE THE CURRENT LOAD, THEN YOU WOULD HAVE A LARGE AMOUNT OF ADDITIONAL LOAD.
ANY OTHER QUESTIONS OR COMMENTS? HAVE NO FURTHER COMMENTS? I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD ENDORSE THE SILVERLEAF AND COW PEN 3 45 1 38 KV STATION'S REGIONAL PLANNING GROUP PROJECT BASED ON THE NERC IN ERCOT RELIABILITY PLANNING CRITERIA AND TO, TO DESIGNATE THE PROJECT AS CRITICAL TO THE RELIABILITY OF ERCOT SYSTEM PURSUANT TO PUCT OF RULE 20 POINT 10.
ANY OPPOSED OR ABSTENTIONS THAT WE'LL CONSIDER THAT PASSED? SO
[8. Recommendation regarding Real-Time Market Price Correction – Security Constrained Economic Dispatch (SCED) Error]
AGENDA ITEM EIGHT IS NEXT.IT'S A RECOMMENDATION REGARDING REALTIME MARKET PRICE CORRECTION, SECURITY CONSTRAINED ECONOMIC DISPATCH ERROR.
KANAN GELMAN WILL PRESENT ERCO STAFF'S RECOMMENDATION FOR THE BOARD TO APPROVE CORRECTION OF THE REALTIME MARKET PRICES FOR OPERATING DAY OCTOBER 22ND, 2023.
THIS IS A VOTING ITEM ON A COMMITTEE RECOMMENDATION TO THE BOARD.
UM, SO JP HAS ALREADY SPENT, UM, SOME TIME WITH, UH, UH, THE, UH, TECHNOLOGY COMMITTEE ON, ON THIS AROUND THE, THE ERROR.
BUT, UM, ULTIMATELY THERE WAS A KIND OF INTEGER COUNTING ERROR, UM, THAT AS WE FIXED IT FOR THE DAY AHEAD MARKET, IT KIND OF CASCADED INTO THE REAL TIME MARKET FOR ABOUT AN HOUR.
UM, AND THAT'S THE DRIVER FOR US REQUESTING THIS PRICE CORRECTION.
SO, UM, WHAT WE'RE PRESENTING TO YOU TODAY IS THAT WE ARE REQUESTING THAT THE RNR AND M COMMITTEE RECOMMEND THAT THE ERCOT BOARD OF DIRECTORS APPROVE THE PER, UH, THE PROPOSED CORRECTION FOR THIS OCTOBER 22ND, 2023, UH, UH, ISSUE THAT, THAT, THAT WE EXPERIENCED.
UM, AGAIN, AS I'VE UH, SPOKE WITH YOU, THIS ORIGINALLY SHOWED UP AS A, UH, DAY AHEAD ISSUE, BUT AS WE TRIED TO WORK THROUGH THAT AND MAKE SURE THE DAY AHEAD CLEARED, UH, THERE WAS ABOUT AN HOUR, UH, WHEN, UH, THERE WAS AN IMPACT TO THE REAL TIME MARKET, AND THAT WAS MAINLY, UH, DUE TO THE FACT THAT SOME OF THE OFFERS INTO REAL TIME WERE NOT, UH, ABLE TO BE PROCESSED BY THE SECURITY CONSTRAINED ECONOMIC DISPATCH ENGINE.
UM, SO WHEN WE WENT BACK AND LOOKED AT THIS, UH, WHAT WE DISCOVERED IS THAT, UM, UH, PER PROTOCOL, WE CAN GO BACK AND FIND THE LAST GOOD SECURITY CONSTRAINED ECONOMIC DISPATCH RUN.
AND WE KNOW WHEN WE, UH, EXITED FROM THIS, UH, ISSUE AND, UH, WE WOULD UTILIZE THE LAST CORRECT SECURITY CONSTRAINED ECONOMIC DISPATCH PRICE FOR THE, UH, INTERVALS THAT ARE IN QUESTION.
AND THAT'S HOW WE ARE, UH, CORRECTING THE PRICE.
UM, AND AS FAR AS THE IMPACTS GO, UH, THIS SLIDE KINDA LAY, LAYS IT OUT FOR YOU, BUT, UM, WE DEFINITELY, UH, WE HAVE SOME THRESHOLD REQUIREMENTS THAT WE HAVE TO, UH, OVERCOME BEFORE WE BRING SOMETHING TO THE BOARD.
AND ALL OF THOSE, UH, WERE, UH, EX EXCEEDED OR THOSE THRESHOLDS WERE MET.
UM, SO THE LARGEST VALUE TO A PARTICULAR COUNTERPARTY WAS IN THE 8 MILLION, UH, DOLLAR RANGE.
[00:40:01]
THE CHANGE IN SETTLEMENT CHARGES, UH, ARE, UH, NEGATIVE $62 MILLION BECAUSE, UM, THE PRICE WAS CLEARING AT OR NEAR THE CAP AND THE CORRECTED PRICES ACTUALLY IN THE BETWEEN 20 AND $30.SO WHEN I TELL YOU THESE PRICES, THEY ARE, UH, SYSTEM AVERAGE, OF COURSE, WE WERE ACTUALLY CORRECTING PRICES AT EVERY RESOURCE NODE, AND THEN THAT AGGREGATES, UH, THROUGH, SO THE, THE CORRECTED PRICES ACTUALLY LOOK AT EACH LAST CORRECT SC RUN AS AS THE CORRECTION MOVES THROUGH.
UM, AND, UH, THAT'S THE, THAT'S THE MEAT OF THE PRESENTATION.
THERE IS A, A MOTION OR A, A, A VOTING, UH, RECOMMENDATION THAT'S ALSO ATTACHED TO THIS PRESENTATION, BUT ULTIMATELY WE ARE LOOKING FOR R AND M TO RECOMMEND TO THE BOARD THAT WE MAKE THE PRICE CORRECTION AS PROPOSED.
ARE THERE ANY, DOES THIS CREATE ANY CREDIT OR COLLECTABILITY ISSUES AS YOU TRY TO PUSH THESE, THESE CORRECTIONS THROUGH TO THE MARKET? SO, UM, THERE WERE CREDIT ISSUES AND THERE WERE, UH, AROUND THIS ISSUE SOME DAY AHEAD OFFER ISSUES THAT WE EXPERIENCED.
SO, UM, WE DID NOT MAKE ANY CREDIT CORRECTIONS.
THEY ULTIMATELY KIND OF CORRECT THEMSELVES OVER TIME.
HOWEVER, THERE WERE, UH, STAKEHOLDERS OR MARKET PARTICIPANTS THAT, UM, HAD TO UPDATE THEIR, UH, CREDIT AND, UH, THEY HAVE EXPRESSED SOME CONCERNS AROUND THAT OUTCOME.
THE OTHER AREA THAT WE'VE GOTTEN CONCERNS FROM, AND AGAIN, THIS RELATES TO THE DAY AHEAD MARKET, BUT UM, IT WAS KIND OF WE'RE HAVING THIS ISSUE DAY AHEAD.
OFFERS ARE NOT BEING PROCESSED THE WAY WE COMMUNICATED TO THE MARKET SEEMED INSUFFICIENT.
SO WE WOULD SAY, UH, WE EXPECT TO RUN DAM IN 45 MINUTES AND THEN IT WOULD BE AN HOUR AND A HALF.
AND IN THAT TIME PERIOD SOME PEOPLE HAD TO SUBMIT, UH, SUBMIT NEW DAY AHEAD OFFERS TWICE.
UM, WE'RE GOING THROUGH A PROCESS WHERE WE'RE INTERVIEWING SOME OF THE CONCERNED MARKET PARTICIPANTS TO, UH, DETERMINE CHANGES TO HOW WE COMMUNICATE WHEN ISSUES LIKE THIS HAPPEN.
UM, UH, WE WERE LUCKY THAT THE ISSUE IS RELATIVELY, I MEAN, THE NUMBERS I JUST SHARED WITH YOU ARE, ARE SIGNIFICANT, BUT RELATIVELY MINOR, UM, UH, COMPARED TO AN ANOTHER TIME PERIOD WHERE, WHERE SOMETHING LIKE THIS COULD HAPPEN.
SO, UH, WE DEFINITELY WANNA LOOK AT THE CREDIT COLLATERAL ISSUE AND HOW THAT PLAYED OUT.
WE ALSO WANT TO REALLY, UH, DO A HARD EXAMINATION OF HOW WE COMMUNICATE OUT TO STAKEHOLDERS SO THAT WE CAN FACILITATE THEIR ABILITY TO SUBMIT THEIR DAY AHEAD OFFERS IN AN EFFICIENT WAY.
UM, SO THAT'S AN ONGOING PROCESS THAT, UH, WE'LL BE WORKING ON, I THINK FOR PROBABLY ANOTHER COUPLE MONTHS.
IN ADDITION TO THE ROOT CAUSE THAT RELATED TO THE INTEGER SOFTWARE, IS CONSIDERATION BEING PLACED ON PERHAPS FLAGGING DAY AHEAD OFFERS THAT COME IN THAT CANNOT BE PROCESSED? IS THERE A WAY WE COULD HAVE HAD A WARNING FROM SKID THAT THIS PRO OFFER'S NOT PROCESSING? SO I, I, UH, JP PLEASE ADD IN HERE, BUT I BELIEVE WE GOT, WE GOT THE FLAG, BUT HOW WE COMMUNICATED OUT EXTERNALLY DID NOT WORK THAT WELL.
SO WE, I THINK AROUND IT WAS A LITTLE BIT AFTER SIX 30 WE STARTED UNDERSTANDING SOME OF THIS, BUT, UH, LET ME THAT, YOU KNOW, THAT INFORMATION BETTER THAN I DO JP.
SO AS FAR AS THE MARKET PARTICIPANTS WERE CONCERNED, THEY COULD IMMEDIATELY SEE THAT THERE WAS AN ERROR ON SUBMITTING IT, RIGHT? SO, SO THE ERROR WAS THERE.
I THINK ONE OF THE PROBLEM WAS WHEN WE FIXED THE THING, AND LIKE I DESCRIBED IN THE TECHNOLOGY COMMITTEE, WHEN WE IMPLEMENTED THE FIX TO MAKE A 64 BIT, AT THAT POINT, THE OPERATORS, UH, THE MARKET PARTICIPANTS GOT A SUCCESS MESSAGE BECAUSE IT DID GO THROUGH.
AND I THINK THAT'S WHERE THE CONFUSION STARTED, BECAUSE FOR THEM IT WAS SUCCESSFUL, BUT OUR SYSTEMS STILL COULDN'T PROCESS IT DOWNSTREAM.
SO THEN WE HAD TO ASK THEM TO RESUBMIT AND HENCE ALL THIS COMMUNICATION GAPS.
I'M ASKING A SLIGHTLY DIFFERENT QUESTION.
WHEN SC FLAGGED THIS OFFER NOT BEING PROCESSED, DOES ERCOT GET A MESSAGE AND DOES ERCOT GO LOOK AT WHAT'S HAPPENING? OH YEAH.
I I I DO WANT TO JUST DIFFERENTIATE.
[00:45:01]
SO THE SCED THINGS WOULD'VE BEEN IN REAL TIME VERSUS THE OTHER ACTIVITIES IN THEY HAD? YES.SO KENAN ON THE TIMELINE, YOU'LL SEEK INPUT FROM MARKET PARTICIPANTS, GET THAT FEEDBACK, AND THEN WHAT IS THE, WHAT DOES THAT LOOK LIKE? SO, UM, WE WOULD TAKE THAT INPUT, SEE WHERE THE KIND OF POINTS OF FAILURE WERE.
AND WE'VE CONDUCTED SE SEVERAL INTERVIEWS ALREADY, UH, WITH QUALIFIED SCHEDULING ENTITIES.
UM, AND THEN I THINK IT'S A MATTER OF US LOOKING BACK AND I DON'T KNOW IF IT LOOKS LIKE A, A CHECKLIST OF, UM, OPERATIONAL NOTES THAT WE CAN SEND OUT OR A SPECIFIC SCRIPT, BUT WE WOULD KIND OF DEVELOP, UM, WHAT, UH, HOW WE WOULD LIKE TO COMMUNICATE AND THE VENUE IN WHICH WE WOULD LIKE TO COMMUNICATE ON THIS.
UH, MARKET NOTICE IS NOT THE BEST WAY TO DO IT.
'CAUSE IT TAKES US ABOUT AN HOUR TO CREATE AND ISSUE A MARKET NOTICE.
UM, SO WE WOULD KIND OF TAKE OUR PROPOSAL TO THE STAKEHOLDERS AND GET THEIR FEEDBACK ONE MORE TIME.
I THINK THE, RIGHT NOW THE CRITICAL ISSUE IS IDENTIFYING WHAT DIDN'T WORK, UM, AND KIND OF UNDERSTANDING THAT WITHIN THEIR SYSTEMS AS WELL AS OURS, WHICH IS, YOU KNOW, A A LITTLE BIT OUTSIDE OF OUR NORMAL, NORMAL ZONE WHEN WE HAVE THESE TYPES OF FAILURES, WE LOOK AT IT VERY, UH, ON, ON THE INTERNAL THINGS THAT WENT WRONG, BUT, UM, WE REALLY NEED TO BE COGNIZANT OF THE EXTERNAL AS WELL, KENAN.
SO ASSUMING YOU GET APPROVAL TODAY AND TOMORROW FOR THIS IS THEN, THEN YOU GO OUT TO THE MARKET AND, AND DO THE KIND OF THE RESETTLEMENT PROCESS.
ONCE WE HAVE THIS APPROVAL, WE WOULD RE FOLLOW UP WITH A RESETTLEMENT.
ARE THERE ANY OTHER QUESTIONS OR COMMENTS FOR KON? IF NO FURTHER COMMENTS, THEN I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD APPROVED THE PROPOSED CORRECTION OF REAL-TIME MARKET PRICES FOR THE OPERATING DAY OCTOBER 22ND, 2023.
ANY OPPOSED OR ABSTENTIONS? HEARING NONE WILL CONSIDER THAT APPROVED RECOMMENDATIONS TO THE BOARD TOMORROW.
[10.1 System Planning and Weatherization Update]
AGENDA ITEM 10, WHICH IS COMMITTEE BRIEFS AND CHRISTY HOBBS PRESENTATION OF THE SYSTEM PLANNING AND WEATHERIZATION UPDATE, WHICH IS AGENDA ITEM 10.1, WHICH I'VE NOTED TO INCLUDE AN UPDATE ON RELIABILITY STANDARD STUDY RESULTS.SO I'M GONNA GIVE YOU A UPDATE, UM, ON SOME OF THE LATEST HAPPENINGS IN THE SYSTEM PLANNING AND WEATHERIZATION AREA SINCE WE LAST VISITED BACK IN OCTOBER.
UM, SO I'M GONNA START OFF WITH AN UPDATE ON OUR WEATHERIZATION PROGRAM.
UM, IF YOU RECALL, THIS IS ONE OF THE NEWER PROGRAMS AT ERCOT.
UM, THE COMMISSION ADOPTED THEIR FIRST WEATHERIZATION RULES IN THE FALL OF 2021, JUST MONTHS AFTER WINTER STORM YURI, WHICH GAVE US VERY LITTLE TIME TO GET A PROGRAM UP AND RUNNING.
UM, BUT THAT WINTER WE HAD INSPECTORS OUT IN THE FIELD, UM, ON THE FIRST SET OF STANDARDS.
SINCE THEN, WE'VE REALLY WORKED TO GROW THE TEAM, BOTH INTERNALLY.
WE STILL USE EXTERNAL CONTRACTORS TO SUPPLEMENT THE WORK DURING OUR BUSY SEASONS, UH, LIKE WE'RE IN NOW.
UM, BUT MY FIRST, UH, REPORT TO YOU IS TO LET YOU KNOW ABOUT A PROGRAM THAT THE TEAM HAS DEVELOPED, UM, A GREAT TRAINING PROGRAM AS WE BRING ON NEW INSPECTORS.
UM, MANY OF THEM COME MAYBE WITH A BACKGROUND IN A SINGLE TYPE OF A PLANT.
AND SO THIS GIVES THEM OPPORTUNITY TO LEARN ABOUT ALL THE DIFFERENT TYPES OF RESOURCES THAT ARE ON THE GRID.
UM, IT'S ABOUT A YEAR LONG IMMERSIVE PROGRAM, UM, THAT THEY GO THROUGH.
AND I'M PROUD TO SAY THAT WE HAD OUR FIRST SET OF FIVE OF OUR INSPECTORS, UM, GET THEIR CERTIFICATION.
THEY GO THROUGH A YEAR, THAT YEAR LONG PROCESS OF TRAINING, AND THEN THEY HAVE TO DO AN ORAL BOARD AT THE END TO PASS.
UM, SO WE'RE PROUD TO HAVE AWARDED THEM THAT THE MONTH OF DEC NOVEMBER, UM, THROUGH DECEMBER 1ST, UM, MARKET PARTICIPANTS HAD TO PROVIDE THEIR WINNER PREPAREDNESS DECLARATIONS TO US AS ON DECEMBER 1ST, UH, COMPLIANCE RATE.
WE HAD 97% OF THE GENERATORS TIMELY RESPOND, AND 95%
[00:50:01]
OF THE TRANSMISSION SERVICE PROVIDERS, OUR TEAMS DID FOLLOW UP, UM, TO MAKE SURE THAT THE MARKET PARTICIPANTS WERE GETTING IN.IT WENT FROM 13 GENERATORS DOWN TO SEVEN.
WE STILL HAVE OUTSTANDING AND THREE, UH, TRANSMISSION SERVICE PROVIDERS DOWN TO ONE.
SO WE WILL, WE HAVE BEEN IN COMMUNICATIONS WITH COMMISSION STAFF AND WE'LL TURN THAT OVER FOR THEM TO FOLLOW UP ON AS WELL.
ON DECEMBER 1ST, WE STARTED ALSO, OR EXCUSE ME, THE FIRST WEEK OF DECEMBER, WE STARTED OUR WINTER INSPECTIONS.
UM, AT THE END OF LAST WEEK, UH, WE HAD COMPLETED ABOUT 75 GENERATION INSPECTIONS AS WELL AS THREE TRANSMISSION SERVICE PROVIDERS.
WHAT WE'VE GOT ON OUR PLATE IN TARGETING FOR THE FULL WINTER SESSION IS TO GET 350 GENERATION RESOURCES AND OVER A HUNDRED TRANSMISSION SERVICE FACILITIES.
UM, AND THIS WOULD KEEP US ON TRACK TO MEET THE PUC RULE REQUIREMENT, UM, THAT WE, UM, SEE EVERY GENERATION RESOURCE AT LEAST ONCE IN A THREE YEAR PERIOD.
THIS IS A SLIDE, UM, THAT WE ROUTINELY SHARE WITH YOU JUST TO SHOW YOU WHAT WE SEE AS FAR AS NEW INTERCONNECTION REQUESTS IN THE QUEUE.
UM, VERY SIMILAR TO PREVIOUS MONTHS REPORTS.
YOU CAN SEE THAT BATTERY ENERGY STORAGE CONTINUES TO BE THE BULK OF THE NEW APPLICATIONS THAT WE RECEIVE SEEKING, UM, TO INTERCONNECT IN THE REGION FOLLOWED BY SOLAR.
UM, JUST SOME, SOME QUICK STATS.
WHEN WE COME TO YOU IN FEBRUARY, WE'LL KIND OF GIVE YOU A, A, A LOOK BACK ON THE YEAR AND WHAT WE SAW FOR THE TOTAL YEAR.
UM, BUT AS THE TEAM WAS STARTING TO PULL THAT INFORMATION TOGETHER, I THOUGHT IT WAS VERY INTERESTING BACK IN 2018.
SO FIVE YEARS AGO DURING THAT YEAR, WE RECEIVED NEW 243 APPLICATIONS.
FAST FORWARD TO THIS YEAR, AS OF LAST WEEK, WE HAD ALREADY SEEN OVER 800 APPLICATIONS COME IN.
NOW THE DIFFERENCE IS, IS WE'RE SEEING THOSE COME IN FOR A LOT SMALLER UNITS.
UM, AND COMPARED TO LAST YEAR, WE'VE ALREADY SEEN OVER 226 MORE THAN WE PROCESSED LAST YEAR.
SO THE NUMBER CONTINUES TO GO UP.
SO I'D LIKE TO USE THIS AN OPPORTUNITY TO KUDOS TO THE TEAM.
THEY'VE HAD A LOT OF TURNOVER, UM, OF, OF FOLKS AND THEY'VE BEEN ABLE TO KEEP UP WITH THAT INCREASING WORKLOAD, KEEPING THOSE, UH, NEW REQUESTS MOVING FORWARD IN THE PROCESS.
UM, ONE OTHER KIND OF FUN FACT, I KNOW A LOT OF INTEREST USUALLY ON NEW DISPATCHABLE GENERATION COMING ONTO THE SYSTEM.
IN PARTICULAR NATURAL GAS AS OF MID-DECEMBER, WE'D SEEN ABOUT 7,700 NEW MEGAWATTS IN COME INTO THE QUEUE, UH, FOR NATURAL GAS.
SO THAT IS PROMISING AS WELL, UM, TO SEE THAT STARTING TO PROVIDE AN UPTICK.
SO WHILE WE'RE TALKING ABOUT THE NUMBERS, UM, I KNOW WE'VE HAD SOME QUESTIONS IN THE PAST ABOUT HOW THINGS MOVE THROUGH THE PROCESS AND WHAT ERCOT RESPONSIBILITIES.
THIS IS JUST A QUICK SNAPSHOT TO SHOW YOU THAT IT IS A LOT OF DIFFERENT STUDIES THAT GO ON, BUT IT'S NOT JUST ERCOT.
THERE'S RESPONSIBILITIES ON THE INTERCONNECTING ENTITY.
THERE'S RESPONSIBILITIES WITH THE TRANSMISSION SERVICE PROVIDERS TO DO A NUMBER OF THE STUDIES.
SO WE OFTEN GET THE QUESTION LIKE, WHAT CAN YOU DO TO SPEED UP THE PROCESS? CHRISTIE, EVEN IF WE HAD, YOU KNOW, DEVOTED, YOU KNOW, DOUBLE ERCOT RESOURCES ON THESE EFFORTS, WE COULD ONLY SPEED UP THOSE PROCESSES THAT ERCOT ARE INVOLVED IN.
MUCH OF THOSE ARE ALREADY TIME BOUND TO RESPOND WITHIN A CERTAIN NUMBER OF BUSINESS DAYS.
AS YOU CAN SEE, UM, FROM THESE NEXT SLIDES THAT WE PUT IN FOR YOU, THERE ARE A LOT OF SOLAR AND BATTERY ENERGY STORAGE, UM, MEGAWATTS IN THE QUEUE.
UM, JUST KIND OF GOING BACK TO THE NUMBER OF APPLICATIONS GO BACK TO 2018, MAYBE WHEN WE HAD MORE DISPATCHABLE IN THE QUEUE.
WE'RE DOING THE SAME NUMBER OF STUDIES FOR EACH INTERCONNECTION.
SO THAT VOLUME OF WORK WENT UP FROM 246 UP TO 800.
WE, YOU KNOW, ALMOST TRIPLED THE AMOUNT OF WORK, UH, THAT WE'RE HAVING TO DO TO PROCESS THE MEGAWATTS THAT ARE COMING THROUGH THE SYSTEM ON THIS SLIDE BY FUEL TYPE, UM, AND INTERCONNECTION STAGE BY PROJECT COUNT.
AGAIN, THE BULK ARE COMING FROM BATTERY ENERGY STORAGE, WHICH IS THE, THE TURQUOISE BAR AS WELL AS SOLAR, WHICH IS, UM, OR EXCUSE ME, IN BATTERIES, WHICH BATTERY AND SOLAR, UH, ON THIS CHART.
UM, THE BULK OF THEM ARE IN THE FULL INTERCONNECTION STUDY APPROVAL PROCESS.
THIS IS WHERE THE VERY IMPORTANT RELIABILITY STUDIES ARE PERFORMED TO MAKE SURE THAT WE CAN SAFELY CONNECT THEM TO THE SYSTEM.
[00:55:01]
DONE BY THE TRANSMISSION SERVICE PROVIDERS.SO, YOU KNOW, A LOT OF WORK, UM, IS SHIFTED TO THEIR TEAMS AS WELL TO BE ABLE TO PROVIDE THAT BACK TO ERCOT.
ALSO IN, UM, KIND OF IN THE INTERCONNECTION QUEUE, WE'RE ALSO TRACKING LARGE LOADS THAT ARE WANTING TO COME TO THE SYSTEM.
THE TEAM CONTINUES TO TRACK ALMOST 40 GIGAWATTS OF PERSPECTIVE NEW LARGE LOADS.
SO THESE ARE LOADS, UM, THAT ARE, UH, OVER THE, THE 25 TO 75 MEGAWATT RANGE OVER THAT RANGE SINCE JANUARY OF 2022.
UM, THEY'VE, WE'VE APPROVED ALMOST 3,200 MEGAWATTS TO BE ABLE TO ENERGIZE TO THE SYSTEM, BUT AS YOU CAN SEE, IT'S THE FIRST WEEK IN NOVEMBER OR DECEMBER.
NOT ALL OF THOSE HAVE ACTUALLY, UM, CONNECTED AND ENERGIZED ON THE SYSTEM.
ONLY 2,400 MEGAWATTS ARE ACTUALLY OPERATIONAL TODAY.
LOOKING AHEAD TO NEXT YEAR, WE'VE ALREADY APPROVED 9,400 TO BE ABLE TO ENERGIZE TO THE SYSTEM AND SO WE'LL HAVE TO SEE HOW THOSE PROGRESS THROUGH THE YEAR, WHETHER THEY ACTUALLY ENERGIZE ON THE SYSTEM OR NOT FROM A RESOURCE ADEQUACY REPORTING PERSPECTIVE.
UH, THE LAST TIME WE SHARED WITH YOU, WE HAD JUST ROLLED OUT OUR FIRST MONTHLY OPERATIONAL RESOURCE ADEQUACY REPORT.
THIS IS A REPORT, UH, THAT REPLACED OUR SEASONAL RESOURCE ADEQUACY REPORT THAT GETS POSTED ON THE FIRST, UH, FRIDAY OF EACH MONTH, AND IT LOOKS THREE MONTHS IN ADVANCE.
SO RIGHT NOW, UM, WE'VE GOT REPORTS THAT ARE OUT THERE FOR DECEMBER, JANUARY, AND FEBRUARY AND WANTED TO HIGHLIGHT THE JANUARY AND FEBRUARY REPORTS.
'CAUSE WHAT THEY SHOW US IS THAT AS WE'RE IN THE WINTER MONTHS, OUR RISK IS TIMES CONTINUE TO BE IN THOSE MORNING HOURS.
