SB6 addresses the increase in large industrial electrical loads due to developments such as chip manufacturing, data centers, and hyperscalers in Texas.
There is significant growth in electrical demand, with some single customers requiring more electricity than entire cities.
SB6 mandates the PUC to establish standards for the interconnection of large customers, aiming to support business growth and maintain grid reliability.
Key requirements include a flat fee for a screening study, proper control of the site, disclosure of duplicate requests for backup generation, and preparation for energy emergencies.
The bill involves changes to net metering arrangements and gives PUC and ERCOT the authority to approve, deny, or condition these arrangements.
Utilities are required to develop protocols for emergency curtailment of large loads.
SB6 requires PUC to re-evaluate and possibly revise the 4CP rule, which is used for cost allocation but does not align with current load profiles.
Acknowledgement and gratitude expressed by Barksdale English from the PUC to the committee.
The bill is designed to welcome new large loads to Texas while maintaining grid reliability.
Three main aspects of the bill:
Ensuring transmission system users pay their share.
Improving visibility into size and number of new large loads for better planning.
Preventing net loss in generating capability when new loads colocate with existing generation facilities.
The PUC has 180 days to approve, modify, or deny colocation agreements, or they are deemed approved by default.
This process requires a full evidentiary hearing led by commissioners, which is challenging for the small commission due to tight timelines.
Barksdale expresses confidence in PUC's capability to manage the process but acknowledges the strain on resources and the need for expeditious processing to support economic development.
Representative Anchía discussed PUC's regulatory powers with Chair Gleeson and confirmed they have existing authority to regulate the market and large loads.
The purpose of SB6 is to clarify and make specific the authority and ability to regulate the market, balancing economic development and grid reliability.
Section 4 (page 6, line 14 to page 9) provides clarity and visibility for ERCOT and the commission regarding arrangements between new large loads and existing generation facilities.
Subsection D (page 2, line 24 to page 3, line 17) clarifies that new large loads with backup generation facilities should support grid reliability during emergencies.
Section 5 (page 9, line 18 to page 10, line 21) directs the study of how transmission charges are allocated in the ERCOT region, especially with new large loads.
These sections clarify concepts that need clarification or provide specific clear authority.
Discussion on the 180-day contested cases that involve complex technical debates between economists, engineers, and lawyers.
Key difference highlighted between the proposed bill and existing statutes is that applications are deemed approved if the commission does not issue an order within 180 days.
The commission has the ability to issue a good cause exception order to extend the 180-day period if justified.
Net metering cases will be contested similarly to other cases, involving applicants and intervening parties who must provide evidence.
ERCOT is required to be a party in these cases, performing a transmission and security analysis to ensure net metering arrangements do not jeopardize the transmission system.
ERCOT's analysis process takes approximately three to four months.
Discussion on updating the 4CP methodology to ensure fair cost distribution for maintaining and expanding transmission, impacting large flexible loads like data centers.
Current policy allocates charges based on peak usage in a 15-minute window during summer months, with a suggestion to study actual usage year-round.
Exploration of more equitable cost distribution methods, such as seasonal or time-of-use peak measures.
Recognition of the urgency to address changes in the Texas grid and load profile, with plans to review 4CP within the current calendar year.
Encouragement for the Public Utility Commission (PUC) to act promptly in evaluating methodologies to meet projected load growth challenges.
Discussion on the bill's authority for the PUC to approve, deny, or modify co-location agreements.
Concerns were raised about the PUC's ability to meet the 180-day timeline for reviewing applications, especially with other obligations such as system resiliency, rate case, and electric CCNs.
The PUC currently does not review these types of arrangements, marking a new process for them.
Evaluation of applications involves transmission security analysis and resource adequacy analysis.
Resource adequacy analysis will use a reliability standard comprising magnitude, frequency, and duration of load shed events.
ERCOT and the PUC will analyze the impact of new large loads on grid reliability, particularly during capacity-scarce moments.
Clarification on whether PUC evaluates large loads on the transmission and distribution system; it appears not covered in the bill.
The bill focuses on existing generation resources serving co-located loads, which is seen as a different challenge compared to new large loads entering the market.
Discussion on market response differences between co-located and new separate large load projects.
Representative McQueeney raised a question about how new generation for colocation behind a meter would be treated under current legislation if they temporarily join the grid before their intended user is ready to consume their power.
The question assumes that this temporary contribution of power could be beneficial for Texas, ERCOT, and citizens.
There is concern over whether this situation places temporary generators under a 180-day rule and if this requires legislative adjustments.
Barksdale English acknowledged the question as interesting and hypothetical and opted to follow up instead of providing an immediate response.
Representative McQueeney emphasized the practicality of the situation due to new users coming to Texas and the readiness of power before these users are prepared.
The discussion noted the potential reluctance of new generators to go through lengthy regulatory procedures to assist in the short term.
Representative Anchía inquired about the current state of the market's ability to meet the projected load forecast and referenced previous testimony by Mr. Vegas, who affirmed that the existing market forces could support the growth trajectories.
Concerns were raised about the ongoing modifications to the market structures and the lack of longitudinal experience to evaluate the effectiveness of the current market.
