Special Episode with the Chairman of the Texas PUC, Thomas Gleeson

Today's episode is a special one: an interview with Thomas Gleeson, the Chairman of the Public Utility Commission (PUC) of Texas, recorded live on September 20th at the SPEER Industry and Policy Workshop. 

The PUC oversees ERCOT and the transmission grid, fully regulates the monopoly transmission distribution utilities, and has power and authority over just about every part of the power grid. Chairman Gleeson was appointed Chairman in January; before that, he worked at the PUC for over 15 years, including as the Executive Director for about four years.

I enjoyed talking with the Chairman, he’s thoughtful, self effacing, and open to new ideas. As you know, I don’t agree with everything the Commission prioritizes or does and I am sometimes critical of their decisions. So I give Chair Gleeson a lot of credit for agreeing to do this. And, as often happens when people talk, it turns out we agree on a whole lot as well.

Chair Gleeson and I spoke about his vision for the grid in 5-10 years, the technologies he’s most excited about, and whether changes are needed in the utility business model. We talked about Winter Storm Uri and what remains to be done to increase reliability and resilience. We also talked about affordability; Gleeson worked on low income assistance programs as a staffer at the PUC a decade ago. Of course, given we were at the SPEER conference, we talked about the importance of demand response and energy efficiency.

We also talked about communications and public engagement. The Chairman is focused on making the PUC more accessible to Texans. In fact, the PUC will be in Houston on October 5 for the first PUC meeting with all the commissioners outside of Austin in over a quarter century.

 We also dug into the Texas Energy Fund and I asked the Chair if the PUC plans to allocate the funding, approved by Texas voters last year, to fund microgrids at critical facilities, an issue that’s become more and more pressing after Hurricane Beryl led to deaths at nursing homes that could’ve benefited from the voter approved funds.

This interview was recorded at South-central Partnership for Energy Efficiency as a Resource’s, or SPEER’s, sold-out Industry and Policy Workshop, an annual conference that, if you haven’t been, I highly encourage you to attend next year. You can keep up-to-date about this event, and SPEER’s other work, at their website and on their social media, which we link to in the show notes. 

I’m trying to keep as many of these podcasts as possible free. To do that, I need your support. If you’re not yet a paid subscriber to the Texas Energy and Power Newsletter and the Energy Capital Podcast, please become one today!

Timestamps

5:00 - Chair Gleeson’s outlook on the grid for the next 5 to 10 years

7:45 - Technologies Chair Gleeson is most enthusiastic about and emphasis on Texas’ “energy expansion”

9:30 - Extra High Voltage (EHV) transmission, changes in planning with load growth

14:00 - Winter Storm Uri: diagnosis of what went wrong; mistakes after 2011 winter storm outages; and the state’s progress for addressing these issues

19:30 - Replacing resistance heat in Texas; heat pumps and energy efficiency

26:35 - Targeting energy efficiency programs for low-income Texans; failure of past bill assistance programs and ways to ensure we don’t repeat those failures

30:45 - Does Texas need to report utility shut-offs?

34:52 - After Hurricane Beryl, does the PUC need to change the way it regulates monopoly utilities? 

40:00 - How do you align utility incentives with the financial interests of their customers?

43:45 - Texas Energy Fund and whether the promised 18% will be spent on Backup Power Packages for critical facilities

50:26 - Upcoming public hearing in Houston and efforts to make the PUC more publicly accessible

54:31 - Audience question: How to get ongoing and expected load growth under control, especially related to crypto mining and data centers 

57:37 - Audience question: Integrated resource planning for non-ERCOT utilities

1:05:58 - Audience question: Interconnecting ERCOT with other systems

Show Notes

SPEER (South-central Partnership for Energy Efficiency as a Resource) website

SPEER Twitter, Facebook, and LinkedIn

Office of Public of Engagement at the Texas Public Utility Commission

His 93-year-old mom died from heat after Beryl. Her death was preventable. - Houston Chronicle

How to Restructure Utility Incentives: The Four Pillars of Comprehensive Performance-Based Regulation - RMI

The February 2021 Cold Weather Outages in Texas and the South Central United States – FERC, NERC and Regional Entity Staff Report

This new organization wants to remake PUCs for the energy transition - Charles Hua on the Volts Podcast

Texas’ Energy Expansion - Texas 2036

Transcript

Doug Lewin

He's worked at the commission for 15 years, really understands the commission, understands the ins and outs of policy, and really excited to dig into all of that today. Anything else you want to say by way of introduction Chairman?

