(silence)
(item:0.1:Chairwoman Jackson calls meeting to order) Good morning. This meeting of the Public Utility Commission
of Texas will come to order. To consider matters that
have been duly posted with the Secretary of State for
November 2, 2023. For the record, my name is Kathleen
Jackson. I'm joined by Will McAdams, Lori Cobos and
Jimmy Glotfelty. (item:0.1:Chairwoman Jackson recognizes Commissioner Cobos, Werner Roth, Commission Staff) I'd like to congratulate and recognize
the PUC's very own Werner Roth for receiving the David
Carr Award for Outstanding Staff Contributions. As a result
of his work in MISO, Chairing multiple stakeholder committees.
Werner is the first recipient, recipient of the inaugural
annual award. And it's no surprise to those of us who've
worked closely with Werner to see him recognized by
others for his astounding, his outstanding hard work.
Additionally, Commissioner Cobos was elected as an
At-Large Board Member for the organization of MISO
States at their 2023 annual meeting. As a result, she
will continue to serve on the Advisory Committee to
the MISO Board of Directors and serve as the Lead on
the transmission issues for the OMS Board. So congratulations
to Lori and congratulations to um to Werner.
(item:0.1:Chairwoman Jackson lays out agenda planning purpose) For planning purpose, we will take up Section 2 first,
and then go into Closed Session as close to 11:30 as
possible. If we've not finished the Agenda by then
we will recess around 11:30 come back after Closed Session
to finish the remainder of the Agenda. There was
an issue with the numbering on the agenda. So um for
clarification, there are no items, 18 or 19. Public
Comment for General Matters, Item 16 will be taken
up first. (item:0.1:Chairwoman Jackson lays out instructions for Public Comment) Public comments related to a specific Agenda
item will be heard when that item is taken up. Speakers
will be limited to 3 minutes each. And commenters
should not approach the table unless oral argument has
been granted or they have been invited by a Commissioner.
Shelah, will you please walk us through the Consent
items on today's Agenda? (item:0.2:Shelah Cisneros with Commission Counsel lays out Consent Agenda) Yes, ma'am. Good morning Commissioners.
By individual ballot, the following items were placed
on your Consent Agenda: Items 5-15. (item:0.2:Chairwoman Jackson asks for motion to approve items on Consent Agenda) I will entertain
a motion to approve the items just described by Shelah.
So moved. Second. I have a motion and a second. All in favor, say
aye. Aye. Motion passes. (item:16:Chairwoman Jackson lays out instructions for Public Comment) Let's begin with Item No. 16.
General Comments for Topics not Specifically Posted
on this Agenda. Speakers will be limited to 3 minutes
each. Shelah, do we have anyone from the public signed
up to speak? (item:16:Shelah Cisneros with Commission Counsel confirms there are no Public Comments) Chairman, it's my understanding that no
one has signed up to speak. And if I'm incorrect, Mike
Hoke will correct me.
Ok, very good. This completes Item No. 16. I
don't have anything on Item 17. There's nothing for
18 or 19. I don't have anything on Item No. 20.
(item:21:Chairwoman Jackson lays out Project No. 38533) Next up is Item No. 21, Project No. 38533. This
is the Commission's Review of ERCOT's Budget. Shelah,
do we have anyone from the public signed up to speak
on Item No. 21? No, ma'am. No one signed to speak
on this item. (item:21:Chairwoman Jackson lays out process of approving ERCOT's budget) And once the Commission approves ERCOT's
Budget under 25.363 of our rules. The Commission
must authorize ERCOT to charge a reasonable and competitively
neutral administration fee to fund that budget. Because
any change to the fee approved by the Commission must
be noticed through standard market processes at
least 45 days before implementation. We need to make
a decision today for the budget to take effect January
the 1st. We have Kasey Feldman with PUC Staff and Pablo
Vegas, President and CEO of ERCOT here. Commissioner
Cobos filed a memo. Let's hear from Kasey first and
Pablo. And then Commissioner Cobos, you can lay out
your memo. Kasey, do you want to come on up and provide
a brief overview of your memo? Ok, very good. Please
state your name for the record. (item:21:Kasey Feldman lays out Commission Staff's memo) Good morning, Kasey
Feldman for Commission Staff. Commission Staff proposes
an order in Project 38533 that would approve a two
year budget for ERCOT effective January 1, 2024 and
a 69 cent per Megawatt hour system administration fee
consistent with ERCOT supplemental budget filing.
It also includes uh directions regarding reporting
on performance measures and includes instructions for
ERCOT submission of its proposed 2026 to 2027 budget
consistent with the process used in previous years.
Ok, very good. Our next up is Pablo. Will you come
on up and provide an overview if you will of ERCOT's
budget and recent filings?
Good morning Commissioners. I'm joined by Sean Taylor,
our Chief Financial Officer in case there's any questions
with regard to our budget today. I just want to
affirm what Kasey pointed out that, you know, following
the workshop. We had the opportunity. Can you state your name? Oh
(item:21:Pablo Vegas, ERCOT President & CEO gives brief overview of ERCOT's proposed budget) my name is Pablo Vegas. I'm the President and CEO of ERCOT.
Following the workshop that we hosted a couple that
we had a couple of weeks ago here. We were able to
make some adjustments to the proposed budget based
on more current information on interest rates that
reduced the system of administration fee asked from
71 cents, which was originally what had been filed
and approved by the ERCOT Board uh down to 69 cents.
As uh as noted by Kasey, we over the last couple of
weeks, we have responded to many inquiries um including
inquiries from Senator Menendez and, and Senator Zaffirini,
about uh aspects and components of that budget.
We've been trying to be helpful with all of the details
around what are the drivers for the revenue side of
the budget as well as what are the drivers for the
expense side of the budget? And we are here and
available to answer any questions based on what has
been recommended and proposed by Staff.
Ok.
Do you have any questions now or would you like to
hear from Commissioner Cobos? (item:21:Commissioner Cobos asks to reserve laying out her memo) Chairman Jackson, I would
want to reserve laying out my memo until we have a
deliberation on the actual budget and the numbers involved.
Okay, open for a discussion. I, I think just to frame
it up, it's my custom, I guess. (item:21:Commissioner McAdams on ERCOT's increased budget) Is the magnitude
of the increase has been the topic of controversy
and from, from my point of view, Sean uh or Pablo,
um, the magnitude of the increase is somewhat driven
by it. Well, it certainly driven by operational needs
and capabilities of the organization, but it also,
um it also reflects a very specific understanding of
how revenues coming into ERCOT will be accounted for
If you could. Gentlemen, please walk through the accounting
of interest revenues of any type to the organization
and how they are accounted for in the budget.
Absolutely. (item:21:Sean Taylor, ERCOT CFO on auctions and treasury backed securities) Sean Taylor ERCOT, Chief Financial Officer
So ERCOT has access to conjecture revenue rights auction
receipts that we hold when market participants enter
into those auctions, those auctions are then the funds
from those auctions are then paid out in future dates
up to 2 to 3 years in the future. During that time
ERCOT invest those money in treasury or treasury backed
securities. The interest that is earned on those treasuries
and treasury back securities associated with those
conjecture revenue rights auction receipts that we
are holding is used to offset the system administration
fee revenue requirements. That is our source of the
funds that we are investing that come back to ERCOT
against the system administration fee revenue requirements.
(item:21:Sean Taylor, ERCOT CFO on investment buckets) We invest those in two large buckets. The first bucket
are money market mutual funds that have the immediate
liquidity requirements because we do bring in money
in and out of every day. And so we're investing that
money daily. The other which we enhanced this year
and we included in one of the filings after one of
the responses after it was presented at the October
Finance and Audit Committee meeting. Shows a bond portfolio
a ladder that we've established to help lock in the
high interest rates that we're seeing right now. The
way that ERCOT manages that process is we take those
congestion revenue rights auction receipts to be paid
out in the future and invest those in treasuries that
mature three months prior to us having to pay those
out at which time we'll roll those into money market
mutual funds. This has allowed us to secure rates into
24 and limited amount into 25 that help guarantee we
have that rate of return coming in to offset that system
and the revenue requirement. Thus lowering the impact
to the Texas consumers of ERCOT's fees. So that money
for 2024 is accounted for in the budget request. Correct.
The
that money. I'm sorry, the last bucket of revenues
that you described which is the treasury, treasury
bill related. Yes, the assumption on the revenues
from the, from that ladder, from that bond ladder. Is
a part of the assumed revenues coming in before the
budget. Okay. Sean, can you walk us through? Um how you
came up with the 2.5 and 2% interest rates that um
you are using for years '24 and '25? Yes, absolutely.
(item:21:ERCOT's Sean Taylor in response to Commissioner Cobos' question on interest rates) We started and if you want to refer to some of the
documents. And within the documents, within ERCOT's
original budget filing. We included the fed fund forward
curve that includes a mean line and it also includes
the projected ranges. At that time what we did was
we took the main line and reduce that by 100 basis
points or 1% approximately. That was our general strategy
going into the budget request that was approved by
the Board in June and submitted to the Commission in
August. (item:21:ERCOT's Sean Taylor on the risk with interest rates) There is risk obviously associated with these
interest rates. What we want to make sure that we're
avoiding is from ERCOT's perspective is placing any
solvency or liquidity risk on ERCOT that exceeds our
ability to backstop it. Interest rates are quite variable.
we've seen in the past where ERCOT has budgeted or
using those forward curves that existed at the time.
And the interest we've overcovered going back to the
past few budget cycles, we've over recovered and then
we've also under recovered. As we saw the rates drop back
down to zero. So we know that there's variability in
those numbers. So it's a balancing act. Of taking into
consideration what the risk of under recovering on
those interest income amounts are. And causing financial
hardship on ERCOT liquidity concerns. That we do
not have the ability to cover in another means. When
I refer to covering in other means. (item:21:ERCOT's Sean Taylor on covering in other means) ERCOT has access
to $100 million revolving line of credit. We use that
if we need to. Our first step is to use congestion
revenue rights auction receipts, if we up to that amount.
The Board has authorized us to use those 2 fund operations
in lieu of using that line of credit. Because it is
a less costly option for ERCOT to use that for those funds.
But we are limited to policies to only use the amount
up to what we have available in that revolving line
of credit. So that is what we are balancing to make
sure that in the future if something happens, that
we do not have access to those funds. (item:21:ERCOT's Sean Taylor on liquidity calculations) ERCOT can still fund
operations. ERCOT has a couple of demands for that. One is
our seasonality. Because most of our revenues come from
our system administration fee revenues. In the early
months of the year, we will undercover, we'll over
recover in the middle months of the year and then we'll
undercover in the latter months of the year. Just following
the load demand. It that seasonality ERCOT's costs are
primarily fixed across the year. Labor, hardware, software
those things are generally fixed cost. So we take that
into consideration. We also take into consideration
just business liquidity requirements. So within any
given month, if we have large bills due. We have to
have cash to pay those until we recover those funds.
So we consider that all in our liquidity calculations
to determine how much risk we can put in place. So
we balance those things out and determined that using
those assumptions of the 2.5 and 2% that you referenced.
We would still be able to cover a shortfall with that
liquidity backstop. So balancing those two items made
sense to us. What is the mean average you referenced
to at the beginning? What's that mean average interest
rate?
What, what is it shown in the chart that we referenced? Yes sir.
(item:21:Sean Taylor's response to Commissioner Cobos' question on mean average interest rate) So in ERCOT's budget request. The original amount which
is then also referenced in the TIEC's comments about
the ERCOT budget.
On page 4 of TIEC's comments, you see the chart.
That blue line and this is a reproduction of
the chart from ERCOT's presentation. The blue line
shows the mean and then the gray area shows the range
of predictions. And so it varies across time and it
varies by day. In ERCOT's response to TIEC's comments,
we've included the chart that shows as of two separate
days where though that mean actually varied by 25 basis
points across four days from a Thursday to a Monday.
And that is in ERCOT response to TIEC
and it is on page
3 of that response. That shows the current amount
the one I was just referencing in TIEC shows what it
looked like back in May. When we were taking the budget
to the Board in June. And the one that is shown on
page 3 of our response to TIEC is as of October
23rd.
(item:21:Commissioner Cobos' dialogue with Sean Taylor on interest rates) Okay. So the, the chart from May 2023 has a 3.5 and
3% and then ERCOT reduced it by 100 basis points.
That's how you got to 2.5 and 2. And then if you
look in October 2023, I guess the means are what 4
and 4.5. Is that correct or? Depending on the specific
dates being chosen, yes. So the range goes anywhere
from the beginning for as of December of the 550. Down
to about a little bit over 400. We're looking out at
the end of 25. Actually, the mid 25 through 26. So
is that 5.5 and like a little bit over 4? Correct.
Okay. Do we know what they are like today? I know they
flat fluctuate on a daily basis? I did not look today.
I would have been able to see what yesterday was yesterday
It was fairly consistent with what we're looking at
on this page. Okay. And then the fed did not announce
an increase on Wednesday when they made their announcement.
Okay. So Sean just to allow everybody to collect their
thoughts. Talk to us about. All right, we're, you're
applying for a two year. Well, actually, it's a
four year budget window. Correct? With a two year approved
budget. Describe the distinction between what we're
looking at as we. (item:21:Sean Taylor's response to Commissioner McAdams on two year budget distinction) So we file a two year budget and
that is what you are approving. You approve a couple
of pieces of that. You approve the system administration
fee rate as was mentioned earlier and you approve a
total authorized expenditures. We are not allowed to
spend more money than you tell us we can spend in a
year without getting approval, additional approval
to do so. I want to draw a distinction between the
revenue and the expenditure side for that specific
point. Even if we over recover as we are this year
in 2023. Because when we did the 23 budget in 2021
the ERCOT rate of interest that we were receiving at
that time was one basis point. Which on $2 billion is
$200,000. So the interest rates have a huge impact
and they vary quite drastically. (item:21:ERCOT's Sean Taylor on spending approvals) That is why it's very
important to remember and critical for the proper oversight
of ERCOT. We do not have the ability to just take that
money and spend that on anything until we get approval.
Because the expenditures are completely separate from
that perspective than the revenues and the interest
income is considered a revenue, not an offset against
expenditures. Thus reducing expenditure allow us to
spend that money on other things. (item:21:Sean Taylor on 2 to 4 year budget cycle) So when we look at
the 2 to 4 year budget cycle. What we do is we
get the authorization from you for the two years similar
to what the state process is. What ERCOT does is we
look at a couple of different aspects that have been
requested of it. In the past one is advance warning
of fee increases when we did our last fee increase
which was eight years ago. We were asked by market
participants to give us more, give them more advanced
notice of fee increases. They include ERCOT's fee in the
rates that they're calculating that they then pass
on to the actual consumers. It's also important to
remember that ERCOT doesn't directly charge and use
customers for our rate. Our rate flows through the
load serving entities that are then passing that rate
on. (item:21:Sean Taylor on fee increases and changes) So they need, they prefer to have more advanced
notice of the fee increases and fee changes so that
they can incorporate them into all their contracts
and all of the pricing mechanisms that they are using
in the calculations that they're creating to make sure
that they are competing properly.
That is one aspect of it. So we try to keep, keep
the fee stable as long as possible. Said the last fee
increase was 8 years ago. So we're able to manage
that fee increase to be stable for 8 years. (item:21:Sean Taylor on the 4 year budget look) In
this case of the 4 year, look that we take. The
other thing that ERCOT does is budgets for our operating
expenses. So that is labor, all of those types of items
And also our capital expenditures are large outflows
That's why you see spikes when you look at our budget
request and our sources and uses and we look at the
source and uses page. You'll see that in some years
expenditures are higher for projects and some years
are lower. One of the items that comes up this year
in 2024 is the funding for real time optimization and
other market design efforts. And so that causes a spike
we also have spikes when we do our data center refreshes
does not recover depreciation through its fee request.
It's not part of our calculation. What we do is we
recover the capital costs associated, which others
would turn into depreciation by normalizing it across
that four year period. Almost all of ERCOT assets that
we purchase are hardware and software assets which
have 3 to 5 year depreciable lives. So in lieu of issuing
debt, which would be more costly to fund those as people
with longer term assets are we've taken and incorporated
those 3 to 5 year assets into our system. Administration
fee rate from a revenue funding perspective. So to
speak, to make that fair to the ratepayers and equitable
across the generations. We then take that amount and
determine what that fee should be across those four
years to cover those expenditures. (item:21:Sean Taylor on interest income) We view interest
income similarly and that interest income can spike
in different years just like those capital expenditures
can. So we feel that normalizing that interest income
impact against this as an administration fee rate across
at least a four year period is the appropriate thing
to do. The other thing that I'll say about the four
year fee or four year budget view, which results in
a four year fee. (item:21:ERCOT's Sean Taylor on cash balance) Is that our goal and our objective
is to have a cash balance and this is detailed in these
materials as well at the end of the four years. That
is positive but near zero to make sure that ERCOT is
not overspending over recovering monies. So in the
case of what we have showing with the, the 69 cent
fee. That results in ERCOT having a $17 million cash balance at the
end of 2027 the four years of which that fee would
apply. When I say cash balance, I'm referring to ERCOT
operating cash. So we're not having to use debt to
fund at that point. Although ERCOT does have notes payable
outstanding, which we paid that service on. Which are
associated with buildings and those longer term asset
a small amount of money in the scheme of ERCOT's budget.
It's $5 million over $5 million a year for principal
and interest. But that is how we have come up with
the calculations. (item:21:Sean Taylor on over recovering interest income) And if we over recover on interest
income, like we have in 2023 versus what we budgeted
then we roll that over recovery into that calculation
of what that next fee increase would be required across
that next four year period. Still targeting what ERCOT
cash balance would be at the end of that fourth year.
So it's a rolling mechanism. So any over or under recovery
is considered in that next cycle of the increases.
Great. So one question leading into that.
In terms of your forecast for 2024 because for the
Commission, as we kind of had alluded to. Both in Board
Meetings and in prebriefs. It's very important to
know what is certain and what is not. Is the 2024 outlook
certain for ERCOT? In terms of revenues and a reasonable
degree of expectation on interest income that could
be experienced by the system versus 2025? Because I
understand in those out years, it becomes much more
variable. (item:21:Sean Taylor's response to Commissioner McAdams' question on certainty of 2024 outlook) The greatest uncertainty is the interest
income. I won't say that any of it's absolutely certain
there can be fluctuations in the load. Our load forecast
is usually very accurate when it comes to the impact
of the administration fee rate. So usually that's within
a couple of percentages. So usually that's pretty solid.
Our user fees do vary, but that's a small amount of
ERCOT's total budget. The interest income is truly the
big variable. Sean, let me just ask one question there
because it's important. On the load forecast, what metric
do you use in the load forecast? Because so we looked
it up and it's a good data point for all of us
to know since 2016. Last approval load had grown 20%
on the system. So that's on terawatts used, which is
the volumetric assumption that you would pay the system
administration fee to. So what is the load metric that
you plug in to, to measure against for your forecast?
(item:21:Sean Taylor' response to Commissioner McAdams' question on forecasted load metric) It's the same forecast that ERCOT uses for everything
that is directly into our load forecast. So a gross
load expectation. Yes, the load that is being charged
out on a daily basis. So when ERCOT revenue is based
off of the load flowing through ERCOT load. Okay.
I have more but I was going to share. (item:21:Commissioner Cobos' observations on ERCOT's budget) Well I, I
guess just a, a few observations. I think, you know
Sean you explained the basis for the four year uh budgetary
outlook. And trying to provide stability to the LSCs
as to what to expect with the system administration
fee. On the flip side to that, you know. I'm, I'm
wondering if, you know, looking out that far. I, I
understand the need to create stability for the LSCs,
right in and having a picture. But at the same time,
as you look beyond two years. You know that the assumptions
and everything become more uncertain. And even though
you're asking for a two year budget approval. The four
year budgetary outlook, um when you, when you go past
the two years into 26 and 27. There's just more uncertainty
involved. Because, you know we're, we're looking out
further. So um the other piece to that is observation
is that while you can come in for a rate increase or
decrease rather if interest income evolves and you
get more money and, you know, dynamics change in terms
of your assumptions in the revenue, um you can't refund
the money. So, so the the the ratepayers that are paid
for that system administration fee for those two years
24 and 25. Well, they all have paid, but in the next
two years, they'll get a reduction, but they're not
really necessarily getting their money back. I mean
there's some intergenerational inequity going on there
as well. So I'm just trying to sort of figure out
what, what as the Commission looks at your budget,
how can through what lens should we be looking at the
budget from instead of a four year sort of budgetary
outlook. Which I get, you're trying to provide stability
to the LSCs. But at the same time, there's just so
much volatility in the market, right? So we should
we sort of pare down our lens and really focus on on
a much smaller short term, you know, outlook the
next year, the next two years? And one of the, one
of the things to consider on that Commissioner is a
question for you, Sean. CRR funds are based on overall
congestion in the system, correct? But you've noted
actual a downturn in the level of CRR funds that we
are holding. Could you describe that? (item:21:Sean Taylor's in response to Commissioner McAdams' question on CRR funds) The amount that
we are holding in and it was shown in one of our
filings has flattened off. And it was the first time
in a while that we've seen. And we've seen this year
where the long term congestion revenue rights that
we're holding. The ones that are greater than one year.
