AI Meeting Summary - 06/12/24 Business & Commerce

* This summary was created with AI. It is for reference only and has not been reviewed or edited by human intelligence.

1 - Chairman Schwertner lays out the State of the Reliability Program

• Chairman Schwertner discussed the interim charges for the meeting, which focused on electricity market design, transmitting Texas power, and the impact of Bitcoin mining on the Texas grid.
• He mentioned Senate Bill 2627, which has led to a significant number of notices of intent to apply for a loan through the Texas Energy Fund, totaling over $39 billion for proposed dispatchable power generation projects in the ERCOT region.
• The discussion also focused on HP 1500, particularly the reliability program (PCM), with emphasis on the parameters for loan applications and the concerns about moving away from an energy-only competitive market in electricity.
• The meeting included a discussion about concerns regarding the reliability program, its necessity at the current time, and the statutory provisions related to its implementation.

2 - Senators Initial Remarks

• Vice-Chair Phil King discussed the issue of PCM and questioned if it is necessary with the current funding in Texas.
• He mentioned the significant increase in the money in the market compared to a couple of years ago.
• He pointed out the high number of applications for the energy fund and the announcements made by companies like Vistra.
• King raised the question of whether PCM is still needed as a capacity market and whether there is already sufficient money in the market.

• Senator Donna Campbell acknowledges the chairman's work in keeping the grid resilient and reliable, and praises the Texas Energy fund.
• She highlights the significant load growth since their last meeting and emphasizes the need to manage load growth and reallocate transmission without burdening residents and small businesses.
• Senator Campbell expresses concern about the pressure on the energy-only market from capacity market pressures and acknowledges the daunting task ahead.
• She expresses confidence in the committee's ability to address these challenges and achieve success.

3 - First Panel

• Thomas Gleason, Chairman of Public Utility Commission of Texas, presented on the Market Design Blueprint Phase Two
• Discussed the development of a reliability standard, with a proposed rule for publication in August and adoption at the end of August
• Seeking feedback on the PCM and awaiting cost-benefit analysis from IMM and ERCOT, particularly related to the billion dollar net price cap
• Anticipating completion of PCM feedback and analysis by November or December
• Discussed the new ancillary service, DRRs, with parameters for qualification and anticipated implementation in 2026 or 2027
• Mentioned other market design issues and timelines for milestones on page five of the slide deck

• 125 projects have advanced to the formal application phase in the Texas Energy Fund, representing 56 gigawatts and approximately $39 billion of investment
• The program has been successful despite initial doubts, with an application phase running through July
• A consultant and staff will work together to recommend projects for due diligence and funding, with decisions made in public meetings to address concerns about transparency

• The PUC's Chairman Thomas Gleeson discussed the progress on backup power package grants.
• An advisory committee has been formed and has met multiple times.
• The PUC has issued an RFP for a consultant to help choose which projects should move forward.
• Parameters for selecting projects are being developed, with the goal of having them ready in the next few weeks.
• The committee and the consultant will provide a report to help the commission decide which projects to move forward with for the backup power plan.

• ERCOT's President & CEO, Pablo Vegas, discussed the current market design and the significant growth happening in Texas
• He highlighted the increasing demands from data centers and artificial intelligence, along with significant electrification in the oil and gas industry and the potential impacts of the hydrogen economy
• Vegas emphasized the need to rethink planning to meet the growing demand and ensure delivery on the expectations of Texans
• He mentioned the uniqueness of the reliability standard being discussed, which is being closely monitored by the NERC and could set new ground for Texas
• Additionally, Vegas talked about the progress on the real-time co-optimization project, stating that it is on track for completion by early 2026, with the potential to be pulled in earlier if things go well

• Focus of DRRS protocols is on thermal dispatchable generation units initially
• Loads and batteries are not eligible in the initial definition
• Development of multiple products and solutions for long-term reliability and resiliency, including Texas Energy Fund, new ancillary services (ACRs), and DRRs
• Consideration of novel solutions like PCM
• Pieces of the puzzle are in place for resource adequacy solution, but not all of them have to be included
• The design work will evaluate the cost impact and cost effectiveness of the combination of solutions
• Recommendations will aim for optimal reliability at the desired cost, which may or may not include all available options

• ERCOT's five year forecast for growth in Texas predicts 110 gigawatts of demand by 2029, a 40 gigawatt increase in the five year horizon attributed to changes in load growth planning, House Bill 5066 impacts, AI, and the green hydrogen economy.
• The forecast now shows around 150 gigawatts, almost doubling the peak demand of the ERCOT grid in about six years, prompting the need to support generation and transmission development.
• The generation interconnection queue currently expresses strong interest in solar and batteries, with the expectation of growing gas elements due to the Texas Energy fund, not yet reflected in the queue.

4 - Senators Questions for First Panel

• Chair Schwertner asked PUC Chair Gleeson if Texas is moving away from an energy only market design.
• PUC Chair Gleeson responded that Texas is not moving away from an energy only market.
• There was no indication of a shift towards a different market design.
• The discussion did not provide any specific details on potential changes in the market design.

• PUC Chair Gleeson stated that the PUC dealt with a similar issue regarding capacity market over a decade ago.
• He expressed his belief that the commission does not have the authority to unilaterally move to a capacity market.

• ERCOT remains committed to the energy-only market
• Solutions being considered would be part of the energy-only market
• ERCOT is not looking to move away from an energy-only market
• Mention of the ECRS Texas Energy Fund and notices of intent for up to 55 gigawatts of new generation
• Discussion of the DRS, which is being designed and is legislatively mandated
• Reliability program/PCM mentioned as the only piece not mandatory legislatively
• Reference to the significant jolt of money (12 billion) put into the market and significant subscription to the energy fund

• Chair Schwertner asked if the PCM (Predictive Capacity Model) is necessary for implementation, considering its role as a potential revenue source for generation.
• Pablo Vegas discussed the current infrastructure's ability to enable growth, likening it to having the down payment for a home.
• He emphasized the need to determine the best combination of components for reliability and cost-effectiveness, including PCM, while acknowledging that PCM may not significantly impact reliability or cost-effectiveness.
• Vegas stressed the importance of providing certainty for the market and developers, particularly for long-term investments in assets.
• He highlighted the need for further study and analysis to design an optimal mix, while expressing confidence in the existing infrastructure's capability to support future developments.

• PUC Chair's response to Chairman Schwertner's question about the necessity of implementing the PCM is "to be determined".
• The PUC Chairman emphasizes a need for sequencing in implementing changes, suggesting consideration of existing tools like DRRS, ECRS, RTC plus B, and ORDC curve adjustments before fully exploring PCM.
• It is suggested that implementing existing tools first to meet reliability goals is a prudent approach, with PCM available as a backup if required.
• Concerns are raised about the evaluation of reliability standards and programs, specifically referencing the legislature's implemented guard rails and price cap, which seem to be subject to workgroup discussions and workarounds in timelines for real-time optimization implementation.

• Chair Schwertner asked if ERCOT intends to follow the law regarding guardrails on price caps
• Pablo Vegas affirmed that all guardrails will be embedded in the design considerations for PCM and that RTC remains the first priority
• Vegas stated that no other project priority will change the trajectory of the PCM project

• PUC's Chair Gleeson reassures that there is no intention to violate statutes or find workarounds
• Senator Campbell raises questions about the hiring of E3 and their experience in the unique energy market of Texas

• Senator Campbell questions the credibility of the study on the energy only market, pointing out that the company hired to analyze the market lacks experience in an energy only market.
• ERCOT's response emphasizes the efficiency of working with a company that had already developed the models used to establish and assess the cost implications and impacts to the energy only market.
• ERCOT defends the choice, stating that the PCM is not changing the energy only market but rather augmenting it with a different revenue focus for reliability purposes.
• Senator Campbell expresses skepticism, suggesting that hiring a company with a vested interest in the PCM may not result in an unbiased analysis of their own work product.

• Senator Campbell raised concerns about the study by Equilibrium, highlighting the exclusion of potentially 15,938 MW in queue interconnect from the study.
• ERCOT's Pablo Vegas explained that the study was currently focused on basic design parameters for the initial analysis of how PCM (Power Cost Mitigation) would work, but noted that the impact of what's in the generation queue will be considered in the future.
• Senator Campbell also mentioned that the study included artificially retiring megawatts, with past predictions of 5 to 6000 MW being retired, but only about 1500 MW has been retired, questioning the accuracy of these predictions and its potential impact on scarcity assumptions and pricing.

• Senator Campbell expressed concern over the credibility of the analysis of the PCM.
• Emphasized the importance of spot-on assumptions before evaluating the tool.
• Raised concerns about the unknown impacts of assumptions, such as 14 gigawatts of retirement and the Texas Energy fund jolt.
• Highlighted the complexity of the reliability program and the novelty of PCM, which was not initially part of the solutions devised by E3.
• Questioned the decision of introducing another program that could interfere with the competitive market and potentially add a subsidy payment to electricity charges.
• Stressed the legislative directives aimed at addressing these concerns.
• ERCOT's Pablo Vegas discussed the load growth forecast for the next five years
• Before the passage of 5066, the forecasted peak demand was expected to increase from 85 gigawatts to 110 gigawatts by 2029
• After the passage of 5066, the forecasted peak demand increased from 110 to 150 gigawatts by 2030
• This represents an almost doubling of the ERCOT total peak demand over a six-year period
• The increase in forecasted demand is attributed to prospective loads that are expected to come to Texas and develop
• While not all of the forecasted demand may materialize, it still represents a significant growth in demand
• The impact of HB1500 and SB2627 has created the core components of the future energy-only market design and market construct.
• The legislation has provided significant elements to help meet energy demand.
• The components within the legislation have provided regulatory and policy certainty to the ERCOT market and its participants.
• Over the next six months, the plan is to work with the Public Utility Commission to put together a puzzle that illuminates the market's potential for the next 5-15 years.
• There is confidence in the ability to build the market for the next 20 years with the tools and experience available.

• The PUC emphasizes the need to balance reliability and cost considerations, expressing concerns about the pendulum swinging too far towards reliability after Winter Storm Uri.
• Regulatory certainty is a key concern for market participants, emphasizing the need for stability amidst numerous changes post-Winter Storm Uri, in order to ensure interoperability and chart a sustainable course forward.
• Affordability is a priority for the commission, with an emphasis on considering cost implications for residential customers when building out the transmission system.
• The independent market monitor’s role in addressing concerns about costs and economic efficiency is acknowledged, highlighting the need to consider their perspective in balancing economic efficiency and reliability.
• The significant difference in the drop of average real-time electricity prices compared to natural gas costs is brought up, raising the question of how to discuss this with constituents.

• Wholesale market costs reflect the capital cost of facilities, fuel cost, and the overall design of the energy-only market.
• During scarcity periods, wholesale prices can be much higher than the underlying variable cost of fuel.
• Texas remains on the bottom half of the cost of energy for the United States, being very affordable.
• ERCOT is working on designing the next market to include incentives for generation, transmission, energy efficiency, and demand response to provide reliability at a lower cost.

• Senator Zaffirini asked about the number of guardrails and the need for additional ones, as well as the need for guardrails for programs other than PCM
• Thomas Gleeson mentioned the eleven guardrails identified in House Bill 1500 and stated that they provide a framework to assess the viability of PCM
• He expressed concern about potential overbuilding of transmission and the need to evaluate the ease of projected load additions
• Gleeson indicated that any concerns not addressed in rulemakings would be included in the PUC's agency report for consideration
• He also referenced the assessment of state efforts to provide incentives for new thermal generation

• Senator Zaffirini asked Thomas Gleeson about the state's efforts to provide incentives for new thermal generation.
• Gleeson expressed satisfaction with the increased incentives for generation in the state.
• He indicated that all the necessary economic incentives are in place to encourage investment in the state.

