Meeting Summary -10/31/24 P-55845 Staff Led Workshop

Questions and Answers – Stakeholders, ERCOT, IMM

Q1: Should the Commission direct ERCOT to determine AS procurement quantities based on a criterion that corresponds to maintaining a specified level of reserves less than the amount used in current operating procedures and more than the amount that triggers a Watch?

1 – Jeff Billow, ERCOT, AS Procurement Quantities

• Jeff Billow from ERCOT addressed misconceptions about ancillary services, emphasizing their role primarily in addressing unexpected system events rather than capacity shortages.
• Two main scenarios discussed: running out of capacity on extreme weather days and emergencies due to forecast errors or generator trips.
• Ancillary services like Non-spin and ECRS are procured to manage unexpected events, not just capacity shortages.
• The WATCH criteria indicates a state policy directive post-Winter Storm Uri to avoid signaling grid instability unnecessarily.
• Highway analogy used to explain safety margins and reserve levels. Before certain policy revisions (NPRR1105 & NPRR1106), there was a greater buffer between declared emergencies and load shedding.
• Recent changes reduced reserve margins from 2600 MW to 1000 MW between emergency alert (EEA1) and load shedding.
• Debate over criteria for ancillary services procurement focuses on avoiding a WATCH state, with opinions differing on whether to continue current practices or use a different reserve standard.
• Key discussion point: Determining the probability and criteria for entering a WATCH should ERCOT aim for a 1-in-5, 1-in-10, or 1-in-20-year event frequency?
• Stakeholder comments varied on operational criteria, with some supporting ERCOT’s approach and others suggesting aligning with a model targeting involuntary load shed.

1 – Michele Richmond, TCPA, AS Procurement Quantities

• Michele Richmond represented Texas Competitive Power Advocates.
• Emphasized that grid operation standards should determine ancillary service procurement.
• Market activities should reflect control room operations.
• Current demand curves do not reflect post-Uri real-time co-optimization changes.
• Advocates for alignment between ERCOT’s operational directives and market design to avoid policy disconnect.
• Stressed the need for ERCOT’s market design to align with Commission’s decisions.

1 – Blake Holt, LCRA, AS Procurement Quantities

• Blake Holt aligns with Michele on the discussed issue and doesn’t provide additional justification.
• Concerns raised about a disconnect between ERCOT’s operational posture and the AS plan procurement.
• ERCOT plans to fill resource gaps with RUC instructions, which is deemed unacceptable by stakeholders.
• Stakeholders prioritize resource adequacy in conversations.
• Concern that increased RUC commitments might decrease reliability due to wear and tear on older units.
• 415 RUC hours were issued from June to September; over 90% affected units were over 50 years old.
• Preference for policies that signal demand needs through pricing rather than out-of-market actions.
• AS plan should align with ERCOT’s current operational posture.

1 –  Bryan Sams, Calpine, AS Procurement Quantities

• Achieving the reliability standard is the primary objective of the market design.
• Ancillary services, LMP, and ECRS are crucial tools in achieving this standard.
• Prospective tools like DRRS and PCM are not well-defined currently.
• Consider changes in standards in context of moving towards or away from the reliability goal.
• Current measurements and tuning of policy dials, such as LMP cap and ancillary services purchasing quantities, lack cohesion.
• Recent reductions in ancillary services quantities for 2026 seen as reducing investment signals.
• Potential for reform in existing resources like ECRS to enhance demand response.
• DRRS and PCM currently hold no value as they are not implemented.
• Calpine’s focus is on aligning changes with reliability standard goals.

