WEBVTT 00:00:04.531 --> 00:00:07.198 (gavel banging) 00:00:08.130 --> 00:00:10.740 Right, we will reconvene this work session 00:00:10.740 --> 00:00:13.300 of the Public Utility Commission of Texas. 00:00:13.300 --> 00:00:16.463 I think we covered all of the first bucket 00:00:19.770 --> 00:00:21.840 or the primary topics in the first bucket 00:00:21.840 --> 00:00:26.840 of SB3 related changes. 00:00:27.160 --> 00:00:32.160 We've designated the second part of our work session today 00:00:32.160 --> 00:00:37.090 to talk about another, 00:00:37.090 --> 00:00:41.410 what I call above and beyond more fundamental changes 00:00:42.730 --> 00:00:45.240 that I believe that SB2, 00:00:45.240 --> 00:00:47.763 the spirit of SB2 directed us to do. 00:00:48.750 --> 00:00:50.220 A lot of the things we talked about this morning 00:00:50.220 --> 00:00:53.300 were mechanisms that have been used before, 00:00:53.300 --> 00:00:54.550 or were already in place. 00:00:56.720 --> 00:00:59.720 That doesn't diminish the value of making those changes. 00:00:59.720 --> 00:01:04.720 But I'm also confident that we need to not, 00:01:07.290 --> 00:01:08.690 we can't stop there. 00:01:08.690 --> 00:01:13.200 We need to strongly and thoroughly consider 00:01:13.200 --> 00:01:18.017 additional changes to firm up our market. 00:01:20.240 --> 00:01:22.540 As we've said multiple times, 00:01:22.540 --> 00:01:25.080 I think we're solving two problems. 00:01:25.080 --> 00:01:26.880 We're solving an extreme weather event problem, 00:01:26.880 --> 00:01:27.970 as we saw last February, 00:01:27.970 --> 00:01:30.940 and we're also solving the blue sky problem. 00:01:30.940 --> 00:01:32.940 When we have resource adequacy challenges 00:01:32.940 --> 00:01:36.980 on a perfectly normal day with beautiful blue skies, 00:01:36.980 --> 00:01:41.860 like we saw last April, and June, and July, and August, 00:01:41.860 --> 00:01:46.860 and late October, that is a substantial challenge. 00:01:50.930 --> 00:01:52.920 We have plenty of generation in Texas. 00:01:52.920 --> 00:01:55.540 We've got over 110,000 megawatts installed 00:01:56.681 --> 00:02:01.127 and our highest peak load demand, I think was 76,000. 00:02:03.120 --> 00:02:06.010 The peak this summer was 75,000. 00:02:06.010 --> 00:02:07.760 We've got a hundred and 110,000. 00:02:07.760 --> 00:02:09.370 We've got plenty of generation, 00:02:09.370 --> 00:02:12.510 but a good portion of that is not firmed up. 00:02:12.510 --> 00:02:17.510 It can disappear leaving us with just the 75,000 megawatts 00:02:18.120 --> 00:02:20.980 that we have of dispatchable. 00:02:20.980 --> 00:02:22.770 SB3 calls for fundamental change 00:02:25.230 --> 00:02:29.040 and the regular resource adequacy challenges 00:02:29.040 --> 00:02:33.360 that we face periodically are I think, 00:02:33.360 --> 00:02:36.810 giant red flags waving in our face that we need 00:02:37.900 --> 00:02:41.238 in addition to all the changes we discussed this morning, 00:02:41.238 --> 00:02:43.760 above and beyond fundamental change, 00:02:43.760 --> 00:02:45.140 that firms up our grid. 00:02:45.140 --> 00:02:46.440 We've got plenty of generation. 00:02:46.440 --> 00:02:48.850 We need more firm dispatchable generation and that direction 00:02:48.850 --> 00:02:52.480 was clear in SB3 in the Governor's letter 00:02:52.480 --> 00:02:55.030 and other direction from the legislature. 00:02:55.030 --> 00:02:58.420 I don't know exactly what a a firming mechanism looks like. 00:02:58.420 --> 00:03:01.403 There are a variety of ways to accomplish that. 00:03:02.630 --> 00:03:04.683 As you heard at our last work session, 00:03:05.520 --> 00:03:08.976 so far I think the LSE, some version of an LSE obligation 00:03:08.976 --> 00:03:13.976 is the best solution I've heard so far. 00:03:16.300 --> 00:03:20.500 Of course, there's a spectrum of versions 00:03:20.500 --> 00:03:22.083 of what an LSE could look like. 00:03:23.730 --> 00:03:28.260 And if you'll, my colleagues will hear me, 00:03:28.260 --> 00:03:31.350 I'll try to lay out the short version of, 00:03:31.350 --> 00:03:35.483 or array of options of what that could look like. 00:03:36.910 --> 00:03:39.733 And then of course, we want to hear 00:03:39.733 --> 00:03:41.760 y'all's thoughts and questions. 00:03:41.760 --> 00:03:46.760 And then as the later part of the conversation , 00:03:47.210 --> 00:03:51.450 have a discussion about if we don't utilize some form 00:03:51.450 --> 00:03:54.723 of an LSE obligation, then what, what do we do? 00:03:55.690 --> 00:03:57.883 I'm happy to consider other ideas, 00:03:58.880 --> 00:04:00.620 and there's some interesting ideas submitted 00:04:00.620 --> 00:04:03.840 in the comments this week 00:04:03.840 --> 00:04:07.363 though we can discuss those at that appropriate time. 00:04:08.320 --> 00:04:11.940 At the end of the day, our goal for December, 00:04:11.940 --> 00:04:15.390 the blueprint is, in addition to everything we talked 00:04:15.390 --> 00:04:20.020 about this morning, I think as I told Lori I'm very, 00:04:20.020 --> 00:04:20.920 very trigger happy, 00:04:20.920 --> 00:04:23.393 and the legislature wants us to be trigger happy. 00:04:24.770 --> 00:04:29.180 And there are these giant red flags that we see periodically 00:04:29.180 --> 00:04:30.750 are demanding, our grid is demanding 00:04:30.750 --> 00:04:32.790 that we be trigger happy. 00:04:32.790 --> 00:04:35.840 The goal is for December is to make decisions 00:04:35.840 --> 00:04:38.550 about what mechanisms to choose, 00:04:38.550 --> 00:04:40.340 what horse to back, if you will. 00:04:40.340 --> 00:04:41.720 That does not mean that we will have 00:04:41.720 --> 00:04:44.280 every single detail figured out. 00:04:44.280 --> 00:04:46.150 That does not mean every single nut and bolt 00:04:46.150 --> 00:04:47.633 will be in place, of course, 00:04:48.770 --> 00:04:52.987 but we need to provide our market, 00:04:52.987 --> 00:04:57.173 and our stakeholders and investors, and most importantly, 00:04:58.040 --> 00:05:01.930 the people of Texas some indication of where we're going, 00:05:01.930 --> 00:05:04.010 what we we're doing to solve this problem, 00:05:04.010 --> 00:05:06.270 to make this grid reliable 00:05:06.270 --> 00:05:08.490 and show them how we're gonna do it. 00:05:08.490 --> 00:05:11.160 Of course, there'll be more analysis and implementation. 00:05:11.160 --> 00:05:16.160 Of course there'll be more work to be done after that point. 00:05:16.710 --> 00:05:22.700 But like I said, we need to, on all of these tools 00:05:22.700 --> 00:05:26.010 that we're discussing need to get to the point, 00:05:26.010 --> 00:05:28.903 we can pick a direction and go from there. 00:05:29.791 --> 00:05:33.917 With that, I'll lay out some brief 00:05:35.220 --> 00:05:38.940 additional thoughts on the LSE obligation to build 00:05:38.940 --> 00:05:42.163 on the conversation from last work session. 00:05:44.070 --> 00:05:47.160 I mentioned the spectrum of LSE obligations. 00:05:47.160 --> 00:05:52.160 The NRG proposal is what I call, land somewhere 00:05:52.210 --> 00:05:54.560 on what I would call the heavier handed approach. 00:05:54.560 --> 00:05:57.380 And I'll offer these comments as bookends, 00:05:57.380 --> 00:06:01.790 not suggestions from the heaviest most robust version 00:06:01.790 --> 00:06:04.003 to the lightest touch version. 00:06:05.770 --> 00:06:07.810 The heaviest hand, whether it's energy or any, 00:06:07.810 --> 00:06:10.523 some variation of that proposal creates a new product, 00:06:10.523 --> 00:06:13.103 a new capacity type credit. 00:06:15.130 --> 00:06:20.130 In order to provide transparency and ensure there's no, 00:06:22.060 --> 00:06:25.962 or there's mitigation of market powers 00:06:25.962 --> 00:06:30.820 would require that capacity credit to be traded 00:06:30.820 --> 00:06:32.570 and exchanged in a transparent way, 00:06:32.570 --> 00:06:34.990 probably through a central clearing mechanism at ERCOT, 00:06:34.990 --> 00:06:37.923 I think CRR on steroids. 00:06:38.770 --> 00:06:41.240 That shows price, volume, counterparties 00:06:41.240 --> 00:06:43.510 so that everybody especially the IMM, 00:06:43.510 --> 00:06:46.372 but also the entire marketplace can see who's selling what 00:06:46.372 --> 00:06:51.372 to who, when, how much and at what price. 00:06:51.610 --> 00:06:53.960 That is as you can imagine, 00:06:53.960 --> 00:06:55.780 you asked the implementation question last time, 00:06:55.780 --> 00:06:59.147 that's a big time implementation exercise. 00:06:59.147 --> 00:07:02.610 That's a major undertaking, it provides transparency, 00:07:02.610 --> 00:07:07.610 it provides a market mechanism to require the retailers 00:07:12.433 --> 00:07:16.503 to procure the ability and the capability 00:07:17.580 --> 00:07:19.940 to provide power to the customers that they promised 00:07:19.940 --> 00:07:22.590 they were gonna deliver that good too. 00:07:22.590 --> 00:07:23.650 That's the heaviest hand approach, 00:07:23.650 --> 00:07:25.923 the other bookend you've got the lightest touch. 00:07:27.360 --> 00:07:28.710 That would be something 00:07:29.610 --> 00:07:32.070 or a solution that does not create a new product, 00:07:32.070 --> 00:07:33.280 no new capacity credit, 00:07:33.280 --> 00:07:37.880 no new product is created, or traded, or exchanged. 00:07:37.880 --> 00:07:41.580 So that's what we could call simply proof of purchase. 00:07:41.580 --> 00:07:44.500 The Commission sets an accreditation standard 00:07:44.500 --> 00:07:47.780 that holds each resource type accountable 00:07:47.780 --> 00:07:51.960 for the level of reliability it can provide, 00:07:51.960 --> 00:07:53.492 or is expected to provide 00:07:53.492 --> 00:07:57.300 and we simply ask for proof of purchase 00:07:57.300 --> 00:08:02.300 of an LSE's expected load for the set timeframes, 00:08:05.840 --> 00:08:07.890 very much an audit exercise. 00:08:07.890 --> 00:08:12.890 It could even be as simple as asking LSEs to ensure 00:08:15.280 --> 00:08:16.870 that they are fully hedged 00:08:16.870 --> 00:08:19.970 and only with dispatchable resources. 00:08:19.970 --> 00:08:22.193 And if they show up in the real-time market, 00:08:23.130 --> 00:08:25.540 unhedged, accounting for forecast error, 00:08:25.540 --> 00:08:27.190 that will always be there. 00:08:27.190 --> 00:08:30.560 But if they show up short in the real-time market, 00:08:30.560 --> 00:08:33.440 there's some sort of penalty associated with that. 00:08:33.440 --> 00:08:35.370 So that's a much lighter touch 00:08:35.370 --> 00:08:38.763 that doesn't have any public transparency component to it. 00:08:39.850 --> 00:08:44.540 So I'd offer those as the bookends of what an LSE obligation 00:08:44.540 --> 00:08:46.120 could look like. 00:08:46.120 --> 00:08:49.550 Like I said, we're not gonna figure that out by December, 00:08:49.550 --> 00:08:54.550 but I know we must continue to evaluate options like this. 00:09:01.840 --> 00:09:03.410 And so there's also of course, 00:09:03.410 --> 00:09:06.450 market protection mechanisms that can be put in place. 00:09:06.450 --> 00:09:07.580 For new entrance in the market, 00:09:07.580 --> 00:09:09.370 you could easily have a two-year exemption 00:09:09.370 --> 00:09:14.370 for any obligation, or until they reach a certain load size. 00:09:14.430 --> 00:09:19.130 You could have price caps in the first few years 00:09:19.130 --> 00:09:21.110 of implementation to ensure 00:09:21.110 --> 00:09:26.110 that the financial liability is limited, 00:09:27.420 --> 00:09:32.420 especially as the new dispatchable generation 00:09:32.970 --> 00:09:34.970 that we've been directed to incentivize, 00:09:34.970 --> 00:09:38.850 and that we need so badly is brought into the system. 00:09:38.850 --> 00:09:41.650 We know we don't have enough dispatchable generation 00:09:41.650 --> 00:09:43.500 and whatever form that takes. 00:09:43.500 --> 00:09:44.360 We know we need more. 00:09:44.360 --> 00:09:45.560 We know it's not built now. 00:09:45.560 --> 00:09:49.410 And so somebody somewhere somehow has to put their money 00:09:49.410 --> 00:09:52.403 on the table and pay somebody to build it. 00:09:53.300 --> 00:09:56.160 The reason I have favor an LSE obligation 00:09:56.160 --> 00:09:58.320 is 'cause that's just requiring the marketplace to buy it, 00:09:58.320 --> 00:10:01.780 rather than the central administration of ERCOT. 00:10:01.780 --> 00:10:05.460 The other reason the market participants are the ones mixing 00:10:05.460 --> 00:10:07.630 and matching the resources, 00:10:07.630 --> 00:10:10.800 according to the prescribed accreditation standard. 00:10:10.800 --> 00:10:13.563 It's not us, it's not the central administration, 00:10:14.520 --> 00:10:16.244 the other reason, but somebody has got to put money 00:10:16.244 --> 00:10:17.640 out there and buy these resources 00:10:17.640 --> 00:10:19.720 and pay for dispatchable resources. 00:10:19.720 --> 00:10:20.553 It can be the market. 00:10:20.553 --> 00:10:25.040 It can be the Centrally Administrated ISO. 00:10:25.040 --> 00:10:26.840 That's the choice we've got to make. 00:10:27.820 --> 00:10:29.120 I prefer to the market. 00:10:29.120 --> 00:10:31.780 I think our, in general Texas prefers 00:10:31.780 --> 00:10:33.023 market based solutions, 00:10:35.110 --> 00:10:38.990 and also suggested the LSE obligation 00:10:38.990 --> 00:10:43.300 because especially in the absence of creating a new product 00:10:43.300 --> 00:10:45.190 and just on the proof of purchase side, 00:10:45.190 --> 00:10:50.190 show us your receipt, you're just requiring LSEs 00:10:50.480 --> 00:10:54.180 to purchase the power that they expect to use. 00:10:54.180 --> 00:10:58.680 You're not spending money on resources 00:10:58.680 --> 00:11:02.290 that are deliberately intended to be held out of the market, 00:11:02.290 --> 00:11:05.173 except when there's scarcity and crisis. 00:11:06.220 --> 00:11:09.550 So, those are a few thoughts. 00:11:09.550 --> 00:11:10.510 I'll stop there. 00:11:10.510 --> 00:11:14.510 Happy to try to answer any questions. 00:11:14.510 --> 00:11:17.180 I know we've got multiple resources here 00:11:17.180 --> 00:11:21.783 that can provide a lot more detail if needed. 00:11:22.910 --> 00:11:24.303 So, open it up. 00:11:29.630 --> 00:11:30.933 This is the pinata part. 00:11:31.780 --> 00:11:32.810 So, I'll go first. 00:11:32.810 --> 00:11:36.760 I mean, so Chairman Lake, thank you for laying out 00:11:38.040 --> 00:11:40.970 where you're at right now and everything. 00:11:40.970 --> 00:11:42.810 I've spent some time 00:11:42.810 --> 00:11:45.561 looking at Senate Bill 3 and what it requires 00:11:45.561 --> 00:11:47.483 and what it doesn't require. 00:11:49.550 --> 00:11:53.450 And I believe that if we wanted to make 00:11:53.450 --> 00:11:56.600 a market redesign change, we have the authority to do so, 00:11:56.600 --> 00:11:58.700 but what SB3 asks from us 00:11:58.700 --> 00:12:00.970 is not directly a firming requirement. 00:12:00.970 --> 00:12:05.180 It asks from us a variety of measures 00:12:05.180 --> 00:12:07.363 to reach a reliability requirement. 00:12:09.570 --> 00:12:10.403 And what I mean by that 00:12:10.403 --> 00:12:14.881 is they've got a specific section, a new section, 39 151. 00:12:14.881 --> 00:12:16.200 I don't wanna sit here and read it all, 00:12:16.200 --> 00:12:19.990 but it talks about establishing your requirement 00:12:19.990 --> 00:12:22.250 to meet the reliability needs of the power region. 00:12:22.250 --> 00:12:24.000 And that in my mind, you can interpret 00:12:24.000 --> 00:12:26.290 that as a reliability standard 00:12:26.290 --> 00:12:28.919 or at least some kind of requirement that we have 00:12:28.919 --> 00:12:31.473 to meet with dispatchable generation. 00:12:32.340 --> 00:12:33.720 We still don't have any feedback 00:12:33.720 --> 00:12:35.570 on our reliability requirement, or target, 00:12:35.570 --> 00:12:37.770 or anything at this point. 00:12:37.770 --> 00:12:39.380 It requires us to periodically, 00:12:39.380 --> 00:12:41.570 but at least annually determine the quantity 00:12:41.570 --> 00:12:43.410 and characteristics of the ancillary service 00:12:43.410 --> 00:12:46.080 or reliability service necessary 00:12:46.080 --> 00:12:49.520 to ensure appropriate reliability during extreme heat, 00:12:49.520 --> 00:12:51.380 extreme cold weather, and during times 00:12:51.380 --> 00:12:54.030 of low dispatchable power generation priority region. 00:12:54.030 --> 00:12:55.530 That sounds like blue sky day. 00:12:57.600 --> 00:13:01.790 And so it requires those ancillary and reliability services 00:13:01.790 --> 00:13:05.720 to be procured on a competitive basis to ensure 00:13:05.720 --> 00:13:08.120 that reliability is maintained during extreme heat 00:13:08.120 --> 00:13:09.740 and extreme cold weather conditions. 00:13:09.740 --> 00:13:12.720 And during times of low non-dispatchable power production 00:13:12.720 --> 00:13:14.030 in the power region. 00:13:14.030 --> 00:13:15.800 We have to come up with qualifications 00:13:15.800 --> 00:13:19.757 and performance requirements for those services 00:13:19.757 --> 00:13:22.980 and sizes for the services. 00:13:22.980 --> 00:13:26.700 And so from my perspective, 00:13:26.700 --> 00:13:31.390 and I certainly respect the fact and the charge 00:13:31.390 --> 00:13:34.280 that we've been mandated with to drive more steel 00:13:34.280 --> 00:13:35.870 in the ground for dispatchable generation, 00:13:35.870 --> 00:13:40.870 but for I'm sitting here today, I want, from my perspective, 00:13:40.980 --> 00:13:44.090 I think we got to focus on what SB3 requires, 00:13:44.090 --> 00:13:46.630 and we've got to keep a little bit more broader perspective 00:13:46.630 --> 00:13:47.610 on what it requires. 00:13:47.610 --> 00:13:52.290 I don't see a straight firming requirement being required. 00:13:52.290 --> 00:13:54.230 So, from where I'm coming from, 00:13:54.230 --> 00:13:57.500 I just want to keep at least a broader perspective 00:13:57.500 --> 00:14:02.140 as to what maybe long-term solutions, 00:14:02.140 --> 00:14:04.180 I mean, we'll continue to look at the LSE obligation, 00:14:04.180 --> 00:14:09.180 but I do wanna open our perspective 00:14:10.660 --> 00:14:13.210 to think about other proposals, because I think 00:14:14.327 --> 00:14:17.230 there's a lot in SB3 that ties to ancillary services 00:14:17.230 --> 00:14:19.220 and reliability services. 00:14:19.220 --> 00:14:22.480 And we must be mindful of that language. 00:14:22.480 --> 00:14:24.930 The other thing that I think is really important, 00:14:26.880 --> 00:14:30.610 Senate Bill 7 created our ERCOT competitive market 00:14:30.610 --> 00:14:32.393 over 20 years ago. 00:14:32.393 --> 00:14:37.280 And it moved that risk of investment away from the consumers 00:14:39.630 --> 00:14:40.490 that were being served 00:14:40.490 --> 00:14:42.770 by regulated vertically integrated utilities 00:14:43.750 --> 00:14:45.520 to the investment community. 00:14:45.520 --> 00:14:48.560 I fear that with an LSE obligation construct 00:14:48.560 --> 00:14:49.580 that we're looking at right now, 00:14:49.580 --> 00:14:52.120 where we're taking that risk and putting it right back 00:14:52.120 --> 00:14:54.170 on the consumers and departing 00:14:54.170 --> 00:14:57.170 from the underlying principles of Senate Bill 7. 00:14:57.170 --> 00:15:00.990 And I don't think that SB3 can be read 00:15:00.990 --> 00:15:02.913 to move us in that direction. 00:15:04.560 --> 00:15:06.200 While we're trying to ensure reliability 00:15:06.200 --> 00:15:07.590 and insent dispatchable generation 00:15:07.590 --> 00:15:08.890 using a competitive market 00:15:11.160 --> 00:15:12.990 that was established by Senate Bill 7, 00:15:12.990 --> 00:15:14.193 we must be vigilant, 00:15:15.650 --> 00:15:18.040 and make sure that we're not weakening our market 00:15:18.040 --> 00:15:19.240 and in shifting the risk 00:15:20.720 --> 00:15:23.240 from the investment community back to the consumers. 00:15:23.240 --> 00:15:25.990 And so I just with that backdrop, 00:15:25.990 --> 00:15:28.833 but, I just want to lay that out. 00:15:29.900 --> 00:15:32.423 And as we continue to look at long-term solutions, 00:15:33.500 --> 00:15:35.197 whether the LSE obligation 00:15:35.197 --> 00:15:37.163 and any other solution that's out there that, 00:15:37.163 --> 00:15:40.280 that I really would like to bring some more options. 00:15:40.280 --> 00:15:41.113 I don't wanna be looking at just one option-- 00:15:41.113 --> 00:15:42.820 I'd welcome any and other options. 00:15:42.820 --> 00:15:43.750 I didn't see a lot. 00:15:43.750 --> 00:15:46.340 There were a few in the comments this week. 00:15:46.340 --> 00:15:50.056 And if you'll, go ahead. 00:15:50.056 --> 00:15:51.479 Oh, sure. 00:15:51.479 --> 00:15:55.220 So, to close all this, I just wanna say, 00:15:55.220 --> 00:15:57.930 I continue to believe that we need to move 00:15:57.930 --> 00:16:01.600 in a strategic targeted phase manner 00:16:01.600 --> 00:16:04.694 to ensure greater reliability and resiliency. 00:16:04.694 --> 00:16:07.950 While we take the time to thoughtfully, 00:16:07.950 --> 00:16:10.210 deliberately and holistically evaluate 00:16:10.210 --> 00:16:11.810 all potential long-term options 00:16:11.810 --> 00:16:13.960 that can help maintain grid reliability in the future, 00:16:13.960 --> 00:16:15.903 as our industry continues to evolve. 00:16:18.010 --> 00:16:19.510 The Commission's evaluation 00:16:19.510 --> 00:16:22.720 from my perspective of potential long-term actions 00:16:22.720 --> 00:16:24.860 that would result in a mass redesign 00:16:24.860 --> 00:16:27.800 of the ERCOT competitive market must be fully evaluated 00:16:27.800 --> 00:16:30.460 and vetted before we can pull the trigger. 00:16:30.460 --> 00:16:32.320 I know we're all ready to pull the trigger, 00:16:32.320 --> 00:16:37.320 but I would prefer to pull the trigger in a very calculated, 00:16:37.330 --> 00:16:39.140 strategic, targeted way, right? 00:16:39.140 --> 00:16:42.870 We shoot a gun to hit the target, right? 00:16:42.870 --> 00:16:43.703 Sure. 00:16:43.703 --> 00:16:45.770 On moving forward with the implementation. 00:16:45.770 --> 00:16:48.640 So too much is at stake for us 00:16:48.640 --> 00:16:51.700 not to really scrub down every long-term proposal 00:16:51.700 --> 00:16:54.300 in a very, very diligent way. 00:16:54.300 --> 00:16:55.710 It's critically important matter. 00:16:55.710 --> 00:16:57.890 And well, that will have long lasting impacts 00:16:57.890 --> 00:17:00.040 on our market and our state. 00:17:00.040 --> 00:17:01.490 That's where I'm coming from. 00:17:02.560 --> 00:17:07.560 I just wanted to set the table as to kind of how I'm seeing 00:17:09.950 --> 00:17:13.040 potential LSE obligation and how I would like 00:17:13.040 --> 00:17:16.740 to look at other potential long-term solutions 00:17:16.740 --> 00:17:19.490 as we move forward in our evaluation of those measures. 00:17:20.490 --> 00:17:22.600 Sure, let's start scrubbing. 00:17:22.600 --> 00:17:24.013 We've been asking for ideas. 00:17:25.270 --> 00:17:28.690 We've got a very narrow scope of ideas. 00:17:28.690 --> 00:17:32.120 And so let's start scrubbing. 00:17:32.120 --> 00:17:34.053 You mentioned investor risk. 00:17:34.940 --> 00:17:39.560 I wanna clarify that an LSE obligation 00:17:39.560 --> 00:17:42.050 is not risk on consumers. 00:17:42.050 --> 00:17:47.050 It's risk on companies that have promised to provide power 00:17:47.050 --> 00:17:50.253 to the consumers when they took their money. 00:17:51.340 --> 00:17:53.440 The risk isn't on the consumer, it's on the company, 00:17:53.440 --> 00:17:54.920 the retail company. 00:17:54.920 --> 00:17:57.330 Those retail companies also have investors 00:17:57.330 --> 00:17:59.280 just like generators have investors. 00:17:59.280 --> 00:18:00.910 Oftentimes it's the same investor 00:18:00.910 --> 00:18:04.170 when it's an affiliated generator with retailers. 00:18:04.170 --> 00:18:07.110 So in no way would an LSE obligation move the risk 00:18:07.110 --> 00:18:08.380 to the individual consumer. 00:18:08.380 --> 00:18:12.220 It would move it to a different set of customers. 00:18:12.220 --> 00:18:16.727 And I know you care deeply about consumers as I do 00:18:16.727 --> 00:18:17.630 and we all do. 00:18:17.630 --> 00:18:19.490 That's why we're here at the end of the day. 00:18:19.490 --> 00:18:22.470 We're not here to create new revenue streams 00:18:22.470 --> 00:18:25.490 for these companies or to juice their operating income. 00:18:25.490 --> 00:18:27.980 We're here for the consumers of Texas. 00:18:27.980 --> 00:18:32.980 And my part of the concern with the current framework 00:18:33.410 --> 00:18:38.410 is that when asking about what an LSE obligation 00:18:39.090 --> 00:18:44.090 might look like to a retailer and their investors, 00:18:46.610 --> 00:18:51.360 one response I got was a retail provider, 00:18:51.360 --> 00:18:54.320 picking up a coaster, waving in my face, 00:18:54.320 --> 00:18:57.670 saying we don't provide power, we sell things. 00:18:57.670 --> 00:18:58.960 We don't do, it doesn't matter. 00:18:58.960 --> 00:18:59.990 It could be this coaster. 00:18:59.990 --> 00:19:01.000 We're just sales. 00:19:01.000 --> 00:19:05.440 That's all we do, which is not in my mind, 00:19:05.440 --> 00:19:09.430 providing reliable power to our customers, 00:19:09.430 --> 00:19:11.680 our consumers, our businesses, 00:19:11.680 --> 00:19:14.410 that's a sales shop that doesn't care what they're selling 00:19:14.410 --> 00:19:17.120 as long as they get more people to sell it to. 00:19:17.120 --> 00:19:20.340 And I have no problem starting to add some accountability 00:19:20.340 --> 00:19:22.080 to people like that. 00:19:22.080 --> 00:19:24.350 Okay, well, I would just like to say that the retailers 00:19:24.350 --> 00:19:26.787 are not required to own generation. 00:19:26.787 --> 00:19:28.550 That is not the way our competitive market is structured. 00:19:28.550 --> 00:19:30.019 So They're prohibited. 00:19:30.019 --> 00:19:32.240 They're prohibited, so. 00:19:32.240 --> 00:19:33.470 Sure, but at the same, I mean, 00:19:33.470 --> 00:19:35.950 you can't pretend like retail providers 00:19:35.950 --> 00:19:37.450 don't have investors. 00:19:37.450 --> 00:19:41.970 If you own shares of any of the affiliated generators 00:19:41.970 --> 00:19:43.210 that we have in our market. 00:19:43.210 --> 00:19:45.120 And we're glad to have them, 00:19:45.120 --> 00:19:48.343 any of them NRG, Vista, Calpine, Exelon, 00:19:50.180 --> 00:19:51.720 any of them. 00:19:51.720 --> 00:19:55.110 You are an investor in both the underlying generators 00:19:55.110 --> 00:19:57.690 and the underlying retailers. 00:19:57.690 --> 00:20:00.920 So the risk is on the investors and those retailers. 00:20:00.920 --> 00:20:02.053 That's the objective. 00:20:03.990 --> 00:20:07.300 Mr. Chairman, listening to the spectrum of proposals 00:20:07.300 --> 00:20:11.310 that you've laid out, one as we move forward, 00:20:11.310 --> 00:20:13.750 and again, as Sam's watching this and Brattle, 00:20:13.750 --> 00:20:18.083 as he is developing his recommendations and his study, 00:20:19.560 --> 00:20:20.713 what's important to me, 00:20:21.862 --> 00:20:25.200 and I believe it should remain consistent with the products 00:20:25.200 --> 00:20:27.740 that we have already discussed. 00:20:27.740 --> 00:20:31.830 Price responsive behavior on the part of the market. 00:20:31.830 --> 00:20:34.850 In real time, it's been the beauty of the ERCOT market. 00:20:34.850 --> 00:20:39.703 Again, it will allow us to better manage the resource mix 00:20:39.703 --> 00:20:43.353 than most because our market is already accustomed to, 00:20:43.353 --> 00:20:45.180 I've got to be responsive to price somehow. 00:20:45.180 --> 00:20:47.210 Other markets don't necessarily have that. 00:20:47.210 --> 00:20:52.210 So as Sam's listening and as Brattle is taking notes, 00:20:52.410 --> 00:20:53.960 we've got to continue that 00:20:53.960 --> 00:20:56.090 because it is my foundational belief 00:20:56.090 --> 00:21:01.090 that whatever firming requirement vision on loads 00:21:02.070 --> 00:21:04.330 or resources is pursued, 00:21:04.330 --> 00:21:08.900 or if we pursue it in the coming months or years, 00:21:08.900 --> 00:21:12.970 it's still must remain a bedrock principle 00:21:12.970 --> 00:21:16.510 and an attribute of the ERCOT marketplace. 00:21:16.510 --> 00:21:19.440 Absolutely. With that, I think 00:21:19.440 --> 00:21:22.020 it would be useful subject 00:21:22.020 --> 00:21:25.083 to Commissioner Gloflefty's comments or questions to you, 00:21:28.240 --> 00:21:30.960 to be able to call someone up who can answer 00:21:30.960 --> 00:21:34.300 some kind of a practical exercise questions 00:21:34.300 --> 00:21:37.433 on what firming requirements look like. 00:21:38.380 --> 00:21:40.430 And with having said that I'd like 00:21:40.430 --> 00:21:45.430 to call up Lubbock Power and Light to talk through, okay, 00:21:45.770 --> 00:21:49.693 SBP in that market, and again, they just transitioned. 00:21:50.610 --> 00:21:53.100 What does that look like in SBP? 00:21:53.100 --> 00:21:55.340 How is your proposal different? 00:21:55.340 --> 00:21:58.760 And again, how does that harness the best aspects of both? 00:21:58.760 --> 00:21:59.593 Could we? 00:21:59.593 --> 00:22:01.274 Sure. Okay. 00:22:01.274 --> 00:22:02.107 It looks like they already did. 00:22:02.107 --> 00:22:05.520 Welcome. (all laughing) 00:22:05.520 --> 00:22:07.620 Quickly before we go through this line of questioning. 00:22:07.620 --> 00:22:12.510 I would say that in any version of an LSE obligation 00:22:12.510 --> 00:22:16.130 on that spectrum, demand response should be treated exactly 00:22:16.130 --> 00:22:19.260 as any other generating source with both the benefits 00:22:19.260 --> 00:22:20.163 and the penalties. 00:22:21.130 --> 00:22:24.640 So I think that would not only continue 00:22:26.890 --> 00:22:31.360 to allow demand response, it would enhance it dramatically 00:22:31.360 --> 00:22:35.340 because now that demand response has to be quantified 00:22:35.340 --> 00:22:37.780 and you have to be accountable for it. 00:22:37.780 --> 00:22:42.780 The command, it's a reinforced version of the command 00:22:42.880 --> 00:22:47.150 and control you've correctly identified as so important 00:22:47.150 --> 00:22:48.090 to demand response. 00:22:48.090 --> 00:22:50.470 Not only does ERCOT need to be able to have the command 00:22:50.470 --> 00:22:51.980 and control for distributed resources, 00:22:51.980 --> 00:22:54.180 we're gonna count on that demand response. 00:22:54.180 --> 00:22:56.400 As you correctly suggest, 00:22:56.400 --> 00:22:58.140 it's not much good if you don't have 00:22:58.140 --> 00:23:01.680 that command and control to rely on 00:23:01.680 --> 00:23:05.280 this would not only require that, 00:23:05.280 --> 00:23:08.040 but any version of those LSE requirements would require 00:23:08.040 --> 00:23:11.580 the quantification of it and the accountability of it. 00:23:11.580 --> 00:23:13.980 So this would be one of the most, I mean, 00:23:13.980 --> 00:23:17.840 this would supercharged demand response 00:23:17.840 --> 00:23:21.290 because it's not just kinda, as it happens go with, 00:23:21.290 --> 00:23:25.280 it's now accountable, it's quantified and it's valued. 00:23:25.280 --> 00:23:26.520 So I would say 00:23:26.520 --> 00:23:30.020 it's not only continuing to allow demand response 00:23:30.020 --> 00:23:31.960 it's reinforcing and encouraging it. 00:23:31.960 --> 00:23:36.960 In your view, if this panacea of demand response 00:23:37.600 --> 00:23:41.620 behaving as generation is developed, again accountable 00:23:41.620 --> 00:23:45.360 on the same standards as frankly, a resource, again, 00:23:45.360 --> 00:23:50.267 aggregated DG, how is an unaffiliated retailer, 00:23:53.338 --> 00:23:54.750 and again, this would be accounted for 00:23:54.750 --> 00:23:56.430 in the CDR and for our purposes, 00:23:56.430 --> 00:23:59.010 reliability metrics moving forward. 00:23:59.010 --> 00:24:02.280 How would an unaffiliated rep who is again, 00:24:02.280 --> 00:24:06.280 not a generator first own those assets 00:24:06.280 --> 00:24:08.844 and still not run afoul of PURA. 00:24:08.844 --> 00:24:10.620 Own demand response? 00:24:10.620 --> 00:24:14.140 Well, DG to an aggregated degree where there, I mean, 00:24:14.140 --> 00:24:16.730 thousand megawatt plays, Octopus Energy. 00:24:16.730 --> 00:24:20.090 If they harness enough DG where they're commanding 00:24:20.090 --> 00:24:22.550 and committing a thousand megawatts. 