WEBVTT
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Good morning.
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This meeting of the Public
Utility Commission of Texas
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will come to order to consider matters
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that have been duly posted
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with the Secretary of State of Texas
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for October 14th, 2021 for the record.
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My name is Peter Lake
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and with me today are, Will McAdams,
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Lori Cobos and Jimmy Glotfelty.
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For today's work session we
will only be taking up item 23.
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We've concluded business
one, two and three?
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Yes, sir.
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Outstanding across the board.
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Going to item 23, as I
think most of you know
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we have a full slate of
speakers and topics today.
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So let me lay out a few
logistics to kick us off.
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We'll start off with
commentary from Brattle
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on concept and examples
over liability standards.
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Then ERCOT staff will
discuss near term improvements
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that compliment our
overall market design efforts
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and design discussion.
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After those presentations,
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we will begin our panel discussions.
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Each panelist will get up to
eight minutes of uninterrupted
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presentation time.
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At which point we're all
good with holding questions
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until each panelist has
concluded their presentation.
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Also, Commissioner
McAdams has filed a memo
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on this docket that
we will take after lunch
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during our open discussion period.
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And then after lunch,
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we will wrap up with some commentary
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and feedback on the discussion
that was had in the morning
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from both Brattle and Potomac economics.
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We'll aim optimistically
for noon-ish lunch.
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And whenever we do take lunch,
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it will definitely be
at least 45 minutes
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over 30 minute lunch ambitions.
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But before we begin the formal agenda,
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I'll offer a few comments.
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And of course we'd love to hear comments
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from my fellow Commissioners.
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As you all know, today is the last part
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of what has been an
extensive, robust and exhaustive
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stakeholder engagement process.
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As part of this market redesign effort.
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And going forward, we will
be switching to the final stage
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of the market design as
this Commission crafts,
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what will eventually be the
blueprint for ERCOT market
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redesigned to be delivered in December.
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Of course, we will
continue to take input
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as we go through different
draft versions of that blueprint,
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but the next 60 days
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or so will be intense for
all of us and all involved
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decisions that are gonna
start being made rapidly.
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So for myself and all of her Commission,
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staff and stakeholders brace yourselves,
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this is gonna start moving very quickly.
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At the end of the day,
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market redesign is
about reliability for Texas.
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I've said it before,
and I'll remind everyone
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here in watching at home
that the paramount goal
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is reliability for Texas,
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not preserving business
models or propping up profits.
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We have plenty of generation in Texas,
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but a third of it can vanish
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if the wind stops blowing the sun stops
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or the clouds cover
the sun in West Texas,
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and it's hot and sunny
in Dallas and Houston
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or natural gas stops flowing.
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And if those things happen,
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that leaves us with a
reserve margin of almost zero.
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I have been and will
continue to be harshly honest
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about the pros and cons of each type
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of resource we have.
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Some of the highlights of wind and solar
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are the self-contained supply chain.
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You don't have to worry
about the supply chain
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that we're all dealing with
and reading about with shirts,
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ice tea, computer chips,
supply chains around the world,
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wind and solar don't have that problem.
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They're self-contained,
which is a tremendous feature.
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Their marginal cost of
operating is also a great benefit
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of wind and solar, especially
when natural gas goes to $6.
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And that's a tremendous
benefit operationally
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for our market participants,
but also at the end of the day
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our consumers in Texas.
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The downside of course,
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is the wind can stop blowing
and clouds can cover the sun.
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And we can't control
either of those factors.
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Just like anything else, natural gas
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and coal have pros and cons.
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They're dispatchable, we can
turn them on and they generally
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run as long as we need them.
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Of course, the downside
is machinery breaks
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and sometimes gas stops flowing.
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Supply chain issues, hit coal and gas,
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just like everything else.
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So again, we will be harshly
honest about pros and cons
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of each of these resources,
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but the bottom line is we
need to firm up our power grid.
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You're up in California,
learning hard lessons
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right now about ignoring the realities
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of their resource mix.
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And they're facing the
biggest energy crisis
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in a generation.
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We will not fall victim to the fallacy
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that averages are always accurate.
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As we all know wind blowing,
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clouds cover the sun and
sometimes natural gas doesn't flow.
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This Commission will
not structure a market
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around hoping averages
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all are always exactly on average.
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Hope is not a strategy
and we're skydiving.
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You can only be wrong once.
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The Texas economy...
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Turning off the Texas
economy is the most expensive
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downside scenario we have.
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Texas will not sacrifice
its own businesses,
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and safety of its citizens
on the false premise
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that we can have a reliable grid
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without reliable generation.
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And that cuts across all resource types.
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We will leverage the
benefits of each resource type.
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We'll optimize our portfolio
of generating assets,
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and we're gonna hold all of our market
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participants accountable.
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Look forward to hearing your ideas
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about how we accomplish
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this and as all the mechanics of doing
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so as always the
(indistinct) in the details.
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At this point, I'll open up for comments
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from my fellow Commissioners.
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Sure, I did prepare
a few statements
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for this morning's work session.
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And first of all, I would like
to thank my fellow colleagues
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for all their hard
work on these critically
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important matters.
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Having been through
this type of discussion
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years ago, I know exactly
how complex technical
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important and challenging
these discussions are.
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There's a lot of hard work
that goes into coming up
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with proposals and a lot of factors
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that impact how you
develop those proposals.
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And I have had the
experience of working with many
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of you on these topics
several years ago.
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And I wanna thank you for
your hard work and feedback.
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I wanna thank staff
and the Brattle group
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for their work on these
important matters.
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I echo many of the words
that Chairman Lake said today,
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and I think it's really
important that we focus
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on making market design
changes that help ensure year-round
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reliability and address
specific operational issues
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like the cold weather events
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and periods where there is
higher than expected demand
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with lower than expected
generation output.
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Because as Chairman
Lake has highlighted,
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that is across all generation types,
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whether solar and wind drops off,
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or we have a higher than
expected amount of thermal
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generation outages.
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From my perspective, I view
this workshop as an opportunity
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to identify potential
short-term, mid-term
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and long-term solutions
that can help us restore
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public trust and ensure
your year-round reliability
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is our market continues
to evolve in the future,
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and our state continues
to expand from a population
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and economic standpoint.
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Thank you very much.
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Thank you, Mr. Chairman.
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I don't have any prepared remarks,
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but in the spirit of
speaking to the moment,
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this Commission was
comprised constituted,
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appointed selected by the
Governor to make the hard choices.
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Nationally, globally the
industry that supports
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one of humanity's most
ubiquitous essential services,
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that's now enshrined and
ingrained in every aspect
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of our daily lives is being
disrupted at a transformational
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moment with new and
innovative technologies,
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new resources that offer
the public great benefit
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on the part of affordability
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and just self regeneration.
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I mean, there's no into
it, and this is a good thing.
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Our task and our mission is
to harmonize this new resource
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with the interests of our economy
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and the reliability of the system.
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And so we must
harness this and integrate
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it in a way that solves for concerns
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that all three aspects of
the problem present to us.
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So with that, I appreciate
the work that everyone's done.
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I think the legislature, the Governor,
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the public is crying out for a new model
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in ERCOT that again toward
that drive toward harmonization
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sends the appropriate signals
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and takes the safety
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and the physical status of the consumer
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out of this equation.
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We pay for performance
and we pay for that surety
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that when we call that consumer
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to turn off, it is that
effect of last resort.
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And I think that's what these briefings,
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what these proposals
are designed to address
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in one way or another.
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And I think the work that we
have done in no way speaks
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criticizes discriminates
against or considers taking
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punitive action against
any particular resource,
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it is simply designed to
harmonize new and intermittent
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affordable power
sources within the system
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that we have today.
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And our task is to set that framework
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and our non-negotiables
so that everybody
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can move forward and
innovate toward a better outcome
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for the public interests.
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Thank you, Mr. Chairman
for leading on this issue.
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I don't have prepared
remarks either.
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I think short and
sweet is probably better
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we have a long day ahead of us.
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I do wanna thank all the participants
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for putting in the time
writing comments,
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spending resources to analyze models,
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trying to understand
each other's proposals.
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I wanna thank you for your comments.
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And I think I want to
chastise you for filing
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so many of them.
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(laughing)
00:12:00.900 --> 00:12:05.900
On behalf of all of us,
you all have done a great
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amount of work.
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And I think it shows that
everybody has confidence
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in this market and that we
believe it it's the best market
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in the world.
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And we can't afford to lose that.
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So what we're gonna do is we're gonna
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fix it to make sure that the issues
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that the chairman mentioned,
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and the other Commissioners mentioned
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are we're not doing a
wholesale restructuring
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of the entire market.
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We know a lot of it works,
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but if we can make some
small efforts to improve
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our reliability to make
that the paramount concern,
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I think we're gonna have an
even better economic growth
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in the state.
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And we're gonna allow all the resources
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that we have, that are
given to us, solar, wind gas.
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We have...
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We are blessed with all of
those resources in Texas,
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and we ought to be able to use them.
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Just think those in Connecticut,
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they've got a pipe in natural gas.
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We have it right here.
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So we ought to not fight
against each other and figure
00:13:12.980 --> 00:13:16.200
out what's best for the
state and the economy
00:13:17.090 --> 00:13:20.650
so that we can continue to be the model.
00:13:20.650 --> 00:13:21.483
Thanks.
00:13:22.440 --> 00:13:23.273
Thank you all.
00:13:24.110 --> 00:13:26.040
At this point, we'll
start the formal agenda
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with the (indistinct).
00:13:34.800 --> 00:13:35.633
Good morning.
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Is the mic working?
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Can people on... Can
we tell that people online
00:13:42.810 --> 00:13:45.430
can hear me 'cause
there's no mic on my phone.
00:13:45.430 --> 00:13:46.650
Got it, thank you.
00:13:46.650 --> 00:13:48.430
Well, good morning.
00:13:48.430 --> 00:13:51.913
It's really great to be
here with all of you.
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Many of you, I saw a
(indistinct) about 10 years
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ago when we were
facing similar questions
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and it's good to see
a lot of old friends.
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Now we are here because
the system has been tested
00:14:07.550 --> 00:14:10.910
and failed in a very,
very big way in February.
00:14:10.910 --> 00:14:15.710
And because the fleet is
changing and ways far beyond
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what we even thought about 10 years ago,
00:14:17.810 --> 00:14:22.259
that requires taking a fresh
look at the market design
00:14:22.259 --> 00:14:26.890
and making it better
according to the objectives
00:14:26.890 --> 00:14:29.853
we just heard from the
Commissioners just now.
00:14:31.520 --> 00:14:35.629
And it's for us it's really
an honor to be involved
00:14:35.629 --> 00:14:38.330
in this most important matter.
00:14:38.330 --> 00:14:41.450
Our role is to take a very critical look
00:14:41.450 --> 00:14:43.570
and an informed and analytical look
00:14:43.570 --> 00:14:46.190
at all the possible solutions
to help the Commission
00:14:46.190 --> 00:14:49.048
come up with a market
design that supports
00:14:49.048 --> 00:14:50.890
their objectives.
00:14:50.890 --> 00:14:54.350
And today we will...
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Actually what I wanna do
right now is just help frame
00:14:58.040 --> 00:15:03.040
the discussion for so
that today is informative
00:15:03.480 --> 00:15:07.040
to the Commissioners
because they actually have to...
00:15:07.040 --> 00:15:07.873
And we'll help them.
00:15:07.873 --> 00:15:10.123
They have to come up
with a plan by next week.
00:15:13.946 --> 00:15:16.703
So with that, where I'd like to start
00:15:17.980 --> 00:15:21.980
is based on our having
talked to the Commissioners
00:15:21.980 --> 00:15:24.142
and having talked to market participants
00:15:24.142 --> 00:15:28.393
and having looked
closely at this market.
00:15:30.350 --> 00:15:31.183
We're here...
00:15:31.183 --> 00:15:32.310
And by the way I'm
here with my colleague
00:15:32.310 --> 00:15:33.320
Kathleen (indistinct),
00:15:33.320 --> 00:15:36.090
so you'll also hear from later today.
00:15:36.090 --> 00:15:40.670
And we're hearing two distinct problems
00:15:40.670 --> 00:15:41.920
that we're here to solve.
00:15:43.740 --> 00:15:46.513
So one is supply adequacy,
00:15:47.860 --> 00:15:49.910
and that is what that
means is making sure
00:15:49.910 --> 00:15:53.663
there's always enough supply
available to meet demand,
00:15:54.530 --> 00:15:56.900
whether it's very
cold, like in February,
00:15:56.900 --> 00:15:59.170
or it's very hot, or
the wind isn't blowing
00:15:59.170 --> 00:16:00.420
or the sun isn't shining.
00:16:01.259 --> 00:16:06.259
And that is the, I see
as the primary challenge,
00:16:08.870 --> 00:16:10.220
that's what happened in...
00:16:10.220 --> 00:16:12.283
That's what the problem was in February.
00:16:13.470 --> 00:16:16.690
And now to solve this we
do have to sharpen a little bit
00:16:16.690 --> 00:16:20.268
what we mean by how
reliable do we want it?
00:16:20.268 --> 00:16:23.190
Are we doing, we wanna
be prepared for a repeat
00:16:23.190 --> 00:16:24.540
of the weather in February.
00:16:24.540 --> 00:16:25.400
Do we want to...
00:16:25.400 --> 00:16:28.226
You hear about these
sort of probabilistic analysis
00:16:28.226 --> 00:16:32.590
that we wanna have enough
supply to meet demand,
00:16:32.590 --> 00:16:35.593
all but some very diminimous
percentage of the time.
00:16:36.820 --> 00:16:41.050
And for example no more than one event,
00:16:41.050 --> 00:16:43.253
one mild event in 10 years.
00:16:45.350 --> 00:16:48.060
So that is something that
actually would be helpful
00:16:48.060 --> 00:16:51.580
to hear from the Commissioners
even sort of a sharpened
00:16:52.638 --> 00:16:57.223
description of what that
objective is as you comment today.
00:16:58.780 --> 00:17:01.683
So that's the first
problem, supply adequacy.
00:17:02.800 --> 00:17:05.840
The second problem, which is distinct
00:17:05.840 --> 00:17:09.203
is operational responsiveness.
00:17:10.040 --> 00:17:14.617
And what that means is to
always be able to quickly restore
00:17:15.930 --> 00:17:19.100
a supply demand balance
and maintain system frequency
00:17:19.100 --> 00:17:23.830
in the face of sudden
unexpected large changes
00:17:23.830 --> 00:17:26.143
in particularly in supply and demand.
00:17:27.110 --> 00:17:29.520
So whether that's a
nuclear plant going out,
00:17:29.520 --> 00:17:33.330
or it's the wind
suddenly dying the fleet...
00:17:33.330 --> 00:17:37.290
We have to be able to position the fleet
00:17:37.290 --> 00:17:38.523
to be able to meet that.
00:17:39.380 --> 00:17:44.050
And to do that through market products
00:17:44.050 --> 00:17:46.360
that reward all of the
resources that are helping
00:17:46.360 --> 00:17:51.310
to do that rather than
just through control room
00:17:51.310 --> 00:17:54.700
commands that we're
increasingly relying on.
00:17:54.700 --> 00:17:55.820
And that brings me to...
00:17:55.820 --> 00:17:57.240
So those are the two problems,
00:17:57.240 --> 00:18:00.741
supply adequacy and
operational responsiveness.
00:18:00.741 --> 00:18:03.548
There are a number of principles
00:18:03.548 --> 00:18:06.000
that actually we just
heard some comments
00:18:06.000 --> 00:18:06.950
about them this morning
00:18:06.950 --> 00:18:10.780
but some principles
that I think are a big part
00:18:10.780 --> 00:18:13.110
of how we solve those problems
00:18:13.110 --> 00:18:17.110
and the first one is,
and that I think actually
00:18:17.110 --> 00:18:20.133
I think I hope we all agree
on is to do it through markets.
00:18:20.990 --> 00:18:22.569
Because if we do it through markets,
00:18:22.569 --> 00:18:27.569
then we provide the
incentives to invest in the fleet
00:18:27.780 --> 00:18:31.339
that we need to meet
the reliability objectives.
00:18:31.339 --> 00:18:36.120
And we incent performance,
both of those things.
00:18:36.120 --> 00:18:40.690
And it all comes together
really well if we are valuing,
00:18:40.690 --> 00:18:43.850
if we are expressing what
we value in terms of reliability
00:18:43.850 --> 00:18:45.083
through the market.
00:18:46.000 --> 00:18:48.207
So that's the first principle.
00:18:48.207 --> 00:18:53.143
The second principle that we've heard,
00:18:54.330 --> 00:18:55.940
especially from the Commissioners,
00:18:55.940 --> 00:19:00.230
is that we wanna be
able to operate this system
00:19:00.230 --> 00:19:02.290
in a way that is not...
00:19:02.290 --> 00:19:06.330
That is avoiding crises,
as opposed to depending
00:19:06.330 --> 00:19:09.533
on crisis to send a price signal.
00:19:10.590 --> 00:19:13.002
So that's gonna be
an important part of it.
00:19:13.002 --> 00:19:17.140
And then finally another principle,
00:19:17.140 --> 00:19:18.110
it's not even a principle,
00:19:18.110 --> 00:19:21.140
just a practical
consideration is timing.
00:19:21.140 --> 00:19:25.130
Because there's obviously
a lot of political pressure.
00:19:25.130 --> 00:19:28.650
There's an economic need
to solve these, to ensure
00:19:28.650 --> 00:19:31.523
reliability as soon as possible.
00:19:32.370 --> 00:19:34.400
And some solutions are gonna take longer
00:19:34.400 --> 00:19:36.920
than others to implement.
00:19:36.920 --> 00:19:41.920
So with that framing, what are
the problems supply adequacy
00:19:42.071 --> 00:19:45.480
and operational responsiveness,
00:19:45.480 --> 00:19:48.253
and what are the principles
market avoid crises?
00:19:49.290 --> 00:19:50.900
I think it'd be really helpful to hear
00:19:50.900 --> 00:19:53.930
from all of the proposals today.
00:19:53.930 --> 00:19:57.660
First of all, clarify 'cause
there a lot of tactics here.
00:19:57.660 --> 00:20:00.610
Clarify which problem are you solving?
00:20:00.610 --> 00:20:03.460
Which of those two problems
are you solving and how much?
00:20:04.860 --> 00:20:06.500
Second is what's the time?
00:20:06.500 --> 00:20:08.630
How long does it, what's
the timing to implement
00:20:08.630 --> 00:20:10.940
the solution that you're talking about.
00:20:10.940 --> 00:20:12.920
And how does it fit and sequence
00:20:12.920 --> 00:20:15.913
and compliment other
elements of a solution.
00:20:18.900 --> 00:20:23.900
And then third what are
the counter-arguments
00:20:26.010 --> 00:20:28.640
to your proposal and
the biggest challenges
00:20:28.640 --> 00:20:30.240
and how would you address those?
00:20:31.200 --> 00:20:32.970
'Cause in this tight timeframe
00:20:35.330 --> 00:20:37.985
you really don't wanna
make mistakes, right?
00:20:37.985 --> 00:20:40.730
And we don't have a lot of time to sort
00:20:40.730 --> 00:20:42.610
through all the what are the challenges
00:20:42.610 --> 00:20:44.832
and things that could go wrong.
00:20:44.832 --> 00:20:47.080
And you know for your proposal,
00:20:47.080 --> 00:20:48.630
that there it'll be challenged
00:20:48.630 --> 00:20:51.210
it's best if given the tight timeframe,
00:20:51.210 --> 00:20:54.270
today you talk about
the counter-arguments
00:20:54.270 --> 00:20:55.718
and how you'd address them.
00:20:55.718 --> 00:20:59.248
'Cause I think that'll all
make it a productive session.
00:20:59.248 --> 00:21:02.990
And I also look forward to hearing,
00:21:02.990 --> 00:21:06.410
have enjoyed so far hearing
the variety of solutions,
00:21:06.410 --> 00:21:08.770
and I look forward
to the rest of the day.
00:21:08.770 --> 00:21:10.720
Thank you very much for having us here.
00:21:12.090 --> 00:21:12.923
Thank you Sam.
00:21:14.230 --> 00:21:16.960
All right, next up we have ERCOT
00:21:16.960 --> 00:21:21.960
to offer some suggestions
on near term improvements.
00:21:24.690 --> 00:21:27.533
Otherwise, sometimes
termed as low-hanging fruit.
00:21:28.390 --> 00:21:29.223
Yes.
00:21:31.670 --> 00:21:35.330
So some of the things that I'm...
00:21:35.330 --> 00:21:39.106
I'm sorry for the record
(indistinct) Galman with ERCOT.
00:21:39.106 --> 00:21:40.783
Good morning, everybody.
00:21:42.210 --> 00:21:47.210
So when we thought about
kind of the low-hanging fruit,
00:21:48.950 --> 00:21:53.270
there are some time
variations between those.
00:21:53.270 --> 00:21:58.270
So I'll try and highlight
those types of differences
00:21:58.490 --> 00:22:00.203
that may take longer.
00:22:01.430 --> 00:22:05.040
But from a high level perspective,
00:22:05.040 --> 00:22:09.900
we've really focused
on operational changes
00:22:09.900 --> 00:22:14.900
that can help us
operate the grid reliably.
00:22:15.830 --> 00:22:20.830
And what I would describe
those as are changes
00:22:22.640 --> 00:22:24.580
to ancillary services
00:22:24.580 --> 00:22:28.217
which actually were
in the works already.
00:22:28.217 --> 00:22:30.712
And these would include
00:22:30.712 --> 00:22:35.200
what we call fast frequency response,
00:22:35.200 --> 00:22:40.200
which we should deliver
near the end of this year.
00:22:42.840 --> 00:22:45.270
The other one that we would wanna talk
00:22:45.270 --> 00:22:47.020
about and have brought up
00:22:47.020 --> 00:22:52.020
is the ERCOT contingency
reserve or ECRS.
00:22:53.400 --> 00:22:58.400
That one is more of a
year and a half to two years
00:22:58.648 --> 00:23:01.210
for delivery.
00:23:01.210 --> 00:23:06.210
However, we can kinda finish the design
00:23:07.250 --> 00:23:10.403
in 2022 is our hope.
00:23:11.280 --> 00:23:16.280
However finishing the design
or the software side of it.
00:23:18.380 --> 00:23:20.157
This is already an approved NPRR
00:23:21.148 --> 00:23:26.148
runs up against the freeze
that we have on our energy
00:23:26.730 --> 00:23:29.690
management system
as we are updating that.
00:23:29.690 --> 00:23:32.563
So that pushes out the delivery year.
00:23:33.610 --> 00:23:38.610
The contingency reserve
service addresses, in our opinion,
00:23:39.497 --> 00:23:44.240
some of the ramping issues
that we see going forward,
00:23:44.240 --> 00:23:49.240
it's important that you
look at that ramping issue
00:23:49.280 --> 00:23:53.900
being solved by a
combination of the ECRS
00:23:53.900 --> 00:23:58.150
and the existing
non-spin reserve service.
00:23:58.150 --> 00:24:01.690
So if you think about the two products,
00:24:01.690 --> 00:24:05.440
one is a 10 minute ramping product.
00:24:05.440 --> 00:24:10.440
We probably will need
enhanced duration on that product.
00:24:10.700 --> 00:24:13.950
And then non-space comes in as a backup
00:24:13.950 --> 00:24:17.133
with a longer duration requirement.
00:24:19.186 --> 00:24:24.186
So those are the items
that we have laid out
00:24:24.540 --> 00:24:28.790
in as far as ancillary services go.
00:24:28.790 --> 00:24:32.110
There are other ones
that have been proposed
00:24:32.110 --> 00:24:34.673
by other parties.
