Senate Business & Commerce – February 25, 2021

The Senate Business and Commerce Committee met to examine extreme weather condition preparedness and circumstances that led to the power outages as directed by Electric Reliability Council of Texas (ERCOT). The committee also reviewed generator preparedness and performance, utility outage practices, natural gas supply, and the reliability of renewable generation, as well as overall ERCOT system resilience.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing 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.

Opening Remarks

Chair Kelly Hancock

• Rules adopted
• Will go until roughly 5p but if they need more time have posted for tomorrow
• An information hearing – have made a public portal on their webpage for comments: https://t.co/jGJN8dhSm6
• Opening remarks – devasted, personal story daughter was 9 months pregnant, there will be plenty of times to ask questions but committee goal is to bring in the decision makers, begins in prayer seeking wisdom

PANEL 1

Bob Rose, LCRA Meteorologist

• Timeline of article outbreak provided- it was historical
• Unique event that allowed cold temperatures you do not regularly see dip into Texas
• Late Sunday that bitterly cold air swept into Texas and by Friday the coldest air was out of here
• Reviews lowest temperatures of week including DFW -2
• Number of consecutive hours below freezing – North Texas more than 200 hours, Central Texas 140-160 hours; Austin, Waco and Midland were longest on record
• Hancock – how long have we been recording?
  • A few spots in Texas about the 1860’s but around state 1895 and forward
  • Agrees in some areas; coldest temperatures since 1895
• Whitmire – If we are going to address being prepared; when did we know this would approach Texas so public and generators could prepare?
  • First week in February we saw signs and as we moved into second week
  • 7^th of February good signs article air would be coming into Texas but was not sounding huge alarm at that time
  • As they went through the week of Feb 7^th saw this type of cold would be “pipe busting type cold”
• Whitmire – whatever you label this should we be ready for more in the future
  • Hancock – we can chase a lot of rabbits in the discussion; focus on last week should we have known or what we knew would happen
  • Hancock – don’t want to get into a climate change discussion at this time
• Whitmire – its helpful to know some people knew weeks ahead and did see this on the horizon and been better prepared
  • Starting to see a lot of computer output forecasting very cold temperatures; sometimes those numbers are faced with skepticism but they got more confidence in those numbers around 12^th or Wednesday before the event
• Hancock – can you predict the length?
  • Some skills; modeling showed this as an extended event; knew it would be several days but not really clear it was going to lasts all week long
• Paxton – was your information about the storm translated to public in general; what was communication statewide?
  • National Weather Service began send messaging around the 10^th
• Menendez – you mentioned last week was not coldest; this event can happen every 1-4 years? Should we not be prepared every 1-4 years?
  • They don’t always result in the cold air coming our way
  • Last winter was one of mildest so its not 1-1
• Menendez – Did anyone share the information with ERCOT?
  • Do not know but he does provide information on a public blog
• Menendez – Does ERCOT have a meteorologists and do you communicate?
  • We did not at that time, busy with the information
• Menendez – agrees with Paxton, when we know of “pipe busting cold” we should let public know
• Nichols – what does LCRA based on the information Rose gave them about the weather?
  • Does know power side was taking a close look at it; transmission side was looking at temperatures and precipitation
  • Knows a lot of information was being communicated internally
  • His communication was also going out to a large portion of outside world as well
• Nichols – do others received your type of advice?
  • Thinks so, most subscribe to some sort of weather forecast
  • Weather vendors were all sending out forecast
• Nichols – in your mind within a day or two before it hit, you were quite sure it was going to happen
  • Yes, we began our internal briefings before that Sunday
  • As far as longevity, many areas set records for longest but not everyone did
  • Not able to say this is the longest for Texas, maybe 1983
  • As far as magnitude it may not have been coldest on record
• Johnson – you said you don’t think we can expect to see an event like this anytime soon; is it because there is global modeling
  • Does not think it will repeat itself because it was a set of circumstances that caused Siberian air to hit
  • There is more randomness to timing, number of variables lined up for this to happen
  • There is a possibility things could come together to repeat
  • These events don’t tend to line up all that often
  • Johnson – this is a look back not a look forward correct?
  • Yes, some scientist have said it might be more likely to happen in the future but that is another discussion about climate change was not prepared to get into today
• Paxton – Keep thinking about movie the perfect storm, number of things that happened all at the same time; what were elements that all converged
  • Disruption in polar vortex
  • Stratospheric warming caused the disruption
  • North Atlantic Oscillation created blocking and focus cold air to come to south
  • In some years this might of have been just a cold weather event but the blocking brought in the air from Siberia
• Paxton – did those factors influence the precipitation?
  • In part, Feb 15^th produced widespread snow