Have actually the dollar amounts have actually decreased
year over year. So that's the first time we've seen
that happen. So we have seen that change. The question
about, I believe it was a question. It was just a statement. Observation.
Observation. (item:21:Sean Taylor's response to Commissioner Cobos on equity across years, over payment) As far as the equity across the years and
whether somebody could be over paying. There's a couple
of items I'd like to highlight on that for your consideration.
The first is that the interest income is not considered
generally to be a primary source of revenue for ERCOT.
It is that way right now, but that decreases in the
future. So that is actually serving to provide those
current people that you're speaking of, of those that
will be paying in 24 and 25 a much lower rate than
if we didn't apply that at all. If we're doing something
else with that money. So I think that that offsets
part of that concern. The other is that the certainty
is ERCOT works to establish a four year. We were mentioning
the load serving entities as being the beneficiary
of that. But I believe that if we think about what
is the greatest concern of most people and most companies
it's the unknown. And so the uncertainty of what's
happening in the future causes people to mitigate that
risk in some way. The way that most people would mitigate
a risk of an uncertainty is to build in some sort of
cushion for that. So I think knowing that ERCOT's fee
will be where it is. Also serves to make sure that people
can track that fee on to others without having to worry
about that changing and having to build in that uncertainty
into their calculations in the future if they already
know it. So I think it benefits the end gives customers
in that way as well. And so I may just add one
thing to those comments. (item:21:ERCOT's Pablo Vegas' response to Commissioner Cobos on overpayment, equity) Is that I think that what you're
what you're looking for is perhaps a balance between
um trying to balance the uncertainty of the interest
rate environment that we're facing right now, which
is fairly unusual in recent years and the um and, and
the fairness to consumers who are going to be paying
a fee for a period of time, a set period of time
And so I think that balance, I think if you look on
the short end of that balance, a one year type of fee
that could change annually, I think it is difficult
for both consumers and retailers to manage that consistently
changing and fluctuations that could happen as a result
of uh of interest rate changes. But at the same time
you know four years could, you know, could be too
long given how much uncertainty is in the out years.
(item:21:Pablo Vegas with ERCOT on reasonable expectations) And so I think what we're trying to do here is trying
to find a place in the middle where we can say with
a reasonable expectation, it would be great to be able
to have a four year set budget because that would,
that would lead to a close to zero balance at the end
because that would be ideal. I think for all participants
that we were able to do that. However, if those assumptions
in the out years proved to be incorrect. There is a
mechanism through the biennial budget to make those
adjustments so that we don't hold those monies any
longer than necessary and can lower the system and
administration fee in the next biennial budget. (item:21:Pablo Vegas on potential uncertainty of incremental needs and uses for funds) And
there's one other uncertainty that we haven't spoken
to. And that is the potential uncertainty of incremental
needs or uses for funds. But if, if there were needed
investments or changes or capabilities in the market
that either the Commission or the Legislature wanted
ERCOT to affect. Those are also uncertainties that merge
in the next couple of years. Which if it was an increase
in expenditures, the Commission would need to approve. But
if the budget was there to be able to accommodate it
it wouldn't have to quickly transition into trying
to prove an increased budget down the road if there
was, if there were additional needs in the market. That
had to be developed based on those kinds of uncertainties
too. So there's uncertainties on both the operational
side, potentially and certainly on the financial side
as we've been primarily talking about.
So Sean, you brought up. We had assumptions going into
June um that helped shape the budget filing that the
Board considered. The environment as we said, was changing
as we spoke. And I'm trying to narrow down and, and
just for discussion purposes. (item:21:Commissioner McAdams' question to ERCOT on the magnitude of the increases) We have to look at
this in or in terms of an order of magnitude change.
The Commission has to do that and we have to recognize
it. It's gone from a 29% potential increase to the
fee to a 25% potential increase to the fee. So it
it, it is, it is significant. I've said that before.
But we're dealing with a bit of a changing environment
because federal interest rate policy is changing, revenues
are changing on the part of the administrator and we've
even recognized that in the supplemental filing. Um
and there's been a over performance, a positive over
performance for revenues that Sean you've recognized.
And that allowed you to credit the system with over
$30 million in unexpected unanticipated as of June
interest income, $36 million, something like that Pablo,
um for this cycle. Now, does that include the the final
year end estimate that you believe you'll, you'll have
because I know that that anticipated as of the Board
meeting $72.9 million on interest related income. And
but you anticipated that you'd have $107 million
or $106 million by the end of the year potentially.
It includes 107. So it includes 107. So walk me
through how the assumptions may change and thus potential
magnitude of the increase that we could consider? Because
I just want the Commissioners to have the full menu
and the reasoning for it. And how it could affect your
ability to operationalize your plans? And what the consumers
could experience over a two year period? What does
that look like now? (item:21:ERCOT's Sean Taylor on increases) So if we look at ERCOT's filing that
supplemental filing, that includes the 69 cent calculation.
On the first uh horizontal sheet, which is page 4
of that filing. We showed that what you just referenced.
Which was on the top where we have a 28% increase and
on the bottom, we have a 24% increase to get to that
69 cents. I will also point out on this slide that
that 24% increase is that increase across those 8
years. So the annualized increase of that 24% is less
than 3%. The annualized increase in the system administration
fee rate since our last fee increase was only 2.8%
at the 69 cent proposal. As we turn to the next slide
which is titled the ERCOT proposed budget summary, revised
to include updated 2023 favorable financial variants.
If we were to make changes to this slide based on what
you're talking about with the change in interest income
percentage, the interest rate. Then we would look at
changing line 11(a) on here. The assumptions on here
are the 2.5 and 2% that Commissioner Cobos mentioned
earlier. We're to increase those by the approximate
1% that we're talking about the change on the new forward
curve. Then that would increase each of these years
of interest income by $20 million each year of that
$20 million across those four years. Then adds up to
$80 million. We were to take that $80 million and apply
that to the energy consumption in row 2. Which is
the load and back that out. The rate, the conversion
rate on that is previously filed is 1% change equals
approximately four cents on the fee across those four
years. Which would lower that 69 cents to 65 cents.
What I would also like to highlight on that this page
is row 17. Row 17 is that cash balance. Now assuming
the $170 million that is currently in the budget for
interest income from 24 to 27. ERCOT's cash balance
at the end of 2027 is only $17 million. So we are
down to that near zero level. If we were to increase
that, as you mentioned that $20 million a year, that's
$80 million more of risk that we're putting on this
budget. (item:21:ERCOT's Sean Taylor on potential liquidity concerns) Which then makes for the just the potential
for liquidity concerns in the future even higher. That's
why we ended up with these numbers. So if we use that
same methodology in that 1% we would consider that
but then we would also consider the risk associated
with that. And we would have that discussion with our
Board. Have Commission Staff to try to balance some what
Pablo was mentioned, balance the risk reward of that
But the straight up math is four cents per 1%. And that's
over an 8 year glide path. Four year glide path. Four
year, four year. Just through 2027, eights years since the
last fee increase. So Sean that, that's using the basically
you would use a 3.5 and 3% that's the May 23 interest
rate. If you use the October 2023 interest rates. But
but reduce that by 100 basis points, where would that
put us? That's approximately that you would be the
same.
Exactly. Okay.
3, 3.5. Okay. So in your original um, filing on the budget.
No, let me pull that up. It's um
page 61, page 61. Which is essentially all the
options, right? Option one is a four year rate increase,
a two year rate increase and a one year rate increase.
It's my understanding and, and let me confirm. That
for Option 2 and 3. Which is Option 2 being
the 2 year rate increase that starts in 24. So it's
for 24 and 25 only, you're not looking into 26 and
27. And then the Option 3, which is the 1 year
rate increase. You haven't run the um, sort of the
the calculation that was run for adjusting from 71
to 69 cents. So if you look at this chart, the 65
cents is really 63 because you need to account for
the 2% decrease from 71 to 69. Is that correct? And
then the second Option 3 would actually be 59 cents.
Because you have to apply the 2 cents reduction that
was applied from 71 to 69. You kind of have to translate
that down to Option 2 and 3.
It's not quite that directly, but yes. (item:21:Sean Taylor's response to Commissioner Cobos' question on rate reductions) They would, they
would be lower to get to that amount because you're
offsetting that fee in each in each year, you're offsetting
it. So then you're choosing the way that this is developed
is to choose a relatively consistent growth. We are
still targeting even though you're referencing that
we're no longer using the four years. In all these
cases, we are using four years. It is just changing
splitting that increase across two year two periods
in one case or four periods in the other case. But
we are still as shown on that page that you referenced
page 61 that green amount at the end of 2027. That
is still what we are targeting because we still have
that objective of making sure that we have that after
four years. The difference is just, it's just staggering
two different rates across the same four year outlook
is what is, what is what the difference is. But the
four year outlook is the same, the four year budget
is the same between the scenarios. Okay. I, I guess I
was just trying to understand like, you know, we went
from 71 to 69 right? Because of the interest income
um realization and was trying to figure out like now
that we, you know, because you guys updated that. ERCOT
caught updated that um in their supplemental budget
right? And, and so y'all ran the calculation because
you're focused on the four year outlook. So if you ran
the calculation on option two and three, applying that
sa the same assumption that went from 71 to 69 would
you be really looking at 63 cents and 59 cents for
option two and three?
Likely. So depending on what you want to do for 2026
and 27. Okay. (item:21:Commissioner Cobos' thoughts on interest rates fluctuation and volatility) So if you basically because of that two
cent reduction, um if you look at a four year outlook
you have eight pennies. Is that eight pennies to play
with if you look, I mean 4 years. And so because if
we don't want to look four years out, it sounds like
there's a balance between, you wanna look four years
out to provide stability to the LSCs and you know
not have to come in, you know, as, as much and just
have stability. But then there's all this volatility
in the market with interest rates and, and uncertainties
and, and that kind of thing and I know revenue and
are, are rather interest income is not your only source
of revenue but, but it is a major driver. Right? Because
that's how we're able to get from 71 cents to 69 cents
And that's what the consumers are paying. Right. So
I'm just wondering if we zero in on a two year budget
and, and just kind of be conservative in how far we're
looking out and run the calculation that gets you from
71 to 69 cents to option two, which would get you from
65 cents to 63 cents. That, that would at least get
you to where you were in your calculation for the first
option, which is the four year outlook to apples to
apples. And then it seems like from there, you can
maybe apply some penny savings as well to those two
years. So I'm just trying to figure out like, you know
is there some other way to um, kind of extrapolate
all these assumptions and numbers to where we move
some of the interest rate I get, I get, you're being
conservative and you don't wanna, you know, overcount
interest income because that could put you in a bad
position. But at the same time, the interest rate volatility
risk, we gotta be careful that we don't place that
on the consumers and the, and the you know, the
the, the consumers paying the system administration
fee. Because again, they're not going to get refunded
they're only going to get a reduced rate, the money
is out the window, right for two years. So I'm trying
to find a balance. And so for Sean's answer to contextualize
it. (item:21:Commissioner McAdams' thoughts on stability) So it is important to look for ERCOT to look out
into the future to have stability. But also the increase
as per the approved rate will go up as of January.
And so what what I'm the direction I'm coming at this
from is I don't like rate shock and, um, the magnitude
of the increase is what they will feel immediately
albeit smoothed out over a longer term horizon, it
becomes less because again, they don't experience the
incremental increases over time, but still, um, on
a volumetric basis, on a per Megawatt basis, these
are, and that's why TIEC filed. Because they pay
the majority of the amount of that fee. Because they
use more electrons in the system than anybody else.
So when they're doing their books, just like ERCOT
is they're trying to forecast. Okay. How much more of
a margin is reduced? But my profit margin is reduced
because this fee is going out the door. So, I it's
that first year, that's, that's very important and
that's what I'm trying to focus on. And thus, I think
Sean is doing that, he is now updating or he has been
updating the assumptions going into what we're considering
now. To, to try to be as accurate as possible with the
best available information. But um I think what we're
trying to do is squeeze down that initial big hit,
that initial big increase or smooth it out. (item:21:Commissioner Cobos' thoughts on the impact of higher interest rates) Like focus
on the 1st and 2nd year. Exactly. That's what I'm trying
to do. So, so I'm trying to inform the feedback. That's
why I'm focused on option two and looking at option
three to just kind of cross compare with option one.
And what the impact is of the 2% or, or rather the
two cent reduction. So bringing it apples to apples
right? So it's really 63 cents. We're looking at an
option two. And, and so and then, and then also
um take into consideration like what is the impact
of just using the lower fee without taking 100 the
the lower interest rate without taking 100 basis points
off? So you end up at 3.5 3% which would lower the
fee to 65 cents, which will actually get you back down
to 63 potentially. Or, you know, I was trying to
get, also get an idea of what would be the impact of
the higher interest rate. And you're telling me it's
the same. So I'm just trying to figure out a way where
we could take the interest rate volatility and, and
allow for some conservatives, some conservative assumptions
but not be overly conservative. Because at the end of
the day, being overly conservative is gonna result
in paying more potentially then you need to. (item:21:ERCOT's Pablo Vegas on the uncertainty interest rates) The one
thing to think about also in terms of the uncertainty
of those interest rates is that the downside risk is
likely higher than the upside risk at this point. Given
how high interest rates have risen to and the expectation
of changes in interest rates over time, the likely
direction, if there's going to be more rapid changes
would be on the downside versus on the high side, given
the signals that reading and seeing from the federal
government, from the Fed and everything else. So there's
more downside risk than there is upside risk. And so
I think we have to manage that as well as we think
about the uncertainties ahead of us.
I did have one question. And it really, it has to
do more, I think with the operating side of the budget.
(item:21:Chairwoman Jackson's question on constrained resources for operations) Because obviously, um we've given ERCOT many more tasks
and many more things to do um driven by the change
in resource mix, driven by the growth driven by the
the changing market. And so, um I just want to make
sure that as that increase occurs in terms of the resources
that you need. That you're not in any way constrained
because you haven't had the ability through whatever
structure we end up with. To recover enough cost so
that you stay balanced in the budget throughout the
entire period. So, you know, if you kind of look at
you know, the changes, I see it. It's almost been a
step change and then we know that, you know, response
to a step change is, is, is somewhat gradual, but the
the slope of that curve. Is, is what we, you know, it's
our ability to respond. And so we don't want any way
be um and, and feel like that ERCOT is um, you know
not able to hire as many people as you need. To get
the software that you need when you need. So that we
are in any way impacting your schedule. Yeah, I appreciate
that. (item:21:Pablo Vegas' response to Chairwoman Jackson's question) And clearly the ramp up into many of the initiatives
that we've been talking about like PCM, the real time
optimization, the DRRS. And, and changes all related
to those kinds of programs. Do require a lot of the
investment and the resources and the capabilities in
the next year or two as we're trying to get ramped
up in development and get those moving. So you are
correct that it is front loaded in terms of some of
that growth. We've already seen some of it in 2023.
Which led to some of the variances in the 23 budget
that we've experienced and then we to continue to accelerate
into 2024. As we Staff up fully for the execution of
those programs. So I think that's a fair, that's a
fair point. And that is certainly how we have been
looking at the budget. To set it in a way that can
smooth out and make sure to meet that, that peak and
then be able to carry that forward as we execute over
the next several years. Madam Chair, may I dovetail
on your question? Just uh operationally.
(item:21:Commissioner McAdams' dialogue with ERCOT's Pablo Vegas & Sean Taylor on FTEs) Pablo how many FTE does ERCOT stand at right now? Because
I know you've been in a higher up phase and where are
we at? We're in the 880, 890 range. Okay. 880,
890. And with the goal of uh we, we need
to get to over 1000, I believe. Yeah. And so, so we've
been able to do that as a system, as load has increased
And as these new revenues have become realized over
the course of the year. And so you've been able to manage
through that thus far? We started that process several
months ago. And that's why some of our over bridges
this year have occurred since we knew that it would
take time to build these resources up. You can just
go hire that many people in a week. Well, yeah. And
then Woody's division, you know, which is very important
operationally, the weatherization aspects, those inspectors
So that's one of those divisions that was front loaded
to have this higher up that goes back all the way to
last year.
Okay. So you're on path and doing that now under the
current 55. And I have to ask this question because
TIEC posed it. As matter of fact, they even recommended
a rate reduction, um which I'm not looking at right
now. But they said, uh why is uh an increase even needed?
Given again, the more aggressive approach to interest
rate calculation and all things being equal? Explain
that. (item:21:Sean Taylor responds to Commissioner McAdams on why an increase is needed) I think it's important to note when you look at
the 23 forecast. We have been authorized to exceed
our budget. So we are not operating within the 55.5
cents right now. That's important respect. You're not
what we are not. We have expenditures are exceeding
the 23 budget because we have had to go and hire these
additional people and do all this additional work.
So we have the authorization to exceed that budget
for that purpose. That's why when you look at 2023.
We have the additional interest income, but then we
also have additional expenditures to accomplish all
of these new things.
Okay. You'll see that in detail. When you compare the
21 numbers, we're just looking at on the sheet. When
you look at the 23 budget versus the 23 forecast. On
the expenditure side, you can see that the 23 forecast
exceeds the 23 budget. Got it. Okay. So
I'll just throw some numbers out there because I think
it will be constructive.
So now that we're,
we're talking about a difference in an increase in
order of magnitude on a two year, two year budget with
four year glide path.
Of 16 to 18% option two, which is that now with
updated assumptions. (item:21:Commissioner McAdams' thoughts on a one or two year budget) And a one year increase of around
8 to 10% increase.
I mean, this this is kind of a range that, that I'm
looking at and debating. Um
but, but I still have questions about the need case
Um
but they do have growing needs and we know that. So
that's kind of the range I'm looking at it from, see
how we build off that. So are you saying that you're
focused on a two year budget or a one year budget?
Well, look my starting point coming into this, I be
I believe uh a one year budget is appropriate given
the volatility. But I mean, with their updated assumptions
coming in at two, it it needs to be discussed. What
do y'all think?
I love being the guy to do this every time. So if we do a
two year budget what can we get? So let me uh can
I give you my thoughts here, please? (item:21:Commissioner Glotfelty's thoughts on ERCOT's budget) I'm uh I tried
to look at this um objectively through a growing market.
Um I've tried to understand how these numbers are tied
to um interconnections going up 300%. The numbers of
market participants going up. I still don't quite understand
it. I think there's a tipping point where these
system where operations of an entity like this ought
to become more efficient, the more you have. You pass
this delta where you don't need to keep adding systems
or adding issues. But those issues are benefiting you
and you're reducing costs. I'm fearful that in
this budget, um, there are too many across the, across
the board salary increases. (item:21:Commissioner Glotfelty's thoughts on bonuses) Uh, too many, uh, across
the board bonuses. The questions that I've asked about
the bonus structures leave for those online or in the
audience. There's currently a $23.2 million worth of
bonuses in here. Of which $14 million, $14.5 million
is for all employees. Um, $1.8 million is long term incentive
for 66 specific employees. The problem is the delta
between that is somewhere between around $6 million
which seems unaccounted for. But
this is the data that I get back that leaves me with
a lot of questions about this budget. Um I, I'm,
I'm gonna bark up an area that we really can't do anything
about right now. (item:21:Commissioner Glotfelty on the Texas Regional Entity Liability Organization's numbers) Which is the Texas Regional Entity
Liability Organization. Their numbers are continuing
to go up $27 million, I think $29 million in terms of
budget or what in terms of budget. That are reflected
in the ERCOT budget, which is unfair. It's a pass through.
It's a federal law that requires NERC, this is a NERC
the Liability Council of Texas. That's a $27 million
or $29 million part of this budget. Which
our consumers are going to pay for it one way or the
other. Either it's efficiently through ERCOT or it's
inefficiently through uh some way that they figure
out how to, to get money from market participants.
But I don't like it because they're not here to defend
that and we have no way to question that. That's approved
by FERC and just becomes a pass through. But you all get
the hard time, you all get the hard time for it and
all of you all get to pay for it. I think
that um. (item:21:Commissioner Glotfelty's thoughts on KPIs) I have asked since shortly after I got here
2.5 years ago about possibly instituting FERC KPIs.