00:24:35.720 --> 00:24:39.680
One is the some kind of fuel backup
00:24:41.230 --> 00:24:44.800
that is something we
could implement as long
00:24:44.800 --> 00:24:47.100
as it was a standalone service,
00:24:47.100 --> 00:24:52.100
not being procured through
our market management system
00:24:54.480 --> 00:24:57.020
and a separate auction.
00:24:57.020 --> 00:25:01.470
That is something we
could do more quickly,
00:25:01.470 --> 00:25:04.090
as long as we got the details.
00:25:04.090 --> 00:25:09.090
And I guess the debatable
principles ironed out,
00:25:12.800 --> 00:25:14.790
and it was something that we could move
00:25:15.731 --> 00:25:17.731
through the stakeholder process quickly.
00:25:18.840 --> 00:25:23.840
The other ones I can talk
about is what is expressed
00:25:24.660 --> 00:25:29.660
desire to remove the
(indistinct) buyback provision.
00:25:31.850 --> 00:25:34.313
I think this is something in the IMMS,
00:25:35.663 --> 00:25:38.970
the independent market
monitors proposals as well.
00:25:38.970 --> 00:25:42.160
That is something that
we would be interested
00:25:42.160 --> 00:25:46.837
in and could implement
relatively quickly.
00:25:50.048 --> 00:25:53.760
I'm gonna talk about
a couple of other items
00:25:53.760 --> 00:25:58.760
that are on the demand side
now, I think on the fast end,
00:26:02.240 --> 00:26:06.010
if y'all decided you
wanted to do some changes
00:26:06.010 --> 00:26:10.780
to the emergency
response service or ERS,
00:26:10.780 --> 00:26:13.840
that is something we could do.
00:26:13.840 --> 00:26:16.410
It would require protocol changes
00:26:16.410 --> 00:26:21.410
and such but that is
something we could do.
00:26:22.090 --> 00:26:26.470
The main barrier to that is
the next contracting period
00:26:26.470 --> 00:26:29.160
is coming up relatively quickly.
00:26:29.160 --> 00:26:33.660
I believe it's we issued
the RFPs in November.
00:26:33.660 --> 00:26:37.340
So we would want to reflect the changes
00:26:37.340 --> 00:26:41.060
that you want in that RFP,
00:26:41.060 --> 00:26:44.910
we are upping the procurement periods
00:26:44.910 --> 00:26:47.710
from three per year to four.
00:26:47.710 --> 00:26:49.377
So if we were to miss that one,
00:26:49.377 --> 00:26:52.160
the next one comes a little bit faster
00:26:52.160 --> 00:26:55.450
than what had happened in the past,
00:26:55.450 --> 00:26:58.530
but we would be kind of stuck with that.
00:26:58.530 --> 00:27:02.340
I think for December, January, February,
00:27:02.340 --> 00:27:04.760
and then we could of course change
00:27:04.760 --> 00:27:06.453
after that procurement period.
00:27:07.340 --> 00:27:09.000
The last one on the demand side
00:27:09.000 --> 00:27:12.908
is to me this is
relatively straightforward,
00:27:12.908 --> 00:27:16.420
but I wanna caution
you that the time period
00:27:16.420 --> 00:27:21.080
is gonna be I think very
long and it's a little bit
00:27:21.080 --> 00:27:23.070
outside of ERCOT's purview.
00:27:23.070 --> 00:27:24.997
But when...
00:27:24.997 --> 00:27:29.380
I'm gonna harken back
to October's energy's
00:27:29.380 --> 00:27:33.400
presentation before you
on demand response.
00:27:33.400 --> 00:27:38.400
And the problem that they posited
00:27:39.820 --> 00:27:44.730
before you was I wanna
do demand response,
00:27:44.730 --> 00:27:48.180
but I cannot pull or get the information
00:27:48.180 --> 00:27:53.180
I want quickly enough to
really know what each premise
00:27:53.669 --> 00:27:55.430
is doing.
00:27:55.430 --> 00:28:00.090
And they talked about
under smart meter Texas,
00:28:00.090 --> 00:28:02.493
what the standards are.
00:28:03.750 --> 00:28:08.690
To me increasing that
polling and allowing
00:28:11.240 --> 00:28:14.830
non-ERCOT market driven demand response
00:28:14.830 --> 00:28:19.830
is something that certainly
should be on the radar.
00:28:19.933 --> 00:28:23.040
And that is kind of something
00:28:23.040 --> 00:28:25.320
I would very much be interested
00:28:25.320 --> 00:28:28.310
in working on but I
don't think that fits
00:28:28.310 --> 00:28:30.680
into the quick time period.
00:28:30.680 --> 00:28:33.170
There's a contract
for smart meter, Texas.
00:28:33.170 --> 00:28:38.120
There are standards and
changing that would take some time.
00:28:38.120 --> 00:28:42.840
So that's kind of the packet of items
00:28:42.840 --> 00:28:46.790
that we had thought through.
00:28:48.530 --> 00:28:50.630
Certainly happy to answer any questions
00:28:50.630 --> 00:28:53.780
on anything else that
may be on your mind
00:28:53.780 --> 00:28:57.300
or anything you'd like to follow up on.
00:28:57.300 --> 00:28:58.440
Thank you Kanaan.
00:28:58.440 --> 00:29:01.750
At this point, any
questions for comments
00:29:01.750 --> 00:29:03.743
for Brattle or ERCOT?
00:29:05.088 --> 00:29:08.000
I'm sorry, there is
one I forgot to mention.
00:29:08.000 --> 00:29:10.520
That was NPRR1093.
00:29:10.520 --> 00:29:13.420
This is loads in non-spin.
00:29:13.420 --> 00:29:17.860
That is on its way to the board.
00:29:17.860 --> 00:29:20.910
I would say that
stakeholders have introduced
00:29:20.910 --> 00:29:25.910
some concepts that we think
are valuable and good concepts,
00:29:27.084 --> 00:29:30.080
but they delay the implementation.
00:29:30.080 --> 00:29:34.070
So we're trying to
work through that issue
00:29:34.070 --> 00:29:39.070
and see if we can deliver
the loads and non-spin
00:29:40.160 --> 00:29:44.610
NPRR1093 for the summer
and then bring the additional
00:29:44.610 --> 00:29:49.610
functionality that has been
raised at a slightly later date.
00:29:52.060 --> 00:29:53.450
Good point, thank you.
00:29:53.450 --> 00:29:54.283
Question yeah.
00:29:54.283 --> 00:29:57.090
Mr. Chairman, Kanaan thanks.
00:29:57.090 --> 00:29:59.070
This is good stuff.
00:29:59.070 --> 00:30:01.003
Nodal pricing for load resources.
00:30:01.900 --> 00:30:05.890
You suggested that, how long
would that take to implement?
00:30:05.890 --> 00:30:09.930
So that looks like
a year and a half
00:30:09.930 --> 00:30:13.590
to two year implementation.
00:30:13.590 --> 00:30:16.360
We have gone through the exercise
00:30:16.360 --> 00:30:20.490
of doing that for distributed generation
00:30:20.490 --> 00:30:22.693
and that's been the experience.
00:30:24.730 --> 00:30:29.730
I would describe that
need as things kinda falling
00:30:30.610 --> 00:30:33.430
in line with that kind of a delivery.
00:30:33.430 --> 00:30:36.980
There are some really good
reasons why you'd potentially
00:30:36.980 --> 00:30:38.923
want to get those things,
00:30:39.901 --> 00:30:44.630
load resources getting a nodal price.
00:30:44.630 --> 00:30:48.328
And one example I'll give
you is probably some projects
00:30:48.328 --> 00:30:52.800
that you have seen where load sites
00:30:52.800 --> 00:30:55.653
jointly with a resource of some sort.
00:30:57.398 --> 00:31:02.200
Having a different payment
pattern for the two actually
00:31:02.200 --> 00:31:07.200
creates incentives where
one part of that combination
00:31:07.410 --> 00:31:11.030
may wanna deploy yet the other does not.
00:31:11.030 --> 00:31:13.240
The other thing that
we've started to see
00:31:13.240 --> 00:31:17.404
is load responding
to a high zonal price,
00:31:17.404 --> 00:31:21.160
but being in a location
that actually doesn't help
00:31:21.160 --> 00:31:24.680
the nodal problem that we're having.
00:31:24.680 --> 00:31:29.680
So these types of enhancements
would help us operate
00:31:30.000 --> 00:31:31.790
the grid more reliable.
00:31:31.790 --> 00:31:35.513
Great, on from fuel
ancillary service concepts.
00:31:37.550 --> 00:31:40.860
In the interest of expediting,
00:31:40.860 --> 00:31:44.647
some type of redundant safeguard measure
00:31:44.647 --> 00:31:46.400
for the upcoming winter.
00:31:46.400 --> 00:31:48.140
Not necessarily this upcoming winter,
00:31:48.140 --> 00:31:50.793
but the next,
00:31:52.017 --> 00:31:57.017
what do you think
barriers or downside risks
00:31:57.330 --> 00:31:59.330
are to considering allowing a percentage
00:31:59.330 --> 00:32:01.370
of non-spin reserve risk
00:32:01.370 --> 00:32:06.370
in SRS to be only available to entities
00:32:06.430 --> 00:32:09.270
that meet specific
firm fuel or dual fuel
00:32:09.270 --> 00:32:11.113
or on-site storage requirements?
00:32:12.930 --> 00:32:16.459
So I think those...
00:32:16.459 --> 00:32:21.240
I mean, that is avenue
to achieve that goal.
00:32:21.240 --> 00:32:22.580
The drawback...
00:32:22.580 --> 00:32:26.500
I guess Sam wanted
us to bring up drawbacks
00:32:26.500 --> 00:32:30.850
that we see, is that
will impact liquidity.
00:32:30.850 --> 00:32:35.850
There could be a delay and
there become some additional
00:32:37.040 --> 00:32:41.230
stratification on who's
eligible, and who's not.
00:32:41.230 --> 00:32:45.650
So from an economic standpoint,
00:32:45.650 --> 00:32:50.650
I think we would prefer to build that.
00:32:53.120 --> 00:32:55.300
And I think it would take
us longer to incorporate
00:32:55.300 --> 00:32:56.830
that into non-spin.
00:32:56.830 --> 00:33:01.580
It may be better to do the
fuel as a standalone service
00:33:01.580 --> 00:33:06.070
that I auction off and build separately
00:33:06.070 --> 00:33:09.350
and keep out of my
market management system
00:33:09.350 --> 00:33:14.350
in terms of speedy delivery
than having it part of non-spin,
00:33:14.670 --> 00:33:18.430
where in the order
in which I clear things
00:33:18.430 --> 00:33:21.950
or the optimization
with which I clear things,
00:33:21.950 --> 00:33:24.120
I have to add another factor in.
00:33:24.120 --> 00:33:28.920
So I think adding it into
non-spin as a requirement
00:33:28.920 --> 00:33:32.700
will make it a more
complex delivery than say
00:33:32.700 --> 00:33:36.323
some kind of standalone
service where I do an auction
00:33:36.323 --> 00:33:41.323
and award, that to
parties that installed-
00:33:41.480 --> 00:33:43.310
Sure, and so my question
00:33:43.310 --> 00:33:45.350
is a leading question obviously,
00:33:45.350 --> 00:33:48.930
but it's not an either
or option just kinda like
00:33:48.930 --> 00:33:50.393
the transmission projects and the RGV
00:33:50.393 --> 00:33:51.810
that we were talking about.
00:33:51.810 --> 00:33:55.018
So it's just a matter of
expeditious employment
00:33:55.018 --> 00:34:00.018
of some type of fuel firming system
00:34:01.530 --> 00:34:04.780
to compensate some of these
folks on a performance basis.
00:34:04.780 --> 00:34:08.130
So you're telling me that in
order to even take that half
00:34:08.130 --> 00:34:10.900
step, it might take a...
00:34:10.900 --> 00:34:14.620
By using SRS, it would
take longer than just standing
00:34:14.620 --> 00:34:17.680
up the standalone ancillary service?
00:34:17.680 --> 00:34:21.213
Yes as we've walked
through this because...
00:34:21.213 --> 00:34:23.678
Let me step back a second.
00:34:23.678 --> 00:34:26.278
The minute I have to touch
some of our core systems,
00:34:27.400 --> 00:34:32.400
I start having lots
of additional planning
00:34:32.610 --> 00:34:37.210
that I have to do and
projects that I have to run.
00:34:37.210 --> 00:34:42.110
And these core systems
also have testing.
00:34:42.110 --> 00:34:45.540
I have to make sure
that they do everything
00:34:45.540 --> 00:34:47.540
else they're still supposed to do.
00:34:47.540 --> 00:34:50.702
And this additional
component that we added,
00:34:50.702 --> 00:34:55.010
if I do just a straight
up standalone service
00:34:55.010 --> 00:34:57.663
with an auction of some sort,
00:34:58.825 --> 00:35:02.080
kinda like the emergency
response service or black start,
00:35:02.080 --> 00:35:05.190
that doesn't really go
into any system except
00:35:05.190 --> 00:35:07.290
our settlement system.
00:35:07.290 --> 00:35:10.700
That's a more
straightforward design for us.
00:35:10.700 --> 00:35:12.690
I'm not saying that's the better design,
00:35:12.690 --> 00:35:14.466
but that is a more rapid,
00:35:14.466 --> 00:35:18.030
we expect to deliver that more rapidly
00:35:18.030 --> 00:35:20.290
than trying to roll it into non-spin
00:35:20.290 --> 00:35:21.290
Okay (indistinct).
00:35:22.353 --> 00:35:25.210
Like to be on those, there's
some operational streamlining
00:35:25.210 --> 00:35:26.990
opportunities that
I'm sure the new board
00:35:26.990 --> 00:35:28.567
will be addressing.
00:35:28.567 --> 00:35:31.603
But another topic for another day.
00:35:31.603 --> 00:35:32.737
(indistinct)
00:35:32.737 --> 00:35:33.640
And just to add a thing,
00:35:33.640 --> 00:35:35.900
thank you for your feedback
on that issue Kanaan.
00:35:35.900 --> 00:35:38.760
It may be important that
we ask these questions
00:35:38.760 --> 00:35:41.480
of some of the companies
that we'll be speaking later
00:35:42.490 --> 00:35:45.810
that have... That
actual provide non-spin.
00:35:45.810 --> 00:35:46.760
Yep (indistinct).
00:35:48.240 --> 00:35:49.131
One more question.
00:35:49.131 --> 00:35:52.870
On ECRS as a concept right now,
00:35:52.870 --> 00:35:55.720
as an ancillary service,
how are you sizing that?
00:35:55.720 --> 00:35:58.410
What's the vision on size of ECRS?
00:35:58.410 --> 00:36:03.410
So the size is in terms
of capacity that we procure
00:36:04.230 --> 00:36:06.360
is what I'm assuming, you're asking.
00:36:06.360 --> 00:36:09.930
So the size is actually built flexibly
00:36:09.930 --> 00:36:14.330
because what we do is with
all of our ancillary services
00:36:14.330 --> 00:36:19.330
is do an annual review of
what amounts we may need.
00:36:19.330 --> 00:36:22.720
And that varies from year to year.
00:36:22.720 --> 00:36:27.720
So our expectation was to
procure relatively small amounts
00:36:28.500 --> 00:36:29.573
of that initially.
00:36:30.790 --> 00:36:35.790
I would say maybe a
couple thousand megawatts,
00:36:36.650 --> 00:36:40.037
but because we expect the size to vary,
00:36:40.037 --> 00:36:43.880
the parameters are built into change.
00:36:43.880 --> 00:36:46.380
And so there is flexibility.
00:36:46.380 --> 00:36:50.510
Okay, so on
especially with that type
00:36:50.510 --> 00:36:53.683
of performance value,
00:36:53.683 --> 00:36:58.173
at least the way you
have have defined it.
00:36:59.420 --> 00:37:02.300
I'll tell you kinda what I'm
a little bit concerned about.
00:37:02.300 --> 00:37:04.240
And then this is to Sam's point,
00:37:04.240 --> 00:37:05.660
what are the threats?
00:37:05.660 --> 00:37:08.560
And if we do nothing else today,
00:37:08.560 --> 00:37:10.930
we're gonna have a lot
more solar on the system
00:37:10.930 --> 00:37:13.500
in two years, which will create
00:37:14.600 --> 00:37:16.150
between four and 8:00 p.m
00:37:16.150 --> 00:37:18.550
a lot more variability
in terms of production.
00:37:18.550 --> 00:37:21.570
'Cause that production
falls off as the sunsets.
00:37:21.570 --> 00:37:24.040
And again if wind has
not caught up at that point,
00:37:24.040 --> 00:37:26.878
that makes a really dramatic decline
00:37:26.878 --> 00:37:31.090
in generation on the
system, that duck curve.
00:37:31.090 --> 00:37:34.910
And I'm afraid of the
magnitude of that curve
00:37:35.780 --> 00:37:39.670
with 10,000 more megawatts of solar.
00:37:39.670 --> 00:37:40.920
That is a concern for me.
00:37:42.240 --> 00:37:46.530
For the purposes of ECRS,
it looks like it might be a good
00:37:46.530 --> 00:37:48.510
fit to try to cure that problem,
00:37:48.510 --> 00:37:51.243
to try to arrest that
fall in generation.
00:37:52.220 --> 00:37:56.440
But have you considered
sizing it on a percentage
00:37:56.440 --> 00:37:59.380
of forecasted intermittent
variability just as a rule?
00:37:59.380 --> 00:38:02.840
So again if me as a Commissioner,
00:38:02.840 --> 00:38:07.840
I'm kinda interested
in not setting numbers
00:38:08.170 --> 00:38:11.080
arbitrarily in terms of this market,
00:38:11.080 --> 00:38:14.690
but letting the degree
of variability dictate
00:38:14.690 --> 00:38:17.960
the needs so that we
don't have to get litigated
00:38:17.960 --> 00:38:19.640
by all new people all the time.
00:38:19.640 --> 00:38:22.623
And what do you think?
00:38:23.553 --> 00:38:25.280
So that is a possibility,
00:38:25.280 --> 00:38:30.280
and it is actually in a
factor in our analysis,
00:38:31.180 --> 00:38:32.330
our annual analysis.
00:38:32.330 --> 00:38:35.280
So I'm gonna speak at very high level,
00:38:35.280 --> 00:38:38.300
but when we do our
ancillary service methodology
00:38:38.300 --> 00:38:42.210
what we do is we look
at what is on the grid,
00:38:42.210 --> 00:38:45.870
how performance has been historically,
00:38:45.870 --> 00:38:50.870
and look at almost every
hour of the upcoming year.
00:38:51.680 --> 00:38:56.680
And based on that, we
procure amounts of responsive
00:38:56.880 --> 00:39:01.880
reserve service RegUp and
RegDown non-spin service
00:39:02.560 --> 00:39:07.340
and once we have ECRS
in there that will be driven
00:39:07.340 --> 00:39:08.520
by that as well.
00:39:08.520 --> 00:39:13.170
Now what I would tell
you is I wouldn't meet
00:39:13.170 --> 00:39:17.050
the standard that you
met solely with ECRS
00:39:17.050 --> 00:39:19.300
that might have a shorter duration,
00:39:19.300 --> 00:39:22.660
it would be a combination
of ECRS and non-spin.
00:39:22.660 --> 00:39:26.133
Yeah, and so just to drill
further on your comment,
00:39:26.133 --> 00:39:30.930
what the point you made
is an annual contract
00:39:30.930 --> 00:39:33.280
or a consideration enough?
00:39:33.280 --> 00:39:35.250
Do we need to be doing
this on a seasonal basis?
00:39:35.250 --> 00:39:38.760
I mean, this generation
mix is changing fast.
00:39:38.760 --> 00:39:40.540
Absolutely, so the way we work
00:39:40.540 --> 00:39:42.900
that is, although we
study that annually,
00:39:42.900 --> 00:39:45.420
we reserve the right to procure more.
00:39:45.420 --> 00:39:49.240
That's just the minimum
amount that we're gonna procure.
00:39:49.240 --> 00:39:53.940
The reason why we try and
announce that kind of a year ahead
00:39:53.940 --> 00:39:57.580
is to help load serving
entities and procure that.
00:39:57.580 --> 00:40:02.077
However, just like we ended
up procuring more non-spin
00:40:02.077 --> 00:40:06.724
this year, we can always
expand that amount
00:40:06.724 --> 00:40:09.740
when we see issues arise.
00:40:09.740 --> 00:40:13.310
So if there were a change,
00:40:13.310 --> 00:40:16.850
some kind of a retirement
of a certain type of resource
00:40:16.850 --> 00:40:21.850
or a generation mix
on the system changed
00:40:21.890 --> 00:40:25.960
such that we needed to
procure more ancillary services
00:40:25.960 --> 00:40:29.380
that is allowed in the methodology.
00:40:29.380 --> 00:40:30.213
Okay.
00:40:30.213 --> 00:40:35.090
Can I fill in some extra
numbers on your comment?
00:40:35.090 --> 00:40:38.302
'Cause we've looked at the same numbers.
00:40:38.302 --> 00:40:42.230
When you say that in
the absence of action,
00:40:42.230 --> 00:40:44.960
we anticipate much more solar coming on.
00:40:44.960 --> 00:40:48.350
And with that sunset decrease in solar,
00:40:48.350 --> 00:40:50.435
just for context for the folks
00:40:50.435 --> 00:40:52.785
wanna be in two, three
years, 20,000 megawatts.
00:40:54.058 --> 00:40:56.150
Or (indistinct) about 13 gigs.
00:40:56.150 --> 00:40:58.680
Yeah or three or more.
00:40:58.680 --> 00:41:01.860
So that's, I think depending on how fast
00:41:01.860 --> 00:41:03.863
if it's two years or three years out,
00:41:04.840 --> 00:41:07.300
ERCOT would re responsible for coming up
00:41:07.300 --> 00:41:12.300
with 20,000 megawatts as the sunsets
00:41:12.930 --> 00:41:17.450
which on a normal fall day is a third
00:41:17.450 --> 00:41:20.720
of our total peak load.
00:41:20.720 --> 00:41:22.790
In his context
that's approximately
00:41:22.790 --> 00:41:24.970
the same amount that
you had to arrest during URI
00:41:24.970 --> 00:41:26.330
when everything froze up.
00:41:26.330 --> 00:41:29.610
So we're basically faced with
a URI on a reoccurring basis
00:41:29.610 --> 00:41:31.480
in the next two years.
00:41:31.480 --> 00:41:33.840
I mean, so we wanna
provide that context
00:41:33.840 --> 00:41:35.850
for folks watching at home
00:41:35.850 --> 00:41:40.850
and also offer the
thought, food for thought
00:41:42.200 --> 00:41:46.090
is that why is it necessary...
00:41:46.090 --> 00:41:51.000
Why do we necessarily have
to be responding to liabilities
00:41:51.000 --> 00:41:53.870
that market participants
are putting in the market
00:41:53.870 --> 00:41:58.320
instead of requiring them to
address the broader universe
00:41:58.320 --> 00:42:01.493
of market participants to
address those liabilities?
00:42:02.700 --> 00:42:04.420
Just food for thought.
00:42:04.420 --> 00:42:06.020
So give me an example of that.
00:42:08.260 --> 00:42:11.120
You're responsible either
gen side or load side,
00:42:11.120 --> 00:42:14.112
you're responsible for
a certain series of hours
00:42:14.112 --> 00:42:17.560
of generation, if you're
going to be offering in.
00:42:17.560 --> 00:42:20.760
And just because something...
