Energy - Joint

We get our by taker states will get started. I want to appreciate everyone for coming out and I just have a few statements before we get started. I am very happy with the group that we have presented today I think we're going to get a good picture many of you have I've talked to already about this and I you know we're gonna talk about what happened what didn't happen and and yeah maybe a little bit about what could happen type of thing so then I want to get that picture here so that we can set the foundation for this committee you now to help Possible decisions as far as a future concern or are or how to best manage the system I will tell the members that. Hopefully if you try to limit your questions to clarification type question so if there's a present to present something you're not clear on that. That that's a good question but let's try not to much to drill down into the weeds on some stuff because I don't think we have time I want to give all our presenters as much time as possible if needed we'll we'll we'll get a group back together and I take care of that making sure that everyone has a chance to talk Present thank so that's really all I have to start with do you have any comments. But I also I echo just thank you for being here in actual members who showed up I appreciate that I really anticipated I mean I and I know the like were on top of there's a back the blue press conference and everybody would like to be able to be at and and I know that I think maybe Senate transportation cancel because the overlap is really a hard time to have a meeting trying to do it during lunch time when everybody else started a meeting scheduled or lunch is scheduled so I appreciate you guys making the the the effort to be here because I really believe that there is and and maybe it's because of my short lifetime in it and and the and because of my short relatively short the last ten years involvement in the legislature but that but I cannot imagine there being a more significant energy situation except for maybe the the ice storm that we had you know several years ago Mrs been a been a pretty pretty incredible time and so it is highly appropriate the energy committee meeting and we talk about it find out you know what we did was great what we can do those great and and what we need to do to to try to be better prepared for the future so I do appreciate all the providers of all you all jumped up and and made arrangements to be here and so thank you and I I do expect this to be very informative and you with less people here maybe we get get to more of your questions but you know if is represented back moves on quickly passed you know it doesn't is because we've got a lot of people to prison so you know we will need to make sure that we're move and get this thing going we won't get through it. Thank you. Of the format that we're really trying to go with tears at I looked at it and uh after we we got the number of people who want to talk we were we're gonna try to come to go top down with this thing gonna start with the public service commission get their views and they will go down through talking to the attorney general's office we're also good then the Artios then down to the electrical and gas so we're getting further down the grant you might say as we go through the the the topic too so that's sort of the format that we to try to put together thinking that it would be Make things a little bit clearer as he per each one the presenters so with that I want to recognize I think chairman Thomas is going to introduce himself and start with your presentation. Thank Mr members of committee Or so you all know we had a winter event that was quite dramatic and stressed for system with respect I want to talk about the three things in an MA. Maybe legislative options stuff that will look at those three areas a resource mix of the resource mix is always a political football as you watch the the news you see the football being kicked I want to talk about the you know level send some of that they will talk about the operations of what actually happened in Arkansas operations of that we know so far and then the cost consequences. Of all of this when you look at the resource mix of circulated this handout that I hope you all have. Like this on the front you can get this on the web I apologize for the. Microscopic print amend and skate and it didn't happen. This is the fourteenth version of a cost is the price sheet for energy it's updated every year from a European financial entity called was or. It's basically based on surveys of actual deals It's also generationally NO transmission in some instances that matters. All right it's also a new to a new comparison. so something's cheaper New you know you can have an argument about which cheaper a Mercedes or BMW but if the Ford that you've already paid for. Is might be your apples to apples comparisons of this assumes you need new anything you know to me this this is a garbage detector on on stuff that I that you can hear out there For example we hear a lot about the struggles of coal. If you compare the coal to natural gas if you look on. This chart you see in orange diamonds this would be on the second page. You see coal combined cycle gas and you see a little diamond. Those bars are new costs for the unit. Those diamonds where it says forty one dollars for coal twenty eight for gas. That's what's causing Coles problem because gases under it. The the the diamonds are what we call marginal cost which is very able cost if you think about going to the beach and you have four friends and you can figure out who's car you're gonna drive. The lowest car payment doesn't matter is it doesn't matter who drives to the beach got paid that anyway it your variable cost and when the system is operating that's what they look at coal under gas is what gas under Cole's worth really hurts the struggles that coal is had. Another thing you look at if you see how. The wind. Is cheap you here to expensive. But it's cheap House Budget qualifications and have to come with this this doesn't include transmission. This is only when it's blowing so one of the means you saw on this whole thing was amendment what wasn't working. Can you depend on it or engineers no you can't that's not the value. The value is it's cheap when you have it so you want some of in the mix you too much in the mix then you got a problem. But when you got a little bit you capture the value the more that it grows the more the intermittent stuff grows the more problems. That you can have you heard about corporate demand for renewables corporate demand for renewables what's driving that what's these prices. Course they're not volunteering to pay more that's publicly. They want these prices I don't know that they volunteer for the transmission expense as part of the deal. But no matter what one's ideological bent. You know these are real prices and a cut both ways. If you flip to the next page where you see the charts with the bars. To me that's very important what you hear so much the wind is expensive because it used to be. Twenty nine one sixty nine to one a one. Twenty twenty fifty four twenty eight. These run subsidized prices there's no subsidy in here. There's no transmission which adds a third. The tax subsidy gives the back taxes is the third. So you hear people say we wouldn't have window wasn't subsidize it's expensive that's the dumb argument let me give you the smart one why the hell are we subsidizing it when it's already cheap you never heard that argument you haven't heard that argument on the cable news is true though. These price things are really important because that happens with almost every new technology the sole justification for a subsidy that I can think of is to make this happen faster. The questions do happen by itself it happens faster with a subsidy want to come down in price chart you really shouldn't have a subsidy. But we still have them because a. The politics in Washington DC. We passed the green hydrogen fuel to go back to that front deal. You see green hydrogen of one twenty seven on the bottom line from can combine natural gas that's what we want to do that that's expensive you know when you that now but maybe a little bit to get it started to scale up. And what we hope for if we do that is that green hydrogen will take a trip down this price the price graph like the other technologies have done but this to me is a good resource it's on the web levelized cost of energy Lazard you can find it you can blow it upwards not microscopic the marginal cost thing is portanto as I talked about the dispatch and the variable costs so that's that's kind of the resource but you hear all the the normal folk scene the normal things. These are the real prices that's we should go on. Second operations in Arkansas but it was very challenging and stressful time we didn't hit the wall but we rubbed up against it. the folks that do that that run that system or extraordinarily skilled they can do pretty much anything except physically impossible electrons will follow the laws of physics for example in this PP one time in twenty four hours they went from nearly seventy percent wind to see three percent in twenty four hours to get the system running it was in the news nothing happened when even in the trade press. This is how they do. They're good. When you see folks that you know are that good. And it's a stressful situation that's a problem. What to me was the corner we know so far first fax will develop thoughts will change. To me the cold. Froze gas access. You didn't have a gas. Nine perform very well you know I don't perform very well when it's zero degrees. The core problem. Was a gas problem when you didn't have gas we didn't have access to gas generation. Gas in the winter really compliment Terry. The women's like that the gas is engineered move like that and they complement and that's how we keep the system work and we don't have cash I can't do that. The problem is compounded in the winter time when you have competition between home heat from gas in generation from gas. That's the core of the problem we had what we call load should advance the folks behind me that's what they were sent anything from a professional perspective they hate it when that happens they work very hard to keep it from happens it rarely happens. we didn't hit the wall we nicked it shall we had load shed thank you S. PPD three calls. To which actually happened one that went away and it makes a good one commenter some numbers out my six forty two thousand megawatts the margin was three hundred. Megawatts. Less than a percent. But we spent three or four days right there in that red line really nicked walls three times how could been worse. Right They operate regional roots of all of their bills they will follow on the the regional grids. next is the cost Chris we have a regulated system cost of service cost ultimately get passed to ratepayers of the costumes are going to be ugly We have folks that spend more in ten days buy multiples on gas than they did all of last year. I wish I could sit here and tell you that there's a couple rich Texans we're gonna take him to court we're going to get the money back an amazing be happy that's not our real world works. those do need to be thoroughly investigated contract rights need to be litigated of fork is open investigation the. The Artios you'll hear what they're looking at both thirty others have what we call independent market monitors which will do another assessment this is fundamentally an engineering business and this is the first weather event that y'all will probably remember since I've been the chairman we've had five or six of these offers six is over we had come up with all Maxygen events on my set aside. Other regions and had them and we do studies that's what these folks do that's why they're good not because they're perfect because every time you have one of these the assessed the risks this is the metrics you say what can we do better and they get better and that's why they're so good yes Bye you know your folks will notice that you'll hear from them is these bills ran out of we're working on ways to mitigate that which mostly involves stretching over more time and you can do that but you can't find a bill again and again US like rolling your car over you do it five times you have a Mercedes payment in your driving a kia we don't want to do that. But this is an extraordinary event and we need to look at it so what all will happen what will first we're going to investigate open investigation ought to look into these matters the AG has called for that and will certainly be participating and we'll speak next week at the contracting practices we'll get contract enforcement. I will look at winners nation two years ago the fork ordered some meters ation that's a big issue in Texas I think it's less of an issue here but we still need to examine that. We'll get gas prioritization we it's very difficult you know when you got home he your hospital over here you got industrial facilities if you shut off the gas and Mrs after Quitman you got generators for electricity in the home he. The gas prioritization is set by a federal