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The Senate Business and Commerce Committee met on February 26, 2021 to examine extreme weather condition preparedness and circumstances that led to the power outages during severe weather last week. Continuing from testimony given yesterday, the Committee heard from utilities, transmission companies, resources firms, and other industry stakeholders.

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.

Panel 3

Allen Nye, Oncor

  • Understands outrage and anger, apologize for whatever role Oncor played in the event
  • Every action taken by Oncor was to prevent more damage, prevent the complete collapse of the ERCOT grid
  • Prepped ahead of time with storm center, load shed list, requesting extra assistance from partners, etc.
  • Thought we were ready, got notifications we were moving to EEA 1, 2, 3 early Monday morning; intention was to roll people off and on, requests to shed load escalated
  • Monday morning Oncor hit 59.302 Hz, relays trip at 59.3 Hz
  • Later in the morning 34k megawatts were inoperable, shed was 5x worse for Oncor than in 2011
  • Actions of Oncor were done considering the low frequency event on Monday, were within .002 of tripping defense systems
  • Oncor does not charge a variable rate, charges a fixed rate with kilowatt hours charge; will not see a sharp uptrend on Oncor bills
  • Hancock – ERCOT seemed to not be as concerned as others; what was Oncor’s pre-event level of concern?
    •  Looked at it as possible a significant ice event, major concern Sunday night was how we were going to get people back online with ice on wires
  • Hancock – Explain load shedding more
    • In events like this you either need to get generation to increase, or take demand down; TDUs have plans to take customers offline so that the supply curve never crosses demand curve
    • ERCOT orders a shed of a particular amount, then wires companies divide
  • Hancock – How many feeders do you have? Asks about structure
    • 3,660 feeders, have transmission facilities and low voltage connections; 25% of load must be on low frequency relays which will take certain feeders offline to preserve the system
    • Because these relay feeders must always be online, they cannot be shed; residents seeing others with power on constantly could be low frequency relays or critical infrastructure feeders
    • So feeders that can shed load are about 51% of total and must bear burden of shed
    • Found out that he lived on a relay feeder, asked that he be taken off
  • Whitmire – As an elected official I want to be the last one to have my power restored
  • Hancock – Would suggests people identify neighbors living near hospitals, etc. for support
  • Whitmire – Should work on communication, public is not aware of these kinds of issues
  • Whitmire – Grouping together in houses with power or heat were also COVID spreaders
    • Was overwhelmed with communication about these types of questions; we should have made sure that we explained why some people were on and some were off, as well as options
    • Fully intended to roll people on and off, got to a point where we were worried about touching the system and breaking what was running, had to freeze where we were
    • Wish we would’ve done a better job of notifying people that we were no longer doing rolling blackouts
  • Nichols – I’m assuming gas producers feeding plants would be a priority?
    • Yes, can address this issue
    • After 2011, state and stakeholders tried to ensure critical gas was on the list; kept the 35 identified gas producers online
    • During the event became clear that important facilities hadn’t made it onto the list and that other facilities became critical as some froze; added 168 new facilities
  • Nichols – Trying to understand who is responsible for the list; ERCOT, PUC, transmission?
    • Combination; can’t see in real time where gas is going, need to be informed by generators and producers what is critical
  • Nichols – Should not need legislative action to make this happen, coordinating officials at ERCOT and PUC should be pulling you together; how do we do this?
    • Someone with some authority at ERCOT, combined RRC & PUC, needs to instruct us to get together and figure this out
  • Hancock – A little on us to specifically assign this task rather than agencies figuring this out; agencies like to work in silos and they don’t like us telling them what to do
  • Campbell – How do you determine who is cut when you load shed?
    • When looking at load shed, look for residential feeders that have more houses on it
    • Have struggled with shutting off power one by one because it
  • Campbell – Is there a cost to be more specific on who gets cut off?
    • That is correct, need to reevaluate look at who we roll and when
  • Campbell – The onus of that would not be on us, that would be on you?
    • Correct
  • Menendez – One area of frustration was the miscommunication/lack of communication concerning the rolling brown outs; asking distributors if they could provide their protocols on what they are supposed to do when they do rolling blackouts
    • Have that information, will provide it
  • Menendez – Are concerns other neighborhoods had blackouts longer than others; need to be better prepared to ensure fragile constituents do not have their power turned off
  • Menendez – Oncor operates in Texas? Wonders if there is an agency model that has both gas and electric so we can handle things better?
    • Only in Texas
    • Believes there are some other states where they are combined
  • Paxton – How close did we come to a blackout
    • At 2:02 am Monday 59.32 Hz, it trips at 59.3
  • Paxton – Is that specifically your company?
    • All are required by ERCOT to have 25% reserve for underfrequency relays; therefore, they trip at that frequency
  • Paxton – Notes McKenny pumping station, traffic lights, etc. went out; how often is the load shedding list reviewed?
    • Annually
  • Paxton – How often is the load shedding list reviewed?
    • Annually
  • Paxton – In districts like mine, might it be worth reviewing this more frequently?
    • Yes, in areas with a lot of growth, so much changes frequently
  • Paxton – What about households with medically fragile individuals, what’s the answer to that?
    • Difficult question, we have a critical customer list for these individuals, difficulty is that out of 3,660 feeders, 2,405 have critical customers
  • Paxton – Would definitely want some sort of generator or some sort of backup; how do they get on the list?
    • Info through providers
  • Paxton – Was your load shed proportional to other providers in the state?
    • Based purely on load ratio share, Oncor has the most feeder so it had the most to do
  • Paxton – Even with communication, power made it difficult to access sources of communications; text alerts might have been workable for most people; do you think we can give people timelines info?
    • Completely understand, estimated restoration is one of most common requests; in normal times have an interactive map, but last week situation was so dire that we had no idea when or if generation was going to return
    • Generation was spotty; Oncor equipment was working, but just waiting for generation
    • We were getting as accurate info as anyone could possibly give us, but the situation changed so rapidly
  • Paxton – This highlights the direness of the situation, appreciates work done to keep us from disaster
    • Fully committed to helping and learning from this situation
  • Hancock – Watched load on the ERCOT system, very intermittent & difficult to guess
  • Johnson – There was a disproportionate burden borne by people, who reviews load shed lists?
    • Oncor reviews them on the operations side
  • Johnson – Would it make sense to have an external agency review?
    • Perfectly happy to have this
  • Johnson – Is there discussion among TDUs about best load shed protocols
    • Yes, talk all the time about how we load shed
  • Johnson – There was a disparity in North Texas, Dallas County had less power restored than Tarrant, Tarrant has less population
    • We do not differentiate customers, way you work outages is going where you can do the most good; get as many on as possible the quickest
    • Damage in Dallas was with equipment that was not meant to rapidly shift on and off
  • Johnson – Is there a risk associated with that?
    • You try to do what you can do, replaced significant number of transformers due to cold load pick up issues
    • When we flipped the switch these systems would come on and then flip off immediately; needed to sectionalize
  • Johnson – Did you train your employees in the emergency scenario last week?
    • Yes, done with ERCOT, done twice a year
  • Johnson – It was not a scramble?
    • No, was a lot to do, but was highly organized
  • Johnson – Did underfrequency relays trip?
    • Yes, had several trip at 59.302
  • Johnson – Why would that happen if they are designed to trip at 59.3?
    • Would have to look at that feeder at that exact second
  • Johnson – Is it possible that the feeder system could be updated, perhaps further fragmented for more precise control over outages?
    • I believe it could
  • Johnson – Would this enhance your ability to protect us from 59.3?
    • Issue with 59.3 is when supply & demand come close together; could discuss impact with operations
  • Johnson – Talking about equity in bearing the pain and preventing system from plunging into long catastrophic blackout
  • Johnson – Is biggest protection bigger dispatchable capacity?
    • Correct
  • Johnson – And if you had more capacity, you would have had more capability; you don’t care where the power comes from?
    • Just needed electrons, regardless of the source
  • Johnson – Coastal wind is more reliable, yet we have insufficient capability to carry the generation of wind that we produce; do TDUs construct the transmission lines?
    • We don’t serve the coastal area of the state, generators generally locate near transmission
  • Johnson – Market decision?
    • Is between us and the generator, oftentimes will need to get a CCN
  • West – Concerning being fair and equitable, how did you make decisions?
    • Was very concerned with equity when this began, will keep digging into equity numbers and report what I found
    • Over Feb 15-17, Oncor footprint load shed north of I-30 is 51%, south of I-30 is 50%; we go where the need is and greatest benefit is
    • Data can be broken down to make an argument, but numbers don’t show bias
  • West – So you’re saying Oncor behaved fairly & equitable towards its customers?
    • Everything I’ve seen says we have
  • Johnson – When did you start looking at load shed?
    • During the storm
  • Johnson – Does Oncor make more money when electricity price goes up?
    • No, impact on charges to customers is based on what customers use
  • Hancock – You are a fully regulated industry, everything you do has to get approval
    • Yes