1 – Bill Barnes, NRG, AS Procurement Quantities

• ERCOT operated more conservatively after Winter Storm Uri, which initially had some disagreement due to timing and retail market impact.
• Over time, it was acknowledged that conservative operations can lead to more reliable systems, which consumers desire.
• Support for ERCOT’s approach in using ancillary services was expressed, but a stable amount of procurement is requested to avoid market disruptions.
• Resource adequacy is a major concern, with upcoming large load growth over the next five years.
• Importance of defining tools for reliability objectives, particularly with ancillary services and demand response resources, DRRS.
• Concerns were raised about what tools remain if certain products are potentially eliminated for resource adequacy.
• A suggestion was made for a comprehensive review of demand response programs, utilizing platforms for energy efficiency and demand response in the competitive retail market.
• Possible new product design for different customer classes to aid ERCOT in managing resource adequacy and operational reliability.

1 – Andy Nguyen, Constellation, AS Procurement Quantities

• Andy Nguyen from Constellation agrees with previous commenters, including TCPA.
• Expressed concerns about the reliance on RUC, aligning with LCRA’s comments.
• Emphasized a misalignment between ERCOT’s desired operational reserve and the market’s signal response.
• Noted a reduction in RUC after the implementation of ECRS.
• Concerned about ERCOT’s comment regarding insufficient ancillary services potentially leading back to using RUC.
• Utilizing RUC could be costly for consumers due to make-whole payments.
• Potential negative impact on generators and concerns on aging fleet wear and tear were also mentioned.

1 – Laurie Block, TSPA, AS Procurement Quantities

• Laurie Block represents the Texas Solar Power Association.
• Agrees with ERCOT on the role of ancillary services as an operational reliability tool.
• Emphasizes the importance of the energy-only market and maintaining its competitiveness.
• Stresses the need to clearly define the true purpose of ancillary services before determining procurement quantities.
• Acknowledges the conservative operations adopted by ERCOT post-Winter Storm Uri.
• Highlights the importance of focusing on avoiding unintended consequences and preserving investment signals.

1 – Ned Bonskowski, Vistra, AS Procurement Quantities

• Ned Bonskowski acknowledged agreement with several previous comments but highlighted a divergence in views related to resource adequacy and operational reliability needs.
• Emphasized the importance of using energy and ancillary services markets to support resource adequacy, due to limitations placed on other tools.
• Discussed the need for conservatism in ancillary service procurement to ensure sufficient resources during extreme events.
• Used an analogy involving roads and rumble strips to explain current market structures and the need for additional capacity to prevent system failures.
• Raised a question regarding whether a commission directive for ERCOT to determine ancillary service protection quantities implies the need for rulemaking, suggesting a potential rulemaking process under HB1500.

1 – Katie Coleman, TIEC, AS Procurement Quantities

• Ancillary services should cover specific operational risks, not additional reserve levels.
• Prefer objective analysis to define risks and ensure transparency in risk assessment.
• Concern with using WATCH criteria as it is subjective, prefer criteria with objective triggers.
• Support market solutions including ancillary services over RUC.
• Disagreement with the notion that no money is put in the market until critical conditions occur.
• Recognition of efforts to price reliability risk earlier and changes to the operating reserve demand curve.
• Future discussions anticipated on ancillary service demand curves and real-time co-optimization.
• The importance of assessing if tools meet the reliability standard rule.
• Encouragement for transparent definitions of risks and levels of coverage.

1 – Eric Goff, TEBA, AS Procurement Quantities

• The reliability standard aims to avoid outages, and ancillary service procurement should align with this standard.
• Transparency in procurement of operating reserves is crucial to meet planning and reliability standards.
• Understanding the quantities and reasons for procurement is essential for addressing uncertainties consistently.
• Demand response can be a larger component of ancillary services, potentially reducing costs if implemented for advance scenarios.
• New products, such as hours or days in advance demand response, could lower overall consumer costs.
• Conversations should focus on specific reasons and risks related to procurement rather than using metaphors or analogies.