00:24:22.550 --> 00:24:23.800 Well, if we're gonna say 00:24:23.800 --> 00:24:28.370 we can't accept distributed generation from retailers, 00:24:28.370 --> 00:24:29.930 because that runs afoul PURA, 00:24:29.930 --> 00:24:31.943 we've gotta open up a whole nother-- 00:24:31.943 --> 00:24:33.160 I know, I'm just trying to think 00:24:33.160 --> 00:24:36.510 through legal can of norms type issues and stuff like that. 00:24:36.510 --> 00:24:41.510 I mean, if that's the, regardless of an LSE obligation, 00:24:41.670 --> 00:24:43.790 if distributed generation 00:24:43.790 --> 00:24:48.580 can be treated as a retailer regardless of affiliation, 00:24:48.580 --> 00:24:53.470 if the subsidiary of the corporate structure 00:24:53.470 --> 00:24:55.730 owns and treats, if we're gonna treat 00:24:55.730 --> 00:25:00.730 that distributed generation as a retailer owning generation, 00:25:02.730 --> 00:25:04.450 and you read that contrary to PURA, 00:25:04.450 --> 00:25:07.750 then we need to put the brakes on any distributed generation 00:25:07.750 --> 00:25:08.900 coming on to ERCOT at all. 00:25:08.900 --> 00:25:10.730 I don't wanna do that, but I just raised it-- 00:25:10.730 --> 00:25:12.180 Okay, well, if we're gonna do it, 00:25:12.180 --> 00:25:13.650 let's do it everywhere. 00:25:13.650 --> 00:25:16.730 Not just on a specific proposal. 00:25:16.730 --> 00:25:18.800 It's a fair question we need to consider, 00:25:18.800 --> 00:25:20.570 but let's consider universally. 00:25:20.570 --> 00:25:23.293 Okay. Lubbock. 00:25:24.970 --> 00:25:27.120 Hi, do you wanna explain your experience? 00:25:27.120 --> 00:25:28.650 I'm David McCullough, I'm the Director 00:25:28.650 --> 00:25:31.380 of Electric Utilities with Lubbock Power and Light. 00:25:31.380 --> 00:25:32.213 Welcome. 00:25:32.213 --> 00:25:35.213 I can tell you a little bit about our experience in 2014. 00:25:36.349 --> 00:25:38.780 When I started with Lubbock Power and Light, 00:25:38.780 --> 00:25:42.500 we undertook to secure power supply for a contract 00:25:42.500 --> 00:25:44.370 that was expiring in 2019, 00:25:44.370 --> 00:25:47.380 long in advance of when it was actually expiring. 00:25:47.380 --> 00:25:50.040 And so we went through an RFP process, 00:25:50.040 --> 00:25:51.830 looked at a number of options, 00:25:51.830 --> 00:25:54.933 including local generation build options. 00:25:56.240 --> 00:26:01.170 And the most attractive option we got was a PPA option 00:26:01.170 --> 00:26:03.160 that was ERCOT based when we did the RFP, 00:26:03.160 --> 00:26:05.630 we opened it up to ERCOT and SBP options 00:26:05.630 --> 00:26:08.700 because the CREZ lines were in close proximity to Lubbock. 00:26:08.700 --> 00:26:09.660 We thought that it was an option 00:26:09.660 --> 00:26:12.030 that we should at least consider and look at. 00:26:12.030 --> 00:26:14.580 So the PPA option was far and away the best option 00:26:14.580 --> 00:26:16.960 that we looked at, it was ERCOT based. 00:26:16.960 --> 00:26:19.670 So the first thing we did was ask that company, 00:26:19.670 --> 00:26:22.830 if they could structure that as an SBP product. 00:26:22.830 --> 00:26:24.490 And they tried really hard to do that. 00:26:24.490 --> 00:26:27.680 We all took a trip to Little Rock, Arkansas 00:26:27.680 --> 00:26:30.630 and met with the executives of Southwest Power Pool 00:26:30.630 --> 00:26:33.670 in Little Rock and went back and forth. 00:26:33.670 --> 00:26:34.880 And because of their 00:26:36.250 --> 00:26:39.940 load responsible entity resource adequacy obligation, 00:26:39.940 --> 00:26:42.373 it's a physical generation requirement. 00:26:43.670 --> 00:26:45.680 You've got to prove that you have access 00:26:45.680 --> 00:26:46.720 to physical generation. 00:26:46.720 --> 00:26:49.390 And not only that, but it's deliverable to your load. 00:26:49.390 --> 00:26:52.470 The deliverability problem was where we got 00:26:52.470 --> 00:26:54.180 wrapped around the axle with, 00:26:54.180 --> 00:26:56.807 with their program is because Lubbock was kind of at the end 00:26:56.807 --> 00:27:00.200 of the transmission system and SBP, 00:27:00.200 --> 00:27:02.300 we were in a constrained part of the grid. 00:27:03.290 --> 00:27:05.660 There were capacity options available 00:27:05.660 --> 00:27:07.890 in Nebraska and other places that were 00:27:07.890 --> 00:27:11.660 economically priced, but we could not get those delivered 00:27:11.660 --> 00:27:12.890 into Lubbock. 00:27:12.890 --> 00:27:15.600 So, ultimately we decided 00:27:17.170 --> 00:27:18.910 not to exercise the build options, 00:27:18.910 --> 00:27:20.640 but to pursue integration with ERCOT, 00:27:20.640 --> 00:27:22.870 that happened in 2015. 00:27:22.870 --> 00:27:23.703 Okay. 00:27:26.330 --> 00:27:30.583 So in the accreditation portion for SBP, 00:27:31.530 --> 00:27:34.563 how functionally did that work in your experience? 00:27:35.540 --> 00:27:38.773 How do you get different resources accounted for? 00:27:39.750 --> 00:27:43.070 Well, they do have an accreditation process. 00:27:43.070 --> 00:27:47.783 They look at generally the fossil fuel units, 00:27:50.150 --> 00:27:53.980 gas and coal and nuclear and all those, 00:27:53.980 --> 00:27:56.930 they generally get a hundred percent accreditation, 00:27:56.930 --> 00:28:00.660 the wind resources get a much lower accreditation 00:28:00.660 --> 00:28:01.963 and then solar, 00:28:04.150 --> 00:28:06.280 kind of at lower percentage as well. 00:28:06.280 --> 00:28:10.590 But generally, when you sign up for a capacity, 00:28:10.590 --> 00:28:15.120 you've gotta know what its accreditation value is. 00:28:15.120 --> 00:28:18.480 SBP determines that, and you've gotta cover 00:28:18.480 --> 00:28:20.540 a hundred percent of your load 00:28:20.540 --> 00:28:23.420 with these deliverable resources. 00:28:23.420 --> 00:28:26.640 And then the 12% reserve margin can be covered 00:28:26.640 --> 00:28:28.527 with non-deliverable assets. 00:28:28.527 --> 00:28:29.940 That's something that changed 00:28:29.940 --> 00:28:31.420 after we went through this process. 00:28:31.420 --> 00:28:33.360 Okay, and in the real-time market, 00:28:33.360 --> 00:28:36.470 how does SBP sort of look compared to ERCOT 00:28:36.470 --> 00:28:38.290 now that you're in? 00:28:38.290 --> 00:28:39.840 What was your experience there? 00:28:42.364 --> 00:28:45.660 They have LMPs, you can offer into the day ahead market 00:28:45.660 --> 00:28:47.080 and settle in the real-time market, 00:28:47.080 --> 00:28:51.610 but there's not a robust, actively traded forward market 00:28:51.610 --> 00:28:55.800 in SBP that we could make access to. 00:28:55.800 --> 00:29:00.800 So it's not a actively traded liquid, wholesale market 00:29:01.445 --> 00:29:02.470 like what we have in ERCOT. 00:29:02.470 --> 00:29:05.460 And that was one of the features that was attractive to us 00:29:05.460 --> 00:29:07.232 as well coming to ERCOT. 00:29:07.232 --> 00:29:10.000 Is that because they're vertically integrated utilities, 00:29:10.000 --> 00:29:12.750 or because of some requirement on LSEs 00:29:12.750 --> 00:29:14.360 to prove they've purchased the power, 00:29:14.360 --> 00:29:16.380 they promise to their customers? 00:29:16.380 --> 00:29:17.970 It's a good question, 00:29:17.970 --> 00:29:20.070 I can't tell you that I know the answer precisely. 00:29:20.070 --> 00:29:22.281 I think it has probably has something to do with the fact 00:29:22.281 --> 00:29:24.900 that vertically integrated utilities 00:29:24.900 --> 00:29:28.040 and it's primarily a physical market, 00:29:28.040 --> 00:29:30.670 unlike in ERCOT where you have a lot of financial traders, 00:29:30.670 --> 00:29:33.590 you've got active financial institutions 00:29:33.590 --> 00:29:34.423 that are active in this market. 00:29:34.423 --> 00:29:37.020 And that creates a lot of liquidity in the ERCOT market 00:29:38.615 --> 00:29:39.765 and financial strength. 00:29:41.530 --> 00:29:43.630 Fair not to blame that lack of liquidity 00:29:44.758 --> 00:29:46.643 solely on the liability obligate. 00:29:47.590 --> 00:29:51.220 No, but I would say about the reliability obligation, 00:29:51.220 --> 00:29:54.230 SBP had 23% reserves 00:29:54.230 --> 00:29:56.440 in their latest resource adequacy report. 00:29:56.440 --> 00:30:00.903 And it declines in 2026 to 12%. 00:30:02.000 --> 00:30:05.570 They're seeing generation retirements just like ERCOT is. 00:30:05.570 --> 00:30:08.220 And I think nationwide we'll continue to see 00:30:08.220 --> 00:30:09.770 because of the pressures that y'all talked about 00:30:09.770 --> 00:30:11.950 this morning, the environmental pressures, 00:30:11.950 --> 00:30:14.810 the financial pressures, we'll continue to see 00:30:16.170 --> 00:30:17.793 conventional resources retired. 00:30:18.750 --> 00:30:20.100 So Commissioner McAdams touched 00:30:20.100 --> 00:30:22.393 on operational reliability issues. 00:30:24.370 --> 00:30:27.380 Was LP&L and SBP during winter storm, Larry ? 00:30:27.380 --> 00:30:30.740 We were, we did experience rotating outages. 00:30:30.740 --> 00:30:34.010 It wasn't, we experienced rotating outages 00:30:34.010 --> 00:30:36.170 on the 15th and the 16th. 00:30:36.170 --> 00:30:38.597 A longer period of time on the morning of the 16th. 00:30:38.597 --> 00:30:41.673 And what drove those interruptions was SBP 00:30:44.450 --> 00:30:47.630 was importing about six gigawatts of power 00:30:47.630 --> 00:30:50.030 from adjacent RTOs. 00:30:50.030 --> 00:30:53.990 That's an advantage that ERCOT doesn't present have, 00:30:53.990 --> 00:30:56.920 but so it was the imports that really saved them 00:30:56.920 --> 00:31:00.113 from more lengthy rotating outage scenario. 00:31:02.530 --> 00:31:04.789 Those tide lines were interrupted 00:31:04.789 --> 00:31:06.287 on the Tuesday morning event 00:31:06.287 --> 00:31:10.990 and that's what caused a lot of the rotating outages 00:31:10.990 --> 00:31:11.823 that we experienced. 00:31:11.823 --> 00:31:12.980 Yeah, we participated in that. 00:31:12.980 --> 00:31:15.910 I've been through three rotating outage events in my career, 00:31:15.910 --> 00:31:20.563 '89, 2011, and last year as well, and this year. 00:31:21.430 --> 00:31:22.263 Thank you. 00:31:26.960 --> 00:31:31.960 Load growth forecast, how does, because again, 00:31:32.530 --> 00:31:37.040 under the concepts, both in SBP and E3 proposed 00:31:39.100 --> 00:31:41.550 and Mr. Chairman, I'm not sure kind of the modifications, 00:31:41.550 --> 00:31:46.550 but the way we account for the reliability 00:31:47.350 --> 00:31:50.690 or the way we account for the need to firm 00:31:50.690 --> 00:31:53.919 is based on load growth forecast, correct? 00:31:53.919 --> 00:31:54.752 Right. 00:31:54.752 --> 00:31:57.560 So I've seen in comments, but again, 00:31:57.560 --> 00:32:01.350 you're out there in, Lubbock's interesting animal. 00:32:01.350 --> 00:32:02.603 I grew up south of you. 00:32:03.510 --> 00:32:06.000 It's got a good urban core dynamic, 00:32:06.000 --> 00:32:08.310 and it's got rural areas going out. 00:32:08.310 --> 00:32:11.180 It's got an oil field play right next door. 00:32:11.180 --> 00:32:14.113 So you've had a little bit of everything on load growth, 00:32:15.410 --> 00:32:19.640 but what are the considerations we should take into account 00:32:19.640 --> 00:32:21.710 on the forecasting of load growth, 00:32:21.710 --> 00:32:24.680 conservative versus you wanna get those numbers right, 00:32:24.680 --> 00:32:27.250 otherwise you're overpaying or underpaying, 00:32:27.250 --> 00:32:28.420 or you're not gonna be there. 00:32:28.420 --> 00:32:30.790 Talk through that, how does it work? 00:32:30.790 --> 00:32:34.200 It's a challenge for all of us and load forecasting, 00:32:34.200 --> 00:32:38.170 because particularly for a city like Lubbock 00:32:38.170 --> 00:32:42.100 that's undergoing a fair amount of renovation. 00:32:42.100 --> 00:32:44.420 Some of the older facilities that are getting torn down 00:32:44.420 --> 00:32:47.080 are replaced with much more energy efficient facilities. 00:32:47.080 --> 00:32:51.480 So you don't get a one for one growth with new facilities 00:32:51.480 --> 00:32:52.313 that come in. 00:32:52.313 --> 00:32:54.410 Even though they're large compared 00:32:54.410 --> 00:32:55.490 to what might've been there before. 00:32:55.490 --> 00:32:57.500 So the energy efficiency is really had a big 00:32:57.500 --> 00:32:59.820 effect on overall demand growth. 00:32:59.820 --> 00:33:02.033 It slowed down pretty significantly. 00:33:04.019 --> 00:33:06.870 We have a forecaster that works for us 00:33:06.870 --> 00:33:10.590 that develops our, our energy forecast and demand forecasts. 00:33:10.590 --> 00:33:13.520 So that's, it's an art and a science 00:33:13.520 --> 00:33:15.753 that is beyond my level of expertise to do. 00:33:17.140 --> 00:33:19.610 Is it subject to manipulation? 00:33:19.610 --> 00:33:21.083 Sure can be. Great. 00:33:22.960 --> 00:33:25.750 So you mentioned transmission constraints, 00:33:25.750 --> 00:33:29.250 keeping LP&L from being able to meet obligation requirements 00:33:29.250 --> 00:33:31.680 in SBP, you're kind of out there on the end of the line, 00:33:31.680 --> 00:33:32.970 on the ERCOT grid too. 00:33:32.970 --> 00:33:34.160 I mean, you're in between. 00:33:34.160 --> 00:33:35.970 We are, but we have, 00:33:37.550 --> 00:33:40.330 the advantage in the ERCOT market is that again, 00:33:40.330 --> 00:33:44.640 we buy firm LD block energy products for them, 00:33:44.640 --> 00:33:47.450 for the most part to hedge our load. 00:33:47.450 --> 00:33:51.400 And the wholesale market is very functional 00:33:51.400 --> 00:33:53.080 from that standpoint, you can buy, 00:33:53.080 --> 00:33:54.670 we're buying two years ahead of time right now, 00:33:54.670 --> 00:33:56.820 firm LD products. 00:33:56.820 --> 00:34:01.820 They're backed by credit worthy entities that, 00:34:01.980 --> 00:34:03.860 that sell us those packages. 00:34:03.860 --> 00:34:07.103 And so we have a lot of trust that they'll deliver 00:34:07.103 --> 00:34:08.380 when the time comes. 00:34:08.380 --> 00:34:10.223 Who determines they're credit worthy? 00:34:11.190 --> 00:34:15.760 We work with a energy market administrator, 00:34:15.760 --> 00:34:17.470 or third party. 00:34:17.470 --> 00:34:18.340 I probably shouldn't mention their name. 00:34:18.340 --> 00:34:19.630 That's a hired vendor. 00:34:19.630 --> 00:34:20.463 It's hired vendor. 00:34:20.463 --> 00:34:22.222 So, that's on y'all, that's the risk on you. 00:34:22.222 --> 00:34:24.970 They do a credit check on all the vendors 00:34:24.970 --> 00:34:27.250 that are doing business with. 00:34:27.250 --> 00:34:29.490 Okay, so that, that, that risk is on you? 00:34:29.490 --> 00:34:31.190 It is. In both ERCOT and SBP? 00:34:31.190 --> 00:34:33.160 Yes. All right. 00:34:33.160 --> 00:34:38.110 You mentioned the deliverability requirement 00:34:38.110 --> 00:34:39.630 was the key concern. 00:34:39.630 --> 00:34:40.463 It was. 00:34:40.463 --> 00:34:42.900 You said there are two components of the SBP requirement, 00:34:42.900 --> 00:34:46.450 proving that you've procured according 00:34:46.450 --> 00:34:48.800 to the accreditation standard of the power 00:34:48.800 --> 00:34:50.940 of your expected load plus the reserve. 00:34:50.940 --> 00:34:52.010 Right. 00:34:52.010 --> 00:34:54.830 And then the second component was the requirement 00:34:54.830 --> 00:34:57.040 to prove that you can get it to your load. 00:34:57.040 --> 00:34:57.873 Correct. 00:34:59.400 --> 00:35:02.050 And from your comments, it sounded like 00:35:02.050 --> 00:35:04.700 the second part was a problem, not so much the first part. 00:35:04.700 --> 00:35:07.770 The second part was the problem of the, primarily, 00:35:07.770 --> 00:35:10.240 just because of the length of time it took to run, 00:35:10.240 --> 00:35:12.050 the SBP to run this studies. 00:35:12.050 --> 00:35:13.950 You had to participate in the aggregate 00:35:13.950 --> 00:35:15.400 transmission service study, 00:35:15.400 --> 00:35:18.053 took six to 12 months to go from start to finish. 00:35:18.053 --> 00:35:20.870 Right, but the proving you purchased the power 00:35:20.870 --> 00:35:21.990 you were gonna purchase anyway, 00:35:21.990 --> 00:35:23.920 doesn't sound like it was too onerous. 00:35:23.920 --> 00:35:26.590 Well, there was a, it's a bilateral market, 00:35:26.590 --> 00:35:30.740 so you could, you'd have to get out and talk to people, 00:35:30.740 --> 00:35:32.627 but there's, there was capacity available. 00:35:32.627 --> 00:35:34.386 It was just a matter of getting 00:35:34.386 --> 00:35:36.103 proven that it was deliverable to your load. 00:35:36.103 --> 00:35:37.603 That was the hard part for us. 00:35:39.310 --> 00:35:40.590 So the first part, 00:35:40.590 --> 00:35:42.170 just proving that you've purchased the power 00:35:42.170 --> 00:35:43.510 that you're going to purchase anyway, 00:35:43.510 --> 00:35:45.840 it doesn't sound like it's a dematic departure 00:35:45.840 --> 00:35:47.447 from business, in business as usual. 00:35:47.447 --> 00:35:49.460 No, that was not the problem. 00:35:49.460 --> 00:35:51.920 Okay, and I don't think any other proposals 00:35:51.920 --> 00:35:54.220 on the spectrum of our LSEs obligations 00:35:54.220 --> 00:35:56.960 have a deliverability requirement. 00:35:56.960 --> 00:35:59.300 In fact, the centrally cleared 00:35:59.300 --> 00:36:01.250 that even the heaviest hand approach 00:36:02.300 --> 00:36:06.087 by definition being a centrally cleared capacity credit, 00:36:06.087 --> 00:36:08.320 can't have a deliverability component to it 00:36:08.320 --> 00:36:11.630 because it's gotta be fungible between all parties. 00:36:11.630 --> 00:36:14.620 On the lightest end of the spectrum the proof of purchase 00:36:14.620 --> 00:36:18.290 shows your receipts sounds similar to the first part 00:36:18.290 --> 00:36:20.500 that you did the first element of SBP requirements, 00:36:20.500 --> 00:36:22.820 which you described as not really changing business. 00:36:22.820 --> 00:36:25.120 And it is normal, no departure 00:36:25.120 --> 00:36:27.040 from your normal business practices substantially. 00:36:27.040 --> 00:36:28.510 It was the second part, proving you could 00:36:28.510 --> 00:36:30.360 get it to your load that was the real challenge. 00:36:30.360 --> 00:36:33.713 That is not being considered in any of our LSE obligations. 00:36:35.090 --> 00:36:36.973 Yeah, the IMM, 00:36:36.973 --> 00:36:38.950 read through some of the other comments, 00:36:38.950 --> 00:36:41.277 the IMM mentioned that that might be something 00:36:41.277 --> 00:36:42.730 that would have to be looked at at some point, 00:36:42.730 --> 00:36:44.910 but I haven't heard y'all say that 00:36:44.910 --> 00:36:45.743 that would be a requirement. 00:36:45.743 --> 00:36:48.440 And that was in my testimony that y'all please don't make 00:36:48.440 --> 00:36:50.040 that part of your requirement. 00:36:50.040 --> 00:36:51.073 'Cause it's very problematic. 00:36:51.073 --> 00:36:53.480 It's not under consideration in any 00:36:53.480 --> 00:36:56.060 of the versions we've seen. 00:36:56.060 --> 00:36:59.800 You mentioned you got about a hundred percent plus the 12%. 00:36:59.800 --> 00:37:03.210 I know it was in an additional reserve margin 00:37:03.210 --> 00:37:04.540 was in some of the proposals. 00:37:04.540 --> 00:37:07.893 And as you saw in my memo last week, 00:37:09.184 --> 00:37:11.250 that's not under consideration 00:37:12.473 --> 00:37:14.393 and the straw man, I offered. 00:37:15.270 --> 00:37:20.130 So we would, again, never ask LSEs to buy more power 00:37:20.130 --> 00:37:23.060 than they expect to use for their customers 00:37:23.960 --> 00:37:27.363 during some metric related to peak demand. 00:37:29.875 --> 00:37:33.630 And finally, you mentioned the challenges 00:37:33.630 --> 00:37:37.203 with load growth or forecasting load growth. 00:37:38.860 --> 00:37:43.400 I think it's fair to say that the U.S. stock market 00:37:43.400 --> 00:37:47.300 is one of the most quantified evaluated ecosystems 00:37:47.300 --> 00:37:52.180 on the planet, and nobody can get that one right tomorrow. 00:37:52.180 --> 00:37:54.170 So under no circumstances does any, 00:37:54.170 --> 00:37:56.810 I think any of us expect load growth forecast 00:37:56.810 --> 00:37:59.393 to be accurate even a week out. 00:38:01.760 --> 00:38:05.970 And that is exactly why my straw man proposal last week 00:38:05.970 --> 00:38:08.810 had a escalating requirement 00:38:08.810 --> 00:38:11.210 starting at 50%, three years out. 00:38:11.210 --> 00:38:15.530 Is there any scenario where you see Lubbock losing 50% 00:38:15.530 --> 00:38:17.330 of its load in the next three years? 00:38:21.910 --> 00:38:24.890 Well, as you know, as most of you might know, 00:38:24.890 --> 00:38:26.450 we're planning on joining the retail market. 00:38:26.450 --> 00:38:29.480 So in theory, if we join the retail market in two years, 00:38:29.480 --> 00:38:30.730 we will lose a hundred percent of our load. 00:38:30.730 --> 00:38:33.490 Somebody else will be responsible for the demand 00:38:33.490 --> 00:38:35.100 at that point in time. 00:38:35.100 --> 00:38:38.670 Okay, sure. (all laughing) 00:38:38.670 --> 00:38:39.753 Welcome to ERCOT. 00:38:42.660 --> 00:38:46.553 As previously, 00:38:47.972 --> 00:38:50.272 in SBP, when you're responsible for that load, 00:38:51.250 --> 00:38:54.440 was there any scenario where you expected to lose 50% 00:38:54.440 --> 00:38:57.097 of your load within the timeframe of 36 months. 00:38:57.097 --> 00:39:00.630 No, absolutely, our load is fairly stable. 00:39:00.630 --> 00:39:03.200 Weather is the biggest factor year to year 00:39:03.200 --> 00:39:05.830 'cause you can't predict weather three years in advance. 00:39:05.830 --> 00:39:06.920 But if you have-- Of course not. 00:39:06.920 --> 00:39:09.930 Long hot summer, your load is gonna be 10%, 20% 00:39:09.930 --> 00:39:13.870 higher than it would be in a mild summer. 00:39:13.870 --> 00:39:15.860 Okay, so you said 00:39:15.860 --> 00:39:20.860 you were buying the bilateral arrangements 00:39:21.260 --> 00:39:23.930 for your power two years out, right? 00:39:23.930 --> 00:39:26.383 Yes. Or even more with the 2019? 00:39:27.580 --> 00:39:30.120 We're buying through a summer, 00:39:30.120 --> 00:39:33.510 well, let's see, we're buying through May of 23 right now. 00:39:33.510 --> 00:39:36.490 Okay, so you were already buying power multiple years out? 00:39:36.490 --> 00:39:37.793 Right. Okay. 00:39:38.970 --> 00:39:40.140 It's firm LD products though. 00:39:40.140 --> 00:39:44.020 I don't know if they qualify under the LSE obligation, 00:39:44.020 --> 00:39:45.630 approach the chart considering. 00:39:45.630 --> 00:39:47.380 As always devil's in the details. 00:39:48.410 --> 00:39:49.820 I mean, they're firm from my standpoint 00:39:49.820 --> 00:39:51.630 because they're financially firm for sure 00:39:51.630 --> 00:39:53.240 from our perspective. 00:39:53.240 --> 00:39:56.540 So Mr. McCauley, LP&L is, 00:39:57.575 --> 00:39:58.900 you're in the process of unbundling. 00:39:58.900 --> 00:40:02.220 I mean, your experience in SBP 00:40:02.220 --> 00:40:04.880 is a vertically integrated utility, right? 00:40:04.880 --> 00:40:05.850 Right, it was. 00:40:06.820 --> 00:40:08.660 So it's a little bit of a different experience 00:40:08.660 --> 00:40:12.640 than say a rep would have, traditional rep would have 00:40:12.640 --> 00:40:13.893 with an LSE obligation? 00:40:15.548 --> 00:40:18.203 Yes, and the reps, 00:40:20.150 --> 00:40:23.530 reps are adding load and losing load all the time. 00:40:23.530 --> 00:40:25.140 So I think it'd be a little harder for a rep 00:40:25.140 --> 00:40:27.468 to predict what they're load might be 00:40:27.468 --> 00:40:29.820 two years, three years in advance. 00:40:29.820 --> 00:40:32.135 So there's a lot of wind in SBP? 00:40:32.135 --> 00:40:32.968 Yes. 00:40:32.968 --> 00:40:35.580 Are they experiencing some of the issues we experienced 00:40:35.580 --> 00:40:37.683 here in ERCOT where it's a low load, 00:40:40.040 --> 00:40:41.433 higher than expected load, 00:40:42.350 --> 00:40:44.453 lower than expected wind generation? 00:40:46.510 --> 00:40:47.343 They are. 00:40:47.343 --> 00:40:50.230 I think every RTO is experiencing the same phenomenon 00:40:50.230 --> 00:40:52.650 that y'all are experiencing. 00:40:52.650 --> 00:40:56.902 SBP has got a major wind resources coming into the grid. 00:40:56.902 --> 00:40:59.350 I don't know if they've got as much solar 00:40:59.350 --> 00:41:00.830 as ERCOT has coming in, 00:41:00.830 --> 00:41:03.533 but they're all dealing with the same kind of problems. 00:41:03.533 --> 00:41:07.730 And how do they manage those operational reliability 00:41:07.730 --> 00:41:10.720 scenarios or experiences they have with a lot of wind 00:41:10.720 --> 00:41:12.420 on the system that they drop off? 00:41:12.420 --> 00:41:15.620 And I know they're multi-state market. 00:41:15.620 --> 00:41:18.793 So, they have access to a lot of resources, 00:41:19.665 --> 00:41:20.640 but what are some of the tools, 00:41:20.640 --> 00:41:23.090 do they have an ancillary service market as well? 00:41:24.310 --> 00:41:26.330 They do, they deploy a lot of the same tools 00:41:26.330 --> 00:41:27.950 that ERCOT is using? 00:41:27.950 --> 00:41:30.050 They may be a little more aggressive about curtailing. 00:41:30.050 --> 00:41:32.547 I know we've got some wind resources 00:41:32.547 --> 00:41:35.510 that they get curtail frequently, so. 00:41:35.510 --> 00:41:40.510 So even with an SBP, some version of an LSE obligation, 00:41:41.130 --> 00:41:42.550 they continue to rely heavily 00:41:42.550 --> 00:41:45.710 on their ancillary service market on those types of days? 00:41:45.710 --> 00:41:48.155 Yes. Okay, thank you. 00:41:48.155 --> 00:41:52.040 And the point I made a minute ago, there 23% reserves 00:41:52.040 --> 00:41:54.427 and which is above where ERCOT is today 00:41:54.427 --> 00:41:56.030 and they still had rotating outages. 00:41:56.030 --> 00:41:58.230 So I think that they call it 00:41:58.230 --> 00:42:03.230 the LRE resource adequacy requirement does not guarantee 00:42:03.300 --> 00:42:06.133 that you're gonna have a hundred percent liability. 00:42:06.133 --> 00:42:10.993 The winter storm area was in the extreme black swan event 00:42:13.150 --> 00:42:16.783 that affected and affected all of us nationwide. 00:42:19.890 --> 00:42:22.680 But the wind degeneration days are not black swan events. 00:42:22.680 --> 00:42:25.140 They're issues that all markets are experiencing, 00:42:25.140 --> 00:42:26.133 including ERCOT. 00:42:28.400 --> 00:42:31.450 SBP has large and growing percentage 00:42:31.450 --> 00:42:33.603 of wind in their mix, in their portfolio. 00:42:36.660 --> 00:42:39.930 Do they have, does SBP experience rolling blackouts 00:42:39.930 --> 00:42:43.210 on blue sky days that you've heard us talk about? 00:42:43.210 --> 00:42:45.103 No, sir, the event in February was the first one 00:42:45.103 --> 00:42:48.250 that'd had 80 years of being around. 00:42:48.250 --> 00:42:50.450 Yeah, the extreme weather event is one problem. 00:42:50.450 --> 00:42:53.000 The blue sky problem is a different problem. 00:42:53.000 --> 00:42:54.207 Okay, thank you. 00:42:54.207 --> 00:42:55.040 But that's primarily the structure 00:42:55.040 --> 00:42:56.810 of the vertically integrated utilities 00:42:56.810 --> 00:43:00.260 that have rate-based plants that have been in there 00:43:00.260 --> 00:43:02.290 for 50 years. 00:43:02.290 --> 00:43:05.403 So we have a very different market from that. 00:43:07.960 --> 00:43:12.180 Sorry, it's the blue sky problem is the result of what? 00:43:12.180 --> 00:43:14.440 Yeah, the blue, I mean, obviously the blue sky problem, 00:43:14.440 --> 00:43:16.470 in my view, the blue sky problem there, 00:43:16.470 --> 00:43:17.670 and here it's very different 00:43:17.670 --> 00:43:20.160 because they have vertically integrated utilities 00:43:20.160 --> 00:43:22.730 with power plants that are in their rate base. 00:43:22.730 --> 00:43:24.840 We don't have those. 00:43:24.840 --> 00:43:25.910 They shouldn't be-- That would be called 00:43:25.910 --> 00:43:28.945 a capacity market in this space. 00:43:28.945 --> 00:43:31.057 Right, so they shouldn't be having those problems. 00:43:31.057 --> 00:43:32.525 They shouldn't be having those problems. 00:43:32.525 --> 00:43:34.550 And that gets us to a, 00:43:36.130 --> 00:43:38.760 if there's a capacity market issue here, 00:43:38.760 --> 00:43:41.380 that's persona non grata, 00:43:41.380 --> 00:43:45.380 but that's what they have. 00:43:45.380 --> 00:43:48.474 Sure, they'll have to talk to the, I mean, right. 00:43:48.474 --> 00:43:50.120 If anybody wants to go straight to the capacity market, 00:43:50.120 --> 00:43:51.340 they'll have to talk to the legislature. 00:43:51.340 --> 00:43:52.380 That's right. 00:43:52.380 --> 00:43:55.453 Well, I mean, right. 00:43:57.810 --> 00:43:58.940 I'm pretty sure the legislature 00:43:58.940 --> 00:44:00.163 would want to way in on that. 00:44:00.163 --> 00:44:03.230 I mean, anywhere near capacity market, right. 00:44:03.230 --> 00:44:06.110 They're gonna weigh in, I can guarantee that. 00:44:06.110 --> 00:44:07.050 They did weigh in. 00:44:07.050 --> 00:44:09.783 They're gonna weigh in again, I guarantee you that too. 00:44:11.030 --> 00:44:16.030 Sir, on your filing, how did you come up with the costs 00:44:17.340 --> 00:44:18.340 that you put down there? 00:44:18.340 --> 00:44:19.870 'Cause again, we're all trying to come up 00:44:19.870 --> 00:44:24.090 with a menu of costs that we're looking at it. 00:44:24.090 --> 00:44:26.020 Well, it was based on 00:44:26.020 --> 00:44:29.840 what we have paid historically for capacity and SBP 00:44:29.840 --> 00:44:31.713 and just multiplied it out. 00:44:31.713 --> 00:44:35.530 It was anywhere from $4 to $8 per KW month 00:44:35.530 --> 00:44:38.620 is what we paid for capacity and SBP, 00:44:38.620 --> 00:44:43.114 multiply that out times 12 months, 00:44:43.114 --> 00:44:45.410 times how many megawatts you need 00:44:45.410 --> 00:44:48.427 and then divide it by your annual energy sales. 00:44:48.427 --> 00:44:50.560 And that's how I came up with that cost. 00:44:50.560 --> 00:44:51.910 Okay. 00:44:51.910 --> 00:44:53.220 I actually do have a question. 00:44:53.220 --> 00:44:57.790 So would you describe the LSE obligation and SBP, 00:44:57.790 --> 00:45:00.570 which bookend that the chairman talked about, 00:45:00.570 --> 00:45:04.183 is it much more proof of purchase? 00:45:04.183 --> 00:45:06.713 I would say it is a, 00:45:08.660 --> 00:45:10.560 if you look at just the capacity part of it, 00:45:10.560 --> 00:45:12.210 it's probably the light touch approach. 00:45:12.210 --> 00:45:13.650 It's this deliverability aspect 00:45:13.650 --> 00:45:16.052 that made it so unworkable for us. 00:45:16.052 --> 00:45:17.760 Okay, so the proof of purchase side of it 00:45:17.760 --> 00:45:19.320 is not very problematic. 00:45:19.320 --> 00:45:21.610 No, that part was not, it was not that difficult, 00:45:21.610 --> 00:45:23.590 There's annual filings that you have to do, 00:45:23.590 --> 00:45:26.720 show you the load forecast and show you your contracts 00:45:26.720 --> 00:45:30.443 and generation that you own and just match all that up. 00:45:31.410 --> 00:45:32.243 Accounting and Auditing. 00:45:32.243 --> 00:45:33.180 That part wasn't tough. 00:45:34.784 --> 00:45:36.113 Thank you. 00:45:36.113 --> 00:45:38.683 Any other questions? No sir. 00:45:38.683 --> 00:45:40.166 All right, thank you sir. 00:45:40.166 --> 00:45:40.999 Thank you. 00:45:40.999 --> 00:45:42.580 Could we have Bill Barnes come up 00:45:42.580 --> 00:45:47.113 and offer some thoughts on the Lubbock perspective? 00:45:53.480 --> 00:45:54.313 Thank you. 00:45:58.090 --> 00:46:02.250 I think what you heard from Lubbock 00:46:02.250 --> 00:46:04.610 pointing out some pretty big structural differences 00:46:04.610 --> 00:46:07.790 between the SBP market and in the ERCOT market. 00:46:07.790 --> 00:46:11.680 So in terms of comparing-- 00:46:11.680 --> 00:46:13.623 Bill, current or as proposed? 00:46:15.370 --> 00:46:20.370 I would say current, current markets and as proposed. 00:46:20.550 --> 00:46:21.830 Okay. 00:46:21.830 --> 00:46:23.631 The evolution of all we need to get to. 00:46:23.631 --> 00:46:24.964 Okay. Right. 00:46:26.690 --> 00:46:28.210 And we keep coming back 00:46:28.210 --> 00:46:31.660 to this capacity versus energy discussion, 00:46:31.660 --> 00:46:33.980 similar to what we see in SBP in other markets, ERCOT. 00:46:33.980 --> 00:46:37.270 So I think we need a brief therapy session 00:46:37.270 --> 00:46:39.543 on what energy versus capacity means. 00:46:40.600 --> 00:46:43.900 We've never had an energy only market. 