(item:0:Chairman Gleeson calls meeting to order) This meeting of the Public Utility Commission of Texas
will come to order. To discuss matters that have been
duly posted with the Secretary of State for today
March 21, 2024. Good morning, Shelah. Good morning
Connie. So before we go through the Consent Agenda
just a couple of things. (item:0:Chairman Gleeson give condolences to family of Former Commissioner Jo Campbell) One um, Former Commissioner
Jo Campbell passed away on March 10th. I'm sure some
of you had worked with her. She was a Commissioner
here from 1985 till 1991. So just wanted to, uh to
say that, if some of you hadn't heard. And express
our sincerest condolences to, uh to her family in
her passing. She was 92 years old. (item:0:Chairman Gleeson recognizes Commissioners Cobos and Glotfelty) And on a, on a
positive note, our very own, uh Commissioner Lori
Cobos is going to be inducted into the Sul Ross Hall
of Honor on Saturday, um for distinguished alumni.
Thank you. So congratulations Lori. That's a, that's a tremendous
achievement. Thank you so much, I appreciate the recognition.
And Jimmy's birthday was a couple of days ago. So
happy birth, Happy belated Birthday Jimmy. There you
go. Yeah, yeah.
All right, Shelah. Will you take us through the Consent
agenda, please? Yes. (item:0.1:Shelah Cisneros with Commission Counsel lays out Consent Agenda) Good morning, Commissioners. First,
let me state that the Chairman filed a memo in Project
No. 52761. Stating that he is recused from Items
1, 2, 4, 10 and 12. And then for the Consent Agenda by
individual ballot, the following items were placed
on your Consent Agenda. Items 1-4, 8, 12, 13
and 15. (item:0.1:Chairman Gleeson asks for motion to approve items on Consent Agenda) I would entertain a motion to approve the Consent
Agenda as laid out by Shelah.
So moved. Second. I have a motion and second. All those in favor, say aye. Aye. Opposed?
Motion prevails. Okay, so we are going to start with
Item No. 5. Shelah, will you lay out Item No.
5 please? Yes. (item:5:Petition for emergency order appointing temporary manager to Blue Cereus, LLC under TWC & Commission Rule) Item 5 is Docket No. 56171.
This is the petition for an emergency order appointing
a temporary manager to Blue Cereus, LLC under Texas
Water Code 13.4132 and Commission Rule 24.355. Commission
Staff filed a petition to appoint a temporary manager
to the utility. An emergency order was filed on February
1st. The Commission provided notice of a hearing on
the merits to consider the emergency order in this
docket. Okay. So at this point, we will recess this meeting
uh of the PUC and hold a separate hearing on this item.
So
For the Merits Hearing in Docket 56171. Which has
been duly posted with the Secretary of State for today
March 21, 2024. And I'll now turn it over to our Staff
ALJ to conduct the hearing. Good morning Commissioners.
I call to order Docket No. 56171, Commission Staff's
petition for an emergency order. Appointing a temporary
manager to Blue Cereus, LLC. Without a hearing, pursuant
to Texas Water Code section 13.4132 and 16 Texas
Administrative Code section 24.355. This is Christina
Denmark assisting the Commissioners. And the purpose
of this hearing is to determine whether to affirm, modify
or set aside the emergency order. Issued by the Interim
Executive Director in this docket on February 1st of
2024. Which appointed CSWR Texas to temporarily manage
and operate Blue Cereus. I'll go ahead and take appearances
from counsel, if they would like to approach. (inaudible)
on behalf of the Commission Staff.
May I just jump in? When the parties approach, if you'll
wait and, and please be sure to speak into the
microphone for the Court Reporter.
Good morning Michael Floriani for Blue Cereus, LLC.
My apologies, let's try that one more time. John
Lajzer on behalf of Commission Staff. Okay.
Commissioners, we had a pre-hearing conference on March
18th of 2024. And I admitted 19 exhibits from Commission
Staff and two exhibits from Blue Cereus. The 21 exhibits
should be in a binder before you. The parties agreed
to limit opening and closing statements to 5 minutes
each. The parties also agreed to the order for our
four witnesses and agreed to limit testimony to a collective
hour. We'll first have Dina Ferguson from Seguro Water
Company. Second, Bob Ferguson of San Pedro Water Resources.
Third, Judge Jimmy Allen Hall, Managing Member of Blue
Cereus. And fourth, Kristen Robinson, employee and office
manager of Blue Cereus.
Blue Cereus asked to invoke the rule, Texas Rule of
Evidence 614. To exclude witnesses from hearing other
witness testimony, which I'll address in a few minutes.
Let's go ahead and proceed with opening statements.
And I'll follow up with the Commissioners to see if
they have any questions before we proceed. Commission
Staff, do you have an opening statement? I do Judge
Denmark, but just one quick correction on the order.
Would it be possible to take Bob Ferguson first versus
Dina? Counsel, do you have a problem with us taking
Bob instead of Dina first? No.
That's, that's good. And Commission Staff does have an opening.
Judge Denmark, John Lajzer on behalf of Commission Staff.
Commission Staff requests the Commission affirm the
appointment of CWR Texas as temporary manager for Blue
Cereus, LLC, as ordered through the February 1, 2024 emergency
order. Commission Staff issued its emergency order
citing two grounds for abandonment, as defined under
Texas Water Code section 13.402, Subpart F. Failure of
a retail public water utility to pay an obligation
that results in the utility receiving a notice of discontinuation
for a necessary service. And hostility towards the Texas
Commission of Environmental Quality or the Commission.
Blue Cereus is the holder of CCN No. 11088 and
operates two public water systems. San Pedro Village
and La Coletta Estates. As a CCN holder, Blue Cereus
is required to ensure continuous and adequate service
to customers within its certificated area. Blue Cereus
does not have its own water source. From 2009 through
December 31, 2014, Blue Cereus secured access to
potable water through written contracts with two wholesale
providers. Seguro Water Company and San Pedro Water
Resources Joint Venture. Those contracts expired by
their natural terms on January 1, 2015. Presently
Blue Cereus does not have a written contract securing
access to a water source. Instead, Blue Cereus and the
wholesalers have operated under a series of one year
oral agreements. The absence of a written contract
has resulted in multiple conflicts between Blue Cereus
and the wholesalers, including disputes before this
Commission and in District Court. On June 1, 2018,
the wholesalers provided Blue Cereus its first notice
of default and notice of termination. Citing delinquent
bills exceeding $150,000. From August 18, 2018 through
March 16, 2020, Blue Cereus was placed under temporary
management. Over concerns that the fraying relationship
between Blue Cereus and its wholesale providers. Would
jeopardize the continuous and adequate service of water
to Blue Cereus' customers. Commission Staff requests
the Commission affirm the February 1, 2024 temporary
management appointment. Because once again, those same
concerns have resurfaced. On June 19, 2023, TCEQ issued
an order requiring Blue Cereus to secure water purchase
contracts for San Pedro Village and La Coletta Estates
no later than January 11, 2024. On January 8, 2024,
the Commission and Blue Cereus received a letter issued
by the wholesalers. Wherein the wholesalers signaled
their intention to terminate all business dealings
with Blue Cereus. In that letter, the wholesalers commented
that despite TCEQ's order, Blue Cereus had made no
effort to secure or negotiate water purchase contracts.
Commission Staff confirmed that Blue Cereus' access
to potable water would be terminated by the wholesalers
no later than February 1, 2024, absent action by the
Commission. To date, Blue Cereus has failed to provide
a water purchase contract for either public water system
under its CCN. Instead, Blue Cereus argues that a SOAH
order setting an interim rate and a now void settlement
agreement in Docket 50239. Take the place or amount
to a water purchase contract. The same argument was
rejected by TCEQ during the June 2023 hearing. That
resulted in TCEQ order requiring Blue Cereus to obtain
a written purchase contract. The Commission should similarly
reject this argument today. The absence of a written
water purchase contract for the public water systems
under Blue Cereus' CCN. Present a clear and actionable threat
to Blue Cereus' ability to ensure continuous and adequate
service to its customers. This is tantamount to abandonment
under the Water Code and Commission rules. For this
reason, Commission Staff requests Commission affirm
the February 1, 2024 emergency order appointing CSWR
Texas as temporary manager for Blue Cereus, for a term
of no longer than 360 days.
Blue Cereus, would you like to proceed? Thank you. My
name is Michael Floriani. I represent Blue Cereus, LLC.
I am new to this case. The prior attorney for Blue
Cereus, LLC unfortunately became very ill in January of
this year and passed away very recently. So there are
many things that have happened in this case recently
and for which I'm still learning the facts. So I beg
your
thank you.
Our position, this position of Blue Cereus is that
the temporary manager is not necessary. And that the
emergency temporary manager that was appointed on February
1st was also not necessary. Because the Public Utility
Commission has failed to meet their burden of showing
that there is an emergency. And that there's the basis
of that is that there was no abandonment by the utility.
We will show that the perceived emergency is the creation
of the wholesaler with whom Blue Cereus has had a long-standing
dispute. That dispute was settled in June of 2022 under
docket zero, Docket No. 502139 with a mediated settlement
agreement. That mediated settlement agreement was reported
by the mediators as a final settlement in that case.
Under the terms of that settlement agreement, which
is Exhibit 1 of Blue Cereus, LLC. There was a complete
divorce between the wholesaler and Blue Cereus, LLC. And
it was a position by which Blue Cereus, LLC would take
over the assets of the wholesaler for one subdivision.
And then the wholesalers would take over the retail
connections portion for Blue Cereus for another subdivision.
So they would essentially acquire each other's assets
and have no further business with each other ever in
the future.
In November of this year, of last year. I'm sorry, 2023.
One of the wholesalers filed a report attempting to unilaterally
repudiate that mediated settlement agreement which
is a contract. The this issue was raised in the hearing
in June of 2023 but that there was no determination
whether that settlement agreement was void. Counsel
for the PUC has said that it's a now void settlement.
In the position of Blue Cereus is that is an enforceable
agreement that they intend to enforce. And if that
agreement is enforced, there's no emergency. Because
the perceived emergency here is the wholesaler coming
forward under this docket number and saying they have
no contract in place with Blue Cereus, LLC. And reserve the
right to stop providing potable water to them for resale.
Our position is that the wholesalers are themselves
public utilities that provide potable water. They're
subject to the regulation of this Commission. And that
this action should be brought against the wholesaler
who is the one threatening to cut off water supplies
to retail customers. We will show that we have complied
with the terms of the media settlement agreement. Seek
enforcement of that and have not created any emergency
with the retail customers. Thank you.
Commissioners, do you have any questions before we
proceed?
At this time, we'll swear in the 4 witnesses. And
then I'm going to ask the witnesses to excuse themselves
from the Commissioner's hearing room. Could our 4
witnesses please approach?
Thank you.
Thank you. Perfect. And for the record, Ms.
Ferguson will not be here today and will not be. She will
be, okay. Mr. and Mrs. Ferguson. Judge Hall. Please raise right your
hand, please raise your right hand. Do you swear or
affirm the testimony you give today will be the truth,
the whole truth and nothing but the truth. I do. I
so swear. Okay. At this time, I'm going to invoke the
rule. Judge Hall, you may stay because the rule wouldn't
apply to you. And we're starting with Mr. Ferguson,
correct? You can go ahead and stay since you're the
first witness. Mr. Ferguson. Ms. Robinson.
When you do leave this room, you may not. Not Mrs.
Robinson, Mrs. Ferguson. Sorry.
My name is actually Robinson Ferguson. Okay. When you do leave this
room, you may not converse about this docket with each
other. Or with any other person other than the attorneys
in this case, except by permission of the Commission.
And you may not read any report of or comments on the
testimony in this case while the rule is invoked.
So I guess I'm just gonna ask at this time, you will
leave the Commissioner's hearing room. And if you can
find a location out there where you can't hear the
testimony and someone will come grab you when it's
your turn to testify.
Certainly.
It's enough?
Okay.
Just a reminder to try to speak into the microphones.
With the big note in front of it, that says please
speak into it. Commission Staff, you may proceed with
your question. Thank you, Your Honor.
Good morning Mr. Ferguson. Hi. Can you please state your
name for the record? Robert B. Ferguson. And who
is your current employer? I am self-employed. Okay. Do
you have a role or title with San Pedro Water Resources
Joint Venture? Yes I do, manager. Okay. And how long
have you served in this capacity? Since I've owned the
system? I guess it would be 2005. Okay. And that was
my next question. How long have you owned the company?
2005. Okay. Can you give me a brief description of
what San Pedro Water Resources Joint Venture is? San
Pedro Water Resources Joint Venture is a joint venture
of, I'd have to get the chart to look at it. Of
two companies that, that I do own and control. One
being a LLC and the other being a corporation, I think.
And has that entity San Pedro Water Resources ever
gone by any other name? No. Which public
water systems does San Pedro Water Resources currently
serve? It serves San Pedro Village. Does it serve any
other public water systems? No. Who, what are the names
of the clients of San Pedro Water Resources? Blue Cereus. Are there
any other clients? No.
Can you give me a brief description of what Segura
Water Company is? Segura Water Company is an LLC owned
by Dina Robinson Ferguson and myself. Okay. What position
if any do you presently hold at Seguro Water Company?
Vice President. How long have you held that position?
Couple of years. Okay. What about from 2009 to 2014,
did you still hold the title of Vice President or did
you have a different role? I think I might have been
President. I mean, that's a good while back. I can't
remember. Okay. I'm going to try to get through these
questions as quickly as possible. And make sure I'm
responsive and responsible with everybody's time here
today. As hearing me speak for five minutes is enough
for a lifetime. But let's get the big question out
of the way first. As we sit here today March 21,
2024, is there currently a written contract between
Blue Cereus, LLC and San Pedro Water Resources Joint
Venture. Concerning the provision of wholesale water
to Blue Cereus. No, there is no contract. Has there
ever been a written contract? The original contract
written 2009, expired in 2014. And then that's the only
written contract we've ever had. Okay. Well, let's go
ahead and talk about those exhibits.
I'm going to present to you copies of Exhibits 14 and
15. These are Commission Staff's Exhibits 14 and 15.
All right. Can you tell the court what you were just
handled? Yes, I was handed Exhibit 14, Agreement to
Sell and Purchase Water between Seguro Water Company,
LLC and Blue Cereus, LLC. And I believe you were handed the
other one, what's that other one? Yes sir. What's Exhibit 15th, Agreement to Sell and
Purchase Water between San Pedro Canyon Water Resources
and Blue Cereus, LLC? Okay. And are these the two contracts
you were just referring to in your previous testimony?
Yes, it is. Okay. Go ahead and take a real quick moment
to just scan through it.
Let me know if you believe, let's focus on. I believe
it's going to be Exhibit No. 15, which is San Pedro.
Let's tell me if you believe that that is a complete
record of the agreement between the parties? Yes, it
is.
If you'll notice on signature
Mr. Hall had permission to sign my name Okay. Well, thank
you for that clarification. Here, when you take a look
at both of these contracts. Would you agree with me
that they are largely identical? Yes. Ok. And apart
from the name of the wholesale entity and the date
it was, these contracts were signed. Is there a difference
in the rate of water for a base rate or a volumetric
rate in these contracts? I believe so. I'd have to
look at the contracts and reread them they're old.
Let's see water. Yes, yes. Ok. Let's go ahead and focus
on Exhibit 15 for now. I believe you may have already
testified to this. But can you just confirm for the
court, when did this contract expire? This contract
expired,
expiration date I think in 2014.
Term of contract effective date.
Yes. This uh contract expired 11:59, December 31, 2014.
Since we're looking at that same general section. I
believe that's Article 4 of the Exhibit No. 15
there. Can you also tell me if there is a provision
that would have permitted the parties to extend the
term of this contract?
I don't see a section that extended it. Okay. Let me
rephrase the question. If you take a look at Article
4, Section 4.1, Subpart C-Data termination and Renewal.
Does this contract permit the parties to upon mutual
agreement, extend the terms for a length of time?
However, the parties may therefore renew this agreement
for a subsequent 5 years by mutual consent executed
in writing. At least 30 days prior to the expiration
of this agreement. To your knowledge, did either party
seek to extend the contract by reaching mutual consent
and reducing that consent to writing? No.
All right. Do you know if the 2009 contract discusses
how payment disputes would be addressed?
Section 3.4, in the event any controversy between the
two parties. Payment of money under this article, Blue
Cereus shall make payment in full as billed by San Pedro
Water Resources. And shall identify in writing the portion
of the payment that it disputes. Ok. Go ahead and keep
your finger on that section for right now. But I'm
going to ask you one more question about this 2009
contract before we go on. Did the 2009 contract specify
average maximums for annual delivery of water that
Blue Cereus could obtain through this agreement with
San Pedro Water Resources.
I think it does. I would direct your attention to Article
2, you may find the answer there.
Okay. Requirements, okay. The maximum delivery
shall not exceed 60,000 gallons. Monthly delivery of
2 million gallons and not to exceed 24 million gallons
a year. Ok. And did this contract contain or concern,
include perhaps minimum and volumetric water rates?
Yes, it did. And what was the base rate?
Monthly minimum charge for zero gallons would be $1,100.
Okay. I'm gonna go ahead and hand you Exhibits 18 and
7. But as I said, go ahead and keep a, keep a
finger on, on that contract still. And
can you please tell the court where you're just handed?
Exhibit 7, Blue Cereus' August 2018 Water Bill
from San Pedro Water Resources J.V. In Exhibit 18, June
1, 2018, Notice of Default and Notice of Termination.
Let's go ahead and start with that one. Let's go ahead
and start with No. 18. Can you briefly summarize
the purpose of this letter? The purpose of this letter
was, we were going on the basis of there was a no
written contract. So we were going on the basis of
of uh oral contracts. So this is the termination of
any and all contracts with Blue Cereus.
Ok. And why was San Pedro Water Resources terminating
all contracts oral or otherwise? We couldn't come to agreement
in a written contract.
Okay. Was there any concern about the past due balances?
Yes, there was but.
Yes, there was. Okay. I believe that this version here
has a particular page flagged, I believe it's Attachment
B. Can you describe to the court what Attachment B
is to Exhibit 18?
It, it shows the balance. Let's see Attachment B you say?
Correct. Okay.
Yes, okay.
Yes, it shows the balance due.
Ok. And what was the amount of the past due balance
in the last entry on that exhibit? The last
entry is, as of the last date on this is April 2018. For the
balance due of $39,419.54. What's the first date on
that list? First date on this list would be January
2014. And was that during the contract term for Exhibit
No. 15 that we just looked at?
18. I'm, I'm sorry. Let me rephrase that question. Were any
of those dates included on Attachment B on Exhibit
18 within the contract term. For the written contract
that you testified as the only written contract between
San Pedro Water Resources and Blue Cereus? Yes. Ok. How
many months? I would have to count them.
January 14 to April 18. My math is right, that's
four years and four months. Well let me just clarify
during the written period. The written period expired
on, I believe you testified December 31, 2014. Okay,
December 31, 14 would be $11,006.85. And I believe
you testified that or testified that there was a mechanism
by which payment disputes would be handled in the written
contract?
Yes. Based on the exhibit you have there. Did Blue Cereus
follow the terms of the written contract, pursuant to
the payment disputes section and the 2009 contract?
No. Ok.
Now go ahead and take a look at Exhibit No. 7.
Is this largely the same as what we saw in Attachment
B?
Yes. Okay. The first portion though, does it provide
a matrix if you will. That has the breakdown for how
each monthly bill was charged? Yes, it does. Ok.
Has Blue Cereus resolved its past due balance with San
Pedro Water Resources for the provision of wholesale
water as identified in either of these exhibits? No
Do you have a number uh, that uh remains in arrears
by Blue Cereus?
Yes. What is that number?
That would be due through July of '18. That's the last
that I have here. Would be, let me see. San Pedro. Yes, $48,527.18
Ok. I'm gonna hand you another exhibit. This is Respondent's
Exhibit 1.
Have you seen this document before? Yes. Can you please
identify this document? Yes, this is an agreement in
principle. From a mediation of June the 3rd 2022.
Ok.
And you'll see in this document that there are some
responsibilities and requirements of each party. Based
on this document, what was expected or required of
San Pedro Water Resources that is?
We were to, to submit a SDM application to transfer
to swap these systems.
Well, were you required to submit an STM or Blue Cereus? No.
Blue, Blue Cereus Okay. What were the obligations of the wholesalers in
this document?
Our obligations, the first thing would be that we would
have to have a complete application.
To from Blue Cereus so that we could submit that
to the one of the agencies. I don't know if it was
the PUC or the TCEQ. But we would have to
have that complete in order to move forward.
Did either you as individually or as a representative
of San Pedro Water Resources ever receive a draft version
of the STM? We received a draft
from Mr. Hall representing Blue Cereus, but the draft
was incomplete. It did not have the income numbers
on it. Did you advise Blue Cereus that the draft STM was
incomplete?
I can't remember, I think so. Ok.
Did Blue Cereus ever make the incomplete STM complete?
No. Did San Pedro Water Resources or Blue Cereus ever submit
the draft STM to the PUC for review? No. You've had
a chance to take a look at this agreement in principle.
Does this agreement in principle concern the purchase
of wholesale water? No. Did San Pedro Water Resources
enter into this agreement in principle with the intent
that this document serve as a contract for the provision
of wholesale water from San Pedro Water Resources to
Blue Cereus? No.
Is this agreement in principle still valid? No. Why?
Because of No. 4 Blue Cereus and water wholesalers
agree to work together. To ensure a smooth transfer
of this amendment or a new CCN for both systems. Okay.
