บทถอดความฉบับเต็มของ Grid Reliability with NERC

similarly across the world. 00:02:20.592 --> 00:02:25.828 And there's a lot to learn about perhaps mistakes or challenges, 00:02:26.124 --> 00:02:30.678 emerging reliability issues that others are experiencing, and we can bring that back here. 00:02:30.678 --> 00:02:34.898 So that's really been the foundation for me and really excited to talk a little 00:02:34.898 --> 00:02:40.503 bit more about what we're actually seeing on the grid and some of the challenges that confront us. 00:02:41.124 --> 00:02:43.988 We're really excited to hear about it. Sue, how about you? You want to give 00:02:43.988 --> 00:02:45.588 us a little bit of your background? 00:02:46.082 --> 00:02:49.211 Sure. I didn't come to NERC, NERC came to me. 00:02:50.262 --> 00:02:54.652 And NERC came to me after a 40-year career in the industry. I started out as 00:02:54.652 --> 00:02:56.798 an energy lawyer in private law practice. 00:02:57.216 --> 00:03:01.542 I ended up eventually going to the National Rural Electric Cooperative Association 00:03:01.542 --> 00:03:06.456 as their senior regulatory counsel, an organization I'm sure many of your listeners know about. 00:03:06.938 --> 00:03:09.932 Then I went back to private practice and I went to the American Public Power 00:03:09.932 --> 00:03:13.886 Association, which is the Trade Association of Public Power Utilities, 00:03:14.188 --> 00:03:18.734 as their general counsel and then finished up as a six-year stint as their CEO. 00:03:18.937 --> 00:03:21.032 And I retired at the end of 2019. 00:03:21.305 --> 00:03:28.062 I was expecting to just travel the world with my husband in 2020 and make up for all that lost time. 00:03:28.689 --> 00:03:34.604 Unfortunately, COVID hit, caught me at home in my jammies doing jigsaw puzzles 00:03:34.976 --> 00:03:39.544 when I got a call from a headhunter asking if I was interested in being considered for the NERC board. 00:03:40.160 --> 00:03:45.232 And I'd always been familiar with NERC, had done some work when I was at APPA 00:03:45.232 --> 00:03:48.333 and NRECA and a private practice with NERC. 00:03:48.920 --> 00:03:53.672 And on the rules that would be applied when they first became the Mandatory 00:03:53.672 --> 00:03:56.541 Electric Reliability Organization, as I'm sure we'll get into it. 00:03:57.017 --> 00:04:00.379 And I was very attracted to the mission, just like Jog said. 00:04:00.738 --> 00:04:05.302 To me, I thought, what a great way to finish out my career by being able to 00:04:05.682 --> 00:04:09.403 have a hand in helping maintain the reliability of the entire North American grid. 00:04:09.635 --> 00:04:14.506 So that was the hook that got me involved. And I've been on the board of directors now for six years. 00:04:14.738 --> 00:04:18.322 Wow, that's impressive that your illustrious career has been boiled down to 00:04:18.322 --> 00:04:20.502 just a few moments here with us, Sue. 00:04:21.083 --> 00:04:24.670 You guys both have talked a little bit about the mission of NERC.

00:04:24.995 --> 00:04:32.802 And for our listeners who may not know a lot about NERC, its mission is to ensure 00:04:32.802 --> 00:04:34.132 that the grid is reliable. 00:04:34.481 --> 00:04:39.902 How do you think the energy industry would be if we didn't have an entity like NERC? 00:04:40.379 --> 00:04:43.442 Well, I'll take the first crack at that, and John can back and fill for me. 00:04:43.442 --> 00:04:45.411 I think it would be a lot less reliable. 00:04:45.713 --> 00:04:49.922 A bit of an oxymoron because we are responsible for, 00:04:50.660 --> 00:04:55.246 writing, with the help of industry, mandatory and enforceable reliability standards 00:04:55.246 --> 00:05:00.546 that all users, owners, and operators of the bulk power system have to comply with. 00:05:01.086 --> 00:05:05.706 And it's one big ecosystem. We're all in it together. What one industry player 00:05:05.706 --> 00:05:09.786 does impacts everybody else, as anybody who's run a grid knows. 00:05:10.158 --> 00:05:14.036 So we all have to kind of hold ourselves to certain minimum standards. 00:05:14.552 --> 00:05:19.396 But it It wasn't always this way. This didn't really happen until after the 00:05:19.396 --> 00:05:23.620 great blackout of 2003, the Northeast Blackout. 00:05:23.747 --> 00:05:27.962 After that, Congress passed a new section of the Federal Power Act. 00:05:28.617 --> 00:05:34.532 Which is Section 215. It sets up this whole mandatory reliability scheme. 00:05:34.880 --> 00:05:41.202 It calls for the establishment of an electric reliability organization, which we call the ERO. 00:05:41.632 --> 00:05:47.489 It then tapped NERC to be the ERO. And our job under that section of the statute 00:05:47.489 --> 00:05:52.940 is to write those standards with the help of industry. We use industry volunteers to do that. 00:05:53.183 --> 00:05:58.909 And then we enforce them with the help of six regional entities that work with 00:05:58.909 --> 00:06:02.789 us on the enforcement side and also the assessment side because they have a 00:06:02.789 --> 00:06:05.181 more regional view when they're a little closer to the ground. 00:06:05.698 --> 00:06:10.644 And then we have to take those standards to FERC, get them approved. 00:06:11.079 --> 00:06:16.659 And as we're enforcing it, we also have to get the more major enforcement actions 00:06:16.659 --> 00:06:17.970 approved by FERC as well. 00:06:18.283 --> 00:06:20.663 So it's a pretty comprehensive scheme. 00:06:21.006 --> 00:06:25.569 It involves the industry and it also involves our six regional entity partners. 00:06:25.569 --> 00:06:30.719 We called ourselves altogether the ERO Enterprise, which I always have likened 00:06:30.719 --> 00:06:34.734 to the Starstep Enterprise. We're boldly going where others have never gone. 00:06:35.193 --> 00:06:39.140 So that's kind of been a nutshell, the scheme and how it works. 00:06:39.640 --> 00:06:41.459 Yeah, and Sue, maybe I'll chime 00:06:41.459 --> 00:06:47.558 in and say, NERC was really born out of necessity versus opportunity. 00:06:48.519 --> 00:06:53.531 Like Sue said, we had a blackout in 2003, had some blackouts earlier than that. 00:06:54.118 --> 00:07:00.299 And it was really clear that a set of enforceable rules was absolutely needed to operate the grid. 00:07:00.677 --> 00:07:06.933 Assessments were needed to understand the risks posed by a number of factors 00:07:06.933 --> 00:07:10.081 and are we building enough capacity, emerging risks. 00:07:10.533 --> 00:07:14.748 So all this was born out of necessity. And I think the mission, 00:07:15.218 --> 00:07:19.323 especially for the people that work across both at NERC, the regions in our 00:07:19.323 --> 00:07:24.001 what we call the reliability ecosystem, that mission is really captivating. 00:07:24.175 --> 00:07:29.173 And motivates a lot of action, a lot of volunteer work for industry. 00:07:29.446 --> 00:07:35.193 And that's really our purpose is to bring, convene industry stakeholders and 00:07:35.193 --> 00:07:39.583 develop our independent perspective of reliability, again, develop the standards 00:07:39.583 --> 00:07:44.115 and do what I do. We'll talk a little bit about that later, which is the assessment world. 00:07:44.655 --> 00:07:49.463 Do you mind providing a little bit of clarification? Even though I think there's 00:07:49.463 --> 00:07:55.353 a lot of confusion, Is NERC a governmental entity, and what is the distinction between NERC and FERC? 00:07:55.353 --> 00:07:58.393 How are they similar, different? What functions do they each serve, 00:07:58.393 --> 00:08:00.413 and how are they related to one another? 00:08:00.617 --> 00:08:04.349 I'll take that one. That's all set up in Section 215. 00:08:04.593 --> 00:08:09.429 NERC itself is not a government entity. It is a not-for-profit entity, 00:08:09.667 --> 00:08:13.324 but it has been delegated certain functions, 00:08:13.777 --> 00:08:19.750 by Congress under that statute, but we have to report to FERC. 00:08:20.110 --> 00:08:25.533 So any reliability standard that we develop and that the board approves then 00:08:25.533 --> 00:08:27.488 must be filed with FERC for approval. 00:08:27.697 --> 00:08:33.493 As I said, major enforcement actions, especially ones where monetary penalties 00:08:33.493 --> 00:08:37.483 or behavioral penalties are being imposed, those have to be sent to FERC and 00:08:37.483 --> 00:08:39.766 approved by FERC. So the work we do... 00:08:40.323 --> 00:08:45.763 Is delegated to us by FERC under a framework that Congress developed. 00:08:46.203 --> 00:08:50.212 We have to be very mindful of, obviously, of what FERC is interested in having 00:08:50.212 --> 00:08:56.361 us do. But on the other hand, FERC cannot dictate to us exactly what a standard is going to say. 00:08:56.576 --> 00:09:00.392 It can tell us, we think you need to have a standard on, for example, 00:09:00.392 --> 00:09:03.338 physical security. They actually did that a number of years ago. 00:09:03.640 -->