1 – Cyrus Reed, Sierra Club, AS Procurement Quantities

• Cyrus Reed from the Sierra Club’s Lone Star Chapter presented comments on AS procurement quantities.
• Expressed agreement with previous discussions, opposing the concept of “RUC-ing” due to cost and inefficiency, and potential pollution from older units.
• Noted ERCOT’s conservative strategy post-Winter Storm Uri, acknowledging its effectiveness but also its high cost to consumers.
• Suggested that an EEA is clearer than a watch for managing events.
• Advocated for considering demand response as a tool, highlighting opportunities for residential demand response between a watch and an EEA.
• Pointed out that bringing in ancillary services too quickly might prevent consumers from gaining financial benefits through demand response programs.
• Emphasized a risk versus reward assessment for the market concerning current measures.

1 – Stephanie Kroger, Hunt Energy, AS Procurement Quantities

• Agreement with previous comments, particularly those by Ned.
• Concern that the public is worried about power shortages and doesn’t want to operate under such conditions.
• Jeff mentioned two causes for potential power shortages: extreme weather events or insufficient capacity.
• Highlighted the need to address resource adequacy as a critical issue.
• Warning against waiting until 2026 to start analyzing reliability standards.
• DRRS is identified as a key tool that requires further Commission guidance.
• The dual purpose of DRRS should include reliability reserves.

1 – Resmi Surendran, Shell Energy, AS Procurement Quantities

• Resmi Surendran from Shell Energy discussed a balanced position between load position and generation position.
• Emphasized the importance of combining energy and ancillary services to provide necessary revenue for required resources.
• Highlighted the need for transparent competitive markets to procure reserves.
• Concurred with ERCOT’s current operational approach to avoid ‘WATCH’, advocating for continuation if desired.
• Stressed the significance of transparency in the market for hedging and price reflection to serve as investment signals.
• Discussed the need for evaluation of the ASDC for real-time optimization and appropriate valuation of services.
• Acknowledged the need to quantify and qualify the types of reserves and services needed.
• Noted the significance not only of the quantity but also the valuation of the reserves.
• Called for ERCOT to define the necessary services and ensure correct signaling for resource development.
• Mentioned the IMM wants to replace a filing but did not react further to Iran’s filing.

1 – Jeff McDonald, IMM, AS Procurement Quantities

• Jeff McDonald emphasized that procurement levels should be based on reliability criteria, specifically the probability of loss of load, rather than watch notifications.
• He argued that using empirical evaluation for AS procurement based on the probability of loss load is more efficient and should be the standard.
• A discussion on AS procurement compared the watch protocol to a rumble strip, highlighting that structuring operations around a probability of loss load covers all conditions, enhancing reliability.
• Jeff clarified that reaching the 3000 megawatt mark in PRC (Physical Response Capability) is when ERCOT enters a watch for low operating reserves, marking it as an objective reliability criteria.
• It was also clarified that ERCOT doesn’t prefer to use RUC and would rather rely on market mechanisms to ensure sufficient capacity.
• Support was expressed for increasing demand response within the market to help manage capacity issues.
• A discussion about dynamic procurement suggested setting minimum procurement quantities annually and adjusting them closer to real time to address concerns about hedging practices.

Q2: Would the following procurement approach provide the appropriate balance amongst reliability, efficiency, and regulatory certainty to Market Participants: a. setting minimum procurement quantities annually based on one criterion, and b. setting final quantities closer to real time (e.g., five days ahead) based on some other, more conservative criterion?

2 – Eric Goff, TEBA, AS Quantities Determination

• Dynamic procurement is beneficial if done consistently and transparently, based on clear criteria.
• Arbitrary or unpredictable methodologies should be avoided to prevent unnecessary expenses and confusion.
• Procurement should not be overly conservative several days in advance; it should consider uncertainties not known during the annual process.
• Decisions on procurement should account for specific conditions such as higher forecast error likelihood in load, wind, solar, or increased outages.
• Avoiding conservative procurement could save costs by not interfering with longer-term procurement plans.
• The ancillary services market is already illiquid; adding complexity through dynamic procurement could be risky.
• Procurement decisions should include consideration of which specific products are necessary, potentially opting for different services based on anticipated conditions.

