Meeting Summary - 02/27/2025 Senate Business & Commerce
Grid Monitor AI
02/28/2025
▶️ - Texas Energy Fund Update - PUCT Chairman Thomas Gleeson
There are currently 72 applications, with 17 advancing to due diligence, representing approximately 8,900 megawatts of new generation.
A project by ENGIE was withdrawn due to lack of direct line of sight to necessary components, leading to its withdrawal.
Staff plans to present an option at the next open meeting to backfill the lost megawatts, restoring the capacity closer to the original 9,700 megawatts.
Three program rules from Senate Bill 2627 have been adopted, though work is ongoing on the backup power promise portion.
Concerns were raised about the tight timelines for projects, specifically regarding the first disbursement deadline by December.
Projects are expected to come online between 2026 and 2029, making current timelines challenging.
Chairman Gleeson suggested flexibility with project timelines, as longer timelines may avoid worthwhile projects dropping out.
▶️ - Extra High Voltage Update - PUCT Chairman Thomas Gleeson
ERCOT has provided two plans in response to House Bill 5066: one for existing 345kV model, another for upgrading to 765kV statewide.
ERCOT conducted a study with two cost scenarios: $32.99 billion for 765kV and around $30 billion for 345kV, with specific costs for the Permian region.
A workshop is scheduled to address uncertainties around the 765kV option, focusing on timeline, supply chain, and costs.
Chairman Thomas Gleeson emphasized the importance of timely execution and efficiency regardless of the voltage chosen.
A self-imposed deadline of May 1 is set for a decision, with defaulting to the 345kV if a consensus is not reached.
Concerns were raised about the reliance on extrapolated cost estimates from MISO's experience for 765kV.
The discussion highlighted the need for empirical scrutiny and public confidence in the decision-making process.
TDUs can file for using 765kV if approved by the PUC; this situation arises from provisions around regional transmission plans.
The committee discussed if the move to 765kV in the Permian would scale to other parts of the state.
Senator King introduced SB6, addressing Texas's exponential electric load growth.
The state's electric demand has significantly increased, requiring the grid to accommodate 50 gigawatts by 2030, up from 10 gigawatts previously estimated.
Businesses, especially large data centers and AI facilities, are driving this surge in electricity demand.
Concerns addressed include inaccurate load forecasting, the impact of large loads on the existing grid, and proper allocation of grid costs.
Four main challenges were identified: lack of accurate load forecasting, large loads taking existing generators offline from the ERCOT market, insufficient load-shedding protocols during emergencies, and improper allocation of grid costs.
Proposed solutions include improved criteria for large load interconnection processes, PUC approval for generators wanting to remove megawatts from the ERCOT market, and updated cost allocation methods.
The proposal advocates transparency in load forecasting, enhancing grid reliability protections, ensuring residential outage protections, and improved cost allocation.
The bill presents both opportunities and challenges with respect to economic development and grid reliability.
A key focus is balancing economic opportunities with reliable grid operations.
Ensuring all transmission system users contribute to costs is emphasized.
The PUC is required to establish planning standards for new large loads.
Avoiding the loss of generation capacity when new large loads are added is critical.
The bill aims to safeguard the power supply for Texans' health and safety.
▶️1 - Senator King to Barksdale English, PUCT - PUCT Resources and Responsibilities
Senator King discussed how the PUC has been assigned a significant amount of work since 2021 and has completed much of it, but still has tasks pending.
Concerns were raised about the ability to complete tasks such as the four CP reevaluation in a timely manner.
Barksdale English discussed whether additional resources are necessary to meet these demands.
Assurance was given that the organizational capacity and expertise have increased over time.
Confidence expressed in executing tasks effectively and expeditiously once approved by relevant authorities.
Request for 7 new full-time employees at a cost of around $1,000,000 per year to ensure timely completion.
▶️1 - Senator Schwertner to Barksdale English, PUCT - Grid Reliability Concerns
Senator Schwertner expressed concerns about grid reliability related to loss of generation and financial discussions between large companies and ratepayers.
Barksdale English confirmed that currently the PUC cannot prevent contracts that might impact grid reliability by removing large megawatts.
Legislation is needed for the PUC to manage the removal of large megawatts from the grid.