FERC has a docket where they look at key performance
indicators of RTOs and ISOs. They are not like
ERCOT um KPIs. They are like um they are um specific
to RTOs. And um some of them are very important
and I think budgets, whether it be this year or in
the future should be tied to the outcomes of these
KPIs. The um somewhere in this morass, I do have a
uh a note about that. Um
I think some while ERCOT needs certainty in their budget.
(item:21:Commissioner Glotfelty on adding incentives to ERCOT's budget) I also think there needs to be incentives in their
budget. We need incentives in their budget for them
to reduce congestion, the more they reduce, the more
they get or the the more efficient they are, the more
we need to find these benefits, um, to require them
to be more efficient. I don't see it in here. I just
see uh I, I asked the question. Is there anything
on your wish list that you didn't put in here? And
the answer was no. Which tells me they put every single
thing in here.
And that tells me that, that there's not a whole lot
of budget scrutiny. And um, I'm convinced that a two
year budget is all I'm gonna vote for. I'd be,
I'd be happy to do one. But two, I can't go any
further than that. And I think that what the number
is um the system operations, the real time operations.
The planning, weatherization, those are areas that
are critical to the operation of our system. Some of
the other areas I'm just not so sure.
Okay. (item:21:Commissioner's dialogue concerning one or two year budget) So when you look at a two year budget, the option
two and apply the across the board reduction of two
cents, um, which would be 65 to 63.
Is that something that you're okay with or is it a more
reduced number? No, I think that's, that's probably
in the ballpark. I mean, I think some flexibility.
I think they have to. Uh yeah I think that's, that's
I could live with that. And, and Commissioner McAdams
you're looking at a one year which would place us at
59 cents. That's correct.
Is that something you're comfortable with. Look, I
know 2024 is more certain than not. But, but again
there,
Okay. (item:21:Commissioner McAdams on peer group comparison) The other thing we need to talk about is peer group
comparison. All right. And we, I know in our Staff
briefing, we acknowledge this. So I think um you know
I know PJMs annual budget is $405 million. Okay? As of
the last one we pulled um. SPP just came back. They
approved their budget. It was a neighborhood of $325
million PJM is bigger in terms of an energy market.
SPP is smaller. So keep apples and apples context to
it.
SPP is also growing west. They may go from a 55 gigawatt
annual system to 100 and 20 gigawatt annual system
in the next three years depending on which states continue
to join. Um
PJM operates a fully liquid for capacity market. They
administer that market, they have 1000 employees. This
is where Pablo believes that ERCOT will need to get
to. Um their last approved budget is again backdated
So $405 million, he's looking for $425 million annual.
So we're kind of talking about it on that scale and
we should review it uh as such. If I could add MISO's?
Yeah, what is MISO? They're increasing at $397.4 million.
So their their fee is going up to 4.7. Right, but they
they can, they can do that smaller because they have
more megawatts to socialize it across. 17 right bodies,
states. Which ours is growing, ours is growing. Correct.
The number that we're socializing is continuing to
which I think there's no end in sight on that. It will
end at some point in time.
(item:21:Commissioner Glotfelty on peer group comparison) You know, I don't want to use the pier. I think it's
a good information because I think the peers are way
off base. I think what PJM and MISO have become is far
far from what the initial open access RTO ISO program
was intended to create and they have become the blocking
and tackling of everything, innovation across the United
States. And I don't want that to happen here. That's
why I want part of this. If they, if we get
an increase. I, I want it to be strategic. I want
it to be to those initiatives that help us. Um I um
I, I get there's one other area which is the uh the
systems, you know, RTC plus storage state of charge
the DRRS, PCM. Um I mean, I, I just II I
have to
voice this Pablo. We've talked about the. (item:21:Commissioner Glotfelty on upgrading ERCOT's EMS system) I would be
more willing to pay for a major increase if you all
were going to upgrade your entire EMS system. That includes
all of this to something that is more applicable to
what other regions are using, like the Siemens system.
And get the benefit of the updates that they do. We've
talked about this. RTC is already a software tool that
is built into PJM. We wouldn't have to go spend $50
million to create it for our one of a kind GE system.
And some of those strategic decisions I think have
to be addressed by the Technology Committee, by John
Swinson on the board uh Dell, Software Executive. And
figure out I just, I don't think the intent of all
of these RTOs was to continue to grow. You know, the
old saying, I just want the land next to mine. Um they're
growing and growing and growing and that's not absolutely
essential for consumer benefits. I agree 100% Commissioner.
(item:21:ERCOT's Pablo Vegas on the grid in the future) And, and you're describing exactly the posture that
we are working to shift into. Which is taking a longer
term look at where the grid of 5 years and 10 years
from now is going to be versus the one we're operating
today. And that's the challenge. Is as we're going through
this very rapid transition on the grid of today, trying
to make decisions that will put us in a position to
leverage the economies of scale the economies of technology
changes that will actually position us better than
other RTOs to be in a place where we can operate
that system of the future. And arguably I would say
in the discussion around comparing with the other RTOs.
We are operating one of the most complex systems in
the world and arguably the most complicated in the
United States right now. And so the rapidity of change
I think is we're trying to keep up with that rapidity
of change in the short term while so trying to keep
an eye towards how can we prepare for and develop for
the future. I would argue that. (item:21:Pablo Vegas on long term engagement) What we're trying to
build into this budget, which includes capacity to
do some of that longer term engagement, which includes
things like engaging with outside research institutions
with, with the institutes of higher education, with
national. We had cut all of those initiatives out of
our budget in the last couple of years because of the
shortfalls that we had by keeping the budget flat,
we're trying to build some of that back in so that
we can have that engagement and start thinking about
what are those technology investments you're describing
that will get us to a much more advantageous position
around economies of scale and innovation. And so it's
it's through that lens that we built this budget to
both try to manage the very short term changes, operation
that we have to do like these projects, but also start
to position ourselves for those longer term investments
and changes which do take some dollars in order to
you know, participate with those institutions and to
start doing things like pilots and such that could
be part of getting ready to do that, that's all baked
into this as well. And so that's why I'm appreciative
of you doing that. I mean, we've talked about that
It was my view. I think you all accepted it or want
to help rectify it that almost every other RTO has some
dollars in there to engage these outside groups to
get other data points, to use their technology, to
help them understand the research that's coming down
the line. The visualization tools, the better system
operations tools, the better ways to site and manage
transmission and
doesn't even get to the distribution system. But I
think putting that in is a is a good down payment for
success in the long run and and having a little bit
of a longer outlook. (item:21:Pablo Vegas on 4 year deal) And that's why we've advocated
for this four year view because typically a lot of
the short term development projects are a two year
kind of horizon in terms of development in that 23
year range, some of the longer ones you start now,
but have a 3, 4 year horizon. And so looking ahead anticipating
where we want to go, that also drives the desire to
try to have a stable kind of a revenue stream that
can be planned around anticipating those kinds of changes
and tasks that may come from you all or may come from
others outside to say this is important for her to
be able to do this and we want you to move in
that direction. So that's why I would strongly advocate
for as long a horizon as reasonable to try to provide
that kind of stability and the capacity to be able
to make those kinds of investments.
Pablo, since Commissioner Glotfelty he alluded to the kind of the
project areas. And since we've received Legislative
letters on it. Some of whom offices are represented
in the room, office space. What are your thoughts we
need to talk about? (item:21:ERCOT's Pablo Vegas' response to Commissioner McAdams' question on office space) Yeah the, the office space that
we acquired across the street um has been incredibly
helpful to enable efficient engagement with the Legislative
bodies over the course of Session. We were across um
working at the Capitol in meetings and educating and
trying to help folks understand kind of what the various
implications of all the different Legislation was over
40, 50 times over the course of just the Session. We
use that also as an office to be able to engage with
meetings when we have meetings with you all here at
the Commission or with Staff. It helps on both of those
fronts because we can walk to the Capitol or to this
location. What it provides for is the ability to then
work productively in between the meetings because those
meetings are not always contiguous. It doesn't, you
know, when we have meetings at the Capitol, it's not
necessarily 1, 2 and 3 o'clock. It could be at 9
in the morning, at 4 in the day, and then at noon.
And so it allows us to be productive and efficient
and it's a relatively de minimus cost in our asset
base. It's about $87,000 a year for that office space.
And the cost of that has been far exceeded by the value
that the team has gotten by being able to engage as
needed with any of the folks that need to have folks
available on a ready basis and be productive while
we're doing that. May I ask you if we were, if you
were to get out of that and find more affordable accommodations
even just as close to the Capital? Um, how much would
that cost? (item:21:Pablo Vegas, Sean Taylor respond to Commissioner McAdams on real estate cost) I don't know, I haven't done any research
on additional real estate. Real estate isn't typically
going down. No, no. I know that. When we, when we secured
the position, we hired a firm went through the RFP process.
Oh no, no. I'm not questioning that. So we have office
space that could be available as I understand it might
be an option. And I just want to make sure that we
recognize the Legislative questions around that are
deferential. And I know you do. We would be, we would
absolutely be open to that as well. We really just
the whole driver for it was being able to be more product
and, and have access to those who would like to work
with ERCOT.
(item:21:Commission Staff Thomas Gleeson responds to Commissioner McAdams on office space) So Commissioner McAdams, that's correct. We have recently
obtained additional floor space in this building on
6. If you all so desire. You know happy to, to
work to, to lend some of that to ERCOT. I will say
we need to work with Facilities Commission about obtaining
access for ERCOT to the building. Because obviously
you know, we have early hearings and, and hearings
that run late. But happy to do that and work with
TFC and ERCOT. If that's what you all want. One more
badge Pablo, we'll get you some.
So I welcome any other thoughts. I mean
Madam Chair, what do you think? (item:21:Chairwoman Jackson's thoughts on ERCOT's budget) So, you know, we've
had a lot of discussion about the budget and, you know
to me it's important that we have, you know, a very
be very robust on the expense side, we've talked about
some options on the income side and whether there might
be an opportunity to, to maybe take a little bit um
less conservative view, I guess on the interest and
thereby have some opportunity to reduce um potentially
what the fee might be. Um But I, I guess from my
perspective and again, maybe it's kind of from my background
is that a budget is a promise, right? It's, it's not
just a promise from the standpoint of, you know, what
our forecasts that I'm going to expand in staying within
those dollars, but it's also achieving the objectives
that the budget funding is intended to do. And so,
you know, when you look at ERCOT's work up. I mean
they were very comprehensive and it being a zero based
kind of bottom up process. And so I feel, I feel very
comfortable with what they have on the expense side
recognizing all the work that we have ahead and the
need to, you know, to, to basically be, you know, to
be able to manage that change. I mean, we want to be
able to be in charge of that change. We don't want
to be reactive, we want to be, we want to be um
um forthcoming and ahead of it. Um But, you know, part
of that promise is to achieve those objectives. And
I know that there, you know, staff uh did some work
in terms of what the KBI should be. I know that
Commissioner Cobos put together uh a memo, uh to me
those kind of go hand in hand. So I think that, you
know, very much there is an opportunity um potentially
and I would welcome ERCOT thoughts on this to, to see
where we could go, you know, if we had potentially
as you've mentioned and pointed out maybe some, you
know, less conservative approach to the, to kind of
the income side. But um you know, also, you know, have
that discussion about the KPIs and again, get ERCOT's thoughts
potentially have you lay out your memo and get ERCOT's
thoughts on the memo. Sure. And, and I'm happy to add
more performance measures. If you know, I know Commissioner
Glotfelty threw a couple out there, um that could be
added. (item:21:Commissioner Cobos lays out her memo) Really what, what I want to ensure through the
memo is that um if we approve any increase, that we
have very specific performance measures to ensure the
delivery of the Commission priorities that we have
been focused on. Right now. I know ERCOT has been focused
on it, um, have submitted filings at the Commission
been updating the Board on where they're at. But I
I just really want to make sure that we stay on time
and within budget on these key priorities and, and
the, and the, and the timelines that I've laid out
the years, you know, are really based on ERCOT's filings
right? So, um I just want to make sure that we are
keeping track and we are meeting those milestones and
you know, I I've laid out 4. One of them is a reliability
standard and I know ERCOT is in the process of doing
a lot of number runs. And the final piece to that,
that I view is the value load study in ERCOT's reporting.
Has said that that would be deliverable in the first
quarter of 2024. So ensuring that we stay on track
for that delivery, the implementation of DRS as per
the letter that we got from the Legislature. And the
desire throughout last Session was to implement it
as expeditiously as possible. And prior to RTC plus B so it could
be incorporated in the RTC plus B according to ERCOT's filings
would be fully implemented and delivered in 2026. And
then finally, the implementation of PCM aligning that
with RTC plus B because ultimately, um you know, I
know PCM, your update says delivery in towards the
end of 25. And RTC's delivery is in 26 we would
want to try to align those as closely as possible.
And if they're not aligned, if PCM is implemented,
you know, in 2025 and, and you know, there's a whole
year nearly that goes by until RTC is implemented
then we, we want to make sure that the cost assessment
that that ERCOT provides in conjunction with the IMM
to us shows us two costs, one cost with PCM alone without
RTC and one cost with PCM and RTC together because
I think the spirit of 1500 was intended to make sure
that RTC and PCM were combined together because in
one hand, you'll have the PCM market paying for the
credits. And on the other hand, you have the efficiency
of the RTC and that was all baked in together in
the E3 report, the initial one. So I just want
to make sure that um those two major projects, market
design projects are as closely aligned as possible
so that we understand the true cost of the PCM and
if they're not going to be aligned, then we need to
see two cost comparisons in the cost assessment. And
so I believe that that was the intent of House Bill
1500 all the discussions that happened um surrounding
the passage of 1500. I wanna make sure we stay clear
and, and true to that commitment. So, um those are
my four Commission priorities that I want to um enshrine.
in performance measures that will be reported on by
ERCOT on a quarterly basis until they are implemented
(item:21:Commissioner Cobos on tracking the budget) So that we are tracking for the, you know, first two
years of the budget where they're at and where we're
trending and accomplishing our priorities. And we take
that into consideration when they come in in the next
you know, whatever we decide here in the next for the
next budgetary cycle because we gotta make sure we're
on track and, and that we're, if we're gonna in approve
any increase, whatever that number is, if we do, um
that we gotta make sure that they're accomplishing
their staffing up to meet our priorities and our expectations
and the legislature's expectations and I'm happy to
add any more. I know Commissioner Glotfelty, you mentioned
reductions in congestion. I don't know how we measure
that exactly. I guess it's the construction of transmission
and reporting, but you also mentioned um, EMS upgrade
and, and that's critically important because EMS upgrades
(item:21:Commissioner Cobos on EMS upgrades) My experience has been that, you know, ERCOT, right
now with GE um software environment, they have to conduct
these EMS upgrades and, and they get in the way of
us, you know, ERCOT being able to implement anything
that has to be co-optimized through the EMS and MMS
system. So it's critically important that the next must
upgrade does not get in the way of the implementation
of DRS and RTC and PCM even. So how if there's a
performance measure you want to add into maybe starting
to transition to a Siemens even. (item:21:Commissioner McAdams' dialogue with ERCOT on CRR and RTC) One performance measure
And we should think about this is so much now is being
predicated upon the levels of CRR funds. Correct,
Sean. It's an important component. It is important
that the interest rate is a bigger driver but the CRR.
I got it, but the level of CRR funds is important and
combined with the interest rate. Won't CRR funds decline
once RTC is operationalized, congestion will decline?
Thus hedging on CRRs, yes? You can draw that conclusion
Yes. Okay. So that's an important milestone as well.
New transmission. Yes, sir. But it's an important milestone
that we have to in terms of their financial stability.
Keep in mind which is a driver of when decisions around
the system administration fee need be made.
So what is your conclusion on that? When is RTC supposed
to come online? 2026. So that's two years from now.
Yeah, so 24-25 is a two year budget and so you would
have to take that into consideration in the next budgetary
cycle, the impact of their revenue from CRR funds.
But I mean RTC would be implemented. You still have
to realize the congestion.
I mean, they're going to have the software developed
they'll have modeling going on on what it will solve
for it interrelates with PCM and how that, that helps
again, solve for congestion. So we're gonna have models
at that time. So what I'm saying is uh I think this
starts to sync up with an overall vision of where they're
gonna their next check in strategically um where
they're gonna be headed. That's my point. Okay. So
did ERCOT have any ideas or thoughts on the recommended
KPIs? (item:21:ERCOT's Pablo Vegas' response to Chairwoman Jackson's question on KPIs) Yeah, I think we're very supportive of detailed
and specific KPIs with regular check ins. I think the
Staff did a really nice job of laying out a potential
framework for that. And your supplemental memo gave
some more specificity. A couple of things. I want to
just make sure we're clear on. (item:21:Pablo Vegas on value of lost load) The value of lost load
work based on our current work with the partners that
has been getting delayed because of the time to contract
with that partner. And the expectation is that the
studies would be issued in the surveys would be issued
in the first quarter. But it's likely that the respondents
and the analysis and how much, how long it will take
time for consumers of Texas to actually participate
that could push it to the second quarter. So I think
it would be more realistic based on what we know today
to look at a second quarter timetable for the value
of lost loads in the first quarter. But we can check
in on that. I think you put a March 1st aid and
as for a checkpoint in there. I think that makes a
lot of sense. We can update on where we are and exactly
in that study work. But I think that's probably a little
more realistic on the value of loss load. Okay. (item:21:Pablo Vegas on DRS, PCM and RTC) With
regard to the um the DRS, PCM and RTC. What, what
we were thinking is that from a strategic point of
view, anchoring everything around the most expeditious
delivery of RTC as I have heard and understood that's
a priority to everybody. It is for us too. So what
we would like, what we would recommend is our current
program of work has RTC being delivered in 2026 and
that's on the most expeditious path that we've defined
There is now changes that have been made potentially
to the DRRS if we were to consider a different approach
for DRRS than what has been um so far approved. So we'll
need to talk about that if there's a different pathway
on DRRS. And then for PCM, we're also working through
now based on the framing document, a new design on
PCM, that is going to be worked on in the first part
of next year. So what we were thinking is that we would
prioritize first the RTC delivery and then put together
project plans and timelines for DRRS based on whatever
the paths for that and PCM as a subset of meeting the
RTC in the most expeditious way and within the budget
that we have to do so. And so then we would be
able to come back and lay out a set of performance
metrics and timelines that would show exactly how that
would work in conjunction with the, if that makes sense
for you and we could again come back probably that
March 9 period of next year, be able to do an update
on overall the programs, the impact analysis because
we don't have new impact analysis yet on those two
those two projects and then the timeline for those
two projects as well. Okay. So um I think I understand
what you're saying. It's just basically you're going
to prioritize RTC, we're going to make that the anchor
with fast pace, fast pace
DRRS would be floating in between there. I mean
years 24 and 25 and even 26 to get it in place
And according to some of the filings that I've seen
from ERCOT and the stakeholder process on NPRR 203, they
believe that they can implement at least the comments
filed by Khan state that, you know, you can implement
a stand alone DRRS product um that closely aligns with
RTC. So, and, and that was actually passed in the
NPRR and PRS uh NPRR 1203. So it seems like
ERCOT is pretty confident they can make all that work
according to these comments, that we can implement
a stand alone DRRS. Yes, is to implement a stand alone
that aligns with the delivery of RTC. (item:21:Pablo Vegas' response to Commissioner Cobos' question on standalone aligning with RTC) Yes, which is
beyond the December 2024 deadline of the original assumption
for the. That's correct. And I think there's still
questions on the design, whether it would be a co ancillary
service or not a co optimized ancillary service. And
so I think that kind of design work has to happen and
that would probably then align whether it goes live
exactly concurrently with it or for it or. Are we commingling
dockets here? Let's see something. To keep that a little
bit. Ok. So, so I think you kind of laid out a
process. Okay. And so Commissioner Cobos, based on what
he kind of laid out in terms of your KPIs and what
vision is kind of going forward again to make sure
that we are aligning the budget with the KPIs and the
expectations of what's delivered. Are you, are you
kind of in agreement with what Pablo has laid out?
(item:21:Commissioner Cobos' question on an amendment) So for purposes of, if everybody agrees to the changes
that I'm proposing to any order that ultimately, if
we approve an increase. If you all agree with the direction
of my performance measures, what I would say is I would
amend as, as Pablo suggested on the value loss load.
Delivery of the bowl from the first quarter,
second quarter to give some flexibility. Um I would
amend um Commission priority number two, the implementation
of DRRS as expeditiously as possible um to closely
align with RTC delivery as opposed to before, just
to build in a little bit of flexibility in the sort
of alignment there. Commissioner does that presuppose
that we're not going to hit our statutory deadline?