2 – Katie Coleman, TIEC, AS Quantities Determination

• The proposal could be workable if the market is given expectations around minimum amounts.
• Factors requiring additional ancillary service needs should be evaluated closer to real time for better assessment.
• Industrial clients generally pay ancillary services directly without much hedging against costs.
• Efficient, dynamic procurement closer to real time is better for industrial clients.
• Small commercial and residential customers face issues with cost prediction by retailers.
• Dynamic procurement can be aligned with customer cost prediction if there are clear criteria, transparency, and consistency.
• The goal is to avoid unpredictable, arbitrary determinations.
• Middle ground could be setting a minimum quantity with additional quantities procured closer to real time based on risk assessment.

2 – Ned Bonskowski, Vistra, AS Quantities Determination

• Current practice involves dynamically procuring ancillary services with ERCOT and Commission approval.
• Additional ancillary services may be procured during events like a solar eclipse or other conservative operations.
• Concerns exist regarding changes to ancillary service quantities as it could lead to inefficient trade-offs.
• Consistent and transparent procurement of operating reserves is crucial for planning reserves.
• Dynamic procurement could result in less predictable signals, complicating market predictions.
• Potential market confusion and uncertainty are concerns, especially for retail providers needing to hedge.

2 – Laurie Block, TSPA, AS Quantities Determination

• Agreement with previous statements regarding the importance of predictable and transparent rules for generator investment decisions.
• Emphasis on the need for clear and identifiable guidelines if the Commission introduces unpredictable elements.
• Discussion on the potential impacts of unpredictability in market fundamentals on investment decisions.
• Importance of details and differences in ancillary services, highlighting that not all services require dynamic procurement.
• Acknowledgement that certain services, such as those countering forecast errors related to weather, might necessitate different approaches.
• Advocacy for clarity and understanding in any new proposals from the Commission.

2 – Bryan Sams, Calpine, AS Quantities Determination

• Reducing the overall procurement of ancillary services could decrease market revenue for generators, impacting the reliability standard.
• Emphasis on the need to measure the potential impact of reduced procurement on reliability.
• Concerns about hedging incentives for different representatives, and the risk of exposure to price volatility.
• Importance of ensuring sufficient credit to cover potential risks.

2 – Blake Holt, LCRA, AS Quantities Determination

• Blake Holt from LCRA discussed implementation of dynamic procurement coinciding with the go live of RTC.
• He raised concerns about the complexity of adjusting hedging practices during this time.
• Highlighted the importance of having a stable plan to analyze market outcomes post-RTC go live.
• Emphasized that this stability will provide better insight and confidence for necessary incremental adjustments.

2 – Bill Barnes, NRG, AS Quantities Determination

• Support for transitioning to a dynamic procurement process for higher efficiency and flexibility.
• Current energy market is illiquid and difficult to hedge, with North Hub being the most liquid product.
• Ancillary services are even more challenging to hedge with little expected impact from the proposed changes.
• Advocacy for known procurement ranges posted in advance to assist in market adjustments.
• Suggestion for ERCOT to publish minimum and reasonable maximum procurement amounts to aid market stability.
• Recommendation for these ranges to be announced in December for the following year.

2 – Stephanie Kroger, Hunt Energy, AS Quantities Determination

• Challenges for developers, lenders, and investors seeking regulatory certainty and clarity regarding expected revenues.
• Concerns that dynamic scheduling or procurement may increase these challenges.
• Difficulty in achieving predictability and transparency in market dynamics.
• Agreement with concerns about market confusion and lack of transparency when introducing RTC.
• Suggestion to study dynamic scheduling further after addressing RTC.

 2 – Resmi Surendran, Shell Energy, AS Quantities Determination

• Concerns about minimum and maximum quantities in dynamic situations; hedging becomes difficult if variability is large.
• Recommendation to set the minimum to cover at least 90% of scenarios to reduce variation.
• Advocacy for predictability and transparency to enhance comfort in hedging.
• Consideration of different quantities needed during high risk vs. low risk periods.
• Observation that ancillary service value is low during low risk periods, affecting cost differences.
• Evaluation of whether dynamic procurement provides real benefits when there are large cost differences.
• RTC design currently uses a demand curve that dictates ancillary service quantities hour by hour.
• Question raised on whether dynamic procurement would alter the demand curve hourly, leading to energy and ancillary service price instability.
• Need for careful consideration of several factors before implementing dynamic procurement.

