WEBVTT
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Right.
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Welcome back to this work session
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of the Public Utility
Commission of Texas.
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At this point, in terms of scheduling,
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we will finish the
panel from this morning.
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And with NRG excellence panel,
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and we will move to
some timing constraints,
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we'll move straight to Dr. Brattle.
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And then circle back to
Commissioner McAdams.
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Dr. Patton.
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Dr. Patton after the panel,
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and then (muffled speaking).
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Yes sir, the name
change anyway.
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Sorry.
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(crowd laughing)
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All right.
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Energy is on.
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All right.
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Thank you, Chairman, Commissioners
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appreciate the opportunity to be here.
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Bill Barnes for NRG.
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I'm gonna help tag team this
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with Arnie Olson for me three.
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Because you guys are
asking such good questions,
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I'm gonna sit up here and help him out
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and also have a few
brief introductory remarks
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for handed over to him.
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Last time, I was up here
on a market design panel
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that was in your first in early July.
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And we had just begun
the process of talking
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with the three and
developing our thoughts
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and proposals on market design concepts.
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And we got the message loud and clear,
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work with urgency but work with purpose.
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And two main components to
what we had through our minds
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as we developed this proposal was one
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is the reliability expectations
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and goals of our market have been
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redefined from now until forever, right?
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So the prior expectations,
the prior thoughts
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on what our market design needed
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to achieve from reliability has changed.
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And that means moving
away from scarcity events,
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moving away from what
you call crisis based pricing,
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moving in a direction that ensures
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and helps increase the likelihood
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that we have more
reliability, higher reserves.
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And we've heard that
consistently from our customers
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from the public, from
our legislative members
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from the Governor's office,
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that is our common
goal common objective.
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And we felt very strongly
that we need to do
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that the right way by setting
the right foundation first.
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And that begins with setting
a reliability requirement
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and having the market achieve that.
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Any other proposal
that you've heard today
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that doesn't start with
that shooting in the dark?
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And so then that's what
we kept getting back to
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because we need to
begin with the right part,
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and give you guys a plan and a process.
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As you said, hope is not a plan.
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And so that's what we
have worked diligently
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on last few months to deliver.
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And the second component
that was important for us
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is you have to achieve the goal
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and the requirement through
the competitive market,
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preserve what has
worked so well in ERCOT,
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the best and most robust
and competitive retail market,
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empower reps analysis to solve
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and contribute to the reliability.
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So with that backdrop,
I'm gonna turn over to Arnie.
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Thank you.
Thanks, Bill.
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And Charlie Commissioners
thanks for the opportunity to come
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and talk about our
proposal with you today.
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So just to echo what
Bill said, our proposal is,
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in fact, to ask the Commission based
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on technical work conducted by ERCOT,
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to establish a forward
looking reliability standard
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that the Texas electricity market
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would be expected to perform too.
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I think, to me, that's
the central question
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that this Commission faces,
is do you wanna continue
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with a market where reliability
is an outcome of the market?
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So we send market signals
that we hope will incent
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companies investors
to invest in generation.
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But we're not sure how much reliability
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we'll get out of that system.
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Now, the theory of that is
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that the market outcome
should be a function
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of customers value
of reliability, right?
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That's the theory, and it makes sense.
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The challenge is we
don't really have a system
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where customers can
realize and experience
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their value of reliability
in the marketplace.
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And we've seen some
challenges and dangers
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of what happens when we expose customers
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to real time prices all the way up
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to what their value
of reliability might be.
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So the reality is, we
have a system where
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we're not sure what level
of reliability we're gonna get.
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So that really is the key question
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and what we've offered is
in effect a straw proposal
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or if you accept the proposition
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that a forward looking
reliability standard is appropriate.
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You've offered a straw proposal
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for how you might get there in
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a way as Bill said, that's most friendly
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and most consistent with
competitive market principles
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as it can be as we can design it,
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which is to embed it in the
LSE load serving obligation.
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So we've listed up here,
the challenges that we see.
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And we've designed
the proposal to address,
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ensuring sufficient
generation capability.
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And this is what Sam described.
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That's problem number
one, supply adequacy.
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And really, all over the proposals
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that you've been hearing
about today, they're
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all really aimed at problem
number one, supply adequacy.
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I haven't really heard any proposal
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that says whose main purpose
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is day to day reliability
positioning this system
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to have the operational
responsiveness that Sam described,
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they really are always
at raising electricity prices
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during certain hours of the
year to provide incentives
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for people to make investments,
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they really are all aimed at
that investment challenge.
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Most of them are aimed
very indirectly at that challenge
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by incenting behavior
and dispatch in response
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during certain time periods of the year.
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Ours is aimed directly
at it by identifying
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the characteristics that are needed
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to ensure reliability
throughout the year,
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and directly rewarding
them through a generator
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accreditation program,
which I'll get into.
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If you go to the next slide.
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So our proposal is a load serving
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entity reliability obligation.
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In fact, it's a procurement obligation
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on the load serving entities,
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to procure the quantity of
resources that are required
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to meet that forward
looking reliability standard.
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I'll walk through a few
of the elements here.
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The first element is that
ERCOT would on a regular basis,
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semi annually, annually
do very detailed modeling,
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loss of load modeling, considering all
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of the various weather conditions
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that the system might expect to face,
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all of the various supply conditions
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looking at conditions on
the natural gas system.
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And through that process,
develop a proposal
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for what that reliability
standard might look like,
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along with information
about how costly it would be
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to achieve different
levels of reliability,
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what types of resources that
you would need to achieve that?
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How each of those resources contributes
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towards the meeting
that reliability standard,
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and whether the system
is in fact adequate,
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based on their best
available information
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that they can muster,
to look at this problem.
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And based on all of that, they
would come to the Commission
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and ask you for a determination
of whether or not the system
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is adequate, what the
reliability standards should be.
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And if the system is not adequate
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to trigger this load serving
entity reliability obligation
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on a three year forward basis.
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So in time for new steel on
the ground to be developed,
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new resources to be constructed
to remedy this situation,
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so that we can go
into the operating near
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the operating season the operating day,
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with enough capability to make sure
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that we can operate the system reliably.
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The requirement falls onto the LSE.
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It's a natural extension
again of their role
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in hedging forward
energy purchases on behalf
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of their customers, assembling
a portfolio of resources
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that they believe best meets
the needs of their customers,
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this is just one additional component of
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that procurement obligation
that they would need to look at.
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There will be a showing one
year ahead of the time period in
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which the deficiency was identified.
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That showing is a formal requirement.
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And if LSE are deficient,
they're penalized.
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And any penalty monies
that are caught would collect
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it could use still in the
year ahead timeframe
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to take some actions to
attempt to remedy the situation.
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That's not a lot of time.
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But it may be enough time to implement
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some emergency demand
response, type programs,
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load shedding programs
that might need to be in time
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to identify backup diesel generators,
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for example, that could be deployed
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to help prepare a physical
remedy for the situation.
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So we believe that establishing
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this forward looking reliability
requirement is responsive
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to the requirements of SB 3,
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which it says that the Commission
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should establish requirements
to meet the reliability needs
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of the power system.
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It says that the Commission
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should determine the
quantity and characteristics
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of reliability services necessary
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to ensure appropriate reliability.
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It procures ancillary
and liability services
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on a competitive basis,
and it develops appropriate
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qualification performance
requirements for generators.
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I spend just a minute now
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on this slide about
resource accreditation.
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So this would be an important component
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of the forward shelling process,
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which is that LSEs
would signed contracts
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with individual generators
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to procure reliability
attributes of those generators.
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In order to do that, in order
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to know whether our
system is gonna be reliable.
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We need to have a way
of accurately assessing
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how each resource would perform
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under the conditions that matter most.
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And the conditions that matter most are
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when the system is the most short
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and the most at risk of
suffering a loss of load event
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and The types of modeling
that energy planners do
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are designed exactly
to address that question
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of what are the most stressful
conditions on the system?
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And narrowing in on really what
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is a very few number of hours.
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When you might expect to suffer loss,
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you don't suffer loss
of load once a month,
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or even every year, it
really only happens under
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the most extreme weather conditions.
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So what matters the most is
how these resources perform
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under the most extreme
our weather conditions.
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And this is what a
forward looking assessment
00:10:30.120 --> 00:10:33.620
can do for you as you can
identify these in advance, again,
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as best you can, given the
limits of data available to you.
00:10:38.360 --> 00:10:40.550
So each resource has
its own characteristics.
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None of them are perfect.
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Each of them have limitations,
00:10:43.010 --> 00:10:45.869
solar and wind have
limitations based on.
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When the weather the sun
shining, where the winds blowing,
00:10:48.560 --> 00:10:50.370
some of the thermal
resources have limitations
00:10:50.370 --> 00:10:52.500
based on whether they can get fuel
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or whether they're weatherize
and those sorts of things.
00:10:55.930 --> 00:10:58.220
Can just maybe have another risk.
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A couple minutes, I'll
wrap up quickly, yeah.
00:11:00.110 --> 00:11:04.640
So the next one gets into
the issues of LSE showings.
00:11:04.640 --> 00:11:07.250
So if triggered, each
LSE would be required
00:11:07.250 --> 00:11:10.830
to procure enough reliability
attributes to meet its share
00:11:10.830 --> 00:11:14.504
of the system requirements
as identified by ERCOT.
00:11:14.504 --> 00:11:15.913
If you go to the last slide.
00:11:16.830 --> 00:11:20.430
The LSE obligation would
be extinguished at the end
00:11:20.430 --> 00:11:22.190
of the four week showing period.
00:11:22.190 --> 00:11:24.170
So in fact, you're ahead.
00:11:24.170 --> 00:11:27.150
But this really it's an
obligation not just on the LSE,
00:11:27.150 --> 00:11:29.310
but also on the generators that agreed
00:11:29.310 --> 00:11:32.370
to sell these reliability
attributes to the LSE.
00:11:32.370 --> 00:11:34.720
So the generators would
then have an obligation
00:11:34.720 --> 00:11:37.500
to perform during the system events.
00:11:37.500 --> 00:11:40.360
So ERCOT would identify the potential
00:11:40.360 --> 00:11:42.360
for reliability events to occur.
00:11:42.360 --> 00:11:45.380
And the generators that
sold these reliability attributes
00:11:45.380 --> 00:11:46.600
would be required to offer
00:11:46.600 --> 00:11:48.850
all their capabilities into the market.
00:11:48.850 --> 00:11:50.750
So that ERCOT can be assured now
00:11:50.750 --> 00:11:52.190
that those resources are actually going
00:11:52.190 --> 00:11:54.750
to be available on the
operating day available
00:11:54.750 --> 00:11:56.913
for dispatch when they
need them the most.
00:12:00.700 --> 00:12:01.983
Counter argument.
00:12:03.520 --> 00:12:04.920
Let me take the first one.
00:12:06.523 --> 00:12:10.810
So yeah, the most
popular counter argument
00:12:10.810 --> 00:12:11.770
I think we've heard so far.
00:12:11.770 --> 00:12:12.960
And obviously we've talked a lot
00:12:12.960 --> 00:12:14.750
of other stakeholders about this
00:12:14.750 --> 00:12:18.300
is that it disadvantages
smaller participants
00:12:18.300 --> 00:12:21.518
included particularly smaller
retail electric providers,
00:12:21.518 --> 00:12:22.410
Unaffiliated.
00:12:22.410 --> 00:12:24.383
Unaffiliated or smaller.
00:12:25.560 --> 00:12:26.600
I don't believe that's true at all,
00:12:26.600 --> 00:12:28.710
and for a lot of good reasons.
00:12:28.710 --> 00:12:32.550
First, is, although this mechanism
00:12:32.550 --> 00:12:34.440
is modeled off of Australia,
00:12:34.440 --> 00:12:37.420
and it's similar to SPP,
and I've also heard some try
00:12:37.420 --> 00:12:41.340
to compare it to California,
you cannot compare
00:12:41.340 --> 00:12:45.163
ERCOT retail market to any
other market that exists today.
00:12:46.190 --> 00:12:48.600
It is highly robust, the barriers
00:12:48.600 --> 00:12:52.550
to entry are extremely
low, you are seeing eight
00:12:52.550 --> 00:12:57.550
to 10 new rep certificate
applications being filed
00:12:57.780 --> 00:13:01.080
almost regularly, it's easy to enter
00:13:01.080 --> 00:13:02.793
and exit the retail market.
00:13:04.290 --> 00:13:05.690
There's really no other market
00:13:05.690 --> 00:13:08.040
that you can actually
compare it to my opinion.
00:13:09.690 --> 00:13:11.910
And so part of the delivery mechanism
00:13:11.910 --> 00:13:15.870
that's proposed here is
after the accreditation is done,
00:13:15.870 --> 00:13:18.780
each of those resources
gets a certificate
00:13:18.780 --> 00:13:20.113
or a rec like product.
00:13:21.260 --> 00:13:25.840
And that is a tradable liquid
product that can be purchased.
00:13:25.840 --> 00:13:27.610
Similar to what we see today
00:13:27.610 --> 00:13:29.830
with the renewable portfolio standard.
00:13:29.830 --> 00:13:31.760
I've heard it no one complain about
00:13:31.760 --> 00:13:35.480
how the rec market
disadvantages any types of retailer.
00:13:35.480 --> 00:13:39.006
It's liquid, you can talk to a
broker and get a quote on it.
00:13:39.006 --> 00:13:42.370
The delivery mechanism
and fulfillment mechanism
00:13:43.320 --> 00:13:44.780
can be similar to that so
00:13:44.780 --> 00:13:47.233
that you have a liquid tradable product.
00:13:48.650 --> 00:13:52.800
That is probably the biggest attribute
00:13:52.800 --> 00:13:56.530
to help achieve and accomplish that goal
00:13:56.530 --> 00:13:59.973
without advantages or
disadvantages certain participants.
00:14:02.010 --> 00:14:07.010
The second is the
amount of the obligation
00:14:09.210 --> 00:14:11.363
is based on your sizes rep.
00:14:12.620 --> 00:14:16.430
The entity that will have to
procure the most capacity
00:14:16.430 --> 00:14:18.773
to meet this obligation is right here.
00:14:20.100 --> 00:14:22.490
So if you're a smaller rep,
00:14:22.490 --> 00:14:24.500
and this is what we really
like about this product,
00:14:24.500 --> 00:14:28.910
and what really allows reps and LSE
00:14:28.910 --> 00:14:31.800
to differentiate
themselves, if I'm a small rep
00:14:31.800 --> 00:14:32.990
and I wanna meet my obligation
00:14:32.990 --> 00:14:35.263
with just demand
response, I can do that.
00:14:36.610 --> 00:14:39.090
When you're a rep of
our size, and you have
00:14:39.090 --> 00:14:40.820
to procure thousands of megawatts
00:14:40.820 --> 00:14:43.570
to meet your obligation,
we don't have that option.
00:14:43.570 --> 00:14:47.070
So we have to go out and get all kinds
00:14:47.070 --> 00:14:49.340
to meet the reliability share.
00:14:49.340 --> 00:14:51.690
So in a way, I would
argue it's more burdensome
00:14:51.690 --> 00:14:52.950
for the larger reps because we have
00:14:52.950 --> 00:14:55.410
a much bigger obligation to cover.
00:14:55.410 --> 00:14:57.510
And that's the way it should be, right?
00:14:57.510 --> 00:14:59.140
We all need to step up and make sure
00:14:59.140 --> 00:15:01.540
that we're covering our
share of the obligation.
00:15:03.950 --> 00:15:07.860
The third thing which is
completely unique to ERCOT,
00:15:07.860 --> 00:15:09.550
is I just checked last night,
00:15:09.550 --> 00:15:13.200
I see about 2000 broker registrations,
00:15:13.200 --> 00:15:18.200
we have a very robust and
mature market for retail brokers
00:15:20.200 --> 00:15:22.820
that helped provide
substantial liquidity on
00:15:22.820 --> 00:15:25.050
any types of products energy,
00:15:25.050 --> 00:15:29.030
and this product would
look no different in terms
00:15:29.030 --> 00:15:32.580
of their ability to provide
that liquidity for all shapes
00:15:32.580 --> 00:15:34.603
and sizes of market participants.
00:15:35.620 --> 00:15:37.890
I did you have anything
else to add on that one?
00:15:37.890 --> 00:15:38.960
No.
00:15:38.960 --> 00:15:41.230
And then the second
counter argument
00:15:41.230 --> 00:15:43.743
that we've heard is
concerned about market power.
00:15:44.670 --> 00:15:48.900
And in a way, some of what I just said
00:15:48.900 --> 00:15:50.330
that addresses the
first counter argument
00:15:50.330 --> 00:15:53.090
also helps address the
second counter argument,
00:15:53.090 --> 00:15:54.660
which is when liquidity.
00:15:54.660 --> 00:15:58.040
So do you have a
tradable product that's liquid
00:15:58.040 --> 00:16:00.580
that helps all entities shapes
00:16:00.580 --> 00:16:03.060
and sizes meet their obligation?
00:16:03.060 --> 00:16:05.273
You can develop a mechanism to do that.
00:16:06.900 --> 00:16:08.680
And the biggest thing that I wanna try
00:16:08.680 --> 00:16:13.680
to draw comparison to is today,
00:16:13.840 --> 00:16:17.060
the vast majority of reps analysis
00:16:17.060 --> 00:16:19.490
meet their energy obligation.
00:16:19.490 --> 00:16:21.360
So when we all hedge, we have
00:16:21.360 --> 00:16:24.420
to procure supply to meet our load.
00:16:24.420 --> 00:16:27.923
That happens through
the bilateral energy market.
00:16:29.240 --> 00:16:32.120
Vast majority of power
that's transacted energy
00:16:32.120 --> 00:16:35.720
that's transacted is
in the bilateral market,
00:16:35.720 --> 00:16:38.763
which would look similar
in a concept to this.
00:16:39.880 --> 00:16:43.910
That there's been no
concerns that I've heard
00:16:43.910 --> 00:16:46.190
from the IMM about the
bilateral energy market
00:16:46.190 --> 00:16:50.020
having a structural issue,
that there are mechanisms
00:16:50.020 --> 00:16:54.780
that help ensure that
there's market power
00:16:54.780 --> 00:16:58.070
abuse is prohibited on
spot and energy prices,
00:16:58.070 --> 00:17:02.950
that helps limit that behavior
in the forward market.
00:17:02.950 --> 00:17:06.950
But still, that exists and
with sufficient competition,
00:17:06.950 --> 00:17:10.840
and liquid product, that
competition diminishes
00:17:10.840 --> 00:17:12.733
those market power opportunities.
00:17:15.030 --> 00:17:17.340
And I'm gonna turn the market power
00:17:17.340 --> 00:17:19.640
issue over to Arnie to
address in more detail.
00:17:20.730 --> 00:17:22.230
Yeah, which is very briefly,
00:17:23.360 --> 00:17:26.220
market power rests in concentration,
00:17:26.220 --> 00:17:27.890
if there's degeneration resources,
00:17:27.890 --> 00:17:30.150
or too concentrated in a
small number of owners,
00:17:30.150 --> 00:17:31.680
they might be able to withhold,
00:17:31.680 --> 00:17:33.710
and thereby actually
execute market power.
00:17:33.710 --> 00:17:37.083
That concern exists within
all of our cuts markets,
00:17:37.083 --> 00:17:38.750
then all of the organized markets,
00:17:38.750 --> 00:17:41.230
and there are detailed mitigation plans
00:17:41.230 --> 00:17:43.050
that are put in place
for the energy market,
00:17:43.050 --> 00:17:44.610
we think those could very easily apply
00:17:44.610 --> 00:17:47.630
to the sale of these
forward reliability certificates
00:17:47.630 --> 00:17:49.930
as well, there's no
reason why they couldn't.
00:17:49.930 --> 00:17:51.680
I've got maybe just a
couple of others to raise,
00:17:51.680 --> 00:17:54.050
just briefly the issue on
the timing that Sam raise.
00:17:54.050 --> 00:17:56.890
So we recognize this
as a long term solution.
00:17:56.890 --> 00:18:00.450
And that's why it's important
to plant the seeds now
00:18:00.450 --> 00:18:02.360
to start the process now of developing
00:18:02.360 --> 00:18:04.780
a more comprehensive holistic reform,
00:18:04.780 --> 00:18:07.600
so that over time, we
evolve towards a system
00:18:07.600 --> 00:18:09.860
in which all of the LSEs
have the right incentives
00:18:09.860 --> 00:18:11.610
to invest in the right
types of resources
00:18:11.610 --> 00:18:13.490
that the system needs for reliability,
00:18:13.490 --> 00:18:17.130
you can certainly put in
place some shorter term fixes,
00:18:17.130 --> 00:18:18.787
as this process plays itself out.
00:18:18.787 --> 00:18:21.130
And all the design
parameters are developed.
00:18:21.130 --> 00:18:24.520
And we've heard a lot of ideas on that.
00:18:24.520 --> 00:18:26.260
The last one I wanted
to raise, actually,
00:18:26.260 --> 00:18:27.520
could you go back to the slide
00:18:27.520 --> 00:18:29.580
with the restructure accreditation,
00:18:29.580 --> 00:18:32.172
I want to address the
issue around averaging
00:18:32.172 --> 00:18:34.500
that you brought up Chair Lake on this.
00:18:34.500 --> 00:18:35.790
And then we have heard this concern
00:18:35.790 --> 00:18:37.830
about these types of methods
00:18:37.830 --> 00:18:40.760
for accrediting renewable
resources in particular,
00:18:40.760 --> 00:18:42.810
is this really just a complicated way
00:18:42.810 --> 00:18:44.440
of calculating an average?
00:18:44.440 --> 00:18:46.630
And I wanna show you that it's not.
00:18:46.630 --> 00:18:51.630
And it really is the focus on
those most extreme hours,
00:18:51.770 --> 00:18:54.450
that prevents you, you
know that moves you away
00:18:54.450 --> 00:18:55.990
from averaging, you really are concerned
00:18:55.990 --> 00:18:57.590
about how does the wind perform
00:18:57.590 --> 00:19:00.490
when it's the coldest day of the winter,
00:19:00.490 --> 00:19:02.410
when it's the hottest day of the summer.
00:19:02.410 --> 00:19:04.203
And it turns out that in most markets
00:19:04.203 --> 00:19:05.830
wind is anti correlated
00:19:05.830 --> 00:19:08.450
with load during those
most extreme events.
00:19:08.450 --> 00:19:12.630
So the average winter time
wind is might have nothing to do
00:19:12.630 --> 00:19:15.970
with how the wind performed
during the most extreme day.
00:19:15.970 --> 00:19:18.940
And this method is the most accurate one
00:19:18.940 --> 00:19:21.020
at capturing the performance
of those resources
00:19:21.020 --> 00:19:22.880
during those hours that matter the most.
00:19:22.880 --> 00:19:24.650
In fact, any other
method that moves away
00:19:24.650 --> 00:19:27.410
from this invites more
and more averaging.
00:19:27.410 --> 00:19:29.090
And we heard a lot of discussion
00:19:29.090 --> 00:19:32.400
about the RDC proposals that earlier.
00:19:32.400 --> 00:19:34.580
And all of those would involve
more averaging than these,
00:19:34.580 --> 00:19:36.970
although it would provide incentives
00:19:36.970 --> 00:19:39.980
for performance during hours
that are maybe kind of tight,
00:19:39.980 --> 00:19:41.320
but not the most extreme hours
00:19:41.320 --> 00:19:42.480
where you really are most worried
00:19:42.480 --> 00:19:45.023
about loss of load events potentially.
00:19:46.100 --> 00:19:48.150
And then maybe the last thing is that
00:19:48.150 --> 00:19:51.430
if you have this reliability
certificate program,
00:19:51.430 --> 00:19:53.750
there's a question, is this increasing
00:19:53.750 --> 00:19:56.200
costs to everyone else?
00:19:56.200 --> 00:19:58.770
And what I would say to that is,
00:19:58.770 --> 00:20:02.200
this is really ends up
being a residual market.
00:20:02.200 --> 00:20:06.690
So if all the resources can
realize enough revenues through
00:20:06.690 --> 00:20:08.480
the daily and hourly energy markets,
00:20:08.480 --> 00:20:10.310
and through some of
the RDC reform proposals
00:20:10.310 --> 00:20:11.560
that we heard about earlier,
00:20:11.560 --> 00:20:13.630
then there'll be plenty of certificates.
00:20:13.630 --> 00:20:15.200
And there won't be any need really,
00:20:15.200 --> 00:20:16.650
for anybody to fuss too much
00:20:16.650 --> 00:20:18.530
about procuring enough of this stuff.
00:20:18.530 --> 00:20:20.210
It's really only if
those other resources,
00:20:20.210 --> 00:20:22.210
other systems don't work.
00:20:22.210 --> 00:20:24.370
These certificates
become in short supply.
00:20:24.370 --> 00:20:27.800
And the remedy to market
power ultimately, is new entry.
00:20:27.800 --> 00:20:29.360
And that's exactly what this is intended
00:20:29.360 --> 00:20:31.310
to unsend on a three year forward basis,
00:20:31.310 --> 00:20:33.160
is provide the incentives for new entry
00:20:33.160 --> 00:20:35.900
into the market building
new steel in the ground.
00:20:35.900 --> 00:20:38.000
So that provides a natural ceiling on
00:20:38.000 --> 00:20:40.572
that the price of these certificates is
00:20:40.572 --> 00:20:42.770
they should never get
higher in the long run
00:20:42.770 --> 00:20:44.870
than the cost of
building their resources.
00:20:46.870 --> 00:20:48.907
Sorry, just to
piggyback on that,
00:20:48.907 --> 00:20:51.420
and a couple more about the big change,
00:20:51.420 --> 00:20:52.420
we're not gonna sit up here
00:20:52.420 --> 00:20:53.970
and act like this is something simple
00:20:53.970 --> 00:20:55.590
that can be done next year, right?
00:20:55.590 --> 00:20:56.423
This is a plan.
00:20:56.423 --> 00:20:58.250
This is a process.
00:20:58.250 --> 00:20:59.760
Katie mentioned it and I agree there
00:20:59.760 --> 00:21:03.520
are numerous important policy decisions
00:21:03.520 --> 00:21:06.350
that would need to
accompany this proposal
00:21:06.350 --> 00:21:11.053
that would need to be
made, that's paperwork.
00:21:12.450 --> 00:21:13.820
We believe system light.
00:21:13.820 --> 00:21:16.350
I agree with Kanaan that
it would require changes
00:21:16.350 --> 00:21:19.683
to the settlement system for
the performance assessment.
00:21:20.560 --> 00:21:24.010
But in terms of system
and implementation time,
00:21:24.010 --> 00:21:24.900
we think that's light.
00:21:24.900 --> 00:21:27.650
But there are policy
decisions that need to be made.
00:21:27.650 --> 00:21:30.620
If we had tried to guess I
would say two to three year
00:21:30.620 --> 00:21:34.230
implementation time to
get all those decisions made.
00:21:34.230 --> 00:21:36.810
And then the second thing I wanna add on
00:21:36.810 --> 00:21:41.293
to is Katie's concern about guarantees.
00:21:42.490 --> 00:21:44.160
You're also not gonna
hear us sit up here
00:21:44.160 --> 00:21:46.290
and say this is gonna
guarantee reliability,
00:21:46.290 --> 00:21:49.000
nothing will guarantee you reliability,
00:21:49.000 --> 00:21:51.550
a fully regulated utility market
00:21:51.550 --> 00:21:53.260
would not have prevented URI.
00:21:53.260 --> 00:21:56.303
What this does is it lowers the risk.
00:21:57.970 --> 00:21:59.820
Well, it doesn't take zero.
00:21:59.820 --> 00:22:01.616
Yeah, fair enough.
00:22:01.616 --> 00:22:04.480
All right, let's do a
quick round of questions.
00:22:04.480 --> 00:22:06.290
Can kind of go first?
Yeah, yeah.
00:22:06.290 --> 00:22:10.630
So Bill, I wanna
have you counter
00:22:10.630 --> 00:22:13.627
to your own response to that argument.
00:22:13.627 --> 00:22:18.627
And that is the impact
to the retail market.
00:22:19.890 --> 00:22:21.623
You mentioned that.
00:22:23.230 --> 00:22:25.900
In fact, California and SPP in Australia
00:22:25.900 --> 00:22:28.513
have an LSE obligation
in place right now.
00:22:29.640 --> 00:22:33.540
But that the difference
between those obligations
00:22:33.540 --> 00:22:36.280
and in other states
and markets countries
00:22:37.630 --> 00:22:40.403
is that we have a robust retail market.
00:22:41.300 --> 00:22:46.300
So I really wanna
understand that a little bit more,
00:22:46.700 --> 00:22:48.640
because I almost
think that you got to turn
00:22:48.640 --> 00:22:51.910
that on its head a little bit, right?
00:22:51.910 --> 00:22:55.210
Because that is what
we have to be sensitive to
00:22:55.210 --> 00:22:57.730
because we have a
robust retail market, right?
00:22:57.730 --> 00:22:59.630
And I understand that, you know,
00:22:59.630 --> 00:23:04.630
we have new reps coming
in on a continuous basis.
00:23:05.800 --> 00:23:09.110
But isn't that the reason?
00:23:09.110 --> 00:23:10.960
Having a robust
competitive retail market
00:23:10.960 --> 00:23:13.890
is a reason we have new
reps signing up to come in.
00:23:13.890 --> 00:23:17.890
So I just wanna make sure
that I understand that fully,
00:23:17.890 --> 00:23:19.540
because that's why we're different.
00:23:19.540 --> 00:23:22.030
I don't know if it's a positive,
00:23:22.030 --> 00:23:23.473
I think it's something
we have to recognize is
00:23:23.473 --> 00:23:27.270
that we have a retail
market, unlike California.
00:23:27.270 --> 00:23:30.477
And, you know, most states in SPP,
00:23:30.477 --> 00:23:32.253
and I'm guessing Australia,
00:23:33.400 --> 00:23:35.600
but I also do wanna ask you to counter
00:23:37.050 --> 00:23:40.170
how your proposal may impact,
00:23:40.170 --> 00:23:41.880
could potentially negatively impact
00:23:41.880 --> 00:23:46.880
smaller MOUs in some of the
smaller electric cooperatives.
00:23:48.840 --> 00:23:52.803
So yeah, let me try to
rephrase your question.
00:23:54.250 --> 00:23:57.680
In the context of does
this create any advantages
00:23:57.680 --> 00:24:00.550
or disadvantages for
smaller versus larger entities,
00:24:00.550 --> 00:24:02.143
whether it be a rep or an MOU?
00:24:03.070 --> 00:24:07.750
And the way that we've
thought about that is,
00:24:07.750 --> 00:24:11.550
does is there something
about this mechanism
00:24:11.550 --> 00:24:16.550
that makes it easier for
NRG to meet our obligation
00:24:16.920 --> 00:24:20.020
than it would a smaller participant?
00:24:20.020 --> 00:24:21.320
And I believe that would be true
00:24:21.320 --> 00:24:23.920
if there were liquidity issues,
00:24:23.920 --> 00:24:27.240
if the market wasn't as
competitive and robust
00:24:27.240 --> 00:24:30.330
if the proposal didn't accompany
00:24:30.330 --> 00:24:34.577
and was fulfilled by a
tradable incremental product
00:24:35.630 --> 00:24:38.530
that mimics something similar today
00:24:38.530 --> 00:24:39.963
that you can get quotes on.
00:24:41.870 --> 00:24:44.530
I think that would be a concern.
00:24:44.530 --> 00:24:46.390
But that's not what we're proposing.
00:24:46.390 --> 00:24:47.750
I don't see that, to me,
00:24:47.750 --> 00:24:49.850
the burden is on how
much you need to buy.
00:24:50.990 --> 00:24:55.570
And, to me, that would
be a larger rep that
00:24:56.740 --> 00:24:59.550
whoever needs who has the
largest obligation is the one
00:24:59.550 --> 00:25:01.131
that's gonna have to come up
00:25:01.131 --> 00:25:05.097
with the most amount to
cover their share, right?
00:25:06.110 --> 00:25:11.110
And also, if this proposal
required LSE or reps
00:25:11.110 --> 00:25:14.930
to buy a very specific
type of technology,
00:25:14.930 --> 00:25:19.930
like, you know, thermal
or some type of mechanism
00:25:21.750 --> 00:25:26.354
or some type of resource,
instead of anything
00:25:26.354 --> 00:25:30.930
that can contribute to
reliability gets credit, right?
00:25:30.930 --> 00:25:32.630
And so what's gonna happen is LSEs
00:25:32.630 --> 00:25:35.860
are gonna naturally gravitate
towards the resources
00:25:35.860 --> 00:25:38.650
that can provide their obligation,
00:25:38.650 --> 00:25:41.040
they can meet their
obligation at the lowest cost.
00:25:41.040 --> 00:25:42.450
I think demand response is a big winner
00:25:42.450 --> 00:25:44.063
in this proposal.
00:25:44.898 --> 00:25:48.193
DG, small incremental batteries.
00:25:49.705 --> 00:25:52.380
And so those things help really,
00:25:52.380 --> 00:25:54.610
I think, really help
address the concerns
00:25:54.610 --> 00:25:57.790
about any advantages or disadvantages
00:25:57.790 --> 00:25:59.906
as a part of this proposal, yep.
00:25:59.906 --> 00:26:02.660
And then as a spin off, you
mentioned how this could work,
00:26:02.660 --> 00:26:04.700
sort of the accreditation process
00:26:04.700 --> 00:26:07.150
could work like our
existing rec trading program.
00:26:09.640 --> 00:26:11.350
Is there a salient difference in
00:26:11.350 --> 00:26:13.650
that maybe you'd be don't meet your rec,
00:26:13.650 --> 00:26:15.620
trading program requirements
00:26:15.620 --> 00:26:18.363
that you don't impose
a penalty, is that true?
00:26:20.460 --> 00:26:22.150
I think you have to
retire a certain amount
00:26:22.150 --> 00:26:23.848
of wrecks to meet your obligation.
00:26:23.848 --> 00:26:25.600
If you don't you get assessed a penalty.
00:26:25.600 --> 00:26:26.950
But in your
proposal, if you don't
00:26:26.950 --> 00:26:28.710
meet your requirement,
you're assessed to penalty.
00:26:28.710 --> 00:26:29.717
Correct.
Okay.