And that's the reason why it's, it's not valid? Was one
and then number 15 also. The parties of the agreement
of this document represented the entire agreement between
the parties. There are no other verbal contract, verbal
or written agreements between them to mock that, modify
this agreement. And each party will act diligently and
in good faith included, but not limited to. Without
further consideration, executing and delivering additional
documents. And taking such action that will be reasonably
necessary to carry out the purpose and intent of this
agreement, and to fulfill the obligations of the respective
parties. And San Pedro Water Resources, do you feel
that you acted diligently pursuant to this agreement?
Yes.
Can you tell me why you feel Blue Cereus did not? Because
we didn't get the, the complete application from Blue
Cereus and Blue Cereus did not act in good faith. Our, this agreement
was done in June and here it is June of 2022 and
here it is March 21, 2024. When did San Pedro Water
Resources withdraw from this agreement?
I think it was in November of 2023. Like you, my math
is also bad. I got into law because I can't count.
But I think I can count the number of months. I believe
that would be 17 months between the adoption and termination.
Is that your memory as well? Yes. Okay. And I know I
broke the cardinal rule of saying I had no more questions
over exhibits. But I do have one last one
and I'm going to hand you this last exhibit. Here.
Can you identify the document I just placed in front
of you? Yes. This is a letter from Segura Water Company
and San Pedro Water Resources J.V. Okay. I want to focus
on the closing of this letter. And if you would, if
you could read the last paragraph for me? The last
paragraph of this, this letter uh states. Wholesalers
have made a six year effort to establish a contract
with Blue Cereus for the sale of drinking water. That effort
has not resulted in any, in any constructive progress
towards establishing a contract. As a result, the wholesalers
will not be able to continue to provide drinking water
to Blue Cereus. What's the date on this, on this document?
The date on this, of this document is January the 8th
2024. Okay.
There's a couple of other dates in there. I believe
you um identified January 15, 2024. Can you explain
why that date is in there?
Would you repeat the question please, sir? Sure. Let
me specify that better. I believe you will see kind
of in the middle of that exhibit. There is a reference
to a January 15, 2024 date. What event are you referencing
in this letter on January 15th? On January the 15th?
Ok. Yes. What we're, I'll read the paragraph. Since
the effective date of the TCEQ order. Wholesalers anticipate,
anticipated Blue Cereus would reach out for negotiations.
To come to agreement that would provide, that would
provide continuous and reliable water service to the
customers of Blue Cereus.
No personnel, executives or legal counsel representing
Blue Cereus made efforts to open negotiation. The deadline
for Blue Cereus to acquire a contract by order is January
15, 2024. So taking these last two paragraphs in
combination. If a temporary manager had not been appointed
on February 1, 2024.
Would San Pedro Water Resources have turned off the
water to Blue Cereus? I would say the water would be
in peril. Okay.
Thank you. I'll pass the witness. Mr. Floriani, you may
proceed. Thank you.
Now Mr. Ferguson. You're testifying on behalf of both
San Pedro Water Resources Joint Venture and Segura
Water Company LLC, correct? Yes, I am. Now the, would
you agree that historically. Those two companies have
provided potable water to Blue Cereus for resale to
retail customers? Yes. And that the resale of those
takes place in the La Coletta Estate subdivision and
the San Pedro Village subdivision, correct? Yes. And
the there's been as you've outlined. A long-standing
dispute between your two companies and Blue Cereus LLC,
correct? Correct. And in fact, litigation was undertaken
and regarding your attempts to collect those amounts.
That you allege were past due under the prior exhibit,
correct? Correct. And is it true that after the termination
of the written contract or after it expired under its
terms. That you entered into a series of oral contracts
with Blue Cereus, LLC to provide potable water for resale?
That was Mr. Hall's uh interpretation. And,
but after the, the written contract expired under
its terms. You continued to provide the water to Blue
Cereus LLC, correct? Yes, for the customers of La Coletta
Estates and San Pedro Village. But, but you were paid
by Blue Cereus LLC, correct? Correct. And is it true that
they paid you monthly for the water you provided, even
after the written contract expired?
Yes, but not the same amount every month according
to the contract. And is it true you didn't issue invoices
to Blue Cereus, LLC after the contract for the amounts that
you were alleged to? And that is true.
And is it true that even during the contract period
you didn't issue invoices to Blue Cereus, LLC? That is
true. Now you in Blue Cereus, LLC appeared under Docket No.
502139, correct.?
Which document, which docket is that? Is that the, all these
numbers confuse me? Is that SOAH Order No. 12? That
was part of it? Okay, yes. And you agree that your disputes
regarding past amounts due and rates were brought before
SOAH? Correct. And that SOAH issued an order on December
10, 2021, which determine the exact amount that Blue
Cereus, LLC was to pay your two companies for the potable
water, correct? On an interim basis. But the SOAH order
did specify the exact amounts that were to be paid,
correct? Correct. And is it your testimony that under
that SOAH order you have no duty to provide water,
potable water to Blue Cereus LLC?
Would you rephrase the question? Is it your testimony
that under SOAH Order 12, that you have no duty to
provide water to Blue Cereus, LLC?
That was an interim rate contract. And
that was issued, what was the date that was issued?
December 10, 2021. 2021, right. And that obligated Blue Cereus
to pay a specific amount for the water you provided,
correct? Correct. And for you to provide the water
to Blue Cereus, correct? Correct. And about six months
after that order was entered, you went through the
mediation process with the State Office of Administrative
Hearings. And you were represented by counsel at that
time, correct? Correct. And when I say you, I'm talking
about the two businesses that you're representing today,
correct? Correct. And your counsel at that time was
Selena Romero. Correct. And you entered, you mediated on June
3, 2022, correct? Correct. And you entered into a
written agreement on the 17th day of June 2022 memorializing
your mediation agreement, correct?
Memorializing which agreement? I'll refer you to Exhibit
1 that you have in front of you. Which is entitled
agreement in principle between Blue Cereus and Wholesalers.
Okay, now I'm looking at the agreement. Would you look
at page two. And does it say that it's signed and agreed
to on the 17th day of June 2022?
Yes, it is signed that day. And is it true that the
mediators issued a mediation report to SOAH. Saying
that the case was settled and that you had reached
an agreement? This agreement was. No, that's not the
question. Okay, ask me again. I'm sorry. Is it true, the
mediators filed a report with SOAH saying you completed
mediation and reached an agreement?
I don't know that answer. Now part of this agreement
was that well, the fundamental part of this agreement.
Was that you would have no if, if effectuated. You
would never have another contract with Blue Cereus
again, correct?
Provided we went through these uh steps. Right. And
this was a step by step process. Sure. And if you'd gone
through the process, ultimately you would have turned
over the assets of Seguro Water Company to Blue Cereus.
So that they could provide the potable water directly
to the customers, correct? Of which system? From your
Seguro system, San Pedro Village. Correct. And you
then also in exchange for that. Would have received
the retail customers of Blue Cereus, LLC for the other
water system, correct? Correct. So you would, if this
was effectuated you would never be in business again
directly with Blue Cereus LLC, correct? Correct. And
then therefore, you would never have to have any contracts
with them ever again, correct? Correct. And your testimony
is that in November of 2023 you unilaterally declared
that this mediation agreement was void, correct? Yes
I did. And it was void as of November of 2023, correct?
Correct. Is there a specific event in November 2023
that required you to say that it was a void?
There were many events, yes. In November of 2023? No,
no. Not in November of 23. Why did, why in November
of 23, did you declare it void? Because we went through
some things at, at Seguro that was not operate and
maintain. In section of three, and also we felt, felt.
We had reached out to Mr. Hall over some
down hole pump issues that were capital improvements.
And there was no agreement, no back and forth of what
we do about that. So in turn to, to provide water for
the customers of Blue Cereus. We went in and
reinstituted the wells. Because the well pumps down
hole went, went out. And Mr. Hall said that was our issue,
not his. And uh all, all communication with him was
referred to his
lady that, that took care of it. I, I don't know what
her. What her manager, office manager, whatever she
was. So there was no, no more contact with Mr. Hall.
That was uh so and we had been at this, this. Well
again this, this document was written in June 3,
'22 and now it's November '23. And we still don't have
anything. Now after this agreement, you were continued
to be represented by Selena Ramiro, correct?
I think Ms. Romero. No, no. Well at some point after this
agreement, you discharged her and hired Clint Buck
to represent your company, correct? Yes, yes. Yes. And then,
and then you also at some point discharged Mr. Buck
and they're now proceeding pro se, correct? Correct.
And has any prior fact ever determined this mediation
agreement to be void or invalid?
Redirect? You asked me to ask it again? Yes. No trier
of fact has ever determined this mediation agreement
to be invalid or void, correct?
According to this agreement? When I say try our fact
I mean, a court or Commission or an administrative
authority? Let me rephrase it. It's your opinion this
is void, correct? Yes. And it's the opinion of, of
your wife that it's void, correct?
You'd have to ask her, not me. And it calls, calls for speculation. His wife
will testify, and she could provide that to you. Ok. This is you stating
your opinion that Articles 4 and 15 have not been
complied with by my client and it is thus void, correct?
That is correct. But no trier fact has ever determined
that there's been noncompliance, correct?
I would think three, part of three. But if three the language
is, is not clear.
Now, you in the letter that was written by and signed
by you on January 8. You said that you're not able
to continue to provide drinking water to Blue Cereus,
correct? Correct. And you understand that if the Public
Utility Commission prevails in this hearing. That a
temporary administrator will be appointed for Blue
Cereus, correct? Correct. And that they would expect
you to provide water to them for these retail customers,
correct? Correct. And have you agreed to provide the
water to the administrator, temporary administrator?
Yes. Manager? And uh why would you agree to provide
it to them and not to Blue Cereus?
We have no long
negotiation with them. We're under the purview, I would
think of the PUC, state agency and we'll have rules
to follow. And we feel like it is in the best interest
of the customers and the best interest of the wholesalers.
To continue, to provide service through the temporary
manager. Because we will be under the purview and oversight
of the PUC and along with the TCEQ. So do you
agree that if the temporary manager is appointed, you'll
have a duty to provide water to them for their retail
customers? We are working on a contract with them as
we speak.
Um
now there's been a temporary manager appointed in this
case before, correct? Yes. And there's been two before,
one of which was Lynn Sherman, correct. Correct. And
did you cooperate with Mr. Sherman when he was the
temporary manager of Blue Cereus? Yes, we did. Isn't
it true that while he was temporary manager, you threatened
to cut off the water supply to the retail customers?
Yes, yes we did. Isn't it true that he filed a report
saying that your actions were reprehensible? Sure, he
did. We will, every time I would have to call to be
paid, the PUC Staff. At that time, it was Elena Zermio
to get a check. The for the system to be able
to pay the utility bills and the operating expenses.
So one morning we turned off the water. Missed the, we turned
it off that morning, we turned it back on that afternoon.
The PUC Staff said do you need any documents or
anything like that? We just wanted to be paid on a
regular basis from Mr. Sherman. That's all it was and
it was just that one day. And the water went back on
I think at 4:15 that afternoon.
Pass the witness.
Mr. Ferguson, I just have a couple more points of clarification.
When I take a look at respondents exhibit number one.
and I believe you just were asked some questions about
assets that would be transferred from the wholesalers
I believe Seguro. in exchange for a public water system
from Blue Cereus, what was the name of that public
water system?
We would, we would surrender to Mr. Hall. The, the uh
uh Seguro Water Systems. Now, it troubles me prepping
for this case, looking at this document.
Because the arguments I'm hearing suggest that as it
stands right now these assets have already transferred.
Do you presently have ownership and control of the
San Pedro Village Public Water System. Yes, I do. Of
the public water system?
Let me rephrase the question. Do you presently as of
March 21, 2024, have control of the asset formerly
owned by Blue Cereus, San Pedro Village. Do you have control
of that public water system? Yes. You have control?
I have the, the.
I have the, the uh the plants, both plants are under
under my control. Ok. I think there's some confusion.
And there's two similar names here. There are, there's
the retail portion and then there's the wholesale portion.
Correct.
I control the wholesale uh, uh portions of uh San
of San Pedro and the uh, uh Seguro. But as it stands
right now, you do not control the retail side? No,
no. I do not control the retail side of either system.
Pass the witness. No further questions. Commissioners, do you
have any questions?
Mr. Ferguson, you're released and may step out. Quick
reminder to not speak to anyone about this docket other
than the attorneys. Until the conclusion of all testimony.
Thank you for your time. Thank you.
Do you want to grab Mrs. Ferguson?
Okay.
Counselors, before we call this witness. We're approaching
close to an hour. Is this witness needed to offer anything
further? Unfortunately yes. This witness is going
to be necessary. I apologize for the lengthiness.
Are we back on the record? Yes. Commission Staff, you
may proceed.
Perfect. Good morning Mrs. Ferguson. Can you please state your
name for the record? My name is Dina Robinson Ferguson.
And who is your current employer? I am self-employed.
Do you have a current title or role at Seguro Water Company?
Yes. What is that role? I am an Executive Officer of
Segura and part Owner. Ok. And how long have you
served in that capacity?
Four or five years or so. Ok. Have you held any
other position with Segura Water, that predates your
current position? What positions were those? I was
doing some contract work as an employee. Ok. And when
did your time as a contract employee, when did that
start? When I purchased part of the company. And when
was that?
I want to say it was probably around 2019, maybe '20.
I don't, I don't recall exactly. And have you ever
held a position at San Pedro Water Resources? I have
provided administrative services as a contract employee
also. Okay. I asked a similar question. As of today, March
21st 2024, is there currently a written contract between
Blue Cereus, LLC and Segura Water Company concerning
the provision of wholesale water to Blue Cereus? No. Has
there ever been a contract to that effect? Yes.
Ok. I'm gonna hand you an exhibit.
And what I've just handed over is Commission Staff
Exhibit 14. I believe I've already provided opposing
counsel a copy. Were you involved? Well first, can
you please tell me what this exhibit is? This is a
purchase contract as it's titled the Agreement to Sell
and Purchase Water between Segura Water Company LLC
and Blue Cereus, LLC. Now if I understand your previous
testimony, you were not involved in the negotiations
of this contract, but are you familiar with its terms?
I was not involved and I am partially familiar with
its terms as just a layman. I'm not an attorney.
As a, as a layman but also as an executive of Segura
Water. Is this contract still valid and binding against
Segura Water? No, sir. And why is that? It expired
on December 31, 2014. And the provisions that allowed
for renewal or extension were never taken never, never
happened to my knowledge. You are asking or answering
my questions before I can ask them, I appreciate that.
And so do the Commissioners. And so again, to your knowledge
no one has ever moved to extend the term of this contract
Not to my knowledge. I'm gonna hand you two more exhibits.
I'm just handing you Exhibits 18 and 6.
Can you please tell the court what you were just handed?
Does it matter which one's 1st? Let's start with 18 and then
go to 6. Exhibit 18 is titled June 1st 2018, Notice
of Default and Notice of Termination.
Ok, and Exhibit No. 6. Is titled Blue Cercus August
2018 Water Bill from Segura Water Company LLC. Were
you involved in the generation or the submission of
Exhibit No. 18?
Um, just probably as an ancillary person. At that
time, I did not own or hold an executive office with
Segura Water Company. Ok. Well, let's take a look at
Exhibit 6. Then can you identify that document one
more time? It's a water bill that was generated on
or about August of 2018. Ok. And as of August 1st 2018
what was the total past due balance allegedly owed
by Blue Cereus to Segura? $117,498.22. Has Blue Cereus
ever resolved this past due balance?
No. Does this document identify a base rate? Yes. Ok. I
want you to go ahead and take another peek back at
what we previously talked about, Exhibit No. 14.
Can you tell me if there are provisions concerning
volumetric rates? Yes. Is there a base rate or a minimum
monthly rate? Yes. Ok. And just for point of clarification,
if Blue Cereus had to use zero gallons of water in, let's
say March of 2014. What would they have been charged
by Segura?
Um in Exhibit 14, the contract to sell and purchase
water. Um, item 3.02 identifies a monthly volumetric
water rate. Um and that would be $3400 as a monthly
minimum charge for zero gallons. To your knowledge,
to your knowledge. Was there ever a month where Blue
Cereus was only charged the minimum rate by Segura
Water? Not as far as my knowledge, no. Go ahead and
set that aside for one second. Let's take a look at
Commission Staff Exhibit No. 13.
And can you go ahead and identify that document, please?
This is identified as in uh PUC docket 50239, SOAH
order number 12. Now, if you would turn to, there's
a couple of pages in front that are not numbered. But
if you can turn to the numbered page three, there's
a, a last paragraph there on SOAH Order 12. That begins
lastly Blue Cereus and wholesalers. Uh could you read
that contract, uh that provision real quick?
Page 3?
Lastly, Blue Cereus and the wholesalers are currently
negotiating the terms of a wholesale water contract.
I'm going go ahead and stop you right there. This document
was signed on December 10, 2021. At that time were
Blue Cereus and Segura Water presently in negotiations
for a water wholesale contract?
What was the time frame again? I believe this document
was signed and you can check me. I think it's on page
six of that document. I believe it's December 10th
2021, and I'll repeat the question. On December 10th
2021, were the parties engaged in negotiations for
a water purchase contract?
I honestly don't recall at that time. I mean there
were intermittent occasions when um we would request
mediation or discussion or proposal to talk about those
things. And I don't recall if any of that was actively
occurring at that time in December of '21. Would it
be fair to say that if there had been negotiations
in and around December of 2021. That those negotiations
did not produce a water purchase contract? Correct.
Ok. That paragraph also contains a figure that Blue
Cereus would pay Seguro while the parties were working
towards a written contract. Can you identify that figure?
Yes, it's $3400 per month. I, I told the last witness
I'm bad at math. I'm telling you the same thing is
that amount higher, lower or identical to the base
rate identified in either the 2009 contract or exhibit
six, which is the balance sheet? It's identical. Ok
You previously testified there was not a month that
Blue Cereus was only charged the base rate. Would Seguro
have agreed to a flat rate contract for the provision
of wholesale water in 2021 for an indefinite basis?
What you're asking, would we have? Would you have?
It's difficult to say anything that's speculative,
but I would venture to guess, no. Okay. And why, why
is that? It's an inadequate amount in order
to perpetually manage the business and maintain the
equipment, and in order to make the system reliable.
Would you anticipate that had the, um exhibit number
14 been renewed? Or been on, I guess it's now third
renewal as we are now 10 years out so its expiration
uh that the base rate would have increased? Yes.
Uh and again, just as a refresher, that base rate and
that 2009 contract is? $3400 per month. Let's go ahead
and take a look at Exhibits 9 and 10.
And let me hand those to you.
Can you please identify what you've just been handed?
Exhibit 9 is titled Letter from Seguro Water Company
LLC and San Pedro Water Resources J.V. And Exhibit 10
is titled Correspondence from Dina Ferguson. Ok. On
Exhibit 9, can you briefly summarize why Seguro
sent this letter to the Commission and Blue Cereus?
Ok. So Exhibit 9 is a letter that was prepared and
dated um January 8th 2024. And it is um a notice to
Blue Cereus from both San Pedro Water Resources and
Segura Water Company. It identifies um historical activities
that occurred generally beginning in January of 2018.
That were efforts made uh unsuccessfully to resolve
um
uh let's see here.
I guess let me just identify in each paragraph. On
the letter January 18th, we started meeting with um
I say we as Seguro. Although I was not an owner at
the time, I was present at that meeting. In August of
'21, Blue Cereus provided as an order from the then
Chairman of the Public Utility Commission. A docket
that identified a plan of action in order to acquire
an alternate water source. That would um alleviate both
San Pedro and Seguro from having to provide water.
Um, in June of 22 it identifies in the letter here
that um the wholesalers and Blue Cereus. I uh entered into
an agreement in principle, commonly referred to as
the settlement agreement in 50239. Um I believe even
in the opening statements. I understand that, that was
an agreement that was basically affected an asset swap
involving an STM application. Um In June of 2023 the
Texas Commission on Environmental Quality issued um
default order in um their action. TCEQ specific docket
number and the SOAH docket number there. Um And that
paragraph also states that the order provided for a
six month deadline to finalize a contract with a water
provider for the public drinking water systems.
And um that the next paragraph identifies that since
that order went into effect. The wholesalers had not
received any communication whatsoever from Blue Cereus.
In regards to an attempt to enter into any kind of
mediation or negotiation or proposal for terms of a
contract to purchase water from the wholesalers. And
that the wholesalers in the final paragraph. Identify
that following the six year effort to establish a contract
with Blue Cereus. That there has been that that result
has, has resulted in no constructive progress towards
the establishment of a contract. And that the wholesalers
will not be able to provide drinking water to Blue
Cereus going forward. So the last part I want to just expand
upon a bit. Did Seguro intend on terminating its provision
of wholesale water to Blue Cereus at some point after
this letter? Yes, sir. What was that? We had not
set a specific date in mind. We understand the critical
nature of providing drinking water to over 100 households
through Blue Cereus distribution system. So when this
letter was sent to Blue Cereus, we also forwarded it
in um, email correspondence to both the Texas Commission
on Environmental Quality and the Public Utility Commission
Staff that we've been working with. In order to help
or to hope I, I should say. That there would be some
sort of a regulatory solution to this. In order to prevent
um, the wholesalers from having to turn off the water.
Let's take a look at Exhibit No. 10. And can you
tell me briefly what that is? It's identified as correspondence
from Dina Ferguson? That would be me.
Ok. And does this exhibit contain communications between
you on behalf of Seguro and the wholesalers? And representatives
of the Office here at the division, at the Commission? Yes. It's an
email correspondence between myself and Nemat Muntahan.
Ok. And what was the nature of that communication?
Um, the initial email at the bottom of page one here
is my initial correspondence to uh Nema and various
personnel at TCQ, including also Bob Ferguson, who
is the owner and executive for representing uh San
Pedro Water Resources. And it's sharing our January
letter that I just described with those agencies and
those personnel. Um The next uh email above that is
from Nema and he is requesting that we commit to keeping
the water on at least until February 1st for which
I go ahead. And that's, and that's kind of the point
I want to want to stop you there just for time's sake.
