WEBVTT
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Afternoon, this meeting
of Public Utility Commission
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is now back in session.
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We'll move on to our ancillary
services panel with, Randa,
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Sorry, we have our weatherization item.
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We're gonna move to and table item four,
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moved to item 10 for weatherization
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staff is prepared to
proposals for publication
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for a new rule related to
weather emergency preparedness
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that we've all familiar with
and discussed exhaustively
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this proposal relates to
one of the Commissions.
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Well, whether development standards,
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I think we, like I said,
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we've all been part of a
robust stakeholder process
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and lots of discussions.
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I'll open up the floor for
discussions, questions for staff.
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Do we want to call it?
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We can call it Barksdale English.
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Anyone else from staff who maybe needed,
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I've turned over questions, comments,
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or we can discuss
timing for final adoption
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on other a few options there.
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Any, questions or comments
before we get to the timeline?
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You good?
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I have one item that I
need to pull up the hard copy
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so I could mention it.
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(clears throat)
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Specifically, one minute,
on page nine of the proposal,
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subsection two.
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Okay.
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There is a language
in there that says
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by December 1st, 2021,
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a generation entity must submit to ERCOT
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a form prescribed by ERCOT and developed
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in consultation with Commission staff,
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a winter weather readiness report.
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I had visited with
staff about this during,
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when we had an
opportunity to review the draft,
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a proposal for a publication
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and(clears throat) had
offered a proposed addition
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to this language that would be better
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discussed that here in open meetings
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and it was a substantive change
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and I was interested in hearing
your thoughts on whether or
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not we should include or
require the generation entity to
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submit the winter
weather readiness report
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to the Commission and ERCOT
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and I know ERCOT is gonna
be providing us a summary report
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with a variety of information
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regarding the generation
entities compliance.
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But I do think it's important
that to have the generation
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entities file the report
at the Commission,
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because those reports are
gonna include the attestations
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from the executives
with binding authority
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and so I think as a matter
of ensuring our oversight
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over the standards that we have,
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that report filed at the
Commission and at ERCOT.
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So adding language, it says,
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submit at the Commission and ERCOT.
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Good afternoon,
Barksdale English
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on behalf of Commission staff.
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Commissioner Cobos, so I
think we can add that language
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if that's the direction
of the Commission.
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Yeah, just as simply
adding the phrase,
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the Commission and to
ERCOT and the Commission
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form prescribed, et cetera.
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Yes, a generation
entity must submit
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to the Commission and ERCOT.
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On the form prescribed,
et cetera, et cetera.
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Works for me.
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All right, so we'll any
motion will be in regards to
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the proposal for publication as amended
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per Commissioner Cobos.
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Yes.
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Request in terms of timing,
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I know staff laid out several options.
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We obviously, as we've discussed
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working on an accelerated timeline,
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both to adhere to the
legislative deadlines
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from the 87th legislature,
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but also to make sure
that our generation fleet
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is more resilient going
into this one winter
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than it was going into last winter.
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Most importantly, as
such given the timelines,
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the tight timeline and in
consideration of make sure
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consideration making sure
the generators have time
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to implement, turn the wrenches
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and fastened to bolts
on these improvements.
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They have time to
implement these changes
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and these are the
weatherization requirements.
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We're looking to accelerate a timeline.
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If we published the proposal today,
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it technically will not
appear in the register
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until September 10th due
to the print timeline of that,
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but it will be available
online immediately.
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So given both the fact
that it will be available online
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immediately for stakeholders
to review, process
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and comment on prepare comments on,
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and the fact that
we've had such a robust
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and thorough stakeholder
process, both staff-level
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and with this Commission,
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I'm comfortable moving
forward with the date,
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the proposed timeline that
gives us an effective date
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of the rule of November 3rd
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would leave a three week comment period
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from online posting,
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it would only be in the
register for six days,
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but the public would have
a full 21 days to review that.
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But I think we'll see in the timeline.
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I'm comfortable with that, but it happy
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to hear your thoughts otherwise.
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Mr. Meltzer, does
that comply our
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statutory and tax obligations
on comment period.
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Davidson Meltzer,
Commission staff.
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(clears throat)
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Yes we believe it does
as we've discussed before,
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there's not a minimum
comment period other than
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members of the public
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must be given a reasonable
opportunity for comment
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and so we think that
this is after the notice
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and the register that
should be sufficient
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three weeks plus all the
process they've gotten before
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should be enough and
it gives us a little bit of,
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we can get it done quickly,
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but it gives flexibility
before our statutory deadline
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if you guys need an extra open meeting
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to consider it on the
backend or anything like that,
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but that is what we
have laid out is option one
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in the materials we gave
to you is statutorily fine
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and we're ready to do it,
if that's your preference.
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And they also lines up
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with the customary
Texas register posting halo.
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Yes, sir.
Okay.
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I agree with the
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faster timeline.
Okay.
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Good deal.
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I agree.
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All right, in that case,
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is there a motion to propose
new substantive rule 25.55
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for publication and public comment
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where they comment
deadline of September 16th?
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So move.
Second.
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And we've got a motion and
a second all in favor, say aye,
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Aye.
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Motion passes.
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And chairman we understand
that motion to have included
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Commissioner Cobos this direction.
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Yes.
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Thank you.
Thank you
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for the clarification.
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All right, thank you, gentlemen.
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I appreciate the accelerated
timeline to get to this point.
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I know it's a lot of
work in fast maneuver.
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Happy to do it.
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That concludes item number 10.
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We will go back to item
number four and bring up our
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ancillary services panel
Randa Stephenson from LCRA
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Bill Berg Exelon and Scott
Gahn from Just energy.
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Welcome all.
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Randa is up first.
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All right good afternoon.
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I'm Randa Stephenson
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and I am the chief
commercial officer at LCRA
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and one of my responsibilities
is portfolio management.
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So I did want to just
veer off for a minute
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to clarify something
about unit commitment
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and how generators are committed.
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In our current operating
plan these are obviously plans,
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which we make sure our
plans are shown as available
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and we do these, on a week out basis
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and they are updated as soon as possible
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from a generation a resource standpoint,
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but having a portfolio that
you have generation and load,
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there's a lot of different
things we have to manage
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day to day and things that
change like the weather,
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the wind forecast, gas prices,
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these are all things that clear daily
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and so the reason you probably,
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I understand what he's concerned about,
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getting a better understanding
of which units would be
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committed or not.
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Sometimes we just
don't have the information
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to commit a unit until the day before
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and also until the day
ahead, market clears,
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usually by the time the
day ahead market clears,
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I then know if it's
economical to run my unit
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or to buy from the market.
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As a result of the then.
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Correct pricing.
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Correct exactly.
Pricing.
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And so that's one
thing to consider
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as we look at improvements
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is just like ERCOT
doesn't have great weather
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or wind forecast a week
out, neither do generators,
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neither do load.
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I mean, this is an issue
on both of our sides.
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So just one point,
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and if you all are ever
interested in knowing more,
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we can talk to you about
our real-time operations
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and our dispatch floor
with the trading group.
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So kind of give you a
little more detail on that so.
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Randa on that and it's,
thank you for bringing it up
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and in terms of the
operation of the market
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any type of significant
change will necessitate
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in depth stakeholder review
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and to work through
those specific nuances
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of the market, it's not like it would,
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it could happen
overnight to a degree that
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we change foundational
processes within the system.
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Yes correct.
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But if, there's gotta
be a way to reconcile
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Woody's engineering
and operational concerns
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and that of the market operations,
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if it's a matter of building in
other more forward-looking
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constructs, again the foreign markets,
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go out indefinitely before real time.
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Correct.
And it's a,
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there's got to be a way
to establish markers
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that ancillary services guide off of,
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and then that ERCOT operators
can make significant decisions
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based on to have adequate
resources available in real time
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with enough lead time to where
00:11:15.440 --> 00:11:17.993
they can evaluate all that information.
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Would you disagree with that?
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No, I agree 100% with you.
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I actually think what
I'm presenting today
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about a dispatchable
reliability ancillary service
00:11:26.640 --> 00:11:27.620
does just that.
00:11:27.620 --> 00:11:28.460
Okay.
00:11:28.460 --> 00:11:29.400
That's the requirement.
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It is going to be a forward looking,
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seasonal or annual contract
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that that generator
has to be there for you
00:11:36.862 --> 00:11:41.483
and I think that's the key to
how we do this other than just
00:11:41.483 --> 00:11:44.763
relying on our current
market structure that helps.
00:11:46.208 --> 00:11:48.130
Okay, I go next slide please.
00:11:48.130 --> 00:11:50.120
So I've been here before,
and I've talked to you about it
00:11:50.120 --> 00:11:52.250
as special reliability service.
00:11:52.250 --> 00:11:55.640
I wanna include that
it's not just thermal units,
00:11:55.640 --> 00:11:58.360
hydro units we have 300 megawatts,
00:11:58.360 --> 00:12:00.116
We have storage for three weeks.
00:12:00.116 --> 00:12:01.860
We are there.
00:12:01.860 --> 00:12:04.740
We were very integrated
part of the solution
00:12:04.740 --> 00:12:08.470
during the winter storm,
batteries is another area.
00:12:08.470 --> 00:12:10.560
So it's more than just
thermal generation,
00:12:10.560 --> 00:12:13.000
when we talk about dispatchable.
00:12:13.000 --> 00:12:15.290
Also from fuel ancillary services,
00:12:15.290 --> 00:12:16.640
I'm gonna go into a little more detail
00:12:16.640 --> 00:12:19.760
about our proposal we'd
like to see considered
00:12:19.760 --> 00:12:23.260
and all we're trying to do is
enhance reliability to again,
00:12:23.260 --> 00:12:24.300
incentivize new build
00:12:24.300 --> 00:12:27.350
and keep the remaining
generation online.
00:12:27.350 --> 00:12:28.520
I think that's a very key part.
00:12:28.520 --> 00:12:30.963
You got to look at both
sides of that equation,
00:12:32.200 --> 00:12:35.000
and we have always been supporters
00:12:35.000 --> 00:12:36.770
of market-based principles.
00:12:36.770 --> 00:12:38.690
So competitive market solutions
00:12:38.690 --> 00:12:41.650
that are not regulated solutions.
00:12:41.650 --> 00:12:44.540
We think that really is the
most efficient market design
00:12:44.540 --> 00:12:46.890
and decreases cost to our customers,
00:12:46.890 --> 00:12:49.710
the cooperatives and the municipalities.
00:12:49.710 --> 00:12:50.543
Next slide.
00:12:51.690 --> 00:12:54.330
So I bring this slide up
because there's been so much
00:12:54.330 --> 00:12:56.230
discussion about all these proposals
00:12:56.230 --> 00:12:59.320
to do a rate regulated type solution.
00:12:59.320 --> 00:13:00.870
I've been doing this for about 20 years,
00:13:00.870 --> 00:13:05.680
and I actually went back to
my notes in 2018 and 2019
00:13:05.680 --> 00:13:09.010
and we were debating the ORDC
and how we change the curve
00:13:09.010 --> 00:13:11.620
and moving it one
standard deviation or not.
00:13:11.620 --> 00:13:13.020
When we were arguing that point,
00:13:13.020 --> 00:13:16.660
that was a $70 million
annual increase to load.
00:13:16.660 --> 00:13:19.500
This proposal right
here is at $800 million
00:13:19.500 --> 00:13:21.870
increase to load, it is huge.
00:13:21.870 --> 00:13:24.740
It's swings the pendulum
all the way to the other side.
00:13:24.740 --> 00:13:28.010
So you said 70
Million increase load
00:13:28.010 --> 00:13:30.000
was a pretty one standard deviation move
00:13:30.000 --> 00:13:32.120
out of total annual spend.
00:13:32.120 --> 00:13:34.770
Yes, for increased
customer costs by 73 million
00:13:34.770 --> 00:13:36.340
by shifting the curve is what the-
00:13:36.340 --> 00:13:39.553
So 70 Million out of
how much total spend was,
00:13:39.553 --> 00:13:41.990
that'd be like 10% of.
00:13:41.990 --> 00:13:44.292
The market's probably
$1 billion I mean.
00:13:44.292 --> 00:13:45.240
But it wasn't it a low,
00:13:45.240 --> 00:13:47.930
it was actually a lower
amount than otherwise feared
00:13:47.930 --> 00:13:52.349
because it based on just
the demand of that year,
00:13:52.349 --> 00:13:53.460
right due to the load.
Correct yes.
00:13:53.460 --> 00:13:54.730
This was what was planned.
00:13:54.730 --> 00:13:56.137
This was what we were debating.
00:13:56.137 --> 00:13:58.172
This was not actual, to be honest.
00:13:58.172 --> 00:13:59.283
And so we had I think it was Brattle
00:13:59.283 --> 00:14:02.310
who did that report for us, but yeah,
00:14:02.310 --> 00:14:05.310
I mean, so you can just see
the biggest change of money
00:14:06.600 --> 00:14:09.540
and if we go with a rate-based solution,
00:14:09.540 --> 00:14:11.560
one of the things you have to consider
00:14:11.560 --> 00:14:13.900
is what happens to
the existing generation
00:14:13.900 --> 00:14:17.830
and then what happens to new generation.
00:14:17.830 --> 00:14:22.600
As we start to pick folks to
get a regulator rate of return,
00:14:22.600 --> 00:14:25.890
what it does is we
lose scarcity pricing.
00:14:25.890 --> 00:14:30.290
So it does put price
dampening impacts on increase
00:14:33.290 --> 00:14:36.830
for actually current
generation to stay online.
00:14:36.830 --> 00:14:38.940
But then also for new generation,
00:14:38.940 --> 00:14:40.760
they're gonna want rate regulation.
00:14:40.760 --> 00:14:43.660
So there's a lot of
consequences for this
00:14:43.660 --> 00:14:46.710
and I know that there's
been a lot of testimony
00:14:46.710 --> 00:14:48.380
and debate about this,
00:14:48.380 --> 00:14:50.570
I would say to do something like this,
00:14:50.570 --> 00:14:53.630
and then do a bandaid to
fix the energy only market
00:14:53.630 --> 00:14:55.010
that's still left over
00:14:55.010 --> 00:14:56.960
is gonna cost you another $800 million.
00:14:57.840 --> 00:15:01.180
So now we're looking
at $1.6 billion annually
00:15:01.180 --> 00:15:03.020
for load costs.
00:15:03.020 --> 00:15:05.200
I believe we can do
that a lot more efficient
00:15:05.200 --> 00:15:08.760
and a lot cheaper by
using competitive solutions
00:15:08.760 --> 00:15:11.763
in the market, okay and
that's next slide, please.
00:15:15.200 --> 00:15:18.100
So I've talked about this
dispatchable reliability service.
00:15:18.100 --> 00:15:20.190
It has to be able to respond 30 minutes,
00:15:20.190 --> 00:15:23.710
It has to be in the cap,
committed showing it's online
00:15:23.710 --> 00:15:26.200
and then provide uninterruptible power
00:15:26.200 --> 00:15:27.960
for at least 24 hours.
00:15:27.960 --> 00:15:29.670
I think this is really key.
00:15:29.670 --> 00:15:32.610
This was a big issue
with the fuel supply
00:15:32.610 --> 00:15:36.123
and I think that is, should
be mandatory to be honest.
00:15:37.270 --> 00:15:39.490
We also believe longer term procurement
00:15:39.490 --> 00:15:41.960
is good for load and generation.
00:15:41.960 --> 00:15:45.140
So we then provide the
signals to load that this is an
00:15:45.140 --> 00:15:48.060
additional cost that needs to
be hedged at a certain price.
00:15:48.060 --> 00:15:51.910
What kind of quantity of
generation would you anticipate?
00:15:51.910 --> 00:15:54.540
Sure so in our comments,
00:15:54.540 --> 00:15:59.540
we talked about using reliability
metrics that incentivize a
00:16:00.410 --> 00:16:04.600
loss of load that is more
bearable or withstandable.
00:16:04.600 --> 00:16:08.930
So lately we've had a one in
two years loss of load event.
00:16:08.930 --> 00:16:11.460
What we're recommending
is a one in 10 years
00:16:11.460 --> 00:16:13.100
loss of load event.
00:16:13.100 --> 00:16:14.760
So what you would do is determine
00:16:14.760 --> 00:16:17.350
ERCOT actually has
done this study in the past.
00:16:17.350 --> 00:16:19.760
We go ahead we determine
what that one in 10 year
00:16:19.760 --> 00:16:21.100
loss of load is,
00:16:21.100 --> 00:16:23.940
we look at what amount
of capacity has to be there,
00:16:23.940 --> 00:16:27.955
look at the Delta between
what you have that's dispatchable
00:16:27.955 --> 00:16:29.200
and what you need,
00:16:29.200 --> 00:16:33.360
and that would help figure
out what that amount should be.
00:16:33.360 --> 00:16:35.090
So I think there's
more studies to be had
00:16:35.090 --> 00:16:36.590
and a lot more discussion with
00:16:36.590 --> 00:16:38.570
people that are much brighter than me
00:16:38.570 --> 00:16:41.763
and I think we could get to a
point that we could determine.
00:16:42.983 --> 00:16:45.798
So you're welcome.
Thank you.
00:16:45.798 --> 00:16:47.850
I think a lot of folks talked
about financial penalties,
00:16:47.850 --> 00:16:51.603
If you're not there,
we agree, obviously,
00:16:53.260 --> 00:16:56.280
making sure the cost of this
market base backup service
00:16:56.280 --> 00:16:58.440
can be directly assigned
00:16:58.440 --> 00:17:00.940
is something that was not
only in Senate Bill three,
00:17:00.940 --> 00:17:04.410
but I think is fundamental
from a load perspective too.
00:17:04.410 --> 00:17:06.640
I think any of these
solutions we're talking about
00:17:06.640 --> 00:17:09.120
are gonna be additional costs to load.
00:17:09.120 --> 00:17:12.690
We need to be very
cognizant of what those are
00:17:12.690 --> 00:17:17.290
and transparent, but I do think
that value of backup service
00:17:17.290 --> 00:17:20.660
can be computated and
we could have a good idea
00:17:20.660 --> 00:17:23.890
based off a lot of studies
that I've seen done in the past
00:17:24.772 --> 00:17:27.030
and then we have to evaluate every year,
00:17:27.030 --> 00:17:30.300
this has to be a current, we
have to keep going back to see,
00:17:30.300 --> 00:17:31.133
is this working?
00:17:31.133 --> 00:17:32.850
Is this incentivizing things?
00:17:32.850 --> 00:17:34.700
Do we need to adjust?
00:17:34.700 --> 00:17:35.830
How do we pivot?
00:17:35.830 --> 00:17:37.640
And that's something
that hasn't really been done
00:17:37.640 --> 00:17:39.030
at the Commission that often
00:17:39.030 --> 00:17:41.730
as we put in some of these
market design changes.
00:17:41.730 --> 00:17:43.960
So if you could
elaborate on that,
00:17:43.960 --> 00:17:45.453
cause it's a very important principle
00:17:45.453 --> 00:17:49.720
that was heavily debated in
the legislature cost causation.
00:17:49.720 --> 00:17:51.110
So in your mind,
00:17:51.110 --> 00:17:53.020
how functionally would that be applied
00:17:53.020 --> 00:17:56.430
and how broadly, how
specific please describe?
00:17:56.430 --> 00:17:57.843
You gonna get me in trouble,
00:17:57.843 --> 00:18:01.669
okay, no, it's truthfully,
00:18:01.669 --> 00:18:05.954
I think we need to look at it
from a market wide impact.
00:18:05.954 --> 00:18:06.787
Okay.
00:18:07.760 --> 00:18:10.900
There's obviously
load is variable,
00:18:10.900 --> 00:18:12.560
renewables are variable,
00:18:12.560 --> 00:18:15.070
really go back and look
at what's causing what
00:18:15.950 --> 00:18:19.420
I think the ancillary service
methodology is a great guide
00:18:19.420 --> 00:18:22.690
that talks about why we
buy certain ancillary services
00:18:22.690 --> 00:18:24.480
and that's a study ERCOT can perform,
00:18:24.480 --> 00:18:27.310
I mean, they're doing it
already for responsive reserve.
00:18:27.310 --> 00:18:28.410
We should be able to do that
00:18:28.410 --> 00:18:30.963
for any type of dispatchable
reliability service.
00:18:32.070 --> 00:18:33.543
Do you think
this type of service
00:18:33.543 --> 00:18:36.330
would have actually
helped last February?
00:18:36.330 --> 00:18:37.310
Absolutely.
00:18:37.310 --> 00:18:38.847
What part of it would,
because obviously?
00:18:38.847 --> 00:18:42.310
That's 24 hours
uninterrupted power.
00:18:42.310 --> 00:18:46.200
Understood, but also
obviously financial penalties
00:18:47.075 --> 00:18:48.740
for failure to deliver,
00:18:48.740 --> 00:18:52.620
but they may have had
gas contracts to deliver
00:18:53.570 --> 00:18:54.660
and what happened.
Well I think
00:18:54.660 --> 00:18:55.920
one of the requirements you have to have
00:18:55.920 --> 00:19:00.010
is either gas their available storage,
00:19:00.010 --> 00:19:01.430
dual fuel capabilities,
00:19:01.430 --> 00:19:04.220
so if they did have
shortage, they could switch.
00:19:04.220 --> 00:19:05.980
So that's one of the biggest pieces
00:19:05.980 --> 00:19:07.240
that I think a lot of us face
00:19:07.240 --> 00:19:09.890
we're working towards improving that,
00:19:09.890 --> 00:19:13.860
but that gas supply is very
key or that water supply
00:19:13.860 --> 00:19:17.680
or whatever the supply of
fuel in that mix has to be there.
00:19:17.680 --> 00:19:20.100
So that's, what's
embedded in the 24 hours
00:19:20.100 --> 00:19:23.250
of operating is they have
to make the choice as to
00:19:23.250 --> 00:19:25.550
how to assure that they show up
00:19:25.550 --> 00:19:28.710
with either a dual fuel
or some other component
00:19:28.710 --> 00:19:31.540
that makes sure that they
have the onsite storage
00:19:31.540 --> 00:19:33.970
or something that makes sure
that they can run for 24 hours.
00:19:33.970 --> 00:19:35.160
That's correct.
Okay.
00:19:35.160 --> 00:19:36.990
I mean and we'll talk
about my next idea.
00:19:36.990 --> 00:19:38.660
So firming fuel product, right?
00:19:38.660 --> 00:19:42.260
So you may not bake in
all your costs in this product.
00:19:42.260 --> 00:19:44.540
You may be able to
recuperate some of your costs
00:19:44.540 --> 00:19:48.040
for doing this in affirming
field product as well.
00:19:48.040 --> 00:19:50.560
Do you think that
something that would be
00:19:52.020 --> 00:19:54.500
like this dispatchable
reliability service,
00:19:54.500 --> 00:19:56.146
would it be seasonal.
00:19:56.146 --> 00:19:57.426
It could be, yes.
00:19:57.426 --> 00:19:58.690
I think it definitely could be.
00:19:58.690 --> 00:20:01.050
I think you're really
gonna have to look hourly
00:20:01.050 --> 00:20:06.000
of the effective load carrying
capacity of a renewables
00:20:06.000 --> 00:20:10.330
and really determine and
make some studies on what,
00:20:10.330 --> 00:20:13.960
I think you've got to do
some probabilities and adjust
00:20:13.960 --> 00:20:16.991
if we're thinking of a P50, a P75,
00:20:16.991 --> 00:20:20.480
a P85 of what that
effective load carrying
00:20:20.480 --> 00:20:21.960
capacity should be.
00:20:21.960 --> 00:20:23.630
It's not just one number we've learned
00:20:23.630 --> 00:20:25.520
our lesson is what I feel like,
00:20:25.520 --> 00:20:27.190
we have to look at the biggest range
00:20:27.190 --> 00:20:29.320
and then determine the right way to go.
00:20:29.320 --> 00:20:31.230
To your earlier
point is dispatchable
00:20:31.230 --> 00:20:33.720
is not necessarily not renewable.
00:20:33.720 --> 00:20:35.020
Correct.
00:20:35.020 --> 00:20:39.950
And intermittent renewable
resources with battery
00:20:39.950 --> 00:20:41.450
with compressed air with-
00:20:41.450 --> 00:20:42.320
Could work exactly.
00:20:42.320 --> 00:20:45.380
Or that falls in the
dispatchable universe.
00:20:45.380 --> 00:20:46.363
I agree, yes.
00:20:47.750 --> 00:20:49.420
What would provide
more regulatory certainty
00:20:49.420 --> 00:20:52.390
making changes to non-spin,
the existing non-spin product
00:20:52.390 --> 00:20:53.940
or creating a whole new product.
00:20:53.940 --> 00:20:57.030
I believe because this is
gonna be forward-looking
00:20:57.030 --> 00:20:58.003
and has to be something
00:20:58.003 --> 00:21:01.080
that we give some
long-term commitments to
00:21:01.080 --> 00:21:03.740
that something like this
incentivizes new generation
00:21:03.740 --> 00:21:07.070
better than our existing
fleet of ancillary services
00:21:07.070 --> 00:21:09.660
and I'll talk through
building a new peaker
00:21:09.660 --> 00:21:11.560
and what we're looking at in a minute.
00:21:11.560 --> 00:21:12.393
Okay.
00:21:12.393 --> 00:21:13.380
Thank you.
Okay.
00:21:15.640 --> 00:21:16.673
So firming fuel,
00:21:18.150 --> 00:21:21.800
I really believe that a
lot of the extreme weather
00:21:21.800 --> 00:21:26.731
emergencies could have been
somewhat relieved or reduced
00:21:26.731 --> 00:21:31.731
based off having different
firming fuel capabilities
00:21:32.780 --> 00:21:35.870
wouldn't have solved
everything by any means,
00:21:35.870 --> 00:21:40.510
but we have not been incentivized
to have dual fuel storage,
00:21:40.510 --> 00:21:42.300
multiple pipeline interconnections,
00:21:42.300 --> 00:21:43.310
They're very expensive.
00:21:43.310 --> 00:21:45.720
There are two and a half to $5 million
00:21:45.720 --> 00:21:47.490
in a market where a generator right now
00:21:47.490 --> 00:21:49.760
is just making marginal cost,
00:21:49.760 --> 00:21:51.760
it doesn't pay to do that, right?
00:21:51.760 --> 00:21:55.530
And so having a process that generators
00:21:55.530 --> 00:21:57.390
can competitively bid into
00:21:59.080 --> 00:22:00.420
and I believe you're gonna need
00:22:00.420 --> 00:22:02.370
to hire some expertise here.
00:22:02.370 --> 00:22:03.470
I believe you're gonna need to have
00:22:03.470 --> 00:22:05.630
an independent consultant
work with ERCOT
00:22:05.630 --> 00:22:08.770
who has gas knowledge of how pipelines
00:22:08.770 --> 00:22:11.320
and compression stations
and everything works
00:22:11.320 --> 00:22:14.003
to determine the most
cost effective solutions.
00:22:14.970 --> 00:22:19.280
I've really, ERCOT has
a lot of great expertise,
00:22:19.280 --> 00:22:24.280
but understanding how
fuel flows and the limitations
00:22:24.820 --> 00:22:29.180
and the changing market with
LNG and pipeline development,
00:22:29.180 --> 00:22:32.448
I mean, you really
need an expert on this.
00:22:32.448 --> 00:22:35.042
Would you include
from gas contracts in this?
00:22:35.042 --> 00:22:36.620
Yeah absolutely yes.
00:22:36.620 --> 00:22:40.700
Would you distinguish
between intrastate or interstate
00:22:40.700 --> 00:22:42.460
in that analysis?
00:22:42.460 --> 00:22:44.070
Its a good
question, I don't know.
00:22:44.070 --> 00:22:46.763
I think that'd be something
that needs to be looked at.
00:22:47.732 --> 00:22:49.170
All right what are
the economics on
00:22:49.170 --> 00:22:52.180
on-site fuel storage
into a dual capability
00:22:52.180 --> 00:22:54.050
or what's ts option?
Sure.
00:22:54.050 --> 00:22:55.140
So they are expensive.
00:22:55.140 --> 00:22:56.790
I've just, these are things
00:22:56.790 --> 00:22:59.530
that are big capital
investments for generators.
00:22:59.530 --> 00:23:02.680
Some of us have had
dual fuel capabilities
00:23:02.680 --> 00:23:04.330
with some of the older units
00:23:04.330 --> 00:23:07.290
and reinstating that
may not be as costly
00:23:07.290 --> 00:23:09.340
as building it new.
00:23:09.340 --> 00:23:12.293
So you do have some,
I think efficiencies there,
00:23:13.230 --> 00:23:16.330
but storage is definitely very costly
00:23:16.330 --> 00:23:19.440
and it's very locationally specific
00:23:19.440 --> 00:23:22.730
and we do have a storage facility.
00:23:22.730 --> 00:23:27.730
It is volcanic and, we're
just at the right spot
00:23:28.070 --> 00:23:28.970
and we built the plant there,
00:23:28.970 --> 00:23:30.710
knowing that we wanted storage,
00:23:30.710 --> 00:23:33.790
not all generators
have that flexibility,
00:23:33.790 --> 00:23:36.700
but I do think looking
at variety of options
00:23:36.700 --> 00:23:40.030
and whoever knows
what's the next new thing
00:23:40.030 --> 00:23:42.123
could be something
that really just gets us
00:23:42.123 --> 00:23:45.933
some fuel certainty throughout the grid.
00:23:49.130 --> 00:23:51.823
Okay next slide.
00:23:54.450 --> 00:23:57.550
So this is a very, very
high level understanding
00:23:57.550 --> 00:24:00.430
of how you decide to build
a new power plant or not
00:24:00.430 --> 00:24:03.830
and I looked at it from
100 megawatt peaker plant,
00:24:03.830 --> 00:24:07.860
my team did, and these are the things
00:24:07.860 --> 00:24:12.230
and not all-inclusive by any
means that we are looking at,
00:24:12.230 --> 00:24:14.360
we're really looking at
a return of investment
00:24:14.360 --> 00:24:17.580
that's greater than my
cost of capital investment.
00:24:17.580 --> 00:24:21.160
Every person who makes
these, I mean, these are,
00:24:21.160 --> 00:24:23.820
hundreds of millions
of dollars of investments
00:24:23.820 --> 00:24:26.910
are going to have to meet
some type of hurdle rate
00:24:26.910 --> 00:24:28.570
or break even requirement.
00:24:28.570 --> 00:24:32.653
If you're a competitive or in
the mini-cooperative space,
00:24:33.830 --> 00:24:36.840
these are long lived
assets, 20, 30 year life
00:24:36.840 --> 00:24:39.290
they're capital intensive, like I said,
00:24:39.290 --> 00:24:42.340
it's very dependent on
future power and gas curves.
00:24:42.340 --> 00:24:45.470
We've been talking
about this for a long time.
00:24:45.470 --> 00:24:48.940
The forward curves are
inverted and declining,
00:24:48.940 --> 00:24:52.320
so that makes it, and if you
see my graph to the right,
00:24:52.320 --> 00:24:55.186
that makes the money
you make in the future,
00:24:55.186 --> 00:24:58.343
it makes your loss larger
and larger, right now,
00:25:00.640 --> 00:25:04.370
we also looking at fuel supply,
environmental regulations,
00:25:04.370 --> 00:25:07.293
transmission access, am I
gonna be congested or not,
00:25:08.270 --> 00:25:12.680
technology selection, tons
of other things, water supply,
00:25:12.680 --> 00:25:13.860
a lot of other factors,
00:25:13.860 --> 00:25:15.840
but this is part of the consideration.
00:25:15.840 --> 00:25:18.090
Please elaborate on
environmental considerations
00:25:18.090 --> 00:25:23.090
and do ESG requirements
impact your analysis.
00:25:23.890 --> 00:25:24.933
Yes definitely.
00:25:26.740 --> 00:25:31.740
We obviously have a very
great and cooperative TCEQ
00:25:33.070 --> 00:25:36.240
that has really understood
the need for generation
00:25:36.240 --> 00:25:41.160
and what we have to provide,
but at the EPA right now,
00:25:41.160 --> 00:25:42.800
it's a whole different consideration
00:25:42.800 --> 00:25:45.060
and Bill is probably better
than I am to talk about it,
00:25:45.060 --> 00:25:48.810
but there are, it's like
death by a million cuts,
00:25:48.810 --> 00:25:49.680
I'll just be honest.
00:25:49.680 --> 00:25:51.270
It's not a carbon tax,
00:25:51.270 --> 00:25:56.090
It is multiple different
regulations that will be coming on
00:25:56.090 --> 00:26:00.620
coal and gas generation
in the future and that risk
00:26:00.620 --> 00:26:02.350
and being able to understand it,
00:26:02.350 --> 00:26:06.250
monetize it in a way that
makes sense is important
00:26:06.250 --> 00:26:08.330
when I'm making an investment decision.
00:26:08.330 --> 00:26:09.180
'Cause I'll be honest,
00:26:09.180 --> 00:26:11.340
when I look forward to gas construction
00:26:12.370 --> 00:26:15.423
at a peaker unit that
has higher emissions,
00:26:16.800 --> 00:26:19.993
that plant may not have
a life longer than 10 years,
00:26:21.280 --> 00:26:24.020
depending on what
happens in a lot of things that
00:26:24.020 --> 00:26:28.167
none of us control, elections
and directions of the EPA
00:26:28.167 --> 00:26:30.170
and the government, federal government.
00:26:30.170 --> 00:26:33.900
May I ask you, so
the Fayette power plant,
00:26:33.900 --> 00:26:37.290
which you own was
one of the last coal plants
00:26:37.290 --> 00:26:40.450
to actually have a
environmental enhancement,
00:26:40.450 --> 00:26:43.860
meaning scrubbers who invested
a significant amount of money
00:26:43.860 --> 00:26:45.380
in those scrubbers,
00:26:45.380 --> 00:26:48.670
do you think given the
current market conditions
00:26:48.670 --> 00:26:51.870
and the financial conditions,
00:26:51.870 --> 00:26:55.250
you could finance that project
today with ESG pressures
00:26:55.250 --> 00:26:57.163
within wall street-
Absolutely not.
00:26:58.430 --> 00:27:02.680
Okay so for the current fleet,
00:27:02.680 --> 00:27:04.210
the one that's in the ground right now
00:27:04.210 --> 00:27:06.980
that Woody says we
kind of have to maintain,
00:27:06.980 --> 00:27:08.520
otherwise it becomes a problem
00:27:09.680 --> 00:27:13.773
given the amount of variable
energy that we have out there.
00:27:16.190 --> 00:27:21.190
What is the financing
conditions for those facilities to,
00:27:21.610 --> 00:27:24.440
again, continue to stay operational?
00:27:24.440 --> 00:27:27.730
Sure I mean, we all
have long-term debt on us
00:27:27.730 --> 00:27:31.823
and so making sure that we have,
00:27:33.270 --> 00:27:35.450
revenues available to
meet our debt service
00:27:35.450 --> 00:27:37.573
and our debt service coverage is key.
00:27:39.090 --> 00:27:41.670
Each one of the plants have
been financed differently,
00:27:41.670 --> 00:27:45.120
so it's hard to say
exactly what the number is,
00:27:45.120 --> 00:27:49.830
but when we made those
enhancements on the scrubbers
00:27:49.830 --> 00:27:53.308
at Fayette, they were over $400 million.
00:27:53.308 --> 00:27:54.141
Correct.
00:27:54.141 --> 00:27:56.900
I have not covered
that cost by any means.
00:27:56.900 --> 00:28:00.810
This is something I'm still
paying down year to year,
00:28:00.810 --> 00:28:03.110
as many generators that have,
00:28:03.110 --> 00:28:06.270
long-term financing
again, 15, 20 year projects.
00:28:06.270 --> 00:28:09.040
They have a debt payment
schedule that they have to meet
00:28:09.040 --> 00:28:10.713
before they're making any,
00:28:11.850 --> 00:28:16.290
net income and meeting
their whatever hurdle rates
00:28:16.290 --> 00:28:19.170
or rate of returns that they
finance these projects on.
00:28:19.170 --> 00:28:21.990
So where I'm going Randa
with the line of questioning is
00:28:21.990 --> 00:28:23.810
I'm trying to figure out if,
00:28:23.810 --> 00:28:26.840
so there's the ancillary
service approach
00:28:26.840 --> 00:28:28.180
where we can pay for
00:28:28.180 --> 00:28:31.023
some of these specific
performance measures,
00:28:32.150 --> 00:28:37.150
to help our system, but then
given the universe of headwinds
00:28:38.460 --> 00:28:40.370
for dispatchable generations
00:28:40.370 --> 00:28:45.290
of a generation of
different types and vintages
00:28:45.290 --> 00:28:47.690
in order to maintain operations,
00:28:47.690 --> 00:28:52.690
do we need to consider a
more significant design change
00:28:53.510 --> 00:28:57.180
in order to maintain that
fleet over the near term?
00:28:57.180 --> 00:28:58.013
'Cause again,
00:28:58.013 --> 00:29:00.360
you're not gonna build
a peaker just overnight,
00:29:00.360 --> 00:29:01.640
and it's gonna take some time
00:29:01.640 --> 00:29:04.370
and I'm not expecting
10,000 megawatts of batteries
00:29:04.370 --> 00:29:06.330
to be deployed next year.
00:29:06.330 --> 00:29:09.620
So how do we kind of bridge this gap?
00:29:09.620 --> 00:29:11.510
I really believe in
incremental steps.
00:29:11.510 --> 00:29:14.573
I think that's the first
way to get out there.
00:29:15.420 --> 00:29:18.940
I think you need to provide
some regulatory certainty
00:29:18.940 --> 00:29:23.010
about some of these products
from a longer-term perspective
00:29:23.010 --> 00:29:25.090
and if you still don't
see people building new,
00:29:25.090 --> 00:29:28.400
or you still don't see
enhancements coming to the system
00:29:29.600 --> 00:29:33.850
and the again, constant evaluation,
00:29:33.850 --> 00:29:36.317
I think then we have to re-look at it.