00:26:29.717 --> 00:26:30.550
And that's part of I think,
00:26:30.550 --> 00:26:32.030
what Arnie was touching on in terms
00:26:32.030 --> 00:26:36.890
of market power concerns,
there's a maximum amount
00:26:36.890 --> 00:26:39.530
that this product would be valued at,
00:26:39.530 --> 00:26:41.980
and it's wherever we set
the compliance building.
00:26:43.530 --> 00:26:48.383
Okay, and then one more
on the implementation timeline.
00:26:51.050 --> 00:26:53.060
Greater than a year, we know that,
00:26:53.060 --> 00:26:56.800
but is it true that we
kind of really don't know?
00:26:56.800 --> 00:27:00.840
Because I think the only
comparisons we have are California,
00:27:00.840 --> 00:27:03.040
which is drastically different.
00:27:03.040 --> 00:27:05.820
Because they have just a
whole different kind of market
00:27:05.820 --> 00:27:08.873
with regulated utilities, et cetera.
00:27:10.690 --> 00:27:12.240
I think what I heard from Brattle,
00:27:12.240 --> 00:27:14.390
and I'll let Sam speak to it later is
00:27:14.390 --> 00:27:17.620
that the closest comparisons
are California and Australia.
00:27:17.620 --> 00:27:21.900
And California doesn't really
match our market profile.
00:27:21.900 --> 00:27:24.130
So that's not I don't know
how much lessons learned
00:27:24.130 --> 00:27:26.290
we're gonna squeeze
out of there in terms of
00:27:26.290 --> 00:27:28.290
how do we build it and how quickly
00:27:28.290 --> 00:27:32.063
and then Australia was just
a recent market development.
00:27:33.420 --> 00:27:36.160
Australia just put in
their LSE obligations.
00:27:36.160 --> 00:27:38.360
So they really don't
have a historical tread
00:27:39.520 --> 00:27:43.000
that we can compare to in
the lessons from necessarily,
00:27:43.000 --> 00:27:45.460
although they do have
an energy only market.
00:27:45.460 --> 00:27:49.010
So I'm just trying to figure
out, as we look at again,
00:27:49.010 --> 00:27:50.500
like I said, at the beginning,
00:27:50.500 --> 00:27:52.923
near term, mid-term,
long-term solutions.
00:27:54.680 --> 00:27:58.460
And I know you all conceded,
this is a longer term solution.
00:27:58.460 --> 00:28:01.660
And but as we sit here today, trying
00:28:01.660 --> 00:28:03.610
to ensure reliability in the future,
00:28:03.610 --> 00:28:06.990
we got to make sure
that we're being realistic
00:28:06.990 --> 00:28:09.640
about timelines for
implementation and truly calling,
00:28:10.670 --> 00:28:12.590
truly making sure
that we're taking steps
00:28:12.590 --> 00:28:15.210
to get these done in the interim,
00:28:15.210 --> 00:28:17.420
even if we have more
midterm and long term solutions
00:28:17.420 --> 00:28:20.250
out there and being realistic
about the implementation,
00:28:20.250 --> 00:28:24.020
and complexities
surrounding all of the options.
00:28:24.020 --> 00:28:25.610
Yeah, fair point.
00:28:25.610 --> 00:28:29.730
We've got appreciate
you guys sticking around
00:28:29.730 --> 00:28:30.640
for a little bit longer.
00:28:30.640 --> 00:28:33.450
I know Dr. Patton has to get on a plane.
00:28:33.450 --> 00:28:36.470
So if it works, we'll
just move straight onto
00:28:36.470 --> 00:28:39.083
that segment of our
programming for today.
00:28:41.330 --> 00:28:42.970
Come on up.
00:28:42.970 --> 00:28:44.843
Okay, can I ask one
question real quick,
00:28:45.700 --> 00:28:48.660
in the view of this as key LSE
00:28:48.660 --> 00:28:51.060
reliability obligation elements.
00:28:51.060 --> 00:28:54.030
You have reliability, standard
resource accreditation,
00:28:54.030 --> 00:28:56.550
system assessment and
performance assessments.
00:28:56.550 --> 00:28:59.580
Are you proposing that every component
00:28:59.580 --> 00:29:00.970
of this gets done by ERCOT
00:29:02.030 --> 00:29:07.030
or PUC have a role in
setting those standards,
00:29:07.130 --> 00:29:11.380
quantifying the value of the
resources, things like that?
00:29:11.380 --> 00:29:13.880
You know, our view of it is
that ERCOT would conduct all
00:29:13.880 --> 00:29:16.280
of the quantitative modeling.
00:29:16.280 --> 00:29:19.020
And they would develop
a rich body of evidence,
00:29:19.020 --> 00:29:21.220
different model runs at
different levels of reliability
00:29:21.220 --> 00:29:22.350
with different cost levels
00:29:22.350 --> 00:29:24.990
and different levels of resources added.
00:29:24.990 --> 00:29:26.720
But then they would bring
that to the Commission.
00:29:26.720 --> 00:29:28.160
And it would need to
be the Commission's job
00:29:28.160 --> 00:29:29.550
to look at all that and determine
00:29:29.550 --> 00:29:32.130
what an appropriate
reliability standard is
00:29:32.130 --> 00:29:34.520
how much we ought to be
willing to pay for reliability
00:29:34.520 --> 00:29:38.720
in Texas and then as to
whether or not that it's warranted
00:29:38.720 --> 00:29:42.080
to trigger the obligation
based on your concern
00:29:42.080 --> 00:29:44.133
about how short the market
might be in three years.
00:29:44.133 --> 00:29:45.713
Thanks.
Thanks, John.
00:29:47.407 --> 00:29:49.407
Thank you.
All right.
00:29:50.750 --> 00:29:51.583
Come on up.
00:30:08.549 --> 00:30:11.433
(muffled speaking)
what's my timeframe?
00:30:13.840 --> 00:30:15.140
Your timeframe?
Yeah.
00:30:16.858 --> 00:30:18.543
I have two hours.
00:30:19.630 --> 00:30:21.080
We're not that long.
00:30:22.700 --> 00:30:24.043
But let's bracket it.
00:30:24.900 --> 00:30:25.733
Okay.
00:30:28.576 --> 00:30:29.730
Let's start with
your presentation.
00:30:29.730 --> 00:30:32.180
And we'll aim to have this
segment wrapped up by.
00:30:33.890 --> 00:30:34.723
6pm.
00:30:35.934 --> 00:30:37.940
Okay, yeah.
00:30:37.940 --> 00:30:41.040
We'll aim for no more
than a 30 minute discussion.
00:30:41.040 --> 00:30:41.873
Okay.
00:30:43.110 --> 00:30:47.710
That's great, because I think
there are some comments
00:30:47.710 --> 00:30:51.190
I'll make that you may
wanna discuss with me.
00:30:51.190 --> 00:30:53.433
As I go through the presentation.
00:30:55.270 --> 00:30:58.880
Even before I get to some
of the potential changes
00:30:58.880 --> 00:31:03.880
in the market, particularly
on this first slide, slide two.
00:31:05.610 --> 00:31:10.010
One thing that I think is
critically important is that
00:31:10.010 --> 00:31:13.410
and I'm glad Sam framed
us at the beginning is
00:31:13.410 --> 00:31:16.583
that we think really hard
about what our objectives are,
00:31:18.268 --> 00:31:22.380
and map these various
proposals to these objectives.
00:31:23.780 --> 00:31:27.020
And one thing that's very useful is
00:31:27.020 --> 00:31:30.380
that some of these proposed
changes have actually been tried
00:31:30.380 --> 00:31:34.620
and other markets we monitor, New York,
00:31:34.620 --> 00:31:38.093
New England, the mid-continent,
ISO as well as ERCOT.
00:31:39.219 --> 00:31:41.500
So other RTOs that we
monitor have tried some
00:31:41.500 --> 00:31:43.680
of these things, and some of
them haven't been successful.
00:31:43.680 --> 00:31:45.750
So I think it's really useful to learn
00:31:45.750 --> 00:31:48.070
from their experience, and I
can talk about why they have
00:31:48.070 --> 00:31:49.420
or haven't been successful.
00:31:50.960 --> 00:31:55.005
But even before hearing
Sam's categorization
00:31:55.005 --> 00:31:58.600
of the objectives, I propose
these three objectives.
00:31:58.600 --> 00:32:03.600
And interestingly, I think
they aren't exactly matched up
00:32:04.060 --> 00:32:07.603
with Sam's, but I can map
these to what he talked about.
00:32:08.500 --> 00:32:10.890
And importantly, number
one, and number two,
00:32:10.890 --> 00:32:14.825
so number one, I labeled as increasing
00:32:14.825 --> 00:32:17.400
the total capacity margin,
00:32:17.400 --> 00:32:21.250
or targeting some
level of capacity margin,
00:32:21.250 --> 00:32:23.967
as a potential objective that some
00:32:23.967 --> 00:32:27.380
of the proposals seem
to be trying to accomplish.
00:32:27.380 --> 00:32:29.040
And you can think of that as being
00:32:29.040 --> 00:32:31.370
a steel on the ground requirement,
00:32:31.370 --> 00:32:33.163
how many power plants do we have?
00:32:35.230 --> 00:32:39.350
And then I argue that
wasn't really an issue
00:32:39.350 --> 00:32:43.200
with winter storm URI,
the problem was really
00:32:43.200 --> 00:32:48.020
in category number
two, which is the objective
00:32:48.020 --> 00:32:52.300
of having our power plants
be available and be flexible.
00:32:52.300 --> 00:32:57.300
So if I were mapping this to
a supply adequacy objective,
00:32:57.320 --> 00:32:59.860
it's really a combination of
number one and number two,
00:32:59.860 --> 00:33:03.040
it's how many power plants you have,
00:33:03.040 --> 00:33:05.310
and how well they perform.
00:33:05.310 --> 00:33:08.020
And the reason it's
important to break those apart
00:33:08.020 --> 00:33:10.550
and not call them
both supply adequacy is
00:33:10.550 --> 00:33:14.010
that all of our problems
were in number two,
00:33:14.010 --> 00:33:16.860
just about if we had more power plants,
00:33:16.860 --> 00:33:18.610
we still would have had our outages,
00:33:18.610 --> 00:33:21.210
the problem was the power
plants we had kind of run.
00:33:22.970 --> 00:33:27.490
So understanding how the
different proposals would achieve,
00:33:27.490 --> 00:33:29.440
you know, more power plants being built
00:33:30.317 --> 00:33:31.850
versus allowing power plants
00:33:31.850 --> 00:33:35.510
to perform more reliably
is critically important.
00:33:35.510 --> 00:33:37.210
And then number three, I think
00:33:37.210 --> 00:33:38.420
we haven't really talked about it.
00:33:38.420 --> 00:33:43.420
But when you rely
heavily on the tail end
00:33:44.560 --> 00:33:49.560
of the RDC curve at
$9,000 to incent behavior
00:33:49.990 --> 00:33:52.080
by participants, you can end up
00:33:52.080 --> 00:33:54.450
with the sort of catastrophic
economic impacts
00:33:54.450 --> 00:33:56.800
that we saw coming out of URI.
00:33:56.800 --> 00:34:01.800
And I think, in theory, like
if you took an economist
00:34:02.170 --> 00:34:04.640
and just say, well, should this work?
00:34:04.640 --> 00:34:07.610
An economists would say,
yeah, well, this should work.
00:34:07.610 --> 00:34:11.340
The problem really is we're putting most
00:34:11.340 --> 00:34:13.730
of your expected revenues
are very large share
00:34:13.730 --> 00:34:15.580
of your expected
revenues at the tail end
00:34:15.580 --> 00:34:19.410
of the at the most extreme
end of the RDC curve
00:34:19.410 --> 00:34:23.410
in terms of pricing and
revenues, is problematic in
00:34:23.410 --> 00:34:27.440
that those conditions are
extremely hard to forecast.
00:34:27.440 --> 00:34:32.440
So if you look at the economic
outcomes coming out of URI
00:34:32.510 --> 00:34:36.192
for various generators,
like the companies
00:34:36.192 --> 00:34:40.270
that those generators
were well winterized and ran,
00:34:40.270 --> 00:34:42.030
the difference between how they fared
00:34:42.030 --> 00:34:45.500
and how companies who
weren't well winterize performed.
00:34:45.500 --> 00:34:46.820
I mean, you're talking about billions
00:34:46.820 --> 00:34:48.233
of dollars of differences.
00:34:49.270 --> 00:34:51.810
Say you have to look at that and say,
00:34:51.810 --> 00:34:53.860
it doesn't look like we
have an incentive problem
00:34:53.860 --> 00:34:56.650
with winterizing, so why
wasn't everybody winterized?
00:34:56.650 --> 00:35:01.233
Well, the problem is that if
you ask anybody you know,
00:35:03.100 --> 00:35:04.860
calculate the percentage chance
00:35:04.860 --> 00:35:07.390
that something like URI would happen.
00:35:07.390 --> 00:35:09.590
Like, it's almost impossible
to even calculate that number.
00:35:09.590 --> 00:35:11.220
It's so small.
00:35:11.220 --> 00:35:12.230
It's so unlikely.
00:35:12.230 --> 00:35:16.973
So if you build a market design
around delivering revenues,
00:35:18.040 --> 00:35:20.660
in conditions that are almost impossible
00:35:20.660 --> 00:35:22.340
to calculate the probability of then
00:35:22.340 --> 00:35:26.210
you won't necessarily get
get people committing capital
00:35:26.210 --> 00:35:29.690
to investments that would
address those concerns.
00:35:29.690 --> 00:35:34.690
And so that's why relying on the ORDC
00:35:34.850 --> 00:35:39.660
and scarcity pricing in and
of itself isn't a terrible idea.
00:35:39.660 --> 00:35:43.420
Because as you move away
from the extreme conditions
00:35:43.420 --> 00:35:45.430
that the simply the tight conditions,
00:35:45.430 --> 00:35:46.870
those are much easier to forecast
00:35:46.870 --> 00:35:48.800
how often you're gonna have those.
00:35:48.800 --> 00:35:51.330
And people actually will
respond to those incentives,
00:35:51.330 --> 00:35:54.830
because they can build a
business case around the revenues
00:35:54.830 --> 00:35:57.810
that would occur on parts of the curve,
00:35:57.810 --> 00:36:00.173
that you're gonna hit 1000 hours a year,
00:36:01.084 --> 00:36:04.090
versus the part of the
curve that you're gonna hit,
00:36:04.090 --> 00:36:08.173
you know, just a few hours,
maybe every five years.
00:36:10.030 --> 00:36:15.030
Okay, so that's why
our proposals generally
00:36:15.480 --> 00:36:18.260
address number two, and number three,
00:36:18.260 --> 00:36:21.430
now it's unambiguously
true that if you do something
00:36:21.430 --> 00:36:23.010
to get people to build
more power plants,
00:36:23.010 --> 00:36:25.393
that's gonna result in more reliability.
00:36:26.590 --> 00:36:29.770
But I think that it's a
more costly approach.
00:36:29.770 --> 00:36:32.360
And when people talk about establishing
00:36:32.360 --> 00:36:34.760
a minimum reliability requirements,
00:36:34.760 --> 00:36:37.440
and then structuring a
market around satisfying,
00:36:37.440 --> 00:36:39.170
they're talking about number one,
00:36:39.170 --> 00:36:42.750
that's what the capacity
markets do in other markets,
00:36:42.750 --> 00:36:45.510
they say we're gonna
meet a one in 10 standard,
00:36:45.510 --> 00:36:47.730
we have to have a capacity margin
00:36:47.730 --> 00:36:51.500
coming out of the
planning models of 16, 17%,
00:36:51.500 --> 00:36:53.460
whatever it is, in different markets,
00:36:53.460 --> 00:36:56.990
and then we structure
our market to procure it.
00:36:56.990 --> 00:36:59.870
And you're largely doing
number one, although
00:36:59.870 --> 00:37:02.963
how your credit resource
should account for number two.
00:37:05.160 --> 00:37:08.100
The problem is that
those accreditation models
00:37:08.100 --> 00:37:11.510
don't envision the sort
of extreme circumstances
00:37:11.510 --> 00:37:13.210
that you have in like a URI, like,
00:37:13.210 --> 00:37:15.530
you're never gonna tell a gas plant
00:37:15.530 --> 00:37:17.510
that you're gonna credit them way down,
00:37:17.510 --> 00:37:21.730
because there may be
some very unlikely situation
00:37:21.730 --> 00:37:22.970
where they can't get gas,
00:37:22.970 --> 00:37:25.600
because there's a power outage
00:37:25.600 --> 00:37:28.520
to the compressors, so gas won't flow.
00:37:28.520 --> 00:37:31.530
And so you can't really
address number two
00:37:31.530 --> 00:37:33.500
with a capacity market very effectively.
00:37:33.500 --> 00:37:38.090
You can try to but not really.
00:37:38.090 --> 00:37:40.370
So just keep in mind
that when you establish
00:37:40.370 --> 00:37:44.970
a minimum capacity or a
minimum capacity requirement,
00:37:44.970 --> 00:37:48.380
you're essentially
establishing a capacity market
00:37:48.380 --> 00:37:51.183
as you do that, even
if it's a bilateral market.
00:37:53.490 --> 00:37:56.380
Okay, so, any questions on those sorts
00:37:56.380 --> 00:37:58.260
of comments before I move
00:37:58.260 --> 00:37:59.500
to the proposal?
I will save the
00:37:59.500 --> 00:38:01.583
questions for end.
Okay.
00:38:02.454 --> 00:38:07.454
So one thing I wanted to
mention that hasn't been well,
00:38:08.260 --> 00:38:10.110
or hasn't been discussed yet today
00:38:10.110 --> 00:38:13.330
is how important
Real-Time Co-optimization is.
00:38:13.330 --> 00:38:16.800
A lot of the questions that
you've asked earlier today
00:38:16.800 --> 00:38:21.130
about how you accommodate
extreme ramp demands,
00:38:21.130 --> 00:38:24.780
like with solar, which is
gonna be a problem that needs
00:38:24.780 --> 00:38:26.920
to be managed by ERCOT, as well
00:38:26.920 --> 00:38:31.640
as fluctuations in wind
output, and so forth, are things
00:38:31.640 --> 00:38:35.470
that Real-Time Co-optimization
is really the only thing
00:38:35.470 --> 00:38:40.470
that will meaningfully help
ERCOT manage those well
00:38:40.510 --> 00:38:44.910
and set prices that reflect
the true market conditions.
00:38:44.910 --> 00:38:46.780
So I'm gonna sort of refer
00:38:46.780 --> 00:38:50.090
to how Real-Time
Co-optimization would change
00:38:50.090 --> 00:38:51.530
the performance of the markets as
00:38:51.530 --> 00:38:54.650
I talk about the first proposal
00:38:54.650 --> 00:38:58.490
that I wanna discuss which
is related to the ORDC.
00:38:58.490 --> 00:39:03.490
So if you'll skip ahead
to proposal number two,
00:39:04.500 --> 00:39:06.800
I apologize that I'm
taking this out of order.
00:39:13.154 --> 00:39:15.240
So proposal number two has to do
00:39:15.240 --> 00:39:20.240
with improving our scarcity,
pricing, our pricing of energy.
00:39:23.070 --> 00:39:27.710
And I'm gonna talk a
little bit about what's wrong
00:39:27.710 --> 00:39:30.490
with what we currently do,
which would help improve
00:39:30.490 --> 00:39:32.490
reliability and ERCOT and then some
00:39:32.490 --> 00:39:35.540
of the changes that we should make.
00:39:35.540 --> 00:39:38.160
So at the outset, one thing
that's really important is just
00:39:38.160 --> 00:39:41.260
to understand what this
curve actually means.
00:39:41.260 --> 00:39:45.360
It's the shortage value associated
with energy and reserves.
00:39:45.360 --> 00:39:49.480
And the best way to calculate
it is by calculating the value
00:39:49.480 --> 00:39:52.120
of lost load how much
electricity is worth
00:39:52.120 --> 00:39:56.500
to consumers times the
probability of losing load.
00:39:56.500 --> 00:40:00.710
So as you become more
and more short of reserve,
00:40:00.710 --> 00:40:03.340
the probability that the
lights might goes out goes up.
00:40:03.340 --> 00:40:04.410
Now the reason.
00:40:04.410 --> 00:40:07.820
So for example, the reason
when you're at 5000 megawatts
00:40:07.820 --> 00:40:12.820
of reserves, you only get
a price of, let's say, $200.
00:40:14.910 --> 00:40:17.260
Even though the value
of last load is 9000,
00:40:17.260 --> 00:40:19.100
is the probability of losing loads at
00:40:19.100 --> 00:40:22.050
that point is below 1%.
00:40:22.050 --> 00:40:26.100
And so as you start
using up your resources,
00:40:26.100 --> 00:40:29.270
so you have less resources in reserve,
00:40:29.270 --> 00:40:31.090
that the probability
something could happen,
00:40:31.090 --> 00:40:33.110
that would cause the
lights to go out goes up.
00:40:33.110 --> 00:40:35.170
So you're moving up this curve.
00:40:35.170 --> 00:40:37.560
There's one thing that in Texas,
00:40:37.560 --> 00:40:40.380
as always sort of a
departure from that basic idea,
00:40:40.380 --> 00:40:43.400
and that's this minimum
contingency level,
00:40:43.400 --> 00:40:47.010
which sort of arbitrarily
jumps you up to the cap.
00:40:47.010 --> 00:40:50.890
Right now, at 2000 megawatts,
there's really no rationale
00:40:50.890 --> 00:40:55.360
for that, all it does is
just put some revenue
00:40:55.360 --> 00:40:57.157
in the very tight conditions.
00:40:57.157 --> 00:41:01.650
So it increases your reliance
on the extreme events,
00:41:01.650 --> 00:41:04.420
I can't see any reason why
you shouldn't do away with that.
00:41:04.420 --> 00:41:07.223
So that's part of our,
that's part of our proposal.
00:41:08.870 --> 00:41:11.730
Now, the other thing
that you should know
00:41:11.730 --> 00:41:14.210
about how this varies from sort
00:41:14.210 --> 00:41:18.333
of an economically sound
approach, is number one,
00:41:20.160 --> 00:41:22.600
because you don't have co-optimization,
00:41:22.600 --> 00:41:25.773
you're not utilizing all of
your resources efficiently.
00:41:27.421 --> 00:41:29.871
And this is particularly
important when you ramp.
00:41:32.440 --> 00:41:35.140
The amount of reserves
you actually have available
00:41:35.140 --> 00:41:37.390
to you is the amount of
megawatts you can get
00:41:37.390 --> 00:41:40.780
to within 10 or 30 minutes, okay.
00:41:40.780 --> 00:41:44.360
So put yourself on the
bottom of the dark curve
00:41:44.360 --> 00:41:46.860
and start ramping all of
your conventional generation
00:41:46.860 --> 00:41:48.250
as fast as you can.
00:41:48.250 --> 00:41:52.110
At that point, you can't
get megawatts out of any
00:41:52.110 --> 00:41:53.300
of those units that are ramping.
00:41:53.300 --> 00:41:55.520
So let's say they're
ramping for an hour,
00:41:55.520 --> 00:41:58.593
and then you lose 1000 megawatt unit.
00:42:00.221 --> 00:42:02.890
You're done, there's nothing you can do
00:42:02.890 --> 00:42:04.820
because you're already
ramping those units
00:42:04.820 --> 00:42:06.710
as fast as you can to make up
00:42:06.710 --> 00:42:08.780
for the solar that's going down.
00:42:08.780 --> 00:42:11.520
And so effectively, you
don't have operating reserves
00:42:11.520 --> 00:42:14.090
that are spinning at that point in time.
00:42:14.090 --> 00:42:18.960
Now, in ERCOT, that's
invisible to you, right?
00:42:18.960 --> 00:42:23.310
Because the without
Real-Time Co-optimization,
00:42:23.310 --> 00:42:27.380
you're not really tracking
how many megawatts
00:42:27.380 --> 00:42:28.950
you can ramp within 10 minutes,
00:42:28.950 --> 00:42:31.910
and you're not trying to
allocate your resources
00:42:31.910 --> 00:42:34.520
between energy and reserves in the way
00:42:34.520 --> 00:42:36.300
that's the most efficient.
00:42:36.300 --> 00:42:37.700
Now, what happens in other markets
00:42:37.700 --> 00:42:40.430
that are co-optimized is
when you're on that dark curve,
00:42:40.430 --> 00:42:41.830
if you get into the circumstance
00:42:41.830 --> 00:42:43.440
where you're ramping as fast as you can,
00:42:43.440 --> 00:42:46.910
and you can't meet your
spinning reserve requirements,
00:42:46.910 --> 00:42:48.130
which is based on how much you can
00:42:48.130 --> 00:42:50.600
ramp your regulation requirements,
00:42:50.600 --> 00:42:53.310
which is also how much you can ramp
00:42:53.310 --> 00:42:55.380
just in a few second timeframe
00:42:55.380 --> 00:42:57.570
as supply and demand fluctuates.
00:42:57.570 --> 00:43:01.080
Those markets will recognize
that there's a shortage,
00:43:01.080 --> 00:43:05.380
and you'll get a high price
for 10 minutes, 15 minutes.
00:43:05.380 --> 00:43:06.510
And it happens a lot.
00:43:06.510 --> 00:43:11.510
Because like in miso we had
prices in over $1,000 range
00:43:19.190 --> 00:43:20.633
twice in April this year,
00:43:21.570 --> 00:43:23.720
because wind chopped off 30 minutes
00:43:23.720 --> 00:43:27.060
before it was forecasted
miso has in the span
00:43:27.060 --> 00:43:30.703
of just an hour to last up
to like 12 gigawatts of wind.
00:43:30.703 --> 00:43:33.330
Now, if you don't
forecast that drop properly,
00:43:33.330 --> 00:43:34.910
like if it happens a little earlier
00:43:34.910 --> 00:43:36.470
than you thought it was gonna happen,
00:43:36.470 --> 00:43:38.670
you're gonna have a
serious ramping problem.
00:43:39.980 --> 00:43:42.830
And so you can get the
shortages that last 10 or 15 minutes.
00:43:42.830 --> 00:43:45.920
And those high prices conveniently
00:43:45.920 --> 00:43:47.190
don't get paid to the wind
00:43:47.190 --> 00:43:48.840
because they're causing the problem
00:43:48.840 --> 00:43:51.060
they're not producing
out but they do get paid
00:43:51.060 --> 00:43:53.810
to everybody who can ramp
00:43:53.810 --> 00:43:56.690
and the faster you can ramp
the more money you make.
00:43:56.690 --> 00:43:59.000
Also, and this is a problem in ERCOT,
00:43:59.000 --> 00:44:01.733
it gets paid to your
offline peaking units.
00:44:02.920 --> 00:44:05.010
You're not paying
your offline picking units
00:44:05.010 --> 00:44:07.210
except a very small subset of people
00:44:07.210 --> 00:44:09.620
who can start in 10 minutes.
00:44:09.620 --> 00:44:13.570
So in other markets
00:44:13.570 --> 00:44:16.543
because this curve sets
the price for reserves.
00:44:17.460 --> 00:44:19.963
Anybody who's selling
reserves gets paid.
00:44:20.990 --> 00:44:24.220
So I guarantee you
want your gas turbines
00:44:24.220 --> 00:44:26.950
to get paid the ORDC adder even
00:44:26.950 --> 00:44:28.830
if they can only start in 30 minutes
00:44:28.830 --> 00:44:33.820
because they are a critical
component of what's keeping
00:44:33.820 --> 00:44:38.820
They're included in the
calculation of your reserves
00:44:39.720 --> 00:44:42.440
to some extent, but they
are critically important
00:44:42.440 --> 00:44:47.440
for determining how
likely am I to lose load.
00:44:47.960 --> 00:44:51.860
So there are some not
having co-optimization makes
00:44:51.860 --> 00:44:54.870
it harder for the ORDC
to be fully effective
00:44:54.870 --> 00:44:57.780
at compensating dispatchable units,
00:44:57.780 --> 00:45:00.083
flexible units and gas peaking units.
00:45:01.750 --> 00:45:05.480
But so there are some improvements
00:45:05.480 --> 00:45:06.850
that you could do in that regard.
00:45:06.850 --> 00:45:08.930
Even before you get to co-optimization,
00:45:08.930 --> 00:45:12.133
we could track how much
ramp bubble capacity you have,
00:45:13.250 --> 00:45:17.680
or ERCOT has, so that
you could adapt the system
00:45:17.680 --> 00:45:20.460
to recognize ramp shortages.
00:45:20.460 --> 00:45:23.320
And if ERCOT says
Real-Time CO-optimization
00:45:23.320 --> 00:45:26.670
is I don't know what they're
saying now, to be honest,
00:45:26.670 --> 00:45:28.820
but if they're saying it's
four or five years away,
00:45:28.820 --> 00:45:30.270
it might be worth doing that.
00:45:31.340 --> 00:45:33.100
If we're gonna get a lot of solar
00:45:34.363 --> 00:45:37.410
before Real-Time
Co-optimization can be in place.
00:45:37.410 --> 00:45:38.910
So go ahead to the next slide.
00:45:41.860 --> 00:45:44.103
Go one more, I'll talk
about these things.
00:45:45.230 --> 00:45:46.820
So this is in effect, what
00:45:46.820 --> 00:45:49.880
we're proposing you do at the ORDC.
00:45:54.360 --> 00:45:56.180
And I think what would be useful is
00:45:56.180 --> 00:45:59.453
to talk through a lot of the
scenarios that you raised,
00:46:00.610 --> 00:46:04.970
and how this would
affect those scenarios.
00:46:04.970 --> 00:46:09.223
But one important thing to
keep in mind is that you know,
00:46:11.880 --> 00:46:14.440
people have listed as a con
of a lot of these proposals
00:46:14.440 --> 00:46:18.963
that it won't be guaranteed
that people will build.
00:46:20.080 --> 00:46:24.387
But as an economist, and
I think what I would say is
00:46:26.530 --> 00:46:29.210
that if you increase
the expected revenues
00:46:29.210 --> 00:46:32.580
that a generator would
receive all other things equal,
00:46:32.580 --> 00:46:33.850
they're gonna invest more,
00:46:33.850 --> 00:46:36.600
and they're gonna
retire fewer resources.
00:46:36.600 --> 00:46:39.480
And we're already seeing
that even in today's market,
00:46:39.480 --> 00:46:42.720
although there's
opportunities for improvements.
00:46:42.720 --> 00:46:46.210
There's one company that's
in the middle of a process
00:46:46.210 --> 00:46:48.250
to build 4000 megawatts of peakers.
00:46:48.250 --> 00:46:51.633
I think by the end of this
year, they will built 1500.
00:46:54.260 --> 00:46:57.430
We've seen units come out of mothball.
00:46:57.430 --> 00:47:01.720
Our capacity margin next
year is forecasted to be 28%.
00:47:01.720 --> 00:47:06.720
So we do see folks responding
to the shortage pricing,
00:47:07.210 --> 00:47:10.130
I think when you rely on extreme events,
00:47:10.130 --> 00:47:12.030
the bad part of that scenario is
00:47:12.030 --> 00:47:13.230
that when they haven't happened
00:47:13.230 --> 00:47:16.300
for a while, people will underestimate
00:47:16.300 --> 00:47:17.760
the probability that they would happen.
00:47:17.760 --> 00:47:20.340
And then once they happen,
they'll tend to overestimate
00:47:20.340 --> 00:47:22.070
so you end up with kind of a boom bust.
00:47:22.070 --> 00:47:25.020
And I think we're kind
of in the boom part of that
00:47:25.020 --> 00:47:26.970
because of the amount of money
00:47:26.970 --> 00:47:29.163
that people saw change hands during URI.
00:47:30.190 --> 00:47:33.980
So we don't disagree with your objective
00:47:33.980 --> 00:47:37.730
to move away from the reliance
on the emergency conditions,
00:47:37.730 --> 00:47:41.533
which is really down in
the blue area of this curve.
00:47:43.260 --> 00:47:48.260
And one way to do that is to
cap the system wide offer cap,
00:47:53.700 --> 00:47:56.930
the maximum price that can be generated
00:47:56.930 --> 00:47:59.800
by the curve at something
like 5000 megawatts,
00:47:59.800 --> 00:48:01.250
you do you want it to be high enough
00:48:01.250 --> 00:48:04.810
to provoke the demand
response that can respond
00:48:04.810 --> 00:48:08.650
to help you keep the lights
on for the non-flexible loads.
00:48:08.650 --> 00:48:11.260
So I thought the
comments of the industrial
00:48:14.090 --> 00:48:17.423
representative were extremely
insightful in that regard.
00:48:18.700 --> 00:48:22.930
So capping it at something
like $5,000 makes sense.
00:48:22.930 --> 00:48:25.740
Now, I've heard people talk about
00:48:25.740 --> 00:48:27.573
fattening the end of the tail.
00:48:30.490 --> 00:48:33.080
If you go back to the
formula of value of loss load
00:48:33.080 --> 00:48:35.650
times the probability of losing load,
00:48:35.650 --> 00:48:38.160
you shouldn't arbitrarily
change the probability
00:48:38.160 --> 00:48:40.460
of losing load to
something that it's not.
00:48:40.460 --> 00:48:42.770
So some proposals that have said
00:48:42.770 --> 00:48:44.713
increase the standard deviation.
00:48:46.480 --> 00:48:48.970
That is a deliberate departure away
00:48:48.970 --> 00:48:52.210
from what ERCOT is estimated
the probability of losing load
00:48:52.210 --> 00:48:56.260
is the variable you can change
00:48:56.260 --> 00:48:59.070
and should change is
the value of last load.
00:48:59.070 --> 00:49:00.840
The study support a much higher value
00:49:00.840 --> 00:49:03.040
of loss load the $9,000.
00:49:03.040 --> 00:49:05.220
Now it doesn't mean
you'll actually pay it,
00:49:05.220 --> 00:49:08.520
it means that and then
in this green line here,
00:49:08.520 --> 00:49:13.140
the reason that it's higher
on the tail end of the curve,
00:49:13.140 --> 00:49:16.650
is because we're calculating
that curve based on something
00:49:16.650 --> 00:49:19.900
that's closer to a
$20,000 value of loss load.
00:49:19.900 --> 00:49:24.840
So what you're saying when
you do that is when we start
00:49:24.840 --> 00:49:28.790
to get tight in the
five to $6,000 range,
00:49:28.790 --> 00:49:33.790
we care a tremendous amount
that we minimize the chance
00:49:35.200 --> 00:49:36.410
that we're gonna lose load
00:49:36.410 --> 00:49:38.740
because losing load
is extremely valuable.