00:09:08.322 But then we went off and wrote that standard with the help of industry and then 00:09:08.322 --> 00:09:10.136 filed it with FERC for approval. 00:09:10.258 --> 00:09:15.592 So hopefully that gives you a little bit of a flavor for how we work with the 00:09:15.912 --> 00:09:17.537 federal agency that oversees us. 00:09:17.729 --> 00:09:20.562 I'll add the international flavor as well. 00:09:20.612 --> 00:09:22.239 Oh, very true. Thank you. 00:09:22.530 --> 00:09:28.582 This course exists in the U.S., the ERO framework, and a similar framework exists 00:09:28.582 --> 00:09:33.692 in each of the seven provinces that we're synchronously interconnected to as well. 00:09:33.692 --> 00:09:40.688 And so while it's not the ERO designation per se, the similar framework of developing standards, 00:09:41.071 --> 00:09:46.289 having an oversight function with each provincial regulator in those provinces, 00:09:46.644 --> 00:09:50.916 and also conducting independent assessments, all very similar activity in each of the provinces. 00:09:51.079 --> 00:09:53.360 Thank you, John, for making that clear. It's really important. 00:09:53.782 --> 00:09:59.645 Yeah, really insightful about the role here in the United States and then also the role in Canada. 00:10:00.133 --> 00:10:06.768 Sue, you said in your background that NERC found you, and I think that's one interesting thing. 00:10:07.592 --> 00:10:11.230 I guess, how do you become a trustee of NERC? Could you walk us through the 00:10:11.230 --> 00:10:13.170 process you went through to sit where you sit? 00:10:13.398 --> 00:10:17.450 Sure, I'll be happy to do that. But the most important thing to know is that 00:10:17.450 --> 00:10:22.720 to be on the NERC board of trustees, you have to be completely independent of 00:10:22.720 --> 00:10:26.110 any user, owner, or operator of the bulk power system, 00:10:26.697 --> 00:10:30.730 which means that if you have been in the electric utility industry in any way, 00:10:30.730 --> 00:10:33.964 shape, or form, you in effect have to cut those ties. 00:10:34.580 --> 00:10:39.460 So they came to media at the right time because I had retired from a PPA. 00:10:39.820 --> 00:10:44.019 I was no longer practicing law. I had no current ties to the industry. 00:10:44.471 --> 00:10:49.000 So I was actually able to meet these strict independence criteria. 00:10:49.000 --> 00:10:54.901 But even now, for example, I have to make sure that any financial investments that I hold, 00:10:55.622 --> 00:11:00.567 are not, for example, individual stocks of any electric utility or generator 00:11:00.567 --> 00:11:05.467 or anything like that. So I have to scrub and review my financial holdings every 00:11:05.467 --> 00:11:07.574 year to make sure that I don't. 00:11:08.567 --> 00:11:12.677 And I often joke that I have entered the reliability nunnery because by doing 00:11:12.677 --> 00:11:14.842 this, I can't do anything else. 00:11:15.150 --> 00:11:19.817 A lot of people would find that very difficult, but at this stage of my career, I can do that. 00:11:20.235 --> 00:11:24.457 It does mean that the trustees that we have are either, if they're from the 00:11:24.457 --> 00:11:27.837 electric utility industry. They generally are in my situation, 00:11:27.837 --> 00:11:31.688 which means they're at the end of their careers. And this is kind of the cherry on top. 00:11:31.897 --> 00:11:35.847 Or they come from other industries so that they can meet the independence requirements, 00:11:35.847 --> 00:11:39.667 even though they're still active in those industries. So we have trustees that 00:11:39.667 --> 00:11:41.818 have telecommunications backgrounds. 00:11:42.300 --> 00:11:47.297 We have one trustee who has a water background, who has a fascinating backstory 00:11:47.297 --> 00:11:49.318 about how he got to the NERC board. 00:11:49.746 --> 00:11:54.237 And I think having that mix of backgrounds, you know, we have people with financial 00:11:54.237 --> 00:11:58.361 expertise, people with legal expertise, people with engineering expertise, 00:11:58.552 --> 00:12:03.447 but having that mix of types of expertise and past experiences in different 00:12:03.447 --> 00:12:05.071 industries and our industry, 00:12:05.698 --> 00:12:11.177 really makes it a very collegial and thoughtful and frankly impactful body. 00:12:11.177 --> 00:12:15.776 It's one of the reasons I really enjoy serving on it. I've been on the board for six years now. 00:12:15.973 --> 00:12:19.447 This is the year at which the member representatives committee of NERP will 00:12:19.447 --> 00:12:22.068 decide whether they're going to honor me with another term. 00:12:22.597 --> 00:12:27.786 So I haven't printed campaign buttons, but I'm hopeful that I will be voted back in. 00:12:28.326 --> 00:12:31.571 And that's, I think, what makes our board so special. 00:12:32.227 --> 00:12:36.310 Certainly appreciate that independence and the thoughtfulness behind it. 00:12:36.310 --> 00:12:40.840 It's a very important task that you've all been delegated, and it's good to 00:12:40.840 --> 00:12:45.610 know that it's being served by impartial entities operating in the best interest 00:12:45.610 --> 00:12:47.947 of a grid rather than a financial interest. 00:12:48.305 --> 00:12:55.515 Absolutely. So, Sue, you talked a little bit about the diverse background of your fellow trustees. 00:12:55.735 --> 00:12:59.900 Could you tell us a little bit about what a trustee does for NERC, 00:12:59.900 --> 00:13:03.026 so what more of your day-to-day role is? 00:13:03.229 --> 00:13:09.840 Sure. We are responsible for making sure that NERC fulfills its mandate to develop 00:13:09.840 --> 00:13:12.810 reliability standards, to enforce those standards, to 00:13:13.250 --> 00:13:19.901 run all the assessments, all the statutory functions that have been set out for us in Section 215. 00:13:20.308 --> 00:13:24.150 So our goal is to make sure that NERC carries out the reliability and security

00:13:24.150 --> 00:13:29.334 mission, that we maintain our independence because that's a core statutory requirement, 00:13:29.863 --> 00:13:35.679 that NERC has sufficient resources to do its job, but that they use those resources efficiently, 00:13:36.242 --> 00:13:38.230 and that we maintain high ethical standards. 00:13:38.230 --> 00:13:41.153 And I think that's a big part of our job. 00:13:41.386 --> 00:13:45.310 We are not supposed to get involved in the day-to-day management of the organization. 00:13:45.310 --> 00:13:49.407 That's the job of our CEO, Jim Robb, and his staff. 00:13:49.639 --> 00:13:54.860 But it is our job to make sure that our senior management is doing what they 00:13:54.860 --> 00:14:01.121 need to do for NERC to maintain its high standards and to carry out the functions that it needs to do. 00:14:01.388 --> 00:14:05.750 At this moment, the board is focused on making sure that NERC meets the increasing 00:14:05.750 --> 00:14:08.656 reliability challenges that our industry is facing, 00:14:09.080 --> 00:14:13.074 increased cyber and physical security risks, changing resource mix, 00:14:13.376 --> 00:14:17.010 more extreme weather events, and rapidly increasing demand. 00:14:17.010 --> 00:14:21.220 That's a lot of challenges to face at once, but NERC has got to do it. 00:14:21.220 --> 00:14:25.171 That's our job. And so our job as the board of trustees is to make sure that, 00:14:25.618 --> 00:14:28.236 NERC has the resources and the brains to take that off. 00:14:29.292 --> 00:14:34.685 Absolutely. Appreciate that, Sue. And I think that kind of shifts the conversation 00:14:34.685 --> 00:14:39.619 into the LTRA, the Long-Term Reliability Assessment. 00:14:39.816 --> 00:14:45.545 John, do you want to give us an overview of what this report is and how it came about? 00:14:46.038 --> 00:14:51.055 Yeah, I love to, Mike. And I really do love talking about our long-term assessment 00:14:51.055 --> 00:14:56.305 and really our assessment functions more broadly, really because that was the 00:14:56.305 --> 00:14:59.755 inception of NERC, was bringing industry together, 00:15:00.237 --> 00:15:06.165 coming up with guidance for system operations, but also coming together to conduct 00:15:06.165 --> 00:15:09.105 wide area reliability assessments. 00:15:09.105 --> 00:15:11.847 That's really how it started in the 1960s. 00:15:12.340 --> 00:15:17.215 And so this report that we produce every year is something that was started 00:15:17.215 --> 00:15:20.287 in the 1960s, and we're part of that history. 00:15:20.734 --> 00:15:23.975 And we have committees that have been engaged from 00:15:24.395 --> 00:15:30.406 all the transmission companies, the ISORTOs, the utilities that have made up 00:15:30.754 --> 00:15:33.745 these committees, these technical groups to produce, help produce, 00:15:33.745 --> 00:15:35.855 provide input into the data, 00:15:36.335 --> 00:15:39.403 help understand some of the assumptions. for decades. 00:15:39.723 -->

