Good morning. This meeting of the Public Utility Commission
of Texas will come to order. To consider matters that
have been duly posted with the Secretary of State of
Texas for January 19, 2023. For the record, my name
is Peter Lake. And I am joined today by Will McAdams,
Lori Cobos, Jimmy, Glotfelty and Kathleen Jackson. The
purpose of today's meeting is to resume our discussion
on market design. And take a vote on selecting a reliability
service to fulfill our statutory obligations under
SB 3. We'll begin work on that right after public
comment. Uh, as always public comment speakers will
be limited to 3 minutes each. Mr. Journeay, do we have anyone
from the public signed up to speak?
Yes sir. We have one person signed up who indicate
they'd like to speak on market design. All right, call
him up. Mike Brothava?
All set.
I rarely get a comment out here sir.
Most people have a harder time with the name. All right,
welcome. Can you please state your name for the record
and who you're with? (item:1:Mike Brasovan with Thigbe, LLC) Sure, my name is Mike Brasovan.
I'm the President of Thigbe, LLC. We are broker that works
with mainly residential customers around the state.
Our mission is to help make markets work for those
customers. So we do that by applying our energy expertise.
Our time and our energy, to help you make sure that
they pay as little as possible for this energy supplies
that they need. So it's very important to us that a
very functional, very efficient market is in place.
So that we can help our customers save and, and help
raise money for charities along the way. Um, I come
before you today, I attended my first open meeting
probably 30 years ago or almost 30 years ago. And
in that time, I've seen some things. And one of those
things I wanted to make sure you guys knew about. In
about 1995, I attended a California Manufacturers Association
meeting. And one of the themes of that meeting was
Knight is right. And that referred to Commissioner Knight
of the of the California, Texas Public Utility Commission.
One of the things that was under debate at that time.
Was whether or not the California Commission was going
to be able to design a market that worked efficiently.
Or if they should let the market work and allow bilateral
contracting. Commissioner Knight was the only Commissioner
that stood up and said it needs to be bilateral contracting.
That's the only thing that's going to effectively work.
Everybody or almost everybody probably, at the CMA agreed.
Because they knew how markets worked. That did not occur.
Uh, and I come before you today, asking that you make
sure that it does occur in Texas. That whatever you
put in place. Has the, gives the suppliers and the participants
in the market the ability to bilaterally contract. To
manage their risk effectively. If you don't do that,
risk premiums are going to increase dramatically. My
customers are gonna be wasting a lot of their hard
earned money. Because people can't effectively participate
in that market without that bilateral contracting capability.
So I ask you to consider that. I also ask you to
consider one other thing. Um you, I know you're constricted
by SB 3 on the proposals that you need to put forward.
But I would ask that you fulfill that obligation, but
maybe consider going beyond that. And asking the Legislature
for more leeway and how you approach this issue. Because
the big issue issue to me, is for the free rider problem.
People being able to dump into the, into the market
and lower prices without concern about what the market
price really is. Obviously renewables and wind generation
are right up there. Uh, driving down that price, that
suppliers get or generators gef for the power. Uh,
and that needs to be addressed. I know that SB 3
constrains your ability to address that. But I would
encourage you to consider putting forward, requesting
the ability to consider that as well. I think that
would be important for the long term health of our
market. And with that, I'm probably out of time. So
if you have any questions for me, I would be glad to answer them. Thank
you for your time.
Anyone else signed up to, for public comment. No sir.
All right. Thank you, Mr. Journeay. Public comment is
now closed. (item:5:Order of Business) And we will pick up next with agenda items
5, 6, and 7. Um, know that we've all had a full
week to consider the discussion from last week's work
session. And um, glad all of the Commissioners have
filed memos to set the stage for this discussion. The
as I mentioned earlier, the aim of today's business.
Is to vote on the best reliability service to meet
the long term reliability and adequacy needs in ERCOT,
as defined in Section 18 of SB 3. In terms of order,
of business, you'll have all seen my memo. And the uh,
everybody's familiar with the concepts I've articulated.
So I'd prefer to start out today's business with asking
each of you to lay out your memos. Uh and we'll go
through by order of appointment, if that's acceptable
with you all. Uh and eventually have a discussion about
uh, the concepts laid out. And I would hope then move
to a portion of our business. Where we can
look for the areas and the con, where the concepts and
principles laid out in each of your memos. Can be aligned
with this month, the longest memo for better or worse.
But, but find the areas of common agreement, identify
and agree on those. Discuss where there's the opportunity
to edit what's in my memo. To reconcile with concepts
or principles that you all think are important, uh
if, if they're reasonable. Uh and then at the end of
that sequence. Have a discussion about anything, any
additional edits or additions, y'all would like to
make. On top of the underlying foundation laid out in
my memo. And once we have a working draft. I'd like to
that everybody has, is comfortable with. And uh, it's
an updated version of my memo. I'd like to call a recess,
where I can finalize that
with my Staff. And however, that whatever hour long period
that is. Uh within file an updated version and circulate
an updated version of my memo, incorporating all of
y'all's feedback. Uh points that, which point I hope
we could reconvene. And uh, discuss taking a vote on,
uh the PCM that's laid out in my memo.
The attributes in there, as edited and amended by the
discussion. Everybody will get to see and participate
in that. And of course we'll have time to review that
during our extended recess. But that's my hope about
how we can move through today's meeting. Get to a productive
result, um that work for everybody? Yes sir. All right. With
that, we'll start with memo layouts. (item:5:Commissioner McAdams Memo Layout) Commissioner McAdams?
Thanks sir. Um, Mr. Chairman, members. Uh my memo focused
on. Really trying to uh, not just set the table but also
clear the table. Of certain components that I believe
in order to focus our energies are not needed anymore.
And as my memo alluded to um, we have real world, real
time experience now to inform our decision. With Winter
Storm Elliot that happened just before Christmas of
this last year. Um, that storm swept across the country.
It affected multiple ISOs. Multiple regions of
the country. It tested the resiliency framework that
FERC has imposed in those other ISOs. Uh, the
deliverability of power, the energy supply of those
generators. Um many of which uh, had forward capacity
constructs. And as we all know, we have debated, debated
forward capacity for years, um in Texas. We've never
uh, ultimately moved in that direction. But we've certainly
considered concepts that are familiar in other parts
of the country, country here in this project. And um,
and those are all based on forecast, Load forecast
by an ISO. And the ultimate dependability of dispatchable
generation or installed generation. Uh, to perform when
you need it to perform. Winter Storm Elliott proved
uh, that to be flawed, a flawed design. All designs
have flaws and I'm not saying energy only is the best.
I think that's exactly what we've spent 18 months trying
to refine, to improve it. But forward capacity in um,
ISO PJM. Um in uh, ISO New
England. Um and, SBP even had issues but worked through
the issues. Never entered Load shed, but as my memo
alluded. Um and was demonstrated last week. PJM has held
up as as the true success story in the country. Massive
amount of generation has been stalled in a short period
of time. The unfortunate fact is um, they had a massive
amount of generation go on forced outage. Which one
they missed their load forecast. And um, two what they
were counting on didn't show up. Which caused them
a tense night on December 23rd, going into Christmas Eve.
So as a result of that, I think it's an excellent opportunity.
Um to, to take the forward reliability market or mechanism,
and the LSCRO off the table. Since the
foundation of those concepts and no offense, I'm taking
mine off the table. Um, to anybody's suggested proposals.
Is foundationally you've got to be somewhat accurate
on your forecast. And what we're learning today is the
grid is changing so much. The Load experience is changing
so much. Forecasts are hard to get right. And I see Pablo
nodding over there and he's realizing just how hard
his job is. Um and, and additionally with the vintage
of the fleet, that we have. The dependability of that
dispatchable generation that we have installed. That,
that runs more often, that has more and wear and tear
on the facilities. That may have fuel constraints occur,
is that much more uncertain. And so as a result, I
think we should as a formal action. Take FRM and Lucero
off. I would additionally propose as uh, articulating
the memo, uh tabling DEC. Because um, and I think
this has come up in other memos, from my colleagues.
We need to focus on retaining our dispatchable generation.
We do not need to pressure those assets. And as came
up in the 1,000 pages of comments. DEC would have the
uh, the effect uh of making marginally, economically
marginal facilities that much more uneconomic. Because
they would be competing with the resource, that is receiving
a subsidy in my view, an incentive. But bottom line
is the, the value of that incentive would be uh baked
into the bid of those megawatts coming onto the system.
And um, and as asserted by stakeholders, have the effect
of a production tax credit. For a subset of dispatchable
generation, that theoretically could run all the time
depending on the technology. So at this time I would,
I would advocate for tabling my proposal of the DEC
market design. Um and then focus on the production,
uh the performance credit mechanism. And as I said in
my memo, the PCM has great potential. Um, the problem
is it has great potential for everybody and nobody
can win everything, every argument. And so that's what
I believe this exercise today is gonna help us, help
us define what the PCM ultimately becomes. Those broad,
that broad framework, those broad parameters. That will
hold us accountable, and ERCOT accountable and the stakeholders
accountable. As they attempt to advocate for their companies,
for their industry positions. Um, but at the end of
the day, we have to look out for the Texas consumer,
on both the reliability side and the cost side. Um,
and so I believe just for the sake of clarity, let's
make the determination on PCM. Let's move forward and
let's build in some concrete principles. That allow
the greatest flexibility on the part of our grid administrator.
Uh and the PUC staff, and this Commission, to continue
to work the problem, evaluate the problem. And address,
address each uh, component of that framework on an iterative
basis. Um to produce the most the the optimal market
design. As a part of that, I included certain principles
that I considered important. The reliability standard,
I've said it before, I'll say it again, we need a reliability
standard. It is certainly implied in Senate Bill 3.
Whether that's a target or a hard and fast standard,
we need a goal. And in my view, that goal must inform,
be informed by both the deliverability of megawatts
across the system. Because you can't just overlay a
copper sheet over the ERCOT system. There are known
constraints out there. And the system will continue
to have constraints, as new generation and loads are
interconnected into the system. Um additionally, it
is informed by the old uh, metric of resource adequacy.
But those two have to be harmonized into a study. And
I believe uh Astrape', which is our current uh consultant.
Who focuses on this issue could rerun a study. Um given
that, those parameters, those two parameters. It's not
just one parameter that would inform a reliability
standard, in my view. Which is resource adequacy is
certainly part of it, but ultimate deliverability.
And again, if you can't deliver the power. Then the
Commission has to break logjams, to make sure that power
is ultimately delivered to the end use consumer. And
that should be a policy in the future. And that also
means we're not bridging, building bridges to nowhere,
in terms of transmission construction. But we are tearing
down barriers to megawatts. Moving into systems that
are badly in need of them uh, for reliability uh, purposes.
Secondly, forecast as as you can gather. I am not a
big fan of grid administrators having to make forecasts,
and that also goes to the accreditation. We are trying
to air away from accreditation. Um, we're trying to
make people uh, prove themselves by their actual performance,
and pay them accordingly. And so in my view, I'd like
a principle enshrined definitively. That the grid administrator,
that the PCM and the value of the PCM. Is
not going to be based on some arbitrary Load forecast
by the grid administrator. That will be informed by
the collective market intelligence of the system. And
all the traders, generators, and loads that will help
inform that. And ultimately you're paid as a result
of the performance. Which the proof's in the pudding.
The system will either be reliable or it will not. Um,
PC qualification. I believe this is an important high
level determination that should be enshrined from the
outset. That if you are dispatchable and you can be
controlled by ERCOT. You provide value to the system
to meet ultimate reliability. And therefore ultimate
reliability is the goal, and that's what the value must
be based upon. And so we need to uh, we need to
qualify. That um, any resource that can be controlled
or dispatched. Um and ERCOT knows they're there and
that they will perform accordingly. Uh, qualifies to
generate a PC during that high risk hour. One that
will be a cost control feature on the system. But it
will also um, allow technological innovation to help
satisfy the ultimate goal of ensuring reliability. Because
we don't know where technology is ultimately, ultimately
going to head. But there's a lot of demand side uh,
technologies that are going to allow us to combat future
conditions, critical hours.
Ultimately, Senate Bill 3 orders us to provide
a service that copes for periods of low uh, intermittent
output.
This is the tie that makes the law legal. Um, so when
we move forward, net peak load has to be a condition.
Uh, just because of the statutory direction that we've
received. Um dictating the, the hours that we're targeting
for reliability purposes. Um, and then as a nuance to
that. Because of our back cast analysis, because of comments
from the IMM, that we received last week. You have
to account for forced outages, when you're doing that
calculation. Because forced outages is what you experienced
during Winter. Because of the laws of thermodynamics,
uh metal breaks during frigid conditions, bad things
happen, gas freezes. So um net peak Load, if you're
just taking it on its own. Would concentrate during
the Summer hours. But if you account for thermal outages,
it conforms more to the ORDC, um performance.
And you see it overlay into Winter as well. So if ERCOT
through their wisdom. Determines we need a seasonal
approach or even a monthly approach. Accounting for
net peak load. With a calculation for subtracting out
forced outages, would allow us to meet certainly our
high risk seasons which are Summer and Winter. And
then um, almost lastly market power. Uh Mr. Chairman,
I see in your memo, our thoughts are very much in alignment
on market power. The central, the feature of the centrally
cleared market. I think we need to make a determination
on centrally cleared markets. Um, and I think that needs
to be made at the outset. Just to manage expectations
for the market. That market power abuse is a central
component of the focus of the Commission, and ERCOT
and their evaluation moving forward, and the stakeholders.
Um but additionally, I believe uh transparency and
clarity and, and frankly a prohibition on affiliated
transactions needs to be a central view as well. So
I believe your language aligns with mine. In terms of
this is a focus for us, on a principled basis moving
forward. And then finally um, for the feature of self-
correction. In terms of the value that is and the, and
the signal that is sent to the market. The goal is
reliability. And um, the definition of reliability according
to uh, E3 is economic equilibrium for our dispatchable
generation community. So if you are at economic equilibrium
for the purposes of the system. You should be a reliable
system, you should be meeting that standard. And as
a result, if you're at equilibrium. The value behind
the PCs should be allowed to go to zero. To show we
are not, we do not have a scarcity of resource adequacy
or deficiency of resource adequacy on the system. So,
I think that's a core component. If we want it to be
self-correcting and self-leveling. Allow it to do so
all the way down to no value add, on PCs. Uh in
closing, I want to support with, with these additions
on a principal basis, the PCM. Uh, I believe it can
be harnessed for all sides. Both the generation community
and the loads, but there's trade offs on both sides.
Holding each component accountable to their behavior
in real time. And on a performance basis, um not a
forecasted basis. Not some crude target that we're
gonna set out there. That is gonna be economically inefficient
for our system. That, that requires everybody to pay
more attention to the real time market, to the energy
market. Where the system continues to be governed by
energy price. But there is certainty out there. To a
certain degree for our dispatchable resources. That
that they, there will be money available. To provide
an incentive to retain your generation, and then to
build new. And with that I'll yield my time. (item:5:Chairman Lake Comments on Commissioner McAdams Memo Layout) Thank you
for laying that out. I agree with everything you said
in principle. A couple of details. We can nail down
when you start aggregating all this. Yes sir. And I agree with
every, in principle with everything you said. And all
I will offer is uh, commendation to you. And, and walking
through the different options that have been evaluated.
And I agree need to be discarded at this point. Um,
and as you said, and and well know. Both you and I
had original proposals that, that we've advocated for.
And I think it is a highlight of the process and how,
how thorough and comprehensive the process. That this
Commission has gone through. That we both worked through
the pros and cons of each, trusted the analysis. Uh,
we challenged the analysis, uh but ultimately did what
we said, we were gonna do at the outset. We discarded
the flaws of each. Uh, worked together as a Commission,
with the Staff. To capture the features, the best components
of each. And put those into the next generation and
the next generation. And I think that's what the PCM
delivers. So. Sir, and that was due to your leadership.
(item:5:Commissioner McAdams follow-up comments on memo layout) Look, the PCM is a good faith effort at some kind of
a hybrid. I don't think you can dispute. That this
is some kind of a hybrid. This is not forward capacity
as we're talking about this. This is something new.
That um, that really does on a principal basis, it aligns
well with the energy market. Subject to conditions we
can put on there to prevent gaming by one side or the
other. Um, it is an enhancement. It harnesses the features
of our market which is a large and robust industrial
uh, energy consumer segment. That has a lot of capabilities,
that can participate robustly in this. And a new innovative
retail market, that's coming along. Even NRG, with their
their new capabilities. That's, that's proof of the
vision that loads and gen need to be harmonized. In
terms of their activity to meet reliability, and that's
the goal. And this will like you said, bring a new level
of accountability to both sides of that equation. Load
and gen with the opportunity to be compensated for being
reliable on both, on both sides of that. And as we heard
from Pablo last week. This is a hybrid of features
not only we evaluated, but features from other markets
around the world. All of these components are known
there's no grand mystery out there. It's just a new
combination of the best components of different, different
products we've seen around the world. Um, but thank
thank you for that and thank you for laying that out.
Any other comments or questions for Commissioner McAdams?