00:29:36.317 --> 00:29:40.190
Are we getting the right-
Do you think as a regulator,
00:29:40.190 --> 00:29:42.500
we will have time do that, I mean,
00:29:42.500 --> 00:29:46.004
if people start retiring
facilities and we get tight,
00:29:46.004 --> 00:29:47.654
I don't think I'll have the time.
00:29:48.890 --> 00:29:50.930
And I agree you're
in a difficult situation.
00:29:50.930 --> 00:29:52.590
I do not disagree.
00:29:52.590 --> 00:29:54.150
Okay, so I'm gonna
ask you a question.
00:29:54.150 --> 00:29:56.560
I read your comments to our questions
00:29:56.560 --> 00:30:01.560
and you're the one I was
most scared of on the market,
00:30:01.810 --> 00:30:02.960
So I'm being brave here,
00:30:02.960 --> 00:30:07.020
but would more participation
in day ahead market
00:30:07.020 --> 00:30:09.460
increase your visibility
on the likelihood
00:30:09.460 --> 00:30:13.210
of your participating
in the real-time market?
00:30:13.210 --> 00:30:14.190
Absolutely not.
00:30:14.190 --> 00:30:16.160
It would not, why?
00:30:16.160 --> 00:30:18.750
So when I'm a generator,
00:30:18.750 --> 00:30:22.920
I look at what my cost to produce is,
00:30:22.920 --> 00:30:26.850
and I create an offer curve
from a day ahead perspective
00:30:26.850 --> 00:30:31.380
based off my fuel, my gas
cross and my variable ONM
00:30:31.380 --> 00:30:34.840
that gas cost is changing
every single day, right?
00:30:34.840 --> 00:30:37.680
So that is what I bid in
from a generator standpoint.
00:30:37.680 --> 00:30:40.850
I also have load, I'm
trying to serve my load,
00:30:40.850 --> 00:30:42.270
the least expensive way.
00:30:42.270 --> 00:30:45.210
So that does not mean that
it's coming from my generation.
00:30:45.210 --> 00:30:48.010
That may mean that I'm
gonna buy it from a renewable
00:30:48.010 --> 00:30:51.060
asset because that price is
gonna be less than my price
00:30:51.060 --> 00:30:53.920
of power if it takes me to produce.
00:30:53.920 --> 00:30:55.750
So let's just say I have a gas plant
00:30:55.750 --> 00:31:00.320
and I have a, my lowest offer is $30.
00:31:00.320 --> 00:31:04.590
If the clearing price is
$15, I did not run that unit,
00:31:04.590 --> 00:31:07.770
I bought that power
from the wind generator.
00:31:07.770 --> 00:31:12.360
I don't know any better how
to commit that unit beforehand
00:31:12.360 --> 00:31:15.880
until that market runs because
I'll lose money otherwise,
00:31:15.880 --> 00:31:18.360
because if I commit it
and prices are lower,
00:31:18.360 --> 00:31:19.530
I just lost money.
00:31:19.530 --> 00:31:21.640
So in that line of thought,
00:31:21.640 --> 00:31:23.130
it really is contingent upon
00:31:24.040 --> 00:31:25.930
the conditions of your gas supply,
00:31:25.930 --> 00:31:27.600
'cause again, you're
having to buy that out, right?
00:31:27.600 --> 00:31:28.980
Sure I mean yes.
00:31:28.980 --> 00:31:32.770
So given your menu of
options that you proposed
00:31:32.770 --> 00:31:35.870
and we create an ancillary service for
00:31:35.870 --> 00:31:38.270
on-site fuel storage
or something like that,
00:31:38.270 --> 00:31:43.090
it would incent gas
generators, gas resources,
00:31:43.090 --> 00:31:44.970
to have some type
of on-site fuel storage
00:31:44.970 --> 00:31:47.640
to compete for your ancillary service
00:31:47.640 --> 00:31:51.820
that'll be out there theoretically
that helps you smooth out
00:31:51.820 --> 00:31:53.440
that condition in day ahead.
00:31:53.440 --> 00:31:56.130
Right so generators are
only a very small, I mean,
00:31:56.130 --> 00:31:57.040
there shouldn't say small,
00:31:57.040 --> 00:31:59.960
a significant part of
the gas market, right?
00:31:59.960 --> 00:32:03.610
We don't just me having
certain amount of gas supply
00:32:03.610 --> 00:32:06.840
or storage doesn't mean
that when I inject or withdraw
00:32:06.840 --> 00:32:09.650
in my storage facility,
00:32:09.650 --> 00:32:12.160
that the price of gas
is gonna move daily,
00:32:12.160 --> 00:32:14.880
regardless of what
payment I'm getting from that
00:32:14.880 --> 00:32:15.970
from fuel price.
00:32:15.970 --> 00:32:17.520
But it does have
the effect of creating
00:32:17.520 --> 00:32:18.610
a natural hedge for you
00:32:18.610 --> 00:32:20.340
'cause you've already
paid for it, you've got it there.
00:32:20.340 --> 00:32:22.140
Yes I would call
it a dirty hedge.
00:32:22.980 --> 00:32:23.813
I mean, that's what he did
00:32:23.813 --> 00:32:26.110
when you can't hedge the whole product
00:32:26.110 --> 00:32:27.827
it's called the dirty hedge, right?
00:32:27.827 --> 00:32:30.610
And so you still have
put risk on that generator
00:32:31.924 --> 00:32:34.300
and so I still think you
have the same issue.
00:32:34.300 --> 00:32:35.900
Okay, I'm gonna
keep pressing on it.
00:32:35.900 --> 00:32:38.740
That's okay and
again, I do, please.
00:32:38.740 --> 00:32:40.780
I invite you all to come in
and see how we operate.
00:32:40.780 --> 00:32:43.430
I mean, it's really is very interesting.
00:32:43.430 --> 00:32:45.960
In this economic
example that you,
00:32:45.960 --> 00:32:47.760
your staff worked on for new builds.
00:32:47.760 --> 00:32:50.507
Is that a simple cycle
peaker or aeroderivative.
00:32:50.507 --> 00:32:53.400
Its aeroderivative
actually, it's a jet engine yep.
00:32:53.400 --> 00:32:56.359
So that's obviously
the cheapest
00:32:56.359 --> 00:32:58.040
peaker you can get out there.
Exactly.
00:32:58.040 --> 00:33:01.240
It's about 800 to $1000 of KW right now.
00:33:01.240 --> 00:33:02.073
Okay.
00:33:02.910 --> 00:33:07.150
So obviously we kind of
talked about plant costs,
00:33:07.150 --> 00:33:09.340
construction, operational debt
00:33:09.340 --> 00:33:10.330
and then what do we do?
00:33:10.330 --> 00:33:11.710
I mean, it's like any investment we do
00:33:11.710 --> 00:33:13.250
a discounted cashflow analysis
00:33:13.250 --> 00:33:17.690
and we look at, what
type of market prices
00:33:17.690 --> 00:33:19.545
and revenues are needed
to meet our hurdle rates
00:33:19.545 --> 00:33:23.400
so nothing different there.
00:33:23.400 --> 00:33:27.710
So you do you do your DCF
and we hear not just from you,
00:33:27.710 --> 00:33:30.868
a lot of people that in
your green box and lower,
00:33:30.868 --> 00:33:34.190
or are there predictable and
sustained annual revenues
00:33:34.190 --> 00:33:38.983
for a 20 year asset life?
00:33:40.310 --> 00:33:42.270
I mean, there were a lot of
DCS out there in the world
00:33:42.270 --> 00:33:45.710
that have that run a lot of
businesses that don't have
00:33:45.710 --> 00:33:48.920
any visibility on the revenue inputs,
00:33:48.920 --> 00:33:53.060
in those and high Cap
Ex infrastructure industries
00:33:53.060 --> 00:33:57.100
that don't have any visibility
or even any foreign markets.
00:33:57.100 --> 00:33:58.120
So even the benefit,
00:33:58.120 --> 00:34:00.360
I know our inverted Ford
curves for power prices
00:34:00.360 --> 00:34:01.460
are a problem,
00:34:01.460 --> 00:34:04.070
but there are forward
contracts to limit natural gas
00:34:04.070 --> 00:34:07.050
price volatility that
generators can procure
00:34:07.890 --> 00:34:12.763
from next gas date of
four-day packs or even further.
00:34:15.040 --> 00:34:18.540
So in this compared to other industries,
00:34:18.540 --> 00:34:23.500
like how predictable and how
sustained do they need to be?
00:34:23.500 --> 00:34:26.770
Because there is no industry
on a planet that has 20 year
00:34:26.770 --> 00:34:29.940
visibility into revenues and costs.
00:34:29.940 --> 00:34:32.460
No I agree 100% and
there's not enough liquidity
00:34:32.460 --> 00:34:34.730
in the market to do any of that.
00:34:34.730 --> 00:34:35.730
risk management, hedging.
00:34:35.730 --> 00:34:39.350
Sure even oil and gas
maybe goes out four years.
00:34:39.350 --> 00:34:40.183
Exactly.
00:34:42.986 --> 00:34:44.110
And so it's not just you,
00:34:44.110 --> 00:34:46.910
we hear a lot predictable and
sustainable revenues, right?
00:34:46.910 --> 00:34:51.830
So like how realistic
is that in any industry?
00:34:51.830 --> 00:34:54.110
Well, I mean, I think
we've talked about it
00:34:54.110 --> 00:34:55.920
in other markets and I
know Bill we'll touch on that.
00:34:55.920 --> 00:34:57.880
A capacity market does that, right?
00:34:57.880 --> 00:35:00.233
And legislature
debated that exhaustively.
00:35:00.233 --> 00:35:02.780
Exactly I'm not saying that's
the answer by any means,
00:35:02.780 --> 00:35:05.230
but if we go to the next slide,
00:35:05.230 --> 00:35:09.253
what I do say is I think it's
multiple different services.
00:35:10.520 --> 00:35:12.730
I really believe when
you're trying to meet
00:35:12.730 --> 00:35:15.370
that revenue target, like right now,
00:35:15.370 --> 00:35:16.700
this is based off current market.
00:35:16.700 --> 00:35:18.710
So things change day to day.
00:35:18.710 --> 00:35:20.310
But currently right now,
00:35:20.310 --> 00:35:23.253
if I'm looking at building
this peaker over 20 year term,
00:35:24.380 --> 00:35:26.370
this is kind of how it money's out.
00:35:26.370 --> 00:35:28.553
It's losing $82 million right now.
00:35:29.600 --> 00:35:32.130
it's based off running at,
00:35:32.130 --> 00:35:34.940
maybe 10 or 20% for energy.
00:35:34.940 --> 00:35:37.670
So very low capacity factor on this unit
00:35:37.670 --> 00:35:40.550
so I'm making my
money or making the value
00:35:40.550 --> 00:35:45.082
to run this unit based
off a lot of different
00:35:45.082 --> 00:35:46.690
ancillary service products.
00:35:46.690 --> 00:35:48.720
So I guess another way
00:35:48.720 --> 00:35:51.470
or another a corollary question would be
00:35:51.470 --> 00:35:54.880
when you've got such
a low capacity factor
00:35:54.880 --> 00:35:57.360
peaking that gets back to high revenues,
00:35:57.360 --> 00:36:00.720
only generated when
our reserve margins get
00:36:00.720 --> 00:36:02.270
tighter and tighter and tighter
00:36:04.119 --> 00:36:08.830
and so this is a somewhat
philosophical question,
00:36:08.830 --> 00:36:11.440
are we just skirting around
the edges of this thing,
00:36:11.440 --> 00:36:14.240
looking at different services,
00:36:14.240 --> 00:36:16.270
different versions
of ancillary services,
00:36:16.270 --> 00:36:20.630
or do we need to be looking
at how to move revenues
00:36:20.630 --> 00:36:25.080
to ordinary operating times
like businesses as usual
00:36:25.080 --> 00:36:29.550
where dispatchable generators
can generate enough revenue
00:36:29.550 --> 00:36:32.870
and again, any form
of dispatchable, battery,
00:36:32.870 --> 00:36:37.610
compressed air,
thermal, anything, but just,
00:36:37.610 --> 00:36:39.860
it doesn't require a
crisis for generators
00:36:39.860 --> 00:36:44.790
to have that increased level of revenue
00:36:44.790 --> 00:36:49.270
and that it happens on
a regular enough basis
00:36:49.270 --> 00:36:54.260
that those forward power
curves for power in Texas
00:36:54.260 --> 00:36:57.150
can get to a level that's
not an extraordinary burden
00:36:57.150 --> 00:36:57.983
for a consumer,
00:36:57.983 --> 00:37:02.157
but provides a financial
incentive for investment
00:37:03.120 --> 00:37:05.720
in the dispatchable
capacity we're gonna need.
00:37:05.720 --> 00:37:07.203
Yes, I agree with you.
00:37:08.229 --> 00:37:11.110
I think, when I look
at all those services
00:37:11.110 --> 00:37:14.870
that there could be
predictable payments for like,
00:37:14.870 --> 00:37:16.560
I'll just take voltage support.
00:37:16.560 --> 00:37:19.890
We're the only market does
not pay for voltage support.
00:37:19.890 --> 00:37:22.490
MISO pays for it, SPP pays for it.
00:37:22.490 --> 00:37:25.310
That to me is a very easy, I mean,
00:37:25.310 --> 00:37:27.190
we can send you the tariffs even.
00:37:27.190 --> 00:37:30.710
That's a very easy,
predictable stream of payment
00:37:30.710 --> 00:37:33.113
that ERCOT has not
historically ever paid for.
00:37:34.650 --> 00:37:36.080
Black start service,
00:37:36.080 --> 00:37:38.240
if you look at what we've
paid, our Black start units,
00:37:38.240 --> 00:37:41.313
and I have one it's 84
cents, a megawatt hour,
00:37:42.690 --> 00:37:46.000
ancillary services are clearing
at $14, a megawatt hour,
00:37:46.000 --> 00:37:49.730
and Black start has cleared
for 84 cents a megawatt hour.
00:37:49.730 --> 00:37:52.250
I mean, these are all
things I think we can tweak
00:37:52.250 --> 00:37:55.210
and figure out how to
enhance payment streams
00:37:55.210 --> 00:37:57.920
and predictability for
existing generation
00:37:57.920 --> 00:38:00.460
and future generation to stay online
00:38:00.460 --> 00:38:05.460
and to be built, that
firming fuel service.
00:38:05.740 --> 00:38:08.237
Again, you want me to
invest 500 million, I mean,
00:38:08.237 --> 00:38:12.750
$5 million into, additional pipelines.
00:38:12.750 --> 00:38:16.520
Well, there's gotta be
some type of reason to do it
00:38:16.520 --> 00:38:21.030
well okay, pay me affirming
fuel service, ancillary service.
00:38:21.030 --> 00:38:23.670
Is that voltage
support in SPP, MISO,
00:38:23.670 --> 00:38:27.390
is that born on LSCs
or is that assigned?
00:38:27.390 --> 00:38:28.223
How is that assigned?
00:38:28.223 --> 00:38:29.160
Yeah was the LSCs pay for it?
00:38:29.160 --> 00:38:30.890
The LSCs did, okay.
00:38:30.890 --> 00:38:32.427
I mean, I have always
said in this market,
00:38:32.427 --> 00:38:34.123
and I'll try to wrap up 'cause,
00:38:35.830 --> 00:38:39.580
there is a lot of efficiency
that we've gotten out
00:38:39.580 --> 00:38:42.200
of this market, a huge amount,
00:38:42.200 --> 00:38:44.910
but we did it at the cost of reliability
00:38:44.910 --> 00:38:49.860
and I think this is a prime
example of what happened
00:38:49.860 --> 00:38:50.950
in winter storm Yuri,
00:38:50.950 --> 00:38:53.080
in which we need to switch the pendulum
00:38:53.080 --> 00:38:56.483
and look at paying for
these reliability services,
00:38:58.730 --> 00:39:00.380
like Barbara has shown earlier,
00:39:00.380 --> 00:39:04.590
a lot of other markets do
a lot of things that enhance
00:39:04.590 --> 00:39:07.660
the revenues for generators
00:39:07.660 --> 00:39:09.440
and I know it costs a load money,
00:39:09.440 --> 00:39:12.780
but I also can tell you that
we lost billions of dollars
00:39:12.780 --> 00:39:14.302
during winter storm Yuri
00:39:14.302 --> 00:39:17.190
and I don't think any of these solutions
00:39:17.190 --> 00:39:20.060
that are competitive in nature
would cost that much money.
00:39:20.060 --> 00:39:24.900
So you're saying remove
or move revenues to reliability
00:39:24.900 --> 00:39:27.460
within the existing
competitive framework.
00:39:27.460 --> 00:39:31.140
So we capture the market
efficiencies and the benefits
00:39:31.140 --> 00:39:34.200
for consumers of competition amongst
00:39:34.200 --> 00:39:36.110
both generators and retail providers.
00:39:36.110 --> 00:39:37.661
Yes.
00:39:37.661 --> 00:39:39.001
Thank you.
00:39:39.001 --> 00:39:41.470
Randa, do you have
00:39:41.470 --> 00:39:45.860
pricing figures for
your new firms fuel AS,
00:39:45.860 --> 00:39:48.180
I know you provided some for the,
00:39:48.180 --> 00:39:49.690
through dispatchable liability service.
00:39:49.690 --> 00:39:52.451
How would do you, can
you give us a little more.
00:39:52.451 --> 00:39:55.530
I think its very specific to
everyone's own generator
00:39:55.530 --> 00:39:57.610
and how they're connected?
00:39:57.610 --> 00:40:01.250
So when we develop power
plants, some generators,
00:40:01.250 --> 00:40:03.670
depending on their vintage and year,
00:40:03.670 --> 00:40:04.990
there was a time in the nineties,
00:40:04.990 --> 00:40:09.640
we all did multiple
gas, interconnections
00:40:09.640 --> 00:40:12.910
things got tighter we had
to get capital costs down.
00:40:12.910 --> 00:40:14.650
Now, some of the newer stuff's only
00:40:14.650 --> 00:40:16.520
connected to one gas pipeline.
00:40:16.520 --> 00:40:19.340
So it's very specific
on each power plant
00:40:19.340 --> 00:40:22.240
and the individual
characteristics of that plant
00:40:22.240 --> 00:40:23.103
and location.
00:40:25.370 --> 00:40:27.050
So the payment
would vary by the year.
00:40:27.050 --> 00:40:28.283
It would, it would.
00:40:29.570 --> 00:40:31.300
I think the first thing to do there
00:40:31.300 --> 00:40:33.680
is when you get that
independent consultant or study
00:40:33.680 --> 00:40:35.623
is say, well, how much do we need?
00:40:36.740 --> 00:40:39.730
And then start a competitive
process in which folks say,
00:40:39.730 --> 00:40:43.010
this is what it would
cost me to do X, Y, and Z.
00:40:43.010 --> 00:40:46.583
Here's the fund of dollars,
how do we do that the best way?
00:40:47.640 --> 00:40:50.040
Because it's not
only just allowing folks
00:40:50.040 --> 00:40:52.020
to be able to recover that cost,
00:40:52.020 --> 00:40:54.930
but getting that gas
availability in the right spot
00:40:54.930 --> 00:40:57.080
in the grid is key
00:40:58.900 --> 00:41:00.520
and it goes back to also the Black start
00:41:00.520 --> 00:41:02.480
and how you do the
islands of bringing back
00:41:02.480 --> 00:41:03.623
the black star units.
00:41:05.940 --> 00:41:08.542
Voltage support,
oh, sorry one more.
00:41:08.542 --> 00:41:11.570
You mentioned how other
markets pay for voltage support
00:41:11.570 --> 00:41:13.740
and I think you've mentioned tariffs.
00:41:13.740 --> 00:41:16.010
Can you speak to a little bit
more about how other markets
00:41:16.010 --> 00:41:18.420
compensate for voltage support
00:41:18.420 --> 00:41:20.060
and how that would be done in ERCOT?
00:41:20.060 --> 00:41:22.400
Sure, I actually have a
summary I can just send
00:41:22.400 --> 00:41:24.900
that may be the best
thing to do, so I'll do that.
00:41:32.120 --> 00:41:33.455
Maybe let me do it.
00:41:33.455 --> 00:41:35.450
Bring on it.
00:41:35.450 --> 00:41:38.360
We talked about the
dispatchable generation
00:41:38.360 --> 00:41:40.880
and what it costs to
do a peaker I should say
00:41:40.880 --> 00:41:42.873
you have a metric to do this already.
00:41:43.910 --> 00:41:46.300
You have the peaker net margin analysis
00:41:46.300 --> 00:41:48.453
that is part of your rules right now.
00:41:49.290 --> 00:41:52.570
The costs need to be
updated is what I would say.
00:41:52.570 --> 00:41:56.620
It hasn't been updated since 2012.
00:41:56.620 --> 00:42:01.240
So what I would recommend is
to have a better understanding
00:42:01.240 --> 00:42:02.910
is update those costs.
00:42:02.910 --> 00:42:04.800
You can look right now,
00:42:04.800 --> 00:42:08.960
the red line shows that
you need at least $105,000
00:42:08.960 --> 00:42:13.960
of a cumulative peak net
margin to get to help incentivize
00:42:15.360 --> 00:42:19.930
and yes, we've had
instances that that's occurred,
00:42:19.930 --> 00:42:23.680
but it still is not enough
certainty in the market
00:42:23.680 --> 00:42:28.680
to invest, $300 billion
in a project based off
00:42:30.670 --> 00:42:33.810
the outlier of 2021, right?
00:42:33.810 --> 00:42:35.460
We hope we never get there again.
00:42:39.050 --> 00:42:41.680
All right thank you ma'am.
00:42:41.680 --> 00:42:43.683
Thank you oh, no,
it's the same thing.
00:42:45.023 --> 00:42:49.791
Good deal, Exelon is
next the floor is yours.
00:42:49.791 --> 00:42:52.500
Yes thank you very
much Commissioners
00:42:52.500 --> 00:42:54.100
for the opportunity to be here today.
00:42:54.100 --> 00:42:55.880
My name is Bill Berg
and I'm vice president
00:42:55.880 --> 00:42:59.010
of wholesale market
development for Exelon Corp.
00:42:59.010 --> 00:43:01.490
What I'd like to walk
through with you today
00:43:01.490 --> 00:43:02.610
is our proposal,
00:43:02.610 --> 00:43:05.460
the comments we filed focusing primarily
00:43:05.460 --> 00:43:07.993
on the ancillary service product,
00:43:08.880 --> 00:43:11.030
the it's a new product we're proposing,
00:43:11.030 --> 00:43:13.835
which is available to
dispatchable form resources
00:43:13.835 --> 00:43:15.460
and we'll talk about
what those resources are
00:43:15.460 --> 00:43:18.260
and can include and how it fits into
00:43:18.260 --> 00:43:21.430
and strengthens kind of
the existing market design
00:43:21.430 --> 00:43:23.440
and improves reliability.
00:43:23.440 --> 00:43:26.580
As we were kind of developing
this proposal, we took,
00:43:26.580 --> 00:43:27.550
we've kind of looked inward.
00:43:27.550 --> 00:43:32.020
We looked at the unique
nature of the Texas grid,
00:43:32.020 --> 00:43:34.800
the existing market design in Texas,
00:43:34.800 --> 00:43:37.240
as well as the recently
passed legislation
00:43:37.240 --> 00:43:40.710
to try and come up with a
strong man for a holistic proposal
00:43:40.710 --> 00:43:43.060
for the Commission to consider.
00:43:43.060 --> 00:43:45.290
So the first thing we commented on,
00:43:45.290 --> 00:43:47.890
I won't spend a lot of
time on this because it's not
00:43:47.890 --> 00:43:50.560
an ancillary service product per se,
00:43:50.560 --> 00:43:53.550
is just the price cap in the ORDC.
00:43:53.550 --> 00:43:57.050
We are supportive of
lowering the price cap
00:43:57.050 --> 00:43:59.770
and kind of widening the tails
00:43:59.770 --> 00:44:02.690
and we list a couple of
reasons why we do that.
00:44:02.690 --> 00:44:07.460
It would on the margin move
reliability away from the crisis
00:44:07.460 --> 00:44:09.410
situation we're at today.
00:44:09.410 --> 00:44:12.250
I think resources could build into that
00:44:12.250 --> 00:44:15.040
and I think what we're seeing
from ERCOT and kind of their
00:44:15.040 --> 00:44:19.070
change and kind of operating
philosophy is adjusting that
00:44:19.070 --> 00:44:22.520
ORDC would take a lot of
these procurements that ERCOT's
00:44:22.520 --> 00:44:26.050
doing today out of market
and move them into market,
00:44:26.050 --> 00:44:26.883
which I think,
00:44:26.883 --> 00:44:29.303
using the market to
achieve your objectives.
00:44:29.303 --> 00:44:30.980
I think most of us would agree
00:44:30.980 --> 00:44:33.250
is better than command and control.
00:44:33.250 --> 00:44:36.950
Bill can you explain how it
would move us from the crisis
00:44:36.950 --> 00:44:38.530
standard that we're on right now?
00:44:38.530 --> 00:44:42.450
How does broadening
the ORDC tail do that?
00:44:42.450 --> 00:44:45.810
Well, what you're
basically doing is,
00:44:45.810 --> 00:44:47.610
and you think of the
end of the tail, right?
00:44:47.610 --> 00:44:50.730
So think about the ORDC,
when does it start providing,
00:44:50.730 --> 00:44:52.610
making the $100 adder.
00:44:52.610 --> 00:44:56.490
Does it start providing $100
adder at 4,000 megawatts
00:44:56.490 --> 00:44:58.670
or 5,000 megawatts
00:44:58.670 --> 00:45:02.600
and so by widening
the tail to, as I said,
00:45:02.600 --> 00:45:05.070
you will be carrying
more reserves in real time.
00:45:05.070 --> 00:45:09.010
So if the $100 adder
occurs when reserves
00:45:09.010 --> 00:45:10.690
fall to 5,000 megawatts,
00:45:10.690 --> 00:45:13.340
people will commit their
units to capture that adder.
00:45:14.870 --> 00:45:16.060
Does that make sense?
00:45:16.060 --> 00:45:19.330
Yeah, well, I mean,
you're elongating the tail,
00:45:19.330 --> 00:45:23.530
but you still get to
crisis to trigger the tail.
00:45:23.530 --> 00:45:26.390
Absolutely and
changing the curve
00:45:26.390 --> 00:45:27.830
is only part of our solution.
00:45:27.830 --> 00:45:28.700
Okay.
00:45:28.700 --> 00:45:31.440
Changing the curve
alone in our opinion
00:45:31.440 --> 00:45:34.593
is not going to dramatically
help the situation
00:45:34.593 --> 00:45:35.426
that you're facing.
00:45:35.426 --> 00:45:38.400
I think, let me make
sure I got the concept right.
00:45:38.400 --> 00:45:41.180
For my own edification that
you were saying about by
00:45:41.180 --> 00:45:45.590
flattening that tail or
broadening that curve
00:45:45.590 --> 00:45:49.040
instead of a unit and
the unit understandably
00:45:49.040 --> 00:45:52.113
would hold up out of the
market, not commit to the market.
00:45:53.180 --> 00:45:57.120
If it's a 12 or 18 hour start time unit
00:45:57.120 --> 00:45:59.020
right now that unit staying out,
00:45:59.020 --> 00:46:04.020
waiting for that adder to,
waiting until that reserve margin
00:46:04.050 --> 00:46:06.020
shrinks enough, that
there's a possibly for an adder
00:46:06.020 --> 00:46:06.853
in the meantime,
00:46:06.853 --> 00:46:08.640
what he's looking at and
say, if it's 18 hours out
00:46:08.640 --> 00:46:12.933
and I don't have it
committed yet I'm rocking it.
00:46:13.780 --> 00:46:15.870
That's part of it for
the long lead time units.
00:46:15.870 --> 00:46:18.420
But it's also for shortly
time units as well.
00:46:18.420 --> 00:46:21.370
Anybody who says I can make money
00:46:21.370 --> 00:46:23.380
at this higher reserve level,
00:46:23.380 --> 00:46:25.260
they're gonna self commit.
00:46:25.260 --> 00:46:26.850
They're gonna stay off until.
00:46:26.850 --> 00:46:27.740
They're gonna stay off until
00:46:27.740 --> 00:46:28.820
they think they can make money
00:46:28.820 --> 00:46:30.170
and so that kind of-
So long as the margin,
00:46:30.170 --> 00:46:31.003
it gets close.
That's right.
00:46:31.003 --> 00:46:32.170
And then they're gonna commit it.
00:46:32.170 --> 00:46:33.530
It doesn't have to be logging any time.
00:46:33.530 --> 00:46:34.530
It could be quickstart peakers.
00:46:34.530 --> 00:46:36.523
It could be any type of resource.
00:46:37.370 --> 00:46:40.070
What number do you
suggest that we lower the cap to.
00:46:43.433 --> 00:46:46.630
We have put in
there $4,500, $3,000.
00:46:48.250 --> 00:46:49.200
I do want to say,
00:46:49.200 --> 00:46:54.200
I think the ORDC curve is
an incredibly powerful tool
00:46:54.290 --> 00:46:55.570
for the market.
00:46:55.570 --> 00:46:58.560
I think energy prices should
remain a prominent feature
00:46:58.560 --> 00:46:59.393
of the market
00:47:00.620 --> 00:47:04.290
and I don't think you
should try and go too low
00:47:05.260 --> 00:47:07.900
energy prices as we talked about
00:47:07.900 --> 00:47:09.930
it's in price responsive demand,
00:47:09.930 --> 00:47:12.440
and we're gonna talk about non
price, responsive demand here
00:47:12.440 --> 00:47:13.273
in a minute,
00:47:14.160 --> 00:47:18.513
they inform the market as
to the duration of an issue.
00:47:20.140 --> 00:47:23.650
Is there a tight system
condition for an hour,
00:47:23.650 --> 00:47:27.840
a day or for four hours a
day or for eight hours a day?
00:47:27.840 --> 00:47:29.200
And now all that information,
00:47:29.200 --> 00:47:31.840
very informative to
the market in terms of
00:47:31.840 --> 00:47:34.640
their calculus as to what
type of resource should I build,
00:47:34.640 --> 00:47:35.640
where should I build it?
00:47:35.640 --> 00:47:40.060
And so we think the ORDC
curve should remain a prominent
00:47:40.060 --> 00:47:40.960
feature of your market.
00:47:40.960 --> 00:47:42.360
We just think you need more.
00:47:43.460 --> 00:47:46.860
Do you think the ORDC
will incent if there's changes
00:47:46.860 --> 00:47:49.830
you made will incent
generation investment alone?
00:47:49.830 --> 00:47:51.480
Not in and of itself no matter.
00:47:57.920 --> 00:48:02.920
Okay, the, are we good on the ORDC?
00:48:03.580 --> 00:48:04.413
Yeah keep going.
00:48:04.413 --> 00:48:08.460
Okay so now we're kind of
delving into the new product
00:48:08.460 --> 00:48:11.750
and I want to kind of
go back to the first thing
00:48:11.750 --> 00:48:14.770
that Woody said this morning
about his number one issue was
00:48:16.170 --> 00:48:19.120
what is the amount of reliability
you're trying to procure?
00:48:19.970 --> 00:48:22.870
And that really is
kind of the foundation
00:48:22.870 --> 00:48:25.420
for a lot of these discussions,
I agree with Woody,
00:48:25.420 --> 00:48:27.003
that is the first question
00:48:27.003 --> 00:48:29.050
that the Commission
needs to wrestle with
00:48:29.050 --> 00:48:32.140
and I would argue it is
the most difficult question
00:48:32.140 --> 00:48:35.330
to wrestle with because
it's a little bit of a Goldilocks
00:48:35.330 --> 00:48:39.460
situation here where if you
incent too much reliability,
00:48:39.460 --> 00:48:42.010
right, consumers are
burdened with that cost
00:48:42.010 --> 00:48:46.150
and you have a, your
grid becomes stagnant.
00:48:46.150 --> 00:48:48.480
You have too many
resources that are inefficient
00:48:48.480 --> 00:48:50.120
and they're just hanging around too long
00:48:50.120 --> 00:48:52.730
and they're really not
providing much reliability,
00:48:52.730 --> 00:48:57.490
too little reliability, right
It's devastating as we know.
00:48:57.490 --> 00:49:01.310
So defining, finding that spot
00:49:01.310 --> 00:49:04.100
where you are comfortable
from a public policy perspective
00:49:04.100 --> 00:49:07.030
of this is the right balance
of reliability we need,
00:49:07.030 --> 00:49:10.870
we think is your first
it's a very important issue
00:49:10.870 --> 00:49:12.900
for you to solve and it
becomes the foundation
00:49:12.900 --> 00:49:15.470
for a lot of these other conversations.
00:49:15.470 --> 00:49:17.780
Where I differ with Woody a little bit
00:49:18.690 --> 00:49:21.493
is how you define that reliability,
00:49:22.430 --> 00:49:25.390
Woody was talking about,
defining that reliability
00:49:25.390 --> 00:49:28.060
in terms of a planning
reserve margin concept,
00:49:28.060 --> 00:49:29.920
the planning reserve margin concept
00:49:29.920 --> 00:49:32.170
has been around for decades,
00:49:32.170 --> 00:49:35.620
it works exceptionally well
when your universe of resources
00:49:35.620 --> 00:49:36.963
is called nuclear and gas.
00:49:38.380 --> 00:49:41.400
That is not the environment
we were in Texas.
00:49:41.400 --> 00:49:45.423
We are in an environment
where there's an increasingly,
00:49:47.550 --> 00:49:49.560
there's the mix of generation,
00:49:49.560 --> 00:49:52.430
as we've talked about is
becoming increasing intermittent.
00:49:52.430 --> 00:49:56.420
So what we're proposing
to kind of define the reliability
00:49:56.420 --> 00:50:01.420
standard is to look at the
concept of net peak load seasonal
00:50:02.020 --> 00:50:06.537
net peak load, which is
from load expectations,
00:50:07.540 --> 00:50:10.630
minus your intermittent
renewable resources.
00:50:10.630 --> 00:50:13.330
The difference is
what you need to solve,
00:50:13.330 --> 00:50:15.250
for dispatchable resources
00:50:16.240 --> 00:50:17.550
and we're going one step further
00:50:17.550 --> 00:50:19.540
and this is kind of
where the art comes in
00:50:19.540 --> 00:50:22.180
from the Commissions
perspective, we're saying, all right,
00:50:22.180 --> 00:50:26.670
we can start with net from
load minus intermittence
00:50:26.670 --> 00:50:29.090
and both those are
expected cases, right?
00:50:29.090 --> 00:50:32.930
The load is 50,50 probability
of happening the intermittence
00:50:32.930 --> 00:50:34.433
or whatever resource,
00:50:35.460 --> 00:50:37.760
effective load carrying
capability we give them,
00:50:37.760 --> 00:50:41.200
we're saying, take those
two numbers and stress them,
00:50:41.200 --> 00:50:44.440
stress the load up, stress
the renewables down
00:50:44.440 --> 00:50:47.250
and that is the amount of
dispatchable reserves you need
00:50:47.250 --> 00:50:48.550
to have reliability.
00:50:48.550 --> 00:50:50.933
How far down
would you stress it?
00:50:50.933 --> 00:50:53.300
That is the art
and that is really
00:50:53.300 --> 00:50:55.013
where the art comes into this?
00:50:57.704 --> 00:51:01.300
There's a lot of good information
in the Sara report today
00:51:01.300 --> 00:51:03.850
where ERCOT looks at what
happens if the load goes up
00:51:03.850 --> 00:51:06.960
to a 90, 10 case or whatever case,
00:51:06.960 --> 00:51:09.960
what happens if the re
renewables go down to the,
00:51:09.960 --> 00:51:11.310
same case, right?
00:51:11.310 --> 00:51:12.607
What we're suggesting is,
00:51:12.607 --> 00:51:15.920
and we probably are gonna
need some analysis from ERCOT
00:51:15.920 --> 00:51:19.920
and definitely some policy
consideration from the Commission
00:51:19.920 --> 00:51:22.680
as to look at those two events jointly,
00:51:22.680 --> 00:51:26.790
what's the probability of those
happening at the same time
00:51:26.790 --> 00:51:30.110
and such that, you could pick
it a one on 100 year standard
00:51:30.110 --> 00:51:32.130
or one in 50 year standard,
00:51:32.130 --> 00:51:36.623
but there's definitely
some art as well as science
00:51:36.623 --> 00:51:38.660
into that conversation.
00:51:38.660 --> 00:51:43.300
But it truly is foundational
to kind of defining success
00:51:43.300 --> 00:51:45.993
and defining a market
design that achieves success.
00:51:49.040 --> 00:51:51.780
We tried the
probability thing in June.
00:51:51.780 --> 00:51:53.847
Yes, sir well, I'm
gonna get to that.
00:51:53.847 --> 00:51:54.700
But in all right,
00:51:54.700 --> 00:51:58.500
so let's, what is a
dispatchable from resource?
00:51:58.500 --> 00:52:02.090
It's a new term that sounds
similar to dispatchable
00:52:02.090 --> 00:52:04.020
reliability service.
00:52:04.020 --> 00:52:06.430
I think the concept's saying the same,
00:52:06.430 --> 00:52:09.650
but we're talking about creating
a procurement of resources
00:52:09.650 --> 00:52:12.630
as determined by what
the reliability standard
00:52:12.630 --> 00:52:13.880
you just talked about is,
00:52:15.150 --> 00:52:16.840
and they would be seasonal
00:52:16.840 --> 00:52:20.440
because the kind of the
net peak load concept,
00:52:20.440 --> 00:52:23.270
we were talking about changes by season,
00:52:23.270 --> 00:52:25.410
the amount of swing
you could have in the load
00:52:25.410 --> 00:52:27.583
changes by season, the
amount of swing you could have,
00:52:27.583 --> 00:52:30.590
in your inner resources
changes by season.