00:15:42.755 And so we get to kind of shepherd that process along the way, 00:15:42.755 --> 00:15:47.945 especially right now, which is probably the most interesting time in the long-term 00:15:47.945 --> 00:15:53.224 assessment history because of all the changes that are occurring, not only on the system, 00:15:53.682 --> 00:15:58.727 but how we're adjusting the lens around how we look at the assessments. 00:15:58.831 --> 00:16:03.319 Gone are the days of just looking at supply adequacy and 00:16:03.905 --> 00:16:08.729 Counting how much generation's coming in, counting how much peak summer demand 00:16:08.729 --> 00:16:14.479 is coming in, doing a pretty simple math problem and understanding the margin. 00:16:14.479 --> 00:16:20.379 And that's all we really had to do for decades because you understood the system, 00:16:20.379 --> 00:16:23.909 you understood the generation, you had dispatchable resources. 00:16:24.164 --> 00:16:28.739 And so the way we measured reliability was something that was pretty straightforward. 00:16:28.739 --> 00:16:34.009 So right now we're in this evolutionary period where we're changing the assessment. 00:16:34.009 --> 00:16:35.763 And we'll talk a little bit more about that. 00:16:36.001 --> 00:16:41.694 Just the assessment in general is becoming much more consequential than it ever has. 00:16:41.955 --> 00:16:46.349 And like I said, I've been doing this for about 18 years here at NERC and I've seen 00:16:46.709 --> 00:16:53.449 the progression and the interest, frankly, change over time as the results are 00:16:53.449 --> 00:16:59.029 more concerning about what the future entails and the uncertainty that we have 00:16:59.029 --> 00:17:00.775 now that we didn't have before. 00:17:01.030 --> 00:17:07.109 And while the assessment has always been important to do, to take a wide area 00:17:07.109 --> 00:17:10.353 look and over the decades show, yes, the system is good. 00:17:10.632 --> 00:17:16.593 Now it's really being used to highlight areas that markets need to evolve, 00:17:16.895 --> 00:17:24.229 that the federal government needs to intervene in order to support reliability, that industry 00:17:24.689 --> 00:17:28.789 Is understanding how much demand is coming in outside their territory, 00:17:28.789 --> 00:17:31.089 which is really important for their own. 00:17:31.089 --> 00:17:36.534 So it's providing all this value that we really hadn't even thought of probably a decade ago. 00:17:36.963 --> 00:17:41.756 And it's just really fascinating time and really great to be part of the team doing it. 00:17:42.621 --> 00:17:46.894 Sometimes we get questions about why does NERC do these assessments? 00:17:47.480 --> 00:17:54.388 And the short answer is Section 215G, which says the ERO shall conduct periodic 00:17:54.388 --> 00:17:58.771 assessments of the reliability and adequacy of the bulk power system in North America. 00:17:58.991 --> 00:18:03.885 So it's another one of our statutory functions. We're mandated to do it.

It's not optional. 00:18:04.407 --> 00:18:08.218 And what's interesting to me, John is absolutely right, that the reports are 00:18:08.218 --> 00:18:12.018 increasingly referenced and read and discussed. 00:18:12.337 --> 00:18:17.323 Members of Congress hold them up in their hands. That's great and scary all at the same time. 00:18:17.735 --> 00:18:23.268 And in the last year or two, Congress actually mandated us to do an additional 00:18:23.568 --> 00:18:28.190 study that is not called for under the statute. John, you might want to mention that quickly. 00:18:28.701 --> 00:18:33.624 Yeah, thanks, Sue. So the ITCS or the Interregional Transfer Capability Study 00:18:34.488 --> 00:18:40.158 was kind of a key point where Congress needed an answer about wide area reliability 00:18:40.158 --> 00:18:45.639 of potential solutions that may or may not include long distance transmission, 00:18:45.976 --> 00:18:49.000 increasing the transfer capabilities between areas. 00:18:49.337 --> 00:18:54.671 And we were able to show that there could be some value, reliability value in doing that. 00:18:55.049 --> 00:19:01.458 But it's just a testament that Congress needed some information about wide area reliability. 00:19:01.458 --> 00:19:06.598 They have this lever to pull through their kind of oversight function in this 00:19:06.598 --> 00:19:10.018 team that's doing these assessments to be able to analyze that. 00:19:10.018 --> 00:19:15.018 And we were able to turn that around and provide some value to all the decision makers out there. 00:19:15.779 --> 00:19:18.864 I would add one other thing, which is I'm very proud of the fact that we did 00:19:18.864 --> 00:19:23.523 a Canadian add-on to that, even though that wasn't really required by Congress. 00:19:23.773 --> 00:19:27.294 We decided to take that opportunity to look at the Canadian transmission system 00:19:27.294 --> 00:19:30.512 as well and to provide additional analysis for them. 00:19:30.925 --> 00:19:36.594 Everything we have here on the system, right, which is you can't look at the 00:19:36.594 --> 00:19:41.204 U.S. by itself, which is really the point, right? We were compelled to look 00:19:41.204 --> 00:19:44.507 at the Canadian system because this is all one system. 00:19:45.221 --> 00:19:49.704 And that's really the value of why you have to have an international organization 00:19:49.704 --> 00:19:53.098 to be able to look wider than just the national boundaries, 00:19:53.423 --> 00:19:58.174 have that same input into the data and all the studies that are going to provide 00:19:58.174 --> 00:20:03.224 that cross-border view, which is essential given where the resource mixes are 00:20:03.224 --> 00:20:05.991 going and the power transfers that are increasing. 00:20:06.723 --> 00:20:10.670 Is Mexico studied as well? or is it just Canada? 00:20:11.071 --> 00:20:14.794 Yeah, we tend to leave that off sometimes in dialogue. It's a really small part, 00:20:14.794 --> 00:20:19.244 Mexico. It's the Baja California, a very small part of Baja California, 00:20:19.529 --> 00:20:22.756 CFE that's connected to the WEX system. 00:20:23.029 --> 00:20:27.944 There are two other interconnections, the bigger interconnections in Mexico. 00:20:27.944 --> 00:20:33.842 Those were not synchronously connected and we don't have any jurisdiction or agreement there. 00:20:34.115 --> 00:20:39.020 But that small part in just the South of California is synchronously connected. 00:20:39.496 --> 00:20:44.424 Yeah, it's really interesting to hear about how, you know, it's not just a U.S. 00:20:44.424 --> 00:20:47.972 Problem that we need to look at as a global picture because of how we're connected. 00:20:48.587 --> 00:20:53.484 This sounds like a big lift. So how frequently are you guys putting out a long-term 00:20:53.484 --> 00:20:54.909 reliability assessment? 00:20:55.605 --> 00:20:59.960 Yeah, it is a big lift. There's a huge team that supports that when you look 00:20:59.960 --> 00:21:04.435 at really the start of the development, which comes from all the different entities out there. 00:21:04.882 --> 00:21:10.187 We don't do our own independent forecasting of generation or transmission or demand. 00:21:10.495 --> 00:21:15.348 It's really a ground up approach, collecting all that information from industry, 00:21:15.766 --> 00:21:18.430 collecting it then from our regional entities. 00:21:18.430 --> 00:21:22.450 We have six regional entities that they have delegated authority to support 00:21:22.450 --> 00:21:26.888 some of our delegated functions, standards, compliance, and assessments. 00:21:27.434 --> 00:21:33.510 And so that whole process takes about a year to collect the data, to now run 00:21:33.899 --> 00:21:39.870 some pretty intense energy analytics that's synchronously looking at the entirety 00:21:39.870 --> 00:21:43.604 of the Western, Eastern, and ERCOT and Quebec interconnections, 00:21:44.202 --> 00:21:46.820 and then understanding what all those results say. 00:21:46.820 --> 00:21:50.780 That takes about a year. Over the time, it's taken a little bit longer because 00:21:50.780 --> 00:21:52.962 the analytics have taken longer. 00:21:53.085 --> 00:21:58.200 But we do think that there's some light ahead of the tunnel we see as releasing 00:21:58.200 --> 00:22:02.420 assessments in a more timely fashion as something that we're aspiring to. 00:22:02.420 --> 00:22:06.081 So putting in technology particularly to help support that. 00:22:06.512 --> 00:22:12.660 You mentioned earlier that it was more or less a relatively simple calculation. 00:22:12.660 --> 00:22:18.243 Is there enough generation to meet demand, do a simple math problem, and have your result? 00:22:18.679 --> 00:22:20.814 When did that shift occur where it started? 00:22:21.469 --> 00:22:25.742 Became a little bit more complicated. Is that within the past year, past five years? 00:22:26.032 --> 00:22:31.133 Great observation because that's certainly what we're seeing and we actually see it