00:49:38.740 --> 00:49:41.730
In fact, it's more valuable than $9,000.
00:49:41.730 --> 00:49:42.563
It's easy.
00:49:42.563 --> 00:49:46.040
We're proposing in my so a
$23,000 value of loss load,
00:49:46.040 --> 00:49:49.350
it's easy to support a
$20,000 value loss load.
00:49:49.350 --> 00:49:54.030
It's not easy to justify
paying it for 30 hours straight,
00:49:54.030 --> 00:49:56.340
which is why the cap makes some sense
00:49:56.340 --> 00:49:59.190
to de emphasize the extreme shortage,
00:49:59.190 --> 00:50:01.233
but that area I've circled there,
00:50:02.390 --> 00:50:06.040
it's important to recognize
you're gonna be in that zone,
00:50:06.040 --> 00:50:09.330
probably one to 2000 times as often
00:50:09.330 --> 00:50:11.430
as you are in the blue zone.
00:50:11.430 --> 00:50:16.430
So although it looks small
and we do zoom in on it,
00:50:17.120 --> 00:50:18.220
so that you can see better
00:50:18.220 --> 00:50:20.670
that there's a meaningful gap in prices,
00:50:20.670 --> 00:50:23.680
you're there so much
more often than you are
00:50:23.680 --> 00:50:27.970
lower in the curve, that if
you look at the performer
00:50:27.970 --> 00:50:32.970
for a peaking unit, that
would hugely incentive
00:50:34.310 --> 00:50:37.020
or increase the net
revenue of peaking units
00:50:37.020 --> 00:50:39.560
who are providing your reserves,
00:50:39.560 --> 00:50:41.760
presuming that they get paid the ORDC,
00:50:41.760 --> 00:50:43.500
adder which they don't all get paid.
00:50:43.500 --> 00:50:44.883
So we should fix that.
00:50:46.450 --> 00:50:48.530
So this would be a meaningful change,
00:50:48.530 --> 00:50:51.040
it wouldn't rely on the
market being so tight
00:50:51.040 --> 00:50:53.070
that you're on the
precipice of losing load,
00:50:53.070 --> 00:50:56.690
but it would, it would greatly
increase the the payments
00:50:56.690 --> 00:50:58.490
and to the comment earlier about,
00:50:58.490 --> 00:51:01.520
you don't wanna fatten
the tail to just create a tax.
00:51:01.520 --> 00:51:03.560
This is absolutely not a tax
00:51:03.560 --> 00:51:07.380
because that adder is
based on the probability
00:51:07.380 --> 00:51:11.500
of losing load times of
value that we all believe in
00:51:11.500 --> 00:51:14.170
as far as the value of
keeping the lights on.
00:51:14.170 --> 00:51:16.630
So when you get into that area,
00:51:16.630 --> 00:51:21.610
and you're paying $100
adder, let's say, or a $200 adder,
00:51:21.610 --> 00:51:24.660
that adder reflects
the reliability threat
00:51:24.660 --> 00:51:26.540
of being in the tight condition.
00:51:26.540 --> 00:51:29.780
So it's absolutely justified.
00:51:29.780 --> 00:51:33.743
And it's in no way in my mind, a tax.
00:51:35.480 --> 00:51:38.913
And now let's talk about
the solar the dark curve ramp.
00:51:42.390 --> 00:51:46.083
If ERCOT is not perfectly
prepared for the dark curve,
00:51:47.160 --> 00:51:49.460
in most cases, they
should be prepared in terms
00:51:49.460 --> 00:51:50.850
of how they turn on the units
00:51:50.850 --> 00:51:55.150
and their dispatch software should
00:51:55.150 --> 00:51:57.500
be holding units at a
level that when you enter
00:51:57.500 --> 00:51:59.760
into the dark curve, you're right
00:51:59.760 --> 00:52:01.930
that just a few combined
cycles can't handle it.
00:52:01.930 --> 00:52:04.540
But if you have 100
units that are all way down
00:52:05.985 --> 00:52:09.210
in their operating
range, that it's not gonna
00:52:09.210 --> 00:52:12.670
be overly taxing for them all to move.
00:52:12.670 --> 00:52:15.270
But you will bounce into this range
00:52:15.270 --> 00:52:18.210
for 15 minutes, 30 minutes an hour.
00:52:18.210 --> 00:52:20.060
And when you bounce into that range,
00:52:20.060 --> 00:52:21.780
you're gonna be generating revenues
00:52:21.780 --> 00:52:25.497
for the units that are dispatchable.
00:52:25.497 --> 00:52:27.950
And that are helping
you maintain reliability.
00:52:27.950 --> 00:52:31.383
And importantly, what
we've shown in our reports,
00:52:32.290 --> 00:52:35.220
is when you get deeper into this range,
00:52:35.220 --> 00:52:39.033
like into the three 4000 areas,
00:52:40.100 --> 00:52:41.810
that's almost always gonna happen
00:52:41.810 --> 00:52:45.370
because the intermittence
are producing at low levels.
00:52:45.370 --> 00:52:48.810
So we have this concept in
our reports called the net load,
00:52:48.810 --> 00:52:51.743
which is the load minus
the renewable resources.
00:52:52.610 --> 00:52:54.820
So although we wouldn't advocate
00:52:54.820 --> 00:52:56.260
for doing anything deliberate
00:52:56.260 --> 00:52:57.960
to discriminate against
the intermittence,
00:52:57.960 --> 00:53:00.090
like don't pay them the ORDC,
00:53:00.090 --> 00:53:01.980
it's naturally going to be the case
00:53:01.980 --> 00:53:05.660
that to the extent they're
putting you in this range,
00:53:05.660 --> 00:53:07.650
they're generating at very low levels.
00:53:07.650 --> 00:53:12.640
And so the meaningful
revenues that are generated
00:53:12.640 --> 00:53:15.280
by the ORDC are gonna
go to everybody else
00:53:15.280 --> 00:53:18.563
who's helping you and not go to them.
00:53:21.139 --> 00:53:21.972
Trying to think if there was
00:53:21.972 --> 00:53:23.963
another scenario that you asked about.
00:53:27.380 --> 00:53:32.380
It's not coming to mind, but
so why don't I pause there?
00:53:32.890 --> 00:53:34.040
Do you have any questions about this
00:53:34.040 --> 00:53:37.520
particular proposal?
Well, I tell you what,
00:53:37.520 --> 00:53:38.840
we're getting tight on time,
00:53:38.840 --> 00:53:39.673
if we're gonna keep going.
00:53:39.673 --> 00:53:41.960
So go ahead and bring
it home for us, if you will,
00:53:41.960 --> 00:53:43.970
and we'll do a round of
questions with the Commission.
00:53:43.970 --> 00:53:46.370
Okay, so let's go back
to proposal number one.
00:53:48.320 --> 00:53:52.317
Okay, so I don't wanna
mislead you into thinking
00:53:57.295 --> 00:54:00.360
that we are opponents
of capacity markets,
00:54:00.360 --> 00:54:02.250
we don't think capacity markets are evil
00:54:02.250 --> 00:54:03.840
or should be avoided at all cost,
00:54:03.840 --> 00:54:06.690
but we think they have
significant problems.
00:54:06.690 --> 00:54:09.390
And the most significant
problem is the money
00:54:09.390 --> 00:54:13.400
for nothing problem, that
we accredit resources.
00:54:13.400 --> 00:54:15.350
We pay the millions of dollars,
00:54:15.350 --> 00:54:18.920
and then you get into a
circumstance like URI or situations
00:54:18.920 --> 00:54:21.930
that are less dramatic than URI.
00:54:21.930 --> 00:54:23.300
And you look at a bunch of resources
00:54:23.300 --> 00:54:24.920
that you paid in the capacity market,
00:54:24.920 --> 00:54:25.753
and they weren't there.
00:54:25.753 --> 00:54:27.587
And you say, well,
what are we doing here?
00:54:27.587 --> 00:54:30.570
You know, why are we
giving these people money
00:54:30.570 --> 00:54:32.570
if they're not gonna keep the lights on?
00:54:33.510 --> 00:54:35.143
So go forward one slide.
00:54:36.330 --> 00:54:40.233
So one way to even out the revenues
00:54:42.360 --> 00:54:46.610
that generators receive and
to pay for reliability in a way
00:54:46.610 --> 00:54:50.100
that will sustain an
adequate resource base.
00:54:50.100 --> 00:54:52.720
But do so in a way that's consistent
00:54:52.720 --> 00:54:54.520
with your energy only market is
00:54:54.520 --> 00:54:57.740
to create a mandatory forward hedge.
00:54:57.740 --> 00:55:02.370
So this is a I call it a four
shortage energy hedge.
00:55:02.370 --> 00:55:05.680
So it has some of the characteristics
00:55:05.680 --> 00:55:08.490
that look kind of like a
capacity requirement,
00:55:08.490 --> 00:55:12.600
but it's really not, it's
entirely a financial product.
00:55:12.600 --> 00:55:17.190
And it's based on the amount
of an accredited amount
00:55:17.190 --> 00:55:20.527
of the hedge that a particular generator
00:55:20.527 --> 00:55:23.140
could be deemed to be adequate to sell.
00:55:23.140 --> 00:55:27.593
Because you do want this
to be a physical product.
00:55:28.730 --> 00:55:33.730
So what happens is, I have
a 50 megawatt gas turbine,
00:55:35.620 --> 00:55:37.700
it's accredited at 45 megawatts.
00:55:37.700 --> 00:55:41.923
So I buy 45 megawatts of
this hedge from the turbine now,
00:55:42.760 --> 00:55:47.760
when the shortage happens,
and that turbine is producing
00:55:48.710 --> 00:55:52.290
or selling reserves providing reserves,
00:55:52.290 --> 00:55:54.760
they don't get paid the ORDC adder,
00:55:54.760 --> 00:55:58.660
because they've sold that forward.
00:55:58.660 --> 00:56:00.430
So they're gonna get a ton of revenues
00:56:00.430 --> 00:56:03.490
by selling the hedge, but they
don't get the ORDC revenues.
00:56:03.490 --> 00:56:05.450
Now, if they're not available,
00:56:05.450 --> 00:56:07.793
they have to pay the ORDC price.
00:56:08.950 --> 00:56:12.760
So they are directly on
the hook for the extent
00:56:12.760 --> 00:56:15.180
to which they are contributing
00:56:16.476 --> 00:56:20.760
to the tight condition, or
the load shedding event.
00:56:20.760 --> 00:56:23.700
But remember, most of the ORDC adder
00:56:23.700 --> 00:56:25.890
is gonna be in periods
where you're not very close
00:56:25.890 --> 00:56:28.900
to shutting load, it's
just tight conditions,
00:56:28.900 --> 00:56:30.230
they're contributing to it.
00:56:30.230 --> 00:56:33.223
And so they're financially on the hook.
00:56:34.480 --> 00:56:38.190
If you do that, I guarantee you that
00:56:38.190 --> 00:56:40.380
that's gonna create
an enormous incentive
00:56:40.380 --> 00:56:43.460
to firm your fuel to
have dual fuel capability
00:56:43.460 --> 00:56:48.033
like no company is going to be
wanting to hold these hedges.
00:56:50.890 --> 00:56:54.290
And not have the ability to perform
00:56:54.290 --> 00:56:57.423
with a reasonably high probability.
00:56:58.620 --> 00:57:01.690
So creates a very strong
incentive for companies
00:57:04.190 --> 00:57:06.590
to do things to ensure
that they will be available
00:57:06.590 --> 00:57:09.350
and it directly compensates them
00:57:09.350 --> 00:57:14.230
with based on their actual availability.
00:57:14.230 --> 00:57:17.330
And what it does from
a revenue standpoint,
00:57:17.330 --> 00:57:20.420
is shown in the picture here.
00:57:20.420 --> 00:57:24.450
The one problem with relying
on extreme events and the ORDC.
00:57:24.450 --> 00:57:26.750
Is you get what you see on the left.
00:57:26.750 --> 00:57:29.483
And if you look in our
report at the net revenues,
00:57:30.400 --> 00:57:33.710
we compare the ERCOT to
other markets around the country.
00:57:33.710 --> 00:57:36.800
ERCOTs almost always
the lowest, and it's the lowest
00:57:36.800 --> 00:57:41.160
because when you don't
have a significant amount
00:57:41.160 --> 00:57:46.160
of shortages, basically
you're relying on energy
00:57:46.350 --> 00:57:49.670
and ancillary service revenues
and non shortage hours.
00:57:49.670 --> 00:57:52.030
And there's not a lot of
profit margin built into those
00:57:52.030 --> 00:57:55.200
because the outcome
market is fairly competitive.
00:57:55.200 --> 00:57:58.040
In other markets, there's a
big chunk of capacity revenues
00:57:58.040 --> 00:58:00.060
that look like the green on the right,
00:58:00.060 --> 00:58:03.350
like in the rest of the
Eastern interconnect.
00:58:03.350 --> 00:58:06.120
But in ERCOT, all those revenues
00:58:06.120 --> 00:58:08.220
are embedded in shortage pricing.
00:58:08.220 --> 00:58:11.310
So you get almost nothing in most years,
00:58:11.310 --> 00:58:14.373
and then you get the one
year where it's enormous.
00:58:15.566 --> 00:58:17.730
And it makes it hard
to invest around that
00:58:17.730 --> 00:58:19.940
because if you can't
calculate the probability
00:58:19.940 --> 00:58:23.520
of the year for happening,
then it's really hard
00:58:23.520 --> 00:58:26.590
to make the business
case and get financing.
00:58:26.590 --> 00:58:29.223
But if you have a mandatory hedge,
00:58:30.410 --> 00:58:33.620
it will spread out the
revenues associated
00:58:33.620 --> 00:58:35.350
with the mandatory
hedge will be based on
00:58:35.350 --> 00:58:39.230
the expected value
of your for happening.
00:58:39.230 --> 00:58:44.230
And so you'll get a much
more even incentive to invest.
00:58:44.400 --> 00:58:48.350
I think it'll go a long way
to meeting the obligation
00:58:48.350 --> 00:58:52.530
to maintain a an adequate
base of resources,
00:58:52.530 --> 00:58:55.630
but also give them a
much stronger incentive
00:58:55.630 --> 00:58:59.940
to perform as the
system starts to get tight.
00:58:59.940 --> 00:59:04.130
And that will be more
and more important.
00:59:04.130 --> 00:59:06.040
The more intermittency you have,
00:59:06.040 --> 00:59:08.750
the more you're gonna
bounce into the range
00:59:08.750 --> 00:59:12.130
where the market is tight,
00:59:12.130 --> 00:59:13.950
but not now the lights aren't going out,
00:59:13.950 --> 00:59:15.330
but the system is tight
00:59:15.330 --> 00:59:17.970
because the intermittence
are fluctuating,
00:59:17.970 --> 00:59:19.790
particularly if it's hard to forecast.
00:59:19.790 --> 00:59:22.010
So wind is a much
bigger problem than solar,
00:59:22.010 --> 00:59:24.510
because it's hard to forecast the wind,
00:59:24.510 --> 00:59:27.013
and they're highly
correlated with one another.
00:59:29.498 --> 00:59:30.998
And then the last proposal is,
00:59:32.010 --> 00:59:33.660
I'll just mention it briefly
00:59:33.660 --> 00:59:35.663
so that you all can ask questions.
00:59:37.820 --> 00:59:39.910
The one thing that's really
missing in a lot of markets,
00:59:39.910 --> 00:59:43.450
including ERCOT is a
longer term reserve product.
00:59:43.450 --> 00:59:46.037
We have 30 minute reserves
and 10 minute reserves
00:59:46.037 --> 00:59:48.410
are common in all
markets, but what we need
00:59:48.410 --> 00:59:50.340
with more and more
intermittency is something like
00:59:50.340 --> 00:59:53.170
a four hour reserve
product, a two to four hours,
00:59:53.170 --> 00:59:56.628
so when a RTS starts to realize
00:59:56.628 --> 00:59:59.150
that the wind is forecasted incorrectly
00:59:59.150 --> 01:00:01.430
or the load is higher than expected,
01:00:01.430 --> 01:00:03.170
instead of doing things out
01:00:03.170 --> 01:00:05.560
of market like wrecking resources,
01:00:05.560 --> 01:00:07.820
they deploy these longer term reserves
01:00:07.820 --> 01:00:09.523
and more units can sell it.
01:00:11.518 --> 01:00:16.518
So it syncs up the operations
of most RTS with the products.
01:00:16.960 --> 01:00:19.510
And importantly, it's integrated
01:00:19.510 --> 01:00:21.150
with the rest of the products,
01:00:21.150 --> 01:00:24.720
the one thing I think I would
stay away from are products
01:00:24.720 --> 01:00:29.240
that are outside the market operations,
01:00:29.240 --> 01:00:31.540
that's been tried and not worked,
01:00:31.540 --> 01:00:33.973
you know, buying reserves forward.
01:00:35.753 --> 01:00:38.040
And trying to hold them outside
01:00:38.040 --> 01:00:39.963
the market was done by New England,
01:00:40.928 --> 01:00:42.699
it's really been kind of a disaster,
01:00:42.699 --> 01:00:46.073
and they're trying to eliminate
that product at this point.
01:00:47.270 --> 01:00:49.876
This, on the other hand,
would would be integrated
01:00:49.876 --> 01:00:53.190
and co-optimized with the
rest of the reserve products,
01:00:53.190 --> 01:00:56.240
and a lot more resources could sell it,
01:00:56.240 --> 01:00:58.660
you know, any resource
that could get on within,
01:00:58.660 --> 01:01:00.820
say, two hours could sell it.
01:01:00.820 --> 01:01:04.580
And the importance of
allowing them to sell it is
01:01:04.580 --> 01:01:06.280
it puts all of those actions
01:01:06.280 --> 01:01:09.040
that ERCOT takes
committing units like that
01:01:10.070 --> 01:01:13.250
and puts them into the
market and prices them,
01:01:13.250 --> 01:01:16.153
which provides better
incentives for everybody.
01:01:17.680 --> 01:01:18.830
And it gives you a better signal
01:01:18.830 --> 01:01:20.150
that you're actually getting tight,
01:01:20.150 --> 01:01:23.900
when you start to run out
of two to four hour units,
01:01:23.900 --> 01:01:25.450
you should be recognizing
01:01:25.450 --> 01:01:28.350
that the system is
starting to get tight.
01:01:28.350 --> 01:01:30.370
So that ORDC could capture
01:01:30.370 --> 01:01:33.350
this product when and if we define it.
01:01:33.350 --> 01:01:34.183
All right.
01:01:34.183 --> 01:01:35.260
Good deal.
01:01:35.260 --> 01:01:37.021
Thank you very much.
01:01:37.021 --> 01:01:38.460
There's a lot to unpack there.
01:01:38.460 --> 01:01:42.270
I know, my colleagues
will have some questions.
01:01:42.270 --> 01:01:45.303
I'll start with just one question.
01:01:46.660 --> 01:01:50.510
Both in your comments
and a variety of others
01:01:50.510 --> 01:01:55.340
two themes have heard
our (indistinct) procurement,
01:01:55.340 --> 01:01:56.653
more than just the dam,
01:01:57.730 --> 01:02:02.730
allow us visibility on extend
revenues out more than a day,
01:02:02.940 --> 01:02:06.053
potentially, a month, a quarter a year,
01:02:07.240 --> 01:02:09.920
and essentially require full hedging.
01:02:09.920 --> 01:02:13.750
Especially your comments
and the previous speakers.
01:02:13.750 --> 01:02:16.460
But what I'm still have
an open question about
01:02:16.460 --> 01:02:21.460
is we're trying to solve
a lot of problems created
01:02:22.830 --> 01:02:27.830
by weather dependent resources
that suddenly stop generating
01:02:30.550 --> 01:02:34.610
and forecasting weather is hard.
01:02:34.610 --> 01:02:35.760
It's hard for everybody.
01:02:35.760 --> 01:02:37.950
Nobody's particularly good at it.
01:02:37.950 --> 01:02:41.010
Some people are better
than others, but it's difficult.
01:02:41.010 --> 01:02:44.140
And so even in your
example of the forward hedge
01:02:45.760 --> 01:02:47.570
with the entire name, right?
Yeah.
01:02:47.570 --> 01:02:49.830
And in a lot of other
comments we've had
01:02:49.830 --> 01:02:52.410
the reason we've got that
high cap that high vol is
01:02:52.410 --> 01:02:54.730
that's a huge incentive
for generators to perform,
01:02:54.730 --> 01:02:59.480
because if they don't perform,
most of them are hedged.
01:02:59.480 --> 01:03:00.740
And if there's a required hedge,
01:03:00.740 --> 01:03:03.830
they've got to go pay
this extraordinary cost
01:03:03.830 --> 01:03:06.150
to meet their obligation
to provide power.
01:03:06.150 --> 01:03:11.150
That's a tremendous
incentive to generate power.
01:03:12.130 --> 01:03:14.520
Where's the incentive for intermittence
01:03:14.520 --> 01:03:16.733
to generate power when we need it?
01:03:19.020 --> 01:03:21.300
Why don't they get the same penalty
01:03:21.300 --> 01:03:23.363
for suddenly stopping generating power?
01:03:25.000 --> 01:03:29.170
Another way to think about
it is if you have two windmills,
01:03:29.170 --> 01:03:33.280
for example, one
investor has a freelance,
01:03:33.280 --> 01:03:35.800
if it does have a bilateral,
01:03:35.800 --> 01:03:40.800
it's as generated not
even a fit curve contract,
01:03:41.280 --> 01:03:45.280
you have another windmill
that is associated with storage,
01:03:45.280 --> 01:03:47.900
battery, compressed
air, whatever collocated,
01:03:47.900 --> 01:03:50.223
associated off site, whatever it is,
01:03:51.750 --> 01:03:54.590
what in any of these proposals is going
01:03:54.590 --> 01:03:57.520
to incentivize an investor
01:03:57.520 --> 01:03:59.893
to firm up that intermittent resource?
01:04:02.600 --> 01:04:05.260
Whether avoiding a penalty
or providing a proactive,
01:04:05.260 --> 01:04:06.610
like avoiding the high cap penalty
01:04:06.610 --> 01:04:11.610
or providing a adder
or proactive incentive?
01:04:13.430 --> 01:04:15.913
Yeah, that's a great question.
01:04:18.170 --> 01:04:20.380
And I wanted to distinguish one thing
01:04:20.380 --> 01:04:22.871
about the forward procurement in some
01:04:22.871 --> 01:04:24.090
of the other proposals from this one,
01:04:24.090 --> 01:04:26.790
because I think it goes
directly to your question is
01:04:29.200 --> 01:04:31.150
if you look at the economics associated
01:04:31.150 --> 01:04:34.853
with that forward hedge,
although you're buying it forward,
01:04:35.990 --> 01:04:38.950
all of the economics
and incentives associated
01:04:38.950 --> 01:04:42.930
with it are linked to what's
happening in real time.
01:04:42.930 --> 01:04:47.930
So it links back to our
real reliability circumstance,
01:04:49.220 --> 01:04:50.910
which is critically important in my mind
01:04:50.910 --> 01:04:55.910
because it is the one thing that ensures
01:04:56.245 --> 01:04:59.267
that the resources that help
us keep the lights on get paid
01:04:59.267 --> 01:05:02.320
and the ones that contribute
to the lights going out,
01:05:02.320 --> 01:05:04.483
don't get paid or get charged,
01:05:06.420 --> 01:05:08.170
which is different than
some of the proposals
01:05:08.170 --> 01:05:11.330
that procure things forward
and generate revenue streams
01:05:11.330 --> 01:05:13.400
that are not connected in any real way
01:05:13.400 --> 01:05:18.283
to the real time outcomes,
so, to the wind example.
01:05:21.610 --> 01:05:24.910
It's one of the reasons
why I can't get away
01:05:24.910 --> 01:05:28.490
from the primary incentive
being paying people
01:05:28.490 --> 01:05:29.477
for the value of the reserves
01:05:29.477 --> 01:05:31.760
and the energy in the real time,
01:05:31.760 --> 01:05:36.760
because if I'm right, that
fast forward five years,
01:05:37.630 --> 01:05:39.610
nine 90% of our shortages are gonna be
01:05:39.610 --> 01:05:42.483
when intermittence are
producing at low levels,
01:05:44.700 --> 01:05:46.423
and I'm a wind resource.
01:05:47.886 --> 01:05:51.980
And I can see that my net
revenues aren't very good,
01:05:51.980 --> 01:05:54.420
because every time the
price is high in ERCOT,
01:05:54.420 --> 01:05:57.410
I'm not running, or
I'm producing very low,
01:05:57.410 --> 01:05:59.410
because I'm contributing to the problem.
01:06:01.430 --> 01:06:04.400
The economics of me
putting a battery on my site,
01:06:04.400 --> 01:06:09.100
so that when all my buddies
are producing nothing,
01:06:09.100 --> 01:06:10.363
I'm producing a lot.
01:06:11.620 --> 01:06:13.500
Like my net revenues versus them
01:06:13.500 --> 01:06:14.770
are gonna be night and day.
01:06:14.770 --> 01:06:16.623
In fact, we've done that calculation.
01:06:17.630 --> 01:06:18.780
But it hasn't happened yet.
01:06:18.780 --> 01:06:21.560
We've had those
incentives, we've had 9000,
01:06:21.560 --> 01:06:22.900
and there are no batteries
01:06:22.900 --> 01:06:26.020
next to wind mills of
any meaningful scale.
01:06:26.020 --> 01:06:29.090
Sure, but that
goes back to the fact
01:06:32.230 --> 01:06:35.590
that all we've really
had is a circumstance
01:06:35.590 --> 01:06:38.100
that would have been almost impossible
01:06:38.100 --> 01:06:40.080
for someone to attach a probability to
01:06:40.080 --> 01:06:42.100
and spend a lot of money on the basis of
01:06:43.290 --> 01:06:46.503
with the change in the ORDC
that we're discussing here.
01:06:48.907 --> 01:06:51.780
The economics, given that
you're running into the bottom of
01:06:51.780 --> 01:06:54.530
that curve thousands of times a year,
01:06:54.530 --> 01:06:58.460
you're dramatically increasing
the value of having a battery
01:07:01.009 --> 01:07:06.009
that you know, if I can
make $200 $1,000 a year.
01:07:11.020 --> 01:07:15.010
Shifting ORD curves firm
up our entire intermittent fleet.
01:07:15.010 --> 01:07:18.384
It will form up the
entire intermittent fleet,
01:07:18.384 --> 01:07:19.713
I would doubt that's the case.
01:07:19.713 --> 01:07:22.790
Because right now,
it's pretty close to zero.
01:07:22.790 --> 01:07:25.090
And if we don't from
a fire in intermittently,
01:07:26.286 --> 01:07:29.500
we're gonna be chasing the dark curve
01:07:29.500 --> 01:07:31.170
for the next 100 years, whether
01:07:31.170 --> 01:07:34.920
it be eternally spiraling towards.
01:07:34.920 --> 01:07:35.960
The other thing
I would say about
01:07:35.960 --> 01:07:37.543
that the other proposal.
01:07:38.830 --> 01:07:41.850
Remember how I said,
for the forward hedge,
01:07:41.850 --> 01:07:43.240
it's gonna produce a lot of revenues
01:07:43.240 --> 01:07:45.100
that are very predictable over time.
01:07:45.100 --> 01:07:48.890
And that I said that,
that has to be a physical,
01:07:48.890 --> 01:07:50.650
you have to have the ability to perform,
01:07:50.650 --> 01:07:52.870
you don't want that to be
a purely financial product
01:07:52.870 --> 01:07:55.120
that J.P. Morgan can come rolling in
01:07:55.120 --> 01:07:57.100
and sell it to you with no power plant.
01:07:57.100 --> 01:08:01.850
For example, as soon
as an intermittent resource
01:08:01.850 --> 01:08:04.020
puts a battery on
their site, the amount of
01:08:04.020 --> 01:08:06.773
that hedge they can
sell is gonna go from,
01:08:07.670 --> 01:08:12.670
let's say, 7%, five to 7%
to some much higher level,
01:08:13.180 --> 01:08:15.520
because the amount of firmness
01:08:16.850 --> 01:08:20.695
that you can accredit them
goes way up, so that change.
01:08:20.695 --> 01:08:24.860
And then they're also under
the full hedging construct.
01:08:24.860 --> 01:08:28.910
They're also liable
to that penalty as well.
01:08:28.910 --> 01:08:30.992
Which you absolutely want.
01:08:30.992 --> 01:08:32.360
I agree.
01:08:32.360 --> 01:08:34.470
I don't think a lot of
window operators want
01:08:34.470 --> 01:08:36.630
to be associated with that penalty
01:08:36.630 --> 01:08:39.900
when they've got essentially
a free ride right now.
01:08:39.900 --> 01:08:41.224
Yeah.
I was gonna say,
01:08:41.224 --> 01:08:42.057
well, I think one
01:08:42.057 --> 01:08:44.150
of the reasons why they're
not putting batteries on,
01:08:44.150 --> 01:08:46.950
love your opinion is a lot of these
01:08:46.950 --> 01:08:49.280
in West Texas are
bought behind congestion.
01:08:49.280 --> 01:08:51.060
So they're not even
getting paid right now
01:08:51.060 --> 01:08:53.420
because of their getting curtailed.
01:08:53.420 --> 01:08:56.150
So why would they go add
more capital costs to their plant,
01:08:56.150 --> 01:08:58.207
if there we don't have any expectation?
01:08:58.207 --> 01:08:59.250
(muffled speaking)
if they were worried
01:08:59.250 --> 01:09:00.610
about generating revenues,
01:09:00.610 --> 01:09:03.070
they wouldn't have
built behind congestion.
01:09:03.070 --> 01:09:05.060
Well, I think what
happens is they didn't
01:09:05.060 --> 01:09:07.970
they did the smart movers built first,
01:09:07.970 --> 01:09:10.680
you know, the farthest away
to the best wind resource.
01:09:10.680 --> 01:09:13.190
And then the way our
interconnection process works,
01:09:13.190 --> 01:09:16.860
everybody built, you know,
in front of them towards load.
01:09:16.860 --> 01:09:20.690
So, you know, the original
wind generator went
01:09:20.690 --> 01:09:22.900
to the best capacity factor wind,
01:09:22.900 --> 01:09:25.610
which was the furthest away,
and then everybody said,
01:09:25.610 --> 01:09:26.443
Well, what the heck?
01:09:26.443 --> 01:09:27.276
I'm just gonna build along
01:09:27.276 --> 01:09:29.450
that same transmission line closer,
01:09:29.450 --> 01:09:31.010
and the furthest ended up being the one
01:09:31.010 --> 01:09:32.520
that gets curtailed first.
01:09:32.520 --> 01:09:36.630
So it's not a matter
of when you invested.
01:09:36.630 --> 01:09:38.300
Well, it is a matter
of when you invest it,
01:09:38.300 --> 01:09:41.950
but not the value or
the volume of your wind.
01:09:41.950 --> 01:09:42.783
Sure.
01:09:42.783 --> 01:09:43.616
So pay that forward.
01:09:43.616 --> 01:09:47.510
And if the winds not
blowing and prices are high,
01:09:47.510 --> 01:09:50.580
even under a current
construct, even a battery on
01:09:50.580 --> 01:09:55.080
that furthest windmill should
be generating excess economics
01:09:55.080 --> 01:09:57.480
and others wouldn't, we have no battery.
01:09:59.260 --> 01:10:00.999
I think on a compared
to basis between
01:10:00.999 --> 01:10:03.760
one mill and one without.
01:10:03.760 --> 01:10:06.860
So it might produce, if you're assuming
01:10:06.860 --> 01:10:08.510
that all the congestion has gone?
01:10:09.420 --> 01:10:14.420
No, I mean, I think if
we can't get an investor
01:10:14.690 --> 01:10:16.410
who's firmed up in intermittent resorts
01:10:16.410 --> 01:10:20.423
to make money first versus other folks,
01:10:22.057 --> 01:10:24.023
then we're not doing our job.
01:10:24.023 --> 01:10:26.070
But the point of the battery was even
01:10:26.070 --> 01:10:30.160
if there's transmission,
even there's congestion
01:10:30.160 --> 01:10:33.610
in West Texas, if the winds
not blowing and prices are up,
01:10:33.610 --> 01:10:36.900
that fully charged battery
would have a free pass down
01:10:36.900 --> 01:10:39.760
that transmission line
to the revenues, right?
01:10:39.760 --> 01:10:40.973
Potentially, I think.
01:10:42.050 --> 01:10:44.000
As long as solar and
all the other resources
01:10:44.000 --> 01:10:46.090
don't come in in front of them.
01:10:46.090 --> 01:10:50.293
So I will say with the data
we have, we could estimate
01:10:52.290 --> 01:10:57.290
and I'm 90 some percent
confident that we could show you
01:10:57.600 --> 01:11:01.253
a battery is extremely
economic under these proposals.
01:11:02.600 --> 01:11:04.810
Because you know, we can calculate
01:11:04.810 --> 01:11:07.210
how much additional net revenue
01:11:07.210 --> 01:11:11.120
a battery in West Texas
would make if you were
01:11:11.120 --> 01:11:13.053
to just the ORDC in this manner.
01:11:14.192 --> 01:11:16.060
Good to
know, it's that simple.
01:11:16.060 --> 01:11:17.690
It's not simple.
01:11:17.690 --> 01:11:19.563
We have access to a lot of data.
01:11:21.529 --> 01:11:24.950
Okay, so kind of back
to a broader discussion
01:11:24.950 --> 01:11:27.503
on this forward hedging
proposal that you put forth.
01:11:28.390 --> 01:11:31.400
Can you just kind of
compare and contrast it
01:11:31.400 --> 01:11:33.010
with the LSE obligation?
01:11:33.010 --> 01:11:35.540
I know you mentioned
that it's not purely financial,
01:11:35.540 --> 01:11:37.723
but it involves some physical, right?
01:11:38.870 --> 01:11:41.210
And it sounds like the LSE obligation
01:11:41.210 --> 01:11:43.790
is more of a physical obligation.
01:11:43.790 --> 01:11:46.280
Can you compare and contrast
01:11:46.280 --> 01:11:48.373
your forward hedging proposal with that?
01:11:49.260 --> 01:11:53.930
So we've estimated
in other markets,
01:11:53.930 --> 01:11:56.480
A one in 10 reliability standard implies
01:11:56.480 --> 01:11:58.750
in terms of the value of loss load.