00:42:20.760 --> 00:42:23.350
Just because what you
thought you could offer
00:42:23.350 --> 00:42:27.930
or promise to offer, doesn't show up.
00:42:27.930 --> 00:42:31.680
It's not the 15 folks
in the control room
00:42:31.680 --> 00:42:34.580
that have to scramble to
magically conjure resources.
00:42:34.580 --> 00:42:37.205
They're supposed to
balance the resources,
00:42:37.205 --> 00:42:38.460
not conjure the resources.
00:42:38.460 --> 00:42:41.150
It's the responsibility
of either the generator
00:42:41.150 --> 00:42:46.150
who's being paid for those
resources or the load serving
00:42:48.531 --> 00:42:50.210
entity who's obligated
to their customers,
00:42:50.210 --> 00:42:52.500
that they will deliver those resources.
00:42:52.500 --> 00:42:54.830
I don't know which one
are the precise mechanics,
00:42:54.830 --> 00:42:57.231
but I'm very wary of us.
00:42:57.231 --> 00:43:00.750
I'm not saying ECRS
is not a valid product,
00:43:00.750 --> 00:43:05.730
but I'm wary of us getting into
band-aids on bullet wounds,
00:43:05.730 --> 00:43:07.340
where we're chasing every few years
00:43:07.340 --> 00:43:10.540
we find ourselves chasing
whatever the latest liability
00:43:10.540 --> 00:43:14.720
is that the resource mix,
00:43:14.720 --> 00:43:16.520
the ever changing resource mix
00:43:18.730 --> 00:43:20.003
dumps on ERCOT.
00:43:21.070 --> 00:43:23.770
And I don't, again
it's food for thought,
00:43:23.770 --> 00:43:28.770
but it's as we all know
technology is evolving
00:43:29.090 --> 00:43:32.925
so rapidly and the resource mix,
00:43:32.925 --> 00:43:37.925
the potential for resource
exchange is so fast
00:43:38.710 --> 00:43:41.500
that we can't... I mean
by the time these things,
00:43:41.500 --> 00:43:44.370
these programs are
built just operationally,
00:43:44.370 --> 00:43:47.460
it'll be a new liability, right?
00:43:47.460 --> 00:43:51.050
So I just wanna offer
up the consideration
00:43:51.050 --> 00:43:55.070
that it's not that we
may want to consider
00:43:55.070 --> 00:43:57.610
moving that liability to the marketplace
00:43:57.610 --> 00:44:00.210
where appropriate there
are risks and rewards
00:44:01.443 --> 00:44:04.770
and much broader universe
of risk management tools
00:44:04.770 --> 00:44:07.470
move that liability or
responsibility for that liability
00:44:07.470 --> 00:44:08.970
into the marketplace,
00:44:08.970 --> 00:44:12.720
rather than on the 15 folks
sitting in the control room
00:44:12.720 --> 00:44:16.510
every day trying-
Keep the lights on.
00:44:16.510 --> 00:44:18.550
Keep the lights on
when URI happens
00:44:18.550 --> 00:44:19.940
every single day.
00:44:19.940 --> 00:44:21.250
Just food for thought.
00:44:21.250 --> 00:44:22.083
If I may,
00:44:23.470 --> 00:44:28.470
I just wanna highlight that and
everything that the chairman
00:44:28.970 --> 00:44:30.170
said is correct.
00:44:30.170 --> 00:44:34.640
So these are gonna be costly
or interventions by ERCOT.
00:44:34.640 --> 00:44:36.670
But if you see...
00:44:37.740 --> 00:44:40.540
If there is a ramp on a daily basis
00:44:40.540 --> 00:44:44.030
that you see there are
ERCOT'S position to manage
00:44:44.030 --> 00:44:48.740
that either I have ancillary services
00:44:48.740 --> 00:44:51.890
that deploy when instructed
00:44:51.890 --> 00:44:55.130
that has a cost or other things
00:44:55.130 --> 00:45:00.130
that we have done and could
do is also you bring resources
00:45:00.670 --> 00:45:01.713
online early.
00:45:02.572 --> 00:45:06.140
And some of the solar doesn't
is allowed to come online.
00:45:06.140 --> 00:45:09.090
In other words, we
curtail those resources.
00:45:09.090 --> 00:45:12.333
That's how... That's the
way we would manage that-
00:45:12.333 --> 00:45:13.280
With curve ramp-
That ramp,
00:45:13.280 --> 00:45:14.653
that duck curve today.
00:45:16.140 --> 00:45:18.330
And I would have
a few questions.
00:45:18.330 --> 00:45:22.570
So I know ERCOT has been
preparing for an increased amount
00:45:22.570 --> 00:45:26.980
of solar, for a few years now
with solar forecasting models
00:45:26.980 --> 00:45:29.870
that have been updated
and preparation similar
00:45:29.870 --> 00:45:32.400
to what ERCOT did to handle
the operational challenges
00:45:32.400 --> 00:45:35.013
of increased wind
generation on the system.
00:45:37.545 --> 00:45:41.150
I agree with both of my
colleagues here, Chairman
00:45:41.150 --> 00:45:42.660
and Commissioner
McAdams, we've got to prepare
00:45:42.660 --> 00:45:46.100
for the future and the
significant increase in solar
00:45:46.100 --> 00:45:48.710
that is coming as we expect a
significant amount of increase
00:45:48.710 --> 00:45:50.160
in the next two, three years.
00:45:51.770 --> 00:45:55.450
I would like to understand the
duck curve of concept comes
00:45:55.450 --> 00:45:56.863
from California, right?
00:45:57.900 --> 00:46:00.410
California, as a state
experienced a significant increase
00:46:00.410 --> 00:46:03.940
in solar and was dealing
with operational challenges
00:46:03.940 --> 00:46:05.290
associated with duck curve.
00:46:06.500 --> 00:46:09.304
In many ways we are
different than California,
00:46:09.304 --> 00:46:14.304
sunsets later here and
there's just a lot of geographical
00:46:14.470 --> 00:46:18.900
differences with geographic
diversity in the location
00:46:18.900 --> 00:46:19.940
of solar facilities
00:46:19.940 --> 00:46:23.673
that is different than probably
California sunsets later.
00:46:24.780 --> 00:46:26.270
I wanna make sure that ERCOT
00:46:26.270 --> 00:46:30.368
is looking at that, and I know
probably are really studying
00:46:30.368 --> 00:46:33.880
what kind of a duck
curve or similar curve
00:46:33.880 --> 00:46:35.720
we would be facing in the future
00:46:35.720 --> 00:46:38.720
as we add more solar
generation on the system.
00:46:38.720 --> 00:46:40.210
I don't know that we can just say,
00:46:40.210 --> 00:46:42.680
we're gonna have a duck
curve just like California
00:46:42.680 --> 00:46:45.220
and we got to prepare
for that, I think as a state
00:46:45.220 --> 00:46:46.053
we're different.
00:46:46.053 --> 00:46:49.337
We have a different market,
we have different resources
00:46:49.337 --> 00:46:51.720
and I just wanna make sure
ERCOT stays on top of that.
00:46:51.720 --> 00:46:55.530
So we are appropriately
planning for the future
00:46:55.530 --> 00:46:57.390
as we integrate all of this resources,
00:46:57.390 --> 00:47:01.730
because I think we're
a very attractive state
00:47:02.910 --> 00:47:05.510
with or without subsidies probably
00:47:05.510 --> 00:47:08.539
because our land is cheap
and we've got a lot of wind
00:47:08.539 --> 00:47:09.390
and we've got a lot of solar
00:47:09.390 --> 00:47:12.050
and a lot of transmission access.
00:47:12.050 --> 00:47:16.370
So it's just the reality of
our market we're attracting.
00:47:16.370 --> 00:47:20.370
So we need to really
understand the impacts
00:47:20.370 --> 00:47:21.570
of that increased solar.
00:47:22.560 --> 00:47:27.180
Now, I'm gonna go back to
the new approved AIS products
00:47:27.180 --> 00:47:28.240
that you mentioned Kanaan.
00:47:28.240 --> 00:47:32.860
FFRS just for purposes
of the public understanding,
00:47:32.860 --> 00:47:34.850
what is that product intended to do?
00:47:34.850 --> 00:47:39.850
What specific resources are
you incenting with that product?
00:47:40.020 --> 00:47:45.020
So that product is a very
rapid response product
00:47:47.320 --> 00:47:49.160
and fast frequency response.
00:47:49.160 --> 00:47:53.283
So it responds to
seconds, cycles in terms
00:47:57.370 --> 00:47:59.030
of the response time,
00:47:59.030 --> 00:48:01.800
where any decay in the frequency
00:48:01.800 --> 00:48:03.850
or increase in the frequency,
00:48:03.850 --> 00:48:07.830
there would be a response
where you either increase
00:48:07.830 --> 00:48:12.590
or decrease your output
to maintain frequency.
00:48:12.590 --> 00:48:15.160
The types of resources
that would qualify
00:48:15.160 --> 00:48:18.310
for that are a mix
00:48:18.310 --> 00:48:22.061
but the new resources that
we're trying to accommodate
00:48:22.061 --> 00:48:26.090
in that package are batteries
00:48:26.090 --> 00:48:29.283
and some additional demand response.
00:48:30.680 --> 00:48:35.680
But that the product does not
disqualify thermal resources
00:48:35.900 --> 00:48:38.380
from participating or other things.
00:48:38.380 --> 00:48:43.380
It is a resource agnostic
looking for performance,
00:48:44.760 --> 00:48:48.410
very quick response.
We're paying for very rapid
00:48:48.410 --> 00:48:51.000
frequency support batteries happened
00:48:51.000 --> 00:48:52.660
to be very good at that.
00:48:52.660 --> 00:48:53.493
Yes.
00:48:53.493 --> 00:48:55.450
We're not saying it's
designed for one resource
00:48:55.450 --> 00:48:57.890
and others designed to
solve a specific problem.
00:48:57.890 --> 00:48:58.965
That's correct.
00:48:58.965 --> 00:49:00.040
And the spirit of we
pay for what we want
00:49:00.040 --> 00:49:03.680
and let the market
deliver the most efficient
00:49:03.680 --> 00:49:04.580
effective product.
00:49:05.463 --> 00:49:06.296
And that product
will be delivered
00:49:06.296 --> 00:49:07.440
by the end of this year.
00:49:08.490 --> 00:49:12.830
Now moving on to ECRS,
it sounds about mid 2023.
00:49:12.830 --> 00:49:17.830
when that new product
would be placed into the market
00:49:19.240 --> 00:49:21.290
mid 2023, maybe 2024.
00:49:22.600 --> 00:49:24.490
Because that product
is currently contingent
00:49:24.490 --> 00:49:26.743
on the EMS upgrade.
00:49:27.583 --> 00:49:28.670
That's correct.
00:49:28.670 --> 00:49:30.230
Can you speak to it?
00:49:30.230 --> 00:49:33.303
When will the EMS upgrade
be completed by ERCOT?
00:49:34.210 --> 00:49:38.410
So the EMS upgrade
will be completed.
00:49:38.410 --> 00:49:41.650
I believe in 2024.
00:49:41.650 --> 00:49:45.090
We may be able to
deliver that slightly early,
00:49:45.090 --> 00:49:48.140
but right now it's 2024 delivery.
00:49:52.646 --> 00:49:57.646
There usually is some additional testing
00:49:58.990 --> 00:50:01.270
and things like that, that happened,
00:50:01.270 --> 00:50:05.330
but that's our estimate currently.
00:50:05.330 --> 00:50:08.710
That doesn't mean I can't start working
00:50:08.710 --> 00:50:13.270
on the next market design change
00:50:13.270 --> 00:50:15.940
that would have to
come in a little after,
00:50:15.940 --> 00:50:18.210
after the EMS system.
00:50:18.210 --> 00:50:19.860
But that's where...
00:50:21.540 --> 00:50:24.067
That's the timeline for EMS.
00:50:24.067 --> 00:50:27.600
So the EMS system at
ERCOT is critically important.
00:50:27.600 --> 00:50:31.050
It's been an process
of upgrade for maybe...
00:50:31.050 --> 00:50:32.260
For a while now.
00:50:32.260 --> 00:50:34.230
What are some of the challenges?
00:50:34.230 --> 00:50:38.710
Because what I'm hearing
just with these initial comments
00:50:38.710 --> 00:50:40.450
and probably will continue to hear,
00:50:40.450 --> 00:50:42.870
and we'll continue to investigate
throughout this workshop
00:50:42.870 --> 00:50:47.870
is as we're tasked with
coming up with short term,
00:50:48.330 --> 00:50:50.843
maybe midterm looking
at long-term options,
00:50:50.843 --> 00:50:54.750
what are those options
that would be impacted
00:50:54.750 --> 00:50:56.053
by the EMS upgrade?
00:50:57.220 --> 00:51:01.054
Because the reality is
we need to start delivering
00:51:01.054 --> 00:51:04.040
enhanced reliability
sooner rather than later
00:51:04.960 --> 00:51:09.580
and my concern is that
we will move forward
00:51:09.580 --> 00:51:13.850
with market design proposals
that will take an extended
00:51:13.850 --> 00:51:15.320
amount of time to actually implement
00:51:15.320 --> 00:51:17.900
because they may get
caught up in the EMS upgrade.
00:51:17.900 --> 00:51:21.080
Is there something that we
can do as a Commission to help
00:51:21.080 --> 00:51:22.060
you speed that up?
00:51:22.060 --> 00:51:23.410
Do you need more resources?
00:51:24.510 --> 00:51:27.760
So just to step back
00:51:27.760 --> 00:51:32.580
so the energy management
system is kind of the real time
00:51:32.580 --> 00:51:37.580
optimization of a kind
of energy recognizing
00:51:38.270 --> 00:51:41.080
the typology limitations.
00:51:41.080 --> 00:51:44.320
So security constraint
economic dispatch,
00:51:44.320 --> 00:51:46.340
locational marginal prices,
00:51:46.340 --> 00:51:49.053
those things all come through EMS.
00:51:51.650 --> 00:51:56.650
I think at this point
throwing that side,
00:51:56.700 --> 00:52:01.050
that development is staffed very well.
00:52:01.050 --> 00:52:05.060
If we bring on a new
additional resources,
00:52:05.060 --> 00:52:06.940
because we would have to train them up.
00:52:06.940 --> 00:52:10.739
I think there's not a lot
of time gained by throwing
00:52:10.739 --> 00:52:12.590
additional resources there.
00:52:12.590 --> 00:52:17.590
I would like to reserve the
right to check with our IT team
00:52:17.770 --> 00:52:20.470
and make sure I got that right.
00:52:20.470 --> 00:52:25.470
So if you are wanting some
kind of real time optimized
00:52:29.580 --> 00:52:34.580
pricing outcome and dispatch
outcome with any of the new
00:52:34.880 --> 00:52:39.040
proposed changes, or I
need to feed something
00:52:39.890 --> 00:52:44.890
from that, there could be a
reliance or a dependence on EMS,
00:52:45.170 --> 00:52:47.360
and that would slow it down.
00:52:47.360 --> 00:52:52.360
So the more I can stay
out of that, the less I run
00:52:53.648 --> 00:52:56.730
against EMS.
00:52:56.730 --> 00:53:01.730
When I look at the new proposals,
00:53:02.590 --> 00:53:06.003
every single one of them
has a settlement's impact.
00:53:07.120 --> 00:53:12.120
That is my biggest worry
is to our settlement system.
00:53:12.530 --> 00:53:14.920
There may be some, there's not.
00:53:14.920 --> 00:53:16.800
All the details haven't
been fleshed out.
00:53:16.800 --> 00:53:20.830
So there might be something
that needs to come from EMS
00:53:20.830 --> 00:53:22.120
to feed them.
00:53:22.120 --> 00:53:25.610
But the settlement changes
that we're already doing
00:53:25.610 --> 00:53:30.052
with securitization and other projects
00:53:30.052 --> 00:53:33.050
that's where I see the
big bottleneck right now
00:53:33.050 --> 00:53:36.623
in terms of delivering
some of these products.
00:53:38.885 --> 00:53:43.690
Might be worth talking more
about these things after folks
00:53:43.690 --> 00:53:46.723
have presented them but for example,
00:53:50.050 --> 00:53:55.050
an obligation on load doesn't
necessarily impact the EMS.
00:53:57.910 --> 00:54:02.090
It could, if there's a
penalty or something
00:54:02.090 --> 00:54:06.790
that needs to come from
actually what happened in that day,
00:54:06.790 --> 00:54:09.780
but it doesn't necessarily impact it.
00:54:09.780 --> 00:54:13.130
It will impact my settlement systems.
00:54:13.130 --> 00:54:18.130
So that's the big bottleneck
that I'm seeing now.
00:54:19.640 --> 00:54:22.670
But if it pulls anything from EMS
00:54:22.670 --> 00:54:24.280
that will also become a bottleneck,
00:54:24.280 --> 00:54:26.560
to your point, Commissioner Cobos.
00:54:26.560 --> 00:54:29.610
So is it a bottleneck
in settlements
00:54:29.610 --> 00:54:31.820
because of the lack of staff or what...
00:54:31.820 --> 00:54:34.700
Can you explain a
little bit more about that?
00:54:34.700 --> 00:54:39.700
Yes, so what we're
having to do right now
00:54:39.860 --> 00:54:43.550
is very different than
the normal staffing
00:54:43.550 --> 00:54:45.510
that we have in and around that.
00:54:45.510 --> 00:54:49.280
We have actually hired or
are in the process of hiring
00:54:50.350 --> 00:54:53.773
four new FTEs on that end.
00:54:55.770 --> 00:55:00.690
But that was just not the way we were...
00:55:02.101 --> 00:55:04.100
The staffing that we needed to do
00:55:04.100 --> 00:55:08.010
are normal course
of business in the past
00:55:08.010 --> 00:55:11.913
did not need as many
resources on the settlement.
00:55:12.819 --> 00:55:13.900
And I know that's
something that the new board
00:55:13.900 --> 00:55:15.250
will be looking into.
00:55:15.250 --> 00:55:16.770
They're meeting next Friday,
00:55:16.770 --> 00:55:19.860
would that be something of
interest to put on the agenda
00:55:19.860 --> 00:55:22.300
for the new board to
think of next Friday?
00:55:22.300 --> 00:55:23.760
We're running up at our 10:30.
00:55:23.760 --> 00:55:26.520
Yes, so I think it's
important to stay on top
00:55:26.520 --> 00:55:31.220
of this issue because
both the EMS upgrade
00:55:31.220 --> 00:55:35.080
and the settlements
systems are critically important
00:55:35.080 --> 00:55:37.500
for many important matters
as you just mentioned,
00:55:37.500 --> 00:55:40.140
securitization some of these proposals.
00:55:40.140 --> 00:55:43.670
And I think that that would
be a topic that should be raised
00:55:43.670 --> 00:55:45.960
because I know ORCOT
has a lot of really important
00:55:45.960 --> 00:55:48.040
matters on the table right now,
00:55:48.040 --> 00:55:51.600
but if there's a way that we
can help reprioritize funds
00:55:51.600 --> 00:55:56.600
staff to really kind of
help with speed up EMS,
00:55:58.820 --> 00:56:02.370
potentially, I know we have
some funds probably sitting
00:56:02.370 --> 00:56:03.970
on the sidelines for RTC
00:56:05.600 --> 00:56:09.691
and also just visit more about
00:56:09.691 --> 00:56:10.670
what some of the challenges are.
00:56:10.670 --> 00:56:11.750
I think that's really important.
00:56:11.750 --> 00:56:13.790
So let's continue to visit about that.
00:56:14.981 --> 00:56:16.900
And I'll make sure to
add it to the board agenda
00:56:16.900 --> 00:56:19.550
for the New York board they're meeting
00:56:19.550 --> 00:56:22.630
they're off to a fast start
there'll be meeting next Friday.
00:56:22.630 --> 00:56:24.780
Absolutely, and
just one last thing,
00:56:24.780 --> 00:56:27.400
thank you for bringing up
the field backup service.
00:56:27.400 --> 00:56:31.040
The firm field service is very
important for my perspective,
00:56:31.040 --> 00:56:34.370
and I am glad to hear that
it can be procured outside
00:56:34.370 --> 00:56:36.080
of an EMS upgrade.
00:56:36.080 --> 00:56:39.610
I think as you stated, I
think if we can come up
00:56:39.610 --> 00:56:43.180
with a defined path
forward on that product.
00:56:43.180 --> 00:56:45.961
I think the market will build around it.
00:56:45.961 --> 00:56:48.000
I would like to hear from the companies
00:56:48.000 --> 00:56:50.170
about Commissioner McAdam's
question about non-spin
00:56:50.170 --> 00:56:52.880
being or that product
being rolled into non-spin.
00:56:52.880 --> 00:56:54.340
I understand there's
some challenges there.
00:56:54.340 --> 00:56:57.608
So I would like to hear a
little bit more from them.
00:56:57.608 --> 00:57:02.608
And also I think that having
it as a standalone product
00:57:04.120 --> 00:57:06.950
sounds similar to Blackstar
and that procurement
00:57:06.950 --> 00:57:08.800
seems to be a reasonable path forward.
00:57:08.800 --> 00:57:12.430
And so thank you for your
feedback on that important issue
00:57:12.430 --> 00:57:14.353
in tackling that proactively.
00:57:15.710 --> 00:57:17.860
All right, yes Sir.
00:57:17.860 --> 00:57:19.950
Thank you, Mr. Chairman,
if you don't mind
00:57:19.950 --> 00:57:22.530
I want to respond to a
concept that came up,
00:57:22.530 --> 00:57:24.610
which is about the duck curve
00:57:24.610 --> 00:57:27.230
and the challenges that, that poses.
00:57:27.230 --> 00:57:29.150
But I wanna make sure that to be clear
00:57:29.150 --> 00:57:32.450
that those are very different
from the URI type challenges.
00:57:32.450 --> 00:57:36.707
So in URI, that demand got
as high as say 77 gigawatts,
00:57:36.707 --> 00:57:40.760
and the most we could squeeze
out of the fleet was 45 to 50
00:57:40.760 --> 00:57:44.600
gigawatts because there were
frozen and there was no fuel.
00:57:44.600 --> 00:57:46.440
And that's very different.
00:57:46.440 --> 00:57:49.650
The duck curve sounds
challenging and it is.
00:57:49.650 --> 00:57:52.360
We're very lucky we've got
ERCOT to help manage it.
00:57:52.360 --> 00:57:54.650
That is totally manageable
because you actually
00:57:54.650 --> 00:57:58.160
do have enough resources to pick up.
00:57:58.160 --> 00:58:01.200
It's just a question of
when you turn them on.
00:58:01.200 --> 00:58:03.650
Which resources you hold back,
00:58:03.650 --> 00:58:05.830
because they're worsening
that need for ramping
00:58:05.830 --> 00:58:07.670
or cause they've
got a lot of flexibility
00:58:07.670 --> 00:58:10.120
you wanna use them as you need the ramp.
00:58:10.120 --> 00:58:14.260
It's just how you manage the fleet.
00:58:14.260 --> 00:58:16.370
What's actually a little
harder than the duck curve,
00:58:16.370 --> 00:58:19.787
which is kind of an expected
diurnal when the sun goes down
00:58:19.787 --> 00:58:21.590
problem is the unexpected
00:58:21.590 --> 00:58:24.760
when there's a front and the
wind might die all of a sudden.
00:58:24.760 --> 00:58:28.370
That's harder to manage but in fact
00:58:28.370 --> 00:58:30.150
you have to manage both.
00:58:30.150 --> 00:58:33.415
And I think a lot of
the job of what ERCOT
00:58:33.415 --> 00:58:38.415
has to do is to your point
Commissioner Cobos
00:58:38.740 --> 00:58:41.810
is analyze the specific patterns
00:58:41.810 --> 00:58:44.410
that this system might face.
