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OKAY, GREAT.[1. Call General Session to Order]
OKAY.GOOD AFTERNOON, MEMBERS OF THE ERCOT BOARD OF DIRECTORS AND GUESTS.
I'M BILL FLORES, THE ERCOT BOARD CHAIR.
I WANNA WELCOME EACH OF YOU TO THE FEBRUARY 25TH, 2025 SPECIAL MEETING OF THE BOARD OF DIRECTORS OF ERCOT.
I'VE CONFIRMED THAT QUORUM IS IN PRESENT IN PERSON, AND HEREBY CALL TO ORDER THIS MEETING OF THE ERCOT BOARD OF DIRECTORS BOARD VICE CHAIR PEGGY.
HE IS PARTICIPATING VIA TELECONFERENCE IN TODAY'S MEETING.
THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON ER COP'S WEBSITE.
AT THIS TIME, I WOULD LIKE TO ASK PUC CHAIR GLEASON IF HE WOULD LIKE TO CALL AN OPEN MEETING OF PUBLIC UTILITY COMMISSION OF TEXAS TO ORDER.
YES, UH, THIS MEETING AND PUBLIC UTILITY COMMISSION OF TEXAS WILL COME TO ORDER TO CONSIDER MATTERS THAT HAVE BEEN DULY POSTED WITH THE SECRETARY OF STATE FOR FEBRUARY 25TH, 2025.
UH, THANK YOU CHAIR GLEASON, UH, THE ANTITRUST ADMONITION AND THE SECURITY MAPPER INCLUDED WITH THE POSTING POSTED MEETING MATERIALS.
THE REASON FOR THIS MEETING IS THE ERCOT BYLAWS PROVIDE THAT THE BOARD VICE CHAIR, OR CHAIR OR THE CEO OR THEIR DESIGNEE MAY CALL A SPECIAL MEETING.
THIS SPECIAL MEETING HAS BEEN CALLED PRIMARILY TO ADDRESS ISSUES RELATED TO THE POTENTIAL RELIABILITY MUST RUN.
WE'RE GONNA CALL THAT RMR MOVING FORWARD AGREEMENTS CONCERNING CPS ENERGY BROADENING UNITS ONE AND TWO, AND A POTENTIAL ALTERNATIVE SOLUTION INVOLVING LIFECYCLE POWER BUBBLE GENERATION.
THIS IS A MATTER THAT ERCOT STAFF HAS BEEN UPDATING US ON FOR SEVERAL BOARD CYCLES, AND WE NOW BELIEVE THAT WE HAVE ALL THE NECESSARY INFORMATION TO MAKE AN INFORMED DECISION ON A RELIABILITY ISSUE IMPACTING THE SAN ANTONIO AREA.
IN ADDITION TO ERCOT STAFF, THERE ARE REPRESENTATIVES FROM CENTERPOINT ENERGY CPS ENERGY AND LIFECYCLE POWER HERE TODAY TO PROVIDE COMMENTS AND AN ANSWER ANY QUESTIONS THAT WE MAY HAVE DURING THE DISCUSSION.
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 TUESDAY, FEBRUARY 18TH, AND PROVIDED INSTRUCTIONS TO THE PUBLIC FOR COMMENTING IN PERSON.
UH, CHAD, IT'S MY UNDERSTANDING THAT THE DATE NO ONE HAS EXPRESSED AN INTEREST IN COMMENT.
IS THAT STILL CORRECT? THAT IS CORRECT.
[3. CEO Update]
ERCOT, CEO PABLO VEGAS IS OUR FIRST PRESENTER TODAY PRESENTING AGENDA ITEM THREE, THE CEO UPDATE.THANK YOU EVERYBODY FOR YOUR, UM, ENGAGEMENT AND INTEREST TODAY AND THE IMPORTANT WORK THAT WE ARE DOING HERE AT ERCOT.
WHAT I WANNA REVIEW REAL BRIEFLY IS THE RECENT PERFORMANCE DURING THE, UM, UH, MOST RECENT WINTER STORM THAT WE HAD LAST WEEK, UH, WINTER STORM KINGSTON.
I'M HAPPY TO REPORT THAT, UH, THROUGHOUT THE, UH, COLD WEATHER EVENT THAT WE HAD ACROSS TEXAS LAST WEEK, THE GRID PERFORMED RELIABLY AND CONSISTENTLY THROUGHOUT.
WE DID SEE THIS, UM, WE DID SET BRAND NEW RECORD FOR ALL TIME WINTER PEAK, UH, DURING THIS LAST WEEK, JUST OVER 80,000 MEGAWATTS.
AND, UH, WE WERE ALSO, UH, FORTUNATE THAT WE HAD SOME OF THE NEW TOOLS AVAILABLE TO US DURING THIS WINTER EVENT, THE FIRM FUEL SUPPLY SERVICE, UH, A NEW PRODUCT THAT WE CREATED POST WINTER STORM URI TO ENSURE GAS CONTINUITY AT, UM, AT GAS PLANTS THAT HAVE THE ABILITY TO STORE, UH, FUEL ON SITE.
AND WE WERE ABLE TO LEVERAGE THAT AND NEEDED TO LEVERAGE THAT IN A COUPLE OF SITUATIONS THROUGHOUT THIS EVENT.
SO THAT PROVED TO BE VERY HELPFUL.
WHAT I'D LIKE TO DO IS JUST KIND OF REVIEW THE DIFFERENCES IN SOME OF THESE RECENT EVENTS THAT WE'VE HAD AND WHAT, UM, WHAT'S HELPFUL TO LOOK AT HERE ON THIS CHART.
THERE'S, THIS CHART HAS TWO AXIS TO IT.
YOU'VE GOT ON THE LEFT SIDE THE CAPACITY AND DEMAND TOTALS THAT WERE OUT THERE.
AND IF YOU WANT TO MATCH THAT UP TO THE BARS THAT YOU'RE LOOKING AT, THE GREEN IS THE DEMAND AND THE CAPACITY IS THE PURPLE THAT IS NEXT TO IT.
THOSE TWO NUMBERS KIND OF LINE UP TO THE AXIS ON THE LEFT SIDE, AND THEN THE WIND AND SOLAR AVAILABILITY.
AND THEN THE OUTAGES OF THERMAL OR, OR NON, UH, INTERMITTENT RENEWABLE RESOURCES OR IN PUNS IS IN THE GRAY COLUMN ON THE RIGHT.
THE WIND, SOLAR AND OUTAGES, THEY LINE UP WITH THE, UH, SCALE THAT'S ON THE RIGHT SIDE OF THE, OF THIS CHART.
AND WHAT YOU CAN SEE IS REALLY A VERY SIGNIFICANT, UH, DIFFERENCE IN SOME OF THE PROFILE CHARACTERISTICS.
UH, IN EACH OF THESE RECENT EVENTS.
WINTER STORM ENZO WAS THE COLD WEATHER PERIOD THAT WE HAD TOWARDS THE END OF JANUARY, UH, OF THIS YEAR.
IN CONTRAST, YOU CAN LOOK AT THAT TO THE PERFORMANCE OF, UM, THE GRID DURING WINTER STORM, HEATHER, WHICH WAS AROUND THE MARTIN LUTHER KING DAY IN 2024 THAT HAD BEEN PRIOR WAS THE HIGHEST PEAK CAPACITY THAT WE HAD HIT, OR HIGHEST PEAK DEMAND THAT WE HAD HIT, UH, DURING A WINTER WEATHER EVENT.
AND THEN BEFORE THAT WAS WINTER STORM ELLIOT.
THAT WAS THE WINTER STORM THAT OCCURRED JUST BEFORE CHRISTMAS OF, UH, DECEMBER OF 2022.
AND YOU CAN LOOK AT THE, YOU KNOW, WHAT REALLY DRIVES THE DIFFERENCES IN THE
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AVAILABLE CAPACITY THAT WE'VE HAD IS THE AVAILABILITY OF WIND.WE'VE HAD REALLY CONSISTENT STRONG PERFORMANCE FROM THE THERMAL FLEET THROUGHOUT EACH OF THE, THESE WEATHER EVENTS DURING PEAKS IN THE, IN THE WINTER.
YOU CAN SEE THE SOLAR AVAILABILITY IS VERY LOW.
AS YOU LOOK AT ON THE CHART HERE, THE TIMESTAMPS OF WHEN THESE INSTANTANEOUS PEAKS OCCURRED, WERE ALL EARLY IN THE MORNING BEFORE 8:00 AM BEFORE THE SUN REALLY RISES AND BECOMES A SUPPORTIVE ELEMENT OF PROVIDING SUPPLY.
SO YOU CAN SEE VERY LITTLE CONTRIBUTION TO SOLAR, WHICH INCIDENTALLY HAS BEEN THE LARGEST KIND OF GROWING COMPONENT ON THE, ON THE ERCOT GRID OVER THE LAST SEVERAL YEARS.
AND THEN, YOU KNOW, THE AVAILABILITY OF BATTERIES AS BATTERIES HAVE ADDED ON IN, IN, IN EACH SUBSEQUENT YEAR.
WE HAVE DOUBLED THE PERFORMANCE OR DOUBLED THE AVAILABILITY OF BATTERIES EVERY YEAR SINCE 2021 ON THE ERCOT GRID.
AND THE AVAILABILITY OF BATTERIES HAS BEEN EXTREMELY HELPFUL IN BRIDGING THE EPISODIC PERIODS OF TIME WHEN THERE IS SCARCITY, WHETHER THAT'S IN THE SUMMER, DURING THE SOLAR SUNSET, OR WHETHER IT'S IN THE WINTER DURING THE PRIOR PERIOD PRIOR TO THE SUNRISE AND IN THE PERIOD JUST AFTER THE SUNSET.
AND SO WINTER STORM KINGSTON FITS IN HERE WITH A, A FAIRLY STRONG CAPACITY.
WE HAD FAIRLY GOOD WIND AVAILABILITY DURING THE DAY, NOT AS MUCH AS WE HAD DURING ENZO.
WE HAD GOOD THERMAL PERFORMANCE AND WE HAD ADEQUATE SUPPLIES.
YOU CAN SEE HERE TO MEET, UH, THE DEMAND OF JUST OVER 80,000.
THE DIFFERENCE IN THE 80,657 INSTANTANEOUS PEAK VERSUS WHAT WE'RE SHOWING AS A RECORD OF 80,154.
THE DIFFERENCE IS THE WAY WE COUNT BATTERIES AND, UH, EXCLUDE THE PERFORMANCE OF, UH, CERTAIN BATTERIES DURING, OF BATTERIES DURING THE INSTANTANEOUS, UH, PEAK, THE, THE CHARGE OF BATTERIES.
SO WHEN BATTERIES REPRESENT A LOAD ON THE GRID, THOSE ARE NOT INCLUDED IN THE LOAD NUMBERS.
AND THEN I JUST WANTED TO BRIEFLY TOUCH ON THE COMPARISON OF, UH, THIS STORM COMPARED TO THE OTHER STORMS. IT, UH, IT, WINTER STORM KINGSTON IS THE PURPLE DOT.
THAT'S BETWEEN THE 48 AND 72 HOUR DURATION, UH, PAR, UH, ON THE X AXIS AND BETWEEN THE 17 AND 19, UH, AVERAGE TEMPERATURE, WHAT THAT MEANS IS IT PUTS IT EFFECTIVELY AS THE FOURTH COLDEST WINTER EVENT THAT WE'VE HAD IN THE LAST, UH, 14 YEARS, AND THE FOURTH LONGEST DURATION EVENT THAT WE'VE HAD IN THE LAST FOUR YEARS.
SO IT REALLY FITS KIND OF RIGHT IN THE MIDDLE OF THE, UH, SEVEN EVENTS THAT WE'RE, UH, SHOWING HERE.
NOT THE, NOT THE WORST AND, AND NOT THE LIGHTEST, BUT NONETHELESS STILL HAD A BRAND NEW PEAK RECORD REFLECTING OBVIOUSLY THE GROWTH THAT WE'VE BEEN EXPERIENCING IN TEXAS OVER THE LAST FEW YEARS.
SO WE'VE SEEN THAT GROWTH MANIFEST ITSELF INTO HIGHER DEMAND.
AND ALSO SEEING THE, YOU KNOW, THE PERFORMANCE BASED ON THE GREAT EFFORTS AROUND WINTERIZATION AND WEATHERIZATION THAT HAVE OCCURRED ACROSS THE SYSTEM.
I WANNA POINT OUT THAT DURING, UH, YOU KNOW, THIS EVENT, WE, UH, TOOK ADVANTAGE AND COORDINATED VERY CLOSELY WITH THE MARKET.
WE WORKED CLOSELY WITH, UH, TDE, UH, THE TEXAS DIVISION OF EMERGENCY MANAGEMENT, AS WELL AS WITH, UH, MEMBERS FROM TURK, WHICH IS THE ENERGY RELIABILITY COUNCIL THAT THE GOVERNOR CREATED FOLLOWING WINTER STORM URI.
UM, AND WE, OF COURSE, COORDINATED WITH THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY.
THEY PROVIDE DISCRETION DURING EXTREME EVENTS LIKE THIS WHERE, UH, THERMAL RESOURCES THAT MAY RUN INTO EMISSION LIMITS BECAUSE OF THE REQUIREMENTS, UH, TO KEEP EMISSIONS UNDER A CERTAIN LEVEL OVER THE COURSE OF A YEAR.
THEY PROVIDE EXEMPTIONS IF NECESSARY IN ORDER TO ENSURE RELIABILITY DURING PERIODS OF, UH, EXTREME WEATHER AND, AND PEAK, UH, PEAK SYSTEM REQUIREMENTS.
AND I, I WANTED TO JUST CALL OUT A COUPLE OF STATS ON OUR WEATHERIZATION PROGRAM.
SINCE WE'VE STARTED THIS PROGRAM, WE HAVE COMPLETED OVER 3,200 WEATHERIZATION INSPECTIONS OF BOTH GENERATION AND TRANSMISSION FACILITIES THAT HAS FAR EXCEEDED THE MINIMUM REQUIREMENTS THAT WAS PUT TOGETHER IN THE RULEMAKING.
WE HAVE, THROUGH THIS JANUARY, HAVE INSPECTED OVER 315 GENERATOR AND TRANSMISSION FACILITIES, AND WE EXPECT TO COMPLETE ANOTHER 140 OR SO.
THIS PROGRAM CONTINUES TO BE ONE OF THE MOST IMPACTFUL AND HELPFUL PROGRAMS TO ENSURE THAT ALL OF THE AVAILABLE AND NEEDED SUPPLIES ARE GOING TO BE THERE WHEN WE GET INTO THESE EXTREME EVENTS.
AND ALSO, WE DON'T TALK A LOT ABOUT SWITCHABLE GENERATION, BUT WE HAD OVER 4,000 MEGAWATTS.
WE, WE HAVE OVER 4,000 MEGAWATTS OF GENERATION THAT CAN SWITCH BETWEEN ERCOT AND OTHER GRIDS IN THE EASTERN INTERCONNECTION AND EFFECTIVELY TRANSFER THAT CAPACITY, UH, BASED ON WHERE IT'S NEEDED MOST.
SO WE COORDINATED VERY CLOSELY WITH SPP AND WITH MISO THROUGHOUT THIS EVENT.
THERE WERE PERIODS OF TIME WHEN SOME OF THOSE RESOURCES WERE NEEDED TO SUPPORT GRID OPERATIONS IN THOSE OTHER ISOS, AND THEY WERE MADE AVAILABLE TO DO SO.
AND THEN DURING THE PEAK, UH, PEAK PERIODS FOR US, WE HAD THOSE RESOURCES AVAILABLE TO US AND WE'RE ABLE TO LEVERAGE THOSE.
SO THAT IS A RESOURCE THAT CONTINUES TO BE VERY HELPFUL, AND THAT SWITCH ABILITY PROVIDES FLEXIBILITY BOTH FOR THE GENERATION RESOURCE AND FOR THE RELIABILITY, UH, IN EACH OF
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THE ISOS ON EACH SIDE.SO OVERALL, I WANNA JUST, YOU KNOW, OFFER MY THANKS TO EVERYONE WHO PARTICIPATED.
THIS REQUIRES, YOU KNOW, ON THE ERCOT TEAM, IT'S HIGH ACTIVE ENGAGEMENT, OF COURSE, FROM OUR OPERATIONS TEAM, BUT IT ALSO EXTENDS INTO OUR IT AND TECHNOLOGY TEAMS THAT ARE SUPPORTING THEM AROUND THE CLOCK, MAKING SURE THEY CAN BE VERY RESPONSIVE IF ANYTHING OCCURS.
OUR COMMUNICATIONS TEAMS THAT ARE WORKING HARD TO MAKE SURE THAT ALL OF OUR STAKEHOLDERS ARE AWARE OF WHAT'S HAPPENING DURING THE GRID OPERATIONS AND THE GRID EVENTS SO THAT, UH, WE CAN BE TRANSPARENT IN WHAT'S HAPPENING, UH, DURING THESE, UH, EXTREME PERIODS OF, UH, OF WEATHER.
SO WITH THAT, THOSE, MY, THAT WAS MY COMMENTS FOR TODAY.