01:11:58.750 --> 01:12:00.640
And it's somewhere in the neighborhood
01:12:00.640 --> 01:12:04.120
of $200,000 per megawatt hour.
01:12:04.120 --> 01:12:09.120
So the if you were to ask the question,
01:12:10.079 --> 01:12:15.079
why, in New York, for example,
if I look at a peaking unit,
01:12:16.390 --> 01:12:18.260
why do they make more
than half their revenues
01:12:18.260 --> 01:12:20.700
in the capacity market and
the rest in the energy market
01:12:20.700 --> 01:12:22.650
because they have
shortage pricing and so forth,
01:12:22.650 --> 01:12:24.370
or same thing in New England?
01:12:24.370 --> 01:12:28.930
It's because they have
a capacity requirement
01:12:28.930 --> 01:12:32.960
that is extremely
expensive to try to satisfy.
01:12:32.960 --> 01:12:36.190
And so they maintain
a base of resources,
01:12:36.190 --> 01:12:40.303
that makes shortages, less frequent.
01:12:41.890 --> 01:12:46.480
The thing with the forward
capacity hedge is it links
01:12:46.480 --> 01:12:49.530
to whatever value of
loss load you're setting
01:12:49.530 --> 01:12:53.280
for your energy and
ancillary service markets.
01:12:53.280 --> 01:12:56.730
So you get much better
performance incentives out of it.
01:12:56.730 --> 01:13:01.730
But also, you won't generally
maintain as high a level
01:13:05.030 --> 01:13:08.500
of high a base of iron in the ground,
01:13:08.500 --> 01:13:10.580
or steel in the ground as you would
01:13:11.580 --> 01:13:13.743
in a traditional capacity market.
01:13:15.270 --> 01:13:18.350
So I would imagine, it's hard
to say where you'd end up
01:13:18.350 --> 01:13:20.993
in the E3 proposal.
01:13:21.840 --> 01:13:24.320
Because we don't want know what
01:13:24.320 --> 01:13:25.850
that requirement would look like.
01:13:25.850 --> 01:13:28.800
But I would imagine it would lead you
01:13:28.800 --> 01:13:31.080
to more installed capacity
01:13:31.080 --> 01:13:33.423
and weaker performance incentives.
01:13:35.010 --> 01:13:39.240
So would your forward
hedging proposal be contingent
01:13:39.240 --> 01:13:42.980
on a successful real time
quantization implementation?
01:13:42.980 --> 01:13:44.550
Or could it stand on its own two feet
01:13:44.550 --> 01:13:45.750
and still provide value?
01:13:46.950 --> 01:13:49.790
It can still operate
under the current ORDC,
01:13:49.790 --> 01:13:54.220
it's just that the problem
with the current ORDC
01:13:54.220 --> 01:13:57.780
is we're not gonna price
a lot of the circumstances
01:13:57.780 --> 01:14:00.520
where we actually are tight,
01:14:00.520 --> 01:14:05.270
particularly the ramping
hours where we're tight,
01:14:05.270 --> 01:14:09.100
but because we're not
jointly optimizing our reserves
01:14:09.100 --> 01:14:12.363
and energy, we just
don't price that today.
01:14:14.420 --> 01:14:18.470
So you mentioned
better performance?
01:14:18.470 --> 01:14:20.440
Yes.
That's the key.
01:14:20.440 --> 01:14:23.770
Yes.
And I know nobody
01:14:23.770 --> 01:14:26.163
can guarantee you still on the ground,
01:14:26.163 --> 01:14:28.130
I mean, how does it impact dispatchable
01:14:28.130 --> 01:14:29.577
generation in this though?
01:14:31.270 --> 01:14:35.680
It will definitely increase
dispatchable investment
01:14:35.680 --> 01:14:40.680
because the predictable
increase in net revenue,
01:14:40.820 --> 01:14:45.760
like any investor
who's doing an analysis
01:14:45.760 --> 01:14:50.140
of the economics of an
investment in a peeker resource
01:14:51.533 --> 01:14:55.507
with an ORDC that is going to trigger
01:14:56.442 --> 01:15:01.442
and generate more
than double the revenues
01:15:01.870 --> 01:15:05.080
that the current ORDC
does during tight conditions
01:15:05.080 --> 01:15:09.540
is gonna find that the
incentive to invest in
01:15:10.685 --> 01:15:14.100
a peaking unit is significantly
higher than it is today.
01:15:14.100 --> 01:15:18.770
Now, again, it's important
that the peaking units
01:15:18.770 --> 01:15:21.780
get paid the ORDC adder
and many of them don't.
01:15:21.780 --> 01:15:24.510
So that's an important caveat.
01:15:24.510 --> 01:15:27.500
So if you're talking about
investment in new gas resources
01:15:27.500 --> 01:15:29.400
that don't have access to the ORDC,
01:15:29.400 --> 01:15:32.063
when they're offline, that's a problem.
01:15:33.020 --> 01:15:35.400
And we should fix that problem.
01:15:35.400 --> 01:15:37.180
But is it an offline
peaker problem
01:15:37.180 --> 01:15:40.380
or more of we're looking
to add more hours of ORDC
01:15:40.380 --> 01:15:42.300
and we're gonna have less peak times,
01:15:42.300 --> 01:15:43.870
And so peaker units
are not just gonna be
01:15:43.870 --> 01:15:46.173
on the system, whether they're?
01:15:47.550 --> 01:15:52.550
No, I mean, the
thing is the I don't know
01:15:53.920 --> 01:15:57.710
if you can go back to one of
the charts that shows the ORDC.
01:15:57.710 --> 01:16:00.120
But either one, that quantity
01:16:00.120 --> 01:16:02.990
of real time reserves
down at the bottom.
01:16:02.990 --> 01:16:05.470
We don't calculate that
exactly correctly today.
01:16:05.470 --> 01:16:07.470
But let's imagine we calculated that
01:16:07.470 --> 01:16:11.940
so that it reflected,
our online reserves,
01:16:11.940 --> 01:16:15.720
our offline 10 minute reserves
and our 30 minute reserves,
01:16:15.720 --> 01:16:17.310
so that every megawatt you're seeing on
01:16:17.310 --> 01:16:20.323
that axis as a megawatt of
peaking resource can sell you,
01:16:21.450 --> 01:16:25.110
as you go short, it's gonna be the case
01:16:25.110 --> 01:16:30.030
that any available peaker
is gonna be selling you one
01:16:30.030 --> 01:16:31.550
of those classes and reserves
01:16:31.550 --> 01:16:33.530
and should be getting paid the ORDC
01:16:33.530 --> 01:16:37.683
if we made some changes
to how the ORDC settles,
01:16:37.683 --> 01:16:42.683
And so that's why I think, yeah,
01:16:44.940 --> 01:16:46.530
we're not gonna have a problem under
01:16:46.530 --> 01:16:47.730
this sort of reform
01:16:47.730 --> 01:16:50.564
with under compensating
peaking resources.
01:16:50.564 --> 01:16:51.970
Okay.
01:16:51.970 --> 01:16:55.430
Do other markets have a
forward hedging mechanism
01:16:55.430 --> 01:16:56.580
that we can compare to?
01:16:57.836 --> 01:17:01.820
They do they, I mean, one thing
01:17:01.820 --> 01:17:03.450
about the electric
industry is everyone wants
01:17:03.450 --> 01:17:04.800
to use their own terminology,
01:17:04.800 --> 01:17:06.790
and it sort of muddies the water,
01:17:06.790 --> 01:17:10.680
but PJM and New England
has something they call
01:17:10.680 --> 01:17:13.490
that pay for performance regime.
01:17:13.490 --> 01:17:16.840
And if you look hard
at what that regime is
01:17:16.840 --> 01:17:21.490
it basically when they
buy capacity embedded
01:17:21.490 --> 01:17:26.490
in the capacity product
is a forward hedge
01:17:27.660 --> 01:17:31.590
of a component of
their shortage pricing.
01:17:31.590 --> 01:17:36.590
So right now, for
instance, in New England,
01:17:36.690 --> 01:17:40.930
I think we're now at $5,700.
01:17:40.930 --> 01:17:42.830
If they have any sort of shortage
01:17:42.830 --> 01:17:45.320
of 30 minute or 10 minute reserves,
01:17:45.320 --> 01:17:46.983
and you're a capacity seller,
01:17:49.010 --> 01:17:53.697
and you don't perform,
then you're charged $5,700.
01:17:55.020 --> 01:17:56.930
And if you're not a capacity seller,
01:17:56.930 --> 01:17:59.040
and you do produce megawatts
01:17:59.040 --> 01:18:02.230
or self reserves, you get paid $5,700.
01:18:02.230 --> 01:18:06.360
So that is a forward
shortage pricing hedge
01:18:06.360 --> 01:18:08.500
it's just cloaked in terminology
01:18:09.806 --> 01:18:12.300
that might not make
it clear that it's similar
01:18:12.300 --> 01:18:14.632
to what we're talking about here.
01:18:14.632 --> 01:18:17.363
Yeah, I wanna get one in.
01:18:18.300 --> 01:18:22.820
So, Dr. Patton, the
backstop reliability service,
01:18:22.820 --> 01:18:25.600
which was proposed by the
industrial energy consumers
01:18:25.600 --> 01:18:29.330
before you spoke, let
me read you this slide
01:18:29.330 --> 01:18:30.750
consider allocation similar
01:18:30.750 --> 01:18:32.550
to the reliability unit commitment,
01:18:32.550 --> 01:18:34.560
which allocates cost to capacity short,
01:18:34.560 --> 01:18:36.590
qualified scheduling entities,
01:18:36.590 --> 01:18:39.580
this would increase long
term hedging incentives.
01:18:39.580 --> 01:18:41.660
When net peak load is anticipated,
01:18:41.660 --> 01:18:43.327
the price of the service should increase
01:18:43.327 --> 01:18:45.220
and more costs should be allocated
01:18:45.220 --> 01:18:48.100
to capacity short
entities in the market.
01:18:48.100 --> 01:18:50.210
Can you please explain
the difference between
01:18:50.210 --> 01:18:53.553
your forward shortage energy
hedge and that proposal?
01:18:55.160 --> 01:18:56.640
Well, I have to say
I'm not an expert on
01:18:56.640 --> 01:18:57.660
what they were proposing.
01:18:57.660 --> 01:19:02.570
But to the extent that
there's a separate product.
01:19:02.570 --> 01:19:04.340
I mean, that would be the key difference
01:19:04.340 --> 01:19:09.340
that the forward hedge
that we're talking about
01:19:09.510 --> 01:19:14.250
is links back to energy
and ancillary services
01:19:15.170 --> 01:19:19.550
that ERCOT is utilizing
to keep the lights on
01:19:19.550 --> 01:19:22.610
and that we are pricing
in the real time market.
01:19:22.610 --> 01:19:25.500
And so as we get short of the megawatts
01:19:26.440 --> 01:19:29.600
that are providing our
reliability, the price would go up,
01:19:29.600 --> 01:19:32.780
and the hedge would settle against that.
01:19:32.780 --> 01:19:37.780
I think any proposal that would
create some separate product
01:19:37.850 --> 01:19:40.860
that is not part of our
cots operating protocol,
01:19:40.860 --> 01:19:44.493
I think is you know, doesn't
have the same advantages.
01:19:45.690 --> 01:19:48.010
Okay, but conceptually,
01:19:48.010 --> 01:19:51.493
they are in the same
universe, sounds like?
01:19:52.730 --> 01:19:55.528
They maybe, why
don't I get back to you?
01:19:55.528 --> 01:19:56.570
Okay, that would be helpful.
01:19:56.570 --> 01:19:57.920
I'll take a look
at that product
01:19:57.920 --> 01:19:59.450
and try to give you a better idea
01:19:59.450 --> 01:20:01.080
of what the difference are.
01:20:01.080 --> 01:20:03.720
You did prefer it
uncertainty product, which.
01:20:03.720 --> 01:20:05.960
Yes.
Might be why
01:20:05.960 --> 01:20:07.332
you preferred it.
01:20:07.332 --> 01:20:10.810
That's simply a
longer term reserve
01:20:10.810 --> 01:20:12.683
product longer than 30 minutes.
01:20:13.680 --> 01:20:18.340
So most of the time, just
kind of an idea why 10 minute
01:20:18.340 --> 01:20:21.299
and 30 minute reserves
emerged in the industry,
01:20:21.299 --> 01:20:26.299
is generally those
reserve products exists
01:20:26.771 --> 01:20:29.150
to satisfy narcs
reliability requirements
01:20:29.150 --> 01:20:32.960
that when a big unit
ships off, within 10 minutes,
01:20:32.960 --> 01:20:34.810
you need to have supply
and demand in balance,
01:20:34.810 --> 01:20:37.040
and then within 30 minutes, you need
01:20:37.040 --> 01:20:39.040
to recover your 10 Minute reserve.
01:20:39.040 --> 01:20:39.950
So you need to have something
01:20:39.950 --> 01:20:42.123
you can turn on within 30 minutes.
01:20:43.100 --> 01:20:47.620
Now, if you listen to that explanation,
01:20:47.620 --> 01:20:52.620
I didn't say anything about
missing the wind forecast,
01:20:52.680 --> 01:20:55.040
for example, or
missing the load forecast
01:20:56.340 --> 01:20:59.710
we're headed into as a situation where
01:20:59.710 --> 01:21:01.330
having a unit trip off our
01:21:01.330 --> 01:21:03.490
is not our big reliability problem.
01:21:03.490 --> 01:21:07.020
It's Miss forecasting the wind
01:21:07.020 --> 01:21:08.933
is much bigger problem and myself.
01:21:10.560 --> 01:21:15.263
And responding to that concern,
there a much larger number
01:21:17.570 --> 01:21:19.730
of resources that
that take longer to start
01:21:19.730 --> 01:21:21.820
that can help you with that problem
01:21:21.820 --> 01:21:23.120
than the immediate problem
01:21:24.514 --> 01:21:28.020
of replacing a unit that
just chipped off line.
01:21:28.020 --> 01:21:30.250
Would your product needed
ERCOT system change
01:21:30.250 --> 01:21:32.000
that is impacted by the MS upgrade?
01:21:32.890 --> 01:21:33.723
Yes.
01:21:33.723 --> 01:21:35.340
Yeah, the good news about the ORDC
01:21:35.340 --> 01:21:39.670
is this sort of change can
be done very, very quickly.
01:21:39.670 --> 01:21:42.980
And it's the most effective
thing that you can do,
01:21:42.980 --> 01:21:44.840
then certainly product is a new product
01:21:44.840 --> 01:21:48.270
that I imagined would be in Kaanans,
01:21:48.270 --> 01:21:50.113
you know, to your timeframe.
01:21:51.580 --> 01:21:54.222
All right, excellent,
Jimmy, any more questions?
01:21:54.222 --> 01:21:55.055
No.
01:21:55.950 --> 01:21:56.930
All right.
01:21:56.930 --> 01:21:59.750
Thank you, Dr. Patton,
will obviously love for you
01:21:59.750 --> 01:22:00.970
to stick around as long as you can,
01:22:00.970 --> 01:22:02.320
but don't miss your flight.
01:22:04.090 --> 01:22:06.610
I'll be around for
another hour and a half.
01:22:06.610 --> 01:22:07.443
Okay.
01:22:07.443 --> 01:22:09.823
So you can let me know
if you have other questions.
01:22:11.537 --> 01:22:13.870
Brave man to
admit that information,
01:22:13.870 --> 01:22:15.233
will have you back up here.
01:22:17.430 --> 01:22:21.750
At this point, we're
gonna shift gears a little bit
01:22:21.750 --> 01:22:26.000
and ask Commissioner McAdams to lay out
01:22:26.000 --> 01:22:28.733
his memo on interconnect priority.
01:22:31.230 --> 01:22:32.680
We'll lay that out.
01:22:32.680 --> 01:22:35.140
And I know we'll wanna
have some discussion
01:22:35.140 --> 01:22:38.453
on the Commission and hopefully by 2:30.
01:22:40.000 --> 01:22:43.743
We'll start with the rattle conclusions.
01:22:44.870 --> 01:22:46.190
20, 30 minutes on their thoughts
01:22:46.190 --> 01:22:47.430
on the presentations for the day.
01:22:47.430 --> 01:22:51.380
And from three to four, we'll wrap up
01:22:51.380 --> 01:22:54.124
with open conversation
for the Commission,
01:22:54.124 --> 01:22:55.213
does it work for everybody?
01:22:55.213 --> 01:22:56.923
Good for me.
All right.
01:22:58.750 --> 01:23:01.670
Commissioner,
as I tried to be brief
01:23:01.670 --> 01:23:05.927
and concise in the memo,
the overarching policy premise
01:23:08.550 --> 01:23:13.550
is speed expeditious employment policy,
01:23:15.830 --> 01:23:18.760
to where we can start
sending meaningful signals
01:23:18.760 --> 01:23:21.363
to market participants
as soon as possible.
01:23:22.560 --> 01:23:24.830
And I'm gonna welcome
thoughts on this memo.
01:23:24.830 --> 01:23:28.000
But as you all know,
we have a great deal
01:23:28.000 --> 01:23:31.380
of we have natural gas in queue
01:23:31.380 --> 01:23:32.650
and transmission interconnection
01:23:32.650 --> 01:23:34.550
but we also have a
great deal of batteries.
01:23:34.550 --> 01:23:35.640
And what we're trying to do,
01:23:35.640 --> 01:23:38.060
I believe, in our
conversations, and even today
01:23:38.060 --> 01:23:40.010
with the greater market design efforts,
01:23:41.100 --> 01:23:44.650
is send a layered strategy of signals
01:23:44.650 --> 01:23:46.340
to market participants that we want
01:23:46.340 --> 01:23:50.040
certain performance characteristics soon
01:23:50.040 --> 01:23:52.640
to arrest any type of
dark curve phenomenon
01:23:52.640 --> 01:23:57.060
to help meet the threat of a URI event.
01:23:57.060 --> 01:23:59.030
Bottom line is we need you to be able,
01:23:59.030 --> 01:24:00.970
we would like you to be
able to be dispatchable
01:24:00.970 --> 01:24:03.320
in the future for command
and control of ERCOT.
01:24:04.540 --> 01:24:07.657
The transmission interconnection
process is in my view,
01:24:07.657 --> 01:24:09.930
one of those pieces of low hanging fruit
01:24:09.930 --> 01:24:12.220
that could be looked at
sooner rather than later.
01:24:12.220 --> 01:24:16.370
And I'm talking about
working with TDSPs,
01:24:16.370 --> 01:24:20.770
starting next year to prioritize
those dispatchable projects
01:24:20.770 --> 01:24:22.680
that could be and again right now,
01:24:22.680 --> 01:24:26.650
it's just first come first
serve you're in line due
01:24:26.650 --> 01:24:28.960
to the date of your application.
01:24:28.960 --> 01:24:31.410
And again, it's an 18
month process typically
01:24:31.410 --> 01:24:33.669
to do the studies between ERCOT
01:24:33.669 --> 01:24:36.300
and the transmission service provider,
01:24:36.300 --> 01:24:39.840
the on course, the APS,
but even the knollys.
01:24:42.340 --> 01:24:45.150
What this would do is depending
01:24:45.150 --> 01:24:46.560
on those performance characteristics,
01:24:46.560 --> 01:24:49.490
and I actually articulated
what in my view,
01:24:49.490 --> 01:24:52.470
some of the non negotiables
are I actually shot the moon
01:24:52.470 --> 01:24:55.020
and for our dispatch ability.
01:24:55.020 --> 01:24:56.510
Again, it's not the 24 hours,
01:24:56.510 --> 01:24:59.140
which we can talk
about with Randall later
01:24:59.140 --> 01:25:02.610
but it's takes a step
in qualifying batteries,
01:25:02.610 --> 01:25:06.820
you know, pairing of batteries
with intermittent resources
01:25:06.820 --> 01:25:09.630
to qualify, and getting
those front loaded
01:25:09.630 --> 01:25:12.930
in those interconnection processes.
01:25:12.930 --> 01:25:14.730
It's my understanding that a great deal
01:25:14.730 --> 01:25:18.050
of the financing that happens
in the renewable space
01:25:18.050 --> 01:25:20.770
or any generator, but
especially the renewable space,
01:25:20.770 --> 01:25:25.770
and especially solar, is that
those financing arrangements
01:25:26.340 --> 01:25:29.250
aren't really like
solidified until they get
01:25:29.250 --> 01:25:33.307
a firm confirmation of an
interconnection process
01:25:34.680 --> 01:25:36.710
from the interconnection process.
01:25:36.710 --> 01:25:40.741
And so right now, there's not really an
01:25:40.741 --> 01:25:44.280
a clear cut black and white incentive
01:25:44.280 --> 01:25:46.970
for them to deploy batteries as is,
01:25:46.970 --> 01:25:50.250
because the price of power
is still lucrative for them,
01:25:50.250 --> 01:25:53.430
the federal policy is
still lucrative for them.
01:25:53.430 --> 01:25:55.630
So this would be just one more signal
01:25:55.630 --> 01:25:58.150
that we could send to those developers
01:25:58.150 --> 01:26:01.480
and then to the financiers
who are funding these projects,
01:26:01.480 --> 01:26:03.430
that this is what the state of Texas
01:26:03.430 --> 01:26:06.610
ultimately desires
more in the near future,
01:26:06.610 --> 01:26:08.460
and you might qualify.
01:26:08.460 --> 01:26:12.640
So with that, we've got a lot
of experience on this Dyess,
01:26:12.640 --> 01:26:14.290
so I'd love to hear any thoughts.
01:26:16.460 --> 01:26:17.293
Sure.
01:26:18.140 --> 01:26:21.350
Thank you, Commissioner
McAdams for looking into this issue,
01:26:21.350 --> 01:26:26.350
as we look to it, you know,
ensure more greater liability,
01:26:26.730 --> 01:26:29.630
more dispatchable generation
investment in the state,
01:26:29.630 --> 01:26:32.273
we must leave no stone unturned.
01:26:33.190 --> 01:26:35.943
I generally agree with
the spirit of your memo.
01:26:37.530 --> 01:26:40.580
I guess I have a question,
and then maybe a statement.
01:26:40.580 --> 01:26:43.120
So I'm trying to
understand the mechanics
01:26:43.120 --> 01:26:44.260
of how this will work.
01:26:44.260 --> 01:26:48.950
Okay, by moving
generation up batteries up
01:26:48.950 --> 01:26:51.060
and then having renewable generation
01:26:52.730 --> 01:26:54.840
after them in the interconnection queue.
01:26:54.840 --> 01:26:59.230
So would this mean that if you're ready
01:26:59.230 --> 01:27:03.453
to go as a solar generator,
or wind generator,
01:27:06.400 --> 01:27:11.080
do you have to wait until the
gas generation plant goes?
01:27:12.600 --> 01:27:14.980
And what if they're not ready?
01:27:14.980 --> 01:27:19.450
Right, so that's why I
put a time limit on this
01:27:19.450 --> 01:27:21.320
to where that process resets.
01:27:21.320 --> 01:27:23.950
If they get all of their ready to go,
01:27:23.950 --> 01:27:28.000
key condition dispatchable
projects studied
01:27:28.000 --> 01:27:33.000
and approved and on course,
for execution of the project
01:27:33.080 --> 01:27:35.290
and development of the project,
01:27:35.290 --> 01:27:39.300
then those non dispatchable
paired intermittence
01:27:39.300 --> 01:27:41.310
would then be right there in the queue.
01:27:41.310 --> 01:27:43.500
I think the problem
is there's a backlog,
01:27:43.500 --> 01:27:45.710
there's so many projects in queue within
01:27:45.710 --> 01:27:48.500
so many transmission service providers,
01:27:48.500 --> 01:27:52.560
either, again, non opt in
entities or competitive area,
01:27:52.560 --> 01:27:57.453
territory, service providers,
that a backlog forms,
01:27:58.540 --> 01:28:00.850
and again, they're
inundated with requests,
01:28:00.850 --> 01:28:03.610
I liken it to a city
permit office, you know,
01:28:03.610 --> 01:28:05.560
so they're trying to
meet the shot clocks
01:28:05.560 --> 01:28:07.270
that they have on themselves.
01:28:07.270 --> 01:28:10.170
But any type of prioritization effort
01:28:10.170 --> 01:28:13.200
that is beyond just the normal time
01:28:13.200 --> 01:28:15.770
of application submission,
01:28:15.770 --> 01:28:17.290
could make a meaningful difference.
01:28:17.290 --> 01:28:20.020
And again, get those
projects reviewed through
01:28:20.020 --> 01:28:23.550
and then they turn to
the straight intermittent
01:28:23.550 --> 01:28:26.290
resources after that, they
could still process them,
01:28:26.290 --> 01:28:29.400
but then they reset
that queue after a year.
01:28:30.394 --> 01:28:33.590
Okay, I think I
understand that.
01:28:33.590 --> 01:28:37.460
So, you know, again,
01:28:37.460 --> 01:28:39.810
I guess kind of a
mechanical sort of statement.
01:28:41.400 --> 01:28:43.210
I mean, does ERCOT need more
01:28:43.210 --> 01:28:46.723
interconnection assisting staff?
01:28:47.660 --> 01:28:49.600
Is there a shortage out of ERCOT?
01:28:49.600 --> 01:28:51.010
I don't know, if
this necessarily
01:28:51.010 --> 01:28:53.110
the ERCOT phenomenon is the TSP.
01:28:53.110 --> 01:28:53.943
Okay.
01:28:53.943 --> 01:28:56.730
Again, ERCOT does a
component of the studies
01:28:56.730 --> 01:29:00.260
but then the TSPs, they're
in the trenches doing this.
01:29:00.260 --> 01:29:02.130
It's their systems that are.
01:29:02.130 --> 01:29:03.600
Okay.
Interconnected.
01:29:03.600 --> 01:29:04.433
Okay.
01:29:04.433 --> 01:29:06.080
Thank you for that clarification.
01:29:07.787 --> 01:29:10.920
So it resets every year almost?
01:29:10.920 --> 01:29:12.910
Yeah, because if it's
an 18 month process,
01:29:12.910 --> 01:29:14.950
again, you want and a portion of that,
01:29:14.950 --> 01:29:16.430
say eight months of that is ERCOT,
01:29:16.430 --> 01:29:18.400
we can get ERCOT up later Kaanan,
01:29:18.400 --> 01:29:19.600
I'm sure you don't wanna get balled up
01:29:19.600 --> 01:29:20.950
in this this in your field.
01:29:21.810 --> 01:29:24.530
But we can talk to him about it later.
01:29:24.530 --> 01:29:25.967
But if eight months of it is ERCOT
01:29:25.967 --> 01:29:29.490
and a year of it is the
TSP, then we wanna try
01:29:29.490 --> 01:29:32.300
to get them, you know,
through their backlog
01:29:32.300 --> 01:29:36.260
of qualified dispatchable
projects, if any are ready to go.
01:29:36.260 --> 01:29:37.093
Okay.
01:29:37.093 --> 01:29:39.350
So it's more of a
signal to the utilities.
01:29:39.350 --> 01:29:41.210
That's right.
That we want them
01:29:41.210 --> 01:29:44.910
to prioritize that type
of, rather than ERCOT.
01:29:44.910 --> 01:29:49.420
Well, so I think
everybody applies
01:29:49.420 --> 01:29:51.100
to the ricotta interconnection process.
01:29:51.100 --> 01:29:53.360
Everybody's in the same queue.
01:29:53.360 --> 01:29:55.160
There are different types
of resources in there.
01:29:55.160 --> 01:29:58.280
Obviously, if you've looked
at the interconnection queue,
01:29:58.280 --> 01:30:03.280
it's very long and there
are ways that projects
01:30:03.600 --> 01:30:07.180
that are ready can get to
the head of the line anyway,
01:30:07.180 --> 01:30:10.360
it's because some of the TSPs
01:30:10.360 --> 01:30:12.120
actually get the studies done quicker.
01:30:12.120 --> 01:30:17.120
And, you know, a lot of
this is done by the TSPs.
01:30:17.410 --> 01:30:22.090
In other markets, they
use third party firms that go,
01:30:22.090 --> 01:30:24.210
they hire additional third party firms
01:30:24.210 --> 01:30:26.480
to do interconnection
work and do the studies.
01:30:26.480 --> 01:30:28.140
There are three or
four different studies,
01:30:28.140 --> 01:30:31.470
depending on markets,
what needs to be completed
01:30:31.470 --> 01:30:34.090
before you can get your final
interconnection agreement.
01:30:34.090 --> 01:30:35.640
Sometimes those take short time,
01:30:35.640 --> 01:30:38.060
sometimes they're
very, very controversial,
01:30:38.060 --> 01:30:41.323
depending upon what
facilities are deemed needed.
01:30:42.400 --> 01:30:44.610
That's not as much a problem in ERCOT,
01:30:44.610 --> 01:30:48.150
because the TSP pays for
most of the interconnection.
01:30:48.150 --> 01:30:53.150
So that challenge has gone
away to a large extent here.
01:30:53.600 --> 01:30:58.323
I think the goal of moving
something that's dispatchable,
01:30:59.160 --> 01:31:01.330
you know, satisfies
what the Governor wants
01:31:01.330 --> 01:31:04.040
And is, I think something
that the market needs.
01:31:04.040 --> 01:31:06.100
I'm concerned about
one thing, and that is,
01:31:06.100 --> 01:31:08.880
if there are entities
that are in the process
01:31:08.880 --> 01:31:11.653
that have already
spent money on studies,
01:31:13.230 --> 01:31:15.710
as they have been required to
01:31:15.710 --> 01:31:18.560
is there some legal
issue associated with that.
01:31:18.560 --> 01:31:21.720
You mean grandfather and
conditions that can be imposed,
01:31:21.720 --> 01:31:25.089
If they're almost there that
they just move on through?
01:31:25.089 --> 01:31:27.263
Yeah, yeah, exactly,
something like that.
01:31:28.600 --> 01:31:30.700
I'm afraid that we don't wanna get
01:31:30.700 --> 01:31:33.770
into a legal snafu here.
01:31:33.770 --> 01:31:36.300
But, you know, if we tell, you know,
01:31:36.300 --> 01:31:39.659
a guy who's number one in
the queue, who, you know.
01:31:39.659 --> 01:31:41.630
Who's almost there.
Who's almost done,
01:31:41.630 --> 01:31:43.630
you know, you have to move to the back.
01:31:43.630 --> 01:31:47.150
But this is our
value, your experience,
01:31:47.150 --> 01:31:48.400
because a lot of them just sort of put
01:31:48.400 --> 01:31:49.840
that minimum amount of,
01:31:49.840 --> 01:31:52.818
so what's the threshold
that you'd advise on?
01:31:52.818 --> 01:31:54.700
I don't have an
answer for you right now.
01:31:54.700 --> 01:31:57.120
But I know, you know, we could come up
01:31:57.120 --> 01:31:59.520
with one that I think would be valuable.
01:31:59.520 --> 01:32:02.770
I think we have found
that there used to be a lot
01:32:02.770 --> 01:32:05.260
of as we called Mom and Pop developers
01:32:05.260 --> 01:32:07.740
that would just go
file or interconnection,
01:32:07.740 --> 01:32:10.760
they were developers that
were wanting to sell projects.
01:32:10.760 --> 01:32:12.590
So they just filed
these interconnections.
01:32:12.590 --> 01:32:14.053
Buying a call option.
01:32:14.053 --> 01:32:15.810
Buying a call option,
and that's exactly right.
01:32:15.810 --> 01:32:17.560
Interconnection didn't cost much.
01:32:17.560 --> 01:32:18.850
You didn't have to do money studies,
01:32:18.850 --> 01:32:20.100
you just threw your name in the queue,
01:32:20.100 --> 01:32:21.660
and you were done with it.
01:32:21.660 --> 01:32:24.970
I'm not sure that is all
of our problem right now.
01:32:24.970 --> 01:32:29.480
I think we've attracted
so much global attention
01:32:29.480 --> 01:32:31.090
to build resources in our market
01:32:31.090 --> 01:32:32.460
is really what the issue is.
01:32:32.460 --> 01:32:34.620
But I think, you know, sticking
01:32:34.620 --> 01:32:39.000
with finding something
that's dispatchable.
01:32:39.000 --> 01:32:40.920
And if we're trying to remain agnostic,
01:32:40.920 --> 01:32:42.840
if we're gonna put a battery with wind
01:32:42.840 --> 01:32:46.630
or battery with solar, I mean, actually,
01:32:46.630 --> 01:32:51.300
you could put a battery
with thermal generation too
01:32:51.300 --> 01:32:54.540
and actually make it even
quicker start they could apply to,
01:32:54.540 --> 01:32:56.690
you could put it at a
combined cycle plant
01:32:56.690 --> 01:32:58.240
and they can ramp very quickly.
01:32:59.190 --> 01:33:03.160
But doing this, I think
follows the the point
01:33:03.160 --> 01:33:06.080
of what I think we're
intending to do here,
01:33:06.080 --> 01:33:07.260
and I just don't want there
01:33:07.260 --> 01:33:08.880
to be some unintended consequences
01:33:08.880 --> 01:33:10.940
that people have already
spent a lot of money
01:33:10.940 --> 01:33:14.380
and gone away down a queue
process to be disadvantaged.
01:33:14.380 --> 01:33:16.630
And that's where
I was going next.
01:33:16.630 --> 01:33:21.163
And so I definitely agree
with the spirit of your memo.
01:33:21.163 --> 01:33:23.171
And obviously, we are charged
01:33:23.171 --> 01:33:25.560
to carry forward this
direction from the Governor
01:33:25.560 --> 01:33:27.260
and in some cases, the legislature
01:33:29.610 --> 01:33:32.000
with respect to this specific issue,
01:33:32.000 --> 01:33:35.900
as I look at it, that's the
lens I'm looking at it is
01:33:35.900 --> 01:33:38.790
from an unintended
consequences standpoint,
01:33:38.790 --> 01:33:41.830
with respect to impacting investment
01:33:41.830 --> 01:33:43.140
that's already been made.
01:33:43.140 --> 01:33:45.113
That's sort of, like Jimmy described,
01:33:45.113 --> 01:33:47.910
already has some momentum going
01:33:47.910 --> 01:33:49.593
and they're gonna get reshuffled.