All right, Commissioner Cobos. All right. Thank you. I'd like to open up just
by thanking my fellow colleagues. Um Kathleen, I know
you joined us after all the fun last Fall. But welcome
um welcome to the, welcome to the party. And um but, you
know, we we spent a lot of time and a lot of
hard work. Went into developing a blueprint that had
options. Um, a Load side reliability mechanism, dispatchable
energy credit, and a backstop reliability service. And
because we spent so much time evaluating a variety
of options and ultimately approved a blueprint. That
had different options in there. We, we now have the
ability to combine all of those options that were in
the blueprint to extract a hybrid, which is the performance
credit mechanism. So because of our long deliberations,
and thorough analysis of everything that we've done
so far through market design. That's how we came up
with this hybrid. Because we have a menu of options
in the market design blueprint. And that was very important
to me, as you well know Chairman. And so here we are
today. And um I do want to thank, thank each and every
one of you really, um, from a lot of my heart. I
know this has been a tough deliberation. But as I said,
a few open meetings ago. Market design, resource adequacy
discussions are never easy. They're always contentious.
Everybody always has a different perspective. But at
the end of the day, we have to come together. To build
consensus around something that we can, you know, put
out there. That will improve and enhance our market.
And I also want to thank the Staff. I know that everybody
has been working very hard to provide us with information
throughout this entire process. Connie and team, I
wanna, I wanna thank the stakeholders in the market.
That have been part of this process as well um. Throughout
our deliberations and, and ERCOT. Um, ERCOT and their
feedback throughout this process. So I thank you everybody
involved, this has been a long road, it's been a tough
road at times. But um, appreciate all the hard work
that's gone into it. I know I certainly have dumped
a lot of hard work into this myself. And I know that
everybody sitting here has. (item:5:Commissioner Cobos Memo Layout) Um my memo um, is particularly
focused on near term actions. Um, you know, from my
perspective, given the time that it's gonna take to
implement a long term liability plan. Like and I,
and I say long term reliability plan because I'm viewing
this as a package, right. Whether, you know, we ultimately
implement PCM, you know, the Legislature passes something.
Uh, you know, that that runs with or you know, it it's
all a package in my opinion, all the framework. And
so, given the time it's gonna take to implement a long
term reliability plan. Um, I believe that the near
term actions are almost as important as the long term
actions. Um, that are ultimately taken by the PUC and/
or the Legislature. To help drive new dispatchable generation
investment and put new still on the ground. In order
for, for the long term solution, PCM or other. To effectively
work in the future we must unpack so we can appropriately
pack for the future. And what that means from my perspective
is that we must focus on the following year term actions.
Enhancing operation reliability and flexibility through
the optimization of ERCOT's ancillary service portfolio.
Reducing and ultimately replacing RUC with existing
market driven processes. To retain our long duration
dispatchable thermal generation fleet. In order to continue
to meet extreme weather conditions in the future. Especially
the multi-day winter weather events. And letting the
RDC work is intended to send market signals for new
dispatchable generation investment in the interim.
In my memo I focus on, you know, our discussion from
last work session. Um some of ERCOT preliminary feedback.
And the two options that we primarily talked about
which were RMR and BRS. And highlighting my
concerns with RMR, and my views on BRS. But ultimately,
I believe that my, I would like for the blueprint to
include um some direction to ERCOT. To go back and
come back with options for our consideration. On near
term actions to reduce and replace RUC. And I'm and
I'm fine with what you've laid out in your memo, with
one you know, slight variation. You know Pablo and
team goes back and works on options, they consult with
the ERCOT board. The ERCOT board may provide us a recommendation.
But I would ask as we get a recommendation from the
ERCOT board, that we get a recommendation. But we get
a full menu of options that we, we can select from, including
an ERCOT board recommendation. So that we have a full
menu of options. So not just one solution a menu. Not just one, not
just one. Um, and I say that because of the uh. Best
in class we consider and then a menu. (item:5:Chairman Lakes Questions on Commissioner Cobos Memo) Uh, so what I'm
hearing you say is the ERCOT staff goes back to evaluate.
And provide a menu of options to uh, ensure liability
with minimal RUCs. And provide a bridge of ancillary
service or some combination of, of the tools available,
including RMR. Evaluate those present that the, that menu
to the board. The board makes the selection of what
they think is the best recommendation. And sends that
recommendation, plus the full menu to us for consideration. Yes.
That works for me. (item:5:Commissioner Cobos continuation on Memo) Okay, um next stop in my memo. I
I give some broad feedback on the long term reliability
um plan. I think, I'm in agreement with Commissioner
McAdams and you Chairman in your memo. I think um,
from a long term liability stand point first and foremost.
The commission should open a project to evaluate, establish
an appropriate reliability standard. Um, for today's
rapidly evolving, dynamic ERCOT grid. That properly balances
reliability and consumer cost. And I want to stress
rapidly evolving, dynamic grid. Because in my opinion,
we should just not go straight to a 1 in 10 reliability
standard. That is one important piece of information.
But every other market in this country is looking to
move away from the 1 in 10 reliability standard.
Even though, you know, they all build to it. It's not
it's not, it's not um, indicative of reliability as
you just highlighted in the PJM market. You know, taking
in account the whole system. I think you mentioned
derivability. I think resiliency, I think is very
important. So I think that we as ERCOT um, the Commission.
Should take an avant-garde approach to ensuring that
we have the reliability standard for the future. And
I, and I think that starts with updating ERCOT reserve
margin study. They conducted one in 2018, probably in
conjunction with the Astrape'. But at least running that
study as a foundational first step. So that we can build
upon their, um, from that foundation and, and you know
with other information. I think there's a lot of think
tanks throughout this country. That are putting out
white papers on a variety of ways to look at. Um, the
industry now with, with the influx of renewables and
and you know, thermal dispatchable generation and everything
involved. So I'm in agreement, I think that needs to
be a necessary first step. And I think we need to do
it in a diligent um way um, as soon as we can
but in a very diligent, thoughtful manner. Um, next
stop is, you know, I laid out some general principles.
That I think are important for, you know, whatever we
end up doing in the long term. If we implement this
PCM or whatever happens, um that we abide by general
principles. And the first one in my opinion, is that
the long term reliability action PCM or other be consistent
with the ERCOT competitive electricity market, do no
harm. That we protect the competitiveness of the wholesale
and retail markets in ERCOT. And included in that, is
establishing strong mitigation measures to help prevent
gaming opportunities and market manipulation in the
wholesale market. And ensure appropriate voluntary mitigation
plans are in place to address future market conditions.
Strong, we should establish strong mitigation measures
to help prevent market power abuse and preserve customer
choice. In other words that reps, that customers continue
to have options and retail electric providers and products.
Fixed rate products possible. Um, that would be market
based, transparent and predictable. That it creates
a transparent, stable price signal for new dispatchable
generation investment. Creates transparent and predictable
costs for LSC. So they can proactively hedge and manage
their wholesale supply costs for their consumers, and
avoid costs through demand response measures. That there
needs to be a focus on existing, retaining our existing
long duration dispatchable thermal generation. And we
are able to maintain reliability with a higher penetration
of intermittent renewable generation system. Which is
net peak load, which I think we're in agreement with.
And that we're able to maintain reliability during
extreme weather conditions, especially the multiday
extreme hot and cold weather um, events that we've experienced.
And um, it includes a robust non-performance penalties.
What does that mean? I mean, is it just, you know,
you won't get the money if you're not there? I mean
I think that needs to mean a little bit more than that.
If we really want to ensure that um, that we're paying
for performance but we're also maintaining reliability.
(item:5:Commissioner McAdams Questions Commissioner Cobos Memo) On that, if we can ask on that Commissioner? So it if
it's one of the implementations mechanisms is a must
offer uh, in the day ahead. So you are exposed on a
contractual basis to the value of whatever that is.,
plus the PC. Is that sufficient in your mind at this
stage? Um, as a as long as there's something of that
nature. Some sort of penalty at the end that is structurally
based. In the framework of the PCM that satisfies that
condition?
(item:5:Commissioner Cobos reponds to Commissioner McAdams Questions) I'm not gonna give a definitive answer right now because
I think a lot of these principles need a lot of, a
lot of evaluation and analysis and thoughtfulness.
Um I think, you know, there's been a variety of potential
penalties proposed. One of them is buying back your
energy position, if you didn't show up. And so um,
I would like to explore that. Because we want to make
sure that we're paying for performance. But at the
same time we want to make sure that we're getting a
reliability value out of it, right? Not just okay,
well I didn't get my money big deal, you know. (item:5:Chairman Lake Follow-up Comments to Questions) So it's
fair to say that that's a decision point. We should
list for implementation some combination of
exposure, normal market exposure, and that loss clawback.
Like PJM is gonna have $2 billion of clawbacks for
non performance. That's pretty damn serious. Um or a
non performance ability. Some ask as part of the implementation
decision points. Ask ERCOT uh, when we get to implementation
and TAC. To evaluate what's the best combination of
those options, does that work for everybody? Okay.
I think, I think I don't that's a complicated answer
we're not gonna come up with today. But I think it's
all of it's worth considering in depth and figuring
out what the right combination is. (item:5:Commissioner Cobos Memo Comments continuation) It and finally,
as we move forward, um, with ultimate implementation
some point down the road. That we consider consumer
cost impacts along the way. As we're selecting potentially
technical parameters. Um that are key features to market
design change. That at every step of the way, we're
keeping all consumers in mind. Because the technical
parameters and how they interact with each other. Are
going to, you know, make it a success or failure. And
costly or not as costly to consumers. So we have to
every step of the way, we need to keep the consumers
in mind. And um so I think, you know, just to sum
it up. With respect to feedback on the blueprint and
we can continue talking about this as you stated. We're
kind of, kind of go through an iterative process here
down the road. Um you know, having some defined um
structure around um, near term actions in the blueprint.
I think is important. I know we don't have the exact
step. But at least the process of how ERCOT will go
back, come up with options. ERCOT more provides a recommendation,
Commission considers considers a full menu of options,
by a certain time period. I think you suggested some
time period that we can leave that open, for now. (item:5:Chairmain Lake Comments on possible ERCOT proposal) Just
to that real quick I, I agree that we should ask ERCOT
to bring us options, bridging options. For both short
term reliability and also to hopefully mitigate the
RUC issue. Um, after hearing from ERCOT and also looking
at the ERCOT board meeting date. Because I think, I think it's
important we incorporate, that independent boards expertise
and experience. Uh I would, I would move off of my early
March date. And just ask that ERCOT comes back to us
at the next open meeting or shortly thereafter. With
a proposed date that can allow them to do their analysis
and incorporate board feedback. Does that work for
ya'll? Yes.
(item:5:Commissioner Cobos continues with Memo layout) Next stop with respect to you know, in the blueprint
and the implementation of a PCM. Um, I believe that
it's very important that. You may want to clarify on this,
but the way I read your memo. Was that we would, you
know, basically let ERCOT and the stakeholders come
up with the framework for the PCM, and then bring
it back to us. My perspective, I think that the Commission
as, as the regulators and and responsible for a lot
of different matters in the market. Um protecting customers,
ensuring firm regulatory oversight over the market.
That um, we need to be on the front end of making
high level policy calls. Obviously working in concert
with ERCOT as a, you know, bring us back information
on implementation, analysis that we need along the way.
And, and probably in the detailed technical implementation
in the protocols and market rules. But I think the
Commission needs to remain in the driver's seat. Of
making the high policy, high level policy calls. That
are going to impact the market, the state, the consumers.
Um, that's what I believe how the process should run.
And I'm open to hear your feedback on that. In case
you want to clarify anything. (item:5:Chairman Lake Follow-up Comments on Memo) My intentions I said
from I said before, I think it's one to reach a decision
today. Tap the brakes let the Legislature, for the Legislature.
To consider their options throughout the Legislative
session. Um, if after that we do move on to an implementation
phase. Um either after enhancement or, or other direction
the Legislature. Uh send the decision point, send this
directive and this, this blueprint to ERCOT. Ask them
to bring to bear their technical expertise. Uh, and
just as importantly, the market expertise from TAC and
our market participants, include them in the process.
of identifying additional decision points. They need
to be considered providing us answers. And uh, and going
through the process of answering those. Providing clarity
and specifics about what each of these components needs
to look like. Uh, work through their board uh and but
at certain milestones bring us the responses. Uh they
can't just disappear. Uh into the night and then show
up sometime later with an answer. I think we, we need
to my, my intention would be find the balance between
leveraging the expertise at ERCOT and with our market
participants. While also ensuring the PUC is involved
at predetermined milestones. To provide feedback, uh
correct course where necessary, uh and then eventually
approve the final technical specifications. Um and, and
finding that balance between leaning on the experts
at ERCOT. Leaning on the market participants who
are gonna be the ones that have to put their money
and their investors money on the table. Get their feedback
and input, but have predefined milestones. Or the Commission
provides input, feedback, corrects course. And then of
course, the ultimate decision making on, on the technical
specs would reside in the Commission? Um that's, that's
my intent. Does that makes sense to you all?
Ultimate, ultimate decision making needs
to be here. But we can't, we need to let TAC work.
We need to let the experts work and strike a balance.
(item:5:Commissioner Glotfelty Comments on Chairman Lake's Comments) You know, if that's what you mean uh, in the kind of
the last set of bullets the implementation. Um, you know,
I have some suggestions on which one should remain
here and which ones should go to ERCOT. And we'd like
to discuss those at the appropriate time. Sure, but
go ahead and give us a sneak peek, in response to Lori's question. Well, I mean, I
think, you know, determining so technical issues ought
to be handed over to ERCOT. Determining the compliance
period, determine the hours, determine the requirements
for producing a credit. Um, forward market timing, but
I think a lot of these others are policy calls. That
should reside with us, the final call. And I guess as
Commissioner Cobos said. Um you know, I might, I might
be open to letting them come back with a menu of options,
that we can choose from. Um, I don't know think. For example, what are the policy calls you're
thinking about? Um,
determine if there should be geographical requirements
for PCMs? Sure. I don't know the answer to that. I don't
either. I certainly want to have somebody do some analysis.
Yes. So the question. Formed by the reliability standard
you know, the run that Astrape' does. The question would be is
the ERCOT process or is our contested case process
best? And I mean I think that's a policy call, that we
should be making. Um, for example determined demand curve
parameters for each PCM compliance period. To me that is
the demand curve is the crux of the capacity market
here. And to leave that to ERCOT is not their role.
Their role is to implement what we say is critical
for the market. So those are ideas. (item:5:Chairman Lake Comments on Commissioner Glotfelty's Comments) I would say every
one of these bullet points at the end of the decision
points, if you will ultimately, we have to sign off
on. I would, my point is, I think implementation should
incorporate their technical feedback, market participants
feedback for us to ultimately make a decision. And
I think the question that I have versus the way I am
assuming that you have laid this out. Is, is it in their
proceeding? That they come to a decision and recommendation
for us. Or is it in our proceeding, that they come to
us with a recommendation? Where everybody else can have
a recommendation as well. I think that's where the
difference is. (item:5:Chairman Lake Continuing Comments on Commissioner Glotfelty's Comments) I think it could be a combination of
the above, right. Like a reliability standard project
here. But we, as you pointed out. We need their, not
only their expertise and manpower. We need outside
consultants. So it's probably gonna be a combination
of both. (item:5:Commissioner Glotfelty on Policy Calls) Um so I think, I think what I'm wanting is
us to make the policy calls. And them uh, lead us on
the implementation calls. And I think that um, it's important
for us to. Maybe we just separate these out. As to, you
know, who ensure that we know who the final decision
maker is. And I mean I, I know there. I think the
one thing that I think about is. When we get um, protocol
changes over here. Um the ability to debate that is
kind of a, it's kind of a foregone conclusion. That everyone's
gonna be passed. They've already been debated over
there and they've, they've passed the ERCOT board.
And um I wanted to be a robust discussion, that we are
allowed to have and policy calls. Uh that would develop
the parameters of this implementation. (item:5:Chairman Lakes on Policy Calls) Okay, well I
certainly don't think we're rubber stamping anything
in the protocols. I think the ones that we directed
them to go change. Everyone's expecting us to reaffirm
what we directed them to do. But I don't think at any
point. Protocol changes that weren't directed by the
Commission are rubber stamped. Just like at the ERCOT
board meeting. There's some that are uncontested and
nobody's,
nobody's really fighting over them. They're kind of
cleanup changes. Those generally move pretty smoothly.
Um I have a compromised position maybe. Fire away. Uh Okay. (item:5:Commissioner McAdams on Policy Calls) Um,
PUC Staff is critical to this, in terms of their interaction
with ERCOT Staff. And again this is a collaborative
exercise team, uh exercise. And so given what we're discussing
in your memo. Uh, PUC staff could devise a breakout
plan. Of phased implementation decisions, which would
involve. Again, going through ERCOT stakeholder, ultimate
ERCOT board, but PUC Staff organized workshops.
Delineate the roles and responsibilities of who is
where? Just different buckets. Yes sir.
And then kind of a strong man schedule that is subject
to adjustment. Because we all know this stuff adjusts.
Um and then when it comes back to us on a phase
basis for approval. So that we can take it in chunks.
So that we have a cost picture and we know exactly
kind of what we're buying and when. Because this is
a big old cow, I mean there's a lot going on there.
Um and then uh, the market knows the plan at that point.
And we can work on that over the next several months
while the Legislature deems if we're messed up or not.
