WEBVTT

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Good morning. This meeting of the public utility commission

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of Texas will come to order to consider matters have

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been duly posted with the Secretary of State of Texas

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for january 12th 2023 for the record. My name is Peter

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lake and I'm joined today by will McAdams Lori Cobos

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jimmy, Glotfelty and Kathleen Jackson. Before we dive

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into our official business. As you all know today's

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primary purpose is to discuss market design but we

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do have a few housekeeping items uh that we need to

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knock out ahead of that just so everybody knows the

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run of show today in our order of business. I want

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to make sure and lay it out uh at the beginning as

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usual we'll start with public comment. Uh then we'll

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receive a ERCOT update and briefing on our most recent

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Winter storm. Elliot over the christmas holiday. Then

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we've got some agency business to attend to including

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the motion for rehearing for are the inter gcc in case

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and consideration of our biennial report. We will then

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meet in closed session to discuss personnel matters

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And then at that point later this morning returned

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to open session to begin our discussion and deliberation

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on our market design work. So just wanna make sure

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everybody knows order business today that being said

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mr Journeay Let's start with public comment. No one

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signed up this morning sir. All right at that point

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Public comment is closed as always. When we do get

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to specific agenda items. Oral comments on those specific

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items will be limited to three minutes and stakeholders

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should not approach unless specifically asked or oral

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argument has previously been granted. Uh let's jump

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ahead to item 14. Police sir, it will be our cots update

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on Winter Storm Elliot, chrissy Hobbs or Friends here

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Good morning dan Woodfin with her gut. I'm happy to

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be here today to talk to you about what was effectively

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a non event during winter Storm Elliot uh even though

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we have do have lessons learned that we will be improving

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upon uh as we have all described in a few minutes.

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So a week prior to the storm, we issued an operating

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condition notice for forecasted extreme cold weather

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on December 22-26. Then we ratcheted that up to an

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advisory and ultimately a watch at the appropriate

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time frame. Um we did have some under forecasting of

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load going into the week. Um the global weather models

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were predicting a significant cold weather event on

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the 22nd but it was deeper and quicker than what the

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weather models were forecasting, resulting in a significantly

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higher load forecast especially in the evening peak

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on Thursday. In addition the load forecasting models

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overplayed the effects of the holiday weekend um given

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the significant cold weather um many other system operators

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across the country had similar under forecasting of

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Load and uh we plan to reach out to them to work

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together to figure out what can be improved on their

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um we're already working on those modeling and process

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improvements and I want to emphasize that this under

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forecast had no impact on reliability because we intentionally

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prepared for a higher Load uh than what the forecast

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models were projecting and ultimately that is what

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happened. So we were prepared for it. Uh During the

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whole course of the cold weather operations market

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participants generally brought online all available

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generation other than the units that could be started

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quickly. We ordered several units online under the

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new firm fuel supply service that otherwise would have

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been unavailable due to gas restrictions in order to

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maximize the amount of available generation. We also

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ordered these units to refill their gas storage during

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the event and since then so that they would be available

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if we need to deploy them later this winter. We asked

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for T. C. Q. Enforcement discretion an emergency order

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from the D. O. E. Not because we were in an emergency

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but to avoid any generating units becoming unavailable

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due to environmental limits in order to maximize available

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generation in the interest of avoiding an emergency

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As far as actual operations go, we set a new winter

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peak all time. Winter peak of 73.7 GW on Thursday evening

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We had about 23 gigawatts of wind generation at that

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time. Then uh the demand on friday morning was also

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a little higher than that. It wound up approaching

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74 gigawatts which is also now is and is now our new

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all time winter peak record um overnight that night

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thursday night into friday morning. Uh we had about

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5.7 gigawatts of additional thermal generation outages

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and wind generation dropped Uh to 11.6 GW, so we had

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less wind, little less thermal generation, which made

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conditions tighter Friday morning than had been the

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previous evening. The friday evening peak actually

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resulted in some of the tightest conditions after a

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sunny day. The evening peak was lower only about 68

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gigawatts, but so was wind generation in that it dropped

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about 9.1 gigawatts during that day by the evening

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peak. The conventional generation outages also went

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down from what they had been at the morning peak by

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about 3.2 gigawatts for the evening peak. Um at no

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point during the cold weather operations, did ERCOT

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need to declare an emergency or even get close enough

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to issue an advisory of watch for low reserves.

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Some of the lessons learned, many of the improvements

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that were made after the February 2021 winter storm

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really helped during this event. Uh we do have a few

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action items already mentioned the load forecasting

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improvements. Uh There were several units that appear

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to have tripped due to weather related issues and so

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our weather station inspection team has already begun

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to investigate those. Uh we'll be sending our f I.

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S out as under our purview as the reliability uh entity

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to uh look at those um, units. Um I think it also

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emphasizes the importance of implementing the Phase

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two weatherization standards that will be in effect

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starting this december, we'll also likely be proposing

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some changes to the firm fuel supply program based

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on this first time of actually using it, we'll be producing

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a more detailed after action report over the next few

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weeks. Um In addition many of the other reliability

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coordinators in the central and Southeast us had, they

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did have to implement their energy emergency procedures

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as a result of the storm, and a couple had to implement

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Load said. And so as a result of those entities issues

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for Connor car investigate is initiating an investigation

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of the event will be included even though we did not

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have to go into emergency operations, so I'm happy

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to answer any questions after that summary, thank thank

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you, dan. I think you you made the most important point

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in your opening statement that this was a non event

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extremely cold arctic blast, but it was not a great

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event and that should be an outstanding demonstration

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of the operational reliability forms of this commission

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This agency staff, ERCOT and ERCOT team have worked

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so hard on uh since that landmark legislation was passed

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are working, we're seeing the results. Uh and we we

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set another two records after a record breaking a summer

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of multiple records. Uh So the proof is in the pudding

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these reforms, these operational reforms are working

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um and we we can see that the grid, we've, we've got

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now generators we have now are reliable. Uh We just

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need more of them, which is what we'll be talking about

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later on. And I would also note that on the evening

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of the 23rd our peak was about 68,000 in the 68,000

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range. But for those of you who were watching on the

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um ERCOT market dashboard, if you would have noticed

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that about six o'clock or seven o'clock, the Load Flattened

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instantly and stayed flat for the remainder of the

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evening. So we really had a very clear, clear demonstration

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of demand response from our retailers are all of our

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market participants. Uh that's, I mean that is as good

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as examples as I could hope for, of the market forces

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delivering demand response. It was, it was an outstanding

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result and on the evening of the 23rd it made a tremendous

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difference in ensuring reliability. So I was glad to

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see that in action, that happy to open up for questions

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coming. But thank you Mr Chairman, I agree with everything

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you said, um dan, it's interesting the profile and

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the conclusions that will be drawn after you do more

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extensive analysis. I know that our, with our weatherization

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policies are now being closely examined by other areas

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of the country, Southwest power pool is talking about

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it um and and they are really leading from the front

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our policies are leading from the front where others

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are examining okay, what are we doing? What are the

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standards that the inspectors are going out and checking

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to um, for the purposes of how it uh performed during

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winter storm Elliott windshield was certainly extreme

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wind forces as they moved through on a percentage basis

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how that clearly drove. It seemed to me as we watched

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it on our dashboards, it clearly drove Load because

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it was so much colder. Uh, and I noted conclusion residential

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and critical industrial Load has grown a lot and that

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that windshield amplified that effect. Um, so what

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on a percentage basis was sort of the drop off as the

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front moved through and the windshield level temperatures

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abated uh, did we see in terms of a reduction? So there's

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a windshield Load and then there's a non windshield

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Load that appeared to be visible. Do you happen to

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know the magnitude of that? Okay. And, and then for

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our purposes as we talk about potential solutions,

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winner is dangerous and the country is learning that

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we are all based around many of us are based around

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summer peaks but the country is relearning lessons

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from a century ago that winter is a dangerous season

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and you must prepare for that and as we become more

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dependent on wind as an essential resource, as the

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wind blows through, What do you prepare for in terms

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of that demand standpoint that you must meet. And so

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uh, I think there's important lessons that we learn

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after this, highlight the Commissioner Glotfelty actually

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predicted the exact phenomena you're talking about

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ahead of the event

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doesn't happen very often. And really what that was

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was that the front of the front um takes all the energy

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out of the atmosphere and behind the front is when

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you have to die down of the wind resources. So um,

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you can expect a huge amount of wind uh in in front

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of and during the front moving through the state. But

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behind it is really where we have seen this, this challenge

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and I think we saw a year ago or two years ago

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with hurricanes as well. They do the same, they have

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the same effect where they pull that energy out of

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the atmosphere, It's still cold, not as cold, but it's

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still extremely cold. So we still need to have be able

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to meet that demand or after hurting it's still hot

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challenge. It is not a phenomenon that should surprise

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us. Mr Mccallum said, we need to, we need to be more

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consistent about all of our grids need to be more consistent

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about preparing for that more deliberately. Um, I have

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one question and uh dan, I appreciate your uh, your

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initial report, Look forward to the, to the big after

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action report that you are going to work on. Um, are

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y'all getting the right amount of information from

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generators on outages on why they uh were either forced

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or on, you know? Unforced. Normally, I think we should

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understand, but I think there's been something some

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um for some time, I brought up that, you know, a lot

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of times when generators have forced outages, they

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don't know the reason immediately, or they check the

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box that says uh You know, unknown. Um are you all

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getting the right information from generators as to

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why they or transmission facilities are tripping and

00:13:22.059 --> 00:13:25.799
why they're having problems? Yeah. So so last year

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um the board passed and the commission approved NPR

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1084, which is requires more uh quicker and more thorough

00:13:34.500 --> 00:13:39.830
reporting of outages quick after the fact. Um And uh

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we also made some changes in our schedule or to make

00:13:42.190 --> 00:13:44.639
sure that they can update those outage causes, if,

00:13:44.649 --> 00:13:46.370
you know, when the unit trips and they have to get

00:13:46.370 --> 00:13:48.409
it in within a certain period of time, they don't know

00:13:48.409 --> 00:13:52.090
the answer, they can update it. Um We think that helped

00:13:52.100 --> 00:13:55.720
quite a bit, that we seem to have more just in the

00:13:55.720 --> 00:13:58.179
reporting that we've seen so far, It's better than

00:13:58.179 --> 00:14:01.710
it was. Um We'll be looking at, kind of making sure

00:14:01.710 --> 00:14:04.759
that people actually did what they needed to do under

00:14:04.759 --> 00:14:08.940
10 80 for uh and met those protocol obligations and

00:14:08.940 --> 00:14:11.200
see if we need to make any other improvements there

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and then we'll also be issuing our f. I. S uh as

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I mentioned out to make sure that uh you know what

00:14:17.269 --> 00:14:20.379
what's an outage schedule or ties to what's in uh what

00:14:20.389 --> 00:14:22.799
comes back on those are F. I. S. That they know today

00:14:22.809 --> 00:14:25.129
Right. I mean clearly that those things are supposed

00:14:25.129 --> 00:14:28.629
to be informative for data and trends purposes, they're

00:14:28.629 --> 00:14:31.970
not supposed to be and I got you to a generator trips

00:14:31.980 --> 00:14:36.330
and you know, I think we know that mechanical equipment

00:14:36.340 --> 00:14:38.970
you know, fails at times, but uh I hope that we can

00:14:38.970 --> 00:14:41.059
make sure that we get that so that we can begin to

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look at these trends and figure out if there are solutions

00:14:44.029 --> 00:14:46.159
that we could implement in the market or need to implement

00:14:46.169 --> 00:14:50.710
or request and you know, I think that's an important

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you know, data element that we should uh we should

00:14:52.919 --> 00:14:55.419
be continuing to look at over over the time ahead.

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Thanks. Yeah. And so a few comments um dan thank you

00:14:59.929 --> 00:15:03.110
so much for your update. Um you know, as the chairman

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noted, you know, thankfully the arctic blast was was

00:15:05.860 --> 00:15:08.590
a non event, but as always, I think we need to take

00:15:08.590 --> 00:15:12.039
the time to learn from every winter storm every summer

00:15:12.049 --> 00:15:15.200
every hot summer, um how to continue to improve. Obviously

00:15:15.200 --> 00:15:18.090
extreme winter and hot weather is seems to be here

00:15:18.090 --> 00:15:21.120
to stay and the rest of the country is learning that

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and and catching up on on ways to improve resiliency

00:15:25.850 --> 00:15:29.970
and reliability um in areas that we have already taken

00:15:29.970 --> 00:15:34.529
action on. So obviously we have taken swift action

00:15:34.529 --> 00:15:37.730
on enhancing winter reliability through weatherization

00:15:38.299 --> 00:15:40.539
the firm fuel product that we put in place that it

00:15:40.549 --> 00:15:44.509
definitely has shown benefits this winter and continued

00:15:44.509 --> 00:15:48.330
improvement in electric gas coordination I think you

00:15:48.330 --> 00:15:51.440
know, as commissioner, McAdams highlighted, you know

00:15:51.450 --> 00:15:56.039
the other markets are looking to Texas to learn about

00:15:56.039 --> 00:15:59.029
what we have done to improve winter resiliency. I know

00:15:59.029 --> 00:16:01.759
that um some of the issues experience in my, so we're

00:16:01.759 --> 00:16:05.480
very similar to what we experienced during winter storm

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Uri, which involved um full availability issues and

00:16:10.054 --> 00:16:14.575
weatherization issues and because of my work and my

00:16:14.575 --> 00:16:17.674
so and coordinating with energy, I know that um my

00:16:17.674 --> 00:16:20.815
show was about a step or two away from having to conduct

00:16:20.825 --> 00:16:24.054
rotating outages and how would that have been packed

00:16:24.054 --> 00:16:27.404
in Texas? You know, Texas, you know, energy was prepared

00:16:27.414 --> 00:16:31.169
and had sufficient generation, but ultimately the cascading

00:16:31.169 --> 00:16:33.950
effect of the north and central region could have resulted

00:16:33.960 --> 00:16:37.179
in rotating outages in Texas in southeast Texas and

00:16:37.179 --> 00:16:39.649
that's that's something we've got to keep in mind as

00:16:39.649 --> 00:16:41.929
we through our work through the R. T. O. S and I

00:16:41.929 --> 00:16:45.840
S. O. S. That the inter inter inter connectivity of

00:16:45.850 --> 00:16:50.259
Texas to other markets. Um it is important to to be

00:16:50.259 --> 00:16:52.950
watching not only from an impact of extreme weather

00:16:52.950 --> 00:16:57.909
conditions but also as the states move to uh focus

00:16:57.909 --> 00:17:01.289
on net zero uh decarbonization goals that move them

00:17:01.289 --> 00:17:04.410
away from large concentration. dispatchable generation

00:17:04.420 --> 00:17:09.309
all of those factors impact, um, uh, Texas parts of

00:17:09.309 --> 00:17:11.430
Texas that are interconnected to other markets, but

00:17:11.430 --> 00:17:15.180
with respect to market and continuing to learn lessons

00:17:15.190 --> 00:17:17.730
from, from every event. Right. Whether it's a non event

00:17:17.730 --> 00:17:20.059
or not, I think it's important. I think this, this

00:17:20.069 --> 00:17:24.049
event demonstrated that winter Storm Elliot as you

00:17:24.049 --> 00:17:27.589
said was, was quick and deep and, and ERCOT missed

00:17:27.589 --> 00:17:30.539
the forecast but was prepared. But I think it's important

00:17:30.539 --> 00:17:33.769
to continue to refine the load forecasting and work

00:17:33.769 --> 00:17:36.289
with the other markets and see what they're doing to

00:17:36.579 --> 00:17:40.170
um, be better prepared in the future for this extreme

00:17:40.170 --> 00:17:42.880
weather that, that's here to stay the firm fuel product

00:17:42.890 --> 00:17:45.779
as I mentioned, you know, we, we take swift action

00:17:45.779 --> 00:17:48.160
this past year on it and it has provided a lot of

00:17:48.160 --> 00:17:52.109
benefits. How many megawatts did you use of our units

00:17:52.109 --> 00:17:55.690
Did you use this time for part of the event? We were

00:17:55.690 --> 00:17:58.450
using about 7 50 either. I think at the peak, it was

00:17:58.450 --> 00:18:01.700
more like 9 50 a third.

00:18:03.240 --> 00:18:07.410
We did have some entities that generated with their

00:18:07.410 --> 00:18:10.130
oil on their own as well.

00:18:12.500 --> 00:18:16.000
Well, fantastic. Um, and you know, to your point Commissioner

00:18:16.000 --> 00:18:18.769
Glotfelty I think it's important that we continue to

00:18:18.779 --> 00:18:23.339
also, um, focus not only on, um, you know what, you

00:18:23.339 --> 00:18:24.970
know, what, what information we're getting from the

00:18:24.970 --> 00:18:27.720
generators, but also ways that we can improve generation

00:18:27.720 --> 00:18:31.500
availability during, during the winter. So I don't

00:18:31.500 --> 00:18:33.940
know how much how many megawatts that we have, um,

00:18:33.940 --> 00:18:38.490
that were forced out. Well. So from the evening peak

00:18:38.500 --> 00:18:42.930
on thursday night to the morning peak on friday morning

00:18:42.930 --> 00:18:47.700
there were about 5.7 gigawatts. That was um, that,

00:18:47.710 --> 00:18:51.880
that 5.7 gigawatts additional that went out. Now not

00:18:51.880 --> 00:18:54.359
all of those necessarily were weather related. In fact

00:18:54.369 --> 00:18:57.250
large number may not have been and will be digging

00:18:57.250 --> 00:18:59.630
into each and every one of those to find out what was

00:18:59.630 --> 00:19:00.289
going on.

00:19:02.210 --> 00:19:08.250
Yes, ma'am. And as you mentioned, fuel was at the most

00:19:08.250 --> 00:19:11.430
vulnerable, vulnerable points of our gas supply chain

00:19:11.440 --> 00:19:14.759
Uh, really, really proved its worth in that event.

00:19:14.769 --> 00:19:16.750
And I know you've worked hard on that and been been

00:19:16.759 --> 00:19:18.980
leading the charge on that. So thank you for the work

00:19:18.980 --> 00:19:21.210
on that and we're seeing the results,

00:19:22.819 --> 00:19:23.660
saw it in action.

00:19:25.630 --> 00:19:28.420
I think your comments were dead on on the demand response

00:19:28.420 --> 00:19:30.990
And so I'm glad you highlighted that. And any time

00:19:30.990 --> 00:19:33.299
that you, you know, we, we feel like it's working.

00:19:33.299 --> 00:19:36.230
But any time that you can see the science and the data

00:19:36.230 --> 00:19:39.809
that you know, validates that that action, I think

00:19:39.809 --> 00:19:43.380
that's an important thing to highlight and um, definitely

00:19:43.380 --> 00:19:45.990
says that we're moving in the right direction. Um,

00:19:45.990 --> 00:19:49.039
the other thing that I think is, um, is noteworthy

00:19:49.039 --> 00:19:51.440
and I think you kind of alluded to it in your comments

00:19:51.450 --> 00:19:54.490
is I think the approach that the commission has taken

00:19:54.500 --> 00:19:57.970
in terms of focusing on compliance. And I think you

00:19:57.970 --> 00:20:00.390
mentioned it earlier, this isn't a gotcha, this is

00:20:00.400 --> 00:20:04.799
a process that's put in place, that encourages um,

00:20:05.009 --> 00:20:08.470
you know, after the event to go back and actually do

00:20:08.470 --> 00:20:12.519
a root cause analysis on your own, determine what um

00:20:12.529 --> 00:20:16.079
you could have done better and then proactively go

00:20:16.089 --> 00:20:19.480
forth and implement those changes. And I think, um

00:20:19.490 --> 00:20:23.039
you know, ERCOT is in, is we've got both the generators

00:20:23.039 --> 00:20:25.259
we've got ERCOT we've got the transmission systems

00:20:25.269 --> 00:20:29.329
that are all of that mindset and so, um, very much

00:20:29.339 --> 00:20:35.490
um, a good approach in terms of um promoting operational

00:20:35.490 --> 00:20:39.190
integrity, promoting reliability and sustainability

00:20:39.190 --> 00:20:44.910
of the system. So, good job, I will say um Commissioner

00:20:44.910 --> 00:20:48.140
Jackson is the only one who has used the word root

00:20:48.140 --> 00:20:52.359
cause analysis once now, twice in this setting and

00:20:52.359 --> 00:20:55.230
I think it shows her expertise in the, in the engineering

00:20:55.230 --> 00:20:57.990
world and what the private sector really does when

00:20:57.990 --> 00:20:59.950
they have an outage is they go back and they look,

00:20:59.950 --> 00:21:02.710
they do root cause analysis and find the problems,

00:21:02.720 --> 00:21:05.789
the breakdowns of the, of the chain and they fix them

00:21:05.799 --> 00:21:09.700
And uh, so I love having that experience on the commission

00:21:09.710 --> 00:21:13.819
So indeed, I know our resident engineer is continuous

00:21:13.819 --> 00:21:16.140
improvement and that's impossible manner. That's right

00:21:17.029 --> 00:21:19.819
if you don't mind. I have one other thing, I think

00:21:19.819 --> 00:21:25.210
it um, I hope in your after action report, you do spend

00:21:25.210 --> 00:21:31.369
a little bit of time on the um, The misses the swing

00:21:31.369 --> 00:21:36.269
and the miss is on the demand numbers. Um I think uh

00:21:36.279 --> 00:21:39.680
they weren't off by one or 2000 MW. They were off by

00:21:39.680 --> 00:21:41.410
a whole lot more than that. And I hope you all can

00:21:41.410 --> 00:21:45.720
spend some time in that report looking at how you perhaps

00:21:45.720 --> 00:21:47.619
missed it, what those problems were, but then how you

00:21:47.619 --> 00:21:51.839
can improve that going forward. All right, good deal

00:21:51.849 --> 00:21:52.549
Thank you dan.

00:21:54.380 --> 00:21:57.440
We don't have anything on items. Go back to the top

00:21:57.440 --> 00:22:00.740
of our agenda. Items two and three. Which brings us

00:22:00.740 --> 00:22:03.990
to item number four. Mr could you lay that out for

00:22:03.990 --> 00:22:08.049
us? Item four is docket 52487. It's the application

00:22:08.049 --> 00:22:12.529
of energy to amend the CCN to construct a power plant

00:22:12.539 --> 00:22:16.710
down in Orange County. We have a motion for rehearing

00:22:16.710 --> 00:22:20.759
in front of the commission. We got to two separate

00:22:20.849 --> 00:22:24.250
elements of this to take up any initial thoughts or

00:22:24.250 --> 00:22:30.210
comments, refer to the representative for myself. It's

00:22:30.210 --> 00:22:35.130
a great excuse will. Uh Well as you noted,

00:22:37.200 --> 00:22:39.849
yes, I can't wait to S. P. P. And S. P. S

00:22:39.849 --> 00:22:45.359
Come up. Um Alright, so as you noted, uh Mr Journeay

00:22:45.369 --> 00:22:48.920
Uh T I c filed a motion for hearing on december 12th

00:22:48.930 --> 00:22:52.119
2020 to that motion was technically denied by operation

00:22:52.119 --> 00:22:57.599
of law on monday january 9th 2023. However, I recommend

00:22:57.599 --> 00:23:00.019
that the commission and vote Texas government code

00:23:00.029 --> 00:23:05.400
section 2001.146. Subsection E to extend the deadline

00:23:05.400 --> 00:23:08.500
for the commission to act on the motion because today

00:23:08.500 --> 00:23:13.160
january 12th is within 10 days after january 9th. Um

00:23:13.380 --> 00:23:15.349
The commission's open meeting schedule constitutes

00:23:15.349 --> 00:23:18.009
good cost to extend the deadline for the commission

00:23:18.009 --> 00:23:21.829
to act on the motion um Today because it's the first

00:23:21.829 --> 00:23:24.609
regularly scheduled open meeting at which the commission

00:23:24.609 --> 00:23:27.019
could reasonably consider T. I. C. S. Motion for rehearing

00:23:27.029 --> 00:23:30.329
So I would make a motion to extend time today for the

00:23:30.329 --> 00:23:33.130
commission to act on T. T. I. C. S. Motion for rehearing

00:23:33.130 --> 00:23:38.410
under Texas government code section 2001.146. Subsection

00:23:38.420 --> 00:23:41.220
B makes sense to me. We got a motion do we have

00:23:41.220 --> 00:23:44.609
a second? Second motion Second all in favor say aye

00:23:44.619 --> 00:23:48.759
aye, not opposed motion passes that brings us to the

00:23:48.759 --> 00:23:53.650
next part of this. Okay, so having now extended the

00:23:53.660 --> 00:23:56.190
deadline, I would then grant rehearing in the stock

00:23:56.190 --> 00:24:00.380
it to delete findings of fact 91 92 99 regarding the

00:24:00.380 --> 00:24:03.640
request for proposals in this proceeding. These three

00:24:03.640 --> 00:24:06.519
findings are unnecessary and could unintentionally

00:24:06.519 --> 00:24:08.829
established precedent that future applicants could

00:24:08.829 --> 00:24:12.490
rely on the three findings of fact should be deleted

00:24:12.490 --> 00:24:14.920
without could be deleted without undermining the commission's

00:24:14.920 --> 00:24:17.880
decision. So, I would make a motion to grant rehearing

00:24:17.880 --> 00:24:23.140
to delete findings of fact 91 92 93 99. Also makes

00:24:23.140 --> 00:24:27.420
sense to me. We've got a motion 2nd 2nd motion a second

00:24:27.420 --> 00:24:30.269
all in favor say, aye, aye none opposed motion passes

00:24:30.269 --> 00:24:34.900
nicely done. Commissioner. Uh, we don't have anything

00:24:34.910 --> 00:24:40.400
on five items six and seven and eight will be taken

00:24:40.400 --> 00:24:44.309
up later in the meeting uh, for items nine through

00:24:44.309 --> 00:24:50.000
16, we don't have anything. So that brings us to Item

00:24:50.000 --> 00:24:53.579
17, which is our report to the legislature

00:24:55.130 --> 00:24:58.980
Last week. Our staff Filer agents report to the 88th

00:24:59.039 --> 00:25:03.240
legislature before we get to any discussion on this

00:25:03.240 --> 00:25:07.329
item first and foremost, want to thank the many contributors

00:25:07.329 --> 00:25:12.630
to this report. This was a huge team effort. Uh and

00:25:12.640 --> 00:25:17.839
every single staff member who was had involved was

00:25:17.839 --> 00:25:22.210
involved in his development. Uh as you can imagine

00:25:22.220 --> 00:25:26.700
this interim has not been a standard interim for the

00:25:26.710 --> 00:25:30.529
PUC Uh, so in addition to all of the tremendous mental

00:25:30.529 --> 00:25:35.849
work uh, that, that you are familiar with. Uh, everybody

00:25:35.849 --> 00:25:40.210
contribute in our agency contributed to this report

00:25:40.220 --> 00:25:44.569
but most specifically want to recognize, uh, name a

00:25:44.569 --> 00:25:48.640
mom Tahan, Eliana de la fuente Mac Arthur, Rama Singh

00:25:48.640 --> 00:25:53.289
Rastogi, maddie Heath and Rebecca's Arwa's. Those folks

00:25:53.299 --> 00:25:58.950
put in many, many, many long hours over holidays, weekends

00:25:59.680 --> 00:26:02.970
late nights to get this thing to the finish line and

00:26:02.970 --> 00:26:06.650
we're very, very grateful that they got it done and

00:26:06.660 --> 00:26:10.309
got us a good work product ready to send the Legislature

00:26:10.319 --> 00:26:13.930
there's obviously lots to report covers quite a bit

00:26:13.940 --> 00:26:19.140
And so I just want to lead with a sincere thanks to

00:26:19.140 --> 00:26:22.589
everybody who put so much work into this. Uh, with

00:26:22.589 --> 00:26:26.339
that. I'll open it up for questions, comments and I

00:26:26.349 --> 00:26:29.000
think we've got Rebecca is here to answer any questions

00:26:29.009 --> 00:26:31.970
we may have. Mr Chairman, I would like to Echo your

00:26:31.970 --> 00:26:34.940
thanks to staff. And as it was pointed out to me, this

00:26:34.940 --> 00:26:40.059
was an 18 month process incorporating input from all

00:26:40.059 --> 00:26:44.160
staff at all levels. Um and and I am grateful for the

00:26:44.160 --> 00:26:48.259
inclusion of uh those recommendations from adjunct

00:26:48.269 --> 00:26:52.420
entities that staff is also participants on. Um it's

00:26:52.420 --> 00:26:56.059
helpful to speak with one voice when we know that policy

00:26:56.059 --> 00:26:59.819
is in the public interest. And um and I apologize for

00:26:59.819 --> 00:27:02.650
any miscommunication on my part in trying to coordinate

00:27:02.660 --> 00:27:06.099
and Herd cats in this way dealing with task forces

00:27:06.099 --> 00:27:10.390
and then agencies of 200 people. Um but the product

00:27:10.390 --> 00:27:14.240
is is sound and uh I believe the recommendations are

00:27:14.250 --> 00:27:17.029
certainly in the public interest, especially on the

00:27:17.029 --> 00:27:19.119
A. D. R. Front which Commissioner Glotfelty and I have

00:27:19.119 --> 00:27:24.730
had a part in protecting um protecting consumers in

00:27:24.730 --> 00:27:27.869
this new environment uh is important. Um it's part

00:27:27.869 --> 00:27:31.230
of our core function at the agency. Uh The industry

00:27:31.230 --> 00:27:35.130
is changing, it's dynamic, it's evolving and um and

00:27:35.130 --> 00:27:37.910
we need to ensure that we have the flexibility to to

00:27:37.910 --> 00:27:41.390
protect consumers and one not give the industry a black

00:27:41.390 --> 00:27:44.079
eye but to foster an environment where that innovation

00:27:44.079 --> 00:27:48.589
and dynamism may continue. So so I applaud the efforts

00:27:48.589 --> 00:27:50.599
on the part of the task force as well as staff and

00:27:50.599 --> 00:27:53.990
working with that task force uh to produce a strong

00:27:53.990 --> 00:27:59.170
outcome for the public. Thank you all about the consumers

00:27:59.170 --> 00:27:59.829
at the end of the day.

00:28:01.549 --> 00:28:04.390
You know their thoughts, comments on the agency report

00:28:05.380 --> 00:28:09.680
Alright, in that case Um in that case I'll entertain

00:28:09.680 --> 00:28:12.319
a motion to approve the biennial agency report to the

00:28:12.319 --> 00:28:14.579
88th legislature with authorization to staff to make

00:28:14.579 --> 00:28:18.829
any technical changes necessary before delivery. Got

00:28:18.829 --> 00:28:22.089
a motion in a second. All in favor say aye. None opposed

00:28:22.089 --> 00:28:23.079
motion passes.

