(banging)
-: Good afternoon.
And welcome back to the second half of this meeting
of the Public Utility Commission of Texas.
This is the part of our programming where
we as a Commission discuss
our market redesign efforts.
Apologies for the late posting of the memo last night,
but it was a full, full day.
Hell, it's been a full six months.
As I highlighted in that,
this Commission has taken
an extraordinary amount of action to date,
to make significant reforms that are enhancing resiliency
for the people who live in ERCOT and for the State of Texas.
I would challenge anyone to find another grid, RTO, ISO,
in the world that has
implemented as much meaningful reform
as quickly as this Commission has
in the last six to eight months.
And we're not finished.
We still have work to do.
But I don't want to let that go unnoticed and unrecognized.
This is...
Well, we started April, May.
-: April 16 for me and a week later for you.
-: And that, yeah, it has been breakneck since then.
Both in legislative implementation
and operational improvements
and in the changes we've made to ERS and
we're quickly gonna be making with ORDC,
and the high cap that we did today
to reduce financial liability to customers.
Those, like I said,
I think it would be hard to find any other
grid in the world that's moved as quickly,
as decisively and as with much impact as we have
in the last six to eight months.
Lori and Jimmy got to join the party a little later,
but that this, there have been
tremendous accomplishments so far.
And I want to thank you all, thank our staff,
thank the team at ERCOT for helping make that happen.
The second thing I want to highlight is something Jimmy,
I know you care a lot about,
and I made sure to mention that in the memo,
is that this discussion is about operation
or market redesign changes.
There are still significant operational improvements
that can be made at ERCOT.
Transmission planning is something of importance to you.
I know Lori's efforts in the Rio Grande Valley
have made big progress.
That's another tremendous accomplishment.
The list is too long to go through.
Highlight the need that we have to improve that.
And there are a variety of other operational improvements.
But I want the public to know that
we're addressing the market design element
in addition to the operational improvements that can be made
and we will continue to do so as we move into the new year.
We have
been through an extraordinary process,
an incredible amount of stakeholder feedback,
a tremendous amount of time
from everybody on this Commission,
considering market redesign efforts.
I've spent hours hearing,
we've all spent countless hours hearing for stakeholders,
reading stakeholder input.
I've listened, we've all listened to
input and thoughts from each other for hours.
Many, many hours.
And at the end of the day,
as the chairman and leader of this Commission,
my job is to gather,
evaluate all that information, all that feedback,
discard the ideas that we don't think are viable,
capture the productive ideas,
synthesize those, aggregate those,
and help drive this Commission to
a productive and meaningful reform.
As you all know more than anybody,
that's not an easy task.
We've had a lot of ideas that were discarded.
Some pretty easily.
Some took a little more deliberation.
But it's important that the public know
that we've been through a lot of ideas
that weren't worthy of this market and this reform.
Today, we need to talk about
the ideas and concept that these four Commissioners
think are viable in addressing
both the extreme weather event
and the blue sky problem that we have.
In addition to, of course,
the infrastructure reform
and weatherization reform we've taken.
And we need to continue moving towards
a point where we can put a flag in the ground and
establish a blueprint that shows a path forward
to build on the substantial progress we've made
and continue to implement meaningful reform in ERCOT.
At the highest level,
we know we need more dispatchable power.
We have, I think, almost 120,000 megawatts
of installed capacity when we only need 75 or 80,000.
The problem is, it's not dispatchable.
A big portion that can vanish relatively quickly.
We know that Commissioner McAdams has made
a very good point multiple times about
the avalanche of the intermittency
that creates that challenge.
We know we need more dispatchable.
How much do we need and how do we get it
at the highest level?
I think we need to comprehensively address the problem.
We need to buy substantially or incentivize substantially
all of the dispatchable power we need.
We don't necessarily have to treat
all of that.
Those can be distinguished
with different performance standards.
But we need to address the whole problem,
not parts of the problem.
Where do we get that dispatchable power?
Do we get it through the load side?
Do we get it through the gen side?
Do we get it through the centrally procured at ERCOT?
There've been many, many proposals across the spectrum.
We can certainly, and I've certainly considered
generation side affirming standards.
We can require affirming performance
or dispatchability metric on all generations,
60, 70% over a weekly or monthly basis,
which require our entire fleet to firm up
and increase their level of reliability.
We could even go so far as to curtail,
as other industries have done in the past in Texas,
to ensure that,
both for stability and for reliability,
we have enough dispatchable
available at all times.
Those are heavy handed, regulatory moves
that do not capture and leverage market forces.
So I don't think those are the best options,
not to mention they're tremendously expensive.
But those are options on the table.
We've heard a lot about centrally procured products.
As Commissioner Glotfelty so eloquently says,
cash for clunkers.
And I think we've all heard about how that's,
we've all expressed concern with those models.
And of course, we've heard about the load side,
some version of a load side
procurement of a requirement for that dispatchable power.
As you saw in
my memos and my straw man, I think the,
some version of a load side reliability mechanism
is the most effective and productive product for ERCOT.
It leverages market forces.
It utilizes resources that,
or pays resources that are being used in general,
rather than holding them back,
and it leaves a lot of the decision-making
about portfolio construction to market participants,
not the regulators.
There are lots of different versions of LSE obligations
and I don't claim to know which one
is exactly the perfect model right now.
I do know that of all of our proposals,
none of them are ready-made and perfectly packaged,
ready to go right now.
And it's not my proposal or your proposal or your proposal.
We need to take the best elements of all of these
and move forward to the next version
and iterate moving forward.
It's not either or.
It's, how do we put all the puzzle pieces,
the right puzzle pieces together?
And in that spirit, I took the approach of looking at
all of the proposals or the most recent proposals.
And as you saw, I mean, we've got the
phase one elements of ORDC,
ERS we've already taken substantial action on,
a firm fuel product, I think, is something that we all agree
needs to be developed.
But the bigger questions come in phase two.
In my most recent straw man or draft of a straw man,
I paired a concept similar to Lori, which you proposed.
I know you didn't, you wanted to update the name.
So did the best I could.
Similar to Brattle's option number two,
with some version of an LSE obligation
based on a set of principles.
None of these principles are,
those lists are not exhaustive by any means.
And I hope today we can expand those principles.
Edit them if elements need to be removed.
But I want to make sure
or get to a point where we can identify
the principles and the mechanisms that
we as a Commission think need to be
the foundation of the mechanism,
the reliability mechanism we move forward with.
As you know, I've got great reservations about
a backstop mechanism.
But there's some elements of it that I'm concerned about.
Largely that it's a,
it's withholding resources from the market.
We're paying people to not participate in the market.
It's not the most economically efficient version.
And we'd have to also sit there
with a lot of generation on the sideline while
customers pay 4,000, five, $4,500 a megawatt
and not utilize those resources until
the high cap is reached.
But that is also a feature of it.
So that backstop doesn't interfere
with normal market dynamics.
And that's a tough trade-off.
But at the end of the day I think
that is a product we need to ensure reliability
as a bridge to an eventual LSE obligation.
I like the features of the backstop,
and the fact that it can be hopefully
implemented relatively quickly.
And so I think that's a key part of us moving forward
is some sort of backstop mechanism.
I appreciate all the work you've put into that.
The second part of that, of course, is the LSE obligation.
We've discussed my original version of that
and I'll be the first to say that is not the right answer.
I think the sizing of it's too big,
in addition to some other concerns.
I think some version of an LSE obligation is the way to go.
Not that version.
And not,
but I think there, like any of these,
there are some features that
could be beneficial in some version of an LSE obligation.
We heard a lot about the deck program last time.
I think the deck program as currently constructed
has all of the problems that we heard last time,
and it's not something as a standalone product
that would solve a problem.
We don't need to solve our problem.
We heard plenty about that last time.
But I think the deck program has
some very important features that can be leveraged
and incorporated in some version of an LSE obligation.
Most importantly, you're paying for what you use.
It's a very important part of that proposal.
It has a forward price signal,
which as you saw in my last,
in my original straw man, I think is very important.
It has performance standards and penalties and testing,
which I think is a key feature.
It's built on a familiar framework
that can be implemented quickly, which is a,
not only a feature, but a highlight.
That's a very important element.
We've heard about the implementation challenges
of a lot of these.
The penalty structure at cost of new entry
is something that I think is a very clever mechanism,
an important one, and should be applied
not only to non-compliance on the load side,
but for non-performance on the generator side.
That's a very clever and effective mechanism
as part of the deck proposal.
And it's self-correcting.
It's designed so that at cost of new entry,
where the noncompliance penalty matches costs of new entry,
that first new unit is very, very expensive.
But over time, as more supply comes in to meet demand,
the price goes down and the sizing is also dynamic.
So I would like to
move forward with some version of an LSE obligation
based on principles like that.
The last I heard was that the deck wasn't,
you were focused on deck as packaged,
which is why I didn't incorporate
all of those principles into last night's edition.
But I'm happy to.
And I would not want to consider an LSE obligation without
studying how those principles can be leveraged
and incorporated into any future LSE obligation.
But as you know, I think that as packaged,
it's not gonna solve our problems
and not gonna be a silver bullet.
And that's what I want to talk about.
What are the principles, what are the mechanisms
that we need to put forward and can allow us to
build a foundation, plant a flag,
to chart a course forward,
so that in addition to all of the reform we've made so far,
we can also show the markets,
we can show our legislature, our state leadership,
and most importantly, the citizens of Texas that
we're continuing to make longterm reform
that will comprehensively solve the problem at hand.
Jimmy, I know you've,
my sense is you
also think there are features and elements
of the deck proposal that can be,
that should be captured in further study
and rolled into an LSE obligation.
I think that's the sense I've gotten from you.
Lori, I know you've also thought about
the elements that can be captured.
And I also want to say another element of your proposal,
the backstop mechanism,
is the net load highlighting the net load variability.
This is a great sizing mechanism.
I think we need to focus on that as well
in any LSE obligation.
So I think, I feel confident you like the idea of a backstop
since you published the memo.
I don't quite have a sense of your thoughts on the backstop.
I've got a pretty good sense of your thoughts on the deck.
I'm not sure about the backstop.
So that's what we're here for.
Let's talk about it.
Let's see what works, what doesn't work,
what people like, what people don't like,
and move towards mechanisms based on certain principles
and we can hopefully keep this train moving
in a positive direction.
With that, I'll open up to thoughts or comments.
-: Yeah, I guess I'll go first.
Just to make some clarifying statements.
I think you noted that
I had originally proposed the strategic reliability service.
The reason I use strategic is because
the service would be used strategically
and I used reliability service
'cause it's the term, the phrase is embodied in SB3.
Over the last week or so I think
there may be some that have turned that into
what they believe it is.
