WEBVTT 00:00:05.290 --> 00:00:08.350 Afternoon, this meeting of Public Utility Commission 00:00:08.350 --> 00:00:09.880 is now back in session. 00:00:09.880 --> 00:00:12.180 We'll move on to our ancillary services panel with, Randa, 00:00:12.180 --> 00:00:16.670 Sorry, we have our weatherization item. 00:00:16.670 --> 00:00:20.830 We're gonna move to and table item four, 00:00:20.830 --> 00:00:23.350 moved to item 10 for weatherization 00:00:23.350 --> 00:00:25.330 staff is prepared to proposals for publication 00:00:25.330 --> 00:00:29.340 for a new rule related to weather emergency preparedness 00:00:29.340 --> 00:00:32.830 that we've all familiar with and discussed exhaustively 00:00:32.830 --> 00:00:34.940 this proposal relates to one of the Commissions. 00:00:34.940 --> 00:00:36.983 Well, whether development standards, 00:00:39.650 --> 00:00:40.850 I think we, like I said, 00:00:40.850 --> 00:00:44.180 we've all been part of a robust stakeholder process 00:00:44.180 --> 00:00:45.380 and lots of discussions. 00:00:47.500 --> 00:00:51.020 I'll open up the floor for discussions, questions for staff. 00:00:51.020 --> 00:00:52.110 Do we want to call it? 00:00:52.110 --> 00:00:53.760 We can call it Barksdale English. 00:00:56.040 --> 00:00:59.950 Anyone else from staff who maybe needed, 00:00:59.950 --> 00:01:02.610 I've turned over questions, comments, 00:01:02.610 --> 00:01:05.660 or we can discuss timing for final adoption 00:01:05.660 --> 00:01:08.920 on other a few options there. 00:01:08.920 --> 00:01:13.420 Any, questions or comments before we get to the timeline? 00:01:13.420 --> 00:01:14.547 You good? 00:01:14.547 --> 00:01:17.520 I have one item that I need to pull up the hard copy 00:01:17.520 --> 00:01:19.248 so I could mention it. 00:01:19.248 --> 00:01:20.820 (clears throat) 00:01:20.820 --> 00:01:25.820 Specifically, one minute, on page nine of the proposal, 00:01:37.250 --> 00:01:38.503 subsection two. 00:01:39.614 --> 00:01:40.520 Okay. 00:01:40.520 --> 00:01:43.020 There is a language in there that says 00:01:43.020 --> 00:01:44.590 by December 1st, 2021, 00:01:44.590 --> 00:01:46.920 a generation entity must submit to ERCOT 00:01:47.840 --> 00:01:49.780 a form prescribed by ERCOT and developed 00:01:49.780 --> 00:01:52.050 in consultation with Commission staff, 00:01:52.050 --> 00:01:54.013 a winter weather readiness report. 00:01:55.210 --> 00:01:56.940 I had visited with staff about this during, 00:01:56.940 --> 00:01:59.250 when we had an opportunity to review the draft, 00:01:59.250 --> 00:02:01.110 a proposal for a publication 00:02:01.110 --> 00:02:06.110 and(clears throat) had offered a proposed addition 00:02:06.810 --> 00:02:09.330 to this language that would be better 00:02:09.330 --> 00:02:11.400 discussed that here in open meetings 00:02:11.400 --> 00:02:13.440 and it was a substantive change 00:02:13.440 --> 00:02:17.140 and I was interested in hearing your thoughts on whether or 00:02:17.140 --> 00:02:21.530 not we should include or require the generation entity to 00:02:21.530 --> 00:02:24.470 submit the winter weather readiness report 00:02:24.470 --> 00:02:26.920 to the Commission and ERCOT 00:02:27.770 --> 00:02:30.800 and I know ERCOT is gonna be providing us a summary report 00:02:30.800 --> 00:02:32.550 with a variety of information 00:02:32.550 --> 00:02:35.350 regarding the generation entities compliance. 00:02:35.350 --> 00:02:39.670 But I do think it's important that to have the generation 00:02:39.670 --> 00:02:42.810 entities file the report at the Commission, 00:02:42.810 --> 00:02:46.270 because those reports are gonna include the attestations 00:02:46.270 --> 00:02:48.490 from the executives with binding authority 00:02:49.380 --> 00:02:52.630 and so I think as a matter of ensuring our oversight 00:02:52.630 --> 00:02:55.530 over the standards that we have, 00:02:55.530 --> 00:02:58.753 that report filed at the Commission and at ERCOT. 