Meeting Summary - 06/13/24 Open Meeting

0.1 - Consent Agenda

• Items 2-6, 9, 11, 13, 14, 16, 18-21, and 24, 26, 47, and 49 were placed on the consent agenda.

1 - Docket No. 53063; SOAH Docket No. 473-22-2236.WS – Petition by Outside City
Ratepayers Appealing the Water Rates Established by the City of Leander. (Final Order) Grace Lager

• A SOAH proposal for decision is before the commission, with filed exceptions and replies.
• The SOAH ALJ recommended no changes to the PFD.

• John Carlton, on behalf of the petitioners, argued that adhering to the generally accepted rate making principles is crucial in this case.
• Principles set out in Water Code 13.043-J need to be upheld, including the requirement for rates to be just, reasonable, non-discriminatory, and sufficient.
• A map (Exhibit ORP4) showing the different rates being charged to residents in and outside the city limits was presented, claiming that there is no justification for these differences in costs.
• He referenced the cost evaluation principles established in the Town of Wood Lock case, arguing that these rates are unreasonably preferential, prejudicial, and discriminatory.
• Service of similar character 
• Rates should be based on customer class
• Payment of property taxes is not a consideration for rates
• Customer usage must be the same
• City of Austin Appeal Docket established a principle that if using a budget, the city must show that the budget is based upon actual costs consistent with the Houston Lighting and Power case ruled on by the Supreme Court. 
• Rate base is overstated as it has not been adjusted for contributions in construction.
• Rate case expenses lack detail typically required and should be shared amongst all 24,000 customers, not just the outside city customers.

• Scott Smith with the City of Leander explained this is an appeal to a 2021 decision to establish a revenue neutral three-tier rate structure implemented to encourage conservation.
• 95% of Leander's customers enjoyed a rate reduction, while the 5% who saw an increase were those using over 21,000 gallons of water per month.
• Rancho Sienna from where the petitioners reside, is the furthest from the source of water and thus the most expensive to deliver.
• TheBrushy Creek Regional Utility Authority was formed as the cities of Leander, Cedar Park and Round Rock joined forces to increase economies of scale
• Leander adopted a 10% rate differential between inside city and outside city customers, based on 2017 study that identified the greater costs and risks of servicing customers outside the city limit.
• A 2020 long-range multi-rate plan finalized in July 2021, outlined options including inverted block rates, wherein customers using less water paid a lower rate and those using more water paid a higher rate.
• 2022 Budget numbers were used as the budget had been approved by the City Counsel.
• The ALJ found that the evidence presented by Leander was credible and that the rate structure, including the 10% rate differential, was just and reasonable, and common in Texas.
• Leander’s 10% rate differential is one of the lowest in the state with the average being 47% while the actual cost differential is 18.6%
• As a provision of PURA disallows normal cost of service regulations for municipally owned utilities, American Water Works Association M1 manual was used meaning cash basis was used to deter the just and reasonable rates for the inside and outside customers then used the utility basis to compare calculations for customers outside the city limits.
• Leander sought to recover its rate case expenses through a surcharge to its customers, with the ALJ agreeing, but acknowledged the Commission's lack of jurisdiction inside the city limits.

• Commissioner Jackson inquires about how the city council addressed the debt service requirements from the Texas Water Development Board loans when setting the rights in 2021.
• Leander confirms that the city council did consider the debt service requirements.

• Commissioner Glotfelty asked what costs and rate were applied to the TWDB loan
• Leander pledged sufficient revenues when applying for the loan

• Glen Imes with Commission Staff reaffirms support for their positions in the briefing and exception to the PFD and still respectfully disagrees with the conclusions in the PFD
• Commissioners express willingness to delay decision on the matter to a future open meetings for further review

7 - Docket No. 54972 – Application of the City of Marble Falls and Travis Lakeside Inc., dba Flat Rock Ranch, LP dba Capstone Water System for Sale, Transfer, or Merger of Facilities and Certificate Rights in Burnet County. (Final Order) John Kelly

• A proposal for decision is presented
• Shelah Cisneros filed a memo citing a correction 
• Chairman Gleeson filed a memo 
• Commissioner Cobos appreciates Chairman Gleeson's memo and indicates the difference of rates inside and outside of city limits is an important issue.