And so really what it is
is a backstop reliability mechanism,
backup reliability service,
backup reserve service, whatever you want to call it.
That is the concept.
What I'm focused on is the principles.
So I don't want to get caught on semantics
of what the name is
because I feel like some people out there have
knowingly misconstrued what I'm trying to do
and turned it into a proposal that it's not.
And so I'm happy to call it whatever it's called.
Backstop-- -: Call it whatever
you want to call it.
That's your-- -: Backstop reliability service
because reliability service is in SB3.
So I just wanted to clarify that.
I think that
I'm tired of going back and forth on semantics.
And so that's what it is.
I've laid out the principles of it.
I've spent a lot of time at least
laying out the framework for it in terms of
some of the major questions in there,
what types of resources, who would pay for it,
how would it be paid for.
What's very important to me from this mechanism
is that it's sized appropriately
to a specific reliability need.
Now, I mentioned peak net load variability.
I don't want to create a mechanism that is out-sized.
I still very much care about consumer costs.
But one thing I do want to mention as well is that
we really would have to evaluate
how quickly it would get implemented,
but also evaluate how much and based on what.
I had initially sort of
put out an example of the SARA report
and some of the numbers in the red that
the mechanism could be used to fill
a specific reliability need.
However, the last thing I would want to do is
withhold resources from the market
and create a reliability risk in the near term.
So I want to make sure that
if we are going to use this as a bridge,
that we study it a little bit further
to make sure we're not creating
a near term reliability risk,
and that maybe there is something else we could use
to complement this mechanism to fill potentially
as a joint bridge.
Because I think really if you pull out the resources,
the goal would be to efficiently raise energy prices
to drive, send the forward signal
that new generation is needed and
so that's how you would drive investment.
And so we have 13,000 megawatts of natural gas
in the interconnection queue.
I would want to be sure that we're gonna have
some announcement soon, some investment soon,
because what I was looking for with this bridge mechanism,
whether it's standalone, market enhancement, or a bridge,
is to create, to ensure we have reliability
while we implement or evaluate,
continue to evaluate more long-term solutions.
So I will stop there.
I know, well, let me add,
I know that there has been some correspondence filed
that my proposal could
be paired with decks.
I know that's not anything we've fully evaluated yet but
I read through some of the filings
and I know that we have some stakeholders here that
would probably be happy to talk to that issue.
But I just want to make sure that
we're kind of turning over every stone
and we're being open-minded of how
it could all work together to get to an eventual
long-term milestone.
-: Thank you.
Thoughts? Comments?
-: I'm happy to state some comments.
I appreciate the time that everybody's put into this.
It's pretty darn important, obviously,
as a result of what happened in February,
but also for the economic development of our state
and for the benefit of the consumers.
I am still very wary
of what a load serving entity obligation would look like
and would do to the market and do to retailers.
But I'm willing to go along with
a deeper dive on the analysis of that.
One thing that I have struggled with is
I haven't seen any analytics behind supporting any of these.
So I don't know how they affect the market.
I don't know how to compare one versus the other,
except for on one filing versus another
or one person's opinion versus the other.
That's not the way I have historically made decisions.
I like to have them grounded in analytics.
That's what happens when you're trying to build
a billion dollar power plant.
It's grounded in analytics.
They look at the market, they look at the revenues.
And that's the way markets function.
They have to have robust analytics behind them.
I really, really like the deck proposal.
I think it's a great innovation
that can help Texas be a leader in this new world,
this new world that we're looking at,
that everybody's looking at,
which is lots of intermittent renewables,
cost pressures going downwards,
which put pressure on dispatchable resources.
And I think that the deck idea is really good.
I've searched long and far to find examples of that
that have worked and have been successful.
And I have found a few, and I think one of them,
I'm no pro on it but--
-: Better hope you're a pro.
-: I'm not.
There's a project that was in Queensland
called the Queensland Gas Certificate Program.
And it was in New Zealand
and it was intended to spur
natural gas fire generation from coal scenes.
Very specific.
And it worked very well.
Went from like two,
2% of the market to 20% of the market.
It was a very similar type program as the deck.
And I think it has a very good likelihood of success here.
And want that to be one of the things
that we study going forward.
I understand when you tell load
they have to subscribe to something, that's an obligation.
So I think the semantics of the
load serving entity obligation
and the deck program being a small part
of a load serving entity obligation are,
they are somewhat the same, but it has to do with amounts,
characteristics of the resource
that you're striving to resolve.
So like I said,
I'm on board with trying to do a deeper dive.
We have to do something deeper on the LSE obligation
for me to totally understand how it works.
We have to do something much deeper on the deck program
to understand how it's gonna affect
demand response and energy efficiency
and who's gonna play in these games
and how it's gonna affect the market.
And I say that.
There are a lot of issues that I have
that are operational issues at ERCOT,
that I think will have a major effect on the market.
They are not major operational changes.
I don't think February was a failure of the ERCOT market.
There were failures within the market.
There were failures within the gas system.
But the entire market, in my opinion, did not fail.
Things that we talked about at the open meeting earlier.
How we are gonna work on energy efficiency programs.
How are we gonna give every bit of the market access
to demand response functions and resources?
So we're going from a market where,
a system where shutting off load
was the worst thing you could ever do,
because it was a utility doing it
and it was a dire circumstance,
to somebody voluntarily saying,
oh yeah, I'll do that for money.
We've got to give them the chance
because there's a cost reduction
and there's a reliability benefit.
So we have to get there.
That's demand response.
Energy efficiency.
Energy efficiency by definition
will lower the amount of megawatts we need forever.
And we don't even know what those megawatts are.
But if we don't have a robust energy efficiency mechanism,
we're gonna oversize and
the market will oversize and overspend.
Transmission, I came in to this Commission.
I love dealing with transmission issues.
Unless we know that all the megawatts
that are being produced can get to the load,
we don't know how much we need.
We need more transmission.
We need to solve generic transmission constraints.
We need more data to be open to the public on that.
We need to solve this transmission planning effort to allow,
to get our underlying understanding of how much we need.
I have just a few more.
As we move towards from a supply sided system where just,
it was vertically integrated utilities
and now it's generators and reps,
gentailers, as we call them, are providing resources.
The lines between what a utility does
and what a consumer does are being blurred.
The transmission and distribution systems are being blurred
as consumers become generators of power
and put that back on the system.
We have to account for that.
And I don't know how these mechanisms account for that.
That's, again, that's part of my issue.
Promoting an individual's right
or these companies rights to
interconnect at the distribution level voltage
with certainty to understand.
We have this at the large generator interconnection process.
We don't have that at the lower voltage
or distribution voltage.
We need that because we need those megawatts.
Two more things.
Let me just say.
Well, three more things.
One of them is,
as I understand it,
ERCOT still gives no capacity value to storage.
That may be because they haven't
had much storage on the ERCOT system.
But it's coming.
And it seems to me like that is a very important component
of understanding how many megawatts we need,
is to understand how many megawatts we have.
If we don't have this,
if 30% of the queue is storage coming in,
we got to have a better understanding
of what that capacity value is.
Utilizing ELCC, effective load carrying capability,
important, get it done.
We got to understand the megawatt picture better.
We can't do any of these proposals, in my opinion,
until we understand this baseline
or the market will not respond
to what's needed in the,
what is needed for reliability,
if they don't have those numbers.
And finally looking forward, the question is,
I mean, we see all these electric vehicles.
They may be this new future of storage.
They may be generators.
They're consumers as well.
Same with Tesla power walls and batteries.
And I think we're kind of
thinking in the old world of
loss of load expectation numbers.
What is our reliability megawatt metric?
And I think that as we go forward
and look at these,
the deck proposal, the LSE obligation,
I think we need to look at them progressively going forward
with all of these as a part of that analysis.
I'm fearful that we will make the wrong decisions.
We will impact, everything we do impacts the market.
Everything that we do addresses price formation.
It helps it and it destroys it.
Every generator, every transmission line, everything.
So I think with that, Commissioner Cobos,
I want to understand more about the economics
of what the strategic reserve is.
I'm wary of pulling megawatts out of the system.
And I understand, mostly from Sam at Brattle,
I understand that
one way to show the market that you need
more dispatchable resources to pull a bunch out.
So it's not being priced in the day to day market.
It's there for standby, and it's the standby,
it's there for reserve.
Seems foreign to me.
It seems like people,
when they want to invest in the market,
they want to be in the market,
not just get paid for standing by.
So with that, I think that kind of,
let me just say one other thing.
As we've discussed about the load serving entity obligation,
I have,
kind of the way I view it
or the way I've characterized it for myself is that
when the legislature created the retail market in Texas,
they wanted retail electric providers to
be new entrants into this market,
we wanted them to provide creative services,
bundling, different pricing, all of this,
and they were not required to bring
generation to the market.
They could go to the market.
We separated and unbundled those for a reason.
The load serving entity obligation is kind of, to me,
like you've got to take a loaf of bread to the grocery store
in order to buy a loaf of bread.
And sometimes it has a hard--
-: Including deck obligations.
It's a version of a load serving entity.
-: Well-- -: A load serving entity.
-: I don't necessarily think that,
but I think as, if we're trying to show that
100% of the load obligation
plus a reserve margin is taken care of,
then that's when you have to show that you have it
in order to be able to buy it from the market.
Again, that's just the way I characterize it.
I want to look through this.
I want to do this underlying base analysis of this
that I don't think we've done yet and
I'm eager to get on with that
and to narrow the thought and to get on with it.
-: Thank you.
-: Yes, sir.
Thanks, Commissioner.
I think it's fair to say the last few days,
and certainly the last few months,
have been challenging for all of us.
Think you captured that well, Mr. Chairman.
As we had started out, I feel now we have ended up
at a similar place asking similar questions about
what the impacts of any reform may have on the market and
what do reforms under consideration
do to the wholesale price of power.
Does it have the result of eliminating
the competitive retail market?
Does it create an unregulated and unaccountable system
of monopolies controlling one of our most
important essential services?
Does it guarantee that we build enough
dispatchable generation to meet demand in a timely way
that actually meets the demand?
Because that's been one of the
symptoms of our system,
that we're always behind the eight ball
and trying to catch up to increasing load growth
'cause we're growing so fast.
And then the pressures of intermittence
on the system at that time.
We have looked to other models
across the country and across the globe for examples.
And anecdotally, again, you can get this through
the Energy Information Administration
or drill down onto those systems themselves.
They have higher costs.
And I think it's relatively easy to say
that one of the driving forces of moving business
and peoples to Texas has been low energy costs.
So that has been a virtue of the ERCOT system
that has been absolutely essential
to the economic growth and success of Texas
over the last two decades.
