WEBVTT

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Good morning. This meeting of the Public Utility Commission of

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Texas will come to order. To consider matters that have

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been duly posted with the Secretary of State of Texas

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for January 26, 2023. For the record, my name is Peter

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Lake and I'm joined by Will McAdams, Lori Cobos, Jimmy Glotfelty

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and Kathleen Jackson. Ms. Cisneros, would you please walk through

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our consent agenda today? Good morning Commissioners.

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By individual ballot, the following items were placed

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on the consent agenda. Items 3 through 7, 9 ,10, 11,

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14 ,16, 17, 19, 20, 21, 22, 25, and 34.

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Thank you, ma'am. Do we have a motion to approve the items

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just described by Ms. Cisneros?

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Motion and a second. All in favor say, aye. Aye. None opposed, motion

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passes. We will not be taking up Item 23 today. So

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we will begin with the first item on our agenda, Public

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Comment. As always, oral comments related to specific

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agenda item will be heard when that item is taken up.

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This segment is for general comments only. When we get

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to oral comments on specific items, stakeholders should

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not approach the table. Unless oral argument has been

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granted or they have been invited by a Commissioner.

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As usual, speakers will be limited to 3 minutes

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each. Ms. Cisneros, do we have any from the public

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signed up to speak? Yes sir, we have 5 people that

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have signed up for Public Comment this morning. All

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right, let's start at the top. All right. I'll call

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the first person up, Angela Cervantes.

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(silence)

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Sit right here.

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Just sit. This is not a good start.

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Bad omen?

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Good morning, welcome. Good morning. Excuse the nerves.

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(item:1:Angela Cervantes concerning CenterPoint substatation) Good morning, my name is Angela Cervantes and I am

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a resident of the Red Oak Acre subdivision in Seabrook,

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Texas. I'm speaking today on behalf of the entire neighborhood.

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Against a substation that CenterPoint is planning

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to build inside of our one way in, one way out subdivision.

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Sandwiched between established homes as close as 50

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ft from a resident's home interior. Furthermore adding,

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this land has been zoned residential since it's purchase

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by HL&P in 1960. We have received support from

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Representative Dennis Paul, who in a meeting realized

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that CenterPoint misrepresented the location and impact

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of the substation. The city of Seabrook, who is vocally

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against the chosen location, but believes their hands

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are tied due to imminent domain. In Harris County, who

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realized the gravity of this location choice, and pulled

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in a team of site engineers to facilitate a new suitable

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location for the substation. Harris County's progress

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failed because in Harris County's words, CenterPoint

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moved the goalposts and tightened their requirements

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and ultimately, it was deemed that there was no available

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land in the limited acceptable area to CenterPoint.

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Because CenterPoint also stipulated that the subdivision,

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the substation had to be within Seabrook's boundaries.

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CenterPoint has stated repeatedly that this substation

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is critical due to rapid growth in the Seabrook area.

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I will point out that Seabrook is landlocked. In according

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to recent data only growing at a rate of 1.2% with

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a less than 2% population increase last year. Cities

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just south of us, such as League City are growing at

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a rate of 2.5, 2.56% annually with an increase

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of 8.9% population. In Nassau Bay, at a rate of 2.39

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with a population increase of 7.5. CenterPoint refuses

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to answer the question, what percentage of Seabrook

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will this substation benefit? But repeats the mantra

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over and over that Seabrook is rapidly growing and

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needs the substation. We provided CentrePoint, the City

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of Seabrook, and Harris County, a spreadsheet of 6 properties

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that CenterPoint owns along the 146 corridor. To consider

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instead of inside are developed subdivision. Why were

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these not considered? According to Harris County, Center

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Point even seemed agreeable, agreeable to construct

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the substation on the east side of 146, which is plentiful

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of undeveloped industrial property. With these revelations,

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it is obvious Center Point is not acting in good faith,

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and abusing their power. CenterPoint admitted in the

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community meeting, that they have not done an environmental

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assessment of the property. This was criteria that

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Heather Caramanica from CenterPoint, listed as a

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land requirement to Harris County. The house directly

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adjacent to the proposed substation location has foundation

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issues. The home directory directly across the street

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has foundation repairs, as well as two homes around

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the corner. If we have issues with our soil and land

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composition, why wouldn't CenterPoint? Further adding

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our subdivision is in a flood zone. And CenterPoint

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has stated dependency on are currently taxed ditches

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as drainage overflow along with the retention pond.

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We asked CenterPoint how many substations have been

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constructed inside of a fully developed subdivision?

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And they could not answer. All examples provided were

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neighborhoods built around a substation after the fact.

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These homeowners paid the price accordingly and accepted

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the risks associated with the proximity. This risk

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is being forced upon our residents. Three CenterPoint

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substations have caught fire within the last 5 years,

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one as recently as July of 2021. The placement of this

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substation 50 ft from a residence is in one word, negligent.

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Ma'am, your time has ended. Go ahead and wrap it up, one final thought. Thank you. We understand CenterPoint

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feels that this substation is necessary for growth

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in the area. But we do not understand nor has it been

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explained, why inside of an enclosed established subdivision.

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When there is a vast supply of undeveloped industrial

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properties nearby. By allowing them to construct the

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substation in fully developed and close subdivision,

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with one way in and one way out. Is risking the livelihood,

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health, safety and well being of this neighborhood

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and our kids. We are pleading with you to intervene

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on this project before something goes wrong. This is

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negligent of them and the risk is way too high on us

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to be on the losing end when something occurs. We matter

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too and we need your help. Thank you so much for your

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time.

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(inaudible)

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The next speaker is Jose Cervantes.

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Good morning, I'm not as good as her. I'm just speaking

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on behalf of the wildlife in our area, in our neighborhood

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basically. (item:1:Jose Cervantes, CenterPoint substation wildlife concern) So I said with that said, good morning

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my name is Jose Cervantes and I live in Seabrook, Texas,

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and I'm here to address the environmental impact. That

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a proposed CenterPoint substation in our small neighborhood

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will have on our local wildlife. I provided pictures,

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I don't know if you guys have that. That's, these are

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all recent pictures. Um, the land that CenterPoint is

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proposing to build their electrical substation is heavily

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wooded, and butts up to Armand Bayou Nature Center Reserve.

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Because of its close proximity to the Nature Reserve,

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the wildlife in that area is well protected, abundant

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and thriving. There is families of deer, armadillos,

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migratory birds, hawks, migratory butterflies and even

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a bald eagle that frequents that tree line. That Center

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Point is proposing to build on. Our concern is that

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CenterPoint in order to build a substation. Will

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need to cut down most of those trees, which will greatly

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impact their habitat. Forcing them closer to a nearby

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highway, uh to a busy highway. And please I plead, I

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plead with the PUC to help us protect the wildlife.

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And with my children here, who I woke up at 4am.

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to get here. Uh, they would love to see that there is

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people like yourselves with, with powers and responsibilities

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to change things. To have the courage to be heroes and

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protect the earth's natural habitats. All it takes

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is for you guys to pause for a moment. Reevaluate

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the impact of this substation will have in our small

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neighborhood, and the wildlife that it shares with us.

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Because we feel like, we moved into that area because

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of those trees and and everything that came with it.

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So thank you guys. Thank you. Ya'll have a good day. Point out, that's a picture of a bald

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eagle.

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May I ask you a question, sir? Um, there are two um, pictures

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in here. One of them has the substation, kind of at

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the back of the neighborhood. And one of them has it

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at the front of the neighborhood. Do you know which

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one it is? Uh, no sir. That's, that's just so, our neighborhood's

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like a circle. So uh, my home it says home. It's, it's

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to the corner of that. That's where it's proposed to

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build. To the left of that, where it's just wooded.

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That's the second proposal to build. So there are multiple sites, potential sites. So the way I see

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it, it's in the neighborhood, there is no. If it was

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like towards the back of the neighborhood, I probably

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wouldn't be here. You know, like where I couldn't see

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it. Got it. But, thank you. Thank you.

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(laughter)

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Each, each one of these gets better. You did great.

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Next up, Ms. Cisneros. All right, the next speaker is Marcus Phelps.

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(item:1:Marcus Phelps, CenterPoint substation health concerns) Good morning. I bet ya'll can't guess why I'm here. Uh,

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my name is Marcus Phelps. I live at 2526 Loganberry

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Circle in Seabrook. I'd like to also speak regarding

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the health concerns with the proposed substation in

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the Red Oak subdivision. Uh, first of all, I am a 100%

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disabled vet. I served 21 years in the United States

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Navy as a Radar and Communications Systems Technician.

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I have an intimate knowledge of electricity and 

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EMF. I used to take light bulbs and hold them up

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in front of the radar and watch them light up in my

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hand. With that being said, this proposed this proposed

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substation is 134 ft from my front door. I completely

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understand the need for electrical power with the uh,

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you know the freeze last year, and with the growth that

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we're experiencing. But, EMF is something that's

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real. Uh, typical substation generates about 0.5 micro

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tesla of EMF out to about 300 ft. This level

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is affected of course by shielding and, and things like

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trees that they want to cut down. Currently, Texas

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has no regulation of shielding or distance from homes

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for power lines or substations. The PUC claims it uses

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a de facto prudent avoidance per its March 1992 study

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titled, "Field Effects of Exposure to Power Line Frequency

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an Electromagnetic Fields." To determine the

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safe distance for these from homes and residents. In

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this study, the PUC references several federal and

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state agencies such as the CDC, The National Center

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for Health Statistics, and OSHA. That state there's

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no definitive proof that EMF has health effects.

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But the same report also states that there's no proof

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it does not, and further study is needed. That was

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30 years ago and no studies have been conducted since.

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So my question is, what is prudent prudent avoidance?

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Uh, there's several articles out that talk about the

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safe distance from a um, substation. The number that

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keeps coming up is 300 ft. Sir, you have one minute. Okay.

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Uh, with that, like I said I'm a disabled veteran. I suffer

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from PTSD back in 2012. They did a study where they

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took mice that had PTSD and they introduced them to

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an electromagnetic magnetic field. Uh, then they turned

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those mice loose into a field and to see what would

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happen. The mice that were not exposed to the EMF,

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froze to death. The or the vice versa. The mice

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that were exposed to the EMF froze to death. They

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lost their fear. The electromagnetic frequency caused their

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fear to be canceled. Those who had not been exposed

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huddled up and found safety. So my question is there's

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22 veterans a day that commits suicide in the United

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States, per VA uh report. I don't want to be a guinea

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pig. To find out if EMF makes me more vulnerable

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to suicide or not. I really don't want that. There's

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children that live in this neighborhood, that are gonna

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be less than 300 ft away from the substation. EMF

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has been proven to show, cause childhood leukemia.

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So we're just asking you to look at all the factors

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that are involved in this substation, and where it's

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going. Thank you. Thanks for being here.

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Next. Next speaker is Stacy Gaona.

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(item:1:Stacy Gaona, concerning CenterPoint substation) Morning. Welcome. My name is Stacy Gaona also live at 2526

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Loganberry Circle in the Red Oaks subdivision. And I'm

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here to talk about the proposed substation. I know

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uh, Mark mentioned some articles that were written by

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a person called Jordan Mitchell. Uh, Jordan Mitchell

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is a certified EMF Consultant and her research

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and findings are available on a web, her website beat

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emf.com. Uh if you, we have documents that

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we are happy to provide to you guys after this meeting.

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If you want to be able to do more reading on what

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we're bringing up. Uh, he also mentioned a case that

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Klein ISD had against a CenterPoint, when it

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was HL&P. And in that case a jury and

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a judge, found that CenterPoint had a blatant disregard

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for the health of children in a proposed substation.

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That they had and they put a stop to it. And I

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know that Seabrook is a small city and our subdivision

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is extremely small. Uh and there's a handful of children

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that live in the subdivision, subdivision as well as

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a daycare one street over. Uh, so I know that Klein

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ISD is a big school district, but we feel like

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we matter uh every, every life matters. And uh, we also

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feel like CenterPoint has really misrepresented this

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site to the Public Utility Commission. Uh, they talked

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about the, my neighbors talked about the exponential

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growth to put numbers to those percentages. In 2010,

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the Seabrook census, we had 11,952 people in our city.

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In our 2021 census, 11 years later we, our census has

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13,560 people living in our city. So that is an increase

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of less than 2000 people, where CenterPoint has called

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an exponential growth. And has said that they don't

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have any other viable options for this substation.

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However, they are also on record as telling our city

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and our subdivision. That the substation is mainly needed

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for power to the North and South of Seabrook. Ma'am, you have one minute.

00:15:08.720 --> 00:15:12.960
One minute, thank you. Um again, my front door will

00:15:12.960 --> 00:15:16.850
be 134 ft from this. We also have this tree

00:15:16.850 --> 00:15:21.139
line not only protects us uh, as far as you know providing

00:15:21.139 --> 00:15:23.490
the wildlife and stuff. But right on the other side

00:15:23.490 --> 00:15:26.299
of the tree line, we have the highway, railroad tracks,

00:15:26.299 --> 00:15:29.919
and a Geon Plant, a chemical plant. So at the point

00:15:29.940 --> 00:15:32.519
that CenterPoint removes all of that. Our neighborhood

00:15:32.519 --> 00:15:34.580
will, we will no longer be living in a neighborhood,

00:15:34.580 --> 00:15:37.950
we will be living in an industrial complex. And if

00:15:37.950 --> 00:15:41.490
you look at the research on property values. A research

00:15:41.490 --> 00:15:44.509
study that was done by an appraisal group in Wisconsin

00:15:44.509 --> 00:15:47.169
and presented to the Public Service Commission, Commission

00:15:47.169 --> 00:15:51.929
in Wisconsin. They found that there is a 30-40% decrease

00:15:51.929 --> 00:15:54.269
in property values for homes where a substation is

00:15:54.269 --> 00:15:57.840
constructed close by. Part of that study include, they

00:15:57.850 --> 00:16:01.019
referenced a study done by a man in the Houston area,

00:16:01.019 --> 00:16:05.399
David Bolton. Where he said that their property values

00:16:05.399 --> 00:16:09.240
in the Houston area were also 30% lower. Again, we

00:16:09.240 --> 00:16:12.110
can follow up with further documentation. But we ask

00:16:12.110 --> 00:16:14.879
you to please look closer at this and please help our

00:16:14.879 --> 00:16:17.250
neighborhood in our community. Thank you for your time.

00:16:17.259 --> 00:16:18.450
Thank you for being here.

00:16:21.980 --> 00:16:24.299
All right. The last speaker is Cyrus Reed.

00:16:33.370 --> 00:16:35.549
(item:1:Cyrus Reed, Sierra Club on energy efficiency) Hello, good morning Commissioners. Cyrus Reed, Sierra

00:16:35.549 --> 00:16:38.399
Club. That's a hard act to follow. I'm not gonna talk

00:16:38.399 --> 00:16:41.500
about Seabrook, but appreciate them coming today. Um,

00:16:41.509 --> 00:16:45.149
I'm really here to praise the Commission. Um, for opening

00:16:45.149 --> 00:16:48.909
up a stakeholder dialogue about energy efficiency.

00:16:48.919 --> 00:16:51.379
Uh, starting this week and going through March 9th.

00:16:51.379 --> 00:16:55.029
There'll be a series of workshops and meetings being

00:16:55.029 --> 00:16:59.740
led by your, your team by Tetra Tech. Um, it's all been

00:16:59.750 --> 00:17:04.700
filed in Project 38578. If you didn't sign up for

00:17:04.700 --> 00:17:08.190
the one of the working groups, you're too late to participate

00:17:08.190 --> 00:17:11.549
directly. But you're not too late to give input and

00:17:11.549 --> 00:17:14.759
listen in. And so I would urge any stakeholders interested

00:17:14.759 --> 00:17:18.140
in energy efficiency around all of these issues. Uh,

00:17:18.150 --> 00:17:21.680
to look in that project and, and participate and provide

00:17:21.680 --> 00:17:24.900
input. And I appreciate your leadership in this issue.

00:17:24.900 --> 00:17:27.579
You know, it's an important issue to all of us. Uh, and

00:17:27.579 --> 00:17:30.950
Whatever we do on the on fixing the grid. Making sure

00:17:30.950 --> 00:17:34.690
that the programs and projects we have are as efficient,

00:17:34.690 --> 00:17:36.819
and well done as possible is gonna be important. So

00:17:36.829 --> 00:17:39.420
public service announcement and thank you to the Staff

00:17:39.420 --> 00:17:42.079
and, and Commissioner Jackson, thank you. Thank you

00:17:42.079 --> 00:17:42.609
sir.

00:17:45.759 --> 00:17:49.099
I believe that concludes our public comments, is that correct?

00:17:50.079 --> 00:17:54.500
Correct. I know uh, Commissioner Glotfelty has always been

00:17:54.500 --> 00:17:57.170
a big advocate for getting more transmission out of

00:17:57.170 --> 00:18:03.769
the same space. That's right. So, we'll always look to him for issues

00:18:03.769 --> 00:18:08.670
like that. That brings us to Item No. 2, on our

00:18:08.670 --> 00:18:11.170
agenda. Ms. Cisneros, could you lay that out for us?

00:18:11.180 --> 00:18:16.670
(item:2:49242, Commissioner McAdams on TX Water Utilities) Yes sir. Item No. 2 is docket number 49242 is the

00:18:16.670 --> 00:18:20.259
application of Texas Water Utilities, LP. For a pass

00:18:20.259 --> 00:18:23.710
through gallonage charge. A revised proposed order

00:18:23.710 --> 00:18:26.740
was filed on December 1st, and Commissioner McAdams.

00:18:28.490 --> 00:18:33.529
Commissioner McAdams, would you like to lay it out for us. Certainly Mr. Chairman and thank you. Uh,

00:18:33.539 --> 00:18:36.509
members I filed a memo in this docket, I know you saw.

00:18:36.519 --> 00:18:39.950
Recommending that we remand this case, for the parties

00:18:39.950 --> 00:18:44.049
to provide clarification. Um the, the application is

00:18:44.049 --> 00:18:47.390
for Texas Water Utilities to increase its pass through

00:18:47.390 --> 00:18:53.440
rate from $0 or cents to 69 cents per 1000 gallons.

00:18:53.890 --> 00:18:56.500
It's a straightforward application, but it has taken

00:18:56.500 --> 00:19:00.349
a while in our processes. Um, because it was abated twice.

00:19:00.359 --> 00:19:04.349
Bless you. Um, it was abated twice to work on related

00:19:04.349 --> 00:19:07.170
pass through issues for the utility and other dockets.

00:19:07.690 --> 00:19:10.980
And in early 2020, Commission Staff filed an agreed

00:19:10.990 --> 00:19:14.140
final recommendation. To increase the pass through rate

00:19:14.150 --> 00:19:20.109
from $2.27 per 1000 gallons. And also to decrease the

00:19:20.109 --> 00:19:23.490
Texas Water Utilities approved gallonage base rates

00:19:23.500 --> 00:19:27.789
by a dollar uh, 68 cents per 1000 gallons for all tiers

00:19:27.799 --> 00:19:32.059
of their usage. It appears Commission Staff was trying

00:19:32.059 --> 00:19:34.690
to ensure that all pass through expenses are recovered.

00:19:34.700 --> 00:19:37.299
Through the separate pass through charge and not in

00:19:37.299 --> 00:19:41.859
base rates. The silver lining in uh, to the many delays

00:19:41.859 --> 00:19:44.759
that was experienced over the years. Is that the docket

00:19:44.769 --> 00:19:47.789
um, is that these issues previously identified by Commission

00:19:47.789 --> 00:19:50.980
Staff were resolved. In the recent base rate docket

00:19:50.990 --> 00:19:54.390
for Texas Water Utilities, which we handled. Um, that

00:19:54.390 --> 00:19:57.079
case was resolved by agreement of the parties pass

00:19:57.079 --> 00:19:59.509
through rates were one of the issues the party specifically

00:19:59.509 --> 00:20:01.880
addressed in the agreement. And the Commission approved

00:20:01.880 --> 00:20:04.980
a tariff for Texas Water Utilities, including the pass

00:20:04.980 --> 00:20:08.309
through rates. So during the base rate case, this pass

00:20:08.309 --> 00:20:10.569
through docket was abated until the final related

00:20:10.569 --> 00:20:13.640
pass through rates issues were finally resolved. And

00:20:13.640 --> 00:20:18.230
in the meantime, extensive turnover had occurred within

00:20:18.230 --> 00:20:22.259
PUC Staffs. Which ultimately appeared to affect the

00:20:22.259 --> 00:20:27.099
recommendation not being updated. So where does that

00:20:27.099 --> 00:20:29.990
leave us now? It seems that the remaining issues are

00:20:29.990 --> 00:20:34.089
limited. First, approving the pass through rate of 69

00:20:34.089 --> 00:20:37.009
cents from the date the application was filed until

00:20:37.009 --> 00:20:39.190
the date interim rates went into effect in the base

00:20:39.190 --> 00:20:43.009
rate proceeding. And then second, the refund owed to

00:20:43.009 --> 00:20:46.589
customers of two water systems, that Texas water Utilities

00:20:46.599 --> 00:20:51.079
agreed to. On remand, I believe the parties can confirm

00:20:51.079 --> 00:20:54.670
this or clarify these issues, if there are is something

00:20:54.670 --> 00:20:58.490
I may have missed. Otherwise, my memo lays out my concerns

00:20:58.490 --> 00:21:01.369
and recommendations. I don't believe this is the fault

00:21:01.369 --> 00:21:05.140
of any of the parties including Staff. I believe this

00:21:05.140 --> 00:21:07.490
was just a disconnection that occurred because of Staff

00:21:07.490 --> 00:21:09.809
turnover. And a number of years it took to ultimately

00:21:09.809 --> 00:21:13.299
process the proceeding. Uh, and Mr. Chairman, I'm happy

00:21:13.299 --> 00:21:16.470
to take questions. But I have, I would move to remand

00:21:16.470 --> 00:21:20.769
consistent with the memo. Everything you said, made

00:21:20.779 --> 00:21:24.710
sense to me. Welcome questions, comments or a second

00:21:24.720 --> 00:21:31.059
to close motion? A second and motion. All in favor say, aye. Aye.

00:21:31.730 --> 00:21:35.119
Uh, none opposed, motion passes. Thank you sir.

00:21:37.079 --> 00:21:40.000
Next item, please ma'am. (item:8:53373, Commissioner McAdams on modifications/additions to memo) The next item is Item No.

00:21:40.009 --> 00:21:44.470
8. This is docket number 53373. The complaint of

00:21:44.480 --> 00:21:47.410
Andrew and Sarah Fossum against Undine Development,

00:21:47.420 --> 00:21:50.960
LLC. A draft preliminary order was found on January

00:21:50.960 --> 00:21:54.519
19th, and Commissioner McAdams also filed a memo

00:21:54.519 --> 00:21:55.519
on this docket.

00:21:57.829 --> 00:22:00.500
Yes sir. I would frame this as a bit of housekeeping.

00:22:00.509 --> 00:22:05.509
Uh, in regards to uh, questions to be asked. To be brief,

00:22:05.509 --> 00:22:08.109
I filed a memo in this docket making some modifications

00:22:08.109 --> 00:22:10.950
and additions to the preliminary order. To better understand

00:22:10.950 --> 00:22:13.700
the facts surrounding the dispute in this complaint.

00:22:13.710 --> 00:22:16.289
I believe the questions added help provide clarity

00:22:16.289 --> 00:22:20.710
for us, as this comes back to us. Uh, pending any questions,

00:22:20.720 --> 00:22:23.890
uh, I'd move to approve the preliminary order as modified

00:22:23.890 --> 00:22:27.740
by the memo. Second. Got a motion and a second. All in favor say, aye.