Bill Magness, ERCOT

• ERCOT presentation
• Texans suffered last week ways they shouldn’t suffer
• Will review things they discussed at Feb 24 board meeting
• ERCOT role can be considered similar to air traffic controller
  • Expands on this example, tells power generators they need to come on or go off
  • As demand goes up; supply need goes up and vice versa
  • No assets, other than people who manage
• This storm at its worst took out almost half of generation with record demand and they need to keep supply and demand in balance
• If they had not called for rolling outages then Texas would have faced a blackout
• Would have to done black start if they had not done outages and it had not impacted the demand
• Restarting the grid is a difficult process and it takes weeks or months to get it back up
• Prior to this the winter record was 65k MW and they were heading to mid 70k MW of demand
• Reviewed timeline (on pg 11 -13) – Sunday night 11:17 they deployed responsive reserve; points out they were throwing everything at it
• Entered EEA3 when they had 35k MW of generation out, points out on pg 12 of 59.4 frequency is important because system could work in a way that damages the system
• They can stay at 59.4 for no more than 9 minutes – ERCOT was there for 4 minutes and 23 secs
•  Units would have only been tripped off during frequency dips which would have been 10 units
• Will investigate every single second of this
• All incentives in market are for generators to run when there is scarcity in the market and they were showing up
• Effort was going on 24 hours day to get generation back on but until it was stable could not take bigger action for consumers to restore power
• Keep system stable so as soon as generation came back and were pretty much back to normal; they only way to get back to normal was to control the situation
• The outages allowed us to hold onto the system long enough to get back to normal
• Points to slide 20; transmission owners did their job
• His part that he can do better, Sunday night through 18 calls hearing they have never shed this much load before and not sure they can shed anymore – were in a danger zone
• In some of largest cities, Houston and Dallas, there was a large enough that had to come off the system they could not move them around which is when they got stuck
• Have never seen this before, had to say controlled outages instead of rotating because they were not rotating
• Urge industry to look at it because they were stuck, could not put that demand back on system and needed sacrifice to keep going – transmission owners didn’t like it either
• Don’t know if its technology or policy but wants to work with them on solutions
• Hancock – when you talk about shedding 1k MW, how many homes?
  • 200 homes per MW
• Hancock – what does deploy responsive reserves? What supply are you calling on?
  • Hancock – different generation in the system?
  • Direction from ERCOT to industrial facilities that have generation, turn on responsive reserve generation and reduce demand as well
  • Hancock – what source of generation?
  • Typically, its natural gas
• Hancock – what types of drops did you see? If they don’t show up what happens?
  •  Serious consequence if they don’t show up, they have to replace it at real time price which was $9k per MW
  • Hancock – is entire market treated equally? Who does not have to abide by those standards?
  • Yes, price goes up for everyone
  • Commitment is different from different sources – wind and solar does have those same commitment
• Hancock – two players in the marker don’t have to show up, it’s a market advantage for them?
  • Yes
• Hancock – slide 12, tolerance that gets attention?
  • Operators will take a look anytime it gets below 60k MW
  • At 59.9 entered into EEA3 also in part because it appeared to get worse
• Hancock – walks through slide 12 on losing generation
  • Don’t think we would frequency load event until operators were at 59.4 event
  • Have not seen evidence there were trips because they were at 59.4
  • Hancock – didn’t see any evidence?
  • Have not seen a trip at 59.4 and that it contributed
• Hancock – if frequency drops what happens to a generation plant?
  • They would get damaged
  • Saw plants drop off for operational reason, n
  • ot that they tripped under frequency relay
  • Have heard people saying it and have not seen anything that shows that is the case
  • It has not been disproved yet
• Hancock – what forms of generation are available for load growth?
  • Things that can turn on fast, lions share is gas but future may be battery; now its gas
• Reviews various capacity by fuel type
• Hancock – how reliable was are nuclear?
  • Completely reliable until there was a trip
• Hancock – what have we seen happen with our coal fleet?
  • Saw many retire, large loss of generation lead to tight summers
• Hancock – when was last time we built a nuclear plant?
  • 1990s
• Hancock – coal and nuclear were pretty steady?
  • Will get percentages running at capacity, loss a substantial chunk of generation
• Whitmire – is your job to help prevent the catastrophe we had? Have not heard yet what you or your team would have done different? Where does the buck stop?
  • Our job to keep grid balanced, need to look at gas supply and availability but says there is complication there
  • Will continue to investigate but believes operators on their team did the best they could
  • Do not think he would have questioned their judgement or experience
  • But after he listens to hours of tape and testimony if he hears something should have been done different then it does fall on him
• Whitmire – concern about complacency, do you think ERCOT, PUC or some elected officials were too complacent with forecast? Could we have done a better job? Etc
  • Think communications expressed a sense of urgency so they people seeing and receiving communications understood urgency
  • Fundamentally things went wrong; try to regularly encourage winterization practices but until they get out into the field hard to know what was done
• Whitmire – what you did didn’t work
  • It worked to keep up from going into a blackout today and protect integrity of the system
• Whitmire – in terms of human suffering it did not work
• Whitmire – do you have strategic meetings with others in the industry; can you call on others
  • Yes have process in place with neighbors and can get power from other power pools
  • Did reach out but problem was they had a similar weather event going on
  • They went into rotating outages as well
• Whitmire – were you ever concern in early parts of crisis; did you say someone is manipulating gas prices or gouging the system?
  • Generators were reporting they had to run less because of gas but they don’t manage gas
• Whitmire – do you have ability or motivation to go up food chain to see where is holdup? (example gas supply)
  • Worked with others and take teams from ERCOT and work on solving specific problems as they came up – example working with RRC
  • Focused on getting generation back
• Whitmire – Wednesday afternoon they all started producing at the same time; Hancock said they will have opportunities to address those supply chains
• Hancock – we will have a panel with renewables as well
• Whitmire – not sure we fully appreciate what happens when you say, “we could have lost the entire system.”
  • If we had frequency drop continue to decline, lose generation and at 59.4 after 9 minutes and more generation comes off because of physically can tear up the system
  • From 59.4 to 58.4 cannot stay there for more than 9 min, Whitmire said the numbers don’t help explain it to the constituents
• Schwertner – House testimony from NRG, etc seems to be contradicting his testimony
  • When we were at 59.4 should not have seen automatic trips causes by low frequency, if they are saying it then they would not be operating according to the rules and do not see evidence that shows this
  • Have not shared this information with him, not sure what evidence they are bringing to the table; if they are right we would need to look at it because it should not have happened
• Schwertner – hears mismanagement was the reason for the failure in the House but that seems to contradict what ERCOT is testifying
  • Information provided by generators, just now looking at data but does not see this
  • Even if there were units that tripped, number that would trip in that time would dwarf other trips
  • Need to figure out what they are saying but unless they are claiming a large amount of generation with the phenomenon
• Johnson – said it was a horrible week but we did not go black and need that context, ERCOT purpose is electricity market
  • Agrees point of electricity market is to deliver electricity to homes and businesses
• Johnson – last week about 12 fewer gigawatt hours being produced but for some amount of electricity to be delivered and cost went up – where is the $45 billion?
  • Prices go higher in scarcity
  • Sending out invoices, they are billing users of wholesale to pay for generation
  • Johnson – some of it is not settled?
  • They have timelines for settle up and they are pretty tight
• Johnson – retail electric provider has to buy at $9k and customers had to pay usual price, continues with example; who profited from this?
  • Hedging arrangements for example could impact, it will be dependent entity by entity
• Johnson – all we can know for sure is that is cost us $45 billion more to not heat our homes, Monday if PUC has moved clearing price right then would we have seen another 1 MW of generation come online?
• Johnson – where we are max output or were people holding back generation waiting for a higher price
  • Gas prices were so high that some voiced challenges as price coming in was lower at the start
• Johnson – weren’t some generators operating at a loss?
  • We know if they are on or are off, don’t really need to know motives, just want to see enough MW on grid as they can
• Johnson – do you have power to compel them regardless of cost?
  • They can be compelled; there are rules in place for this process
• Johnson – reason clearing house price is so high is to incentive generation and meeting capacity, but at some point that is all the capacity there is regardless of CAP
• Johnson – Would you agree the CAP was not about getting us through 5 days?
  • No, because they implement policy that dictates a high level of scarcity policy but lawmakers can review to see if it was designed to work like they want
  • Policy makers need to review
  • Unless asked to do analysis using data they have; don’t make recommendations otherwise
• Johnson – mentioned other states have problem, is a black start in Texas worst than other states?
  • We rely on our own resources, can’t lean on area for other amounts
  • Yes we expect it would be challenging situation
• Hancock – asks questions about types of generations, 5 MW of renewable was a free ride at the peak price?
  • They did get different arrangements
  • Hancock – disparity in the marketplace which is impacting the market
• Campbell – most important thing we are doing is first settle what went wrong and caused failure; and it could be a multitude of problems but once we find out then we can address
• Campbell – looking at process, model of ERCOT seems like a good model but needs to know if there are flaws in the model, did it work?
  • Have automatic process in place and in longer term they have had discussions on winterization
  • Meet with board yesterday, technical advisory will be meeting so starting process to look at every level what they can avoid in the future
  • We don’t mandate generation, not a regulator, operate under market rules and can take actions if they are not operating in the market rules
  • Have gotten involved to assisting units – but they are not enforcement
• Campbell – you don’t have any enforcement ability? The plants can take up recommendations or not? They can choose to skimp on weatherization.
  • No enforcement
• Campbell – asked about colder climates, do they have wind energy?
  • Thinks there may also be hydro power
  • Over 20% of amount of energy from wind
• Campbell – our wind turbines froze but ones in North work in cold, why?
  • Believes there are treatments that can be used with newer turbines, directs them to discuss with the renewable panel
• Campbell – crisis seemed great than EEA3 but it was the highest?
  • Yes, good point that EEA3 is when they start shedding load but there is no additional level beyond that
• Campbell – thinks ERCOT could have done better job of communicating with the public, inquires more about critical list confirms she needs to ask transmission and RRC communication cut off with natural gas
• Campbell – wants to know more about turbine freezing, natural gas shortage and to talk to RRC when they come up
• Menendez – slide 7 in handouts shows all generation, number one is gas followed by wind, then coal, solar, and nuclear; is this total of generation we can tap into?
  • Yes, that is the maximum
• Menendez – see natural gas was out most and would like to see what was percentage lost by fuel type to just see how they performed
• Menendez – talks about names/labels for events, example rolling brownouts were not rolling, etc
• Menendez – is there a provision for market suspension
  • There is for market restart, if they had a cyber event that pulled down market
  • Commission authorized them to use maximum discretion
• Menendez – stock market example with a breaker, do you have something like that for prices?
  • No, not pursuant to current rules
  • There is a policy the commission approved which says when you get to a certain point of earnings in the year the caps go down, PUC can address
• Menendez – On annual basis the cap can come down?
  • Yes
• Menendez – on slide 12 some of the generational outages, wants some sort of proof that the trips were not the case if they are being accused of causing the trips
• Menendez – asked about large commercial areas with lights on, couldn’t ERCOT or someone at transmission could turn off those large demands to keep things in the flow; do you have a program?
  • Execution of load shed is owned by transmission and distribution companies
  • Need to address that question with transmission
• Menendez – thought there was a financial incentive with commercial?
  • They have a program with emergency response service, commercial businesses wiling to turn down the load but that is called on by people who have contract with them
  • This is pre-rotating outages at EEA 2 level; not during the load shed
  • This is voluntary and is different
• Menendez – maybe we could expand the program
• Menendez – weatherization slide 17, are generators on honor system
  • No legal authority that confirms, correct
• Hancock – there is a difference between revenue and profit
• Hancock – did everyone respond correctly to notices?
  • Yes as far as they know
  • ERCOT directs it and it is their job to make it happen
• Hancock – for those that failed to winterize how much did they make?
  • They didn’t run, and yes they have to make up the shortfall
  • Hancock – those that didn’t weatherize potentially lost a lot of money this last week
• Nichols – Knows 2011 pops up in conversations; what should we do on weatherization?
  • Really hates to give policy advice but if when all data is in and generators identified what happened repeats in 2011 then think about making it more mandatory
• Nichols – cold weather was main stressor and same thing happened in 2011 so members will have to figure out a way to address
• Nichols – free market works very well until they don’t work, if you have different rules then it doesn’t work so well for all
• Nichols -CREZ lines discussion
  • CREZ was allocated across transmission across ERCOT
  • Nichols – citizens paid for it
• Nichols – adding conventional generation at one point but incentive is not there for a gas plant and at same time have taken off coal; we may have come up with net negative on conventional
  • Its possible
  • Seen explosion of wind and now solar
• Nichols – what incentives are we doing for conventional power?
  • Defer to other witnesses to ask this policy question
  • They manage the grid that is presented to them
• Slide 19 chart compares 2011 to this storm
• Hancock – renewables keep our cost low, but would you think wind and solar benefit from CREZ as well?
  • That was the point to bring them to market
  • Hancock – they don’t pay for it, getting a free ride on back of consumers
  • They do not pay for transmission benefit
• Creighton – can you explain your obligation over power grid, do you have to implement certain market protocols?
  • If our board approves or commission directs them, they are obligated to do it
• Creighton – want public to be clear on how pricing structure works?
  • Takes pricing back and market participants agree to market rule change
  • Commission approves policy and they implement it
• Creighton – do you believe our market construct is adequate or should be changed?
  • Not able to speak to it, have seen some success
• Creighton – largest train wreck in history of deregulation, need your opinion
  • Thinks everything should be on the table after an event like this
  • Decision about market will be made at the commission, but committed to working on whatever issue the legislature identifies
• Creighton – do you believe we should have a capacity market in Texas?
  • Don’t know if it will help or prevent or enable anything
  • Creighton – inclined to believe supporting free market alternative is better but other operators who operate within a capacity model, interesting
• Creighton – should be very opinionated on what needs to change, would appreciate hearing it
• Creighton – How could you not know foreseeable danger and not express it to those who could amplify?
  • We started sending communications on Feb 8 and continued to amplify
  • Participated with Governor during press conference
• Creighton – don’t know ultimate cost from storm but in his opinion lives lost were the ultimate cost; it did not resonate with us that the grid could be at risk from a supply standpoint
• Paxton – ask about R in ERCOT being reliability, shares personal story of how she was impacted, further expands on concerns and says there are types of electricity that are more reliable than others – wind and solar you were not counting on?
  • Not as much for coal and gas
  • Expecting about 5 MW from solar and wind, never went about much as what was expected
  • Paxton – said not very reliable when it bounces around
• Paxton – does ERCOT plan to move 20 MW of power to solar and wind
  • Does not move generation, generation developers tell them what they can plan on getting
  • They do studies and can project out but don’t direct it in that way
• Paxton – putting more demand on our grid because our state is growing

• Hancock – directs Paxton to keep her remarks to issue at hand and notes he asked Whitmire to do the same thing
• Paxton – points out market price was about $200 all week and cap was $9k
  • It came down to a glide path out of the danger zone and kept the prices at that level
  • Paxton – seems like there is a large differential between $200 market prices and $9k
  • Don’t know what you are saying about $200 because price was $9k at EEA load shed
• Paxton – purpose of cap pricing is to encourage generators to generate but as generators came off the price stayed there
  • Ones able to run, did get that price