• Senate Bill 2627 authorized a $10 billion pool for lower interest loans, completion bonuses, and other elements for new thermal generation
• Only a portion of the $10 billion was appropriated in the budget
• There is an opportunity for the legislature to fully leverage the pool of money due to strong interest
• Proposal to consider front running the other $5 billion for new thermal generation to support potential load increase to 150 gigawatts in 2030

• Senator Zaffirini asked about collaboration between the PUC and other agencies, such as TCEQ and the independent monitor
• PUC has worked effectively with agencies like the Railroad Commission, meeting monthly to discuss matters
• Collaboration has improved, with regular meetings at TERK (Texas Energy Reliability Council) chaired by Chief Nim Kiddo
• Satisfaction with the level of input received from sister agencies, ERCOT, and private companies
• Improvements in collaboration were noted as necessary even before Winter Storm Uri

• Pablo Vegas highlighted the significant impact of increased collaboration since Winter Storm Uri, leading to improved reliability performance during winter storms.
• The conversation shifted to ERCOT's reliance on ancillary services for reliability in the energy-only market, with discussion around their purpose and potential for incentivizing new generation investment.
• There was discussion about the implementation of the Potential Competition Model (PCM), with a focus on ensuring accurate information and proceeding within legislative constraints.
• It was noted that the Demand Resource Response Service (DRRS) is being pursued initially for thermal generation, with potential for inclusion of non-thermal sources like batteries due to a legislative amendment by Senator Zaffirini.

• ERCOT has been limiting the DRRS to thermal generation only for specific reasons.
• The current focus is on incentivizing more thermal dispatchable generation rather than storage or energy storage resources.
• The aim is to provide revenue incentives for the construction of new generation and to retain existing generation, rather than just as a reliability ancillary service.
• The current queue shows a high presence of storage and the emphasis is on providing the right revenue mix for thermal dispatchable generation.
• There seems to be a belief that there are already enough incentives for storage or energy storage resources in the market.
• DRRS is expected to drive investment decisions towards peaker plants, and when combined with other tools, it can be sufficient as an incentive.
• The aim is to direct DRRS towards thermal dispatchable generation to encourage the building of more such resources in the state.
• The discussion includes the need for resources to operate inter-hour and come online quickly, with an emphasis on the flexibility and ability to run for a specific duration.

• Senator Johnson asked about the policy decision involving non-thermal sources in the statute
• PUC's Thomas Gleeson mentioned the initial focus on thermal dispatchable generation
• He discussed the challenges of the 2-hour minimum and sustained 4-hour requirement for batteries
• Gleeson suggested the potential for incentivizing long-duration batteries but emphasized the current focus on thermal dispatchable generation
• Discussion on the allocation of funds for incentivizing thermal generation
• Mention of the importance of legislative decisions being considered at the implementation level

• ERCOT would prefer to move forward with thermal dispatchable only to accommodate energy storage resources in drrs due to specific technical reasons.
• Significant technical changes are needed in ERCOT's core systems for this to happen.
• Energy storage resources don't have an offline status in ERCOT's operating system, making it difficult to manage their state of charge and offline status to support drrs.
• The RUC engine in ERCOT would need to be changed to manage the state of charge of batteries, which is different from a generator, causing a significant time lag to enable this.
• ERCOT could deliver DRRS sooner with the dispatchable generator, thermal dispatchable only, and later add in batteries to support.

• Senator Johnson posed a question to ERCOT's Pablo Vegas regarding the impact of plants being frequently "rucked" (presumed to be a misspelling of "recycled") on their ability to stay online.
• Senator Johnson expressed concern about the negative impact of frequent rucking on the long-term longevity of plants, citing the economic disincentive for plants to commit and the limited life remaining in older plants (30 to 60 years old).
• Vegas acknowledged the potential for rucking to diminish the long-term duration of plants due to the utilization of their available starts and runs, particularly for older plants.

• Senator Johnson raised a question regarding the relationship between DRRs (Demand Response Resources) and the expectation for older plants remaining operational.
• The discussion included the potential economic incentives for older plants to participate in DRRs, which could influence their decision to continue operations.
• The recent extreme summer conditions in Texas were cited as contributing to strong economic opportunities for generating units, potentially affecting the retirement projections.
• Senator Menendez and Senator King also were acknowledged in the conversation.
• Chairman Gleeson emphasized the importance of considering the cost of improving grid resiliency, highlighting the limitation of taxpayer resources.
• ERCOT's exploration of demand side measures in a recent PUC filing was mentioned as a potential approach to address the need for new generation.

• The fastest new generation could be online is projected to be 2026
• Senator Menendez questioned if this could be achieved by January 2026, and the response indicated it may be more likely in the second half of the year
• Incentives in the energy fund have been discussed as potential sources for new generation
• Current immediate sources of new potential generation appear to be demand response or energy efficiency measures
• Demand response and energy efficiency have not been at the forefront of discussions or policy implementation
• The focus on demand side measures, including demand response and energy efficiency, is seen as necessary to ensure a reliable grid in the future
• ERCOT is supportive of the commission's efforts to promote measures that cost effectively provide long term demand reduction

• Senator Menendez raised concerns about the need to educate residential users on demand response.
• Emphasized the importance of engaging residential users in demand response programs and highlighting the benefits to them.
• Mentioned conversations with retail electric providers about challenges in residential demand response participation.
• Highlighted efforts to establish an energy efficiency division at the commission and hiring of a director for that group.
• Discussed collaboration with Commissioner Kathleen Jackson to increase participation in energy efficiency and demand response programs.

• The discussion highlighted the potential for demand response programs for residential users to contribute in alleviating energy supply strain.
• The use of smart thermostats, smart meters, and communication technology was suggested to enable the development of programs for broader residential consumer participation.
• Mention of a pilot program under Commissioner Jackson and Chair Gleeson to roll out demand response at a larger scale, covering both the non-opt-in and retail competitive market, was made.
• Emphasis was placed on the need to address rising energy costs impacting constituents, with discussions tying uncertainty under the PUC rulemaking to current gas prices and higher rates.

• Senator Menendez expressed concerns about rates coming down and mentioned a significant increase in residential prices.
• PUC Chair Gleeson indicated hope for stabilization and potential decrease in rates in the future, as the focus shifts towards affordability and not just reliability at any cost.
• Discussion on the importance of affordability and accessibility for residential customers in demand response and energy efficiency programs, particularly for low-income customers.
• Mention of benefits of smart thermostats and smart readers for both generators and retail providers, with examples of agreements allowing thermostat control and free installations.
• Clarification that ultimately, customers would bear the costs of any implemented PC mechanism, with credits awarded to dispatchable generation sources during system stress.

• Senator Menendez asked about defining system stress during low generation to serve load
• PUC is considering defining the hours for earning performance credits and seeking comments
• Uncertainty regarding E3 performing a back cast of times when system stress occurred in 2022 and 2023
• Chair suggested E3 may have information on back cast results and could provide answers later

• Evaluation criteria for awardees of the Texas Energy Fund in progress
• Application attributes discussed with individual commissioner offices
• Emphasis on geographic diversity to have plants in different areas of the state
• Importance of placing generating facilities near load pockets to limit transmission needs
• Discussion on generation hubs and reducing transmission losses
• Clarification on entities eligible to apply for the fund, including municipally owned utilities
• Inquiry on regulatory authority to regulate certain types of generation and load on the grid based on reliability and resiliency impacts

• Vice Chair King questioned ERCOT's Pablo Vegas on the regulatory authority to limit certain types of generation on the grid.
• Pablo Vegas stated that ERCOT's authority is limited to taking offline a generator that violates NERC operational requirements and compromises grid reliability.
• Vegas mentioned that outside of this scenario, ERCOT does not have the ability to limit access to the grid for any other generator.

• PUC's Chair Gleeson expressed a belief that they do not have the regulatory authority to limit certain types of generation on the grid
• He mentioned that as an economic regulator, they aim to create incentives within the confines of the law to produce desired outcomes
• Gleeson emphasized that they do not have the ability to prohibit a certain type of resource

• ERCOT does not have the authority to limit or prevent the interconnection of certain types of generation based on fuel mix or reliability concerns
• Certain exceptions exist, such as if interconnection would create transmission instability
• ERCOT's open connection protocol allows generation resources to enter the grid, even if there are congestion constraints
• Solar and wind facilities may be allowed onto the grid even if there are transmission constraints, with curtailment implemented when necessary
• Transmission upgrades may be needed to address congestion issues and allow full delivery of power
• Discussion of the need for building transmission out to the Permian region for potential new industries

• Vice Chair King questioned ERCOT's authority to require bonding or security for transmission in the Permian Basin to ensure industries stay for a long period.
• ERCOT representatives clarified that they currently lack the authority to require bonding or regulate who connects to the grid.
• It was highlighted that without such authority, concerns arise about unnecessary transmission investments and the impact on ratepayers.
• ERCOT confirmed there is no existing authority for security or bonding requirements, expressing a need for these tools.
• Vice Chair King suggested the concept of requiring industry users to pay for the new transmission lines as a solution to prevent impact on other ratepayers.
• Concerns were voiced about the impact of new demand on consumers and the need to consider special treatment for certain high-demand industries.
• Further discussion revolved around the evaluation process for generator hook-ups and the transmission capabilities.

• ERCOT's Pablo Vegas explained the steps involved in putting a generator on the grid, emphasizing that it requires extensive studies and modeling to ensure grid stability.
• The transmission operator and ERCOT both run stability studies to assess the impact of new generators or load on the grid.
• Senator Nichols expressed concerns about the potential for subsidies in the Power Cost Mitigation (PCM) program and emphasized the importance of sticking to incentives for encouraging certain actions.
• There was a discussion about the efficiency of electricity prices in Texas compared to other parts of the nation, with mentions of the state's abundant low-cost natural gas and its impact on prices.
• Overall, the conversation highlighted the complexity of connecting generators to the grid and the importance of evaluating incentive programs and gauging efficiency beyond just electricity prices.

• Senator Campbell inquired about the energy usage of AI data centers and whether it should be combined with load.
• Pablo Vegas described AI data centers as one of the fastest growing components of the data center industry.
• He mentioned that AI searches consume 10 to 30 times more power than traditional searches.
• The growth of AI data centers is explosively increasing, as evidenced by Nvidia shipping 500,000 GPU's in one quarter, each using as much power as a household in the US does in a year.
• Predicts a significant electric demand impact due to the development of AI GPU's by various companies.
• Current view suggests around 40 gigawatts of growth in data centers, with less than 20 gigawatts currently.
• There was discussion regarding the predicted 24 gigawatts from the Permian Basin, with half attributed to oil and gas and the rest to other sources, including some AI.
• Pablo Vegas did not have a fixed number for the energy usage of AI centers due to uncertainty about their introduction into Texas.
• Other related topics discussed included a hydrogen facility's high electricity usage and the need for caution regarding reliability programs.
• The meeting moved on to panel two, including Courtney Hjaltman, Jeff McDonald, and Zachary Ming, who were invited to speak about E3.

5 - Second Panel 

• E3, a consulting firm, was engaged by the Texas Public Utility Commission to evaluate potential reforms to the ERCOT market in 2022.
• E3 conducted technical economic analysis to assess the impact on reliability, cost, and resource entry/exit for each potential reform.
• The Public Utility Commission selected the performance credit mechanism (PCM) as the chosen reform, which aims to ensure dispatchable resources on an electricity system meeting a reliability standard have opportunity to recover costs.
• PCM is designed to work in conjunction with other market products and may ramp down if other products are delivering sufficient resources.
• ERCOT has been directed to develop detailed rules for PCM, and E3's role is to outline decisions, options, and selection criteria for ERCOT under the direction of the commission and legislature.
• E3 has presented decisions and options in a public workshop, awaiting public feedback, and will then perform analysis.