I like the bucket, I'd almost say, I think that probably
gets us where we need to go. I'd say that's probably
the first step of implementation after we hear from
the Legislature. Okay. Um does that make sense? I think
so, you know, as long as the ultimate goal is that
we we make the policy calls. Uh and uh they guide us
on the technical implementation, um then I'm, I'm good
with that. Yeah, I think in principle technical, not
all of the decisions are made here. Um some of them
are so technically clear, there's probably not room
for a lot of debate. Some of them are cleanups that
nobody is contesting, and it's not much reason for debate.
But yes, ultimately all of the, all of the decisions
need to be either made or approved here, ultimately.
(item:5:Commissioner Cobos additional comments on Memo) So thank you for your feedback. You know, Commissioner
McAdams I think, and that's what I was sort of thinking
in my head and you beat me to it. Is, is trying
to really delineate what are the policy calls we need
to make here and in what venue? Probably projects
you know, Commissioner Glotfelty I'm putting on my
lawyer hat with contested cases, probably not a good idea.
I use that interchangeable with a project, a whatever.
It makes me, you know, there's a lot going on there.
But anyway, but I get your point. And the point is that
um, ultimately determining. What high level policy calls
need to be made by the Commission and in what, what
venue? You know, through what mechanisms, right. And
having a plan, right? Creating buckets and, and um creating
processes in those buckets. Of keeping some things here
at the Commission. That need to be done via projects
roll makings, etcetera. And something's getting farmed
out to ERCOT. And and this is all subject again, as
the Chairman has, has, you know prominently um highlighted.
If we move forward with this implementation subject
to Legislative feedback. Having a framework, um a plan
I think is very important not only for our, you know,
the Commission oversight and involvement. Interest process
with ERCOT but also for the market. And and for them
to know when certain actions are being taken and starting
to provide regulatory certainty as soon as possible.
Right? So in my mind, you know, and I don't have a
definitive list right now. We can work with Staff when
the time is appropriate. But you know, Commissioner
Glotfelty's point. You know, I almost say, you know
like determining a compliance period. I mean that has
huge policy implications and market impacts. As many
of the stakeholders have highlighted, low operating
reserves as a compliance. You know, uh how you determine
hours of highest reliability risk if you rely on tightest
operating reserves. That creates all kinds of issues
with um, you know, generation maintenance, potential
gaming, there's all sorts of issues. Right? So depending
on what comply, what, how you determine the highest
reliability risk hours. Whether it's, you know, tight
operating reserves. Uh, pete net Load as as you've highlighted.
I think provided the back cast analysis. You know,
that's how, you know, I think that decision on its
end of itself has a lot of implications. Um, establishing
the reliability standard. I think that, that is in our
forum here, as as you've highlighted Chairman. Um, changes
to the ORDC, VOL and SWAC, all those are
definitely here. Um, those are policy calls and impact
consumers and, and those need to remain here. And some
of those concepts are even in our rules. So they absolutely
have to remain here. So we can continue to talk about
it. I'm not, you know, making cuts right now. But I'm
just giving examples and market power abuse. That project
that um, you know, Chairman you highlighted. That Connie
and team would open to look at potential market power
mitigation measures. But also ensuring that the retail
market remains competitive. Through, you know, customer
choice, with impacts of switching, collateral, etcetera.
But anyway, examples, we can continue to refine that
list and buckets. And what stays here and what goes
to ERCOT later. Yeah. Again, I'd say that's the first step
of any implementation, identifying the buckets. Does that
makes sense to everybody? Does that work for staff? All right.
Okay. All right. And then um I guess finally, I think
well, RTC. That's not mentioned in the blueprint and
I think ERCOT has paired that with implementation of
PCM. I think that's important to highlight in the blueprint.
Because not only would real time optimization introduce
beneficial market efficiencies. But it also reduces
consumer cost. And I know ERCOT's plan is to develop
an updated plan on implementation by the end of March.
And may be setting forth uh, you know, a requirement
that ERCOT filed an updated implementation plan in
April. Um and then once they kick start the RTC implementation
process. That they file quarterly updates in the RTC
Project 48540. Um, so that were apprised as to how
RTC implementation is going, on a systematic, routine
basis.
Sorry, where's that timeline in your
um it's not in my memo. It's just additional considerations
I was thinking about. What to add to the blueprint. To
kind of put some guardrails on, on the implementation
of the long term plan. (item:5:Chairman Lake Questions on RTC & PCM) So you do want to implement
or not? Well, yes. Okay. So, so what's the request?
To include RTC in there, and some balance. What about?
(item:5:Commissioner Cobos Comments on RTC & PCM) Oh that um, you know, that's going to be a part of
the long term principles. Since ERCOT has paired it
together with PCM. And I think that's important because
it provides additional market efficiencies and um reduces
consumer costs. And ERCOT is supposed to go back and
update their implementation plan. How long it's gonna
take to implement RTC. And they're going to do that
by the end of March. So, having them file an updated
plan in the project, that's been open for several years
now, 48540. And then also requiring them to follow
quarterly updates. To keep us informed on where they
are with their RTC implementation. Because I think
RTC implementation is very important. As it paired with
PCM mitigates consumer cost.
Okay so, so you want
it's somehow related to PCM. Um, update on a systems
upgrade at ERCOT. A new requirement for quarterly updates,
on the progress of that system upgrade. Yes, because
ERCOT has paired PCM with RTC. I want to make
sure that we're keeping checks and balances on that.
Paired? Well they, when they're filing they have said
that PCM and RTC would be implemented together.
And that's how E3 has modeled it. (item:5:Chairman Lake Follow-up Comments on RTC & PCM.) Uh, there was
an assumption in E3s original analysis that
RTC would eventually be implemented. And that they
evaluated the market under those future conditions.
Which I think is appropriate. I don't, I'm still not
following where, where they link other than that. (item:5:Commissioner Cobos Follow-up Comments on PCM & RTC) Well
ERCOT has said, that they're going to implement
RTC and PCM. While PCM is not dependent on RTC.
It's important I believe from my perspective. And if
anybody disagrees, please let me know. Um that RTC,
since it was modeled um, with the E3 report.
And it obviously had consumer reduction impacts on
the PCM. That we need to implement RTC because it
creates market efficiencies and it reduces costs. And
ERCOT is planning to implement it. And I think it's an
important um, initiative that's running in parallel
with PCM. Is what I understand from ERCOT and they're
filing, and all the discussions I've had and testimony,
given at the work session. Maybe it would be helpful
if you could clarify. Um Pablo do you mind? Or whoever's best informed to clarify?
(item:5:Commissioner Glotfelty Comments on PCM & RTC ) One other thing that I might add is on staffs memo.
That they are, discussion of questions um after our
last open meeting. It says Staff believes we need a
reliability standard. Staff also believes that RTC
should be a priority. Right, I think everybody agrees
it's a priority. But last time we heard commentary
from Commissioner Cobos said it was a concern. That
because of those increases efficiencies. No. That would
reduce incentives for generators. (item:5:Commissioner Cobos Comments on RTC) What I was trying
to make sure is that the generators don't turn around
and say that RTC prevented us from investing in
our market. Because some of them have filed comments
saying that it's not helpful for resource adequacy.
And I was trying to confirm that, and make sure that
I understood where everything was with implementation.
With respect to um, you know, what their timeline was.
Potentially EMS upgrade and the future could impact
it. I was trying to do basically a full 360 review
of RTC. I haven't had concerns with RTC,
I just wanted to give it a full view. Uh number one,
what are the benefits? Um, consumer cost benefits, market
efficiency benefits. And I also wanted to ensure that
you know, we are built, if we're gonna build a PCM. Subject
to Legislative feedback, etcetera. That I don't want
to hear later that RTC got in the way
of investment. And I wanted to make sure that everything
was sort of, you know, fully evaluated. Um and that's
why I bring it up. Because if we're going to implement
it, then I want to make sure that we're doing it. Um
in an efficient manner and/or understand that were
informed. Basically report ERCOT is, what they're updated
plan is. And get quarterly updates. (item:5:Chairman Lake Comments on RTC) To be clear, I don't, other than last week. I haven't
heard anybody say that RTC is not a priority. And
I certainly would never advocate that. So I think everybody
is in agreement that RTC is a priority. And should
move forward um, with all alacrity. I don't think anybody's
arguing otherwise is certainly not our Staff. I just
I just want an updated plan and quarterly updates. And my understanding
is implementing one or the other. PCM and/or RTC are
not technically related. They depending on different
freeze times or other systems constraints. They can
generally be implemented concurrently. But Pablo, can
you provide some clarification on that? (item:5:Pablo Vegas for ERCOT, on RTC) Yeah. So I
think we're aligned in terms of, I think the consistent
perspective that RTC is important and that it's an
urgent priority. It's not dependent on the development
cycle for any of the Phase 2 market redesign options.
In fact it likely would be delivered, RTC would be
delivered after any of these. Because of the extensive
complexity of building the RTC system changes. Will
likely take longer than the Phase 2 market redesigns.
So our intent is to get started on it with urgency.
Try to get it done as quickly as possible. But there
is not a link developmentally to any of the Phase 2
market redesign items. The E3 model, the E3 assumptions
assumed RTC was in place for their economic modeling.
They stated, I think in last week's conversation that
take it in or take it out, it affects them all equally.
It's not really a factor whether in determining between
the the different Phase 2 options. (item:5:Commissioner McAdams on RTC) Mr. Chairman, I
think and look ERCOT's score mission, reliability. Um,
given I think this would be something well suited for
the board to deliberate on. Uh sooner rather than later.
Just one of those front burner items as they get organized
on the focus of Phase 2. What will they deliberate? At the
risks to not implementing RTC exactly, concurrently
to PCM. And this is where I'm going. Is because the market
is complex. The ancillaries are being beefed up.
RTC as a functional purpose is to sink these varied
tools up. Um, to one cost efficiently deploy resources.
Um to uh serve reliability, but also what I worry about
is PCM as we're moving forward. Again, everybody's gonna
be trying to make commitment decisions. Based on one
the value of energy, but two the likelihood of PCM is
occurring. Either on a seasonal basis or monthly basis
or whatever you guys recommend. I just want to make
sure that that tool on a reliability basis is not necessary.
Given this do dynamic of adders on high risk hours.
I want to make sure that this is all sync'd up and
this is something for the board to consider. Because
the ultimate mission of the board is reliability. So
do they need the tool. To make sure that all of these
things are harmonized in real time? Yeah, it's completely
separate so they don't. And so it, it will have its own
developmental track, project schedule, all of that. Which
we can bring updates to uh to the Commission at any
time that you would like to see that. But it is completely
independent from the other considerations. In terms
of the design decisions, the parameters. On how PCM solution
would be developed. So those can be separated conceptually
in terms of their development risks and issues. But
we can provide updates to this body as often as you like.
I know the board's updated and what I'm hearing is
I think regardless of what happens on the PCM
or anything else, RTC is moving forward. And those systems
don't. That's definitely what you're hearing is from
what I'm hearing. Which is good, which is great. Uh
I know, I know the board is updated at every board meeting,
on an array of things. All of these projects including
RTC. Uh would it, would it work for you Commissioner
Cobos? If that update was relayed to your office? If
you're at the board meetings for those updates. Right.
But anyway. I guess RTC is a very expensive process
as well. And so I want to know in your updated plan,
how much it's gonna cost to finish the project? We
include that in all of our updates, as well with the
board. So we include project timeline, the schedule,
project costs. And we do that at each of our major updates.
Okay. Um all I'm looking for and I think you're committing
to do that every board meeting. Which is, you know,
every quarter, I think almost now. Um every other month.
Yes sooner. Um, all I want to know is what's the updated
plan? What's the updated cost and to have checks and
balances on where this project is going? Like, is it
is it on time? Is it, you know, staying on course with
implementation? Because I do think, as we all agree.
RTC is important. And it's important to implement it
um in parallel and as close as possible through PCM
implementation. That ultimately happens because it
helps mitigate consumer cost. So that is why I'm interested
in the updates. And if that suffices for everybody else,
then I'm good. I'm just interested in regular updates,
and looking at an updated plan? Yeah, I think
the board meets next month. Will be a full update on
RTC, then presumably. Well, and we did communicate.
We're planning to have kind of a refreshed perspective
on the overall implementation plan and timeline by
the end of March. So we would probably be given a status
subject that, that's being developed. And then for the
April meeting, we would have the completed analysis.
For the next, for how we would implement RTC. Mr. Chairman,
that also might be useful as Staff develops their implementation
plan, those buckets. Uh and it's kind of on an iterative
like in chunks. Um then RTC updates will, will help inform.
Okay, this is what cost picture looks like. An implementation
picture looks like, with RTC and without. And just
show us how the development of the implementation plan
is sinking up over this long term horizon. Over the
next two years as we move on down the road. Making
these decisions on an iterative basis. That way, uh
the ERCOT board sees what's happening. Um and we see
what's happening, in terms of major decisions that are
being made. Okay. So I think we can, ERCOT staff can
incorporate. If and when we do get to the implementation
phase. In addition to the buckets, ERCOT could provide a incorporated
that into the RTC update. How would, how would whatever implementation
process lays out. Um and how those buckets end up being
arrayed? How that syncs up with RTC and other systems
upgrades. There's that's not the only thing going on.
Um and in the meantime, um ERCOT can make sure Commissioner
Cobos and all other Commission offices receives the
updates. Same updates that the board does.
Does that work? Good. All right, thanks Pablo.
All right, that completes my comments for now.
All right. I've got some thoughts on your request for
a project on reliability standard. But I'll save that
until any other questions or comments for Commissioner
Cobos? Not right now. Okay. (item:13:Chairman Lake on Project for Reliability Standard) Your, your request to
open a project on reliability standard, makes sense to
me. Um, I would defer to Staff on resources. I mean
it's something that's very clearly required. I think
it's actually the first thing in Section 18 of SB 3.
(item:17:Commissioner McAdams on discussion with Legislative members of Sunset Commission) Well and if Ms. Emily Johnson is out in the, the audience
from Sunset Commission. And we have an app action item
to develop reliability standard. And what that means
before May. Is uh, is we're gonna try to get it done
fast. Um, but they have views on. (item:17: Commission Executive Director on discussion with Legislative members of Sunset Commission) So Commissioners, I
can provide an update on that. We've, Staff has had
preliminary conversations with some members of the
Sunset Commission. Um, just about the timeline of opening
a rule and that this would not be completed by May
1st. And they understand that we'll continue to communicate
with them. And I think the the progress we're making
today. I think meets the spirit of what they were trying
to adopt. So we'll we'll go meet with all of them. And
bring back any issues that they have to you all. And that's
that's discussions with Legislative members of the
Sunset. Correct. Legislative members and their, their
Staffs.
And of course at the end of the day. As as we've
discussed this reliably standard is no small task.
That requires robust technical analysis. Just to lay
the foundation for you guys, I know we'll hear from
Commissioner Glotfelty what is the right version? You
gotta pick that first before you can even pick what
the right one is. Uh, so it's you got to do a
lot of, lot of calculus. Before you even get to the policy
making part, the first policy making part. So it's
it's a serious undertaking, so appreciate Sunset leadership
understanding. That it's in order to do it right, It
may take some time. And so what we'll do to the Commission
and to the Staff of the Sunset Commission. Is provide
them a work plan with estimated timelines to get to
get the analysis and the rule done. Is that, and we
can, as part of that, the first step would be opening
a project. And staff can take care of that immediately? Yes.
All right. Thank you Commissioner Cobos. (item:6:Commissioner Glotfelty Comments on Memo Layout) Commissioner
Glotfelty, the floor is your. Thank you, appreciate this discussion today. Excited
to see all five commissioners have memos, which is
uh first for me. But I think that's uh, that's great.
Um, clearly I've laid out some uh some concerns, uh
and some ideas that I have. With regard to the PCM
and the debate generally speaking. I'm not gonna
get into all of them today. Um, I think what I'd like
to do is just talk about the principles that I have.
And uh, and then leave them up for debate for us. Uh,
to see how we go forward. The first one would be, uh
if a PCM is adopted, ensure that it's technologically
neutral. Um with that, I mean that the distributed
resources and energy efficiency should be allowed to
compete for credits in our market. Just as they do for
capacity credits and other markets. The discussion
that we had initially was. Can they be used to decrease
an amount of PCs that a generator needs to buy? And
I think that puts them, I'm sorry, a Load needs to
buy. Um, my view is that that's the wrong bucket for
them to be in. They need to be able to access these
credits as well. Uh, to potentially make more and more
technologies available. Access the credits will produce
the credits. Or I'm sorry, produce the credits, right.
Um and, and uh, energy efficiency. Um, while I think
you know, we haven't done a whole lot on that and Commissioner
Jackson is gonna be leading up our efforts there. Um,
in other markets, energy efficiency is available for
capacity credit. So I think there are some models out
there that we can look into. As to how that might progress
uh, to provide those types of upgrades. So how would
that work functionally? Uh, you know, I'm happy to
um, give you the PJM energy efficiency structure on
how they're available for capacity credits. But uh,
I'm not, I think that it's way more technical than
I understand. Uh, there's a formula in there. Um having
not gone to Stanford Business School, I can't understand
it. But I think you can. You can sure advocate for it. That's right. I
think, I think the policy is that all of those resources.