01:33:50.430 --> 01:33:53.660
Also, you know,
recognizing the fact that,
01:33:53.660 --> 01:33:56.120
you know, by moving we are here today,
01:33:56.120 --> 01:33:57.730
because we're working on trying
01:33:57.730 --> 01:34:01.470
to send more price
signals to the market,
01:34:01.470 --> 01:34:04.870
so that a portion of
that 13,000 megawatts
01:34:04.870 --> 01:34:07.160
actually does come to
fruition, because right now,
01:34:07.160 --> 01:34:10.190
based on historical trends, it's only 1%
01:34:10.190 --> 01:34:14.040
of gas generation that
comes to fruition, traditionally,
01:34:14.040 --> 01:34:16.873
so by moving it up, we're
hoping that you know,
01:34:16.873 --> 01:34:20.100
what we do here, actually, you know,
01:34:20.100 --> 01:34:22.450
sends it out of the gate, right?
01:34:22.450 --> 01:34:27.450
Secondly, I wanna
kind of zoom in into sort
01:34:28.430 --> 01:34:30.400
of a point I tried to make earlier,
01:34:30.400 --> 01:34:33.360
I completely recognize
that renewable generation
01:34:33.360 --> 01:34:35.460
has its variability issues.
01:34:35.460 --> 01:34:39.820
But with respect to solar, you know,
01:34:39.820 --> 01:34:42.420
we have received grid
reliability updates all summer long
01:34:42.420 --> 01:34:45.590
from ERCOT, where a
significant percentage
01:34:45.590 --> 01:34:47.320
showed up during the summer
01:34:47.320 --> 01:34:50.453
to provide generation
that we really needed.
01:34:52.001 --> 01:34:54.710
And I do think that in some cases,
01:34:54.710 --> 01:34:58.010
solar is a little bit more
of a predictable resource.
01:34:58.010 --> 01:34:59.900
And what I don't wanna do
01:34:59.900 --> 01:35:02.990
is having unintended consequences on
01:35:02.990 --> 01:35:06.970
a little bit more of a
reliable intermittent resource
01:35:06.970 --> 01:35:08.980
that has actually helped
us in some situations
01:35:08.980 --> 01:35:10.280
where we are really tight.
01:35:11.690 --> 01:35:16.690
And it also a resource that
can be built very quickly.
01:35:19.220 --> 01:35:23.450
Months, you know,
in about a year versus,
01:35:23.450 --> 01:35:26.456
you know, a gas generation plant
01:35:26.456 --> 01:35:28.930
that can take about two years or more.
01:35:28.930 --> 01:35:32.100
So in the interim, while
we send these signals out
01:35:32.100 --> 01:35:35.500
through whatever pathways
that we ultimately decide,
01:35:35.500 --> 01:35:37.920
we have to recognize it's
gonna take about two years
01:35:37.920 --> 01:35:39.960
to get a plant online, if not more,
01:35:39.960 --> 01:35:41.250
but what are we gonna do in the interim,
01:35:41.250 --> 01:35:45.770
and I just don't wanna
impact our ability
01:35:45.770 --> 01:35:49.220
to get some quickly built resources
01:35:49.220 --> 01:35:52.040
that can help us during
times when we need it
01:35:52.040 --> 01:35:53.590
in certain periods of the year.
01:35:55.010 --> 01:35:56.320
I reshuffling but it sounds like
01:35:56.320 --> 01:35:58.480
from what Commissioner McAdams is saying
01:35:58.480 --> 01:36:00.950
that the shot clock, you know,
01:36:00.950 --> 01:36:05.130
starting in a periodic basis
might address that issue.
01:36:05.130 --> 01:36:06.650
And I would also expound
01:36:06.650 --> 01:36:10.513
on the legal issue that Jimmy raised.
01:36:11.430 --> 01:36:16.430
I know, Commissioner McAdams
you mentioned the TDUs.
01:36:16.910 --> 01:36:19.340
But one thing we got to make sure
01:36:19.340 --> 01:36:23.890
that if they're ready to interconnect,
01:36:23.890 --> 01:36:25.510
we can't just tell them no, right?
01:36:25.510 --> 01:36:26.388
There's a pair of statutory required.
01:36:26.388 --> 01:36:27.520
That's not the intention.
Okay.
01:36:27.520 --> 01:36:30.180
So because there is a
statutory requirement against
01:36:30.180 --> 01:36:32.550
that Imperial right now we're at 39 151.
01:36:32.550 --> 01:36:34.290
And I just wanna be mindful,
01:36:34.290 --> 01:36:36.200
and it's a requirement on ERCOT.
01:36:36.200 --> 01:36:40.410
I just wanna be mindful that
we're not putting you know,
01:36:40.410 --> 01:36:41.797
anybody in an illegal stable.
01:36:41.797 --> 01:36:44.180
I think (muffled speaking)
are you ready to interconnect?
01:36:44.180 --> 01:36:45.590
I mean, are you going, you know,
01:36:45.590 --> 01:36:48.823
and we have so much
hypothetical, we still do,
01:36:48.823 --> 01:36:52.540
I mean, queue huge,
hypothetical projects out there.
01:36:52.540 --> 01:36:55.130
And from a sorting perspective, again,
01:36:55.130 --> 01:36:57.630
this is just one more
layered signal that says,
01:36:57.630 --> 01:36:59.930
look, you can get to
the front of the line,
01:36:59.930 --> 01:37:01.750
after all these guys who have said,
01:37:01.750 --> 01:37:02.583
they're ready to interconnect,
01:37:02.583 --> 01:37:04.540
and they're gonna energize
01:37:04.540 --> 01:37:07.520
that they're gonna
get their eye out there.
01:37:07.520 --> 01:37:11.270
After they're, you know,
flush through the process,
01:37:11.270 --> 01:37:14.500
then then we get to
this prioritization scheme.
01:37:14.500 --> 01:37:15.990
And it'll be there for you.
01:37:15.990 --> 01:37:19.050
And hopefully, it proves
decisive in years to come.
01:37:19.050 --> 01:37:21.520
I mean, it just seems
consistent policy with again,
01:37:21.520 --> 01:37:24.090
what we're talking about on that curve.
01:37:24.090 --> 01:37:27.260
And as the solar deploys,
and I agree with you,
01:37:27.260 --> 01:37:29.100
it's a great resource
at peak, we just have
01:37:29.100 --> 01:37:31.653
to how it how we come
down off that solar hot.
01:37:32.830 --> 01:37:34.630
And we need to continue
to study the dark curve,
01:37:34.630 --> 01:37:35.770
because again, I still think
01:37:35.770 --> 01:37:37.260
we are different than California.
01:37:37.260 --> 01:37:39.290
And I really want ERCOT to really take
01:37:39.290 --> 01:37:40.310
a deeper look at that.
01:37:40.310 --> 01:37:41.450
I know they already have been
01:37:41.450 --> 01:37:45.730
but really give us a
very Texas perspective
01:37:45.730 --> 01:37:47.570
of what we're facing with that amount
01:37:47.570 --> 01:37:49.053
of solar on our system.
01:37:50.760 --> 01:37:51.593
Value here.
01:37:51.593 --> 01:37:53.820
And what you propose,
well, it's just two part,
01:37:53.820 --> 01:37:55.250
one, it's a very important signal
01:37:55.250 --> 01:37:57.937
that we value dispatch
ability of any flavor.
01:37:57.937 --> 01:37:58.770
He's right.
01:37:58.770 --> 01:38:00.880
That could be combined
cycle gas could be bigger gas,
01:38:00.880 --> 01:38:03.040
it could be battery, that
could be compressed air,
01:38:03.040 --> 01:38:06.203
it could be hydrogen,
it's dispatchability the key,
01:38:07.050 --> 01:38:09.560
certainly never gonna
tell a generating asset
01:38:09.560 --> 01:38:10.760
that they can't hook up.
01:38:12.240 --> 01:38:15.013
We're just gonna focus on
the dispatchable ones first.
01:38:16.960 --> 01:38:19.153
The second real value add, I think is
01:38:19.153 --> 01:38:21.083
that to Laura's point about timing.
01:38:22.150 --> 01:38:24.690
Certainly solar is very
quick to be in terms
01:38:24.690 --> 01:38:29.690
of implementation to full
operation and fully energized,
01:38:30.350 --> 01:38:32.530
but batteries are even quicker.
01:38:32.530 --> 01:38:36.110
And so to the extent that
this can move batteries up
01:38:39.320 --> 01:38:43.110
to the we always wanna be
wary of unintended consequences.
01:38:43.110 --> 01:38:46.850
But if one of the consequences
is we have more batteries
01:38:46.850 --> 01:38:48.810
at the front of the line sooner,
01:38:48.810 --> 01:38:51.780
that's one of the best
things we can do in terms
01:38:51.780 --> 01:38:54.180
of physical steel on the
ground for next summer.
01:38:55.320 --> 01:39:00.320
And I think the important
value in this proposal,
01:39:00.470 --> 01:39:04.360
I think the devil is
always in the details.
01:39:04.360 --> 01:39:07.190
Certainly think just because you bought
01:39:07.190 --> 01:39:08.773
a call option hold your place in line,
01:39:08.773 --> 01:39:11.160
I don't think that means
you get to preserve
01:39:11.160 --> 01:39:13.130
that place in line, we're not gonna tell
01:39:13.130 --> 01:39:14.880
you can't stay in line.
01:39:14.880 --> 01:39:16.460
If somebody has procured cost
01:39:16.460 --> 01:39:18.960
to move forward in the process.
01:39:18.960 --> 01:39:21.660
I would certainly hope
we can let them continue in
01:39:21.660 --> 01:39:26.150
that process if there's
a dispatchable asset
01:39:26.150 --> 01:39:30.540
that is co-located or associated
with an intermittent asset.
01:39:30.540 --> 01:39:34.890
So we value solar but we
value solar plus battery more.
01:39:34.890 --> 01:39:37.457
We certainly would
consider that dispatchable.
01:39:39.180 --> 01:39:44.180
And like I said, this is a great
step we can take right now
01:39:44.900 --> 01:39:49.900
to both show the market that
we do truly value dispatchable
01:39:50.900 --> 01:39:54.310
and to drive action on the ground
01:39:54.310 --> 01:39:55.760
to move these things forward.
01:39:56.730 --> 01:39:58.010
I have one other thing to say.
01:39:58.010 --> 01:40:01.680
And that is there's really
two parts to this one of them is
01:40:03.220 --> 01:40:06.080
those that are in the
interconnection queue today,
01:40:06.080 --> 01:40:09.120
under the old rules ought to
be able to have some process
01:40:09.120 --> 01:40:12.990
to say that they can amend
their solar only project
01:40:12.990 --> 01:40:14.800
and add batteries to it.
01:40:14.800 --> 01:40:16.200
Agreed.
In their
01:40:16.200 --> 01:40:18.150
same queue position.
01:40:18.150 --> 01:40:20.880
That if they meet that new standard,
01:40:20.880 --> 01:40:25.530
then this new standard
adding for our batteries,
01:40:25.530 --> 01:40:27.370
they get to keep that same position,
01:40:27.370 --> 01:40:29.793
you know, everything else being equal.
01:40:30.640 --> 01:40:31.473
I agree.
01:40:33.570 --> 01:40:35.130
Since we do have next week,
01:40:35.130 --> 01:40:37.160
could we get some feedback from ERCOT,
01:40:37.160 --> 01:40:38.513
possibly on the logistics of that?
01:40:38.513 --> 01:40:40.860
Because I agree with you,
I mean, you wanna be able
01:40:40.860 --> 01:40:42.910
to amend it, and it's in our
interest that you amend it.
01:40:42.910 --> 01:40:43.743
Yeah.
01:40:44.720 --> 01:40:46.240
Can you work with ERCOT
01:40:46.240 --> 01:40:50.610
to work with him to bring
a proposal on logistics
01:40:50.610 --> 01:40:54.120
and implementation
timeline for this change?
01:40:54.120 --> 01:40:55.220
And let me just
say one other thing,
01:40:55.220 --> 01:41:00.150
that interconnection queue
is only one part of the process
01:41:00.150 --> 01:41:02.350
of interconnecting the facility.
01:41:02.350 --> 01:41:04.260
Obviously, you have
that interconnection piece,
01:41:04.260 --> 01:41:06.810
but I mean, you have energy
01:41:06.810 --> 01:41:08.430
that's flowing across the ERCOT system.
01:41:08.430 --> 01:41:10.550
So you may be creating more congestion,
01:41:10.550 --> 01:41:13.030
you know, as we're adding, you know,
01:41:13.030 --> 01:41:16.960
so many megawatts of storage,
we may be create exacerbating
01:41:16.960 --> 01:41:19.810
that congestion problem on
different areas of the system.
01:41:19.810 --> 01:41:24.810
That I mean, it could
create all sorts of problems,
01:41:25.390 --> 01:41:26.870
or it could create none, you know,
01:41:26.870 --> 01:41:27.703
that's something else
01:41:27.703 --> 01:41:30.910
that we should ask ERCOT to think about.
01:41:30.910 --> 01:41:33.290
We also hoped that the
clever investors behind this
01:41:33.290 --> 01:41:36.023
wouldn't put a bunch of
storage behind congestion.
01:41:38.500 --> 01:41:41.150
Again, as we said,
or as I said earlier,
01:41:41.150 --> 01:41:43.060
you know, it was great when you built,
01:41:43.060 --> 01:41:44.030
you know, way out there.
01:41:44.030 --> 01:41:45.430
And but you didn't know two guys,
01:41:45.430 --> 01:41:47.140
were gonna come in front of you.
01:41:47.140 --> 01:41:50.140
On this one, I will say, and
I'll birddog it with ERCOT.
01:41:50.140 --> 01:41:52.140
But I can tell they're
gonna get fidgety over there.
01:41:52.140 --> 01:41:54.680
And rightly so.
(crowd laughing)
01:41:54.680 --> 01:41:57.430
As I understand it, the inverters
01:41:57.430 --> 01:42:00.120
of the batteries do
cause a little different
01:42:00.120 --> 01:42:05.120
study constraints in those processes.
01:42:05.240 --> 01:42:06.470
So I'll get you details on that.
01:42:06.470 --> 01:42:08.490
And we'll get something by next week.
01:42:08.490 --> 01:42:11.150
In addition,
Commissioner McAdams,
01:42:11.150 --> 01:42:12.770
just to give us all some you know,
01:42:12.770 --> 01:42:15.030
just to confirm, because
I wanna make sure
01:42:15.030 --> 01:42:17.080
that as we move forward with this path,
01:42:17.080 --> 01:42:18.950
you know, we've dotted all the ORDs
01:42:18.950 --> 01:42:21.370
and cross all our
ORTs, and it's all sound.
01:42:21.370 --> 01:42:23.160
Can you please also
check with our colleagues,
01:42:23.160 --> 01:42:24.160
they don't have any concerns?
01:42:24.160 --> 01:42:26.623
Sure, that will be a pleasure.
01:42:28.900 --> 01:42:30.090
Thank you for
taking the lead on this.
01:42:30.090 --> 01:42:32.000
Yes sir.
Great initiative.
01:42:32.000 --> 01:42:35.200
We'll look forward to
hearing that day naturally.
01:42:35.200 --> 01:42:37.623
All right, 2:30.
01:42:39.910 --> 01:42:43.640
Next up is Braddell for
a debrief on everything
01:42:43.640 --> 01:42:46.574
we heard and learned today.
01:42:46.574 --> 01:42:48.050
Okay.
01:42:48.050 --> 01:42:51.830
Looking forward to that,
so it's been a long day,
01:42:51.830 --> 01:42:55.990
but I think my job is to kind
of remind everybody about
01:42:55.990 --> 01:43:00.350
the problems that
we're focused on today,
01:43:00.350 --> 01:43:02.030
that needs to be in the blueprint,
01:43:02.030 --> 01:43:04.750
like over the next week and months,
01:43:04.750 --> 01:43:06.830
in terms of what are
what is kind of the suite
01:43:06.830 --> 01:43:10.163
or package of solutions that
can address those problems.
01:43:11.150 --> 01:43:14.670
So before kind of reviewing
the menu of options
01:43:14.670 --> 01:43:17.020
that are on the table, I just thought
01:43:17.020 --> 01:43:19.810
it would be worth getting
back to the problem statement
01:43:19.810 --> 01:43:21.810
and making sure that, you know,
01:43:21.810 --> 01:43:24.140
the Commissioners have
a chance to, you know,
01:43:24.140 --> 01:43:28.800
agree on what is the set of
problems we're trying to solve.
01:43:28.800 --> 01:43:30.880
So I think we have
two that Sam articulated
01:43:30.880 --> 01:43:32.270
at the beginning of the day,
01:43:32.270 --> 01:43:35.620
the Market Monitor
are articulated a third,
01:43:35.620 --> 01:43:38.300
and I think it's, you
know, really helpful
01:43:38.300 --> 01:43:40.600
to this whole room and and us,
01:43:40.600 --> 01:43:43.130
if we get a, you
know, an affirmation or,
01:43:43.130 --> 01:43:46.800
you know, confirmation of
that's what we're trying to solve.
01:43:46.800 --> 01:43:50.120
Problem number one
being supply adequacy,
01:43:50.120 --> 01:43:53.670
that we have enough resources
in the system in the grid,
01:43:53.670 --> 01:43:56.890
to meet all system
conditions, supply available,
01:43:56.890 --> 01:43:59.740
all winter conditions,
all summer conditions,
01:43:59.740 --> 01:44:02.640
including, you know,
extreme winter events
01:44:02.640 --> 01:44:04.090
and extreme summer events.
01:44:04.090 --> 01:44:06.490
So that's problem number
one is supply adequacy.
01:44:07.800 --> 01:44:11.010
And also, we actually did
hear a case that's actually kind
01:44:11.010 --> 01:44:13.037
of a an inarticulate
definition of the problem.
01:44:13.037 --> 01:44:15.380
And so I think, you
know, just clarifying,
01:44:15.380 --> 01:44:17.110
is that a problem that
needs to be solved?
01:44:17.110 --> 01:44:19.593
And how are we gonna
define that exactly?
01:44:20.670 --> 01:44:24.910
Number two, is operational
flexibility and performance,
01:44:24.910 --> 01:44:27.290
making sure that the resources
01:44:27.290 --> 01:44:29.330
that we have on the
system are positioned
01:44:29.330 --> 01:44:32.810
and ready to respond at all timeframes
01:44:32.810 --> 01:44:34.080
to provide that flexibility
01:44:34.080 --> 01:44:36.450
and operational support
that the system needs.
01:44:36.450 --> 01:44:37.740
Through market incentives,
01:44:37.740 --> 01:44:39.410
not through control room reactions,
01:44:39.410 --> 01:44:40.510
not through out of market means
01:44:40.510 --> 01:44:42.450
but through market incentives
01:44:42.450 --> 01:44:45.703
that incentivize strong
dispatch, ability and performance.
01:44:46.560 --> 01:44:49.730
To meet all system
needs, contingency risks
01:44:49.730 --> 01:44:53.337
and system uncertainties,
ramp known ramping,
01:44:53.337 --> 01:44:56.370
expected net load variability as well
01:44:56.370 --> 01:44:59.423
as uncertainties
around that expectation.
01:45:00.700 --> 01:45:03.300
And then having a
strong system of incentives
01:45:03.300 --> 01:45:07.450
and potentially penalties
for folks who perform
01:45:08.440 --> 01:45:10.810
and address that problem and penalties
01:45:10.810 --> 01:45:13.933
for those who kind of
exacerbate the problems.
01:45:13.933 --> 01:45:17.170
And then the third one that I
think we probably have heard
01:45:17.170 --> 01:45:19.290
less from the Commissioners
on, it would be helpful
01:45:19.290 --> 01:45:20.900
to articulate is that third problem
01:45:20.900 --> 01:45:25.460
that Dr. Patton identified,
which is related to hedging.
01:45:25.460 --> 01:45:27.440
Is part of this trying
to find a solution
01:45:27.440 --> 01:45:29.750
to extreme financial events?
01:45:29.750 --> 01:45:32.370
And looking at that, both
from the supplier perspective.
01:45:32.370 --> 01:45:36.570
I mean, are we trying to smooth
out revenues for you know,
01:45:36.570 --> 01:45:39.450
kind of a smoother year
to year investment signal?
01:45:39.450 --> 01:45:41.780
Or is that actually not what
the Commission is trying to do?
01:45:41.780 --> 01:45:44.140
So that's one piece, or articulated
01:45:44.140 --> 01:45:45.770
from the customer perspective.
01:45:45.770 --> 01:45:47.680
Are we trying to find
an insurance product
01:45:47.680 --> 01:45:52.680
that protects consumers from
extreme financial consequences?
01:45:52.980 --> 01:45:57.200
So I think, you know, all
three of those problems,
01:45:57.200 --> 01:45:59.363
actually, if we have direction as to,
01:46:00.250 --> 01:46:01.970
that these are the problems on the table
01:46:01.970 --> 01:46:06.400
that need to be solved, can
then be turned into a numerical,
01:46:06.400 --> 01:46:08.700
you know, set of parameters, right?
01:46:08.700 --> 01:46:11.120
Exactly what is the level of reliability
01:46:11.120 --> 01:46:13.390
that we wanna support in the system,
01:46:13.390 --> 01:46:14.760
whether that's a target or a standard
01:46:14.760 --> 01:46:16.170
that needs to be enforced?
01:46:16.170 --> 01:46:18.090
And then on the
financial side, you know,
01:46:18.090 --> 01:46:20.541
what is the level of financial
consequences that you know,
01:46:20.541 --> 01:46:22.563
consumers can be exposed to?
01:46:23.760 --> 01:46:26.450
And those can, I think,
guide a lot of the parameters
01:46:26.450 --> 01:46:30.343
in terms of some of the
details of the solutions, as well.
01:46:32.540 --> 01:46:35.100
So back to summarizing
some of the solutions
01:46:35.100 --> 01:46:37.520
that are on the table for problem one,
01:46:37.520 --> 01:46:40.360
which again, are very
related to problem three,
01:46:40.360 --> 01:46:43.313
because they're the solutions
are gonna be very related.
01:46:44.430 --> 01:46:48.500
So there's also, you
know, again, coming back
01:46:48.500 --> 01:46:50.500
to some of these solutions,
there's a time element to it,
01:46:50.500 --> 01:46:52.950
how quickly can these be accomplished?
01:46:52.950 --> 01:46:56.780
So the first panel today, we heard
01:46:56.780 --> 01:46:58.920
from three different entities,
01:46:58.920 --> 01:47:00.890
most of them had more than one component
01:47:00.890 --> 01:47:03.140
to their solution to have
a complete package.
01:47:04.540 --> 01:47:06.360
And you know, some of
them had some similarities.
01:47:06.360 --> 01:47:08.160
So I'm gonna talk about
them thematically as
01:47:08.160 --> 01:47:09.970
to the differences and those
01:47:09.970 --> 01:47:13.420
that are kind of complementary
versus standalone.
01:47:13.420 --> 01:47:15.614
So one portion of the solution,
01:47:15.614 --> 01:47:20.614
potentially the most urgent
is addressing fuel security.
01:47:20.820 --> 01:47:22.870
So we're talking about winterization.
01:47:22.870 --> 01:47:26.390
And, you know, if
not entirely preventing
01:47:26.390 --> 01:47:28.470
at least mitigating
and limiting the extent
01:47:28.470 --> 01:47:31.313
of something like
what we saw last winter.
01:47:32.230 --> 01:47:34.890
So we're talking about fuel security.
01:47:34.890 --> 01:47:38.090
Some of the problems that
we see are the challenges
01:47:38.090 --> 01:47:39.990
are some of the solutions on the table
01:47:39.990 --> 01:47:42.060
are not really market oriented.
01:47:42.060 --> 01:47:45.130
They are kind of a cost
recovery sort of mechanisms.
01:47:45.130 --> 01:47:48.380
If we you know, end up using
some of those mechanisms,
01:47:48.380 --> 01:47:50.610
we may end up at a
place where we're having
01:47:50.610 --> 01:47:53.140
some component of competition,
01:47:53.140 --> 01:47:55.050
but it's in the end
of the day potentially
01:47:55.050 --> 01:47:56.400
not gonna be as resource neutral
01:47:56.400 --> 01:47:58.060
or market oriented
as some of the others,
01:47:58.060 --> 01:48:00.743
we may have spillover effects
into the rest of the market.
01:48:01.830 --> 01:48:04.180
That being said, it is
the most urgent problem.
01:48:06.090 --> 01:48:09.680
The second category
as I would characterize it
01:48:09.680 --> 01:48:13.100
is something on the
order of a strategic reserve.
01:48:13.100 --> 01:48:15.380
So these are the reserves
that can be procured
01:48:15.380 --> 01:48:17.860
and kept available
out of the energy nicely.
01:48:17.860 --> 01:48:20.610
service markets are
combined those in advance.
01:48:20.610 --> 01:48:23.330
And again, in terms of
the timing dimension of this,
01:48:23.330 --> 01:48:24.950
that can be done, I think
01:48:24.950 --> 01:48:27.690
we heard quickly, like within a year.
01:48:27.690 --> 01:48:30.310
So with those, we already
have a product similar
01:48:30.310 --> 01:48:32.820
to that ERS with demand response,
01:48:32.820 --> 01:48:35.500
this would be an extension
of that sort of a product,
01:48:35.500 --> 01:48:38.040
you'd withhold these
resources out of the energy
01:48:38.040 --> 01:48:39.660
and ancillary service markets.
01:48:39.660 --> 01:48:43.070
And that has the spillover
effect of boosting energy
01:48:43.070 --> 01:48:44.710
and answer service prices.
01:48:44.710 --> 01:48:48.100
So the incentives we're getting
in the market are stronger.
01:48:48.100 --> 01:48:49.340
And presumably, that's gonna add
01:48:49.340 --> 01:48:51.593
to the supply investment incentive.
01:48:52.730 --> 01:48:57.120
So that approach is attractive,
01:48:57.120 --> 01:48:59.940
because it can be in some flavors,
01:48:59.940 --> 01:49:01.970
you know, more resource neutral,
01:49:01.970 --> 01:49:02.980
it is using the market
01:49:02.980 --> 01:49:05.380
to provide most of
the investment signals.
01:49:05.380 --> 01:49:07.780
And those signals,
again, are gonna be driven
01:49:07.780 --> 01:49:10.560
through energy and
ancillary service markets.
01:49:10.560 --> 01:49:12.650
The disadvantages of that being
01:49:12.650 --> 01:49:14.610
some operational inefficiencies,
01:49:14.610 --> 01:49:17.371
because we have resources
being held out of energy
01:49:17.371 --> 01:49:18.610
and ancillary service markets.
01:49:18.610 --> 01:49:21.420
So on a day to day basis,
they're not providing some of
01:49:21.420 --> 01:49:24.450
that performance support
that we wanna see.
01:49:24.450 --> 01:49:27.053
So that's kind of a
disadvantage of that approach.
01:49:28.400 --> 01:49:31.560
And then another disadvantage,
01:49:31.560 --> 01:49:35.770
I would say is that we
can size the quantity
01:49:35.770 --> 01:49:37.190
that we're procuring in order
01:49:37.190 --> 01:49:40.960
to target a specific reliability level,
01:49:40.960 --> 01:49:43.830
but we don't have the same
level of kind of guarantee,
01:49:43.830 --> 01:49:47.450
you know, to achieve
that reliability level.
01:49:47.450 --> 01:49:50.203
So a bit of a pros and
cons that we see there.
01:49:51.520 --> 01:49:55.050
And then a final or
another solution to achieve
01:49:55.050 --> 01:50:00.050
that reliability standard is
the LSE reliability obligation.
01:50:00.760 --> 01:50:02.305
One of the options, that's the one
01:50:02.305 --> 01:50:07.010
that is the most likely
to, I won't say guarantee,
01:50:07.010 --> 01:50:10.888
but close to guarantee that
we hit the reliability standard
01:50:10.888 --> 01:50:12.143
if we adopt one.
01:50:13.260 --> 01:50:16.540
And that can be tailored
to the winter needs.
01:50:16.540 --> 01:50:17.410
And so therefore,
01:50:17.410 --> 01:50:19.730
if we have certain fuel
security requirements
01:50:19.730 --> 01:50:22.090
or on site fuel requirements
that can be built right into
01:50:22.090 --> 01:50:24.320
that reliability obligation.
01:50:24.320 --> 01:50:26.060
And so that makes that an
01:50:26.060 --> 01:50:29.173
in market mechanism for that problem.
01:50:30.900 --> 01:50:33.910
We also talked about
some of the disadvantages
01:50:33.910 --> 01:50:36.960
of that approach, it will
take longer to implement,
01:50:36.960 --> 01:50:39.880
than some of the others
were talking about,
01:50:39.880 --> 01:50:42.470
I think, would be very
optimistic to say two years,
01:50:42.470 --> 01:50:44.850
it can take, you know,
let's say three years
01:50:44.850 --> 01:50:46.503
to implement something like that.
01:50:47.680 --> 01:50:48.750
That being said, that can be
01:50:48.750 --> 01:50:50.703
a long term sustainable solution.
01:50:52.720 --> 01:50:56.890
The other challenges with
that solvable challenges,
01:50:56.890 --> 01:50:59.660
you know, need to adopt and implement
01:50:59.660 --> 01:51:01.420
a robust monitoring
and mitigation regime.
01:51:01.420 --> 01:51:04.980
So anybody who has,
you know, market power,
01:51:04.980 --> 01:51:05.990
we'd need to make sure that there's
01:51:05.990 --> 01:51:09.540
a monitoring mitigation regime
that would address you know,
01:51:09.540 --> 01:51:12.290
prevent the exercise
of that market power.
01:51:12.290 --> 01:51:14.120
And then the other
piece, again, that needs
01:51:14.120 --> 01:51:17.490
to be fleshed out, that
hasn't been as yet is to ensure
01:51:17.490 --> 01:51:21.030
that it's totally consistent
with the retail choice market.
01:51:21.030 --> 01:51:25.090
So making sure that all of
the positive and you know,
01:51:25.090 --> 01:51:29.380
competitive attributes of
the retail market in Texas are,
01:51:29.380 --> 01:51:31.280
you know, continue to be supported,
01:51:31.280 --> 01:51:33.633
enabled under this mechanism.
01:51:34.750 --> 01:51:39.610
So again, you know, a few
pros and cons of that option.
01:51:39.610 --> 01:51:44.610
And then the final option,
this forward hedge option
01:51:46.560 --> 01:51:51.300
is can, as Dr. Patton said, be
01:51:53.450 --> 01:51:55.970
a solution to either just problem three,
01:51:55.970 --> 01:51:58.480
which is about hedging,
you know, protecting,
01:51:58.480 --> 01:52:00.470
you don't either smoothing
investment incentives
01:52:00.470 --> 01:52:03.570
for the suppliers, and smoothing,
01:52:03.570 --> 01:52:05.750
you know, impacts for consumers.
01:52:05.750 --> 01:52:10.010
But it can also be combined
with physical requirements
01:52:10.010 --> 01:52:12.640
on the generators, saying,
you know, you actually
01:52:12.640 --> 01:52:15.340
can't just be a financial
entity and sell this hedge,
01:52:15.340 --> 01:52:17.190
you have to be a
physical entity, you have
01:52:17.190 --> 01:52:20.260
to meet certain physical
performance requirements.
01:52:20.260 --> 01:52:23.960
In that case, it can also be a solution
01:52:23.960 --> 01:52:28.500
that meets, you know, a
particular reliability standard.
01:52:28.500 --> 01:52:30.980
So that one, I think,
has at least, you know,
01:52:30.980 --> 01:52:32.300
two variations depending on
01:52:32.300 --> 01:52:34.523
which problem you're trying to solve.
01:52:35.840 --> 01:52:40.210
So I think, you know, those being kind
01:52:40.210 --> 01:52:42.370
of the menu of options on the table,
01:52:42.370 --> 01:52:44.010
any one of them probably does need
01:52:44.010 --> 01:52:45.280
to be fleshed out further,
01:52:45.280 --> 01:52:47.710
and there will be many
kind of calls along the way,
01:52:47.710 --> 01:52:49.983
but I think, primary
pros and cons there.
01:52:52.060 --> 01:52:56.840
So, problem number two, I
think, you know, what I heard,
01:52:56.840 --> 01:52:58.820
I believe, kind of from all fronts is
01:52:58.820 --> 01:53:03.070
that there's a common
agreement that problem two is one
01:53:03.070 --> 01:53:06.270
that needs to be solved,
which is operational flexibility.
01:53:06.270 --> 01:53:08.450
And I also think what's, you know,
01:53:08.450 --> 01:53:10.420
interesting is that we have, you know,
01:53:10.420 --> 01:53:13.050
even if there's not 100%
agreement on the exact set
01:53:13.050 --> 01:53:15.610
of solutions, some very common threads.
01:53:15.610 --> 01:53:18.750
And this is a package of reforms,
01:53:18.750 --> 01:53:21.270
some of them that are
ongoing, and some of them
01:53:21.270 --> 01:53:23.483
that will take some time to implement.
01:53:24.600 --> 01:53:25.810
So the nearest term things
01:53:25.810 --> 01:53:29.620
that can be implemented
are changes to the ORDC.
01:53:29.620 --> 01:53:31.870
Again, those kind of guiding principles,
01:53:31.870 --> 01:53:33.960
in terms of the problem
statement may drive us
01:53:33.960 --> 01:53:35.460
in a different place in terms
01:53:35.460 --> 01:53:37.980
of exactly what reforms
get implemented on ORDC.
01:53:39.470 --> 01:53:40.560
But at the end of the day, I think
01:53:40.560 --> 01:53:42.580
that can also be done quickly,
01:53:42.580 --> 01:53:45.960
the implementation
timeframe is pretty fast.
01:53:45.960 --> 01:53:49.870
The other piece is to the
extent that we see operational
01:53:49.870 --> 01:53:51.933
and reliability problems today,
01:53:53.906 --> 01:53:56.430
immediate solutions to
that are gonna end up being
01:53:56.430 --> 01:53:59.693
higher quantities of existing
ancillary service products.
01:54:01.726 --> 01:54:04.440
Or we're gonna end up
with out of market actions
01:54:04.440 --> 01:54:07.420
to address operational
reliability problems.
01:54:07.420 --> 01:54:10.753
So, those being the
most immediate solutions.
01:54:13.770 --> 01:54:16.500
And then the other kind of very soon
01:54:16.500 --> 01:54:18.540
to be implemented as
fast frequency response.
01:54:18.540 --> 01:54:22.590
So kind of an already
ongoing not a complete solution,
01:54:22.590 --> 01:54:25.140
but contribution to solving
some of these problems.