00:46:43.900 --> 00:46:47.135 We've always had an energy, mostly market. 00:46:47.135 --> 00:46:49.660 And that means like any other power market, 00:46:49.660 --> 00:46:52.640 you have two sources of revenue that support operations 00:46:52.640 --> 00:46:54.390 and investment, and that is energy revenues 00:46:54.390 --> 00:46:55.543 and capacity revenues. 00:46:56.620 --> 00:46:57.780 Ancillary service revenues. 00:46:57.780 --> 00:47:00.140 Our capacity revenues have been traditionally 00:47:00.140 --> 00:47:02.540 a much smaller piece of the overall picture, 00:47:02.540 --> 00:47:03.673 ancillary services. 00:47:04.710 --> 00:47:08.950 As we have evolved through time and learned that 00:47:10.636 --> 00:47:12.940 a system that depends on frequent scarcity 00:47:12.940 --> 00:47:16.220 is not in the public interest, 00:47:16.220 --> 00:47:17.820 we have recognized that we need 00:47:17.820 --> 00:47:22.160 to increase the capacity revenue side of the equation. 00:47:22.160 --> 00:47:24.100 We buy more ancillary services. 00:47:24.100 --> 00:47:26.120 We've implemented the ORDC in a way 00:47:26.120 --> 00:47:30.440 that does not reflect the fundamentals of a scarcity price. 00:47:30.440 --> 00:47:32.800 It reflects the fundamentals of needing 00:47:32.800 --> 00:47:36.473 to get a higher price at a farther portion of time. 00:47:38.730 --> 00:47:43.730 And so when you hear the phrase capacity market, 00:47:45.500 --> 00:47:49.960 to me, that is interpreted widely by all of us 00:47:49.960 --> 00:47:52.310 to mean something that's, 00:47:52.310 --> 00:47:55.053 it costs a lot of money that buys stuff we don't want. 00:47:56.320 --> 00:47:59.520 And in my perspective, there isn't a proposal in here 00:47:59.520 --> 00:48:01.200 that is doing that. 00:48:01.200 --> 00:48:04.370 That is not what the LSE obligation proposal 00:48:04.370 --> 00:48:05.730 is intended to do, 00:48:05.730 --> 00:48:10.230 but at what it is intended to do is to recognize 00:48:10.230 --> 00:48:13.940 that as we meet our reliability objectives, 00:48:13.940 --> 00:48:18.520 we need a competitive product that values reliability 00:48:18.520 --> 00:48:20.423 in a better way than what we have today. 00:48:21.260 --> 00:48:22.747 That's what it's intended to do. 00:48:22.747 --> 00:48:27.747 And it's intended to use mechanisms that have been 00:48:29.020 --> 00:48:33.070 and are reflective of what we see in our market today. 00:48:33.070 --> 00:48:36.010 When we went through the process of developing this, 00:48:36.010 --> 00:48:40.260 we stopped at every part, every bucket of proposals 00:48:41.380 --> 00:48:44.515 that we've seen in this, ORDC reforms, 00:48:44.515 --> 00:48:48.400 expansion of ancillary service products 00:48:48.400 --> 00:48:50.870 which when we spent time thinking 00:48:50.870 --> 00:48:52.903 about how those would work, 00:48:53.840 --> 00:48:56.450 we kept getting back to the point of, well, 00:48:56.450 --> 00:49:00.790 if you're buying a substantially 00:49:00.790 --> 00:49:02.753 higher amount of ancillary services, 00:49:04.230 --> 00:49:07.400 which is a central procurement of capacity. 00:49:07.400 --> 00:49:09.380 So let's, again, let's talk freely about 00:49:09.380 --> 00:49:11.023 what were these concepts. 00:49:12.600 --> 00:49:14.070 Which we have in place right now, 00:49:14.070 --> 00:49:15.110 right, through our ancillary service market? 00:49:15.110 --> 00:49:16.440 We have that in place now. 00:49:16.440 --> 00:49:20.960 And we're one bucket of solutions is to increase that 00:49:20.960 --> 00:49:23.310 and create new ones. 00:49:23.310 --> 00:49:25.440 And so to me-- 00:49:25.440 --> 00:49:27.134 We're just expanding existing ones? 00:49:27.134 --> 00:49:28.356 We're expanding existing ones. 00:49:28.356 --> 00:49:29.189 Just moving on, 00:49:29.189 --> 00:49:30.022 spending 20 thousand megawatts. 00:49:30.022 --> 00:49:34.540 To me, the market design is a, from a high level, 00:49:34.540 --> 00:49:36.663 very simply a risk management exercise. 00:49:37.880 --> 00:49:38.850 On one of the spectrum, 00:49:38.850 --> 00:49:42.270 you have the lowest cost, highest risk. 00:49:42.270 --> 00:49:43.750 on the other end of the spectrum, 00:49:43.750 --> 00:49:45.860 you have a higher cost, lower risk. 00:49:45.860 --> 00:49:47.680 And so we're trying to find something in the middle 00:49:47.680 --> 00:49:50.453 that works the best for our market. 00:49:51.410 --> 00:49:54.730 With concern about expanding ancillary services 00:49:54.730 --> 00:49:57.490 and relying just on it, which is a path we can go down. 00:49:57.490 --> 00:49:59.890 That's envisioned in SB3 00:49:59.890 --> 00:50:01.783 with respect to ancillary service and reliability services. 00:50:01.783 --> 00:50:04.560 I think SB3 addresses that as well, 00:50:04.560 --> 00:50:06.370 but we obviously believe that SB3 00:50:06.370 --> 00:50:09.230 also provides a clear framework 00:50:09.230 --> 00:50:12.290 for a more comprehensive approach, 00:50:12.290 --> 00:50:17.060 but our worry is the ancillary service route eventually ends 00:50:17.060 --> 00:50:19.880 in a spot where you've compensated capacity 00:50:19.880 --> 00:50:20.950 to be dispatchable. 00:50:20.950 --> 00:50:24.400 You've compensated a portion of capacity to be able to meet 00:50:24.400 --> 00:50:26.320 very specific operational needs. 00:50:26.320 --> 00:50:28.890 But then you have the, the rest of this capacity 00:50:28.890 --> 00:50:31.053 that's not getting compensated that will eventually 00:50:31.053 --> 00:50:32.130 have to exit. 00:50:32.130 --> 00:50:33.290 And then you're talking about 00:50:33.290 --> 00:50:35.480 adding another ancillary service to keep them around. 00:50:35.480 --> 00:50:37.940 And you basically backed yourself into a central procurement 00:50:37.940 --> 00:50:40.770 of capacity for everything, okay. 00:50:40.770 --> 00:50:43.510 So when we thought about the LSE obligation 00:50:43.510 --> 00:50:46.313 and we looked at SBP, we looked at Australia, 00:50:49.551 --> 00:50:52.250 and this is where, when I look at all the proposals filed, 00:50:52.250 --> 00:50:56.150 I think, and probably not apparent to you all, 00:50:56.150 --> 00:50:58.344 but we've gone through this process a few times 00:50:58.344 --> 00:51:00.520 in the last 20 years. 00:51:00.520 --> 00:51:04.164 And I feel like there's more agreement and support 00:51:04.164 --> 00:51:06.490 for high level principles than we've had before. 00:51:06.490 --> 00:51:08.970 And that is one, make sure we achieve 00:51:08.970 --> 00:51:10.010 our reliability objectives, 00:51:10.010 --> 00:51:12.483 but also preserve our competitive market. 00:51:15.270 --> 00:51:17.070 Whatever we end up with, right, 00:51:17.070 --> 00:51:18.520 has to check those two boxes. 00:51:20.155 --> 00:51:23.103 Now, the difference, I think, between the proposals is, 00:51:24.630 --> 00:51:28.040 maybe a matter of the sense of urgency, 00:51:28.040 --> 00:51:29.550 but I can tell you from our perspective, 00:51:29.550 --> 00:51:32.263 what informed our path and our decision-making was, 00:51:33.220 --> 00:51:35.170 do we think we will get another chance. 00:51:36.920 --> 00:51:40.720 If this doesn't work, if we go down the route 00:51:40.720 --> 00:51:43.320 of a certain direction and it doesn't work, 00:51:43.320 --> 00:51:46.020 do we think we'll have another chance at this? 00:51:46.020 --> 00:51:50.520 And I spent more time at the legislature this last session. 00:51:50.520 --> 00:51:53.570 And I can tell you, I agree, but I don't think we do. 00:51:53.570 --> 00:51:57.062 And so to me, the solution has to be forceful 00:51:57.062 --> 00:51:59.410 in how it addresses reliability, 00:51:59.410 --> 00:52:02.702 but we have to address the issues and the concerns 00:52:02.702 --> 00:52:05.320 that we've heard and you've seen 00:52:05.320 --> 00:52:07.390 filed for the LSE obligation. 00:52:07.390 --> 00:52:09.630 Market power, impact on retail. 00:52:09.630 --> 00:52:12.223 We got to make sure that it meets those things, 00:52:13.090 --> 00:52:16.860 which is what kind of coming back to the original question. 00:52:16.860 --> 00:52:20.060 That's what makes ERCOT so different from SBP, right? 00:52:20.060 --> 00:52:22.220 You've got a kind of handful of utilities up there. 00:52:22.220 --> 00:52:27.220 It's just a very different structure in terms of the ability 00:52:27.360 --> 00:52:32.360 for participants to provide liquidity, to provide products. 00:52:32.540 --> 00:52:35.920 You hear folks talk about how our ERCOT is, 00:52:35.920 --> 00:52:39.410 the product is a liquid, energy product is a liquid. 00:52:39.410 --> 00:52:43.450 That to me is a function of price volatility, 00:52:43.450 --> 00:52:44.770 not necessarily structure. 00:52:44.770 --> 00:52:48.270 So why is there ERCOT product so volatile 00:52:48.270 --> 00:52:50.500 or so illiquid at times is because the bid-ask 00:52:50.500 --> 00:52:52.780 is 9,000 or a hundred dollars, right? 00:52:52.780 --> 00:52:55.080 And that I don't care what market you have. 00:52:55.080 --> 00:52:57.110 That's going to be a very liquid market. 00:52:57.110 --> 00:52:59.410 So lowering the vol will help address 00:52:59.410 --> 00:53:01.240 some of those issues. 00:53:01.240 --> 00:53:04.650 But structurally there is ample amount 00:53:04.650 --> 00:53:06.930 of financial intermediaries. 00:53:06.930 --> 00:53:09.230 There are brokers, there are mechanisms 00:53:09.230 --> 00:53:12.010 that help provide liquidity for the energy products 00:53:12.010 --> 00:53:12.930 that we have, right. 00:53:12.930 --> 00:53:15.990 So that to me, I think is one of the bigger differences 00:53:15.990 --> 00:53:20.990 with, the LSE obligation in ERCOT versus SBP, 00:53:21.440 --> 00:53:24.893 in terms of the mechanisms on how you implement it. 00:53:26.690 --> 00:53:29.250 Accreditation, we have a version of accreditation now 00:53:29.250 --> 00:53:31.610 with the SAR and the CDR that would absolutely 00:53:31.610 --> 00:53:36.610 have to be revamped and thought through and bolstered. 00:53:37.020 --> 00:53:40.813 And when I look at section 25,173 of the substandard rules, 00:53:42.020 --> 00:53:46.385 that creates a process to incentivize investment 00:53:46.385 --> 00:53:50.490 in a very specific amount of capacity. 00:53:50.490 --> 00:53:54.770 That's assigned full load serving entities, retail entities, 00:53:54.770 --> 00:53:55.960 in that, in aspects that, 00:53:55.960 --> 00:53:57.650 that's the renewable energy credit, 00:53:57.650 --> 00:54:00.020 the structure is similar. 00:54:00.020 --> 00:54:02.090 The concerns that you hear about it is 00:54:02.090 --> 00:54:05.540 because that type of product in this market, 00:54:05.540 --> 00:54:08.200 we think we are of short supply. 00:54:08.200 --> 00:54:10.870 We're not short supply of renewable energy credits, right? 00:54:10.870 --> 00:54:13.310 But structurally, it's similar. 00:54:13.310 --> 00:54:15.540 Our ancillary service market, 00:54:15.540 --> 00:54:18.940 we administratively set an amount of ancillary services 00:54:18.940 --> 00:54:21.780 that we want to procure for a specific reliability reason 00:54:21.780 --> 00:54:24.033 and we assign it to LSEs. 00:54:25.093 --> 00:54:27.650 This is not a foreign concept in our market, 00:54:27.650 --> 00:54:29.370 but we do have issues that we need to work through 00:54:29.370 --> 00:54:32.070 to make sure that it does not do harm. 00:54:32.070 --> 00:54:34.760 It maintains the parts of our market 00:54:34.760 --> 00:54:36.240 that have worked so well. 00:54:36.240 --> 00:54:40.070 But, again, reps are specifically authorized and statued 00:54:40.070 --> 00:54:41.970 by specific legislation. Agree. 00:54:41.970 --> 00:54:44.120 We are talking about making something 00:54:44.120 --> 00:54:45.690 out of whole cloth here. 00:54:45.690 --> 00:54:46.523 Yep. 00:54:46.523 --> 00:54:50.450 Tied to two sections of a somewhat ambiguous section 00:54:50.450 --> 00:54:54.940 of law that has profound consequences for the retail segment 00:54:54.940 --> 00:54:58.440 of the market, in the energy only market design. 00:54:58.440 --> 00:54:59.570 Would you agree with that? 00:54:59.570 --> 00:55:02.500 I don't wanna minimize the effort involved 00:55:02.500 --> 00:55:04.910 with implementing an LSE obligation. 00:55:04.910 --> 00:55:06.113 It's not a small change, 00:55:07.050 --> 00:55:10.890 which is why we have encouraged a longer term process 00:55:10.890 --> 00:55:12.600 to develop that because we wanna make sure 00:55:12.600 --> 00:55:14.799 we get it right and we explore it. 00:55:14.799 --> 00:55:16.470 I do think Senate Bill 3 00:55:16.470 --> 00:55:18.883 provides the foundation to pursue this path, 00:55:19.890 --> 00:55:24.080 but it is one that like the Chairman has said, 00:55:24.080 --> 00:55:27.000 this isn't a today thing tomorrow, next month, 00:55:27.000 --> 00:55:28.650 there are issues that we would need to work through. 00:55:28.650 --> 00:55:33.180 But when we look across the spectrum of proposals 00:55:33.180 --> 00:55:36.320 and we look at them through the perspective of, 00:55:36.320 --> 00:55:37.803 do we have another chance, 00:55:39.440 --> 00:55:42.340 I don't see a proposal that is comparable 00:55:42.340 --> 00:55:46.360 in terms of its ability to reduce the risk 00:55:46.360 --> 00:55:48.303 of reliability event. 00:55:50.120 --> 00:55:51.870 And so that's where we get concerned, 00:55:51.870 --> 00:55:55.170 is what else is out there that helps us 00:55:55.170 --> 00:55:58.573 solve the reliability problem and achieves the objectives 00:55:58.573 --> 00:56:00.750 that we want in terms of preserving our market. 00:56:00.750 --> 00:56:04.660 So two things, you've said multiple times 00:56:04.660 --> 00:56:06.333 we don't have another chance. 00:56:07.580 --> 00:56:09.603 This is not a today, tomorrow thing. 00:56:13.610 --> 00:56:15.730 It's unknown how long the LSE obligations 00:56:15.730 --> 00:56:16.870 is gonna take to implement. 00:56:16.870 --> 00:56:20.110 I mean, we can be moving towards your proposed path 00:56:20.110 --> 00:56:21.883 and still not have a chance. 00:56:22.756 --> 00:56:25.300 So, I mean, I don't view this as, like, 00:56:25.300 --> 00:56:26.190 we don't have another chance, 00:56:26.190 --> 00:56:28.860 we need to go down the LSE obligation route 00:56:28.860 --> 00:56:29.960 because we don't have another chance. 00:56:29.960 --> 00:56:31.310 I see it as we need to attack 00:56:31.310 --> 00:56:34.080 our operational reliability issues now, 00:56:34.080 --> 00:56:35.730 because we certainly won't even get a chance 00:56:35.730 --> 00:56:39.525 to get to your LSE obligation in the mean, if we don't-- 00:56:39.525 --> 00:56:41.300 I agree with that. Okay. 00:56:41.300 --> 00:56:43.780 Yeah, this isn't a just pick this and do that. 00:56:43.780 --> 00:56:44.613 Forget everything else. 00:56:44.613 --> 00:56:47.433 No, I think this is all the above. 00:56:48.530 --> 00:56:52.930 What's the downside of exploring a longer-term solution 00:56:52.930 --> 00:56:55.063 while you do the things you just mentioned. 00:56:55.063 --> 00:56:57.573 And you said another thing that I just, 00:56:57.573 --> 00:56:59.860 I have to say, you said, well, 00:56:59.860 --> 00:57:01.710 this is the way we maintain reliability 00:57:01.710 --> 00:57:03.070 and make sure the lights don't go out. 00:57:03.070 --> 00:57:04.650 Something like that at the tail end of your statement. 00:57:04.650 --> 00:57:06.073 But I have to say, 00:57:07.990 --> 00:57:12.990 SBP might as well have LSE obligation related markets 00:57:13.120 --> 00:57:15.900 and had rotating outages during the storm, 00:57:15.900 --> 00:57:18.870 California has a more similar market 00:57:18.870 --> 00:57:21.570 and their Governor had to take extraordinary action 00:57:21.570 --> 00:57:24.630 to address energy supply shortfalls. 00:57:24.630 --> 00:57:29.630 So we gotta be cognizant of the fact that 00:57:29.860 --> 00:57:31.750 absolutely you wanna maintain reliability, 00:57:31.750 --> 00:57:34.170 absolutely everything we can to figure out a solution 00:57:34.170 --> 00:57:35.640 to get there. 00:57:35.640 --> 00:57:39.090 But we really have to be cognizant of the fact 00:57:39.090 --> 00:57:41.730 that these market constructs exist in one form or fashion 00:57:41.730 --> 00:57:43.230 and ours will be different 'cause we'll be cutting it 00:57:43.230 --> 00:57:48.230 out of cloth, but I'm not sure they ensure 00:57:48.530 --> 00:57:50.830 complete reliability and nothing will, nothing will, 00:57:50.830 --> 00:57:53.730 but we can't be saying that this will definitely do that 00:57:54.870 --> 00:57:57.660 or help us get there when we have real-world examples 00:57:57.660 --> 00:57:58.900 of where it has not. 00:57:58.900 --> 00:58:00.610 Agreed and we shouldn't say that, 00:58:00.610 --> 00:58:01.800 we can't make any guarantees. 00:58:01.800 --> 00:58:02.737 I certainly will not. 00:58:02.737 --> 00:58:04.230 And I wanna work the problem. 00:58:04.230 --> 00:58:05.670 So in that interest, okay. 00:58:05.670 --> 00:58:09.750 So Singapore has one of these, don't they? 00:58:09.750 --> 00:58:11.253 Sort of? It was proposed. 00:58:12.270 --> 00:58:13.103 Okay. 00:58:14.070 --> 00:58:17.730 Well, so I'd heard that we're talking about 00:58:17.730 --> 00:58:21.670 under your concept, Mr. Chairman, a hundred percent, 00:58:21.670 --> 00:58:23.650 we're trying to firm to a hundred percent 00:58:23.650 --> 00:58:25.830 of what we're gonna need on a given day, right? 00:58:25.830 --> 00:58:27.543 That's what we're gonna try to trade. 00:58:27.543 --> 00:58:29.130 The first straw man's a starting point. 00:58:29.130 --> 00:58:29.997 I understand. 00:58:29.997 --> 00:58:31.670 But no under no circumstances, 00:58:31.670 --> 00:58:33.799 would I ask LSEs to buy more power than they expect to use. 00:58:33.799 --> 00:58:36.083 That's where my question's goin, toward the straw man. 00:58:38.290 --> 00:58:41.630 In order to allow flexibility in the market 00:58:41.630 --> 00:58:43.430 for price responsive behavior. 00:58:43.430 --> 00:58:46.740 Again, in real time, I'm worried about suppressing 00:58:46.740 --> 00:58:49.830 the animal spirits of real-time, Bill 00:58:49.830 --> 00:58:52.200 on the steel which has been extremely effective 00:58:52.200 --> 00:58:54.983 in Texas and made power affordable. 00:58:56.520 --> 00:58:59.890 Do you need to procure all a hundred percent or over? 00:58:59.890 --> 00:59:03.960 Should there just be a minimum procurement there 00:59:03.960 --> 00:59:06.793 to allow the market to market? 00:59:08.320 --> 00:59:13.320 So, I think the main question that you raise 00:59:15.040 --> 00:59:20.040 on this particular topic is how should the responsibility 00:59:20.490 --> 00:59:24.200 to provide reliability, be distributed 00:59:24.200 --> 00:59:26.453 amongst market participants, sir, right? 00:59:28.020 --> 00:59:31.850 Which raises the question of free ridership for liability 00:59:31.850 --> 00:59:34.480 is that something that we think should be addressed 00:59:34.480 --> 00:59:36.690 or should be left to the market to decide? 00:59:36.690 --> 00:59:38.000 The wagon coaster. 00:59:38.000 --> 00:59:39.920 Exactly, right? 00:59:39.920 --> 00:59:42.260 Say that again. The wagon coaster 00:59:42.260 --> 00:59:44.850 from retailer, we don't, we just sell things. 00:59:44.850 --> 00:59:46.480 I'll sell you a coaster, I'll sell you a pen. 00:59:46.480 --> 00:59:48.510 If it's power or coasters, I don't care. 00:59:48.510 --> 00:59:51.090 I think that's not the right approach for retailers 00:59:51.090 --> 00:59:53.600 in Texas who were responsible for powering the lives 00:59:53.600 --> 00:59:54.603 of their customers. 00:59:55.850 --> 00:59:59.893 So that's part of the decision with the LSE obligation, 01:00:02.140 --> 01:00:04.000 but to your question Will, 01:00:04.000 --> 01:00:07.610 which is part of what's allowed this market to work so well 01:00:07.610 --> 01:00:11.540 is that freedom and the ability 01:00:14.101 --> 01:00:16.980 to be as flexible as possible 01:00:16.980 --> 01:00:20.250 in meeting real-time obligations, right? 01:00:20.250 --> 01:00:24.630 And if a retailer decides that they wanna be 01:00:24.630 --> 01:00:28.120 completely unhedged and take that risk, right, 01:00:28.120 --> 01:00:31.720 that's a market risk, they're free to wear today 01:00:31.720 --> 01:00:33.700 and they will bear the financial consequences 01:00:33.700 --> 01:00:35.310 if they're wrong. 01:00:35.310 --> 01:00:36.590 We all make that decision every day 01:00:36.590 --> 01:00:39.290 in operating our businesses in the competitive market. 01:00:41.050 --> 01:00:45.500 I think that is a separate from the question 01:00:45.500 --> 01:00:46.420 that the Chairman raises, 01:00:46.420 --> 01:00:48.920 which is who's gonna help us solve 01:00:48.920 --> 01:00:50.860 the reliability problems? 01:00:50.860 --> 01:00:54.390 And in a central procurement, 01:00:54.390 --> 01:00:56.684 if we increase the ancillary services, 01:00:56.684 --> 01:01:01.620 ERCOTs procuring that amounts and then distributing 01:01:01.620 --> 01:01:03.030 it to everyone, right? 01:01:03.030 --> 01:01:05.763 Or LSEs based on low ratio share. 01:01:08.820 --> 01:01:13.820 The question with the requirement to hedge energy, 01:01:15.230 --> 01:01:18.580 which this is part one that I've been thinking about 01:01:18.580 --> 01:01:22.960 quite a bit, which again, this is a complicated thing 01:01:22.960 --> 01:01:25.293 that was gonna take time to work through. 01:01:26.790 --> 01:01:29.773 If LSEs are required to hedge their energy, 01:01:32.500 --> 01:01:33.730 What I've been thinking about is, 01:01:33.730 --> 01:01:37.320 how will the bilateral market evolve 01:01:37.320 --> 01:01:39.363 and respond to that requirement? 01:01:41.220 --> 01:01:44.060 And I think it actually manifests itself 01:01:44.060 --> 01:01:47.720 in more of a product that looks like capacity. 01:01:47.720 --> 01:01:52.000 'Cause as an LSE, I don't know exactly what my load's 01:01:52.000 --> 01:01:55.760 gonna be next week, or next month, or next year. 01:01:55.760 --> 01:01:59.200 So in order to meet a hundred percent requirement 01:01:59.200 --> 01:02:00.853 to match my load, 01:02:02.460 --> 01:02:07.150 I'm gonna want as much flexible resources as I can, 01:02:07.150 --> 01:02:09.563 that can ramp up or ramp down to meet my load. 01:02:10.590 --> 01:02:15.330 Now, in any construct that is pursuing 01:02:15.330 --> 01:02:17.233 this type of attribute, 01:02:20.397 --> 01:02:23.750 you want that same ability in real time. 01:02:23.750 --> 01:02:24.900 You don't wanna be constrained 01:02:24.900 --> 01:02:28.070 to have to go buy something very specific. 01:02:28.070 --> 01:02:29.470 You may wanna use demand response. 01:02:29.470 --> 01:02:30.380 You may wanna have batteries. 01:02:30.380 --> 01:02:31.860 You may wanna have whatever. 01:02:31.860 --> 01:02:35.580 So that's part of their proposal that we thought 01:02:35.580 --> 01:02:40.580 was attractive, is not constraining to a specific resource. 01:02:41.340 --> 01:02:46.340 And providing a range of options of certain resources 01:02:46.810 --> 01:02:49.590 that can provide certain percentages of reliability 01:02:49.590 --> 01:02:51.060 and allow the market to solve the problem 01:02:51.060 --> 01:02:53.430 in the way they prefer. 01:02:53.430 --> 01:02:56.710 Some may wanna lean towards solar and batteries 01:02:56.710 --> 01:02:58.750 because it's has green attributes. 01:02:58.750 --> 01:03:00.500 Some may wanna use demand response, 01:03:01.810 --> 01:03:04.993 others like us that will have a much bigger obligation, 01:03:05.961 --> 01:03:10.260 we'll have to probably invest in conventional generation 01:03:10.260 --> 01:03:14.163 'cause the smaller bites of the apple won't be enough, 01:03:15.990 --> 01:03:20.950 but the attribute or the function that you described, 01:03:20.950 --> 01:03:23.080 I think is important to try to preserve, 01:03:23.080 --> 01:03:27.200 which is the ability and flexibility to solve that problem. 01:03:27.200 --> 01:03:29.733 It should be up to the market to do that. 01:03:32.506 --> 01:03:34.490 And again, this is really premised 01:03:34.490 --> 01:03:39.423 on the notion of having a reliability standard, 01:03:39.423 --> 01:03:40.790 which you haven't talked a whole lot about 01:03:40.790 --> 01:03:43.700 or having some goal that all of us, 01:03:43.700 --> 01:03:45.130 market participants know exactly 01:03:45.130 --> 01:03:47.270 what it is that we want to accomplish 01:03:47.270 --> 01:03:48.490 and we can go out and try to do that 01:03:48.490 --> 01:03:50.650 without making the guarantees, but lowering the risk. 01:03:50.650 --> 01:03:53.260 Oh, sorry, Commissioner, I wanna hear your thoughts. 01:03:53.260 --> 01:03:54.290 Yeah, yeah, yeah, go ahead. 01:03:54.290 --> 01:03:56.810 I'm gonna go off on a different direction 01:03:56.810 --> 01:03:58.900 if you wanna carry, keep on this thought. 01:03:58.900 --> 01:04:01.270 Okay, well, so the problem I'm trying to solve 01:04:01.270 --> 01:04:03.630 is look, everybody sells 01:04:04.643 --> 01:04:07.650 or buys their dispatchable energy credits 01:04:09.324 --> 01:04:14.324 and they've got it locked up 95% month out. 01:04:14.550 --> 01:04:16.193 Not everybody. Who? 01:04:17.250 --> 01:04:18.290 Who is not? 01:04:18.290 --> 01:04:20.510 Well, everybody who comes and talks says they do 01:04:20.510 --> 01:04:21.343 and promises they do. 01:04:21.343 --> 01:04:22.810 No, no, no, I'm talking about 01:04:22.810 --> 01:04:25.330 in the functionality of the proposal. 01:04:25.330 --> 01:04:26.390 Oh, yeah. What we're talking about? 01:04:26.390 --> 01:04:28.040 Yeah, yeah. Sure. 01:04:28.040 --> 01:04:30.410 So you go out there and you buy your decks 01:04:30.410 --> 01:04:32.830 and you're going into real time. 01:04:32.830 --> 01:04:37.070 And so everybody's got their paper 01:04:37.070 --> 01:04:38.860 that says they're good for that day. 01:04:38.860 --> 01:04:41.223 And then STP trips. 01:04:43.170 --> 01:04:44.003 Yep. 01:04:44.003 --> 01:04:45.123 A lot of megawatts. 01:04:46.210 --> 01:04:49.060 And then how do we respond to that? 01:04:49.060 --> 01:04:51.710 Well, we hope we have excess 01:04:51.710 --> 01:04:53.663 dispatchable generation to kind of try, 01:04:54.530 --> 01:04:55.830 and the wind's not blowing 01:04:57.277 --> 01:05:00.100 and we hope we have excess dispatchable generation 01:05:00.100 --> 01:05:02.850 that already hasn't locked in and sold their paper 01:05:02.850 --> 01:05:05.520 at X value in the deck market, right? 01:05:05.520 --> 01:05:06.740 To meet that challenge 01:05:08.060 --> 01:05:10.050 'cause it's kind of way the other 01:05:10.050 --> 01:05:12.183 forward capacity markets work. 01:05:14.230 --> 01:05:15.720 They don't ramp up as quickly. 01:05:15.720 --> 01:05:18.020 They're not as nimble. Yup. 01:05:18.020 --> 01:05:22.750 So I think a mechanism 01:05:22.750 --> 01:05:25.660 that provides additional dispatchable capacity 01:05:25.660 --> 01:05:29.891 which is another thing, that's the product we need, right? 01:05:29.891 --> 01:05:32.033 So an ancillary service? 01:05:32.033 --> 01:05:35.090 A longterm dispatchable capacity, 01:05:35.090 --> 01:05:37.200 the product that ERCOT needs 01:05:37.200 --> 01:05:40.930 is dispatchable capacity so that we can meet the duck curve. 01:05:40.930 --> 01:05:44.350 We can meet situations when there's a lot of forced outages 01:05:44.350 --> 01:05:47.440 and not every everything's trying to take an outage at once 01:05:47.440 --> 01:05:50.550 when it increases or decreases. 01:05:50.550 --> 01:05:55.493 So that product, right, will increase, 01:05:59.490 --> 01:06:00.640 create incentives for more investment 01:06:00.640 --> 01:06:02.300 that will increase reserve margins 01:06:02.300 --> 01:06:05.580 which helps you in operations. 01:06:05.580 --> 01:06:09.700 So when plants trip, when STP trips offline, 01:06:09.700 --> 01:06:12.710 and we have a more robust reserve margin 01:06:12.710 --> 01:06:15.150 that's composed of dispatchable capacity, 01:06:15.150 --> 01:06:16.730 not a reserve margin that has 01:06:16.730 --> 01:06:18.860 a good deal of renewables in it, 01:06:18.860 --> 01:06:21.210 then you're able to withstand those events. 01:06:21.210 --> 01:06:26.210 So, long-term incentives for that type of capacity 01:06:27.000 --> 01:06:31.510 reserve margins translate into an easier way 01:06:31.510 --> 01:06:33.453 to manage through operational issues. 01:06:34.357 --> 01:06:35.530 Like a product like this 01:06:35.530 --> 01:06:38.170 you're saying a long-term dispatch, 01:06:38.170 --> 01:06:40.940 an LSE obligation of some form or fashion would be that, 01:06:40.940 --> 01:06:42.383 you're not talking about a different product. 01:06:42.383 --> 01:06:44.120 I'm not talking about different product. 01:06:44.120 --> 01:06:46.820 I guess I'm confused because it almost sounded like, 01:06:47.851 --> 01:06:48.960 and I'm just trying to envision it 01:06:48.960 --> 01:06:50.640 and we've gone around and round on this issue, 01:06:50.640 --> 01:06:51.680 I think to some degree 01:06:51.680 --> 01:06:54.367 and that is if you had LSE obligation 01:06:54.367 --> 01:06:56.210 and we have these operational issues 01:06:56.210 --> 01:06:58.130 as in minus one minus one scenario 01:06:58.130 --> 01:07:00.167 where STP trips off and the wind's not there, 01:07:00.167 --> 01:07:01.890 and maybe solar has some cloud coverage, 01:07:01.890 --> 01:07:03.590 so maybe that's another minus one. 01:07:07.020 --> 01:07:11.020 How do you nimbly address those issues? 01:07:11.020 --> 01:07:12.970 And it sounds like we would rely 01:07:12.970 --> 01:07:17.970 on our ancillary service market, whatever product it is, 01:07:18.480 --> 01:07:20.520 whether it's an existing ancillary service product 01:07:20.520 --> 01:07:22.320 or a new one like TCRS. 01:07:22.320 --> 01:07:25.280 And so I guess what you're asking is, 01:07:25.280 --> 01:07:27.860 what happens in a scenario like that? 01:07:27.860 --> 01:07:29.600 It sounds like the same thing 01:07:29.600 --> 01:07:30.860 would happen that happens today. 01:07:30.860 --> 01:07:33.160 We would rely on our ancillary service market, 01:07:34.680 --> 01:07:36.400 but I guess, at the tail end, 01:07:36.400 --> 01:07:38.670 I was trying to connect the dots, Bill 01:07:38.670 --> 01:07:41.180 'cause he said, well, we would have 01:07:41.180 --> 01:07:43.210 more dispatchable generation 01:07:43.210 --> 01:07:46.883 and that would be driven by what's signal? 01:07:47.930 --> 01:07:49.953 I see now, there's a difference. 01:07:51.470 --> 01:07:53.800 In my opinion there are two different problems. 01:07:53.800 --> 01:07:56.470 There's the operational need, right? 01:07:56.470 --> 01:08:01.470 And so we see a huge net load ramp, we see solar drop-off. 01:08:02.650 --> 01:08:07.650 We need enough operational capacity to be online, 01:08:08.150 --> 01:08:10.170 to better manage that event. 01:08:10.170 --> 01:08:11.253 That's problem one. 01:08:12.540 --> 01:08:15.298 Problem two is enough, 01:08:15.298 --> 01:08:20.298 additional installed dispatchable capacity 01:08:20.430 --> 01:08:24.710 to be able to provide the operating reserve, right? 01:08:24.710 --> 01:08:26.900 So, two different problems, 01:08:26.900 --> 01:08:29.780 ECRS and the suite of ancillary services 01:08:29.780 --> 01:08:31.300 addresses the operational issues 01:08:31.300 --> 01:08:33.653 and so it is the RDC reforms. 01:08:35.790 --> 01:08:39.843 The hole is what solving the investment incentives? 01:08:41.110 --> 01:08:43.860 Now, our market has operated 01:08:45.610 --> 01:08:50.070 almost entirely up to this point that the operational issues 01:08:50.070 --> 01:08:53.480 are expected to connect the dots downstream to investment 01:08:53.480 --> 01:08:55.010 or incentives, right? 01:08:55.010 --> 01:08:57.720 So as we have operational issues and we stand, 01:08:57.720 --> 01:09:02.450 we dispatch more ancillary services which will increase, 01:09:02.450 --> 01:09:03.553 as we buy more ancillary services 01:09:03.553 --> 01:09:06.190 that increases ancillary service prices. 01:09:06.190 --> 01:09:08.350 As we have operational issues 01:09:08.350 --> 01:09:11.970 in real-time energy prices go higher, right? 01:09:11.970 --> 01:09:13.480 The current framework of a market says, 01:09:13.480 --> 01:09:17.220 well, eventually that will manifest itself 01:09:17.220 --> 01:09:21.887 into enough expected revenues where investment will come in. 01:09:21.887 --> 01:09:23.700 And I think what we've seen 01:09:23.700 --> 01:09:28.550 is that those dots are challenged 01:09:28.550 --> 01:09:31.160 in terms of fully connecting that investors want, 01:09:31.160 --> 01:09:32.170 more certainty 01:09:33.050 --> 01:09:35.640 and our market isn't great at providing certainty, 01:09:35.640 --> 01:09:39.280 which is why I think we're challenged in those aspects. 