• Courtney Hjaltman, Chief Executive and Public Counsel at the Office of Public Utility Council, presented a slide deck with emphasis on energy and ancillary service costs.
• Slide five shows annual energy-only costs, projected to grow at a rate of about 5.3 billion each year over a five-year period from 2019 to 2023. Slide six shows annual ancillary service costs, projected to grow at a rate of about 300 million per year over the same period.
• Market changes like the operating reserve demand curve (ORDC) adjustments and the implementation of the bridge solution are increasing costs.
• Growth in ancillary services is driven by intermittent resources, overall demand, and the need for a reliable grid.
• Despite increased costs, consumers are benefiting from essential grid support and the integration of renewable resources, which are cheaper and can potentially lead to lower costs for consumers.
• Slide seven represents the average monthly bill for consumers over the same five-year period, showing expected growth.
• Factors contributing to the increased average bill include upcoming projects for reviewing ancillary services, defining reliability standards, and the implementation of Real-Time Co-optimization (RTC) by ERCOT.

• Jeff McDonald, the IMM director of Potomac Economics and vice president, discussed the focus on reliability and resiliency in the ERCOT market
• Highlighted the challenge of valuing advances in reliability services and their marginal benefits
• Mentioned ongoing analysis and input in valuing incremental reliability in the ERCOT system
• Emphasized the importance of considering how Texans as a whole would value incremental reliability
• Clarified that the analysis is aimed at finding the right balance in the space of market efficiency, not opposed to a reliable and resilient grid
• The conversation moved to discussing the consequences of aggressive deployment of ECRS raising prices.

6 - Senators Questions for Second Panel 

• Chair Schwertner expresses concern about PCM pricing overruns and the potential cost to Texans.
• E3's Zach Ming states that the design of PCM can prevent cost overruns and explains that it is engineered to back off if there are sufficient revenues in the market.
• An analogy is made by Chair Schwertner relating PCM to over-engineered tools in orthopedic surgery, highlighting concerns about complexity.
• Senator Campbell questions the study's approach, noting discrepancies in the retirement of megawatts and the lack of credit for interconnect bringing on megawatts, creating a scarcity that skews the results.

• E3's study is focused on the future market in 2026
• The study uses ERCOT's established equilibrium approach methodology to determine the expected generation the market can support
• The study excludes DRRS due to the undefined product at the time
• The study is based on assumptions about how ECRS will interact with other factors
• Senator Campbell questioned the study's focus on only one aspect, which could skew the results
• Senator Menendez asked about E3's definition of system stress and if a back cast of the results was performed for future planning

• Senator Menendez raised concerns about getting a fair return and maintaining low rates for electricity in Texas to ensure that investments are viable for constituents.
• There was discussion about the need for identifying predictable hours well in advance to enable forecasting and informed decision making for potential investments in Texas.
• E3's Zach Ming mentioned that they have released analysis on expected performance credit hours in 2026 and highlighted the importance of forward-looking forecasts for potential investments.
• There was a request for a back cast to understand the methodology behind the forecasts and build trust in the accuracy of the predictions.
• Overall, the focus was on ensuring fair returns, low rates, and reliable predictive forecasts for potential investments in Texas.

• RTC allows ERCOT to dispatch the lowest cost generation resources first, driving cheaper resources to be used and benefitting consumers.
• Public Utility Council intervenes in cases brought to the PUC by utilities and generation sources, asking for transparency and bringing down the funding they charge consumers.
• The Office of Public Utility Council saved consumers $251 for every dollar appropriated to the agency in 2023 by intervening in cases and reducing costs, particularly those related to consultant or attorney fees.

• OPUC has established good working relationships with utility agencies
• Open communication and discussion of all items have been a goal from the start
• Utility agencies come to OPUC asking thoughts first and rely on OPUC's water knowledge
• Collaboration has been beneficial and utility agencies have implemented rulemaking based on OPUC's input
• OPUC's expertise and input have helped in keeping costs down for residential consumers

• Senator Menendez asks OPUC's Courtney Hjaltman about the billing of consultant costs to consumers.
• He mentions the use of consultants in cases, charging a certain amount per hour, and highlights the issue of consumers having to pay for the full amount.
• Senator Menendez expresses the need to find a way to split the costs between the consumer and the hiring entity to encourage conscientious spending and negotiation.
• Courtney confirms that consumers are currently paying for the full consultant costs.

• The evaluation compared different levels of deploying reserved ECRS into the market, not the complete absence of an ECRS program.
• It used a 75% deployment where 75% of the ECRS reserve would be made available for use as energy.
• The analysis concluded that the decrease in true shortages and shortage pricing in 2022 was due to the influx of new wind and solar resources, energy storage, and natural gas. Specifically, seven and a half of wind, almost two of batteries, and one of natural resources were mentioned.

• Senator Johnson asked IMM Director Jeff McDonald if intermittent renewable generation reduced prices and pricing pressures in 2023 compared to 2022.
• McDonald stated that the influx of renewable generation did help reduce the frequency of shortage events.
• He mentioned that the new capacity of all four flavors of renewables, along with other factors, contributed to the reduction in pricing shortages.
• McDonald also highlighted a 62% reduction in natural gas prices and a 13% reduction in average real-time prices.

• Real time energy prices are not directly correlated with real time gas prices
• Generators do not purchase 100% of their gas supply
• Gas generators do not purchase 100% of their natural gas on the spot market
• The correlation between energy and gas prices is expected to be loose
• The percentage of natural gas typically contracted for is imagined to be in the 70% or higher range, varying by company

• Discussion about the extent of renewable resources setting prices compared to natural gas units.
• Noted that during certain parts of the day, solar or wind set the price, causing deviation from natural gas units setting the price.
• Discussed the correlation between natural gas price and the frequency of the fleet setting the price.
• Noted a large deviation in the reduction of natural gas price compared to the average real-time energy price, attributed to factors such as increased price introduced into the market by ECRS.
• Consideration of market deviations beyond natural gas contracts and the influence of renewables on price setting.

• Senator Zaffirini raised a discrepancy between the IMM and ERCOT reports on the cost of ECRS to the ERCOT market.
• Jeff McDonald was unable to explain the difference in estimates, citing unfamiliarity with the ERCOT estimate.
• McDonald explained that the $12 billion estimate was obtained by re-running the real-time market with 75% of ECRS capacity removed from reserve to capture the impact on energy prices and shortage pricing.
• The estimate was based on the difference between the altered deployment of ECRS and the actual market conditions.
• McDonald agreed to further analyze the difference in estimates and provide additional information to the committee.

• Senator Zaffirini asked IMM Director Jeff McDonald for recommendations for the committee relative to the charge
• McDonald mentioned ongoing efforts with ERCOT and the PC in evaluating ancillary services and reserve adequacy
• McDonald did not have specific recommendations at the time, but expected to have recommendations on different aspects in the next six to nine months
• Senator King expressed looking forward to hearing those recommendations
• Senator Nichols expressed interest in the energy-only market design in relation to the PCM report from April 17, 2024

• Senator Nichols questioned the statement about moving away from an energy-only market
• E3's Zach Ming clarified that introducing the performance credit mechanism does not change the energy market's design
• Emphasis was on augmenting the market with the new design, not moving away from an energy-only market

• Senator Nichols questioned the difference between an ongoing subsidy and an incentive in relation to the PCM.
• E3's Zach Ming emphasized that the PCM is designed to be complementary to the energy market and would only provide positive pricing or revenues for generators if revenues from other products are insufficient for a reliable system.
• The goal is to create a sustainable stream of revenues for generators to incentivize their investment in the market.
• The PCM would back down if there are sufficient revenues from other market products and would only ramp up if those revenues are not sufficient.

• Chair Schwertner asked about the perception of DRRS, ECRS, and TX Energy Fund as a bridge to the PCM.
• Zach Ming views DRRS and ECRS as long-term sustainable market elements.
• The longevity of TX Energy Fund as a long-term incentive would be determined by the legislature.

• Chair Schwertner's question to E3's Zach Ming regarding whether performance credits are a subsidy.
• Ming does not view performance credits as subsidies, but as competitive market products complementary to each other.
• Chair Schwertner asked if another incentive is needed based on market evaluation, to which Ming responds that they will study various assumptions and ensure robust cost-benefit analysis.
• Senator comments on Ming's potential bias towards a capacity market and emphasizes the need for clarity on supporting an energy-only market.
• Further discussion on the move away from an energy-only market design due to the need for reliability after Uri, with emphasis on not advocating for abandoning the energy-only market.

7 - Third Panel

• Brent Bennett from the Texas Public Policy Foundation discussed concerns about load growth and the potential impact of EPA regulations on building new generation and causing some generation to retire.
• He expressed immediate concerns about rising costs of keeping the lights on, referencing the considerable rate increases in California and residential rates in Texas going up by about 20% in the last few years.
• Bennett highlighted the shift from a system with a lot of baseload generation to one with a greater reliance on solar, wind, batteries, and gas for balancing, drawing an analogy with cars that run 100% of the time versus those that run only 50% of the time with a backup option.
• He mentioned his modeling from four or five years ago, indicating that a grid with 50% renewables is fundamentally more expensive to operate than the previous grid with about 25% renewables from a basic cost perspective.
• He stressed the importance of studies, including the cost allocation study, the study on backup power costs, and the pricing structure study in understanding the true costs of maintaining the system and in addressing the allocation of ancillary reliability services to certain resources.
• Lastly, Bennett highlighted the need to consider cost allocation in the discussion, referencing Governor Abbott's letter from three years ago directing the consideration of allocating ancillary reliability service costs to certain resources.

8 - Senators Questions for Third Panel

• The model used for cost analysis is fairly simple and does not include all ancillary services and market mechanisms.
• Bennett mentioned the wholesale market cost and dividing it by the amount of megawatts to get the annual cost in dollars per megawatt hour.
• He emphasized the need to carefully examine the resource mix's contribution to the increased costs and finding the right balance in the market.
• There was discussion about the concern of continuously subsidizing backup power and the need to reduce costs.
• Senator Menendez raised the point that operating demand reserves have been a major driver of costs to ensure reliability.
• Bennett acknowledged that PUC and ERCOT are not currently studying whether any of these costs should be allocated to generators.

• Brent Bennett discussed two ways to allocate costs to generators for ancillary services: passing costs through to consumers or embedding costs in the generator's structure, which would eventually flow to ratepayers.
• The goal is to find the right balance in the market and reduce volatility to ensure generation gets built in a more volatile environment.
• There were concerns about the application of the reliability requirement in HB 1500, as it only applies to new generation, creating potential imbalances in the market.
• There is ongoing work in progress on the cost allocation study, focusing on transmission band response, energy efficiency, and other areas.

9 - Fourth Panel 

• Powering Texans, an association comprising four members, seeks to preserve customer choice and the competitive wholesale market in Texas.
• The association believes that robust competition benefits consumers by ensuring affordable and reliable power for Texas families and businesses.
• As Texas heads into the hot summer, there may be tight times, particularly in the 08:00 p.m. area when solar energy is ramping down and dispatchable generation is needed.
• Conservation notices may be issued on days when supplies are tight, causing wholesale prices to rise; however, these high peak prices are short in duration and may not directly impact customer prices in the retail market.
• Market reforms passed by the committee are yielding results, with nearly 5000 additional dispatchable gas generation units expected to be brought online by Powering Texans' members.
• The association highlights the importance of regulatory certainty in driving capital investment for affordable and reliable electricity in the competitive marketplace.
• The ERCOT market is expected to see growth in electrification, data centers, and large commercial activities, requiring better load management and customer-centric solutions.
• The committee's work in passing wholesale competition in 1995 and retail competition in 1999 has set Texas up for another growth boom.
• The speaker thanks the committee for their work in setting up the competitive framework and is open for testimony and questions.