00:52:30.590 --> 00:52:32.000
So you want to come up with that kind of
00:52:32.000 --> 00:52:34.140
seasonal reliability need,
00:52:34.140 --> 00:52:37.510
and then procure those
dispatchable resources.
00:52:37.510 --> 00:52:39.440
What are those dispatchable resources?
00:52:39.440 --> 00:52:41.500
They are obviously thermal resources
00:52:41.500 --> 00:52:42.870
and we would include nuclear in there
00:52:42.870 --> 00:52:44.380
because they're always on,
00:52:44.380 --> 00:52:46.120
even though they're not
technically dispatchable,
00:52:46.120 --> 00:52:48.240
there must run resources.
00:52:48.240 --> 00:52:49.240
They could also include,
00:52:49.240 --> 00:52:51.960
and it should include demand response.
00:52:51.960 --> 00:52:53.770
You have the ERs program,
00:52:53.770 --> 00:52:56.060
that's kind of its own
little capacity market
00:52:56.060 --> 00:52:57.100
out there today.
00:52:57.100 --> 00:52:58.530
You could roll that into this product
00:52:58.530 --> 00:52:59.420
and they could do that.
00:52:59.420 --> 00:53:01.970
We talked about residential
demand response,
00:53:01.970 --> 00:53:03.890
that could be part of this as well.
00:53:03.890 --> 00:53:07.870
I wrote down voltage reduction because
00:53:07.870 --> 00:53:09.560
that came up today as well.
00:53:09.560 --> 00:53:12.390
The trick is create a broad market
00:53:12.390 --> 00:53:14.550
for these dispatchable services
00:53:14.550 --> 00:53:18.180
and then clear it on a
competitive market basis.
00:53:18.180 --> 00:53:19.830
What do you get for it?
00:53:19.830 --> 00:53:21.930
What we're proposing here is that there,
00:53:21.930 --> 00:53:23.550
you could put some conditions on this.
00:53:23.550 --> 00:53:27.040
You could require anyone
who receives a dispatchable
00:53:27.040 --> 00:53:30.577
ancillary service to offer
into their ahead market.
00:53:30.577 --> 00:53:31.950
Physically commit.
00:53:31.950 --> 00:53:35.150
To commit, not
to necessarily run,
00:53:35.150 --> 00:53:37.220
but to throw in a price-based offer.
00:53:37.220 --> 00:53:40.140
You do not want, it's
not good for a generator
00:53:40.140 --> 00:53:44.960
that has a marginal cost of
$30 to run in a $20 market.
00:53:44.960 --> 00:53:46.150
That's not, that's right,
00:53:46.150 --> 00:53:49.510
but you could have them submit an offer.
00:53:49.510 --> 00:53:51.370
You could put some conditions on
00:53:51.370 --> 00:53:53.913
kind of pre-submitting
maintenance schedules.
00:53:55.620 --> 00:53:58.513
There's a lot of conditions
you could do with this.
00:54:00.674 --> 00:54:02.760
So what does this do?
00:54:02.760 --> 00:54:06.560
This would, we think improve
reliability in all seasons
00:54:07.920 --> 00:54:10.470
and as we've thought about this,
00:54:10.470 --> 00:54:14.160
and particularly as it
relates to the ORDC,
00:54:14.160 --> 00:54:16.370
if this works, you're going to attract,
00:54:16.370 --> 00:54:17.540
and we hope it would,
00:54:17.540 --> 00:54:21.370
you're going to attract
more dispatchable resources,
00:54:21.370 --> 00:54:24.060
which means now we're not in the day
00:54:24.060 --> 00:54:26.190
where we're committing more resources,
00:54:26.190 --> 00:54:28.040
self committing in the day.
00:54:28.040 --> 00:54:30.730
You just have more resources in general
00:54:30.730 --> 00:54:34.400
and so that is gonna keep
you from the super steep
00:54:34.400 --> 00:54:36.950
portion of the RDC curve,
00:54:36.950 --> 00:54:40.090
because they're around and
they're available to commit
00:54:40.090 --> 00:54:43.110
and so yes, there might
be an incremental cost
00:54:43.110 --> 00:54:45.880
with this ancillary service product,
00:54:45.880 --> 00:54:48.800
but we would expect there
to be an incremental reduction
00:54:48.800 --> 00:54:51.270
in kind of life on the ORDC curve.
00:54:51.270 --> 00:54:56.140
So that's important
and nuanced distinction,
00:54:56.140 --> 00:55:00.250
but an important that those
two elements are tied together.
00:55:00.250 --> 00:55:01.083
Yes, sir.
00:55:02.150 --> 00:55:05.990
As to your reliability
standard and how it works,
00:55:05.990 --> 00:55:10.640
how it syncs up with the
dispatchable AS product
00:55:10.640 --> 00:55:11.913
that you just described.
00:55:13.820 --> 00:55:16.270
If you'll humor me, let's do a quick.
00:55:16.270 --> 00:55:17.103
Yes, sir.
00:55:17.103 --> 00:55:18.220
Back of the
envelope calculation,
00:55:18.220 --> 00:55:22.890
you said peak net load say this,
00:55:22.890 --> 00:55:25.660
we'll just call it 75,000 for a normal,
00:55:25.660 --> 00:55:28.884
not extreme weather event,
normal August afternoon,
00:55:28.884 --> 00:55:29.717
Right.
00:55:29.717 --> 00:55:34.330
Back out the intermittent
switchers, 35,000 right now.
00:55:36.470 --> 00:55:39.017
So that gets you to 40,000, right?
00:55:44.368 --> 00:55:45.201
A little bit-
00:55:45.201 --> 00:55:47.340
But I've got a discount
factor on the intermittent.
00:55:47.340 --> 00:55:49.520
Definitely a discount
factor, I don't think you'll pull
00:55:49.520 --> 00:55:51.970
we're not suggesting you
pull out all the intermittent.
00:55:51.970 --> 00:55:54.600
Okay so this is the art
part that you mentioned.
00:55:54.600 --> 00:55:57.210
You're gonna stress them
down, the question is how much?
00:55:57.210 --> 00:56:01.610
Okay so right now we're
at 7% of installed capacity
00:56:01.610 --> 00:56:03.230
for our wind fleet.
00:56:03.230 --> 00:56:04.210
Yes, sir.
00:56:04.210 --> 00:56:08.120
So that's, I wouldn't
say that's is that again?
00:56:08.120 --> 00:56:10.380
To see all right we don't have
to figure that out right now,
00:56:10.380 --> 00:56:14.360
but if you take a snapshot
of 1:15 this afternoon,
00:56:14.360 --> 00:56:18.770
mid August or late
August, we're at a 7%.
00:56:18.770 --> 00:56:22.763
So say so there's
more than that so it's.
00:56:24.360 --> 00:56:29.360
It's got us, there were about 80%.
00:56:29.870 --> 00:56:31.200
Correct.
00:56:31.200 --> 00:56:34.050
So let's say we've got the
grand total we're getting is
00:56:35.502 --> 00:56:37.917
10,000 megawatts normal day right now.
00:56:38.816 --> 00:56:41.180
So if you back that out,
00:56:41.180 --> 00:56:45.340
we're from 75,000 peak net
load and afternoon to 65,000
00:56:46.300 --> 00:56:49.005
and then what's the
next step in your process?
00:56:49.005 --> 00:56:50.940
Are you saying the rest
of that's the dispatchable?
00:56:50.940 --> 00:56:52.680
That's your
dispatchable need without,
00:56:52.680 --> 00:56:54.810
before you start stressing the load up
00:56:54.810 --> 00:56:57.860
and remember, this
is the peak net load
00:56:57.860 --> 00:56:59.860
for the season we're talking about.
00:56:59.860 --> 00:57:01.010
Sure.
So you're talking about
00:57:01.010 --> 00:57:02.180
a normal day, but let's just assume
00:57:02.180 --> 00:57:04.130
it's the peak load for the season
00:57:04.130 --> 00:57:07.230
today was the peak and
we're applying our methodology
00:57:08.390 --> 00:57:12.030
then yes, the dispatchable
requirement would be 65.
00:57:12.030 --> 00:57:16.073
So that would be ERCOT
procuring on a week ahead or.
00:57:17.525 --> 00:57:22.130
Well so, couple a
month or two prior.
00:57:22.130 --> 00:57:24.610
Sure the month ahead or
even seasonal for the summer
00:57:24.610 --> 00:57:26.570
hey, we're quarter by
quarter we'll look at it.
00:57:26.570 --> 00:57:27.830
So that's what you're saying.
00:57:27.830 --> 00:57:29.240
Yes, sir.
00:57:29.240 --> 00:57:31.610
Looking at ERCOT
runs its analysis
00:57:31.610 --> 00:57:34.700
We think on August 26th,
00:57:34.700 --> 00:57:36.170
we're gonna need a dispatchable.
00:57:36.170 --> 00:57:40.960
We need to procure 65,000
megawatts of dispatchable
00:57:40.960 --> 00:57:45.253
resources and ancillary services.
00:57:47.190 --> 00:57:51.130
So I just want to
make sure I'm tracking.
00:57:51.130 --> 00:57:54.320
So the next season is the fall, right?
00:57:54.320 --> 00:57:55.530
I'm saying if we
had done this model.
00:57:55.530 --> 00:57:57.530
Absolutely If
you had done this,
00:57:57.530 --> 00:57:59.300
if you had done this in the spring.
00:57:59.300 --> 00:58:00.170
For the summer,
00:58:00.170 --> 00:58:01.010
For this summer,
00:58:01.010 --> 00:58:04.300
you would have already
procured all those resources.
00:58:04.300 --> 00:58:07.780
Those resources were gonna
be, they're committed to you.
00:58:07.780 --> 00:58:11.563
They have an offer into every
day, had market every day.
00:58:12.560 --> 00:58:15.230
They have performance obligations
00:58:15.230 --> 00:58:18.000
throughout the entire
season they're committed.
00:58:18.000 --> 00:58:18.833
Okay.
00:58:18.833 --> 00:58:21.250
And so on any given
day within that season,
00:58:21.250 --> 00:58:24.110
they're yours and there are
ERCOTs and at your disposal,
00:58:24.110 --> 00:58:27.510
but you have secured the
right amount of dispatchable
00:58:27.510 --> 00:58:30.600
to kind of deal with variable load
00:58:30.600 --> 00:58:32.250
and variable, intermittent resources
00:58:32.250 --> 00:58:34.010
and the payments are targeted
00:58:34.010 --> 00:58:36.170
to those dispatchable resources.
00:58:36.170 --> 00:58:39.699
So you're actually
beginning to target the money
00:58:39.699 --> 00:58:42.640
and the payments to the
resources that kind of balance out.
00:58:42.640 --> 00:58:44.920
Like Randa said,
revenues to reliable.
00:58:44.920 --> 00:58:46.550
That's right, revenues
to reliable reliability
00:58:46.550 --> 00:58:47.453
That's right.
00:58:47.453 --> 00:58:49.968
Can you compare and
contrast your two products
00:58:49.968 --> 00:58:51.067
cause they sound very similar.
00:58:51.067 --> 00:58:52.024
They are.
What's the difference?
00:58:52.024 --> 00:58:53.167
We should have spoke.
00:58:53.167 --> 00:58:57.500
I know now I think the
big difference is the way I,
00:58:57.500 --> 00:59:00.520
what we're recommending
that art of how you determine
00:59:00.520 --> 00:59:02.720
how much you need,
that's the big difference
00:59:03.835 --> 00:59:06.623
and I think that needs
to be studied further.
00:59:08.010 --> 00:59:13.010
My concerns are, if you procure so much,
00:59:13.680 --> 00:59:16.080
it becomes a balancing act, really?
00:59:16.080 --> 00:59:18.300
Because if you procure
so much, it sounds funny,
00:59:18.300 --> 00:59:21.070
but people will start
bidding close to zero
00:59:21.070 --> 00:59:23.710
and that amount will
clear at a very low,
00:59:23.710 --> 00:59:26.610
low value that doesn't enhance anything.
00:59:26.610 --> 00:59:29.020
So it has to be a balancing act
00:59:29.020 --> 00:59:33.010
of determining the right amount and,
00:59:33.010 --> 00:59:36.050
we also talked about
a price floor to look at
00:59:36.050 --> 00:59:39.160
as an option too, to make
sure that the value is there
00:59:39.160 --> 00:59:41.060
in the future to incentivize it,
00:59:41.060 --> 00:59:42.860
or it could be driven to nothing
00:59:42.860 --> 00:59:45.580
and we've seen that at capacity
markets I hate to say that,
00:59:45.580 --> 00:59:46.990
but, we've seen that.
00:59:46.990 --> 00:59:50.417
So it's gotta be a nice
balance of what we need
00:59:50.417 --> 00:59:54.093
and how you keep those
generators online also connection.
00:59:55.040 --> 00:59:56.320
I imagine Scott will
have a few thoughts
00:59:56.320 --> 00:59:58.023
on the expenses related to this?
00:59:59.577 --> 01:00:00.833
But it does.
01:00:02.130 --> 01:00:06.030
the pricing of the market is important,
01:00:06.030 --> 01:00:08.310
but how much you procure,
01:00:08.310 --> 01:00:11.250
what you need for
reliability is your first step.
01:00:11.250 --> 01:00:14.060
And that is the art
01:00:14.060 --> 01:00:16.880
we can deal with in
a price is going zero
01:00:16.880 --> 01:00:18.580
through market design enhancements.
01:00:18.580 --> 01:00:20.580
You could put a downward
sloping, demand curve,
01:00:20.580 --> 01:00:24.050
like the RDC there's things
you can do to kind of mitigate
01:00:24.050 --> 01:00:25.800
some of the price volatility.
01:00:25.800 --> 01:00:27.950
But again, coming
back to kind of studying
01:00:27.950 --> 01:00:32.470
the quantity of resources
you deed is important.
01:00:32.470 --> 01:00:33.370
All right.
01:00:33.370 --> 01:00:35.343
Okay just wrapping up here.
01:00:37.910 --> 01:00:40.660
There's been a lot of
talk about winterization
01:00:40.660 --> 01:00:44.064
from fuel maintenance outages,
01:00:44.064 --> 01:00:46.950
there's been a lot of
conversation after the storm
01:00:46.950 --> 01:00:51.497
and because this is a
seasonal specific product
01:00:52.680 --> 01:00:54.050
you can develop seasonal,
01:00:54.050 --> 01:00:57.350
you can and should develop
seasonal specific requirements.
01:00:57.350 --> 01:01:01.594
So you can think about to
salvage dispatchable from service
01:01:01.594 --> 01:01:03.750
dispatchable from resources, sorry,
01:01:03.750 --> 01:01:05.350
I'm already picking up on yours.
01:01:06.610 --> 01:01:10.070
In the winter you have
to do A, B, C, and D
01:01:10.070 --> 01:01:11.320
to sell it in the summer,
01:01:13.385 --> 01:01:14.810
it's another set of requirements
01:01:14.810 --> 01:01:17.660
spring and fall you're dealing
with your maintenance issues,
01:01:17.660 --> 01:01:21.570
but it does provide a nice
umbrella to kind of wrap
01:01:21.570 --> 01:01:24.180
a lot of the reliability requirements
01:01:24.180 --> 01:01:25.840
you're struggling with right now
01:01:25.840 --> 01:01:28.090
and trying to figure
out under this umbrella,
01:01:28.090 --> 01:01:31.350
because you can put some
conditions on selling this product.
01:01:31.350 --> 01:01:33.600
So those seasonal
examples you've mentioned
01:01:34.800 --> 01:01:39.100
tailor what's required by
SB three and that based,
01:01:39.100 --> 01:01:41.370
or based on those aspects.
01:01:41.370 --> 01:01:44.240
So the spring and the fall,
01:01:44.240 --> 01:01:47.090
basically the shoulder months.
01:01:47.090 --> 01:01:50.800
So are you suggesting an AS product
01:01:50.800 --> 01:01:55.000
dispatchable AS product
that would be compensated for
01:01:55.840 --> 01:01:58.420
scheduling and some other different way.
01:01:58.420 --> 01:02:01.320
Like, can you explain
that spring and fall one?
01:02:01.320 --> 01:02:02.180
So the spring and the fall,
01:02:02.180 --> 01:02:05.690
you're gonna start with
the same kind of analysis,
01:02:05.690 --> 01:02:08.200
which is how much do we need
01:02:09.780 --> 01:02:13.840
of seasonal kind of net
peak load for that season.
01:02:13.840 --> 01:02:16.330
It's gonna be very
different than the summer.
01:02:16.330 --> 01:02:18.570
You're gonna also take into,
01:02:18.570 --> 01:02:20.190
and then you're going,
procure that amount.
01:02:20.190 --> 01:02:22.540
What we're saying
with the spring in the fall
01:02:22.540 --> 01:02:25.330
is we have to find a
way to also incorporate
01:02:25.330 --> 01:02:28.830
maintenance into that as
well, 'cause we're starting to,
01:02:28.830 --> 01:02:31.260
we're at kind of at a point now where
01:02:31.260 --> 01:02:34.780
it is difficult for the
thermal generation
01:02:34.780 --> 01:02:36.680
to take maintenance
outages in the spring and fall
01:02:36.680 --> 01:02:39.130
simply because I'm not
sure we have enough of it.
01:02:41.170 --> 01:02:42.003
Thank you.
01:02:42.003 --> 01:02:43.290
Yes, ma'am.
01:02:43.290 --> 01:02:46.299
And that concludes
my presentation.
01:02:46.299 --> 01:02:47.479
All right thank you, Bill.
01:02:47.479 --> 01:02:50.448
Any other questions
or comments for Bill.
01:02:50.448 --> 01:02:52.745
All right somebody
gonna pay for all this.
01:02:52.745 --> 01:02:54.600
(members laughing)
01:02:54.600 --> 01:02:55.433
Thank you.
01:02:57.010 --> 01:03:00.493
My name's Scott Gahn, I
am the CEO of Just Energy.
01:03:01.860 --> 01:03:06.520
We are an independent
retail electric provider in Texas
01:03:06.520 --> 01:03:11.520
and 11 other states in the U.S.
and six provinces in Canada.
01:03:11.570 --> 01:03:15.130
We have formally provided
retail electric service in the UK,
01:03:15.130 --> 01:03:17.430
Ireland, Germany, and Japan,
01:03:17.430 --> 01:03:19.660
and have departed those markets
01:03:19.660 --> 01:03:22.200
and I mentioned this and I
beg your pardon, chairman Lake,
01:03:22.200 --> 01:03:23.140
I'd already told you this,
01:03:23.140 --> 01:03:24.778
but I would like to express
01:03:24.778 --> 01:03:27.640
from the experience
of this company from,
01:03:27.640 --> 01:03:30.460
by experience being in
the industry for 35 years,
01:03:30.460 --> 01:03:33.980
I entered this in 1986, I've
done nothing else since,
01:03:33.980 --> 01:03:35.910
and being in all these other markets,
01:03:35.910 --> 01:03:38.420
despite the challenges
that we're discussing today,
01:03:38.420 --> 01:03:41.040
despite what happened in February,
01:03:41.040 --> 01:03:45.380
Texas remains the best
market in North America
01:03:45.380 --> 01:03:47.200
and those four other
countries we used to be
01:03:47.200 --> 01:03:48.530
and I would say on the planet,
01:03:48.530 --> 01:03:50.360
but I haven't been in every market.
01:03:50.360 --> 01:03:53.900
So we are committed to this process
01:03:53.900 --> 01:03:55.810
and I'll tell you as CEO of the company,
01:03:55.810 --> 01:03:57.900
We will remain committed
to the end to make sure
01:03:57.900 --> 01:04:01.560
that we get the right outcome
for ERCOT and for Texans.
01:04:01.560 --> 01:04:03.270
So having said that,
01:04:03.270 --> 01:04:04.970
I wanna give you a
little bit of the context,
01:04:04.970 --> 01:04:07.260
of what it's like,
01:04:07.260 --> 01:04:09.710
what a retail electric
provider who's unaffiliated
01:04:09.710 --> 01:04:12.560
without affiliate
generation what they see
01:04:12.560 --> 01:04:14.660
when they see things
like this next slide.
01:04:15.910 --> 01:04:18.143
So this just to pick something recent,
01:04:19.044 --> 01:04:23.040
is a graphical
representation of what we see
01:04:23.040 --> 01:04:26.880
from the recent increases
in the non-spin reserve
01:04:28.130 --> 01:04:30.087
service for reliability,
01:04:30.087 --> 01:04:31.933
and we support reliability.
01:04:31.933 --> 01:04:34.380
I would be in a way
different position right now,
01:04:34.380 --> 01:04:37.003
if we didn't have the
February reliability event.
01:04:38.330 --> 01:04:39.480
But when we look at it,
01:04:39.480 --> 01:04:43.160
the first thing we see is
that we've now got additional
01:04:44.340 --> 01:04:46.120
ancillary service obligation
01:04:46.120 --> 01:04:47.150
that we're gonna have to meet.
01:04:47.150 --> 01:04:48.930
This is the entire market.
01:04:48.930 --> 01:04:51.720
Ours would obviously
be low ratio share of that,
01:04:51.720 --> 01:04:54.780
but we view it as
something that is occurred,
01:04:54.780 --> 01:04:58.320
that it's outside of our
ability to go into the market
01:04:58.320 --> 01:05:00.120
and to hedge.
01:05:00.120 --> 01:05:03.060
So it's new volume it creates an impact.
01:05:03.060 --> 01:05:05.520
One of the things that I
think we talk, and I think,
01:05:05.520 --> 01:05:07.400
my two colleagues
mentioned this and I'll mention it
01:05:07.400 --> 01:05:10.130
when I finally answer
your question and that is,
01:05:10.130 --> 01:05:13.060
we do believe the market
should be used to the maximum
01:05:13.060 --> 01:05:15.300
extent, practical to
resolve these issues
01:05:15.300 --> 01:05:18.010
and we should take advantage
of all benefits of the market.
01:05:18.010 --> 01:05:21.520
But when we take
actions within a market,
01:05:21.520 --> 01:05:22.830
as complicated as ERCOT,
01:05:22.830 --> 01:05:25.650
that has all the
tentacles out to even ice,
01:05:25.650 --> 01:05:27.980
where people trade product night,
01:05:27.980 --> 01:05:29.650
there is going to be a response,
01:05:29.650 --> 01:05:30.700
and we have to consider that.
01:05:30.700 --> 01:05:32.680
But sometimes it's
unintended consequence
01:05:32.680 --> 01:05:33.930
that we really don't want.
01:05:33.930 --> 01:05:38.930
So I just would say for us,
this remains, this would alone.
01:05:40.330 --> 01:05:43.160
We've already started
implementing this on July 12th.
01:05:43.160 --> 01:05:48.160
This remains uncertain costs to us.
01:05:48.590 --> 01:05:50.310
It is a significant hedge risk
01:05:50.310 --> 01:05:53.403
because we can't find a
counterparty in the market
01:05:53.403 --> 01:05:55.960
that will trade this with us
01:05:55.960 --> 01:05:58.500
and, I signed up last month,
01:05:58.500 --> 01:06:02.170
I signed up 29,000 customers,
new customers last month,
01:06:02.170 --> 01:06:04.737
and I renewed 25,000
customers on new contracts
01:06:04.737 --> 01:06:08.580
and the average term of
those contract is 2.2 years.
01:06:08.580 --> 01:06:11.720
So I've taken up a position out there
01:06:11.720 --> 01:06:12.940
and we've made the decision to do
01:06:12.940 --> 01:06:13.980
we have faith in the market,
01:06:13.980 --> 01:06:15.410
we have faith that
we're gonna resolve this,
01:06:15.410 --> 01:06:18.270
but when these costs come up,
01:06:18.270 --> 01:06:20.170
these changes in what we do come up
01:06:20.170 --> 01:06:22.520
within the term of the contract,
01:06:22.520 --> 01:06:24.700
it has a significant impact on us
01:06:24.700 --> 01:06:27.570
and so we've now got
to figure out how to do it,
01:06:27.570 --> 01:06:31.850
but what makes it even worse
is when the change happens
01:06:31.850 --> 01:06:34.040
and there's no vehicle in the market
01:06:34.040 --> 01:06:35.490
for us to go out and hedge it.
01:06:35.490 --> 01:06:38.170
So I can't even tell my
board risk committee
01:06:39.010 --> 01:06:41.630
that I'm not gonna be in
violation in three months,
01:06:41.630 --> 01:06:43.370
because I'm gonna
figure out how to do it.
01:06:43.370 --> 01:06:47.010
Right now we have an
exception from board risk policy
01:06:47.010 --> 01:06:49.243
to carry this over in
position next slide.
01:06:50.380 --> 01:06:55.380
So this is a representation from July,
01:06:55.988 --> 01:07:00.250
through August 23rd of RRS daily average
01:07:00.250 --> 01:07:02.740
and NSR is daily average prices.
01:07:02.740 --> 01:07:04.160
These are the actual costs
01:07:04.160 --> 01:07:06.560
of the volume
increases at settle prices.
01:07:06.560 --> 01:07:09.490
So this is the volume increases,
01:07:09.490 --> 01:07:13.630
ties to settle prices
for the period from July
01:07:13.630 --> 01:07:16.650
through August 23rd.
01:07:16.650 --> 01:07:19.730
If you look, you can see the
spike that occurs on the 12th
01:07:19.730 --> 01:07:23.610
when we started with
the increased volume
01:07:23.610 --> 01:07:27.130
and you can see the orange
line is non-spin reserve
01:07:27.130 --> 01:07:28.147
and the blue line is RRS
01:07:28.147 --> 01:07:30.800
and this is what the
additional volume traded at.
01:07:30.800 --> 01:07:32.800
The green shaded line,
01:07:32.800 --> 01:07:34.910
which is tied to the right-hand axis
01:07:34.910 --> 01:07:39.084
will reveal that the costs to the market
01:07:39.084 --> 01:07:41.540
of this reliability action
01:07:41.540 --> 01:07:44.543
for the first 43 days is $50 million.
01:07:45.540 --> 01:07:48.400
So it's not an inconsequential
amount of money,
01:07:48.400 --> 01:07:49.810
but it's not 40 billion
01:07:49.810 --> 01:07:52.510
so we understand what we're after here,
01:07:52.510 --> 01:07:54.900
but it is a significant impact
01:07:54.900 --> 01:07:58.220
and I had my supply
guys go back and say, well,
01:07:58.220 --> 01:08:00.640
tell me what this risk could be
01:08:00.640 --> 01:08:02.610
I've got to figure out what it
could be over the next year,
01:08:02.610 --> 01:08:04.910
give me an annual number
and they look back at,
01:08:04.910 --> 01:08:08.040
five-year look back on
the market clearing prices
01:08:08.040 --> 01:08:11.210
applied it to these
volumes, it's $200 million.
01:08:11.210 --> 01:08:14.330
So this could be a material cost
01:08:14.330 --> 01:08:18.150
and it may be the right thing to do it.
01:08:18.150 --> 01:08:21.540
We've got to do something
we're 100 on board with it,
01:08:21.540 --> 01:08:24.177
but I just want, as a retailer,
01:08:24.177 --> 01:08:27.140
we look at these things
and it's so important
01:08:27.140 --> 01:08:28.500
when you're standalone retailer,
01:08:28.500 --> 01:08:31.180
because we are retail
are built in the image
01:08:31.180 --> 01:08:32.437
of SB seven because retailers
01:08:32.437 --> 01:08:34.500
weren't supposed to have a generation
01:08:34.500 --> 01:08:35.513
when we started out.
01:08:37.290 --> 01:08:38.123
So these things,
01:08:38.123 --> 01:08:40.200
when they change
have a significant impact,
01:08:40.200 --> 01:08:41.300
if you could go to the next slide,
01:08:41.300 --> 01:08:45.883
I'll explain to you why
were the whiny retailers?
01:08:47.887 --> 01:08:49.070
So this is what a doll,
01:08:49.070 --> 01:08:52.700
this is a illustrative
example of what a dollar of
01:08:52.700 --> 01:08:57.700
revenue looks like
at a retailer like us,
01:08:58.830 --> 01:09:01.670
and these are built off a real numbers,
01:09:01.670 --> 01:09:04.630
but they're averages
because, if you go to ERCOT,
01:09:04.630 --> 01:09:06.450
the TDSB charges
are different than if you,
01:09:06.450 --> 01:09:09.520
if you're in center point or
TDSB or somebody or AEP,
01:09:09.520 --> 01:09:12.070
but this gives you a
breakdown of that dollar.
01:09:12.070 --> 01:09:15.650
So 37 cents or energy
costs, what we know as,
01:09:15.650 --> 01:09:18.070
is what we hedge as
energy, what we hedge
01:09:18.070 --> 01:09:22.080
and pay for in the day ahead
market for ancillary services,
01:09:22.080 --> 01:09:23.400
as well as upload charges,
01:09:23.400 --> 01:09:27.480
37 cents out of the
dollar 42 for TDSB costs.
01:09:27.480 --> 01:09:31.430
So the delivery costs in
the provision of that service
01:09:31.430 --> 01:09:32.890
by the TDSB is 42.
01:09:32.890 --> 01:09:35.445
So out of that dollar,
01:09:35.445 --> 01:09:39.980
you could see how much
we've got in 79 cents of it
01:09:39.980 --> 01:09:43.393
is cash out the door,
right out the door,
01:09:45.063 --> 01:09:48.730
3 cents of it is taxes and
3 cents of it is bad debt
01:09:48.730 --> 01:09:51.120
and, you'll hear us also get cranky
01:09:51.120 --> 01:09:53.330
about disconnect
moratoriums although we did,
01:09:53.330 --> 01:09:54.590
much better than I thought we would
01:09:54.590 --> 01:09:57.150
with the four month
disconnect moratorium
01:09:57.150 --> 01:10:00.360
and then we've got about
10 cents to run the business
01:10:00.360 --> 01:10:01.880
and it leaves us at the end of the day,
01:10:01.880 --> 01:10:03.340
out of a dollar with a nickel
01:10:04.260 --> 01:10:08.380
and so we have been
very successful in ERCOT
01:10:08.380 --> 01:10:10.450
at making a commoditizing this business,
01:10:10.450 --> 01:10:12.610
which has been good
for consumers, right?
01:10:12.610 --> 01:10:14.890
There's just not a lot of not left,
01:10:14.890 --> 01:10:16.680
not a lot of operating income after.
01:10:16.680 --> 01:10:18.240
So when we look at a number,
01:10:18.240 --> 01:10:20.380
like a nickel on top of a dollar,
01:10:20.380 --> 01:10:24.480
when you have what look
would appear to be relatively small
01:10:24.480 --> 01:10:27.980
changes in some of these
costs within the contract term,
01:10:27.980 --> 01:10:31.680
we're dealing with, it could
turn things upside down
01:10:32.702 --> 01:10:37.702
and, like I said, we wanna
find a resolution to these things
01:10:38.208 --> 01:10:40.857
we wanna to and we
do support all the things
01:10:40.857 --> 01:10:44.030
you're talking about doing to try to
01:10:44.030 --> 01:10:45.450
create a more reliable market,
01:10:45.450 --> 01:10:48.800
because like I said, retailers,
01:10:48.800 --> 01:10:52.223
as much as anyone can
survive an unreliable market.
01:10:53.290 --> 01:10:54.463
So next slide.
01:10:55.320 --> 01:10:57.763
So now I'm gonna try to
answer your questions.
01:10:58.760 --> 01:11:01.190
So what principles should
the Commission focus on
01:11:01.190 --> 01:11:02.860
to optimize between
reliability and cost?
01:11:02.860 --> 01:11:06.620
I would say one thing
Mr. Berg said that I agree with,
01:11:06.620 --> 01:11:09.040
I think the reliability standards
should be established
01:11:09.040 --> 01:11:11.620
first, and then you should attempt
01:11:13.372 --> 01:11:17.070
to reach that reliability
standard in the lowest pie,
01:11:17.070 --> 01:11:18.420
the lowest possible cost
01:11:18.420 --> 01:11:21.608
and we think that utilizing
competitive markets
01:11:21.608 --> 01:11:23.790
to the maximum extent you can
01:11:23.790 --> 01:11:26.140
is gonna be the best way to get there
01:11:26.140 --> 01:11:29.810
and help you achieve that lowest cost.
01:11:29.810 --> 01:11:33.547
But we do think that while ERCOT,
01:11:33.547 --> 01:11:35.840
and the Commission need the flexibility
01:11:35.840 --> 01:11:38.330
to take reliability actions.
01:11:38.330 --> 01:11:42.380
We think that to the extent,
01:11:42.380 --> 01:11:44.770
the benefit of those reliability actions
01:11:45.810 --> 01:11:48.210
is to the entire market, right?
01:11:48.210 --> 01:11:53.210
Or is to all customers
forcing the entire cost
01:11:53.400 --> 01:11:56.910
of the reliability action
through a P and L
01:11:56.910 --> 01:12:00.870
that has a nickel to
play with is really hard
01:12:03.458 --> 01:12:06.070
and worse than that,
but what happens is that,
01:12:06.070 --> 01:12:07.250
and I'll jump to my fourth bullet,
01:12:07.250 --> 01:12:11.033
is that the uncertainty
associated with us,
01:12:12.070 --> 01:12:15.590
having to price that into our product
01:12:16.672 --> 01:12:19.350
and we don't have to
price fixed price product,
01:12:19.350 --> 01:12:21.180
but it is the primary value proposition,
01:12:21.180 --> 01:12:23.520
89% of the officer in power to choose
01:12:23.520 --> 01:12:25.780
our fixed price term products.
01:12:25.780 --> 01:12:27.810
If we're gonna continue
to be able to provide that
01:12:27.810 --> 01:12:31.563
to customers, which is the
preferred product, not gritty,
01:12:33.000 --> 01:12:36.500
it's, we need to have some certainty
01:12:36.500 --> 01:12:39.000
as to what the recovery of that is.
01:12:39.000 --> 01:12:40.790
We can't bear the burden
01:12:40.790 --> 01:12:43.173
of the entire
reliability action hitting,
01:12:44.822 --> 01:12:47.210
hitting retailers and
not have the ability
01:12:47.210 --> 01:12:51.010
to recover that from
the beneficiaries of it.
01:12:51.010 --> 01:12:53.030
Customers are
beneficiaries of reliable grid
01:12:53.030 --> 01:12:53.863
there's no question about it
01:12:53.863 --> 01:12:56.420
and then in a different
market environment,
01:12:56.420 --> 01:12:58.610
that's how that would be recovered.
01:12:58.610 --> 01:13:01.390
So, and I'll jump back to three,
01:13:01.390 --> 01:13:03.800
cause I do wanna
reiterate something that
01:13:03.800 --> 01:13:04.740
my colleagues have said,
01:13:04.740 --> 01:13:09.020
and that is that we think
that one of the principles
01:13:09.020 --> 01:13:10.600
for grid reliability has to be,
01:13:10.600 --> 01:13:12.310
to encourage all market participants
01:13:12.310 --> 01:13:14.210
and customers is participate
01:13:14.210 --> 01:13:16.990
within some organized
framework in grid reliability
01:13:16.990 --> 01:13:18.340
and associated costs.
01:13:18.340 --> 01:13:20.990
I think there's so much
technology being driven
01:13:20.990 --> 01:13:21.823
at the meter level.
01:13:21.823 --> 01:13:23.260
We're being contacted all the time
01:13:23.260 --> 01:13:25.130
because we have a lot of customers
01:13:25.130 --> 01:13:28.585
and so the technology providers
want to get to our customers
01:13:28.585 --> 01:13:30.890
and they wanna talk to us
about things they can do.
01:13:30.890 --> 01:13:34.050
I think a really healthy
market for another place,
01:13:34.050 --> 01:13:35.010
for ERCOT to lead,
01:13:35.010 --> 01:13:38.370
where we've led in other
areas like wind and solar
01:13:38.370 --> 01:13:41.340
is to lead in the types of things
01:13:41.340 --> 01:13:42.740
that are being designed now,
01:13:43.718 --> 01:13:46.610
both load as a resource
or load with resource
01:13:46.610 --> 01:13:49.690
that can create a more
reliable and more efficient grid
01:13:50.590 --> 01:13:52.988
and that's my comments I'll
be happy to take questions.
01:13:52.988 --> 01:13:54.160
All right, thanks.
01:13:54.160 --> 01:13:55.682
May I?.
01:13:55.682 --> 01:13:57.717
Yeah go ahead.
01:13:57.717 --> 01:14:00.080
Before, Will gets
to his questions,
01:14:00.080 --> 01:14:03.420
I do want to say we very
much appreciate your comments
01:14:03.420 --> 01:14:07.150
about the additional ancillary
services costs this summer.
01:14:07.150 --> 01:14:10.110
That's very much our effort
and our cots effort to stabilize
01:14:10.110 --> 01:14:11.880
the grid for the summer,
01:14:11.880 --> 01:14:14.760
knowing that Texas
can't have another misstep
01:14:14.760 --> 01:14:16.820
after the February event,
01:14:16.820 --> 01:14:20.140
we're going through this
entire market redesign effort
01:14:20.140 --> 01:14:22.570
to make sure that we don't have to keep
01:14:22.570 --> 01:14:25.483
procuring those additional
ancillary services,
01:14:26.900 --> 01:14:29.610
that extra margin
of safety indefinitely.
01:14:29.610 --> 01:14:32.022
We're gonna do it while
we go through this process
01:14:32.022 --> 01:14:34.630
and certainly throughout the summer,
01:14:34.630 --> 01:14:37.940
but I know your company
and many other retail providers
01:14:37.940 --> 01:14:39.410
are in many ways
bearing the brunt of that.
