The PUC met on January 26th to distributed energy resources cost recovery, ERCOT input on wholesale electric market design, CY2023 reports from ERCOT, and a regular agenda. The full agenda and a video archive for the hearing can be found here.
This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.
PUC consented to items 3-7, 9, 10, 11, 14, 16, 17, 19, 20, 21, 22, 25, and 34
PUC did not discuss items 15, 23, 28, 29, 32, and 35-44
Item 1. Public Comment
Angela Cervantes, City of Seabrook Resident
- Speaking against substation CenterPoint is planning to build in the Red Oak subdivision
- Rep. Dennis Paul supports the opposition, CenterPoint misrepresented positioning
- City feels it is bound by eminent domain
- CenterPoint has said substation is critical due to rapid growth in subdivision, however subdivision is growing slower than other communities in the area; CenterPoint will not answer which part of the subdivision this will benefit & has other properties it can consider
- CenterPoint is not acting in good faith and abusing power, has not done environmental assessment of the property; subdivision is in a flood zone
- Substations are not usually built within bounds of existing subdivision, substation is a safety hazard
Jose Cervantes, City of Seabrook Resident
- Proposed CenterPoint substation will have a negative impact on local wildlife; located close to nature reserve
- Glotfelty – Two pictures, one with substation at back of the neighborhood, one at front, which is it?
- Neighborhood is like a circle, there are multiple proposal
Marcus Phelps, City of Seabrook Resident
- Proposed substation is 134 feet from front door, electro-magnetic field (EMF) is a real concern for the subdivision; studies have not proven or disproven harm, other studies suggest safe distance is 300 feet
Seabrook Resident
- Cites studies done by Jordan Mitchell, operator of beatemf.com
- CenterPoint has misrepresented need and danger of substation
- Will turn neighborhood into an industrial complex, will have a 30-40% decrease in property values
Cyrus Reed, Sierra Club Lone Star Chapter
- Praising PUC for opening up stakeholder dialogue on energy efficiency; too late to sign up to participate on work groups directly, but can still submit comment
Item 2. Docket No. 49242; SOAH Docket No. 473-19-6296.WS – Application of Texas Water Utilities, LP for a Pass Through Gallonage Charge. (Final Order)
- McAdams – Filed a memo on this docket recommending remanding case
- Abated twice to work on other passthrough issues, PUC staff submitted final order suggestion, but issues were resolved in recent base rate docket for Texas Water Utilities
- Remaining issues are limited, approving previous temporary $.69 passthrough rate & rebate to customers that Texas Water Utilities agreed to
- Issues with getting this resolved due to turnover in PUC, recommends remand
- Chair Lake – Everything makes sense to me
- Motion to remand passes
Item 8. Docket No. 53373 – Complaint of Andrew and Sarah Fossum Against Undine Development, LLC. (Preliminary Order)
- McAdams – Filed a memo on this docket making modifications and additions to preliminary order to better understand facts surrounding the dispute
- Motion to approve preliminary order as modified by memo passes
Item 12. Project No. 54041 – Review of Chapter 24 – Substantive Rules Applicable to Water and Sewer Service Providers in Accordance with Administrative Procedure Act 2001.039. (Proposal to Re-Adopt Chapter 24)
- Glotfelty – Industry has put forth a lot of good ideas within this filing to streamline CCN, admin procedures, system improvement, etc.; these things were not incorporated because?