01:54:26.410 --> 01:54:29.363
Medium term.
What was that last one?
01:54:30.600 --> 01:54:31.433
FFR.
Okay.
01:54:31.433 --> 01:54:33.763
So like fast
frequency response.
01:54:36.030 --> 01:54:39.000
So medium term, some of the solutions
01:54:39.000 --> 01:54:41.490
that are available in the
medium term are really those
01:54:41.490 --> 01:54:44.950
that are kind of already in progress,
01:54:44.950 --> 01:54:48.470
talking about ECRs so enhanced ability
01:54:48.470 --> 01:54:51.290
to respond in a 10 minute
basis to contingencies
01:54:51.290 --> 01:54:53.770
and ramp system ramping needs.
01:54:53.770 --> 01:54:56.490
And then there are other
some other components,
01:54:56.490 --> 01:54:59.670
Commissioner Cobos, you
really emphasize the importance
01:54:59.670 --> 01:55:02.830
of timing out when companies, you know,
01:55:02.830 --> 01:55:05.740
different exciting
solutions be implemented,
01:55:05.740 --> 01:55:10.653
given the upgrades to the
EMS in real time optimization.
01:55:11.670 --> 01:55:16.250
Now, EMS, right now we heard 2024,
01:55:16.250 --> 01:55:17.703
that feels like a long time.
01:55:18.830 --> 01:55:19.770
And then I think even after that,
01:55:19.770 --> 01:55:23.330
we're gonna see
Real-Time Co-optimization.
01:55:23.330 --> 01:55:26.280
One of the things that
Dr. Patton articulated
01:55:27.180 --> 01:55:30.140
is the importance of that
Real-Time Co-optimization,
01:55:30.140 --> 01:55:32.190
despite the fact that
it's quite far out there
01:55:32.190 --> 01:55:35.580
is a really essential and
important enabling tool set
01:55:36.640 --> 01:55:39.300
for the effectiveness
of things like ORDC,
01:55:39.300 --> 01:55:42.110
for the effectiveness of
ECRS, and, you know,
01:55:42.110 --> 01:55:45.160
any other balancing products
that may be implemented.
01:55:45.160 --> 01:55:47.410
And so the timing is
a bit of a challenge.
01:55:47.410 --> 01:55:48.270
But at the end of the day,
01:55:48.270 --> 01:55:50.558
I hope we're going on a pathway where
01:55:50.558 --> 01:55:54.450
that enabling tool to achieve
that operational response
01:55:54.450 --> 01:55:57.770
and effectiveness
won't be delayed further
01:55:59.310 --> 01:56:02.300
by the, you know,
the strain on resources
01:56:02.300 --> 01:56:04.560
that, of course, that we're gonna see.
01:56:04.560 --> 01:56:08.980
And then as we look to 2025,
and beyond, or, you know,
01:56:08.980 --> 01:56:11.320
hopefully some of it could be expedited,
01:56:11.320 --> 01:56:14.670
we're gonna need a suite
of ancillary service products
01:56:14.670 --> 01:56:18.280
that make sure that we
have that operational flexibility
01:56:18.280 --> 01:56:20.720
and performance at all
timeframes, you know,
01:56:20.720 --> 01:56:23.810
if cycles, you know, within
cycles, within 10 minutes,
01:56:23.810 --> 01:56:25.770
within 30 minutes within two hours,
01:56:25.770 --> 01:56:29.650
because as we see, again,
back to the 10 more gigawatts
01:56:29.650 --> 01:56:33.660
of solar or other resources
that are gonna introduce,
01:56:33.660 --> 01:56:36.570
you know, that ramping
need, we do need to make sure
01:56:36.570 --> 01:56:38.950
that ERCOT has the tools in his toolbox
01:56:38.950 --> 01:56:42.380
to send market based signals
for the market to pre position
01:56:42.380 --> 01:56:45.330
and then react to those system needs.
01:56:45.330 --> 01:56:48.480
So once we get out a few
more years down the line,
01:56:48.480 --> 01:56:52.170
seeing either increasing needs
for more ramping capability,
01:56:52.170 --> 01:56:56.490
so perhaps that's ECRS,
maybe it's more volume of VCRs.
01:56:56.490 --> 01:57:01.490
And perhaps it's addition
of new products for ramping,
01:57:01.530 --> 01:57:02.830
for example, the two hours
01:57:02.830 --> 01:57:06.160
or some of the dispatchable reserves
01:57:06.160 --> 01:57:07.960
that we heard from TIEC.
01:57:07.960 --> 01:57:09.220
And then finally, you know,
01:57:09.220 --> 01:57:11.620
are we gonna need other
products such as inertia.
01:57:11.620 --> 01:57:14.770
And those again, I
think, probably do need
01:57:14.770 --> 01:57:17.690
to be on the roadmap of
reforms and solutions today,
01:57:17.690 --> 01:57:20.990
because this is a problem
that's gonna come very quickly,
01:57:20.990 --> 01:57:23.810
you know, given the
timeframe to implementation,
01:57:23.810 --> 01:57:26.810
but at the same time,
can't really be expected
01:57:26.810 --> 01:57:29.903
to be in place, you know,
next year or even a year after.
01:57:33.170 --> 01:57:34.003
All right.
01:57:34.003 --> 01:57:36.130
Thank you very nicely.
01:57:36.130 --> 01:57:37.930
Summarize, you've been taking notes.
01:57:39.860 --> 01:57:41.310
Well done a quick turnaround.
01:57:45.100 --> 01:57:47.040
Yep, state your name and who you are
01:57:47.040 --> 01:57:47.950
for the record, I'm sorry.
01:57:47.950 --> 01:57:49.923
Kathleen Spees
from the Brattle group.
01:57:51.690 --> 01:57:54.640
In the the fifth
10 or 15 minutes,
01:57:54.640 --> 01:57:57.510
we got left, and we
made it do a quick break it
01:57:59.710 --> 01:58:04.710
let's say 2:50, and reconvene at three.
01:58:08.620 --> 01:58:10.100
I'll just do a quick response
01:58:10.100 --> 01:58:12.823
to your clarification
on problem statement.
01:58:14.490 --> 01:58:16.543
Number one, supply adequacy.
01:58:17.830 --> 01:58:21.543
Yes, of course, I'd break
it into three components.
01:58:23.260 --> 01:58:26.283
Reliability when we
need it, it's available.
01:58:27.150 --> 01:58:29.253
Two resiliency.
01:58:30.200 --> 01:58:35.200
When unusual conditions
arise, extreme weather, et cetera.
01:58:36.190 --> 01:58:37.780
The assets perform.
01:58:37.780 --> 01:58:40.030
And three, quantity, obviously
01:58:40.030 --> 01:58:42.530
is the most important
part of the supply.
01:58:42.530 --> 01:58:44.990
In the context of a reserve
margin, somebody mentioned
01:58:44.990 --> 01:58:45.860
that we're looking at like
01:58:45.860 --> 01:58:48.563
a 28% reserve margin in a year or two.
01:58:49.670 --> 01:58:51.900
If you discount wind and solar
01:58:51.900 --> 01:58:55.623
to a bad day, that's like six.
01:58:56.660 --> 01:59:01.650
So we need to be realistic
about what that quantity
01:59:01.650 --> 01:59:04.363
and the character of
that quantity should be.
01:59:05.690 --> 01:59:09.410
Number two, operational
ability, flexibility,
01:59:09.410 --> 01:59:13.490
You all said, it's what
I've, in my simple parlance,
01:59:13.490 --> 01:59:14.970
called the Blue Sky
problem, you can have
01:59:14.970 --> 01:59:17.670
a perfectly lovely day expectations
01:59:18.930 --> 01:59:21.810
of intermittent are off
weather wind or solar.
01:59:21.810 --> 01:59:23.240
There's a thunderstorm in West Texas,
01:59:23.240 --> 01:59:24.470
but it's hot and sunny in Dallas
01:59:24.470 --> 01:59:27.370
or the wind drops off
whatever blue sky day
01:59:27.370 --> 01:59:31.110
and we are in suddenly very suddenly
01:59:31.110 --> 01:59:34.338
in very scarce conditions.
01:59:34.338 --> 01:59:37.153
That is no way for a
civilized country to live.
01:59:38.842 --> 01:59:40.610
So we need to solve that.
01:59:40.610 --> 01:59:43.810
And then finally the,
I guess the financial
01:59:43.810 --> 01:59:48.000
or the the hedging challenge.
01:59:48.000 --> 01:59:52.270
I don't think I do think
we need reliability
01:59:52.270 --> 01:59:55.020
to be a standard feature of this market.
01:59:55.020 --> 01:59:57.950
As I've said before, that is part
01:59:57.950 --> 02:00:00.120
of its day to day
operation, not a bolt on
02:00:00.120 --> 02:00:01.773
or an add on or an afterthought.
02:00:03.130 --> 02:00:06.670
And like the things we heard
today around that concept
02:00:06.670 --> 02:00:09.210
or since we are requiring some sort
02:00:09.210 --> 02:00:12.823
of full forward looking hedging.
02:00:15.020 --> 02:00:19.210
I think a byproduct of that
would be both providing a bid
02:00:19.210 --> 02:00:23.250
for investors to see what
future revenues are out there.
02:00:23.250 --> 02:00:28.010
And also by requiring full hedging,
02:00:28.010 --> 02:00:33.010
minimizing volatility in
price risk to consumers.
02:00:33.230 --> 02:00:35.210
So while that's not a
problem we're solving
02:00:35.210 --> 02:00:36.830
for I think it's something
we should expect
02:00:36.830 --> 02:00:41.830
to see as an outcome of
the, if we do our job correctly.
02:00:42.290 --> 02:00:43.123
I'll stop there.
02:00:47.596 --> 02:00:49.005
I just made it.
You said a lot.
02:00:49.005 --> 02:00:51.755
(crowd laughing)
02:00:53.230 --> 02:00:55.330
(muffled speaking) I
know her hands are tired
02:00:55.330 --> 02:00:57.420
so we can break now if you want.
02:00:59.990 --> 02:01:04.850
All right, we'll take a break
now and reconvene at 3pm
02:01:04.850 --> 02:01:07.275
for the final hour of discussion.
02:01:07.275 --> 02:01:08.870
But the only thing I can guarantee is
02:01:08.870 --> 02:01:10.740
I think all four of us will be ready
02:01:10.740 --> 02:01:11.790
to walk out here for.
02:01:12.713 --> 02:01:14.590
(crowd laughing)
02:01:14.590 --> 02:01:15.790
See all of that.
02:01:25.034 --> 02:01:27.951
(crowd chattering)
02:01:32.907 --> 02:01:35.860
All right, folks, it is not
quite yet happy hour,
02:01:35.860 --> 02:01:37.213
but I like the spirit.
02:01:40.730 --> 02:01:45.730
All right, we're closing out a
very long but productive day
02:01:48.150 --> 02:01:53.150
with open discussion
with our Commissioners
02:01:53.330 --> 02:01:56.010
and our participants today,
02:01:56.010 --> 02:01:59.550
the especially on specific plans.
02:01:59.550 --> 02:02:00.870
I know Commissioner McAdams has
02:02:00.870 --> 02:02:03.310
a very particular question to ask first.
02:02:03.310 --> 02:02:04.470
That is on timeline.
02:02:04.470 --> 02:02:05.650
So I'll turn it over to you.
02:02:05.650 --> 02:02:06.483
And we'll go from there.
02:02:06.483 --> 02:02:08.170
Yeah, Dr. Patton.
02:02:08.170 --> 02:02:10.040
I see you moving close to the mic.
02:02:10.040 --> 02:02:10.873
Thank you very much.
02:02:10.873 --> 02:02:13.093
Katie, would you approach
your mic so we can.
02:02:15.490 --> 02:02:17.461
(speaking off mic)
02:02:17.461 --> 02:02:18.294
Oh, yeah.
02:02:20.550 --> 02:02:21.690
Yeah, if y'all wanna start doing that,
02:02:21.690 --> 02:02:23.020
I'll go ahead and feel my questions
02:02:23.020 --> 02:02:25.763
so we can get Dr. Patton good to go.
02:02:26.600 --> 02:02:29.120
I wanted to see conceptually since
02:02:29.120 --> 02:02:31.490
we've had 10 whole minutes to reset
02:02:31.490 --> 02:02:34.540
and figure out some
very important economics,
02:02:34.540 --> 02:02:36.430
forward shortage energy hedge
02:02:36.430 --> 02:02:39.480
versus backstop reliability service.
02:02:39.480 --> 02:02:40.800
Katie, in your mind, what are
02:02:40.800 --> 02:02:43.720
the significant difference
between years are there?
02:02:43.720 --> 02:02:45.600
Or is it just a question of mechanics.
02:02:45.600 --> 02:02:48.960
So having seen this
proposal from Potomac
02:02:48.960 --> 02:02:50.860
for the first time a few minutes ago,
02:02:50.860 --> 02:02:53.080
I probably need a
little more detail myself.
02:02:53.080 --> 02:02:57.860
But what I can appreciate at
this point is our proposal was
02:02:57.860 --> 02:03:01.160
that we would have some
level of dispatchable resources
02:03:01.160 --> 02:03:04.040
that we're procuring every
day for operating reserves,
02:03:04.040 --> 02:03:05.940
and I think we've got some flexibility,
02:03:05.940 --> 02:03:09.240
they had proposed like a
two or four hour product,
02:03:09.240 --> 02:03:10.920
I think that could I think we're open
02:03:10.920 --> 02:03:12.180
to that as an alternative.
02:03:12.180 --> 02:03:13.690
But we were proposing to allocate
02:03:13.690 --> 02:03:16.670
that on a capacity short basis.
02:03:16.670 --> 02:03:19.610
As I understand Dr. Patton's proposal it
02:03:19.610 --> 02:03:24.290
is a broader attempt
to allocate more energy
02:03:24.290 --> 02:03:28.790
and ancillary services at large
in perhaps a similar manner.
02:03:28.790 --> 02:03:32.910
The thing that I think
is similar about both
02:03:32.910 --> 02:03:35.220
that we like, is that it is more
02:03:35.220 --> 02:03:37.820
of a real time dynamic
allocation instead
02:03:37.820 --> 02:03:41.143
of some fixed administrative
four word allocation.
02:03:42.650 --> 02:03:44.560
Anything further
down on that (indistinct)?
02:03:44.560 --> 02:03:48.370
Yeah, in simple terms,
and I went back and read,
02:03:48.370 --> 02:03:51.610
and I'm still a little foggy
on exactly the nature
02:03:51.610 --> 02:03:56.610
of the product, but I think,
and please correct me,
02:03:57.780 --> 02:04:02.230
our forward hedge covers
all generation and all load.
02:04:02.230 --> 02:04:06.033
So you're buying 70,
some 1000 megawatts of it.
02:04:07.860 --> 02:04:11.130
And, and almost all the
generators are selling it.
02:04:11.130 --> 02:04:13.361
I mean, they might put a risk premium.
02:04:13.361 --> 02:04:15.580
And they may not all
clear if you don't need
02:04:15.580 --> 02:04:17.673
as much hedges as there is generation.
02:04:19.160 --> 02:04:22.063
But it's covering the
entire market, essentially.
02:04:23.020 --> 02:04:26.080
And I believe your product
is more like a reserve product.
02:04:26.080 --> 02:04:29.263
So it might be 4000
megawatts or something.
02:04:31.050 --> 02:04:31.883
I think you've covered this,
02:04:31.883 --> 02:04:32.930
and I might have missed it in terms
02:04:32.930 --> 02:04:34.500
of implementation timeline,
02:04:34.500 --> 02:04:36.080
given what you know
about the ERCOT market.
02:04:36.080 --> 02:04:39.410
I mean, this is a system
change, it would require.
02:04:39.410 --> 02:04:41.353
The hedge?
Yeah, yeah.
02:04:43.100 --> 02:04:44.170
I mean, I think they could have
02:04:44.170 --> 02:04:46.561
it implemented in just a few months.
02:04:46.561 --> 02:04:47.394
(crowd laughing)
02:04:47.394 --> 02:04:49.840
I'm just kidding.
Well, that's great.
02:04:49.840 --> 02:04:51.593
Okay, no, I'm kidding.
02:04:53.684 --> 02:04:56.201
The, the settlement piece of it
02:04:56.201 --> 02:05:00.450
is there would be
settlement system issues
02:05:00.450 --> 02:05:01.853
that would take some time.
02:05:02.790 --> 02:05:04.790
In concept, it's not complicated,
02:05:04.790 --> 02:05:09.663
because you already know
who you're paying the ORDC to.
02:05:09.663 --> 02:05:12.470
And so this would run in advance,
02:05:12.470 --> 02:05:13.680
it'd be a very simple auction,
02:05:13.680 --> 02:05:16.240
and it would establish obligations.
02:05:16.240 --> 02:05:18.730
So, in concept, it's not complicated.
02:05:18.730 --> 02:05:20.440
Probably the most complicated part of it
02:05:20.440 --> 02:05:22.710
is doing the accreditation, like
02:05:22.710 --> 02:05:24.850
how much of the hedge
should each generator
02:05:24.850 --> 02:05:26.253
have the ability to sell?
02:05:27.730 --> 02:05:30.210
Which, you know, it takes some time,
02:05:30.210 --> 02:05:32.520
and in any time, there'd be a lot
02:05:32.520 --> 02:05:33.700
of money associated with this hedge.
02:05:33.700 --> 02:05:35.760
So anytime you have
that much economic value
02:05:35.760 --> 02:05:40.760
that developing the rules is
you have to be super careful.
02:05:41.430 --> 02:05:46.220
Take time, so my guess is a year or two.
02:05:46.220 --> 02:05:50.667
So in terms of comparison
to the E3 proposal,
02:05:51.570 --> 02:05:54.290
it again, the devils in the
details on the accreditation,
02:05:54.290 --> 02:05:56.110
so to speak, I mean, were you're trying
02:05:56.110 --> 02:05:58.780
to establish a standard
on that nameplate
02:05:58.780 --> 02:06:01.920
or average unless you have to hedge to?
02:06:01.920 --> 02:06:06.920
Yeah, I think, and I said
this to someone at the break,
02:06:08.400 --> 02:06:11.830
I think the accreditation,
there's less at stake.
02:06:11.830 --> 02:06:15.330
Like if you're a little more optimistic,
02:06:15.330 --> 02:06:17.370
like your credit
somebody a little bit higher
02:06:17.370 --> 02:06:18.590
than what they can perform,
02:06:18.590 --> 02:06:20.800
they're gonna end up buying back,
02:06:20.800 --> 02:06:23.140
they're gonna end up owing you the ORDC.
02:06:23.140 --> 02:06:25.580
So the cost of being a little bit wrong
02:06:25.580 --> 02:06:28.560
is not really high in a capacity
02:06:28.560 --> 02:06:31.183
market proposal, like the E3 proposal.
02:06:33.673 --> 02:06:35.660
You're giving them money
02:06:35.660 --> 02:06:38.920
that you're not gonna take
back if they don't perform.
02:06:38.920 --> 02:06:41.310
I mean, there may be
some penalty regime,
02:06:41.310 --> 02:06:46.310
but unless, unless the penalty
regime is the forward hedge,
02:06:47.630 --> 02:06:50.540
you know, you have to be super careful
02:06:50.540 --> 02:06:52.650
about how well you accredit the resource
02:06:52.650 --> 02:06:55.180
to make sure you're not paying somebody
02:06:55.180 --> 02:06:57.240
for something where they're providing
02:06:57.240 --> 02:07:00.700
you much less reliability
than what you paid them for.
02:07:00.700 --> 02:07:04.083
And that's particularly the
case for intermittent resources.
02:07:06.578 --> 02:07:08.273
Okay, does anybody
have anything on that
02:07:08.273 --> 02:07:10.643
because to ask about ORDC to?
02:07:12.120 --> 02:07:13.360
If I could just
clarify your guests
02:07:13.360 --> 02:07:15.230
a little bit on our E3 proposals
02:07:15.230 --> 02:07:19.770
that there is a penalty
provision in our proposal,
02:07:19.770 --> 02:07:22.240
where in fact, they would have
to give back whatever revenue
02:07:22.240 --> 02:07:23.510
they might have earned through the sale
02:07:23.510 --> 02:07:24.970
of the reliability obligations,
02:07:24.970 --> 02:07:27.600
add a time plus a
penalty on top of that,
02:07:27.600 --> 02:07:30.077
plus not being able to
sell into the energy market
02:07:30.077 --> 02:07:33.990
and all the natural penalties
that they would otherwise see.
02:07:33.990 --> 02:07:35.110
So there is a penalty provision
02:07:35.110 --> 02:07:37.785
that we think would
help ensure performance.
02:07:37.785 --> 02:07:40.010
And that's an important part of it.
02:07:40.010 --> 02:07:42.190
Can I say one thing
about that penalty,
02:07:42.190 --> 02:07:43.340
and why it's different?
02:07:44.850 --> 02:07:46.950
So if you remember my bar chart where
02:07:46.950 --> 02:07:50.430
the hedge is like a very measured value,
02:07:50.430 --> 02:07:51.713
or it's gonna fluctuate,
02:07:52.752 --> 02:07:56.680
but the ORDC adder is
gonna end up being low
02:07:56.680 --> 02:08:00.340
and then be huge when
you have shortages.
02:08:00.340 --> 02:08:03.150
Just having them give
back what you paid them
02:08:03.150 --> 02:08:04.610
is not nearly enough,
02:08:04.610 --> 02:08:08.490
because the cost of the system during
02:08:08.490 --> 02:08:10.440
the very infrequent
event where they happen
02:08:10.440 --> 02:08:14.290
to not be there could be 40 times higher
02:08:14.290 --> 02:08:16.120
than just taking back, you know,
02:08:16.120 --> 02:08:18.803
the expected value
payment that you paid them.
02:08:19.860 --> 02:08:21.730
Along those
lines on this topic.
02:08:21.730 --> 02:08:26.730
Katie, your final slide
says the allocation method
02:08:27.250 --> 02:08:32.250
of the costs to short entities would be
02:08:32.530 --> 02:08:37.530
if applied more broadly, would increase
02:08:38.260 --> 02:08:42.780
long term hedging
incentives, which seems
02:08:42.780 --> 02:08:46.770
to indicate that incentivizing
02:08:46.770 --> 02:08:48.970
that would y'all would be supportive
02:08:48.970 --> 02:08:51.010
of even any stronger incentives
02:08:51.010 --> 02:08:54.740
almost requiring long term
hedging, physical hedging sorry.
02:08:54.740 --> 02:08:56.990
I think incentivizing hedging
02:08:56.990 --> 02:08:58.770
is a critical part of the market.
02:08:58.770 --> 02:09:00.990
I mean, that's the whole $9,000 price,
02:09:00.990 --> 02:09:05.030
in the first instance, was not
about setting prices at 9000.
02:09:05.030 --> 02:09:06.810
It was about scaring the you know,
02:09:06.810 --> 02:09:08.800
what out of everybody
so that they hedged.
02:09:08.800 --> 02:09:11.880
And so, you know,
different ways to do that.
02:09:11.880 --> 02:09:14.020
You know, I think this is
a really interesting idea.
02:09:14.020 --> 02:09:16.540
I think the our
capacity, short allocation
02:09:16.540 --> 02:09:18.943
for the services meant
to get at the same thing.
02:09:19.910 --> 02:09:23.420
Where we start getting
uncomfortable is something
02:09:23.420 --> 02:09:26.580
that's sort of like an
administratively determined mandate
02:09:26.580 --> 02:09:29.630
with a long lead time but
encouraging hedging on
02:09:29.630 --> 02:09:32.100
a dynamic real time or day ahead basis.
02:09:32.100 --> 02:09:33.923
Yes, we very much support.
02:09:34.863 --> 02:09:38.240
Is the long term nature
of some of these proposals,
02:09:38.240 --> 02:09:40.340
or the administrative oversight
02:09:40.340 --> 02:09:41.760
of the proposals that are worried them?
02:09:41.760 --> 02:09:43.820
My experience is
those go hand in hand
02:09:43.820 --> 02:09:46.710
because the longer term
you're trying to set something,
02:09:46.710 --> 02:09:48.620
you're kind of having to
make it up out of thin air
02:09:48.620 --> 02:09:50.390
and set parameters and things like that.
02:09:50.390 --> 02:09:54.400
Whereas what Dr. Patton
just said as a great example,
02:09:54.400 --> 02:09:57.150
you can figure out like the value
02:09:57.150 --> 02:09:59.620
of not being hedged based on something
02:09:59.620 --> 02:10:01.300
that we already have, the ORDC.
02:10:01.300 --> 02:10:03.230
And that's gonna change in real time.
02:10:03.230 --> 02:10:06.000
So features like that,
that have a dynamic value
02:10:06.000 --> 02:10:08.320
that still incentivize demand response
02:10:08.320 --> 02:10:11.700
or generator performance
based on the actual conditions,
02:10:11.700 --> 02:10:14.280
not hypothetical conditions
that are, you know,
02:10:14.280 --> 02:10:18.660
laid out in advance, that's a
better program, in our view.
02:10:18.660 --> 02:10:20.370
On the penalty side,
02:10:20.370 --> 02:10:23.407
or the original bid side
(muffled speaking)?
02:10:24.590 --> 02:10:26.883
So if you think
about like our proposal,
02:10:28.063 --> 02:10:31.190
and where we're proposing,
like additional reserves
02:10:31.190 --> 02:10:34.200
to cover off this
operational uncertainty,
02:10:34.200 --> 02:10:36.510
the value of that is gonna increase
02:10:36.510 --> 02:10:38.850
on days where there's more of that.
02:10:38.850 --> 02:10:42.380
And so if you allocated
that on a short basis,
02:10:42.380 --> 02:10:45.080
people who were short
on those days would pay
02:10:45.080 --> 02:10:47.040
for the service when
it's a higher price.
02:10:47.040 --> 02:10:49.470
On other days, when
there's not as big of a risk,
02:10:49.470 --> 02:10:51.920
that service might be close to zero.
02:10:51.920 --> 02:10:53.460
And that's what you want.
02:10:53.460 --> 02:10:54.760
And that's a lot better,
02:10:54.760 --> 02:10:57.010
you know, there's gradations of this.
02:10:57.010 --> 02:10:59.340
And, you know, there's gonna be some
02:10:59.340 --> 02:11:00.970
forward aspect to all of it.
02:11:00.970 --> 02:11:03.370
But the more it's got that sort
02:11:03.370 --> 02:11:06.370
of dynamic tracking
what's actually happening,
02:11:06.370 --> 02:11:09.610
the easier it is for us to
manage as loads and respond to
02:11:09.610 --> 02:11:12.630
and give you guys extra
megawatts manage our costs,
02:11:12.630 --> 02:11:14.350
and the more you're gonna get generator
02:11:14.350 --> 02:11:16.420
incentives to perform so.
02:11:16.420 --> 02:11:19.640
Okay, I need to kind of
straighten this out in my head
02:11:19.640 --> 02:11:22.783
because your proposal, Dr. Patton.
02:11:23.950 --> 02:11:26.200
Sounds very similar
to the LSE obligation,
02:11:26.200 --> 02:11:29.120
except there's, you know,
some key differences
02:11:29.120 --> 02:11:30.020
that you've noted.
02:11:31.640 --> 02:11:32.760
One piece that I just heard
02:11:32.760 --> 02:11:36.670
from you was that it'll take
maybe two years to implement.
02:11:36.670 --> 02:11:41.230
And I'm just trying
to capture, you know,
02:11:41.230 --> 02:11:42.570
are we actually gonna drive
02:11:42.570 --> 02:11:44.140
dispatchable generation investment
02:11:44.140 --> 02:11:46.570
with a forward hedging proposal?
02:11:46.570 --> 02:11:51.290
Are we just gonna get optimal
performance potentially?
02:11:51.290 --> 02:11:53.780
Yes, to be absolutely clear
02:11:55.090 --> 02:12:00.090
that the value in the hedging
product is derived from energy
02:12:01.330 --> 02:12:03.070
and ancillary service pricing,
02:12:03.070 --> 02:12:04.290
and the improvement in the energy
02:12:04.290 --> 02:12:05.640
and ancillary service pricing could
02:12:05.640 --> 02:12:08.020
be done within a month or two.
02:12:08.020 --> 02:12:10.120
And so that's where
the economic value is.
02:12:11.410 --> 02:12:13.340
The hedge smooths it out.
02:12:13.340 --> 02:12:16.670
So that's probably
valuable for investors.
02:12:16.670 --> 02:12:19.150
But the by far the most
important component
02:12:19.150 --> 02:12:22.300
of these proposals is the
improvement in the energy
02:12:22.300 --> 02:12:24.193
and answer service pricing.
02:12:26.966 --> 02:12:29.890
And so one of the key
differences, that mean,
02:12:29.890 --> 02:12:31.690
you asked about the timing,
02:12:31.690 --> 02:12:34.843
I would absolutely not procure
those three years ahead.
02:12:35.750 --> 02:12:39.250
I would procure it in advance
of the season, perhaps.
02:12:39.250 --> 02:12:42.640
So you're procuring the
hedges for each season.
02:12:42.640 --> 02:12:44.990
And the reason I went
into it three years ahead
02:12:46.088 --> 02:12:48.653
is there's no reason to
buy it three years ahead.
02:12:51.440 --> 02:12:54.130
We monitor and evaluate
forward capacity markets.
02:12:54.130 --> 02:12:58.723
And if you think how investors
are looking at investments,
02:13:01.010 --> 02:13:03.100
they're not gonna make
an investment decision
02:13:03.100 --> 02:13:06.590
three years out based on
a one year hedge, right?
02:13:06.590 --> 02:13:08.650
They're building a 30 year power plant,
02:13:08.650 --> 02:13:10.550
what they are gonna do
is they're gonna forecast
02:13:10.550 --> 02:13:13.640
what the value of this hedge
is gonna be over 30 years.
02:13:13.640 --> 02:13:18.640
And they don't get better
information by you're procuring
02:13:19.880 --> 02:13:21.390
that a hedge three years out
02:13:21.390 --> 02:13:23.520
versus in advance of the season.
02:13:23.520 --> 02:13:25.250
In fact, they get better information
02:13:25.250 --> 02:13:29.780
if you do it seasonally,
because the quantity, the supply
02:13:29.780 --> 02:13:31.290
and demand and the price of it
02:13:31.290 --> 02:13:32.640
it's gonna be far more accurate
02:13:32.640 --> 02:13:35.630
if you're not forecasting
three years in the future.
02:13:35.630 --> 02:13:37.670
There's a lot of big
investments made
02:13:37.670 --> 02:13:42.170
on three year five years,
say oil, gas, future strips,
02:13:42.170 --> 02:13:45.290
Well, and but
think of this hedge,
02:13:45.290 --> 02:13:46.940
this will be priced seasonally,
02:13:46.940 --> 02:13:48.963
and the price will change every season.
02:13:50.730 --> 02:13:53.790
Now you can forward contract around
02:13:53.790 --> 02:13:56.780
that product and energy
and ancillary services.
02:13:56.780 --> 02:14:00.180
So the fact that ERCOTs
not buying the hedge,
02:14:00.180 --> 02:14:02.410
you know, three years out
doesn't mean that investors
02:14:02.410 --> 02:14:07.173
can't engage in
contracting that would lock in
02:14:07.173 --> 02:14:09.490
the value of the hedge
for three to five years.
02:14:09.490 --> 02:14:11.520
I don't know any
oil or gas investors
02:14:11.520 --> 02:14:13.950
who would rather just have
a one year future strip rather
02:14:13.950 --> 02:14:18.310
than a five year future strip,
even though none of them.
02:14:18.310 --> 02:14:20.790
I mean, that's the pricing mechanism
02:14:20.790 --> 02:14:22.320
in the pro forma, right?
02:14:22.320 --> 02:14:26.750
So is there I guess that
leads to the question,
02:14:26.750 --> 02:14:31.750
is there a way to
provide price visibility
02:14:33.950 --> 02:14:37.503
because investors they
can't see a central point
02:14:41.770 --> 02:14:44.960
of transaction or price formation,
02:14:44.960 --> 02:14:48.170
like WTI if the entire forward market
02:14:48.170 --> 02:14:50.950
is bilateral off the automatic run.
02:14:50.950 --> 02:14:54.600
So is there a way to
require or incentivize
02:14:54.600 --> 02:14:58.493
or those transactions to happen,
02:14:59.330 --> 02:15:01.760
I want more forward basis to provide
02:15:01.760 --> 02:15:04.880
price formation information
02:15:04.880 --> 02:15:08.010
and transactions without incurring
02:15:08.010 --> 02:15:12.183
the administrative
troubles the non market,
02:15:16.430 --> 02:15:19.810
centralized clearing mechanism.
02:15:19.810 --> 02:15:22.950
So to try to capture, I guess, selfishly
02:15:22.950 --> 02:15:24.720
the best of both worlds?
02:15:24.720 --> 02:15:25.960
Absolutely.
02:15:25.960 --> 02:15:27.950
So if you think of what's happening
02:15:27.950 --> 02:15:31.930
in most forward markets is buyers
02:15:31.930 --> 02:15:36.803
and sellers are voluntarily
engaging in forward transactions
02:15:36.803 --> 02:15:39.030
because the buyer presumably is getting
02:15:39.030 --> 02:15:42.631
some hedge value the
seller is locking in revenues
02:15:42.631 --> 02:15:44.313
and it's entirely voluntary.
02:15:47.060 --> 02:15:49.100
The one thing that
changes in electricity markets
02:15:49.100 --> 02:15:50.860
when you talk about Ford procurement
02:15:50.860 --> 02:15:52.960
is you're forcing the demand
02:15:52.960 --> 02:15:56.380
to buy three years
ahead of time, which isn't.
02:15:56.380 --> 02:15:58.250
So you're creating a forward procurement
02:15:58.250 --> 02:16:00.450
that doesn't look anything
like for procurements
02:16:00.450 --> 02:16:02.963
and gas or oil or anything else.
02:16:03.880 --> 02:16:08.100
But what you could do,
let's say it's mandatory
02:16:08.100 --> 02:16:10.363
for the load to buy
these hedges seasonally.
02:16:12.320 --> 02:16:17.320
What you could do is transact
voluntary hedge auctions
02:16:19.360 --> 02:16:22.680
that ERCOT could administer
a year out, two years out,
02:16:22.680 --> 02:16:26.010
three years out, and you would get
02:16:26.010 --> 02:16:29.670
some portion of the hedges clearing.