00:02:59.660 --> 00:03:01.310 So adding language, it says, 00:03:01.310 --> 00:03:03.563 submit at the Commission and ERCOT. 00:03:05.230 --> 00:03:06.600 Good afternoon, Barksdale English 00:03:06.600 --> 00:03:08.810 on behalf of Commission staff. 00:03:08.810 --> 00:03:10.870 Commissioner Cobos, so I think we can add that language 00:03:10.870 --> 00:03:13.443 if that's the direction of the Commission. 00:03:15.150 --> 00:03:17.540 Yeah, just as simply adding the phrase, 00:03:17.540 --> 00:03:21.010 the Commission and to ERCOT and the Commission 00:03:21.010 --> 00:03:23.120 form prescribed, et cetera. 00:03:23.120 --> 00:03:26.720 Yes, a generation entity must submit 00:03:26.720 --> 00:03:28.547 to the Commission and ERCOT. 00:03:30.490 --> 00:03:32.753 On the form prescribed, et cetera, et cetera. 00:03:33.870 --> 00:03:34.933 Works for me. 00:03:36.420 --> 00:03:41.240 All right, so we'll any motion will be in regards to 00:03:41.240 --> 00:03:43.670 the proposal for publication as amended 00:03:43.670 --> 00:03:44.953 per Commissioner Cobos. 00:03:47.130 --> 00:03:48.080 Yes. 00:03:48.080 --> 00:03:50.830 Request in terms of timing, 00:03:50.830 --> 00:03:52.610 I know staff laid out several options. 00:03:52.610 --> 00:03:54.100 We obviously, as we've discussed 00:03:54.100 --> 00:03:55.790 working on an accelerated timeline, 00:03:55.790 --> 00:04:00.790 both to adhere to the legislative deadlines 00:04:00.900 --> 00:04:02.210 from the 87th legislature, 00:04:02.210 --> 00:04:07.210 but also to make sure that our generation fleet 00:04:07.220 --> 00:04:09.330 is more resilient going into this one winter 00:04:09.330 --> 00:04:11.132 than it was going into last winter. 00:04:11.132 --> 00:04:16.132 Most importantly, as such given the timelines, 00:04:18.360 --> 00:04:22.690 the tight timeline and in consideration of make sure 00:04:22.690 --> 00:04:24.760 consideration making sure the generators have time 00:04:24.760 --> 00:04:27.490 to implement, turn the wrenches 00:04:27.490 --> 00:04:32.020 and fastened to bolts on these improvements. 00:04:32.020 --> 00:04:34.506 They have time to implement these changes 00:04:34.506 --> 00:04:37.280 and these are the weatherization requirements. 00:04:37.280 --> 00:04:39.230 We're looking to accelerate a timeline. 00:04:40.170 --> 00:04:43.820 If we published the proposal today, 00:04:49.500 --> 00:04:52.140 it technically will not appear in the register 00:04:52.140 --> 00:04:56.730 until September 10th due to the print timeline of that, 00:04:56.730 --> 00:05:00.010 but it will be available online immediately. 00:05:00.010 --> 00:05:04.030 So given both the fact that it will be available online 00:05:04.030 --> 00:05:07.550 immediately for stakeholders to review, process 00:05:07.550 --> 00:05:09.090 and comment on prepare comments on, 00:05:09.090 --> 00:05:12.200 and the fact that we've had such a robust 00:05:13.230 --> 00:05:17.920 and thorough stakeholder process, both staff-level 00:05:17.920 --> 00:05:19.530 and with this Commission, 00:05:19.530 --> 00:05:23.723 I'm comfortable moving forward with the date, 00:05:27.660 --> 00:05:30.400 the proposed timeline that gives us an effective date 00:05:30.400 --> 00:05:32.490 of the rule of November 3rd 00:05:32.490 --> 00:05:34.470 would leave a three week comment period 00:05:34.470 --> 00:05:35.920 from online posting, 00:05:35.920 --> 00:05:38.690 it would only be in the register for six days, 00:05:38.690 --> 00:05:42.803 but the public would have a full 21 days to review that. 00:05:45.630 --> 00:05:48.230 But I think we'll see in the timeline. 00:05:48.230 --> 00:05:50.777 I'm comfortable with that, but it happy 00:05:50.777 --> 00:05:53.593 to hear your thoughts otherwise. 00:05:55.320 --> 00:05:58.400 Mr. Meltzer, does that comply our 00:05:58.400 --> 00:06:02.733 statutory and tax obligations on comment period. 00:06:04.540 --> 00:06:06.375 Davidson Meltzer, Commission staff. 