tariff. from the transportation company on the gas side that's the. All of influencing them in a non governmental entity we're gonna look at that there might be preemption issues I've talked to the general counsel enable who thinks that they're terrified preempt anything of that we would do but will still examine that kind of stuff another thing is that a securitization which is an option I think we need some legislation on that essentially the utility has to pay these gas bills right now the Bill pass along the have to borrow the money we need for the money they like at their normal what rate of return debt plus equity you hear about the equity return you average that was their debt that they actually paid you get a number in the middle. Securitizations basically paying it will bond paying a bond off then you're only paying a securitization that's an option that might be good might be bad will review those Chris Agee and other parties will do that and initially it's up to the utilities to bring the proposal for some utilities are gonna probably need something like that some of it's an earthquake other folks it's a ripple nothing that will look at is communication are by definition when you have an emergency like that it's difficult to give notice you can't get four hours notice we're gonna spend the next four hours trying not to make this thing happen. But we're going to review what were the protocols that that'll seem to work pretty good this never happened before in the RTO era so there were contingency sitting in drawers have you do this meet with them out and they did it and under those circumstances that were pretty good but we need to look at the communication Wilson looked back in communication how long is this going to last that could be communicated better but will review all of that. And see what we can do better This will involve as all things do it yes the a balance you we want to communicate to the investment types that might loan utilities money to pay these things. That the state will cost recovery so we get a good rate. But at the same time if there's some stuff that happens happened of. Not by the utility in this instance it's to the utility they were buying gas the gas sellers. the wholesale sellers we need to examine that but I don't want to paint a rosy picture to say somebody else is going to pay all of this. In all likelihood a substantial part of the costs borne by Arkansas here's. So that I'd be glad to answer any questions. All right. I think a certain amount of your question. Thanks Mr you know I I think the I think the the approaches that you sort of explain of us right now they're getting into this and trying to figure things out right I think I think it's good that we started the process and have the conversation here but but ultimately there's a lot of data that still needs to be gathered the one thing that I would ask in in if it's possible I'd love to be able to do this is I anticipate that we'll have a not I mean we're going to have a special session sometime in the fall for redistricting so we know we got a got a call that once we get the get the numbers and so you would by that time with should we have enough data that if we need legislation to address the that we could do that during that special session yes okay it in the invoices have to come in Henderson also trick they are to level their aim ends do a great job they will track the prices. And and they have an economic theory this is what the price should be this is what happened. You want some degree in the first time I heard this you know I was skeptical you want some degree of prices going up because that would bring supply and talk to my colleague in Ohio the bot They were selling myself from Lisle. High prices bringing supply keep you from hitting the wall but in but that's the two or three months. Is when we usually get those reports at the next my so board meeting so that's plenty of time so yes so by by September at the earliest yes the Director of now if you're looking at a plan to stretch this out over time in terms of the cost recovery that's probably too long I think folks want to move faster than that so that they don't move it just pops up in bills and all shares in one month well and that's what I mean honestly it's a legitimate concern of we know enough to even go over right now but if we do need to do something this session yeah we are running out of time so yes that's what we do need to do some that's. This call to action is start when it sees legislation going I would put on that is an option for securitization for gas we have a securitization market recently came from storm damage had a big storm when to pay it off like that but that plan selector calmly and storm damage right now all right lawyers can argue about whether this was storm damage right or storm impacts but it only applies to like Rick's not the gas or making it optional to the gas side would be the one thing. to put that option on the table that the legislature could do during the session thank you. I have a question. Well I'll tell you what I'll let. Resent ninety min all recognize you first. Thank you Mr chairman I apologize for being late in the fund yes the question that you already answered but. You seem to be saying that we we were we were low on natural gas because of the heat of the residential load what it is is that correct no freezing at the well head okay but the problem was compounded by in the winter time it just happens in the summer. You don't have the home heating thing is one of some of that comes from electric okay so you had to buy gas from a peaking plant around the country or whatever and you had it by that high prices that would usually go from the well head the problem was fifty percent of the production facilities in Texas Oklahoma froze so there wasn't enough cash you couldn't buy it okay which cause the price to spike dramatically okay. This might not be appropriate times question but if we lose capacity due to coal plants being shut down I mean is those that. Complicate this problem or not. Perhaps in the Texas area but then. Our our coal plants here. Didn't run that well I think that's more of a localiza think when you look at Texas in a broader thing that's not a problem but we had to plan on point thing trip out which custom Yunis. we had some issues with our large energy coal plants that the will be thoroughly review but I don't think it was a winterization because they were running at the time of the new thing though. they were there and large in one of the nukes had some issues and if it would have gone on over three hundred megawatts would be twenty five hundred megawatts of load shed but it ran will. The Texas thing or some critical core retirement centers been core term it's an enormous. That's part of what needs to be looked at again course that that's a trade off. You can have far more expensive. And you can have cheaper you can't have both at the same time that's a balance like all of the stuff. Thank you. Chairman Thomas I have a question related to a high frequently tell people that one of things Arkansas has going for it in the energy market is that nice mix we have a little bit of everything in during the. Did just quickly if you could do it during this outage What we see there are makes help us how that happens was or some components that were helping more than others and. Just a brief as much as what you saw my head that I might also prep the other people that I'm I'm going to ask you that question also brought. The nuclear thing helped because they were all on the running I think at one point they had to ramp it down for transmission issues not operational. A principal value of the coal even know it's Norma normally more expensive than gasses a hedge when gas goes crazy. We had some issues where it wasn't there. But when you do the whole grid that's the value being in mice or S. P. P. is not just what happens in our state it's the whole grid has to balance and when they did this low chip that was everywhere they spread it out among an old foot print so everybody had to take a little bit of it but the mix thing is very important but you know. When it's zero degrees. Nothing is running optimally. It was the extreme of the weather event. And because you have a margin of error when you engineer you know this was right to this press line on the money so S. P. P. engineering limits because you dispatch it as agreed. Now we look at our. Oslo back from our mix. But that will be thoroughly examined some of this is anecdotal it might turn out not to be the case. We have partial information that will develop and to complete exhaustive information over time and that. A couple months not a long time course litigation will. I will go on forever. All single other question would Preciado you being here. Thank you. Next we're gonna hear from the Attorney General. Office Chuck harder. Please Senators yourself with the committee. Thank you Mr chairman members of the committee my name is Chuck harder I am the deputy Attorney General for public protection what that means is my department is responsible for enforcing Arkansas's consumer protection laws and for representing ratepayers in utility matters. By way of background I held legal and regulatory positions at centerpoint energy for twenty five years when I left the company in twenty fourteen I was the senior director of regulatory policy and external relations. between centerpoint and working for the attorney general's office I was the vice president of regulatory and government affairs for source gas which was purchased by black hills in twenty sixteen so I'm very familiar with the energy industry. I've actively participated in ratemaking process is and gas Purchasing reviews in many jurisdictions on behalf of Attorney General Rutledge I appreciate the opportunity to be here today to discuss her role and involvement in investigating what happened last month from both an operational and financial perspective I want to let the committee know that the electric and gas utilities were very good at keeping us apprised of the issues as they arose so we were well aware of the operational issues that occurred we track those very closely and we've begun to look at the financial issues that also resulted from the weather last month. Before getting into the attorney general's investigation I'd like to to focus on four key things that I think the committee should consider some of these the chairman has already discussed. One is what we experience in February is not like what we normally experience in winter weather our Kansans are used to winter weather that causes widespread and long lasting outages and that just didn't happen this time the impact to the consumers from this winter storm is going to be a financial impact and it's caused by the great disparity in the demand for energy in the supply of natural gas as the German alluded. The second thing that's important is when natural gas there are shortages of natural gas it impacts both electric and natural gas utilities natural gas is use the ability of natural gas to quickly dispatch and use it for electric generation make it important very critical resource for electric utilities and high prices and limited supply of natural gas can cause gas generation facilities to shut down. Thirty pourtant point is that the Arkansas Public Service Commission and the federal energy regulatory commission have the jurisdiction over the rates charges terms of conditions of service for the electric and gas utilities the public service commission will ultimately determine how much of the costs associated with the events of this last mile are borne by ratepayers and how that's to be paid the one thing they don't have jurisdiction over is the market price of natural gas they can't get to that and I think the chairman alluded that. That's where the Attorney General I think plays a very important role Arkansas has price gouging laws which when triggered by the declaration of a state of emergency by the governor the president or local officials replace market driven prices with cost based prices there are limits as to how much can be charged for certain essential goods and services and in the time of a winter storm when temperatures are well below freezing natural gas is an essential goods and service when those laws of trigger and triggered bill the law limits the amount that a a party can charge for natural gas to the cost of acquiring that product was a reasonable markup plus ten percent to the extent that the price charged the natural gas and the electric utilities exceeds that amount we believe is subject to Arkansas as price gouging law and that's an important aspect of our investigation. Last week the Attorney General asked the commission to open an investigation of what happened and we appreciate that the chairman indicated the commission will do so the Attorney General will take an active role in that investigation at the same time and in parallel we will can we will investigate allegations and the potential for price gouging by the people that supplied natural gas to the electric and natural gas utilities. Some of the key questions that I think are going to be raised during