02:16:29.670 --> 02:16:31.747
I mean, there's no reason as an LSE,
02:16:33.380 --> 02:16:35.170
you wouldn't be willing to buy ahead
02:16:35.170 --> 02:16:37.830
if you thought the price was attractive,
02:16:37.830 --> 02:16:40.300
and the suppliers could sell ahead.
02:16:40.300 --> 02:16:43.560
But they would all be
bidding and asking prices
02:16:43.560 --> 02:16:46.070
that reflect what they
imagine they're gonna have
02:16:46.070 --> 02:16:47.540
to pay if they wait until the very
02:16:47.540 --> 02:16:49.380
last auction where it's mandatory.
02:16:49.380 --> 02:16:50.213
Sure.
02:16:50.213 --> 02:16:54.270
So a quick clarifying question,
02:16:54.270 --> 02:16:57.343
I think there's no
requirement for oil and gas.
02:16:58.830 --> 02:17:01.597
Central hedgers, like WTI and CME,
02:17:01.597 --> 02:17:03.840
there is no requirement
to utilize those futures.
02:17:03.840 --> 02:17:06.380
Those are hedging mechanisms,
02:17:06.380 --> 02:17:10.030
not the physical, like spot contract.
02:17:10.030 --> 02:17:11.080
Correct.
There's no requirement,
02:17:11.080 --> 02:17:16.080
but they also don't have a
guarantee of being supplied,
02:17:17.270 --> 02:17:20.497
the good they're looking
for, like LSE are, right?
02:17:20.497 --> 02:17:22.280
And LSEs just sits back and say,
02:17:22.280 --> 02:17:23.580
hey, I've got this load that's up
02:17:23.580 --> 02:17:25.850
to the control room to serve that load.
02:17:25.850 --> 02:17:26.683
Yeah.
That didn't happen
02:17:26.683 --> 02:17:28.997
in a refinery, right?
Yeah.
02:17:28.997 --> 02:17:31.210
And that's why the LSE procurement has
02:17:31.210 --> 02:17:33.720
to be mandatory at some point.
02:17:33.720 --> 02:17:36.220
I'm just arguing that it
should be mandatory
02:17:36.220 --> 02:17:38.060
in advance of the season.
02:17:38.060 --> 02:17:39.940
Physical procurement
at some point.
02:17:39.940 --> 02:17:42.160
Yeah, the hedge.
Okay, I got you.
02:17:42.160 --> 02:17:44.593
I mean, they're gonna
have to be forced to buy it.
02:17:46.430 --> 02:17:48.380
Whether you force them
to buy it three years ahead
02:17:48.380 --> 02:17:51.710
versus in advance of the winter
season in the summer season.
02:17:51.710 --> 02:17:53.607
And can I add
something to this just from,
02:17:53.607 --> 02:17:55.963
you know, when we're
talking about investing,
02:17:56.980 --> 02:17:58.453
bringing the Stephenson LCRA.
02:17:59.970 --> 02:18:01.310
You know, we talk about
02:18:01.310 --> 02:18:03.050
the forward market, like it's liquid.
02:18:03.050 --> 02:18:05.820
And it's not.
It's bilateral or ice?
02:18:05.820 --> 02:18:07.700
Bilateral and ice, both of them
02:18:07.700 --> 02:18:09.830
are very illiquid right now.
02:18:09.830 --> 02:18:11.090
Okay, obviously, there's a lot
02:18:11.090 --> 02:18:14.270
of regulatory uncertainty
that is creating that.
02:18:14.270 --> 02:18:17.490
But I mean, we've had these
conversations over the last 10
02:18:17.490 --> 02:18:19.540
to 15 years, these are
the same market signals
02:18:19.540 --> 02:18:22.210
we've talked about, these are the same,
02:18:22.210 --> 02:18:24.350
you know, the load
obligation is a little different.
02:18:24.350 --> 02:18:27.360
But I will say that
any sophisticated party
02:18:27.360 --> 02:18:30.030
should have already
done a load obligation deal
02:18:30.030 --> 02:18:33.250
to hedge their risk looking
out two to three years.
02:18:33.250 --> 02:18:35.480
And one counterparty didn't do that,
02:18:35.480 --> 02:18:36.930
and got in really big trouble,
02:18:36.930 --> 02:18:39.310
like we all know, over
the winter store, okay?
02:18:39.310 --> 02:18:43.080
And so these theories
are very meaningful
02:18:43.080 --> 02:18:45.120
when you think there's a liquid market
02:18:45.120 --> 02:18:47.290
with people wanting to transact.
02:18:47.290 --> 02:18:50.570
But when there is not,
this is extremely difficult
02:18:50.570 --> 02:18:55.200
for any generation or load
side entity to do and perform.
02:18:55.200 --> 02:18:58.450
And so, you know, as
we talk about certainty
02:18:58.450 --> 02:19:02.970
and out of market actions,
and what is really a good signal
02:19:02.970 --> 02:19:05.223
for new generation to be built.
02:19:06.940 --> 02:19:10.270
Obviously, anything
that provides certainty,
02:19:10.270 --> 02:19:14.060
strong signals, easy to
understand, just be very,
02:19:14.060 --> 02:19:17.010
these are some very
complicated proposals.
02:19:17.010 --> 02:19:20.410
And a lot of the hedge funds
and investment banks are very,
02:19:20.410 --> 02:19:23.060
very smart people that
work on these all the time,
02:19:23.060 --> 02:19:24.530
but they're not in the details
02:19:24.530 --> 02:19:27.010
of my load forecast looks like this.
02:19:27.010 --> 02:19:30.587
Therefore, my load obligation
is based off this and that.
02:19:30.587 --> 02:19:34.400
And so if we're trying to
send signals for folks to invest,
02:19:34.400 --> 02:19:38.080
I think the way to make
sure it is meaningful
02:19:38.080 --> 02:19:40.830
and impactful is the rules to be clear.
02:19:40.830 --> 02:19:42.930
The rules to be certain and the rules
02:19:42.930 --> 02:19:46.410
to have some type of reliability mandate
02:19:46.410 --> 02:19:48.140
to get generation on.
02:19:48.140 --> 02:19:50.990
Nobody's gonna fault you
for making fun of hedge funds.
02:19:52.107 --> 02:19:56.660
But continue that thought,
both bilateral markets
02:19:56.660 --> 02:20:01.030
and centralized hedging markets
02:20:01.030 --> 02:20:03.998
and ice don't have liquidity.
02:20:03.998 --> 02:20:05.670
They do not.
Even the sun last year,
02:20:05.670 --> 02:20:09.400
they didn't have adequate
liquidity begs the question,
02:20:09.400 --> 02:20:12.950
how do we provide
liquidity for (indistinct)?
02:20:12.950 --> 02:20:14.840
And I think regulatory
certainty I mean,
02:20:14.840 --> 02:20:18.860
I'll be very honest,
having the rules very clear,
02:20:18.860 --> 02:20:22.300
and very understandable
with all the different
02:20:22.300 --> 02:20:24.380
financial players is important,
02:20:24.380 --> 02:20:26.780
Of course, always, but I
mean, we've changed ORDC,
02:20:26.780 --> 02:20:29.010
in the past, we had
regulatory certainty,
02:20:29.010 --> 02:20:32.560
I would guess, last this time,
you know, October last year.
02:20:32.560 --> 02:20:34.270
Well, I would argue that ORDC
02:20:34.270 --> 02:20:36.160
does not provide regulatory certainty.
02:20:36.160 --> 02:20:39.280
ORDC duty is pricing
during scarce periods
02:20:39.280 --> 02:20:41.680
of time in which you cannot predict.
02:20:41.680 --> 02:20:43.500
Right, but I mean, we
heard a lot about ORDC
02:20:43.500 --> 02:20:45.360
today solving all sorts of problems.
02:20:45.360 --> 02:20:48.850
I disagree with it.
But I mean, in regulatory,
02:20:48.850 --> 02:20:50.660
we've had in the past 10 years,
02:20:50.660 --> 02:20:52.360
right periods of regulatory certainty.
02:20:52.360 --> 02:20:54.000
I'm new here, but I certainly hope
02:20:54.000 --> 02:20:56.940
there's been more regulatory
certainty than we have today.
02:20:56.940 --> 02:20:58.550
Yes.
Okay.
02:20:58.550 --> 02:21:01.600
So is there an open question,
02:21:01.600 --> 02:21:02.780
how do we provide more liquidity?
02:21:02.780 --> 02:21:04.080
We're not gonna solve that right now.
02:21:04.080 --> 02:21:06.500
But I'll leave that up.
02:21:06.500 --> 02:21:08.410
Yeah, I mean, I do
think it's just clear rules,
02:21:08.410 --> 02:21:11.860
I mean, a bilateral
market that function Wales
02:21:11.860 --> 02:21:15.070
has financial and physical players
02:21:15.070 --> 02:21:18.830
that are willing buyers
and willing sellers, right?
02:21:18.830 --> 02:21:23.270
And so to make sure
everything is as predictable
02:21:23.270 --> 02:21:27.050
and understandable
as can be, I think helps.
02:21:27.050 --> 02:21:30.567
It doesn't per se me
in a capacity market.
02:21:30.567 --> 02:21:32.767
And I don't think
capacity market does that.
02:21:33.610 --> 02:21:37.520
But I do think understanding
and implementing rules
02:21:37.520 --> 02:21:42.520
that are, you know, easy
for folks to understand.
02:21:42.980 --> 02:21:46.050
I keep saying this,
because we over complicate
02:21:46.050 --> 02:21:49.250
things in ERCOT so, so much sometimes
02:21:49.250 --> 02:21:53.410
that it makes investment
in this market very difficult,
02:21:53.410 --> 02:21:58.230
and makes it a difficult
market to transact in
02:21:58.230 --> 02:22:00.690
and find folks other than literally five
02:22:00.690 --> 02:22:04.480
or six counterparties
bilaterally, that transact right now.
02:22:04.480 --> 02:22:06.170
To me, that's not really a true market
02:22:06.170 --> 02:22:09.010
where you can hedge
yourselves get the benefits
02:22:09.010 --> 02:22:11.533
of building new generation assets.
02:22:13.600 --> 02:22:14.530
Thank you for your comments.
02:22:14.530 --> 02:22:17.150
I mean, I'm kind of sitting
here trying to understand
02:22:17.150 --> 02:22:21.470
that proposal myself,
in terms of, you know,
02:22:21.470 --> 02:22:22.950
setting aside economic theory
02:22:22.950 --> 02:22:24.980
and thank you for highlighting
02:22:24.980 --> 02:22:26.420
the elliquidity of the forward markets.
02:22:26.420 --> 02:22:28.090
And we've got to look
at all these proposals
02:22:28.090 --> 02:22:31.050
and from a robust,
holistic perspective in,
02:22:31.050 --> 02:22:33.200
I'm just trying to, in my
mind trying to figure out,
02:22:33.200 --> 02:22:34.810
I know that your proposal is sort
02:22:34.810 --> 02:22:39.810
of maybe geared towards
addressing the LSE obligation,
02:22:40.830 --> 02:22:43.040
maybe with less negative impacts,
02:22:43.040 --> 02:22:46.730
but I'm still wondering how this helps
02:22:46.730 --> 02:22:50.243
us solve anything going forward.
02:22:51.590 --> 02:22:53.390
I just don't have that transparency.
02:22:57.310 --> 02:23:00.057
Okay.
(crowd laughing)
02:23:00.057 --> 02:23:02.050
It's gonna be hard for me to
answer that question quickly.
02:23:02.050 --> 02:23:03.650
And I do have to excuse myself
02:23:05.948 --> 02:23:09.470
but what I will say is
that the combination
02:23:11.250 --> 02:23:13.980
of the ORDC reform, which is necessary,
02:23:13.980 --> 02:23:16.823
no matter what else you do, in my mind,
02:23:18.740 --> 02:23:21.310
together with the hedge will provide
02:23:21.310 --> 02:23:24.720
an extremely strong
incentive to be available
02:23:24.720 --> 02:23:29.720
and to be flexible,
which incense everything
02:23:29.810 --> 02:23:32.550
we say we want firming field,
02:23:32.550 --> 02:23:36.710
batteries behind wind
resources, you know,
02:23:36.710 --> 02:23:41.710
dual fuel at gas only
units, winterizing units,
02:23:42.120 --> 02:23:44.040
all of those things are incented
02:23:46.000 --> 02:23:51.000
by compelling participants
to settle with ERCOT,
02:23:51.640 --> 02:23:55.490
based on the value of
energy and ancillary services
02:23:55.490 --> 02:23:57.853
when the conditions are
tight, and the need to do that
02:23:57.853 --> 02:24:01.120
it's gonna get higher
and higher and higher,
02:24:01.120 --> 02:24:04.040
because we're gonna see more and more
02:24:04.040 --> 02:24:07.340
frequent conditions
where fluctuations in
02:24:07.340 --> 02:24:10.390
or intermittent resources as
their penetration increases,
02:24:10.390 --> 02:24:14.720
will create ramps
shortages and forecast errors
02:24:14.720 --> 02:24:16.010
that cause us to be short when
02:24:16.010 --> 02:24:18.280
we didn't think we were gonna be short.
02:24:18.280 --> 02:24:22.180
Now as we were saying
that the ORDC reforms
02:24:22.180 --> 02:24:24.470
aren't relying on periods where we're
02:24:24.470 --> 02:24:26.420
on the verge of turning the lights out,
02:24:28.400 --> 02:24:30.330
but it will greatly increase the revenue
02:24:30.330 --> 02:24:33.210
in periods where ERCOT
can't hold the quantity
02:24:33.210 --> 02:24:35.080
of reserves they would like to hold.
02:24:35.080 --> 02:24:38.095
So the probability
of losing load instead
02:24:38.095 --> 02:24:42.820
of being you know, one half of 1% is 3%.
02:24:43.690 --> 02:24:45.760
Now, that sounds like a small deal,
02:24:45.760 --> 02:24:48.090
but if you multiply that
increased percentage times
02:24:48.090 --> 02:24:51.800
that $25,000 value of lost load,
02:24:51.800 --> 02:24:54.700
there's a lot of money that
we should be paying generators
02:24:56.500 --> 02:24:59.330
to make sure they're
available or penalizing them
02:24:59.330 --> 02:25:01.290
when they're not have
billable and they contribute
02:25:01.290 --> 02:25:03.423
to getting us into those circumstances.
02:25:04.360 --> 02:25:06.700
So to provide very strong incentives
02:25:06.700 --> 02:25:08.450
to move in the direction of
02:25:08.450 --> 02:25:12.813
that your objectives are
indicating that you want to go.
02:25:13.820 --> 02:25:17.590
And that hedge,
although it's linked back
02:25:17.590 --> 02:25:18.750
to the shortage pricing,
02:25:18.750 --> 02:25:22.830
because it would provide
a smoother revenue profile.
02:25:22.830 --> 02:25:25.110
In almost every
scenario, it's going to be
02:25:26.043 --> 02:25:28.750
a better starting point
to finance investment
02:25:29.736 --> 02:25:34.240
than having, you know, the
extremely volatile revenues
02:25:34.240 --> 02:25:36.533
that you get from
shortage pricing alone.
02:25:37.530 --> 02:25:39.810
Can I jump in for
a second, though?
02:25:39.810 --> 02:25:41.460
Because there are two points that are
02:25:41.460 --> 02:25:42.840
because there's a lot of
interest in your proposal.
02:25:42.840 --> 02:25:44.840
I know you have to go and just a second.
02:25:45.934 --> 02:25:47.863
A second ago, I had to go.
02:25:49.100 --> 02:25:51.010
I'll just say there
are a couple things
02:25:51.010 --> 02:25:54.083
that I'm still puzzled about.
02:25:55.080 --> 02:25:56.400
Good, I'm glad
I'm not the only one.
02:25:56.400 --> 02:25:59.050
So one is, I agree with
you that the fundamental
02:25:59.050 --> 02:26:01.010
is the real time signals and they
02:26:01.010 --> 02:26:03.540
and what you change what's in the ORDC.
02:26:03.540 --> 02:26:05.310
And there's already
strong signals there.
02:26:05.310 --> 02:26:07.500
And what you're proposing
which makes sense
02:26:07.500 --> 02:26:09.173
to me makes that stronger.
02:26:10.040 --> 02:26:11.940
But to some degree, all else equal,
02:26:11.940 --> 02:26:13.710
sure you said the
prices would be higher.
02:26:13.710 --> 02:26:17.750
But if you also then
attract or retain more supply
02:26:17.750 --> 02:26:20.240
that can be available
and realize those prices,
02:26:20.240 --> 02:26:22.560
you've added only maybe 1000 megawatts
02:26:22.560 --> 02:26:25.410
in the picture you had
before prices re-equilibrate
02:26:25.410 --> 02:26:27.740
to about the same that they are today.
02:26:27.740 --> 02:26:29.950
So okay, that helps, but it's marginal
02:26:29.950 --> 02:26:32.793
about maybe 1000 megawatts
more available supply.
02:26:33.820 --> 02:26:34.930
Then with a forward hedge.
02:26:34.930 --> 02:26:37.150
I don't actually see how that again,
02:26:37.150 --> 02:26:38.930
that doesn't seem to
change the fundamental.
02:26:38.930 --> 02:26:41.310
And there's lots of hedging today.
02:26:41.310 --> 02:26:45.620
And so I would be nice to understand
02:26:45.620 --> 02:26:48.420
what you're really adding
by making that mandatory.
02:26:48.420 --> 02:26:50.470
And it also then this is to Katie.
02:26:50.470 --> 02:26:51.920
Actually, I was actually surprised
02:26:51.920 --> 02:26:53.210
you thought that sounded okay.
02:26:53.210 --> 02:26:55.600
And this is not comparable
to what you proposed at all.
02:26:55.600 --> 02:26:57.620
This is mandating that.
02:26:57.620 --> 02:27:00.610
Yeah, I missed that
part that was in the slides.
02:27:00.610 --> 02:27:04.470
Okay, but you
need to go (indistinct).
02:27:04.470 --> 02:27:07.810
I do that the short answer is
02:27:07.810 --> 02:27:11.600
that this would motivate far
more than 1000 megawatts.
02:27:11.600 --> 02:27:14.380
So I'm not sure how you
get to 1000 megawatts,
02:27:14.380 --> 02:27:17.830
but I'd be happy to talk
to you offline about that.
02:27:17.830 --> 02:27:20.420
I mean, already, without
making any changes,
02:27:20.420 --> 02:27:23.170
we think seeing 1000s of
megawatts of response just
02:27:23.170 --> 02:27:25.350
from people for the first time
02:27:25.350 --> 02:27:28.810
seeing the ORDC implication play out,
02:27:28.810 --> 02:27:31.823
which they hadn't
really seen before this.
02:27:33.350 --> 02:27:36.720
But you're right, that mandating
the hedge in and of itself,
02:27:36.720 --> 02:27:41.710
because it has to be purchased,
will move in the direction,
02:27:41.710 --> 02:27:44.120
like you do have some
flexibility on the quantity
02:27:44.120 --> 02:27:45.820
of the hedge that you choose to buy.
02:27:45.820 --> 02:27:47.420
And the higher you make that quantity,
02:27:47.420 --> 02:27:49.720
the more you're gonna force the market
02:27:49.720 --> 02:27:50.800
in the direction of having
02:27:50.800 --> 02:27:52.693
to sustain a higher capacity margin.
02:27:53.950 --> 02:27:57.330
And I'll be happy to talk
to you offline, it's okay.
02:27:57.330 --> 02:27:58.163
Thanks.
02:27:59.530 --> 02:28:01.610
So the piece that
I did not pick up
02:28:01.610 --> 02:28:03.070
from the slides was that there would
02:28:03.070 --> 02:28:07.570
be some administrative
assignment of a lot of this
02:28:07.570 --> 02:28:08.860
that wasn't fleshed out to me.
02:28:08.860 --> 02:28:10.210
So I was thinking this was more like
02:28:10.210 --> 02:28:13.066
a broader way to do a rock allocation.
02:28:13.066 --> 02:28:15.210
So that is different.
02:28:15.210 --> 02:28:17.147
And just to put a finer point
on that, I mean, this is one
02:28:17.147 --> 02:28:18.789
of the things we're struggling
02:28:18.789 --> 02:28:21.390
with all of these types of proposals
02:28:21.390 --> 02:28:24.200
that have some sort
of mandatory obligation.
02:28:24.200 --> 02:28:25.870
So like, one of the
things that's really hard
02:28:25.870 --> 02:28:29.910
for my clients is, if you
say to one of my members,
02:28:29.910 --> 02:28:32.270
who has demand response capability,
02:28:32.270 --> 02:28:34.300
how interruptible are you?
02:28:34.300 --> 02:28:36.360
How much of your load is interruptible?
02:28:36.360 --> 02:28:38.220
And how much of it is firm?
02:28:38.220 --> 02:28:41.170
They're gonna ask
you, what season is it?
02:28:41.170 --> 02:28:43.380
What day of the month is it?
02:28:43.380 --> 02:28:45.930
What are, you know,
the product that I sell?
02:28:45.930 --> 02:28:47.580
What is the demand for that product?
02:28:47.580 --> 02:28:49.760
Do I have production
quotas with counterparties,
02:28:49.760 --> 02:28:52.000
that I have to meet in a week or not?
02:28:52.000 --> 02:28:54.470
And that's gonna make
their interoperability
02:28:54.470 --> 02:28:57.680
and how they participate
in the market vary wildly.
02:28:57.680 --> 02:28:59.250
And then when you fix those types
02:28:59.250 --> 02:29:03.050
of requirements in
advance, it's not conducive
02:29:03.050 --> 02:29:06.160
to my members being
able to manage their costs
02:29:06.160 --> 02:29:07.920
and participate effectively.
02:29:07.920 --> 02:29:10.720
Now, if you can have
like obligations in advance
02:29:10.720 --> 02:29:13.200
that then if their situation changes,
02:29:13.200 --> 02:29:16.310
they can liquidate that
position in real time.
02:29:16.310 --> 02:29:18.020
That is easier to deal with.
02:29:18.020 --> 02:29:18.900
But some of these things
02:29:18.900 --> 02:29:20.400
that are administratively determined,
02:29:20.400 --> 02:29:23.100
and you pay costs up front,
and then that's what it is.
02:29:23.100 --> 02:29:25.910
That much harder for them to manage.
02:29:25.910 --> 02:29:27.880
So, Katie, thank
you for touching
02:29:27.880 --> 02:29:31.510
on the demand response
impact of some of these proposals.
02:29:31.510 --> 02:29:33.710
What I would like you to address is,
02:29:33.710 --> 02:29:36.580
what is the economic
development impact on some
02:29:36.580 --> 02:29:39.220
of your clients with
some of these proposals?
02:29:39.220 --> 02:29:41.240
Well, like I said,
I think the ones
02:29:41.240 --> 02:29:45.210
that they can understand
like how they can manage it
02:29:45.210 --> 02:29:48.140
or not manage it that I
think that's really helpful.
02:29:48.140 --> 02:29:50.190
One of the things that I've
gotten a lot of questions about
02:29:50.190 --> 02:29:53.740
is we've sort of socialized
the NRG proposal is
02:29:55.787 --> 02:29:58.300
and I asked this at the
workshop the other day
02:29:58.300 --> 02:30:01.720
and there is an answer
but if I'm a large load,
02:30:01.720 --> 02:30:03.790
and I'm looking to site here in Texas,
02:30:03.790 --> 02:30:05.860
and there are these forward obligations,
02:30:05.860 --> 02:30:07.450
I have to not only bottle like,
02:30:07.450 --> 02:30:10.430
what do I think my energy
costs would be in the market or,
02:30:10.430 --> 02:30:12.910
you know, buying
through a rap or whatever?
02:30:12.910 --> 02:30:14.900
But also, there's this new obligation
02:30:14.900 --> 02:30:17.300
that I've somehow got
to figure out how to meet
02:30:17.300 --> 02:30:19.640
and quantify, like, what
that's gonna cost me
02:30:19.640 --> 02:30:22.020
for something like an LSE obligation.
02:30:22.020 --> 02:30:24.040
If that's determined
three years in advance,
02:30:24.040 --> 02:30:26.860
and then somebody is gonna
bring a large new load online.
02:30:26.860 --> 02:30:30.000
No, LSE is gonna
have links sitting there
02:30:30.000 --> 02:30:33.140
to accommodate a huge chemical facility,
02:30:33.140 --> 02:30:35.900
or a huge, you know,
semiconductor manufacturer.
02:30:35.900 --> 02:30:38.140
And so then that puts the load
02:30:38.140 --> 02:30:40.110
in the position of trying to figure out,
02:30:40.110 --> 02:30:41.950
well, how am I gonna get an LSE
02:30:41.950 --> 02:30:43.970
that can cover this off for me, right?
02:30:43.970 --> 02:30:46.490
And the answer has
been, we're gonna create
02:30:46.490 --> 02:30:50.200
this wreck trading
program kind of thing.
02:30:50.200 --> 02:30:53.400
But then, you know, they
don't know what that cost,
02:30:53.400 --> 02:30:54.980
that's an LSU is gonna have to try
02:30:54.980 --> 02:30:57.770
and go out and get that for them.
02:30:57.770 --> 02:30:59.490
It's extremely complicated.
02:30:59.490 --> 02:31:01.710
And and I think that's
what makes it challenging.
02:31:01.710 --> 02:31:04.620
And also what level do they
have to cover off based on,
02:31:04.620 --> 02:31:06.670
are they considered
interruptible or not?
02:31:08.280 --> 02:31:11.290
To what extent do clients
typically hedge other feedstock?
02:31:11.290 --> 02:31:13.420
And how far in advance I
know changed by industry?
02:31:13.420 --> 02:31:15.220
And I don't want ask
any company specifics,
02:31:15.220 --> 02:31:18.100
but like fertilizer, natural gas,
02:31:18.100 --> 02:31:19.560
just by example, not your client.
02:31:19.560 --> 02:31:20.510
I don't know if you have clients,
02:31:20.510 --> 02:31:24.683
but like fertilizer plants, bio
water natural gas features?
02:31:24.683 --> 02:31:27.120
I mean, I do know
that they had natural gas,
02:31:27.120 --> 02:31:30.900
I can't speak to a
lot of the other ones.
02:31:30.900 --> 02:31:32.510
I don't know about.
02:31:32.510 --> 02:31:34.920
I mean, electricity is
another feedstock, right?
02:31:34.920 --> 02:31:35.753
Sure.
02:31:35.753 --> 02:31:36.723
And they do hedge.
02:31:37.980 --> 02:31:39.110
This is the other thing, I mean,
02:31:39.110 --> 02:31:40.880
it kind of depends on
their business model.
02:31:40.880 --> 02:31:44.750
So the ones that have more
predictable interoperability
02:31:44.750 --> 02:31:46.490
where you know, they can kind of turn
02:31:46.490 --> 02:31:49.500
their process off like that,
they tend to hedge less,
02:31:49.500 --> 02:31:52.630
because when prices hedge
less in terms of contracts
02:31:52.630 --> 02:31:55.760
with another Counterparty,
because when prices rise,
02:31:55.760 --> 02:31:57.300
they have a natural hedge of being able
02:31:57.300 --> 02:32:01.150
to turn off, the ones
that can't do that.
02:32:01.150 --> 02:32:02.750
They hedge a lot more.
02:32:02.750 --> 02:32:05.530
And I mean, I like I
said, I can't really speak
02:32:05.530 --> 02:32:07.657
to how long they hedge differences.
02:32:07.657 --> 02:32:11.960
Does that concern
for your clients diminish
02:32:11.960 --> 02:32:15.340
if the forward mandatory
physical hedging
02:32:19.300 --> 02:32:24.090
is a percentage of three
years out and slowly ramps up
02:32:24.090 --> 02:32:27.100
to say, a quarter, it's not
100% until a quarter out
02:32:27.100 --> 02:32:30.870
or something, some
escalating requirement like that.
02:32:30.870 --> 02:32:34.220
And wouldn't that be on LSE as part
02:32:34.220 --> 02:32:36.770
of the risk book rather
than your clients?
02:32:36.770 --> 02:32:38.640
It is their risk.
02:32:38.640 --> 02:32:40.450
But I mean, at some point, they've got
02:32:40.450 --> 02:32:41.900
to recover that from somewhere.
02:32:41.900 --> 02:32:43.570
And if they're gonna get costs assigned
02:32:43.570 --> 02:32:45.780
to them based on our
load, they're gonna want
02:32:45.780 --> 02:32:47.150
to charge those to our load.
02:32:47.150 --> 02:32:48.610
So is it one for one?
02:32:48.610 --> 02:32:49.590
No, probably not.
02:32:49.590 --> 02:32:52.830
But it does tend to increase
the cost that we would be asked
02:32:52.830 --> 02:32:55.937
to recover from us to pay from an LSE.
02:32:59.506 --> 02:33:00.680
And it's like what I said earlier,
02:33:00.680 --> 02:33:03.880
they want the ability
to liquidate a position
02:33:03.880 --> 02:33:06.800
or trade out of a position
closer to real time.
02:33:06.800 --> 02:33:09.450
And I think one of the tensions
here and I don't know how
02:33:09.450 --> 02:33:13.070
to resolve this is that
requires some kind
02:33:13.070 --> 02:33:15.470
of centralized market at some point.
02:33:15.470 --> 02:33:20.190
And the LSE obligation is sort
of premised on avoiding that,
02:33:20.190 --> 02:33:21.750
kind of trying to get to the result
02:33:21.750 --> 02:33:23.330
of a centralized capacity market,
02:33:23.330 --> 02:33:24.837
but avoiding that
centralized procurement
02:33:24.837 --> 02:33:27.160
and the costs associated with it,
02:33:27.160 --> 02:33:29.660
trying to somehow then
translate that into a product
02:33:29.660 --> 02:33:31.130
that you can you liquidate in
02:33:31.130 --> 02:33:33.070
a centralized manner in real time.
02:33:33.070 --> 02:33:34.490
I don't know how to do that.
02:33:34.490 --> 02:33:36.970
I don't know that anybody
knows how to do that.
02:33:36.970 --> 02:33:40.060
So doesn't this take
place, look, again,
02:33:40.060 --> 02:33:44.550
the whole point of the E3 proposal,
02:33:44.550 --> 02:33:47.893
or at least one of the
the crux points of it was,
02:33:49.430 --> 02:33:51.080
again, those LSE are able to offset
02:33:51.080 --> 02:33:53.630
those obligations moving forward, again,
02:33:53.630 --> 02:33:57.940
distributed generation DR
your guys kind of do that a lot.
02:33:57.940 --> 02:33:59.780
I mean, it's one of
the central components
02:33:59.780 --> 02:34:01.882
of manufacturing in Texas.
02:34:01.882 --> 02:34:04.793
And we've set up our
entire system around it.
02:34:06.240 --> 02:34:10.880
So doesn't that sort of offset
the industrial concern here?
02:34:10.880 --> 02:34:13.000
I mean, yeah, you're dealing with an LSE
02:34:13.000 --> 02:34:15.130
for some of your members.
02:34:15.130 --> 02:34:18.870
But again, if they modeled
their business correctly,
02:34:18.870 --> 02:34:20.670
if they've got their own
distributed generation,
02:34:20.670 --> 02:34:24.540
and again, it's credited and
then they offset just doesn't
02:34:24.540 --> 02:34:27.640
that neutralize the
impact to a certain degree?
02:34:27.640 --> 02:34:29.317
I mean, so it goes back
to there's a lot of features
02:34:29.317 --> 02:34:32.933
of this that haven't
been ironed out yet.
02:34:32.933 --> 02:34:34.651
I think it's gonna
be long process anyway.
02:34:34.651 --> 02:34:37.370
Yeah, I know, but at a high
level, the way I understood
02:34:37.370 --> 02:34:39.540
the proposal was that these obligations,
02:34:39.540 --> 02:34:41.430
were gonna get set three years out,
02:34:41.430 --> 02:34:43.860
you didn't have to
come in and show proof
02:34:43.860 --> 02:34:46.540
until I think it's a year before.
02:34:46.540 --> 02:34:49.268
It's a year out.
A year out.
02:34:49.268 --> 02:34:53.110
And you know, the
three year forward setting
02:34:53.110 --> 02:34:56.233
that's really challenging
showing it a year out.
02:34:57.180 --> 02:34:59.430
You know, it's less
challenging than three years,
02:34:59.430 --> 02:35:01.190
but It's not clear to me
02:35:01.190 --> 02:35:03.680
that the obligations change a year out.
02:35:03.680 --> 02:35:06.053
It's just that they
might be traded around.
02:35:07.550 --> 02:35:11.111
But I don't think that we, I
mean, to your point about DER,
02:35:11.111 --> 02:35:14.610
and DG, I mean,
that's still going toward
02:35:14.610 --> 02:35:16.603
what counts in the static look,
02:35:18.851 --> 02:35:21.650
that still doesn't account for
how things actually operate
02:35:21.650 --> 02:35:23.200
in real time and how that interacts
02:35:23.200 --> 02:35:25.650
with what the capacity
obligation was in advance.
02:35:25.650 --> 02:35:28.270
So if I'm a load, and you say,
02:35:28.270 --> 02:35:30.046
how interruptible are you gonna be
02:35:30.046 --> 02:35:32.480
and if you're not as
interruptible, as this,
02:35:32.480 --> 02:35:35.370
you're gonna have to pay a
penalty than my, you know,
02:35:35.370 --> 02:35:36.530
maybe I'm gonna say,
02:35:36.530 --> 02:35:39.090
I'm less interruptible
than I actually am.
02:35:39.090 --> 02:35:40.640
And then I'm gonna hedge for that.
02:35:40.640 --> 02:35:42.230
And then when you get to real time,
02:35:42.230 --> 02:35:44.042
what's my incentive
to interrupt at that point,
02:35:44.042 --> 02:35:46.540
you know, I already paid for whatever,
02:35:46.540 --> 02:35:48.850
you see how it can interfere
02:35:48.850 --> 02:35:50.740
with the real time
performance incentives.
02:35:50.740 --> 02:35:55.400
And that's what I've been
very much wondering about
02:35:55.400 --> 02:35:58.500
and invest, you know, in
our Genie three about it,
02:35:58.500 --> 02:36:01.050
and all the other stakeholders,
02:36:01.050 --> 02:36:03.793
as we look to address
market design changes.