globally. 00:22:31.473 --> 00:22:35.933 The real answer there, it's kind of depends on which area you're in and what 00:22:35.933 --> 00:22:38.105 the resource mix is made up of. 00:22:38.651 --> 00:22:44.923 There are certainly parts of North America that are highly dependent on dispatchable resources. 00:22:44.923 --> 00:22:50.663 If you look at Florida, for example, a lot of dispatchable generation Reserve 00:22:50.663 --> 00:22:56.433 margins, calculating that margin, is still an adequate, sufficient approach 00:22:56.433 --> 00:22:59.235 to understanding resource adequacy. 00:22:59.781 --> 00:23:04.933 And some other areas that have experienced some pretty rapid generation mix 00:23:04.933 --> 00:23:11.380 changes, California, where they see some days are 100% renewable output. 00:23:11.797 --> 00:23:14.703 That adjustment has been needed for quite some time. So, you know, 00:23:14.703 --> 00:23:18.283 over the last five to 10 years, where you started seeing a lot of that increase. 00:23:18.283 --> 00:23:23.813 So, yeah, over the past decade or so, we've started to see that we need to measure 00:23:23.813 --> 00:23:27.012 reliability differently than we had in the past. 00:23:27.117 --> 00:23:28.596 You said you guys do these on a... 00:23:29.305 --> 00:23:34.466 An annual basis. So from the last time NERC did the long-term reliability assessment 00:23:34.570 --> 00:23:38.446 to the most recent long-term reliability assessment, which came out in January 00:23:38.446 --> 00:23:42.076 of 2026, what changed the most? 00:23:42.569 --> 00:23:47.256 Yeah, I think the thing that drives reliability the most is what changed the 00:23:47.256 --> 00:23:49.611 most, which is the demand forecast. 00:23:49.773 --> 00:23:55.369 Really, that's the shiny light in terms of big things that changed since previous assessments. 00:23:55.683 --> 00:23:59.326 It's important to understand, we talk often about this when we talk about our 00:23:59.326 --> 00:24:02.370 assessments and most and particularly about demand. 00:24:02.585 --> 00:24:06.213 They're not a prediction, right? We're not trying to forecast demand. 00:24:06.573 --> 00:24:10.840 We're not trying to get the exact amount of demand out there. 00:24:11.264 --> 00:24:15.635 It's a risk assessment. And so we gather information from industry, 00:24:15.861 --> 00:24:20.911 information about the data center explosion that we've seen in demand. 00:24:21.422 --> 00:24:24.865 There's some guidance around what do we count? What don't we count? 00:24:25.375 --> 00:24:30.216 From what we can tell, data center demand is coming in, coming in strong. 00:24:30.471 --> 00:24:35.576 Some of it's been deferred and delayed over time as generation hasn't been able 00:24:35.576 --> 00:24:41.257 to catch up and siting and permitting and supply chain issues have also challenged 00:24:41.530 --> 00:24:43.068 bringing those resources on. 00:24:43.550 --> 00:24:46.736 So the other side of that equation is the generation side, right? 00:24:46.736 --> 00:24:52.489 So understanding that supply chain and permitting risks have delayed and deferred generation. 00:24:52.797 --> 00:24:56.112 We're not seeing as much generation come online as we have in the past. 00:24:56.506 --> 00:25:00.326 And so that's where that risk is starting to emerge, right? So we're not really 00:25:00.326 --> 00:25:04.466 predicting these blackouts. What we're saying is the information that has come 00:25:04.466 --> 00:25:09.866 in from industry has shown this level of demand and this level of generation, 00:25:09.866 --> 00:25:11.361 and there's some risk there. 00:25:11.884 --> 00:25:17.294 I think the best part of our assessments, which we do every year is that there's time to act 00:25:17.851 --> 00:25:23.666 Right we're looking five ten years out in order to steer the ship before we 00:25:23.666 --> 00:25:29.901 hit the iceberg and we have a really long horizon view a lot of uncertainty out there 00:25:30.488 --> 00:25:33.326 But the point is to show risk 00:25:34.197 --> 00:25:37.512 It might be what we call elevated risk or high risk. 00:25:38.260 --> 00:25:42.883 And it starts steering the ship in that right direction. There's a lot of levers 00:25:42.883 --> 00:25:46.833 and dials to pull, whether it's from the regulatory side, whether it's from 00:25:46.833 --> 00:25:51.633 the market side, investment side, a whole ecosystem coming together to find 00:25:51.633 --> 00:25:53.144 that right path to each area. 00:25:53.696 --> 00:25:57.483 I am curious. You mentioned that we're not forecasting demand, 00:25:57.483 --> 00:26:02.463 not forecasting generation, but you are reviewing all of these sources and have 00:26:02.463 --> 00:26:05.883 to use some sort of assumption. 00:26:05.883 --> 00:26:12.753 So based on what you were seeing, what did you use for long-term demand growth? 00:26:12.753 --> 00:26:18.003 In the assessment, what did you find to be a reasonable percentage of growth 00:26:18.003 --> 00:26:20.483 over the next, I don't know, 10 years or so? 00:26:20.483 --> 00:26:24.533 Because at ACES, we hear a lot of conversation. Some people are saying, 00:26:24.533 --> 00:26:26.093 oh, all this demand is coming. 00:26:26.093 --> 00:26:30.363 We're underestimating. Some people are saying there's no way all this demand 00:26:30.363 --> 00:26:34.943 comes to fruition. So I didn't know if you could give us any insight into what 00:26:34.943 --> 00:26:39.019 you found to be a reasonable approach in assessing demand going forward. 00:26:39.263 --> 00:26:43.493 Yeah, yeah. And I think the kind of the reasonable approach for assessment is, 00:26:43.493 --> 00:26:51.193 I think, very different than how you look at it from maybe a financial or economic perspective, right? 00:26:51.193 --> 00:26:55.592 We're trying to do still accounting, essentially. And so we bucket. 00:26:56.428 --> 00:27:02.889 Different things based on how certain they are, maybe how far along they are in their process.

00:27:03.220 --> 00:27:06.802 We're getting better at this. It's something we haven't had to do to demand 00:27:07.185 --> 00:27:13.297 because demand was demand and you had a timeline for it. And it just so happened to line up. 00:27:13.588 --> 00:27:18.130 The paper mill construction just so happened to line up with how long it took 00:27:18.130 --> 00:27:22.650 to build transmission to support it, right? And now those timelines don't match 00:27:22.650 --> 00:27:24.610 up. You can build a data center really quickly. 00:27:24.860 --> 00:27:29.840 So the assessment way is to know what is firm, right? 00:27:29.840 --> 00:27:35.700 What do we have a business contractual arrangement signed up with a load serving 00:27:35.700 --> 00:27:42.640 entity that has a obligation to serve that load in the coming years? 00:27:42.942 --> 00:27:48.000 You kind of categorize these loads. Some are uncertain. We don't count those. 00:27:48.000 --> 00:27:49.723 Maybe they're early stage planning. 00:27:50.071 --> 00:27:54.976 Maybe the site hasn't been approved or the transmission upgrades haven't been approved. 00:27:55.394 --> 00:27:57.710 This is exactly what we do with generation. 00:27:58.424 --> 00:28:02.590 And some are further along than others. And so as we kind of get better, 00:28:02.590 --> 00:28:06.476 this will have a better microscope to put on that so we can understand that. 00:28:06.929 --> 00:28:11.470 But, you know, Mike, you asked for numbers. So our assessment found it's about 00:28:11.470 --> 00:28:17.180 200 gigawatts of new demand over the next 10 years. That's all of NERC. 00:28:17.528 --> 00:28:21.666 And that's actually, what's interesting about that is that it's a winter peak. 00:28:22.786 --> 00:28:28.184 Summer peak is actually growing a little bit less, 235 gigawatts or so. 00:28:28.422 --> 00:28:34.158 And that's really fascinating because, like I said earlier, we're using electricity 00:28:34.343 --> 00:28:36.067 way different than we had in the past. 00:28:36.503 --> 00:28:38.540 And that changes how we have to plan the system. 00:28:39.254 --> 00:28:43.051 If you're summer peaking, you can start building a lot of solar, 00:28:43.562 --> 00:28:47.613 you can start building a lot of storage, as California and ERCOT have done. 00:28:47.933 --> 00:28:52.966 And that's resolved a lot of summer peaking reliability issues. 00:28:53.506 --> 00:28:58.808 But when the challenge is happening in the winter, and now solar and storage 00:28:58.808 --> 00:29:04.268 don't seem to make a lot of sense because the winter peak is early morning or 00:29:04.268 --> 00:29:06.561 early evening. Sun's already down. 00:29:07.112 --> 00:29:11.058 Storage only gives you a couple hours, right? So that persistent cold weather 00:29:11.058 --> 00:29:15.788 year, day after day. So the way we're using electricity has changed how we are 00:29:15.788 --> 00:29:18.982 assessing and where the risk is heading. 00:29:19.366 --> 00:29:23.028 That's really interesting. I