Um
You might get a no vote from me on this. I understand
But yes, we need to decide that issue and we can return
back to this if you like. OK, we can also pause to
take that item as well and continue the discussion
under both items. That that's, that is an option.
Just to be safe in case there's any overlapping discussion
is what I would say. Okay. Sure. Okay.
But you do agree that any form of DRRS should be implemented
expeditiously as possible. So, Shelah can you kind
of help me through this? So we would need to um take
up Item No.? Looking at Connie, would be 25. Is that
right? Take up Item No. 25.
Yes. Okay. (item:25:Chairwoman Jackson takes up Item 25 in conjunction with Item 21) We'll also be taking up Item 25 in conjunction
with moving forward with the for the purposes of this
discussion. And again, this is not necessarily to take
up the DRRS but to include it in the discussion so that
we are staying in concert with what the expectations
are for the agenda. Exactly. (item:25:Chairwoman Jackson lays out the purpose of conjoining Item 25 with Item 21) So for the purposes of
this discussion, in terms of moving forward with the
budget, I think again, we're trying to, you know, come
to grips with what we think the um the fee needs to
be moving forward as well as you know, get our arms
around the KPI process because what we're talking
about here is just using these again as an indicator
of performance as we move forward and we kind of monitor
the budget. So yes, so yes. (item:25:Commissioner Cobos' thoughts on an amendment) So that, that's really
the goal here is just to create very specific performance
measures that are targeted, targeting our, our priorities
that have been laid out in ERCOT filing. And we've
been very focused on um after the Legislative Session
on developing the reliability standard. DRRS, RTC
and PCM. And um like I said, I'm happy to amend the
first one. I'm happy to add if you like Commissioner
Glotfelty and Commissioner McAdams, I'm happy to amend
number two to just say implementation of DRRS as expeditiously
as possible.
Um that will work with RTC plus B or something I
could smooth that out so that it's any form of DRRS.
So that way we can make a decision to prove it. So
so ultimately, just, just so everybody knows my position.
(item:25:Commissioner McAdams appreciation of Legislators input) The very much appreciated the Legislators uh letter.
um the Chairs of both Committees of jurisdiction in
both Chambers and the um the Author of the House Bill
1500 which gave us the framework that we're operating
under. It was man, I, I can't say enough how much
it was well taken by me. The letter, it identified
some inefficiencies that have been inadvertent due
to the way we're operating right now. Simply because
of the changing landscape of the grid. They identified
volatility and they identified
basically the challenges with, with the way we're
operating, the implication of their letter was for
the Commission to instruct ERCOT or to bless ERCOT's
action of disregarding an implementation date. And
I cannot do that. As a former Legislative Aid, law matters
and black letter law matters. And uh I, I so in any
policy that blesses ERCOT, disregarding applicable
law, I cannot do. And so even the language that Commissioner
Cobos and again, we're talking about the KBI, I see
we're going to have a different discussion later. I
think about the DRRS, right? So I can amend it to say
implementation of DRRS as expeditiously as possible
Um to work with RTC plus B I could smooth it
out and we can pass it around after, you know, make
sure everybody's good so that it's not, it's any version
of DRRS right. Yeah, Yeah,
What we're talking about here missing deadlines. Just
so, you know. (item:25:Commissioner Glotfelty's thoughts on DRRS) I think, I think this in my view goes
back to the fact that DRRS was,
is required under House Bill 1500. But what we haven't
done is we still haven't looked at all of the ancillary
services in total. So we're adding and adding and adding
and adding and we've never looked at all of the pieces
put together correctly. So we're going to add DRRS
at some point in time, we've added ECRS in the last
year. Um We've, yeah, I mean, the, the the problem
to me, you know, we, we have to have a real understanding
of what this market is gonna look like in terms of
energy, day ahead, energy and ancillary services. And
I, I haven't talked to many people that have a real
understanding of, of what it looks like. But bottom
line is Commissioner. I, I can get on board with some
type of smooth out language whatever, whatever that
means. I just if, if that policy approach again, tying
their budget to it.
Implies that they should miss the statutory deadline
I have significant concerns with that. (item:25:Chairwoman Jackson on DRRS and KPIs) I don't think
I think all it addresses is monitoring DRRS the ability
at which we're able that is implementing it. And I
think your language now says we'll make that decision
in conjunction with right now is I'm sorry, this is
really just focused towards the budget and the KPIs
And, and again, this was something that initially started
with Staff in terms of recommending certain KPIs to
go along with, you know, the actual monitoring of
you know, how well you're doing on your finances were
you know, in the ERCOT Board as well as us, we, we
look at, you know, what is your spend, what was your
plan? What is your variance versus the plan? I mean
we're, we're now coming in and saying we also want
at the same time because of all of the important work
activities that are happening to. Also at the same
time. Look at, you know, what are you accomplishing
along the way so that we can kind of be, be engaged
we can monitor it and quite frankly, uh we continue
to have the discussions about what do we need to do
to make sure as the Commission that we're on track
as well as how can we provide resources and make sure
that ERCOT has what they need and that they're on track
So I think that was really the only intent uh in terms
of what you were talking about in terms of the KPIs
So performance monitoring, I'm good on that. Absolutely
So could you read it one more time? It's just the implementation
of DRRS as expeditiously as possible to work with RTC
C plus something like that? Yeah, it could be any form
of DRRS and we'll make that decision here. A little
bit later in the agenda. But as written, it would contemplate
any form. Okay. We want to make sure we have total alignment
with our ERCOT so just thoughts. Does that work for you Kenan? (item:25:ERCOT's Kenan Ögelman in response to Chairwoman Jackson's question on amendment) This is Kenan Ögelman
with ERCOT. Yeah I mean, I think the issue for us
was the absolute statement of prior to RTC that was
in item two. And the way you're proposing to smooth
that out aligns with what uh Pablo was saying, which
is um you know, we want a little bit of flexibility
in and, and around delivering RTC plus B on time and
uh and, and would like to be able to move slightly
ahead or, or after RTC plus B depending on the circumstances
Okay. Well, the delivery of RTC is a priority, right.
And we cannot delay it and it shouldn't be delayed
according to your comments by developing DRRS stand
alone product. Now when and that all links up, that's
what you need flexibility. Exactly. Okay. But again, the
key point is RTC plus B is the number one priority.
Okay. Pablo, you know what, wrap it up with any statements
regarding the KPIs? (item:25:Pablo Vegas in response to Chairwoman Jackson's question on KPI strategy) I think it's a good strategy and
we look forward to coming each quarter to talk about
progress on these initiatives. And, and I think.
On some, I would like us or you all to look at
the FERC KPIs. (item:25:Commissioner Glotfelty's question on interest rates) I mean, clearly things like load forecast
accuracy, things like that. Are really important for
how you all are working internally. They're not just
external KPIs but they are how the organization is working
Um I think we've, um I, I think it's a good data
point but to look at those at the FERC KPIs and um
not all of them are going to be applicable to our market
but some of them are, and I'd like you all to look
at those and include, include those as we go through
this process. Okay. So I know we've been talking, we've
got the KPIs kind of issue kind of settled, I think
And kind of what remains is um is the fee and I
know that you've been kind of carry that. So, uh so
so come up with something that hopefully, um you know
ERCOT is um
able to execute. Madam Chair, you may be upset with
me. (item:25:Commissioner McAdams introduces Katie Coleman with TIEC) May I invite one individual uh to the, the dais
um
Nope. Katie Coleman of TIEC if I may.
Like everybody's tensed up, Katie. You had
a filing, it was a very detailed filing. And my question
to you is the range that we are discussing was contemplated
in your filing. Your group did analysis on it. 163
is hitting one of those numbers, I'm sorry, option
two is hitting one of those numbers that you discussed
and evaluated. I understand that increasing the fee
is not appetizing to your members. Could I clarify
that. (item:25:TIEC's Katie Coleman in response to Commissioner McAdams' question on decreasing fee) So I think you referenced that we had asked for
it to be decreased. And I just wanted to clarify what
our filing was. We dug in on the assumptions. It is
a that my customers pay a disproportionate amount of.
So we have a responsibility to make sure that all
the assumptions make sense. But we also very much recognize
the important work that ERCOT does for reliability
and we want them to be well funded. We want their employees
to be happy. When we looked at the data that was
filed, some of the issues that you all have hit upon
were concerning to us, the interest rates looked out
of sync with the information that we were reviewing.
There were some other discrepancies I think earlier
it was discussed, um you know, keeping the CRR balance
flat at $2 billion. It's actually above that right now.
So even if you keep it flat, it's actually at like
$2.115 billion or something like that. Um those things
all have an impact that could lend itself to a more
conservative fee, but we were not proposing to reduce
the fee. And I think just digging in on those parameters
and an intermediate um fee and recognizing that some
of these factors may be volatile over time like the
interest rates, I think your conversation has given
us some comfort that the um the proposal was vetted
We, we were just to be frank, we had hoped to have
a more open discussion about these issues at the hearing
that was held. But because of the way it was structured
we did not get a real opportunity to have some of those
conversations and get some of those questions answered
Hence the filing. Um But I think the diligence that
you all have done on this satisfies many of our concerns
Thank you, Katie. Don't say anything else.
Madam Chair so I, I just wanted to afford the industrial
consumers because they did file and, and they, they
will bear some of the impact, the opportunity to kind
of say their piece because when you're passing a budget
and you're assessing a fee, it's good to have that.
And I think it's good governance um with that um.
(item:25:Commissioners dialogue with ERCOT on the 2 year budget option) The two year,
yes, I'm good on to on to your budget to your budget
at Sean say or forever hold your peace. The 63 is that
I mean you needed to do that math uh because we your
option two had contemplated 65. But again, Commissioner
Cobos had pointed out your carry over. Does the math
still work out for you to support your needs at 63
Yes, thats an increase in 26 as well with using option
two. Ok, I need to be clear. So you're saying 63 but
with an increase later, that's the expectation that
option too. Can you increase the fee after two years
we'll see based on how things roll out. That's the
whole thing in two years. We really don't know how
it's going to look. Right. I'm trying to stick to landing
with everything else that y'all are doing and because
that's going to have a pretty dynamic effect on what
you're looking at RTC and everything else. (item:25:PUC Executive Director Thomas Gleeson on operating budget reconciliation) Commissioners
if I may just make a suggestion? You know, this process
was set up to look very similar to what our process
is at the Legislature. If you're going to approve a
2 year budget, which I think is the right action.
What I may suggest. I know Sean and his team provide
updates to the ERCOT Board at a normal iteration on
their budget progress. One of the things that, that
state agencies file on the years that they're not submitting
their LARs are an operating budget reconciliation. So
perhaps we ask ERCOT to provide, say a year from now
when they would have a year before they filed their
next budget request, an operating budget reconciliation.
Which would be an abridged version of their budget
request so that you all can see their progress and
have a discussion about that at that time.
Sounds like a good measure just to track progress.
Good. Yeah, absolutely. I am too.
So um I don't know what motion I need to make on
this. So it sounds like the motion would include
um approving a 63 cent um fee SAF
and the performance measures included in my memo. With
the addition of a performance measure to track ERCOT's
progress on FERC KPIs. Yes.
And is there something that we have to do in a motion
about total expenditures?
So I don't know what that total expenditure number
would be we do 63 cents. Well the total expenditure because
you haven't changed, the expense side would be the
same.
So I just want to be clear that this is something that
you feel
comfortable about and that there's not another option that you want to
discuss before we move forward. (item:25:ERCOT's Sean Taylor in response to the Commissioner's questions on total expenditures) So just to clarify
the total expenditure, if you change the fee, then
the total sources coming in and the total uses when
we talk about total expenditures, it is total uses
as was mentioned earlier in comparing ERCOT's $424 for the
filing to the other ISOs. Then of that $424 that $26 million
is associated with NERC there's also $18 million that's
associated with increase in cash balance. So that number
would actually decrease, as we decrease the 63 cents.
So there would be an impact to that financial expenditure
unless you did a direct offset with the interest income
rate.
So the total expenditures would decrease and we can
calculate what that would be with the 63 cents. So
do we uh Madam Chair. It is 11:18. You are close
to your Executive Session mark. We are. Could we put our heads
together and formulate a motion that captures what
we need?
Because we want this to sustain itself for a while.
(item:25:Commission's Staff Connie Corona on ERCOT writing an updated order) I think we can do that. It would also be advisable
for ERCOT to reduce, to writing the changes in the figures
that Mr. Taylor just explained. So that we can make sure
we have the accurate information in the order that
we prepare for your signature.
Okay. Sounds good. So, um we were scheduled to go into
Closed Session um around 11:30. It's 11:18. So let's
go ahead and skip to um Item 50. Which brings us
to Closed Session and then we'll come back afterwards
and, and have the, the details that we need to
proceed on with the motion. (item:50:Chairwoman Jackson pauses Open Meeting, to hold Closed Session) So, having convened in
duly noticed Open Meeting. The Commission is now at
11:19 on November 2, 2023. To hold a Closed Session to
discuss matters pursuant to Chapter 551 of the
Texas Government Code sections 551.071, 551.074,
and 551.076. We'll break for a Closed Session and
a few minutes for lunch and I'll anticipate us being
back in about 45 minutes. Thank you.
You catch me if I'm not.
(item:50:Chairwoman Jackson concludes Closed Session, Public Meeting resumed) The Closed Session is hereby concluded at 12:32pm
on November 2, 2023. And the Commission will resume
its Public Meeting. The Commission will take no action
today on litigation matters discussed in Closed Session.
We will resume our agenda beginning with Item No.
21. I know we took a break so that ERCOT could run
some numbers and
entertain a motion.
Pending any objections from ERCOT. I would love to
make a motion, good?
Or comments. (item:21:Pablo Vegas' response to Commissioner McAdams' question prior to motion) Just a quick comment that, you know, we
updated the, the numbers as we have discussed and put
forth. And I just want to make sure it was clear because
I'm not sure if it was clear in the conversation. That
based on the assumption that are in there, there is
an expectation of potentially coming back for a system
admin fee increase in two years that this isn't setting
a forecasted number for four years as the other assumptions
were. And so that change is just part of that assumption
just to make sure that was clear in the dialogue. But
otherwise the numbers as proposed and as offered are
the numbers discussed. Thank you, Mr Vegas. No, that
was my understanding. It very much appreciate the clarification.
I would also like to thank you for conducting the number
run over the break. And this motion that I'll put forward
reflects the outcome of that. (item:21:Motion to modify proposed order on ERCOT's budget consistent with memo, discussion) Members, I would modify
I would move to modify the proposed order regarding
ERCOT's budget, consistent with Commissioner Cobos
memo and our discussion including
development and reporting applicable to performance
measures or metrics that other independent system operators
or regional transmission operators use with the Federal
Energy Regulatory Commission. Submission of value of
lost load study associated with the development of
a reliability standard in the second quarter of 2024.
Implementation of DRRS as expeditiously as possible,
and prior to or aligned with RTC plus B. Full implementation
and delivery of RTC plus B in 2026. And implementation of
the PCM must be aligned with the implementation of
RTC plus B in 2026 consistent with House Bill 1500.
Additionally, ERCOT shall file with the Commission
and operating budget reconciliation for 12 months ending
June 30, 2024 by September 1, 2024. A two year budget
with system administration fee of $0.63 per Megawatt
hour which is 63 cents for everybody listening. To be
effective January 1, 2024. And 2024 expenditures of
$405,700,000. And 2025 expenditures of
$414,300,000.
So moved. I have in addition to your KPI on the
fourth one. Where it says implementation of PCM must
be aligned with the implementation of RTC plus B in
2026. Adding the requirement that if they're not
aligned, that we need to get cost analysis, both of
PCM alone and PCM plus RTC plus B. Basically what
I have in my memo.
So I would modify the um. Okay so that's in your memo
right? Yes.
(item:21:Motion updated to harmonize proposed order Commissioner Cobos' memo) So I moved to harmonize additionally, moved to harmonize
this order with your memo, which I had in there. So
which would be full implementation and delivery of
RTC plus B in 2026. And there's a parenthetical that you
kind of sort of summarized but the actual language
in my memo. Consistent with your memo.
Motion made. Do I have a second? Second. We have a
motion and a second. All in favor, say aye. Aye. Motion passes.
Having wrapped up Item 21 the ERCOT budget. We will
now transition to Section 1 of our agenda. Contested
Case Items. First up is Item No. 1. Shelah, will
you please lay out this item?
Yes, ma'am. (item:1:Formal Complaint of Tammy Bean against Waterco, Jim & Gloria Nelson, Waterco Board) Item No. 1 is Docket No. 47411.
This is the formal complaint of Tammy Bean against
Waterco. Jim and Gloria Nelson and WaterCo
Board. Before you is the proposal for decision from
SOAH. No corrections or exceptions were followed by
the parties and Chairman Jackson filed a memo in this
docket. I did file a memo to make some needed corrections
to the order. Do we have any thoughts? (item:1:Commissioner Cobos thoughts on the order) Chairman
Jackson, the only additional thought I have is that
um, we go ahead and remand the agreed sewer rate as
well. I know there's agreement on it, but it sounded
like from the analysis of the case that um, depending
on how the first issue comes on with respect to the
additional evidence on the connection fees that, that
could impact the sewer rate. So I would suggest that
we send everything back, including the affiliate expenses
and the sewer rate.
Is that a correct interpretation of what I read? You
maybe? Are, are you referring to Item No. 3
the Forest Glen? We're on Item No. 1. I'm sorry.
It's been, it's been a long day, a long week. Sorry
Chair
Jackson. I didn't know we were gonna start with the
contested cases, so it's fine. Now I know how you feel. (item:1:Commissioner McAdams motion to approve PFD modified by the Chairwoman's memo) Commissioner Jackson, I agree with your memo. I believe and I believe
and I would move to adopt the PFD as modified by your
memo. Second. A motion and a second. All in favor, say
aye. Aye. Motion passes. Okay. Next up is Item No. 2. Shelah,
will you please lay out this item. Yes, ma'am. (item:2:Ratepayers appeal decision by Windermere Oaks WSC to change water & sewer rates) Item 2 is Docket
No. 50788. This is the ratepayers appeal of the
decision by Windermere Oaks Water Supply Corporation to change
rates and sewer rates. The Commission considered the
Docket at the June 16, 2022 of the meeting and the
Commission remanded the Docket to SOAH for further
processing. Before you is a second proposal for decision
from SOAH. Windermere, the ratepayers group, Commission
Staff all filed exceptions to the proposal for decision.
The SOAH ALJ filed a memo declining to make changes
to the PFD. Oral argument was requested in this Docket
and the Commission voted to grant oral argument. (item:2:Chairwoman Jackson lays out instructions for oral arguments) So
our normal time for parties to speak on oral argument
is 3 minutes. However, due to the complexity of
this case, I think we should allow parties 6 minutes
each for oral argument. Any thoughts, all aligned. Shelah,
will you please call up the parties individually for
oral argument? Yes, Chairman. We have four different
people that signed up to speak. (item:2:Shelah Cisneros, Commission Counsel introduces Catherine Allen on behalf of ratepayers) The first person that
signed up is Catherine Allen on behalf of ratepayers.
And a reminder each party will have six minutes to
speak. Miss Allen, if you'll come up to the desk and you'll
just be sure to say your name for the record. That
would be helpful.
(item:2:Catherine Allen, Ratepayer Representative for Windermere Oaks Water Supply Corp.) Commissioners. My,
my name is Catherine Allen. I'm here on behalf of the
Ratepayer Representative for Windermere Oaks Water
Supply Corporation. First, we wish to tell you how
grateful we are that the Commission agreed to allow
us to address you today. We consider this your time
really rather than ours. We're gonna do our very best
to assist you in any way that we can because all that
the ratepayers here are looking for is what they're
entitled to under the law, which are just in reasonable
rates. They're not looking to avoid paying for their
utility service. They just want to do that in compliance
with the law. And what precipitated this appeal was
a 2020 rate increase by a Board of Directors that disregarded
both the contract between Windemere and its members
reflected in its governing documents. And fundamental
rate making principles of just and reasonable rates.
The ratepayers felt that they had no alternative but
to appeal. Because their Board was requiring them to
pay more than the cost to provide them service their
contract with the company, which as you know is what
allows Windemere to function as a utility. If it did
not have governing documents with specific provisions
could not be a utility. And those governing documents
prohibit Windemere from collecting from its customers
more than what it costs to provide service. Those documents
prohibit Windemere from spending its resources for
purposes other than to provide service. And those documents
govern above. For example, the Texas Nonprofit Corporation
Act and other law. That's the contract and it allows
Windemere to exist and operate as a utility. Windermere's
Board with the 2020 rate increase disregarded that.
Likewise, the just and reasonable standards prohibit
Windemere from collecting revenue in excess of the
cost to provide service to its customers. And the 2020
rate increase likewise contravened that.
