Meeting Summary - 12/03/24 Joint Legislative Oversight Committee On Grid Reliability

1 - Call to Order

2 - Roll Call

3 - Organizational Business

• Adoption of committee rules for the joint Senate and House Grid Reliability Legislative Oversight Committee.
• Chair Hunter moved to adopt the committee rules with no objections.
• Creation of the Grid Reliability Legislative Oversight Committee by House Bill 1500 to review legislation related to electricity market regulation by the 87th and 88th legislatures.
• Significance of collaboration between House and Senate to maintain and enhance the electric grid's reliability and resiliency.
• Impact of Senate Bill 3 post-Winter Storm Uri, which strengthened the Texas power grid reliability.
• Last legislative session's focus on new dispatchable generation and market operation improvements with Senate Bill 2627 and House Bill 1500.
• Prioritization of system hardening and planning with House Bills 2555 and 5066.
• Hurricane Beryl highlighted shortcomings in the electric infrastructure and renewed focus on resiliency.
• Anticipation of insights from industry leaders on recent reforms and future priorities.
• Acknowledgments and appreciations from Chairman Hunter and other members towards each other and their collaborative work.

4 - Invited Testimony - Grid Reliability

Panel 1 Invited Testimony 

▶️ - Connie Corona, Executive Director, PUCT, Invited Testimony

• Updates on Texas Energy Fund Loan program, including staff recommendations for replacing 1200 megawatts from a denied project, with accelerated background checks.
• Reliability plan for the Permian Basin approved by commissioners, with analysis on extra high voltage transmission options and stakeholder engagement underway.
• Publication of the Severe Weather Preparedness and Response Investigation Report and two proposed rulemakings: outage tracker maintenance and emergency communications.
• Challenges with mass transfer of customer emergency contact information and options for voluntary enrollment in TDU outage notifications.
• Recommendations for customer communications improvements, including information about service restoration and vegetation hazard reporting.
• Proposal for a framework and penalty structure to assess utility service quality during major outages.
• Legislative recommendations in the upcoming agency biennial report for improving commission efficiencies and infrastructure standards.
• Invitation for legislative input and readiness to answer questions from the commission members.

▶️ - Woody Rickerson, SVP and COO, ERCOT, Invited Testimony

• ERCOT's forecasting models have been updated to include TSP load forecasts, with a significant increase to 150 gigawatts by 2030 due to House Bill 5066.
• The Regional Transmission Plan considers upgrading from 345-kV to 765-kV due to unprecedented load growth, similar to a historical upgrade in the 1960s.
• The Permian Basin Reliability study also explores transmission upgrades with 345-kV and 765-kV options included in ERCOT's overall plan, with decisions expected from PUC in May.
• Large load growth is occurring with 63 gigawatts tracked, 6.3 gigawatts approved to energize, and 3.6 gigawatts energized, posing unique challenges for grid stability.
• Battery and solar energy account for 83% of new generation interconnection, with a total of 371 gigawatts in the queue, alongside 26 gigawatts of gas-fired projects.
• ERCOT's system weatherization and reliability efforts, including 3,000 inspections since winter storm Uri, are recognized as leading initiatives by the NERC winter reliability assessment for 2024.

Panel 1 Q&A

▶️ - Senator Schwertner to Connie Corona, PUC's Plan for Mobile Generation Misuse

• Discussion on PUC's investigation of hurricane Beryl and preparedness, focusing on mobile generation misuses.
• Recommendation for utilities to pre-identify site characteristics requiring backup generation.
• Suggestion for utilities to measure needed mobile generation in advance for efficient deployment during storms.
• Inquiry about potential reimbursement plans for ratepayers who paid for unused or misappropriately sized mobile generation.
• Mention of legislation filed for making ratepayers whole and possible redeployment of unused units to San Antonio.
• References to legislation proposed by Senator King and others regarding ratepayer protection.
• Acknowledgment of the need for balancing new wind and solar generation to maintain grid reliability.