think most people, you know, they associate data 00:29:23.028 --> 00:29:26.458 centers, you know, you need to cool them down. You would think the demand would 00:29:26.458 --> 00:29:31.486 be higher and you'd be in a summer peaking. So it's really interesting that it's a winter peak. 00:29:31.736 --> 00:29:36.048 Yeah. Like John mentioned, a lot of the solutions that fix a summer peaking 00:29:36.048 --> 00:29:41.758 issue can't possibly fix a winter peaking. So then that turns to what is the 00:29:41.758 --> 00:29:43.863 right solution for winter peaking? 00:29:44.205 --> 00:29:51.218 And that takes my mind to a reliability perspective on keeping generation plants on longer. 00:29:51.705 --> 00:29:57.684 How is NERC tackling keeping things on longer, maybe than historically envisioned? 00:29:58.038 --> 00:30:03.501 Yeah, well, I think that plays right into the mandate. And as part of the mandate, 00:30:03.965 --> 00:30:10.014 very specifically, NERC cannot order the construction of generation or transmission. 00:30:10.206 --> 00:30:15.478 That was a very specific thing. Those are states have the ability to bring on 00:30:15.478 --> 00:30:19.985 generation or take off generation. That's kind of the state model, the state rights. 00:30:20.543 --> 00:30:25.971 NERC role is to do the assessment. And so we can put a lot of information out there. 00:30:26.215 --> 00:30:30.387 That's our job. Our obligation is put that information out there and not only 00:30:30.387 --> 00:30:33.077 kind of put it out there, but push it out there. 00:30:33.077 --> 00:30:38.347 Talk to the people, the areas that are most implicated from whatever messages 00:30:38.347 --> 00:30:41.256 we're saying and compel them to understand the risk. 00:30:41.650 --> 00:30:45.347 At that point, they really have to make those decisions, whether it's to brand 00:30:45.347 --> 00:30:51.183 generation on, site new generation, keep generation on longer has been done. 00:30:51.490 --> 00:30:54.577 In California, we've seen nuclear stay on longer. In other areas, 00:30:54.577 --> 00:30:57.254 we've seen generation stay on longer. 00:30:57.556 --> 00:31:03.547 In some cases, the federal government has looked at the entirety of factors 00:31:03.547 --> 00:31:06.217 that are affecting electricity. Reliability is part of that. 00:31:06.589 --> 00:31:11.117 There's national security, there's global strategy, there's a lot of other factors 00:31:11.117 --> 00:31:16.137 here, but federal government has an ability to keep generation online using 00:31:16.137 --> 00:31:20.652 a pretty blunt instrument, as I would call it, the 202C, another 00:31:21.117 --> 00:31:24.524 legislative order that falls within this framework. 00:31:24.820 --> 00:31:28.745 And that's been used to keep generation online longer. And that's kind of a 00:31:29.105 --> 00:31:33.116 shorter term solution. It's kind of band-aid. It's not durable. 00:31:33.667 --> 00:31:38.758 We need more durable solutions. Keeping generation online, it's part of the tool set, 00:31:39.391 --> 00:31:43.571 Especially in areas where you foresee this risk, you see a deficit, 00:31:44.134 --> 00:31:47.347 you look in your toolkit, you got a couple options, I think, 00:31:47.347 --> 00:31:49.312 which is important. Keep generation online. 00:31:49.643 --> 00:31:55.128 Demand response. Bring on data centers that have flexibility. 00:31:55.419 --> 00:32:00.377 That's being done in ERCOT, maybe another blunt instrument where new data centers 00:32:00.377 --> 00:32:02.205 have to provide demand response. 00:32:02.967 --> 00:32:06.320 Build transmission is another option. It's going to take some time. 00:32:06.570 --> 00:32:08.827 And so you're looking at the toolkit. What things can they do? 00:32:09.267 --> 00:32:12.079 Deferral of generation that's online today. 00:32:12.548 --> 00:32:16.054 That's a really important one. It's generation that's dispatchable. 00:32:16.692 --> 00:32:21.874 It's got fuel certainty for the most part. And so, yeah, looking at that broad 00:32:21.874 --> 00:32:23.222 tool set, I think is important. 00:32:23.675 --> 00:32:30.334 As you talk about the available tools that exist, what regions is NERC most 00:32:30.334 --> 00:32:33.816 concerned with through the long-term reliability assessment? 00:32:34.078 --> 00:32:38.304 That's the heart of it. And I think there's two important aspects of reliability 00:32:38.304 --> 00:32:43.458 that we have to talk about when we talk about maybe what is NERC most concerned with. 00:32:43.824 --> 00:32:48.604 The energy adequacy piece that we've been talking about, which is classic reliability, 00:32:48.604 --> 00:32:53.894 resource adequacy. Do I have enough generation to meet my load? 00:32:53.894 --> 00:32:56.496 We outline that in our risk maps. 00:32:56.653 --> 00:32:59.260 We showcase areas like the Northwest, 00:32:59.445 --> 00:33:04.316 like PJM, like the Northeast and New England during winter times. 00:33:04.716 --> 00:33:11.048 And there are several areas where we see either higher elevated energy adequacy risks. 00:33:11.391 --> 00:33:16.774 There's another part about reliability. It's probably even more important than 00:33:16.774 --> 00:33:23.163 energy adequacy, which is operating reliability or maintaining the stability of the system. 00:33:23.761 --> 00:33:28.894 And that pops up in different areas and maybe different areas that don't have 00:33:28.894 --> 00:33:30.768 the energy adequacy risk. 00:33:31.401 --> 00:33:34.895 And so an area like California, I think, is a really important one, 00:33:35.313 --> 00:33:41.327 where when you look at all the energy adequacy metrics, California is actually looking pretty good. 00:33:41.768 --> 00:33:45.350 They built a lot of solar, they got storage to complement it, 00:33:45.890 --> 00:33:50.404 and they don't have those deep winters that challenge some other areas that 00:33:50.404 --> 00:33:52.629 have gone through that transition. 00:33:53.053 --> 00:33:57.802 And

so when you look at energy adequacy across all the Western interconnection 00:33:57.999 --> 00:34:01.238 and California, there's some positive stories there. 00:34:01.708 --> 00:34:08.847 However, there are times where the production of renewable energy in California 00:34:09.804 --> 00:34:14.919 Looks a lot like the production in the Iberian Peninsula. 00:34:15.384 --> 00:34:21.072 And I draw that similarity because there are times where in California, 00:34:21.415 --> 00:34:29.424 renewable energy inverter-based resources are producing 90%, 100%, 105% 00:34:30.274 --> 00:34:32.416 Of California's total internal demand. 00:34:32.851 --> 00:34:37.895 And so when you have all the inverters on, you don't have a lot of mass spinning. 00:34:38.290 --> 00:34:43.218 Those are the same conditions we saw in the Iberian Peninsula, 00:34:43.322 --> 00:34:45.442 southern Portugal and Spain. 00:34:45.854 --> 00:34:51.204 And while we have what I would say is, one, we have a much more durable and 00:34:51.204 --> 00:34:53.365 much more reliable regime 00:34:53.819 --> 00:34:58.282 for implementing the required standards like Sue talked about, 00:34:58.590 --> 00:35:01.174 where we have mandatory. They don't have that in Europe. 00:35:01.754 --> 00:35:07.130 And some of the operational procedures and assumptions that were made with neighboring 00:35:07.130 --> 00:35:10.912 systems is exactly kind of the challenges that happen. 00:35:11.051 --> 00:35:14.302 So we don't have that. So that's good. And we have some controls around that. 00:35:14.830 --> 00:35:20.136 But we are putting even more reliability controls around inverter-based resources 00:35:20.583 --> 00:35:24.989 right through standards to ensure we've got the right set of rules in place. 00:35:25.500 --> 00:35:29.900 And so from that aspect, the stability piece, we are worried and concerned with 00:35:29.900 --> 00:35:34.498 those moments where you have high levels of penetration of inverter-based resources 00:35:34.776 --> 00:35:37.778 because the system's quite unstable at those times. 00:35:38.126 --> 00:35:42.760 More stability resources, keeping more spinning mass online, 00:35:42.760 --> 00:35:46.572 those are part of the solutions that have been implemented worldwide. 00:35:47.530 --> 00:35:52.006 So just kind of follow up to that, making a comment on, you know, 00:35:52.006 --> 00:35:56.005 we need more dispatchable resources, more spinning mass. 00:35:56.481 --> 00:36:00.606 When I hear that, I'm thinking it's probably natural gas as a solution. 00:36:00.606 --> 00:36:05.336 Obviously, there's other dispatchable resources, but just looking at economics, 00:36:05.336 --> 00:36:06.966 it's probably natural gas. 00:36:06.966 --> 00:36:11.656 And then looking at a winter peak, when that'll likely be most used, 00:36:11.656 --> 00:36:17.628 is an increasing reliance on natural gas. Does that create new vulnerabilities and new risks? 