• There was a motion to modify the PFD to find that notice was not proper and there was good cause to waive the notice requirement to the extent notice was deficient
• The motion was made and seconded, and it prevailed with all in favor

8 - Docket No. 55582 – Petition of Blue Star Land, LP to Amend Rose Hill Special Utility District’s Certificate of Convenience and Necessity in Kaufman County by Streamlined Expedited Release. (Final Order) Austin Spraetz

• Chairman Gleeson filed a memo in this docket regarding the proposed order.
• Agreement with the memo filed.

• Motion to grant Blue Star's petition to remand proceeding to docket management for further processing was entertained.
• The motion was carried with a vote in favor.

10 - Docket No. 55807 – Petition of Squeaky Lomas, LP to Amend Rose Hill Special Utility District’s Certificate of Convenience and Necessity in Kaufman County by Streamlined Expedited Release. (Final Order) Austin Spraetz

• A revised proposed order and a memo from Chairman Gleeson are presented for consideration.

• Motion to grant Squeaky Lomas' petition to remand proceeding to docket management for further processing consistent with Chairman Gleeson’s memo.
• Motion made, seconded, and approved with all in favor.

12 - Docket No. 56354 – Application of Undine, LLC for Authority to Change Rates. (Order on Appeal of Order No. 3) Alex Scheifler

• Jamie Malden on behalf of Undine, LLC is asking ERCOT to deny staff's appeal of Order No. 3, as it reverses Commission precedent and imposes burdens on regulated utilities.

• Abandons long standing practice to evaluate rate cases applications on a case by case basis
• Imposes a burdensome 90 to 120-day old test year standard which Undine nor many other regulated utilities cannot comply with.
• ALJ found the law does not support staff’s purported additional evidentiary burden on regulated utilities and granting the appeal would remove flexibility found in the statuary definition
• Staff's position would prevent the Commission from granting a good cause exception if the utility does not meet its strict standard
• ALJ found Undine test year does comply with the rule
• Staff’s appeal would cause delay of systems in dire need of rate relief after filing a previously prepared rate case in 2022 was delayed due to system improvements
• Undine requests a good cause exception if their test year does not meet the rule, citing the public interest and previous Commission precedent.

• Ed Grisham expressed concern about the proposed 100% rate increase for water services in his subdivision

• Test period used to justify the rate increase was cherry-picked for a drought and did not accurately represent normal conditions
• Grisham mentioned the lack of infrastructure improvements in the last 20 years despite the proposed 100% rate increase
• He highlighted the poor quality of water, stating it's undrinkable and used only for non-consumption purposes
• Grisham questioned the justification for the rate increase without any accompanying improvements

• Scott Miles on behalf of Commission Staff appeals the ALJ's finding that Undine was not required to justify the test year time frame.
• Staff argues that an implicit requirement exists for the applicant to provide information regarding the availability of operating data - justification of test year
• Burden to justify the test year should lie with the applicant and not with staff or interveners.
• Test using data from the most recent 12 months of operating data is not an immense evidentiary burden.
• Staff requests the commission to overturn the ALJ's order on the test year and find Undine's application deficient.
• If the commission rules in staff's favor, they recommend Undine to file an amended application with a test year reviewed for compliance based on the filing date of that amended application.

• Motion to extend time to act on appeal was made, seconded and approved.

15 - Docket No. 55277 – Compliance Filing of Southwestern Electric Power Company to Include Rate Case Expense Rider in Accordance with Docket No. 51415. (Final Order) Austin Spraetz

• A revised proposed order is presented, along with a filed memo by Chairman Gleeson recommending the reversal of the ALJ.

• Motion to deny SWEPCO's request to implement a rate case expense rider and direct docket management to prepare an order to this effect
• Includes language specifying that SWEPCO may request recovery of these rate case expenses in the next base rate case
• Motion passed with all in favor and none opposes

17 - Docket No. 56165; SOAH Docket No. 473-24-12812 – Application of AEP Texas Inc. for Authority to Change Rates.(Order on Appeal of SOAH Order No. 7) Austin Spraetz

• Commissioner Glotfelty provided a memo in this docket and discussed along with Item 34 Project 54224

• The issue involving distributed storage assets being put on the system using four different structures and rates by different utilities has been ongoing for almost two years.
• Proposes to approve the AEP docket, deny the appeal and commit to finalize issues of interconnection costs and cost allocation for DERs by the end of the year.