00:28:24.990 --> 00:28:28.000
Thank you. And thanks again to the staff, tremendous

00:28:28.009 --> 00:28:32.549
tremendous lift. Alright, having convened in a duly

00:28:32.549 --> 00:28:35.049
noticed open meeting, the commission will hold a closed

00:28:35.059 --> 00:28:41.220
session pursuant to sections 551.71551 point 74551.76

00:28:41.240 --> 00:28:46.029
and 551.89 of the Texas government code. We will be

00:28:46.039 --> 00:28:48.099
back in a bit. Thank you all

00:28:56.309 --> 00:29:00.039
welcome back. The closed session is hereby concluded

00:29:00.039 --> 00:29:04.269
11:07 a.m. On january 12th 2022 the commission will

00:29:04.269 --> 00:29:06.359
resume his public meeting. The commission will not

00:29:07.329 --> 00:29:10.529
take any action following closed session. I don't have

00:29:10.529 --> 00:29:16.970
anything on I'm number 18 but on item number 19 we

00:29:16.970 --> 00:29:20.730
do have an update from our executive director. Thank

00:29:20.730 --> 00:29:23.099
you. Mr Chairman. Good morning Commissioners. Just

00:29:23.099 --> 00:29:26.599
two items this morning. First we all know jay stone

00:29:26.599 --> 00:29:29.599
works on one of our employees that works on staff just

00:29:29.599 --> 00:29:32.700
to let you know that his father passed away last weekend

00:29:32.700 --> 00:29:36.279
So as you're in prayer and and your thoughts just lift

00:29:36.279 --> 00:29:39.980
him and his family up in this difficult time. The second

00:29:39.980 --> 00:29:42.769
thing and you let her get away too easy on her last

00:29:42.769 --> 00:29:46.519
time at this table as PUC employee. Um do you have

00:29:46.519 --> 00:29:49.670
to report that Rebecca's airways will be leaving staff

00:29:49.680 --> 00:29:53.839
on the, I believe the 20th of january which is you

00:29:53.839 --> 00:29:57.809
know very sad for us is a big loss cannot be replaced

00:29:57.809 --> 00:30:00.359
and I would just say to her, I've told her this, I

00:30:00.369 --> 00:30:03.920
wanna be able to see her. Um I've told her this privately

00:30:03.930 --> 00:30:06.730
a bunch but I would be remiss if I did not say

00:30:06.730 --> 00:30:10.380
it here. Everyone in this room, everyone in this state

00:30:10.980 --> 00:30:14.410
everyone that diess owes you a great debt, a debt of

00:30:14.420 --> 00:30:16.589
gratitude. If you had not been here over the last two

00:30:16.589 --> 00:30:20.869
years this would not have worked. A lot of people can

00:30:20.869 --> 00:30:22.819
take a lot of credit for the good work that's been

00:30:22.819 --> 00:30:25.970
done, but no one can take more credit than you. Um

00:30:25.980 --> 00:30:29.029
personally I would not have gotten through last session

00:30:29.039 --> 00:30:32.369
If it were not for you. The hours you put in explaining

00:30:32.369 --> 00:30:35.450
things like 50 times fit to me. So I could go testify

00:30:35.450 --> 00:30:38.829
on these things may not seem completely uneducated

00:30:38.829 --> 00:30:42.779
sitting next to ri mm and other folks um is something

00:30:42.779 --> 00:30:46.430
is a debt I can't repay and um we're excited for you

00:30:46.440 --> 00:30:49.369
I'm extremely sad to see you leave, but I hope for

00:30:49.369 --> 00:30:51.720
you all the things I hope for myself and and one of

00:30:51.720 --> 00:30:55.230
those is a career that you continue to find rewarding

00:30:55.240 --> 00:30:57.839
And um I know you will, wherever you are, you will

00:30:57.839 --> 00:31:01.519
be extremely valuable and do tremendous work and just

00:31:01.519 --> 00:31:04.240
know that wherever I am, you will always have a place

00:31:04.240 --> 00:31:07.130
at that organization because I've never, in my professional

00:31:07.130 --> 00:31:09.619
career met someone as dedicated and hardworking as

00:31:09.619 --> 00:31:12.220
you so

00:31:20.880 --> 00:31:25.569
there's no way I can top that. I'm gonna double down

00:31:25.569 --> 00:31:28.269
on everything thomas said we will miss you terribly

00:31:28.279 --> 00:31:33.009
but wish you all the best Rebecca don't go too far

00:31:33.680 --> 00:31:34.990
I hope to keep saying it.

00:31:39.950 --> 00:31:44.500
All right. We don't have anything else on our agenda

00:31:44.500 --> 00:31:48.230
except items 67 and eight which we will take up together

00:31:49.299 --> 00:31:53.589
And as you all know, this is today's primary item but

00:31:53.589 --> 00:31:56.589
before jumping in, I'd like to remind folks how we

00:31:56.589 --> 00:32:00.559
got here. This project began with a series of work

00:32:00.559 --> 00:32:02.759
sessions, as you know, back beginning, back in the

00:32:02.759 --> 00:32:09.940
summer uh of 2021 multiple work sessions, dozens and

00:32:09.940 --> 00:32:14.519
dozens of hours of invited testimony, expert testimony

00:32:14.529 --> 00:32:19.539
Commissioner deliberations discussions, uh intents

00:32:19.539 --> 00:32:24.650
at many times. Thousands of pages of public comment

00:32:24.650 --> 00:32:29.380
multiple realms of public comment. Hundreds and hundreds

00:32:29.380 --> 00:32:33.900
of staff hours dedicated to synthesizing all of that

00:32:34.539 --> 00:32:39.150
resulted in our blueprint uh published last December

00:32:39.150 --> 00:32:45.859
or in December of 21, which was a tremendous, Tremendous

00:32:45.859 --> 00:32:50.400
accomplishment that then led us to hire an outside

00:32:50.400 --> 00:32:55.680
consultant as directed by S. B. three um And we have

00:32:55.690 --> 00:32:59.299
been going through that process since both the procurement

00:32:59.299 --> 00:33:02.049
and then working with that outside consultant took

00:33:02.049 --> 00:33:08.779
up the bulk of 2022 and as uh you all know, we

00:33:08.789 --> 00:33:15.230
shared those results of the public uh this fall the

00:33:15.240 --> 00:33:21.789
bottom line is we are required by SP three to develop

00:33:21.789 --> 00:33:25.680
reliability, standard and reliability service to ensure

00:33:26.450 --> 00:33:29.710
reliability during periods of low non dispatchable

00:33:29.710 --> 00:33:35.819
power. There there were two directives in S B 32 problems

00:33:35.819 --> 00:33:38.420
to solve solve the extreme winter weather event like

00:33:38.430 --> 00:33:40.829
we experienced in your E which we've addressed with

00:33:40.829 --> 00:33:42.829
weatherization, better coordination with natural gas

00:33:42.829 --> 00:33:45.779
and other reforms and we as we spoke earlier have seen

00:33:45.779 --> 00:33:48.170
the results of those reforms, especially most recently

00:33:48.170 --> 00:33:51.059
over the christmas storm. The second part of SB three

00:33:51.059 --> 00:33:54.759
was to ensure reliability during periods of low non

00:33:54.759 --> 00:33:58.210
dispatchable power, that's what this is about today

00:33:59.289 --> 00:34:02.559
Before we dive into the meat of the issue, I would

00:34:02.559 --> 00:34:06.079
like to lay out how I proposed for you all uh you

00:34:06.079 --> 00:34:09.670
all have been briefed on this but the order of business

00:34:09.679 --> 00:34:12.829
I'd first like to start by calling up our consultant

00:34:12.829 --> 00:34:16.199
to lay out their work the process they went through

00:34:16.199 --> 00:34:19.380
and then their thoughts on the public public comments

00:34:19.380 --> 00:34:23.590
that have been filed uh then ERCOT is prepared to present

00:34:23.599 --> 00:34:29.150
their thoughts and considerations on comments and high

00:34:29.150 --> 00:34:32.019
level overview of some of the analysis they have run

00:34:32.030 --> 00:34:36.849
in response to requests from this commission. As you

00:34:36.849 --> 00:34:39.639
know, our staff has also put in a lot of work and

00:34:39.639 --> 00:34:44.030
has a has published a memo in response to our public

00:34:44.030 --> 00:34:49.300
comments. And then of course most importantly we will

00:34:49.300 --> 00:34:52.960
then get to the commissioner discussion and would welcome

00:34:52.960 --> 00:34:57.260
you all to invite up any witnesses that you would like

00:34:57.269 --> 00:35:02.679
to uh offer clarifying statements or ask questions

00:35:03.599 --> 00:35:07.250
Uh and of course we'll have our consultants are caught

00:35:07.260 --> 00:35:12.889
PUC staff and um and staff experts available to answer

00:35:12.889 --> 00:35:16.579
questions and offer their perspectives. I hope that

00:35:16.880 --> 00:35:21.960
order business works for you all And I will also say

00:35:21.960 --> 00:35:26.320
that the purpose of today is purely deliberation. I

00:35:26.329 --> 00:35:30.269
do not expect you not plan to ask for any formal action

00:35:30.280 --> 00:35:33.269
This is very much in the spirit I hope of the work

00:35:33.269 --> 00:35:37.679
sessions we had in 21 a time for discussion, deliberation

00:35:37.679 --> 00:35:42.269
questions uh to make sure we are thorough and going

00:35:42.269 --> 00:35:46.210
through this process and that everyone has a chance

00:35:46.210 --> 00:35:48.849
to air their thoughts, ask the questions they want

00:35:49.320 --> 00:35:52.599
uh and to have that discussion between all of the commissioners

00:35:52.650 --> 00:35:59.389
and our stakeholders. Um As I've told each of you in

00:35:59.389 --> 00:36:03.829
our one on one meetings, my hope is that going forward

00:36:03.840 --> 00:36:10.329
are posted. Meeting for the 19th is when we can achieve

00:36:10.340 --> 00:36:14.320
two things. I hope one fulfill our statutory obligation

00:36:14.320 --> 00:36:19.980
under SB three to recommend recommend a reliability

00:36:19.980 --> 00:36:23.150
service to the Legislature to ensure reliability during

00:36:23.150 --> 00:36:25.380
periods of low non dispatchable power

00:36:27.150 --> 00:36:31.760
and at that point stop offer purely a recommendation

00:36:31.769 --> 00:36:37.099
to the Legislature And then second discuss today and

00:36:37.099 --> 00:36:41.710
then consider on the 19th if we need some sort of bridge

00:36:41.710 --> 00:36:44.440
mechanism between now and any implementation of any

00:36:44.440 --> 00:36:48.690
long term solution. If yes, what's the best way to

00:36:48.690 --> 00:36:55.550
identify that and develop it? Uh As we, so that's that's

00:36:55.550 --> 00:37:01.300
the goal for the 19th. As we move into this discussion

00:37:01.440 --> 00:37:05.000
I want to thank all of the members of the public and

00:37:05.000 --> 00:37:07.389
the stakeholders who have provided their comments during

00:37:07.389 --> 00:37:11.039
this comment period. Uh this has been an intense and

00:37:11.039 --> 00:37:13.289
comprehensive process. Everybody knows that we have

00:37:13.289 --> 00:37:17.400
over 1000 pages of comments received as part of this

00:37:17.400 --> 00:37:20.769
most recent public comment period that shows that people

00:37:20.769 --> 00:37:24.929
are engaged and care about ensuring our grid is reliable

00:37:25.679 --> 00:37:27.880
and we're grateful for the work that goes into that

00:37:27.960 --> 00:37:32.329
and that insight and input. I also want to thank each

00:37:32.329 --> 00:37:35.329
of you all, everybody on this diocese put in a lot

00:37:35.329 --> 00:37:40.030
of work a lot of hours to get where we are now

00:37:40.039 --> 00:37:44.059
Uh, everyone in this diocese has unique experience

00:37:44.070 --> 00:37:47.349
background and expertise and you've all brought that

00:37:47.349 --> 00:37:52.730
to bear. Uh and everybody has contributed to get to

00:37:52.730 --> 00:37:53.960
the point where we are today.

00:37:55.480 --> 00:37:58.599
This has not been an easy process for any of you all

00:37:59.110 --> 00:38:05.829
our staff, but this is also something that is so important

00:38:05.840 --> 00:38:09.150
to the state of Texas that it warrants that kind of

00:38:09.150 --> 00:38:12.219
effort diligence and analysis.

00:38:14.280 --> 00:38:16.800
A lot of work has gone into this, but as you all

00:38:16.800 --> 00:38:20.199
know better than almost anyone time is of the essence

00:38:20.210 --> 00:38:25.320
our state's growing people are depending on us keeping

00:38:25.320 --> 00:38:29.130
the grid reliable and ensuring that our grid keeps

00:38:29.139 --> 00:38:30.599
up with that growth

00:38:32.340 --> 00:38:35.449
After reviewing all the comments and meeting with a

00:38:35.449 --> 00:38:39.119
wide array of stakeholders over the past month and

00:38:39.119 --> 00:38:43.250
a half. In addition to the previous 18 months of meetings

00:38:44.460 --> 00:38:48.010
I still believe PCM is the best mechanism to fulfill

00:38:48.010 --> 00:38:52.320
our obligation under SB three to ensure reliability

00:38:52.329 --> 00:38:55.199
In ERCOT during periods of low non dispatchable power

00:38:56.599 --> 00:38:59.659
lot of the criticism and feedback that we saw in our

00:38:59.659 --> 00:39:04.670
comments were technical in nature and as we've discussed

00:39:04.679 --> 00:39:09.199
multiple times, I think are fair questions to be asked

00:39:09.199 --> 00:39:12.849
and decisions to be made. If we do get to a technical

00:39:13.000 --> 00:39:16.949
implementation point and they certainly offer opportunities

00:39:16.949 --> 00:39:21.949
to improve uh the contemplated PCM. Uh and that's why

00:39:21.949 --> 00:39:26.340
any any such implementation phase, if we get to that

00:39:26.340 --> 00:39:30.909
point would rely heavily on market participants, stakeholders

00:39:30.909 --> 00:39:35.650
tax experts at archives to go through all of those

00:39:35.650 --> 00:39:39.960
decision points, answer those questions, examine which

00:39:39.960 --> 00:39:43.670
version of each of these components is the best way

00:39:43.670 --> 00:39:45.829
to move forward. Uh

00:39:48.239 --> 00:39:49.739
If we can get to

00:39:51.619 --> 00:39:53.920
the point where we can identify a policy direction

00:39:53.920 --> 00:39:57.239
we want to take of course, like I said, we'll defer

00:39:57.980 --> 00:40:02.389
defer to the legislature uh to provide us feedback

00:40:03.389 --> 00:40:06.769
and pick a different direction tell us we're off course

00:40:06.780 --> 00:40:11.159
give us another give us another path and we'll of course

00:40:11.159 --> 00:40:16.909
be happy to support and implement that. In the meantime

00:40:18.119 --> 00:40:20.670
we have a duty to implement the laws that are currently

00:40:20.670 --> 00:40:24.480
on the books and we've got to continue moving forward

00:40:24.480 --> 00:40:26.409
to meet the growth that's facing our state

00:40:29.139 --> 00:40:31.639
as you've heard me say before. But I think it bears

00:40:31.650 --> 00:40:34.059
repeating given the nature of our conversation today

00:40:34.610 --> 00:40:38.250
I believe that PCM is the right solution Because it's

00:40:38.250 --> 00:40:42.199
a comprehensive solution that sets a clear reliability

00:40:42.199 --> 00:40:45.519
standard as required by S. B. three. It's not a band

00:40:45.519 --> 00:40:50.030
aid it's not a dabble here on the edges and a touch

00:40:50.039 --> 00:40:53.710
over on the side of the grid. It ensures system wide

00:40:53.710 --> 00:40:58.099
reliability. It does not interfere and is completely

00:40:58.099 --> 00:41:01.659
separate from the existing market. The existing real

00:41:01.659 --> 00:41:05.039
time day ahead markets would continue to operate as

00:41:05.039 --> 00:41:09.710
usual. Does not impact or interface with the bilateral

00:41:09.710 --> 00:41:14.219
market in any way. It adds a reliability service on

00:41:14.219 --> 00:41:17.539
top of the existing market. It's a market based solution

00:41:18.150 --> 00:41:20.840
Market forces drive better and more efficient technology

00:41:20.840 --> 00:41:24.969
and deliver lower costs for customers just like any

00:41:24.969 --> 00:41:27.500
market. It's self correcting. The cure for high prices

00:41:27.500 --> 00:41:30.829
is high prices. If we don't have enough reliable, non

00:41:30.829 --> 00:41:35.820
dispatchable or non renewable power prices will go

00:41:35.820 --> 00:41:37.989
up if we have enough dispatchable power then prices

00:41:37.989 --> 00:41:42.389
will go down and so at the end of the day, if

00:41:42.400 --> 00:41:48.099
the P. C. M. Or something like it, um it's not needed

00:41:48.860 --> 00:41:51.690
then we'll have adequate supply and the price is the

00:41:51.690 --> 00:41:55.260
price impact on consumers would be negligible benefits

00:41:55.260 --> 00:41:56.960
of markets. Is their self correcting.

00:41:58.519 --> 00:42:03.869
As commissioner, McAdams has suggested and proclaiming

00:42:03.869 --> 00:42:08.610
from the beginning. Uh this provides a separation of

00:42:08.610 --> 00:42:11.570
economic scarcity from physical scarcity, which is

00:42:11.570 --> 00:42:16.719
a key key concept that we must must focus on. It's

00:42:16.719 --> 00:42:19.210
not a capacity payment just for sitting on the sideline

00:42:19.789 --> 00:42:22.739
A key part of this is paying for what we need and

00:42:22.739 --> 00:42:25.340
paying for that performance. If the wind is blowing

00:42:25.340 --> 00:42:27.650
the sun is shining and we have plenty of reserves,

00:42:27.659 --> 00:42:31.440
consumers don't need to pay for the power. At that

00:42:31.440 --> 00:42:36.110
point, it has a low administrative overhead. It avoids

00:42:36.110 --> 00:42:41.750
the cumbersome rules and regulations of other products

00:42:41.750 --> 00:42:45.050
in the market. Financial operational risk is based

00:42:45.050 --> 00:42:48.070
on market participant businesses, not on ERCOT and

00:42:48.070 --> 00:42:51.639
not on consumers Paper for performance. It does not

00:42:51.639 --> 00:42:54.889
pay company just for owning something that happens

00:42:54.889 --> 00:42:58.289
to sit there, which leads to better outcomes for the

00:42:58.289 --> 00:43:02.940
grid and the consumer market manipulation and self

00:43:02.940 --> 00:43:06.050
dealing at the expense of consumers is a concern that

00:43:06.059 --> 00:43:08.969
every member of this commission has expressed from

00:43:08.969 --> 00:43:11.329
the beginning consistently throughout this process

00:43:11.329 --> 00:43:14.769
and I agree wholeheartedly, which is why another key

00:43:14.769 --> 00:43:18.019
component of the contemplated PCM is that it will be

00:43:18.019 --> 00:43:21.360
centrally cleared, which is something you've highlighted

00:43:21.360 --> 00:43:25.429
and advocated from the beginning. ERCOT would be nothing

00:43:25.429 --> 00:43:29.179
more than a clearinghouse between buyers and sellers

00:43:29.179 --> 00:43:32.320
of credit, much like a stock exchange. But that central

00:43:32.320 --> 00:43:35.789
clearing provides transparency, minimizes self dealing

00:43:35.800 --> 00:43:38.590
and requires accountability for all participants in

00:43:38.590 --> 00:43:43.150
the market system. It brings the opaque to light which

00:43:43.150 --> 00:43:46.400
is a benefit for all consumers and participants.

00:43:48.070 --> 00:43:49.449
This is a market friendly

00:43:50.989 --> 00:43:55.760
solution that can be adjusted to accommodate our L

00:43:55.760 --> 00:43:59.570
S. E. S and be compatible with their businesses and

00:43:59.579 --> 00:44:03.230
in some potential ways enhance their ability to manage

00:44:03.230 --> 00:44:07.460
risk and thus delivering lower costs and volatility

00:44:07.460 --> 00:44:10.789
to consumers. I'm looking forward to this discussion

00:44:10.800 --> 00:44:12.889
I know you all have a lot of thoughts and a lot

00:44:12.889 --> 00:44:16.320
to contribute to this discussion. Uh, and I know that

00:44:16.320 --> 00:44:17.579
at the end of the day,

00:44:19.329 --> 00:44:24.000
every one of you all is approaching this from the fundamental

00:44:24.000 --> 00:44:29.559
point that our job is to deliver reliability to Texans

00:44:31.030 --> 00:44:34.079
our citizens deserve it, our economy demands it. And

00:44:34.079 --> 00:44:37.829
I know that that is uh, the underlying motivation for

00:44:37.829 --> 00:44:38.260
y'all.

00:44:39.860 --> 00:44:44.539
So with that uh, we'll start at the

00:44:46.809 --> 00:44:49.289
top of the order if you all have any other opening

00:44:49.300 --> 00:44:51.380
comments or questions or thoughts

00:44:52.949 --> 00:44:55.920
would welcome those. I do, but they might be just as

00:44:55.920 --> 00:45:01.460
long. Um, so you know, I took the time to kind of

00:45:01.460 --> 00:45:04.769
think about this. So I do, I would like to provide

00:45:04.769 --> 00:45:09.050
some remarks. Um, you know, Texas is in a unique position

00:45:09.820 --> 00:45:12.550
Um we were facing many of the same challenges that

00:45:12.550 --> 00:45:14.599
are being experienced in other electricity markets

00:45:14.599 --> 00:45:18.159
in the United States in the world, but The archive

00:45:18.159 --> 00:45:20.469
grade is experiencing exponential and unprecedented

00:45:20.480 --> 00:45:24.010
Load growth. Texas is the ninth largest economy in

00:45:24.010 --> 00:45:26.559
the world and is among the fastest-growing economies

00:45:26.559 --> 00:45:29.730
in the United States. The state is experiencing significant

00:45:29.730 --> 00:45:32.460
economic and population growth in the last couple of

00:45:32.460 --> 00:45:34.449
years. The state's population has increased to over

00:45:34.449 --> 00:45:37.619
30 million, making Texas the second largest state in

00:45:37.619 --> 00:45:41.380
United States and 26 million. Um, customers reside

00:45:41.380 --> 00:45:42.579
currently in ERCOT

00:45:44.809 --> 00:45:47.289
ERCOT grid is rapidly evolving and undergoing dynamic

00:45:47.289 --> 00:45:50.949
change, even though Texas does not have a net zero

00:45:50.949 --> 00:45:53.579
decarbonization goal. Like many other states in the

00:45:53.579 --> 00:45:56.920
country, the ERCOT grid is experiencing leading renewable

00:45:56.920 --> 00:46:00.250
generation and storage penetration in the next few

00:46:00.250 --> 00:46:02.500
years. When generation is expected to grow from about

00:46:02.510 --> 00:46:07.119
36,000 megawatts to over 40,000 megawatts. Solar generation

00:46:07.119 --> 00:46:10.400
is expected to grow from about 14,000 megawatts to

00:46:10.409 --> 00:46:14.909
nearly 40,000 megawatts battery storage is expected

00:46:14.909 --> 00:46:18.690
to grow from about 1700 megawatts to over 7000 megawatts

00:46:20.039 --> 00:46:23.000
To put it in perspective. Texas currently has more

00:46:23.000 --> 00:46:25.420
installed wind solar and storage than any other state

00:46:25.429 --> 00:46:29.539
in the United States with about 48,000 MW, that's 48

00:46:29.550 --> 00:46:33.389
gigawatts of these resources on the system today in

00:46:33.389 --> 00:46:36.699
the next few years. There will likely be about 80,000

00:46:36.710 --> 00:46:40.960
megawatts, 80 gigawatts of wind and solar on the system

00:46:41.280 --> 00:46:44.570
the inflation reduction act, environmental social governance

00:46:44.570 --> 00:46:47.469
investment, community, corporate sustainability goals

00:46:47.480 --> 00:46:50.360
customer interest, technical technological innovation

00:46:50.369 --> 00:46:53.369
and persistently higher natural gas prices that are

00:46:53.369 --> 00:46:55.980
being impacted by geopolitical forces are all driving

00:46:55.980 --> 00:46:58.380
this massive increase in wind, solar and batteries

00:46:58.380 --> 00:46:58.800
in ERCOT

00:47:00.429 --> 00:47:02.949
Like many other states, the ERCOT system has an aging

00:47:02.949 --> 00:47:05.329
dispatchable her mO generation fleet that is under

00:47:05.329 --> 00:47:07.980
physical pressure because these plants are being consistently

00:47:07.980 --> 00:47:10.789
run in ways that have been used that have not been

00:47:10.800 --> 00:47:13.989
that they have not been before. Um in order to provide

00:47:13.989 --> 00:47:17.280
near term reliability markets like the rest of the

00:47:17.280 --> 00:47:20.119
country, the state is experiencing pervasive extreme

00:47:20.119 --> 00:47:23.230
weather conditions that require resiliency and reliability

00:47:23.230 --> 00:47:26.059
driven actions to ensure the lights stay on during

00:47:26.059 --> 00:47:29.429
multiday, extreme weather, winter weather and extreme

00:47:29.440 --> 00:47:33.409
hot summer months. The devastating impacts of winter

00:47:33.409 --> 00:47:36.730
storm Uri and subsequent bipartisan legislative reforms

00:47:36.730 --> 00:47:41.949
passed in 2021 have required the commission ERCOT to

00:47:41.949 --> 00:47:44.329
take a litany of decisive actions to enhance winter

00:47:44.329 --> 00:47:47.110
resiliency and reliability, including as the commissioner

00:47:47.110 --> 00:47:49.559
has mentioned, uh the chairman has mentioned taking

00:47:49.559 --> 00:47:51.829
actions to bring more power generation online earlier

00:47:51.829 --> 00:47:54.280
to meet electricity demand and electricity and extreme

00:47:54.280 --> 00:47:55.369
weather conditions

00:47:57.539 --> 00:48:01.070
using reliability tools earlier to help prevent emergency

00:48:01.079 --> 00:48:05.559
conditions. That means um leaving these important,

00:48:05.570 --> 00:48:07.840
instead of leaving these important reliability tools

00:48:07.840 --> 00:48:10.860
in the toolbox until we're actually an emergency. We've

00:48:10.860 --> 00:48:12.769
pulled them out to use them to prevent emergencies

00:48:12.769 --> 00:48:16.440
like our emergency response service, Implementing mandatory

00:48:16.440 --> 00:48:19.289
weatherization requirements for power generation and

00:48:19.289 --> 00:48:21.539
transmission distribution companies with a statutory

00:48:21.539 --> 00:48:25.559
hammer of two with the ability to assess administrative

00:48:25.559 --> 00:48:28.179
penalties of $1 million dollars per violation per day

00:48:28.840 --> 00:48:31.780
We've established critical Load designation processes

00:48:31.780 --> 00:48:35.360
to ensure that critical natural gas facilities that

00:48:35.360 --> 00:48:37.800
are needed to provide power to electric gas are not

00:48:37.800 --> 00:48:40.869
rotated out during the load shed event. We've improved

00:48:40.869 --> 00:48:43.139
electric gas coordination through the newly created

00:48:43.139 --> 00:48:47.159
Texas elect Texas electric reliability council. That's

00:48:47.159 --> 00:48:49.719
comprised of qi state agency leaders and stakeholders

00:48:49.719 --> 00:48:52.349
from the electricity and oil and gas industries. We've

00:48:52.349 --> 00:48:54.469
developed a critical map through the leadership of

00:48:54.480 --> 00:48:59.329
our um folks from a variety of of agencies and and

00:48:59.329 --> 00:49:02.610
our executive director that identifies critical gas

00:49:02.610 --> 00:49:07.050
facilities that need to be identified so that the road

00:49:07.050 --> 00:49:09.420
commission can properly ensure that those facilities

00:49:09.420 --> 00:49:11.900
are authorized and as mentioned earlier, we developed

00:49:11.900 --> 00:49:14.909
the first in class new firm field product to help ensure

00:49:14.909 --> 00:49:18.389
when a reliability when field ability issues arise

00:49:18.400 --> 00:49:21.840
in the future. All of these critically important actions

00:49:22.530 --> 00:49:25.210
demonstrated substantial benefits during winter storm

00:49:25.210 --> 00:49:28.199
landing this past winter and winter storm Elliott this

00:49:28.199 --> 00:49:32.699
past month where we set a new winter peak record. Uh

00:49:32.710 --> 00:49:34.840
this past summer was the second hottest summer in Texas

00:49:34.840 --> 00:49:39.159
history. ERCOT set 11 new all time peak demand records

00:49:39.170 --> 00:49:42.940
The previous all time peak demand record of 74,820

00:49:42.940 --> 00:49:47.639
megawatts set on august 12 2019 was shattered by the

00:49:47.639 --> 00:49:51.650
new all time peak demand record of 80,038. Megawatt

00:49:51.650 --> 00:49:55.699
set on july 20th This record as the chairman has noted

00:49:56.420 --> 00:49:59.199
was as much demand as the state of new york and California

00:49:59.199 --> 00:49:59.679
combined

00:50:01.309 --> 00:50:03.820
as a result of the hard work by the commission. ERCOT

00:50:03.820 --> 00:50:06.579
the legislature and market participants. ERCOT has

00:50:06.579 --> 00:50:09.710
kept the lights on since winter, store mary through

00:50:09.719 --> 00:50:12.489
to arctic blasts and a record breaking summer but we

00:50:12.489 --> 00:50:16.260
still have work to do the commissioner khan the legislature

00:50:16.260 --> 00:50:19.449
must continue to work together to proactively and diligently

00:50:19.449 --> 00:50:23.030
plan for the future. So Texans have a reliable resilient

00:50:23.030 --> 00:50:26.659
and affordable supply of power, public feedback throughout

00:50:26.659 --> 00:50:29.110
this process has and will continue to be critically

00:50:29.110 --> 00:50:33.489
important. I have read the file public comments and

00:50:33.500 --> 00:50:35.739
they will drive a lot of the questions and dialogue

00:50:35.750 --> 00:50:39.440
um for me today um on evaluating near term and long

00:50:39.440 --> 00:50:41.719
term solutions that will help provide the best outcome

00:50:41.719 --> 00:50:44.980
for the public and the everyday Texans and businesses

00:50:44.989 --> 00:50:48.760
in our state. From my perspective, I believe the commission

00:50:48.769 --> 00:50:52.820
um should as the chairman alluded to um consider um

00:50:52.820 --> 00:50:56.909
near term actions bridge to help ensure reliability

00:50:56.909 --> 00:51:00.150
While long term reliability plan is carefully and holistically

00:51:00.159 --> 00:51:03.550
evaluated and ultimately executed in an efficient,

00:51:03.559 --> 00:51:05.690
effective and responsible manner.