the course of both investigations are as follows. What was the cause of the control curtailments by the electric utilities was it related to natural gas shortages or was there some other costs. Why because what were the costs incurred to serve electric and natural gas customers during the emergency how much was paid for pipeline services transportation and storage how much was paid for the cost of generation for purchase power for fuel what were those costs. Another question is did the utilities have sufficient pipeline and storage capacity to meet their peak dates. The other utilities receive the services for which they contracted. Utilities often contract for premium services that are supposed to show up in weather like this they paid marketers of premium for gas that **** is supposed to show up and twenty four and four hours twenty four hours or four hours those costs have been paid by the rate payers in the course of under those contracts those supplies show up and if not what actions or the utilities planning to take to enforce the contracts and take the appropriate legal action. The utilities follow their procurement plans they fall procurement plans every year with the public service commission did they follow those plans I feel confident that in large measure they did follow those plans but it's something that has to be investigated. Did the pipeline and storage providers take the appropriate steps to winterize their facilities as the chairman indicated this event was driven in large measure by free sauce that occurred in Oklahoma and Texas that's happened before during my time at centerpoint energy that happened in nineteen eighty nine and this happened at other times where they were freeze offs that impacted natural gas supply did they take the appropriate steps were paying a premium for those services did you do what you're supposed to do. And did any of the natural gas marketers are producers engaged in market manipulation did they withhold production or take do take other steps to drive up the price of natural gas that is a question that certainly needs to be explored. Where the increases in the cost of natural gas driven by the market or driven by costs if they were driven by costly they may not run afoul of the price gouging laws if they just let the market do what the market does when there's a severe shortage price gouging might apply. And then at the end of the day when we take the total amount that the utilities have spent we determine of what financial responsibility if any they may have been what responsibility that the marketers have for which the utility is taking appropriate legal action we get down to what is the legal amount the ratepayers should pay for the cost of energy for last month how are those costs going to be recovered and that's up to the public service commission and the German is indicated that that's going to be an important part of the inquiry and one that's going to have to happen soon we agree with the commission the chairman suggestion that securitization presents a viable option that should be explored that's been used successfully by electric utilities over the years to deal with the bands that create a great deal of costs and by storms most often in the because of hurricanes and ice storms but I think it applies may apply here too with maybe some changes in the statute to apply that to the cost of natural gas in the other energy costs that were incurred by the tildes. Again Mr chairman members of the committee I appreciate the opportunity to be here on behalf of general religion I'm available to answer any questions. Thank you I have a question. Related to you were talking about the winterization you'd seen it and eighty nine of the wells of it's my understanding that you can elaborate on this a bit of that would did that come from the first type of regulations or was that if so that would never apply necessarily to Texas and could you. Entertain after a lot of it a large measure a lot of it is industry practices you know it when you pay a premium for for gas supply contract you play a premium for storage services and that's where the for gets involved the first regulate stored services in the services that they provide you should engage in the winterization of your facilities there are before natural gas reaches processing plants you can have a look what's the the the but the gas and the like which can freeze up in the pipe now the other thing that can happen is ice and sleet and other precipitation that falls on the equipment can ice up in the same way that you have an ice storm and you're struggling to get into your car because it's all jammed up because of the ice those the types of things that happened with the freeze offs and they're expected to occur in cold weather but not nearly to the extent that was experienced in this this last month and somebody needs to be held accountable for that I feel certain the park's gonna do their part to see that storage providers followed first rules and I think that the LDCs and other interested parties should hold the other should hold their people accountable for keeping up with a contractual commitments which I feel to do. Thank you. Represented Ladyman. Thank you Mr chair. Up when we talk about applying the price gouging law that we have in Arkansas to the price of gas that may be purchased out of state of I mean would we have jurisdiction over some of that and we talk about the well it's in Oklahoma taxes and trying to apply regulations we have jurisdiction there would that be at the federal level up it's not regulated at the at the federal level I think it I think there's an argument that it does apply sadly we've had some experience with price gouging relative to cope with and I think the same thing would apply here as an out of state vendors selling PVP to a hospital at a at greatly increased rates I think of the law applies to the goods and services delivered here to our Kansans and that the law does apply we it needs further research and it may be challenged on that basis but I think I think the same principle applies goods that were sold to our cans and ship stark and sins during a state of emergency at at Streamwood high prices are subject to price gouging and I think what happened with Kogan also applies with respect to this this event as well. The following. Go ahead. A. So. If it and and I worked to natural gas plant where we had the buying gas and supply that in you have contracts that you're supplying X. amount and you have to go by that gas at whatever the market will bear so if you apply this price gouging requirements find what you want to call it there's restriction with that be applied to the generating plant or would that be applied to the person selling fuel to that generating plants you have to look at the whole supply stream and this is this is true proposed price gouging with because of it in the price gouging here you take a look at the retail provider in this case the the local distribution companies if they're just passing along their costs under the contracts with the gas supply with the high points of the marketers then you take a look at that next step the wholesaler did the wholesaler pass along cost increases that they experienced from from a from a producer from another entity that sells gas you work your way up the supply chain to find out where what is we're we're is the source of the price increase some was that cost based same thing applies to be for during cope with the retailers just passed along with the district distributors charge them and so you take a look at the meat packing plants is the same principle you just move up the the chain to determine where the where the increase occurred was a cost based. Or driven by shortages of of supply so in many cases these power plants are private companies. And they have contracts of course but if the demand required them to produce more and we applied a penalty to the fuel cost what do you think would happen if they said well we just we can't do that and they just shut down what would I mean how would that affect users I I think we have to approach this with the goal of of not crippling anybody in the process not cripple the ratepayers not cripple the the LDCs local natural gas utilities and the the others I think there has to be fair in the process I don't think the goal is is to punish anybody the goal is to the discords any unreasonable profits that somebody is received but I think that can be done in a way that's not going to to cripple the ability for the electric and natural gas utilities to get what they need in the future thank you. Senator Garner. Thank you Sir so OB will merely say I got here late so this question been answered by either of the prisoners before or rose list your presentation is seven eight did come up but I'm I'm have missed exact language the issue I heard more anything else if you gonna be doing investigation for people was kind of the alert system to let them know whenever these rolling blackouts from happening help that would how they would be notified through that system I think that's the main concern or for people who may not have been worried about the rollouts but would like to a better conduct communication Avenue I don't know that violates any kind of law price gouging or anything else or fascist party your vested geisha can find that process sees that they use for that and see if that is something they can improve on but you something that that was the main concern I heard from people actually my district office but that isn't that needs to be part and I believe it will be part of the public service investigation it's going to be a review of the emergency operating plans of the electric and natural gas providers to see what communication to consumers or in those plans whether they follow their plans and whether those can be improved I will tell you that will also be part of the what we do as our office in our investigation of liberty utilities response to the problems with the water in pine bluff how well did you communicate with consumers about the problems to give them the information they need so that they can can make the decisions and take the actions they have to do to protect their families yeah the follow for quick I know they reached out to me within a couple days of that and getting some more information so I'm not gonna completely say they were derelict in that duty I don't know what the initial start of it there were some cost nation for people by how that system of work I'd like to just see what exactly that one down how does some like this can report investigation Nixon. Say no other questions we appreciate you coming up. The next we're gonna hear I'm gonna change a little bit accord to the schedule but we're gonna have representatives from my cell to come up it also at the same time okay if we get S. be paid up here and we'll let you guys present sort of together and then we'll just open up for questions after you both that your presentations. And you can find it out as to who goes first that might be entertained. Okay. Okay because of this okay my name is Darrell brown on the executive director of external affairs for myself so I appreciate the opportunity to present to you today I'll go over basically three very brief filed. Okay three slots one that tells you who is my so the second slide tells you what is our role and then the load shedding van itself I'll talk to those I have some assume a appendix slides also that may answer some of the questions that I've heard already. Okay. This line here it shows you who is why so it shows you are would print right and first let me say that minute my so make confident in system operators we're a five oh one C. for rights were nonprofit organization that oversees the transfer transfer mission superhighway for the central US we were started in two thousand and one as far as the south region where was two thousand and thirteen as you can see on the slide here I cover we cover fifteen states and one Canadian province forty two million in use customers seventy five thousand megawatts of generation and almost sixty six thousand miles of trans transmission lines have a hundred eighty members example of the member is like a C. C. R. entity informed seventy one market participants. And we're divided into north central and South. We mention to that south region it actually covers Arkansas Mississippi New Orleans and parts of Texas okay. This next I just see here this is our role as reliability coordinator you know in order for us to be successful with delivery of electricity to your home there really three components the parts that we handle our general generation transmission we actually act that is the overseer right the air traffic controller of that and whenever one of those things is not in sync yes we have disruption of power okay our goal though at all times to protect the integrity of the grid we don't want a situation like in two thousand and three we had a role in I'm sorry the total blackout right in New York City so that's always our focus we don't own any of the assets but we do manage the process that ensure safe allowable deliver power to utility which ultimately gets to