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The Public Utility Commission met on October 21st to discuss electric weatherization standards and Wholesale Electric Market Design. A video archive of the hearing can be found here.

This report is intended to give you an overview and highlight of the discussions on 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.

 

Rulemaking to Establish Electric Weatherization Standards

  • Barksdale English, PUC – Has prepared recommendations for weatherization plans for upcoming winter season
  • Chair Lake – Need to make sure this is all in place for this winter; phase 1 of rulemaking, operational standard; a more robust, year-round preparation standard is being developed by ERCOT to be implemented later
  • Cobos – Need to ensure that TX has more reliable generation fleet for this winter
  • McAdams – Important to impose this standard to protect consumers
  • Glotfelty – Weatherization is one piece of a larger puzzle of ensuring that system is reliable in winter
  • Motion passes

 

Review of Wholesale Electric Market Design

  • Lake – Starting point, not exhaustive, anticipate this being a dynamic document with continued stakeholder input; can identify concepts not to focus on going forward
  • Need to identify key questions in narrow scope so staff can issue a formal, stronger draft to which stakeholders can respond
  • Concepts that need to be taken off the table: capacity market disguised as a new ancillary service; in long-run, will not solve problem
  • What would work: ORDC, would drive revenue and allow dispatch of resources in times of need; market-based mechanism to bring more generation on sooner; should make some changes to ORDC, have made them in the past that certainly did not solve problems
  • LSE obligation: only thing that integrates reliability in normal function of market absent of a crisis; drives revenues to reliable dispatch of resources when needed without paying a lot of money to pay for assets to sit and not generate power; leverages competitive market resources
  • Functionally, for LSE obligation, need two things: accreditation of resources by generator type, need honesty about how reliable each type is; providing forward price signaling to investor universe
  • Challenges to LSE obligations: need to make sure it does not open door to market manipulation, have to make sure can incorporate demand response into any LSE obligation put forward
  • McAdams – Not prepared to endorse any details, would strike column; does not want stuff unleashed on any components unordained
  • Agrees with ORDC, believes MCL should be adjusted out; counter to public interest; should offer up a range for cost impacts
  • Regarding with LSC obligation, not ready to endorse, significant questions about what it would do to market; would like more study on this
  • Need to do legwork now to be on target for whatever market will look like in 5 years
  • View LSC obligation like a drug entering market, needs peer-review and studies to get to a place within public interest
  • Lake – Between now and December, want to focus stakeholder process on getting to place to be able to vote on this in December
  • Cobos – Focus needs to be on addressing operation reliability issues; will continue to face winter storms and times of high electricity demand; need to look at market with this lens
  • All proposals received involve a capacity-market element; central-procurement of resources for ERCOT, capacity requirements for LSC
  • Lake – Only different with LSC application is that it is the only one where you are required to procure generation that you are actually planning on using, not sitting on sideline
  • Cobos – 100% agree on ORDC, need to make sure they are sending price updates; reforms necessary, but must do so in balance manner that will drive investment; MCL has to increase
  • Just a matter of what number
  • With respect to policy considerations, must set price cap at a point where generation that fails to perform will still have a penalty at all times; should be at least between 3,000 and 2,800
  • Need to see analysis; need context as to what parameters will do to consumer cost, market
  • Have heard that stakeholders are somewhat comfortable with IMMs proposal; another piece of context, look at suggestion
  • Suggestion for ORDC to be replaced by ERCOT so entering into winter season ORDC will be in place to maintain reliability, additional tool to arsenal of tools
  • Not prepared to endorse LSC obligation, question if can get enough info by December; will not really know a few years after its implementation
  • Lake – Fear of something not working is not a reason to avoid trying
  • Cobos – In meantime, can have significant impact on market; can protect retail market, LSC would not do that
  • Have spent a lot of time working on landmark securitization to stabilize ERCOT market to protect retail market; want to make sure actions undermine hard work
  • McAdams – If it will squeeze out independence then will vote no
  • Cobos – Appreciative of overall memo and where it looks; there are other avenues to do same thing
  • Glotfelty – How do we approach memo
  • Lake – Can do it however we want, goal is to have narrowed scope; not asking for endorsements
  • Glotfelty – Should do no harm, only enhance market; all resources equal, especially in scarcity; need reliability standard
  • No idea what any of these ideas cost; need to know this to act in best interest of consumers
  • Need to encourage ERCOT to prioritize work to ensure reliability
  • Doing a lot of supply work and not demand work; working backwards, demand side important
  • Need to pay for value of components
  • ORDC a no regrets action, something needs to be modified; to be comfortable on number, need study to know what amount and cost would be
  • Need to allow all generation types to collect ORDC during scarcity, includes all resource types
  • Test MCR at different extremes so we know how each value affects the market
  • LSC obligation to watch monopolies; if it is detrimental to retail and customers, I do not support it
  • I do not have assurance that all generations can collect ORDC; we need to push technology to be supply and demand
  • Lake – I would like to see ORDC analysis, I do not want this to be overengineered
  • We need to increase demand response; does not mean we have no demand now
  • We do not have enough wind power in Texas; we want to be competitive but short-term prices are going to increase because lack of supply