Chair Gleeson

No, I'm excited to be here. You know, as I was saying to you, we don't get to interact too often. So I'm excited to kind of have a conversation, get your thoughts on some of this. I will say I initially, when I came up the stairs, ended up at the beer distributors. And so…

Doug Lewin

You almost stayed over there?

Chair Gleeson

Almost. And I may mosey on back over there after this just to see if they're sampling anything or if I can join that association as well. 

Doug Lewin

An energy efficiency crowd or beer distributors? It's a tough call. Before we jump in, I also just want to thank SPEER. We're obviously, for those that are listening on the podcast, we are recording this live at the SPEER Industry Conference. If you were not here live with us, you should make sure you're here next year. It's been, it was great yesterday. It's going to be great today. And, of course, thanks, Chairman Gleeson, for doing this. I think it's really important for you to be here, for folks to hear from you, and for you to hear from them in this really important industry, sort of sub-industry within the energy industry focused on energy efficiency.

So I just want to start with kind of a general question. And if you could kind of describe for us, I do this sometimes on the podcast. I think it's kind of a good way to jump into this. If you think of the grid in like five to ten years. And I'm hoping you could kind of describe this like you've got energy people in the room. There's energy people listening to the podcast, but also listening to the podcast are some folks that just, because of Winter Storm Uri or Hurricane Beryl or just rising costs or climate change or whatever it is that kind of brings them to that. There's folks that are not experts as well. So both in kind of, f you can kind of a technical way, but also to a consumer that's not super into industry jargon and all of that. What is your vision for what the grid will look like in five to ten years?

Chair Gleeson

Yeah. So, you know, one of the things I speak about often and I try to tell people in every speaking engagement I have is we hear often about an energy transition, which implies we are somewhere and we're transitioning from where we are to where we're going. And that may work in other parts of the country or in other parts of the globe. But in Texas, with the load growth that we see, I don't see it as a transition at this point. I see it as an expansion. And so we don't have the luxury of deciding we only want renewables or we only want gas fire generation or nuclear is going to be the end all, be the panacea that fixes everything. I don't think we have that luxury based on the load that I see coming to this state, which is a good thing, right? The governor, the elected leadership of the state want Texas to remain an economic engine for the country. So with that comes a lot of people and a lot of businesses. And so I don't think we have that luxury. I see the grid continuing to try, I see us trying to continue to incent as many different types of generation resources as we can. I see us trying to look at extra high voltage lines. As we talk about the transmission needs of the state, which I think are great. 

I think, again, it's an expansion of everything. You know, I had a conversation out in the hallway earlier about something I just really became aware of, the idea of looking at our system as far as reconductoring a lot of it. I saw a report yesterday that said some estimates are saying that if you look at the entire grid in the United States, some 65 terawatts of energy could be captured through reconducting the system. So, we got to look at sustainability, affordability, reliability, and the intersection of all those three from a policy standpoint, I think, are where we get the biggest wins and the biggest impact. And that's what we need to be looking for. 

Doug Lewin

So for that, kind of moving towards reliability, affordability, sustainability, you touched on a couple of them there with extra high voltage lines. But what are some of the technologies that you're most excited about? And I'll do the disclaimer for you. You can't say every one. So if somebody's favorite technology is on this list, it's not that the chairman doesn't like it. But what are a few that you are particularly excited about?

Chair Gleeson

Yeah, so you know, definitely I think one thing that everyone seems excited about that if you've heard me speak before watching any of our open meetings I've talked about, I think nuclear is something when I talk in the Capitol to folks, it may be the one resource that everyone seems to be in favor of looking more into analyzing and seeing how it could benefit the state. I was just telling Doug, when I was driving in this morning, I was listening to CNBC and Constellation just announced that they are gonna look to recommission Three Mile Island in Pennsylvania, which is something we never would have thought. And when I looked at the report when I got here, the reason they're looking to do that is because Microsoft is gonna be an offtaker of that energy for their data centers, for their AI data centers. And so, you know, we haven't really had discussions in this state about large-scale nuclear. You know, it's more been around small modular reactors. But I would say that's the technology that's probably, you know, I think if you talk to most people and Commissioner Glotfelty’s kind of sphere of influence around nuclear and his working group would say is, you know, 8 to 10 to 12 years away. I think the governor would like to see that sooner here. He wants us to be a leader in nuclear but that's one place I think everyone is really excited about. 