Kenneth Mercado, CenterPoint

  • Will do our best to improve and make sure this doesn’t happen again
  • Before event, were treating this like a hurricane and prepping resources
  • Prepping for 1,875 megawatts load shed, felt confident that we could manage that risk; due to unexpected volume, load shed program ran out of space to rotate outages
  • 59.302 Hz was a new event, very scary and intense time; likely within 3 or 4 minutes of state going dark; went to man substations and asked industrial customers to conserve load
  • Industrial load went from 3k megawatts to 1k megawatts, conservation made big impact
  • Realized this would be a long outage and lost ability to rotate outages, team built a manual process to roll these around; eventually able to get 4 hour rotations on Tuesday
  • Started to see generation come back online Wednesday, almost back to 3.5k megawatts at the end of Wednesday and then worked to restore on Thursday and Friday
  • Started sending crews to Dallas and Austin to help out in other areas of the state
  • Going to improve feeder organization and structure
  • Had a communications person in place, will keep legislature informed; needed to do better to communicate about the frequency
  • Hancock – Workers on the ground are crucial to the state having power now
    • Crews are trained to do everything
  • Hancock – Do you have a listing of industrials willing to shed load and amounts?
    • Can get that for you
  • Hancock – Would be helpful across the board, piece of the statewide alert conversation
  • Hancock – Would it have been beneficial to negotiate with industrial customers on load shed?
    • Absolutely, industrial transmission load was significant and meant we did not have to shed that load for residentials
    • Helpful if you can accelerate this; also worked with them to bring them back on
  • Whitmire – Through social media and elected officials, I think CenterPoint did a very good job on communication; will need your input as changes are made at the state level
  • Johnson – Have heard CenterPoint cut more load than ERCOT asked for; does this put a burden on other TDUs?
    • Load share is published; need to have a winter and summer load share, did what we could but having only one caused more challenges
  • Johnson – You mentioned you needed to communicate better about frequency?
    • Wish we had explained rolling outages better
  • Johnson – Were some customers more responsive than other in prep for the storm?
    • Don’t have the breakdown, but can provide you info; message in the early stages it was just what could be given, but come Sunday night it was everything possible
  • Johnson – We all depend on TDUs to push industrial power conservation
  • Creighton – Asks after transmission issues in Galveston
    • Guessing it was a galloping situation down there where ice builds on the wires and cause them to cross over; will be addressing this in the future
  • Creighton – Is there anything else that contributed to Galveston not coming back online?
    • Guessing it was the outages, had situations where equipment failed
  • Creighton – Can you check into timelines and transmission usage?
    • Will come and meet with you
  • Menendez – Asks about people gas service being shut down
    • We are a fully regulated gas service entity, >99% of customers did not have gas interruptions
    • We have firm agreements for gas, but only for what is typical
  • Menendez – Storm should not be an economic windfall for anyone, no one should be bragging
  • Menendez – Heard yesterday that gas access was a problem with generation
    • When there was an issue and they communicated, we were 100% there
  • Menendez – Do you think you would benefit from a single regulatory agency to manage both electric and gas
    • Gas and electric do not communicate, in a crisis this is a problem
  • Menendez – Efficiencies and how we communicate are a matter of life and death

Phil Wilson, LCRA

  • Very empathetic to all that happened to Texans last week
  • Provides an overview of LCRA operations and structure, wholesale power provider with no retail customers; LCRA regularly inspects transmission lines and keeps protocols to prevent failures
  • Regarding load shed, LCRA must bear its share of percentage on behalf of distribution customers
  • Hancock – Asks about timelines and planning
    • We keep a CDR reserve margin, don’t care about source of power that leads into this
  • Hancock – Asks further after renewables
    • Wind & solar are dependable during certain times, can count on these sources when things are tight sometimes; need to have a conversation about reserve
    • ERCOT is the entity timing load shed, needs to be a conversation about how this was done and timelines; questions exist over whether we could’ve managed frequency better, possible we could balanced more and not have gotten this low so quickly
  • Hancock – Frequency went back up and dropped again, lost 2k megawatts before ERCOT made another change and drop sped up; wonders if we could’ve done this differently
    • Regarding intermittent, wind is awesome, but had thousands of megawatts less than expected, creates tension in reserve market
  • Hancock – The amount of renewables we count currently on reserve?
    • Probably 13k-14k, 5,500 megawatts short on the worst day
  • Menendez – Asks after length of time transmission was down for customers
    • No one was off for more than 4 hours
  • Menendez – Who is going to get caught holding the bag on the $9k cap price?
    • We use our physical plants to offset what takes place in the market, our customers will likely see very little losses
    • Variable pricing plans and those who did not have enough generation and had to buy it are the groups who will have the most challenges
  • Menendez – Did you have any issues with a coal plant?
    • Had limited problems, had an issue where coal froze on a train
  • Menendez – I don’t think ERCOT planned for the wind & solar generation that failed; a lot of wind generation happens in cold areas
    • My bigger issue is the reserve margin conversation and inability to plan for it to be there
  • Hancock – Discusses how some electric coops are upside down due to need to buy power, doesn’t cost wind & solar anything; do you know where LCRA is at financially?
    • Haven’t been paid for 3 days by ERCOT
  • Hancock – This is why the Governor saw some urgency in this
    • Hoping to have a check this afternoon
    • We lost money for operations, the question is if we lost money in a way that can be managed; goal is to be relatively unscathed by the end of the year
    • Would be surprised in most generators didn’t see some of this
  • Hancock – Do you have an idea of gas produced versus consumed?
    • Had to go to the spot market, market gave us a price signal Thursday or Friday the week before
  • Hancock – Market closure on Monday had a very large impact
    • Huge, everything together contributed to scale of the problem
  • Menendez – Generators said that $9k cap created a feast or famine scenario
    • Ways to look at this working with this body and PUC to see if there is a market incentive along with reserves
  • Hancock – Asks about gas pressure and generation
    • You don’t lose a unit, you lose a percentage of what you’re able to do
  • Campbell – You were counting on a certain number of megawatts that didn’t come in from renewables; why didn’t some windmills work?
    • You’d have to ask them that, had a lot of weather complexity like everyone else
    • Whether it’s thermal or renewables, you need the power to be there
  • Hancock – To clarify, our reserve is at 10% now?
    • Roughly, always used 12.5% as a target
    • Should be careful about counting certain sources in the reserves if you really don’t know they’ll be active
  • Hancock – Because of the seasonality of wind and sun, there is a disparity there
    • Like a discount rate, my concern is knowing worst case reserve
  • Hancock – Better prepared if we estimate reserve on worst case
  • Johnson – Renewables are not as reliable as thermal, problematic in calculating margins; thermal has issues like needing to utilize spot market?
    • Gas prices drive power prices, real time market is happening instantaneously; there is a penalty associated with being megawatts short
    • Associated with needing a certain amount of power and not having this to deliver
  • Johnson – When it enters the market, you get penalties for thermal bids, but not on wind bids?
    • Yes
  • Johnson – Many generators have a diversified portfolio, aren’t the economic disparities something you build into your business model? If each generator can avail themselves of the advantage of wind, then each generator wants to invest more in wind; is this the problem with the incentive?
    • Yes, with the understanding that you’re risking your baseload position; doesn’t necessarily wash out because you’re still worried about resiliency
    • Some propose peak type system with extra backstop
  • Johnson – What about a peaker system
    • I think a peaker system is needed
  • Johnson – So that we don’t take down wind energy that is here that we rely upon
  • West – How long can you go with nonpayment from ERCOT
    • We’re solid because of our resources, but would like to get paid
  • Hancock – What about your customers?
    • From what I’ve heard, they’re doing fine
  • Hancock – Do you owe anything in the market?
    • Did this week, believes it will balance itself out; but we need to get paid
  • Hancock – Market does have to settle
  • Eckhardt – We agree that renewables can’t be peakers, correct?
    • Correct
  • Eckhardt – Peakers need to be reliable, what cause unreliability of peakers in this event?
    • Multiple reasons for that; spoke about frequency issues, critical gas facilities unidentified, plants brought down cannot easily be brought back up
  • Eckhardt – Peakers were not reliable in this event because of cold, dearth of critical gas, and slow restoration?
    • We had peakers that were reliable, questions on frequency in if things were taken offline too quickly and when the freeze happened; did this happen too quickly
  • Eckhardt – The peakers that were not reliable because of cold weather, lack of natural gas, and inability to come back on quickly
    • Need to look at cause, these might have gone down too quickly causing other issues and could’ve had a cascade effect; was it these issues, or did something cause those issues
  • Eckhardt – Isn’t this an inherent problem with energy only market?
    • I think the energy only market has worked very well, more of a technical issue along with conversation on reliable peaker backstop
  • Eckhardt – Do you have other suggestion to adjust market?
    • Conversation to be had on short-term batteries with transmission for stability
  • Hancock – How do the peaker plants operate?
    • They get a signal, turn on fast, and start instantly generating; expensive so respond to price and demand
  • Hancock – Peakers wait until price is very high
    • Expensive to operate and buy
  • Hancock – So we can continue the pace of renewable and offset with peakers, but question is do we want to continue huge swings or do what is reliable
    • Yes, it’s similar to a reserve conversation, how much do you want to pay for assurance