 

ECRS Ramping Product Development timeline at ERCOT

  • Lake – My proposed LSC obligations; thoughts on ECRS Ramping Product Development timeline at ERCOT
  • Cobos – ERCOT gives opportunity to batteries and quick start to help ramping issues; will not be implemented till 2023 because of the upgrade; need to think of intermediate effort
  • In the interim we should look at AS products and incentivize progress on ramping issue
  • Lake – I do not want ERCOT to feel pressured to build something new, I only want to expand
    • Cobos – I am asking to look at current AS products and find ways to expand; we just have to tweak existing marketing rules
  • Glotfelty – I think waiting till ECRS is finished with the upgrade might be too late to address the ramping and battery issue
  • Pose question to ERCOT; what is the appropriate duration requirement for ECRS to address operational need?
  • Lake – Thoughts on Voltage support?
  • McAdams – I think clarifying what an inertia product is and how we would standardize it; committee agrees

 

Winter Resiliency Product

  • Lake – Thoughts on winter resiliency products?
  • Cobos – We will have increased weatherization in place, and I think that the winter resiliency product will act in combination with this; do not want to go another winter without this on the list
  • McAdams – Add question about how the cost will be divided to the list between voltage and weathering product
  • Lake – Add question about auditing and standardizing method as well
  • Cobos – I would like to direct ERCOT to use more of their $50 million budget towards their winter contract period
  • Lake – Are you wanting to change the existing contract?
    • Cobos – To my understanding ERCOT can adjust budget

 

Kenan Ögelman, ERCOT

  • Issued RFP for December through February but we can update it before Dec. 8
  • We may not get more megawatts in this request, but it sets example for the future
  • Lake – What would be required to increase the budget?
    • The budget is set by substantive rule; we would have to open up the cap
  • Cobos – I am asking to add more money to RFP winter budget and increase earlier deployment to ERS
  • Lake – How high could we raise the budget; what contracts need to be altered
    • Cobos – I think that is a policy call for us; what point do we want ERS deployment
  • Lake – I am happy with 3,000 MCL
  • Ögelman – summary; RFP is going to be modified by budget and further research about earlier ERS deployment
  • We can bring response from ERCOT council on Oct 28 meeting
  • Lake – What questions do we have for stakeholders?
    • McAdams – Should ERS always be deployed after MCL; What quality of ERS should be procured seasonally; Is it a moving target or a fixed target?

 

Demand Response

  • Lake – Thoughts on demand response?
  • Upgrade to centralize distributed handwear; aimed to gain more frequent data about our grid
  • What upgrades are required to reach this goal?
  • Smart Meter Texas has employed a vendor to run the centralized hub; the bottle necks towards the data could reside here
  • Located at TVSP is an independent management system that can be accountable for the limitation; I see needed upgrades for both locations

 

Liz Jones, Oncore

  • AMS can be improved but cost-benefit analysis needs to be evaluated
  • Oncore thinks meter data is not necessary for demand response; it is a verification trust project, not the most cost-effective ways to get this data
  • Lake – What hardware and software upgrades do we need to enhance demand response; add question to ERCOT list
  • Cobos – When I think about how we can increase demand response it gets grey because the commission does not know how to progress this idea
  • Lake – The best thing we can do is stay out of the way; add question about pros and cons of LNP pricing

 

Performance Standards for Energy Efficiency Program

  • Lake – Thoughts on Performance Standards for Energy Efficiency Program; we spent so much money on this; not sure rate payers are getting the best value
  • What is the highest standard we can set; most programs are meeting the standards
  • McAdam – We have constraints in statue and a very specific rule; in terms of new revenues there should be standards outside the existing rule
  • Question; How could additional recourses in EEP be applied and broadened to include greater competition by the competitive market within the managed projects of public utility?
  • Cobos- Who can participate and how we get the most value for the money; good questions
  • Glotfelty – Get estimated amount of metric and quantity; I am thinking dollars and Energy Efficiency
  • Glotfelty – If we want more robust demand response, can we allocate them to energy efficiency as well; are they connected
  • McAdams – Energy efficiency is megawatts that are saved and removed from the system; designed to assist low-income consumers and increase efficiency in their homes
  • Lake – Consumer power; customers decide to sell their power by consuming less or using their own generator