your home or business. This slide shows actual load shedding process right. You'll see slide one here is talking about tight supplies so that's when demand is exceeding what we accept in terms of supply I don't before I go through those steps want to talk about a little bit of what we do our way in advance of that so there are annual what we call reading as well workshops this both summer and winter that occur we have actual joint training between us and the members where the reliability coordinators the guys is actually in the control room making decisions where we have basically trial runs right or or a mock you know case so to speak of hello city bent so that when that situation comes they know what to do that training cars every year we also have these best practice meetings take hurricane lar for instance right we learned a lot from that in terms of the communication piece which is has which has been a I think one of the focus areas we actually started setting up calls between us and the member companies want is like over operation so they'll be operations call daily there's a communications call daily and then there's a real let our regulatory call that we did daily we did that with with the several of our larger members that we did on a regular basis so that happens a lot but in terms of this actual lotion at once the supply got tight and we get to this stage to was called emergency alert level to you'll see I don't know if you actually got that hand out or not but if in fact you did there's actually several steps that you get to before you ever reach this point there's a total of about nine steps in this operating procedures and we're sending that communication out each and every time before you get to what what we're talking about here which is N. E. A. two we get to the E. A. two that's when the public you know we'll we're we're only tell and regulate. Enters as well as our members Hey this is where we are we're telling them that on a regular basis then they're communicating that out to you residential commercial owners but once it gets to that point. you know we're talking about I would say that public appeal whenever you all see that that's when you're really on high alert that there is a possibility of load ****. If in fact we do do a low said I love the analogy that I heard Todd use so I think a couple weeks ago with the Louisiana public service commission it's like you have a new car right and all of a sudden the engine light comes on we see that engine like come on you know you can keep driving but it's a new card the smart thing to do is a pullover call somebody make sure that everything's okay before you you move on down the road right so that load **** and it senses like that engine light going out we're trying to make sure that we're protecting the overall greeted not have cascading outages which ultimately is to a blackout so that's what you're talking about the lotion the actual low city been itself it happened at six forty five central time. What happened because that was a loss over the course of that day there was twenty five hundred megawatts of generation that we lost it ended at eight PM just under two hours with the total you know loss we use every lever possible you know call known load modifying resources and the things you see here like other public appeals for a conservation but at the end of the day we did have to do that the total hello said was seven hundred megawatts and it was a pro rata share so that was spread out over what we call our load balancing authorities which I guess in simple terms is it was spread throughout the five states of south region so was in any one area that got that lotion it was actually a program this year that was spread of that seven hundred megawatts. There were that's really the conclusion about the presentation you do have to other slides in here just for reference later. That shows you the communication timeline in terms of us communicating to the regulators as well as to our members and then the final one is the operations are merging sea actions operations this could be found easily on our website and those are all the steps that you get to before you hear this window there a lot of people talking about Hey we only had a thirty minute window right with there's a lot of steps that came before that when we get to that thirty minute part that's that you know those warnings we were an eighty eight to the night before all the way up until that point the thirty minutes is actually when they have the that member has the thirty minute window to actually react and actually she had the load so that's that thirty minute window is not the community really reacting there just want to make sure to point that out so that concludes my presentation I answer any questions that they ask you. All right so if you all I have some questions but we're gonna hold those until we get through this next presentation that will last about. Please introduce yourself for the. Committee thank you Mr Mr chairman Mike Ross senior VP at southwest of power pool and she's bringing that up but let me just begin by it was I was just sitting here thinking it was thirty years ago last month that that I raise my hand and became a member of the Arkansas state senator it's hard to believe it's been thirty years but I have a great respect and admiration for what you all do and I want to thank you for your service to the. And the people of our beloved state. Yes. There we go. So I'm going to go through some these rather quickly but I wanted you to to have on that you could look at your at your leisure because I'm really want to get to your questions but so S. B. P. of is but many of you have been to our facility we were founded in nineteen forty one we're a five oh one C. six nonprofit organization were one of nine grid operators and in North America there seven in the U. S. nine in North America including the the two and and in Canada we have a hundred and for members and fourteen states as you can see the maroon is our region it's kind of a hash mark up there in the Dakotas so that's because we share some of that area with with my so what we operate the grid and all or part of fourteen states so we don't know the generation there's about eight hundred generators in our region we don't own them our members do others about seventy thousand miles of high voltage transmission lines in our region we don't own those are members do were more like air traffic controllers were forecasting how much power is needed tomorrow and making sure the generation is there to provide it were also forecasting the win in revenue that days in advance because of the variability with the win because this is you can look at our region where the Saudi Arabia of of women a lot of women in the panhandle Texas Oklahoma Kansas Iowa and so forth and and and so on and so days in advance were forecasting the win because the large gas or coal plants can take more than a day to get up and running and so we had to get really good at forecasting the win as well as how much power is is is needed so we balance the supply demand across the region maintain reliable grid operations operate the host so electric market and we plan hi voltage transmission needs for the future across our region in Arkansas. basically my so has a big part of Arkansas as you can see from the map they serve inter G. and and some of the coops and the we have some of the co ops as well as what code G. and G. O. G. and a and the other electric utility companies in Arkansas these look kinda like legislative districts if you will is because they follow the high voltage of a transmission lines we're designated by for a regulated and audited by them as well as network the north American electric reliability a corporation and I'm not gonna spend a lot of time there I think you get the idea is once it gets to the substation it then becomes the members responsibility than deliver that power from from that point on the distribution lines to the end use customers over the high voltage lines to the generators if you if you will similar to what they're also to think again were heavily regulated were subject to fines of more than one billion dollars per day per violation I will add that the electric industry of the electric utility industry is the most heavily regulated of all utilities and of all of America's critical infrastructure. And so basically the reliability coordination piece we're following over fifty five hundred pages of reliability standards and cried criteria that's required before and nurture the north American electric reliability corporation and we're doing a lot of a lot of training in fact were designated by the dark to provide training not only for our grid operators but for our member company read operators as as well in fact and twenty twenty we provided twenty six hours of training the two hundred and fifty one organizations and In terms of how do we prepare for events like this grid operators. They work a six week rotation shipped one out of every six weeks is dedicated to training that's how significant the training is that's involved. Of because of the enormous responsibility that's that's put on on them to make decisions in an instant. so what happened is you can see from this math the call it was it was really the perfect storm. record low temperatures calls record high demand for electricity we set up a store call maximum winter load on February the fifteenth of that dark blue on the map. That's where the temperatures were zero below and it was the entire SBP region a lot of times we benefit from having a large geographical region there's been times when it's seventy eight degrees in Shreveport Louisiana and minus twenty in Bismarck North Dakota in this instance everything was is zero or below in the entire entire region. And so You know I've referred to it as the as the perfect storm there wasn't enough available generation to meet the man during this severe weather event historic weather event and record demand also calls transmission loading issues there were an adequate supplies of natural gas needed to power some generators and in fact we saw our members all gas go from under three dollars to over twelve hundred and fifty dollars per MM BTU. From under three dollars over one thousand two hundred and fifty dollars I was talking last week with the Oklahoma secretary of energy and he indicated not just the entire state but just one producer one gas producer in Oklahoma at eight hundred wells at all but thirty eight were inoperable. Most of them were frozen at the well head in fact I believe it was below twenty degrees in Oklahoma for more than a more than a week I would also say extreme cold temperatures made it difficult for some units to operate. we lost some wind due to icing of the wind came in pretty much at what we had forecast for it unfortunately the wind one blowing a lot during these these events and then call some of the coal piles were frozen and so we lost gas we lost when we lost coal it was it again really the the perfect of the perfect storm. I think we managed it as well as we could we've been coordinating Parsons nineteen forty one this is the first time that we've had to implement a controlled interruption of service and you do that to ensure their does that it does not become an uncontrolled interruption of service as zero mention the last one was in two thousand three that started on the east coast and went all the way up to Canada and it took days to to get the system back online all the generation back up in the system and balance again as it relates to built engine and and frequency and so we're required to carry one and a half times the largest generator that we've got online at the time in reserve in what we call operating reserves and so we have these different levels that we go through but And I think you've seen pretty much what's on that that screen the we don't determine when when we're in a energy emergency alert level one two or three what we determine it but it's based on their guidelines and again we're subject to fines of more than a million dollars per day per violation if we don't follow these in their guidelines so everything from normal operating conditions to any a level three and this is the time line of of what all happened and the senator Gardner's gardeners Blake point earlier I just wanted to share with you a little bit we issued a cold weather alert on February fourth. And a resource alert on February eighth constituent and conservative operations on February the ninth and we usually commit generation we have what's called a day ahead market that commits generation a day in advance we went a longer lead time generating resources on February eleventh for the period February the thirteenth through the the sixteenth now we issued an E. a level one effective at five AM on February the fifteenth we issued that though on February fourteenth at twelve fifty nine PM when we enter an energy emergency alert level one nerve does not let allow us to direct a public appeal for conservation but what we did at twelve fifty nine PM on February fourteenth as we requested our members to request a public appeal for conservation and then we went