01:09:39.280 --> 01:09:43.590 So, the mechanism that the LSE obligation provides is, 01:09:43.590 --> 01:09:45.470 let's provide longer-term certainty, 01:09:45.470 --> 01:09:48.060 or, I mean, I've seen other proposals filed as well, 01:09:48.060 --> 01:09:51.580 seasonal procurement of reserves 01:09:51.580 --> 01:09:54.516 which is a short-term capacity market. 01:09:54.516 --> 01:09:56.860 Those provide more certainty 01:09:57.890 --> 01:10:00.110 to help solve the same problem. 01:10:00.110 --> 01:10:01.480 Centralized procurement, 01:10:01.480 --> 01:10:03.730 short like a smaller centralized procurement. 01:10:05.000 --> 01:10:07.960 Okay, so as we're trying to incent more 01:10:07.960 --> 01:10:10.130 dispatchable generation it sounds like 01:10:12.340 --> 01:10:14.037 the two mechanisms are the energy 01:10:14.037 --> 01:10:16.270 and the ancillary service market revenue streams 01:10:16.270 --> 01:10:17.434 that we currently have in our market 01:10:17.434 --> 01:10:20.580 and we know at least we're sending some signals right now 01:10:20.580 --> 01:10:22.063 with ECRS, 01:10:23.180 --> 01:10:24.310 but what you're saying is 01:10:24.310 --> 01:10:27.420 with this additional market design change on top, 01:10:27.420 --> 01:10:32.080 it'll drive additional generation investment. 01:10:32.080 --> 01:10:33.440 And what I'm trying to figure out, 01:10:33.440 --> 01:10:35.260 because we are solving a today problem, 01:10:35.260 --> 01:10:38.370 we're trying to solve a near term problem 01:10:38.370 --> 01:10:41.830 with operational reliability issues as we await 01:10:41.830 --> 01:10:43.167 long-term solution, let's just say, 01:10:43.167 --> 01:10:44.770 it's the LSE obligation. 01:10:44.770 --> 01:10:49.603 So when would that signal, 01:10:50.877 --> 01:10:53.435 'cause I know, and you may have a different, 01:10:53.435 --> 01:10:55.530 and I can't remember if you did three year look ahead 01:10:55.530 --> 01:10:58.860 or one year look ahead, but when would we get the signal? 01:10:58.860 --> 01:11:00.410 Like when would we get investment? 01:11:00.410 --> 01:11:03.350 Would it be, is the investment community 01:11:03.350 --> 01:11:06.000 gonna be waiting for us to get our rules, 01:11:06.000 --> 01:11:08.770 our framework in place first as they shape up. 01:11:08.770 --> 01:11:10.340 And then we start sending signals that way. 01:11:10.340 --> 01:11:12.470 So that could be, we could start, 01:11:12.470 --> 01:11:14.700 it sounds like to me, and please clarify, 01:11:14.700 --> 01:11:16.380 'cause we're all trying 01:11:16.380 --> 01:11:19.070 to incent more dispatchable generation 01:11:19.070 --> 01:11:21.070 that it could be, I don't know. 01:11:21.070 --> 01:11:23.660 It could be a couple of years before we send a clear signal 01:11:23.660 --> 01:11:28.320 and then you still need two to three more years 01:11:28.320 --> 01:11:30.887 to build a plant depending on what size or what it is. 01:11:30.887 --> 01:11:35.363 So, is it five years when we get steel in the ground? 01:11:36.500 --> 01:11:41.483 So, I think the answer to that question has a lot to do, 01:11:42.570 --> 01:11:45.120 unfortunately with what you guys decide what to do. 01:11:46.112 --> 01:11:46.945 If-- Which will go on 01:11:46.945 --> 01:11:47.903 for a little while, right? Yeah-- 01:11:47.903 --> 01:11:49.820 If we went with it. And I'm not trying to put 01:11:49.820 --> 01:11:52.353 pressure on you, certainly you don't wanna speed up this, 01:11:53.320 --> 01:11:55.300 the deliberation on a longer-term solution 01:11:55.300 --> 01:11:57.210 because I do think the details are important 01:11:57.210 --> 01:11:59.210 and there's complexities too. 01:11:59.210 --> 01:12:00.760 But I'll use a couple examples. 01:12:02.720 --> 01:12:06.360 One, if this Commission were very clear 01:12:06.360 --> 01:12:10.030 that they were gonna adopt a reliability standard 01:12:10.030 --> 01:12:13.930 and that standard was known to be some amount 01:12:13.930 --> 01:12:17.410 and the message was we're gonna develop 01:12:17.410 --> 01:12:20.270 some market-based approach to achieve 01:12:20.270 --> 01:12:23.440 that reliability standard that provides a signal 01:12:23.440 --> 01:12:25.486 that there is going to be at some point 01:12:25.486 --> 01:12:28.150 a revenue stream for this reliability. 01:12:28.150 --> 01:12:31.483 So I think that helps get the gears turning quickly, 01:12:33.670 --> 01:12:37.500 or even just, we're gonna require, 01:12:37.500 --> 01:12:39.210 basically a 0% reserve margin, 01:12:39.210 --> 01:12:42.670 which would be loads have to meet their own obligations. 01:12:42.670 --> 01:12:44.000 And that's very clear 01:12:44.000 --> 01:12:46.550 that we're gonna develop a solution 01:12:47.420 --> 01:12:49.870 that solves that problem 01:12:49.870 --> 01:12:53.193 or achieves that outcome is a better way to say it. 01:12:54.700 --> 01:12:58.320 That will start people thinking, investors thinking about, 01:12:58.320 --> 01:13:02.540 okay, well, this is going to be an additional revenue stream 01:13:02.540 --> 01:13:04.620 that can help justify investment. 01:13:04.620 --> 01:13:05.890 I know there's a requirement. 01:13:05.890 --> 01:13:07.070 If I build dispatchable power, 01:13:07.070 --> 01:13:08.290 I know there will be a requirements 01:13:08.290 --> 01:13:09.470 by my dispatchable power. Yes, you know that 01:13:09.470 --> 01:13:11.640 there's going to be something there which is-- 01:13:11.640 --> 01:13:13.380 It does not exist today. Does not exist today. 01:13:13.380 --> 01:13:15.730 We confirmed earlier at the opening of this conversation, 01:13:15.730 --> 01:13:18.560 over the day that I already see, 01:13:18.560 --> 01:13:20.610 or you're researching comments 01:13:20.610 --> 01:13:25.610 and our general, all of our experiences does not drive new 01:13:26.090 --> 01:13:28.750 dispatchable generation That's right. 01:13:28.750 --> 01:13:30.773 That is one of the other things 01:13:30.773 --> 01:13:32.740 I think that makes ERCOT unique 01:13:34.260 --> 01:13:36.680 is it is very attractive for investments 01:13:37.620 --> 01:13:41.490 even with the history of our market design, 01:13:41.490 --> 01:13:43.120 when we have ancillary service floors, 01:13:43.120 --> 01:13:45.523 you already enhancements, 01:13:46.850 --> 01:13:50.260 you see a willingness to invest 01:13:50.260 --> 01:13:52.310 based on a higher risk profile 01:13:52.310 --> 01:13:55.280 than potentially what you see in other markets. 01:13:55.280 --> 01:13:57.780 So just signaling that there's more certainty coming 01:13:57.780 --> 01:13:59.060 from a reliability perspective 01:13:59.060 --> 01:14:00.560 that will support investments. 01:14:01.810 --> 01:14:03.040 That will start the gears turning, 01:14:03.040 --> 01:14:06.630 and you'll start to see folks get more serious, 01:14:06.630 --> 01:14:10.880 but it's hard to put your finger on a timeframe, right? 01:14:10.880 --> 01:14:14.810 The more certainty we see in the solution, right? 01:14:14.810 --> 01:14:17.100 The more certainty we have to show to our investors 01:14:17.100 --> 01:14:19.610 and to say, see, look, we need to start moving. 01:14:19.610 --> 01:14:21.140 So, it's a dance. 01:14:21.140 --> 01:14:23.120 So, and I know you talked about 01:14:23.120 --> 01:14:24.630 central procurement versus LSE obligation 01:14:24.630 --> 01:14:26.130 and just for comparison. 01:14:26.130 --> 01:14:29.520 So let's just say, we went out and said 01:14:29.520 --> 01:14:34.460 we're gonna have ancillary or reliability service. 01:14:34.460 --> 01:14:37.850 And just for example, 01:14:37.850 --> 01:14:40.200 and we said, we're gonna procure, I don't know, 01:14:41.143 --> 01:14:44.820 5,000 megawatts of these types of resources 01:14:44.820 --> 01:14:46.810 with these types of characteristics 01:14:48.200 --> 01:14:51.820 that would play in the market in a certain way 01:14:52.950 --> 01:14:56.320 strategically and it's all well-defined 01:14:56.320 --> 01:15:00.183 and setting aside all, the price impacts and all that. 01:15:01.730 --> 01:15:03.960 Versus an LSE obligation 01:15:03.960 --> 01:15:06.040 that we'd have to spend a couple of years 01:15:06.040 --> 01:15:07.450 developing a framework on. 01:15:07.450 --> 01:15:10.000 What do you think is gonna send the signal quicker, 01:15:10.900 --> 01:15:12.160 honestly? 01:15:12.160 --> 01:15:14.170 Well, so that will send a signal. 01:15:14.170 --> 01:15:17.220 So, let's talk about the ancillary service path. 01:15:17.220 --> 01:15:19.470 Or reliability service. Reliability service path. 01:15:19.470 --> 01:15:20.460 Which you acknowledged 01:15:20.460 --> 01:15:22.340 we have to kind of pursue that path. 01:15:22.340 --> 01:15:24.290 I think, well, we already have, I started in July 01:15:24.290 --> 01:15:26.530 when our company bought 5,000 megawatts of non-spin. 01:15:26.530 --> 01:15:30.023 So we're already moving in that direction, right? 01:15:31.900 --> 01:15:33.840 And so the question is with ECRS, 01:15:34.870 --> 01:15:37.140 how do we want that to look, do we wanna buy more? 01:15:37.140 --> 01:15:40.520 Is there some other ancillary service product? 01:15:40.520 --> 01:15:44.300 So, let's talk about how that creates investment incentives. 01:15:44.300 --> 01:15:46.900 That will, one is the demand for, 01:15:46.900 --> 01:15:50.660 that short-term capacity product will go up. 01:15:50.660 --> 01:15:52.700 So the revenue streams that you get 01:15:52.700 --> 01:15:57.273 from selling that product increase to some extent. 01:15:58.848 --> 01:16:01.470 And I also think there's probably a temporary phenomenon 01:16:01.470 --> 01:16:06.230 where when you're buying that capacity, 01:16:06.230 --> 01:16:09.660 you're reserving those resources 01:16:09.660 --> 01:16:11.630 and you're holding them outside of the energy market 01:16:11.630 --> 01:16:12.893 until they're deployed, 01:16:13.990 --> 01:16:15.990 which means you have less resources 01:16:15.990 --> 01:16:17.910 that are participating in energy markets. 01:16:17.910 --> 01:16:20.390 So energy prices will naturally increase 01:16:20.390 --> 01:16:21.600 to some extent as well. 01:16:21.600 --> 01:16:23.330 But I think that's a temporary phenomenon. 01:16:23.330 --> 01:16:25.510 As you see other resources come in, 01:16:25.510 --> 01:16:29.453 then that'll naturally find an equilibrium there. 01:16:30.720 --> 01:16:31.760 That sort of, I mean, 01:16:31.760 --> 01:16:35.390 our ancillary service market works very similar to that. 01:16:35.390 --> 01:16:37.840 It is, that's exactly what I'm describing, yup. 01:16:38.810 --> 01:16:41.250 Lori also think about quantity of ancillary services. 01:16:41.250 --> 01:16:42.740 It's a fair question. 01:16:42.740 --> 01:16:47.740 So we, this summer, or going into the summer, we added, 01:16:48.390 --> 01:16:53.280 I think total AS from 4,500 to 6,500, 01:16:53.280 --> 01:16:55.973 which is almost 50% increase. 01:16:57.430 --> 01:17:00.210 We've heard multiple proposals that said, 01:17:00.210 --> 01:17:01.360 well, you just need to build 01:17:01.360 --> 01:17:02.763 this reliability, ancillary service. 01:17:02.763 --> 01:17:05.970 It's only gonna be two or 3000 megawatts. 01:17:05.970 --> 01:17:09.380 We've already done that, we didn't get any new generation. 01:17:09.380 --> 01:17:10.443 And on top of that, 01:17:11.730 --> 01:17:16.730 we've got 75, 76,000 megawatts of dispatchable generation 01:17:18.340 --> 01:17:20.710 in ERCOT right now, some of it's old, 01:17:20.710 --> 01:17:24.160 some of it will be retiring, but we've got a lot 01:17:24.160 --> 01:17:29.160 and I'll be interested to hear Bill's perspective on this. 01:17:29.240 --> 01:17:32.380 But if you've got an existing fleet of dispatchable 01:17:32.380 --> 01:17:37.380 and you set up a new reliability service 01:17:38.730 --> 01:17:43.410 or ancillary service to buy 10,000 or 20,000 megawatts, 01:17:43.410 --> 01:17:46.580 that's gonna be filled by the stuff you've already got 01:17:46.580 --> 01:17:48.880 because it's cheaper to buy that power 01:17:48.880 --> 01:17:53.230 than it is to buy power from a new generator. 01:17:53.230 --> 01:17:54.867 It's just by definition. 01:17:54.867 --> 01:17:56.170 But again, that's why we get back 01:17:56.170 --> 01:17:59.190 to that question, Mr. Chairman, that we asked Woody 01:17:59.190 --> 01:18:02.260 what kind of generation do you need to match that? 01:18:02.260 --> 01:18:04.650 And again, a coal plant will break 01:18:04.650 --> 01:18:08.100 trying to arrest that fall, ramping that quickly. 01:18:08.100 --> 01:18:10.410 Sure, but that's fine, I mean, like again, 01:18:10.410 --> 01:18:13.710 ECRS is needed and we need to do that. 01:18:13.710 --> 01:18:16.150 No one here is saying to not do that 01:18:16.150 --> 01:18:18.903 and to do it expeditiously, robustly, 01:18:19.810 --> 01:18:24.810 but we need more than a hundred megawatt band-aids 01:18:25.330 --> 01:18:26.778 strapped across ERCOT. 01:18:26.778 --> 01:18:29.160 May I ask and actually NRG 01:18:29.160 --> 01:18:30.711 this is an appropriate question. 01:18:30.711 --> 01:18:32.660 Let me finish the thought. 01:18:32.660 --> 01:18:35.790 We had a scarcity pricing event in late October, 01:18:35.790 --> 01:18:38.190 the price went to a thousand dollars a megawatt. 01:18:39.600 --> 01:18:43.920 Because ERCOT correctly allowed thermal generators 01:18:43.920 --> 01:18:47.013 to go down for maintenance to prepare for the winter. 01:18:48.320 --> 01:18:51.770 We expected 12,000 megawatts of wind. 01:18:51.770 --> 01:18:56.113 We got 1500 to 2000 megawatts for that sequence of days. 01:18:58.785 --> 01:19:03.010 And ERCOT and our stakeholders did an extraordinary job 01:19:03.010 --> 01:19:05.690 making sure that we had adequate supplies, 01:19:05.690 --> 01:19:07.223 but it was very, very tight. 01:19:08.410 --> 01:19:13.410 That wasn't a couple, that was 8,000 megawatts, 01:19:13.680 --> 01:19:15.183 10,000 megawatts short. 01:19:17.370 --> 01:19:21.980 You'd have to add 8,000 megawatt peakers 01:19:21.980 --> 01:19:24.050 just for a blue sky day in October 01:19:25.210 --> 01:19:29.680 when it's just a normal fall day. 01:19:29.680 --> 01:19:31.990 That's 10% increase to the total number of units 01:19:31.990 --> 01:19:33.580 in our cart right there. 01:19:33.580 --> 01:19:36.300 So, yes, we need to do that 01:19:36.300 --> 01:19:39.320 but days like that and make it abundantly clear to me 01:19:39.320 --> 01:19:41.703 that we need to go above and beyond, just that. 01:19:42.880 --> 01:19:45.610 So, what I will say can, if I can add real quick, 01:19:45.610 --> 01:19:47.254 because we did hear from, 01:19:47.254 --> 01:19:49.820 and this is where I'm trying to understand 01:19:49.820 --> 01:19:50.653 this a little bit more 01:19:50.653 --> 01:19:53.350 because we heard from Mr. McCullough earlier, 01:19:53.350 --> 01:19:55.690 and we know from live experience here 01:19:55.690 --> 01:19:57.540 and your blue sky days 01:19:57.540 --> 01:20:00.403 and what we're experiencing on those days. 01:20:01.400 --> 01:20:03.220 But it seems like we would still be relying 01:20:03.220 --> 01:20:04.930 on our ancillary service market, right? 01:20:04.930 --> 01:20:07.100 Sure, you'd still use it. 01:20:07.100 --> 01:20:09.510 That's the question, I think Bill's hit on several times. 01:20:09.510 --> 01:20:12.300 To get new dispatchable, you need to put money on the table. 01:20:12.300 --> 01:20:13.950 Somebody needs to put money on the table 01:20:13.950 --> 01:20:15.520 to pay for new dispatchable. 01:20:15.520 --> 01:20:18.290 Do you want it to be centrally procured? 01:20:18.290 --> 01:20:23.290 Eight, 10, 8,000,10,000, 20,000, 30,000 megawatts? 01:20:23.490 --> 01:20:26.260 Or do you want that won't be used 01:20:26.260 --> 01:20:29.200 except in scarcity incidence? 01:20:29.200 --> 01:20:31.490 Or do you want to set a standard 01:20:31.490 --> 01:20:35.820 that requires the market participants to buy dispatchable 01:20:35.820 --> 01:20:39.549 as in a mix that they best see fit for that moment in time? 01:20:39.549 --> 01:20:41.300 But you're not doing that, sir. 01:20:41.300 --> 01:20:42.930 You're asking them to go out 01:20:42.930 --> 01:20:45.300 and buy a thousand megawatt facilities. 01:20:45.300 --> 01:20:48.040 And the answer is 250 megawatt facilities, 01:20:48.040 --> 01:20:49.120 and they're not band-aids. 01:20:49.120 --> 01:20:52.500 On aggregated they're a suit of armor against these threats. 01:20:52.500 --> 01:20:54.880 And then I would ask Mr. Barnes, 01:20:54.880 --> 01:20:57.030 given this, what are you gonna go out and build? 01:20:57.030 --> 01:20:58.850 You're gonna build peakers, aren't you? 01:20:58.850 --> 01:21:00.550 Because that's the headroom you need 01:21:00.550 --> 01:21:02.610 to meet these ancillary service type products 01:21:02.610 --> 01:21:06.420 plus an LSE obligation so you double dip in both. 01:21:06.420 --> 01:21:08.950 Plus there's ECRS that provides a fine revenue stream 01:21:08.950 --> 01:21:11.340 for peakers in the near future. 01:21:11.340 --> 01:21:14.720 I think the, again, this goes back 01:21:14.720 --> 01:21:19.160 to the same foundation that I was trying to portray 01:21:19.160 --> 01:21:22.860 which is certainty and cost 01:21:22.860 --> 01:21:24.410 versus what you're trying to achieve. 01:21:24.410 --> 01:21:27.410 So sufficient dispatchable resources 01:21:27.410 --> 01:21:29.857 to solve an operational reserve problem. 01:21:29.857 --> 01:21:32.407 You need 10,000 megawatts, whatever, pick a number, 01:21:33.650 --> 01:21:35.810 but you also need enough 01:21:35.810 --> 01:21:40.130 that you can have outages during that time. 01:21:40.130 --> 01:21:42.850 You need enough if the load outperforms 01:21:42.850 --> 01:21:46.630 and the wind under-performs, or if it's a cloudy. 01:21:46.630 --> 01:21:50.690 So you need enough installed dispatchable capacity 01:21:50.690 --> 01:21:53.910 to make sure you can meet your operational reserve needs 01:21:55.090 --> 01:21:56.620 doing it just through ancillary services, 01:21:56.620 --> 01:22:00.780 which again, up to this point, that's what we've relied on, 01:22:00.780 --> 01:22:05.620 will increase revenues for ancillary services. 01:22:05.620 --> 01:22:08.760 It will, I think, temporarily impact energy prices 01:22:08.760 --> 01:22:12.540 but you will rely on those two revenue streams. 01:22:12.540 --> 01:22:15.370 The capacity revenue stream will be a little bit 01:22:15.370 --> 01:22:16.913 higher than it is today. 01:22:18.050 --> 01:22:22.530 But again, in terms of the amount of dispatchable capacity 01:22:22.530 --> 01:22:25.600 that you need to provide reserves and have one outage, 01:22:25.600 --> 01:22:27.440 it's not gonna address that issue, right? 01:22:27.440 --> 01:22:31.900 It's not the longer term investment signal. 01:22:31.900 --> 01:22:34.800 It will help with the investment signal. 01:22:34.800 --> 01:22:39.100 So again, in my opinion, it would be a lower cost, 01:22:39.100 --> 01:22:42.640 higher uncertainty path than an LSE obligation, 01:22:42.640 --> 01:22:47.530 which would be a higher certainty, but a higher cost. 01:22:50.210 --> 01:22:51.870 And maybe higher, okay. 01:22:51.870 --> 01:22:53.730 So I have one question left on this, 01:22:53.730 --> 01:22:58.730 and that is for the Chairman's latest straw mans parameters. 01:23:00.880 --> 01:23:03.370 And Mr. Chairman, you mentioned that in the first two years, 01:23:03.370 --> 01:23:07.283 you could maybe consider an exemption for new reps, 01:23:08.390 --> 01:23:12.160 as you work for a competitive rep. 01:23:12.160 --> 01:23:17.160 Is that something you would be comfortable with 01:23:17.260 --> 01:23:18.350 in the competitive market 01:23:18.350 --> 01:23:21.270 if some reps were exempt for two years 01:23:21.270 --> 01:23:23.170 for meeting an obligation, but you were-- 01:23:23.170 --> 01:23:24.833 Yeah, an exemption? 01:23:27.290 --> 01:23:31.720 I mean, we've been really thinking hard about this concern 01:23:31.720 --> 01:23:36.620 that's been raised about whether this proposal 01:23:36.620 --> 01:23:39.873 creates advantages or disadvantages for retailers. 01:23:41.740 --> 01:23:44.910 And we thought about an exemption or having some 01:23:45.760 --> 01:23:47.800 other type of mechanism 01:23:47.800 --> 01:23:51.860 that smaller reps that don't have affiliate generation 01:23:51.860 --> 01:23:54.330 could use to help address 01:23:54.330 --> 01:23:56.603 the reliability issue without an obligation. 01:23:58.490 --> 01:24:00.910 This I would put in the category of something 01:24:00.910 --> 01:24:03.310 that we need to talk about and think about more. 01:24:04.547 --> 01:24:06.880 To clarify, so any new rep, not just on affiliate. 01:24:06.880 --> 01:24:09.060 Any new rep, yes. 01:24:09.060 --> 01:24:11.924 Exempted for two years or up to a certain load. 01:24:11.924 --> 01:24:13.430 Yep, yep. Excuse. 01:24:15.350 --> 01:24:16.430 This topic has come up 01:24:16.430 --> 01:24:17.410 a couple of times in your discussion. 01:24:17.410 --> 01:24:18.810 So I didn't wanna touch on it. 01:24:18.810 --> 01:24:22.350 And it's the concept of Gene Taylor 01:24:22.350 --> 01:24:23.890 or the fact that we've got 01:24:24.850 --> 01:24:27.883 retailers that have affiliated generation in our market. 01:24:29.440 --> 01:24:32.540 This, in my opinion, has been a natural evolution 01:24:32.540 --> 01:24:36.563 of our market to find the lowest cost, 01:24:37.443 --> 01:24:39.740 and ability to be able to be competitive 01:24:39.740 --> 01:24:41.363 on a cost to meet supply. 01:24:44.140 --> 01:24:49.140 As a large independent rep which reliant was at one point, 01:24:49.840 --> 01:24:54.840 you have to procure a lot of capacity and a lot of energy. 01:24:55.240 --> 01:24:59.030 Let's just say you have a 10,000 megawatt peak load, 01:24:59.030 --> 01:25:00.680 it would be very difficult for you 01:25:00.680 --> 01:25:05.340 to purchase 10,000 megawatts on the open market, right? 01:25:05.340 --> 01:25:06.740 The cheaper way to do that 01:25:06.740 --> 01:25:09.580 is have some affiliated generation 01:25:09.580 --> 01:25:12.430 and then that way you can go out and get the rest. 01:25:12.430 --> 01:25:15.330 It's almost would price you out of the market today, 01:25:15.330 --> 01:25:19.610 so the market has evolved to that point 01:25:19.610 --> 01:25:21.530 to be able to provide the supply 01:25:21.530 --> 01:25:23.810 in the cheapest way for our customers. 01:25:23.810 --> 01:25:25.230 Now, if you are always a rep 01:25:25.230 --> 01:25:27.610 you're always looking for the maximum, 01:25:27.610 --> 01:25:31.380 the optimal mix of supply to make sure you have a lower cost 01:25:31.380 --> 01:25:35.463 and meet your targets and what you're trying to achieve. 01:25:36.830 --> 01:25:38.370 But I just wanna make sure that 01:25:38.370 --> 01:25:40.830 that that business model is understood 01:25:41.740 --> 01:25:44.690 as a natural progression and evolution of our market 01:25:44.690 --> 01:25:48.400 that has had to go in that direction in order to provide 01:25:48.400 --> 01:25:50.030 a lower cost structure. 01:25:50.030 --> 01:25:53.610 If I had to buy 10,000 megawatts 01:25:53.610 --> 01:25:55.020 from you, Commissioner Cobos, 01:25:55.020 --> 01:25:57.090 the margin that I would have to post and credit 01:25:57.090 --> 01:25:59.360 would be extraordinary, right? 01:25:59.360 --> 01:26:03.940 And so that's how large retailers have evolved 01:26:03.940 --> 01:26:07.070 to be able to meet that problem in a more economic way 01:26:07.070 --> 01:26:08.370 and with more flexibility. 01:26:09.800 --> 01:26:10.740 Do you have another question 01:26:10.740 --> 01:26:12.297 or can I go? No. 01:26:12.297 --> 01:26:13.450 Go, go, go, please. 01:26:13.450 --> 01:26:16.660 But I do want to, I have a lot other questions 01:26:16.660 --> 01:26:18.160 for a lot of stakeholders as well. 01:26:18.160 --> 01:26:19.770 And so for the sake of time, 01:26:19.770 --> 01:26:20.778 and I'm not trying to lower you 01:26:20.778 --> 01:26:21.679 but I'm just trying to -- 01:26:21.679 --> 01:26:26.679 So my questions deal more with the retail market. 01:26:27.631 --> 01:26:29.540 Then they do the wholesale market. 01:26:29.540 --> 01:26:31.270 I think we're trying to make solutions 01:26:31.270 --> 01:26:32.170 for the wholesale market, 01:26:32.170 --> 01:26:35.650 which is important and reliability is managed through there. 01:26:35.650 --> 01:26:36.594 But the retail market 01:26:36.594 --> 01:26:39.980 was the crown jewel back in the '90s 01:26:39.980 --> 01:26:41.650 when we pass retail competition. 01:26:41.650 --> 01:26:46.650 And we've seen a lot of retail providers come and go. 01:26:47.180 --> 01:26:51.540 And according to this study that I read since 2018, 01:26:51.540 --> 01:26:55.200 you all have acquired five of the eight largest 01:26:56.080 --> 01:26:59.710 and NRG accounts for almost 50%, 01:26:59.710 --> 01:27:03.093 under 50% of the residential load in the state. 01:27:04.070 --> 01:27:07.573 So 45%, according to one study. 01:27:08.720 --> 01:27:11.450 So your acquisition of direct energy 01:27:13.820 --> 01:27:16.010 totally skewed the HHI index 01:27:16.010 --> 01:27:19.320 which basically said that this market is very concentrated 01:27:20.170 --> 01:27:21.700 and that disturbs me. 01:27:21.700 --> 01:27:25.580 It disturbs me that the crown jewel that we tried to pass 01:27:25.580 --> 01:27:30.580 to give consumers a choice is becoming, you get one to five 01:27:31.040 --> 01:27:34.883 and one of those five corners their generation market, 01:27:36.450 --> 01:27:37.283 and then there are five 01:27:37.283 --> 01:27:38.580 that corner of their generation market. 01:27:38.580 --> 01:27:40.590 And then there are no small reps that come in here 01:27:40.590 --> 01:27:42.310 because they can't build. 01:27:42.310 --> 01:27:45.140 You yourself just said, you are trying to get 01:27:46.140 --> 01:27:47.710 a economy of scale 01:27:47.710 --> 01:27:51.000 by pairing your retail load with your generation load. 01:27:51.000 --> 01:27:53.670 Not everybody has that balance sheet and that ability. 01:27:53.670 --> 01:27:55.580 And that's what scares me about this. 01:27:55.580 --> 01:27:58.800 It scares me that you all are pushing something 01:27:59.780 --> 01:28:02.883 that you all can achieve, but nobody else can. 01:28:03.910 --> 01:28:06.080 Maybe you and your four other brothers 01:28:07.100 --> 01:28:09.770 that are the big Gene Taylors, but nobody else can 01:28:09.770 --> 01:28:11.223 and that concerns me. 01:28:12.280 --> 01:28:16.943 And I did ask you if this would allow you all 01:28:19.070 --> 01:28:21.740 or you would bring on new generation 01:28:21.740 --> 01:28:24.193 if they LSE obligation and you said, 01:28:25.100 --> 01:28:28.500 paraphrasing it, you said, if there's a deficiency 01:28:28.500 --> 01:28:30.820 and the rules were implemented correctly, 01:28:30.820 --> 01:28:34.563 and we needed it for our load, then yes, we would. 01:28:35.960 --> 01:28:40.610 And I think that's the mentality that I'm scared of 01:28:40.610 --> 01:28:43.723 is that you all are gonna be doing just stuff for you all. 01:28:45.160 --> 01:28:47.110 And this market was built on the premise 01:28:47.110 --> 01:28:49.540 that we were all in this together. 01:28:49.540 --> 01:28:52.200 We socialize transmission costs, 01:28:52.200 --> 01:28:54.250 we're all selling into a pool 01:28:54.250 --> 01:28:55.670 and we're pulling out of a pool. 01:28:55.670 --> 01:28:57.480 And if we have five big Gene Taylors 01:28:57.480 --> 01:29:01.620 that are gonna be just doing it for them, that's an issue. 01:29:01.620 --> 01:29:04.480 And that is a fair question to ask 01:29:04.480 --> 01:29:05.510 that we would have to address 01:29:05.510 --> 01:29:07.200 as we work through this proposal, 01:29:07.200 --> 01:29:09.620 'cause I can tell you at the end of the day, 01:29:09.620 --> 01:29:13.440 a market structure that is not competitive 01:29:13.440 --> 01:29:16.027 and does not have a robust retail market 01:29:16.027 --> 01:29:18.760 would ruin it for everyone, including us. 01:29:18.760 --> 01:29:20.690 That is not the objective of this. 01:29:20.690 --> 01:29:21.523 The number-- What consists 01:29:21.523 --> 01:29:23.187 a robust retail market, sir? 01:29:23.187 --> 01:29:24.900 One second. Okay. 01:29:24.900 --> 01:29:28.300 The number one threat, without a doubt 01:29:28.300 --> 01:29:32.070 to the retail market and to reps is reliability. 01:29:32.070 --> 01:29:35.980 That is to me has been made crystal clear. 01:29:35.980 --> 01:29:38.000 So we have to solve that problem 01:29:38.000 --> 01:29:40.380 in a way that preserves the competitive market. 01:29:40.380 --> 01:29:43.890 Now, on the retail side, 01:29:43.890 --> 01:29:46.863 and we've mentioned this and I'll say it again. 01:29:48.270 --> 01:29:50.670 We are the largest buyer under our own proposal. 01:29:52.250 --> 01:29:54.100 In terms of physical capacity 01:29:54.100 --> 01:29:56.240 with the acquisition of direct energy, 01:29:56.240 --> 01:29:59.603 we are the shortest entity in terms of physical capacity. 01:30:01.360 --> 01:30:03.840 That means you've got twice as much load to serve 01:30:03.840 --> 01:30:05.720 than generation-- We have a lot 01:30:05.720 --> 01:30:09.260 of these things that would be part of this proposal, 01:30:09.260 --> 01:30:12.420 and we would do that through many different ways. 01:30:12.420 --> 01:30:14.830 The annual report strategic plan lays out 01:30:14.830 --> 01:30:17.380 the fact that that is the expansion of load 01:30:17.380 --> 01:30:19.500 is the intended business plan. 01:30:19.500 --> 01:30:20.460 Yep. 01:30:20.460 --> 01:30:23.090 You're planning on getting shorter. 01:30:23.090 --> 01:30:25.240 You're gonna have, the plan is for your company 01:30:25.240 --> 01:30:27.390 to have more load to serve than generation, 01:30:28.287 --> 01:30:29.120 you can't more than generation. 01:30:29.120 --> 01:30:33.530 We have widely, this is years in the making, 01:30:33.530 --> 01:30:36.851 but we've mentioned that we are an asset light company, 01:30:36.851 --> 01:30:38.530 and that's what we continue to do. 01:30:38.530 --> 01:30:43.530 We are assigning more contracts and building less, 01:30:44.600 --> 01:30:47.473 but financing the construction of other things. 01:30:49.490 --> 01:30:53.023 But your concern that you raised, I understand, 01:30:54.810 --> 01:30:57.773 we think other structures would be much worse, 01:30:58.950 --> 01:31:01.830 but everything you just described. 01:31:01.830 --> 01:31:03.050 We would have to address. 01:31:03.050 --> 01:31:04.850 We'd have to make sure that that is satisfied. 01:31:04.850 --> 01:31:06.700 We'd have to make sure that market power 01:31:06.700 --> 01:31:08.090 was sufficiently mitigated 01:31:08.090 --> 01:31:12.630 which if you look at these concerns of market power 01:31:12.630 --> 01:31:15.400 and you'd go back and look at 20 years ago 01:31:15.400 --> 01:31:17.590 with filings on when we developed Tizona market, 01:31:17.590 --> 01:31:19.320 they're the same. 01:31:19.320 --> 01:31:20.603 And we figured it out. 01:31:22.790 --> 01:31:25.310 It's all been done before, and we can do it. 01:31:25.310 --> 01:31:28.150 But just to emphasize this point, 01:31:28.150 --> 01:31:32.600 is any reliability construct 01:31:32.600 --> 01:31:35.460 that does not have a active and robust retail market 01:31:35.460 --> 01:31:38.010 would be a failure for everyone, including us, 01:31:38.010 --> 01:31:40.840 because if it's not competitive and it doesn't work, 01:31:40.840 --> 01:31:43.490 the legislature will take it away from office. 01:31:43.490 --> 01:31:44.323 On that note, 01:31:44.323 --> 01:31:46.540 because you have very much focused on market power. 01:31:46.540 --> 01:31:48.557 I would like to call Carrie Bivens. 01:31:49.403 --> 01:31:52.040 Let's see if anybody else has questions. 01:31:52.040 --> 01:31:55.010 Sure, sorry, go ahead, Jimmy are you done? 01:31:55.010 --> 01:31:56.860 Anybody else? No, I'm good, sir. 01:31:59.920 --> 01:32:02.100 Actually I do have one very quick question. 01:32:02.100 --> 01:32:07.100 So under your construct, I hope I get this right. 01:32:07.400 --> 01:32:08.233 I'm sorry if I don't, 01:32:08.233 --> 01:32:12.100 but I think today, this was in someone's filing. 01:32:12.100 --> 01:32:12.933 I don't know who it was, 01:32:12.933 --> 01:32:14.420 but it made a good point and it just kind of stuck with me 01:32:14.420 --> 01:32:17.570 and that is, ERCOT or does not talk to reps today. 