And, and ask you did you agree to hold the water
on until at least February 1, 2024? Yes. Ok. If the
commission had not entered an emergency order, would
seguro have turned off the water on February 1st.
You know, I hate to say that out loud because it sounds
so harsh. Um and callous. Um because like I said, we
do take it very serious, our obligation to continue
to provide water, but because of the legal remedies
that we had sought to resolve, um and not seeing any
progress and the efforts that we've made towards that.
We were coming to a point and still are um where we
just cannot continue to do this as a nonprofit or charitable
act. All right, I'll pass the witness. Mr. Floriani, any
questions? Yeah, you really Mrs. Ferguson. You really
didn't answer the last question. So, is your answer
that you would have shut off the water? I'm sorry,
what was the last question again? I said, you really
never answered the last question that was asked of
you. You said you'd hate to say it out loud and you
didn't want to provide free services. But is your answer
you would have shut off the water?
I feel at this point the answer is yes. So you would
have denied the service to the retail customers because
of your dispute with Blue Cereus. Our customer is not the
retail customers. Our customer is Blue Cereus. But you understand
cutting off the water is cutting it off to a retail
customer, correct? I understand us, cutting off the water is
cutting off the water to the distribution system that
provides that water. Once that water leaves our facility
and our plant, it no longer is ours. And you understand
that Blue Cereus is exclusive source of water for its
retail customers what you provided, correct?
Again, once that water leaves our plant in the, in the
specifics of. You're not, not responding to my question. You understand that you are
the only source of potable water for Blue Cereus to
provide to its retail customers? Currently yes. And
at the time you threatened to cut it off, you were
the exclusive source, correct?
Yes. I, I don't consider it a threat. I'm sorry.
Now the you said you've been involved in these water
companies for four or five years as a, as an officer
an employee, correct? As an officer, yes. And how long
were you involved with the companies prior to that
as an employee or a contract employee? Began around
2017. And you understand that the contracts that you've
testified to the written contract terminated in 2014
before you were ever involved, correct?
Again, I'm not an attorney. So I, you know, there are
a lot of other things within that contract. But it
does state in there that the contracts expire without
additional action on that date. But you were not involved
with the companies at that time in 2014, correct? No sir. And
uh you weren't involved in the series of oral agreements
between your companies and Blue Cereus that took place
after 2014, correct?
I feel like your question is presuming that I agree
that there were oral contracts. If there were any agreements
you were not part of them though, correct? I would not have
been part of anything prior to 2017. And the Exhibit
6 which you testified to is a bill that you created
dated August 1st 2018, correct? Which Exhibit? 6? Six.
August of 2018, yes. And the terms of that bill are
the same payment terms as outlined in the original
contract, correct? Yes.
Now the you've submitted two exhibits from 2018 stating
that Blue Cereus was not in compliance with the payment
agreement, correct? I didn't submit any exhibits. You've
testified as to two exhibits as authentic and created
by your company. That Blue Cereus did not make payments
to you in 2018, correct?
Say the question again. You've testified as to two
exhibits created by your company and your company's
attorney. Stating that in 2018, Blue Cereus did not
comply with payment terms of an agreement, correct?
Of the 2009 agreement? Of any. Written agreement.
Any agreement?
I think I'd have to have more specifics about which
agreement you're talking about. Let me make it simple.
In 2018, you stated that that Blue Cereus was delinquent
in making payments to your companies, correct? Yes.
And also you had an attorney state that they were delinquent,
correct? That's in the other exhibit.
Yes. And in December of 2021 you were part of a SOAH order
which set the rates by which my client had to pay your
companies, correct? That was effective in December
of 2001, yes. 2021, correct? Yes sorry, I said 2001. And in June
of 2022 you entered into a mediated settlement agreement
with my client. Whereby you would exchange assets and
have no further business with each other. If the agreement
was effectuated, correct?
Yes. And if that agreement was effectuated, there would
be no need for any contracts between you and my client
in the future, correct?
If it had come to completion and the parties had separated
the business interest, yes. Well um,
state the question again. Question is if that agreement
from June of 2022 was effectuated. That there would
have been no need for any contracts whatsoever between
your companies and my client ever again, correct? Not
for payments going forward. However, the past due payments
have never been cured. So it's your testimony that
the mediation agreement didn't address all issues including
past payments?
Agreed. And in November of 2023 you unilaterally declared that
the mediation agreement was void, correct? We terminated
that agreement. And by what authority did you terminate
that agreement? As the owner and executive of Segura
Water Company. And I believe that agreement, that notification
was also executed by Bob Ferguson. The managing partner
for San Pedro Water Resources Joint Venture. And Mr.
Ferguson is your husband, correct? Yes. And you and
Mr. Ferguson in November determined that that mediation
agreement was no longer valid, correct? No, we didn't
say it was no longer valid. We said we terminated it.
Okay. And, and then you said now you have a duty to have
gone undergone contract negotiations with us over the
last several months, correct? I did not say that. You said it
in your letter that has been admitted as an exhibit.
The letter dated January 8th 2024.
Wait, which exhibit is that?
I found it. You have it? Exhibit 9? Exhibit 9. Okay.
And so you're presuming what? Well, I'm not presuming
I'll just read what you wrote you. You said in June
of 2023 the Texas Commission on Environmental Quality
and State Office of Administrative Hearing. Determined
B.C. does not have a contract to purchase water from
your company in violation of the Texas Administrative
Rules. And then you go on to say you anticipated my
client would reach out for negotiations with you to
come to an agreement that would provide water, correct?
We were hopeful. Why didn't you reach out to my client
to negotiate?
I don't have an order against us from the State of
Texas stating that I'm required to have a contract.
I don't have any compliance issues with the TCEQ. Is
it true that the reason we're here today is because
you threatened to terminate the water supply to Blue
Cereus LLC? I have not threatened anything. You stated that
you would turn it off though, correct? Yes, sir. And
you wouldn't be able to provide continue potable drinking
water to my client? Yes. And you stated in the email
to the Commission. That it's been admitted as an exhibit
that you will at least provide it until February 1st
of 2024, correct? Correct. Did you reach an agreement
with the Commission or with the temporary manager to
provide water after February 1, 2024?
Did we? Yes. Like when? I mean, I didn't even know who that
was until after the appointment was done. I guess I'm
asking a yes or no question. Do you have an agreement
with the temporary manager to provide water? We have
an interim understanding, yes. And what is an interim understanding
in your mind?
We said we'll keep the water on and we didn't want
any changes in anything. Until the temporary manager
through today's process would be affirmed by the Commission.
And if the temporary manager is affirmed and appointed
for 365 days. Do you agree to provide potable water
to the temporary manager under the SOAH order scheduled
payment? No, sir. So it's you, you can decide at any
time hereafter today that you want, you can stop providing
water to the temporary manager? No. Will you agree
to provide them water? We are working towards that
end. Yes, sir. So you're saying you might, if they
agree in a contract?
We are working towards an agreement for that provision.
On a long term basis under their management of Blue
Cereus.
Pass the witness. I'm going to go ahead and offer you a chance to take
a look at Exhibit No. 8. Which I believe you
were just asked questions about by opposing counsel.
I'm going to go ahead and hand it to you. I didn't
haven't handed to you yet. Now you have it. Can you
please tell the court what document I just handed you?
It's titled the TCEQ Order Docket number 2022-0010-PWS-E.
Now we at the state do a couple of weird things when
it comes to numbering pages. If you would turn to,
I believe the second full page that has the mailing
list. Let me know when you find it. Yes, sir. Ok. Can
you tell me if you identify Seguro Water Company as
being an identified recipient of this order? We're
not? Nor is San Pedro Water Resources. My very next
question, thank you for that. I'm gonna have you turn
a bit further to page five, the numbered page five.
And actually keep your finger there. My apologies.
Let's go ahead and talk about going back on that mailing
list. Is there a section that identifies a respondent?
On the mailing list? Correct.
Yes. Who is the respondent? Our Brian Daniel, attorney
for Blue Cereus, LLC? Ok. Now going back to page number
five. Yes. Ok. And there should be a numbered paragraph
number two. Within 180 days after the effective date
of this order. Respondent shall secure water purchase
contracts for both La Coleta Estates and San Pedro Village.
In accordance with 30 Texas Administrative Code section
290.45. I believe the answer is going to be obvious.
But are you the respondent identified in this paragraph?
No, sir. Who is?
As I just read
our Brian Daniel representing attorney for Blue Cereus,
LLC. So does this order obligate any of the wholesalers
here today, Seguro or San Pedro Water Resources to
negotiate and affect a contract? No. Pass the witness. No further questions.
Commissioners, do you have any questions?
Ok. This should conclude our witnesses at this time.
Any other questions by the Commissioners?
Let's move on forward. Your, your excused to sit down.
Do I need to go back to the sequestration or? Now that
we're done with witnesses, you're welcome to take a
seat. Ok. Could be something against him. Ok.
May I proceed? Yeah, just let me make sure it does.
Yeah. I, I have no objection to the new procedure.
I wanna make sure that's still happening.
Gotta go.
May I proceed? Yes, you may proceed. Call Jimmy Allen
Hall as a witness.
Would you please state your name for the record? Jimmy
Allen Hall. How are you currently employed? I'm Judge
of Hayes County Court of Law, Number 1 Texas. And
how long have you been so employed as that Judge? Since
January 1st of 2023. And what is your connection if
any with Blue Cereus, LLC. I am the President and Member
of Blue Cereus, LLC. And would you briefly state your
employment history prior to you becoming a Judge? I've
been a licensed attorney for 41 1/2 years. I started
out at the Texas Department of Water Resources, a predecessor
to the TCEQ. Did everything I could there, water quality
hazardous waste, um even cross training and water rights
um on site sewage facilities, section 401 section,
404 requirements, open records. Any, almost any and
everything. I went into private practice with the Bickerstaff
firm after that helped create the Barton Springs, Edwards
Conservation District. Represented river authorities
and counties and other persons with water issues. I
left that firm in
1987-'88. Went to Scannon Buckle where I did more water
work, secured discharge bands on the Highland Lakes.
Defeated a hazardous waste permit uh for salt dome
hazardous waste facility near Lake Houston. Became
board certified in ministry law in 1989. Represented
doctors, nurses and other occupational licenses uh
with special counsel to the Edwards Aquifer Authority on
the initial permitting process they went through.
And have been doing quite a bit of litigation over
that time um and became a solo practitioner in 2005.
Now, you heard the testimony of Robert and Dina Ferguson
today, correct? Correct. And you heard them declare
that the mediated settlement agreement that you reached
with them on June 17th 2022 is void or terminated,
correct? I did hear that. And do you believe that agreement
to have been terminated? I do not. And do you believe
the agreement is void? I do not. Has any prior of fact
ever determinated that this agreement is void or has been
terminated? It has not. Now as part of the, would you
explain in brief what this mediated settlement agreement
did in June of 2022? It was an attempt with negotiations.
There was myself and my engineer Don Roscher for Blue
Cereus, Selena Romero and Bob Ferguson for the water
utilities. And I'm going to call them water utilities. They're
not wholesalers under the, the statute. They are defined
as water utilities. Blue Cereus is a reseller under 13.002,
Subpart 23.
We negotiated this agreement. We did prior to this
mediated settlement agreement, work on a contract.
The big stumbling blocks are the Ferguson's wanted
to be able to terminate water any time they wanted
to, in essence. Given the obligation that Blue Cereus
has as a CCN and a provider of potable drinking water
I couldn't agree to that. I needed notice and some
sort of opportunity, you know, some means to secure
water.
And the other big issue was from Blue Cereus' perspective
was having access to the master meter. I got trained
as to how to calculate line loss. I have to have that
master meter number to see what's lost in the lines
after it leaves the plant into my customers homes and
residences. I even offered to buy the mass demeter
and put it in a different location. But none. Well
with respect to the agreement itself. Well, basically
the agreement itself. The idea was put out, hey why
don't we just divorce. Mr. Floriani, he's a divorce
attorney, Divorce and
Blue Cereus was given the option to pick one system
and I picked La Coleta Estates. Because I know many of the
customers out there uh fairly well. And the agreement
was to as that exchange. And as part of that asset exchange
would you receive the source of water for one system.
And then convey the retail connections for another
system back to the wholesalers. Correct. We go through
the STM process as I stated in here. And then I have contacted
Staff of the PUC or whether we needed one for both
systems and they said yes. Even though it just says
one in here. Now you heard Mr. Ferguson testify this
morning that you did not act in good faith in dealing
with them. After the execution of this agreement in
June of 2022, correct? I say that it's not true. And as part
of this June of 2022 agreement, it created an obligation
to exchange documents for review and execution, correct?
Correct. And do you have an obligation to provide a
draft STM to the wholesalers within one month after
the execution of this agreement on the 17th day of
June 2022, correct? Correct. And did you provide that
draft document to their attorney at the time? I did.
And uh did you provide any requested information from
that attorney regarding the execution and affectation
of this agreement? Yes. We had a series of exchange
of emails getting the draft, underlying draft STM which
is provided by both parties. Both sides have to sign
it. I gave it to Ms. Romero. We exchanged information
or emails and I sent her more information. And I gave
her everything she asked for. It was only subsequent
when Mr. Buck got involved that they needed this
financial information but. Well let me stop you there.
So you provided everything that Ms. Romero asked you
to provide, correct? That's absolutely correct. And
then when they discharged Ms. Romero. Their new attorney
Mr. Buck asked for additional information that's not part
of the mediation, correct? Right, they had. What did
he ask for? Well they said, well we had some time
to get up to speed. So it took a month or two
they asked for the financial information, which is
an attachment. Which I did provide them because the
temporary manager was in place before I did not have
all the expenditures. So I provided them 10 years of
past financial information. With a gap in there when
the temporary manager, but I gave them everything I
had in QuickBooks. Printed report, sent send and sent
it to uh Branscomb Law Firm. Then and I'll also point out.
That the transferee is also obligated to project five
years into the future. That's their job, not the transfer's
job. And in addition to communicating with their two
attorneys post mediation agreement, did you also communicate
with the Fergusons? I did. And what was the nature of
those communications? Well, we had communications repeatedly
because of the failures of their plant. And we had to
issue boil water notices of compliance with the TCEQ rules.
As well as coordinate when things are going to be fixed.
And even if
no, that's enough. And so were boil water notices issued
to your retail customers after this agreement was signed
in June of 2022? Yes, several. I think for La Coletta
we had 7 due to plant failures at La Coletta and
3 at San Pedro Village. Now, were you surprised
when you saw the communication from Ms. Robinson terminating,
attempting to terminate this mediation agreement in
November of 2023? Actually, no, I was not surprised.
I was disappointed, saddened but not surprised given
her past behavior. Is it your testimony that this mediation
agreement is a valid contract that settles all of the
disputes you had with the two wholesalers? Yes, in
paragraph six of that settlement agreement. The lawsuit
pending in Del Rio that we filed. To dispute their
fanciful,
illusory trying to collect for back amounts which Bob
Ferguson never agreed to. That would dismiss that, that
would resolve everything in the past. As Bob Ferguson
like to say that's water under the bridge. Let's not
deal with it and settle up the other dock dockets here.
They would get their rights approved by the PUC for
their system. And we would get our rates for the La Coletta
Estates system separate. We've divorced, we split the
sheets. And is it your intent to seek legal enforcement
of this mediation agreement? Absolutely. By specific performance?
Specific performance as well as actual damages? And if this
mediation agreement is enforced by a, a appropriate
forum, would there be any need for any contracts between
you and the two wholesalers? No, we wouldn't have any
relationship we wouldn't need a contract. And, um
is it your position that the two wholesalers are themselves
public utilities which are subject to jurisdiction
of this Commission? Yes. It's if you Docket 50769
with the then temporary manager, Lynn Sherman and I filed
with the PUC and interpreting Chapter 13 of the Texas
Water Code. That they provide potable water. And therefore
they should have a CCN just like Central Texas Water
Supply up on Still Hollow. Providing water to one of
my former clients, Kempner Water Supply. Has Blue Cereus
LLC ever cut off water to any of its retail customers?
No, other than we never cut it off. We only did
it in one case and it was requested by the owner. Because
they vacated the house, it was empty. But you didn't
want to pay bills anymore, so we turned it off. You've
never terminated any water from any retail customer
even for non payment of bills, correct? That's correct.
We've taken people to court but we've never turned,
actually turned the water off. That's cruel and unusual.
And has the two companies that provide you water, in
fact, cut off water supplies to you before? Yes,
as Ms. Ferguson testified. They turned it off or I don't
know Mr., Mr. Ferguson, one of the two. And when Mr. Sherman
was the temporary manager, um you have a monthly cycle.
You can't really change that because people pay their
bills on a monthly cycle. You read the meters on a
monthly cycle, you send the bills out and they pay
a monthly cycle. Mrs. Ferguson contacted Mr.
Sherman and said I want it sooner and gave him five
days notice. He was in the middle of a rate case before
this agency and couldn't get it to it immediately.
But she turned the water off anyway. Now, after this
agreement was effectuated in November of 2022 you were
elected as a Judge, correct? Yes. And you took office
in January 2023, correct. That's correct. And at that
point, you weren't allowed to practice law related
to this case, correct? Correct. And you hired an attorney
Mr. Daniel to represent you at that time? Yes. And he
was the one that was exchanging information with the
Ferguson's attorneys, correct? Yes. And Mr. Daniels
recently passed away and you've not had access to his
emails and communications file with respect to the
attorneys for the Ferguson's, correct? That's correct.
He um when I got, I think I got the notice of the termination
in the mail on, I think it was the 14th of January
or the alleged termination. I contacted Mr. Daniel.
He sent me a text, I'll get back to you when I
see it back. Get back him on the slopes with my children.
I didn't hear back from him. So I contact him on February
1st when hey, I got just notice there's a temporary
manager. And I got a text message back from his wife
who's also the financial secretary.
From my, from my church that Brian was deadly ill and
he died on March 6th, and we had his funeral last Friday.
Now, but even though there may have been communications
through your attorney over the last year plus. You,
you are aware of a term of communications in the form
of 22 emails to their then attorneys. Conveying all
of the information required under this media, correct?
Correct, as well as the subsequent one with the branch
confirmed. And I didn't have time last night to print
out or count those. But I did uh communicate with Mr.
Buck and I can't remember the associate's name as well
as Rhonda Jolly. And she and I had numerous conversations
up through November of 2022 to try to get it uh settled
or something. And she floated the idea after Bob
Ferguson blurted out, just buy me out. Um and she put
together something and said it to me. And unfortunately
I was very sick at the time and I
send it on to Mr. Daniel and I never got back to
it in 2023. Pass the witness.
Good morning Judge Hall. I'm going to try to keep this
very brief. But I do want to ask you a very quick
question about respondent's exhibit number one. And
I believe you have a copy of that in front of you.
If not, I can provide. Is that the mediated settlement
agreement? That is. Is it your testimony that this
document is effective today as we stand? It sure is.
Ok. And by nature of it being effective, what portions
of the current CCN. Do you presently own as the owner
of Blue Cereus? I don't, Blue Cereus doesn't own the CCN. It
holds it in trust for the public utility and the State of Texas.
And the two portions are separate. One is labeled San
Pedro Villas. The other one is labeled La Coletta
Estates. I'm not sure if that was quite answers my question,
but it was a bad question. So let me rephrase it. As
it stands today March 21st 2024, which of the two public
water systems you just identified still remain part
of the Blue Cereus CCN number 11088?
The as I stated, the San Pedro Village Water System.
I don't know the PWS number off the top of my head.
The La Coletta Estate's water distribution system both
off of US highway 90 West outside of Del Rio. Now
this is where I get a little confused. Because your
previous testimony and the questions given by your
counsel when cross-examined the witnesses. Has been
that this document is already effective as of today.
Doesn't this document agree to transfer San Pedro Village
to the wholesalers? Yes, by effective. I apologize,
you misunderstand. Effective means it's still in force
in effect yet to be fully executed. The process and
the end of the road is PUC Commissioners approving
as required by Staff two STMs and the transfer. You
can't, I've done this before. You can't transfer the
assets until you have the PUC approval and then go
file the requisite documents. If you noted here,
the drafting of the transfer of the real estate and
improvement documents are addressed in here. So it's
effective, it hasn't been fully executed. It's just
like if you had a loan for a car. It's effective until
you make all the payments. The difference being when
you take out a loan for a car, you can drive that
car off the lot. You still have to pay for it, but
you can drive that car off the lot. So let me ask
you this. Well, maybe I used a bad analogy. Perhaps
but I will still ask you the question. As it stands
today, do you have ownership and control of Seguro
Water Company or its assets, the wholesale system they
possess?
No, and I don't know why you're asking that question.
Well, isn't that the asset that you would have traded
for San Pedro Village? Yes. All of the conditions precedent
in a contract, all have to be satisfied before it is
finally executed. Sometimes executed gets confused
with signing. But until all the terms are satisfied
then the ownership of the assets would transfer. There's
no contemplation in either of the agreement that Blue
Cereus would own the, the entity, the membership
interest in San Pedro or Seguro Water Company LLC or
any of the partnership interest in the San Pedro Water
Resources Joint Venture. This is just a trade of assets.
But it has to be done in compliance with PCU, PUC
rules almost at TCEQ. And the Texas Property Code on
the conveyances of real property and the improvements
they're on. But what are those assets from Seguro that
you would have obtained, had this contract or had this
agreement in principle rather gone through to its fruition?
Well, it may still if we have our way in any specific
performance. The assets that Blue Cereus would pick up would
be the, as Mr. Ferguson said the plant which is a
storage tank, pressure tank, chlorinated master meter.