The only conclusion that I can draw
from this thought exercise,
and oh, by the way, in those systems,
this is what I struggle with,
in those systems, we see declining reserves.
At least I watch SPP every day
and they've had declining reserve margins,
which has been disconcerting.
I mean, they have a lot of these backstop features
that we're discussing.
Declining reserve margins
and in some of the systems cases, less reliability.
Now, that could come from other things.
If you put everything side by side.
But you see it.
So the only conclusion I can draw
from this thought exercise is that we need another way.
I mean, we're producing and consuming
10% of the power of this country,
and we're the preeminent economic power on this planet.
Just in Texas.
So we have always been unique.
We have always held ourselves out to be unique.
So we need a Texas way.
And this has been the hallmark of our state
since the beginning.
And I propose the dispatchable portfolio
standard deck system as a first in the nation,
first of its kind proposal,
harnessed from the aeolian concept
because it's a targeted approach
rather than a broad approach.
But it's targeted consistent with
the track that we're already pursuing
in light of the menu and spectrum
of the ancillary service products
that we're already pursuing.
Because again, those are all different performance values
that we are seeking on an individual basis.
So bundled together,
it is a broad framework for reliability.
As a targeted approach,
given the concerns raised by Brattle and yourself,
which are valid,
about the dan-- -: And others.
-: And others, yeah, and others.
Peter: All of that.
-: About the danger of distorting
the substitute good principle.
I would urge that we should not consider
this policy position in isolation.
Given what we know about Brattle's second option
or Commissioner Cobos' backstop reliability service.
-: Sure, yes.
Reliability service backstop. -: Okay.
As outlined, this could be harnessed to capture
the older, less efficient units,
or at least a portion of them,
also new units, depending on whatever the performance value
that we're seeking there,
so that we mitigate the dangers again
of the substitute good concerns.
Thus ensuring we do not lose our existing fleet,
but allow these units to be retired over time
as new generation and economic conditions
continue to dictate.
So with that, Mr. Chairman,
I was disappointed that the deck proposal
did not make the outline.
I am disappointed because I believe,
man, an hour and a half for an idea, first of its kind,
last workshop.
If we could be allowed to continue this exercise.
And as you can tell,
and as we've said throughout this point,
I have moved toward, we need a load obligation.
Gen versus load.
I believe the statute
has more allowance for load requirements.
And thus it affords us better optionality
in pursuing resource adequacy options.
So I know your intention is to take something off the table.
I do have core principles.
We have all discussed them
and I can articulate them here.
We have a difference of opinion in how
revenues designed to incent generation should be used,
spread across a broad existing generation,
the generation fleet,
or targeted for new or
next generation technology, best available technology.
I do believe that if we're allowed to pursue this,
we can answer fundamental concerns and questions
raised by stakeholders and market participants,
to where Texas might be able to blaze a path
for the world to follow because everyone
is having the same problems.
Everyone has not cracked the code.
No one has cracked the code on this.
Sam's flying all over the world.
So is everybody else flying all over the world,
giving advice on how we solve this
and nobody's done it yet.
For the future.
Because the numbers are so large
in terms of intermittent technologies
penetrating all markets,
no one has to deal with it at scale.
So I would ask,
I beg that a deck portion similar to what you had,
the LSE obligation, the backstop reserve service,
and potentially a deck proposal
could be studied over the next six months
so that we could have, again,
we've got consulting groups coming in here,
economists telling us that this could work.
And I don't want to kill the baby in the crib on this.
And I'll leave it at that, sir.
-: And I'd like to follow up because
I think both Commissioner Glotfelty
and Commissioner McAdams made some good points.
We've done a tremendous amount of work
over the last several months and Chairman,
you've definitely highlighted that.
All of these proposals,
the LSE obligation introduced originally
by NRG in late September,
introduced in your memo in sort of later October.
I mean, even the deck program that we've had
on our plate for a few weeks,
maybe a couple of weeks.
-: Two. -: Two weeks.
We've gotten extensive comments on the LSE obligation
over the last five weeks.
Since your memo.
A lot of commentary there.
I know I myself have expressed deep concern with it
from a variety of perspectives
and I know that there have been comments filed
that attempt to address those concerns as well.
But I feel like, and even with the deck program,
I feel like,
I strongly believe that I need more time
to evaluate these options.
We've had them on the table for weeks.
And what we're doing here has prolific impacts on our state,
our market, our consumers, the public.
And I would just like more time to digest
these proposals and how they can work together,
whether it's my bridge and both proposals or,
I proffered the bridge to give us more time to evaluate.
But I also want to make sure that it's studied too,
because as I said earlier,
I want to make sure, one, ERCOT can get it done
in a time efficient manner.
Secondly, I want to be able to make sure
it's right sized so we're not,
and it's gonna work in a way that does not create
any near term reliability issues,
and that's not impacting pricing in a negative way.
So even with my proposal,
I know I've laid a lot of parameters there that I think
would be palatable for a broad stake of consumers.
It's by no means the last stop.
I would like it to get more comments on it
because we actually haven't gotten formal comment
on the deck proposal.
I know you've gotten maybe phone calls and
commentary. -: Got a lot of comments.
Not formal.
-: On the formal, yes sir.
But on the deck proposal,
I think it's all been sort of just nothing on record.
Nothing on record.
I know there's concerns and let's get them on the record
and do a deeper dive into,
are there aspects of the deck program
or the deck, DPS deck program that can be
modified to make it more palatable?
Are there aspects that can be used in a broader obligation?
We just need to think about this more
of how it could all work together.
I know that last night I read about how,
some comments that were sent over,
how my backstop reliability service can work with decks.
I know, Chairman Lake, we've talked about that too.
And I know you have your concerns.
But I would like to see how we can maybe make it all work.
And together.
And I feel like we need some more time
to get more input
from not only the stakeholders, but from some,
whether it's Brattle, I know Brattle,
Sam expressed some deep concerns with the deck program.
Nobody's had an opportunity to refute those statements,
publicly in the record.
But also to get more information from Sam and Brattle.
My concerns, and it could be broader than
just the broader LSE obligation,
Chairman Lake, that you proposed,
but I want to make sure that whatever we are doing
to significantly modify our market
is actually going to drive new dispatchable generation
and maintain our existing fleet.
We need every megawatt, whether it's existing or new,
and I don't want any unintended consequences
and I don't want to spend the next five years
building something that didn't get us anywhere
that we're not at today.
And I want to make sure we're actually
getting something meaningful for whatever we decide to do.
And I think that's gonna take a little bit more analysis,
some more robust feedback,
and really continuing to roll up our sleeves and
focus more on how all these concepts can work together.
And we're just gonna need
a little bit more time because if I,
right now, I mean, and you know this,
I have concerns about the LSE obligations but--
Peter: Yeah, I know.
You got concerns about everything.
-: Well, I mean-- -: And okay.
Thank you. -: Well, that's the matter
of due diligence.
I mean, that is being diligent.
-: My concern though is
when in one breath you say
we've got to do the backstop as a bridge now
because we need solutions now,
then the next breath you say, we need more time to study.
We need more time to study.
-: Well, I'm not just gonna sit here and say,
ERCOT, go procure 3000 megawatts to fill a hole.
The way I deliberate,
the way I make policy decisions,
is by making sure that I have holistic information
and there's not any unintended consequences.
And that is what I want to do, even with my proposal.
Period.
-: Thank you for that.
Couple of thoughts
in response to all of those comments.
We know our actions impact the market.
That's what we're here for.
If actions weren't needed, none of us would be here.
If things were working smoothly, none of us would be here.
We wouldn't have SB3, wouldn't have SB2.
Lack of action also has consequences.
That is severe.
And so while analysis and due diligence is important,
action is also important.
Endless studies will not help the people of Texas
and it will not solve either one of these problems.
The blue sky problem or
the extreme weather event problem.
The low cost of power is important to Texas.
And it is a feature of our state.
But it is far from the only reason people move to Texas.
And I don't want good ideas to be sacrificed
at the altar of no prices can ever go up.
We've got a great workforce.
We've got low cost of living.
We've got tremendous natural resources.
We have a very
efficient and light touched business,
regulatory environment.
There are a lot of reasons people come to Texas.
More than just ERCOT.
As both of you said in your opening comments,
the deck concept is a load obligation.
It is an LSE obligation.
Is there any disagreement on that?
-: No, sir. -: I agree.
-: And do you have any disagreement on that?
-: No.
-: In a point,
at a point like this,
where we know we don't have enough of a resource,
at the most basic level,
it's a question of supply and demand.
If you don't have enough supply
for the demand that you have,
prices go up until the market finds equilibrium.
Amount of supply matches the demand.
Usually overshoots it, which drives prices back down.
That's the way markets work.
As you said.
That's what's supposed to happen.
Whether it's apples or widgets
or barrels of oil or bushels of cotton.
If you don't have enough of them,
the higher prices are what incentivize
getting more supply.
On the other hand, withdrawing that supply
has the same impact from the other way.
You're just moving supply and demand.
Which way are you going?
Some version of an LSE obligation
increases or requires that demand to be put there.
And the deck obligation is a very narrow demand.
In a broader LSE obligation,
it's a much higher level of demand.
In the NRG original proposal,
it was 120% of total need.
And my proposal was 100% of peak load,
which is, I think, probably too much,
which is why I'm bringing it down.
I want to focus more on the net peak load.
But at the end of the day,
it's a matter of supply and demand and
I don't want to sacrifice reliability
for fear of temporarily raising prices.
Because that'll dig us deeper in this hole
and not solve the problem at all.
And I think we can all agree that in any LSE obligation,
there are market power control problems.
Agreed?
There can be.
There's a potential for it, yeah?
Will: Yeah on, well, I'll let you finish, sir.
-: Including in a deck construct.
There's a possibility for market power problems
if the same people have the supply of power that
they can withhold from people.
It's a smaller percentage under the existing framework,
but it's the same challenge.
Withholding's a possibility,
self-dealing's a possibility.
If the same people that are creating the decks
are the ones that need to buy it.
It's the same principle of a problem.
Yes?
Will: So.
-: I'm not saying it can't be mitigated in any of those,
but it's just, it can be mitigated in any
LSE obligation. -: Framework, yes.
Yeah, just to remember, sir.
So in a new concept, nobody's there yet.
Nobody's got the market power.
So it's starting from scratch.
And again, if you're only building to meet growth,
and we're talking about five gigs or something like that,
that's a small, that is less than Vistra's 20% cap
right now in terms of total manipulative power
in the market.
So this is well within the spectrum of our IMM
to catch and mitigate.
But I agree, all your points. -: Sure, just like NRG's got
twice as much load as they do gen,
so they're gonna have to buy it from somebody else.