The more resources that are that are producing credits,
the lower costs for consumers. Um secondly, um market
power. Um, one more question on that, before I decipher
this formula for everybody. Um would you, would you
consider a. (item:6:Chairman Lake Questions on Commissioner Glotfelty Memo) Uh, one is this a decision point to be considered.
Um, just like penalties or um anything else that can.
If we get the implementation is the technical experts
TAC and everybody else ultimately subject to the Commission
decision? Should he be required to evaluate the ability
to incorporate energy efficiency? Or is this something
that you think PCM cannot be viable, cannot move forward
unless that is required to be incorporated in? Like.
The latter. Okay, so no vote without energy efficiency.
So we, we and the reason for that is I don't believe
that we can consider this, just a supply side issue.
Supply side and demand side, solve the problem. And
if we are allowing both sides to put competitive pressures
on each other. I think we come to the better to a
better solution for the consumer. Okay, second question.
Would since it's an all or nothing requirement for
you. Would you distinguish in that requirement uh, that
they be controllable or non-controllable? I absolutely
believe that uh, there's a dynamic there that has to
be considered. So I don't know how energy efficiency
is controllable. I do believe that demand resources
should be controllable by ERCOT. So yes, I think that.
And I think that exploration is how do, how do other
markets provide energy efficient, provide capacity
credits for energy efficiency. And that's something
that we should, should um look at and adopt. That we're
gonna adopt it, is the foregone conclusion. If we can't
adopt it, that's the, if there's a challenge with that.
So that sounds uh, the reason I ask is that it sounds
like we're back at a decision point that needs to be
considered. Especially with the different retail markets
and different uh ISOs. Could be formulas, could be
not universally applicable. Well I think, I think that's
true. But I think energy efficiency and decreases demand.
And I think that's the same in every market. So, understanding
how energy efficiency will play in a PCM world. Um, and
generate credits just like distributed resources can.
We're adding, is what I think needs to be in the principle.
Okay. I mean, my hesitation is that we've all been
very clear that we have a very unique retail market.
That doesn't look act or behave like any other retail
market. And when you consider that a feature. Uh, so
I'm, I'm hesitant. I think, I think that's not a, a
retail market function that's a wholesale market function.
If these retail um, structures are impacting the wholesale
market than their wholesale market functions in my
view. Sure but that's, that's the customer side of
it. Right. Mhm. I mean that's the same thing, that we've
been discussing about distributed resources on, on the
distribution system. That want to play into the, into
the wholesale market. I mean it's, it's a dichotomy
that every market is going through. Um and that I think
that um again. My, my belief is that energy efficiency
um and distributed resources um should be available.
To produce credits just as a generation side resources.
Okay. And I'm, I'm happy to consider that as a decision
point to be considered. Given the admitted uncertainty
and unfamiliarity of how that would work with our retail
market, our wholesale market, everything else. I hesitate
to make it a deal breaker condition. But we can consider
that as we continue the discussion. Considered that's good. Before
you, one more question before you um, going on the
DER concept. Uh, certainly understand why we want
to incentivize those resources. Um, any concern that
requiring those to be incorporated. Before we've even
really gotten out of the gates on the pilot project.
Might be putting the cart in front of horse a bit. Not one bit. If
we've got a 3 or 4 year implementation timeframe.
We've got uh 2 or 3 um, perhaps phases of the
of the pilot project, if successful in year one. Which
I expect it will be um, I think it will merge quite
nicely into that multiyear implementation timeframe.
(item:6:Commissioner McAdams comments on DER) Mr. Chairman, don't forget on the DER, and it's a broad
bag. So within that you also have the Enchanted Rocks
of the world to. Which have duration that will, that
will play in ancillaries and stuff like that. So again
that's just the distribution level cut off. In terms
of what you're gonna see in the system. Sure, but there's
also a lot. And they're already there, so they're already
participating. Sure. Um, but I mean the reason we're
doing a pilot project because we don't have all the
answers. On how especially aggregated resources. Um, if we
knew the answers, we wouldn't need the pilot project.
Yeah, and and my point is, so the ADER pilot.
You're absolutely right and that's just the small stuff.
That's the sub megawatt one, megawatt activity. But
you've got bigger participation out there again, like
the enchanted rocks that are co locating with the
HGBs. That, that have more horsepower, that have more
duration that are already playing outside of the
ADER pilot. That are within the bucket that you're
talking about. Right, I mean. I think they're also, they're
already wholesale market participants. Yes, sir. So I don't
I don't, I don't know that, I would assume
they don't need any special singling out. They're just
there. They can come participate just like any other
resource. Yeah, it's just the definition of generator.
Okay, fair.
Um okay. We can um, continue to discuss that. (item:6:Commissioner Glotfelty continuation on Memo) Two other components of market power.
One of them is uh, in the way that we want to
protect the citizens and ratepayers. I would request
that the Attorney General's Office be involved in any
market power reviews. That were uh, that were brought
to this Commission. Um, they have a Consumer Protection
Division that I think would be a valuable voice uh,
protecting consumers here. I did not put ocpuc because
I figured that they would be involved anyway. But that
was an oversight. Clearly they will be involved, if
it's if it's something that's over here. But I think
the Attorney General as well. You asked them about that? I'm sorry. Have you asked the Attorney General about that? I have not.
Um uh finally, I think um as we uh move through a
uh if PCM is finalized. I think while this is getting
up and running. And while there is a concentration of
performance credits with a small number of generators.
That even though this is centrally cleared, I think
we should um, uh prohibit affiliate transactions. Um,
and I think that um it would be a, 5 years would
be a, a time frame. That would allow the proliferation
of credits from lots of different resources. So that
um, we have competitively neutral driven um PCM market.
And that um these are, the PCs are not are not concentrated
among a few generators. Which in fact would challenge
the retail side as well. I assume you're gonna have
a comment on that. You've gotten, you've given me lots
to work with Jimmy. Um, my hope and the reason I was
focused on the central clearing. Is that in a properly
functioning centrally cleared market. You don't know
who your counter party is. I understand that. But the
New York Stock Exchange has a market manipulation all
the time, and it's still centrally cleared. So I think
a ban on affiliate transactions, Commissioner McAdams
used the same words, I think. Um uh, is something
that we ought to consider as our principles. So do
we need to talk to the SEC about the New York Stock
Exchange? Because it's generally considered one of the
most transparent liquid markets in the world. Uh, listen
if, if they're not self dealing, then it won't
matter. If they. I guess the point I'm trying to make
is there's a big difference between an affiliate dealing
with itself. How do you, how can we be sure that. Uh,
the person that is putting the bids into your, uh
transparent marketplace is not buying them on the computer
right next to them. (item:6:Chairman Lake's follow-up questions on memo) Because they won't see anything
other than the price and the quantity they offered.
Especially if run it. And if they lowball them, they can buy at a
low ball price, they can match there. So my affiliate
transaction means that one person cannot. So that's not how markets work,
actually. Okay, Peter. Especially not auctions. I appreciate that.
But my concern still stands and I think that having
an affiliate, um, transaction ban. Should be something
that we should consider and have more meat around.
Because I think it's unfair to some market participants.
That um, and it might uh reduce the size of the retail
market in Texas. And concentrate uh PC credits among
a certain number of generators. So any, any consideration
that there's a difference between affiliates dealing
with themselves behind closed doors. With a bilateral
contract that nobody can see, maybe a broker. Is there,
is that different than submitting bids and offers in
a centrally cleared exchange? Where you put it in and
the guy next to you can put it in uh, at the
computer next to you. But the best you can hope for
is. That maybe I'll be allocated some of the quantity
but also can't see any of the other bids. I can't see
any of the other offers. Maybe. Are those the same thing or are
they different? I don't know the answer to that. I'm
not, I'm not a pro on, on how these markets are cleared.
So all I'm trying to do is protect the consumer from
manipulation. And protect the consumer, the retail market
and the wholesale market. So any concerns that would
remove liquidity? No. And so that. I mean I, I don't, I don't
think it would. I think if everything's on the up and
up. It shouldn't, they're gonna be going to the market
anyway and buying things. so. Well, but if you, if you
prohibit people from or you you force ERCOT to
sort through the bids and offers and say. Even though
these people can't see each other. They may know what
the guy next to him put in. I'm gonna start instead
of trading at $50 a megawatt hour to $51 mega, uh
a megawatt hour. Now because I have to remove all of
these people that the spread goes from $40 to $80. I would
be happy to request ERCOT to come back and tell us.
How a uh a ban on affiliate transactions would impair
the market. So that would be a decision point to be
considered? Yes. (item:6:Commissioner Cobos questions ban on affiliate transactions) So can I ask because I know this is
a big issue for me too. And I think, you know, the
project that we've been talking about with. This is
very important to me. Commissioner Glotfelty as well.
That we have, you know, appropriate market power mitigation
measures. I know um, central clearing is a foundation.
I know both um, your memo and Commissioner McAdams memo
talk about um no self-arrangements. And um, you know,
continuing to explore what else we need. I think is
important in the project. That I think will ultimately
as we move forward to PCM and have, you know, part
of what we do at the PUC. Having retail market related
project where we evaluate additional market power mitigation
measures. And you know, competitiveness in the retail
market. Um would be the appropriate venue, I think. To
continue to look at additional measures. Like you know,
virtual transactions that the IMM suggested. Is that in conjunction
with the Attorney General or in place of the Attorney
General? Um, I mean at this point I think that's a PUC obligation. My
view is that. (item:6:Commissioner Glotfelty on banning affiliate transactions) My thought was that the Attorney General should
be involved, if there is a charge of market manipulation.
Not at the front end, but if they're they have the
legal views, the statutory obligation for consumer protection.
I know we have some as well. We are short staffed um,
and I think they could add a positive voice to the
discussion. (item:6:Commissioner McAdams on banning affiliate transactions) I think what's happening here. Is one, on
a on a principal basis. The language we have now in
terms of no self-arrangement. Uh and the term of art
was knowingly self-arranged. Which means you have premeditatedly
uh self-arranged between your affiliate arms. Um and
what Commissioner Glotfelty is saying we also need
some teeth uh with that and, and some the accountability
measures. And between the two, one is certainly something
that can be worked out in implementation. How we apply
those teeth. But on a principal basis I believe we
have consensus. Thou shall not uh self arrange. Um,
through a centrally cleared market. That could theoretically
also have a bulletin board and all kinds of belts and
suspenders, and bells and whistles. That ring, um when
we can get somebody some increased power to watch for
this stuff. I'm looking over at our independent market model.
So we do have an IMM that's generally responsible
for these kind of things. So we just need to be thinking about it. We also don't have any authority
to compel the Attorney General to do anything. It would
be a request. I'm not saying we compel. Be a cool job
for them so well. And it's something to think about
long term. I mean, you know, is you know, um you know.
Thomas and team go to talk about our budget, with the
Legislature Um recognizing that, you know, in the future
we may need more resources for, you know, enforcement.
And and um, you know, addressing these issues in the
future. Because I view it as, you know, and you know
maybe we can get to the discussion of who's involved
later. But I view that um, the market power mitigation
measures reside at the Commission. And we'll do, we
can do a robust assessment of what else we need, um
at the appropriate time in the future. But I do think
that we need teeth, whatever the teeth may look like.
And um you know, ensuring that the IMM can, can
you know, do her job. And, and getting involved in, you
know, any kind of market power market manipulation
issues. And ensuring she has the resources to do it.
And ultimately as she said, the last time. And this
is not a topic for today. That she has the administrative
penalties to actually make an effect, a deterrent effect.
On on any kind of potential violations or violations
that are that are found um by her office, and confirmed
by the PUC. Yeah, I think that's a healthy part of
our LER budget request. That's getting more resources
for enforcement is not a new, not a surprise. And we're
I know Staff working with the Legislature to get the resources
we need. Is that fair? (item:6:Commission Staff comments on memo) Yes and indeed we are. And I
think you know, we had a fairly robust discussion about
market power mitigation during the open meeting last
week. Um, several issues that the Commission has discussed
this morning would be right for rulemaking. Um I would
add in there to consideration of affiliate code of
conduct. As we have used in some other aspects of our
rules, to address this type of issue. All fair consideration.
I think that's in our enforcement universe. That would
be applied to all elements of market component, market
activity. Not just the PCM, not just ancillaries,
is not just anything else. And also last year, I specifically
asked IMM, what additional resources we could advocate
for, for her office. Uh, as we are at the Legislature.
That's a work in process, but I think in principle.
Yes everybody wants accountability, everybody wants
enforcement. Um whether that needs to be um, a parallel
activity applied universally or part of this blueprint,
is an open question. (item:6:Commissioner Jackson on code of conduct) Mr. Chairman, I think we need the
best performers. And I think we need to broaden the
field. And I think we need to be very careful about
anything that might potentially, as an unintended outcome
narrow the field. So having what you mentioned this
code of conduct for the affiliates, I think is appropriate
to be done in a parallel manner. But very much need
to broaden the field. Get are good performers to step
forward, to build out new capacity, and to be there when
we need them. Agreed. We need a robust set of reps too, right.
So that's really the retail market we're talking about.
And all of these measures are very important. So that
we can continue to have a robust, competitive retail
market. Because that is one of the central features
of our today's competitive electricity market. Without
the retail market then really know what we're doing,
having a competitive market, right. Um so, you know,
we continue discussion. But, but that's really what
it's driven towards. And I think, I think we will have
a lot of good information to have a robust discussion
later on it if, whenever the time is appropriate. It's
clearly focused for everybody. I think we've, we've
addressed it both in the central clearing, and with
the additional enforcement actions, and with additional
resources for IMM. Um, and we can we can talk about
the liquidity challenges later. But one of the big
reasons um, the IMM is advocating for virtual players.
Which I saw in some of the memos is because that additional
liquidity, liquidity drives competition. Um, in every
market universally, globally. That's not speculation.
Um, and so it's
managing self-dealing can be accomplished in a lot
of ways. Pulling huge chunks of liquidity out of the
market by banning affiliates in a centrally cleared
venue. I think does more harm than good. Um, but I'd
be happy to consider as one of the decision points.
Asking ERCOT to evaluate and the IMM to evaluate ways
to do that, without requiring it to be a ban. I would
like that as a decision point in the future. I think
that would be valuable. And I would ask that the Commission stay
involved and have the project. So we can we because
market power, I don't view this as an ERCOT issue.
I view it as a Commission policy issue, that we have
to retain here. And look at options that, you know,
all options that have been profit here today. You know,
Connie you offered one, you have some ideas. And we
can get stakeholder comment and ultimately make something
into a rulemaking. But I think that's for the future
we need to stay involved. That that's our mission to
protect the consumers. Um, we can get whatever feedback
ERCOT can provide on it. But they don't really get
involved in the retail market, other than settlement and protocols.
We're the ones protecting the retail market and, and
the consumers in it, so. And, and hopefully with the
resources that we've asked for from Legislature and
this all looks very different, starting September 1st.
We have a lot more tools and we can assess how best
to deploy them, going forward from the Commission side.
Okay, all right. What else you got? (item:6:Commissioner Glotfelty continuation of memo) Uh, number three is reliability standard.
I don't need to go into this. I think we've discussed
it and agreed. That we're gonna have uh a Staff project
here. It's gonna be open, deliberative. It's not gonna
be assumed to be 1 in 10. But we're good to be
looking at the different types of standards that are
out there. The industry and in the world are moving towards.
That, either one or a suite of that defined reliability
that we expect on the system. One or any combination
of the above. Absolutely, open to all of that. Uh, and
finally accountability. Um I'm uh, I struggled with this
one to be honest with you. But I uh, we've been promised
we being the Commission, um the members of the Legislature,
the Governor had been promised. That 4600 megawatts of uh, of
new resources would become on the system. And um,
what I would like is some um clawback. Um some ability
to say that this isn't the right mechanism, if we don't
see that that happens. Um and that um if PCs begin
to go towards resources that end up closing down. Um,
then we have some claw back mechanism. There are two
peas in a pod. One of them is um, we've got commitments
for resources, but we don't have any way to ensure
that they're gonna be here. So if you want to play
in the market, it's my hope that you can commit to
it. Um and that um, you know, maybe it's not, the
PCM should be repealed as in my memo. But it's some
mechanism that needs to be repealed. Um, in order to
um, you know, satisfy the accountability of people
just saying we're gonna put megawatts in the system.
So point of clarification. I believe the testimony
was, those megawatts will be put in the system. If the
PCM, as contemplated and discussed is adopted, and
the Legislature does not interfere in its implementation.
So that's a, that's an important part of that statement.
Um which we don't, we can't do anything about. Um,
but important clarification. So it wasn't
if, if a PUC vote happens, then tomorrow we start breaking
ground. There's the Legislative part of it. Um, so
how would you expect to hold uh, market participants
accountable to the megawatt that they promised the
Governor. (item:6:Chairman Lake on accountability) Uh, fair question. I'd say that their investors
are the best way to do that. Because if those, those
investors pony up a billion dollars to build a new
resource, and then it shut down within five years. I
think the were the least of that management teams
problems. Those investors, regardless of the PCs they
got. That's, that's a gross mismanagement of fiduciary
duty. So I think that's a natural check in any market
system. I don't know how you would distinguish. Um,
and one if, if the megawatts that were promised
by those who are making those promises, don't materialize.
Then if we do the PCM right, somebody else is
gonna step in and do that. Um, that's the cure. Perhaps.