Which I did offer to buy from him. The lot in question
the real property question in exchange for the distribution
system at San Pedro Village. But right now, you do
not have control of those assets?
Those assets I have control of the San Pedro Village
Water Distribution System. Blues Cereus does. You have control
of the Seguro wholesale assets? No, that's not your question.
You asked me a compound question. I cut out one part
and answered that part. I do not have control over anything
owned by Segura Water Company LLC. Which you would agree
that as it stands today includes the wholesale plan?
Absolutely. Ok. Does this agreement actually define
a term called the effective date? I'm sorry, I didn't
hear your question. Sure. Let me rephrase it. Is there
a term of or title the effective date that is used
in this agreement?
Yes, it's on paragraph 14. What is, what gets you to the effective
date? It's the
PUC approval of the final STM or CCN applications.
Or any other thing that PUC says we need to do. We
being the two parties to the three parties to this
agreement. So it's not as simple as just on June 17th
2020. Blue Cereus and the wholesalers agreed that this
is how we're going to divide the pot. You still needed
to have the PUC's blessing, the Commissioner's blessing.
In order for this agreement to be completely effective
and divorce the assets. As your counsel previously spoke.
Well again you're using effective, which can be confusing.
It would be fully finalized and completed upon PUC's
approval. Of therefore allowing the legal transfer of
the assets. At what point did you transfer or I should
I should rephrase. Let me withdraw that question. Have
you ever submitted the draft STM to the PUC for its
review? No, an STM is a transferor and a transferee. Blue
Cereus would be the transferor.
And in the San Pedro Village would be the San Pedro
Water Resource Joint Venture would be the transferee.
We both have to sign it and both have to submit it.
Blue Cereus agreed in paragraph nine to do the first
draft. The draft, initial draft of the STM which I
did. I sent it to Ms. Romero. It was a day or
two late because we got notice I was working with my
engineer the week before. But we got notice that my
mother in law was dying so I couldn't finish it up.
Sent Ms. Romero an email and she said, fine, give
it to me as soon as you can. And I did just
shortly thereafter. It may have been the 18th, 19th
or 20th. I don't remember. But there was no heartburn
on either side. They understand people die. So if I'm
understanding your testimony correctly. And you submitted
a draft STM within 30 days of this agreement. That
would have been, let's say on or around July 15th,
16th, 17th of 2022. Well 30 days would have been the
17th, which is a Sunday. So I sent the email to Ms.
Romero on the 18th because I couldn't finish up because
my mother-in-law was dying and I had to be with my
wife. But I shortly a day or two later I did.
Why have you not sought to enforce this agreement,
if it is in fact still enforceable. In the more than
a year and a half since submitting that STM. Well,
several reasons, one as you pointed out that my, I
testified. I was elected to the bench and it's a full
time job. Two, I have had an attorney. Unfortunately
he can't be here today because he dead, working on it.
Three, Mrs.. Ferguson was the instigator of the TCEQ enforcement
action. She was on the Zoom there at the hearing because
she used to work at the TCEQ and she loves to go
make messes. And I don't know why she doesn't like me
but she sure as hell doesn't like me. She gives me
grief every time I turn around. And um we were dealing
in 2023 with numerous boil water notice problems. And I
only have so much bandwidth to devote to Blue Cereus.
But my view was by Blue Cereus complying with requirement
number nine of providing the draft. The ball was in
their court. I had SOAH order number 12.
As well as um
the prior modification, modification of the written
agreement. So the ball was in the court.
I was happy to go forward, but I needed their next
draft to comment on. And if it was acceptable sign
I never got one. Nothing, zero, nada. And Ms. Jolly, she
seemed to be taking a different course. Possibly getting
rid of the mediate agreement whereby we should buy
out completely. I'm sorry, who is Ms. Jolly? She was
their attorney at the Branscomb firm.
And I show in the record here that you only have two
exhibits that were submitted on behalf of Blue Cereus.
Those exhibits are the agreement in principle marked
as exhibit one and then a list of dates marked as exhibit
two. Is there a reason why the draft STM or the 22
emails you referenced earlier were not submitted as
exhibits?
Probably not enough time and focus and my attorneys
as he just announced to the court, he's very new. I
did send all of them to Mr. Montahan.
Neema. So he's got them all PUC has it, but they
will not act on it. You can but they have not been
entered as exhibits in this hearing. No, but I testified
that I did it. That's in my court. That's sufficient
testimony.
I'm under oath. I, I'm a firm believer in seeing is
believing. But I don't see a draft STM but I will take
you at your word. I think I sent a couple to you as well, sir. I don't have
a copy but you may send one after the hearing, if you
so choose. I'll copy the TCEQ and the PUC.
I am going to move over to what should hopefully be my last
two exhibits. And those are going to be Commission Staff's
exhibits 16 and 17. I go ahead and have them combined
over to you now. Ok.
Now, I'm unsure since I do recognize you do have a
day job that is not Blue Cereus. But have you ever
seen a document such as the one currently identified
as Exhibit 16. I've seen this one specifically. Okay,
can you please explain to the court what this document
is? It's a complaint filed by one of the customers
Mr. Terpak with the PUC about the water going off due to the failure
at the Segura Water Company water plant. Is that the
totality of what this complaint mentions? No. Does
this complaint reference in any capacity CSWR Texas
or more specifically their appointment as temporary
manager Blue
Cereus. Yes, it said he received a letter from CSWR Texas Utility
Operating Company. And what was the date of this complaint?
It looks like March 6th. Ok. And you would agree that
that is at least a month by my count a month and
five days after the appointment of the temporary manager,
correct?
You take judicial notice of that. Ok. I'll take that
as a yes. There is a section in here. We immediately
contacted Blue Cereus. Who told us Blue Cereus is still
handling all customer accounts as far as I've heard
from Mr. Hall despite the ongoing litigation disputes
with the wholesalers. If I hear anything differently
I will let you know as soon as possible. Have I read
that correctly? Yeah. Ok. Since it references a Mr. Hall
I'm assuming you did not issue this statement. By chance
do you know who handles customer complaints for Blue
Cereus? Probably Ms. Robinson. Ok. And she is not here to
testify today, correct? Ok. When were you provided
notice of the appointment of the temporary manager
for Blue Cereus?
I think I got an email in on the 1st of February
and I called you that day, I think. In fact, you did.
Yes. So I'll go on. This complaint continues so now
we have a bill from Blue Cereus due at the end of
March. Do we pay them? Have I read that correctly?
Yeah. I want you to take a look at exhibit number 17 And
please tell me if you can identify what that document
is. It's an invoice. Ok. What is the date of this invoice?
February 29th. Ok. Who submitted this invoice? Blue
Cereus. And you would agree that February 29, 2024 is after
the appointment of the temporary manager for Blue
Cereus? That's correct. Ok. Why did Blue Cereus continue
to issue bills? If you look under the term service from
January 13th to 2/10. The I made the Executive Decision
that it would be a total pain in the rear. I experienced
with the prior temporary manager of keeping the accounting
and bookkeeping correct. To do the this last segment
because it does include the majority of the time with
prior to February 1st. And that's how when our, our
beta reader goes out once a month and I couldn't make
him go back out on January 31st. Because I didn't know
until February 1st. So not to rock the boat. I made
that executive decision to do it. Because personally
I don't believe the order is valid because it's unconstitutional
for lack of due process and taking property without
compensation. So it's your testimony that the executive
order filed on an emergency basis that is somehow a
authority that is outside of the scope of the Executive
Director of the Public Utility Commission. That's my
legal opinion, correct. Ok.
Do you feel that by continuing to bill Blue Cereus
customers during the period where a temporary manager
has been appointed could create confusion among the
Blue Cereus customer base?
I don't have a feeling one way or the other. I will
tell you my opinion. Ok. Based on exhibit 16, has your
decision to issue a bill to Blue Cereus customers during
CSWR Texas temporary management of Blue Cereus caused
confusion amongst Blue Cereus' customers?
I would say the confusion is the issuance of the temporary
or the emergency order.
I'll continue. Um
So now we have a bill from Blue Cereus due at the
end of March. Do we pay them? Do we send that bill
and remit to CSWR? Without social media we would have
no idea if they may or may not be any change. Now
have I read that correctly? Yes, it's in the record.
Would you agree with me that this customer appears
confused as to who he should be paying during the temporary
management period? Yes. I'll pass the witness. No further questions.
Commissioners, any questions?
I don't think we have any questions, Judge Denmark.
This might be a good time to take, uh like a 45
minute break for the Court Reporter and for folks
to get some lunch. So why don't we come back uh, recess
and come back time certain. Let's say 12:15.
(silence)
The question is whether to allow the parties five minutes
for closing arguments or whether you'd like to go and
take a break now before the closing arguments? I'd
say this seems to have taken a little longer than we
anticipated. So why don't we just break now and come
back and hear closing arguments? All right. So we'll
stand in recess until 12:15.
Ok. We will reconvene at 12:21 and I will turn it back
over to our ALJ. Good afternoon Commissioners. I call
back to order Docket No. 56171, Commission Staff's
petition for an emergency order.
Commissioners, do you have any questions? I did and
witnesses thank you for coming back up. I guess just
a couple of things. First,
The draft STM that we've heard about. Is there any
chance of movement on this, do you think? I just want
to kind of ask each of you? Is there any chance to
come to an agreement on the, the swapping of these
assets at this point in your opinion? If we gave you
more time to work it out? No. Yes. As as we stated
we're bound on enforcing about specific performance
we have a binding contract. We tend to go forward because
it would resolve the problem we have.
As, as far as Segura no, we don't, we
don't see that that's got an opportunity to move forward.
It's been since June of 2022 when that agreement was
executed. Yes, an initial draft, partial, partially
completed was provided within the 30 days in there.
The, the agreement in principle was um a an 11th hour
agreement in a mediation. It was orchestrated by the
alternative dispute resolution team within SOAH.
It was on a Friday um when we started the mediation
um we mean the wholesalers came in with the idea that
it would be an all day event. The the actual mediators
had to dismiss themselves at three o'clock in the afternoon
or so, three or four. Mr Hall also dismissed himself
late in the afternoon. But at the very end of obviously
it often happens is on a Friday mediation discussion.
Um you know, wanting to get something in place. We
um talked about the idea of asset swap. And um while
the complete settlement agreement, as you see it today
was not executed that day. We worked through the
weekend in a presentation that was limited in scope
in order to prevent complications and roadblocks from
it happening. We were hopeful that it would be an exit
for the issues that the wholesalers and the retailer
have had. Blues Cereus did provide that initial draft application
with a lot of significant data and information as it's
represented. Um it was never submitted because the
financial data, partial financial data that's required
as part of the application was provided in August of
2023, 14 months after the execution of the agreement.
In August of 23 the financial data that was provided
was missing and lapse of income information. It only
included expenses and that would not have met the sufficiency
requirements as we know them. And um in order to have
the application move forward. And so we did not, we
opted not to sign the um application. That's not to
say that Blue Cereus didn't have the opportunity to sign
it at that point. To my knowledge, it's never been
actually signed by Blue Cereus um for submission. And
so it was then in November of 2023 that we provided
that notice to terminate movement forward as we
know that agreement. Ok. So just be clear, no benefit
to offering more time to try to work this out. Not
under that agreement no. It's too vague and minimal.
It would have to be renegotiated. Do you see benefit
to that? I mean, I, I guess what I'm asking is this
so intractable at this point between these two parties
that you don't see a way to get to an agreement, even
if you started over?
After 6 1/2 years, no sir. Additionally, we have legal
representation at that time because we could afford
it. Although we still owe a lot of money for that.
At this time, we don't have legal representation and
we would have to reengage that. In order to feel like
we could enter even into negotiations. Due to all of
the complexities and allegations and loopholes that
are within two state agencies and civil issues between
the two parties. I disagree wholeheartedly. Because
in my experience over 41 plus years. The even
before we reached the mediated settlement agreement
in this case, it was intractable. But we reached a
mediated settlement agreement and I refer people to
mediation and then all the time. And I guess 90% of
the time they come back. And I think at least between
Mr. Ferguson and I, we Ferguson and I. We could work something
out. But I, I think it's worth a valiant effort to
do so rather than to spend a lot of time. And um
you know, it's worth sitting down at the table without
the uh pressure of a state agency looking down your
throat, uh checking everything. But um you know, if
there's a mediator that could work us through the agreement
if anything. I disagree with the characterization of
the mediation settle agreement by the Fergusons. But if
there are things I made back to the same mediators
to flush out anything or flesh out something that can
be done. I'm willing to do the effort because I want
it's my obligation or it's Blue Cereus obligation to
hold over CCN. To make sure there's adequate continued
supply of potable water. And I keep running into the
problems with the facilities of the Ferguson's breaking
down and they don't, they don't get fixed.
Excuse me, may I ask a question? I don't know if it's.
Here, hold on. So
it's my understanding that perhaps the temporary manager
may be interested in buying this utility. Do you have
any interest in selling? I've had a discussion. We're
gonna talk with the attorney for the temporary manager.
And I did get a call from um, the January 8th letter
January 8th letter I got on the 14th and the 18th.
I got a letter from uh Central States saying, do you
want to sell? I said you need to talk to the partisans
because I don't own the top and bottom so to speak.
And then the next thing I know temporary manager
which causes me some heartburn to begin with.
But um, if it's a reasonable price, sure. I'd love
to get away from the Fergusons as fast as I can.
My, my question is if there is an appointment of a
temporary manager that does that preclude Blues Cereus from
negotiating a swap as you're replying. I don't believe
so. I'm just trying to see kind of where we are. Because
my understanding is we don't have to make a decision
in this docket today. So I'm just trying to procedurally
figure out for myself and my colleagues kind of what
our options are so. Do y'all have? I actually do have a question. Mr.
Hall, in the findings of the fact that we've seen in
this uh in this case. It looks like there's been a
temporary manager appointed at least two times, two
previous times, maybe three previous times. What
what is the cause of temporary managers being appointed
often in this case? Well, the cause is the Ferguson
threatening to turn the water off and the PUC take
the position that they don't have jurisdiction over
these potable water supplier. My opinion and Mr.
Sherman's opinion that we petition we filed in docket
50769. Is you do and you should set their rates that
we don't need a contract. They should be set by the
PUC. And they prove up their case while we prove up
our case separately. With respect to the repeated is
because of the I think under the prior statute until
they made it 365 days, it was 180 days. And the first
appointment was to my certified operator out in Del
Rio, Jane Whaley. And they, I hate to say the word but
someone lied. And said that Blue Cereus agreed to Jane
Whaley as a temporary manager. We didn't even know about
it and Jane Whaley didn't have the bandwidth to do
it. And so they renewed it. Don't you own this system?
Aren't you the CCN holder? Yes of the. Then don't you have
the obligation to provide this service? Yes. And I
had an agreement with my good friend, former good friend
Mr. Ferguson to do so. And it changed. I just, I just
don't understand. I mean, you had said something during
your testimony that since you got your new job as a
as a Judge. You only have the bandwidth to devote so
much time to Blue Cereus. And I don't think that's a
very good standard for what consumers expect from their
public utility delivering water service. I don't know.
I just, do you want me to respond to that or is
that a question? Uh no, that was my comment.
Commissioners, any further questions?
Commission Staff, you resting at this time? Yes. Commission
Staff rests. Blue Cereus, are you resting at this time? Yes.
Ok. We're going to go ahead and proceed with closing
statements. Commission Staff, your five minute or less
closing statement. Thank you. Thank you Judge Denmark,
Commissioners. Thank you for your patience. During
this overly long morning session. I will try to make
this as quick as possible. You have heard a significant
amount about contracts that did not in fact exist despite
Blue Cereus' protestations to the contrary. Neither
SOAH Order 12 nor the agreement in principle serve
as a viable water purchase contract. Both documents
fail to satisfy the requirements of title 30 Texas
Administrative Code Section 290.45, Subpart F. Which
defines a water purchase contract as a signed written
document of specific terms agreeable to the water purchaser
and the water wholesaler. A written water purchase
contract must contain a specific terms such as daily
and hourly, maximum draw rates and capacity requirements
for the wholesalers. SOAH order 12 and the agreement
in principle do not concern themselves with these requirements.
Because they were never intended to be replacements
for water purchase contracts. While the agreement in
principle could have provided a source of water to
Blue Cereus after the effective date. The trigger event
for that effective date. The PUC's approval of the
STM or CCN amendment for the San Pedro Village Public
Water System has yet to be submitted. Had Blue Cereus
arranged to renew its 2009 contracts for the wholesalers
in five year increments as contemplated under those
now expired contracts. Had Blue Cereus obtained new
water purchase contracts when ordered by TCEQ in June
of 2023 from any potential wholesaler. Not just the
two who spoke today. Had Blue Cereus followed through
fully on its obligations under the agreement in principle.
So as to obtain their own source of water during the
17 months between that agreement's adoption and the
wholesaler's termination. Had any of these actions occurred
the appointment of a temporary manager may not have
been necessary but these things did not happen. And
for that, we find ourselves here today.
When actions are silent in action speak because there
are no contracts. Blue Cereus is in violation of the
June 19th 2023 TCEQ order which is a hostile act towards
TCEQ. Because Blue Cereus continued to bill its customers
and advise those customers that they and not CSWR Texas
were the current operator of Blue Cereus after the
February 1st appointment of a temporary manager. Blue
Cereus has interfered with that appointment which is
a hostile act towards the Commission. Because the wholesalers
who sent their first notice of default in 2018. Have
yet six years after the fact to be fully made whole.
Blue Cereus continues to not fully pay its obligations because
the wholesalers are not contractually bound to provide
potable water for Blue Cereus, the January 8th 2024
letter terminating all business dealings with Blue
Cereus. Represents a clear and actionable threat to
Blue Cereus' ability to provide continuous and adequate
service to its customers. Whether viewed collectively
or independently all of these actions and inactions
by Blue Cereus. Constitute abandonment of the retail
public water utility. Because Blue Cereus, LLC has been
abandoned. The Commission should affirm the February
1, 2024 appointment setting CSWR as a temporary manager
for Blue Cereus. The appointment of a temporary manager
is a very serious matter and should only be done when
there are no other options available to address a viable
and imminent threat to the public's well-being. At
this moment, there are approximately 80 connections
within Blue Cereus' CCN. 80 connections that because
of Blue Cereus' failure to secure a source of water through
a viable water purchase contract would not have had
water for the last 50 days. If that emergency order
had not been entered on February 1, 2024. These emergency
conditions posing a threat to the continuous adequate
service of Blue Cereus' customers remains so too. Does
the need for a temporary manager? And for these reasons
Commission Staff respectfully requests the Commission
affirm the emergency order appointing CSWR Texas
as temporary manager for Blue Cereus, LLC. Thank you.
Blue Cereus, you may proceed. Thank you. May it please the Commission
there are two steps to go through here as we see it.
First, is there grounds for issuing an emergency order?
And secondarily, should that emergency order the remedy
of that order be the appointment of a temporary manager?
Now first, with respect to the emergency and the grounds
for doing an emergency order. It comes forward if there
is discontinuation of retail service is imminent. And
that both sides agree has happened because the wholesalers
have unilaterally canceled an agreement that settles
all of their disputes with my client. And announced
that they will stop providing water to Blue Cereus.
The testimony you heard from Mrs. Ferguson is that she
agreed to provide water through February 1st and then
she equivocated on whether she would continue to provide
water to the temporary manager in the future. Her husband
Mr. Ferguson agreed they would provide it. But Mrs.
Ferguson said that depends on the negotiations that
go on with the temporary manager. The testimony you
also heard from Mr. Ferguson, is that under a prior
temporary manager, they cut off the water supply. They
have a history and pattern of wanting to maintain the
right to cut off retail water. To get the contractual
terms they want and not backing down from that. They
have created this emergency. Now the question is,
how do, how does this Commission resolve this emergency?
And we would say, and point out that it's not by including
a temporary manager for my client. First, statutorily
they have to prove that my client has abandoned the
utility. And the uh Texas Administrative Code, Section
24.355(C) sets out a laundry list of seven items and
they focused on one of those items. To prove that they've
abandoned it. And that is pattern and displaying a pattern
of hostility towards the Commission or repeatedly failing
to respond to the Commission or the utility customers.
First of all, there's been no testimony whatsoever
that my client has failed in any way to respond to
any of the customers. There's one customer complaint
about wanting to know who to pay. That's, that's it.
He has a history and pattern of treating his customers
fairly and keeping the water supplies on to his customers.
There's been no testimony whatsoever that my client
has failed to respond to the Texas Public Utility Commission.
The basis of their complaint is that my client hasn't
complied with an order of the TCEQ. And under this statute
they have to prove that the pattern of hostility is
towards the Texas Public Utility Commission, not another
state agency. So they're trying to shoe spoon non-compliance
with the TCEQ order. To say that's proof that they've
been hostile to the PUC. And that simply hasn't happened.
That only became an issue in November of 2023 when
the Ferguson's unilaterally and without cause attempted
to repudiate this mediated settlement agreement. They
did so without counsel, they're proceeding pro se and
they've admitted there's no basis from any prior fact
that says that the agreement is void or cancelable
in any way. My client intends to enforce that agreement
by specific performance. And if it is ordered so performed
there will be no emergency. Because no contracts will
be required between the parties and they can go forward
and provide their own potable water according to their
plans to their customers in the future. So our position
is that the wholesalers in this case are public utilities.
They meet the definition under the Texas Water Code,
Section 13.002, Subsection 23 of a water and sewer utility
or a public utility. Because they provide potable water
for resale. And that's the key is that it's potable
water. It's not raw water, it's not untreated water.
They are subject to this Commission's jurisdiction
as is my client. Putting a temporary manager in place
today is not going to solve this problem. It's going
to kick this problem over to the temporary manager.