- PUC Staff – According to Texas Register posting requirements, would have needed hundreds of pages; keep material to bring up when rulemaking is opened
- Glotfelty – Supports things to make processes more efficient, look forward to discussing these during rulemaking
- PUC Staff – Rule division is recent, fully intend to mine the old material for rules that need to be addressed
- Chair Lake – Good point, foundational issues for future rulemaking
- Motion to approve passes
Item 18. Docket No. 52728; SOAH Docket No. 473-22-2464 – Application of the City of College Station to Change Rates for Wholesale Transmission Service. (Final Order)
- Chair Lake – Certainly some gaps, would like to hear thoughts from Commissioners
- McAdams – appreciate efforts of parties to come to an agreement, but need to either remand or deny; recommending College Station was not entitled to recover transfer costs, these are typically returns on capital investments, College Station has been improperly increasing rate of return above what is approved by PUC
- McAdams – Appropriate for College Station to refund entirety of $31m
- McAdams – Should allow some general fund transfer fees going forward, but not at the previous level, e.g. College Station should be allowed to recover general fund transfer fees in line with clear rationale; 9% should be reduced to 5%
- McAdams – Should remand for parties to reach a settlement consistent with PUC direction, or deny the application
- Cobos – Agree, think we should reject proposed order, College Station increased RoR above what was approved in the last comprehensive rate case
- Cobos – PUC policy is that any unreasonable charges be returned along with carrying charges; agree with McAdams on the return of the $31m
- Cobos – Need to consider this issue, PUC only has oversight on TCOS uplift & something to keep in mind when cities don’t come to PUC for 20+ years & PUC needs to clean up after the fact
- Cobos – Should be on some kind of schedule, maybe not 4 years due to volume of work, maybe 6 years
- Chair Lake – Hearing this needs a lot of work and proposed order needs to be rejected, docket remanded & parties need to come back with dramatically improved settlement
- Motion to reject and remand passes
Item 24. Docket No. 53860 – Application of Hanover RS Construction LP for Approval of Method for HVAC VRV/VRF System Billing. (Final Order)
- Cobos – Think we need to remand so Hanover can supplement evidence with software calculation details, data for verification, and retention policy
- Glotfelty – Don’t want to dissuade creativity and new tech to make things more efficient, but don’t have the foundational understanding of the software, don’t know if software works as it should, etc.; support remand
- McAdams – We do have a mechanism for filing proprietary and confidential info, so have safeguards in place to be able to handle this
- Jackson – Need to understand algorithm, not just the concept, obligated by statute to use mechanism based on square footage, also good operating practice to have info retained and available
- McAdams – Seeking to have loads become more efficient, so new tech is in line with this, but need to know how they work
- Chair Lake – Have a process for proprietary information, not trying to put anyone out of business or discourage new tech
- Motion to remand passes
Item 31. Project No. 54224 – Cost Recovery for Service to Distributed Energy Resources (DERS). (Discussion and possible action)
- Taken out of order
- McAdams – Projects that affected DERS were already bifurcated, one tackled cost allocation and the other standard interconnection agreements
- McAdams – Have several options for how to proceed on cost allocation, which is the most controversial and has implication for other policy:
- 1) Can table discussion until after we create the reliability standard than can account for deliverable megawatts, could also be implications for PC obligations; would be a benefit for interconnections and distributed resources, would lower PC value and obligation to reach equilibrium and staff could look to this metric
- 2) Could make a policy cut, could consider this at the February 16th open meeting & have two more weeks to think about policy cut; could direct staff on policy direction for discussion draft, comes down to value judgement on the part of PUC; if we believe distributed resources are good we may determine they should get their own rate
- McAdams – Think we should give this more time & thought, two weeks should give staff more time and PUC to consider
- Glotfelty – World has changed since previous rule was passed, finding that economics means we need to address this; okay with waiting two weeks; thinks they should be considered wholesale resources and costs uplifted to TCOS
- Glotfelty – Just want to get it done quickly, okay with moving on interconnection agreement
- McAdams – Advocates moving forward with interconnection agreement regardless
- PUC Staff – This is a different project, rulemaking calendar is posted and there are no plans to delay the interconnection agreement
- McAdams – If we are somehow able to build rational and methodology that these distribution level resources would be uplifted to TCOS, this is a large policy decision, but policy cutline is not a systemwide policy action; impact of cutline would be at distribution level, PUC would only be affecting distributed resources in competitive areas of the state