2 – Resmi Surendran and Bill Barnes – AS Quantities Determination

• Discussion on setting a maximum value for purchasing beyond which additional procurement might be needed during extreme situations.
• Concerns regarding dynamic assessments leading to purchasing requirements above the predefined maximum were expressed.
• Suggestion to categorize standard conditions and extreme situations separately, with different processes for each.
• The importance of having a clear methodology for calculating potential maximum values for better market predictability was emphasized.
• Bill Barnes expressed a preference for predefined maximum limits for predictability, even if based on conservative criteria.
• Discussion on the option to procure long-duration demand response resources as additional reserves needed by ERCOT, separate from ancillary services.

2 – Mark Walker, Engie North America, AS Quantities Determination

• Mark Walker from Engie North America agrees with concerns about reducing revenues in the ancillary service market impacting investment decisions.
• Operational complexities include outage scheduling, maintenance, and fuel procurement, creating uncertainty.
• Walker stresses the importance of understanding obligations as a retail provider, mentioning the need for long-term hedging.
• Retail providers cannot pass hedging costs to customers and face risks from service outages.
• Uncertainty in the market increases hedging costs and creates challenges in modeling.
• The perception of ERCOT saving money by purchasing less ancillary services may not account for the overall market impact.
• Ultimately, increased risk and costs may penalize customers.

2 – Jeff Billow, ERCOT, AS Quantities Determination

• Commitment to transparency and providing detailed information to stakeholders before rollout.
• Implementation would occur after RTC, earliest January 2027 if RTC is December 2025.
• Consideration of including minimum and maximum criteria in the process.
• Consistent criteria for both annual and dynamic approaches is preferred.
• Annual calculations may include worst-case scenarios but procurement will be a percentage of that.
• Dynamic procurement involves calculating risk variables to determine daily requirements.
• Discussion on the appropriateness of dynamic procurement for certain AS or risks.

Q3: Is dynamic procurement more appropriate for some AS or for some risks than for others? If so, which AS or which risks are best managed with a more dynamic procurement of AS?

3 – Katie Coleman, TIEC, Dynamic Procurement

• Observation that some ancillary services are based on known risks and are more predictable throughout the year.
• Services like NonSpin or ECRS may vary more throughout the year.
• No strong view from TIEC, but dynamic procurement could be beneficial for ancillary services with day-to-day risk variations.
• Ned Bonskowski agreed with the point that some services have hard constraints, limiting flexibility.

3 – Jeff Billow, ERCOT, Dynamic Procurement

• Discussion on ECRS and Non-spin being primarily related to the risk of forecast error.
• Responsive reserve can be considered dynamically, with a focus on inertia as a main variable.
• Need for a methodology to determine inertia a day or two in advance, not ready yet but a potential future development.
• Regulation is influenced by forecast error and variability, could be set dynamically.
• Probabilistic Modeling was widely agreed to be superior to historical statistical approaches.
• Importance of clear and transparent modeling assumptions emphasized.
• Question raised on frequency for Commission review of AS procurement criteria, with participation encouraged.

Q4: How often should the Commission review AS procurement criteria? 

4 – Ned Bonskowski, Vistra, Probabilistic Modeling

• Interplay between Questions 4 and 5 regarding ancillary service methodology update.
• Emphasis on probabilistic framework as part of the methodology for procuring ancillary service quantities.

4 – Bill Barnes, NRG, Probabilistic Modeling

• Support for the probabilistic approach.
• Request for ERCOT to publish modeling inputs, assumptions, formula, and criteria.