00:22:27.740 --> 00:22:33.450
Aye. None opposed, motion passes. Efficient work, Commissioner McAdams.

00:22:34.470 --> 00:22:38.880
Continues. Next up, Ms. Cisneros. (item:12:54041, Commissioner Glotfelty & David Smeltzer, Commission Staff) Believe this brings us to Item No.

00:22:38.880 --> 00:22:44.400
12. That's project number 54041 - Review of Chapter 24 -

00:22:44.400 --> 00:22:48.079
Substantive Rules applicable to water and sewer service

00:22:48.079 --> 00:22:51.490
providers. Commission Staff filed a memo and a proposal

00:22:51.490 --> 00:22:55.549
to readopt the Chapter 24- Substantive rules. Welcome

00:22:55.549 --> 00:22:59.920
Mr. Smeltzer. Thank you, Ms. Cisneros. Thoughts,

00:22:59.920 --> 00:23:03.579
comments? Yeah, I would like to just say something

00:23:03.579 --> 00:23:08.450
real quick about this. Um, to me the uh the industry

00:23:08.450 --> 00:23:12.130
has put forth a lot of good ideas within this um, filing

00:23:12.130 --> 00:23:14.869
for ways to streamline the docket or streamline the

00:23:14.869 --> 00:23:18.609
CCN process or the administrative procedures. Um, system

00:23:18.609 --> 00:23:22.150
improvement charges um, expedited releases, harmonizing

00:23:22.150 --> 00:23:25.119
the CCN process with TCEQ. All things that I think

00:23:25.430 --> 00:23:28.190
um, if the words are right and the process is right.

00:23:28.190 --> 00:23:31.269
That's what we want in this administrative procedure

00:23:31.269 --> 00:23:34.970
here for us, and for the industry to be efficient. And

00:23:34.980 --> 00:23:41.359
I know we've, we've talked to uh David about uh, about

00:23:41.369 --> 00:23:43.670
why these things weren't incorporated. But I just want

00:23:43.670 --> 00:23:46.420
to ask you hear publicly. These weren't incorporated

00:23:46.420 --> 00:23:52.099
because? So, according to uh Texas Register posting

00:23:52.099 --> 00:23:55.690
requirements. Uh, you know, we would have to post hundreds

00:23:55.690 --> 00:23:57.529
and hundreds of pages of rules to be able to make changes

00:23:57.529 --> 00:23:59.559
and do public comments. And so the way that we structure

00:23:59.559 --> 00:24:02.819
our rule reviews is sort of a gathering of ideas for

00:24:02.829 --> 00:24:06.450
future rulemakings. Um and you know, a lot of times

00:24:06.450 --> 00:24:08.609
we'll get to those and we keep a backlog and a list

00:24:08.609 --> 00:24:11.519
on Staff. For when we open rules, we can make updates.

00:24:11.529 --> 00:24:14.660
And uh when we have additional bandwidth and we kind

00:24:14.660 --> 00:24:17.329
of go back and see what the most pressing suggestions

00:24:17.329 --> 00:24:20.549
were that we can we can get to. So, that's great in

00:24:20.549 --> 00:24:23.319
my opinion, I mean clearly having a list of ways that

00:24:23.319 --> 00:24:26.089
we can create an efficient rulemaking process or things

00:24:26.089 --> 00:24:29.849
to do. And I hope that, you know, as we continue throughout

00:24:29.849 --> 00:24:35.660
this year. Um if, if this if the uh water and service

00:24:35.660 --> 00:24:38.970
rule Chapter 24 gets reopened. We consider these things

00:24:38.980 --> 00:24:43.920
for uh discussion within that uh that process. We certainly

00:24:43.920 --> 00:24:47.099
will. And for, for watchers who, who say, oh I know they

00:24:47.099 --> 00:24:49.009
collect these ideas and never get to them. And you know,

00:24:49.009 --> 00:24:51.690
we've only actually had a rules division for uh, you

00:24:51.690 --> 00:24:53.410
know, a little over a year and a half. And so the

00:24:54.140 --> 00:24:56.420
we fully intend to be going back and mining the old

00:24:56.420 --> 00:24:59.309
rule reviews. For stuff to do as time permits in a

00:24:59.309 --> 00:25:01.740
way that wasn't done in the past. Well this year has

00:25:01.740 --> 00:25:04.750
been extraordinarily busy with rules so uh, you get

00:25:04.750 --> 00:25:06.140
a pass this time.

00:25:07.789 --> 00:25:11.329
I appreciate, appreciate the entire Staff. And, and

00:25:11.329 --> 00:25:14.420
the process that you laid out for us. You get a pass

00:25:14.420 --> 00:25:18.769
plus a gold star for all those rulemakings. Uh Jimmy, that's a good

00:25:18.769 --> 00:25:21.940
point that these are foundational concepts for future

00:25:21.940 --> 00:25:24.440
rulemaking, is that fair? Yeah, absolutely. That's

00:25:24.450 --> 00:25:29.130
that's a good way to incorporate them and aggregate

00:25:29.130 --> 00:25:32.710
a large, large number of ideas. Any other thoughts,

00:25:32.710 --> 00:25:36.789
comments. No. All right. Is there a motion to approve the

00:25:36.789 --> 00:25:37.829
proposal for adoption?

00:25:39.599 --> 00:25:43.509
Second. Got a motion and a second. All in favor say, aye. Aye. None

00:25:43.509 --> 00:25:47.059
opposed, motion passes. Well done, enjoy the gold star

00:25:47.059 --> 00:25:47.299
Mr. Smeltzer.

00:25:49.309 --> 00:25:53.450
I don't think we have anything on 13. Where, what does

00:25:53.450 --> 00:25:57.400
that bring us to, Ms. Cisneros? If there's nothing on 15, I believe

00:25:57.400 --> 00:26:00.650
that brings us to Item 18. Alright, would you lay

00:26:00.650 --> 00:26:04.220
that out for us? Certainly. (item:18:52728, Commissoner McAdams & Commissioner Cobos, on College Station wholesale transmission service rate increases) Item No. 18 is docket number

00:26:04.220 --> 00:26:07.690
52728. This is the application of the City

00:26:07.690 --> 00:26:11.079
of College Station to change rates for wholesale transmission

00:26:11.079 --> 00:26:14.819
service. A proposed order was filed on November 17th.

00:26:14.859 --> 00:26:18.200
The ALJ filed corrections memo on December 6th and

00:26:18.200 --> 00:26:20.170
the Commission Council memo was filed with proposed

00:26:20.170 --> 00:26:21.420
changes to the order.

00:26:23.569 --> 00:26:28.690
Uh, certainly some, a variety of elements in this one.

00:26:28.700 --> 00:26:32.750
Uh, eventually some gaps, we'd love to hear ya'll's thoughts

00:26:32.750 --> 00:26:39.730
and comments on, on this docket. Well uh, I hate to

00:26:39.740 --> 00:26:44.259
do this. I'm a good Aggie, um but. That's why I let

00:26:44.259 --> 00:26:44.759
you go first.

00:26:46.269 --> 00:26:52.009
Um. Well played Commissioner Cobos. While I appreciate the efforts of the parties uh,

00:26:52.019 --> 00:26:54.640
to come to an agreement. I believe that we need to

00:26:54.640 --> 00:26:57.750
either remand uh, this for the parties to continue working

00:26:57.750 --> 00:27:02.059
on it or to deny the application altogether. There

00:27:02.059 --> 00:27:04.490
are two major issues within the settlement and the

00:27:04.490 --> 00:27:08.589
proposed order. First, uh I recommend that we find

00:27:08.589 --> 00:27:11.900
College Station was not entitled to recover any of

00:27:11.900 --> 00:27:14.119
its general transfer payments or payments in lieu of

00:27:14.119 --> 00:27:17.839
taxes to the City, including in its interim wholesale

00:27:17.839 --> 00:27:21.549
transmission proceedings. Interim T cost proceedings

00:27:21.559 --> 00:27:25.869
are reserved for changes in invested capital, not payments

00:27:25.869 --> 00:27:29.549
in lieu of taxes or other transfer payments. To be clear

00:27:29.549 --> 00:27:32.609
these payments are not an interim transmission investment.

00:27:32.619 --> 00:27:35.859
Nor are they a federal income tax as we clearly see

00:27:35.869 --> 00:27:40.539
or other associated taxes. Because by their very name

00:27:40.539 --> 00:27:44.019
and definition payment in lieu of taxes or transfer

00:27:44.019 --> 00:27:47.869
payments are not a tax at all. So by including these

00:27:47.869 --> 00:27:50.079
payments in the interim revenue requirements. College

00:27:50.079 --> 00:27:52.890
Station has been improperly increasing its rate of

00:27:52.890 --> 00:27:55.390
return above what was approved by the Commission in

00:27:55.390 --> 00:27:59.369
its last comprehensive wholesale transmission proceeding.

00:28:00.410 --> 00:28:03.769
So therefore, it is my view and I don't expect anyone

00:28:03.769 --> 00:28:06.759
to share this at this time. But in my view, I believe

00:28:06.759 --> 00:28:08.599
it is appropriate for College Station to refund the

00:28:08.599 --> 00:28:12.299
entire $31.5 million dollars. From transfer payments

00:28:12.299 --> 00:28:15.049
consistent with the Staff's original recommendation.

00:28:16.019 --> 00:28:19.950
Now, second um, now that College Station has filed

00:28:19.960 --> 00:28:22.609
a comprehensive T cost application. I believe that

00:28:22.609 --> 00:28:27.309
we should allow some general fund transfers going forward,

00:28:27.940 --> 00:28:32.730
but not at the 9% level. And that is because PURA generally

00:28:32.730 --> 00:28:35.670
requires that a utility that owns and operates transmission

00:28:35.670 --> 00:28:38.640
facilities must provide wholesale transmission service.

00:28:38.650 --> 00:28:42.259
At rates and terms including terms of access that are

00:28:42.259 --> 00:28:45.079
comparable to the rates and terms of the utility's

00:28:45.079 --> 00:28:48.940
use of its system. So, College Station should only

00:28:48.940 --> 00:28:52.319
be allowed to recover general fund transfer fees. That

00:28:52.319 --> 00:28:55.619
can be justified by a specific rationale related to

00:28:55.619 --> 00:28:58.789
the actual cost of the provision of service, and not

00:28:58.789 --> 00:29:02.700
just just compensation. The city's financial policies

00:29:02.710 --> 00:29:06.660
state that the transfer includes, but is not limited

00:29:06.660 --> 00:29:10.450
to, and in lieu of franchise fee consistent with the

00:29:10.450 --> 00:29:13.380
franchise rates. Charged to investor owned utilities

00:29:13.380 --> 00:29:17.279
to operate within the city. But according to College

00:29:17.279 --> 00:29:21.119
Station, it charges investor owned utilities 5% franchise

00:29:21.119 --> 00:29:25.019
fee, uh, to operate within that city. And I agree with

00:29:25.019 --> 00:29:28.720
Staff's assertion, that the remaining 4% did not appear

00:29:28.720 --> 00:29:32.000
to be supported by an express rationale. And so College

00:29:32.000 --> 00:29:34.710
Station did not provide justification for including

00:29:34.710 --> 00:29:38.589
the 9% general fund transfer in return, uh, in the

00:29:38.589 --> 00:29:42.559
return calculation. So therefore, I believe that the

00:29:42.559 --> 00:29:46.859
9% fee should be reduced to 5% of transmission operating

00:29:46.859 --> 00:29:50.849
reserves. Given these two thoughts, I believe that

00:29:50.859 --> 00:29:54.480
we should either remand this proceeding, as stated. For

00:29:54.480 --> 00:29:57.160
the parties to reach a settlement consistent with our

00:29:57.160 --> 00:30:02.829
direction. Um, and that is reasonable to this Commission

00:30:02.839 --> 00:30:06.059
or if the settlement cannot be reached, ultimately

00:30:06.059 --> 00:30:10.109
deny the application. I'd welcome any thoughts. Well

00:30:10.109 --> 00:30:10.809
put.

00:30:12.869 --> 00:30:16.970
I agree with Commissioner McAdams position in general.

00:30:16.980 --> 00:30:19.990
Um, I think we need to reject the proposed order, remand it

00:30:19.990 --> 00:30:22.569
back for additional settlement negotiations or processing

00:30:22.569 --> 00:30:25.480
of the hearing and, or denial ultimately. College

00:30:25.480 --> 00:30:27.339
Station violated the Commission's order and docket

00:30:27.339 --> 00:30:31.769
number 15762. By including in its interim T cost updates

00:30:31.779 --> 00:30:34.839
general transfer payments slash. You know, payments

00:30:34.839 --> 00:30:38.680
in lieu of taxes on the invested capital set in 1997.

00:30:38.690 --> 00:30:40.970
The Commission approved the transmission river, the

00:30:40.970 --> 00:30:43.230
Commission approved revenue requirement, transmission

00:30:43.230 --> 00:30:46.170
revenue requirement. It did include payment in lieu of

00:30:46.170 --> 00:30:49.720
taxes or any taxes, the tax expense in fact allocated

00:30:49.720 --> 00:30:52.920
to transmission, that case was set to zero. So the

00:30:52.920 --> 00:30:55.900
general transfer payments were not included in the

00:30:55.900 --> 00:30:58.519
authorized rate of return in the case. And then subsequent

00:30:58.519 --> 00:31:01.130
to that, you know, by including these transfer payments

00:31:01.130 --> 00:31:03.970
in the interim revenue requirement. College Station

00:31:03.970 --> 00:31:06.750
has been effectively as Commissioner McAdams strongly

00:31:06.750 --> 00:31:09.220
noted. Increasing its rate of return above what it was

00:31:09.220 --> 00:31:12.359
approved in their last comprehensive rate case. And

00:31:12.359 --> 00:31:20.970
these are significant increases 16.62%, 16.82%, 13.34%.

00:31:20.980 --> 00:31:23.910
That's the effect of including payment in lieu of taxes

00:31:23.920 --> 00:31:31.490
in the interim updates. And um, so I think with respect

00:31:31.490 --> 00:31:35.210
to the refund, you know, the Commission requires that

00:31:35.210 --> 00:31:37.180
any amounts resulting from an intern update. That are

00:31:37.180 --> 00:31:40.599
found to be unreasonable and necessary. Plus corresponding

00:31:40.609 --> 00:31:43.390
returning taxes shall be refunded with carrying charges.

00:31:43.400 --> 00:31:47.839
So with respect to the amount um, you know, the the

00:31:47.849 --> 00:31:50.369
little bit over $3 million. I know it's a black box

00:31:50.369 --> 00:31:53.579
settlement, there's carrying charges in there somewhere.

00:31:53.589 --> 00:31:57.819
That's not enough. And I, I lean towards where Commissioner

00:31:57.819 --> 00:32:00.599
McAdams is with the $31 million. That's a lot of money

00:32:00.599 --> 00:32:02.569
that's been, being added. And, and we're kind of in a

00:32:02.569 --> 00:32:05.569
tough position with these muney rate wholesale transmission

00:32:05.579 --> 00:32:07.839
rate cases, in general. I mean, they haven't been in

00:32:07.839 --> 00:32:11.390
in 26 years. We had a similar situation with a prior

00:32:11.390 --> 00:32:14.220
docket then. And, and that's something that we, you

00:32:14.220 --> 00:32:16.539
know, need to consider and I know that, you know, all

00:32:16.539 --> 00:32:20.819
the non-ERCOT utilities are on a schedule. Um, to come

00:32:20.819 --> 00:32:24.470
in every four years. Um, we only have jurisdiction

00:32:24.480 --> 00:32:27.569
over the city's transmission service rates. The wholesale

00:32:27.569 --> 00:32:32.049
T cost, that's uplifted to all ratepayers. And so this

00:32:32.049 --> 00:32:34.569
puts us in a bind when, when, you know, cities don't

00:32:34.569 --> 00:32:37.180
come in for 20 plus years. And we're having to clean

00:32:37.180 --> 00:32:40.059
up at the back end and all kinds of, you know, updates

00:32:40.059 --> 00:32:42.349
are made in between. And we're dealing with complicated

00:32:42.349 --> 00:32:45.359
issues. And so it's just something to keep in mind.

00:32:45.369 --> 00:32:49.609
Um, I know we have submitted our Legislative recommendations

00:32:49.609 --> 00:32:51.920
to the Legislature. And asked for the ability to seek

00:32:51.920 --> 00:32:56.539
interim rates for the cities. But you know, these are

00:32:56.539 --> 00:32:58.960
rates, these wholesale transmission cost rates are

00:32:58.960 --> 00:33:03.009
uplifted to all ERCOT ratepayers. And we must be diligent

00:33:03.009 --> 00:33:07.130
and we, we need it. I feel that we should be on

00:33:07.130 --> 00:33:09.269
some kind of schedule. Maybe it's not four years because

00:33:09.269 --> 00:33:13.059
of the amount of work that would um, impose on all

00:33:13.059 --> 00:33:15.460
of us, but maybe it's six years. I don't know what

00:33:15.460 --> 00:33:18.630
it is, but I feel like, you know, when the city stay

00:33:18.630 --> 00:33:22.230
out that long. It has a tremendous impact on ratepayers.

00:33:22.240 --> 00:33:24.019
And we have to come in at the very, you know, 20

00:33:24.019 --> 00:33:25.279
years later and clean it up.

00:33:26.950 --> 00:33:30.609
Good points all. Any other thoughts, comments?

00:33:33.549 --> 00:33:36.259
Anybody have a motion? I mean, what I'm hearing is that this

00:33:36.259 --> 00:33:39.680
this needs a lot of work. Needs this proposal clearly

00:33:39.680 --> 00:33:42.400
needs to be rejected and the docket remanded. So the

00:33:42.410 --> 00:33:48.619
parties can uh. Reach a settlement. Digest what they've heard, uh, at the

00:33:48.619 --> 00:33:52.670
diose today. And come back with a dramatically improved

00:33:53.390 --> 00:33:56.660
settlement. Is that consistent with ya'lls thinking?

00:33:56.670 --> 00:33:58.200
Yes sir. Yes.

00:33:59.940 --> 00:34:04.200
Unless you want to a. Uh no, I'm happy to let you take

00:34:04.200 --> 00:34:09.219
that because uh. On behalf of Commissioner McAdams, I

00:34:09.219 --> 00:34:09.530
so move.

00:34:11.150 --> 00:34:14.969
We'll let the horned frog take that. Well, he is wearing

00:34:14.969 --> 00:34:15.579
near maroon, so.

00:34:17.139 --> 00:34:19.519
And I would second. All right. We've got a motion and a

00:34:19.519 --> 00:34:25.480
second. All in favor say, aye. Aye. None opposed, motion passes. Next

00:34:25.480 --> 00:34:30.079
item please. (item:24:53860, Chairman & Commissioners on software proprietary information & costs allocated) I believe it takes us to Item No. 24,

00:34:30.090 --> 00:34:35.210
docket number three sorry, 53860. This is the application 

00:34:35.210 --> 00:34:39.679
of Hanover RS Construction LP. For approval of a method

00:34:39.690 --> 00:34:43.420
for system billing for heating, ventilation and air

00:34:43.420 --> 00:34:46.460
conditioning. There was a proposed order filed on October

00:34:46.460 --> 00:34:47.300
14th,

00:34:49.190 --> 00:34:53.369
and that's what's before you. Thank you ma'am. Uh, interesting

00:34:53.369 --> 00:34:58.719
dynamic in this one. Um, with a kind of interesting technology

00:34:58.719 --> 00:35:04.300
angle. Any thoughts, comments? I think we. Go ahead.

00:35:05.179 --> 00:35:07.769
Well, I was just gonna, from my perspective. I think

00:35:07.769 --> 00:35:10.090
we need to remand the application back to docket management.

00:35:10.090 --> 00:35:14.050
So that Hanover can supplement the evidentiary record

00:35:14.059 --> 00:35:18.059
with additional information. That specifies how the calculations

00:35:18.059 --> 00:35:22.389
are used by the software um are used to determine the

00:35:22.389 --> 00:35:26.380
costs allocated. So that we can effectively review complaint

00:35:26.380 --> 00:35:29.469
cases in the future. Um we also need to know what data

00:35:29.469 --> 00:35:32.159
will be available to objectively verify the accuracy

00:35:32.159 --> 00:35:35.679
of the cost allocations. And how historical data will

00:35:35.679 --> 00:35:39.119
be retained to resolve any customer complaints or compliance

00:35:39.119 --> 00:35:41.250
inquiries. In other words, what's their retention policy

00:35:41.260 --> 00:35:44.230
Yeah, sure. Yeah, I agree. You know, I don't think

00:35:44.230 --> 00:35:49.219
we want to dissuade um creativity. Um new technology

00:35:49.219 --> 00:35:52.579
softwares that will help make things more efficient

00:35:52.590 --> 00:35:56.909
when it comes to separating bills in, in multi-unit

00:35:57.139 --> 00:36:00.579
um complexes. Um, it's just that we don't have the

00:36:00.579 --> 00:36:02.750
foundation understanding of the software. We don't

00:36:02.750 --> 00:36:05.489
have the foundation understanding of, we know what

00:36:05.489 --> 00:36:07.369
they've told us. But we don't know if the software

00:36:07.369 --> 00:36:10.880
works as they told us and in order to protect the the

00:36:10.889 --> 00:36:14.309
constituents that are in that uh that space. Um, I

00:36:14.320 --> 00:36:16.579
would agree that we remanded it for more information. And

00:36:16.590 --> 00:36:19.130
and just for the record, we do have a mechanism for

00:36:19.130 --> 00:36:22.320
filing proprietary and confidential information at

00:36:22.320 --> 00:36:27.090
the Commission. So the fear that this, you know, discloses

00:36:27.090 --> 00:36:30.329
your secret sauce and how you're, you know, making

00:36:30.329 --> 00:36:32.809
your business model that much more efficient. We have

00:36:32.809 --> 00:36:35.019
safeguards in place for that. But we have to establish

00:36:35.019 --> 00:36:37.840
the evidentiary record and the safeguards for the consumers

00:36:37.840 --> 00:36:40.730
coming back later on to try to audit this, you know.

00:36:40.739 --> 00:36:43.019
Because complaints are inevitable, especially as these

00:36:43.019 --> 00:36:44.090
systems proliferate.

00:36:46.429 --> 00:36:48.829
I very much agree with your point, Commissioner Glotfelty.

00:36:48.829 --> 00:36:52.590
I'm not trying to um dissuade new technologies. I mean

00:36:52.599 --> 00:36:56.659
you know, downtown Austin is exploding with multi, a

00:36:56.670 --> 00:36:59.809
lot of big buildings. Multi-use dwellings and and you

00:36:59.809 --> 00:37:02.559
know these uh commercial developers. Should have

00:37:02.559 --> 00:37:05.699
the ability to use modern technology and software packages

00:37:05.699 --> 00:37:08.150
to figure out how to build their customers. It's just

00:37:08.150 --> 00:37:10.579
we just need more information so we can do our job

00:37:10.579 --> 00:37:13.329
at the back end, if we get any complaints. I think it's

00:37:13.329 --> 00:37:16.369
incumbent on us at the front as well. Because we need

00:37:16.369 --> 00:37:18.639
to understand the algorithm, you know. Not just the

00:37:18.639 --> 00:37:23.170
concept so that we can fully make sure at the front

00:37:23.170 --> 00:37:26.139
end that it qualifies. Because we're obligated under

00:37:26.139 --> 00:37:29.309
statute right now to use a certain mechanism. That's

00:37:29.309 --> 00:37:32.150
based on square footage. So I think it's important

00:37:32.150 --> 00:37:35.309
at the front end, it's important at the back end. In

00:37:35.309 --> 00:37:40.110
case we have folks that come to us and um, you know

00:37:40.110 --> 00:37:43.309
want to challenge how their bills are being allocated.