00:51:10.619 --> 00:51:11.369
Thank you ma'am

00:51:13.300 --> 00:51:18.159
Dr comments before we get to our consultants and staff

00:51:18.170 --> 00:51:20.869
and ERCOT presentations, I'd just like to say, I look

00:51:20.869 --> 00:51:22.860
forward to our deliberations. This has been a long

00:51:22.860 --> 00:51:25.440
time coming stakeholders have been on this journey

00:51:25.440 --> 00:51:29.929
with us for a year and a half. Um I concur with

00:51:29.929 --> 00:51:33.139
the breakdown that my colleagues have, have made the

00:51:33.139 --> 00:51:35.449
situation, we have a near term problems and then we

00:51:35.449 --> 00:51:38.389
have a long term vision to satisfy, and the long term

00:51:38.389 --> 00:51:41.360
vision is where Texas is going, where are Load growth

00:51:41.360 --> 00:51:44.280
is going to take us and how do we meet that challenge

00:51:44.289 --> 00:51:47.809
And so I think that's what the plans were constructed

00:51:47.809 --> 00:51:52.030
around the T three evaluated and ultimately why staff

00:51:52.030 --> 00:51:55.570
has recommended PCM as the best in class under their

00:51:55.570 --> 00:52:00.019
view and Mr Chairman, yours um and uh I look forward

00:52:00.019 --> 00:52:01.369
to walking through that today,

00:52:03.630 --> 00:52:05.780
do you mind if I say something real quick? That's why

00:52:05.780 --> 00:52:11.800
you're here. Um so uh I think what I want to do

00:52:11.800 --> 00:52:16.250
is encourage the stakeholders to be really a part of

00:52:16.250 --> 00:52:20.510
this. Um I went back and I looked at um docket number

00:52:20.519 --> 00:52:23.469
I guess 40,000 is what y'all call it the last time

00:52:23.469 --> 00:52:26.659
you all did this resource Adequacy, which amazing!

00:52:26.670 --> 00:52:29.500
Um the same issues are being brought up over and over

00:52:29.500 --> 00:52:33.630
again and over again and over again. Um but what struck

00:52:33.630 --> 00:52:37.090
me as I was looking through the docket um Was that

00:52:37.090 --> 00:52:41.980
there were over 600 filings from interveners in those

00:52:41.980 --> 00:52:47.230
dockets in that docket and they were um challenging

00:52:47.230 --> 00:52:53.260
each other, it was not a one way uh document that was

00:52:53.260 --> 00:52:58.369
telling your view to us, it was you all debating the

00:52:58.369 --> 00:53:02.409
issue amongst yourself, challenging each other's uh

00:53:02.420 --> 00:53:08.119
assumptions challenging each other's um solutions um

00:53:08.130 --> 00:53:12.179
and that's valuable when you only have one way communication

00:53:12.190 --> 00:53:15.449
we only get part of the story. So I encourage you all

00:53:15.460 --> 00:53:18.519
as we go through this implementation and whatever design

00:53:18.519 --> 00:53:21.789
we go with this is just the beginning, if you look

00:53:21.789 --> 00:53:27.820
at the E three report, um long implementation timeline

00:53:27.820 --> 00:53:31.059
short implementation timeline, moderate implementation

00:53:31.059 --> 00:53:33.760
timeline, so we are still gonna be at this for a long

00:53:33.760 --> 00:53:38.829
time and decisions get made when we are communicating

00:53:38.840 --> 00:53:42.989
uh in what's best for Texas and for the citizens of

00:53:42.989 --> 00:53:46.349
Texas and not just what's best for your individual

00:53:46.349 --> 00:53:49.389
company. That's happened before. That happened when

00:53:49.389 --> 00:53:53.739
we went from a fully regulated market to a wholesale

00:53:53.739 --> 00:53:57.860
market to a retail market and then from uh zonal to

00:53:57.860 --> 00:54:02.539
Nodal and we need that to happen again, we need to

00:54:02.550 --> 00:54:05.519
respect each other's positions, respect that everybody

00:54:05.519 --> 00:54:08.199
is in this market for a reason and then do what's right

00:54:08.199 --> 00:54:13.190
for the state, uh and the consumers and um having you

00:54:13.190 --> 00:54:17.260
all work with each other and challenge each other is

00:54:17.260 --> 00:54:20.030
a very important part of that. And so I encourage you

00:54:20.030 --> 00:54:24.090
as we go through this implementation, whatever it is

00:54:24.099 --> 00:54:26.849
that you all just continue to stay involved and be

00:54:26.849 --> 00:54:32.579
more involved. If you can thank you nicely stated in

00:54:32.579 --> 00:54:38.179
an incredibly important point, uh If if we do get to

00:54:38.190 --> 00:54:42.099
an implementation phase pending legislative feedback

00:54:42.110 --> 00:54:47.230
and insight or uh if and when the legislature gives

00:54:47.230 --> 00:54:50.110
us different direction that implementation, whatever

00:54:50.119 --> 00:54:53.710
whatever, whatever we end up implementing the point

00:54:53.719 --> 00:54:58.809
you make stands, that it needs to be an engaged, thorough

00:54:58.820 --> 00:55:02.460
comprehensive discussion on each of the decision points

00:55:02.469 --> 00:55:06.239
that need to be addressed. Thank you for highlighting

00:55:06.239 --> 00:55:11.829
that. Um at this point, uh I think we're ready to call

00:55:11.829 --> 00:55:17.980
up our consultant E three while they're coming up To

00:55:17.980 --> 00:55:21.480
the table two points of order. First of all, once we

00:55:21.480 --> 00:55:26.289
get to the one o'clock hour, I would anticipate recessing

00:55:26.289 --> 00:55:30.750
for 45 minutes for lunch. Uh And then also I'd like

00:55:30.760 --> 00:55:34.130
to recognize ERCOT board. Vice Chairman. Bill flores

00:55:34.500 --> 00:55:37.500
is in the audience with us today. As you all know,

00:55:37.500 --> 00:55:39.630
the ERCOT board is highly engaged and grateful that

00:55:39.639 --> 00:55:40.659
Bill could join us today.

00:55:43.440 --> 00:55:46.219
Alright, Zach, welcome. Okay, state your name and who

00:55:46.219 --> 00:55:49.119
you're with for the record and four years. Thank you

00:55:49.130 --> 00:55:52.360
Thank you. Mr Chairman. My name is Zak Ming. I'm a

00:55:52.360 --> 00:55:55.019
Director with Energy and Environmental Economics E

00:55:55.019 --> 00:55:59.780
three. And sorry, I neglected I didn't realize Miss

00:55:59.780 --> 00:56:04.059
Jackson had some remarks. Sorry, I apologize MS Jackson

00:56:04.070 --> 00:56:08.849
I didn't see you didn't see your thanks for recognizing

00:56:08.849 --> 00:56:12.519
me and just totally agree and endorse all of the comments

00:56:12.519 --> 00:56:14.880
that were made and particularly I think what you mentioned

00:56:14.880 --> 00:56:17.829
just recently that this is the next step along the

00:56:17.829 --> 00:56:22.460
way um that you know, the PUC will be actively engaged

00:56:22.469 --> 00:56:25.309
in any implementation and the process that we will

00:56:25.309 --> 00:56:28.869
continue to steward. Um I didn't want to recognize

00:56:28.869 --> 00:56:31.070
and um say that I appreciate the engagement of the

00:56:31.070 --> 00:56:34.090
public and our stakeholders and the time and effort

00:56:34.090 --> 00:56:37.159
that you spent providing your written comments. We

00:56:37.159 --> 00:56:40.510
received a wide breath of comments, including some

00:56:40.510 --> 00:56:42.969
comments from a retired professional engineer as I

00:56:42.969 --> 00:56:46.260
read through them, uh I've met many of you value your

00:56:46.260 --> 00:56:49.619
input, appreciate your sharing your insight and found

00:56:49.619 --> 00:56:53.329
your comments to be very helpful. Uh public participation

00:56:53.340 --> 00:56:56.429
as we said earlier is a key to a successful outcome

00:56:56.800 --> 00:56:59.449
Staff, I sincerely want to thank you for the time and

00:56:59.449 --> 00:57:01.980
effort you spent over the holidays, reading, reviewing

00:57:01.989 --> 00:57:04.929
and digesting these comments and providing us with

00:57:04.929 --> 00:57:07.809
your recommendations. I did want to highlight that

00:57:07.809 --> 00:57:09.940
some of the comments that were filed were incorporated

00:57:09.940 --> 00:57:13.409
into staff's recommendations. Uh after reviewing all

00:57:13.409 --> 00:57:16.019
of the comments, um evaluating the science and the

00:57:16.019 --> 00:57:19.230
data, meeting with members of the public and stakeholders

00:57:19.239 --> 00:57:22.840
I continue to support the performance, credit mechanism

00:57:23.030 --> 00:57:25.449
achieving reliability and ensuring the lights stay

00:57:25.449 --> 00:57:28.900
on is our number one objective, I believe the PCM is

00:57:28.900 --> 00:57:31.989
the right path forward, a performance based structure

00:57:32.000 --> 00:57:35.159
that will achieve reliability by incentivizing new

00:57:35.159 --> 00:57:38.329
investment in dispatchable generation and provide a

00:57:38.329 --> 00:57:42.750
long term solution. Texas is successful today because

00:57:42.750 --> 00:57:45.659
of the contributions and the success of the competitive

00:57:45.659 --> 00:57:49.269
market. The PCM preserves the energy only market and

00:57:49.269 --> 00:57:51.480
will allow Texas to continue to garner the benefits

00:57:51.480 --> 00:57:55.039
of competition and innovation. I'm looking forward

00:57:55.039 --> 00:57:57.880
to our discussions today about the P. C. M and how

00:57:57.880 --> 00:58:00.949
working together we can ensure that Texas has a more

00:58:00.949 --> 00:58:05.429
reliable dispatchable electric grid. Thank you MS Jackson

00:58:05.429 --> 00:58:08.099
apologize again for not seeing you wave down there

00:58:09.829 --> 00:58:14.460
Okay, no problem. Yes. Great thank you. Thank you.

00:58:14.460 --> 00:58:17.110
Mr Chairman and commissioners. I really appreciate

00:58:17.110 --> 00:58:19.880
being here today. My name is Zak Ming with E three

00:58:20.059 --> 00:58:21.929
As you know, we've been engaged for a number of months

00:58:21.929 --> 00:58:25.139
on this topic and we we both appreciate the opportunity

00:58:25.139 --> 00:58:29.260
to participate today and like you've noted the engagement

00:58:29.269 --> 00:58:32.440
of the stakeholders and their feedback on our report

00:58:32.449 --> 00:58:35.539
and their comments over 1000 pages as you've noted

00:58:35.550 --> 00:58:39.019
and we did read all of the comments and we appreciate

00:58:39.019 --> 00:58:41.280
that and what I'd like to do today is provide some

00:58:41.280 --> 00:58:44.369
thoughts and reactions and responses to some of those

00:58:44.369 --> 00:58:49.059
comments. I'm not going to respond to any individual

00:58:49.059 --> 00:58:52.849
specific comments but rather broad and recurring themes

00:58:52.849 --> 00:58:55.989
that we saw in across many different stakeholders,

00:58:55.989 --> 00:58:58.719
comments that we think are worth worth mentioning.

00:58:59.170 --> 00:59:02.079
I've grouped my responses into four different buckets

00:59:02.090 --> 00:59:05.869
One of the first bucket is on some clarifications around

00:59:05.869 --> 00:59:09.429
the project scope that we completed. The second bucket

00:59:09.440 --> 00:59:13.690
is relating to technical issues of the three analysis

00:59:13.699 --> 00:59:17.690
The third bucket is on broad market design themes and

00:59:17.690 --> 00:59:21.909
the fourth bucket is on the PCM specifically. So if

00:59:21.909 --> 00:59:24.500
I could just talk for a minute about the scope of the

00:59:24.500 --> 00:59:29.260
project. So as you know, we were asked to analyze market

00:59:29.260 --> 00:59:33.010
designs that were explicitly listed in the phase two

00:59:33.019 --> 00:59:37.070
blueprint from december 2021 specifically Load side

00:59:37.070 --> 00:59:40.929
reliability mechanisms, back reliability mechanism

00:59:40.940 --> 00:59:45.599
and hybrid mechanisms of those two for designs that

00:59:45.599 --> 00:59:48.699
fall within those two buckets, we produced a number

00:59:48.699 --> 00:59:52.789
of quantitative outputs, specifically how we think

00:59:52.800 --> 00:59:55.860
resources would enter or exit the market under different

00:59:55.860 --> 00:59:59.320
reforms, how the reliability of the system would change

00:59:59.329 --> 01:00:01.900
under different reforms and how costs would change

01:00:01.909 --> 01:00:04.820
under different reforms. And then we also produced

01:00:04.820 --> 01:00:08.059
a number of qualitative analysis and considerations

01:00:08.059 --> 01:00:11.090
for the commission to highlight the strengths and weaknesses

01:00:11.099 --> 01:00:15.119
of each design, notably what was not included in the

01:00:15.119 --> 01:00:18.070
blueprint and why we did not analyze it or were asked

01:00:18.070 --> 01:00:21.210
to are directed to analyze it are a number of other

01:00:21.219 --> 01:00:25.230
potential reforms including new or reformed Ancillary

01:00:25.230 --> 01:00:31.630
Service products, although I will say all of the new

01:00:31.630 --> 01:00:34.059
Ancillary service products that were directed to be

01:00:34.059 --> 01:00:37.039
implemented through phase one are included in our analysis

01:00:37.039 --> 01:00:40.380
so we have not evaluated additional Ancillary Service

01:00:40.380 --> 01:00:42.960
products beyond those, although I will get a little

01:00:42.960 --> 01:00:45.230
bit later in my comments to talk about some ancillary

01:00:45.230 --> 01:00:50.179
services and the other thing is that we also as part

01:00:50.179 --> 01:00:55.469
of our scope, it was not directed to develop an optimal

01:00:55.480 --> 01:00:58.489
portfolio mix of resources so determined for the ERCOT

01:00:58.489 --> 01:01:02.039
system, what we think is the perfect time Nisshin mix

01:01:02.050 --> 01:01:05.829
of resources but rather under a variety of different

01:01:05.829 --> 01:01:08.820
portfolios to analyze how we think the market will

01:01:08.820 --> 01:01:12.159
perform under each of these market designs. And we

01:01:12.159 --> 01:01:15.170
believe that that scope under your direction, working

01:01:15.170 --> 01:01:17.909
closely with you through many iterations, as you know

01:01:17.920 --> 01:01:22.469
we do believe that that scope is sufficient to help

01:01:22.480 --> 01:01:25.190
address the key questions that this commission faces

01:01:26.809 --> 01:01:29.110
The next, the second bucket of topics that I would

01:01:29.110 --> 01:01:32.849
like to speak to are. Some technical clarifications

01:01:32.860 --> 01:01:36.579
on comments that stakeholders raised in particular

01:01:36.590 --> 01:01:41.909
the first bucket around extreme weather. So there were

01:01:41.909 --> 01:01:45.510
there were some comments raised that the analysis did

01:01:45.510 --> 01:01:50.260
not include extreme weather in particular extreme winter

01:01:50.260 --> 01:01:55.659
weather. And actually, if you as documented in the

01:01:55.659 --> 01:02:00.250
report specifically pages 33 through 35, the analysis

01:02:00.250 --> 01:02:04.949
does consider a 40-year weather record from 1980 to

01:02:04.949 --> 01:02:09.280
2019. And in that 40 year weather record, there are

01:02:09.280 --> 01:02:12.550
extreme temperatures, extreme cold temperatures and

01:02:12.550 --> 01:02:17.260
extreme hot temperatures. Specifically the years 1983

01:02:17.260 --> 01:02:21.090
and 1989 have winter weather temperatures that are

01:02:21.090 --> 01:02:25.519
consistent with what the state saw during your E um

01:02:26.679 --> 01:02:30.039
if we look at extreme hot temperatures, the hottest

01:02:30.039 --> 01:02:32.489
temperatures in the history of the state that the state

01:02:32.489 --> 01:02:35.980
has ever seen fall within the weather record that we

01:02:35.989 --> 01:02:41.780
analyzed. So we take those extreme temperatures and

01:02:41.780 --> 01:02:46.210
we calculate how loads increase during those time periods

01:02:46.219 --> 01:02:50.090
and we see extreme peak loads. So not only are we looking

01:02:50.090 --> 01:02:52.880
at a broad range of weather conditions that lead to

01:02:52.880 --> 01:02:56.619
extreme peak loads during both hot and cold temperatures

01:02:56.630 --> 01:02:59.860
we then further stress test that by increasing those

01:02:59.860 --> 01:03:05.750
loads by 2% and 4% to create even more than conditions

01:03:05.750 --> 01:03:09.110
than we've seen historically, how loads might increase

01:03:09.369 --> 01:03:12.650
And when you take the final result of that in our analysis

01:03:12.659 --> 01:03:17.119
we do model winter peak loads of 80 gigawatts higher

01:03:17.119 --> 01:03:19.789
than any winter peak Load that this system has ever

01:03:19.789 --> 01:03:24.019
seen and summer peak loads as the report documents

01:03:24.030 --> 01:03:28.449
of 93 gigawatts, a full 13 gigawatts higher than any

01:03:28.449 --> 01:03:32.960
Load the ERCOT system has ever experienced ever. So

01:03:33.079 --> 01:03:38.440
any statement that the model does not look at extremes

01:03:38.449 --> 01:03:41.119
or that it does not use to cast IX or that it's

01:03:41.119 --> 01:03:45.360
looking at average conditions is inaccurate. And I

01:03:45.360 --> 01:03:48.280
will also further note that the techniques, the modeling

01:03:48.280 --> 01:03:51.210
techniques that we're using to conduct this analysis

01:03:51.219 --> 01:03:55.000
are the most sophisticated techniques that exist in

01:03:55.000 --> 01:03:59.769
the industry to answer these questions. The next bucket

01:03:59.980 --> 01:04:02.469
a technical clarification I'd like to address is around

01:04:02.469 --> 01:04:07.570
generator outages. So the report does note that we

01:04:07.579 --> 01:04:11.780
are not including generator outages of the magnitude

01:04:11.789 --> 01:04:15.820
that were experienced during winter storm Uri and that

01:04:15.820 --> 01:04:20.719
is an intentional decision and that is by design. The

01:04:20.719 --> 01:04:22.809
reason for that is because there have been a number

01:04:22.809 --> 01:04:25.929
of reforms that this commission has implemented and

01:04:25.940 --> 01:04:29.559
both this commission and the railroad commission and

01:04:29.570 --> 01:04:32.949
we do not believe that it's appropriate to assume that

01:04:32.949 --> 01:04:35.329
the system would perform under those weather conditions

01:04:35.329 --> 01:04:38.949
as it did during your e. Now with that said, we do

01:04:38.949 --> 01:04:42.480
recognize that under extreme temperatures, particularly

01:04:42.480 --> 01:04:45.340
winter weather conditions, that generators are more

01:04:45.340 --> 01:04:47.860
likely to fail and have higher failure rates. And we

01:04:47.860 --> 01:04:52.000
are capturing that if you look at the analysis as documented

01:04:52.010 --> 01:04:55.650
the report as documented on page 41 you can see that

01:04:55.659 --> 01:05:00.800
as temperatures decrease from 20 F to zero F. The failure

01:05:00.800 --> 01:05:04.710
rate of generators increases by five X. And that is

01:05:04.710 --> 01:05:08.010
captured in our analysis and we believe that that is

01:05:08.010 --> 01:05:11.099
the best representation of how the system will perform

01:05:11.110 --> 01:05:13.460
under winter weather events. And if you look at how

01:05:13.460 --> 01:05:16.840
the system did perform this past december, you will

01:05:16.840 --> 01:05:20.599
see that the level of generator outages that the system

01:05:20.599 --> 01:05:23.550
actually did experience are well within the range of

01:05:23.559 --> 01:05:26.289
outages that we model in in our report,

01:05:28.119 --> 01:05:31.239
The next technical topic that I'd like to address is

01:05:31.239 --> 01:05:35.659
around the O R D C and comments that the formulation

01:05:35.670 --> 01:05:39.219
of the R D C were static and we did not make

01:05:39.230 --> 01:05:42.829
updates to the O R D C relative to the parameters of

01:05:42.829 --> 01:05:48.989
how the RdC is structured today. We believe that this

01:05:49.000 --> 01:05:53.869
issue, this topic uh has a very minor effect on the

01:05:53.869 --> 01:05:58.389
conclusions of the report. And this statement is based

01:05:58.400 --> 01:06:02.519
on analysis that was conducted in 2021 by brattle and

01:06:02.519 --> 01:06:06.239
a strap that looked at how do different parameter changes

01:06:06.239 --> 01:06:09.300
to the O R. D C affect the amount of capacity on

01:06:09.300 --> 01:06:12.130
the system. And if you look at that analysis, you will

01:06:12.130 --> 01:06:15.269
see that under the most extreme cases where the O.

01:06:15.269 --> 01:06:19.239
R. D. C. Is being stretched uh through these parameter

01:06:19.239 --> 01:06:23.829
changes, that the impact on the amount of capacity

01:06:23.829 --> 01:06:27.679
to the system is about 2000 MW. And that's in the most

01:06:27.679 --> 01:06:30.070
extreme case. And we don't we don't believe that it

01:06:30.070 --> 01:06:33.460
would even be that large. So if you take that 2000

01:06:33.460 --> 01:06:37.710
megawatt impact and compare it to the The level of

01:06:37.719 --> 01:06:40.969
deficits that we're forecasting on the system, 5600

01:06:40.969 --> 01:06:45.389
MW. It's it's a it's a fraction of that. So it could

01:06:45.389 --> 01:06:47.619
be a potential impact but we don't believe that to

01:06:47.619 --> 01:06:50.460
be a material impact that would change any of the findings

01:06:50.460 --> 01:06:51.559
of our study.

01:06:53.610 --> 01:06:58.039
The next topic on technical issues is around equilibrium

01:06:58.050 --> 01:07:01.300
And this is a this was there was a lot of different

01:07:01.300 --> 01:07:04.920
stakeholder comments on this, but in particular the

01:07:04.929 --> 01:07:11.139
assumption that the analysis uses that the market equilibrium

01:07:11.150 --> 01:07:16.789
is based on the cost of new entry and what our perspective

01:07:16.789 --> 01:07:21.119
is on this is that a cost of new entry equilibrium

01:07:21.119 --> 01:07:25.989
framework is consistent with a long run market equilibrium

01:07:26.000 --> 01:07:30.190
and that a long run market equilibrium is the appropriate

01:07:30.190 --> 01:07:34.519
framework to assess potential market designs. This

01:07:34.519 --> 01:07:37.889
is a perspective that is shared by a number of other

01:07:37.900 --> 01:07:40.690
academics and economists including several that submitted

01:07:40.690 --> 01:07:41.440
comments.

01:07:43.289 --> 01:07:47.769
The reason that a long run cost of new entry framework

01:07:47.780 --> 01:07:52.949
is appropriate is because prices have to be at that

01:07:52.949 --> 01:07:57.099
level in order to incentivize new entry into the market

01:07:57.110 --> 01:08:01.230
and ultimately the at some point, sooner or later the

01:08:01.230 --> 01:08:05.079
market will need new entry either because Load is growing

01:08:05.090 --> 01:08:08.639
or because existing resources are reaching the end

01:08:08.639 --> 01:08:11.440
of their useful life will retire and will need to be

01:08:11.440 --> 01:08:12.340
replaced.

01:08:14.170 --> 01:08:20.649
So it is true that the long run equilibrium approach

01:08:20.659 --> 01:08:24.720
is, is an appropriate framework with which to evaluate

01:08:24.720 --> 01:08:28.909
market designs, but we also do recognize that the market

01:08:28.920 --> 01:08:34.520
may exist temporarily outside of that equilibrium due

01:08:34.520 --> 01:08:37.420
to a shortfall or an excess of generation.

01:08:39.680 --> 01:08:43.630
And so to address that particular topic, we did include

01:08:43.640 --> 01:08:48.829
a short run cost of retention sensitivity and so that

01:08:48.829 --> 01:08:51.640
information is in the report, it's available to stakeholders

01:08:51.649 --> 01:08:53.890
uh to be used as appropriate.

01:08:59.850 --> 01:09:02.359
I think another important point to make about the cost

01:09:02.359 --> 01:09:08.399
of new entry equilibrium framework is that any assumption

01:09:08.439 --> 01:09:12.340
that deviates from that framework, the cost of new

01:09:12.340 --> 01:09:17.710
entry framework, it essentially becomes not really

01:09:17.710 --> 01:09:22.020
a technical analysis, but almost an entirely assumption

01:09:22.029 --> 01:09:26.470
driven result of how much is the market going to be

01:09:26.470 --> 01:09:31.380
out of equilibrium. And so therefore it's very different

01:09:31.380 --> 01:09:34.789
than the technical results that are study are producing

01:09:34.800 --> 01:09:37.060
in terms of looking at how the market will perform

01:09:39.449 --> 01:09:43.909
related to the topic of equilibrium closely related

01:09:43.920 --> 01:09:49.090
is the performance of the energy only market as as

01:09:49.090 --> 01:09:52.659
it exists today. And in particular the finding of the

01:09:52.659 --> 01:09:57.260
study that the energy only market uh would expected

01:09:57.260 --> 01:10:02.340
to have a retirement of 11 gigawatts. And that was

01:10:02.340 --> 01:10:04.649
a, that was a notable finding that many stakeholders

01:10:04.649 --> 01:10:08.460
commented on and in particular that the, it's unrealistic

01:10:08.460 --> 01:10:11.920
to assume that 11 gigawatts would retire. The first

01:10:11.920 --> 01:10:15.069
clarification I want to make about the 11 GW is that

01:10:15.079 --> 01:10:18.829
that is not an assumption that is a technical output

01:10:18.840 --> 01:10:23.279
of the analysis. So that is a calculated value. And

01:10:24.390 --> 01:10:28.119
The reason that we are projecting this 11 gigawatts

01:10:28.130 --> 01:10:32.029
of retirement is because of an assumption based on

01:10:32.039 --> 01:10:37.550
ERCOT projections that 27 new gigawatts of solar, five

01:10:37.550 --> 01:10:40.750
gigawatts of new wind and five gigawatts of new battery

01:10:40.750 --> 01:10:43.529
storage will be coming online in the next few years

01:10:43.529 --> 01:10:48.479
So that's 37 gigawatts of new resources in addition

01:10:48.489 --> 01:10:51.079
to all of the renewables and storage that exist on

01:10:51.079 --> 01:10:55.090
the system today. And why is that important? Well,

01:10:55.100 --> 01:10:58.989
it's pretty well understood and established the relationship

01:10:59.000 --> 01:11:02.800
that new generation entry in particular renewables

01:11:02.800 --> 01:11:05.739
has on the financial pressure on thermal resources

01:11:05.750 --> 01:11:11.060
And so it's not Unreasonable to see how 37 gigawatts

01:11:11.069 --> 01:11:14.350
of new renewables and storage could have an impact

01:11:14.359 --> 01:11:18.449
on the thermal fleet today. Leading to again, a calculated

01:11:18.460 --> 01:11:22.760
technical finding of an expected 11 gigawatts of firm

01:11:22.760 --> 01:11:23.899
generation retirement.

01:11:26.140 --> 01:11:29.920
The third broad bucket that I would of topics that

01:11:29.920 --> 01:11:33.729
I would like to address is on market design themes

01:11:35.460 --> 01:11:39.289
So the first topic in this section is as chairman Lake

01:11:39.300 --> 01:11:42.939
already discussed the self correcting aspect of the

01:11:42.939 --> 01:11:45.649
P. C. M. And in fact also many of the other market

01:11:45.649 --> 01:11:49.489
designs included in the study. So I think it's important

01:11:49.489 --> 01:11:54.090
to acknowledge that uh you know, different stakeholders

01:11:54.100 --> 01:11:58.220
may come to different conclusions about how the existing

01:11:58.220 --> 01:12:01.949
energy only market or performs to the market through

01:12:01.949 --> 01:12:05.810
insular services or other products may ultimately impact

01:12:05.810 --> 01:12:09.250
the total quantity of dispatchable generation on the

01:12:09.250 --> 01:12:15.279
system. But the way that the P. C. M. And other self

01:12:15.279 --> 01:12:18.909
correcting designs have been set up is to allow for

01:12:18.920 --> 01:12:23.140
if the energy only market is delivering, then the expected

01:12:23.140 --> 01:12:26.670
price of the PCM would fall. And if the energy only

01:12:26.670 --> 01:12:29.300
market combined with answer services is not delivering

01:12:29.300 --> 01:12:31.439
what's needed to achieve a reliability standard, then

01:12:31.439 --> 01:12:38.180
PCM and other market prices would rise. So the entire

01:12:38.180 --> 01:12:41.210
debate, to a certain extent about how many megawatts

01:12:41.210 --> 01:12:44.770
of generation will retire and to what extent extent

01:12:44.770 --> 01:12:50.189
the PCM is necessary almost by design becomes irrelevant

01:12:50.199 --> 01:12:53.329
because if the PCM isn't necessary, then the prices

01:12:53.329 --> 01:12:56.819
of the PCM will clear at zero are very, very low, very

01:12:56.819 --> 01:12:57.699
close to zero.