The other thing which we've talked about a lot recently at the commission is looking at the need for extra high voltage lines. I think it's something I know you when we have spoken have talked about the need for additional transmission and the lack of efficiency and the cost that we bear that the market bears because of transmission constraints around the system. And I think to Commissioner Glotfelty and Commissioner Cobos's credit they've led on the transmission issue and you know I think we're in a place now where there's real analysis being done on transmission, on what we need to do, how we need to change our planning process going forward. You know one of the crazy things that's happened in the last year I would say that at least has come to my attention is ,you know, we recently brought Lubbock's load into the ERCOT region I want to say, don't hold me to this, I want to say it was somewhere around 700 to 800 megawatts. My chief of staff and I went and visited an AI data center site that's going to have three buildings. They're talking about that site alone being 1,400 megawatts, which is just wild. 

Doug Lewin

And it could come on the grid in like a year. 

Chair Gleeson

It can come on, and they want to know that they're going to be able to receive power yesterday. They don't wanna wait. And so, that's just such a new paradigm for our planning process, that that's another thing, extra high voltage lines. 

And then, I know this is a discussion, a conference about energy efficiency and demand response. Not necessarily a technology, but one of the things I think we've been thinking a lot about at the commission is how you empower customers and not just large industrial and commercial customers, but residential customers. I've had a lot of conversations with ERCOT CEO Pablo Vegas. This is something that he's really big on trying to find ways to provide incentives and a structure so that residential customers can participate meaningfully in demand response programs that there's access to energy efficiency money. 

My heart in that is really in the low-income realm. One of the jobs I had early in my career at the PUC was overseeing the staff that used to administer the Lite-Up program, which you all may be familiar with. It was a low-income discount for electric customers that was discontinued in, I want to say, 2016. You know affordability is really important. And I think you hear a lot about affordability at the Capitol. I don't know if it's always focused on the most vulnerable folks. And so, you know, I think looking at ways we can leverage public money to help in technology, to help customers with affordability, to help with research on emerging technologies. I think those are all discussions that I'm excited to continue to have. 

Doug Lewin

Yeah, obviously really happy to hear you say that. And I think as you're talking about energy expansion, there's expansion of generation sources, there's expansion of transmission that's going to be needed to your point about load growth. And we don't know how quickly, the load growth could be materializing very quickly. But I think certainly as you're looking through the 2030s and, you know, extra high voltage. I think a lot of folks don't understand. I don't think I fully understand this yet. I'm trying to learn more about it. But even, I was doing, I do these, quick little plug, these little live chats during some of the PUC meetings. And Commissioner Glotfelty had said that extra high voltage gives you four times the capacity through the lines. There was somebody on the chat that was saying it's actually closer to six is what they're seeing in the real world. So I think when people think about this, they need to understand that if you're just trying to do three, four, five years out, okay, like maybe the 345 kV is okay. But if you're planning, as I hope you're thinking, and I hope everybody in the state's thinking about, 10 years out as well, you need that extra high voltage. 

And on the demand side, there's an expansion to happen there too, right? There are a whole lot of customers out there that would like the opportunity to save on their energy bills. And they're across lots of, a lot of times you hear this repeated over and over. I've heard it very recently that low income customers can't participate. They just can't do this. They can't participate in DR. I want to challenge that assumption. I think that there's absolutely ways for people to save on their energy bills. So, and I'll just give a quick shout out on energy expansion to our friends at Texas 2036. They've done a lot of really good work, folks that want to sort of learn more about that concept. I think they deserve a lot of credit for kind of getting that out there.

All right. So I want to ask you, you know, I don't think it would be right to have a conversation on something called the Energy Capital Podcast focused on Texas with the Chairman of the PUC if I didn't ask you at least a little bit about Winter Storm Uri. I do think we are in better shape than we were. And I tend, I like to be very data-driven. We saw during the winter cold snap in January, which I think they called Heather, we saw less thermal plant outages than we did during Elliott or Uri. There's critical infrastructure mapped. There are some things that, we have a lot more solar in the state, which right, people forget this, but like during Winter Storm Uri, it was actually quite sunny during the power outages, right? So there's a lot of things that would make things better.  But you have said and I'm quoting you here…

Chair Gleeson

That’s always dangerous.