A question was posed regarding the potential impact of adding additional regulation to an already evolving market structure.
Chad Seeley emphasized the importance of regulatory certainty for investors and indicated that continuous changes create uncertainties.
Discussion around the load forecast highlighted its role in providing clear investment signals and the importance of standardizing how data is collected and utilized to improve accuracy.
The conversation acknowledged that Texas is attracting data centers and other investments without the need for additional legislative measures like SB6.
Joel Yu from Enchanted Rock LLC registered as neutral on the bill and was invited to provide further testimony.
Enchanted Rock is a microgrid developer based in Houston.
Focus on developing solutions for large load customers with on-site generation.
Recommendation for the commission to develop standards recognizing flexible attributes of new co-located dispatchable generation and load in the interconnection process.
Advocates for expedited interconnection for new large loads investing in co-located generation.
Emphasizes contribution to reliability and affordability as grid assets.
Circulated a handout and graph demonstrating benefits of co-located dispatchable generation.
Supports proposed red line to encourage deployment of co-located generation solutions.
Goal to bridge the power gap and accelerate economic development.
Greg Turner represented Liberty Power Innovations in support of SB6.
Liberty Power Innovations is a subsidiary of Liberty Energy, an energy services company founded in 2011.
Liberty Energy is a significant oilfield service company in North America with nearly 6,000 employees, half based in Texas.
Liberty operates in nine states and two countries, often in remote areas with self-generated power capabilities.
They plan to deploy over 700 megawatts of modular natural gas generators in ERCOT.
ERCOT is seen as a vibrant ISO region with essential leadership in SB6 to support market vibrancy.
Key SB6 components: transparency in interconnection process, predictable service during emergencies, and reliability programs for large loads with onsite generation.
Preserving privileges for newly developed co-located resources is crucial for cost advantage and resiliency.
Current market signals in ERCOT are inadequate for certain technology investments without these components.
Continued investment in Texas and flexibility of the ERCOT grid with distributed resources are prioritized.
Will McAdams referenced the impact of Winter Storm Uri, highlighting the issue of disproportionate load shed allocation in the Houston area with CenterPoint.
McAdams discussed the importance of accounting for large loads in the ERCOT planning model to prevent disproportionate allocations during load sheds.
Representative Darby inquired about changing legislative language related to colocation overseen by ERCOT
In response, McAdams drew parallels to the reliability must run (RMR) evaluation for generation seeking retirement.
McAdams noted the precedent of a 180-day review process by the Public Utility Commission (PUC), suggesting the complexity of transferring certain responsibilities from the PUC to ERCOT.
Concerns were raised about the regulatory lag effect impacting business and economic development due to lengthy approval processes.
The bill proposes that all loads be treated equally regardless of their flexibility, which McAdams agreed was the case.
McAdams mentioned potential market adaptations due to new curtailment actions and their subsequent impact on price formation.
There is apprehension about fast-moving reliability events, as highlighted by a previous occurrence in Spain, and the inability of ERCOT to quickly adapt to such scenarios.
Walt Baum, representing Powering Texans, is neutral on the bill.
The primary focus is ensuring a reliable grid to provide electricity to millions of Texans, prioritizing customer health and safety.
Support for SB6 to establish necessary requirements for grid reliability and market transparency, while keeping Texas attractive for data center and industrial growth.
Concerns about SB6 possibly hindering data center development by duplicating regulatory efforts and deferring investment.
SB6 may impose restrictive reliability requirements that limit market innovation and create burdensome review processes for large loads.
Opportunity for the house to refine SB6 to avoid placing undue cost burdens on the public and ensure it aligns with ERCOT and PUC processes.
Emphasis on choosing innovative markets over strict regulatory regimes, and ensuring ERCOT has visibility into large load electric usage.
Optimism for a refined SB6 that signals Texas's innovation and openness for business while maintaining reliability and affordability.
Representative Geren raised concerns about the proposed Public Utility Commission (PUC) timelines affecting forward planning due to delays in rulemaking which might take nearly a year.
Walt Baum acknowledged that the timeline is detrimental to planning, as it involves starting a new process from scratch and trying to complete the first rulemaking in 180 days.
Baum pointed out that co-locations and data centers are particularly concerned, as they want faster hookups.
There are worries about losing business to other states due to these delays, as there have been more announcements in other states recently.
Representative Anchía questioned the necessity of a legislative bill, referencing claims that data centers would not be able to establish in Texas without it.
Dan Diorio disagreed with the claim, stating that he does not believe it to be accurate.
The conversation shifted to the topic of remote disconnection devices, which some utilities are already installing.
Concerns were raised about the implications of remote disconnection devices, particularly their impact on data centers that provide essential services beyond social media and streaming, including healthcare, finance, cybersecurity, law enforcement, and national security.
The risk highlighted was that facilities might be disconnected remotely with inadequate warning, posing national security concerns and impacting critical functions during emergencies.
Discussion on ERCOT's ability to curtail large loads in power emergencies.
Need for clarity on the process for curtailing large loads during emergencies.
Data centers use backup diesel generators.
Diesel generators are regulated by the EPA and TCEQ with limits on usage.