00:58:44.410 --> 00:58:49.100
And so to figure out what kind
of ramping products we need.
00:58:52.230 --> 00:58:56.193
And so that is analysis
that ERCOT is already doing.
00:58:57.870 --> 00:58:59.850
Again, this is definitely manageable.
00:58:59.850 --> 00:59:02.610
It's a question of what
products you design
00:59:02.610 --> 00:59:04.760
to meet it and do it through a market.
00:59:04.760 --> 00:59:06.140
And I think that...
00:59:06.140 --> 00:59:09.610
So after analyzing it, one question is
00:59:09.610 --> 00:59:12.560
and Commissioner McAdams,
you asked about quantity.
00:59:12.560 --> 00:59:13.940
That's key, right?
00:59:13.940 --> 00:59:18.860
Now, initially you can just
even expand existing products
00:59:18.860 --> 00:59:20.020
and we've done that.
00:59:20.020 --> 00:59:21.170
ERCOT did that this summer.
00:59:21.170 --> 00:59:23.300
So you can even just
increase the quantity
00:59:23.300 --> 00:59:26.300
of existing products, that's easy.
00:59:26.300 --> 00:59:28.620
Second thing you could
do is increase the quantity
00:59:28.620 --> 00:59:31.100
of products that are in
development like ECRS,
00:59:31.100 --> 00:59:33.230
but that's a couple years later.
00:59:33.230 --> 00:59:36.020
For even beyond that
you could tailor some really
00:59:36.020 --> 00:59:38.880
well-designed perfectly
fit to the problem
00:59:38.880 --> 00:59:41.530
ramping products
maybe an inertia product,
00:59:41.530 --> 00:59:43.600
that'll take a little bit longer.
00:59:43.600 --> 00:59:46.330
But again, these things
are all manageable.
00:59:46.330 --> 00:59:49.530
These are the steps that
ERCOT has to take I think.
00:59:49.530 --> 00:59:51.180
Now what we're gonna
hear from the market
00:59:51.180 --> 00:59:53.770
participants today is primarily...
00:59:53.770 --> 00:59:55.690
'Cause that's all about
problem number two
00:59:55.690 --> 00:59:57.780
as I set it up this morning.
00:59:57.780 --> 01:00:00.470
What we're gonna hear from
the market participants today,
01:00:00.470 --> 01:00:03.370
just to not confuse things
is primarily about problem
01:00:03.370 --> 01:00:05.003
number one, which is harder,
01:00:06.222 --> 01:00:09.140
not just a technical management problem,
01:00:09.140 --> 01:00:11.110
it's sort of a harder
market design problem.
01:00:11.110 --> 01:00:13.520
How do you make sure you
always have enough supply?
01:00:13.520 --> 01:00:15.923
And that's largely I
think the focus of most
01:00:15.923 --> 01:00:20.923
of the stakeholder proposals
that we'll hear from today
01:00:20.960 --> 01:00:25.960
and to me, it's actually
helpful to sort out
01:00:26.680 --> 01:00:30.133
those two problems and
think about them separately.
01:00:33.086 --> 01:00:34.780
Well, I'd also heard that
those two problems can happen
01:00:34.780 --> 01:00:35.683
at the same time.
01:00:36.700 --> 01:00:41.580
So having to conjure up
20,000 megawatts every day
01:00:41.580 --> 01:00:45.719
as a known challenge is,
it's still a challenge because...
01:00:45.719 --> 01:00:50.300
Just because resources
available may not be offering
01:00:50.300 --> 01:00:52.021
into the market at that moment in time
01:00:52.021 --> 01:00:53.910
depending on market conditions.
01:00:53.910 --> 01:00:56.740
And so that's where ERCOT got a scramble
01:00:56.740 --> 01:00:59.523
but if you have a second
issue you're wrong.
01:01:00.520 --> 01:01:02.103
Now you have a backup sheet.
01:01:03.090 --> 01:01:06.380
And so that's where leaving the...
01:01:06.380 --> 01:01:10.692
I mentioned leaving the liability
in the ERCOT control room
01:01:10.692 --> 01:01:13.280
it limits the amount
of resources available,
01:01:13.280 --> 01:01:16.270
the tools not the resources,
the tools available.
01:01:16.270 --> 01:01:18.510
And so I wanna make
sure we think very hard
01:01:18.510 --> 01:01:22.212
about how separate problems can converge
01:01:22.212 --> 01:01:27.212
and the liability that we're
exposing ourselves to even...
01:01:31.010 --> 01:01:34.233
Especially for the days
when both shoots don't open.
01:01:34.233 --> 01:01:36.493
Okay, operational
question, Sam.
01:01:38.500 --> 01:01:41.610
Is a 20 year old combined
cycle gas plant designed
01:01:41.610 --> 01:01:45.910
to arrest a drop of that
magnitude on a daily basis?
01:01:45.910 --> 01:01:48.763
I mean, can it ramp that
fast and meet that challenge?
01:01:49.620 --> 01:01:53.870
Because we had 16% of
our dispatchable capabilities
01:01:53.870 --> 01:01:57.393
break in one day this summer.
01:02:00.160 --> 01:02:04.033
So the answer
is maybe in partly.
01:02:05.600 --> 01:02:07.970
The key point is the
questions you're raising
01:02:07.970 --> 01:02:09.960
are the right ones to raise to make sure
01:02:09.960 --> 01:02:12.420
we do have that capability in place.
01:02:12.420 --> 01:02:14.860
I mean, sure, with a combined cycle,
01:02:14.860 --> 01:02:15.740
it's partly a question
01:02:15.740 --> 01:02:19.170
of when you turn them on
and who you're holding back
01:02:19.170 --> 01:02:21.660
and they do have ramping in them.
01:02:21.660 --> 01:02:24.520
They absolutely do, but
you have to make sure
01:02:24.520 --> 01:02:29.400
that you have enough overall
to meet the operational needs
01:02:29.400 --> 01:02:30.233
for the day.
01:02:30.233 --> 01:02:33.380
And again, I think you're
asking exactly the right questions
01:02:33.380 --> 01:02:36.090
here to make sure that
we're set up to do it and to do
01:02:36.090 --> 01:02:39.020
it in a way that's in
market which not only gets
01:02:39.020 --> 01:02:41.863
the job done, the
controllers can do that too.
01:02:42.730 --> 01:02:46.690
It gets it done in a
market-based way that also sends
01:02:46.690 --> 01:02:49.090
the right signals for investment.
01:02:49.090 --> 01:02:54.090
So, by my comments,
01:02:54.450 --> 01:02:55.820
I wasn't at all saying,
01:02:55.820 --> 01:02:57.890
we're not asking the right questions.
01:02:57.890 --> 01:03:00.040
These are the right questions.
01:03:00.040 --> 01:03:01.990
I was just trying to separate
out what are the different
01:03:01.990 --> 01:03:04.190
threats and the tools for them.
01:03:04.190 --> 01:03:07.970
So, in the spirit of
providing holistic perspective
01:03:07.970 --> 01:03:10.720
on an operational challenge,
01:03:10.720 --> 01:03:13.543
like the one that we faced in June,
01:03:14.636 --> 01:03:18.200
'cause I was examining
these operational challenges
01:03:18.200 --> 01:03:21.580
a little bit closer and looking
at what actually occurred
01:03:21.580 --> 01:03:25.376
and just for the sake of
providing a holistic picture
01:03:25.376 --> 01:03:28.870
on one of the tightest
days that we had in June
01:03:28.870 --> 01:03:30.233
during conservation week,
01:03:31.490 --> 01:03:33.290
we had a lot of solar on the system.
01:03:34.170 --> 01:03:38.040
Well, over 50% that
helped us get across peak
01:03:38.040 --> 01:03:40.240
on the tightest day that
we had this summer.
01:03:42.440 --> 01:03:43.780
And I know there could be cloud coverage
01:03:43.780 --> 01:03:46.542
and that may not
always happen but just...
01:03:46.542 --> 01:03:48.680
I just want to make
sure that we're looking
01:03:48.680 --> 01:03:51.070
at all these issues
holistically and robustly
01:03:51.070 --> 01:03:52.020
as we move forward.
01:03:53.350 --> 01:03:54.714
Alright, thank you.
01:03:54.714 --> 01:03:58.253
Well, let's get started
with a panel number one.
01:03:59.440 --> 01:04:02.423
Come on up, you brave souls.
01:04:04.593 --> 01:04:06.463
Vistra next to hear and LCRA.
01:04:38.200 --> 01:04:39.700
All right, the floor is yours.
01:04:42.530 --> 01:04:44.750
I hope the microphone is on.
01:04:44.750 --> 01:04:46.910
Good morning Commissioners.
01:04:46.910 --> 01:04:48.020
My name is Julia Frayer,
01:04:48.020 --> 01:04:49.120
I'm (indistinct) Economics,
01:04:49.120 --> 01:04:52.280
and I will be presenting
on behalf of the request
01:04:52.280 --> 01:04:53.543
of Vistra Corporation.
01:04:55.150 --> 01:04:58.340
We began our analysis
by looking at the objectives
01:04:58.340 --> 01:05:01.800
of the policy makers, for
example, SB3 requirements,
01:05:01.800 --> 01:05:03.840
and it was very clear
to us at the beginning
01:05:03.840 --> 01:05:05.620
that policy makers wish to improve
01:05:05.620 --> 01:05:07.510
reliability and resiliency
01:05:07.510 --> 01:05:09.630
and I think you've all underscored that.
01:05:09.630 --> 01:05:12.060
I have my notes, every
one of you said this morning
01:05:12.060 --> 01:05:13.230
that is a key objective.
01:05:13.230 --> 01:05:14.450
So I think we're on the right track
01:05:14.450 --> 01:05:17.440
in terms of understanding
the priorities.
01:05:17.440 --> 01:05:20.140
We also evaluated
historical market outcomes.
01:05:20.140 --> 01:05:22.140
Looking back to 2014,
01:05:22.140 --> 01:05:25.850
we saw very clear
insufficiency of revenues to cover
01:05:25.850 --> 01:05:28.740
the costs of developing and
operating a new dispatchable
01:05:28.740 --> 01:05:32.620
resource under normal
conditions in ERCOT.
01:05:32.620 --> 01:05:33.730
In the industry we referred
01:05:33.730 --> 01:05:35.680
to this as a missing money problem.
01:05:35.680 --> 01:05:38.520
So you'll hear me
speak about that a bit.
01:05:38.520 --> 01:05:40.751
These are the facts that
I think explain why new
01:05:40.751 --> 01:05:42.560
dispatchable resources
have not been built
01:05:42.560 --> 01:05:44.590
in recent years in Texas.
01:05:44.590 --> 01:05:47.620
And these are the observations
that really led us down
01:05:47.620 --> 01:05:50.113
the path of our proposal.
01:05:51.040 --> 01:05:53.310
To be clear, we do think
that the energy market
01:05:53.310 --> 01:05:55.770
has functioned well in
choosing which resources
01:05:55.770 --> 01:05:58.300
should be dispatched, providing a signal
01:05:58.300 --> 01:05:59.890
for efficient consumption.
01:05:59.890 --> 01:06:03.860
So it's not a complete failure
of the energy market design
01:06:03.860 --> 01:06:05.680
that we're trying to fix here.
01:06:05.680 --> 01:06:10.680
So our recommendations are
built upon the basic cornerstones
01:06:10.810 --> 01:06:12.800
of the existing real-time energy market
01:06:12.800 --> 01:06:14.360
and they had energy market.
01:06:14.360 --> 01:06:17.400
What we're recommending
are two modifications.
01:06:17.400 --> 01:06:20.983
The first one is an improved ORDC curve,
01:06:20.983 --> 01:06:22.900
that will basically integrate
01:06:22.900 --> 01:06:24.550
with the real-time energy market.
01:06:25.550 --> 01:06:29.360
The improvements in the ORTC
curve that we are suggesting
01:06:29.360 --> 01:06:32.080
will enhance the economic
signals for investment
01:06:32.080 --> 01:06:37.080
in dispatchable resources and
real-time operating reserves.
01:06:37.200 --> 01:06:41.490
The second piece of the
puzzle for us is a new ancillary
01:06:41.490 --> 01:06:44.070
services product which we've referred
01:06:44.070 --> 01:06:46.423
to as dispatchable stand-by reserves.
01:06:47.440 --> 01:06:50.260
The goal behind both recommended changes
01:06:50.260 --> 01:06:51.790
is again to reiterate,
01:06:51.790 --> 01:06:54.940
improve reliability and
mitigate load shed in the future.
01:06:54.940 --> 01:06:58.678
So to Sam's question that is the problem
01:06:58.678 --> 01:07:00.710
we are trying to solve,
01:07:00.710 --> 01:07:05.520
and I think both changes the
DSR and the improved ORDC
01:07:05.520 --> 01:07:07.770
should be done in concert,
01:07:07.770 --> 01:07:10.130
as we believe doing
just one or the other
01:07:10.130 --> 01:07:12.260
will not be enough.
01:07:12.260 --> 01:07:14.193
If we can go to the next slide.
01:07:15.630 --> 01:07:19.050
In this slide, we have laid
out how our recommendations
01:07:19.050 --> 01:07:20.550
would affect the energy market.
01:07:20.550 --> 01:07:25.550
So this is the links if you
will and how we anticipate
01:07:25.670 --> 01:07:28.870
it will create that investment signal
01:07:28.870 --> 01:07:30.560
for supply adequacy.
01:07:30.560 --> 01:07:33.420
We'll begin in the top hand side, step A
01:07:33.420 --> 01:07:36.680
where there's an announcement
of the complete package
01:07:36.680 --> 01:07:40.290
of RDC changes and
based on practical experience
01:07:40.290 --> 01:07:43.970
here in the industry, this will
raise forward market prices.
01:07:43.970 --> 01:07:45.486
And then we move on.
01:07:45.486 --> 01:07:49.630
We expect a DSR auction
to be implemented by ERCOT
01:07:49.630 --> 01:07:51.280
ahead of the real-time market
01:07:51.280 --> 01:07:54.050
and I will try to explain
what the DSR product
01:07:54.050 --> 01:07:55.240
is in the auction in a bit,
01:07:55.240 --> 01:07:58.230
but before we get into
the nitty-gritty details,
01:07:58.230 --> 01:08:00.540
I just wanted to complete the circle.
01:08:00.540 --> 01:08:03.810
So with the DSR auction
happening ahead of time,
01:08:03.810 --> 01:08:06.968
this would compliment the
forward market expectations
01:08:06.968 --> 01:08:10.663
being sent by the changes to the ORDC.
01:08:11.880 --> 01:08:15.170
And it would also give ERCOT
a set of standby resources
01:08:15.170 --> 01:08:17.580
they could call upon
in the energy market.
01:08:17.580 --> 01:08:22.240
Activate is the term we use
to meet any emergency events
01:08:22.240 --> 01:08:27.220
that cannot be met with
energy market offers.
01:08:27.220 --> 01:08:29.290
Once we get to the real-time market
01:08:29.290 --> 01:08:31.070
and this is a really important piece,
01:08:31.070 --> 01:08:33.640
we will have the improved ORDC in place.
01:08:33.640 --> 01:08:36.500
It will be triggered depending
on supply conditions,
01:08:36.500 --> 01:08:39.250
and it will essentially
validate the forward market
01:08:39.250 --> 01:08:42.060
expectations that had been
built up by the announcements.
01:08:42.060 --> 01:08:45.820
ERCOT will also have
the DSR product in reserve
01:08:45.820 --> 01:08:48.703
to protect the market
from load shed events,
01:08:48.703 --> 01:08:51.880
and we'll use those resources as needed
01:08:51.880 --> 01:08:53.713
to ensure sufficient supply.
01:08:54.650 --> 01:08:57.730
And then over time we
expect that the forward market
01:08:57.730 --> 01:09:01.160
energy market signals
would trigger new investment
01:09:01.160 --> 01:09:05.829
and create a more reliable system.
01:09:05.829 --> 01:09:08.620
I think we also expect that with time,
01:09:08.620 --> 01:09:12.570
the ORDC parameters
that we introduced in step A
01:09:12.570 --> 01:09:15.070
would need to be reviewed and adjusted
01:09:15.070 --> 01:09:17.780
to ensure that it's really
capturing the uncertainty
01:09:17.780 --> 01:09:20.890
in the market, the changes
in the supply mix contribute
01:09:20.890 --> 01:09:22.170
to that uncertainty
01:09:22.170 --> 01:09:25.190
and continuing to send
that strong economic signal
01:09:25.190 --> 01:09:26.183
for investment.
01:09:28.510 --> 01:09:31.010
If we go onto the next slide,
01:09:31.010 --> 01:09:33.790
let me spend a few minutes
talking about each of our two
01:09:33.790 --> 01:09:38.270
recommendations in a bit
more detail, a deeper dive.
01:09:38.270 --> 01:09:41.840
So the ORDC change
has three components to it.
01:09:41.840 --> 01:09:44.260
First we're going to lower the H cap
01:09:44.260 --> 01:09:48.473
and we're recommending
$4,000 per megawatt hour H cap.
01:09:48.473 --> 01:09:51.860
We're then increasing the
minimum contingency level,
01:09:51.860 --> 01:09:55.740
the MCL we're increasing
it to 2300 megawatts.
01:09:55.740 --> 01:09:58.618
And finally step three,
we are adjusting the shape
01:09:58.618 --> 01:10:02.770
of the curve through an
expansion of the standard deviation
01:10:02.770 --> 01:10:06.710
that goes into the loss of
load probability calculations.
01:10:06.710 --> 01:10:09.628
Based on our analysis of
historical actual outcomes
01:10:09.628 --> 01:10:14.628
in ERCOT since 2014 and
consideration of that missing money
01:10:15.460 --> 01:10:19.390
piece for a hypothetical new CCGT,
01:10:19.390 --> 01:10:23.000
we believe the new
multiplier or the rescaler
01:10:23.000 --> 01:10:26.603
if you will to the standard
deviation should be 1.5 X.
01:10:27.760 --> 01:10:30.460
These three parameter
changes are related.
01:10:30.460 --> 01:10:32.950
For example, you could imagine an H cap
01:10:32.950 --> 01:10:35.670
that could be a little bit
higher, a little bit lower
01:10:35.670 --> 01:10:36.780
than what we're proposing,
01:10:36.780 --> 01:10:40.150
but then the other
parameters need to be modified
01:10:40.150 --> 01:10:43.113
as well to get that
economic signal correct.
01:10:44.010 --> 01:10:46.260
From the changes we are proposing,
01:10:46.260 --> 01:10:48.915
we're actually accomplishing two things.
01:10:48.915 --> 01:10:53.915
We are intentionally and
quite explicitly targeting
01:10:55.810 --> 01:10:59.810
an opportunity for CCGTs
to earn sufficient revenues
01:10:59.810 --> 01:11:02.687
so that economic signal for investment.
01:11:02.687 --> 01:11:06.690
But we are also creating an
economic signal for generators
01:11:06.690 --> 01:11:09.980
to self commit in the
real-time energy market
01:11:09.980 --> 01:11:12.490
resulting insufficient
operating reserves.
01:11:12.490 --> 01:11:14.030
And you can really see that well,
01:11:14.030 --> 01:11:16.360
when we look at the
zoomed in portion of the graph
01:11:16.360 --> 01:11:18.030
on the slide,
01:11:18.030 --> 01:11:20.990
we know that ERCOT recently
has been trying to operate
01:11:20.990 --> 01:11:25.990
to reserve levels around
6,000 to 7,000 megawatts.
01:11:28.830 --> 01:11:30.650
And at 6,500 megawatt,
01:11:30.650 --> 01:11:32.740
it's very clear that the current ORDC,
01:11:32.740 --> 01:11:37.740
the black line is basically
providing no economic signal,
01:11:37.890 --> 01:11:40.730
no additional revenues
to those generators
01:11:40.730 --> 01:11:42.650
that are showing up.
01:11:42.650 --> 01:11:47.480
ERCOT has had to
essentially use controlled room
01:11:49.200 --> 01:11:51.080
tools that it has that it's disposable,
01:11:51.080 --> 01:11:55.240
the RUC tool to get those
operating reserves that it wants.
01:11:55.240 --> 01:11:57.830
With the modified or improved ORDC
01:11:57.830 --> 01:11:59.410
that we're showing the red line,
01:11:59.410 --> 01:12:04.410
we expect that on average
at those levels of supply 6,500,
01:12:04.960 --> 01:12:08.150
for example, we would
be getting a little bit
01:12:08.150 --> 01:12:13.150
more than 6000 megawatt
or adder to system Lambda
01:12:13.790 --> 01:12:15.270
in our real-time price.
01:12:15.270 --> 01:12:18.270
And we believe that that is
the important key to getting
01:12:18.270 --> 01:12:19.700
the right economic incentive
01:12:19.700 --> 01:12:23.890
so that we don't have to depend
on out of market maneuvers
01:12:23.890 --> 01:12:27.290
by the system operator
to get those levels
01:12:27.290 --> 01:12:28.793
of operating reserves.
01:12:31.290 --> 01:12:32.430
And this is really important
01:12:32.430 --> 01:12:36.690
because those out of market maneuvers
01:12:36.690 --> 01:12:39.310
are actually going against
the whole investment signal.
01:12:39.310 --> 01:12:41.566
They're eliminating or create...
01:12:41.566 --> 01:12:43.940
Eliminating the price signal
01:12:43.940 --> 01:12:47.640
or at least depressing it
because of how RUC interplays
01:12:47.640 --> 01:12:50.410
with the price settlement process.
01:12:50.410 --> 01:12:53.600
These ORDC changes are targeting
01:12:53.600 --> 01:12:56.550
specifically dispatchable resources.
01:12:56.550 --> 01:12:59.300
For example, based
on our backcast analysis
01:12:59.300 --> 01:13:04.300
that CCGT on average
between 2014 and 2021.
01:13:06.300 --> 01:13:08.500
And based on those system
conditions that prevailed
01:13:08.500 --> 01:13:10.877
historically would have
earned an additional
01:13:10.877 --> 01:13:13.935
$10 megawatt hour
on average when it ran.
01:13:13.935 --> 01:13:18.760
These changes do not boost
the revenues of intermittent
01:13:18.760 --> 01:13:22.060
resources like wind generation
anywhere near that quantity
01:13:22.060 --> 01:13:23.103
or that amount.
01:13:24.200 --> 01:13:27.330
And that kind of makes
economic sense or intuitive sense
01:13:27.330 --> 01:13:29.950
I would say because
in hours with high levels
01:13:29.950 --> 01:13:31.690
of wind generation,
01:13:31.690 --> 01:13:35.790
the level of the supply
cushion or the RTO El cap,
01:13:35.790 --> 01:13:40.790
the excess supply in
the market is much larger,
01:13:40.830 --> 01:13:43.820
which then gets us to
the tail end of the curve
01:13:43.820 --> 01:13:46.940
where we have low or
negligible ORDC adders.
01:13:46.940 --> 01:13:50.250
And when solar penetration
increases over time,
01:13:50.250 --> 01:13:52.930
we expect exactly the
same thing to happen,
01:13:52.930 --> 01:13:57.010
where the ORDC payments
will basically be highly correlated
01:13:57.010 --> 01:14:02.010
with low wind and low solar
conditions operating conditions.
01:14:02.440 --> 01:14:07.440
So this remuneration is
targeting dispatchable resources,
01:14:07.590 --> 01:14:09.360
not just resources...
01:14:11.350 --> 01:14:14.000
Not just all resources I
guess in the supply mix.