00:37:43.320 --> 00:37:47.219
As well as I think it's it's um it's just good operating

00:37:47.230 --> 00:37:53.590
practice to have um the information um, retained and

00:37:53.590 --> 00:37:57.409
available. So that not only is it available to those

00:37:57.420 --> 00:38:00.599
who want to come later and challenge it. But it's also

00:38:00.599 --> 00:38:03.460
available for them to go in on an ongoing basis and

00:38:03.460 --> 00:38:06.349
audit it themselves. Um you know, they mentioned that

00:38:06.349 --> 00:38:09.820
this is, as you mentioned, innovative technology. Uh

00:38:09.829 --> 00:38:12.739
the energy savings are actually coming from the implementation

00:38:12.739 --> 00:38:16.469
of the new type of of system. And so this is just

00:38:16.469 --> 00:38:19.699
an increment on top of that. So, um I think it's incumbent

00:38:19.699 --> 00:38:23.300
on us to do, as you mentioned to remand it back. And

00:38:23.300 --> 00:38:25.210
I'm glad that you mentioned that we do have a process

00:38:25.210 --> 00:38:28.719
in place to accommodate that. And and Commissioner,

00:38:28.719 --> 00:38:31.619
I think do your efforts on energy efficiency and then

00:38:31.619 --> 00:38:36.030
what we're seeking to do on PCs. We are seeking to

00:38:36.030 --> 00:38:39.219
have loads, become more efficient uh in their energy

00:38:39.219 --> 00:38:43.219
consumption. And uh so new technologies, new systems

00:38:43.219 --> 00:38:45.730
like this are right in line with that, but we have

00:38:45.730 --> 00:38:49.949
to know how they work. Um, otherwise we're just not

00:38:49.949 --> 00:38:53.289
doing our job. Yeah, good, good points all. Not only

00:38:53.289 --> 00:38:56.699
more uh loads, more efficient, but more responsive and

00:38:56.699 --> 00:39:01.030
more capable of capturing savings for their consumers.

00:39:01.039 --> 00:39:06.010
Um excellent points all. Uh and the only thing I would

00:39:06.010 --> 00:39:08.460
add is that we have we have we have a process and

00:39:08.460 --> 00:39:12.840
mechanism, proprietary information. But I hope nobody

00:39:12.840 --> 00:39:18.230
is hearing a desire for any we we need, we need the

00:39:18.239 --> 00:39:20.159
methodology. We need accountability on the front end

00:39:20.159 --> 00:39:25.500
and the back end uh for future complaints. But we we're

00:39:25.500 --> 00:39:27.460
not trying to put anybody out of business. We've got

00:39:27.469 --> 00:39:30.960
appropriate channels. We're not trying to discourage

00:39:30.969 --> 00:39:34.269
new technologies using new ways. Uh but we got to find

00:39:34.269 --> 00:39:39.469
that balance. Um, anybody have a motion,

00:39:42.659 --> 00:39:48.440
motion to remand? I second. Got a motion and a second. All

00:39:48.440 --> 00:39:52.090
in favor say, aye. Aye. None opposed, motion passes.

00:39:53.840 --> 00:39:57.400
I believe we're going to go out of order at this point.

00:39:57.400 --> 00:40:02.449
And take up Item No. 31 and then return to Item 26,

00:40:02.449 --> 00:40:03.469
if that works for ya'll?

00:40:06.400 --> 00:40:10.010
Could you lay out 31 for us, Ms. Cisneros? (item:31:54224, Chairman, Commissioners McAdams, Glotfelty, and Cobos on interconnection agreement & reliability standards) Certainly, item 31 is

00:40:10.010 --> 00:40:14.940
project number 54224, cost recovery for service to

00:40:14.949 --> 00:40:16.949
distributed energy resources.

00:40:19.210 --> 00:40:23.210
Uh, thank you ma'am. I know Commissioners McAdams, Glotfelty

00:40:23.239 --> 00:40:28.170
taking the lead on this. Ya'll have any opening thoughts

00:40:28.170 --> 00:40:31.079
to kick off the discussion? Policies aren't easy, are

00:40:31.079 --> 00:40:37.420
they, David? So opening thoughts Mr. Chairman and I

00:40:37.420 --> 00:40:44.590
think we've got a lot um. But ultimately the projects

00:40:44.599 --> 00:40:51.139
that affected DESR interconnection um were already bifurcated

00:40:51.150 --> 00:40:55.599
into two projects. One entailed cost allocation um

00:40:55.889 --> 00:41:00.780
the other entailed interconnection agreements and um

00:41:01.289 --> 00:41:05.090
standard interconnection agreements. And in my view

00:41:05.090 --> 00:41:09.340
we have a couple of options uh for how to proceed. On

00:41:09.349 --> 00:41:13.530
the cost allocation which is by far the most controversial

00:41:13.539 --> 00:41:19.369
and complicated with significant implications um for

00:41:19.369 --> 00:41:26.610
other policy. So we could table this discussion until

00:41:26.619 --> 00:41:31.809
on cost allocation, broadly. Until after uh we create

00:41:31.809 --> 00:41:35.440
a reliability standard which should consider both resource

00:41:35.440 --> 00:41:39.219
adequacy as well as deliverability of energy, on the

00:41:39.219 --> 00:41:43.590
system. And my thinking there is as part of Phase II,

00:41:43.599 --> 00:41:47.300
we have determined that we're going to adopt a reliability

00:41:47.300 --> 00:41:51.719
standard. That it will account for if megawatts are

00:41:51.719 --> 00:41:55.809
actually deliverable in a system. And what that means

00:41:55.809 --> 00:41:59.239
is it could be on a zonal basis. It certainly could

00:41:59.239 --> 00:42:01.800
be on a system wide basis, but drilling down still

00:42:01.800 --> 00:42:05.889
further, there may be implications for PC obligations.

00:42:05.900 --> 00:42:11.460
Um to make the system reliable and resilient. As such

00:42:11.469 --> 00:42:16.070
um there would certainly be benefit uh for distribution

00:42:16.070 --> 00:42:20.250
systems to have interconnections of distributed level

00:42:20.260 --> 00:42:25.000
uh energy resources. Um certainly batteries or anything

00:42:25.000 --> 00:42:27.389
else that's coming into their system. Because the more

00:42:27.389 --> 00:42:31.440
resources you have in a given area, the lower your

00:42:31.449 --> 00:42:34.780
uh, the PC value is. And the lower your obligation is

00:42:34.789 --> 00:42:39.670
so we reach equilibrium. So that would be a metric

00:42:39.679 --> 00:42:42.400
theoretically that Staff could look to in the future

00:42:42.400 --> 00:42:45.500
when they're determining cost allocation. To say, well

00:42:45.500 --> 00:42:49.480
there is certainly a system benefit uh to having these

00:42:49.489 --> 00:42:53.989
resources interconnect at this level um and transform

00:42:53.989 --> 00:42:57.210
their power all the way up to uh from distribution

00:42:57.219 --> 00:43:05.369
up to transmission. Um so again, table it or uh we

00:43:05.369 --> 00:43:08.619
could make a policy cut um and we could consider doing

00:43:08.619 --> 00:43:11.579
that at the February 16th Open Meeting. Bottom line

00:43:11.579 --> 00:43:14.860
is I know I'm tired and I know you are too after

00:43:14.860 --> 00:43:19.809
last week. After the last 18 months. And um and so I could give it two more

00:43:19.809 --> 00:43:23.920
weeks of thought. Uh to think about a policy cut and

00:43:23.920 --> 00:43:27.380
what that means is um, we could theoretically direct

00:43:27.380 --> 00:43:32.570
Staff on a policy direction for discussion draft. And

00:43:32.579 --> 00:43:35.030
at the end of the day this all comes down to value

00:43:35.030 --> 00:43:37.750
judgments on our part. I believe Liz Jones sitting

00:43:37.750 --> 00:43:40.000
out there said it months ago. That this was gonna come

00:43:40.000 --> 00:43:43.280
down to a value judgment and it still may uh, on the

00:43:43.280 --> 00:43:46.530
part of the Commission. Meaning if we believe these

00:43:46.530 --> 00:43:50.780
distributed level resources are uh good for the system.

00:43:51.429 --> 00:43:56.530
Um then we may determine that they get, should get

00:43:56.530 --> 00:44:04.030
their own uh cost allocation rate, get their own rate.

00:44:04.039 --> 00:44:10.429
In terms of uh charging megawatts or uh, you know, wear

00:44:10.429 --> 00:44:14.260
and tear on the system that they have to pay for. And

00:44:14.260 --> 00:44:15.789
so I want to give you a little bit of history and

00:44:15.789 --> 00:44:19.409
remind you of it. This policy has been building for

00:44:19.409 --> 00:44:24.849
10 years, over 10 years now. In 2012, Staff recommended

00:44:24.860 --> 00:44:27.980
the energy storage resources should pay for transmission

00:44:27.980 --> 00:44:31.440
services when charging. And again, they're not paying

00:44:31.440 --> 00:44:34.619
for transmission when they're exporting. Because by

00:44:34.619 --> 00:44:37.769
definition, legally they are a generator and that's

00:44:37.769 --> 00:44:40.630
been well enshrined in law. Senator Hancock, Senate

00:44:40.630 --> 00:44:44.079
Bill 415 last Session, said that there a generator.

00:44:44.630 --> 00:44:47.599
Um, as a result, just like all other generators, they

00:44:47.599 --> 00:44:50.400
don't pay to put megawatts back on the system. That's

00:44:50.400 --> 00:44:55.300
baked into uh, the, the public interest that we get

00:44:55.300 --> 00:44:59.500
out of consuming those megawatts. But Staff in 2012,

00:44:59.510 --> 00:45:02.829
said that they should pay for the charge. During an

00:45:02.829 --> 00:45:05.920
Open Meeting, Commissioners supported storage resource

00:45:05.920 --> 00:45:09.099
development and disagreed with Staff's position. They

00:45:09.099 --> 00:45:12.269
directed Staff to exempt wholesale storage resources

00:45:12.269 --> 00:45:15.820
from the wholesale transmission service tariff. So

00:45:15.820 --> 00:45:18.449
they made a value judgment that batteries were good

00:45:18.449 --> 00:45:21.710
for the system. They're easily deployed um, they're

00:45:21.710 --> 00:45:25.300
more granular, they increase system resiliency, all

00:45:25.300 --> 00:45:28.730
this was discussed. Staff then recommended that the

00:45:28.730 --> 00:45:31.469
Commission clarify that the exemption applies only

00:45:31.469 --> 00:45:35.440
to transmission level storage entities. But the ultimate

00:45:35.440 --> 00:45:38.500
rule adopted by the Commission, omitted that detail.

00:45:38.510 --> 00:45:42.900
So now we find ourselves trying to make this sausage

00:45:42.900 --> 00:45:47.559
10 years later. And by the way, that's TAC 25.192,

00:45:47.570 --> 00:45:48.610
if you want to look it up.

00:45:50.219 --> 00:45:53.639
So ultimately, I think we we give this a little more

00:45:53.639 --> 00:45:58.380
time and thought. But um and I think 2 weeks would

00:45:58.380 --> 00:46:02.579
help me get with Staff and our Rules Division. And chart

00:46:02.579 --> 00:46:07.989
a path forward, but I would say it is Staff's job is

00:46:07.989 --> 00:46:12.809
to make the world work. Our job is to think strategically,

00:46:12.909 --> 00:46:14.409
about where the world is going.

00:46:17.150 --> 00:46:19.239
Oh, he's got a lot of responsibility, this is an important

00:46:19.239 --> 00:46:24.440
man. Purple heart. And uh, and the Legislature should know where to

00:46:24.440 --> 00:46:30.860
find you. Oh, that was a big (inaudible). That was. Um,

00:46:30.869 --> 00:46:34.329
but anyway, I think we've got a lot to think about.

00:46:34.329 --> 00:46:36.119
I know Commissioner Glotfelty has thoughts and I'd

00:46:36.119 --> 00:46:39.380
welcome any type of deliberation on this matter. Thank you. Um,

00:46:39.389 --> 00:46:42.090
I would uh appreciate you laying it out like that.

00:46:42.099 --> 00:46:46.469
Um clearly, I think since the, the since this was initially

00:46:46.469 --> 00:46:50.940
passed, um the world's changed dramatically. Um it was

00:46:50.940 --> 00:46:55.400
uneconomic to put distributed resources at the distribution

00:46:55.400 --> 00:46:58.690
level. And probably unheard of for them to think that

00:46:58.690 --> 00:47:01.400
they would have a value at the wholesale trans, at the

00:47:01.400 --> 00:47:04.679
wholesale market level here in ERCOT. Um I think

00:47:04.679 --> 00:47:08.389
we're finding um through economics that that's not

00:47:08.389 --> 00:47:12.130
the case anymore, and that we need to address this.

00:47:12.139 --> 00:47:16.800
Um, I'm okay with delaying in two weeks. Um, I think finding

00:47:16.809 --> 00:47:22.440
the balance. Um quite frankly I, I think um they should

00:47:22.440 --> 00:47:24.460
be considered wholesale resources and their cost should

00:47:24.460 --> 00:47:27.460
be uplifted to T cost. Because that's where the impact

00:47:27.460 --> 00:47:31.269
is. Um I'm ready to have that discussion, you know,

00:47:31.269 --> 00:47:37.550
in the broader context. But um I want, what I want primarily

00:47:37.559 --> 00:47:40.579
is to do it quickly. Because there are resources that

00:47:40.579 --> 00:47:42.900
want to get on our system. There are resources that

00:47:42.900 --> 00:47:45.989
we need uh, you know, based upon our market design discussions

00:47:45.989 --> 00:47:49.219
that we've had. Um you know, these can add up to to

00:47:49.219 --> 00:47:52.460
megawatts that can improve reliability and resiliency,

00:47:52.469 --> 00:47:56.409
lower economics. Um so I just want to get it done quickly.

00:47:56.420 --> 00:47:59.900
Um and you know, if we move forward with the interconnection

00:47:59.900 --> 00:48:03.849
agreement uh and and delay cost allocation for a few

00:48:03.849 --> 00:48:06.860
weeks, I'm okay with that. And and I would certainly

00:48:06.869 --> 00:48:10.699
uh I would advocate just food for thought. Moving forward

00:48:10.710 --> 00:48:12.670
no matter what with the interconnection agreement.

00:48:12.679 --> 00:48:16.489
It is the least controversial aspect of the policy.

00:48:16.829 --> 00:48:21.030
Um it sets accountability measures on both parties,

00:48:21.039 --> 00:48:24.739
both the transmission and distribution service providers.

00:48:24.750 --> 00:48:29.820
Um hooking the resources up and on part of the resources

00:48:29.820 --> 00:48:32.909
to get their filings in. Do you have thoughts on that

00:48:32.909 --> 00:48:36.059
part, David? No, that's just a different project so. 

00:48:36.070 --> 00:48:37.539
I was questioning whether or not we should be talking

00:48:37.539 --> 00:48:40.449
about it. That's a good point and I will stop talking 

00:48:40.460 --> 00:48:44.260
about it. But what is posted is the rulemaking calendar, which

00:48:44.260 --> 00:48:46.860
is posted. And I will say that we have, do not

00:48:46.860 --> 00:48:51.429
have any plans to delay that project. No, I know that. Okay. But I'll

00:48:51.440 --> 00:48:58.110
stop talking about it. Um so, uh and also to dovetail

00:48:58.110 --> 00:49:00.800
on Commissioner Glotfelty points. I want to throw this

00:49:00.800 --> 00:49:06.460
out there for consideration. If we, if we are somehow

00:49:06.469 --> 00:49:10.550
able to build a rationale and methodology to where

00:49:10.550 --> 00:49:14.429
these costs are ultimately uplifted to uh, T costs.

00:49:14.440 --> 00:49:17.469
These are distribution level costs that would then

00:49:17.469 --> 00:49:22.880
be uplifted to T costs. Um, that is a comprehensive

00:49:22.889 --> 00:49:26.690
policy action. But if we make a value judgment that

00:49:26.690 --> 00:49:31.309
just makes, draws a cut line in terms of a standard

00:49:31.309 --> 00:49:36.510
substation level rate, for these resources. That is

00:49:36.510 --> 00:49:39.960
not a system wide comprehensive policy action and that.

00:49:39.969 --> 00:49:45.519
But the reason is, is because whether they are paying

00:49:45.519 --> 00:49:48.929
their entire contribution in aid of construction and

00:49:48.929 --> 00:49:52.230
then getting this price certainty for a monthly distribution

00:49:52.230 --> 00:49:56.840
rate. The the impact is still at distribution level.

00:49:56.849 --> 00:50:00.050
And this Commission does not touch distribution level

00:50:00.050 --> 00:50:03.329
policy of the non opt-in entities. And I'm staring out

00:50:03.329 --> 00:50:06.480
there at cooperatives and municipal utilities. And so

00:50:06.480 --> 00:50:09.289
therefore, we would be only affecting policy for distributed

00:50:09.289 --> 00:50:13.099
energy resources for the competitive areas of the state.

00:50:13.110 --> 00:50:17.320
And so you would limit the geographic area where these

00:50:17.320 --> 00:50:19.739
resources would interconnect with this type of stable

00:50:19.739 --> 00:50:24.199
policy framework. So that's the trade off. And arguably

00:50:24.199 --> 00:50:28.090
I would say that in the cooperative areas and the no

00:50:28.090 --> 00:50:31.409
areas. There are very viable and valuable places for

00:50:31.409 --> 00:50:35.000
these types of resources to be interconnected. And they

00:50:35.000 --> 00:50:40.059
can already, there's there are more open pathways there.

00:50:40.070 --> 00:50:42.750
In the noise than there are outside the noise right

00:50:42.750 --> 00:50:48.829
now. They have more optionality on that right now,

00:50:48.840 --> 00:50:52.989
than outside of ERCOT, outside of the outside

00:50:52.989 --> 00:50:56.699
of the noise. They get, they get control of some parts

00:50:56.699 --> 00:50:58.949
of their policy that we don't touch. Now that's true. They

00:50:58.949 --> 00:51:02.010
have universal control over that. That distribution

00:51:02.019 --> 00:51:06.829
for sure. Um that could be something to look at in

00:51:06.829 --> 00:51:11.840
terms of A-B uh examining what's, what's happening in

00:51:11.840 --> 00:51:15.039
some of those areas versus. And how have those approaches

00:51:15.050 --> 00:51:19.530
been received? Well yeah, and in terms of the purse

00:51:19.530 --> 00:51:23.039
strings that we control, we control the T side of the

00:51:23.039 --> 00:51:25.670
equation. Because everybody comes in for wholesale.

00:51:25.679 --> 00:51:28.760
I mean poor College Station, just look at what we just did.

00:51:28.769 --> 00:51:34.809
Everybody comes in for T costs. Um but DCRF

00:51:34.809 --> 00:51:38.550
applies to our the distribution cost recovery factor.

00:51:38.559 --> 00:51:44.250
Applies to our competitive areas and um we don't touch

00:51:44.250 --> 00:51:49.260
the noise. And um and that's that's a hard policy to

00:51:49.260 --> 00:51:54.840
overcome um given PURA. So I think we just need to consider

00:51:54.840 --> 00:51:58.610
that over the next two weeks. And and you kind of inform

00:51:58.610 --> 00:52:01.699
yourselves on what you're, where you want this to head.

00:52:01.710 --> 00:52:05.739
But there there are a lot of megawatts of resources

00:52:05.739 --> 00:52:09.489
sitting out there, waiting on this. And

00:52:11.340 --> 00:52:16.150
hard to figure out. Um well, these are tough policy

00:52:16.150 --> 00:52:20.289
calls, right. And I appreciate the options you've laid

00:52:20.289 --> 00:52:25.949
out. I think that ultimately making these decisions

00:52:25.949 --> 00:52:30.389
on cost allocation and uplifting to T costs or or the

00:52:30.389 --> 00:52:33.360
impacts of different types of um companies out there.

00:52:33.360 --> 00:52:36.320
Whether they're in ERCOT or outside of ERCOT, as a co-

00:52:36.320 --> 00:52:40.739
op or muni are very significant um policy calls. That

00:52:40.739 --> 00:52:43.210
have a lot of different implications for different

00:52:43.210 --> 00:52:46.349
types of companies even within those categories. Co-

00:52:46.349 --> 00:52:49.119
ops that are distribution service providers versus

00:52:49.130 --> 00:52:52.460
some that are transmission and distribution co-ops.

00:52:52.460 --> 00:52:55.500
They, so if your DSP that doesn't have transmission

00:52:55.500 --> 00:52:58.739
then how do you uplift to the, to the T cost? So

00:52:58.739 --> 00:53:02.019
there's just a lot there to consider. I personally

00:53:02.019 --> 00:53:04.079
don't know if I can get there in two weeks. I mean

00:53:04.079 --> 00:53:07.000
we've been on a pretty long marathon here. And these

00:53:07.000 --> 00:53:09.079
are very important issues that I want to spend more

00:53:09.079 --> 00:53:13.280
time looking at. And so I don't know if that means

00:53:13.289 --> 00:53:17.130
more time to the next open meeting or that means more

00:53:17.130 --> 00:53:19.699
time to get our reliability standard.

00:53:22.809 --> 00:53:27.269
Absolutely. And, and so I said two weeks just to hold

00:53:27.269 --> 00:53:30.730
myself accountable to keep trying to develop this. And

00:53:30.730 --> 00:53:34.719
force myself to focus on it. Now that I've got PC put

00:53:34.719 --> 00:53:37.739
to bed and the Legislature is considering that. Um,

00:53:37.750 --> 00:53:40.510
I'll certainly bear down on it with Commissioner Glotfelty

00:53:40.510 --> 00:53:47.019
and focus. Um, it's also Staff resources, um, broadly

00:53:47.030 --> 00:53:49.190
that reliability standard is the key to a lot of this

00:53:49.199 --> 00:53:54.699
folks. And um, and that's where, why I appreciated ordering

00:53:54.699 --> 00:53:57.449
the agenda the way we have, for this discussion purposes.

00:53:57.460 --> 00:54:02.849
We have to be able to show the system level consumers

00:54:02.860 --> 00:54:05.309
that they are experiencing benefit. And now that we

00:54:05.309 --> 00:54:08.360
have adopted a standard where values are going to be

00:54:08.360 --> 00:54:11.409
associated with that standard of an obligation on loads.

00:54:11.690 --> 00:54:14.710
That's where you show the value of doing these different

00:54:14.710 --> 00:54:18.630
things. There's a trade off. Undoubtedly these resources

00:54:18.630 --> 00:54:21.349
provide value and we want to unlock that potential. Right.

00:54:21.360 --> 00:54:25.960
Um, for reliability resiliency um as you mentioned

00:54:25.969 --> 00:54:28.750
um, localized regional reliability. Right. These are essentially

00:54:28.750 --> 00:54:32.400
would be like microgrids and we want to unlock that

00:54:32.400 --> 00:54:36.159
potential. But I would like to do it in a very thoughtful

00:54:36.170 --> 00:54:38.469
diligent way. And I know you guys have spent a lot of

00:54:38.469 --> 00:54:43.019
time and still digging through these issues. And you

00:54:43.019 --> 00:54:45.840
know, I know I can't get there in two weeks, but I

00:54:45.840 --> 00:54:48.670
would like to have more time to really dig in. And maybe

00:54:48.670 --> 00:54:51.650
it dovetails into the reliability standard, you know,

00:54:51.650 --> 00:54:55.429
sort of discussion. But ultimately I think, you know,

00:54:55.429 --> 00:54:58.989
as we move to adopt a reliability standard we'll have

00:54:58.989 --> 00:54:59.800
a metric.