Who are going to have to deal with the same issues
with the Fergusons about demands and threatens to
shut off the water supply. Our position is that you
should deny the temporary manager but issue an emergency
order that you have jurisdiction to do. To bind the
wholesalers to continue to provide water to my clients
or to a temporary manager. Under the auspices of the
prior SOAH order and according to your emergency jurisdiction.
Thank you.
Anything further Commissioners?
We're adjourned. Thank you. Thank you.
All right here. The Merits Hearing in Docket 56171
is here by adjourned. And we will reconvene the regular
Open Meeting of the PUC at 12:40.
(silence)
All right. We, we heard a lot of information there.
Thoughts, comments?
I mean the mediation agreement is sort of a private
matter of, you know. An ancillary sort of issue on
the side. And I think our focus here is on um the
statutory language in the water code. And ultimately whether
the Commission properly appointed a temporary manager
under TWC 13.4132. And I believe they did because there
was an abandonment of operations and that was as a
result of failure to pay the bill.
Blue Cereus is failing to pay their bills to the wholesale
water supplier.
I, I tend to agree. I think the, the Commission Staff
presentation or was compelling. That, that
the operations for the water utility have been abandoned.
At least in regards to the retail side and how that
affects the 80 meters, the 80 consumers that need water.
And that I would be supportive of appointing a temporary
manager, affirming the temporary manager. I would be
supportive of affirming the temporary manager as well.
I believe, you know, to me what's at issue here
is the ratepayers or the customers. And um making sure
that they have dependable and reliable service. And
that they have um a temporary manager in place. And
I think we've heard, you know, and was provided in
the testimony that there is some evidence that they're
interested in the long term in acquiring the system.
Which, you know, the testimony here sounds to me
like, you know, we very much need to move forward and
do the kind of things that will address this. Not just
in the short term, but also in the long term. Provide
a more long term solution um and address the needs
of the ratepayers. Is there a uh a option if we affirm
the temporary manager. That we can ensure that duplicate
bills do not get sent thus continuing, confusing the
consumers? Or is that a, is that nothing unaddressed
or is that not something we can address in this order?
That's a good question Commissioner. I am going off my recollection
and I don't have the order with me. But I do, I
believe that I recall that for a previous order in
which the Commission appointed a temporary manager
for Blue Cereus. There may have been an ordering paragraph
something to that effect. Um, specifying um
the participation of the owner, what the owner could
could or could not do in terms of operating the utility.
And, and subject to check with you. We could go, we could go
look at that. And um, if that is something the Commission
would like to implement as an ordering paragraph. Then
you would direct us to modify the emergency order and
incorporate an ordering paragraph to that effect. But
I would also ask that we give us a chance to go
back and look at that. And if we need to brief you
on that and bring it back, we will. But we could certainly
look into that.
Okay.
Is everybody comfortable with that then? I mean, I
think we ought to protect consumers in that regard.
Eliminate some confusion if we can. If we can do that
in an ordering paragraph, that would be my suggestion.
Right. So I, I would say, you know, let us go back
and research that and bring it back to you. We'll
have to bring we'll, we'll need to work on an order
regardless of the Commission's decision. And we can
certainly look into that and bring it back to a future
open meeting. Mr. Barksdale may have something
to add here. Mister, sorry.
Mr. Barksdale, go right ahead. Yes, Ms. Shelah. Chairman,
Commissioners. Thanks very much Barksdale English on
behalf of Commission Staff. The, the order appointing
a temporary manager that relies on the statute that
gives the duty and responsibility to issue bills to
the temporary manager. So absent any other language
that you all would insert into your order. We would
find duplication of billing by Blue Cereus to be a violation
of the, of that order. Ok, great. Thank you for that,
for that Barksdale.
All right. Then I think I agree with everybody. I would
I would also say, you know. If CSWR is interested in
in buying this utility, hopefully there's good engagement
on, on moving forward that. You know, in the short
term. (item:5:Motion to approve Commission's emergency order) So with that, I would entertain a motion to approve
the Commission's emergency order that was entered into
on February 1, 2024.
So moved. Second. I have a motion and a second. All those in favor, say
aye. Aye. Opposed? The motion prevails. Thank you to everyone.
Okay.
(silence)
Shelah, I don't have anything on 6. So next would
be Item 7. (item:7:Petition to appoint temporary manager for Marion J. Smith, DBA Smith Management Services) Item 7 is Docket No. 56252. This
is the petition to appoint a temporary manager for
Marion J. Smith, DBA Smith Management Services. Before
you use a petition filed by Commission Staff to appoint
a temporary manager for this utility. The Commission
provided notice of a hearing on the merits to consider
the petition in this docket. All right, we will recess
this meeting of the PUC and hold a separate hearing
on this item.
This meeting of the Public Utility Commission of Texas
will come to order. For the hearing on the merits in
Docket 56252 which has been duly posted with the Secretary
of State for March 21, 2024.
I will turn it over to our Commission ALJ. Good afternoon
Commissioners. I call to order Docket No. 56252,
Commission Staff's petition to appoint a temporary
manager for Marion J. Smith DBA Smith Management Services
continuing until the Commission orders otherwise.
This is Christina Denmark assisting the Commissioners.
And the purpose of this hearing is to determine whether
a temporary manager should be appointed. We had a pre
hearing conference on March 18, 2024. And I admitted
3 exhibits from Commission Staff. No witnesses
were sworn at the pre hearing conference. At this time
let's take the appearance starting with Commission
Staff. Mildred Anaele for Commission Staff. Have
we heard anything from the utility? No, we have not.
Ok. We'll go ahead and proceed. Commission Staff, do
you have any opening statements? I do not. Commissioners,
do you have any questions? Commission Staff you don't
have any witnesses, correct?
Probably I should ask that first.
All right. Commissioners no questions, correct? No.
Commission Staff, any closing statements? No, I do
not have any. All right, we're adjourned. Thank
you. The Merits Hearing in Docket 56252 is hereby adjourned.
And we will reconvene the open meeting of the PUC
at 12:48pm and resume with Item No. 7.
All right. So in this docket, um we have a few policy
issues we need to need to run through quickly.
So similar to what we've done in previous open meetings.
My plan is to just run through those. Tell you what
I think and if we all agree, we can move forward. So
issue one, has the Commission Staff demonstrated the
utility has abandoned operations. I believe it has.
Item No. 2, should the Commission appoint South
Plains as temporary manager of the utility? I believe
the answer is yes. If the Commission appoints South
Plains as temporary manager of the utility, should
the appointment begin once the current temporary manager
term expires? And should the term be indefinite? I
believe the appointment of South Plains should be indefinite
going forward. Item No. 4, should the Commission
approve the proposed compensation rate? I believe it
should. We should approve the proposed compensation
for South Plains at $12 per connection per month. Item
No. 5, should the Commission approve the proposed
waiver of financial assurance? I believe it should.
And finally, Item No. 6. If the Commission decides
to appoint South Plains as temporary manager for the
utility, what action should the, should the Commission
take regarding this proceeding in an open meeting?
And I believe we should make certain determinations
and direct OPDM to draft an order accordingly. Any? I'm supportive
of all of those. I am as well. I'm in agreement as
well. Okay. (item:7:Motion to determine utility has abandoned operations, appoint South Plains as temporary manager & set compensation) Then I would entertain a motion to determine
the utility as abandoned operations for the reasons
cited in the petition. Appoint South Plains as temporary
manager for the utility beginning March 29, 2024,
until the commission orders otherwise. Set the temporary
manager compensation for South Plains at $12 per connection
per month as recommended by Commission Staff. Waive
the requirement regarding the temporary manager's duty
to post financial assurance with the Commission and
direct OPDM to draft an order consistent with previous
Commission orders.
So moved. Second. A motion and second. All those in favor, say aye. Aye. Opposed?
Motion prevails. Thank you.
Item No. 8 was consented.
Item No. 9. Shelah will you lay out Item No.
9, please? Yes, sir. (item:9:Application of El Paso Electric Company for authority to reconcile fuel costs) Item 9 is Docket No.
54142. This is the application of El Paso Electric Company
for authority to reconcile fuel costs. Before you are
two items. A proposal for decision from SOAH and a
proposed order. The proposed order addresses the unanimous
partial agreement among the parties. That resolved all
but one of the issues between the parties in this docket.
Proposed corrections were filed and corrections were
made to the proposed order. The single contested issue
that the parties did not reach agreement upon is addressed
in the proposal for decision from SOAH. Parties filed
exceptions and corrections to the proposal for decision.
And the SOAH Administrative Law Judge filed a letter
declined, declining to make the changes to the PFD.
So the PFD is before you now as well as the proposed
order.
So this took a long time in my briefing actually.
I came to the conclusion. I think the SOAH ALJ reached
the correct decision in this case. I believe we should
deny El Paso's request to recover the requested EIM
costs under the special circumstances, exception for
a fuel rule and approve the proposed order that addresses
the stipulation and agreement of the parties.
I'm in agreement as well. I am as well. I struggled with this one
a little bit.
Encouraging for consumers benefit participation in
wholesale markets is absolutely critical, I think.
And I think this is a unique challenge where that vertically
integrated utility chose unilaterally to go into the
Western market.
I think this kind of falls through the cracks. I agree
with you. It's not a fuel expense. It's pretty darn
close though. When you're buying electricity, you're
converting one resource to another. And, but I'm supportive
that this is not the right place for it and that there's
another place to do this. But I'm sympathetic to the
challenges of getting into that wholesale market and
where those costs would fall for recovery. Shelah,
I believe on this one we need three motions for this?
I think it's a good idea to do a motion separately
for the PFD and one separately for the proposed order.
Yes. (item:9:Motion to adopt PFD) Then I would entertain a motion to adopt the PFD.
So moved. I second. A motion and a second. All those in favor, say
aye. Aye. Opposed? Motion prevails. (item:9:Motion to approve proposed order) I'd entertain a motion to
approve the proposed order that addresses the stipulation
and agreements of the parties.
So moved. Second. Motion and a second. All those in favor,
say aye. Aye. Opposed? The motion prevails. (item:9:Motion to direct OPDM to draft final order incorporating all the Commission's decisions) And finally, I'd
entertain a motion to direct OPDM to draft final order
incorporating all the Commission's decisions in this
proceeding. So moved. I second. I have a motion and second. All those
in favor, say aye. Aye. Opposed? Motion prevails.
Item No. 10, I'm recused from. So we'll come back
to that. Item No. 11. Shelah, will you please lay
out? Item number 11. (item:11:Application of TNMP to amend its CCN for the Pilot Point 138-kV transmission line project) Item 11 is Docket No. 55114.
This is the application of Texas New Mexico Power Company
to amend its certificate of convenience and necessity
for the Pilot Point 138 KV transmission line project in
Collin, Grayson and Denton counties. The Commission's
order was filed February 1. Four Season Ranch Limited file
a motion for rehearing. The Commission voted by individual
ballot to add the motion for rehearing to this meeting,
only to extend time to act on the motion. So before
us is an extension of time motion for rehearing. I'm
in favor of this.
Okay. (item:11:Motion to extend time to act on motions for rehearing) I entertain a motion to extend time to act on the
motions for rehearing to the maximum extent allowable
by law. So
moved. Second. Motion and a second. All those in favor, say aye. Aye. Opposed?
Motion prevails. Items 12 and 13 were consented. Item
14. Shelah, will you please lay out this item? (item:14:Petition of citizens of Livingston for fair and equitable rates to review City of Livingston's Rate Ordinance No. A-842) Item 14 is
Docket No. 55661. Petition of citizens of Livingston
for fair and equitable rates. To review city of the,
City of Livingston's Rate Ordinance No. A-842.
Before you is a SOAH proposal for decision. The petitioner
filed exceptions to the proposal for decision. The
SOAH ALJ did not file a letter in response to the
exceptions. So before you now is the SOAH proposal
for decision, the exceptions and replies to exceptions.
So on this item, I agree with the PFD on the jurisdiction
issue. I don't believe that the Commission has jurisdiction
of appeals filed by in city residents regarding electric
rates for municipal owned utility. And because of that
I don't think it is necessary for us to address the
signature requirement issues. And so if you agree with
me on that, I think we should take finding of facts
No. 25-27 and conclusions of law numbers
9 and 9. And delete those from the PFD.
I'm in agreement with your finding. I am as well. Okay, then. (item:14:Motion to adopt PFD in part & modify in part and direct OPDM to prepare final order) I would
entertain a motion to adopt the PFD in part and modify
in part. Directing OPDM to prepare a final order consistent
with this discussion.
So moved. Second. I have a motion and second. All those in favor, say aye. Aye. Opposed?
The motion prevails. And Item No. 15 was consented.
So at this point, we will move back up to Item No.
10 and I will turn it over to Commissioner Cobos. Thank
you, Chair Gleeson. Shelah, will you please lay out
this item? Yes, ma'am. (item:10:Application of Oncor to amend its CCN for Ramhorn Hill-Dunham 345-kV transmission line) Item 10 is Docket No. 55067.
This is the application of Oncor Electric Delivery
LLC to amend it CCN for the Ramhorn Hill to Denham
345-kV transmission line in Denton and Wise counties.
Let's see, the Commission order was filed on February
1st. The following parties filed a joint motion for
rehearing La Stancia Investments LP, the town of
North Lake, Seth Deleon, Jeff True, Benito Gonzalez,
Jeremy and Katie Young. And the Commission voted by
individual ballot to add the motion for a hearing to
this meeting only to extend time to act on the motion.
Thank you, Shelah. (item:10:Motion to extend time to act on motion for rehearing) I'm in favor of extending time to
act on the motion for rehearing to the maximum permitted
by law. I am as well. Okay. Do I have a motion?
So moved. Second. I have a motion and a second. All
in favor, say aye. Aye. All right, motion passes. I will
now that brings us to the end of the contested case
uh docket part of our agenda. And I'll hand over the
meeting back to Chair Gleeson. Thank you, Commissioner
Cobos. Shelah next up is Item 16, Public Comment. Did
anyone from the public sign up to comment today? (item:16:Shelah Cisneros with Commission Counsel confirms there are no public comments) Chairman,
no one signed up for Item 16. However, we did have
one person sign up for Item 26. And that is the only
item for which someone from the public signed up for
comment. Ok, so we'll call that person up under Item
26. Correct. (item:17:Chairman Gleeson lays out Project No. 53924) Next up is Item 17, Project 53924. Water
and sewer utility rates after acquisition before is
a proposal for adoption. So I'd ask Staff to come up
to go through their proposal.
David Smeltzer for Commission Staff.
So we are initial note, we're at the six month deadline
on this which is evidence of how tricky this has been.
But we staff is hopeful that we will resolve this and
get a final order today. So as not to have to start
the project over again. Before you, we have a proposal
for adoption and this is informed by the discussion
that we had two open meetings ago. Where the Commission
approves some general statutory interpretation and
guidance on how we would interpret this rule. I, you
know there, there was a, a letter filed last night
by one of the stakeholders/ Saying that they wish some
additional time for clarity on this. And I will say
that there are new procedural provisions that are in
this rule that hadn't been seen before. But I, I've
talked to them since and I think we're going to be
able to work out some time to get familiar with it.
And I will say that the, the challenging thing before
you with this rule. Is because we know that we have
a duty under the statute to ensure that every rate
is fair and reasonable in the context of these transactions.
We can't use the process that we know that does that
which is cost of service rate making. And so staff
has attempted to design a streamlined of a process
that's possible. That makes use of the existing procedural
provisions in the STM rule. You know, you would, you
would make the determination at the same time in the
same hearing using the available facts and circumstances
surrounding a trans the transaction. Facts and circumstances
is not particularly limiting. I mean, I think we know
what the best case scenario is, which would be, you
know, a fully formed system that wants to buy a distress
system. That just so happens to need repairs that are
the estimated value of the difference in revenues between
the two tariff rates, right? That's your onpay perfect
scenario that we're never going to see. We also know
what we don't want to see. Which is affiliates that
are trying to move all of their rates to the one system
that they have, that happens to have the higher rates.
Without any justification that would be sort of skirting
the ratepayer protections that come with the full rate
case. And so those are the for sure yes, for sure
no situations, right? And everything in the middle
is going to depend on the facts and circumstances.
Staff has provided some guidance about the questions
that we are not going to take up during this hearing.
Which involved things like requiring them to justify
the rates of the tariff system, things as established
cost of service, things like this. And then we've also
provided additional language that says some things
that the Commission can consider. For instance, in
that dream scenario, if there are, if, if there is
cost of service information available. That shows that
repairs are needed. Of course, we would want to know
that if there's information about how long it's been
since the rate case, since rate cases have happened
that would be relevant too. So I think that we, this
is something that as we work through more cases. We
may get additional clarity on what's required. But
I think that for now we provided as much guidance um
as we can in this docket and I'm happy to answer any
questions that you guys have. Thanks David. I want
to thank you and your team. Uh for all the hard work
I think this is an example of uh you know, of a
rule that came out of the Bill that, you know, there
wasn't really that much discussion about during the
Session. And the rule, promulgating the rule actually
became, you know, somewhat difficult to uh to navigate.
I'd also say thank you to all the, you know, folks
that provided comments in this docket. All the private
companies. I'd say thank you to um Public Counsel Yalman
and her OPUC Staff for their valuable contributions.
This, this took a lot to get it here. Like you said
we're at the, at the six month deadline. I was pleased
with how staff took our feedback and incorporated into
the rule. So um I'm good with it. I'm prepared to approve
it, but happy to listen to y'all's thoughts.
I want to thank staff as well for their development
of this rule. I think they did a great job. And like
you stated, the Legislation provides a framework and
we had to get in there and make some policy cuts and
I think this puts us in the right direction as well.
I feel like the staff did a great job in terms of
kind of balancing between, you know, the two various
scenarios that you described um very important. I think
that we, we added the paragraph under scope of right
review. That as you, as you noted, it's the kind of
things that we're not going to, to review and consider.
As well as, you know, spending the time to, you know
in the second paragraph. Talk about the things that
we would likely uh want to have information on and
that we want, want to consider. Um I think just kind
of moving forward in terms of, you know, what our challenges
are, particularly with small systems. This can be a
very, you know, great thing that in my mind, the Legislature
has done. To enable, you know, some of those small struggling
systems to um to be acquired and continue. And, and
have the opportunity to be back to uh to be viable
not only with um providing if you will kind of the
initial upgrade. But also, you know, an ongoing um
kind of stewardship and asset management so that those
systems um will continue to provide um reliable service
to the ratepayers. And, you know, companies that are
thinking ahead being proactive in their, in their management
and their stewardship. So, uh I think this is a very good
step forward. It did make me kind of think about
um capital improvement plans. And I know that that is
something that we are working on, something that we've
had a request in the past. And so, you know, I look
forward to seeing that as we move forward. But I did
want to thank you very much and I think this is going
to be a really um great step forward. I think we took
the measures that we needed in terms of protecting
against some of those unintended outcomes. And uh for
particularly for I think small rural systems, um this
this is gonna really help to, to position those going
forward to be, to provide continuous and reliable service
for those ratepayers.
I think it's a great effort and I appreciate all the
staff work. Yeah. And in, in response to your comments
Chairman. I, I had a more uh, excuse me uh, Kathleen.
Commissioner. Things change around here, you know, how am I supposed
to keep up? I, I have to, I had a, a staff
completely agrees with your, with the sentiment. That
the end goal is to get the hands of all of these
systems into with, with entities that can manage them
responsibly into, into the future in the long run.
And I think that we were, we experienced challenge
because there were from, from both sides, there was
lots of language that was sent to me. Like oh, maybe
these should be the criteria, these should be the considerations.
And we thought it was premature to preestablish all of those
things at this point. But, but we agree with that
sentiment completely. Also I, I had originally when
we thought this open meeting would be shorter. I had
a longer layout that I had anticipated doing, but I
cut it short. And so we previously talked about whether
or not we would host a workshop or something. I'm going
to leave it up to it's, it's a fairly small group
of stakeholders that engage with us on this. So you
guys know how to get a hold of me. Let me know
if that would be helpful or if you guys want to meet
with staff. To just talk about how we envision some
of these things are a little bit more about what was
intended behind this role. We really want to make sure
everyone understands the intent. So I get a hold of
me. If we need to have additional conversation, staff's
always open to that. Thank you. Thanks David. With
that. (item:17:Motion to approve proposed order) I will entertain a motion to approve the proposed
order in Project 53294.
So moved. Second. I have a motion and second. All those in favor, say
aye. Aye. Opposed? The motion prevails.
I don't have anything on 18 or 19. (item:20:Chairman Gleeson lays out Project No. 55999) So that would bring
us to Item No. 20, Project 55999. Reports of the
Electric Reliability Council of Texas. You know, ERCOT
is here and wanted to give us an update under this
item. So ERCOT Staff, please come on up.
Good afternoon Woody. Good afternoon, Woody Rickerson
ERCOT.
So I'll give you a brief summary of the filing and
then contritions.
So on March 1st, ERCOT established four new GTCs.
Those were to manage flow on two new IROLs.
The IROLs with the limit flows both North to South
and South to North from on certain lines. They
IROLs which is an interconnection reliability operating
limit. That's a NERC acronym.
They are IROLs because if you were to overload them
and the contingency occurs, you could have cascading
outages. So that's what makes them IROLs.
So one is for export, which would be a South to North
flow. So it'd be exporting out of the valley. This
is some, some characteristics of this one. It would
occur during peak conditions. So when we are uh near
scarcity for the entire system. This one, this one
is most likely to occur um especially when the generation
in the North or in the generation nNorth of the constraint
is less than the load North of the constraint. Which
is most, most of the load in ERCOT. So this is really
relates to scarcity conditions across ERCOT. It's a resource
adequacy. It's tied very closely to resource adequacy
across the entire system. And so the IROL is to limit
the flow out of the South. It's most likely to occur
after the sun sets. Since there's a lot of solar generation
in the north when we lose that solar generation in
the North. We're losing a percentage of the North generation
increases the flows from the South. If we were to have
um strong wind conditions along the coast and not as
much in the West, that would make it worse as well.