• Whitmire – want to ask about governance of ERCOT? Does this body need to re-examine the structure of the governance? Should part of our examination be accountability and transparency of ERCOT?
  • Balanced board with consumers, independents and producers
  • Whitmire – do we need more consumers? 16 sounds like a lot maybe they need less?
• Whitmire – board answers to the PUC does it not?
  • We are accountable to PUC for everything, they approve our budget and the fee that funds them
• Whitmire – did you communicate with PUC that they were going to experience something like this and what they have implemented?
  • Sending out updates
• Whitmire – who is an operator, how are they chosen?
  • People who work in utility industry on 12 hour shifts
  • Frequently gotten some who were in navy
  • Control center is in Taylor, Tx and backup in Bastrop
• Whitmire inquires more about operators and about how they work
• Hancock – there have been ERCOT members resigned, how are they normally replaced?
  • Board typically picks successor and taken to vote and approved by the commission
• Whitmire – how do board members pick successor? Infers it is a good ol’ boy system? Do they ever allow someone who asks tough questions?
• Campbell – glide slide 19 is up, if weatherization was done would there have been enough generation to prevent outages?
  • Think until we find out from generators what was each cause of their outages can not answer, but getting that data now
• West – asked about generators, ERCOT as oversight
• Hancock – generators will be coming to speak to committee later
• West – Do you know if there are other states that have some sort of certification for weatherization?
  • People in their shop know, he does not know
  • West – you don’t know what other states are doing regarding best practices?
  • Will find out for you
• Perry – Refers to page 13 total installed capacity, did you ask or receive an emissions waiver so generators can operate
  • We have a process set up, and did it with TCEQ and DOE
  • Perry – should not hear regulatory concerns for turning up generation
  • Correct
• Perry – PUC allows for them to turn up generation, did you implement RUC?
  • RUC, can require it to run
  • Will need to look at data on orders
  • Perry – only kicks in if a generator is out
• Perry – only 6% reported fuel shortage? Can’t blame it on gas lines were frozen?
  • Based on what they have on system for outages
  • Agree heard from more people anecdotally they were having supply issues
• Perry – when someone committed to ERCOT a certain amount and cannot in scarcity they have to pay for it? Just a financial transaction?
  • Yes, it’s a financial transaction
• Perry – Is ERCOT board subjected to Ethics and positions
  • If you have positions then you can’t have his job or be on the board
  • Perry – you did not personally benefit
  • No
• Perry – how long does it take to start up a shelved or mothballed generator
  • Could take a couple of days
  • Started taking actions informing market about week before
  • Most generators brought up anything they could
  • Agrees with Perry there were no unused generators, there was one small one but it was having issues
  • Agree everything that could be in system and run was running
• Hancock – concerns from six years are significantly elevated regarding supply and demand
• Schwertner – testimony in the House that generators warned ERCOT there demands were off, specifically Vistra
  • Load forecast keep going up and they expressed concerns and ERCOT had concerns as well and was getting out messaging
  • Agrees demand was going to be great
• Schwertner – ask questions about the ERCOT graph on preliminary causes for outages
  • Does not really like this graph because 20% other is not helpful in the graph
  • Schwertner not reaffirmed by his testimony, support reform so that this never happens again
• Alvarado – What is involved in a site spot check? COVID hampered abilities?
  • Concern of ERCOT personnel with them, limits on who all could be on site
  • Did some of them virtually
  • Expanded on details of what is involved in a spot check
  • Alvarado – would like checklist of what is involved in spot checks and details on those
• Alvarado – 2011 report had good recommendations, talked about in your board meeting yesterday some of the things you have implemented
  • Set up ancillary services – changed the way they buy them so they can be responsive quickly
  • Alvarado – would like to see it in writing what they have implemented and what they have not
• Alvarado – can you talk about functions of control room? Who all is in there and what is flow of operation from control room?
  • Everyone is certified by NERC , training done on simulators, 10-20 years’ experience
  • Communication and a lot of visualization of data
• Alvarado – communication flow?
  • Data going back and forth between them and participants, hotlines, use communication protocols
• Alvarado – asked then about a conference on weatherization
  • It’s a way for them to gather generators and provide preliminary update on weather
  • As technologies evolve and people find new ways or want to share lessons learned that is what occurs at this conference
• Alvarado – you are a 501c4; do you consider yourself a government agency?
  • Issue is being litigated at the moment, a private Texas organization but fully regulated entity
  • Perform a public purpose, so in the middle in some ways
• First time they have ever encountered a load shed event where generators were saying they didn’t think they could roll it
• Hall – complement him on opening statement of the importance of electricity, need a resilient and reliant electric system…elaborates on pricing concern that people with high electricity bill did not benefit more than others from electricity
• Hancock – will have witnesses later to better address
• Hall – how does raising cap get any more power on line than what they are capable of providing – why go to $9k?
  • Price signals are implementing a market policy; when power is in supply it is cheap but when it is scarce is when they raise prices and people who show up are rewarded
  • Investors willing to come to Texas as incentive to invest
  • There are some that sit still and when price is right, they then come on
• Gutierrez – confirmed understanding of governance structure of ERCOT, asked if Oncor has implemented any weatherization per the FERC report… continues listing groups to see if they had implemented
  • Not aware
  • Hancock – group will be on panel later to answer
• Gutierrez – no standard for weatherization currently
  • Yes, best practices
• Gutierrez – if you don’t have a stick on spot checks then what are you doing
  • Not regulatory; assisting with best practices
  • Gutierrez – need to give you a stick, El Paso was fine because they relied on Western grid
• Gutierrez – do you think a stick is needed for agency or standardization on weatherization? Expands on what limited things ERCOT can do
  • Agrees they are not a regulatory agency
• Gutierrez – failure on ERCOT, report of extreme weather event was provided by ERCOT meteorologist; how did you communicate it?
  • Got out awareness so they can make decisions to get ready for it
• Gutierrez – what kind of contact did you have with government officials? Did you talk to anyone in government on November 5^th report?
  • Shared notices with senior staff and various officials
  • Does not know for sure what they did for November 5^th report
• Hancock – again says he would like to move through this expeditiously but witness has been in the seat for 4 hours but thinking we may need to take a break
• Springer – have you set percentage for each provider for what is under frequency lines?
  • Set some frequency relay requirements so let him review and get back to him
  • Hancock – will have a panel on that which may be better place to ask a question
• Springer – request for expedited publishing of report, don’t want to wait 60 days
  • Working to waive confidentiality protocols and get them details quickly
• Springer – a plant had gas diverted, did you know about it
  • Would not have known they were getting gas cut off, if plant was tripped by supply then it’s a problem
  • Springer – would hope ERCOT would help make sure no one cuts off gas
  • Don’t have numbers yet on those who had supply cut off, had more stories that seemed like gas supply cut off
• Springer – who determines resource mix
  • There is not something in place
• Springer – discusses more about triggers underfrequency; each time you go down under frequency could it take down those plants around it?
  • Will need to get back to him on this on how it impacts local issues
• Springer – asked about market
  • Flexibility for next few days, trying to work with providers to help make arrangements
• Miles – question on mandating weatherization; went to workshops on weatherization over last 10 years
  • No mandate, went to workshops; no rule they could have enforced under current law
• Eckhardt – $9k cap didn’t really get more on the grid, everything was on the grid that could; but gas prices were so high
  • Dynamics between gas and energy they didn’t have visibility on it
  • Maintaining cap may have prevented reduction in capacity, struggle was to keep generation on
• Eckhardt – would like to see interplay of capped electricity and uncapped cost of gas during this time period
  • Can certainly get that information to them
  • Phenomenon of gas pricing was an important part of this event
• Eckhardt – do you believe PUC has sufficient authority
  • They have full authority over ERCOT
  • But not mandatory weatherization standards
  • ERCOT cannot punish for non-compliance
• Eckhardt – questions on residential energy code
  • Hancock – not really ERCOT purview lets stick with focus
• Eckhardt – Bluebonnet Co-Op was able to do rolling backouts, but Austin Energy really struggled with it because of the amount of infrastructure in the area, could ERCOT would with providers to target in these circumstances? You asked for a shed across the board?
  • When we order a load shed there is a pre-determined percentage and they go out and do it the way they want to
  • They don’t manage the distribution system, don’t know industry or critical care areas
  • The ones that will execute should manage the plan
• Echardt – What agency should we work with?
  • PUC may have overall jurisdiction
• Bettencourt – Thanks him for his 4 plus hours of testimony, pg 7 how far back does the slide go? Did lack of reliability start on February 9^th?
  • We did observe that storm hit the west first – maybe Thursday
  • Bettencourt – at least 4-5 days before valentines day
• Bettencourt – public is furious about notice from ERCOT describing time expectancy on rolling outages, don’t understand how we could not have tested something like on page 20 regarding the load shed?
  • We may have trained on a scenario like this, thinks failure was certainly in rotating outage messaging
• Bettencourt – tens of billions of dollars of insurance claims, deaths, and believes it could have been lessened to some degree if you have just run the test
  • Have to work with transmission owners, it’s their system
  • Agree cannot repeat this
• Bettencourt – asked about PUC order language, cap at $9k notes its been a lost week for Texas and we can’t afford to lose another one
• Whitmire – looking at handout on breakdown of source of energy on page 7, what did you expect in terms of wind? What percentage of wind was actually…
  • Not tied with day – just if you looked at total on system
  • During power failure recalls was not expecting tremendous amount like 4-5MW, some days it performed and some days it trailed off
  • Walks through expectations of capacity – mix up in charts but tried to calculate what was lost refers back to charts to get a sense of the difference
• Hancock – timing matters
  • Yes solar increases if there is sun and then comes down at end of day
  • Hancock – don’t count on it as much in winter
  • Can’t create it, wouldn’t be expecting 25 MW but there was a good week last week
  • Hancock – renewables climb to a point and then start declining
  • Usual demand is two humps in the winter and one big rise in the summer and then it starts to tail off
  • (More discussion on what demand looks like over the summer and winter)
• Hancock – rephrases question for Senator Paxton, do you hold cash or are you day in or day out
  • Hold cash for auction but mainly we don’t hold money of our own
• Paxton – talked about market and prices
  • People working with market participants trying to figure out ways to manage issues without having a big loss to the market
  • If ERCOT takes a loss, they can’t absorb it so they would uplift it and everyone ends up paying for it
  • Some participants in the market are more sophisticated than others
• Paxton – it would be good if we had pause to investigate the pricing, look at price gouging for a few days to sort things out before we make payments on things hard to get back
• Creighton – if you are short paid and there are market participants that don’t make it, for good actors do you foresee a situation with a cascading effect
  • Hopefully that is not how it ends up
  • It is a market system and there are some that don’t make it
  • Consequences are allowed to happen but good point on short pay
  • Trying to use discretion and flexibility gave them to figure out solution but know this is a today and tomorrow problem and working on a way to balance it out to address concerns
• Hancock – in one way you say we were prepared but we were within minutes of losing the whole thing
  • Training came through and they made hard calls, wants to help solve as well

DeAnn Walker, Public Utility Counsel (PUC)