Well, the cure for high prices is high prices and the
cure for low prices is low prices. Um, and I think that's,
that's ideal. We have some market share constraints
that may prohibit some folks, that can change over time.
If somebody builds a certain number of megawatts, uh, as retirements
that can change the 20% limit. Um, and I think that's
that's the point of the exercise. If, if the people
around the table now are involved now can't do it.
The market, the designs should be sufficient to get.
Brookfield infrastructure with 100 billion under management.
should get capital partners with a trillion dollars
under management. To look at ERCOT and say that's
where we need to deploy our investment capital. Uh,
so I think, and as we've always also talked about.
I think the self-correcting mechanism is the, is the
default repeal, right? If it turns out that everything's
fine anyway or we have an oversupply or we need, we
need 3000 to solve to, to provide stability. Instead
of 5600, whatever it is, then the value of the 3000
and first megawatts gonna plummet. Which is your, your
point in your demand curve. So I think my hope and
I think by design that is the de facto repeal. Uh, I
don't know. Um I mean, I like the sentiment. I don't
know how we can distinguish between PCM revenue.
Well, I think your notion of tracking it. Like who's
what's, I don't know that we can get into the books
of these companies, especially private trading. Agreed. Uh,
but you know, PJM does a pretty good job of tracking
how many megawatts before and after. Uh and it's a
lot. I don't know how we can distinguish PCM type mechanism
delaying a retirement for five years. Which really
helps us cover those five years. Eventually that resources
it into life not competitive and it retires. How can
we as a regular, regulator authoritatively say.
The difference between
yes, the PCM did its job of keeping that unit in ERCOT
for another five years. And thank God it did because
that was a key resource versus those, those guys played
us for fools and we're gonna claw back the money. I
don't know. That's a, that's an open question. Then, then
can we put that into the implementation discussion?
And uh, and see if a clawback, clawback mechanism is
necessary. For plants that uh initially participate
in the market and then closed down. I and the reason
why I say this is. Because E3 sat up here and
said, the most important challenge we're facing in
the short term is retaining old plants. And uh, if
someone's gonna get performance credits. Um and, and
then leave the system. The consumer is the only one
that loses.
Yeah, I like the sentiment. But again, I don't know
how to say. I mean, we heard from one generator, who
who put notice up for leaving the market last
month. Who said, this is what I need to come back. And
we have other generators that are building without
any subsidy. You know, and I think that that is. Not
much, but. Well, no I mean. I think, and I'm thinking
of WattBridge. I mean, they built 800 megawatts of
natural gas, quick start natural gas fired power plants.
And I would not shake a stick at, you know, 800 megawatts
of sites. I'm glad to have them. But my point is
the same generator. So the PCM is what I need to bring
my very old clunky unit back. Also said, this unit shouldn't
be in ERCOT for much longer. Like I want to get my
investors need to get everything out of it. But eventually
we have cleaner, better, faster technology. Um, so
how, how do you parse it? I don't know. Um, and I'm
also a little wary of the Australia problem. Where they
put in a reliability standard, reliability requirement. (inaudible) But it
was, it was a toggle. Like we're only gonna provide
this revenue reliability mechanism, every once in a
while. Right. Uh, that doesn't instill investor confidence
I understand that. And, and so putting a repeal on it.
So let's say this. Um, we can eliminate A, which is
the PCM is repealed. Okay. Okay. Um B, ERCOT must
report back, report and track the percentages of PCs
for new build versus existing generation facilities.
And new market entrants versus incumbent generation,
and report to the PUC annually. Absolutely. Before and
after, before implementation after built, after. Right
Yes. I mean, I think a clear understanding of who is
building and who is getting these credits. Is it just
the old guys who have a concentration of existing generating
units. Taking control more than we hope. O is it new
guys coming in helping us with faster, quicker, efficient.
I'm just wondering how accurately we can track that?
Because as we discussed last work session and I think
your, your question and your thought is is fair Jimmy.
(item:6:Commissioner Cobos questions on tracking) Um, I'm just wondering how accurately we can, we can
track it. Because as we heard last work session, the
PC adder will be only one of several components that
an investor will look at, right. So um, payments through
ancillaries from fuel um, ORDC. Um, you know,
if we continue to RUC, RDPA, and and uh,
and even a PC adder. So um, you know, one general indication
of what's being built and retired as a CDR report, right.
Um that ERCOT provides us every, you know, twice a year.
That's that's one, one measure high level. It's hard to
sometimes tell like why folks are building and, and
retire. And I think Mountain Creek is an example of
a very old plant. That has a lot of capex and maintenance
issues. That um, was at a point where it just needed
to be retired. But we gotta figure out a way to systematically
um you know, move resources in and out of our market.
And that's why I think, you know, I've I've proffered
the near term sort of focus on long duration generation
fleet and preserving them so that we can get to a place
where um we provide the certainty for new replacement
generation down the road and um you know systematically
move resources in and out. I mean some resources do
need to leave the market because they're old but we
gotta have something in place to bring in the replacement
generation and not have a reliability gap. So I think
to your point. I mean how can I think what you're trying
to get at. Is, you know, there's been a guarantee of
4600 megawatts under the right framework. We don't
know what that right framework is right now. Um, you
know, we we've heard various, you know, assumptions
of what they could be from from the generation community.
Um we, we can't force the generators to build. Because
they're not regulated utilities. Um, but we want them
to build. And, and basically want to make sure that what
we're doing at the end of the day. The money we're
spending, we're actually getting a return. And so how
do we, how can we actually, you know, track that. Is
something we can continue to figure out a way to, to
do. Um so I'm not opposed, I'm just trying to, you
know. Listen, I'm open. I think Mr. Chairman, you're
open to some reporting from ERCOT. On uh, you know,
how these new builds are coming in, in the system and
what may be going out of the system. You know, maybe
the CDR it may be something very specific. It's clear
that uh, from the generators testimony. That the PCM
is something that they say will compel them to build. Yes.
Okay. Under the right framework. Under the right framework and without Legislative
whatever. Um but the, all I want to do is make sure
there's a tracking mechanism in place. That we can utilize
to see that. 100%. Is it because, you know, we have one generator
that at some point in time might hit a 20% cap. We
don't want five generators with 20% of this market,
that's not gonna be beneficial to our consumers. And
you know, dropping that 20% that's not our call, that's
the Legislature's call. But um, trying to better understand
the types of resources, the ownership structures and
who is competing for what. Is really important to me,
in this debate. So the ERCOT IMM, regularly tracks
the revenue that's brought into the market. Um, by
the ORDC and ancillary services. And when we're hitting
cone. So I suspect that will be if we get down the
road where there's a PC market, that will be an additional
tracking you do Carrie. And so that we'll be able to
tell how much money is being put in the market, by the
PC. That ultimately is put in the market. And then
correspondingly see how much generation is entering
the market. Via the CDR report or any other kind of
granular reporting that ERCOT can provide, along the
way, if that's the desire of the Commission.
Yes, I'm sure Carrie can come up, and we'll come up with.
Very effective ways to measure all that and enforce
market manipulations. (item:6:Chairman Lake on tracking) But I would um, I would also
double down, I mean, I would double down on the request
for the tracking information. I'd put in the decision
points, a requirement for ERCOT to develop a KPI. A measuring
stick for success, whatever it is. I mean track this,
but also bring us and the board. All of the above, the
best KPI success metric, whatever you wanna call it.
Combination so that if we can get this to the point.
Where you can look over the first five years of implementation,
you know, existing units before existing units after.
Put a heat rate comparison whatever, but come up with
a KPI. So over the first five years, the Commission
and the Legislature can look at it. And say hey, this
is how we define success on the front end. Here's the
data like you've requested here and build on to that.
Here's the data that defines that. And so we can look
back and say this is what we said success would look
like. Did we achieve that, yes or no? Uh, Mr. Chairman.
(item:6:Commission Executive Director on tracking) I would just add so through the ERCOT budget process,
we approve their performance metrics. And this was an
issue that came up during Sunset, during the Sunset
review of ERCOT. Us reviewing their performance metrics
and coming up with new ones. So we can address this
during that process. That's fine. Alright, that's that's
a decision point. Plus a Staff request for to, to work
with Sunset or to think about something like that.
Um, as we go through the Sunset process. (item:6:Commissioner Glotfelty on clawback mechanism) Um and then
uh you know, as the general component of this. This
was the claw back mechanism. Um listen, maybe this
isn't the place to have this um, in this implementation.
Um I'll reserve the right to bring it back up in the
future. Um if we don't see the resources come into
this market or if we see market. If we see resources
that are um expected to stay in the market and are
advocating for this type of mechanism go away. Um,
and I think that it's a important um,
check and balance. And clawbacks happen as you said
Mr. Chairman earlier. PJM had a clawback on of over
$2 billion from generators. For non-performance. For non-performance
that's right. Well, I see it so it is different but
I see it as a similar issue. And I would request that
we um, keep a claw back mechanism in our back pocket.
As a possible market power um, mechanism to be considered
in the future. If uh, if we if the market doesn't develop
as we've expected. (item:6:Chairman Lake on clawback mechanism) Can we just include, I've added
a bullet point on clear performance standards. To identify
appropriate combination of penalties, clawbacks, other
financial consequences, in cases of non-performance. That's excellent.
That's acceptable. Let's, let's just not wait. Let's
just put that in decision points. Okay. And then my
last paragraph was just really about what are we gonna
do in the interim? Um, I think we've addressed that.
That we're gonna have to come up with some ideas and
I think that, that's acceptable. So thank you for the
discussion. Um and uh, look forward to Kathleen. Any
other questions or comments for Jimmy?
(item:6:Commissioner Jackson's memo layout) Ms. Jackson. Thank you. Um, I support the performance
credit mechanism and agree with Staff's assessment in
its January 5, 2023 memo. Uh, the ERCOT power region
has both an operational flexibility problem and a resource
adequacy problem, in my view. No single solution tailored
to only one of these uh, issues will result in an effective
outcome. Uh, we need to build on the ancillary service
enhancements, approved as part of Phase 1 on the market
design blueprint. And move forward with a design that
will retain existing dispatchable generation and incentivize
new dispatchable generation. Uh, the PCM is a performance
based structure, that will provide a long term solution
for reliability. By incentivizing new investment uh,
to provide regulatory certainty. The PCM should be
the sole market design remaining under consideration,
which many of you have stated. Um, I suggest discussion
on key principles, parameters, and a near term bridge.
To be considered in a market design blueprint 2.0.
And the Texas economy is thriving today, in large
part because of the success of the competitive electric
market. The PCM preserves our energy only market and
will allow Texas to continue to garner the benefits
of competition and innovation. Uh, there are many things
that I think have been said today. Um, one of the things
that I think um, that you brought forth. Was to make
sure that we include milestones. I think you mentioned
the key performance indicators. Um the need to um, be
mindful of the role that energy efficiency can play.
As we move forward and kind of design this. But um, I
think we're headed down the right path. I think that
it's important that we move forward and, and do as you've
suggested. I think many of the things that we've discussed.
In terms of um, what are those principles are well stated,
and I endorse what we've talked about today. Thank
you, ma'am. Questions, comments for Ms. Jackson?
Can always rely on our engineer to be decisive in her
assessment. Um, al right. We've covered Mr. Chairman?
Yes, sir. Um, I may trade key principles for a break
right now. If we could do that, but your call. Because
I know you still have your memo to go through, and that
may take a minute. No, no problem. Let's uh recess
until 11:45 am. At that point we will take up the
integration or attempt at integration. And um, hopefully
uh do that. Get as far as we can on that. Then
go to a full lunch recess. Where we'll get an updated
version, aggregated uh, filed and circulated. And then
come back after lunch and go from there. That work
for everybody? Bless you sir. All right, we'll be back in 15 minutes.
Twenty minutes, sorry, 11:45.
All right, welcome back. We're meeting the Public Utility
Commission of Texas is hereby reconvened. To continue
discussion and deliberation. And to move to an eventual vote
on our reliability service. All the Commissioners have
laid out their memos. We've had a robust discussion, uh
so far. Suspect we covered some of the things in the
first part of our programming. That
were anticipated to be covered in the second part of
the programming. But that'll hopefully just moves along
a little faster. (item:7:Chairman Lake on actions for updating memo) Um, as I laid out the top of our
agenda. My hope now is to go through the memo, an updated
version of the memo, I filed. With the goal of adjusting
editing, adding to subtracting from. Uh, to get us to
a document that can later today be contemplated for
a vote. Our distinguished Staff has been updating in
real time, as we've gone through this discussion. So
I can,
I'll provide those updates as I go through the bullet
points. Uh, if it works for you all. I'll start at
the top. I think a lot of what's in here. Has with
the new additions we've already covered and hoping
we have general agreement on. Um, and then we'll, we'll
go through in here what, for what works now. And then
once we get to the end of what everybody's on board
with right now. Then we can circle back to any other
additions, that you'll want to uh have considered to
be added. Does that process work for everybody?
All right.
But we can ask questions along the way? Absolutely.
Change. And my goal is Dave's doing real time. So change
this, add that, pulled this out, add this in. Uh, is my
hope that that's so this is a ongoing discussion. Um,
and uh with a live document. So yes, by all means chime
in.
(item:7:Chairman Lake bullet points for updating memo) New addition at the top.
Is bullet point added, based on Commissioner McAdams.
And. Are you starting on page two? I'm sorry. Page two. Yes. Okay.
So above or below the, to meet the requirements of Senate
Bill 3. Correct, that we've got started? Yes. Um,
and above the Commission will recommend, added a bullet
point per McAdams and Jackson memo. To table FRM,
LSCRO, and DEC from any further consideration. We'll remove
them. Hold heartedly support. Okay, uh we all covered that. Um, next new bullet
point. Commission agrees to open a project to evaluate
and establish an appropriate reliability standard.
We've covered that thoroughly. Everybody good with
that? And so it will remain, must consider both infrastructure
adequacy. For the deliverability and resource adequacy
within the system. Is that your intention, sir? I didn't
have that in there, but I think we can. Say that one
more time. I mean this is your. This is your language. This is your language.
And I actually had a question about what that meant.
Okay, okay. Infrastructure adequacy for the deliverability.
Is that. So you're in the first paragraph?
Defined reliability standard. So you're in the paragraph
above or the defined reliability standard? Defined reliability
standard. Line right next, right below that. Okay. Um.
Yes, is that. So first of all, is that language acceptable?
Yeah, I just didn't know what, I didn't know what you
meant by. Uh you know, are we gonna consider deliverability
across the ERCOT system. As a component of this
discussion. Um, yes. Does that get in. That's a nod.
I think to Will's point that. Do you want to add the deliverability
of energy? No that's fine. That's totally fine.
I just want to make sure that. To his point of, if you got
a total (inaudible) man but also where it is. Um, so that's
that's under a principle in the PCM. This is a
new addition above that directing action. Oh, okay. I'm
sorry. But same,
same result. It's just it's the same concept. Just now
that we've agreed to take action. Direct staff to open
the project, and include that directive to action. Um, so
those are the two new additions for action. And then
third one is that the first paragraph you see there.
Commission will recommend the creation reliability
service etcetera, etcetera. Right above defined reliability
standards. So that's as is. Can I ask, can I ask?
I read the, the intro paragraph of your memo and referencing
all the actions we've taken um under SB 3. With
respect to weatherization, critical mapping. Those are
all the litany of actions that you know we've taken.
And I highlight is improving winter resiliency, you
know. As you know, um Senate Bill 3, requires both being
able to maintain reliability during extreme weather
conditions and peak net Load. Um and I don't know how
this stuff tails into what you're trying to draft. But
you know in my mind, the way we continue to maintain
reliability during extreme weather conditions. Is by
ensuring um, these are all very important actions and
certainly at a resiliency. But ensuring that we maintain
our long duration thermal, generation fleet in the market.
And that's why I think the near term is important
so that we can continue to come to meet that, that
other requirement of SB 3. And so um, that's how
I'm viewing it. I don't know what that means in respect
to. I would consider that addressed and directed in
the last bullet point. In addition, Commission directs
ERCOT at the bottom. Commission directs ERCOT to evaluate bridging
options to retain existing assets, building generation,
until PCM can be fully implemented. Report and file
this project by March 1, 2023. I want to move that
change that, that has been changed to. They need to
bring us some dates to accommodate board input. Uh,
to your original consideration of, and the discussion
we had. Don't just, the board shouldn't just bring us
a recommendation. They should, the sub bullet says
they should bring options evaluated by ERCOT, as a
bridge. Pros and cons of each. The preferred solution
as voted on by the ERCOT board. And then timeline
the next step. So I think that encompasses everything
you asked for in your memo and in our discussion. Okay
Yeah. Yes, thank you for highlighting that long list.
Yeah, it's
And there's a, there's a request to have the updated
dates. Um give us a date, when they'll have the menu
for us. And the board recommendation at our January
26th Open Meeting. So they'll get back to us quickly
on that. Okay. Um,
the
so that's. I think that, that incorporates the bridge.
Directing action to move, move forward on that.
Everybody with me so far? All right.
Back at the top. Where Commission recommends reliability
service etcetera, etcetera. New service to be based on
the performance credit mechanism concept, as articulated
in E3 report that includes the following principles.
So let's go through these lists, see which of these
are compatible with your, your thought, your thoughts.
What's included, incorporated? Um, if anything needs
to be edited or adjusted. This is the time to let me
know and we'll, we'll work through these in real time.