00:55:01.309 --> 00:55:04.840
And then I'm not sure how we would sort of fit this

00:55:04.840 --> 00:55:06.909
underneath, and I understand like the mechanics of

00:55:06.909 --> 00:55:10.099
deliverability and their reliability benefits. So

00:55:10.630 --> 00:55:14.599
I'm just wondering, um, at what point if we wait for

00:55:14.599 --> 00:55:18.710
the reliability standard and how? Versus how much more

00:55:18.710 --> 00:55:22.719
time we need to sort of unpack this very, very important

00:55:22.719 --> 00:55:26.550
issues? Understanding that we have a lot on our plate.

00:55:26.559 --> 00:55:30.480
And you know, we've opened the hood in every direction.

00:55:30.489 --> 00:55:32.619
I mean we've opened the hood and we're working on everything

00:55:32.619 --> 00:55:34.409
there is to work under the hood. I mean it's, this

00:55:34.409 --> 00:55:39.400
is, feels like Christmas and so um, and Christmas wish

00:55:39.400 --> 00:55:44.639
list for everyone. Well, to follow on your analogy, I've got parts all over the garage floor. Yeah, exactly. So I don't know.

00:55:45.219 --> 00:55:49.460
And so um, you know, in terms of everybody, everybody's

00:55:49.460 --> 00:55:52.329
issues are important. There's a lot of things we got

00:55:52.329 --> 00:55:54.869
to get done for a lot of different folks. And I just

00:55:54.869 --> 00:55:57.539
want to make sure that we have time to look at some

00:55:57.539 --> 00:56:01.550
of these issues very diligently and thoughtfully. Um

00:56:01.559 --> 00:56:03.610
so that's my perspective right now. I'm not saying

00:56:03.610 --> 00:56:05.630
no, I'm not saying anything. But I recognize these

00:56:05.639 --> 00:56:09.079
you know, resources are very valuable. I just want

00:56:09.079 --> 00:56:11.030
to think about these issues some more and have more

00:56:11.030 --> 00:56:15.550
time, and two weeks isn't enough for me. Fair. I'm sorry go on.

00:56:17.380 --> 00:56:20.449
These decisions are big enough. That we all need to

00:56:20.449 --> 00:56:23.940
make sure that we have time to, to analyze and deliberate

00:56:23.940 --> 00:56:27.519
these things. Uh, I know expediency is always important.

00:56:27.530 --> 00:56:29.559
I don't think anybody can accuse this Commission of

00:56:29.559 --> 00:56:34.929
not moving quickly. On a tremendously wide range of

00:56:34.940 --> 00:56:40.179
issues, but nobody's gonna force any of that. We're

00:56:40.179 --> 00:56:42.300
not going to force anybody to make a decision before

00:56:42.300 --> 00:56:46.389
they're ready, is I want to say. Yeah, I was gonna add that. Um, you

00:56:46.389 --> 00:56:49.820
know, we didn't really have to, the Commission

00:56:49.829 --> 00:56:54.789
didn't really have to cross this, um, this river. Um

00:56:54.800 --> 00:56:57.710
when it came to wholesale generators interconnecting

00:56:57.710 --> 00:57:01.250
at the, at the transmission level. Because loads pay

00:57:01.260 --> 00:57:08.019
has been the um, the law of the state since we unbundled

00:57:08.019 --> 00:57:14.010
in 1995. Um and I think that um, that was a good

00:57:14.010 --> 00:57:16.539
policy. I think it makes sense. I think consumers benefited

00:57:16.539 --> 00:57:20.690
from that, but you know, uh we could draw this out

00:57:20.690 --> 00:57:23.809
for a long, long time or we could do it fairly quickly.

00:57:23.809 --> 00:57:26.199
And and I just hope that and I urge all of ya'll

00:57:26.199 --> 00:57:29.820
to take your time. But to do it, uh, take your

00:57:29.820 --> 00:57:34.409
time to do it quickly. Yeah, you know, I'm not a fan

00:57:34.409 --> 00:57:40.110
of paralysis by analysis. But I do agree with like

00:57:40.119 --> 00:57:42.349
this, this is a big enough policy decision that we

00:57:42.349 --> 00:57:46.769
need to be thorough. Um yeah, and I will assure you guys

00:57:46.769 --> 00:57:49.019
that there will be, there will be no idle hands waiting

00:57:49.019 --> 00:57:52.250
for the decision. And so uh, Mac and Mariah are gonna

00:57:52.250 --> 00:57:54.809
be running running at full speed on some projects. And

00:57:54.809 --> 00:57:57.519
so if it's not this, it'll be another one of the priorities.

00:57:57.519 --> 00:58:00.880
So whichever, you know, it's not fatal if you need

00:58:00.880 --> 00:58:03.429
a little bit more time on this, on this one. The one

00:58:03.429 --> 00:58:06.820
thing, one last thing I might say is. That uh like all

00:58:06.820 --> 00:58:09.159
of the changes in the industry that we're facing here

00:58:09.170 --> 00:58:12.929
in ERCOT, um other regions are facing the same thing.

00:58:12.940 --> 00:58:15.550
Um, so these are happening all over the United States.

00:58:15.550 --> 00:58:18.360
So there's a lot that we can learn from what's the

00:58:18.360 --> 00:58:20.400
pros and cons that they've done in the other regions.

00:58:20.400 --> 00:58:22.199
And I hope we take some of that into consideration

00:58:22.199 --> 00:58:28.739
as well. Yeah, well put. The 2 thoughts at offer.

00:58:28.739 --> 00:58:35.010
One, it's wherever we end up on this can also be a

00:58:35.010 --> 00:58:38.289
spectrum. It's not necessarily either or it can be

00:58:38.300 --> 00:58:41.929
there's a spectrum of options. Um so just something

00:58:41.940 --> 00:58:45.130
something to keep in mind as we dig into this further

00:58:45.139 --> 00:58:49.940
Uh and then I think it also is worth noting that uh

00:58:49.949 --> 00:58:54.480
like Commissioner McAdams said. I think the the first

00:58:54.480 --> 00:58:58.050
decision we need to reach, at whatever time people are

00:58:58.050 --> 00:59:02.469
comfortable. Is whether or not this decision is dependent

00:59:02.480 --> 00:59:05.150
on establishing a reliability standard. One of the

00:59:05.159 --> 00:59:08.480
big points we all made last week is that reliability

00:59:08.480 --> 00:59:14.690
standard isn't just system resources. It's the how

00:59:14.690 --> 00:59:19.739
they're deployed as well. And they're uh ability to

00:59:19.750 --> 00:59:22.250
there's more, it's more than just having supply and demand,

00:59:22.260 --> 00:59:25.110
right? That's an important component of it. I don't

00:59:25.110 --> 00:59:27.349
know what the answer is right now and I think that's

00:59:27.349 --> 00:59:30.079
probably the first fork in the road, we need to get

00:59:30.090 --> 00:59:33.440
to. Does that make sense? Or am I missing something? Kinda.

00:59:34.619 --> 00:59:40.530
Think on it two more weeks, Peter. All right. Um like I said

00:59:40.530 --> 00:59:43.829
I don't, I don't know the answer today. But that was

00:59:43.829 --> 00:59:48.260
a good point, I think it's worth consideration. Uh

00:59:49.150 --> 00:59:52.210
any other thoughts, comments on this one? Or think we

00:59:52.210 --> 00:59:55.739
can. I'll continue to work with Staff as as well as

00:59:55.739 --> 00:59:58.199
Commissioner Glotfelty over the next two weeks. If anything

00:59:58.199 --> 01:00:03.019
comes up but we'll keep keep working on it. Okay, I don't

01:00:03.030 --> 01:00:07.159
think we need any formal action today. Yeah. Which will bring

01:00:07.159 --> 01:00:13.480
us back to. Item 26. Thank you.

01:00:17.130 --> 01:00:21.710
(item:26:53992, Chairman, Commissioners McAdams & Cobos on Entergy concerns) Item 26 is docket number 53992. This is the application

01:00:21.710 --> 01:00:25.369
of Entergy Texas, for approval of rate schedule for

01:00:25.380 --> 01:00:29.940
utility owned distributed generation. We have an order

01:00:29.940 --> 01:00:32.500
requesting list of issues, parties have filed their proposal

01:00:32.500 --> 01:00:36.190
list of issues. However, rather than drafting a preliminary

01:00:36.190 --> 01:00:40.150
order, we posted this item for guidance and direction

01:00:40.150 --> 01:00:41.929
from the Commission, on how to move forward with this

01:00:41.929 --> 01:00:50.199
proceeding. All right, thank you ma'am. Thoughts, comments? Before

01:00:50.199 --> 01:00:52.179
Commissioner McAdams tries to punt it to me, because

01:00:52.179 --> 01:00:54.809
it's a MISO. I would like to remind Commissioner McAdams

01:00:54.809 --> 01:00:59.630
that he filed a memo. I am wanting to withdraw his application so

01:00:59.630 --> 01:01:04.460
I'm going to give him the floor first. I am going to pay for that memo for a long time. I can tell. Well played again Commissioner Cobos.

01:01:05.820 --> 01:01:13.039
I did, I did um so I think that that's why I

01:01:13.039 --> 01:01:16.289
requested we uh possibly order the agenda as we've

01:01:16.289 --> 01:01:20.019
had. So that we had the high level um policy discussion

01:01:20.019 --> 01:01:26.219
on DSRs, distribution level uh resources. And that was

01:01:26.230 --> 01:01:30.840
based in ERCOT, Uh Entergy is clearly non-ERCOT, wholly

01:01:30.840 --> 01:01:33.909
located in MISO. And um,

01:01:35.699 --> 01:01:43.070
I get back to you need a. If you're trying to

01:01:43.070 --> 01:01:46.619
spread the cost of distribution level resources and

01:01:46.630 --> 01:01:50.059
again trying to get an entire system to pay for it.

01:01:50.619 --> 01:01:52.670
I believe you need to be able to weigh that against

01:01:52.670 --> 01:01:55.219
something. So that's why I suggested the reliability

01:01:55.219 --> 01:01:58.110
standard was so important in ERCOT and what that means.

01:01:58.119 --> 01:02:02.590
And to what degree that reliability standard transcends

01:02:02.590 --> 01:02:05.900
down, not just from a system but also to a region. So

01:02:05.900 --> 01:02:09.929
and enter Entergy's case you know the orange area. Which

01:02:09.929 --> 01:02:14.230
was so heavily impacted by tornadoes, tornadic activity

01:02:14.239 --> 01:02:18.219
over the last 72 hours. And so um

01:02:20.219 --> 01:02:22.610
by having some type of standard by having some type

01:02:22.610 --> 01:02:26.380
of metric that is positively impacted. Uh through the

01:02:26.380 --> 01:02:30.449
deployment of these resources then you can justify

01:02:30.460 --> 01:02:35.219
um spreading those costs. I don't really have a view

01:02:35.230 --> 01:02:37.829
on how we do that. That's why I lean on Commissioner

01:02:37.829 --> 01:02:40.769
Cobos and your experience in MISO, on what MISO has

01:02:40.769 --> 01:02:44.320
going. I know that for SPPs purposes we have

01:02:44.320 --> 01:02:48.119
a broad based reliability standard of 0.1 and 10.

01:02:49.659 --> 01:02:52.539
But they are talking about expected unserved energy.

01:02:52.550 --> 01:02:57.559
Everybody wants to grow into a more granular reliability

01:02:57.559 --> 01:03:02.230
standard. Um to hold uh utilities accountability for

01:03:02.230 --> 01:03:08.210
the reliability on a regional and regional basis. So

01:03:08.219 --> 01:03:12.039
I'd like to hear from you on what MISO has? What

01:03:12.039 --> 01:03:16.969
we can uh peg Entergy proposed policy to? Again, they're

01:03:16.969 --> 01:03:21.969
proposing to expand the cost of these uh devices and

01:03:21.969 --> 01:03:25.829
resources, to there's the rest of their system. Not just

01:03:25.840 --> 01:03:28.590
beyond the scope of the pilot project for which they

01:03:28.590 --> 01:03:34.360
are currently uh interconnecting. Um but how can we

01:03:34.369 --> 01:03:38.679
how can we justify that? Sure. So some key relevant

01:03:38.679 --> 01:03:42.869
facts are, the fact that MISO North. Well all of MISO

01:03:42.869 --> 01:03:46.920
relies on a 1 and 10 reliability. The .1 

01:03:46.929 --> 01:03:50.980
LOLE. And currently in MISO North for the MISO

01:03:50.980 --> 01:03:55.869
and North and Central regions. They're at a 0.179 

01:03:55.880 --> 01:03:59.750
LOLE. Which is approximately one day in 5.6 years

01:03:59.760 --> 01:04:04.630
of liability risk. But with respect to MISO South,

01:04:04.639 --> 01:04:10.360
where Entergy Texas sits. They are exceeding the 0.1

01:04:10.369 --> 01:04:13.550
LOLE. So they're they're not in the same position as

01:04:13.559 --> 01:04:17.969
MISO North and Central. And um I know that MISO

01:04:17.969 --> 01:04:23.869
in general is looking to uh modify their market design.

01:04:23.880 --> 01:04:26.039
They have a sort of capacity market right now. As we've

01:04:26.039 --> 01:04:28.820
talked about where they ran the PRA, this past

01:04:28.820 --> 01:04:34.010
April and they had a shortage. And um caused the prices

01:04:34.010 --> 01:04:38.010
to hit cone in the in the Northern regions. North and

01:04:38.010 --> 01:04:41.440
in Northern central and because of that they're looking

01:04:41.440 --> 01:04:45.619
to expand to a seasonal construct. And and seasonal

01:04:45.619 --> 01:04:49.690
accreditation and have looked at a minimum contingent

01:04:49.699 --> 01:04:52.880
minimum capacity obligation. And and all of at least

01:04:52.880 --> 01:04:55.280
the seasonal accreditation, the MCO. The minimum

01:04:55.280 --> 01:04:59.340
capacity obligation are under um appeal right now. For

01:04:59.869 --> 01:05:02.760
approved, all of MISO's filings except the MCO.

01:05:02.760 --> 01:05:05.369
The minimum contingency obligation, capacity obligation

01:05:05.369 --> 01:05:09.699
which is 50% obligation on LSC. So the whole sort of

01:05:09.710 --> 01:05:15.519
broader market construct changes are still in flux.

01:05:15.530 --> 01:05:21.730
But today MISO South um the reliability standard is

01:05:21.730 --> 01:05:25.179
being met and exceeded. So which brings us to the point

01:05:25.190 --> 01:05:27.480
I think what you're asking Commissioner McAdams is

01:05:27.489 --> 01:05:31.050
you know what how can allowing Entergy to use these

01:05:31.059 --> 01:05:35.019
um distributed resources, natural gas DGE. Through

01:05:35.019 --> 01:05:39.070
this uh through their DGE proposal, help with help

01:05:39.070 --> 01:05:42.360
Entergy meet their resource adequacy requirements,

01:05:42.369 --> 01:05:47.039
in MISO. And so that that's the background I have

01:05:47.039 --> 01:05:50.739
on that. I mean there's currently no shortage. And I'm

01:05:50.739 --> 01:05:54.309
just wondering if you know as they sort of proposed

01:05:54.309 --> 01:05:57.900
to bid these DGE facilities as Load resources into

01:05:57.900 --> 01:06:03.059
MISO, through ancillary services etc. You know what

01:06:03.070 --> 01:06:05.590
if these costs are going to be allocated to all ATI

01:06:05.590 --> 01:06:09.130
customers. Then what is the benefit to the customers

01:06:09.139 --> 01:06:12.789
um with respect to offsetting those revenues to what

01:06:12.789 --> 01:06:15.360
they're paying ultimately would be responsible for

01:06:15.360 --> 01:06:19.369
paying. Because we do know that when there's an emergency

01:06:19.369 --> 01:06:23.750
outage, the host customers will benefit from the DGE

01:06:23.750 --> 01:06:27.650
facilities, not the ratepayers as a whole. And so

01:06:27.659 --> 01:06:30.250
from my perspective there is still some unique issues

01:06:30.250 --> 01:06:34.360
in this DGE proposal. That that are issues of first

01:06:34.360 --> 01:06:37.710
impression uh from my perspective that I would like

01:06:37.710 --> 01:06:43.090
to further um explore. Once we have maybe a framework

01:06:43.090 --> 01:06:45.599
in place like what we're trying to do with distributed

01:06:45.599 --> 01:06:49.869
generation. As a whole in ERCOT distributed energy storage

01:06:49.869 --> 01:06:53.610
resources as a whole. Um the difference here in my

01:06:53.610 --> 01:06:57.460
opinion and I'm open to consideration on this. Is we'

01:06:57.460 --> 01:07:00.349
re May 12th Open Meeting conversation, to what we're

01:07:00.349 --> 01:07:04.170
dealing with here is that. The tariff issue that we

01:07:04.170 --> 01:07:07.849
addressed there was underpinned by an existing PUC rule.

01:07:07.860 --> 01:07:12.110
We have no PUC rule here. We we you know, per your

01:07:12.110 --> 01:07:15.719
memo, we decided to ask the Entergy to withdraw their

01:07:15.719 --> 01:07:18.349
application. Because we didn't have a rule and you didn't

01:07:18.349 --> 01:07:20.750
want to conduct piecemeal rulemaking. So I'm just trying

01:07:20.750 --> 01:07:24.750
to think of what has happened since then to now and

01:07:24.750 --> 01:07:27.639
and the tariff issue was raised as a sort of an opening

01:07:27.639 --> 01:07:31.429
for that. But I don't see it as apples to apples. And

01:07:31.599 --> 01:07:36.239
I'm also wondering that now that there's a pilot. Why those

01:07:36.239 --> 01:07:38.400
costs weren't included in the current base rate case

01:07:38.400 --> 01:07:41.769
that was filed um not too long ago? Where we could have

01:07:41.769 --> 01:07:45.119
started addressing these issues. So these are just

01:07:45.130 --> 01:07:47.639
thoughts that and in questions I have in my mind. And

01:07:47.639 --> 01:07:51.309
I'm open to hearing what you all think. Well well

01:07:51.309 --> 01:07:51.889
put.

01:07:54.860 --> 01:07:59.239
I know so Entergy is unique. They are in a hurricane

01:07:59.239 --> 01:08:03.130
prone, tornado prone area of the state of Texas. I like

01:08:03.130 --> 01:08:06.750
to you, Commissioner Jackson, you grew up in 

01:08:06.750 --> 01:08:10.139
that area, that service territory. So resiliency is

01:08:10.139 --> 01:08:14.690
important to their customer base. Um as we see grocery

01:08:14.690 --> 01:08:18.800
stores are interested in this, universities are interested,

01:08:18.800 --> 01:08:22.699
hospital systems are interested in this. Um it clearly

01:08:22.710 --> 01:08:25.770
for localized resiliency or at least for those, those

01:08:25.770 --> 01:08:29.399
campuses and buildings. It will benefit those folks.

01:08:29.409 --> 01:08:34.779
Under the tariff, um the current pilot framework. They're

01:08:34.779 --> 01:08:38.619
paying for it. But again, if you want mass deployment

01:08:38.619 --> 01:08:42.100
of this, you expand that to the broader system wide

01:08:42.109 --> 01:08:47.279
tariff. Um but the question is, are we ready for that

01:08:47.289 --> 01:08:52.920
at this time? Do we have enough bones in place to to

01:08:52.920 --> 01:08:55.159
know what we're dealing with? In terms of the magnitude

01:08:55.159 --> 01:08:59.470
of this, this new distribution level resource integration.

01:09:02.670 --> 01:09:07.649
I don't know, I don't didn't feel like we do. Um I

01:09:07.649 --> 01:09:09.970
think all your points are well taken and I think that's

01:09:09.970 --> 01:09:13.319
a that's a good indication that we don't have those

01:09:13.329 --> 01:09:15.970
bones in place. We don't have the structure in place

01:09:15.970 --> 01:09:19.800
yet to decipher all of this. Um

01:09:21.649 --> 01:09:27.579
it's it's maybe a little premature for us to be asked to

01:09:27.579 --> 01:09:30.909
make this decision. So, in in terms of a path forward.

01:09:30.920 --> 01:09:33.119
Look, we've gone back and forth on this, but we've

01:09:33.119 --> 01:09:38.000
also been contemplating a lot of uh wholesale changes

01:09:38.010 --> 01:09:42.720
um within the grid, ERCOT or outside of ERCOT.

01:09:44.460 --> 01:09:49.090
We we thought we might use this as a vehicle to set

01:09:49.090 --> 01:09:52.739
policy. Entergy files it we certainly saw an opportunity

01:09:52.739 --> 01:09:57.100
there. Um do we want to go back in terms of the

01:09:57.109 --> 01:10:00.229
enormous workload that Staff already has to manage.

01:10:00.239 --> 01:10:04.970
And consider a rulemaking approach or does this, does

01:10:04.970 --> 01:10:10.000
this have to sit for a time under the existing framework.

01:10:10.000 --> 01:10:13.020
Again, there is no downside risk to create uncertainty

01:10:13.020 --> 01:10:17.699
on what is the law. House Bill, House Bill 1510 on

01:10:17.699 --> 01:10:20.890
what that created uh and what Entergy is currently doing

01:10:20.890 --> 01:10:24.979
now. In terms of the constraints on socializing costs.

01:10:25.670 --> 01:10:30.800
But that would not change. But in terms of a rulemaking

01:10:30.800 --> 01:10:34.020
to establish a long term approach, do we want to consider

01:10:34.020 --> 01:10:37.500
that idea at this time? Or are we still dealing with

01:10:37.510 --> 01:10:40.250
too wide of a universe to plug this in there right

01:10:40.250 --> 01:10:42.840
now? And are we gonna tie our hands in a later rate case?

01:10:42.850 --> 01:10:47.590
Correct. Yeah, that's a really good point. Um

01:10:48.399 --> 01:10:49.880
I think it's either

01:10:51.880 --> 01:10:55.119
we don't want paralysis by analysis. But I think there's

01:10:55.130 --> 01:11:00.850
we either need to get to a point where we've put enough

01:11:00.859 --> 01:11:06.189
bones and and structure around it, at the comprehensive

01:11:06.189 --> 01:11:12.399
level. Um or a rate case. Um either of those would be

01:11:12.399 --> 01:11:15.060
the appropriate time to cross this bridge, but neither

01:11:15.060 --> 01:11:17.449
of those are today. Or the Legislature could pass a law

01:11:17.449 --> 01:11:21.170
and just tell us what to do. That would be cool too. That's

01:11:21.170 --> 01:11:26.149
always a good option. Yeah. I can see that what they're

01:11:26.149 --> 01:11:28.680
trying to do here and and you highlighted with the

01:11:28.689 --> 01:11:33.020
hurricane prone and you know, tornadic, I like that word.

01:11:33.039 --> 01:11:39.300
Um tornadic risk, you know, um that is in the area. And

01:11:39.300 --> 01:11:41.869
it's just, you know, we're trying to set some kind

01:11:41.869 --> 01:11:44.170
of a policy framework here to deal with all kinds of

01:11:44.180 --> 01:11:48.289
distributed resources. Right. And, you know, in a diligent

01:11:48.300 --> 01:11:51.760
prudent way going forward. And so how do we get there

01:11:51.760 --> 01:11:54.350
an efficient manner. I think what what provides me

01:11:54.350 --> 01:11:56.619
some comfort is that they currently have a pilot in

01:11:56.619 --> 01:11:59.949
place. And they can continue to move forward and, and

01:11:59.960 --> 01:12:04.590
you know, build upon that program. And eventually, you

01:12:04.590 --> 01:12:07.520
know, we'll either do a rulemaking or they'll come

01:12:07.520 --> 01:12:11.829
in for a rate case, when Legislation gets passed. Something

01:12:11.829 --> 01:12:14.779
you know, I just feel like we need to have a framework

01:12:14.789 --> 01:12:17.329
in place. Because there are a variety of underlying

01:12:17.329 --> 01:12:22.060
cost allocation issues, that we need to be mindful of.