02:36:04.810 --> 02:36:08.860
One very important goal for me anyway,
02:36:08.860 --> 02:36:10.660
and I think I can
speak for my colleagues
02:36:10.660 --> 02:36:13.960
to address operational reliability.
02:36:13.960 --> 02:36:17.500
And, you know, as I think
somebody mentioned earlier,
02:36:17.500 --> 02:36:21.250
maybe it was Dr. Patton,
that said, you know,
02:36:21.250 --> 02:36:25.640
you could accredit a
plant, because you know,
02:36:25.640 --> 02:36:28.150
has firm gas or on site storage,
02:36:28.150 --> 02:36:30.940
and you give them a
higher accreditation,
02:36:30.940 --> 02:36:33.840
but then there's gas that doesn't have
02:36:33.840 --> 02:36:36.340
those components to
it, that could show up
02:36:36.340 --> 02:36:39.590
in a real time condition
where we actually need them.
02:36:39.590 --> 02:36:44.190
But they were disadvantaged
in the accreditation process.
02:36:44.190 --> 02:36:48.330
Also, you know, real time conditions,
02:36:48.330 --> 02:36:51.710
as I noted earlier, you know,
the accreditation process,
02:36:51.710 --> 02:36:53.660
I think the answer has been well,
02:36:53.660 --> 02:36:55.560
you get higher accreditation,
if you're weatherize
02:36:55.560 --> 02:36:56.940
and you have onsite fuel
02:36:56.940 --> 02:36:58.510
and dual fuel capability,
et cetera, et cetera.
02:36:58.510 --> 02:37:02.970
So that may hopefully
address like weather conditions,
02:37:02.970 --> 02:37:05.350
presumably, and then, but then there's
02:37:05.350 --> 02:37:08.620
the real time actual market
conditions when all of a sudden,
02:37:08.620 --> 02:37:10.660
we have higher than expected demand.
02:37:10.660 --> 02:37:13.547
And renewable generation
drops off or thermal generation,
02:37:13.547 --> 02:37:17.870
we have a higher than expected
level of generation outages.
02:37:17.870 --> 02:37:22.870
And then at that point,
that's what I'm wondering like,
02:37:23.240 --> 02:37:24.150
where we go from there?
02:37:24.150 --> 02:37:26.660
Do we just turn to our
ancillary service market
02:37:26.660 --> 02:37:28.890
or, like, how does it work?
02:37:28.890 --> 02:37:31.020
I can focus on that area.
02:37:31.020 --> 02:37:32.890
If I can jump in
there, just real quickly
02:37:32.890 --> 02:37:33.910
to describe that goods, the way
02:37:33.910 --> 02:37:35.890
that we see it playing
out is that, you know,
02:37:35.890 --> 02:37:38.140
really, this is just
an additional layer,
02:37:38.140 --> 02:37:40.760
that's a three year
ahead, forward look based
02:37:40.760 --> 02:37:42.810
on physical capability, right?
02:37:42.810 --> 02:37:45.160
Then it's far enough
out that there's still time
02:37:45.160 --> 02:37:46.070
to do something about it.
02:37:46.070 --> 02:37:47.960
If it looks like you're gonna be short.
02:37:47.960 --> 02:37:49.890
It doesn't supplant, you know,
02:37:49.890 --> 02:37:53.170
or replace any of the hedging
the activities that would need
02:37:53.170 --> 02:37:56.160
to happen, it doesn't necessarily
replace an ORDC reform
02:37:56.160 --> 02:37:57.960
that still provides
all of those incentives
02:37:57.960 --> 02:37:59.910
to get the plants operational, have them
02:37:59.910 --> 02:38:01.640
perform in real time, it doesn't replace
02:38:01.640 --> 02:38:03.370
the ancillary service requirements,
02:38:03.370 --> 02:38:05.160
that we're talking about the four hour,
02:38:05.160 --> 02:38:06.340
you know, flexibility requirement
02:38:06.340 --> 02:38:08.440
that helps us address the
dark curve and all the wind
02:38:08.440 --> 02:38:09.530
and solar ends, do we still have
02:38:09.530 --> 02:38:12.610
to have all the operational
incentives lined up as well.
02:38:12.610 --> 02:38:15.850
This is just an additional
layer of insurance that says,
02:38:15.850 --> 02:38:17.510
I know that I need at least
02:38:17.510 --> 02:38:20.070
this much physical
capability on the system.
02:38:20.070 --> 02:38:22.180
And you do that look
far enough out in time
02:38:22.180 --> 02:38:24.980
to where there's still time for
a new investment to come on.
02:38:24.980 --> 02:38:26.720
And maybe somebody
hadn't already been planning.
02:38:26.720 --> 02:38:29.780
Okay, compare
and contrast to some
02:38:29.780 --> 02:38:31.730
of those other insurance
policy proposals
02:38:31.730 --> 02:38:34.410
that are out there,
like a Bistra or NextEra,
02:38:34.410 --> 02:38:38.460
that seem to be more right
sized for certain conditions?
02:38:40.790 --> 02:38:41.770
Yeah, so good question.
02:38:41.770 --> 02:38:43.010
So a couple of differences.
02:38:43.010 --> 02:38:44.350
I think some of those proposals
02:38:44.350 --> 02:38:46.060
that are more kind
of seasonal proposals,
02:38:46.060 --> 02:38:49.480
those are meant to take a
certain proportion of the capacity
02:38:49.480 --> 02:38:52.320
and target that and set
that aside to make sure
02:38:52.320 --> 02:38:54.080
that at least that amount,
and it's a much smaller amount,
02:38:54.080 --> 02:38:56.930
a few 1000, megawatts,
8000, whatever it is,
02:38:56.930 --> 02:38:59.950
are ready to go and able
to provide a reserve service
02:38:59.950 --> 02:39:02.700
on let's say, a quarterly
or a seasonal basis,
02:39:02.700 --> 02:39:05.178
whereas ours is much more
like Dr. Patton's proposal.
02:39:05.178 --> 02:39:07.040
It's market wide,
it's the entire market.
02:39:07.040 --> 02:39:08.930
We wanna know how many megawatts
02:39:08.930 --> 02:39:10.990
of load we expect to have, under
02:39:10.990 --> 02:39:12.670
a whole bunch of different
weather conditions,
02:39:12.670 --> 02:39:14.840
and how many megawatts
of effective capability
02:39:14.840 --> 02:39:18.070
with that the entire fleet provides you.
02:39:18.070 --> 02:39:20.880
So it's much more of a
comprehensive system wide look,
02:39:20.880 --> 02:39:22.490
and that gives you some assurance,
02:39:22.490 --> 02:39:24.410
then that when you get into
02:39:24.410 --> 02:39:25.640
these really difficult conditions
02:39:25.640 --> 02:39:28.510
that the system is
gonna be able to perform,
02:39:28.510 --> 02:39:30.300
but it's just as simple physical look,
02:39:30.300 --> 02:39:31.990
I think it's actually less burdensome
02:39:31.990 --> 02:39:35.360
on the LLSE than the
hedging requirement.
02:39:35.360 --> 02:39:36.940
Because that now gets into well,
02:39:36.940 --> 02:39:38.920
how much hedging should
there be what proportion
02:39:38.920 --> 02:39:40.480
of your portfolio should you be hedged
02:39:40.480 --> 02:39:42.500
on energy basis on $1 basis,
02:39:42.500 --> 02:39:45.220
or different LSE have
different hedging strategies,
02:39:45.220 --> 02:39:47.400
already, you're getting
way into their business
02:39:47.400 --> 02:39:49.600
of how hedged they want their portfolio
02:39:49.600 --> 02:39:51.420
to be rare as we're just saying.
02:39:51.420 --> 02:39:53.660
It's just a physical capability
that everyone needs
02:39:53.660 --> 02:39:54.920
to do their share to make sure
02:39:54.920 --> 02:39:56.950
there's enough resources online so
02:39:56.950 --> 02:39:59.190
that the market can
clear when people want
02:39:59.190 --> 02:40:02.543
to do both hedging and
real time transactions.
02:40:04.160 --> 02:40:05.800
Okay, may have missed this,
02:40:05.800 --> 02:40:08.150
but we've covered a lot of ground today,
02:40:08.150 --> 02:40:10.810
three years versus the one year.
02:40:10.810 --> 02:40:12.550
What does that get us in the system?
02:40:12.550 --> 02:40:14.740
I mean, it allows people
to build a power plant,
02:40:14.740 --> 02:40:16.307
apparently, in three years, you know,
02:40:16.307 --> 02:40:21.060
and get themselves right
with the system, but what else?
02:40:21.060 --> 02:40:22.920
Yeah, so that's
the main rationale
02:40:22.920 --> 02:40:24.370
for the three year
hedge forward look is.
02:40:24.370 --> 02:40:26.230
No, the power plant?
Enough time that you
02:40:26.230 --> 02:40:28.130
can actually remedy the situation
02:40:28.130 --> 02:40:31.840
with steel in the ground, if
you're looking season ahead,
02:40:31.840 --> 02:40:34.710
you really are just limited to hedging,
02:40:34.710 --> 02:40:37.830
you know, maybe doing
some maintenance deferral,
02:40:37.830 --> 02:40:39.440
you really are limited to the resources
02:40:39.440 --> 02:40:41.910
that you've already have in the ground,
02:40:41.910 --> 02:40:43.330
and making sure that
they were available,
02:40:43.330 --> 02:40:45.940
you really don't have
the remedy of looking out
02:40:45.940 --> 02:40:48.250
and developing something new.
02:40:48.250 --> 02:40:51.640
So the system I look
would be three years out.
02:40:51.640 --> 02:40:53.330
But there's but we also recognize
02:40:53.330 --> 02:40:55.640
that not everyone knows
what their load obligations
02:40:55.640 --> 02:40:56.920
will be three years out.
02:40:56.920 --> 02:40:59.350
So that's why there's a notice period
02:40:59.350 --> 02:41:01.850
that says in two years,
there's gonna be a form
02:41:01.850 --> 02:41:04.170
of showing by then
we'll have a better idea
02:41:04.170 --> 02:41:06.602
of what each of these
obligations are going to be.
02:41:06.602 --> 02:41:11.030
And then here's your what
your proportion would be.
02:41:11.030 --> 02:41:14.020
And then then come up
with the form of showing
02:41:14.020 --> 02:41:15.390
that says you're doing your part.
02:41:15.390 --> 02:41:17.700
I don't think this may or
may not be part of the purpose.
02:41:17.700 --> 02:41:19.050
But I think about if you think back
02:41:19.050 --> 02:41:21.930
to one of these first work
sessions, like in June,
02:41:21.930 --> 02:41:24.270
when Ice presented the forward curve,
02:41:24.270 --> 02:41:26.323
remember what product it was.
02:41:27.470 --> 02:41:30.070
And it was backward related.
02:41:30.070 --> 02:41:32.223
And so if you're an investor,
02:41:34.270 --> 02:41:37.570
and typically you literally
put those prices in oil, gas,
02:41:37.570 --> 02:41:40.090
soybeans, whatever, you put those prices
02:41:40.090 --> 02:41:43.810
at your revenue discounted
for any differential, whatever.
02:41:43.810 --> 02:41:46.980
But if the market is telling you,
02:41:46.980 --> 02:41:49.310
your revenues are going down,
02:41:49.310 --> 02:41:51.410
because the only thing
they have to look at right now
02:41:51.410 --> 02:41:56.410
is the CDR, which claims at
28% reserve margin when we know
02:41:57.210 --> 02:42:00.905
that on a bad day,
it's really five or six.
02:42:00.905 --> 02:42:01.970
Right.
02:42:01.970 --> 02:42:03.540
You've got no reason to invest.
02:42:03.540 --> 02:42:07.770
But I think a byproduct of a market wide
02:42:07.770 --> 02:42:10.410
essentially saying we need the market
02:42:10.410 --> 02:42:14.810
to be reliable, every day, all day.
02:42:14.810 --> 02:42:16.210
And we're gonna require people
02:42:16.210 --> 02:42:18.463
to put a bid out there in the future.
02:42:19.461 --> 02:42:23.330
You're also requiring them
to show what they're willing
02:42:23.330 --> 02:42:28.200
to pay for a reliable asset
three years from now.
02:42:28.200 --> 02:42:30.500
In April 2024 or whatever.
And I agree with it,
02:42:30.500 --> 02:42:33.400
and I think your summaries
absolutely spot on.
02:42:33.400 --> 02:42:37.330
My point is, is that kind of
with all the other movements
02:42:37.330 --> 02:42:40.200
that have been suggested
by you to stakeholders,
02:42:40.200 --> 02:42:43.240
and that we had talked
about leading up to this point.
02:42:43.240 --> 02:42:46.040
And again, that layered
strategy on dispatch ability
02:42:46.040 --> 02:42:50.160
and paying for it, from
where we came from in 2013,
02:42:50.160 --> 02:42:53.580
to now is light years, I mean,
to what we're talking about,
02:42:53.580 --> 02:42:55.170
and we were talking
about a lot of stuff.
02:42:55.170 --> 02:42:59.430
So MCL movement on ORDC
that means more consistent,
02:42:59.430 --> 02:43:00.810
you know, reaching high cap,
02:43:00.810 --> 02:43:02.890
that means more money into this market.
02:43:02.890 --> 02:43:05.930
Now with, you know, any
type of firming obligation,
02:43:05.930 --> 02:43:08.580
three years out, I mean,
that's a lot of liquidity plus,
02:43:08.580 --> 02:43:10.070
you're hitting more consistent,
02:43:10.070 --> 02:43:12.550
plus the odds of you
hitting more high caps
02:43:12.550 --> 02:43:15.680
because of increased
penetration by solar, you know,
02:43:15.680 --> 02:43:17.823
and then curves occurring more often.
02:43:18.730 --> 02:43:22.810
That's a lot of money
coming into the market.
02:43:22.810 --> 02:43:25.210
In my view, I'm just
hearing a lot of money
02:43:25.210 --> 02:43:27.260
starting to come into this market.
02:43:27.260 --> 02:43:28.370
And then the other
thing is changes
02:43:28.370 --> 02:43:31.610
that you all make
impact the forward curves
02:43:31.610 --> 02:43:34.680
for years in advance, even
if they don't dictate what
02:43:34.680 --> 02:43:36.600
that price is gonna be years in advance
02:43:36.600 --> 02:43:38.490
or set a price years in advance. right?
02:43:38.490 --> 02:43:41.590
So I do think, you know, if
you do one of these things,
02:43:41.590 --> 02:43:44.910
that's gonna procure more
dispatchable every day
02:43:44.910 --> 02:43:46.350
and assign a value to it.
02:43:46.350 --> 02:43:49.250
Even though you're not doing
that three years in advance,
02:43:49.250 --> 02:43:50.910
the market will be able to rationalize
02:43:50.910 --> 02:43:52.450
that three years in advance, as long
02:43:52.450 --> 02:43:55.390
as the structure stays, you know.
02:43:55.390 --> 02:43:57.163
Consistent.
Consistent, yes.
02:43:57.163 --> 02:43:58.830
And the only reason
I flagged it now is
02:43:58.830 --> 02:44:01.440
because one of the
topics that keeps coming up
02:44:01.440 --> 02:44:04.207
and your group has already identified it
02:44:04.207 --> 02:44:06.840
and then that attempt to
do address it is the liquidity
02:44:06.840 --> 02:44:08.200
of the market three years in advance
02:44:08.200 --> 02:44:11.620
those independent retailers
trying to buy those blocks
02:44:11.620 --> 02:44:14.230
or enter the market, you
know, this new entrance
02:44:14.230 --> 02:44:16.050
to be so well capitalized where
02:44:17.234 --> 02:44:19.990
they can be firm enough or.
02:44:19.990 --> 02:44:20.823
Working capital.
02:44:20.823 --> 02:44:22.830
Yeah, working capital
three years in advance,
02:44:22.830 --> 02:44:24.715
you know, so it's a
little bit higher road.
02:44:24.715 --> 02:44:26.348
Is that good or bad?
02:44:26.348 --> 02:44:28.610
I don't know, I'm
thinking about it.
02:44:28.610 --> 02:44:30.010
Well, again, just to be clear,
02:44:30.010 --> 02:44:32.427
the obligation becomes
formal one year in advance.
02:44:32.427 --> 02:44:33.990
Right.
The three year in advance
02:44:33.990 --> 02:44:35.880
is just the ERCOT wide look
02:44:35.880 --> 02:44:38.070
that says we need X
amount of total capability.
02:44:38.070 --> 02:44:39.790
We haven't divided it
up among the LSEs yet
02:44:39.790 --> 02:44:42.354
until much closer in time
to when they know what
02:44:42.354 --> 02:44:44.493
their loan obligations are gonna be.
02:44:47.260 --> 02:44:48.950
I know I've asked
this question a lot
02:44:48.950 --> 02:44:52.300
and I'm trying to
understand it sounds like
02:44:52.300 --> 02:44:53.640
at least setting the framework
02:44:53.640 --> 02:44:56.270
of how it'll work would provide
02:44:56.270 --> 02:44:57.840
that one year three year
02:44:57.840 --> 02:45:01.253
out liquidity investments potentially.
02:45:02.540 --> 02:45:04.330
I'm just wondering
how long it's gonna take
02:45:04.330 --> 02:45:06.630
to get that framework in place.
02:45:06.630 --> 02:45:10.330
These are, you know,
in Brattle, you know,
02:45:10.330 --> 02:45:11.793
Sam and Kathleen.
02:45:14.790 --> 02:45:16.640
I really would like to
get a little bit more input
02:45:16.640 --> 02:45:17.860
from you all.
02:45:17.860 --> 02:45:22.860
I know that we took a ride
towards this path in 2012.
02:45:24.380 --> 02:45:29.380
And I went back and looked
at the report you provided us
02:45:29.637 --> 02:45:31.520
and some of the subsequent answers
02:45:31.520 --> 02:45:35.230
and to before technical conference.
02:45:35.230 --> 02:45:39.210
And I'm just gonna sort
of give you some blurbs
02:45:39.210 --> 02:45:41.839
from your report and from the response.
02:45:41.839 --> 02:45:45.370
And one of them, I think
I really wanna focus in on
02:45:45.370 --> 02:45:46.800
because I just wanna see
02:45:46.800 --> 02:45:48.660
if anything has changed from back then.
02:45:48.660 --> 02:45:50.730
I know our market
has definitely changed.
02:45:50.730 --> 02:45:54.350
But the primary disadvantage of imposing
02:45:54.350 --> 02:45:56.800
a resource adequacy
requirement on LSE is not
02:45:56.800 --> 02:46:00.270
that the approach is that
the approach is complicated,
02:46:00.270 --> 02:46:02.260
incur substantial implementation costs
02:46:02.260 --> 02:46:03.150
or requires a number
02:46:03.150 --> 02:46:06.500
of new design elements to be introduced.
02:46:06.500 --> 02:46:10.540
Then I go to a chart that
was filed after this report.
02:46:10.540 --> 02:46:15.540
And it says that the risk to
investors medium to high.
02:46:18.220 --> 02:46:23.160
And then let me
actually quote something,
02:46:23.160 --> 02:46:24.310
another piece from the report,
02:46:24.310 --> 02:46:26.910
because this is kind
of what I've been sort
02:46:26.910 --> 02:46:31.280
of zooming in on a
little bit is with respect
02:46:31.280 --> 02:46:33.030
to the retail market.
02:46:33.030 --> 02:46:35.290
And what that, you know,
02:46:35.290 --> 02:46:40.290
in your report, you talk
about how a disadvantage is
02:46:40.900 --> 02:46:45.180
that the requirement, the
LSE obligation requirement,
02:46:45.180 --> 02:46:48.220
cannot be imposed on a four
basis due to the stranded costs,
02:46:48.220 --> 02:46:50.520
risks that would be
imposed on reps in ERCOT,
02:46:50.520 --> 02:46:51.820
retail choice environment.
02:46:54.910 --> 02:46:58.290
Can you speak to
some of these statements
02:46:58.290 --> 02:46:59.330
you've made in the past, and let me know
02:46:59.330 --> 02:47:01.960
if there's any difference
from then to now?
02:47:01.960 --> 02:47:03.730
Yeah, sure thing.
02:47:03.730 --> 02:47:06.300
So I think a lot of the issues
02:47:06.300 --> 02:47:07.960
that we flagged then are really the same
02:47:07.960 --> 02:47:10.490
that we've been discussing today.
02:47:10.490 --> 02:47:12.763
So for example, forward obligation.
02:47:13.670 --> 02:47:14.750
Three years forward,
02:47:14.750 --> 02:47:19.750
if you impose an obligation
such as this on retailers,
02:47:20.350 --> 02:47:21.980
it would be very challenging for them
02:47:21.980 --> 02:47:23.740
to know how many customers
02:47:23.740 --> 02:47:25.760
they're gonna have three
years from now, right?
02:47:25.760 --> 02:47:27.980
So that was the issue identified.
02:47:27.980 --> 02:47:31.730
That's why you move
that requirement as close
02:47:31.730 --> 02:47:34.750
to the prompt timeframe as possible.
02:47:34.750 --> 02:47:39.750
If you don't have a LSE, like
an agnostic for procurement.
02:47:40.030 --> 02:47:42.240
So if you do for procurement,
you don't wanna impose
02:47:42.240 --> 02:47:46.320
that on individual
entity LSE for showing
02:47:46.320 --> 02:47:48.203
I think that's still true today.
02:47:49.180 --> 02:47:52.530
In terms of the implementation costs,
02:47:52.530 --> 02:47:54.560
I think we need to put that in context
02:47:54.560 --> 02:47:57.070
to the other options on the table.
02:47:57.070 --> 02:47:59.780
I think the costs of
implementing that, you know,
02:47:59.780 --> 02:48:01.040
in today's environment, first of all,
02:48:01.040 --> 02:48:02.790
they're absolutely negligible compared
02:48:02.790 --> 02:48:06.350
to the size of the problem,
we're talking about solving.
02:48:06.350 --> 02:48:08.860
So they are substantial.
02:48:08.860 --> 02:48:10.890
And they come in the form of, you know,
02:48:10.890 --> 02:48:14.460
timeline to implement upgrades to,
02:48:14.460 --> 02:48:16.960
you know, various systems and so on.
02:48:16.960 --> 02:48:19.271
But you don't you're talking about,
02:48:19.271 --> 02:48:22.780
you know, 10s of millions or
up to 50 million or something
02:48:22.780 --> 02:48:25.790
and implementation costs,
but compared to the size
02:48:25.790 --> 02:48:27.240
of the problem we're solving,
02:48:28.920 --> 02:48:30.730
it's more about timeline, I would say.
02:48:30.730 --> 02:48:32.518
I'd like to add a
couple of things.
02:48:32.518 --> 02:48:34.157
Well, you go ahead but I wanna respond.
02:48:34.157 --> 02:48:36.877
Can you respond to this
first because its important.
02:48:38.580 --> 02:48:42.550
Risks investors,
medium to high.
02:48:42.550 --> 02:48:44.300
What did you mean, if you can remember?
02:48:44.300 --> 02:48:45.610
Can you remind me what it says
02:48:45.610 --> 02:48:48.110
under centralized
capacity market for that?
02:48:48.110 --> 02:48:49.750
Yeah, we need to say it
in in context to the other.
02:48:49.750 --> 02:48:51.470
Right yeah.
Things it was compared to.
02:48:51.470 --> 02:48:52.303
Yeah.
02:48:52.303 --> 02:48:54.810
It was compared
to pure energy only
02:48:54.810 --> 02:48:56.570
with market base reserve margin,
02:48:56.570 --> 02:48:59.940
which is kind of what we had
back then without ORDC adders
02:48:59.940 --> 02:49:01.860
to energy only with adders
02:49:01.860 --> 02:49:03.730
to support target reserve margin would,
02:49:03.730 --> 02:49:05.130
which is where we're at now.
02:49:06.650 --> 02:49:09.110
And then a centralized capacity market.
02:49:09.110 --> 02:49:11.720
Yeah, well, I also wanna add
02:49:11.720 --> 02:49:14.240
that you missed one of the concerns,
02:49:14.240 --> 02:49:16.730
which is market power in a bilateral,
02:49:16.730 --> 02:49:20.330
see it's actually the concept
02:49:20.330 --> 02:49:22.910
the problem itself that it's solving.
02:49:22.910 --> 02:49:24.970
What's the demand
our resources accredited,
02:49:24.970 --> 02:49:28.030
that's all fairly similar to a
centralized capacity market.
02:49:28.030 --> 02:49:29.170
It's just that you don't have
02:49:29.170 --> 02:49:31.320
a centralized auction, it's bilateral.
02:49:31.320 --> 02:49:34.483
And actually the biggest
problem is that in that context,
02:49:36.090 --> 02:49:38.000
if it were purely bilateral,
02:49:38.000 --> 02:49:41.350
you cannot I don't think
satisfactorily mitigate
02:49:41.350 --> 02:49:46.350
the structural market power
that exists in selling a product
02:49:47.000 --> 02:49:50.120
to meet peak load plus of reserve margin
02:49:50.120 --> 02:49:51.580
or a high measure of peak load,
02:49:51.580 --> 02:49:54.350
there's structural market
power that has to be addressed.
02:49:54.350 --> 02:49:58.550
And it could be and I was
actually having a side chat
02:49:58.550 --> 02:50:01.820
with like a session talk about that.
02:50:01.820 --> 02:50:05.810
But let's just say an
idea that, you know,
02:50:05.810 --> 02:50:10.270
you might have to require
the biggest generators
02:50:12.640 --> 02:50:17.073
to have to sell all their capacity,
02:50:18.490 --> 02:50:21.420
offering it at cost in an auction,
02:50:21.420 --> 02:50:25.510
maybe administered by market,
buyers could decide whether
02:50:25.510 --> 02:50:28.330
to buy there or in the bilateral market,
02:50:28.330 --> 02:50:30.110
you'd have to do
something where you're able
02:50:30.110 --> 02:50:33.580
to make sure that the largest
generators aren't economically
02:50:33.580 --> 02:50:35.770
or physically withholding
from the market.
02:50:35.770 --> 02:50:38.940
Don't be distracted by this is
even more fundamental than,
02:50:38.940 --> 02:50:42.150
you know, how much they
would charge some other retailer.
02:50:42.150 --> 02:50:44.250
And don't be distracted
by when they say,
02:50:44.250 --> 02:50:46.370
no, we're also a
retailer, we're a buyer,
02:50:46.370 --> 02:50:47.980
that's not really true.
02:50:47.980 --> 02:50:50.170
They don't have long
term obligations such
02:50:50.170 --> 02:50:52.200
that they have a short
position in the market,
02:50:52.200 --> 02:50:53.430
they are long in the market,
02:50:53.430 --> 02:50:55.850
they do well, when prices are high.
02:50:55.850 --> 02:50:57.120
The biggest problem here
02:50:57.120 --> 02:51:00.260
is market power by large generators.
02:51:00.260 --> 02:51:02.740
And that would have to be addressed.
02:51:02.740 --> 02:51:04.990
That was our biggest
problem with it, then.
02:51:04.990 --> 02:51:06.650
And it would be now if you thought
02:51:06.650 --> 02:51:08.060
let's just do it bilaterally.
02:51:08.060 --> 02:51:10.203
You have to have some
way to address that.
02:51:11.150 --> 02:51:13.530
As for the risk for investors, look,
02:51:13.530 --> 02:51:15.900
this is gonna be a risky
business no matter what
02:51:15.900 --> 02:51:17.530
I think we'll have to see if
02:51:17.530 --> 02:51:19.970
no design was low, except if we talked
02:51:19.970 --> 02:51:23.823
about some you know,
undesirable re-regulate?
02:51:25.721 --> 02:51:28.200
Well, you did have
low for an interview only
02:51:28.200 --> 02:51:30.155
with a backstop
procurement out of minimum.
02:51:30.155 --> 02:51:31.548
He didn't like it
(muffled speaking).
02:51:31.548 --> 02:51:32.766
We actually had lower
economic efficiency.
02:51:32.766 --> 02:51:35.092
Sorry, all of them are high.
02:51:35.092 --> 02:51:37.300
(crowd laughing)
02:51:37.300 --> 02:51:40.230
So my generator
friends are probably angry
02:51:40.230 --> 02:51:44.050
what I just said, but I will
tell you that the business
02:51:44.050 --> 02:51:46.150
that they're in is a tough business.
02:51:46.150 --> 02:51:47.113
It's risky.
02:51:48.050 --> 02:51:51.350
And, you know, you can't
expect them to do things forever
02:51:51.350 --> 02:51:52.370
without paying them for it.
02:51:52.370 --> 02:51:55.610
So that's, maybe they'll
like that I told you that part.
02:51:55.610 --> 02:51:57.210
Fair enough.
02:51:57.210 --> 02:51:59.860
Being mindful of the clock,
we got five minutes left,
02:52:01.869 --> 02:52:05.637
I wanna offer one closing
thought and then obviously,
02:52:06.560 --> 02:52:08.373
hear from my fellow Commissioners.
02:52:09.830 --> 02:52:13.800
I started the day by talking
about optimizing our portfolio
02:52:13.800 --> 02:52:18.260
and one of the things
about the accreditation
02:52:18.260 --> 02:52:23.260
that is not concerning
but is a problem I'd love
02:52:23.690 --> 02:52:25.280
as we go continue to move forward.
02:52:25.280 --> 02:52:26.610
I'd love to hear more about not now
02:52:26.610 --> 02:52:31.463
because we're leaving
it for the kind of like
02:52:32.430 --> 02:52:34.840
what Katie said, like the
ability to hedge a portfolio
02:52:34.840 --> 02:52:38.020
in real time is a
feature of this market.
02:52:38.020 --> 02:52:41.910
And if you accredit
wind, solar, et cetera,
02:52:41.910 --> 02:52:43.810
only a certain percent like yes,
02:52:43.810 --> 02:52:46.410
that's being realistic
about our resources,
02:52:46.410 --> 02:52:49.210
but afford obligation that's married
02:52:49.210 --> 02:52:52.580
to those accreditation standards,
02:52:52.580 --> 02:52:57.340
and limits the ability to
flex in real time between
02:52:57.340 --> 02:52:59.900
if the winds blowing gas prices are $6,
02:52:59.900 --> 02:53:02.750
I'm deploying my wind
resource, the winds not blowing
02:53:02.750 --> 02:53:05.340
and coal is cheaper
than gas, this heat, right?
02:53:05.340 --> 02:53:07.940
I'm deploying my coal.
02:53:07.940 --> 02:53:12.790
So I'll just ask everybody involved
02:53:12.790 --> 02:53:17.790
to think about how do we
capture the feature of yes,
02:53:19.700 --> 02:53:24.130
we want the entire market
to be reliable every day,
02:53:24.130 --> 02:53:27.905
while still also
allowing our participants
02:53:27.905 --> 02:53:30.740
that real time or near real time
02:53:30.740 --> 02:53:33.720
portfolio optimization flexibility,
02:53:33.720 --> 02:53:38.720
without requiring ERCOT
to administer an ice or CME,
02:53:38.940 --> 02:53:41.623
like centrally cleared market stuff.
02:53:43.350 --> 02:53:46.080
And that's where I'm
coming from how do we ensure
02:53:46.080 --> 02:53:51.080
a year round reliability and
address the operational issues
02:53:51.770 --> 02:53:55.150
that we are have been faced
with could be faced with again,
02:53:55.150 --> 02:53:57.219
in some form or fashion in
the future and are being faced
02:53:57.219 --> 02:53:59.810
with and what I mean
by that is cold weather
02:53:59.810 --> 02:54:03.493
and a tremendous amount
of variability on our system.
02:54:05.820 --> 02:54:09.210
And oftentimes, real time
conditions that we're having
02:54:09.210 --> 02:54:12.450
to deal with as a result
of that, but also you know,
02:54:12.450 --> 02:54:15.000
just higher than demand
higher than expected demand
02:54:16.780 --> 02:54:18.590
in conjunction or separately
02:54:18.590 --> 02:54:23.410
from higher than expected generation,
02:54:25.780 --> 02:54:27.890
higher than expected
lower generation output
02:54:27.890 --> 02:54:30.240
and that could be wind,
solar and even thermal.
02:54:31.680 --> 02:54:36.680
So that's how we classify
operational reliability issues we
02:54:36.990 --> 02:54:39.370
that I would like to
solve for, in addition
02:54:39.370 --> 02:54:44.370
to providing a bedrock of as
a bedrock as we can provide
02:54:48.070 --> 02:54:53.070
of year round reliability
for the public and Texans.
02:54:58.590 --> 02:55:02.957
Kind of the bottom line
then, all right we closed.
02:55:02.957 --> 02:55:05.382
I'll yield my one minute back.
02:55:05.382 --> 02:55:06.810
(crowd laughing)
02:55:06.810 --> 02:55:09.070
Will make an exception for it.
02:55:09.070 --> 02:55:10.023
So do I get two?
02:55:15.490 --> 02:55:17.380
I guess I just wanna
thank all the participants.
02:55:17.380 --> 02:55:20.700
I mean, we've gone
I put in a lot of work,
02:55:20.700 --> 02:55:23.060
have done a lot of effort.
02:55:23.060 --> 02:55:24.253
It's a good discussion.
02:55:25.090 --> 02:55:26.940
You know, I hope that we come
02:55:26.940 --> 02:55:30.270
to the conclusion that
creates the right investment
02:55:31.910 --> 02:55:33.500
atmosphere, that's what we need.
02:55:33.500 --> 02:55:34.370
That's what we want.
02:55:34.370 --> 02:55:37.700
And certainty is I think,
02:55:37.700 --> 02:55:39.010
the name of the game going forward.
02:55:39.010 --> 02:55:41.820
How do we get it we
set it and we keep it.
02:55:41.820 --> 02:55:43.500
So thanks.
02:55:43.500 --> 02:55:46.513
All these smart people are
not procure to small expense.
02:55:47.920 --> 02:55:50.883
And I would like to thank
the stakeholders for that.
02:55:52.060 --> 02:55:56.300
The effort is, as noted, and on behalf
02:55:56.300 --> 02:55:58.570
of public we'd like to thank you.
02:55:58.570 --> 02:55:59.820
This has been productive.
02:56:01.270 --> 02:56:02.560
Well put.
02:56:02.560 --> 02:56:03.830
Many, many thanks.
02:56:03.830 --> 02:56:08.640
And 3:59 at 43 seconds
there being no further business.
02:56:08.640 --> 02:56:10.190
This meeting of the
Public Utility Commission
02:56:10.190 --> 02:56:12.043
of Texas hereby adjourned.