The envisioned process involves assessing the balance between new load introductions and loss of capacity to ensure grid reliability.
Consideration of the timing and geographic location of new generators is key to preventing negative impacts on system reliability.
Provisions may require resources taken offline to be available for statewide service restoration.
▶️1 - Senator Schwertner to Pablo Vegas, ERCOT - Potential Load Loss from Contractual Obligations
Senator Schwertner's discussion focused on the reliability and maintenance of grid operations as a primary obligation for ERCOT.
Addressed potential loss of large megawatts from the grid due to contractual obligations.
Pablo Vegas discussed a bill providing four pathways to effectively handle load loss situations.
One approach involves situations where a load with backup generation can disconnect from the grid to serve its own load, allowing the grid to benefit from adjacent generation capacity.
The bill includes provisions that allow ERCOT to require loads to use their own generators during scarcity periods.
ERCOT has a mechanism called 'reliability must run analysis' to evaluate the impact of generation resource loss on local transmission systems.
During peak periods, if generation loss poses an instability risk, mechanisms exist to require generation continuation or develop alternatives.
The bill particularly considers data centers, allowing their backup generation to ensure full capacity service from adjacent generation.
▶️1 - Senator Schwertner to Barksdale English, PUCT - Minimum Transmission Charges and 4CP Methodology Reevaluation
Senator Schwertner’s discussion on having a minimum transmission charge to address cost allocation related to large loads and new transmission.
Requirement to reevaluate the 4CP methodology due to potential gaming of the system.
Barksdale English discusses how the bill aims to ensure that large loads do not unfairly impact residential and small consumers.
Exploration of balancing fixed versus variable costs in transmission charges.
The Commission had already planned to examine this issue in the current calendar year.
Suggestion to combine considerations into a comprehensive directive to study transmission costs holistically.
Goal to achieve a nuanced understanding of minimum charges versus other cost methodologies like 4CP or 12CP.
▶️1 - Senator Schwertner King to Pablo Vegas, ERCOT - Invitation to Comment on Cost Allocation and Transmission Costs
ERCOT focuses on the impact from a reliability perspective.
Ensuring that protocols are efficient and cost-effective in achieving reliability goals.
Cost allocation is considered a commission issue, typically managed under PUC's purview.
PUC is recognized for balancing interests of various customer classes and sizes.
▶️1 - Senator Campbell to Pablo Vegas, ERCOT - Accuracy of Load Forecasts and Impact of Minimum Transmission Rate on Generation Incentive
Senator Campbell inquired about the reliability of the 2029 forecast asserting a load of 150 gigawatts and if the load profile from last year's forecast remains accurate.
Preliminary data suggests that the future load could be significantly higher than the 150 gigawatts estimate for the 2030-2031 period.
ERCOT is working on tightening forecasting methods, but they currently lack improved data to validate specific forecasts.
Discussion included whether incentives exist for loads with backup power to contribute to grid reliability.
Currently, data centers primarily use their backup for their own reliability needs.
The lack of participation in voluntary programs is noted.
Many data centers focus on using backup power solely for self-reliance during demand response scenarios.
Senator Campbell questioned if the minimum transmission rate acts as a disincentive for co-located generators. The answer suggests it depends on whether the load depends on the grid for service at times or not.
Discussion about whether loads should pay for grid services, based on their reliance on the grid, to ensure fairness.
If a data center is completely islanded and not using the grid, they should not incur charges.
If connected to the grid, even for backup purposes, they should share costs.
▶️1: Senator Zaffirini to Pablo Vegas, ERCOT - Concerns of Kill Switch Provision Impacts on Grid and Public Safety
Senator Zaffirini asked about concerns regarding the impact of the kill switch provision on the grid and public safety.
Mr. Vegas responded that the kill switch provision could be beneficial for the grid by allowing more large loads to be included in a load shed scenario, thereby providing flexibility for transmission operators.
The provision aims to allocate the burden of load shedding more fairly across customer classes.
Mr. Vegas acknowledged concerns but emphasized that if managed safely, the shared burden during such events is fair.
Taylor Kilroy testified on behalf of the Texas Public Power Association regarding a Senate Bill 6.
TPPA represents 72 municipally owned utilities serving over 5 million Texans.