So there's just as much,
they're just as vulnerable to market manipulation
as they would be theoretically capable of it.
-: Yes, sir, if they could build a new power plant,
that'd be great and then--
-: I mean, they're below their 20% cap.
-: I know.
They could build a new-- -: So they could build
a new power plant under the deck program,
which is in the same opportunity for self-dealing.
So I want to make sure we're not pretending
one version of an LSE obligation
has market manipulation concerns but another one doesn't.
Different scale, is that--
-: That's fair, sir. -: Fair?
Fair? -: Yeah, oh yeah.
-: Fair?
-: Sure.
-: As I said at the beginning,
there are a lot of elements of the deck proposal
I think are immensely valuable.
And I know we've covered that ad nauseum.
The reason I didn't include those,
I still have them here,
I would have liked to have them here,
is, and this is the question to you.
Are you willing to consider changes to the deck proposal
as it currently exists?
Or is it a take it or leave it,
we can only do this version of the deck?
-: Oh no.
I mean, I've framed it as
I need feedback from market participants
on how this thing can function moving forward.
So open.
I mean, whack away at it.
Where are we gonna-- -: I don't want to
whack away at it.
I want to, because the last I heard from you,
it was take it or leave it as it exists.
And it's good to hear that that's not the case.
-: It was over the nuance of new versus existing, sir.
And I would just argue,
the more existing you get out there,
the less potency and effect you have for your decks.
And again, the timely installation of new generation.
That's the whole reason. -: Sure.
And I'm perfectly, I mean,
there's a sizing concern
that I have with just 5,000 megawatts here,
5,000 megawatts there.
Doesn't solve a 67,000 megawatt problem.
You still got 40 or 50,000 megawatts out there that
can be stripped down and sold for parts
or moved to South America or Africa
where they don't have emissions concerns.
Happens all the time.
And so that's a concern.
We don't have to solve that today.
I know we've had the conversation.
-: Good, 'cause I don't have the answer today.
Trust me, so.
-: But the key point is,
and I think we've talked about,
the decks are probably too small.
E3's proposal's way too big.
My proposal was too big.
So I don't know what the right answer is,
but I think it's somewhere in the middle.
And so that's a question,
another question for you,
is in utilizing the features of a deck program,
is sizing and open to adjustment?
-: Yes, sir.
And I think that drives at a central point.
We develop a target.
What we've got to bring on to this system
to meet load growth
and actually develop a process for that.
And I think that is incumbent. That's one of the virtues,
one of the attributes of this proposal,
is that we do that.
It's in both.
So yeah, and to answer your question sir, I'm open.
-: Good to hear.
Thank you.
At the highest level.
You stated earlier that you believe whatever solution,
the reliability mechanism we eventually settle on
needs to come on the load side.
-: Yes, sir.
-: So it sounds like you're willing to commit
to developing a load side mechanism.
-: Yes, sir. -: Of some form or fashion.
Is that fair? -: That is correct.
-: I'm the same.
-: Yes, I mean,
I just need more time to evaluate what that would look like.
-: I'm not saying which one it is, but.
So just as importantly as we're saying that
is we're taking curtailment or load
or generation fleet firming standard off the table.
If we're all gonna commit
to a load side reliability mechanism,
means we're not gonna focus on the gen side.
-: Correct, sir.
With the caveat, 'cause I don't want hem you in
and managing the grid moving forward.
I mean, if there's so much solar coming on
that reliability becomes an issue, curtailment is always.
-: Sure, thank you. -: But yes.
-: Okay.
So that's, I mean, I think right there, that's a big,
if we're all willing to commit to
a load side reliability mechanism,
that's a substantial step.
Yeah?
-: As long as it's all encompassing.
In terms of all of the resources that are available
to participate in. -: Yep, I mean,
these are the principles that I want to start checking off.
I'm willing to commit, in the meantime,
to the fastest possible version of a backstop.
The closer we can get it to a,
not a wreck, but a black start framework.
Not to address the entire problem, but as a backstop,
I'm willing to do that or commit to developing that.
Ask ERCOT to, all of these are us asking ERCOT to develop
a product or a series or an option,
a menu of options.
I'm willing to do that.
-: Okay, and I'm willing to commit,
I know we will all look at it,
but I'm willing to work with ERCOT personally
and Brattle and all the stakeholders as well to make sure,
I know I laid out some parameters,
but to make sure that I refine it in a way
that provides meaningful reliability while we
get some kind of a load obligation in place.
And that maintains your liability in the near term.
So I'm fully committed to doing that.
-: Thank you.
Will, I mean, Will and Jimmy.
-: Yes, sir. -: Well, you've got some
hesitations about, I know you expressed
some concerns about developing,
pulling supply out when we need supply, which--
-: It's just, I have two concerns.
One of them is about pulling out supply,
but I'm willing to look at the numbers behind it.
There is a component of supply
that doesn't get dispatched on a daily basis.
I understand that.
So I don't know what the market impact is.
If it doesn't have a market impact,
I'd be willing to look at it more, for sure.
If it has a major market impact then
I think there just has to be more
analysis and discussion about it.
The other thing is I'm getting,
I feel like I'm getting whiplashed here
with all of these new products that we're creating
and all of this new,
ERCOT's doing obviously black start and
some ancillary services.
We're adding more, we've got ERS, firm fuel, backstop,
all, I mean, God forbid.
I almost feel like we're creating niche markets
instead of one big market.
-: I tell you, if anything happens after this,
I mean, it's a miracle.
I mean, it's a sign from God that
something's definitely wrong with the whole system.
I mean.
-: So all I'm saying is I hope in this,
we're not cannibalizing our own system
and we're doing good for markets,
doing good for the products that we need for markets,
as opposed to not.
-: Oh, agreed. -: But I can't get
the whole thing around,
I can't wrap my head around
all of these new products this quickly.
-: Well, Commissioner Glotfelty,
and I understand what you're saying,
but for instance, the firm fuel product,
I mean, that is our effort to try to make sure
we have enough fuel available.
That was a significant part of the megawatts
we lost during the winter.
Ultimately, that standalone product could get
rolled into a broader concept
and that's the way we have been discussing it.
And so that's just one piece of it there.
The ancillary services,
ECRS is something that's been in the oven for awhile.
I mean, that wasn't our decision.
ERCOT decided to move forward with it
and it will serve a very good purpose in the future
when we have to address more ramping issues
as more solar comes on the system, hopefully with storage.
But I think that every action on our consensus item,
and even the broader concepts
that we're evaluating right now,
are really intended to either address
specific reliability issues that we've experienced
and may continue to have in the future
if we don't take action,
but also to remain vigilant and diligent about
continuing to review long-term changes that
we may need in the future.
I think we are, I think what you're saying is,
and I tend to agree with what you're saying, I think,
and I'm not gonna put words in your mouth but
there's a lot of pancaking.
-: Good word. -: We're pancaking.
And I think if we're able to
work to get in place a effective conservative backstop
and continue to evaluate this obligation,
then we can maybe buy the market some time to breathe
and kind of adjust to everything
we're putting in the market.
And then we could take that analysis into consideration
as we're formulating more long-term policy.
That's what I'm thinking, just generally speaking.
-: Absolutely fair concerns.
But if we're gonna get it wrong,
I'd rather have too much reliability rather than not enough.
-: Can be very expensive.
-: And that's why it's important that we ensure all
resources are treated equally
and that the market mechanism
as articulated in the deck program is self-correcting.
So if we do mess with too much supply,
cure for high prices is high prices.
-: Well, when you say we,
I don't remember what you exactly said just a second ago,
but it made me think about the assignment of costs.
I've said numerous times that
I am very opposed to assigning costs.
We have done things in this market for years
where we do it for the good of all Texans.
If we're gonna sign transmission costs,
we've got to go back and do it for every single generator.
We've got to, if we're gonna assign reliability costs,
we're gonna have to do it for the peak of the day.
When that gas fired power plant trips
or that nuclear plant trips, guess what?
It's gonna be painful.
It's gonna be very painful for that resource.
And that's why I'm opposed to it
because I think reliability spread out
across the entire system of consumers
is a lower cost to every single one of them
than it is to assigning a cost to somebody
that doesn't say they're gonna pay, they're gonna,
that does not commit they're gonna provide it
and is not getting paid to provide it.
And then we're gonna tag them and say,
well, you get tagged because you're not providing something
that you say you're gonna,
you don't even say you're gonna provide the market.
Providing voltage support is a market.
There are companies that can go provide.
You can put in all sorts of equipment to provide voltage.
That doesn't mean that cost has to be borne by a generator.
It doesn't, so I'm just,
that's the one thing in your memo that
I'm very passionate about as you, as you can see.
-: I know.
-: And that's where I would have a big concern.
-: But in that same,
Commissioner, respect your thoughts on this.
But again, the legislature spoke.
I mean, the statute, the debate,
it all led in that direction.
So when I look at it,
I'm just trying to do what the 181 folks
and the Governor said.
In writing, they actually put it in writing,
which is reassuring.
I appreciate that.
If you look at that background and all the debate,
it was oriented on a set of resources that they felt,
all right, they needed to pay a portion
to get their product to market.
But yeah, I hear you, sir.
-: Well articulated.
And we're not all going to agree on everything every day.
Reasonable people can disagree.
Think we've hit it out of the park on disagreeing
so far these last few months.
-: We have agreed on a lot of important things. (laughs)
-: Like I said, well articulated.
You know how I feel about it.
In the absence of a new resource
that has 100% correlation of dropping out,
none of this would be a problem.
But voltage and quick ramping.
And that's an ECRS product that's 18 to 24 months away.
So we don't need to solve that today.
-: Actually, the program is 18 to 24 months away,
but the products are on the grid today.
The resources are coming on very fast.
They will be here way ahead of ECRS.
-: The intermittence.
-: Well, the batteries and the other voltage components
that can help voltage across the system
and that can provide other ancillary services.
They're gonna be here before their product is.
-: Sure.
I've heard ad nauseum about how intermittence
can provide voltage supportive if appropriately outfitted.
And I look forward to them implementing those technologies.
In which case they would not be responsible
for the cost of voltage support.
-: Voltage support, again, as I in most markets--
-: Sorry, no.
-: We pay for voltage support.
We pay for VARS.
We pay for VARS which come from
large thermal generating plants, nuclear plants.
But we paid for them for a reason.
And that's because you have to reduce
the amount of real energy you're producing
on the system to produce VARS.
You produce VARS to allow the transmission system
to capture those and move those.
So what you're doing is you're compensating
for a reduction of real energy
that could be sold into the market.
That's why you're doing it.
And that is,
to me, voltage support is a common good.
Nobody does great unless we pay for it.