CHAIR FLORES, I'M, I'LL BE HAPPY TO TAKE ANY QUESTIONS IF THERE ARE ANY.
UM, PABLO, I NOTICED THERE WERE A COUPLE OF UNITS THAT, UH, WENT TO FIRM FUEL.
CAN YOU COMMENT A LITTLE BIT ON THAT? YEAH, SO WHAT CAN HAPPEN IS THERE CAN BE AN INTERRUPTION, UM, FOR A VARIETY OF REASONS, UH, THAT CAN BE LOCAL IN NATURE IN TERMS OF A LOCAL PIPELINE ISSUE.
UM, I THINK IN THIS CASE, THOSE WERE MORE THE SITUATIONS THAT WE WERE HEARING ABOUT SOME LOCAL ISSUES THAT, UH, REQUIRED THE UNITS TO LEVERAGE THE, THEIR BACKUP SUPPLY.
OVERALL, THE, THE GAS SYSTEM PERFORMED VERY WELL THROUGHOUT THIS PERIOD, AND, UH, AND THE SYSTEM AT LARGE HAD THE AVAILABLE GAS THAT THEY NEEDED.
THE AMOUNT THAT WE HAD UNDER FIRM FUEL DURING THIS EVENT WAS ABOUT 600 MEGAWATTS IN TOTAL.
IT'S THE THIRD TIME THAT WE'VE USED FIRM FUEL DURING A WINTER EVENT.
AND, UH, THIS WAS, I THINK, THE, MAYBE THE FEWEST AMOUNT OF MEGAWATTS THAT WE HAD TO USE IN A DEPLOYMENT.
AND IS THERE BACKUP TYPICALLY DIESEL OR DO THEY HAVE ON ONSITE STORAGE? IT'S, UH, I THINK IT'S TYPICALLY ONSITE DIESEL OR OIL IS TYPICALLY THE BACKUP FUEL.
ANY OTHER QUESTIONS OR COMMENTS FOR PABLO? OKAY, CARLOS PABLO, IT'S JUST, UM, TALKING ABOUT METRICS AND MAYBE THE ADDITIVE IMPACT OF MEASURES TAKEN AFTER URI, UM, FIRM FIELD BEING ONE BETTER PERFORMANCE OF WIND RESOURCES, UH, THESE KINDS OF ITEMS, UH, TO CORRELATE ACTIONS TO SORT OF RESULTS.
IF WE DON'T HAVE THEM, IT'D BE GOOD TO WORK ON THEM.
AND, AND THAT'S SOMETHING THAT I THINK WE COULD ILLUSTRATE THROUGH, UM, METRICS LIKE OUR RELIABILITY STANDARD THAT TAKE VARIABLES LIKE WEATHERIZATION INTO ACCOUNT, BECAUSE THE RELIABILITY SCANDAL, WHEN IT MODELS THE PERFORMANCE OF THE SYSTEM, IT'LL MAKE ASSUMPTIONS ON FORCED OUTAGES.
THOSE FORCED OUTAGE METRICS ARE DIRECTLY CHANGED AS A RESULT OF WEATHERIZATION.
AND SO THEN THE RESULTING MODELING AND METRICS, WHICH SHOW A MORE RELIABLE GRID BECAUSE OF WEATHERIZATION.
AND SO THERE ARE TOOLS WE COULD USE CARLOS, TO SHOW SPECIFICALLY HOW WEATHERIZATION HAS CHANGED THE UNDERLYING METRICS ON AVAILABILITY.
UH, THE SIMILARLY, THE AVAILABILITY OF FIRM FUEL, THAT ADDITIONAL CAPACITY WOULD ALSO LOWER THE OUTAGE RISK FOR THOSE UNITS THAT HAVE SECONDARY FUEL.
WE, I THINK WE HAVE THE DATA THAT WE COULD USE TO SHOW THE SPECIFIC METRIC IMPACT ON RELIABILITY THAT THESE MEASURES HAVE TAKEN.
ANY OTHER COMMENTS OR QUESTIONS OR PABLO? WELL, PABLO, WITH THAT, I'D LIKE TO CLOSE OUT THIS PART OF THE AGENDA BY SAYING, UH, UH, GOOD WORK, UH, TO YOU AND ALL OF THE ERCOT TEAM.
UH, I LIKED THE WAY THE PUBLIC FACING, UH, RESOURCES OF ERCOT WERE USED.
I MEAN, YOU, EVERY WEATHER CAST YOU SAW INCLUDED A SNAPSHOT OF THE ERCOT WEBSITE OR THE APP, BOTH OF WHICH ARE, ARE PRODUCING REALLY GOOD INFORMATION FOR THE PUBLIC TODAY.
ALSO, I THOUGHT THE COORDINATION AMONG YOU AND THE PUC AND THE GOVERNOR AND THE ALL OF THE, UH, ASSOCIATED AGENCIES OF THE STATE WAS REALLY WELL EXECUTED.
AND THEN FINALLY, THE TRAINING TOPICS THAT ERCOT PUBLISHED ABOUT WEATHERIZATION ABOUT THE SAME TIME STORM HAPPENED WAS RIGHT ON POINT SO THAT PEOPLE COULD SEE THE VALUE OF WHAT OF THE WEATHERIZATION PROGRAM, UH, THAT THEY PAID FOR THAT WAS MANDATED BY THE POLICYMAKERS BACK IN 2021.
YEAH, I APPRECIATE THAT CHAIR FLORES.
AND YEAH, I'D BE REMISS FOR NOT POINTING OUT THAT, YOU KNOW, THE PUBLIC UTILITY COMMISSION MAINTAINS VERY CLOSE CONTACT WITH A LOT OF THE UTILITIES THAT THEY REGULATE AND ENSURE THE AVAILABILITY AND READINESS FOR THESE RESOURCES.
SO ON THE MARKET SIDE, WITH THOSE THAT ARE PERFORMING ON THE MARKET TOGETHER, IT'S REALLY A VERY ACTIVE AND COORDINATED JOINT EFFORT TO ENSURE THAT EVERYBODY'S ABLE TO BRING TOGETHER THE RESOURCES TO PERFORM UNDER THESE CIRCUMSTANCES.
AND THAT COORDINATION AND PRACTICE THAT WE'VE DONE OVER THE LAST SEVERAL YEARS HAS REALLY BEEN A MARKET IMPROVEMENT SINCE WHAT HAPPENED BEFORE WINTER STORM URI.
AND, AND SO I THINK WE'RE, UH, WE'RE, WE'RE ALL SEEING THE BENEFITS OF THAT, UH, COLLABORATION TOGETHER, RIGHT? THE STAKEHOLDERS REALLY STEPPED UP THE, AND, UH, TO MAKE IT ALL WORK, UH, DURING THIS EVENT.
IF WE DON'T HEAR, UH, ANY OTHER COMMENTS OR
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QUESTIONS, I DON'T SEE ANY, WE'RE GONNA MOVE TO AGENDA[4. ERCOT Staff Recommendation regarding ERCOT Board Approval of CPS Energy Braunig Units 1 and 2 Reliability Must-Run (RMR) Agreement or Alternative Solution of Life Cycle Power Mobile Generation]
ITEM FOUR, WHICH IS ERCOT STAFF RECOMMENDATION REGARDING ERCOT BOARD APPROVAL OF CPS ENERGY BROUGHT IN UNITS ONE AND TWO, RELIABILITY MUST RUN AGREEMENT OR ALTERNATIVE SOLUTION OF LIFECYCLE POWER MOBILE GENERATION, UH, WOODY RICKSON, CHAD SEALEY, AND NATHAN BIGBY ARE PRESENTING.AND AS MENTIONED EARLIER, WE HAVE SEVERAL, SEVERAL OTHER PARTIES TO HELP WITH THIS DISCUSSION.
UH, JASON RYAN, WHO'S EXECUTIVE VICE PRESIDENT OF REGULATORY SERVICES AND GOVERNMENT AFFAIRS OF CENTER POINT ENERGY IS HERE IN PERSON, ALONG WITH EIGHT REPRESENTATIVES FROM CPS ENERGY AND THOMAS RIGGS, THE CEO OF LIFECYCLE POWER, ALONG WITH COUNCIL FOR LIFECYCLE.
UH, KIMBERLY GLASSPOOL ARE JOINING US VIA TELECONFERENCE, UH, WOODY CHAD AND NATHAN, PLEASE PROCEED WHEN READY.
UM, YOU KNOW, NATHAN BIGBY WILL DO THE KIND OF HEAVY LIFTING HERE TODAY BY WALKING THE BOARD THROUGH THE POWERPOINT PRESENTATION, UH, ON ARCOT STAFF'S RECOMMENDATION.
HOWEVER, BEFORE I TURN IT OVER TO NATHAN, I WANTED TO ASK JASON RYAN TO COME FORWARD TO THE PODIUM AND JUST CONVEY CENTERPOINT ENERGY'S ROLE IN THIS MATTER, SPECIFICALLY RELATED TO THE LIFECYCLE, UH, MOBILE GENERATION, WHICH IS ERCOT STAFF'S PREFERRED RECOMMENDATION OVER THE RMR AGREEMENTS WITH CPS ENERGY AND BRO UNITS ONE AND TWO.
YOU KNOW, CENTERPOINT HAS BEEN A GREAT STRATEGIC PARTNER WITH ERCOT OVER THE LAST SEVERAL MONTHS IN ALLOWING US TO HAVE THIS OPPORTUNITY TO PROVIDE A MORE COST EFFECTIVE AND RELIABLE SOLUTION IN THE SAN ANTONIO AREA.
IN YOUR BOARD DECISION TEMPLATE, YOU HAVE A LETTER FROM JASON RYAN ON BEHALF OF CENTERPOINT, UH, NOTING THEIR ROLE, BUT I THOUGHT IT'D BE GOOD FOR JASON JUST TO PUBLICLY ADDRESS THE BOARD AS WELL.
SO, WITH THAT, I'LL TURN IT OVER TO JASON.
THANK YOU, MR. CHAIRMAN, UH, AND BOARD MEMBERS.
I'M JASON RYAN, EXECUTIVE VICE PRESIDENT AT CENTER POINT ENERGY.
FOR THOSE OF YOU THAT AREN'T FAMILIAR WITH OUR COMPANY, WE'RE AN ELECTRIC AND GAS UTILITY BASED OUT OF HOUSTON, WITH A FOOTPRINT ACROSS THE MID CONTINENT.
IT'S A PLEASURE TO BE HERE BEFORE YOU TODAY, YOU KNOW, EVERY SINGLE DAY AT CENTERPOINT, UH, WE WORK HARD TO BALANCE THE INTERESTS OF ALL OF OUR STAKEHOLDERS.
AND I'VE GOT, UH, A PROPOSAL, UH, IN FRONT OF YOU IN WRITTEN FORM THAT I WON'T READ WORD FOR WORD, BUT I BELIEVE IT'S A, UM, A UNIQUE TEXAS DRIVEN SOLUTION FOR THE CHALLENGE THAT YOU ALL HAVE BEEN DISCUSSING, UH, IN THE SAN ANTONIO AREA.
SO, I'LL, I'LL, UH, WALK THROUGH IT, UH, IN A LITTLE BIT OF DETAIL AND THEN ANSWER QUESTIONS.
UH, POST WINTER STORM URI, WE LEASED 15 LARGE GENERATORS, UH, TO HELP WITH LOAD SHED IN THE EVENT WINTER STORM URI WERE TO EVER HAPPEN AGAIN.
AND WINTER STORM URI ON, UH, PABLO'S CHART WAS THE, THE STORM THAT WAS ALMOST OFF THE CHART.
UH, WE HAD DIFFICULTY IN THE HOUSTON AREA ROTATING LOAD DUE TO THE UNIQUE CHARACTERISTICS OF THE AREA, INCLUDING THE, UH, SIGNIFICANT INDUSTRIAL LOAD THAT CANNOT BE TURNED OFF, UH, IN AN EMERGENCY.
UH, EACH OF THOSE, UH, GENERATORS, THEY AVERAGE ABOUT 30 MEGAWATTS A PIECE.
THEY CAN EACH POWER ABOUT 30,000 HOMES, UH, IN THE TIME OF, UH, EMERGENCY.
SO, AS, UH, WE'VE HAD DISCUSSIONS OVER THE LAST, UH, HALF YEAR OR SO WITH STAKEHOLDERS, IT'S BECOME CLEAR THAT WE NEED TO, UH, CHANGE THE MIX OF GENERATORS THAT WE HAVE IN HOUSTON TO NO LONGER, UH, HAVE THESE LARGE GENERATORS TO MITIGATE THE RISK THAT WE JUST TALKED ABOUT WITH WINTER STORM URI, AND HAVE MORE SMALLER, UH, GENERATORS TO MITIGATE, UH, HURRICANE RISK ON THE GULF COAST.
UH, SO AS A RESULT, AS PART OF OUR COMMITMENT TO RIGHT SIZE OUR FLEET, UH, WE'VE PROPOSED TO SEND THESE 15 LARGE GENERATORS TO THE SAN ANTONIO AREA FOR UP TO TWO YEARS TO HELP WITH THIS PROBLEM.
UH, AS WE MOVE FROM HAVING THOSE GENERATORS IN A REGULATED, UH, UTILITY POSTURE TO, UH, BEING, UH, OUTSIDE OF THE UTILITY, AS, AS THAT LEASE, UH, RUNS THE COURSE OVER THE REST OF THE DECADE.
LET ME STRESS FIVE THINGS THAT ARE ADDRESSED IN THE LETTER, UH, BUT I THINK ARE IMPORTANT FOR YOU TO, TO, TO KNOW AS YOU CONSIDER THE ALTERNATIVES TODAY.
NUMBER ONE IS THAT, UH, WE WILL RECEIVE NO COMPENSATION FROM ERCOT OR ANY OTHER PARTY, UH, FOR THE PERIOD OF TIME THAT THESE GENERATORS ARE IN SAN ANTONIO.
NUMBER TWO, WE WILL NOT BE A PARTY TO THE AGREEMENT BETWEEN, UH, LIFECYCLE POWER, OUR VENDOR THAT WE LEASE THESE UNITS FROM AND ERCOT.
UH, AND THIRD, WE HAVE NO OWNERSHIP, UH, INTEREST IN LIFECYCLE POWER.
SO, UH, SO WE ARE NOT PART OF THIS AGREEMENT AT ALL, OTHER THAN MAKING THE ASSETS THAT WE'VE PAID FOR AVAILABLE, UH, TO HELP, UH, THE STATE IN TIME OF NEED.
FOURTH AND FIFTH, LET ME ADDRESS, UH, IMPACT ON OUR CUSTOMERS.
SO, UH, AS THESE UNITS ROLL OUT OF HOUSTON TO SAN
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ANTONIO, IF YOU CHOOSE TO PICK THEM UP, UM, WE WILL MAKE AN APPLICATION AT THE PUBLIC UTILITY COMMISSION TO TAKE THESE UNITS OUT OF RATES.SO THERE'LL BE A RATE REDUCTION TO HOUSTON CUSTOMERS.
AND FIFTH AND FINALLY, WE'VE PUBLICLY MADE A COMMITMENT TO KEEP OUR CUSTOMERS WHOLE FOR WHAT THEY'VE ALREADY PAID, UH, FOR THESE LARGE UNITS THROUGH A SERIES OF OTHER RATE REDUCTIONS AND FOREGOING COSTS THAT WE'D OTHERWISE, UH, RECOVER FROM THEM.
SO I KNOW THERE'S MORE WORK TO BE DONE.
UH, I WANT TO THANK, UH, THE ERCOT TEAM AND THE, UH, PUC STAFF FOR HELPING US WORK THROUGH A LOT OF THE ISSUES RELATED TO THE MOVEMENT OF THESE ASSETS.
THERE ARE DEFINITIVE AGREEMENTS THAT STILL NEED TO BE WORKED OUT AMONGST ALL OF THE PARTIES, UH, INVOLVED, BUT WE'RE WELL UNDERWAY, UH, MAKING PROGRESS ON THAT.
AND I'M PLEASED THAT, AGAIN, THAT WE CAN BRING A, A TEXAS SOLUTION, UH, AND REALLY AN UNPRECEDENTED CORPORATE CONTRIBUTION, UH, TO HELP, UH, ADDRESS THE CHALLENGES OF THE STATE.
HAPPY TO ANSWER ANY QUESTIONS, UH, THAT YOU ALL MAY HAVE.
MR. CHAIRMAN, UH, JASON, THANK YOU FOR BEING HERE TODAY, AND THANK YOU FOR, UH, UH, CENTERPOINT'S, UH, COMMITMENT TO HELP, UH, RESOLVE THIS CHALLENGE.
ANY QUESTIONS, UH, FOR JASON? OKAY, THANK YOU, JASON.
OKAY, WITH THAT CHAIR THEN, I WOULD ASK, UH, NATHAN BIGBY, WHO'S CHIEF REGULATORY COUNSEL FOR ERCOT TO, TO COME, COME ON UP AND, AND START THE PRESENTATION.