- Glotfelty – There are desirable and valuable places for these resources to be interconnected
- Chair Lake – They get to control some part of their policy that we don’t touch, might be good to examine what’s happening there and how to proceed
- McAdams – We control the T side, DCRF applies to our competitive areas & we don’t touch he nodes; hard policy to overcome; need to consider this over the next two weeks, but a lot of megawatts are waiting on this
- Cobos – Ultimately making decisions on cost allocation, many different types of these resources, not sure I can get there on two weeks; maybe until after reliability standard
- McAdams – Said two weeks to hold myself accountable and keep trying to develop this; a lot of these issues are relying on reliability standard
- Cobos – Would like to have more time & maybe it dovetails into reliability standard discussion, with standard we would have a metric
- Glotfelty – “Loads pay” has been law of the state since we unbundled in 1995, just urging all to take their time to do this quickly
- Chair Lake – Big enough policy decision that we need to be thorough
- PUC Staff – Staff will be running at full speed on some project
- Glotfelty – Other regions are facing the same issues, can learn from what other regions in the US are doing
- Chair Lake – Wherever we end up can by somewhere on a spectrum, not necessarily either/or; first decision we need to reach is whether or not deciding this depends on reliability standard
Item 26. Docket No. 53992 – Entergy Texas, Inc.’s Statement of Intent and Application for Approval of Rate Schedule UODG (Utility-Owned Distributed Generation). (Discussion and possible action)
- Cobos – McAdams filed a memo on this issue
- McAdams – Wanted to order agenda this way to have discussion on DERS first, Entergy is located in MISO; important to consider reliability standard for ERCOT
- McAdams – Everyone wants to grow into a regional, granular reliability standard; want to hear what MISO has, what cost they are trying to peg to
- Cobos – All of MISO is on a 1 in 10 reliability standard, in MISO South they are exceeding the .1; MISO in general is looking to modify market design, they have capacity market right now and saw issues recently, looking to expand to seasonal construct with minimum capacity obligation
- Cobos – MISO South’ reliability standard is being met & exceeded; question is how allowing Entergy to use these resources will benefit MISO & what is the benefit to the customers; difference from the May 12th tariff discussion is that it was underpinned by existing PUC rule, but there is no rule here
- McAdams – Entergy is unique, in a hurricane & tornado prone area of Texas, resiliency is important to customer base; if you want mass deployment, you expand to systemwide tariff, but question is if we’re ready for this distribution-level resource integration
- Chair Lake – Doesn’t feel like we are, points made is good indication that we don’t have structure to decipher all of this
- McAdams – Thought we could use this as a vehicle to address policy; can expend staff effort or could sit for a time under existing framework; do we want to consider rulemaking at this time?
- Cobos – And are we going to tie our hands in a larger rate case?
- Chair Lake – Don’t want to not act, but we need to either put structure in place or have a rate case, but neither done today
- McAdams – Or legislature can pass a law and tell us what to do
- Cobos – Can see & understand tornadic risk in the area; need framework or rulemaking
- Chair Lake – Hopefully Entergy is listening and understands we are not ready to move on this today or in the next two months
- Chair Lake – Comfortable with tabling this for the time being?
- Cobos – Think we need to give direction back on withdrawing application or sending back?
- Chair Lake – Good point, can direct to withdraw
- PUC Staff – Think intent is clear; do you want to table, abate?
- McAdams – Remand back to ALJ with instruction to ask Entergy to withdraw?
- Chair Lake – Remand to ALJ to dismiss within two weeks?
- Motion to remand consistent with instruction passes
Item 27. Project No. 21072 – Goal for Natural Gas Generating Capacity. (Discussion and possible action, including Waiver of Filing Requirement and Annual Report for 2023).
- Chair Lake – Annual process
- Glotfelty – Would have consented this, goal includes provision that trading mechanism be put in place if capacity drops below 50%; want to consider this within context of ORDC, PCM, etc.; not immediate, but understanding hat we have another mechanism in law from SB 7
- Chair Lake – 50% excluding renewables? 50% of dispatchable
- McAdams – According to you; policy and mechanics do not make sense if you exclude renewables; if underpinning requires that over 50% of capacity is NG, but renewables are the dominant share and if you don’t include renewables what is the point; staff has good reading, but I disagree (with the exclusion)
- Chair Lake – What is our current?
- PUC Staff – 88% is fueled by NG, not going to get anywhere near 50%
- Chair Lake – Of dispatchable fleet have pretty healthy percentage of NG
- Glotfelty – We do?