▶️ -  Senator Schwertner to Woody Rickerson, Impact of Co-Located Generation on Grid Stability

• The growth of large load requires an additional 150 gigawatts by 2030, raising concerns about grid stability.
• Co-located generation and large loads raise policy issues, especially regarding transmission cost allocation.
• Even if load is behind a generator, it still consumes the same amount of power, posing questions about its impact on the grid.
• There is a challenge in outage coordination with co-located large loads since ERCOT loses some control when it becomes a private use network.
• The main issue is transmission cost allocation, socialized across all rate payers, not accounting for loads behind the meter.
• 4CP cost allocation method doesn't consider behind-the-meter loads, impacting ERCOT's accounting perspective.
• Transmission system stress has shifted due to solar power, making traditional peak hours obsolete.
• A review of the cost allocation method is needed due to changes in resource mix, with stress occurring more often outside traditional peak hours.
• The Market Analysis Division agrees with recommendations from the independent market monitor to revisit transmission allocation policy in 2025.
• No initial fees are currently imposed on large loads when they plan to add to the grid.

▶️ - Representative Hunter to Connie Corona, Transparency in Utility Bill Charges

• Highlighted public's concern about undefined charges on utility bills labeled as 'miscellaneous', 'delivery', and 'other'.
• Requested Connie Corona and her agency to investigate these charges for transparency before the legislative session.
• Emphasized the need for public awareness about why charges are applied.
• Connie Corona agreed to review and update the committee on utility billing charges & welcomed requests from committee members on specific bills needing investigation.
• Rep. Hernandez Discussed the legislative appropriations request for more resources due to increased caseloads, especially regarding transmission line processing.
• Chairman inquired into penalties for utility service quality during major outages.
• Discussed inclusion of major events in existing penalty measures for service interruptions.
• Senator Zaffirini discussed codifying customer rights to information about service restoration times and emergency contact with providers.

• Explored potential methods for customers to report vegetation hazards, suggesting phone lines and tech-friendly solutions.

▶️ - Senator Zaffirini to Connie Corona, Emergency Communication Plans for Utilities

• Importance of utilities conducting annual emergency drills involving neighboring utilities and local governments.
• Recommendation for pre-emergency communication plans to be required by the legislature or PUC.
• Need for dedicated communication paths and shared plans among partner entities during emergencies.
• Most generation and transmission facilities met the weatherization inspection requirements, with a few exceptions rectified for winter or summer seasons.
• Lessons from international use of 765 equipment include efficient land use and existing U.S. supply chain.
• Efforts to increase public awareness of ERCOT's website and mobile app through expanded social media presence.
• Lack of prepared metrics to demonstrate improved public usage of the website and app; intention to provide them upon request.

▶️ - Senator Nichols to Woody Rickerson, Power Allocation for Data Centers with Dedicated Generation

• Discussion of the growth in power consumption, driven by data centers.
• Some data centers are contracting for their own power generation.
• Two scenarios for supplying power to data centers: co-located behind the generator or via the grid.
• Behind-the-meter generation is subtracted from grid capacity, not adding load to the grid.
• Generation contracted through the grid keeps the generation apparent in reports but can be misleading about availability.
• Concerns about potential congestion in transmission lines and cost allocation.
• Emphasis on the need for improved separation of resources used off-grid and their impact on grid capacity.
• Data centers' power draw can be calculated during peak hours using shift factors and 4CP method.

▶️ - Senator Schwertner to Woody Rickerson, TDU Projection Models and Uniformity

• The current methodology for projecting load can be manipulated, prompting discussions on improving this system.
• Issues with 4CP reductions are noted during the critical months from July to September.
• TDUs use different projection models, highlighting concerns about their accuracy and the lack of uniformity.
• A voluntary large load interconnection process is in place for reviewing loads reported by TSPs.
• Duplications of loads within Texas have been detected and removed, but global duplications remain challenging to address.
• No fees are required for foreign loads during interconnection, pending TSPs' input.
• Concerns exist over the artificial scarcity introduced by current grid management methodologies affecting ancillary services.
• There was an improvement due to process changes in ERCOT's management for summer 2023 and further updates are planned for next year.
• Discussions on large load connections and their impact on the grid show concerns over cost burden on ratepayers without universal benefits.
• Currently, there is no ability to differentially manage or curtail large loads connected to the grid.
• A voluntary registration program exists only for crypto mines.