01:14:39.410 --> 01:14:43.060
So thank you for
hanging tough this summer
01:14:45.870 --> 01:14:49.535
and being part of ensuring
we're stable for the summer.
01:14:49.535 --> 01:14:51.702
I just want to lay it out.
01:14:52.570 --> 01:14:55.470
I second that,
Mr. Berg, one question,
01:14:55.470 --> 01:14:57.453
having heard the panelists before you,
01:14:59.950 --> 01:15:03.300
I'm sure you saw dollar signs
flashing in front of your eyes
01:15:03.300 --> 01:15:05.840
at every one of those bullet points on,
01:15:05.840 --> 01:15:07.620
on the two previous speakers
01:15:07.620 --> 01:15:12.620
and if, what was suggested
was to come to fruition
01:15:13.580 --> 01:15:16.340
and to be passed down to the LSC level,
01:15:16.340 --> 01:15:18.203
allocated to the LSC level,
01:15:19.790 --> 01:15:21.633
would you even stay in business?
01:15:23.187 --> 01:15:24.570
It depends on
what the cost was.
01:15:24.570 --> 01:15:27.230
Well, if it's gonna
be a lot, I mean,
01:15:27.230 --> 01:15:29.770
just from what I was looking
at, that looked like a lot,
01:15:29.770 --> 01:15:33.370
and it seemed that it has a natural
01:15:35.060 --> 01:15:36.840
in terms of the retail market,
01:15:36.840 --> 01:15:40.560
it would have a natural
effect on those retail providers
01:15:40.560 --> 01:15:42.810
affiliated with generation
01:15:42.810 --> 01:15:45.770
and those that did not
have a natural hedge.
01:15:45.770 --> 01:15:48.030
So was that your read on it?
01:15:48.030 --> 01:15:50.040
Yeah so I think
it's a cost though,
01:15:50.040 --> 01:15:53.190
even for affiliated generation,
if you put that cost on it,
01:15:53.190 --> 01:15:56.519
because that resources now
having to be devoted to an
01:15:56.519 --> 01:15:58.300
ancillary services support load,
01:15:58.300 --> 01:16:01.220
to the extent itself arranged, right?
01:16:01.220 --> 01:16:05.610
That's why my $50 million
doesn't move self arranged out
01:16:05.610 --> 01:16:06.990
because it's still a cost, right?
01:16:06.990 --> 01:16:11.990
So, while a retailer
with affiliated generation
01:16:12.100 --> 01:16:13.960
can sell for range that,
01:16:13.960 --> 01:16:16.820
that resources now
devoted to a new service.
01:16:16.820 --> 01:16:21.470
So I'm not sure that they
don't see a similar impact
01:16:21.470 --> 01:16:23.000
'cause they might've been,
01:16:23.000 --> 01:16:25.120
that generation resource
it's out being self arranged
01:16:25.120 --> 01:16:27.840
for a new ancillary into something else.
01:16:27.840 --> 01:16:31.160
I also think that it's
a tricky market, right?
01:16:31.160 --> 01:16:34.170
I sit here and talk to
generators who complain
01:16:34.170 --> 01:16:36.420
about the same thing
I'm complaining about
01:16:36.420 --> 01:16:39.060
'cause they're saying it's
reducing realtime energy,
01:16:39.060 --> 01:16:41.190
it's reducing real-time energy,
01:16:41.190 --> 01:16:42.780
and I sit there and go, well,
01:16:42.780 --> 01:16:44.940
if I could only be
short real-time energy,
01:16:44.940 --> 01:16:47.020
that'd be great because
then I get some of this back.
01:16:47.020 --> 01:16:49.060
Well, I sell fixed prices to customers.
01:16:49.060 --> 01:16:50.350
I have a risk policy.
01:16:50.350 --> 01:16:52.980
I can't take advantage of
the real time energy market.
01:16:52.980 --> 01:16:54.980
I got pushed into the
real-time energy market
01:16:54.980 --> 01:16:59.950
when half my customers
came on with 48 degree homes
01:16:59.950 --> 01:17:02.880
and businesses and doubled my load
01:17:02.880 --> 01:17:04.130
and I'm in real-time energy
01:17:04.130 --> 01:17:05.960
and now where I am now.
01:17:05.960 --> 01:17:09.880
So I can't, even if we have situation,
01:17:09.880 --> 01:17:11.830
it's sort of like the unintended effect
01:17:13.010 --> 01:17:14.590
the deployment of
the additional ancillary
01:17:14.590 --> 01:17:16.940
could suppress other
costs in the market.
01:17:16.940 --> 01:17:19.480
So I'm not sure what happens,
01:17:19.480 --> 01:17:22.220
Commissioner McAdams,
with all the other costs,
01:17:22.220 --> 01:17:23.550
we'd have to look at that,
01:17:23.550 --> 01:17:27.080
but I do control what I sell
01:17:27.080 --> 01:17:31.317
and so my view is to the
extent we have a lot of this,
01:17:31.317 --> 01:17:32.850
and there's a lot of uncertainty,
01:17:32.850 --> 01:17:37.140
I think me and other
retailers are going to change
01:17:37.140 --> 01:17:38.110
the product we sell.
01:17:38.110 --> 01:17:42.870
There'll be less fixed,
shorter term product out there,
01:17:42.870 --> 01:17:44.290
or people will wear the risk
01:17:44.290 --> 01:17:46.280
and then we'll see
what happens with that.
01:17:46.280 --> 01:17:47.433
I'm sorry, Mr. Gahn.
01:17:48.410 --> 01:17:53.410
So do you believe those
retail electric providers LSCs
01:17:54.900 --> 01:17:56.640
with affiliated generation,
01:17:56.640 --> 01:17:58.960
do they operate under the
same kind of breakdown,
01:17:58.960 --> 01:18:03.840
of profit versus liabilities
that you do that nickel?
01:18:03.840 --> 01:18:04.926
Is that what they're looking at?
01:18:04.926 --> 01:18:05.759
So everybody kind of squeezed.
01:18:05.759 --> 01:18:07.480
They compete against
me they might be better.
01:18:07.480 --> 01:18:10.720
They might be more scalable if I have,
01:18:10.720 --> 01:18:12.750
just under a million
residential customers,
01:18:12.750 --> 01:18:14.530
but they're in 12
different jurisdictions.
01:18:14.530 --> 01:18:16.450
Somebody has a million in ERCOT,
01:18:16.450 --> 01:18:17.770
they're gonna have a
lower operating cost.
01:18:17.770 --> 01:18:20.140
So they may do a
little bit better than me
01:18:20.140 --> 01:18:22.060
because they have a more scalable system
01:18:22.060 --> 01:18:23.850
within Texas, right?
01:18:23.850 --> 01:18:25.650
They're heavy in Texas, not elsewhere.
01:18:25.650 --> 01:18:27.010
So the other thing too,
01:18:27.010 --> 01:18:29.980
is they may measure their
P and L differently because
01:18:29.980 --> 01:18:33.690
I'm not sure how
they'll clear the transfer,
01:18:33.690 --> 01:18:35.690
the internal transfer price between
01:18:35.690 --> 01:18:39.970
their self arranged generation
and the retail business.
01:18:39.970 --> 01:18:40.803
So, Mr. Gahn.
01:18:40.803 --> 01:18:42.850
But I think the concept
would be the same.
01:18:44.010 --> 01:18:45.960
I have a related question.
01:18:45.960 --> 01:18:49.000
So setting aside what has
been happening this summer
01:18:49.000 --> 01:18:52.840
with the procurement of more
ancillary services and also,
01:18:52.840 --> 01:18:54.930
echoing the chairman's comments about,
01:18:54.930 --> 01:18:57.330
having to stabilize the
grid and in our efforts,
01:18:58.300 --> 01:19:00.910
this current venue right
now to address market design
01:19:00.910 --> 01:19:02.605
changes for the future
01:19:02.605 --> 01:19:06.730
and I know Commissioner
McAdams asked you to apply it on,
01:19:06.730 --> 01:19:09.890
what will those costs look
like for you going forward
01:19:09.890 --> 01:19:11.360
and obviously there's
still a lot of information
01:19:11.360 --> 01:19:14.603
that needs to be
developed on actual pricing.
01:19:16.410 --> 01:19:18.920
Would it be fair to
say that what you need
01:19:18.920 --> 01:19:22.020
from us as we develop new
ancillary service products
01:19:22.020 --> 01:19:24.780
is just more visibility and transparency
01:19:24.780 --> 01:19:25.890
as to how they're gonna be priced.
01:19:25.890 --> 01:19:27.973
So you can plan your yearly contracts
01:19:27.973 --> 01:19:31.500
and I mean, cause you're,
you just bake in those costs,
01:19:31.500 --> 01:19:32.630
we create two new products.
01:19:32.630 --> 01:19:33.990
You would look at the products,
01:19:33.990 --> 01:19:37.910
see how much they cost
and bake that into your annual
01:19:37.910 --> 01:19:40.720
contract for your
rate, for your products
01:19:40.720 --> 01:19:42.090
for your customers.
01:19:42.090 --> 01:19:44.960
Yeah, so I have
two issues here.
01:19:44.960 --> 01:19:48.020
The one you're talking about is the,
01:19:48.020 --> 01:19:52.050
what I would call the
issue that I would embrace
01:19:52.050 --> 01:19:54.160
and would want,
certainly wanna have that.
01:19:54.160 --> 01:19:57.750
So that as I, cause I'm
gonna add another 25
01:19:57.750 --> 01:20:00.060
or 30,000 customers
this month, I'm on track
01:20:00.060 --> 01:20:02.330
and renew another 25,000.
01:20:02.330 --> 01:20:06.880
So the sooner I know
and all those customers
01:20:06.880 --> 01:20:08.910
are paying higher prices because of
01:20:08.910 --> 01:20:10.540
some of the things
that are going on now.
01:20:10.540 --> 01:20:12.260
Some of it's just gas prices are up
01:20:12.260 --> 01:20:13.930
and so power prices are up.
01:20:13.930 --> 01:20:18.930
But so I wanna know
it's exactly what you said,
01:20:18.960 --> 01:20:20.760
transparency and advanced knowledge,
01:20:20.760 --> 01:20:24.290
so that I can start to
build out and understand
01:20:24.290 --> 01:20:27.050
what wholesale products
are available to me
01:20:27.050 --> 01:20:29.300
so that I can hedge or dirty hedge,
01:20:29.300 --> 01:20:31.200
which we have to do from time to time.
01:20:32.586 --> 01:20:34.090
What the risks that's gonna be put on me
01:20:34.090 --> 01:20:36.000
and I could price it into my product
01:20:36.000 --> 01:20:37.390
so that I know I've got it,
01:20:37.390 --> 01:20:40.250
but I've got I signed term contracts,
01:20:40.250 --> 01:20:44.200
which I may compress
those terms in ERCOT
01:20:44.200 --> 01:20:45.410
because of what's happening
01:20:45.410 --> 01:20:48.170
because all of the contracts that I have
01:20:48.170 --> 01:20:51.080
do not have this cost in
it, but I'm gonna incur it.
01:20:51.080 --> 01:20:53.100
So they'll, so all of that,
01:20:53.100 --> 01:20:54.680
that margin that I was looking for,
01:20:54.680 --> 01:20:56.810
that nickel on the portion of my book
01:20:56.810 --> 01:20:58.743
has already been priced and is there,
01:20:59.790 --> 01:21:01.850
is gonna be impaired by this.
01:21:01.850 --> 01:21:05.340
So when you look to
develop your annual contracts,
01:21:05.340 --> 01:21:08.060
do you do that at the, like
the last quarter of the year?
01:21:08.060 --> 01:21:09.000
When do you touch.
01:21:09.000 --> 01:21:10.680
It's realtime, we're
selling every day.
01:21:10.680 --> 01:21:13.779
So we it's a very dynamic process.
01:21:13.779 --> 01:21:16.130
Okay so what you're saying
is you'd want to shorten those
01:21:16.130 --> 01:21:19.160
contract periods so you can
remain nimble to whatever
01:21:19.160 --> 01:21:21.280
changes occur from these new products
01:21:21.280 --> 01:21:25.410
and so what we can provide
you from our standpoint
01:21:25.410 --> 01:21:27.980
is transparency and visibility
01:21:27.980 --> 01:21:30.450
as to what ancillary
service costs you may be
01:21:30.450 --> 01:21:31.540
having incur in the future,
01:21:31.540 --> 01:21:32.760
not only for new products,
01:21:32.760 --> 01:21:35.820
but also there are
other existing products
01:21:35.820 --> 01:21:37.700
and how much are ERCOT's gonna procure
01:21:37.700 --> 01:21:39.920
and that's something we'll
have to go back and look at
01:21:39.920 --> 01:21:42.910
in the fall to see how we wanna change
01:21:42.910 --> 01:21:46.560
the minimum AS methodology,
et cetera, going forward
01:21:46.560 --> 01:21:49.360
to hopefully give you some
more transparency and visibility
01:21:49.360 --> 01:21:51.550
and then as we have these
discussions and we just,
01:21:51.550 --> 01:21:54.620
if we decide to move
forward with AS products,
01:21:54.620 --> 01:21:55.453
new AS products,
01:21:55.453 --> 01:22:00.453
then as we shape those
out PUC here by role,
01:22:00.690 --> 01:22:02.740
and then also through
ERCOT market rule changes,
01:22:02.740 --> 01:22:05.590
then you'll start getting
more information to be able to.
01:22:07.060 --> 01:22:09.700
There's one other
issue and I appreciate that
01:22:09.700 --> 01:22:11.850
and that's exactly what
we need going forward.
01:22:11.850 --> 01:22:14.705
That's exactly what we
need from you going forward.
01:22:14.705 --> 01:22:17.250
But we also have an
impairment to an existing
01:22:17.250 --> 01:22:20.620
say series of contracts
by virtue of these costs
01:22:20.620 --> 01:22:25.247
and so we believe that
that should be something
01:22:25.247 --> 01:22:28.520
and in any other market
environment but the one we're in
01:22:28.520 --> 01:22:30.210
those would be socialized costs
01:22:30.210 --> 01:22:32.150
because they benefit everyone,
01:22:32.150 --> 01:22:34.180
but they're only socialized to us
01:22:34.180 --> 01:22:38.550
and so it's really two
places where we see it.
01:22:38.550 --> 01:22:41.270
We see that within contract impairment
01:22:41.270 --> 01:22:43.750
and then there's the,
how do I go forward?
01:22:43.750 --> 01:22:46.040
How do I create a sustainable
business plan going forward,
01:22:46.040 --> 01:22:50.200
given the things that are
necessary in ERCOT to make it
01:22:50.200 --> 01:22:53.090
reliable and as vibrant as it's been?
01:22:53.090 --> 01:22:55.710
So yes, we would like both
01:22:55.710 --> 01:22:57.360
and I know the one is more controversial
01:22:57.360 --> 01:23:00.960
because nobody wants to
do that nobody wants to see
01:23:00.960 --> 01:23:01.793
pass in fact,
01:23:01.793 --> 01:23:03.379
we've got the consumer
protection rule talking about making
01:23:03.379 --> 01:23:05.390
sure ancillaries don't get through
01:23:05.390 --> 01:23:07.840
because of the magnitude
that you can see,
01:23:07.840 --> 01:23:11.260
but from a reliability cause when we do
01:23:11.260 --> 01:23:13.280
and I wouldn't say
pass through ancillaries
01:23:13.280 --> 01:23:15.070
on a normal basis anyway,
01:23:15.070 --> 01:23:19.670
but when a decision is
made to enhance reliability
01:23:19.670 --> 01:23:22.510
and that changes the
profile of the ancillary costs
01:23:22.510 --> 01:23:23.577
as a result of that,
01:23:23.577 --> 01:23:25.560
and I'll call it a non-market decision
01:23:25.560 --> 01:23:26.710
out of market decision.
01:23:27.880 --> 01:23:29.390
We believe that should be,
01:23:29.390 --> 01:23:31.940
we should be able to
socialize that to the market
01:23:31.940 --> 01:23:33.150
or to customers
01:23:33.150 --> 01:23:36.240
because it's, they are the
direct beneficiaries of that.
01:23:36.240 --> 01:23:39.280
We are too, we are
too, I'm not gonna deny it
01:23:39.280 --> 01:23:41.330
doesn't benefit all the stakeholders,
01:23:41.330 --> 01:23:45.130
but we don't believe we should
be the sole market segment
01:23:45.130 --> 01:23:47.563
to bear the cost of that.
01:23:49.240 --> 01:23:50.300
So it's both.
01:23:50.300 --> 01:23:55.300
Is there to to build on Lori's
point about the variability
01:23:56.000 --> 01:23:59.524
and ancillary services at a high level
01:23:59.524 --> 01:24:02.510
in the past ancillary was that services,
01:24:02.510 --> 01:24:05.320
the amount of ancillary
services for the next 12 months
01:24:05.320 --> 01:24:08.364
were identified, I think
typically in December
01:24:08.364 --> 01:24:11.110
and that was the set
amount of the, I guess,
01:24:11.110 --> 01:24:15.023
the reserves for ERCOT
for the next 12 months.
01:24:16.100 --> 01:24:19.253
And if you go back to slide two Connie,
01:24:24.440 --> 01:24:26.600
the red bars are the high,
01:24:26.600 --> 01:24:28.730
what you've got labeled
as high variability days,
01:24:28.730 --> 01:24:31.220
which is one of the changes
we made this summer
01:24:31.220 --> 01:24:35.190
with the notion being
that the amount of reserves
01:24:35.190 --> 01:24:39.350
ERCOT has available to it should be,
01:24:39.350 --> 01:24:41.280
should reflect real time conditions,
01:24:41.280 --> 01:24:46.100
such as heat waves or droughts
or tornadoes and hurricanes
01:24:46.100 --> 01:24:48.470
impacting transmission and congestion,
01:24:48.470 --> 01:24:50.630
which for whatever reason was not done
01:24:50.630 --> 01:24:51.640
in considered in the past.
01:24:51.640 --> 01:24:54.700
So to Lori's point
about visibility, I mean,
01:24:54.700 --> 01:24:56.420
I think we think this is a feature,
01:24:56.420 --> 01:25:00.973
this is an improvement on
recognizing real-time conditions,
01:25:00.973 --> 01:25:02.210
as an improvement.
01:25:02.210 --> 01:25:03.043
Right.
01:25:03.043 --> 01:25:05.960
But to Lori's point about
how y'all can manage that risk,
01:25:05.960 --> 01:25:09.260
whether it's, if we continue doing
01:25:09.260 --> 01:25:12.640
kind of forecast
variability procurements,
01:25:12.640 --> 01:25:16.173
which are day by day or
three days to three days out,
01:25:17.090 --> 01:25:22.010
or if it's like Bill said a
more seasonal look at
01:25:22.010 --> 01:25:25.600
some undetermined amount
of dispatchable ancillaries.
01:25:25.600 --> 01:25:26.750
Right.
01:25:26.750 --> 01:25:29.790
That would only give
you all the three months.
01:25:29.790 --> 01:25:32.020
If you wouldn't know that
until ERCOT sets it for the next
01:25:32.020 --> 01:25:35.303
three months, maybe a
month in advance of that.
01:25:36.160 --> 01:25:39.060
Other than shortening contract
terms with your customers,
01:25:39.060 --> 01:25:41.920
which I could see being a benefit
01:25:41.920 --> 01:25:43.410
and an annoyance to customers.
01:25:43.410 --> 01:25:44.243
Right.
01:25:44.243 --> 01:25:45.770
Depending on which
way the reset goes.
01:25:46.880 --> 01:25:48.810
Is there any other mechanism
01:25:48.810 --> 01:25:51.130
or that you can currently use
01:25:51.130 --> 01:25:55.860
or would need to be
provided to help facilitate that?
01:25:55.860 --> 01:25:58.250
No, I think the
communication and certainty
01:25:58.250 --> 01:26:00.497
are key elements and the
way that we would price it out,
01:26:00.497 --> 01:26:03.530
one of the things that we're
dealing with in ERCOT is
01:26:03.530 --> 01:26:05.620
if some of it is post-storm.
01:26:05.620 --> 01:26:08.570
Some of it is starting to
come back is there is a little bit
01:26:08.570 --> 01:26:13.570
of a liquidity issue for us in
being able to acquire more,
01:26:14.710 --> 01:26:17.770
I will say exotic things,
not just an energy swap,
01:26:17.770 --> 01:26:21.410
but to acquire certain types of options
01:26:21.410 --> 01:26:23.770
or certain types of ancillary services.
01:26:23.770 --> 01:26:26.090
Like we can acquire this.
01:26:26.090 --> 01:26:29.030
We've tried and we may be able to,
01:26:29.030 --> 01:26:32.660
as things start as market
participants start to see
01:26:32.660 --> 01:26:35.490
where the market's
gonna fall out, then they,
01:26:35.490 --> 01:26:37.450
the people who would
provide us this product
01:26:37.450 --> 01:26:42.190
would be able to bridge that
and so this, my expectation is,
01:26:42.190 --> 01:26:45.480
and this is an optimistic
expectation just because
01:26:45.480 --> 01:26:47.050
I've seen this in the market before
01:26:47.050 --> 01:26:50.253
you end up with situations
where there's a change,
01:26:51.170 --> 01:26:52.690
everything seizes up,
01:26:52.690 --> 01:26:54.610
there's no liquidity
people figure it out.
01:26:54.610 --> 01:26:56.940
Now all of a sudden
you start getting product,
01:26:56.940 --> 01:26:58.170
you get wholesale product
01:26:58.170 --> 01:27:00.420
that allows you to
manage this type of risk.
01:27:00.420 --> 01:27:02.040
That's what markets
are supposed to do.
01:27:02.040 --> 01:27:03.277
That's right yep.
01:27:03.277 --> 01:27:04.440
All right.
01:27:04.440 --> 01:27:06.910
So to crystallize that
if you see that again,
01:27:06.910 --> 01:27:08.630
the 7,000 megawatts,
01:27:08.630 --> 01:27:11.940
that conservative strategy
is somewhat institutionalized
01:27:11.940 --> 01:27:14.210
on a going forward
basis, you are able to,
01:27:14.210 --> 01:27:17.480
you believe you will be able
to smooth that out over time.
01:27:17.480 --> 01:27:18.313
I mean, if that's what it's gonna be.
01:27:18.313 --> 01:27:21.910
That one I think right now
it's an open position to me
01:27:21.910 --> 01:27:23.316
it's completely open.
01:27:23.316 --> 01:27:24.149
Yeah.
01:27:24.149 --> 01:27:27.420
But I think as certainty
comes back into the market,
01:27:27.420 --> 01:27:28.570
I'll be able to build that.
01:27:28.570 --> 01:27:31.260
In fact, I've already built into price,
01:27:31.260 --> 01:27:32.700
this additional costs.
01:27:32.700 --> 01:27:34.070
So the people that we were renewing
01:27:34.070 --> 01:27:36.750
we were renewing a bit
higher prices because of this
01:27:36.750 --> 01:27:38.180
and there's a little bit
of a premium in there
01:27:38.180 --> 01:27:40.200
because it's an open
position that's uncertain.
01:27:40.200 --> 01:27:42.090
I don't know whether
it's gonna be $200 million
01:27:42.090 --> 01:27:43.950
on an annualized basis to the market.
01:27:43.950 --> 01:27:48.760
I don't know whether
it's gonna be, 150, 350.
01:27:48.760 --> 01:27:52.260
It's really a function of what
comes out of SB three market
01:27:52.260 --> 01:27:53.220
redesigned too, right?
01:27:53.220 --> 01:27:55.270
Because it may not be based on it.
01:27:55.270 --> 01:27:56.930
So some of the uncertainty is a function
01:27:56.930 --> 01:27:58.160
of where we find yourselves today
01:27:58.160 --> 01:28:01.550
and I understand that it's
the business that we're in,
01:28:01.550 --> 01:28:04.270
but we think, on those two elements
01:28:04.270 --> 01:28:07.197
as we make these changes, we think that,
01:28:07.197 --> 01:28:10.250
and it's our position that
these costs should be,
01:28:10.250 --> 01:28:13.260
should not just be born by a P and L
01:28:13.260 --> 01:28:14.560
that has a nickel despair.
01:28:15.670 --> 01:28:18.990
It should be borne by those
that benefit by the market
01:28:18.990 --> 01:28:23.990
and so we can with
certainty and communication.
01:28:25.496 --> 01:28:26.650
We can get a wholesale market
01:28:26.650 --> 01:28:28.010
that will support these products.
01:28:28.010 --> 01:28:30.910
I'm sure of it because that's
what competitive markets do.
01:28:30.910 --> 01:28:32.440
They figure out how they're
gonna make money at it
01:28:32.440 --> 01:28:36.550
and they'll come out and
we'll be able to price product
01:28:36.550 --> 01:28:39.680
and set terms and do what
we need to do going forward.
01:28:39.680 --> 01:28:41.390
But it really is gonna require us
01:28:41.390 --> 01:28:44.960
to have a really good
solid set of rules that we,
01:28:44.960 --> 01:28:46.590
everybody can get their head around.
01:28:46.590 --> 01:28:49.020
So you heard
Mr. Bergs suggestion,
01:28:49.020 --> 01:28:53.373
as it related to ancillary
services, possibly,
01:28:54.940 --> 01:28:57.450
a requirement for the
resources themselves
01:28:57.450 --> 01:29:00.080
to kind of participate in day ahead,
01:29:00.080 --> 01:29:02.420
day ahead, it's a useful
tool to you, is it not
01:29:02.420 --> 01:29:05.550
to kind of see how ultimately
resources shake out,
01:29:05.550 --> 01:29:07.033
what you're ultimately
facing the next day?
01:29:07.033 --> 01:29:08.870
That's right.
Okay.
01:29:08.870 --> 01:29:11.310
So from a retailer perspective,
01:29:11.310 --> 01:29:14.310
it is a useful tool to sort
of smooth out volatility
01:29:14.310 --> 01:29:16.320
that you're otherwise gonna experience.
01:29:16.320 --> 01:29:18.303
Well, we're
following load, right?
01:29:18.303 --> 01:29:20.510
I mean, we're following
residential customer,
01:29:20.510 --> 01:29:22.430
load and commercial
01:29:22.430 --> 01:29:26.050
and people were talking
about forecast error,
01:29:26.050 --> 01:29:27.500
we have weather changes
01:29:27.500 --> 01:29:31.120
and so day ahead
market is a very useful tool
01:29:31.120 --> 01:29:34.240
for us to make sure we
can balance ourselves
01:29:34.240 --> 01:29:37.440
going into the uncertainty,
the real-time market.
01:29:37.440 --> 01:29:38.340
Okay, thank you.
01:29:42.540 --> 01:29:44.041
Can I.
Of course.
01:29:44.041 --> 01:29:47.130
Just one point, and I
think Mr. Gahn got there
01:29:47.130 --> 01:29:48.930
and I appreciate it.
01:29:48.930 --> 01:29:53.540
It's I think what we're all
struggling with right now
01:29:53.540 --> 01:29:56.283
is a little bit of
regulatory uncertainty.
01:29:57.390 --> 01:29:58.921
And what I mean.
That's what I wanted say.
01:29:58.921 --> 01:30:01.100
And what I mean by that
01:30:01.100 --> 01:30:04.280
is we're having a very
important conversation
01:30:04.280 --> 01:30:05.850
on market design.
01:30:05.850 --> 01:30:08.773
It's going to take a little
bit of time to work through,
01:30:10.210 --> 01:30:11.760
but once we do,
01:30:11.760 --> 01:30:14.500
even if there's the
market is gonna figure out
01:30:14.500 --> 01:30:17.500
how to provide term and if
the market's gonna be able
01:30:17.500 --> 01:30:18.520
to understand the rules
01:30:18.520 --> 01:30:21.090
and go back to short term, medium term,
01:30:21.090 --> 01:30:22.600
long-term contracting.
01:30:22.600 --> 01:30:25.300
That's true even if we have a
three-month seasonal product,
01:30:25.300 --> 01:30:29.130
'cause the market is gonna
understand and digest how,
01:30:29.130 --> 01:30:32.120
what the new equilibrium
is in terms of market design
01:30:32.120 --> 01:30:33.420
and digest it,
01:30:33.420 --> 01:30:35.910
manage those risks and provide
those benefits to customers.
01:30:35.910 --> 01:30:38.100
I just wanted to kind
of underscore that point,
01:30:38.100 --> 01:30:41.450
but right now we're all kind
of in this spot where we're not
01:30:41.450 --> 01:30:44.950
exactly sure where it's all
gonna land and the sooner we
01:30:44.950 --> 01:30:47.260
can get through this
very important process,
01:30:47.260 --> 01:30:49.430
I think the better it is for consumers
01:30:49.430 --> 01:30:50.560
and the market that all.
01:30:50.560 --> 01:30:53.360
So I think that's an
actually very important point.
01:30:53.360 --> 01:30:55.380
I know everything that's
coming out of our mouth
01:30:55.380 --> 01:30:57.960
individually scares the market
01:30:57.960 --> 01:30:59.650
because it introduces uncertainty
01:31:00.970 --> 01:31:05.970
and maybe this is a segue
into just a conversation
01:31:07.110 --> 01:31:11.160
about process or ultimately
01:31:11.160 --> 01:31:16.160
where we wanna try to get to
be a near term, medium term,
01:31:16.950 --> 01:31:17.980
long term, I don't know,
01:31:17.980 --> 01:31:22.040
but he brought up a very cogent point
01:31:22.040 --> 01:31:25.810
that markets have to have time to adjust
01:31:25.810 --> 01:31:27.538
to whatever is done here
01:31:27.538 --> 01:31:28.621
and what do you think Mr. chair?
01:31:28.621 --> 01:31:32.810
Sure I think we've laid
out of what is admittedly
01:31:32.810 --> 01:31:34.800
a very aggressive timeline
01:31:36.140 --> 01:31:37.622
for between now and the end of the year.
01:31:37.622 --> 01:31:38.455
Yes, sir.
01:31:38.455 --> 01:31:40.650
So to get what we told the,
01:31:40.650 --> 01:31:42.700
what I told the Senate
was the blueprint.
01:31:42.700 --> 01:31:44.250
We don't know what that will be,
01:31:44.250 --> 01:31:47.452
ORDC new seasonal products,
01:31:47.452 --> 01:31:50.060
farming requirements of duel,
01:31:50.060 --> 01:31:52.930
whatever that ends up
being in that blueprint,
01:31:52.930 --> 01:31:55.010
that's an aggressive timeline,
01:31:55.010 --> 01:31:57.570
but I think it's important one
01:31:58.820 --> 01:32:01.190
because we know we
need to make these changes.
01:32:01.190 --> 01:32:05.160
We need to give certainty
to market participants,
01:32:05.160 --> 01:32:07.400
investors we'll need to,
01:32:07.400 --> 01:32:10.770
nobody's gonna move
money out of the bank
01:32:10.770 --> 01:32:13.790
until they know what the full
scape of changes look like.
01:32:13.790 --> 01:32:16.306
I think that's fair to say there.
01:32:16.306 --> 01:32:18.700
They need to see what it's
gonna look like before anybody
01:32:18.700 --> 01:32:22.330
invests in new generation
or makes a decision to
01:32:22.330 --> 01:32:23.833
not retire an asset.
01:32:25.610 --> 01:32:27.190
The implementation part of that.
01:32:27.190 --> 01:32:30.220
I think if we stick with
the end of the year timeline
01:32:30.220 --> 01:32:33.560
that would give us,
four or five, six months,
01:32:33.560 --> 01:32:35.720
depending on what the mechanism is.
01:32:35.720 --> 01:32:39.090
The implementation at
ERCOT would is varies
01:32:39.090 --> 01:32:44.090
from a few weeks to a couple
of months, but importantly,
01:32:44.420 --> 01:32:47.620
that would give folks while
we're implementing that,
01:32:47.620 --> 01:32:50.700
that would give folks in the marketplace
01:32:50.700 --> 01:32:55.700
time to say before June to
adjust their businesses and how,
01:32:55.760 --> 01:33:00.760
and start positioning for
those changes to go into place
01:33:00.820 --> 01:33:04.061
and finally, and I
guess most importantly,
01:33:04.061 --> 01:33:05.950
I think we need to have,
01:33:05.950 --> 01:33:08.080
we need to deliver results for SB three,
01:33:08.080 --> 01:33:12.090
certainly before the next
session comes in in January, 2023
01:33:14.210 --> 01:33:17.593
and even on the timeline we're on now,
01:33:20.690 --> 01:33:25.690
May, June 2022 is pretty
close to the gavel dropping
01:33:27.480 --> 01:33:30.040
for the 88 session in January, 2023.
01:33:30.040 --> 01:33:32.360
So I think that that's my thought,
01:33:32.360 --> 01:33:36.793
obviously men make plans and God laughs.
01:33:38.530 --> 01:33:43.410
Yeah, I would echo all of
the comments to be expeditious
01:33:43.410 --> 01:33:44.500
in how we get through this.
01:33:44.500 --> 01:33:47.070
I think while market participants
01:33:47.070 --> 01:33:49.220
may not like 100% of what we do,
01:33:49.220 --> 01:33:52.140
if we get through it quickly
and set the rules quickly,
01:33:52.140 --> 01:33:56.840
they will adapt and so let's get it done
01:33:56.840 --> 01:33:59.150
let's do our homework,
let's get our input,
01:33:59.150 --> 01:34:00.450
let's get it done quick
01:34:01.502 --> 01:34:03.210
and I believe in markets
01:34:03.210 --> 01:34:05.340
and I believe market
participants will adapt
01:34:05.340 --> 01:34:07.230
and they will find ways to make money
01:34:07.230 --> 01:34:09.380
in the market as long
as we set the rules
01:34:09.380 --> 01:34:11.660
and then leave them in place.
01:34:11.660 --> 01:34:13.200
Absolutely, I agree as well.
01:34:13.200 --> 01:34:16.240
I think we need to take
expeditious deliberate action
01:34:16.240 --> 01:34:17.450
and in every step of the way,
01:34:17.450 --> 01:34:19.150
try to provide as much transparency,
01:34:19.150 --> 01:34:21.840
visibility, and regulatory
certainty to the market,
01:34:21.840 --> 01:34:25.420
to the investment community
and also to the public
01:34:25.420 --> 01:34:27.770
that we are taking aggressive action
01:34:27.770 --> 01:34:29.750
and steps to ensure that we improve
01:34:29.750 --> 01:34:31.450
further liability in the longterm.
01:34:32.330 --> 01:34:36.490
Yeah and just for me, I
think we're in alignment
01:34:39.050 --> 01:34:40.470
giving the market time to absorb
01:34:40.470 --> 01:34:43.790
giving stakeholders time
to work through the details.
01:34:43.790 --> 01:34:46.850
I believe what we can do in this process
01:34:46.850 --> 01:34:50.740
before the statutory
deadlines come into play
01:34:50.740 --> 01:34:54.750
is to provide direction on
what the non-negotiables are
01:34:54.750 --> 01:34:56.530
for the ERCOT market.
01:34:56.530 --> 01:34:59.500
What we have moving forward,
01:34:59.500 --> 01:35:02.350
not necessarily in
terms of hard dates on
01:35:02.350 --> 01:35:06.100
final implementation depending
on nuances of smoothing out
01:35:06.100 --> 01:35:09.520
the market integration
details just as we've done
01:35:09.520 --> 01:35:12.820
on nodal or other major
system changes in the past,
01:35:12.820 --> 01:35:15.030
but ultimately the financial community,
01:35:15.030 --> 01:35:17.160
the generation community,
01:35:17.160 --> 01:35:19.580
the retail community will
know where we are headed
01:35:19.580 --> 01:35:22.690
and what our non-negotiables
are and what we must have
01:35:22.690 --> 01:35:24.750
and I think that's the
best thing we can do.
01:35:24.750 --> 01:35:27.730
Yeah well put in to
the extent we can identify
01:35:27.730 --> 01:35:31.030
broad principles
sooner rather than later,
01:35:31.030 --> 01:35:34.000
even if we don't know
the exact mechanisms
01:35:34.000 --> 01:35:36.220
of implementing those
sooner rather than later,
01:35:36.220 --> 01:35:37.830
I think is.
Yes, sir.
01:35:37.830 --> 01:35:40.060
Along your line
of thinking, yeah.
01:35:40.060 --> 01:35:40.893
Yes, sir.
01:35:41.900 --> 01:35:45.460
All right thank you.
01:35:45.460 --> 01:35:47.170
Thank you Mr. Chairman.
01:35:47.170 --> 01:35:48.003
Ladies and gentlemen,
01:35:48.003 --> 01:35:50.330
appreciate y'all's time
and input at this point
01:35:50.330 --> 01:35:52.205
let's take a 15 minute break
01:35:52.205 --> 01:35:55.290
to let folks stretch their legs.
01:35:55.290 --> 01:35:57.853
We'll come back at 2:10 PM.
01:36:14.246 --> 01:36:16.130
All right this meeting of
the Public Utility Commission
01:36:16.130 --> 01:36:19.863
of Texas is back in session.
01:36:20.870 --> 01:36:24.300
We are coming up on
our final panel of the day
01:36:24.300 --> 01:36:28.040
before we have our concluding
Commission discussion.
01:36:28.040 --> 01:36:31.423
Thank you panelists for being here.
01:36:33.030 --> 01:36:35.370
Turn it over Mr. stones from Dow.
01:36:35.370 --> 01:36:37.620
I think that's your first up.
01:36:37.620 --> 01:36:39.220
Yeah, okay, is this on?
01:36:39.220 --> 01:36:40.150
Yeah.
Okay.
01:36:40.150 --> 01:36:42.440
All right Well thank you
chairman Lake and Commissioners.