And getting no relief from their Board, the ratepayers
had no alternative but to bring this appeal. And all
that they are after is a rate that covers the cost
of service. That's all that they're after. The proposed
as it, as this appeal progressed. It became apparent
that there were any number of other problems and frailties
with the appealed rates. And Windermere shifted its
position continuously in order to avoid those problems.
There's a lot of minutia to that. There's no need to
address it today except to say that if the Commission
is to consider allowing some appeal case expenses,
we simply ask the Commission to consider the complexity
that resulted from having to follow the shifting positions
Having to reask every time Windermere changed its position
to reask for data to reask for its rate design. All
of those things. we asked the Commission to keep that
in mind if you are inclined to consider an award of
expenses. But that minutia is kind of beyond uh the
detail of what we're here today to talk about. What
I do though want to address is that the proposal for
decision carries forward and incorporates all of the
problems that the appealed rates have. (item:2:Catherine Allen on recovery of costs) Number one,
they recover costs that are greater than the cost of
service. Even Windemere itself admits that these outside
legal costs are not cost of service. Mr. Burress, its
General Manager, Mr. Nelson, its treasurer and Vice-
President. Very candidly admitted they don't make the
water run, they don't make the toilets flush, they
don't build capital improvements. They don't maintain
the system, they don't help with billing, they don't
help with office. None of that. It's entirely a different
matter. They are not cost of service. And this commission
has required that if you're going to include something
in rates, it needs to be a cost of service. Clearly
these are not and therefore they're problematic for
that reason and I'll have about one more minute.
In addition, they collect costs that are not uh known
and cannot be known with reasonable certainty. Windermere
has admitted that
and so they are frail for that reason as well or uh
sorry, I've, I've gotten myself off track with my paper
There we go. Yeah. In addition,
they uh were designed without a cost of service study
They were designed without a revenue requirement. Windermere
admitted that kind of at the end of the proceeding
And so all of the data that everybody had looked at
was for naught.
The appealed rates recover expenses that Windermere's
governing documents say it cannot recover, nothing
can be reasonable prudent and sound about that decision
because it's violating the governing documents. The
appealed rates required all of Windermere's ratepayers
to pay costs for which only a few received a benefit
and that is prohibited both by the just and reasonable
standards and the governing documents. I'm happy to
address any questions that the Commissioners might
have on that, but we again appreciate very much the
opportunity to be here today and to have our word.
Thank you so much.
(silence)
(item:2:Shelah Cisneros introduces Jamie Malden and Scott Miller with Windermere WSC) The next party that signed up to speak is at Windermere
WSC. There are two people that have signed up to speak
Jamie Malden and Scott Miller.
Would you like to approach?
Miss Malden, just to clarify? Are you alone speaking for the party?
I am, yes. I believe Scott Miller might be a ratepayer. Oh
you're right. I'm sorry. And
I saw a party represented owner. I didn't realize perhaps
it's a homeowner. All right. Thank you for the clarification
Thank you.
(item:2:Jamie Malden with Windermere WSC opening remarks) Good afternoon Commissioners. Jamie Malden with
Windemere Oaks Water Supply Corporation. I also have
with me today, Jeff Walker. He is on the Board and
he's available to answer any questions you might have
Um, I just wanna, I with your permission, I would like
to make one or two opening remarks and clarifications
and reserve the rest of my time for closing if that's
okay. Okay. Thank you. First, I would just, we would
respectfully urge you to adopt the proposal for decision
That is before you today. It is uh very well reasoned
and thorough. Um and has a, a very in depth analysis
of a very extensive record in this proceeding. Additionally
most of the things you will likely hear today are not
new and have been considered in that proposal for decision.
There is some new information that I would like
to provide to you since closure since the PFD was issued.
And that is that Windemere Oaks has received insurance
proceeds of approximately $679,000. Concurrently with
this rate appeal, Windemere Oaks was appealing the
insurance, their insurance company's denial to forward
the legal costs of the underlying lawsuit. The Double
F Hanger lawsuit. Windermere Oaks um won that appeal and
received the insurance proceeds a few months ago since
receiving those proceeds, Windermere Oaks has paid
off all of the underlying legal debt and the only legal
debt that is remaining is related to the rate case
expenses for this rate appeal. And with that, I'll
reserve my remaining time.
Good.
Thank you. (item:2:Shelah Cisneros introduces Scott Miller) The next person who signed up to speak is Scott Miller
who I'm not sure if the party represented.
Mr. Miller, if you state your name for the record and who
you're representing. (item:2:Scott Miller, ratepayer of WSC) My name is Scott Miller and
I'm a ratepayer for the Water Supply Corporation.
And I would just like to uh express my appreciation
for the work y'all have done and for the uh knowledge
that you have transmitted to a ratepayer to allow me
to have the realization that not only am I a customer
but an owner and with that comes uh the rights uh that
I knew nothing about, I don't think most of our ratepayers
knew about uh due to the documents that your Staff
and dice uh committees provided real eye opener on
to what's uh what we should have and how we can combat
this, you know, huge increase in rates that we knew
nothing. You know, as far as we know the utility bill
you have to pay it. And uh took a while to get
the realization that yes, there is power to, to, you
know, maybe overturn this stuff. That's all I can put
any additional time to the closing, like she said.
Very appreciative, thank you. Thank you.
(item:2:Shelah Cisneros introduces Merritt Lander with Commission Staff) Okay. All right, the final party will be Commission Staff,
Merritt Lander.
Good morning Chairwoman, Commissioners. (item:2:Merritt Lander, Commission Staff on rejecting PFD) Merritt Lander,
on behalf of Commission Staff. I actually wanna keep
this brief today as well. I know that there is a
lot of noise in this docket. There are multiple underlying
lawsuits. There are legal expenses, there are costs
of appeal. There is a revenue requirement that was
initially presented to the Commission that we found
out at the first hearing on the merits was not actually
the revenue requirement used to design the rates.
The reason that the PFD should be rejected is because
it is based on a revenue requirement that the utility
itself did not use to set its rates. Additionally,
the PFD incorporates into base rates, extraordinary
non-recurring legal expenses that at this point have
all been paid off and if the rates are allowed to stand
the utility will continue to collect those rates year
after year after year. We all know that extraordinary
expenses do not belong in base rates. That is not how
we design rates. We have not designed rates like that
for 20 years. This is a question of math and putting
all of the noise aside. The math of the PFD is not
good. Staff's rates allow Windemere to maintain its
financial integrity. The refund that Staff recommends
allows Windemere to maintain its financial integrity
and so you can comfortably adopt Staff's rates knowing
that the math is sound and Windermere's financial integrity
will remain intact. And with that, I will reserve my
time and I'm happy to answer any questions. I really
appreciate the opportunity.
I believe that some time is reserved on behalf of the
WSC.
We're gonna say 4.5 minutes.
It's my record 4 minutes and 26 seconds, Ms. Malden.
Okay, thank you. (item:2:Jaime Malden with WSC's closing remarks) Thank you for allowing me this opportunity
I just want to speak, uh, make a few clarifications
um, based on what Ms. Allen and Ms. Lander have said
today. And first of all, everything that they have
said, they have said already in this docket and has
been considered uh in exceptions to the proposal for
decision or were considered in the analysis of the
proposal for decision. (item:2:Jaime Malden with WSC on cost of service) First of all, Ms. Lander talked
about the cost of service. I would just like to point
out that um, network accounts include in the definition
of operations and maintenance, including legal fees
We believe it is dangerous to set a policy that small
nonprofit utilities cannot include outside legal expenses
into their rates. We believe the PFD um, correctly
analyzed that issue and came to the correct findings.
(item:2:Jaime Malden with WSC on changing positions) Additionally um, it was said that Windermere Oaks
changed its position, that is incorrect. We consistently
maintained that the utility used the TRWA model and
adjusted to account for increased legal expenses that
is all heavily briefed. It's, it's a very extensive
record and um, I don't want to go over all of it
here today. (item:2:Jaime Malden with WSC's math and calculations of rates) Additionally and lastly, uh Ms. Lander
brought up the calculation of rates and that the, the
math is wrong. We would disagree and we provided
uh or Windermere Oaks provided a filing on September 8,
2023. That uh I, I think takes into consideration um
and shows what the PFD was considering when setting
rates. Uh and with that, um I will thank you for your
time.
All right, Commission Staff also reserved four minutes.
If Commission Staff would like to respond,
it
now.
All right. Thank you guys. Again. (item:2:Merritt Lander with Commission Staff's closing remarks on revenue requirement) I wanna speak one
more time to the revenue requirement. Initially, Windemere
Oaks stated that it used a rate study provided by Texas
Rural Water Association which showed a revenue requirement
of $576,000 and included $171,000 in legal expenses
After the first hearing on the merits, Windemere stated
and it is in the RFI responses, it has been addressed
in testimony. They use their 2020 annual budget to
design their rates which included $250,000 a year in
legal expenses. The TRWA study did not incorporate
other revenues. We all know you start with an overall
revenue requirement, you reduce it by the offsets from
other revenues you then have a revenue requirement
that you use for setting rates. TRWA included no offsets
2020 annual budget included, some offsets also included
an overestimation of expenses that were not supported
by the record. And so to use the revenue requirement
first provided by Windemere which Windemere then stated
it did not use but rather used its 2020 annual budget
The PFD uses that first number that Windemere itself
did not use. You cannot use a revenue requirement that
the utility itself did not use and then apply Staff's
offset from a completely separate rate study to the
revenue requirement from the PD and get to just and
reasonable or mathematically sound rates. And for that
reason, Staff's rates are the proper rates to adopt.
Please let me know if you have any questions.
That concludes the oral argument for this particular
jacket. Okay, thank you.
So I know we have a number of issues to discuss on
this. And
I was wondering who might take off the discussion?
(item:2:Commissioner Cobos asks to defer consideration of item until next meeting) Chair Jackson. I would like to defer our discussion
of these issues to the next open meeting. I'd like
additional time to review the PFD and, and record um
at least to a future open meeting date if that's possible.
Look I, I think my feeling is, I think we've learned
this is a complex case. Um a little more time would
help me. So I, I would support that.
I'm ready to go but uh I'll support the effort, the
needs of my Commissioners. Okay. (item:2:Chairwoman Jackson defers item until a future meeting) Well, then we'll propose to bring
this item back up to a future meeting. Thank you.
Next up is Item No. 3. Shelah, will you please
lay out this item? Yes, ma'am. (item:3:Application of Forest Glen Utility Co. Inc. for authority to change rates) Item No. 3 is
Docket No. 52075. The application of Forest Glen
Utility Company Incorporated for the authority to change
rates. Before you is a proposed order that addresses a unanimous
agreement between the parties. Commission Staff filed
proposed corrections. The ALJ filed a memo revising
the proposed order. Commission Counsel memo was filed
recommending changes to the proposed order. And Chairman
Jackson filed a memo in this docket. (item:3:Chairman Jackson recommends in memo remanding proceeding to docket management) I did follow memo
recommending that this proceeding be remanded to docket
management for further processing. Regarding evidence
showing whether Forest Glen is in compliance with the
previous Commission order. And I believe Commissioner
Cobos you had some thoughts in this. Yes, Chair Jackson.
Thank you. (item:3:Commissioner Cobos thoughts on remanding PFD) So my only addition would be that we go
ahead and remand the agreed to rate as well. My understanding
based on a review of the case is that the resolution
of the first issue with respect to compliance with
the Commission order could have an impact on the agreed
sewer rate. So I would request that we go ahead and
remand the whole docket back on all three issues and
then make a determination later when it comes back
on on the three issues. Okay. Sounds good to me. (item:3:Motion to remand case back to Docket Management, consistent with memos & discussion) So I
would entertain a motion to remand this proceeding
to docket management for further processing. Consistent
with the Commission Counsel memo, my memo and our discussion.
So moved. Second. I have a motion and the second. All in favor, say
aye. Aye. Motion passes.
Next up is Item No. 4. Shelah, will you please
lay out this item? Docket number, I'm sorry. (item:4:Application of Conroe Resort Utilities, Undine TX, Undine TX Environmental, for STM) Item No.
four is Docket No. 52797. The application of Conroe
Resort Utilities, LLC and Undine Texas, LLC and Undine
Texas Environmental, LLC. For the sale, transfer or merger
of facilities and certificate rights in Montgomery
County. Before you as a certified issue in this proceeding
from the Administrative Law Judge at SOAH. In September,
the parties filed a joint request for certification
of an issue to the Commission regarding the implementation
of rates under the Texas Water Code. Later that month
the SOAH ALJ filed an order certifying an issue to
the Commission. The certified issue that is before
the Commission is whether the Commission as part of
the approval of a sale, transfer merger application
under the Texas Water Code. Can authorize the implementation
of a phase of a tariff that is different than the phase
of a tariff in place at the time the application is
filed. And that is the issue before the Commission.
(item:4:Chairwoman Jackson lays out details of the application) So this docket is Undine's application for a sale, transfer
or merger of water and sewer facilities and certificate
rights as you stated under Texas Water Code 13.3011.
Undine is requested to charge initial rates that are
shown in the acquiring utilities, tariffs to the customers
of the acquired utility. The rates shown in the acquiring
utilities, tariffs are rates that are implemented in
three phases. The parties agreed to use step one of
Undine's phase in rate schedule as initial rates, even
though the phased in rates were in step three, the
Commission ALJ ruled that the, that the only rates
of the third phase were enforced on the date the application
was filed. So those are the only rates, those in the
third phase that could be used as initial rates under
Texas Water Code 13.3011. This refer, this proceeding
was referred to SOAH and the parties jointly requested
to pose this issue to the Commission. The SOAH ALJ
posed the question to the Commission and um so
it uh
pose the question to the Commission. (item:4:Chairwoman Jackson's position on the application) It's my position
that the Commission can authorize a person who files
an application for sale, transfer or merger under the
Texas Water Code to charge initial rates for service
under a phase shown in an enforced tariff that is different
than the phase of the tariff in place on the date the
application is filed.
I agree. Agreed. Agreed. Okay. (item:4:Motion to approve order consistent with discussion) I would, I would move to approve an order consistent
with our discussion and what we just stated. Second.
We have a motion and a second. All in favor, say aye.
Aye. Motion passes.
Okay. Items 5-15 have been uh Consented.
(silence)
Returning to the previous agenda. I don't have anything
on Items 22, 23 or 24. (item:25:Chairwoman Jackson lays out Project No. 53298) Next up is Item No. 25, Project
No. 53298. Implementation of the wholesale electric
market design. (item:46:Chairwoman Jackson lays out Project No. 55156) We will take up this item and Item 46
together. Project No. 55156, implementation activities
for the 88th Legislature. We have three items to discuss
the ancillary services program, the performance credit
mechanism and DRRS. Shelah, do we have anyone from
the public signed up to speak on Items 25 or 46? (item:25:Shelah Cisneros with Commission Counsel confirms there are no public comments) (item:46:Shelah Cisneros with Commission Counsel confirms there are no public comments)No
ma'am, no one signed up to speak on those items.
(item:25.1:Chairwoman Jackson opens discussion on ancillary services methodology) First, let's discuss the ancillary services methodology
review. We have Harika with PUC Staff and Woody Rickerson
with ERCOT here. Harika and Woody, do either of
y'all have an update since our last open meeting.
(silence)
Okay, good afternoon. (item:25.1:Harika Basaran with Commission Staff on ancillary services methodology) Harika Basaran, Commission Staff. I
believe ERCOT to a high level update, there was two requests
from Commissioner McAdams. The methodology is currently
not in the protocols. However, there is a division
request in progress. It will move it to the protocol
which means that it will come to the Commission for
approval. And the second update will be uh after the
services guidance documents, Commissioner McAdams has
and I think ERCOT has been working on that.
(item:25.1:Chad Seely with ERCOT on ancillary services methodology) Good afternoon. Chad Seely with ERCOT. So that's correct
I think from previous Commission discussion, we can
move forward with the protocol change that allows the
Commission to review and improve the minimum quantities
under our ancillary service methodology. You know
you look at the ancillary service methodology document
and you kind of think of it as a, as a cookbook
it has everything in it. And so what we'd really do
here over the coming weeks and months is kind of deconstruct
that cookbook and see what makes sense to be put into
the protocols to provide clear direction on these types
of ancillary services and what they're meant to accomplish.
As far as addressing risk on the system along with
the the minimum quantities of procurement and then
leverage that process that we do every year where we
go to the stakeholders and talk about those changes
to the minimum quantities. Have the Board approve that
and then ultimately come over here for the Commission
to approve that. So I think we can do that in
the first part of the year with the protocol change
around the process that ultimately you would approve
And then the second half of the year is obviously looking
at the 2024 ancillary service, sorry, 2025 ancillary
service methodology that would be for Commission consideration
at the end of next year. So we'll continue to coordinate
with the Commission Staff on what this looks like to
do that. (item:25.1:Chad Seely on ERCOT timelines) One thing that I would highlight is that obviously
this document is used every year at the beginning of
the year to set those minimum quantities. So that will
require the Commission to take action at the end of
every year for the next calendar year. So we just need
to be cognizant of those timelines as we move forward
with Board consideration and where you'll go with as
far as approval of Board recommendations right now
in your interim process, you want at least 30 days
to consider uh an action from the Board. So we want
to make sure that we're able to build in that time
frame if we continue with that under a more permanent
process for a document like this and not have a miss
where the Commission is not able to look at that as
we go into the next calendar year. (item:25.1:Chad Seely on guidance document) And then to the second
point around the guidance document. I think again,
if you go back to this ancillary service methodology
document, kind of deconstructing it, putting the pieces
that make sense in the protocols and providing additional
clarity on our website around the different types of
services and having that real educational value around
what each service does. So part of your work effort
is to kind of get everything in one place in a sense? Or to make
it more manageable and understandable for the Commission
and consumers to understand what each one of these
products does. And what their purpose is in achieving
those objectives. Correct.
Madam, Madam Chair. Thank you. Thanks Chad, so
Woody for you. Do you think it's achievable in terms
of the guidance document, the sizing document, which
is the methodology? Absolutely on track, agree with
your proposed path forward for next year. But in terms
of the guidance document, which is a little bit separate
and distinct, it is just an explanation on how operations
given the variability of the system. And again, what
you see on MORA, you know, moving. Not necessarily MORA but what
you see in system operations. How ops plans to use
the ancillaries on a seasonal basis? What you see moving
forward in the Summer? How you intend to use those
in terms of time ranges, predictability. You again
it's not a binding document for the system but an explanation
on how operations believes they intend to use the ancillaries
(item:25.1:Woody Rickerson of ERCOT to Commissioner McAdams on intended use of ancillaries) Woody Rickerson with ERCOT. Thank you, sir. Yes, I think we can. Okay. That I think that
would be give the system great benefit. I think it
will help inform the other discussion we'll have on
the DRRS and I think it will help smooth a lot
of stuff out. (item:25.1:Woody Rickerson's follow-up response to Commissioner McAdams) I think keep in mind that the ancillary
service methodology used the minimal. Yes, sir. There
are circumstances where you're gonna buy more. Yep
Thank you. Thank you both. Appreciate it. (item:25.2:Chairwoman Jackson opens discussion on performance credit mechanism) Next up
we'll discuss the performance credit mechanism. We
have Kenan with ERCOT here. ERCOT filed a decision
points document to further uh to guide further development
of the PCM. Including ERCOT's recommendations for
next steps with respect to each decision point for
the PCM Design. Commissioner Cobos, you filed a memo.
We'll hear from Kenan first and then discuss your
memo. Thank you. (item:25.2:Kenan Ögelman with ERCOT on performance credit mechanism) Kenan Ögelman with ERCOT. So, um I think
uh our, our filing, uh I think outlines both what was
in uh HB1500 the uh discussion that the Commission
had prior to last Session and the items that, that
were highlighted there. Now that that's just the initial
cut. We totally understand that there could be other
dynamics that ultimately need to be considered as part
of PCM. (item:25.2:Kenan Ögelman with ERCOT on engaging in feedback) So our path forward is to get a uh straw
band uh designed and uh next year shared with stakeholders
to engage in feedback. I think that would help inform
the Commission of potentially other dynamics or other
issues around PCM. And then um we would expect to work
on it and uh have a target of sometime in 2026 trying
to deliver that service. We would consistent with your
other discussion today. You know, prioritize uh
real time co optimization and, and this would kind
of fit around uh the delivery of that. There's absolutely
some other statutory requirements in terms of delivery
of PCM relative to um uh real time optimization. So
we plan to honor all of that as well. So I think
that that's kind of a high level of where we're at
I'm happy to answer any questions that you may have.