4 –  Resmi Surendran, Shell Energy, Probabilistic Modeling

• Resmi Surendran representing North America perspective.
• Acknowledges the value of Probabilistic Modeling.
• Expresses concern about the potential variability in outcomes based on different assumptions.

4 – Jeff Billow, ERCOT, Probabilistic Modeling

• Jeff Billow from ERCOT addressed requests from stakeholders.
• Stakeholders are seeking more details and transparency.

Q5: Should the modeling assumptions be part of the annual AS Methodology update process?

5 – Ned Bonskowski, Vistra, Probabilistic Modeling

• Discussion of recent changes being approved by the Commission.
• Annual review and approval of the ancillary service methodology.
• Positive alignment of processes with the new changes.

5 – Bill Barnes, NRG, Probabilistic Modeling

• The speaker appreciates the current annual AS process and looks forward to the discussions.
• Mentions the importance of evaluation due to system changes such as load growth, changes in fuel and supply mix.
• Annual evaluation is supported for effectively addressing these changes.
• Stakeholder process discussions are described as robust and methodologies are thoroughly vetted.
• Encouragement for the Commission to conduct annual reviews due to the impact and frequent changes.

5 – Resmi Surendran, Shell Energy, Probabilistic Modeling

• Frequency of evaluation depends on the specific aspects being evaluated.
• Annual evaluation might be disruptive if only focused on loss of load vs. extra buffer.
• Annual evaluation is sensible for effective load carrying capability of resources.
• Fundamental questions need resolution before proceeding with Probabilistic Modeling.
• Objectives for ancillary services, pricing signals, and resource valuation are critical.
• Important to determine if all resources providing services are being valued and procured.
• Probabilistic model, despite advantages, could be contentious without prior question resolution.
• A hybrid approach of statistical and probabilistic could be more effective.
• Hybrid approach covers potential scenarios not accounted for purely statistically.

5 – Jeff Billow, ERCOT, Probabilistic Modeling

• Consensus on the need to incorporate Probabilistic Modeling into the annual AS methodology process.
• The model development has already started due to the consensus.
• Plan to present the model to stakeholders early next year for discussions.
• Anticipation of needing a few meetings to finalize details.
• Agenda items 4 and 5 were combined and agreed upon.
• Transition to discuss the procurement and utilization of DRRS capacity without distorting price formation.

Q6: How can DRRS capacity best be procured and utilized without distorting price formation?

6 – Mark Walker, Engie North America, DRRS

• Mark Walker, representing Engie North America, addressed comments from NRG about changing the DRRS duration requirement from 4 to 12 hours during winter.
• Engie North America opposes the change from 4 hours, as it is a standard clearly set in the statute.
• ERCOT does have the ability to adjust the duration if needed, but there is no current analysis supporting a shift to 12 hours.
• Any change would require thorough consideration, analysis, stakeholder input, and proper processes.
• Increasing the minimum duration to 12 hours could eliminate many resources currently available for DRRS.
• Shorter durations help incentivize developers to invest in longer-duration batteries, benefiting ERCOT and the market.
• Suggests that discussions on this topic would be more appropriate in the context of ancillary services and real-time call optimization.

6 – Michele Richmond, TCPA, DRRS

• DRRS was designed to provide an incentive for dispatchable gas generation with flexibility for greater duration if needed.
• The need to look at ERCOT’s revenue streams holistically to ensure reliability standards and prevent resource retirement.
• Concerns that current discussions aren’t adequately considering revenue streams necessary for resource building and maintenance.
• Debate over whether DRRS is for operational flexibility or resource adequacy.
• Awareness that investments are made based on forward markets, not past performance.
• Sending price signals through revenue products is crucial for encouraging investment in needed resources.
• Policy decisions focusing on reducing consumer prices can send negative signals to forward markets, preventing new generation investments.
• Emphasis on the costs associated with achieving greater reliability and the need to consider DRRS and related market tools in this context.

