Meeting Summary - 08/20/24 Board of Directors Meeting

1 - Call General Session to Order - Vice Chair - Bill Flores

2 - Notice of Public Comment, if Any Discussion - Vice Chair - Bill Flores

• No Public Comment

3 - Consent Agenda Vote - Vice Chair - Chad V. Seely

• NPRR1215 was removed from the consent agenda and will be discussed under agenda item 7.1.2.
• The TAC report includes revision requests unanimously recommended for approval and selected for additional discussion.
• The board approved the consent agenda with the exception of NPRR1215.

3.1.1 - NPRR1216, Implementation of Emergency Pricing Program - Vote - Chad V. Seely

• NPRR1216 addresses the implementation of the emergency price program as a result of a PUC rulemaking (Project 54585)
• The program has a budget impact ranging from $175,000 to $225,000.
• Implementation will occur in two phases.

3.1.2 - NPRR1217, Remove Verbal Dispatch Instruction VDI Requirement for Deployment and Recall of Load Resources and Emergency Response Service ERS Resources - Vote - Chad V. Seely

• Budget impact between $10,000 to $20,000.

4 - June 18, 2024 General Session Meeting Minutes - Vote - Vice Chair - Bill Flores

• Motion to approve June 18, 2024 meeting minutes passed.

5 - CEO Update Discussion - Pablo Vegas

• Pablo Vegas provided the CEO update.
• Upcoming market design analysis focusing on reliability, resiliency, and efficiency of the ERCOT market.
• Current state of mitigations for the new South Texas interconnection reliability operating limit established in March.
• Update on the progress related to the Permian Reliability plan and considerations for the larger 2024 regional transmission plan.
• Operational highlights: Aug 20 operation is likely one of the peak days this summer with significant differences from last summer's weather and resource mix.
• Increase in energy storage, solar, and wind resources contributing to less scarcity conditions.
• Future market design framework discussed to provide context for market features and services.
• Framework to evaluate ERCOT market design qualitatively and quantitatively includes 7 attributes, slide 4 of the update.
• New South Texas IROL update: additional transfer capabilities projects endorsed by ERCOT board, expected completion between 2027-2029.
• Permian Basin reliability plan filed with the PUC as per 88R-HB5066, with a projected load of 23,700 MW by 2030.
• Development of the 2024 regional transmission plan to address forecasted load growth including high voltage transmission lines options.
• Discussion on the timeline for 765 kV vs. 345 kV transmission projects and supply chain considerations.
• ERCOT’s planning and coordination with stakeholders and transmission developers emphasized to address evolving needs and supply chain timelines.

5.1 - Update on CPS Energy Reliability Must-Run RMR and Must-Run Alternative MRA Process Discussion - Pablo Vegas / Woody Rickerson / Chad V.Seely

• Update on CPS Energy RMR and MRA process.
• Background and context of the Braunig units operated by CPS in San Antonio undergoing RMR evaluation due to proposed suspension of operations.
• Issues unique to this situation related to early repair and continued operations during winter/summer seasons.
• Trigger of reliability analysis under PUC rules finding deficiencies in ERCOT system due to suspension.
• Explanation of the RMR analysis methodology focusing on transmission reliability rather than capacity.
• Considerations for temporary fixes like new transmission lines or units until proper mitigation is in place.
• Two-year necessity of the CPS units until CPS transmission projects come online in summer of 2027.
• Current RFP for must-run alternatives is open and timeline extended to allow more industry response.
• Board has to decide by December whether to go with RMR or alternatives based on risk assessment and reliability analysis.
• Ongoing coordination with CPS regarding maintenance schedules and inspection of units before April 1, 2025.
• Possible outage of one of the units (412 MW unit) for inspection to understand issues before RMR commences.
• Consideration of lost opportunity costs if units are taken out for inspection early.
• ERCOT staff proposed to take an outage for inspection, working with CPS for detailed framework and timeline.
• Addressing the challenge of methodology for calculating lost opportunity costs.
• Importance of evaluating risk and operational characteristics for financial assessments to be fair for Texas consumers.
• Examining if current MRA framework offers proper economic incentives, potential needs to revisit RMR framework for future situations.
• ERCOT will continue to negotiate and draft agreements ensuring fairness and clear communication with CPS.

6 - Board Education – Thermal Generation Development in ERCOT Discussion - Dave Maggio

• Introduction by Dave Maggio on the focus of the discussion: incentives for generation development, specifically thermal resources.
• Incremental increase in gas technologies in the ERCOT market, with a continued focus on renewables and storage.
• Discussion on factors impacting the outlook for generation development, including both improvements and impairments.
• Comparative cost analysis across different technologies shared, mentioning the levelized cost of energy (LCOE) provided by Lazard.
• Timeline of project development discussed, highlighting the median duration of around two years for the interconnection agreement process.
• Emphasis on the importance of a reliability standard and updates on ERCOT's work with the PUC.
• Highlighting load growth and its implications for generation development.
• Discussion on impairments to outlook, such as EPA rules and cost of new entry (CONE).
• Comparison of historical Peaker Net Margin (PNM) to current CONE to gauge investment signals.
• Future-focused approach on market design evaluation, especially considering a comprehensive framework for evaluating grid needs and market incentives.