• Motion to deny the appeal of Order No. 7 in the docket summit was entertained.

• A motion and a second were made to deny the appeal.
• The motion was approved, and the appeal of Order No. 7 in the docket summit was denied.

19 - Docket No. 56242 – Settlement Agreement and Report to the Commission Regarding Specialized Property Management, Inc.’s Violations of PURA §§ 17.004(a), 39.102, 39.107, and 39.352(a), and 16 TAC §§ 25.107(a), and 24.475. (Final Order) David Grimson

• Shelah Cisneros confirmed that there were no public comments for any of the rules or projects.

22 - Docket No. 56429 – Application of Texas-New Mexico Power Company for an Extension of Rate Filing Requirement under 16 TAC § 25.247. (Discussion and possible action, including Preliminary Order) Alex Scheifler

• The request for referral to SOAH in this proceeding is discussed.
• Uncertainty on whether to draft a preliminary order for referral to SOAH and seeking guidance from the Commission is noted.
• There seems to be agreement that there are no factual issues that need to be litigated.
• It is concluded that a referral to SOAH may not be necessary in this case and docket management is suggested to determine the best next steps on how to proceed.

• Commissioner Cobos is in agreement with the decision to delay the rate case as long as they are not over earning and defers to docket management 

• Motion to deny the request for a referral to SOAH and direct processing by docket management made.
• Motion seconded and approved.

23 - Docket No. 56439 – Settlement Agreement and Report to the Commission Regarding Southwestern Electric Power Company’s Violations of 16 TAC § 25.52, Related to Reliability and Continuity of Service in Reporting Year 2022. (Final Order) Krishna de la Cruz

• Proposed order with one agreed correction from the parties incorporated by the ALJ.
• Counsel filed a memo recommending changes to the final order filed.
• Commissioner expressing satisfaction with the proposed order and noted company's efforts to take corrective action.

• Commissioner Glotfelty acknowledged SWEPCO's efforts in vegetation management but not a huge success as it takes years to be effective
• Mentioned the challenge of balancing operation and maintenance dollars with capital investment in utilities
• Suggested future consideration of comparing and contrasting data processing methods 
• Expressed support for approving the order

• Motion to approve the proposed order was made and seconded.
• All in favor, motion passes.

29 - Project No. 55999 – Reports of the Electric Reliability Council of Texas. (Discussion and possible action)

• Staff's Harika Basaran with update on Summer RFP
• ERCOT Staff and IMM have agreed that ERCOT developed guardrails to evaluate cost effectiveness of offers.
• An agreed upon methodology to set spending limit based on sound economic principles has been established.
• Budget is not expected to be public before the bids are due today.
• Staff developed protocols to attract more new demand response with increased transparency based on lessons learned from Winter and Summer RFPs.

• Chairman Gleeson agrees with the proposal
• He is comfortable with making the budget public afterwards.
• The methodology for the budget is considered good and grounded in reality and puts the right number.
• Emphasis on being ready to adjust the budget in the future if needed.

• Commissioner Cobos supports the demand response process in ERCOT protocols.
• She suggests giving stakeholders the opportunity to provide comments based on lessons learned from the winter.
• Emphasizes the need to create a robust process for demand response.
• Sees opportunity for optimization of demand response.

• Commissioner Glotfelty believes ERCOT should create a program and protocols with input from stakeholders.
• The program should be well-defined and not change with every instance.

• Chairman Gleeson agrees with the need to create a demand response protocol
• Acknowledges that the protocol process can be time-consuming.
• Open to revisiting the issue on a one-off basis if circumstances necessitate.

• Commissioner Jackson highlights the significance and value of seeking new sources of demand response
• Points out that the initiative will provide value during specific and steady state conditions.
• Stresses the ongoing importance of demand response for overall system reliability and efficiency.
• Expresses support and approval for the proposed order in project number 54445.

• Motion to adopt the proposed order in the docket was put forward.
• There was a motion and a second.
• The motion prevailed with all in favor and no opposition.

31 - Project No. 54584 – Reliability Standard for the ERCOT Market. (Discussion and possible action, including Proposal for Publication) Werner Roth, Chris Brown, and Allison Fink

• ERCOT and Commissioner Cobos filed memos in this docket.