• Julia Harvey, VP of Government Relations for Texas Electric Cooperatives, representing 76 co ops in rural Texas, discussed the impact of market design changes on member-owned electric utilities.
• Highlighted the need for transparent and justified management of reliability costs, emphasizing the ultimate burden on end users.
• Advocated for the PUC to define a reliability standard in a rulemaking and expressed support for incremental changes to achieve resource adequacy goals.
• Criticized conservative operations for driving up costs and making maintenance outages difficult for generators, also affecting wholesale prices.
• Raised concerns about long-term load forecasts and speculative load, urging scrutiny and cost allocation for transmission infrastructure.
• Looked forward to future actions at the PUC or ERCOT on topics such as drrs, ancillary services review, cost allocation, and real-time co-optimization, seeking fair balance for load and generators.

• Katie Coleman, representing the Texas Association of Manufacturers, expressed concern about the potential move away from the energy-only market to the PCM (Potential Capacity Market).
• She emphasized that the introduction of a capacity market could shift revenue away from the energy market, impacting real-time performance.
• Coleman highlighted the sensitive nature of administrative determinations in a capacity construct, raising concerns about the potential for significant revenue shifts based on subjective judgments.
• The highlight was on the potential dangerous impact and the concerns associated with the PCM, including the potential of moving billions of dollars by administrative fiat.
• She also emphasized the need for market certainty, expressing a desire for clarity regarding the deployment of ECRs, the potential fate of the PCM, reliability standards, and conservative operations for investment planning and cost certainty.

• Mark Stover, Executive Director of Texas Solar Power Association (TSPA), discussed the impact of solar power on reliability and affordability.
• TSPA represents various solar industry sectors, including residential, commercial, and utility scale assets.
• Texas has around 25,000 installed utility scale capacity, representing a $28 billion investment, and solar has provided approximately 9% of the state's power needs this year.
• Solar contributes to meeting peak demand, lowering wholesale power costs, and providing economic benefits to communities and landowners.
• Solar ranks number one in ERCOT's generation queue, with energy storage, wind, and natural gas following.
• The addition of energy storage to solar assets enhances reliability and response to demand fluctuations.
• Solar and storage growth in Texas is driven by customer demand and grid needs.
• Market design reforms and the growth of clean energy and natural gas assets have led to less market tightness and scarcity hours in ERCOT.
• TSPA emphasizes the importance of respecting legislative guardrails to ensure the effectiveness and efficiency of market activities.
• Despite changes in resource mixes and load patterns, ERCOT is perceived to have a world-class competitive market, and solar is believed to play a significant role in enhancing reliability while maintaining the market structure.

• Catherine Webking represented TEAM, an industry association of retail electric providers in ERCOT.
• TEAM expressed appreciation for the efforts of the commission in implementing last session's initiatives, stating that the competitive retail electric market is vibrant and customers are benefiting from regulatory certainty.
• The city of Lubbock successfully transitioned into the ERCOT service area, demonstrating the benefits of competitive retail electric markets in providing customer choice, downward pressure on prices, and innovation.
• Demand response programs, as well as reliability concerns, were discussed, emphasizing the need for analysis of cost impacts on a customer class basis.
• TEAM expressed concerns about mandatory reliability standards and the implications for market innovation, but conveyed dedication to working on these issues with the commission and ERCOT.
• Mr. Stover from the Texas Solar Power association discussed predictability of solar power, the role of batteries, and the need for power supply during the night, emphasizing the importance of subsidies versus incentives.

10 - Senators Questions for Fourth Panel

• The federal subsidy per kilowatt hour is a matter of public record
• The production tax credit (PTC) for wind power was first introduced in 1992 and has come and gone over the years
• The solar power industry has the investment federal investment tax credit (ITC) equal to 30% of the capital cost of the project
• Changes in federal law have allowed solar providers to elect the PTC instead of the ITC
• The majority of solar producers continue to elect the ITC rather than the PTC

• Senator Nichols inquires about the conversion of production tax credit to dollars per kilowatt hour.
• Mark Stover clarifies that the production tax credit is currently less than a penny per kilowatt hour.
• Stover mentions that the Investment Tax Credit (ITC) is 30% of the capital cost and offers to provide specific numbers.
• Senator Nichols emphasizes the value difference between dispatchable and non-dispatchable kilowatt hours, pointing out the hidden cost of renewables in federal taxes.
• There is a discussion about the need to balance the pricing and the possibility of differential pricing for electrons.
• Senator King raises concerns about the high costs of transmission buildouts and compares it to the previous CREZ project, which ended up costing much more than initially projected.

• No public numbers for Permian build out yet
• Speculation of build out being as much as CREZ or more
• Important distinction that the purpose is to serve load, particularly oil and gas loads with high load factor
• Emphasis on reasonable cost and plan for the build out
• Not as concerned about cost impact compared to CREZ due to additional load coming on and paying into the system

• The plan is aiming to put oil and gas load on the same footing as residential and small commercial customers
• The goal is to correct the longstanding issue of differential treatment in load forecasting
• Utilities historically had more discretion in forecasting residential and small commercial loads, while large loads required signed contracts for each individual load
• The current method has caused delays, hence the need for a correction
• Concerns about potential cost implications were acknowledged, but it was emphasized that this is a different issue from other concerns
• There are concerns about data centers or data miners potentially moving to West Texas and consuming large amounts of energy
• The concern is that such entities could potentially relocate and impact energy demand abruptly

• Vice Chair King raised concerns about the potential for transmission capacity to be taken up by miners or data centers, and the risk of them leaving before finalization
• TAM representative discussed the challenge of not having a system to reserve capacity for load that is coming to utilities
• Excluding loads like data centers and crypto miners when building infrastructure for oil and gas load poses a risk of not having enough capacity
• Lack of capacity reservation system is viewed as inefficient, as it may lead to building duplicative facilities for loads that actually show up
• Existing customer interconnection agreements include provisions for customers to pay system costs and post security for those costs, providing potential security for loads actually showing up
• The possibility of introducing changes to provide more security for ensuring loads actually show up has been discussed, but no official position on this change has been taken at this time

• Vice Chair King inquired about the average acreage required to produce a megawatt of electricity in utility solar.
• Mark Stover from TSPA stated that it currently takes roughly six acres per megawatt, but noted that this number is expected to decrease as technology improves.
• Stover highlighted the market trend of deploying bifacial solar panels in the current market.

• Bifacial solar panels can capture energy from both direct sunlight and reflected light, adding 5-15% more output to solar projects.
• There was a discussion about the availability of federal investment tax credits for residential and utility solar projects. The details were not clear, but it was mentioned that the information can be provided later.
• The conversation also touched upon the use of impact fees to incentivize residential projects to stay around and contribute to revenue.
• There were questions about the need for transmission remodeling to keep pace with the variability in large load projections, including considerations about transitioning to higher voltage polls.

• There is a planned study on introducing a higher voltage.
• Practical concerns include cost, additional facilities, and accessibility.
• Concerns about limited deployment and lack of experience with the technology.
• Practical reliability consequences of a 765 kv line being a larger contingency and risk.
• Need for deliberate introduction and study to understand the efficiency of the technology.
• Permian project is not seen as the appropriate place to introduce the higher voltage element due to ongoing issues and concerns about potential delays.

• Senator Menendez raised concerns about rural Texas members paying for unnecessary socialized costs on the grid.
• Julia Harvey acknowledged the concern and agreed with the statement.
• Senator Menendez requested a survey to ensure transparency and avoid increasing costs for those who can least afford it.
• The focus was on ensuring that any specialized projects do not burden those who are struggling financially.

• Senator Zaffirini commended ERCOT for maintaining a focus on affordability while implementing tools passed in the last session.
• He recognized the importance of keeping an eye on the costs associated with the implementation of these tools.
• He emphasized that once rules are established and certainty is provided, investment and capital will follow, indicating that the tools passed in the last session are leading Texas in the right direction.

• ERCOT and PUC face the challenge of balancing differences in price tolerance among consumers, the industry, and consumer classes.
• Wholesale costs affect customer classes differently, but all are ultimately affected.
• Clients are directly exposed to wholesale market prices and feel the immediate impact of changes as there are typically no fixed price products available.
• Ancillary service costs are passed through directly to smaller customers, including higher energy costs.
• Retail providers play a crucial role in making sense of these costs and hedging them for customers.
• There may be a timing impact, but the long-term differential impact of ERCOT changes on different customer classes remains uncertain.
• Balancing the need for reliability and the cost impacts for consumers is an important discussion.

• ERCOT submitted NPRR 1235 to limit participation in DRRS to gas generators
• Concerns raised about the impact on solar as DRRS was not designed with a role for renewable energy assets
• Support for a conversation with ERCOT to ensure a role for batteries in the DRRS
• View that a role for batteries in the DRRS could act as an incentive for longer duration storage, benefiting consumers and the grid
• Acknowledgment that longer duration battery technology costs are currently higher but could benefit the grid if included in the DRRS

11 - Fifth Panel 

• Texas is experiencing exponential economic and population growth and is expected to have over 50 million people by 2050.
• ERCOT has hit new all-time winter and summer peak demand records, expecting over 150 gigawatts of total load by 2030.
• The load growth is driven by the expansion and electrification of industrial, manufacturing, oil and gas, and high tech industries, particularly data centers and bitcoin mining.
• Over 60% of the new load growth is comprised of data centers and bitcoin mining.
• Transmission infrastructure expansion is needed to accommodate the load growth and unlock existing constrained resources.
• Texas can build transmission faster than any other state or market in the country (3-6 years in ERCOT versus 7-13 years elsewhere).
• The commission has ordered a new circuit on an existing 345 kv transmission line and directed ERCOT to deem critical for reliability a large scale 345 kb transmission project to provide additional reliability and resiliency benefits for the Rio Grande Valley, representing over a billion dollars of transmission investment.

• House Bill 5066 reduces CCN processing timeline from 365 days to 180 days to expedite transmission construction
• Legislation allows ERCOT to submit reliability plans for commission's review and approval based on load growth data
• Prior to legislation, transmission providers had to provide signed customer agreement to justify project, now can use load forecast data
• Project to implement legislation in progress, expects rule adoption by end of year
• Statutory provisions related to Permian Basin region necessitate ERCOT to develop reliability plan by January 2024, to be filed in July with stakeholder feedback and plan approval in September
• Plan to include transmission facilities to serve up to 26,000 load in Permian Basin, estimated cost figure to be included in the final reliability plan
• Mention of House Bill 2555 resiliency plans, open to questions or reserved for later discussion

• Commissioner Lori Cobos discusses HB 2555 allowing electric utilities to file resiliency plans for commission approval inside and outside of ERCOT
• The plan includes recovering resiliency related investments like hardening of electric transmission facilities, wildfire mitigation, and response undergrounding of distribution facilities
• Rule adopted on January 24, and the legislature has provided tools to accelerate transmission infrastructure development
• Will work with ERCOT to ensure necessary transmission is built with a focus on balancing reliability, resiliency, and affordability for state consumers

• Transmission costs make up around 30% to 40% of a customer's monthly bill
• These costs include infrastructure for moving energy, such as poles and wires, as well as riders that transmission and distribution providers can apply for
• The Office of Public Utility Council (OPUC) intervenes to ensure that requested costs by providers are reasonable and transparent
• The growth in population and businesses affects transmission costs, which ultimately are paid by the consumer

• ERCOT has recorded a history of load growth in Texas, showing resources that serve the load and future load growth, indicating the need for new generation and transmission.
• Over $2 billion in transmission projects have been endorsed in the last two years, and there are currently over $14 billion in projects in the ERCOT grid.
• The future years will likely see even more rapid load growth, requiring a substantial amount of new generation and an expansion of the transmission system.
• Traditionally, load generation and transmission were built at a similar rate over several years, but now large amounts of load are appearing in a short period, with generation such as wind, solar, and batteries being able to be built much more quickly than thermal generation.
• However, the process of transmission, including buying right of way, planning, and constructing, still takes three to six years, requiring adaptation in planning and updating the grid to keep up with these changes.

