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The Public Utility Commission met on November 10, 2022 to discuss the construction of advanced power stations, reports, electric reliability, and wholesale electric market design. An archive of this hearing and the agenda 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.

 

Item 1: Public comment for matters not specifically posted on this agenda.

  • No public comment

 

Item 2: Docket No. 52487; SOAH Docket No. 473-22-1074 – Application of Entergy Texas, Inc. to Amend Its Certificate of Convenience and Necessity to Construct Orange County Advanced Power Station. (Final Order)

Commissioner Lori Cobos

  • The commission must consider if the certificate is necessary based on the criteria
  • OCAPS is needed in the long run to lower costs
  • The need for additional service is driven by the deactivation of generation and expiration of the PPA
  • Primary driver is deactivation of plants 1, 3, and 4 – all 60 years old
  • These units are all part of the deactivation plan; however, greater focus on Sabine 4 due to its many issues
  • Keeping Sabine 4 would create great risk
  • There is a need for additional service, specifically in the eastern region (heavy industry there)
  • The deactivation will be a problem we consider at a later time
  • Sabine 4 has many aging issues and therefore makes it no longer reliable
  • OCAPS takes advantage of the swing capability of Spindletop storage, and will capitalize on fuel storage due its location by the plants
  • There would be fuel caps and consumer savings generated by OCAPS
  • The evidence is established that the plant needs improvement
  • The addition of hydrogen to OCAPS is not reliable at the time due to the lack of evidence and high costs
  • The dual fuel capability of hydrogen is not needed for reliability because OCAPS will be connected to the over caps which is the ultimate reliability
  • Not in favor of including hydrogen as part of the approval
  • If we are going to approve this item then we need a balance of costs and risk and how to build a reliable plant; want to impose a cost cap
  • The hydrogen cost would be deducted from the cost cap, so the cost cap would end up being $1.38m
  • I recommend $1.58 B for some headroom for market escalation
  • The weatherization of OCAPS should meet the conditions and favors imposing those conditions

 

Commissioner Jimmy Glotfelty

  • The Midwest ISO has brought many benefits to consumers in the Entergy service territory
  • I believe competitive markets make a lot of these issues go away
  • Joining of the RTO is not an issue in this case, same goes for competitive markets
  • The most compelling argument is the need for additional voltage support in the southeastern part of the service territory
  • Adding the Sabine plant is valuable for reliability and economic development
  • The hydrogen component is a little bit ahead of its time
  • Blending hydrogen is a higher cost and higher emission profile
  • Lowering emissions is needed if we want to accept this technology, it is a viable option in the future
  • If we do the cost cap, we need to do it right and allow flexibility
  • Supports the CCN with modifications

 

Commissioner Will McAdams

  • We can defer the hydrogen technology to another proceeding
  • Has concerns about modification that would delay the Entergy construction
  • I would lean toward the $1.58m for the cost cap basis to have that head room

 

Commissioner Kathleen Jackson

  • We need the benefits that come with reliable power
  • We should move forward and build this plant with no cost cap
  • This is a perfect area to consider the plan for hydrogen, and we are in a unique position; have the ability for hydrogen pipeline in plants
  • Is a unique opportunity; have the capability; set up to make this innovative move

 

Chairman Peter Lake

  • The hydrogen plan has tremendous opportunity
  • Under the threat of losing coal plants due to federal power, hydrogen is an outstanding candidate
  • I would like to see if we improve [the filing] with more analysis on what the true benefits are
  • More in depth analysis of what the emissions and economics looks like in the future
  • Agrees with Jackson about the hydrogen opportunity, but unsure about the money and timing of the plan
  • Glotfelty – Are there issues associated with curtailment?
    • Jackson – Matches need; have the opportunity to make the investment with our resources and infrastructure

 

Commissioner Lori Cobos

  • As a regulator here today, is the cost worth adding right not
  • These capital costs will go down in time and could be cost effective to where we can implement
  • But as of today, the approving of the precedent will be for best interest of the public

 

Chairman Peter Lake

  • The need is there, however I am not comfortable about inflation and the stock market right now
  • We cannot try to determine a number under these conditions and therefore do not want a cost cap
  • We can ensure an undo cost is not being put on our consumers

 

Commissioner Jimmy Glotfelty

  • The biggest cost uncertainty is labor; labor market changes all the time, it cannot be stopped
  • Capping cost during this time, is unrealistic with the labor problems today

 

Commissioner Lori Cobos

  • The commission in the past has made cost caps to protect ratepayers
  • I want the plant built, but want to ensure that there is some financial protection during a time of high inflation

 

Chairman Peter Lake

  • The commission would rather move this discussion to the rate case
  • Need to impower the production of the plant and use the robust tools to ensure it is built efficiently and economically
  • We should come back to this discussion in the future to incorporate hydrogen and to modify the PFD to remove the cost cap with the assurance that consumers are getting the asset in exchange for rent paying dollars
  • Motion to approve the PFD under modifications passes

 

Item 3: Project No. 52933 – CY 2022 Reports of the Electric Reliability Council of Texas. (Discussion and possible action) 

Commissioner Will McAdams

  • Supports ERCOT’S endeavors to amend bylaws enacted by SB 2

 

Commissioner Jimmy Glotfelty

  • Believes the memo and changes are a reflection of the authority given to ERCOT
  • ERCOT professionals are looking out for Texas consumer’s best interest
  • This is both good and valuable
  • One cautionary note, RTO’s can be powerful and insulated, they often these projects die
  • Industry input is critically important going forward, and supports the motion to approve bylaw changes

 

Commissioner Lori Cobos

  • Agrees with the preservation of ERCOT and the desire to provide a safe community
  • Supports the intent chairmen’s bulleted points that meet the requirements of SB 2

 

Commissioner Kathleen Jackson

  • Supports the chairman’s points

 

Chairman Peter Lake

  • The intent of the ERCOT board is to continue to lean on market participants regardless of bylaw changes; motion passes

 

Item 4: Discussion and possible action on electric reliability; electric market development; power-to-choose website; ERCOT oversight; transmission planning, construction, and cost recovery in areas outside of ERCOT; and electric reliability standards and organizations arising under federal law. 