But like I said, this, this export the South to North
is most likely to occur when we have a uh scarcity
condition. So high loads, Summer peak type loads. Now
on the other side, the other IROL. Same same lines, same
interface, but it's on import. So this would be flowed
from North into the valley along the same interface.
This is closer to the traditional valley issue that
we've seen in the past. It would also occur at high
load but it might not be after the sunsets. It would
probably be during a low wind day, a high load, low
wind or if we had some forced outages in the valley
the force outage is South of the constraint. And the
IROL would limit power that can flow North to South.
So, because these are IROls NERC standards require
ERCOT, have a plan to keep from exceeding those limits.
And that plan includes shedding load.
So when we think about the one from South to North.
That's gonna occur
in lockstep with um peak conditions. And so the load
shed plan, there is a system wide load shed.
It's approximately uh 250 megawatts across all of ERCOT
for a 5% overload of the line. So we can't let it
overload, contingency, overload. So you'd have to shed
load before the overload occurs for the import. That
would be a regional load shed South of the constraint.
And um this would be a uh a load shed that would
be spread among the the loads in the South. It would
follow a transmission emergency.
So the rest of the filing talks about some of the short
term midterm, long term solutions to this. We can
go into that as well if you want to.
That's a summary. Thank you, Woody. Questions for
Woody? Comments. I, I have a couple of questions if
you don't mind. I sent some over to you. I'm not going
to get into all of those. But I,
I struggle with this after September 6th just to understand
it. I know you all are trying to do what's right for
reliability across the system. The way that I think
about this from a generator perspective and tell me
if I'm right or if I'm wrong. But that
when you uh put the limit on this line, you're effectively
um
limiting generation in the South's ability to get to
the market in the North.
When generation in the North, it when you have high
um forced outages in the North and very high load in
the North.
Any time the, anytime you're under. Ok. So first of all
it's
the subset of time we're talking about is under peak
conditions. When we're in scarcity conditions, we're
already very tight, right? So I mean, if we have a
40,000 Megawatt load day, forced outages in the North
won't matter because there's plenty correction. Ok
Good point. So when we're under peak conditions, any
time, the load in the North, North of the constraint
exceeds the generation North of the constraint will
have this issue under peak conditions. So that's really
it's like most of Texas load, right? That is the majority
of the ERCOT load. Yeah. So under peak conditions,
when that load, not during the day, when there's plenty
of solar, that's not a problem. When the sun sets, most
of that solar is located North of the constraint. And
so you'll see that go away. If you have a lot
of wind in West Texas, it's not gonna be a problem
if you have a day where the overall peak is not an
85,000 Megawatt day. It's not gonna be a problem. So
it's a, it's a subset of conditions. But the basic
thing to remember is it's a resource adequacy issue
North of the constraint.
Right. I think I get that. I just I get it seems
to me, I don't like operator actions that are necessary
that impede the market. We have them for reliability
of the entirety of the system. But to me, when I think
about this, from a generator perspective. ERCOT is
telling me that I can't sell power to the North because
some other generator didn't do their maintenance and
there they have high forced outages, right? High forged
And that's a simplification because all of the other
parameters have to be the same which is low, low wind
in the North, high forced outages in the North, high
load in the North. Very hot day towards the end of
the day when the sun's going down. So but to me, it's
a,
it's an unfortunate happening that we've got to impair
excess generation from being able to get to load, to
lower prices and to serve load because we haven't planned
well, you know. And I think it's a, it's a remnant
of
the growth that we're seeing in the market, the age
of our fleet. And the uh,
you know, I mean. I, when I, when I think about
this in the uh transmission planning process. Did y'all
all ever anticipate this happening in the in the planning
process. Yeah, we went back and did a real in depth
look at what we were doing. So if you think about this
we, we should have been able to see this in 2018. If
we, if we saw it in 2018, we'd have time for this
line to have been built last year. So we went back
and looked at the studies we did in 2018 and said,
why did not, did we not see this in 2018? So some
of the things that we found were that um the load growth
north of the constraint exceeded any of our forecast
So San Antonio central Texas, Dallas, that load growth
was much more rapid and much more concentrated than
we expected. That made the situation worse. We also
had the Frontera Plant switch into the system. So usually
if a 500 Megawatt plant comes online, you see it come
three or four years in advance and you have time to
plan around it. Well, now we had 500 megawatts South
of the constraint appear with no time to plan for it.
So that. You paid for that as excess generation. Yes. So
that makes that makes this this export out much, much
worse. Another thing was that uh 6400 megawatts
of dispatchable generation in the North retired after
2018. So that 6400 megawatts was not included or some
of, most of it was not included, some of it. We we
we knew about most of it was not included in that 2018
study. And uh and lastly, there was somewhere between
four and 5000 megawatts of wind and solar that came
online rapidly after 2018 in the South. So you got
extra generation in the South that wasn't anticipated
generation retired in the North. It wasn't anticipated
load growth in the North. That was beyond what we anticipated
And then you also had a new plant show up in the
south at a pretty good size plant that uh wasn't included.
So all those things mean that the, the 28 the, the
process we were using for system planning in 2018 doesn't
meet our needs today. So I think maybe the, you know
what are we gonna do about it? How do we change that
What do we do to evolve that? And really, if you think
about, um think about system planning, there are three
parts to it. There's, there's generation, there's transmission
and load. And really the only thing transmission does
is connect generation to load. That's the only reason
you need the transmission for the most part. If all
generation was built near load, you wouldn't need a
whole lot of, of transmission.
What we've seen happen in the last five or six years
is that generation can now be built much more quickly
than it used to. It used to be four or five years
three or four years for a plant to be built. Now, we
see it being built in, uh you know, two or three years
or even less in some cases. So the new generation shows
up in a shorter time frame. And then on the other end
of the line, you see load load shows up much more quickly
now too and it shows up in big chunks. We'll see 1000
Megawatt load show up in a matter of 1216 months. And
so the problem you have now have is that transmission
which sits in the middle of those is still a 3, 4, 5 year
process. So what can we do to accelerate that 3, 4 or
five year process so that it fits the generation and
the load? And so some of the things we have done, um
we have, we're exploring some, some new tools with
vendors that will allow us to place generation anticipate
where generation is gonna be and put that in planning
cases. So there are generation expansion tools that
you can run and say this is a place people will probably
build generation. So because we don't know where generation
is gonna be, we may have to start placing generation
generation hubs. We're looking at plan at expanding
our planning guides that tell us what we can currently
put in cases. So there's planning guide rules that
say if they don't, if, if developmental generation
doesn't meet certain requirements. You can't put it
in a planning case, we're gonna open that up and look
at adding to that so that things that are not as developed
not as have, haven't, haven't progressed as far can
be included as well. That will help us get a better
feel for where generations probably gonna be. And
we're also looking at ways to, to incorporate uh more
developmental generation that maybe is even further
down the developmental path. Uh maybe some give people
some incentive to move forward faster. So those are
ways that we're trying to, to make sure we have cases
that, that anticipate because if, if generation is
gonna show up inside the planning criteria inside the
planning horizon, we need to try to anticipate where
they're going to be. Um on the load side, we're already
bringing more load into the RTP cases, our regional
transmission planning cases. So we had some pretty
strict rules in 2018 about what kind of load you can
include in a planning case. We are breaking those rules
now and uh doing new things. In fact, the RTP case
this year will have 50% more load in it than what it
had last year, which is that will also help us anticipate
where the transmission is gonna be needed. We're asking
TSPs to give us more bus level information when they
give us load, to give it to us at a bus level
so we can make better decisions on transmission. We're
also allowing TSP officers to sign letters to say we
think this is load that needs to be included in your
case, even though we don't have signed interconnection
for that load, this is load, we are pretty sure is
gonna be there. So we're doing all those things to
try to try to uh get a, get, get ahead of both
the generation of the load showing up in unanticipated
places. And then with the transmission, um you know
we've already put a team together to look at you guys
approve the uh San Antonio export project late last
year and that project will actually solve this problem
But we're already moving ahead to try to anticipate
what that next IROL is. So we've already put a team
together. We're working with TSPs to put a, put a
project together for what we think may be the next
IROL. So we don't find ourselves in that, in that same
situation again. So those are some proactive things
we're doing to change the planning process to try to
keep us out of this kind of situation in the future
because this is not where we want to be, this is not
where we want to operate the grid. But if you look
back at 2018, there were some real reasons, some valid
reasons why this didn't show up in the in that planning
process. Clearly, clearly do do you all have any understanding
of how much those these gcs will cost in terms of congestion
on an annual basis?
We don't have numbers calculated. No. Is that something
that is calculable? I guess with assumptions built
in that would necessarily be wrong. But um we can look
at what happened last Summer and how often that was
these constraints were binding before they were IROLs
last Summer and we had that number from last year.
So that's a good. So that's, but what's changed is
load growth more. I mean, this Summer is gonna be a
lot more load in the North than there was last Summer.
And so um that, that's what made this more of a, of
a problem this year than it was last year is there
I mean, I'm going to bark up a tree here that I'm
probably going to regret, but that's not a threat to
you by any means. But are, are there, are there like
storage solutions that could be, could happen like
on the North and the South of these constraints that
could because, because these things don't these constraints
you're not anticipating to happen for a long time in
terms of minutes or hours, right? I mean, this could
be a 60 minute constraint or a. That's right. So we
especially the export constraint, we think that's more
like a, a one or two hour type thing as the sun
sets, load starts falling off, constraint goes away
So yeah, the answer to your question is yes. Anything
we can do basically anything we can do to add generation
to the North.
Okay. Or decrease the load in the North demand response
I mean, there may be things PUC can help with that
would help us do one of those two things. And the third
thing is increase the transfer capability across the
constraint. That's the third part. So my, my my question
here is a little bit more in depth. It deals with storage
is charging storage as a load if that was coordinated
in the North during this time or in the South, depending
on which way the constraint is, is that a viable? It
would that help? I don't know how you do that, but
the answer is yes, because that storage becomes a load
So let's take the uh valley exporting South to North
right? If during that critical time, those critical
couple hours batteries North of the constraint, if
those batteries were to discharge that would that could
very well solve this problem if the, if the quantity
is right. Right. So yes. Okay. Well, I I know you're
not where you want to be on this thing and uh I'm
not where you wanna be either. So uh I'm appreciative
you look at technologies and other types of solutions
and encourage you to keep asking the questions of the
labs, the universities, the vendors, the different
technologies that are out there. Um You know, I suspect
putting, you know, some technology in a transmission
rate to solve this on a short term basis would be a
unique policy. But if, if these congestion costs become
in the hundreds of millions of dollars, technology
might be a much less cost solution. So I look forward
to working with you, you know, as we, we look through
this in the future. Thanks. Commissioner Glotfelty great, great points.
Woody, I really appreciate ERCOT making this filing because
I think it's very important for the public, the Legislature
the Commission, the stakeholders. To understand the
situation that's going down in the valley with respect
to this um import export constraint, uh constraints
that you all have identified. You know, there's a few
things I want to highlight. I, I know you um stated
that um it's largely a resource adequacy North um in
the North. Um I think that that becomes potentially
an issue based on a confluence of events. Like you've
said, if there's four outages, if there's low wind
there, the solar drops off and it's still hot outside
that kind of thing. But I, I wanna sort of explore
because I think what's going on in the valley is, is
largely a transmission issue coupled with accelerated
low growth. So I know that in 2021 we ordered um transmission
to be built into the valley over $1.3 billion of transmission
um will be built in the Rio Grande Valley. Part of
that is a large part of that is the new Greenfield
project that um will be built that cuts it down the
center and across the valley by AEP Texas. And that's
supposed to be put in service um uh by 2027. And then
we ordered the second circuit to be built on the Western
part of the Rio Grande Valley um into the lower Rio
Grande Valley. And, and so that should be completed
sometime this year. And so I know that that those are
intended to help with import rather than export. So
that that's I think will help at least address some
of the load growth down there um with respect to the
additional infrastructure down there. You know,
we're currently in the process of, of um implementing
House Bill 5066 starting with the Permian Basin area.
And so um that I believe will help accelerate the development
of transmission to meet um the rapid low growth that
we're experiencing throughout the state. Historically
as you've say, as stated, ERCOT has, has used a conservative
um process to plan transmission that's based largely
on signed customer interconnection agreements. And
it wasn't until the law was passed this past session
House Bill 5066 that um allows the TDSPs to submit
reasonable load data. Um that doesn't have to be supported
by signed customer agreements so that ERCOT can then
look at transmission projects to accommodate that load
growth. And so, um I think that, that, you know, where
we've been with respect to transmission planning to
where we're at now, I think uh with, with respect to
that Legislation will help identify um transmission
projects more proactively. I know you referenced the
RTP process and including more load growth. And I
think that's already based, I think on y'all's incorporation
of 5066 and an NPRR. That's kind of started to
move through the process that will allow ERCOT to include
additional load growth based on load submitted by
TSPs that um is either signed off by the a TSP officer.
Or um you know, has a customer interconnection agreement
that's signed and, and so that will incorporate more
load into the base cases that go into the RTP projects
that will help identify this type of load that you're
stating was not identified in 2018. So that, that should
help. I think um you know, with respect to 5066. Again
our uh CCN process got um shortened um 280 days from
from one year. So that'll help our part of the um transmission
build out process here at the Commission. I know um
in discussions I've had with Kristi Hobbs that
um ERCOT in the process of drafting NPRR to establish
the econ economic criteria test um that was required
by SB1281. I ask um if you could please deem that
urgent to move that through the process once it's drafted
and, and uh dropped into the stakeholder process. And
you, you stated you've put a team together to proactively
start looking at projects right after the CPS Energy
Project. Um because I think load is just continuing
to grow in, in South Texas and, and it won't stop at
the CPS Energy Project and we must remain vigilant
and, and um diligent in identifying future transmission
projects down there. With respect to resource adequacy
you know, I we have a lot of inter interconnection
Q interest, right? Um Since last April of 23 there's
about 7500 megawatts of new gas in the interconnection
queue and over 335 gigawatts of new generation interest
that's largely solar and storage. We're working
on market design measures here um to provide that market
certainty and regulatory certainty for investment in
dispatchable generation, including today, we'll be
looking at the Texas Energy Fund rules. So there, there's
you know what I'm trying to summarize here is all of
the actions that you know, we've taken, we're in the
process of taking to um help accelerate transmission
infrastructure build out throughout the state, but
even in the valley and then also the resource adequacy
related uh measures that we're, we're in the middle
of trying to work on right now. You mentioned generation
hubs. I think that's an excellent idea um to Commissioner
Glotfelty's point on this sighting of storage on that
sort of seam right there between San Antonio and Waco.
With the development, large increase in data centers
and and other types of um large um loads. I think it
would be very important if ERCOT could come up with
some kind of a strategy. I know the generator generation
developers are very sophisticated and they can probably
figure out where to site but any kind of assistance
there, strategic assistance um to help address this
issue in the valley. While we await, the CPS Energy
transmission project would, would be very helpful.
And what I mean, strategic, it's sort of like what
you discussed about storage and you know, discharge
charging other types of resources along that scene
and then with respect to demand response, you know
um this past Session, the Legislature passed Legislation
that requires the crypto miners to um register at the
PUC. However, I I would like for um Connie to and staff
to include a um issue to get Legislative guidance on
this issue with respect to um our, our authority, ERCOT's
authority to be able to um require the crypto miners
to get off the system during times of scarce conditions.
And I and I say that I think it's important to get
that guidance for the Legislature because as I've been
working on the Permian Basin initiative. I mean
ERCOT's looking at like nearly 7000 megawatts of crypto
mining related, depend in the future and that's a lot
of megawatts. A not, not just there but across the
state and those megawatts are gonna have to be not
only accommodated by our transmission system, but by
generation. And, and so I think it's really important
we start trying to get ahead of this issue because
that's a massive amount of megawatts. And I mean, alone
in the Permian Basin, that's a lot, much less throughout
the state. There's probably a lot more. So I think
getting guidance from the Legislature is gonna be important
on this issue. And I would encourage staff, you
know, Ramya, as you take the reins in the new Energy
Efficiency Division/DR, I guess division. To
work with ERCOT and try to find near term solutions that
can help address this issue in the Valley. Because um
in the next three years, we've got to be taking proactive
action to mitigate this risk and dynamic line ratings
is great. I think that that could help. I think in
some respects as you've noted in your filing, um work
continue to work with the TSPs to see if there's any
workarounds where you go open breakers, things like
that. Anything that we can look at that can help over
the next three years to mitigate this issue um to help
mitigate this issue, I think would be very helpful
But um you know, happy to continue to work with you
um on, on these issues um and would request that or
co remain vigilant and proactive in trying to identify
solutions.
I was just going to, I guess comment on um on the
notice itself, which is in management of risk. That's
the very first step is that you've identified the risk
and then to go back and kind of look at. Ok. How
did we get here going back and looking at the 2018
data. And then taking the actions that you did in evaluating
each one of those processes and then looking at, OK
what do we need to do differently? And then recognizing
I think that that that process not only impacts what
we're doing in the Valley in this particular situation.
But also um gives us the opportunity to look at across
the state, how our transmission planning process overall
you know, can be improved and better um better address
the, you know, what we're seeing in terms of, of overall
growth as well as the the changing resource mix and
and the timing associated with, you know, when the
needs are in the various areas across the state.
I thought it was, it was really good in your um in
your notice that you not only looked at what the impact
was and kind of explaining how we got here, but also
looking at what we can do in the short term before
some of these long term changes. Are able to take place
And um you know, I think as, as others have kind of
noted um this opportunity for demand response, particularly
in the North, knowing that that's an opportunity um
working with ERCOT and our energy efficiency group
and seeing what that opportunity is not just to address
this particular situation. But I think as you mentioned
you know, the opportunity moving forward across the
state. So I appreciate you putting this together. I
think you did um and explained it very well and I think
it's not just what is presented here, but obviously
you are doing and ERCOT is doing much more um work and
um thoughtful deliberation about this. Again, not
specific to just this particular incident, but looking
at it from a broader view across the state and I appreciate
that.
Thanks Woody, appreciate the filing. As I know you
all will do continue to kind of work with our staff
as you're looking at measures to, to address these
issues. And um I appreciate everything that y'all are
doing. I know, you know, we always wish we can find
these things earlier, but it's important that we, that
we've identified it and, and we're working to address
it. So I really appreciate your work and everyone at
ERCOT for this. And Connie, I guess add, add, add it
to the list, the running growing list of things we
need to address in our next agency report for the upcoming
Legislative Ssession next year.
Will do. Thanks y'all, appreciate it.
So, we're going to do a slight detour. I've been told
that I misspoke. I'm not going to place any blame on
my staff or name by names, Tom Hunter. But I, I misspoke
and transposed two numbers in a motion on Item 17.
The water and sewer utility rates after acquisition
rules. So we'll go back to that call that up and redo
the motion. So this time we'll move back to Item 17,
Project 53924. Water and sewer utility rates after
acquisition. (item:17:Chairman Gleeson updates motion to approve proposed order in Project No. 53924) And I would entertain a motion to approve
the proposed order in Project No. 53924, in this
consistent with our discussion. And consistent with
two last minute typo edits that someone not to be named,
Tom Hunter sent us over as well that are. And authorize
staff to make perfecting and non-substantive changes. Thank
you.
So moved. Second. I have a motion and second. All those in favor, say
aye. Aye. Opposed? Motion prevails. All right.
So I don't have anything on 21 or 22. (item:23:Chairman Gleeson lays out Project No. 55000) Item No. 23
is Project No. 55000. Performance credit mechanism
and staff had a filing in this project.
Good afternoon. This is Harika Basaran with Staff. We filed
memo based on instructions at the last open meeting.
And Chris will go over the design elements, the content
of that and my focus will be the next steps in the
process. So Chris. Chris Brown, Commission Staff.
So just kind of quickly summarizing this. So the first
point we wanted to make is that we looked over the
37 design parameters. We think this accurately describes
the set of decisions that need to be made. Just
confirming, we agree with the previous discussion about
the absolute cost cap and then related to that, there's
an open question of how to do the net calculation to
ensure compliance with this cap. One of our main
recommendations here is that certain design element
decisions that affect the modeling be prioritized.
That's numbers 1 through 15 and 19 through 21.
We mentioned at least two items here that we think
that we don't have a specific recommendation at this
time, but we think they warrant additional consideration.
And then on Item 37, market power mitigation. The default
option is just kind of a blanket term that PUC and
IMM will develop some guidelines. And we think a helpful
starting point here would be for the IMM to provide
input on what they view as valuable market mitigation
rules. I think that's kind of the main substantive
points,
basically feedback. So I was just going to ask. So
at what point in time do we have to make recommendations
on these points? Is it now or is it um or we
like taking this memo and letting you all run with
it? And make those recommendations on the Commission's
behalf?
I mean I, I think it's, it's fine for us to give
recommendations on what we think now. I think, you
know, similar to what we discussed last time and Commissioner
Cobos, you know, hit this pretty hard, you know, it's
important to get feedback from stakeholders as well
And so, um I would not want to just short circuit any
options until we got um input from the market participants
and, and others. So, but I think, yeah, if you have
kind of preliminary thoughts to, to help kind of guide
staff as they move forward and, and ERCOT and IMM absolutely
I think, I think we should discuss them. I'm just wondering
I think the idea, I think about when we're doing these
doing these modeling exercises to understand the cost
what the,
uh, outliers are that we can get rid of. What are the
um, um you know they um
I mean, we talk about a number of seasons here. We
talk about, you know, what's the high and the low?