• ERCOT's transmission planning process is compared to other FERC regions, showing that while ERCOT builds infrastructure faster than other places, it is still the slowest part of the grid planning process.
• Changes are being made to adapt to a new era of system planning, including legislative mandates from the last session, new economic tests, and new ideas utilizing increased computing power and analysis methods.
• An extra high voltage study will be produced this year to evaluate the impact and cost of transitioning from the current high voltage (345 kv) to the next level (500 kv or 765 kv), marking a new area of focus for ERCOT.

• ERCOT is changing the way they plan the system due to rapid load growth and changing types of resources.
• Meeting the large load growth demand will require additional grid investments.
• A lot of new tools, processes, and procedures will need to be implemented, which will take time.
• Projected load is expected to increase to 150 gigawatts by 2030, which will require consideration of how the electricity will be transmitted.

12 - Senators Questions for Fifth Panel 

• Commissioner Cobos expressed the need for further examination of load growth, particularly in relation to hydrogen production facilities and their heavy electricity usage.
• Mentioned a specific hydrogen production facility with a potential capacity of 2.6 gigawatts in the Permian, based on data received from ERCOT.
• Highlighted federal funding fueling interest in hydrogen production facilities and potential changes in qualification criteria.
• Pointed out potential uncertainty related to bitcoin mining operations and their ability to relocate swiftly.
• Emphasized the importance of examining reasonable load forecast data submitted by transmission companies to ERCOT and the need for thoughtful infrastructure planning.
• Discussed the commission's statutory authority to act based on projected load growth and ongoing rulemaking to determine policy criteria for examination.

• ERCOT has $14 billion in transmission projects under planning, construction, or engineering
• These projects will be paid for by all ratepayers in ERCOT
• Senator Menendez requests a list of the top electricity users broken out by industry, including upcoming users
• Concerns raised about consumers, especially those on fixed incomes, having to pay for transmission lines benefiting businesses like bitcoin miners
• Request for data on who benefits from the transmission lines and concerns about the fairness of costs for everyday Texans

• Senator Menendez asked about reducing congestion and making the system more efficient by using AI or increasing capacity lines.
• ERCOT mentioned the ongoing process of studying congestion reduction with transmission system additions and evaluating their effect on congestion.
• They highlighted the benefit to consumers of reducing congestion and using congestion economics criteria for evaluation.
• The importance of evaluating new power generators based on their proximity to demand to reduce the need for new transmission was emphasized.

• PUC's Commissioner Cobos expressed a commitment to working with ERCOT on their generation hub concept
• Emphasized the potential cost savings of building transmission closer to load
• Highlighted the importance of integrating new grid enhancing technologies such as dynamic line rating to maximize the use of existing transmission systems
• Senator Menendez asked about transmission costs, stating that 30% to 40% of the customer's bill is for transmission.
• He inquired whether this cost is for past or future transmission and how it can be reduced.
• Miss Hjaltman mentioned that she does not have data on industrial users' transmission costs and that the costs are based on the four months of the year that the costs are implemented.
• Commissioner Cobos was thanked for her expertise on the subject.
• OPUC's Courtney Hjaltman discussed the need to minimize the impact on consumers in contested cases related to refunds and additional costs.
• Highlighted the challenge of holding entities accountable for expenses such as cybersecurity, tree trimming, and resiliency measures.
• Emphasized the difficulty in assessing whether upfront investments in resiliency actually pay off and the need to address this issue.
• This assessment is part of the process of reviewing plans in general.

• Woody Rickerson highlighted the importance of looking at transmission projects to minimize the impact on consumers.
• He provided an example of prioritizing building transmission lines further from the coast to enhance resiliency against hurricane damage.
• The considerations for resiliency include choosing options less likely to be impacted by natural disasters.
• Senator Nichols discussed the breakdown of transmission costs, emphasizing that it includes not only building new transmission lines but also ongoing maintenance and everyday operational costs.
• He highlighted the need to analyze the separate components of transmission costs to understand the impact on consumers, even without adding new capacity.
• Senator Nichols expressed concern about the rapid growth in demand for electricity in Texas, particularly citing the high proportion of growth attributed to data centers, crypto mines, and hydrogen production.
• He raised the question of whether Texas is disproportionately attracting electrical demand growth compared to other states and sought clarity on the national perspective of load growth, particularly referencing the different categories of bitcoin mining and the attraction of the hydrogen market in Texas.

• Unprecedented load growth driven by larger blocky loads causing states and markets to scramble
• Need for additional transmission and generation resources on the wholesale supply side
• Working on getting reliable new capacity and industry investment in new power plants
• Load growth is far greater than population growth, raising concerns about the adequacy of the current system
• Calls for certainty in addressing the load growth issue to avoid building an inadequate system
• Consideration of an interim charge or additional studies to further investigate the significant load growth issue

• San Antonio is ranked 11th in the nation for data centers, with 35 operated by eleven providers, including Microsoft, and seven data centers currently under construction.
• Data centers are attracted to areas where electricity is cheap and reliable.
• San Antonio has low-cost, reliable electricity from a diverse portfolio of energy sources, including renewable energy.
• Data centers have backup power on-site, including large generators, and the possibility of putting power back onto the grid during times of need is raised as a way to encourage data centers to operate in Texas.

• Data centers are not prohibited from using their backup generation as a commercial resource on the grid
• Most data centers do not currently include this in their business plans
• AI data centers will have significantly higher power demand, requiring a change in how they are addressed
• Committee will further address managing the growth of Texas size in relation to data centers

• ERCOT's Woody Rickerson discussed the rapid load growth and mentioned that the methodology for forecasting load has shifted from contracted to projected methodology.
• He highlighted the significant increase in load, attributing it to the emergence of AI data centers, which are substantially larger than traditional data centers.
• Rickerson noted that some AI data centers are over 2000 MW, emphasizing the tremendous scale of their impact on the grid.
• He compared the size of these data centers to the city of Lubbock, demonstrating the substantial increase in load due to these facilities.

• Chair Schwertner raised questions about the electrification of existing load, particularly in the oil and gas sector and expressed concern about lack of knowledge pertaining to this shift.
• There was a discussion about the responsibility for projecting load and limitations regarding contracted load in transmission service providers (TSPs).
• The mention of a conservative approach to projecting load and the implications this has for policy decisions.
• The mention of a potential hydrogen economy and the lack of forecasting regarding new technologies and their impact on load.
• Concerns were raised about limitations on discussing anything outside of contracted load and the lack of vigorous relay of information on this topic.

• Senator Johnson discussed the impact of Senate Bill 5066 on the accuracy of energy growth projections.
• He highlighted the challenges posed by rapid load growth, such as the electrification of the oil and gas industry and the increasing power consumption of AI data centers.
• Senator Johnson emphasized the need to re-evaluate all previous assumptions and policies in light of the evolving economy and grid expansion in Texas.
• Senator Campbell raised concerns about regulating power consumption from emerging technologies, suggesting the need to consider limiting energy demand from large consumers.

• Chair Schwertner emphasized the need to focus on Texans, homes, and core state functions in addressing rapid load growth.
• He suggested discussing impact fees, bonding, and other measures to look at load and have a disproportionate amount picked up by an entity that may not be as highly valued by policymakers.
• Mentioned the potential for AI to drive load growth and the need to consider load growth in terms of stability and reliability.
• Stressed the importance of prioritizing the lives of everyday Texans in decision-making related to new generation and grid reliability.

13 - Sixth Panel 

• Ellen Buck, representing Oncor, discussed the increasing demand for energy on the ERCOT grid and the challenges it presents.
• She mentioned that Oncor has received nearly 300 requests for load interconnection to the transmission system, representing nearly 47 gigawatts of new demand.
• A significant portion of these requests are for large loads, between 100 mw and gigawatts in size, and are geographically concentrated in specific areas, which is straining the transmission system.
• The rapid growth is outpacing transmission development, particularly in areas like the Permian Basin, where the current load growth significantly outpaces historical trends and ERCOT's internally developed load forecasts.
• Transmission projects have long lead times, and the current situation is impacting customers, with over 100 requests for service on the Oncor distribution system in the Permian Basin.
• She emphasized the importance of aligning transmission development with customer needs and mentioned House Bill 5066 as a valuable tool to address the needs of high-growth areas like the Permian Basin.
• Buck also highlighted the need for implementing HB5066 into transmission planning and development processes, as well as integrating load-seeking interconnection guidance into codified rules and protocols.
• She explained the process Oncor uses to determine which loads are credible enough to include in their attestation, focusing on the customer's evidence of commitment and maturity.
• Buck stressed the critical importance of forecasting transmission system needs and ensuring facilities are in place in advance of customer needs to support the state's growth.
• She expressed the need for actionable plans to ensure that transmission infrastructure keeps pace with the growing load in Texas.

• Todd Staples, president of the Texas Oil and Gas association, expressed gratitude for the attention given to infrastructure needs and the passing of House Bill 5066, aiding in forecasting and infrastructure development.
• He emphasized the rapid growth in oil and natural gas production in Texas, particularly in the Permian Basin, and the importance of addressing infrastructure and power limitations to sustain this growth.
• Staples highlighted the significant contribution of the oil and gas industry to the Texas economy through taxes and funding for various programs.
• He urged scrutiny of non-oil and gas load forecasts and emphasized the importance of meeting all needs for the continued growth of the industry.
• Staples praised ERCOT’s efforts in developing the Permian Basin reliability plan and stressed the need for the full plan to be advanced without additional reviews or studies to modernize processes and support Texas’ economic leadership.
• He also emphasized the importance of transmission infrastructure and generation diversity, advocating for attracting new market participants to enhance generation capacity in Texas.

• Katie Coleman from Texas Association of Manufacturers discussed the impact of costs on companies not related to oil and gas industry.
• Mentioned the House Bill 5066 which reinstates utility forecasts for load growth, indicating the need for their integration into ERCOT's planning process.
• Senate Bill 1281 was discussed as a means to alleviate consumer-facing congestion costs, but additional forms of congestion costs were noted as not being considered in the test.
• Emphasized that with these two bills, the necessary tools are generally in place to serve customers.
• Expressed the need for a deliberate implementation of higher voltage projects without introducing additional practical or reliability problems.
• Addressed the importance of understanding the portion of customer bills attributed to transmission costs.

• Different customer classes have different elements of their bills
• Higher voltage customers use less of the system and have lower distribution costs
• Lower voltage customers have higher percentage of bill in wires cost
• Distribution level customers, such as businesses, pay about 30% of their bill in transmission costs
• Load growth includes transmission load and generation growth
• Focus on incentivizing new generation as well as transmission
• Concern about not stopping movement of electrons in Texas

14 - Senators Questions for Sixth Panel

• Chair Schwertner mentioned the need for more detailed data analysis and unaddressed questions regarding vetting loads and potential inconsistencies between utility jurisdictions
• Emphasized the study for the Permian region extending to 2038, indicating uncertainty about future changes and generation growth
• Highlighted the possibility of non-firm loads, such as crypto facilities, which may not require additional transmission investment and may reduce costs
• Acknowledged the 2038 study but also noted forecasts for the nearer term, with a large focus on 2038 for the Permian region
• Chair Schwertner raised a question to Mr. Staples about addressing generation and transmission issues within six years, based on the mentioned data

• Chair Schwertner emphasized the process of each TSP applying for a CCN from the PUC as a checks and balances for transmission needs.
• He highlighted the importance of maintaining an energy only market and keeping it market-based to attract investment in new generation.
• Mentioned ample revenue through the Texas Energy fund applications and the notice of intent for new applications.
• Emphasized the need to avoid introducing tools that create uncertainty and add cost to consumers.
• Discussed the role of innovation, particularly AI, in managing systems better and incentivizing the type of power needed.
• Overall, the focus is on guiding principles to ensure balanced growth and for Texas to continue leading in every aspect.