Jackie Sargent, Austin Energy

  • Shares frustration about what happened last week
  • Overall generation performed well, helped protect grid; customer rates should not be impacted as a result
  • For Austin, issues began with ice storm on Feb 11, worked hard to keep power on while following ERCOT directives to shed load, load shed requirements were far in excess of 2011
  • Couldn’t rotate customer outages due to risk to critical facilities
  • Eckhardt – Austin Energy had more generation available than ERCOT was allowing, correct?
    • Met demands of customers and provided more support to statewide grid
  • Eckhardt – Asks about critical load
    • Critical load is spread across the system, 410 feeders on system with 190 designated for critical load
    • Also have downtown network feeding Capitol Complex, hospitals, communications, etc. not set up for load shed; would’ve needed workers in manholes and risking there lives to shed load
  • Schwertner – One of the concerns was maintenance in Austin; ordinances in Austin also prevented some utility work, some of the inability to shed load was due to lack of adequate infrastructure
    • Infrastructure was available and functioning, previous ice storm impacted infrastructure and customers
    • Have a vegetation management program to address issues where lines and trees could crossover
  • Schwertner – Municipal utilities have a different structure, do you have to meet the same standards as retail?
    • We are regulated in similar ways regarding bulk transmission and infrastructure
  • Schwertner – There are customers in your service region that were out continuously for 5 days and don’t understand why; you would think there is some design that would allow rolling
    • I regret they were not powered during this time, worked with our team and monitored the situation
    • Were hit with ice on multiple occasions that iced up infrastructure and strained lines; circuits were out of service due to damage, meaning no protective devices were operating, were unable to identify specific line issues until they were brought back
  • Schwertner – With municipal utilities, there is some variability in amount of money put into infrastructure and training, etc., which I believe has led to longer outages under Austin Energy
  • Campbell – Do you feel like your micromanaged by city council?
    • No
  • Campbell – You operate independently, but they have oversight?
    • For day to day operations, the impact they have is approving our budget
  • Johnson – Austin was one of the areas that was out longer, Austin was hit harder with ice and damage to infrastructure?
    • Yes, definitely an impact on our system
    • System we have requiring a utility to force customers to be without power is unacceptable, need to look at this
    • We also experienced cold load pickup
  • Nichols – Austin Energy signed a contract with Southern Company to build a biomass plant under a take or pay, for a number of years you didn’t take power; Southern Company was required to keep it ready in case there was need, after your purchase did you mothball it, did you use it?
    • That agreement consisted of a capacity payment on a monthly basis, as the payments for this system escalated it got more expensive
    • Southern Company put it on the market, Austin Energy bought the plant; as we took ownership we’ve been looking at minimizing cost
    • Facility does provide energy and capacity more easily during Summer months, challenging to fuel in off season
    • In preparing for this event we looked at getting this plant online
  • Nichols – So it was appropriate more for Summer peak
  • Schwertner – Austin was really hit harder because the city council doesn’t let you do your jobs; really an issue of micromanagement; many lost power Feb 12
    • Trees coming in contact with power lines did happen, but ice also impacted the infrastructure itself; we restored those who lost power the week before prior to the large emergency
  • Menendez – ERCOT requests to shed load were so great that it prevented you from rolling power?
    • First we had the ice storm that we responded, then ERCOT called the load shed and we had to do so quickly
    • Had to reduce so much load so quickly that we didn’t have space to take someone off and put someone back on
  • Menendez – Do you have EDR set up with industrial and commercial clients?
    • Have some of that, reached out to these customers; also have energy efficiency outreach with other customers, this was challenging
  • Menendez discusses need to reach out to industrial and commercial users and stress need to support individual rate payer

Panel 4

Tom Hancock, Garland Power & Light

  • Provides overview of GP&L operations and measures taken after the 2011; some wind & solar facilities experienced icing that reduced output
  • Cost of gas to produce power was significantly higher than usual, up to $1,100; ancillary services cost were equal to 28 years of typical costs
  • Experienced difficulty with rotating outages did to significant amount of load shed requested
  • Schwertner – Were you hedged?
    • No, had available resources to meet load demand, but we were buying spot gas
  • Schwertner – So you had enough to meet demand?
    • Yes
  • Schwertner – Some cities have purchase power agreements that are solar & wind based, but these were not running and had to purchase power; you weren’t like this?
    • No, we were not
  • Schwertner – You weren’t able to rotate?
    • No, had people without power for 3 days, but due to load shed
  • Schwertner – Does your governing body prevent you from clearing tree lines, powerlines?
    • No
  • Johnson – Who charges you for ancillary services?
    • All services in ERCOT must provide and typically base don load share; not a liquid market so difficult to know what is needed year to year, difficult to hedge these forward
  • Johnson – Was the decision to weatherize a directive from city council or a utility decision?
    • Utility made this decision with support from the council
  • Johnson – Think you may have saved money over the last week due to the investment?
    • No doubt
  • Johnson – Have you had chances for public input
    • Yes, held a council meeting, made commitment to customers to improve
  • Paxton – What are your recommendations on public communication?
    • Customers don’t like silence, frequently communicating what you do know is important
    • Will likely bring in external help to look at communication process, will review
  • Nichols – What recommendations do you have for the legislature?
    • Diversification is important, more peaking machines are important
    • Percentage of renewables counted by ERCOT into reserve is a work in progress, looking at how this calculation is derived is important
    • Some of the things we saw in this situation are things that concerned us when we started seeing so many renewables
  • Nichols – Renewables are very clean and inexpensive, using them when able is very beneficial; but when they don’t work our citizens still expect to be able to hit the light switch
  • Nichols – Have taken off more conventional power than built recently, all growth is in renewables; not reasonable for peakers to come up with 20k megawatts
    • Would be very expensive
    • Renewables have a place in the market, but we recognize the intermittency of them
  • Menendez – You were able to restore power to all customers by Thursday morning?
    • Yes
  • Menendez – Did any facilities fail during the recent storm?
    • No, all facilities ran during the event
  • Menendez – How did this event compare to 2011?
    • Similar initially, but longer duration
  • Menendez – So weatherization in place kept you going?
    • Yes
  • Menendez – Was the weatherization cheap, was it easy?
    • Not sure, wasn’t a significant budget issue
  • Menendez – Were your costs for ancillary services price gouging?
    • I don’t think it was price gouging, many factors influenced ERCOT calculation
  • Menendez – I personally think the gas price you paid from $3/cubic foot to above $100/cubic foot meets the percentage requirement for price gouging
    • Highest price before this event was $32/cubic foot
  • Menendez – No matter how you define this I think it is some sort of gouging, should have something against this
  • Schwertner – Municipal utilities have oversight from the council; who determines critical infrastructure designation or rolling blackouts?
    • GP&L is a transmission service provider, makes these decisions
  • Menendez – Cites DTPA, price gouging applies to excessive prices on fuel