AND AGAIN, THIS WILL BE KIND OF A PARTICIPANT DISCUSSION BETWEEN NATHAN LEADING IT, YOU KNOW, MYSELF ADDING SOME PERSPECTIVE WOODY AND, AND PABLO AS AS WE WALK THROUGH THE SLIDES AND OBVIOUSLY WELCOME ANY QUESTIONS OR COMMENTS FROM BOARD MEMBERS.
I'M NATHAN BIGBY, CHIEF REGULATORY COUNSEL FOR ERCOT.
AS CHAD INDICATED, OUR PURPOSE HERE TODAY IS TO SEEK YOUR AUTHORIZATION TO PROCEED, UH, IN CONTRACTING WITH LIFECYCLE POWER FOR THE USE OF ITS MOBILE GENERATORS TO HELP SOLVE THE RELIABILITY ISSUES IN THE SAN ANTONIO, SAN ANTONIO AREA.
SO OUR PURPOSE HERE IS TO WALK THROUGH KIND OF OUR ASSESSMENT OF THE COSTS AND BENEFITS OF THE LIFECYCLE SOLUTION COMPARED TO THE COST AND BENEFITS OF CONTRACTING WITH CPS ENERGY FOR THE BROWN EGG ONE AND TWO, UH, UNITS UNDER AN RMR CONTRACT.
SO, LET'S, UH, TAKE A QUICK ONE SLIDE REFRESHER ON, UH, HOW WE GOT HERE TODAY.
AND THIS ALL STARTED BACK IN MARCH OF 24 WHEN CPS ENERGY SUBMITTED ITS NOTIFICATIONS OF SUSPENSION OF OPERATIONS TELLING US THAT IT INTENDED TO SUSPEND THE OPERATION OF BROWNING UNITS ONE, TWO, AND THREE IN MARCH OF 25, UH, AS REQUIRED BY THE PROTOCOLS, WE HAD TO CONDUCT AN ANALYSIS OF THE RELIABILITY IMPACTS OF THAT SUSPENSION, AND THAT ANALYSIS REVEALED SIGNIFICANT RELIABILITY CONCERNS ASSOCIATED WITH OVERLOADS OF TRANSMISSION LINES THAT CARRY POWER FROM SOUTH TEXAS INTO THE SAN ANTONIO AREA.
UH, THOSE, UH, CONTINGENCIES OR THE, THE CONDITIONS THAT WE SAW, UM, THOSE OVERLOADS, UH, IF THEY WEREN'T ADDRESSED, COULD RESULT IN CASCADING OUTAGES OF THE SYSTEM.
AND THAT MEANS THAT THIS BECOMES AN INTERCONNECTION RELIABILITY OPERATING LIMIT, AN IROL, WHICH MEANS THAT WE HAVE TO DO SOMETHING ABOUT IT UNDER THE NERC RELIABILITY STANDARDS.
UM, OUR SOLUTION, UH, WERE WE NOT ABLE TO FIND GENERATION WOULD HAVE TO BE TO SHED LOAD IN ORDER TO AVOID THOSE EXCEEDANCES.
SO THIS IS A SIGNIFICANT RELIABILITY RISK THAT WE'RE TRYING TO ADDRESS HERE.
SO, AS FURTHER REQUIRED BY THE PROTOCOLS, WE ISSUED A REQUEST FOR PROPOSALS IN JULY OF 24, SEEKING MUST RUN ALTERNATIVES, MRS. TO AN RMR AGREEMENT FOR THE THREE BROWNING UNITS.
UM, THAT RFP, UH, WHICH CONCLUDED IN OCTOBER OF 24, DID NOT RESULT IN THE IDENTIFICATION OF ANY PERMISSIBLE RAS.
WE DID GET ONE OFFER FROM, UH, A PARTY THAT WAS PROPOSING THE ACCELERATION OF THE INTERCONNECTION OF A 200 MEGAWATT ENERGY STORAGE RESOURCE, BUT THAT PROPOSAL WAS NOT ELIGIBLE, UH, TO BE ACCEPTED BECAUSE OF CONDITIONS THAT WERE PUT ON THE OFFER.
AND BECAUSE IT WAS A BATTERY THAT COULD NOT BE AVAILABLE 24 BY SEVEN, I THINK ONE OF THE CONDITIONS I WOULD WANNA POINT OUT, UM, THAT THIS PARTY PUT ON THE OFFER WAS THAT, UM, IT WOULD BE ALLOWED TO PARTICIPATE IN THE MARKET.
AND THAT IS REALLY ANTITHETICAL TO MRA PARTICIPATION WHERE WE TRY TO SIDELINE THIS CAPACITY UNTIL WE ABSOLUTELY NEED TO SOLVE THOSE TRANSMISSION ISSUES.
SO WE WERE NOT IN A POSITION TO BE ABLE TO ACCEPT THAT OFFER AS PART OF THAT RFP.
NATHAN, I COULD INTERRUPT, IF I COULD INTERRUPT YOU JUST REAL QUICK.
I THINK IT'S IMPORTANT TO NOTE THAT THE RULES AROUND HOW AN RMR AND AN MRA ARE ESTABLISHED ARE RULES THAT HAVE BEEN WORKED THROUGH THE T AND PROTOCOL PROCESS AT ERCOT ACROSS ALL STAKEHOLDERS.
SO ALL MARKET PARTICIPANTS HAD AN OPPORTUNITY AND WEIGHED IN STRONGLY THROUGHOUT THE DEVELOPMENT OF THE PROTOCOLS FOR AN RMR AND AN MRA SITUATION.
THOSE PROTOCOLS THEN ARE APPROVED UNDER RULE THROUGH THE PUBLIC UTILITY COMMISSION, AND IT IS GUIDE, AND IT IS NOT JUST GUIDANCE, IT IS THE RULES ON HOW
[00:25:01]
ERCOT HAS TO EXECUTE AN RMR AND AN MRA.WE DO NOT HAVE THE LATITUDE TO JUST SUSPEND AND THROW OUT THOSE RULES AND REQUIREMENTS IN ORDER TO JUST ACCEPT ANY KIND OF AN OFFER THAT COMES IN ON THE TABLE.
THAT'S NOT THE WAY THIS WORKS.
ALL MARKET STAKEHOLDERS HAVE A VERY SIGNIFICANT VESTED INTEREST IN HOW THE MARKET RULES AND THE ECONOMICS OF AN MRA AND AN RMR WORK, AND THAT'S WHY IT WAS WORKED THROUGH A FAIRLY PRO, PRO PRONOUNCED PROTOCOL PROCESS TO GET THROUGH THE PROCESS THAT WE USE TODAY.
I THINK YOU, PABLO, AND LET ME JUST ADD A A COUPLE MORE POINTS TO THAT, BECAUSE I THINK IT'S IMPORTANT FOR THE, YOU KNOW, NEW BOARD MEMBERS TO, AND, AND THE CURRENT BOARD MEMBERS KIND OF BE REMINDED WHEN WE, WE STARTED THIS IN JULY, WE HAD AN ORIGINAL SET OF DI DEADLINES, AND WE ACTUALLY EXTENDED THE DEADLINE TO TRY TO GET THE MARKET TO RESPOND WITH APPROPRIATE SOLUTIONS BECAUSE WE OBVIOUSLY DON'T WANT TO BE IN A SITUATION WHERE WE'RE HAVING TO GET TO THE LAST RESORT AND PRESENT AN RMR OR, YOU KNOW, AS THE SOLUTION WHEN THERE COULD BE MARKET SOLUTIONS THAT ARE BETTER AND MORE COST EFFECTIVE IN PLACE OF THE RMR. SO WE, WE ACTUALLY EXTENDED THAT TIMELINE, SO IT WENT FROM JULY TO OCTOBER, QUITE SOME TIME TO ANSWER QUESTIONS AND ALLOW THE MARKET TO REALLY LOOK FOR SOLUTIONS.
AND EVERYTHING THAT PABLO SAID IS CORRECT IS THAT WE HAVE TO LIVE WITHIN KIND OF A RULE CONSTRUCT TO PROTECT THE WHOLESALE MARKET.
YOU, YOU CAN'T HAVE AN ENTITY OFFERING AS A SOLUTION THAT I JUST WANNA BE A PART OF THE MARKET.
WELL, IF THAT'S THE CASE, JUST COME AND BE PART OF THE MARKET.
THE THESE ASSETS ARE MEANT TO BE OF LAST RESORT SO THAT THE MARKET WORKS FIRST BEFORE WE DEPLOY THE RMR SOLUTION OR THE MRA SOLUTION.
SO WHEN NATHAN TALKS ABOUT THE, THE INELIGIBILITY OF THE ONE OFFER THAT WE RECEIVED, IT'S BECAUSE THEY WANTED TO DO SOMETHING COMPLETELY DIFFERENT THAN WHAT WERE THE REQUIREMENTS THAT WERE BUILT INTO THE PROTOCOL FRAMEWORK.
AND I THINK THAT'S IMPORTANT FOR THE BOARD TO UNDERSTAND, BUT ALSO FOR ALL STAKEHOLDERS TO UNDERSTAND THAT WE'RE REALLY TRYING TO STAY WITHIN THE RESPECTED NATURE OF HOW THIS WHOLESALE MARKET WORKS AND USE THESE TYPE OF ASSETS AS LAST RESORT WHEN WE NEED TO DO THAT BEFORE WE GET TO LOAD.
SHE, SO WHETHER IT'S THE RMR THAT WE MOVE FORWARD WITH, OR WHETHER IT'S THE MOBILE GEN, THESE ARE UNITS OF LAST RESORT YESTERDAY, WE EXECUTED THE UNIT THREE RMR AGREEMENT AND IT'S NOW COMPLETELY DONE AS WE START THAT INSPECTION PROCESS, UH, STARTING ON MARCH 3RD, THAT IS THE UNIT OF LAST RESORT.
EVERY OTHER SOLUTION WILL BE USED BEFORE WE ASK THE RMR UNIT TO START TO RAMP UP AND COME ON.
THAT WOULD BE THE SAME INSTANCE FOR UNITS ONE AND TWO.
IF WE HAVE TO GO THAT WAY, IT'LL BE THE SAME INSTANCE FOR THESE 15 MOBILE GENERATORS THAT WOULD BE LOCATED INTO THE SAN ANTONIO AREA, THE UNIT OF LAST RESORT, BECAUSE WE WANT THE MARKET TO SOLVE THE RELIABILITY SOLUTION IF IT CAN DO SO.
YEAH, I'M GLAD, I'M GLAD YOU BROUGHT THAT UP, CHAD.
SO THAT, I MEAN, A COUPLE OF POINTS TO TAKE AWAY FROM, FROM THIS, FROM WHAT I'M HEARING FROM, FROM YOU AND THE TEAM, IS THAT THERE WAS NOTHING, THERE WAS NO ARBITRARY RESTRICTION INSIDE THE RFP THAT PREVENTED EVERY POSSIBLE SOLUTION, SO LONG AS THEY MET THE RULE SET THAT ERCOT IS REQUIRED TO FOLLOW IN ORDER TO MAINTAIN RELIABILITY OF THE GRID.
UH, THE SECOND THING IS THAT TO THE EXTENT THAT THE MARKET RESPONDS TO POTENTIAL SITUATIONS THAT COULD CAUSE THAT EYE ROLL TO GO INTO EFFECT, THE MARKET WILL RESPOND, AND THEN THE BROADENING ONE AND TWO OR THE, THE LIFECYCLE UNITS WILL BE HELD BACK UNTIL THE VERY END, UNTIL THE MARKET NO LONGER CAN MEET THE NEEDS.
IS THAT WHAT I'M HEARING? CORRECT.
SO TO THE EXTENT THAT THERE'S A BUNCH OF NEW BATTERIES THAT ARE ADDED NORTH OF THE CONSTRAINT, THOSE BATTERIES WOULD LIKELY HAVE THE CHANCE TO RESPOND AND ADDRESS THE SOLUTION AT LEAST COST.
I, I GUESS MY QUESTION IS, ONCE RTC IS IN PLACE, WILL, UM, WILL RTC BE USED TO DISPATCH THIS? THE RMR SOLUTION? NO, THE, THE RMR WOULD STILL REMAIN THE LAST OKAY.
SO THE RTC WILL BE USED FOR ALL THE MARKET AND THEN THE LAST RESORT, IF THE CONSTRAINT IS ABOUT TO COME INTO PLAY, THEN THOSE WILL BE MANUALLY DISPATCHED.
AND I THINK YOU BROUGHT UP ANOTHER INTERESTING POINT THAT WITH THE, AS NEW RESOURCES COME ONLINE, YOU KNOW, AS PART OF THIS BACKGROUND, ERCOT DID AN EXTENSIVE RMR ANALYSIS TO ASSESS NOT ONLY THE RESOURCES THAT WERE, UH, AVAILABLE TODAY, BUT ALSO THE RESOURCES THAT WERE PLANNED AND COMMITTED TO COME ONLINE IN 2025.
AND IN 2026, WE FACTORED ALL OF THOSE PLANNED RESOURCES INTO OUR ANALYSIS AND CAME UP WITH THE DETERMINATION THAT THE LOCAL TRANSMISSION CONSTRAINTS WERE STILL GOING TO BE PROBLEMATIC WITH THE LOSS OF THE THREE BRO UNITS.
AND SO THE NEED FOR THE RMR OR AN MRA DID FACTOR IN THE, NOT ONLY ALL OF THE RESOURCES THAT HAVE BEEN DEVELOPED RECENTLY, BUT ALSO
[00:30:01]
THOSE THAT WERE PLANNING TO COME ONLINE AND THAT WERE FAR, THAT WERE FAR ENOUGH INTO THE QUEUE TO SHOW THAT THEY WERE GONNA BE DEVELOPED IN 2025 AND IN 2026.THOSE WERE INCLUDED IN OUR ANALYSIS TOO.
I'M GLAD YOU GLAD YOU MENTIONED THAT.
I THINK IT'S A GREAT DISCUSSION.
SO BASED ON THAT UNSUCCESSFUL RFP THAT WE RAN FOR RAS, UH, OUR RECOMMENDATION TO THE BOARD ON DECEMBER 3RD, AS YOU RECALL, WAS, UH, TO APPROVE RMR SERVICE FOR BROWN EGG UNIT THREE.
AS CHAD MENTIONED, WE JUST SIGNED THAT CONTRACT YESTERDAY.
UH, THAT'S IN EFFECT AND WE'LL START IN EARLY MARCH.
HOWEVER, UM, AT ERCOT RECOMMENDATION, THE BOARD DEFERRED ITS DECISION ON BROWNING UNITS ONE AND TWO TO GIVE US TIME TO EXPLORE AN ALTERNATIVE SOLUTION, UM, USING LIFECYCLE POWERS MOBILE GENERATION.
AND THAT'S WHAT WE'RE HERE TO TALK ABOUT TODAY.
WE GOT LINKS THERE TO THE DISCUSSIONS ACT THE OCTOBER, DECEMBER AND, UH, FEBRUARY, UH, 2025 MEETINGS.
SO JUST A, AN OVERVIEW OF THE LIFECYCLE SOLUTION.
AS WE HEARD FROM CENTERPOINT EARLIER TODAY, UM, THEY HAVE ALLOWED LIFECYCLE TO PURSUE CONTRACT WITH US FOR 15 OF ITS, UH, MOBILE GENERATING UNITS.
EACH OF THOSE IS ABOUT 30 MEGAWATTS IN SIZE NAMEPLATE FOR SUMMER PEAKING CAPABILITY.
THOSE ARE COLLECTIVELY ABOUT 350 MEGAWATTS AT THE, UM, AT THE AVERAGE PEAK TEMPERATURES WE SEE IN THE SAN ANTONIO REGION.
UM, SO THOSE UNITS WOULD BE MOVED FROM HOUSTON TO SAN ANTONIO, UM, STARTING SOMETIME, UM, THIS SUMMER PERHAPS MOVED OVER IN STAGES, UM, BETWEEN JUNE OF 25 THROUGH, UM, UH, THROUGH AUGUST OF, UH, SEPTEMBER OF 25, DEPENDING ON EXACTLY HOW QUICKLY WE'RE ABLE TO WORK WITH CPS ENERGY, UH, TO GET THOSE UNITS INTERCONNECTED AND IN PLACE.
AS, AS JASON MENTIONED, THE CENTER POINT'S GIVEN US A LETTER COMMITTING TO RELEASE THOSE FROM THE, UH, FROM THEIR LEASE OBLIGATIONS FOR A TERM OF UP TO TWO YEARS.
AND, UH, BUT WE ARE EXPLORING TRANSMISSION SOLUTIONS THAT WOODY AND CHRISTIE ARE GONNA TALK ABOUT LATER THIS AFTERNOON THAT COULD ALLOW FOR AN EARLY TERMINATION OF THAT AGREEMENT.
UM, MITIGATING THE COST TO CONSUMERS IN THE ERCOT REGION.
UM, SO JUST LIKE AN RMR AGREEMENT, THE, THE AGREEMENT WE'RE ENVISIONING WITH LIFECYCLE THAT WE'RE NEGOTIATING WITH THEM, SUBJECT TO THE BOARD'S APPROVAL, UM, IS THAT, THAT, UH, THE, THE, THE CORE PRINCIPLE IS THESE UNITS WOULD BE DEPLOYED BY ERCOT ONLY DURING ACTUAL OR ANTICIPATED EMERGENCY CONDITIONS.