AND WHERE WE SEE, YOU KNOW, IN, IN COLD DAYS, IF YOU THINK ABOUT PEOPLE ARE GETTING UP, THEY'RE TURNING THEIR HEATERS ON, THEY'RE GETTING READY FOR WORK OR THEY'RE ARRIVING AT WORK, BUT THAT'S ALSO THE TIME OF DAY WHERE WE DON'T HAVE VERY MUCH SOLAR ON THE SYSTEM.
AND SO OUR RISK FOR GOING INTO AN EMERGENCY, UM, CONDITION IS, IS HIGHEST AT THAT TIME OF DAY DURING NORMAL CONDITIONS, NORMAL WEATHER.
UM, WE SHOW IN JANUARY THAT THE RISK OF GOING INTO AN EMERGENCY OPERATIONS IS ABOUT 7.6% FOR THE MONTH OF FEBRUARY.
NOW AS WE RAN OUR STUDIES AND WE FIXED, UH, THE SCENARIOS FOR, UH, PEAK LOAD CONDITIONS SIMILAR TO WHAT WE SAW LAST WINTER DURING WINTER STORM ELLIOT, AS WELL AS OUTAGES COMPARABLE TO WHAT WE SAW DURING WINTER STORM ELLIOT, AS YOU CAN SEE, THOSE NUMBERS GO UP QUITE A BIT TO 20.6% IN JANUARY FOR THE 8:00 AM HOUR AND 18.3% IN THE FEBRUARY TIMEFRAME FOR GOING INTO AN EMERGENCY CONDITION.
COULD YOU REMIND US WHAT ASSUMPTIONS YOU MADE ABOUT WINTER WEATHERIZATION WITH REGARD TO THIS CHART IN PARTICULAR? I THINK WE ASSUMED 70 PER 70 OR 75% EFFECTIVENESS.
DO YOU REMEMBER IT? IT'S IN THE, IN THAT I CAN COME BACK AND CONFIRM THAT, BUT WE DID ASSUME THAT, UM, WE DID SEE POSITIVE IMPROVEMENTS FROM THE WEATHERIZATION.
CHRISTIE, IF I MAY, UM, YOU KNOW, WE'VE HAD A LOT OF DISCUSSIONS ABOUT THIS MOORE REPORT AND, AND THE, UM, TWO DIFFERENT VERSIONS OF THE CHART.
AND I THINK IT'S REALLY IMPORTANT TO NOTE AGAIN THAT THE WINTER STORM ELLIOT SCENARIO VERSUS THE PRIOR CHART AND THE PRIOR CHART, I GUESS, UM, SLIDE NUMBER NINE, THAT THAT CHART DOES INCLUDE SOME EXTREME WEATHER SCENARIOS IN THERE AS WELL.
SO I JUST WANNA BE CLEAR ABOUT THAT TOO.
'CAUSE I THINK, UM, I THINK THAT'S IMPORTANT TO NOTE THAT THAT FIRST SET OF CHARTS ALSO INCLUDES EXTREME WEATHER.
IT'S JUST THE SECOND CHART, JUST I THINK THE WINTER STORM ELLIOT CHART SEEMS TO, YOU'RE CORRECT.
SO IN THE FIRST CHART THERE WOULD BE, YOU KNOW, VARIOUS TYPES OF WEATHER IN THE, THE MANY PROBABILISTIC RUNS THAT ARE TO COME OUT WITH THESE RESULTS.
BUT WHEN WE LOOK, UM, AT THIS SECOND SET, WE FIX THE WEATHER TO A, UH, A WINTER STORM ELLIOT TYPE FOR ALL OF THE RUNS JUST TO SHOW A VARIATION TO SHOW.
AND I THINK IT'S IMPORTANT TAKING CONSIDERATION ALSO ON A MONTHLY BASIS WHAT THAT WEATHER IS ACTUALLY TRENDING TO LOOK LIKE.
RIGHT? I KNOW CHRIS COLEMAN WILL GIVE US A WEATHER UPDATE, UM, TOMORROW, BUT I THINK AS WE KIND OF ON A MONTHLY BASIS TAKE A CLOSER LOOK AT WHAT THE WEATHER IS THAT WE'RE ACTUALLY SEEING SO THAT WE'RE HAVING A LITTLE BIT MORE ACCURATE PERSPECTIVES ON A MONTHLY BASIS THROUGH THE WINTER SO THAT, YOU KNOW, THE PUBLIC AND EVERYBODY UNDERSTANDS THAT SORT OF AN EVOLVING PICTURE RATHER THAN A STATIC PICTURE.
AND DON'T CAUSE ANY, YOU KNOW, ALARMS. OKAY.
[01:00:01]
FOLLOW UP ON QUESTION THAT JULIE'S POINT, UM, SO THE WEATHERIZATION, ARE YOU MAKING AN ASSUMPTION ON AN IMPROVED UNFORCED, OH, SORRY, ON AN IMPROVED FORCED OUTAGE RATE OF THE GENERATION? OR DO YOU KEEP THE FORCED OUTAGE RATE KIND OF AT A STANDARD TYPE NUMBER? SO HOW, HOW DO YOU FACTOR IN WEATHERIZATION WHEN YOU COME UP WITH THESE CALCULATIONS HERE TO YOUR FIRST POINT, WE'RE MAKING AN ASSUMPTION ABOUT THE IMPROVEMENTS THAT WE'VE SEEN AND THE EFFECTIVENESS OF WEATHERIZATION ON HOW THAT WOULD IMPACT THE NUMBER OF OUTAGES WE WOULD SEE IN A SIMILAR SCENARIO.AND IS THAT, YOU KNOW, ROUGHLY, YOU KNOW, WHAT, WHAT ORDER OF MAGNITUDE PERCENTAGE IMPROVEMENT IS THAT? IS THAT SINGLE DIGIT DOUBLE DIGIT? DOUBLE DIGIT 95%.
THEN THE LAST, UH, SLIDE IS JUST TO GIVE US, UH, AN UPDATE ON THE IMPORTANT WORK THAT THE TEAMS ARE WORKING ON IN THE RELIABILITY STANDARD VALUE OF LOSS LOAD AND COST OF NEW ENTRY STUDIES.
SO FOR THE LIABILITY STANDARD, UM, WE FILED REVISED STIMULATION RESULTS FOR THE INITIAL 48 SCENARIOS AS WELL AS THE 2023 PROMPT YEAR STUDY RESULTS WITH THE COMMISSION AT THE END OF NOVEMBER.
WE ARE WRAPPING UP, UM, THE REMAINING STUDY WORK THAT WAS REQUESTED BY COMMISSION STAFF, UM, EARLIER, UH, OR BACK IN NOVEMBER AS WELL BY RUNNING SOME ADDITIONAL SCENARIOS.
AND WE WILL BE WORKING TO FILE THAT WITH THE COMMISSION IN THE COMING WEEKS.
UM, SO THEY'LL HAVE THAT FOR THEIR CONSIDERATION AT THE JANUARY 18TH, UH, OPEN MEETING.
FROM THE VALUE OF LOST LOAD STUDY PERSPECTIVE, UH, WE'VE ENGAGED WITH THE BRATTLE GROUP AND THEY'VE GOT A SUBCONTRACTOR PLAN.
BEYOND THAT, WE'VE ENGAGED TO WORK ON PERFORMING A STUDY OF CONSUMERS, UH, THAT WE'VE FILED A PLAN WITH THE COMMISSION ON HOW WE'D LIKE TO MOVE FORWARD ON GETTING THAT OUT TO CONSUMERS TO GET THAT INFORMATION BACK.
UM, WE'LL BE TARGETING NO EARLIER THAN FEBRUARY ROLLING OUT THE SURVEY.
WE ARE ALSO WORKING WITH LAWRENCE BERKLEY NATIONAL LABS.
THEY'VE GOT A SURVEY INSTRUMENT THAT THEY'VE ALREADY BEEN USING, UM, SO THAT WE CAN, UM, BUILD OFF THE WORK THAT THEY'VE ALREADY DONE FOR THE COST OF NEW ENTRY.
STUDYING, UH, WE'VE GOT A CONSULTANT, UH, THAT WE HAVE PICKED, I CAN'T SHARE THAT NAME YET BECAUSE WE'RE STILL IN THE CONTRACTING PHASE, BUT WE HOPE TO HAVE THAT DONE BY THE END OF DECEMBER SO THAT WE CAN BEGIN WORK IN JANUARY AND WE'VE GOT A TARGET COMPLETION FOR JUNE TO HAVE THE COST OF NEW ENTRY INFORMATION BACK.
SO REALLY A LOT OF GOOD PROGRESS TO KEEP THAT WORK MOVING FORWARD.
WITH THAT, TURN IT OVER TO DAN.
[10.2 System Operations Update]
SO DAN WOODFIN WILL NOW PRESENT THE SYSTEM OPERATION UPDATE, WHICH IS AGENDA ITEM 10.2.OUR DEMAND, OBVIOUSLY IN SEPTEMBER AND OCTOBER, BOTH EXCEEDED LAST YEAR'S BY QUITE A BIT.
IN FACT, UH, FOR SEPTEMBER WE HIT A PEAK THAT WAS ONLY A LITTLE UNDER A THOUSAND MEGAWATTS, MORE THAN OUR, OR LESS THAN OUR, UH, ALL TIME PEAK IN AUGUST.
AND THEN SEPT, UH, OCTOBER WAS ALSO A, A NEW PEAK.
OUR FORECAST PERFORMANCE WAS STILL ON PRETTY MUCH A STRAIGHT LINE FROM WHAT WE'VE BEEN SEEING FOR OUR NET LOAD.
THE FREQUENCY CONTROLS WAS STILL GOOD, THE TRANSMISSION LIMIT CONTROL, WE HAVEN'T HAD AN AN INTERCONNECTION RELIABILITY OPERATING LIMIT EXCEEDANCE SINCE, SINCE MARCH.
SO NO PROBLEMS THERE FROM AN ANCILLARY SERVICE PERSPECTIVE.
UH, EVERYTHING'S STILL WORKING.
UM, WE'RE OBVIOUSLY GONNA TALK TOMORROW ABOUT THE UPDATES WE'RE GONNA BE DOING FOR FOR 2024, UM, WHICH LEARN BASED ON HOW THINGS HAVE GONE THIS YEAR.
UM, NONS SPEND DEPLOYMENTS, WE HAD, UM, SEVEN, UH, OFFLINE NONS SPEND DEPLOYMENTS, BUT MANY MORE THAN THAT WERE, BECAUSE IT'S AUTOMATICALLY RELEASED FROM AN ONLINE, UH, NONS.
SPIND IS AUTOMATICALLY RELEASED BEHIND A $75 FLOOR.
SO THEN QUITE A FEW DEPLOYMENTS ONLINE, BUT THESE SEVEN WHERE WE ACTUALLY MANUALLY RELEASED THE, UH, THE OFFLINE NONS SPEND ECRS WE'VE HAD, UH, DURING THIS TIME PERIOD FROM THE END OF SEPTEMBER THROUGH THROUGH NOVEMBER, WE'VE HAD, UH, FOUR FREQUENCY EVENTS THAT
[01:05:01]
RESULTED IN ECRS BEING DEPLOYED.AND THEN SEVERAL TIMES, UH, INCLUDING THAT TIGHT WEEK IN SEPTEMBER WHERE WE RELEASED ECRS BE, UH, BECAUSE IT WAS MORE IMPORTANT TO LET IT BE USED TO SERVE ENERGY RATHER THAN KEEP IT IN RESERVE.
REALLY, WE RELEASED EVERYTHING ON SEPTEMBER 6TH, AND SO WE RELEASED ALL OF THE, UH, DIFFERENT KINDS OF RESPONSIVE RESERVE ON THAT DAY AND, UH, THERE WAS GENERALLY GOOD PERFORMANCE THERE.
SO A FEW THINGS THAT REALLY I WANTED TO HIGHLIGHT.
WE'VE BEEN DOING THIS THE LAST SEVERAL MONTHS, UH, WE'VE PUT IN PLACE, UH, THIS M-D-R-P-O-C MAXIMUM DAILY PLANNED OUTAGE CAPACITY, KIND OF A LIMIT ON HOW MANY PLANNED OUTAGES THAT THAT RESOURCES CAN TAKE.
UM, BLACKLINE HERE ON THIS GRAPH SHOWS THE KIND OF THE, THAT MAX THAT'S SET BASED ON VARIOUS STATISTICAL ANALYSES AND THE, UH, BLUE LINE SHOWS WHAT WAS ACTUALLY TURNED INTO THE SYSTEM AND, AND APPROVED AND ACTUALLY WAS, WAS TAKEN.
AND KIND OF THE KEY THING HERE IS THAT WE, WE BUMPED UP AGAINST IT QUITE A FEW TIMES, WHICH PROBABLY MEANS BECAUSE WE DON'T TRACK WHETHER, IF SOMEBODY TRIES TO SUBMIT SOMETHING INTO THE SYSTEM AND IT WOULD TAKE IT OVER THE LIMIT, THEY'D GENERALLY TRY TO FIND ANOTHER TIME.
AND SO WE DON'T TRACK HOW MANY TIMES THEY, UH, BUMPED UP AGAINST THAT LIMIT.
BUT THEY WERE RIGHT UP TO THE LIMIT SEVERAL TIMES.
BUT THERE WAS ALSO QUITE A BIT OF SPACE TOWARD THE END OF NOVEMBER WHERE FOLKS COULD HAVE TAKEN ADDITIONAL OUTAGES TO GET READY FOR WINTER IF, IF THEY WERE NEEDED.
AND SO WE DON'T THINK THAT THERE, THERE'S REALLY A PROBLEM THERE GETTING, HAVING PLENTY OF TIME TO TAKE OUTAGES TO BE PREPARED FOR WINTER.
UM, ONE OF THE QUESTIONS THAT FOLKS HAVE ASKED IS, WELL, IF NOW THAT WE'VE PUT THIS KIND OF PLANNED OUTAGE CAPACITY LIMIT IN PLACE, DOES THAT, HAS THAT RESULTED IN MORE FORCED OUTAGES OF, OF NOT, ESPECIALLY FOR THE, THE THERMAL GENERATION FLEET? AND THE GRAPH ON THE LEFT HERE SHOWS KIND OF THE VERY SQUIGGLY LINE FOR
UH, IT'S KIND OF HARD TO SEE A PATTERN THERE, BUT WE TOOK MONTHLY AVERAGES ON THE RIGHT SIDE AND REALLY IT, FOR THE FALL PERIOD OVER THE WINTER, YOU DON'T SEE A REAL, UH, LOT OF PATTERN.
BUT IF YOU LOOK AT MAY AND JUNE PARTICULARLY, YOU SEE EVERY YEAR WE'VE GONE UP IN THOSE MONTHS.
AND I THINK THAT THAT MAY, THAT MAY BE INDICATIVE OF MAYBE NOT THE M-D-R-P-O-C BECAUSE A LOT OF IT'S DRIVEN BY, IF A, IF A PLANNED OUTAGE GETS EXTENDED LONGER THAN WHAT IT WAS ORIGINALLY PLANNED FOR, WE TREAT THAT AS A FORCED OUTAGE.
AND SO IF THEY WERE, IF FOLKS WERE HAVING SUPPLY CHAIN ISSUES OR THINGS WERE TAKING LONGER TO GET, UH, COMPLETED, THEN THAT WOULD FIGURE IT, THAT WOULD CAUSE THE OUTAGE TO BE LAID IN COMPLETION AND START FEEDING INTO THAT.
AND SO YOU DEFINITELY SEE IN THAT SUMMER PREPARATION PERIOD, YOU SEE THE OUTAGES, UH, GRADUALLY GOING UP, UH, EACH, EACH MONTH.
AND THEN, UH, FINALLY, THE, THE, UH, WE HAD TOLD YOU IN THE LAST COUPLE OF MEETINGS THAT WE WERE GONNA BRING, BRING NOVA 2 45, WHICH IS THE NODAL OPERATING GUIDE REVISION REQUEST RELATED TO, UH, INVERTER BASED RESOURCE RIDE THROUGH, UH, THAT WE WERE GONNA BRING THAT TO THE BOARD IN DECEMBER FOR APPROVAL.
BUT, UM, AS WORKING WITH STAKEHOLDERS TO TRY TO COME TO CONSENSUS AS CLOSE AS WE CAN GET ON WHAT'S NEEDED FROM A RELIABILITY PERSPECTIVE, MATCHING THAT UP WITH WHAT THE STAKEHOLDER, WHAT THE RESOURCES CAN ACTUALLY IMPLEMENT, WE ISSUED AN RFP OUT TO ORIGINAL EQUIPMENT MANUFACTURERS OF THE EXISTING AND FUTURE, UH, UH, IDRS.
AND TO REALLY TRY TO FLESH OUT WHAT, WHAT CAN THEY DO, WHAT TECHNIC FROM A TECHNICAL PERSPECTIVE, AND WHAT WOULD IT TAKE TO GET TO SOME OF THESE REQUIREMENTS THAT WE HAD ORIGINALLY PROPOSED IN THAT NOER.
AND, UM, AFTER GETTING THE RESULTS OF THAT RFI, I GUESS IT WAS ISSUED IN OCTOBER, AFTER GETTING THE RESULTS OF THAT IN, WE'VE FOUND SOME PLACES WHERE WE PROBABLY NEED TO BACK OFF THE REQUIREMENTS A LITTLE BIT, UH, BECAUSE THEY'RE JUST NOT GONNA BE ABLE TO MEET THOSE.
AND IT'S, IT OKAY, WE THINK WE CAN CAN WORK AROUND THAT.
AND SO, UM, WE'RE, WE'VE ALREADY SUBMITTED KIND OF CONCEPTUALLY WHAT WE THINK THOSE ADJUSTMENTS ARE GONNA BE TO ATTACK, UH, AND, UH, THROUGH THE STAKEHOLDER PROCESS.
AND THEN WE'RE GONNA, IN THE NEXT SEVERAL WEEKS, ARE GONNA ISSUE ANOTHER SET OF, UM, COMMENTS TO THAT NOER AND HOPEFULLY COME TO SOMETHING THAT'S CLOSER TO CONSENSUS.
UH, I THINK IT'S STILL, IT'S UNLIKELY THAT THERE'S GONNA BE COMPLETE CONSENSUS, SO IT'S PROBABLY GONNA BE, UH, HAVE TO COME BEFORE
[01:10:01]
THE BOARD FOR, FOR MORE DISCUSSION.BUT, UH, WE'RE EXPECTING THAT THAT WOULD HAPPEN IN FEBRUARY AT THIS POINT.
AND IN FACT, WE, THAT'S WHAT WE'RE ALL WE'VE TOLD THE STAKEHOLDERS WE'RE DRIVING TOWARD.
AND SO THAT'S REALLY ALL I'VE GOT.
HAPPY TO ANSWER ANY QUESTIONS YOU MIGHT HAVE.
DAN, I HAVE A QUESTION ABOUT MAXIMUM DAILY RESOURCE PLANNED OUTAGE CAPACITY.
WILL THAT LIMIT THAT LINE BE RECALCULATED PERIODICALLY BASED ON THE, LIKE, UPDATED CONDITIONS OF THE GRID AND THE MIX YES.
IT'LL BE UPDATED BASED ON THAT, BASED ON EXPECTED FORCED OUTAGES, THOSE KIND OF THINGS.
AND HOW IS THAT ANNUALLY OR BI-ANNUALLY? I THINK IT'S AN ANNUAL REVIEW, BUT LET ME CHECK ON THAT.
AND DAN, MY, MY QUESTION WAS SIMILAR VEIN IS, IS JULIE'S, I THINK WHAT I'VE, WHAT I'VE BEEN HEARING IS THAT, YOU KNOW, RIGHT NOW IT'S, THERE'S NOT A TODAY ISSUE, BUT AS WE CONTINUE TO HAVE MORE, UM, MORE GROWTH AND LOAD IN THE FUTURE, AND THEN IN THE SHOULDER SEASONS, YOU KNOW, TRYING TO PLAN EVERYTHING OUT, UM, AND I GUESS WHAT YOU YOU'RE SAYING IS THE M-D-R-P-O-C WILL BE UPDATED ON AN ANNUAL BASIS.
SO IT MIGHT BE HELPFUL TO START KIND OF UPDATING THOSE EXPECTATIONS AS WELL, BECAUSE THAT'S SORT OF THE FUTURE, NEAR TERM FUTURE CONCERN IS THE INCREASE IN LOAD GROWTH AND, YOU KNOW, HAVING TO HAVE YOUR GENERATION AVAILABLE TO, TO MEET ELECTRICITY DEMAND, UM, DURING THE, YOU KNOW, JUST PERIODS OF HIGHER, HIGHER ELECTRICITY CONSUMPTION, WHICH COULD OCCUR ANYTIME DURING THE YEAR.
AND THEN TRYING TO BALANCE IT ALL OUT WITH THE M-D-R-P-O-C, I THINK THERE, THERE IS DEFINITELY A, UH, UH, POTENTIAL FUTURE PROBLEM IF WE CONTINUE TO GET LARGE AMOUNTS OF LOAD GROWTH AND WE DON'T GET MORE DISPATCHABLE GENERATION.
AND SO THAT'S REALLY THE, THE, THE KEY THING THERE IS THAT IF YOU DON'T GET MORE DISPATCHABLE GENERATION, THEN YOU DON'T HAVE AS MUCH HEADROOM IN ORDER TO ALLOW OUTAGES TO HAPPEN.
AND SO THAT'S REALLY WHERE THAT FUTURE PROBLEM STARTS TO MANIFEST.
IF WE CAN SOLVE THAT PROBLEM, THEN, THEN HOPEFULLY WE WON'T HAVE THE, THIS PROBLEM WE'RE TALKING ABOUT.
THANK YOU, DAN, ON THE SLIDE THAT SHOWED THE FORCED OUTAGES AND YOU SEE THE KIND OF THE, THEY'RE PEAKING DURING THE SHOULDER QUARTERS OR THE QUARTERS WHERE YOU EXPECT THE, THE PLANNED MAINTENANCE, I THINK YOU SAID THE EXPLANATION OF THAT WAS MORE AROUND THE PLANNED OUTAGES EXTENDING LONGER THAN PLANNED.
AND IF I HEARD THAT RIGHT THEN HOW DOES THAT THEN RELATE TO THE OTHER SLIDE IN TERMS OF THE MAXIMUM ALLOWED PLANNED OUTAGES AND, AND IS THERE A RISK THERE THAT WHEN YOU DO THAT LIMITATION ON, ON PLANNED OUTAGES, IT'S SOMEWHAT IMPACTED BY OVERRUNS ON THE ACTUAL PLANNED OUTAGE VERSUS WHAT YOU WANT IT, UM, WHICH SEEMS TO BE WHAT THE OTHER SLIDE IS SHOWING THAT THEY TEND TO OVERRUN ABOUT.
IF I HEARD THAT CORRECTLY, I, I, I THINK THAT'S, THAT, THAT IS A CONCERN THAT ESPECIALLY IN THE MAY JUNE TIMEFRAME, WHICH WE, YOU WOULD THINK THAT THAT PLANNED OUTAGE JUST WOULD BE WINDING DOWN, BUT YET WE SEE THEM STARTING TO RATCHET UP FROM YEAR TO YEAR IN THOSE MONTHS.
IT COULD BE THAT THERE'S NOT ENOUGH THERE IN THE SPRING, AND SO WE'RE DEFINITELY GONNA BE WATCHING THAT CLOSE IN THE SPRING.
AND THERE IS NO, I GUESS, TYPE OF PENALTY FOR THAT, UH, OTHER THAN THE GENERATORS MAY BE MISSING THE OPPORTUNITY TO BE IN THE MARKET.
UH, OTHER QUESTIONS FOR DAN? NO.
[10.3 Commercial Markets Update]
ERMAN HAS THE NEXT THREE AGENDA ITEMS, 10.3, WHICH IS THE COMMERCIAL MARKETS UPDATE, INCLUDING AN UPDATE ON THE AGGREGATE DISTRIBUTION, ENERGY RESOURCES PILOT PROJECT STATUS, AS WELL AS AGENDA ITEM 10.3 0.1, WHICH IS THE REAL TIME CO-OP OPTIMIZATION UPDATE.AND 10.4, THE MARKET CREDIT UPDATE.
SO I'LL TURN IT OVER TO CANNAN.
SO, UM, UH, I THINK THE MAIN THINGS I WANNA HIGHLIGHT IN THIS PRESENTATION ARE, UH, UPDATE ON A DER, UM, UH, AN UPDATE ON CONGESTION AND ANCILLARY SERVICES COSTS.
UH, ALSO I WOULD LIKE TO TALK A LITTLE BIT ABOUT RU COMMITMENTS AND, UM, UH, AS WE DISCUSSED EARLIER, I, AT THE TIME I PUT THIS TOGETHER, I WASN'T SURE ABOUT THE ORDER.
SO JUST WANNA HIGHLIGHT AGAIN THAT WE ARE BRINGING A PRICE CORRECTION FOR APPROVAL.
UM, THE, SO AS FAR AS A DER GOES, UM, WE DO HA HAVE SEEN
[01:15:01]
AN INCREASE IN BOTH ERCOT WIDE ENERGY, UH, THAT'S BEING OFFERED AND NONS SPEND THAT'S BEING OFFERED.UM, SO THE, THESE CAPACITIES CONTINUE TO RISE, UH, AND, AND I THINK THAT'S A, THAT'S A GOOD, UH, TREND.
UM, THE PRIMARY DRIVER BETWEEN, UH, AND FOR THE RISE FROM LAST MONTH TO THIS MONTH IS THAT VENDORS HAVE ABLE TO QUALIFY MORE, UH, DIFFERENT TYPES OF BATTERIES AT IN RESIDENCES FOR, FOR THE PROGRAM.
UM, AS OF, UH, SEPTEMBER 11TH, THEY HAVE CARRIED NON SPINNING RESERVE SERVICE RESPONSIBILITY, BUT HAVE NOT, UH, BEEN DEPLOYED.
UM, THE LAST THING IS THAT, UH, ON, ON THIS ONE IS THAT, UH, THE COMMISSION AND THE TASK FORCE THAT THE COMMISSION HAS, UH, KICKED OFF IS, UH, EXAMINING NEXT STEPS AS FAR AS, UH, AGGREGATED DISTRIBUTED ENERGY RESOURCES GOES.
AND THE TOPICS THAT THEY'RE DISCUSSING ARE QUALIFYING, UM, UH, THESE RESOURCES TO PROVIDE THE ERCOT CONTINGENCY RESERVE SERVICE, UH, AS WELL AS MAKING A CHANGE THAT I MAY HAVE MENTIONED IN THE PAST ON HOW WE, UM, PROCESS THE DATA ON QUALIFICATION.