6 – Bill Barnes, NRG, DRRS

• Recommended clearly defining the reliability objectives for DRRS.
• Suggested that DRRS could serve a resource adequacy purpose and that should be clearly stated.
• Pointed out DRRS aims to reduce RUC, which they support having a competitive product for.
• Proposed using historical RUC procurements to determine DRRS procurement amounts, focusing on different seasons.
• Recommended designating a portion of DRRS for longer duration assets, similar to how responsive reserves have different components.
• Suggested allocating 50% of DRRS for longer duration (8-14 hours) resources while maintaining a minimum for other portions.

6 – Stephanie Kroger, Hunt Energy, DRRS

• Stephanie Kroger from Hunt Energy Network concurs with previous speakers and emphasizes the need to define the purpose of DRRS clearly.
• She references statute requirements, particularly PURA § 35.004.G2, stressing that the need for additional services for reliability and adequate incentives for dispatchable generation has not been fully addressed in the draft report.
• There is an opportunity for the Commission to clarify the purpose of DRRS and fulfill statutory requirements, especially those under PURA § 39.159b.
• Stephanie Kroger suggests that DRRS should not be part of the RTC construct and should be treated as a separate ancillary service.
• The distinctiveness of DRRS lies in its separate operational requirements regarding online timing and duration.
• She highlights that proper price formation discussions should occur only after the clearer definition of DRRS’s purpose and structure.

6 – Laurie Block, TSPA, DRRS

• Laurie Block spoke on behalf of TSPA, highlighting the necessity to understand the purpose of DRRS which is to address market uncertainty.
• The IMM first introduced the concept of the requirement for an uncertainty product in the State of the Market report.
• The legislature explicitly stated that DRRS is for market uncertainty in its language.
• Operational tools like DRRS should focus on issues such as unit trips, weather, and load forecast errors.
• There’s a timing issue in addressing these concerns ahead of the commission process laid out for evaluating reliability standards.
• DRRS is distinct from resource adequacy products outlined in legislation, like PCM.
• The Commission has previously stated that it would decide on necessary products after a comprehensive analysis by ERCOT.
• Recent changes to price adders and the creation of a successful firm fuel product are part of addressing reliability concerns.
• DRRS should be treated like other ancillary services and not isolated, as isolation could impact the energy market.
• Questions raised about treating DRRS like a resource adequacy product require clarity on associated guardrails.

6 – Ned Bonskowski, Vistra, DRRS

•  PCM is preferred for resource adequacy, but ancillary services are necessary due to existing decisions and stakeholder advocacy.
•  DRRS is closely tied to the reliability standard and PURA § 39.159, which mandates reliability requirements for ERCOT.
• The TEF aids investment but is not a market design. The discussion around fund timing is crucial as initial distributions must occur by 2025, necessitating clarity on market design.
• Concerns exist over how DRRS capacity can be procured without distorting prices. Suggestions include adjusting the demand curve and extending its range.
•  ERCOT is authorized to determine DRRS duration, especially for thermal generation. Proper release and deployment strategies, including offer floors, are needed to prevent price distortion.
• Reliability Deployment Price Adder ensures the market signals additional needs without reducing prices during reliability service utilization.

6 – Katie Coleman, TIEC, DRRS

• TIEC advocated for the DRRS, emphasizing it’s meant to address market uncertainty, including intermittency and forced outage rates.
• DRRS is not meant as a resource adequacy or revenue sufficiency tool, as per legislative and commission interpretations.
• DRRS provides additional revenue for dispatchable generation but is not a revenue sufficiency tool.
• Concerns about DRRS causing price distortions were addressed; it’s seen as a tool to improve market predictability and replace RUC.
• TIEC supports the ancillary service demand curve proposal and highlights the need for an efficient allocation of resources.
• There was discussion on whether DRRS should be co-optimized, noting ERCOT’s current proposal does not include co-optimization.
• Long term, efficiency could be improved by allowing online resources to provide DRRS and considering co-optimization.
• Initial implementation is acceptable without co-optimization, but future steps should explore it.