00:36:18.429 --> 00:36:22.496 It certainly does. Like you read my mind, like everything in energy, 00:36:22.876 --> 00:36:25.598 it's a whack-a-mole, right? There's no free lunch. 00:36:26.486 --> 00:36:30.793 And so once you kind of get one, you move on to the next and you find out where 00:36:31.153 --> 00:36:35.849 the gaps are and you try to plug those. And this is the same storyline. 00:36:36.476 --> 00:36:42.177 Before we go into natural gas, which I think is important, I do want to mention 00:36:42.635 --> 00:36:48.696 there are ways to keep inertia and spinning mass on the system, 00:36:49.716 --> 00:36:54.031 Real inertia, not kind of what we call maybe synthetic inertia from inverters, 00:36:54.408 --> 00:37:00.167 using things like synchronous condensers, which can be developed from older 00:37:00.288 --> 00:37:01.876 steam turbines, combustion turbines. 00:37:01.876 --> 00:37:07.538 Can actually provide inertia on the system. That's being done worldwide and no fuel. 00:37:07.683 --> 00:37:10.417 It's really just a spinning mass on the system. 00:37:10.690 --> 00:37:16.146 And ERCOT, I think that they've done some really good operational procedures where 00:37:16.651 --> 00:37:22.916 they'll actually dispatch the system to maintain a certain level of inertia, 00:37:22.916 --> 00:37:26.776 about 100 gigawatt seconds of inertia on the system. 00:37:26.776 --> 00:37:30.896 So they'll curtail wind, they'll curtail other resources is to make sure they've 00:37:30.896 --> 00:37:36.206 got that much mass on the system. So those are some really good things that 00:37:36.206 --> 00:37:39.424 can be implemented to ensure we've got a stable system 00:37:40.122 --> 00:37:46.287 But like you said, as we transition our reliance to natural gas, 00:37:46.775 --> 00:37:49.956 a whole set of issues, maybe questions, 00:37:50.588 --> 00:37:54.460 we start with questions as the assessment, as the assessment professionals, 00:37:54.762 --> 00:37:56.898 and there's new questions that start to arise. 00:37:57.363 --> 00:38:02.644 One is around the energy adequacy and the fuel assurance of those resources. 00:38:03.097 --> 00:38:10.848 Not every gas generator has a firm dedicated right to gas, both from the supply 00:38:11.168 --> 00:38:12.629 all the way to the burner tip. 00:38:13.296 --> 00:38:18.498 And so there are some percentage of natural gas resources that don't have that 00:38:18.498 --> 00:38:20.669 firm level of fuel assurance. 00:38:21.162 --> 00:38:25.358 And while we're not prescribing that you do, the most important thing is to 00:38:25.358 --> 00:38:30.914 understand that these different generators have different expectations 00:38:31.449 --> 00:38:37.458 and availability of fuel, depending on time of year and other where the gas 00:38:37.458 --> 00:38:40.498 is going that they don't have that firm right to. 00:38:41.548 --> 00:38:45.288 So you have the challenge with natural gas. There's also has been challenges 00:38:45.288 --> 00:38:51.487 in the past with the cold weather operation of gas turbines,

whereas 00:38:51.894 --> 00:38:58.548 nuclear coal has been a pretty reliable, very low forced outage rates during 00:38:58.548 --> 00:39:01.899 winter periods and very reliable over the decades. 00:39:02.631 --> 00:39:06.955 Gas generation, on the other hand, has had very high forced outage rates, 00:39:07.426 --> 00:39:15.224 12% on average, up to 20%, 30% forced outage rate during very critical periods of the winter, right? 00:39:15.224 --> 00:39:18.594 And so NERC has, over the years, put some controls in place. 00:39:19.034 --> 00:39:22.694 We have cold weather standards. It's part of our standards, right? 00:39:22.694 --> 00:39:25.990 It's like you can't write a standard that says, bell shall not freeze. 00:39:26.164 --> 00:39:30.414 You know, that's kind of where you start, but it's like, well, how can we enforce that? 00:39:30.414 --> 00:39:33.964 So he started coming up with what's the technical rationale? 00:39:33.964 --> 00:39:37.394 What's actually freezing? What's causing the risk factors? 00:39:37.394 --> 00:39:42.114 And he comes to create something that's usually a heuristic approach. 00:39:42.114 --> 00:39:46.404 When we look at weather temperature and we say, okay, you will withstand to 00:39:46.404 --> 00:39:48.344 this level, put in protection. 00:39:48.344 --> 00:39:52.504 And if you can't, there's exceptions, yada, yada, yada. There's a whole slew 00:39:52.504 --> 00:39:58.833 of details that go into the compliance nature. But you put in this control around 00:39:59.042 --> 00:40:01.515 withstanding low temperatures. 00:40:02.287 --> 00:40:06.524 And while we understand that, well, there's more factors than just the temperature, 00:40:06.524 --> 00:40:12.742 there's precipitation and wind, all these kind of things that kind of go into a generator freezing. 00:40:13.317 --> 00:40:17.814 But you put in the control, you measure it. We've seen some good performance 00:40:17.814 --> 00:40:19.865 over the couple of years on that. 00:40:20.190 --> 00:40:25.064 And you hope you fix that problem. That standard is a durable solution. 00:40:25.064 --> 00:40:31.608 It's something that all generator vendors and owners are putting in place by design now. 00:40:32.061 --> 00:40:36.504 And so it's changing the industry to something that used to be much more of 00:40:36.504 --> 00:40:40.844 a economic business opportunity question. 00:40:41.738 --> 00:40:45.668 And is now, we don't think about that, right? It's a standard that's required. 00:40:45.906 --> 00:40:47.317 So that's really changed the industry. 00:40:47.560 --> 00:40:50.760 And I think that we'll continue to see positive improvements, 00:40:50.760 --> 00:40:55.583 I think, from our gas leak going forward on cold weather performance. 00:40:56.024 --> 00:41:01.710 What I'm going to add to that is that, yes, we have enacted those rules and 00:41:01.710 --> 00:41:05.305 we're in the process of having generators comply with them. 00:41:05.648 --> 00:41:08.422 But that actually was not

an easy road. 00:41:08.817 --> 00:41:14.506 These standards were more intrusive and expensive than many of the standards we've done in the past. 00:41:14.970 --> 00:41:19.500 And many in industry had a lot of difficulty coming to the realization that 00:41:19.500 --> 00:41:21.251 they were going to have to do this. 00:41:21.687 --> 00:41:26.620 And in the end, the board had to invoke a special authority it has under its 00:41:26.620 --> 00:41:32.390 rules of procedure to basically require that these standards be developed and 00:41:32.390 --> 00:41:36.176 to, in effect, say, if you all can't do it, then we, the board, will. 00:41:36.652 --> 00:41:41.807 And faced with that prospect, the industry pulled together, developed a standard, 00:41:42.051 --> 00:41:46.290 which was passed by the requisite majority, and we were able to file that with 00:41:46.290 --> 00:41:50.630 FERC. But we had never before had to implement that authority. 00:41:51.019 --> 00:41:54.873 And that was a learning experience for everybody, that we're entering into a time, 00:41:55.447 --> 00:41:59.240 when the situation is just much more complicated, and we're all going to have 00:41:59.240 --> 00:42:04.640 to work together much more completely and fully and in good faith than we have 00:42:04.640 --> 00:42:07.770 in the past to make sure that we can keep the system reliable. 00:42:07.770 --> 00:42:12.166 We are entering a new time, and it's important that we all pull together. 00:42:12.868 --> 00:42:18.370 Can you tell us a little bit how areas with like an RTO or a market are a little 00:42:18.370 --> 00:42:22.876 bit different than areas, say, in the Southeast or without an organized market, 00:42:23.294 --> 00:42:29.412 and what different unique challenges existed based on location in the markets available? 00:42:31.043 --> 00:42:34.755 Yeah, thanks. Thanks, Mike. Yeah, I think that's an important aspect of kind 00:42:34.755 --> 00:42:39.985 of how energy policy, how we regulate electricity and ultimately the set of 00:42:39.985 --> 00:42:45.515 solutions that are that are available. There's different regulatory structures across North America. 00:42:46.385 --> 00:42:53.303 Some are, like you said, mostly vertically integrated, regulated by states. 00:42:53.780 --> 00:42:58.045 They have integrated resource plans where they look out five, 00:42:58.045 --> 00:43:06.249 10 years, make commitments on generation based on some assumed load forecast, 00:43:06.760 --> 00:43:09.515 and then build that generation. 00:43:09.515 --> 00:43:14.645 They fund it through cost of service, put those costs in rate bases, 00:43:14.645 --> 00:43:18.405 build generation, and that's how we do it. Here in the South, 00:43:18.405 --> 00:43:20.164 in Atlanta, that's how we do it. 00:43:20.623 --> 00:43:25.545 In Georgia, in other parts of the country, we have what we call ISOs, 00:43:25.885 --> 00:43:30.671 Independent Service Operators, or RTOs, Regional Transmission Organizations. 