• Thanks committee and reviews their role
• Touches on FERC and NERC report – things were proposed put not formally adopted
• SB 1133 they reviewed operation plans and hired third party for report with 13 observations and 9 recommendations; bill did have provision to require winter weatherization but it was removed before the bill was passed
• Have adopted rules that included requirements as necessary for an emergency operation plan
• Must file emergency operation plan and provide ERCOT responsibility to review reports and submit report to them
  • ERCOT did not identify any plants who failed to have weatherization in the report they submitted
• Wants to explain February 15^th letter, ERCOT called them and said $9k cap is meant to only be in place for load shed event
• Hancock – asked her to repeat a part of her testimony
• When ERCOT was gathering load in reserves and restore system, signal was being sent to dispatch there was sufficient generation on the system and no longer in load shed event
• When that happened the generators started backing down, if had not done change they would have had to add more to the rolling outages
• This did not impact fixed price customers but did impact Griddy customers
• In regards to what did she see that could be changed:
  • FERC and NERC investigation,
  • one is electric gas coordination and how to better coordinate those two industries;
  • need to look at rolling outages but need to be better prepared;
  • last week was about getting the system restores and this week was about settlements;
  • do we want to modify market is something needed to look at by lawmakers;
  • don’t have authority to require weatherization;
  • ERCOT board authority makeup
• Listening to Magness would think PUC exercises great deal of authority, pass rules that sets certain perimeters so they do send signals but impression of oversight is incorrect
• Had her staff work on protocol language and hear some say PUC opinion does not matter
• Don’t think they have total and complete oversight of ERCOT, can’t require anyone to resign or how they are organized
• Hancock – you have oversight but very little power? No stick or carrot?
  • Thinks to say they had a certain amount of power is not correct
• Whitmire – title has her down as powerful position so if see governance of ERCOT as issue could point it out to the body, PUC has bully pulpit and access to the press
• Whitmire – upset at lack of communication, PUC either has authority or does not
  • Enforcement division was moved into legal division
• Whitmire – what role did you play Sunday and early Monday?
  • Our role started before that
  • Contacted Governor’s office, Speaker, Lt. Gov office, etc and told them we would very soon be facing rolling outages
  • By Thursday and Friday was already preparing so asking for waivers from TCEQ, talked to Craddick about possible gas problems
  • Whitmire – did you talk to producers? Gas supply lack of weatherization at well head?
  • Hancock – interrupts to say those at wellhead well be there to testify as well
• Whitmire – did they sense gravity of what was going to happen?
  • Vistra called her at 9p on either Wednesday or Thursday saying there were being curtailed by their gas company and heard this from several other utilities so she reached out to Craddick
  • There was complete urgency
• Have committee to Senator Alvarado to not replace members until she hears from them loud and clear what they want
• Whitmire – need transparency and sunshine on who is making those decisions
• Schwertner – call with Vistra, warning you new supply was going to be an issue
  • Would be done at distribution and not knowing what kind of load they were serving
• Schwertner – what is fine structure when it comes to regulating public utility
  • $25k per day per violation by statute
  • Highest they have given was $2 million fine
• Schwertner – don’t think you all have many teeth, need to get bite into your regulatory enforcement
• Schwertner – regarding EO pricing was not matching load shed, why PUC raised price to $9k
  • $1200 would depend on time, it was a computer formula so it depended on reserves
• Schwertner – why have this complex system if it does not work on pricing and why PUC needed to take unilateral action to raise to $9k, what was not working? Who got you to issue memorandum? What time of day?
  • ERCOT on Monday at 6:30p
• Hancock – how does your communication with generation work?
  • Told them we were going into a serve event, other than gas curtailment was anything else needed?
• Hancock – How does your communication with generation work?
  • Told them there was a going to be a severe event; when I was calling on Thurs-Fri we were asking if there were any other resources they needed from us to be on and running
  • Try and reach out to CEOs before an event to be proactive
• Hancock – How do you find out about outages?
  • They schedule outages through ERCOT, was calling because I was concerned
  • Schedule of outages changes based on time of day and what they’re putting in and getting out, could not keep track of all of this info
• Hancock – Do we have times were we have them reschedule outages?
  • ERCOT is responsible for those type of market notices, generators seemed to be aware and were bringing everything online that they had
• Hancock – TX ended contract with the reliability entity?
  • Began a contract but had questions over costs, were given information with significant overhead built in that kept changing
  • Had concerns about the financial info being provided to PUC as well as the quality of recommendations about the emergency plans
  • Texas Reliability Entity asked to be let out of the contract after the issues were brought up to PUC
• Menendez – Concerned that consumers will be weighed down after this emergency with massive bills; what are you doing to avoid this?
  • Most customers are on a fixed rate, Griddy is a different issue
• Hancock – Can you share data on who falls under these utilities?
  • 40k-42k customers are on index rates out of 7 million total
• Menendez – What about people in municipally owned utilities?
  • Rates set by governing bodies, we have no oversight
• Menendez – So these utilities will either need to absorb costs or pass them onto ratepayers?
  • Probably true
• Menendez – So we are not helping municipally owned co-ops?
  • Broad issue that we need to look at this in general
• Hancock – All customer purchasing from ERCOT buy at the same price, providers and suppliers may be absorbing the business impact in other methods; will have panel on them as well
• Menendez – Do you feel the distribution utilities did a good job with the load shed?
  • Load shed need was the highest we’ve seen; should consider questions like having one for Winter and Summer
  • Under the circumstances, they did the best they could at that time
• Menendez – Can you speak to the emergency demand response initiatives; concerned that big commercial clients were fully lit while people were freezing
  • Totally agree with you, contacted Facilities Commission on to back down temperature and turn off lights at state buildings
  • Building by building issue, something we need to look at and address
• Menendez – Current demand response program is limited to $50 million, is it robust enough? Not sure which commercial entities this applies to
• Hancock – The Governor did call and request that businesses and industries curtail use, no real power to force this; didn’t see much load shed when he publicly asked for help
• Menendez – On the extra power delivery service charge, is this not causing high bills?
  • Ancillary services is something we’re working on
• Menendez – Should I tell citizens to sit tight the state is working on something on bills?
  • Don’t know the answer to that right now, these are issues we’re currently trying to work on
• Hancock – This discussion was happening before anyone got an invoice, there were discussion during the storm
• Nichols – There’s really nothing to keep this same thing from happening two weeks from now
• Nichols – Asks after emergency plans and weatherization
  • We used a vendor to examine the reports one time
• Nichols – If we see a generator with an insufficient plan, what happens?
  • ERCOT would report it to us, responsible for checking on plan implementation as well
• Nichols – Saw a report previous that 19 plans on weatherization failed inspections?
  • No
• Nichols – So there’s no real verification this being done? ERCOT said they had no enforcement authority on weatherization and you’re saying the same thing
  • We do have enforcement authority on the plans themselves, but no way to require weatherization
• Nichols – Both ERCOT and you have said you don’t have authority to make them do this, but there are series of approvals needed to locate a plant
  • PUC has no regulatory oversight on siting generation
• Nichols – Does ERCOT?
  • They have oversight on interconnection, but no, generation was totally deregulated
  • They need permission from ERCOT to hook up to the grid
• Nichols – They have to be approved for bids as well?
  • Registration with the PUC
• Nichols – Is there any reason you have to remove someone from this list?
  • Only if they violate financial requirements, but not otherwise
• Nichols – So you do have some approval authority; we have put citizens in health & safety danger during this event, that raises the need for action that can be taken on weatherization somewhere in the process
  • We have not been given legal authority to require weatherization
• Johnson – Can you describe the ERS system?
  • Usually commercial entities that will bid into a market and get paid to come off the system when there is high demand
• Johnson – So process by which ERCOT can go to a large user and we’ll pay you to conserve
  • Bidding process up to cap of $50 million
• Johnson – Does the legislature or the PUC put it at $50 million?
  • Believe the limit is via ERCOT, I can get back to you on that
• Johnson – Is it a decision the PUC can make?
  • Not in statute now, if it is a rule it is something we can do
• Johnson – Is increasing the allotment a good idea to do?
  • We can look at it, it’s very contentious on whether it is replacing incentive to build generation
• Johnson – Sounds like it’s something the legislature ought to look at with you
• Johnson – Why was the price stuck?
  • Because ERCOT was having to hold reserve to maintain the system while building service up; system was seeing the reserves and assuming no load shed was needed, thus letting the system go down
• Johnson – Was it the generators coming to the PUC about this?
  • No, ERCOT brought this to PUC’s attention, generators were being backed down due to price differences
• Johnson – So on Monday we had generators producing less than what they were capable?
  • Yes
• Johnson – And this was a computerized result?
  • That is my understanding, ERCOT would understand this better
• Johnson – Would anyone be able to identify generators who were producing less?
  • I believe this is something we can know
• Johnson – Looking into market structure issues and maybe we need to look at this
  • Generators weren’t doing this by themselves, system was telling them to do this
  • When the reserves were building up and price was dropping generation was scaled down, then reserves would dip low and this puts wear and tear on generation
• Johnson – Shouldn’t this have been known on Monday morning? And who should know?
  • This is something we should look at, it would be ERCOT
• Johnson – What is the longest period of time the wholesale price was sustained at the cap?
  • Summer before last was the last time, nowhere near this, less than a day; need to look at this, $9,000 was not intended
• Johnson – How many hours was the cap in place last week?
  • Not sure, saw figure of load shed being 70.5 hours
• Johnson – We know it was several days, pretty much the entire industry should have been aware, should there have been a break mechanism to suspend the market?
  • Don’t know the answer to this question, ERCOT has provisions in protocols
• Johnson – Did anyone know the $9k cap was not driving generation
  • I think the cap was keeping the generation on that was there
• Johnson – If it backed off $9k would generation come down?
  • I believe so
• Johnson – Does the PUC have oversight on managing the cap? Someone should have been able to step in and keep generation on, could the PUC talk to the RRC?
  • I think discussion need to be held to figure out where to break this circuit
• Creighton – Have you asked the legislature for the authority you need to carry out obligations? Do you feel you have enough authority?
  • If this refers to weatherization I think I need more
• Creighton – PUC creation act grants you complete authority over ERCOT; when you delegate functions to ERCOT are you absolved of oversight responsibility?
  • Absolutely not
• Creighton – Have you asked for anything different in meetings with the legislature?
  • No, I don’t think I understood the situation and needs
• Creighton – We’ve talked about things like 2011 issues, bills passed, etc.; saw lots of precursors to the weather event last week;
• Creighton – Not sure why the legislature needs to mandate responsibilities associated with emergency plans, etc., contend that you are choosing not to leverage authority we’ve given you
• Creighton – What would you suggest regarding the market and caps? We need competition in Summer to push prices down, I understand the market cap is an incentive; are there any other suggestions or best practices that we should be doing?
  • I don’t have any at this point, we all need to look at this, gather info, and make policy decisions
• Creighton – So in preparing for this hearing, you don’t have any opinions on what we could do to enhance construction of the market?
  • I don’t have specific suggestions
• Creighton – I’m personally surprised that there are no suggestions to keep competition but be ready for exigent circumstances
  • Have worked for past two weeks trying to get power restored, if you believe we have that authority, I’m willing to move forward with it
• Creighton – I believe you have the authority to mandate emergency operations plans, that you have the leverage to make them want to impress you, and that you can come before the legislature to discuss these issues
• Paxton – Is the order Sen. Menendez referenced still in effect?
  • The Feb 21st order is still in effect, yes
• Paxton – Can you describe that order again?
  • Asks the reps to delay invoicing to retail customers, prohibits disconnection for nonpayment, requires retailers to offer deferred payment plans, sets dates for ERCOT to deviate from deadlines
• Paxton – This is designed to give consumers protection, time, etc., also the retailers as well?
  • Correct
• Paxton – Do you have sort of timeline on communications you engaged in over the course of the last week?
  • Nothing like that now, can put something together, most was over phone so exact times and days may not be right
• Paxton – The signaling system is automated, and the only way to signal we don’t have a surplus is to raise the price to the cap?
  • That is what I was told
• Paxton – I would suggest that’s a broken algorithm, needs to be some sort of pause; doesn’t make sense that generators would be happy to generate at $250 and then suddenly only be willing at $900
• Paxton – On Monday, the PUC lifted a pause on payment from generators?
  • ERCOT lifted the pause, we did not order them
• Paxton – My understanding was they were ordered to lift it
• Hancock – That is a day-by-day transaction, all they did was resume normal transactions
• Paxton – So they were not ordered to lift the pause, they just resumed normal activity?
• Hancock – Correct, they were requested to pause so the legislature could discuss; pause was of great concern to many because these happen regularly
• Paxton – But the PUC didn’t lift anything, that’s something ERCOT did?
  • Yes
• Campbell – How much control do you have over selection of members of the ERCOT board?
  • We have approval over the board after the membership approves them
• Campbell – You don’t seem to demonstrate the knowledge to be able to exercise PUC authority
• Campbell – How concerned are you that some customers will lose current electric providers defaulting?
  • We’ve set up a process to move customers to other retail providers
• Campbell – Who is going to absorb the losses?
  • Uplifted to the market
• Campbell – When you communicated about the rolling blackouts and your concerns, did you relate this to the public?
  • No
• Campbell – TDUs are the ones that do the shedding, they cannot pinpoint shut offs?
  • Correct
• Campbell – How can we change the model to be able to target shedding?
  • Would need to put in devices to be able to do this
• Campbell – Cost would be borne by the TDUs
• Hancock – TDUs are fully regulated, so cost would be pushed to consumer
• Campbell – People have to fill out applications to be a critical needs receiver?
  • Goes to the retail electric provider, PUC has oversight
• Menendez – You said emergency response is one of the most contentious programs, is it because generators don’t like large commercial coming off?
  • Yes, because large chunks of commercial will bring down the price
  • Other group opposed are traders
• Menendez – Hurting residential customers because generators and traders don’t like it
• Menendez – Do you think we’re doing a good enough job ensuring TDUs know who critical care people are? Have received many calls on this issue, shouldn’t be on the backs of vulnerable populations to keep track of this
  • I agree, listed this in things we need to work on
• Menendez – Concerned about using taxpayer dollars to weatherize plants for for-profit companies that have not been cooperating and helping us reduce commercial use to keep residential power
• Hancock – Bill passed out of the Senate last session did address batteries, Lt. Gov. wants to bring this again post-haste
• Whitmire – What is the function of the independent reliability monitor?
  • They reviewed data for violations of ERCOT protocols, ERCOT staff uses this review for enforcement action; contracted with the PUC
• Whitmire – Who was serving as the monitor going into the storm since the other was let go?
  • Didn’t let the other one go, they asked to be let out of the contract, staff was performing this function
• Whitmire asks for clarification
  • Had a 3rd party contractor, was concerned about financial irregularities which led the 3rd party to ask to exit the contract; staff has done this since
• Hancock – How much were we paying for that?
  • $5.3 million, paying for furniture, etc.
• Perry – The algorithm that was indicating need for lower generation, it wasn’t lowering generation, it was just sending signals that ERCOT should be doing this? Does it set the rate?
  • Was told it was actually moving the generation units up and down
• Perry – Would like some follow up info on that; if we’re connected that well and its that sensitive, then absolutely we need to think about how we set prices
• Perry – Asks for clarification on planned gas outages?
  • Generating units were notified that gas outages were curtailing
• Perry – And these were planned?
  • No, this was due to weather, something that needs to be addressed is that generation units have interruptible gas and they need to have firm gas
• Perry – Don’t think we should have any generators with interruptible gas contract
• Springer – Asks after gas redirection away from plants to other customers? Brazos Electric plant was one of them
  • Had worked on this issue with some generators
• Springer – Denton had a pipeline contract and gas
• Springer – Discusses frequency lines, critical infrastructure lines
• Springer – Why didn’t PUC invoke Section 25?
  • ERCOT would need to
• Springer – Since you have complete control over ERCOT, why didn’t you tell them to?
  • Didn’t discuss this at the time
• Springer – What would the difference be under a RUC versus the $9k cap?
  • Would need to get back to you
• Springer – What was the cost of generation from Sunday-Monday?
  • $47 billion
• Springer – So if a RUC said $17 billion, the difference would’ve been billions more than the RUC
• Springer – What stops an REP from filing bankruptcy, reorganizing and selling power under a new name?
  • REPs have to register with PUC and we look at business history
• Springer – I don’t think they should be let back in
• Creighton – Does PUC have plan in place for filing grievances?
  • There is a process through the PUC website
• Creighton and Walker discuss the process, importance of contacting customers
• Miles presents statute provision on PUC authority over ERCOT
• Hancock – Are there things that should have been done differently?
  • Absolutely, coordination between gas and electric became real during the event, it should have been in place before
• Hancock – Are there things that you saw that potentially exacerbated conditions last week?
  • I have concerns about decisions made last week, things we need to look at
  • Committed to working out how to do better