▶️ - Representative Hunter to Connie Corona, Simplifying Electric Bill Transparency for Consumers

• Representative Hunter expressed concern about electric bill charges being passed to consumers without clear explanations.
• ERCOT has made efforts to educate consumers by providing resources on social media, but Hunter feels this indicates complexity in understanding bills.
• Hunter suggested many consumers, especially those less technologically savvy, might struggle with accessing online resources for bill explanations.
• The primary concern discussed was the burden of costs and lack of transparency in passing costs to Texans.
• There was a discussion about the absence of a 'no harm' certification in Texas to ensure that new projects do not reduce grid megawatts or negatively affect grid function.
• Corona acknowledged the potential benefit of a 'no harm' certification policy for Texas and mentioned a possible legislative solution for data centers to switch to backup power during grid scarcity.
• It was clarified that ERCOT and Transmission Service Providers (TSPs) look at projects from a transmission adequacy standpoint, but Texas lacks a generation adequacy or resource adequacy standard.
• The panel transitioned to include speakers from the Office of Public Utility Council and Potomac Economics to discuss related regulatory and economic issues.

Panel 2 Invited Testimony

▶️ - Chris Ekoh, Deputy Public Counsel, OPUC

• Chris Ekoh introduced himself and mentioned the governor's new public council appointment.
• Clarified a question regarding the cost of ancillary services, mentioning an estimated $12 billion excess cost for ECRS implementation.
• OPUC's annual public meeting scheduled for December 12th was announced.
• Discussion focused on the rising costs of ancillary services, as dictated by the 87th legislature, with an emphasis on balancing reliability and cost.
• Cost of ancillary services rose by 270% between 2020 and 2022 due to increased conservative procurement post-Winter Storm Uri.
• In 2023, costs increased by 32.4% despite decreases in natural gas and energy prices, attributed to the implementation of ECRS.
• IMM suggested that current ECRS levels could be reduced by 52% and non-spin quantities by 35% without compromising reliability.

▶️ - Jeff McDonald, Director, Potomac Economics

• Jeff McDonald, representing IMM for ERCOT and Potomac Economics, discussed reliability focus in Texas.
• Texas utilizes a market-based approach to reliability, aiming to provide price signals that encourage performance and new investment.
• McDonald has been in his role for nine months and offers a fresh perspective on reliability issues.
• Emphasis on two reliability approaches: enhanced resiliency and development of market reliability products.
• Recent assessments focused on ERCOT's operational reliability through studies and reports with the PUC.
• Involvement in developing a new product (DORS) to address forecast timing gaps.
• Worked on improving shortage reserve curves for the upcoming real-time co-optimization market framework for next year.
• Goal is to align procurement and pricing of reliability services with their value to Texans.
• Extended focus over the past two years on these market instruments for increased reliability.
• Positive outcomes from the ECRS process, with ERCOT now better positioned to avoid false scarcity conditions.
• Identified potential for reduced procurement of reserves and lower costs for consumers, working with ERCOT to further reduce these procurements.

Panel 2 Q&A

▶️ - Senator Schwertner to Chris Ekoh, Cost Allocation for Non-Residential Load Growth

• Discussion on overprocurement and reserves impacting Texas electricity costs, noting adjustments post-Winter Storm Uri to maintain affordability.
• Focus on non-residential load growth driven by data centers, crypto mining, oil and gas, and new commercial operations.
• Concerns about resource adequacy, interconnection, cost allocation, and cost causation in ERCOT and PUC programs.
• Mention of House Bill 5066 and NPRR1180, related to substantiated load definitions and visibility in load forecasts.
• Emphasis on the need for accurate load forecasting and potential overforecasting risks leading to overinvestment.
• Concerns raised about lack of standardization in methodologies used by TDUs for load forecasting.
• Discussion on possible financial commitments for large loads before grid connection to address phantom load issues.

▶️ - Senator Zaffirini to Chris Ekoh, Strategies to Prevent Load Shedding

• Chris Ekoh discussed the strategy for avoiding load shedding by focusing on avoiding a 'watch' trigger, which is a precursor to Energy Emergency Alerts (EEA).
• Current operations aim to prevent grid loading close to 3000 megawatts, at which point EEAs and ancillary services are triggered.
• IMM modeling suggests that reducing the procurement of ancillary services can allow the grid to run effectively.
• Concerns were raised about potential overbuilding of transmission infrastructure if the NPRR 1180 is passed, which could lead to unnecessary costs.
• Overbuilding risk is high due to a provision allowing utility officers to request infrastructure based on forecasted load needs.
• Chris Ekoh emphasized the importance of balancing reliability and affordability of the grid, noting the necessity of evaluating cost implications before implementation.
• He highlighted the high cost of some ERCOT programs, such as ECRS, which was more expensive than initially anticipated.