SO WE'RE TALKING ABOUT TWO DIFFERENT CONDITIONS, ONE OF THEM BEING A TRANSMISSION EMERGENCY, UM, WHERE YOU MAY SEE AN OVERLOAD OF A LINE THAT WOULD RESULT IN IN LOAD SHED, UM, IF WE DIDN'T HAVE ANY OTHER SOLUTION TO SOLVE THAT OR THE OTHER SOLUTION.
THE OTHER EMERGENCY SITUATION IS AN EEA ENERGY EMERGENCY ALERT.
THAT'S A SYSTEM CAPACITY DEFICIENCY WHERE WE WOULD DEPLOY CAPACITY TO RESOLVE, UM, THAT SHORTAGE.
SO THESE WOULD ONLY BE USED DURING EMERGENCY CONDITIONS, VERY SIMILAR TO RMR AGREEMENTS, UH, RMR UNITS AND MUST RUN ALTERNATIVE, UM, RESOURCES AS WELL.
THESE UNITS, AS WE'RE ENVISIONING THEM, WOULD BE REGISTERED WITH US AS GENERATION RESOURCES, WHICH ALLOWS US TO GET TELEMETRY FROM THEM TO DISPATCH THEM USING SC, UH, BUT ONLY WHEN WE'VE RT THEM ONLINE.
UM, USING RELIABILITY, UNIT COMMITMENT, VERBAL DISPATCH INSTRUCTIONS, R VDIS, JUST LIKE WITH RMR RESOURCES.
SO WE'RE REALLY FOLLOWING THE RMR CONSTRUCT HERE AS WE, UM, ENVISION THIS AGREEMENT WITH, UH, WITH LIFECYCLE.
UM, SO SOME OF THE OPERATIONAL FEATURES HERE IS THAT IT, AS WE TALKED WITH LIFECYCLE, WE'VE, UM, WE'VE DEVISED A, AN APPROACH WHERE THEY COULD BE ABLE, THEY WOULD BE ABLE TO REMOTELY START THESE UNITS FROM A REMOTE OPERATION CENTER AND THEY WOULD BE SUBJECT TO ERCOT DEPLOYMENT, UH, 24 HOURS A DAY, SEVEN DAYS A WEEK, UM, THROUGHOUT THE TERM OF THIS AGREEMENT.
SO THESE UNITS WOULD BE OPERATING USING DIESEL FUEL, UM, NOT THE TRADITIONAL NATURAL GAS.
THESE ARE AERO DERIVATIVE COMBUSTION TURBINES.
UM, THEY ARE VERY QUICK STARTING UNITS.
THEY COULD BE UP AT FULL OUTPUT IN ABOUT 10 MINUTES.
THAT'S COMPARED TO ABOUT 10 HOURS FOR BROWN EGG UNITS ONE AND TWO.
SO THESE ARE MUCH MORE NIMBLE UNITS, UM, AND MUCH MORE CAPABLE ADDRESSING RELIABILITY ISSUES.
UM, AS I MENTIONED, WE'RE LOOKING AT, UM, AN INTERCONNECTION TIMELINE OF JUNE 25, ENDING IN AUGUST, PERHAPS SEPTEMBER OF 25, DEPENDING ON HOW QUICKLY WE WERE ABLE TO GET THOSE PROCESSES GOING.
UM, AS FOR SETTLEMENTS, THE, WHAT WE'RE ENVISIONING RIGHT NOW IS THAT LIFECYCLE WOULD BE PAID BASED ON ITS ACTUAL INCREMENTAL COSTS OF MOVING INTERCONNECTING AND OPERATING THOSE UNITS.
PLUS A 10%, UH, INCENTIVE FACTOR OR AN ADDER ON SPECIFIC COST CATEGORIES THAT ARE ENUMERATED IN THE AGREEMENT.
WE WOULD REQUIRE LIFECYCLE TO DOCUMENT ALL OF ITS EXPENSES, AND ALL OF THOSE WILL BE SUBJECT TO REASONABLENESS REVIEW, JUST LIKE AN RMR CONTRACT.
SO WE'D BE SETTLING THESE, UH, THIS CONTRACT THROUGH LIFECYCLE'S QSE, AND AT THIS POINT WE ANTICIPATE THAT THAT WOULD BE CPS ENERGY.
UM, AND WE WILL TALK MORE ABOUT THOSE, UH, THOSE COSTS AND THAT ARRANGEMENT HERE IN JUST A LITTLE BIT.
UH, THE 10% ADDER THAT I MENTIONED IS CONSISTENT WITH THE FRAMEWORK FOR RMR AND THE PROTOCOLS WHERE THERE IS A 10% INCENTIVE
[00:35:01]
FACTOR ON, UH, ON CERTAIN KINDS OF COSTS.I SHOULD CLARIFY THOUGH, THIS WOULD NOT BE A TRADITIONAL RMR OR MRA AGREEMENT.
UM, THE, THE DRAFT AGREEMENT WE'RE ENVISIONING IS, IS CALLED AN EMERGENCY GENERATION SERVICES AGREEMENT.
UM, AND THAT WOULD B BORROW VERY HEAVILY FROM THE RMR AND MRA FRAMEWORKS TO ACHIEVE A FEASIBLE, RELIABLE AND COST-EFFECTIVE ALTERNATIVE SOLUTION, UM, WITH SIGNIFICANT COST CONTROLS.
AS I MENTIONED BEFORE, UM, THIS SOLUTION IS ADOPTED UNDER OUR GENERAL RELIABILITY AUTHORITY UNDER PIRA, UM, WHICH REQUIRES US TO ENSURE THE RELIABILITY AND ADEQUACY OF THE REGIONAL ELECTRICAL NETWORK AND NOT UNDER THE TRADITIONAL R-M-R-M-R-A FRAMEWORK.
SO THE PROTOCOLS DO NOT EXPLICITLY CONTEMPLATE THIS SORT OF ARRANGEMENT.
HOWEVER, THERE IS CLEARLY A RELIABILITY NEED, AND WE BELIEVE THAT OUR STATUTORY AUTHORITY, UH, ALSO RECOGNIZE IN PEC RULES EXPLICITLY IS CERTAINLY BROAD ENOUGH TO, UM, ALLOW US TO ADDRESS THIS SITUATION.
SO WE CONTINUE TO WORK WITH LIFECYCLE AND CPS ENERGY ON THE DETAILS OF THIS ARRANGEMENT.
NOW LET'S TALK ABOUT THE COST OF THIS PROPOSAL AT THIS POINT, CURRENTLY, THE, THE TOTAL ESTIMATED COST FROM LIFECYCLE FOR A FULL TWO-YEAR CONTRACT.
AND NATHAN, WE'VE GOT A TECHNICAL ISSUE ON THE WEBCAST.
WE'LL HAVE TO PAUSE FOR A SECOND.
ARE WE GOOD TO GO? OKAY, WE ARE.
UH, NATHAN, I BELIEVE THAT, UH, JOHN SWENSON HAD A QUESTIONER.
THIS PROBABLY IS A QUESTION FOR WOODY.
WHAT WOULD THE DISPATCH PRIORITY BE OF BRO THREE VERSUS THESE UNITS, GIVEN THE LONG LEAD TIME TO START UP? WOULD BRO THREE BE THE FIRST TO DISPATCH OR THE LAST WELL, BROING THREE WOULD BE THE FIRST TO DISPATCH IF WE, IF WE KNEW ABOUT IT AHEAD OF TIME.
YEAH, SO YOU HAD ENOUGH LEAD TIME.
BUT IF YOU HAD A FORCED OUTAGE WITH AN HOUR TO SPARE, WE WOULDN'T HAVE THAT OPTION, SO YOU'D HAVE TO DO THE LIFECYCLE.
ALRIGHT, ANYTHING, PLEASE CONTINUE.
SO WITH RESPECT TO THE COST, IF I COULD GET YOU TO PAUSE FOR A MINUTE FOR THE PUBLIC, THE REASON WE SUSPENDED FOR A MINUTE IS WE DROPPED OUR FEED, UH, TO THE PUBLIC DROPPED, AND SO NOW IT'S BACK UP AND WE'RE RESUMING.
SO WITH RESPECT TO THE COST OF THE LIFECYCLE SOLUTION, UM, THE COST FIGURES THAT WE'VE RECEIVED FROM LIFECYCLE LIFECYCLE SO FAR, THE ESTIMATED COST IS ABOUT $29 MILLION IN TOTAL.
AND THE MOST SIGNIFICANT COST CATEGORIES, UH, THAT WE'VE SEEN SO FAR INCLUDE LABOR AND ABOUT 19 AND A HALF MILLION DOLLARS.
AND THAT INCLUDES, UH, HIGHLY SPECIALIZED, HIGHLY SKILLED LABOR, UH, WITH, UH, FOLKS THAT ARE FAMILIAR WITH RUNNING THESE SPECIFIC ASSETS AND ALSO, UH, FOLKS THAT WOULD BE ABLE TO RUN THEIR REMOTE OPERATION CENTER AND CONTROL THESE ASSETS REMOTELY.
SO, UH, THIS LABOR WOULD HAVE TO BE PROCURED FOR THE MOST PART, USING THIRD PARTY SERVICES.
UM, AND WHICH ADDS TO THE EXPENSE HERE.
UM, AND, AND WITH THE SHORTER TERM HERE, UH, WITH TWO YEARS OR LESS PERHAPS FOR THIS ARRANGEMENT, UM, THAT ADDS TO
[00:40:01]
THE INCREMENTAL COST PER, UH, FTE, THAT LIFECYCLE'S HAVING TO HIRE.UM, ANOTHER SIGNIFICANT COST BUCKET HERE IS THE TRANSFER OF THE GENERATORS FROM HOUSTON TO SAN ANTONIO.
WE EXPECT THAT THAT'S GONNA BE ABOUT 2 MILLION EACH WAY FOR A TOTAL OF $4 MILLION.
UM, THE FUEL STORAGE AND INFRASTRUCTURE COSTS ARE ABOUT 1.4 MILLION.
THAT'S DIESEL TANKS AT EACH OF THESE, UH, EACH OF THESE SITES WE'RE TALKING ABOUT, UM, NINE SITES AROUND THE CPS ENERGY, UH, SERVICE TERRITORY.
AND THEN, UM, AT $1.6 MILLION FOR A NEW REMOTE OPERATION CENTER, UM, THAT WOULD ESTABLISH, UM, ALL THE INFORMATION AND COMMUNICATION CAPABILITY THAT THEY NEED TO BE ABLE TO, UM, TO COMMUNICATE WITH CPS ENERGY, THE QUEASY, AND TO DISPATCH THESE RESOURCES.
UH, OUR ES THE ESTIMATE THAT WE HAVE BEEN PROVIDED SO FAR FOR THE INITIAL FUEL FILL OF THE DIESEL TANKS IS ABOUT $800,000.
UM, AND SO THEY'RE, UH, THE, THE IDEA WOULD BE TO FILL UP THE TANKS AND THEN IF WE DEPLOY THEM, WE WOULD HAVE THEM REFILL THE TANKS AND PAY THEM FOR THAT INCREMENTAL COST.
AND THEN AT THE END, IF THERE'S SALVAGE VALUE TO THE FUEL, IF IT CAN BE CLEANED UP AND SOLD, THEN WE WOULD ALSO RECOUP THAT COST AT THE END AS WELL.
SO THE TOTAL PROJECTED COST, UH, BASED ON OUR, OUR ANTICIPATED DISPATCH OF THESE UNITS OVER A TWO YEAR PERIOD WOULD BE ABOUT $2.1 MILLION ON TOP OF THAT, UH, THAT INITIAL FUEL FILL.
SO ON THE CPS ENERGY SIDE, THEY, THEY WOULD ALSO BE INCURRING COSTS TO INTERCONNECT THESE RESOURCES TO PROVIDE QUEASY SERVICES.
AND, UH, SO, SO THAT TOTAL IS ABOUT $23 MILLION.
AND THE BIGGEST COST CATEGORIES WE'RE SEEING THERE, UH, INCLUDE THE CONSTRUCTION OF THE INTERCONNECTION FACILITIES IS ABOUT $9 MILLION.
UM, REMOVING THOSE FACILITIES AT ABOUT $2.4 MILLION, THAT'S A LOT OF, UH, EQUIPMENT, SPECIALIZED EQUIPMENT, THEY'VE GOTTA BRING IN SPECIALIZED LABOR.
UM, AND THEN WE'VE GOT METERING TELEMETRY EXPENSES, UM, SETTING UP METERING, SETTING UP, UM, NEW COMMUNICATIONS PATHWAYS, ABOUT $4.3 MILLION.
AND THEN FINALLY, UM, CPS ENERGY HAS WHOLESALE DISTRIBUTION SERVICE TARIFF CHARGES, UM, UNDER THEIR MUNICIPAL TARIFF OF ABOUT $5.4 MILLION, IS OUR UNDERSTANDING.
AND CPS ENERGY'S REPRESENTATION THAT THOSE WOULD BE ASSESSED TO ANY OTHER THIRD PARTY GENERATOR LOCATING IN THEIR SERVICE TERRITORY.
SO, UM, THAT'S HOW YOU GET TO THE 23 MILLION.
YOU ADD ALL THOSE TOGETHER, AND OUR PROJECTED TOTAL COST OF THE LIFECYCLE SOLUTION IS ABOUT $54 MILLION.
NOW, ONE SIGNIFICANT ISSUE THAT WE HAVE, UM, ENCOUNTERED IN TALKING WITH LIFECYCLE IS, UM, AIR EMISSIONS PERMITTING.
UM, SO THUS FAR, UM, WE HAVE, UH, OUR DISCUSSIONS WITH, WITH LIFECYCLE NOT YIELDED, UM, A SOLUTION TO THIS PROBLEM.
THE, THE KEY ISSUE IS THIS, THAT IN THE HOUSTON AREA, THESE ARE SUBJECT TO WHAT'S CALLED A PERMIT BY RULE UNDER TCEQ RULES.
AND, AND THAT'S BECAUSE THEY SERVE AS BACKUP GENERATION THAT WOULD ONLY FIRE UP WHEN, UM, THEY'RE ISLANDED FROM THE, THE PRIMARY GRID.
BUT OUR USE CASES IS QUITE A BIT DIFFERENT.
WE WANT THOSE TO BE CONNECTED TO THE GRID TO HELP ALLEVIATE THE LOADING ON THE IOL.
AND SO WE CAN'T HAVE THESE JUST OPERATING AS BACKUP GENERATION WITHOUT A VERY COMPLICATED RECONFIGURATION OF CPS ENERGY SYSTEM.
AND, AND SO THAT'S NOT REALLY A VIABLE SOLUTION.
UM, AND BECAUSE THEY'RE GRID CONNECTED, THE TQS RULES SAY THAT THEY'VE GOTTA MEET CERTAIN CRITERIA FOR, FOR PERMITS.
OUR INITIAL, UM, ASSESSMENT IS THAT THESE MAY NOT MEET THE CRITERIA FOR THE STANDARD AIR PERMIT.
SO WE ARE IN DISCUSSIONS WITH TCQ AND LIFECYCLE, TRY TO SORT OUT HOW TO DEAL WITH THIS ISSUE.
PERHAPS THERE'S A SOLUTION, UM, IN, IN TERMS OF ENFORCEMENT DISCRETION.
PERHAPS THERE'S A SOLUTION IN TERMS OF A CASE BY CASE PERMIT THAT COULD BE ADDRESSED FOR THIS SPECIFIC USE CASE HERE, WHERE THESE WOULD ONLY BE USED DURING A LIMITED NUMBER OF EMERGENCY, UM, CIRCUMSTANCES OVER THE COURSE OF A COUPLE OF YEARS.
OUR PROJECTIONS, SO SHOW THAT WE'D HAVE ABOUT FOUR HOURS OF IOL EXCEEDANCES IN 2025 WHEN WE NEED TO USE THEM, AND ABOUT 42 OR 43 HOURS IN 26 WHEN WE NEED TO USE THESE UNITS.
SO THIS IS A FAIRLY LIMITED USE CASE, UM, THAT, THAT WE EXPECT MAY JUSTIFY, UM, SOME SORT OF SPECIAL PERMITTING APPROACH.
BUT THAT IS SOMETHING THAT WE ARE PURSUING DISCUSSIONS WITH TCUQ, UH, IN EARNEST AT THIS POINT, WE ARE REALLY HOPING WE CAN DEVISE SOME SORT OF A STATE LEVEL SOLUTION TO THIS ISSUE.
BUT WE ARE AWARE THAT IF FOR SOME REASON THE STATE OF TEXAS CANNOT IDENTIFY A SOLUTION TO MAKE THIS WORK, UH, ONE APPROACH WOULD BE TO DISCUSS WITH THE SECRETARY OF ENERGY, UH, AN ORDER UNDER SECTION 2 0 2 C OF THE FEDERAL POWER ACT.
WE HAVE, UH, INVOKED THAT AUTHORITY IN, UM, AN ISOLATED NUMBER OF PREVIOUS CASES INVOLVING, UM, ACTUAL OR ANTICIPATED EEA CAPACITY SHORTAGE SITUATIONS.