It's not assigned to, if we pay for it,
that is a huge step forward.
But there is a market there for entity.
Someone could go put on a synchronous condenser
and get paid for voltage support if economics worked.
And that would be it.
So that's why I think what we're doing
is telling somebody to do something that they don't,
they are never committing to do.
-: So with that, Commissioner,
do you believe it would be fair
and legal, which would be great to have both,
if a intermittent resource that does not provide
on the face of its own generation capability,
if they were paired with a system of batteries
or whatever technology was available
to where they could provide their own voltage support,
could they be exempted from the cost causation?
Jimmy: Maybe, maybe.
Something to think about. -: Tariff or whatever.
-: Something to think about. -: Okay, all right.
Got it.
-: So how would we implement the voltage support?
Is that through a rulemaking
or what process would we use to compensate, I guess?
-: Initial thought is to direct ERCOT to develop a product,
both operational need
and mechanism of implementation,
and the cost assignment and settlement of that cost.
With any of these, we'd ask them to go
develop such a product or give us two or three options
of what it could look like
and then we'd evaluate and iterate from there.
And I think that's-- -: I think Brattle,
forgive me if I'm saying this out of school,
but I think Brattle was looking
and was gonna provide us with some of the examples
that other markets, how they pay for voltage and
they were gonna do that.
-: Is that in process?
It can be in process? -: Yes.
Usually not a market product but compensated.
-: Compensated product, that's correct.
-: All right.
We'll look forward to that, Sam, thank you.
Okay.
Thank you.
Right now we've thus far agreed to
develop a load side reliability mechanism
of some form or fashion,
based on principles that will articulate and
agree to incorporate here shortly.
I think we're all in support of
developing a backstop mechanism in the meantime.
Is that something you--
-: I'd look at, absolutely.
-: Okay, not there yet but--
-: Not there yet but absolutely look at.
-: Okay.
So we're three out of four on that one.
Lori: That's fair.
-: I'm just gonna work backwards up here.
Firm fuel product.
We all agree to commit to developing a firm fuel product.
-: Mm-hmm.
-: Yes. -: Yes, sir.
-: On the general frameworks in this memo.
-: Yes, sir. -: Yes.
-: Voltage support product
in process with Brattle.
In principle, I'm hearing we all agree to develop
some form of that.
Cost assignment and settlement to be determined,
pending analysis of other
analog options and
look at what,
examination of what that would look like in our market.
-: Yes, absolutely. -: Agreed?
-: Agreed. -: Agreed.
-: Agreed? Agreed? -: Yes.
-: Fast frequency response, ECRS in process.
Anybody want to stop them in process?
No.
-: Accelerate if we could.
-: On costs on that? -: On costs on ECRS.
-: Same thing.
(laughing) Sorry.
-: Well, I think we'd have to have a rulemaking
'cause of the SB3 language we need to implement.
SB3 has clear language and
we can open up a rulemaking project next year
and get that rolling.
-: Okay, so.
Don't take it, either one of those off the table,
accelerate if possible.
Cost allocation, a cost assignment
to be discussed as part of rulemaking for
in compliance with SB, implementation with SB3, yeah?
Agreed? -: Yep.
Agreed? Agreed? All right.
ERS reform, I think we've already done most of that.
We've got to have to tighten it up with the rule next year
but the good cause exception has done that.
All right, nobody wants to reverse that?
Demand response.
So all the LMP pricing.
Anybody opposed to asking ERCOT to move in that direction?
-: No, I like it.
I felt it was handled. -: Okay.
-: Sure. -: I'm for it.
-: Okay.
Energy efficiency performance standards.
Getting more bang for our buck
out of the same allocated dollars.
-: Strong supporter of opening up that rule for rulemaking
and making sure we're getting
a return on our investment rate payer money.
-: This is great, I'm all about it.
We need to open up that rule.
I'm just looking at some of the people
who are gonna be involved in that rulemaking.
-: Oh yeah. -: This is great.
-: Have to
beat them off with this. -: My comments from earlier
in the open meeting,
you can probably assume that I'm for that.
-: Mm-hmm. (laughs)
Yeah, I picked up on that.
I'm slow, Jimmy, but not,
not quite that slow. -: You're not that slow.
(laughing)
-: All right, ORDC reform.
Made some adjustments here.
We've got our high cap set.
As you can see, I broke it into two phases.
HCAP is official as of today.
Great progress.
The first step, and I think we've had a lot of discussion
about MCL at 3000 for many of the reasons
that have been previously articulated.
Everybody okay with that?
-: Yes, sir. -: Yes.
-: And by rule, vol is at 5,000
because that's what HCAP is at.
And based on the analysis that I've seen
and many discussions with the Brattle team I think
that essentially gets us back to even.
The amount of revenue in the marketplace
brought the highest price down,
moving it out a bit, but that just gets us back to even.
And we know back to even, I mean,
back to even gets our generators, I guess,
whole or back to where they were.
But I know we want to go above and beyond.
We're not here to do status quo.
So that's why I proposed separating vol and HCAP
early next year when we can open up that rule
to add more revenue.
To go above and beyond just getting back to even so that,
I forgot to put your thing in here,
go above and beyond.
We want more revenues in the market,
especially in times of scarcity.
So let's move that vol up.
It should not extend farther out to the PCR reserves
of who's getting those payments,
but should increase the area of under the curve
so that those who are there in the time of scarcity
get more revenues than they used to.
I don't know what that number is,
but that was a part of the IMM proposal
with that concept of separating vol and HCAP.
In principle, does that make sense?
-: Yes, sir.
May I suggest piggybacking,
while the rule is open on this one,
25-505 is a big rule.
Could we consider splitting out
the subsection E, I believe, in 25-505,
which is the CDR Sara,
so we get some reforms going there.
So at least we have a standalone rule on that.
-: Not only yes, but absolutely yes.
And I think you'd be great
to take charge of that. -: Okay, cool.
-: Congratulations. -: Great, thank you.
-: I can offer feedback. -: Oh, cool.
-: Yeah, well, I know that's something
you've cared about for a long time,
and I know that's something that
the market looks at, investors look at,
and it is not painting the best picture.
It is not the best version of the product it could be.
Will: Yes, sir.
-: Yes, absolutely do that.
Let me see what I need to add here.
And opening up as part of the ORDC,
I don't know that we need to put this in rule,
but I would also ask that we have
an automatic revisit built in,
even if that's directing staff or ERCOT
to present to the Commission,
we don't have to figure this out now but
present to the Commission by December 1st
of every odd number year,
an assessment of the efficacy of the ORDC,
the balance and trade-offs
between revenues to generators, should we need,
and how that is balanced with cost on consumers.
So that ahead of every legislative session
and at least on a regular basis,
this Commission and future Commissions
will be required to evaluate
all that money that's being pumped into that market.
-: Good idea. -: Does that make sense?
Thank you for that idea.
Hope Ben's writing this stuff down.
All right.
That covers every element, I think, in that memo.
We got ORDC visit.
Sara, CDR.
-: Chairman Lake? -: Yes, ma'am.
-: Can I add a couple of items for consideration?
Maybe two, three?
-: Sure. -: From my flow chart.
I know that we have been,
Encore currently has distribution voltage reduction
in place today that we have directed ERCOT to use
outside of emergency conditions.
And I would like to continue to explore
if we can add to our roles
some kind of rate recovery mechanisms
so that we can get some of the TDUs
that are able to provide that distribution voltage reduction
to procure that equipment.
If we can expand that capability or look into expanding it,
I think that would be additional megawatts
that we could take advantage of.
Right now I think it's maybe 300 megawatts,
is that correct, Liz?
500? -: I couldn't say
across the system.
-: Okay, from Encore alone,
I think we relied on--
-: We're very grateful to have that.
-: Yes. -: I appreciate y'all.
-: And Encore has proactively done that on their own.
But if we can evaluate whether other TDUs
that are able to do it based on their geographic
service we can squeeze out-- -: Absolutely.
-: Stated goal of maybe 1000 megawatts, 500 megawatts.
Just expand that capability.
I would like to add that to the list
'cause that's on the demand side.
-: Agree.
In principle, yes.
Thoughts?
You want to establish it as a precedent in rate recovery?
-: Yeah, I think from what I understand,
densely populated service territories,
it's gonna be difficult there.
So some of the TDUs that are
in the more densely populated areas.
We wouldn't require the TDUs to do it,
but should they have the capability to do it,
there would be a process for them to be able to
recover just and reasonable prudently incurred costs
for that equipment
so that we can get more megawatts
on the demand side reduction.
-: Would you count that in the CDR Sara?
I mean, would you count that as megawatts?
-: I don't know if ERCOT currently does that right now.
I don't-- -: I don't think that...
-: Do y'all count distribution voltage reduction
in your CDR reporting?
Representative: I don't believe so.
-: We should and we have more.
-: So that's the trigger.
I mean, let's get the value out of it.
I mean, we gotta-- -: Well, I want to do it.
I want the megawatts when we need them.
But it's when it gets tight,
dear God, we're grateful for Encore's megawatts.
If we can do that, yes, we should recognize that
is part of the emergency.
I wouldn't count them, we don't like doing that
on a regular basis. -: For regular operation.
-: That's not, yeah, not regular operations
but part of the emergency suite.
Thoughts? -: Fine.
Let me just say, an additive to this.
I mean, I think this is where,
is a place where there are some investments
that need to be made by the TDUs.
There's significant megawatts that we can't get
when we go to emergencies.
Significant megawatts.
So if we get to that,
it clearly is a value proposition, I think, will pay off.
-: So would you want that
part of a targeted approach on this one
or a broader gleaning megawatts on the TDU side?
-: I think we get started as a targeted approach
and see what we can get.
Maybe we open up a project
and get some information from the TDUs.
-: Yeah, I'm wondering what,
I think in principle, yes, absolutely.
I'm trying to think of the right venue
because that may be something where we ask
open a project and ask OPDM to think about the best way
to incorporate that in Commission operations.
Lori: Sure.
-: To your dynamic line rating and those concepts,
what is the best, I think those are important to leverage.
I don't know that we need to require them,
but perhaps incentivize.
Is that a ERCOT ops market design or is that a--
-: It's not a market design.
I mean, I think it's--
-: It's over here? -: Yeah, yeah.
It's operational and it's happening.
Some of the TDUs have done a great job with it.
Others have not.
And I think we just need to work through it
and see what those issues are.
If there are rate issues, we need to be told.
If not, we can keep pushing.
-: Yeah.
So the way, and just to clear it,
'cause I see the distinction you're making now,
Chairman Lake, I would view this as more
as part of an extra tool in our toolkit,
kind of like ERS.
Those tools we use when we are trying to avoid conservation.