Lori Cobos, Office of Public Utility Counsel (OPUC)

• Provides overview of OPUC structure and operations, no regulatory over PUC, ERCOT, etc., advocates for consumers
• Responded to calls from consumers, saw roughly twice as many calls during peak as regular during the whole year; main calls were about water or high bills
• Focus area during storm was communicating with consumers through direct communications, web publication, press releases on energy conservation, etc.
• OPUC will work with legislature, PUC to help investigate and ensure customers have reliable, affordable electricity
• Whitmire – Who hires you?
  • Appointed by the Governor
• Whitmire – Leading up to the storm, were you in contact with members of the PUC? When did you get word?
  • Got word at the board meeting on Feb 9
• Whitmire – So at the board meeting at ERCOT a week before issues, there were discussions of upcoming severe weather?
  • Yes, received update that storm was on the way, generators were notified, and we might hit Winter peak
• Whitmire – Do you communicate with our constituents that a storm is coming, supplies are needed, etc.
  • Yes, but did not know there would be a severe issue, information indicated ERCOT and grid was prepared
• Whitmire – We all knew Winter was on the way, just wondering what role you could’ve played, were you in contact with PUC or ERCOT?
  • Yes, PUC let me know things were looking very tight, ERCOT notified us conservation appeal would be released Sunday, we sent out a press release on this
• Whitmire – Who do you answer to?
  • Taxpayers, OPUC is an independent agency
• Whitmire – Have you looked at the PUC website? It’s not very user friendly and not useful in contesting outrageous bills
  • If anyone is experiencing high electricity bills and needs help to file a complaint, they can’t contact our office
• Whitmire – People may not understand how to file these complaints
  • OPUC office holds their hands in filing complaints
• Whitmire – How would they know to contact you?
  • Number is prominently displayed on web, asks that info is passed along
• Whitmire – Need to put yourself in position of these people
  • Absolutely, can communicate via social media, or town hall
• Whitmire – Maybe could get the people sending the bill to inform on the appeals or complaint process
  • Can look at this in the PUC’s investigation on how to add better protections
• Campbell – Legislators need to do more to get word out, OPUC has massively increased social media outreach due to the communication need
• Campbell – How can we protect consumers from these high utility bills?
  • Working around the clock to help consumers, plan to be actively involved in PUC investigation into companies like Griddy; I don’t think residential and small commercial should be allowed to get on these types of plans due to volatility
  • Many have already been auto-drafted, absolutely should file a PUC complaint and call OPUC for help; documents billing issue while legislature responds
• Campbell – Should be more to alert customers to risk of retailers like Griddy
• Menendez – How can we help those in month-to-month contracts under variable rates?
  • You enter into a contract with the REP, should also look at if protections are needed for these kind of plans
• Menendez – How does the current market impact consumers
  • Needs to be a little more transparency on the ERCOT side as to when REPs are having issues; would help us serve customers being served by customers going bankrupt
• Menendez – What initiatives can we take to better protect customers?
  • Weatherization is a very important conversation, if this involves PUC rulemaking we would be involved in that conversation
• Menendez – If there was gross negligence or malfeasance found, would you represent residential and small commercial customers to help them not be held liable for bills?
  • That is something we’ve thought about in the investigation being opened up on Griddy
• Hancock – Wholesale is about 45k, variable is another 350k; gets all the press, but it’s a small percentage of the market

Christi Craddick, Railroad Commission of Texas (RRC)