6 – Eric Goff, TEBA, DRRS

• Eric Goff represents the Texas Energy Buyers Alliance.
• Stresses the unnecessary need for a separate resource adequacy mechanism if correct operational reserves are purchased.
• Highlights that inadequate revenue implies a failure in price signaling from the operational reserve energy market.
• Advocates fixing ancillary service procurement related to operational needs rather than creating additional revenue streams.
• Expresses concern that DRRS might lead to inefficiently higher prices.
• Warns that generators with market power could manipulate the market by offering DRRS at low prices to avoid generating, mimicking withholding.
• Emphasizes the importance of the demand curve in preventing market manipulation through DRRS.

6 – Cyrus Reed, Sierra Club, DRRS

• Cyrus Reed represented the Sierra Club’s viewpoint on the DRRS.
• There was some confusion about interpreting PURA §39.159 regarding ancillary and reliability services.
• The interpretation is that DRRS is an ancillary service intended to handle market uncertainties, not primarily a reliability service.
• Resources eligible for DRRS should include those meeting certain characteristics, possibly including longer duration storage.
• There’s no issue with ERCOT requiring more than four hours of resource availability, especially in winter.
• Including online resources and co-optimization could benefit the market and consumers.
• Incentives should be provided to both storage and traditional generation that is currently online.
• The transition to including online resources could occur in a second phase if necessary.

6 – Resmi Surendran, Shell Energy, DRRS

• Resmi Surendran emphasizes that energy and ancillary services together should drive resource adequacy, not a single ancillary service.
• Supports the idea that operational reserves can meet long-term planning reserves.
• Highlights the importance of appropriately valuing reserves to signal investment in necessary resources.
• Stresses the need for clear criteria and quality standards for the ancillary services being procured.
• Mentions the implementation of real-time co-optimization and its impact on ancillary service values.
• Questions the logic of dynamic procurement if it introduces uncertainty and disruptions without changing net quantities.
• Advocates for ensuring that the services procured truly align with ERCOT’s intentions to meet reliability needs.

6 – Keith Collins, ERCOT, DRRS

• Stakeholder process is underway for NPRR1235.
• Ongoing discussions with stakeholders are heavily considered.
• Focus on real-time procurement, which is crucial but not initially covered in drafts.
• Comments about duration and forecast hours are being reconsidered.
• Discussions are recognized as valuable for developing a robust reserve product.
• Appreciation for continued stakeholder engagement and input.

6 – Andrew Reimers, Potomac Economics, DRRS

• Andrew Reimers of Potomac Economics commented on operational reliability versus resource adequacy.
• He agreed that it’s conceptually flawed to procure an ancillary service to create future revenue sufficiency.
• Addressed over-reliance on reliability unit commitment and suggested DRRS as a better fit for reducing this reliance.
• Clarified initial study comments that Non-spin is not suited for procuring excess reserve capacity.
• Advocated for the design of DRRS as a more appropriate product.
• Emphasized co-optimization of DRRS in real time to manage price formation effectively.
• Highlighted importance of avoiding price suppression and allowing provision from online units.
• Reaffirmed involvement in the stakeholder process and suggested more information is available at the Supply Analysis Working Group page.
• Clarified that the IMM does not support more RUC.

Next Steps – Commission Staff

7 – Next Steps – Commission Staff

• No additional comments were made on the previous agenda item number six.
• The discussion and comments have been valuable to the meeting participants, including the speaker and staff.
• Harika was invited to make concluding remarks.

7 – Harika Basaran – Commission Staff

• The team expressed appreciation for participation and emphasized that all comments are reviewed and considered.
• The primary goal is to comply with PURA and the scope of the report, ensuring a comprehensive outcome.
• If questions were not addressed during the workshop, they will be covered in the report.
• A holistic and complete picture will be provided to the commissioners for further action.
• There will be no additional comment period after the staff files their recommendations due to time constraints.
• The process will follow typical rulemaking procedures, with discussions set for three open meetings with the commissioners.
• The team expressed gratitude towards participants and colleagues involved in the process.