into an eighty eight to at seven twenty two in the morning of February the the the fifteenth and then we had a E. a level three it It paper on February fifteenth at ten oh eight AM and and I think it's important to note that. When you're in E. a level three it does not mean that you're going to have a controlled interruption of service it means that you're now in your operating reserve so whatever the biggest unit running at the time we have to carry one and a half times that amount in reserves once we get into those reserves we are required by for dinner to issue any a level three which can lead to a controlled interruption of service and so when that happens I wish there could be more notice notice to we started sounding the alarms under the construct and the regular regulation that we required to follow back on on February fourth and really but the siren out there on Sunday February fourteenth at twelve fifty nine PM but What when it comes down to having to reduce load. It's happening in real time it's a commodity this traveling at nearly the speed of light and you're hoping that that the demand stays down to where you don't have to do that or you're hoping that this generator that's offline comes back online and so it's not like a decision the CEO or the CEO or the board may is not likely these grid operators have time to go huddle around a conference table it's happening in real time and that's why they spend one out of every six weeks on the job in training is to prepare for a dance like this it's a matter of seconds if not minutes to react if they don't then it could lead to a black out of the of the system. That may be a good place I guess the point is she should make enclosing is that on February the the fifteenth one and a half percent of our region. One and a half percent of our region lost power for fifty minutes and then on February sixteenth it It range between three and a quarter in six and a half percent of our region lost power for a total of three hours and and twenty one minutes And so when that happens it's a load ratio share so if one of our member companies makes up ten percent and we've got to cut a thousand megawatts they would cut one hundred megawatts and so the local member of the local utility they have a plan usually it involves not cutting off critical infrastructure like hospitals but they have a plan and if it had been like this goes for an extended period of time a bill bill cut this this region other service territory off for an hour or two and then they'll go to a different area and then a different area and so who gets actually cut is based on plans that each member company has has and in place. And so upbeat I think they're allowed both be glad to answer any questions anyone of might help but that's a topic join all the warnings that we we issued. Thank you for your presentations I have a few questions here I think I'll start with you. Thank chair so to me at least looking from the outside and and I appreciate the explanation it seems like your response was appropriate timely like you guys go to what you do the the thing that is concerning to me. Is. It is maybe what has had led up to to us not be and really prepared for it and and look you know like this event is a is a historic event it's not going to be something that we're gonna run into all the time but what I'm afraid of is the direction we're going maybe moving it to where this type of event could happen and it could occur more often so you. To me like to see this for what it really. What is whether they put the exclamation point on Basil generation right so you know when you get hit in the mouth it's you can't count on anything else besides for for what you call basically generation. But we're not going to put new hydroelectric dams up anywhere on any streams in anywhere around here. Building new nuclear seems like you know a pipe dream your bill I mean I you know it be nice of the it would be a focus and and we're probably not going to build new coal fired power plants you know I think clean coal technology probably would be warranted for us to talk about in in honestly those are the are the three Basil generation It effect before two weeks ago I was a natural gas is a pretty good baseload generation when the when the prices are down however obviously this event teaches us that there's needs to be big changes are for an account on that is as Basil generation so so my my question is moving for like what direction we don't want because what I've seen or at least it looks like and I'm not merely the expert you guys are the we're moving away from all four of those maybe not as much gas but definitely the other three when it comes to you know aging infrastructure we have right now you know are we are blessed with cheap energy and in Arkansas until this thing hit us which you know everybody. But you know we have an aging aging nuclear power plant that's going to change everything that goes away we have a you know who you know but for the the coal fired power plants we had one of them that's that is you know plan to be mothballed you know we would have been in a in a worse position if if we didn't have those on the grid so you know you have the future is to do away with a lot of that or not get you know what are we going to do in the future because there's no way you at least I I can't imagine I want our lifetime having a storage battery storage to to really handle Basil generation for wind or solar so what is the what is the future look like and how we change the directory so we don't have this type of thing happen on a regular basis so we don't get to decide what kind of generations bill but we get a look at what's going to be built up because we're required to do the studies on how that generation would reliably connect to the grid and when you look at what's planned across our region for the future it's it's when it's over it's storage and a little bit of gas yet but in terms of what kind of generation gets built that is something that our member companies determine and coordination on these restore at resource adequacy plans with their state of state commission's Arkansas course it would be chairman Thomas in the Arkansas Public Service Commission but your point about about of gas just to give you an example of because we set all the North American when records we've had as much as seventy over seventy percent of all energy for fourteen states come from when before but with when it comes for ability for and the reason we've been able to do that quite frankly is because we have about a hundred and fifty natural gas fast or quick start units they can go from off the own in anywhere from ten to sixty minutes. Okay and and we don't have those in our back pocket we would not be able to integrate the massive amounts of land that we've done across our our our fourteen state region but because we facilitate the wholesale electric market we're Clark were required to be fuel agnostic we don't pick the winners losers of the form of energy that runs it's the market that that does that they're only one well I would just point you to what we call our reliability impaired there's actually a white paper that addresses those issues your go to the mysa website or actually I'll email that to think that contacts Emily also in that to her so she can send it to all of you guys it's a great paper that looks that the resource adequacy basically like an umbrella over all the things that you're talking about and have concerns with yes let me say this I don't know if I was with it was question to challenge you all to do more because I know that's not really that's outside your control as much as like what do you see that the future and so I mean that's a good example where everything you you have that's new is is the wind and solar. And the very nature I'm at you know I I appreciate all the work there's been been put into maintaining the power plants but if we don't have anything planned new for for the for what is basically generation then then we're going to be and then come in trouble so I appreciate that information thank you. The Representative Ladyman. Mister chair and I'll try to be brief but can you up just for clarification one of your both of you defined you said you had the members and you had market participants for a clarification can you define those two terms I mean what are we talking about the. Yes so we're talking a member's interview will be considered a member we're talking about market participants it can be a large industrial customers for instance so members are suppliers market participants are users is that correct and in some cases there one in the same right there's not us but in follow general purposes yes. You have like like you know for example SWEPCO they they serving use customers all right then we also have market participants that used on a large gas plant if you will codes in there they're making power and and putting it on the market to be ball so my correct in saying that I may use the wrong term you're but you basically go from the high your to the city gate I mean that those are different gestern maybe but is that correct you don't you you have operating plants you don't have local distribution systems we don't own anything we just directed you know thinker traffic controllers and so how does how does the and I know our symbol that is on the thing here but but in Jonesborough we have on city water light has their own generating facilities so you have nothing to do with those are distributed that gas that electricity produced at the local level in use at the city level is just their own AS in unity they may they're probably a member of my so yeah probably I I I I've been here about a year right so I could I don't know all the members also well my question is with those type of utilities put that gas into the grid and then take it back off or is it only there's. You understand the question. I think I do so so when you're so like they have what's called PPA agreements right uh which is basically a way an agreement between say a producer like or a an entity that's a wholesale supplier to those cities and that's where they're actually that's actually source in some cases you do have as well as with their own generation facilities so it it there's no will kind of one size fits all it could be a combination of things in terms of how they actually meet their resource adequacy needs will the and I'm sure there's other entities like this one are selected consumer this but in general they have for those quickstart generators Ellen six thousand that can come up in fifteen minutes and produce forty five megawatts power and it is in there is within their system so I mean are they do they have total control over that or I guess it would depend on the contract is that what you're saying well meaning as they get you know when it comes to the markets right and may we sent control it it is a day ahead price that's that each day and that's what actually would controls who's able to put out their own agreed and who's not right so depends on the pricing and each day that is determined throughout markets. Mister one more quick question that could. If it's correct. The contracts when you you do you all have contracts with the suppliers and with the users or are you just paid a fee for transmitting. Yet what we're we're just paid a fee yes. Okay thank you. Okay sitting no other questions were gonna move to the next level which is we're gonna be talking with all right we appreciate you guys for showing up is a great discussion I think we could. And I apologize for that the other senator Johnson got up and left and I retire I turned it off I thought it was here you go Sir Johnson. This is probably for both of you SBP in me so as grid operators what's the difference between you and what Erekat was in Texas. Well so there there is there are seven regional transmission organizations in the United States my so an SBP or two of the seven are not as one I would say the biggest difference is caught is not for jurisdictional and they operate in a in a single state and I think in the last few weeks we have learned the importance of being part of a more regional grid if you will. Same with me so yes Zacks yes so there's a there's a level of federal regulation and and both of yours as suppliers Arkansas as compared to Texas correct you are constantly can affect this thank you yes one thing I Mr chairman I failed to mention is is when we were in those two events that likely didn't last very long impact that many people although we're never happy when a single person gets impacted my so we're we're all partners in this and they helped us out tremendously when they could they were in a tie the tough spot more than time to when they can help as they helped us we can help them we help them and I I just I'd be remiss if I didn't make that point we we thank them for their cooperation and help it is a story about. We appreciate you guys coming John is very poor I think we could buy the whole meeting out of this long I did I do. one mention that one of the comments that were made was that how in terms of Arkansas and in terms of the Artios I've heard this from the Artios to saying that all the