• Commissioner Cobos emphasized the need to release a proposal for stakeholder comment but expressed lingering questions about exceedance tolerances associated with magnitude and duration.
• What are the unintended consequences of having a more or less restrictive reliability standard?
• What are the advantages and disadvantages of adding a specific exceedance tolerance to the rule?

• Commission Staff’s Werner Roth discussed the concept of explicit and assumed exceedance probability in relation to reliability standards.
• Not having an explicit exceedance probability would set the assumed exceedance probability at 0%.
• Having an exceedance probability could create a more relaxed reliability standard, allowing for some model runs to go over the set magnitude.
• Mentioned the need to continually evaluate the exceedance probability as the megawatts that can be rotated out continues to change and how often it should be evaluated.

• Executive Director Connie Corona emphasized the importance of commenters to include specific language in their recommendations for rules.

• ERCOT’s Pete Warnken provided an update on Brattle’s CONE study
• Reference technology is the most important decision.
• LM 6000 unit is found to be the dominant reference technology, with 98% of capacity added being of this type.
• Complications arise due to equipment discounts and refurbished equipment.
• Other technologies such as combined cycle and frame CT are also considered for sensitivity purposes, but LM 6000 is predominant.

• Rebecca Zerwas acknowledges the complexity of the issue and proposes briefings before the next open meeting on July 11.

• Commissioner Cobos is concerned about 
• Potential delays to the cone study and its impact on the adoption of reliability standards by ERCOT.
• Supply chain issues indicating availability for a LM 6000 is not until 2028 or 29.
• Recommends Brattle studying technology that can be obtained.
• ERCOT suggests delays in the cone study may have some impact but should not significantly affect the ability to adopt reliability standards by the end of the summer.
• The implication to the peaker net margin and threshold exists, but using different cone values and reference technologies may cause some delay in the study, but the impact should not be significant.
• Brattle has already done much of the study, and additional time would be required to come up with another reference technology and cone value, but it should not be extensive.

• ERCOT's Matthew Arth plans to file the native Excel model used for a study along with the final report, so stakeholders can run their own sensitivities on the numbers.

• Commissioner Glotfelty expressed support for Commissioner Cobos's remarks  emphasizing the need for additional references and considerations for future technologies in ERCOT, particularly with regards to non-attainment zones like Houston.

• Commissioner Jackson: emphasized the need for a combination of technology will be necessary for future reliability.
• Data being generated and shared with stakeholders will allow for input on various options.
• The reliability standard team is working towards a final decision on a rule for the August 29th open meeting, which is crucial for follow-on studies.
• Will affect the cost benefit analysis for PCM
• Emphasized need for all feedback and questions in advance of the July 11th Open meeting.

• Motion to approve the proposal for publication consistent with Commissioner Cobos memo and previous discussion
• Motion was seconded and approved with all in favor

32 - Project No. 55837 – Review of Value of Lost Load in the ERCOT Market. (Discussion and possible action). 

• ERCOT’s Matt Arth provided the update.

• Survey period concluded with good results.
• Soft launch of survey on March 26th, full launch on April 9th.
• High response rates for residential and small to medium commercial segments.
• Low response rates for large commercial and industrial segment.
• Working with Berkley Lab and University of Texas to get ICE Calculator results for large commercial and industrial segment.
• Brattle working on developing models for assessing data.
• Draft results expected by mid to late July, final study results by end of August.
• Working closely with commission staff.

33 - Project No. 55845 – Review of Ancillary Services in the ERCOT Market. (Discussion and possible action) Harika Basaran

• Harika Basaran requested a one-month extension on the project.
• Final results by the end of September or early October .
• Workshop scheduled in mid-October after one of the open meetings.
• Despite the delay, the deadline for making the study appendix in the agency report submitted to the ledge will still be met.
• A minimum of two TAC updates were proposed in line with Commissioner Cobos earlier request: June and a workshop in August, while potentially skipping the July update to focus on working on the actual study.
• Stakeholder feedback is crucial and the delay is acceptable in order to achieve the goal of completing the study and getting enough stakeholder feedback.
• The delay proposal was supported by the Commissioner Cobos and others.