01:13:00.890 --> 01:13:04.539
Another common theme that was present in many of the

01:13:04.539 --> 01:13:09.859
stakeholder comments was to focus on the presence or

01:13:09.869 --> 01:13:14.810
absence of a particular resource and I know many stakeholders

01:13:15.340 --> 01:13:18.520
you know closely tied to particular resources. So different

01:13:18.520 --> 01:13:22.579
stakeholders raised comments about the too much or

01:13:22.579 --> 01:13:25.529
not enough of a particular resource like dispatchable

01:13:25.529 --> 01:13:28.159
generation or battery storage or renewables or demand

01:13:28.159 --> 01:13:33.100
response or energy efficiency and I think the broad

01:13:33.109 --> 01:13:37.390
reaction and comment to that is that resources are

01:13:37.390 --> 01:13:38.680
not market designs,

01:13:40.319 --> 01:13:44.779
simply asserting that the system needs more of a particular

01:13:44.779 --> 01:13:49.510
resource does not help the commission in any way with

01:13:49.520 --> 01:13:52.939
how do we get to that resource? There has to be a

01:13:52.939 --> 01:13:57.670
market design that will incentivize the entry or potentially

01:13:57.670 --> 01:14:04.020
exit of the optimal quantity of resources and it's

01:14:04.020 --> 01:14:08.029
a market design that can incent resources to come into

01:14:08.029 --> 01:14:10.800
the market. So there has to be a mechanism to do that

01:14:10.810 --> 01:14:13.699
and that's what our analysis is focusing on. It's not

01:14:13.710 --> 01:14:17.170
helpful just to say we need more of a particular resource

01:14:17.180 --> 01:14:20.779
What's helpful is to have a mechanism to figure out

01:14:20.779 --> 01:14:25.350
how to get those resources into the market, which leads

01:14:25.359 --> 01:14:29.810
very closely into the next topic of resource specific

01:14:29.810 --> 01:14:34.500
subsidies. So many, many of the comments said that

01:14:34.510 --> 01:14:37.909
in lieu of the market design reforms that we analyze

01:14:37.909 --> 01:14:42.000
that what we actually need are subsidies to bring in

01:14:42.010 --> 01:14:46.039
a particular type of resource. And again, the range

01:14:46.039 --> 01:14:50.960
here of proposals was many of many different resources

01:14:50.970 --> 01:14:54.399
subsidies for dispatchable generation fast acting dispatchable

01:14:54.399 --> 01:14:57.510
generation battery storage, small modular nuclear nuclear

01:14:57.520 --> 01:15:00.750
renewables, demand response, energy efficiency and

01:15:00.750 --> 01:15:06.920
more. And I will say that well, we did not model all

01:15:06.920 --> 01:15:10.949
of those. We did look at one particular market design

01:15:10.949 --> 01:15:13.739
that could be considered a form of a resource specific

01:15:13.750 --> 01:15:16.239
subsidy, which is the dispatchable energy credit

01:15:17.930 --> 01:15:23.260
and as the report documents the effect of subsidizing

01:15:23.260 --> 01:15:25.939
a particular resource, any resource doesn't matter

01:15:25.939 --> 01:15:28.960
what it is is that it will bring that resource into

01:15:28.960 --> 01:15:33.189
the market. But in absence of a holistic and comprehensive

01:15:33.199 --> 01:15:37.539
market design, it will hasten and expedite the exit

01:15:37.550 --> 01:15:40.960
of non subsidized resources from the market. And that

01:15:40.960 --> 01:15:45.229
finding is true for any resource subsidy that could

01:15:45.229 --> 01:15:48.909
be envisioned. Several stakeholders noted that the

01:15:50.310 --> 01:15:53.979
the way we model, dispatchable energy credits is different

01:15:53.989 --> 01:15:56.869
than what was originally described in Commissioner

01:15:56.869 --> 01:16:01.270
McAdams memo and I will first just say that of course

01:16:02.460 --> 01:16:07.229
and defend you hear people well maybe let me defend

01:16:07.229 --> 01:16:12.510
myself and then and then you can jump in. But I will

01:16:12.510 --> 01:16:16.859
just say, as as all commissioners know, we were performing

01:16:16.869 --> 01:16:20.689
our analysis under your direction very, very closely

01:16:20.699 --> 01:16:26.800
and analyzing the specific designs that we were asked

01:16:26.800 --> 01:16:31.189
to analyze. And we did in fact not just look at the

01:16:31.189 --> 01:16:34.670
final iteration for dispatchable Energy credits that

01:16:34.680 --> 01:16:36.539
you saw in the report, but we looked at a number of

01:16:36.539 --> 01:16:38.460
different iterations, including something that was

01:16:38.460 --> 01:16:41.640
much closer to the original memo. But the theme here

01:16:41.649 --> 01:16:44.819
is that resource specific subsidies, no matter what

01:16:44.829 --> 01:16:48.489
what resource they're incentivizing have the effect

01:16:48.500 --> 01:16:51.500
that our previously described about bringing that resource

01:16:51.500 --> 01:16:54.710
into the market and with in in the absence of a comprehensive

01:16:54.710 --> 01:16:57.270
design pushing out other resources. And that's true

01:16:57.279 --> 01:17:01.029
for any resource including demand side resources like

01:17:01.029 --> 01:17:04.069
demand response or energy efficiency, which are and

01:17:04.069 --> 01:17:07.199
should be on equal footing with resources because they

01:17:07.199 --> 01:17:08.350
are resources.

01:17:10.109 --> 01:17:14.869
The next topic. That final topic on broad market design

01:17:14.869 --> 01:17:19.409
themes is around Ancillary services and this was a

01:17:19.420 --> 01:17:23.119
common stakeholder suggestion that in as an alternative

01:17:23.119 --> 01:17:26.270
to the market designs that we did analyze that the

01:17:26.270 --> 01:17:29.229
commission should consider modified or additional Ancillary

01:17:29.229 --> 01:17:32.880
service products like an uncertainty product or dispatchable

01:17:32.890 --> 01:17:36.720
reliability, reserve service. So first, as I've already

01:17:36.729 --> 01:17:40.859
stated, The market designs that we analyzed were the

01:17:40.859 --> 01:17:44.109
market designs that were included in Phase two of the

01:17:44.109 --> 01:17:46.810
blueprint and insular services were not included in

01:17:46.810 --> 01:17:52.050
that they were included in Phase one. So from the outset

01:17:52.060 --> 01:17:54.489
these, those those particular designs were not on the

01:17:54.489 --> 01:17:59.920
table, but secondly, from a reliability perspective

01:17:59.930 --> 01:18:04.829
answer services exist to ensure operational reliability

01:18:05.840 --> 01:18:09.489
In other words, they exist to ensure that the generation

01:18:09.489 --> 01:18:12.689
that exists on the system is available and ready to

01:18:12.689 --> 01:18:16.869
be used when needed. And service markets are relatively

01:18:16.869 --> 01:18:21.449
small in the scheme of the entire market And they are

01:18:21.460 --> 01:18:25.399
not designed to ensure there is sufficient quantities

01:18:25.409 --> 01:18:30.829
of total resources on the system or designed to adhere

01:18:30.829 --> 01:18:34.239
to a specified reliability standard as directed by

01:18:34.239 --> 01:18:38.050
S. B3 and in fact in no market in the world and

01:18:38.050 --> 01:18:40.300
all markets have ancillary services in no market in

01:18:40.300 --> 01:18:44.430
the world are ancillary services used to meet and adhere

01:18:44.430 --> 01:18:48.329
to a specific reliability standard with that said,

01:18:48.340 --> 01:18:51.409
Ancillary services are absolutely critical to the operational

01:18:51.409 --> 01:18:55.430
reliability of the system and nothing of what I'm saying

01:18:55.430 --> 01:18:59.180
here is not to suggest that potentially new answer

01:18:59.180 --> 01:19:01.600
services or tweaks to the Ancillary service products

01:19:01.600 --> 01:19:05.100
that exist are necessary but it's rather to say that

01:19:05.109 --> 01:19:07.909
that's not the purview of Phase two and that's not

01:19:07.909 --> 01:19:10.869
the purview of adherence to reliability standard. That's

01:19:10.869 --> 01:19:13.819
just ensure there are sufficient quantities of dispatchable

01:19:13.819 --> 01:19:15.289
generation in the first place.

01:19:17.920 --> 01:19:22.739
And the final bucket of my comments today is around

01:19:22.750 --> 01:19:27.470
specific responses to comments on the P C. M. And the

01:19:27.470 --> 01:19:32.470
first, the first topic of this is around the concept

01:19:32.479 --> 01:19:36.529
of net Load and this was a topic that was raised in

01:19:36.529 --> 01:19:40.989
the paper and many stakeholders commented on the quote

01:19:41.000 --> 01:19:44.199
definition of net Load that the report uses and whether

01:19:44.199 --> 01:19:47.850
you subtract renewables and storage from Load or just

01:19:47.850 --> 01:19:51.109
renewables because the first comment that I want to

01:19:51.109 --> 01:19:57.380
make on this is that Net Load does not play in our

01:19:57.380 --> 01:20:02.569
report any role at all. It is, there was a chart that

01:20:02.579 --> 01:20:07.130
illustrated net Load but actual Net Load is not calculated

01:20:07.130 --> 01:20:10.960
in our report anywhere. It is not used in any of the

01:20:10.960 --> 01:20:14.399
results of the analysis, what the report uses, which

01:20:14.399 --> 01:20:20.449
it generates many many times is that the P C. M. Uses

01:20:20.449 --> 01:20:24.539
the hours of highest reliability risk where hours of

01:20:24.539 --> 01:20:28.439
highest reliability risk are defined as the lowest

01:20:28.449 --> 01:20:34.130
incremental available operating reserves. And we illustrated

01:20:34.140 --> 01:20:38.279
those hours as being typically aligned with peak Net

01:20:38.279 --> 01:20:40.840
Load but they're not exclusively aligned with peak

01:20:40.840 --> 01:20:45.739
Net Load and we don't state that they are, I think

01:20:45.739 --> 01:20:48.189
there was also confusion about the inclusion of storage

01:20:48.189 --> 01:20:51.199
in that calculation as if somehow storage would not

01:20:51.210 --> 01:20:55.810
be eligible to participate in the PCM but in fact the

01:20:55.810 --> 01:21:00.119
PCM as envisioned in the base case is technology neutral

01:21:00.119 --> 01:21:03.970
so all resources can participate in the PCM market

01:21:03.979 --> 01:21:08.390
storage and in fact renewables and any other resource

01:21:08.399 --> 01:21:11.640
but a resource has to be confident that they're going

01:21:11.640 --> 01:21:14.260
to be available during the hours of highest reliability

01:21:14.260 --> 01:21:17.899
risk, which can and often do occur during hours of

01:21:17.899 --> 01:21:20.460
low non dispatchable generation.

01:21:23.449 --> 01:21:28.140
So with that said, um, I think that there's still some

01:21:28.149 --> 01:21:32.000
outstanding questions and work to be done on exactly

01:21:32.000 --> 01:21:34.819
the metric that's used to determine highest reliability

01:21:34.819 --> 01:21:38.529
risk. I know commission staff is working on that and

01:21:38.539 --> 01:21:43.560
we look forward to those conversations. Last topic

01:21:43.569 --> 01:21:49.520
is around the when performance hours occur and how

01:21:49.520 --> 01:21:53.310
many performance hours. So as you know in the report

01:21:53.319 --> 01:21:59.890
we used an annual PCM framework with the top 30 hours

01:21:59.899 --> 01:22:03.539
of highest reliability risk but we do talk about that

01:22:03.550 --> 01:22:06.640
that's not set in stone, that is not an inherent feature

01:22:06.640 --> 01:22:10.380
of the PCM PCM could work under different formulations

01:22:10.390 --> 01:22:14.050
more hours, fewer hours, a seasonal approach, etcetera

01:22:14.050 --> 01:22:17.060
and there were stakeholders that had a wide variety

01:22:17.060 --> 01:22:19.399
of opinions on this. Someone has more someone unless

01:22:19.399 --> 01:22:23.159
someone at annual, someone in sub annual, I think what's

01:22:23.159 --> 01:22:27.500
important to highlight on this uh, determination of

01:22:27.500 --> 01:22:32.029
how these hours are calculated is to establish a few

01:22:32.039 --> 01:22:37.960
principles. The first principle is that the hours should

01:22:37.970 --> 01:22:42.399
as best as possible reflect hours where the system

01:22:42.409 --> 01:22:48.609
has the largest reliability need. And what that means

01:22:48.619 --> 01:22:51.340
is that, you know, the system

01:22:53.100 --> 01:22:56.810
reliability need is going to be concentrated in a few

01:22:56.810 --> 01:23:00.060
times of year. In fact, in reality it's concentrated

01:23:00.060 --> 01:23:02.739
in a few times per decade. But let's take at least

01:23:02.739 --> 01:23:06.189
as a smallest possible frame framework we can get is

01:23:06.189 --> 01:23:09.609
to an annual period, reliability need is going to be

01:23:09.609 --> 01:23:13.329
concentrated in a few times of that year, if not a

01:23:13.329 --> 01:23:20.159
single time of that year. And any departure that establishes

01:23:20.159 --> 01:23:24.279
PCM hours that deviate from the most Critical Times

01:23:24.289 --> 01:23:29.170
introduces an economic inefficiency. The economic inefficiency

01:23:29.170 --> 01:23:33.979
being you're paying resources, PCM credits when the

01:23:33.979 --> 01:23:38.520
system doesn't actually need reliability or conversely

01:23:38.529 --> 01:23:42.140
you're not paying PCM credits when the system does

01:23:42.140 --> 01:23:46.869
need reliability. And the more segmentation of breaking

01:23:46.869 --> 01:23:50.659
up the annual framework into sub annual periods, the

01:23:50.659 --> 01:23:54.869
more of that potential inefficiency is introduced.

01:23:55.079 --> 01:23:59.750
We do think that a segmentation on a seasonal basis

01:23:59.760 --> 01:24:02.949
is reasonable and we stayed in the report that the

01:24:02.949 --> 01:24:06.779
piece, we believe on a seasonal framework, the PCC

01:24:06.779 --> 01:24:09.430
would perform as we've modeled, meaning that it could

01:24:09.430 --> 01:24:12.039
achieve the level of reliability at the forecasted

01:24:12.039 --> 01:24:14.869
costs. That we're calculating 460 million incremental

01:24:15.380 --> 01:24:18.800
We uh we do believe a seasonal approach could work

01:24:18.810 --> 01:24:21.300
but a monthly approach. We believe there's too much

01:24:21.300 --> 01:24:24.210
segmentation and you would ultimately be compensating

01:24:24.220 --> 01:24:27.319
creating PCM credits in months that have significantly

01:24:27.319 --> 01:24:29.770
less scarcity than other months and under compensating

01:24:29.770 --> 01:24:32.960
in the months that actually do have the scarcity. If

01:24:32.960 --> 01:24:35.539
you were to take it to the extreme as some stakeholders

01:24:35.539 --> 01:24:39.010
have suggested and break apart the PCM into a daily

01:24:39.010 --> 01:24:43.159
product that would exponentially increase this economic

01:24:43.159 --> 01:24:46.399
inefficiency to the point where we do not even consider

01:24:46.399 --> 01:24:51.100
that to be essentially a PCM design anymore. It's too

01:24:51.100 --> 01:24:56.100
far away from the original annual 30 hours. So there's

01:24:56.109 --> 01:24:59.010
there's a number of topics to be discussed and work

01:24:59.010 --> 01:25:01.600
to be done on determining those hours. But we look

01:25:01.600 --> 01:25:05.079
forward to that. And with that, that concludes my comments

01:25:05.079 --> 01:25:06.880
and look forward to answering any questions from the

01:25:06.880 --> 01:25:10.460
commissioner's. Thank you. Thank you Zack. Before we

01:25:10.460 --> 01:25:14.970
get to question McAdams if he wants to defend. Yeah

01:25:14.979 --> 01:25:19.239
absolutely. Great, great opportunity um, in, in Zach

01:25:19.250 --> 01:25:23.569
in front of the world. Uh, I'd like to explain how

01:25:23.569 --> 01:25:30.390
the change in dec uh, index profile occurred. Uh, we

01:25:30.390 --> 01:25:33.170
went through an iterative process as you have stated

01:25:33.180 --> 01:25:37.920
on analysis um, through the first iteration, given

01:25:37.920 --> 01:25:42.609
the parameters that that we settled upon um, to evaluate

01:25:42.619 --> 01:25:47.539
on deck the output was that we would have had a significant

01:25:47.550 --> 01:25:51.100
retirement of dispatchable generation as a result because

01:25:51.100 --> 01:25:55.430
of the, as you put it, the subsidization. Um, and then

01:25:55.439 --> 01:26:00.380
the net gain on that in generation would have occurred

01:26:00.390 --> 01:26:03.319
purely from batteries for all intensive purposes and

01:26:03.319 --> 01:26:06.310
I want everybody to know that. So um, I didn't state

01:26:06.310 --> 01:26:09.340
this in my opening comments but I have a number of

01:26:09.350 --> 01:26:12.979
personal goals that I'd like to achieve as a part of

01:26:12.979 --> 01:26:17.930
this uh, market design and one of those is the retention

01:26:17.939 --> 01:26:22.619
uh, or at least the incentive ization of long duration

01:26:22.630 --> 01:26:27.199
generation to guard against as former chairman Pat

01:26:27.199 --> 01:26:30.039
would put it in the hunt energies comments the long

01:26:30.039 --> 01:26:34.390
winter night because as Winter Storm Elliot uh showed

01:26:34.390 --> 01:26:36.590
us once again winter storm landing before that winter

01:26:36.590 --> 01:26:39.409
storm Uri as a practical example, an object lesson

01:26:39.420 --> 01:26:42.789
that's the health and safety risk to Texas That's the

01:26:42.789 --> 01:26:45.720
health and safety risk to every system in the country

01:26:45.890 --> 01:26:48.550
So we need the duration to be able to bridge that gap

01:26:48.560 --> 01:26:52.140
And uh, so the decision was made. So because I believe

01:26:52.140 --> 01:26:57.380
the analysis of of decks by E three will be reviewed

01:26:57.390 --> 01:27:00.039
continually by other I. S. O. S who are trying to learn

01:27:00.039 --> 01:27:03.810
from our experience. Uh, I wanted to have analysis

01:27:03.810 --> 01:27:07.430
done on what if batteries which we know are economic

01:27:07.779 --> 01:27:11.659
uh, in today's market and will continue to come and

01:27:11.659 --> 01:27:13.739
are now going to benefit from the inflation reduction

01:27:13.739 --> 01:27:16.340
act. What if they were excluded so that we were purely

01:27:16.340 --> 01:27:18.470
looking at efficient peaker generation that had the

01:27:18.470 --> 01:27:21.350
duration to get us through that long winter night and

01:27:21.350 --> 01:27:24.930
that's what we saw. So I appreciate your uh, your complying

01:27:24.930 --> 01:27:28.699
with that request. And uh I think it was important

01:27:28.699 --> 01:27:32.699
information to have. Well we'll put will and I also

01:27:32.699 --> 01:27:36.720
will highlight that the iterative process that Commissioner

01:27:36.720 --> 01:27:39.489
McAdams just described it back and forth between his

01:27:39.489 --> 01:27:44.380
office uh and E three and receiving one version of

01:27:44.380 --> 01:27:48.430
outputs. Commission McAdams provides feed, book feedback

01:27:48.430 --> 01:27:51.010
change this change that let's examine this, let's poke

01:27:51.010 --> 01:27:53.819
and prod change assumptions, question assumptions,

01:27:53.829 --> 01:27:58.159
do that 34 times we and that happened with each office

01:27:58.170 --> 01:28:01.069
independently as we went through this this process

01:28:01.069 --> 01:28:04.520
So each each office that was involved throughout the

01:28:04.529 --> 01:28:07.630
beginning of the engagement with the three went through

01:28:07.630 --> 01:28:11.329
the same multiple iterative process, completely independent

01:28:11.590 --> 01:28:16.109
Uh One on one, many hours. I know Zach uh was there

01:28:16.109 --> 01:28:19.359
for all of them uh many hours with each office, many

01:28:19.359 --> 01:28:22.020
iterations, many challenges, lots of poking and prodding

01:28:22.029 --> 01:28:26.699
uh which I think speaks to the thoroughness of the

01:28:26.699 --> 01:28:32.699
process we've run. Thank you Andy three for uh going

01:28:32.699 --> 01:28:36.750
through that intensive intensive process with that

01:28:36.760 --> 01:28:40.449
uh happy to hear any questions or comments for. Exactly

01:28:42.199 --> 01:28:45.859
Um Zach, thank you for being here with us today, as

01:28:45.869 --> 01:28:48.250
the chairman noted, I mean definitely a lot of extensive

01:28:48.250 --> 01:28:51.720
conversations with respect to the various market design

01:28:51.720 --> 01:28:55.079
proposals that you've analyzed. We spend a lot of time

01:28:55.079 --> 01:28:58.340
looking at all of them together um in particular on

01:28:58.340 --> 01:29:00.939
my end the backstop reliability service was one that

01:29:00.939 --> 01:29:04.829
you analyzed in um you know try to provide analysis

01:29:04.829 --> 01:29:07.569
on um while I will say that some of the specifications

01:29:07.569 --> 01:29:10.630
you ultimately analyzed in your report did not exactly

01:29:10.630 --> 01:29:13.960
match what I had in my memo? Um I do appreciate the

01:29:13.960 --> 01:29:17.039
extensive analysis that you provided the ultimate conclusion

01:29:17.039 --> 01:29:20.569
that it does actually provide reliability. Um So thank

01:29:20.569 --> 01:29:24.250
you for that. Um So I'm gonna focus on just buckets

01:29:24.260 --> 01:29:26.699
um and some of some of my questions will come just

01:29:26.710 --> 01:29:30.050
based on what some of the stakeholders raised and not

01:29:30.060 --> 01:29:34.050
every not not not every point, but I think it's important

01:29:34.050 --> 01:29:36.779
to to kind of think about um with respect it, you know

01:29:36.779 --> 01:29:38.750
where we're headed and the impact that some of these

01:29:38.760 --> 01:29:43.390
um um areas have on on reliability and ultimate cost

01:29:44.319 --> 01:29:47.600
So let's start with respect to real time co optimization

01:29:47.609 --> 01:29:52.430
Your analysis based on what I reviewed your analysis

01:29:52.430 --> 01:29:54.750
takes into consideration real time co optimization

01:29:54.750 --> 01:30:00.270
and all the design proposals. Okay. Um so as you're

01:30:00.270 --> 01:30:05.460
evaluating the impact or your encapsulating RtC real

01:30:05.460 --> 01:30:09.300
time optimization in your analysis of PCM and and others

01:30:09.310 --> 01:30:14.710
What is the impact of including our TC um as an assumption

01:30:14.720 --> 01:30:18.510
on your ultimate output for instance and cost because

01:30:18.520 --> 01:30:22.310
real time optimization is a market efficiency driven

01:30:22.720 --> 01:30:27.699
um market design change. And and so I'm just wondering

01:30:27.710 --> 01:30:30.739
you know, because I know ERCOT has paired the implementation

01:30:30.739 --> 01:30:36.180
of PTC with I'm sorry roll time compensation with PCM

01:30:36.890 --> 01:30:40.539
and and that there from what I understand, you know

01:30:40.539 --> 01:30:43.220
you can have PCM without real time optimization but

01:30:43.220 --> 01:30:45.399
you've assumed it in there. So what what is the impact

01:30:45.399 --> 01:30:48.279
of assuming real time optimization for instance on

01:30:48.279 --> 01:30:50.689
your ultimate cost output for PCM?

01:30:52.430 --> 01:30:57.970
So we didn't run our our analysis, as you noted, assumes

01:30:57.970 --> 01:31:00.789
real time co optimization and all of our scenarios

01:31:00.800 --> 01:31:04.510
and we didn't run analyze the counterfactual that doesn't

01:31:04.510 --> 01:31:07.670
have that. So I don't have specific answer. I would

01:31:07.670 --> 01:31:11.380
say that the real time co optimization would have an

01:31:11.390 --> 01:31:17.529
impact on energy prices and the PCM prices have an

01:31:17.539 --> 01:31:20.960
interaction with energy prices. And so there may be

01:31:20.960 --> 01:31:25.920
some I would even hesitate to guess the magnitude of

01:31:25.920 --> 01:31:30.460
it, but there may be some impact on PCM prices but

01:31:30.470 --> 01:31:34.250
I wouldn't expect it to affect the reliability conclusions

01:31:34.250 --> 01:31:37.920
of the report. In other words, the PCM is designed

01:31:37.930 --> 01:31:42.069
to fill the gap for whatever the energy market, whatever

01:31:42.069 --> 01:31:44.159
resources need that's not being delivered in the energy

01:31:44.159 --> 01:31:47.100
market to reach a cost of new entry equilibrium level

01:31:47.109 --> 01:31:50.000
So it might have some impact on PCM prices but would

01:31:50.000 --> 01:31:55.050
not affect the reliability standards that the commission

01:31:55.050 --> 01:31:58.779
sets. But but the assumption is right commissioner

01:31:58.779 --> 01:32:01.569
is that it would smooth out the volatility. R. T. C

01:32:01.569 --> 01:32:06.050
Would smooth out that energy volatility which PCS give

01:32:06.050 --> 01:32:10.899
us there would Yes, there would be interaction. Yes

01:32:10.909 --> 01:32:14.899
the RTC could so it's an efficiency gain that you get

01:32:14.909 --> 01:32:18.550
that make the energy volatility go down to stabilize

01:32:18.560 --> 01:32:22.659
energy prices. The efficiency benefit of RTC would

01:32:22.659 --> 01:32:26.050
apply universally. Yeah. No, no, no, I get that right

01:32:26.220 --> 01:32:26.539
there.

01:32:29.789 --> 01:32:33.979
It was just lower, lower prices. Okay, so, so RTC market

01:32:33.979 --> 01:32:39.119
Efficiency initiative lowers energy prices would have

01:32:39.119 --> 01:32:42.000
some impact on the price of PC and ultimate cost impact

01:32:42.000 --> 01:32:45.520
That you don't know for sure how much um what what

01:32:45.520 --> 01:32:49.420
would be the impact if if our TC is not implemented

01:32:49.430 --> 01:32:52.510
in time to sort of converge with PCM,

01:32:54.340 --> 01:32:58.359
it would likely affect the clearing price of performance

01:32:58.359 --> 01:33:03.479
credits. So Okay, so it's important to converge them

01:33:03.489 --> 01:33:06.369
so that, you know, the implementation, R T C and P

01:33:06.369 --> 01:33:11.539
C. M. So that you have that sort of combined impact

01:33:11.550 --> 01:33:15.930
is what I think the the RTC serves the role of improving

01:33:15.930 --> 01:33:20.579
the operation and efficiency of the system. The PCM

01:33:20.590 --> 01:33:24.329
is designed, you can think of it as playing clean up

01:33:24.670 --> 01:33:30.380
too, whatever the energy market formulation is. However

01:33:30.390 --> 01:33:33.619
our TC is implemented. However, the parameters of the

01:33:33.619 --> 01:33:36.439
O. R. D C are implemented. If those are changed, the

01:33:36.449 --> 01:33:41.060
PCM is designed to fill in the gap of whatever is needed

01:33:41.060 --> 01:33:44.100
to make sure that resources can achieve revenues equal

01:33:44.100 --> 01:33:46.390
to the cost of new entry relative to whatever else

01:33:46.390 --> 01:33:49.180
the market is delivering on a number of other ways

01:33:49.180 --> 01:33:51.699
in which those could change, so they balance each other

01:33:51.699 --> 01:33:55.300
out. Yes. Okay, let me ask the question the same question

01:33:55.300 --> 01:34:00.539
Another way. Can PCM deliver the reliability were expecting

01:34:00.539 --> 01:34:02.270
from it with or without.

01:34:04.840 --> 01:34:08.079
Okay, so yes, that that that's great on the reliability

01:34:08.079 --> 01:34:10.739
side I was kind of focused on both. My questions were

01:34:10.739 --> 01:34:13.409
focused on cost but yes, that's a good question. Um

01:34:13.420 --> 01:34:15.659
All right. So um

01:34:17.369 --> 01:34:19.979
with respect to cost a new entry, I know you've responded

01:34:19.979 --> 01:34:23.310
to some criticisms on costing you entry that raising

01:34:23.310 --> 01:34:28.489
stakeholder comments and you use the 93.5 per KW year

01:34:28.500 --> 01:34:33.760
costing new entry. Um, Can you kind of just generally

01:34:33.760 --> 01:34:37.670
explain and you know why you use that figure? I think

01:34:37.670 --> 01:34:41.310
there's some thought that you know the current 105

01:34:41.840 --> 01:34:47.000
KW per year in ERCOT is it's lower than that that figure

01:34:47.000 --> 01:34:49.770
but it actually the ERCOT figure should be higher because

01:34:49.770 --> 01:34:52.210
of higher cost of capital that we're experiencing in

01:34:52.210 --> 01:34:57.250
the market today and just maybe respond on how like

01:34:57.250 --> 01:34:59.640
if you use the higher cone, what would be the ultimate

01:34:59.640 --> 01:35:00.010
impact.

01:35:01.890 --> 01:35:04.930
Yeah. So we, I guess to answer the first question of

01:35:04.930 --> 01:35:08.560
how we came to that value, that is the cost of new

01:35:08.560 --> 01:35:13.170
entry that was used in the most recent market equilibrium

01:35:13.180 --> 01:35:15.859
ERCOT market equilibrium study and that's the model

01:35:15.859 --> 01:35:18.250
that we leveraged to conduct this analysis. So that's

01:35:18.250 --> 01:35:21.770
where that value came from. We recognized that there

01:35:21.770 --> 01:35:25.100
are you know different perspectives on both that value

01:35:25.100 --> 01:35:28.550
and how that might change over time in general. What

01:35:28.550 --> 01:35:31.319
you would expect is that with a higher cost of new

01:35:31.319 --> 01:35:37.010
entry resources need more money to enter the market

01:35:37.020 --> 01:35:43.579
and so we would expect that any potential deficit of

01:35:43.579 --> 01:35:47.539
the Energy only market Under a higher cost of new entry

01:35:47.539 --> 01:35:51.149
would be larger. So instead of, for example, 11 gigawatts

01:35:51.159 --> 01:35:54.979
of expected retirements that if we were to have used

01:35:54.979 --> 01:35:58.390
a higher cost of new entry, that would be larger exactly

01:35:58.390 --> 01:36:00.949
how much larger we need to conduct that analysis, but

01:36:01.149 --> 01:36:04.579
that that would be the ultimate impact of it. So it

01:36:04.579 --> 01:36:07.869
would essentially degrade the reliability of the Energy

01:36:07.869 --> 01:36:11.979
only framework and increase the amount of revenues

01:36:11.989 --> 01:36:15.899
that any reliability mechanism like the PCM would again

01:36:15.899 --> 01:36:19.920
need to clean up to ensure that resources can earn

01:36:19.930 --> 01:36:24.649
sufficient revenues to enter the market. So I think

01:36:24.649 --> 01:36:27.300
it's important for us to recognize that, right? Because

01:36:27.310 --> 01:36:31.279
ultimately as we go to, you know, look at areas that

01:36:31.279 --> 01:36:33.920
need to be addressed technical parameters and everything

01:36:33.930 --> 01:36:37.210
Um, I think one piece of it is to ensure that um

01:36:37.220 --> 01:36:39.590
as we're doing that on the way that we're plugging

01:36:39.590 --> 01:36:43.069
in updated figures that are tied directly to the market

01:36:43.069 --> 01:36:45.340
so we can get a real clear sense of where we're headed

01:36:45.350 --> 01:36:47.630
from. Not only a reliability perspective, but a cost

01:36:47.630 --> 01:36:50.939
perspective because it sounds like to me that if we

01:36:50.939 --> 01:36:53.279
use what we have in ERCOT or even updated to count

01:36:53.279 --> 01:36:56.359
for today's market that the cost could be a little

01:36:56.359 --> 01:36:59.720
bit higher. Right? So I just want to make sure that

01:36:59.720 --> 01:37:04.720
that's my conclusion, I'm trying to confirm, trying

01:37:04.720 --> 01:37:08.020
to understand this. Okay, all right. Um,

01:37:09.760 --> 01:37:13.810
okay, so, um, in your report, you say that the number

01:37:13.810 --> 01:37:17.789
of pcs um generated across 30 hours of highest reliability

01:37:17.789 --> 01:37:23.319
risk, um, is 2212 gigawatt hours In a system collaborated

01:37:23.319 --> 01:37:29.390
to achieve one in 10 reliability standard. So how many

01:37:29.390 --> 01:37:30.590
megawatts is that?