players in Arkansas we're working together to try to keep everything going as best they could so all the major players were in contact during this event in that sense well for Arkansas in the world the waiver of. Yes I like to point out there was one meeting in particular I actually made a phone call board member of Arkansas research alliance he made a few calls and I called the chairman Thomas as well and it ended up being I don't know forty people on that call right of state troopers the mayor's office a department of emergency you name it we were all on the call talking through how could we get snow plows and state troopers to lead down to where we can get diesel fuel to some of these plants that needed in their only days out before they were run out right so those kind of efforts I think are key I know from my experience prior to coming to my so I was part of hurricane Katrina part of the unfortunately a part of the store ice storm that took place in Georgia and the public private partnerships and meeting and talking through these types of events and lessons learned is something about the you know we can always improve that's area I think that would be helpful that was more of an ad hoc meeting I think I was actually thinking through that implanting those out to where we can periodically have those meetings when we see this type of event coming before we something what's worse to do. Thank you thank you. With that we're going to continue on it would ask the I'm I'm I'm asked the electric utilities and to come up. And also represent together if we possibly can and then we'll take some questions of energy. The SWEPCO and electric coops please. All I say to you to introduce yourself with a committee. Ninety days then the CEO of Arkansas electric cooperative corporation retired submarine officer. The better I'm Buddy hasten the as CEO of Arkansas electric cooperative corporation a retired submarine officer so I did that for twenty years surface those suffering the North Pole so I'm used operating power plants a pretty harsh conditions I'd of been in the civilian power sector since two thousand seven and in Arkansas electric since twenty nineteen. Go ahead Mr chairman members of the committee on Bradley hard on them the external and government affairs manager for southwestern electric power company based in table. And good morning to afternoon I guess good afternoon Mr chairman members of the committee John Bethel and I'm the director of public affairs for injuries the Arkansas. Thank you and I'll let you guys decide who's gonna go first. We're cued up I've got a lot of slides in a move through pretty quick so I just have some quick talking points on each I don't know if you'll have a copy of these but I'm definitely willing to provide and if you don't. What. Here's. I did break in. Mr page down maybe. Okay. The point of this light is a show that there were rolling blackouts the the cooperatives were not immune there was uh and SB PMI so far to cover their then so I will go into that we had thirteen thousand eighty one of our members that were impacted I can assure you that they understand they don't like it when mother nature cuts off their power in a winter storm but they really don't like it when we do it because we don't have supplies so I would say you can multiply the frustration and irritation by a factor of ten and then we also serve eight interruptible industrial customers that were curtailed multiple times and I'll show that later in the presentation but that was actually a big benefit to the. My so went through these this is just a number of alerts when you talk about how much communication was going out every one of these as an alert everyone of these I forwarded on all seventeen call options or member systems were pretty plugged into what was going on and that's my so anywhere there's read that's where there was an actual curtailment or Hey load is exceeding supply so we think we're going to have to worship load or or or reduce load. And this is the similar slide for SBP and these are significant and Senate they went a week or longer and that's a pretty significant then the winner. Our weather for us it was the all time record and and we've talked about that for vortex in twenty fourteen the bomb cyclone in twenty eighteen we're significant but this when the clips that by about three to four times and we'll see that later but I'd say yes gas production dropped off generation outages increase that's across the spectrum so yes there were some coal plant problems some gas plant problems and the and other sources I would say that for the co ops though any of the what we call wholly owned assets assets that we own and operate a we did not have any winter problems I'd say our problem really resulted in paying high prices for gas so the the plants we operate operated they were prepared ready for winter but they but but some of that load could survive very expensive gas. Mr shows you a picture of what that looks like the red line used to be the all time records you know in the history of the company that's the most load with ever served in that was in the summertime and now you can see that we blew that away in four of the seven days in the week we were up around three thousand megawatts which is a big which is a significant increase you know we went up by a well over ten percent there so it's a pretty big pretty big bomb. So from twenty five hundred megawatts up to about twenty nine eighty three so it's a big return big left. Mr shows that historically in this kind of gives you some sense of things down here in the south things have probably been engineered for the summer so for years and years that red lines been over the blue line we've been a summer peaking utility so load gets really tight you know supply and load get really tight in the summer which you can see how that curve is kind of shifted and since the polar vortex and fourteen I think one of the one of the legislators asked the question is is becoming more common yes we're seeing more these winter events and I think we're definitely seeing some bigger peaks in the winter times as well and that this graph just tries to show you that. this is just a also to the question of communication I don't know if you can read this but this is just a snippet from a letter that our VP of marketing sent to all of our interrupted will factory customers this is Hey we see some storm clouds brewing on the horizon this was sent on a Saturday morning this is this is the worst we've ever seen in thirty years and there's going to be some expensive prices we just know this based on what we can see in the day had markets was also over a holiday weekend so gas trades for three days and so we kinda knew what prices were getting ready to do and so we said Hey just wanted to give you the most heads up if you can plan for as low as low as possible to hear it would be it would be to your best interest we followed announcements like this also out to our members systems as SBP said we were room letting them know of these issues asking for conservation and to the extent that we could whenever we saw real potentials for load cuts making sure they're aware that this could happen in their area. I talked about industrial customers this is a picture of their load and you can see how they really cut down on February fifteenth sixteenth seventeenth and eighteenth right in the middle of this thing so they shed three hundred and fifty seven megawatts using some rough math winter peak they that basically if they hadn't been able to shed load and we would have to get rid of other load that equates to two hundred and thirty thousand homes so what thirteen thousand members were impacted absent this reduction in load with no water supply it would have impacted two hundred and thirty thousand other homes out there so just to give you an impact as to the is to the value that that interruptible provides. Natural gas use we've got six gas plants to those are dual fuel we can burn diesel not all of them are dual field on for pipelines and we kind of it to at some point thought that was a pretty diversified portfolio multiple pipelines some dual fuel capability when you think about resiliency and redundancy but what really happened in here was that natural gas prices spiked we we saw prices in the two hundred dollar range so for us I think the highest we ever paid I put it on here was two hundred and twenty dollars maybe to you there were quotes for prices around four hundred that we were able to to move move around but that's about a hundred times normal and which made it then cost effective for us to burn diesel fuel diesel fuels about fifteen dollars and maybe to you normally on a daily basis that's way too expensive to burn but to say it was a bargain it wasn't this at these prices and then are unable aside what really comes from Oklahoma you can see we were having pricing a size four hundred dollars what's more important here is a talk about rate ability at some point the pipelines became so constrained if you bought gas you had to buy it for the whole day you have to promise you're gonna burn that exact amount if you deviate from that there's a penalty and you can see these penalties or even more expensive than the gas seven and seventy five dollars we were not hit with any of those penalties and so I like I said I think what we said would burn burn the plants we needed to run run so we we avoided those but that just let you understand the complexities people were dealing with trying to plan this out to Burke did talk a little about fuel oil. by burning fuel oil we saved Thirty seven million dollars. And that's into small plants so the fits you plant it's about a hundred fifty megawatts the the McLaren plan is a very old plant it's about a hundred twenty megawatts but just by burning that diesel if I reversed up to what the market prices would have been just the market not the gas prices that's that's about a thirty seven million dollars swing so when Darrell said that we really benefited from this meeting with the state I can't give enough credit to the Arkansas department of energy management Arkansas department transportation getting snow plows out there getting fuel to these plants it was that level of need it kept these plants running and saved our members money member I will call up I'm not a there's no profit motive here is just really trying to manage costs for our members so thank you very much to the organizations that helped us out there. And the put it in context for you just to small plants burned one point eight million gallons of diesel fuel in those five days so and that's that's the small stuff. when production not picking on when of the Senate wouldn't there and so the question about what we do in the future I'm not picking on my soon as BP but everything that's in the queue if you go out on the internet look at what is in the plans to be built it's all wind and solar nothing else and this is this is how it kind of played out that day I have a contract or contracts for five wind farms that they should provide me four hundred seventy four megawatts of power if they're at full load you can see the red line that's kind of what I'm I normally get in February some months or windier than other months of per the forecast but not everything's for the forecast and this is what showed up and so you can see on the days that we were work cutting load and everything else it was about zero. Similarly we have twenty five megawatts of solar and you can see that the the solar facilities honestly on a winter peaking situation a lot of times at peak happens early morning or late at night and that's just not when that technology is available throw some snow in some bad conditions and overcast guys for five days and it makes a pretty challenging for that technology as well. This is shows your mice of south this is the generation that was online during that time the the the bottom was nuclear the gray the blues coal the greens gas cylinders hydro one other up above and so you can kind of see. with my so south looks like any others a lot more gas down here when you look at the next picture this is my so overall the big my so all of those regions and you can see is a lot more coal and it's is it's just it's It just shows the difference. Yes PP this is kind of the same this is what was online at that time and I said I think there were some coal outages but on our S. B. P. side of the coal plants ran pretty well for us. Variability which is this is this the highlight this is a snapshot in time but that you can see that for SBP during this time call was at fifty four percent natural gas is a thirty nuclear six and we don't win this one and a half percent and I think they've got a balance that and I think they they did a good job but the flip side of that is a week later windows at fifty seven percent it's over supplying demand and it's driving all the prices in the market negative. And so yes those are negative prices so if you run a power plant in your producing power at that moment you're paying to keep it online that's it that's the way the equation works so balancing all of that And then this speaks to a bigger problem bigger issues