TPPA broadly supports the new planning requirements for large loads in the bill.
They also support the bill's goal to reassess the allocation of transmission costs.
There is a recommendation to move away from the 4CP methodology, as advised by the ERCOT Independent Market Monitor since 2015.
TPPA supports the concept of a minimum transmission charge but insists that more work is needed to avoid regulatory confusion.
Changing transmission cost allocation could lead to numerous rate cases, posing an administrative burden on the PUC and transmission service providers.
Further instructions are suggested to be included in the bill to guide PUC on implementing the new charge and adjusting utility rates.
Senate Bill 6 aims for fair cost distribution, potentially benefiting end-use residential customers in terms of cost and reliability.
TPPA believes the concerns raised can be addressed without altering the bill's original vision and intent.
Walt Baum represents Powering Texans and discusses economic growth and grid reliability in Texas.
Powering Texans is neutral on SB6 but agrees with many aspects of the bill.
Believes interconnection requirements should be strengthened for better load forecasting.
Supports data centers paying for grid services and using their backup generation.
Calls for flexible load management and re-examination of TCOS allocation methods.
Concerns regarding colocation with existing generators being subjected to different requirements.
Believes backup generation should be considered in approval processes.
Thinks stranded cost liability should apply both ways, with potential savings in transmission costs.
▶️1.1 - Dan DiOrio (Data Center Coalition) Testimony SB6
Dan Diorio from the Data Center Coalition (DCC) testified on Senate Bill 6.
Expressing concerns about transmission level load shed and remote disconnect provisions without sufficient notification, which could impact public safety in Texas.
Data centers are crucial for services like government, hospitals, and finance, requiring constant uptime; any interruption can have significant consequences.
DCC suggests more stakeholder input from entities like ERCOT and PUC before deploying high-risk provisions.
DCC supports using backup generation during critical times with proper notification but seeks relief from environmental regulations for exceeding air permits in emergency situations.
Concerns include how backup generation is governed by regulations and the potential violation of these permits during emergencies.
DCC seeks modifications to the bill to outline proper procedures and notifications for deploying backup generation.
There is a need for flexibility in location of replacement generation, not restricted to the same zone, to better address generation needs such as those in the Permian Basin.
Data centers commonly use diesel generators due to reliability and cost, but environmental limits on usage are a concern.
Exploration of other backup technologies beyond diesel is ongoing, including natural gas and batteries.
Senators acknowledged concerns about remote disconnect and the need for collaboration to optimize backup utilization while complying with regulations.
Discussion on the bill's provisions related to transmission charges, interconnection costs, and the implications of colocating data centers next to power plants was raised.
It was noted that colocating can avoid building new transmission but involves recognizing associated interconnection cost responsibilities.
▶️1.2 - Panel 2 - Lee Bratcher (Texas Blockchain Council), Mark Bell (AECT), Warren Lasher (TxOGA), Katie Coleman (TAM)
▶️1.2: Lee Bratcher (Texas Blockchain Council) Testimony SB6
Supports Senate Bill 6 which aims to clear out the interconnection queue by removing phantom load.
Advocates for more accurate visibility into load growth through added costs for load studies.
Expressed concerns over uncertainty surrounding minimum transmission costs, which could slow investment.
Supports empowering ERCOT to shed large loads during EEA three events.
Unclear on whether the costs of disconnections will fall on loads, utilities, or be included in utilities' rate costs.
Assumes ERCOT would have discretion over flexible loads that are already 90% curtailed before EEA one events.
Expresses general support for the committee's efforts in SB 6 and a willingness to be a collaborative stakeholder.
Warren Lasher represents the Texas Oil and Gas Association, the largest aggregate consumer of electricity on the Texas grid.
TxOGA emphasizes the need for a reliable and cost-effective grid.
Concerns are raised regarding the bill's establishment of a minimum transmission charge, preferring a holistic review of transmission cost allocation first.
The bill should ensure the minimum transmission charge does not apply to legacy cogeneration facilities not included in utility forecasts.
The minimum transmission charge should not discourage new customers from co-locating resources.
Currently, the bill allows flexibility for the commission to set a threshold lower than 75 MW, which TxOGA believes could create uncertainty; they recommend setting 75 MW as the minimum.