UH, WE HAD, UH, TWEAKED THAT, UM, UH, WHICH WE WERE, UH, GIVEN THE LATITUDE TO DO SO, BUT WE WOULD LIKE TO, UH, ENSHRINE THAT DECISION MAKING IN THE A DER DOCUMENT GOING FORWARD.
SO THOSE ARE THE TWO THINGS, UH, THAT, THAT ARE GETTING A LOT OF FOCUS.
THE TASK FORCE IS DISCUSSING MANY OTHER ISSUES, BUT THOSE ARE THE MAIN ONES THAT, UH, ERCOT IS FOCUSED ON IN TERMS OF NEXT STEPS, UH, FOR THIS PROGRAM.
AND CAN YOU REMIND US WHAT'S GONNA BE THE MINIMUM THRESHOLD FOR AN A DER IN TERMS OF MEGAWATTS? SO, SO, SO FAR, UH, AS FAR AS THE NONS SPEND SIDE, UH, IT'S, UH, 80 MEGAWATTS THAT MAY BE, UH, REVISITED.
UM, BUT THERE ARE ALSO, UH, AS YOU, AS YOU CAN SEE THESE VARIOUS ZONES BY COLOR ON THE MAP, THERE'S ALSO, UH, AN EFFORT TO ACHIEVE SOME EQUITY.
THERE ARE, UH, ALLOCATIONS TO PARTICULAR ZONES.
UM, WHAT I CAN TELL YOU IS RIGHT NOW MOST OF THE MEGAWATTS YOU SEE ARE COMING FROM HOUSTON AND THE NORTH ZONE.
SO THERE HAS BEEN DISCUSSION ABOUT PROPORTIONING THOSE ALLOCATIONS TO THESE INDIVIDUAL ZONES THAT YOU SEE KIND OF COLOR CODED.
I'M NOT SURE HOW THAT'S GONNA PLAY OUT.
THE VARYING PARTIES ARE KIND OF NEGOTIATING THAT DISCUSSION.
UM, THEY HAVE PROVIDED NONS SPAN, BUT WHEN IT CAME TIME DURING A DEPLOYMENT, THE OBLIGATION WAS MOVED TO A DIFFERENT RESOURCE.
AND WHEN YOU THINK ABOUT THE SIZE, LIKE THE NINE MEGAWATTS OF ENERGY WIDE, UH, ERCOT WIDE ENERGY, HOW MANY DIFFERENT RESOURCES IS THAT PULLING FROM? I MEAN, IS THAT MULTIPLE LOCATIONS THAT YES, THAT, THAT'S, UM, ALL, UH, ALL OF THESE ZONES COMBINED, UM, AS A, AS A DECENT YARDSTICK? I WOULD JUST SAY A LITTLE BIT MORE THAN, IF I REMEMBER RIGHT, A LITTLE BIT MORE THAN HALF COMES FROM THE NORTH ZONE AND THE REST COME FROM THE HOUSTON ZONE.
BUT I GUESS HOW MANY INDIVIDUAL UNITS MAKE UP THAT? IS THAT, IS THAT LIKE, UM, I'M TRYING TO UNDERSTAND LIKE, YEAH, I, I, I CAN GET THAT FOR YOU.
I DON'T HAVE THAT NUMBER, BUT THESE ARE INDIVIDUAL HOUSEHOLDS.
AND, UM, I WOULD JUST SAY THAT KIND OF THE GENERAL RULE OF THUMB, UH, IS THAT IT'S PROBABLY A, YOU KNOW, UH, FIVE TO SEVEN KILOWATT SYSTEM.
SO TO, TO, UH, YOU WOULD HAVE TO THINK ABOUT BOTH STATE OF CHARGE, UH, OF, OF THE SYSTEM.
SO THAT DOESN'T MEAN THEY'RE GONNA BE AT MAXIMUM CHARGE.
AND, UH, SO IT'S, YOU KNOW, HUNDREDS OF, OF HOMES TO THOUSANDS OF HOMES.
[01:20:01]
SOMEBODY THAT AGGREGATES THE LOAD AND BASICALLY BIDS IT IN FOR THEM.IT, IT IS, UH, SO IT IS SOMEBODY THAT BOTH AGGREGATES THE LOAD.
THEY NEED TO HAVE A RETAIL ELECTRIC PROVIDER THAT IS, UM, CONSISTENT ACROSS THE AGGREGATION, AND THEY HAVE TO HAVE WORKED OUT AN ARRANGEMENT WITH THE TRANSMISSION AND DISTRIBUTION PROVIDER.
AND THESE ARE THE BATTERIES IN HOUSEHOLDS.
SO IT'S BASICALLY JUST BACKUP FOR THOSE HOUSEHOLDS IS THEY'RE NOT NECESSARILY USING IT UNLESS THEY'RE USING IT SOMEWHAT AT PEAK TIMES AND THIS IS BEING BID IN OFF PEAK, OR, UM, SO, UH, MY, MY UNDERSTANDING IS IT'S ACTUALLY THE HOME DECIDES WHAT THEY WOULD LIKE TO RESERVE FOR PERSONAL USE, AND THEN THE REMAINDER IS, IS ELIGIBLE TO BE OFFERED INTO THIS PROGRAM.
BUT, UM, I, I MEAN, I THINK THE PROGRAM IS DESIGNED TO DO, UH, ALSO INCORPORATE THE VERY THING THAT YOU WERE, UM, UH, ALSO DISCUSSING, WHICH IS, UH, THERE ARE, UH, WAYS DEMAND RESPONSE OR OTHER, UH, COMBINATIONS OF RESOURCES COULD QUALIFY.
SO FAR IT'S BEEN MAINLY BATTERIES AT, AT HOMES.
AND YOU CAN SEE THIS, IT'S EXTENDING, I GUESS, TO EVS AT SOME POINT IN THE FUTURE AND OTHER RESOURCES.
SO IT'S A GREAT ANSWER TO GENERATION.
UM, I, I DID, I DID WANNA HIGHLIGHT A FEW, UH, OCTOBER, UH, ITEMS, UM, UH, CONGESTION BY, UH, ZONE WENT DOWN IN OCTOBER.
UM, BUT, UH, IT'S, UH, THE COMPOSITION'S DIFFERENT FROM, UH, OCTOBER, UH, A YEAR AGO.
AND IT'S STILL HIGHER THAN, UH, OCTOBER, UM, 2022.
UH, SO WANTED TO HIGHLIGHT, UH, THAT ELEMENT.
UM, ALSO, UH, AND WE'VE BEEN, YOU KNOW, LOTS OF DISCUSSION AROUND ANCILLARY SERVICES.
THIS IS THE COST OF ANCILLARY SERVICES, NOT NECESSARILY THE ENERGY MARKET IMPACT OF THE ANCILLARY SERVICES.
SO THIS IS PRICE TIMES, UH, UH, A QUANTITY PROCURED.
UM, THOSE COSTS HAVE GONE DOWN FROM A HIGH IN, UH, AUGUST.
UM, AND THIS IS RELATIVELY, AS YOU CAN SEE, THERE'S HISTORICAL DATA HERE.
UM, AND THAT IS A NORMAL TREND FOR OCTOBER TO SEE A DECREASE.
UM, OF COURSE, ECRS ONLY WENT LIVE IN, UH, 2023.
SO ECRS IS NOT, UH, ON, ON HERE, UH, OTHER THAN THE SUMMER MONTHS OF, UH, 2023 KENAN IS THE REASON WE SEE THAT GIANT JUMP AUGUST 23 COMPARED TO, UM, AUGUST 22.
IS THAT ECRS JUST MAKING IT THAT MUCH? UM, NO, IT IS, UM, NOT JUST ECRS.
IT IS THE FACT THAT, UM, AUGUST OF 2023 HAD MUCH HIGHER PRICES AND SCARCITY EVENTS MUCH MORE FREQUENTLY ACROSS THE SYSTEM.
SO IF YOU WERE TO THINK ABOUT ANCILLARY SERVICES, THE, THE OPPORTUNITY COST OF PROVIDING ANCILLARY SERVICES IS ENERGY.
SO, UM, I NEED A VERY HIGH ANCILLARY SERVICE PRICE TO MAKE ME INDIFFERENT TO PROVIDING A VERY HIGH ENERGY PRICE.
SO, UH, THE HIGH, VERY HIGH PRICES IN AUGUST REFLECT THE FACT THAT WE HAD A LOT OF SCARCITY.
AND IN ORDER TO GET, UH, A COMMITMENT TO PROVIDE ANCILLARY SERVICES, THE PRICE IN THE MARKET CLEARING ENGINE CLEARED VERY HIGH ON THE ANCILLARY SERVICE SIDE AS WELL.
M IN AUGUST OF 23, ABOUT HOW MUCH IN RESERVES WERE YOU CARRYING ON AVERAGE, DAN? OH, DO YOU HAVE THAT NUMBER? I DON'T HAVE IT OFF THE TOP OF MY HEAD.
IT SHOULD BE MORE THAN 6,500 IF I REMEMBER RIGHT.
BUT I, I'M NOT ABSOLUTELY CERTAIN ABOUT THAT.
WELL, I, I THINK THE REASON I RAISED THAT IS BECAUSE IF YOU'RE CARRYING MORE, YOU'RE PAYING MORE OPPORTUNITY COSTS, WHICH WILL RESULT IN A HIGHER PRICE ANCILLARIES.
IT'S THE WAY I'M TRANSLATING IT.
'CAUSE IF YOU'RE GONNA BE CARRYING 7,000 MEGAWATTS, THEN YOU'RE PAYING 7,000 MEGAWATTS THE OPPORTUNITY COST OF NOT BEING IN
[01:25:01]
THE REAL TIME MARKET.IF THE QUANTITY GOES UP, UH, FOR ANY GIVEN PRICE, THE TOTAL COST IS GONNA GO UP.
IF, UH, IF I'M UNDERSTANDING YOUR POINT CORRECTLY, AND YOU'RE, THEN YOU'RE REMOVING THE RESERVES FROM THE MARKET.
SO THAT COULD CREATE SOME SCARCITY AS WELL.
THERE ARE, UH, IT, IT DEPENDS ON THE TYPE OF ANCILLARY SERVICE.
SO FOR EXAMPLE, UH, REG WOULD DEPLOY AT VARIOUS PRICES, BUT ECRS, IF I'M HOLDING IT, UH, BACK AND WAITING TO RELEASE IT, THAT WOULD, UM, THAT, THAT WOULD HAVE AN IMPACT ON THE, ON WHAT IS AVAILABLE TO SECURE THE SECURITY CONSTRAINED ECONOMIC DISPATCH ENGINE.
SO ECRS WOULD BE ONE, AND THEN NONS SPIN WOULD PROBABLY BE THE TWO MAIN IMPACTFUL ANCILLARIES.
UM, I, I, I WOULD BROADLY AGREE WITH THAT.
UH, NONS, SPIND DOES HAVE FOR ONLINE NONS, SPIND, UH, DEPLOYMENT PRICE.
SO IT TENDS TO ENTER INTO SCED AT SOME POINT.
UM, SO THERE IS A SLIGHT DIFFERENCE BETWEEN NON SPEN AND ECRS.
I'M JUST TRYING TO UNPACK THE, YOU KNOW, THE SORT OF MOVING PIECES AROUND, UM, THE AUGUST 23RD NUMBER.
AND, YOU KNOW, I CAN UNDERSTAND WHY AUGUST I, I'M SORRY, OCTOBER WOULD BE LOWER, BUT THE SUMMERS SEEM TO BE THE MORE EXPENSIVE ANCILLARY SERVICE, UM, MONTHS.
AND SO JUST, YOU KNOW, TRYING TO UNDERSTAND ALL THE MOVING PIECES.
'CAUSE I KNOW WE'RE GONNA HAVE A BROADER DISCUSSION ON THIS TOPIC LATER, BUT, UM, I THINK JUST REALLY UNDERSTANDING WHAT, WHICH ANCILLARIES ARE THE ONES THAT ARE OR HAVE THE GREATER IMPACT.
YEAH, I MEAN, I, I I WOULD JUST SAY THAT, UM, IF YOU LOOK AT KIND OF, UH, THE THINGS THAT RESTRICTED SCS ACCESS TO ENERGY, UM, DURING THE SCARCE MOMENTS, THE THINGS YOU WOULD WANNA LOOK AT IS, UM, THE BEHIND THE HIGH ANCILLARY SERVICE LIMIT CAPACITY, THE CONGESTION THAT MADE, UM, UH, IT DIFFICULT TO MOVE POWER FROM SOME GENERATION POCKETS TO OTHER PARTS OF THE SYSTEM.
AND OF COURSE, THERE ARE THINGS THAT DRIVE THE OFFER PRICE.
SO THOSE ARE THE THREE FACTORS, I THINK, TO LOOK AT, UH, RELATIVE TO THE EXPENSE.
HOW WAS WEATHER ACCOUNTED FOR IN THE GRAPH BETWEEN THE TWO YEARS? SO, UM, AUGUST WAS, WAS A VERY, VERY HOT YEAR, AND WE, WE HAD LOTS OF SCARCITY, BUT THERE IS NO ADJUSTMENT FOR WHETHER IT JUST IS, UM, A GIVEN IN, IN THE, IN THE CALCULATION.
THIS IS SIMPLY QUANTITIES TIMES THE, THE PRICE OF THE ANCILLARY SERVICES.
SO THE WEATHER IS DIFFERENT FROM ONE YEAR TO THE NEXT.
AND, AND MONTH TO MONTH IT, IT WAS DIFFERENT AS AS WELL.
DID I GET ALL THE QUESTIONS ANSWERED ON THIS ONE? I THINK SO.
UM, UH, RUCK, UH, AS, UM, IT WAS IN THE TAC PRESENTATION IS ALSO AN IMPORTANT, UH, ITEM FOR US TO TRACK.
UM, THE RUCK COMMITMENTS HAVE BEEN RELATIVELY LOW, UH, IN OCTOBER OF 2023 AND LOWER THAN THE COMMITMENTS WE SAW IN 2022 AND, UH, 2021.
UM, SO THAT, UH, IS, UH, A NOTABLE, UH, CHANGE.
I WOULD JUST SAY THAT, YOU KNOW, SYSTEM CONDITIONS REALLY DICTATE RUCK AND A DIFFERENT SET OF CONDITIONS IN A, IN ANOTHER OCTOBER CAN REALLY PUSH UP RELIABILITY UNIT COMMITMENT.
I'M SEEING, SO IF YOU GO BACK TO THE LAST SLIDE AND YOU COMPARE IT TO THIS ROCK, WHEN YOU'RE SKYROCKETING ANCILLARY SERVICE PRICING, YOUR RUCKS ARE DOWN, AND WHEN YOUR RUCKS ARE UP, YOUR ANCILLARY SERVICES ARE DOWN.
IS THAT CORRECT? WELL, I MEAN, UH, SO THAT THERE ARE A LOT OF MONTHS THAT WOULD ALIGN WITH THAT, BUT OCTOBER DOESN'T EXACTLY ALIGN WITH THAT.
SO, UM, GENERALLY SPEAKING, WHEN WE, THE SYSTEM IS REALLY TIGHT.
THERE'S NOTHING TOO RUCK AND, AND THE RUCKS WOULD GO DOWN, BUT, UM, YOU SEE IN OCTOBER, A DECREASE IN RUCKS ALSO WITH, WITHOUT A LOT OF HIGH PRICES.
AND, UH, ESSENTIALLY, UH, FOR THE OCTOBER TIME PERIOD, THEY'RE JUST, UH, THE SYSTEM OR THE, UH, OWNERS OF THE RESOURCES WE'RE COMMITTING SUFFICIENT AMOUNT OF RESOURCES FOR US TO MEET LOAD.
SO, UM, THERE WAS NO NEED, UH, FOR A RUCK IN THOSE INSTANCES.
[01:30:02]
SO I, I THINK THERE'S TWO STORIES THAT ARE BEING TOLD AUGUST WOULD KIND OF SUPPORT WHAT YOU WERE SAYING.OCTOBER LOOKS DIFFERENT THAN THAT CANNOT.
AND THERE, THERE WAS ANOTHER QUESTION, YOUR HONOR, A LOT OF THE CORRELATIONS ARE INTUITIVE TO YOU IN YOUR HEAD, BUT FOR FUTURE REPORTS, YOU KNOW, IF THERE'S SOME LIKE BASIC CORRELATIONS YOU COULD SHOW US ON HOW THESE ANCILLARY SERVICES RESPOND TO CONDITIONS ON THE GRID, I WOULD REALLY APPRECIATE THAT.
SO WE'LL, WE'LL START WORKING ON THAT.
UM, AND THIS IS AGAIN, A LITTLE BIT MORE DETAIL ON THE, UH, PRICE CORRECTIONS, UM, UH, AND, AND SOME OF THE MAGNITUDES, BUT, UH, I'VE KIND OF GONE OVER THIS.
UM, THE ONE OTHER THING THAT I THINK I GOT A QUESTION ON THAT IS IN THE APPENDIX THAT I JUST WANTED TO MAKE SURE I WAS SHARING WITH YOU IS, UH, I WAS ASKED KIND OF, UM, YOU KNOW, WHAT, WHAT ARE THE FREQUENCY OF PRICE CORRECTIONS AND, AND THAT TYPE OF THING LOOKING LIKE, AND WE PUT THIS, UH, IN OUR MONTHLY REPORT, BUT I MEAN, KNOCK ON WOOD, RIGHT NOW, THE TREND APPEARS TO BE, UH, GOING DOWNWARDS.
BUT IF, IF YOU NOTICE, UH, ALL IT TAKES IS A, UH, AND, AND THIS DOESN'T HAVE, UM, THE, UH, UH, IT MIGHT NOT HAVE THE BOARD APPROVED ONE IN HERE.
I'M NOT ABSOLUTELY SURE THE, SO IT IS IN HERE IT SAYS MET CRITERIA, BUT PENDING BOARD CORRECTION, IS THAT KIND OF DARK BLUE ONE.
UH, BUT, BUT I JUST WANTED TO SHARE THAT.
UM, UH, THERE SEEMS TO BE A BROAD DOWNWARD TREND, BUT ALL IT WOULD TAKE IS ONE KIND OF SYSTEMATIC ERROR TO START PUSHING THOSE UP, OR, OR A COUPLE.
BUT WE DO TRY AND REPORT ALL OF THESE THAT INVOLVE PRICE CORRECTIONS ON A MONTHLY BASIS FOR YOU TO BE ABLE TO SEE THE, THE TRENDS AND, AND KIND OF WHAT CATEGORY THEY ARE, EVEN IF WE DIDN'T BRING THEM TO YOU.
AND THAT, UH, IS THE CONCLUSION OF MY, UH, PRESENTATION.
HAPPY TO ANSWER ANY OTHER QUESTIONS YOU MIGHT HAVE KENAN, A COUPLE SLIDES, YOUR LAST SLIDE, UH, IN, IN THE APPENDIX.
WHAT, WHAT ARE WE LOOKING AT HERE? SO, UH, WHAT WE'RE LOOKING AT HERE IS JUST, UM, THIS IS MORE OF A RETAIL MARKET.
UH, HOW ACTIVE ARE PEOPLE SWITCHING AND MOVING AROUND? UM, UH, AND, AND THAT'S, UH, WE'RE, WE'RE TRYING TO, UM, WE REPORT ALL OF THE DIFFERENT KIND OF CATEGORIES THAT WOULD INVOLVE A, UH, WHAT WE CALL A EASY ID OR A, A RESIDENCE OR, OR A A METER POINT MOVING AROUND, UH, IN THE VARIOUS FORMS THAT IT CAN, UM, UH, BROADLY, UH, IT JUST, UH, KIND OF SHOWS HOW ACTIVE CONSUMERS ARE IN CHANGING, UH, PROVIDERS AND, AND THINKING ABOUT HOW THEY WANT TO, UH, CONSUME POWER AND, AND THEIR RELATIONSHIP WITH THEIR RETAIL PROVIDER.
MM-HMM,
RIGHT? WE DON'T NECESSARILY, UM, I I WOULD SAY BROADLY THAT, THAT IT DOES NOT.
UM, BUT, UH, WITH THE EXCEPTION OF THAT VERY LAST LINE ITEM, MASS TRANSITIONS, THIS IS USUALLY HAPPENS WHEN ONE RETAILER EITHER GOES OUT OF BUSINESS OR SELLS ITS BOOK.
AND, UH, WE ACTUALLY HAVE TO DO A LOT OF WORK TO ENSURE THE MATCH BETWEEN THE NEW RETAIL PROVIDER THAT THAT RESIDENCE IS GOING TO THE TDSP AND ERCOT, THAT THAT IS A VALID, ACCURATELY RECORDED SET OF OWNERSHIPS.
UM, AND THESE TYPES OF THINGS TEND TO HAPPEN IN A VERY TIGHT TIMELINE.
AND, UM, THERE ARE, THERE ARE, UH, USUALLY A FEW EASY IDS THAT EITHER DON'T HAVE AN ADDRESS, THEY'LL HAVE AN ADDRESS LIKE TURN LEFT AT THE GATE ON RANCH ROAD.
SO, AND SO, THOSE ARE REALLY DIFFICULT TO
[01:35:01]
MOVE QUICKLY AND CAN AT TIMES LEAD TO, UH, OTHER, UH, WAYS THAT THE ENERGY IS COVERED, UH, UNTIL WE CAN GET THAT RIGHT.SO THOSE ARE ALL IMPORTANT, UH, UH, ISSUES FOR US TO MAKE SURE WE'RE SETTLING THE MARKET ACCURATELY.
[10.3.1 Real-Time Co-optimization Update ]
ARE YOU GONNA GO INTO CO-OP OPTIMIZATION? YES.UM, SO AS FAR AS, UH, REALTIME CO-OP OPTIMIZATION, WE DID HAVE, UH, ONE, UM, UH, NOTABLE NPRR GO THROUGH.
UM, AND THIS IS, UH, IS A MATERIAL NPRR TWO, UH, SUCCESSFULLY, UH, DEPLOYING REAL-TIME CO OPTIMIZATION PLUS BATTERIES PLUS STATE OF CHARGE.
UM, WE ARE GOING TO BE KICKING OFF MUCH MORE FREQUENT, UH, STAKEHOLDER MEETINGS IN THE FORM OF THIS REALTIME CO OPTIMIZATION PLUS BATTERY TASK FORCE.
UM, AND, UH, THAT, UH, I'LL, I'LL GO A LITTLE BIT INTO THAT, UH, SCHEDULE.
UH, BUT, UM, AS, AS THIS SAYS, WE WILL BE HAVING MONTHLY MEETINGS, UH, UH, IN 2024 ON THIS.
UM, AND, UH, AS OF RIGHT NOW, EVERYTHING'S ON SCHEDULE.
AND THAT ALIGNS WITH, UM, KIND OF JP P'S PRESENTATION, UH, EARLIER TODAY.
I WOULD JUST SAY, UM, WHILE EVERYTHING'S ON SCHEDULE, WHAT WE HAVE LEFT TO DO IS QUITE SUBSTANTIAL, AND WE WOULD WANNA KEEP BRINGING UPDATES TO THIS GROUP, THE TECHNOLOGY GROUP, AND THE BOARD AS FAR AS HOW THIS IS PROGRESSING.
ANY QUESTIONS ON REALTIME CO OPTIMIZATION?
[10.4 Market Credit Update]
IF I MAY, I'LL PROCEED TO THE MARKET CREDIT UPDATE.UM, HERE, THE KEY TAKEAWAYS OR THE ITEMS WE WANTED TO, UH, SHARE IS THAT THERE HAVE BEEN NO DEFAULTS OR UNUSUAL COLLATERAL ACTIVITY, UM, MARKET WIDE, UH, AS YOU MIGHT HAVE SEEN FROM THOSE DECREASE IN PRICES.
TOTAL POTENTIAL EXPOSURE, UH, HAS, HAS, UH, I'M SORRY, I'VE GOT THIS BACKWARD.
SO, UH, TOTAL POTENTIAL EXPOSURE INCREASE FROM 2.5 BILLION IN SEPTEMBER TO 2.88 BILLION IN OCTOBER.
SO, UM, THAT IT WAS DRIVEN BY KEY, UH, PRICE SPIKES, UH, IN, IN THE OCTOBER TIME PERIOD.
UM, THE DISCRETIONARY COLLATERAL, SO THE COLLATERAL IN EXCESS OF WHAT, UH, PARTIES ARE REQUIRED TO HOLD DECREASED FROM 5.04 BILLION TO 4.33 BILLION IN, IN OCTOBER KENNAN.
SO FROM THAT, WE, AGAIN, WE'RE O OVER COLLATERALIZED, BUT THAT ISN'T NECESSARILY THE CASE BY INDIVIDUAL COUNTERPARTY.
AN INDIVIDUAL COUNTERPARTY COULD JUST BE RIGHT AT THE THRESHOLD.
IS THAT FAIR WAY TO LOOK AT IT? UH, UH, A A PARTICULAR INDIVIDUAL PARTY COULD BE RIGHT AT THE THRESHOLD, BUT IN AGGREGATE, ALL, WHEN I BRING ALL THE COUNTERPARTIES TOGETHER, THERE IS EXCESS COLLATERAL.
AND THIS ALLOWS THEM FLEXIBILITY TO CHANGE A STRATEGY OR, OR DO SOMETHING, UH, DIFFERENTLY.
UH, THE ONE THING I WOULD OBSERVE IS WITH, UH, HIGHER INTEREST RATES, THIS, THE OPPORTUNITY COST OF THIS DYNAMIC REALLY CHANGES BECAUSE THERE'S A COST TO HAVING EXCESS COLLATERAL OUT THERE.
BUT, UM, I MEAN, WE, WE DON'T, WHAT'S THE RIGHT WAY TO SAY THIS? WE DON'T RESTRICT THE MARKET PARTICIPANTS TO CHOOSE TO, UH, PROVIDE US WITH EXCESS COLLATERAL.
UM, THERE ARE TWO NPRS THAT I WANTED TO UPDATE THE BOARD ON.
UH, NPRR 1184 IS THE UPDATE TO PROCEDURES FOR MANAGING INTEREST ON CASH COLLATERAL.
THIS WAS FILED BY, UH, ANACA AND APPROVED AT THE OCTOBER 17TH BOARD OF DIRECTORS MEETING.
SO, UH, WE ARE IN PHASE ONE, UH, OF IMPLEMENTING THIS, AND IT SHOULD GO LIVE
[01:40:01]
IN JANUARY OF 2024.UH, PHASE TWO, UH, THE REPORTING ON THE INTEREST EARNINGS IS, UH, STILL UNDER PRIORITIZATION REVIEW, BUT WILL BE ASSIGNED A RANK IN PRIORITY AND, UH, UH, MOVE FORWARD, UH, AS WE COMPLETE THAT WORK.