01:14:14.000 --> 01:14:16.410
And it's simply because
of the pattern of generation
01:14:16.410 --> 01:14:18.853
for whether contingent resources.
01:14:20.550 --> 01:14:22.393
If we move on to slide five,
01:14:24.670 --> 01:14:29.143
in a vacuum if we had just
implemented those ORDC changes
01:14:29.143 --> 01:14:32.020
that would have triggered
additional investment,
01:14:32.020 --> 01:14:34.376
that's our objective,
that's what we want.
01:14:34.376 --> 01:14:38.604
But we would also
anticipate in a dynamic world,
01:14:38.604 --> 01:14:41.030
a wave of mothballing announcements
01:14:41.030 --> 01:14:42.770
or retirements to follow.
01:14:42.770 --> 01:14:44.980
Because of the
infrequently used resources
01:14:44.980 --> 01:14:46.690
sitting on top of the supply stack
01:14:46.690 --> 01:14:49.150
and we have adjusted
an illustrative graphic
01:14:49.150 --> 01:14:50.683
here at the bottom right.
01:14:51.534 --> 01:14:54.093
We will never get dispatched
in the energy market.
01:14:55.120 --> 01:14:57.280
And eventually as a new supply resources
01:14:57.280 --> 01:15:00.160
came in, they'd get squeezed
out by those new resources
01:15:00.160 --> 01:15:04.380
and they would rationally
choose to either exit temporarily
01:15:04.380 --> 01:15:06.240
or permanently the market.
01:15:06.240 --> 01:15:08.910
But existing dispatchable resources
01:15:08.910 --> 01:15:13.390
sitting at the top of that
supply curve are still valuable.
01:15:13.390 --> 01:15:16.230
They can provide
significant reliability benefits
01:15:16.230 --> 01:15:18.402
to the system if they remain operating.
01:15:18.402 --> 01:15:22.250
So that was really the,
I think the foundation
01:15:22.250 --> 01:15:26.190
to our thinking through an additional
01:15:26.190 --> 01:15:29.090
or new ancillary service
that could be implemented
01:15:29.090 --> 01:15:33.630
to compliment the changes
that we would anticipate
01:15:33.630 --> 01:15:36.373
out of the improved ORDC payments.
01:15:38.740 --> 01:15:40.010
This new AIS product,
01:15:40.010 --> 01:15:42.430
and we call it the dispatchable standby
01:15:42.430 --> 01:15:46.823
are reserves product or DSR
for sure would be completed
01:15:48.910 --> 01:15:50.913
through periodic forward auctions.
01:15:51.840 --> 01:15:53.750
And I know I may have run out of time,
01:15:53.750 --> 01:15:56.697
so I will ask your
permission if I could continue.
01:15:56.697 --> 01:15:58.597
Finish your last
slide (indistinct).
01:16:02.171 --> 01:16:04.090
We have a lot of details
that we've thought through
01:16:04.090 --> 01:16:06.160
about how the DSR would be procured
01:16:06.160 --> 01:16:07.260
and I'm happy to go through
01:16:07.260 --> 01:16:10.173
it with you if you have questions on it.
01:16:11.110 --> 01:16:13.360
But generally we're thinking
that this is a short term
01:16:13.360 --> 01:16:16.820
forward auction that is done outside
01:16:16.820 --> 01:16:18.850
of the energy management system
01:16:18.850 --> 01:16:20.515
as we heard from ERCOT today,
01:16:20.515 --> 01:16:23.040
that is a consideration in terms
01:16:23.040 --> 01:16:24.870
of timeliness of implementation,
01:16:24.870 --> 01:16:26.990
very similar to the competitive markets
01:16:26.990 --> 01:16:29.323
they've created for Blackstar for ERS.
01:16:30.450 --> 01:16:32.320
We think a simple option could work
01:16:33.170 --> 01:16:37.930
and the key piece really
here is about how the DSR
01:16:37.930 --> 01:16:40.440
resources, once they're self identify
01:16:40.440 --> 01:16:41.820
and participate in the auction,
01:16:41.820 --> 01:16:44.480
how they're actually used by ERCOT.
01:16:44.480 --> 01:16:46.169
Well, they would be
activated or dispatched
01:16:46.169 --> 01:16:48.912
when extreme events occur.
01:16:48.912 --> 01:16:51.210
And when that happens,
01:16:51.210 --> 01:16:55.460
they wouldn't affect the
realtime energy price.
01:16:55.460 --> 01:16:58.330
The key is for us to preserve
the realtime energy price.
01:16:58.330 --> 01:17:00.360
So they wouldn't be counted for example,
01:17:00.360 --> 01:17:03.363
in the calculation of the real time,
01:17:04.760 --> 01:17:08.340
adders from the ORDC
and that's in order to preserve
01:17:08.340 --> 01:17:09.783
that economic signal.
01:17:12.850 --> 01:17:14.880
Feel free to conclude
with Sam's question
01:17:14.880 --> 01:17:16.103
about counter-arguments.
01:17:17.112 --> 01:17:18.670
And actually we can
go to the next slide,
01:17:18.670 --> 01:17:22.723
that might be a helpful stay about this.
01:17:25.380 --> 01:17:29.350
We are solving, as Sam
had asked a question,
01:17:29.350 --> 01:17:33.440
both a supply adequacy problem that's...
01:17:33.440 --> 01:17:37.030
And an operational
responsiveness problem.
01:17:37.030 --> 01:17:40.530
The supply adequacy problem
is an investment signal problem,
01:17:40.530 --> 01:17:44.160
and the modified or improved ORDC
01:17:44.160 --> 01:17:46.486
we believe will get us there.
01:17:46.486 --> 01:17:49.429
We also have a sort of planning problem
01:17:49.429 --> 01:17:54.429
and a dispatchability problem
under extreme circumstances,
01:17:54.530 --> 01:17:56.010
an operational responsiveness
01:17:56.010 --> 01:17:59.940
and we believe that having
reserves stand-by reserves
01:17:59.940 --> 01:18:02.637
that ERCOT can use
in the real-time market
01:18:02.637 --> 01:18:04.860
really helps resolve that.
01:18:04.860 --> 01:18:07.040
And that's the purpose
of the DSR product.
01:18:07.040 --> 01:18:10.140
In fact, I like to think of it
as an insurance product.
01:18:10.140 --> 01:18:11.540
And the counter arguments.
01:18:12.390 --> 01:18:15.570
So the challenges I
think is your question.
01:18:15.570 --> 01:18:19.870
Sam identified for all of
us who devil's advocate.
01:18:19.870 --> 01:18:22.990
What would a opponents of this plan say?
01:18:22.990 --> 01:18:26.730
Well, before I go to
the devil's advocate,
01:18:26.730 --> 01:18:28.500
I think there is a sequencing issue.
01:18:28.500 --> 01:18:30.690
This slide shows that we do think
01:18:30.690 --> 01:18:32.410
that this could be done very quickly
01:18:32.410 --> 01:18:35.060
because it's outside of the
energy management system.
01:18:36.560 --> 01:18:39.700
But I think in terms of
devil's advocate or challenge,
01:18:39.700 --> 01:18:42.750
I think the challenge
is, really goes back
01:18:42.750 --> 01:18:45.997
to what is your metric of
success for this product?
01:18:45.997 --> 01:18:50.020
My metric of success or lack of success
01:18:50.020 --> 01:18:51.400
is if we don't get investment
01:18:51.400 --> 01:18:53.780
and we don't get the
additional operating
01:18:53.780 --> 01:18:55.440
reserves committing on their own,
01:18:55.440 --> 01:18:56.800
self committing on their own,
01:18:56.800 --> 01:18:58.541
or for example we
don't get weatherization.
01:18:58.541 --> 01:19:00.300
I didn't mention it earlier,
01:19:00.300 --> 01:19:03.560
but the DSR product is
well positioned to be a market
01:19:03.560 --> 01:19:06.590
mechanism to get weatherization
01:19:06.590 --> 01:19:07.960
in there and from fuel as well.
01:19:07.960 --> 01:19:10.180
So if we don't get
weatherization activities,
01:19:10.180 --> 01:19:12.270
we don't get announcements
of new investment
01:19:12.270 --> 01:19:15.422
and we implement the modified
ORDC the improved ORDC
01:19:15.422 --> 01:19:20.422
with the DSR and we're
still not getting those levels
01:19:21.050 --> 01:19:24.320
of operating reserves we
need, that to me is a challenge.
01:19:24.320 --> 01:19:26.820
And I think there is a
solution to that challenge.
01:19:28.990 --> 01:19:31.860
The solution is twofold,
don't do things to piecemeal.
01:19:31.860 --> 01:19:33.780
Because the market has a hard time
01:19:33.780 --> 01:19:38.780
kind of reacting to piecemeal
pieces of information.
01:19:38.780 --> 01:19:41.200
And I think another
thing is don't try to fine
01:19:41.200 --> 01:19:45.520
tune all the details
to extreme perfection
01:19:45.520 --> 01:19:50.080
because we probably
won't get it perfectly, right.
01:19:50.080 --> 01:19:53.320
We need to err on the
side of quick signals.
01:19:53.320 --> 01:19:54.930
We know what
failure looks like.
01:19:54.930 --> 01:19:59.630
What would a counter
argument to be why this solution
01:19:59.630 --> 01:20:02.920
will not deliver the
opposite of failure?
01:20:02.920 --> 01:20:05.360
Well, I think directionally,
01:20:05.360 --> 01:20:08.631
we know that the ORDC
as a Stan state doesn't work.
01:20:08.631 --> 01:20:13.080
So the counter argument
to it is that we are shifting
01:20:13.080 --> 01:20:17.600
the ORDC to get us the
right level of real-time prices
01:20:17.600 --> 01:20:18.750
that should work.
01:20:18.750 --> 01:20:19.660
And then we're creating
01:20:19.660 --> 01:20:21.950
a safety net with the DSR (indistinct).
01:20:21.950 --> 01:20:25.450
That's an excellent example
of how this is a great idea.
01:20:25.450 --> 01:20:26.900
It would not be a counter argument.
01:20:26.900 --> 01:20:27.975
Thank you very much.
01:20:27.975 --> 01:20:31.440
How do you answer
to a counter-argument
01:20:31.440 --> 01:20:35.369
that your ORDC proposal's
gonna provide adders
01:20:35.369 --> 01:20:36.890
over a longer period of time
01:20:36.890 --> 01:20:40.970
which could actually provide
more ORDC payments
01:20:40.970 --> 01:20:43.200
to renewable generation.
01:20:43.200 --> 01:20:46.073
I think ORDC
payments in some hours
01:20:50.630 --> 01:20:53.420
may also be paid out to
renewable generations
01:20:53.420 --> 01:20:55.950
that are producing
energy in those hours.
01:20:55.950 --> 01:21:00.920
But on an average annual
basis the ORDC payments
01:21:00.920 --> 01:21:03.440
are primarily going to
dispatchable resources.
01:21:03.440 --> 01:21:06.110
And the reason being is
that renewable resources
01:21:06.110 --> 01:21:09.210
that are intermittent and
we have two general classes
01:21:09.210 --> 01:21:10.161
I'm talking about.
01:21:10.161 --> 01:21:13.180
Right now, it's wind and
time when we get more solar
01:21:13.180 --> 01:21:15.220
will be solar as well.
01:21:15.220 --> 01:21:18.450
They by themselves create
supply situations in the market
01:21:18.450 --> 01:21:21.960
that puts us really at
the tail end of the ORDC.
01:21:21.960 --> 01:21:25.920
So it is about understanding
kind of the implications
01:21:25.920 --> 01:21:27.785
of when those resources run
01:21:27.785 --> 01:21:31.055
and what kind of supply
condition it puts us in.
01:21:31.055 --> 01:21:33.093
We have some data we could
look at where we've looked
01:21:33.093 --> 01:21:35.690
at where we look at the correlation
01:21:35.690 --> 01:21:39.440
for example of when wind generation
01:21:39.440 --> 01:21:42.920
occurs and what the resulting
supply cushion levels are.
01:21:42.920 --> 01:21:45.060
And generally there is
that positive correlation
01:21:45.060 --> 01:21:47.170
that I was trying to
speak to an intuition.
01:21:47.170 --> 01:21:49.600
And as we get more and
more of those resources,
01:21:49.600 --> 01:21:54.600
that will just be expanded
such that those resources
01:21:56.021 --> 01:21:58.300
will themselves if they keep generating
01:21:58.300 --> 01:22:03.190
all at the same time, will
themselves create a situation
01:22:03.190 --> 01:22:04.880
with in those hours that they generate
01:22:04.880 --> 01:22:09.030
there's very limited or zero
RDC payments or (indistinct)
01:22:09.030 --> 01:22:11.010
Now let's say there are
resources that are added
01:22:11.010 --> 01:22:13.720
in specific locations
that don't generate like
01:22:13.720 --> 01:22:16.645
the rest of the fleet or
intermittent resources
01:22:16.645 --> 01:22:19.620
co-located storage devices onsite.
01:22:19.620 --> 01:22:20.670
Those are all good things,
01:22:20.670 --> 01:22:23.601
those make those
resources actually improve...
01:22:23.601 --> 01:22:27.490
Those types of changes
improve overall system reliability.
01:22:27.490 --> 01:22:30.620
And I wouldn't be uncomfortable,
01:22:30.620 --> 01:22:33.200
for remunerating
those types of activities
01:22:33.200 --> 01:22:34.493
within the energy market.
01:22:38.180 --> 01:22:42.330
Could you tell me, how
does your ORDC react
01:22:42.330 --> 01:22:46.953
to 10,000 more megawatts of
solar on the system into yours?
01:22:48.290 --> 01:22:52.600
So the ORDC
modifications as I've presented
01:22:52.600 --> 01:22:55.310
and they have been
calibrated to historical conditions
01:22:55.310 --> 01:22:57.594
rather than potential future conditions,
01:22:57.594 --> 01:23:02.517
would generally be in a
situation where there's less
01:23:04.310 --> 01:23:08.940
payout than what the
calibrations to historical
01:23:08.940 --> 01:23:11.000
conditions would otherwise suggest.
01:23:11.000 --> 01:23:16.000
So in fact to kind of anticipate maybe
01:23:18.440 --> 01:23:19.940
what would need to be done.
01:23:19.940 --> 01:23:23.356
I had mentioned earlier that
we would recommend periodic
01:23:23.356 --> 01:23:28.050
reviews of the ORDC parameters
as system conditions change.
01:23:28.050 --> 01:23:31.019
And that's a great example of
where we would need to go back
01:23:31.019 --> 01:23:33.160
and take a look at what those conditions
01:23:33.160 --> 01:23:36.500
are, and maybe adjust either the MCL
01:23:36.500 --> 01:23:38.740
with combinations on
the standard deviation
01:23:38.740 --> 01:23:41.440
or the average of the
loss of load probability,
01:23:41.440 --> 01:23:43.640
but there would need
to be some adjustments.
01:23:44.850 --> 01:23:49.323
Yeah and with that the
ancillary service product,
01:23:51.387 --> 01:23:56.387
the ESR product, how soon
do you expect under optimal
01:23:56.610 --> 01:23:58.680
conditions to have it implemented?
01:23:58.680 --> 01:24:01.093
Well, I'm nervous
about putting words-
01:24:01.983 --> 01:24:02.978
I know but-
For another institution.
01:24:02.978 --> 01:24:04.863
You've watched this-
01:24:06.820 --> 01:24:09.640
I believe that the way
that we've tried to design
01:24:09.640 --> 01:24:13.820
this it's something that
with a focus and support,
01:24:13.820 --> 01:24:16.757
so concerted effort of
multiple staff members,
01:24:16.757 --> 01:24:19.890
this type of market could get in place
01:24:19.890 --> 01:24:21.740
within a 12 month timeframe.
01:24:21.740 --> 01:24:24.090
And the reason being
is in terms of figuring
01:24:24.090 --> 01:24:26.450
out how much to procure our part already
01:24:26.450 --> 01:24:28.390
does a lot of analysis to know that.
01:24:28.390 --> 01:24:31.120
In terms of an auction
framework and rules
01:24:31.120 --> 01:24:34.110
ERCOT has examples
ready for other products
01:24:34.110 --> 01:24:36.863
that procures through
competitive auctions.
01:24:38.260 --> 01:24:40.360
So I think that's very possible,
01:24:40.360 --> 01:24:42.550
but we also don't
wanna rush it in a month
01:24:42.550 --> 01:24:44.760
or two because we
want to be able to publish
01:24:44.760 --> 01:24:47.416
the rules, the cost
allocation framework,
01:24:47.416 --> 01:24:49.570
and make sure industry understands
01:24:49.570 --> 01:24:51.120
that consumers understand it.
01:24:51.120 --> 01:24:53.670
Generators who might be
interested in participating
01:24:53.670 --> 01:24:54.913
understand it.
01:24:54.913 --> 01:24:58.360
But I'm thinking 2020, maybe 2023,
01:24:58.360 --> 01:25:00.380
if nodal protocol
changes take a little bit
01:25:00.380 --> 01:25:03.370
of time is a very, very
feasible timeframe.
01:25:03.370 --> 01:25:05.270
And then for
clarity for the public,
01:25:07.913 --> 01:25:12.533
how do you view cost
allocation on this product?
01:25:13.410 --> 01:25:14.530
Great question.
01:25:14.530 --> 01:25:17.430
Didn't spend time today
'cause it's hard to fit it all in.
01:25:19.020 --> 01:25:23.100
I believe that very strongly
in cost causation principles.
01:25:23.100 --> 01:25:25.030
So what does that mean?
01:25:25.030 --> 01:25:28.990
If we're looking for example
at the Sarah reports recently
01:25:28.990 --> 01:25:31.550
and the extreme events
and the various drivers
01:25:31.550 --> 01:25:32.910
that cause extreme events,
01:25:32.910 --> 01:25:36.177
we see very clearly that for example
01:25:36.177 --> 01:25:39.173
unexpected high load is one driver.
01:25:40.270 --> 01:25:44.910
So higher load causes,
higher load that cant respond
01:25:44.910 --> 01:25:47.640
and cartel consumption
is potentially a causer
01:25:47.640 --> 01:25:51.100
of these extreme events and
should be responsible for it.
01:25:51.100 --> 01:25:54.230
And frankly, load benefits
from this type of insurance
01:25:54.230 --> 01:25:56.170
and should be responsible for it.
01:25:56.170 --> 01:25:59.560
But also there are other drivers,
01:25:59.560 --> 01:26:04.040
for example low solar,
low wind are listed
01:26:04.040 --> 01:26:06.050
as potential drivers of extreme events
01:26:06.050 --> 01:26:08.780
where the system might
find itself short of capacity.
01:26:08.780 --> 01:26:13.200
And I believe that I call
them catalysts entities
01:26:13.200 --> 01:26:15.010
that cause reliability to worse
01:26:15.010 --> 01:26:18.260
than on the system
should also be responsible
01:26:18.260 --> 01:26:20.640
for some share of those thoughts.
01:26:20.640 --> 01:26:21.473
Alright.
01:26:21.473 --> 01:26:22.942
Can I just ask a
question on that?
01:26:22.942 --> 01:26:27.420
Do cost causation principles
apply to dispatchable resources
01:26:27.420 --> 01:26:32.231
also in days when you
have unforced outages?
01:26:32.231 --> 01:26:34.040
Well, for example...
01:26:34.040 --> 01:26:35.620
And the short answer is yes.
01:26:35.620 --> 01:26:39.520
And the example here
is that the DSR resources
01:26:39.520 --> 01:26:41.740
that commit to be available to provide
01:26:41.740 --> 01:26:44.290
this insurance will have
performance penalties.
01:26:44.290 --> 01:26:46.610
And if they're not performing
when our (indistinct)
01:26:46.610 --> 01:26:47.770
needs them to perform,
01:26:47.770 --> 01:26:50.080
they have to face those
performance penalties.
01:26:50.080 --> 01:26:51.642
Okay and what...
01:26:51.642 --> 01:26:56.110
Are there parameters in the DSR?
01:26:56.110 --> 01:26:58.110
What is the parameter
of the type of resource
01:26:58.110 --> 01:26:59.913
you're looking for and the DSR?
01:27:00.910 --> 01:27:03.870
Great question, it's actually
the fundamental question.
01:27:03.870 --> 01:27:04.820
What are we buying?
01:27:06.148 --> 01:27:10.467
Dispatchability and I think
part of that could involve
01:27:10.467 --> 01:27:14.453
weatherization and fuel firm.
01:27:15.880 --> 01:27:18.380
Sorry firm fuel, I'm
getting my F mixed.
01:27:18.380 --> 01:27:22.390
Firm fuel requirements because
what we want is resources
01:27:22.390 --> 01:27:25.730
that will dispatch when instructed
01:27:25.730 --> 01:27:28.000
to do regardless of the weather.
01:27:28.000 --> 01:27:30.750
And there may be duration
requirements and so forth
01:27:30.750 --> 01:27:33.390
that you have to produce
energy for certain period of time.
01:27:33.390 --> 01:27:35.340
Right, I struggle
with one thing
01:27:35.340 --> 01:27:37.970
and that is we all want dispatchability
01:27:37.970 --> 01:27:41.737
when we need it, but February
showed that we didn't have it.
01:27:41.737 --> 01:27:45.010
So the question is how do
we make sure that we solve
01:27:45.010 --> 01:27:46.590
that issue as well?
01:27:46.590 --> 01:27:49.200
And it doesn't just have
to be to your proposal
01:27:49.200 --> 01:27:51.980
to everybody it's that
is a fundamental issue
01:27:51.980 --> 01:27:54.800
that I think we have to
make sure that we're on top
01:27:54.800 --> 01:27:55.670
of it as well.
01:27:55.670 --> 01:27:58.508
Well and Commissioner, I
think there's two elements to it.
01:27:58.508 --> 01:28:01.080
We want to have more investment.
01:28:01.080 --> 01:28:03.910
We clearly see that there
was, I think an investment
01:28:03.910 --> 01:28:06.050
problem, a supply adequacy problem,
01:28:06.050 --> 01:28:08.800
but we also can't have a ton
of spare capacity just sitting
01:28:08.800 --> 01:28:13.140
around, waiting for an event
that happens once 10 years,
01:28:13.140 --> 01:28:14.060
once 20 years.
01:28:14.060 --> 01:28:17.750
So I think the most cost
effective way of getting
01:28:17.750 --> 01:28:21.250
that additional reliability is
through a targeted insurance
01:28:21.250 --> 01:28:22.830
product and that's how I view this.
01:28:22.830 --> 01:28:27.450
It creates kind of a
safety net that ERCOT
01:28:27.450 --> 01:28:30.847
can call upon resources that are paid
01:28:30.847 --> 01:28:34.392
to be operable and available,
regardless of whether.
01:28:34.392 --> 01:28:35.225
And all resources could fit
01:28:35.225 --> 01:28:37.750
into that or do you
have parameters or that?
01:28:37.750 --> 01:28:40.010
So we wanna be
technology agnostic
01:28:40.010 --> 01:28:41.950
because that's actually
a fundamental rule
01:28:41.950 --> 01:28:43.170
of competitive markets.
01:28:43.170 --> 01:28:45.160
If we start trying to be very narrow,
01:28:45.160 --> 01:28:47.413
we might not get a
competitive market as a result.
01:28:47.413 --> 01:28:49.860
I think it's not just a...
01:28:49.860 --> 01:28:53.160
It will be up to the resources
to choose to participate.
01:28:53.160 --> 01:28:56.950
But naturally let's say you
have a base load combined cycle
01:28:56.950 --> 01:28:58.830
that we generally think is dispatchable.
01:28:58.830 --> 01:29:01.750
They might say, I'm not going
to give up my energy market
01:29:01.750 --> 01:29:04.630
opportunities because
I'm expecting to make
01:29:04.630 --> 01:29:05.830
a good profit there.