THIS WOULD BE A LITTLE BIT DIFFERENT, UH, BECAUSE WE'RE TALKING ABOUT AN ANTICIPATED TRANSMISSION CASE, BUT WE BELIEVE THAT THE FEDERAL POWER ACT WOULD BE BROAD ENOUGH TO ACCOMMODATE, UM, BYPASSING A STATE PERMITTING REQUIREMENT IN THIS VERY, UM, EXTENUATING CIRCUMSTANCE INVOLVING AN EMERGENCY.
[00:45:01]
EGG ONE AND TWO RMR OPTION.SO THIS IS A TRADITIONAL RMR. NATHAN, COULD I INTERRUPT YOU JUST FOR ONE SECOND AND MAKE A POINT ON THAT LAST SLIDE? THAT, AND IF YOU, IF YOU, IF YOU DON'T MIND BACKING UP JUST FOR A SECOND.
SO WHILE THIS IS THE EXPECTED POTENTIAL USE PROFILE UNDER THESE CIRCUMSTANCES, THE RMR REQUIREMENTS ARE NOT LIMITED BY THIS, AND THAT'S AN IMPORTANT POINT.
THE PERFORMANCE CHARACTERISTICS OF THE SOLUTION, WHETHER IT'S THE RMR OR THE MRA SOLUTIONS THAT COME IN, HAVE TO BE ABLE TO PERFORM TO FULL DURATION REQUIREMENTS WITHOUT LIMITS IN ORDER TO MIRROR THE PERFORMANCE OF WHAT, WHAT THEY ARE REPLACING.
AND SO, WHILE THIS IS THE EXPECTED PROFILE FOR THE PURPOSE OF AIR PERMITTING AND FOR EXPECTED OPERATIONS, THIS DOES NOT LIMIT THE ACTUAL REQUIREMENTS THAT COULD BE OUT THERE.
AND THAT'S AN IMPORTANT POINT TOO.
SO AS YOU LOOK AT POTENTIAL SOLUTIONS FOR AN RMR AND MRA, THEY ARE REQUIRED TO BE ABLE TO PERFORM FOR LONG DURATION AND BE ABLE TO FULLY REPLACE THE RESOURCES THAT THEY ARE SUBSTITUTING FOR.
AND SO I JUST MAKE MAKE SURE THAT THAT POINT IS CLEAR THAT THIS IS NOT A LIMIT OR SOMETHING THAT WOULD CHARACTERIZE WHAT THE PERFORMANCE OF THE AN MRA UNIT WOULD HAVE TO BE ABLE TO, UM, WOULD BE LIMITED BY WHAT THEIR EXPENSIVE UNITS TO RUN.
SO YOU WOULDN'T RUN THEM UNLESS YOU REALLY HAD TO.
THEY STILL WOULD BE LAST RESORT.
SO ON, ON THE BROWN EGG ONE AND TWO, UH, RMR OPTION, THIS WILL BE A TRADITIONAL RMR AGREEMENT.
SO THE CONTEXT THERE IS THAT, IS THAT WE WOULD REIMBURSE CPS ENERGY FOR THE COST OF INSPECTING, REPAIRING AND OPERATING UNITS ONE AND TWO, VERY SIMILAR TO WHAT WE'RE GONNA DO FOR UNIT THREE.
UM, SO WE PAY CPS ENERGY, ITS ACTUAL COSTS PLUS A 10% INCENTIVE FACTOR ON EVERYTHING OTHER THAN, UH, CAPITAL COST AND FUEL.
ERCOT WOULD HAVE A RIGHT TO TERMINATE THAT AGREEMENT WITH 90 DAYS NOTICE.
UM, WE ARE CONTEMPLATING A 30 DAY NOTICE PROVISION FOR THE LIFECYCLE AGREEMENT.
AND, UM, AND, AND HERE'S, HERE'S WHAT THOSE UNITS LOOK LIKE.
THESE ARE ABOUT, UH, 2 17, 2 30, UM, UH, SUMMER MAX RATING.
I GUESS THE, THE UPDATED RATING WE HAVE FOR UNIT TWO IS ONLY 175 MEGAWATTS.
UM, AND THESE ARE BOTH 60-YEAR-OLD, ABOUT 60-YEAR-OLD UNITS.
UM, CPS ENERGY HAS, HAS TOLD US THAT THESE ARE GONNA NEED LENGTHY OUTAGES AND EXPENSIVE, UH, INSPECTIONS AND REPAIRS TO ENSURE THAT THEY CAN BE SAFELY OPERATED.
YOU KNOW, CPS ENERGY TIMED THESE SUSPENSIONS TO BE, YOU KNOW, WHEN THEY WERE GONNA HAVE TO, TO UNDERTAKE THIS VERY EXPENSIVE MAINTENANCE.
SO THEY, THEY TIMED THAT TO HAPPEN RIGHT BEFORE THEY WOULD HAVE TO DO THOSE, UH, INSPECTIONS BECAUSE, UM, THAT, THAT MADE A LOT OF, UH, COMMERCIAL SENSE.
AND SO, UH, THE, THE DOWNSIDE OF THAT, OF COURSE, IS THAT WE WOULD HAVE TO INCUR THAT COST TO GET THESE UNITS BACK WHERE THEY WOULD NEED TO GO IN THE SAME WAY THAT CPS ENERGY ITSELF WOULD'VE HAD TO INCUR THAT SORT OF COST, UM, HAD IT DECIDED TO MAINTAIN OPERATION OF THOSE UNITS.
UM, SO ANOTHER IMPORTANT THING TO NOTE HERE IS THAT THESE ARE GONNA HAVE TO BE, UH, INSPECTED, UH, CONSECUTIVELY.
THEY CANNOT BE DONE AT THE SAME TIME.
THAT LEADS US REALLY TO THIS, THIS NEXT SLIDE WHERE WE HAVE A SUMMARY OF THE TIMELINE OF THE OUTAGES AND THE INSPECTIONS OF THE THREE UNITS.
OF COURSE, WE'VE JUST SIGNED AN AGREEMENT, UM, FOR UNIT THREE, THAT OUTAGE IS GOING TO START, UM, NEXT MONDAY, AND, UM, IS PROJECTED IN A BEST CASE SCENARIO TO LAST THROUGH EARLY MAY.
UM, NOW IF CPS ENERGY UNCOVERS SIGNIFICANT, UH, DAMAGE OR WEAR, UH, THEY WILL NEED TO ADDRESS THAT AND THAT COULD EXTEND THE DURATION OF THAT, UH, INSPECTION AND OUTAGE.
AND DEPENDING ON THE NATURE OF THAT, UH, IN INSPECTION, THEY MAY HAVE TO EXTEND THE TIMELINE, THE START TIME FOR THE INSPECTIONS FOR UNITS ONE AND UNITS TWO.
SO THERE'S SOME CONTINGENCY HERE ON THE TIMING OF WHEN UNITS ONE AND TWO COULD TAKE THEIR OUTAGE AND INSPECTIONS AND REPAIRS BASED ON, UH, HOW LONG IT TAKES FOR A CPS ENERGY TO, UH, TO GET UNIT THREE OUTAGE INSPECTION REPAIRS DONE.
YEAH, AND, AND NATHAN, JUST TO ADD, I THINK EVEN ON UNIT THREE, YOU KNOW, THIS WAS A BEST CASE SCENARIO.
UNIT THREE IS NOW BEST CASE, 70 DAYS I BELIEVE, AND CAN GO UP TO 90 DAYS WITH AN EXPECTATION THAT, YOU KNOW, CPS WILL, THROUGH OUR COMMUNICATION ADDENDUM AS PART OF THE RMR AGREEMENT WILL KEEP UP UPDATING US.
BUT THAT JUST SHOWS YOU THAT THIS IS SUBJECT TO A LOT OF VARIABILITY.
AND AS NATHAN INDICATED WITH, YOU KNOW, YOU COULDN'T START TO WORK ON UNIT ONE UNTIL YOU WERE COMPLETELY DONE WITH UNIT THREE.
SO RIGHT NOW WE'RE LOOKING AT, YOU KNOW, BEST CASE OF 70 DAY SCENARIO FOR UNIT THREE, WHICH COULD CONTINUE TO PUSH OUT, DEPEND AS THEY START TO OPEN UP THE UNIT HERE NEXT WEEK AND, AND START TO UNDERSTAND THE TYPE OF WORK THAT THEY NEED.
CHAD IS THE CONSTRAINT ON THAT SKILLED LABOR.
THAT'S MY UNDERSTANDING IS THAT THIS IS ALL BEING DONE THROUGH, YOU
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KNOW, OUTSIDE SERVICES COMING IN, WHICH IS A, A MAJOR FACTOR OF, OF THE COST.WE HAVE CPS HERE IF THEY WANNA OBVIOUSLY COME UP AND DIRECTLY ANSWER YOUR QUESTION, JOHN, BECAUSE THEY'RE, THEY'RE THE ONES DEALING WITH THE VENDOR SPECIFICALLY ON THAT.
SO IS THERE A REPRESENTATIVE FROM CPS? HELLO, UM, ANDREW O OLIO, CPS ENERGY BUSINESS MANAGEMENT STRATEGIST FOR THE ENERGY SUPPLY TEAM.
UM, IT IS A FUNCTION OF SERVICES THAT IS A CONSTRAINT ON DOING THE OUTAGES CONSECUTIVELY, BUT IT'S ALSO A FUNCTION OF THE SPACE AND THE TURBINE FLOOR.
SO THERE'S ONLY A FINITE AMOUNT OF SPACE TO WHEN WE OPEN OUR MAJOR EQUIPMENT APART, NAMELY THE TURBINE AND THE GENERATOR TO SPREAD OUT THOSE PARTS AND BE ABLE TO CONDUCT THAT MAINTENANCE SAFELY AND THEN PUT EVERYTHING BACK TOGETHER.
SO THAT'S KIND OF THE OTHER MAIN CHALLENGE.
I THINK THAT'S A GOOD POINT, UM, THAT, THAT UPDATE ON THE TIMING OF THAT UNIT THREE INSPECTION WAS INFORMATION THAT WE JUST RECEIVED THIS WEEK.
AGAIN, AS CPS ENERGY HAS KIND OF DRILLED DOWN TO UNDERSTAND BETTER WHAT THEY'RE GOING TO NEED TO BE DOING HERE FOR THE NEXT COUPLE OF MONTHS, THAT INFORMATION IS, IS GONNA CHANGE.
AND SO THAT EXPECTATION HAS CONTINUED TO SHIFT.
I THINK THAT JUST UNDERSCORES THE RISK HERE THAT WE'RE DEALING WITH BECAUSE OF THAT COMMONALITY OF EQUIPMENT AND, AND THE, THE NEED FOR, UM, FOR SPACE THAT THERE COULD BE, YOU KNOW, FURTHER KNOCK ON DELAYS TO THE OUTAGES OF UNITS ONE AND TWO, IF, YOU KNOW, UNIT THREE TAKES LONGER.
SO THAT'S, THAT'S SOME ADDITIONAL RISK YOU SEE HERE.
THAT UNIT ONE WILL BE IS UNDER A BLUE SKY SCENARIO, UM, ONLY UNTIL UNTIL EARLY JULY.
UH, SO ANY KIND OF, UH, DELAY IN THAT IF WE, IF WE ACTUALLY BAKE IN THE EXTRA 10 DAYS THAT WE'VE BEEN RECENTLY NOTIFIED OF, UM, THAT'S ALREADY GOT US OUT TO, YOU KNOW, JULY THE 12TH.
SO, UM, WE'RE ALREADY TALKING ABOUT GETTING INTO THAT SUMMER PEAK AREA THAT IS A, A HIGH RISK SITUATION ALREADY.
UM, JUST SOMETHING TO KEEP IN MIND AS WE, AS WE THINK THROUGH THESE, UH, PROS AND CONS OF DIFFERENT APPROACHES.
SO LET'S, LET'S LOOK AT THE, THE COST ESTIMATES.
WE TALKED, UM, EARLIER ABOUT, UM, THE, THE $54 MILLION LIFECYCLE COST.
YOU CAN SEE THAT TOTAL THERE ON THE RIGHT COLUMN.
UM, AS YOU CAN SEE, MOST OF THAT COST IS, IS FRONT LOADED IN THAT FIRST YEAR, AND THAT'S BECAUSE THERE'S A LOT OF, UH, SUNK COSTS THAT HAVE TO BE UNDERTAKEN TO MOVE THE GENERATORS TO GET THEM SET UP TO, TO BUY THE INTERCONNECTION FACILITIES.
UM, A LOT OF, A LOT OF UPFRONT COSTS THERE.
IT'S ONLY ABOUT HALF THE COST FOR YEAR TWO OF OPERATION, UH, EVEN THOUGH THE ANTICIPATED DISPATCH OF THE UNITS IS SIGNIFICANTLY GREATER, UM, IN THAT SECOND YEAR.
SO BY COMPARISON UNITS ONE AND TWO WOULD COST, UM, COLLECTIVELY ABOUT $59 MILLION UNDER OUR PROJECTED DISPATCH SCENARIO.
AGAIN, A SIGNIFICANT AMOUNT OF THAT COST, UH, IS, IS UPFRONT WITH THOSE, UM, OUTAGES AND INSPECTIONS, UM, REALLY INCREASING THAT, UH, THAT EXPENSE CONSIDERABLY IN YEAR ONE COMPARED TO THE, THE LOWER INCREMENTAL COST OF OPERATION IN YEAR TWO.
SO WHEN YOU TAKE THAT COST INFORMATION, UM, AND YOU COMPARE IT TO THE VALUE OF THE BENEFITS WE RECEIVE, YOU CAN REALLY START TO SEE THE RELATIVE, UM, COST BENEFIT ANALYSIS SHAKE OUT.
SO THIS SLIDE IS INTENDING TO KIND OF CAPTURE, UM, AND, AND QUANTIFY WHAT THAT BENEFIT COST, UH, RATIO REALLY IS.
SO TO CALCULATE THE BENEFITS, AND THIS IS REALLY UNIQUE TO THE, THE BENEFIT OF RELIEVING THE IOL, UM, WE, WE CALCULATED, WE TOOK THE VALUE OF LOSS LOAD AND MULTIPLIED THAT BY, UM, THE AVOIDED AMOUNT OF LOAD SHED THAT WE WOULD RECEIVE.
WE WOULD SEE IF THESE UNITS WERE HERE TO HELP ALLEVIATE, UM, THESE OVERLOADS ON THE SOUTH TEXAS EXPORT IRL COMING INTO THE SAN ANTONIO AREA.
UM, SO YOU CAN SEE HERE THAT, UM, THE VALUE FOR BOTH THE LIFECYCLE OPTION ON THE RIGHT AND THE BROWNING ONE AND TWO OPTION ON THE LEFT, IN BOTH CASES, BOTH, BOTH OF THOSE APPEAR TO BE COST EFFECTIVE SOLUTIONS IN THEIR OWN RIGHT.
UM, BUT YOU'LL SEE THAT THE VALUE OF THE AVOIDED LOAD SHED UNDER THE LIFECYCLE OPTION IS, UH, IS A LITTLE BIT GREATER THAN IT IS UNDER THE BROWNING SOLUTION.
AND SO EVEN THOUGH THE TOTAL MEGAWATT CAPACITY IS A LITTLE BIT LOWER FROM THE LIFECYCLE SOLUTION AT SUMMER PEAK, THESE ARE MUCH MORE NIMBLE RESOURCES THAT CAN BE DEPLOYED TO ADDRESS THESE EXCEEDANCES MUCH MORE READILY.
THEY OBVIOUSLY HAVE A 10 MINUTE COMPARED TO A 10 HOUR STARTUP TIME, UM, AND THEY ALSO HAVE SHORTER MINIMUM RUNTIME.
SO THAT RELIABILITY VALUE REALLY STARTS TO SHOW UP AND YOU SEE THAT, UH, HERE IN THESE NUMBERS, UM, COMPARED TO A LOWER COST OF OPERATION PROJECTED UNDER THAT DEPLOYMENT SCENARIO OVER A TWO YEAR HORIZON.
SO THE, THE DELTA THERE IN, UM, THE BENEFIT ABOVE THE COST IS, IS $23 MILLION FOR A LIFECYCLE AND
[00:55:01]
$14 MILLION FOR A BROWN EGG ONE AND TWO, THESE FIGURES INCLUDE THE COST OF FUEL FROM PROJECTED DISPATCH.AND IT IS IMPORTANT TO KEEP IN MIND THAT LIFECYCLE BEING FIRED ON DIESEL IS RUNNING A MORE EXPENSIVE FUEL, UM, THAN THAN THE NATURAL GAS THAT THE UNITS ONE AND TWO WOULD CONSUME.
NEVERTHELESS, IT IS STILL A SIGNIFICANTLY CHEAPER SOLUTION, EVEN ALL THE WAY UP TO MUCH HIGHER LEVELS OF DISPATCH.
YOU'D HAVE TO GET, YOU KNOW, UH, SEVERAL TIMES, UM, GREATER DISPATCH IN ORDER TO GET TO A POINT WHERE THE BROWNING ONE AND TWO SOLUTION BECOMES INCREMENTALLY CHEAPER THAN LIFECYCLE.