If we can expand those megawatts
on the distribution voltage reduction,
again, we wouldn't require every utility to do it,
but the ones that were able to,
and we could get some more megawatts,
we can provide some pathway for them
to be able to invest in those, that additional equipment.
-: Okay, well.
Will you work with staff to figure out
what the best venue for that is.
In principle, we're all on board on implementing that.
-: Absolutely.
The other item I was gonna add on there
is distributed generation. And what I mean by that,
I know Commissioner McAdams several months ago,
even before I got to the PUC,
based on two contested case proceedings at the time
that you asked to be dismissed,
you asked for staff to open a project
to look at distributed generation.
Based on a lot of feedback that I've gotten
from distributed generation companies,
microgrid related companies,
I think there is some opportunities there
to evaluate streamlining the interconnection process
and making improvements there.
And I think perhaps those issues can get paired up
with some of the issues you were looking at.
I know staff hasn't yet opened up a project
to evaluate that but that would be something else
that we can have staff evaluate.
-: And as the moratorium lives on January 4th,
more data will be available for that.
Peter: Okay.
-: For detail. -: So the project would
incorporate that data to what?
-: Evaluate our interconnection procedures
and work with ERCOT and TDU timelines.
There seems to be some ad hoc sort of procedures that go on.
And I think you hear that from distribute generation
resources like micro related type companies, DG,
also storage. -: Is that,
yep, good, yes, yes.
-: I think so.
What my experience is from what I've heard
is some TDUs do it really well.
And I say TDUs, I mean,
co-ops, communities, whatever the interconnection entity is.
Some of them do it really well.
Others are very slow, very secretive about costs,
very not timely,
and finding a way, as I had said earlier
when I first discussed market design,
doing some sort of standard inner connection
at the distribution level would be, I think,
a very important component because it all equals megawatts.
Will: It does.
-: Then finally--
Jimmy: Megawatts or what?
Peter: There it is. (laughing)
-: We should have--
-: On that, real quick question, Lori.
How would that, or should it or can it,
overlap with the interconnect work you all are doing?
And with it-- -: I think it's different.
-: A little bit different. -: Ours is gonna be simpler.
I hope.
-: Okay, okay, just wanted to ask the question.
Okay, so that's...
-: Okay.
And one final one.
Peter: Okay, so.
DG interconnect, okay.
Jimmy: That's on mine as well.
-: Your ops list? Yeah.
Go ahead. -: And I have one final one
that I think is worth exploring.
FERC recently issued a for quarter 22-22 that promotes
eliminating barriers for distribute generation resources
and from getting into the market.
DERS is often referred to distributed
energy resources-- -: Talked about that before.
-: And we're not subject for jurisdiction.
But I think the other markets
are gonna be evaluating these issues.
And what I mean by DERS,
it's aggregations of customers and how they can participate
in real-time market ancillary services.
As I've often said before to you in public and to others
is that I want to use this opportunity
to not only ensure reliability,
but to continue to innovate and enhancing reliability.
And so if the other markets are looking at
eliminating barriers to this type of participation,
I think it would be a good idea to at least direct ERCOT
to have a workshop and start looking at best practices
and barriers, opportunities for customer aggregations
or what are known as virtual power plants,
the distributed energy resources,
and just kind of at least get some momentum going
out there at ERCOT through by way of a workshop
and maybe additional stakeholder discussions,
a task force or something to evaluate it,
because I don't want to fall behind
from the rest of the United States.
We innovate here at ERCOT.
We lead and I want to make sure we continue to do so.
And this concept of virtual power plants,
well, I would like to see personally a roadmap as to,
basically once ERCOT has conversations
with the stakeholders as to what is the pathway,
what are some challenges,
and learn what some of the pros and cons are.
So I think that we capitalize on the demand side.
That's another demand. -: Absolutely.
I think the first question to answer is,
what are the existing barriers?
And I want to be very careful,
as we have numerous stakeholders who do this,
I want to make sure everyone has equal access,
but not preferential.
I catch folks from time to time saying
we're preventing demand response,
when that translates to actually mean
you're not paying me extra more than the next megawatt
and I want a special product just for me.
I think it needs to be equal, it needs to be on par,
but it should all be on par.
So I want it, let's make, let's check.
Yes, let's move forward on that.
Let's start with the barriers.
Let's start with the command and control needs.
So it's not just a bonus.
You've got to commit to,
you've got to schedule just like
anybody else who's getting paid.
So we know if we're counting on that,
your CTR, your Sara, if you're counting on it being there,
it dam sure better be there.
-: Absolutely. -: So schedule when you clear,
is that right maybe?
-: Well, I'm saying you--
-: Just trying to make it apples and apples,
if I can, out of this stuff.
-: Yeah. I don't know that you have to be clear,
but you have to be willing to commit all those Teslas.
You have to be willing to commit all those power walls.
-: I hear you. -: To be there.
You're commanding control.
Woody needs to know
if he's gonna call on these resources.
-: I agree. -: Absolutely.
-: He can't be grabbing air.
-: And I definitely agree with that.
We want to make sure we understand the barriers,
but also the operational risk involved.
And I think by way of working with ERCOT or
creating some kind of forum where
we are presented with information from
a robust discussion with ERCOT and stakeholders
would be great because I'm definitely
on the same page as you, Chairman Lake.
I don't want to create any unintended consequences,
but I want to see if there's any rewards
we can reap on an even playing field.
-: Yeah, I think there's tremendous opportunity there.
And to the point you make,
sometimes angrily and sometimes happily,
(laughing)
these resources should be,
they should all be part of this.
Both in economic reward,
but if you're not there, you're getting the same penalty.
Whether it's in a cone deck construct or whatever it is,
you get the same economic reward
and you get the same penalty pain
as a unit tripping.
Yeah, anything else.
Lori: Have to be able to count on.
-: Yeah, accountability across the board.
Will?
-: I think so.
I'm just trying not to preclude basic elements
of the old deck program.
I just want some good to get
dispatchable generation.
DG stuff is more amorphous.
So I'm not trying to box in the deck program.
-: No, no, no, I'm not-- -: I'll cross that hill.
I think we-- -: I think that's one of the,
but I think that's one of the features of the deck program
is you identify,
we don't have to figure all this out now but in
any version of an LSE obligation,
heavy, light, short, tall, whatever,
you treat each of them equally,
both in reward and punishment.
And by doing that, you're putting value to it,
whether it's decks you don't have to buy or
a LSE obligation that you can offer.
You can essentially self-insure.
You're putting a value on that demand response
that's quantifiable and fungible,
which I can't think of anything more important
or more that will do more to drive
the quantifying demand response
and incentivizing implementation
of those demand response technologies and aggregation.
But you put a value on it and tell people to,
tell the market to go figure out the best way to get those.
-: I think, as a principle,
if those aggregated systems can perform like a power plant
to Woody's satisfaction and ERCOT operations,
they're a power plant.
I mean, if they work like a power plant,
they're a plower pant.
-: Pay them the same, treat them the same.
-: Absolutely.
-: And I think that'll get better reliability,
more economically,
and provide more incentive for those
resources and technologies than we've ever had.
-: Yes, sir. -: Absolutely.
-: That's where I had said earlier in my view
that we're blurring the lines between
consumers and providers on the system.
It's not just supply and demand
because the demand side is also gonna be
a supplier at some point in time.
So this roadmap gets blurry
as we're gonna
I don't think we will get it right the first time
and I don't think others will
as we try to find out how these VPPs
and other of those distribution resources
really fit into this market.
But I think it's the signal that we want to push for them.
We want their megawatts,
we want their demand response as part of our market.
-: Yes, absolutely and
one very important point I want to make.
Oftentimes in the media and the public,
stakeholder comments,
there's a lot of discussion or points being made
that we're not doing enough on the demand response side.
And I just really want to
zoom in on the fact that today we have discussed
a lot of demand side improvements,
and that is through long-term improvements through ERS,
emergency response service,
the TDU energy efficiency load management rule
that we're gonna be evaluating,
distributed generation interconnection procedures
to make sure that those processes are streamlined,
and evaluation of virtual power plants.
Peter: And opening up non-spend two 50% load.
-: Right.
-: Just as a matter of operations, Mr. Chairman.
I see Kenan and Christie over here,
and I know they're listening to all this,
and this is a mountain of work.
So as a rule,
well, we all agreed with what you have here.
The framework that we've kind of discussed.
It's kind of-- -: We gotta add
some principles to the bottom of that.
-: But in terms of near term ERCOT operations,
where the workshops get going
and what the stakeholders start discussing,
this is the priority over the next two years.
Is that accurate?
Or are we gonna try to work on all this at the same time?
'Cause their bandwidth and resources
has come into question
and also the governance-- -: Yes, and.
First part, yes.
On your first comment.
Yes, that framework and whatever principles
or everything we put into that is paramount.
These other, I guess, non-market design
operational elements like CDR and Sara.
That'll take some ERCOT resources,
but I've got a pretty good hunch
that you're gonna do a lot of heavy lifting on that.
Will: Yeah, we'll provide real practical feedback.
(laughing)
-: Yeah, my sense is you're gonna
roll your sleeves up on that.
Will: Sure.
-: Which is probably not gonna be too much of this.
That's not a huge resource drain on them.
The voltage reduction,
that's probably an OPDM rate making thing.
Et cetera, so I'm not,
yes, we don't want to overwhelm them
and we want to be careful with that.
And so,
I want to, as part of the next step of this
between now and the 16th,
I need to work with your individual offices
and them to figure out a more
crystallized implementation system.
-: I'm done.
Thank you so much for your consideration.
-: Yes, ma'am.
Thank you for laying those out.
Pending discussion on principles of LSE obligation,
is there anything else in this memo plus Lori's that,
and the cost visualization issue we'll have to work on,
anything else on here that is not,
we're not committed to moving forward on?
-: Other than principles, no sir.
-: Yeah, I'm good. -: That's it.
-: I don't see anything right now.
-: Okay, and this is, I mean, this is a draft.
Staff will be, we'll issue the final--
-: Struggling for final comment?
-: The final second draft of the temporary
work in progress.
So there's still time.
We'll have time to adjust.
And then that will be the last set of comments we take
at the end of the year.
All right.
LSE obligation principles.
We've committed to move forward,
studying and developing an LSE obligation
or LSE reliability mechanism.
What are the principles we want to ask
ERCOT, Brattle, et cetera,
to design that principle or design that mechanism around?
I've laid out some here.
Obviously I know you all have seen those.
I would also submit the
deck features I listed at the beginning.
Especially the penalty at cone.
Listing...
Building on rec framework as much as possible.
I mean, in general, I think we want to
utilize existing frameworks as much as we can.
