The PUC held a work session on November 30th to discuss alternative ratemaking mechanisms for water and sewer utilities, electric service emergency operations plans, administrative penalty authority, and critical natural gas facilities/entities. The video archive and agenda of the meeting 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.
Project No. 50322 – Alternative Ratemaking Mechanisms for Water and Sewer Utilities (Proposal for Adoption)
- David Smeltzer, PUC Staff – Last piece of legislative implementation from 87th (R); water and sewer utilities have a hard time with standardized rate-making mechanisms
- Streamlined and reduced confusion within proposal
- Lake, Glotfelty and McAdams agree this is needed for utilities
- Motion passes
Project No. 51841 – Review of 16 TAC § 25.53 Relating to Electric Service Emergency Operations Plans (Proposal for Publication)
- Barksdale English, PUC Staff – Implements portions of SB 3 from 87(R); would require regular updates from utilities, stay current with best practices
- Reorganized to make it more logical, outline for how plans should be filed in future
- Motion passes
Project No. 52312 – Review of Administrative Penalty Authority (Proposal for Adoption)
- Smeltzer – Clarifies that million-dollar penalty authority is in effect, will use if necessary
- Lake – If plants don’t weatherize by winter, there will be penalties
- English – Reviewed internal process for how to review winter readiness reports, have been working closely with ERCOT; good process in place for real-time visibility of data
- Feels very synchronized with ERCOT about how information will flow; have the foundation for making sure we have a good compliance regime in place for this winter
- Lake – Process will make sure there are no gaps and either force plants to fix errors or face penalties; “power plant fleet will be in better shape this year than last year”
- Glotfelty – Any thoughts regarding having a formula for different penalties according to offense?
- English – Typically commission has not published a set formula for how penalties are determined; nature of each violation is unique; need experience of what offenses look like to determine formula for penalties
- McAdams – Most of these facilities are also subject to penalties for environmental standards by TCEQ; they don’t have a blanket formula
- Smeltzer – Have received comments about this, can discuss further
- Cobos – Important to maintain enforcement flexibility
- Glotfelty – Point is that if you get to a certain level of infraction, you know you will be fined X amount; want to use full extent of penalty authority
- Lake – Flexibility will not mean leniency; “thanks to these efforts, our generation fleet will be much more resilient this winter than last winter”
Project No. 52345 – Critical Natural Gas Facilities and Entities (Proposal for Adoption)
- Smeltzer – Part of key coordination efforts between agencies; have been meeting with RRC twice a week; RRC will adopt their version of the rule
- Added definition of emergency to capture areas outside of ERCOT
- Will not impede federal obligations; natural gas operators can fill out just one form, ERCOT and other entities can access info through one portal
- Didn’t put hard deadline so entities could have more flexibility
- Lake – “Fundamental reason why power grid will be more reliable this year;” important relationship between natural gas and electric generation industry
- Lake – “We will have a much more resilient grid this year, both on the supply side and on the power generation side”
- Some of the effort is making sure to focus on the sites that are truly critical; not end of process
- Cobos – Landmark rule that recognizes importance of interrelationship between electric generation and natural gas supply; will go a long way in ensuring reliable future grid
- McAdams – Acting in concert with RRC, partners in forming a consistent policy approach that allows government to ensure TX and ERCOT system remain safe
- Important that utilities have discretion to prioritize critical facilities so they can adjust in a timely way to ensure people remain safe
- McAdams – “Consumers in ERCOT will have service”
- Glotfelty – Critical to address issues from past year, paradigm shift in how industries are working together
- Motion passes
Project No. 52631 – Review of 25.505 (Proposal for Adoption)
- Lake – Discussion about HCAP; started at 4,500, 50% down from original 9,000
- McAdams – Need to recognize what ORDC is, should it account for rucking, competitive forces of increase solar penetration
- ORDC a stabilizing force and should be altered with goal of stabilizing existing fleet; price incentives to behave the way they should in a real-time market
- ORDC component of broader framework; given feedback, MCL of 3,000 provides breathing room, ability to build in reserve metrics to follow to appropriately deploy ERS after MCL
- 5,000 would work; need to see higher prices to justify turning off facilities and responding to price conditions
- Did not separate value of lost-load from HCAP, just changed number
- Smeltzer – Want to make sure we aren’t impacting people who otherwise wouldn’t be impacted; make sure public has adequate knowledge that change will be adopted
- Lake – For purposes of Thursday, will focus on HCAP
- Cobos – ORDC an important reliability tool; an operational reliability tool and revenue adequacy tool; will stabilize existing generation and potentially drive investment in existing generation
- With respect to HCAP, 5,000 seems to be a good spot; at a 3,000 MCL as well to get reserves on earlier to maintain reliability and prevent conservation in emergency events
- Glotfelty – Okay with doing price cap at 5,000; changes being considered are expensive
- McAdams – Tool that was always designed to be moved dependent on conditions of grid, taking appropriate action with this move; can always be refined more
- Lake – Big part of this is moving MCL out, while also moving price point further out, reducing liability and exposure both on degree of price and timeframe of getting info out
- Smeltzer – Staff can write this up, need to know intent of commission
- Lake – Extremely high price of 9,000 an extraordinary liability, intention to reduce financial liability while also maintaining appropriate market and price signals for both generators and demand response units; asking staff to strike balance at HCAP of 5,000
- No motion made