- McAdams – Not good enough
- Motion to approve passes, 4-1 with McAdams voting no
Item 30. Project No. 53298 – Wholesale Electric Market Design Implementation. (Discussion and possible action)
Kristi Hobbs, ERCOT
- Following instruction from last meeting, filed memo on plans to get back to PUC on bridging solution; have started to put together menu of options for deliberation and consideration
- Goals include 1) retention of existing fleet, 2) consider incentives for new dispatchable generation, 3) opportunity to limit use of reliability mechanism
- Looking at all of these to optimize cost to consumers
- Will work over the next few weeks to present at the February meeting of the Reliability & Market Committee of ERCOT, then will want to have ERCOT-led stakeholder discussions, final recommendation to ERCOT committee in April, then can bring it to PUC to deliberate at the April 27th open meeting
- Chair Lake – Makes sense to me
- Cobos – Options focused on retention of existing fleet and to send price signal for retention?
- Yes
- Cobos – When committee considers recommendations it will then go to full ERCOT board?
- Yes
- McAdams – Important to have ERCOT input on removing ERCOT from command & control posture; important that legislature knows we are moving, timing is just right
- Cobos – Highlights RUCing issues, need info on this and age range of units being RUCed
Item 33. Project No. 54444 – CY 2023 Reports of the Electric Reliability Council of Texas. (Discussion and possible action)
Chad Seely, ERCOT
- Speaking on Phase II of firm fuel supply service, filed Request for Guidance letter on Monday, need guidance on definition of “qualifying pipeline”
Marcia Hook, Kirkland & Ellis LLP, ERCOT Outside Counsel
- Framework doc contains requirements for FFSSR:
- Generation entity or affiliate must own or have good title to sufficient NG in storage facility to deliver for at least 48 hours, must also commit to maintain during all times
- Must have firm gas storage agreement with operator of storage facility to be able to deliver for at least 48 hours, must contain sufficient withdrawal provision
- Generation entity can use its own storage facility if it has sufficient resources
- Must enter into firm delivery agreement on qualifying pipeline, qualifying pipeline will be discussed later; agreement must allow generation entity or affiliate to monitor capacity of pipeline & storage or pipeline operator must provide reasonable estimate of daily and monthly receipts and delivery of gas
- Must contain qualifying force majeure provision, incl. provision that storage or pipeline operator must incur reasonable costs to overcome force majeure before invoking
- Includes reporting requirements from FFSSR to ERCOT and other enforcement provisions
- ERCOT has received public comment on this, incl. allowing bundled agreements; saw the most comments on proposed definition of qualifying pipeline
Chad Seely, ERCOT
- Qualifying pipeline has been discussed extensively by industries; in building definition, made clear it applied to FERC interstate and any interstate that is not serving Human Needs or LDCs
- Received a lot of comments from gas industry that firm commitment would mean very low risk of curtailment for these resources
- ERCOT maintains the definition of qualifying pipeline is the most conservative
- Goal is to try and finalize this no later than June board meeting, possibly by April
- Also asking for guidance on other topics: 1) duration of the product, currently 48 hours under Phase I, 2) additional resources participating in the program
John Arnold, Locke Lord, Enterprise Products
- So long as definition of qualifying pipeline excludes intrastate pipelines
- 85% of ERCOT generation are served by intrastate pipelines, these pipelines providing services to generating resources also provide service to local distribution; current qualifying pipeline definition will exclude vast majority of pipelines in Phase II & create severe limitation on available gas
- Highlights Kinder Morgan, significant portion of resources available in ERCOT
- Seeing resiliency with firm gas and storage contracts
- Underground storage facilities and pipelines are naturally weather resilient, new weatherization rules have hardened aboveground facilities; with respect to new curtailment process, it is up to gas delivery pipeline to issue orders, not directed by PUC; this solves the supply problem that happened with Uri
- Urges PUC to consider definition that includes intrastate pipelines
PUC Discussion
- Chair Lake – I know ERCOT has been working towards defining a performance result, not picking and choosing who is in, didn’t discuss intrastate versus interstate; also working from thesis that we don’t want to use ratepayer money to pay for the same behavior
- Chair Lake – Ultimate goal is to put ratepayer money out into market for both industries to compete for; still some open questions about bundling, qualifying pipeline definition is still a key sticking point, still waiting to hear from stakeholders & ERCOT; need another two weeks
- Chair Lake – Looking to get more information on performance during Uri, question is if everyone would’ve been able to deliver if 80% had firm contracts during Uri, rather than just 10%; also open questions on the distinctions between molecule ownership in storage & transport, curtailment restrictions under RRC rule if these apply to regulated pipelines or a 3rd party shipper or affiliated element of a regulated pipeline. Important to keep digging through issues to capture most gas possible.