01:12:23.750 --> 01:12:29.899
Agreed. Um, I mean, I think the right move here listening

01:12:29.899 --> 01:12:34.699
to this discussion. Is that we, we definitely don't

01:12:34.699 --> 01:12:38.109
want to take any other action the table or, or uh,

01:12:39.380 --> 01:12:42.850
I think hopefully Entergy is listening to this conversation.

01:12:42.859 --> 01:12:45.689
And recognize that we were not ready to move forward

01:12:45.689 --> 01:12:51.649
on this uh, today or even in the next couple of months.

01:12:51.739 --> 01:12:57.140
Um, so not in two weeks, probably not two weeks. I think they

01:12:57.140 --> 01:13:00.439
should be commended for their forward thinking. And

01:13:00.449 --> 01:13:04.720
you talked about a hurricane prone area. Um, you know

01:13:04.720 --> 01:13:09.560
the a gas station that's able to um, to start up after

01:13:09.560 --> 01:13:12.170
an event. When the rest of the community is devastated,

01:13:12.180 --> 01:13:16.479
provides a beacon of hope. And so there's there's certainly

01:13:16.479 --> 01:13:19.199
I think in this area is obviously growing. And it's

01:13:19.199 --> 01:13:22.840
a, it is a key industrial area. Also provides an escape

01:13:22.840 --> 01:13:25.880
route for all those inhabitants in that area. So, so

01:13:25.880 --> 01:13:28.329
many, many reasons. And I think, you know, the fact

01:13:28.329 --> 01:13:32.220
that they're thinking about this and have come to the

01:13:32.220 --> 01:13:34.220
Commission, I think is a very positive thing. That

01:13:34.229 --> 01:13:39.029
you know, to your point, um, from a timing standpoint

01:13:39.029 --> 01:13:42.829
not to be forgotten and not to be kind of put aside

01:13:42.829 --> 01:13:46.510
forevermore. But um, just waiting until we have a little

01:13:46.510 --> 01:13:49.270
bit more structure in place. But I think they definitely

01:13:49.270 --> 01:13:53.569
are to be commended for thinking about this. Yep. All

01:13:53.569 --> 01:13:55.550
right, we're all comfortable with tabling this.

01:13:57.329 --> 01:14:02.380
Yes. Yes, for the time being. All right, consider it tabled.

01:14:03.210 --> 01:14:05.789
Well, I think we need to give direction back. I mean

01:14:05.789 --> 01:14:08.270
based on our conversation with respect to what happens

01:14:08.270 --> 01:14:10.720
to the application. Do we ask Entergy to withdraw the

01:14:10.720 --> 01:14:12.689
application or send it back? So, that.

01:14:14.500 --> 01:14:18.789
Good point. I think we can ask them to withdraw. I'm open to other

01:14:18.789 --> 01:14:21.970
ideas. So remand. I'll jump in, yeah. I mean, I would say that

01:14:21.970 --> 01:14:24.979
your discussion has been fairly clear. I think Entergy

01:14:24.979 --> 01:14:27.569
probably has heard your, that the Commission is not

01:14:27.569 --> 01:14:29.380
ready to act at this time. Withdrawal is certainly

01:14:29.380 --> 01:14:32.649
an option, um, and then. Leave it to them.

01:14:34.539 --> 01:14:36.260
And then it's possible that, you know, in a certain

01:14:36.260 --> 01:14:40.960
amount of time the ALJ could take action. Okay, so

01:14:40.960 --> 01:14:44.979
we can table for now and in two weeks?

01:14:44.979 --> 01:14:48.460
Or do you need a direction to the ALJ now? Oh, I misunderstood then. Do you want to table

01:14:48.460 --> 01:14:51.930
it for two weeks? Or did you want to abate this? Or

01:14:51.930 --> 01:14:52.630
do you want.

01:14:55.859 --> 01:14:57.649
Do we have something more to discuss in two weeks?

01:14:58.109 --> 01:14:59.939
No, I'm not. Whether or not

01:15:01.760 --> 01:15:07.199
So, so uh is it remand back to the ALJ, with instruction

01:15:07.210 --> 01:15:13.350
to uh ask Entergy to withdraw? Or consider dismissal if

01:15:13.760 --> 01:15:15.989
Entergy hasn't withdrawn within a certain amount of time.

01:15:15.989 --> 01:15:19.100
Certainly. How about remand with instruction to dismiss

01:15:19.539 --> 01:15:21.869
within two weeks. There's our two weeks.

01:15:25.350 --> 01:15:28.189
You got a motion? So moved, consistent with our discussion.

01:15:29.409 --> 01:15:32.850
Second. A motion and a second. All in favor say, aye. Aye.

01:15:32.859 --> 01:15:34.510
None opposed, motion passes.

01:15:36.270 --> 01:15:40.010
All right, good discussion. Next item please, Ms. Cisneros. All right.

01:15:40.010 --> 01:15:45.479
(item:27:21072, Commissioners Glotfelty & McAdams on natural gas capacity concerns) That takes us to Item 27. This is project 21072, goal

01:15:45.479 --> 01:15:49.000
for natural gas generating capacity. Commission Staff

01:15:49.000 --> 01:15:52.090
filed a memo and a proposed order. Requesting a waiver

01:15:52.100 --> 01:15:56.420
of Commission Rule 25.172, and certain subsections.

01:16:00.000 --> 01:16:03.890
Thank you, ma'am. I know this is something we've it's

01:16:03.890 --> 01:16:06.460
an annual issue we've considered before. Any thoughts or

01:16:06.460 --> 01:16:11.060
comments? Yeah, Mr. Chairman, I  would have consented

01:16:11.060 --> 01:16:15.180
this except for I just wanted to bring up the issue.

01:16:15.180 --> 01:16:19.380
That um this goal for natural gas um includes in it

01:16:19.390 --> 01:16:23.659
a mechanism. If our capacity for natural gas drops below

01:16:23.659 --> 01:16:27.569
50% that a trading mechanism be put in place. And I

01:16:27.569 --> 01:16:30.909
wanted to highlight that as a discussion item for us

01:16:30.909 --> 01:16:34.300
to think as we go forward, on all of the market design.

01:16:34.310 --> 01:16:36.100
That if we have an ORDC, we have a

01:16:36.100 --> 01:16:40.369
PCM and then kicks in a natural gas credit system.

01:16:40.369 --> 01:16:43.479
What that would look like at some point in time? We're

01:16:43.479 --> 01:16:48.270
a ways off from that, uh, drop below 50%. But I just

01:16:48.270 --> 01:16:50.640
wanted to highlight that. That is something that's

01:16:50.640 --> 01:16:53.289
there. We've talked to Staff about it and I think there's

01:16:53.300 --> 01:16:58.119
a discussion, um, you know, that that needs to happen

01:16:58.119 --> 01:17:02.140
in the future. This is not immediate. But just a understanding

01:17:02.140 --> 01:17:04.739
that there's another mechanism that has already been

01:17:04.750 --> 01:17:09.079
put in law in Senate Bill 7. That that considered

01:17:09.090 --> 01:17:13.079
the issues associated for the system, if we fell below

01:17:13.079 --> 01:17:16.489
50% natural gas. Thank you, Representative Tommy Merritt.

01:17:16.800 --> 01:17:22.039
Um, and um, just to highlight that for the, for the

01:17:22.050 --> 01:17:25.789
Staff, uh, and the Commissioners. Just point of clarification

01:17:25.789 --> 01:17:29.689
is 50% excluding renewables, right. I'm sorry. It's

01:17:29.689 --> 01:17:34.000
50% excluding renewables. Yes. Right Okay, so 50% of the

01:17:34.000 --> 01:17:38.850
dispatchable fleet? Yes. According to you. Again, that

01:17:38.850 --> 01:17:43.050
was my bone of contention the last time I, and uh,

01:17:43.050 --> 01:17:45.850
I have the deepest respect for Staff and their interpretation.

01:17:45.850 --> 01:17:49.300
But the policy mechanics, uh, that were clearly intended

01:17:49.300 --> 01:17:53.590
by the Legislation do not make sense. If you exclude

01:17:53.590 --> 01:17:58.390
renewables. I mean, what, what is the point? Um, so

01:17:58.399 --> 01:18:00.869
Kathleen, you're new to this. I voted against this

01:18:00.869 --> 01:18:04.039
the last time. It was a good joke. Um, at the diose

01:18:04.039 --> 01:18:09.579
that day. But if, if the, if the underpinning of the

01:18:09.579 --> 01:18:16.229
calculation is that the system requires over 50% of

01:18:16.229 --> 01:18:21.500
our capacity to be uh, natural gas driven, and natural

01:18:21.500 --> 01:18:25.189
gas powered. But subtract out the renewables, renewables

01:18:25.199 --> 01:18:28.460
is the dominant share. So if you're not counting the

01:18:28.460 --> 01:18:32.579
renewables, what is the point of what they put into

01:18:32.579 --> 01:18:35.810
law? And there clearly was a discussion. I've talked

01:18:35.810 --> 01:18:38.310
to many people who were around at the time. And they

01:18:38.310 --> 01:18:42.000
agreed, but it's in there. Staff has a good sound reading

01:18:42.000 --> 01:18:45.060
and good history, underpinning that reading. I just

01:18:45.060 --> 01:18:48.409
disagree. And uh, and I've already voted no once on

01:18:48.409 --> 01:18:51.590
that. So I think I'm gonna be a historical no on this

01:18:51.590 --> 01:18:57.899
interpretation. As uh, as is your privilege. Thank you sir.

01:18:59.609 --> 01:19:05.810
Wonder what, what is our current, uh, the current under

01:19:05.810 --> 01:19:08.939
the current interpretation of the rule percent of natural

01:19:08.939 --> 01:19:12.399
gas out of our total dispatchable resources installed

01:19:12.399 --> 01:19:13.199
capacity.

01:19:15.939 --> 01:19:19.920
I think. I think you went around Commission Staff, based off the current calculation

01:19:19.920 --> 01:19:22.850
for new generating capacity. That's been put into the

01:19:22.850 --> 01:19:26.590
system since 2000 excluding renewable energy technologies.

01:19:26.600 --> 01:19:30.220
Um, we calculated that was approximately 88.6% of the

01:19:30.220 --> 01:19:33.250
current capacity to put on the system since 2000 was

01:19:33.260 --> 01:19:35.489
fueled by natural gas. Um, and we project for at least

01:19:35.489 --> 01:19:37.270
the next three years. That's still not gonna get anywhere

01:19:37.270 --> 01:19:40.329
near the 55% that is required to trigger the natural

01:19:40.329 --> 01:19:45.319
gas energy credit training program. Thank you sir. Of

01:19:45.319 --> 01:19:47.220
our dispatchable fleet, we got a pretty healthy amount

01:19:47.229 --> 01:19:55.659
of natural gas. We do. Well, not healthy enough. I was

01:19:55.659 --> 01:19:57.850
questioned. I thought that was a very good point that

01:19:57.850 --> 01:20:02.399
you made, Mr. Chairman. Of the dispatchable fleet and

01:20:02.409 --> 01:20:04.939
as always, I'm sure Commissioner McAdams and the rest

01:20:04.939 --> 01:20:07.489
of us would welcome clarification from the Legislature.

01:20:07.500 --> 01:20:10.079
That would be great if they could ever do that.

01:20:11.829 --> 01:20:16.630
All right, another good conversation. Any other thoughts or

01:20:16.630 --> 01:20:19.409
comments? Or a motion to approve the proposed order?

01:20:21.560 --> 01:20:25.600
Got a motion and a second. All in favor say, aye. Aye. Any opposed? No.

01:20:28.130 --> 01:20:31.659
Motion passes. Thank you all. Thanks Werner.

01:20:33.640 --> 01:20:38.149
All right. Next item I think is item 30, does that track

01:20:38.149 --> 01:20:38.439
Ms. Cisneros?

01:20:40.859 --> 01:20:45.829
(item:30:53298, Kristi Hobbs, ERCOT VP, update on a bridge mechanism) We have an update from ERCOT on the instruction from

01:20:45.829 --> 01:20:50.890
last week, to bring back information on a bridge mechanism.

01:20:53.729 --> 01:20:56.680
And I believe Kristi Hobbs is here to present.

01:21:00.220 --> 01:21:03.390
All right. Good morning Chairman, Commissioners. Kristi

01:21:03.390 --> 01:21:06.939
Hobbs from ERCOT. So following your discussion last

01:21:06.939 --> 01:21:09.710
week, in your direction at the last Open Meeting. We

01:21:09.710 --> 01:21:12.359
returned back to kind of start our planning and wanted

01:21:12.359 --> 01:21:15.569
to, we filed a memo in the docket for your reference.

01:21:15.579 --> 01:21:18.489
And like to just lay that out for you, our plans to

01:21:18.500 --> 01:21:21.329
get back to you a recommendation from the ERCOT board,

01:21:21.340 --> 01:21:25.590
on the bridging solution. And so what we will do internally

01:21:25.590 --> 01:21:28.670
is we have started an effort to start to put together

01:21:28.670 --> 01:21:32.640
a menu of options for consideration and deliberation.

01:21:32.649 --> 01:21:35.529
We're gonna have several goals that will take into

01:21:35.529 --> 01:21:39.130
account as we look at ideas. Look at the pros and cons.

01:21:39.140 --> 01:21:43.289
Our first goal that we've laid out of course is retention

01:21:43.289 --> 01:21:45.930
of our existing fleet. That's our number one goal in

01:21:45.930 --> 01:21:50.500
coming up with a solution. Our next goal would be to

01:21:50.500 --> 01:21:54.149
consider incentives that may incent new generation.

01:21:54.159 --> 01:21:57.090
To be dispatchable generation to be added to the fleet.

01:21:58.000 --> 01:22:01.319
Following our third goal would be uh, do we have an

01:22:01.319 --> 01:22:05.489
opportunity uh, to the extent possible to limit the

01:22:05.489 --> 01:22:10.289
use of the reliability commitment mechanism. Overarching

01:22:10.300 --> 01:22:15.020
all of those goals would be to um look at the opportunities

01:22:15.029 --> 01:22:17.770
as we always do in anything we do in our operations,

01:22:17.779 --> 01:22:20.989
to optimize cost to consumers. So we'll be taking that

01:22:20.989 --> 01:22:24.600
into account as well. What we'll do in the next coming

01:22:24.600 --> 01:22:27.180
weeks is we will work on putting together a list, a

01:22:27.180 --> 01:22:30.750
menu of options. To have in preparation for consideration

01:22:30.750 --> 01:22:34.050
at the February Meeting of the Reliability and Markets

01:22:34.050 --> 01:22:36.970
Committee of the ERCOT board, to get direction from

01:22:36.970 --> 01:22:38.579
them. Because that will be the first time they will

01:22:38.579 --> 01:22:42.359
meet since your deliberations last week. We'll take direction

01:22:42.359 --> 01:22:47.119
from them. We would intend to hold ERCOT led stakeholder

01:22:47.119 --> 01:22:49.779
discussions. Because we feel it's very important to

01:22:49.779 --> 01:22:52.020
get feedback from those that would be impacted by the

01:22:52.020 --> 01:22:55.050
changes that we would be making. That would allow us

01:22:55.050 --> 01:22:59.010
to bring a final recommendation to the April Reliability

01:22:59.010 --> 01:23:01.260
and Markets Committee and board meeting. Where they

01:23:01.260 --> 01:23:04.550
could then consider and make a vote in a recommendation

01:23:04.560 --> 01:23:06.930
that we could bring back to you all. We would plan

01:23:06.930 --> 01:23:10.199
to file that by April 20th. To give you at least a

01:23:10.199 --> 01:23:13.130
week in advance to be able to consider that and deliberate

01:23:13.130 --> 01:23:16.850
at your April 27th Open Meeting. It's all pause there

01:23:16.850 --> 01:23:18.930
to see if you have any questions or feedback on our

01:23:18.930 --> 01:23:22.729
plan. That makes sense to me. Thoughts, comments? Just

01:23:22.729 --> 01:23:27.510
two clarifying questions. So the options would be focused

01:23:27.510 --> 01:23:32.100
on the retention of the existing fleet. And also to

01:23:32.229 --> 01:23:36.449
that would also send a price signal for the retention

01:23:36.449 --> 01:23:40.409
of that fleet? Correct Okay. And then when RNM

01:23:40.409 --> 01:23:44.149
consider finally considers um the options, will that

01:23:44.149 --> 01:23:47.729
go up to the full board for approval? Yes, that would

01:23:47.739 --> 01:23:52.130
be at the April board meeting. Okay, thank you. Yeah

01:23:52.130 --> 01:23:56.029
I like the way the timeline syncs up. Uh the Legislature

01:23:56.029 --> 01:23:59.090
is also watching and we'll be able to see kind of what

01:23:59.100 --> 01:24:02.319
stakeholder driven options. Because as Kristi alluded

01:24:02.319 --> 01:24:04.760
to, it's very important to have their input. On how

01:24:04.760 --> 01:24:07.829
we can again to withdraw ERCOT out of that command

01:24:07.829 --> 01:24:10.109
and control posture and let that market start to work

01:24:10.109 --> 01:24:13.250
again. Um It's very important for the Legislature to

01:24:13.260 --> 01:24:18.710
to see that we are in progress, that progress is moving.

01:24:18.720 --> 01:24:22.609
And um and to watch the new collaboration between stakeholders,

01:24:22.609 --> 01:24:25.310
the ERCOT board, and ultimately the PUC, on such an

01:24:25.310 --> 01:24:28.890
important matter. So I think the timing's just right.

01:24:29.500 --> 01:24:32.149
And I thought the information that Dan Woodfin provided

01:24:32.159 --> 01:24:34.729
at the TAC meeting. Would be very good information

01:24:34.729 --> 01:24:38.300
for the RNM Committee to have before them. That

01:24:38.300 --> 01:24:40.979
highlighted the number of effective RUC hours that

01:24:40.979 --> 01:24:47.260
were conducted in 2021, 2022. And what specific resources

01:24:47.270 --> 01:24:50.550
have been the most impacted for RUC. Since the presentation

01:24:50.550 --> 01:24:52.670
you provided yesterday, I thought was very helpful

01:24:52.680 --> 01:24:56.689
and illustrative. Of the amount of RUCing but also

01:24:56.689 --> 01:25:01.340
which how old the age range of the units that are primarily

01:25:01.340 --> 01:25:02.130
being RUCd.

01:25:04.329 --> 01:25:07.310
Good points all. All right, thank you Kristi.

01:25:09.939 --> 01:25:13.640
We've already covered item 31. I don't have any thing

01:25:13.640 --> 01:25:20.520
on 32. (item:33:54444, Chad Seely, Senior VP ERCOT & Marcia Hook with Kirkland & Ellis on firm fuel) Brings us to item 33. I believe we've got a

01:25:20.520 --> 01:25:25.850
memo from ERCOT and Chad Seely's here to lay out our

01:25:25.859 --> 01:25:29.100
progress on the second iteration of firm fuel.

01:25:33.500 --> 01:25:35.699
Good morning Chairman, Commissioners. Chad Seely with

01:25:35.699 --> 01:25:39.659
ERCOT. Also to my right is Marcia Hook, who's ERCOT outside

01:25:39.659 --> 01:25:42.460
counsel with Kirkland and Ellis. Uh, we want to talk

01:25:42.460 --> 01:25:46.300
about Phase II of the firm fuel supply service. Um

01:25:46.310 --> 01:25:50.760
on Monday, we filed a request for guidance letter but

01:25:50.760 --> 01:25:55.699
also attached as Attachment A, our proposed framework

01:25:55.710 --> 01:25:59.159
for Phase II. And primarily what we're looking for

01:25:59.159 --> 01:26:01.500
today is some guidance on the definition of qualifying

01:26:01.500 --> 01:26:06.279
pipeline. I've also asked John Arnold, which is a partner

01:26:06.279 --> 01:26:09.340
with Locke Lord. Um if the Commission desires to have

01:26:09.340 --> 01:26:13.189
him present for um Kinder Morgan and Enterprise. Because

01:26:13.189 --> 01:26:15.119
I think it's highly relevant for the Commission to

01:26:15.119 --> 01:26:18.229
hear their perspective around this definition of qualifying

01:26:18.229 --> 01:26:21.840
pipeline. Um, but before we engage the Commission in

01:26:21.840 --> 01:26:25.329
the kind of the risk management policy discussion around

01:26:25.340 --> 01:26:27.079
the qualifying pipeline definition. I thought it'd

01:26:27.079 --> 01:26:32.060
be useful for Marcia to talk about the framework document

01:26:32.060 --> 01:26:34.470
that's attached to the letter. Because there are fundamental

01:26:34.470 --> 01:26:38.199
differences here in Phase II versus what was in Phase

01:26:38.199 --> 01:26:42.430
I. Which was resource entities that own the storage

01:26:42.439 --> 01:26:46.220
on site or if it was offside, they own the storage

01:26:46.220 --> 01:26:49.720
facility and had ownership of the pipeline as well.

01:26:49.729 --> 01:26:51.760
So as we move forward to Phase II, obviously we're

01:26:51.760 --> 01:26:54.770
interacting with third parties, uh the gas suppliers

01:26:54.770 --> 01:26:57.779
and producers here. And it's a different structure as

01:26:57.779 --> 01:27:00.289
we move forward. And so I'll turn it over to Marcia

01:27:00.289 --> 01:27:02.479
just to kind of spend a few minutes to highlight

01:27:02.479 --> 01:27:05.220
the key features in the framework that I think are

01:27:05.229 --> 01:27:08.039
important for the overall policy discussion. And then

01:27:08.039 --> 01:27:10.489
we'll turn back to the qualifying pipeline definition.

01:27:13.180 --> 01:27:17.319
Good morning. Um I summarized in the filing, hopefully

01:27:17.319 --> 01:27:19.789
you can hear me a little quiet even with a microphone.

01:27:22.260 --> 01:27:25.050
I'm a partner at Kirkland & Ellis as Chad said. I'm

01:27:25.060 --> 01:27:27.760
outside counsel for ERCOT with respect to development

01:27:27.760 --> 01:27:31.760
of the Phase II FFSS program. So at a high level

01:27:31.770 --> 01:27:34.239
the framework document which was attached to the filing

01:27:34.239 --> 01:27:37.350
that Chad referenced. Contains certain key requirements

01:27:37.350 --> 01:27:41.409
for resources to participate as Phase II FFSSRs. And

01:27:41.409 --> 01:27:44.300
we'll highlight four of the key elements. First, the

01:27:44.300 --> 01:27:47.119
generation entity that owns the generation resource

01:27:47.130 --> 01:27:49.760
or an affiliate of that generation entity must own

01:27:49.760 --> 01:27:52.399
and have good title to sufficient natural gas in a

01:27:52.399 --> 01:27:56.020
storage facility for the generation resource to deliver

01:27:56.020 --> 01:28:00.220
the offered megawatts for at least 48 hours. The generation

01:28:00.220 --> 01:28:03.590
entity also must commit to maintain such quantity of

01:28:03.590 --> 01:28:06.729
gas in storage at all times during the obligation period.

01:28:07.090 --> 01:28:10.439
If the generation resource is selected as an FFSSR

01:28:10.439 --> 01:28:13.920
and is deployed such that it's reserved gasses

01:28:13.920 --> 01:28:17.090
depleted. It may request permission from ERCOT 

01:28:17.090 --> 01:28:20.229
restock. Alternatively, ERCOT may direct the FFSSR

01:28:20.229 --> 01:28:24.680
to restock. Second, the generation entity or an affiliate

01:28:24.680 --> 01:28:28.069
must have a firm gas storage agreement with the operator

01:28:28.079 --> 01:28:31.949
of of the storage facility where the gas is being stored.