Terry Naulty, Denton Municipal Electric

  • Provides overview of Denton Municipal Electric
  • Uplifting costs to utilities like Denton to pay for failure of competitive retail markets does not seem right
  • Experienced sudden gas shut off for 225 megawatt plant, should have been in ERCOT’s priority list
  • Provides timeline of emergency prep before the winter storm, began prepping on Friday before the storm, were selling surplus power into the market the first 3 days
  • When gas was cut, lost surplus position and became short, began buying from market; when gas was restored took a fool day to thaw generators and reached surplus again
  • Well-prepared from a hedging perspective, unexpected cessation of gas led to issues
  • Highlights issues with getting firm gas contracts, physical limitations, risk hedging, etc. all lead into current gas contract system of managing physical and financial risk; if no gas is available and pressure isn’t maintained, still not firm gas regardless of contract
  • Able to use 92 feeders for load shedding
  • Schwertner – Did you have a gas contract?
    • Had an interruptible contract
  • Schwertner – You thought you were covered as a municipality, but due to issues you needed to purchase power from the grid?
    • Correct, when we look at expected position, we first look at renewable generation, then use thermal and contracts to bridge gap
    • Wind produced nothing during the event, solar resources did; gas generation was needed
  • Schwertner – Summarize your financial concerns
    • Denton has paid all of its bill for $9k power to ERCOT, we are owed money by ERCOT for energy that was injected into the system
    • Concerned because of uplift that we will not be paid, still need to pay gas supplier
    • Using public funds to pay for this does not seem equitable, taking steps to make sure it happens
  • Schwertner – Asks about governance
    • Controlled by city council, have an advisory board
  • Menendez – You were selling into before the $9k, at what price?
    • Somewhere in the 1.2k-2k range
  • Menendez – Do you think the price increase was necessary or would you still have sold energy?
    • At some point we were buying gas at $700 MMBtu, would’ve needed $7k to cover cost for this
  • Menendez – How much have you paid ERCOT for your purchases? And you’re owed by ERCOT
    • Yes, paid close to $200 million
  • Menendez – How many MMBtus of gas did you purchase above typical rates?
    • Have this data, same range as other users
  • Menendez – Asks about price gouging and DTPA concerns
    • We would’ve paid whatever price it took to keep power and heat on
  • Schwertner – You had no gas or electric hedges?
    • No, we always hedge
  • Schwertner – Do you have an estimate on your gas cost?
    • Will be around $20 million

Mike Kezar, South Texas Electric Cooperative

  • Provides overview of STEC operations and diverse power portfolio
  • Began prepping the week before, worked to secure fuel oil and with Mexico to ensure dam generation; laid on additional gas hedges, prepped tools and heating resources, staged first responders
  • Certain generators were able to produce more, freeze protection equipment was positioned before storm
  • Frequency issue did affect one facility, operators were able to get ahead of issue to hold the unit online
  • All units performed well during the event, had one 2 hour outage of around 40 megawatts
  • As load shed was ordered, we started working through priorities and taking feeders off; some members reached the end of priority lists
  • Longest outage was 15 hours, were able to keep members with power
  • Saw melted fuses and sectionalized lines to bring power back online gradually; was difficult to tell when outages were due to equipment issues or feeder rolling
  • Hancock – What percent of generation were you able to maintain?
    • Portfolio was long at times; weren’t sure what gas supply was like so we switched to fuel oil when pressure seemed to drop
    • In general, we were almost debt equal
  • Hancock – It sounds like you did a lot to prepare; who do you rely on to warn you?
    • We utilize a contract weather service
  • Hancock – No one from the state reports to you?
    • We receive OCMs from ERCOT
  • Hancock – Did ERCOT’s info cause you to prepare or your outside source?
    • The outside source, gave us info earlier, we were notified from the third party in January about the event in February
    • Weather service gave us better information
    • Use multiple services for weather forecasts, contract service has been reliable
  • Hancock – Talk to us about the financial side
    • We sell resources and buy back out, we believe that if invoices are paid, we will be in a debt neutral position
    • ERCOT has short paid a bit the first two days of invoices
  • Schwertner – When there’s a hurricane or other event, is ERCOT more on the ball?
    • Those are usually a different circumstance because we see hurricanes forming early
    • Any coordination from ERCOT is operational, ready checks
  • Menendez – Having the mix of generation you have insulate you from the spot market?
    • We were exposed to some gas spot purchases, roughly 40% unhedged
  • Menendez – Discusses difficulties
    • One of the complications was the holiday on that Monday, were having to look at longer period of time than normal for trades

Cameron Smallwood, United Cooperative Services

  • Provides overview of operations and weather prep
  • Typically test 5k megawatts of ERCOT load shed request, but request hit 20k
  • Average outage time was 30 minutes, were able to roll generation consistently
  • Used press releases, social media, phone calls, texts, etc. to communicate; received significant feedback
  • Members were concerned about fairness of outages, did not roll any of the Barnett Shale load
  • One third of feeders are protected from low frequency, ERCOT allowed us to use some of these to roll outages
  • Only a small percentage of load was able to roll, had essentially two groups that would exchange time on and off
  • Other concern shared is that $9k was price gouging and that it shouldn’t be passed to customers; not a generation or transmission owner, have a wholesale power agreement with Brazos Electric, buy all power from Brazos
  • Brazos had some market exposure, have not yet been billed from Brazos yet, but we did have some market exposure through this
  • Members will not see any rate increase even though Brazos portion is not yet known
  • Hancock – How did Brazos Electric’s units perform?
    • Similar to some of the others that reported, I believe they had some outages due to weather and frequency issues, had some exposure due to this
  • Hancock – They had to buy a significant amount off the market?
    • Not sure significant enough to get attention
  • Hancock – I think it got their attention; why do you think this is, was it gas pressure, winterization, etc.?
    • My understanding from what’s been reported is all of the above
    • They operate a number of plants and saw issues
  • Hancock – Average age of their plants? 30 years?
    • Possibly
  • Nichols – Does Brazos purchase from the market or generate their own?
    • Both
  • Nichols – Brazos had similar issues?
    • Yes, gas pressure, etc.
  • Nichols – You have no idea what the bill is going to be?
    • No idea at this time
  • Nichols – Has to be clarity pretty soon
  • Hancock – I have a pretty good idea, Gov. contacted me before the storm was over with financial concerns
  • Paxton – Sounds like you see your communication as a success story
  • Paxton and Smallwood discuss communications, UCS took new steps for mass outreach that weren’t done before