SO THERE'S STILL A LOT OF HEADROOM THERE BEFORE LIFECYCLE BECOMES, UM, A SUBPAR DEAL COMPARED TO BROWN ONE AND TWO FROM AN INCREMENTAL COST PERSPECTIVE.
UM, UH, SO I, I THINK ONE THING TO HIGHLIGHT HERE IS THAT NEITHER ONE OF THESE SOLUTIONS ENTIRELY ELIMINATES THE RISK OF LOAD SHEDDING DUE TO IOL VIOLATIONS.
WE ARE STILL SEEING SOME EXCEEDANCES THAT GO BEYOND WHAT THESE UNITS CAN CONTRIBUTE.
UM, SO THIS IS NOT GONNA COMPLETELY ELIMINATE THAT RISK, BUT IT WILL HELP TO, UM, TO MITIGATE THAT RISK OF IOL EXCEEDANCES IN TERMS OF PROBABILITIES.
I MEAN, WHAT, WHAT IS THE PERCENTAGE THAT'S NOT COVERED BY THIS SOLUTION? DOES THAT MAKE SENSE? I MEAN, THE BASE CASE IS YOU DON'T HAVE THESE, THIS SOLUTION, THE LIFECYCLE SOLUTION AT ALL.
SO YOU HAVE A PROBABILITY OF LOAD SHE X PERCENT OF THE TIME, AND THEN YOU ADD THESE UNITS AND THAT REDUCES THAT.
WHAT DOES THAT LEAVE UNCOVERED? SO I'D LIKE TO INVITE MAYBE THE FOLKS FROM OUR PLANNING TEAM IF THEY CAN TO, UH, TO AT LEAST, UH, ANSWER THAT QUESTION OR ATTEMPT TO ANSWER THAT QUESTION.
I KNOW THAT'S, THAT'S SOMETHING THAT HAS BEEN EVALUATED AS PART OF OUR ANALYSIS.
I MEAN, IT'S BASED ON LOAD, IT'S BASED ON TEMPERATURES, IT'S BASED ON, UM, YOU KNOW, WHAT, WHAT'S HAPPENING WITH THE REST OF THE GRID THERE, THERE'S A TON OF FACTORS THAT GO INTO THIS, BUT INDEED, I KNOW IT'S HARD TO BOIL IT DOWN TO A PERCENTAGE.
YEAH, IF YOU'LL GIVE US A FEW MINUTES, WE'LL, WE'LL UP.
ONE OTHER THING I WANTED TO KIND OF HIGHLIGHT IS WE HAVE A REALLY GOOD IDEA OF THE LIFECYCLE COST FOR UNITS ONE AND TWO.
YOU KNOW, WE HAVE THE COST RIGHT NOW THAT CPS HAS GIVEN US, JUST AS YOU'VE SEEN WITH UNIT THREE GO UP AS WE GET CLOSER FOR CPS WORKING WITH THE VENDORS AND UNDERSTANDING THAT LABOR COSTS THAT UNIT THREE COST HAS GONE UP.
SO WHAT WE'RE SHOWING HERE IS COSTS THAT HAVE BEEN GIVEN TO US OVER, OVER THE LAST COUPLE MONTHS BY CPS FOR UNITS ONE AND TWO.
IF WE ULTIMATELY MOVE FORWARD WITH UNITS ONE AND TWO, BECAUSE WE'RE NOT ABLE TO RESOLVE THE EMISSIONS ISSUES ONE WAY OR ANOTHER, I WOULD EXPECT THOSE COSTS TO GO UP AS THEY START TO ACTUALLY GET CLOSER IN TIME AND SIGN AGREEMENTS WITH UNITS ONE AND TWO.
THERE HASN'T BEEN THE SAME AMOUNT OF WORK FOCUSED ON UNITS ONE AND TWO FROM A COST PERSPECTIVE BECAUSE WE'VE BEEN WORKING WITH LIFECYCLE AND CPS ENERGY ON OUR PREFERRED SOLUTION, WHICH IS THE MOBILE GENERATION SOLUTION.
UM, IF WE HAD TO PIVOT, WE WOULD OBVIOUSLY BE SPENDING A LOT OF TIME WITH CPS ENERGY TO REALLY UNDERSTAND, YOU KNOW, IS THAT THE TRUE COST OR IS IT GONNA INCREASE AS THEY START TO LOOK AT THEIR OUTSIDE VENDORS TO COME IN FOR AN INSPECTION.
SO I JUST WANTED TO KIND OF MAKE SURE THE BOARD IS AWARE THAT, THAT ALTHOUGH WE'RE DOING THE BEST TO COMPARE ACTUAL COSTS, YOU KNOW, MY EXPECTATION IS THAT YOU WOULD SEE UNITS ONE AND TWO LIKELY GO UP IN COST IF WE ENDED UP MOVING FORWARD TO ENGAGE THOSE AS R AND R AGREEMENTS.
BY THE WAY, WE'RE TOSSING AROUND THE WORD COST A LOT.
AND SO I THINK IT'S IMPORTANT TO, TO SAY WHO PAYS THE COST AND WHAT IS THE IMPACT ON A, ON AN AVERAGE MONTHLY BILL.
SO IF WE CAN, WHERE WHERE DOES THE COST, WHO'S, WHO PAYS FOR THE COST? THE COSTS ARE PAID ON A, ARE ALLOCATED ON A LOAD RATIO SHARE TO ALL CONSUMERS IN TEXAS, RIGHT? BE BECAUSE THIS IS A TRANSMISSION RELIABILITY CONCERN.
AND THE SOLUTIONS UNDER THE R-M-R-M-R-A FRAMEWORK ARE SOLUTIONS THAT ARE PAID FOR BY ALL CONSUMERS.
'CAUSE ALL CONSUMERS BENEFIT FROM RESOLVING THE RELIABILITY ISSUE, RIGHT? SO IT'S NOT JUST SAN ANTONIO CUSTOMERS THAT PAY, IT'S NOT JUST HOUSTON CUSTOMERS THAT PAY.
IT'S ALL TEXANS THAT PAY TO RESOLVE THIS RELIABILITY CONCERN.
THE RING REASON TO BRING THE QUESTION UP IS, I THINK IT'S IMPORTANT FOR THE AUDIENCE TO KNOW THAT THAT $54 MILLION IS THE COST OF THE, OF THE LIFECYCLE SOLUTION ON A $20 BILLION MARKET, WHICH IS ROUGHLY FOUR TENTHS OF A PERCENT.
SO JUST, I, I THINK WE NEED TO KEEP THIS IN PERSPECTIVE.
YEAH, $54 MILLION IS A BOATLOAD OF MONEY, BUT THE, BUT IT'S FOUR TENTHS OF A PERCENT ON AN AVERAGE BILL AND THAT IS OFFSETTING A MUCH HIGHER COST OF A LOAD SHE EVENT.
SO I THINK IT'S IMPORTANT THAT
[01:00:01]
EVERYBODY KEEPS THAT IN MIND AS WE GO THROUGH THIS DISCUSSION.WHAT, AND WHILE WE'RE, UM, WAITING FOR THE PLANNING INFORMATION, WE'LL JUST PROCEED THROUGH THE SLIDES HERE AND PERHAPS COME BACK TO THAT, THAT INQUIRY LATER.
UM, ONE THING TO HIGHLIGHT HERE IS THAT THERE, THERE COULD BE POTENTIAL SAVINGS TO EARLY TERMINATION, AND THOSE SAVINGS WE BELIEVE WOULD BE GREATER UNDER THE LIFECYCLE APPROACH VERSUS THE BROWNING ONE AND TWO APPROACH.
WHAT WE HAVE, I THINK TENTATIVELY AGREED TO WITH LIFECYCLE IS A 12 MONTH, UM, UH, GUARANTEED MINIMUM CONTRACT.
AND THEN BEYOND THAT, WE WOULD HAVE THE RIGHT TO TERMINATE WITH 30 DAYS NOTICE.
AND, UM, AND SO WE'VE KIND OF COSTED OUT THREE DIFFERENT SCENARIOS HERE.
IF WE TERMINATE AT 15 MONTHS, AT 18 MONTHS AND 2018 MONTHS, HOW MUCH MONEY WOULD WE SAVE UNDER THE LIFECYCLE OPTION VERSUS THE BROWNIE ONE AND TWO OPTION? UM, THESE FIGURES DO NOT INCLUDE THE FUEL COST LIKE THE PREVIOUS SLIDE DID, BUT, UH, BASED ON THE BUDGETED COST, WHICH I THINK IS, UH, IS THE CRITICAL FACTOR THAT WE'RE LOOKING AT HERE, UM, WE CAN SEE, UM, AVOIDED COSTS OF, OF ABOUT $5 MILLION MORE FOR THE LIFECYCLE OPTION UNDER A 15 MONTH TERMINATION, ABOUT $3 MILLION MORE FOR AN 18 MONTH, UH, TERM, AND ABOUT $2.3 MILLION MORE FOR A 22 MONTH TERM.
AND THAT, THAT LAST TERM REALLY CORRESPONDS TO THE TIMELINE, UM, THAT WE'RE ANTICIPATING BASED ON, UM, THE, THE OUTSIDE ESTIMATE THAT WE'VE RECEIVED FROM CPS ENERGY'S STACK A EP WITH REGARD TO THE ACCELERATION OF THE SAN ANTONIO SOUTH TWO RELIABILITY PROJECT.
SO THERE'S TALK ABOUT THAT POTENTIALLY BEING ABLE TO BE IMPLEMENTED IN JANUARY OF 27.
UH, STILL SOME THINGS TO BE FIGURED OUT, UH, IN THERE, BUT IF WE'RE ABLE TO TERMINATE IN JANUARY OF 27, THAT STILL SAVES US AN ADDITIONAL COUPLE MILLION UNDER THE LIFECYCLE SOLUTION ABOUT TWICE AS MUCH AS UNDER BROWN ONE AND TWO.
SO AS, AS, AS CHAD KIND OF ALLUDED TO EARLIER, UM, YOU KNOW, THERE ARE A LOT OF RISKS THAT WE BELIEVE NEED TO BE TAKEN INTO CONSIDERATION IN EVALUATING THE BROWN ONE AND TWO OPTION VERSUS LIFECYCLE.
UM, ONE SIGNIFICANT COST, AND I THINK CHAD MENTIONED THIS, IS THAT THERE ARE POTENTIALLY SIGNIFICANT UNFORESEEN COSTS ASSOCIATED WITH THE OUTAGES OF, UH, BROWNING UNITS ONE AND TWO.
UM, THE, THE UNITS, THE BUDGETS THAT WE RECEIVED SO FAR ARE BASED ON ANTICIPATED WORK TO ENSURE SAFE, UH, OPERATIONS, BUT THOSE ARE REALLY BEST CASE SCENARIO ESTIMATES.
THERE'S A SIGNIFICANT, UM, PROBABILITY THAT THOSE COSTS COULD GO UP BECAUSE THESE ARE 60-YEAR-OLD UNITS.
UM, WE, YOU KNOW, THAT BROWNING UNIT THREE'S BUDGET HAS GONE UP 33% SINCE NOVEMBER, I THINK AS OF LAST WEEK THAT IT'S ACTUALLY EVEN HIGHER THAN THAT.
AN ADDITIONAL 4%, UH, CPS ENERGY HAS, HAS BEGUN PREPARE FOR THESE, UH, INSPECTIONS.
THEIR, THEIR BUDGETS HAVE GONE UP BY 8%, UH, SINCE THE ESTIMATE WE GAVE TO THE BOARD BACK, UM, AHEAD OF ITS DECEMBER 3RD MEETING.
AND, AND NO DECISIONS EVEN BEEN MADE YET TO, UH, COMMIT THOSE UNITS FOR RMR. SO, UM, AS, AS CHAD INTIMATED, OUR GUESS IS THAT, THAT WE MIGHT SEE, MIGHT SEE ADDITIONAL, UH, COST INCREASES FOR UNITS ONE AND TWO.
UM, IF THAT WERE, UM, THE CHOSEN PATH, UM, UH, THE DISCOVERY OF ADDITIONAL NEED OF REPAIRS COULD ALSO EXTEND THE DURATION OF THE OUTAGES.
SO THERE'S AN OPERATIONAL CONSEQUENCE, NOT JUST A COST CONSEQUENCE HERE.
AND, AND THAT COULD BE, UH, VERY RISKY THAT COULD EXTEND THESE OUTAGES.
YOU KNOW, PAST THE SUMMER PEAK IN JULY, UH, IN SUMMER OF 25, AGAIN, WE HAD A, A BLUE SKY ESTIMATE OF EARLY JULY NOW MAYBE JULY THE 12TH, UM, FOR UNIT, UH, UNIT ONE TO COME BACK.
BUT THAT'S, UH, AGAIN, VERY SUBJECT TO DELAY AND, UH, WE THINK THAT'S A SIGNIFICANT RISK.
UM, THERE'S ALSO THE, UH, THE POTENTIAL, A POTENTIAL CONCERN OF SUPPLY CHAIN CONSTRAINTS THAT COULD LIMIT THE AVAILABILITY OF PARTS THAT MAY BE NEEDED TO GET THESE UNITS ONLINE.
SO ANY ONE PART THAT'S REQUIRED, IF WE CAN'T GET IT ON THE TIME WE NEED IT, THAT CREATES A SIGNIFICANT RISK OF DELAY.
UH, WE'RE ALSO CONCERNED ABOUT THE HIGHER PROPENSITY FOR FORCED OUTAGES THAT OLDER UNITS TEND TO HAVE.
THESE ARE 60-YEAR-OLD UNITS NEARLY.
UM, SO WE EXPECT THAT THOSE, UM, THOSE FORCED OUTAGE RATES WOULD BE HIGHER AS THEY HAD BEEN, UH, IN RECENT YEARS.
UH, SO GIVEN THE AGE AND TECHNOLOGY OF THESE UNITS, UM, ERCOT WOULD NEED TO COMMIT THESE UNITS A LOT, UH, A LOT FURTHER IN ADVANCE.
AGAIN, THESE HAVE 10 HOUR LEAD TIMES IN OUR SYSTEMS RIGHT NOW, AND, UH, THAT'S COMPARED WITH 10 MINUTE NOTICE FOR LIFECYCLE.
UM, SO IF YOU HAVE A FAST DEVELOPING EMERGENCY SITUATION, A UNIT TRIP WHERE YOU NEED TO BRING SOME, UH, GENERATION ONLINE, THESE ARE, UH, THESE BROWNING UNITS ARE NOT GONNA BE MUCH ASSISTANCE THERE.
THIS IS REALLY ONLY FOR A SITUATION WHERE WE CAN FORESEE THAT EMERGENCY COMING.
I THINK WOODY'S GOT A COMMENT.
YEAH, AND ALONG THOSE SAME LINES, BECAUSE THEY HAVE, YOU HAVE TO USE SO MUCH ADVANCED NOTICE TO START THEM.
YOU MAY USE 'EM IN TIMES YOU DIDN'T NEED THEM.
YOU'RE LOOKING AHEAD 10 HOURS, YOU THINK, I THINK I'M GONNA NEED THEM.
IF YOU HAD SOMETHING THAT COULD START WITHIN AN HOUR, YOU COULD WAIT UNTIL THINGS FIRMED UP A LITTLE BIT
[01:05:01]
LONGER AND THEN USE 'EM.AND SO IT'S NOT ONLY, UH, ARE THEY, BECAUSE THEY'RE NOT AS FLEXIBLE, YOU LOSE ON BOTH SIDES OF THAT EQUATION.
COMMENT, JUST, UM, ONE, ONE COMMON QUESTION IN TERMS OF WHAT THE, THE STRATEGY IS.
OBVIOUSLY THE CERTAINTY OF OUTCOME IS REALLY IMPORTANT, WHICH IS WHY THIS LIFECYCLE OPTION, NEWER TECHNOLOGY, EASY STARTUP, EASY DEPLOYMENT, ALL THESE KINDS OF ITEMS, OF COURSE FAVORITE, BUT WE HAVE A PROBLEM TO SOLVE AND THAT ONE IS NOT, UH, VIABLE BECAUSE OF EMISSIONS OF OUR OTHER REASONS.
WE STILL HAVE TO CONFRONT THE ISSUE AND UP TO, UM, TACKLE THE BROWN EGG ONE AND TWO UNITS.
SO JUST TO KEEP THAT IN PERSPECTIVE, YEAH, THIS IS A BIG PROBLEM THAT WE HAVE.
WANTED TO HEAR A BIT ABOUT YOUR STRATEGY GOING FORWARD, EXHAUST, I GUESS ALL OPTIONS WITH RESPECT TO THE LIFECYCLE OPTION.
AND THEN OF COURSE, IF NOT, BE SURE THAT WE CAN WORK ON THE PRODUCT.
YEAH, I BELIEVE THAT'S OUR STRATEGY.
CHAD, DID YOU WANT TO SUPPLEMENT? THAT'S CORRECT.
I MEAN, AS NATHAN INDICATED, THE EMISSIONS ISSUE IS THE, THE, THE BIGGEST OBSTACLE IN FRONT OF US FOR LIFECYCLE.