▶️ - Senator Zaffirini for Jeff McDonald, Understanding 4CP and Its Impact on Utility Bills

• Mr. McDonald provided a high-level overview of 4CP, a technique used in transmission cost allocation.
• 4CP was first applied in 1966 for transmission allocation based on coincident peak load driving the need for new transmission.
• Current transmission investments are driven by factors other than peak load, such as demographic shifts, industrial use, and new resources.
• Costs of transmission are currently allocated broadly across Texas ratepayers, which may not be efficient.
• Exploring a more localized cost allocation to avoid broad distribution of costs across all Texans.
• Discussion on expanding coincident peak measures to 12 times per year or from 15 minutes to one hour.
• Increasing the time from 15 minutes to an hour might reduce inefficiency and difficulty predicting peak periods.
• Acknowledgment that 40% of utility bills are tied to transmission costs, with an expectation for this percentage to grow.
• No specific forecast was provided for the future percentage of transmission costs on utility bills.

Panel 3 Invited Testimony

▶️ - Katie Coleman, TAM, TCC, TxOGA, Invited Testimony

• Representatives for Texas Association of Manufacturers, Texas Chemistry Council, and Texas Oil and Gas Association are concerned about large load issues, fearing negative impacts on industrial development.
• There's a need to scrutinize numbers related to electric usage and data center development, especially if they don't align with national expectations.
• Proposals include additional fees for interconnection studies, security requirements, and disclosure of alternative service facilities.
• Stressed the need to differentiate between transmission planning forecast and generation adequacy analysis.
• Emphasized that transmission planning must account for maximum capacity needs, unlike generation adequacy which considers expected peaks with a reserve margin.
• Called for reevaluation of cost allocation methods in transmission investment to ensure they reflect current system needs better than the traditional 4CP method.
• Advocated for consideration of peak demand using a broader definition and for including winter months in analysis.
• Highlighted importance of aligning cost allocation methodology with cost causation.
• Discussed historical colocation practices, emphasizing that industrial support for on-site generation could enhance resource adequacy.
• Expressed readiness to participate in discussions to ensure favorable industrial backed generation development.

▶️ - Julia Harvey, TEC, Invited Testimony

• Julia Harvey represents Texas Electric Cooperatives, which comprises 76 member-owned electric co-ops in Texas.
• Electric Co-Ops are not-for-profit utilities focused on serving member needs, involvement includes retail distribution, wires, transmission, and generation.
• Appreciation was expressed for the PUC efforts on legislative implementation around SB2627 and HB1500.
• The main priority is maintaining affordability and dealing with cost allocation since Co-Ops have no shareholders and are accountable to the people served.
• Concern about cost escalation impacting end users, particularly amidst significant load growth in rural and metropolitan areas.
• Stressed the need for accurate ERCOT load forecasting to support infrastructure development, especially for large loads.
• Emphasis on adjusting transmission cost allocation to prevent disproportionate financial burden on residential end users due to infrastructure serving businesses.
• Acknowledged the obligation to serve large loads despite associated risks, particularly with flexible loads that may avoid transmission costs.
• Highlighted the need to revisit cost allocation under the current consumption-based paradigm.
• Expressed commitment to addressing cost issues and infrastructure build-out collaboratively in the upcoming session.

▶️ - Cathy Webking, TEAM, Invited Testimony

• Kathryn Webking represented TEAM, an industry association of retail electric providers, offering perspectives on serving residential and small commercial customers in Texas.
• Highlighted the benefits of competitive retail service, such as transparency, options, and fixed price contracts for customers.
• Discussed the importance of maintaining the ability for customers to choose the terms of their contracts without speculative pricing for future costs, like the DRRS service.
• Emphasized the need for a one-time adjustment to cover any new costs without burdening current contracts.
• Mentioned the commission's efforts on legislative implementations, particularly customer communication during emergency events.
• Supported the commission's approach to making the communication responsibilities of utilities clear to customers, especially during outages.
• Stressed the importance of the public outage tracker and the need for reliable information to help customers make health and safety decisions.
• Mentioned Senate Bill 3's power alert system and the potential for legislative adjustments to allow broader communication.
• Concluded with appreciation for the opportunity to testify and a willingness to answer questions.