I have a clarifying question, Kenan. Um under your
timeline, you have um the Commission rulemaking is
running concurrently with the cost analysis that they're
happening in parallel. Can you speak to that a little
bit? Because I'm, I'm just wondering how, how do you
envision that like what's your reasoning for that
or how that'll work? Because I mean, obviously we need
to see what the cost and the market impact is before
we start enshrining it into our Commission rules. So
uh yeah, I mean, there, there is absolutely uh a design
(item:25.2:Kenan Ögelman's response to Commissioner Cobos on design & accurate cost analysis) Uh so, so to give you accurate cost analysis, we
need to know the design, but you need to know uh the
cost uh to really ultimately approve something. So
that was actually the reason for that to move in parallel
So we would have a straw band, we would have feedback
um that, you know, that could be a baseline for us
um designing PCM and coming up with some uh cost impact
But if um there are substantive rule changes or other
things that need to happen that have uh what I would
describe as uh uh administrative timelines to them
I don't know if we can wait till all of that's done
to start um all of the rule making process and all
the input that the administrative law provisions require
But wouldn't that be the reverse though? Like, I mean
we would want to get the cost assessment and not putting
ourselves in a position where we're now tied to A P
A rule requirements and have to move through a rule
making process to meet all those deadlines while we're
still trying to process all of your cost assessments
and market impact. So I mean, the tail can't wag the
dog. Are you all understanding what I'm saying?
I think Kenan does too. He's, he's worked here before
or in OPUC certainly. So Commissioner Cobos, you're
saying basically, um you use the administrative uh
timeline and you back out of that because you, you
want, you want everything in place and all the studies
completed before you initiate the rulemaking timeline
so that you can frame what you're enshrining in rule
Is that accurate
Kenan? (item:25.2:Kenan Ögelman's response to Commissioner McAdams on timelines) You may have an answer to that. I mean, I think
there are a lot of the timelines work around minimums
and, and uh I items getting started on, on on the administrative
side. So, uh again, um there is room to honor what
you describe and still have something operating concurrently
I think on the back end, the timing has to align with
uh giving you the information on any decision you want
to make. But um I think uh a lot of the requirements
are minimum timelines as, as I recall. Connie, what
do you think administrative. I'm sorry. Connie, what
do you think about that administrator? (item:25.2:Connie Corona's to Commissioner McAdams on prework prior to the APA process) I think it's
important to remember that um a Commission rulemaking
project typically has a lot of pre work that goes on
before the APA process. And so that's the part that
would parallel the uh the ERCOT development process
And then once we've reached a level of certainty about
um the cost impacts, for example, um that's when we
would proceed with a formal proposal um under the
APA. But prior to that, we would be working on rule
language and trying to capture, you know, what, what
uh parameters belong in the rule, things of that nature
So it it would just the APA process um would
kick in, you know, once we have that certainty from
so it would be a scoping theory. Okay. I, I guess I
just want to make sure that the scoping period properly
incorporates a completed cost assessment, right? That
you know, I mean, we have to do the cost assessment
because of HB1500 right? And, and so we wanna make
sure that we honor that analysis in and are not, you
know, scoping ahead without taking into consideration.
(item:25.2:Connie Corona's response to Commissioner Cobos on milestones anchoring the timeline) Certainly. And I would consider that to be one of the
um the milestones that, that we anchor the whole timeline
around, right, that we work with Kenan to um line up
their timeline for the cost analysis so that you all
have enough time to consider it before you pro formally
propose a rule. I was just going to ask. So where does
the IMM's cost analysis come into play? Is that in
parallel with
ERCOT's?
(item:25.2:Connie Corona on IMM cost analysis) Yes I, I believe that um that can take place concurrently.
But again, you know, as, as we do, we will be working
sort of in a three way conversation with the IMM to
ensure that, that all parties are, are getting their
time for due diligence. (item:25.2:Commissioner Glotfelty on IMM study) And can we commit and accept
that we are that ERCOT and the IMM studies are going
to be separate?
I don't know that, that we're prepared to address that
today.
I think it's my belief that two data points on the
metrics of ACM with a cap on it are more important
and more valuable than just one. So having
the IMM do a study and ERCOT do a study independently would
be valuable to me at whatever point we want to have
that discussion we can, but it doesn't have to be today
we appreciate receiving, receiving that guidance. Yeah
I mean, so yeah, I see it working. (item:25.2:Commissioner McAdams on IMMs cost analysis) You need two data
points to verify the biases or, or um highlight the
biases of one over the other, you know, because you're
gonna question both. All right, what assumptions did
we use? How did you go about that analysis to see um
where you meet in the middle between Kenan's analysis
and ultimately carries. So it, we're kind of pursuing
that approach a little bit with ball because again
uh, Pete Warrington's analysis is producing what could
be implied balls or certainly will. Um, and then we'll
have a ball study coming back to see where we're at
So,
so you're saying you're good with two studies? Yeah
Well it studies each other. Yeah. And I guess they can run
concurrently at the same time frame. Yes ma'am. But not losing
the, I guess what you talked about earlier, which was
you know, Staff and IMM and ERCOT working together and getting
in, put along the way. I think we can have two studies
that are a appropriately um independent of one another
without being in total isolation.
Uh Yes. Now on the hard one, I just, I have one
I have one more thing I did ONC as well. Ok. Go
ahead. Ok. (item:25.2:Commissioner McAdams on PCM) One of the thing Madam Chair, when thinking
about PCM was uh we now have 1500 conditions that are
statutory. Um this, this Commission boy
I'm getting tired. I spent a lot of time um on development
of PCM and working on a blueprint in collaboration
with ERCOT. Uh We heavily negotiated that we all signed
it um as you'll recall through the leadership of Chairman
Lake. And uh I think it's important to recognize what
guides and governs the gray areas that statute did
not address on PCM and recognize that the blueprint
still controls in those areas and should guide our
our path forward. Um And I, and I just wanted to stress
and, and hear from the Commission that that's still
the intention, that's still the policy.
Yes. And so that's what I try to capture or get with
respect to feedback from Commission Staff in my memo.
I can lay that out if you like or. (item:25.2:Commissioner Cobos lays out her memo) Really um my
memo was intended to further engage Commission Staff
in the um PCM development and in strawman and wanted
to solicit their feedback to make sure that um from
their perspective, that all the decision points and
milestones are were captured. Obviously looking
at the um blueprint as Commissioner McAdams identified
there are some areas in there that weren't covered
by 1500 and then um to try to sort of start breaking
down what stays here and the Commission rulemaking
process goes over to the ERCOT stakeholder process or
involves both processes. Ultimately, I guess all protocols
have to come over here for approval and um and also
get their thoughts on how PCM will work with the reliability
standard from their perspective. So just getting more
feedback from them um based on on your filing, Kenan.
Is what I was looking for in my memo. So we
could just kind of have a robust package of information
as we look to um help build straw band.
So, uh I mean, (item:25.2:Kenan Ögelman's response to Commissioner Cobos on working with Commission Staff) the, the plan has always been to work
very closely with Commission Staff. Even prior
to putting out uh the, the straw man publicly. I
do think there are uh uh and, and the other aspect
would be to uh Commissioner McAdams' point, honor the
decisions that have been already made. So that,
that will be a package that we would plan to a create
then be uh work with the Commission Staff on and then
release publicly and it have it go through another
iteration uh stakeholders uh that are uh market participants
and external to ERCOT or the Public Utility Commission.
So I believe we would accommodate all of the elements
that you expressed Commissioner Cobos. And in what
you just described.
I had just a couple of things and these are a little
bit more specific um really just kind of um coming
off of what you uh proposed in your decision points.
And so, um you know, they all, they all look, they
all look good. Uh I did have a comment on, on two
of them. (item:25.2:Chairwoman Jackson on success metric) One being uh the success metric. Um You
know, my experience has been when you do a project
there's a lot of value gained. If you, if you kind
of incorporate in upfront in the process, what those
metrics will be as you move forward in, in, in the
design process and, and in this case, in the straw
model. So I know that you um you did recommend maybe
addressing those in a separate project, but I can see
a lot of value and actually ERCOT in incorporating
those upfront and actually determining what those metrics
are. You know, again, upfront is kind of part of the
strawman process. I believe we can honor that request
(item:25.2:Chairwoman Jackson on the billion dollar cap) And then secondly, I guess, um you had an additional
decision point, um that was, was kind of pointed toward
addressing the monitoring evaluation and control of
the cap. Um You kind of noted that this Commission
direction as to how the cap would be identified would
be defined and how the term net works. And then this
is in reference to the billion dollar cap. And um you
said that this would most likely be necessary before
the monitoring evaluation and control could be designed
And my only thought there would be if a could come
to us with a recommendation of what that might be.
And then we can kind of go forward with that as opposed
to just us developing and have y'all do a recommendation
and come to us again. I think uh I'm happy to take
that instruction and I believe we can deliver a recommendation.
(item:25.2:Kenan Ögelman on interpreting instructions) I guess the only other feedback I would offer is
that there may need to be some iteration um to this.
We are at some level interpreting the instructions
you gave us. When uh PUC was approved, there
may be dynamics that have changed around the statutory
requirements. So I just would want to make sure I allowed
you uh enough, sufficient time to iterate and provide
some policy guidance if, if need be. Um But we're happy
to in a straw man lay our best uh best opinion around
that. But ultimately, I would want to acknowledge that
you get it perfectly right. Given the high level policy
considerations that are involved here, I just think
there's always value in getting the operator kind of
engaged and particularly at the onset. So I appreciate
that. And again, I, I guess I had a, a question, I
guess for Connie. Do you think that we need to set
up a separate project specifically for uh PCM? (item:25.2:Connie Corona's response to Chairwoman Jackson on making separate projects) Yes
I do. I believe that it would be advisable to set up
separate projects for PCM, the ancillary services
methodology and the upcoming topic of DRRS. Staff
will plan to set up a separate project for each of
those.
So what I'm hearing is that PUC Staff will open a new
project specifically for PCM and that ERCOT will
work with Staff to develop a straw man to identify
what will be needed in rule making and what will we
develop through the stakeholder process. If I can get
Staff to respond back to me specifically on for my
memo by next open meeting on the three questions that
I posed? Absolutely, we'll prepare that for the next
open meeting. Did we give you enough time to lay that out? Yes ma'am.
So I do have one for Kenan. (item:25.2:Commissioner Glotfelty on demand response and energy efficiency) And that is during the discussion of the PCM.
There was, I think a little debate about whether we
could include demand response and energy efficiency
and get those, those technology and providers be able
to receive PUC performance credits. I think at some
point in time, we have to come and readdress that issue
I don't think it's totally solved but it that up for
your thoughts. I know some of them are maybe systemic
issues on how to do energy efficiency, demand response
might be easier, but I just want to put a place marker
out there. That's something that I'd like to discuss
as we go down this road in the blueprint, we were strategically
ambiguous around that.
Yeah, I I, and that's one of the ones I think that
there we might have to iterate around. Um But I absolutely
would welcome the opportunity to at least propose something
and let you offer critique. Yeah, absolutely. Thank
you. I, you
Okay. (item:46:Chairwoman Jackson opens discussion for dispatchable reliability service) Well, next, we'll discuss the dispatchable, dispatchable
reliability reserve service. Um ERCOT filed a letter
requesting guidance on the DRRS. Chad, will you
please come up and provide an overview of your filing.
(item:46:Chad Seely with ERCOT on letter Legislators filed) Chad Seely with ERCOT. So we obviously saw the letter that they
um Legislative members filed. Uh And we wanted to obviously
respond and have that information for the Commission's
consideration on, on where we are with implementing
DRRS right now. We have uh an NPRR that is sitting at
TAC right now. Uh NPRR1203, that would be ready for
Board's consideration here in December. And of course
Commission consideration probably at the February open
meeting under current processes. And part of that
letter was also indicating to the Commission as far
as the project work to implement. 1203 has already
started as we get prepared to implement the DRRS as
part of the subset of nonspin, we have to start ramping
up the project team for that. And in order to comply
with the December 1, 2024 deadline, of course, recognizing
the letter that was submitted to the Commission, we
wanted to highlight if the Commission wants to change
course on where we are right now with that existing
protocol change, then we need guidance from the Commission
on how to proceed. We would ultimately, if the Commission
wanted us to move course, withdraw that NPRR and then
start to work on DRRS as a stand alone product. And
of course, in that letter, we highlighted like kind
of the duration that it would to ultimately implement DRRS
the as well as a stand alone product. Of course, with
the stakeholders. We've all acknowledged that ultimately
long term, having THERS as a stand alone product is
the best course of action. But we were constrained
because of the December 1st statutory deadline that
we went down this path of making a subcategory of nonspin
And I'll see if Kenan wants to add anything else Yeah, I
mean, the only other thing I, I would add. (item:46:Kenan Ögelman with ERCOT on commitment to a standalone product) Is that ERCOT
did as part of 1203 commit to delivering a stand alone
product. But there would be this interim, uh not stand
alone product that existed that did not align with
the letter that was filed. And I think that's where
uh there, there's a real challenge for us.
So, um I know we've had the presentation for ERCOT
but we also have uh Carrie Bivens here today, the Independent
Market Monitor. And I know it's important to have a
three way conversation with the Commission, ERCOT and
the IMM about this market chain. So I was wondering
if Carrie would come on up and um and then we can
maybe have a discussion afterwards.
(item:46:Carrie Bivens, IMM with Potomac Economics on standalone product) Good afternoon. Carrie Bivens with Potomac Economics
We agree that a stand alone product is the best
way to go from an accuracy of pricing standpoint, from
most accurately being able to address the reliability
needs. We understand the statutory deadline. So when
we gave our TAC opinion, um we supported the approval
of 1203 understanding that there is this deadline target
to hit. Um We still have some questions about how much
DRRS is gonna be procured and how it's going to be deployed
And we'd like ERCOT to address that next year. I'm
sure they will do that before the implementation of
the service.
So in terms of optimal implementation, um of course
you're concerned not only with economics but also efficiency.
And so do you have specific thoughts about that? Yes
Um
(item:46:IMM Carrie Bivens' response to Chairwoman Jackson on economics & efficiency) The service was really envisioned as a stand alone
product. At least as we envisioned it when we were
thinking about a similar product, the uncertainty product
and we think that best addresses the reliability need
Um I think that conversation needs to be had about
how nonspin and DRRS are gonna interact in the future
And so that's kind of part of that review we'd like
to see go going forward next year. But as far as
accuracy of pricing, it's, it's an inefficient inefficiency
It's not accurate to have um services that have constraints
within them, but give them all the same price. They're
different services with different requirements, but
they all get the same price and that is a market design
issue.
That is a what issue?
A market design issue. Yes.
But we have that with current services we have that
with already. Yes, we do. Yes.
So, in your opinion, the stand alone is the product
Yes,
I agree. I understand. But the world is not perfect
and you have statutory conditions that we must comply
with. Well, I think the letter says that
what's being delivered doesn't comply with the statute
and the statutory deadline itself is not, I mean, if
you're delivering the wrong product according to what
the authors of the Bill said, then you're not really
complying. I mean, you're not complying in general
Right. So that's why I thought they didn't care about
the statutory deadline. If you meet the deadline and
give them what they don't want, you're not really meeting
the. So, so you think it was more about reaching the
right policy outcome? I know, you know, part of the
discussion, what we've had today on a number of different
other subjects is um you know, the impact to real time
co optimization. And so, you know that I think is another
issue that is gonna kind of come up. And I didn't know
if op wanted to jump in and kind of comment on that
at the beginning. (item:46:Kenan Ögelman's response to Chairwoman Jackson on real time optimization) On, on real time optimization. Um
We're gonna use up resources one way or the other.
The timing of what we use for DRRS versus
real time co optimization might might shift around
a little bit. But for example, if I don't do the, uh
if I don't do DRRS by um December 1, 2024
it does free up resources in in that window to work
on real time co optimization or something else. Um
On the back end, it might be a more difficult fit for
DRRS. And that's why I think in the earlier
conversation that we had this morning giving us some
flexibility around the exact timing relative to real
time co optimization is, is really important. Again
I'll emphasize that ERCOT also sees real value in a
stand alone product. And that's why we committed to
working on that, you know, even after we deliver something
December uh uh 2024. Um So it, it's there, there's
risk to real time co optimization. It just exists at
a different time of the design. If I don't have to
do a December 1, 2024 DRRS, that means the resources
I was going to use to code and bring all that forward
are free to work on other things earlier. But again
there's going to be this kind of convergence of three
major projects in the back end. And that is where we
need some flexibility to manage everything. And with
the with the DRRS and, and PCM, as we discussed earlier.
again, maintaining the priority for real time, correct
So Kenan just to really understand flexibility on the
back end and the convergence uh the, the uh performance
measure that we approved earlier says DRRS would be
implemented prior to or closely aligned with RTC.
Is that, I mean, does your concern fit in with that
performance measure? (item:46:Kenan Ögelman's response to Commissioner Cobos on DRRS alignment with RTC) I think that requirement is something
we can honor. It's just I I would be very scared of
delivering all three things on one day. So if I have
months on either side where I could bring something
in early or something in a little bit uh on the other
side of real time co optimization, we believe that
gives us the best flexibility to deliver a quality
effective product, three quality effective products
versus trying to, you know, cram it all into one delivery
I guess that the thought is, you know, you want to
keep real time optimization in 2026 but you don't want
DRS dragging out forever where you hit another EMS
upgrade. And we end up how we were with the ECRS where
it was delayed for years upon years because not just
the EMS upgrade but other things happened, we just
don't want to, you know, go into extra innings over
and over again on the DRRS that's why that's the whole
goal of the performance measure, right? And I think
you know, based on, you know, to bring it up again
your October12th comments say that you can develop
a stand alone product and um would commit to even putting
it in further, OK? KRS and everything to ensure that
the service aligns with the delivery of RTC. So I'm
just trying to understand if it, what's changed since
October 12th. (item:46:Kenan Ögelman's response to Commissioner Cobos on risking co-optimization) So, so nothing's changed. I mean, what
I said was uh in, in that if I can have some
time on either side, I'm still in my opinion, delivering
in, in line with real time co optimization. Um but
I'm not putting real time co optimization at risk.
So I'm not asking for years, I'm asking for months
uh in, in terms of flexibility and maybe that wasn't
very clear and and I appreciate it. Thank you. But
I do see as long as I have months on either side
of real time customization, I believe I can deliver
those things on time if that aligns with your thinking
Yes. No. Thank you for the clarification. I appreciate
it.
(item:46:Commissioner McAdams thoughts on precedent) I would assert that the product that is being delivered
is a matter of interpretation, but that the deadline
is black letter law and this is a terrible precedent
that invites ad hoc lawmaking through Legislative letters.
I know because I've helped draft some of those letters
in my career and
terrible precedent but respectful of the body.
Oh I'm, I'm for stand alone product as best we can
get the best product that we can as fast as we can
stand up. So I think what I'm hearing is that we're
interested in reaching the right policy outcome and
want to guard against impacting the schedule for implementing
uh RTC plus B, RTC plus B should still be
um our priority. And with that,
I think we'll move on. And um we'll be taking Item 26
later in the agenda with Item 34. (item:27:Chairwoman Jackson lays out Project No. 54445) And so next up is
Item No. 27, Project No. 54445. This is the Commission's
Project for rules adopted by ERCOT. Shelah, do we have
anyone from the public signed up to speak on Item No.
27? No, ma'am. Okay.
PUC Staff filed a memo regarding one alignment, Nodal
operating guide revision request, uh 259 and recommended
approval of this revision to the ERCOT rules. Harika
is here if we have any questions. If not, I would enter
Do you have any questions?
I do not. Okay. (item:27:Motion to approve proposed order) And if not, I would entertain a motion
to approve the proposed order. And can I can I, I want
to make sure that we reading the right thing. The proposed
order will just approve an OGRR 259. Is that right
Ok, thank you.
I move. Ok. I have a motion. Second. And a second. All in favor,
say aye, aye. Motion passes. (item:28:Chairwoman Jackson lays out Project No. 54584) Next up is Item No. 28, Project
number 54584. This is the Commission's project for
the reliability standard. Shelah, do we have anyone
from the public signed up to speak on Item No. 28?
No, ma'am. No one signed up to speak. PUC Staff filed
a memo and ERCOT filed a letter. Let's first hear
from ERCOT and then PUC Staff. Woody, could you
come on up and um,
tell us if you have any comments regarding your filing.
(item:28:ERCOT's Woody Rickerson on rerunning errors) Woody Rickerson,
ERCOT. So yes, uh the uh 48 scenarios that we filed have errors
and we're going to, we found the errors, we're rerunning
those now. So the priority is to rerun those and resubmit
those. And the second priority would be to implement
some of the things that our
goal is to do. You expect to have any timing impact
on the overall outgoing ongoing work with the reliability
standard. No, I don't think it will affect the timing
still expect to have those results at the same time
frame.