All right. Defined reliability standards sub bullet one.
We just talked about that one. I think that works for everybody.
Clear performance standards, um that's the reward generators
for actual performance during hours of high reliable risk.
So on, on that one Mr. Chairman. If I could jump in
on the nuance of words. Uh, reward generator. Second
word, generators for actual performance during hours
of higher, highest reliability risk. Uh in the interest
of and, and again, as per my memo. Leaving the ERCOT
board uh, and ultimately the Commission options. Uh to
evaluate how things qualify. Um change the word generators. To eligible resources.
I would agree with that. Good. There you go, your government at
work. That is good government.
And Commissioner Glotfelty, I think that would address
some of the concerns in your. That this is not just
supply. It's, it's eligible resources. I think we need
to define DERs and energy efficiency as eligible resources.
Like and, and. It doesn't have to be in that.
Can we put that in the decision points? As a thing to
be defined?
Let's keep going through these and I'll have to see
that at the end. Okay. But to make sure, we're on the same
page here.
Um all right. Everybody good on unclear performance standards?
Yes sir. All right. Dynamic sizing, be proportional to the system
need with dynamic pricing and sizing. To ensure reliability
needs are met without over procuring resources. I would
also include this to be your no forecasting claws.
Okay.
I was gonna. This add, add a sub bullet that
says the, this service shall not be based on forward
looking forecast. Perfect. Does that work? Yes sir. Is there anything
that needs to be put in there? If so if we, if
the market over performs, the price goes to zero. That's
in the, I tried to tackle that in the self-correcting. Okay
Okay, got it. Yes, it's different, little further down.
We're good over here?
All right. Forward price signal, encourage investment
in dispatchable generation. By guaranteeing the opportunity
to compete for a pool of revenue based on performance.
Um no, as we talked about the other day. There's no
guarantee of revenue. No single company or resource
would be guaranteed revenue. The only guarantee is
there the opportunity to compete for a pool of revenue.
That in that pool of revenue, when we get to the self-
correcting. Will expand in times of low supply of dispatchable.
Contract in times of excess supply. So that's an attempt
to distinguish forward forecast procurement from
an enabling mechanism. The options as we've discussed
through, through the PCM. As attributed the option for
both generators to offer and LSCs to procure. At some
point, they have the option and ability to not the requirement
to procure forward. Uh, as they best see fit. Uh,
their financial and operational business model, and
risk tolerance. Um, can we uh displace dispatchable
generation with eligible resources here as well? Yes.
Can we add encourage new investment? Because I think what
I'm hearing is concerns earlier. That all the money
would be just spent on existing generation when, you
know, new investment. So really what we're trying to
do is get new steel in the ground, right? So can we
encourage investment in new.
Of existing and investment in new eligible resources.
Commissioner Glotfelty does that work?
All right. Self-accreditation, require eligible resources
to self commit. Instead of using an administratively
assigned accreditation. And that's one of the core principles
we've
been focused on for a while. Again, should we put eligible
resources. They did. Yeah. Oh, I'm sorry. I'm just going to. I cant do two things at once.
Maybe it's not in this bullet too. But I thought
I read in some of the comments. And I think I sort
of looked at this issue in a way where you can under
a credit. And kind of, you know,
play the system and that doesn't help with reliability.
You know, so that ultimately whatever the penalties
are you, you under under credit yourself. So you're not
too much at risk. And then that puts everybody at a
reliability, sort of scramble. Um and that won't benefit
us, but may benefit others. So maybe that goes into um
I don't know if that's there, but and how to quite phrase
it. But I want to make sure there's no potential for
gaming that ultimately impacts reliability. Agreed. I think
there's like you said. There's gotta be some forward.
You got to be able to promise the resource in advance.
That's what distinguishes it from the ORDC. So some degree. Whether that's
stay ahead, we had with TBD. Um, but we put
that I think we can add a bullet in market manipulation.
Another sub bullet uh, examine bidding and offering
behavior. To ensure or too limit and mitigate any market
manipulation. Like you can't offer in one megawatt, 6
months in advance and then change your to quantity 500.
That kind of thing, that's what you're talking about?
Yeah or under credit yourself. By saying I'm only gonna
provide x amount. And but to try to minimize your risk
and then yeah something like that. I'm trying to work
through it in my head. But there's something there. I'd
put that another sub bullet in market manipulation. And
that could I mean.
I think it's probably somewhere between both on definitely
on quantity is somewhere between. You got to offer some
amount. You know, it's tough to say you've got to have
your full and final amount, in advance. But we definitely
don't want to allow what you just described. With like
a low ball one lot. And then you can play it however
you like. Uh, so ask as part of the both in decision
point and and in a principle. To have some maybe it's
a band and you can't move about 20 more than 20%. I
don't know. But as a decision point, a principle and
also a decision point. Determined limitations on
bids, offers and other market behavior. To eliminate
to mitigate market power. Yeah, tying PC awards to
forward offers, something along those lines. PC uh, piece. Let's
see. Um I don't know.
I guess under market power mitigation. PC awards must
be proportionally uh, assigned based on uh, forward offers.
Must. Quantity. There must be a forward offer requirement
of some form of fashion, in order to be eligible for
PCs. That's correct. I mean that's where we're headed.
Yeah. So trying the PC award to a forward offer quantity.
So mitigate that. I think what you said earlier, the
one megawatt kind of deal. I think you got, you even
saw that addresses a lot of things is. I think the forward
procurement requirement. They must be offered as a
key feature distinguishes this from just happening
to show up in the ORDC. But also separately. There
should be in one of the decision points. The best way,
evaluate and identify the best way to mitigate market
manipulation.
Through, through most offer requirement. Yeah, bidding behavior.
That work? I think so. We can smith that it out. It's a
tough concept for me to wrap my mind around, right now.
But okay.
Okay. Enable, ensure against bidding and offering strategies
to mitigate against potential abuse. Next bullet point
under market power mitigation. PC awards must be reported,
change it to the last thing I said. The um, must have
a forward offer requirement. To avoid and mitigate
market manipulation. Great. David, did you get that?
Okay. That's why we're gonna have the recess. Yeah
smooth this out. Um.
All right. So I think we did self-accreditation.
the
Next we've got centrally cleared.
Ensure affiliated generation
and retail entities
uh, do not self-arrange commitments by requiring all
transactions to be cleared through a centralized ERCOT
administered market. Let's change that to, ensure entities
with affiliated eligible resources.
Because you can,
depending on how deep that rabbit holes goes. You can
have a lot of opportunity for gamesmanship. Um.
That's I think that's the principle. I think we get
to the decision points. We can ask, that can be directive
to evaluate ways to mitigate
self-dealing within a centrally cleared market. Yeah.
I think on a principal basis. You leave it broad and
then we can narrow it down from there. But everybody
in the market gets the self-arrangement becomes problematic.
Depending on the construct of the central clearance.
And/or the existence of bulletin boards, and declarations
of how you're transacting whatever. Code of conduct
affiliates, all of the above. Um, and if, if ERCOT
come up with a very clever way to during some time
period. To prevent or limit the amount of transactions
between affiliates, that doesn't destroy liquidity.
Please tell us about it. We'll put that in decision
points. The principle is centrally clearing is a defining
characteristic, conducting the decision points. We need
this and we need you to answer these questions. And
should that be all, who does this apply to? With the
principal or the decision point?
Good point. Um
I'd say I'd say in the principles, what we consider
a PCM. You can only call it PCM, if its centrally cleared.
If it's something else, if it's not centrally cleared,
then it's not what we would call a PCM. We've gotten
off of the definition, that we agree that we're agreeing
to.
We, it has that characteristic, we require that characteristic,
because of the market mitigation powers. Then once
you get to, so that's in the definition of a PCM. Once
you get to the decision points. We would require to
be answered, evaluated, answered during any future implementation.
That's when we add a section that says evaluate and
identify methods to mitigate market power. Within the
sentiment, within a centrally cleared system including
but not limited to code of conduct. Uh market bidding
behavior uh limitations. Or you know if, if ERCOT come
up with a clever way to say only 20% of affiliates
can trade with each other the first five years. If
that doesn't destroy liquidity. But any, any of the
above. Come, come up with the best ways to within this
centrally cleared system, mitigate market power. And
then bring good work with TAC on that. And bring us
bring us options. So that would be the directive and
the decision points. Does that work?
And that tells what the project that Connie will have
here for the when we evaluate it .Yeah, okay. That would be kind of an overwatch
separate apart from the implementation here. But
solving for the same thing.
We're good on that?
All right. Residual market, provide flexibility to market
participants to fulfill their obligations and facilitate
of actual performance. Pretty straightforward.
Something we had in there for a while. We're good?
Demand curve, achieved the specified reliability standard
in a cost effective manner, as part of the residual
market. So, can we talk about this one for a second? Sure.
Um, so to me um, the demand curve is what makes this
a capacity market. The demand curve is what tells what
puts more megawatts into the market than we actually
need. Or tells the market that we need more than uh.
Establishes a reserve, how about that? Establishes a reserve.
Um,
so I think um it's just. I think we, we need
to recognize that that's what this. Uh, slope demand
curve actually does. And that we ought to have um, this
shouldn't be kicked to ERCOT. Uh that, this is something
that we own with input from our ERCOT. Um and perhaps
that the slope demand. I don't know what the appropriate
time frame is for uh, modification or understanding
it. But I don't want this and I'll be totally clear.
This PCM is a market mechanism that we're trying to
thread a needle here. But if it doesn't work, I don't
want the slope demand curve to become a capacity market.
Just plain and dry. Just dumping money for no good purpose. Yes. Agreed, So my view, my view is
that um, we need to make sure that um. Anyway that, that
that was my point. That I wanted to say on the demand
curve. And so I think, I think McAdams addresses a
lot of that. And saying there can't be a minimum for
there, can't be. If we truly have excess supply, it's
gotta, it's gotta be. Okay. I think that that's probably fair.
And even more so to mitigate your concern. Is the fact that
I think we talked about earlier is what we're moving
off the table. Um, that Commissioner McAdams highlighted
for reliability market, um Lucero. Those are capacity
markets and by putting them in there. That we're not
we're tabling them or not considering them, as part
of this PCM implementation. That hopefully will address
your concern with the demand curve. It is because it's
clearly not what the Commission would want.
I spoke my piece. I'd also add the demand curve, additionally
add something that was part of the IMMs contribution.
Helps eliminate whiplash in between periods of excess
supply and demand. Which we've seen in other grids.
MISO. Um so you're, you don't win periods of excess. You
don't or some extra supply, there's value there. It's
not entirely zero. If you have an abundance, over abundance
it is zero or close to zero. But you don't go from
zero price to cone and back. Which I think is another
valuable, that's a valuable addition. Um, it's another
feature of having the demand curve on the back end.
Um and the option, the forward procurement option. Also,
allows market participants to essentially forward hedge
as much as they like, on both sides. Um, which would
minimize the, I guess the actual use. The more, the
forward hedging is there, the less actual use of the
demand curve would be. Which I think of as a feature as
well. Uh, what I like about what you wrote here is. Um,
basing it on a reliability standard. I like that more
than a ERCOT Load forecast. Because I know that was proposed
in comments. And I think to avoid the volatility and
potential for error. We gotta tie it to something concrete, if
that's ultimately would end up doing with this curve.
We could look at a reliability standard, I think that's
the first probably. Which lines up with what was in
my memo, under that forecast. You know, it's just based
on that reliability standard, and that's how they compete
for the reserves. That you will be uh, obligated to comply
with. Your energy plus reserve. Mhm agreed.
All right. Everybody good on that one? Uh, maintain the current
ERCOT market. Protect ERCOT's robust competitive electric
retail market that provides choice for consumers. Think
this obviously focused on the retail, but also applies
to dead real time energy market. The PCM is something
separate and apart. It does not directly tie to impact,
engage with, other in any way. Other than maybe having
a similar utilizing the, the definition of day ahead
as a forward procurement, definitely. But does not actively
operate, interact with day ahead, real time, existing
constructs, ancillaries and all that. Also everybody's
on board with it, that's it. So the question that I
have is. Should, is it appropriate to add a wholesale
market there also? I mean, we want to protect this
wholesale market, and we want it to work for the good
of the retail market. And um. How would you phrase it?
Um, protect ERCOT's robust, competitive wholesale
market and retail electricity market that providing,
that provides choices to consumers. That, if you will.
I agree with Commissioner Glotfelty on that. I provided
a pretty robust general principle myself. Um, that says
uh and you can usually use maintained. So basically
maintaining the current ERCOT competitive electricity
market and underneath would be protecting or protects
uh, the competitive of the competitiveness of the wholesale
and retail markets in ERCOT. That's how I phrased it.
And underneath I had strong mitigation measures um,
to help prevent gaming opportunities and market manipulation.
In the wholesale market and ensure appropriate BMPs are
in place to address future market conditions. And then
with respect to the retail market. Strong mitigation
measures to help prevent market power abuse. And preserve
customer choice, ie customers continue to have options
on retail, electric providers and products. And I kind
of was a little bit more fleshed out. I'm happy to
just kind of, you know, property that language as we
go back to script out. But I think the real key point
here. Is just maintaining the current ERCOT competitive
electricity market, and protecting the competitiveness
of the wholesale and retail markets at ERCOT. Correct.
I think everybody's saying the same thing. We'll work
on the way to say it the most concisely. And I think we
can some of the first half.
Under market power mitigation we can um,
we can move that to market power mitigation. Yes, I'll
agree in principle and everything you said. We'll find
the best, best way to polish it.
All right. Self-correcting, established demand curve that
results in the value of credits decreasing with market
has excess. Generation lowering costs to consumers
in periods of excess supply.
I had excess supply there. I think we just covered that.
Are going to say
so lowering costs. Do you capped it off by uh, expanding
that there is no minimum price? Um yeah, that was
a separate sub bullet. If possible, that'd be a great
signal. That once equilibrium is achieved value is um,
goes away.
How about we just say, can we just say no, no minimum price. Yeah.
The demand curve cannot include a minimum price to
allow obligations for LSCs to return to zero, a system
equilibrium is achieved. Can we can, can we just
say the no minimum price? More enlightning equilibrium
could be a lightning rod on
on how to define that. Happy to allow you to do. Okay.
All right. We're good on that one?
All right. Appropriately placed risk, place financial
operating risk on profit seeking businesses instead
of ERCOT or the consumers of Texas. I think that's a
pretty high level concept. I struggle with this
one a little bit. I do too. Um, just because I think that what
we're doing in this instance. Is if we're guaranteeing
some dollars, then we are actually putting this back
on the consumer. So um, a energy only market shifts
100% of the generation risk to the generation sector.
Now what we're doing is we're shifting that back to
the consumer. So um, all of the revenue earned in
the energy only market is eventually passed on to consumers,
through our LSEs. There's a key difference I
think. I mean. This is me going back to us, when we
restructured the market in '95. The goal was to make
sure that captive ratepayers, we're not paying for
generation in the state. And this moves us back somewhere
towards that. Not at that totally. And you know, I
don't know if we're gonna keep it or not. It's probably
okay, but I want to just put a marker in there. That
I don't think it's totally accurate what we're, what
it says. So to Commissioner Glotfelty's point. Um, when
the market got deregulated through Senate Bill 7.
The risk was placed on, on the, you know private companies
that, profit making companies. Now through the PCM we
are transferring some of that risk to the consumers.
Because we're requiring the LSCs that are, are serving
directly to consumers where they be reps, co-op communities.
Um to shoulder some of that risk by having to buy PCs.
To meet their consumption um, during the highest the
hours of highest reliability risk. So there is a shifting
towards the consumers definitely. Um with this market
design, so maybe it's just a matter of smithing out that
language a little bit differently. And we can work on
that. But that's the issue I kind of have to. So I'd
say this brings increased
accountability to the Load side. Because right now retailers
have no obligation other than to send in an easy idea
and collect a monthly check. They have no responsibility.
I think that I think that minimum. I mean that's just
like the grocery store has no obligation, other than
to put bread on the shelf. Or a gas station only has
to, you know, uh fill their tank. So it's not that
easy. I mean it's, I mean not all of them do that.
Most of them have some sort of risk management in place.
But there's a subset that don't. That are gonna fly
by night, and we have lots of rules that try to corral
those, but they're still out there. And other than their
own willingness to engage in risk management. They
don't have any requirement to. So I think this brings
more accountability to the Load side. In establishing
a requirement that you're going to have to go by through
a credit system. The commodity that you promised your
customers and you collect money for every month. And
I think that's a good thing. I think that's a good
thing for consumers. And uh, in some ways I think that
will help separate the wheat from the chaff. On who
are the retailers that are actually good actors. Run
good businesses, have good risk management, from the
fly by nights. So I think is it at the same time.
You can say that the generators would have access to
a new pool of revenue that separates their, that gives
them value for a forward obligation to be online,
available. That's new. That's all resources, any eligible
eligible resources. Any eligible resource. Uh, so that's
new, that should be an enhancement. We want to be an
enhancement.
It doesn't rely, it doesn't force them to rely on physical
scarcity to achieve revenues. Which we've talked about
exhaustively. Uh,
and it would only make sense if we put in the checks
and balances that we're going through right now. Um,
so I don't,
it's, it's somewhere in the middle. I don't wanna,
I'm not comfortable saying it dumps huge risk on the
consumers. I think it moves retailer accountability
up, a couple notches. And I think that's good. Uh, but
I don't think it's just a a dump of risk on the
consumers. I think it's moving risk outside of the
control room. And now making market participants more
accountable on both sides of the equation. Which I
also think is good. But it's.