01:36:42.440 --> 01:36:45.090
My name is Edward Stones
on the global business director
01:36:45.090 --> 01:36:49.200
for energy for Dow, which is
formally known as Dow chemical,
01:36:49.200 --> 01:36:52.160
but some as you know,
Dow is a global manufacturer
01:36:52.160 --> 01:36:53.790
and we're heavily invested along
01:36:53.790 --> 01:36:56.690
the Texas Gulf coast since 1940,
01:36:56.690 --> 01:36:59.814
our assets stretch
from Orange to Seadrift
01:36:59.814 --> 01:37:04.814
and we have our largest
site globally in Freeport, Texas
01:37:04.880 --> 01:37:07.710
and that manufacturer is
over 40% of the products
01:37:07.710 --> 01:37:12.380
we sell in the United
States and 20% globally.
01:37:12.380 --> 01:37:15.510
We employ just over 10,000
people here in the state
01:37:15.510 --> 01:37:17.550
and since 2008,
01:37:17.550 --> 01:37:20.100
we've invested over
$10 billion in new assets
01:37:20.100 --> 01:37:23.253
and modernizations
at our sites in Texas.
01:37:24.470 --> 01:37:25.880
As you can see from this slide
01:37:25.880 --> 01:37:27.890
Dow committed to sustainability
01:37:27.890 --> 01:37:29.770
and we support reliable integration of
01:37:29.770 --> 01:37:32.580
renewables into the generation.
01:37:32.580 --> 01:37:34.120
We're actually among the top 20
01:37:34.120 --> 01:37:38.760
consumers of renewables
globally as a corporate.
01:37:38.760 --> 01:37:41.280
And that's, we have these goals
01:37:41.280 --> 01:37:42.800
from a sustainability perspective
01:37:42.800 --> 01:37:44.370
to reduce our annual carbon emissions
01:37:44.370 --> 01:37:47.210
by 5 million tons or 15% by 2030,
01:37:47.210 --> 01:37:49.573
and then be carbon neutral by 2050.
01:37:50.490 --> 01:37:52.260
But we also have scale
01:37:52.260 --> 01:37:56.110
and so right now we have
more than seven of power
01:37:56.110 --> 01:37:57.660
and steam globally.
01:37:57.660 --> 01:37:59.420
We consume more than a million barrels,
01:37:59.420 --> 01:38:00.610
a day of feed stocks,
01:38:00.610 --> 01:38:04.150
and we have more than 50 gas
and steam turbines and boilers,
01:38:04.150 --> 01:38:06.750
and that feeds more than 100 furnaces.
01:38:06.750 --> 01:38:10.540
So we're a big company
we need consistent,
01:38:10.540 --> 01:38:13.350
reliable power and affordable power
01:38:13.350 --> 01:38:15.700
to make our stuff go.
01:38:15.700 --> 01:38:18.930
So what's the problem
from my perspective,
01:38:18.930 --> 01:38:20.140
we define the right solution,
01:38:20.140 --> 01:38:22.730
we really have to identify
what the problem is first
01:38:22.730 --> 01:38:25.110
and what I would say is
over the last few years,
01:38:25.110 --> 01:38:27.610
ERCOT has been increasingly reliant
01:38:27.610 --> 01:38:29.470
on intermittent generation,
01:38:29.470 --> 01:38:33.510
which are renewables for the
most part to serve peak demand.
01:38:33.510 --> 01:38:35.550
As this trend increases,
01:38:35.550 --> 01:38:37.300
stakeholders have become uncomfortable
01:38:37.300 --> 01:38:39.690
with potential liability issues.
01:38:39.690 --> 01:38:41.730
So why is this happening?
01:38:41.730 --> 01:38:43.840
Basically, government
incentives have caused
01:38:43.840 --> 01:38:46.650
a disproportionate investment
in renewable generation
01:38:46.650 --> 01:38:50.520
compared to dispatchable
or thermal generation
01:38:50.520 --> 01:38:53.230
and those renewables
don't respond to price.
01:38:53.230 --> 01:38:55.730
So traditional market
signals and incentives
01:38:55.730 --> 01:38:58.270
don't increase output
or improve performance
01:38:58.270 --> 01:39:00.200
from these resources.
01:39:00.200 --> 01:39:03.420
So if prices rise, customers pay more,
01:39:03.420 --> 01:39:04.810
but you don't get any more energy
01:39:04.810 --> 01:39:06.870
from the intermittent generators.
01:39:06.870 --> 01:39:09.870
In fact, it actually works
the other way in Texas
01:39:09.870 --> 01:39:12.970
high renewables
supply leads to low prices
01:39:12.970 --> 01:39:15.000
for all sources of supply
01:39:15.000 --> 01:39:17.660
and low renewable
supply leads to high prices
01:39:17.660 --> 01:39:19.490
for anybody who's left
01:39:19.490 --> 01:39:22.283
and that's kind of where
the net load concept
01:39:22.283 --> 01:39:23.743
that has been discussed.
01:39:24.970 --> 01:39:27.920
The problem in some ways
that customers in ERCOT,
01:39:27.920 --> 01:39:30.280
and not directly
linked to their contract,
01:39:30.280 --> 01:39:34.660
its source of physical
power, if they were,
01:39:34.660 --> 01:39:35.610
would solve the problem,
01:39:35.610 --> 01:39:38.350
because those who only buy
renewables would be directly
01:39:38.350 --> 01:39:41.090
exposed to the risk of intermittency
01:39:41.090 --> 01:39:43.110
and would have an incentive
to contract around that.
01:39:43.110 --> 01:39:45.310
So if you go to the next slide,
01:39:45.310 --> 01:39:47.670
these are real data from our facilities.
01:39:47.670 --> 01:39:49.400
So this is not some hypothetical,
01:39:49.400 --> 01:39:52.010
this is actual real data
01:39:52.010 --> 01:39:55.790
on the left you can see
our renewable contracts,
01:39:55.790 --> 01:39:58.030
we have something in coastal wind
01:39:58.030 --> 01:40:01.590
and we have a panhandle wind
and then I show a gas turbine.
01:40:01.590 --> 01:40:05.090
The gray bar of the
left bar is the capacity.
01:40:05.090 --> 01:40:08.103
The green bar is our March
delivery and the July bar is,
01:40:09.700 --> 01:40:12.700
the right bar is the
July delivery dark, right?
01:40:12.700 --> 01:40:16.220
So you can see it it's
quite different by month
01:40:16.220 --> 01:40:17.480
from the wind.
01:40:17.480 --> 01:40:19.840
Whereas the gas turbine
pretty much delivers
01:40:19.840 --> 01:40:21.890
what it says it does.
01:40:21.890 --> 01:40:24.390
If you actually go to a
kind of five minute basis,
01:40:24.390 --> 01:40:25.900
which is the chart in the middle here,
01:40:25.900 --> 01:40:27.970
this is the month of July, 2017
01:40:27.970 --> 01:40:29.800
and all months look like this.
01:40:29.800 --> 01:40:32.160
This is just one that we picked.
01:40:32.160 --> 01:40:36.320
You can see the gas
turbine is like a rock just solid
01:40:36.320 --> 01:40:40.230
and the wind goes all over
the place and it goes all over
01:40:40.230 --> 01:40:44.300
the place every day
there's no pattern to it.
01:40:44.300 --> 01:40:48.000
That's fine, but it's a
fundamentally different product
01:40:48.000 --> 01:40:50.080
than a gas turbine generation
01:40:50.970 --> 01:40:55.040
and so since we, our
own retail electric provider,
01:40:55.040 --> 01:40:57.650
we can blend dispatchable
and renewables in a way
01:40:57.650 --> 01:41:01.440
that's tailored to our load
profile and our risk tolerances,
01:41:01.440 --> 01:41:04.350
but the centrally
dispatched integrated system
01:41:04.350 --> 01:41:05.970
can't do that.
01:41:05.970 --> 01:41:09.360
All system resources are
shared on all parties are exposed
01:41:09.360 --> 01:41:10.880
to the lowest common denominator
01:41:10.880 --> 01:41:13.880
in terms of reliability risk
01:41:13.880 --> 01:41:16.180
and even though we manage our risk,
01:41:16.180 --> 01:41:19.190
we're still exposed to the
price and supply volatility
01:41:19.190 --> 01:41:20.830
of others through this common system,
01:41:20.830 --> 01:41:23.560
because ERCOT for us
is the balancing wheel.
01:41:23.560 --> 01:41:24.670
It's the last thing that
01:41:24.670 --> 01:41:28.540
we use to make our numbers work when,
01:41:28.540 --> 01:41:31.380
on this chart, there's times when I get
01:41:31.380 --> 01:41:34.210
100% delivery from both wind deals
01:41:34.210 --> 01:41:35.153
and there's time when I've got less than
01:41:35.153 --> 01:41:38.113
2% of the capacity delivered.
01:41:39.290 --> 01:41:41.763
So just to give you a
sense of how that works,
01:41:42.720 --> 01:41:46.160
therefore, what you Commissioners
have to do in our opinion,
01:41:46.160 --> 01:41:48.990
is directly manage this risk
for the entire ERCOT market.
01:41:48.990 --> 01:41:51.220
I mean, that's the task you've been set
01:41:51.220 --> 01:41:52.470
and it's not an easy one.
01:41:53.433 --> 01:41:56.810
From our perspective,
lowering the price cap
01:41:56.810 --> 01:41:59.503
and flattening flattening
the ORDC just won't work.
01:42:00.460 --> 01:42:04.310
A competitive market depends
on an accurate price signals,
01:42:04.310 --> 01:42:07.670
an accurate price signals
drive generator performance
01:42:07.670 --> 01:42:10.450
in times when the system needs it most
01:42:10.450 --> 01:42:12.980
and they provide price
signals for efficient demand
01:42:12.980 --> 01:42:16.730
and response and
efficient demand response,
01:42:16.730 --> 01:42:20.750
manipulating the ORDC
really just raises overall prices.
01:42:20.750 --> 01:42:22.270
It won't improve your liability
01:42:22.270 --> 01:42:24.640
or it won't change investment patterns.
01:42:24.640 --> 01:42:27.150
It only increases cost to customers
01:42:27.150 --> 01:42:30.308
and frankly, in our opinion,
decreases risks to generators.
01:42:30.308 --> 01:42:33.470
In 2019, the Commission shifted the ORDC
01:42:33.470 --> 01:42:36.260
by a quarter of standard deviation
01:42:36.260 --> 01:42:39.200
and adopted a second quarter
of a standard deviation shift
01:42:39.200 --> 01:42:40.667
that was implemented in 2020
01:42:40.667 --> 01:42:43.340
and that was just last year.
01:42:43.340 --> 01:42:45.100
There really hasn't been any time
01:42:45.100 --> 01:42:48.050
for the investment
community to fully respond
01:42:48.050 --> 01:42:48.883
to these changes
01:42:48.883 --> 01:42:51.260
and now we're thinking
about further changes,
01:42:51.260 --> 01:42:53.900
this sort of instability
in the market design
01:42:53.900 --> 01:42:58.270
deters investment and is
challenging for large consumers
01:42:58.270 --> 01:43:01.950
and retail electric providers to handle.
01:43:01.950 --> 01:43:05.660
So turning this ORDC into
an around the clock price adder
01:43:05.660 --> 01:43:08.800
essentially makes it an
energy tax for customers,
01:43:08.800 --> 01:43:11.180
and that can create
the wrong incentives.
01:43:11.180 --> 01:43:14.610
It reduces hedging incentives
and hedging is driven by
01:43:14.610 --> 01:43:17.420
the risk of high price
is not the absolute
01:43:17.420 --> 01:43:19.410
and we want to avoid crises,
01:43:19.410 --> 01:43:23.900
but the fact the balances may
have shortages in the future
01:43:23.900 --> 01:43:26.593
rises the, makes the forward curve rise.
01:43:27.510 --> 01:43:29.450
Even if those prices never occur,
01:43:29.450 --> 01:43:34.350
that, future supply demand
shortage should send investment,
01:43:34.350 --> 01:43:37.150
which is reflected
in the hedging, right?
01:43:37.150 --> 01:43:39.870
Newly built generators
make most of their money
01:43:39.870 --> 01:43:44.100
through bilateral sales and
not through the realtime market.
01:43:44.100 --> 01:43:47.520
So most generators are only
exposed to realtime prices
01:43:47.520 --> 01:43:51.390
when they fail and have
to replace a bilateral option
01:43:51.390 --> 01:43:52.477
or bilateral position
01:43:52.477 --> 01:43:54.680
and that's why you hear from generators
01:43:54.680 --> 01:43:59.093
asking for a lower price cap,
not customers or consumers.
01:44:00.600 --> 01:44:03.750
Increasing prices at
higher reserve levels
01:44:03.750 --> 01:44:07.163
actually increase revenues to
non-dispatchable generation.
01:44:08.940 --> 01:44:10.720
It's a blunt tool,
01:44:10.720 --> 01:44:13.020
and this could make
the problem even worse
01:44:13.020 --> 01:44:15.840
because right now the
ORDC primarily kicks in
01:44:15.840 --> 01:44:18.620
when the intermittent
generation has dropped off
01:44:18.620 --> 01:44:20.370
extending the ORDC to be hired,
01:44:20.370 --> 01:44:23.340
a lower reserve level
will increase the revenues
01:44:23.340 --> 01:44:26.710
to intermittent generation
or perpetuate this overbuild
01:44:26.710 --> 01:44:29.800
of intermittent
resources in our opinion.
01:44:29.800 --> 01:44:32.440
So a more targeted solution is required
01:44:32.440 --> 01:44:35.430
and we think that's where
ancillary services come in
01:44:35.430 --> 01:44:38.423
and they should address the
seasonal net load variability.
01:44:39.920 --> 01:44:44.050
Increasing the overall price
won't impact the resource max,
01:44:44.050 --> 01:44:45.730
instead the Commission should identify
01:44:45.730 --> 01:44:49.023
exactly what the
reliability is, in other words,
01:44:49.023 --> 01:44:52.530
how much extra dispatchable
generation do we need online
01:44:52.530 --> 01:44:54.660
to address potential
net peak load conditions
01:44:54.660 --> 01:44:57.750
and it's targeted away as is possible.
01:44:57.750 --> 01:45:01.400
Then ERCOT should buy this
dispatchable generation directly
01:45:01.400 --> 01:45:03.550
through a seasonal and slurry service
01:45:03.550 --> 01:45:06.800
that reflect the variability
of the intermittent generation
01:45:06.800 --> 01:45:10.130
and this is a targeted direct
way to buy what you need
01:45:10.130 --> 01:45:12.020
rather than just increasing prices
01:45:12.020 --> 01:45:15.183
and reducing performance risk.
01:45:15.183 --> 01:45:18.700
Ancillary services could drive
more investment in storage
01:45:18.700 --> 01:45:20.370
to smooth out variability
01:45:20.370 --> 01:45:22.360
and could help reduce
costs for batteries
01:45:22.360 --> 01:45:23.483
as more come online.
01:45:24.600 --> 01:45:27.290
We also see technologies
continuing to develop
01:45:27.290 --> 01:45:29.280
for renewables to replicate
01:45:29.280 --> 01:45:32.020
or provide the equivalents
of conventional power
01:45:32.020 --> 01:45:33.620
things like synthetic inertia,
01:45:33.620 --> 01:45:36.810
fast frequency response
to market mechanisms,
01:45:36.810 --> 01:45:40.330
to financially compensate
those who provide them,
01:45:40.330 --> 01:45:43.010
could accelerate these
technological developments
01:45:43.010 --> 01:45:44.610
and their implementation
01:45:44.610 --> 01:45:48.300
and I was glad to hear
Woody speak about this
01:45:48.300 --> 01:45:49.170
at the beginning of the day,
01:45:49.170 --> 01:45:51.750
I thought those are really good things.
01:45:51.750 --> 01:45:55.890
So that's generally my major comment
01:45:55.890 --> 01:45:59.100
and I would say, for
us ancillary services
01:45:59.100 --> 01:46:00.620
would be more targeted
01:46:00.620 --> 01:46:03.267
and a more efficient way to solve this.
01:46:03.267 --> 01:46:05.363
But with that, I'm open for questions.
01:46:06.990 --> 01:46:09.693
Thank you questions
come up, Mr. Stone.
01:46:12.320 --> 01:46:15.030
Heard you say several things there.
01:46:15.030 --> 01:46:17.720
One of which was
overbuild of intermittence.
01:46:17.720 --> 01:46:18.553
Yeah.
01:46:19.810 --> 01:46:24.210
That's jumped out, the
other more importantly,
01:46:24.210 --> 01:46:28.893
you said the revenues are
going to generating assets
01:46:31.860 --> 01:46:34.323
that aren't price responsive.
01:46:35.180 --> 01:46:36.160
Right.
01:46:36.160 --> 01:46:41.160
And I get what
you're saying in that if
01:46:43.810 --> 01:46:48.303
a resource happens to be
generating in a moment of scarcity,
01:46:48.303 --> 01:46:50.783
if the price goes to $9,000,
01:46:50.783 --> 01:46:55.783
that when asset can't
make the win $9,000,
01:46:58.480 --> 01:47:00.750
won't make the wind blow
anymore than $40 debt.
01:47:00.750 --> 01:47:01.583
Right.
01:47:02.840 --> 01:47:05.680
Or the sunshine at 8:00 PM,
01:47:05.680 --> 01:47:10.680
any more than $100, if we're looking on,
01:47:10.700 --> 01:47:12.600
so the broader question is,
01:47:12.600 --> 01:47:16.130
if on the one hand we just
spent a lot of time talking about
01:47:16.130 --> 01:47:19.030
spending more money
on ancillary services,
01:47:19.030 --> 01:47:24.030
which we heard from
Scott and Just Energy about
01:47:24.800 --> 01:47:27.913
how that is that obviously
we'll go to the customers.
01:47:29.090 --> 01:47:34.090
Do we also need to be talking
about removing revenues
01:47:34.500 --> 01:47:37.170
from generators that
aren't price responsive
01:47:37.170 --> 01:47:38.830
and can't provide reliability
01:47:38.830 --> 01:47:42.823
to cushion the blow to
the customer if you will?
01:47:43.910 --> 01:47:45.490
So I'm not sure
I would do that.
01:47:45.490 --> 01:47:47.683
I think from my perspective,
01:47:51.550 --> 01:47:54.750
I would prefer to be technology agnostic
01:47:54.750 --> 01:47:55.990
and just let,
01:47:55.990 --> 01:47:58.490
have the grid pay for
only the ancillary services
01:47:58.490 --> 01:48:01.640
they need and the high
prices for those services,
01:48:01.640 --> 01:48:02.700
which would have traditionally
01:48:02.700 --> 01:48:04.943
gone to conventional generators.
01:48:05.920 --> 01:48:08.990
Well both support operation
of those types of generators
01:48:08.990 --> 01:48:11.800
and incense, the deployment
of new technologies
01:48:11.800 --> 01:48:13.900
like batteries, like grid farming,
01:48:13.900 --> 01:48:15.560
like all these things
that we spoke about.
01:48:15.560 --> 01:48:17.033
Sure, I mean,
if it's going to do,
01:48:17.033 --> 01:48:20.150
like the revenue's
going to reliable assets.
01:48:20.150 --> 01:48:20.983
Right.
01:48:20.983 --> 01:48:24.700
The issue is if you
have a solar facility
01:48:24.700 --> 01:48:26.990
and you don't get that revenue
01:48:27.920 --> 01:48:30.040
you and eventually
the market will only pay
01:48:30.040 --> 01:48:32.010
so much for power
01:48:32.010 --> 01:48:35.460
and so if you're not getting
your share of the good stuff,
01:48:35.460 --> 01:48:36.820
you are actually getting less,
01:48:36.820 --> 01:48:39.100
that's how that I think
would work in the real world.
01:48:39.100 --> 01:48:40.797
You don't have to take it away from them
01:48:40.797 --> 01:48:41.997
because the market will.
01:48:43.780 --> 01:48:45.570
Okay, because I'm also,
01:48:45.570 --> 01:48:47.380
when you said that I
started seeing a picture
01:48:47.380 --> 01:48:51.130
of know customers
paying extraordinary prices
01:48:51.130 --> 01:48:52.370
in these moments of scarcity,
01:48:52.370 --> 01:48:54.576
which we of course want to minimize.
01:48:54.576 --> 01:48:55.409
Right.
01:48:55.409 --> 01:48:56.900
But those, some of
those revenues are going to
01:48:56.900 --> 01:48:59.270
the dispatchable
generation that they need,
01:48:59.270 --> 01:49:04.209
whether it's a combined cycle
gas turbine or a battery bank,
01:49:04.209 --> 01:49:08.470
extra solar panels or any of
the other dispatchable assets.
01:49:08.470 --> 01:49:11.200
But they're also because
of the way our market clears
01:49:11.200 --> 01:49:13.723
uniform price coring
instead of by volume,
01:49:14.800 --> 01:49:18.090
that the customers are
also dumping money on
01:49:18.090 --> 01:49:20.617
whatever happens to show up.
01:49:20.617 --> 01:49:21.810
It's, non-responsive.
01:49:21.810 --> 01:49:23.610
I think what you'd
be surprised by
01:49:23.610 --> 01:49:25.410
is how little that actually happens,
01:49:25.410 --> 01:49:28.240
because the reason
that the price is so high
01:49:28.240 --> 01:49:31.090
is because there were so
little renewable available
01:49:32.300 --> 01:49:34.410
and that's what happens.
01:49:34.410 --> 01:49:39.410
I only got 2% of my
capacity from my wind deals
01:49:39.410 --> 01:49:41.943
in the very high price period.
01:49:42.900 --> 01:49:44.643
So I don't get, the reason why.
01:49:44.643 --> 01:49:47.320
The impact on
customer isn't as large it-
01:49:47.320 --> 01:49:50.850
What I'm saying, is there,
you're not sending money
01:49:50.850 --> 01:49:53.110
to the non dispatchable at that time,
01:49:53.110 --> 01:49:55.450
because there is no
non-dispatchable because if the were
01:49:55.450 --> 01:49:57.110
we wouldn't have a problem.
01:49:57.110 --> 01:49:58.230
Okay.
01:49:58.230 --> 01:50:02.103
It's sort of a weird tautology
of the market, if you will.
01:50:02.103 --> 01:50:03.940
Its not fair.
01:50:03.940 --> 01:50:07.510
Mr. Stone's question
for you about sort of
01:50:08.370 --> 01:50:11.140
the mentality of the market right now.
01:50:11.140 --> 01:50:13.303
I know that it is,
01:50:14.760 --> 01:50:18.937
I believe it is commonly
held amongst the market
01:50:20.410 --> 01:50:24.840
that renewables are
in the public interest.
01:50:24.840 --> 01:50:27.470
You know, they're in
the societal interest,
01:50:27.470 --> 01:50:29.693
low cost and carbon neutral.
01:50:31.110 --> 01:50:36.110
Do you think, would Dow
chemical buy renewables
01:50:36.490 --> 01:50:37.323
no matter what?
01:50:38.640 --> 01:50:40.280
No we only buy renewables
01:50:40.280 --> 01:50:41.570
if we think we can make money from it.
01:50:41.570 --> 01:50:42.640
Economic, okay.
01:50:42.640 --> 01:50:44.490
So it's an economic condition
01:50:44.490 --> 01:50:46.660
and where I go with that is like,
01:50:46.660 --> 01:50:50.030
if that cost burden shifts
over from the consumer,
01:50:50.030 --> 01:50:53.650
that load serving entity,
and as some have asserted,
01:50:53.650 --> 01:50:56.900
we should assign costs to
the renewables themselves,
01:50:56.900 --> 01:50:58.290
the intermittence.
01:50:58.290 --> 01:51:00.500
I mean, what does that do?
01:51:00.500 --> 01:51:03.260
So I don't think that's
smart because I think
01:51:03.260 --> 01:51:05.400
all of a sudden you're
picking winners and losers
01:51:05.400 --> 01:51:06.930
and I don't like that idea.
01:51:06.930 --> 01:51:10.670
I think what you do is
you define what you want,
01:51:10.670 --> 01:51:15.670
which is I want enough
load serving capacity
01:51:15.750 --> 01:51:17.963
in the peak times, right?
01:51:19.268 --> 01:51:21.440
And then let the markets technologically
01:51:21.440 --> 01:51:23.890
and economically solve for that.
01:51:23.890 --> 01:51:25.520
That's why you get more batteries,
01:51:25.520 --> 01:51:28.970
if, I don't think you want
to penalize anybody.
01:51:28.970 --> 01:51:31.890
I think what you wanna
do is pay for what you want.
01:51:31.890 --> 01:51:35.170
So like a different
version of Will's question
01:51:35.170 --> 01:51:38.467
we heard earlier that
we're the only market
01:51:38.467 --> 01:51:40.520
that doesn't pay for voltage support.
01:51:40.520 --> 01:51:45.520
So if we move to, if we
change that and start providing
01:51:48.250 --> 01:51:49.810
through some form or fashion,
01:51:49.810 --> 01:51:51.090
whatever the service looks like,
01:51:51.090 --> 01:51:52.590
or the compensation looks like
01:51:54.000 --> 01:51:55.043
who should bear those costs
01:51:55.043 --> 01:51:56.880
because we're paying for what we want
01:51:56.880 --> 01:51:59.142
it's have we'll have woody come up with
01:51:59.142 --> 01:52:03.270
a standard of synchronous
voltage support
01:52:03.270 --> 01:52:05.360
and it's whether that's
synthetic or rotating master,
01:52:05.360 --> 01:52:09.380
whatever the technical
specification needs to be,
01:52:09.380 --> 01:52:11.240
we'll pay for the output we want
01:52:12.140 --> 01:52:13.890
technology agnostic.
01:52:13.890 --> 01:52:15.356
Right.
01:52:15.356 --> 01:52:17.990
I think the question is
when something like that,
01:52:17.990 --> 01:52:22.160
where should those costs be assigned?
01:52:22.160 --> 01:52:24.640
So I'm not a
market design expert.
01:52:24.640 --> 01:52:26.470
I'm not sure I'm qualified to answer
01:52:26.470 --> 01:52:27.740
where they should be assigned.
01:52:27.740 --> 01:52:30.230
What I would say is let's please
01:52:30.230 --> 01:52:32.736
have as few of those costs as we can.
01:52:32.736 --> 01:52:35.930
(members laughing)
01:52:35.930 --> 01:52:38.510
and as targeted as we can.
01:52:38.510 --> 01:52:41.090
So that's why I kinda liked the idea,
01:52:41.090 --> 01:52:43.740
honestly we see problems
with voltage support.
01:52:43.740 --> 01:52:47.050
So yes, we, the benefit of that,
01:52:47.050 --> 01:52:49.810
but should we be the only
ones bearing those costs?
01:52:49.810 --> 01:52:53.800
I don't think so, but I
don't know who should,
01:52:53.800 --> 01:52:56.290
that's not my role.
01:52:56.290 --> 01:53:00.853
What I would say though,
is let's please design for,
01:53:02.410 --> 01:53:04.880
like I think fast ramping
services are good,
01:53:04.880 --> 01:53:09.220
I think, voltage support
may be an unimportant thing.
01:53:09.220 --> 01:53:10.520
I don't know what other problems are.
01:53:10.520 --> 01:53:13.590
Somebody, ERCOT has
a lot of very expert people,
01:53:13.590 --> 01:53:14.990
they can go and study these things
01:53:14.990 --> 01:53:16.780
and come up with the right answers.
01:53:16.780 --> 01:53:17.910
But for example,
01:53:17.910 --> 01:53:21.480
let's not buy extra
capacity in March at night
01:53:21.480 --> 01:53:23.123
when it's windy, right?
01:53:24.160 --> 01:53:26.690
Buying extra capacity in July or August
01:53:26.690 --> 01:53:29.570
when we're right up
against the net load limit.
01:53:29.570 --> 01:53:32.430
That makes, maybe that
makes some more sense, right?
01:53:32.430 --> 01:53:37.430
And where we are as a consumer
is we want to put our assets
01:53:37.460 --> 01:53:41.540
where the market works as
efficiently as it possibly can
01:53:41.540 --> 01:53:45.380
while still maintaining the
reliability we need to operate,
01:53:45.380 --> 01:53:47.290
because it costs us a lot of money.
01:53:47.290 --> 01:53:50.830
That's why we have gas turbines or cells
01:53:50.830 --> 01:53:53.377
is to maintain our reliability, right?
01:53:53.377 --> 01:53:56.890
I don't know if I kind of evaded
your question, I apologize.
01:53:56.890 --> 01:53:58.366
But very artfully so.
01:53:58.366 --> 01:54:00.090
(members laughing)
01:54:00.090 --> 01:54:02.630
So I agree with your points.
01:54:02.630 --> 01:54:06.740
I think they're very well
articulated about assigning costs.
01:54:06.740 --> 01:54:10.130
I think it gets us into
a challenging position
01:54:10.130 --> 01:54:12.380
because then we are
influencing the market
01:54:12.380 --> 01:54:14.270
on what single piece,
01:54:14.270 --> 01:54:16.810
what metric are we gonna use to assign?
01:54:16.810 --> 01:54:17.823
It could be,
01:54:19.600 --> 01:54:24.403
we don't like gas turbines
running at $12 gas.
01:54:25.941 --> 01:54:27.740
That would change
some people's thinking.
01:54:27.740 --> 01:54:28.640
Nobody wants that,
01:54:28.640 --> 01:54:30.690
we've had that once,
we don't want that again.
01:54:30.690 --> 01:54:34.520
But you know, then you create a market,
01:54:34.520 --> 01:54:37.189
an out of market mechanism for that.
01:54:37.189 --> 01:54:42.189
No, so I just think that
one of the challenges
01:54:42.800 --> 01:54:45.000
that we've had- <v
->Recently, right?
01:54:45.000 --> 01:54:45.833
I'm sorry.
01:54:45.833 --> 01:54:48.790
I had gas turbines running
at $300 gas very recently.
01:54:48.790 --> 01:54:51.230
(members chuckles)
01:54:51.230 --> 01:54:53.790
One of the challenges,
I think, as we look at
01:54:56.650 --> 01:55:01.590
electric reliability through
the lens of the old world,
01:55:01.590 --> 01:55:04.860
which was, we had
plants that ran all the time
01:55:04.860 --> 01:55:08.340
with all their fuel in piles
or in their gas pipeline
01:55:08.340 --> 01:55:09.700
and that attributes of our
01:55:09.700 --> 01:55:12.410
generation resources are changing
01:55:12.410 --> 01:55:15.300
and we just have to make
the market change to that.
01:55:15.300 --> 01:55:20.300
You pair, wind goes like
this and solar goes like this,
01:55:20.770 --> 01:55:22.470
that line is almost flat.
01:55:22.470 --> 01:55:24.854
You just have a little bit of
areas you have to build in.
01:55:24.854 --> 01:55:27.090
You got a problem at 7:00 PM.
01:55:27.090 --> 01:55:29.693
Yeah, exactly and or
seven in the morning,
01:55:30.890 --> 01:55:35.300
but that's where this market is working,
01:55:35.300 --> 01:55:36.940
that we can look at the,
01:55:36.940 --> 01:55:38.510
put the products out there
01:55:38.510 --> 01:55:40.350
and let the market solve the problem,
01:55:40.350 --> 01:55:43.960
as opposed to, this
one's bad for that reason.
01:55:43.960 --> 01:55:45.730
This one's bad for that reason.
01:55:45.730 --> 01:55:46.960
Let the market take over.
Sure I mean,
01:55:46.960 --> 01:55:50.445
I'm certainly wanna
agree with both of you
01:55:50.445 --> 01:55:51.580
and that we want to pay for outcomes.
01:55:51.580 --> 01:55:54.110
We don't want to pick and
choose the input variables.
01:55:54.110 --> 01:55:59.110
We, I think that throughout
our discussions this summer,
01:55:59.490 --> 01:56:02.023
we've all been consistent on that,
01:56:03.470 --> 01:56:06.690
but I do want to be
cautious of going through
01:56:06.690 --> 01:56:10.940
a market redesign the SB
three market redesign effort,
01:56:10.940 --> 01:56:15.940
reacting to the external variables,
01:56:19.620 --> 01:56:22.500
like tax credits and what private
01:56:22.500 --> 01:56:24.293
would wall street investors want,
01:56:25.460 --> 01:56:28.570
shouldn't drive our market design.
01:56:28.570 --> 01:56:29.480
We should drive.
01:56:29.480 --> 01:56:31.870
We should undertake the market designed
01:56:31.870 --> 01:56:34.660
to drive the resources we need in Texas
01:56:36.010 --> 01:56:40.120
and I think, you want to be
careful about that nuance.
01:56:40.120 --> 01:56:41.360
We would agree with that.
01:56:41.360 --> 01:56:43.020
So this brings up an
interesting question, sir,
01:56:43.020 --> 01:56:47.160
because ultimately if
we're on current trajectory,
01:56:47.160 --> 01:56:52.160
we will have an abundance
of wind and abundance of solar
01:56:53.250 --> 01:56:56.580
and that is absolutely great resource.
01:56:56.580 --> 01:56:59.510
But to the chairman's point,
01:56:59.510 --> 01:57:01.070
there is that probability
01:57:01.070 --> 01:57:03.700
that you will have a
cloudy windless day.
01:57:03.700 --> 01:57:04.970
Sure.
A lot.
01:57:04.970 --> 01:57:05.803
So how does,
01:57:05.803 --> 01:57:09.700
how would Dow chemical
propose a hedge against that?
01:57:09.700 --> 01:57:14.130
So, okay, so we
manage that risk
01:57:14.130 --> 01:57:16.182
by having our own generation
01:57:16.182 --> 01:57:21.182
and also purchasing a
portfolio of renewable supply.
01:57:21.380 --> 01:57:23.440
You're not suggesting
the Berkshire plan, are you?
01:57:23.440 --> 01:57:24.600
No, no, no, no.
01:57:24.600 --> 01:57:26.340
Actually I'm certainly not by the way,
01:57:26.340 --> 01:57:29.850
but what I would say
01:57:32.340 --> 01:57:35.360
from a market perspective,
design perspective,
01:57:35.360 --> 01:57:38.430
I think one thing you have
to think about potentially
01:57:38.430 --> 01:57:43.430
is are your ancillary
services poorly priced too low
01:57:44.400 --> 01:57:48.740
and is your power, your net
power price, meaning it could,
01:57:48.740 --> 01:57:50.210
the power price can come down,
01:57:50.210 --> 01:57:52.150
If the ancillary services go off.
01:57:52.150 --> 01:57:54.150
That was one of the points
that somebody who's dealing with
01:57:54.150 --> 01:57:56.093
a peak or example, right?
01:57:57.570 --> 01:58:00.850
Right your short facilities
that can ramp quickly,
01:58:00.850 --> 01:58:04.120
you're short facilities
that can give you power
01:58:04.120 --> 01:58:08.550
when you need it in a low,
renewable load situation.
01:58:08.550 --> 01:58:12.270
You're very, very long renewable power
01:58:12.270 --> 01:58:14.390
or power in general in the night
01:58:14.390 --> 01:58:16.800
in March when it's 75 degrees
01:58:17.960 --> 01:58:19.850
and you have to be careful that
01:58:20.760 --> 01:58:23.020
the solution you create,
01:58:23.020 --> 01:58:26.870
doesn't spend a lot of money on times
01:58:26.870 --> 01:58:28.050
when you don't need the power
01:58:28.050 --> 01:58:30.020
to get a little bit of power in August
01:58:31.050 --> 01:58:34.300
and that's why I think for
us, the ancillary services,
01:58:34.300 --> 01:58:37.270
and maybe it's seasonal, and those,
01:58:37.270 --> 01:58:39.920
it may be very expensive
to do business in August.
01:58:39.920 --> 01:58:42.490
I mean, that, and then
people will start to react
01:58:42.490 --> 01:58:45.070
and move on from that.
01:58:45.070 --> 01:58:49.910
So am I hearing you say
that you're comfortable with
01:58:51.070 --> 01:58:54.423
costs going up if the money
is spent on the right resources?
01:58:56.590 --> 01:58:58.480
I'm never comfortable
with costs going up
01:58:58.480 --> 01:59:00.520
on the manufacturer.
Right.
01:59:00.520 --> 01:59:03.880
But I think if we
can get reliability,
01:59:03.880 --> 01:59:06.720
we do need a market that's works, right?
01:59:06.720 --> 01:59:08.700
We need an affordable, reliable,
01:59:08.700 --> 01:59:12.110
sustainable market that
works within the political realities
01:59:12.110 --> 01:59:13.854
and the bounds of physics.
01:59:13.854 --> 01:59:15.410
That's what I always said.
01:59:15.410 --> 01:59:17.360
Is that all anything else.
01:59:17.360 --> 01:59:18.360
You need all five.
01:59:18.360 --> 01:59:21.410
Okay so what I
heard you say earlier
01:59:21.410 --> 01:59:24.877
is you want a low cost, reliable market.
01:59:25.825 --> 01:59:26.780
Is that fair statement.
01:59:26.780 --> 01:59:31.780
I wanna a low cost reliable
market with that's sustainable
01:59:32.100 --> 01:59:36.240
for the planet that is within the bounds
01:59:36.240 --> 01:59:37.870
of what society wants.
01:59:37.870 --> 01:59:41.780
So, I can't live in an island by myself
01:59:41.780 --> 01:59:44.970
and it has to work in terms of physics.
01:59:44.970 --> 01:59:47.350
I always, I'm sorry to repeat them all,
01:59:47.350 --> 01:59:48.470
but I need all five
01:59:48.470 --> 01:59:50.790
because I've seen
markets around the world
01:59:50.790 --> 01:59:52.690
with only three of those,
with are only two of those
01:59:52.690 --> 01:59:54.280
and they fail.
01:59:54.280 --> 01:59:56.360
That's why like Australia,
01:59:56.360 --> 01:59:58.610
which is one of the world's
greatest gas reserves,
01:59:58.610 --> 02:00:00.750
exports gas to Japan,
02:00:00.750 --> 02:00:03.070
the price of Australian
gas in Japan is cheaper
02:00:03.070 --> 02:00:06.833
than it is in Sydney harbor,
is because they screwed it up.