• Crypto mining growth in Permian Basin has raised concerns regarding access to transmission and generation for the oil and gas industry.
• Concerns include uncertainty about the duration and level of jobs and investment brought by crypto miners.
• There are discussions regarding the potential manipulation of the system by certain businesses to advantage themselves at the expense of all consumers.
• The goal is to ensure that load growth does not allow for manipulation of demand, and to encourage conservation of power during peak loads.

• Todd Staples believes the Permian Basin reliability plan can be a model for other areas in Texas
• He believes that other transmission service providers are closely watching this plan as the needs are expected to grow rapidly
• Staples commends all stakeholders, providers, and regulatory agencies for their work in addressing the needs in a "real Texas fashion"

• Grid constraints are impacting the oil and gas industry, particularly in the Permian Basin, which accounts for 70% of the state's capacity.
• The Eagle Ford area and the LNG facilities along the Gulf coast are also affected.
• Operators are hoping for expedited processes, like the one from 5066, to be put in place in these areas to relieve the pressure.

• Senator Zaffirini asked why the price of electricity isn't lower with the low price of natural gas
• Todd Staples from TOGA mentioned that they have grown significantly and regulators are developing new products to put revenues in the system
• He suggested that as the market design continues to mature, there should be a corresponding decline in electricity prices as natural gas prices decline
• Staples emphasized the need to focus on affordability and ensuring a balance between reliability and affordability in the new services being provided

• Miss Buck indicated the likelihood of needing to move to higher voltage, 765 lines in ERCOT to support additional projected load.
• Highlighted the necessity of studying the entire ERCOT region to develop a comprehensive plan rather than piecemealing a solution for better technical and cost-effective results for consumers.
• Encouraged policymakers to refrain from making hasty decisions and suggested waiting for further industry evaluation or insights from ERCOT before January.
• Stated that ERCOT is currently studying the matter as part of a regional transmission plan and holistically to determine the needs.

• Oncor did not specifically foresee the explosive load growth in certain areas such as the Permian due to increased electrification.
• Challenges were faced in keeping up with the growth in these areas.
• The surge in data center growth was not anticipated five years ago.
• A 150,000 square foot data center had significantly increased its load from 9 to 60 in the span of six years, with the most recent increase not being foreseen even 18 months ago.

• The electrification in the Permian Basin involves both new development and retrofitting of old diesel operations to electrical operations.
• There is heavy dependence on gas processors and significant electrification of the upstream sector.
• Projected load growth for oil and gas and non-oil and gas in ERCOT is around 11 plus gigs.
• The breakdown of the load growth for retrofitting existing diesel operations to electrical operations is not available yet.
• Electrifying diesel operations brings social benefits as a large proportion of the power drawn will be renewable energy from wind and solar farms.
• There is a symbiotic relationship between renewable energy and traditional thermal production of oil and gas.
• The Permian Basin is crucial for meeting supply for global allies with significant benefits such as decline in emissions and future electrification of operations.
• Concerns about costs being imposed on residential and small business consumers, but it's important to recognize the social benefits of electrifying operations.

• Todd Staples believes that the significant legislation passed in the last two sessions has created a framework for growth and it is important for all stakeholders to have certainty for regulators to fully implement the rules.
• Staples acknowledges the concerns about the PCM and its unnecessary component due to existing revenue streams, suggesting that allowing it to play out would serve the purposes well, assuming no unusual issues are identified.
• Miss Coleman raises a question regarding load growth projections for transmission planning, expressing concern about the prediction that all projections are 100% firm.

• ERCOT is not currently attempting to gauge what proportion of the load will be firm because of the lack of experience in forecasting load for newer technologies.
• There has historically been a lack of visibility regarding the types of businesses interconnecting to the grid. TDSPs have not historically collected or provided this information to ERCOT.
• Efforts are underway to establish a process for TDSPs to collect and provide business interconnection information to ERCOT, allowing for better understanding of the behavior and types of loads being interconnected.
• ERCOT may be able to forecast specific types of loads as more experience is gained, but at present, there is uncertainty.
• Utility companies must plan to serve the load they expect, and currently, they are treating it as firm. Senate Bill 1929 addressed this issue with cryptocurrency mining in the last session.

• Senator Johnson raised the issue of expanding SB1929 to provide ERCOT with better visibility of upcoming online resources
• He expressed the opinion that there may not be a legislative need for expansion, and suggested that utilities can improve communication with their customers to gather necessary information and provide it to ERCOT
• Senator Johnson indicated that the lack of previous communication from utilities may have been due to the lesser importance of the issue in the past
• He emphasized that there may be no legal impediment to such an expansion

• Ellon Buck agrees and expresses support for providing information to ERCOT
• ERCOT planning process followed by a certification process through the commission for new construction
• ERCOT's regional planning group review allows ERCOT to study projects and endorsements carry weight in the commission's need determination
• Utilities prefer ERCOT's approval, which differs from other jurisdictions where they have to prove the case to the commission
• There's a back-end process where utilities can be held accountable for imprudent decisions or overspending
• The back-end process may become a bigger part of the look going forward
• Concerns raised about potential gaming of demand response programs
• Question asked about the possibility of certain actions by Miss Coleman

• Senator Johnson expressed concern about bitcoin miners and other industrial users not participating in demand response during peak hours
• He mentioned the offensive idea of these users profiting off power when they could have easily not used it during peak hours
• Emphasized the need to differentiate between industrial users running 24/7 like automobile manufacturers and those who can choose when to operate, such as bitcoin miners
• Pointed out the need to predict and account for such behavior in planning
• Suggested restricting the ability of such users to profit from the system if evidence shows they are gaming it during critical times

• A conversation was had about allowing critical infrastructure to participate in demand response programs during peak load periods if they have available capacity on the system.
• There was discussion about whether flexible and price responsive loads could bid into the market engine with attention on addressing structural reasons preventing it from happening seamlessly.
• Senator Johnson's bill regarding registration for demand response passed, but another bill limiting cryptocurrency mining's participation and tax incentives did not pass the House.
• Data miners often contract with retail providers rather than dealing directly with ERCOT.
• There were remarks praising Encore for their response to recent tornadoes and flooding in the area.
• There was a question about whether to prioritize the type of generation coming onto the grid during times of intense pressure and demand.

• Vice Chair King is questioning the need to prioritize the type of generation allowed to interconnect based on dispatchability
• There are already defined interconnection timelines for generation in the protocols
• Priority in interconnection of dispatchable generation was done by the commission between the 21 and 23 sessions
• There is a discussion on delaying interconnections altogether, particularly regarding crypto miners
• The rapid growth of renewable generation has outpaced dispatchable generation, leading to a bad situation
• The question arises whether there is a need to prioritize interconnection of dispatchable generation over renewable and intermittent generation until catching up
• A bill from the last session aimed for 50% of all new generation connected to be natural gas fired, but it did not progress
• Discussion on the need to alter market incentives to prioritize dispatchable generation
• A suggestion to halt renewable interconnections until a certain amount of dispatchable generation is connected
• Discussion on the resource intensiveness of interconnecting generators and transmission planning
• Uncertainty on the interaction between transmission planning and the large load issue

• Vice Chair King emphasized the need to prioritize dispatchable generation interconnections and expressed concerns about federal subsidies for renewable energy.
• The conversation highlighted that most of the power, about 75%, is currently being produced by nuclear, coal, and natural gas.
• There was a discussion about the potential over-dependence on renewable energy and the need to balance renewable and dispatchable sources for reliability.
• It was mentioned that federal subsidies heavily incentivize renewables over dispatchable sources in the market.
• The uncertainty around new technologies like AI and their potential impact on reducing congestion and transmission losses was acknowledged.
• The conversation then shifted to Osmos, where they were about to share some best practices related to the topic.

15 - Seventh Panel

• Osmose works with electric utility partners on the structural integrity of the grid, focusing on wood poles and steel transmission towers.
• They conduct wood pole inspections, estimating 12-14 million wood poles in Texas and emphasizing the impact of wood decay on structural integrity.
• Osmose's maintenance program can extend the life of wood poles to 75-100 years with proper maintenance, ensuring optimal health through inspections, decay removal, and preservative reapplication every 8-10 years.
• They also provide grid resiliency work, leveraging pole data to model and prescribe measures for withstanding severe weather events.
• Osmose offers similar asset health and grid resiliency programs for steel transmission towers, with additional services for wildfire mitigation.

• Demand for electricity in Texas has risen by 25% over the last decade compared to 5% for the nation as a whole, with estimates suggesting a further increase of 51% in the coming decade.
• Peak demand has grown by 18% in the last five years and is estimated to increase by 77% in the next ten years.
• ERCOT has set 21 all-time peak demand records over the last two summers.
• Strategic investment in electric infrastructure is essential for economic future and reliability.
• Legislation has been passed to address the development of a regional transmission plan and load forecasts.
• There have been significant storm activities causing outages in various areas, leading to the passing of the Texas Resiliency Act for investment in resiliency projects to better withstand extreme weather events.
• The Resiliency Act includes wildfire mitigation measures and strategies.
• Investment in infrastructure extends to generation, with the Energy Fund being successful and member companies investing in the grid to meet demand and growth.
• Texas has below-average electricity prices and high reliability is a priority for Texans.
• The impact of energy-intensive cryptocurrency mining facilities on the Texas electric grid is being studied, with a focus on system reliability and customer costs.

16 - Senators Questions for Seventh Panel

• State regulatory regulations on poles are limited in Texas
• FERC has requirements
• Some states, such as Florida, have more advanced regulations
• Osmose assisted with wildfire in the panhandle and advocated for a best in class program for pole maintenance to extend their lifespan
• Cost is a factor for utility executives in implementing such programs
• Chairman Schwertner highlighted the importance of hearing from the company and any potential regulatory changes in Texas relative to other states

17 - Eighth Panel

• Brian Morgenstern, Riot Platforms, discussed their bitcoin mining operations in Texas, having invested about a billion dollars in Milam county and employing over 225 people full time.
• They are expanding into Corsicana and have a large workforce with various career tracks such as software developers, engineers, technicians, construction crews, security personnel, and administrative staff.
• Morgenstern emphasized their reliability in the bitcoin market, being one of the largest commodities markets in the world.
• Riot Platforms can act as a flexible energy source, helping ERCOT during peak demand times and providing a reliability service to the grid.
• They have invested significantly in Texas and have no intention of leaving, with plans for continuing mining operations for over 100 years.
• Riot Platforms aims to repurpose existing infrastructure for their operations, minimizing transmission costs.
• They have a long-term power purchase agreement allowing them to sell power into the wholesale market in addition to bidding for ERCOT's ancillary services to control their load.

• Peak demand of crypto mining in ERCOT system is around 2600 megawatts, equivalent to the city of Austin.
• There is an expected growth in crypto mining, with an approved 2600 megawatts and a forecast of 11,000 megawatts by 2030.
• ERCOT's struggle to categorize and forecast new loads coming online, as they lack load capacity categories and detailed load breakdowns.
• Controllable load resources are a reliable way for loads to participate in ERCOT market, with about 130 of the identified 2600 megawatts crypto load participating.
• Crypto mining represents about 4% of the 7% spent on ancillary services in the electric market.

• AEP Texas' Senior Vice President of Energy Delivery, David Ball, addressed challenges and opportunities presented by the crypto mining industry.
• He expressed concerns over the transparency of ownership related to the crypto mining industry and its increasing percentage of load relative to other industries and customer classes.
• AEP Texas proposed three recommendations: First, large loads, including the bitcoin industry, should register with ERCOT and NERC and be subject to reliability standards.
• Second, AEP Texas advocated for the development of transmission planning and real-time operational tools to enable the dynamic aspects associated with large loads such as bitcoin mining.
• Third, a holistic planning approach to account for generation that will be needed to serve the new loads as part of a high-voltage transmission backbone in Texas should be considered.
• David Ball highlighted the sensitivity of crypto mining loads to unexpected frequency and voltage changes and emphasized the potential impact on grid equipment and system stability.
• He stressed the need for tools capable of identifying and isolating large load facilities causing grid reliability issues and urged the committee to consider solutions that provide transmission owners and operators with the visibility, information, and tools needed to ensure the reliability and security of the bulk electric system.