Why don't you leave it as it is? And I'll think, if
I can come up with a word or a few. We'll talk
about it in the next, in the next round. My point is
you know, I don't necessarily have to have a modification.
But I want it to be a general understanding that. The
pendulum is swinging here. It's not when we create
this slope demand curve. You know, and we're over
procuring a lot. This isn't the market over procuring.
This is regulators, this is the regulators telling
the market to do that. So and a the
um, the your words. Um, the ability for, um, the pool
of revenues. Um, is a um, that's, that's where the
consumer has, you know, more risk in this process.
So anyway, I'll come up with some language, see if
it works. Um, and that, but that was my point. Okay.
Well let us know, before we go back and. And
refresh my memory Mr. Chairman. We already placed, because
I don't have it in front of it. We already placed the
condition. And again, I don't know it's in another section.
But we said basically PC values are based not on forecast,
but on actual performance. So we've already codified
that in another section, right? And I was just thinking
is it a, if we have, I'm great. Um but it, it
it certainly does impact the risk profile on each actor.
Again, we're not talking about some arbitrary forecast.
This is based on both the generation and Load side
um, for the purposes of reliability. So there's accountability
on both sides of the generation. But if it's already
in there, which I think it is, I'm good. Okay. Can we just the
other, you know, and one thing that kind of factor
into. That as I was thinking through this, yes. We were
kind of thinking about load serving entities a lot
and in the retail space. But there are load serving
entities like, um, younis and co-ops that have a captive
customer base. That will not be able to avoid these
charges, right? As, as those LCSs that are not subject
to the bad actor, you know, requirements um, that we
have our. You know, collateral requirements on all
the rules we've continuously updated in the last decade.
For reps to be able to get certified and stay in our
market. We have other LSCs like younies and coops that
will have to absorb these costs, and pass them to their
captive customer base. The only way for them to avoid
is to move out of the service territory. And then you'll
probably go somewhere else to capture it. But, but I guess
just really recognizing that, I think not all LSC's
are in the same bucket. Um, but I just wanted to highlight
that. And again, we'll work on the language to see what
makes sense. But just really, I think it's important
to get that out there as well.
Fair, fair point. Um all right. We'll come back to
that one.
Market power mitigation, this has been updated as part
of our conversation. The last of the principles market
power mitigation. First bullet stands, ensure competition
innovation will continue to thrive in the ERCOT. By
mitigating market power concern, especially regarding
affiliate generation retail entities.
Next bullet point. And I think the
maintain features, maintain competitiveness of the
hotel wholesale market and retail electric market. Is
captured in the previous bullet point, like we talked
about. This is about what to do the any PCM by definition.
Must have robust market mitigation measures. Uh, second
sub bullet. Ensure against bidding and offering strategies
to mitigate against potential abuse, as we discussed.
And um, the performance credit awards must be based on some
form of forward offer.
Some, some sort of forward offer. Forward offer quantity. Yes, yep.
That work for everybody? Where are you putting? Uh, thought
we were gonna have something, your sentence on clawbacks? Uh,
decision points to me. Please go evaluate the best
combination of market penalties, nonperformance penalties,
clawbacks, etcetera. (inaudible) implementation.
Please bring those that menu to us and we'll. That's the best
combination that they're of? So I wonder if we can
put maybe a general principle that says. Um robust,
non performance penalties. And under that bullet, we
sort of build the framework that covers some of the
items that were raised today. Like what is the penalty?
Well, I'm putting decision points. Because Commissioner
McAdams had a question earlier about whether or not
the, the very fact that you have a market, market. The
market implements its own penalty
in the event of nonperformance. Is that sufficient
or not? To incentivize the behavior we want in the
accountability we want. Without being so onerous that
eligible resources are
too, too scared to participate in the market. I don't
know the answer. That's why I put. Yes, that that question
is in there. It's just under the decision points, rather
than deciding today. Exactly what combination and permutation
of penalties is appropriate. Does that work? Okay, that's
fine. Mr. Chairman before you move on. And I'm just thinking
back and trying to establish certainty. Um, and to establish
an anchor on, on the value of PCs and what we're talking
about. But in terms of that principle of self-correction
and again going to zero. And our objective is to set
a reserve. And that is what we're trying to establish.
We're gonna create a toggle, a lever that we can adjust.
Depending on system reliability, that we feel is sufficient.
And so um, in the spirit of going to zero. Uh, and
not specifying equilibrium. Um, should we say uh,
there is no minimum and values go to zero. When there
are sufficient PCs generated to meet the reliability
standard. Which includes the reserve margin, whatever
that is. Again, that pegs it to the Commission goal,
ERCOT's goal. Um,
has it, if anything. I'd change it to excess or extreme
excess. Because the uh, I think one of the benefits
of that demand curve or that it is a tool. That can
be used to establish the appropriate level of reserves.
To achieve our desired reliability standard. But also
prevents the whiplash that we've seen in MISO and PJM,
and with problems. So uh, by by saying that essentially
telling the marketplace. That even if you're not within
that reserve margin. We're not gonna pay you full price.
But there is some residual value, which is probably
a stick around retention.
But isn't that the reserve?
Well, because it's big and broad, that includes like
excess generation. That's I think that's the heart
of the science of picking the slope of that demand
curve. Um, and I do agree with the IMM. That we don't
want
the reserve actual usage, plus reserve. To be compensated
and then the next megawatts zero. I think you want to
glide path there. You want to make sure you can get
to zero. You don't wanna have a minimum, agree with
100% on that. But you don't want to because I think
that's what I think MISO learned and probably PJM.
Is what a vertical demand curve. Right, like that next megawatt is worth zero.
And until the reserve or the growth in your Load gets
there. Because there's nobody else around in that next
couple of megawatts. The price goes straight to cone.
But again, I think that's that's the art and science
of determining the demand curve. Which is gonna be like
Glotfelty said a key part. That's and, and something
that's very policy driven. Highly technical but policy
driven. And I think you would you achieve exactly what
you're.
Yeah I think we achieve what you're, you're seeking
by requiring and defining PCMs. As having no minimum
price for. Without deciding exactly how we can, we can
achieve that today without having to decide exactly.
When we exactly when it goes to zero and that may change.
If you like, if you have monthly uh compliance periods
that may, those demand curves will change month by month.
Depending on on what you're seeking and then the characteristics
of the grid.
Okay. Uh we need to look at it and implementation then.
I mean that the system needs to know when success is
achieved. When victory is achieved, and values need to
represent that. You know, it's like you're there and
oh by the way. Whoever is over and above, you can go
ahead and retire. I mean that's cool. And then we'll
go into scarcity and there'll be a signal. It's like
values there reinvest. Uh so anyway. Yes. And I think
like Jimmy said. That's, that's a question of how steep
is it? I think MISO and PJM learned, you don't want
it to be 100% steep. Because then your, your whip lashing.
And you end up going straight to cone. You don't want
it to be such a flat glide path. That you're paying
people for. No, you're paying resources to stick around
for no discernible value. Glotfelty is concerned.
Where the, where in the middle do we need to be.
On any particular compliance period is exactly what
you said. That's an implementation. That's a very big
big part of implementation. Big policy call. Well in
principle, it's gotta be a way to get to zero. And then,
that'll hold everybody accountable and then we fight
it out in implementation. Any, by definition any demand
curve gets you to zero. It's just how quickly you get
there. As long as you don't have a minimum price for it. I understand.
Uh, so I think we're guaranteeing, you can get your statement
guarantees that you can get to zero. Implementation
question is how quickly.
That work?
Okay, uh I think that gets us through the principles.
We've had some additions. If it works for ya'll,
I'll go through the
implementation decision points.
Oh,
commentary about the stakeholder process, ERCOT staff, and
of course the ERCOT board. Uh,
characterizing these decision points as the questions
that need to be answered. Whenever implementation
occurs. And of course this is not an exhaustive, exhaustive
list. Would fully expect there be additions to this
list from PUC Staff, ERCOT Staff um, stakeholders,
and TAC. But to make sure that we, the Commission are
alerting all of those interested parties. That at a
minimum. These decision points must be addressed, evaluated,
and an answer reached. Options presented to the Commission
and answer reached. Based on our prior discussion, I
think the umbrella paragraph of the list needs to be
modified. Because it and I think this is where we came
out on. With respect to what is held here and what's
sent to ERCOT. It's not real clear at this point.
Um we need to come up with a plan on what policy
calls need to be made by the Commission. With implementation
direction to ERCOT, and what what feedback. It's an iterative
process. So I think it's written, it's it's still,
you know, um indicating that we're just gonna ship
it off to ERCOT. They're gonna figure it out and they're
gonna send it back to us for a vote at the end.
And, and that's definitely not what I heard we want.
So I think we've got to modify that umbrella paragraph.
To give us the flexibility of coming up with an implementation
plan with buckets. And in that way we can work together
with Staff on figuring out. What we hold here, what's sent to
ERCOT. Um, how the process of implementation would work,
if that is ultimately where we end up in the future.
Agreed. Um, how about adding a line to the, at the end
of that paragraph. Saying Commission will develop an
implementation plan uh, with buckets designating which
decision points should be led by PUC, ERCOT, and whichever
combination require ERCOT technical support. And
that's the first of my definition. That would be the
first step of any implementation, identifying those
buckets.
We need to say buckets, I think that's what encapsulates
the conversation earlier.
We'll come up with something a little more. Never seen
buckets in a PUC order, maybe categories. Wordsmith
that. We'll wordsmith that. But does that address your concern? I think so
I mean yeah, I think it does. I just yeah, I mean.
It almost, I almost feel like that as a plant.
That that umbrella paragraph you just said. But I'll.
Certainly a vision too, I mean you guys.
Yeah, I think in addition to, but at some point with
deference to the Legislature. If we do reach, receive
or get to the point we need to start implementation.
You need an active clause in there to direct somebody
to do something. Um,
including in the first step of that being developed
implementation plan with categories, categories, not
buckets. To determine what decision points remain
PUC, ERCOT, whichever combination requires ERCOT technical
support.
Is that? I'm not quite funneling that.
The first step is to develop the buckets on which responsibility
lies where. And we're gonna see that in the next draft?
Yeah, he just wrote it right here. We're doing, David's
doing real time. Um yeah, right here. That's in addition
we'll look at it. I think that language sounds good
to me. My, my whole what I'm wondering and I'll look
at what Dave circulates. Is how it links up with that
umbrella paragraph. And but we'll see what. You say umbrella paragraph, do you mean. I'm sorry
this part right here. During implementation of the BCM
at some point.
Okay. I also want to be clear. I think that's also
important. Because I want to say that we're not at some
point in the future.
That means not today. We're not we're being very clear
that we're not kicking this thing off, implementation
off today. 100% agree. So we'll wordsmith that and um, I think
we can,
I think we can get that resolved pretty easily. Yes. All
right.
Principles, determined PCM compliance period. Pretty
easy check mark. Determine reliability standard associated
with each PCM compliance period. Can I ask? So I don't
necessarily have wordsmithing on these bullets. But
my question within all of these, was who is going to
do what? And that's what the sentence we just added,
at the last part of that paragraph. Okay. Right after
the during implementation sentence. Okay. It says
as, as the first step to any implementation. The Commission
will develop an implementation plan, identifying categories
that. Got it. Designate which topic goes in which category.
Doing categories work. I'm supportive of that. Okay. Is that first bullet just,
so how will we determine the hours of highest reliability
risk? Is that what you're capturing with that first
one? The first one is what time period? Annually, I
think we've all heard we don't want to do that. Is
it monthly? Is it weekly? Is it some people propose
daily. That's a big question. That's a key decision
point. We need our ERCOT technical staff, TAC to evaluate
that work through options. Provide a recommendation
but ultimate decision on that. So that's. I think the
first bullet should be. How will the hours of highest
reliability risk be determined? Because then that's
like, you know, it sounds like peak net Load is, is
where everybody's headed with Staff recommendation.
What you've recommended and I'm not disputing that.
But I'm just saying that's what we need to determine
and then take that. And whether it's seasonal, monthly,
or whatever is the second, the first bullet on your.
I was wondering about that too. Just because um, even
Staff cited it. It's a statutory requirement and you've
acknowledged the, the computation of determine how PCM
hours are recalculated. Thus either on like uh, operational
condition or a peak net Load condition. And so do you
want that on a principal basis enshrined. Because the
Legislature. Yeah, yeah. It is in uh, in determining
but it's kind of determined because it's in Law.
She's asking which one should go first? I think you're
asking is it an open question or is it already decided?
What do you think Mr. Chairman, you're the leader? For
better or worse? Uh, I think that you have to answer
both those questions simultaneously. Your compliance
period will inform how many hours per compliance period.
Right? And so I think those, those should this chicken
and egg. Where you, you got to figure out how they enter.
You need to evaluate how they interact and interplay
with each other. And how that relates to what we're
solving for. I think those I agree with Lori. Those
are the first two things you've got to figure out, after
the buckets. Um, but I think there they go hand and
glove. Does that make sense?
And I think I agree with you Lori. Those are the,
are the two prime. Two questions that must be answered
first. Okay, I think they're separate questions but
they are joined at the hip. Right? Good?
Um, after that determine reliability standard associated
with each PCM compliance period. I think that's the
art and science of that demand curve. And that again,
will depend on your time frame. Can be very different
for an annual versus a monthly versus a quarterly versus
even a 3 month seasonal. Uh, but that's the next
most important question. A new addition, per our previous conversation.
Is identified the appropriate combination of penalties,
clawbacks and other financial consequences. In case
of non performance by performance credit recipients.
Okay. That's
I think that encompasses everybody's concerns about
appropriate penalties or consequences for noncompliance.
Without having to decide exactly which version is most
appropriate right now. But in we know we'll have them.
All right. Um next to the same spirit evaluate and identify
the best way to mitigate market manipulation, through
bidding behavior. This is the belt of the suspenders
of the previous principle that we want. We by definition
must have mechanisms to mitigate market manipulation.
This is saying as a decision point ERCOT, TAC must
bring us options on the best way to do that. Well,
I'm sorry I still continue that believe that needs
to be our policy decision. Because again, ERCOT. It will be
once we get the buckets. We gotta, I mean. Okay. We're
not deciding what goes in the buckets today. We're just
identifying the questions that need to be answered. Okay, well
I just don't know that ERCOT and stakeholders are
the ones that should be bringing us options on how
to mitigate power. Because ERCOT has, you know, they
have some enforcement through now doing reliability
uh functions that the TRE was doing. But like with
respect to the retail market, um they don't really have
a lot of you know kind of visibility into it. Other
than settling it and test flighting reps into the market.
You don't trust the retailers to tell us the best ways
to ensure they don't manipulate the market. I think
us yes, I don't know if the path through. So I think
that that can be a peasy bucket. I mean that's where
all I'm saying here is that that's the question that
must be answered and evaluated. Um we can get that,
I'd add IMM to the list at the top. As as
somebody who can be participating, have their own bucket.
Or participate in a bucket. Yeah, I just I was just
hearing that, you know, maybe I heard you wrong. Um,
that ERCOT and stakeholders have come to us some market
mitigation measures. And I just continue to believe
that that's our forum. But I think you're telling me
what I want to hear. Yeah, it's it's 100% our policy
decision, but if I'm not going to refuse to listen to
good ideas from ERCOT. Yeah, I mean they can offer
some. But I'm not what, I just don't want them driving
the train. That's what I'm saying,
Fair enough and I think we, we make that clear in the
first step is identifying the categories and buckets.
And we've added IMM to an entity eligible for buckets.
All right.
The I think the next one we can, we can combine the
next one. Just make a note to do that. Uh code of
conduct, this is just articulating code of conduct.
Limited not, but not including but not limited to uh,
self-dealing. We can put all that in one. Uh next up
determine number of PCM hours per compliance period.
Determine how PCM hours are calculated. Think that's
to the question about net peak Load.
Um I think everybody's triangulating on that pretty
well. But I think it also wouldn't be bad to have the
more analysis on that. Know exactly, let's lock that
in based on some math or if it's net peak load. Plus
(inaudible) Is that the same in each season? You
know that I don't know yet. I just didn't know what
you wanted in print, so that we can answer the ledge.
And when they start talking about. I think it's I think
this recognizes that it needs to be something associated
with peak load. With some nuances on things like um
it's forced outages and duration of batteries. I don't
know how that that probably changes by season. And how
that inter plays with the self accreditation of the
batteries. So we just, we need to have thoughtful analysis
on that.
Alright, requirements for producing a performance credit.
Um generally, generally the concept is online and available.
What exactly are the, the technical specs on that?
Is it per pricing period? Is it per 15 minute intervasl?
What's, I'm sure there will be some details that need
to be flushed out. But I think that's a general idea.
Performance. Hmm. Yeah. Um, with within that bucket.
Um, is that where the they will analyze the must offer?
Ratio degree of commitment um or is that under another?
I'd put it under that category. Yes.
Alright. We're good with that? Yes sir.