00:06:06.375 --> 00:06:07.208 (clears throat) 00:06:07.208 --> 00:06:08.850 Yes we believe it does as we've discussed before, 00:06:08.850 --> 00:06:12.070 there's not a minimum comment period other than 00:06:12.070 --> 00:06:12.960 members of the public 00:06:12.960 --> 00:06:15.470 must be given a reasonable opportunity for comment 00:06:15.470 --> 00:06:18.260 and so we think that this is after the notice 00:06:18.260 --> 00:06:19.940 and the register that should be sufficient 00:06:19.940 --> 00:06:22.470 three weeks plus all the process they've gotten before 00:06:22.470 --> 00:06:25.560 should be enough and it gives us a little bit of, 00:06:25.560 --> 00:06:26.610 we can get it done quickly, 00:06:26.610 --> 00:06:30.070 but it gives flexibility before our statutory deadline 00:06:30.070 --> 00:06:32.570 if you guys need an extra open meeting 00:06:32.570 --> 00:06:35.570 to consider it on the backend or anything like that, 00:06:35.570 --> 00:06:38.850 but that is what we have laid out is option one 00:06:38.850 --> 00:06:41.930 in the materials we gave to you is statutorily fine 00:06:41.930 --> 00:06:45.830 and we're ready to do it, if that's your preference. 00:06:45.830 --> 00:06:46.700 And they also lines up 00:06:46.700 --> 00:06:50.770 with the customary Texas register posting halo. 00:06:50.770 --> 00:06:51.770 Yes, sir. Okay. 00:06:54.720 --> 00:06:55.610 I agree with the 00:06:55.610 --> 00:06:56.880 faster timeline. Okay. 00:06:56.880 --> 00:06:57.713 Good deal. 00:06:57.713 --> 00:06:58.546 I agree. 00:06:59.490 --> 00:07:02.670 All right, in that case, 00:07:02.670 --> 00:07:07.520 is there a motion to propose new substantive rule 25.55 00:07:07.520 --> 00:07:09.500 for publication and public comment 00:07:09.500 --> 00:07:12.390 where they comment deadline of September 16th? 00:07:12.390 --> 00:07:13.753 So move. Second. 00:07:15.543 --> 00:07:18.700 And we've got a motion and a second all in favor, say aye, 00:07:18.700 --> 00:07:20.100 Aye. 00:07:20.100 --> 00:07:21.280 Motion passes. 00:07:21.280 --> 00:07:23.900 And chairman we understand that motion to have included 00:07:23.900 --> 00:07:25.390 Commissioner Cobos this direction. 00:07:25.390 --> 00:07:26.223 Yes. 00:07:26.223 --> 00:07:27.056 Thank you. Thank you 00:07:27.056 --> 00:07:27.889 for the clarification. 00:07:28.800 --> 00:07:30.983 All right, thank you, gentlemen. 00:07:30.983 --> 00:07:35.690 I appreciate the accelerated timeline to get to this point. 00:07:37.044 --> 00:07:39.910 I know it's a lot of work in fast maneuver. 00:07:39.910 --> 00:07:41.083 Happy to do it. 00:07:42.590 --> 00:07:44.050 That concludes item number 10. 00:07:44.050 --> 00:07:46.350 We will go back to item number four and bring up our 00:07:46.350 --> 00:07:49.500 ancillary services panel Randa Stephenson from LCRA 00:07:49.500 --> 00:07:54.170 Bill Berg Exelon and Scott Gahn from Just energy. 00:07:54.170 --> 00:07:55.003 Welcome all. 00:08:07.640 --> 00:08:08.517 Randa is up first. 00:08:08.517 --> 00:08:11.610 All right good afternoon. 00:08:11.610 --> 00:08:13.720 I'm Randa Stephenson 00:08:13.720 --> 00:08:16.850 and I am the chief commercial officer at LCRA 00:08:16.850 --> 00:08:20.270 and one of my responsibilities is portfolio management. 00:08:20.270 --> 00:08:23.420 So I did want to just veer off for a minute 00:08:23.420 --> 00:08:25.940 to clarify something about unit commitment 00:08:25.940 --> 00:08:27.633 and how generators are committed. 