AND, UH, FINISHED THE, UH, IMPACT ON FINDING THE RIGHT PLACE TO DELIVER IT.
UM, IN PRR 1175, UH, WHICH IS THE REVISIONS TO MARKET ENTRY, FINANCIAL QUALIFICATIONS, AND PARTIC, UH, PARTICIPATION REQUIREMENTS, WHICH WAS FILED BY ERCOT WAS ALSO APPROVED AT THE OCTOBER 12, UH, UH, PUC MEETING.
AND, UH, IT IS GONNA BE, IT'S BEEN, UH, IMPLEMENTED EFFECTIVE NOVEMBER 1ST, 2023.
UM, THERE IS THIS, UH, THERE IS AN NPRR THAT WE'RE WORKING ON, UH, THAT I THINK IT'S WORTH GIVING YOU ADVANCED NOTICE ABOUT.
UM, AND THIS IS NPRR 1205, AND THIS IS, UH, GONNA COVER REVISIONS TO THE CREDIT QUALIFICATION REQUIREMENTS OF BANKS AND INSURANCE COMPANIES.
WE ARE PROPOSING TO INCREASE THE, UH, FINANCIAL STRENGTH OF THE BANKS THAT CAN PROVIDE, UH, UH, COLLATERAL.
UM, AND THIS, UH, ITEM IS UNDER, UH, DISCUSSION.
SOME MARKET PARTICIPANTS HAVE ASKED THAT IN RETURN FOR THIS, UH, NPRR, OR EVEN AS PART OF THIS NPRR, THAT WE INCREASE THE MINIMUM, UH, THE MAXIMUM ANY ONE BANK CAN GIVE, UH, IN, IN TERMS OF, UH, COLLATERAL.
SO WE'RE GONNA BE WORKING WITH STAKEHOLDERS TO MOVE THAT ITEM ALONG.
IT SEEMS LIKE, UM, INCREASING THAT AMOUNT MAKES SENSE SINCE WE ARE DECREASING THE NUMBER OF ELIGIBLE BANKS THAT, UH, CAN, UH, PROVIDE THE INFORMATION.
SO, I, I JUST DID WANNA HIGHLIGHT THIS FOR THE BOARD, UH, FOR, FOR R AND M, I'M SORRY.
UM, SO, UH, AND THIS, THIS IS JUST, UH, UH, UH, EXCERPT FROM, UM, THE, UH, PROTOCOLS THAT, UH, DESCRIBE THE LETTERS OF CREDIT AND ISSUING, UH, BANK LIMITS.
UM, SO THIS IS JUST BACKGROUND FOR, UH, NPRR 1205.
UM, THE OTHER THING IS THAT WE DO TRACK, UH, THE, UH, LETTERS OF CREDIT, UH, ISSUING BANKS AND THEIR, THEIR LIMITS.
UM, I CAN UPDATE YOU THAT THE VERY FIRST BANK CREDIT, UH, I COLE, IS NO LONGER AT 156%.
IT HAS DROPPED, UH, BELOW A HUNDRED PERCENT.
SO AGAIN, UH, THIS IS BACKGROUND ON, UH, NPRR 1205, AND I'M HAPPY TO TAKE ANY OTHER QUESTIONS THAT YOU MIGHT HAVE.
ANY OTHER QUESTIONS FOR KENAN? KENAN, SINCE WE, UH, TOOK OUT UNSECURED CREDIT IN THE OCTOBER TIMEFRAME, HAS THERE BEEN ANY RAMIFICATIONS OR UNINTENDED CONSEQUENCES OF THAT CHANGE? WE HAVE NOT SEEN ANY, UM, HOWEVER, I'M SURE MARKET PARTICIPANTS THAT WERE UTILIZING THAT WOULD TELL YOU IT COST THEM MORE TO, UH, GET THEIR CREDIT THAN IT DID PRIOR TO THAT.
UH, IS THERE ANYTHING, ANYTHING ELSE I COULD ANSWER? THANK YOU.
[10.5 Revision Request Status Update]
UH, CHAD, WE'LL PRESENT AGENDA ITEM 10.5, THE REVISION REQUEST STATUS UPDATE.HI, THIS IS JOHN LEVINE, ASSISTANT GENERAL COUNSEL.
CHAD IS UNAVAILABLE AT THE MOMENT, SO I'M GONNA STEP IN AND PRESENT THIS IN HIS PLACE.
I DON'T REALLY HAVE MUCH TO HIGHLIGHT.
UM, I'LL GO OVER THE KEY TAKEAWAYS HERE.
UH, ONE NON UNANIMOUS REVISION REQUEST, WHICH YOU ALREADY CONSIDERED.
IN ADDITION TO THAT, THERE ARE EIGHT THAT WILL BE ON THE CONSENT AGENDA TOMORROW.
UM, WE HAVE 65 REVISION REQUESTS IN PROCESS.
UH, THE LAST THING I'LL HIGHLIGHT IS ON THE AGING REVISION REQUESTS.
UH, SO THERE ARE NOW SEVEN, AND THAT,
[01:45:01]
JUST SO YOU KNOW, UH, THAT'S ANY REVISION REQUESTS HAS BEEN TABLED FOR MORE THAN SIX MONTHS.UH, THERE ARE DETAILS ON THE AGING REVISION REQUESTS ON SLIDE EIGHT, AND THAT'S REALLY ALL I HAVE TO HIGHLIGHT.
IF ANYONE HAS QUESTIONS, I CAN TRY TO ANSWER THEM.
[11. Future Agenda Items]
AGENDA ITEM 11.UH, MS. CANON'S PRESENTATION OF FUTURE AGENDA ITEMS. IT'S AFTER THE ACRONYM SLIDE.
SO, UM, THIS IS THE KIND OF THE CALENDAR OF, UH, ME, UH, ISSUES THAT WILL BE DISCUSSED, UH, IN, IN THE, UH, UPCOMING, UH, YEAR.
UH, AND I, I, I THINK IT SPEAKS FOR ITSELF AND IS KIND OF GOVERNED AS Y'ALL WOULD LIKE TO, UH, UH, COVER ISSUES.
UM, I'M HAPPY TO ANSWER ANY QUESTIONS REGARDING FUTURE AGENDA ITEMS. NO QUESTIONS.
[12. Other Business]
BEFORE WE RECESS THE MEETING UNTIL TOMORROW MORNING IS AGENDA ITEM 12, OTHER BUSINESS.IS THERE ANY OTHER BUSINESS ANY COMMITTEE, COMMITTEE MEMBER WOULD LIKE TO RAISE? HEARING NONE THE AGENDA NOW NOTICES A RECESS UNTIL TOMORROW AT 8:30 AM IN BOARDROOM B.
FOR THOSE ATTENDING IN PERSON, WE'LL RESUME TOMORROW WITH AGENDA ITEM 13, A REPORT FROM THE INDEPENDENT MARKET MONITOR, FOLLOWED BY COMMITTEE CONSIDERATION OF THE 2024 ERCOT METHODOLOGIES FOR DETERMINING MINIMUM ANCILLARY SERVICE REQUIREMENTS.
GENERAL SESSION IS NOW RECESSED PERSON HERE.
WELL, GOOD MORNING, MEMBERS OF THE RELIABILITY AND MARKETS COMMITTEE AND GUEST.
THIS IS BOB FLEXON, COMMITTEE CHAIR.
I'VE JOINED THE MEETING BY TELECONFERENCE AND ERCOT LEGAL HAS CONFIRMED TO ME THAT A QUORUM IS PRESENT IN PERSON.
I HEREBY CALL BACK INTO ORDER THE DECEMBER 18TH AND 19TH 2023 COMMITTEE MEETING, WHICH WAS RECESSED YESTERDAY AFTERNOON.
THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON ERCOT WEBSITE.
BEFORE WE BEGIN, I WOULD LIKE TO ASK PC INTERIM CHAIR KATHLEEN JACKSON IF SHE WOULD LIKE TO CALL AN OPEN MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS TO ORDER.
UH, WE DON'T HAVE A QUORUM AT THIS TIME.
SO BEFORE MOVING ON TO TODAY'S BUSINESS, I'D LIKE TO HIGHLIGHT THAT THE ANTITRUST ADMONITION AND SECURITY MAP ARE INCLUDED WITH POST-IT MEETING MATERIALS.
CHAD, CAN YOU PLEASE CONFIRM THAT NO REQUESTS FOR PUBLIC COMMENT HAVE BEEN RECEIVED SINCE WE RECESSED YESTERDAY? THAT IS CORRECT.
SO, AS NOTICED ON THE AGENDA, WE'LL
[13. Independent Market Monitor (IMM) Report]
RESUME TODAY WITH AGENDA ITEM 13, THE INDEPENDENT MARKET MONITOR REPORT.DAVID PATTON, PRESIDENT OF POTOMAC ECONOMICS WILL MAKE THAT PRESENTATION.
BEFORE WE PROCEED, I'D LIKE TO THANK CARRIE BIVINS FOR HER HELP OVER THE PAST COUPLE OF YEARS IN HELPING TO IMPROVE THE ERCOT MARKET.
DR. PATTON, PLEASE PROCEED WHEN READY.
EXCUSE ME, MR. CHAIRMAN, I DO NEED TO CALL THE MEETING TO ORDER.
UM, AS ANOTHER MEMBER HAS ARRIVED, UM, 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 DECEMBER 19TH, 2023.
I'M KATHLEEN JACKSON, AND I'M JOINED TODAY BY COMMISSIONERS JIMMY GLTE AND LORI KOBOS.
UH, I APPRECIATE THE OPPORTUNITY TO SPEAK WITH YOU.
I, I TOO APPRECIATE THE WORK THAT, THAT CARRIE DID WHEN SHE WAS OUR IMM DIRECTOR DOWN HERE.
UM, SHE DID A INCREDIBLY GOOD JOB.
I KNOW A LOT OF YOU INTERACTED WITH HER QUITE A BIT.
YOU'RE GETTING THE, THE B TEAM TODAY.
UM, SO WE ARE, WE'RE GONNA WALK THROUGH, UH, REALLY TWO THINGS.
ONE IS A SUMMARY OF THE PERFORMANCE OF THE MARKET, UH, FROM THE SUMMER THROUGH THE FALL, UM, BUT THEN LEADING INTO A DISCUSSION OF THE IMPACTS OF THE ANCILLARY SERVICE
[01:50:01]
PROCUREMENTS AND METHODOLOGY, PARTICULARLY THE PROCUREMENTS OF ECRS, UM, BECAUSE IT'S, IT'S HAD A PROFOUND EFFECT ON THE, THE MARKET OUTCOMES, AS YOU WILL SEE.AND THERE'S BEEN, UM, SOME OF THESE RESULTS THAT ARE IN THIS PRESENTATION WERE PRESENTED BY, BY CARRIE IN AN INITIAL FORM IN OCTOBER.
UH, I PRESENTED A LOT OF THESE RESULTS AT THE TAC.
UH, THERE'S BEEN A FAIR AMOUNT OF CONFUSION, MISUNDERSTANDING, AND EVEN SOME MISINFORMATION.
UM, SO I'M HAPPY FOR YOU TO INTERRUPT ME AND ASK QUESTIONS AS WE GO ALONG.
'CAUSE I THINK THE GOAL OF THIS, THIS PRESENTATION SHOULD, SHOULD BE FOR EVERYONE TO HAVE A REALLY CLEAR IDEA OF WHAT, WHAT HAPPENED THIS SUMMER, WHAT DROVE THE MARKET OUTCOMES AND THE EXTENT TO WHICH THE, THE ANCILLARY SERVICE METHODOLOGY PLAYED A ROLE IN, IN, UM, IN THE MARKET OUTCOMES.
SO, UM, ON SOMETIMES ACCUSED OF, OF, OF PUTTING FIGURES TOGETHER THAT HAVE LIKE TWO OR THREE TIMES TOO MANY THINGS ON THEM, MAKING THEM HARD TO READ.
SO, UH, WE'RE GONNA START WITH ONE OF THOSE.
THIS IS THE, THE ALL IN PRICE.
IT INCLUDES THE, ALL OF THE DIFFERENT PRICE COMPONENTS THAT DETERMINE WHAT LOAD PAYS FOR ELECTRICITY IN, UM, IN ERCOT.
SO IT, IT TAKES THE THINGS THAT ARE NATURALLY ON A PER MEGAWATT HOUR BASIS LIKE ENERGY.
UH, BUT IT ALSO INCLUDES OUR ANCILLARY SERVICES, UH, AND UPLIFT, UH, PLACED ON A PER MEGAWATT HOUR BASIS.
SO YOU CAN GET A SENSE OF THE TOTAL COST, THE TOTAL MARKET COST THAT, UH, LOADS WERE, UM, THAT THE ERCOT MARKET WAS PRODUCING IN, IN, UM, THIS TIMEFRAME.
NOW, BECAUSE FUEL COST PLAYS SUCH AN IMPORTANT ROLE IN DRIVING ELECTRICITY PRICES, WHAT YOU SEE HERE IN THE BLUE IS A, IS A FUEL PRICE ADJUSTED ENERGY PRICE.
SO THIS IS THE ENERGY PRICE THAT CORRESPONDS TO THE NATURAL GAS PRICES THAT PREVAILED AT THE END OF 2023.
UM, SO YOU CAN SEE IN 2022, THE THE NATURAL GAS PRICES WERE WERE SIGNIFICANTLY HIGHER, AND THE ENERGY PRICES THEREFORE, UH, WOULD'VE BEEN DRIVEN UP BY THOSE NATURAL GAS PRICES.
BUT IN ORDER TO, TO STRIP OUT THE EFFECT OF, OF CHANGES IN FUEL PRICES AND, AND BETTER BE ABLE TO SEE WHAT THE, WHAT THE TRUE FLUCTUATIONS IN PRICES WERE THAT WERE DRIVEN BY OTHER FACTORS, WE, WE ADJUST THE ENERGY PRICES TO NEGATE THAT EFFECT.
AND SO YOU CAN, WHAT, WHAT SHOULD BE THE CASE IS, ONCE YOU'VE DONE THAT, SINCE THAT DRIVES MOST OF THE FLUCTUATION IN ENERGY PRICES, YOU SHOULD SEE A RELATIVELY CONSISTENT SET OF PRICES IN THE BLUE.
UM, EXCEPT IN, IN PERIODS WHERE THE MARKET GETS, GETS SOMEWHAT TIGHT.
SO YOU SAW THAT IN JULY OF 2022, THE ENERGY PRICES A LITTLE BIT HIGHER, BUT BY AND LARGE, UH, IF YOU LOOK AT JANUARY THROUGH MAY OF 2023, JANUARY OF 2022 THROUGH MAY OF 2023, THE THE PRICES ARE FLUCTUATING IN A RELATIVELY TIGHT BAND DRIVEN LARGELY BY NATURAL GAS PRICES.
NOW THAT, THAT RELATIONSHIP DISAPPEARED IN JUNE OF 2023 WHEN WE IMPLEMENTED ECRS, AND YOU CAN SEE THAT THE, THE BLUE, UM, SORT OF EXPLODES AT THAT POINT, UM, IN JUNE, AUGUST AND SEPTEMBER.
AND SO WE'RE GOING TO TALK ABOUT WHY THAT'S THE CASE.
NOW, IMPORTANTLY, AND THIS IS VERY IMPORTANT TO UNDERSTAND IN ORDER TO, TO, UM, UNDERSTAND THE DYNAMIC OF THE PRICES AND THE EXTENT TO WHICH THEY WERE EITHER EFFICIENT OR INEFFICIENT.
THE SHORTAGE PRICING ADDERS ARE DESIGNED TO INDICATE WHAT THE SHORTAGE VALUE OF ENERGY IS.
SO WHEN THE MARKET GETS VERY TIGHT AND RESERVE LEVELS FALL, THE MARKET STARTS MOVING UP.
THE ORDC, THE OPERATING RESERVE DEMAND CURVE, AND WHAT THAT'S INTENDED TO SIGNAL IS THAT RELIABILITY IS IN THAT PERIOD, IS, IS THREATENED, AND THERE'S A COST TO THAT.
AND SO IF YOU LOOK IN 2022, FOR EXAMPLE, IN IN JULY, UM, A RELATIVELY LARGE SHARE OF THE OVERALL ENERGY PRICE IS ATTRIBUTABLE TO THE SHORTAGE PRICING ADDERS.
AND YOU CAN THINK OF THOSE ADDERS AS BEING KIND OF THE, THE FUNDAMENTAL INDICATOR OF, OF TRUE SHORTAGE OCCURRING IN THE MARKET.
THE, THE PRICE SPIKES THAT OCCUR BECAUSE YOU'RE HAVING A SHORTAGE, UH, SHOULD LARGELY BE CONTAINED IN THOSE ADDERS.
BUT IN 2023, WE, WE HAD A SIGNIFICANT NUMBER OF, UH, WHAT APPEARED TO BE SHORTAGE PRICING EVENTS, UM, WHEN THE MARKET WAS NOT IN
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SHORTAGE.AND THE ORDC ADDERS WERE RELATIVELY SMALL.
AND THAT ACCOUNTS FOR, FOR WHY THE, THE, THE BLUE AND JUNE THROUGH SEPTEMBER IS SO HIGH.
NOW, THE, IT'S, AND I'LL, I'M GONNA TALK ABOUT THIS IN DETAIL, BUT THAT, THAT'S THE DIRECT RESULT OF THE IMPLEMENTATION OF ECRS AND THE MANNER IN WHICH ECRS, UM, AFFECTS THE DISPATCH OF THE SYSTEM AND, AND CAN, HAS THE POTENTIAL TO CREATE, UH, ARTIFICIAL SHORTAGES.
NOW, THERE'S NO DOUBT THAT THAT LOAD WAS HIGH DURING THAT, UH, DURING THESE PERIODS IN 2023, IT WAS A HOT SUMMER, BUT AS I'LL SHOW YOU, 2022 WAS ACTUALLY A MORE CHALLENGING SUMMER FROM A RELIABILITY PERSPECTIVE THAN 2023.
UM, SO, UH, SO I WILL WALK THROUGH THAT.
UM, BUT BEFORE I GET TO THAT, IF YOU, IF YOU GO TO THE, THE NEXT SLIDE, I SHOW YOU THE, THE PEAKER NET MARGIN, JUST TO GIVE YOU A SENSE OF THE, UM, OF THE ECONOMIC SIGNIFICANCE OF THE PRICES THAT YOU'RE SEEING.
SO THE, UH, I SAID THAT 2022 WAS ACTUALLY TIGHTER AND PRICES WERE, WERE, UM, UH, OR RELIABILITY WAS, WAS, UH, MORE DIFFICULT TO MANAGE IN 2022.
UM, AND WE SAW MORE ORDC ADDERS AS A RESULT AND LOWER RESERVE MARGINS.
AND YOU CAN SEE THAT, THAT THAT RESULTED IN A FAIRLY SIGNIFICANT, UM, UH, CUMULATIVE CUMULATIVE PEAKER NET MARGIN.
NOW, WHAT THE PEAKER NET MARGIN IS, IS IT'S THE AMOUNT OF MONEY THAT A NEW DISPATCHABLE PEAKER WOULD EARN, UM, UH, OVER AND ABOVE ITS OPERATING COSTS.
SO GENERALLY, UH, THE PEAKERS ARE GOING TO MAKE, UH, A FAIR AMOUNT OF PROFIT WHEN, WHEN SHORTAGES OCCUR, BECAUSE THAT SHORTAGE PRICING PRODUCES REVENUES THAT FAR EXCEED THEIR OPERATING, OPERATING COSTS IN THOSE PERIODS.
UM, AND ERCOT, THE, THE THEORY UNDERLYING THE ERCOT MARKET IS, UH, BEING AN ENERGY ONLY MARKET, IS THAT, THAT WE PLACE A HIGH PREMIUM ON PRICING SHORTAGES EFFICIENTLY AND ACCURATELY, BECAUSE THAT IS THE PRIMARY INCENTIVE FOR, FOR PEOPLE TO BUILD DISPATCHABLE RESOURCES TO MAINTAIN THEM AND NOT RETIRE THEM, AND TO, UM, TO MAKE SURE THAT THEY'RE AVAILABLE WHEN WE REALLY NEED THEM.
AND SO IN 2022, YOU CAN SEE LARGELY BECAUSE OF THE, THE SHORTAGES THAT HAPPENED IN JULY, UH, OUR PEAKER NET MARGIN WAS, WAS 170,000, AND THAT'S SIGNIFICANTLY HIGHER THAN WHAT AN INVESTOR WOULD NEED TO MAKE TO BREAK EVEN ON, ON BUILDING A NEW NATURAL GAS PEAKER.
BUT IN, IN 2023, THE, BECAUSE OF THE, THE PRICING THAT I SHOWED YOU ON THE, THE LAST CHART, THE PEAKER NET MARGIN NOW STANDS ABOVE $250,000 A, UM, 200, $250,000.
AND THE, THE ANNUALIZED COST, THE COST IT WOULD TAKE TO RE TO, UM, TO BREAK EVEN ON AN INVESTMENT IN A NEW PEAKER IS ABOUT 105,000.
SO WE'RE APPROACHING BY THE END OF THE YEAR, UM, THREE TIMES THE COST OF BUILDING A NEW PEAKER.
SO WE'RE, WE'RE CLEARLY SENDING VERY, VERY STRONG INCENTIVES TO, TO BUILD NEW DISPATCHABLE RESOURCES AND OTHER, OTHER RESOURCES THAT CAN PREDICTABLY BE AVAILABLE DURING SHORTAGE CONDITIONS.
UH, MOST NOTABLY, UH, ENERGY STORAGE RESOURCES DO VERY, VERY WELL WHEN, WHEN SHORTAGES ARE FREQUENT.
UM, AND WE'VE SEEN A, AN INCREDIBLY RAPID DEVELOPMENT OF ENERGY STORAGE IN TEXAS AS WELL.
SO ON ITS FACE, THAT'S A GOOD THING BECAUSE WE DEFINITELY, ONE OF THE OBJECTIVES OF THIS MARKET IS TO MOTIVATE INVESTMENT IN DISPATCHABLE RESOURCES THAT CAN COMPLEMENT THE, THE RAPID RISE IN INTERMITTENT RESOURCES.
BUT IT'S ALSO INCREDIBLY IMPORTANT THAT THE, THE PRICES THAT WE'RE GENERATING BE FUNDAMENTALLY SOUND, UM, AND THAT WE, WE SEND STRONG SIGNALS TO BUILD GENERATION, UM, WHEN IT'S ACTUALLY NEEDED.
AND ONE LAST SLIDE, JUST GIVING A, AN OVERVIEW OF KIND OF THE DIFFERENCES BETWEEN 2022 AND 2023.
THESE ARE ACTUALLY RESULTS THAT THAT ERCOT PRESENTED AS WELL IN, IN THEIR REVIEW OF THE SUMMER.
UM, AND I THINK THAT SURPRISED A LOT OF PEOPLE BECAUSE, BECAUSE THE SUMMER WAS SO HOT, UH, RESERVE LEVELS WERE ACTUALLY SIGNIFICANTLY HIGHER IN 2023 THAN THEY WERE IN 2022, UM,
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ON AVERAGE, UH, EVEN EVEN IN THE HOTTEST MONTHS OF, UH, JUNE AND AUGUST AND EARLY SEPTEMBER.SO THAT WOULD SUGGEST THAT PRICES ACTUALLY SHOULD HAVE BEEN LOWER IN 2023 RATHER THAN HIGHER.
UM, AND THAT, THAT'S GONNA SEGUE US INTO A DISCUSSION OF, OF ECRS AND KIND OF THE, THE IMPORTANCE OF THE ANCILLARY SERVICE PROCUREMENTS TO THE PERFORMANCE, PARTICULARLY OF THE ERCOT MARKET.
UM, THE, AND I, I FEEL LIKE AT THIS POINT, I START TO LOSE PEOPLE BECAUSE WHEN YOU START TO TALK ABOUT PROCURING ANCILLARY SERVICES, IT, IT FEELS LIKE YOU'RE, YOU'RE MOVING OFF INTO A NICHE PRODUCT AND, AND IN QUANTITY IT IS A PRETTY SMALL PRODUCT IN COMPARISON TO ENERGY.
UM, SO I'M GONNA TRY TO, TO LINK BACK WHY THE ANCILLARY SERVICE PROCUREMENTS, ESPECIALLY IN ERCOT, UH, ARE SO IMPORTANT AND SUCH AN IMPORTANT DRIVER OF THE PRICE FOR EVERYTHING IN ERCOT.
ALL RIGHT, SO I WANNA GIVE YOU A SENSE OF, OF WHAT MAKES ERCOT DIFFERENT FROM, UH, AN ANCILLARY SERVICE PROCUREMENT.
SO THESE ARE LARGELY OPERATING RESERVES, UH, VERSUS OTHER MARKETS.
SO WE MONITOR, UM, WE'RE THE INDEPENDENT MONITOR FOR MISO, NEW YORK AND NEW ENGLAND.
AND WE HAVE BEEN SINCE, UH, AROUND THE YEAR 2000.
SO WE'VE, WE'VE MONITORED EACH OF THESE MARKETS, MARKETS INCLUDING ERCOT FROM THE, FROM THE INCEPTION OF THE MARKET.
AND SO WE HAVE A LONG HISTORY OF MONITORING NOT ONLY THE PERFORMANCE OF THE MARKET, BUT BUT HOW THE MARKETS ARE OPERATED, HOW THE RESERVES ARE UTILIZED AND OPERATIONS.
UM, AND SO WHAT I'M SHOWING YOU ON THI ON THIS FIGURE IS A COMPARISON OF THE 10 MINUTE AND 30 MINUTE RESERVE QUANTITIES THAT ARE PURCHASED BY ERCOT BEFORE YURI AFTER YURI, AND THEN AFTER THE IMPLEMENTATION OF ECRS.
UM, AND THEN I SHOW 2022 FOR EACH OF THE OTHER MARKETS TO GIVE YOU SORT OF A, A BENCHMARK OF, OF HOW THEY OPERATE.
NOW, UM, IF YOU THINK ABOUT WHAT THE, HOW THESE RESERVES ARE USED, THEY'RE, THEY'RE USED IN VERY SIMILAR WAYS IN ALL OF THE MARKETS.
I WOULD SAY ERCOT IS A LITTLE BIT DIFFERENT WITH REGARD TO HOW IT, IT IS USING 10 MINUTE RESERVES NOW.
UH, BUT HISTORICALLY THE 10 MINUTE RESERVES IN ERCOT AND THE OTHER MARKETS WERE, WERE PRETTY SIMILAR IN THAT THEY WERE LARGELY USED TO RESPOND TO CONTINGENCIES.