01:29:05.830 --> 01:29:09.800
So the DSR is not for me,
but then we have perhaps
01:29:09.800 --> 01:29:13.610
a combustion turbine
that is not expecting to run
01:29:13.610 --> 01:29:16.050
very frequently in the next month or two
01:29:16.050 --> 01:29:18.333
because of expected
energy market conditions.
01:29:18.333 --> 01:29:20.160
And instead of being mothballed,
01:29:20.160 --> 01:29:23.990
which is an economic
rational option for the owner
01:29:23.990 --> 01:29:26.914
of that unit, they can offer
it into this DSR product.
01:29:26.914 --> 01:29:31.914
And that means that
capacity is there when needed.
01:29:34.310 --> 01:29:35.716
Thank you.
01:29:35.716 --> 01:29:36.976
Oh I have a lot of questions,
01:29:36.976 --> 01:29:39.250
but I'm gonna reserve them
for the Commissioner questions.
01:29:39.250 --> 01:29:40.750
Portion of our work session.
01:29:43.030 --> 01:29:43.863
Thank you.
01:29:44.770 --> 01:29:46.020
One follow-up question.
01:29:47.319 --> 01:29:49.023
And then we'll move on the DSR
01:29:51.170 --> 01:29:53.520
other than being procured
a month or a quarter
01:29:53.520 --> 01:29:57.270
in advance and potential
for weatherization.
01:29:57.270 --> 01:29:58.970
How is it different than non-spin?
01:30:02.060 --> 01:30:07.060
I think, it may have
slightly different technical
01:30:07.300 --> 01:30:09.630
characteristics because we haven't...
01:30:09.630 --> 01:30:11.630
Non-spin has very specific requirements
01:30:11.630 --> 01:30:16.490
at in terms of startup
time and responsiveness.
01:30:16.490 --> 01:30:19.220
We don't necessarily
need a ton of megawatts
01:30:19.220 --> 01:30:22.200
sitting there all with, I don't
know 30 minute requirements.
01:30:22.200 --> 01:30:25.590
What we need is
resources that are sitting
01:30:25.590 --> 01:30:29.390
there that ERCOT can activate
that won't affect the realtime
01:30:29.390 --> 01:30:30.790
price so that it won't undermine
01:30:30.790 --> 01:30:32.490
what we're trying to do with ORDC.
01:30:33.590 --> 01:30:37.740
And replace what
ERCOT is currently trying
01:30:37.740 --> 01:30:41.490
to do with just procuring a
lot of additional resources,
01:30:41.490 --> 01:30:44.160
wrecking them and
paying for them all the time.
01:30:44.160 --> 01:30:47.400
So that's ORDC
is the stop rocking
01:30:47.400 --> 01:30:50.830
let the market rock, that the DSR-
01:30:50.830 --> 01:30:52.750
Is an additional
amount of reserves
01:30:52.750 --> 01:30:55.426
on top of it, but it doesn't have-
01:30:55.426 --> 01:30:57.045
Ramp requirement, et cetera.
01:30:57.045 --> 01:30:58.690
(indistinct) similar to (indistinct).
01:30:58.690 --> 01:31:00.100
So it'd be like, sounds like a bigger,
01:31:00.100 --> 01:31:02.150
I guess procured further in advance
01:31:02.150 --> 01:31:05.514
to provide market signals
that doesn't undercut
01:31:05.514 --> 01:31:07.880
real-time prices when deployed.
01:31:07.880 --> 01:31:08.713
Yes.
01:31:08.713 --> 01:31:10.090
Okay, thank you very much.
01:31:11.700 --> 01:31:15.710
Next up, we have NextEra.
01:31:15.710 --> 01:31:16.860
Thank you Chair Lake,
01:31:18.171 --> 01:31:20.780
I appreciate the opportunity
to speak with you today
01:31:20.780 --> 01:31:23.240
on this important topic.
01:31:23.240 --> 01:31:24.790
Before I share our proposal,
01:31:24.790 --> 01:31:27.630
let me start with the problem
that we are attempting
01:31:27.630 --> 01:31:28.463
to solve.
01:31:28.463 --> 01:31:30.730
And I think Sam framed it correctly,
01:31:30.730 --> 01:31:34.408
we're trying to figure out
how to address reliability,
01:31:34.408 --> 01:31:37.820
how to deal with the supply
and demand equation,
01:31:37.820 --> 01:31:39.960
where we have thin operating reserves,
01:31:39.960 --> 01:31:41.570
particularly in the summer.
01:31:41.570 --> 01:31:44.240
But also how can we
avoid a February type event
01:31:44.240 --> 01:31:47.810
from occurring as well,
01:31:47.810 --> 01:31:49.330
if you go to the next slide please.
01:31:49.330 --> 01:31:50.163
Thank you.
01:31:51.130 --> 01:31:55.750
So we started by assessing
the magnitude of the reliability
01:31:55.750 --> 01:31:58.300
issue on the charts on the right,
01:31:58.300 --> 01:32:01.970
which we defined is the
excess of projected peak
01:32:01.970 --> 01:32:06.970
from demand over projected firm supply.
01:32:07.580 --> 01:32:10.875
And so we did that
calculation and as you can tell
01:32:10.875 --> 01:32:13.750
in the illustration for 2022
01:32:13.750 --> 01:32:15.560
that would suggest that firm supply
01:32:15.560 --> 01:32:17.910
is short about two gigawatts,
01:32:17.910 --> 01:32:21.853
and it will grow to about
three gigawatts by 2026.
01:32:22.750 --> 01:32:25.860
So as we step back and
think about the context
01:32:25.860 --> 01:32:29.520
of that situation there's
certainly an issue
01:32:29.520 --> 01:32:30.700
we need to solve.
01:32:30.700 --> 01:32:32.800
There's a supply issue
we need to deal with.
01:32:32.800 --> 01:32:35.550
There's a reliability issue
we need to deal with.
01:32:35.550 --> 01:32:37.440
But we think it's manageable,
01:32:37.440 --> 01:32:40.220
we think we can solve
it without disrupting
01:32:40.220 --> 01:32:44.690
the entire current ERCOT market design.
01:32:44.690 --> 01:32:49.690
And so our solution is
there's really four steps
01:32:49.740 --> 01:32:52.690
in the solution that's
meant to try to address
01:32:52.690 --> 01:32:53.610
the supply issue.
01:32:53.610 --> 01:32:57.990
And I think our overall
objective in designing the solution
01:32:57.990 --> 01:33:00.961
to close this gap was
really to try to find ways
01:33:00.961 --> 01:33:05.961
to support existing at risk
dispatchable generation
01:33:06.430 --> 01:33:09.584
while at the same time
providing price certainty,
01:33:09.584 --> 01:33:12.513
that will incent new generation.
01:33:13.400 --> 01:33:16.438
So if we can go to the next slide.
01:33:16.438 --> 01:33:18.910
And I think just one thing you'll notice
01:33:18.910 --> 01:33:20.670
is there's going to be and this gonna
01:33:20.670 --> 01:33:23.610
sound very similar to
some of the discussion
01:33:23.610 --> 01:33:26.923
we just had in the Vistra proposal.
01:33:26.923 --> 01:33:29.970
The first step in our proposed solution
01:33:29.970 --> 01:33:33.360
is to incentivize
dispatchable generation
01:33:33.360 --> 01:33:36.070
to secure onsite fuel.
01:33:36.070 --> 01:33:39.060
So we can avoid another February event.
01:33:39.060 --> 01:33:42.800
Fuel security as we all
learned is critical for reliability
01:33:42.800 --> 01:33:44.780
and we believe gas generators need
01:33:44.780 --> 01:33:46.990
a cost recovery mechanism.
01:33:46.990 --> 01:33:51.040
So if plants are unable
to secure supply,
01:33:51.040 --> 01:33:53.540
they still have the ability to
run which will help improve
01:33:53.540 --> 01:33:57.173
reliability certainly in those
extreme stress conditions.
01:33:58.060 --> 01:34:00.960
The second idea we had was to create
01:34:00.960 --> 01:34:03.080
a new contingent reserve ancillary
01:34:04.300 --> 01:34:09.125
leveraging the energy only
market design that ERCOT has.
01:34:09.125 --> 01:34:14.060
It is meant to provide
revenue into the system
01:34:14.060 --> 01:34:16.980
to support that at risk
dispatchable generation,
01:34:16.980 --> 01:34:18.490
give them a revenue stream,
01:34:18.490 --> 01:34:21.130
prevent them from retiring
and allow them to continue
01:34:21.130 --> 01:34:23.733
to operate in and provide that supply.
01:34:24.800 --> 01:34:26.640
We also believe that with investment
01:34:26.640 --> 01:34:30.520
in demand response to technology
and improved communication,
01:34:30.520 --> 01:34:32.760
ERCOT can better manage its low demand
01:34:32.760 --> 01:34:34.640
and especially in extreme conditions.
01:34:34.640 --> 01:34:39.170
So we'd advocate for expanded
demand response programs.
01:34:39.170 --> 01:34:41.060
And then finally we would also suggest
01:34:41.060 --> 01:34:45.383
reforming the ORDC
lowering the price cap to $4,500
01:34:46.888 --> 01:34:50.850
and modifying the shape of the ORDC.
01:34:50.850 --> 01:34:53.193
Now I think it's
important that we believe
01:34:53.193 --> 01:34:56.430
that along with the contingent reserve
01:34:56.430 --> 01:34:59.595
is what's needed in order
to insert new generation
01:34:59.595 --> 01:35:04.595
because we believe the
combination of both of those items
01:35:05.050 --> 01:35:07.660
will provide more frequent
higher price signals,
01:35:07.660 --> 01:35:10.700
which will be the price
clarity that investors
01:35:10.700 --> 01:35:13.330
need to put new
generation into the system.
01:35:13.330 --> 01:35:15.550
So let me explain that
in a little bit more detail
01:35:15.550 --> 01:35:16.523
on the next slide.
01:35:17.910 --> 01:35:21.460
Let me first tackle
the contingent reserve,
01:35:21.460 --> 01:35:23.020
ancillary product, the way it works
01:35:23.020 --> 01:35:25.763
think of it as four steps.
01:35:26.750 --> 01:35:29.907
So the first step ERCOT
would identify an annual volume
01:35:29.907 --> 01:35:32.640
needed of contingent reserve procurement
01:35:32.640 --> 01:35:34.030
based on the shortfall.
01:35:34.030 --> 01:35:36.453
So they would look at
from supply and projected
01:35:36.453 --> 01:35:39.120
from supply, projected from demand,
01:35:39.120 --> 01:35:44.120
they would stress the
supply by looking at P95
01:35:44.370 --> 01:35:47.850
low wind resource, low solar resource,
01:35:47.850 --> 01:35:49.990
E4, hight E4.
01:35:49.990 --> 01:35:53.630
And let's say that results in
a shortfall of two gigawatts
01:35:53.630 --> 01:35:55.603
for purpose of this illustration.
01:35:56.720 --> 01:35:59.920
Next they would procure
contingent reserves.
01:35:59.920 --> 01:36:01.860
In this example for two gigawatts
01:36:01.860 --> 01:36:06.683
on a Ford basis using
multiple central auctions.
01:36:07.860 --> 01:36:10.360
I think one difference
between our proposal
01:36:10.360 --> 01:36:13.030
and the Vistra proposal
is we would suggest
01:36:13.030 --> 01:36:15.940
that, that should be
a three-year period.
01:36:15.940 --> 01:36:19.540
So begin procuring
slices of that two gigawatts
01:36:19.540 --> 01:36:22.150
and year one, and
year two and year three.
01:36:22.150 --> 01:36:24.420
And then as we get close to the season,
01:36:24.420 --> 01:36:26.530
right before the time
period where we're solving
01:36:26.530 --> 01:36:30.640
for you would by the remaining 55%.
01:36:30.640 --> 01:36:34.190
So it allows the market
to continue to adjust
01:36:34.190 --> 01:36:37.590
as demand is supply adjust
through time with respect
01:36:37.590 --> 01:36:39.200
to that shortfall.
01:36:39.200 --> 01:36:42.624
And so then existing
generation would compete
01:36:42.624 --> 01:36:46.620
in the auction to supply
the contingent reserve,
01:36:46.620 --> 01:36:49.980
lowest costs would be selected.
01:36:49.980 --> 01:36:52.740
And then those two
gigawatts in this example
01:36:52.740 --> 01:36:54.610
of contingent reserves would be held,
01:36:54.610 --> 01:36:56.210
withheld from the energy market
01:36:57.220 --> 01:37:02.220
which would improve
higher price signals.
01:37:03.890 --> 01:37:06.380
And then that contingent
reserve would only be deployed
01:37:06.380 --> 01:37:08.090
in periods of scarcity.
01:37:08.090 --> 01:37:10.160
So when those scarcity events occur
01:37:10.160 --> 01:37:12.540
then we would deploy
the contingent reserves.
01:37:12.540 --> 01:37:16.820
So if we take the shift in the RDC curve
01:37:16.820 --> 01:37:20.190
and the change in the
curve moving from the yellow,
01:37:20.190 --> 01:37:22.000
line to the green line on the slide,
01:37:22.000 --> 01:37:25.710
and then we also add
the contingent reserve.
01:37:25.710 --> 01:37:27.930
We think we'll see those higher pricing,
01:37:27.930 --> 01:37:30.600
those which we'll say new generation.
01:37:30.600 --> 01:37:33.850
And so when you sort of step back
01:37:33.850 --> 01:37:35.900
and look at this all
the resulting impact
01:37:35.900 --> 01:37:40.260
is at risk generation has
given a revenue stream
01:37:40.260 --> 01:37:43.450
that will keep them on system,
prevent them from retiring
01:37:43.450 --> 01:37:45.770
and help improve reliability.
01:37:45.770 --> 01:37:48.150
And then by holding out the generation
01:37:48.150 --> 01:37:50.440
the contingent reserve
from the energy market,
01:37:50.440 --> 01:37:53.000
it should send us send
higher price signals
01:37:53.000 --> 01:37:56.870
that will provide that price clarity
01:37:56.870 --> 01:37:59.343
that's needed to incent new generation.
01:38:02.410 --> 01:38:07.410
In terms of the beneficiaries
and the timeframe
01:38:07.456 --> 01:38:10.910
with the four ideas we
have from existing generation
01:38:10.910 --> 01:38:14.130
will benefit from at
risk existing generation
01:38:14.130 --> 01:38:17.870
will benefit and then
certainly over a longer period
01:38:17.870 --> 01:38:21.020
of time it should incent
new generation as well.
01:38:21.020 --> 01:38:23.451
We believe the implementation
timing on this can be fairly
01:38:23.451 --> 01:38:25.300
quick as well.
01:38:25.300 --> 01:38:28.326
We would agree with the
commentary from Vistra
01:38:28.326 --> 01:38:33.110
and that the market can
see the benefits pretty quickly.
01:38:33.110 --> 01:38:36.799
And in our view this should
greatly improve reliability
01:38:36.799 --> 01:38:41.260
and we believe load will
benefit from that reliability.
01:38:41.260 --> 01:38:43.660
And so we would be
proponents of load bearing
01:38:43.660 --> 01:38:45.740
that cost but as you
can see on the graph,
01:38:45.740 --> 01:38:48.540
we believe that cost is manageable.
01:38:48.540 --> 01:38:53.540
It's reasonable in terms
of overall market designs
01:38:53.830 --> 01:38:55.973
that we've considered another proposals.
01:38:57.420 --> 01:39:01.990
On the last slide, this is
a comment we've shared
01:39:01.990 --> 01:39:04.910
in multiple filings with the Commission.
01:39:04.910 --> 01:39:06.390
One of the things that we've looked
01:39:06.390 --> 01:39:10.960
at is if a significant
amount of ancillary costs
01:39:10.960 --> 01:39:13.585
or reliability costs were charged
01:39:13.585 --> 01:39:16.050
to non dispatchable generation,
01:39:16.050 --> 01:39:18.670
what would that do to the supply stack.
01:39:18.670 --> 01:39:23.670
As we brand the economics
on existing generation
01:39:23.807 --> 01:39:25.890
and new generation
that would come online
01:39:25.890 --> 01:39:28.020
in the form of renewables.
01:39:28.020 --> 01:39:29.740
We believe it would sufficiently,
01:39:29.740 --> 01:39:34.441
it would significantly
reduce the supply stack
01:39:34.441 --> 01:39:37.440
and challenged reserve margins.
01:39:37.440 --> 01:39:41.220
And if we go back to the
original statement I made,
01:39:41.220 --> 01:39:45.207
which is we believe that
this is manageable today,
01:39:45.207 --> 01:39:50.207
we believe it's
possible to use solutions
01:39:50.450 --> 01:39:52.678
such as this to help with supply
01:39:52.678 --> 01:39:57.678
We are worried that charging renewables
01:39:59.113 --> 01:40:02.050
these ancillary costs, renewable costs
01:40:02.050 --> 01:40:05.030
would just exasperate the problem
01:40:05.030 --> 01:40:06.080
if we're not careful.
01:40:06.960 --> 01:40:09.240
Can we go back to slide
four just for a moment
01:40:09.240 --> 01:40:10.620
so I can address...
01:40:11.890 --> 01:40:13.680
One more back please.
01:40:13.680 --> 01:40:17.060
So to address what Sam suggested
01:40:17.060 --> 01:40:19.220
in terms of counter-arguments
01:40:19.220 --> 01:40:23.600
and look this is the reason we like
01:40:23.600 --> 01:40:27.490
this idea is it's using the
energy only framework
01:40:28.330 --> 01:40:33.090
within the orchid market
and it's relying on Ford price
01:40:33.090 --> 01:40:38.090
signals to send information
to instant new generation.
01:40:38.810 --> 01:40:43.010
So I think we believe it will work,
01:40:43.010 --> 01:40:47.340
but I think we still in terms
of what would be the counter
01:40:47.340 --> 01:40:51.830
is verifying that actually would result
01:40:51.830 --> 01:40:54.100
in new generation coming on system.
01:40:54.100 --> 01:40:56.250
So the only way
to kind of argue
01:40:56.250 --> 01:40:58.780
this would be to try
it if it doesn't work
01:40:58.780 --> 01:40:59.860
that was the (indistinct)
01:40:59.860 --> 01:41:01.570
Well I think there's...
01:41:04.640 --> 01:41:08.360
Again a lot of what we're
trying to accomplish is the same,
01:41:08.360 --> 01:41:10.250
ideas that Vistra are
trying to accomplish
01:41:10.250 --> 01:41:11.636
as well.
01:41:11.636 --> 01:41:13.436
I think it's very signals we believe
01:41:14.279 --> 01:41:17.653
in this market should
incent the new generation.
01:41:19.200 --> 01:41:20.130
Alright, good deal.
01:41:20.130 --> 01:41:22.647
Thank you, questions
for next (indistinct).
01:41:23.950 --> 01:41:24.937
I'll reserve (indistinct).
01:41:27.339 --> 01:41:29.350
I'll ask you one question
that I consider important
01:41:29.350 --> 01:41:31.903
that I didn't ask
Vistra, but it applies.
01:41:33.000 --> 01:41:36.450
With the cost allocation
on load, generally,
01:41:36.450 --> 01:41:40.750
do you consider this to place retailers
01:41:40.750 --> 01:41:43.130
with a affiliate generation component
01:41:43.130 --> 01:41:44.790
at a competitive advantage
01:41:44.790 --> 01:41:47.353
to their independent
retailer counterparts?
01:41:55.730 --> 01:41:57.293
It's an obligation on everyone.
01:41:58.590 --> 01:41:59.423
Yeah.
01:42:03.440 --> 01:42:05.810
So can you just clarify the question?
01:42:05.810 --> 01:42:08.560
So the concern is if you impose
01:42:08.560 --> 01:42:13.360
and again there's no way
to offset the cost allocation.
01:42:13.360 --> 01:42:15.660
So it's universally applied.
01:42:15.660 --> 01:42:17.710
And we do have a
public interest concern.
01:42:17.710 --> 01:42:18.940
We've got a reliability concern
01:42:18.940 --> 01:42:20.720
but we also don't wanna wipe out 20%
01:42:20.720 --> 01:42:22.520
of our retail market.
Correct.
01:42:22.520 --> 01:42:24.303
How would you
address that concern?
01:42:25.530 --> 01:42:29.410
Well I think the
first point I'd make
01:42:29.410 --> 01:42:34.410
is I think we gotta find a
solution that we believe
01:42:34.420 --> 01:42:36.380
will address the reliability issue,
01:42:36.380 --> 01:42:38.610
but also be mindful of the costs.
01:42:38.610 --> 01:42:41.583
And I think in this instance,
01:42:42.500 --> 01:42:46.090
we believe this cost is manageable
01:42:46.090 --> 01:42:50.580
and is not going to maybe create
01:42:50.580 --> 01:42:53.057
some of the concerns you're raising.
01:42:53.057 --> 01:42:55.740
We've considered a
number of different proposals
01:42:55.740 --> 01:42:58.010
and a number of different ideas.
01:42:58.010 --> 01:43:00.120
One of the things
that we've tried to stay
01:43:00.120 --> 01:43:05.120
away from is a 50 gigawatt
ancillary product, right?
01:43:05.140 --> 01:43:06.750
So this is, in this example,
01:43:06.750 --> 01:43:09.230
a two to three gigawatt
ancillary product.
01:43:09.230 --> 01:43:11.220
And I think that helps manage the cost
01:43:12.060 --> 01:43:14.260
and would help achieve the objectives
01:43:14.260 --> 01:43:16.263
you're referencing.
01:43:18.240 --> 01:43:20.021
I just have one question.
01:43:20.021 --> 01:43:22.920
A lot of what you based
this on is from supply
01:43:22.920 --> 01:43:23.903
and from demand.
01:43:25.010 --> 01:43:29.270
It seems to me like we've
always been a supply side system,
01:43:29.270 --> 01:43:33.250
but as we are getting into more
demand response mechanisms,
01:43:33.250 --> 01:43:34.640
that becomes a...
01:43:34.640 --> 01:43:36.880
Load becomes a moving target as well.
01:43:36.880 --> 01:43:38.030
Correct.
01:43:38.030 --> 01:43:40.860
So how do we pay for something
01:43:40.860 --> 01:43:43.220
when we don't know
what that firm demand is?
01:43:43.220 --> 01:43:45.450
Yeah, so in the way we thought
01:43:45.450 --> 01:43:47.590
about this, I think
you're gonna have to look
01:43:47.590 --> 01:43:49.210
at those demand response programs
01:43:49.210 --> 01:43:51.690
and try to make an estimate
just like you're making
01:43:51.690 --> 01:43:53.460
an estimate on the supply side
01:43:53.460 --> 01:43:56.380
on and stress it a little bit.
01:43:56.380 --> 01:43:58.400
So we're stressing on the supply side,
01:43:58.400 --> 01:44:01.230
in extreme conditions,
we have low wind resource.
01:44:01.230 --> 01:44:04.010
We have low solar resource,
we have high outages.
01:44:04.010 --> 01:44:05.690
What is in that stress condition?
01:44:05.690 --> 01:44:07.150
What is the supply stack look like?
01:44:07.150 --> 01:44:09.350
And then we need to do the
same thing on the firm side.
01:44:09.350 --> 01:44:10.650
So you're giving it a capacity
01:44:10.650 --> 01:44:12.450
value associate, essentially-
01:44:12.450 --> 01:44:15.060
Essentially in an attempt
to identify the shortfall
01:44:15.060 --> 01:44:17.550
that you need to set aside
in the contingent reserves.