01:37:32.369 --> 01:37:38.149
So if you were to Rough, if you were to divide that

01:37:38.149 --> 01:37:42.899
by 30, You would get an average megawatt number because

01:37:42.909 --> 01:37:45.609
that's a megawatt our numbers, you divided by 30 hours

01:37:45.609 --> 01:37:47.880
then you get to a megawatt number, I don't have the

01:37:47.880 --> 01:37:50.600
exact number, but it's somewhere in the neighborhood

01:37:50.600 --> 01:37:56.579
of about 70 GW I believe. And what that represents

01:37:56.590 --> 01:38:02.069
is how much megawatts the system needs during the hours

01:38:02.079 --> 01:38:05.659
of highest reliability risk, which the hours of highest

01:38:05.659 --> 01:38:10.590
reliability risk are increasingly not peak Load they

01:38:10.590 --> 01:38:14.710
are hours of low non dispatchable generation or low

01:38:14.710 --> 01:38:17.409
thermal generation because of forced outages. And so

01:38:17.409 --> 01:38:20.920
the, those tend to occur increasingly, especially at

01:38:20.920 --> 01:38:23.470
the penetrations of solar that we're looking at in

01:38:23.470 --> 01:38:27.020
non solar hours in the evening and in winter hours

01:38:27.020 --> 01:38:29.850
when just winter, Load winter winter Load tend to be

01:38:29.850 --> 01:38:32.920
lower than summer loads. So that's why that 70 ish

01:38:32.920 --> 01:38:35.979
gigawatt number is lower than the peak loads that the

01:38:35.979 --> 01:38:38.560
system is experiencing, but that's what that represents

01:38:38.579 --> 01:38:42.670
and right. Obviously with that. Okay, well that's helpful

01:38:42.670 --> 01:38:44.739
I mean, I'm just trying to unpack it. Right to understand

01:38:44.739 --> 01:38:46.560
Okay, if you're planning a system to meet the highest

01:38:46.560 --> 01:38:50.029
reliability risk hours and based on your analysis so

01:38:50.029 --> 01:38:52.649
far, of course it will be updated as we continue to

01:38:52.649 --> 01:38:56.699
look at various, you know parameters and areas of discussion

01:38:57.340 --> 01:38:59.569
but try to just understand like what, what is the goal

01:38:59.569 --> 01:39:02.050
for the highest reliability risk hours, how many, how

01:39:02.050 --> 01:39:04.590
much generation do you have to have on the system to

01:39:04.590 --> 01:39:09.220
meet um, to meet that one in 10 reliability standard

01:39:09.229 --> 01:39:11.979
or the gigawatt hours of the PCS Pcs that need to be

01:39:11.989 --> 01:39:16.699
generated. So you're saying about 70,000 megawatts

01:39:16.710 --> 01:39:21.180
um Under the under the specific portfolio that we're

01:39:21.180 --> 01:39:24.729
looking at in 2026 and right, that would be a dynamic

01:39:24.739 --> 01:39:27.510
number. That would be recalculated every year but yes

01:39:28.810 --> 01:39:29.489
Okay.

01:39:31.600 --> 01:39:33.479
Alright. So I mean

01:39:36.390 --> 01:39:38.109
I'm trying to figure out how we look at this in a

01:39:38.109 --> 01:39:41.619
sort of multi year analysis way. Right? Because you

01:39:41.619 --> 01:39:44.300
know right now we probably have about that much on

01:39:44.300 --> 01:39:48.319
the system of a generation. I don't know what you got

01:39:48.319 --> 01:39:52.060
from market. I mean in terms of how much we have 70,000

01:39:52.069 --> 01:39:56.140
megawatts on the system. Well, again, this the, this

01:39:56.140 --> 01:39:59.880
is not looking at how much generations on the system

01:39:59.880 --> 01:40:03.340
this is looking at what is the availability of generation

01:40:03.350 --> 01:40:07.430
during the hours of highest reliability risk and the

01:40:07.430 --> 01:40:10.359
word availability. Exactly availability. Okay. Yes

01:40:10.369 --> 01:40:15.329
And so, okay, so you know solar, in, in the PCM as

01:40:15.329 --> 01:40:18.310
we modeled, it is essentially unavailable. It has a

01:40:18.310 --> 01:40:23.529
1% PCM credit because all of the hours of highest reliability

01:40:23.529 --> 01:40:26.979
risk are in the evening after the sun has set. Wind

01:40:26.979 --> 01:40:30.460
has also a relatively low availability.

01:40:32.359 --> 01:40:35.539
Okay, thank you for that clarification. Um

01:40:39.979 --> 01:40:45.399
Sure um okay and and that kind of gets to how solar

01:40:45.399 --> 01:40:49.050
is performing um and and when we have these high risk

01:40:49.050 --> 01:40:53.039
hours, so on page six of your report, you say uh you

01:40:53.039 --> 01:40:57.000
explicitly recommend that Net Load not be used in any

01:40:57.000 --> 01:41:00.340
market design is suggested by some of our commenters

01:41:00.350 --> 01:41:05.109
um what would you use? So are you using Pr C? So

01:41:05.119 --> 01:41:09.630
I we do not have a specific recommendation. Yeah, so

01:41:09.630 --> 01:41:12.600
I think that's something that needs to be discussed

01:41:12.600 --> 01:41:15.569
and worked through the principle is that it should

01:41:15.569 --> 01:41:20.140
be the hours of lowest incremental available operating

01:41:20.140 --> 01:41:23.880
reserves, there are a number of ways to measure that

01:41:23.890 --> 01:41:27.989
P r C r D C reserves, you know, there's questions about

01:41:28.000 --> 01:41:31.270
how fast do you need to be able to come online to

01:41:31.279 --> 01:41:35.130
be considered to be available? So those are questions

01:41:35.130 --> 01:41:38.829
that I think need to be debated right, but I mean the

01:41:38.840 --> 01:41:43.720
difference right, is that peak, Net Load looks at low

01:41:43.729 --> 01:41:47.619
non dispatchable generation. What it doesn't capture

01:41:47.630 --> 01:41:52.869
is other real reliability risks like low thermal generation

01:41:52.880 --> 01:41:56.090
because from a system perspective, if there's a big

01:41:56.090 --> 01:41:59.369
thermal outage that doesn't really look a whole lot

01:41:59.369 --> 01:42:03.180
different than the solar going behind clouds or the

01:42:03.180 --> 01:42:06.949
wind stopped blowing, its low generation and so looking

01:42:06.949 --> 01:42:10.289
at incremental available operating reserves captures

01:42:10.300 --> 01:42:14.369
all of the risks in the technology neutral way including

01:42:14.380 --> 01:42:16.850
low non dispatchable generation

01:42:18.539 --> 01:42:24.100
and like jimmy said, we're anything whether it's PCM

01:42:24.109 --> 01:42:29.300
or another concept advocated directed by the legislature

01:42:29.310 --> 01:42:32.880
were these are technical questions that are, will have

01:42:32.880 --> 01:42:35.939
to be answered with additional analysis like Zach said

01:42:35.939 --> 01:42:41.060
and and the point you're making, I think are similar

01:42:41.060 --> 01:42:44.210
in that there's additional, this is jimmy said this

01:42:44.210 --> 01:42:46.340
is the beginning. Yeah, no, no, absolutely. And and

01:42:46.340 --> 01:42:49.689
this is helpful to kind of have Zach's following thoughts

01:42:49.699 --> 01:42:53.590
um another follow on to that one when we talk about

01:42:53.600 --> 01:43:00.829
PC supply um and generators of Pcs what in your view

01:43:00.840 --> 01:43:04.680
constitutes a generator, generator of PC um trying

01:43:04.680 --> 01:43:07.689
to kind of read between lines are loads in that bucket

01:43:07.689 --> 01:43:12.210
as the controllable Load resources uh clarify in your

01:43:12.210 --> 01:43:15.760
view. Yeah, that that is a good question, I think it

01:43:15.770 --> 01:43:22.270
it so there's an inherent incentive in the construct

01:43:22.270 --> 01:43:27.880
of the PCM for loads to not consume energy during PC

01:43:27.890 --> 01:43:33.000
hours because those are the hours that ultimately mean

01:43:33.000 --> 01:43:36.600
they have to buy Pcs and so there's an economic incentive

01:43:36.609 --> 01:43:40.510
to reduce Load during those hours. So that's an inherent

01:43:40.510 --> 01:43:44.529
feature and that's a good feature because that reduces

01:43:44.529 --> 01:43:47.220
the quantity of dispatchable generation that the system

01:43:47.220 --> 01:43:50.260
needs and that's a cost saving, that's benefit. There's

01:43:50.260 --> 01:43:56.510
I think an additional question of can does Load actually

01:43:56.520 --> 01:44:01.069
have to reduce during those hours or can it offer into

01:44:01.069 --> 01:44:04.439
the energy market just like a generator and say I will

01:44:04.439 --> 01:44:07.119
reduce if you need me to but I'm only going to reduce

01:44:07.130 --> 01:44:09.270
if you tell me to, that's kind of like a generator

01:44:09.270 --> 01:44:13.350
that offers that isn't dispatched and I think that

01:44:13.350 --> 01:44:18.800
is an appropriate um that is an appropriate feature

01:44:18.810 --> 01:44:21.500
to include to a certain extent because we wouldn't

01:44:21.500 --> 01:44:25.350
want to be unnecessarily curtailing loads that are

01:44:25.350 --> 01:44:28.739
generating economic value if they don't need to be

01:44:28.739 --> 01:44:33.359
curtailed and so you could allow loads to participate

01:44:33.369 --> 01:44:37.270
and offer to curtail if needed for reliability without

01:44:37.279 --> 01:44:39.579
actually having to do that and then those customers

01:44:39.579 --> 01:44:43.090
could continue to generate value by consuming energy

01:44:43.090 --> 01:44:46.890
if the system does have that energy available, so does

01:44:46.890 --> 01:44:49.369
energy efficiency fit into that? I mean obviously it's

01:44:49.369 --> 01:44:52.890
a different kind of animal, right? Energy efficiency

01:44:52.890 --> 01:44:56.500
I think would be in the first bucket of just natural

01:44:56.500 --> 01:45:01.189
Load reductions that reduce the quantity of pcs that

01:45:01.199 --> 01:45:04.579
LSE would need to buy because energy efficiency just

01:45:04.579 --> 01:45:07.479
kind of is there, it doesn't need to be dispatched

01:45:07.479 --> 01:45:11.439
it just is inherently there and there is an incentive

01:45:11.449 --> 01:45:14.560
for that. Well, I mean I think clearly having that

01:45:14.560 --> 01:45:16.779
incentive, I mean we've talked a little bit and Kathleen

01:45:16.779 --> 01:45:21.529
you're gonna, you know work on these e plans um but

01:45:22.930 --> 01:45:25.920
it is unique but I think a lot of people have said

01:45:25.920 --> 01:45:29.229
that clearly there is a benefit to the system as a

01:45:29.229 --> 01:45:32.649
whole and the prices as a whole, you know, if we capture

01:45:32.649 --> 01:45:35.930
at least in some form that the value of, of energy

01:45:35.930 --> 01:45:39.689
efficiency and especially in, in times of you know

01:45:39.689 --> 01:45:43.140
very, we're in a hot state. So uh, you know, the benefits

01:45:43.140 --> 01:45:46.489
there um, so better understanding that would be, would

01:45:46.500 --> 01:45:48.819
be good in the future for sure and drilling down on

01:45:48.819 --> 01:45:52.260
that idea still further uh and and we're trying to

01:45:52.260 --> 01:45:55.020
incentivize generation generation that is in Ancillary

01:45:55.029 --> 01:45:59.140
which we are contracting for uh for operational purposes

01:45:59.149 --> 01:46:03.909
um they are available and they are dispatched theoretically

01:46:03.909 --> 01:46:06.409
during these high risk hours they get pcs

01:46:08.840 --> 01:46:11.300
if they're, if they're well they're there, they're

01:46:11.300 --> 01:46:14.189
available, they're there. So that's the part that I'm

01:46:14.189 --> 01:46:15.939
trying to understand because earlier you said that

01:46:15.939 --> 01:46:19.449
Ancillary aren't, you didn't use them to meet reliability

01:46:19.449 --> 01:46:21.800
standard. I mean obviously they do help, right, because

01:46:21.800 --> 01:46:26.000
we procure them and we deploy them to think that that

01:46:26.000 --> 01:46:29.170
prior statement was saying that the procurement of

01:46:29.180 --> 01:46:36.029
ancillary services is not used in any market or an

01:46:36.029 --> 01:46:38.539
appropriate framework to ensure there is a sufficient

01:46:38.539 --> 01:46:41.289
total quantity of supply, but that doesn't mean that

01:46:41.289 --> 01:46:44.420
the Ancillary aren't a part of the total supply. Okay

01:46:44.510 --> 01:46:48.250
in one clarification, you mentioned tech neutral um

01:46:48.260 --> 01:46:52.840
in but the resources that bit into the voluntary forward

01:46:52.840 --> 01:46:55.550
market would have to be confident that they can actually

01:46:55.550 --> 01:46:59.800
be there. Right? So in in that confidence um bucket

01:46:59.810 --> 01:47:05.079
what, what are you assuming like a penalty um, if you're

01:47:05.079 --> 01:47:08.159
not available because otherwise you just don't get

01:47:08.159 --> 01:47:10.380
the money if you just show up and if you don't show

01:47:10.380 --> 01:47:12.189
if you get in you don't show up you just don't get

01:47:12.189 --> 01:47:15.149
the money. But the confidence that that's where I'm

01:47:15.149 --> 01:47:19.630
like SOAH resource that clears in the forward market

01:47:19.810 --> 01:47:24.619
would incur an obligation to be available during the

01:47:24.619 --> 01:47:28.090
performance credit hours and if they're not available

01:47:28.100 --> 01:47:31.609
then the penalty would be that they have to buy out

01:47:31.609 --> 01:47:35.350
of their obligation in the residual settlement market

01:47:35.449 --> 01:47:37.659
Same reason they don't really show up in the market

01:47:38.560 --> 01:47:41.090
They don't know if they're gonna be there, they don't

01:47:41.100 --> 01:47:43.640
want the penalty, they don't want to have to buy back

01:47:43.640 --> 01:47:48.079
that obligation which would you know perhaps encourage

01:47:48.079 --> 01:47:52.960
more co location of storage and solar and other renewable

01:47:52.960 --> 01:47:56.800
resources among other things. Yeah. Absolutely. Can

01:47:56.800 --> 01:48:01.720
I ask a question about uh retirements and new builds

01:48:01.729 --> 01:48:05.670
So how do you see, do you see the P. C. M

01:48:05.680 --> 01:48:10.680
Or I mean you can talk through all of the market designs

01:48:10.689 --> 01:48:17.439
um do they stop old units from retiring Or do they

01:48:17.439 --> 01:48:21.689
incent new builds or do they do both or neither? Right

01:48:21.699 --> 01:48:26.079
Well it is an interesting conclusion from the study

01:48:26.079 --> 01:48:31.920
and the report that given all of the renewables and

01:48:31.920 --> 01:48:35.609
storage that are coming online, 37 gigawatts of combined

01:48:35.609 --> 01:48:38.100
capacity which does provide some reliability value

01:48:38.800 --> 01:48:42.779
All of that coming online means that the challenge

01:48:42.779 --> 01:48:47.229
for dispatchable resources to maintain sufficient numbers

01:48:47.229 --> 01:48:50.420
of those to meet a reliability standard really is a

01:48:50.420 --> 01:48:54.420
question of maintaining existing resources, you know

01:48:54.430 --> 01:48:57.810
if that amount of renewables weren't coming online

01:48:57.819 --> 01:49:00.210
we might need more than we have. But given that there

01:49:00.210 --> 01:49:03.500
is, it's really a challenge of maintaining existing

01:49:03.500 --> 01:49:07.880
quantities of dispatchable and so what the PCM does

01:49:07.890 --> 01:49:12.300
under the portfolio that we're looking at is mitigate

01:49:12.310 --> 01:49:15.289
the quantity of exit from the market or retirements

01:49:15.300 --> 01:49:19.760
Now that is, I will say that that's a net number. So

01:49:19.770 --> 01:49:24.359
if for example, there is a large exit of resources

01:49:24.939 --> 01:49:27.859
you can imagine a large exit of coal resources due

01:49:27.859 --> 01:49:30.319
to environmental regulations that are sort of outside

01:49:30.319 --> 01:49:33.340
the scope of our analysis, if there's a large exit

01:49:33.350 --> 01:49:37.699
then that might require actual new build to get to

01:49:37.699 --> 01:49:40.449
the total quantity of dispatchable that we're saying

01:49:40.449 --> 01:49:43.930
is necessary but on net that would still be lower for

01:49:43.930 --> 01:49:47.800
example, than the quantity of dispatchable that exists

01:49:47.800 --> 01:49:51.569
today. So it's Oh yeah, under our assumptions is primarily

01:49:51.569 --> 01:49:55.050
an incentive to retain existing dispatchable generation

01:49:55.050 --> 01:49:58.739
but potentially have to get new dispatchable if existing

01:49:58.750 --> 01:50:03.859
retires to appoint to appoint right because again,

01:50:03.869 --> 01:50:06.750
you've got to hit that high risk our and Aztecs chin

01:50:06.760 --> 01:50:10.850
comments showed less efficient, older vintage stuff

01:50:10.859 --> 01:50:13.779
isn't gonna have the ramping capability to hit it.

01:50:14.680 --> 01:50:17.720
Yeah. And as one of the features, of course this is

01:50:17.720 --> 01:50:20.659
self correcting over time. So even if it's initially

01:50:20.659 --> 01:50:23.890
it's retaining old units, everything is gonna reach

01:50:23.899 --> 01:50:27.539
into useful life. So that dynamic is it fair to say

01:50:27.539 --> 01:50:30.720
that dynamic would probably change. Yes, a decade later

01:50:30.729 --> 01:50:31.130
Yes,

01:50:32.720 --> 01:50:35.369
that's kind of interesting too because I've been sort

01:50:35.369 --> 01:50:37.560
of thinking about this from, I think your vantage point

01:50:37.569 --> 01:50:41.539
jimmy, it's, it's, you know, the pC hours and the ability

01:50:41.539 --> 01:50:43.970
of a generation resource that bids into the voluntary

01:50:43.970 --> 01:50:47.640
forward market, um, to be able to get that PC our,

01:50:47.640 --> 01:50:49.699
like, what kind of units are gonna actually be able

01:50:49.699 --> 01:50:53.210
to come on and grab those pieces right. The speakers

01:50:53.210 --> 01:50:56.600
in the summer seem pretty opportune, right. I'm wondering

01:50:56.600 --> 01:51:00.090
about those bulky base Load large combined cycles,

01:51:00.100 --> 01:51:03.199
whether the generators are gonna bid those in um, to

01:51:03.199 --> 01:51:06.949
go after PC hours and ultimately will, that, you know

01:51:06.949 --> 01:51:09.539
how that encourages the retention of those longer duration

01:51:09.539 --> 01:51:13.180
larger combined cycle units. Well, I think in general

01:51:13.189 --> 01:51:16.619
one of the lessons that we are seeing across the country

01:51:16.949 --> 01:51:21.569
is that these large scale reliability events are actually

01:51:21.579 --> 01:51:26.750
relatively forecast a ble a few days in advance. These

01:51:26.760 --> 01:51:30.369
these events that are going to be primarily driving

01:51:30.380 --> 01:51:34.239
reliability issues, We see them coming because their

01:51:34.239 --> 01:51:38.170
weather driven events and those longer lead time units

01:51:38.180 --> 01:51:41.539
would in that world have enough time to get online

01:51:41.539 --> 01:51:45.739
to be available so that they're ready and needed. And

01:51:45.750 --> 01:51:47.939
so, you know, they, you know, that's not to say that

01:51:47.949 --> 01:51:51.130
every high reliability risk our is completely accountable

01:51:51.130 --> 01:51:53.020
There might be some things that do come out of the

01:51:53.020 --> 01:51:56.390
blue for what for whatever reason and you know those

01:51:56.390 --> 01:51:58.680
units might not be able to capture those specific hours

01:51:58.680 --> 01:52:01.029
but to a large extent they would be able to capture

01:52:01.029 --> 01:52:05.260
the summer events. The winter events and so that that

01:52:05.270 --> 01:52:08.840
that's more predictable and better improved by looking

01:52:08.840 --> 01:52:12.729
at it in more granular basis like a seasonal basis

01:52:12.739 --> 01:52:14.789
rather than annual. Right? Because I don't know if

01:52:14.789 --> 01:52:16.880
anybody can predict when the hours are gonna hit in

01:52:16.880 --> 01:52:19.340
the summer on an annual basis. Well this is not saying

01:52:19.340 --> 01:52:22.270
that you can at the start of the year know what hours

01:52:22.270 --> 01:52:25.369
the PC hours are going to occur. This is saying that

01:52:25.380 --> 01:52:30.409
a day or two before you know three days before you

01:52:30.409 --> 01:52:34.170
know that in the three days there's a high likelihood

01:52:34.180 --> 01:52:37.479
that that day is gonna have PC hours and you can get

01:52:37.479 --> 01:52:40.279
yourself online. So that's the predictability aspect

01:52:40.279 --> 01:52:44.210
of it. But what if you don't get dispatched in that

01:52:44.210 --> 01:52:47.859
scenario? Yeah the PC. You produce a P. C. By being

01:52:47.859 --> 01:52:51.329
available and operating offering not by being dispatched

01:52:51.329 --> 01:52:53.359
so you do not have to be dispatched to get a performance

01:52:53.359 --> 01:52:57.779
credit. Okay. And then what if you offer are dispatched

01:52:57.789 --> 01:52:58.430
and trip

01:53:00.140 --> 01:53:03.109
then you would not produce a performance credit. Would

01:53:03.109 --> 01:53:06.739
you get penalized? Yes. And what what would that penalty

01:53:06.750 --> 01:53:09.090
be or is that yet to be decided? Is that? Well you

01:53:09.090 --> 01:53:11.920
have two penalties in that world. One you'd have to

01:53:11.920 --> 01:53:14.979
buy out of the energy and two you would have to buy

01:53:14.979 --> 01:53:17.420
yourself out of performance credit market in the residual

01:53:17.420 --> 01:53:21.420
market. So part of the thing that I struggle with as

01:53:21.420 --> 01:53:28.510
you all know, I'm my mind. Um it seems to wrap, I've

01:53:28.510 --> 01:53:31.520
wrapped my head around how dispatchable energy credit

01:53:31.529 --> 01:53:34.979
or as I call it a resource equalization payment and

01:53:34.979 --> 01:53:40.210
a backstop work together. Um A deck, you know the way

01:53:40.210 --> 01:53:44.630
that my question is if a deck is expanded to to include

01:53:44.630 --> 01:53:47.729
all types of dispatchable resources is a deck the same

01:53:47.729 --> 01:53:48.789
thing as a PCM

01:53:52.479 --> 01:53:58.239
if the deck were to expand it to include all resources

01:53:58.250 --> 01:54:02.920
and the hours in which you can generate a deck are

01:54:02.920 --> 01:54:07.500
shrunk to only being the highest reliability hours

01:54:07.510 --> 01:54:10.100
risk, highest reliability risk hours per year then

01:54:10.100 --> 01:54:15.800
Yes but the deck as envisioned was first of all not

01:54:15.810 --> 01:54:18.109
every resource and second of all it was every day.

01:54:18.119 --> 01:54:21.569
So it's providing the daily signal which again most

01:54:21.569 --> 01:54:23.810
days don't have any type of reliability risk. So you're

01:54:23.819 --> 01:54:27.149
overcompensating on those days and necessarily under

01:54:27.149 --> 01:54:29.420
compensating on the few days that have a really large

01:54:29.420 --> 01:54:32.819
risk and so that's the inefficiency and thats a, thats

01:54:32.819 --> 01:54:36.600
a good clarification what what I'm, what I still struggle

01:54:36.600 --> 01:54:42.140
with is whether it's a PCM or a deck there are gonna

01:54:42.140 --> 01:54:45.350
be units that get them and units that don't,

01:54:46.909 --> 01:54:49.810
what is the difference between the the argument against

01:54:49.810 --> 01:54:52.569
the deck was that some resources are going to get them

01:54:52.569 --> 01:54:54.100
and it's going to push those that don't out of the

01:54:54.100 --> 01:55:00.310
market. The PCM is gonna have some that get the P.

01:55:00.310 --> 01:55:03.500
C. M. And others that don't and what is to stop them

01:55:03.510 --> 01:55:05.869
from going out of the market. I don't understand what

01:55:05.869 --> 01:55:09.210
the difference is. And is there a mechanism to stop

01:55:09.210 --> 01:55:11.199
them from going out of the market if they don't get

01:55:11.199 --> 01:55:11.970
a PCM?

01:55:13.970 --> 01:55:20.239
Well the the deck the deck, the problem with the deck

01:55:20.239 --> 01:55:23.779
is that it brings in new generation and reduces prices

01:55:23.789 --> 01:55:27.420
like entirely and that's what pushes out other resources

01:55:27.420 --> 01:55:31.649
The PCM is not reducing prices it's reducing energy

01:55:31.649 --> 01:55:34.760
prices but it's fulfilling you know creating a pc price

01:55:34.760 --> 01:55:38.140
that supports sufficient generation. So it's actually

01:55:38.140 --> 01:55:43.119
not reduced. The PCM is not reducing prices for really

01:55:43.130 --> 01:55:47.739
any resource because you could imagine let's take apparently

01:55:47.739 --> 01:55:51.399
reducing the energy cost which affects every resource

01:55:51.409 --> 01:55:55.380
But the uncertainty of exactly gonna help here. I think

01:55:55.390 --> 01:55:59.060
the uncertainty of the PC is the uncertainty of the

01:55:59.060 --> 01:56:02.090
high risk our to occur the next day. And so therefore

01:56:02.100 --> 01:56:05.699
you can't bid you can't bake in the value of the Pc

01:56:05.960 --> 01:56:09.010
in your bid because you don't know if it's gonna if

01:56:09.010 --> 01:56:11.579
it's gonna come in for you. And his argument has always

01:56:11.579 --> 01:56:14.470
been that the deck has been uh sorry I don't want to

01:56:14.470 --> 01:56:17.340
put words in your mouth. But I think a production tax

01:56:17.340 --> 01:56:20.069
credit equivalent because you can count on the deck

01:56:20.069 --> 01:56:23.319
and so therefore you're gonna low bid and uh mess up

01:56:23.319 --> 01:56:26.220
skid and you're you're gonna get dispatched and you

01:56:26.220 --> 01:56:28.520
can and so you're gonna throw other people out of the

01:56:28.520 --> 01:56:32.539
market. One question on that is commenters have said

01:56:32.539 --> 01:56:35.569
that you can normalize that impact through the R. D

01:56:35.569 --> 01:56:40.840
P. A. Um do you have a view on that by accounting

01:56:40.840 --> 01:56:45.949
for it and the reliability deployment price at in computation

01:56:45.949 --> 01:56:50.439
of it? I don't have a comment on that. Is that the

01:56:50.439 --> 01:56:53.220
self accreditation issue that was raised where you

01:56:53.229 --> 01:56:57.819
credit less to reduce risk? Well, I think you back

01:56:57.819 --> 01:57:00.750
them out of the reliability deployment price after

01:57:00.750 --> 01:57:03.199
so that it doesn't skew off price for wholesale price

01:57:03.210 --> 01:57:06.229
I mean, I think there's a couple of different dynamics

01:57:06.229 --> 01:57:12.819
here. So the they're, the PCM would have the two step

01:57:12.819 --> 01:57:15.500
process, you gotta earn, the credit generators gotta

01:57:15.510 --> 01:57:19.550
earn the credit and then they have to either in advance

01:57:19.550 --> 01:57:25.029
or in a residual market, offer that credit into the

01:57:25.039 --> 01:57:29.649
PCM clearing house at a low enough price that some

01:57:29.649 --> 01:57:34.039
LSD comes and buys it. So is that fair in the market

01:57:34.069 --> 01:57:37.250
and the market, um in the residual market, the demand

01:57:37.250 --> 01:57:39.930
curve will take care of that. And but the same same

01:57:39.930 --> 01:57:45.119
net impact is some generators who have earned Pcs will

01:57:45.119 --> 01:57:48.539
not be cleared because they're at too high a price

01:57:48.550 --> 01:57:49.060
Right.