02:00:07.900 --> 02:00:12.900
You know, as we look to
develop or redesign our market
02:00:13.220 --> 02:00:16.790
and if we continue down
the path that we've been
02:00:16.790 --> 02:00:17.930
sort of hearing about today
02:00:17.930 --> 02:00:20.720
and potentially making ORDC tweaks,
02:00:20.720 --> 02:00:24.683
if you ultimately decide
that new AS products
02:00:24.683 --> 02:00:25.516
(clears throat)
02:00:25.516 --> 02:00:27.319
costs are gonna go up,
02:00:27.319 --> 02:00:30.970
I think costs will have
probably have to go up
02:00:30.970 --> 02:00:35.970
to meet the reliability
goal that we're trying to
02:00:37.010 --> 02:00:39.230
reach with our new
market design changes.
02:00:39.230 --> 02:00:42.100
So there's gonna have to be some give
02:00:42.100 --> 02:00:45.540
between having
reliability and the least cost
02:00:45.540 --> 02:00:47.490
so that the cheapest power you can have
02:00:48.460 --> 02:00:50.210
and then also, I'm hearing you say,
02:00:50.210 --> 02:00:51.730
you're good with sustainable energy,
02:00:51.730 --> 02:00:54.510
but I've heard a lot on this side, too.
02:00:54.510 --> 02:00:55.880
I'm a little confused.
02:00:55.880 --> 02:01:00.250
Is your Behind the meter
power renewable generation.
02:01:00.250 --> 02:01:03.140
No, our Behind
the meter is not,
02:01:03.140 --> 02:01:05.593
we have a gas turbines behind the meter.
02:01:06.480 --> 02:01:09.603
but we are PPA off takers.
02:01:11.010 --> 02:01:14.830
What I would say is the
challenge I would say to you is
02:01:14.830 --> 02:01:18.680
there's another cost of power
embedded in most markets
02:01:18.680 --> 02:01:22.960
that is today very well
minimized in ERCOT,
02:01:22.960 --> 02:01:24.230
which is in most markets,
02:01:24.230 --> 02:01:27.820
there's a market inefficiency, okay?
02:01:27.820 --> 02:01:30.230
In most other markets in the world,
02:01:30.230 --> 02:01:32.860
the market inefficiency
exceeds that in ERCOT
02:01:33.900 --> 02:01:36.380
and my request is whatever you do,
02:01:36.380 --> 02:01:39.190
I get that you have
to solve for reliability
02:01:39.190 --> 02:01:40.600
and you have to be,
02:01:40.600 --> 02:01:43.930
I also know the concerns
you all have about affordability,
02:01:43.930 --> 02:01:46.440
but let's preserve the market efficiency
02:01:46.440 --> 02:01:51.050
because you lose much
more in market inefficiency
02:01:51.050 --> 02:01:52.240
than the cost increase
02:01:52.240 --> 02:01:56.273
you'll have to get a proper
market design in my view.
02:01:57.340 --> 02:01:59.803
So that's my request.
02:02:01.590 --> 02:02:02.897
Fair enough.
02:02:02.897 --> 02:02:04.470
I don't mean to take them away.
02:02:04.470 --> 02:02:05.303
No, this is good.
02:02:05.303 --> 02:02:07.884
this is good and I suspect we'll,
02:02:07.884 --> 02:02:09.919
some of these questions will apply
02:02:09.919 --> 02:02:13.460
to other panelists as well all right.
02:02:13.460 --> 02:02:16.534
All right Bob Helton
NG North America,
02:02:16.534 --> 02:02:17.700
(clears throat)
02:02:17.700 --> 02:02:18.800
of course, this is NG,
02:02:20.070 --> 02:02:23.830
we are the developer,
constructor, operator
02:02:23.830 --> 02:02:28.620
and owner of Wind Solar storage
02:02:28.620 --> 02:02:32.750
and then we also have a
rather large book of industrials
02:02:32.750 --> 02:02:37.163
with it's real small
on the retail side of it,
02:02:38.098 --> 02:02:40.913
the Resy side, we own
that plant by the way,
02:02:42.380 --> 02:02:43.423
one of his plants,
02:02:44.571 --> 02:02:46.627
I'm gonna throw that one in there.
02:02:48.610 --> 02:02:50.980
We really appreciate you
letting us be involved in this.
02:02:50.980 --> 02:02:52.650
This is really important
02:02:52.650 --> 02:02:55.900
and NG believes in trying
to get the best market
02:02:55.900 --> 02:02:58.810
we can both reliable and sustainable
02:02:58.810 --> 02:02:59.900
and I don't mean sustainable
02:02:59.900 --> 02:03:04.810
from a sustainability standpoint.
02:03:04.810 --> 02:03:06.923
I'm talking about a
sustainable stable market
02:03:06.923 --> 02:03:09.740
that we can rely on both from reliable
02:03:09.740 --> 02:03:12.952
and in the market
standpoint (clears throat)
02:03:12.952 --> 02:03:14.140
and you've got a difficult job
02:03:14.140 --> 02:03:18.070
and we just talked about it a little bit
02:03:18.070 --> 02:03:22.240
to where we're going we
have a lot of renewables
02:03:23.160 --> 02:03:25.720
and why do we have a lot of renewables?
02:03:25.720 --> 02:03:27.950
He had it on his first slide.
02:03:27.950 --> 02:03:31.350
They're gonna be 50% carbon are 50%.
02:03:31.350 --> 02:03:34.210
We cut, we gonna cut
emissions 15% by 2030.
02:03:34.210 --> 02:03:36.450
Yeah so they're looking at,
02:03:36.450 --> 02:03:37.950
everyone's looking at cutting emissions,
02:03:37.950 --> 02:03:39.470
both the companies that are here
02:03:39.470 --> 02:03:41.070
and the companies that
are wanting to move down
02:03:41.070 --> 02:03:42.170
and do move down to Texas.
02:03:42.170 --> 02:03:44.030
So that's gonna continue.
02:03:44.030 --> 02:03:45.770
So that's a reality,
02:03:45.770 --> 02:03:47.890
and I really liked what you
said, chairman lake, right?
02:03:47.890 --> 02:03:51.540
A minute ago, we can't
let those outside pieces,
02:03:51.540 --> 02:03:52.490
'cause those that's a little bit
02:03:52.490 --> 02:03:54.200
of a different economic model
02:03:54.200 --> 02:03:57.550
than what is on the
thermal side drive completely
02:03:57.550 --> 02:04:00.020
what we're doing with the market design.
02:04:00.020 --> 02:04:02.780
So it will play a deep
part in that, but we do,
02:04:02.780 --> 02:04:04.570
I believe you're
correct and right on that,
02:04:04.570 --> 02:04:07.505
there is some separation
we need to think about there.
02:04:07.505 --> 02:04:08.338
(clears throat)
02:04:08.338 --> 02:04:11.950
To move on the main thing
that I was gonna bring up first
02:04:11.950 --> 02:04:16.450
is that his first thing that he
had from Dow was the ORDC
02:04:16.450 --> 02:04:20.050
and to back it up a little bit,
02:04:20.050 --> 02:04:21.910
whenever we first brought in the,
02:04:21.910 --> 02:04:25.140
first started talking about
the energy only market
02:04:25.140 --> 02:04:26.793
versus a capacity market,
02:04:28.220 --> 02:04:29.660
we came in and said,
02:04:29.660 --> 02:04:32.760
go buy 3,300 megawatts
of additional reserves
02:04:32.760 --> 02:04:34.320
in the day ahead
02:04:34.320 --> 02:04:36.290
and that'll give you
enough market revenue
02:04:36.290 --> 02:04:39.000
to get you to about a 12.5%,
02:04:39.000 --> 02:04:42.420
which was our target at
the time reserve margin
02:04:42.420 --> 02:04:44.453
and that didn't go.
02:04:45.470 --> 02:04:49.620
So we understood that the
operating reserves demand curve
02:04:50.490 --> 02:04:54.950
and reserves in general
are in an energy only market
02:04:54.950 --> 02:04:56.700
the only way you can get there,
02:04:56.700 --> 02:04:58.190
it's either gonna be ancillary services
02:04:58.190 --> 02:05:00.248
or it's gotta be the
energy price, that's it,
02:05:00.248 --> 02:05:01.081
that's all you have.
02:05:01.081 --> 02:05:05.190
So we have to figure out how
to get that in an equal place
02:05:05.190 --> 02:05:06.810
that'll give us what we need.
02:05:06.810 --> 02:05:10.417
So what we're solving for in my mind is,
02:05:10.417 --> 02:05:13.010
and it's been mentioned a
little bit around here today
02:05:13.010 --> 02:05:16.680
is I've heard, the economic
optimal reserve margin
02:05:16.680 --> 02:05:18.053
several times today.
02:05:18.920 --> 02:05:20.620
That's a good number.
02:05:20.620 --> 02:05:21.890
It's nice number to know.
02:05:21.890 --> 02:05:23.700
You wanna know where you're at on that.
02:05:23.700 --> 02:05:26.220
But to me, that is not the
most important number,
02:05:26.220 --> 02:05:27.880
the most important
number that comes out of
02:05:27.880 --> 02:05:30.460
and you talked about it
earlier, Commissioner,
02:05:30.460 --> 02:05:33.180
the Brattle report, out of that report
02:05:33.180 --> 02:05:34.600
there's also another number in there,
02:05:34.600 --> 02:05:37.560
which is the market
equilibrium reserve margin.
02:05:37.560 --> 02:05:42.420
That's the number you wanna
try to provide revenues in
02:05:42.420 --> 02:05:46.080
that will get you to the reserve margin
02:05:46.080 --> 02:05:48.800
that you're seeking under an energy only
02:05:48.800 --> 02:05:51.250
because you don't have
a mechanism to ensure
02:05:51.250 --> 02:05:55.040
you're at 13.5 or
12.5, you don't have it.
02:05:55.040 --> 02:05:57.340
So you have to supply the revenues
02:05:57.340 --> 02:06:01.720
that should incent
those investors to invest
02:06:01.720 --> 02:06:02.980
for that market.
02:06:02.980 --> 02:06:05.650
So that's the number I
think we need to look at.
02:06:05.650 --> 02:06:07.600
So Bob, on that question,
02:06:07.600 --> 02:06:11.070
so that market
equilibrium reserve margin,
02:06:11.070 --> 02:06:14.597
again when we were
at 9% was only at 10.5%
02:06:14.597 --> 02:06:17.330
as I recall, or 11%.
02:06:17.330 --> 02:06:18.380
You used a couple of numbers.
02:06:18.380 --> 02:06:20.970
Oh yeah it was down the
market equilibrium number
02:06:20.970 --> 02:06:21.803
was down also.
02:06:21.803 --> 02:06:23.220
So it's like instead of
a one in 10 standard,
02:06:23.220 --> 02:06:24.670
it was like a one in four standard.
02:06:24.670 --> 02:06:26.610
I mean, it was still terrible
02:06:26.610 --> 02:06:27.443
for liability purposes.
02:06:27.443 --> 02:06:29.620
Exactly and that was
part of the reason that
02:06:29.620 --> 02:06:32.380
we went ahead and did make
the standard deviation changes
02:06:32.380 --> 02:06:34.300
is 'cause we felt there
02:06:34.300 --> 02:06:37.310
was needed more revenues
into the market to bring that up,
02:06:37.310 --> 02:06:39.140
to try to incent to bring that up
02:06:40.730 --> 02:06:42.090
and we did make those changes.
02:06:42.090 --> 02:06:45.680
Now what I'm looking
at is several things
02:06:45.680 --> 02:06:49.220
It has to include both
ancillary services.
02:06:49.220 --> 02:06:52.230
It also has to include, I
believe the realtime energy
02:06:52.230 --> 02:06:56.780
and whenever we first did the ORDC,
02:06:56.780 --> 02:06:58.710
we didn't use what we call the
02:06:58.710 --> 02:07:02.670
cumulative distribution curve,
which is what we use today.
02:07:02.670 --> 02:07:05.520
That's what's in the curve
when it was approved
02:07:05.520 --> 02:07:09.500
and that's based on
inputs from forecast error
02:07:09.500 --> 02:07:12.500
and a few other inputs
that come into that I believe
02:07:12.500 --> 02:07:14.010
and then you get your curve
02:07:14.010 --> 02:07:18.170
and then the only way
really to adjust that curve,
02:07:18.170 --> 02:07:19.670
it's the curve itself
02:07:19.670 --> 02:07:21.650
and you keep hearing
the standard deviation,
02:07:21.650 --> 02:07:25.210
you change the standard
deviation and that moves the curve.
02:07:25.210 --> 02:07:26.770
Doesn't really change the shape,
02:07:26.770 --> 02:07:30.080
but it changes the curve
moves it to the right.
02:07:30.080 --> 02:07:31.640
So when we originally did this
02:07:31.640 --> 02:07:35.530
and the original ERCOT
filings for the ORDC
02:07:35.530 --> 02:07:38.580
had what we call a piece wise linear
02:07:38.580 --> 02:07:40.890
and I know I'm the only
one that uses that term,
02:07:40.890 --> 02:07:42.200
but there's some other curves out there
02:07:42.200 --> 02:07:45.420
that are similar to that,
that was in some other filings
02:07:45.420 --> 02:07:49.450
and why would I push
to do something like that?
02:07:49.450 --> 02:07:52.600
What you can do is instead
of changing standard deviation
02:07:52.600 --> 02:07:54.550
and the whole thing just moves,
02:07:54.550 --> 02:07:57.780
I can move different
pieces of that curve
02:07:57.780 --> 02:08:01.470
that I want to get the
economic outcome that I want
02:08:01.470 --> 02:08:04.270
and that's where they'll
have a problem with that
02:08:04.270 --> 02:08:09.270
is that the curve goes from
just a distribution function,
02:08:11.270 --> 02:08:14.450
you decide on an economic outcome
02:08:14.450 --> 02:08:17.100
and then you can shape
that curve in the manner,
02:08:17.100 --> 02:08:19.443
you want it to get that
economic outcome,
02:08:20.470 --> 02:08:22.640
and that would drive forward prices,
02:08:22.640 --> 02:08:24.730
it's not gonna give you all the money,
02:08:24.730 --> 02:08:27.750
but it'll give you more
money into the market
02:08:27.750 --> 02:08:30.790
to try to incent that the
investors can rely on,
02:08:30.790 --> 02:08:32.760
on a more regular basis.
02:08:32.760 --> 02:08:36.490
So that's what the reason is for that
02:08:36.490 --> 02:08:39.080
and there's two other things
that we think you ought to do,
02:08:39.080 --> 02:08:42.210
but that's the reason that
you'll hear Katie and them
02:08:43.520 --> 02:08:47.610
complain about it because it
is as she would say made up,
02:08:47.610 --> 02:08:48.720
I don't believe it's made up.
02:08:48.720 --> 02:08:50.730
We will study that and make sure that,
02:08:50.730 --> 02:08:52.760
we have Brattle do it
for that matter to say,
02:08:52.760 --> 02:08:57.590
what do we need to
get a minimum of 12.5%,
02:08:59.240 --> 02:09:01.520
along with the other
changes in the market,
02:09:01.520 --> 02:09:03.840
'cause it all goes into that figure.
02:09:03.840 --> 02:09:05.390
So there's ways we can do that,
02:09:05.390 --> 02:09:09.700
that are done by a professional
that knows economics
02:09:09.700 --> 02:09:11.593
that could get it done for us.
02:09:12.610 --> 02:09:15.490
The other thing that we
think you need to do is
02:09:15.490 --> 02:09:18.363
since we are buying more reserves,
02:09:19.230 --> 02:09:22.040
that means we value reserves more,
02:09:22.040 --> 02:09:24.920
which means we should protect more
02:09:24.920 --> 02:09:26.760
and we believe that you should move
02:09:28.117 --> 02:09:31.260
the X factor we called it,
which is now 2000 megawatts
02:09:31.260 --> 02:09:35.150
that's when you hit
ball, move that to 2,500,
02:09:35.150 --> 02:09:37.030
at least somewhere in that neighborhood,
02:09:37.030 --> 02:09:39.670
or you could change it a little further
02:09:39.670 --> 02:09:44.543
and make it a function of
load growth and as load,
02:09:45.529 --> 02:09:46.410
or you can call it net load,
02:09:46.410 --> 02:09:48.670
whatever you want to use for that factor
02:09:48.670 --> 02:09:51.820
and you can move that
number based on that also
02:09:51.820 --> 02:09:53.620
to where you think it needs to be for,
02:09:53.620 --> 02:09:56.380
what do you want to
protect for reserves.
02:09:56.380 --> 02:10:01.380
And then the third piece
is dropping the cap to 4,500
02:10:03.380 --> 02:10:05.550
and I think what that does is it doesn't
02:10:05.550 --> 02:10:08.300
and by changing to a piecewise layer,
02:10:08.300 --> 02:10:13.300
moving that over X
over and coming to 4,500,
02:10:13.660 --> 02:10:17.900
you can get the revenues
you want without relying on
02:10:17.900 --> 02:10:20.890
having to get to a $9,000 price
02:10:22.060 --> 02:10:26.320
that this will get you where
you wanna be at a lower price.
02:10:26.320 --> 02:10:30.580
If we'd have had 4,500 in
that curve, instead of 9,000,
02:10:30.580 --> 02:10:33.119
we'd have been in a
much different place today
02:10:33.119 --> 02:10:34.370
from a market standpoint,
02:10:34.370 --> 02:10:38.410
not from a human tragedies standpoint,
02:10:38.410 --> 02:10:40.070
but from this standpoint.
02:10:40.070 --> 02:10:44.750
So that is the reasons that
we say do those three things
02:10:44.750 --> 02:10:46.523
and that's all in the filings.
02:10:47.780 --> 02:10:49.900
With that I was just kind of move on
02:10:51.128 --> 02:10:53.140
to the ancillary services,
02:10:53.140 --> 02:10:55.565
a lot of that's been
talked about already.
02:10:55.565 --> 02:10:59.260
I was really happy and
pleased to hear the conversation
02:10:59.260 --> 02:11:00.810
that y'all had just a minute ago
02:11:00.810 --> 02:11:05.120
after Just Energy was up
here, saved me a lot of talking.
02:11:05.120 --> 02:11:07.150
So you don't have to
listen to me very long
02:11:07.150 --> 02:11:08.680
because that's really what we're after
02:11:08.680 --> 02:11:10.280
we agree with where that is,
02:11:10.280 --> 02:11:14.070
we need it, we need to
know what it is, what level it is,
02:11:14.070 --> 02:11:17.785
and just make sure that it's
transparent liquid and stable.
02:11:17.785 --> 02:11:20.650
So that's where we're
along with them on that,
02:11:20.650 --> 02:11:22.240
so I'll skip right through that one.
02:11:22.240 --> 02:11:25.973
The next one is the any
new ancillary services.
02:11:26.910 --> 02:11:30.181
The way we look at it is
we need to be looking at,
02:11:30.181 --> 02:11:35.181
ERCOT need for reliability
and what they say they need
02:11:36.190 --> 02:11:39.790
for reliability and not
the other way around.
02:11:39.790 --> 02:11:41.690
So we're a little concerned about that
02:11:42.786 --> 02:11:44.890
and so we wanna make sure
that anything that comes out
02:11:44.890 --> 02:11:49.410
as a new ancillary
service is directly tied to
02:11:49.410 --> 02:11:52.580
a verifiable reliability study
02:11:52.580 --> 02:11:54.390
or something along those lines that says
02:11:54.390 --> 02:11:57.400
here's what we need and for an example,
02:11:57.400 --> 02:12:00.100
the ramping product, yeah
that's used in other markets,
02:12:00.100 --> 02:12:01.600
it's a good product can be used,
02:12:01.600 --> 02:12:03.740
we're not necessarily opposed to that.
02:12:03.740 --> 02:12:05.440
The only problem we've seen with it.
02:12:05.440 --> 02:12:08.580
So just to let you know,
if you do go that route,
02:12:08.580 --> 02:12:11.000
some things we'll have to consider is
02:12:11.000 --> 02:12:13.620
in the Southwest power pool,
we're trying to do that also.
02:12:13.620 --> 02:12:15.020
We're having problems
with trying to figure out
02:12:15.020 --> 02:12:16.510
how to deal with uplift
02:12:16.510 --> 02:12:18.560
and uplift is not very
good for the mark,
02:12:21.726 --> 02:12:24.260
for spit out here for our EPS either.
02:12:24.260 --> 02:12:26.823
So that's just a comment on that.
02:12:28.460 --> 02:12:29.930
After listening to the last panel,
02:12:29.930 --> 02:12:32.322
I think there's another decision
02:12:32.322 --> 02:12:34.086
that the Commission
is gonna need to make
02:12:34.086 --> 02:12:39.086
and that is when does an
energy only market not become
02:12:39.400 --> 02:12:43.380
or not remain an energy only market.
02:12:43.380 --> 02:12:46.800
I think that, and I'll
use the capacity word.
02:12:46.800 --> 02:12:51.360
I think that the proposals
earlier you have to question that
02:12:51.360 --> 02:12:53.610
is does that change
us from an energy only
02:12:53.610 --> 02:12:54.970
to a capacity market?
02:12:54.970 --> 02:12:58.490
The question would be is
what is a capacity market?
02:12:58.490 --> 02:13:02.460
Is it a formal centralized
procurement, which they are,
02:13:02.460 --> 02:13:06.180
is it one year, three years, six months?
02:13:06.180 --> 02:13:09.030
How would you define a
capacity market to make sure that,
02:13:09.980 --> 02:13:11.677
you'd have to ask those
questions to say okay,
02:13:11.677 --> 02:13:14.380
are we ready to end
that energy only market
02:13:14.380 --> 02:13:17.890
and go into some type
of a capacity component
02:13:17.890 --> 02:13:20.283
outside of our normal
ancillary services?
02:13:21.610 --> 02:13:25.760
So also we believe
that raising the current
02:13:25.760 --> 02:13:30.550
ancillary services is okay
02:13:30.550 --> 02:13:32.820
as long we know the right amounts
02:13:32.820 --> 02:13:35.700
and like you said, at the right times,
02:13:35.700 --> 02:13:37.260
but a bigger amount is fine
02:13:37.260 --> 02:13:40.200
as long as we know
what it is, we're fine with it.
02:13:40.200 --> 02:13:42.850
We can go out and hedge
that moving into the future
02:13:42.850 --> 02:13:46.580
and my guys can go out
and buy the 2024 ancillary
02:13:46.580 --> 02:13:48.040
services that they're holding off on
02:13:48.040 --> 02:13:50.600
'cause we don't know
what's gonna happen.
02:13:50.600 --> 02:13:53.606
So I would say that that
would be another one for us
02:13:53.606 --> 02:13:54.793
to look at.
02:13:56.420 --> 02:13:59.220
Let's see, I'm trying to
see if I missed anything.
02:13:59.220 --> 02:14:01.980
When you come up
last, there's good and bad.
02:14:01.980 --> 02:14:03.920
The good is you could
kind of shoot holes
02:14:03.920 --> 02:14:05.680
sometimes the bad is
02:14:05.680 --> 02:14:07.753
everything you wanted to say is changed.
02:14:10.150 --> 02:14:14.740
So I think with that,
oh yeah, talk about,
02:14:14.740 --> 02:14:15.840
you talked about voltage support,
02:14:15.840 --> 02:14:18.020
let me address that question.
02:14:18.020 --> 02:14:21.400
All generators have to
supply voltage support.
02:14:21.400 --> 02:14:22.740
So I just wanna make sure you do
02:14:22.740 --> 02:14:23.900
that the way you were talking.
02:14:23.900 --> 02:14:27.330
I wasn't sure if that's
what you were saying,
02:14:27.330 --> 02:14:29.460
but for voltage support, everybody does,
02:14:29.460 --> 02:14:34.083
that's a requirement for
ERCOT for reliability and.
02:14:35.021 --> 02:14:36.700
So what was Woody
concerned about then?
02:14:36.700 --> 02:14:38.770
Woody was
concerned about inertia.
02:14:38.770 --> 02:14:40.620
Okay.
Which is a different
02:14:40.620 --> 02:14:43.410
service, which yes we will be needing
02:14:43.410 --> 02:14:45.060
to look at that in the future.
02:14:45.060 --> 02:14:49.393
I think there are ways to do that,
02:14:49.393 --> 02:14:51.540
but that's another discussion we'll need
02:14:52.376 --> 02:14:55.370
where we haven't quite got
to a complete need for that yet
02:14:55.370 --> 02:14:57.940
that is what he was saying,
but we have got close.
02:14:57.940 --> 02:14:59.460
Well, I think when
you get to the point
02:14:59.460 --> 02:15:00.300
of complete need for that,
02:15:00.300 --> 02:15:02.350
you don't have a function grid anymore.
02:15:02.350 --> 02:15:03.410
Right yeah.
02:15:03.410 --> 02:15:05.029
So we don't want to get closer.
02:15:05.029 --> 02:15:05.862
No I was saying.
02:15:05.862 --> 02:15:07.750
This was not a lab experiment.
02:15:07.750 --> 02:15:09.350
And that goes back
to what I was saying.
02:15:09.350 --> 02:15:11.977
When ERCOT says, I need it
02:15:11.977 --> 02:15:14.230
regardless if that's today, tomorrow,
02:15:14.230 --> 02:15:16.120
or next week or next year,
02:15:16.120 --> 02:15:18.260
then we need to get on
the ball and get it done.
02:15:18.260 --> 02:15:19.640
So I fully agree with that.
02:15:19.640 --> 02:15:21.960
But that's from the
standpoint of, like I said,
02:15:21.960 --> 02:15:23.970
with the other ancillary services
02:15:23.970 --> 02:15:26.410
that ERCOT has to come and say,
02:15:26.410 --> 02:15:28.820
we've got an issue coming in the future,
02:15:28.820 --> 02:15:29.850
we need to resolve it
02:15:29.850 --> 02:15:32.100
and then we go out
and resolve it as a market
02:15:33.640 --> 02:15:38.640
and I think with that, that
concludes my thoughts.
02:15:38.810 --> 02:15:39.643
Thank you.
02:15:39.643 --> 02:15:40.943
Open for questions.
02:15:40.943 --> 02:15:42.033
Questions, comments.
02:15:45.430 --> 02:15:48.390
I'll give you one question that
02:15:50.350 --> 02:15:52.370
merges with the Exelon conversation
02:15:52.370 --> 02:15:54.570
about the art of picking,
02:15:54.570 --> 02:15:57.600
how much of those
ancillary services are needed
02:15:58.520 --> 02:16:02.670
and reconciling that weather dependent,
02:16:02.670 --> 02:16:05.430
renewable resource with reliability
02:16:07.340 --> 02:16:09.150
under that framework, just by example,
02:16:09.150 --> 02:16:11.590
I'm not endorsing it or saying,
02:16:11.590 --> 02:16:12.890
it's the way we should go.
02:16:15.120 --> 02:16:18.470
You could do you
discount those risks, yeah
02:16:18.470 --> 02:16:19.610
an intermittent resource
02:16:19.610 --> 02:16:23.944
that doesn't have a dispatchable
enhancement like batteries
02:16:23.944 --> 02:16:25.460
or co-located compressed
air or something.
02:16:25.460 --> 02:16:26.660
You would have to, they do,
02:16:26.660 --> 02:16:28.850
ERCOT does that today
with all their ancillary services
02:16:28.850 --> 02:16:31.260
Right but that
also doesn't work.
02:16:31.260 --> 02:16:34.050
Yeah, I know that's
why I was saying
02:16:37.160 --> 02:16:38.510
having ERCOT look and see
02:16:38.510 --> 02:16:42.390
at what level of reliability
in real time they want,
02:16:42.390 --> 02:16:45.610
and then implementing those
ancillary services to do that
02:16:45.610 --> 02:16:46.570
is appropriate.
02:16:46.570 --> 02:16:49.680
So I guess, I mean,
is there from the Dow
02:16:51.660 --> 02:16:56.660
example or the graphic
it's anywhere between 2%
02:16:57.851 --> 02:17:00.520
and 98% is that.
02:17:00.520 --> 02:17:05.190
That's right yeah and
that's not on purpose.
02:17:05.190 --> 02:17:07.617
Right I mean, that's just
the nature of the resource
02:17:07.617 --> 02:17:11.090
and it has features,
which will point it out.
02:17:11.090 --> 02:17:14.430
Right, so, and that's,
everybody's challenging,
02:17:14.430 --> 02:17:16.700
that we're having across,
Southwest possible.
02:17:16.700 --> 02:17:20.010
All right so we're all
trying to figure this one out.
02:17:20.010 --> 02:17:21.831
Well, we've got to
figure it out pretty quick
02:17:21.831 --> 02:17:25.690
and as Commissioner
Cobos correctly pointed out,
02:17:25.690 --> 02:17:29.040
there always seems to be a
gas generator behind the meter
02:17:29.040 --> 02:17:29.890
when you need it.
02:17:31.220 --> 02:17:34.002
So what, huh.
02:17:34.002 --> 02:17:35.100
To pay for that.
02:17:35.100 --> 02:17:37.940
Right you gotta pay,
you're paying for reliability.
02:17:37.940 --> 02:17:38.773
Right.
02:17:38.773 --> 02:17:42.290
So is there, whereas
this is just gonna,
02:17:42.290 --> 02:17:44.900
you're gonna how do
we get to that number?
02:17:44.900 --> 02:17:45.979
How do we get to that?
02:17:45.979 --> 02:17:47.140
I mean, we know what
the ERCOT numbers are.
02:17:47.140 --> 02:17:50.150
We saw the Zara study.
02:17:50.150 --> 02:17:51.733
I'm gonna agree with Randa.
02:17:52.910 --> 02:17:55.010
There's some really
smart people out there
02:17:56.025 --> 02:17:58.580
that we would need to
sit down and talk to on how
02:17:58.580 --> 02:18:00.024
we could get to that number,
02:18:00.024 --> 02:18:02.470
because I'm not smart
enough to do that one.
02:18:02.470 --> 02:18:04.760
Okay I guess let
me put it another way.
02:18:04.760 --> 02:18:06.943
If you look at the Dow data set,
02:18:08.080 --> 02:18:10.290
is there any universe
where you don't discount it
02:18:10.290 --> 02:18:12.333
to that 2% scenario?
02:18:13.230 --> 02:18:16.545
You can discount
whatever is appropriate
02:18:16.545 --> 02:18:18.590
based on the studies
and what you're looking at.
02:18:18.590 --> 02:18:22.160
The reason the CDR
is where it is on those
02:18:22.160 --> 02:18:24.320
is we elected back.
02:18:24.320 --> 02:18:27.280
I forgot what it was, I
was on the board back then
02:18:27.280 --> 02:18:31.630
to use the past average,
02:18:31.630 --> 02:18:33.980
I think it's, five-year, I
forget the exact number now,
02:18:33.980 --> 02:18:38.650
the back average of on
peak for those resources
02:18:38.650 --> 02:18:42.390
and that was just the
election we decided to go with,
02:18:42.390 --> 02:18:45.110
and we thought we could
manage it from that standpoint,
02:18:45.110 --> 02:18:47.486
if that needs to be changed,
02:18:47.486 --> 02:18:49.380
then that needs to be looked at.
02:18:49.380 --> 02:18:51.023
That's what we're here for.
02:18:52.040 --> 02:18:54.380
All right thank you.
02:18:54.380 --> 02:18:58.030
So Bob another question
in terms of things to consider
02:18:58.030 --> 02:19:00.580
are these ancillary services again,
02:19:00.580 --> 02:19:05.070
how much time do your generators need
02:19:06.040 --> 02:19:08.210
in order to absorb that?
02:19:08.210 --> 02:19:11.280
How much lead time
should we consider here
02:19:11.280 --> 02:19:14.130
on a generator side or-
Yeah on generator side
02:19:14.130 --> 02:19:15.630
market construct side.
02:19:15.630 --> 02:19:18.720
That gets really difficult
'cause most of those contracts
02:19:18.720 --> 02:19:21.260
are 10, 20 years.
02:19:21.260 --> 02:19:23.193
So without affecting a contract,
02:19:24.480 --> 02:19:25.840
I don't see how you can do it.
02:19:25.840 --> 02:19:28.010
Let's see how I make
move as a Commissioner
02:19:28.010 --> 02:19:29.400
without affecting a contract.
02:19:29.400 --> 02:19:31.360
That's correct, correct.
02:19:31.360 --> 02:19:32.193
So okay.
02:19:32.193 --> 02:19:33.230
Yeah oh, one thing
I did want to add,
02:19:33.230 --> 02:19:34.960
speaking of contracts,
02:19:34.960 --> 02:19:37.570
it was mentioned just a
minute ago also depend,
02:19:37.570 --> 02:19:40.310
I don't know how his
contracts are set up,
02:19:40.310 --> 02:19:43.560
but the you'd like other generators,
02:19:43.560 --> 02:19:46.800
the only way renewable
would get the ORDCs
02:19:46.800 --> 02:19:48.740
if they were long in the market
02:19:48.740 --> 02:19:50.610
and if we're not long in the market,
02:19:50.610 --> 02:19:53.560
we're settling with our contracts,
02:19:53.560 --> 02:19:57.250
outside of the ERCOT,
ORDC, it's included in there,
02:19:57.250 --> 02:19:59.750
of course, because of
the settlement point prices,
02:20:00.670 --> 02:20:04.900
but that's all contractual
and that doesn't flow through
02:20:04.900 --> 02:20:07.720
the way you would normally
expect someone that's long
02:20:07.720 --> 02:20:10.221
in the market and get to the ORDC.
02:20:10.221 --> 02:20:12.640
So if you explain there.
There is some nuances there.
02:20:12.640 --> 02:20:14.973
So when you say
long is that commitment,
02:20:14.973 --> 02:20:16.350
how do you mean long?
02:20:16.350 --> 02:20:17.650
Yeah like, for instance,
02:20:19.606 --> 02:20:22.077
if I'm a pure merchant
and I go into the day ahead
02:20:22.077 --> 02:20:24.220
and I don't have anything out there
02:20:24.220 --> 02:20:26.800
that I've got scheduled
on the other side,
02:20:26.800 --> 02:20:30.010
then I'm getting
whatever the LMP price is.
02:20:30.010 --> 02:20:32.770
Now, if I've signed a bilateral contract
02:20:32.770 --> 02:20:36.000
and I've scheduled 100
megawatts in on the gen side
02:20:36.000 --> 02:20:38.290
and 100 megawatts in on the load side,
02:20:38.290 --> 02:20:42.090
then I've netted out and
there's really no RDC there.
02:20:42.090 --> 02:20:46.510
At the $60 or $20,
whatever you set that price at,
02:20:46.510 --> 02:20:49.530
regardless of what
they already sees, $500.
02:20:49.530 --> 02:20:51.216
You're not, you're still clearing 25.
02:20:51.216 --> 02:20:52.424
Your still clearing.
02:20:52.424 --> 02:20:54.000
The only time it
would hurt, which it did.
02:20:54.000 --> 02:20:58.380
I will say during this
unfortunate storm is if,
02:20:58.380 --> 02:21:00.300
based on those contracts,
02:21:00.300 --> 02:21:03.820
if wind doesn't perform
or solar doesn't perform,
02:21:03.820 --> 02:21:05.980
they get hit outside in those contracts
02:21:05.980 --> 02:21:08.150
the same way other generators do.
02:21:08.150 --> 02:21:12.200
Same way, that's why
they're very interested in a cap
02:21:12.200 --> 02:21:14.813
and a moving up the curve left.
02:21:15.726 --> 02:21:17.340
A lot of generators are.
02:21:17.340 --> 02:21:18.173
Right.
02:21:18.173 --> 02:21:23.173
So the, I guess what I
think I'm hearing is the only,
02:21:23.750 --> 02:21:26.680
the most important times
ORDC comes to play
02:21:26.680 --> 02:21:31.500
when a generator of any nature
can't cover its commitments
02:21:31.500 --> 02:21:34.830
and is short, and it has to go
pay the extraordinary prices,
02:21:34.830 --> 02:21:37.820
which of course were then
passed on to consumers
02:21:37.820 --> 02:21:41.017
or if they're just a merchant generator.
02:21:41.017 --> 02:21:42.423
They are from
bilateral contracts,
02:21:42.423 --> 02:21:44.200
they may just need it themselves.
02:21:44.200 --> 02:21:45.440
Yeah.
02:21:45.440 --> 02:21:50.400
Sure but it only hits
the consumer, I guess,
02:21:50.400 --> 02:21:54.630
or the balance sheet of a
generator if they're short
02:21:54.630 --> 02:21:58.530
or they just happen to
show up without having any.
02:21:58.530 --> 02:21:59.363
Yeah.
02:21:59.363 --> 02:22:00.450
Without having a PPA,
02:22:00.450 --> 02:22:02.700
in which case it's just a lotto ticket.
02:22:02.700 --> 02:22:04.350
Poor faith yeah without people.
02:22:05.930 --> 02:22:10.930
They'll cover 80% of their
generation would be with
02:22:11.185 --> 02:22:14.970
bilateral contracts and take
the last 20% of themselves.
02:22:14.970 --> 02:22:16.593
Yeah so some will do that yeah.
02:22:16.593 --> 02:22:18.372
So that kind of goes to.
02:22:18.372 --> 02:22:19.793
And some of that is hedging.
02:22:21.740 --> 02:22:23.903
Yeah I think this kind of goes,
02:22:23.903 --> 02:22:24.736
I think this line of discussion,
02:22:24.736 --> 02:22:26.180
but maybe after I'm
gonna turn it on its head.
02:22:26.180 --> 02:22:28.840
But I think Bob said earlier that
02:22:28.840 --> 02:22:30.780
most generators have financial hedges,
02:22:30.780 --> 02:22:32.800
so they're not getting the ORDC.