AND WE WILL AGGRESSIVELY MOVE FORWARD TRYING TO RESOLVE THAT SOLUTION WITH THE STATE, HOPEFULLY IN THE NEXT WEEK, AND THEN IF NOT, ENGAGE FEDERAL PARTNERS TO TRY TO RESOLVE THIS IN THE NEXT COUPLE WEEKS.
UM, BECAUSE WE KNOW EVERY WEEK THAT WE DELAY, IT'S, IT'S A WEEK OF TRYING TO MOVE FORWARD WITH ONE OF THE SOLUTIONS.
SO, AND WE OBVIOUSLY WANT TO BE IN POSITION IN, IN THE MID-MARCH TIMEFRAME TO KNOW WHICH PATH WE'RE GOING DOWN SO THAT WE CAN, UH, START TO PREPARE THE SYSTEM FOR WHATEVER THAT RESOURCE LOOKS LIKE AND HAVE THE BEST CHANCE OF HAVING AS MUCH MEGAWATTS AVAILABLE, UH, DURING THE SUMMER OF 2025.
WHAT ONE, ONE MORE ITEM TOO IS BECAUSE THE LIFECYCLE UNITS ARE SMALLER UNITS, THE OUTAGE OF ONE OF THOSE IS MUCH LESS IMPACTFUL THAN THE OUTAGE OF, OF ONE OF THE BRA UNITS WHERE YOU LOSE HALF OF THE MEGAWATT YOU'RE TALKING ABOUT.
SO THAT'S ANOTHER IMPORTANT PIECE TO THINK ABOUT WHEN YOU THINK ABOUT WHICH ONE IS GONNA BEST FIT THE NEED OF, OF, UH, KEEPING THE LOADING OFF THAT IOL THAT'S RIGHT.
ONE OTHER POINT TO EMPHASIZE, I THINK IS THE, THE RELATIVE SHIFT FACTORS HERE.
THE LIFECYCLE UNITS TOGETHER HAVE A, A SLIGHTLY BETTER SHIFT FACTOR, SLIGHTLY MORE HELPFUL TO ALLEVIATING THE LOADING ON THAT SOUTH TEXAS EXPORT, ROL.
UM, AND THEN FINALLY, UM, THE BROWNING UNITS THEMSELVES ARE NOT IMMUNE FROM NOX EMISSIONS ISSUES OR POTENTIAL ISSUES THEMSELVES.
UM, AS OF THIS YEAR, CPS ENERGY IS SUBJECT TO A ROLLING 30 DAY, UM, AVERAGE NOX EMISSIONS LIMIT.
AND, UM, AND THERE IS A, A POTENTIAL ISSUE WITH, SORRY, CPS ENERGY IN ITS IN, ITS FOR ITS ENTIRE FLEET, UH, POTENTIALLY RUNNING UP AGAINST THAT LIMIT.
AND THESE UNITS WOULD GET ENSNARED, UM, YOU KNOW, UNDER THAT CAP IF THAT WERE TO BECOME AN ISSUE.
UM, WE ARE AWARE THAT THE, THE SAN ANTONIO AREA HAS BEEN IDENTIFIED AS A, UH, AN AREA OF SEVERE NON-ATTAINMENT, AND IT'S POSSIBLE THAT THAT VALUE COULD BE RATCHETED DOWN EVEN FURTHER.
IT WILL BE AT SOME POINT IN THE FUTURE IS OUR UNDERSTANDING.
UM, AND IF THAT HAPPENS DURING THE TERM OF THIS AGREEMENT, THEN THAT LOWER NOX 30 DAY ROLLING AVERAGE NOX EMISSIONS LIMIT, UH, COULD, COULD END UP BITING A BIT.
NOW WE HAVE AN AGREEMENT, UM, A SUPPLEMENT TO OUR RMR AGREEMENT ON UNIT THREE THAT, UH, ADDRESSES HOW WE INTEND TO DEAL WITH THAT SITUATION.
CPS ENERGY WOULD HAVE TO GIVE US NOTICE AS WE GET, UH, WITHIN A CERTAIN PERCENTAGE OF, OF THAT, UM, THAT LIMIT.
AND THEN ONCE THEY GET TO A HIGHER LEVEL OF THAT LIMIT, WE WOULD HAVE TO ACCELERATE OUR DISCUSSIONS ABOUT EXACTLY WHAT WE'RE GOING TO DO AND WHAT CPS ENERGY'S RIGHTS ARE WITH RESPECT TO THAT UNIT.
THAT'S ALL CAPTURED IN THE PUBLICLY POSTED AGREEMENT.
WE EXPECT A SIMILAR ARRANGEMENT COULD BE MADE FOR UNITS ONE AND TWO, BUT THIS IS, UM, THIS IS A POTENTIAL RISK, UM, DOWN THE ROAD.
IT'S NOT MAYBE THE SAME TYPE OF ISSUE THAT WE'RE DEALING WITH ON THE PERMITTING SIDE OF THE LIFECYCLE, BUT IT IS STILL AN ENVIRONMENTAL RISK THAT WE HAVE TO, TO CONTEMPLATE HERE.
SO I THINK THAT THE KEY TAKEAWAY HERE, THE ESSENCE OF THIS IS THAT WE DO SEE SIGNIFICANT OPERATIONAL AND COST RISK DUE TO THE ADVANCED AGE AND THE TECHNOLOGY OF THESE BROWN EGG ONE AND TWO UNITS.
SO THERE ARE ALSO RISKS ON THE LIFECYCLE SIDE THAT I THINK IN ALL CANDOR, WE WANT TO MAKE SURE YOU'RE AWARE OF.
UM, THE ACTUAL COST OF THIS CONTRACT COULD END UP BEING HIGHER THAN WHAT HAS BEEN ESTIMATED.
UM, SO FAR OUR ANALYSIS IS BASED ON, UH, COST ESTIMATES PROVIDED BY LIFECYCLE.
NOW WE'VE HAD A LOT OF CONVERSATIONS ABOUT THOSE.
WE HAVE, THEY HAVE MODIFIED THOSE COST ESTIMATES BASED ON OUR, UH, REVIEW
[01:10:01]
OF THOSE AND, AND OUR DISCUSSION OF THOSE NUMBERS.UM, THEY IN SOME RESPECTS HAVE COME DOWN FROM WHAT WE INITIALLY SAW, BUT, UM, THESE ARE BASED ON LIFECYCLE PROVIDED ESTIMATES.
THERE IS SOME POSSIBILITY THAT THOSE COSTS COULD GO UP, THEY HAVE TO BE REASONABLE COSTS, UM, BUT AT THE SAME TIME, IT IS POSSIBLE THAT COST COULD REASONABLY GO UP.
UM, AND, AND EVEN THOUGH THE UNITS ARE, THE MOBILE GENERATING UNITS ARE MORE FUEL EFFICIENT, UH, THAN THE BROWNING UNITS IN TERMS OF HOW MUCH FUEL THEY NEED, AND IN TERMS OF HOW MUCH FUEL THEY WOULD CONSUME TO RAMP UP TO, TO BE AT THE MINIMUM LEVEL, WE NEED THEM FOR DISPATCH.
UM, THE, THE PRICE OF, UH, FUEL OIL IS SIGNIFICANTLY HIGHER THAN THE PRICE OF NATURAL GAS.
SO AS I MENTIONED BEFORE, IF YOU END UP DEPLOYING THESE AT A VERY HIGH LEVEL, UM, FOR, TO ADDRESS THE IOL, YOU COULD IMAGINE A SCENARIO WHERE, UM, THE LIFECYCLE SOLUTION BECOMES MORE EXPENSIVE.
WE DON'T THINK THAT'S LIKELY BASED ON OUR PROJECTED OVERLOADS, UH, THAT WE'RE WE'RE SEEING IN THE NEXT COUPLE OF YEARS FOR THE IOL.
BUT, UH, IT IS A POSSIBILITY THAT, UM, THAT WE SHOULD BE AWARE OF.
UM, I THINK THAT THIRD BULLET KIND OF CAPTURES THAT THE COST OF VICTIM JUST DEPENDS ON THE AMOUNT OF DISPATCH THAT WE ASSUME.
AND THEN FINALLY AGAIN, THE NOX EMISSIONS ISSUE, UM, THAT THAT COULD END UP BEING A PROBLEM FOR LIFECYCLE.
AGAIN, THE PERMITTING ISSUE IS HOW TO GET IN, YOU KNOW, GET ONTO THE GRID.
ONCE YOU'RE ON THE GRID, YOU MAY BE SUBJECT TO SOME ADDITIONAL RESTRICTIONS AND, UH, DEPENDING ON WHAT KIND OF PERMIT THEY ULTIMATELY ARE ALLOWED TO HAVE, IF THEY DO GET A PERMIT, THEN THAT COULD IMPACT THEIR OPERATION.
SO CERTAINLY SOMETHING THAT WE'RE, UM, WE'RE BEING VIGILANT OF.
UM, NET OF NET I THINK OUR ANALYSIS IS THAT THESE RISKS PRESENT, UH, LESS OF A CONCERN THAN THE RISKS ASSOCIATED WITH THE BROWN EGG ONE AND TWO RMR SOLUTION.
SO JUST A SUMMARY SLIDE TO KIND OF CATALOG THE VARIOUS CATEGORIES OF, OF RISKS AND OTHER CONSIDERATIONS.
UM, ON THE BENEFIT COST RATIO, AGAIN, THAT'S JUST THE QUANTIFICATION OF, OF, UM, THE BENEFIT ABOVE THE COST FOR BOTH SOLUTIONS LIFECYCLE HAS A 15% BETTER RATIO THAN THE BROWN EGG ONE AND TWO SOLUTION.
UH, WE ALSO ANTICIPATE LIFECYCLE WOULD HAVE A MUCH BETTER FORCED OUTAGE RATE, UH, MUCH BETTER COST CERTAINTY, UH, CERTAINLY A LOWER START TIME AND FEWER TEMPORAL CONSTRAINTS.
UH, THE BROWNING SOLUTION WOULD HAVE THE BETTER FUEL PRICE, UH, INCREMENTALLY.
UM, BUT WE EXPECT THAT LIFECYCLE UNITS WOULD HAVE BETTER AVAILABILITY AND PERFORMANCE AND, UH, WOULD ALSO PROVIDE SUPERIOR SAVINGS IF WE WERE ABLE TO TERMINATE THE CONTRACT EARLY.
SO REALLY FROM A COST RISK AND RELIABILITY PERSPECTIVE, THE LIFECYCLE SOLUTION WE BELIEVE IS PREFERABLE TO COMMITTING UNITS ONE AND TWO THROUGH AN RMR AGREEMENT.
UM, IT'S IMPORTANT FOR US TO, TO NOTE THAT WE MAY ALSO NEED THE ASSISTANCE OF THE PUBLIC UTILITY COMMISSION HERE IF WE GO DOWN THIS LIFECYCLE PATH.
AND THAT'S BECAUSE TO GET THESE UNITS ONLINE AS QUICKLY AS WE WOULD NEED TO, WE MAY NEED PERMISSION, UM, TO AVOID SOME OF THE REQUIREMENTS THAT WE HAVE IN THE ERCOT PROTOCOLS AND THE PLANNING GUIDE WITH RESPECT TO THE INTERCONNECTION PROCESS.
AND SO, UM, SPECIFICALLY THINGS LIKE THE MODELING TIMELINES TODAY, WE TYPICALLY REQUIRE A GENERATOR TO, UH, TO COME TO THE GRID TO TO BE IN THE MODEL, YOU KNOW, 90 OR 120 DAYS BEFORE THAT DATE, THEY WOULD START SERVICE.
WE WOULD NEED THAT TO BE SHORTENED AND WE HAVE SOME WAYS OF DOING THAT AND THAT'S NOT SOMETHING WE'D WANT TO DO IN, IN OTHER CASES.
BUT HERE WE BELIEVE THIS IS A VERY SPECIAL RELIABILITY CASE BECAUSE WE'RE DEALING WITH THE IROL AND, AND, UH, IF WE'RE NOT ABLE TO ADDRESS THAT SITUATION, AGAIN, THE CONSEQUENCES LOAD.
SHE, SO WE THINK THERE'S A COMPELLING CASE TO BE MADE FOR, UM, SEEKING PERMISSION FROM THE PUC FOR A GOOD CAUSE EXCEPTION TO THESE, THESE RULES.
UM, INTERCONNECTION STUDY REQUIREMENTS IS ANOTHER EXAMPLE OF SOMETHING WE MAY NEED THE COMMISSION'S ASSISTANCE WITH, UM, FOR GOOD CAUSE.
UM, OUR ANTICIPATION IS MAKING THAT REQUEST, UM, NO LATER THAN APRIL OF 25 WITH THE PDC AND JUST A SLIDE THAT SUMMARIZES THE TIMELINE OF ALL THE, THE RELEVANT FACTORS HERE.
UM, SOME OF THIS IS, IS GONNA BE TOUCHED ON IN THE NEXT PRESENTATION, AS I UNDERSTAND BY WOODY AND CHRISTIE ON THE TRANSMISSION SOLUTION.
BUT THIS JUST PUTS US ALL IN PERSPECTIVE.
YOU CAN SEE HERE, UM, THAT WITH THE BROWNING THREE RMR, UH, AGREEMENT THAT WE HAVE NOW IN PLACE, THEY'LL BE STARTING THAT OUTAGE NEXT WEEK.
UM, IN THE BLUE SKY SCENARIO, THEY MAY HAVE THE UNIT BACK BY MAY FOR OPERATION THIS SUMMER.
UH, BROWNING UNIT TWO OBVIOUSLY IS, UH, IS GOING TO BE, UM, AT, IN THE BLUE SKY SCENARIO BACK ONLINE IN SEPTEMBER IF ALL THE STARS ALIGN THERE.
AND THEN BROWN ONE COULD BE, UM, COULD BE ON IN, UH, IN AROUND MID-JULY, I THINK IS OUR, OUR LATEST ESTIMATE THERE.
THOSE WOULD ALL BE TWO YEAR TERMS, UM, ENDING SOMETIME IN EARLY 27.
AGAIN, LIFE CYCLE WILL BE BROUGHT ON IN STAGES, UM, THIS SUMMER IDEALLY.
AND AGAIN, ALSO SUBJECT TO A TWO YEAR, UM, CONTRACT CENTER POINT HAS, HAS GIVEN US A BACKSTOP DATE OF MARCH 31ST, 2027.
UM, AND SO THE CONTRACT WOULD HAVE TO TO END
[01:15:01]
BEFORE THEN.AND THEN YOU CAN JUST SEE THE, THE RELATIVE, UH, PACE OF ACCELERATION OF THE TRANSMISSION SOLUTIONS THERE.
FOR THE SAN ANTONIO SOUTH TWO RELIABILITY PROJECT RIGHT NOW PROJECTED TO BE COMPLETED IN, UM, LATE 28, EARLY 29 OR MID 29, THOSE WOULD BE ACCELERATED TO, UM, UH, POTENTIALLY LATE 26 AND EARLY 27.
UM, WE REALLY NEED, UM, I THINK BOTH OF THOSE TO BE IN PLACE BEFORE WE COULD, UH, POTENTIALLY END THE RMR AGREEMENT BASED ON OUR LATEST ANALYSIS.
SO TO SUMMARIZE, OUR RECOMMENDATION WOULD BE TO, UH, THAT THE BOARD WOULD AUTHORIZE ERCOT TO FINALIZE AN AGREEMENT WITH LIFECYCLE FOR THE OPERATION OF ITS MOBILE GENERATORS, ASSUMING THAT THE COST EFFECTIVENESS OF THIS PROPOSAL DOES NOT MATERIALLY CHANGE.
NOW, IF SOMETHING HAPPENS AND WE'RE NOT ABLE TO CONTRACT WITH LIFECYCLE FOR SOME REASON, UM, WE, WE STILL THINK THAT IT'S IMPORTANT TO HAVE A A BACKSTOP RELIABILITY MECHANISM IN PLACE AND WHEN, SO WE WOULD ALSO ASK ALTERNATIVELY THAT YOU GIVE US AUTHORITY TO CONTRACT WITH CPS ENERGY AS AN ALTERNATIVE, UM, FOR UNITS ONE AND TWO, FOR SOME REASON, WE CAN'T GET THAT LIFECYCLE, UH, DEAL COMPLETE.
SO WE WOULD, UH, COMMIT TO UPDATING THE BOARD ON THE STATUS OF OUR NEGOTIATIONS WITH LIFECYCLE OR CPS ENERGY AS APPROPRIATE.
AND THEN WE WOULD ALSO ISSUE A MARKET NOTICE IN FORMING STAKE OF THE FINAL SOLUTION HERE, AND THEN WE WOULD PLAN TO PROVIDE OUR RMR EXIT SOLUTIONS TO THE BOARD AT THE APRIL, 2025 REGULARLY SCHEDULED MEETING.
SO I THINK THAT'S ALL WE HAVE FOR TODAY ON, ON THAT PRESENTATION.
