Lee Lark, of Tetra Tech, the third-party evaluator of the utility programs in the state, reviews the results of utility programs in 2023 (Photo by Cyrus Reed)
By Cyrus Reed
In case you thought the only decision being made was the $5 billion in low-interest loans to gas plants that we covered recently, we wanted to update you on the dizzying number of projects being considered by the five commissioners at the Public Utility Commission of Texas.
Reliability Standard
First, the PUCT approved what is called a “Reliability Standard” for the ERCOT market. While Texas has always had a “target” (currently our target is to have 12.5% more supply than demand on the highest demand days) that is not a standard.
Getting in the Weeds...
Last month, after months of meetings, comments, and lots of different perspectives, the Commission adopted a new “three-legged stool” reliability standard that establishes a standard for ERCOT that says (leg 1) you should run a system that will not lead to more than 1 in 10 “Loss of Load” events, and (leg 2) that event should not last more than 12 hours, (leg 3) with no less than a 1% exceedance tolerance, while also setting a maximum number of megawatts that can be shed as part of the event, with a similar exceedance tolerance.
Under the adopted proposal, ERCOT would set the initial reliability standard in December 2024 based on those parameters, and then the standard would be assessed every three years, which would begin in 2026.
Sierra Club was an active participant in the proceedings and was generally pleased with the outcome. The setting of a reliability standard will not require any specific action, but it will allow policy makers to see if the standard is being met and if additional tools are needed to ensure a more reliable market. Some market participants such as large generators have been pushing for a mandatory reliability standard that would require the use of an extra payment known as a PCM (Performance Credit Mechanism), but in making their decision, the PUCT made clear that the reliability standard does not require the implementation of a PCM.
Performance Credit Mechanism - A Bad Idea Still An Arm’s Length Away
Speaking of the PCM, the PUCT filed and approved a proposed PCM framework for future review. Under legislation passed in 2023, any PCM proposal must go through a cost-benefit analysis to see if it is needed. To be clear, the PUCT did not approve a PCM, they only approved a framework for further study. There is widespread opposition to the implementation of a PCM by both Sierra Club and many large industrial customers since it would be an extra cost on all customers.
PUCT Begins to Implement a Good Bill - SB 1699
In other news, the PUCT also finally opened up rulemaking on SB 1699, a bill supported by the Sierra Club which requires the state to set new demand reduction goals for the competitive part of the ERCOT market and was an important part of Sierra Club’s legislative agenda in 2023.
In August, the Commissioners approved for public comment a proposed rule (Project No. 56966) that would require retail electric providers that have programs to help residential customers reduce peak demand through the use of smart thermostats and other appliances to aim to reduce their load by 25%.
Under the proposal, the public had until September 27 to make comments on the rule. While the rule is modest, it is welcome news for the PUCT to finally be paying attention to the demand side of the market, after years of promises, and some 15 months after the legislation was approved. Here is a copy of our comments on the proposed residential demand response rule we filed in late September. We were generally supportive of the rule but called for an annual assessment of progress on demand response and on the goal itself.
The Sierra Club is still waiting for a separate rulemaking on the energy efficiency programs run by large utilities like Oncor, Centerpoint Energy, and AEP Texas. Since early 2023, the PUCT has been promising to open up a rulemaking to improve the efficiency of those programs, but has yet to do so. Let’s keep the pressure on the PUCT to do so!
New Report Shows How Much Power We Can Save
It is also important to note that ERCOT filed a report they commissioned on energy efficiency and demand response by a Texas A&M professor that highlights the vital role energy efficiency and demand response could be playing in Texas with the right policy. The report supports recent efforts suggested by the Sierra Club, including passage of SB 1699, and the need to expand the energy efficiency programs.
A copy of the report is available here and the recommendations can be found on Page 35 which include:
- Legislating energy efficient retrofits
- Increasing the demand response market size
- Reforming the energy market (specifically to move away from all transmission and ancillary costs being based on summer coincident peak)
- Educating and encouraging customers
Speaking of People First Solutions to Keep the Power On…
This week, the PUCT held their Energy Efficiency Implementation Project (EEIP) Fall Meeting where the energy efficiency programs and other technical issues were discussed. The Sierra Club was in attendance. To view the meeting, see here.
Part of the meeting was to discuss the findings of the Texas A&M whitepaper, while another was to look at the results of Oncor’s pilot program for residential demand response.
This year, Oncor began a pilot project to allow Retail Electric Providers to participate in a residential demand response program, and four providers - Reliant, TXU, Octopus Energy, and Rhythm - participated. When the pilot is done in December, it is expected that about 2,000 households in North Texas will participate in the program with those four retail electric providers.
In their presentation, Reliant said that those signing up were participating in the demand response events. To incentivize them to join, they were offering the installation of free thermostats, plus a $50 credit on their bill. Asked if, in the future, participants could actually be paid money for participating in the actual event, Reliant said yes they were exploring it but it was a complex process to figure out the correct incentive based on settlement prices at ERCOT.
The third-party contractor that analyzes the energy efficiency programs run by the eight utilities (four inside ERCOT and four outside of ERCOT) found that in Program Year 2023, utilities continued to easily meet and exceed the very modest goals set by the Legislature. A reminder that the Sierra Club has been asking since 2022 for the PUCT or the Legislature to raise the modest goals for demand response and energy efficiency and even did our own petition for rulemaking. More than two years later, we and many others are still waiting. However, one slight glimmer of hope was that Commission staff announced they would begin a rulemaking for energy efficiency by the end of the year! We kind of believe them, but keep the pressure on.
Getting in the Weeds Again…
The PUCT also gave direction for the public to provide further comments on distributed energy resource interconnection standards and cost allocation - basically the rules for smaller generation (think solar) and storage to participate in the ERCOT market. Under Project 56962, the Commission put forth a rulemaking requiring existing and new cryptomines larger than 75 MW to register with the PUCT, and provide certain information about their electric demand and capabilities.
While it’s a modest step, the proposal is responsive to legislation supported by the Sierra Club (SB 1929), and could lead to further action down the road. But we need much more than required registration for large crypto loads given their environmental impacts. We said as much in comments we filed last month!