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The Board of Directors of the Electric Reliability Council of Texas met on June 21, 2022, to discuss regular business concerning ERCOT. The Board heard updates from ERCOT staff about summer operations and multiple rule changes. The Board also voted on several matters requiring approval. An agenda for the meeting can be found here.

 

This report is intended to give you an overview and highlight of the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

 

Item 2: Public Comment

Arushi Sharma Frank, Tesla

  • Provides overview of Tesla’s work in Texas, including work with ERCOT and with the electric grid
  • In 1 year, Tesla changed market rules, implemented them, and connected a 100-mW battery, unprecedented progress
  • Rule change being voted on today is creating a new value proposition for batteries
  • New initiative – Reliability on distribution system, resiliency on the grid is the goal

 

Item 3: Consent Agenda

  • Motion to approve the consent agenda as presented; passes

 

Item 4: April 28, 2022 General Session Meeting Minutes

  • Motion to approve the meeting minutes; passes

 

Item 5: 2023 ERCOT Board Meeting and Annual Meeting Schedule

  • Board discusses meeting dates for 2023
  • Motion to approve schedule; passes

 

Item 6: CEO Update – Brad Jones

  • May 13 – several units came offline, 2,900 mW offline
    • ERCOT called for a conservation of energy use over that weekend, voluntary reduction allowed generators to go back online, grid operated as it should have
  • Securitization – Closed on bonds just under $2.1B, 4.979%, proceeds will go to market participants per settlement agreement from Winter Storm Uri, will begin payments August 1st
  • New transmission process – SB 1281 (87R) requires ERCOT to perform a Biennial Grid Reliability Assessment to evaluate common-cause outages from weather conditions
    • PUC has started rulemaking 53403 to address this change
  • Provides update on ERCOT’s progress on the Market Design Blueprint
  • Chair Lake (PUC) – Makes note that an OCN is a standard market notice, applauds ERCOT’s work on May 13

 

Item 6.1: ERCOT Analysis of Environmental Protection Agency (EPA) Federal Implementation Plan (FIP) Regional Ozone Transport Rule

  • EPA proposes that emission reductions for 26 states, including Texas, are necessary to address upwind states’ interstate transport obligations
    • ERCOT analysis – 10,803 MW reduction, which included 8,203 MW of coal-fired generation at 7 locations, and 2,600 MW of gas-fired generation at 4 locations
    • Significant impacts to the reliability of the transmission system resulting in $1.2 to $1.5 billion to resolve the local reliability issues
    • Probability of load shed increases by 9 times in summer months
    • ERCOT board members discuss emission reductions proposed by ERCOT to meet obligations of the EPA
    • ERCOT board member states this will bring extreme volatility to the market, and the issue must be addressed immediately

 

Item 7.1: 2022 Summer Weather Update

  • ERCOT staff provides overview of recent weather updates, including many record high and low temperatures in Winter 2021, Spring 2022, and Summer 2022
    • The coldest winter period since the 1980s (Feb 2021)
    • The warmest December ever recorded (2021)
    • One of the hottest springs ever recorded (2022, more details to follow)
  • Most of Texas has experienced rainfall well below normal in 2022
  • Forecast is for La Niña to continue this summer and extend through at least the fall season – commonly associated with drought in Texas
  • 2011 was the hottest summer on record for Texas
    • 2022 is currently trending hotter than 2011
    • Evidence for the summer of 2022 to at least approach the summer 2011 extremes, if next 3 months have very little rainfall
    • 105+ degree highs should be frequent this summer, unlike last year
    • Most of the state is forecasted to experience a drier-than-normal summer
  • Over 78% of the state’s land area is in a moderate drought or worse
    • Current drought is the worst (largest % of area) as of the end of May since 2013
  • 2022 hurricane forecast: 18-22 named storms, 7-12 hurricanes, 4-6 major hurricanes, this is above average

 

Item 7.2: 2022 Summer Operations

  • Anticipate record peak demand of 77,884 MW based on average summer weather
  • Planning reserve margin for summer 2022 is 22.8%
  • Assessment of resource adequacy for high-demand days is dependent on output of wind and solar, as well as unplanned outages
  • No wide-area reliability concerns expected this year, barring significant outages
  • Board member – Is it possible to calculate how much extra energy has been generated with changes made in last two years?
    • No new generation was created, but can get number of reallocated generation created, maybe around 500-1,000 mW

 

Item 7.3: 2022 Summer Markets and Credit

  • Changes in ORDC price adder relative to previous summer, $9,000/MWh to $5,000 MWh
  • Natural gas prices are much higher than previous years
  • ICE forward prices for ERCOT summer power have trended upwards in 2022 for August
    • Several market participants have been late posting additional collateral resulting from securitization
  • Board member – What happens when market participants are late?
    • They are informed their collateral is not sufficient, there is a window to update, we think it is just something they missed due to change in calculation for collateral

 

Item 8: Independent Market Monitor (IMM) 2021 State of the Market Report for the ERCOT Electricity Markets