out there this is a similar snippet where you look at the price contour map there's enough wind blowing in the world that is causing all the prices to kind of flip naked and so trying to balance that but then at the same time expecting the folks that run and operate these plans to spend a lot of money on resiliency and redundancy I think there's with those two things collided the purpose of this latest Bragg under a little bit. Derrell sent an email at three twenty three AM. That's pretty early in the morning to be working as a at that level M. my vice president of power marketing and operations responded one minute later Meisel said we need something in one minute later he said we'll do it and then they were calling me about one minute after that so to say this was all hands on deck and people were sleeping in forty five minutes naps in one hour naps around a week that's that's what happened. Phase two for us is the big problem how to pay for it all and I know that that's a big concern I don't want to get in the exact number because that goes to my board tomorrow but I'll just say if you take the polar vortex or the bomb cyclone those big events in the past this event is three to four times that cost so it's pretty significant cost and those are still finalizing firming up but it's a big it's a big expense. Just a shot put that in perspective this is our low cost so what are load pays you can see that in S. PP popped up over about a hundred times normal so it's up over three thousand dollars for several days a normal price this time of year would be about thirty dollars per megawatt hour in my so it was a little bit little more relief there's was about ten times normal an average cost in mice so this time I I use slices twenty four thirty dollars is around number you can see where we were up around two or three hundred dollars a few times but it kind of the state but it wasn't it one was a ten X. problem one was kind of a a hundred X. problem and that's what we're dealing with. And bill for any questions or maybe after the German present. Nextel yes Sir S. the amount okay good yep just to do a follow up to the extreme weather event during the week of February fifteenth presented a lot of challenges for for all utilities in the state at all levels fortunately FOR Arkansas as a whole and for inter G. R. system performed well and the service interruptions were limited in number and limited in duration our our employees and those of the other electric utilities worked real hard and tirelessly during that week to ensure that our customers have electric service the extreme conditions the high demand for to electricity and natural gas resulted in an imbalance between supply and demand the relationship between supply and demand was extremely tight and that was compounded by the winter weather event that added a significant that affected a significant portion of our country throughout the the week we work to encourage our customers to conserve and to avoid service interruptions due to the higher demand on the system as of as Darryl mentioned we got notice from my so of the constraints that were were coming and we begin I believe we begin on Sunday with those notifications to customers to conserve to help our system whether the storm and we did that through a variety of ways we used a text messages phone calls emails broadcast and print media and social media and but and our customers responded to those requests and that certainly helped limit the duration of and the number of outages that occurred as a result of that and you know although the outages were limited in number and duration of any of our customers the experience now to do is is obviously significant to them an undesirable for them and we're we're sensitive to that and we know that that's that's not what what our customers want especially in extreme weather conditions a very real. Benefit to Arkansas any contributing factor to the to the states ability to weather the storm is our diverse mix for fuel generation we benefit from having resources that includes nuclear coal natural gas hydro and solar and although the the solar resources most of them were not able to contribute very much during the event we were able to draw on our other resources and without the significant investments that we've made to build a choir operate maintain those generating facilities the impact of the extreme winter weather would likely have been greater during the winter weather event we drew upon all of our fuel sources we confronted challenges brought about by the extreme weather with all of our fuel sources however because of the diversity of our fuel mix the our utilities have been able to keep the lights on in the power flowing with only limited erection interviews the largest transmission service provider in the state and over the last several years we've made significant strategic investments in our transmission system these investments have made our transmission network in Arkansas more rules reliable and resilient and additionally the other elected your electric utilities have also invested in their transmission networks and those investments of strength in the system and it helped us withstand the challenges presented by the current extreme conditions and to serve many insure reliable electric service every day to our customers without those investments to build operate maintain and improve those facilities the impact of the winter weather would have been more significant. also we've made significant investments in our distribution systems that deliver power directly to our homes and businesses and those further strengthened our ability to respond to the challenges presented by the event not only we installed new facilities but we maintain and upgrade our existing facilities and we continue to invest in technological improvements to modernize and improve our distribution system by way of example we've installed or were in the process of installing advanced meters throughout our system and the meters will provide more detailed information to the company to help improve our operations customers will also have more timely information that they can use to to adjust their usage and to respond and we will be able to offer new products and services the advanced meters also help us more efficiently identify outages on our system when they occur and we're making other improvements through our distribution network to provide better information to allow the a systems to relax to operate more reliably inefficiently. Without these investments to build operate maintain and improve our facilities the impact of the weather would have been a lot more significant. as I mentioned above this way of winter weather event because historically higher usage and demand for electricity statewide throughout the region by way of example intraday Arkansas as peak demand on February fifteenth twenty twenty one was approximately four thousand one hundred ninety eight megawatts which is the second largest monthly winter peak on the system since we joined my so in twenty thirteen by way of comparison the demand on July twenty ninth two thousand fifteen which was the highest summer demand on our system since joining my so it's four thousand six hundred and sixty five megawatts so the the winter peak was very near the summer peak which is which is unusual and and on top of the on Thanks since joint joining my so nine of those came in February twenty twenty one so it was not only a single event but it was a peak event that lasted for several days which is unusual because those often will happen one time in a week or one time in a month as opposed to multiple times over several days so it was a prolonged. read a big demand. having having higher usage and and and demand during a winter bill creates additional challenges because you have dual of dual demands for natural gas for Burke both for electric generation and for home and space heating buyer buyer customers and that doesn't happen in the summertime and so that created a of a different problem and you would have with the summer peak. And so as the others have mentioned the cold weather created challenges for the natural gas industry as a whole and they're in their representatives are here and can address that better than acting in consequently the high winter demand situation created a lot of real challenges for the industry like everything else in twenty twenty and twenty twenty one we're we're seeing things we don't normally see of although the adages of have been limited number duration there were some and as reported by several news outlets and by the the other witnesses here today both my so an SBP called on the utilities to interrupt our load to maintain the reliability of the greeted and the representatives for my soon as BP of explain those to you today entered the Arkansas was instructed by my so to interrupt customers on Tuesday evening the February sixteenth that beginning at six fifty nine PM and the last customers were restored at eight fifty nine PM the company interrupted approximately sixty thousand customers in groups of twenty thousand and enrolling intermittent outages in the outages lasted between thirty and forty five minutes with an average customer outage duration of about forty minutes the news reports it indicated that the other utilities were called upon to do the same things and you've heard that this this morning and afternoon as well my soonest PP operate the transmission systems for a number of utilities across large regions of our country they act in part to ensure the reliability of the transmission system and help prevent widespread outages that can cause damage to the electric grid the transmission system operator in extreme circumstances and as a last resort will call upon customers to interrupt the load on there to preserve the and protect the system to the extent possible we work to inform our customers throughout the week Regardie. In the need to conserve the potential for outages and in the event of outages our efforts to restore power and I'll be glad to take questions on more specifics after Mr harden. You're recognized please try to keep your comments break I will I want to give everyone a chance to we are running up and all hard stop here okay you've heard a lot of information already today and I know there's a lot more to go so I'll be. Re for the narrative of the at that time it's what go SWEPCO service about one hundred twenty three thousand customers in thirteen western Arkansas counties as well as customers in. Skews me in Louisiana and Texas and along with our sister company public service company of Oklahoma we are part of the fourteen state southwest power pool electric grid and in fact SWEPCO and PSO were among the eleven original members at a speed be back in the early nineteen forties. SWEPCO began preparing for the winter storm a during the week of February eight anticipating the possibility of multi day outages we issued news releases and utilize social media post about storm preparations on Thursday on Friday and on Sunday the fourteenth. At the same time we were calling in more than one thousand outside line tree and support personnel to assist in storm response as well as preparing to establish base camp for operations in crucial areas of our service territory. On Sunday the fourteenth we were alerted by SBP of the need to issue an emergency appeal for energy conservation we joined with other utilities across as BP in issuing that appeal Sunday for the forty eight hour period to include Monday and Tuesday. On Monday morning SBP called on SWEPCO to reduce load by fifty eight megawatts on Tuesday morning as BP called on SWEPCO to reduce load by two hundred sixty member watch. SWEPCO implemented its emergency load shed plan with a series of rotating controlled outages across our three state service territory. The total number of Arkansas customers impacted of that one hundred twenty three thousand customer base we had in Arkansas fifty five hundred were impacted on Monday and seventeen thousand eight hundred on Tuesday. That is B. P. load shed that lasted less than one hour on Monday injured might lead to earlier and less than three and a half hours on Tuesday. Weapons emergency plan is intended to limit the impact on customers by rotating the averages from one circuit to the next. And by interrupting service for no more than two hours when possible although some outages did take longer to restore due to weather or system conditions. As part of the load shed plans worker issued public notifications when the controlled outages were implemented and when they ended. Both Monday and Tuesday. We communicated through the news media and social media as well as numerous telephone calls emails and text messages. Because the load shed offense were merging she's requiring immediate attention immediate action SWEPCO was unable obviously to notify every potentially impacted customer directly however we will continue to explore ways to improve communications as part of our continued planning for emergencies. Meanwhile storm preparations continued with forecasts of snow sleet freezing rain and ice across much of our service territory beginning in the