Cathy Webking, Texas Energy Association for Marketers

  • Provides overview of TEAM operations, shares concerns and appreciate leadership being shown
  • Still need to deal with the financial fallout from this event and potential customer impacts one way or another
  • Highlights how REPs are customer-facing entities; REPs serve customers, e.g. meters, actual population can exceed the number of meters served
  • REPs were in constant communication with customers, form is chosen by the customer pursuant to customer protection rules
  • REPs knew this event was coming, have very sophisticated forecasts for power, communicated with customers as much as possible
  • There is tension because ERCOT has cautioned REPs to not alarm customers of potential outages without indication from ERCOT
  • Some REPs were trying to encourage conservation with incentives or bonuses
  • Directed by ERCOT to communicate about rotating outages, but became clear that this was not possible
  • Deeper into the event, there was a big vacuum of information
  • Customers with REPs on fixed rate or variable are not going to exposed to price changes for services last week
  • Some TDUs spoke about customer bills, but they don’t bill directly, they bill the REP, who then bills the customer, and some customers choose passthrough models
  • Need to look at commercial customers as a different category, work with REPs to source power; typically have a band of use with excess subject to market
  • Discusses how market prices were set by ERCOT, price was set to ensure power continued during load shed
  • Good actors who secured firm power ahead of time were severely affected by market conditions, this is where the largest strain is
  • REPs are likely the first to feel impact, cannot own generation are essentially looked to for deposits on future market activity, e.g. collateral calls
  • Lot of discussion that customers will move to providers of last resort if there are defaults; sometimes contracts for commercial customers are at risk
  • Hancock – What happens when a REP defaults?
    • If a REP defaults, if not purchased, the customers go to providers of last resort
    • Will be priced at some sort of market based rate
  • Hancock – What percentage do you think will be in default?
    • Don’t have transparency into this
  • Hancock – Would they survive if financing were made available? Not talking a bailout, but financing to spread costs
    • That answer would vary; difficulty is that vertically integrated entities could be financed, but those in competitive markets are not assured their customers
  • Hancock – But we know what happens if they default
    • Would love to explore alternatives to defaults
  • Schwertner – If a REP goes bankrupt and they need a new service provider and there’s a book of business, are they able to sell this and a private equity firm would be able to go after them, is this allowed? IN other words will Texans still see certain charges from REPs?
    • Can get back to you on that
  • Paxton – What are uplift charges?
    • If there is some charge that needs to be socialized, these charges get uplifted on a load ratio share, e.g. spread among all participants that have customers
    • There are some associated with the imbalance of power on Thurs & Fri of last week
  • Paxton – When you were talking about communication, was wondering about the intensity of the message; I get the need to not alarm customers, expect for when they should be, did your REPs feel hamstrung by directive not to alarm? Does it need tweaking?
    • Going forward we need decisions made through some process with TDUs, generation, ERCOT, and REPs
  • Paxton – And maybe the manual needs updating, e.g. different categories of alarm
    • Example would be price impacts, started well ahead of the $9k price and REPs knew that, market signals existed that scarcity was coming
  • Hancock – Market was crazy, was open 3 times after noon and definitely reacting to the weather
  • Johnson – Concerned about after $45 billion extracted from the power system, Vistra lost essentially $900 million
  • Johnson discusses market conditions during the week
    • Didn’t have a wholesale market during that week, ancillary services
  • Johnson – Consequence of market issues was the unfathomable loss of money from the market
    • When there was scarcity prices could’ve been close to $9k, other times prices were likely not that high
  • Johnson – Consequences for letting entities go down; asks after need for state action
    • We did have state action affecting the market via an ERCOT order setting $9k price
    • If we are going to discuss state action, we also need to consider how to get out of it
  • Creighton – What is the most extreme example of uplift that you’ve seen?
    • In market costs itself, I think we’re many digits lower than uplift we’re seeing now
  • Creighton – Are there guardrails with uplift?
    • There are in PUC rules in regards to pricing, which has some effect on uplift
    • Could have helped in the past, had it been clearer and more specific
  • Creighton – Would you recommend additional guardrails?
    • This is new territory
    • Market uplift has to do with market operations, not sure that occurred this time
    • Unsure which measure to look at
  • Creighton – what happens when uplift isn’t feasible anymore?
    • Disaster relief mechanisms can help
    • Some other price relief mechanisms, need some more data
    • Some data inaccuracies for meters are distorting prices and creating confusion
  • Creighton – Do you feel that most market participants feel PUC has authority over ERCOT, or that ERCOT is an “unbridled entity”?
    • Not sure what participants think
    • Expertise in ERCOT is difference than PUC
  • Creighton – Which entity enforces uplift?
    • ERCOT
  • Creighton – If market participants or entities had issues with ERCOT, would they go to the PUC to request changes, or would they be so separate with PUC having little/nothing to do with it, that the PUC becomes disconnected from concerns?
    • PUC Is the arbiter of last resort at the agency level
  • Creighton – So companies frustrated would go to PUC for frustrations with ERCOT?
    • Yes
    • Participants try to work through issues collectively, through ERCOT
    • If they reach a place where a policy decision needs to happen, it comes to the PUC
  • Menendez – Testify that 90 hours were spent at the $9,000 cap, in previous 10 years only 16 hours total near the cap. References Energy Choice article concerning commodity prices for electricity during the storm.
    • We have a scarcity pricing market for energy
    • Market participants understand the setting of the price, would need another arbiter to change that
    • Situation here was the breakdown of the market, not a functional market during the storm
    • Not asking for a review of the market rules, but rather suggesting that we weren’t subject to the market rules due to the disaster and concern with presentation of life
  • Menendez – What would we do for retail electric providers in the non-competitive market
  • Menendez – is the market design we created broken?
    • Not enough information to say, unsure about other aspects outside my own area
    • Not sure if there is flaw in design, but we need more information
    • We do need scarcity pricing
  • Menendez – Should a storm or disaster be an opportunity to create a windfall on the backs of Texans?
    • I don’t know if the market conditions could have created that opportunity
  • Menendez – are you aware of the rules regarding deceptive market process
    • Yes
  • Paxton – Do you have a recommendation on how to resolve the situation when we have reached the market cap but no longer are at scarcity
    • We filed a pleading at PUC to address some of this
    • Believe the PUC order got it right, when there is load shed in EEA3, we will put the prices in place
    • Order stated that the $9000 price was associated with load shedding conditions, which have ended, as of 1am Thursday morning
    • Industrial customers are much more price elastic unlike commercial customers
    • By the order, scarcity pricing is necessary during load shed, but not after the period ends
  • Hancock – are you aware of what pricing was before the order?
    • It was spiking over the weekend and during the week
    • Somewhere in a range of $4000, don’t have the specific numbers
    • People buying on Saturday knew scarcity was coming

Panel 5

Griddy was scheduled, but did not attend

Panel 6

John Franklin, RWE Renewables

  • Thoughts and prayers with those affected by the outages and storm
  • Need to prevent this from occurring again
  • Includes nuclear, oil, renewables across the globe
  • Decades of experience in energy sector and engineering
  • Operates 3.6 GW of wind projects, over $4 billion in Texas since 2007
  • 21 sites across the state
  • Maintenance fleet impacted by the ice storm
  • Working through data to determine causes and countermeasures to another event like this one
  • Varied impacts based on locations of assets throughout the state
  • We were generating and providing Mw hours during the storm, but West Texas operations were impacted severely by ice
  • Panhandle and South Texas production were also impacted, but minorly
  • Much to learn from this experience
  • Menendez – When did your company receive the weather reports the storm was coming?
    • Indications on Feb 8
  • Menendez – Where in the US and around the world do you operate Wind facilities?
    • Many states with cold weather and counties with extreme temperatures
  • Menendez – Do those produce during cold weather?
    • Yes, generally, but Icing on the blades is what distrupts most turbines, not cold
  • Menendez – how much generation did you fail to meet?
    • We fell short on original estimates to ERCOT
    • Through the 14-19, we were able to generate about 70% of the energy we could have without the icing on the blades
  • Menendez – is there anything you use to remove ice on blades?
    • Nothing commercially viable
    • After 2011, we installed WIIM software on some facilities to change pattern of blades during icing, but the magnitude of the ice buildup (3-6 in) was more than the system could handle
  • Menendez – how did coastal turbines perform?
    • We saw limited ice buildup, so those facilities performed well
  • Menendez – how reliable was wind versus the others during this storm?
    • We lsot around 2,800 MW of energy from icing on the blades
    • We met 70% of our estimated contribution
  • Hancock – total number of turbines?
    • 1,976
  • Campbell – so 18 turbines failed due to temperature only, what number failed due to icing
    • Don’t have the specific turbine number
  • Campbell – Promised number of MWs?
    • Planned MWs are determined hourly, and daily
    • Lowest MW was about 8,000
  • Campbell – want the lowest amount in percent you were able to deliver
    • Maximum we could have delivered would have been around 24,000 MW
    • Worst day loss was 50%
  • Campbell – what is the difference in turbine functioning in Texas versus northern states and Scandinavian counties? Why did they fail here in low temps, is there the same rate of failure in the North?
    • Don’t have that information
  • Campbell – Why did we fail in cold weather and the North doesn’t, other than Ice?
    • Ice was the only reason we lost turbine capability here
  • Campbell – Is anything used for deicing, warming blades, etc?
    • No, no difference in turbines here and the north
  • Campbell – are there fossil fuels used? Electricity?
    • No fossil fuels, yes electricity
    • Electric motors turn the turbine into the wind
  • Campbell – did turbines have electricity?
    • They produce their own power
  • Campbell – In retrospect, would you have done anything different?
    • We need to continue investigating deicing turbines due to lack of practical limitations now
  • Campbell – Concerned that wind/solar aren’t reliable in decreasing wind or ice conditions
  • Hancock – 2800 out of 3600 MW offline, at worst?
    • Maximum off at any one time, 800 MW up at that time
  • Hancock – Any idea what that 800MW did?
    • Feb 14-19, put 106,000 MW hours into the grid
  • Hancock – Nameplate says we should have 800 MW from this
    • Yes, but it depends on the conditions at individual turbines
  • Hancock – what was the real production? How much generation was taking place
    • Around 106,000 MW hours over the crisis
    • Produced less than nameplate capacity
  • Hancock – what portion of the nameplate was active?
    • Produced 70% of the capacity over the 4 day period
  • Schwertner – was under the impression that blades are different in the North, with heating/deicing capabilities?
    • Not aware of RWE fleet turbines with those blades
    • There are producers that make those blades, but not standard in our fleet
  • Schwertner – on the night of the 14th and morning of the 15th, what percentage of the daily max was being produced?
    • In MW hours, we could have produced 47,000 MW hours on the 14th, actual production was 24,000
    • 36,000MW hours possible, produced 11,000 on the 15th
  • Hancock – The capacity factor of the 800MW, what percent of capacity were you getting off of that? 30%?
    • About one-third, yes
  • Hancock – so around 275 MWs?
    • Yes
  • Hancock – So the nameplate in the winter mean very little
  • Nichols – ERCOT gave us a chart listing sources of power during the storm. Wind and solar are about 35% total of power in the state. Wind was producing, solar was somewhat producing, but when you add up the production, its nowhere close to 35%.
    • I agree
  • Hancock – Want members to understand that the nameplate number, but seasonally the number will vary significantly