 

Scenario Proposals

  • Board pitches numbers to run a scenario analysis; each member sets up a scenario to reflect on results and next meeting
  • Lake – HCAP and VOLL at $4,500, MCL 3,000 MW
  • McAdams – VOLL and HCAP at $6,000, MCL at 2,800 and 3,200 MW
  • Cobos – IMM Scenario
  • Glotfelty – I think those scenarios cover it; no need to propose another

 

LSC Obligation Questions

  • Lake – Do we want to include LSC obligations on the list of things to ask ERCOT about; if so what questions?
  • Cobos – There are concerns with your proposal; you have heard from the commission and stakeholder involving a central procurement of resources
  • Is there something that will help address the concerns and increase reliability without having to significantly change your market?
  • Lake – What would a fleetwide generator firming standard look like?
  • Cobos – At some point our existing generators need to make money; they have been some dry years
  • McAdams – Trying to solve for two missions: variability within new resource mix and long-term dispatchability capabilities of grid
  • Lake – Second helps the first
  • Cobos – If LSC obligation, how does it account for increase in reported outages in summer? ORDC will add money to market to pay for maintenance and upgrades
    • Lake – Just because you provide money does not mean you get upgrades
  • Cobos – Asking question will cover the subissues; how will the LSC obligation assist ERCOT with real-time market reliability issues? Including winter cold weather, time periods with higher demand
  • McAdams – Covered under question asked earlier
  • Lake – Can have both questions
  • Cobos – How will LSC obligation impact demand response? Will it result in expansion of ERS program? If you are moving resources to get accredited, will still have broad sweep of ERS services?
    • Lake – No, do not want to get rid of ERS or AS suite
    • Cobos – Then stay with broader question
  • Cobos – Regarding industrial consumers, how will that impact them?
    • Lake – Guess that it is business-specific, will ask
  • Lake – Everyone has highlighted concern of retail market and command response; if do not get satisfactory answers, this will be stopped
  • A lot of concern about forecast load, independent businesses
  • McAdams – List was comprehensive; regarding load forecasting, needs to be standardized; is that a component of everything we are doing?
    • Lake – Yes
  • Lake – Individual businesses typically have load forecasting for investors; not required to have perfect answer or visibility; just need people procuring the amount they promised
  • Various entry, do not want them too high or too low; some merit to having a market-based credit check
  • Penalties are a key part; lack of procuring, lack of performance
  • Accreditation a key part of whole thing; need to be honest about reliability of assets
  • Merit in a phased in process with price caps, or waive penalties in early cases; not going to expose LSCs to unmitigated price jumps
  • Want to keep dispatchable services within market, rewarded for reliability they create in marketplace
  • Curious to know other than accounting mechanism and administrative action how this is different for a fully hedged LSC? Not asking them to buy any more power than they use
    • McAdams – Depends on definition of fully-hedged
    • Lake – Means 100% of usable load
  • McAdams – Transmission prioritization for dispatchability?
    • Lake – Separate action; another element of that is transmission plan
  • Cobos – Everything talked about is good
  • Lake – Anything else?
  • Cobos – Conducting AS study by end of year, will be important; want to circle back to interconnectedness discussion
  • McAdams – Communicated with ERCOT and many stakeholders, had substantive conversations; something that we should move forward, key nuance transmission voltage
  • Will not have discriminatory practical effect; no barrier right now to a dispatchable resource deploying now; prioritization of that would not change the expeditious nature of their interconnection; grandfathering clause is key to that
  • Want to prioritize based on non-invertor based resources, dispatchable invertor-based resources, and intermittent invertor-based resources (no battery)
  • Cobos – There are no 4-hour batteries, to reap reliability benefits of solar and storage together would loosen that to 2 hours
  • McAdams – There are 2-hour capable projects that have battery component, but will not send them to back of line
  • Would leave mechanics of implementation up to ERCOT, but would grandfather based on projects that could be energized in a timely way, would make it fully collateralized and have a notice to proceed
  • Will not reset them; have to establish threshold somewhere, sending a market signal; simple policy
  • Lake – Would love to see that in writing in a memo form; need to identify operational need, set that as the standard; nothing preventing companies from aggregating multiple batteries, always want to keep operational need as guide
  • McAdams – 18 months in general for study; resets certain components of process; wants standard everyone is accustomed to; if establish policy preference now, will benefit future