01:32:17.570 --> 01:32:20.203 They talk to qualified scheduling entities. 01:32:22.130 --> 01:32:26.370 What's the mechanism for getting a rep obligation 01:32:26.370 --> 01:32:30.530 information to ERCOT in that process, the LSE obligation? 01:32:30.530 --> 01:32:32.380 That happens through the queasy, 01:32:32.380 --> 01:32:35.570 that same construct exist today in renewable energy credits. 01:32:35.570 --> 01:32:36.950 So that would roll up to the queasy, 01:32:36.950 --> 01:32:38.700 the queasy would be the one responsible 01:32:38.700 --> 01:32:40.653 for relaying that information to ERCOT? 01:32:40.653 --> 01:32:42.610 So when ERCOT settles the market, 01:32:42.610 --> 01:32:43.937 they know the load by LSE, 01:32:43.937 --> 01:32:46.980 and that's how they calculate the compliance penalties 01:32:46.980 --> 01:32:50.220 or the requirement to have retired enough reps 01:32:50.220 --> 01:32:51.870 to meet your share under 25, 173. 01:32:52.978 --> 01:32:54.210 Okay. Yeah. 01:32:54.210 --> 01:32:56.320 That's a great question and I would love to explore 01:32:56.320 --> 01:33:00.413 some of that with ERCOT as our discussion continues. 01:33:01.950 --> 01:33:03.388 Thank you, Bill. 01:33:03.388 --> 01:33:04.750 Thank you guys. 01:33:04.750 --> 01:33:05.590 Just want to say, 01:33:05.590 --> 01:33:08.800 having been part of this process and other processes 01:33:08.800 --> 01:33:10.700 where we've discussed market design 01:33:10.700 --> 01:33:13.910 at this Commission is a very complicated topic 01:33:13.910 --> 01:33:17.970 that has many issues, and it is often been divisive. 01:33:17.970 --> 01:33:21.370 It'll always be divisive among stakeholders, right, Katie, 01:33:21.370 --> 01:33:23.630 but it is often been divisive 01:33:23.630 --> 01:33:26.060 and I just appreciate the open candor 01:33:26.060 --> 01:33:28.360 and discussion and dialogue you guys have had. 01:33:30.250 --> 01:33:33.150 It's helpful for stakeholders and we know it's contentious. 01:33:33.150 --> 01:33:36.500 So thank you for taking in all of our opinions and feedback. 01:33:36.500 --> 01:33:37.550 Absolutely. Yep. 01:33:39.690 --> 01:33:41.470 Any changes that's substantial meaningful 01:33:41.470 --> 01:33:46.007 is going to upset some people and probably a lot of people. 01:33:46.007 --> 01:33:50.030 And I appreciate you bringing that issue 01:33:51.610 --> 01:33:54.323 front and center in no uncertain terms, 01:33:55.810 --> 01:33:59.840 but I would also remind folks 01:33:59.840 --> 01:34:03.620 that there's no prohibition on somebody 01:34:03.620 --> 01:34:06.350 other than the big five building new generation. 01:34:06.350 --> 01:34:07.300 Absolutely right. 01:34:09.470 --> 01:34:13.050 They're actually constrained by law 01:34:13.050 --> 01:34:16.900 from going beyond that 20% of the generation side, 01:34:16.900 --> 01:34:19.450 which is the whole point of the exercise is getting 01:34:20.860 --> 01:34:24.570 new folks to build dispatchable generation, 01:34:24.570 --> 01:34:27.770 which would then be available for not only 01:34:28.890 --> 01:34:30.920 their excess load, but everybody else. 01:34:30.920 --> 01:34:34.120 Which we encourage that 20% to be 10 but was a lot-- 01:34:34.120 --> 01:34:35.603 That's another one you have to check with the legislature. 01:34:35.603 --> 01:34:38.186 That's a question to the IMM. 01:34:41.493 --> 01:34:45.064 All right, you wanna order from the IMM, Carrie? 01:34:45.064 --> 01:34:47.597 Yes, if I can, thank you. Come on up. 01:34:52.880 --> 01:34:55.880 Good afternoon, Carrie Bivens with Potomac Economics. 01:34:55.880 --> 01:34:57.060 Hi Carrie, how are you doing? 01:34:57.060 --> 01:34:58.040 Doing great. 01:34:58.040 --> 01:35:02.350 So I think before we resume asking questions with you, 01:35:02.350 --> 01:35:05.230 I think just for the purposes of the public, 01:35:05.230 --> 01:35:07.130 can you give us just a brief background 01:35:07.130 --> 01:35:10.550 on what the main roles or duties of the ERCOT IMM are? 01:35:10.550 --> 01:35:12.300 Yeah, there are twofold. 01:35:12.300 --> 01:35:14.930 So we monitor the market 01:35:14.930 --> 01:35:18.853 and we recommend market design changes as we see fit. 01:35:19.930 --> 01:35:24.350 The second role is to look for market power abuse, 01:35:24.350 --> 01:35:25.760 market manipulation, 01:35:25.760 --> 01:35:28.683 and refer those cases for enforcement if appropriate. 01:35:30.260 --> 01:35:32.410 In your current duties of serving 01:35:32.410 --> 01:35:36.040 as a ERCOT IMM, do you monitor market power abuse 01:35:36.040 --> 01:35:38.213 in the bilateral market? No, we do not. 01:35:39.680 --> 01:35:41.100 What are some of the challenges 01:35:41.100 --> 01:35:44.900 that monitoring market power in a bilateral market 01:35:44.900 --> 01:35:49.150 under an LSEO construct would present for you as ERCOT IMM? 01:35:49.150 --> 01:35:51.340 Yes, our role is limited 01:35:51.340 --> 01:35:55.080 to the central ERCOT energy market. 01:35:55.080 --> 01:35:58.700 And obviously if the Commission creates new products 01:35:58.700 --> 01:36:01.900 or creates new markets, we will monitor those markets. 01:36:01.900 --> 01:36:04.440 There are some unique challenges that we see 01:36:04.440 --> 01:36:09.123 with the LSE obligation proposal centrally because they are, 01:36:11.340 --> 01:36:13.700 these transactions are taking place 01:36:13.700 --> 01:36:14.850 through the bilateral markets. 01:36:14.850 --> 01:36:17.170 So one is that these contracts 01:36:18.110 --> 01:36:20.060 may not necessarily be standardized. 01:36:20.060 --> 01:36:23.720 So you might have contracts that are for accredited capacity 01:36:23.720 --> 01:36:26.640 for uncredited capacity, for other types of products. 01:36:26.640 --> 01:36:29.500 You're talking the light touch proof of purchase, 01:36:29.500 --> 01:36:31.403 no new product version. 01:36:32.770 --> 01:36:37.310 Any other one because there could be contracts that are 01:36:37.310 --> 01:36:38.750 from-- In the new product, 01:36:38.750 --> 01:36:40.230 create a new product by definition, 01:36:40.230 --> 01:36:41.660 it would be standardized. 01:36:41.660 --> 01:36:43.280 The product itself might be standardized, 01:36:43.280 --> 01:36:45.710 but doesn't necessarily mean the contract would be. 01:36:45.710 --> 01:36:48.070 So if you're, you could sell that product 01:36:48.070 --> 01:36:49.200 and sell other products, 01:36:49.200 --> 01:36:51.320 all packaged together in one contract, 01:36:51.320 --> 01:36:54.630 and it would be difficult to know whether or not, 01:36:54.630 --> 01:36:58.430 what the actual price of that standardized product was 01:36:58.430 --> 01:37:00.830 because there might've been consideration 01:37:00.830 --> 01:37:02.173 in the other products. 01:37:03.179 --> 01:37:08.179 If somebody was trying to artificially inflate or deflate 01:37:08.560 --> 01:37:11.480 the price of that capacity product they could do so 01:37:11.480 --> 01:37:15.270 by adjusting the terms or changing the other terms 01:37:15.270 --> 01:37:17.250 of the contract so it'll be-- 01:37:17.250 --> 01:37:20.264 They could do that with any contract between two 01:37:20.264 --> 01:37:21.591 sophisticated parties-- Absolutely. 01:37:21.591 --> 01:37:23.047 Except for those two parties just like -- 01:37:23.047 --> 01:37:26.630 So if you hand me contracts and you asked me, 01:37:26.630 --> 01:37:29.932 is this entity exercising market power 01:37:29.932 --> 01:37:33.170 and I'm trying to compare multiple contracts 01:37:33.170 --> 01:37:36.400 to find out what the true cost of that capacity was, 01:37:36.400 --> 01:37:40.610 it'll be very difficult to compare apples to apples 01:37:40.610 --> 01:37:42.840 amongst all these bilateral contracts. 01:37:42.840 --> 01:37:46.200 Have you ever reviewed a bilateral contract? 01:37:46.200 --> 01:37:47.183 We have not. 01:37:49.168 --> 01:37:50.730 When we go through our RFI processes, 01:37:50.730 --> 01:37:53.280 we ask for particular data and we'll often get 01:37:54.750 --> 01:37:58.340 kind of information about those contracts, 01:37:58.340 --> 01:37:59.960 but there is a lot of hesitancy 01:37:59.960 --> 01:38:03.413 to provide the actual contracts themselves. 01:38:05.120 --> 01:38:09.130 So in order to be able to review a bilateral contract, 01:38:09.130 --> 01:38:10.420 I guess, first that the companies 01:38:10.420 --> 01:38:11.550 would have to provide them to you, 01:38:11.550 --> 01:38:13.810 which they're highly confidential 01:38:13.810 --> 01:38:15.250 and there's a lot surrounding there, 01:38:15.250 --> 01:38:17.173 but in order to review them, 01:38:18.340 --> 01:38:20.710 would you have to have the entire contract? 01:38:20.710 --> 01:38:22.750 Yes, we'd have to have the entire contract 01:38:22.750 --> 01:38:26.280 and another issue, again, 01:38:26.280 --> 01:38:28.520 our role is to find market a power abuse 01:38:28.520 --> 01:38:30.540 and refer it to the Commission for enforcement. 01:38:30.540 --> 01:38:35.080 So let's say that we were able to detect and identify 01:38:35.080 --> 01:38:37.280 market power abuse in the bilateral market 01:38:37.280 --> 01:38:38.510 through these contracts 01:38:38.510 --> 01:38:40.440 and we referred to the Commission for enforcement, 01:38:40.440 --> 01:38:42.610 the Commission enforces, maybe there's penalties, 01:38:42.610 --> 01:38:45.040 there's still a contract that was executed 01:38:45.040 --> 01:38:49.150 and that the LSE is subject to for a year or longer 01:38:49.150 --> 01:38:53.660 and that contract cannot be canceled necessarily. 01:38:53.660 --> 01:38:57.260 And so even if something, we like to try to, 01:38:57.260 --> 01:39:00.060 and that's why we participate so heavily 01:39:00.060 --> 01:39:01.440 in the market design process 01:39:01.440 --> 01:39:04.610 is that it's better to design markets 01:39:04.610 --> 01:39:09.150 that prevent the exercise of market power in the first place 01:39:09.150 --> 01:39:10.730 than trying to come behind it 01:39:10.730 --> 01:39:13.870 and use penalties or enforcement after the fact, 01:39:13.870 --> 01:39:16.230 because the harm is already done at that point. 01:39:16.230 --> 01:39:18.160 How do you know there's not market power 01:39:18.160 --> 01:39:19.800 enacted in the current bilateral market 01:39:19.800 --> 01:39:21.800 if you're not reviewing those contracts? 01:39:22.910 --> 01:39:25.440 Well, every entity has access 01:39:25.440 --> 01:39:26.980 to the ERCOT energy market. 01:39:26.980 --> 01:39:29.930 So if you weren't able to access good terms 01:39:29.930 --> 01:39:31.110 in the bilateral market, 01:39:31.110 --> 01:39:32.690 then you can purchase everything you need 01:39:32.690 --> 01:39:34.330 from the day ahead market at ERCOT. 01:39:34.330 --> 01:39:36.200 So there's that backstop. 01:39:36.200 --> 01:39:38.709 Would that change with the LSE obligation? 01:39:38.709 --> 01:39:43.709 Okay, so, one option would be a backstop 01:39:46.410 --> 01:39:48.120 or residual type market, 01:39:48.120 --> 01:39:53.120 so that if LSE had difficulty accessing 01:39:53.620 --> 01:39:55.220 good terms in the bilateral market, 01:39:55.220 --> 01:39:58.200 there would be a backstop or a residual type auction 01:39:58.200 --> 01:39:59.800 and it would have all of the features-- 01:39:59.800 --> 01:40:01.790 This is in a new product scenario. 01:40:01.790 --> 01:40:03.670 In a new product scenario. 01:40:03.670 --> 01:40:04.860 It would have all the features 01:40:04.860 --> 01:40:07.130 of any other centralized market 01:40:07.130 --> 01:40:09.133 that would have market power mitigation, 01:40:09.990 --> 01:40:13.880 reliability based demand curve, all of those features. 01:40:13.880 --> 01:40:17.800 And it would probably in the end 01:40:17.800 --> 01:40:20.470 just become a centralized capacity market 01:40:20.470 --> 01:40:22.200 with a self supply option 01:40:23.770 --> 01:40:26.080 is what it would migrate to over time. 01:40:26.080 --> 01:40:27.893 And just to be clear, okay. 01:40:29.860 --> 01:40:32.793 You're saying that a protective measure, 01:40:34.672 --> 01:40:39.290 or a process to help you monitor market power 01:40:42.238 --> 01:40:45.293 in the bilateral market under LSE obligation. 01:40:46.700 --> 01:40:49.730 The one that you're pointing to, the residual auction 01:40:50.860 --> 01:40:54.530 is essentially part of the capacity market? 01:40:54.530 --> 01:40:59.130 It's essentially the heavier touch version-- 01:40:59.130 --> 01:41:01.714 What about in a proof of purchase scenario? 01:41:01.714 --> 01:41:03.930 I'm not sure I understand how that would work. 01:41:03.930 --> 01:41:07.550 Like the SBP, the first part of SBP 01:41:07.550 --> 01:41:09.640 where you just, without the deliverability problem. 01:41:09.640 --> 01:41:12.100 The part that Lubbock said was pretty straightforward 01:41:12.100 --> 01:41:14.940 and easy as administrative accounting. 01:41:14.940 --> 01:41:15.773 Didn't really change business. 01:41:15.773 --> 01:41:20.773 You just need to prove that you purchased reliable power 01:41:20.820 --> 01:41:21.680 for the customers 01:41:21.680 --> 01:41:24.083 that you believe you were gonna need to serve. 01:41:25.590 --> 01:41:28.653 And it would be based on accredited capacity? 01:41:30.550 --> 01:41:32.530 Yes, an accreditation standard 01:41:32.530 --> 01:41:36.530 that holds each resource type accountable 01:41:36.530 --> 01:41:37.760 for their level of reliability, 01:41:37.760 --> 01:41:41.220 just like you would do in the heavy touch version. 01:41:41.220 --> 01:41:46.040 But if you're hedged, and then escalating fashion, 01:41:46.040 --> 01:41:48.320 as you get closer to the operating day, 01:41:48.320 --> 01:41:50.650 the only change in your day-to-day life 01:41:50.650 --> 01:41:52.700 would be showing the receipt essentially. 01:41:53.930 --> 01:41:56.710 And you don't have to, there's nothing saying that, 01:41:56.710 --> 01:42:01.130 the wisdom of the contract you signed 01:42:01.130 --> 01:42:03.460 between two sophisticated and competent parties, 01:42:03.460 --> 01:42:07.210 you just need to show that you purchased the power 01:42:07.210 --> 01:42:10.520 that you expect to have to deliver. 01:42:10.520 --> 01:42:14.470 Right, I think that has the same market power issues, 01:42:14.470 --> 01:42:17.550 because it's wholly relying on the bilateral market. 01:42:17.550 --> 01:42:18.970 How do you know that's not happening 01:42:18.970 --> 01:42:20.423 now in the bilateral market? 01:42:20.423 --> 01:42:24.880 Because right now you have access to the ERCOT market. 01:42:24.880 --> 01:42:27.639 You still would. You still would-- 01:42:27.639 --> 01:42:28.472 Nobody is getting rid 01:42:28.472 --> 01:42:29.305 of the real time of the data. 01:42:29.305 --> 01:42:30.940 But you're telling me I have to prove to you 01:42:30.940 --> 01:42:33.940 that I have purchased for capacity 01:42:33.940 --> 01:42:37.013 and if I don't do that, I have some penalty, right? 01:42:39.040 --> 01:42:41.420 You're forcing me into the bilateral afford market 01:42:41.420 --> 01:42:43.943 whereas nobody's forced there today. 01:42:43.943 --> 01:42:45.930 That's the problem. 01:42:45.930 --> 01:42:49.738 Nobody's buying dispatchable power in the future. 01:42:49.738 --> 01:42:52.363 That's the problem, that's why we're running out. 01:42:54.150 --> 01:42:57.720 So Carrie, under our PUC rules right now, 01:42:57.720 --> 01:42:59.270 you're not required 01:42:59.270 --> 01:43:01.065 to monitor market power in the bilateral. 01:43:01.065 --> 01:43:01.898 In the bilateral. 01:43:01.898 --> 01:43:03.240 Yeah, that would be an expansion-- 01:43:03.240 --> 01:43:04.590 Of your role. Of the role 01:43:04.590 --> 01:43:06.590 under the substantive rules. 01:43:06.590 --> 01:43:07.460 So what would that mean? 01:43:07.460 --> 01:43:10.840 I mean, are you gonna have to add more staff, expertise? 01:43:10.840 --> 01:43:12.470 I mean, what does all this mean? 01:43:12.470 --> 01:43:13.640 Oh yes, absolutely. 01:43:13.640 --> 01:43:15.300 We would need more staff. 01:43:15.300 --> 01:43:16.660 We would probably issue 01:43:16.660 --> 01:43:19.870 many more RFI, request for information 01:43:19.870 --> 01:43:22.750 whereby folks would have to answer all of our questions 01:43:22.750 --> 01:43:24.040 and provide all of our contracts 01:43:24.040 --> 01:43:26.463 and we would have this iterative process. 01:43:27.970 --> 01:43:29.720 But that's fine, we're happy to do it. 01:43:29.720 --> 01:43:33.020 Just note that for every RFI we issue, 01:43:33.020 --> 01:43:34.430 I'm sure everybody in this room can tell you 01:43:34.430 --> 01:43:36.580 how much they don't enjoy having to respond to that. 01:43:36.580 --> 01:43:39.000 It's quite an administrative burden for them as well. 01:43:39.000 --> 01:43:40.020 So no matter what, 01:43:40.020 --> 01:43:41.720 and what construct of an LSE obligation, 01:43:41.720 --> 01:43:45.610 whether it's the souped up one or the light one, 01:43:45.610 --> 01:43:47.030 you're still gonna have to have 01:43:47.030 --> 01:43:51.530 some kind of new approach to addition to reviewing 01:43:51.530 --> 01:43:53.420 and you'll still have to read those contracts 01:43:53.420 --> 01:43:54.610 that you've never read before. 01:43:54.610 --> 01:43:56.960 And we'll need some sounds like some additional staff 01:43:56.960 --> 01:43:58.471 and maybe some expertise, perhaps. 01:43:58.471 --> 01:43:59.671 That's right. 01:44:01.490 --> 01:44:04.893 So if you're gonna need all these things, right? 01:44:06.103 --> 01:44:07.483 Who pays for the IMM? 01:44:09.204 --> 01:44:10.710 The IMM is paid 01:44:12.260 --> 01:44:15.270 essentially through the ERCOT administration fee. 01:44:15.270 --> 01:44:16.750 So the archive administration fee 01:44:16.750 --> 01:44:19.313 is assessed on a megawatt hour basis to load. 01:44:20.400 --> 01:44:23.300 Okay, I'm gonna kind of change the subject here 01:44:23.300 --> 01:44:26.040 because this is another piece of the lighter approach 01:44:27.420 --> 01:44:30.300 or I actually, I guess just the one you had proposed 01:44:30.300 --> 01:44:32.923 last time, Chairman, the public bulletin board, 01:44:34.450 --> 01:44:35.323 will that help? 01:44:40.286 --> 01:44:41.780 I'm not sure I see the benefit 01:44:41.780 --> 01:44:43.903 of the public bulletin board. 01:44:48.220 --> 01:44:50.520 there's no guarantee that what's posted 01:44:50.520 --> 01:44:52.823 on the bulletin board is accessible. 01:44:53.840 --> 01:44:55.338 What do you mean it's not accessible? 01:44:55.338 --> 01:44:56.770 It's a public bulletin board. 01:44:56.770 --> 01:44:58.323 It's a public bulletin board. 01:44:59.770 --> 01:45:01.820 Maybe I need a little bit more description. 01:45:01.820 --> 01:45:04.050 Oh, I mean. Natural gas pipeline 01:45:04.050 --> 01:45:06.090 is a delivery point bulletin board. 01:45:06.090 --> 01:45:07.530 It's a public facing website, 01:45:07.530 --> 01:45:10.210 has prices and volumes of every transaction. 01:45:10.210 --> 01:45:12.600 And so maybe I call you and I say I would like 01:45:12.600 --> 01:45:16.360 whatever you posted and you tell me, oh, I'm sorry, 01:45:16.360 --> 01:45:17.340 that's not available, 01:45:17.340 --> 01:45:20.913 but I've got this other thing for different terms. 01:45:22.030 --> 01:45:22.993 It's not a-- 01:45:24.290 --> 01:45:27.210 So you're saying that if the IMM called companies 01:45:27.210 --> 01:45:30.895 under the Commission's jurisdiction to ask about 01:45:30.895 --> 01:45:33.390 specific transaction, 01:45:33.390 --> 01:45:34.990 they would swap out the contracts 01:45:34.990 --> 01:45:36.240 and give you a different contract 01:45:36.240 --> 01:45:38.360 than the one you really want. 01:45:38.360 --> 01:45:40.670 And are we sure that's not happening today 01:45:40.670 --> 01:45:42.303 when you put out an RFI? 01:45:45.533 --> 01:45:48.753 Are we just conjuring up ghosts that already, I mean, 01:45:50.510 --> 01:45:52.410 if you're worried about people switching out contracts 01:45:52.410 --> 01:45:54.400 on you, that's a now problem as well. 01:45:54.400 --> 01:45:56.700 No, I guess I'm just trying to say that 01:45:56.700 --> 01:46:00.130 a bulletin board is not the same thing as a cleared market. 01:46:00.130 --> 01:46:03.770 And so it's just somebody putting up a post-it that says, 01:46:03.770 --> 01:46:05.860 I'll sell you this at this dollar amount 01:46:05.860 --> 01:46:08.580 and that doesn't necessarily mean that 01:46:08.580 --> 01:46:12.433 the other contract terms are going to be favorable to you. 01:46:14.111 --> 01:46:17.210 So, the bulletin board with post executed prices 01:46:17.210 --> 01:46:18.200 and this would be-- 01:46:18.200 --> 01:46:21.140 Oh, this is an after the fact, maybe, 01:46:21.140 --> 01:46:21.973 I apologize. 01:46:21.973 --> 01:46:23.790 I thought the bulletin board concept was, 01:46:23.790 --> 01:46:26.910 because Australia has like a trading platform 01:46:26.910 --> 01:46:29.904 where they do some brokerage services and that's the before. 01:46:29.904 --> 01:46:31.470 Okay this is an after. And do both. 01:46:31.470 --> 01:46:34.590 I know this is not the way ERCOT works but most, 01:46:34.590 --> 01:46:36.770 a lot of markets have the bid stack, 01:46:36.770 --> 01:46:38.120 the offer stack all in one, 01:46:38.120 --> 01:46:40.860 you can see price transactions cleared and you can see-- 01:46:40.860 --> 01:46:42.150 Okay, absolutely that, 01:46:42.150 --> 01:46:44.260 increasing transparency would help, yes. 01:46:44.260 --> 01:46:45.093 Or real time, I mean, 01:46:45.093 --> 01:46:47.030 these are updated every five minutes. 01:46:47.030 --> 01:46:48.300 If it's cleared, it's posted, 01:46:48.300 --> 01:46:50.920 if it's a bid or offer always subject detained, 01:46:50.920 --> 01:46:52.260 but you can see the stack. 01:46:52.260 --> 01:46:53.460 Yeah. 01:46:53.460 --> 01:46:56.263 The only thing, I just wanna go back to the fact that, 01:46:58.910 --> 01:47:03.170 these contracts may contain terms that are not comparable. 01:47:04.540 --> 01:47:08.360 It's not necessarily that one and another 01:47:08.360 --> 01:47:09.350 are gonna be the same. 01:47:09.350 --> 01:47:12.370 So let's say you've got two affiliated entities. 01:47:12.370 --> 01:47:14.150 One is selling to the other, 01:47:14.150 --> 01:47:16.570 the capacity part of that contract 01:47:16.570 --> 01:47:19.190 might look lower and it, 01:47:19.190 --> 01:47:20.670 I don't wanna go into too much detail 01:47:20.670 --> 01:47:22.820 because I feel like I'm just telling people 01:47:24.290 --> 01:47:25.861 how to get in trouble. Said by monitor. 01:47:25.861 --> 01:47:26.940 Yeah. 01:47:26.940 --> 01:47:30.110 Maybe I need to be a little bit more cautious, but anyway, 01:47:30.110 --> 01:47:31.560 I can certainly see examples 01:47:31.560 --> 01:47:34.597 under which you could try 01:47:34.597 --> 01:47:38.253 to make things look different than they are. 01:47:39.690 --> 01:47:41.678 Take it from the other side though. 01:47:41.678 --> 01:47:46.530 Is there a reason to have different terms and contracts 01:47:46.530 --> 01:47:49.310 for different counterparties, valid reasons? 01:47:49.310 --> 01:47:50.540 Yes. Okay. 01:47:50.540 --> 01:47:52.150 So just because they're different terms, 01:47:52.150 --> 01:47:53.950 doesn't mean they're evil or manipulative? 01:47:53.950 --> 01:47:54.783 No. 01:47:54.783 --> 01:47:57.150 And there's a very good reason you could sell power 01:47:57.150 --> 01:47:59.520 or any good or service to one counter party 01:47:59.520 --> 01:48:01.233 at a higher price than you did it, 01:48:02.440 --> 01:48:04.290 the same product to the next counterparty. 01:48:04.290 --> 01:48:05.810 Yes. They're very legit 01:48:05.810 --> 01:48:07.323 and I'm gonna make sure everybody's clear on that. 01:48:07.323 --> 01:48:08.330 There are very legitimate business 01:48:08.330 --> 01:48:09.680 and risk management reasons for that. 01:48:09.680 --> 01:48:11.610 Okay, because different counterparties 01:48:11.610 --> 01:48:12.607 have different risk profiles. 01:48:12.607 --> 01:48:15.020 Different risk profiles, different delivery terms, 01:48:15.020 --> 01:48:16.890 different-- Yes. 01:48:16.890 --> 01:48:18.840 Financial risk management 01:48:18.840 --> 01:48:20.010 and payment terms associated with it, 01:48:20.010 --> 01:48:20.910 there are a lot of reasons 01:48:20.910 --> 01:48:23.410 for different contract terms to exist. 01:48:23.410 --> 01:48:24.480 And just because they're different 01:48:24.480 --> 01:48:26.091 doesn't mean that they're malicious. 01:48:26.091 --> 01:48:27.550 No, no, absolutely. 01:48:27.550 --> 01:48:28.460 I'm just saying that, 01:48:28.460 --> 01:48:30.620 if you're selling a megawatt of energy in real time, 01:48:30.620 --> 01:48:32.620 that megawatt of energy is the same for everybody 01:48:32.620 --> 01:48:34.817 and so I can say if you're offering $30 01:48:34.817 --> 01:48:37.750 and you're offering $800, 01:48:37.750 --> 01:48:39.670 I can very easily compare those two 01:48:39.670 --> 01:48:42.070 and I can make some judgment calls about. 01:48:42.070 --> 01:48:45.010 Sure, and also just to be a point of clarification 01:48:45.010 --> 01:48:48.930 on all of these proposals, none of these proposals, 01:48:48.930 --> 01:48:53.430 anywhere on the spectrum, envisions a real time 01:48:53.430 --> 01:48:56.720 constant checking of exactly how many credits you have, 01:48:56.720 --> 01:48:58.050 or exactly how hedged you are. 01:48:58.050 --> 01:49:01.010 In my straw man at most it was a one month away 01:49:01.010 --> 01:49:02.160 from the operating day. 01:49:04.110 --> 01:49:06.190 At which point, and you asked about the realtime 01:49:06.190 --> 01:49:10.020 and the head market earlier, that's what they're for. 01:49:10.020 --> 01:49:12.890 I mean, after one month ahead, under the first straw man, 01:49:12.890 --> 01:49:14.440 which is just a starting point, 01:49:15.420 --> 01:49:16.650 we don't care. 01:49:16.650 --> 01:49:19.040 We've got the proof of purchase in the lightest touch. 01:49:19.040 --> 01:49:22.710 We've seen that you bought 95% 01:49:22.710 --> 01:49:26.280 or a hundred percent or whatever the number is 01:49:26.280 --> 01:49:28.200 and you go about your business. 01:49:28.200 --> 01:49:30.250 Nobody's checking every morning 01:49:30.250 --> 01:49:34.070 or every four hours that would prevent. 01:49:34.070 --> 01:49:36.060 So you can still go to the realtime market. 01:49:36.060 --> 01:49:38.900 You can still go to the day ahead market 01:49:38.900 --> 01:49:40.663 to meet your energy needs. 01:49:42.368 --> 01:49:45.380 There's no requirement in any of these proposals 01:49:45.380 --> 01:49:46.970 anywhere on the spectrum, 01:49:46.970 --> 01:49:49.460 that if your load changes a week ahead, 01:49:49.460 --> 01:49:51.450 you've got to scramble to get more credits, 01:49:51.450 --> 01:49:53.020 capacity credits, or decks, 01:49:53.020 --> 01:49:57.450 that's not proposed anywhere in any of these versions. 01:49:57.450 --> 01:49:59.630 It's a monthly at most, probably more likely 01:49:59.630 --> 01:50:04.630 quarterly checkpoint with ERCOT. 01:50:04.680 --> 01:50:06.923 For the 5% that has not been procured? 01:50:09.760 --> 01:50:12.450 In January you've got to submit your report. 01:50:12.450 --> 01:50:15.430 Some subset of those would be audited. 01:50:15.430 --> 01:50:19.970 And they look at essentially your book three years out, 01:50:19.970 --> 01:50:23.440 here's the expected load, do you have 50% of that, check. 01:50:23.440 --> 01:50:26.940 Do you have two years out, do you have 75% of that 01:50:26.940 --> 01:50:31.540 or whatever the escalating requirement the obligation is, 01:50:31.540 --> 01:50:35.220 that's a milestone or check-in, 01:50:35.220 --> 01:50:38.353 there's no real time penalty. 01:50:40.050 --> 01:50:41.270 And they'll check all your operating days. 01:50:41.270 --> 01:50:44.650 Three or seasons is months, weeks. 01:50:44.650 --> 01:50:47.300 I don't know what metric we'd wanna use, 01:50:47.300 --> 01:50:50.060 but you look ahead and say, hey, if it's January, 01:50:50.060 --> 01:50:52.430 what do you have lined up for February? 01:50:52.430 --> 01:50:55.610 We're only gonna look a month ahead out and further 01:50:55.610 --> 01:50:57.720 because once you get within the month, 01:50:57.720 --> 01:51:01.563 it's too dynamic and it's moving too fast. 01:51:03.510 --> 01:51:06.683 So it's not a real-time buzzer. 01:51:07.770 --> 01:51:10.443 Nobody's sewing a flag in the middle of the football game. 01:51:13.486 --> 01:51:15.350 Whether it's a new credit product 01:51:15.350 --> 01:51:18.650 or the light touch proof of purchase, 01:51:18.650 --> 01:51:21.804 they're just checkpoints and milestones along the way. 01:51:21.804 --> 01:51:25.170 Nobody's gonna grab you two days before your operating day 01:51:25.170 --> 01:51:28.590 and say you're two token short. 01:51:28.590 --> 01:51:29.570 That's not envisioned at all. 01:51:29.570 --> 01:51:32.473 I just wanna make that important clarification. 01:51:35.470 --> 01:51:40.470 And I got to say that I'm gonna need the (indistinct) 01:51:42.310 --> 01:51:45.190 I think to properly evaluate what you're recommending 01:51:45.190 --> 01:51:46.810 and this now new lighter touch approach. 01:51:46.810 --> 01:51:49.570 I think it would be helpful to have it 01:51:50.520 --> 01:51:54.260 scripted out because I'm now beginning 01:51:54.260 --> 01:51:55.250 to get a little bit confused 01:51:55.250 --> 01:51:57.280 as to what the purpose of the reliability tokens are 01:51:57.280 --> 01:51:59.980 and everything, and in order to properly evaluate it, 01:51:59.980 --> 01:52:02.720 I think we gotta get it sort of shaped so we can look at it 01:52:02.720 --> 01:52:04.370 and be able to ask appropriate questions. 01:52:04.370 --> 01:52:06.070 But at the end of the day I think, 01:52:07.710 --> 01:52:08.980 it sounds like no matter what, 01:52:08.980 --> 01:52:11.370 you're still gonna have to look at the bilateral contracts 01:52:11.370 --> 01:52:13.790 and they're just not standardized contracts, right? 01:52:13.790 --> 01:52:16.560 And that's fine if they're not standardized, 01:52:16.560 --> 01:52:19.210 but I think what you're saying is, 01:52:19.210 --> 01:52:20.890 it's not that there's any malicious intent 01:52:20.890 --> 01:52:23.340 because they're not standardized, they never are. 01:52:25.320 --> 01:52:27.650 The point I think that you're trying to make 01:52:27.650 --> 01:52:31.600 is that it's gonna be a very complex administrative 01:52:31.600 --> 01:52:34.780 process for you to look for market manipulation 01:52:34.780 --> 01:52:37.200 in an area that you've never monitored before. 01:52:37.200 --> 01:52:40.470 That's accurate, yeah, that's a challenge. 01:52:41.520 --> 01:52:43.870 Under this scheme, how would you, 01:52:43.870 --> 01:52:46.990 what are your fears about manipulation? 01:52:46.990 --> 01:52:48.830 Because we've got large actors 01:52:48.830 --> 01:52:52.023 on both sides of the field now. 01:52:53.480 --> 01:52:54.660 What worries you? 01:52:54.660 --> 01:52:56.970 I think Commissioner Gloflefty spoke very well 01:52:56.970 --> 01:52:59.890 to my largest concern which is around 01:53:01.360 --> 01:53:03.310 the fact that there are large retailers 01:53:03.310 --> 01:53:04.830 that have affiliated generation. 01:53:04.830 --> 01:53:09.830 And so they're going to, I think it was even stated here, 01:53:11.150 --> 01:53:13.780 they're gonna reserve that generation for their own use. 01:53:13.780 --> 01:53:16.763 And let's say they had more generation than they have load. 01:53:18.790 --> 01:53:23.790 You have a retail arm that you could, now I'm being, 01:53:25.300 --> 01:53:26.480 I feel like, again, like I'm talking about 01:53:26.480 --> 01:53:27.530 how you could do it-- 01:53:29.050 --> 01:53:30.700 Well, this is the future. 01:53:30.700 --> 01:53:33.943 I know, I know, anyway. 01:53:35.025 --> 01:53:36.520 That's a blueprint, she does not wanna lay out. 01:53:36.520 --> 01:53:39.067 Yeah. I mean, maybe one or two. 01:53:39.067 --> 01:53:42.110 But you have an advantage over smaller retailers 01:53:42.110 --> 01:53:45.070 because you have access to this affiliated generation. 01:53:45.070 --> 01:53:48.030 And why would you want to help out your competitors 01:53:48.030 --> 01:53:50.043 by offering that generation to them, 01:53:51.390 --> 01:53:54.630 knowing that they'll be penalized if they don't have access 01:53:54.630 --> 01:53:58.690 to enough generation to meet their obligation 01:53:58.690 --> 01:54:01.513 and there's a limited amount of, 01:54:02.780 --> 01:54:04.710 there are pivotal suppliers. 