(item:28:Commissioner McAdams on ERCOT's rerunning errors) Madam Chair, in my view, this is a good thing. I'm
glad they caught it, first of all. And then it's an
opportunity to refine it and help improve the menu
of considerations that the Commission can then look
at, I think, look, I'd like to compliment ERCOT and
Staff, the rest of your team for creating this framework
for us to start discussions on the reliability standard
and responding to basically Staff's memo. Requesting
more information and our original memo requesting more
information about the inputs and outputs of the modeling
exercise. I believe this this does constitute an open
and transparent process to deliberate on such an important
issue. I think it's playing a very important role in
all the other projects that we've been discussing.
Um I also appreciate the alternative view that Staff
has presented in collaborating with us on these new
inputs. Now that ERCOT has explained the variables
that go into the s model. I would like for the Commission
to request as a part of this stakeholder feedback.
So again, we can start getting that Woody to help inform
that next leg after we get the results back from your
rerun. So hopefully, we don't lose any time. I do think
it would be value to kind of bring up Staff maybe at
this time. Werner to kind of go through, you know,
some of the um or Brendan whoever is going to be the
speaker. Well, they're coming out Madam Chair. (item:28:Commissioner Glotfelty on ERCOT's root cause analysis) I just
want to point out to you that in this ERCOT did a root
cause analysis. Which you have mentioned many times up
here and I have said we don't do very often but you
and your engineering background, I wanted to point
out that that is being utilized in this process. Excellent.
So identify the issue, go back and correct it and prevent
it from happening again. Excellent.
Okay. So whoever is going to make the press, I guess
Brendan you're going to do it. Take it away sir. Take it, take it, take away.
with what you've kind of been working on. (item:28:Brendan Ok with Commission Staff on memo concerning reliability standard study) Brendan Ok
with Commission Staff. Staff filed a memo to offer
some suggestions for the reliability standard study
This includes some additional scenarios and formatting
changes and these suggestions were discussed with our
ERCOT. So to start, uh Commission Staff recommends
that the 2023 prompt here study should be conducted
as soon as possible to see a cost comparison between
the two studies. Next, we recommend that the 1
in 5 LOLE scenarios be replaced by 1 in 8
LOLE scenarios. 1 in 5 as a base case can be
a bit misleading because uh an additional 3000 megawatts
um are retired just to get there, uh which isn't included
in the table. Next, uh Commission Staff recommends
that ERCOT should perform this analysis with uh different
sets of weather assumptions to better account for more
recent uh weather trends. So we propose adding uh scenarios
that use just 15 years of historical weather data.
Um Next, regarding weatherization effectiveness, Commission
Staff recommends that ERCOT provide additional sensitivities
on the expected level of reduction in weather related
outages. (item:28:Brendan Ok on considering metrics holistically) Next, when setting a reliability standard
we think that the Commission should consider all metrics
holistically um as the exceedance probabilities depend
on the chosen duration and magnitude threshold. Uh
So Commission should go scenario by scenario and um
consider the exceeding probabilities associated with
each scenario uh rather than rely on a fixed set of
probability. Then for cost uh in PURA there's a $1
billion cap on the cost of performance credits. If
PCM is going to be the method in which we meet the
reliability standards, then we need analysis on the
level of lole that can be achieved with this cap in
place. And lastly, we just propose some formatting
changes to help better interpret the results. That's
all I have. (item:28:Commissioner McAdams on achieving a reliability standard) Madam Chair, that kind of goes hand in glove
with what you were talking about earlier. It will help
inform uh how we know the PCM and achieving a reliability
standard can be done under the constraints of the statute
So we know how to try to refine this or make recommendations
to the Legislature later on to achieve the desired
outcome in statute. Well I was um, I was particularly
pleased to see the work that you did on the probabilities
of exceeds. And I think that was a, a very kind of
unique approach and quite frankly, one that we hadn't
thought about before. And I know that you uh, worked
closely with, with ERCOT on these kind of, you know
in, in kind of drafting them and before he even brought
them before us, but I did want to give Woody an opportunity
to kind of kind of weigh in and, and tell us what
you think about kind of these additional additions
that are now part of the reliability study. Oh yeah
I think those conditions are in line with what we expect
that next step.
I think a very excellent job on y'all's behalf. Lori
Did you?
(item:28:Commissioner Cobos' appreciation for Commission Staff and ERCOT) No, no, I don't. I want to thank Staff for raising
these additional issues for consideration and in the
I guess last leg of the scenario analysis and also
want to thank Woody for their continued work on the
reliability standard. It seems like it's generally
all on track and that I think is the underpinning and
of um all the market reform measures that we're looking
to implement over the course of the next few years
So thank you for keeping everything on track.
(item:28:Chairwoman Jackson's final thoughts to Commission Staff and ERCOT) Okay. So good recommendations worthy of being included
in the analysis. Excellent work, I think by Staff. And
um as we said earlier ERCOT, um please continue to
work with Staff as you develop the modeling inputs
and assumptions of the reliability.
Okay. (item:29:Chairwoman Jackson lays out Project No. 54585) Next up is Item No. 29, Project No. 54585.
This is the Commission's project for the emergency
pricing program. Shelah, do we have anyone from the
public sign up to speak on Item No. 29? No, ma'am.
Okay. (item:29:Chairwoman Jackson opens discussion on generators recovering costs while in EPP) I believe we should have a discussion today on
the question of whether the ability of a generator
to recover its reasonable verifiable operating cost
while the emergency pricing program is in effect should
be, should be capped. Our goal is to have a discussion
today with the intention of voting on the final rule
at our November 30th meeting to ensure that the program
is in place for the upcoming Winter. I believe we have
David Smeltzer with PUC Staff here. And David, could
you please kick off our discussion? Sure. Thank you.
(item:29:David Smeltzer with Commission Staff on emergency pricing program) David Smeltzer, Commission Staff. I want to thank the
Chair for uh the Chair and the uh Commission for bringing
up this issue today so we can set ourselves up for
success for next time. The, the issue that
we want to discuss as the Chair forecasted was brought
up by Commissioner McAdams at the open meeting. When
we first laid out the proposal for publication and
in short, the design of this program and for anyone
listening, there are a lot of contested issues within
the rulemaking such as we'll measure verifiable costs
or what the time frame should be, what counts as emergency
conditions, all these will be handled a future time
So don't, if I key in on any of those words, don't
read, read into that, it's just, we're just having
a discussion on this one issue. And so the structure
of this program generally under the statute requires
in any rolling 24 hour period. If we're at H cap for
12 hours, then the emergency pricing program kicks
in and while the emergency pricing program is in effect
under the proposal, the, the cap on energy prices will
go down down to the L cap which is 2000 however, should
generators. We never want generators to operate at
a loss. And so should they have under the statute?
Reasonable verifiable operating costs that exceed $2000
they can submit those costs to ERCOT for review and they
can be compensated and made whole for those costs.
And so one issue that was pointed out is there are
a lot of input commodity costs that may exceed our
ability to regulate in our regulatory scope. And so
Commissioner McAdams had asked for briefing on whether
or not um we should put some sort of cap or otherwise
try and manage those costs. Commission Staff believes
that the statute provides the use of the word reasonable
statute provides us authorization to consider this
discussion if we like. Although, um you know, ultimately
that's a legal interpretation that you guys have authority
over and Commission Staff after reviewing comments
and sort of brainstorming to sort of help this discussion
we think that there are a number of approaches that
you could take to this if you like the two, the two
pure approaches would be either exactly as proposed
No cap. Um This would allow the recovery of verifiable
operating costs, you know, whatever, whatever they
end up being so long as they're verified through our
that's normal, normal verification process. (item:29:David Smeltzer on hard cap) And you
could also put on a hard cap, which is no one goes
over h cap for your recovery of operating costs regardless
We think that is the ceiling of what should reasonably
be recovered during an emergency period. The and, and
Commission Staff would say that if we consider
that cost, we should also consider um in a, in a soon
future rulemaking, adopting a similar policy for other
contexts in which uh verifiable costs are recovered
such as when the caps in effect or units are wrecked
(item:29:David Smeltzer on hybrid approaches) The next couple of approaches that I provided in your
brief materials are what I would consider hybrid approaches
which is, there would be a cap but there would be conditions
upon which you could go above that cap and sort of
working through them. There could be some additional
tests or affirmations by the companies in question
that their costs are in fact verifiable so that we
know that they're focusing on the fact that they have
verifiable costs and that they didn't have control
over those costs. Adding a little bit more scrutiny
we could require some body other than other than ERCOT
Staff to verify the results of that, verify the cost
basically check the receipts and that could be ERCOT
or it could be the Commission or excuse me. The ERCOT
Board or Commission or just some path of escalation
(item:29:David Smeltzer on good cause exception and or reasonability analysis) And then the next option that we considered is that
the Commission could do something like a full good
cause exception and or reasonability analysis that
considered all the facts. And before electing to
allow people to increase the cost of 5000, um the last
option that we put is one that um we thought of is
I I if you are concerned about cost being too long
under the proposed rule, um the length of time in which
the emergency cap stays in place is either, is the
is the greater of 72 hours or 24 hours after ERCOT exits
emergency conditions. And so of course, the longer
that you are in the emergency pricing program, the
longer you're exposed to this situation where costs
could be higher. So you could instead focus on limiting
ex by reducing the time frame or tinkering with another
numbers otherwise. So I think these are the sorts of
different options that could be considered. And I think
if we don't necessarily need full resolution on that
today, although if you all have resolution that would
be helpful, but commission staff was just hoping for
some insight to sort of take your temperature on these
issues. And the sorts of considerations that you might
think about is cost protection for consumers, regulatory
certainty for people that are in the market and sort
of the efficiency of administrative processes that
each of these would involve. And so some of them are
quick checks that are ERCOT does using existing processes
some of them might require a more extended investigation
by the Commission or some of the body. And so I think
that those are, that's sort of the, the sort of considerations
I think you might think about um joining us today if
you want to have, we're, we're just here to talk about
policy if you need. And then also ERCOT is prepared
to discuss how their current verification process works
Should that be of interest to you or how um how we
can get this in place? And I will also note that one
of staff's priorities is to get this in place by this
winter. And in order to do so eventually ERCOT will
be able to automate this process. But they recommended
in their comments, some provisions that can be put
in place immediately that would allow them to manually
implementing program for this winter. So we also want
to be if we, if we cook up something too complicated
it would be my recommendation, not, not to jeopardize
their ability to enact this program this winter without
needing big technical reworks or protocol revision
So hopefully the rule can be self executing. So this
is the the range of considerations that I would recommend
you think about and I'm happy to answer questions.
Um Should you have them?
Would you like to kick off the discussion? Thank you
Madam Chair and David thanks for the layout. Appreciate
it. You framed it well. (item:29:Commissioner McAdams on a viable path forward) I, I'm a believer and I
preach the gospel. Don't let perfect be the enemy of
the good serve the purpose of this winter. This Commission
should develop some type of viable path forward that
can be expediently implemented. So thank you for framing
it that way. High level members, I believe we need
some type of a cap on the the verifiable cost, but
you can approach that for a number of directions. Um
and under certain circumstances, the options I'm leaning
toward in the menu that Staff has presented, which
was very good is requiring Commissioner ERCOT Board
approval of recovery of verifiable costs above cap
or requiring a good cause exception, which I understand
there's a hair around that or a reasonableness determination
by somebody for the recovery of expenses above the
cap. And I think the policy imperative there and the
feature is that some type of check to where special
scrutiny comes down upon those receipts or those costs
that rise above the cap and,
and the way I approach this from is I believe the most
likely uh event that the emergency pricing program
envisions is a fuel uh event, fuel related event, especially
12 hours, not necessarily uh contiguous hours, but
um something of that duration, fuel is going to be
involved somewhere along the line in the ERCOT system.
And I'm trying to draw upon the lessons that we learned
from Uri um just requires a little bit of a pause uh
when this happens so that we can start providing transparency
in daylight on the transactions that may be involved
and whatever market behavior is involved so that hopefully
better angels will prevail um and, and cost containment
pressure uh related to the impacts of that for consumers
are brought to bear. Welcome any thoughts. Commissioner
McAdams. Thank you for your leadership on this issue
(item:29:Commissioner Cobos on protecting consumers) I, I'm sort of sitting at a blend of three and option
three and four and um agree with you that I think there
should be a cap. However, if those costs, if there
are costs that exceed the cap, they must be verifiable
reasonable, verifiable. And there needs to be a process
for review that um it includes um not just ERCOT Staff
review, but ERCOT Staff review um Board approval and
ultimately commission approval because these costs
can be very high. And, and as I've said before, in
other discussions. Um Our, our mission is to protect
the consumers. And so ultimately, we should be in a
position where we are reviewing and determining whether
um the border proof costs are reasonable and verifiable
and making that cut at the back end. So, um and the
reason I involved option three is because um it wouldn't
hurt to have the attestation from the generation company
from the CEO just to have that as additional um affirmation
(item:29:Chairwoman Jackson on duration of the event) I think the part of what you discussed that um kind
of, I guess drew my attention was, I think it was they
called it option six, which is where you kind of ask
the question about the duration of, of the event. And
so if you're kind of thinking about what the overall
cost is to the consumer, it's that area under the curve
And so if we can go in and actually, you know, put
some boundaries that we think are um that are sufficient
and, and, and again, if we can, if we can do it
based on some sort of exceeding probability or something
that we can kind of tie back to what we think is
reasonable for a duration of an event, then we are
kind of like automatically going to be able to reduce
the impact regardless of what cap we impose. That was
one of Madam Chair, that was one of my default positions
was to look at that one and consider reducing that
into again, another reasonable range. Reducing the
duration. And also, and this may be in the rule and
but what is emergency conditions, I guess emergency
operations, how is that defined?
Werner's here. Sorry. (item:29:Commission Staff's Werner Roth to Commissioner Cobos on emergency condition) Werner Roth, Commission Staff. So that wasn't clearly
laid out and how we had to find that there's um some
commenters had suggested that that be tied to um load
shed. Some have suggested that that be tied to any
kind of um energy emergency alert situation. So just
we would need to clearly define the direction we're
wanting to go with that. But um I'd say the initial
stance was at any point in ee a is kind of what
we were leaning to initially because we would not want
even if we're not necessarily in load shed, there would
not necessarily be a desire to come out of this program
And so we're clear of the entirety of the emergency
operations.
I'm interested to hear from you all and what you all
think that appropriate threshold is for emergency conditions
I'm sorry, on which piece? On all of it. All of it. (item:29:Commissioner Glotfelty on concerns with caps) I
kind of lean towards option one or two, which is less
command and control and more
the challenge that I find is if you're a generator
and you're providing, I know we need a cap, but we
just don't yet have a handle on gas prices. We don't
have a handle on how that works. It's going to happen
It may not, it may not and therefore putting a cap
on something that we don't know what the costs are
going to be. Is it fair to put that burden on a
generator that we're trying to actually incent to be
in the system? But that, that's one of the features
of the market you created in 1995. I wish we had done
the gas on too. But the risk is borne by the generator.
That I understand that. I understand that. And thus
that's why I think that if you set a reasonable cap
or if you put no cap, it's verifiable through the settlement
process
to, to me, that's it. We shouldn't bear that burden.
That's a market function that so ERCOT ought to bear
it one way or the other. ERCOT ought to verify it.
Um, and bringing that over here is just gonna add months
and months and months to some process. So that's where
I stand.
(item:29:Commissioner Cobos on real costs to consumers) These could be real costs and they will be. And so
again, I assert that we, our mission is to protect
the consumers and if we're just going to leave it out
at ERCOT, then we have no checks and balances and these
could be exceptional fuel costs. (item:29:Commissioner McAdams on statutory authority and constrained activities) Not just that poor
ERCOT, they're going to have to deal with the gas markets
the Public Utility Commission in Texas and, and Railroad
Commission has, has said they, they cannot control
this. You know, they do not have the statutory authority.
This is one of the few mechanisms that could exist
for any agency to try to constrain these activities.
And uh how are you constraining them, transparency
trying to bring, like, show us your receipts. How did
this go? How long, um what kind of hedging options
did you have? Are those absorbed or contemplated in
this? Uh what type of firm contracts did you have at
the time? I mean, to their business practices? Well
when something is over 12 hours, that becomes important
right? I mean, that's, yeah, you obviously hope that
uh uh the financial markets will see that.
So um I don't know, I just um I know David has
thoughts, David is always good. So just to help juice
the discussion a little bit to the extent that uh you
know. (item:29:David Smeltzer on ERCOT giving Commission EPP performance summary after EPP event) Some part of the goal of this is the review of
the costs, right? And that can take place in different
levels. And then some part of that is the transparency
which may or may not have to do with review of those
costs beforehand. But the report like under the proposed
rule, it currently requires after an EPP event for ERCOT
to report Commission, a summary of the events that
triggered the EPP an analysis EPP performance. The number
of generators have filed for cost recovery in the total
dollar amounts of costs recovered with this mechanism
and any recommendations to modify or improve the emergency
price program. But there's no reason why it has to
stop at that. And so to the extent that it's the shed
light on, we could also brainstorm some additional
items that could be reported after the fact for sort
of policy making transparency purposes that would not
slow down the recovery of costs in real time. So that
gas prices above a, you know, that accomplish your
goals. But I just wanted to. Yeah. Yeah. Well, no,
no, no. (item:29:Commissioner McAdams on triangulating the system) So it helps triangulate for the Commission
what just occurred on the system, our system that we're
attempting to manage, uh, is it just North Texas that
is affected? Is it just uh a subset of North Texas
generators along one line that is affected? It helps
us identify how acute a problem is and, and how ultimately
we can try to solve for that. Um
I think as David said, the way I would interpret what
David just said was. You could put in there something
on gas prices so that ERCOT would put a report as part
of their report to us after the event that after analyzing
the generators, you know, there was a, I do a common
metric on the percentage of gas prices above Henry
House or I don't know what it would be. But, uh you
know, uh it's informative in nature, we're not, doesn't
start not practical checks and balances.
And at any point today, if we decide like these are
these are questions that we would like answered or
get additional briefing on things before. Um, we, we
we could do that. So I'm not trying to force and, and
I'm sorry to introduce this, uh, issue of controversy
(item:29:Commissioners dialogue on fuel costs) Um, but
consumers paid tens of billions of dollars last time
I mean, on an event that was partially induced through
fuel se security because of fuel security. And, uh
a policy was written in the law, they actually wrote
that one in the law. I mean,
this needs to be solved or addressed but whatever you're
exactly right, it needs to be solved. We need to solve
the piece of it that's within our pie. And that is
looking at the cost at a certain point. Right. I don't
want to get into their books either, but at some point
we have to be able to determine what's going on. Um
listen, I don't have a problem with looking at the
books. I really don't or the receipts or whatever.
But if we, if we really have to get in there and
look at those, I don't know. I just, I think we're
going to be just better not happen all the time. I
understand that. I understand that. But what are you
what are you going to do if gas prices go up to
18 bucks during an event? We'll just take the highest
that they've been in the last decade or so? 12 bucks
And, uh, so they show, we, we pay $12 for, mm BTU
And what are you gonna say,
you can say, ok, because you proved it.
So without any other type of, without any type of review
process, um, you can't do investigations or, uh, it's
very hard to, there's no data gathering, there's no
evidentiary gathering. There's no go to the A G on
price gouging. There's no nothing. You just let them
run away with it.
I see some, some points to that. I mean, the, what
you're saying is the only place that we get the information
is from the generator because we don't get it from
the gas guy. That's, I think that's a good point. I
mean, I think that uh there's value in that, in that
piece of it,
David. Do you have what you need? Okay.
Crystal clear as usual. (item:29:David Smeltzer on high level of scrutiny on the verifiability of the costs) No I mean, so what I'm
what I'm hearing is the Commission generally is interested
in making sure that there is a high level of scrutiny
on the verifiability of the costs. So we will explore
something in the option
3 to 4 range and we'll continue discussions on that
about how we can make sure that we're all confident
in the verifiability of costs. We're interested in
exploring limited, limiting the exposure through reconsideration
of maybe the timeline. And so that sort of option six
territory. And I will say that
I think that we will be, we will look at limiting the
time frame, but we're also wanting to be cognizant
of the effect of how this will affect day ahead markets
And so we don't want to like tighten it too much. Um
So that will be part of our thinking on that. Um And
the third thing we are hearing, uh I forgot what I
was talking about the first two. But oh may maybe,
(item:29:David Smeltzer on robust reporting) maybe making sure that we're getting robust reporting
um in some way so that we're able to do um after
the fact analysis of and and shed light on it and bring
transparency. And so that cluster of so so a cap but
with the ability to make sure that there is verifiability
on that cap will be sounds like the starting position
for Staff analysis with the idea that we could receive
additional briefing or direction at the next open meeting
to finalize the decision. And it sounds like that fits
within the spirit and letter of the law. I mean, again, that
reasonable, reasonable verifiable cost. So this forms
what we are supposed to give to give meaning to all
of the words. And so it doesn't just say verifiable
cost, it says reasonable. So you're right. I mean,
the fact that it's reasonable suggests that this isn't
just carte blanche, there needs to be, you know, we
need to be thinking about it in that way. So can I
add one more?