• Thanks those responding to the emergency, provides an overview of agency operations; regulatory authority does not extend to electricity producers
• RRC held an emergency meeting on Feb 12 as we learned the storm was on the way
• Waived transportation requirements for out-of-state alternative fuel haulers
• Committed to preventing undue burden on LDC customers, directed info to be collected on costs
• Took proactive steps to prevent disruption to natural gas supply; worked with industry and TDEM to clear roads for access
• Heard constantly of lack of power at production sites, operators were unable to keep systems functioning & some operators needed to temporarily shut-in wells
• Worked with PUC to provide specific coordinates for power and gas to be provided to specific sites
• Highlights remarkable performance of LDCs around the state, only 2,153 customers experienced service disruption
• Did not have any transmission pipelines freeze, flowed so long as electricity was available for compressors; production disruptions would have been limited given sufficient electricity
• Hancock – Without your industry, the lights would not be on
• Schwertner – Is there a plan of action between PUC and RRC to ensure delivery of gas to electric plants?
  • On Feb 11, we received a call from the PUC to ensure gas continued to flow; had a curtailment order in place for weather since 1973
  • Will always prioritize residential, hospitals, etc.; LDCs are number one to avoid inspections and relights needed for all households
  • Had a lot of conversations with the PUC after that time, also had an ad hoc group via the Texas Energy Reliability Council help with discussions in moving gas across the state
  • We do have enough gas if we can keep the electricity on
• Schwertner – Regarding profiteering or throttling of feed to various plants, do you have any insight on if that’s happening and can you tell?
  • Will continue to look at this, don’t suspect this happened at this time
  • No authority to look at big transmission pipelines but do look at utilities and they will come in for a review in expenses
• Schwertner – But most of the natural gas generators are supplied directly by pipelines?
  • Yes, this is a private contract between two entities
• Schwertner – Some of these contracts are interruptible and a company could interrupt for whatever reason?
  • We were on a call about Vistra and Atmos, options were to put it into Plano or the power plant
• Schwertner – Vistra is the one in Limestone county?
  • I believe so
• Hancock – I think that was the Hubbard plant? I think in the House the executive blamed that on lack of emergency from elected officials
  • There was a lot of urgency to make sure power stayed on and gas flowed
• Hancock – Who executes the interruptible contracts?
  • The pipeline company and the generator
• Hancock – So the executive that blamed elected officials?
  • I defer that to you
• Menendez – I heard reports of frozen natural gas wellheads? Do you require winterization of wellheads?
  • We don’t require it unless its an H2S, continuing to look at this; not aware of a state that requires winterization of O&G facilities
  • Making sure wells are safe is priority 1 in RRC rules
  • Hot water coming up from the ground and freezing can be addressed by flowing wells back or chemical additives; will continue to look at realistic solutions
• Menendez – Did we have the full supply of gas to meet demand?
  • No filings yet, have seen EIA numbers that suggest we dropped to 12 BCI/day, will know in March
  • If this is the case then we had a supply challenge, but significant gas storage supplies were being used
  • ERCOT determined only 6% of issues were related to supply
• Menendez – I assume you were in contact with ERCOT?
  • I never spoke to ERCOT directly, RRC participated in the TERC calls
• Menendez – Recommendation in 2011 and 2014 suggested operators should winterize wellheads, lines, and compressors; I think this should be done, would you agree?
  • Conversation we should continue to have
• Campbell – Would winterization have helped with flow of gas? Vistra is saying it isn’t something they could do
  • Gas supplies were backed off from the wellhead, but we were pulling gas from storage so there was gas on the systems
  • Wellhead will always be a little bit of a challenge due to safety issues; weather event hit West Texas on Feb 11 and prudent operators weren’t putting people on the road
  • Received a call on Tuesday from producers that they needed electricity to produce
• Campbell – What does it mean when there were failure with 3rd party offsite?
  • Not sure about this exact reference, but there is a supply chain that can be interrupted at various points
• Campbell – If we had more pipeline capacity and high-deliverable storage this could minimize some of the issues?
  • Opportunities exist
• Campbell – And this would be private industry?
  • Yes
• Campbell – Are there any new applications for nuclear plants to be built?
  • These would go through the federal government
• Paxton – Asks for clarification on gas provision
  • Residents, hospitals, churches, other human needs, LDCs; added delivery of gas to electric generators to number 2, small industrials, etc.
• Paxton – Who used to be number 2?
  • It used to be small industrial and regular commercial loads
  • Interruptibles are the last ones on our priority list
• Paxton – Reconsidering temporary nature of new priorities?
  • Yes, order has been in place since 1973, will have a full hearing
• Paxton – Regarding communication, would you be willing to create a timeline of discussions and actions taken?
  • Can provide you with this, started giving notice to operators the day after emergency order
  • In addition to communication; will likely also see move to make TERC a more permanent entity, storage and capacity will be important
  • As an agency RRC doesn’t have a lot of conversation with ERCOT, have asked for stakeholders to put ERCOT priorities lists together
• Johnson – Sounds like we’ve gotten ourselves into a situation where we can’t produce gas without electricity and we can’t produce electricity without gas
  • I think that’s part of the challenge we’ve had
• Johnson – Could we have backup systems at the wellhead or compressors to start the cycle?
  • Doesn’t work at wellhead, some parts of the field use gas-powered compressors
  • Many compressors have now shifted to electric due to environmental and reliability concerns
  • Many bigger pipelines can keep running due to backups
• Johnson – Was there enough gas to meet demand?
  • There was gas enough to meet the priority demands, had more gas in the system than ever before
• Johnson – If generators say they couldn’t get any gas how do we square that with more gas being in the system?
  • Priorities play into this, could also be an issue with processing
• Johnson – Could we do an analysis of where problems are?
  • Sure, entire system is connected; we now understand how much the industry is interconnected
• Johnson – Can you explain the economic justification for the price of natural gas?
  • Supply & demand signals, rest of the country was also using gas
• Johnson – Were we at an all time high for gas sales this past week? Could you look into this?
  • Still compiling data, sent requests for information from LDCs
• Johnson – Should there be a power in your agency or another to put a brake on the gas price? Would producers suffer?
  • We’ve never regulated the price of gas through these private contracts; this would be a policy decision and would be a real challenge for the agency
• Johnson – Not suggesting this is the normal course of things, but might it have been a good thing during the crisis?
  • Not sure how their contracts work
• Johnson – Isn’t just a question of costs?
  • One of the things to look at, RRC will have a true up in the future to see if costs are realistic
• Johnson – Don’t have interest in interfering in contracts, but may need a discussion over what to do differently in a crisis
• Johnson – You mentioned some producers shut-in wells to prevent damage, is this the general rule or an exception?
  • General practice for a cold weather event; haven’t seen 8 days of below freezing weather before, some were prioritizing what could still get to market
  • Depends on the operator, weather, and field event
• Johnson – If money were no object, could you have wells operate at these temperatures?
  • If they had electricity then these wells could operate
• Johnson – Aside from electricity, are there other things you could do?
  • Other states don’t do these things, up to a prudent operators and what makes sense for them to do
• Johnson – If there is an economic way to do these things, it seems like a good idea
  • Can bring in technical personnel, also need to consider Summer operations
• West – We will have to put more money into the system to take care of everything being done; do you see a potential rate increase for consumers?
  • Have put out a request for info from LDCs, we currently allow gas cost to be passed to end user; yesterday we asked LDCs to not do this while we have time review
• West – After the review, this cost will be passed to consumers?
  • At some point it could be
• Nichols – Gas industry helped save Texans, kept generators running and warmed homes
• Nichols – Cn you explain how the price of gas got so high?
  • Easy answer is supply & demand, had more demand from consumers, supply was used by other states
• Nichols – Price went very high and it’s a bidding process
• Nichols – Do you think there was any collusion or price gouging?
  • Not that I’m aware of
• Whitmire – How would your agency notice collusion? Do you have an investigative group?
  • We have a formal and informal complaint for that and we investigate
• Whitmire – Have heard reports that certain individuals are elated about prices
  • These are private contracts so difficult to know, unless someone reports a violation we have no visibility; would have a hearing on a report
• Whitmire – Production came back online on Wednesday when the price was favorable?
  • No, we notified operators on Tuesday and returned electricity to some operators; didn’t have gas flow to operate power plants until Thursday
• Eckhardt – Does the RRC do anything to ensure that natural gas providers are on the list of crucial infrastructure reported to the PUC?
  • This has been done by individual providers up to now, but I think you’ll see a more organized approach now
• Eckhardt – Top price gas on Feb 10 was $3, Feb 17 was above $500
  • Still getting information in from LDC on gas prices; testament to how impactful Texas’ gas industry is
• Eckhardt – Do you think it’s important for the RRC to look at Texas prices versus other states
  • No statutory authority, would be a policy decision
• Eckhardt – The high price is due to scarcity?
  • Would think its supply & demand, these are private contracts
• Eckhardt – Should we be looking at unit cost as we drill into private contracts?
  • Not privy to these contracts
• Eckhardt – Do you think we should look at premium prices being charged during a disaster?
  • Policy decision
• Eckhardt – Do you think there is a reasonable & prudent reason for these high prices?
  • Unsure as these are private contracts
• Eckhardt – Anti-price gouging measures are part of law, do you think we should investigate?
  • Historically the AG looks at price gouging
• Eckhardt – We had issues with the wellheads?
  • No, without electricity the whole chain couldn’t operate
• Eckhardt – Which might be fixed by having a better list of critical infrastructure?
  • I believe so
• Eckhardt – 46% of wellheads have high-cost gas exemptions? Should we look at this?
  • I’m sure the legislature will investigate everything, we can help you with data
• Hancock – Can a state actually regulate the gas prices?
  • Would be difficult, difficult for us to know prices without formal complaint
• Hancock – We can cap price, but the gas could go to other states; do you know where the price went in other states?
  • Most of them went higher I believe
• Johnson – Recall that on Wednesday the Gov issued an order saying we weren’t exporting gas; theoretically we could have a cap and stop it from being exported?
  • Haven’t had anyone complain of noncompliance, not sure how order affected things

Toby Baker, Texas Commission on Environmental Quality (TCEQ)

• Provides an overview of TCEQ response, boil water notices, testing
• Due to lack of power and frozen pipes, we had a water situation unlike events in the past; >1,800 boil notices in place at once out of 7,000
• 607 boil notices still in place, many of those left are smaller than 250 connections; a primary concern was having enough lab space available to lift boil water notices, many collaborated to ensure lab space was available
• Also stood up a phoneline to assist with water system issues, reaching out to water systems still on the list
• Also had more than 80 large petrochemical facilities go into some form of shut down, TCEQ deployed mobile air monitoring in coordination with stationary monitors as facilities go through start up essentially at the same time
• From a public water perspective, failures due to lack of power, frozen pipes, back up system froze and broke
• TCEQ has a work session for Wednesday Feb 3 to talk about next steps
• Whitmire – Where do we go from here?
  • City of Austin has raised storage, which is helpful due to gravity feeding; city ran out of water due to mains issues and every person in the city running their taps
  • Main challenges are that the systems are built for hurricanes and heat, generators are built for warm weather
• Whitmire – Need to spend the resources to address the issue
  • Everything is on the table
• Campbell – Do you have recommendations that need to be legislated?
  • I don’t yet, want to be very thoughtful about how we approach this as very small systems essentially can barely afford to operate as they are
  • Small water systems are not required to have any backup generation
  • Unsure if we can commit to having something this session due to the broad base of stakeholders
• Campbell – Likely what you have now will work?
  • We have the ability to address weatherization in the rules
• Campbell – Can you explain why boil water notices go out at low pressure?
  • Can lead to contaminants inside the water system
• Campbell – SAWS went under a boil water notice, but people were without power so they couldn’t boil it; what’s the remedy?
  • This was a challenge we didn’t have a solution for, worked in the San Antonio area to deliver bottled water and other resources
• Eckhardt – Have seen a troubling lack of coordination between agencies
• Eckhardt – To what extent does TCEQ have the authority or want the authority to require water supplies to require them to be among the critical infrastructure for their energy provider? Oncor didn’t have Pflugerville water in their list, etc.
  • Don’t have the authority to label something critical infrastructure ourselves
  • Saw other issues like Austin Energy being owned by the city and power being down for 4 days; power transmission, etc.
  • Would be fine with water systems being on critical infrastructure lists