I'M HAPPY TO ANSWER ANY QUESTIONS, ANY QUESTIONS FOR NATHAN OR ANY OTHER MEMBER OF THE ERCOT TEAM OR CPS OR CENTER POINT? OKAY, CHAIRMAN FLORES ON THE, UH, QUESTION YOU ASKED EARLIER, UM, WE'RE NOT GONNA BE ABLE TO PROVIDE THE PERCENT THAT'S LEFT, BUT I CAN SAY THAT, UM, IF BROING HAD NEVER RETIRED, IF IT HAD BEEN THERE THE ENTIRE TIME, THAT'S A GOOD ONE.
YEAH, THERE WOULD STILL BE A RISK.
WE WOULD STILL HAVE THAT RISK.
OUR FOCUS ON IN THIS ANALYSIS WAS A COMPARISON OF THE BRO ONE AND TWO VERSUS THE LIFECYCLE AND WHAT THE DIFFERENCE, THE COST BENEFIT DIFFERENCE WAS THERE.
IT'S GONNA TAKE A LITTLE MORE TIME TO BE ABLE TO BREAK OUT AND GET THAT THIRD PIECE THAT THAT'S LEFT THE LEFTOVER PART OF, OF THE RISK.
OKAY? WE'RE NOT GONNA HAVE THAT THIS AFTERNOON.
YEAH, I DON'T, I WOULDN'T SPEND ANY MORE BANDWIDTH ON THAT.
I, I THINK THE IMPORTANT THING HERE IS THAT, UM, ERCOT AND THE STAKEHOLDERS IN TEXAS ARE DEVELOPING A SOLUTION TO SOLVE A RISK THAT IS REAL, AND THAT'S THOSE LOSING THOSE THREE UNITS, UH, DUE TO THE RETIREMENT, AND THAT CREATES A CHANCE OF A LOAD.
SHE EVENT THAT THAT HAS HIGHER, UH, PROBABILITIES AS YOU GO DEEPER INTO 25, 26, AND 27 UNTIL THE, THE CPS TRANSMISSION PROJECT IS FINISHED.
AND SO THIS IS A SOLUTION TO BRIDGE THAT GAP TO LOWER THAT, UH, CHANCE OF LOAD.
SHE, AND AGAIN, EVERYBODY NEEDS TO REMEMBER LOAD.
SHE HAS A SEVERE COST AND SO WE ARE TRYING TO AVOID THAT, BUT YOU HAVE TO SPEND MONEY ESSENTIALLY FOR INSURANCE TO AVOID THAT.
ANY OTHER QUESTIONS? SO, CHAD, IS IT TIME FOR A MOTION? IS THAT YEP.
UH, JOHN HAS MADE THE MOTION, THE MOTION IS INCLUDED ON PAGE 36 OF THE BEATING MATERIALS.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
THE MOTION IS APPROVED AND, UH, ERCOT WILL BE MOVING FORWARD WITH, UH, THE RMR SOLUTIONS FOR LIFECYCLE WITH A BACKUP FOR BROING ONE, BROING ONE AND TWO.
WITH THAT, I THINK WE'RE GOING TO MOVE TO AGENDA ITEM 4.1, WHICH IS THE PRELIMINARY EXIT STRATEGY FOR THE RMR AGREEMENTS OR THE ALTERNATIVE MOBILE SOLUTIONS, UM, WHICH IS THE ACCELERATION OF THE SAN ANTONIO SOUTH RELIABILITY TO TRANSMISSION PROJECT.
NO BOARD ACTION IS REQUIRED ON THIS MATTER, IT'S JUST FOR DISCUSSION PURPOSES ONLY, AND CHRISTIE HOBBS CAN LEAD THAT DISCUSSION.
ALL RIGHT, CHAIRMAN, THANK YOU FOR TEEING THAT DISCUSSION UP WITH THE SIGNING OF THE RMR AGREEMENT YESTERDAY.
PER PROTOCOL, WE ARE NOW ON A 90 DAY CLOCK TO COMPLETE OUR FORMAL EXIT STRATEGY AND TO PROVIDE A FORMAL REPORT BACK TO YOU ALL.
BUT BECAUSE WE'RE ON THAT SHORT TIMELINE, WE WANTED TO GIVE YOU SOME INSIGHT INTO SOME OF THE THINGS THAT WE'RE ALREADY LOOKING AT.
SO FOR OUR NEW BOARD MEMBERS, AND ACTUALLY PROBABLY ALL FOR ALL OF YOU, BECAUSE IT'S BEEN A WHILE SINCE WE'VE BEEN THROUGH AN ACTUAL RMR PROCESS, ONCE WE ENTER INTO AN RMR AGREEMENT, ERCOT UNDER PROTOCOL HAS TO LOOK AT FEASIBLE OPTIONS FOR EXITING THAT RMR AGREEMENT
[01:20:01]
AND LOOKING AT ARE THERE ALTERNATIVES THAT MAY BE MORE EFFICIENT, MAY BE CHEAPER FOR THE CONSUMERS OF TEXAS TO BE ABLE TO EXIT THAT STRATEGY SOONER.AND SO I WANTED TO GIVE YOU, UH, AN OVERVIEW OF ONE OF THE IDEAS THAT WE ARE CURRENTLY PURSUING.
YOU MAY RECALL LAST YEAR IN APRIL, YOU APPROVED A, OR ENDORSED A PROJECT THAT WAS PROPOSED BY C-P-S-A-E-P AND STAT THAT WAS LOOKING AT, IN THE SAME AREA OF THE GRID IMPROVEMENTS TO THE TRANSMISSION SYSTEM.
THE BROING UNITS SIT AT THE TOP OF WHERE THIS OVAL CIRCLE IS.
AND SO PART OF THE REASON THAT WE'RE HAVING TO KEEP THE, THE UNITS AND LOOK AT RMR AGREEMENTS MOVING FORWARD IS BECAUSE THERE'S IMPROVEMENTS NEEDED TO THE TRANSMISSION SYSTEM.
NOW, THE PROJECT THAT YOU ENDORSED, UM, LOOKED AT THAT COMING INTO SERVICE.
IT HAS THREE KEY PARTS TO IT, BUT WASN'T EXPECTED TO BE IN SERVICE UNTIL MAY OF 2029.
SO AS WE'VE BEEN IN DISCUSSIONS ABOUT IMPROVEMENTS IN THE AREA, WE'VE BEEN TALKING WITH THE IMPACTED TSPS ABOUT HOW COULD WE ACCELERATE THIS PROJECT THAT'S ALREADY BEEN STUDIED FOR IMPROVEMENTS IN THE AREA.
SAN ANTONIO HAS TOLD US, UM, THEY HAVE ENGAGED, UH, AN RFP AND ARE LOOKING AT WAYS TO ACCELERATE THE BUILDING OF THE LINE.
IT'S TAKING THE CURRENT CIRCUIT AND REBUILDING IT, DOING THAT WORK LIVE OR HOT SO THAT WE DON'T LOSE THE LINE OR THE CAPABILITIES OF THE LINE DURING THE TIME OF THE WORK.
AND THEN IT'S ALSO ADDING A DOUBLE CIRCUIT.
SO IT'LL BE, UM, A TWO STEP PROCESS.
NOW, AS WE LOOKED AT ON THE, THE PREVIOUS SLIDE, THE ORIGINAL PROJECT DIDN'T HAVE IT ALL INTO SERVICE UNTIL MAY OF 2029.
C-P-S-A-E-P AND STUCK BELIEVE THAT THEY CAN GET THAT ALL IN SERVICE BY ACCELERATING THE WORK BY THE END OF 2026.
SO WELL, UM, A LOT OF EXTRA TIME, UH, TO BE SAVED THERE.
THAT WOULD ALLOW US TO CONSIDER MOVING OUT OF THE RMR OR, UH, THE AGREEMENTS FOR THE LIFECYCLE UNITS TO REDUCE THE IMPACT, NOT ONLY FOR THE RMR, BUT IT WOULD ALSO REDUCE THE OVERALL RISK FOR THE SOUTH TEXAS GDC OR THE IRL, UH, THAT WE TALKED ABOUT IN THE PREVIOUS PRESENTATION.
UH, THE SAN ANTONIO SOUTH RELIABILITY ONE PROJECT, WHICH IS TARGETED TO BE IN SERVICE IN 2027, THE LOWER RIO GRANDE VALLEY PROJECT, WHICH WAS ENDORSED AND TARGETED TO BE IN SERVICE ALSO IN 2027, AS WELL AS THE SOUTH TEXAS RELIABILITY TWO PROJECT, UM, WHICH IF THEY ARE ABLE TO ACCELERATE, COULD BE IN BY THE END OF 2026.
UM, THERE'S ALSO SOME ADDITIONAL UPGRADES THAT ARE NEEDED, UM, IN THAT CORPUS UH, AREA.
UM, BUT A LOT OF THAT WE HAVE TO REMIND, WE'LL CONTINUE TO REVIEW THIS AS WE MOVE THROUGH THE PROCESS.
UH, REALLY DEPENDENT ON WHERE A NEW GENERATION SHOWS UP, WHERE NEW LARGE LOADS SHOW UP ON THE SYSTEM.
UM, BUT IT ALSO IS POTENTIALLY THE ACCELERATION WOULD GIVE US, UM, AN EXIT STRATEGY FOR THAT OVERALL ROL AS WELL.
SO NEXT STEPS, UM, NO, AGAIN, NO ACTION IS REQUIRED BY THE BOARD.
WE DID WANNA GIVE YOU A HEADS UP SINCE THIS WAS A PROJECT THAT YOU HAD PREVIOUSLY ENDORSED.
UM, WE WILL BE WORKING TO FINALIZE OUR EXIT STRATEGY, UM, AND PROVIDE YOU THAT FINAL REPORT.
UH, WE'RE TARGETING TO HAVE THAT TO YOU BACK AT THE APRIL BOARD, UH, IS OUR GOAL.
UH, WE ARE, UH, LOOKING AT ISSUING A LETTER, UH, TO THE IMPACTED TSPS AS WE DO SEE, UH, EVEN THE ACCELERATION AND THE ADDITIONAL COSTS THAT OUR POTENTIALLY ANTICIPATED.
IT STILL WOULD'VE BEEN THE SOLUTION THAT WE PICKED WHEN WE DID OUR INDEPENDENT REVIEW AND LOOKED AT THE OPTIONS FOR IMPROVEMENTS FOR TRANSMISSION IN THAT AREA.
AND SO WE WOULD LIKE TO GO AHEAD, UM, AND GIVE THEM THAT INDICATION THAT WE SUPPORT THE ACCELERATION OF THEIR PROJECT.
IS THERE ANY QUESTIONS, ANY QUESTIONS FOR CHRISTIE ON THIS? I WANTED JUST TO ADD TO THE PROCESS HERE.
SO, YOU KNOW, ERCOT STAFF SUPPORTS ACCELERATING THESE PROJECTS AND ULTIMATELY, AS CHRISTIE INDICATED, THE BOARD HAS ALREADY APPROVED THIS PROJECT.
SO OUR EXPECTATION WOULD BE IN THE COMING DAYS TO PREPARE
[01:25:01]
A LETTER AND SEND THAT TO THE THREE UTILITIES, UM, WITH ERCOT STAFF'S RECOMMENDATION TO MOVE FORWARD WITH ACCELERATION.UM, ULTIMATELY WHAT DOES THAT MEAN THAT, YOU KNOW, THAT ALLOWS C-P-S-A-A-P AND STACK TO DO WHATEVER THEIR INTERNAL PROCESSES ARE TO MOVE THAT FORWARD.
AND THEN ULTIMATELY IT'S, UH, REALLY JUST A RATE RECOVERY ISSUE THAT IS IN, IN FRONT OF THE COMMISSION AT THE END OF THE DAY.
UM, SO JUST WANTED TO MAKE SURE THE, THE BOARD UNDERSTOOD KIND OF THE PROCESS.
YOU'VE ALREADY DONE YOUR PART BY APPROVING THE PROJECT BACK IN APRIL OF 2024.
CHAD, CHAD, HOW CAN WE DO THAT WITHOUT KNOWING WHAT THE IMPROVEMENT COSTS? I MEAN, THIS, THEY'RE NOT IMPROVING THIS FOR FREE.
THEY'RE GONNA SPEND MORE MONEY, THEY'RE GONNA SPEND MORE LABOR.
UH, HOW, HOW DO, HOW, HOW DO WE APPROVE SOMETHING WHERE WE DON'T KNOW THE COST BENEFIT? SO THEY'RE IN NEGOTIATIONS WITH THE, THE RFP UH, RESPONDERS AND UH, WE CAN TALK A LITTLE BIT MORE ABOUT THAT IN EXECUTIVE SESSION.
AS FAR AS THE COST GO, CLEARLY HAVE TO, YEAH, I DON'T THINK WE CAN APPROVE THE ACCELERATION OF A PROJECT, WHICH IS WHAT I HEARD CHAD JUST SAY WITHOUT KNOWING WHAT IT COSTS.
YEAH, I GUESS WHAT I WOULD SAY IS BASED ON THE INFORMATION WE HAVE THAT IN OUR UNDERSTANDING OF WHAT THOSE COSTS WOULD BE, THAT IT WOULDN'T HAVE CHANGED OUR RECOMMENDATION BACK IN APRIL OF 2024.
YEAH, YOU CAN'T TAKE YOUR WORD FOR IT, SORRY.
SO, SO EVEN THOUGH THERE'S A COST INCREASE, UH, THE ERCOT BOARD DOES NOT NEED TO REEN ENDORSE THAT? CORRECT.
ANY OTHER QUESTIONS ON THE POTENTIAL MITIGATION OR THE EARLY TERMINATION OF THE RMRS? THE RAS? NO.
UH, I'M GONNA CALL AN AUDIBLE AND MOVE AGENDA ITEM FIVE, THE BOARD COMMITTEE DISCUSSION TO FOLLOW THE EXECUTIVE SESSION IF, UH, NOBODY HAS AN OBJECTION TO THAT.
UH, SO THAT WOULD TAKE US TO AGENDA ITEM SIX, WHICH IS, UM, OTHER BUSINESS.
IS THERE ANY OTHER BUSINESS THAT ANY BOARD MEMBER WISHES TO RAISE AT THIS TIME? OKAY, I DON'T HEAR ANY.
[Convene Executive Session]
THE BOARD WILL ADJOURN, UH, SESSION, CONVENIENT EXECUTIVE SESSION.NO VOTING ITEMS ARE ANTICIPATED DURING EXECUTIVE SESSION.
UH, BUT WE DO WANT TO COME BACK TO AGENDA ITEM FIVE.
SO WE WILL RECONVENE FOR A FEW MINUTES AFTER EXECUTIVE SESSION, UH, AND THEN ADJOURN.
SO THOMAS, I'M GONNA TURN IT OVER TO YOU.
THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS WILL STAND IN RECESS.
[Reconvene General Session ]
ALL RIGHT.THE GENERAL SESSION IS NOW RECONVENED.
I DON'T, UH, IT LOOKS LIKE WE'VE ONLY GOT ONE COMMISSIONER HERE, SO WE DON'T NEED TO, TO, UH, RECONVENE THE PUBLIC UTILITY COMMISSION MEETING.
[5. Announcement of Board Committee Membership ]
ITEM, IT'S AGENDA ITEM FIVE, AND THAT IS BOARD COMMITTEE ASSIGNMENTS.AND FOR THE RECORD, WHAT WE'RE GOING, UH, I'M GONNA DO IS, UH, ANNOUNCE WHO THE BOARD COMMITTEE MEMBERS WILL BE, UH, MOVING FORWARD.
WE HAVE DECIDED TO, UH, MOVE THE FUNCTIONS OF THE JURISDICTION OF THE, UH, RELIABILITY AND MARKETS COMMITTEE BACK TO THE FULL BOARD AND LIGHT OF THOSE BEING, UH, THE CORE MISSION OF ERCOT AND THUS THE CORE MISSION OF THE BOARD.
SO THE RELIABILITY AND MARKETS COMMITTEE, UH, MEMBERS ARE, ARE ALL OF US ARE GONNA BE MEMBERS OF THAT COMMITTEE AT THE, FOR FULL BOARD LEVEL, UH, THE FINANCE AND AUDIT COMMITTEE IS GONNA HAVE, CARLOS AGUILAR IS CHAIR OF BEN BARKLEY, SIG CORNELIUS AND JULIE ENGLAND ARE GONNA BE MEMBERS FOR HUMAN RESOURCES AND GOVERNANCE.
PEGGY HIGG IS GOING TO CHAIR THAT.
LINDA CAMPANO, UH, SIG CORNELIUS AND I WILL BE MEMBERS OF THE HR AND G COMMITTEE.
TECHNOLOGY AND SECURITY COMMITTEE IS GOING TO BE CHAIRED BY JOHN SWENSON.
MEMBERS ARE INCLUDE CARLOS AGUILAR, JULIE ENGLAND, ALEX HERNANDEZ.
ANY QUESTIONS OR COMMENTARY ABOUT THE BOARD ASSIGNMENTS WITH THAT? THERE'S NO OTHER BUSINESS, UM, UH, FOR THE BOARD TO CONSIDER AT THIS SPECIAL MEETING.
UH, SO THE BOARD IS GOING TO ADJOURN GENERAL SESSION, UH, AND I THANK YOU, ALL OF YOU FOR YOUR PARTICIPATION.
AND THE, UH, WEBCAST IS NOW CONCLUDED.