A self-correcting, ensuring that it's self-correcting.
The cure for high price is a high price.
That first, and that's the corollary
of the cone penalty concept.
The first one is you don't have enough supply,
you've got this much demand.
That next one is cone.
The next one's cone.
But as you get closer to that demand
and that market equilibrium,
the marginal price per H next unit decreases.
And then you, so that kind of,
make sure we incorporate
that kind of self-correcting mechanism.
Forward price signal,
performance penalty, and noncompliance penalty.
If we're gonna ask someone on the load side
to procure something to ensure
their customers receive the reliable power
that they've promised them,
same penalty on the gen side for not showing up.
For not,
they took revenue for that reliability credit
that they sold.
If they don't show up, same penalty,
or philosophically the same penalty.
I mean, performance standards,
that was something you mentioned, I think,
that was something in the-- -: Performance, yeah.
A different issue.
I would ask him to, again, as a part of this,
model two scenarios because I think
it's important for scope
so that we at least answer questions,
which is a specific performance standard or for all.
All dispatchable generation,
so that we can adequately be informed
on crossing that river.
-: Can I ask if you'd consider asking for,
or we have a sizing question, a quantity,
and then a compensation side.
And I would like to explore,
and you gotta be real careful about
the principle of tech agnostic,
which I think is important to all of us.
Some bifurcated value of,
by performance standards, I mean,
the deck is designed for new,
but the new part is just from the performance standard.
It doesn't technically say it's gotta be a ribbon cutting.
But to have some performance standard
that has the deck or the reliability credit
or whatever it is valued more
for a higher performance standard.
Almost a bonus, if you will.
I don't know that that,
I don't know that that's the answer but
at least consider the concept of staggered valuation or--
-: Or if you work through the ACP,
sort of the value of the ACP
or whatever that concept is, which is cone,
and work your way backward.
If you're talking, because,
if you're concerned about batteries or something,
that again, they're gonna have a two hour duration
or whatever that performance value is,
and they're not providing as much,
then that gets you into, okay,
well, whatever is the standard metric
that you want to assign and the value.
So that maybe it's not the full ACP value at first.
And then it ratchets down as more new generation comes in.
-: Well, we want, yeah. -: Know what I'm saying?
-: Yeah, and that's, we want that self-correcting mechanism
that can be structured.
I think we want it market driven.
But I mean, for right now, I think we all,
all we need to
agree to is that--
Will: Performance standard.
-: We can pay more for higher performance.
Will: Check.
-: And still pay something for existing.
-: Deck value associated with performance standard
with degrees of performance-- -: Different performances.
-: Degrees of performance. -: Right, so.
I know it's something that's important to you
is we don't want to dump money.
All of us, cash for clunkers.
We don't want to do that.
Will: Deck value associated, yeah.
-: But we do want,
and that's part of, I mean it's...
And the other feature of, I think I put,
I already put this in there.
Performance standards.
One of the features of the deck proposal
is it's pay by performance.
You gotta clear,
I think as Aaron pointed out last time,
it was like, it's based on a net peak element.
So it's important.
You got to clear out the important times.
You gotta be in the market, you gotta be available.
You're not dispatch, but you gotta be there.
That's how you get paid.
Doesn't have to look exactly like that.
But that's important.
Will: Seems to make sense, yes.
-: Yeah, that's a tremendous feature.
So I would include that.
And I would also say you could pay,
I mean, hell, problem may take care of itself anyway.
I don't know, we don't need to figure it out today, but.
And that may be,
that may take care of itself anyway in that,
in order to clear, you've gotta be lower heat rate.
So anyway, we don't need to
figure that out. -: I think high level,
as you say,
associate that deck value with a performance value
of the machine of the facility.
-: Yeah.
Be open to
higher payments for higher performance,
lower payments, but some payment
for lower performance slash existing.
-: Okay, check. -: Yeah.
-: Work, Lori?
-: I think that all sounds,
I'm fine with what we all are discussing.
I think we're just scoping out
at least some general parameters right now.
-: I think that that's,
that's what I've got for principles to include
in the LSE obligation.
And my intention is once the staff version is published,
we'll do kind of a brief,
abridged version of stakeholder comments for this one.
I would ask that the stakeholders
stick to the same parameters of page number and format,
but also limit their responses to the LSE.
The load side reliability mechanism
and the backstop reserve mechanism,
so we can concentrate on just those.
And in that spirit, if it works for y'all,
I'm gonna put a subset of,
in that left column of LSE obligation,
I'm gonna put a subset of principles,
not principles, versions as flavors of an LSE.
What kind of different flavors of ice cream.
One of them is decks. One of them is proof of purchase.
We heard the gentleman from Lubbock
say it was the transmission studies
that killed it and won the proof of purchase.
That proof of purchase was easy.
My original proposal-- -: Do the assortment.
Yes, sir. -: And then the E3.
With the understanding that
none of those as previously presented are
the final product.
But stakeholders tell us
what the pros and cons of each of these are
and the best way.
We know we're doing some combination of these.
So tell us what the best version is.
Does that work for y'all?
-: Yes. -: That's appropriate.
-: All right, any other principles?
I mean, these principles to include
in our, I gotta come up with a better name.
-: We're renaming everything. -: Straw man.
-: LSE, I'm not good at the naming stuff.
-: I tried, but you know.
-: Do we want to put in on either--
Jimmy: You could have stakeholders.
Peter: Jimmy, you kill me.
-: Do we want to put in parameters on the sizing to reflect,
and this kind of goes for all of them,
either on an annual or a seasonal basis?
So that we head things off at the pass on years out
and all that kind of fluster.
Or do you want to keep that in?
I don't know. -: So how about this.
Forward pricing for a year, no more than a year,
which is an element of deck.
Aim for,
we need to figure out sizing.
I don't know the answer to that.
Like I said, I think my original shot was too big.
I think the kind of share, the other one's too low.
But I think the important part is it's dynamic
and it responds, and it doesn't have to be net peak load,
but that's because that peak load
isn't just a blunt instrument.
Hey, go buy everything we could possibly need.
It accounts for the intermittence.
And the second part of that is,
two follow-ons is one, if we set a dynamic metric,
we can just fire and forget.
We don't have to revisit it all the time.
We don't have to resize it every year.
This is the metric.
This is what we're gonna do.
And more importantly,
and I think this is something that you care about,
is that if you do it on a dynamic,
if you use a dynamic sizing tool,
presumably around key stress, periods of stress,
that also gives you an opportunity to utilize
the 4CP phenomenon
where people know that that's where they either make money
or they get penalized if they don't show up.
-: Yeah, that feeds in,
that's what I was gonna ask next is,
do you want, peak load,
peak net load is kind of important.
I think we've all identified that.
So do you want as a principle
that it should be based around the past year's
peak net load intervals from the past year,
or leave that open?
'Cause I just want it reflective of
actual load participation. -: Yeah.
I don't know if it's last year's
or the projection for this year and next year.
I don't know.
But yes, net peak load dynamic,
based on some dynamic load metric.
We don't have to figure that out right now.
Does that work for everybody?
-: That's fine. -: Yes.
-: On the ACP portion,
I thought this was a virtue,
and I believe everybody did comment.
Any penalty,
firming obligations should act as a circuit breaker
and offset the cost of ancillary services to it.
That seems like a no brainer to incorporate from the outset.
-: Yeah, absolutely.
Yeah, yeah.
Just use,
well, hold on.
Yes and I think, I can't remember if we talked about this.
It may be in there,
but not only use it to offset the cost,
but to procure more
so that you get your new bill one way or the other.
Does that make sense?
-: Yeah, if you don't, I mean,
if you're not getting the decks,
if you're not getting generation resulting from the decks,
something needs to get built.
-: If you're not getting more dispatchable
on the top end from your reliability mechanism--
-: I'm fine with that, yes sir.
Peter: Take that penalty and buy it on the backend.
-: Yes. -: Right.
-: Does that work? -: Yes.
-: In principle? -: Yes.
-: Yeah. -: Okay.
Keep going. -: That's all.
How many was that?
-: Got a lot.
Don't ask. -: Ben, did you catch that?
(laughing)
I think I'm done.
-: Any other thoughts on principles to be added?
-: No, I think-- -: We got a lot.
-: Yeah, I think y'all came up with a suite of
good starting principles.
I don't have anything to add at this time.
-: I'm sorry? -: I don't have anything
to add at this time.
Do you think it's helpful,
and I know you laid out some parameters for the backstop
reserve mechanisms. -: We can go through those too.
-: And you did include some of the main pieces that I had.
-: I tried to but it was late, so.
-: I guess the first one is
procuring dispatchable resources using a framework
similar to an existing framework.
And I think, and we talked about this
and I think that the goal here is to try to get this
mechanism in place as soon as possible.
And in my proposal I had put in
kind of two options,
a competitive RFP process or a competitive auction.
And I know in your memo, you laid out potentially,
I think black start and ERS are both
competitive RFP processes at ERCOT.
And maybe if there's some feedback from Kenan as to,
I know we've had this discussion already and,
but if there's additional feedback you can provide us on
maybe we use a black start sort of framework,
if that's any more efficient.
Any added feedback on implementation
in the most efficient manner?
Is that-- -: I don't know that,
happy to hear from Kenan,
but I don't know that we need to figure it out today.
My only intention in saying that was
get it in place.
Use whatever we can to get it in place as soon as possible.
If we can use an existing RFP framework,
anything like that, and copy and paste from that,
rather than build something completely new from scratch,
that was my intention on that.
Which I think is your sentiment.
I just said the same thing more clumsily.
-: That's fine.
I think that the,
I'm kind of going through here,
so that takes care of how we will procure SRS,
what resources will qualify for SRS.
I had in my proposal, and I'm not sure there's
anything in there yet, but that's a key question.
I had opened it up for new and existing credited resources.
And what I mean by that are obviously weatherized.
Generation resources will have to be weatherized
for our weatherization role.
Potentially a review of supply arrangement,
fuel supplier arrangements.
Just making sure the resources we're getting
are accredited and seasonally tested
so that we could avoid the cash for clunkers concept.
We would not want clunkers to be
part of this program. -: Black start though, right?
I mean, you want to test them.
-: Yep, yep, seasonally. -: Yep.
In both of these, we want them tested.
I would ask, in your original proposal,
it was two hours or more.
So very much like the idea of it being
a broader universe of assets we can include.
I would put a cap on it.
I would, I don't know what that is,
but I don't, to avoid the cash for clunkers phenomenon.
I don't know what it is, but say it's got to either,
it either gotta be at, I wouldn't say heat rate,
but a start time or some,
it can't be the,
the haunted house cobweb version of a generator
sitting out there.