The definition of emergency conditions is very important.
Because along with the duration that drives the magnitude
of the cost? So that's something we need to really
think about.
Yeah. (item:29:David Smeltzer on duration of an emergency condition) And so we will, we will think about that and
consistent with our excuse me alongside our discussion
our thinking about what the duration would be. And
so if anyone afterwards, if they have additional thoughts
or they want to chat about it, more learn about how
we're thinking about it before we get to next open
meeting. Happy to do that. Otherwise we'll brief you
as part of part of the open meeting on that. Thanks
Agreed. Thank you. That's fine. Ok, thanks David. Thank
you. Thank you all. Okay. (item:30:Chairwoman Jackson lays out Project No. 55222) Next up is Item No. 30, Project
number 55222. This is the Commission's project for
its RFP for a contractor to act as the wholesale electric
market monitor for the ERCOT region. Shelah, do we
have anyone from the public sign to speak on Item No.
30? No, ma'am. PUC Staff filed a memo with a proposed
order. We have Barksdale English and Jay Stone here.
Barksdale and Jay, will you please um provide your
recommendation? (item:30:Jay Stone with Commission Staff on updating language to the RFP) Good afternoon Chairman and Commissioners.
Jay Stone, Commission Staff. I bring you uh Project 55222.
Originally seeking delegation of authority for the
Executive Director to enter negotiate and sign a contract
Um while drafting the RFP, we made some changes to
the language within the RFP. House Bill 1500 says if ERCOT
makes changes, we need, it needs to come in front of
the Commissioners. We have since, since um for transparency
they want to bring it to the Commissioners and explain
the changes that were made to the RFP from the previous
contract. And with that,
I'll give it to Barksdale. Thanks Jay. (item:30:Barksdale English with Commission Staff reflects on IMM contract, HB1500 changes) Barksdale English for Commission Staff. I'm
here as the Administrator of the IMM contract and I
started that role uh two years ago when um I stepped
into this role as the Head of the Enforcement Division
for the Commission. And so this is um you know, that
that was right in the middle of our current contract
uh two years into the current contract. So this was
really my first opportunity to kind of do a soup to
nuts. Look at what's in the scope of work and make
sure that it, um you know, it has been updated to align
with kind of how we're thinking today versus how we
were thinking four years ago or maybe even eight years
ago. And, and as Jay mentioned, there were also
some, you know, hugely substantive changes to the enabling
statute for the Market Monitor uh that were adopted
in HB1500 uh which needed to be addressed in this
scope of work. So, uh the, the changes that we made
and filed at the end of September in the request for
proposals reflect the efforts to first make sure that
the language made sense was clear, reflected the expectations
of commission staff in terms of its role in overseeing
this contract and to implement the, the legislation
that was adopted this past session. Um I recognize
that there has been some um some concern expressed
in the public about how those changes may impact the
independence of the market monitor. (item:30:Barksdale English confirming changes made or proposed do not curtail the IMM's ability) And I want to say
on the record that none of the changes that I made
or that anybody on the review team proposed or, or
agreed with intended to curtail the market monitor's
ability to do its work independent of the um of the
industry because we need that independent eye to make
sure that we've got uh a well functioning market that's
efficient and that folks aren't taking advantage of
any loopholes that might exist that we didn't know
about previously. So with, with that understanding
in mind and hearing how folks were interpreting our
changes, um we went back and we looked at the changes
that we've made and, and want to suggest to you uh
a handful of additional things to fix in a final contract
Should you authorize Thomas to go out and, and award
and execute a contract so that the language in the
final contract really reflects exactly what our intention
is. So if, if you'll permit me chair, I'd like to lay
out four changes that we're recommending um in the
final to, to be included in the final contract. Um
And please interrupt me at any time if you want to
talk about them one at a time or if you want to
take them all of it at the end, it's, you know, at
your prerogative. (item:30:Barksdale English on retaining the name Independent Market Monitor) The first thing that we're recommending
is to retain the name Independent Market Monitor. We
had initially proposed to re label the contract wholesale
electric market monitor because that's what it says
in the statute. We spent a lot of time thinking about
what the exact words in the statute are and how to
best reflect the expectations of the statute in the
contract. So we um I made the change to, to relabel
it wholesale electric market monitor. I've heard the
concerns that have been expressed and to kind of close
off any confusion or any concern that might still exist
We're recommending that we retain the title Independent
Market Monitor.
(item:30:Barksdale English on notification of 3rd party contacts the IMM for services) The second item that we would like to see in the final
contract is a codification of the current practice
um that our contractor Potomac Economics follows which
is to notify us anytime that a third party. And that
means anybody outside of uh PUC or ERCOT requests uh somebody
from Potomac Economics to address them on issues related
to the Market Monitor services here in the region.
This is a long standing practice. It's not controversial
You know, we've seen press articles from former directors
of Potomac who have said that they did this and there
was, you know, no effort from Commission Staff to influence
the message that they were sharing with, with those
3rd parties. There's been no approval process. It's
really just about situational awareness and good contract
management. Understanding what your contractor is doing
a contractor that's being paid, you know, upwards of
$4.5 million a year, understanding what they're doing
what they're spending their time on is important. And
it's just, it's sound contract management practice
not intended to restrict the information or the message
that the Market Monitor has been asked to speak about.
And so that's the, the second change that we'd like
to see made in this final contract.
(item:30:Barksdale English on setting expectations) The third is really um it's about setting expectations
in terms of the Executive Director's authority to terminate
a contract for cause or for convenience or to request
that the contractor providing these services replace
the Director. Our standard terms and contracts allow
the Executive Director to take this action. Recognizing
how important this contract is to um to not only my
staff but to all of the Commission to you all, to the
public to ERCOT. To what we'd like to propose is that instead
of um simply allowing the Executive Director to unilaterally
make this decision without any public awareness. So
we would propose that the Executive Director file a
memo in advance of an open meeting, stating his intention
to take one of these actions, post that for your next
open meeting, so that a discussion can happen if you
want one to happen and delay taking any action until
after that open meeting. So so as to ensure that we
can receive your feedback and if the public has any
comments also receive the public's comment.
(item:30:Barksdale English on protocol development and updated language) And the final change um is a little bit more of a
new nuanced one. There's a, a specific term in the
current contract that talks about um the Independent
Market Monitors ability um and requirement to work
with ERCOT. To um propose changes that would improve
the efficiency of the market. The way I personally
read the read, the current contract is to require the
Market Monitor to work with ERCOT. If ERCOT requests
it, I don't think that's good contract management because
then I lose control over, over contractor who's, who's
using a lot of repair public money to do this really
important work. And so I had proposed to place in there
uh language that would require um our direction to
the, to allow the Market Monitor to go forward to write
those protocols. And, and as you know, protocol development
is time intensive, it takes a, it takes a lot of work
to actually write those words down and it takes a long
time to actually usher through the stakeholder process
And so for good contract management purposes only,
I wanted to make sure that um we had a check on
that. Again hearing the concerns that have been
expressed in public. I recognize the, the specific
words that I put in there um are misleading and, and
um I want to walk those back and, and ask that the
market monitor, just take a beat to consider the appropriateness
of ERCOT S requests to work with them, to develop new
protocols, to make sure that the work is appropriate
It's in line with everything that we're trying to achieve
here. Um And just make sure that there's some thoughtfulness
about that process. Those are the four changes that
we're recommending being included in a final contract.
In addition to um you know, kind of the more kind
of nuts and bolts, semantics and grammar and, you know
kind of nonscented its that, that we made relative
to the current contract with that. I'm happy to take
your questions, receive your slings and arrows and
find a way forward. Well I, I guess I'll speak first.
And first thank you for the work on this contract.
(item:30:Chairwoman Jackson's thoughts on the recommendations) You laid out four issues. Um, I guess 4 changes
that you are recommending. Uh I'm good with, um, with
three of them, um, would recommend on the second one
where you talk about, you know, the need to codify
and I understand your rationale, which is understanding
what uh the person that we are contracting with is
doing. However, it's my personal belief that, um, this
is, it's not necessary to include this as a part of
the contract. We already have a long standing and
I think functioning as you've been able to find out
uh long-standing process, um, that's been in place
over a decade, um, that, you know, we've been successful
in doing it through this informal process. So, um,
save that one change. I'm, I'm good with the other
three, but I would definitely recommend that we go
back and, and make sure we continue with our existing
process. Which is um, you know, one that is informal
rather than actually codifying it in the contract.
(item:30:Commissioner McAdams thoughts on the recommendations) Madam Chair I, I agree with what you just said and
and I support that change if, if I could recommend
the consideration of one more tweak. And I think Barksdale,
Jay, Thomas. I think, have done a great job in trying
to find a middle approach, given the feedback that
we've had from the Legislature, which we heard loud
and clear. It was, it was a clear letter but, um
I would like to propose one thing. I, I realize that
the statute reads um, the Independent Organization
may not, but you substantially modify the Market Monitor's
contract unless the modification is approved by the
majority of the Commissioners. I realize that says
the independent organization. But a again, the,
the application of ultimate approval of the final contract
if modified by ERCOT, by the Commissioners, that isn't
necessarily synced up with what they have said. They
want transparency, uh which, which is available. I
mean, it's enshrined in your contract process, but
ultimately, they want a full vote of the Commission
and you are building in a process to have that anyway
having the Executive Director post um come in brief
but I think that last step should at least be and I
understand it is somewhat a deviation from established
contractual uh, conditions of the state. But I believe
we at least need to have a, a full vote of the
Commission given the um, the interests of the Legislature
and full visibility and accountability at the Commission.
What do you guys think? I'm in agreement. And so I
think what you're saying, Commissioner McAdams. Is that
ultimately, you want the Commissioners to approve any
termination of the Independent Market Monitor, the
Executive Director will still come in, make their recommendation
Ultimately, a vote of the Commission is held a formal
vote. Yes. Yes, agreed.
Okay.
(item:30:Commissioner Cobos' thoughts on the recommendations) I would like to just emphasize a couple of things
and I think Barksdale, you highlighted this in the
um, section of um, the language that reads, um requiring
the IMM to work with the, with ERCOT if appropriate
And, and I think that's important if appropriate is
important because we wanna make sure that the IMM continues
to have an independent role. And I know you highlighted
that, um I think, you know, it, it's also important
um for the IMM to have an independent role as um, the
IMM works with the PUC on any role and protocol changes
that the Commission endorses. So that same spirit
um as it applies to ERCOT needs to move over to us
even though we're the contract managers, the whole
role, the whole point of the IMM is to be independent
of, of um ERCOT and even some of our own policies to
provide a separate voice, they're not independent from
us from a contractual standpoint, but they are independent
from us from a policy perspective. So I just wanted
to emphasize that. Are you asking for the contract
to specifically state that the Market Monitor should
only work with Commission Staff to implement Commission
approved. Endorsed is what it says. Endorsed
policies if it's appropriate to do so.
Yes. Say that again again, I'm I'm aware.
Okay. Barksdale laid out some language. It talks about
requiring the IMM to work with ERCOT if appropriate
to develop new Nodal protocols and delete the requirement
PUC Staff must direct ERCOT before it may work with
ERCOT or the IMM for work. And what Barksdale was saying
is that if appropriate is important because I'm emphasizing
because, you know, in some cases, it may not be possible
because the IMM has a separate voice from ERCOT, right
And so um we're all in agreement with that, right?
And so as I, as I was looking at Page 7 of
the RFP language, it states um the IMM will insist that
the, the puc would develop in a role language or protocols
that implement market efficiencies or design projects
that have been endorsed by the commission. So I think
that's great and the IMM should work with the Commission
but it's also important that the IMM continue to have
an independent voice as well in this. And so what,
what are you saying to do with number eight there?
Um I mean, II, I like to carry that same spirit over
from the ERCOT language over here because I wanna make
sure that the IMM continues to have an independent
voice, independent policy voice. That's what I'm saying
So if you're going to say if it's appropriate or should
we be saying that if it's appropriate the Commission
I'm just wondering, I mean, I would, I would agree
I have no problem with an IMM telling me that
my policy is not going to have the intended effect
that I expected to. Welcome to the market reform discussions
I heard that all for the whole year. Yeah. So I think
that's, I think that's a valuable point. Barksdale, were you gonna say?
Forgive me for interrupting. (item:30:Barksdale English's follow-up to the Commissioner's comments on the recommendations) And I 100% agree with
how you're talking about a Commissioner Glotfelty that prior
to the Commission's endorsement of a policy, we want
that feedback, we want to know what we're getting wrong
We want to be guided and by their expertise, deep,
deep, deep bench on how to make the best policy decisions
once it's been endorsed by the Commission.
For me, that's appropriateness. But what does endorse
mean approved or end like that's another word that
I need clarified. You know, I think we're trying to
be a little bit vague on purpose because we don't want
to tie your hands to require a vote on each and every
single thing that you do to direct or guide market
design.
But also to say that something is endorsed means it
rises above the level of, oh, Barksdale's got, you
know, a crazy idea. Why don't you go spend 100 hours
working on it.
And saying that you think this is too restrictive,
the language that Barksdale put in here. Can we have Staff kind
of way in here, I'd appreciate it. (item:30:PUC Executive Director Thomas Gleeson to Commissioners on the recommendations) I think when it comes to the PUC, it is
appropriate to say that the IMMs analysis remains
independent. But the IMMs work as it pertains to Commission
sponsored, Commission endorsed programs or policies
is still at Staff's direction. As the contract administrator
for this contract, the analysis is independent. That
is not, there's no contention about that. That is what
it says in the rule of the analysis is independent
but the IMM works in our direction and with our oversight
So I don't want to tie Staff's hands through this on
what we can do from a proper contract management standpoint
for invoices that we sign off on and a contract that
I sign. (item:30:Commissioner Cobos' follow-up to Thomas Gleeson) And that's not necessarily what I'm trying
to do. I just want to be clear that as we, as
we emphasize on the in the ERCOT forum that if it's appropriate
to work with ERCOT, the emphasis is that you still
have an independent voice at ERCOT and Independent
analysis, right? And so that would carry over here
But understanding that the contract oversight lays
over here. (item:30:Thomas Gleeson's follow-up to Commissioner Cobos' response) But I think it's different because they
are the IMM is independent, wholly independent from
ERCOT. They are not wholly independent from the PUC.
Their analysis is independent. And so we need to make
that clear.
So what are you saying? So I'm saying that if you want
to add similar language to what we say around ERCOT,
we need to be clear that the analysis that is done
by the IMM on Commission endorsed projects remains
independent. To your point, Commissioner Glotfelty. If Potomac
disagrees or, or whoever we end up going with. That's
one thing, but that work is still done in our direction.
We can direct the IMM to do work as a contractor. They
are our vendor for this contract. She didn't get to
pick and choose. That's right.
(item:30:Chairwoman Jackson's follow-up on the recommendations) And part of that directed work would be kind of what
we talked about today is that we want to get engagement
with the three, right? We want ERCOT, Staff and the
IMM. So we, we want to make sure that whatever language
that we're talking about here gives us the flexibility
to do that because we've got a lot of work ahead that's
gonna depend on us being able to draw on her expertise.
Yeah. I I'm try, I'm not trying to change the language
necessary. I'm just trying to capture the spirit and
clarify as Thomas has done. Yeah. So, so can I be very
specific?
We passed the PCM. She does an analysis that says the
PCM is gonna cost X plus $12 billion.
Is she allowed to do that? (item:30:Thomas Gleeson's response to Commissioner Glotfelty's IMM specific question) Yes, because that, that
is in our direction, we would direct her regardless
of what the outcome of the analysis is, but we can
direct the IMM to do that analysis. I think what is
different from ERCOT. Is the change that we're talking
about there is ERCOT cannot tell her to just go
do something and, and Potomac has to do it. Totally
agree. I just agree with the ERCOT side and I just want to
make sure on our side that if we, if we agree that
ACM is the right policy for the state, it's still valuable
to have an independent market monitors view. If it's
different from ours, if directed, say where, where
do you see differences and they come back and give
us that? Yes. And I would argue, not only is it valuable
it's, it's the point. Okay. So, yes. (item:30:Commissioner McAdams' follow-up on the recommendations language) So I, I think we're
one, we're not changing anything. We may be talking
past each other on semantics. The analysis is not
affected, the Commission still orders the projects
that the analysis is performed over Legislatures watching
the Commission, everybody's watching everybody. And
um, you know, Carrie's voice is independent and God knows
she is, you know, on point on criticizing or supporting.
So we get what we need. Yeah, all I was trying to
do is capture the spirit and clarify, get a clarification
into there and understand what's happening and Thomas
has explained. So I'm not trying to change the language
I, I just was trying to get clarification and fully
understand what was happening. Okay. Very good. Good talk.
(item:30:Barksdale English on preparing revisions to the recommendations) So Chair, um we'll, we'll prepare a revision to the
order that's before you, that reflects the conversation
here that specifically um removes the codification
of the notification language. Um requires uh a formal
vote at an open meeting of the Executive Director's
authority to terminate a contract. Or sorry. I shouldn't
call it that. I should say get your approval for his
recommendation to terminate a contract and and the
remaining items will remain the same. And we understand
the, the, the vision here in terms of independent analysis
work being done at the direction of of contract management
Staff.
Did I capture the, the conversation correctly?
Yes. Yes. Thank you.
We're going to move forward. Thank you. I think Shelah
if it's appropriate to take a vote now. Then we can
prepare that order for you to sign today. (item:30:Motion to revise proposed order with discussion, edits proposed by Staff) So, so a
motion to draft a proposed order consistent with the
discussion? Revise the proposed order with the discussion
and with the edits proposed by Commission Staff, I believe.
And to authorize delegation to the Executive Director
to sign and negotiate, negotiate and sign the contract.
You spoke most about this. So moved. Second. We have
a motion and a second. All in favor, say aye. Aye. Motion
passes. Thank y'all. Thank you so much. I don't have
anything on Item No. 31. (item:32:Chairwoman Jackson lays out Project No. 55407) Next up is Item No.
32, Project number 55407. This is the Commission's
rule making regarding the Texas Backup Power Package
Advisory Committee. Shelah, do we have anyone from
the public signed up to speak on Item No. 32? No
ma'am. No one signed up to speak. You see Staff filed
a memo and proposal for adoption. David Smeltzer
and David Gordon are here. Can you please provide
us with a brief overview of Staff's recommendation.
Yes thank you, ma'am. And good afternoon Commissioners.
(item:32:Dave Gordon with Commission Staff on proposal for adoption) This is David Gordon with Commission Staff. This is
a proposal for adoption for new rule 25.515 which
would establish the Texas Backup Power Package Advisory
Committee.
We issued the public of the proposal for publication
in September. And since we've received comments in
light of those comments, we've made two significant
changes to the rule. (item:32:Dave Gordon on changes to the rule) First, all of the Commission's
written or the Committee's written recommendations
uh will need to be made available publicly. And then
secondly, we removed the Executive Director's ability
to remove a committee member. So only the Commission
can remove the Committee Member. And I just want to
note uh there's one type of graphical error in the
proposal for adoption uh on page four, line 17. There's
a reference of Texas Government Code, Section 2001 that
should actually be changed to Texas Government Code,
Chapter 2110. Chapter 2110 is the law that allows us
to establish this Committee. With that change, we
recommend approval of the proposal for adoption, but
I'm happy to take any questions or explain any part
of the, the PFA. This was one I thought looked good.
(item:32:Motion to approve proposal for adoption with changes) Subject to any discussion. I would move to approve the proposal for
adoption. With his change. With the, with the changes
I support that. And I second that proposal with the
hope that we get more than three members more in the
9ish range.
The attention is to fully empanel the committee. Okay.
We have a motion and a second. All in favor, say aye.
Aye. Motion passes. I don't have anything on Item No.
33. Chairman? Yes. Before we go on to Item 34. May I
just jump in and suggest that perhaps we take 15
recess. Take a 15 minute break for everyone to have
a go to the hallway and for the Court Reporter to have
a break. Okay. Yeah. Thank you for reminding that. Okay.
(item:32:Chairwoman Jackson pauses Open Meeting, for 15 minute break) We'll take a 15 minute break so we will be back and
just go off the record. Yes. Yes.