18 - Senators Questions for Eighth Panel

• ERCOT Chair Schwertner questioned Riot Platforms' Brian Morganstern on selling into the wholesale market and participating in ancillary service DRRS.
• Morganstern clarified that they participate in both markets, with a power purchase agreement for a portion of the load and the ability to participate in ancillaries for another portion.
• Revenue breakdown from 2020 to 2023 included power credits, total revenue, and mining revenue, where power credits were cost offsets and not actual revenue.
• Revenue in 2023 was approximately $280 million, with $90 million from bitcoin mining, $60 million from switchgear fabrication, and $20 million from hosting agreements.
• Approximately $70 million in power credits offset power bills, with $50 million under private contracts and $20 million from ancillary services selling control of load to ERCOT.
• Schwertner referenced Riot's SEC filing on fixed price power purchase contracts enabling strategic curtailing of mining operations and participation in programs.
• Schwertner raised concerns about Texas' energy market system significantly advantaging crypto mining and questioned the natural throttling down of power use based on high bitcoin prices and electricity prices.
• Morganstern disagreed with the characterization of having an advantage and noted the growth of data centers in Texas.

• The discussion revolved around whether Riot Platforms is classified as a data center and their ability to curtail energy usage as a controllable load.
• Riot Platforms argued that they are a data center due to their use of storage, AI, and back office operations for various companies, including Microsoft and Google.
• The company stated that they sometimes participate as a controllable load, allowing ERCOT to determine when to turn them off, while at other times they participate in the wholesale market based on price considerations.
• They highlighted their capability to adjust their energy usage like a dimmer switch, maintaining a specific frequency and value.
• The company emphasized the benefit of their business model to Texas and discussed the potential for incentivizing new generation by having businesses capable of buying cheap and abundant energy and giving control of the load back to the grid.

• Brian Morganstern mentions that Riot Platforms' machines are put together in a factory outside Pittsburgh, Pennsylvania, and the chips are currently coming from Samsung in Korea.
• He states there is a longer-term plan to have the chips built in Texas at the Samsung plant in Taylor.
• Micro BT, a subsidiary of Riot, is responsible for building the machines in Pennsylvania. However, Micro BT is a Singapore Chinese company, while their parent company may be Chinese.
• Brian Morganstern also notes the prevalence of Chinese companies manufacturing electronic equipment, citing the example of his iPhone, possibly made by Foxconn in China.

• Brian Morganstern mentioned that their company is interconnected to the grid at both of their sites, and they consume power from whatever source is on the grid.
• He discussed a potential investment in a company that converts municipal solid waste into sustainable aviation fuel or energy for consumption.
• The company is focused on building out large sites connected to the grid for long-term use.
• Senator Johnson raised concerns about the availability of electrons and potential competition for power, to which Morganstern suggested that collocating with intermittent renewable energy may be more likely for the growth of crypto.

• Senator Johnson asked Riot Platforms' Brian Morganstern about alleviating scarcity or pricing pressure using power purchase agreement and the ability to sell power back.
• Morganstern explained that by making a lot of power available in the wholesale market, it drives down the price in the wholesale market and reduces costs for control of load on the ancillary side.
• He discussed the decentralized nature of the bitcoin network, highlighting its flexibility and unique advantages compared to other businesses with critical data centers.
• Senator Johnson expressed concerns about the unpredictability and rapid demand of the bitcoin industry, especially with regards to the electricity sector, but also acknowledged the potential benefits and unique opportunities from a public policy and market participation perspective.

• Vice Chair King is concerned about companies utilizing a large amount of transmission capacity and then creating scarcity, leading to higher costs.
• Brian Morganstern of Riot Platforms disagrees with this characterization, stating that they are located next to existing infrastructure and generally do not locate far away from generation.
• The company's business model involves using abundant and cheap power but having the ability to give it back when it's needed, thus not causing a problem for others who may demand power in Texas.
• Riot Platforms also participates in demand response and power purchase agreements in Texas due to favorable sites for their type of business and available power.
• The company can offset costs by participating in the wholesale market or ancillaries, ultimately making the price per bitcoin mined favorable.
• Other states like Wyoming and Oklahoma are also competing for this type of business.

• Riot Platforms' business started in Texas and has been mining bitcoin there for quite some time
• They have two sites in Texas, with electricity loads of 3-400 mw in Rockdale and 100 mw in Corsicana
• Riot is working on developing the Corsicana site to have a possible gigawatt available, but it will take time, possibly not before 2020
• The EVP of Riot Platforms expressed interest in discussing their business operations and power needs further
• There are concerns about the demand response being a significant part of their business plan and the unpredictability of the power queue
• Mention of Riot's 2023 SEC filing showing high total revenue, bitcoin production, and power credits earned
• Acknowledgement of the importance of industry input in solving power-related problems and the need for the company to address concerns raised

• Chair Schwertner asked Riot Platforms' Brian Morganstern about their operations in Texas, emphasizing the importance of electricity to their business.
• Morganstern confirmed that electricity is a crucial input to their business and discussed the significance of power purchase agreements, ancillary services, and demand response to their bottom line, especially in relation to bitcoin mining.
• He mentioned that out of 31 million, 24 were under their contractual terms and seven were in ancillaries, with less than 1% made in August.
• Schwertner brought up the 125 million made by Riot Platforms selling energy during winter storm Uri and asked for confirmation, indicating a unique structure with ERCOT.
• Morganstern acknowledged the unique market structure in ERCOT and highlighted it as a key reason for Riot Platforms' location in Texas.

• Cryptocurrency miners are not solely focused on Texas but are also investing and building in other states such as Wyoming, Oklahoma, and Nebraska.
• These miners are attracted to rural areas with abundant power resources, and some states, like North Dakota, are very active in this space.
• While Texas has an advantageous ERCOT market covering 90% of the population, only specific areas, like Rockdale and Corsicana, are currently hosting crypto miners.
• There is potential for crypto mining in the remaining 10% of Texas, but it is uncertain if any are active in those areas.
• The discussion also touched upon the significant additional load in the Permian, with 60% of it being from crypto or data centers, highlighting the substantial impact of crypto mining on the energy market.

• Brian Morganstern discussed the potential of powering crypto mining with natural gas.
• He mentioned that using gas could lead to lower production costs.
• Morganstern outlined the possibility of capturing and utilizing flared gas in the field for mining.
• He emphasized the importance of utilizing municipal solid waste to power crypto mining and participate in demand response programs.
• There was discussion about potentially selling excess electricity generated from powering with natural gas.
• Morganstern highlighted the dependency on site capabilities and the challenges of both harvesting power for mining and selling it elsewhere.
• There were specific questions posed by Senator Menendez and Senator Birdwell regarding the ability to give power back.

• Senator Menendez questioned Brian Morganstern on compensation for giving power back to ERCOT.
• Menendez highlighted that selling power back doesn't equate to giving it back, even if the entity can sell it cheaper than others.
• Menendez criticized the suggestion that ERCOT is allowing facilities to give back power, rather than sell it.
• Mentioned that data centers in the community host and transmit sensitive data, questioning Riot Platforms' classification as a data center when they mine for bitcoin.

• Senator Menendez questioned Brian Morganstern about the proportion of Riot Platforms' business that is bitcoin mining versus data center functions.
• Morganstern explained that bitcoin mining and data centers are intertwined, as the bitcoin network is essentially a data center made up of blockchain data.
• The discussion delved into whether there is a statutory definition of a data center, to which Morganstern mentioned the possibility of defining it in the context of bitcoin mining.
• The presence of a definition for virtual currency mining facility in Senator Johnson's bill was also referenced, but clarity on the definition of a data center was not provided.

• Senator Johnson expressed concerns about the definition of a data center and suggested that the legislation should specify the parties subject to it, which includes crypto mining.
• There was a discussion about the need to differentiate between non-crypto data centers and crypto mining facilities.
• The distinction between firm load and flexible load was highlighted as crucial in defining a data center.
• Senator Johnson cautioned against conflating data centers with crypto mining and urged the speaker to be careful with presenting facts to the committee.
• Senator Morgenstern raised questions regarding the properties being used for the operations.

• Riot Platforms purchased the property in Corsicana and has a long-term lease on the property in Rockdale.
• The details on the terminability of the lease in Rockdale were not explicitly discussed in the provided excerpt.

• Senator Birdwell asked about the termination of a lease, particularly related to bitcoin mining in rural Texas.
• The discussion highlighted that the lessor could also terminate the lease, not just the lessee.
• There was a mention of a bitcoin miner in Granbury leasing a portion of Wolf Hollow, and concerns about noise problems.
• Senator King cautioned about the terminology used when describing the process of "selling back" electricity, emphasizing the distinction between selling and not drawing electricity from the grid.
• Brian Morganstern explained the contract and the payment for not using electricity, clarifying that it's not about storing and selling back, but about not drawing from the system.
• The discussion explored Riot Platforms' participation in the wholesale market and the demand response program in ERCOT.
• Senator Menendez advised being cautious with terminology and distinctions between different types of operations.
• Brian Morganstern acknowledged the feedback and agreed to be more cautious in his explanations.

• Chair Schwertner asked ERCOT's Woody Rickerson about economic curtailment related to crypto mining.
• There is a cut-off point for crypto mining when wholesale prices reach between $70 and $160, leading to most crypto operations shutting down.
• The fluctuating profitability of crypto mining makes it unpredictable.
• ERCOT lacks control over crypto mining's response to price changes, causing uncertainty during scarcity events.
• Chair Schwertner expressed a desire for all crypto to be controllable load resources for improved reliability.

• Legal problems need to be addressed before managing crypto growth in ERCOT
• Court cases related to software and other issues that need to be resolved
• Lone Star Infrastructure Protection Act regarding foreign ownership of grid assets needs consideration

• Chair Schwertner asked if there is a formal registration process for crypto mining, to which Woody Rickerson from ERCOT responded that they register, but there is no formal process for crypto mining registration
• Chair Schwertner suggested mandating all crypto mining to be controllable load resources (CLR) to have visibility and know exactly when they will turn on and off
• ERCOT expressed that controllable load resources are beneficial for grid operators to have visibility on variable load and to accurately predict when they will turn on and off
• There was a question about whether the state could mandate all crypto mining to be CLR
• The discussion also included a mention of public testimony by Mr. Bell and the invitation to testify at the hearing.

• Crypto miners are only paid directly by ERCOT for ancillary services
• They submit offers into ancillary services using electricity they've already purchased
• They offer a megawatt value to ERCOT for certain prices, and if selected, they reduce their output or usage when called upon
• The power they use for this comes from a power purchase agreement or the spot market
• They can quickly ramp up or down their mining operation as selling electricity back can be more profitable than mining
• This business model is unique and legal, and not all loads are capable of doing this

• Senator Nichols inquired about the availability of written testimony.
• AEP's David Ball expressed uncertainty about having the testimony in writing, suggesting it may not have been submitted by the team.
• Senator Nichols suggested that copies of the testimony be made to ensure all members receive them.
• It was agreed that copies of the testimony could be quickly obtained from Isaac in the back of the room.
• The discussion emphasized the importance of the recommendations included in the testimony.

• Senator Nichols raised a question about the difference and definition of crypto mining and data centers in their load perspective.
• AEP's David Ball explained that the main difference is in the load behavior, where crypto mining facilities show large load fluctuations, dropping to zero for a few minutes or hours, and then picking back up to the same threshold.
• He emphasized the need for a statutory definition of a data center to differentiate it from crypto mining, as this would help in creating incentives for certain types of data centers beneficial for the community.
• Cited Riot's method of making money through the sale of pre-purchased energy back to their energy provider in exchange for credits, and active participation in demand response programs for the benefit of Texans.