02:22:32.800 --> 02:22:34.230
Is that what you're
speaking to right now?
02:22:34.230 --> 02:22:38.060
No, no those hedges
are, those hedges,
02:22:38.060 --> 02:22:39.070
I'm trying to think
02:22:39.070 --> 02:22:40.810
that depends on how
that comes through ice
02:22:40.810 --> 02:22:42.930
and how it gets scheduled
at ERCOT actually,
02:22:42.930 --> 02:22:45.480
I think that'd be the easiest
answer for me to say,
02:22:46.737 --> 02:22:49.920
cause we do try to hedge
that and we're hedging that
02:22:49.920 --> 02:22:52.313
we did have some hedges for being short.
02:22:53.730 --> 02:22:55.200
They turned upside down on us.
02:22:55.200 --> 02:22:56.520
So we lost money also
02:22:56.520 --> 02:23:01.520
So you can hedge and
lose in some cases also.
02:23:03.480 --> 02:23:08.160
So I'm not the one that's
doing the hedging for NG.
02:23:08.160 --> 02:23:10.583
So I'd hate to go much deeper than that.
02:23:11.850 --> 02:23:12.683
Can you explain,
02:23:12.683 --> 02:23:14.763
then who's getting this pattern.
02:23:15.740 --> 02:23:16.950
Who is not getting it.
02:23:16.950 --> 02:23:18.510
Who's not getting it right.
02:23:18.510 --> 02:23:21.450
Yeah who's in and
who's out on the ORDC.
02:23:21.450 --> 02:23:23.670
Who is in and who
is out is who is out,
02:23:23.670 --> 02:23:25.770
is anyone that's taken a commitment
02:23:26.820 --> 02:23:28.593
and provides that commitment.
02:23:29.827 --> 02:23:33.120
They don't get it the same way.
02:23:33.120 --> 02:23:36.630
That means also if I
have a bilateral contract
02:23:36.630 --> 02:23:40.010
and I have scheduled through ERCOT,
02:23:40.010 --> 02:23:43.530
so many megawatts coming in
so many megawatts going out
02:23:43.530 --> 02:23:44.760
and that's equal,
02:23:44.760 --> 02:23:47.253
then that would be
settled that way it nets out.
02:23:48.250 --> 02:23:50.880
It's only whenever you have
imbalances at the settlement
02:23:50.880 --> 02:23:55.853
point price, does that
get paid out or brought in.
02:23:56.920 --> 02:23:59.240
And that's paid out based on.
02:23:59.240 --> 02:24:01.740
The imbalance and
where we're at on the curve.
02:24:01.740 --> 02:24:06.740
Okay so how does SCAD
and low cost dispatch fit into this.
02:24:07.219 --> 02:24:08.930
Dispatch and low cost?
02:24:08.930 --> 02:24:10.420
Yeah so SCAD lease costs.
02:24:10.420 --> 02:24:11.640
The SCAD yeah.
02:24:11.640 --> 02:24:13.520
It's economic security constraint
02:24:13.520 --> 02:24:15.900
and it's looking at everything out there
02:24:15.900 --> 02:24:19.630
and if I'm scheduled out there,
02:24:19.630 --> 02:24:22.590
I've also have offers in,
on talking more thermal,
02:24:22.590 --> 02:24:24.760
but we do have some down, we have to,
02:24:24.760 --> 02:24:28.900
have offers for down
also as they go through,
02:24:28.900 --> 02:24:31.250
they'll go up and down your offer curves
02:24:31.250 --> 02:24:34.970
and then you'll be working
in the most efficient way.
02:24:34.970 --> 02:24:37.620
So you'll be coming in and
out of that, depending on.
02:24:39.110 --> 02:24:40.950
So let's just say X kicks in
02:24:40.950 --> 02:24:44.040
and we're writing the ORDC curve
02:24:44.040 --> 02:24:48.450
and so who's capturing.
02:24:48.450 --> 02:24:51.530
Okay, now let me get into
the way that kind of work.
02:24:51.530 --> 02:24:54.810
Let me use a schedule in
and schedule out ERCOT
02:24:54.810 --> 02:24:56.860
and then say, I have an offer in there.
02:24:56.860 --> 02:25:01.240
I've got more generation
leftover, say the 20%
02:25:01.240 --> 02:25:06.240
and SCAD takes me that extra
10 megawatts at 20% I have.
02:25:07.410 --> 02:25:10.680
Then there's an imbalance
in that settlement point,
02:25:10.680 --> 02:25:13.520
I have 10 megawatts more
than what is scheduled.
02:25:13.520 --> 02:25:16.350
So there's an imbalance
and since I'm over producing,
02:25:16.350 --> 02:25:18.920
I would get the revenues from that,
02:25:18.920 --> 02:25:21.710
which would be include
the ORDC if there was,
02:25:21.710 --> 02:25:25.690
if by chance I was dispatched down,
02:25:25.690 --> 02:25:28.240
there's an imbalance there also
02:25:28.240 --> 02:25:32.533
and with that imbalance, I
would be charged for that.
02:25:34.070 --> 02:25:36.050
Okay cause I'm just
trying to think about how.
02:25:36.050 --> 02:25:37.730
Now same thing
goes with the load too
02:25:37.730 --> 02:25:40.750
I mean, it hits load the same
way if they're short or long.
02:25:40.750 --> 02:25:44.270
Okay so what I'm
trying to assess is how,
02:25:44.270 --> 02:25:47.654
ORDC interacts with low
cost renewable generation
02:25:47.654 --> 02:25:49.000
that has low marginal costs
02:25:49.000 --> 02:25:51.750
that reasonably would be dispatched
02:25:51.750 --> 02:25:53.233
based on at least cost model.
02:25:54.800 --> 02:25:56.910
Can you speak to that a little bit?
02:25:56.910 --> 02:25:58.610
It's all based on just
what I was talking about,
02:25:58.610 --> 02:26:00.720
how those contracts are written.
02:26:00.720 --> 02:26:05.720
Now there is, I won't put a
caveat on this for right now is
02:26:06.380 --> 02:26:11.380
since URI, the renewable
contract world has gone crazy
02:26:11.820 --> 02:26:16.267
and there's a lot of questions
about how the contract
02:26:16.267 --> 02:26:20.050
now forward on whether
you do some of these from
02:26:20.050 --> 02:26:22.610
and do these contracts like like this,
02:26:22.610 --> 02:26:25.590
or if you turn around and
you do unit contingent,
02:26:25.590 --> 02:26:29.230
there's a lot of things being
looked at right now because.
02:26:29.230 --> 02:26:30.330
Contracts can be changed.
02:26:30.330 --> 02:26:33.740
Well, that's the ones
we're signing, coming up.
02:26:33.740 --> 02:26:35.407
The ones that I already own.
02:26:35.407 --> 02:26:37.840
Yeah that's the ones,
that's going forward
02:26:37.840 --> 02:26:40.220
for those contracts
for today's contracts.
02:26:40.220 --> 02:26:42.506
That's how that works, go ahead.
02:26:42.506 --> 02:26:45.810
The only thing I would say
is the one thing that the ORDC
02:26:45.810 --> 02:26:48.835
does do is it affects the forward curve
02:26:48.835 --> 02:26:52.015
and the forward curve
allows you to either
02:26:52.015 --> 02:26:55.660
get a sort of broader,
higher level of revenue
02:26:55.660 --> 02:26:57.540
or a lower level of revenue
02:26:57.540 --> 02:26:59.563
and that allows you to either build,
02:27:00.840 --> 02:27:03.690
renewables or even
conventional generations.
02:27:03.690 --> 02:27:06.950
it affects the hedges, which
affect the forward market,
02:27:06.950 --> 02:27:09.460
whichever everybody absorbs and books,
02:27:09.460 --> 02:27:10.610
ahead of the real time.
02:27:10.610 --> 02:27:11.840
Right.
Right, yeah
02:27:12.877 --> 02:27:16.200
and that goes back to the
Myrtle and the ORDC changes.
02:27:16.200 --> 02:27:17.033
Right.
02:27:17.033 --> 02:27:18.490
Just thought I'd
circle back to that.
02:27:19.780 --> 02:27:21.894
All right thank you.
02:27:21.894 --> 02:27:24.370
Thank you for this time.
Appreciate it.
02:27:24.370 --> 02:27:28.070
Turn it over to Denton to bring us home.
02:27:28.070 --> 02:27:31.593
Thanks and always
great to be last.
02:27:33.970 --> 02:27:37.030
So let me, I'm Terry Naulty
assistant general manager
02:27:37.030 --> 02:27:38.573
at Denton municipal electric.
02:27:40.320 --> 02:27:41.870
I'm here on behalf of Denton
02:27:41.870 --> 02:27:46.830
and just to give the
Commission some perspective on
02:27:46.830 --> 02:27:50.770
the municipal segment, we're a small,
02:27:50.770 --> 02:27:53.530
relatively small municipal utility,
02:27:53.530 --> 02:27:57.593
but we operate as a non
opt-in electric, non opt-in entity
02:27:59.380 --> 02:28:02.230
and we run a vertically
integrated utility company.
02:28:02.230 --> 02:28:04.310
So we're really, we're
not in the market,
02:28:04.310 --> 02:28:07.560
but we're in the market
because the only way that I can
02:28:07.560 --> 02:28:11.240
deliver energy to my customers
is to buy it from ERCOT
02:28:11.240 --> 02:28:14.340
and the only way that I can
monetize the value of my assets
02:28:14.340 --> 02:28:15.640
is to sell it to ERCOT.
02:28:15.640 --> 02:28:18.670
So we're in the market,
but not in the market.
02:28:18.670 --> 02:28:23.670
The municipal segment is
about 15% of the ERCOT market
02:28:23.850 --> 02:28:28.143
with about 10,500 megawatts
of generating capacity.
02:28:29.300 --> 02:28:33.640
We serve a little over 5 million Texans
02:28:33.640 --> 02:28:37.093
and so it's a pretty significant
portion of the market.
02:28:38.390 --> 02:28:42.530
Our generation represents what
some would call the backbone
02:28:42.530 --> 02:28:47.530
of the ERCOT market with
a very diverse mix of nuclear,
02:28:48.920 --> 02:28:53.920
coal, natural gas,
hydroelectric, and renewables.
02:28:57.380 --> 02:29:02.380
I think our focus is on real
cost-effective reliable energy.
02:29:04.510 --> 02:29:09.220
Because as a load serving
entity and a generator,
02:29:09.220 --> 02:29:12.200
my obligation to my customers
is to keep the lights on
02:29:13.090 --> 02:29:17.572
and during the February
storm, I couldn't do that
02:29:17.572 --> 02:29:18.922
and that was a real problem
02:29:20.010 --> 02:29:23.300
and for us as a vertically
integrated utility company,
02:29:23.300 --> 02:29:25.340
relying on the ERCOT model,
02:29:25.340 --> 02:29:27.730
the only thing I could
tell my customers was that
02:29:27.730 --> 02:29:32.330
the reason I can't keep
your lights on is because of
02:29:32.330 --> 02:29:33.640
the way the market is structured
02:29:33.640 --> 02:29:35.480
and what happened in the market
02:29:35.480 --> 02:29:38.343
as a market participant,
we have to reduce load.
02:29:39.280 --> 02:29:42.480
So as we think about market changes,
02:29:42.480 --> 02:29:45.080
and I'm very encouraged
to have what I heard today
02:29:46.070 --> 02:29:48.063
from some of the panelists,
02:29:49.120 --> 02:29:52.300
we're certainly interested
in a well-functioning
02:29:52.300 --> 02:29:56.240
reliable market that provides
competitive stable rates
02:29:57.420 --> 02:30:02.420
and it also needs to allow
the municipal model to work,
02:30:03.750 --> 02:30:06.224
which is a model,
02:30:06.224 --> 02:30:11.224
that prioritize the individual
priorities of communities
02:30:12.670 --> 02:30:13.650
and in Denton's case,
02:30:13.650 --> 02:30:17.050
it's we want to be 100%
renewable community
02:30:17.050 --> 02:30:19.700
and so those individual
02:30:19.700 --> 02:30:21.807
things that are important to municipals
02:30:22.958 --> 02:30:25.673
have to be able to be
accommodated in this market.
02:30:27.700 --> 02:30:29.450
Is she's not gonna put up my slide.
02:30:33.210 --> 02:30:36.163
Sure we can, we'll get to them.
02:30:37.407 --> 02:30:38.970
I'm sure she'll be back soon but if.
02:30:38.970 --> 02:30:41.980
Okay let me just
talk a little bit about
02:30:41.980 --> 02:30:44.030
what our portfolio is
and because I think
02:30:45.020 --> 02:30:48.120
it answers some questions
that I've heard today
02:30:48.120 --> 02:30:50.870
about types of resources.
02:30:50.870 --> 02:30:54.350
So we're 100% renewable
energy community.
02:30:54.350 --> 02:30:58.420
We have about the numbers here,
02:31:01.160 --> 02:31:03.260
if I had my slide up, I could
give you the exact numbers,
02:31:03.260 --> 02:31:07.530
but we have roughly 500
megawatts of renewable energy
02:31:07.530 --> 02:31:11.530
that we've contracted for
under long-term contracts.
02:31:11.530 --> 02:31:12.943
One of which is with NG,
02:31:15.600 --> 02:31:17.970
we also own the Denton energy center,
02:31:17.970 --> 02:31:21.620
which is a quick responding
reciprocating engine plant
02:31:21.620 --> 02:31:24.950
225 megawatts and it was a cornerstone
02:31:24.950 --> 02:31:26.650
in our renewable energy plan.
02:31:26.650 --> 02:31:28.420
So that's a
natural gas facility.
02:31:28.420 --> 02:31:29.660
Natural gas facility,
02:31:29.660 --> 02:31:32.670
and it has the ability to
respond to the market prices
02:31:32.670 --> 02:31:33.830
in five minutes,
02:31:33.830 --> 02:31:38.370
it can go from zero to
225 and five minutes.
02:31:38.370 --> 02:31:42.320
Help me reconcile your
statement that you just said
02:31:42.320 --> 02:31:45.370
that you're 100% renewable
02:31:45.370 --> 02:31:48.723
and in your filing, the next sentence,
02:31:49.950 --> 02:31:54.510
it says that you built a big
gas generator to back up
02:31:54.510 --> 02:31:59.510
the renewables, to fill the
gaps in your renewables.
02:31:59.570 --> 02:32:04.240
So while I appreciate this'll
be the Dow demonstration
02:32:04.240 --> 02:32:07.260
of 98% to 2%, and
then the steady gas line
02:32:07.260 --> 02:32:09.210
very much appreciate
why you would do that
02:32:09.210 --> 02:32:12.240
for your customers
to ensure reliability.
02:32:12.240 --> 02:32:16.435
I don't know how that
reconciles as 100% renewable.
02:32:16.435 --> 02:32:19.200
That's a great question
and one I get all the time,
02:32:19.200 --> 02:32:23.550
but yes, the key to being 100% renewable
02:32:23.550 --> 02:32:25.963
and that is measured on an annual basis.
02:32:27.366 --> 02:32:29.710
All the megawatts that
are consumed by the city
02:32:29.710 --> 02:32:33.163
have a rec associated with
them from a contracted asset,
02:32:34.300 --> 02:32:39.260
the generation so the
actual natural gas generation
02:32:39.260 --> 02:32:41.700
is used as a financial hedge
02:32:41.700 --> 02:32:44.620
against those inevitable
periods in which
02:32:44.620 --> 02:32:47.640
our renewable portfolio
is not gonna perform.
02:32:47.640 --> 02:32:51.470
We have to have a financial
hedge against that situation
02:32:51.470 --> 02:32:55.070
and we've experienced
obviously some episodes
02:32:55.070 --> 02:32:59.930
where our portfolio had zero
output of renewable energy,
02:32:59.930 --> 02:33:04.920
and we relied 100%
on our gas generation.
02:33:04.920 --> 02:33:09.920
So to get to the threshold
of on an annual basis
02:33:10.644 --> 02:33:12.713
saying you're a 100% renewable,
02:33:14.180 --> 02:33:18.510
you're going out and buying
additional renewable megawatts
02:33:18.510 --> 02:33:23.510
to offset those, to take
care of the natural gas
02:33:24.500 --> 02:33:25.333
generated megawatt.
02:33:25.333 --> 02:33:26.840
Yeah, I think the
way to think about it,
02:33:26.840 --> 02:33:31.320
chairman Lake is we
operate our renewable portfolio
02:33:31.320 --> 02:33:34.620
in the time market, just
like everyone else does
02:33:35.760 --> 02:33:37.800
and we use that.
02:33:37.800 --> 02:33:39.500
We're just selling into the market
02:33:40.700 --> 02:33:44.600
and then we're buying
from the market for our load
02:33:44.600 --> 02:33:46.450
at whatever the market price is as well.
02:33:46.450 --> 02:33:50.300
Those two offsetting
positions on an annual basis,
02:33:50.300 --> 02:33:52.573
if they're zero, if we've had enough.
02:33:53.527 --> 02:33:56.350
You're saying your
renewables on an annual basis,
02:33:56.350 --> 02:34:00.210
your renewable fleet
generates enough electrons
02:34:00.210 --> 02:34:02.240
that go somewhere in the ERCOT system
02:34:02.240 --> 02:34:04.800
to match your entire
load for that same year.
02:34:04.800 --> 02:34:05.880
Yes, sir.
02:34:05.880 --> 02:34:09.260
Okay but the get-
But in the meantime
02:34:09.260 --> 02:34:11.400
your burning gas to keep the lights on?
02:34:11.400 --> 02:34:12.333
Exactly.
02:34:13.510 --> 02:34:15.870
I just want to make sure
I'm thinking about this, right?
02:34:15.870 --> 02:34:19.200
The physics of the
system are what they are
02:34:19.200 --> 02:34:20.900
and we have to deal with.
02:34:20.900 --> 02:34:23.250
Okay, I mean, I get why
Dow has the blue line there,
02:34:23.250 --> 02:34:27.807
I just, it's tricky to
match that up with the,
02:34:27.807 --> 02:34:31.930
so the point being is
somewhere on the grid,
02:34:31.930 --> 02:34:34.800
somebody has gotta
be burning natural gas.
02:34:34.800 --> 02:34:36.300
Absolutely.
Okay.
02:34:36.300 --> 02:34:37.620
Absolutely.
02:34:37.620 --> 02:34:40.230
And so, I guess the point
I wanted to make is that
02:34:40.230 --> 02:34:42.490
we've been able to do this
02:34:42.490 --> 02:34:45.300
and we've remained competitive.
02:34:45.300 --> 02:34:48.470
Our age, the bottom
graph shows our rates
02:34:48.470 --> 02:34:51.810
are right in the middle
with the competitive retailers
02:34:51.810 --> 02:34:54.530
that offer 100% renewable energy as well
02:34:54.530 --> 02:34:57.190
and I'd say even with
the non renewables,
02:34:57.190 --> 02:34:59.220
our rates are very
competitive with them.
02:34:59.220 --> 02:35:04.060
So we believe that
this is a business model
02:35:04.060 --> 02:35:07.430
that demonstrates that a market with
02:35:07.430 --> 02:35:12.430
high renewable penetration
can in fact provide low costs
02:35:12.830 --> 02:35:17.120
and we believe that the market
redesign needs to continue
02:35:17.120 --> 02:35:20.503
to access those low cost,
02:35:20.503 --> 02:35:25.060
renewable energy resources
for the benefit of rate payers
02:35:25.060 --> 02:35:26.557
in all cases.
02:35:26.557 --> 02:35:29.016
Lets go to the next page.
02:35:29.016 --> 02:35:31.434
So the truths, what I
think about the market,
02:35:31.434 --> 02:35:33.351
where the ERCOT truths,
02:35:34.699 --> 02:35:38.575
this intermittency is
gonna dominate the market
02:35:38.575 --> 02:35:41.919
by driven by the things
that are listed there.
02:35:41.919 --> 02:35:43.341
We live in a society
02:35:43.341 --> 02:35:47.775
where people want the
environmental benefits,
02:35:47.775 --> 02:35:50.637
the ERCOT transmission grid,
02:35:50.637 --> 02:35:55.054
incentivizes the continued
development of renewables,
02:35:56.723 --> 02:36:01.348
tax incentives continue to
provide a level of subsidy
02:36:01.348 --> 02:36:04.931
for these assets that
benefits rate payers.
02:36:05.893 --> 02:36:07.430
We want to take advantage of that,
02:36:07.430 --> 02:36:10.950
I think all Texans want
to take advantage of that.
02:36:10.950 --> 02:36:13.869
We do know from our own
experience that the intermittency
02:36:13.869 --> 02:36:17.249
during peak demand
periods is highly likely,
02:36:17.249 --> 02:36:21.749
and this doesn't mean that
we should build roadblocks,
02:36:23.029 --> 02:36:24.613
to low cost renewables,
02:36:24.613 --> 02:36:27.353
but rather we should design
our system to take advantage
02:36:27.353 --> 02:36:30.436
of those low costs, renewable energy.
02:36:32.450 --> 02:36:37.450
I'm concerned that because
the PUCT cannot drive
02:36:39.300 --> 02:36:41.730
weatherization or mandate weatherization
02:36:41.730 --> 02:36:45.010
that the weatherization
may or may not happen
02:36:45.010 --> 02:36:47.940
as I sit here today I
can't tell you that I've seen
02:36:49.720 --> 02:36:51.650
a high level of probability
02:36:51.650 --> 02:36:53.140
that we're gonna actually achieve it.
02:36:53.140 --> 02:36:54.400
We didn't have
02:36:54.400 --> 02:36:55.440
choose that one-
Weatherization.
02:36:55.440 --> 02:36:56.680
On the gas system.
02:36:56.680 --> 02:37:01.680
Okay we just issued
weatherization rules, okay.
02:37:01.814 --> 02:37:03.520
I'm just point of clarification.
02:37:03.520 --> 02:37:05.190
Delivery system.
02:37:05.190 --> 02:37:06.410
Do you need to go
back and rewrite that.
02:37:06.410 --> 02:37:10.458
No, no and I
bring that up only,
02:37:10.458 --> 02:37:11.960
(members laughing)
02:37:11.960 --> 02:37:13.960
I bring that up because,
02:37:13.960 --> 02:37:16.683
if we're gonna rely on weatherization,
02:37:17.960 --> 02:37:19.387
to build that reliability
02:37:19.387 --> 02:37:23.023
and that weatherization
includes the gas delivery system.
02:37:24.930 --> 02:37:27.800
So we think that you should
drive policy to increase
02:37:27.800 --> 02:37:30.360
reliability based on
what you can control
02:37:30.360 --> 02:37:33.190
and that weatherization
of the gas delivery system
02:37:33.190 --> 02:37:36.903
is probably not something
that's easily controlled.
02:37:38.430 --> 02:37:41.419
What do you think
we can control?
02:37:41.419 --> 02:37:44.670
I mean, when it comes down
to that crux, I mean, I said,
02:37:44.670 --> 02:37:48.710
I think critical load,
ignition and fuel security.
02:37:48.710 --> 02:37:51.610
Fuel security is
what you can control
02:37:51.610 --> 02:37:54.730
by mandating certain
types of fuel security
02:37:54.730 --> 02:37:56.760
and whether that's dual fuel
02:37:56.760 --> 02:38:01.400
or whether that's some higher
standard of from deliveries,
02:38:01.400 --> 02:38:03.300
all these things cost money,
02:38:03.300 --> 02:38:06.310
significant monies that
ultimately load is gonna pay for,
02:38:06.310 --> 02:38:08.623
but that you do control absolutely.
02:38:12.334 --> 02:38:15.450
And I guess the other
last thing I'd say about
02:38:15.450 --> 02:38:18.150
the current market is
that in our assessment,
02:38:18.150 --> 02:38:21.480
the audit does not
provide sufficient cash flows
02:38:21.480 --> 02:38:25.620
to incentivize new generation
02:38:25.620 --> 02:38:30.620
and so any solution
that you come up with
02:38:30.880 --> 02:38:33.373
needs to change that paradigm.
02:38:37.970 --> 02:38:42.970
So we think that it's a
multi-pronged approach.
02:38:43.591 --> 02:38:44.943
I think it's been discussed here.
02:38:44.943 --> 02:38:47.360
It's not different from what we've heard
02:38:47.360 --> 02:38:48.220
from other panelists,
02:38:48.220 --> 02:38:51.170
but changes to the Arctic are needed.
02:38:51.170 --> 02:38:52.320
I'm not gonna get into,
02:38:53.210 --> 02:38:55.700
the details of what those changes are.
02:38:55.700 --> 02:38:59.010
They're way more qualified
people that understand
02:38:59.010 --> 02:39:00.403
the math better than I do.
02:39:03.630 --> 02:39:08.340
We think that if you make
drastic changes in the ORDC
02:39:08.340 --> 02:39:12.410
and rely on it solely to
fix the reliability problem,
02:39:12.410 --> 02:39:14.410
that there'll be unintended consequences
02:39:15.490 --> 02:39:19.110
and that any changes that you make
02:39:19.110 --> 02:39:22.958
require some level of
track record in order for
02:39:22.958 --> 02:39:27.550
financers of generation to actually
02:39:27.550 --> 02:39:30.510
deploy their risk capital
into those markets
02:39:30.510 --> 02:39:31.960
and that will take some time.
02:39:33.700 --> 02:39:38.260
So we think that that just
ORDC changes can achieve
02:39:38.260 --> 02:39:41.980
the reliability fixes that are needed
02:39:41.980 --> 02:39:44.850
and we believe that you should look at
02:39:44.850 --> 02:39:47.070
the amount of dual fuel
that's needed in the market
02:39:47.070 --> 02:39:48.693
from existing generation.
02:39:51.210 --> 02:39:56.210
That any dual-fuel capable
units like black start units,
02:39:59.170 --> 02:40:03.160
for example, to the extent
that they're firmed up
02:40:03.160 --> 02:40:04.500
and become more reliable,
02:40:04.500 --> 02:40:07.470
not subject to the
types of fuel interruptions
02:40:07.470 --> 02:40:11.500
that reduces the amount
of incremental generation
02:40:11.500 --> 02:40:14.050
that is needed in marketplace
02:40:16.650 --> 02:40:19.560
and so we're suggesting like others,
02:40:19.560 --> 02:40:22.320
some sort of form of
grid, reliability, service,
02:40:22.320 --> 02:40:26.330
ancillary service charges
to order to get that money
02:40:26.330 --> 02:40:30.080
into the marketplace,
to pay for that dual fuel
02:40:30.080 --> 02:40:32.060
and then secondarily on the next page
02:40:33.360 --> 02:40:38.360
would be new cost some
way for peaking generation
02:40:41.800 --> 02:40:46.240
to be built based upon
an analysis that shows
02:40:46.240 --> 02:40:49.900
how much additional
reserves are gonna be needed.
02:40:49.900 --> 02:40:51.130
Now, one thing I'll point out
02:40:51.130 --> 02:40:52.883
about the technology selection.
02:40:55.430 --> 02:40:57.830
What I can tell you is
when I look at these numbers
02:40:57.830 --> 02:41:01.644
and I see the proformas
that you've been shown today,
02:41:01.644 --> 02:41:04.340
the forecast,
02:41:04.340 --> 02:41:07.690
all those are based
upon the forward curve
02:41:07.690 --> 02:41:11.323
and the forward curve is really a,
02:41:13.170 --> 02:41:16.670
is a hourly in its current form.
02:41:16.670 --> 02:41:18.510
The way most people would
look at it would look at the
02:41:18.510 --> 02:41:23.510
hourly scalar or the hourly cost,
02:41:24.100 --> 02:41:27.143
for each hour of the next five years.
02:41:28.420 --> 02:41:32.070
And the Denton energy center,
02:41:32.070 --> 02:41:33.970
which can respond in five minutes.
02:41:33.970 --> 02:41:38.480
It achieves incremental
revenues as a result
02:41:38.480 --> 02:41:43.480
of its inter hour its ability
to re react inside of an hour
02:41:43.940 --> 02:41:45.280
inside of five minutes
02:41:46.780 --> 02:41:49.560
and we're glad to share
with the Commission,
02:41:49.560 --> 02:41:51.800
the historical performance of that,
02:41:51.800 --> 02:41:54.440
that extrinsic option value
02:41:54.440 --> 02:41:56.603
that it's able to
achieve is significant.
02:41:57.510 --> 02:42:02.510
So the right type of technology
can drive higher returns.
02:42:05.130 --> 02:42:10.130
It's not as well documented,
I mean, it's still a little bit
02:42:12.530 --> 02:42:14.160
theoretical about how much,
02:42:14.160 --> 02:42:16.930
but there is data out there
you can see from the 15 minute
02:42:16.930 --> 02:42:19.605
settlement, if you had a
machine that was able,
02:42:19.605 --> 02:42:24.260
to react to those 15 minute
and the five minute prices,
02:42:24.260 --> 02:42:26.860
there's additional revenues
that can be achieved
02:42:26.860 --> 02:42:30.020
that will drive returns
up higher and keep
02:42:30.020 --> 02:42:32.610
and if you specify the amount
02:42:32.610 --> 02:42:34.680
of additional generation that's
02:42:34.680 --> 02:42:37.100
needed and it's of that type,
02:42:37.100 --> 02:42:39.540
the cost to the consumer should be lower
02:42:42.010 --> 02:42:46.180
and we do support reducing
the value of loss load
02:42:46.180 --> 02:42:50.830
to $2,000 or thereabouts
until you can get
02:42:50.830 --> 02:42:53.830
enough generation built to
02:42:53.830 --> 02:42:56.070
address the reliability issue.
02:42:56.070 --> 02:42:58.770
We do not support any changes to the
02:43:00.700 --> 02:43:04.067
intermittent resource
offering that was discussed
02:43:04.067 --> 02:43:09.067
and I'll just say that as a
buyer of renewable resources,
02:43:13.810 --> 02:43:17.360
I'm long that position at a fixed price
02:43:17.360 --> 02:43:21.040
and to extent that there
are scarcity premiums
02:43:21.040 --> 02:43:22.023
that are available.
02:43:22.970 --> 02:43:26.640
I achieve those scarcity
premiums as the buyer
02:43:26.640 --> 02:43:30.140
of that fixed price
energy at a nodal point.
02:43:30.140 --> 02:43:34.860
Now that's offsetting the
price that I'm paying for load.
02:43:34.860 --> 02:43:37.640
So it's a net zero effect, but there is,
02:43:37.640 --> 02:43:40.480
there will be basis differential
will be congestion costs
02:43:40.480 --> 02:43:42.340
between those points.
02:43:42.340 --> 02:43:44.840
That's important to
keep in mind as well.
02:43:44.840 --> 02:43:48.960
So there is value for those of us
02:43:48.960 --> 02:43:52.240
that have entered
into long-term contracts
02:43:52.240 --> 02:43:55.433
with renewable energy resources,
02:43:56.530 --> 02:44:01.350
to be able to continue to
achieve those scarcity premiums
02:44:01.350 --> 02:44:02.183
when they're available,
02:44:02.183 --> 02:44:03.170
because I'm gonna have to pay it
02:44:03.170 --> 02:44:05.210
on the other side for the load
02:44:05.210 --> 02:44:07.853
and I need that for a financial hedge.
02:44:09.000 --> 02:44:10.270
The other thing I'd point out is that
02:44:10.270 --> 02:44:13.900
when you make changes,
the contract changes
02:44:13.900 --> 02:44:16.530
that Commissioner
McAdams is worried about
02:44:16.530 --> 02:44:17.770
that I'm worried about as well,
02:44:17.770 --> 02:44:21.280
changing law under those
long-term renewable contracts
02:44:21.280 --> 02:44:24.270
means that I'm either
gonna terminate a contract
02:44:24.270 --> 02:44:26.640
or I'm gonna end up
having to pass through costs
02:44:26.640 --> 02:44:28.480
to my customers
02:44:28.480 --> 02:44:31.220
and the customers are the
ones that ultimately will bear
02:44:31.220 --> 02:44:33.480
the costs of any of those changes
02:44:33.480 --> 02:44:36.581
and I think the Commission
should keep that in mind,
02:44:36.581 --> 02:44:37.863
as you pursue that.
02:44:39.240 --> 02:44:42.810
So with that, I'll be glad
to answer any question.
02:44:42.810 --> 02:44:46.200
Commissioner McAdam said
it best earlier when he said that
02:44:47.590 --> 02:44:51.630
any meaningful changes
we make as directed by
02:44:51.630 --> 02:44:56.333
SB3 will result in a lot of
contracts being changed.
02:44:57.360 --> 02:44:59.860
Don't know which ones
are how, but that's just
02:44:59.860 --> 02:45:02.023
gonna be the nature
of a meaningful change.
02:45:04.480 --> 02:45:05.673
Questions, comments.
02:45:09.170 --> 02:45:10.053
Page four.
02:45:11.340 --> 02:45:15.050
Sir, all market participants
should bear the costs
02:45:15.050 --> 02:45:17.740
of these incremental reliability costs,
02:45:17.740 --> 02:45:19.080
all market participants.
02:45:19.080 --> 02:45:19.943
Can you define?
02:45:20.860 --> 02:45:23.093
Yeah that is all
market participants.
02:45:23.093 --> 02:45:28.093
I mean, I believe that I'm
not just load serving entities.
02:45:28.150 --> 02:45:28.983
Okay.
02:45:28.983 --> 02:45:31.463
But hedgers traders,
02:45:33.240 --> 02:45:35.210
everyone should bear a cost,
02:45:35.210 --> 02:45:38.530
a portion of the cost to
participate in this market
02:45:39.970 --> 02:45:41.920
and if the market is gonna be viable,
02:45:41.920 --> 02:45:44.083
it has to be reliable long-term.
02:45:44.920 --> 02:45:49.363
So why do we want to just
push the costs solely to the load?
02:45:53.180 --> 02:45:54.387
Got it thank you.
02:45:58.457 --> 02:46:02.083
All right thank you
very much I appreciate it.
02:46:03.920 --> 02:46:05.750
That's our last formal panel of the day.
02:46:05.750 --> 02:46:09.503
We've got Barbara and come on and yeah.
02:46:11.210 --> 02:46:15.240
We'll to come up for our
concluding comments.
02:46:15.240 --> 02:46:17.403
Yeah, I can not highlighted that.
02:46:19.182 --> 02:46:21.183
He's fourth in a row, he's been in here.
02:46:22.489 --> 02:46:23.489
Everyone is tired.
02:46:28.760 --> 02:46:30.130
Immediately after saying that,
02:46:30.130 --> 02:46:32.900
I realized that all
three of you are here
02:46:32.900 --> 02:46:34.950
the same amount of
time, and I'm complaining
02:46:34.950 --> 02:46:37.180
to the wrong group of people.
02:46:37.180 --> 02:46:38.030
We sort of work here.
Its okay.
02:46:38.030 --> 02:46:38.863
You don't.
02:46:43.560 --> 02:46:44.660
I'll put in my time,
02:46:48.250 --> 02:46:51.720
this is slated to be our concluding
Commission conversation
02:46:51.720 --> 02:46:55.530
with the goal of identifying key points
02:46:55.530 --> 02:46:56.850
that rose to our attention of course,
02:46:56.850 --> 02:46:58.490
we'll provide more in depth guidance
02:46:58.490 --> 02:47:00.783
for stakeholders next
week per our schedule,
02:47:02.240 --> 02:47:06.250
but a chance for us
to discuss key points
02:47:06.250 --> 02:47:10.440
that we thought were of interest today,
02:47:10.440 --> 02:47:15.440
and perhaps some quick
thoughts on where we
02:47:15.680 --> 02:47:18.410
themes to focus on moving forward
02:47:18.410 --> 02:47:20.633
as we continue through this process,
02:47:23.184 --> 02:47:27.750
a few things that jumped
out at me, reliability standard,
02:47:27.750 --> 02:47:29.220
establishing that reliability standard
02:47:29.220 --> 02:47:30.660
obviously is a key component
02:47:32.610 --> 02:47:34.400
as we've talked about this extensively,
02:47:34.400 --> 02:47:39.190
but need to screw down on accountability
02:47:39.190 --> 02:47:43.270
and associating the accountability,
02:47:43.270 --> 02:47:47.230
of showing up with what
came up several times a day
02:47:47.230 --> 02:47:52.230
in terms of moving the
revenues to reliability,
02:47:54.498 --> 02:47:56.848
dispatchable, all forms
of dispatchable assets,
02:47:58.050 --> 02:48:01.090
importantly not excluding
intermittent weather dependents.
02:48:01.090 --> 02:48:03.383
If they have farming capacity.
02:48:07.560 --> 02:48:11.190
We're gonna get to the demand
response next work session.
02:48:11.190 --> 02:48:12.560
Obviously a lot of opportunity there,
02:48:12.560 --> 02:48:17.140
voltage reduction, increased precision,
02:48:17.140 --> 02:48:19.713
in granularity and load shed,
02:48:22.430 --> 02:48:26.890
and then paying for what we want
02:48:26.890 --> 02:48:28.500
paying for the outcomes we want
02:48:28.500 --> 02:48:30.420
of course, being the broad theme,
02:48:30.420 --> 02:48:33.340
not trying to pick the inputs
02:48:33.340 --> 02:48:38.340
and one of those outputs
that we want is I think inertia,
02:48:40.110 --> 02:48:44.010
and we certainly don't
wanna get close to
02:48:44.860 --> 02:48:47.243
going over the edge or lack of inertia.
02:48:48.223 --> 02:48:51.924
So I'll open it up for
discussion to the board.
02:48:51.924 --> 02:48:54.220
I guess I would add
02:48:54.220 --> 02:48:56.950
to your point about
the reliability standard.
02:48:56.950 --> 02:49:01.750
I think focusing on ensuring
02:49:01.750 --> 02:49:03.460
that we have the
appropriate liability standards
02:49:03.460 --> 02:49:05.500
sounds like one in 10
year liability standard
02:49:05.500 --> 02:49:08.640
is the utility industry standard.