SO WHEN A LARGE UNIT, UH, GOES OUT, AND YOU'RE THEREFORE UNDER-PRODUCING THE 10 MINUTE RESERVES GIVE YOU A BANK OF RESOURCES THAT YOU CAN ACCESS VERY, VERY QUICKLY.
AND THAT'S ESPECIALLY IMPORTANT IN ERCOT BECAUSE YOU'RE AN ISLAND.
AND SO IN ERCOT, THE FREQUENCY WILL START DROPPING AND YOU HAVE TO ARREST THAT.
SO WHAT YOU USE PRIMARILY IF YOU LOSE A BIG UNIT AND, AND FREQUENCY STARTS TO DROP, IS, IS REGULATION, WHICH CAN RESPOND IN SECONDS AND, UH, 10 MINUTE RESERVES.
NOW, THE 10 MINUTE RESERVE CLASS YOU'VE ALWAYS HISTORICALLY HAD IS, IS RRS RESPONSIVE RESERVE SERVICE.
UM, NOW YOU HAVE TWO CLASSES OF 10 MINUTE RESERVES, RESPONSIVE RESERVES SERVICE AND ECRS, UH, WHICH IS THE ERCOT CONTINGENCY RESERVE SERVICE.
AND THAT IS A NEW PRODUCT THAT ONLY EXISTED AFTER JUNE OF 2023.
SO YOU CAN SEE BEFORE YURI ERCOT BOUGHT A LITTLE BIT MORE 10 MINUTE RESERVES, AND ABOUT THE SAME AMOUNT OF 30 MINUTE RESERVES.
NOW, 30 MINUTE RESERVES GETS CONFUSING IN ERCOT BECAUSE WE CALL IT NONS SPIN, BUT IT'S ACTUALLY HELD BY A COMBINATION OF UNITS THAT ARE OFFLINE AND ARE ACTUALLY NONS SPIN AND, BUT, BUT OFTEN BY UNITS THAT ARE ONLINE.
UM, SO IT'S MOST ACCURATE PROBABLY TO JUST CALL THAT 30 MINUTE RESERVES AND ALL OTHER RTOS, UM, HAVE 30 MINUTE RESERVES.
NOW, WHAT 30 MINUTE RESERVES TYPICALLY ARE USED TO DO IS TO REPLENISH THE 10 MINUTE RESERVES AFTER SOMETHING HAS HAPPENED.
SO A UNIT TRIPS OFF, YOU ACTIVATE YOUR 10 MINUTE RESERVES, AND NOW THE, YOU WANNA GET YOUR 10 MINUTE RESERVES BACK.
SO YOU, YOU DEPLOY YOUR 30 MINUTE RESERVES AND THE 10 MINUTE RESERVES WILL COME BACK.
AND THEN MAYBE IN THE BACKGROUND YOU COMMIT SOME UNITS TO REPLENISH THE 10, THE 30 MINUTE RESERVES.
AND OFTEN YOU DON'T HAVE TO REPLENISH THE 10 MINUTE RESERVES.
OFTEN YOU MAY HAVE HEAD ROOM ON GENERATORS THAT ARE ALREADY RUNNING.
AND SO WHEN THE DISPATCH CATCHES UP AND MOVES ALL THE UNITS THAT, THAT HAVE HEADROOM, THEN THAT
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WILL ALSO RESTORE YOUR 10 MINUTE RESERVES.NOW, THERE'S ONE THING THAT MAKES ERCOT VERY DIFFERENT THAN ANY OF THESE OTHER MARKETS, AND THAT IS THAT YOU DON'T HAVE CO-OP OPTIMIZATION.
IT'S THE MOST IMPORTANT THING YOU CAN IMPLEMENT.
IN FACT, WHEN I TESTIFIED IN THE ERCOT NODAL CASE BEFORE YOU IMPLEMENTED YOUR MARKET, IT WAS OUR NUM MY NUMBER ONE RECOMMENDATION BECAUSE IT'S INCREDIBLY IMPORTANT.
NOW, WHY THAT'S IMPORTANT IS THAT WHEN YOU JOINTLY OPTIMIZE THE DISPATCH AND SCHEDULING OF ENERGY AND OPERATING RESERVES, THE DISPATCH HAS ACCESS TO EVERYTHING ON THE SYSTEM, AND YOU'RE NEVER GONNA SEE A SHORTAGE.
THAT'S NOT A LEGITIMATE SHORTAGE BECAUSE THE DISPATCH MODEL IS ACCESSING EVERY MEGAWATT AND IT'S OPTIMIZING EVERY MEGAWATTS.
SO LET'S SAY YOU HAVE A RESERVE BEHIND A CONSTRAINT THAT YOU NEED TO RAMP UP TO LOWER THE FLOW ON THE CONSTRAINT, THE DISPATCH CAN DO THAT AND MOVE THE RESERVE EFFECTIVELY SOMEWHERE ELSE.
UM, IN ERCOT YOU DON'T HAVE THAT.
AND, AND THAT IS THE NATURE OF THE PROBLEM HERE WITH ECRS.
THE 10 MINUTE RESERVES ARE QUARANTINED OFF FROM THE REAL TIME MARKET BECAUSE YOU DON'T HAVE CO-OP OPTIMIZATION.
THE 30 MINUTE RESERVES ARE EFFECTIVELY NOT QUARANTINED OFF.
SO WHEN YOU, IN 2022, WHEN YOU BOUGHT A VERY LARGE AMOUNT OF 30 MINUTE RESERVES, IT DIDN'T HAVE THE, THE SAME POTENTIAL IMPACT ON THE REAL-TIME MARKET AS THE ECRS DOES BECAUSE THOSE MEGAWATTS WERE AVAILABLE TO THE MARKET.
BUT YOU CAN SEE IN 2023, WE WENT TO A WHOLE NOTHER LEVEL IN TERMS OF BUYING TENEMENT, TENEMENT, 10 MINUTE RESERVES THAT DWARF ANY, WHAT ANY OTHER MARKET BUYS.
UM, AND AT THE, AND AT THE SAME TIME THAT WE'RE BUYING THIS VERY HIGH QUANTITY, UM, WE QUARANTINE THEM OFF FROM THE REAL TIME MARKET SO THAT IT, IT EXPOSES THE MARKET TO THE DISPATCH TO BELIEVING THAT IT'S SHORT WHEN IT'S NOT ACTUALLY SHORT.
AND THAT IS THE PROBLEM THAT WE SAW IN 2023.
DOES THAT MAKE SENSE SO FAR? OKAY.
CAN I ASK YOU A QUESTION? I WOULD LOVE TO TAKE
UM, HOW THE DATA IS PRESENTED WITHOUT ANY REFERENCE TO THE LOAD ON THE SYSTEM, AND IT CHANGES YEAR OVER YEAR AS WELL AS THE MIX OF THE SYSTEM.
DID, ARE YOU GONNA ADDRESS THAT LATER? UM, NO.
THE TWO THINGS, SO THE, THE PRICES, UM, LIKE YOU DON'T HAVE TO KNOW THE LOAD TO, TO EVALUATE WHETHER THE PRICES ARE EFFICIENT.
WHAT YOU REALLY NEED TO TO SEE IS THE RESERVE MARGIN AND THE RESERVE MARGIN IS GENERALLY GOING TO FALL WHEN LOAD GETS REALLY HIGH.
WE, WHEN WE START TO HAVE DIFFICULTY, UH, MEETING THE NEEDS OF THE SYSTEM, BOTH ENERGY, THE LOAD AND OPERATING RESERVES, THEN THEN, THEN WHAT HAPPENS IS WE START TO FIND IT DIFFICULT TO MAINTAIN THE AMOUNT OF OPERATING RESERVES WE NEED, AND THE RESERVE LEVELS WILL FALL, AND YOU'LL START MOVING UP THE ORDC CURVE AND START INCURRING THE, THE ADDERS.
SO THAT'S, THAT'S THE MOST DIRECT MEASURE OF HOW TIGHT THE MARKET IS, IS THE RESERVE LEVELS.
NOW, IF, AND, AND, BECAUSE, YOU KNOW, I WOULD'VE BEEN HAPPY TO SHOW SOME RESERVE, UH, SOME LOAD NUMBERS, BUT, BUT I WANNA MAKE SURE WE, WE, I COULD FIT MYSELF WITHIN THE 30 MINUTE TIMEFRAME, BUT WHEN YOU WOULD LOOK AT THE LOAD IS IF YOU WANNA UNDERSTAND WHY THE RESERVES ARE RESERVE LEVELS ARE SO LOW IN A PARTICULAR PERIOD, THEN YOU WOULD, YOU WOULD LOOK AT THINGS LIKE THE NET LOAD, AND IF YOU WANNA UNDERSTAND WHY THAT'S HIGH, YOU WOULD LOOK AT WIND OUTPUT, SOLAR OUTPUT, UM, AND, AND THE LOAD.
UM, AND I THINK A LOT OF THAT INFORMATION IS IN, IS IN ERCOT SUMMER REVIEW.
SO THAT'S, IT'S, UH, USE USEFUL TO LOOK AT THAT.
AND SUMMER 22 IS VERY DIFFERENT THAN SUMMER 23.
THAT'S WHY I WAS ASKING HOW YOU TAKE THAT INTO ACCOUNT.
YEAH, IT'S AN INTERESTING, YOU KNOW, SUMMER 23 COULD HAVE BEEN A, A DISASTROUS SUMMER.
UM, BUT WE HAD A, A REMARKABLE INCREASE IN STORAGE AND SOLAR THAT WAS UNDERWAY FROM 2021 TO 2023 THAT, SO WE SAW A LARGE INCREASE IN LOAD, BUT, BUT THAT LARGE INCREASE IN LOAD THAT WAS OCCURRING IN THE, IN THE MIDDLE OF THE AFTERNOON, IN THE, IN THE SUMMER HOURS, WAS LARGELY BEING
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MET BY, BY THE INCREMENTAL INCREASE, WAS LARGELY BEING MET BY AN ENORMOUS OUTPUT FROM OUR SOLAR RESOURCES.UM, AND IT, IT SORT OF CHANGED THE WHOLE DYNAMIC OF LIKE WHERE YOUR RELIABILITY RISKS ARE, BECAUSE I THINK MOST OF THE RELIABILITY RISKS THEN HAPPEN AS THE, AS THE SUN IS GOING DOWN AND YOU START TO LOSE THE SOLAR AND THEN THE, THE NET LOAD INCREASES.
SO THOSE ARE, THOSE ARE THINGS THAT WE'RE GONNA HAVE TO CONFRONT, LIKE HOW TO MANAGE THE RAMP AS THE SUN GOES DOWN.
AND, UM, YEAH, THOSE ARE GONNA BE REALLY USEFUL THINGS TO TALK ABOUT, WHAT WE CAN DO TO, TO BETTER MANAGE THAT.
DR. PATTON, IN THE CURRENT SLIDE YOU HAVE UP, YOU HAVE THE OTHER ISOS, WHICH IS GREAT.
HOW MUCH ANCILLARY WE HAVE IN TEXAS IS DIRECTLY CORRELATED A LOT TO THE FACT THAT WE HAVE SO MUCH MORE SOLAR AND WIND THAN OTHER ISOS.
IS THAT TRUE? UH, NI WOULD SAY LARGELY NO.
IT'S TRUE TO A, A LIMITED EXTENT.
AND WE'RE GONNA TALK ABOUT A, A RELIABILITY ANALYSIS THAT, THAT WE DID, THAT WE WOULD LIKE TO BE A DRIVER FOR THE ANCILLARY SERVICE PROCUREMENTS.
UM, THE, SO YOU BUY YOUR 10 MINUTE RESERVES TO ADDRESS UNCERTAINTY ON THE SYSTEM, AND THE BIGGEST UNCERTAINTIES ON THE SYSTEM USUALLY ARE, ARE LARGE FOUR STATUSES.
AND SO YOU CAN TAKE THAT AS A, AS A STARTING POINT.
AND THEN THE OTHER UNCERTAINTIES THAT YOU HAVE ARE THINGS LIKE, UH, FORECAST ERROR FOR WIND SOLAR LOAD.
AND AS YOU GET MORE INTERMITTENT, YOUR FORECAST ERROR THAT YOU MAY BE FACING GOES UP.
AND SO TO AN EXTENT, YES, IT, IT DRIVES AN INCREASE IN, UH, A, I WOULD SAY A MARGINAL INCREASE, BUT, UM, BUT NOT THE, NOT THE KIND OF INCREASE YOU'RE SEEING ON THIS FIGURE.
AND SO THE TWO THINGS THAT THAT CAUSE YOU TO BUY MORE 10 MINUTE RESERVES IN ERCO ARE ONE THAT YOU'RE AN ISLAND AND, AND YOU'RE EXPOSED TO THE RISK OF FREQUENCY DROP MORE SO THAN, THAN THE RTOS THAT ARE IN THE EASTERN INTERCONNECT THAT CAN EFFECTIVELY, WELL, I DON'T KNOW THAT I WANNA SAY THESE WORDS, BUT CAN EFFECTIVELY LEAN ON THE EASTERN INTERCONNECTIVE, UH, FOR A FEW MINUTES AS THEY RECOVER, WHICH YOU DON'T HAVE THE LUXURY TO DO.
UM, AND THEN THE, THE, AS AS WE GET MORE INTERMITTENT, IT, IT WILL BE IMPORTANT TO FOLD THAT, THAT FORECAST UNCERTAINTY INTO THE, YOU KNOW, INTO THE PROCUREMENT METHODOLOGY.
BUT, UH, WELL, I'M ABOUT TO TALK ABOUT THIS, SO I'LL JUST, I'LL JUST TALK ABOUT IT NOW.
SO THE WAY, THE WAY YOU SHOULD THINK ABOUT, UH, RELIABILITY AND HOW MUCH ANCILLARY SERVICES YOU NEED IS YOU'RE, YOU'RE TRYING TO MANAGE RE RELIABILITY RISK, RIGHT? AND WHEN YOU'RE IN THE CONTROL ROOM, THE, THERE'S LOTS OF THINGS THAT CAN HAPPEN THAT WOULD, UH, CAUSE YOUR SUPPLY TO DROP.
AND SO SOME OF THE THINGS THAT CAN HAPPEN IS UNITS CAN TRIP OFFLINE.
SO THAT'S ONE OF THE RANDOM FACTORS YOU'RE TRYING TO ACCOUNT FOR HERE IS, IS CONTINGENCIES ON GENERATING UNITS.
THE OTHER THING THAT CAN HAPPEN IS, IS YOU COULD HAVE OVER FORECASTED THE INTERMITTENT, LIKE, AND WE'VE SEEN THIS IN MISO QUITE A BIT, IS IT, IT'S NOT SO MUCH A PROBLEM WHEN THEY'RE PRODUCING A LOT BECAUSE THEY'RE RELATIVELY FLAT.
IT'S MORE OF THE TIMING WHEN THEY'RE GOING TO CHANGE THAT, THAT IS THE RISK FOR INTERMITTENT.
SO, SO WE'LL, WE'LL SEE CASES WHERE MISO HAS FORECASTED, BUT THE WIND IS GONNA DROP BY THREE GIGAWATTS AT A CERTAIN TIME, AND THEN IT, IT DROPS 30 MINUTES EARLIER THAN THEY FORECASTED, AND NOW THEY'RE SITTING THERE SHORT BY THREE GIGAWATTS OR THE, THEY'VE NOT PREPARED TO RAMP AT THAT AT THAT POINT IN TIME.
AND I WOULD SAY WIND IS, IS A MORE DIFFICULT, UH, WIND PRESENTS MORE CHALLENGING FORECAST, UH, ISSUES THAN SOLAR DOES GENERALLY.
UM, SOLAR, YOU HAVE CLOUD COVER, BUT, BUT, UM, SO, SO THAT'S, THOSE ARE TWO UNCERTAINTIES THAT MATTER.
THE LOAD UNCERTAINTY IS A BIG DEAL.
UM, TRANSMISSION CAN, CAN CREATE UNCERTAINTY.
YOU SAW ON SEPTEMBER 6TH, LARGELY THE, THE REASON WE ADD AN E, EA ON SEPTEMBER 6TH IS WE HAD TRANSMISSION ISSUES THAT RESULTED IN THE OPERATORS CURTAILING A LARGE QUANTITY OF ENERGY THAT THEN PROMPTED US TO BE SHORT.
AND SO YOU CAN THINK OF TRANSMISSION AS BEING AN UNCERTAINTY.
SO THESE THINGS, YOU CAN, YOU CAN MODEL, UH, IN A RELIABILITY MODEL,
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MODEL THE PROBABILITY AT DIFFERENT LEVELS OF RESERVES, WHETHER YOU'RE EXPOSED TO A LOSS OF LOAD EVENT.AND BY DOING THAT SORT OF MODELING, MODELING EACH OF THESE RANDOM FACTORS, YOU CAN DETERMINE HOW MANY, HOW MUCH RESERVES YOU NEED TO, TO DRIVE THAT PROBABILITY OF HAVING A LOSS OF LOAD EVENT DOWN TO A VERY, VERY, VERY LOW LEVEL.
UM, AND ULTIMATELY YOU'LL SEE IN THE RECOMMENDATIONS THAT'S, THAT'S OUR NUMBER ONE RECOMMENDATION THAT ERCO USE SUCH A MODEL TO, TO DETERMINE HOW MUCH 10 MINUTE RESERVES THEY NEED TO PROCURE IN ORDER TO, UM, TO GET THE RELIABILITY RISK AT DOWN TO A VERY LOW LEVEL, WHATEVER THAT LOW LEVEL IS.
AND THEN STOP BUYING AT THAT POINT BECAUSE THE ADDITIONAL MEGAWATTS YOU BUY, PARTICULARLY WITHOUT CO-OP OPTIMIZATION, JUST REMOVES VALUABLE RESOURCES FROM THE MARKET.
SO I'LL GIVE YOU A SENSE OF WHAT THIS LOOKS LIKE IN, IN A CO OPTIMIZ MARKET.
SO THIS IS WHAT, IF YOU DID THAT SORT OF ANALYSIS THAT I JUST DESCRIBED, THIS IS WHAT 10 MINUTE RESERVES WOULD LOOK LIKE, IN MISO.
SO THEY GENERALLY BUY 2000 MEGAWATTS, SO LESS THAN HALF OF, OF WHAT ERCOT BUYS AND, AND THE LAST MEGAWATT THEY, THEY BUY IS WORTH ABOUT $500 A MEGAWATT HOUR.
IF YOU VALUE LOAD, UM, LOAD SHED AT $20,000 A MEGAWATT HOUR.
NOW THAT, THAT, THAT INFORMS HOW MUCH THEY BUY BECAUSE THEY COULD CONTINUE TO BUY MORE.
IT'S JUST EVERY MEGAWATT YOU BUY BECOMES LESS AND LESS VALUABLE BECAUSE THE, THE, YOU'RE PROTECTING YOURSELVES AGAINST LESS AND LESS LIKELY CONTINGENCIES OR UNCERTAINTIES.
UM, NOW YOU DON'T HAVE THE LUXURY OF ADOPTING SOMETHING LIKE THIS BECAUSE YOU CAN ONLY ADOPT THIS IN A CO OPTIMIZED MARKET WHERE YOU TELL THE MARKET LIKE, I WANT YOU TO BUY 2000 AT $500, BUT IF THE SYSTEM GETS TIGHT AND IT WOULD COST YOU $2,000, THEN, THEN, UH, ONLY SCHEDULE OR PROCURE, IN THIS CASE, 1300 MEGAWATTS.
UM, SO IT ALLOWS YOU TO SYNC UP WHAT THE MARKET PROCURES WITH, WHAT THE VALUE OF THOSE RESOURCES ARE.
SO WE, SO WE RAN THAT SORT OF ANALYSIS ON THE ECRS PROCUREMENTS IN, IN, UM, ERCOT.
AND PART OF THIS WAS PROMPTED BY THE QUESTIONS THAT KERRY GOT IN OCTOBER RELATED TO WHETHER WE'RE BUYING ECRS TO PROTECT AGAINST A LOSS OF LOAD EVENT.
AND WE NEED TO FACTOR THAT IN.
UM, AND SO WHAT YOU'RE SEEING HERE IS, SO EVEN WITHOUT ECRS, ERCO IS BUYING A LOT OF 10 MINUTE RESERVES.
AND SO WHAT, WHAT YOU'RE LOOKING AT HERE IS WHAT IS, WHAT IS THE FIRST TRANCHE OR THE FIRST, UM, FEW MEGAWATTS OF ECRS, WHAT IS THAT WORTH TO US? WHAT'S IT PROTECTING US AGAINST? AND THAT'S THE BLUE LINE UP HERE.
IT'S PROTECTING YOU AGAINST LOSS OF LOAD EVENTS THAT HAVE A PROBABILITY THAT BOUNCE BETWEEN ZERO AND GENERALLY TWO TENTHS OF 1%.
YOU KNOW, WE, WE SAW DURING YURI THAT A LOSS LOAD EVENT IS, IS INCREDIBLY, UH, HARMFUL AND, AND SHOULD BE AVOIDED.
SO YOU ARE GETTING SOME VALUE OUT OF THE, THE FIRST GROUPING OF MEGAWATTS THAT YOU BUY.
BUT BY THE TIME YOU GET TO THE, THE FINAL TRANCHE OF ECRS PROCUREMENTS, THE, THE VALUE OF THOSE MEGAWATTS IS EFFECTIVELY ZERO.
LIKE WE'RE BUYING SO MANY THAT THE MODEL CAN'T FIND EVENTS THAT COULD HAVE OCCURRED ON THESE DAYS, UM, THAT THOSE MEGAWATTS WOULD HAVE PREVENTED.
NOW WHAT WE'RE LOOKING AT HERE IS, IS THE WORST, THE WORST PERIOD ON EACH OF THESE DAYS.
SO WE LOOKED AT ALL THE PEAK HOURS AND THEN WE PICKED OUT THE, THE HIGHEST LOSS OF LOAD PROBABILITY THAT WE COULD FIND ON DURING THE PEAK HOURS ON THOSE DAYS, UM, INCLUDING, INCLUDING THE HOURS WHEN THE SUN HAS GONE DOWN, WHEN NET LOAD IS PEAKING.
AND THEN WE, WE VALUED THE ECRS BASED ON A $20,000 VALUE OF LOST LOAD.
AND BY THE WAY, AS AN ASIDE, THE VALUE OF LOST LOAD IN ERCOT IS, IS PRETTY HIGH.
I THINK ONE OF THE CONFUSING THINGS ABOUT TALKING TO PEOPLE
[02:20:01]
ABOUT MARKETS MARKET PERFORMANCE IN ERCOT IS PEOPLE BELIEVE THAT THE TOP OF THE ORDC IS THE VALUE OF LOST LOAD, BUT IT'S, IT'S REALLY NOT.UM, THE WAY YOU CAN FIGURE OUT WHAT THE VALUE OF LOST LOAD IS, IS IF YOU TOOK ERCO T'S ORDC AND YOU SAID, OKAY, IT GETS TO A THOUSAND DOLLARS AT, LET'S SAY 5,000 MEGAWATTS OF RESERVES, LET'S SAY, SOMEWHERE AROUND THERE.
AND THEN YOU CALCULATED, OKAY, WHAT'S THE, WHAT'S THE LOSS OF LOAD PROBABILITY AT THAT POINT? SO IF I TOOK $5,000 AND DIVIDED BY THE LOSS OF LOAD PROBABILITY, IT'S PROBABLY ABOUT 10%.
THEN YOU WOULD FIND THAT THE ERCOT LOSS OF LOAD PROBABILITY OR VALUE OF LOSS LOAD IMPLIED BY THE ORDC IS SOMETHING LIKE $50,000 A MEGAWATT HOUR.
SO WE PLACE A HIGH PREMIUM IN HOW WE'VE CONSTRUCTED THE ORDC.
WE PLACE A VERY HIGH PREMIUM ON KEEPING THE LIGHTS ON, AND I DON'T THINK THAT'S INAPPROPRIATE.
I THINK MOST OF THE RTOS HAVE ASSUMED VALUE OF LOSS LOADS THAT ARE, THAT ARE MUCH TOO LOW.
OKAY? SO WE ASSUMED A $20,000 VALUE OF LOSS LOAD AND, AND THEN CALCULATED LIKE, WHAT IS THE ECRS WORTH BASED ON AVOIDING, UH, THE SMALL PROBABILITY OF HAVING A LOSS OF LOAD EVENT THAT WOULD'VE COST $20,000, UM, PER MEGAWATT HOUR.
AND, AND WE FIND THAT THE VALUE OF ECRS WAS ABOUT $12 MILLION FROM JUNE THROUGH THE END OF AUGUST.
AND WHAT WE PAID FOR THE ECRS WAS $608 MILLION, SO ABOUT 50 TIMES HIGHER.
UM, NOW A LOT OF THAT IS DUE TO, AND, AND THAT NUMBER, BY THE WAY, THE $600 MILLION NUMBER IS WHAT IT COSTS US TO BUY THE ECRS.
IT HAS NOTHING TO DO WITH THE $12 BILLION NUMBER THAT YOU'VE HEARD, AND THAT I'LL TALK A LITTLE BIT ABOUT.
PART OF THE REASON THAT NUMBER IS SO BIG IS THAT WE'RE BUYING SO MUCH OF THIS, AND WE ARE, OUR SUPPLY OF 10 MINUTE RESERVES IS JUST NOT THAT VAST.
AND SO THE MORE YOU BUY, THE TIGHTER THAT THAT PROCUREMENT MARKET IS GOING TO BE, THE HIGHER THE PRICE IS GOING TO BE, UM, AND THE MORE IT'S GOING TO COST DR. PATTON, WE'RE GONNA HAVE TO MOVE, MOVE ON AS QUICKLY AS WE CAN TO GET, UH, THE ERCOT VIEWPOINT.
BUT THIS PRESENTATION IS FABULOUS.
SO I'M, I'M PRETTY CLOSE TO THE END.
UM, AND I, SORRY, I'VE BEEN GOING A LITTLE BIT SLOW BECAUSE I, THESE ARE COMPLICATED ISSUES AND PEOPLE TENDED TO GET CONFUSED WHEN, WHEN THEY HEAR THEM REPORTED ON.
UM, SO I THINK THIS IS THE LAST YEAH, NO, YOU'RE DOING, YOU'RE DOING AN EXCELLENT JOB GOING THROUGH IT.
SO THIS, THIS IS THE LAST FIGURE THAT SHOWS, UM, THAT IS REALLY ULTIMATELY WHERE THE, THE $12 BILLION, 12 AND A HALF BILLION DOLLARS NUMBER COMES FROM THAT YOU'VE HEARD ABOUT.