▶️ - Walt Baum, Powering Texans, Invited Testimony

• Walt Baum expressed that the grid is more reliable than at the start of the last session.
• Acknowledged contributions of the legislature, PUC, and ERCOT in improving reliability.
• Mentioned progress on implementing bills passed in 2021 and 2023.
• Highlighted the Texas Energy Fund's role in supporting new dispatchable generation.
• Praised the PUC's adoption of a reliability standard following House Bill 1500.
• Emphasized the need for ancillary services tools to meet the new reliability standard.
• Powering Texans member companies are advancing in the Energy Fund's due diligence phase.
• Concern about the Energy Fund's potential impact on the competitive market if it continues indefinitely.
• Stressed the need for stability and caution against numerous changes that might slow current developments.
• Recognized the importance of encouraging data center development in Texas.
• Believes data center development can coexist with grid reliability and benefit the local economy.
• Sees energy market signals as aligned with supporting new generation developments due to load growth.

▶️ - Mark Bell, AECT, Invited Testimony

• Mark Bell represents the Association of Electric Companies of Texas (AECT).
• Acknowledgement of efforts by the PU), ERCOT, and stakeholders in implementing legislative measures.
• House Bill 1500 continues the PUC until 2029 and introduces various industry changes, including new transmission requirements and market operation changes.
• Introduction of the Dispatchable Reserve Reliability Service (DRRS) to encourage new and existing thermal plant operations.
• House Bill 2555, the Texas Resiliency Act, enables utilities to plan for grid resiliency investments.
• The first resiliency plan under House Bill 2555 is approved by the PUC.
• House Bill 5066 revises electric growth evaluation and requires a transmission plan for the Permian Basin.
• Senate Bill 2627 establishes the Texas Energy Fund (TEF), with ongoing application reviews by the PUC.
• The TEF includes $1 billion in grants for non-ERCOT utilities and $1.8 million for the Texas Power Promise Program.
• Overall legislative actions aim to enhance grid reliability and resilience.

Panel 3 Q&A

▶️ - Senator Zaffirini to Cathy Webking, Mandating Emergency Plans by Statute or Rule

• Cathy Webking discussed the necessity of communication plans.
• She supports mandating communication plans by statute or rule.
• Believes the Commission should have statutory authority for these plans.
• Would support clarification or codification if needed.

▶️ - Senator Zaffirini to Katie Coleman, Expanding on Net Peak Analysis

• Discussion on the difference between absolute maximum demand and net peak load, with net peak load affected by low renewable output.
• Transmission planning now considers net peak load more than absolute peak demand.
• Congestion-related projects are often geographically constrained, exemplified by Houston's electricity import needs due to strict emissions restrictions and water constraints.
• Cost allocation in transmission, such as the postage stamp allocation, aims to avoid disadvantaging economically significant areas like Houston.
• New factors, including net peak demand, are driving transmission development beyond just absolute peak demand.
• 4CP methodology's economic impact is about 5% of the 85 gigawatt system, benefiting companies but not significantly affecting total demand costs.
• 4CP response and transmission cost avoidance are often practiced by various customers, including commercial entities and municipally owned utilities.
• There are reliability benefits from the 4CP regime because it incentivizes demand reduction during scarcity periods.
• Suggestion to consider non-coincident peak basis cost allocation to ensure equitable transmission cost distribution.

▶️ - Senator Zaffirini to Walt Baum, Requiring Data Centers to Provide Their Own Energy

• Mr. Baum mentioned some data centers are providing their own energy.
• Consideration of the state requiring data centers to provide their own energy.
• Flexibility is needed in structuring deals for data centers providing their own energy.
• Concern that over-prescription by the state could drive demand to other states.
• Importance of ERCOT's visibility into the energy provisions of data centers.
• Discussions are ensuring ERCOT is involved before decisions are made.
• Consideration of large loads like cryptocurrency mining in energy requirement discussions.
• The PUC and ERCOT have been working on defining and managing large flexible loads.