Jay Temple, EDF Renewables

  • Provides an overview of EDF renewables
  • Nearly 40% of all generation was offline; wind was above ERCOT’s daily forecast for wind
  • ERCOT’s issues were complicated by the additional Generic Transmission Constraints
  • Additional megawatts of power were available, but was not deliverable due to ERCOT GTCs
  • TX needs to upgrade transmission in critical areas
  • Wind turbines are not typically not designed for the severe weather experienced last week, typically designed to operate in Texas’ typical weather range and hot summer temperatures
  • Hancock – Your total fleet?
    • A little over 1000 megawatts, 642 total turbines
  • Hancock – How many were in operation?
    • 575 available, though these were not available every day
    • Worst day was the Feb 10 coincided with ice storm in West Texas
  • Hancock – Percent capacity for the nameplate?
    • Around 1,100 megawatts
  • Hancock – Give me a capacity
    • Had a capacity factor from as low as 0 to around 55%
  • Hancock – What was your average?
    • About 34% of the nameplate
  • Hancock – Transmission lines are the problem? No one else seems to have that issue
    • Which is surprising that no one mentioned it
    • 4,000 megawatts on the South GTC was reduced to 470 megawatts; even if we could’ve produced more, we couldn’t get it out
  • Hancock – So was it a problem or not?
    • It is a problem because we aren’t the only generator there, there’s wind, solar, thermal, etc.
  • Hancock – You want to build generation closer to demand, you want to limit the transit
    • Cost of building the lines, there is line loss
  • Hancock – You get paid based on generation side, correct? There is line loss before it gets to customers
    • Yes
  • Hancock – How is that handled in other grids?
    • Unsure
  • Hancock – What are some options people take in the line loss?
    • Way most contracts are structured is based on what reaches the grid
  • Hancock – How do other entities address that transmission loss?
    • I don’t know, I think about putting megawatt hour on the line and taking it off
  • Hancock – Are there any entities that consider the line loss? Is this considered in pricing?
    • Can’t answer that
  • Schwertner – Have read that Bill Gates said there are heated blades in the North
    • I believe he is right as far as the blades are concerned, EDFR is doing research
    • You can winterize a turbine, turbine exist with additional heaters, etc.
  • Nichols – On the transmission shortage, the transmission line couldn’t take the South Texas generation? Would it take it during normal times?
    • No, ERCOT has limited ability to transfer energy over the line, GTC limits South Texas line to 649 megawatts and during event it was reduced to 475 megawatts
  • Nichols – Do we have that many transmission lines out?
  • Hancock – This was my point, have had many people with expertise who have not brought this up
  • Menendez – There’s a big wind farm in New York, there is an article with details on de-icing technologies; we have a serious investment in wind, would like to see companies to show concern
  • Menendez – As a strong proponent of renewables, have been disappointed by the witnesses; would’ve done more research into winterization techniques
  • Johnson – What was the capacity of the South Texas line?
    • 6,500 megawatts, brought down to 649 megawatts
  • Johnson – It was brought down 90%? When did this happen?
    • Early January
  • Johnson – What records can we see of this? Who can explain this?
    • Would have to go to ERCOT
  • Johnson – Do you have something in writing showing this?
    • Not handy, but can get it to you

Colin Meehan, First Solar

  • Provides overview of First Solar operation and investment
  • Solar continues to grow responsibly in ERCOT; First Solar is able to provide ancillary and grid services to grid operators
  • Still waiting on final data about last week; ERCOT’s data shows overall solar portfolio met or exceeded expectations
  • Ice & snow was common on the solar panels, didn’t impact output as much as expected, sunlight in the morning tends to melt this
  • Experienced one non-solar equipment shutdown due to extreme weather, was down overnight
  • Have heard of invertor issues due to weather; had techs on sight and manually restarting invertors
  • Communications were down, so data is not yet complete for the site with invertor issues
  • Rest of portfolio, outage rate was less than 3%
  • Have heard from others in the solar industry that there were issues due to transmission voltage, heard of invertors tripping and other weather issues
  • First Solar believes issues experienced are tractable and can implement before 2022
  • Menendez – You mentioned your solar power performed as expected? It appeared that nuclear and solar had least amount come offline from expectations
    • Expectations for solar set by ERCOT were around 300 megawatts
  • Menendez – Asks after penalties
    • Have a number of contracts, financial penalties can exist due to inability to perform
  • Menendez – It appears you exceed seasonal expectations for the 13th, 14th, and 15th?
    • Yes, ERCOT plans for resource availability for all resources; nice to see we performed to ERCOT’s expectations but we still have work to do
  • Johnson – Can you help us understand difference between financial penalties in solar contracts compared to thermal industry?
    • Don’t have knowledge of thermal contracts
    • Financial penalties for any generating unit in ERCOT are all contractually based, no penalties from ERCOT
  • Johnson – Heard earlier that ERCOT assesses 10% penalty on thermal, and to your knowledge there is no distinction?
    • Only difference I know of is thermal who participate in ancillary services have an obligation to serve; if solar entered the ancillary services market we also would have this obligation
  • Johnson – You’ve got long term contracts, did the price cap at $9k affect revenues?
    • In this context we’re operating as a maintenance provider, not paid at those rates & do not have this market exposure
  • Johnson – So you didn’t make any more or less money during the storm than others?
    • Correct, may have lost some due to any outages

Panel 7

Jim Cisarik, Texas Energy Reliability Council (TERC)

  • TERC exists to foster cooperate among industry participants, made up of leadership from PUC, RRC, ERCOT, and industry leaders
  • Highlights supply chain structure, loops between producers and electric generators
  • Before events like last week, TERC caucuses and participants; felt we had a need to elevate electric generation for production to second priority, RRC jumped on this
  • Sat & Sun were the first big supply side cuts, Wed was the low day for gas, Fri gas started to come back on
  • Saw significant loss of wellhead production due to loss of power, freezing in the basins, icy road conditions interrupting transport and repair
  • Intrastate pipeline and storage faired well, mostly built under ground and insulated
  • Need to evaluate every link in the chain for issues, if we could keep production on then likely would’ve had few issues
  • Producers will know what weatherization is needed
  • Need to look at storage in strategic areas to reach different areas
  • Pipeline industry is already set up to work together
  • Other than working on getting critical infrastructure on priority lists, TERC wants to add more company stakeholders
  • Campbell – Are you under any jurisdiction of NERC?
    • No
  • Campbell – Did you export any gas?
    • Council is just pipeline, electric, and other stakeholders trying to get gas to the right people, not aware of gas exports
  • Nichols – Haven’t been adding much conventional power generation, and have been taking more off, probably reduced the amount of conventional generation; has TERC spoken much about that?
    • No, but people in our industry often talk about this
    • Part of the evaluation needs to be identifying reliable resources and how you keep them reliable, also how you add reliable generation as the industry grows?
  • Nichols – Renewable energy is pretty cheap to put in, but need to have dispatchable power; grid is supposed to be a free market, but there are two groups and one is able to provide so cheaply that it discouraged reliable energy development; asks for suggestions?
    • We have a historic event from which we can create a model, need to go to every supply chain participant & identify complications
    • Plants are also old, pipelines were built to spec, but now areas served have grown and gas can’t flow at capacity needed
  • Johnson – Would you say our pipeline infrastructure needs to be updated?
    • Performed adequately for the supplies we had, need more infrastructure as we grow
    • Don’t need updates to what we have, but may need more pipelines to serve units
  • Johnson – Who makes this investment?
    • Would be the power plants
  • Johnson – Who do they pay?
    • Normally the pipeline and power plant would work a transaction where investment would be returned
  • Johnson – Should the RRC be involved beyond oversight for safety?
    • Normally RRC stays out of private contracts
    • Construction and fit to need should be evaluated; people in the industry know the needs
  • Johnson – Is there a role for policymakers?
    • Older facilities are not investing anymore and do not buy firm gas because they don’t know when they will run
    • LDCs will try and track capacity and pay for capacity needed
    • Gotten more complicated as plants get out of date for infrastructure
  • Johnson – If we need pipelines, we need to figure out a way to build them
  • Hancock – I think the concern with renewables is that the price is so low there is difficulty for investments
    • I think that’s right, used to be new construction constantly