01:57:50.989 --> 01:57:54.729
Well, I think the demand curve in any generator that

01:57:54.729 --> 01:57:59.060
generates a PC will be compensated at the demand curve

01:57:59.060 --> 01:58:02.590
level for that. But if in the forward market they offer

01:58:02.600 --> 01:58:05.000
where it doesn't clear, then they wouldn't, on a forward

01:58:05.000 --> 01:58:10.899
basis be able to hedge a PC. Right? So a slow demand

01:58:10.899 --> 01:58:13.649
curve in the back and they would receive, diminishing

01:58:13.659 --> 01:58:16.800
the further back. They are on that the compensation

01:58:16.800 --> 01:58:20.340
they receive would diminish rapidly, depending on that

01:58:21.020 --> 01:58:26.439
down what curve. So down the demand curve. Right? So

01:58:26.439 --> 01:58:31.579
if if you if you commit the forward credit market,

01:58:32.069 --> 01:58:34.609
it's got to be at a low enough price that some LSC

01:58:34.609 --> 01:58:38.289
will come in and buy that credit from you for next

01:58:38.289 --> 01:58:40.479
summer, Right? But if you don't clear in the forward

01:58:40.479 --> 01:58:43.789
market, you could still earn a performance credit by

01:58:43.800 --> 01:58:46.409
generating and selling that into the residual market

01:58:46.930 --> 01:58:49.460
assuming that you had at least offered in the forward

01:58:49.460 --> 01:58:52.729
market, which makes you eligible to generate a performance

01:58:52.729 --> 01:58:55.390
credit. In the residual market, you're probably gonna

01:58:55.390 --> 01:58:58.710
get less than you would have gotten if you sold it

01:58:58.710 --> 01:59:01.420
forward. But I think the so it's a two step process

01:59:01.420 --> 01:59:03.640
you gotta earn it and you've got to earn it at a

01:59:03.640 --> 01:59:07.710
price low enough to receive some reasonable revenue

01:59:08.800 --> 01:59:12.970
The difference is that the demand, the total amount

01:59:12.970 --> 01:59:16.930
of Pcs consumed every month, every season, whatever

01:59:16.930 --> 01:59:24.000
it is, equates to the entire demand of ERCOT plus reserves

01:59:24.000 --> 01:59:28.430
or whatever it is, rather than just a subset the demand

01:59:28.430 --> 01:59:32.670
for those credits is the whole thing. Therefore, one

01:59:32.670 --> 01:59:35.109
resource isn't discriminated against versus another

01:59:35.119 --> 01:59:42.069
thus preventing the undesired exit of a certain type

01:59:42.069 --> 01:59:48.819
of resource is that I get I get that. But to me

01:59:48.829 --> 01:59:52.649
it seems that we're whether we have a deck or we have

01:59:52.649 --> 01:59:53.640
a PCM,

01:59:55.409 --> 01:59:59.060
we are not, we're trying to fool economics but we can

01:59:59.060 --> 02:00:03.800
only do it for so long and ultimately, you know, what's

02:00:03.800 --> 02:00:07.949
gonna impact these, the build and the retirement decisions

02:00:07.960 --> 02:00:12.819
have more to do our decisions that are based more than

02:00:12.829 --> 02:00:17.239
just on a PCM price. They're based upon transmission

02:00:17.239 --> 02:00:22.010
impacts, demand response impacts fuel costs, tax credits

02:00:22.010 --> 02:00:26.550
and Load growth. And so we have to take all those into

02:00:26.550 --> 02:00:29.510
consideration as we are, you know, looking at these

02:00:29.520 --> 02:00:33.989
this market design option that PCM in and of itself

02:00:34.000 --> 02:00:42.649
may not be the the price uh, the adder that forces

02:00:42.659 --> 02:00:46.060
a entity into retirement or adds a new resource to

02:00:46.060 --> 02:00:49.500
the system. Right. I think it's important as you point

02:00:49.500 --> 02:00:53.550
out that to note that the PC performance credit market

02:00:53.560 --> 02:00:58.560
is only one of many market products in ERCOT there's

02:00:58.560 --> 02:01:01.590
also will still be the energy market and there will

02:01:01.590 --> 02:01:05.130
still be multitude. Ancillary service products and

02:01:05.130 --> 02:01:09.260
the decision for resources to build is to look at all

02:01:09.260 --> 02:01:12.399
of those markets and say what are the revenues that

02:01:12.399 --> 02:01:16.359
I would earn in all of those markets and there are

02:01:16.359 --> 02:01:21.079
might be really good reasons for generative resource

02:01:21.079 --> 02:01:23.989
types like solar to build because they think that they

02:01:23.989 --> 02:01:28.199
can earn energy revenues and there might be great reasons

02:01:28.199 --> 02:01:30.050
for batteries to build because they think they can

02:01:30.050 --> 02:01:34.140
earn Ancillary service revenues but if those resources

02:01:34.149 --> 02:01:36.659
and the, and if they think they can be there during

02:01:36.659 --> 02:01:38.359
the hours of highest reliability risk and they can

02:01:38.359 --> 02:01:40.699
also earn performance credit resources but if they

02:01:40.710 --> 02:01:44.050
don't think that they can be there then those resources

02:01:44.050 --> 02:01:47.109
would not be built for the purposes of reliability

02:01:47.109 --> 02:01:49.199
which is the performance credit they built for other

02:01:49.199 --> 02:01:51.779
reasons and other revenues. So, and I think that's

02:01:51.779 --> 02:01:56.039
a really good point that in my mind how I kind of

02:01:56.039 --> 02:01:59.550
segment things is we really do have if whatever this

02:01:59.550 --> 02:02:04.720
reliability market becomes, it becomes a third market

02:02:04.729 --> 02:02:08.329
in this entirety of this market with ancillary services

02:02:08.340 --> 02:02:13.960
energy and then this reliability and performance. So

02:02:13.970 --> 02:02:18.489
so that that that's interesting because um, thank you

02:02:18.489 --> 02:02:19.930
for asking that question because I've been trying to

02:02:19.939 --> 02:02:21.710
sort of think about it as well and I know some of

02:02:21.710 --> 02:02:24.270
the stakeholders have raised that exact same point

02:02:24.279 --> 02:02:30.010
like the P. C. M. Matter credit, the revenue you get

02:02:30.010 --> 02:02:31.909
from, it is not going to be the sole decision driving

02:02:31.909 --> 02:02:34.729
investment. All right, so we have an O. R. D. C. We

02:02:34.729 --> 02:02:38.649
have that's healthy, we have Ancillary services that

02:02:38.649 --> 02:02:45.079
are healthy but the pc is an additional um revenue

02:02:45.090 --> 02:02:50.170
driver that is intended to help kind of consent. Just

02:02:50.170 --> 02:02:55.130
one more drop in the hat to try to um instant new

02:02:55.130 --> 02:03:00.029
dispatchable generation and retention of existing generation

02:03:00.039 --> 02:03:03.670
So one criticism that was raised in the comments and

02:03:03.680 --> 02:03:06.119
I'd like to hear your thoughts um, is well, what are

02:03:06.119 --> 02:03:10.289
what are we paying for exactly with the PC adder? Because

02:03:10.289 --> 02:03:13.119
we've got the energy price, we've got the O R D. C

02:03:13.130 --> 02:03:17.920
will have a PC adder and then if it doesn't go away

02:03:17.930 --> 02:03:22.750
we'll have the R. D. T. P. ADER So what's the difference

02:03:22.750 --> 02:03:26.409
between O. R. D. C. And P C. M. I mean because

02:03:26.409 --> 02:03:30.489
they're both driving generation availability and both

02:03:30.500 --> 02:03:33.850
are built, the police is currently now in your report

02:03:33.859 --> 02:03:37.489
surrounding scarcity conditions and low operating reserves

02:03:38.039 --> 02:03:42.689
One of the biggest differences is the volatility of

02:03:42.689 --> 02:03:49.189
them. So right now the O. R. D C is designed to

02:03:49.189 --> 02:03:54.470
deliver sufficient revenues to resources but in a way

02:03:54.470 --> 02:03:57.909
that's highly unpredictable where you could go years

02:03:57.920 --> 02:04:01.449
without seeing a scarcity price and then you could

02:04:01.449 --> 02:04:04.810
have short periods of time where the scarcity pricing

02:04:04.819 --> 02:04:09.850
is astronomical. And so the PCM is designed to produce

02:04:09.850 --> 02:04:12.609
that volatility on a year by year basis. So that's

02:04:12.619 --> 02:04:18.539
that's one sort of feature revenue certainty. Exactly

02:04:18.630 --> 02:04:23.899
for resources. And the other feature is that the

02:04:25.569 --> 02:04:28.800
demand curve for performance credits that set the price

02:04:28.810 --> 02:04:33.119
can be moved up or down to achieve different levels

02:04:33.119 --> 02:04:36.319
of reliability and potentially increased revenues in

02:04:36.319 --> 02:04:39.670
a way that incense more generators onto the system

02:04:39.680 --> 02:04:44.350
to improve reliability now and again that that's a

02:04:44.350 --> 02:04:47.119
lever that's available based on however the reliability

02:04:47.119 --> 02:04:51.699
standard is set and that can be done in a way that

02:04:51.710 --> 02:04:55.149
provides those revenues to resources in a relatively

02:04:55.380 --> 02:04:58.939
less, much less volatile way than our D. C. I will

02:04:58.939 --> 02:05:02.949
say that you could, it is possible. This is not a design

02:05:02.949 --> 02:05:05.329
me analyzed right? You could also just

02:05:07.289 --> 02:05:10.819
enhance the O. R. D. C. To just keep injecting more

02:05:10.819 --> 02:05:12.939
and more money into it. You could theoretically get

02:05:12.939 --> 02:05:17.090
the R. D. C. So high that you could achieve high levels

02:05:17.090 --> 02:05:18.960
of reliability but that's gonna come with even more

02:05:18.960 --> 02:05:23.350
tremendous levels of volatility. So it's the peace

02:05:23.359 --> 02:05:28.439
The PCM is a way to send the right, send sufficient

02:05:28.449 --> 02:05:31.359
revenues to resources that are needed to meet a reliability

02:05:31.359 --> 02:05:35.149
standard in a way that mitigates volatility relative

02:05:35.159 --> 02:05:37.800
to the R. D. C. Would you concede that in order to

02:05:37.800 --> 02:05:40.439
incent investment we need some level of volatility

02:05:42.310 --> 02:05:45.609
Maybe not tremendous volatility but some level of volatility

02:05:45.609 --> 02:05:47.090
drives new investment generation.

02:05:49.590 --> 02:05:55.399
I think that from from an absolute generation perspective

02:05:56.159 --> 02:05:59.760
generators do not need volatility. What they need is

02:05:59.770 --> 02:06:02.369
revenue certainty and there are different ways for

02:06:02.369 --> 02:06:04.930
generators to get that revenue certainty. So it's the

02:06:04.930 --> 02:06:08.890
opposite regulated rate of return is the easiest way

02:06:08.899 --> 02:06:12.869
but that's not a market volatility. Volatility in the

02:06:12.869 --> 02:06:16.130
market then you're in a regulated industry, that's

02:06:16.140 --> 02:06:19.770
not what we were tasked with. But I also want to ask

02:06:19.770 --> 02:06:25.760
that to the two. Lori previous question if if we are

02:06:26.819 --> 02:06:28.979
if the what's the difference between PCM minority.

02:06:28.979 --> 02:06:33.210
See I think I agree with and you can see everything

02:06:33.210 --> 02:06:35.939
you the logic and everything you said. I want to ask

02:06:35.939 --> 02:06:39.130
if it's also fair to say that another key difference

02:06:39.130 --> 02:06:44.020
is that the O. R. D. C. Revenue revenue goes to whoever

02:06:44.020 --> 02:06:48.199
happens to be there in that five minute interval where

02:06:48.210 --> 02:06:52.199
PC regardless of resource type and regardless of their

02:06:52.199 --> 02:06:56.739
ability to commit forward piece PCM revenue as contemplated

02:06:56.750 --> 02:07:00.970
would only go to those those resources who can commit

02:07:00.979 --> 02:07:04.720
well in advance and promise that they will be there

02:07:05.569 --> 02:07:09.130
during those times of highest need. I think that's

02:07:09.130 --> 02:07:12.529
a hugely important distinction and whether it ends

02:07:12.529 --> 02:07:16.399
up being if any of these products ends up being where

02:07:16.409 --> 02:07:21.220
as you all contemplated includes any any resource including

02:07:21.220 --> 02:07:25.310
wind and solar. But there it's very, the difference

02:07:25.310 --> 02:07:27.670
is it's very hard for them to predict months or years

02:07:27.670 --> 02:07:29.829
in advance that they can be available during certain

02:07:29.829 --> 02:07:34.039
hours or it's just it's a product designed just for

02:07:34.039 --> 02:07:38.689
dispatchable resources. Either way O. R. D. C. Goes

02:07:38.689 --> 02:07:40.970
to everybody. Whoever happens to be there in that five

02:07:40.970 --> 02:07:45.720
minute moment versus resources that can that can and

02:07:45.720 --> 02:07:49.050
will make a financial and operational commitment by

02:07:49.050 --> 02:07:53.109
that private business to be there in in exchange for

02:07:53.109 --> 02:07:57.449
that future commitment premium they receive an additional

02:07:57.449 --> 02:07:59.890
stream or have the opportunity to compete for additional

02:07:59.890 --> 02:08:03.140
stream of revenue, the opportunity, they don't know

02:08:03.140 --> 02:08:04.970
that will happen but they know it'll happen so many

02:08:04.970 --> 02:08:07.869
times every year and thus they're gonna offset whatever

02:08:07.869 --> 02:08:11.399
costs they're making into that you get paid one price

02:08:11.399 --> 02:08:13.840
for just happening to be there. You get paid an additional

02:08:13.840 --> 02:08:16.270
premium for being able to commit in advance that you'll

02:08:16.279 --> 02:08:18.979
be there. I think that's that's a key difference. Is

02:08:18.979 --> 02:08:24.100
that the requirement, can I bring up an issue on deliver

02:08:24.100 --> 02:08:29.289
ability? So we, we heard this um, I think at least

02:08:29.289 --> 02:08:32.590
I recall in the uh, in the comments that lubbock power

02:08:32.590 --> 02:08:36.409
and light, you know, left Spp because one of the reasons

02:08:36.420 --> 02:08:42.270
because they the resource adequate resource adequacy

02:08:42.279 --> 02:08:45.420
requirements were too high and deliver ability was

02:08:45.420 --> 02:08:48.260
the challenge for them. They couldn't meet it because

02:08:48.260 --> 02:08:49.970
they couldn't get transmission built because they were

02:08:49.970 --> 02:08:53.770
on the fringe of the system. Um, so, so what if a

02:08:53.779 --> 02:08:59.920
P C. M. Or another resource Adequacy mechanism? Um

02:08:59.930 --> 02:09:02.670
what if the easy easiest place to build is in the Rio

02:09:02.670 --> 02:09:07.020
grande valley and um everybody goes in sites there

02:09:07.029 --> 02:09:11.939
Um, we may have well in excess of the resource adequacy

02:09:11.939 --> 02:09:14.680
that we need in the valley, but in other Load pockets

02:09:14.680 --> 02:09:17.899
around the state, we may not. Right. How does that

02:09:17.899 --> 02:09:22.659
improve reliability to those regions? When in fact

02:09:22.670 --> 02:09:25.930
I guess that's the question. How does it, Right. Well

02:09:25.939 --> 02:09:30.590
the report does contemplate a geographic dimension

02:09:30.600 --> 02:09:34.399
to performance credit and in fact, if you look at every

02:09:34.399 --> 02:09:36.890
other market in the country that has a reliability

02:09:36.890 --> 02:09:40.829
mechanism, they all do have geographic requirements

02:09:40.840 --> 02:09:45.180
that specify the minimum amount of dispatchable resources

02:09:45.180 --> 02:09:50.630
that need to be in each zone and then that ensures

02:09:50.640 --> 02:09:55.510
that, you know, prices in constraint zones, PCM prices

02:09:55.510 --> 02:09:59.100
could rise and in unconstrained zones they could fall

02:09:59.109 --> 02:10:03.789
So that is definitely an aspect of the design that

02:10:03.789 --> 02:10:07.149
would need to be worked out, that's part of why the

02:10:07.159 --> 02:10:10.310
implementation timeline exists to discuss topics like

02:10:10.319 --> 02:10:13.289
that. So that's that's something that would need to

02:10:13.289 --> 02:10:17.649
be decided. But I would also say again, PCM is only

02:10:17.649 --> 02:10:22.930
one market and there's also the energy market and if

02:10:22.939 --> 02:10:26.060
there's a constrained zone where too much generation

02:10:26.060 --> 02:10:28.510
energy prices are gonna be very low. And if there's

02:10:28.510 --> 02:10:31.100
a zone without enough generation energy prices can

02:10:31.100 --> 02:10:34.300
be very high. So that's already gonna be an incentive

02:10:34.310 --> 02:10:37.369
net energy market incentive to sight in the appropriate

02:10:37.369 --> 02:10:41.470
zones. But we wouldn't want the PCM to be, you know

02:10:41.479 --> 02:10:45.100
countervailing that you need to have something. So

02:10:45.100 --> 02:10:47.399
we have a hard enough time, as does everybody building

02:10:47.399 --> 02:10:50.840
transmission especially into Load pocket, Do you think

02:10:50.850 --> 02:10:53.399
those generators that would get the PCM that are in

02:10:53.399 --> 02:10:56.409
the Load pocket, it would give them more incentive

02:10:56.409 --> 02:11:01.319
to fight transmission because not any more incentive

02:11:01.329 --> 02:11:04.229
than exists today with the energy market, right? You

02:11:04.229 --> 02:11:06.279
could say, well generators that exist in a Load pocket

02:11:06.279 --> 02:11:08.000
would fight transmission because that would reduce

02:11:08.000 --> 02:11:15.770
energy prices well. So incremental incentive change

02:11:15.770 --> 02:11:18.930
relatively incentives that exist today, that's why

02:11:18.930 --> 02:11:24.029
you're here jimmy, but all things, all things, all

02:11:24.029 --> 02:11:27.170
things being equal if you, if you take the time to

02:11:27.170 --> 02:11:29.279
adopt a reliability standard and this is what they

02:11:29.279 --> 02:11:31.470
try to compute for in other parts of the country as

02:11:31.470 --> 02:11:35.340
well. Um, that apply, that same reliability standard

02:11:35.350 --> 02:11:39.340
applies for the deliver ability of power. I mean they

02:11:39.340 --> 02:11:43.420
account for that, especially when they and that's why

02:11:43.420 --> 02:11:46.930
the zonal debate is constantly going on in miso and

02:11:46.930 --> 02:11:50.979
Spp big far flung systems, but if you take the time

02:11:50.979 --> 02:11:53.579
to adopt a reliability standard, it should dictate

02:11:53.590 --> 02:11:57.489
policy on both sides. And if you do that, is it your

02:11:57.489 --> 02:12:01.430
position, then you start to harmonize what your models

02:12:01.430 --> 02:12:03.779
show. I mean that that starts to bear out what your

02:12:03.779 --> 02:12:07.560
models show in terms of an actual deliverable Megawatt

02:12:07.560 --> 02:12:10.199
from one side of the system to the other, that helps

02:12:10.199 --> 02:12:16.850
you meet that equilibrium. Yes, that's it. Okay, a

02:12:16.859 --> 02:12:19.569
quick point of order. I've been advised that we have

02:12:19.569 --> 02:12:25.779
some travel constraints. Um So let's do 10 more minutes

02:12:25.779 --> 02:12:29.420
with Zach and then we'll switch lunch is gonna have

02:12:29.420 --> 02:12:32.250
to be sacrificed. We'll switch to remove back at least

02:12:32.250 --> 02:12:35.600
we'll switch to market and Pablo uh we may be able

02:12:35.600 --> 02:12:39.789
to bring zack up before he has to go. Um but does

02:12:39.789 --> 02:12:43.260
that work for you all make sure we get as much face

02:12:43.260 --> 02:12:48.760
time with every, This is possible. We do 10 more minutes

02:12:48.760 --> 02:12:53.689
with Zach and then ERCOT and Pablo I have a mechanical

02:12:53.689 --> 02:12:59.119
question. So um the generator resource offers pcs um

02:12:59.130 --> 02:13:02.550
into the forward market are they capped at the quantity

02:13:02.560 --> 02:13:04.710
that they offered into the market? So like if your

02:13:04.710 --> 02:13:07.020
solar generation resource and you offer one Megawatt

02:13:07.029 --> 02:13:09.149
and there was like all of a sudden 80 critical hours

02:13:09.149 --> 02:13:13.289
week I got hit, I mean are you just limited to the

02:13:13.289 --> 02:13:16.500
one Megawatt or how does that work? That is a detail

02:13:16.500 --> 02:13:19.119
that needs to be worked out in the implementation as

02:13:19.119 --> 02:13:22.649
to how much can actual production of performance credits

02:13:22.659 --> 02:13:27.060
deviate from what a resource offered and one of the

02:13:27.060 --> 02:13:31.930
considerations that should be factored in is that you

02:13:31.930 --> 02:13:35.270
wouldn't want if a resource only offered one Megawatt

02:13:35.279 --> 02:13:38.449
but it actually could produce more in real time. You

02:13:38.460 --> 02:13:41.000
wouldn't want to disincentivize it from offering those

02:13:41.000 --> 02:13:43.859
megawatts in real time if the system needed it. And

02:13:43.859 --> 02:13:48.949
so that's a balance between how you okay, so mechanically

02:13:48.949 --> 02:13:52.640
What? Okay, so you offer it and and um you would capture

02:13:52.649 --> 02:13:56.409
the pc for that one Megawatt but if you were capped

02:13:56.420 --> 02:13:58.539
and you only got that one Megawatt you could theoretically

02:13:58.539 --> 02:14:01.449
still get potentially like an L R D C S. Yes, that's

02:14:01.449 --> 02:14:04.699
correct or even Yeah. Okay, so I'm just trying to think

02:14:04.699 --> 02:14:07.500
mechanic. Yeah, that's a very good question I'd say

02:14:07.750 --> 02:14:11.000
first of all it needs, that's something that would

02:14:11.010 --> 02:14:13.680
be in any technical implementation that that would

02:14:13.680 --> 02:14:17.859
be one of the decision points to be examined. Uh but

02:14:17.869 --> 02:14:20.380
on its face, I'd say no, you obviously don't, that

02:14:20.380 --> 02:14:22.869
would open up the game and everybody would offer one

02:14:22.869 --> 02:14:26.319
Megawatt and then just kind of bet the come line and

02:14:26.319 --> 02:14:28.579
roll the dice, you wouldn't want to do that, you either

02:14:28.579 --> 02:14:31.829
restricted to what they offered or have some band of

02:14:31.829 --> 02:14:35.470
flexibility around it. And I think to Zach's point

02:14:35.470 --> 02:14:37.819
I think he'd agree that yes, you you you don't want

02:14:37.819 --> 02:14:41.250
to disincentivize that resource from coming on in the

02:14:41.250 --> 02:14:43.960
real, in that operating day, but that's why we have

02:14:43.960 --> 02:14:46.300
the energy market and they already see that's that's

02:14:46.300 --> 02:14:52.430
that day of revenue stream versus the the forward commitment

02:14:52.430 --> 02:14:56.340
revenue stream, is that so? Yeah, no, I think, you

02:14:56.340 --> 02:14:58.819
know, just thinking, I think that falls into the bucket

02:14:58.819 --> 02:15:02.130
of as you continue to look at the PCM, ensuring that

02:15:02.130 --> 02:15:03.800
we're protecting the competitiveness of the wholesale

02:15:03.800 --> 02:15:10.329
market. Last question for me, uh in your analysis,

02:15:10.340 --> 02:15:14.489
um did you assume that demand curve would be set on

02:15:14.489 --> 02:15:15.979
cone or net cone?

02:15:17.890 --> 02:15:18.300
Yes,

02:15:20.430 --> 02:15:25.720
I have another question. Um this deals with fuel, so

02:15:25.729 --> 02:15:28.529
what if you make yourself available, you get the pcs

02:15:28.529 --> 02:15:31.800
and you get force majeure by your gas company? Are

02:15:31.800 --> 02:15:36.460
you responsible for paying the penalties? I mean, does

02:15:36.460 --> 02:15:40.680
that, so, so the fuel component will be the total risk

02:15:40.680 --> 02:15:43.569
of the generator that's gonna offer themselves into

02:15:43.569 --> 02:15:47.310
the market. So it's an incentive for resources to procure

02:15:47.310 --> 02:15:50.569
the most secure and resilient supplies of fuel possible

02:15:50.579 --> 02:15:53.569
including potentially on site fuel storage.

02:15:55.149 --> 02:15:59.789
Exactly. And what if that, I mean, I think that's uh

02:15:59.800 --> 02:16:02.810
some of that's easy to say and some of it's hard to

02:16:02.810 --> 02:16:07.060
do in the situation that we find ourselves in, in different

02:16:07.060 --> 02:16:10.449
parts of the state that have, you know, I would say

02:16:10.449 --> 02:16:15.050
market power in, in terms of kind of the fuel supply

02:16:15.060 --> 02:16:21.069
and um, I just, I wonder if that reduces the number

02:16:21.079 --> 02:16:25.899
of megawatts that we're gonna have, if I can't confidently

02:16:25.909 --> 02:16:31.069
um, expect in other words, you might get, you might

02:16:31.069 --> 02:16:35.809
get more certainty on the, on the performance, credit

02:16:35.809 --> 02:16:39.450
side and you may have more volatility on the fuel side

02:16:39.639 --> 02:16:45.569
I'd say that incentivizes resources that are not relying

02:16:45.569 --> 02:16:46.459
on fuel.

02:16:48.360 --> 02:16:52.020
I mean, that's part of the, within the bucket of dispatchable

02:16:52.030 --> 02:16:56.409
we want to be agnostic. Right? So if, if there are

02:16:56.409 --> 02:16:58.510
vulnerabilities in the fuel supply chain, that's up

02:16:58.520 --> 02:17:01.469
to the market participants, I'd say that's, that's

02:17:01.469 --> 02:17:06.020
the private sector problem to solve. Look at the array

02:17:06.020 --> 02:17:08.780
of potential resources, look where the demand is on

02:17:08.780 --> 02:17:11.549
the system and look at all of your constraints, transmission

02:17:11.549 --> 02:17:13.399
constraints. Like you talked about, look at your fuel

02:17:13.399 --> 02:17:17.069
constraints and it's up to that private business to

02:17:17.079 --> 02:17:20.309
weigh the options, weigh the risk, weigh the potential

02:17:20.319 --> 02:17:24.610
revenue rewards and let the market solve for the best

02:17:24.620 --> 02:17:28.250
outcome, which I think is a good thing, I think. And

02:17:28.250 --> 02:17:33.020
my my hope is that our my goal is to put that

02:17:33.020 --> 02:17:36.889
bucket of revenue out there available only for those

02:17:36.899 --> 02:17:41.000
dispatchable reliable resources and let them compete

02:17:41.000 --> 02:17:44.350
for it and let them figure out the best way to deliver

02:17:44.350 --> 02:17:47.670
the reliability when we need it most. Um, and that's

02:17:47.670 --> 02:17:51.159
in, that's, that's, that's what, that's what makes

02:17:51.159 --> 02:17:55.120
it a market, I think that's why markets deliver better

02:17:55.120 --> 02:17:59.989
technology results and lower costs, but not too low

02:18:02.569 --> 02:18:06.000
cure for low prices, low prices. So how would it work

02:18:06.000 --> 02:18:09.799
then mechanically? Okay, so I see what you're saying

02:18:09.799 --> 02:18:13.639
and that makes sense. Um, incentivizing the generators

02:18:13.639 --> 02:18:17.079
to enter into better contracts with their gas provider

02:18:17.090 --> 02:18:21.010
to be wed arised, um, take all the actions to be a

02:18:21.010 --> 02:18:26.000
valuable because Right, And so yeah, so if you bit

02:18:26.000 --> 02:18:29.799
into the forward market on a voluntary basis, you're

02:18:29.799 --> 02:18:32.559
doing that because you're prepared because if you're

02:18:32.559 --> 02:18:35.860
not, then you're gonna have to replace the power. So

02:18:35.860 --> 02:18:37.850
what happens like in the context of like a firm fuel

02:18:37.850 --> 02:18:41.649
product, You know, if you are, so you're, you've been

02:18:41.649 --> 02:18:43.639
into the firm fuel product, you're getting paid to

02:18:43.639 --> 02:18:48.370
be in the firm fuel product. Um, and so are you now

02:18:48.370 --> 02:18:51.620
going, I mean, is that just another factor, another

02:18:51.620 --> 02:18:54.319
investment, another good decision by a generator made

02:18:54.329 --> 02:18:59.000
um, to be a valuable in the forward market, it's another

02:18:59.000 --> 02:19:02.530
layer revenue stream. So now you've got a pc and you're

02:19:02.530 --> 02:19:05.469
getting paid for firm fuel. So now we're sort of creating

02:19:05.840 --> 02:19:10.950
an incentive for for firming up um not only through

02:19:11.770 --> 02:19:13.940
the cost of that firm fuel program because there'll

02:19:13.940 --> 02:19:17.840
be more qualifying Megawatt available to compete for

02:19:17.840 --> 02:19:21.170
it and ERCOT gets decided and it drives down the price

02:19:21.170 --> 02:19:26.370
of PCM because the more reliable dispatchable generation

02:19:26.370 --> 02:19:31.239
there is the lower those prices are too Okay, alright

02:19:31.239 --> 02:19:32.899
We got two more minutes with Zach before we switch

02:19:32.899 --> 02:19:35.159
to our cotton Pablo any other questions?

02:19:37.000 --> 02:19:39.829
Mhm Oh, come on, jimmy, you got one.

02:19:41.340 --> 02:19:45.059
So if if you were to be uh optimistic and you you

02:19:45.059 --> 02:19:49.040
thought about implementation timelines on, you know

02:19:49.040 --> 02:19:52.180
the br I mean take all five of the ones that you

02:19:52.180 --> 02:19:55.059
looked at. I know you put in here long implementation

02:19:55.059 --> 02:19:58.260
short and medium, um how do you how do you quantify

02:19:58.260 --> 02:20:02.459
those? Are those 12-18 months of those 18 to and I

02:20:02.459 --> 02:20:05.280
know some of that's in here but I think there has been

02:20:05.280 --> 02:20:08.200
a lot of discussion around those since the report came

02:20:08.200 --> 02:20:12.270
out and I'm wondering if you all have any modified

02:20:12.270 --> 02:20:17.040
view on that since the report? Well, we did uh put

02:20:17.040 --> 02:20:20.930
together a list of topics that would need to be decided

02:20:20.940 --> 02:20:24.049
analysis that would need to be completed and based

02:20:24.049 --> 02:20:26.629
on looking at that, you know, it was our rough estimate

02:20:26.639 --> 02:20:30.450
that the PCM has about a two year implementation timeline

02:20:30.450 --> 02:20:33.750
to get all the rules and regulations set and finalized

02:20:33.760 --> 02:20:38.219
and then full implementation timeline, if new resources

02:20:38.229 --> 02:20:40.959
need to be built then that could be additional to that

02:20:40.959 --> 02:20:44.309
But again, a lot of what we're seeing in the report

02:20:44.309 --> 02:20:47.639
is that the role of the PCM would be to prevent retirements

02:20:47.639 --> 02:20:50.420
of existing generation as opposed to having to build

02:20:50.420 --> 02:20:53.479
new and so that reduces the implementation timeline

02:20:53.489 --> 02:20:57.600
So two years is our, our best guess. But I think I

02:20:57.600 --> 02:21:00.729
would defer to ERCOT on more specifics about that because

02:21:00.729 --> 02:21:02.819
they've also been looking at that and have more granular

02:21:02.819 --> 02:21:06.680
estimates on the implementation timeline. So is your

02:21:06.690 --> 02:21:12.940
I just your view that initially the Pcs would be used

02:21:12.940 --> 02:21:20.190
to prevent resources from leaving the system. Is it

02:21:20.190 --> 02:21:22.969
fair to say that you believe that the system is reliable

02:21:22.969 --> 02:21:27.840
Now with all of the resources and loads on the system

02:21:27.840 --> 02:21:32.129
today we have calculated that the system is meeting

02:21:32.139 --> 02:21:36.700
a one in 10 reliability standard. So, but with all

02:21:36.700 --> 02:21:40.639
of the projected resources that are coming online,

02:21:40.649 --> 02:21:45.399
the 27 gigawatts of new renewables and storage generation

02:21:45.530 --> 02:21:49.190
that is as is a phenomenon that's well established

02:21:49.200 --> 02:21:53.059
and appreciated that is going to put significant financial

02:21:53.059 --> 02:21:56.399
pressure on the existing resources today. And so that's

02:21:56.399 --> 02:22:00.440
what we're the PCM would essentially be to some degree

02:22:00.450 --> 02:22:04.420
counteracting Building building for the future. And

02:22:04.420 --> 02:22:07.409
I would also add the caveat that Zac's analysis that

02:22:07.409 --> 02:22:11.110
include all of the reforms is reliable with the reforms

02:22:11.110 --> 02:22:15.170
we've put in place, I would not have wanted to go through

02:22:15.170 --> 02:22:19.670
the last 18, 20 months without those in place. So I

02:22:19.670 --> 02:22:22.469
have one more quick question and that is, do you see

02:22:22.479 --> 02:22:25.739
any real fundamental difference between RM R and a

02:22:25.739 --> 02:22:32.059
backstop? I mean how do you how do you calculate, how

02:22:32.059 --> 02:22:35.270
do you determine the difference between those as a

02:22:35.270 --> 02:22:38.850
mechanism to keep old resources on the system? Well

02:22:38.860 --> 02:22:43.079
the backstop is by design a resource that's held out

02:22:43.079 --> 02:22:47.280
of the market and so that has an impact on energy prices

02:22:47.290 --> 02:22:50.069
and by increasing scarcity because you're holding it

02:22:50.079 --> 02:22:52.170
out of the market and getting it into the price cap

02:22:52.170 --> 02:22:55.670
and RMR resource and again I would I believe is going

02:22:55.670 --> 02:22:58.530
to talk more about this but an arm our resources not

02:22:58.530 --> 02:23:01.389
held out of the market in the same way. So if I

02:23:01.389 --> 02:23:04.590
would add sorry. So we have a lot of resources and

02:23:04.590 --> 02:23:07.100
services that are held out of the market today, a whole

02:23:07.100 --> 02:23:10.629
suite of tools. Right, so BRS is just another tool

02:23:10.629 --> 02:23:13.620
of an emergency tool to use to prevent all out emergency

02:23:13.620 --> 02:23:16.770
Right, so there's been a lot of comments about out

02:23:16.770 --> 02:23:21.239
of market held out all that. So to me that's you know

02:23:21.239 --> 02:23:24.590
semantics and we have so many resources and services

02:23:24.590 --> 02:23:26.260
that are held out of the market today that consumers

02:23:26.260 --> 02:23:29.469
are paying for and this is just another proposal of

02:23:29.469 --> 02:23:32.090
reliability service that would be similar to a long

02:23:32.090 --> 02:23:36.309
lead. Ancillary service product um I will re I'll reserve

02:23:36.309 --> 02:23:39.280
my questions on the RMR for ERCOT and others but um

02:23:39.290 --> 02:23:42.909
I do see a keen distinction between both of them that

02:23:42.909 --> 02:23:45.540
I'd like to highlight later. Okay, all right, thank

02:23:45.540 --> 02:23:47.290
you Zack. We gotta get to Pablo and I know at some

02:23:47.290 --> 02:23:50.430
point we're our court reporter will need a break so

02:23:50.440 --> 02:23:53.190
we'll go on as forge ahead as fast as we can. Thank

02:23:53.190 --> 02:23:55.250
you, Zach, please stick around. I know you've got a

02:23:55.260 --> 02:23:56.090
three o'clock.