The disconnection language could pose operational and reliability risks for large industrial facilities.
Michael McNamara is the CEO of Lancium, an energy infrastructure technology company involved in the Stargate project in Abilene.
The Stargate project in Abilene is claimed to be the world's largest AI data center with 1.2 gigawatts under construction.
There is a plan for a large on-site battery and co-located solar facility at Stargate.
He stressed that transmission cost allocation should be borne by beneficiaries and highlighted the need to distinguish between new resources and co-location at existing assets.
Lancium supports measures to identify and differentiate legitimate new electrical loads from "phantom loads" to improve planning and efficiency.
McNamara mentioned concerns about potential market distortion from mandated generation deployment, particularly in relation to large loads with on-site resources during load shed events.
Mr. McNamara discussed concerns regarding disconnect devices for large data centers, highlighting on-site generation and battery plans to support grid reliability.
The Abilene data center project includes a 1,000 MW battery with 4,000 MWh capacity and natural gas backup to manage grid needs effectively.
Sarah Axelrod leads Public Affairs for Crusoe, a vertically integrated AI infrastructure company.
Crusoe’s approach involves locating data centers at sites of clean, low-cost, abundant energy, which brings investment and jobs to rural communities.
Crusoe aims to avoid straining the grid by using an energy-first approach, including backup power generation and on-site power build-outs.
Crusoe is involved in multiple Texas projects, contributing potential investments in tens of billions of dollars.
Recent projects like Stargate have been highlighted, and data centers are being recognized for their critical role in national security and competitiveness.
Crusoe advocates for a balanced approach to SB6 that incentivizes investment, ensures governance, and allows Texas to compete effectively.
Proposes any regulations on large loads apply across all large load customers based on capacity, regardless of their interconnection type.
Bryn Baker from the Texas Energy Buyers Alliance advocated for expanded transmission to meet energy needs and supported a minimum transmission fee on new loads receiving transmission level service.
The testimony supported reassessing cost allocation for large loads connected post-2023.
Emphasizing the willingness of new loads to contribute to grid costs.
Implementation of an economic benefit test was discussed, highlighting the need to evaluate lifetime costs and benefits with a discount factor as would be done by a CFO.
The importance of different voltage levels and grid enhancement through technologies like advanced conductors and software to reduce consumer costs and wiring needs was emphasized.
Senator Keene emphasized the importance of submitting specific language for a substitute bill by a specified deadline to aid in effective legislative crafting.
Discussion on flexible vs. less flexible loads, particularly concerning AI data centers, was highlighted, proposing stakeholder collaboration for mutually beneficial language.
The role of AI and crypto industries in grid reliability was discussed, citing Bitcoin miners as a proven example of flexible load benefiting grid stakeholders.
▶️1.4 - Panel 4 - Bill Peacock, John Crowell (Switch Data Centers), and Pat Wood (HEN)
Bill Peacock testifies against SB 6, speaking on his own behalf.
Peacock has 20 years of experience in ERCOT related policy development.
He argues that SB6 continues the ineffective approach of addressing grid reliability issues caused by renewable energy over the past 15 years.
Peacock believes wind and solar energy are pushing the grid toward unreliability and driving thermal generation out, resulting in increased costs and grid reliability challenges.
Texas has attempted to solve these issues through significant market interventions: regulatory restrictions and raising electricity prices to stimulate investment in dispatchable generation.
Peacock points out that consumer-funded thermal energy subsidies, totaling $53 billion, have not resolved the reliability problems.
He suggests eliminating subsidies for both thermal and renewable energy, require wind and solar to pay their reliability costs, and remove market regulations to allow market forces to address the issues.
▶️1.4 - John Crowell (Switch Data Centers) Public Testimony SB6
John Kroll represents Switch Data Centers which develops, owns, and operates large data centers throughout North America.
Switch Data Centers currently has facilities in Houston and Austin, and is working on a major project in Texas Senate District 5.
Customers of Switch Data Centers include Fortune 100 companies, banks, financial institutions, social media, and national security entities.
Local clients in Austin include Dell Computers and the University of Texas, as well as Probabilities Electric Co-op.
Focused on provisions related to large load shed and environmental impacts.