AUSTIN, Texas — Bedecked in his best Lone Star-themed tie over the objections of his wife — “But this is about Texas!” he protested — former FERC and Texas Public Utility Commission Chairman Pat Wood III reunited last week with friends, college classmates (Texas A&M, Class of ’84) and others who helped him deregulate Texas’ electricity market and pave the way for strengthening NERC’s compliance function.
Wood, who delivered a keynote address during Texas Reliability Entity’s annual meeting on Dec. 11, was greeted with “whoops” from fellow Aggies and hugs from everyone else. Hopping from one subject to another, he reminded his audience that the “R” in ERCOT stands for “reliability,” and he recalled a bygone ERCOT slogan: “Reliability through markets.”
“That’s the point. Markets are not just to serve customers with better service, better outcomes and less money. We want a system that does what we’ve taken for granted, that stays on at 60 MHz,” Wood said, pointing at the ceiling lights overheard. “Reliability has a real deep component to it. The reliability of our market has been the story for the last quarter-century of our state.”
As chair of FERC from 2001 to 2005, Wood played a leading role in the commission’s response to the California energy crisis, Enron’s bankruptcy and the 2003 Northeastern power blackout. The latter event led to mandatory reliability standards and the Electric Reliability Organization, now NERC and its six regional entities.
“Now we have a much bigger and broader approach to reliability,” he said. “You’re the six cops on the beat who oversee that, for the whole United States.”
As the principal for Wood3 Resources, Wood’s focus is now on competitive generation, independent transmission, energy storage and other new power technologies. As he did in the 1990s in Texas, he still emphasizes the importance of competition.
“We’ve got to eliminate the barriers to entry, similar to the big things we did on wind,” Wood said, referring to the buildout of transmission lines that have fostered ERCOT’s 22 GW of wind capacity. “We’ve got to integrate this clean, carbon-neutral attribute. … I’m a big fan of letting markets solve that problem, but we’ve got to coordinate that with the market we have.”
Wood is still proud of the energy-only market he helped create. He said sending price signals through scarcity pricing “on hot days is the right place to be long term,” predicting that ERCOT’s “9-ish percent [reserve margin] is probably the new normal.” (See ERCOT Sees 10.6% Reserve Margin for 2020.)
“One big reason is we’re not paying for that extra slug of 20% more power,” Wood said, alluding to RTO reserve margins of 20 to 25%. “That model worked in the 20th century. This model is enabled by the market. It’s demand responsive. Real-time pricing signals are going on all the time. That’s a pretty big tool, something I didn’t have when I was a regulator.”
He lamented that he couldn’t rely on storage as a market tool either.
“We do now. The cost of batteries has come down to where it’s feasible to store power,” Wood said. He said the prices still need to drop, but in the meantime, he has a battery on his Houston house that he gets to “geek out on.”
In the end, it’s all about the people, the affable Wood said.
“The thing that makes this so magical is the people,” he said. “I’m blessed to be part of this ERCOT power family for my career.”
Walker Raises Concerns with NERC Representation
During the Member Representatives Committee meeting, Public Utility Commission Chair DeAnn Walker raised what she said was her “continued concern” that a NERC committee is doing away with its regional delegates and potentially denying ERCOT a vote.
The Compliance and Certification Committee, which advises the NERC Board of Trustees on all facets of the ERO’s compliance monitoring and enforcement program, is revising its charter to eliminate its six regionally allocated seats and replace them with six at-large seats.
“I’m not sure why that’s occurring, though I’m sure there’s a good reason I’m not aware of,” Walker said. “While I understand ERCOT is a very small region, it is ultimately a very important region, to not only Texas, but the United States. I can’t fathom there’s not someone qualified from this region.
“The elephant in the room, it’s clear at least to me, is that the Eastern region drives a lot of decisions, especially with standards,” she said.
Oncor’s Martha Henson does represent Texas RE on the CCC. Texas RE CEO Lane Lanford theorized that one of the reasons NERC has moved away from regional representation is because of a lack of qualified candidates from the regions.
“Unfortunately, in some regions, they didn’t send [the most] qualified people,” he said. “One thing the MRC needs to think about is that when we send people [to NERC], we need to send people who add to the conversation.”
NERC Trustee Ken DeFontes, who attended the meeting, said it was not the board’s intention “to diminish ERCOT’s influence.” He noted that the newly formed Reliability and Security Technical Committee is drafting a charter to ensure NERC has good representation in the at-large seats. That committee will number 34 members, including 10 at-large seats.(See Elections Underway for New NERC Panel.)
The MRC’s Brad Cox, with Tenaska Power Services, and Venona, with Occidental Power Services, will represent Texas RE on NERC’s Member Representatives Committee.
“I think it’s important there’s good representation from all the regions, not just Texas,” DeFontes said.
DeFontes: Texas ‘Closer to the Edge’
DeFontes reflected on the industry’s rate of change and NERC’s focus on anticipating the future “so we have further time to prepare for it.” However, he is still getting acclimated to ERCOT’s single-digit reserve margin.
“You do live closer to the edge than what I’m used to, but you do a fantastic job of managing it,” he said. “This is an example of how the grid is changing and how we have to adapt.”
Board Re-elects Chair, Vice Chair
The RE’s Board of Directors approved the re-election of Fred Day as chair and Milton Lee’s nomination as vice chair for 2020, Day’s last year as chairman. The directors also approved Delores Etter’s re-nomination and former BP America senior executive Crystal Ashby’s nomination to three-year board terms. Ashby will replace Vice Chair John Coughlin, a board member since 2012.
The board also approved the MRC’s recommended BAL-001-TRE-2 standard, which sets interconnection steady-state frequency within defined limits.
Texas Reliability Monitor Director Joseph Younger told the directors that the PUC is expected to approve Texas RE for another four-year contract as the ERCOT region’s reliability monitor. The RE was the only entity to submit a bid (49246).
“I would say our chances are favorable,” Younger said.
The Monitor worked with the PUC to assess 11 settlement penalties through the first three quarters of the year, Younger said.
Texas RE also plans to renew its regional delegation agreement, which expires at the end of 2020. It hopes to receive NERC approval by September, and then file with FERC.
— Tom Kleckner