01:54:04.710 --> 01:54:09.710 And so you could have an advantage there 01:54:10.110 --> 01:54:12.950 by forcing the small retailers to go 01:54:12.950 --> 01:54:14.350 to ERCOT with their penalty, 01:54:14.350 --> 01:54:16.880 which could be very extensive. 01:54:16.880 --> 01:54:19.480 And the backstop to using the penalty 01:54:19.480 --> 01:54:22.920 is to have ERCOT procure some sort of resource for them. 01:54:22.920 --> 01:54:27.640 And I would love to ask for more detail 01:54:27.640 --> 01:54:28.857 on how that would work. Best offer (indistinct) 01:54:28.857 --> 01:54:30.630 mentioned earlier can be helpful. 01:54:30.630 --> 01:54:34.883 Yeah, but I mean, if you have retailers 01:54:34.883 --> 01:54:38.400 that don't meet the showing and they pay a penalty. 01:54:38.400 --> 01:54:41.020 There was a statement in the obligation proposal 01:54:41.020 --> 01:54:43.790 that then ERCOT would procure on their behalf 01:54:43.790 --> 01:54:46.830 and I would love to see more detail on how that would work, 01:54:46.830 --> 01:54:48.160 especially month ahead. 01:54:48.160 --> 01:54:50.942 Would the must offer requirement help? 01:54:50.942 --> 01:54:53.120 What is your thought on that? 01:54:53.120 --> 01:54:55.170 I definitely think if you have a capacity product 01:54:55.170 --> 01:54:57.460 that it means you need to have a must offer requirement 01:54:57.460 --> 01:54:59.360 into the ERCOT market, yes. 01:54:59.360 --> 01:55:02.380 I mean, otherwise I'm not sure what that credit gets you. 01:55:02.380 --> 01:55:04.793 The other piece is I think is interesting is that, 01:55:04.793 --> 01:55:06.530 we were talking about penalizing 01:55:06.530 --> 01:55:08.763 and not penalizing and penalties. 01:55:10.040 --> 01:55:13.400 These are contracts that you're penalized, 01:55:13.400 --> 01:55:17.550 that you pay your penalty and you're still gonna keep going. 01:55:17.550 --> 01:55:22.550 Well, the entity that is subject to a penalty 01:55:22.760 --> 01:55:24.180 would just keep going 01:55:24.180 --> 01:55:28.483 and that LSE is locked into your contract. 01:55:31.980 --> 01:55:35.810 They're still on the hook for getting into a bad contract 01:55:35.810 --> 01:55:39.060 that Carrie has discovered has issues. 01:55:39.060 --> 01:55:40.250 Is that a fair representation? 01:55:40.250 --> 01:55:43.260 Yeah, again, so that's kind of where you come 01:55:43.260 --> 01:55:46.560 after the fact monitoring, which definitely has its place, 01:55:46.560 --> 01:55:49.223 but the before, 01:55:51.740 --> 01:55:53.220 because it's in the bilateral market, 01:55:53.220 --> 01:55:57.260 there's a mitigation that can be really handled 01:55:57.260 --> 01:55:58.930 before the contract is signed 01:55:59.770 --> 01:56:01.920 because it's all happening party to party 01:56:01.920 --> 01:56:06.090 instead of through some entity that can impose a mitigation 01:56:07.000 --> 01:56:08.780 ahead of time. 01:56:08.780 --> 01:56:11.483 Do you think there could be affiliate, 01:56:12.390 --> 01:56:16.020 well, like most favored nation status kind of contracts 01:56:16.020 --> 01:56:21.020 that if you're a affiliated retail provider 01:56:21.510 --> 01:56:24.890 that your generator has to provide 01:56:24.890 --> 01:56:26.059 under the same terms and conditions 01:56:26.059 --> 01:56:27.950 to other retailers in the market? 01:56:27.950 --> 01:56:30.480 Is that something that would be a viable? 01:56:30.480 --> 01:56:31.501 Yeah. Yes. 01:56:31.501 --> 01:56:35.080 Is that something that happens today in bilaterals? 01:56:35.080 --> 01:56:37.016 No, but it is something-- 01:56:37.016 --> 01:56:37.849 How do you know? 01:56:37.849 --> 01:56:39.381 You don't read the bilaterals today. 01:56:39.381 --> 01:56:44.381 There's no requirement in the statute that you offer-- 01:56:44.460 --> 01:56:46.740 Okay, so simply having an LSE obligation 01:56:46.740 --> 01:56:51.210 would not necessarily introduce behavior or the opportunity 01:56:51.210 --> 01:56:53.500 for malicious behavior that's not there today. 01:56:53.500 --> 01:56:57.243 Yeah, I'm pretty sure that there's some cases 01:56:57.243 --> 01:57:02.243 in non ISO markets in which there are rules such as that, 01:57:03.430 --> 01:57:06.510 that you have to offer non-affiliated entities 01:57:06.510 --> 01:57:08.970 the same terms as an affiliate. 01:57:08.970 --> 01:57:10.410 Sure, but let's not pretend 01:57:10.410 --> 01:57:13.020 that just by bringing in an LSE obligation 01:57:13.020 --> 01:57:14.760 and that would suddenly introduce them. 01:57:14.760 --> 01:57:15.593 I know, I'm just being, 01:57:15.593 --> 01:57:17.670 it's just a clarification for folks watching at home 01:57:17.670 --> 01:57:20.050 that this would magically introduce the opportunity 01:57:20.050 --> 01:57:23.430 for malicious behavior and bilateral agreements. 01:57:23.430 --> 01:57:25.720 That's a challenge today. 01:57:25.720 --> 01:57:28.033 And my point of bringing it up was more that 01:57:28.033 --> 01:57:31.030 it could be a viable mitigation measure-- 01:57:31.030 --> 01:57:33.260 Sure, sure. If something like-- 01:57:33.260 --> 01:57:36.160 If today there's no LSE obligation, that's the difference. 01:57:36.160 --> 01:57:40.100 The LSEs are physically financial responsible 01:57:40.100 --> 01:57:44.060 for procuring their obligation at whatever percentage. 01:57:44.060 --> 01:57:45.810 So that's the difference. 01:57:45.810 --> 01:57:48.050 And that's why they will honor our market counts today 01:57:48.050 --> 01:57:51.010 and that's why we got to make sure the ERCOT IMM 01:57:51.010 --> 01:57:53.430 can effectively monitor the bilateral market. 01:57:53.430 --> 01:57:54.823 But there's risk in not doing so, 01:57:54.823 --> 01:57:56.920 as I think somebody pointed out earlier, 01:57:56.920 --> 01:58:01.610 if you go into the operating day short and un-hedged, 01:58:01.610 --> 01:58:03.090 you better hope that whatever price 01:58:03.090 --> 01:58:04.860 you get in the spot market 01:58:04.860 --> 01:58:07.110 is lower than what you charge your customers. 01:58:08.030 --> 01:58:09.620 So there's financial risk, 01:58:09.620 --> 01:58:11.830 and a lot of people will take advantage of that 01:58:11.830 --> 01:58:14.740 by just showing up to ERCOT and saying, 01:58:14.740 --> 01:58:16.880 I'm sure I didn't hedge, 01:58:16.880 --> 01:58:19.366 ERCOT, it's your responsibility to serve-- 01:58:19.366 --> 01:58:21.698 Well, I'll say that we had a slow of reps 01:58:21.698 --> 01:58:24.913 that after the storm, which was extraordinary, 01:58:25.790 --> 01:58:29.250 but typically we don't have a lot of that go on. 01:58:29.250 --> 01:58:30.840 We've spent a lot of time 01:58:30.840 --> 01:58:32.710 strengthening our rep certification rules, 01:58:32.710 --> 01:58:35.120 strengthening our rules of the PUC 01:58:35.120 --> 01:58:40.020 and ensuring that we have solid reps come into the market. 01:58:40.020 --> 01:58:42.900 So it's not something that's happening a lot, 01:58:42.900 --> 01:58:45.740 but I understand we saw that a little bit more recently 01:58:45.740 --> 01:58:47.710 because of the storm, 01:58:47.710 --> 01:58:52.710 so I wouldn't classify that as a reoccurring problem. 01:58:53.900 --> 01:58:56.220 I think it's one that we definitely experienced 01:58:56.220 --> 01:58:58.330 because of the storm, and ERCOT got some reps 01:58:58.330 --> 01:59:00.130 on their books right now that defaulted, 01:59:00.130 --> 01:59:05.113 and that's all true, but with respect to, 01:59:08.856 --> 01:59:10.578 does that happen all the time? 01:59:10.578 --> 01:59:11.700 I just don't know. 01:59:11.700 --> 01:59:13.650 I mean, this is a different kind of obligation. 01:59:13.650 --> 01:59:17.123 Sure, but if all of these LSEs are hedged anyway, 01:59:18.040 --> 01:59:19.890 what burden are we? 01:59:19.890 --> 01:59:23.480 I mean, they're forcing themselves to go buy those hedges. 01:59:23.480 --> 01:59:25.460 I mean, we heard two years earlier, 01:59:25.460 --> 01:59:26.370 we've heard other people 01:59:26.370 --> 01:59:30.630 that are buying power five, seven, 10 years out. 01:59:30.630 --> 01:59:34.300 So if they're doing it anyway, what's the change? 01:59:34.300 --> 01:59:36.390 I mean, how does life change for that individual in LSE? 01:59:36.390 --> 01:59:39.763 Well, you're you gotta do it, or you will penalized. 01:59:41.360 --> 01:59:43.040 I mean, they're doing it anyway. 01:59:43.040 --> 01:59:44.440 I would just say the other difference 01:59:44.440 --> 01:59:46.510 is a lot of folks today are financially hedged, 01:59:46.510 --> 01:59:48.190 but they may not be physically hedged, 01:59:48.190 --> 01:59:50.460 and what the LSE obligation 01:59:50.460 --> 01:59:53.450 puts a physical hedge requirement on you, 01:59:53.450 --> 01:59:55.030 that does not exist today. 01:59:55.030 --> 01:59:58.660 And so if you're going out with, you might have exist, 01:59:58.660 --> 02:00:00.810 so that's something that we brought up in our comments 02:00:00.810 --> 02:00:03.150 is that you have existing contracts today, 02:00:03.150 --> 02:00:04.950 Lubbock talked about first, 02:00:04.950 --> 02:00:06.940 if that's not tied to physical units 02:00:06.940 --> 02:00:11.410 that can determine what they're accredited capacity are, 02:00:11.410 --> 02:00:13.760 then those contracts would not count 02:00:13.760 --> 02:00:14.880 towards an LSE obligation. 02:00:14.880 --> 02:00:16.437 So there is-- Sure. 02:00:16.437 --> 02:00:17.480 That's also the important part, 02:00:17.480 --> 02:00:19.530 making sure the physical power's there 02:00:19.530 --> 02:00:24.503 and not just hoping that my financial book works out. 02:00:27.060 --> 02:00:27.893 All right. 02:00:28.770 --> 02:00:30.023 Thank you, Carrie. Sure. 02:00:31.033 --> 02:00:33.983 We're at a good spot for a 10 minute break. 02:00:34.960 --> 02:00:38.920 So we'll step away for, 10 minutes are good? 02:00:38.920 --> 02:00:41.273 All right, we'll be back at 2:40. 02:01:01.850 --> 02:01:03.450 All right, this meeting 02:01:03.450 --> 02:01:06.080 of the Public Utility Commission of Texas 02:01:06.080 --> 02:01:07.913 is now reconvening. 02:01:08.850 --> 02:01:10.470 We certainly had a thorough discussion 02:01:10.470 --> 02:01:12.320 about the LSE obligation 02:01:14.690 --> 02:01:18.890 and heard a lot of the benefits and the challenges, 02:01:18.890 --> 02:01:23.890 concerns, and possible ways to mitigate those concerns. 02:01:24.070 --> 02:01:26.860 Obviously, like everything else, 02:01:26.860 --> 02:01:29.960 not at something to make a decision on today. 02:01:29.960 --> 02:01:32.670 The most important thing is that we keep, 02:01:32.670 --> 02:01:36.853 as always said, scrubbing all options. 02:01:40.660 --> 02:01:43.573 And in the sake of time, 02:01:45.910 --> 02:01:50.430 let's move on to any other firming options 02:01:50.430 --> 02:01:55.430 or above and beyond reliability standards. 02:01:56.350 --> 02:02:01.350 Obviously, we've covered my proposal of an LSE obligation, 02:02:02.180 --> 02:02:04.580 would love to hear thoughts on other mechanisms. 02:02:05.920 --> 02:02:10.920 Chairman Lake, so I really had a lot more questions 02:02:14.000 --> 02:02:16.477 for some key folks we gotta hear from at ERCOT 02:02:16.477 --> 02:02:18.370 and I think even the independent reps, 02:02:18.370 --> 02:02:20.780 I would love to be able to ask them some questions 02:02:20.780 --> 02:02:22.780 since we're not gonna have an opportunity 02:02:22.780 --> 02:02:24.680 potentially to ask them any more questions 02:02:24.680 --> 02:02:26.120 throughout our process. 02:02:26.120 --> 02:02:28.600 Okay, just for the sake of time management, 02:02:28.600 --> 02:02:31.973 have you to call them back up or call folks back up, 02:02:32.969 --> 02:02:35.510 are there any other firming concepts 02:02:35.510 --> 02:02:37.973 that we wanna discuss in the time we've got? 02:02:37.973 --> 02:02:41.180 If I may, Mr. Chairman your gavel, LCRA, 02:02:41.180 --> 02:02:43.420 could they talk about their reliability? 02:02:43.420 --> 02:02:45.590 Is that, yes, that one. 02:02:45.590 --> 02:02:47.560 Okay, so you do wanna fit that in-- 02:02:47.560 --> 02:02:48.520 Sure, I like that. 02:02:48.520 --> 02:02:52.150 To get us out of here by 3:34, hopefully. 02:02:52.150 --> 02:02:53.270 Do you have two minutes is for-- 02:02:53.270 --> 02:02:55.570 No, I'm happy to, I'm just trying to think about 02:02:55.570 --> 02:02:57.900 how much we gotta cover in the time we've got. 02:02:57.900 --> 02:03:00.220 So yes, I would love to hear more about it. 02:03:00.220 --> 02:03:01.600 Any other concepts? 02:03:01.600 --> 02:03:03.086 I know there were some TDU concepts. 02:03:03.086 --> 02:03:05.370 I give my time Commissioner Cobos. 02:03:05.370 --> 02:03:06.230 And I'll try to make this quick 02:03:06.230 --> 02:03:07.520 so we can have LCRA come up and talk about that. 02:03:07.520 --> 02:03:10.060 Okay, I'm trying to get-- 02:03:11.310 --> 02:03:13.610 I'm sorry, I keep hitting you in the chin on this 02:03:13.610 --> 02:03:15.560 when I don't have some alternative right here 02:03:15.560 --> 02:03:19.000 to hand to you, so we'll keep at it, 02:03:19.000 --> 02:03:20.050 we'll keep figuring it out. 02:03:20.050 --> 02:03:22.410 Yeah, and I'll say, Chairman Lake, 02:03:22.410 --> 02:03:27.303 I mean, you coming out boldly with a concept. 02:03:29.840 --> 02:03:32.120 I really am interested in going back to the drawing board 02:03:32.120 --> 02:03:34.430 and coming up with some strategic reliability service 02:03:34.430 --> 02:03:36.994 to also look at it as an option 02:03:36.994 --> 02:03:40.130 and I'm gonna do my best to come back with something else 02:03:40.130 --> 02:03:42.270 'cause I do think we need to be looking 02:03:42.270 --> 02:03:44.540 at more than one option 02:03:44.540 --> 02:03:47.260 and not all of them are gonna be perfect, 02:03:47.260 --> 02:03:48.800 all of them have positive and negatives 02:03:48.800 --> 02:03:52.140 and so I think we, 02:03:52.140 --> 02:03:55.230 it is a matter of due diligence that we continue to look 02:03:55.230 --> 02:03:57.978 for at least one to two other options 02:03:57.978 --> 02:04:00.830 near the finish line in December. 02:04:00.830 --> 02:04:02.780 As I've said, open to all ideas, 02:04:02.780 --> 02:04:04.660 there's no apparent silver bullet, 02:04:04.660 --> 02:04:07.360 but a key part of that is actually having other ideas. 02:04:08.595 --> 02:04:10.303 And be little bit more open-minded about it 02:04:10.303 --> 02:04:11.373 because I think that-- 02:04:11.373 --> 02:04:12.900 I am very open-minded about it. 02:04:12.900 --> 02:04:15.770 I'm happy to consider the TDU purchasing, 02:04:15.770 --> 02:04:18.170 the capacity credit so it doesn't touch the retail market. 02:04:18.170 --> 02:04:20.923 That was one of the interesting suggestions that came in. 02:04:22.829 --> 02:04:26.233 I'm happy to consider any and all ideas. 02:04:29.280 --> 02:04:34.280 We've got to move past reading the same comments 02:04:34.610 --> 02:04:36.100 from the same folks over and over again, 02:04:36.100 --> 02:04:41.100 and start making decisions and picking a path forward 02:04:43.007 --> 02:04:45.780 and like you said, to scrubbing, so-- 02:04:45.780 --> 02:04:46.927 Yes, sir. 02:04:46.927 --> 02:04:48.290 And I know you've been very open 02:04:48.290 --> 02:04:49.860 to hearing a lot about different concepts. 02:04:49.860 --> 02:04:52.530 And so, by no means, we're all trying 02:04:52.530 --> 02:04:53.870 to just keep an open mind here. 02:04:53.870 --> 02:04:56.120 I guess what I'm just saying is, 02:04:56.120 --> 02:04:57.690 kind of continuing to look for something 02:04:57.690 --> 02:04:59.060 that accomplishes our goal 02:04:59.060 --> 02:05:00.820 of ensuring reliability for the future 02:05:00.820 --> 02:05:01.920 in our evolving market 02:05:03.100 --> 02:05:06.290 without necessarily calling it affirming requirement. 02:05:06.290 --> 02:05:07.890 'Cause I think when we call it affirming requirement, 02:05:07.890 --> 02:05:11.130 we get really narrowed in on one path 02:05:11.130 --> 02:05:13.270 and that's the LSE obligation, you're absolutely right, 02:05:13.270 --> 02:05:14.610 that is, if you're gonna affirm, 02:05:14.610 --> 02:05:18.150 then that's, well, structures are out there. 02:05:18.150 --> 02:05:20.200 We can do it on the generator side too. 02:05:21.080 --> 02:05:22.880 You can do it with just curtailment. 02:05:24.120 --> 02:05:25.750 I think everything's on the table, 02:05:25.750 --> 02:05:28.500 but I certainly am not gonna go back to the legislature 02:05:29.520 --> 02:05:30.544 in the ADA. 02:05:30.544 --> 02:05:32.390 We thought real hard about it 02:05:32.390 --> 02:05:35.831 and did a couple of studies, they want action. 02:05:35.831 --> 02:05:38.910 So, one thing to consider, 02:05:38.910 --> 02:05:40.803 I know I'm gonna terrify people now. 02:05:43.510 --> 02:05:46.960 Okay, we mentioned this before, gas credits. 02:05:46.960 --> 02:05:49.584 We're very close to that threshold-- 02:05:49.584 --> 02:05:51.850 Like what? The gas credits. 02:05:51.850 --> 02:05:54.070 Remember the statutory-- Th 51%? 02:05:54.070 --> 02:05:54.903 Yes, sir. 02:05:54.903 --> 02:05:55.736 Oh yeah. 02:05:55.736 --> 02:05:56.910 So we're close to it. 02:05:56.910 --> 02:05:58.560 You're above it, depending on the operating hour. 02:05:58.560 --> 02:06:00.120 Depending on how define it. 02:06:00.120 --> 02:06:01.050 Or the operating hour. 02:06:01.050 --> 02:06:01.883 Yeah. 02:06:05.250 --> 02:06:06.690 And we may not be there yet, 02:06:06.690 --> 02:06:09.450 but with the amount of penetration that we're talking about, 02:06:09.450 --> 02:06:10.823 we may cross the threshold. 02:06:12.370 --> 02:06:13.203 It was put in there, 02:06:13.203 --> 02:06:15.563 at least it's since I can read the statute, 02:06:16.460 --> 02:06:19.023 it's clear, it's statue, just like Rec. 02:06:19.860 --> 02:06:21.790 Read the key part so folks with watching the home 02:06:21.790 --> 02:06:22.810 know what you're talking-- Sure, sure. 02:06:22.810 --> 02:06:24.033 Go for natural gas. 02:06:25.490 --> 02:06:30.437 And this is pure a section 39, 9044 A. 02:06:30.437 --> 02:06:32.100 "It is the intent of the legislature 02:06:32.100 --> 02:06:35.330 that 50% of the megawatts of generating capacity 02:06:35.330 --> 02:06:38.137 installed in the state after January 1st, 2000 02:06:38.137 --> 02:06:39.820 and use natural gas. 02:06:39.820 --> 02:06:41.630 To the extent permitted by law, 02:06:41.630 --> 02:06:44.120 the Commission shall establish a program 02:06:44.120 --> 02:06:46.430 to encourage utilities to comply with this section 02:06:46.430 --> 02:06:49.180 by using natural gas produced in this state 02:06:49.180 --> 02:06:50.950 as the preferential fuel. 02:06:50.950 --> 02:06:53.640 This section does not apply to generating capacity 02:06:53.640 --> 02:06:55.920 for renewable energy technologies. 02:06:55.920 --> 02:06:58.640 And it is the way that we define that 02:06:58.640 --> 02:07:00.087 that could be considered." 02:07:01.830 --> 02:07:04.390 What would your suggestion be? 02:07:04.390 --> 02:07:09.030 How would you compute the resource mix of renewable energy 02:07:09.030 --> 02:07:12.030 technologies as a part of a big pie chart? 02:07:12.030 --> 02:07:14.580 Or are we talking about natural gas once it falls? 02:07:14.580 --> 02:07:16.430 Because it's at 46% today 02:07:17.580 --> 02:07:19.640 in terms of the overall resource mix. 02:07:19.640 --> 02:07:21.090 Capacity or energy? 02:07:23.700 --> 02:07:26.000 Well, Jimmy, I think we need to read the statute 02:07:26.000 --> 02:07:29.713 many, many times and they might appear, 02:07:30.810 --> 02:07:32.020 but that's like many things. 02:07:32.020 --> 02:07:33.833 So I'm saying we got options. 02:07:35.460 --> 02:07:37.463 It is a mechanism just like Rec. 02:07:38.518 --> 02:07:41.343 The statute is mirrored after the Rec program, 02:07:44.240 --> 02:07:46.440 something to think about as we-- 02:07:46.440 --> 02:07:48.810 So what would that look like in practice? 02:07:48.810 --> 02:07:50.840 Just like the Rec program. 02:07:50.840 --> 02:07:54.160 Everybody's got to buy gas credits. 02:07:54.160 --> 02:07:58.910 To a proportion that gets us to 51% 02:07:58.910 --> 02:08:01.130 of a dispatchable resource mix, 02:08:01.130 --> 02:08:02.530 depending on the definition. 02:08:05.550 --> 02:08:08.610 And the proceeds of those gas credits 02:08:08.610 --> 02:08:11.398 would go to the purchase of gas supply. 02:08:11.398 --> 02:08:13.315 That's correct, yeah. 02:08:14.690 --> 02:08:16.990 That's something that you wanna put it on the table 02:08:16.990 --> 02:08:20.320 for consideration, let's put it on the table for scrubbing. 02:08:20.320 --> 02:08:22.510 Well, heck yeah, I mean, easy. 02:08:22.510 --> 02:08:23.423 Yeah, we'll do it. 02:08:24.530 --> 02:08:29.530 But I'm just saying that it may be an answer. 02:08:31.300 --> 02:08:33.230 Yeah, that we've got to turn over every stone, right? 02:08:33.230 --> 02:08:34.670 Sorry, I don't sound more optimistic, 02:08:34.670 --> 02:08:37.730 but you know what I mean, we've got a lot on the table. 02:08:37.730 --> 02:08:40.200 Yeah, but we've got a big challenge. 02:08:40.200 --> 02:08:43.920 It's a challenge that a lot of other places 02:08:45.200 --> 02:08:46.900 grids around the world are facing. 02:08:47.970 --> 02:08:50.730 None of them seem to have handled it well, 02:08:50.730 --> 02:08:52.930 a lot of them are watching us, 02:08:52.930 --> 02:08:57.400 so we need to tackle it head on 02:08:57.400 --> 02:09:01.053 and we need to be aggressive about it. 02:09:03.190 --> 02:09:05.060 And as I mentioned earlier, 02:09:05.060 --> 02:09:06.790 the ask for each of your offices 02:09:06.790 --> 02:09:11.060 is to work on laying out your thoughts 02:09:11.060 --> 02:09:12.320 on each of these components. 02:09:12.320 --> 02:09:15.406 And Carrie and I talked about the winter, I guess earlier, 02:09:15.406 --> 02:09:18.583 an ERS, I'd include ECRS, 02:09:20.120 --> 02:09:22.340 what did each of you independently think 02:09:22.340 --> 02:09:23.640 what that would look like, 02:09:25.450 --> 02:09:29.212 I guess, and include that, flush that out. 02:09:29.212 --> 02:09:30.045 What would it look like? 02:09:30.045 --> 02:09:30.878 What would the benefits be? 02:09:30.878 --> 02:09:34.003 What would be the concerns, pros and cons. 02:09:35.320 --> 02:09:36.850 Next. 02:09:36.850 --> 02:09:39.270 And do include the pros. 02:09:39.270 --> 02:09:40.133 Yes. Yeah. 02:09:41.950 --> 02:09:43.070 All right. 02:09:43.070 --> 02:09:46.540 So we wanna hear about the LCRA reliability at ERCOT, 02:09:46.540 --> 02:09:48.883 but before then, Lori's got some questions. 02:09:49.990 --> 02:09:51.140 Does that work? 02:09:51.140 --> 02:09:53.262 Yes, that's fine, if you're good with that. 02:09:53.262 --> 02:09:54.095 Thank you. 02:09:54.095 --> 02:09:57.080 I wanted to ask ERCOT about their implementation 02:09:57.080 --> 02:10:00.640 of the LSE obligation and just some questions 02:10:00.640 --> 02:10:03.540 to see what you may be able to share with us today, 02:10:03.540 --> 02:10:06.910 because a big part obviously, of these proposals 02:10:06.910 --> 02:10:10.340 is trying to figure out what the timeline is 02:10:10.340 --> 02:10:11.800 for implementation. 02:10:11.800 --> 02:10:14.060 I know right now, I think largely, I think-- 02:10:14.060 --> 02:10:15.508 You gotta pick a place on the spectrum 02:10:15.508 --> 02:10:16.390 before you can figure it out. 02:10:16.390 --> 02:10:17.940 Right, we gotta get some definition, 02:10:17.940 --> 02:10:21.700 but I gotta also understand what are we looking 02:10:21.700 --> 02:10:23.130 at ERCOT, if you're able to share 02:10:23.130 --> 02:10:24.780 any glimpse at this point, right? 02:10:26.030 --> 02:10:30.380 So, are we looking at system changes 02:10:30.380 --> 02:10:32.010 that are impacted by the MS upgrade 02:10:32.010 --> 02:10:34.380 or just settlement billing system changes 02:10:34.380 --> 02:10:35.270 and how significant? 02:10:35.270 --> 02:10:37.860 Yeah, I think in the way we've envisioned 02:10:37.860 --> 02:10:39.407 sort of the ideas have been laid out 02:10:39.407 --> 02:10:41.760 in terms of impacting existing systems, 02:10:41.760 --> 02:10:43.690 it would primarily be settlements. 02:10:43.690 --> 02:10:47.440 And so we've talked about some of the other priority, 02:10:47.440 --> 02:10:49.620 things going on that affects settlements, 02:10:49.620 --> 02:10:53.170 but largely, it seems like it would stay away 02:10:53.170 --> 02:10:54.760 from a lot of our other core systems. 02:10:54.760 --> 02:10:57.010 So I think that is certainly a benefit, 02:10:57.010 --> 02:11:00.800 there'd be investment in whatever the new systems might be. 02:11:00.800 --> 02:11:04.080 There maybe be some need for additional personnel, 02:11:04.080 --> 02:11:07.700 but from a conflicting with existing systems, 02:11:07.700 --> 02:11:10.470 I think it really is primarily around 02:11:10.470 --> 02:11:11.710 our settlement systems. 02:11:11.710 --> 02:11:14.700 Okay, and how significant, 02:11:14.700 --> 02:11:16.555 because I've heard different things, 02:11:16.555 --> 02:11:20.500 I've heard tremendous impact on settlement billing process. 02:11:20.500 --> 02:11:22.300 So I just wanna make sure, like what kind of scale, 02:11:22.300 --> 02:11:23.780 because we've got securitization, 02:11:23.780 --> 02:11:25.250 we've got a lot of things on the, 02:11:25.250 --> 02:11:27.680 I wanna make sure I understand what that impact is 02:11:27.680 --> 02:11:30.470 because you have a lot on your table 02:11:30.470 --> 02:11:34.070 and the settlements processes keeps coming up 02:11:34.070 --> 02:11:36.188 over and over with everything we're talking about 02:11:36.188 --> 02:11:37.173 in anything, right? 02:11:38.590 --> 02:11:41.540 I think again, that's probably the devil's in the details 02:11:41.540 --> 02:11:44.290 as you've all been describing on a lot of these things. 02:11:45.640 --> 02:11:47.540 Again, maybe even one of the benefits, 02:11:47.540 --> 02:11:50.100 I do think they would be fairly significant 02:11:50.100 --> 02:11:51.093 settlements to changes. 02:11:51.093 --> 02:11:53.570 That being said again, there'd be new. 02:11:53.570 --> 02:11:55.620 So in processes I envisioned largely. 02:11:55.620 --> 02:11:58.100 So to some degree, we're not again, necessarily 02:11:58.100 --> 02:12:01.650 affecting some of the existing settlement that we have. 02:12:01.650 --> 02:12:03.330 I think there's no doubt that it would be 02:12:03.330 --> 02:12:05.910 a significant project, 02:12:05.910 --> 02:12:07.480 but there is some of the benefits again 02:12:07.480 --> 02:12:10.930 of it being new systems in some cases 02:12:10.930 --> 02:12:13.810 and new processes in something like settlements. 02:12:13.810 --> 02:12:14.960 What about forecasting? 02:12:14.960 --> 02:12:17.450 I know E3 proposal has ERCOT-- 02:12:19.463 --> 02:12:21.610 Sorry, not E3 proposal, I mean, when we've got 02:12:21.610 --> 02:12:23.640 my proposal is very different from the E3 proposal, 02:12:23.640 --> 02:12:24.490 which is very different 02:12:24.490 --> 02:12:26.180 than which is in the middle of a spectrum. 02:12:26.180 --> 02:12:27.420 So there's a range here. 02:12:27.420 --> 02:12:29.840 I don't wanna be beholden to just the E3 proposal. 02:12:29.840 --> 02:12:32.300 Right, so, okay, understood. 02:12:32.300 --> 02:12:34.230 So in your proposal, 02:12:34.230 --> 02:12:36.720 is ERCOT involved in the forecasting? 02:12:36.720 --> 02:12:39.020 Yeah, it would be some to be determined 02:12:39.020 --> 02:12:44.020 but some ERCOT based load forecast by season, 02:12:44.640 --> 02:12:47.830 like I said earlier by season, by month, by week, 02:12:47.830 --> 02:12:49.610 the more granular, the more beneficial, 02:12:49.610 --> 02:12:52.890 but of course, the more granular, the more complex 02:12:52.890 --> 02:12:56.450 and more challenging to implement and operate. 02:12:56.450 --> 02:13:00.600 That's something that would be a decision 02:13:00.600 --> 02:13:05.600 to be made further on through the process. 02:13:06.040 --> 02:13:06.873 But yes, 02:13:06.873 --> 02:13:09.250 it would be some version of load-share ratio of forecast. 02:13:09.250 --> 02:13:10.650 And of course that would be, 02:13:11.630 --> 02:13:15.760 the obligation would be some percent of whatever that is, 02:13:15.760 --> 02:13:18.130 which is why there's such a tremendous discount 02:13:18.130 --> 02:13:20.610 on the four dated three year, two year 02:13:20.610 --> 02:13:24.200 because there's always forecast error. 02:13:24.200 --> 02:13:27.343 Forecast error increases the longer you project out. 02:13:28.440 --> 02:13:33.440 The important part is for LSEs to procure physical power 02:13:35.370 --> 02:13:38.410 to provide a price signal in the future for investors 02:13:38.410 --> 02:13:42.880 so that investors that are considering building 02:13:42.880 --> 02:13:47.570 dispatchable generation in Texas of any variety know 02:13:48.440 --> 02:13:51.680 they have real hard numbers on what kind of megawatt 02:13:53.150 --> 02:13:55.270 or value they can get for each megawatt 02:13:55.270 --> 02:13:56.400 that they'll provide 02:13:56.400 --> 02:13:59.050 by the time they bring that unit online, 02:13:59.050 --> 02:14:01.150 like knowing what a megawatt worth today isn't very good 02:14:01.150 --> 02:14:03.130 if your assets are not gonna be ready for two years, 02:14:03.130 --> 02:14:04.930 you need to afford price visibility. 02:14:05.920 --> 02:14:10.500 So in any LSE that loses 50% of their expected load 02:14:10.500 --> 02:14:12.180 over two, three years, 02:14:12.180 --> 02:14:14.440 ain't gonna be in business very long anyway. 02:14:14.440 --> 02:14:15.273 Okay. 02:14:16.415 --> 02:14:17.650 And thank you for that clarification 02:14:17.650 --> 02:14:21.513 'cause I know already E3s and I know you had a different way 02:14:22.690 --> 02:14:24.113 of approaching it. 02:14:24.113 --> 02:14:27.320 So I was just trying to understand is this something, 02:14:27.320 --> 02:14:29.860 in any proposal whether it's something ERCOT can do, 02:14:29.860 --> 02:14:31.878 and do you have the capability right now 02:14:31.878 --> 02:14:33.430 and do you have to have system changes 02:14:33.430 --> 02:14:35.270 to be able to get information from LSEs 02:14:35.270 --> 02:14:37.093 or anything like that? 02:14:37.093 --> 02:14:38.900 I mean, I think we already have the capabilities 02:14:38.900 --> 02:14:41.859 to the type of forecasting out and the system-wide, 02:14:41.859 --> 02:14:43.380 obviously, there has to be some mechanism 02:14:43.380 --> 02:14:44.920 to come up with some ratio share 02:14:44.920 --> 02:14:46.679 to handle it out, again, 02:14:46.679 --> 02:14:48.177 I don't think What's the ratio 02:14:48.177 --> 02:14:49.400 of existing settlement system. 02:14:49.400 --> 02:14:51.990 I mean, there's ways that we do load ratio share today. 02:14:51.990 --> 02:14:55.010 So I'm sure there could be some methodology that come up. 02:14:55.010 --> 02:14:57.010 So I don't see a change in systems associated 02:14:57.010 --> 02:14:58.700 with that part of the process. 02:14:58.700 --> 02:15:00.830 I think maybe where there, 02:15:00.830 --> 02:15:02.180 something that would be a little bit new, 02:15:02.180 --> 02:15:05.330 although there's some work that we've done in this area 02:15:05.330 --> 02:15:08.460 and Mr. Barn mentioned it is related to accreditation. 02:15:08.460 --> 02:15:10.430 So we obviously have to develop those processes 02:15:10.430 --> 02:15:12.950 and come up with those look alike. 02:15:12.950 --> 02:15:15.720 Okay, well, for the sake of time, 02:15:15.720 --> 02:15:17.210 because I think to some degree, 02:15:17.210 --> 02:15:19.670 we still got to get more details on paper 02:15:19.670 --> 02:15:23.230 before I can really kind of drill down deeper 02:15:23.230 --> 02:15:24.460 into ERCOT's implementation. 02:15:24.460 --> 02:15:25.470 So for the sake of time, 02:15:25.470 --> 02:15:27.870 I think I'll release you Mr. Roger. 02:15:27.870 --> 02:15:30.563 Okay. Anybody got a question? 02:15:31.430 --> 02:15:32.591 Oh, I'm sorry. 02:15:32.591 --> 02:15:34.793 Thank you. Thank you. 02:15:36.670 --> 02:15:39.810 I really would like to ask Cathy Webking some questions. 02:15:39.810 --> 02:15:41.192 Sure. 02:15:41.192 --> 02:15:42.942 I give you my time. 02:15:56.760 --> 02:15:58.240 Good afternoon, Chairman, Commissioners, 02:15:58.240 --> 02:15:59.342 Cathy Webking 02:15:59.342 --> 02:16:02.288 with the law firm of Scott Douglas McConnicko. 