02:23:59.100 --> 02:24:04.799
Thank you everybody's taking lunch anyway, that's my

02:24:04.799 --> 02:24:10.530
fault. All right, Mr Vegas thank you. Good afternoon

02:24:10.540 --> 02:24:12.739
thank you Chairman and Commissioners. I appreciate

02:24:12.739 --> 02:24:15.450
the opportunity to provide input and some comments

02:24:15.459 --> 02:24:18.940
this afternoon. So building on some of the comments

02:24:18.950 --> 02:24:21.680
that were noted at the start of this conversation,

02:24:21.680 --> 02:24:24.950
you know the ERCOT region currently relies on an energy

02:24:24.950 --> 02:24:28.329
only mechanism that works unevenly and intermittently

02:24:28.340 --> 02:24:31.110
because investment signals are only sent when there's

02:24:31.110 --> 02:24:34.100
scarcity on the system today. This methodology also

02:24:34.100 --> 02:24:37.239
does not send a signal to build and sustain dispatchable

02:24:37.239 --> 02:24:40.129
resources in the way that we want so to break this

02:24:40.129 --> 02:24:43.860
cycle of scarcity and and surplus a different system

02:24:43.860 --> 02:24:48.309
to signal, steady investment is clearly needed. Foundational

02:24:48.309 --> 02:24:50.989
to any solution that is proposed. We need to establish

02:24:50.989 --> 02:24:54.659
a clear reliability standard that can form the basis

02:24:54.659 --> 02:24:57.940
for building a new reliability service targeting dispatchable

02:24:57.940 --> 02:25:01.280
generation. We believe that a rigorous analysis of

02:25:01.280 --> 02:25:04.090
a reliability standard coupled with specific performance

02:25:04.090 --> 02:25:07.270
criteria is going to be essential to building the next

02:25:07.270 --> 02:25:12.190
market design concept. ERCOT supports and favors the

02:25:12.190 --> 02:25:14.799
performance credit mechanism to improve the long term

02:25:14.799 --> 02:25:17.180
reliability of the electric grid by bringing in the

02:25:17.180 --> 02:25:20.809
generation that investment that Texas needs the P.

02:25:20.809 --> 02:25:23.329
C. M. Sends the signals to build power plants that

02:25:23.329 --> 02:25:26.680
matched the characteristics that align with reliability

02:25:26.680 --> 02:25:29.020
without undermining the principles of a competitive

02:25:29.020 --> 02:25:32.690
marketplace. This new mechanism mechanism moves away

02:25:32.690 --> 02:25:36.129
from the volatile energy only market to a market dynamic

02:25:36.129 --> 02:25:39.360
that rewards performance and ERCOT believes that one

02:25:39.360 --> 02:25:42.250
important modification to the E three version of PCM

02:25:42.260 --> 02:25:46.239
is needed instead of taking just the top 30 hours of

02:25:46.239 --> 02:25:49.549
the system's highest reliability risk per year that

02:25:49.549 --> 02:25:53.909
the PCM should use a modified uh peak Net Load type

02:25:53.909 --> 02:25:57.959
of concept distributed across the year for the retroactively

02:25:57.959 --> 02:26:00.540
settled requirement period. I know that was just discussed

02:26:00.549 --> 02:26:04.870
at some length earlier with Zach ERCOT has reviewed

02:26:04.870 --> 02:26:07.479
the E three analysis, has been part of contributing

02:26:07.489 --> 02:26:10.610
to the consultants understanding of how the operation

02:26:10.620 --> 02:26:13.879
dynamics of the grid work. Many options have been put

02:26:13.879 --> 02:26:15.989
forward that would improve the long term reliability

02:26:15.989 --> 02:26:20.299
of our grid. PCM, however, seems to offer the best

02:26:20.299 --> 02:26:22.979
combination of incentives that move our grid from a

02:26:22.979 --> 02:26:26.790
system characterized by extreme pricing, physical scarcity

02:26:26.799 --> 02:26:30.639
and conservation notices. Instead, PCM will eventually

02:26:30.639 --> 02:26:33.520
land our grid in a place of stable investment in a

02:26:33.520 --> 02:26:36.590
wide variety of resources that represent stable, affordable

02:26:36.590 --> 02:26:40.600
and reliable power as we continue to grow. We believe

02:26:40.600 --> 02:26:42.959
the other options do not offer the same balance of

02:26:42.969 --> 02:26:47.059
benefits that are provided by PCM unlike the forward

02:26:47.059 --> 02:26:49.969
reliability market or the frm product, which is really

02:26:49.969 --> 02:26:53.879
a capacity market construct. PCM focuses on rewarding

02:26:53.879 --> 02:26:56.559
performance based on the incidences when performance

02:26:56.559 --> 02:26:57.700
matters. The most

02:27:00.360 --> 02:27:02.690
the backstop reserve services we've talked about still

02:27:02.690 --> 02:27:05.200
relies primarily on the energy only market to support

02:27:05.200 --> 02:27:08.010
new investment and therefore has some of the same characteristics

02:27:08.010 --> 02:27:11.860
and challenges of the energy only market today. A new

02:27:11.860 --> 02:27:14.780
Ancillary service product that relies on the energy

02:27:14.780 --> 02:27:18.190
mechanism for investment outside of ancillary services

02:27:18.770 --> 02:27:21.510
We believe as discussed earlier that the primary benefit

02:27:21.520 --> 02:27:24.620
of adding any new kind of, of an ancillary service

02:27:24.620 --> 02:27:27.450
product is for the real time market to operate more

02:27:27.450 --> 02:27:30.989
reliability, more reliably based on current operational

02:27:30.989 --> 02:27:33.600
requirements, but it does not address the long term

02:27:33.600 --> 02:27:36.680
needs of the ERCOT system and the more stable investment

02:27:36.680 --> 02:27:39.549
signals that are required in order to build new dispatchable

02:27:39.549 --> 02:27:40.329
generation,

02:27:41.850 --> 02:27:45.649
the LSC reliability obligation, the L. S. C. R. O.

02:27:45.659 --> 02:27:48.540
That creates a firm requirement for load serving entities

02:27:48.540 --> 02:27:51.979
to cover their full obligation plus a reserve. The

02:27:51.979 --> 02:27:55.370
PCM does not create that kind of requirement like the

02:27:55.370 --> 02:27:58.280
market today under the P. C. M. L. S. C. S can

02:27:58.280 --> 02:28:01.440
procure on their own or they can have ERCOT purchase

02:28:01.440 --> 02:28:03.440
that obligation for them at a price that would be set

02:28:03.450 --> 02:28:07.360
by the demand curve. The L. S. C. R. O also requires

02:28:07.360 --> 02:28:10.459
a complex and often accreditation mechanism that does

02:28:10.459 --> 02:28:15.139
not exist within the PCM construct, the PCM mechanism

02:28:15.139 --> 02:28:17.750
does build on existing market principles that we have

02:28:17.750 --> 02:28:21.040
today to function. One of the opposing points to PCM

02:28:21.040 --> 02:28:23.909
has been that it is a novel concept would be difficult

02:28:23.909 --> 02:28:27.750
to understand. However, the key components of the PCM

02:28:27.760 --> 02:28:31.799
market are one, it's a settlement mechanism, a retroactive

02:28:31.799 --> 02:28:34.819
settlement mechanism. Today, ERCOT currently employs

02:28:34.819 --> 02:28:38.250
a variety of ex post settlement mechanisms in the energy

02:28:38.250 --> 02:28:41.760
and the Ancillary service markets with market participants

02:28:42.379 --> 02:28:45.850
It has a demand curve element to it Today, ERCOT operates

02:28:45.850 --> 02:28:48.639
and maintains price curves for the ancillary services

02:28:48.719 --> 02:28:51.399
as well as for energy belongs having an operational

02:28:51.399 --> 02:28:52.209
demand curve

02:28:53.760 --> 02:28:56.569
and then the PCM includes a voluntary forward market

02:28:56.860 --> 02:28:59.450
and similarly today are ERCOT has forward markets for

02:28:59.450 --> 02:29:02.360
congestion, revenue rights cr rs those have been in

02:29:02.360 --> 02:29:05.959
place since the Nodal market opened in 2010. So these

02:29:05.959 --> 02:29:08.649
components represent activities or components that

02:29:08.649 --> 02:29:11.760
all market participants understand well and they manage

02:29:11.760 --> 02:29:15.469
currently additionally, bilateral contracting would

02:29:15.469 --> 02:29:18.389
be a component of this market as it as it is in

02:29:18.389 --> 02:29:22.940
today's energy only market as we described in our ERCOT

02:29:22.940 --> 02:29:26.440
filing earlier on this issue, we expect the PCM development

02:29:26.440 --> 02:29:29.489
work to take somewhere between 1.5 to 2.5 years to

02:29:29.489 --> 02:29:32.350
build and one would likely need to add somewhere between

02:29:32.350 --> 02:29:35.090
six and 12 months to finalize the protocols and rules

02:29:35.100 --> 02:29:37.690
that would be needed. So overall, the window of time

02:29:37.690 --> 02:29:40.860
that we put forth was into 2 to 3.5 year to deliver

02:29:40.860 --> 02:29:44.059
on PCM once final direction is set forth to move forward

02:29:44.649 --> 02:29:47.909
and the monetary cost of developing PCM would be somewhere

02:29:47.909 --> 02:29:49.930
between two and $4 million

02:29:51.649 --> 02:29:54.399
regarding interim solutions given the duration potentially

02:29:54.399 --> 02:29:57.680
to deliver and build PCM as contemplated, the commission

02:29:57.680 --> 02:30:00.110
may want to consider an interim solution that would

02:30:00.110 --> 02:30:03.079
accelerate investment signals and reliability improvements

02:30:03.659 --> 02:30:06.319
and in this case, ERCOT would propose further evaluating

02:30:06.329 --> 02:30:09.600
existing market tools that are in place today to determine

02:30:09.600 --> 02:30:12.209
which of those alternatives could better improve reliability

02:30:12.219 --> 02:30:15.840
while we develop a longer term solution. So with that

02:30:15.840 --> 02:30:18.350
I'll pause and open up if there's any questions from

02:30:18.350 --> 02:30:19.159
the commissioners

02:30:21.190 --> 02:30:25.129
Mr Chairman, just to have Pablo help set the table

02:30:25.129 --> 02:30:28.149
in terms of near term approaches. Could you walk us

02:30:28.149 --> 02:30:33.329
through um the 2023 plan for the menu of ancillary

02:30:33.329 --> 02:30:36.270
services that ERCOT will have at its disposal by the

02:30:36.270 --> 02:30:40.420
end of this year, so we will be introducing a couple

02:30:40.420 --> 02:30:43.700
of new services this year. So one of those is going

02:30:43.700 --> 02:30:47.250
to be the ERCOT Contingency Reserve Service. A CRS

02:30:47.260 --> 02:30:50.700
it's a new Ancillary service that has different performance

02:30:50.700 --> 02:30:53.510
criteria than the Nonspin Ancillary service we offer

02:30:53.510 --> 02:30:56.459
today, it has a quicker start time requirement, a 10

02:30:56.459 --> 02:30:59.790
minute start time requirement with operational requirement

02:30:59.790 --> 02:31:03.030
to run for at least two hours. Additionally, we're

02:31:03.030 --> 02:31:05.930
going to be looking to enhance the firm fuel service

02:31:05.940 --> 02:31:08.319
and brought in perhaps the definition of that to enable

02:31:08.319 --> 02:31:11.090
more participation in that product. So that's something

02:31:11.090 --> 02:31:12.950
that potentially will be coming out this year and we

02:31:12.950 --> 02:31:15.020
hope to have that in place and ready to go for the

02:31:15.030 --> 02:31:19.979
winter season. Um we are in that that will be a subset

02:31:19.979 --> 02:31:22.409
of R R S or is that going to be separate and

02:31:22.409 --> 02:31:26.459
apart from RS the firm fuel requirement, it would be

02:31:26.459 --> 02:31:30.319
separate from, are you talking about expansion to expansion

02:31:31.489 --> 02:31:32.600
expansion of

02:31:35.120 --> 02:31:38.569
expansion of the existing firm firm fuel service? And

02:31:38.569 --> 02:31:40.709
then of course we have our existing suite of tools

02:31:40.709 --> 02:31:42.309
that are going to continue to be in place. We've got

02:31:42.309 --> 02:31:47.729
our Nonspin our emergency response services um

02:31:50.700 --> 02:31:54.350
Would you also add into there the new services that

02:31:54.360 --> 02:31:56.809
split out of fast frequency that went into this year

02:31:56.819 --> 02:31:59.940
which the FFR the fast frequency response service.

02:31:59.940 --> 02:32:03.219
So as we modified the response of reserved and broke

02:32:03.219 --> 02:32:05.489
that into its components, those those new components

02:32:05.489 --> 02:32:08.370
are in place and we're going to be available in 2020

02:32:08.959 --> 02:32:11.870
play on Nonspin Nonspin will have two components to

02:32:11.870 --> 02:32:14.239
it, correct. It'll have a generation component that

02:32:14.239 --> 02:32:17.129
is within Nonspin and then a controllable Load Resource

02:32:17.149 --> 02:32:20.069
component that's within Nonspin So really the controllable

02:32:20.069 --> 02:32:23.319
Load resource and demand response or control responses

02:32:23.319 --> 02:32:26.840
is a separate uh response service from the from the

02:32:26.840 --> 02:32:30.510
Nonspin Nonspin is essentially reserves that are being

02:32:30.510 --> 02:32:34.209
held out and they can be in some cases offline or online

02:32:34.209 --> 02:32:38.379
depending on how they are qualifying and forming but

02:32:38.379 --> 02:32:41.229
it's essentially one, it's one product, that product

02:32:41.239 --> 02:32:43.879
has a 30 minute startup time requirement to be able

02:32:43.879 --> 02:32:47.319
to operate for four hours. The controllable Load resource

02:32:47.329 --> 02:32:51.110
is a separate uh separate capability that we are working

02:32:51.110 --> 02:32:55.100
through with with Load resources to be able to control

02:32:55.100 --> 02:32:57.979
their Load based on demand requirements the system

02:32:57.989 --> 02:33:01.989
Okay, thank you. So Pablo, thank you for that and and

02:33:01.989 --> 02:33:03.739
thank you for asking that because I'm trying to work

02:33:03.739 --> 02:33:09.389
through that right now myself. So in 2023 and and further

02:33:09.399 --> 02:33:13.450
um uh, going forward I guess until some kind of, you

02:33:13.450 --> 02:33:16.629
know, face to market redesign PCM Rtc whatever is implemented

02:33:16.639 --> 02:33:19.940
ultimately that's that's where we had. Um,

02:33:21.860 --> 02:33:24.790
so you're saying that you will continue to rely on

02:33:24.790 --> 02:33:28.290
your Ancillary services, you know, Nonspin RRS with

02:33:28.290 --> 02:33:34.299
the addition of e C R s um essentially to maintain

02:33:34.299 --> 02:33:38.110
reliability until long term solutions in place and

02:33:38.110 --> 02:33:40.809
I would add to that that our current operating parameters

02:33:40.809 --> 02:33:43.879
of operating more conservatively to try to make sure

02:33:43.879 --> 02:33:46.579
that we don't get close to, to, to close to physical

02:33:46.579 --> 02:33:49.110
scarcity, we will continue to utilize those kinds of

02:33:49.110 --> 02:33:54.350
practices as well. Okay, so how much e C R s is

02:33:54.350 --> 02:33:57.409
ERCOT planning to procure when it goes live, what's

02:33:57.409 --> 02:34:00.649
what's the range Again, the ranges somewhere, it's

02:34:00.649 --> 02:34:03.940
a percentage based on, you know, system characteristics

02:34:03.940 --> 02:34:07.459
but we have estimated the purchasing to be in the 1200

02:34:07.459 --> 02:34:11.139
to 2800 megawatt range initially do you envision that

02:34:11.139 --> 02:34:13.530
bucket of vcrs getting filled on day one?

02:34:15.690 --> 02:34:18.280
I think we would be, I would envision that there would

02:34:18.280 --> 02:34:20.479
be resources, we haven't gone through the qualification

02:34:20.479 --> 02:34:22.780
period yet for what resources would actually that are

02:34:22.780 --> 02:34:25.120
available today. That would qualify but we do anticipate

02:34:25.120 --> 02:34:28.260
that there would be adequate supply to fill the requirements

02:34:28.260 --> 02:34:31.159
as we begin that purchasing which is scheduled to be

02:34:31.159 --> 02:34:35.229
in the June of 2023 time period. Okay, so I'm just

02:34:35.229 --> 02:34:37.940
trying to make sure I understand what, you know what

02:34:37.940 --> 02:34:40.239
we're looking at it as an ancillary service portfolio

02:34:40.239 --> 02:34:42.989
because I think one of our near term action should

02:34:42.989 --> 02:34:47.290
be to evaluate and optimize our Ancillary service portfolio

02:34:47.299 --> 02:34:50.809
but I want to make sure that we, you know, really get

02:34:50.809 --> 02:34:54.799
a good view of the evaluation right. And, and um, the

02:34:54.799 --> 02:35:00.219
CRS bucket, I don't, you know, it's the same resources

02:35:00.219 --> 02:35:03.209
that are bidding into our R. S. Today. So as a generation

02:35:03.209 --> 02:35:05.879
resource goes out and wants to decide which Ancillary

02:35:05.879 --> 02:35:08.120
service they want to be in, they're going to choose

02:35:08.120 --> 02:35:11.239
between RS and the CRS So it's not like we're just

02:35:11.239 --> 02:35:16.020
gonna get a flush of new new pickers in any CRS necessarily

02:35:16.020 --> 02:35:19.350
It's just an additional Ancillary service product or

02:35:19.350 --> 02:35:21.799
revenue stream that's going to be available out there

02:35:22.420 --> 02:35:22.870
Okay,

02:35:25.170 --> 02:35:27.110
All right, Absolutely. But I'm just trying to think

02:35:27.110 --> 02:35:32.280
about, you know how it all kind of, you know, um unfolds

02:35:32.500 --> 02:35:36.649
rather and okay, so then you're saying that ERCOT will

02:35:36.649 --> 02:35:39.069
stay in his current conservative operations posture

02:35:39.079 --> 02:35:44.809
which is the procurement of Nonspin but Rocky. Okay

02:35:44.819 --> 02:35:47.549
so your plan is to rock for the next several years

02:35:47.549 --> 02:35:53.409
until the long term um plan is in place. Well, let

02:35:53.409 --> 02:35:56.899
me clarify so, so rocking is, is essentially done when

02:35:56.899 --> 02:36:00.799
we see when we see a circumstance, you know, in the

02:36:00.809 --> 02:36:03.920
forward hours where there's not enough commitments

02:36:03.920 --> 02:36:07.770
that are being made by generators to meet a potential

02:36:07.780 --> 02:36:12.350
reserve cushion required in a future. Our that condition

02:36:12.360 --> 02:36:15.420
has occurred historically. It could continue to occur

02:36:15.420 --> 02:36:18.110
in the future. It all depends on the behavior of generators

02:36:18.110 --> 02:36:20.549
and how they make those commitments as well as what

02:36:20.549 --> 02:36:24.620
posture of conservative Nous, the market wants to operate

02:36:24.620 --> 02:36:28.879
under it's a combination of those factors. So behaviors

02:36:28.879 --> 02:36:31.139
by generators are what drives the rocking. It's a,

02:36:31.159 --> 02:36:34.059
it's an engine that calculates based on a cushion reserve

02:36:34.069 --> 02:36:37.719
whether there's enough anticipated generation online

02:36:37.719 --> 02:36:40.020
in the future. Our, if it doesn't see that there's

02:36:40.020 --> 02:36:42.090
enough and it looks as it moves through and looks at

02:36:42.090 --> 02:36:45.379
the resources that are available to be committed. If

02:36:45.379 --> 02:36:47.090
there's ones that have a long lead time and it would

02:36:47.090 --> 02:36:49.870
take eight hours as an example to be available for

02:36:49.870 --> 02:36:52.649
the ninth hour where we see a gap, we would then have

02:36:52.649 --> 02:36:55.209
to make a decision to say do we want to call that

02:36:55.219 --> 02:36:59.440
unit up to commit or not. And so that circumstance

02:36:59.450 --> 02:37:01.569
could continue to happen and probably will continue

02:37:01.569 --> 02:37:03.920
to happen because it's really just a matter of whether

02:37:03.920 --> 02:37:06.870
or not generators are committing to be in place or

02:37:06.870 --> 02:37:11.489
not PCM we think based on its design will incentivize

02:37:11.489 --> 02:37:13.700
units to commit to be available because you have to

02:37:13.700 --> 02:37:16.700
be available and committed to earn the PCM. So we think

02:37:16.700 --> 02:37:19.840
it will improve that factor. But again, it's a decision

02:37:19.840 --> 02:37:22.450
that a generator makes and they may be making it based

02:37:22.450 --> 02:37:24.540
on when they think the PCM hour is going to be, you

02:37:24.540 --> 02:37:27.209
know, incurred. So there could always be a need for

02:37:27.209 --> 02:37:30.860
rocking. It's just a matter of how the design, whether

02:37:30.860 --> 02:37:33.420
there's a more opportunities for less opportunity based

02:37:33.420 --> 02:37:38.739
on the market design. Okay, so 11. Okay, so you have

02:37:38.739 --> 02:37:42.280
told me before that the reason ERCOT is rocking so

02:37:42.280 --> 02:37:44.840
much is because we're carrying a large amount of ancillary

02:37:44.840 --> 02:37:48.000
services and that's driving generation commitment decisions

02:37:48.010 --> 02:37:52.329
So if we're only going to continue to expand our Ancillary

02:37:52.329 --> 02:37:56.420
services right? By adding the crs, I mean, is that

02:37:56.420 --> 02:38:00.110
going to result in more rocking? So it could, I mean

02:38:00.120 --> 02:38:03.459
so the decision of a generator and be good question

02:38:03.459 --> 02:38:06.639
to ask generators. Typically the decision of a generator

02:38:06.639 --> 02:38:08.909
whether to commit or not is based economically and

02:38:08.909 --> 02:38:10.770
whether they think it's going to be profitable for

02:38:10.770 --> 02:38:13.479
them to cover their marginal cost to operate during

02:38:13.479 --> 02:38:17.559
the future. Our and so the way that the pricing curves

02:38:17.569 --> 02:38:20.260
work in the market is that when there's a lot of reserves

02:38:20.260 --> 02:38:22.920
on the system, the prices tend to be lower. So as you

02:38:22.920 --> 02:38:25.540
build up reserves on the system with lower prices than

02:38:25.540 --> 02:38:28.790
the decision on whether or not to commit is what influences

02:38:28.790 --> 02:38:31.440
the other generator. So it is possible if we carry

02:38:31.440 --> 02:38:34.239
more and more reserves that there may be less commitments

02:38:34.239 --> 02:38:36.950
by generators, which is what we have seen as we increase

02:38:36.950 --> 02:38:39.569
the purchases of Nonspin and that would then result

02:38:39.569 --> 02:38:41.899
in a decision on whether or not we want to commit a

02:38:41.899 --> 02:38:44.899
unit through rock, Is there a seasonal concentration

02:38:44.899 --> 02:38:48.180
to that? Again? Our our fleet is built around summer

02:38:48.190 --> 02:38:52.680
Uh, so therefore everybody is online and it's contracted

02:38:52.690 --> 02:38:55.930
to run to meet those scarcity conditions during summer

02:38:55.940 --> 02:38:59.319
because that's where peak load is. Um is there less

02:38:59.319 --> 02:39:04.600
of a necessity for uh, RUC in your experience of the

02:39:04.600 --> 02:39:09.000
last year and a half during those peak months of winter

02:39:09.000 --> 02:39:11.579
and summer? What's interesting actually is that rocking

02:39:11.590 --> 02:39:15.399
tends to happen in kind of the middle Load scenarios

02:39:15.409 --> 02:39:18.889
of market operations. So when we are at a high demand

02:39:18.889 --> 02:39:22.590
high peak scenario, we typically do not require rocking

02:39:22.590 --> 02:39:25.399
because the pricing based on the scarcity of that period

02:39:25.659 --> 02:39:28.540
leads to commitments, which leads to lower rocking

02:39:28.549 --> 02:39:31.969
Similarly, when there's very low demand or high wind

02:39:31.969 --> 02:39:35.000
availability, then you're in a situation where your

02:39:35.000 --> 02:39:37.909
marginal unit tends to be your very cost effective

02:39:37.920 --> 02:39:40.860
cost efficient combined cycle unit. And so they would

02:39:40.860 --> 02:39:43.280
be online providing base load generation. So we don't

02:39:43.280 --> 02:39:45.760
need rocking in that scenario, It's when you get into

02:39:45.760 --> 02:39:48.469
that middle scenario where your marginal unit would

02:39:48.479 --> 02:39:52.399
be your less cost efficient single cycle, uh, you know

02:39:52.409 --> 02:39:56.129
older unit where the decision would be, you know, am

02:39:56.129 --> 02:39:58.420
I going to be getting enough to cover the marginal

02:39:58.420 --> 02:40:01.020
incremental cost? It's not at a peak amount. So the

02:40:01.020 --> 02:40:03.860
pricing isn't certain and it's not low enough where

02:40:03.860 --> 02:40:05.549
we don't think we might need them. So that's right

02:40:05.549 --> 02:40:07.870
in that middle point of load that we see more rocking

02:40:07.870 --> 02:40:11.090
So seasonally actually it happens tends to happen during

02:40:11.090 --> 02:40:13.219
those points in time when we have those kind of middle

02:40:13.219 --> 02:40:16.569
Load periods. And that's also as we've seen a point

02:40:16.569 --> 02:40:20.510
of vulnerability, whether it's thermal outages on May

02:40:20.510 --> 02:40:24.350
13th where we lose six generators, uh, in a matter

02:40:24.350 --> 02:40:28.409
of hours, we've all seen that. Um, and a third of those

02:40:28.409 --> 02:40:31.569
were personnel problems, not even mechanical, but we

02:40:31.569 --> 02:40:33.950
lost them and also maintenance cycles, high planned

02:40:33.950 --> 02:40:36.799
outage rate then plus forced out then plus Pete net

02:40:36.799 --> 02:40:40.909
Load Um, and then, yeah, all of the above or, or uh

02:40:40.920 --> 02:40:43.979
wind drops off like the, I think the saturday after

02:40:43.979 --> 02:40:51.149
thanksgiving in 21. So that's it. The rocking happens

02:40:51.159 --> 02:40:53.559
in this. I think similar periods where we have those

02:40:53.559 --> 02:40:56.059
risks. We don't have those risks. We have the risk

02:40:56.059 --> 02:41:00.159
every day doesn't occur every day. So, okay, so let

02:41:00.159 --> 02:41:02.829
me, let me try to make sure I understand this because

02:41:02.840 --> 02:41:05.100
obviously we're planning for the near term reliability

02:41:05.100 --> 02:41:09.309
and long term reliability. Uh, do you have any concerns

02:41:09.309 --> 02:41:11.709
that continue to run for the next x amount of years

02:41:11.709 --> 02:41:14.280
Gonna have a long term reliability impact on the units

02:41:14.280 --> 02:41:17.639
and our reliability and inter cut? Yeah, I mean when

02:41:17.639 --> 02:41:20.170
you, when you think of the fact that the units that

02:41:20.170 --> 02:41:22.569
were rocking do tend to be often times some of the

02:41:22.579 --> 02:41:26.129
older units, there's, there's really only so many physical

02:41:26.139 --> 02:41:28.610
cycles, you know that these older units will have in

02:41:28.610 --> 02:41:32.209
them and so there is the potential for impacts to reliability

02:41:32.209 --> 02:41:36.760
long term and so our our desire would be to try to

02:41:36.760 --> 02:41:41.200
get to a market design mechanism as quickly as possible

02:41:41.270 --> 02:41:45.290
that minimizes the requirement or opportunity for continuous

02:41:45.290 --> 02:41:49.620
rocking. Do you believe that PCM would create the opportunity

02:41:49.629 --> 02:41:53.850
for investment in new generation that would replace

02:41:53.850 --> 02:41:56.270
those big units that are being rubbed? I do believe

02:41:56.270 --> 02:41:59.760
it would, yes, because the performance criteria kind

02:41:59.760 --> 02:42:03.520
of characteristics of it would be oriented to building

02:42:03.530 --> 02:42:07.129
dispatchable generation that would optimize with the

02:42:07.139 --> 02:42:10.159
with the fleet needs today. So I think it would because

02:42:10.159 --> 02:42:12.040
those units aren't being built anywhere in the country

02:42:12.040 --> 02:42:13.719
That's what I'm wondering, because that's why I'm so

02:42:13.719 --> 02:42:16.709
interested in retaining those long duration plants

02:42:16.709 --> 02:42:19.559
in the system and that's why I propose BRS is because

02:42:19.559 --> 02:42:22.969
of that very same reason because of, you know, that

02:42:22.979 --> 02:42:25.139
they're taking the physical pressure keeping those

02:42:25.139 --> 02:42:28.809
units in the market is important as we're transitioning

02:42:28.819 --> 02:42:31.090
energy transition period that's happening throughout

02:42:31.090 --> 02:42:33.590
the country, but also a transition to any kind of phase

02:42:33.590 --> 02:42:38.209
two market redesign. Um because ultimately I think

02:42:38.219 --> 02:42:41.510
you know, as as what I'm understanding is that ERCOT

02:42:41.510 --> 02:42:45.170
wants to rely on their Ancillary service fleet that

02:42:45.180 --> 02:42:51.129
will will have it totally in place in 2023 um rocking

02:42:51.879 --> 02:42:57.909
but and then at the back end it sounds like at least

02:42:57.909 --> 02:42:59.989
it's definitely been proposed by a lot of stakeholders

02:43:00.000 --> 02:43:05.940
RMR. So is that a good strategy because I'm wondering