Enforcement discretion from TCEQ needed to run generators during emergencies.
Guardrails proposed for using diesel generators within Emergency Energy Alert (EEA) levels could provide more certainty for data centers ability to deploy their generators.
Industry believes backup generation can be used during grid constraints in EEA events.
Guardrails would ensure generators are used only in emergencies to avoid air quality and emissions concerns.
Concern expressed over running diesel generators in non-attainment areas in North Texas.
Mark Bell with the Association of Electric Companies of Texas was noted to be neutral on the bill.
The member companies of AECT have observed significant interest from large load customers seeking to connect to the ERCOT grid.
SB6 aims to create a framework for incorporating this growth into the electric system while maintaining grid reliability.
The bill establishes standards for transparency and credibility in the load forecasting process.
It sets operational requirements for managing facilities during electricity supply emergencies, prioritizing residential customers.
The bill directs the PUC to evaluate cost allocations among customer classes and engages the stakeholder process at the PUC and ERCOT for addressing technical considerations.
Proper coordination and collaboration are deemed essential for integrating this growth into the electric system.
Taylor Kilroy expressed support for the bill SB6 on behalf of the Texas Public Power Association.
The growth of large loads has led to operational concerns on the ERCOT grid.
SB6 is backed by stakeholder negotiation and aims to provide a structure for municipally owned electric utilities to interconnect large loads efficiently.
It is important for each type of customer to pay interconnection and transmission costs relative to their impact on the grid.
SB6 includes provisions for interconnection cost allocation and revisiting 4CP to prevent unfair outcomes.
The bill preserves the ability of municipally owned utilities to set their own retail service standards while establishing uniform standards for wholesale load interconnection.
TPPA encourages quick advancement of SB6 as it addresses large load interconnection comprehensively.
Taylor Kilroy thanked the committee for the opportunity to provide testimony and is open to questions.
Representative Turner asked Gideon Powell for suggestions on improvements and potential gaps in current legislation.
Gideon Powell suggested creating an alternative path for loads that want to support hospitals and residential areas.
Powell mentioned competing to provide lower load response and questioned the concept of the 24-hour firming as outlined in SB6 without sufficient research support.
Powell noted that 3.5 gigawatts on the current system wish to compete more aggressively, compress margins, and benefit ratepayers.
He expressed concern that SB6 is not effectively attracting the growth they believe is possible.
Cyrus Reed represented the Lone Star Chapter Sierra Club and expressed support for SB6, emphasizing the need for consumer protection.
Highlighted the importance of minimum interconnection charges and planning requirements to ensure ERCOT and PUC are aware of upcoming demands.
Stressed the necessity of preventing costs from being shifted onto consumers while leveraging available resources.
Supported revising the 4CP system, stating it is outdated due to changes in peak patterns and demand loads.
Advocated for an additional large load demand management service with flexible implementation while preventing double counting of resources.
Proposed increasing reporting requirements for more data on energy use and flexibility, which would benefit the entire system and residential consumers.
Stacie Bennett represented LS Power, a company with significant investments in competitive generation and transmission infrastructure.
Texas's economic and population growth requires resilient power infrastructure to maintain progress.
LS Power has invested significantly in Texas and aligns with the state’s goals of economic openness and electric grid reliability.
Large loads are perceived as a challenge to grid reliability, and LS Power suggests a solution.
Proposes a bill provision for large loads that supports new dispatchable generation.
New large loads entering a power purchase agreement for new dispatchable generation would receive priority interconnection, excluding battery storage systems.
The primary requirement is that this agreement leads to new dispatchable generation to offset the new load.
This proposal could reduce the number of requests for behind the meter co-location.
There is concern among policymakers about large loads taking megawatts from the grid via co-location agreements.
Katie Coleman testifies neutrally and represents the Texas Association of Manufacturers, Texas Chemistry Council, and Texas Oil and Gas Association.
Associations hold a neutral stance on the bill, but emphasize that it's not a data center bill; it applies to all large loads over 75 megawatts.
Engagement in bill negotiations aims for accurate load information, proper reliability tools, and a prosperous business climate in Texas.
Support for the bill's security requirements and financial postings as they could reduce speculative forecasting.
Pablo Vegas testified that the current load forecasts don't align with national or global expectations, highlighting the need for refinement.
The associations support new emergency tools and transmission voltage load inclusion in load shed protocols, advocating for fair treatment of large customers in load shedding.
The associations back a new large load demand program where sites can reduce consumption with 24-hour notice, providing additional megawatts.
Clarification provided on the co-location issue, emphasizing its limited scope to colocation matters.
Clarification requested on whether the co-location agreement applies only to existing generators being taken private, not all co-locations.
Discussion on the importance of co-location as a business model for both loads and generators, focusing on reliability impacts when a generator is removed from the grid.
Chair Ken King Closing Remarks
Discussion on the existence of a committee substitute and encouragement for committee members to submit suggestions in writing by the end of the week.
No further questions were raised, and the meeting moved towards adjournment.
SB6 is left pending with no objections.
The agenda concluded and the meeting was adjourned subject to the call of the chair.