UM, SO WE SIMULATED WHAT WOULD IT HAVE LOOKED LIKE IF, IF ERCOT MADE THOSE QUARANTINED MEGAWATTS, MOST OF THEM, NOT ALL OF THEM, UM, AVAILABLE TO THE, THE REAL TIME MARKET.
WHAT WOULD THE PRICE HAVE BEEN? AND WE, WE RAN SIMULATIONS TO CALCULATE THAT.
AND, AND WHAT YOU GET IS THE, THE GREEN DIAMONDS HERE.
SO YOU CAN THINK OF THE GREEN DIAMONDS AS BEING AN EFFICIENT ENERGY PRICE, AVERAGE ENERGY PRICE IN EACH OF THESE MONTHS.
AND THE RED IS WHAT WE ACTUALLY SAW WITH THE, UM, WITH THOSE RESOURCES BEING HELD OUT AND, AND THE SHORTAGES THAT WE ENDED UP SEEING, UH, BECAUSE OF THAT.
SO, AND THEN THE, SO WHAT WE'RE SAYING BASICALLY IS THE, THE, THE PRICES WERE NOT CLOSE TO BEING EFFICIENT IN, ESPECIALLY IN JUNE, AUGUST AND SEPTEMBER BECAUSE OF THE ECRS IMPLEMENTATION.
UH, PRICES IN AUGUST, FOR EXAMPLE, WERE MORE THAN DOUBLE WHAT THEY, WHAT AN EFFICIENT PRICE WOULD'VE BEEN IN THAT MONTH.
UM, NOW IF YOU TAKE THAT PRICE AND, AND YOU EVALUATE THE, THE TOTAL NUMBER OF MEGAWATTS LOAD AND GENERATION, UH, IN THE REALTIME MARKET, THAT PRICE INCREASE HAS A VALUE OF 12.5 BILLION.
AND SO THIS IS WHERE I THINK THE MISUNDERSTANDINGS HAVE COME.
SOME, SOME PEOPLE BELIEVE THE 12 AND A HALF BILLION IS ALMOST IRRELEVANT, AND SOME PEOPLE BELIEVE THE 12 AND A HALF BILLION IS, IS SORT OF THE MARKET ARMIN.
IT'S, IT'S NEITHER ONE OF THOSE.
UM, THE, NOW I WILL SAY THE MOST IMPORTANT PRICE IN THIS MARKET IS THIS PRICE.
THIS PRICE IS THE ONE PRICE THAT HAS TO BE RIGHT, BECAUSE THIS PRICE DRIVES EVERYTHING ELSE.
[02:25:01]
IT DRIVES THE PRICE IN THE DAY AHEAD.SO YOU CAN'T PROTECT YOURSELF AGAINST THIS COST BY BUYING IN THE DAY AHEAD MARKET.
THE DAY AHEAD MARKET PRICE WILL GO UP WITH THIS PRICE, UM, AND IT DRIVES THE FORWARD PRICES.
NOW, THE REALITY IS A LOT OF THE, A LOT OF THE LOAD IS PURCHASING FROM SUPPLIERS WHO, WHO BOUGHT THEIR SUPPLY AHEAD OF TIME.
THEY'RE BILATERAL CONTRACTS AND OTHER, OTHER ARRANGEMENTS, AND THOSE DON'T IMMEDIATELY, THOSE DO PROTECT CONSUMERS IN THE VERY SHORT TERM AGAINST THE, THIS COST.
UM, I THINK PABLO SAID SOMETHING LIKE MAYBE 90% OF THE LOAD IS COVERED BY HEDGES.
SO THAT WOULD SUGGEST MAYBE CONSUMERS SAW WOULD SEE $1.2 BILLION OF THIS COST IN THE VERY SHORT TERM.
THE PROBLEM IS, OVER TIME, THEY'RE GONNA SEE ALL OF THE COST OR MOST OF THE COST AS THOSE HEDGES EXPIRE AND HAVE TO BE RENEWED.
THE BILATERAL CONTRACTS THAT, THAT THE FOLKS SERVING LOAD ARE GONNA HAVE TO SIGN ARE GONNA BE MUCH, MUCH MORE EXPENSIVE.
IF YOU LOOK AT THE FORWARDS FOR 2024, SUMMER BEFORE WE IMPLEMENTED ECRS TO AFTER WE IMPLEMENTED ECRS AND PEOPLE SAW WHAT HAPPENED THIS SUMMER, THE FORWARD PRICES WENT UP 67%.
SO THAT SUGGESTS THAT, THAT AS SOME OF THOSE HEDGES EXPIRE AND THEY GET RESIGNED, THEY'RE GONNA, THEY'RE GONNA BE RESIGNED AT MUCH, MUCH HIGHER COST.
NOW, THE GOOD NEWS, AND THERE IS GOOD NEWS HERE, THIS IS NOT HARD TO FIX.
AND IF WE FIX IT, THEN THESE COSTS DON'T.
AND, AND THE MARKET PERCEIVES THAT THIS HAS BEEN FIXED SO THAT WE'RE NOT GONNA SEE ARTIFICIAL SHORTAGES, THEN THESE PRICES WON'T, WON'T EVER END UP IN THE BILLS OF CONSUMERS, UM, LARGELY.
AND SO THE RECOMMENDATIONS FOR THAT WE HAVE FOR, FOR FIXING THIS, UM, I HAVE SOME BULLETS THAT EXPLAIN WHY THIS IS ACTUALLY, THESE ARE ACTUALLY REAL COSTS AND, AND SORT OF REFUTE SOME OF WHAT WAS IN ERCOT STATEMENT ABOUT THESE RESULTS.
UH, BUT I THINK I, I COVERED THOSE.
SO I'M GOING TO SUMMARIZE QUICKLY THE RECOMMENDATIONS THAT WE HAVE, AND I'LL TELL YOU WHERE I THINK WE ARE.
AND WE'VE, I'VE, I'VE HAD SOME CONVERSATIONS WITH ERCOT THAT I THINK ARE ENCOURAGING.
UM, SO JUST QUICKLY TO REPORT ON THAT, THE BEST WAY TO CALCULATE THE AMOUNT OF RESERVES THAT YOU NEED IS TO DO A, A PROBABILISTIC RELIABILITY MODEL WHERE YOU, WHERE YOU MODEL HOW EXPOSED YOU ARE TO ALL THE SOURCES OF UNCERTAINTY, AND THEN ASK YOURSELF, HOW, HOW MANY RESERVES DO I NEED TO BUY TO PROTECT MYSELF AGAINST THAT UNCERTAINTY DOWN TO A REASONABLE LEVEL? I MEAN, OBVIOUSLY WE CAN'T PROTECT OURSELVES AGAINST, AGAINST EVERY RELIABILITY RISK THAT WOULD BE MASSIVELY EXPENSIVE.
UM, BUT IT WOULD ALLOW YOU TO, TO BALANCE COST AND RELIABILITY AND, AND, AND CALCULATE A REASONABLE RESERVE LEVEL.
NOW, THE ANCILLARY SERVICE METHODOLOGY, ONE OF MY CONCERNS ABOUT THAT IS IT, IT, IT USES INDIRECT MEASUREMENTS OF UNCERTAINTY LIKE THE SIX HOUR AHEAD, UM, NET LOAD FORECAST ERROR FOR 30 MINUTE RESERVES AND 30 MINUTE AHEAD NET LOAD FORECAST ERROR, UH, AS DRIVERS OF THE QUANTITY.
AND THE PROBLEM WITH THAT IS, IS THOSE AMOUNTS DON'T TRANSLATE INTO THE RELIABILITY RISKS YOU'RE MANAGING WITH 10 MINUTE RESERVES.
THE FORECAST ERROR THAT CAUSES RELIABILITY PROBLEMS IS THE 10 MINUTE AHEAD FORECAST ERROR.
'CAUSE THE 10 MINUTE AHEAD FORECAST ERROR CAUSES YOUR DISPATCH MODEL NOT TO DISPATCH ENOUGH GENERATION.
THE 10 MINUTE AHEAD FORECAST IS WHAT THE DISPATCH THINKS IT'S TRYING TO, TO, UM, ACCOMMODATE.
AND SO IT'LL SEND OUT DISPATCH SIGNALS TO GENERATORS THAT ARE TOO LOW, AND FREQUENCY WILL START TO DROP, AND THEN YOU'LL DEPLOY REGULATION AND MAYBE RRS, AND THEN YOU NEED TO REPLENISH IT.
SO BY, BY SELECTING A 30 MINUTE AHEAD FORECAST ERROR, YOU GET A BIGGER QUANTITY AND A BIGGER QUANTITY THAT IS NOT RELATED TO THE RELIABILITY RISK YOU'RE TRYING TO MANAGE.
SO I WOULD SAY THE MODEL IS SORT OF A LONGER TERM RECOMMENDATION IN THE SHORT TERM.
A LOT OF THIS CAN BE MITIGATED BY SHORTENING THOSE NET LOAD FORECAST AIR PERIODS FOR 30 MINUTES FROM SIX HOURS TO TWO HOURS, WHICH CORRESPONDS MUCH BETTER TO HOW YOU WOULD USE THE 30 MINUTE RESERVES.
AND FOR THE 10 MINUTE RESERVES SHORTENING THAT FORECAST ERROR, WHICH WOULD LOWER THE QUANTITY THAT ERCOT BUYS A-V-C-R-S BY SOMEWHERE IN THE NEIGHBORHOOD OF SIX TO 800 MEGAWATTS.
AND THAT REDUCTION IN PROCUREMENTS WOULD, WOULD NOT IMPACT RELIABILITY,
[02:30:02]
BUT IT WOULD, IT WOULD BRING A LOT OF THE MEGAWATTS THAT ARE BEING HELD OUT OF THE MARKET BACK IN THE MARKET.NOW, THE REASON WE CARE ABOUT THAT FOR THE, UH, WHAT YOU SAW HAPPEN AT TECH WAS TECH DID NOT APPROVE THIS METHODOLOGY OR DIDN'T ENDORSE IT.
THEY LATER ENDORSED IT AND ASKED ERCOT TO REEVALUATE IT BY APRIL, THE END OF APRIL, THINKING SUMMER WAS THE BIG RISK FOR THESE ARTIFICIAL SHORTAGES.
I ACTUALLY THINK THERE'S A FAIR AMOUNT OF RISK IN THE WINTER WINTERTIME AS WELL, IF WE GET COLD WEATHER, THAT WE COULD SEE PRICE SPIKES THAT, UH, CONTINUE TO GENERATE THE KIND OF COST THAT WE'RE SHOWING, WHICH IS WHY WE'RE RECOMMENDING THAT THAT ERCOT MAKE THAT DISCREET CHANGE IN THE FORECAST CRITERIA FOR THIS WINTER.
NOW, THE, THE OTHER THING YOU CAN DO TO MITIGATE THIS IS DEPLOY ECRS MUCH MORE AGGRESSIVELY.
SO I'VE TOLD YOU ECRS IS HELD OUT OF THE MARKET, AND ERCOT HAS THE OPTION OF MAKING IT AVAILABLE TO THE MARKET, AND GENERALLY WAS CONSERVATIVE, MAKING IT AVAILABLE TO THE MARKET, UM, DURING THE SUMMERTIME.
BUT, UH, WE'VE TALKED TO ERIKA ABOUT POSSIBLE CHANGES IN THEIR PROCEDURES TO MAKE IT AVAILABLE MUCH EARLIER AS THE SYSTEM STARTS TO GET TIGHT, WHICH WOULD, WOULD ALSO HELP MITIGATE THE, THE ARTIFICIAL SHORTAGES.
AND, UM, I'M VERY ENCOURAGED BY, BY THOSE DISCUSSIONS AND, UM, AND I'M GONNA CONTINUE TO TALK TO ERCOT ABOUT THE DIRECTION THEY'RE HEADED.
AND THEN I ALSO AM ENCOURAGED THAT THEY ARE ON BOARD WITH, WITH DOING A REEVALUATION EARLY IN THE YEAR.
AND, AND, YOU KNOW, WE'LL PROVIDE ANY SUPPORT AND ASSISTANCE IN THAT PROCESS THAT I CAN.
SO WHY DON'T I, WHY DON'T I STOP THERE AND SEE IF THERE ARE ANY, ANY QUESTIONS? WELL, WELL, THANK YOU DR. PATTON.
UM, I'M SURE WE'LL BE TALKING MORE ABOUT THIS IN MINUTES, BUT I THINK WHAT WE NEED TO DO NEXT IS GO TO AGENDA
[14. Recommendation regarding 2024 ERCOT Methodologies for Determining Minimum Ancillary Service Requirements]
ITEM 14, WHICH IS THE RECOMMENDATION REGARDING 2024 ERCOT METHODOLOGIES FOR DETERMINING THE MINIMUM ANCILLARY SERVICE REQUIREMENTS.AND THIS IS A COMMITTEE VOTING ITEM ON A RECOMMENDATION TO THE BOARD.
DAN WOODFIN WILL PRESENT THE ERCOT RECOMMENDATION, FOLLOWED BY EMILY JOLLY'S PRESENTATION OF THE TECHNICAL ADVISORY COMMITTEE, ENDORSEMENT OF T'S RECOMMENDATION.
SO DAN, IF YOU CAN PROCEED WITH ERCOT RECOMMENDATION.
SO THE, ONE OF THE THINGS, THE REASONS THAT WE HAVE TO DO THIS EVERY YEAR IS IT'S ACTUALLY A PROTOCOL REQUIREMENT.
WE NEED TO REVIEW THE ANCILLARY SERVICE METHODOLOGY AND UPDATE THAT EVERY YEAR.
AND THEN THERE'S ACTUALLY A REQUIREMENT IN THE PROTOCOL FOR THE BOARD TO REVIEW IT AND APPROVE IT.
AND SO THAT'S REALLY WHAT WE'RE DOING TODAY.
UM, WHAT I WANT TO DO IS I GO THROUGH THIS PRESENTATION.
WE'VE GOT, UM, UH, KIND OF WHAT, WHAT IS THE RECOMMENDATION? SOME SLIDES ON THAT, AND I WANT TO GO WORK THROUGH THOSE.
UH, I SHOULD TELL YOU, YOU KNOW, ANCILLARY, WE'VE BEEN DOING ANCILLARY SERVICES FOR A LONG TIME, AND EVERY YEAR WHEN WE DO THIS PRESENTATION, WE REALLY ONLY TALK ABOUT THE INCREMENTAL CHANGES FROM THE YEAR BEFORE.
BUT WE'VE DONE A LOT OF WORK OVER THE LAST 15 YEARS OR SO.
IF YOU LOOK BACK BEFORE THAT, THE ANCILLARY SERVICES THAT WE BOUGHT OF EACH TYPE WERE A FIXED QUANTITY FOR EVERY HOUR OF THE YEAR.
AND AS WE'VE, THE SYSTEM HAS CHANGED AND WE'VE GOT MORE VARIABILITY AND UNCERTAINTY ON THE SYSTEM, THAT NUMBER WOULD'VE HAD TO GO UP.
BUT INSTEAD OF RAISING IT ACROSS ALL HOURS, WE'VE DONE A LOT OF STATISTICAL ANALYSIS TO SAY, OKAY, THERE'S SOME HOURS THAT YOU NEED MORE TO COVER THOSE RISKS, AND THERE'S OTHER HOURS THAT YOU DON'T NEED AS MUCH.
AND SO THERE, WELL, A LOT OF THESE SLIDES SHOW YOU THE AVERAGE AMOUNTS OVER THE MONTH.
IT VARIES EITHER BY HOUR OR BY FOUR HOUR BLOCKS.
AND WE'VE TRIED TO DO THAT IN A VERY EFFICIENT WAY SO THAT WE'RE ONLY BUYING MORE IN THOSE HOURS WITH THE HIGHER RISK.
AND THEN IF IT'S THE MIDDLE OF THE NIGHT AND IT'S NOT AS RISKY ON LOAD FORECAST OR THOSE KIND OF THINGS, WE DON'T BUY AS MUCH.
AND SO I SHOULD JUST ADD, I WANTED TO ADD THAT BECAUSE THESE SLIDES REALLY ONLY ADDRESS THE KIND OF AVERAGE OVER THE MONTH, HOW MUCH WE'RE BUYING, BUT IT ACTUALLY VARIES MUCH MORE THAN THAT, UM, MUCH MORE EFFICIENTLY.
UM, SO, UM, FOR REGULATION, UM, REGULATION IS REALLY THAT RESPON, THAT RESERVE THAT IS, THAT, UH, RESOURCES PROVIDE, THAT'S MO THAT CHANGES EVERY FOUR SECONDS.
SO RATHER THAN GETTING A DISPATCH SIGNAL EVERY FIVE SEC,
[02:35:01]
FIVE MINUTES, THEY GET A DISPATCH SIGNAL EVERY FOUR SECONDS TO MOVE UP OR DOWN TO MAKE SURE THAT WE MAINTAIN THE FREQUENCY, UH, ON THE SYSTEM.AND, UM, THAT QUANTITY IS REALLY BASED, THE QUANTITY FOR EACH HOUR IS BASED ON HISTORIC ANALYSIS, STATISTICAL ANALYSIS TO SEE WHAT, HOW MUCH, HOW OFTEN DO WE RUN OUT OF REGULATION.
SO IF YOU'RE IN A BIG RAMP UP, YOU MAY BE RUNNING OUT OF OVER THAT FIVE MINUTE INTERVAL, YOU MAY RUN OUT OF REGULATION THAT WOULD CAUSE US THEN TO BUY A LITTLE MORE IN THAT TIME PERIOD IN THE NEXT YEAR.
AND SO WE'VE MADE THOSE ADJUSTMENTS.
THERE'S NO CHANGE TO THE METHODOLOGY.
THE NUM THE NUMBERS ARE CHANGING THIS YEAR, BUT THERE'S NO CHANGE IN THE METHODOLOGY.
AND, AND I SHOULD NOTE IN ALL THESE SLIDES, CARRIE PRESENTED, UH, RECOMMENDATIONS, UH, BACK IN, IN, UH, SEPTEMBER ON CHANGES.
AND SO I'VE ADDRESSED IN EACH OF THESE SLIDES WHAT, WHAT THOSE CHANGES THAT SHE'S RECOMMENDED IN IN SEPTEMBER AND HOW WE'RE ADDRESSING THOSE.
UM, BUT SHE DIDN'T PROPOSE ANY, ANY FOR REGULATION FOR RESPONSIVE RESERVE SERVICE, THAT THAT'S THE, THE, THE RESERVE THAT WE BUY, THAT WHEN THERE'S A UNIT TRIPS ON THE SYSTEM OR SOME BIG DISTURBANCE THAT CAUSES SUPPLY AND DEMAND TO GET OUTTA WHACK.
WE HAVE SOME HEADROOM ON UNITS THAT CAN PICK UP VERY QUICKLY IN ORDER TO KEEP THE FREQUENCY FROM CONTINUING TO GO DOWN.
IT DOESN'T RECOVER FREQUENCY BACK UP TO, TO 60 HERTZ, BUT IT KEEPS IT FROM GOING DOWN.
AND SO THAT'S REALLY THE, THE WHAT RESPONSIVE RESERVE DOES.
THE QUANTITIES ARE, ARE COMPUTED BASED ON HOW MUCH GEN, HOW MUCH HEADROOM DO WE NEED TO HAVE ON GENERATORS FOR EVERY HOUR, TYPICALLY BASED ON THE INERTIA ON THE SYSTEM.
SO IF YOU'VE GOT A, UH, LESS INERTIA ON THE SYSTEM, WE'LL NEED MORE RESPONSIVE RESERVE TO COVER THAT, UM, UH, OF THE SAME SIZE UNIT TRIP.
BUT IF YOU'VE GOT MORE INERTIA ON THE SYSTEM, SAYING YOU'RE IN THE MIDDLE OF THE SUMMER AND ALL THESE GENERATIONS ON, SO YOU'VE GOT A LOT OF INERTIA, YOU MAY NOT NEED AS MUCH RESPONSIVE RESERVE TO COVER THAT, UH, UH, SAME SIZE UNIT TRIP.
AND WE, WE PLAN THIS FOR THE LOSS OF THE, THE TWO NUCLEAR LARGEST NUCLEAR PLANTS.
AND SO WE'RE REALLY, UH, MAKING SURE THAT WE CAN WITHSTAND THAT AND NOT HAVE A, A, A MAJOR PROBLEM.
UM, WHEN WE FIRST IMPLEMENTED, UH, UH, UH, CONSERVATIVE OPERATIONS THAT, THAT, THAT HAVE BEEN TALKED ABOUT, UH, WE ADDED 500 MEGAWATTS TO THE FLOOR.
SO THERE'S A MINIMAL AMOUNT THAT WE BUY OF 2300.
WE ADDED 500 MEGAWATTS, UH, DURING THE SUMMER PEAK HOURS AS PART OF THAT CONSERVATIVE OPERATIONS.
CARRIE RECOMMENDED WE TAKE THAT OUT AND WE AGREE THAT THAT'S THE RIGHT THING TO DO.
AND SO THE MINIMUM WILL DROP DOWN TO 2300, AND THEN IT'LL GO UP FROM THERE DURING THOSE LOWER INERTIA HOURS, UM, AS NEEDED FROM A TECHNICAL PERSPECTIVE.
AND THERE MADE SOME CHANGES THAT FIGURE INTO THIS AS WELL, HOW MUCH WE HAVE TO, HOW QUICKLY WE HAVE TO RESPOND, UH, TO A UNIT TRIP.
AND THEY, UH, WE'RE DOING THAT AS WELL.
SO THAT'S THE CHANGES FROM, FROM LAST YEAR'S AMOUNTS.
NOW, ECRS, UM, LOTS OF DISCUSSION ABOUT ECRS BECAUSE IT WAS NEW LAST YEAR.
UM, ECRS IS REALLY INTENDED TO BE A 10 MINUTE PRODUCT, SO CAPACITY THAT'S OFFLINE OR, OR NOT BEING USED IN THE ENERGY MARKET AND CAN BE USED WITHIN 10 MINUTES.
AND SO IT'S TO COVER IF A UNIT TRIPS AND FREQUENCY GOES DOWN, WE'VE KEPT IT FROM GOING TO THE FLOOR, BUT WE'VE NOW WE'VE GOTTA GET IT BACK UP TO 60 HERTZ UNITS HAVE LOST.
THERE MAY BE GENERATION ONLINE THAT CAN BE USED TO, TO INCREASE ITS OUTPUT AND GET THE, THE FREQUENCY BACK UP, OR WE MAY HAVE TO BRING SOMETHING ON.
AND THAT'S ONE OF THE USES OF ECRS.
AND SO A PORTION OF THE CAPACITY THAT WE BUY IS CALCULATED BASED ON HOW MUCH WOULD WE TYPICALLY NEED TO HAVE AVAILABLE TO MAKE SURE WE CAN GET FREQUENCY BACK UP TO 60 HERTZ FOLLOWING A UNIT TRIP.
THE OTHER PIECE THAT WE BUY IS FOR, TO COVER FORECAST ERRORS AND RAMPS.
AND SO IF YOU'VE GOT A DAY WHEN, UM, LOTS OF GENERA, YOU'VE GOT A CERTAIN AMOUNT OF GENERATION THAT YOU'VE COMMITTED, AND THEN THE SUN STARTS GOING OFF AND INTRA HOUR, THERE'S NOT ENOUGH, UH, CAPACITY COMING ON THAT'S AVAILABLE TO COME ONLINE, THEN WE CAN BRING ON THE ECR RS TO COVER THAT SOLAR DOWN RAMP.
AND THAT'S ESPECIALLY IMPORTANT IF WE'VE GOT LOTS OF DIFFERENT THINGS GOING ON.
I THINK THAT'S ONE OF THE, THE CRITICAL THINGS THAT WE'VE GOT TO CHANGE IS THAT WE'VE GOTTA QUIT LOOKING AT, FROM AN OPERATIONAL RELIABILITY PERSPECTIVE, WE CAN'T LOOK AT HOURLY NUMBERS, SO WE CAN'T DO AN LOLP TYPE STUDY FOR THE AN HOUR BECAUSE, YOU KNOW, WHILE, UH, THE NUMBERS
[02:40:01]
MAY SAY THAT, THAT FROM AN ORDC PERSPECTIVE THIS SUMMER WASN'T AS TIGHT AS LAST SUMMER.THE, UH, AND, AND IT, IT WAS A LITTLE LESS TIGHT FROM AN HOURLY ORDC STANDPOINT INTRA HOUR, BECAUSE THIS YEAR WE HAD SO MUCH MORE SOLAR.
WHEN YOU'RE IN THAT DOWN RAMP, IF YOU'RE SITTING IN THE CONTROL ROOM AT EIGHT O'CLOCK, WHICH I WAS A LOT OF NIGHTS, THAT'S REALLY, IT WAS REALLY SCARY A FEW TIMES THAT COULD WE GET ENOUGH GENERATION ON, FAST ENOUGH AS THE SOLAR WAS RAMPING DOWN.
AND THAT'S WHAT, AND WE WOULD HAVE TO RELEASE THE ECRS, LET IT BE TURNED INTO ENERGY.
AND THAT'S, THAT'S REALLY A LOT OF THAT, UH, MAKING SURE THAT YOU'VE RESERVED ENOUGH CAPACITY AND HAVE COMMITTED ENOUGH GENERATION SO THAT YOU'VE GOT ENOUGH TO COVER THAT DOWN RAMP.
THAT THAT'S A, THAT'S THE CRITICAL THING THERE.
UM, AND SO WE'VE MADE TWO CHANGES TO THE ECRS QUANTITIES FOR THIS YEAR.
WE'VE LOWERED THE, UM, WELL, WE'VE RAISED DURING THE SUNSET HOURS, WE'RE MAKING SURE, BECAUSE YOU CAN HAVE A FORECAST ERROR AND THEN GET INTO A DOWN RAMP.
AND SO IF YOU'RE ALREADY HAVEN'T COMMITTED ENOUGH BECAUSE YOU'VE GOT A FORECAST ERROR AND THEN YOU HAVE THE DOWN RAMP, THAT'S A PROBLEM.
AND SO WE'RE BOOSTING THAT UP TO A 90TH PERCENTILE OF THE FORECAST ERROR.
SO MAKING SURE WE'VE GOT ENOUGH FOR THOSE HOURS.
AND THEN THE FREQUENCY RELATED PART, THIS IS ONE OF THE IMM RECOMMENDATIONS THAT HAS KIND OF CHANGED.
CARRIE MADE ONE RECOMMENDATION AND THEN THERE WAS ANOTHER ONE CAME IN IN DECEMBER.
BUT WE'RE, WE'RE LOWERING THAT FREQUENCY AMOUNT SO THAT AT LEAST DURING THE OFF PEAK HOURS, UH, WE WON'T BUY AS MUCH.