Panel 2

Curt Morgan, Vistra Corp

• Provides an overview of Vistra, diverse energy portfolio
• Expansive weather event not seen before, energy industry was not prepared for that; gas and power industry and infrastructure need to be run in a seamless fashion
• Had forecasts saying 72k to 74k megawatts of demand, ERCOT said 67k; Vistra saw a situation where we saw a big gap without enough supply even if all generators performed perfectly
• Solar & wind was only producing 10% of what it could produce, replacing a lot of assets that can perform on demand with renewables; need more reserve margins when this happens to an energy market
• Vistra went to ERCOT, didn’t see sense of urgency at ERCOT; was not speaking broadly of elected officials
• Went out on Thursday before the storm and communicated with customers; wish I would’ve sounded this signal louder
• On Tuesday during the storm, spent $10 million for further winterization
• Had issues with solid fuel like coal freezing up
• Could not get gas at the pressures needed to run gas power plants at the levels needed
• Atmos could not give us a firm, uninterruptible contract because they must choose between Plano and Vistra
• Could not produce high power from any gas power plants, gas is the mainstay of the electricity system
• Public information was slow and incomplete
• Was a huge advocate of this market, but this has shaken me, questioning if this market can ensure reserves and continuous power; prepping ideas on market design to present
• Hancock – One item of concern is dispatchable units, how many have you built?
  • 2 units at Exelon, both were unable to run at this time
• Hancock – How often were plants built before these
  • TX was a bright spot for combined cycle power generation up until 2017, reason it stopped was due to economics
• Hancock – How many have come off?
  • Around 8k megawatts
• Hancock – Today dispatchable is less than it was 6 years ago
  • Yes, not enough dispatchable power plants to cover our peak load, absolutely rely on some level of renewables to be on
• Hancock – So we’re moving in the opposite direction than what is needed
  • Need to seriously look at doing things differently, maybe increase reserves that are needed
  • Should maybe combine this with price cap decreases; have a feast or famine market now and cannot stomach the famine
• Hancock – What were reserves 6 years ago?
  • 15-16%
• Hancock – What’s happened since then?
  • About 8% two Summers ago, back to 15% but this is not a real figure because renewables are in this
  • We took a system that had uncorrelated outage risk and turned it into a system with correlated outage risk, cannot count on wind
• Hancock – Had a reporter ask what if we had twice as much wind?
  • If you bring on more wind, rely on more wind, you push out more dispatchable resources and increases volatility of pricing
  • Wind has a 0 marginal price, with more wind we’ll see more hours where prices settle at 0 and will need to make this up during the high demand periods; will mean more scarcity events
  • Cannot expose people to products like Griddy due to risk of such a volatile market
• Nichols – You said ERCOT didn’t seem to have an urgency, but they really should have had an urgency
• Nichols – from 2000-201 we had 20k megawatts of traditional power, only 5-6k megawatts over the past 10; difference made up by solar & wind and they’re not as dependable
• Nichols – Don’t have a free market system of power, renewables play with a different set of rules
• Nichols – We need fairness, but we also need dependability; some plants sit idle until the 3 hot months of winter; what incentives do we need to encourage investments in traditional power?
  • When you compare what it takes to build a combined cycle gas plant in TX< wind and solar beat it hands down
  • TX is being overrun with renewables and this will continue, will change risk profile and force dispatchable assets out of the market
• Nichols – Have dependable and undependable power; I’d want to pay more for reliable power
  • Policy decision; we need to decide if we want to pay for reliability
• Nichols – Some plants weren’t running because of weatherization; what can we do to incentivize power generators to do a better job of weatherizing? Was talking about generation meeting
  • You’d think a $9k price cap would be enough; but might should consider disincentives
  • In capacity markets, if you get paid you have a must offer limit and there are penalties, in ERCOT you do not have to offer generation; what we miss is the reliability
  • Will need to bring these aspects together on the market design, can bring forward some ideas on that
• Menendez – Asks for clarification on fleet production
  • Around 20% of all generation, 15k to 20k megawatts across the whole system; Vistra was around 5k megawatts
• Menendez – And this was because of gas pressure?
  • Yes
• Menendez – You said TX is being overrun with renewables?
  • A number of parties want to do purchase power utilities and point to the green investment in other deals; attractive place for people to invest in renewables
• Menendez – You didn’t get to decide where power was going to be cut in your service area?
  • No, we did not
• Menendez – How do customers get on the critical infrastructure list?
  • Transmission & distribution owners have this list, we work with them to make sure customers are on that list
• Hancock – Transmission & distribution is the first group up tomorrow
• Menendez – You said we could lower the cap, what’s the normal price per megawatt?
  • Somewhere around 30-35 dollars per megawatt hour; this is why I don’t think products like Griddy should be accessible by consumer, risk is so high
• Menendez – Seems almost unconscionable to allow someone to participate
  • We wouldn’t do it, try to insulate our customers
• Menendez – It appears you agree the market is not working very well
  • Correct, pains me to say this as I was part of the group that worked on competitive markets, but I’m concerned that the market structure is not compatible with the assets in the system
• Menendez – I think there’s a balance we’re looking for, we want reliable energy, but also want clean air, clean water; will need help coming up with a market, WSJ reported prices in TX have gone up since deregulation
  • There are significant flaws in the WSJ report
• Hancock – Would you agree it’s not accurate information
  • Yes, TX prices are in the lowest quartile; WSJ is taking average pricing when plan cost varies widely and the higher cost plans tend to have extra services attached
• Menendez – Would be interested in getting written material on where you think the mistakes were
• Hancock – What are your emissions with the nuclear plant?
  • Zero
• Hancock – How did it perform last week?
  • Flawlessly, running at full capacity of 2.3k megawatts
• Schwertner – Whole picture is lack of knowledge of interdependence of energy resources; ERCOT said that no plants went off due to frequency dipping too low, points to specific mismanagement at ERCOT
  • No doubt that frequency got so low that we were close to the grid going offline
  • Very technical point to say no plants went off due to low frequency; volatile frequencies can cause plant shut downs, had two plants that shut down due to this
• Schwertner – Do you store gas on site for any period?
  • Not common, we do not; very rare instances like plants built next to L&G facilities
  • Do have storage in fields close by that is piped over
  • There were Force Majeures declared on deliverability by the pipelines and forced us to buy gas on the market
• Schwertner – Are there any concerns this was deliberate?
  • No evidence that this happened, don’t believe this is what happened, I think the system was stressed; demand for gas was very high due to temperatures, residential use was very high
  • Regulation of electric market is still very extensive, price manipulation is extensively investigable, also have an independent market monitor;
  • Big difference between electric regulation and regulation we have on gas, RRC doesn’t have authority on pricing and fair to ask who does
  • Unfair to regulate these two industries so distinctly when they are so interrelated, needs to be a governmental authority that understands these industries
• Schwertner – Maybe we need an umbrella energy agency
• Whitmire – Asks after awareness & accountability
  • If we see something, we need to say something; legislature and state leadership needs to be able to trust that system of authority will come to you and notify; not sure that this happened
• Whitmire – Are you working with other grids? How does ERCOT compare?
  • PJM is similar to ERCOT, but its multi-state; PJM typically notifies the states and has a liaison group that notifies state officials
• Whitmire – In dealing with other entities, is the governance structure of ERCOT regular? 16 board members?
  • 16 seems like too many
• Whitmire – Were any sources of energy dependable at the height of the storm?
  • I think gas generation in TX performed very well, just didn’t get enough gas
• Whitmire – What about the source?
  • We had issues across the entire energy value chain, from the wellhead to curtailment
  • If we want a reliable energy system, can’t have freezes of wellheads
• Whitmire – Do you have to decide cheap versus reliable, or is there a middle ground?
  • There’s a middle ground
• Hancock – You are much closer to your customers than any agency, is it feasible to have a winter weather alert going out through providers?
  • Yes, we have contacts to all customers, we were sending people winter weather alerts
  • Concern is that you wouldn’t want us to inform people of rolling blackouts
• Hancock – It’s a combination, we put out the notice and you send that out making it a bit more noticeable?
  • We could do that
• Hancock – If it is a state issued warning do you think it would be paid attention to?
  • Yes, I think that’s important
• Paxton – When did you sound the alarm to ERCOT?
  • On Feb 10, but the financial markets had already picked up on this
• Paxton – Seems like ERCOT was the last to know or the last to acknowledge, how do you explain the lack of urgency?
  • I think ERCOT thought they could handle this & what they didn’t account for was the gas system also went down
  • There were some signals, but I think they thought if everything played out as it normally does then they could perform as needed
• Paxton – Being prepared means being prepared for the worst case
• Paxton – Emergency notices don’t tell consumers how serious the event is and what steps need to be taken, do you think something that does this would be useful?
  • I don’t think you can communicate enough when you’ve got something putting lives at risk
  • Was pretty certain to us that we would have rolling blackouts which is a pretty big deal, unsure why the red flags weren’t out
  • We do these kind of notices with hurricanes, it just didn’t happen
• Paxton – Even the conservation message didn’t have people taking this seriously enough, doesn’t communicate urgency
• Johnson – Was there a difference in Vistra’s load share before and during the storm?
  • Ended up with a higher share of load, had large industrial users in the Houston area who were curtailing on their own
  • Each of the transmission & distribution owners were told to batten down the hatches
  • Ended up with more customers with power
• Johnson – Was this due to generation systems?
  • That is what we’re trying to figure out
• Johnson – Is there something that we can do to allow you to have greater supply of reserves?
  • Great question, there could be a fuel security product that allows dual fuel; were able to get diesel for some units
  • TCEQ also relaxed emission levels
• Johnson – Good point, in an emergency we do have the power to suspend certain rules and regulations
• Johnson – Did Vistra make a killing?
  • We’re announcing earning at 7am, I’m going to be surprised to see if generators made a lot of money
• Johnson – Where is the $45 billion delta?
  • I think we’re going to see that when settlements are coming out, certain gas trading companies probably did, Macquarie announced a $200 million profit
  • Number of gas companies will likely have big numbers when they release their Q1s
• Menendez – Price went from $35/megawatt hour but the cap went to $9k, how would you not make money?
  • We were prepared going in, we were either flat or had excess generation; when we curtailed on Monday we had less generation because we couldn’t get gas, essentially went short
  • Instead of having excess power to sell at $9k, we had to purchase power at $9k and had already committed to sell at $35
  • As a result, we tried to get every megawatt on the grid; force majeure also meant our stored gas wasn’t delivered to us
  • This wasn’t a calculated risk, another issue when the system breaks down
• Menendez – The market design also hurt you?
  • It did, but if the gas system worked we would’ve been okay
• Menendez and Morgan discuss emergency response and industrial users curtailing on their own
• Menendez – Would like to see an expansion of emergency response to reduce use during disasters like this
• Perry – Back to the computer algorithm, was any of your generation idle that wasn’t weather related?
  • No, had a unit in a long-term failure that happened before
• Perry – Did everything on the grid work?
  • Had some issues with coal freezing, but everything else was able to run
• Perry – You’re not going to get paid on the retail side, if you don’t get paid what does it look like to you?
  • This is the big unknown, whether the system is going to work; still unknown how many generators will declare bankruptcy
• Perry – Highly likely a large part of generation companies will not survive, this is the $45 billion delta
• Perry discusses the 11% dividends increase over prior year, from a PR perspective its bad timing
• Perry – Based on what was said today it sounds like Vistra acted well
  • We declared the 11% back in September of 2020 and the board approved later
  • Vistra produced more than its market share this period
• Eckhardt – Looking forward to hearing ideas on market design and mitigate issues; how could energy storage change this?
  • Batteries would’ve helped us for about 4 hours on Monday and then not have helped us
  • Batteries don’t produce and it doesn’t make sense to charge at $9k
  • Batteries will be a game changer in the market generally, the problem is that the most economic batteries can only discharge for 4 hours
  • Nowhere near allowing solar to bridge from sundown to sun up
• Hancock – Would also guess in Summer peaks
  • Yes, that’s really the use right now; allows us to instant start units rather than waiting for gas to come online as well
• Eckhardt – Looking at new market design, would you also consider additional connections to other grid to improve dispatchable access?
  • Could be explored, there are FERC jurisdictional issues; policy issue, but doesn’t hurt to have import/export capability
• Eckhardt – Vistra has announced Vistra Zero with plans to develop 1k renewable megawatts? Is Vistra coal to accelerate clean energy?
  • We are retiring coal plants, some of it is due to climate change, but mostly its not economically feasible to operate the older coal plants
  • I think we’re going to see even more stringent emissions guidelines
• Hancock – Is reliability better or worse with retirement of the coal plants?
  • Concerned about level of dispatchable resources
  • Pipeline issues shook me as well, coal doesn’t have these issues
• Hall – Is your cost of generation linear?
  • There is an inefficiency at lower generation levels
• Hall – What is the incentive to you that the $9k cap brings? What would cause you to not want to put it on the grid
  • Absolutely nothing would keep us from putting power on grid at $9k
  • PUC enforcement prevents entities from withholding power, fi you can make money above cost then you are operating
• Hancock – Asks for clarification on provider of last result
  • We will bring customers over with open arms and put them on plans based on usage
• Hancock – Before the storm was over, who contacted you about these customers?
  • PUC did
• Hancock – She knew then that based on price we’d have number of entities who did not survive
  • Yes, Chair Walker was concerned