34 - Project No. 54224 – Cost Recovery for Service to Distributed Energy Resources (DERS). (Discussion and possible action)

• Commissioner Glotfelty emphasized the urgency of resolving Docket 54224 quickly to address distributed storage, interconnection, and cost allocation issues.

• PUC's Deputy Executive Director Barksdale English emphasized the need to prioritize the future planning of rules and projects agreed that Project 54225 should be prioritized.
• ERCOT’s Division Director of Rules confirmed the commission’s goal of completing rulemaking by the end of the year.

35 - Project No. 53404 – Temporary Emergency Electric Energy Facilities and Long Lead Time Facilities. (Proposal for Publication) Julie Blocker and Zachary Dollar

• Section 39.911 of the Public Utility Regulatory Act established two new mechanisms for TDUs in restoring power to distribution customers affected by significant power outages
• Commission staff proposed 16 TAC 2556 relating to temporary emergency electric energy facilities (TEEF)
• Proposed 2556 establishes a process for TDUs to lease and operate TEEF, colloquially known as mobile generation, to aid in restoring power to a utility's distribution customers during significant power outages.
• Requires TDUs to obtain pre-approval for the amount of generation capacity.
• Defers to commission evaluation of reasonableness and necessity during the next rate case.
• Requires TDUs to provide the commission with a report after every deployment of generation capacity containing information such as date and time of deployment, description of events that resulted in significant power outage, and the number and type of critical load affected.
• Commission Staff proposed 16 TAC 2559 which establishes a process for a TDUs to procure, own, operate, or enter into a cooperative agreement with other TDUs to procure, own, and jointly operate long lead time transmission and distribution facilities for restoring power after significant power outages.
• Commission staff recommends the commission approve the proposal for publication in the Texas register.

• Commissioner Glotfelty requests to change the rule or request stakeholders to include more detail in the discussion item. 
• Granular detail such as purchasing 25 2.5 Megawatt units will allow the commission to understand how the units can be used across the system.

• Commissioner Cobos is seeking feedback from stakeholders on the appropriateness of the proposed framework as it deviates from the process set for mobile distributed generation.
• Emphasizes the importance of transparency and granularity in the acquisition, costs, and use of these facilities.

• ERCOT’s David Smeltzer responded
• Discussion regarding the difference in process.
• Pre-approval process is new with the possibility of adjusting the granularity and reporting requirements.
• Granularity of reporting requirements can be increased and decreased.
• Proposed questions for stakeholders so they may comment on the range of implementation strategies being explored.
• Reference to a November workshop on pre-approval and varied opinions from different parties.

• Commissioner Jackson suggests a pre-approval process to facilitate investment.
• Drawing a parallel with resiliency planning, where having the plan approved provided companies with a sense of comfort to make the investment.
• Questioned benefits of making the changes.
• ERCOT clarified that the discussion targeted the pre-approval process in subsection C.

• Agreement to memorialize the discussion in questions and await public input.

• Motion to approve proposal for publication was entertained and approved.
• Consensus was reached among the participants.
• Motion was passed with unanimous agreement.

44 - Project No. 2 – Document Filing of Open Meeting Transcripts and Minutes. (Discussion and possible action)

• Chairman Gleeson asks for approval of minutes for the May 2nd Reliability Standard work session given that there was no transcript.
• Motion to approve the meeting minutes for the Reliability Work Session on 05/02/2024 was made and seconded.

• All members voted in favor to approve the minutes, and the motion passed.

50 - Discussion and possible action regarding agency review by Sunset Advisory Commission, operating budget, strategic plan, appropriations request, project assignments, correspondence, staff reports, agency administrative issues, agency organization, fiscal matters and personnel policy. 

• Application period for the Texas Energy Fund has opened
• A dedicated TEF support team is available to field and respond to applicant questions.
• Program guidance materials and living FAQs will be updated based on received questions.
• Materials accessible at www.txenergyfund.texas.gov, including Program Manuals and FAQs.
• Interested parties are encouraged to submit questions through the website for comprehensive information.
• Consideration of additional communication methods such as webinars for effective information dissemination.

• Shelah Cisneros discussed the open meeting schedule for the commission
• Proposed canceling the June 27th open meeting to prepare for the July 11th meeting
• Chairman Gleeson Confirmed with the commissioners that there are no pressing issues necessitating the June 27th meeting and suggested canceling it
• Commissioners agreed to cancel the June 27th meeting