01:28:31.960 --> 01:28:35.020
For sufficient natural gas storage capacity for the

01:28:35.020 --> 01:28:37.899
offer generation resource to deliver the offered megawatt

01:28:37.930 --> 01:28:42.289
for at least 48 hours. The firm gas storage agreement

01:28:42.289 --> 01:28:45.449
must, among other things, have a maximum daily withdrawal

01:28:45.449 --> 01:28:48.050
quantity. That permits the generation entity or its

01:28:48.050 --> 01:28:51.619
affiliate to withdraw from storage a daily quantity

01:28:51.670 --> 01:28:54.670
of gas sufficient to allow the generation resource

01:28:54.699 --> 01:28:59.140
to deliver the offered megawatt over a 48 hour period.

01:28:59.439 --> 01:29:02.979
Alternatively, a generation entity may use own storage

01:29:02.979 --> 01:29:06.260
capacity as long as it has sufficient storage capacity

01:29:06.260 --> 01:29:09.399
and withdrawal rights to meet the requirements previously

01:29:09.399 --> 01:29:13.810
described. Third the generation entity or an affiliate

01:29:13.810 --> 01:29:16.920
must have entered into a for a firm transportation

01:29:16.920 --> 01:29:19.920
agreement which is a new definition. For firm service

01:29:19.930 --> 01:29:23.609
on a qualifying pipeline. Chad will discuss the qualifying

01:29:23.609 --> 01:29:26.510
pipeline requirement later. However, there are several

01:29:26.520 --> 01:29:29.619
other substantive requirements that an agreement must

01:29:29.619 --> 01:29:33.270
satisfy to qualify as a firm gas storage agreement

01:29:33.279 --> 01:29:35.420
or firm transportation agreement that we wanted to

01:29:35.420 --> 01:29:39.199
highlight. A particular note to qualify as a firm gas

01:29:39.199 --> 01:29:42.090
storage agreement or firm transportation agreement.

01:29:42.100 --> 01:29:45.239
The agreement must provide the generation entity or

01:29:45.239 --> 01:29:48.920
its affiliate the right to monitor daily balances of

01:29:48.920 --> 01:29:52.140
storage capacity or flowing natural gas, respectively.

01:29:52.149 --> 01:29:55.609
That is a hallmark on jurisdictional pipelines, but

01:29:55.609 --> 01:29:59.800
it is not generally provided in interest state storage

01:29:59.810 --> 01:30:03.069
and transportation agreements in Texas. The agreement

01:30:03.079 --> 01:30:06.319
also must require that the storage facility or pipeline

01:30:06.319 --> 01:30:09.529
operator make available to the generation entity or

01:30:09.529 --> 01:30:13.189
its affiliate. A detailed accounting indicating a reasonable

01:30:13.199 --> 01:30:16.800
estimate of daily and month to date receipts and deliveries

01:30:16.800 --> 01:30:19.000
of natural gas. Again, this is not traditionally a

01:30:19.000 --> 01:30:24.170
hallmark on interest date uh agreements. So further

01:30:24.180 --> 01:30:27.340
the agreement must contain a qualifying force majeure

01:30:27.340 --> 01:30:30.819
provision. This is a definition that we propose to

01:30:30.819 --> 01:30:33.800
add. A qualifying Force Majeure provision is a force

01:30:33.810 --> 01:30:36.800
Majeure provision that includes certain contractual

01:30:36.800 --> 01:30:40.439
language including that before a pipeline. The pipeline

01:30:40.439 --> 01:30:43.420
or storage provider may suspend its performance due

01:30:43.420 --> 01:30:46.350
to force Majeure. The pipeline or storage provider

01:30:46.359 --> 01:30:50.319
must exercise due diligence and must incur reasonable

01:30:50.319 --> 01:30:53.449
costs, prevent or overcome the event of force majeure.

01:30:53.460 --> 01:30:57.399
Finally, there are a number of ongoing obligations

01:30:57.409 --> 01:31:01.869
that would apply to Phase II FFSSRs, notably if a

01:31:01.869 --> 01:31:06.109
generation resource selected as FFSSR fails to deploy

01:31:06.119 --> 01:31:10.260
due to a force majeure event. The generation entity

01:31:10.270 --> 01:31:13.750
would need to provide a report to ERCOT. That provides

01:31:13.750 --> 01:31:16.770
certain additional information. ERCOT also would have

01:31:16.779 --> 01:31:19.739
other remedies against the FFSSR including but not

01:31:19.739 --> 01:31:23.060
limited to the clawback of 90 days of availability

01:31:23.060 --> 01:31:27.869
payments. ERCOT receives substantial input from participants

01:31:27.869 --> 01:31:30.779
in the electric and gas sectors on the draft framework

01:31:30.789 --> 01:31:32.729
and the draft file with the Commission reflects that

01:31:32.739 --> 01:31:37.380
input. For example, numerous commenters suggested that

01:31:37.390 --> 01:31:40.539
allowing bundled contracts that provide for gas storage

01:31:40.539 --> 01:31:44.899
and transportation and one agreement should be permitted.

01:31:44.909 --> 01:31:48.010
As such contracts are common for interest state pipelines

01:31:48.010 --> 01:31:51.289
in the Texas market. The current draft of the framework

01:31:51.300 --> 01:31:53.859
would allow a generation entity to use such a bundled

01:31:53.859 --> 01:31:57.500
agreement rather than have a firm, a separate firm

01:31:57.500 --> 01:32:00.390
gas storage agreement and firm transportation agreement.

01:32:00.600 --> 01:32:04.119
However, the area where received the most comments

01:32:04.130 --> 01:32:06.899
was on the proposed definition of qualifying pipeline.

01:32:06.909 --> 01:32:10.649
And and that is the key area where ERCOT seeks Commission

01:32:10.649 --> 01:32:13.329
guidance and I will turn it over to Chad to discuss

01:32:13.340 --> 01:32:16.920
that that request for guidance. Okay, thanks Marcia.

01:32:16.930 --> 01:32:20.800
So again, the qualifying pipeline has been a great

01:32:20.800 --> 01:32:23.079
discussion with both industries, the electric and the

01:32:23.079 --> 01:32:26.159
gas industry. And the way in which we struggle that

01:32:26.170 --> 01:32:30.079
structured this is to be very conservative. Because

01:32:30.090 --> 01:32:33.470
when we were going in developing this Phase II, we

01:32:33.470 --> 01:32:36.859
want firm service to really mean firm delivery of the

01:32:36.869 --> 01:32:40.140
product to ensure reliability for Texas consumers. Um

01:32:40.149 --> 01:32:44.100
when you look at the interstate construct, the framework

01:32:44.109 --> 01:32:45.970
was developed on the Railroad Commission and their

01:32:45.970 --> 01:32:50.949
curtailment roll. Under that rule, the generation resources

01:32:50.960 --> 01:32:54.920
are secondary in priority to human needs customers

01:32:54.920 --> 01:32:58.939
and LDCs. Uh and so in a in most

01:32:58.939 --> 01:33:01.979
of our generation resources are going to be connected

01:33:01.979 --> 01:33:05.189
to intrastate pipelines versus interstate pipelines.

01:33:05.210 --> 01:33:09.920
And so in a weather event where even if you had firm

01:33:09.920 --> 01:33:12.689
commitments under that extreme scenario where it played

01:33:12.689 --> 01:33:16.750
out in the gas utility. That makes the decision on when

01:33:16.750 --> 01:33:19.319
to curtail because of the way in which the Railroad

01:33:19.319 --> 01:33:22.069
Commission's role is structured. When they make that

01:33:22.069 --> 01:33:26.069
decision, the entity that's going to be curtailed first

01:33:26.079 --> 01:33:29.680
in that priority between human needs customers. LDCs

01:33:29.680 --> 01:33:33.300
and generation resources is the generation resource.

01:33:33.310 --> 01:33:37.020
And so when we defined this definition of qualifying

01:33:37.020 --> 01:33:40.989
pipeline, we made it clear that the definition for

01:33:40.989 --> 01:33:45.439
eligible pipelines would apply to FERC interstate pipelines.

01:33:45.439 --> 01:33:48.130
Because they have a different structure for their curtailment

01:33:48.140 --> 01:33:52.069
provisions.And any pipeline that is not serving an

01:33:52.079 --> 01:33:55.159
interstate pipeline that is not serving human needs

01:33:55.170 --> 01:33:59.010
or LDCs. Because we want that generation resource to

01:33:59.010 --> 01:34:01.890
have the highest priority to ensure that the gas is

01:34:01.890 --> 01:34:05.029
getting to the resource to provide that service. A

01:34:05.039 --> 01:34:07.989
lot of comments came in as Marcia indicated. We have

01:34:07.989 --> 01:34:10.619
the workshop in which there were over 100 participants.

01:34:10.640 --> 01:34:14.500
On both sides of the industry our resource entity

01:34:14.500 --> 01:34:19.270
friends along with the gas industry. Stress that that

01:34:19.270 --> 01:34:21.920
if they had a firm commitment that there was a very

01:34:21.920 --> 01:34:24.220
low risk that there would be a curtailment of these

01:34:24.220 --> 01:34:27.199
resources. But again, you still have to struggle with

01:34:27.199 --> 01:34:29.380
the reality with the Railroad Commission's curtailment

01:34:29.380 --> 01:34:31.869
role means at the end of the day. And of course every

01:34:31.869 --> 01:34:35.010
weather event is different and you can't look at a past

01:34:35.010 --> 01:34:37.789
indication of performance to indicate what future performance

01:34:37.789 --> 01:34:41.039
would be under that scenario. So we maintain the definition

01:34:41.039 --> 01:34:43.760
of qualifying pipeline to be the most conservative

01:34:43.770 --> 01:34:46.819
and have filed this request for guidance to to engage

01:34:46.819 --> 01:34:49.170
the Commission on their feedback. As we move forward

01:34:49.170 --> 01:34:52.359
to try to structure the protocol language and move

01:34:52.359 --> 01:34:54.720
forward with this. To try to have a product in place

01:34:54.720 --> 01:34:57.720
for the next Winter season. Our goal obviously was

01:34:57.729 --> 01:35:01.579
try to get this finalized no later than the June

01:35:01.590 --> 01:35:04.369
board meeting. It's possible that we could get the

01:35:04.380 --> 01:35:07.210
protocols in place by the April board meeting. But

01:35:07.220 --> 01:35:10.359
we stand here today to seek guidance from the Commission

01:35:10.359 --> 01:35:13.119
on this qualifying pipeline. Also in the, in the, in

01:35:13.119 --> 01:35:16.500
the letter, we asked for guidance on three other topics.

01:35:16.510 --> 01:35:19.189
The there was a lot of discussion around the duration

01:35:19.199 --> 01:35:22.829
of this product right now under Phase One, it's 48

01:35:22.829 --> 01:35:25.960
hours. Of course, everybody knows here in Texas, we

01:35:25.960 --> 01:35:28.729
have a lot of gas supply and that they're likely as

01:35:28.729 --> 01:35:31.770
the opportunity to have a longer duration product here.

01:35:31.789 --> 01:35:34.899
Um similar to Phase One, we would ultimately seek guidance

01:35:34.899 --> 01:35:37.789
on the amount of megawatts procured for this Phase

01:35:37.789 --> 01:35:40.579
II. And then we wanted to highlight some of the comments

01:35:40.579 --> 01:35:43.899
about additional resources participating in this program.

01:35:43.899 --> 01:35:46.649
Uh and so those are kind of the core four elements

01:35:46.649 --> 01:35:49.350
um which were requesting guidance from the Commission.

01:35:49.899 --> 01:35:52.729
So all that being said, I do think it would be helpful

01:35:52.739 --> 01:35:56.670
for, for John Arnold uh the Commission so desires. To

01:35:56.680 --> 01:35:59.329
come forward and kind of, he, he has a presentation

01:35:59.340 --> 01:36:02.100
and kinda highlight the gas industry's perspective

01:36:02.100 --> 01:36:05.979
on on this issue around qualifying pipeline. Thank

01:36:05.979 --> 01:36:07.970
you both. I think it makes sense to call up Mr. Arnold.

01:36:12.609 --> 01:36:16.869
I have (inaudible) this over. We've got five copies here.

01:36:19.729 --> 01:36:23.609
(item:33:54444, John Arnold, Partner with Locke Lord on behalf of Enterprise Products and Kinder Morgan Inc.) Good morning Mr. Chairman, Commissioners. For the

01:36:23.609 --> 01:36:25.829
record, my name is John Arnold and I'm a partner with the

01:36:25.829 --> 01:36:29.020
law firm of Locke Lord and I'm here on behalf of Enterprise

01:36:29.020 --> 01:36:31.640
Products and Kinder Morgan Inc. Uh and in

01:36:31.640 --> 01:36:34.449
particular, their efforts in support of the development

01:36:34.449 --> 01:36:37.739
of the Phase II firm fuel service for offsite gas

01:36:37.739 --> 01:36:42.550
storage. Um, Chad has has teed up the issue nicely

01:36:42.560 --> 01:36:46.189
and I don't have a overly extensive presentation. Fortunately,

01:36:46.189 --> 01:36:48.500
I've had the opportunity to meet with each of your

01:36:48.500 --> 01:36:51.789
offices and discuss from a background perspective. In

01:36:51.789 --> 01:36:54.829
the early days of developing this product to now addressing

01:36:54.829 --> 01:36:58.470
the qualifying pipeline issue. Um Chad has laid out

01:36:58.470 --> 01:37:02.369
the concern that the current definition of qualifying

01:37:02.380 --> 01:37:04.930
pipeline addresses with respect to the Railroad Commission's

01:37:04.949 --> 01:37:10.140
curtailment. Or what I'd like to do is help you understand

01:37:10.149 --> 01:37:13.760
the consequences of that definition. But also help you

01:37:13.760 --> 01:37:17.310
understand some of the reliability features that we

01:37:17.310 --> 01:37:21.729
know from Winter Storm Uri. But to Chad's point about

01:37:21.739 --> 01:37:24.010
that's no guarantee of future performance. To also look

01:37:24.010 --> 01:37:26.729
at how we have some assurance with respect to future

01:37:26.739 --> 01:37:30.090
reliability of delivery. Even with respect to the current

01:37:30.100 --> 01:37:36.079
framework of the curtailment. So a few facts, assuming

01:37:36.090 --> 01:37:39.149
that the definition of qualifying pipeline continues

01:37:39.149 --> 01:37:43.939
to exclude by definition intrastate gas utility pipelines.

01:37:44.060 --> 01:37:46.649
You'll hear me use the phrase intrastate gas utility

01:37:46.649 --> 01:37:49.710
pipelines. That's the regulatory status of an intrastate

01:37:49.710 --> 01:37:52.270
pipeline that delivers gas to customers like generations

01:37:52.270 --> 01:37:56.680
generation resources in ERCOT. On page three of the

01:37:56.680 --> 01:37:59.649
presentation, so skipping past the preface with respect

01:37:59.649 --> 01:38:05.069
to the qualifying pipeline issue. 85% of ERCOT generation

01:38:05.069 --> 01:38:10.310
resources are served by intrastate gas utility pipelines. 63%

01:38:10.310 --> 01:38:13.409
of the gas storage withdrawal capacity in Texas that's

01:38:13.409 --> 01:38:16.439
served by intrastate gas utility pipelines. All of

01:38:16.439 --> 01:38:20.590
these pipelines that provide these services to generation

01:38:20.590 --> 01:38:24.409
resources. Also provides services to local distribution

01:38:24.409 --> 01:38:26.840
companies and local distribution companies, your local

01:38:26.840 --> 01:38:30.789
gas utility. And we use a reference to LDCs as a proxy

01:38:30.789 --> 01:38:33.880
for the notion that they're serving human needs customers.

01:38:34.510 --> 01:38:37.439
The consequence then, is that the current definition

01:38:37.439 --> 01:38:41.449
of qualifying pipeline will exclude the vast majority

01:38:41.460 --> 01:38:44.810
of gas that is available to support the firm fuel service

01:38:44.819 --> 01:38:48.020
um in Phase II of the project. In other words, to

01:38:48.020 --> 01:38:52.369
make offsite storage and transportation to generation

01:38:52.369 --> 01:38:56.520
resources. In the second phase of firm fuel work to

01:38:56.529 --> 01:38:59.840
any intended scope for this second phase or any scalable

01:38:59.840 --> 01:39:04.159
phase for future use excluding Texas intrastate gas

01:39:04.159 --> 01:39:07.560
utility pipelines. Will create a severe limitation on

01:39:07.560 --> 01:39:10.479
the available gas to support the product. Let me use

01:39:10.479 --> 01:39:15.029
Kinder Morgan alone as an example of the impact. Kinder

01:39:15.029 --> 01:39:18.529
Morgan's intrastate gas utility pipeline served 24,000

01:39:18.529 --> 01:39:22.279
megawatts of generation resources in Texas. That's 43%

01:39:22.289 --> 01:39:25.930
of ERCOT's gas fired generation resource capacity. It's

01:39:25.930 --> 01:39:29.489
gas storage currently in Texas, about 20% of the available

01:39:29.489 --> 01:39:32.720
gas storage capacity and it has plans and is currently

01:39:32.720 --> 01:39:36.180
developing that capacity to expand. Such that it represents

01:39:36.180 --> 01:39:38.270
nearly a quarter of that capacity.

01:39:40.029 --> 01:39:44.060
I can also convey some of this data and statistics

01:39:44.069 --> 01:39:47.300
graphically. I think you all have seen a map that was

01:39:47.300 --> 01:39:50.800
prepared with energy information administration data,

01:39:50.810 --> 01:39:53.300
by Enterprise Product and present presented to your

01:39:53.300 --> 01:39:58.340
offices. On page four of your presentation you will

01:39:58.340 --> 01:40:01.800
see a map depicting the relative locations of interstate

01:40:01.800 --> 01:40:05.640
pipelines. Generation resources of two different sizes

01:40:05.649 --> 01:40:08.760
as well as the interstate pipelines and available gas

01:40:08.760 --> 01:40:12.890
storage resources. And what you notice in this photo

01:40:12.899 --> 01:40:15.890
is right down the I-35 corridor, that Central spine

01:40:15.890 --> 01:40:19.949
of Texas, there is no available gas delivery. If you

01:40:19.960 --> 01:40:24.000
turn to page four, you'll see the intrastate system

01:40:24.000 --> 01:40:27.550
which is far more granular. And clearly provides the

01:40:27.560 --> 01:40:30.069
the interconnectivity that's required. To ensure the

01:40:30.079 --> 01:40:32.739
gas delivery reaches the generation resources that

01:40:32.739 --> 01:40:36.600
would be depending on the firm storage and transportation

01:40:36.600 --> 01:40:39.670
contracts to offer in this firm fuel supply ancillary

01:40:39.670 --> 01:40:43.229
service. Let me talk about reliability for just a minute.

01:40:44.319 --> 01:40:47.609
With respect to Winter Storm Uri, and I have spoken

01:40:47.619 --> 01:40:49.789
to both Enterprise and Kinder Morgan. And said, okay well

01:40:49.789 --> 01:40:52.920
we know what happened in Winter Storm Uri. With respect

01:40:52.930 --> 01:40:56.539
to gas withdrawal from storage. Both of these companies

01:40:56.539 --> 01:40:59.729
issued no enforcement adjure notices. They provided 100%

01:40:59.729 --> 01:41:03.140
of the contracted capacity that generation resources

01:41:03.140 --> 01:41:07.399
requested. Neither neither of them curtailed gas to

01:41:07.399 --> 01:41:10.020
generation resources when that gas was backed by a

01:41:10.020 --> 01:41:13.960
storage product. That's that's an important lesson

01:41:13.960 --> 01:41:17.090
from the past. I confirmed that the same was true during

01:41:17.090 --> 01:41:20.300
Elliot. So we're seeing some resiliency here with respect

01:41:20.300 --> 01:41:22.890
to when you've got a firm gas transportation and firm

01:41:22.890 --> 01:41:25.890
gas storage contract. That under the harshest of weather

01:41:25.890 --> 01:41:28.529
conditions it's gonna deliver the gas to the generation

01:41:28.529 --> 01:41:31.850
resources. What about moving forward? What about how

01:41:31.850 --> 01:41:34.890
do we know that this is gonna be effective going forward,

01:41:34.890 --> 01:41:37.510
in the face of the existing curtailment order from the

01:41:37.510 --> 01:41:40.659
Railroad Commission? Number one we know the underground

01:41:40.659 --> 01:41:44.109
storage facilities and pipelines are naturally weather

01:41:44.109 --> 01:41:47.479
resistant, they're buried, they are underground. The

01:41:47.479 --> 01:41:50.359
new weatherization and critical infrastructures rules

01:41:50.369 --> 01:41:54.090
of both the Railroad Commission and the PUC have hardened

01:41:54.100 --> 01:41:57.319
if you will. The above ground facilities like compressors

01:41:57.319 --> 01:42:00.550
that move the gas. One thing I'd like to highlight though

01:42:00.550 --> 01:42:03.310
that's really critical and Chad touched on this. Is

01:42:03.310 --> 01:42:05.989
that with respect to the Railroad Commission's new

01:42:05.989 --> 01:42:09.739
curtailment order. It is not the Commission that invokes

01:42:09.739 --> 01:42:13.430
the order, it was specifically drafted such that the

01:42:13.430 --> 01:42:16.619
gas utility pipeline gets to decide if it must invoke

01:42:16.619 --> 01:42:18.939
a curtailment event with respect to its gas delivery

01:42:18.939 --> 01:42:22.399
obligations. And what that means is it assesses its

01:42:22.399 --> 01:42:25.670
ability to meet its firm delivery commitments. Now

01:42:25.670 --> 01:42:28.739
remember, this is, let's look back at the track record

01:42:28.739 --> 01:42:31.880
from Uri and Elliott. There were no force majeure

01:42:31.880 --> 01:42:34.659
when that gas was coming out of storage. It resolves

01:42:34.659 --> 01:42:37.069
the fundamental problem of Uri, which was a supply

01:42:37.069 --> 01:42:40.119
problem, not a delivery problem. The supply problem

01:42:40.119 --> 01:42:42.970
is resolved by the presence of that gas in storage.

01:42:45.119 --> 01:42:48.010
It's also important for this Commission to understand

01:42:48.020 --> 01:42:53.960
that the gas pipeline and storage market in Texas has

01:42:53.960 --> 01:42:56.890
been evaluating this product very carefully. And understanding

01:42:56.890 --> 01:43:00.010
that it provides an important incentive to competition

01:43:00.010 --> 01:43:02.760
and growth and development of facilities. We've seen

01:43:02.760 --> 01:43:05.420
this with respect to Kinder Morgan's market facilities.

01:43:05.430 --> 01:43:07.729
We've seen it with respect to Enterprise investing

01:43:07.729 --> 01:43:10.199
in greater dehydration so that it has a higher rate

01:43:10.199 --> 01:43:13.220
of withdrawal capacity from its facilities. It is a

01:43:13.220 --> 01:43:16.189
key incentive that I think is going to bring some market

01:43:16.189 --> 01:43:18.289
solution to some of the competitive issues that this

01:43:18.289 --> 01:43:21.420
Commission has heard about. With respect to the performance

01:43:21.420 --> 01:43:25.000
of pipelines across the state. So, I would urge the

01:43:25.000 --> 01:43:28.529
Commission to strongly consider a definition of qualifying

01:43:28.529 --> 01:43:31.760
pipeline in the firm fuel service that does include

01:43:31.770 --> 01:43:35.630
intrastate gas utility pipelines on that basis. I'm

01:43:35.630 --> 01:43:39.649
happy to take any questions. All right. Thank you, Mr. Arnold.