Mauricio Gutierrez, NRG

• Provides overview of NRG operations, diverse energy profile, committed to getting customers back on their feet
• Do not offer any wholesale price related products, customers will not see bills based on these rates
• Highlights weather review and winterization programs annually, preparations are submitted to ERCOT and PUC by Nov 30, ERCOT audits & no adverse findings this year
• Asked all retail companies to send weather alerts
• Took additional steps to prep generation fleet, all units where on high alert and available to the market; brought resources in to continue operating
• Also bought supplemental generation and gas on the market
• Portfolio performed at 80% capacity, produced twice the amount of energy over early February
• Despite this, did not perform as we had hoped; still in process of root cause analysis
• Working with neighbors around the state, committee to working with legislature and officials to figuring out what went wrong
• Hancock – Did you have to buy power?
  • Yes, had several units go down, had to buy power at $9k to balance retail obligation and generation, but were pretty well balanced throughout this time
• Hancock – Is that incentive enough to cause you to winterize those plants to make sure this doesn’t happen again?
  • Yes, costly to business if it hits $9k
  • Also an incentive to reduce load for commercial and industrial customers
• Hancock – Impact to residential will be what?
  • Zero, we do not have index products
• Hancock – Index products concern me, same way municipal involvement concerns me; if we’ve learned anything its that you need expertise to be in this business
  • Residential customers should not be in real time markets, we need to be a buffer
• Menendez – Your company brought back 2k megawatts typically reserved for summer?
  • Yes
• Menendez – Regarding emergency response, would you be opposed to state expanding this?
  • Demand response is critical to achieving reliability, we have a voluntary program for commercial and industrial, as well as one for residential; smart thermostats and similar devices can effectuate demand shifts
• Menendez – Did you experience gas pressure issues?
  • We had that problem in one unit, but not generally
• Menendez – Did frequency trip some of your plants?
  • The plants didn’t trip offline because of the frequency relay itself, but when frequency moves from 60 hz, to 59.3 hz in seconds and minutes, you’re asking plants to generate more or decrease electricity; not shutting these units down could take plants offline for months
• Menendez – Look forward to working with you on the market; heard earlier that we could potentially lower cap with more reliable generation, would you agree?
  • I think we have the opportunity to look at the market, important to do a proper root cause analysis
  • Big issue is lack of reserve margin target specificity, could be a clear tool
• Menendez – To me it seems logical that we would do a better job to segment power reductions more efficiently rather than use residential users
  • ERCOT is responsible for balancing the system, there is a much better opportunity to balance power reductions between generators and retailers
  • We were not aware of when power outages were occurring
  • Opportunity for greater communication to be able to tell households about outages and protocols to restore power
• Menendez – Would ask you to provide ways ERCOT could communicate better with TDUs

Thad Hill, Calpine

• What happened last week was unacceptable, we had responsibility for part of this too
• Provides overview of what happened to generation fleet, Calpine is the largest natural gas generator in the US
• Have committed that residential customers that rates will remain stable, Calpine doesn’t sell index products
• Load was 77 megawatts, higher than in August; 11 degrees colder than the freeze of 2011
• Calpine’s major issues were grid disturbances, gas availability, and winterization; Calpine had voltage and frequency irregularities that tripped two plants offline
• Also had issues where gas plant lost power in the Corpus Christi area
• Event had a lot to do with conditions getting so bad, so quickly
• Had a pipeline issue with the Guadalupe plant
• Force majeure claims led to 40% of gas supply being cut
• 2 of 12 gas plants had freezing issues, investigating the cause
• Lost almost 2k megawatts at the beginning, Monday froze the 2 additional gas plants, as units were being returned to service then gas supply became unstable
• Whitmire – Where do we go from here?
  • Looking into what happened at the plants, need to have better data to be able to have more specifics; hoping in the next 2 weeks to have a better answer
  • 4 things: winterization needs to be structured with oversight, need to look at gas and power coordination, need to think broadly about communication with customers and public, and should look at market construct overall
• Hancock – Separation between gas and power is a key issue, need to look at this and connect agencies
  • This was an issue in 2011 as well, though not nearly this size
  • There was an effort to identify critical gas infrastructure, but a lot of new critical infrastructure has been constructed; need to institutionalize this

Katie Coleman, Texas Industrial Energy Consumers (TIEC)

• Testifying for TIEC and Texas Association of Manufacturers
• Members actively participate in the market, respond to price signals, and put power back into the system when needed, many manufacturers also have on site generation
• Many members stepped up to help grid integrity and provide power to the grid
• Members who liquify and transport natural gas took some of the production offline to add gas to the state system
• Members shutting down is a significant effort and cost
• One of the things members care most about is a reliable, affordable power supply
• Still not enough information to determine exactly what happened, anticipating a more comprehensive breakdown from ERCOT
• Was not a shortage of power plants, meet high demand regularly; problem was generator availability due to weather, supply chain, and resource failures
• Before we build new plants, we need to fix issues with plants now; no reason to expect more gas plants would have had more access to gas than we had last week
• Coordination can go a long way, magnitude of event exposed communication gaps between market sectors
• Schwertner – You didn’t indicate if you were in favor of market redesign or not? Manufacturers typically are the biggest supporters of the current structure
  • I don’t think that’s a fair characterization, we do like the ability of the market for supply to meet usage
  • Current market design provides a lot of flexibility for large customers to decide risk tolerance they’re comfortable with; though has become clear that this is maybe not suitable for residentials
  • Adding reserves, making pricing higher or lower, etc. didn’t solve issues; you don’t get more thermal generation, just more3 cheap wind and solar
  • Making all generation perform on equal footing is the only thing that will change investment in Texas
• Schwertner – My understanding is the 77 megawatts load is the highest than history
  • Had not heard 77k, had heard 74k
  • Have served 74,800 without getting into reliability reserves, confident that if generation fleet had been available we would’ve weathered better
• Hancock – Asks about market volatility
  • A lot of the volatility is due to renewables, not subject to the same consequences for lack of fuel as traditional generation; won’t get a different outcome until this is addressed
  • Don’t get to pick what your resources are in a capacity market, we will throw more resources into the market and get more wind & solar; have seen this in the NE
• Hancock – Asks about generation and transmission
  • Costs shifted to consumers for transmission was meant to incentivize investment, but there are issues with this
  • It’s good policy to pay generators to interconnect, but should be some limits instead of a blank check
  • Risk shifting proposal, thinks some generators should site locations better without needing to shift higher costs to the consumers
• Menendez – Do we have penalties in statute for generation?
  • Not in a regulatory since, but if a generator commits to sell power at $40 per megawatt hour, would need to potentially buy this generation at higher prices
• Menendez – Do we have some similar means with gas suppliers?
  • No, does not exist
• Menendez – Possibly need to differentiate marketplace between commercial, industrial, and residential and look at how these people enter the market
  • I think this is right, kind of like how it works today; my members are severed largely by a different set of retail providers
  • Residential mostly sees fixed-price products, but we’ve learned there may need to be additional safeguards
• Menendez – One of the big issues last week was the supply of gas, would it make sense to you to have a more unified regulatory agency that has power over electricity and O&G?
  • In theory I can see why this has merit, in practice electric regulation is extensive and requires a lot of resources
  • PUC is already somewhat taxed due to water regulation, has limited ability to devote resources to electric side
• Menendez – wouldn’t the last week show us PUC is not taking care of its job appropriately?
  • There were communication issues and shortcomings across the board, wouldn’t say PUC or ERCOT individually is at fault
• Paxton – What are the communication gaps and how do we remedy those?
  • Previous approach required new participants to fill out paperwork and submit to the PUC themselves, this approach does not work
  • Need more communication over field tripping, had instances where fields were brought back online and then immediately tripped again
  • Also had issues with more exotic materials availability
• Hancock – Nitrogen is a very important material
  • Learned a lot about the importance of nitrogen last week, important to preservation of petrochemicals