UM, THE PART ABOUT THE 10 MINUTE FORECAST ERROR, UH, IMM, WE'VE DISCUSSED THIS WITH THEM, IT'S NOT REALLY A PROBLEM OF HOW FAR OUT YOUR FORECAST ERROR IS.
IT'S CAN YOU COVER THE FORECAST ERROR UNTIL YOU CAN GET THE NEXT UNIT ONLINE.
AND SO DO YOU HAVE SOMETHING THAT YOU CAN START UP AND COVER UNTIL YOU GET THE NEXT UNIT ONLINE? AND THAT NEXT UNIT ONLINE IS TYPICALLY A UNIT THAT'S PROVIDING NONS SPEND OR LONGER, IT'S, SO THAT'S 30 MINUTES OUT.
AND SO WE'VE GOTTA HAVE ENOUGH TO, TO DO THAT, TO COVER THAT.
AND SO THAT'S WHY WE LOOK 30 MINUTES AHEAD.
IT CAN'T JUST COVER YOU FOR THE 10 MINUTES.
IT'S GOTTA COVER YOU FOR THE WHOLE TIME PERIOD UNTIL IT'S GOTTA BE ENOUGH TO COVER YOU FOR THE WHOLE TIME PERIOD UNTIL YOU CAN BRING THAT NEXT UNIT ON.
CAN I ASK A QUICK QUESTION? UHHUH
SO HOW, HOW MUCH OF ECRS ACTUALLY PLAYS INTO THE FREQUENCY RESPONSE? I'M A LITTLE CONFUSED BECAUSE B UM, OBVIOUSLY REGULATION IS THE PRIMARY TOOL FOR FREQUENCY TOO HIGH OR TOO LOW.
WHEN DO YOU GET INTO USING ECRS FOR THAT? YEAH, SO, SO WE, IT'S, IT'S ONE OF THOSE THINGS THAT YOU, YOU BUY INSURANCE AND IT'S NOT JUST FOR HAIL, BUT, OR IT'S NOT JUST FOR WRECKS, IT'S NOT JUST FOR HAIL, IT'S SOME FOR BOTH.
AND SO IT'S A LITTLE OVERLAPPED.
UH, SO WE'RE NOT BUYING ENOUGH TO COVER KIND OF THE ADDITIVE OF BOTH.
WE'RE ACTUALLY OVERLAPPING AT SOME, LET ME FLICK OVER HERE AND FIND THE RIGHT NUMBER.
SO, SO DO YOU, DO YOU EFFECTIVELY JUST UTILIZE A SMALL PORTION OF ECRS THAT WAS PROCURED FOR ONE THING AND USE IT FOR REGULATION IF YOU NEED IT FOR REPLACING THE, THE GENERATION THAT WAS LOST? YES.
AND SO I, I THINK THAT, AND THAT'S ACTUALLY A GOOD POINT THAT I SHOULD MAKE, IS THAT ALL OF THESE ANCILLARY SERVICES, WE BUY AN AMOUNT THAT COVERS KIND OF THE, THE, I DON'T WANNA SAY WORST CASE RISK, BUT THE RISK THAT IS KIND OF THE, THE, THE WHAT, THE DESIGN PARAMETER, WE WANNA BUY THIS MUCH, BUT THEN WE MAY USE IT FOR OTHER THINGS.
THERE ARE OTHER KIND OF SUB, UH, SUB, UM, THINGS THAT, THAT ARE, ARE NOT THE, THE MOST CRITICAL, BUT THEY'RE SUBCRITICAL PROBLEMS. AND SO WE MAY USE IT FOR THAT AS WELL.
SO IF WE'RE BUYING ENOUGH TO COVER A, SOME TO COVER A FREQUENCY RESPONSE, SOME TO COVER FORECAST ERRORS, IF WE HAVE A FREQUENT, IF WE HAVE A, A REALLY LARGE UNIT TRIP, WE MAY HAVE TO USE A PORSCHE.
YOU KNOW, ALL THE OPERATORS CAN USE ALL OF IT THAT THEY NEED TO, TO, TO REPLACE IT.
AND THEN NONS SPENT IS CAPACITY THAT THAT IS NOT RE, WHEREAS ECRS IS REALLY HELD IN RESERVE, SO IT'S NOT BEING USED IN THE ENERGY MARKET.
NONS SPEND IS A RESERVE THAT HAS TO BE ONLINE WITHIN 30 MINUTES, BUT IT'S ALWAYS CONSIDERED TO, TO, UH, IT'S ALWAYS AVAILABLE OR IT CAN BE BEHIND A $75 OFFER.
UM, AND SO THE, THE, IF IT'S ON BEING PROVIDED FROM ONLINE UNITS OR FROM QUICK START UNITS, THEN IT CAN BE BROUGHT ONLINE, UH, JUST BASED BY SCAD.
WE DON'T ACTUALLY HAVE TO MAKE A COMMITMENT.
SO IF SC NEEDS THE ENERGY AND THE PRICES ARE GONNA BE
[02:45:01]
THE RESULTING PRICES OF NEEDING ENERGY ARE GONNA BE MORE THAN $75, THEN IT WILL, UH, UH, AUTOMATICALLY USE THAT.UH, AND WE USE THAT FOR KIND OF LONGER TERM NEEDS.
UM, THIS IS PROBABLY THE PLACE WHERE WE'VE, WE, UH, AGAIN, I THINK BACK WHEN WE WERE INITIALLY LOOKING AT, UM, UH, REDO BACK IN THE MID TWO THOUSANDS, UH, MID 2010S WHEN WE WERE REDOING THE ANCILLARY SERVICE METHODOLOGY, WE DIDN'T THINK WE WERE GONNA NEED NONS SPEND ANYMORE.
BUT AS THINGS HAVE BECOME MORE UNCERTAIN, WE'VE, WE HAVE KEPT THAT IN THE ANCILLARY SERVICE METHODOLOGY, UM, TO COVER THINGS LIKE OUR LONGER TERM FORECAST ERRORS AND REALLY, UH, MAKING SURE THAT WE'VE GOT ENOUGH GENERATION THAT CAN BE COMMITTED, UM, AS WE MOVED INTO CONSERVATIVE OPERATIONS.
AND ACTUALLY, I'M GONNA, I'M GONNA FLICK AHEAD TO ONE SLIDE THAT'S IN THE APPENDIX, IF THAT'S OKAY.
UM, THERE'S REALLY TWO CLASSES OF, OF ANCILLARY SERVICES.
THERE'S THE ONES THAT WE USE THAT I THINK DR. PATTON CALLED THE CONTINGENCY RESERVES EARLIER.
AND THAT PORTION OF ECRS THAT WE BUY THAT ARE FREQUENCY RESPONSIVE, AND THOSE ARE REALLY TO, TO, TO, UH, PROTECT AGAINST IF WE LOSE A UNIT OR OTHER THINGS THAT COULD GO WRONG ON THE SYSTEM.
AND SO THERE REALLY IS IN RESPONSE TO CONTINGENCY, THERE'S ANOTHER PORTION WHICH IS NONS SPIN AND THE REST OF ECRS THAT'S REALLY TRYING TO MITIGATE THE RISK OF NOT STARTING UP ENOUGH CAPACITY.
SO GENERALLY, THE MARKET DETERMINES WHETHER OR NOT THEY'RE GONNA START ALL OF THE GENERATING UNITS, OKAY, BASED ON THE ECONOMICS.
BUT IF THE, UM, UH, IF AND IF THEY DON'T HAVE ENOUGH, WE CAN BRING ON UNITS FROM RELIABILITY UNIT COMMITMENT PERSPECTIVE.
SO IF WE DON'T THINK THE MARKET'S BRINGING ON ENOUGH TO MEET ALL OUR RELIABILITY OBLIGATIONS, THEN WE CAN BRING ON, UH, ADDITIONAL GENERATION.
AND AFTER 2021, WE RECEIVED POLICY GUIDANCE THAT SAID, DON'T INTENTIONALLY TAKE RISK WHEN YOU'VE GOT ENOUGH CAPACITY THAT YOU COULD BRING ONLINE, BUT THERE'S A RISK THAT YOU, THERE MAY NOT BE ENOUGH.
DON'T TAKE THE RISK OF HAVING TO SHED LOAD BECAUSE YOU DIDN'T BRING ENOUGH ONLINE.
AND SO WE HAVE USED, UH, NONS SPIN AND THAT EXTRA PORTION OF ECRS TO KEEP FROM HAVING TO BRING ON AS MUCH UNITS THROUGH THAT RELIABILITY UNIT COMMITMENT PROCESS.
UM, INITIALLY IN 2021, WE WERE, WE WERE USING THE RUCK PROCESS TO BRING MORE GENERATION ONLINE, AND WE RECEIVED FEEDBACK FROM MARKET PARTICIPANTS AND THE IMM THAT SAID, DON'T RUCK GENERATION, IT WOULD BE BETTER TO BUY MORE ANCILLARY SERVICES TO MEET YOUR RELIABILITY OBLIGATIONS OF HAVING ENOUGH CAPACITY ONLINE, BUT NOT, UH, BUT, BUT DO IT THROUGH A KIND OF A MARKET BASED PROCESS BY BUYING MORE ANCILLARY SERVICES.
AND THE TYPE THAT WE'VE USED TO DO THAT IS NONS SPEND AND THAT OTHER PORTION OF ECRS.
SO I THOUGHT THAT WOULD BE HELPFUL IN UNDERSTANDING WHAT WE'RE DOING ON NONS SPEND.
UM, AND I, THE, THE BIG CHANGES FOR THIS YEAR ARE THAT WE'RE, UH, BUYING LESS DURING THE OVERNIGHT HOURS, UH, ESPECIALLY.
AND THEN, UH, THE, UH, WE'RE LOOKING AT THE, THE SIX HOUR HEAD ERROR AND THEN SPREADING THAT OUT BASED ON THE, THE TIMES WITH THE HIGHEST RISK.
AND THEN THE TIMES WITH LESS RISK, WE BUY LESS.
AND SO, UM, I, WE ALREADY TALKED ABOUT THE FIRST BULLET HERE THAT WE USE THESE ANCILLARY SERVICES.
WE, WE BUY 'EM BASED ON A CERTAIN QUANTIFICATION, BUT THEN WE CAN USE THEM FOR OTHER THINGS AS NEEDED FROM A RELIABILITY PERSPECTIVE.
THE OPERATORS HAVE THE AUTHORITY TO DO THAT.
UM, AS DR. PATTON MENTIONED, WE AGREED WITH THE, UM, WITH, AS PART OF THE TAC APPROVAL PROCESS THAT WE WOULD REVISIT SPECIFICALLY ECRS, UM, THAT WE WOULD REVISIT THAT, UH, BEFORE APRIL.
I THINK AS WE, AS WE'VE TALKED WITH DR. PATTON, PART OF, PART OF THE ISSUE WITH THE, UM, THE PRICING OUTCOMES IS, ESPECIALLY ON THOSE DAYS WHEN WE'RE OUT, JUST KIND OF OUT OF CAPACITY, IT'S THOSE 49 DAYS THAT THE, OR NOT ALL OF THEM, 'CAUSE THE WIND BLEW MORE ON SOME OF THEM.
BUT THOSE DAYS WHEN WE WERE REALLY TIED ON CAPACITY AND WE HAD TO RELEASE THE ECRS JUST TO HAVE ENOUGH, HAVE IT AVAILABLE TO SERVE ENERGY, THOSE WERE THE DAYS THAT RESULTED IN SOME OF THE HIGHER PRICES.
AND IF WE CAN RELEASE IT EARLIER ON THOSE DAYS, THEN
[02:50:01]
THAT MAY HELP WITH THE EFFICIENCY OF THE PRICING OUTCOMES.AND SO WE, WE'VE, WE AGREED WE'RE GONNA LOOK AT THAT.
WE GOTTA BE CAREFUL WITH THAT BECAUSE THERE ARE PEOPLE THAT ARE OUT THERE MAKING INVESTMENT DECISIONS THAT ARE, UH, LOOKING FOR REGULATORY CERTAINTY.
AND SO IT'S GONNA BE, THIS IS, THIS IS REALLY, WE HEARD A LOT LAST NIGHT ABOUT THE NEED FOR THE STAKEHOLDER PROCESS, AND I THINK THIS IS ONE OF THOSE PLACES THAT IT'LL BE REALLY GOOD TO TALK THROUGH THAT WITH THE STAKEHOLDERS, UH, TO FIGURE OUT WHAT'S, WHAT'S THE RIGHT BALANCE THERE.
SO IN SUMMARY, UM, WE'RE NOT RECOMMENDING ANY, UH, CHANGES FROM, FOR REGULATION.
UH, AND THEN WE'RE MAKING, UH, ONE CHANGE TO THE METHODOLOGY FOR RESPONSIVE RESERVE.
TWO CHANGES TO THE METHODOLOGY FOR ECRS AND ONE, CHANGE TO THE METHODOLOGY FOR NON SPEN.
AND, AND WE'RE LOOKING FOR THE R AND M COMMITTEE TO ENDORSE THIS, UM, AND RECOMMEND IT TO THE BOARD.
WE'LL OPEN UP THE QUESTIONS IN A BIT, BUT I THINK WE SHOULD HAVE, UH, EMILY COVERED THE TAC POSITION NEXT, SO WE HAVE THE FULL VIEW OF EVERYONE.
THANK YOU CHAIRMAN AND COMMITTEE MEMBERS.
I'M HERE ON BEHALF OF THE TECHNICAL ADVISORY COMMITTEE TO EXPLAIN THE TAC CONDITIONAL ENDORSEMENT OF THE 2024, UM, ANCILLARY SERVICE METHODOLOGY AS RECOMMENDED BY ERCOT.
SO AS YOU SEE HERE, UM, WE TOOK, THERE WAS EXTENSIVE DISCUSSION, UM, AND OBVIOUSLY ERCOT, THIS, THIS WASN'T THE FIRST CONSIDERATION BY THE STAKEHOLDERS.
ERCOT HAS TAKEN, UM, THE METHODOLOGY TO ALL THE WORKING GROUPS AND SUBCOMMITTEES FOR REVIEW, UM, OVER THE PAST SEVERAL WEEKS, UM, AT TAC, UM, THERE WAS EXTENSIVE DISCUSSION, UM, SPECIFICALLY, UM, FOLLOWING THE I'S PRESENTATION, UH, ABOUT THE CONCERNS REGARDING THE OVER PROCUREMENT OF ANCILLARY SERVICES AND THE COST TO THE MARKET, UH, AS EXPRESSED BY THOSE, AS YOU SEE DISSENTING AND ABSTAINING, UH, MEMBERS, THE INITIAL VOTE ON ENDORSEMENT OF THE AS METHODOLOGY AS RECOMMENDED BY ERCOT DID FAIL BY THE MARGIN YOU SEE HERE, UM, LARGELY FOR THE REASONS THAT YOU'VE HEARD TODAY.
UM, ULTIMATELY THERE WAS A SUCCESSFUL MOTION ON THE ENDOR, UM, TO ENDORSE THE METHODOLOGY, UM, WITH A COMMITMENT FROM ERCOT STAFF TO BRING BACK THE METHODOLOGY FOR TAC REVIEW AHEAD OF SUMMER.
UH, AND AS YOU HEARD FROM DAN, UM, THAT DISCUSSION WAS LARGELY FOCUSED ON CONCERNS AROUND ECRS PROCUREMENT AND THE COSTS, UM, CONCERNS WITH THAT APPROACH.
UM, I THINK DAN DID SUMMARIZE WELL, THE REGULATORY UNCERTAINTY, UH, INTRODUCED BY NOT HAVING A CONSISTENT METHODOLOGY THAT WE CAN LOOK TO FOR THE ENTIRETY OF THE YEAR.
UM, AND, AND ALSO, YOU KNOW, BALANCED BY THE FACT THAT ERCOT HAS THE ABILITY UNDER THE EXISTING PROTOCOLS TO REVIEW AND ASSESS ITS NEEDS, UH, WITHIN THE YEAR.
IT'S SIMPLY REQUIRED TO DO IT AT LEAST ANNUALLY, UM, TO BRING FORWARD A METHODOLOGY, BUT IT'S NOT RESTRICTED FROM DOING THAT OTHERWISE.
SO I THINK THAT WAS THE SUMMARY OF THE DISCUSSION, AS YOU HEARD HERE.
UH, AND, AND THOSE CONCERNS ARE, ARE, UH, SUMMARIZED ON THIS SLIDE.
UH, GIVEN WHERE WE ARE WITH TIMING, I'M HAPPY TO TAKE ANY QUESTIONS.
UH, CHAIRMAN, IF I MAY, OR CHAIRMAN ONLINE.
SO IN THE DISCUSSION OF ERCOT, GOING BACK TO REEVALUATE THE METHODOLOGY IN APRIL, WHAT SPECIFICALLY DID THE STAKEHOLDERS WANT FOR THAT REEVALUATION TO COVER? YEAH, THERE, THERE WAS DISCUSSION AROUND WHETHER THERE NEEDED TO BE A SPECIFIC COMMITMENT TO MAKE ANY SPECIFIC CHANGES, UH, AND ULTIMATELY, ERCOT STAFF EXPRESSED CONCERN ABOUT COMMITTING TO MAKE ANY, UM, CHANGES TO THE METHODOLOGY, TO THE PROCUREMENT AMOUNTS, UM, BUT CERTAINLY HAVE A ROBUST DISCUSSION.
AND AS YOU SAW ON THE PRIOR SLIDE, UM, BASED ON THAT COMMITMENT, THAT MOTION DID PASS, DID SOME OF THE STAKEHOLDERS SUPPORT ANY OF THE CHANGES THAT THE IMM PUT FORWARD ON THE 30 MINUTE VERSUS 10 MINUTE AHEAD NET LOAD FORECAST ON THE USE OF MONTE CARLO, LOSS OF LOAD PROBABILITY ANALYSIS TO IDENTIFY RISK? YES, COMMISSIONER KOBOS, THERE WAS DISCUSSION OF THAT AND, AND REALLY A REQUEST FOR MORE ANALYSIS FROM ERCOT ABOUT, UM, YOU KNOW, SHOULD, SHOULD THOSE RECOMMENDATIONS BE ADOPTED, WHAT, UH, CHANGES THAT WOULD TRANSLATE TO IN THE, IN THE AMOUNTS PROCURED.
WHAT WERE SOME OF THE PERSPECTIVES SHARED ABOUT COST? I KNOW THERE'S A, YOU KNOW, KIND OF A VARIATION ON, YOU KNOW, WHETHER THE 12 AND A HALF BILLION IS WHOLESALE POWER MARKET COSTS VERSUS ACTUAL COST TO CONSUMERS.
WHAT ARE SOME OF THE CONCERNS RAISED THERE? I KNOW THAT ON OUR END, WE'RE, WE'RE VERY MUCH CONCERNED ON ABOUT COST TO THE MARKET, UM,
[02:55:01]
WHATEVER THEY MAY BE.ULTIMATELY, AS, AS YOU KNOW, I THINK DR. PATTON HIGHLIGHTED, AND I THINK ERCOT HAS HIGHLIGHTED THERE'S A SUBSTANTIAL AMOUNT OF FINANCIAL HEDGING GOING ON, BUT YOU KNOW, WE HAVE PETITIONS SITTING AT THE PUC RIGHT NOW WHERE INDEPENDENT RETAILERS, EXCUSE ME, WANNA PASS THOSE COSTS, THE BCRS TO CONSUMERS, UM, OUTSIDE OF THEIR FIXED RATE CONTRACTS.
SO I'M JUST WONDERING KIND OF WHAT THE MORE ROBUST VIEW ON COST IS, UM, AT THE STAKEHOLDER LEVEL AT TECH.
YEAH, I THINK YOU DESCRIBED IT WELL, COMMISSIONER COBOS, THERE ARE CERTAINLY GIVES AND TAKES, UM, WITH REGARD TO THE COSTS, UM, BECAUSE AS YOU SEE HERE, UM, REPRESENTATIVES FROM ACROSS THE MARKET SEGMENTS THAT, THAT ARE REPRESENTING CUSTOMERS, LOAD SERVING ENTITIES, UM, HAD HAD CONCERNS WITH, UM, ESPECIALLY SINCE URI WITH THE CONSERVATIVE OPERATING POSTURE AND THE AMOUNT OF TOTAL ANCILLARY SERVICES BEING PROCURED AND HOW THAT IS TRANSLATING TO COSTS.
ON THE OTHER HAND, SOME OF THOSE SAME ENTITIES ARE LOOKING AT THE FACT THAT THE AMOUNT OF UNCERTAINTY THAT WE HAVE, UH, IN THIS MARKET IS ALSO HAVING, UH, AN, AN IMPACT ON OUR ABILITY TO HEDGE RIGHT AND AFFECTING LIQUIDITY, UH, IN THESE MARKETS.
UM, AND SO THEY ARE CERTAINLY AT ODDS, THESE TWO FORCES AND THESE TWO TRENDS THAT WE'RE SEEING.
AND SO ALL OF IT'S ULTIMATELY IMPACTING, UM, OUR ABILITY AS LOAD SERVING ENTITIES AND, AND, YOU KNOW, THE MARKET SEGMENTS THAT, THAT REPRESENT THOSE GROUPS, UM, TO MAKE SOUND CHOICES TO PROTECT CONSUMERS FROM THAT PRICE VOLATILITY.
IF I COULD DIRECT, UH, MY QUESTION TO THE OTHER R AND M COMMITTEE MEMBERS, UM, SINCE WE'RE BEING ASKED TO APPROVE THE ERCOT POSITION AND REC MAKE A RECOMMENDATION TO THE BOARD, SO JULIE, CARLOS, COURTNEY, JOHN, EVERYONE, UH, ON THE COMMITTEE, ANY FURTHER QUESTIONS THAT YOU HAVE FOR ANY OF THE PRESENTERS ON THIS TOPIC AND ANY, UH, FEEDBACK BEFORE WE GO INTO A VOTE? UM, BOB, I JUST WANNA LET YOU KNOW CARLOS IS NOT HERE TODAY.
UM, I, THIS COURTNEY, I DO HAVE A FEW QUESTIONS.
UM, SO IMM AND PROBABLY SOME TO DAN AS WELL, BUT IN GENERAL, UM, BOTH OF YOU TALK ABOUT RELIABILITY CRITERIA, AND THEN I HEARD THE, UM, DR. PATTON MAKE REFERENCE TO ASSUMING A VALUABLE, AND I WAS WONDERING, IN YOUR ASSESSMENT OF EVERYTHING WE'VE GONE THROUGH, DID YOU MAKE OTHER ASSUMPTIONS THAT MIGHT BE DIFFERENT FROM WHAT ERCOT WAS USING IN COMPARING INFORMATION? BECAUSE WE'RE GETTING TO SUCH DRASTIC NUMBERS, UM, I'M CURIOUS IF THAT IS PART OF THE FORMULA THAT WE NEED TO KNOW ABOUT
SO WHICH, WHICH ELEMENT OF MY RESULTS ARE YOU THINKING ABOUT, UH, AS BEING DIVERGENT FROM, FROM ERCOT? WELL, I'M ASKING IN GENERAL WHAT CRITERIA YOU'RE IN YOUR DEFINITION.
WE'VE YET TO DEFINE RELIABILITY.
THE COMMISSION IS, SO WHAT YOU ARE USING AS CRITERIA WHEN YOU'RE GOING FORTH VERSUS MAYBE WHAT ERCOT IS USING.
SO YEAH, THIS IS A LITTLE BIT COMPLICATED BECAUSE, UM, SO, SO WE DID THE SORT OF PROBABILISTIC ANALYSIS, AT LEAST IN INITIAL TAKE ON IT TO CALCULATE A LOSS OF LOAD PROBABILITY, UM, THROUGHOUT THE SUMMER OF 2023 AT DIFFERENT LEVELS OF ECRS PROCUREMENTS.
UM, I WOULD SAY YOU, YOU KNOW, THAT IS AN INITIAL ANALYSIS AND THERE'S, THERE'S NO COMPARABLE ANALYSIS BY ERCOT.
SO THERE, THOSE RESULTS SORT OF STAND ON THEIR OWN.
AND THE INTENT OF THOSE RESULTS IS TO SHOW THAT, THAT BY THE TIME YOU BUY THE FULL QUANTITY OF ECRS, YOU'RE, YOU'RE, YOU'RE PROTECTING AGAINST RELIABILITY RISKS THAT ARE REALLY NON-EXISTENT AT THAT POINT BECAUSE, BECAUSE WE'RE BUYING SO MUCH OF IT.
UM, AND IT, I DO WANNA MAKE ONE POINT THAT I FORGOT TO MAKE THAT'S REALLY IMPORTANT ABOUT ECRS IS, UM, TRADITIONALLY THE WAY THE ERCOT MARKET HAS WORKED IS IT'S RELIED HEAVILY ON SUPPLIERS TO SELF COMMIT GENERATION IN THEIR OWN INTERESTS WHEN PRICES ARE ATTRACTIVE.
UM, SO THAT'S THE WAY THE WORLD WORKED BEFORE YURI AND IT, AND TO BE HONEST, UM, IT'S VERY DIFFERENT THAN THE WAY OTHER RTOS WORK.
LIKE THEY HAVE A MAN A DAY AHEAD MARKET WHERE THEY PROCURE VIRTUALLY EVERYTHING.
YOU HAVE A VOLUNTARY DAY AHEAD MARKET, AND THEN YOU RELY ON PARTICIPANTS TO COMMIT GENERATION WHEN IT'S ECONOMIC FOR THEM TO DO SO.
UM, AND THAT, THAT HAS WORKED AND IS STILL WORKING.
UM, ONE PROBLEM WITH OVER PROCURING ECRS IS YOU STOP THE PARTICIPANTS WHO OWN THOSE UNITS
[03:00:01]
FROM TURNING THEM ON.AND THAT'S, THAT'S ONE ELEMENT OF THE ARTIFICIAL SHORTAGE THAT THAT IS, IS PARTICULARLY TROUBLING.
WE BELIEVE IF, IF ERCOT HAD BOUGHT LESS ECRS, THOSE UNITS WOULD'VE BEEN ONLINE AND WOULD'VE BEEN PROVIDING RELIABILITY THAT THEY COULDN'T PROVIDE BEING OFFLINE, SOME OF THOSE UNITS ARE REALLY VALUABLE FOR CONGESTION MANAGEMENT AND MADE MANAGING CERTAIN CONSTRAINTS MORE CHALLENGING ERCOT THAN IT NEEDED TO BE BECAUSE THE UNITS WERE UNAVAILABLE BECAUSE THEY WERE QUARANTINED OFF.
UM, SO, UH, SO IN, IN ANY EVENT, THERE'S, THERE'S SORT OF MULTIPLE REASONS WHY WE THINK IT'S, IT'S IMPORTANT NOT TO ERR ON THE SIDE OF BUYING TOO MUCH ECRS.