01:43:39.659 --> 01:43:43.710
I'm sure we'll have lots of questions and comments

01:43:43.710 --> 01:43:46.279
(item:33:54444, Chairman Lake's comments to ERCOT and attorneys)but if you'll allow me I'll lay a little groundwork. I know

01:43:46.279 --> 01:43:51.229
ERCOT has been well, first of all, um thanks to the

01:43:51.409 --> 01:43:55.449
team and our attorneys. Uh this has been a, as you

01:43:55.449 --> 01:43:58.840
all know, a lot of work going into this. Uh and thank

01:43:58.840 --> 01:44:02.140
you, John and Kinder Morgan and Enterprise have been

01:44:02.149 --> 01:44:05.109
excellent partners. Working through all the different

01:44:05.289 --> 01:44:09.970
combinations and permutations of this. Um and as you

01:44:09.970 --> 01:44:12.899
all know, as well as anybody, none of this is straightforward

01:44:12.899 --> 01:44:16.359
it's all complex and both of those industries are complex.

01:44:16.369 --> 01:44:20.550
And even more complex when you, you kind of start working

01:44:20.550 --> 01:44:24.529
on integrating a new product there. So I want to say

01:44:24.529 --> 01:44:26.350
again, Kinder Morgan, Enterprise have been excellent

01:44:26.350 --> 01:44:30.189
partners. Um and Peggy Hague from the ERCOT board has

01:44:30.189 --> 01:44:33.159
also really led the charge on this. So I want to commend

01:44:33.159 --> 01:44:38.989
her for her insight and expertise on this. Uh and I

01:44:38.989 --> 01:44:41.979
know I know ERCOT and Peggy from the beginning have

01:44:41.979 --> 01:44:46.520
been working towards defining a performance result.

01:44:46.529 --> 01:44:51.050
Not trying to pick and choose which pipelines are included

01:44:51.050 --> 01:44:54.729
or not included. Uh nobody in the ERCOT team or Peggy

01:44:54.739 --> 01:44:57.600
ever sat down and said should it be an interstate or

01:44:57.600 --> 01:45:01.050
intrastate. As Chad alluded to, they said, they started

01:45:01.050 --> 01:45:04.810
this entire project, defining what performance we want.

01:45:04.819 --> 01:45:09.850
Uh and what uh and what will deliver our consumers

01:45:09.859 --> 01:45:13.770
a truly firm product. So that, and that's an important

01:45:13.770 --> 01:45:17.939
distinction. And I know, uh, this, this Commission's

01:45:17.939 --> 01:45:21.310
intention and, and Peggy the board and ERCOT Staff

01:45:21.310 --> 01:45:27.300
have also worked on from the thesis that. We don't want

01:45:27.300 --> 01:45:31.319
to use rate pair of money to pay for the same behavior.

01:45:31.329 --> 01:45:34.300
We don't want to pay for the same thing and John you

01:45:34.300 --> 01:45:39.369
alluded to changes in improvements in competitive options

01:45:39.380 --> 01:45:41.579
uh, and so we want to drive behavior. There's a lot

01:45:41.579 --> 01:45:44.039
of different ways to do that. There's some on the pipeline

01:45:44.039 --> 01:45:46.060
side, like the things John mentioned. There's some

01:45:46.060 --> 01:45:48.699
on the generation side like dual connection building

01:45:48.699 --> 01:45:52.460
new infrastructure. Uh, so it's, it's, it's on both

01:45:52.460 --> 01:45:55.479
sides of the equation, but the ultimate goal is to

01:45:55.949 --> 01:45:59.149
put this ratepayer money out in the marketplace for

01:45:59.149 --> 01:46:03.409
both industries to compete for. To enhance their reliability

01:46:03.409 --> 01:46:06.199
by changing their behavior, their infrastructure, all

01:46:06.199 --> 01:46:08.760
of the above. So that's, I know that's an important

01:46:08.760 --> 01:46:13.130
foundation uh, that we, I know, I know we've been working

01:46:13.140 --> 01:46:17.819
on that foundation from the beginning. Um, there are

01:46:17.819 --> 01:46:21.350
still as Marcia alluded to, there's still some open

01:46:21.350 --> 01:46:24.609
questions about bundling. And of course John's, uh,

01:46:24.619 --> 01:46:27.680
highlighted the qualifying pipeline definition is really

01:46:27.680 --> 01:46:35.090
a key or critical sticking point. Um, and I'll be frank

01:46:35.090 --> 01:46:37.920
I still, I still want waiting uh, and still have a

01:46:37.920 --> 01:46:41.829
lot of answers to be, uh, that I'm waiting to hear

01:46:41.829 --> 01:46:44.689
about. And just, and somewhere I know ERCOT has some

01:46:44.699 --> 01:46:48.319
open questions from my partners in the gas industry.

01:46:48.319 --> 01:46:51.369
So, uh, I'll just tell you all the gates, I think this

01:46:51.369 --> 01:46:53.800
is another one that I need another two. I'm gonna use

01:46:53.800 --> 01:46:57.689
my two week card to another two weeks on this one.

01:46:58.130 --> 01:47:01.539
Um, but but that's all I say that all in the spirit

01:47:01.550 --> 01:47:04.289
of of the good conversations we're having with and

01:47:04.289 --> 01:47:07.449
dialogue with Kinder Morgan and Enterprise. Uh, one

01:47:07.449 --> 01:47:10.760
of the key things is getting more information about

01:47:10.770 --> 01:47:14.909
performance during Uri. Certainly commend Kinder Morgan

01:47:14.909 --> 01:47:17.569
and Enterprise for the delivery during Uri. Of all their

01:47:17.569 --> 01:47:21.369
firm products. Uh, but it's it's an open question and

01:47:21.380 --> 01:47:24.189
I think it's an important question asked. Obviously

01:47:24.189 --> 01:47:28.710
there weren't as many firm gas contracts during Uri

01:47:28.710 --> 01:47:34.189
as we needed. Uh, and so would that, and not just for

01:47:34.199 --> 01:47:38.470
Kinder Morgen, Enterprise. But for system wide, our intrastate

01:47:38.479 --> 01:47:42.310
pipelines. Would everyone have been able to deliver

01:47:42.310 --> 01:47:48.159
that during Uri conditions, if 80% of our gas generators

01:47:48.159 --> 01:47:50.859
had those kind of firm contracts? Instead of just 10

01:47:50.859 --> 01:47:54.439
or 20%. Um, I don't know the answer, but that's that's

01:47:54.439 --> 01:47:56.710
an important question. I certainly hope it's a positive

01:47:56.710 --> 01:47:59.989
response. There's also some open questions. Uh, and

01:47:59.989 --> 01:48:02.050
and the Railroad Commission has also been very helpful

01:48:02.050 --> 01:48:06.909
throughout this. On the difference in uh, the distinctions

01:48:06.909 --> 01:48:12.210
between molecule ownership, both in storage, it clearly

01:48:12.210 --> 01:48:16.050
need to be the generator, but in transport, uh, the

01:48:16.050 --> 01:48:18.850
curtailment restrictions under Railroad Commission

01:48:18.850 --> 01:48:25.199
rules. If, if it is a regulated pipeline that is that

01:48:25.210 --> 01:48:30.039
owns or is responsible for shipping those molecules

01:48:30.050 --> 01:48:35.569
versus the pipelines that's selling the capacity within

01:48:35.569 --> 01:48:39.970
to move those molecules. Uh and if the curtailment

01:48:39.970 --> 01:48:42.689
rules apply to, for example, a third party shipper.

01:48:42.699 --> 01:48:48.369
Uh, an outside party party or even an affiliated element

01:48:48.380 --> 01:48:53.739
of a regulated pipeline. Uh and and so that's, that's

01:48:53.739 --> 01:48:57.979
still one of the open questions. I think as we work

01:48:57.979 --> 01:49:01.189
through that, I think there's some, there's some opportunity

01:49:01.189 --> 01:49:03.189
and that's what I think we need to keep digging, keep

01:49:03.189 --> 01:49:06.149
working with our industry partners. Uh we clearly don't

01:49:06.149 --> 01:49:09.750
have the answer today. Uh, but I think the most important

01:49:09.750 --> 01:49:13.359
thing is we keep digging through those issues uh, to

01:49:13.359 --> 01:49:17.189
make sure if there is there is a way to capture the

01:49:17.189 --> 01:49:21.310
most gas possible. That is truly firm and delivers the

01:49:21.310 --> 01:49:25.789
performance to our generators and that's our ratepayers

01:49:25.800 --> 01:49:28.460
that's worth the money we're paying. That we should

01:49:28.470 --> 01:49:32.180
we should work to find that solution or exhaust every

01:49:32.180 --> 01:49:37.810
option. So that's, that's my reasoning behind wanting

01:49:37.810 --> 01:49:41.840
a little more time. And again, appreciate Kinder Morgan,

01:49:41.840 --> 01:49:45.460
Enterprise for, for all the, all the hard work on this.

01:49:45.470 --> 01:49:48.220
Um, they've, they've been very helpful and and done

01:49:48.220 --> 01:49:51.720
a good job and we'll continue another ERCOT team will

01:49:51.720 --> 01:49:54.949
continue working with them. As we continue to dig through

01:49:54.949 --> 01:49:59.750
the options, dig those nuances and exhaust every every

01:49:59.750 --> 01:50:02.590
possible option. To make sure this is the best product

01:50:02.590 --> 01:50:05.189
possible. And we'll certainly continue to be available

01:50:05.199 --> 01:50:07.359
to answer any questions you have about the way that

01:50:07.359 --> 01:50:09.470
the business operates. And the way it can best support

01:50:09.479 --> 01:50:13.840
the firm fuel services. Appreciate it. Thoughts, comments?

01:50:13.850 --> 01:50:17.369
I do, I do have a couple questions. Is there a way

01:50:17.369 --> 01:50:20.800
to bifurcate the definition of qualifying pipeline?

01:50:20.810 --> 01:50:25.340
Based upon, is a and should this be done or could

01:50:25.340 --> 01:50:29.569
this be done? Um based upon where it is around the state.

01:50:29.579 --> 01:50:34.079
Obviously, I think your maps show that uh, Gulf Coast.

01:50:34.090 --> 01:50:36.890
Obviously you've got a lot of inter and intrastate

01:50:36.899 --> 01:50:41.140
and uh in the Central part, the I-35 corridor up to

01:50:41.140 --> 01:50:45.960
Dallas. You don't have almost zero interstates and

01:50:45.970 --> 01:50:50.449
lots of intrastates. Um is there a way or a reason

01:50:50.449 --> 01:50:55.710
to define those differently? My concern Commissioner,

01:50:55.710 --> 01:50:58.989
would be with respect to the competitive signal part

01:50:58.989 --> 01:51:02.829
of this equation. So with respect to creating a bifurcation

01:51:02.840 --> 01:51:06.770
that sets that limiting principle. Have you limited

01:51:06.770 --> 01:51:09.369
then the incentives for the growth and development

01:51:09.380 --> 01:51:12.810
of new storage facility, new pipelines to serve generation

01:51:12.810 --> 01:51:15.899
resources. In other words, making sure that that cut.

01:51:15.920 --> 01:51:18.060
And we talked about making policy cuts in the implications

01:51:18.060 --> 01:51:22.039
of that. As an outgrowth of that, you may limit geographically

01:51:22.039 --> 01:51:24.819
speaking some of the places where you might have wanted

01:51:24.829 --> 01:51:27.079
this product to serve as an incentive for growth in

01:51:27.079 --> 01:51:32.600
competition. (item:33:54444, Commissioner Glotfelty comments to John Arnold) So you see that a uh, well, that makes

01:51:32.600 --> 01:51:36.039
sense unless it becomes a trigger and the growth of

01:51:36.039 --> 01:51:40.350
competition in storage types of facilities. In that

01:51:40.359 --> 01:51:44.640
Dallas, I-35 Corridor region if competition allows

01:51:44.649 --> 01:51:47.659
regulations to go away. And then you get back to a single

01:51:47.659 --> 01:51:51.479
definition across the entire state. Um I mean I think

01:51:51.479 --> 01:51:54.670
that I think that the maps are pretty obvious. That

01:51:54.680 --> 01:51:58.390
uh that if you look at the population centers across

01:51:58.399 --> 01:52:02.199
the state other than, other than Houston. We've got

01:52:02.210 --> 01:52:08.100
uh you know, an interstate avoid um up the I-35 corridor.

01:52:08.109 --> 01:52:11.739
Um uh I think that we ought to find a way to

01:52:11.739 --> 01:52:16.840
ensure that intrastates are in this. But um I think

01:52:16.840 --> 01:52:21.000
it's it's a very fair question that um on this order

01:52:21.000 --> 01:52:23.619
of curtailment. Um we're really putting those that

01:52:23.619 --> 01:52:26.100
have gas heat above those that have electric heat.

01:52:26.760 --> 01:52:33.239
Um you know, if if human needs are um, you know, considered

01:52:33.239 --> 01:52:35.819
the number one priority or the last priority and curtailment

01:52:35.819 --> 01:52:39.079
and and we're the second to last. And and that's not

01:52:39.090 --> 01:52:41.239
something that I'm yet comfortable with. You know,

01:52:41.250 --> 01:52:43.439
just saying that one kind of heat source is different

01:52:43.439 --> 01:52:47.520
from another, when it comes to two major weather. Um

01:52:48.079 --> 01:52:51.699
It's interesting that you all have 20, that Kinder Morgan

01:52:51.699 --> 01:52:57.069
has 24,000 megawatts of gas on their intrastate.

01:52:57.079 --> 01:53:02.270
Is are human needs contracts? So is a contract to an

01:53:02.270 --> 01:53:07.170
LDC um the same. As a in other words, do

01:53:07.170 --> 01:53:13.500
they have firm um resources. They do. So on on those, 20 on

01:53:13.500 --> 01:53:16.729
the Kinder Morgan's pipeline system, how many megawatts

01:53:16.729 --> 01:53:20.319
of firm gas or transportation do you have for human

01:53:20.319 --> 01:53:24.399
needs? It's the breakdown is the LDC represents

01:53:24.399 --> 01:53:28.640
about 15%. 15 . Whereas the generation resources represent

01:53:28.640 --> 01:53:32.779
about 32% and industrials are 30%. So they're actually

01:53:32.789 --> 01:53:37.579
less than half of the total. 96% of the customer base

01:53:37.579 --> 01:53:41.380
is served on a firm on a firm basis. Um so that

01:53:41.380 --> 01:53:44.439
includes the LDCs but that's only 15% of the total

01:53:44.449 --> 01:53:47.300
gas load represented by service from those pipelines.

01:53:48.189 --> 01:53:51.829
Okay. And that's one of the questions we're trying

01:53:51.829 --> 01:53:54.840
to work through in terms of system wide, right? Because

01:53:54.840 --> 01:53:59.479
if it's um you know, if system wide LDCs are only.

01:53:59.489 --> 01:54:01.489
You know, which by definition are firm regardless of

01:54:01.489 --> 01:54:03.739
the contract says they're by definition of the Railroad

01:54:03.750 --> 01:54:08.659
Commission rule, their firm. If that's only 10%. And that

01:54:08.659 --> 01:54:11.289
will vary. It's it's a it's a good question because

01:54:11.289 --> 01:54:13.380
it will vary from system to system. That's not, you

01:54:13.380 --> 01:54:15.960
know, we don't have a gas delivery system, so to speak

01:54:15.970 --> 01:54:18.369
within Texas. We have a bunch of different gas pipelines

01:54:18.369 --> 01:54:21.029
that provide service to customer bases that they designed

01:54:21.029 --> 01:54:23.810
those pipelines to serve. As opposed to operating on

01:54:23.810 --> 01:54:27.579
an integrated grid like basis. So it will vary from

01:54:27.579 --> 01:54:30.760
pipeline pipeline. Right. But for our purposes we need

01:54:30.760 --> 01:54:34.770
to know how the whole system comes together. If LDCs

01:54:34.770 --> 01:54:40.010
are 40 or 50% of total of the senior stack essentially

01:54:40.020 --> 01:54:44.579
that's one thing. If it's 10% that's very different.

01:54:44.590 --> 01:54:47.020
But this is the, these are the kind of questions were

01:54:47.090 --> 01:54:50.550
continuing to dig through. Can I put you on the spot

01:54:50.550 --> 01:54:58.340
here? Have you not already? Not like this question. Uh oh. Well, so

01:54:58.340 --> 01:55:03.739
would you rather have a modified definition of qualifying

01:55:03.750 --> 01:55:08.399
uh, facility to include intrastate pipelines? Or would

01:55:08.399 --> 01:55:11.560
you rather have the Railroad Commission change the

01:55:11.569 --> 01:55:16.039
order of curtailment? And and include electric generation

01:55:16.050 --> 01:55:19.420
in the human needs category. That's a good question. I'd rather have the

01:55:19.420 --> 01:55:23.529
former than the latter. Um but I will say this um I

01:55:23.529 --> 01:55:26.819
know from extensive conversations with the leadership

01:55:26.829 --> 01:55:29.159
for example, at Enterprise and Kinder Morgan. That they

01:55:29.170 --> 01:55:33.000
very much view um service to generation resources on

01:55:33.000 --> 01:55:36.720
a par with delivery of gas to LDCs and human needs

01:55:36.720 --> 01:55:40.510
customers. They would they view them equally um from

01:55:40.510 --> 01:55:42.829
the standpoint of their customer base, from the standpoint

01:55:42.829 --> 01:55:46.470
of their view of the priorities. Um I recall having

01:55:46.470 --> 01:55:48.479
this discussion with the CEO of one of the companies

01:55:48.479 --> 01:55:51.329
said, well wait a minute, you know my heat is electric.

01:55:51.340 --> 01:55:54.850
To your point, um why would that? He said I was called

01:55:54.850 --> 01:55:57.239
during your Uri, I would have liked to have that heat.

01:55:57.250 --> 01:56:01.210
Um I there is, I think a certain view in the industry

01:56:01.210 --> 01:56:04.460
that those are very much on par and hopefully can be

01:56:04.460 --> 01:56:05.810
treated as such in the future.

01:56:09.229 --> 01:56:15.920
(item:33:54444, Commissioner McAdams to Chad Seely & John Arnold) So Chad remind me of Phase I firm fuel, how much

01:56:15.930 --> 01:56:20.170
did we use during Elliot as a baseline benchmark to

01:56:20.170 --> 01:56:25.210
compare what our needs are? I think we ended up deploying

01:56:25.220 --> 01:56:30.489
8 resources out of 19. And I think uh one of you

01:56:30.489 --> 01:56:34.630
may need to come up. But I think the the maximum amount

01:56:34.630 --> 01:56:38.149
was around 900 megawatts or so, is that correct? So

01:56:38.159 --> 01:56:41.529
around 900 (inaudible) megawatts and we did make the decision.

01:56:41.529 --> 01:56:45.159
Because this happened in December to go ahead and refuel

01:56:45.170 --> 01:56:48.409
those, those 8 that we deployed. Yeah, that totally

01:56:48.409 --> 01:56:52.170
makes and sense. In terms of magnitude of of our use, which

01:56:52.180 --> 01:56:54.829
any as per the questions asked, which we won't address

01:56:54.829 --> 01:56:59.359
yet. But uh any type of survey um would demonstrate

01:56:59.359 --> 01:57:06.250
that um and and consumption rate that. Look every megawatt

01:57:06.250 --> 01:57:09.640
helps, that we can contract for. Every megawatt helps

01:57:09.649 --> 01:57:13.390
make costs manageable for consumers. But also for your

01:57:13.399 --> 01:57:18.189
uh the purposes of your forecast and ability to know

01:57:18.189 --> 01:57:23.460
that you can manage through any contingency. Um we

01:57:23.460 --> 01:57:26.829
have a great tool in the toolbox right now with Phase

01:57:26.829 --> 01:57:31.710
I. Phase II is certainly appropriate and and I encourage

01:57:31.710 --> 01:57:34.520
the Commission to not close the door. Look ultimately

01:57:34.529 --> 01:57:38.010
Phase III's can be in the future, you know, if we

01:57:38.010 --> 01:57:42.140
don't get this absolutely perfect right now. But looking

01:57:42.140 --> 01:57:45.479
at your map, Mr. Arnold. North Texas is the void of the

01:57:45.479 --> 01:57:50.579
type of uh competitive storage facilities that would

01:57:50.590 --> 01:57:54.920
absolutely help our system be more resilient. And meet

01:57:54.930 --> 01:57:58.279
any type of reliability standard. Manage expectations

01:57:58.279 --> 01:58:01.310
for the part of the grid operator that we can effectively

01:58:01.310 --> 01:58:06.189
manage through a large scale Uri type event. And so

01:58:06.470 --> 01:58:10.520
just having it concentrated along the Gulf Coast doesn't

01:58:10.520 --> 01:58:13.609
solve our problem. And we've got to get more infrastructure

01:58:13.609 --> 01:58:16.630
up in North Texas. Ultimately the policy approach that

01:58:16.630 --> 01:58:20.229
we are pursuing is to create a market and you're effectively

01:58:20.229 --> 01:58:22.710
doing that Mr. Chairman. By saying, look, we were gonna

01:58:22.710 --> 01:58:26.670
have a product out there if you can match our needs.

01:58:26.680 --> 01:58:31.220
There is going to be ample um uh revenue um for your

01:58:31.220 --> 01:58:34.699
gas suppliers to build infrastructure and to supply

01:58:34.699 --> 01:58:39.289
that need. Um but I do, I think we need to be

01:58:39.300 --> 01:58:43.449
iterative about this methodical um, I think all eyes

01:58:43.449 --> 01:58:46.380
are upon us. The Legislature is clearly watching this

01:58:46.390 --> 01:58:51.449
and ultimately uh we need to analyze this on an iterative

01:58:51.449 --> 01:58:54.140
basis. Because Railroad Commission's policies will evolve

01:58:54.149 --> 01:58:58.189
as our own policies do. And it is my hope that one

01:58:58.189 --> 01:59:03.180
day um generation is seen in parody uh under a human

01:59:03.180 --> 01:59:05.930
needs test with all the other populations that are

01:59:05.930 --> 01:59:10.079
already accounted for. Because ultimately, I mean the

01:59:10.079 --> 01:59:15.569
systems are, are tied together. Um so I I appreciate

01:59:15.579 --> 01:59:18.180
the thoughts, I appreciate the work that Kinder and

01:59:18.180 --> 01:59:21.229
Enterprise are doing, to provide those competitive options.

01:59:21.239 --> 01:59:26.569
For our generators, but I think we need to think long

01:59:26.569 --> 01:59:28.000
and hard about this.

01:59:30.949 --> 01:59:35.149
(item:33:54444, Commissioner Cobos comments to Chad Seely & John Arnold) So a few comments it with respect to ERCOT's proposed

01:59:35.149 --> 01:59:38.899
definition of qualifying pipeline. If we were to change

01:59:38.899 --> 01:59:43.569
it and modify it to include intra, intrastate pipelines

01:59:43.569 --> 01:59:48.560
that um serve human needs customers. Recognizing that

01:59:48.560 --> 01:59:51.109
Kinder Morgan, Enterprise per per your feedback. Has

01:59:51.119 --> 01:59:55.220
had a successful history during Uri and historically.

01:59:55.229 --> 01:59:58.409
If we were to modify that definition, um, that would

01:59:58.409 --> 02:00:01.479
include other pipelines besides Kinder and Enterprise.

02:00:01.479 --> 02:00:05.550
So we have to be mindful of that, that impact. And although

02:00:05.560 --> 02:00:09.310
Kinder and Enterprise um may have had good performance

02:00:09.310 --> 02:00:13.359
we we're going to open the the gates for all intrastate.