02:43:05.940 --> 02:43:08.129
if you're rocking these units and they're having a

02:43:08.129 --> 02:43:10.479
lot of physical impact. Are you going to even have

02:43:10.479 --> 02:43:13.520
a unit to arm our once you get to that point? Yeah

02:43:13.520 --> 02:43:16.229
I think it's a good strategy if if we keep if we

02:43:16.229 --> 02:43:19.049
think about the overall kind of priority and focus

02:43:19.049 --> 02:43:23.200
is is is to try to get to a place where the

02:43:23.209 --> 02:43:27.309
renewal of the older fleet is enabled because the market

02:43:27.309 --> 02:43:30.950
supports that, that kind of reliable transition. So

02:43:30.950 --> 02:43:34.340
to your point to the we want to, during the transition

02:43:34.350 --> 02:43:38.360
keep the units available and on the system to be able

02:43:38.360 --> 02:43:41.280
to meet whatever the circumstances are that are required

02:43:41.290 --> 02:43:44.840
But the overall goal is not to preserve old units because

02:43:44.840 --> 02:43:47.049
old units are inefficient, they cost more. They don't

02:43:47.049 --> 02:43:49.450
provide the flexibility that the market needs today

02:43:49.739 --> 02:43:52.549
So what the old ultimate goal is to create a market

02:43:52.549 --> 02:43:56.760
mechanism mechanism that enables a fluid, reliable

02:43:56.760 --> 02:44:00.110
transition of new generation coming in, an older, older

02:44:00.110 --> 02:44:04.239
costlier, less flexible generation going out. And so

02:44:04.250 --> 02:44:08.860
the what we think is the best strategy is to as accelerated

02:44:08.860 --> 02:44:12.909
away as possible, get to the design that enables that

02:44:12.920 --> 02:44:16.129
and then leverage the resources that we have in place

02:44:16.129 --> 02:44:19.659
today to try to minimize risk and maximize reliability

02:44:19.659 --> 02:44:22.409
that we have, if we do something that delays getting

02:44:22.409 --> 02:44:25.280
to that, we think that takes the eye off of the primary

02:44:25.280 --> 02:44:27.959
goal, which is to get to that solution, which actually

02:44:27.959 --> 02:44:30.489
gets the market operating in a more sustainable way

02:44:30.500 --> 02:44:35.959
So okay, so a bridge is important and your bridges

02:44:35.969 --> 02:44:41.350
Ancillary services, rocking and armoire utilizing the

02:44:41.350 --> 02:44:44.540
tools we have today and optimizing them in a way that

02:44:44.569 --> 02:44:48.309
maximizes the reliability. That would be the our initial

02:44:48.309 --> 02:44:50.379
recommendations to look at what we have available today

02:44:50.379 --> 02:44:53.120
to see how can we maximize reliability with it. And

02:44:53.120 --> 02:44:55.850
I agree with you, not units, you know, have to exit

02:44:55.850 --> 02:44:59.149
at some point. I mean we recently saw the exit or the

02:44:59.149 --> 02:45:01.540
notice of suspension of operations for Mountain Creek

02:45:02.090 --> 02:45:07.860
um but ultimately, I mean I think the majority like

02:45:07.870 --> 02:45:10.420
over half of our units are old in ERCOT so at some

02:45:10.420 --> 02:45:12.790
point, you know, we're all gonna get old units are

02:45:12.790 --> 02:45:16.399
going to get old and we need a transitionary tool um

02:45:16.409 --> 02:45:19.069
otherwise I'm just concerned because we're trying to

02:45:19.069 --> 02:45:22.909
be, you know, very holistic, very thoughtful on what

02:45:22.909 --> 02:45:28.840
we do for phase two, which in my mind means time and

02:45:28.840 --> 02:45:31.549
deliberation and thoughtfulness and implementing that

02:45:31.559 --> 02:45:34.770
and but in but in that time period that that gap between

02:45:34.770 --> 02:45:39.620
now and when phase two systems and you know, are executed

02:45:39.629 --> 02:45:43.780
you know, I'm just concerned that if, if the tools

02:45:43.780 --> 02:45:47.049
that you currently have laid out are the only tools

02:45:47.049 --> 02:45:49.739
we have that we could be setting ourselves short in

02:45:49.739 --> 02:45:54.020
the long term for reliability by not having more robust

02:45:54.020 --> 02:45:57.620
tools in in in in the mid in the transition period

02:45:57.629 --> 02:46:00.680
And while ERCOT Ancillary service portfolio is very

02:46:00.680 --> 02:46:04.430
robust um and rocking has provided some benefits in

02:46:04.430 --> 02:46:07.250
your term benefits in terms of when we really need

02:46:07.250 --> 02:46:10.180
to get those units on because of lack of generation

02:46:10.180 --> 02:46:15.110
commitment um are mar is I mean nationally known as

02:46:15.110 --> 02:46:17.420
a sign of system failure, market failure and we're

02:46:17.420 --> 02:46:21.399
trying to attract investment in ERCOT relying on RMR

02:46:21.399 --> 02:46:24.819
which is a transmission security reliability tool for

02:46:24.829 --> 02:46:28.989
generation resource Adequacy seems a little dicey to

02:46:28.989 --> 02:46:32.329
me. And also with the fact that um our mark can be

02:46:32.329 --> 02:46:36.319
expensive, I mean the last arm, our contract was very

02:46:36.319 --> 02:46:38.860
expensive and it was because the plan had to be upgraded

02:46:38.860 --> 02:46:42.899
and there was reasons why but since then ERCOT modify

02:46:42.899 --> 02:46:45.799
their protocols to provide a competing reliability

02:46:45.799 --> 02:46:49.600
must offer alternative. So if there is a demand side

02:46:49.600 --> 02:46:53.299
solution that comes in and can compete out the the

02:46:53.299 --> 02:46:56.000
RMR unit or the unit that wants to leave, then we end

02:46:56.000 --> 02:46:58.600
up with the demand side solution and we don't retain

02:46:58.600 --> 02:47:01.500
the unit that we're trying to retain and retain the

02:47:01.500 --> 02:47:05.399
existing generation that we're trying to retain. So

02:47:05.399 --> 02:47:07.600
I'm just trying to think of are more and more broadly

02:47:07.600 --> 02:47:10.299
and and the real impact of what that really does to

02:47:10.299 --> 02:47:13.899
number one does it, will it actually retain the unit

02:47:13.899 --> 02:47:19.399
If it competing demand side, demand side reliability

02:47:19.399 --> 02:47:23.299
must run alternative can beat it out in price, but

02:47:23.299 --> 02:47:25.500
also what we even get to a point where we have a

02:47:25.500 --> 02:47:30.600
plan that we can actually RMR if the plant is just

02:47:30.600 --> 02:47:35.100
the retirement date is accelerated because of the

02:47:37.100 --> 02:47:39.899
the rubbing actions that we'll have to do in for years

02:47:41.100 --> 02:47:44.399
So I think you're making an excellent point in that

02:47:44.399 --> 02:47:47.899
given the urgency of all of these factors, given the

02:47:47.899 --> 02:47:51.000
complexity of the market, there's not there's clearly

02:47:51.000 --> 02:47:53.799
not a silver bullet solution to creating immediate

02:47:53.799 --> 02:47:58.100
improvements in uh and solving the two main issues

02:47:58.100 --> 02:48:00.799
we're trying to resolve here. And so that being the

02:48:00.799 --> 02:48:05.000
case, if we have line of sight to a solution that does

02:48:05.000 --> 02:48:08.000
get there, the focus should be getting there as quickly

02:48:08.000 --> 02:48:12.100
as we can. So yes, and I agree, but in the meantime

02:48:12.100 --> 02:48:15.299
we must be prudent and diligent and proactive in planning

02:48:15.299 --> 02:48:18.899
for that kind of transition is my point. And and again

02:48:18.899 --> 02:48:20.899
I don't want to, you know, beat this to death but that's

02:48:20.899 --> 02:48:24.100
why I propose BRS because it doesn't do what RMR does

02:48:24.100 --> 02:48:27.100
it is a tool and I know nothing's supposed to delay

02:48:27.100 --> 02:48:30.100
the implementation but you know, and we're supposed

02:48:30.100 --> 02:48:34.700
to use existing products and services but BRS is built

02:48:34.700 --> 02:48:37.399
on an existing competitive RFP process that has been

02:48:37.399 --> 02:48:41.200
used in a very efficient and effective manner by ERCOT

02:48:41.200 --> 02:48:44.100
most recently with firm fuel service where they were

02:48:44.100 --> 02:48:46.700
able to get our direction and issued an RFP in five

02:48:46.700 --> 02:48:52.600
months and at the same time, I know ERCOT has a ton

02:48:52.600 --> 02:48:54.899
of other work that they have going on with respect

02:48:54.899 --> 02:49:00.100
to other non market design matters and but the desires

02:49:00.100 --> 02:49:02.899
to focus on the long term solution I get and I agree

02:49:02.899 --> 02:49:03.899
however,

02:49:05.700 --> 02:49:08.500
isn't there a way to Reprioritize what you're doing

02:49:08.500 --> 02:49:11.600
over here in this bucket? So you can add another reliability

02:49:11.600 --> 02:49:14.799
driven action to preserve our long term reliability

02:49:14.799 --> 02:49:17.500
in the future? I mean it's not like it's gonna stop

02:49:17.500 --> 02:49:19.600
working on everything else on the sidelines that's

02:49:19.600 --> 02:49:21.600
not market design driven, you're still gonna have a

02:49:21.600 --> 02:49:24.799
lot of work over here, but can't you Reprioritize and

02:49:24.799 --> 02:49:28.600
prioritize a something like a B. R. S or something

02:49:28.600 --> 02:49:31.000
like that to be able to have that backstop so that

02:49:31.000 --> 02:49:33.000
we can retain our generation in the meantime, so you

02:49:33.000 --> 02:49:36.600
don't have to maybe rock as much or that that's that's

02:49:36.600 --> 02:49:39.600
where I'm coming from, I hope that's clear the commission's

02:49:39.600 --> 02:49:43.000
direction is to do so we'll evaluate how to do so our

02:49:43.000 --> 02:49:47.700
initial analysis has shown that the changes that the

02:49:47.700 --> 02:49:50.899
mechanisms technically to deliver a backstop reliability

02:49:50.899 --> 02:49:54.399
service are different than the firm fuel service. It

02:49:54.399 --> 02:49:57.000
requires changes into some of the energy management

02:49:57.000 --> 02:49:59.899
systems because of the fact that the backstop reserve

02:49:59.899 --> 02:50:02.200
service does not allow us to use those resources to

02:50:02.200 --> 02:50:05.500
solve local transmission constraints. But it could

02:50:05.500 --> 02:50:09.700
that that's Apollo that's policy calls it could put

02:50:09.799 --> 02:50:12.700
depending on that would require transmission studies

02:50:12.700 --> 02:50:16.100
to be done potentially if they were or were not. So

02:50:16.100 --> 02:50:18.200
there's there's there's different issues and it does

02:50:18.200 --> 02:50:21.000
require changes that would go into those same systems

02:50:21.399 --> 02:50:24.500
that would be needed to be modified in order to build

02:50:24.500 --> 02:50:27.899
the PCM. So if the direction from the commish collectively

02:50:27.899 --> 02:50:30.700
is to do something different will work with the commission

02:50:30.700 --> 02:50:33.299
of course to figure out how to enable that. But our

02:50:33.299 --> 02:50:37.399
our recommendation coming in has been to again try

02:50:37.399 --> 02:50:40.899
to focus on the overarching priority of solving this

02:50:40.899 --> 02:50:44.100
this issue and not try to put band aids in place that

02:50:44.100 --> 02:50:46.299
don't get us that solution as quickly as possible.

02:50:46.299 --> 02:50:51.000
Wouldn't a band aid? Those are already in place question

02:50:51.000 --> 02:50:53.399
and just already in place they don't need to be built

02:50:53.399 --> 02:50:55.600
So I'm just wondering because we've had at least three

02:50:55.600 --> 02:50:58.600
consultants say that B. R. S would provide reliability

02:50:58.700 --> 02:51:02.299
So it's not intended to be the comprehensive solution

02:51:02.299 --> 02:51:04.500
it's intended to be. I'm not disputing that. It does

02:51:04.500 --> 02:51:06.799
What I'm saying is that it would require investment

02:51:06.799 --> 02:51:09.399
of time that could potentially delay getting to the

02:51:09.399 --> 02:51:12.100
longer term term solution which addresses the broader

02:51:12.100 --> 02:51:15.299
market issues we're discussing today. That's my primary

02:51:15.299 --> 02:51:18.700
feedback point on PRS and so that being the case and

02:51:18.700 --> 02:51:22.000
so if that is the direction to do so to delay those

02:51:22.000 --> 02:51:24.799
those eventual developments then then we can do that

02:51:24.799 --> 02:51:27.500
I'm trying to understand how it would because you have

02:51:27.500 --> 02:51:33.299
a very robust stock of staff now and as you explain

02:51:33.299 --> 02:51:36.700
you're not working on securitization from fuel and

02:51:36.700 --> 02:51:39.200
a variety of other matters. I think it's just a re

02:51:39.200 --> 02:51:43.200
prioritization of resources to focus on reliability

02:51:43.200 --> 02:51:45.399
driven actions away from maybe some other things you're

02:51:45.399 --> 02:51:49.100
working on um that are not market design related. So

02:51:49.100 --> 02:51:51.799
I would just like to understand you know because I

02:51:51.899 --> 02:51:56.700
mean you could say that about you know your D. G. Efforts

02:51:56.700 --> 02:52:00.500
right now that that could delay um a long term solution

02:52:00.500 --> 02:52:02.799
You could say that about any kind of battery storage

02:52:02.799 --> 02:52:06.799
initiative. So I mean it's just reprioritizing on reliability

02:52:06.799 --> 02:52:09.700
driven actions that could serve as a bridge is my whole

02:52:09.700 --> 02:52:14.600
point on that. But I'll stop here and I'll let you

02:52:15.200 --> 02:52:18.899
respond, let me just respond, we we did analyze developing

02:52:18.899 --> 02:52:25.000
BRS in conjunction with P C. M. And R. T. C. And

02:52:25.000 --> 02:52:27.299
it does affect and has a delay on the impact. If we

02:52:27.299 --> 02:52:29.100
want to go through that in detail. We can do that.

02:52:29.100 --> 02:52:31.299
I don't have the details of the project plans with

02:52:31.299 --> 02:52:34.100
people, we did do that analysis and the conclusion

02:52:34.100 --> 02:52:37.000
was that it would, it would require delaying the development

02:52:37.000 --> 02:52:40.399
of those, those other components to be able to fit

02:52:40.399 --> 02:52:43.600
that in prior as a, as an interim bridge solution.

02:52:43.600 --> 02:52:46.500
Okay, because okay, so let me unpack this a little

02:52:46.500 --> 02:52:50.600
bit. We can, we, can we get McAdams question, this

02:52:50.600 --> 02:52:54.299
would offer food for thought, I think on Any number

02:52:54.299 --> 02:52:57.100
of ways to find a possible solution to retain those

02:52:57.100 --> 02:53:02.000
long duration as uh, assets um, were concurrently working

02:53:02.000 --> 02:53:07.100
right now on firm-fuel supply service, Phase two. Um

02:53:07.100 --> 02:53:10.000
those parameters are currently under consideration

02:53:10.000 --> 02:53:15.399
at market and uh, and being reworked pending negotiation

02:53:15.399 --> 02:53:18.200
and commitments, uh, certainty, commitments from our

02:53:18.200 --> 02:53:23.000
natural gas counterparts um, and the regulator, many

02:53:23.000 --> 02:53:29.200
of these assets are in parts of Texas that theoretically

02:53:29.200 --> 02:53:34.299
if we got the rules worked out and some type of assurances

02:53:34.299 --> 02:53:39.500
made, could theoretically, if offsite is baked in is

02:53:39.500 --> 02:53:45.299
allowed for firm fuel supply service, um, compete for

02:53:45.299 --> 02:53:50.500
that Ancillary which exists today and is already has

02:53:50.500 --> 02:53:54.500
settlement provisions. Um, theoretically those megawatts

02:53:54.600 --> 02:53:58.299
are at least the firm fuel component are held outside

02:53:58.299 --> 02:54:00.600
of the market, correct? I mean, they are not deployed

02:54:00.600 --> 02:54:06.100
unless we are at uh, that's correct. So one option

02:54:06.100 --> 02:54:11.500
is to consider creative solutions on something like

02:54:11.500 --> 02:54:15.899
that that is regionally based, that could be developed

02:54:15.899 --> 02:54:19.700
in a way with, not just offsite storage, you know,

02:54:19.700 --> 02:54:23.000
as the primary target, but also the age, the vintage

02:54:23.000 --> 02:54:28.000
the duration of the unit that could be uh that we could

02:54:28.000 --> 02:54:32.399
develop a pricing scheme around that hopefully retains

02:54:32.399 --> 02:54:35.600
them in this interlude and gives us assurance that

02:54:35.600 --> 02:54:39.000
we have a retaining mechanism before ultimate RMR conditions

02:54:39.000 --> 02:54:43.299
become necessary using the existing firm fuel product

02:54:43.299 --> 02:54:48.000
to another possibility for ERCOT to examine one of

02:54:48.000 --> 02:54:50.399
their tools that's already in place, build something

02:54:50.399 --> 02:54:53.600
new, just I'm not an expert and Pablo is looking at

02:54:53.600 --> 02:54:56.500
me like you're crazy, but I hear what you're saying

02:54:56.500 --> 02:54:59.399
like tweak, tweak what we've already got in combination

02:54:59.399 --> 02:55:02.899
with other tools you use whatever you got already in

02:55:02.899 --> 02:55:06.500
the box to ensure reliability rather than just already

02:55:06.500 --> 02:55:10.200
built in the settlement engines and I think, I think

02:55:10.200 --> 02:55:13.100
I think what I'm hearing clearly and what's being conveyed

02:55:13.100 --> 02:55:16.500
is that there is an urgency to try to do whatever we

02:55:16.500 --> 02:55:19.899
can, to improve reliability as quickly as possible

02:55:19.899 --> 02:55:22.100
and to try to get to a long term solution both at

02:55:22.100 --> 02:55:24.799
the same time. So figuring out how to optimize that

02:55:24.799 --> 02:55:28.899
combination I think is a, is a, is an important endeavor

02:55:28.899 --> 02:55:32.299
and and valuable endeavor that we should take on collectively

02:55:32.299 --> 02:55:34.700
between the commission with ERCOT and with some of

02:55:34.700 --> 02:55:37.100
the key stakeholders and I think what we're looking

02:55:37.100 --> 02:55:40.200
for is a bridge, right, whether it's with your existing

02:55:40.200 --> 02:55:42.500
services and products, whatever, I think Commissioner

02:55:42.500 --> 02:55:44.899
McAdams just mentioned, you know, maybe thinking creatively

02:55:44.899 --> 02:55:47.200
through firm fuel, I mean we had a discussion on other

02:55:47.200 --> 02:55:49.399
options besides BRS right? I mean I asked you to look

02:55:49.399 --> 02:55:52.700
at, you know, it could be crs be skilled in a way

02:55:52.899 --> 02:55:55.799
to serve in some fashion because I know other folks

02:55:55.799 --> 02:55:58.500
had, you know, brought that up as an option and and

02:55:58.500 --> 02:56:01.600
that's not an option as you conveyed to me and I agreed

02:56:01.600 --> 02:56:04.399
to something, it's a whole other kind of different

02:56:04.399 --> 02:56:08.100
product and so we talked about offline Nonspin eight

02:56:08.100 --> 02:56:11.100
our product and give me feedback on how that was not

02:56:11.100 --> 02:56:13.899
gonna work. So I've been trying to go through a menu

02:56:13.899 --> 02:56:18.600
of potential options to help sort of, you know, pull

02:56:18.600 --> 02:56:22.399
the physical pressure off these older units or the

02:56:22.399 --> 02:56:28.899
units that are being rubbed um so that we can, you

02:56:28.899 --> 02:56:32.000
know, obviously still maintain reliability in the near

02:56:32.000 --> 02:56:35.000
term but also preserve what we have for the long term

02:56:35.000 --> 02:56:38.399
Right, so that we have units, these, these the existing

02:56:38.399 --> 02:56:40.200
fleet, that these types of units that can go out and

02:56:40.200 --> 02:56:43.299
get a PCM and so that we're not expediting their retirement

02:56:43.299 --> 02:56:45.299
and all the things we just discussed. So I mean I have

02:56:45.299 --> 02:56:48.799
been looking at options and and um with respect to

02:56:48.799 --> 02:56:52.299
what stakeholders provided, you know, like, you know

02:56:52.299 --> 02:56:54.500
Commissioner McAdams mentions one that I think at least

02:56:54.500 --> 02:56:57.200
one stakeholder mentioned, but I, I do want to make

02:56:57.200 --> 02:57:00.299
sure that we're just not expanding firm fuel to the

02:57:00.299 --> 02:57:04.200
point where it's just, you know, so large, that becomes

02:57:04.200 --> 02:57:07.100
tremendously expensive as well too. But obviously that

02:57:07.100 --> 02:57:08.899
functionality is very important and we're gonna be

02:57:08.899 --> 02:57:12.399
looking at it to phase two but my whole goal here,

02:57:12.399 --> 02:57:15.500
you know Pablo is just to really continue to examine

02:57:15.500 --> 02:57:20.200
you know what we can do to be proactive on retaining

02:57:20.200 --> 02:57:24.200
those longer duration units that are pulling away and

02:57:24.200 --> 02:57:28.000
scaling down um the rocking because it does have a

02:57:28.000 --> 02:57:30.799
distortion eri impact on real time energy prices as

02:57:30.799 --> 02:57:34.799
well. Right, so trying to unpack that some so that

02:57:34.799 --> 02:57:38.700
um we can, you know, just unpack some right now so

02:57:38.700 --> 02:57:40.600
we can appropriately pack for whatever future we're

02:57:40.600 --> 02:57:44.600
going into. And I just, it concerns me that the only

02:57:44.600 --> 02:57:48.899
options we have are continued rug and RMR, I just think

02:57:48.899 --> 02:57:51.299
at this point I wouldn't I wouldn't recommend taking

02:57:51.299 --> 02:57:54.100
any options off the table at this point because I think

02:57:54.100 --> 02:57:58.000
we need to evaluate what are the overall objectives

02:57:58.000 --> 02:58:02.200
of a bridge set of solutions. And so I would keep all

02:58:02.200 --> 02:58:04.500
of the options on the table to evaluate at this point

02:58:04.500 --> 02:58:10.600
It may be that it is preferable to use Ancillary services

02:58:10.600 --> 02:58:13.600
that we have today differently, which may have an impact

02:58:13.600 --> 02:58:16.500
on rock but that may be preferable because of the reliability

02:58:16.500 --> 02:58:19.500
benefit we get and so we have to analyze the trade

02:58:19.500 --> 02:58:22.700
offs that happened because by doing as as we've talked

02:58:22.700 --> 02:58:24.899
about, it characterized the market is very much like

02:58:24.899 --> 02:58:26.799
a balloon, you know when you squeeze on one side, there's

02:58:26.799 --> 02:58:29.200
a reaction someplace somewhere else. And sometimes

02:58:29.200 --> 02:58:32.600
that's a desirable, sometimes it's not desirable. And

02:58:32.600 --> 02:58:35.799
so I think we really should evaluate the full suite

02:58:35.799 --> 02:58:39.399
of the tools we have in differing mutations and and

02:58:39.399 --> 02:58:42.000
discuss what are the priorities of a bridge outcome

02:58:42.200 --> 02:58:44.600
If it's straight up reliability, if it's reduction

02:58:44.600 --> 02:58:47.899
in rock, if it is improving flexibility, there's different

02:58:47.899 --> 02:58:51.100
parameters we could emphasize with bridge solutions

02:58:51.200 --> 02:58:55.200
that could then lead to an optimal set of um of recommendations

02:58:55.200 --> 02:58:57.600
And I don't think we've done that full analysis yet

02:58:57.600 --> 02:59:00.299
to the degree that would be, we'd be ready to make

02:59:00.299 --> 02:59:03.600
a recommendation on them. And I think resolving Pete

02:59:03.600 --> 02:59:07.600
net Load PCM I think um as you know, you guys have

02:59:07.600 --> 02:59:11.000
provided a back cast analysis and and um you know,

02:59:11.000 --> 02:59:14.799
shown, you know the variation on Pete net Load and

02:59:14.799 --> 02:59:18.700
on a seasonal basis. Um and I think that's helpful

02:59:18.700 --> 02:59:23.600
to really understand um my thought and continued question

02:59:23.600 --> 02:59:29.299
is would a Pc and solve for the multiday extreme winter

02:59:29.299 --> 02:59:33.500
weather event because at the end of the day that that

02:59:33.500 --> 02:59:36.500
that that's what we've been dealing with more so acutely

02:59:36.500 --> 02:59:38.600
than, I mean we had a record breaking summer, we had

02:59:38.600 --> 02:59:41.700
a couple of conservation calls and we, you know PCM

02:59:41.700 --> 02:59:46.700
I think if structured correctly potentially could target

02:59:46.700 --> 02:59:51.000
peak Net Load um efficiently effectively potentially

02:59:51.000 --> 02:59:56.299
Um but the multi day winter event is what stays in

02:59:56.299 --> 02:59:59.799
my mind because having worked through that storm and

02:59:59.799 --> 03:00:04.000
knowing the devastating impact as we all know. Um that's

03:00:04.000 --> 03:00:08.399
that's that's what I'm wondering if if that the P.

03:00:08.399 --> 03:00:12.899
C. M. Is going to adequately cover those events and

03:00:12.899 --> 03:00:16.500
and that's why I have proposed the backstop as being

03:00:16.500 --> 03:00:19.200
sort of that backstop that if we needed in a multiday

03:00:19.200 --> 03:00:24.500
cold multi days of very cold dark tights that we had

03:00:24.500 --> 03:00:29.600
something to protect people of Texas and I and I just

03:00:29.600 --> 03:00:33.399
want to I don't want to have a drop off in existing

03:00:33.399 --> 03:00:37.500
generation where we're left kind of flat footed for

03:00:37.500 --> 03:00:40.500
a period of time like you know, a gap we have to

03:00:40.500 --> 03:00:44.299
fill because we're still transitioning and so um that

03:00:44.299 --> 03:00:46.700
that's my concern and and and you know, I'm happy to

03:00:46.700 --> 03:00:50.100
continue to talk to you about it. Um but as you said

03:00:50.100 --> 03:00:52.799
not removing options off the table is important right

03:00:52.799 --> 03:00:55.700
now with respect to the bridge and continue to think

03:00:55.700 --> 03:01:00.399
creatively about those options is very important. All

03:01:00.399 --> 03:01:03.299
right. Thank you Commissioner. We we need to take a

03:01:03.299 --> 03:01:04.799
break here in a minute for the court reporter. One

03:01:04.799 --> 03:01:07.200
more quick question Miss Jackson. One of the things

03:01:07.200 --> 03:01:10.799
that um the chairman gave us some data on this morning

03:01:10.799 --> 03:01:14.000
was the impact of demand response and you talked about

03:01:14.000 --> 03:01:17.899
many things about many services but we know that you

03:01:17.899 --> 03:01:21.799
know critical tool in our toolbox to support grid resiliency

03:01:21.799 --> 03:01:25.299
is energy conservation and that demand response can

03:01:25.299 --> 03:01:30.000
help with both operational and the resource adequacy

03:01:30.000 --> 03:01:36.200
bridge. So um once PCM is implemented as well as, you

03:01:36.200 --> 03:01:38.299
know, this potential during this period, this bridge

03:01:38.299 --> 03:01:42.600
period. Can you kind of give us your thoughts on on

03:01:42.600 --> 03:01:47.100
the value of PCM in promoting demand response? Yeah

03:01:47.100 --> 03:01:49.600
I think it's um it's a it's a good question and we

03:01:49.600 --> 03:01:53.100
should never lose sight of the value of the resources

03:01:53.100 --> 03:01:55.100
that are that are brought to the table on both the

03:01:55.100 --> 03:01:58.799
supply side and on the, on the roadside and demand

03:01:58.799 --> 03:02:02.100
response as a resource I think is going to perform

03:02:02.100 --> 03:02:05.000
and be incentivized under the P C. M. Model because

03:02:05.000 --> 03:02:07.799
of the fact on how the PCM attributes are going to

03:02:07.799 --> 03:02:11.700
be creating the cost and the and the revenue streams

03:02:11.700 --> 03:02:16.700
So when Load is able to anticipate or or look ahead

03:02:16.700 --> 03:02:20.100
to see when they're expect to be tight periods of time

03:02:20.100 --> 03:02:23.000
with low operating reserves. The load that has the

03:02:23.000 --> 03:02:25.500
ability to be flexible and utilize demand response

03:02:25.500 --> 03:02:28.500
would exercise that ability in a way that would give

03:02:28.500 --> 03:02:32.500
them economic value by not being on the CIS, when the

03:02:32.500 --> 03:02:36.100
cost of a PCM has incurred. And so it works kind of

03:02:36.100 --> 03:02:39.200
in the partnership way with the PCM model, such that

03:02:39.200 --> 03:02:41.399
the generator is incentivized to be available during

03:02:41.399 --> 03:02:45.600
that, that low reserve period and the load is incentivized

03:02:45.700 --> 03:02:48.100
to reduce the demand on the system during that period

03:02:48.100 --> 03:02:50.500
offsetting their obligation to pay for it. And so I

03:02:50.500 --> 03:02:54.200
think it incentivizes demand response as we've contemplated

03:02:54.399 --> 03:02:58.600
and and would continue to emphasize the importance

03:02:58.600 --> 03:03:02.299
of demand response resources in managing the overall

03:03:02.500 --> 03:03:05.399
reliability of the grid. So we talk about what we're

03:03:05.399 --> 03:03:08.600
going to use, you know, in the final PCM as well as

03:03:08.600 --> 03:03:11.299
in this bridge period. I mean demand response can play

03:03:11.299 --> 03:03:15.899
a very significant role and um I mean in your opinion

03:03:15.899 --> 03:03:19.399
um you know, have we, have we fully utilized it in

03:03:19.399 --> 03:03:21.899
the past And is there may be an opportunity to do more

03:03:21.899 --> 03:03:23.700
of it? I think there's, I think there's definitely

03:03:23.700 --> 03:03:27.600
an opportunity to leverage it further and the Megawatt

03:03:27.600 --> 03:03:30.000
that's not used as one of the most efficient Megawatt

03:03:30.299 --> 03:03:33.600
that that can be applied. So I think it's there's always

03:03:33.600 --> 03:03:36.500
opportunities to be seeking ways to further drive demand

03:03:36.500 --> 03:03:40.299
response value in the operation. All right, thank you

03:03:40.299 --> 03:03:43.399
Our court reporter needs a break. So we'll recess here

03:03:43.399 --> 03:03:47.100
I know Pablo has got a travel obligation but Kenan

03:03:47.100 --> 03:03:54.100
and dan will be here after the break. Uh This will

03:03:54.100 --> 03:03:57.200
also serve as lunch. So let's recess until 2 15. Does

03:03:57.200 --> 03:04:00.899
that work with? All right, we'll be back