02:16:02.288 --> 02:16:05.650 Hi Cathy, so I know you submitted some comments 02:16:05.650 --> 02:16:10.370 and I just wanna make sure that 02:16:10.370 --> 02:16:12.985 'cause we've been very fast through this process 02:16:12.985 --> 02:16:17.985 and the potential impacts that the LSEO proposal 02:16:20.100 --> 02:16:21.170 in one form or fashion 02:16:21.170 --> 02:16:22.940 and really just speaking to actually 02:16:22.940 --> 02:16:24.290 just German Lake's proposal 02:16:25.210 --> 02:16:27.810 since that's the one we're focusing on at this time. 02:16:29.880 --> 02:16:34.030 Is that something that would be palatable 02:16:34.030 --> 02:16:36.320 for your independent reps? 02:16:36.320 --> 02:16:38.343 Do you still have lingering concerns? 02:16:39.470 --> 02:16:40.810 Because that's what we're focused 02:16:40.810 --> 02:16:42.697 on the Chairman's approach at this point. 02:16:42.697 --> 02:16:43.930 And so I just wanna make sure 02:16:43.930 --> 02:16:46.133 I get an apples to apples comparison. 02:16:47.290 --> 02:16:50.290 Speaking from the perspective of independent reps 02:16:50.290 --> 02:16:53.030 that don't own generation today, 02:16:53.030 --> 02:16:54.700 or don't have affiliates that own generation, 02:16:54.700 --> 02:16:55.720 as has been pointed out, 02:16:55.720 --> 02:16:58.250 we're prohibited from owning generation. 02:16:58.250 --> 02:16:59.560 We have very grave concerns 02:16:59.560 --> 02:17:04.510 with a capacity obligation on reps. 02:17:04.510 --> 02:17:07.870 That is not to say that reps don't hedge 02:17:07.870 --> 02:17:11.080 and buy firm power for all of their expected usage, 02:17:11.080 --> 02:17:14.140 which they do today from contracts. 02:17:14.140 --> 02:17:17.550 But this is a separate, my understanding 02:17:17.550 --> 02:17:19.142 of what we've seen in this period-- 02:17:19.142 --> 02:17:21.670 That'd be handled, it would be a separate product 02:17:21.670 --> 02:17:22.970 and there's also no requirement 02:17:22.970 --> 02:17:25.451 for independent reps to hedge their power today. 02:17:25.451 --> 02:17:27.560 Many of them do that as a business choice, correct? 02:17:27.560 --> 02:17:29.090 Correct. 02:17:29.090 --> 02:17:32.070 And to my knowledge, most. Not all of them. 02:17:32.070 --> 02:17:33.750 I am not aware of any 02:17:33.750 --> 02:17:36.870 that are in business today that do not. 02:17:36.870 --> 02:17:39.290 But for sure were a lot less February. 02:17:39.290 --> 02:17:42.600 I don't know that that's been demonstrated Mr. Chairman, 02:17:42.600 --> 02:17:44.230 and I'm happy to look at it. 02:17:44.230 --> 02:17:47.640 There were other non reps who were not hedged. 02:17:47.640 --> 02:17:49.210 I can think of a few, a couple of them. 02:17:49.210 --> 02:17:52.130 Yes, but in terms of retail electric providers, 02:17:52.130 --> 02:17:53.170 that is not my understanding 02:17:53.170 --> 02:17:54.890 of what the concern was in February. 02:17:54.890 --> 02:17:58.980 They had firm power purchase agreements 02:17:58.980 --> 02:18:01.280 that were not able to be satisfied physically, 02:18:02.340 --> 02:18:04.070 but it was not because they didn't have 02:18:04.070 --> 02:18:05.410 a firm contract in place. 02:18:05.410 --> 02:18:07.676 Perhaps a combination of both. 02:18:07.676 --> 02:18:08.759 Absolutely. 02:18:10.530 --> 02:18:15.530 With regard to the intermediate understanding of just, 02:18:17.280 --> 02:18:20.770 of course, it's a just a basic structure 02:18:20.770 --> 02:18:22.750 that's in the summary sheet 02:18:22.750 --> 02:18:24.470 as we would understand at this point, 02:18:24.470 --> 02:18:28.610 but it still looks to the LSE 02:18:28.610 --> 02:18:31.810 to demonstrate a capacity procurement 02:18:33.090 --> 02:18:35.710 specific to a physical resource 02:18:35.710 --> 02:18:38.140 which is not how it's done today. 02:18:38.140 --> 02:18:41.830 Today our firm contracts are, as Mr. McCullough described 02:18:43.740 --> 02:18:47.290 from contracts with LDS liquidated damages 02:18:47.290 --> 02:18:51.100 and they do, a retail electric provider 02:18:51.100 --> 02:18:54.380 will have a QSC that represents them at ERCOT, 02:18:54.380 --> 02:18:58.010 that QSC will procure resources 02:18:58.010 --> 02:19:00.480 on behalf of the retail electric provider 02:19:00.480 --> 02:19:01.313 as they enter into contracts 02:19:01.313 --> 02:19:04.300 and that may be through another QSC 02:19:04.300 --> 02:19:06.030 who may be through another QSC. 02:19:06.030 --> 02:19:08.930 Ultimately there is a physical obligation in there, 02:19:08.930 --> 02:19:13.510 but the individual reps qualified scheduling entity 02:19:13.510 --> 02:19:16.140 does not necessarily have to demonstrate 02:19:16.140 --> 02:19:19.600 which unit and which megawatts 02:19:19.600 --> 02:19:21.933 associated with that unit are being procured. 02:19:23.670 --> 02:19:25.350 And so it is a new product. 02:19:25.350 --> 02:19:27.020 Could you speak to the lighter touch, 02:19:27.020 --> 02:19:27.853 the proof of purchase 02:19:27.853 --> 02:19:30.730 into the spectrum and what that impact might have. 02:19:30.730 --> 02:19:32.790 If the lighter touches just demonstration 02:19:32.790 --> 02:19:37.023 of energy hedge. Physical energy, I guess. 02:19:38.089 --> 02:19:40.180 When you start putting the physical in there, 02:19:40.180 --> 02:19:43.180 and then you start saying it has to be individual attributes 02:19:43.180 --> 02:19:45.300 of the individual physical unit. 02:19:45.300 --> 02:19:46.710 So you're not attributes of a unit, 02:19:46.710 --> 02:19:48.210 just a classification of unit. 02:19:49.470 --> 02:19:51.780 So it doesn't have to be a gas facility 02:19:51.780 --> 02:19:52.920 for this accreditation. 02:19:52.920 --> 02:19:54.410 It doesn't have to be the gas facility. 02:19:54.410 --> 02:19:57.890 It's gotta be a gas gets so many credits. 02:19:57.890 --> 02:19:59.927 Solar gets so many credits, 02:19:59.927 --> 02:20:00.910 nuclear get so many credits, 02:20:00.910 --> 02:20:02.923 it's by class, not by individual unit. 02:20:04.400 --> 02:20:06.410 But as I understand the proposal, 02:20:06.410 --> 02:20:08.846 it would be that the LSE would still have to say, 02:20:08.846 --> 02:20:12.880 I am saying that these physical generation resources 02:20:12.880 --> 02:20:16.266 are the ones from which I am procuring power. 02:20:16.266 --> 02:20:17.925 That certainly could be a version, yes. 02:20:17.925 --> 02:20:18.820 Okay. 02:20:18.820 --> 02:20:21.650 In that version, that is still a tied to a physical unit 02:20:21.650 --> 02:20:25.760 and physical megawatts, which are capacity of that unit. 02:20:25.760 --> 02:20:28.650 And that is a much different scenario 02:20:28.650 --> 02:20:29.850 than what we have today. 02:20:32.570 --> 02:20:35.223 Would the exemption for the first two years help? 02:20:38.257 --> 02:20:39.670 I went with Mr. Barnes on that, 02:20:39.670 --> 02:20:40.730 trying to evaluate that 02:20:40.730 --> 02:20:44.510 from a competitive position is very difficult. 02:20:44.510 --> 02:20:48.370 And again, if you have this forward procurement, 02:20:48.370 --> 02:20:52.290 there's still a much different issue there 02:20:53.500 --> 02:20:58.470 because you're in essence being asked 02:20:58.470 --> 02:21:01.840 to demonstrate forward capacity purchases 02:21:01.840 --> 02:21:04.570 which are not able to be billed to the customer that day. 02:21:04.570 --> 02:21:05.760 You may not know 02:21:05.760 --> 02:21:08.360 that you're gonna have that customer in three years. 02:21:09.761 --> 02:21:12.400 There's no revenue stream associated 02:21:12.400 --> 02:21:14.720 with that forward capacity purchase. 02:21:14.720 --> 02:21:16.460 Under our energy market today, 02:21:16.460 --> 02:21:21.460 there's a very close correlation between the revenue stream 02:21:21.750 --> 02:21:24.753 and the customer contract and the physical, 02:21:25.610 --> 02:21:28.433 firm power procurement for that customer. 02:21:29.290 --> 02:21:33.870 Okay, what about the forecasting process 02:21:33.870 --> 02:21:35.313 that the Chairman laid out? 02:21:36.200 --> 02:21:41.147 Is that something that you believe the LSEs that, I mean, 02:21:42.790 --> 02:21:44.740 do you have any thoughts on that again? 02:21:45.830 --> 02:21:47.520 And I have Steve Madden here 02:21:47.520 --> 02:21:51.530 who's also an expert on the kind of forecasting and supply, 02:21:51.530 --> 02:21:53.730 and we can certainly get into those details, 02:21:58.550 --> 02:22:03.490 forecasting by LSE, for particular customers. 02:22:03.490 --> 02:22:05.800 That's the exciting thing about our market 02:22:05.800 --> 02:22:10.010 is that customers get to determine their options by shopping 02:22:10.010 --> 02:22:12.310 and moving and moving freely. 02:22:12.310 --> 02:22:15.130 And so forecasting that what my customer base 02:22:15.130 --> 02:22:19.040 might look like years ahead is a very... 02:22:19.040 --> 02:22:21.630 So do the retailers provide their investors 02:22:21.630 --> 02:22:24.300 with forecast of customers and forecast of revenue, 02:22:24.300 --> 02:22:25.600 or just say. 02:22:25.600 --> 02:22:27.430 Those would be proformas, right? 02:22:27.430 --> 02:22:29.370 So you could do that but-- 02:22:29.370 --> 02:22:32.190 You just make them up or where do you get those numbers? 02:22:32.190 --> 02:22:34.526 I mean, yes, I mean, quite honestly, 02:22:34.526 --> 02:22:36.270 I mean, that's what you're doing, right? 02:22:36.270 --> 02:22:38.240 I mean, it is honest, it is just made up, 02:22:38.240 --> 02:22:39.870 I mean, business models change. 02:22:39.870 --> 02:22:42.417 So is it based on any analysis 02:22:42.417 --> 02:22:45.240 and I hope some of your investors are watching. 02:22:45.240 --> 02:22:46.073 So you have a strategy 02:22:46.073 --> 02:22:48.042 that you've set as an entity corporation, 02:22:48.042 --> 02:22:49.020 and then you look out 02:22:49.020 --> 02:22:50.820 and you look at the market size and potential, 02:22:50.820 --> 02:22:52.267 and you decide what percentage of that market 02:22:52.267 --> 02:22:53.690 you think can capture 02:22:53.690 --> 02:22:55.570 and you build that into your proforma, 02:22:55.570 --> 02:22:57.530 but it has nothing to do with reality, right? 02:22:57.530 --> 02:23:01.503 So now reality comes in and I change my business. 02:23:02.360 --> 02:23:04.457 I'd love to invest with you. 02:23:04.457 --> 02:23:06.207 You would've made a lot of money. 02:23:07.060 --> 02:23:08.180 You're good at guessing. 02:23:08.180 --> 02:23:10.003 I've sold two reps, yeah, I know. 02:23:11.120 --> 02:23:12.440 Are you one of the coaster guys? 02:23:12.440 --> 02:23:14.850 I don't care what I'm selling, 02:23:14.850 --> 02:23:16.140 I make it up. I heard that. 02:23:16.140 --> 02:23:18.060 We really do care about our customers. 02:23:18.060 --> 02:23:19.470 I mean, February-- You just said 02:23:19.470 --> 02:23:22.590 you make it up. Well, yeah, we make it. 02:23:22.590 --> 02:23:24.483 Chairman, let me please, 02:23:25.382 --> 02:23:28.150 the proforma was it a forward projection 02:23:28.150 --> 02:23:30.740 for a business plan is a much different thing 02:23:30.740 --> 02:23:33.770 than a cash obligation today, 02:23:33.770 --> 02:23:35.850 three years forward for a customer you don't want. 02:23:35.850 --> 02:23:38.820 How do you pay for the power you purchased 02:23:38.820 --> 02:23:40.780 two or three years, five years, seven years-- 02:23:40.780 --> 02:23:44.670 As you sign contracts now this is where you hit reality. 02:23:44.670 --> 02:23:46.520 So now like today, I'm sitting here, 02:23:46.520 --> 02:23:49.620 I have 10,000 customers and in three years, 02:23:49.620 --> 02:23:51.940 I'm hoping I have half a million, right? 02:23:51.940 --> 02:23:53.287 And that's what I'm gonna tell my investors 02:23:53.287 --> 02:23:55.630 that's what I'm gonna work on towards. 02:23:55.630 --> 02:23:57.700 But if I went out and bought capacity 02:23:57.700 --> 02:23:59.870 for that half a million at today's prices, 02:23:59.870 --> 02:24:03.684 let's say I bought that at, I spent $10 million on that. 02:24:03.684 --> 02:24:05.560 And then all of a sudden it's worth $2 million. 02:24:05.560 --> 02:24:07.083 I'm out of business 02:24:07.083 --> 02:24:08.966 and if I don't get those 500,000 customers, 02:24:08.966 --> 02:24:10.520 what if I only get a hundred thousand? 02:24:10.520 --> 02:24:13.140 So just again, for the 300th time, 02:24:13.140 --> 02:24:14.950 nobody's asking you to buy a hundred percent 02:24:14.950 --> 02:24:17.520 of anybody's load projection three years out. 02:24:17.520 --> 02:24:19.383 It's a percentage of. 02:24:20.608 --> 02:24:22.790 Right, but what would I base that off of. 02:24:22.790 --> 02:24:25.390 So I'm sitting here today, like, back to that example, 02:24:25.390 --> 02:24:27.710 I have 1000 customers 02:24:27.710 --> 02:24:31.030 and I hope to have 500,000 in three years. 02:24:31.030 --> 02:24:32.670 And I very well could, right? 02:24:32.670 --> 02:24:34.003 I mean-- Sure. 02:24:35.300 --> 02:24:37.650 You can base it on ERCOT load projections, 02:24:37.650 --> 02:24:39.240 load share ratio projections. 02:24:39.240 --> 02:24:41.610 If it's a young company and a high growth mode, 02:24:41.610 --> 02:24:43.383 that's why the exemption is there. 02:24:44.230 --> 02:24:46.490 If it's below a certain load threshold, 02:24:46.490 --> 02:24:48.240 you can certainly accommodate that. 02:24:49.240 --> 02:24:51.820 But I'd tackle it from the other side. 02:24:51.820 --> 02:24:56.820 If we're expecting such explosive load growth, 02:24:57.150 --> 02:25:00.570 where are we gonna get the dispatchable power if nobody's, 02:25:00.570 --> 02:25:01.820 for three years from now. 02:25:02.950 --> 02:25:04.780 People are buying that for three years from now, 02:25:04.780 --> 02:25:06.950 this company that's coming in 02:25:06.950 --> 02:25:09.910 and is signing up this customer to serve them, 02:25:09.910 --> 02:25:12.060 they buy that power today. 02:25:12.060 --> 02:25:14.110 They enter into a contract for that power 02:25:15.670 --> 02:25:17.510 before they sign that customer and-- 02:25:17.510 --> 02:25:20.470 All 500,000 customers or a thousand, or? 02:25:20.470 --> 02:25:21.860 As we sign them up. 02:25:21.860 --> 02:25:24.010 So that's what we have to be responsive 02:25:24.010 --> 02:25:25.348 to market prices, right? 02:25:25.348 --> 02:25:27.660 This market is very efficient. 02:25:27.660 --> 02:25:30.310 So as market prices are changing, 02:25:30.310 --> 02:25:32.920 we have to adjust our prices to end use customers. 02:25:32.920 --> 02:25:37.920 Sure, but you don't have the 499,000 customers yet, 02:25:38.040 --> 02:25:40.940 but you and a lot of other folks out there 02:25:40.940 --> 02:25:43.870 are buying power that won't be delivered or obligated 02:25:43.870 --> 02:25:45.247 until three years ago. 02:25:46.458 --> 02:25:49.150 If I would sign up a customer on a three-year agreement, 02:25:49.150 --> 02:25:50.090 I'm gonna go out right now 02:25:50.090 --> 02:25:51.670 and buy that power for that customer 02:25:51.670 --> 02:25:53.430 for the next three years. 02:25:53.430 --> 02:25:56.490 So you're not buying any power and expectation of growth. 02:25:56.490 --> 02:25:57.710 None ever. 02:25:57.710 --> 02:25:59.080 Very little, you can't, 02:25:59.080 --> 02:26:02.410 because if the market falls, you're out of business, 02:26:02.410 --> 02:26:04.430 very quickly, if you do that. 02:26:04.430 --> 02:26:06.990 All kinds of businesses and all kinds of sectors 02:26:06.990 --> 02:26:11.620 buy future supply and their plight prices fluctuate. 02:26:11.620 --> 02:26:12.510 And that's in fact 02:26:12.510 --> 02:26:16.170 the point of our financial hedging system 02:26:16.170 --> 02:26:18.770 in any industry is to mitigate that risk 02:26:18.770 --> 02:26:22.363 yet provide a mechanism for ensuring supply. 02:26:23.590 --> 02:26:26.300 Mr. Chairman, for the entire grid, 02:26:26.300 --> 02:26:30.880 if the concern is we need to tell the generation market 02:26:30.880 --> 02:26:34.373 how much generation is gonna be needed and going forward, 02:26:35.510 --> 02:26:38.780 system-wide that number is understood. 02:26:38.780 --> 02:26:41.760 ERCOT forecast that number system-wide. 02:26:41.760 --> 02:26:44.090 And system-wide that number can be evaluated 02:26:44.090 --> 02:26:47.200 and we can decide, you know what, system-wide, 02:26:47.200 --> 02:26:52.200 we don't have enough resources looking forward that we want. 02:26:52.840 --> 02:26:57.650 So we can look to ERCOT to use a reliability product. 02:26:57.650 --> 02:27:01.800 I think LCRA and others have talked about that 02:27:01.800 --> 02:27:04.730 to meet that forecasted gap. 02:27:04.730 --> 02:27:07.010 The (indistinct) as Jimmy currently says. 02:27:07.010 --> 02:27:10.370 On an entity by entity basis, 02:27:10.370 --> 02:27:13.180 with a competitive market on the retail side of it, 02:27:13.180 --> 02:27:15.370 it becomes a much different prospect, 02:27:15.370 --> 02:27:18.570 but for the entire grid, the generation can get the signal. 02:27:18.570 --> 02:27:23.090 Sure, okay, so it clearly hasn't in the last, it hasn't, 02:27:23.090 --> 02:27:25.150 I mean, that's why we're here. 02:27:25.150 --> 02:27:28.830 I mean, that's why we have SB3 for both of the problems, 02:27:28.830 --> 02:27:31.720 extreme weather event problem, and the blue sky problem. 02:27:31.720 --> 02:27:34.460 And so if, I mean, it brings, 02:27:34.460 --> 02:27:37.470 comes back to the buying another 5,000 02:27:37.470 --> 02:27:39.400 of reliability, ancillary service, 02:27:39.400 --> 02:27:41.440 it's just gonna be filled by definition 02:27:41.440 --> 02:27:43.650 with the units you've got. 02:27:43.650 --> 02:27:47.710 There's this carve out for performance standards for ECRS, 02:27:47.710 --> 02:27:50.250 to address a very specific problem, 02:27:50.250 --> 02:27:52.000 but we know we haven't gotten 02:27:52.000 --> 02:27:54.800 the new dispatchable investment that we need. 02:27:54.800 --> 02:27:57.590 That's abundantly clear. 02:27:57.590 --> 02:28:02.590 And so by expanding our existing ancillary service suite, 02:28:02.960 --> 02:28:03.938 you could double it. 02:28:03.938 --> 02:28:05.729 What difference would that make? 02:28:05.729 --> 02:28:08.020 If I can, 'cause this is part 02:28:08.020 --> 02:28:11.950 of what I was trying to get at earlier, Chairman Lake 02:28:11.950 --> 02:28:15.130 with ERCOT is we know they're buying ECRS. 02:28:15.130 --> 02:28:16.570 We don't know how many megawatts, 02:28:16.570 --> 02:28:21.570 we gotta sort of get a real good view of what we're buying, 02:28:22.490 --> 02:28:23.653 what services. 02:28:25.200 --> 02:28:27.400 I don't know this answer, and I'm not saying 02:28:29.080 --> 02:28:30.570 anybody's wrong or right. 02:28:30.570 --> 02:28:32.493 I don't know this answer of, 02:28:33.770 --> 02:28:36.420 we're trying to set new dispatchable generation, 02:28:36.420 --> 02:28:38.270 we have these revenue streams 02:28:38.270 --> 02:28:40.630 whether they be through existing or new ancillary services 02:28:40.630 --> 02:28:42.113 or some reliability service. 02:28:42.960 --> 02:28:43.980 Do we know for certain, 02:28:43.980 --> 02:28:45.820 it's just gonna be the existing generation 02:28:45.820 --> 02:28:47.010 that moves from pot to pot. 02:28:47.010 --> 02:28:48.885 I mean, is there even enough to cover 02:28:48.885 --> 02:28:52.610 all of the buckets that ERCOT finally gives us 02:28:53.670 --> 02:28:58.560 however many megawatts are gonna buy for ECRS, for non spin. 02:28:58.560 --> 02:29:01.840 I mean-- That's a great, great point 02:29:01.840 --> 02:29:04.810 because they will have to procure those ancillary services, 02:29:04.810 --> 02:29:06.340 those dispatchable resources 02:29:06.340 --> 02:29:09.800 to meet those specific performance profiles that they need. 02:29:09.800 --> 02:29:12.560 And so once that, and that is the priority of the system, 02:29:12.560 --> 02:29:13.650 'cause we've got renewables out here, 02:29:13.650 --> 02:29:16.700 they are gonna provide low cost power. 02:29:16.700 --> 02:29:20.420 So once you procure all those gigawatts of power, 02:29:20.420 --> 02:29:24.640 how much is left for you guys to go and procure three years, 02:29:24.640 --> 02:29:29.640 one year, one month, six months, one month in advance. 02:29:29.650 --> 02:29:32.100 So it's a good question, valid. 02:29:32.100 --> 02:29:33.240 And my point with that 02:29:33.240 --> 02:29:35.140 is from the generation investment side too. 02:29:35.140 --> 02:29:36.857 If we're gonna have streams 02:29:36.857 --> 02:29:39.220 and the existing generation is gonna play, 02:29:39.220 --> 02:29:43.690 and the real-time market, the ancillary service market, 02:29:43.690 --> 02:29:48.180 ECRS, at some point, we're probably, 02:29:48.180 --> 02:29:51.100 I would hope through all the mechanisms of RDC and ECRS 02:29:53.119 --> 02:29:56.700 and whatever other ancillary service/reliability service 02:29:56.700 --> 02:30:00.093 if we were to put one out there per SB3, 02:30:01.920 --> 02:30:03.940 eventually we're gonna attract some generation needs 02:30:03.940 --> 02:30:07.650 to fill those megawatts that ERCOT has said we need. 02:30:07.650 --> 02:30:09.811 So that's what I'm trying to come up with, 02:30:09.811 --> 02:30:13.870 is I need a view as to what we're gonna need. 02:30:13.870 --> 02:30:15.570 Sure, I'll give you a quick example. 02:30:15.570 --> 02:30:17.870 We've got, depending on exactly 02:30:17.870 --> 02:30:19.700 what the winter fuel standard is for winter RNs, 02:30:19.700 --> 02:30:22.690 we've got between 10 and 15,000 megawatts 02:30:22.690 --> 02:30:25.470 of firm winter in place. 02:30:25.470 --> 02:30:28.560 So until our winter ancillary service product 02:30:28.560 --> 02:30:33.160 gets above 15,000 megawatts of procurement, 02:30:33.160 --> 02:30:36.063 there's gonna be no new investment if that's, 02:30:37.179 --> 02:30:38.720 call out the number, don't quote me on it, 02:30:38.720 --> 02:30:43.030 but it's in that range, until we get to that number, 02:30:43.030 --> 02:30:46.340 there's absolutely no incentive for anybody to invest 02:30:46.340 --> 02:30:48.060 in additional winter farming 02:30:48.060 --> 02:30:51.550 because by definition is cheaper for the existing asset 02:30:51.550 --> 02:30:55.223 to clear that market than spending money on a new asset. 02:30:56.130 --> 02:30:57.360 So that's just an example. 02:30:57.360 --> 02:30:59.410 It's a fair question, it's an absolutely valid question, 02:30:59.410 --> 02:31:01.120 and we need to know that, 02:31:01.120 --> 02:31:03.450 but that's all for that example 02:31:03.450 --> 02:31:08.450 as a practical way of showing that 02:31:08.700 --> 02:31:13.700 if we're going to expect these suite of ancillary services 02:31:14.820 --> 02:31:19.820 to solve a 75,000, 80,000 megawatt problem, 02:31:21.180 --> 02:31:24.460 or even a 40,000 or 30,000 megawatt problem, 02:31:24.460 --> 02:31:29.260 we need to be prepared to procure lots and lots 02:31:29.260 --> 02:31:31.470 of ancillary services 02:31:31.470 --> 02:31:35.470 and spend our consumer's money on generating assets 02:31:35.470 --> 02:31:38.230 that will not be used on a day-to-day basis, 02:31:38.230 --> 02:31:41.260 except in scarcity events. 02:31:41.260 --> 02:31:43.500 That's a choice we've got to make. 02:31:43.500 --> 02:31:46.140 The first step of that is the evaluation process 02:31:46.140 --> 02:31:49.390 that you just laid out, which we should pursue. 02:31:49.390 --> 02:31:51.793 And we have to, per SB3 in my opinion anyway. 02:31:53.070 --> 02:31:55.000 And so I guess I'll say to that, 02:31:55.000 --> 02:31:57.703 is that, what I'll say to that is, 02:31:58.792 --> 02:32:00.890 and that's part of the view we need to get 02:32:00.890 --> 02:32:03.140 from ERCOT is how big is this problem, right? 02:32:04.020 --> 02:32:06.970 Commissioner McAdams laid out a really good 02:32:06.970 --> 02:32:09.040 briefing on what's going on globally 02:32:09.040 --> 02:32:10.290 and on the federal level. 02:32:11.400 --> 02:32:14.690 But I hear from ERCOT that if they reach a certain threshold 02:32:14.690 --> 02:32:18.289 of solar that they'll just curtail it. 02:32:18.289 --> 02:32:23.000 So, I mean, are we really needing to have 30, 40,000? 02:32:23.000 --> 02:32:23.833 I mean, that's fair. 02:32:23.833 --> 02:32:24.890 We may need to look at, I mean, 02:32:24.890 --> 02:32:27.460 that's a generator side curtailment mechanism 02:32:27.460 --> 02:32:28.760 or farming mechanism. 02:32:28.760 --> 02:32:32.530 You just reach a certain point of intermittent on the grid 02:32:32.530 --> 02:32:34.350 and you say we're gonna curtail it 02:32:34.350 --> 02:32:37.620 for a number of reliability reasons 02:32:37.620 --> 02:32:39.850 that is a clear signal to the market 02:32:39.850 --> 02:32:43.190 that some portion of our dispatch energy 02:32:43.190 --> 02:32:45.777 will always be dispatchable. 02:32:48.900 --> 02:32:51.180 That's a clear signal that if you put money 02:32:51.180 --> 02:32:52.870 in a dispatchable resource in Texas, 02:32:52.870 --> 02:32:56.120 it will be utilized and it will generate revenue. 02:32:56.120 --> 02:32:57.580 And I'm sure these folks would love 02:32:57.580 --> 02:32:59.423 the implementation timeline on that. 02:33:01.590 --> 02:33:03.656 So that's an option. Okay. 02:33:03.656 --> 02:33:04.489 So I didn't mean to veer off 02:33:04.489 --> 02:33:06.120 into the broader policy discussion, 02:33:06.120 --> 02:33:07.490 but as we were sort of talking about this, 02:33:07.490 --> 02:33:10.120 and it just kind of started up some additional thoughts, 02:33:10.120 --> 02:33:11.550 but I have one question, 02:33:11.550 --> 02:33:15.193 you talked about reps going out of business defaulting. 02:33:16.570 --> 02:33:18.177 When there are polar events. 02:33:19.870 --> 02:33:23.250 If your rep went out of business and there was a polar event 02:33:24.540 --> 02:33:26.497 who acquires typically your rep? 02:33:29.786 --> 02:33:32.080 If it's an actual polar event, 02:33:32.080 --> 02:33:33.310 then the customers get dropped 02:33:33.310 --> 02:33:35.330 to the provider of last resort. 02:33:35.330 --> 02:33:38.860 In this past year, there were significant volunteers 02:33:38.860 --> 02:33:40.640 and I think they all went to voluntary 02:33:40.640 --> 02:33:43.210 retail electric providers for the residential customers. 02:33:43.210 --> 02:33:44.580 There were some commercial customers, 02:33:44.580 --> 02:33:47.870 I think that went to other providers of last resort. 02:33:47.870 --> 02:33:50.810 Some of these companies that we're talking about 02:33:50.810 --> 02:33:53.540 and otherwise they get transitioned, 02:33:53.540 --> 02:33:56.150 more customers, I think then got dropped to polar, 02:33:56.150 --> 02:33:57.720 got transitioned 02:33:57.720 --> 02:34:01.160 to other retail electric providers right before polar drop. 02:34:01.160 --> 02:34:03.610 So when a rep goes out of business, 02:34:03.610 --> 02:34:08.500 either there's a voluntary mass transition 02:34:08.500 --> 02:34:10.140 and there's V reps, right? 02:34:10.140 --> 02:34:12.460 Voluntary reps that sign up. 02:34:12.460 --> 02:34:15.310 I think it's a yearly process that sign up 02:34:15.310 --> 02:34:17.083 to acquire those customers. 02:34:18.240 --> 02:34:20.253 And at least based on this past year, 02:34:21.210 --> 02:34:24.350 who typically are they the bigger reps? 02:34:24.350 --> 02:34:26.020 This past year that's the case, yes. 02:34:26.020 --> 02:34:26.853 Okay. 02:34:26.853 --> 02:34:29.320 And if there's a polar event, 02:34:29.320 --> 02:34:31.203 is it still the same set of reps? 02:34:32.250 --> 02:34:34.630 The V reps are for the polar event 02:34:34.630 --> 02:34:36.180 for the classes of customers, 02:34:36.180 --> 02:34:37.870 which they designate ahead of time 02:34:37.870 --> 02:34:40.330 that they're willing to accept through a polar drop. 02:34:40.330 --> 02:34:42.140 Okay, so it's the same companies 02:34:42.140 --> 02:34:46.270 that are V reps and polar, so they're the same companies? 02:34:46.270 --> 02:34:47.340 There are other companies 02:34:47.340 --> 02:34:49.763 that are polars that are not V reps. 02:34:51.030 --> 02:34:52.670 Yeah, and that's how I understood it, right? 02:34:52.670 --> 02:34:55.430 Every year the Commission goes and puts out 02:34:55.430 --> 02:34:58.920 some kind of requests for V reps and companies sign up. 02:34:58.920 --> 02:35:00.413 And when we had the storm, 02:35:01.500 --> 02:35:03.280 a lot of the customers that were mass transition 02:35:03.280 --> 02:35:05.660 went to V reps 'cause they had to offer 02:35:05.660 --> 02:35:09.300 a market-based plan and that's the better path than a polar, 02:35:09.300 --> 02:35:11.990 which might be a little bit of a higher rate, 02:35:11.990 --> 02:35:14.240 but maybe not because they're interested in keeping 02:35:14.240 --> 02:35:15.550 the customer. Right. 02:35:15.550 --> 02:35:16.810 But I guess what I'm trying to say 02:35:16.810 --> 02:35:17.770 or what I'm trying to get to, 02:35:17.770 --> 02:35:20.160 it sounds like to me that if there are defaults, 02:35:20.160 --> 02:35:24.020 then those customers, at least the residential customers 02:35:24.020 --> 02:35:27.100 all go to the bigger affiliated reps. 02:35:27.100 --> 02:35:28.420 Is that a fair assessment? 02:35:28.420 --> 02:35:30.760 Because I'm trying to assess what Jimmy is saying over here 02:35:30.760 --> 02:35:33.340 about all this consolidation going on. 02:35:33.340 --> 02:35:34.840 And I'm just wondering where to get more, 02:35:34.840 --> 02:35:38.580 if there's more pressure on the independent rep segment. 02:35:38.580 --> 02:35:40.810 And I think you need to look at not just the ones 02:35:40.810 --> 02:35:42.870 that actually went through the polar process, 02:35:42.870 --> 02:35:44.960 but those that transitioned otherwise 02:35:45.870 --> 02:35:47.594 which there are a lot of them. 02:35:47.594 --> 02:35:49.653 Those that purchased? Yes, okay. 02:35:51.540 --> 02:35:52.730 Good, good question. 02:35:52.730 --> 02:35:54.920 Who did you sell to your two reps to? 02:35:54.920 --> 02:35:56.990 Exelon and Vista 02:35:58.020 --> 02:35:59.582 Gene Taylor's affiliate generators. 02:35:59.582 --> 02:36:01.800 Right, right. Okay, so, 02:36:01.800 --> 02:36:05.290 twice that business model seems to have been used to move 02:36:05.290 --> 02:36:08.050 an independent retailer out of the independent category 02:36:08.050 --> 02:36:09.600 into the Gene Taylor category, 02:36:09.600 --> 02:36:13.433 which we despise so much, okay. 02:36:14.820 --> 02:36:16.250 Mr. Chairman, I wanna be clear 02:36:16.250 --> 02:36:18.179 that is not despised so much at all. 02:36:18.179 --> 02:36:20.720 It's just a market power issue 02:36:20.720 --> 02:36:22.500 if you're gonna start changing 02:36:22.500 --> 02:36:25.880 the statutory structure and requiring retail electric-- 02:36:25.880 --> 02:36:29.200 Sure, but it's also a key consideration 02:36:29.200 --> 02:36:32.320 to ask this Commission to ensure 02:36:32.320 --> 02:36:36.940 the competitiveness of independent unaffiliated retailers. 02:36:36.940 --> 02:36:40.420 When the end result of helping 02:36:40.420 --> 02:36:43.070 independent retailers flourish 02:36:43.070 --> 02:36:47.869 is just shuffling them into the affiliated retailers. 02:36:47.869 --> 02:36:49.960 I think in a healthy, competitive market, 02:36:49.960 --> 02:36:52.100 as long as you have low barriers to entry 02:36:52.100 --> 02:36:54.400 and people can continue to work in that market, 02:36:54.400 --> 02:36:57.780 there continues to be a downward pressure on prices 02:36:57.780 --> 02:37:00.950 from competitive options, as well as innovations 02:37:00.950 --> 02:37:03.640 retail electric providers that can come into this market 02:37:03.640 --> 02:37:08.640 and are not obligated to own centralized generation 02:37:10.040 --> 02:37:12.340 that may have a 30 year depreciable life. 02:37:12.340 --> 02:37:14.697 They have a lot more ability to offer some nimble products 02:37:14.697 --> 02:37:17.190 in this market and in any competitive market. 02:37:17.190 --> 02:37:18.690 There's market consolidation-- 02:37:18.690 --> 02:37:21.950 Competition is the hallmark of this market, 02:37:21.950 --> 02:37:22.830 the crown jewel 02:37:22.830 --> 02:37:25.480 and that is for the ultimate benefit of the customers 02:37:28.720 --> 02:37:32.390 enhancing or protecting business models 02:37:32.390 --> 02:37:37.390 just so they can be absorbed or purchased for profit 02:37:39.060 --> 02:37:41.860 to go to the affiliated less competitive 02:37:44.240 --> 02:37:47.950 Gene Taylors is another matter that we should keep in mind. 02:37:47.950 --> 02:37:50.340 This is about preserving customer options, 02:37:50.340 --> 02:37:54.050 not any particular individual company's business model. 02:37:54.050 --> 02:37:56.763 Sure, Gene Taylors provide customers options. 02:37:58.320 --> 02:37:59.530 Any other questions? 