The Public Utility Commission on Texas held a press conference on October 13 to formally introduce of new ERCOT CEO Pablo Vegas and a brief review of the grid performance from the recent summer followed by questions.
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.
Peter Lake, PUC Chairman
- SB 2 established new independent board at ERCOT, and board required to use executive search firm to hire new CEO
- Introduces ERCOT’s new CEO Pablo Vegas
- Vegas’s experience is in electricity, natural gas sectors, and IT; IT was key focus for board in search process
Paolo Vegas, ERCOT CEO
- Short term main focus: get to know new team and offer support
- Very focused on phase 1 blueprint implementation of market reforms which are going well
- Seeing benefits of weatherization changes to get through winter
- Seeing benefits of outage scheduling across state of staggering of maintenance windows
- Firm fuel product coming out in coming months
- Looking forward: looking to implement phase 2
- ERCOT market redesign in next couple months
- Meet expectations of what came out of SB 3
Peter Lake, PUC
- Summer had many new records for demands on grid from heat and economy
- ERCOT grid met challenges without going into emergency conditions
- Maintenance schedule is the new reform in place this fall
- PUC recently passed second round of weatherization requirements
- Will continue to enhance reliability with phase 2 market designs
Q&A
- Q: Many Texans have been hurt or skeptical of grid reliability, how will you rebuild their trust?
- Vegas – key is continued reliable execution, achieving reliable operations over extreme weather conditions to build trust
- Q: Any coal or natural gas projects coming out of the system? Confident the phase 2 market redesign will incentivize that to come?
- Lake – not aware of any major plans, a few smaller ones coming on board
- Phase 2 will incentive new generation and steel
- Q: What are your thoughts on independent market monitor for market gas?
- Lake – we have worked well with natural gas industry since legislative reforms
- RRC, gas and power industries, and PUC worked together to create critical gas supply chain map last April
- Q: Asking Vegas if there will be more transparency in day-to-day production of natural gas?
- Vegas – all the things the chairman mentioned are focused on reliable operations
- Exchange of operational information between ERCOT and gas companies that is relevant to planning and forecasting, we are talking about sharing and seen willingness for industry to share helpful information to operate reliably
- Q: Ask in response reports of maintenance being delayed at power plants to keep lights on, is maintenance being done on power plants or is it still delayed due to extreme heat?
- Lake – maintenance is being done
- Control of maintenance schedules of generators is one of the important reforms we have put in place since winter storm to ensure there is no unusually high amount of outages
- Q: So, maintenance isn’t being delayed, it is being scheduled?
- Lake – Sometimes it is delayed, sometimes accelerated; depends on the day
- Q: Asks Austin energy costumers are facing first base rate increase in decade, energy officials said increase is partly due to grid redesign, how does grid redesign tie into cost of increases?
- Lake – Can’t speak to local decisions at city level
- Context of cost is increased reliability; to date total additional reliability operations costs on average $1.25 per household per month
- Results of improvements have seen 8 days in last 16 months without increase would have been in emergency conditions so think it is a fair, small price to pay
- Q: Asks do you have status updates on issue of securitization loans
- Lake – ERCOT is overseeing that, I do not know status of distribution
- We conducted first bond sale in June, and it is in process
- Q: How long will it take
- Lake – Once initial process starts, initial distribution proceeds and payment of debt series over many years
- Q: Asks will there be changes to staffing or operations at ERCOT?
- Vegas – will always look at what is needed, looking to next set of changes in phase 2 and will look at what investments need to make to make needed changes quickly and reliably
- One of our goals in this phase to implement changes as quickly as possible and are always looking at staffing needs
- Q: Do you think phase 2 will spur a need for more staffing?
- Lake – Will have to wait to see how the redesign materializes to see
- Q: Asks you got a letter from Senator Warren regarding crypto currency mining in Texas, called question to the amount of energy it is using; what is your reaction to the letter and how you foresee crypto mining in the grid?
- Lake – We want to serve any business that wants to business, including crypto
- We look forward to responding and how we are serving needs
- Perspectives implied in letter were not accurate
- Crypto miners along with any large energy user has ability to take advantage of services in ERCOT market that are part of operating large energy loads in Texas like a car manufacturer
- No special subsidy to crypto for doing so
- Q: Asks if Vegas is fluent in Spanish and can you make comments for Telemundo?
- Vegas – I spoke Spanish growing up as a child, fluency is of an 11-year-old; hard to speak on energy subjects
- Q: After the storm, talked about how it would have helped if power plants had simple fix of coverings, has that ever been done or is that true?
- Lake – we had weatherization in place by December of last year, all generators in 2022 had new winterization requirements and in certain circumstances could include coverings and other protections
- We required generators to winterize to ensure operations, no specific requirements within that
- We had inspection crew who did a thorough audit of some of the generators
- Saw results last winter, all generator stayed on
- Q: Confident the winterization that has been done is strong enough to stand up to a storm like the one in January 2021
- Lake – absolutely, it is not one reform, its combination of all of them
- Q: Follow up on letter from Warren, when are you planning to respond
- Vegas – we plan to respond in coming weeks
- Q: To the phase 1 reforms, estimate is that higher cost for services is $800m-1b extra cost to consumers this year, all extra money is going to build new generation; why have we not seen increase in fossil fuel generation?
- Vegas – $1b was hypothetical number as academic study, not actual spent; actual is much lower and is reflected in $1.25 cost; that is the actual cost that has been occurred for ERCOT customers
- We do not have enough dispatchable generation being built in Texas which is why we are moving forward with phase 2 to create more dispatchable generation in Texas
- Q: Lake began press conference by describing the grid as more reliable than ever, Vegas do you agree with that? The polls show Texans do not agree; why do you think there is a disconnect between and what can be done about that?
- Vegas – Key to rebuilding confidence is continued reliable execution of operations; that is our focus at ERCOT
- The grid is more reliable due to weatherization changes; way we are operating the grid is more reliable
- We are bringing resources online earlier to have bigger buffer
- Q: Can you share any data to support showing ERCOT spending does only equal a $1.25? How do you figure the number the independent money market monitor found is more of a hypothetical; what data was used if not actual ERCOT data to come up with that figure?
- Lake – ERCOT will make $1.25 data public; hypothetically billions of dollars operations cost is based off RDPA, reliability deployment price adder
- RDPA is triggered anytime we ruck a unit and assumes it is a big number of money is used, but many times we have sufficient reserves and in reality, price addition is a few cents
- Q: Is it not also changes to ORDC, etc. is that also hypothetical or is main point of difference that the monitor is using an inflated RDPA number?
- Lake – ORDC curve was steepened but also reduced highest price possible from $9,000 to $5,000; even though we steepened ORDC curve, we are bringing in more services and units online sooner rather than later which suppresses prices
- Q: Phase 2 redesign has been talked about for a year now, but we will not get E3 of proposal or potential blueprint until after the election, is this coincidental timing?
- Lake – Our goal in delivering phase 2 is as soon as possible, we have been working hard to get finished and will publish it as soon
- Aiming for mid-November, might end up being a little later
- Then there will be a public comment period and make changes we need
- Q: Do you foresee asking the legislator to create bills that will allow you to further response to near collapse during the winter storm period?
- Lake – Reforms passed in last legislation and have implemented them and plan to present results in January and then it is up to them
- Q: Can you talk about what reform will look like this fall compared to last?
- Lake – Generators in the past could pick any day to brig generators offline; ERCOT had no control to influence that and had high number of generators out at once
- With new reforms, ERCOT can put a cap on a given week; overall generators have more hours than they need to perform maintenance but are required to spread it out now