  • Not discussed

 

Item 5: Project No. 52373 – Review of Wholesale Electric Market Design. (Discussion and possible action) 

Commission Staff

  • Staff filed a commission study – assessment of market reform options and filed memo commission receive public comments
  • Have been refining concepts brought up in work sessions; each potential design has been reliable, market-based, retain/incentivize dispatchable energy, etc.
  • Concept brought up today is qualitative and quantitative; additional generation resources centrally procured by ERCOT along with other responsibilities
    • Has a performance credit mechanism
  • Staff would like to hear from stakeholders regarding this design

 

Chairman Peter Lake

  • Overviews process of this study; have gone through extensive public comment, analysis, and have a “compelling” proposal
  • PCM requires anyone who sells power to guarantee they are buying that power from a reliable source for the first time ever; if they do not, will be held accountable and penalized accordingly
  • Proposed design is a market-based solution and reduces costs for consumers; intended to be self-correcting
  • PCM separates economic scarcity from physical scarcity; key feature of the PCM is “earn it, don’t assign it”
    • There is no capacity payment under this version of the PCM
  • Moves financial and operational risk of generation at ERCOT into the private businesses and out of the ERCOT control room
  • McAdams requested PCM includes a residual market that aims for flexibility of market participants; provides opportunities to hedge or procure in advance
  • Requirement for LSEs; purchase pot of revenue for reliable resources that everyone can compete for
  • Cobos has noted that we need to be aware of market manipulation; PCM will be centrally cleared
  • If implemented as it is today, PCM 10x improvement in reliability for 2-3% increase in cost
  • Believe this is the best mechanism to meet obligation in SB 3, but need to hear from general public and stakeholders
  • New project for this report and to solicit public comment for this report; will have a link for general public and market participants to submit comments online
    • Request to extend public comment period to 35 days and deadline would be December 15 at 12 PM

 

Commissioner Will McAdams

  • No model is perfect, plan notes that 11GW thermal generation to come offline over the next three years
    • Do not have a reliability issue now, but aim to prevent reliability problems
  • Capacity market is not for Texas; capacity market California ISO and other capacity markets have reliability issues
  • Current PCM plan requires loads purchase enough power plus reserves, but not on a forward-basis; can make decisions that make sense for the operator
    • Would be a new feature
  • Capacity can sell credits, but not used to dispatch; would negate need for out-of-market operations
    • Seen competing studies filed like the ICF report that criticizes ERCOT’s forecasting process; comments well taken and may need to refine this upon further implementation

 

Commissioner Lori Cobos

  • Texas leads the way in renewables and need to retain new and existing generation; plan is forward-facing
  • Reiterates McAdams’ comments that ERCOT has maintained reliability through an 80 GW summer
  • As to E3’s report, need to hear from the public as the PCM is a novel concept
  • Need near-term solutions to get this implemented quickly and need to have all options
  • Have recommended backstop reliability service; ask that be considered as a near-term solution
  • Want to take non-spin as a near-term solution off the table as IMM has expressed concerns with behavior in the non-spin market
    • Need to address these in the commission first
  • Recommend amending some of the staff questions
  • Lake – Will not change questions that are already down, but we can add more
  • Want to add one question – what is the impact of the PCM on consumer costs
  • Lake – Comments on concerns with non-spin market are well taken; will address this in the proper forum, but do not think we should shut down non-spin entirely
    • Not looking to shut them down, but do not need to add more at this time
  • Cannot take E3’s cost impact analysis at face value
    • Lake – Nobody is taking anything on this analysis at face value
  • Cobos and Lake discuss adding a question that would ask about near-term solutions
  • Lake – Need input on whether short-term bridging solution a tradeoff for longer solutions

 

Commissioner Kathleen Jackson

  • Notes that the population is growing and need to be future focused
  • Agree with the PCM as designed today and look forward to reviewing comments
  • Lake – Need more steel in the ground, but need to manage both sides of the equation

 

Commissioner Jimmy Glotfelty

  • Do not believe Storm Uri was a market failure, were a lot of things that went into it, but we need to act
  • Gas is the only one without tax credit after recent bills passed in Washington
    • Need to consider finding a mechanism to allow new gas infrastructure
  • Backstop combined with a DEC is innovative and creative; need to expand DEC
  • Recommend small molecular reactors on DEC to be added
  • I want to add the following questions:
    • How would modifications/expansion in quantity in DEC add more/less MW?
    • SMRs to DEC be an incentive to come to Texas?
    • Appropriate reliability standard; need to consider moving from the 1-10-day construct
    • Lake – Sounds like we need to focus on performance, not capacity
    • If comments come back and say PCM is right, will move away from DEC and backstop
    • Lake – Wholeheartedly agree; other commissioners agree

 

Chairman Peter Lake

  • Is a lot of information to digest; have struck a nice balance and are on track with timeline
  • McAdams – Regulation is not easy, debate is nation-wide
  • Cobos – Is a contentious conversation and PCM is the best solutions so far; looking forward to public/stakeholder comments
  • Staff – Will be adding questions discussed on the dais today; that notice of comment will be filed this afternoon if that motion passes
  • Motion to open a new project for the E3 report and notice of comment passes

 

Meeting adjourned