01:44:17.550 --> 01:44:20.430
And again, as I mentioned
before this product
01:44:20.430 --> 01:44:25.430
is flexible so that with a
three-year time horizon
01:44:25.442 --> 01:44:28.610
as that firm demand affirms supply,
01:44:28.610 --> 01:44:31.560
adjust to new generation
coming on system,
01:44:31.560 --> 01:44:36.560
generation leaving system,
that contingent reserve number
01:44:37.020 --> 01:44:39.110
that shortfall that the
Canadian reserves procuring
01:44:39.110 --> 01:44:42.413
can adjust through those
three-year option periods.
01:44:44.710 --> 01:44:46.406
You may have
already answered it.
01:44:46.406 --> 01:44:47.993
I'll just ask one
question we'll move on.
01:44:48.940 --> 01:44:50.940
Same question as Vistra,
01:44:50.940 --> 01:44:52.480
other than the Ford procurement
01:44:52.480 --> 01:44:56.780
and holding out of the scarcity pricing,
01:44:59.080 --> 01:45:04.080
how is this different than
AIS/centralized capacity
01:45:04.100 --> 01:45:05.847
auction like (indistinct)?
01:45:05.847 --> 01:45:09.080
Yeah, so one is the
number of gigawatts
01:45:09.080 --> 01:45:10.080
that we're talking about.
01:45:10.080 --> 01:45:11.320
Small and
centralized (indistinct)-
01:45:11.320 --> 01:45:14.700
And then second we're
attempting to do it outside of EMS,
01:45:14.700 --> 01:45:17.990
same thing using the
auctions that exists.
01:45:17.990 --> 01:45:20.120
And for example,
01:45:20.120 --> 01:45:22.670
like the CCR auctions and utilizing
01:45:22.670 --> 01:45:27.630
those to help purchase the product.
01:45:27.630 --> 01:45:29.390
Okay, so I just
have one question.
01:45:29.390 --> 01:45:31.473
I'll reserve everything
else for the afternoon.
01:45:32.380 --> 01:45:36.270
So my question is why would your company
01:45:36.270 --> 01:45:38.330
be advocating for ORDC reforms
01:45:38.330 --> 01:45:40.980
if presumably you don't get ORDC adders
01:45:40.980 --> 01:45:43.538
because you're not available.
01:45:43.538 --> 01:45:48.538
I hope you appreciate
that our presentation
01:45:50.121 --> 01:45:53.640
doesn't result in additional
revenue for NextEra.
01:45:56.450 --> 01:45:58.800
Our objective in trying
to design a solution
01:45:58.800 --> 01:46:01.740
was trying to figure out a
way to help the market build
01:46:01.740 --> 01:46:04.020
on the construct at
the energy only market
01:46:04.020 --> 01:46:05.820
bring a solution that we think
01:46:05.820 --> 01:46:08.533
could help with the supply issue.
01:46:08.533 --> 01:46:11.700
We weren't focused on necessarily,
01:46:11.700 --> 01:46:14.403
what did that mean for
our book of business?
01:46:16.513 --> 01:46:17.346
I'm pretty sure.
01:46:17.346 --> 01:46:20.309
Yeah, and with respect
ORDC in the adders,
01:46:20.309 --> 01:46:23.440
as I think it was just
pointed out correctly,
01:46:23.440 --> 01:46:25.530
I mean typically what we've seen
01:46:25.530 --> 01:46:29.683
is when low wind resource
and low solar resource exists.
01:46:30.600 --> 01:46:33.400
That's typically when the ORDC adder
01:46:33.400 --> 01:46:36.272
kicks in it's not
something that we typically
01:46:36.272 --> 01:46:37.383
would receive.
01:46:38.320 --> 01:46:40.263
Alright, thank you very much.
01:46:41.164 --> 01:46:41.997
LCRA you're up?
01:46:43.760 --> 01:46:47.570
Good morning, Randa Stephenson.
01:46:47.570 --> 01:46:48.870
I'm thinking my mic is on.
01:46:51.230 --> 01:46:52.640
Okay, thank you.
01:46:52.640 --> 01:46:54.470
I'm the chief commercial
officer at LCRA.
01:46:54.470 --> 01:46:58.033
Nice to be with you here
again, to talk about our products.
01:46:59.460 --> 01:47:01.680
I just wanna say, I am not an economist.
01:47:01.680 --> 01:47:04.420
You have a major amount
of brainpower in this room
01:47:04.420 --> 01:47:07.800
and a lot of wonderful ideas,
01:47:07.800 --> 01:47:10.180
but I am very practical and I manage
01:47:10.180 --> 01:47:12.230
a half a billion dollar portfolio.
01:47:12.230 --> 01:47:14.320
That is my job day in and day out.
01:47:14.320 --> 01:47:17.370
And so when I look
at finding the problem,
01:47:17.370 --> 01:47:19.870
it really comes down
to, there's just a lack
01:47:19.870 --> 01:47:21.653
of dispatchable resources.
01:47:23.260 --> 01:47:25.510
Obviously nothing's
been really built recently,
01:47:25.510 --> 01:47:27.762
generation resources have lost money
01:47:27.762 --> 01:47:30.210
in eight out of the last 10 years.
01:47:30.210 --> 01:47:33.670
So any product or any program
01:47:33.670 --> 01:47:35.540
we pick here is gonna cost money.
01:47:35.540 --> 01:47:36.933
It's gonna be significant.
01:47:38.430 --> 01:47:40.830
And then every dollar
you invest in a new Peaker
01:47:40.830 --> 01:47:44.170
today lose a 64 cents over a lifetime.
01:47:44.170 --> 01:47:45.690
Again, very simple numbers
01:47:45.690 --> 01:47:47.883
that's why no one is
investing right now.
01:47:50.060 --> 01:47:53.140
We're trying to find a
financial incentive for increasing
01:47:53.140 --> 01:47:55.240
fuel resiliency as another goal
01:47:55.240 --> 01:47:58.860
of what we're trying to
accomplish with our proposals.
01:47:58.860 --> 01:48:01.690
And ERCOT has no
form of reliability standard
01:48:01.690 --> 01:48:03.660
for a lot of people talk about this.
01:48:03.660 --> 01:48:05.450
We believe you need to put a requirement
01:48:05.450 --> 01:48:10.450
in where we've been at one
in two loss of load events.
01:48:11.620 --> 01:48:15.930
It's just not bearable to the
state and from an economic
01:48:15.930 --> 01:48:17.560
development perspective as well.
01:48:17.560 --> 01:48:19.513
So that's another big concern I have.
01:48:21.220 --> 01:48:22.160
Next slide.
01:48:22.160 --> 01:48:25.310
I talked about the
dispatchable reliability service.
01:48:25.310 --> 01:48:27.390
This is forward-looking,
01:48:27.390 --> 01:48:30.570
that's the big difference
than using the current
01:48:30.570 --> 01:48:31.880
fleet of AIS.
01:48:31.880 --> 01:48:34.380
I'm trying to get price
certainty out there.
01:48:34.380 --> 01:48:37.660
So you get more peakers
or multiple batteries
01:48:37.660 --> 01:48:39.950
that can provide the service.
01:48:39.950 --> 01:48:41.330
When you wanna know the counter argument
01:48:41.330 --> 01:48:44.210
right off the bat, this
product does not...
01:48:44.210 --> 01:48:46.010
Is not technology agnostic.
01:48:46.010 --> 01:48:49.300
This is really focusing on
something that can respond
01:48:49.300 --> 01:48:52.500
within 30 minutes and
provide power continuously
01:48:52.500 --> 01:48:54.045
for 24 hours.
01:48:54.045 --> 01:48:55.190
(indistinct) answering
the counterargument.
01:48:55.190 --> 01:48:56.023
No problem.
01:48:56.023 --> 01:48:58.493
And I realize it by all means.
01:48:59.470 --> 01:49:02.073
But when we look into
the future of our fleet
01:49:02.073 --> 01:49:04.370
and what we need
for reliability resiliency,
01:49:04.370 --> 01:49:05.950
we definitely need the existing fleet.
01:49:05.950 --> 01:49:09.090
I don't really discount any of that.
01:49:09.090 --> 01:49:11.434
However we're gonna
see so much more solar
01:49:11.434 --> 01:49:13.980
and renewable penetration,
01:49:13.980 --> 01:49:17.550
having batteries and
quick acting peaking units,
01:49:17.550 --> 01:49:20.543
I think is something
we have to build toward.
01:49:21.450 --> 01:49:26.450
So that is really one of our
qualifications requirements
01:49:28.410 --> 01:49:29.890
I'll say.
01:49:29.890 --> 01:49:33.092
Pricing, you really need a
minimum of $10 a megawatt hour
01:49:33.092 --> 01:49:36.340
I'm sure counter argument,
it's not really why put a price
01:49:36.340 --> 01:49:37.740
floor in, right?
01:49:37.740 --> 01:49:39.240
Like competitive markets work.
01:49:41.030 --> 01:49:42.800
We are not seeing these units
01:49:42.800 --> 01:49:45.130
we built, we're not
seeing the prices clear.
01:49:45.130 --> 01:49:46.870
You can change the ORDC,
01:49:46.870 --> 01:49:50.253
I still don't think you'll get
new peaking units on board.
01:49:51.170 --> 01:49:53.840
So this is something
that really gets you there.
01:49:53.840 --> 01:49:57.870
And it doesn't have to get
you there for again, 10, 20 gigs.
01:49:57.870 --> 01:49:59.870
It can get you there
for two to three gigs.
01:49:59.870 --> 01:50:01.610
Whatever you really
think you need to meet
01:50:01.610 --> 01:50:03.293
the reliability standards set.
01:50:04.330 --> 01:50:08.520
I agree with Vistra about
you have to also be concerned
01:50:08.520 --> 01:50:11.880
about real-time energy
prices and price suppression.
01:50:11.880 --> 01:50:14.370
So whatever you do
and reserve the service,
01:50:14.370 --> 01:50:16.040
you have to put it at
the back of the stack,
01:50:16.040 --> 01:50:17.933
whatever you wanna define that as.
01:50:19.332 --> 01:50:20.190
And then compliance,
01:50:20.190 --> 01:50:22.190
we've been talking
over the past few months
01:50:22.190 --> 01:50:25.670
about what helps ERCOT
from reliability standpoint?
01:50:25.670 --> 01:50:28.220
One of the things is knowing in COP
01:50:28.220 --> 01:50:31.890
if a unit is going to be
available a week ahead of time.
01:50:31.890 --> 01:50:34.420
Well, this is a requirement
to do this product.
01:50:34.420 --> 01:50:37.290
So we are trying to match
that up with the conversations
01:50:37.290 --> 01:50:40.270
we've had over the past few months.
01:50:40.270 --> 01:50:42.850
Obviously incentives
and penalties for folks
01:50:42.850 --> 01:50:45.380
that aren't there and then
this can be a bilaterally
01:50:45.380 --> 01:50:46.920
traded market as well.
01:50:46.920 --> 01:50:50.440
So there's a lot of ways
to use what we call trades
01:50:50.440 --> 01:50:52.990
or a capacity trade to provide
01:50:52.990 --> 01:50:56.050
this dispatchable
reliability service also.
01:50:56.050 --> 01:50:58.480
You don't have to just pick
(indistinct) from ERCOT.
01:50:58.480 --> 01:51:02.370
You could say here, my
load, I'm self providing this.
01:51:02.370 --> 01:51:04.540
Here's what I have for a contract too.
01:51:04.540 --> 01:51:07.780
So I'm trying to see it as
a lot of different avenues
01:51:07.780 --> 01:51:12.390
to get load, to pay for a
service that is very specific
01:51:12.390 --> 01:51:14.820
to what happened to winter storm URI.
01:51:14.820 --> 01:51:17.233
That's all I'm trying to
solve with this product.
01:51:18.180 --> 01:51:21.652
The next product is
firming fuel service.
01:51:21.652 --> 01:51:24.650
I agreed with a lot of what
Kanaan had said earlier.
01:51:24.650 --> 01:51:28.530
I do think this could be a
one-off program that evaluates
01:51:28.530 --> 01:51:31.420
bid selects the most effective program
01:51:31.420 --> 01:51:33.393
or proposal I should say.
01:51:34.310 --> 01:51:38.260
The reason you can't do
this within the day ahead,
01:51:38.260 --> 01:51:43.260
as fleet and market is
because a lot of these proposals,
01:51:43.730 --> 01:51:45.870
if you wanna build the resiliency,
01:51:45.870 --> 01:51:48.880
we'll have infrastructure
capital projects.
01:51:48.880 --> 01:51:51.060
That takes time and it takes money.
01:51:51.060 --> 01:51:53.680
And so if you're going to try to build
01:51:53.680 --> 01:51:56.840
that throughout the grant without...
01:51:56.840 --> 01:52:01.360
And trying to find a system
that has those fuel backup
01:52:01.360 --> 01:52:03.363
supplies which could be.
01:52:04.600 --> 01:52:05.710
We've talked about storage,
01:52:05.710 --> 01:52:07.920
we've talked about multiple
interconnection for field
01:52:07.920 --> 01:52:10.070
transport, dual fuel.
01:52:10.070 --> 01:52:13.540
These are all things I think
we need to hire a qualified
01:52:13.540 --> 01:52:16.150
expert to come in, look at the grid,
01:52:16.150 --> 01:52:18.825
work with the railroad
Commission and some of the other
01:52:18.825 --> 01:52:21.275
agencies looking at this
and put together a plan.
01:52:22.450 --> 01:52:25.370
To me, there's no reason
not to move forward
01:52:25.370 --> 01:52:30.370
with understanding the
weaknesses on our grid right now,
01:52:30.690 --> 01:52:32.733
from a field resiliency perspective.
01:52:34.120 --> 01:52:38.522
Obviously we would have
a competitive bid process,
01:52:38.522 --> 01:52:43.100
and like I said earlier,
there will be some proposals
01:52:43.100 --> 01:52:44.630
that have capital cost requirements.
01:52:44.630 --> 01:52:47.760
So that may be something
that you want to contract for five
01:52:47.760 --> 01:52:49.580
or 10 years, right?
01:52:49.580 --> 01:52:52.270
These are why you
can't do it just day ahead.
01:52:52.270 --> 01:52:55.820
These are some projects that
will be longer term in nature
01:52:55.820 --> 01:52:57.600
and higher costs.
01:52:57.600 --> 01:53:02.200
There could be O&M of
existing from fueled capabilities.
01:53:02.200 --> 01:53:05.450
Stack has testified
earlier about they already...
01:53:05.450 --> 01:53:09.340
They continue to have
Dual Fuel on their facilities.
01:53:09.340 --> 01:53:12.250
And that was part of their
success during the winter storm.
01:53:12.250 --> 01:53:14.580
Well, there's a cost for that.
01:53:14.580 --> 01:53:16.830
They're not recuperating
that cost right now.
01:53:17.835 --> 01:53:19.570
And so allowing folks that already
01:53:19.570 --> 01:53:21.950
have made those investments
to play in this market also,
01:53:21.950 --> 01:53:23.083
I think is important.
01:53:24.721 --> 01:53:27.710
And then as you look at these proposals,
01:53:27.710 --> 01:53:30.510
make sure they're coming from generators
01:53:30.510 --> 01:53:34.150
who understand the physical
limitations of their grade.
01:53:34.150 --> 01:53:38.600
And I should say of their
supply on the gas perspective,
01:53:38.600 --> 01:53:41.040
because there are so
many pressure issues,
01:53:41.040 --> 01:53:42.830
location of compression stations,
01:53:42.830 --> 01:53:46.760
where are you in next to
you in a processing plant,
01:53:46.760 --> 01:53:49.370
all of those play into a big, big part
01:53:49.370 --> 01:53:53.460
of the firming field resiliency
that we need on the grid.
01:53:53.460 --> 01:53:57.470
So implementation just real quick,
01:53:57.470 --> 01:54:00.520
I do believe we could do
this all outside the EMS.
01:54:00.520 --> 01:54:03.080
We do agree with a lot of
the tenants that a lot of folks
01:54:03.080 --> 01:54:07.410
are here to discuss on any
type of dispatchable product.
01:54:07.410 --> 01:54:09.980
As long as it doesn't
take us three, four years
01:54:09.980 --> 01:54:10.910
to get something done.
01:54:10.910 --> 01:54:12.483
That's our biggest concern.
01:54:14.220 --> 01:54:18.740
We also recommend a
third party come in and put
01:54:18.740 --> 01:54:21.710
in a reliability requirement.
01:54:21.710 --> 01:54:25.717
We have had a stop do a
one and 10 year standard
01:54:25.717 --> 01:54:28.430
and look at those types
of reliability requirements
01:54:28.430 --> 01:54:30.860
through ERCOT processes before.
01:54:30.860 --> 01:54:32.060
We should do that again,
01:54:32.060 --> 01:54:33.500
make sure we understand what numbers
01:54:33.500 --> 01:54:34.750
we're talking about here.
01:54:35.861 --> 01:54:40.690
As I really have talked
about this near term solution,
01:54:40.690 --> 01:54:44.500
one thing to consider is on
some of the more complicated
01:54:44.500 --> 01:54:47.800
longer-term solutions out there.
01:54:47.800 --> 01:54:51.660
We have been working on a proposal
01:54:51.660 --> 01:54:53.000
we put in the appendix.
01:54:53.000 --> 01:54:56.640
I don't wanna even talk about
it, but I do wanna mention
01:54:56.640 --> 01:54:59.490
there are different ideas out there.
01:54:59.490 --> 01:55:01.500
Ours is a resource adequacy adder.
01:55:01.500 --> 01:55:04.500
We have been working on
this since even before the storm.
01:55:04.500 --> 01:55:07.100
So this is not something that's
just based off what happened
01:55:07.100 --> 01:55:08.949
to winter storm URI.
01:55:08.949 --> 01:55:09.950
All right, thank you Brenda.
01:55:09.950 --> 01:55:10.953
You're welcomed.
01:55:10.953 --> 01:55:13.003
Questions for LCRA.
01:55:15.330 --> 01:55:20.123
One question, as you
pointed on the gold star
01:55:21.350 --> 01:55:23.510
earning counterargument earlier.
01:55:23.510 --> 01:55:26.400
I figured that all
will say soon or later.
01:55:28.176 --> 01:55:33.176
The dispatchable
reliability services
01:55:33.500 --> 01:55:34.857
full version of AIS.
01:55:38.060 --> 01:55:43.060
But not as big as a PGM
type essentially cleared,
01:55:43.550 --> 01:55:45.400
but may have some bilateral features.
01:55:46.890 --> 01:55:49.780
If we look at our future fleet makeup,
01:55:49.780 --> 01:55:54.780
the 27,000 a wind now
30, 40,000 if in the absence
01:55:55.470 --> 01:56:00.330
of other action both,
01:56:02.210 --> 01:56:06.030
all of you said that the
small size of the reliability,
01:56:06.030 --> 01:56:09.890
the insurance product is a feature.
01:56:09.890 --> 01:56:14.890
But if the COP has an
expectation of 20,000 megawatts
01:56:15.320 --> 01:56:18.233
of wind, and that goes to zero,
01:56:19.470 --> 01:56:22.700
what good does two or 3000 megawatts
01:56:22.700 --> 01:56:24.770
to you as your insurance product?
01:56:24.770 --> 01:56:26.790
Sure, so you have to
maintain that the rest
01:56:26.790 --> 01:56:29.292
of the fleet is gonna
do that for you, right?
01:56:29.292 --> 01:56:33.740
Your current generation fleet
is going to be there for you.
01:56:33.740 --> 01:56:37.690
I own a motorcycle that's
20 years old, lost bonds.
01:56:37.690 --> 01:56:40.883
That facility is always offered
into the day ahead market.
01:56:42.430 --> 01:56:46.360
It is up to how we offer it in
and what clears in the ERCOT
01:56:46.360 --> 01:56:49.000
engine deploys that unit.
01:56:49.000 --> 01:56:51.590
Once that units align we have ramp rate.
01:56:51.590 --> 01:56:54.090
So how quickly can we
move up and down, right?
01:56:54.090 --> 01:56:57.380
For an old units about
20 megawatts per minute.
01:56:57.380 --> 01:57:00.930
All that data ERCOT has,
ERCOT is the one that dispatches
01:57:00.930 --> 01:57:03.320
us up and down based
off those ramp rates.
01:57:03.320 --> 01:57:05.520
And that's, to me,
part of their reliability
01:57:05.520 --> 01:57:10.101
responsibilities is to manage
that up and down movement.
01:57:10.101 --> 01:57:13.840
And so, I look to them
to answer that question
01:57:13.840 --> 01:57:15.210
to be very honest.
01:57:15.210 --> 01:57:16.950
I'm gonna provide that unit in there.
01:57:16.950 --> 01:57:18.390
I'm gonna tell you the parameters.
01:57:18.390 --> 01:57:21.370
I'm gonna tell you when it
can work and when it can't.
01:57:21.370 --> 01:57:23.610
And we have that...
It's (indistinct).
01:57:23.610 --> 01:57:25.380
Yes, but I'm
saying I offer it today.
01:57:25.380 --> 01:57:27.870
I think there's a big
concern of many generators
01:57:27.870 --> 01:57:29.870
who don't offer into today ahead.
01:57:29.870 --> 01:57:31.033
I think it's a panful
01:57:32.180 --> 01:57:35.130
and it's because of the
type of generation they have.
01:57:35.130 --> 01:57:37.710
It is not as big of an issue
01:57:37.710 --> 01:57:39.850
as I think it's been made out to be.
01:57:39.850 --> 01:57:41.320
And that's something I think,
01:57:41.320 --> 01:57:42.720
I don't know the exact numbers,
01:57:42.720 --> 01:57:43.810
but that's something that probably ERCOT
01:57:43.810 --> 01:57:45.540
could answer for you.
01:57:45.540 --> 01:57:48.490
So Rhonda, just a
point of clarification,
01:57:48.490 --> 01:57:49.830
you're talking about
day ahead market two.
01:57:49.830 --> 01:57:54.830
So you will classify your
DRS product as an in-market
01:57:55.290 --> 01:57:57.860
product rather than an out
of market sort of insurance
01:57:57.860 --> 01:58:00.060
policy like Vistra and
various proposals.
01:58:00.060 --> 01:58:03.000
I think so I would,
'cause it goes hand in hand
01:58:03.000 --> 01:58:05.300
with a lot of the obligations
01:58:05.300 --> 01:58:07.810
of being there in the real time.
01:58:07.810 --> 01:58:11.960
And you do not get those
kinds of capacity payments
01:58:11.960 --> 01:58:14.113
or AIS payments you wanna call,
01:58:14.960 --> 01:58:18.020
if you're not there and
you're penalize also.
01:58:18.020 --> 01:58:20.150
And just with the normal market design,
01:58:20.150 --> 01:58:22.630
if you don't show up
we're penalized already
01:58:22.630 --> 01:58:25.857
because we're buying power
at, during winter storm URI
01:58:25.857 --> 01:58:27.440
$9,000, right?
01:58:27.440 --> 01:58:28.510
Much higher.
01:58:28.510 --> 01:58:31.740
So I have every incentive to
get that unit they're producing
01:58:31.740 --> 01:58:33.330
during that time.
01:58:33.330 --> 01:58:38.330
So and because it is an
in-market sort of AIS reliability
01:58:40.030 --> 01:58:40.863
project product.
01:58:42.490 --> 01:58:46.410
You're saying that you can
get around the EMS upgrade
01:58:46.410 --> 01:58:51.410
with having your COP
procure this product
01:58:51.936 --> 01:58:54.560
sort of like ERs or Blackstar.
01:58:54.560 --> 01:58:55.393
Exactly.