It needs to be--
-: Haunted house? -: It needs to be performing,
a well-performing asset.
-: Yes, agreed.
And I'm certainly open to exploring that more.
My initial, I guess,
parameter that I put out there was just intended
to try to capture a little bit more than peekers
to give our kind of
operational flexibility. -: It's immensely valuable.
Yes, agree with that. -: But I can work with--
-: Just book end it.
-: Sure, okay.
I think, let me see here.
And oh, and one thing I do want to add
is not only new and existing dispatchable resources,
but potentially demand response,
depending on how we set up the parameters.
If there's a way,
if there's an opportunity there,
I don't want to close the door, but I think it's gonna be,
depending on when you have to get synced up
for how long and how many days.
-: Yeah, I'm willing to leave it in there but that's--
-: We don't want to cannibalize ERS either, so.
-: We're getting--
-: Right, okay. -: Getting in the water.
-: Okay. All right.
-: Well, that is ERS.
ERS is the backstop version of
demand response or flood management.
-: That's correct.
-: Okay.
When will it be deployed,
that's your principle in here,
reserves will be with health in the market
until HCAP is reached.
I have been working with ERCOT and Brattle
on addressing the right price point to bring them in.
I think there are obviously some feedback we've gotten
that recommended the price cap,
and the price cap is the LMP plus the ORDC adder,
'cause sometimes we can be in tight conditions
and the LMP is still not at the price cap.
But there are some stakeholders out there
believe they should be at the market clearing price.
So I want to make sure that we scope that out
in a way that doesn't result in price reversal
and negative price impacts.
So I'll continue the discussion with
Brattle and Kenan and stakeholders.
-: It doesn't have to be withheld to HCAP.
Whatever it is, but I think the principle
needs to be withheld until it's really a backstop.
-: Yes.
-: I don't know what the exact price mechanism is, but.
-: We can start at HCAP, but I'm very much open to hearing
if there are any negative consequences
of deployment price cap.
-: Yes, but let's make sure it's, I agree,
and we can sort that out as part of the development.
-: Sure.
-: But it is important that it is truly--
-: Backstop. -: Backstop.
-: Absolutely.
-: We don't want to tell the market
we're withholding supply.
Break glass in case of emergency.
And it's only coming out at MCL 3000,
PRC, but we get nervous and say,
ooh, 3500 PR is really tight.
Let's dump it in there.
That's what we want to avoid.
-: Right, absolutely, agreed.
-: Does that work?
-: Yup. -: Yes, sir.
-: Okay, so continue exploring.
-: Let me just, go on, finish.
-: Go, I'm done.
Please go.
-: No, I was just gonna say something about
this is kind of off-market but the,
as we look at this load serving entity obligation
and these other mechanisms that
I think the question that I would have is,
mentioned this before that,
so if we're requiring entities
to provide a certain amount of resources in the market,
do we need, what is this,
what is the need for our scarcity pricing mechanism?
-: At all?
-: I think, I mean,
if we got to 100% load serving entity obligation,
I would say that you would have no reason to have,
I mean, you could put a price cap at 500 bucks or 1000,
'cause you're basically guaranteed on the supply side
that there's no reason to have both.
So all I'm saying here in this part of this discussion is
that's an issue that I'm gonna bring up at a later time,
once we figure out all this analytics
and what these things look like.
Tell me it's a-- -: How about this.
I agree in principle.
If we're, we don't need to over correct.
Can we incorporate that analysis
into the odd number year review of ORDC?
And say-- -: Yeah, I think so.
-: And say every two years
when ERCOT and staff comes back
and presents that to your review of the new ORDC,
part of that needs to be,
part of that now analysis needs to include
historic utilization, number of hours of ORDC,
and analysis of efficacy
under the market construct at that time.
Does that make sense? -: I think that's right.
Because even under some kind of a load serving obligation,
you still have to have operational reliability.
You still have the real-time market
and the ancillary market working in constructs.
So I think kind of bake it into
your odd number year review.
Think that makes sense. -: Good for discussion.
Yeah, absolutely.
-: Well, I don't, I mean,
I don't want these good ideas to just drift away
because we move on to other things.
That's why I'm trying to build in
a trigger and a mechanism so that we,
or who, the next Commission.
The next one.
-: A review of performance would be prudent of ORDC.
And we've historically had those from time to time,
but a biannual review,
and then those associated
performance reviews is prudent.
I mean, we need to do that anyway, so.
-: And let me just say it a different way.
And that is, in my opinion,
if we move towards something like a capacity market,
whatever that looks like, whatever it's called,
more guaranteed resources in the market at price cap
becomes something that should go down much lower.
-: Right.
-: If we're guaranteeing that the resources
are gonna be in the market then--
-: It has tended to, yeah.
-: The need for scarcity pricing becomes very thin.
Operational issues set aside.
But I mean...
-: Good concept keep in mind. -: And I am, in no way,
endorsing a capacity market. -: No way, me neither.
(laughing)
-: Another haunted house.
(laughing)
-: I appreciate your time.
(laughing)
-: Okay, so the next one is sizing.
The sizing of it.
And I think in here, Chairman,
like you have size to address
the need based on net peak load variability.
That is an aspect of my proposal.
Peak net load.
The next one is establish performance standards
that are regularly tested.
We already talked about that.
So if we are gonna set this up to be
one year forward on a seasonal basis,
you'd want seasonal testing.
Robust non-performance penalties and clawbacks agreed.
Definitely would want to have a strong penalty
and clawback of any payment
if a resource fails to perform under this mechanism.
Cost allocation based on load ratio share
as measured by coincident net peak load intervals.
I think that is an effort that we're,
I had included that aspect in there,
to not only base it on net peak load
consistent with what we're trying to size
this dynamic flexible tool too,
but also in an effort to address demand response.
I think those are, I agree with your principles.
Let's see if there's anything else that
is from my memo that might need to be included.
I think you captured the main points.
Okay.
I guess generally speaking,
in terms of implementation and considering
this mechanism in conjunction
with some form of modality obligation,
it might be helpful to understand
how they could work together.
Let's just say it's broader,
or maybe it's more narrow and then broader.
Maybe there's an interim way to use
both in construct at the beginning.
And then as you move towards a broader framework,
as we've gotten some common terms--
-: In terms of the set, you mean?
So that it shrinks proportional
to whatever the performance of the LSE obligation is
in terms of new gen.
-: So both are dynamic in sizing.
We want to size them appropriately.
We don't want to be overly gluttonous.
So it's somewhat interrelated.
Is there a way to make them correspondingly complimentary?
Peter: Say that five times fast.
-: Is there a way to
make them complimentary in terms of dynamic
sizing of both links? -: I have no idea.
-: Something to think about. -: There's a potential to.
And that can also change over time.
As you said, the backstop can be a bridge,
so it may need to start bigger.
And as whatever the sizing,
I mean, well, I guess think about it this way.
The bridge is gonna be first.
The backstop bridge is gonna be first.
So let's size that for the need.
There's the kind of immediate need.
And then yes, they can be,
have a correlated sizing as they phase in.
And yes, it's too much to figure out.
I mean, we're not gonna figure it out.
But yes, in principle, yes let's-- -: Right.
And I guess what I'm saying is
we can get maybe some,
is we add that question in there
to the stakeholder comments.
I think I'd like to learn a little bit more about that
because I know there's been some contention on,
well, the deck program is just for new
and then SRS just for old.
Is there any synergies we can gain?
-: Well, I think that's, I mean,
that's part of the principles that we're--
Will: I mean, it's on a steady scale.
I mean, and how it's utilized.
-: Well but that's, yes, it depends on
what the develop, what we learn in the development process,
but it's also, well, it's not either or.
It's like-- -: By definition,
your program will be old just because it's here now
and we need it now.
I mean, it's facilities that are on the ground.
-: Existing. -: Yeah, existing.
-: The load reliability mechanism,
may have some elements of existing.
It may have some, it will have elements,
it has to have elements in it.
It has to, or we failed miserably.
We don't know what that looks like yet,
but yes, I absolutely agree we should keep,
we should consider how to size those
in a complementary fashion.
-: Okay, great. Thanks. -: Does that work?
-: Mm-hmm, yes sir.
-: All right.
Good deal.
Any other thoughts or principles on the backstop reserve?
-: Nope. -: No, sir.
Lori: No, thank you.
-: All right.
I think that
gets us pretty dam close to
covering everything we need to cover today.
Anything else?
-: I've said everything I need to say, thank you.
-: You ready to head home?
-: No. (laughing)
I think we got a meeting tomorrow.
Will: We'll be back tomorrow, yeah.
-: Oh yeah, y'all do.
(laughing)
All right.
None of this is easy, none of it's straightforward.
If it was easy, it would've already been done.
-: Can I ask one question about
stakeholder feedback?
What is the plan for finalizing this,
refiling it and sending it out for stakeholder comment?
-: Ben has been diligently incorporating
the commentary and principles and notes
from what I've, right?
We're not going through all that again.
(laughing)
Lori: Got that all?
Ben: It's all in there, it's forwarded, so.
-: Okay.
So he'll provide an updated draft.
I think he can circulate those to the offices.
I think it's pretty much squared away on what we need
and what we want to include.
As in terms, I think we're gonna...
Don't quote me on this,
from what I remember the calendar
called for stakeholder comments by the 10th,
which I know is a quick turnaround.
But this whole thing is a quick turnaround.
And I would ask that under the same,
we use the same abbreviated formatting
for the stakeholder responses that we've used in the past.
And I would ask stakeholders to limit their feedback
to the phase two proposals.
The load side, the load reliability mechanism
and the backstop reserve-- -: Service.
-: I really got to work on the naming here.
We'll come up with something. -: We'll get something.
-: Focus the comments on those,
their feedback on those.
And then in the meantime,
we've got a list of, I guess, non-market design elements
I can follow up independently with each of your offices on.
And I will, as I promised, I will get,
I will work on a more crystallized
implementation methodology.
I think a lot of it is gonna go to ERCOT.
But I know we all will stay involved.
But I also know that
we can't keep up this operational pace.
And I'm glad we're making,
we've made tremendous progress, made some decisions.
And we've got, I think, a clear path forward that will
implement the tremendous changes we've made so far
and continue to build on that as we move
into the next phase of this grand adventure.
-: Yes, sir.
-: That work? -: Thank you.
Thank you for your consideration.
-: Yes, ma'am.
Thank y'all for all the hard work in this.
This is--
-: Thank you for consideration, Chairman.
-: Absolutely.
None of this is, like I said, none of it's easy.
None of it's straightforward.
All right.
Having no further business before this Commission,
this meeting with Public Utility Commission of Texas
is hereby adjourned.
(bangs gavel)