- Glotfelty – Is there a way to bifurcate definition of qualifying pipeline, and could it or should it be done, based on where it is around the state? Lots of Gulf Coast not much interstate in central Texas.
- Arnold – Concern would be to the competitive signal part of the equation & if you’re limiting incentive for facility and resource growth
- Glotfelty – Maps are pretty obvious with interstate void along I-35; should find a way that intrastates are in this, but in terms of priority putting those who have gas heat above electric heat. Interesting that Kinder Morgan has 24k megawatts of gas-fired generation on intrastate; do Human Needs have firm resources? On Kinder Morgan pipeline, how many MWs for human needs
- LDC represents about 15%, generation is around 32%, industrial 30%
- 96% of customer basis is served on firm basis, but only 15% of gas delivered
- Chair Lake – Need to know how the whole system comes together, e.g., how much of total are LDCs?
- Arnold – Will vary from pipeline to pipeline
- Glotfelty – Would you rather have a modified definition of qualifying facility to include intrastate or have a modified curtailment order?
- Would rather have former than the latter, but would say Kinder Morgan and Enterprise view delivery to generation on par with Human Needs and LDCs
- View within industry that these are on par and hopefully can be treated such in the future
- McAdams – Chad Seely, how much firm fuel did we use during Elliot?
- Seely – 8 resources out of 19, max was around 900 megawatts, made decision to refuel those 8 that were deployed.
- McAdams – In terms of magnitude of use, any megawatt helps; we have a great tool in place with Phase I, Phase II is appropriate, Phase III could be in the future if we don’t get this perfect.
- McAdams – On the map, North has lack of storage facilities that would help manage through large-scale Uri type event, concentrating along Gulf Coast doesn’t solve the problem; ultimate goal is to create a market & need to think hard about this. RRC policies will evolve.
- Cobos – If we were to change qualifying pipeline definition and modify to include intrastate that serves Human Needs, that would include other pipelines aside from Kinder Morgan and Enterprise, would open gates for all intrastates
- Cobos – In terms of duration, need to conduct survey to see what megawatts are out there; personal preference is for 48 hours; should also ask about additional on-site fuel storage capability; need to understand costs and have more transparency for Phase I & II
- Chair Lake – All things we can take up when we define Phase II
- Arnold – ERCOT started from standpoint of building framework focused on accountability, incl. enhanced contract provisions
- Jackson – Curtailment also exists on interstate pipeline, depending on conditions could also play into issues with intrastate pipelines
- Seely – Not eliminating curtailment with this product, though FERC is on pro rata basis
- Allowing FERC to participate with understanding that there is risk of curtailment; not like the RRC rule that will first reduce supply from the generation resources
- Goal with definition was to make sure firm really is firm and consumers are getting reliable service
- Hook – Under curtailment order, priorities lower than generation resources would get curtailed; data from pipelines suggests that we would have to face very high reduction in capacity before have to decide between generation resources and LDCs
- Policy decision is if you want everyone treated equally or if there is a priority system
- McAdams – Important thing for ERCOT is managing expectations and in worst case scenario we can count on so many megawatts; under current framework everything goes down or we have varying degrees of pro rata share
- Glotfelty – If we would change qualifying pipeline to include intrastates, would they accept the framework laid out here, or do they have concerns? Would we not get them in?
- Arnold – There is some hesitation about that, they need to weigh hesitation versus premium from participation
- When faced with incentive, have seen them be willing to face the requirements; will likely be a mix of those who want to participate and not
- Cobos – With any product, we send the signal and market will have to accommodate; not the other way around
- Chair Lake – Important point, goal is to incentivize changes in behavior
- Arnold – Opportunity here is greater incentive than disincentive from having to change commercial practices
- Hook – If pipelines are willing to change behavior, info transparency would be a substantial change for intrastate pipelines, contracts provisions would be much stronger with force majeure, etc.; pretty big benefit from the product
- Chair Lake – Good discussion, everyone comfortable with waiting a couple weeks to continue