  • Average real-time energy prices up more than six-fold in 2021
    • Winter Storm Uri had significant impact
  • Total ERCOT load increased in 2021, up by more than 1,300 mW per hour on average
  • About 8,800 mW of new generation in 2021, most were renewable resources
  • Real-time congestion costs were up 46%, to $2.1B
  • The operational posture changes made in 2021 continue to impact market outcomes into 2022
    • Estimate $210M-$385M YTD due to the increased non-spin procurement and its effect on ancillary services prices
  • Key Recommendations
    • Prioritize implementation of Real-Time Co-optimization project
    • Implement an uncertainty product (2- to 4-hour ancillary service)
  • ERCOT Board Member – How do you consider the impact of inflation on these prices?
    • We have not tried to quantify the impact of inflation
  • ERCOT Board Member – Why not?
    • Only a recent issue, big issue in 2021 was Winter Storm Uri

 

Item 9: TAC Report

  • Large Flexible Load Task Force – Created in March, voted on charter and leadership on 5/25/22
  • Other Binding Documents List – TAC voted unanimously to approve list on 5/25/22
  • Proposed Maximum Daily Resource Planned Outage Capacity Methodology – TAC held special meeting on 6/7/22 to review the MDRPOC methodology related to NPRR1108, TAC raised specific concerns regarding the methodology

 

Item 10: Board-Tabled Revision Requests

  • NPRR1112, Reduction of Unsecured Credit Limits – URGENT
  • ERCOT Presentation on Information Requested by Board
  • ERCOT staff position is that unsecured credit should be eliminated
  • All ISO/RTOs currently offer unsecured credit
  • Unsecured credit limits are by counterparty
  • Total unsecured credit amounts at other ISO/RTOs apparently range from approximately $100 million to $1.75 billion
  • ERCOT has approximately $1.4 billion outstanding
  • Foster – You said ERCOT has $1.75B outstanding currently, what would that number be at $30M?
    • About $420M
  • Board member – I do not see this as a reliability issue, I see it as a cost of doing business issue, do you agree?
    • Sees it as a credit issue, this is an indirect cost that we cannot address directly
  • Lake (PUC) – Other ISOs are provided by counterparty, not a blanket?
    • Other ISOs do not have aggregated cap, all distributed between counterparties, ERCOT has 72 counterparties with unsecured credit
  • TAC Advocate Statement
  • According to ERCOT staff, reducing the unsecured credit limit from $50M to $30M will reduce outstanding unsecured credit of $400M from total of $1.4B
  • TAC recommends the Board approve NPRR1112 as endorsed by the Credit Working Group on March 14, 2022 and as endorsed by TAC on April 13, 2022
  • Board member – What is TAC’s estimate of effective date of implementation?
  • If effective June 1, making it applicable July 1 or up to ERCOT board discretion
  • Board member – This must go to Commission for approval, so July 1 is not feasible, recommends January 1, 2023
  • Board member – If Board votes on the $30M today, can we revisit this issue in 2 years to see the effect it has on consumers? Advocating for a trial period
    • That issue is not up to TAC, at the discretion of the Board
  • Motion to table TAC proposal with two amendments; Modify the effective date to 4-months after PUC approval to January 1, 2023; Revisit the proposal 1 year from now to study effects on market participants and consumers; tabled
  • Foster – Directs ERCOT staff to verify numbers in data provided by TAC, number could be closer to $400M, tables the motion until data can be provided
  • Plan to take this issue up at next board meeting

 

Item 11: Approval of Methodology for Calculating Maximum Daily Resource Planned Outage Capacity

ERCOT recommendation

  • NPRR1108 was approved at last meeting, stipulated that Board should approve methodology for calculating
  • Methodology proposed by ERCOT provides at least a 22% margin for Non-IRR and Non-PUN resources to schedule their Planned Outages through 2026 when 2021 actual Planned Outages are used as the baseline
  • Board member – When do you lock in the percentage available for future years?
    • Changes twice a month, could recalculate at any point, anytime someone adds a new generator the number changes
  • Board member – So, you are doing these calculations twice a month?
    • Yes; multiple board members discuss concerns with proposed methodology, too conservative

TAC Feedback

  • Opted not to endorse methodology
  • Concern was ERCOT methodology was overly conservative, selected to prevent AANs rather than reflect a reasonable amount of renewable output during peak load
  • Board member – Why did TAC take an unhelpful view? Why was there no counterproposal?
    • ERCOT and stakeholders have taken lead on this, TAC did not feel necessary to propose anything new, but just point out some areas of concern
  • Board member – What percentages are acceptable to TAC if these are not?
    • Have not discussed in TAC, percentage may not be issue and it could be time-period
  • Board member – Raises concern with time of outages, summer moratorium is a value to us
  • Motion to approve ERCOT staff’s Methodology for Calculating Maximum Daily Resource Planned Outage Capacity; passes

 

Item 12: Finance and Audit (F&A) Committee Report

  • Motion to approve the F&A Committee Charter as recommended by the F&A Committee; passes

 

Item 13: Human Resources and Governance (HR&G) Committee Report

  • Motion to approve the HR&G Committee Charter as recommended by the HR&G Committee; passes

 

Item 14: Reliability and Markets (R&M) Committee Report

  • Charter is still being drafted, hopefully will have charter ready to approve at next meeting

 

Item 15: Other Business

  • None taken
  • Executive Session convened

 

Item 16: Vote on Matters from Executive Session

  • Chair Foster reconvenes ERCOT Board Meeting from Executive Session
  • Chair Lake reconvenes open meeting of the Public Utility Commission
  • Motion to approve item ES6.1 as discussed in Executive Session; passes
  • Motion to approve item ES6.2 as discussed in Executive Session; passes
  • ERCOT Board reconvenes in executive session to discuss a personnel matter, will not reconvene in open meeting