00:43:31.165 --> 00:43:36.644 And they're essentially flight traffic controllers for all the generation resources, 00:43:36.946 --> 00:43:38.803 making use of all the transmission, 00:43:39.483 --> 00:43:44.625 dispatching an economically optimized system to reduce cost, 00:43:44.625 --> 00:43:46.484 taking the generation that's least cost, 00:43:48.336 --> 00:43:50.286 Dispatching that to generation. 00:43:50.645 --> 00:43:55.439 And what's interesting about that makeup is those areas run markets, 00:43:55.578 --> 00:43:57.163 and the markets are very different. 00:43:57.796 --> 00:44:01.743 From the NERC perspective, it really doesn't matter what regulatory structure 00:44:01.964 --> 00:44:04.634 you are. We're assessing reliability. 00:44:04.994 --> 00:44:09.975 The lens applies in the same way, whether it's vertically integrated or whether 00:44:09.975 --> 00:44:12.627 you're in a high-assortio market area. 00:44:13.457 --> 00:44:17.914 But market areas have a challenge with them. It's kind of a built-in. 00:44:17.914 --> 00:44:23.158 It's a feature, really, as economists would describe it. 00:44:23.465 --> 00:44:26.141 It's a challenge, as engineers would describe it, 00:44:26.924 --> 00:44:31.981 which is the uncertainty, especially around forward commitments for capacity 00:44:32.318 --> 00:44:38.239 and having that forward look into what the future of that system will be, 00:44:38.552 --> 00:44:40.704 because there are investments that need to be made, 00:44:41.504 --> 00:44:48.142 and there's market action to incentivize new generation resources. 00:44:48.781 --> 00:44:57.870 And so all that said, what's not included in ISO-RTOs are these long-term commitments for generation. 00:44:58.486 --> 00:45:06.004 What's also not included is the acquisition and maintenance of a lot of these 00:45:06.004 --> 00:45:09.678 things that we call essential reliability services. 00:45:10.396 --> 00:45:13.943 And so in utility areas, utilities are plating the whole system. 00:45:13.943 --> 00:45:16.633 They're looking at inertia. They're looking at reactive support, 00:45:16.633 --> 00:45:22.204 frequency response, transmission congestion. They're kind of managing their whole system. 00:45:22.674 --> 00:45:25.774 In market areas, you're procuring megawatts. 00:45:27.123 --> 00:45:31.730 Those megawatts are producing energy. Energy is what is sold and traded. 00:45:32.165 --> 00:45:36.413 And so the provision of all these essential reliability services, 00:45:36.413 --> 00:45:42.602 the frequency response, the voltage support, it's not directly planned for. 00:45:43.235 --> 00:45:47.943 We happen to get it. We're lucky, I would say, as we have a lot of spinning 00:45:47.943 --> 00:45:51.477 mass generation today, might not be in the future. 00:45:51.953 --> 00:45:58.275 And so the whole point of that is markets need to incentivize and develop products 00:45:58.756 --> 00:46:01.113 that incentivize the right behavior. 00:46:01.647 --> 00:46:05.798 We used to be able to

say, just produce energy, and we used to get all those 00:46:05.931 --> 00:46:09.723 essential reliability services with it now markets need to 00:46:10.383 --> 00:46:16.351 need to enhance their product offerings need to enhance their market structures and sometimes to look at 00:46:16.833 --> 00:46:18.743 well do i need to incentivize firm 00:46:18.743 --> 00:46:23.579 gas do i need to incentivize frequency response do i need to incentivize 00:46:24.055 --> 00:46:32.403 this longer ramping service for when wind dies down right and i have 60 gigawatts 00:46:32.403 --> 00:46:34.997 of wind and the wind will die down 00:46:35.618 --> 00:46:38.120 right and so what do I incentivize enough 00:46:38.985 --> 00:46:43.003 other generation to make up for that and kind of hang out there, right? 00:46:43.003 --> 00:46:47.273 So markets have to evolve. I think they are evolving, making a lot of changes. 00:46:47.842 --> 00:46:53.033 But I think the solution sets in each of those different regulatory structures 00:46:53.033 --> 00:46:54.071 are just very different. 00:46:55.168 --> 00:47:02.161 Thanks, John. So, John and Sue, you've talked a lot about NERC being the herald 00:47:02.161 --> 00:47:06.941 of risks that the energy industry and grid reliability is facing, and that 00:47:07.422 --> 00:47:11.381 one of your main goals is, one, to educate 00:47:11.950 --> 00:47:13.477 people about their risk. 00:47:13.889 --> 00:47:19.863 The long-term reliability assessment really is a tool in that educational toolbox 00:47:19.990 --> 00:47:24.663 where it tells people from NERC's perspective, this is where 00:47:25.476 --> 00:47:32.041 we might have reliability issues if we don't make changes to how we're operating 00:47:32.041 --> 00:47:34.044 or how we plan to operate in the future. 00:47:34.851 --> 00:47:39.771 If you had to say, this is the one takeaway that we want every reader, 00:47:40.231 --> 00:47:43.071 every person that interacts with. 00:47:43.719 --> 00:47:49.281 With NERC on this to take away, what would you say, John? 00:47:50.297 --> 00:47:50.962 Yeah, I think 00:47:53.002 --> 00:47:56.444 Probably start with, one, this is not a prediction. 00:47:57.202 --> 00:48:02.413 This is a risk assessment. I always try to get couched that understanding because 00:48:03.097 --> 00:48:05.512 our risk maps can look pretty scary. 00:48:05.703 --> 00:48:11.717 The average reader and public that's starting to see more of our publications 00:48:12.562 --> 00:48:16.878 looks at that and may look at it like a weather forecast 00:48:18.142 --> 00:48:22.747 Or may look at it like maybe it's been referred to as the map of doom. 00:48:23.379 --> 00:48:27.907 And that's certainly not the message we want to share. 00:48:28.285 --> 00:48:34.624 It is an output of an incredible amount of engineering and analytical work. 00:48:35.256 --> 00:48:41.472 And we have a credible process where we bring industry in, where we conduct 00:48:41.472 --> 00:48:42.842 our independent assessments. 00:48:42.842 --> 00:48:47.722 They review it and can formulate those conclusions. 00:48:47.722 --> 00:48:55.962 And what I want them to take away the most is that this is an objective, 00:48:55.962 --> 00:48:59.439 non-biased, credible assessment process. 00:49:00.535 --> 00:49:06.299 We're showcasing the risk as complex as it is, and that action is needed. 00:49:06.781 --> 00:49:14.007 And the kind of going rate, the going approach of not building generation as 00:49:14.007 --> 00:49:21.143 quickly as we're seeing demand come on the system will constrain the economic, 00:49:21.817 --> 00:49:26.106 the stability, and the health and safety in those areas. 00:49:26.518 --> 00:49:30.587 So it's something that I think everyone should read it, understand it, 00:49:31.977 --> 00:49:33.728 but also make a difference. 00:49:34.018 --> 00:49:38.819 It's really been like a broad discussion today on the role of NERC, 00:49:39.440 --> 00:49:42.753 what NERC's looking at from a long-term reliability assessment, 00:49:43.496 --> 00:49:49.507 and how you guys are pushing the mission and purpose of NERC to help educate 00:49:49.507 --> 00:49:55.327 people, the public generally, about greater reliability and the reliability 00:49:55.327 --> 00:49:57.545 nature of the electric industry. 00:49:58.346 --> 00:50:03.866 As we step back from the long-term reliability assessment and we look towards 00:50:05.201 --> 00:50:10.716 the future, what are each of you optimistic about in this space? 00:50:11.041 --> 00:50:12.272 John, we'll start with you. 00:50:14.322 --> 00:50:19.477 Yeah, well, that's great. I think I'm optimistic, one, about that we have this 00:50:19.599 --> 00:50:24.879 regulatory structure for reliability that sets the foundation for what it takes 00:50:24.879 --> 00:50:26.332 to have a reliable system. 00:50:26.814 --> 00:50:32.099 So I think I'm very bullish and positive on that ability for industry to respond 00:50:32.099 --> 00:50:38.673 to emerging challenges and then build those and prevent preventable outages from occurring. 00:50:39.520 --> 00:50:45.339 I think I'm also positive about the continued focus and action that's starting 00:50:45.339 --> 00:50:50.886 to emerge from states and the federal government around areas that we've designated 00:50:51.182 --> 00:50:53.377 as elevated or high risk. 00:50:53.859 --> 00:51:00.609 Even areas that are designated as normal risk still need to understand what the challenges are and 00:51:01.149 --> 00:51:05.590 ensure that we have investment in critical infrastructure that's emerging, 00:51:06.072 --> 00:51:10.774 faster coordination on interconnecting large loads. We know that that's happening. 00:51:11.378 --> 00:51:16.249 Retention of those essential reliability services. And then kind of the longer 00:51:16.249 --> 00:51:21.129 term positive note is our continued advancement and 00:51:22.460 --> 00:51:30.070 A focus on getting other technologies like long duration storage and advanced