IT DRIVES UP THE COST OF ECRS AND IT ACTUALLY DIMINISHES RELIABILITY.
UM, NOW THE ANALYSIS WE PRESENTED AGAIN IS THE LOSS FLOAT EXPECTATION ANALYSIS AND THAT ANALYSIS, THERE'S NO CONFLICTING ANALYSIS FROM ERCOT BECAUSE THEY DIDN'T, THEY DIDN'T DO THAT SORT OF ANALYSIS.
THE, THE, WHERE THE PLACE WHERE WE DO DIFFER IS, IS RELATED TO WHETHER THE 30 MINUTE AHEAD FORECAST IS A REASONABLE WAY TO QUANTIFY WHAT YOU NEED OR THE 10 MINUTE A HEAD FORECAST.
AND I THINK THERE WE JUST HAVE DIFFERENT, UH, PERSPECTIVES ON WHAT YOU ACTUALLY USE THE PRODUCT FOR WHEN PUSH COMES TO SHOVE IN REAL TIME, UM, AND WHAT YOU USE THE 30 MINUTE PRODUCT FOR WHEN, WHEN DAN WAS DESCRIBING, ACTIVATING 10 MINUTE RESERVES, UH, BECAUSE YOU NEED TO BRING ON MORE MEGAWATTS TO, TO, TO AID IN A RAMP OR SOMETHING THAT YOU'VE MIS FORECASTED IT.
THAT'S, THAT'S WHAT EVERY OTHER RTO USES THEIR 30 MINUTE RESERVES FOR.
AND IT'S, IT'S BETTER TO USE THOSE IN ERCOT.
SO, UM, JUST BECAUSE THE, YOU HAVE A MUCH SMALLER PRICE DISTORTION IF YOU RELY MORE ON THE 30 MINUTE RESERVE.
SO THAT IS ONE PLACE WHERE THE PERSPECTIVE IS A LITTLE DIFFERENT.
WHAT I'M GETTING AT IS YOUR NUMBER IS 12 BILLION AND THEIRS IS 650 MILLION.
OH, THOSE ARE DRASTICALLY DIFFERENT NUMBERS.
'CAUSE THOSE ARE JUST MEASURING TWO DIFFERENT THINGS.
UM, SO PRICES WERE ARTIFICIALLY AND INEFFICIENTLY INCREASED, UH, BY THE ECRS PROCUREMENTS ENERGY PRICES.
SO THE ENERGY MARKET PERCEIVED SHORTAGES THAT DIDN'T EXIST IN 2023.
AND SO THE 12 BILLION IS THE VALUE OF THAT ENERGY PRICE INCREASE.
IT REALLY SAYS IF, IF, IF EVERY GENERATOR AND EVERY LOAD WERE PAYING, UM, THE REAL TIME ENERGY PRICE, THEN HOW MUCH DID THAT ARTIFICIAL INCREASE COST? AND THAT'S 12 AND A HALF BILLION DOLLARS.
SO THINK OF THAT AS THE ENERGY, THE PRICE OF PROCURING ENERGY AND HOW, HOW MISPRICED ENERGY WAS.
SO THAT'S WHAT THE 12 AND A HALF BILLION IS, AND IT'S NOT ALL INCURRED IMMEDIATELY.
IT IT'S INCURRED OVER TIME AS FORWARD PRICES GO UP AND OTHER THINGS HAPPEN.
AND SO YOU, YOU WANNA ERADICATE THAT AS FAST AS POSSIBLE SO THAT ALL OF THE OTHER CONTRACTS THAT THAT PARTICIPANTS ARE SIGNING, THEY, THEY ALL ARE SIGNED LOOKING AT AN EFFICIENT REALTIME PRICE.
THAT'S WHY THE REALTIME PRICE IS SO IMPORTANT.
THE 600 MILLION IS THE COST OF BUYING THE RESERVES.
SO ENERGY MAY BE 80,000 MEGAWATT HOURS.
AND SO THE ENERGY PRICE, YOU KNOW, IS RELATED TO THAT QUANTITY.
THE ECRS IS 5,000 MEGAWATTS AND IT'S THE RESERVES.
SO IT'S WHAT YOU PAID THE SUPPLIERS WHO ARE SELLING YOU RESERVES.
AND I THINK WE AGREE ON WHAT THAT COST IS.
IT'S SOMEWHERE IN THE NEIGHBORHOOD OF $600 MILLION, WHICH IS A BIG NUMBER AND PROBABLY TOO BIG A NUMBER.
IF WE HAD BOUGHT LESS, IT'D BE MUCH LOWER.
DR. PATTON, BEFORE YOU LEAVE, UH, MY TAKEAWAY FROM YOUR CONVERSATION, EVEN THOUGH WE GOT INTO A LOT OF DETAILS ABOUT ANCILLARY SERVICES, IS THAT YOU'RE REALLY AT THE 10,000 FOOT LEVEL YOU'RE RECOMMENDING WE GET TO REAL TIME CO-OP OPTIMIZATION AS FAST AS POSSIBLE.
IS THAT A CORRECT TAKEAWAY FROM YOUR PRESENTATION? OH, THAT'S CERTAINLY ALWAYS GONNA BE THE TAKEAWAY FROM EVERY PRESENTATION I MAKE.
IT, IT IMPROVES RELIABILITY, IT IMPROVES THE PERFORMANCE OF THE MARKET, THE EFFICIENCY OF THE DISPATCH, AND IT WOULD'VE CERTAINLY GREATLY MITIGATED THE EFFECTS OF ECRS, I MEAN THE BIT AS I DESCRIBED.
UM, BUT RECOGNIZING THAT ECRS IS, OR I'M SORRY, REALTIME CO-OP OPTIMIZATION IS A FEW YEARS AWAY.
WE, I THINK IT'S URGENT TO ADDRESS THESE CONCERNS.
[03:05:01]
ONE INTERESTING THING ABOUT THE CONVERSATION THAT WE HAD WITH ERCOT ABOUT DEPLOYING THE ECRS FASTER WHEN THE SYSTEM STARTS TO GET TIGHT, WHAT THAT WOULD ULTIMATELY DO IS MAKE THE MARKET PERFORM MORE LIKE IT USED TO.LIKE WHAT USED TO HAPPEN IS WE, WE DIDN'T BUY THIS EXTRA 2000 AND THE THE SUPPLIERS WOULD TURN THEM ON WHEN THE SYSTEM STARTED TO GET TIGHT AND THAT WAS GOOD.
UM, 'CAUSE A UNIT THAT COST $60 A MEGAWATT HOUR, ALL LAND SHOULD BE ONLINE WHEN PRICES ARE 200 OR 300 OR $400 'CAUSE THEY'RE MAKING MONEY.
AND THAT'S WHAT WE RELY ON IN THESE MARKETS.
NOW, WHEN YOU TAKE THAT UNIT AND YOU QUARANTINE IT OFF AND YOU DON'T LET IT TURN ON BECAUSE IT SOLD YOU ECRS, THEN THAT'S BAD.
UM, BUT AS DAN WAS, UH, TALKING ABOUT MORE AGGRESSIVELY DEPLOYING THE ECRS WOULD, WOULD GET THOSE UNITS THAT ARE VALUABLE TO TURN ON QUICKER WHEN WE NEED THEM EITHER TO MANAGE CONGESTION OR BECAUSE THE SYSTEM'S GETTING TIGHT.
SO IT WOULD, IT WOULD HELP THE MARKET PERFORM MORE LIKE IT USED TO.
ONLY IT WOULD HAVE THE BENEFIT OF THE OPERATORS KNOWING THAT THE UNITS ARE GOING TO TURN ON, LIKE BEFORE THEY, THEY WOULD HAVE TO HAVE FAITH IN THE MARKET.
AND I'M AN ECONOMIST, SO I ALWAYS TELL PEOPLE TO HAVE FAITH IN THE MARKET, BUT, UH, THEY WOULD'VE TO HAVE FAITH THAT SUPPLIERS ARE GOING TO SELF COMMIT WHEN WE NEED THEM TO.
AND YOU NEVER REALLY KNOW, RIGHT? I MEAN, THERE'S NO GUARANTEE.
UM, SO IT, SO IN ANY CASE, I THINK THAT THAT PARTICULAR CHANGE, WHICH IS NOT REALLY PART OF THE METHODOLOGY, IT'S A, IT'S HOW THE ANCILLARY SERVICES ARE ADMINISTERED BY ERCOT, UM, IS IS A POSITIVE, YOU KNOW, DEVELOPMENT IF, IF WE GET THERE.
I WANNA RECOGNIZE DAN, I THINK HE HAD A COUPLE COMMENTS IN RESPONSE TO SOME OF THE PREVIOUS QUESTIONS.
SO DAN, ACTUALLY ON THAT LAST ONE THAT THAT'S, UM, I, I THINK WHAT DR. PATTON SAID IS CORRECT, AND THAT'S ONE THING WE AGREE ON IS GETTING TO RTC SOON WOULD HELP SOLVE THIS PROBLEM.
AND I THINK THAT'S ONE OF THE REASONS THAT WE, UM, UM, ARE WILLING TO LOOK AT, UM, THE RELEASE OF ECRS FASTER AND TRYING TO MIMIC, UM, IN SOME WAY WHAT, WHAT RTC WOULD DO, BUT WITHOUT, UH, REMOVING THE RELIABILITY BENEFITS OF HAVING THAT MUCH CAPACITY IN, UH, RESERVE.
HE CALLS IT QUARANTINE, I CALL IT RESERVED, UH, FOR USE, UH, FROM, FOR RELIABILITY PURPOSES.
UM, THE OTHER THING I GUESS I'D NOTE IS THAT, THAT WE'VE GOT, THAT THE PUC HAS AN OBLIGATION WITH THE, UH, FOR THE LEGISLATURE TO REVISIT, UH, ANCILLARY SERVICES AND KIND OF THE, THE STRUCTURE AROUND THAT, UH, WHICH WE'LL BE DOING, I GUESS WORKING WITH THEM ON NEXT YEAR.
AND SO, UM, I THINK SOME OF THE, THE, THE THINGS LIKE WE HAVE HAD A MECHANISM FOR QUANTIFYING HOW MUCH, UH, OF EACH TYPE OF ANCILLARY SERVICE WE NEED FROM A, FOR A RELIABILITY PERSPECTIVE.
UM, AND THAT HAS BUILT UP OVER TIME USING A-L-O-L-P ANALYSIS, WHICH, UM, I'M NOT SURE LOOKING JUST AT ONE YEAR, THE FACT THAT WE, WE DIDN'T NEED IT THIS YEAR DOESN'T NECESSARILY MEAN WE WOULDN'T HAVE NEEDED IT GIVEN A DIFFERENT SET OF RANDOM THINGS THAT MIGHT HAVE HAPPENED.
BUT, UM, UM, IF, IF THAT'S AN APPROACH THAT WE WORKED THROUGH WITH THE STAKEHOLDERS AND, UH, THE PC ON HOW WE WOULD, HOW WE SHOULD QUANTIFY THOSE RISKS AND HOW WE SHOULD ASSESS HOW MUCH TO BUY, THEN WE CAN DO THAT, MAYBE NOT AS PART OF THIS PROCESS, BUT AS PART OF THAT, THAT ANALYSIS THAT WE'D BE DOING NEXT YEAR.
BOB, THIS IS DAN WHAT, I'M SORRY, GO AHEAD.
UM, SORRY BOB, I, I JUST WANNA MAKE SOME FINAL COMMENTS THAT I THINK MIGHT BE HELPFUL BEFORE YOU MADE ME MOVING FORWARD FOR A VOTE ON THE RECOMMENDATION.
UH, I MEAN, I, THE, THE FACT OF THE MATTER IS, IS THAT TAC HAS APPROVED THE ANCILLARY SERVICE METHODOLOGY WITH A COMMITMENT FOR ERCOT TO RETURN TO REVIEW THE METHODOLOGY IN APRIL.
AND, UM, YOU KNOW, THERE'S A LOT OF TALK ABOUT COSTS AND, AND DIFFERENT WAYS OF LOOKING AT COSTS.
BUT THE FACT OF THE MATTER IS THAT, YOU KNOW, I THINK THERE'S NO DISAGREEMENT THAT ERCOT HAS PAID ABOUT $600 MILLION FOR THE PROCUREMENT OF BCRS.
AND BY HOLDING OUT THOSE RESERVES, THE ECRS RESERVES OUTTA THE MARKET, THAT THAT, UM, WITH THAT HOLDING OUT OF THOSE RESERVES HAS HAD AN IMPACT ON THE ENERGY PRICE AND HAS RAISED THE ENERGY PRICES, NOT THE ORDC ADDER BECAUSE THAT'S AN INDICATION OF RESERVE SHORTAGES.
AND WE'RE NOT AT A SHORTAGE OF RESERVES.
WE HAVE PLENTY OF RESERVES, IT'S JUST SOME OF THEM ARE BEING HELD OUT.
AND SO WHEN YOU LOOK AT THE WHOLE PICTURE, YOU HAVE HIGHER ENERGY PRICES THAT DR. PATTON ARGUES HAVE MORE THAN DOUBLED IN 2023, AND YOU HAVE A HIGHER PROCUREMENT OF ANCILLARY SERVICE COSTS.
AND WE'RE, YOU KNOW, OUR MISSION AT THE COMMISSION IS TO NOT ONLY ENSURE
[03:10:01]
THAT THE LIGHTS STAY ON, BUT ALSO TO PROTECT CONSUMERS.SO, UM, AS ERCOT GOES BACK TO REEVALUATE THE METHODOLOGY IN APRIL, I THINK THERE'S A FEW THINGS THAT, THAT I THINK NEED TO BE AT LEAST RECOGNIZED.
ONE IS, YES, IS USED AS NOTED DAM THAT, UM, WE'RE REQUIRED BY SENATE BILL THREE TO CONDUCT AN ANCILLARY SERVICE STUDY.
AND WE'RE GONNA KICK OFF THAT PROCESS AT THE COMMISSION IN CONJUNCTION WITH ERCOT AND THE IMM AT THE BEGINNING OF THIS NEXT YEAR IN 24.
UM, WE'VE HAD DISCUSSIONS AT THE PUC THIS FALL THAT, UM, I THINK THERE'S A RECOGNITION AMONGST THE COMMISSION THAT ULTIMATELY THE PUC NEEDS TO BE INVOLVED IN APPROVING THE ANCILLARY SERVICE METHODOLOGY.
AND THAT WOULD BE FOR 20, THE YEAR 2025, NOT FOR 24.
UM, BUT I THINK THE REEVALUATION THAT HAPPENS IN APRIL NEEDS TO BE A TRUE REEVALUATION GIVEN ALL OF THESE COSTS.
AND WHAT I MEAN BY THAT IS, YOU KNOW, ERCOT, PUC STAFF, IMM STAFF GET TOGETHER AND LOOK AT SOME NEAR TERM, UM, YOU KNOW, NEAR TERM PERSPECTIVES AND LONG-TERM PERSPECTIVES ON HOW THE ANCILLARY SERVICE METHODOLOGY CAN BE MORE THOROUGHLY AND DILIGENTLY VETTED, UM, TO MAKE SURE THAT YOU GUYS ARE BUYING EXACTLY WHAT YOU NEED AND DEPLOYING IT WHEN YOU NEED TO.
UM, I KNOW YOU GUYS ARE IN DISAGREEMENT BETWEEN 10 AND 30 MINUTE AHEAD NET LOAD FORECAST, BUT MAYBE, YOU KNOW, I THINK UNDERSTANDING THAT ISSUE A LITTLE BIT MORE WOULD BE A BENEFIT FOR ALL OF US AS TO WHY I, I THINK YOU EXPLAINED IT, IT'S INTRA HOUR, UM, AND OR MAKING SURE YOU HAVE A RESOURCE THAT'S GONNA BE AVAILABLE TO COVER THE UNCERTAINTY.
UM, BUT REALLY TRYING TO GET TO THE HEART OF THAT.
BUT, BUT MORE IMPORTANTLY, I THINK THE LONG-TERM, UM, ISSUE IS THE ABILITY TO MORE SPECIFICALLY IDENTIFY A LOSS OF LOAD RISK.
I KNOW YOU'RE LOOKING AT INTRA HOUR RELIABILITY.
PATTON'S KIND OF LEANING TOWARDS, YOU KNOW, THE MONTE CARAL ANALYSIS TO USE, YOU KNOW, TO RUN THOUSANDS OF, AND, YOU KNOW, SCENARIOS BASED ON HISTORICAL ANALYSIS TO IDENTIFY THE RELIABILITY RISK.
I KNOW THAT WE WERE USING THAT THROUGH E THREE STUDY FOR, UM, VARIOUS RESOURCE ADEQUACY MARKET REFORM.
SO I'M REALLY TRYING TO UNDERSTAND WHY, YOU KNOW, WE CAN'T USE AT LEAST PART OF THAT TO HELP US MAKE SURE THAT, UM, ANCILLARY SERVICES ARE BEING PROCURED IN, IN AN APPROPRIATE MANNER.
I MEAN, WE HAVE A LOT OF CHANGE ON THE SYSTEM AS YOU'VE NOTED.
AND I THINK, AT LEAST FROM MY PERSPECTIVE AT THE COMMISSION, I JUST WANNA MAKE SURE THAT, YOU KNOW, WE'RE TAKING A VERY CONCERTED DEEP LOOK AT WHAT WE'RE DOING IN APRIL, UM, TO GET READY FOR THE SUMMER.
I KNOW DR. PATTON HAS CONCERNS FOR THE WINTER, UM, AS WELL.
AND, AND I DON'T KNOW IF I, YOU GUYS ARE GONNA AGREE TO MAKING ANY CHANGES TO THE WINTER AT THIS POINT.
UM, YOU KNOW, WE GOTTA MAKE SURE WE HAVE ENOUGH RESERVES GOING INTO THE WINTER, BUT I REALLY THINK IT'S A MATTER OF LONG TERM DUE DILIGENCE.
THIS REVALUATION NEEDS TO LOOK AT NEAR TERM AND LONG-TERM STEPS TO MAKE SURE, MAKE SURE WE'RE ADDRESSING THESE ISSUES.
'CAUSE THERE'S A LOT OF COSTS INVOLVED AND WHATEVER THEY MAY BE AT THE END OF THE DAY, YOU KNOW, WHETHER, YOU KNOW, AND I KNOW THERE'S DISAGREEMENT AT 12.5, AND I'M NOT SAYING THAT'S THE COST NECESSARILY 'CAUSE THERE IS HEDGING IN THE MARKET, BUT AS DR. PATTON NOTED, YOU KNOW, THAT THE FORWARD PRICES ON HEDGING IS GOING UP.
WE'RE SITTING WITH A PETITION AT THE COMMISSION WITH RETAILERS THAT WANNA PASS THEIR ECRS COSTS ON TO FIXED RATE CONTRACTS.
SO THERE, THERE, THERE'S OBVIOUSLY SOME HEDGING CONCERNS, THE ABILITY TO HEDGE AGAINST THESE COSTS.
SO BECAUSE OF THE COST PERSPECTIVE AND THE IMPACT TO THE MARKET, WE HAVE TO TAKE THAT APRIL EVALUATION SERIOUSLY.
AND WE HAD TO PUT IN LONG-TERM, UM, DUE DILIGENCE MEASURES, LIKE THE STUDY NEEDS TO BE COMPLETED, THE ANCILLARY SERVICE STUDY METHODOLOGY, UH, AND STUDY THAT IS REQUIRED BY SB THREE.
AND WE AT THE COMMISSION NEED TO GET MORE INVOLVED IN TAKING A LOOK AT THE AS METHODOLOGY.
AND I KNOW WE HAD A DISCUSSION OF KICKING OFF THAT PROCESS AT THE BEGINNING OF THE YEAR AS WELL.
SO I JUST WANTED TO NOTE ALL THOSE BROADER, MORE SPECIFIC, UM, YOU KNOW, PERSPECTIVE AS, AS YOU GUYS MOVE FORWARD AND MAYBE CARRY IT FORWARD INTO THE GENERAL BOARD MEETING.
YEAH, THANKS COMMISSIONER KOBOS.
AND, AND I HAVE A QUESTION FOR CHAD.
CHAD, THE WAY THAT THE, THE SLIDE THAT'S CURRENTLY UP FOR THE SUCCESSFUL MOTION FROM TAC, IS THAT THE SAME WAY THAT OUR MOTION IS PREPARED, IS THAT, IS THAT THE SAME? IT SEEMS THOUGH THE WORD SLIGHTLY DIFFERENT, BUT IT MAY MEAN THE SAME 'CAUSE AS PRESENTED ON THIS SLIDE, THE SUCCESSFUL, I FEEL VERY COMFORTABLE.
THAT'S THE DIRECTION WE SHOULD GO.
SO I MEAN, UH, ERCOT HAS ALREADY COMMITTED TO COME BACK TO THE, UH, I GUESS NO LATER THAN APRIL 30TH.
SO THAT DOESN'T HAVE TO BE PART OF YOUR MOTION.
YOU'VE HEARD HERE TODAY, UH, FROM ERCOT STAFF THAT THEY'RE GONNA MOVE FORWARD WITH THAT COMMITMENT.
UM, OBVIOUSLY COMMISSIONER KOBO HAS ACKNOWLEDGED THAT AS WELL.
SO THE, YEAH, IT'S NOT NECESSARY TO BE PART OF THE MOTION.
THE ONLY THING THAT NEEDS TO BE PART OF THE MOTION FOR THE COMMITTEE TO RECOMMEND TO THE BOARD IS AN APPROVAL OR A RECOMMENDATION TO THE BOARD FOR, UH, ENDORSING THE 2024 ANCILLARY SERVICE METHODOLOGY AS RECOMMENDED BY ERCOT STAFF.
WE'RE GONNA MOVE FORWARD WITH THAT COMMITMENT.
SO THAT DOESN'T NEED TO BE PART OF THE COMMITTEE MOTION OR THE BOARD'S MOTION.
[03:15:02]
MR. CHAIRMAN, IF I MAY, KATHLEEN JACKSON, UM, I JUST WANTED TO KIND OF MAKE ONE OBSERVATION AND THAT IS THAT, YOU KNOW, IF YOU LISTEN TO THE IMM AS WELL AS YOU LISTEN TO, YOU KNOW, OUR VERY TALENTED STAFF WITH ERCOT AS WELL AS THE STAFF THAT WE HAVE WITH THE PUC, THERE SEEMS TO BE A COMMON CAUSE, WHICH IS THAT WE WANT TO FOCUS ON REAL-TIME, CO-OP OPTIMIZATION, AND THAT WE WANT TO MAKE SURE THAT BETWEEN NOW AND WHEN THAT'S IMPLEMENTED, THAT WE HAVE A RELIABLE GRID AND WE CAN DO IT IN AN AFFORDABLE WAY.UM, I THINK WE'VE MADE SOME GREAT PROGRESS LOOKING AT OUR ANCILLARY SERVICE, UH, METHODOLOGY APPROACH BECAUSE THE IMM AND ERCOT, YOU KNOW, TOOK SOME REALLY VALUABLE TIME SITTING DOWN AND KIND OF DISCUSSING THE ISSUE.
I THINK THE IMM BRINGS, YOU KNOW, A, A PERSPECTIVE FOR, FROM OTHER ISOS, I THINK A GREAT RESOURCE THAT WE NEED TO FULLY UTILIZE.
AND AS WE KIND OF MENTIONED EARLIER, WE HAVE SOME PATH FORWARD THINGS THAT WE NEED TO DO AS DICTATED AND, UM, RECOMMENDED BY THE LEGISLATURE IN TERMS OF HOW WE MANAGE, UM, ANCILLARY SERVICES MOVING FORWARD.
AND, AND FOR THAT REASON, I WOULD REALLY LIKE TO SEE, UM, THE IMM AND, UH, ERCOT AS WELL AS OUR STAFF, YOU KNOW, COME TOGETHER HERE IN THE NEAR TERM AS WELL AS THE LONG TERM SO THAT WE CAN FULLY UTILIZE ALL OF THESE RESOURCES.
I THINK THERE'S SOME REAL VALUE I THINK THERE'S A LOT OF VALUE IN DAVID COMING TO TEXAS, AND AS I UNDERSTAND IT, HE WAS BORN HERE, SO IT'S KIND OF LIKE COMING HOME.
UH, AND, AND SO I WOULD LIKE TO SEE THAT, UM, YOU KNOW, COLLABORATION KIND OF MOVING FORWARD HERE, MOVING INTO APRIL AND THE EVALUATION THAT'S GONNA BE DONE AS WELL AS KIND OF MOVING FORWARD IN THE PATH FORWARD FOR THE NEXT YEAR.
AND I APPRECIATE, YOU KNOW, ALL OF THE WORK THAT'S BEEN DONE ON THIS.
UH, IT IS, IT'S, IT'S A HARD TASK.
IT'S AN IMPORTANT TASK AND I'M REALLY GLAD TO SEE THAT WE'RE FOCUSED ON IT.
AND I JUST WOULD VERY MUCH APPRECIATE AND, UH, SEE THE VALUE IN AGAIN, YOU KNOW, ERCOT, UH, STAFF AS WELL AS THE PUC STAFF.
I KNOW HARRICK IS HERE TODAY, AS WELL AS OUR, AS OUR IMM, UH, SITTING DOWN AND KIND OF ASKING THESE HARD QUESTIONS AND KIND OF COMING UP WITH, UH, A PATH FORWARD, KIND OF MOVING FORWARD.
UM, WITH THAT, I'M GOING TO ENTER THE MOTION TO RECOMMEND THE BOARD APPROVE THE 2024 ERCOT METHODOLOGIES FOR DETERMINING MINIMUM ANCILLARY SERVICE REQUIREMENTS AS RECOMMENDED BY ERCOT STAFF.
AND ADDITIONALLY, I NOTE THAT AS WE HEARD, ERCOT STAFF HAS COMMITTED TO ENGAGE TAC AND THE IMM ON FURTHER DISCUSSIONS AROUND THE ANCILLARY SERVICE METHODOLOGY BY NO LATER THAN APRIL 30TH, 2024.
SO WE'LL OBVIOUSLY HEAR MUCH MORE ABOUT THIS EARLY NEXT YEAR.
SO WITH THAT, CAN I GET A MOTION TO APPROVE? SO MOVED.
ANY OPPOSED OR ABSTENTIONS? SO THIS IS WE'LL CARRY, THAT'LL CARRY AND WE'LL MAKE THAT RECOMMENDATION TO THE BOARD LATER TODAY.
SO WITH THAT, THERE'S NO FURTHER BUSINESS REMAINING.
GENERAL SESSION AND THE MEETING ARE NOW ADJOURNED.
THE WEBCAST WILL BE CONCLUDED.
THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS IS ADJOURNED.