Todd Staples, Texas Oil and Gas Association

  • Provides overview of TXOGA
  • Without natural gas, millions of more Texans would be in the cold, carried the grid during the peak
  • Storage played an extremely valuable role during the storm; lack of gas might have been more logistical than supply side
  • Our predominant reason for lack of field production was loss of power, also icy roads, communication failure, etc.
  • 3rd party offsite issues came into play as well
  • Mechanical issues were also a problem, winterization was an issue, but large part of production could’ve continued given enough power
  • For the most part gas was available and delivered
  • Natural gas was feeding electric generation and also direct to consumers
  • Had more natural gas due to L&G facilities, diverted gas to make it available to TX market
  • Menendez – What about freeze up of wellheads?
    • Media reported this was primary cause, we don’t think that it was
  • Menendez – Asks about water transportation difficulty
    • This was a concern
  • Menendez – Would assume this applies to other liquid and materials transport as well
  • Menendez – Heard from power producers talking about lack of pressure; seems like a communication/bureaucracy problem, who is doing the forensic analysis?
    • Each company evaluates processes and makes improvements based on this
  • Menendez – Do other states require wellhead weatherization?
    • Other state operators have different processes, not sure about mandates
  • Menendez – Does RRC have authority to mandate this?
    • Unsure if they do or not, have authority for safety issues & many weatherization procedures are safety related
  • Menendez – Do you know how much production was out of order?
    • Data collected probably takes until mid-April to collect
  • Menendez – My concern is we have to make a commitment so this never happens again
  • Menendez – Do you think its fair for customers to be hit with high bills due to trading?
    • I think its very difficult for residential consumers to understand the marketplace, maybe should review system and make sure they don’t have this exposure
  • Menendez – As you review what caused gas to lose pressure, maybe we can come up with backup systems solutions that can be deployed
  • Creighton – Do you have an idea from members on what they’re doing to correct issues?
    • Having meetings daily on these topics, will be offering solutions and ideas
  • Creighton – We’ve been impressed by testimony of the private sector; asks about what can be done
    • Hearings yesterday and today have identified critical load facilities weren’t registered appropriately; should look to private sector for recommendations
  • Creighton – Not interested in handing down excessive bureaucracy, but saw expertise and leadership from industry & didn’t necessarily see that from agencies
    • Agencies do a lot of good work, constant battle of not getting outside of what they’re authorized to do
    • We know answers need to be found and things need to change, this body is the organization to do that
  • Creighton – We heavily rely on natural gas in a crisis and we have a lot of it
  • Johnson – Discusses difficult cycle of gas and electric production, compressors weren’t getting power and this led to issues?
    • That’s part of the problem
  • Johnson – It may be too early to say primary cause was electricity, may be equipment weatherization, forensic analysis will determine
  • Johnson – Regarding the missing $45 billion, wondering whether industry would be supportive of taking market pressures off of suppliers in non-market conditions; have emergency statutes that could allow this could you envision a scenario where the gas market is subject to emergency regulation?
    • I think there is a market solution to address what went on, can have a contract for firm supply & transport
  • Johnson – So generators could’ve saved us from the last week if they had the foresight to buy these contracts for peaker plants? Seems like this isn’t structured in a way we can rely on
    • NRG said that it was more economical to buy power on the spot market than buy storage
    • Heard Vistra discuss cost & economics in decision making; I think risk taking is part of what is going on here
  • Johnson – They made decisions not to have the fixed contracts; I think its evident market forces didn’t provide for last week
    • Market forces didn’t work the way you wanted it to, but not sure they didn’t work
    • I think contracting and planning can address given the right market signals
  • Johnson – Maybe we’ll be on the same page about right market signals; if markets are sending the wrong signals we have a $45 billion
    • Doesn’t pay to add additional natural gas capacity given the way our system is structured
  • Johnson – Asks after exports and gas supply
    • What I do know is that our L&G facilities diverted gas back, every available resource were made available to the TX market
    • Want to be reliable
  • Schwertner – Confused regarding natural gas’ role in this and am disappointed in their inability to supply; issues were known beforehand, should we be selling interruptible contracts to utilities?
  • Schwertner – Issue of natural gas companies by force majeure shutting down power, concerned was done for a profit reason and if there is any information about this out there, we need it; do you know if there?
    • Did not see any, if anyone violated laws, they should be prosecuted
  • Paxton – Have had winterization and weatherization discussions, were not prepared for the worst-case scenario and am concerned we are not prepared for the worst-case summer scenario
  • Paxton – What lessons learned from this transfer into summer?
    • Is communication, did not know there was a form to fill out to be on the critical load list
    • Are doing a lot of drills, need to reevaluate what we are practicing
    • Weatherization questions need to be asked at every stage
  • Paxton – Have you ever seen market conditions at this $9,000 cap last more than a few hours at a time?
    • Not aware of any that has lasted the duration this his
  • Paxton – Do not build policy around exceptions, need to reevaluate this

Grant Ruckel, Energy Transfer Partners

  • Hancock – Did we request executives?
    • Believed you needed someone who could speak to operational issues
  • Hancock – Believed you understood who we were asking for; wanted executives to speak frankly on this, but proceed
  • Here to address mid-stream activities and what happened last week and how to prevent it
  • Worked around the clock to find way to deliver natural gas
  • Our pipelines never stopped working; prepared according to lessons learned from the 2011 storm
  • Learned personnel and physical resources were needed weeks in advance; mechanics were sent to vulnerable areas
  • At the baseload power sources ramped up to provide over 90% of energy transmission over the coldest days
  • One day last week, energy transfer was drawing billions of cubic feet of natural gas
  • Gives thanks to the RRC, PUC, and others
  • Johnson – What do you say about who has made profits during the storm; have bilateral contracts?
  • Johnson – How do storage negations go?
    • Not familiar
    • Do not have storage contracts, have transportation contracts
  • Johnson – What amount of your profit is made from interruptible versus firm?
    • Do not have that information, will get back to you
  • Johnson – Have contracts to export out of Texas and did you cease doing so after the Governor’s order?
    • Yes, and yes because those pipelines are federal jurisdiction and are demands for us to deliver those molecules to other states
  • Johnson – Did the Governor’s order not have that jurisdiction?
    • Did not believe its intent halted those contractional obligations
  • Johnson – Contracts have force measure clauses?
    • Yes
  • Nichols – Movement and transfer of molecules is your business/ Is there anything you can contribute to winterization mistakes last week?
    • Yes
    • Communication; TERC’s discussions did not have enough input from a diverse field; would be supportive to any way to make TERC stronger
  • Schwertner – Contracts, which are preferable?
    • Do not have a preference
  • Schwertner – Issue of interruptible gas for a major utility is lost during a weather event
  • Schwertner – Interruptible contracts is something we need to revisit, whether that should be allowed? Feedback?
    • Does not know an interruptible versus firm contract was the issue last week because the molecules were delivered
  • Schwertner – Heard from other that there was a loss of gas to certain generators, so it was not delivered; believes
    • Cannot speak to those specific generators, as it relates to us, we delivered natural gas
  • Schwertner – Had no supply interruptions?
    • That is what I have been told
    • Have had direct communication with ERCOT to get our critical infrastructure designators on that list?
  • Hancock – Were unfamiliar with the form, have heard this from many people, where did you get it from?
    • ERCOT
  • Menendez – What do you do?
    • Policy, liaison with stakeholders, community awareness
  • Menendez – Understand why Hancock had asked for CEOs?
    • Understood I would be the best for this
  • Menendez – How long ago was formed?
    • 20 years ago
  • Menedez – Own Sunnaco and are a buyer and seller of natural gas
    • Do engage
  • Menendez – Did you buy natural gas before the storm? What price did you buy it at?
    • Assume so and am not sure
  • Menendez – How much did you buy the
    • If there was a contract, then at that price, but if it was in the market then
  • Menendez – Week before the storm at $3 and selling much higher,  is that price gouging? Is it exorbitant?
    • Not price gouging
    • Yes, exorbitant