nuclear capability. 00:51:30.407 --> 00:51:33.594 Ability. Those call to actions, I think, are starting to be heard. 00:51:34.006 --> 00:51:40.332 That trajectory of risk is increasing. But like I said earlier, there's time to act. 00:51:40.675 --> 00:51:46.038 And the assessment shows that we can make progress if we take action now. 00:51:46.921 --> 00:51:54.639 Certainly appreciate that dose of optimism. We see here and read so much concerning 00:51:54.639 --> 00:52:00.528 news these days. It's nice to have someone say, We can make this work and I think we'll be okay. 00:52:01.538 --> 00:52:03.899 Yeah, I mean, I think there's a call to action to all that too, 00:52:03.899 --> 00:52:08.329 though. We can't just do what we've always done because we'll get what might 00:52:08.329 --> 00:52:12.364 not be the best outcome. But if we continue to push the envelope on... 00:52:13.577 --> 00:52:18.452 Different types of resources available to the grid by looking at alternative 00:52:18.452 --> 00:52:23.592 products that the market might incentivize, we can build and ensure that we 00:52:23.592 --> 00:52:25.894 have a reliable and resilient grid. 00:52:26.377 --> 00:52:31.752 And I think that's a really interesting proposition to see 10 years from now 00:52:31.752 --> 00:52:37.207 when we look back at and see what we did to make sure that there's not rolling blackouts here. 00:52:37.962 --> 00:52:40.220 What are you most optimistic about, Sue? 00:52:41.468 --> 00:52:46.507 To me, I think one of the things that makes me optimistic is the ability to apply new technology. 00:52:47.012 --> 00:52:53.786 I mean, we're starting to see artificial intelligence get into our industry and our systems. 00:52:54.169 --> 00:52:59.127 And I hope that this will enable us to do our work more quickly and efficiently 00:52:59.481 --> 00:53:02.832 and manage the system more quickly and efficiently. We have to be very careful 00:53:02.832 --> 00:53:04.531 about how we do that, obviously. 00:53:04.897 --> 00:53:11.294 And both NERC and electric utilities that are interested in implementing this are going to have to be 00:53:11.660 --> 00:53:17.032 vigilant to make sure that we do this in the right way and that AI is used for 00:53:17.032 --> 00:53:20.652 good and is always kind of guided by 00:53:21.029 --> 00:53:22.863 human intelligence and human touch. 00:53:23.334 --> 00:53:28.852 But if we can do that, I think we can really bring to bear the power of AI to 00:53:28.852 --> 00:53:35.012 help improve reliability, to react faster, to analyze more data more quickly. 00:53:35.842 --> 00:53:39.372 I have high hopes for it. At the same time, of course, it's really stressing 00:53:39.372 --> 00:53:45.351 us on both the demand and the supply side because of the needs of this new technology. 00:53:45.751 --> 00:53:50.157 So it's a complicated and very interesting time, but I'm going to be hopeful 00:53:50.366 --> 00:53:53.321 that we can use our powers for good like Glinda. 00:53:53.576 --> 00:53:55.498 We certainly appreciate that optimism. 00:53:57.465 --> 00:54:00.772 We appreciate the work you're all doing with these reliability assessments. 00:54:00.772 --> 00:54:06.652 I think it outlines what the challenges could be going forward and kind of 00:54:07.844 --> 00:54:13.544 sparks that call to action for people to start thinking about things and understanding 00:54:14.055 --> 00:54:17.538 how they need to adapt to make sure that we can all turn the lights on. 00:54:18.763 --> 00:54:23.059 It is just magic though, right? Like the switch, it just happened. 00:54:23.558 --> 00:54:28.521 It's an amazing thing. As an engineer, you think about, you flick that switch. 00:54:29.653 --> 00:54:35.242 There's a generator out there that increases its output just a little bit to 00:54:35.242 --> 00:54:37.402 serve that nearly instantaneously. 00:54:37.808 --> 00:54:40.960 It is a miracle and a modern marvel for it. 00:54:42.301 --> 00:54:43.323 Absolutely. 00:54:43.613 --> 00:54:48.147 Yeah. Sue, it has been our pleasure to get to know about your role with NERC 00:54:48.350 --> 00:54:52.892 as a trustee And then to have John with us here today to learn more about the 00:54:52.892 --> 00:54:54.643 long-term reliability assessment. 00:54:58.388 --> 00:55:01.598 What's going on on the grid for a resiliency purpose. 00:55:02.091 --> 00:55:07.826 If someone was interested in serving on a board like NERC, where do you suggest 00:55:07.826 --> 00:55:11.937 them looking for that type of information? 00:55:12.860 --> 00:55:14.246 I think first they probably should 00:55:14.246 --> 00:55:18.043 educate themselves about what the responsibilities of a board member are. 00:55:18.508 --> 00:55:24.957 One way to do that is there is a group that actually certifies board directors. 00:55:25.543 --> 00:55:29.316 And of course, you caught me by surprise here. So I think it's the National 00:55:29.316 --> 00:55:32.076 Association of Corporate Directors, NACD. 00:55:33.456 --> 00:55:38.976 But they have a certification program that you can basically make yourself board 00:55:38.976 --> 00:55:41.825 ready by taking that program and being certified. 00:55:42.272 --> 00:55:46.936 I think it also helps to have served on other boards. For example, 00:55:46.936 --> 00:55:51.026 one of the things that when I applied for the NERC board, they noted was that 00:55:51.026 --> 00:55:56.036 I had been on the board of directors of the Energy Bar Association and actually 00:55:56.036 --> 00:55:57.203 served as its president. 00:55:57.679 --> 00:56:03.806 So if you start by serving on boards that are kind of allied to what you're 00:56:03.806 --> 00:56:09.196 doing, or even a nonprofit board in the community, I think one way to do board 00:56:09.196 --> 00:56:10.776 service is to do board service. 00:56:10.776 --> 00:56:14.976 And there's a whole lot of not-for-profits that are very interested in having 00:56:14.976 --> 00:56:19.175 you join that board and help that organization move forward. 00:56:19.523 --> 00:56:24.646 So I think understanding what board members' obligations are and serving on 00:56:24.646 --> 00:56:29.778 a board will enable you to work your way up and serve on other boards. 00:56:30.887 --> 00:56:33.716 Well, we can't thank you enough for your time. Super gracious. 00:56:33.716 --> 00:56:38.366 We could talk to you all day, but we know you have a lot going on. 00:56:38.366 --> 00:56:43.989 We'll let you get to it. But again, just can't state enough how much we appreciate having you on here. 00:56:44.122 --> 00:56:48.715 Yeah. And if our listeners wanted to learn more about NERC, where could they do that? 00:56:49.876 --> 00:56:56.280 Yeah, I think our website's the best, www.nerc.com. You can be part of all of 00:56:56.280 --> 00:57:01.119 our working group task forces, email lists. It's all accessible on our website. 00:57:01.521 --> 00:57:07.440 And then our LinkedIn page, I think, where we're pushing out a lot more content, even starting to 00:57:07.880 --> 00:57:14.870 get more interactive with the data we show, but also the more succinct messaging 00:57:14.870 --> 00:57:17.537 that we're putting out to engage our audience even more. 00:57:18.198 --> 00:57:22.650 It has honestly been a privilege. I appreciate, one, you agreeing to do this 00:57:22.650 --> 00:57:26.990 and then helping us get the right people to have that in-depth conversation. 00:57:26.990 --> 00:57:31.370 So thank you for being, one, a great person to have a conversation with, 00:57:31.370 --> 00:57:36.592 but two, someone that I think will help the industry continue to evolve and grow. 00:57:37.509 --> 00:57:41.000 It's my job at this point in my career to help preach the NERC gospel. 00:57:41.000 --> 00:57:44.057 So anything I can do to make that so, I will do. 00:57:44.882 --> 00:57:48.750 Well, again, thank you for your time. We appreciate you. That's going to wrap 00:57:48.750 --> 00:57:51.674 it up for this episode. Thank you again for listening. 00:57:52.167 --> 00:57:58.178 And if you'd like to find out more about ACES, please visit our website at acespower.com. 00:57:58.694 --> 00:58:02.730 If you have any feedback for the episodes or any content that you'd like to 00:58:02.730 --> 00:58:10.200 see for upcoming episodes, you can email us at acespodcast at acespower.com. Thanks for listening. 00:58:27.700 --> 00:58:30.977 The thoughts and opinions expressed in this podcast are the speaker's own and 00:58:30.977 --> 00:58:33.737 do not represent the views, thoughts, and opinions of ACES. 00:58:34.114 --> 00:58:38.172 The material and information presented here is for general information purposes only. 00:58:38.468 --> 00:58:42.468 This podcast is the property of ACES and is not intended to be advice of any kind. 00:58:42.892 --> 00:58:46.807 Any mentioned to or of any specific organization, product, or service is not 00:58:46.807 --> 00:58:48.321 an endorsement or opposition.