01:58:55.393 --> 01:59:00.210
Okay, and with
respect to the ORDC,
01:59:01.710 --> 01:59:05.870
you mentioned that it wouldn't
get any new Peaker build-out
01:59:05.870 --> 01:59:07.000
can you explain more?
01:59:07.000 --> 01:59:09.300
Sure, we've looked
at all the proposals
01:59:09.300 --> 01:59:11.930
and did a backcast over the last year.
01:59:11.930 --> 01:59:13.103
And we ran...
01:59:13.980 --> 01:59:15.510
I'm lucky to have John Dumas in my shop.
01:59:15.510 --> 01:59:19.940
So he's done this before
and rerun the impact
01:59:19.940 --> 01:59:22.510
of a lot of these different proposals.
01:59:22.510 --> 01:59:24.620
Do they all put more
money into the market?
01:59:24.620 --> 01:59:26.933
Definitely, maybe except one.
01:59:29.160 --> 01:59:31.950
And I think Rhoda will
be able to show you that.
01:59:31.950 --> 01:59:33.980
Does it incentivize enough generation
01:59:33.980 --> 01:59:36.020
to give you the resiliency you need
01:59:36.020 --> 01:59:37.400
for another winter storm URI?
01:59:37.400 --> 01:59:40.500
My answer is no, I don't
think there is enough.
01:59:40.500 --> 01:59:41.870
You'll get money and you'll get...
01:59:41.870 --> 01:59:43.140
You'll see the scarcity pricing,
01:59:43.140 --> 01:59:44.170
but I don't think it's going
01:59:44.170 --> 01:59:46.580
to get enough new generation built.
01:59:46.580 --> 01:59:49.190
So, but with respect
to peaking generation
01:59:49.190 --> 01:59:52.200
my understanding is
and just kind of looking
01:59:52.200 --> 01:59:54.011
at this issue and
visiting with stakeholders,
01:59:54.011 --> 01:59:58.110
it seems that the ORDC
reforms have been proposed
01:59:58.110 --> 02:00:03.110
would increase adder, ORDC
adders operating reserves
02:00:03.666 --> 02:00:05.750
over more hours.
02:00:05.750 --> 02:00:08.360
So you're not gonna have
those peaking opportunities
02:00:08.360 --> 02:00:09.193
for your unit.
02:00:09.193 --> 02:00:11.540
So it's actually going
to potentially negative
02:00:11.540 --> 02:00:14.420
and negatively impact
your peaker resources.
02:00:14.420 --> 02:00:16.820
That's why you would
need sort of an alternative
02:00:18.148 --> 02:00:21.900
whether in market or
out of market concept
02:00:21.900 --> 02:00:25.620
to make sure that we're
not negatively impacting
02:00:25.620 --> 02:00:30.620
our existing or potential new
peaking generation investment.
02:00:30.660 --> 02:00:32.040
Yes, I agree with you.
02:00:32.040 --> 02:00:34.850
What happens is a peaker
when we look at it right now,
02:00:34.850 --> 02:00:36.448
based of a 20 year proforma,
02:00:36.448 --> 02:00:38.370
based off where the forward curves,
02:00:38.370 --> 02:00:41.610
it's only running 10
to 20% of the hours.
02:00:41.610 --> 02:00:44.999
So yes, it's capturing
some of this energy value,
02:00:44.999 --> 02:00:49.290
but really when I look
forward to where...
02:00:49.290 --> 02:00:52.140
What's really gonna get
peakers built in on the ground,
02:00:52.140 --> 02:00:54.860
it's gonna be a steady
ancillary service stream
02:00:54.860 --> 02:00:56.370
that they can count on.
02:00:56.370 --> 02:00:59.120
I think I've talked
about that previously, so.
02:00:59.120 --> 02:01:00.577
All right, thank you very much.
02:01:00.577 --> 02:01:02.890
I appreciate everybody on panel one.
02:01:02.890 --> 02:01:05.880
We will at least get
the first part of panel two
02:01:05.880 --> 02:01:08.013
in before our noon stop for lunch.
02:01:38.780 --> 02:01:40.023
All right, TIEC.
02:01:42.780 --> 02:01:43.613
Thank you.
02:01:43.613 --> 02:01:45.290
Are we ready?
Yes ma'am.
02:01:45.290 --> 02:01:46.430
Timer starts now.
02:01:46.430 --> 02:01:50.160
Thanks, so I wanna first
address Sam's question
02:01:50.160 --> 02:01:51.600
about what are we solving
02:01:51.600 --> 02:01:53.300
because I sense that
there's a perception
02:01:53.300 --> 02:01:56.040
that we're focused
more on the day-to-day
02:01:56.040 --> 02:01:59.410
operational issues, and
that is true at some level,
02:01:59.410 --> 02:02:02.840
but I think that, that's a
little bit of a false dichotomy.
02:02:02.840 --> 02:02:05.536
You can solve long-term
investment incentives
02:02:05.536 --> 02:02:08.340
through creating the right
day-to-day operational
02:02:08.340 --> 02:02:09.680
and market incentives.
02:02:09.680 --> 02:02:13.080
And I think a really perfect
example of that we often forget
02:02:13.080 --> 02:02:15.860
because electricity was once regulated.
02:02:15.860 --> 02:02:17.950
So it's easy to go back to that mindset
02:02:17.950 --> 02:02:19.172
of fixed revenue streams.
02:02:19.172 --> 02:02:21.210
Think about my clients.
02:02:21.210 --> 02:02:24.620
My clients invest, I mean,
you've heard the new Samsung
02:02:24.620 --> 02:02:27.890
is looking at a $17 billion
investment in Texas.
02:02:27.890 --> 02:02:30.760
Any new chemical facility,
several billion dollars,
02:02:30.760 --> 02:02:33.210
refineries, several billion dollars.
02:02:33.210 --> 02:02:35.869
They're responding to market needs
02:02:35.869 --> 02:02:37.770
that may change over time.
02:02:37.770 --> 02:02:39.820
That may not be there in a few years.
02:02:39.820 --> 02:02:41.541
And nobody's sitting around saying,
02:02:41.541 --> 02:02:44.340
how do we ensure revenue sufficiency
02:02:44.340 --> 02:02:48.300
to make sure we have
enough refineries, right?
02:02:48.300 --> 02:02:51.830
How do we make sure that we
have fixed payments to refining
02:02:51.830 --> 02:02:53.290
companies or chemical companies
02:02:53.290 --> 02:02:55.830
to make sure that they
continue to invest in Texas?
02:02:55.830 --> 02:02:59.240
And I would challenge you
to try to think about the electric
02:02:59.240 --> 02:03:01.490
market in that same way.
02:03:01.490 --> 02:03:04.184
That was the whole
purpose of deregulating.
02:03:04.184 --> 02:03:08.310
The electric market is, we're
gonna move away from a world
02:03:08.310 --> 02:03:11.480
where we are guaranteeing
fixed revenue streams
02:03:11.480 --> 02:03:13.240
from customers to generators
02:03:13.240 --> 02:03:15.960
and we're gonna put
that risk on the generators.
02:03:15.960 --> 02:03:20.330
And my concern is that a lot
of these ideas that are framed
02:03:20.330 --> 02:03:24.800
as ensuring long-term resource
adequacy are really designed
02:03:24.800 --> 02:03:27.720
to ensure guaranteed
payments from customers,
02:03:27.720 --> 02:03:29.670
revenue sufficiency.
02:03:29.670 --> 02:03:32.100
So I would challenge you
to try to think about ways
02:03:32.100 --> 02:03:35.270
that we can address what I
perceive is the real problem,
02:03:35.270 --> 02:03:39.000
which is today, our
market is not signaling
02:03:39.000 --> 02:03:40.460
that we have an additional...
02:03:40.460 --> 02:03:42.890
We have a need for additional supply.
02:03:42.890 --> 02:03:45.510
We're not sending those demands signals
02:03:45.510 --> 02:03:48.710
and the reason for that
is because all megawatts
02:03:48.710 --> 02:03:51.036
have been assigned to the same value.
02:03:51.036 --> 02:03:54.970
The instances where the
supply drops off dramatically,
02:03:54.970 --> 02:03:58.130
while it's a very real threat
that needs to be addressed,
02:03:58.130 --> 02:04:01.020
it's happened so rarely
that it's not something
02:04:01.020 --> 02:04:04.220
that customers have
experienced on a regular basis,
02:04:04.220 --> 02:04:05.910
and it's not something that the market
02:04:05.910 --> 02:04:08.600
can really invest
around, but it is a risk
02:04:08.600 --> 02:04:10.400
and it's gonna continue to grow.
02:04:10.400 --> 02:04:14.198
However, I think if you
address that operationally
02:04:14.198 --> 02:04:17.600
by sending more day
to day market revenues,
02:04:17.600 --> 02:04:20.200
to the resources that
solve that problem,
02:04:20.200 --> 02:04:23.370
you will get changes in
long-term investment patterns
02:04:23.370 --> 02:04:25.210
around that shift.
02:04:25.210 --> 02:04:28.880
And so I do believe that
we are primarily focused
02:04:28.880 --> 02:04:30.907
on the operational problem
02:04:30.907 --> 02:04:32.490
because that's what
the problem has been.
02:04:32.490 --> 02:04:34.491
But in addressing that,
I do think you will solve
02:04:34.491 --> 02:04:37.080
the long-term resource adequacy problem.
02:04:37.080 --> 02:04:39.730
So I just wanted to push
back a little bit on that being
02:04:39.730 --> 02:04:42.120
like a complete red line.
02:04:42.120 --> 02:04:44.850
So going through my slides,
I thought it would be helpful.
02:04:44.850 --> 02:04:46.700
Our written comments focused
02:04:46.700 --> 02:04:49.411
on our sort of service proposal,
02:04:49.411 --> 02:04:52.131
but there are some areas
that I think are consensus
02:04:52.131 --> 02:04:55.560
that are maybe low
hanging fuel ish for y'all.
02:04:55.560 --> 02:04:58.279
Not complete consensus,
but I wanted to go through it.
02:04:58.279 --> 02:05:01.626
So $9,000 a megawatt hour,
that's not a magic number.
02:05:01.626 --> 02:05:04.210
Those of us who were around at the time,
02:05:04.210 --> 02:05:07.290
there was a value of loss
load study that had numbers
02:05:07.290 --> 02:05:11.140
ranging from 4,000 to 40,000.
02:05:11.140 --> 02:05:13.910
I mean, there are 200,000,
I think even for some large
02:05:13.910 --> 02:05:16.260
manufacturers, it was
just all over the place.
02:05:16.260 --> 02:05:18.846
So at some level, this
was plucked out of there.
02:05:18.846 --> 02:05:21.410
And I think that you could reduce
02:05:21.410 --> 02:05:23.287
it if you wanna de-risk the market.
02:05:23.287 --> 02:05:27.210
The dynamic there though
is the lower you reduce
02:05:27.210 --> 02:05:29.710
that penalty that
applies when a generator
02:05:29.710 --> 02:05:30.880
who said they were gonna perform
02:05:30.880 --> 02:05:33.380
doesn't show up and they
have to replace in the real-time
02:05:33.380 --> 02:05:36.210
market or the demand response incentive,
02:05:36.210 --> 02:05:38.630
you're reducing market
performance incentives.
02:05:38.630 --> 02:05:39.991
So that's the trade off.
02:05:39.991 --> 02:05:41.680
We do...
02:05:41.680 --> 02:05:44.409
I know from my clients that
you lose demand response
02:05:44.409 --> 02:05:47.550
between 45,000 and 9,000.
02:05:47.550 --> 02:05:52.370
I mean 4,500, Jesus, 4 500 and 9,000.
02:05:52.370 --> 02:05:55.210
And that's because they
have operations that continue
02:05:55.210 --> 02:05:57.509
to be economic at 4,500.
02:05:57.509 --> 02:05:59.820
There are many fewer operations
02:05:59.820 --> 02:06:03.110
if any that remain economic
at $9,000 power prices.
02:06:03.110 --> 02:06:06.210
So you are gonna lose some
demand response capability.
02:06:06.210 --> 02:06:08.975
We would prefer
something more like 6,000.
02:06:08.975 --> 02:06:13.970
On the ORDC issue, I
do think that there is room
02:06:13.970 --> 02:06:15.340
for changes there.
02:06:15.340 --> 02:06:19.532
Our main focus in that is
continuing to keep the incentives
02:06:19.532 --> 02:06:24.532
relatively focused
around reliability concerns
02:06:25.728 --> 02:06:27.390
however you all define that.
02:06:27.390 --> 02:06:30.520
It may not need to be
EEA as we define it today,
02:06:30.520 --> 02:06:31.430
but what is the level
02:06:31.430 --> 02:06:33.680
where we start getting concerned, right?
02:06:33.680 --> 02:06:37.236
And we would prefer to have
the minimum contingency level
02:06:37.236 --> 02:06:41.590
extended rather than thickening
and flattening the curve.
02:06:41.590 --> 02:06:45.248
As you saw in the London
economics presentation.
02:06:45.248 --> 02:06:47.820
When you get out to
like 7,000 megawatts,
02:06:47.820 --> 02:06:50.449
you're creating a $6
per megawatt hour adder,
02:06:50.449 --> 02:06:54.330
and that's a very healthy
level of operating reserves.
02:06:54.330 --> 02:06:57.010
And so essentially
that's just like a $6 around
02:06:57.010 --> 02:06:58.740
the clock adder for customers.
02:06:58.740 --> 02:07:02.560
And again, going back to
my guaranteeing revenues
02:07:02.560 --> 02:07:04.560
versus incentivizing performance,
02:07:04.560 --> 02:07:06.870
I think that trends a little
too far in that direction.
02:07:06.870 --> 02:07:11.360
So we would prefer extending
the MCL and not making changes
02:07:11.360 --> 02:07:13.100
to the shape of the curve.
02:07:13.100 --> 02:07:15.340
Our firm fuel service, I'm
not gonna spend a lot of time
02:07:15.340 --> 02:07:17.840
on this, but I think there's
pretty broad consensus
02:07:17.840 --> 02:07:19.020
that that needs to be done.
02:07:19.020 --> 02:07:20.720
Next slide.
02:07:20.720 --> 02:07:23.897
So this is really the
source of the disagreement
02:07:23.897 --> 02:07:26.780
and as I said, in my opening remarks,
02:07:26.780 --> 02:07:28.870
we view this as an operational problem,
02:07:28.870 --> 02:07:30.809
not an installed capacity problem.
02:07:30.809 --> 02:07:32.790
Chairman Lake, you mentioned this.
02:07:32.790 --> 02:07:35.513
I think Commissioner
McAdams, you did too.
02:07:35.513 --> 02:07:37.810
This one event in 10 years standards
02:07:37.810 --> 02:07:40.460
or even an expected
unserved energy standard
02:07:40.460 --> 02:07:42.276
those are static snapshots in time
02:07:42.276 --> 02:07:45.258
and they're based on a ton
of administrative parameters
02:07:45.258 --> 02:07:48.576
that are hardly ever accurate
on a day-to-day basis.
02:07:48.576 --> 02:07:52.340
And so trying to design
revenue sufficiency
02:07:52.340 --> 02:07:54.690
to meet some static snapshot like that.
02:07:54.690 --> 02:07:57.820
I mean, again, we're
getting back to like regulated,
02:07:57.820 --> 02:07:59.991
integrated resource planning, right?
02:07:59.991 --> 02:08:01.567
I believe...
02:08:01.567 --> 02:08:04.960
Well, and the other thing is,
we've had these predictions
02:08:04.960 --> 02:08:06.540
about one event every two years,
02:08:06.540 --> 02:08:07.970
one event every 10 years,
02:08:07.970 --> 02:08:11.119
we have never had an event
where we just ran out of supply
02:08:11.119 --> 02:08:13.453
and everything was operating as normal.
02:08:13.453 --> 02:08:17.580
All of our reliability events
have been driven by unexpected
02:08:17.580 --> 02:08:19.840
drop-offs and intermittent generation,
02:08:19.840 --> 02:08:24.030
unexpected, forced outages,
those are operational issues.
02:08:24.030 --> 02:08:26.560
And so that's really
what we think you all need
02:08:26.560 --> 02:08:30.720
to focus on is creating
additional reserves every day
02:08:30.720 --> 02:08:34.330
in real time that are
dispatchable and paying them.
02:08:34.330 --> 02:08:37.170
And we have danced around
a bunch of different ways
02:08:37.170 --> 02:08:40.290
to do this, including
having a minimum amount
02:08:40.290 --> 02:08:43.093
of dispatchable that
you commit every day.
02:08:44.120 --> 02:08:46.100
Commissioner McAdams
I know you were looking
02:08:46.100 --> 02:08:48.343
at mandatory day ahead obligations.
02:08:48.343 --> 02:08:51.680
I think if you look
at it that ultimately
02:08:51.680 --> 02:08:54.730
sort of all collapses into,
why don't we just buy more
02:08:54.730 --> 02:08:57.830
dispatchable services day in, day out
02:08:57.830 --> 02:09:00.480
and pay them to cover
off this operational risk?
02:09:00.480 --> 02:09:02.845
And so that's essentially
what we're proposing,
02:09:02.845 --> 02:09:05.936
but I do believe that it
solves the long-term problem
02:09:05.936 --> 02:09:07.550
if it's designed correctly,
02:09:07.550 --> 02:09:09.530
because it's an
additional revenue stream
02:09:09.530 --> 02:09:12.730
for those resources that
they can invest around,
02:09:12.730 --> 02:09:15.290
and there's no magic
about a forward market.
02:09:15.290 --> 02:09:18.020
If this is something that
you're buying every single day
02:09:18.020 --> 02:09:20.590
and there's transparency
around the quantities
02:09:20.590 --> 02:09:22.650
and the pricing becomes predictable,
02:09:22.650 --> 02:09:25.490
you can invest around that,
just like you can something
02:09:25.490 --> 02:09:27.100
that's announced a year in advance
02:09:27.100 --> 02:09:28.250
or two years in advance.
02:09:28.250 --> 02:09:30.990
And in fact, that's the way
most other markets work
02:09:30.990 --> 02:09:31.993
as I mentioned.
02:09:33.180 --> 02:09:38.113
Next, I'll skip this,
let's go to the next one.
02:09:39.350 --> 02:09:42.400
So I touched on this,
but in terms of quantity,
02:09:42.400 --> 02:09:44.020
I think we need a little more data
02:09:44.020 --> 02:09:47.210
to know what this is, but
as opposed to non-spin,
02:09:47.210 --> 02:09:50.750
which was designed to
address hour to hour changes
02:09:50.750 --> 02:09:53.530
in net load, this would be broader.
02:09:53.530 --> 02:09:55.210
And in my defense,
02:09:55.210 --> 02:09:57.790
some of this does start
sounding like what ERCOT
02:09:57.790 --> 02:09:59.440
is doing with non-spin today
02:09:59.440 --> 02:10:01.790
but we've had this
proposal for a long time.
02:10:01.790 --> 02:10:04.290
And ERCOTs are a treatment
of non-spin over the summer
02:10:04.290 --> 02:10:06.070
has sort of evolved into looking
02:10:06.070 --> 02:10:09.630
more like this than it did
when when we started.
02:10:09.630 --> 02:10:13.850
So the idea would be not just
hour to hour load variability,
02:10:13.850 --> 02:10:15.250
but across the board.
02:10:15.250 --> 02:10:18.020
What have we seen
historically season by season
02:10:18.020 --> 02:10:21.290
in unexpected forced outages,
unexpected high demand,
02:10:21.290 --> 02:10:24.683
figure out what that is
statistically, and cover that off.
02:10:25.614 --> 02:10:27.240
I've got one more slide.
02:10:27.240 --> 02:10:30.930
And finally, the other big
difference is, I think you guys
02:10:30.930 --> 02:10:33.850
have a lot of latitude on
how these costs get allocated.
02:10:33.850 --> 02:10:36.040
In fact, I think the Governor has said,
02:10:36.040 --> 02:10:38.370
look at cost causation,
and that's an important piece
02:10:38.370 --> 02:10:40.299
of this that we don't do today.
02:10:40.299 --> 02:10:44.040
There have been calls
to allocate non-spin
02:10:44.040 --> 02:10:47.250
to intermittent generation
for a really long time
02:10:47.250 --> 02:10:48.730
that's never been done.
02:10:48.730 --> 02:10:51.460
I think there's a lot of
challenges there, frankly,
02:10:51.460 --> 02:10:53.065
but one thing that you might consider,
02:10:53.065 --> 02:10:56.940
and I think this is sort of like
a more dynamic compliment
02:10:56.940 --> 02:10:59.304
to what energy is proposing.
02:10:59.304 --> 02:11:03.700
We already have a mechanism
to allocate across the people
02:11:03.700 --> 02:11:05.870
who are capacity short today
02:11:05.870 --> 02:11:08.210
through the reliability
unit commitment process.
02:11:08.210 --> 02:11:11.100
And so that is a technology neutral way
02:11:11.100 --> 02:11:13.160
to do these allocations.
02:11:13.160 --> 02:11:15.490
If you are an LSE and you're short,
02:11:15.490 --> 02:11:17.400
you get allocated those costs.
02:11:17.400 --> 02:11:20.050
If you had a day had
obligation and you don't show up,
02:11:20.050 --> 02:11:21.850
you get allocated some of those costs.
02:11:21.850 --> 02:11:24.860
And there are also
forecast for renewables
02:11:24.860 --> 02:11:28.060
that are used to provide a
shore allocation for RUC.
02:11:28.060 --> 02:11:31.310
I think you could repurpose
something like that to allocate
02:11:31.310 --> 02:11:34.400
a new service and create
similar hedging incentives,
02:11:34.400 --> 02:11:37.490
which would then create
an additional revenue stream
02:11:37.490 --> 02:11:38.820
for dispatchable resources,
02:11:38.820 --> 02:11:42.760
because people will be
incentivized to hedge with resources
02:11:42.760 --> 02:11:45.100
that don't expose them
to those additional costs.
02:11:45.100 --> 02:11:47.200
So I think a lot of benefits there.
02:11:47.200 --> 02:11:48.173
Thank you, Katie.
02:11:49.460 --> 02:11:53.070
Before we depart for
lunch, counter argument.
02:11:53.070 --> 02:11:54.290
Counter argument
02:11:54.290 --> 02:11:55.123
to our proposal.
Yes.
02:11:55.123 --> 02:11:58.160
So I'm gonna say that
the counter argument
02:11:58.160 --> 02:11:59.770
to our proposal is actually the same
02:11:59.770 --> 02:12:01.830
for every single proposal
you're gonna hear today,
02:12:01.830 --> 02:12:04.280
which is it doesn't
guarantee you that anybody
02:12:04.280 --> 02:12:05.720
is gonna build anything.
02:12:05.720 --> 02:12:07.880
The only way to do
that is to re-regulate
02:12:07.880 --> 02:12:09.230
and tell somebody to build.
02:12:10.210 --> 02:12:12.630
And so, or to do some
kind of an auction,
02:12:12.630 --> 02:12:15.067
like the proposals we've
heard at the legislature
02:12:15.067 --> 02:12:18.673
where it's mandated customer
payments to fund capital.
02:12:19.820 --> 02:12:23.320
I don't think that's the
direction that we wanna go,
02:12:23.320 --> 02:12:25.520
but this is I can't sit
here today and guarantee
02:12:25.520 --> 02:12:27.360
you gonna get X number of megawatts out
02:12:27.360 --> 02:12:29.250
of this nor can anyone else?
02:12:29.250 --> 02:12:30.943
All right, thank you ma'am.
02:12:33.130 --> 02:12:37.710
All right, we'll do
45 minutes for lunch,
02:12:37.710 --> 02:12:41.573
and let's say we'll
be back here at 12:40.