02:49:08.640 --> 02:49:11.410
But also determining
02:49:11.410 --> 02:49:14.810
the amount of dispatchable
generation that's needed.
02:49:14.810 --> 02:49:17.820
and what's the difference
between what we have now
02:49:17.820 --> 02:49:20.010
and how much we're
gonna need, what's that Delta
02:49:20.010 --> 02:49:23.310
and does that help us
meet the reliability standard?
02:49:23.310 --> 02:49:25.300
How much do we need to
meet the reliability standards?
02:49:25.300 --> 02:49:29.403
So updating the loss
of load probability study,
02:49:31.060 --> 02:49:34.430
which ERCOT mentioned they
were in the process of rerunning
02:49:35.890 --> 02:49:40.890
having independent
third party analysis of
02:49:40.900 --> 02:49:42.130
some of the market design changes
02:49:42.130 --> 02:49:43.770
that we're looking at right now,
02:49:43.770 --> 02:49:46.880
like ORDC changes and
ancillary service changes
02:49:46.880 --> 02:49:48.046
and anything else we consider
02:49:48.046 --> 02:49:50.050
I think is gonna be very important,
02:49:50.050 --> 02:49:54.700
including if that same
consultant or another consultant
02:49:54.700 --> 02:49:59.400
can look at the gas supply
pipeline aspect of the market.
02:50:01.070 --> 02:50:02.720
I think that's important as well.
02:50:04.487 --> 02:50:05.573
Good point.
02:50:05.573 --> 02:50:09.520
Does anybody else think the
current operating plan system
02:50:09.520 --> 02:50:11.713
in ERCOT is not what we want?
02:50:15.230 --> 02:50:19.330
Does that jive with the
enhanced command and control,
02:50:19.330 --> 02:50:23.793
goal that like he says we need?
02:50:25.150 --> 02:50:28.520
The jobs was enhanced
command and control
02:50:28.520 --> 02:50:30.560
and visibility for our
grid operators to know
02:50:30.560 --> 02:50:32.040
what resources do they've got
02:50:32.040 --> 02:50:33.340
when they're gonna have it
02:50:34.668 --> 02:50:37.840
and that also overlaps
with making sure that
02:50:39.230 --> 02:50:40.690
the resources they need
02:50:40.690 --> 02:50:44.540
are the resources
that get the economics.
02:50:44.540 --> 02:50:47.220
Yeah, I mean, so, well, anyway,
02:50:47.220 --> 02:50:49.230
I want to hear everybody's
thoughts on that
02:50:49.230 --> 02:50:54.230
if it's just the way caps
are submitted determined,
02:50:54.700 --> 02:50:57.020
I mean, would he sitting
there kind of playing chicken
02:50:57.020 --> 02:51:00.271
it's somewhat disconcerting,
02:51:00.271 --> 02:51:03.490
to watch this process in play out
02:51:05.720 --> 02:51:09.707
and from an operational
standpoint, it just seems, no,
02:51:11.050 --> 02:51:12.270
we need something more
02:51:12.270 --> 02:51:15.140
and then it kind of feeds my logic on
02:51:15.140 --> 02:51:18.160
any type of forward commitment,
02:51:18.160 --> 02:51:20.750
but the points of market
participants are well-taken.
02:51:20.750 --> 02:51:22.447
If that means ancillary services,
02:51:22.447 --> 02:51:25.950
are a component of
that to incentivize that
02:51:25.950 --> 02:51:27.223
all well and good,
02:51:28.750 --> 02:51:31.130
but it lends itself
to greater visibility
02:51:31.130 --> 02:51:34.630
on the operator's part to
be able to make decisions
02:51:34.630 --> 02:51:37.713
before we get into game time.
02:51:38.690 --> 02:51:39.890
Or crisis mode.
02:51:39.890 --> 02:51:42.550
So focus on refining
real-time operations
02:51:43.410 --> 02:51:45.230
through better visibility to the caps.
02:51:45.230 --> 02:51:47.620
I know there's an
information we got today.
02:51:47.620 --> 02:51:50.020
I think what he's been
saying that he is struggling
02:51:50.020 --> 02:51:51.820
with the caps for probably years mow.
02:51:51.820 --> 02:51:55.370
Yeah and it's come up
through stakeholder processes
02:51:55.370 --> 02:51:58.270
in ERCOT when you were watching it.
02:51:58.270 --> 02:52:01.913
So it just seems like a
consistent dissatisfaction.
02:52:01.913 --> 02:52:04.490
Yeah and I think
in practical reality,
02:52:04.490 --> 02:52:06.700
there's some disconnect
with trying to improve that
02:52:06.700 --> 02:52:09.040
and then that sounds
like on the generation side,
02:52:09.040 --> 02:52:10.690
there's some challenges as well,
02:52:10.690 --> 02:52:13.560
or they're having to deal
with forecasting as well
02:52:13.560 --> 02:52:14.393
on a daily basis.
02:52:14.393 --> 02:52:16.450
So trying to marry that up
together to come up with a
02:52:16.450 --> 02:52:19.657
better caps, and I'm
not sure what that is.
02:52:19.657 --> 02:52:21.120
Well and better caps,
02:52:21.120 --> 02:52:23.280
but also harmonize
the economics of that.
02:52:23.280 --> 02:52:24.760
So it is not disruptive.
02:52:24.760 --> 02:52:26.770
I mean, I think that goes
to what they were saying
02:52:26.770 --> 02:52:29.240
is that if you tinker with the caps,
02:52:29.240 --> 02:52:32.963
this is a major data point
that everybody bases there,
02:52:34.680 --> 02:52:37.113
forward projection, but also real time,
02:52:39.240 --> 02:52:43.883
expected time commitment
and activity in preparation.
02:52:46.323 --> 02:52:48.200
So that's kind of where my head has been
02:52:48.200 --> 02:52:51.740
and that's why, have been
harping on day ahead so much,
02:52:51.740 --> 02:52:55.610
It's just because it seems
to line up with that system of
02:52:55.610 --> 02:53:00.610
administrative control
and then, where the actors
02:53:02.020 --> 02:53:04.223
or the generators
are in terms of position
02:53:04.223 --> 02:53:07.053
to be able to perform so.
02:53:07.960 --> 02:53:09.670
Don't you think it's
also important distinction
02:53:09.670 --> 02:53:11.180
that you can offer into
the day ahead market
02:53:11.180 --> 02:53:13.200
and not get cleared.
02:53:13.200 --> 02:53:14.033
That's right.
02:53:14.033 --> 02:53:14.866
Right so that's no,
02:53:14.866 --> 02:53:17.800
just because you show
up doesn't mean that
02:53:17.800 --> 02:53:21.310
you're gonna lose money
because you may be forced to,
02:53:21.310 --> 02:53:23.400
I think it's the complete
opposite, right?
02:53:23.400 --> 02:53:25.770
Like you're not gonna get
clear in the day ahead unless.
02:53:25.770 --> 02:53:28.140
It goes through the same
security constrained economic
02:53:28.140 --> 02:53:31.710
dispatch that the market
goes through and you may,
02:53:31.710 --> 02:53:33.050
or may not clear, you may not,
02:53:33.050 --> 02:53:35.880
we make clear energy
and not ancillary services.
02:53:35.880 --> 02:53:39.360
There's, the engine is gonna
run based on the economics
02:53:39.360 --> 02:53:42.910
and the system need
based on the forecast for that.
02:53:42.910 --> 02:53:46.800
Whether or not you wanna
buy gas for the next gas day
02:53:46.800 --> 02:53:49.950
before, you know how the dam clears,
02:53:49.950 --> 02:53:52.143
that's a different operational issue.
02:53:53.236 --> 02:53:54.500
Yeah that's right.
02:53:54.500 --> 02:53:55.610
But doesn't the mint Okay.
02:53:55.610 --> 02:54:00.130
So, and another takeaway
for me was, again,
02:54:00.130 --> 02:54:04.110
menu of ancillary services,
more targeted ancillary services
02:54:04.110 --> 02:54:05.680
based on performance measures
02:54:05.680 --> 02:54:07.963
that we want to purchase procure.
02:54:09.170 --> 02:54:13.930
So that seems like it does
jive with a more forward look
02:54:13.930 --> 02:54:16.800
on what type of ancillary
services we're gonna need
02:54:18.300 --> 02:54:21.780
again for the retailers to
take that into account too,
02:54:21.780 --> 02:54:26.780
on a seasonal basis, what
that seasonal forecast looks like,
02:54:27.350 --> 02:54:28.790
what the rolling average is of
02:54:28.790 --> 02:54:31.803
seasonal intermittent variability are,
02:54:33.770 --> 02:54:36.240
so I think just more of
a comprehensive look
02:54:36.240 --> 02:54:41.230
at how the caps currently
are formed and submitted
02:54:42.500 --> 02:54:45.660
what ERCOT operations sees,
02:54:45.660 --> 02:54:47.110
in terms of that interplay
02:54:50.514 --> 02:54:54.070
and then how we can try to
smooth out this ruck system
02:54:54.070 --> 02:54:56.660
with the ancillary
service, get ahead of that.
02:54:56.660 --> 02:54:57.980
So we don't need to ruck.
02:54:57.980 --> 02:55:00.930
So that essentially
our ancillary services
02:55:00.930 --> 02:55:04.300
is filling that void on a more basis.
02:55:04.300 --> 02:55:06.142
Yeah it's the ultimate goal.
02:55:06.142 --> 02:55:08.093
So just so I could,
02:55:08.093 --> 02:55:11.820
so kind of the list
that I provided earlier,
02:55:11.820 --> 02:55:13.760
I think is sort of a level set
02:55:13.760 --> 02:55:15.640
from my perspective
let's level set our data.
02:55:15.640 --> 02:55:16.473
Yep.
02:55:16.473 --> 02:55:17.710
Get those studies done
02:55:17.710 --> 02:55:21.510
and then I agree with you Will
Commissioner McAdams that,
02:55:21.510 --> 02:55:24.810
we did hear about a new suite
of ancillary service products
02:55:24.810 --> 02:55:28.100
that we got some information on
02:55:28.100 --> 02:55:29.480
probably needed a little bit more,
02:55:29.480 --> 02:55:32.270
but we can start sort of,
02:55:32.270 --> 02:55:34.988
kind of narrowing down what some of
02:55:34.988 --> 02:55:37.080
those new AS products are looking like.
02:55:37.080 --> 02:55:42.080
It seems like there's some
commonality amongst the different
02:55:42.190 --> 02:55:47.190
products we heard from
Denton and Exelon and LCRA
02:55:47.490 --> 02:55:50.740
and a recognition that
these new products will target
02:55:50.740 --> 02:55:52.990
issues that we're currently
experiencing right now
02:55:52.990 --> 02:55:55.300
with trying to stabilize the grid
02:55:55.300 --> 02:55:57.033
and the variability on the grid.
02:55:58.240 --> 02:56:01.910
ORDC, I think there's know
almost uniform agreement
02:56:01.910 --> 02:56:04.830
that alone is not gonna move the needle.
02:56:04.830 --> 02:56:05.663
Correct.
02:56:05.663 --> 02:56:10.450
And so, as we look
at that mechanism,
02:56:10.450 --> 02:56:13.700
running simulations on different runs
02:56:13.700 --> 02:56:15.980
and seeing what it does
from, with a third party,
02:56:15.980 --> 02:56:20.980
but, just recognizing that
alone is not gonna get us
02:56:21.130 --> 02:56:22.010
what we need.
02:56:22.010 --> 02:56:22.843
We're gonna have to look at
02:56:22.843 --> 02:56:24.900
the ancillary service markets as well
02:56:26.730 --> 02:56:30.940
and it seems to me because
of these ancillary service
02:56:30.940 --> 02:56:34.006
markets being discussed in SB three,
02:56:34.006 --> 02:56:39.000
that perhaps thinking
about whether we want to
02:56:39.000 --> 02:56:43.190
open up a rulemaking
project to get more information
02:56:43.190 --> 02:56:46.240
and refine stake holder
comments at some point,
02:56:46.240 --> 02:56:49.820
whether it's, not necessarily today,
02:56:49.820 --> 02:56:54.280
but to consider that so
that we can get more tailored
02:56:54.280 --> 02:56:59.100
stakeholder comments on those
new ancillary service products
02:56:59.100 --> 02:57:00.500
that we heard about today.
02:57:00.500 --> 02:57:02.410
Like the dispatchable
reliability service
02:57:02.410 --> 02:57:04.830
fuel firming the winner.
02:57:04.830 --> 02:57:05.663
Yup.
02:57:05.663 --> 02:57:09.313
Okay, considers rulemaking
or open a dock on that
02:57:09.313 --> 02:57:12.210
and we could also use the
milestones of the Commissioner
02:57:12.210 --> 02:57:14.407
guidance as we go through them.
02:57:14.407 --> 02:57:16.070
One of the others are
more key takeaways.
02:57:16.070 --> 02:57:19.240
Now I want to see if you had thoughts on
02:57:19.240 --> 02:57:21.760
it sounds like ORDC is not as impactful
02:57:21.760 --> 02:57:26.760
for the bulk of intermittent
resources by nature of,
02:57:27.000 --> 02:57:31.140
again, the bilaterals it's a
consistent thing that comes up.
02:57:31.140 --> 02:57:34.190
Or maybe infrequently felt,
02:57:34.190 --> 02:57:36.570
but incredibly impactful when felt.
02:57:36.570 --> 02:57:40.493
Yeah, no that's, I
think that's accurate.
02:57:42.878 --> 02:57:44.045
So, but again,
02:57:45.610 --> 02:57:50.473
any enhancement to
ORDC is that going to,
02:57:52.630 --> 02:57:56.053
is that gonna have any
unintended consequence on,
02:57:58.660 --> 02:58:01.760
I don't know and how
it's deployed, what time,
02:58:01.760 --> 02:58:04.630
what are the conditions of deployment.
02:58:04.630 --> 02:58:07.230
Right, the X factor in the
minimum contingency level,
02:58:07.230 --> 02:58:10.130
should we increase the X?
02:58:10.130 --> 02:58:11.630
We heard a lot about lowering the cap.
02:58:11.630 --> 02:58:14.290
Some stakeholders provided
us with specific numbers
02:58:14.290 --> 02:58:16.450
to where to lower the
cap to others have not
02:58:16.450 --> 02:58:18.310
just said they just
provided lower the cap.
02:58:18.310 --> 02:58:20.660
Maybe we need to get
stakeholder comment about,
02:58:21.870 --> 02:58:23.470
what's specific to what specific number.
02:58:23.470 --> 02:58:26.000
It seems like everybody's
been kind of coalescing around,
02:58:26.000 --> 02:58:27.100
well, not everybody, but it seems.
02:58:27.100 --> 02:58:28.700
Like two to four
thousand range.
02:58:28.700 --> 02:58:31.730
Yeah 4,500 being
the highest I think,
02:58:31.730 --> 02:58:33.370
and so getting a little bit,
02:58:33.370 --> 02:58:36.720
cause that is an important
mechanism, right?
02:58:36.720 --> 02:58:37.867
As we are in this energy only market,
02:58:37.867 --> 02:58:39.900
and we don't have hit
the price cut very often,
02:58:39.900 --> 02:58:43.000
but in terms of we are
gonna change the ORDC
02:58:43.000 --> 02:58:47.880
and there's, I think majority
support for lowering the cap,
02:58:47.880 --> 02:58:50.390
we're gonna change the
ORDC to what number
02:58:50.390 --> 02:58:53.340
and while we're at it, thinking about,
02:58:53.340 --> 02:58:54.780
are we gonna change the X,
02:58:54.780 --> 02:58:56.760
what are we gonna do
with the standard deviations?
02:58:56.760 --> 02:59:00.430
Just to run simulations,
to see what it does.
02:59:00.430 --> 02:59:03.710
Yeah and we don't
have to be married to
02:59:03.710 --> 02:59:06.520
the previous logic that
dictate that there's different.
02:59:06.520 --> 02:59:10.510
I mean, if the goal is to
get assets on the sideline,
02:59:10.510 --> 02:59:12.170
into generating posture,
02:59:12.170 --> 02:59:15.150
we might need to look at
heat rates and sparks spreads.
02:59:15.150 --> 02:59:15.983
I don't know.
02:59:15.983 --> 02:59:17.350
And how do you define reserve?
02:59:18.280 --> 02:59:20.650
Yeah well, again,
what's your target is
02:59:20.650 --> 02:59:22.520
the other thing I want us
to remember about ORDC
02:59:22.520 --> 02:59:25.370
what came out is the
ultimate impact of ORDC
02:59:25.370 --> 02:59:26.723
is on the forward prices,
02:59:27.692 --> 02:59:30.970
'cause everyone's having
to hedge to avoid the thing
02:59:31.880 --> 02:59:35.900
and so when we do, when, again,
02:59:35.900 --> 02:59:39.930
I think we need to
analyze cap submission,
02:59:39.930 --> 02:59:43.900
how that interplays the command
and control for ERCOT there,
02:59:43.900 --> 02:59:46.610
tied in with their reserve margin,
02:59:46.610 --> 02:59:51.180
that they feel that we need
a target reserve margin
02:59:51.180 --> 02:59:54.610
and then ORDC and what it does to shape
02:59:54.610 --> 02:59:56.320
or enhance those forwards.
02:59:56.320 --> 02:59:59.690
Because again, that's
good money into the market,
02:59:59.690 --> 03:00:02.600
theoretically for dispatchability
03:00:02.600 --> 03:00:03.740
depending on how it's designed.
03:00:03.740 --> 03:00:05.010
Yeah.
Right and how do you,
03:00:05.010 --> 03:00:07.360
how would you design
it to just provide money
03:00:07.360 --> 03:00:09.010
to dispatchable generation,
03:00:09.010 --> 03:00:10.750
if that is the will of
the Commission, right?
03:00:10.750 --> 03:00:11.920
So how would you do that?
03:00:11.920 --> 03:00:14.060
How, maybe a function
of that is defining
03:00:14.060 --> 03:00:15.940
what a reserve means
03:00:15.940 --> 03:00:19.020
and so the other piece
that I wanted to go back to
03:00:19.020 --> 03:00:22.280
in the ancillary service
suite is the black starts.
03:00:22.280 --> 03:00:24.850
It seems like there could
be some improvements there
03:00:24.850 --> 03:00:28.230
as well so that may
be another avenue that,
03:00:28.230 --> 03:00:31.980
or another area of sort of
product that we need to maybe
03:00:31.980 --> 03:00:33.620
look at it as well,
03:00:33.620 --> 03:00:36.010
to ensure that when we
need those black starts
03:00:36.010 --> 03:00:37.640
that they're available,
03:00:37.640 --> 03:00:40.370
we didn't have problems
during this last winter storm
03:00:40.370 --> 03:00:43.310
with those units and
I think pricing them
03:00:43.310 --> 03:00:45.760
and ensuring they have field security
03:00:45.760 --> 03:00:49.280
and really doing a robust
analysis of those units
03:00:49.280 --> 03:00:52.423
is also important if it's
not gonna necessarily,
03:00:53.690 --> 03:00:55.960
I don't know that that's
gonna be move big needles,
03:00:55.960 --> 03:00:58.330
but that's also something, as
we look at our market design,
03:00:58.330 --> 03:01:00.603
we're looking at
ancillary service products.
03:01:02.970 --> 03:01:04.650
We should be thinking about
03:01:04.650 --> 03:01:07.180
if there's anything we
need to do with Black start
03:01:07.180 --> 03:01:09.400
and I know ERCOT has
been doing some work on him,
03:01:09.400 --> 03:01:10.870
but maybe we reign it in
03:01:10.870 --> 03:01:13.480
and bring that information together
03:01:13.480 --> 03:01:15.977
and make sure we got that suite.
03:01:15.977 --> 03:01:18.853
Yeah, I mean that plays
into the overall resiliency,
03:01:20.170 --> 03:01:22.771
package that you want.
03:01:22.771 --> 03:01:23.783
Commissioner Glotfelty.
03:01:23.783 --> 03:01:26.143
I'm just sitting
down here listening,
03:01:27.340 --> 03:01:29.413
new guy on the block, taking it all in,
03:01:31.580 --> 03:01:33.330
I think there've been great ideas today,
03:01:33.330 --> 03:01:36.070
great discussions on ORDC
03:01:36.070 --> 03:01:41.070
and I just wanna make
sure that we realize
03:01:41.100 --> 03:01:43.810
that whenever we do some implementation,
03:01:43.810 --> 03:01:47.400
there's gonna be some
reaction by the market,
03:01:47.400 --> 03:01:48.730
hopefully positive,
03:01:48.730 --> 03:01:51.960
but we think there may be
something negative as well,
03:01:51.960 --> 03:01:55.700
but it will adapt, I do
believe it will adapt.
03:01:55.700 --> 03:01:59.150
I just, I haven't totally
gotten my head around
03:01:59.150 --> 03:02:01.440
all of the things that I
think we ought to do.
03:02:01.440 --> 03:02:04.343
So this has been hugely
helpful today to hear,
03:02:05.920 --> 03:02:08.340
Barbara, what you put
out in different markets
03:02:09.470 --> 03:02:13.950
and I think it's really a
really good Blackboard
03:02:13.950 --> 03:02:16.290
that we have of ideas that
03:02:16.290 --> 03:02:18.734
we're gonna end up coalescing around
03:02:18.734 --> 03:02:22.570
that is gonna really improve this market
03:02:22.570 --> 03:02:24.760
for the good of reliability.
03:02:24.760 --> 03:02:26.110
Yeah great.
03:02:26.110 --> 03:02:30.330
One thing I'll urge you to
do as you kind of liberate
03:02:30.330 --> 03:02:34.610
is that market design
sometimes takes time
03:02:34.610 --> 03:02:37.540
and is complex and requires
system changes and things
03:02:38.630 --> 03:02:43.630
talking to stakeholders
about near term solutions
03:02:44.280 --> 03:02:47.340
with the current suite of products,
03:02:47.340 --> 03:02:51.290
i.e how ERCOT is managing
the additional ancillary services
03:02:51.290 --> 03:02:53.570
they're procuring and
more transparency on that.
03:02:53.570 --> 03:02:56.070
So that loads really
know what their obligations
03:02:56.070 --> 03:02:58.120
are gonna be they can
start hedging around
03:02:58.120 --> 03:02:59.780
at what ERCOT is going to be doing
03:02:59.780 --> 03:03:02.040
related to those ancillary services.
03:03:02.040 --> 03:03:04.120
All of the things that
we're gonna be doing
03:03:04.120 --> 03:03:08.260
through kind of sometime in 2022,
03:03:08.260 --> 03:03:11.660
because these other
things we're talking about,
03:03:11.660 --> 03:03:14.070
although you can do
them somewhat quickly,
03:03:14.070 --> 03:03:17.550
but much of it's gonna require
some level of system change
03:03:17.550 --> 03:03:19.280
and effort on behalf of ERCOT
03:03:19.280 --> 03:03:22.230
at a time that's already,
there's a lot going on.
03:03:22.230 --> 03:03:26.660
So looking at how we're
managing the system today
03:03:26.660 --> 03:03:29.140
to make sure we're sending transparent
03:03:29.140 --> 03:03:32.000
and non-discriminatory
signals around the market
03:03:32.000 --> 03:03:36.250
is also something I would say
to get some feedback on that
03:03:36.250 --> 03:03:38.860
and what people think kind of is the,
03:03:38.860 --> 03:03:41.731
the next 12 months versus,
03:03:41.731 --> 03:03:44.920
the future of the ERCOT
market and the future design.
03:03:44.920 --> 03:03:47.283
So could I opine
on that a little bit?
03:03:48.430 --> 03:03:53.320
So I worked over in
the legislature for a bit
03:03:53.320 --> 03:03:56.800
and we have to start somewhere
03:03:56.800 --> 03:03:58.843
and so hat's the problem.
03:03:59.830 --> 03:04:02.700
My term runs out September 1st, 2025,
03:04:02.700 --> 03:04:05.090
and I do not want to be
catching a falling knife
03:04:05.090 --> 03:04:10.090
of 70% renewables on our system,
03:04:10.210 --> 03:04:12.660
dominant fuel source
and trying to back it up.
03:04:12.660 --> 03:04:17.660
So I do need the market
to understand now that yes,
03:04:18.200 --> 03:04:21.480
me personally, I don't
expect a lot of significant
03:04:21.480 --> 03:04:24.410
design change immediately
come January one,
03:04:24.410 --> 03:04:27.710
but I do expect us
to start conversations
03:04:27.710 --> 03:04:32.710
to where this market adapts
to the resource mix evolution,
03:04:33.020 --> 03:04:37.590
to where we do not suffer
reliability issues moving forward
03:04:37.590 --> 03:04:41.140
and so that we are moving in a tandem
03:04:41.140 --> 03:04:43.910
with the way the ERCOT
system is evolving
03:04:43.910 --> 03:04:46.770
and that's ultimately how I believe
03:04:46.770 --> 03:04:48.160
the Commission should proceed
03:04:48.160 --> 03:04:49.590
is to start those conversations,
03:04:49.590 --> 03:04:52.770
get them in study and get us
on the implementation schedule,
03:04:52.770 --> 03:04:55.823
to where the market knows
what to expect and how to comply.
03:04:57.500 --> 03:05:00.099
Long as it's consistent
with the legislative direction.
03:05:00.099 --> 03:05:01.344
That's true.
03:05:01.344 --> 03:05:05.490
And we, I think
we, like I said earlier,
03:05:05.490 --> 03:05:08.590
we need to find the
balance of recognizing,
03:05:08.590 --> 03:05:10.646
I think Mr. Stone said it that,
03:05:10.646 --> 03:05:13.240
well you made a good
point of this earlier.
03:05:13.240 --> 03:05:16.040
Like this is a lot of this
was designed around
03:05:16.040 --> 03:05:18.060
natural gas as a base fuel.
03:05:18.060 --> 03:05:21.930
We've got different
opportunities for new technologies,
03:05:21.930 --> 03:05:25.270
and we certainly want to take
advantage of the opportunity
03:05:25.270 --> 03:05:29.130
to generate power from a
zero marginal costs intermittent
03:05:29.130 --> 03:05:32.425
instead of burning $4 gas
during the times we can,
03:05:32.425 --> 03:05:37.110
but not at the expense
of reliability for Texans
03:05:37.110 --> 03:05:38.665
and so we've.
03:05:38.665 --> 03:05:39.498
In the economy.
03:05:39.498 --> 03:05:42.560
In the yes,
absolutely all the jobs
03:05:42.560 --> 03:05:44.030
these businesses create
03:05:45.200 --> 03:05:46.713
and so we need to,
03:05:48.846 --> 03:05:51.530
we need to recognize the
new opportunities and realities
03:05:51.530 --> 03:05:55.370
that are facing the market,
03:05:55.370 --> 03:06:00.030
but avoid letting the tail wag
the dog of our market design.
03:06:00.030 --> 03:06:04.950
We should make sure that we
always keep as our North star
03:06:04.950 --> 03:06:07.840
reliability and affordability
and a competitive construct
03:06:09.130 --> 03:06:14.130
that ensures that the market design
03:06:14.610 --> 03:06:19.610
dictates the outcomes we want
for our state and our economy.
03:06:21.369 --> 03:06:22.385
Great.
03:06:22.385 --> 03:06:25.653
Any other Canaan or Bar
any other parting thoughts?
03:06:27.260 --> 03:06:30.760
I guess, just to manage
expectations in terms
03:06:31.720 --> 03:06:34.620
of what I think Barbara
kind of touched on this,
03:06:34.620 --> 03:06:39.620
but without, trying to prejudice
the merit of the proposals,
03:06:40.950 --> 03:06:45.060
generally, what I would
say is the ORDC changes
03:06:45.060 --> 03:06:48.920
are easier for us to implement quickly.
03:06:48.920 --> 03:06:52.990
I would say that there will
need to be a substantive rule
03:06:52.990 --> 03:06:57.160
change if you wanna
move all off of $9,000.
03:06:57.160 --> 03:07:00.470
So that might be
something to contemplate
03:07:00.470 --> 03:07:05.470
and I would say the
ancillary service type changes,
03:07:07.040 --> 03:07:10.330
not that we would wanna
we need to get after it.
03:07:10.330 --> 03:07:11.740
So I agree with that point,
03:07:11.740 --> 03:07:14.030
but that will take longer as I try
03:07:14.030 --> 03:07:18.910
and get those into my
systems so that they move from
03:07:19.750 --> 03:07:21.017
the day ahead market system
03:07:21.017 --> 03:07:24.040
and to getting dispatched and so forth.
03:07:24.040 --> 03:07:28.420
So there are system
changes associated with those.
03:07:28.420 --> 03:07:33.180
So I just wanted to
share with you kind of that
03:07:33.180 --> 03:07:37.000
in terms of how quickly
we can turn things around.
03:07:37.000 --> 03:07:39.840
I think the AS type things
03:07:39.840 --> 03:07:42.990
are slightly more time consuming,
03:07:42.990 --> 03:07:45.332
The ORDC can be done fast.
03:07:45.332 --> 03:07:46.244
I appreciate that.
03:07:46.244 --> 03:07:50.411
So ORDC quick change
may require PUC rule change
03:07:53.277 --> 03:07:55.193
the ancillary services.
03:07:56.450 --> 03:07:58.530
One thing that I think
we need to consider
03:07:58.530 --> 03:08:01.600
if we're going to move
forward with these new products
03:08:01.600 --> 03:08:04.412
is trying to put as
much, (clears throat)
03:08:04.412 --> 03:08:06.410
create as many guard rails as we can
03:08:06.410 --> 03:08:08.950
over here at the PUC so
that we can get them done,
03:08:08.950 --> 03:08:12.190
hopefully a little bit
faster at ERCOT, right?
03:08:12.190 --> 03:08:14.020
Because if we just send a direction,
03:08:14.020 --> 03:08:16.410
then it's gonna be purely
stakeholder process
03:08:16.410 --> 03:08:17.320
market will change
03:08:17.320 --> 03:08:20.480
and I'm also wondering if EMS upgrade
03:08:20.480 --> 03:08:23.173
impacts any of these new products.
03:08:24.530 --> 03:08:29.140
It is likely to
fight for resources
03:08:29.140 --> 03:08:33.760
with implementing ancillary services
03:08:33.760 --> 03:08:37.490
and there could be some
lockdown time periods
03:08:37.490 --> 03:08:41.823
where we're trying to stabilize
EMS in terms of when we can,
03:08:42.860 --> 03:08:45.090
we might not be able to
even introduce the changes
03:08:45.090 --> 03:08:48.570
into that system while
it's trying to be stabilized.
03:08:48.570 --> 03:08:52.650
We will do the best
we can to fit all that in.
03:08:52.650 --> 03:08:57.500
and I do wanna emphasize
that all the ancillary services
03:08:57.500 --> 03:08:58.750
don't necessarily work the same.
03:08:58.750 --> 03:09:01.860
So for example, black start is procured,
03:09:01.860 --> 03:09:03.370
not on a daily basis,
03:09:03.370 --> 03:09:08.370
but on, I think it's a
two year now basis.
03:09:10.160 --> 03:09:13.240
So something that works
like that would look different
03:09:13.240 --> 03:09:17.360
than something that
I have to kinda clear
03:09:17.360 --> 03:09:21.840
with optimization with
energy and ancillary services.
03:09:21.840 --> 03:09:26.840
So that's why ECRs might
take longer than maybe a change
03:09:28.010 --> 03:09:29.040
to black start.
03:09:29.040 --> 03:09:31.860
So there is a differences within
03:09:31.860 --> 03:09:35.270
even the suite of ancillary services.
03:09:35.270 --> 03:09:36.720
And to be fair
03:09:36.720 --> 03:09:41.630
and I think the PUC rules at
this time don't have a lot of,
03:09:41.630 --> 03:09:44.363
I mean, all our products
are in our cup market rule.
03:09:45.580 --> 03:09:49.370
So the only difference
here I think would be
03:09:49.370 --> 03:09:54.013
to consider whether these
new products would be better
03:09:54.990 --> 03:09:59.523
housed in PUC rule to provide
more regulatory certainty,
03:10:01.540 --> 03:10:03.910
or you set up sort of the framework,
03:10:03.910 --> 03:10:06.160
and then you let ERCOT implement
03:10:06.160 --> 03:10:09.910
through market rule the details.
03:10:09.910 --> 03:10:12.290
True I mean but it
would need protocols
03:10:12.290 --> 03:10:15.300
and probably system changes depending on
03:10:15.300 --> 03:10:19.760
the product that you wanted
us to pursue or products.
03:10:19.760 --> 03:10:21.280
And in those market rules,
03:10:21.280 --> 03:10:24.450
you would be able to
still have the flexibility of,
03:10:24.450 --> 03:10:26.740
so you wouldn't be just be tied to,
03:10:26.740 --> 03:10:29.220
you'd have flexibility to do
things with those products
03:10:29.220 --> 03:10:30.483
like you currently do,
03:10:32.100 --> 03:10:35.720
but we would set the
framework in PUC rule potentially
03:10:35.720 --> 03:10:38.300
to add more regulatory certainty,
03:10:38.300 --> 03:10:40.760
which is a deviation to
where we currently are today
03:10:40.760 --> 03:10:42.430
with AS products.
03:10:42.430 --> 03:10:43.263
That's a good point.
03:10:43.263 --> 03:10:44.760
We certainly wanna, when we figure out
03:10:44.760 --> 03:10:45.593
what the blueprint is,
03:10:45.593 --> 03:10:48.790
we wanna build and we wanna
put belt and suspenders on it
03:10:48.790 --> 03:10:51.430
to make sure it's executed and yeah.
03:10:52.600 --> 03:10:55.870
Yeah, I wouldn't have too
many concerns either way.
03:10:55.870 --> 03:10:57.890
I mean, I think there
are protocols, first of all,
03:10:57.890 --> 03:11:00.180
you oversee the ERCOT protocols
03:11:00.180 --> 03:11:01.760
and approved the ERCOT protocols.
03:11:01.760 --> 03:11:04.620
So the Commission's sort of role in this
03:11:04.620 --> 03:11:08.610
is to provide that guidance
on what the best practice
03:11:08.610 --> 03:11:11.933
based on the conclusions
you're making in this proceeding.
03:11:12.860 --> 03:11:15.030
But I think that ERCOT protocols
03:11:15.030 --> 03:11:18.660
are kind of the natural
place for the details
03:11:18.660 --> 03:11:21.044
it fits best in those,
03:11:21.044 --> 03:11:23.910
and might actually increase
the complexity if you separate
03:11:23.910 --> 03:11:25.180
have certain ancillary services
03:11:25.180 --> 03:11:26.420
that are only in the protocols
03:11:26.420 --> 03:11:28.580
and certainly on ancillary
services that are more
03:11:28.580 --> 03:11:31.880
directed through PUC rule it, I think,
03:11:31.880 --> 03:11:35.310
just out of a transparency
for market participants,
03:11:35.310 --> 03:11:37.840
you're probably best
suited to have those,
03:11:37.840 --> 03:11:39.930
have the Commission guidance,
03:11:39.930 --> 03:11:43.290
put those into the
details into the protocols
03:11:43.290 --> 03:11:45.910
with regard to things like a,
03:11:45.910 --> 03:11:50.910
the LLP study and setting
a reserve margin to move to
03:11:53.460 --> 03:11:56.836
and how these ancillary
services play into,
03:11:56.836 --> 03:11:59.830
that does sort of
kind of fall to a more,
03:11:59.830 --> 03:12:03.050
oversight kind of rule.
03:12:03.050 --> 03:12:05.645
But when you get into the
details of sort of the market
03:12:05.645 --> 03:12:07.703
products, I think I would urge you to
03:12:07.703 --> 03:12:09.490
sort of keep those into the protocols.
03:12:09.490 --> 03:12:13.410
Sure the problem
is things tend to die
03:12:13.410 --> 03:12:16.020
in stakeholder processes in ERCOT
03:12:16.020 --> 03:12:18.400
and they die for a long time
03:12:20.693 --> 03:12:23.639
and so nothing ever comes
out of them sometimes
03:12:23.639 --> 03:12:25.250
and so I concur with Commissioner Cobos
03:12:25.250 --> 03:12:27.520
in terms of sometime
a parallel proceeding
03:12:28.580 --> 03:12:32.070
to maybe more directive
and not as detail oriented,
03:12:32.070 --> 03:12:36.720
but requiring ERCOT to
provide some type of service
03:12:36.720 --> 03:12:38.760
that's fits a certain profile
03:12:38.760 --> 03:12:40.010
and then you work out the details.
03:12:40.010 --> 03:12:41.780
Yeah I think that is.
At the end of the day,
03:12:41.780 --> 03:12:43.840
state of Texas is telling you to do it
03:12:43.840 --> 03:12:48.650
and so that seems consistent
with the oversight approach.
03:12:48.650 --> 03:12:52.610
And the newly reinforced
seventh legislature's complete
03:12:52.610 --> 03:12:57.220
and total oversight posture.
03:12:57.220 --> 03:12:59.310
All right well, thank all of you.
03:12:59.310 --> 03:13:03.570
Thank you both of you
for it's been a long day
03:13:03.570 --> 03:13:07.490
and thank you to all of our
panelists and participants.
03:13:07.490 --> 03:13:10.090
This is immensely productive for me.
03:13:10.090 --> 03:13:12.340
I hope it is equally
productive for y'all
03:13:13.677 --> 03:13:16.690
and we will not be going
into closed session today.
03:13:16.690 --> 03:13:18.140
So having no further business,
03:13:18.140 --> 03:13:20.610
this meeting of the Public
Utility Commission of Texas
03:13:20.610 --> 03:13:22.576
is hereby adjourn.
03:13:22.576 --> 03:13:25.493
(gravel hammering)