• Brian Morganstern noted that Riot Platforms brings in income from an electricity standpoint through the Corsicana facility and Rockdale facility, with the latter being under a PPA.
• Mentioned the CLR program as market-based and fair, and highlighted the registration process for load, with half already registered and willingness to register more.
• Emphasized that bidding for crypto mining is an economic decision, indicating a lower cost presence in the market.
• Referred to a legal problem regarding crypto mining participation in CLR, expressing willingness to address it.

19 - Public Testimony 

• Matt Boms, TAEBA's Executive Director, emphasizes the need to integrate distributed energy resources (DERs) in ERCOT to meet the expected 150 gigawatts of real-time pricing load by 2030.
• He highlights the significance of SB 1699, enabling retail electric providers to aggregate DERs and participate in the ERCOT market, enhancing grid reliability, affordability, and energy independence.
• Post-winter storm Uri, Texans have increasingly adopted smart meters, thermostats, home batteries, generators, and rooftop solar, making the state a global leader in DER adoption.
• Incorporating DERs could potentially save $5.5 billion over the next decade, with the emphasis that the cheapest megawatt is the one not spent.
• Boms urges the committee to expedite DER rulemakings in project 54,224 and 54233, establishing market certainty on DERs and virtual power plants in Texas.
• His final emphasis is on making the grid more reliable through enabling Texans to control and own their energy resources.

• Senator Johnson asked Matt Boms if the proliferation of DERs (Distributed Energy Resources) could affect tasks related to transmission challenges.
• Matt Boms expressed belief that the proliferation of DERs could help avoid transmission costs, particularly in areas with grid congestion, by providing a supply of DERs and VPPs (Virtual Power Plants).

• Elisa Hammond, representing Third Act Texas, spoke on the organization's advocacy for a sustainable future, renewable energy, and energy efficiency.
• Emphasized the importance of renewable energy and energy efficiency for a sustainable future.
• Expressed support for the growth of renewable energy coupled with battery storage in the grid and opposition to the expansion of coal and gas plants.
• Highlighted concerns for people's health, climate, and long-term sustainable economy in Texas.
• Pointed out the effects of severe weather patterns and air pollution from burning fossil fuels on health.
• Advocated for the use of wind and solar energy coupled with battery storage, citing their rapid growth and decreasing price tags.

• Joanna Freebal, an independent voice for utility customers and landowners, raises concerns about the affordability and reliability of energy in Texas.
• She highlights that a third of Texas customers are struggling to pay their energy bills and emphasizes the impact of unreliable energy on the state's economy.
• Freebal expresses worry about the impending increase in solar energy capacity and its potential impact on reliability and rates.
• She stresses the effects on ranching and farming communities due to the takeover of rural land for solar energy, including the implications of additional transmission lines through eminent domain.
• Freebal challenges ERCOT to prioritize affordable and abundant energy for all Texas citizens.
• Senator Nichols shares details about federal tax subsidies for solar energy, including the Production Tax Credit (PTC) and Investment Tax Credit (ITC).

• Larry Linenschmidt, Hill Country Institute's Executive Director, expressed concerns about the impact of climate change and air quality on Texas.
• He proposed recommending the legislature appropriate $2 million for the PUC to develop and maintain a climate action plan updated every two years.
• Linenschmidt highlighted the impact of climate change on Texas, including increased wildfire risk, prolonged drought, intense rainfall events, flooding, and sea level rise with high impact hurricanes.
• He emphasized the need to review every aspect of the Texas electric grid with consideration of climate change to provide affordable, clean, and reliable energy to the people of Texas.
• Linenschmidt also discussed air quality concerns, particularly related to methane and subsidies to the oil and gas industry.
• Members of the committee expressed appreciation for the perspectives shared and raised concerns about the impact of subsidies on the market and the need to address pollution.

• Susan Meredith discussed her background as a citizen lobbyist and her experience in the energy industry
• She emphasized the need to reevaluate market design and drew parallels between energy and computer industry
• She highlighted the importance of reliability and response in energy systems, likening it to the concept of reliability, availability, serviceability (RAS) in the computer industry
• She spoke about her book, "Beyond Light Bulbs," aimed at simplifying understanding of energy issues for a middle school audience
• The committee members expressed appreciation for her testimony and closed public testimony on charge number one
• They then proceeded to open public testimony on charge number two with a list of speakers including Susan Meredith

• Don Brown advocated for grid resilience and new transmission and distribution systems
• Discussed HB 2555, which allows utilities to get pre-approval for grid resiliency investments
• Pointed out gaps in the act, particularly in addressing extreme impact low frequency events like solar storms and high altitude EMPs
• Cited examples of cost-effective solutions for these hazards, such as technology from imprimis that blocks ground induced currents from severe solar storms
• Called for a mandate to address these types of hazards, citing the recent winterization program as a model for moving forward
• Highlighted historical solar storm events and emphasized the need to act now for protection
• Chairman acknowledged Brown's concerns about the limitations of 2555 in addressing extreme impact low frequency events

• Larry Linenschmidt advocates for Texas to prepare for the grid of 2050 and the expansion of electric delivery capabilities due to population growth, increased manufacturing, AI, and data center demands, as well as the impacts of climate change.
• He emphasizes the need for a comprehensive plan for new transmission lines and urges the PUC and ERCOT to use at least 20-year economic projections for determining the viability of new transmission lines.
• Expedited approval of new transmission lines is proposed to enhance grid stability and reliability, along with exploring additional rulemaking to reduce congestion in the transmission infrastructure.
• Providing incentives and favorable rules for owners of existing transmission lines to increase capacity to 765 kilovolts is suggested as a way to address congestion problems, lower consumer costs, and create economic opportunities.
• Competitive bids for transmission lines with cost caps are recommended to ensure the best prices for Texans.

• Susan Meredith reiterated the importance of the computer model evolution in relation to transmission, emphasizing the need for additional features and functions to improve reliability and revenue generation.
• She highlighted the potential for additional revenue through regional solutions, such as leveraging different energy sources across the state.
• Susan proposed incentives for storage on the demand side and emphasized the need for energy storage at locations with renewable energy sources, advocating for both wind and solar energy.
• She emphasized the need to move past the traditional "either or" thinking in energy and stressed the importance of including carbon emissions requirements for any new fossil fuels.
• Additionally, Susan handed out hats with the slogan "Make Mother Earth Great Again" and emphasized the importance of bringing people together for the planet, regardless of politics.
• The committee expressed appreciation for Susan's testimony and closed the public testimony for the issue.

• Lee Bratcher, President of the Texas Blockchain Council, discussed the growing bitcoin mining industry in Texas, with 2900 currently energized and an average of 90 mining operations being added per month.
• There are 40,000 bitcoin or large flexible load in the interconnection queue, with the industry supporting increased fees to clear out phantom load.
• Bitcoin mining data centers provide rural jobs, are the largest employer in three Texas counties, and the largest taxpayer in four Texas counties.
• ERCOT data shows that bitcoin mining is a responsive and flexible load, and recent research from Texas A&M indicates that it does not stress or strain the grid, supporting its potential benefit for grid stability.
• The majority of bitcoin mining in Texas is conducted through economic curtailment, where operations simply curtail their load when prices get high, rather than being paid by ancillary services or a power price contract.
• The Texas Blockchain Council supports all bitcoin miners going into the Competitive Renewable Energy (CLR) market.

• Senator Johnson is asking about the controllable load resource (CLR) option and its impact on money flow
• Bitcoin miners typically have the lowest bid for ancillary services
• CLR operates within ancillary services and is paid for in the same way
• ERCOT procures a fixed amount of ancillary services; market costs don't increase with more bitcoin miners
• It could potentially crowd out others, but advantageous in bidding at lower prices
• Increased visibility on where bitcoin miners curtail from the grid

• Alex Kuche represents Marathon Digital Holdings, the largest digital asset miner in North America operating in Texas.
• Marathon's Texas operations contribute significant investment and tax revenue to the state.
• Marathon's operations in Texas aim to provide stable grid operations through flexible, curtailable load that responds to market signals and grid demands.
• Marathon voluntarily curtailed power usage for 48 hours in January 2024 to stabilize the electric grid during periods of high demand or anticipated strain.
• Marathon operates in three main areas: cryptocurrency mining, capturing excess energy, and developing hardware and software for the industry.
• The distinction between data centers and crypto miners can be based on energy usage characteristics and the end transaction or result.
• Marathon believes that their operations provide value to the grid and want policy considerations to recognize the benefits they offer for grid stability, economic investment, and energy policy within the state.

• Sheriff Mike Clore from Milam County Sheriff's Office spoke about Platforms, a bitcoin mining facility in Rockdale, Milam county
• Platforms' positive impacts on the community, including providing hundreds of jobs, contributing to first responder organizations, and supporting local projects such as rehabilitating animal shelters and implementing spay and neuter laws
• Platforms' role in revitalizing the area after the closure of an aluminum smelting plant
• Platforms' cooperation with ERCOT to make power available to the grid during extreme weather
• Sheriff Clore's testimony was appreciated, and the discussion was seen as important
• The meeting continued with other speakers.

• There are different technologies for bitcoin mining, such as proof of work and proof of stake, with proof of work being more energy-intensive.
• Large scale bitcoin centers may benefit from energy storage to ensure continuous operation.
• Bitcoin mining can benefit rural areas but may have negative energy and environmental impacts.
• Energy efficiency should be emphasized to counterbalance the demand for bitcoin mining.
• Storage solutions and regional approaches should be considered, with a focus on reward and recognition for energy efficiency.

• Bitcoin's volatility discussed
• Concerns raised about resiliency issues with Chinese transformers in Texas
• Chinese transformers noted as having back doors and vulnerability to being shut off by the Chinese
• Proposal to mitigate risk by either removing transformers over time or using them for bitcoin mining
• Emphasis on the need to address the risk of losing a critical transformer

• Bitcoin mining is distinct from traditional data centers and uses ASIC (application specific integrated circuit) computers specifically for mining bitcoin.
• The potential income from mining bitcoin in Texas is significant, with an example of a company making $8.6 million in a month from a 450-megawatt facility.
• Bitcoin mining companies also earn money through participation in demand response programs and selling back excess power through power purchase agreements (PPAs).
• "Energy arbitrage," likened to Enron-style market manipulation, has been discussed, with concerns about its impact on energy prices and potential grid instability.
• Various estimates suggest that the increased demand from crypto mining could lead to price increases ranging from 2.2% to as much as 8-12% in the next few years, potentially costing Texas billions of dollars.
• The need to prevent bitcoin miners from holding the grid hostage was emphasized.

• Rockdale, Texas Mayor Ward Roddam discussed the positive impact of bitcoin mining data centers in the community.
• Following closures of Alcoa and Luminant, the county economy and tax base were heavily impacted, resulting in job losses.
• Bitdeer and Riot have brought approximately 400 jobs to Rockdale, providing mid-skilled employment opportunities for residents.
• The companies have made investments exceeding $1 billion in Rockdale and contribute significantly to tax payments for Milam County and Rockdale ISD.
• Both organizations have also made donations to various local community initiatives and events.
• Bitcoin miners like Riot and Bitdeer provide a baseload of demand power, creating incentives for investment and more generation which Texas needs.
• Mayor Roddam expressed Rockdale's appreciation for the jobs, tax revenue, and contributions made by bitcoin miners in Milam County.
• He also noted the belief that ERCOT's rules and market incentives effectively regulate bitcoin mining data centers without minimizing local control for offering incentives for economic growth.
• The testimony was concluded with no further questions, and the next hearing is scheduled for August 27.

20 - Chair Schwertner adjourns hearing