Determine if there should be geographic requirements
for PCMs.. Uh again, I don't I don't know
the answer. But uh, I know that there's a palpable fear
out there for localized capacity obligations. Um but
we have to be evaluated on a regional basis. So ERCOT
needs to again the Astrape' study on the reliability standard.
And uh that's kind of tied to the reliability standard.
Whatever we determine is that reliability standard
informs how healthy are our zonal, zone reliability
is. And so it has to be analyzed. Agreed and I put
that in there. So people know it's not a blanket assumption,
it'll be system wide. And we don't care where you are.
Maybe that's where we end up, but we need to ask the
questions. And and work through the issues that you're
identifying. That work for everybody? That's fine. I mean I think
we got to just leave it broad, to see what works better.
Look at it.
Alright, conduct. Um, LOLP analysis determined the quantity
of performance credits required to achieve reliability
standard in each PCM period. This feels a little repetitive
from above, but I think it's the same. On this sir, just
clarity. This is not based on ERCOT's forecasting
anything over and beyond the reserve margin, correct?
That that LOLP I mean we're talking about the
reserve margin, based on the reliability standard. And
again, not kind of going on some sort of forward obligation.
Yeah, I think it's. Yes. And I think it's repetitive from
what we already said above. You got to determine
determine reliability standard associated with each
PCM compliance period.
and we'll lean on the previous statement. That work?
All right, determined demand curve parameters for each
PCM compliance period. Um, I think that's, that goes
hand in glove with. I think that would be good right
below the determined reliability standard associated
with each PCM. It's a sequential thought
process. Okay.
Determine if modifications should be made to the
ORDC based on implementation of the PCM. If so what I
think this was originally a Commissioner Glotfelty
question, from an early stage of iterations. I would
probably be on the latter end of the implementation.
But I think it's a fair question to ask. Would ya'll
think that the. I mean the ORDC might not
go to zero. But if the PCMs are at zero.
One of them's obviously with the intraday volatility and
one of them's kind of dealing with long term. But again
the ORDC is operationally focused so. That's what I mean.
But even if you haven't, if you have met your your
uh demand curve. You're hoping that both will go to
zero, correct? I think if, if there's zero revenue in
the market, then you get guaranteed exits the market
right? So you don't want zero revenue, you want equilibrium revenue.
I didn't mean zero revenue in the market. I meant that
the ORDC does not get triggered on a daily basis.
Yes. Yes. I think what we saw is that in the analysis
is that by having a more reliable grid. The number
of times we utilize the ORDC,
which I think is great. But the, the experience in
the other areas SPP, MISO, PJM. Is that even with their
robust forward capacity system. They still need an ORDC.
That's why they're launching them now. To possibly
to a lesser degree than what we have right now. To signal
operational ramping into these unknown situations. In MISO they're
they have a PRA reserve auction that they hold just
for the Summer right now. And they have the vertical
demand curve that shot all the way to cones as you indicated earlier.
They're moving towards a slope demand curve and expanding
the seasons for the capacity market. But ultimately
I think that's a little bit maybe a little bit different
what we're talking about here with the ORDC. And I but
anyway, I think that's a back end issue that we should
assess here at the Commission. Yeah, I mean, I think there's
bullets, right? And I appreciate it. And it's contemplated
by E3. They said basically reevaluate all these
different mechanisms in line PCM interaction. So, and
I think this is the actual results will be very dependent
on system conditions. In particular, if you have more
extreme conditions in a particular compliance period.
Or a year, you probably have a more active ORDC.
Um, if more solar moves the critical times to after
dark, that could change. Uh, there's no way for us to
know that right now. But I think this question will
be even more valuable with Glotfelty's tracking metrics.
Because then you'll be able to see how much revenue
under what system conditions are going to. Which resources
and that total combined revenue is going to be, what
drives investment decisions. And so I think this will
be better informed by having that success metric, that
KPI. And you can see what's driving or not driving.
You will, we will be able to have a more informed vision
of what's driving or not driving retention and investment.
So good question to ask will be enhanced by um, the
tracking of the information in the KPI.
That work?
Alright, determine changes what changes should be made
evolve swap based on implementation of PCM. If so what?
Same spirit, probably something on the back end of
implementation. Everybody okay keeping that in there?
Alright, requirements for generators participating
offer into forward market. I think probably move that
up the list. But I think that's consistent with the
having some for determined. We we all want some forward
requirement for eligible resources and changed that to eligible
resources. Um, part of implications, figuring out exactly
what that is.
Fair?
All right, determined forward market timing. Like that's
uh that's part of the optionality for resources, LSCs,
and resources to offer and procure credits,
since it's optional. It's probably not a
be a backbreaking, backbreaking decision for any of
the LSCs we want. How far out in the future do we
offer the ability for them to transact? It's a fair,
I think it's an important question to ask. It's not
gonna make or break the PCM. Important question to ask.
and then finally determine the ability of virtual parties,
to participate in the forward market. This is IMM
original suggestion. A lot to be said for additional
liquidity.
Um some open questions on compliance and physical settlement
and how that interacts with physical delivery or being
physically online and available. That's the question.
I don't, I don't know exactly the parameters and conditions
of their participation. If the pros outweigh the cons,
but I think that's an important one to decide. We're
good with that?
All right. That's everything I've got, um.
The, you know, we have some other things too
add the first thing I need to add. I think on the
decision points is defined eligible resources.
That was the one I was missing. So I'm glad you caught
it, yep. And I'm trying to see what else. Okay, the
next the next main section is the bridge, bridging direction
I think we've we've covered that. Everybody's good
with that language? Yes. And on the demand curve, when
we say determined demand curve parameters for each
PCM compliance period. That also makes the determination
cone versus net cone. Uh and makes that recommendation.
We had robust discuss what. Say that again. In terms of the demand curve
cone versus net term, cone associated with the value.
Yes sir. Okay, that's okay. Yeah, that's a good point.
I mean, it's not written but that's part of the determination
recommendation. That's part and parcel of making that
determination.
Alright. So that's, that's everything I've got at this
point. What did you say on eligible resources? Define
eligible resources, bring us all the options. What
works? What doesn't work? You want to flush that out
more? I do. I mean, I think it should be a principle
that um the expectation is that all supply and demand
resources are eligible. For the production of. Principle
not a decision point. I think it's a principle that
we should strive for that. Yes. Okay. So as you heard
me say, I think um that's some I think it's a decision
point on DER. We're doing a pilot project implementation.
I think the the the pilot project will give us, like
you said the results good, bad, otherwise. If we knew
how it was gonna turn out we wouldn't need a pilot.
Uh, but they think it's fair to say in the decision
point or a sub bullet of identify or define eligible
resources. I think it's fair to say upon completion
of the pilot project, um
evaluate compatibility with PCM. Um it's and in the
meantime. I think you can take it as a soon but if
if it needs clarification that any uh, was it enchanted
rock. Any any of those DGR that currently participate
participate in the wholesale market. Would be just as
eligible as any other resource. Um, but I think that
you need to make a distinction between the the aggregated
resources. That we have a lot of remaining questions
to answer and we need to see, we need to see how
they behave. I think it's fair to say in the decision
point, they need to be considered. Once we have the
results of the pilot project. But I'm not comfortable
saying that PCMs can't move forward unless they are
by definition included. Because I don't know how the
pilot projects going to turn out. Well I guess the pilot
project um does not, in my opinion um uh, mitigate the
fact that the enchanted rocks out there, are can participate
in the market. So the virtual power plants is just
one component of a type of resource. That could participate
in this as a producer of PCs. I think again um, other
markets have gone through this. They have said energy
efficiency and demand response uh and distributed resources
all achieve capacity credits. So I would think that
putting that in here is um, what we need to do. To
ensure that we have more people producing the credits.
Thus protecting the consumer and lowering the costs.
That's fine. But all of those other markets are built
and structured entirely off of ISO generated forecasts
Load demands. Which is the only way you can value energy
efficiency or demand response. You've got to have it.
Right here at the top of the page. You've got to have
a forecast that your auction or capacity or whatever
is driven off. By definition we're not PCM wouldn't
have that. I think we need to work through the discussion
about how uh demand resources, DERs. Energy efficiency.
can be eligible for. Sure, like I said. So what again
what I don't want. I don't think it's fair to just
have DERs and energy efficiency. Reduce the amount
of PCs that a low serving entity has to acquire. Reducing
costs worked wonders for wind and solar. That's a hell
of an incentive. That entire, I don't disagree that
but that's just one incentive. I want to help the incentive
for the distributed resources in the energy efficiency.
To jump start those industries as well as valuable
reliability components to our system. And that's fine.
But just because you want to thing, doesn't mean that
we can fit the PGM square peg into a ERCOT round hole. That
doesn't mean we can't. And that's why I'm saying, I think
it belongs in a decision point question to be answered,
evaluated. And we can't say that something that by definition
for demand response or energy efficiency. Requires the
ISO to not only identify a future forecast in this
case. An annual forecast and then procure resources
to meet that forecast. Because there's no way to value
that. I think you're, I think you're talking too much
in the weeds. I wanna have a principle. I know what
you want. But I'm saying my principle is that energy
efficiency and demand response and distributed resources
ought to be able to be eligible for credits. And that's
fine. I know you really, really want that. But this
doesn't fit what you're using an example of. What the
other markets do. The PJM document. Yeah. That's fine.
Then what we'll do. We'll create a Texas standard.
You know, I think that we, we I don't know. I mean
that's just that's my bottom line, is it? It needs
to be included, as a evaluated. How we get them in there?
We may not have the answer today, but we need it as
a principle. That all resources are eligible to um, create.
Every 90% of what you said I heard as a decision point.
We need to evaluate how this could fit into PCM? How
it could work? How we can make it work in the Texas
market? And I'm fully supportive of that. What I'm not
comfortable doing is saying that PCM will not work.
Is not viable, unless the principle of it has some we
don't know. I don't think I said that. You said it's
got to be a principle. I said that it has to be
a principle, that the that the PCM is technology neutral.
And that um eligible resources I mean I can say, eligible
resources which is the decision point. Um
must um, be eligible to produce credits.
Um the inside resources. Yeah. As just to opposed to just reduce
the amount of credits needed to comply. I mean I were
getting in the weeds. But I mean the point is we, want
I mean I want these resources in the market. I don't
know if y'all do or not. But I think that it's important
to have them. Um you're giving them a, a revenue stream.
To perhaps jump start something that everybody has
said that we needed and we've lagged behind. So why
would we um, you know. As Will said, NRG just went out
and bought a company that does a lot of this demand
response and energy efficiency. And you know. And they
they deploy their, one of the best in the state of
deploying it. They do that now. Why would we spend
more taxpayer dollars or ratepayer dollars on something
the market is already achieving for us. We saw a beautiful
example of that on Friday, December 23rd. Where Load
right at the critical time, flatlined, that's demand
response driven by smart thermostat. Maybe. How else do you
achieve that system wide? It wasn't us. That's fair. So I mean. So
why is that a principal not to uh, to include in there?
Um I think it's great as a decision point of value.
Evaluate how these resources can be incorporated in
the PCM. Do we get do we get the same result by
including them on a cost reduction side? Just like
wind and solar, that seemed to work pretty well. Do
we need, do we achieve anything additional by building
them into a construct. That unlike every other energy
efficiency capacity construct. You have a forecast
that you reduce from because at the end of the day.
Increased revenue or decrease cross looks, cross looks
all the same, on an income statement, at the bottom line.
When you get to operating income. Well not necessarily
if if you're but, but you're broadening the pool of
who can get that generate that revenue. Happy to have
that as a decision point question to be asked. Evaluate
the options, bring the options to us. I don't know
how we can claim that a defining characteristic. Is
that it's technology neutral. Is that it includes an
energy efficiency program. Just say it's technology
neutral.
If in what subject to all of the performance conditions.
You know, um I don't know. I mean, I'll work on some
language here for for you. But uh you know, I think
it needs to be technology neutral. I think it's a good
principle. The Legislature says it all the time. We
all talk about all the above and whatever. It ought
to be technology neutral. Okay. Technology neutral
subject to the performance criteria outlined in the
characteristic. Okay.
So it's I mean, I'm just trying to make sure I understand.
So you would like tech, tech neutral eligible resources
and decide that later. Um and then we have to figure
out. Whether that would be okay um, in conjunction with
all the performance and penalties and everything going
on there. I think that
um we can put technology neutral in there as a principle.
And then leave the rest of it in a decision. I'm fine
with that. The I mean, make it make it work, you know.
Uh the PCM strives to ensure all technology neutral
resources can participate in this market. I don't know.
I mean, technology neutral subject to performance standards
and uh eligibility criteria. Fine, fine. Just one thing
I want to say is that SB 3, um Section 18 C1
does say it has to be dispatchable. So I'm sure
there's you know, just FYI and a lot of little
resources are. So just
okay, so that narrows the scope for us to controllable
Load resources.
So, so like for example, they specifically say this
cannot this energy efficiency cannot be dispatchable.
It's got to be in place for this full operational year.
And it is valued based off the number of megawatts
pulled off of the ISO forecast. And but it's not
something we dispatch in and out, it is a steady state
benefit. Which doesn't sync up with what.
So look in, right, in comments when Zach briefed us.
And and their vision and their analysis was predicated
upon any loads performing ancillaries. And that included
the ECRS, CLRs, Nonspin components, demand response certainly
has a dispatchable component. That is in a command and
control framework that ERCOT utilizes. And that was
baked into their analysis and that's exactly kind of
what we're talking about. That's baked in and very controllable
by them to meet that high risk out. 100%. Yeah, so by definition
that's dispatchable dispatch. Why don't we separate
it, on EEs energy efficiency. As a, as a discussion
point that needs to be made later. But dispatchable
resources, dispatchable demand side resources are eligible.
And how about. Let's, let's put a fine point on that.
Principle of the PCM is technology neutral subject
to performance requirements. As outlined, and an established
implementation, and the requirements of SB 3. So
that's that's the universe of technology neutral.
Doesn't say every resource on the planet, says these
are this is the these are the guardrails. That's the
principle and the decision points examine opportunities
and identify ways to incorporate energy efficiency,
into the PCM. Yes. And bring us options, that's a policy
here. Yes. Okay. David, you get that.
Dave is gonna get the gold star for today. Keeping
track of all this.
Alright. So we got those two things in there.
We've gone through what is an existing we've got now.
We've got an addition, other additions. Um you know
I think this is this is the last step that we're gonna
recess and yeah, you know, final version. Going back to the one that
we were talking a little bit of time on and trying
to figure out which one it is. Um appropriately placed
risk somewhere in here. In the general principles,
I just want to have a general principle um that talks
about considering the impacts to all customers. Um
so that means rep, coop, mounie. As we kind
of, you know, we're going to consider the impacts on
to the customers on costs. And maybe that's where maybe
it gets, gets dovetailed into that appropriate place
risk somewhere. But I just want to make sure as we're
kind of looking at building this PCM. If we ultimately
get to that point. That along the way, um as we finalize
technical parameters and analyze the interaction between
the technical parameters. That we can continue to think
about the impacts on all customers. Maybe not customers
that are served by different types of LSCs. But
also different types of customers, residential um, small
business, commercial, industrial. Um you know industrials
are more sophisticated than residential. And but hopefully
through ADR and all that one day. They can become
more sophisticated. Um so I don't know how that dovetails
in there. But I would like some sort of broader cost
impact um somewhere in there. And maybe, maybe we can
give you some language for one of those for your consideration.
Maybe.
So I mean on the appropriately placed risk. I can,
I can go two ways on that. I think in some ways
it's
that's a
admirable goal that doesn't necessarily belong in this
list. I think it's assumed we've all been very clear
from the beginning. That this is, this is all for the
benefit of consumers. So I can see for the sake of
clarity, just striking that appropriate place risk bucket.
Because I think
that that's addressed in all of the other things that
define the PCM. Um and it made this may just muddy the
water more. But I'm also if you, if you want
to change that center. Place financial and operational
risk on profit seeking businesses instead of ERCOT
in order to protect all consumers of.
Okay, we'll just let that work for everybody else?
Thank you.
What are we saying? I'm saying that unnecessarily muddies
the water, all of the other characteristics. The principles
of the questions is the suggestion withdrawn. So basically
just
we protect customers with market mitigation, all the
things we listed like that protects customers. We don't
need to eliminate appropriately placed. Risking the
bullet underneath it.
Right, good catch any other additions. Look forward
to seeing the final bird.
Anything else? I'm good. Anything else?
Ms. Jackson?
The timeline and next steps, steps you had mentioned
mitigation and milestones. Did you want to say timeline
milestones and take steps for implementing. Over the
bridge? Yes. Or the
for the plan. Staff plan. For the bridge, not the PCM.
Yes, I think we've got that in here. Um
uh, including the bring us a menu and a board recommendation
plus options considered with pros and cons. Bring us
the timeline to the January 26th open meeting for the
bridge. Not the PCM, the bridge. The work that address
what you need?
All right, good. Glotfelty?
Next draft. Alright, so you will compile Mr. Chairman,
and then post, and then we can read. I feel like this
is gonna be on David.
Yeah, let's plan on we're gonna recess now. We'll reconvene
at 2:15. Uh sorry for the lunch delay, but we'll be
back here at 2:15. And as soon as we have these
aggregated documents filed. We'll also have Staff make
sure Staff can circulate to your individual offices.
In the meantime, uh, we'll see every back here at 2:15
Thanks.