John Paris, Atmos Energy Mid-Tex Division

  • Provides overview of Atmos Energy structure and operations; not an O&G exploration or production company
  • Have contracting for natural gas to meet demand based on available supplies, which were severely constrained
  • Also have gas storage and compressed natural gas
  • Job is to safely deliver gas to customers, work hard to prep for emergencies and train workforce
  • Followed priority rules to deliver gas to human needs customers, executed curtailment plans when directed on Sat, Feb 13
  • School districts were great partners, worked well during load curtailment
  • Menendez – First priority was human needs customers?
    • Yes
  • Menendez – Is cost of gas passed onto customers dollar for dollar?
    • Similar to others, dollar for dollar passthrough and don’t make anything from the cost of gas
  • Schwertner – You’re buying wholesale, then you ship it customers, what bill do they get next? Is there a fixed rate, do they get elevated rates for certain days?
    • RRC has told us to take all costs associated with this event to review which are prudent
    • Bills outside of normal consumption will be the same for the next month until this is resolved
  • Schwertner – But you already paid for it at the wholesale rate?
    • Yes, or will be paying for it
  • Schwertner – What is the delta we’re looking at versus a normal bill?
    • Don’t know what the delta is, do know that the unreconciled amounts are set aside
    • Conversations are taking place
  • Schwertner – Are you looking at us to somehow backfill this?
    • We look to the RRC
  • Schwertner – Is your company in financial difficulty because of this?
    • Our company is financially healthy
  • Menendez – CenterPoint is reporting incremental gas cost of >$2 billion, do you expect an incremental gas cost?
    • I would expect we’re in the same range as CenterPoint
  • Menendez – RRC has told people to set aside costs because some feel that we should not victimize resident for heat during the storm; is this the reason to set aside?
    • RRC put out an order and we are complying; we’re certainly sensitive to bill prices
    • We don’t make any money on it, never good for our business for prices to be high, creates a large burden on customers
  • Menendez – Appreciate testimony and agree
  • Campbell – The company didn’t make any money off of this, but it may not cost you much because increased costs may be indexed and passed to customers
    • Correct, also drew heavily from stored contracts
    • We do have some risk, were making spot purchases because it was a record event
  • Campbell – Do you feel like the contracts and customers you have were adequately aware that they may get a bill that’s thousands of dollars?
    • The customers curtailed are mainly industrial customers, sophisticated businesses, large companies with staff to manage, so yes very clear about the terms that contract is interruptible and indexed
  • Campbell – Your company deals with just commercial, industrial entities?
    • We deal with residential, commercial, and industrial customers
    • Everything we did was to serve human needs, curtailment was for industrial customers
  • Campbell – Will residential customers see bills thousands of dollars higher than they expect?
    • Any costs determined to be prudent will be passed on and will be spread out over a long period of time
  • Campbell – Do you think the residential customer had a good understanding that this is how their bill would be affected
    • Doesn’t make any sense that we could deliver thousand-dollar bills
    • Whatever the gas cost is, there will need to be a discussion about what is a tolerable amount
    • RRC working with utilities across the state has always had customers in mind and how this charge is smoothed out over
  • Campbell – And you don’t anticipate residents getting thousand-dollar bills?
    • I don’t expect it to work that way, doesn’t make any sense to do it this way
  • Campbell – Our residents just can’t take that
    • Absolutely not, very sensitive to customers, higher bills do not help us
  • Paxton – Family sat in front of our gas fireplace much more than usual, what is going to happen to my bill over 6 months or 15 years?
    • RRC is looking at that now, do not think it will be 6 months, will likely be 15 years, 20 years, etc.
  • Paxton – What sort of amounts are we looking at?
    • All I can say is we’re complying with what RRC is saying, they asked us to put all costs aside and this is yet to be determined
  • Hancock – What type of volumes did you see? Generators had issues and had to buy gas on the market
    • Haven’t seen overall figures, but saw one day with 2 BCF
    • Also makes the point that it wasn’t Plano at fault, just discussed because of the scale of Plano
  • Hancock – What is your average volume?
    • 800k to maybe a BCF; on a summer day it’s more like 300k
    • We saw peaks in all areas
  • Hancock – You couple state’s growth with historic event, there’s phenomenal pressure on natural gas and therefor not much natural gas pressure
    • Sure, there’s a very fluid growth area
  • Paxton – Another facet of this is that a lot of customers are finding out after the fact that their bills might be high; don’t recall any sort of notice that high gas prices were affecting everyone, no guarantee that people would’ve seen the notices if they had been sent due to communication problems

Roland Burns, Comstock Resources

  • Hancock – Already had phone calls about a news story related to Comstock
  • Want to apologize for comments made on Comstock call related to spot gas prices, inappropriate and not sensitive to TX citizens; referencing Comstock’s good position in the spot market
  • Comstock did everything in its power to keep gas production online, operations crew scrambled to weatherize and maintain production; worked to leverage resources and deliver them to markets in need
  • Menendez – Quotes Burns saying he hit the jackpot, doesn’t understand how he could say that while seeing conditions in the state; references hardships faced by Texans across the state
    • No excuse for it, due partly to tunnel vision, focused on financials of the company after a difficult period
  • Hancock – Also had a 45-minute phone call, very productive
  • Campbell – How much truth is behind the statement? How much money is in discussion?
    • Provided an accounting of our participation in the spot market, outside of the peak the spot market was reasonable on price
    • Somewhere around 5% of our stake was for sale during the high spot market
    • Averaged $55 for spot sales in TX, don’t have a full accounting to how much was made; high transportation offset
  • Johnson – You mentioned you took extraordinary measures to get gas to market, you got paid for molecules of gas delivered?
    • Correct, delivered more than we actually sold so there are some imbalances
  • Johnson – What does this mean?
    • Complex process to nominate gas, sell, and deliver, purchasers and sellers don’t always match and could be short or long
  • Johnson – Is that a significant portion of the overall transaction?
    • No
  • Johnson – If you breach your commitment on the index market, they would have to go to the spot market and sue?
    • Correct, can’t over-nominate
  • Johnson – You said you made sure you delivered gas to markets that needed it the most?
    • Our indication of this is what the spot prices are
  • Johnson – You’ve got fiduciary obligations to maximize revenue?
    • Correct, job of the marketing department
  • Johnson – So you’re fulfilling obligations to maximize revenues, so this is another way of saying you’re getting the highest price for it?
    • Indication on markets in need is the spot price
  • Johnson – Are costs you pay to the pipeline a function of spot price?
    • Two types of transportation, firm with a fixed price and interruptible at a variable price
  • Johnson – If I wanted to figure out how much money went through the process, it’d be very complex due to transportation, extraordinary measures to produce, etc.; this is distributed across royalty owners, working interest, etc., could we get this from your numbers?
    • Should be able to, very transparent company and not a complex operation
  • Paxton – Discusses the statement made, personally knows Burns; if you could do it over again what would you say and what would you say to people in TX?
    • Would have to answer the question, but wouldn’t refer to it with any kind of victory
    • Occurred at a time when the company was recovering from a very difficult 2020
    • Market has generally resulted in a very low-priced product for many years
  • Nichols – Still billions of dollars that will need to be paid, very sympathetic to what happened to the people of Texas