02:37:59.530 --> 02:38:04.170 I do not, I did invite someone to come down 02:38:04.170 --> 02:38:08.180 to share their business siting experience in another market. 02:38:08.180 --> 02:38:11.460 And I'd rather have an opportunity to ask 02:38:11.460 --> 02:38:13.730 because I asked them to come down 02:38:13.730 --> 02:38:16.173 based on some conversations that I had, Garrett. 02:38:20.830 --> 02:38:22.630 Thank you for staying all this long. 02:38:23.610 --> 02:38:25.160 So, I think this is important. 02:38:25.160 --> 02:38:26.333 State your name and who you are here with , please. 02:38:26.333 --> 02:38:28.600 Yes, sir, Garrett Kent 02:38:28.600 --> 02:38:30.430 representing commercial metals company 02:38:30.430 --> 02:38:31.980 of steel mill in Seguin, Texas. 02:38:33.240 --> 02:38:38.070 Mr. Kent, we visited a little bit in the last several days 02:38:38.070 --> 02:38:41.120 and I thought you had an interesting experience 02:38:42.970 --> 02:38:46.900 as you have had steel mill operations and in other markets. 02:38:46.900 --> 02:38:48.870 And the reason I think this is important 02:38:48.870 --> 02:38:52.320 is because one of the questions we pose 02:38:52.320 --> 02:38:54.630 to the stakeholders out there was about 02:38:54.630 --> 02:38:58.230 whether or not this proposal, the LSE obligation 02:38:58.230 --> 02:39:00.460 would impact business development. 02:39:00.460 --> 02:39:03.723 There was a lot of different perspectives on that. 02:39:06.320 --> 02:39:08.690 Some say no, some say yes. 02:39:08.690 --> 02:39:13.190 And I just like to hear about someone that is actually 02:39:13.190 --> 02:39:17.740 in the business of siting businesses, industrial businesses, 02:39:17.740 --> 02:39:19.503 that was our specific question. 02:39:21.380 --> 02:39:24.470 What has been your experience with an LSE obligation? 02:39:24.470 --> 02:39:27.187 Yeah, thank you for the opportunity. 02:39:27.187 --> 02:39:29.700 One of the biggest things is I wanna start out with. 02:39:29.700 --> 02:39:33.950 I'm very sure that I'm in Austin, Texas, not California, 02:39:33.950 --> 02:39:34.880 or a different market. 02:39:34.880 --> 02:39:36.930 We're a unique market here in ERCOT. 02:39:36.930 --> 02:39:41.330 But when we hear things like resource adequacy, 02:39:41.330 --> 02:39:43.710 which we experienced in California 02:39:43.710 --> 02:39:47.640 or a capacity obligation, our ears definitely perk up. 02:39:47.640 --> 02:39:51.913 And we recently scuttled a mill in California. 02:39:52.750 --> 02:39:56.520 Part of that is because of some of the costs 02:39:56.520 --> 02:40:01.390 we incurred in that market, having the higher costs, 02:40:01.390 --> 02:40:02.910 also reliability issues 02:40:02.910 --> 02:40:04.783 that we've experienced in California. 02:40:06.240 --> 02:40:10.807 We monthly work and we're in that market, 02:40:12.310 --> 02:40:16.010 but the last month we melted steel, 20% of our costs 02:40:16.010 --> 02:40:18.620 for electricity was in resource adequacy. 02:40:18.620 --> 02:40:21.090 That's something that was hard, 02:40:21.090 --> 02:40:23.280 but really it's also just the bureaucracy 02:40:23.280 --> 02:40:27.070 of working through that and as a consumer, 02:40:27.070 --> 02:40:31.490 I have concerns that the best interest for all Texas 02:40:33.080 --> 02:40:35.523 consumers is a program, 02:40:36.450 --> 02:40:39.570 maybe isn't a program that could affect choice 02:40:39.570 --> 02:40:44.060 and possibly in our experience 02:40:44.060 --> 02:40:46.200 does not have a history of helping investing 02:40:46.200 --> 02:40:48.383 in dispatchable generation. 02:40:50.160 --> 02:40:51.770 Is that the sole factor 02:40:51.770 --> 02:40:54.590 in the management of the California system 02:40:54.590 --> 02:40:55.500 that impacts investors? No. 02:40:55.500 --> 02:40:57.300 There are many, many parts to it, 02:40:57.300 --> 02:41:00.580 but it is definitely one of the biggest. 02:41:00.580 --> 02:41:04.560 Would state intervention and financing power plants 02:41:04.560 --> 02:41:05.510 play a role in that 02:41:06.760 --> 02:41:10.140 as occurred over the last several years? 02:41:10.140 --> 02:41:14.640 Would that dampen investor enthusiasm in California 02:41:14.640 --> 02:41:16.710 by the state procuring natural gas plants? 02:41:16.710 --> 02:41:18.040 Yeah. 02:41:18.040 --> 02:41:20.790 Well, they read it, they shouldn't have to, if they had-- 02:41:20.790 --> 02:41:22.270 Reliability. They did. 02:41:22.270 --> 02:41:23.103 I'm saying they did. 02:41:23.103 --> 02:41:23.936 Right they did 02:41:23.936 --> 02:41:26.430 because the construct they had in place wasn't working, 02:41:26.430 --> 02:41:28.860 if it wasn't, they wouldn't be trying to meet a shortfall 02:41:28.860 --> 02:41:32.717 through ordering generation-- 02:41:33.570 --> 02:41:34.870 Could you tell us in your experience 02:41:34.870 --> 02:41:36.410 how long that LSE obligation 02:41:36.410 --> 02:41:38.690 had been in place in California? 02:41:38.690 --> 02:41:40.140 Well, it's a very good question. 02:41:40.140 --> 02:41:43.770 So almost three years to today, 02:41:43.770 --> 02:41:46.940 we acquired that steel mill from another company. 02:41:46.940 --> 02:41:49.680 We took that over and over two years, 02:41:49.680 --> 02:41:53.730 we put a lot of manpower, 02:41:53.730 --> 02:41:56.250 focused a lot of interests, worked with the right groups, 02:41:56.250 --> 02:41:57.990 everything like that to try to make it work. 02:41:57.990 --> 02:42:00.810 We had important jobs and important peoples there, 02:42:00.810 --> 02:42:03.303 and we could not make it happen. 02:42:06.900 --> 02:42:08.500 You operate in the ERCOT market? 02:42:08.500 --> 02:42:13.003 What are your top two, top three main, I guess, 02:42:13.890 --> 02:42:17.140 important aspects of our market as an industrial consumer? 02:42:17.140 --> 02:42:19.850 Reliability is definitely very important. 02:42:19.850 --> 02:42:24.040 Also, yes, cost is going to be important 02:42:24.040 --> 02:42:28.200 and making sure that we are using the tools 02:42:29.060 --> 02:42:29.893 that are available to us, 02:42:29.893 --> 02:42:32.569 whether it's ancillary service or anything else 02:42:32.569 --> 02:42:34.943 as smart as possible. 02:42:36.500 --> 02:42:37.707 I don't have any more questions. 02:42:37.707 --> 02:42:39.580 All right, and a point of clarification 02:42:39.580 --> 02:42:41.173 on those gas plants that were procured, 02:42:41.173 --> 02:42:43.480 there's a big part of that is locational 02:42:43.480 --> 02:42:46.730 due to transmission being shut down to prevent wildfires. 02:42:46.730 --> 02:42:50.570 So it's not a resource adequacy challenge necessarily. 02:42:50.570 --> 02:42:52.110 It's a wildfire prevention 02:42:53.060 --> 02:42:55.070 and transmission challenge as well. 02:42:55.070 --> 02:42:58.780 And they've got a lot going on over there that I will say, 02:42:58.780 --> 02:43:00.470 but it is extraordinary action 02:43:00.470 --> 02:43:02.550 when the Governor sends a proclamation 02:43:03.490 --> 02:43:07.780 asking agencies to look at getting more gas 02:43:07.780 --> 02:43:10.320 and I don't know if a wildfire would necessarily on its own 02:43:10.320 --> 02:43:12.280 dictate the need for more power plants. 02:43:12.280 --> 02:43:15.451 So, I mean that they've got a lot going on over there. 02:43:15.451 --> 02:43:16.482 I know it's hard to understand. 02:43:16.482 --> 02:43:17.388 Yeah. Thank you. 02:43:17.388 --> 02:43:22.388 Thank you for the time. You bet, any other guests? 02:43:22.410 --> 02:43:25.650 Well, I do, but it's just that 02:43:25.650 --> 02:43:27.580 I got a lot of comments out there 02:43:27.580 --> 02:43:29.820 that it was interesting some of the dynamics 02:43:29.820 --> 02:43:31.620 because there were statements made 02:43:31.620 --> 02:43:36.200 that the LSE obligation would have an impact on LSEs. 02:43:36.200 --> 02:43:38.722 And as you heard, and through comment 02:43:38.722 --> 02:43:42.510 and through, I guess, feedback here today, 02:43:42.510 --> 02:43:45.630 those LSEs have different answers. 02:43:45.630 --> 02:43:47.490 And I could sit here all day and go through that. 02:43:47.490 --> 02:43:49.740 But I think I'd just rather yield my time 02:43:49.740 --> 02:43:51.710 so that you can have LCRA. 02:43:51.710 --> 02:43:54.840 Sure, and you're, of course, welcome 02:43:54.840 --> 02:43:59.660 to ask people these questions with your staff. 02:43:59.660 --> 02:44:01.392 Absolutely, I just think it's important 02:44:01.392 --> 02:44:04.640 as we go through this market design process 02:44:04.640 --> 02:44:06.863 to have this public conversation, 02:44:06.863 --> 02:44:11.320 because we asked for stakeholder comments 02:44:11.320 --> 02:44:14.200 and we have a lot on our plate. 02:44:14.200 --> 02:44:17.260 And so we limited, we're trying to be as robust as we can 02:44:17.260 --> 02:44:18.830 and do this all transparently, 02:44:18.830 --> 02:44:21.300 and we asked for comments on a lot of questions 02:44:21.300 --> 02:44:25.350 that were limited to sort of specific page limit 02:44:25.350 --> 02:44:27.210 and a short turnaround time. 02:44:27.210 --> 02:44:29.880 And these are colossal policy issues 02:44:29.880 --> 02:44:31.440 and impacts to the market. 02:44:31.440 --> 02:44:33.740 And I just wanna make sure that, 02:44:33.740 --> 02:44:35.430 with everybody out there 02:44:35.430 --> 02:44:38.540 that doesn't have the time to read our comments, 02:44:38.540 --> 02:44:40.980 that is not down in the weeds like we are, 02:44:40.980 --> 02:44:43.400 that they have an opportunity to hear 02:44:43.400 --> 02:44:46.860 all sides of the story, but I'm happy to continue to-- 02:44:46.860 --> 02:44:49.440 Sure, and you're welcome to continue those questions 02:44:49.440 --> 02:44:52.550 and aggregate the responses that you and your staff get 02:44:52.550 --> 02:44:54.190 and present those 02:44:56.760 --> 02:44:59.670 when you put pen to paper for our next next meeting. 02:44:59.670 --> 02:45:00.640 Sure. 02:45:00.640 --> 02:45:02.917 All right, we've got, we wanna do-- 02:45:02.917 --> 02:45:04.670 Really quick. Sure. 02:45:04.670 --> 02:45:06.078 Randall, you're up. 02:45:06.078 --> 02:45:08.411 (all laugh) 02:45:12.890 --> 02:45:14.014 Easiest question in the world, 02:45:14.014 --> 02:45:15.040 tell us about your proposal. 02:45:15.040 --> 02:45:16.290 Sure, no problem. 02:45:16.290 --> 02:45:19.340 Randall Stephenson, Chief Commercial Officer LCRA. 02:45:20.380 --> 02:45:22.010 This proposal is something that's been worked on 02:45:22.010 --> 02:45:23.520 even before the winter storm. 02:45:23.520 --> 02:45:27.490 So I wanna make that very loud and clear. 02:45:27.490 --> 02:45:30.020 We have been as market participants talking about ways 02:45:30.020 --> 02:45:31.330 to adjust market prices, 02:45:31.330 --> 02:45:34.707 to reflect the cost affirming load with firm generation. 02:45:34.707 --> 02:45:36.520 And we all know what the issue is, 02:45:36.520 --> 02:45:40.240 but obviously federal incentives have kind of disrupted 02:45:40.240 --> 02:45:43.490 the market dynamics and the volatility in our market. 02:45:43.490 --> 02:45:45.860 And so we had worked on with a group, 02:45:45.860 --> 02:45:48.820 this idea of resource adequacy adder, 02:45:48.820 --> 02:45:51.830 which is really a energy only component, 02:45:51.830 --> 02:45:55.000 which is part of the real-time market pricing. 02:45:55.000 --> 02:45:58.550 So right now, when you look at what is cleared real time 02:45:58.550 --> 02:46:00.220 in your settlement point price, 02:46:00.220 --> 02:46:03.320 it's the LMP plus the ORDC ERCOT 02:46:03.320 --> 02:46:07.480 plus the real-time online deployment adder. 02:46:07.480 --> 02:46:09.920 And this now adds another piece, 02:46:09.920 --> 02:46:12.860 which is the resource adequacy adder. 02:46:12.860 --> 02:46:16.970 So again, we're trying to just address the issue 02:46:16.970 --> 02:46:21.970 about firming the power in a energy only type concept. 02:46:23.450 --> 02:46:26.293 The way you would do that is, 02:46:27.210 --> 02:46:29.610 when a non firm resources produce 02:46:29.610 --> 02:46:32.053 it's affected low carrying capacity, 02:46:33.100 --> 02:46:36.250 we've all known that there is not really a value 02:46:36.250 --> 02:46:37.600 for that backup power. 02:46:37.600 --> 02:46:40.550 So what we're trying to do is create that additional value. 02:46:41.550 --> 02:46:45.540 What you do is you look at each type of resources, 02:46:45.540 --> 02:46:47.200 effective load carrying capacity, 02:46:47.200 --> 02:46:50.320 kind of like what we've talked about in the certificates 02:46:50.320 --> 02:46:53.110 for LSEs or the CDRO process. 02:46:53.110 --> 02:46:56.140 And you figure out their contribution 02:46:56.140 --> 02:46:57.663 to resiliency in real-time. 02:46:58.510 --> 02:47:00.370 And the resource adequacy adder 02:47:00.370 --> 02:47:02.300 is only paid to firm generators. 02:47:02.300 --> 02:47:07.300 And so how it would clear is non firm generator 02:47:07.700 --> 02:47:10.710 would clear at a certain market clearing price. 02:47:10.710 --> 02:47:13.200 And then there would be an additional adder 02:47:13.200 --> 02:47:17.020 in which firm generation would get 02:47:17.020 --> 02:47:21.520 based off if they were there to back up power. 02:47:21.520 --> 02:47:25.300 So ERCOT is counting on certain amount of renewables 02:47:25.300 --> 02:47:27.650 based off their ELCC. 02:47:27.650 --> 02:47:29.830 What we do is we would really clear the market, 02:47:29.830 --> 02:47:33.650 assuming any generation above that was not available 02:47:33.650 --> 02:47:35.500 and see what that additional adder 02:47:35.500 --> 02:47:37.730 would have been to the market. 02:47:37.730 --> 02:47:41.590 And you can do this after the fact, if you wanted to, 02:47:41.590 --> 02:47:44.360 as a settlement piece, 02:47:44.360 --> 02:47:46.560 or you could do it through the skid process. 02:47:47.790 --> 02:47:50.890 There was a lot of different ways to calculate that piece 02:47:50.890 --> 02:47:53.137 and different ideas on how to do that. 02:47:53.137 --> 02:47:55.940 But that is in general what we were trying to do, 02:47:55.940 --> 02:47:58.600 is really value firm generation 02:47:58.600 --> 02:48:02.990 and look at trying to get additional price adder 02:48:02.990 --> 02:48:04.690 for that backup power. 02:48:04.690 --> 02:48:09.290 In your estimation, would implementation of such a plan 02:48:09.290 --> 02:48:11.990 be put on hold until after EMS. 02:48:11.990 --> 02:48:12.823 I think, yes. 02:48:12.823 --> 02:48:13.656 Okay. 02:48:13.656 --> 02:48:14.541 I'll be very honest, 02:48:14.541 --> 02:48:16.123 this is a complicated piece. Yeah, price settlement. 02:48:16.123 --> 02:48:17.649 Yes, and so we definitely 02:48:17.649 --> 02:48:19.230 didn't have to get into the settlement engine. 02:48:19.230 --> 02:48:20.830 If we wanted to do it through skid, 02:48:20.830 --> 02:48:24.530 we'd have to open up EMS, there are different ways 02:48:24.530 --> 02:48:27.600 and that's why we kind of parked it on the side, 02:48:27.600 --> 02:48:30.490 just because I think there's a longer term 02:48:30.490 --> 02:48:31.920 implementation planned for. 02:48:31.920 --> 02:48:34.030 Is there, we've got several other programs 02:48:34.030 --> 02:48:35.270 that have that restraint 02:48:36.470 --> 02:48:41.470 that have, I guess, call it duct tape version 02:48:42.090 --> 02:48:45.903 that has a watered down version, I guess, 02:48:45.903 --> 02:48:46.930 that has been put in place. 02:48:46.930 --> 02:48:51.220 And the development has been put on hold until EMS is ready. 02:48:51.220 --> 02:48:54.250 Would there be some similar kind of temporary version 02:48:54.250 --> 02:48:55.728 that could be implemented more? 02:48:55.728 --> 02:48:58.580 You could duct tape it (laugh) 02:48:58.580 --> 02:49:02.190 and it's still gonna have to impact the settlement systems, 02:49:02.190 --> 02:49:03.710 but you don't have to run it through skid. 02:49:03.710 --> 02:49:06.860 This could be an after effect, a price adjustment 02:49:06.860 --> 02:49:09.510 that would come in and hit your settlement statement. 02:49:11.222 --> 02:49:12.060 And then you would, 02:49:12.060 --> 02:49:14.640 it's kind of post real-time settlement solution. 02:49:14.640 --> 02:49:17.960 What type of generation do you expect to deploy 02:49:17.960 --> 02:49:18.800 in this world? 02:49:18.800 --> 02:49:22.030 Again, is it your combined cycles or is it, 02:49:22.030 --> 02:49:24.110 what kind of steel should we expect? 02:49:24.110 --> 02:49:27.030 I think when you're looking at the firming, 02:49:27.030 --> 02:49:31.190 it's an adder for everybody who is thermal or a nuclear, 02:49:31.190 --> 02:49:34.680 Or just dispatchable. Oh dispatchable, period. 02:49:34.680 --> 02:49:38.540 It's trying to be technology agnostic on everybody 02:49:38.540 --> 02:49:42.150 to provide this, that don't have intermittent base, 02:49:42.150 --> 02:49:44.160 but a battery could also get this as well. 02:49:44.160 --> 02:49:47.470 Yup, the key tech neutral performance base 02:49:47.470 --> 02:49:49.176 is a key element of all of these. 02:49:49.176 --> 02:49:50.843 Correct, correct. 02:49:53.660 --> 02:49:55.480 I think, it's a good question 02:49:55.480 --> 02:49:59.113 to ask what to expect, 02:50:00.080 --> 02:50:04.080 but this, with many of the things we're considering, 02:50:04.080 --> 02:50:05.260 doesn't necessarily have to be either, 02:50:05.260 --> 02:50:08.833 or I'd be very happy with all of the above. 02:50:09.750 --> 02:50:12.640 And I think that would provide all of the above works 02:50:12.640 --> 02:50:13.473 just fine. 02:50:14.350 --> 02:50:17.570 Sure, and we tried to come up with this idea 02:50:17.570 --> 02:50:19.540 based off a lot of work 02:50:19.540 --> 02:50:21.180 with a lot of the folks in this room, 02:50:21.180 --> 02:50:25.250 but also, we had talked earlier about 02:50:25.250 --> 02:50:29.430 two different skid stacks and a $20 floor, 02:50:29.430 --> 02:50:30.990 and this is a little more elegant. 02:50:30.990 --> 02:50:32.670 I think this is more based off 02:50:32.670 --> 02:50:37.670 some of the economic dispatch models that we have 02:50:38.210 --> 02:50:40.160 already in our cot based off the way 02:50:40.160 --> 02:50:44.090 we're running the LRDC adders as well as this new adder. 02:50:44.090 --> 02:50:46.090 Bill's kind of nodding his head. 02:50:46.090 --> 02:50:48.423 I mean, this is competing plans here. 02:50:49.350 --> 02:50:50.233 Is it workable? 02:50:51.840 --> 02:50:54.378 (all laugh) 02:50:54.378 --> 02:50:56.598 If I hadn't got it, I would now have a question. 02:50:56.598 --> 02:50:58.410 (all laugh) 02:50:58.410 --> 02:50:59.534 Try to dispute. 02:50:59.534 --> 02:51:02.010 That's another way to solve the problem, I think. 02:51:02.010 --> 02:51:03.393 Here's is a more elegant-- 02:51:03.393 --> 02:51:05.290 I think there's a more efficient way to do it, 02:51:05.290 --> 02:51:08.590 but again, I think all options is validated. 02:51:08.590 --> 02:51:11.060 All right, I'm gonna come up with more questions for this. 02:51:11.060 --> 02:51:12.060 I don't have any at this time, 02:51:12.060 --> 02:51:15.390 but I think as we have new proposals like this, 02:51:15.390 --> 02:51:17.540 we can have Randall look at him too, right? 02:51:18.400 --> 02:51:20.880 We should have him study all proposals. 02:51:20.880 --> 02:51:22.400 Not all proposals. 02:51:22.400 --> 02:51:27.400 Well, yeah, but I would like to see more robust analysis 02:51:27.620 --> 02:51:32.097 of variety of proposals and this is one that we can-- 02:51:32.097 --> 02:51:35.220 But again, this lives within the real time. 02:51:35.220 --> 02:51:36.053 Correct. Yeah. 02:51:36.053 --> 02:51:37.470 And when is it paid? 02:51:37.470 --> 02:51:38.530 It's after the fact. 02:51:38.530 --> 02:51:41.280 I mean, on what performance basis is it, 02:51:41.280 --> 02:51:45.220 does it rely on scarcity to pay out, of ORDC. 02:51:45.220 --> 02:51:49.240 It relies on what is needed 02:51:49.240 --> 02:51:52.210 for firm generation in that interval. 02:51:52.210 --> 02:51:54.150 So it's really based on what's needed 02:51:54.150 --> 02:51:56.687 for firm generation in that interval. 02:51:56.687 --> 02:51:58.680 In that interval. 02:51:58.680 --> 02:52:02.710 It's fair to say, it's does not rely on scarcity to-- 02:52:02.710 --> 02:52:04.263 No. Pay off. 02:52:04.263 --> 02:52:06.730 Specializes on peak net load, sounds like-- 02:52:06.730 --> 02:52:08.590 Partly yes, I'd agree. 02:52:08.590 --> 02:52:10.480 Well, and that's the next, 02:52:10.480 --> 02:52:13.080 yes that's the next question is 02:52:14.100 --> 02:52:17.100 from out a third-party investor, 02:52:17.100 --> 02:52:19.480 do you all have a captive right base 02:52:19.480 --> 02:52:21.440 and a different kind of investment criteria 02:52:21.440 --> 02:52:24.100 than the IOU's of the world, 02:52:24.100 --> 02:52:29.100 but I guess put your independent financer hat on. 02:52:29.160 --> 02:52:32.780 How do you think this would be viewed 02:52:32.780 --> 02:52:35.680 versus like the increasing I already see 02:52:35.680 --> 02:52:38.140 which we know won't drive new generation? 02:52:38.140 --> 02:52:38.973 How does this-- 02:52:38.973 --> 02:52:41.370 I would put it in the bucket like the ORDC, 02:52:41.370 --> 02:52:44.350 it's not gonna drive new generation? 02:52:44.350 --> 02:52:45.773 I don't think there's, 02:52:46.660 --> 02:52:49.860 it's very hard, I think we just did a backcast of this 02:52:49.860 --> 02:52:52.170 and try to like re-look at the last year 02:52:52.170 --> 02:52:54.530 and how much more money would have add to the market. 02:52:54.530 --> 02:52:55.453 And it was between one, 02:52:55.453 --> 02:52:58.470 one and a half billion dollars of total cost. 02:52:58.470 --> 02:53:02.560 And so I don't know if that adds enough new generation 02:53:02.560 --> 02:53:04.190 to be quite honest, it helps. 02:53:04.190 --> 02:53:06.860 It definitely provides incentives to get there 02:53:06.860 --> 02:53:09.810 and a ability to back up the power. 02:53:09.810 --> 02:53:12.910 But I do think the big benefit of this proposal 02:53:12.910 --> 02:53:16.173 is also helping the existing generation stay online. 02:53:17.200 --> 02:53:18.970 A little point and bounce this off of you, 02:53:18.970 --> 02:53:21.260 as solar increases, 02:53:21.260 --> 02:53:24.480 and again, is that peak net load margin increases 02:53:24.480 --> 02:53:26.000 that's more money under this concept, 02:53:26.000 --> 02:53:26.960 It is, correct. 02:53:26.960 --> 02:53:30.330 Get enhances with the degree of variability. 02:53:30.330 --> 02:53:32.210 Yeah, and I would think this, 02:53:32.210 --> 02:53:35.240 would be utilized more frequently than I already see. 02:53:35.240 --> 02:53:39.700 Yes, I would sell that a thousand-- 02:53:39.700 --> 02:53:42.100 Drive more gender, new generation, 02:53:42.100 --> 02:53:46.210 we know we needed a various performing for more standards, 02:53:46.210 --> 02:53:47.923 prefer to have all of the above. 02:53:48.830 --> 02:53:53.830 So certainly would be interested in scrubbing this more, 02:53:54.870 --> 02:53:57.520 but would also like to scrub it 02:53:58.850 --> 02:54:02.490 while keeping in mind, how can we adjust it 02:54:02.490 --> 02:54:07.490 and tweak it to move more towards that new generation, 02:54:09.340 --> 02:54:13.870 not just keeping the cash for clunkers only. 02:54:13.870 --> 02:54:15.260 Try this on for size, sir, 02:54:15.260 --> 02:54:17.200 just because we're, again, 02:54:17.200 --> 02:54:19.760 to the operational scenario of the duck curve, 02:54:19.760 --> 02:54:21.140 but also the Blue Sky event, 02:54:21.140 --> 02:54:24.073 which are what you wanna solve for, again, 02:54:25.517 --> 02:54:27.380 that's kind of a nighttime phenomenon, right? 02:54:27.380 --> 02:54:29.610 Wind drops off at night, all of a sudden, 02:54:29.610 --> 02:54:31.913 in a 30 gig solar environment, 02:54:33.010 --> 02:54:36.643 this would track those reliable units, I'm sorry, 02:54:37.530 --> 02:54:39.930 somebody is gonna catch this dispatchable units, 02:54:40.910 --> 02:54:42.960 would track their performance at night 02:54:42.960 --> 02:54:47.230 to counter the variability of the wind at that point. 02:54:47.230 --> 02:54:48.700 So it would cover the gap 02:54:48.700 --> 02:54:50.700 and it would pay them to cover that gap. 02:54:51.740 --> 02:54:56.600 Yeah, I mean, I support all of that. 02:54:58.139 --> 02:54:59.500 The fundamental question is, 02:54:59.500 --> 02:55:04.030 does it clear the threshold of meeting investor criteria 02:55:04.030 --> 02:55:08.820 for new generation and that's what we've got to figure out. 02:55:08.820 --> 02:55:11.327 No way. 02:55:11.327 --> 02:55:14.070 No way? Okay. 02:55:14.070 --> 02:55:15.630 I hope-- 02:55:15.630 --> 02:55:16.550 I hope's not a strategy. 02:55:16.550 --> 02:55:18.201 I understand that. 02:55:18.201 --> 02:55:19.034 Okay. 02:55:19.034 --> 02:55:21.701 I feel like we're at a sports book in Vegas. 02:55:21.701 --> 02:55:22.534 (all laughing) 02:55:22.534 --> 02:55:24.060 Okay, we can go on record 02:55:24.060 --> 02:55:25.830 saying this in no way will drive new generations. 02:55:25.830 --> 02:55:27.557 No way, I wouldn't say that. 02:55:27.557 --> 02:55:28.860 No, you just said, "No way." 02:55:28.860 --> 02:55:33.860 No, you said, "Does it create financeable power plants, 02:55:34.350 --> 02:55:35.183 steel on the ground?" 02:55:35.183 --> 02:55:37.171 And I don't think this by itself, 02:55:37.171 --> 02:55:40.100 I think that all of these strategies together, 02:55:40.100 --> 02:55:43.340 even together are challenging our ability 02:55:45.202 --> 02:55:47.700 for banks to finance power plants. 02:55:47.700 --> 02:55:49.810 They don't like the wind. 02:55:49.810 --> 02:55:51.710 They don't like-- 02:55:51.710 --> 02:55:53.690 They like the tax credits, they finance a lot of that. 02:55:53.690 --> 02:55:55.477 Nobody's saying, they don't like fighting the wind 02:55:55.477 --> 02:55:57.427 and they don't like fighting the solar. 02:55:59.248 --> 02:56:00.580 It's too much risk. 02:56:00.580 --> 02:56:02.630 So, and I think somebody, whoever, 02:56:02.630 --> 02:56:04.320 I don't remember who it was who to talk to me, 02:56:04.320 --> 02:56:06.400 that they built a plant in Illinois 02:56:06.400 --> 02:56:09.360 funding the same issues, and it took them 14 banks, 02:56:09.360 --> 02:56:12.740 they syndicate 14 banks to finance a power plant 02:56:12.740 --> 02:56:14.030 because nobody wanted to bear the risk. 02:56:14.030 --> 02:56:15.730 So what are we gonna do? 02:56:17.640 --> 02:56:19.691 I'm not saying the words. 02:56:19.691 --> 02:56:20.740 (all laugh) 02:56:20.740 --> 02:56:22.868 You're gonna have to take that to the legislature. 02:56:22.868 --> 02:56:25.451 (all laughing) 02:56:26.560 --> 02:56:28.810 You got a lot to think about. 02:56:28.810 --> 02:56:30.260 You can continue scrubbing. 02:56:31.930 --> 02:56:33.160 You scrub all you want, 02:56:33.160 --> 02:56:38.093 but we have a very real problem that's right here right now. 02:56:39.210 --> 02:56:44.210 So we either need to saddle up and head to the legislature 02:56:44.860 --> 02:56:47.740 or figure out some other way to finally to screw it up. 02:56:47.740 --> 02:56:49.780 And I do think multiple solutions 02:56:49.780 --> 02:56:52.840 that have been discussed today really do get you there 02:56:54.250 --> 02:56:58.940 and help you justify getting the financing you need 02:56:58.940 --> 02:57:03.120 to build a new power plant, but it's not just, 02:57:03.120 --> 02:57:05.050 like there's no one silver bullet here, right? 02:57:05.050 --> 02:57:08.280 It's gotta be a lot of these multiple solutions that come in 02:57:08.280 --> 02:57:11.050 and help see this value. 02:57:11.050 --> 02:57:15.280 The reason the resource adequacy adder is a nice companion 02:57:15.280 --> 02:57:17.990 to the ancillary service piece too. 02:57:17.990 --> 02:57:19.330 You're getting on your energy side 02:57:19.330 --> 02:57:21.666 as well as your ancillary service side. 02:57:21.666 --> 02:57:24.190 Prevent retirements of existing plans. 02:57:24.190 --> 02:57:26.590 Yes, and hopefully enhance 02:57:26.590 --> 02:57:28.450 when we see more and more solar penetration 02:57:28.450 --> 02:57:31.010 and two, three years that add 02:57:31.010 --> 02:57:32.733 or should continue to increase. 02:57:34.430 --> 02:57:35.730 Thank you. Thank you. 02:57:37.204 --> 02:57:38.204 All right. 02:57:41.980 --> 02:57:42.980 By the way, I'd love for you 02:57:42.980 --> 02:57:46.200 to build a new power plant on your balance sheet 02:57:46.200 --> 02:57:48.203 Mr Chairman. I'm a public servant. 02:57:49.089 --> 02:57:50.739 It's not much of a balance sheet. 02:57:52.560 --> 02:57:54.760 I can get you a little gas station windmill. 02:57:57.820 --> 02:58:01.680 Alright, thank you again to all our participants today 02:58:03.130 --> 02:58:05.603 and for the thoughtful comments that we received. 02:58:08.270 --> 02:58:10.370 Clearly we still have a lot of work to do. 02:58:13.230 --> 02:58:14.740 I'll ask each of your offices, 02:58:14.740 --> 02:58:16.890 as I said earlier, to put pen to paper 02:58:19.540 --> 02:58:21.520 as we go through the next week or two 02:58:21.520 --> 02:58:24.690 ahead of the next work session 02:58:24.690 --> 02:58:29.690 on details of what ECRS should look like. 02:58:29.893 --> 02:58:33.620 I think the technical details are pretty well ironed out, 02:58:33.620 --> 02:58:36.530 the cost allocation is the big question there. 02:58:36.530 --> 02:58:38.430 Winter ancillary services, 02:58:38.430 --> 02:58:41.140 the fuel standard duration, structure 02:58:42.930 --> 02:58:46.350 and quantity of winter ancillary services to be procured 02:58:49.050 --> 02:58:50.643 details on ERS. 02:58:51.541 --> 02:58:52.810 We know what the deployment looks like. 02:58:52.810 --> 02:58:56.683 What should the procurement look like by megawatt, 02:58:57.690 --> 02:59:02.690 by dollar, if by megawatt or by dollar, 02:59:03.890 --> 02:59:05.160 what metrics should we use 02:59:05.160 --> 02:59:09.113 to set that amount for ERS procurement? 02:59:10.520 --> 02:59:13.923 And then finally, 02:59:17.160 --> 02:59:20.683 any thoughts on affirming mechanisms? 02:59:23.550 --> 02:59:28.550 Obviously everyone's got a good sense of the pros and cons 02:59:29.850 --> 02:59:34.170 or initial sense of the pros and cons of the LSE obligation. 02:59:34.170 --> 02:59:35.723 I'll continue to refine that, 02:59:39.030 --> 02:59:41.970 and of course, look, would welcome 02:59:41.970 --> 02:59:45.033 any suggestions on actually how to make it work. 02:59:46.840 --> 02:59:47.823 And of course, 02:59:49.730 --> 02:59:53.253 if any of you want to refine the reliability adder, 02:59:54.550 --> 02:59:55.460 please include that 02:59:55.460 --> 03:00:00.053 in your draft straw man or the straw man. 03:00:00.960 --> 03:00:03.757 And finally, if you want to flush-- 03:00:05.090 --> 03:00:06.620 Gas energy credits final. 03:00:06.620 --> 03:00:09.125 Yup, the gas energy credit, what that would look like. 03:00:09.125 --> 03:00:09.958 Okay. 03:00:13.130 --> 03:00:15.606 If it's credits, if it's curtailment, 03:00:15.606 --> 03:00:16.993 or any version thereof, 03:00:20.810 --> 03:00:24.390 and we'll coordinate with each of your individual offices 03:00:24.390 --> 03:00:27.900 to continue to flush that out. 03:00:27.900 --> 03:00:31.473 As we know, we've got a big challenge. 03:00:33.680 --> 03:00:37.200 As we've seen last spring, this summer, this fall, 03:00:37.200 --> 03:00:39.590 late October, the problem is here, it's is here now. 03:00:39.590 --> 03:00:43.100 It's a big challenge and it's gonna take big solutions. 03:00:43.100 --> 03:00:44.900 Thank you all for participating. 03:00:44.900 --> 03:00:46.510 Chairman Lake, if I may real quick, 03:00:46.510 --> 03:00:49.280 can I assign myself something to add to the blueprint? 03:00:49.280 --> 03:00:50.113 Yeah. 03:00:50.960 --> 03:00:54.150 So aside from affirming requirement 03:00:54.150 --> 03:00:55.340 I'd really like to continue 03:00:55.340 --> 03:00:57.220 to look for a strategic reliability service and-- 03:00:57.220 --> 03:01:00.080 You are welcome to come up with any concrete ideas 03:01:00.080 --> 03:01:01.100 that you can come up with. 03:01:01.100 --> 03:01:02.063 Okay, thank you. 03:01:03.213 --> 03:01:04.863 I look forward to hearing them. 03:01:06.360 --> 03:01:08.120 All right there being no further business, 03:01:08.120 --> 03:01:10.160 this meeting of the Public Utility Commission of Texas 03:01:10.160 --> 03:01:11.463 is here by adjourned. 03:01:12.566 --> 03:01:15.233 (gavel banging)