7 - TAC Report - Discussion - TAC Chair - Caitlin Smith

• Caitlin Smith provided the TAC report.
• Voted unanimously to recommend approval of ten revision requests.
• Three of the ten revision requests had opposing votes and were discussed further.
• Endorsed the Oncor Temple Area Regional Planning group project (Option Five).
• Initiated discussions with stakeholders on the 2025 ancillary services methodology.
• Plan to vote on the ancillary services methodology in September to present it to the board in October.
• Workshop planned after August TAC meeting, concerning the ancillary services study from the 87th legislative session (87R-SB3)
• Discussing stakeholder process improvements to enhance transparency.
• Upcoming workshop planned for September 5.
• NOGRR245 item not previously in front of TAC, with updates provided by ERCOT.
• Focus on key issues for NOGRR245 with possible feedback and consensus needed by February.

7.1 - Non-Unanimous and Other Selected Revision Requests Recommended by TAC for Approval - Vote - Vice Chair

7.1.1 - NPRR1190, High Dispatch Limit Override Provision for Increased Load Serving Entity Costs - Vote - Vice Chair - Caitlin Smith

• NPRR1190 focuses on high dispatch limit overrides for increased load serving entity costs.
• Adds provision for recovery of financial loss from manual high dispatch limit overrides aimed at reducing real power output for QSC load obligation.
• Current protocol allows compensation for day-ahead market obligations and affected bilateral contracts.
• NOEs struggle to recover costs due to self-arrangement obligations.
• NPRR1190 aims to address this issue.
• TAC approved NPRR1190 on June 24.
• Six opposing votes from the consumer segment and one abstention from the independent retailer segment.
• Opposers argue it contradicts nodal market design and might reward over-scheduling of undeliverable power, counter to energy-only market incentives.

7.1.2 - NPRR1215, Clarifications to the Day-Ahead Market DAM Energy-Only Offer Calculation Vote - Vice Chair - Caitlin Smith

• NPRR1215 relates to clarification of the Day-Ahead Market (DAM) energy-only offer calculation.
• The proposal was unanimously approved at the June TAC meeting.
• ERCOT filed comments on August 1 to correct a formula error.
• ERCOT discussed this plan at the July TAC meeting and outlined their intention to file comments and address any concerns.

7.1.3 - NPRR1219, Methodology Revisions and New Definitions for the Report on Capacity, Demand and Reserves in the ERCOT Region CDR – URGENT - Vote - Vice Chair - Caitlin Smith

• Discussed NPRR1219 methodology revisions and new definitions for the Capacity, Demand, and Reserves (CDR) report.
• Changes include revised methodologies for preparing the CDR and updated release schedules.
• A significant change requires switchable generation resource owners to provide information on unavailable switchable units for all seasons, not just summer and winter.
• Part of ongoing reform efforts on CDR since Winter Storm Uri.
• Alignment with Public Utility Commission discussions and previous market participant inputs, specifically the switch to the ELCC methodology.
• Two opposing votes from the consumer segment and four abstentions from the consumer, independent generator, and independent power marketer segments.
• Opposition due to the complexity of ELCCs and related policy issues connected to the reliability standard process at the Public Utility Commission.
• Urgency noted for applying changes to the December CDR.

7.1.4 - NPRR1230, Methodology for Setting Transmission Shadow Price Caps for an IROL in SCED – URGENT - Vote - Vice Chair - Caitlin Smith

• Establishes shadow price cap for congestion impacting an IROL.
• Enables ERCOT to manage power flows using existing operational and market tools instead of manual intervention.
• Manual intervention introduces operational risk during periods of system stress.
• Referenced an issue on September 6 2023 during the EEA event.
• Two opposing votes from cooperative and municipal segments.
• Four abstentions from cooperative and independent retail provider segments.
• Opposition due to higher costs in ERCOT's analysis compared to the current manual solution.
• Other opposing votes cited increased cost to specific load zones.

7.2 - Reliability and Markets R&M Committee Recommendations on Non-Unanimous and Other Selected Revision Requests - Discussion - R&M Chair - Bob Flexen

• NPRR1215: TAC unanimously recommended NPRR1215 for approval. However, it was selected for further consideration due to an incorrect credit formula. The board moved to remand NPRR1215 back to TAC to correct the issue. Motion carried.
• NPRR1190: The committee considered ERCOT comments and six opposing votes at TAC by consumers. It was recommended that more time was needed to analyze quantitative data before the October board meeting. The board moved to table NPRR1190. Motion carried.
• NPRR1219 and NPRR1230: Both revision requests were considered alongside the TAC report and ERCOT comments. The R&M committee unanimously recommended approval of NPRR1219 and NPRR1230. The board moved to approve both requests. Motion carried.