That makes sense, you know, how could you do that?
Do we have to be bound by four seasons or, or 12
months or could it be something different? And, and
that's what I really think. I mean, could it be,
could you, could you have 365 individual PCMs and
have it done daily. And only pay for those, you
know, during the peak time. And divide it by take
your billion dollars and basically divide it and let
everybody know. Then those are the ideas that I'm thinking
about that are like, how would you do something really
simple and not, uh,
well, just to kind of see, you know, I mean, this is
a very complex issue. I think the more simple we make
it,
you know. We might, it might work. I don't know. I
don't know. I'm just, so that's one good feedback simpler
right? So we heard that and then 1 billion is absolute
So those two things, is there anything else like in
our recommendations? And just to be clear, 1 billion
is a net cap. Net cap.
Yeah. And, and so I, you know, I, I read your memo
and, and I zoomed in on the specific design parameters
that you believe are foundational to um running the
models and, but to your broader point on the net cost
cap. I think it's important that as ERCOT moves forward
with modeling that they take into consideration the
annual $1 million hard cap on, on the impact on what
that, how that cap will impact specific parameters
And or, and also not only just the parameter but
the default position that was submitted in ERCOT's paper.
So um I can sort of just give you some thoughts on
on these parameters, I think um for parameters one
and two. And that's four seasons was a default and
there was some, um, months that were provided for,
um, a breakdown of seasons. Like Commissioner Glotfelty, I'm
I'm wondering, you know, should four seasons be the
baseline? What about two seasons and, and that, that
being Winter and Summer being modeled? And when I think
about Winter and Summer periods, I think about, you
know, the fact that the Winter is December through
February and the Summer is June through September. I
think in the paper, there was a parenthetical that
included like the entire year broken up into Winter
and Summer. And I don't think that's an accurate depiction
of what the winter and summer looks like. So I think
running two seasons might be um a good evaluation from
my perspective, uh the number of PUC hours per season
um you know, we spend a lot of time looking at 30
hours in the last two years and all of a sudden 60
hours. So I'm, I'm, you know, curious to see what the
stakeholders will think about the number of hours and
and the introduction of EEA hours per season. Because
the way I envisioned the PCM was to prevent us from
even getting to EEA. So I, I'm trying to understand
that part. But I'lI, I'll let ERCOT and the stakeholders
sort of evaluate that new introduction because that
that's something completely new that I have don't remember
seeing or reading about in E3's prior analysis.
And again, from a policy perspective, the whole point
of having the PCM is to avoid EEA. So I
don't know how EEA hours would be a good um measuring
tool there. Metrics used to determine PC hours
hours with lowest surplus of total valuable generation
relative to load. I mean, when that sort of, I thought
about some of the discussions we've had in the past
and the impact of forced and planned outages on this
kind of metric and what gaming opportunities could
be presented there. We spend a lot of time talking
about peak net load and how our focus of the PCM
would be peak net load. As a matter of fact, it's referenced
in our blueprint that we approved in January of 23
So I really would like to see um scenarios run on peak
net load as well, especially with the um solar ramp
down and periods that we're experiencing and, and ramp
up as we add more solar. Um the option of hours with
lowest ORDC reserve contributions. Should I, I'm not
sure if that should even be an option. I mean, we're
ERCOT is carrying a lot of reserves right now through
not only conservative operations but also ancillary
services. So naturally the ORDC is going to be, you
know, the payments we already see are gonna be lower
because we're, we, we don't have a shortage in reserves.
Our reserves are currently locked up in conservative
operations and ancillary services. So I, I don't particularly
think that option should be evaluated, but I'll, I'll
let um ERCOT and the stakeholders move through that.
PC generation duration based cap for conservative
consecutive PC hours duration, limited resources.
I'll let the stakeholders and ERCOT kind of work through
that. I'm not real sure what that means. It, it, I
read a footnote about batteries and, and 484 hour duration
batteries. And um so I was trying to tie that in my
mind together. I don't know what that means exactly
But I think that should be further evaluated to
make sure that um we're ensuring
that the resources that bid into the forward market
um generation resources bid in the forward market um
will be able to address the high reliability risk hours.
ERCOT wide PC requirement. Essentially the PC
generation required to achieve a target reliability
standard. Um I, I'm assuming that it will be based
on one loss of load event for now because we haven't
set a reliability standard yet. And this is one where
I'm wondering what the impact of the $1 billion hard
cap would have on, on this particular parameter.
And the other part of this is on the blueprint, we
say that the reliability service shall not be based
on forward looking load forecasts made by ERCOT. So
this forecast on the PC requirement is ex ante. Um
And so I'm wondering how our blueprint language marries
up with this recommendation if you're gonna be forward
looking and with forecasts to come up with a PC requirement.
Net cone determination framework. I'm wondering
why that will be done ex post when ERCOT is conducting
a cone study and should know what cone is at some point
based on today's market um environment. And also
I'm also wondering um on number 13, the demand curve
the max annualized PC price 1.5 times net cone is
a recommended default in there. I'm wondering what the impact
of um the cost cap will have on that specific parameter.
Allocation of system PC requirements across LSEs
that's you know, based on load uh ratio share of system
wide gross load during peak or during PC hours. Again
I'm wondering how, you know, it seems like the the
default framework is based on gross peak load. And
I believe that we spend a lot of time talking about
net peak load. So again, I think net peak load should
be a focus there. And then finally, parameter number
20 framework used to comply with net cost cap. Basically
a comparison of the PCM um model to today's energy
only market. Which um would put um ERCOT system at a
market economic equilibrium reserve margin. So part
of the filing talks about modeling the system to year
2026. And I just wanna make sure that as, as you know
E3's running their market equilibrium analysis
for year 2026. That we have a clear understanding of
what those assumptions they're making for year 2026
are. Um because that's gonna be fundamentally important
right? How many megawatts are they removing from the
ERCOT system to reach market equilibrium? We heard a
variety of megawatts the last time we went through
this, this deliberation, what, what is the megawatts
amount they're removing and why um are they factory
in conservative operations. ECRS potentially DRS it
should be in the market by 2026 and RTC plus B.
What about new generation resources? We've had new
gas generation announced um you know, storage solar
and then also um transmission deliverability. What
is the impact of the transmission constraints that
appear throughout our system on delivering our generation
across the system? You know, that's, that's also
an important factor and that was part of our blueprint
So I, I just wanna make sure that the base case starting
point of this analysis that we understand what assumptions
are made. I know that in E3's initial report,
they provided us with a base case um set of assumptions
where they worked off all their model runs. So we need
to understand what those base case assumptions are
and make sure that they're starting at a point that's
truly reflective of year 2026.
I, I guess from my standpoint, um where I see this
study kind of going. Is, you know, identifying what
provides the most value. And so the whole concept
of going in and doing and setting certain initial values
or default values. What the various parameters are
that we're going to consider, you know, how many different
scenarios are going to run to kind of see what change
impacts each of the various parameters or how each
of the various parameters impact the final outcome.
Is all driven towards, you know, identifying and kind
of building what will bring the most value. And to
that extent, I would think that we would want to stay
as flexible as we can. I personally think simple is
always better. Um you know, in the blueprint and, and
I think conceptually the thought was that this would
be over time self correcting, right? And so to me,
those are the most important concepts and things to
remember. I would value the input that we get from
the market participants, the people who, you know,
actually, you know, live and breathe this every day
as well as our staff and our market analysis group
I would just lean uh away from discounting um
things that might provide potential that because it
all operates as collectively as a system in the analysis.
I just want, wouldn't want to kind of forego something
that um you know, inadvertently we, we lose value because
we've, we've taken a position kind of at the outset
that, you know, maybe we um should have given a little
bit more thought too. So, um I'm also um very cognizant
of and I think, um you know, every time we talk about
PCM or any other work initiative, you know, we
we began and in the conversation with real time
co-optimization. And I think in my mind that is, you know
1st, 1st on the list. It's something we absolutely
have to achieve as well as, you know, we're doing this
in order to address and to meet the needs that we identify
with our, within our reliability standards. So, um
it, it looks to me like we've kind of, you, you've
kind of picked the things that in your mind will, you
know, drive the um the, the actual cost of the PCM
and, and then hopefully kind of as we move forward
we'll continue to be cognizant of the time that we
have, we identify the best work pro product we can
in the time available. And um you know, oftentimes
you know, you think about, I wanna get, you know, 100%
of the value. But if you can do it in a, in
a shorter amount of time, if it can be simpler and
you can achieve, you know, maybe 80% of the value,
sometimes that's a better, that's a better work product.
And so in my mind, that's kind of what I'm looking
for because I think we kind of understand that, that
PCM in and of itself isn't, everything isn't gonna
be the whole, you know, solution is gonna be part of
the solution. And so I just wanna be um you know, as
we move forward, being kind of open um again, get the
input from, from our market analysis group, from our
um uh the and from the stakeholders as we move forward
So first, I'd say Harika, Chris, Werner thanks for,
for the work on this. I'm, I'm good with your priorities.
I'd say as we always talk about with any priorities
as we get new information. Just, you know, be nimble
and, and shift where, where you need to and just communicate
that. Harika on the timeline, the only thing I, I might
just add to it is um your, your third entry, 44 memo
SCED files memo, summarizing Commission feedback from
this open meeting. I may just add, you may want to
circle up. I know this was a lot of information today.
So I'd add this open meeting and then maybe some um
additional meetings, maybe walk the hallway and talk
to the Commissioners to get, get some feedback as well.
We can incorporate that for the uh April 4th open meeting
as well or April 4th filing. Ok. Absolutely.
Chairman just said this has all been very helpful
input for staff. And just to confirm what I, what I'm
hearing is that the five bullet points at the end of
staff's memo are acceptable for y'all to, for
us to move forward on. And including I want to just
specifically call out the final one which is us requesting
on your behalf that the IMM file a set of default mitigation
measures for your consideration discussion at the April
11th meeting. Yes. Thank you.
I just want to kind of follow up and um say.
I'd love to talk to y'all a little bit more about the
number of seasons. Um, and just see how we can think
through these that they're not just bound by kind of
the, the traditional seasons or the days and maybe
see if we could get some sensitivities run that would
show varied seasons, different numbers, different times
and see if they actually help or hurt in any analysis
So I'll just do that in the future.
All right, thanks y'all. Thank you. Appreciate it. Sure.
(item:24:Chairman Gleeson lays out Project No. 55837) Next up is uh Item 24, Project No. 55837. Review
of value of lost load in ERCOT markets. ERCOT had
a filing. Um I believe staff may also be coming up
(silence)
Rich, is this your first time at the, at the table?
Yes, sir.
Solid.
Be sure to state your name for the record before you
speak. Rich Parsons, Commission Staff and I'm not starting.
That's why I didn't say my name. Hi Rebecca. Ryan King
with ERCOT. Rebecca Zerwas with ERCOT. So last week ERCOT
filed a memo which consisted of essentially a update
on the value of lost load survey work plan as well as
an overview of the communications strategy. We also
included um the outreach emails that would go out to
customers to illustrate how they will be communicated
to ask them to take the survey as well as a copy
of the survey itself. So I'm happy to kind of speak
at a high level to the outreach plan uh and the work
plan. And then uh Rich is here to kind of speak to
the communication strategy.
So the, the, the plan is that there will be a soft
launch or the plan is to have a soft launch next week
March 26th, I believe. Um and this soft launch will
be uh what I mean by a soft launch is really to
do two things. The first is that the plan will be
to send out the survey to about 20,000 cohort of residential
customers. And I think about uh 4000 commercial customers
the purpose of this will be to get an understanding
of what the response rate looks like. So the response
rate will really inform if we want to get to say 1500
residential customers. Approximately how many customers
will we need to, to outreach to, to get that number.
So that that initial sample back will really be impactful
for that. And it's also the, the I guess the last
opportunity to just make sure that all of the systems
and the, the, the, the technical back and forth are
are working as planned. So it's the, uh there has been
a lot of work that, that plan beyond has done to make
sure that, that that is working as necessary. But it's
it's one more opportunity to kind of do that. The
kind of official launch will begin a couple of weeks
later on April 9th and that will be a more significant
outreach to the CBCI cohort of customers. Again, the
the precise number that will go out will be to some
extent a function of what we think we need to send
out to kind of meet that target. It may happen in
one wave or maybe a couple of waves and so that will
go out to a larger cohort of customers. Um about 6
to 8 days later, there's a reminder that goes out saying
you know, the survey has come, uh please take a look
at it um and then starting, I guess in mid April, April
16th or so, um if there's a need for a second cohort
of CBCI customers, then that will be included as part
of that roll out. And that's also where um plan beyond
and ERCOT. We will be working with the non entity, municipally
owned utilities that have agreed to partner with us
There's about five that have been included and named
in that memo. But because they will be required to
send out the survey, there's a little bit more work
that will be required to just make sure that they have
what they need some support before they actually send
out the survey invitation. The survey will be open
till I think we're looking at around May 17th. So anyone
that receives a survey, um usually the the expectation
is after 48 hours, sometimes it it kind of falls to
the bottom of the email list. But nonetheless, it would
be open until mid May for that reporting to come back.
a little bit about the outreach communication strategy
here. We certainly want as much participation as we
can get. We want people to be aware that this is coming
and what it's all about and why they're receiving it.
So, um beginning or on Tuesday of next week, to coincide
with the soft launch, we'll be issuing a statewide
press release telling folks about the survey what it
is, what it's for, how it will be used, who's going
to the randomized uh nature of it and, and who might
be receiving it. We'll accompany that with some
social media, of course. And we will also be posting
a frequently asked questions on our Consumer Protection
Division web page. And that will also include a tile
on the home page. So all you have to do is go
to puc.texas.gov, find the tile, click on it. And so
folks who receive this and on their email and say,
you know, what's this? Or they may have some questions
they can quickly find out that information. We'll also
include some contact information for consumer protection
and for Office of Public Engagement. So they will
all be available to answer questions about that. And
uh I know Office of Public Engagement will be available
to talk to, if there's any groups of people. It's a
little hard to target any groups because it's randomized.
But um Mike and his team will always be available for
that type of thing. So they'll be fully up to speed
on that. The messaging that we're crafting behind
this because the survey was, was developed by the Department
of Energy's Lawrence Berkeley National Labs. I was
in contact with the team at LBNL and they provided
me the outreach materials and language that they've
used previously uh around the country and even working
with. Uh I believe it's a ep in Texas on some, a
similar survey. We're modeling our language after that
to, you know, make sure people understand. This is
not, this is not a new survey, this is not a one
off survey, this is a widely used highly credible survey
tool and we want people to understand um this is, this
is something that, that is taken very, very seriously.
And so it will the emails that will go out to potential
participants will uh will state that this is a randomized
selection process. They may wonder why, why am I getting
this? It's randomized. We emphasize that participation
is voluntary. We don't have to do it. And uh there's
no impact whether you take it or not, there's no impact
on your service and there's no impact on your billing
Uh People will potentially wonder that uh we emphasize
it's an important opportunity for Texas consumers to
give us their opinion and their thoughts on what they
how they value reliability, what, what cost they're
willing to uh to pay for reliable electricity and uh
the responses are anonymous and no personal information
is attached to their responses. So it's, nobody's name
is gonna pop up anywhere, contact information or anything
like that. And again, we emphasize that, that this
is a, a widely used survey tool. As, as Ryan said
they will get a follow up email that we work with,
with ERCOT and Plan Beyond and Brattle very closely
on. If they don't complete it, you know, they do half
of it and then they leave it. They'll get a follow
up email or if they don't, if they disregard the first
one, they'll get a second bite at the Apple 6 to 8
days later. And then we'll have a, a social media
campaign that will run for the duration that the surveys
in the field. And it'll be different posts 2, 3, 4 times
a week, interspersed with some of our other consumer
um targeted social media. Encouraging people to take
the survey, directing them to the Fa Qs and directing
them to consumer protection or, and, or O pe, if they
have questions, they want to talk to somebody. And
so that's what we'll uh and that's what we'll be doing
Ok, thanks. Um Just two things quickly. Uh One would
be, you know, Chris, if you all start to get complaints
or inquiries, you know, kind of keep us apprised. I
think that may, you know, the, the descriptive statistics
around the types of inquiries and complaints we're
getting, may help us pivot if we need to on our communications
and outreach. And then, um, this is obviously something
that as folks get these surveys, they may call their
you know, State Senators or Representatives. So I just
you know, tell our GR team Brooke and Jess just
make sure that all the members know in the Governor's
Office that this is coming. And um, and what to do
if they get inquiries from their constituents and how
to reach us.
Important points?
Okay. I think that's it. Thanks y'all. Thank y'all.
Chairman and Commissioners. Before we go to the next
item, we're coming up on a 2, 2 hours back from
our lunch break. This might be a good time to take
a 15 minute break for the court reporter. I agree,
Shelah. So why don't we recess until 2:25.
We will reconvene the open meeting at 2:27pm. Okay.
Next up we're gonna take the next two items out
of order. (item:26:Chairman Gleeson lays out Project No. 55826) We're actually gonna take up No. 26 first,
Project No. 55826. Texas Energy Fund in ERCOT Generation
Loan Program. I think some of the discussion on this
will bleed over into the discussion on the completion
bonus. So
Staff, if you want to lay out the proposal for adoption. Before we start Chairman
I'm just going to note that we had one member from
the public that did sign up to speak, but I believe
they may have left. So just to have that on the record
that the person that did sign up to speak, I believe
is no longer here. Thank you for that Shelah. And if they return to the room
we'll give them an opportunity to speak.
Yes. Thank you Commissioners. Alison Fink for Commission Staff.
The proposed order adopting new section 25.510 will
establish the Texas Energy Fund in ERCOT Generation Loan
Program. We briefed y'all on the key issues of
this program at the last open meeting on March 7th.
And then we filed a staff recommended adoption order
on March 11th. Since then, we worked with your offices
and stakeholders to make some final edits to the draft.
There were these were small changes to help the
rule better support the goals of the Texas Energy Fund.
And we filed a revised staff recommended adoption order
on March 19th. Since that filing on March 19th, we
caught one minor item that calls for a small change
to maintain consistency between the notice of intent
and the actual application we recommend referring to
the proposed name of the electric generating facility
in the application.
There are many people inside and outside of this agency
to thank for contributing to this rule. And with the
two Davids here, first and foremost and outside of
us up here, at least 30 members of your staff also
contributed. We had close collaboration with ERCOT
and the support of our contractor Deloitte. It was
a real team effort and we're very grateful for everyone's
work on this. And staff recommends adoption of this
rule. Thank you for that layout and yes, a lot of work.
The, the number of calls that I'm sure you all fielded
along with those of us sitting up here just over the
last three days has been uh been a lot, a lot of
input to develop this rule. You all did an amazing
job. Thank you to everyone who provided comments on
this. I filed a memo in this docket. The memo speaks
for itself. It was, you know, I was persuaded by, by
some commenters who talked about the PAF and POF um
percentages. I think loosening those restrictions,
those performance criteria from 90 to 85 and from 10
up to 15 makes sense. It'll um you know, I'm worried
that if we don't do that, it'll have a cooling effect
a chilling effect on, on resources being willing to
participate. And so that's something I definitely don't
want to do. So, I feel like striking the balance between
performance and ability to actually meet the performance
criteria that those are the right metrics to go with.
But happy to hear y'alls thoughts.
I would agree as well. I think part of uh one
of the changes was driven by, I guess the concern to
if you will kind of work the kinks out in the first
year when you're starting up a new uh facility. And
I have personal experience on that and I can say that
that is warranted. As well as I think one of the uh
uh comments uh was that, you know, as a course of,
of uh operation over the long term of an asset that
there is a very comprehensive downtime that needs to
be taken and that downtime in and of itself would have
um, you know, allowed that asset not to meet the higher
standards. So I, I agree because I, I feel like
they're warranted. I still would point out that these
are, are high performance standards. And so um, I
think that, you know, our whole, whole, whole objective
here. Is that you want, we want to incentivize dispatchable
generation, something that's going to be available
to the ERCOT market. And uh even, you know, with this
change. I think that we very much meet that objective.
I'm in agreement as well with your recommended changes
in, in your memo Chair Gleeson. I think it's, you know
we're trying to strike a balance here between ensuring
that the dispatchable generation power plants are performing.
If they are receiving these um monies from the Texas
Energy Fund, but also try to make sure that we're not
being overly restrictive to allow for the, you know
first year um issues to be addressed in the power plant.
The more the sort of 6 year, 8 year um overhauls
that need to be done to the plant. But also, um recognizing
that there's just gonna be um a need for um you know
equipment maintenance and, and um those things on the
plant. So I think your 85/15 split uh makes reasonable
sense. And I would be fine with moving forward with adding
that to the rule. Yeah I mean, I think that my experience
on this was a start up of a generating plant that used
a new turbine. And for the first year, it was actually
really challenged. Because it was a brand new, really
really efficient turbine. And I just think figuring
out how we can give the benefit of the doubt, we want
that facility long term in the market and figuring
out how we can make that happen is, is the right thing
to do. The intended goal to get those types of facilities
on the system. Perfect. There are a couple of issues
I know I talked to staff about that. I just want to
go over verbally and I'll also be remiss if I didn't
mention. We did receive two letters in this docket from
members of the Legislature. One from Chairman Schwertner
and then another from a group of both House Members
and Senators yesterday. So I want to thank them for
their input into this process as well. So one of
the issues we talked about was the, the concept of
senior debt and the idea that potentially there, there
could be benefit from having. Even though the Bill
says that the state has to be the senior debt, that
potentially would there be benefit to allowing other
senior debt. And I know we talked about this for a
while. So maybe you just go through kind of the thoughts
on not allowing other senior debt. Why that's the
the proper way to approach this? Thank you Chairman
Gleeson. This is David Gordon with Commission Staff.