02:00:13.369 --> 02:00:15.960
I don't know how you make a cut and and maybe that's

02:00:15.960 --> 02:00:19.130
part of your questions you still have out there. Absolutely. Um

02:00:19.130 --> 02:00:22.130
with respect to how do you strike a balance um, if

02:00:22.130 --> 02:00:26.859
it's possible at this time. With um allowing some intrastate

02:00:26.859 --> 02:00:29.350
pipelines to compete in this space to firm fuel service.

02:00:29.350 --> 02:00:31.939
Given the Railroad Commission's curtailment rule and

02:00:31.939 --> 02:00:34.289
everything in the backdrop on the, on the gas side.

02:00:35.060 --> 02:00:38.500
And, and I think as we're thinking about Phase II

02:00:38.510 --> 02:00:41.699
and and sort of, you know, looking at what happened

02:00:41.699 --> 02:00:44.829
during Elliot as well. I think, I think ERCOT's recommendation

02:00:44.829 --> 02:00:48.399
is 48 hours of duration. Ultimately, I think once we

02:00:48.399 --> 02:00:51.909
figure out what we're doing with the proposed definition

02:00:51.920 --> 02:00:54.560
if we're staying the same model, you know, whatever

02:00:54.560 --> 02:00:57.279
wherever we land. I think we need to conduct a survey

02:00:57.289 --> 02:00:59.960
to see what megawatts are out there. So I think that

02:00:59.960 --> 02:01:05.409
data will help us inform the procurement size, the offer

02:01:05.409 --> 02:01:09.039
caps, the duration requirements. Although my personal

02:01:09.039 --> 02:01:12.420
preference at this time would be 48 hours. Because given

02:01:12.430 --> 02:01:16.039
Elliott's performance um, I'm sorry the firm fuel product

02:01:16.539 --> 02:01:18.859
power plants that have been given a firm fuel service.

02:01:19.359 --> 02:01:25.119
Um, only the first day was 48 hours. The rest of the

02:01:25.119 --> 02:01:28.239
days were about 24 hours. The first day being December

02:01:28.239 --> 02:01:33.359
22nd. So I think we've sort of laid a first initial foundation

02:01:33.369 --> 02:01:37.750
through Phase I and appropriately balancing what

02:01:37.760 --> 02:01:40.390
we are doing with respect. To not only ensuring more

02:01:40.390 --> 02:01:43.890
reliability and resiliency, but also balancing consumer

02:01:43.890 --> 02:01:46.529
costs as we continue to scale this product into the

02:01:46.529 --> 02:01:50.159
market. And I think also with respect to the survey

02:01:50.159 --> 02:01:52.189
that goes out. Once we decide what we're doing with

02:01:52.189 --> 02:01:55.159
the definition. I think as part of that survey, we

02:01:55.159 --> 02:01:59.770
should ask if there are any additional um, on site

02:01:59.779 --> 02:02:03.869
fuel storage capability out there. Because now that

02:02:03.869 --> 02:02:06.779
we've sent the signal through Phase I, there could

02:02:06.779 --> 02:02:09.770
be a market response to add that type of technology

02:02:09.779 --> 02:02:15.199
dual fuel capability um, out there. And so just getting

02:02:15.210 --> 02:02:17.630
another picture so that maybe as we go out on Phase

02:02:17.630 --> 02:02:22.060
II. We are not just looking at fuel supply arrangements

02:02:22.060 --> 02:02:25.659
but maybe scaling up the Phase I. Because that's the

02:02:25.670 --> 02:02:28.359
first contract, the first Phase I was only a one

02:02:28.359 --> 02:02:34.630
year contract. Great point. So that, and, and I think also um, you

02:02:34.630 --> 02:02:37.729
mentioned replenishing and restocking. I think as we

02:02:37.729 --> 02:02:40.739
continue to look at Phase I and Phase II. It's gonna

02:02:40.739 --> 02:02:43.470
be really important that we provide some more guardrails

02:02:43.470 --> 02:02:47.680
on replenishing, restocking. Those are costs that are

02:02:47.680 --> 02:02:52.680
outside the budget. And so Phase I firm fuel was

02:02:52.680 --> 02:02:55.880
54 million, whatever restocking and replenishing went

02:02:55.880 --> 02:02:58.970
on is outside of that 54 million. So we, we need to

02:02:58.979 --> 02:03:02.640
at least have some kind of view as to how much those

02:03:02.640 --> 02:03:09.859
costs are and be able to um you know, have more transparency

02:03:09.869 --> 02:03:13.939
in that process for both Phase I and Phase II. Obviously

02:03:13.949 --> 02:03:17.130
you know, replenishing, restocking is important, especially

02:03:17.130 --> 02:03:20.729
if it's earlier in the Winter. And and you know, those

02:03:20.729 --> 02:03:22.949
are good decisions that are being made but that's also

02:03:22.949 --> 02:03:25.090
additional costs. And having some kind of idea of what

02:03:25.090 --> 02:03:27.590
those costs are, things can be really important for

02:03:27.590 --> 02:03:31.390
transparency to the Commission um as ERCOT directing,

02:03:31.399 --> 02:03:32.729
their restocking.

02:03:35.039 --> 02:03:37.579
Yeah, good points. I think we can, those are all good

02:03:37.579 --> 02:03:40.319
things to take up once we have the Phase II defined.

02:03:42.140 --> 02:03:45.020
Commissioner Cobos, I would just briefly say one thing

02:03:45.020 --> 02:03:47.600
with respect to opening the qualifying pipeline definition.

02:03:47.600 --> 02:03:49.909
And have, it includes all of the intrastate gas utility

02:03:49.909 --> 02:03:52.369
pipelines. It's important to remember that ERCOT started

02:03:52.369 --> 02:03:56.039
from the standpoint of building a framework that focuses

02:03:56.039 --> 02:03:58.659
on accountability. Both from the generation resource

02:03:58.659 --> 02:04:00.840
that offers ancillary service in. But also from the

02:04:00.840 --> 02:04:04.069
perspective of that generation resource using now specified

02:04:04.069 --> 02:04:06.560
contractual commitments, including the enhanced force

02:04:06.560 --> 02:04:09.470
majeure language and the firm commitments that are

02:04:09.470 --> 02:04:12.310
made there under. So so the accountability is also

02:04:12.310 --> 02:04:14.840
not just from past performance, from a couple of folks

02:04:14.840 --> 02:04:17.640
that I represent can tell you what the track record was. But we're

02:04:17.640 --> 02:04:21.390
building accountability into the product going forward

02:04:21.390 --> 02:04:23.390
with respect to the transparency of those contractual

02:04:23.390 --> 02:04:26.359
commitments. And the clawback that Chad mentioned with

02:04:26.359 --> 02:04:28.829
respect to the accountability of the generation resources.

02:04:28.840 --> 02:04:31.590
It does put the folks in the market on notice that

02:04:31.590 --> 02:04:33.739
they need to make sure that these contractual provisions

02:04:33.750 --> 02:04:36.609
are solid. And that they can then offer in a dependable

02:04:36.609 --> 02:04:41.199
product. Good point. Certainly, and I and I and I want to take time

02:04:41.199 --> 02:04:44.399
to thank Chad and um, you know, our outside counsel.

02:04:44.409 --> 02:04:48.350
And Peggy as well on this issue, it's it's extremely

02:04:48.350 --> 02:04:50.949
complicated. And I think that um, taking the extra time

02:04:50.960 --> 02:04:54.359
to dig into these issues as part of Phase II is critically

02:04:54.359 --> 02:04:57.079
important. And, and, and you know, thank you for being

02:04:57.079 --> 02:04:58.939
part of the conversation. Obviously we're learning

02:04:58.939 --> 02:05:02.560
a lot about the intrastate and interstate pipeline system

02:05:02.560 --> 02:05:05.710
as well. We don't regulate the gas side. And so I think

02:05:05.710 --> 02:05:09.140
it's important to have your voice involved in in our

02:05:09.140 --> 02:05:12.979
discussions. I haven't hung up my PUC boots yet, so

02:05:12.979 --> 02:05:17.300
I'm happy to be here. I have one. I'm sorry Kathleen, please.

02:05:17.310 --> 02:05:21.850
(item:33:54444, Commissioner Jackson's comments to Chad Seely & John Arnold) I just was gonna ask Chad, I mean, um part of what

02:05:21.850 --> 02:05:25.380
you can um shared with me. Was in the decision making

02:05:25.380 --> 02:05:29.539
process, of course, curtailment within the existing rules

02:05:29.539 --> 02:05:31.800
within the intrastate pipeline. Was a big part of that

02:05:31.800 --> 02:05:34.289
initial decision, but one of the things that you pointed

02:05:34.289 --> 02:05:37.489
out to me. Was there's also curtailment on the interstate

02:05:37.500 --> 02:05:41.189
pipeline. And depending on certain weather conditions

02:05:41.189 --> 02:05:47.340
or situations, um, that could in some situations um

02:05:47.899 --> 02:05:52.810
play into it if you were. If your pipelines were interstate

02:05:52.819 --> 02:05:55.430
and I don't know, maybe you could share that scenario

02:05:55.430 --> 02:05:58.300
that you were discussing with me about how that it

02:05:58.300 --> 02:06:01.170
actually could kind of flip flop. And you'd be potentially

02:06:01.170 --> 02:06:03.529
better off with an intrastate pipeline from a curtailment 

02:06:03.539 --> 02:06:06.689
team. Yeah. And I'll let Marcia chime in as well, but.

02:06:06.699 --> 02:06:10.229
I mean, we're not eliminating curtailment risk with

02:06:10.229 --> 02:06:13.960
this product. Um, so with the FERC interstate, they still

02:06:13.960 --> 02:06:17.159
have a curtailment process. But it's on a pro rata

02:06:17.170 --> 02:06:20.760
basis. So everybody is on par, when you have firm service.

02:06:20.770 --> 02:06:24.359
So that that's the and we're allowing the FERC interstate

02:06:24.369 --> 02:06:26.640
pipelines to participate in this, recognizing that

02:06:26.640 --> 02:06:29.890
there's still a risk of curtailment. But if there's

02:06:29.899 --> 02:06:34.239
a 10% reduction, it applies to all the customers that

02:06:34.239 --> 02:06:37.399
have firm service. It's not, whereas under the Railroad

02:06:37.489 --> 02:06:41.979
uh, Commission's curtailment rule. In that situation

02:06:41.979 --> 02:06:45.430
where the utility makes the decision to curtail from

02:06:45.430 --> 02:06:48.470
an intrastate perspective. They're going to first

02:06:48.479 --> 02:06:52.079
reduce the supply from the generation resources before

02:06:52.079 --> 02:06:55.180
they get to the LDCs of the human needs customers. So that's

02:06:55.180 --> 02:06:58.300
kind of the fundamental difference between the interstate

02:06:58.310 --> 02:07:00.930
and the intrastate, as far as the curtailment risk.

02:07:00.939 --> 02:07:03.699
And and when we look at this definition, again, going

02:07:03.699 --> 02:07:07.210
back to what Chairman Lake started with. Our goal here

02:07:07.210 --> 02:07:10.300
was to make sure that firm really is firm and that

02:07:10.300 --> 02:07:12.810
the consumers of Texas are getting a reliable service.

02:07:12.890 --> 02:07:17.260
And that you're putting the interstate on par with

02:07:17.270 --> 02:07:20.689
the intrastate framework as far as the firm service

02:07:20.689 --> 02:07:21.819
delivery product.

02:07:24.319 --> 02:07:27.029
And this is a point that commenters raised and it's

02:07:27.029 --> 02:07:30.359
a valid point to consider. And this is very much why

02:07:30.359 --> 02:07:33.880
it's a policy decision for the Commission. Because as

02:07:33.880 --> 02:07:36.920
Chad said, because of the way FERC jurisdictional

02:07:36.920 --> 02:07:40.109
pipelines curtail on a pro rata basis. The effect of

02:07:40.109 --> 02:07:43.039
that is that let's say a pipeline's capacity was reduced

02:07:43.050 --> 02:07:46.649
to 80%. Because of a compressor is down or something

02:07:46.649 --> 02:07:50.140
along those lines and pretend it's 100% firm subscription

02:07:50.140 --> 02:07:54.579
100% firm service. So what would happen on a FERC jurisdictional

02:07:54.579 --> 02:07:58.989
pipeline is everybody gets suffers that 20% reduction.

02:07:59.000 --> 02:08:03.050
On a pro-Rata basis within firm service based on their

02:08:03.060 --> 02:08:07.289
their reservations. And so it's it's egalitarian and

02:08:07.289 --> 02:08:10.899
equal. But if you apply the curtailment rule, let's

02:08:10.899 --> 02:08:15.699
say that that 20, there's 20% on that falls in a priority

02:08:15.699 --> 02:08:18.439
that's lower than generation resources. And we outlined

02:08:18.439 --> 02:08:20.739
this in the letter, there's actually five categories

02:08:20.739 --> 02:08:22.979
that have lower priority than generation resources.

02:08:22.979 --> 02:08:27.140
So imagine those are industrials, they would get curtailed

02:08:27.149 --> 02:08:30.270
generation resources wouldn't. Because it's not a situation

02:08:30.270 --> 02:08:32.960
where the pipeline is having to choose between curtailing

02:08:32.970 --> 02:08:37.270
generation resources and generate and LDCs. It's really

02:08:37.270 --> 02:08:40.560
only so the data that the pipelines have provided is

02:08:40.560 --> 02:08:44.229
very helpful. Because it suggests that we would have

02:08:44.229 --> 02:08:48.270
to face a really high reduction in capacity before

02:08:48.270 --> 02:08:50.659
the pipelines get to a situation where they're having

02:08:50.659 --> 02:08:55.880
to choose between generation resources and LDCs. But

02:08:55.890 --> 02:08:59.310
it is truly a policy decision because it's, it's pick

02:08:59.310 --> 02:09:02.739
your poison. Do you want everybody to be treated equally

02:09:02.750 --> 02:09:06.090
in a very transparent way and suffer the curtailments

02:09:06.100 --> 02:09:10.859
equally? Or do you want the system where if we get

02:09:10.859 --> 02:09:13.260
to a situation where you have to choose between LDCs

02:09:13.260 --> 02:09:15.699
and generation resources, the generation resources

02:09:15.699 --> 02:09:19.189
are going to get curtailed first. So this is why we've

02:09:19.189 --> 02:09:22.829
come to you all for guidance. And that's why the follow

02:09:22.829 --> 02:09:26.180
up questions are so important on the market share

02:09:27.470 --> 02:09:31.020
system wide. But ultimately from a policy position, the

02:09:31.020 --> 02:09:34.220
important thing for ERCOT is managing expectations.

02:09:34.220 --> 02:09:37.649
To know that in a worst case scenario we can count

02:09:37.649 --> 02:09:40.529
on so many megawatts that in that break the glass plan.

02:09:40.529 --> 02:09:44.050
So that those operators can engage that and things

02:09:44.060 --> 02:09:49.140
still run and we can manage a scarcity condition as

02:09:49.140 --> 02:09:52.170
it becomes amplified. And so I think, I think that's

02:09:52.180 --> 02:09:57.000
it's either, you know, under the current intrastate

02:09:57.000 --> 02:09:59.520
framework, it's either everything's going down on you.

02:09:59.529 --> 02:10:04.210
Or we have varying degrees of pro rata share that

02:10:04.210 --> 02:10:09.159
we can reasonably expect to accommodate our firm contracts

02:10:09.170 --> 02:10:14.000
and that's. key distinction. Yeah. I have one more question to John. Um

02:10:14.189 --> 02:10:18.050
if we would change the definition of qualifying pipeline

02:10:18.060 --> 02:10:22.199
to include intrastates. Do you think the universe

02:10:22.199 --> 02:10:25.670
of intrastates would accept the framework that is

02:10:25.670 --> 02:10:30.460
laid out here? Or do you think they have uh concerns

02:10:30.460 --> 02:10:35.729
about um data nomination information, um, storage inventory

02:10:35.729 --> 02:10:39.680
levels, things like that? That would uh be another

02:10:39.680 --> 02:10:43.510
point of contention down the road. Um, so my point

02:10:43.520 --> 02:10:45.909
the question first, that's one question. The second

02:10:45.909 --> 02:10:48.260
is so if we include them in here and they still don't

02:10:48.260 --> 02:10:50.750
like this framework, are we not going to get them in

02:10:50.750 --> 02:10:53.260
because they don't like the framework? I think that's

02:10:53.260 --> 02:10:57.470
a pertinent question and based on. I represent many other

02:10:57.470 --> 02:10:59.869
pipelines besides Enterprise and Kinder Morgan. There

02:10:59.869 --> 02:11:03.010
is some hesitation about that. What they have to do

02:11:03.010 --> 02:11:06.750
is weigh that hesitation versus the incentive of participation

02:11:06.750 --> 02:11:09.270
because there's a premium here. You know, the, the

02:11:09.270 --> 02:11:12.600
companies that I represent are interested in the reliability

02:11:12.600 --> 02:11:14.840
and supporting the operations of the state. But there's

02:11:14.840 --> 02:11:16.979
also an opportunity to make money through a very valuable

02:11:16.979 --> 02:11:19.520
product here. So they're gonna have to make some pragmatic

02:11:19.520 --> 02:11:22.819
decisions on that basis. What I have seen is when faced

02:11:22.819 --> 02:11:26.579
with the prospect of the, the incentive to further

02:11:26.579 --> 02:11:29.529
develop these facilities. They have not hesitated to

02:11:29.529 --> 02:11:33.010
say these compromises to have otherwise been a different

02:11:33.010 --> 02:11:35.310
business practice for us in our contracting. We're

02:11:35.310 --> 02:11:38.439
willing to make the transparency, the enhanced accountability

02:11:38.439 --> 02:11:42.350
provisions and the contracts, not a problem. Um, and

02:11:42.350 --> 02:11:45.340
I think there's gonna be a mix because in this marketplace

02:11:45.340 --> 02:11:48.250
it is anything but a monolith. Um, even the business

02:11:48.250 --> 02:11:50.600
model between Enterprise and Kinder Morgan can be very

02:11:50.600 --> 02:11:52.800
very different. Kinder Morgan owns the molecules in

02:11:52.800 --> 02:11:55.510
the pipe. Enterprise typically doesn't. It does in some

02:11:55.510 --> 02:11:59.550
limited circumstances. Um, there's a wide array of

02:11:59.550 --> 02:12:01.689
choices. I think that they're gonna have to make that

02:12:01.689 --> 02:12:04.149
decision. There will be some that say it's worth it.

02:12:04.430 --> 02:12:07.039
There will be some that say we're not used to making

02:12:07.039 --> 02:12:11.000
this type of accommodations, this type of transparency

02:12:11.000 --> 02:12:13.390
with respect to operations, and were less interested

02:12:13.390 --> 02:12:16.180
in the product. So Commissioner Glotfelty it sounds

02:12:16.180 --> 02:12:18.470
like what you're saying is, will the market respond

02:12:18.479 --> 02:12:21.100
to this incentive or will they walk away? And I think

02:12:21.109 --> 02:12:24.300
you ultimately, with any product we send a signal,

02:12:24.300 --> 02:12:27.520
the market has to evolve and accommodate our requirements.

02:12:27.520 --> 02:12:29.600
It's not the way the other way around that were ultimately

02:12:29.600 --> 02:12:32.289
just gonna start peeling back our requirements to accommodate

02:12:32.300 --> 02:12:35.310
more and put ourselves at risk. That's the most important

02:12:35.310 --> 02:12:38.489
point. This is incentivized changes in behavior not

02:12:38.489 --> 02:12:42.729
to pay exactly. Yeah, I can tell you with respect to

02:12:42.729 --> 02:12:44.949
the amount of conversation and deliberation we've had

02:12:44.949 --> 02:12:48.579
about the various issues here. Making those types of

02:12:48.590 --> 02:12:50.710
changes to the commercial practices has been pretty

02:12:50.710 --> 02:12:53.850
far down the list. Um, so the, the opportunity here

02:12:53.859 --> 02:12:57.060
I think is the greater incentive than the disincentive

02:12:57.069 --> 02:12:59.630
of having to change some of the commercial practices.

02:12:59.989 --> 02:13:03.739
And if I may just add on that point. So one of

02:13:03.739 --> 02:13:06.000
the things that you highlighted Chair Lake. Was the

02:13:06.000 --> 02:13:09.520
desire to get something more than what you're already

02:13:09.520 --> 02:13:12.069
paying for. If you're going to provide this incentive

02:13:12.079 --> 02:13:14.840
that's born by customers in the market, you should

02:13:14.840 --> 02:13:18.010
be getting something more. And in addition to the fact

02:13:18.010 --> 02:13:21.520
that just historically there's generally a lower percentage

02:13:21.520 --> 02:13:25.859
of firm transportation service agreements and and capacity

02:13:25.859 --> 02:13:29.479
in this market. Um than in other markets that have more

02:13:29.489 --> 02:13:33.520
constraints on pipelines, for example, up in PJM. So

02:13:33.520 --> 02:13:36.340
this is already something that you're trying to incentivize

02:13:36.350 --> 02:13:38.840
more generators to enter into these firm transportation

02:13:38.840 --> 02:13:41.960
agreements, firm storage agreements. But then separately

02:13:42.069 --> 02:13:45.069
with respect to the requirements on the force majeure

02:13:45.069 --> 02:13:48.520
language and the providing data to customers. That

02:13:48.520 --> 02:13:51.810
is something that does not exist right now in in intrastate

02:13:51.819 --> 02:13:55.869
contracts in Texas, and it's not required by law.

02:13:55.880 --> 02:14:00.579
So this is if, if the pipelines are willing to change

02:14:00.579 --> 02:14:03.659
their behavior and adopt these mechanisms that we've

02:14:03.670 --> 02:14:06.970
proposed to include here. This would be a substantial

02:14:06.979 --> 02:14:12.130
change in the market. These these contracts would be

02:14:12.149 --> 02:14:15.800
much more protective in terms of giving information

02:14:15.800 --> 02:14:18.829
during, if a force majeure event occurs. Trying to

02:14:18.829 --> 02:14:21.550
decrease the events of force majeure and just day to

02:14:21.550 --> 02:14:24.859
day data. That the shippers would have access to would

02:14:24.859 --> 02:14:28.779
increase substantially. So it's a pretty big um benefit

02:14:28.789 --> 02:14:34.970
from the product. Well, well said. Um good discussion

02:14:34.970 --> 02:14:38.520
I think that everybody's okay waiting another couple

02:14:38.520 --> 02:14:40.789
of weeks as we wait on this other information. Marcia

02:14:40.789 --> 02:14:42.989
good chat. John, thank you very much for all the work that's

02:14:42.989 --> 02:14:47.079
gone into this. (item:29:52373) One final note, um just for the public

02:14:47.090 --> 02:14:50.770
record, ERCOT filed this letter under and the draft

02:14:50.770 --> 02:14:57.359
framework under project 52373. Just note that for

02:14:57.359 --> 02:15:01.239
the general public. Thank you all, appreciate the work

02:15:01.250 --> 02:15:04.699
and look forward to continuing to get this drive this

02:15:04.699 --> 02:15:07.880
thing home. Appreciate the comments, Commissioners.

02:15:09.010 --> 02:15:12.819
I don't have anything else on the remainder of the

02:15:12.819 --> 02:15:17.149
agenda. Uh, so we're having no further business before

02:15:17.149 --> 02:15:19.260
this Commission. This meeting of the Public Utility

02:15:19.270 --> 02:15:23.800
Commission of Texas is hereby adjourned. Thanks Peter. Thank ya'll.

02:15:25.340 --> 02:15:25.699
(silence)