8 - Acceptance of 2023 ERCOT 401(k) Savings Plan Audit Report Vote - Vice Chair - Bill Flores

• Finance and Audit Committee recommended board acceptance of the 2023 audit report for the 401(k) savings plan.
• The audit report showed no material issues with plan administration.
• The 401(k) plan has approximately $390 million in assets, indicating significant growth from last year.
• Auditors provided a clean opinion.
• Board unanimously approved the audited financial statements of ERCOT's 401(k) savings plan as of December 31, 2023.
• Reviewed standard committee briefs on financial performance, investment, and debt compliance; all reports were nominal except for one instance where investments were slightly over 10%.
• Board reviewed the PUC ordered operating budget reconciliation for calendar year 2024; ERCOT plans to file materials with the commission before the September 1 deadline.
• Next scheduled meeting in October to include the committee's annual self-evaluation and first draft of the 2025 internal audit plan.

9 - Ratification of Officer Vote - Vice Chair - Peggy Heeg

• Ratification of Officer.
• Short general session, human resources, and Governance committee meeting held.
• Committee recommended ratification of Gilbert Hughes as VP of public affairs of ERCOT effective July 2, 2024.
• Upcoming meetings will cover year-end items such as compensation and succession planning.
• Motion approved unanimously with no opposition or abstentions.

10 - Reliability and Markets R&M Committee Report Discussion - R&M Chair - Bob Flexen

10.1 - NOGRR245, Inverter-Based Resource IBR Ride-Through Requirements – URGENT Vote - Vice Chair - Bob Flexen

• TAC recommended approval of NOGRR245 in June.
• The board tabled NOGRR245 for further development of consensus among ERCOT staff and certain stakeholders.
• Joint commenters previously concerned with the NOGRR filed subsequent comments with no objections after ERCOT comments.
• Motion to recommend approval of NOGRR245 as recommended by TAC in the 06/07/24 TAC report as amended by 08/16/24 ERCOT comments with a priority of 2025 and rank of 3515 and to designate a subsequent NOGRR as a board priority revision request to address the reaming details of the exemption process. 
• Motion approved unanimously.
• Commissioner Jimmy Glotfelty suggested the ERCOT board get updates on NERC's IBR rule for mandatory reliability standards.
• Chairman Gleeson made a comment on the need for broader discussions on policy decisions between ERCOT and PUC, noting some policy discussions might be more suitable for commission rulemaking rather than through ERCOT.

10.2 - Oncor Temple Area Regional Planning Group RPG Project Vote - Vice Chair - Bob Flexen

• Project Details:
• Cost: $272.6 million, Tier 1 project.
• Expected Service Date: December 2028
• Purpose: Address thermal overloads on transmission lines and transformers, as well as voltage violations in Bell county.
• Planning Criteria: Meet NERC and ERCOT reliability planning criteria
• Option Choice: Option five A
• Justification for Option:
• Least cost option
• Meets planning criteria
• Improves long-term load serving capability for future load growth
• Requires least amount of needed CCN miles.
• Motion Details:
• Motion to endorse, as recommended by the R&M committee, the need for the tier 1 Oncor Temple area RPG project, Option five A, which ERCOT staff has independently reviewed and which TAC has voted unanimously to endorse based on NERC and ERCOT reliability planning criteria.
• Motion carries unanimously.

11 - Technology and Security T&S Committee Report Discussion - T&S Chair - John Swanson

Presentation by Anna Lafontaines of EPRI on grid enhancing technologies:

• Advanced connectors
• Dynamic line rating
• Advanced power flow controllers
• Transmission topology optimization

Staff updates on committee briefs:

• 60 ongoing projects
• Detailed update on Real Time Co-Optimization (RTC)
• Discussion of risks associated with changes to RTC methodology
• Emphasis on following NPRR process for future enhancements

Grid transformation initiatives update:

• Discussion on tiered load categories
• Discussion on definitions of loads

Technology and Security Committee Meeting available for rebroadcast.

12 - Other Business Discussion - Vice Chair - Bill Flores

• No additional business was raised by board members.

13 - Vote on Matters from Executive Session Vote - Vice Chair

• General session recessed to reconvene after the executive session.
• Bill Flores, vice chair of the ERCOT board of directors, reconvened the general session.
• Motion to approve Baker Tilley as the 2024 ERCOT 401K savings plan auditor approved unanimously.
• Motion to approve the litigation matter discussed in executive session under agenda item ES 3.5 approved unanimously.

14 - Adjournment - Vice Chair - Bill Flores