Yes. Well, we started off with a reading of the
statute which notes that the loan um that the the the
funds advanced must represent the senior secured debt
of the facility. And we also keep in mind that these
are public funds um subject to the public trust. And
allowing another person to share that co-senior status could
compromise the PUC's ability to recover. In case there
had to be an event that required recovery. So we
took a, an across the board position that the TEF
Funds advanced would need to be the, the senior debt
securing the facility.
I think that's the right move. I think if we were only
given 20% of the loan and the banks had to give 80%
we'd have a challenge there. But the fact that we can
provide up to 60% of the the loan is the right thing
to put the the taxpayers, you know, in the primary
position here. So I think that's right. Everybody was
comfortable with things. Okay. So the next issue was
around points of interconnection. We kind of talked
about two issues there. I'll start with the idea of
you know, new build versus upgrade and can you have
a, a new point of interconnection that's needed at an
existing site? That new point of interconnection
is needed because of a reliability issue. And would
that new point of interconnection require you to be
considered a new build or will we consider, will we
allow for the consideration of upgrades to existing
facilities where a new point of interconnection is
needed because of a reliability issue? Sure, this again
is driven by the the language in the statute. This
really is an issue because of the timing with which
a borrower is going to get its deposit back or can
get its deposit back. And the statute makes a distinction
between new construction, which authorizes a three
year or four year period with perhaps one year additional
if extenuating, sorry. Extenuating circumstances support
that or for upgrades. That's a three year period
with a one year additional time phase.
The reason that we think that the um
when we concede that this, we think of the upgrade
portion as uh building new generation units at an existing
site and the statute talks about the time period that's
relevant being the interconnect period or, or the completion
period because an interconnection already exists. So
to make the statute meaningful there, we took that
cut. Now, there's a distinction if somebody is building
a new generation resource, add an existing facility
Um and they want to add a point of interconnection
for reliability reasons. We don't want to exclude them
So we include language in the rule that says you're
going to be treated differently if you are required
to create an additional point of interconnection. Okay.
Is everybody comfortable with that? Yeah, absolutely.
Okay. So, so just to kind of reiterate. You feel like
the, the statute kind of binds us based on point of
interconnection, a new point of interconnection.
You know that that's new build and existing um is where
the upgrades would be. That's correct Chairman. And
then the last issue we talked about was around switchable
units. This issue came up kind of to me in the
last, last couple of days. The way the rule is, is
currently proposed, switchable units um are prohibited
from participating in this program. So why you talk
through kind of the reasons for that. David, do you
want to take that? Thank you, Mr. Chairman. David Smeltzer
for Commission Staff. I would say that the, you know
the, the folks that we spoke to in the last few days
have had some concerns. Because they, they don't see.
Can you speak in the microphone? I'm sorry, they don't see a preclusion of switchables in
the text of SB2627. And I'm not going to pretend that
there is one there. But I will say that staff's position
on this issue originates from our position that we
have articulated in prior open meetings, which is that
this is public money. And 100%, we want 100% of the new
capacity that's generated as part of this program to
be dedicated to the ERCOT market. And I would say that when
we look at the statute there isn't, it doesn't specifically
dictate this outcome. But I think the vast majority
of the classic principles of statutory interpretation
support this outcome. And so for instance, when you
look at the text, we see that this is to provide uh
loans and finance upgrades for the ERCOT power region.
And it also talks about adding increased capacity.
And as we know, capacity is a measure of something
that you build, that's there all the time as opposed
to real power, which is their part of the time. We
also know that the historical context for passing this
Legislation was based on Winter Storm Uri and the perception
that we need to bolster the, you know, generation fleet
of this state. To ensure that we always have a sufficient
capacity to avoid those sorts of outcomes in the future.
And so this is part of the extended effort that the
Legislature and the Commission have been working on
together to, you know, ensure better outcomes in the
future. So in addition to that, I think that there
are the, the structure of the program presents unique
risks that would exist for switchables. And I it would
be very difficult to set up switchables to succeed in the
context of this program. And by that, what I mean is
by statute, we specifically have to require all of
the recipients of these funds to enter in loan covenants
and have certain performance metrics according to those
loan covenants. One of the difficulties with switch
you know, switchable units is they have indebted obligations
to both us and SPP that make it impossible for us to
know with any certainty when they're going to be here.
And, and so if they were to not meet the performance
standard that you had with any other type of unit,
we would give them a cure period and they would go
make necessary changes to um to come into compliance
without defaulting on their loans. But if the, if the
reason why you're not meeting the performance standard
is because because of the nature of the entity that
you are, that you're switchable. That's not something that
would be able to be cured within any sort of reasonable
period. So we would just be setting these entities
up for risk of default and that, that's not a positive
outcome for anyone. So we think it's the right policy
call. And we also think that the Legislation specifically
lists the considerations that were to, that were to
consider. And on those list of considerations includes
any other factors that the Commission finds reasonable.
And so I think that the discussions we've had with
you guys in prior open meetings about this, I believe
supports the philosophy that we want this energy to
be available to the grid at all times. And finally
I think that it's worth noting that uh
the proposition has been forwarded, you know, well
do you even have to take a specific position on switchables.
But we of course, have an obligation under the
APA to respond to any comments that are filed publicly.
And we did get specific comments filed from parties
both recommending that we do or that we do not include
switchables. And, you know, I think for the purposes of
regulatory certainty, it's better not to hide the ball
if we know that our performance standard is going to
effectively exclude switchables by requiring the energy
to be available to ERCOT grid at all times. It's better
to be upfront about that and include that in the language
directly rather than um set up an entity to go through
the extensive process of filling out a loan application
and going through due diligence. While we would know
that we would not give them a loan because they're
not able to do it. So we think that being transparent
and open with potential applicants is always the best
policy from a regulatory certain perspective. So those
are the underlying factors driving staff's recommendation.
So I, I agree with staff on this. I will say I
did give consideration to the idea of, you know, just
valuing switchables lower and therefore, you know, most
likely they would only get this funding if we didn't
have, you know, full subscription from units that would
only serve ERCOT. But, but as I thought through it
as I talked to staff and, and listen to some of the
comments that came in on the other side of this. I
just think the the defensible position on this is,
is this money needs to be spent for resources that
are wholly going to serve ERCOT. And, and that's I think
that's just how we have to do this. I think this, this
in ERCOT loan program is meant to be for resources
that are going to serve ERCOT all the time. And so
um so yeah, I agree with staff. Happy to hear y'all's
thoughts. I think you'd have kind of the opposite argument
for the non ERCOT loan program. If it was switchable to
outside of ERCOT, switchable to inside ERCOT, you're doing
the same thing. You're, you're eroding the value of
what the Legislature created in those one areas and
blurring that distinction line. So there are non ERCOT
areas that, that will have a loan program in their
in their own right? And I mean, I think you're, I think
you're right on target there.
Yeah, I think that's an important distinction in ERCOT
outside of ERCOT. And also to note that I think
the early completion bonus rule does not make a distinction
between in and outside of ERCOT. So, um you know, based
on my prior experience, you know, the, the um operation
of switch generation between ERCOT and SPP is largely
primarily dictated by the terms contractual terms of
coordinations between ERCOT and SPP. And by way of
those um agreements, it, it just simply or not, the
units are simply not available 100% all the time um
for ERCOT and while they are valuable units in terms
of being able to switch back and forth um and providing
reliability um in ERCOT, but also in parts of ERCOT
I mean, parts of Texas that are not in ERCOT like SPP.
I believe that uh said 2627 then the low interest
rate loans for in ERCOT generation uh require that
the units face ERCOT, 100% of the time and are available
to ERCOT every day.
I agree with your assessment as well. Again, each
and every day um power that's available to ERCOT. And
I think as, as everyone has mentioned, there will be
some programs that will be available for those entities
that are outside ERCOT as, as well as the bonus program.
Okay. So that was the list of issues that I have. Did,
did you all have any other issues you wanted to discuss?
I have two
if other Commissioners want to go first? So these aren't
recommended changes. I just really wanted to make a
statement on two issues following up on my comments
from the last open meeting. So what I talked about
was facilities at generating facilities being built
at industrial facilities. So whether you call them
a pun, you know what they, what they are, I'm thinking
about this from an equipment standpoint about how you
how you create optionality, but how you make these
units more efficient. So if you have,
if you have three
combustion turbines at a cogeneration plant and only
one of them is, is dedicated to ERCOT, say there are
100 megawatts each that will not be eligible for this
because it's not 50% of the facility. So I think this
is something that,
you know, the
industrials ought to go talk to the Legislature about
I mean, I think this is not the first time that this
issue has come up. I think they have a point because
optionality is really key, especially when you're dealing
with steam offtake, which can reduce risk, two plants
you know, reducing risk with, with a,
a industrial host. It just makes sense capitally, but
it doesn't make sense in the construct here. So I would
encourage that discussion to happen and for us to be
open about it in the future. And you know Commissioner
Glotfelty, what I'd say to that. Is I think what you're, what
you're illustrating there is probably more likely to
happen than the anecdote I gave last time about a new
1200 Megawatt facility. You know, 500 sting to serve
the local, local load there behind the meter and then
700 onto the onto the grid. And I think when we talked
I talked to staff about trying to find a way around
the definition of facility to accommodate what you're
talking about. I just, I think we, we had a really
hard time trying to figure out how to do that. But
I agree, I mean, I think is as we look to next
Session to the potential of getting an additional $5
billion that this is something we should definitely
talk to the Legislature about and to the industrials
because I think your comment on optionality is important
like I talked about geographic diversity. I think it
is going to be important for this program. So if we
can remove a barrier, come up with a way to easily
have a line of what is in and what isn't on that
issue. I think that would be beneficial. Great. I appreciate
that we found that that experience in the possibility
of that experience in, in a nuclear plant that's been
proposed down on the Gulf Coast. Three units are there
for steam one unit, you know, might be for electricity
if they ever get that across the finish line, that
would be ineligible for this type of structure. So
I'm really appreciative of, of you thinking that way
and, and and being supportive of that, the other one
is, is a follow up to
kind of our ADER. Okay. ADER is totally different than
this. I know that but there were some comments that
were submitted by USA Compression. That were kind of
appealing to me, not in this day, but again, have to
go to the Legislature to see if this happens. And that
is if these critical facilities or these pipelines
or. Well, let me say it doesn't have to be that if
there are aggregated facilities that are of smaller
amounts that can aggregate to over 100 megawatts, is
that something we could fund in the future? And as
we, as I think about the ADER pilot program on a really
small scale. Something like this could be of value to
to ERCOT on a large scale or on a medium scale. And
it, it may set us kind of again at the, at the
future of, of pushing these aggregated resources. I
don't think there's statutory construct to do it in
this I, I, I told them that I think it's a Legislative
issue. But it's, it could be a really compelling opportunity
for Texas in the large geographic area that we have
a lot of dispersed resources, could have generators
that could aggregate up to become 100 megawatts or
more, so. Yeah, my staff and I met with them as well.
And I think we more with the same feeling like this
this is something that I think could be beneficial
which is probably not right for this program. So I
couldn't agree more. I'm totally in alignment with
you on your feeling on that one as well. That's all
I have. I'm really appreciative of the staff when you
say 30 members of staff and, you know, working together
on this. That's a, that's a high bar. I congratulate
you all for doing it. I congratulate everybody for
doing it.
Just a great effort. I mean, I wanted to thank the
staff as well. So you know the, the manpower that
went into it, the woman power that went into it.
The, um you know, the thoughtfulness, um the deliberation
kind of that marriage between finance and engineering.
So you know, the challenge right off the bat of, you
know, getting the money out the door and then putting
all of the um the procedurals and the, and the guidance
that we're gonna need to make sure that, you know,
not only do we, you know, select those projects that
are of value to the grid, but also that, you know,
as they move through the construction phase that they
do so as expeditiously as possible. And that we end
up, you know, I think the um the performance criteria
that you know that, that staff developed. I mean
it, it, it's, it's a new, it's a new approach. Something
specific to uh to this work effort. And so it's like
you know, we hit on every I think area that was expected
from this incentive program. And so um I, I, I really
think, you know, a lot of times, you know, Texas is
out leading the way and they certainly are with this
Texas Energy Fund. Can I say one other thing? So, um
I, the, the completion bonus, the time frames for when
we are hoping these facilities come online. Um I was
with the President of Siemens yesterday, And uh and he said
that uh good luck getting a combustion turbine before
2031. So my point in that is to the market, if
you all are seeing a massive delay in this major equipment
I think that is something that really has to be conveyed
to the Legislature and to us. So that we don't get in
a bind so that we can really have an understanding
is this program actually going to work in the time
frame that the Legislature really wants it to work.
And if not, what is the structural deficiency that
won't allow us to make that happen? Yeah. And I think
as the state, you know, depending on the financial
situation of the state. As the Legislature looks, you
know, to spend money next Session, potentially. You
know, aiding in that as well and getting components
if there's supply chain issues or, you know, we just
can't get the components to get these Bill. Perhaps
the state could also help there.
I just wanted to thank staff as well. This is a monumental
effort. I think this Legislation, Senate Bill 2627
and the Texas Energy Fund is just critically important
for our state. Our state's taxpayer dollars are backing
up this program and the state has spoken loud and clear,
our voters. That we need more dispatchable generation
built in, in ERCOT. And they're willing to um stand behind
with taxpayer money to ensure that we get those facilities
built in ERCOT. And this is a first in kind program
that the PUC has, has stood up and is in the
process of standing up. And, and I just really want
to thank staff and everybody that worked on this standing
up. This program because this was a monumental effort
at first in kind. And it was a very smooth process
for me and understanding how the program was um being
developed for the Legislation and the policy cuts that
needed to be made along the way. And, and I mean, it
was just, it was a, a very good process um in terms
of developing it. But um you know, the the staff taking
a strong position and creating the framework from a
policy standpoint, it made my job a lot easier. And
I, I just really want to thank you for your hard work.
It was outstanding work. Thanks very much. Thank you
All right. (item:26:Motion to approve proposed order) With that, I would entertain a motion to
approve the proposed order in Project 55826, consistent
with my memo in our discussion. So moved. Second. I have a motion
and a second. All those in favor, say aye. Aye. Opposed? Motion prevails.
Thanks y'all, great work. Thanks to everyone who participated
in this and provided comments. Great work. All
right. (item:25:Chairman Gleeson lays out Project No. 55812) So now we're gonna take up Item No. 25, Project
No. 55812. Texas Energy Fund Completion Bonus Grant
Program. Just real quickly. So we had a discussion
on switchables in the in the last item. Switchables in this
program. What are your thoughts on participation?
You know, that this is something that um you know,
whenever folks meet with us and we say we'll think
about it. We always do. And we've been thinking about
it in the last couple of days. And I think that a
lot of the statutory context and issues that exist
with including switchables in the loan program factored
differently in the grant program. So I think that staff
is working on its recommendation for next open meeting.
But I think that if you look at the way that the
bonus grant program is structured for the performance
measure. It says,
you know, we have to establish by rule, performance
standards and then skip said for the performance during
the 100 hours with the least quantity of operating
reserves each year. And so, whereas the loan rule appears
to contemplate that we would have full time in the
ERCOT region. There's room for an interpretation of
this statute that says that we're supposed to be looking
at the 100 tightest hours. Another feature of this
completion bonus grant rule that's different from the
loan rule. Is that we don't give the money upfront,
we give the money afterwards based on performance according
to that performance standard. So that would, that could
justify an interpretation or a policy preference for
allowing units like switchables because they would
not get any of the money that came from the Texas Energy
Fund unless they were providing according to the performance
standard energy to ERCOT. When we needed it under the
during those 100 hours, which appear to be what's contemplated.
And the last note that I'll make is my, the concerns
that we expressed with regards to an entity not being
able to live up to the covenant that they would have
to the performance covenant under the loan agreement.
That doesn't exist with the grant in the same way that
it does with a loan because you don't get the money
upfront. And so um Commission Staff is, is open to
I mean, if you all want to provide guidance, you can.
But if not, I would just say that Commission Staff
does not,
is not as you know, close minded to the idea that we
would interpret here. We think the statute in the program
is a lot more suited to the inclusion of switchables
for the completion bonus grant program than for the
loan program. So that those are, that's our additional
analysis there. Yeah, and in our discussions and talking
to my staff, I agree with, with what you're saying
with your interpretation of the differences between
the loan program and this this bonus grant program.
So um like I said I, I agree with that.
I do as well. I think that's right. Okay. Another meaningful
difference, just since we've been working with stakeholders.
I will say that this rule has been published for 10
published publicly for 10 days with the idea with staff's
recommendation and that switchables would be excluded. And
just for context, staff has not been approached by
any company or individual that intends to apply that
desires to apply for a loan. But we have been approached
by folks that are desired to apply for a grant that
for a switchable. And so to the extent that that is meaningful
input, um I wanted to communicate that as well. Thanks
David. Thanks y'all, appreciate it. Thank you. Thank you
Okay. I don't have anything on 27, 28, 29, 30 or 31.
(item:32:Chairman Gleeson opens floor for ERCOT's Woody Rickerson to speak on the upcoming eclipse in April) Item No. 32. I believe ERCOT, Woody was gonna talk
about the eclipse we have coming up uh on April 8th.
Woody Rickerson with ERCOT. So
Monday, April 8, 2024, total solar eclipse. We
have a uh there's a good summary that is on the ERCOT
website uh under the Ross committee. And uh there'll
be another update in the April Ross if you may want
to look at that.
So the uh the eclipse will occur approximately between
12:10 and 3:10. The sun coverage ranging from 81% to
99% in Texas. The overall solar output will could be
only 7.6% remaining. So it's a pretty uh pretty big
ramp down. So ERCOT will preposture the system just like
we did previously. As necessary to meet both the down
ramp and the up ramp. We are fortunate that the
solar eclipse is occurring in April, not August. Because
it would be much more difficult to do this in August
than it will be in April. The some of the activities
leading up will start um about 11 days before the eclipse.
We'll send out the first market notice, reminding the
market. And there's a series of things that occur 10
days and 7 days and 4 days. When you get
down to 2 days before the eclipse uh prior to the
next day's uh
day ahead market. We'll review the forecast selections
and ancillary service requirements for the eclipse
hours and assess if any changes are needed. After
one day before, after the dam clears and prior to d
rock. We'll assess a sufficient capacity margin for
the eclipse window. And if a forecast selection changes
are needed. By that point, we should have a pretty
good idea if it's gonna be a clear sky day or a
cloudy day. A cloudy day actually would have of course
less, less ramp. Lower, probably lower overall load
too. The day of the eclipse at 10am, 2 hour
two hours prior to the operating hour window. We'll
assess forecast performance and we'll review all our
parameters. We don't expect there to be any reliability
problems.
Any questions for Woody? No, I would say. I don't know
if I forwarded it to you Woody. But Texas A&M's
smart grid center did a visual simulation of what it
would look like and the megawatts how they are detrimental
to the system in totality as the eclipse happens across
the state. If you go to the A&M Smart Grid
Center website, it's there. It's pretty cool to see.
Thanks Woody, appreciate it.
(silence)
(item:35:Chairman Gleeson lays out Project No. 55156) I don't have anything until Item No. 35, Project
55156. Implementation of activities from the 88 Legislature.
I think Connie, you have an update on our ledge tracker.
I do. Um, this morning we went live on the agency website
with an implementation tracker. From the home page
you can scroll down to the Government Relations tile.
That's where you'll find our one stop shop to keep
up with implementation. It includes links to relevant
Commission projects and key documents in those projects.
We'll be updating this uh tracker periodically and
I hope that helps anyone who's interested. Keep up
with what we have going on here, which is, you know
a few things. Yeah no. I think, yeah absolutely.
And, and you know, having it more accessible. I think
to everyone who's interested in what we're doing is
is definitely a good move and so appreciate the work
in and getting that up. Thanks to the GR team, our
IT Staff, Comm Staff for, for doing all that. Appreciate
it. I don't have anything on 36. (item:37:Chairman Gleeson opens up item for update from PUC Interim Executive Director, Connie Corona) 37 update from our Interim
Executive Director. Thank you Commissioners. I am
also pleased to report to you that as of Monday this
week, we have extended our hours for consumer assistance
by phone. Staff is now available to answer 8 to
5, Monday through Friday. As well as by email or online
form at any time. So that's something that we've
been striving to get um into our schedule as we acquire
more resources um in the agency. And, and we're able
to accomplish that this week. Secondly, I am quite
proud to announce that our very own Ellie Breed is
being honored with the Rising Star Award from the Daily
Texan Hall of Fame. During Ellie's time at the University
of Texas, she served in a number of roles including
Managing Editor of that publication. The Rising Star
Award is given to recent graduates who have already
in their short time in their career, made a significant
contribution to their field. Um Ellie is currently
serving as our Chief Press Officer and she is um indispensable
to the staff, so we appreciate her very much. Absolutely,
congratulations to her. I don't know if she's in the room.
When you, when you see Ellie congratulate her. She,
she does an amazing job. Our Comms team, you know
since, since Winter Storm Uri has grown a lot. And
you know, hiring Rich was, was great for us and
he's been able to put together a great Comms team.
So, um congratulations to her.
I don't have anything else. The last thing I'll say
is happy 1st day of March Madness. To those who celebrate
this day as the tournament is going on. The one thing
I would say is remember that the majority of the real
stars in this year's tournament are in the Women's
bracket. From JuJu Watkins at USC, to you know Paige
Becker at UConn and Caitlin Clark at Iowa. Do yourself
a favor and watch some Women's basketball because that's
where the real stars are in this tournament. (item:40:Chairman Gleeson adjourns meeting) So with
having no more business before us. This meeting of
the Public Utility Commission of Texas is adjourned.