▶️ - Senator Schwertner to Walt Baum, Position on No Harm Certification for Co-Located Generation

• Discussion on the position regarding no harm certification for co-located generation with large load.
• Senator Schwertner asked about any negative effects on overall grid reliability or net loss of dispatchable generation due to co-located generation.
• No firm position was stated; concerns about maintaining Texas's image as open for business were noted.
• Mention of the importance of establishing standards for new load requirements.
• Acknowledgement that determining these standards falls within the appropriate jurisdiction.

5 - Public Testimony

▶️ - Glenn Lyons Public Testimony

• Glenn Lyons, an ExxonMobil retiree, spoke about challenges faced by the ERCOT committee.
• Lyons noted that ERCOT's market design assumed all key parameters were known, leading to issues with adapting to new parameters.
• Compared to more flexible markets, the electricity sector's slow adaptation is problematic, especially with rapid changes such as the rise of data centers.
• Lyons proposed Consumer Regulated Electricity (CRE) as a solution for rapid growth issues, particularly for data centers.
• CRE utilities could operate independently from the regulated grid, offering faster adaptation without adding costs or reliability concerns to existing grids.
• This proposed model would not require Public Utility Commission (PUC) oversight, allowing for quicker implementation.
• Lyons provided a written testimony, a one-page introduction to CRE, and a draft bill concerning this idea.

▶️ - Brent Bennett Public Testimony

• Brent Bennett from the Texas Public Policy Foundation addressed the committee.
• Emphasized the economic future of Texas depends on meeting reliability expectations at the lowest cost.
• Highlighted two critical points from House Bill 1500, Section 23.
• Discussed the PUC report on transmission and backup power costs for dispatchable and non-dispatchable generators.
• Emphasized the importance of cost allocation for ancillary services not currently addressed, as mandated by Senate Bill 3.
• Mentioned market price volatility increases with the addition of wind and solar energy.
• Current research indicates a billion-dollar impact on consumers in 2023 due to wind and solar.
• Discussed market issues caused by the single market clearing price not accounting for wind and solar variability.
• Exacerbation of market problems due to federal subsidies for wind and solar.
• Reliability standards per HB1500, Section 23 point towards solutions, but firming must apply to all generators.
• Concern that applying firming only to new generation won't address existing 40 gigawatt wind and solar by 2026.
• Studying economically efficient ways to use firming to benefit ratepayers.

▶️ - Ryan Scott Public Testimony

• Ryan Scott represented Consumer Energy Alliance (CEA), established in 2005 for advocating sensible energy policies for families and businesses.
• CEA advocates for affordable, reliable, and environmentally friendly energy policies benefiting Texans.
• They have a network of 400 member companies and 500,000 individuals nationwide.
• Emphasized balance between traditional and renewable energy sources to meet diverse consumer needs.
• Urged the committee to focus on affordability, reliability, and environmental stewardship in energy policy implementation.
• Critiqued the grid's reliability post-Winter Storm Uri and other natural disasters, highlighting its impact on the Texas economy.
• Discussed the need for resilient and reliable infrastructure investment for the future.
• Utilities are working on improving resilience without increasing consumer burden.
• Acknowledged the committee's hard work in overseeing efforts to harden the grid and reduce outages.

▶️ - Larry Lindenschmidt Public Testimony

• Larry Lindenschmidt introduced himself as the Executive Director of the Hill Country Institute and a volunteer with the Citizens Climate Lobby.
• He emphasized the importance of considering extreme weather events, based on a report by the Texas State Climatologist, for grid reliability in Texas.
• Thomas Patock from Texas State University provided insights into climate change and its human-driven impacts on weather events.
• Highlighted risks include drought, wildfires, tornadoes, derechos, floods, hurricanes, and associated damages.
• Stressed the importance of integrating climate science into grid planning to prevent costly long-term infrastructure rebuilding.
• Advocated for funding $2 million to the Public Utility Commission of Texas (PUCT) for a climate action plan.
• Recommended building more transmission lines and ensuring they are built to withstand extreme weather specific to their locations.
• Public testimony was closed after Mr. Lindenschmidt's presentation, and members expressed appreciation for the discussion.
• The meeting underscored the need for diligent planning ahead of the upcoming legislative session.

6 - Recess

• The Grid Reliability Legislative Oversight Committee has initiated a recess.
• The meeting will resume when called by the chairs.