00:08:28.970 --> 00:08:33.190 In our current operating plan these are obviously plans, 00:08:33.190 --> 00:08:36.390 which we make sure our plans are shown as available 00:08:37.530 --> 00:08:41.210 and we do these, on a week out basis 00:08:41.210 --> 00:08:44.360 and they are updated as soon as possible 00:08:44.360 --> 00:08:46.363 from a generation a resource standpoint, 00:08:47.260 --> 00:08:50.293 but having a portfolio that you have generation and load, 00:08:51.290 --> 00:08:53.270 there's a lot of different things we have to manage 00:08:53.270 --> 00:08:57.330 day to day and things that change like the weather, 00:08:57.330 --> 00:09:00.160 the wind forecast, gas prices, 00:09:00.160 --> 00:09:03.010 these are all things that clear daily 00:09:03.010 --> 00:09:05.190 and so the reason you probably, 00:09:05.190 --> 00:09:08.830 I understand what he's concerned about, 00:09:08.830 --> 00:09:11.420 getting a better understanding of which units would be 00:09:11.420 --> 00:09:12.900 committed or not. 00:09:12.900 --> 00:09:14.700 Sometimes we just don't have the information 00:09:14.700 --> 00:09:18.990 to commit a unit until the day before 00:09:18.990 --> 00:09:22.030 and also until the day ahead, market clears, 00:09:22.030 --> 00:09:24.300 usually by the time the day ahead market clears, 00:09:24.300 --> 00:09:27.660 I then know if it's economical to run my unit 00:09:27.660 --> 00:09:29.380 or to buy from the market. 00:09:29.380 --> 00:09:31.610 As a result of the then. 00:09:31.610 --> 00:09:33.020 Correct pricing. 00:09:33.020 --> 00:09:34.440 Correct exactly. Pricing. 00:09:34.440 --> 00:09:36.430 And so that's one thing to consider 00:09:36.430 --> 00:09:39.500 as we look at improvements 00:09:39.500 --> 00:09:41.840 is just like ERCOT doesn't have great weather 00:09:41.840 --> 00:09:45.120 or wind forecast a week out, neither do generators, 00:09:45.120 --> 00:09:46.130 neither do load. 00:09:46.130 --> 00:09:48.750 I mean, this is an issue on both of our sides. 00:09:48.750 --> 00:09:50.600 So just one point, 00:09:50.600 --> 00:09:53.070 and if you all are ever interested in knowing more, 00:09:53.070 --> 00:09:56.060 we can talk to you about our real-time operations 00:09:56.060 --> 00:09:59.860 and our dispatch floor with the trading group. 00:09:59.860 --> 00:10:02.536 So kind of give you a little more detail on that so. 00:10:02.536 --> 00:10:07.080 Randa on that and it's, thank you for bringing it up 00:10:07.080 --> 00:10:10.940 and in terms of the operation of the market 00:10:10.940 --> 00:10:13.830 any type of significant change will necessitate 00:10:13.830 --> 00:10:17.840 in depth stakeholder review 00:10:17.840 --> 00:10:20.470 and to work through those specific nuances 00:10:20.470 --> 00:10:22.290 of the market, it's not like it would, 00:10:22.290 --> 00:10:25.160 it could happen overnight to a degree that 00:10:25.160 --> 00:10:27.838 we change foundational processes within the system. 00:10:27.838 --> 00:10:28.920 Yes correct. 00:10:28.920 --> 00:10:33.920 But if, there's gotta be a way to reconcile 00:10:34.860 --> 00:10:39.110 Woody's engineering and operational concerns 00:10:39.110 --> 00:10:41.180 and that of the market operations, 00:10:41.180 --> 00:10:46.000 if it's a matter of building in other more forward-looking 00:10:46.000 --> 00:10:48.370 constructs, again the foreign markets, 00:10:48.370 --> 00:10:51.920 go out indefinitely before real time. 00:10:51.920 --> 00:10:53.960 Correct. And it's a, 00:10:53.960 --> 00:10:58.720 there's got to be a way to establish markers 00:10:58.720 --> 00:11:02.060 that ancillary services guide off of, 00:11:02.060 --> 00:11:07.060 and then that ERCOT operators can make significant decisions 00:11:08.880 --> 00:11:13.880 based on to have adequate resources available in real time 00:11:14.000 --> 00:11:15.440 with enough lead time to where 00:11:15.440 --> 00:11:17.993 they can evaluate all that information. 00:11:19.000 --> 00:11:20.280 Would you disagree with that? 00:11:20.280 --> 00:11:22.270 No, I agree 100% with you. 00:11:22.270 --> 00:11:23.930 I actually think what I'm presenting today 00:11:23.930 --> 00:11:26.640 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. 00:11:29.400 --> 00:11:32.130 It is going to be a forward looking, 00:11:32.130 --> 00:11:33.990 seasonal or annual contract 00:11:33.990 --> 00:11:36.862 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)