early morning hours of February seventeen. that storm alternately cause the most damage down in Louisiana and taxes that service was restored on February twenty one these recent record breaking cold temperatures. Will likely lead to higher electric bills for most customers in the coming months. While base rates do not change most customers did use more kilowatt hours and that are used each will affect the bills the fuel portion of the bills will also be impacted so what goes fuel costs to generate electricity did increase substantially during the event. We'll be working closely with public service commission to find ways to minimize the impact of this is that on our customers electric bills I might also mention that throughout the pandemic which we're we're about one year into now we encourage customers who are struggling to pay their electric bills to contact us so we can work together with them to find a solution we offer a number of those options and we're currently not disconnecting customers for non payment in Arkansas due to the pandemic though that will be coming to an end and may and we're continuing to encourage customers to reach out to see if we can make arrangements to help them with their bill payments thank you. Hi Senator Ballenger. And honestly we may well get this answer offline but I I I do want to. Reiterate so honestly what I want to say is I think this guy is falling and nobody is is looking at it I'd like to be commenced the sky is not falling that I mean if if really for a position where we're aging out and and I and the white glove plant you know I really think we need to change our plan and keep it on online until we know what's know what what the future holds if we are we're only developing new new wind and solar we're not developing new baseload generation then and we're developing a lot more wind and solar which means a lot more inconsistency and and and prices I just don't see how this how this ends well for us it admin talking one person feels like we're on a train going real fast one direction and nobody wants to stop it right so I mean I do want innovation I do want to go to renewables and I do want all that stuff. But not before R. our system is is able to to continue to operate while we get there so so I I don't I know that we we need to gas people so you guys have a real quick response to that that's great but you know I I think that as a group we need to start kind of slowing down say Hey you know let's get to clean energy I want like I I want to get there let's not make it we're we're we're not talking about brown outs or talk about blackouts in grids going down and in order energy prices which is the one thing that we've got above so much go through the roof and and in Arkansas I think those are our real problems we need to just like pump the brakes a little bit of figure out what we need to do differently. Senator I would I would quickly respond to that simply by saying that while SWEPCO does have some plant retirements in our. Relatively near future those are located in other states we will continue to operate both of flint creek and the Turk power plants here in Arkansas as well as a natural gas field plant called Madison which is located up in Washington County at the same time we are moving into adding more renewables to our portfolio recognizing that were in southwest power pool we have the nation's richest when reserves within our footprint and so wind is what's in our immediate future we have three projects under way right now the first of which will come on line within the next few months but will be adding about eight hundred ten megawatts of wind generation capacity this year and next year for our Arkansas and Louisiana customers also SWEPCO participates every three years in an integrated resource planning process that is coming up later on this year and the exploration of future generating resources will be taking place during that IRP process. Thank you very much and A month just have to shut it down there because I want to gastric to get up here I do want to Thank you everyone has been here because we're we're gonna we're running up against a very hard stop here serving as a guest people come up I do appreciate all you guys efforts I and what you does the kept the lights on thanks so much. This. And before you start of I will encourage you that we are running up against a very hard stop we got all these members of got to be up on the floor the other building at one o'clock. Not just for being so brave. While they're doing that up I'll go and get started that's all right thank you Mr chairman and members of the committee I will try to keep this brief thank you for the opportunity to be here I'm Chad Kinsley vice president of operations for Arkansas black hills energy and the to put the weather event in perspective Northwest Arkansas reached near record low temperatures of almost twenty below zero in the middle of February and by our preliminary measurements our system experienced a peak day of almost more than ten percent of our or prior peak on February tenth we begin encouraging customers to conserve energy and aggressively share this message through the weather event and I'm proud to report that ours are safe and reliable gas system perform very well through this extreme and speak stream weather event and we matter public upping the obligation and requirement to keep the gas flowing safely and reliably however record demand did we to one operational issue water system on February sixteenth we did experience a temporary loss of pressure on our system serving the customers with the rich and we lost service to about twenty one hundred customers. As part of our obligation to serving as a sound business practice of black hills energy takes an intentional and deliberate approach to developing our our natural gas supply strategy yet this record cold you for today contributed to dramatic increases the natural gas supply prices as a result we experiencing difficult commodity of cost increases from our suppliers while we continue to account for all the costs associated with this event preliminary assessment is a that we incurred about a hundred and sixty five million dollars of incremental increase gas supply costs for Arkansas customers through through of February through the cement we also note for the committee Inc customers that they may see increased immediate bills and due to this the increased use of their gas however this potential increase will only be attributed to customers because they use more gas and not from the increased price of natural gas during the winter but we're working closely with the the PSC to determine the best path forward to manage the long term impact of the increase natural gas pricing for our customers and our goal is to spread these cost ultimately yes Blake to our customers so with that the internal to McCall. Thank you go ahead Senator suffer the committee first place any Henderson I'm director of regulatory government. we have on would you hit your might. Thank better. Okay I'm kidding Henderson director of regulatory and government affairs with centerpoint energy we have on the the same call miles Kenny are Director of gas supply and I mean or vice president gas behind should say and Cindy Wescott are reached over US prisoner of operations and Lee Mr Kenny is going to assure you screening he's going to be our primary presenter today that's except. Go ahead. Yeah. More energy. Yeah why purchase natural gas. Fantastic job. One. Thank you for a couple years well short on time but the main shopping I wanna make sure that we we thank all of you we always support this discussion and we wanted many people as possible educated on this topic because we are very open to finding solutions to protect our customers from what happened in the upstream market. At some point we have a very long history one that we're very proud of for providing safe reliable service for over four hundred thirty thousand customers in Arkansas. Diagram title said gas utilities have an obligation to serve you heard that earlier but it's board also carried out for to make sure the understand that that results in a corresponding need to purchase gas important the gas utilities in Arkansas nothing on the cost of gas supplied our chairs required to provide a dollar for dollar pass through the actual cost of the supply we purchased without me without markup. it diagram in the middle you see the words customer transfer meter to the left or the bowstring suppliers where this bike comes from and on the right is where the utilities take the supply endorses them to come to serve our customers. it's extremely important to understand the importance of delivering supplies to maintain reliability during a wide variety of conditions this includes safe and reliable supply during extreme weather conditions like response Edward are you also heard earlier about penalties of a lack of supply can also cause reliability and safety issues as well and and like like we discussed also result in the contractual penalties that may be far more extreme than even the prices that we saw in the market during the February storm. this topic was already a covered pretty well by the prior presenters presenters but the main takeaway here that when you've got significant high demand due to the cold weather what the drastic drop off and supplies that is a dangerous recipe for prices. So I think a lot of work to the shark for quite a while now and then for years natural gas has been described as stable around three dollars. in the middle that sure you can see our prices ran up to well over a hundred dollars and and you can see one of the prices of represents Arkansas gas supply settled at four hundred twenty eight dollars and again this is what is typically around three dollars. In closing I just want to repeat that we fully support the discussions to help educate people on this extraordinary back we also encourage a robust dialogue by all stakeholders and we ought to move quickly on the building solutions to mitigate the financial impact for our customers I think should be is not yours well I'm sure she'll have a couple talking points is once you're on the boards while. Good afternoon everyone this is sandy Wescott vice president of the regional operations for Arkansas and Oklahoma. And as small stated earlier we serve almost over four hundred thirty thousand customers in the state of Arkansas we had three hundred over three hundred servers text construction technicians large meter technicians other check for operations specialist along with their supervisors who got very little rest during the week of this event. They did a great job of making sure that the system performed well and we've also been able to. Invest millions of dollars in infrastructure over the past two decades to replace aging main such as cast iron and other facilities which has also helped our system over our our system perform very well we began alerting our customers on February the eleventh. with a press release and we continue to do so up until the event was over. The main focus of our group was to ensure that all of the residential customers. Maintained gas service during this time those are almost over three hundred eighty thousand are just residential services for human needs customers so we wanted to make sure to maintain service then that was our main priority we also experienced one outage during this time frame and it was related to some equipment failure on the part one side of the system not our side but it was quickly remedied and we had two hundred customers that were impacted and we had them back at all of their appliances back in service before ten o'clock that night so that was definitely a success we had over twenty our service techs out there making sure to our. Right restored service those customers. We were at one point due to our pipeline supplier required to curtail or. Eight all right some of our commercial customers reduce their usage a lot of these customers business voluntarily but in order to make sure that we had enough gas for residential customers we did have to mechanically manually go and turn off some of those customers as well I think the. Overall the message for the state and all utilities are we went through this event successfully we didn't have any bill and without gas heat or freeze to death and those sorts of things we will still have to work out all the financial pieces of this obviously and we can all learn a lot from this event and we're going to obviously improve everything that we have a chance to improve on our side as well I thought miles said appreciate the time I appreciate everyone's attention and then if there are any questions feel free to ask thank you. I'm sorry to the committee I don't have to tell you guys this but we don't have time for questions I do appreciate everyone here and I apologize for pushing to have to be so brave but I will we want to get a lot of information in here in a lot of the there's a lot of good information for this but it was good for the committee thanks everybody for coming thank for what you do to serve your customers here in Arkansas and we certainly appreciate him with that. We are joined.