Doug Lewin

I mean, I just think this is just common sense, right? “We're not done improving the grid. We are continuously looking for ways to strengthen reliability and meet the needs of our fast growing state.” So I just want to, what is your diagnosis of what happened during Uri and what are those improvements you're looking at next?

Chair Gleeson

Yeah, so one of the things I think was really a failing of the commission and the industry after kind of the rotating outages of 2011, is it wasn't a large penetration event. It was pretty contained. And because of that, we got through that 2011 session, we made some changes. And I think, at least at the commission, there was definitely a, I'm not gonna say mission accomplished banner hung behind us, but I will say a thought of like, okay, we did what we needed to do to address that issue. And there wasn't really much forethought given to what is this grid gonna look like going forward and what may we need to do in order to ensure reliability going forward.

And so I think the biggest takeaway from Uri is we've implemented, like you said, a map for critical infrastructure, which has proven extremely helpful the last couple of winters, particularly if gas is having an issue or electricity isn't receiving gas, gas isn't receiving electricity, because we have a way to connect those parties. so we can get that addressed quickly. I think that the other thing is we pass those rules on weatherization but we don't stop there this has to be a continuous loop of iterating improvements and so you know as our resource mix is changing as our load is increasing we are going to have to continue to look to make changes to ensure reliability on the system. The other thing I would say that, where the pendulum has started to swing back the other way, I would argue post Uri in the trade-off between affordability and reliability, the pendulum swung all the way to reliability. And I think that was needed because for a long time, I think that pendulum had swung towards affordability. We were operating on the edge all the time to keep costs down. I think now three years out from the winter storm, I think you see this at the commission, you definitely see it at the legislature, discussions about affordability have started to swing that pendulum back towards what I would argue is probably its rightful place, somewhere in the middle, depending on, you know, kind of the dynamic actions that are going on at any given time, where that trade-off needs to be between affordability and reliability. And so I don't think you'll continue to hear discussions about reliability with also an eye towards affordability and what those trade-offs are. 

You know, the other big thing I will say is the establishment of the Texas Energy Reliability Council, TERC, that's headed up by Chief Nim Kidd. You know, we used to have an informal process between industry, the Railroad Commission, TETM, the PUC, but formalizing that process, having those folks get together in a room, talk about changes, talk about what they're seeing in the different industries and their regulatory environments has been really helpful. And I think you've seen a lot of success and a lot of good policy come out of areas where there was alignment from all those groups. Obviously, there's not going to always be alignment between the gas and electric industry on a lot of different issues. But I think where there is alignment and congruence and our goals are all kind of in the same direction, I think we've made a lot of really good policies that have helped this grid stay reliable. And hopefully, you know, those groups will continue to help inform our policy going forward so we can, like I said, iterate on an ongoing basis to make sure that the mistakes we made leading up to and during Uri don't ever happen again.

Doug Lewin

Yeah, I appreciate that. And I think, you know, during Winter Storm Heather, the recent one, while things were better than during Elliott. They weren't perfect. There were outages. And it's not, it’s not ever going to be perfect? I think that spirit of continuous improvement is really, really key. 

Chair Gleeson

And I think that's important, right? Because Heather ended up being a different type of event, right? 

Doug Lewin

Yeah, it wasn't Uri.

Chair Gleeson

That's right. And you end up having distribution issues or it's never going to be exactly the same. There's not a one size fits all, you know, here's the playbook for in a winter storm. This is the checklist of what you need to do. And at the end of that success, that's not how this is going to work. And with each passing season, summer and winter, we're learning more and more and we can adapt to what we're seeing and the information we're getting so that we can be better prepared going forward.

Doug Lewin

Yeah, so my diagnosis of Uri, and obviously I've thought about this a lot and talked about it a lot, listened a lot about this, read a lot about it. And you can agree or disagree with this, obviously. I think it was three things, weatherization, weatherization, weatherization. Weatherization of the gas supply system was not adequate. Weatherization of power plants weren't adequate and weatherization of our homes and buildings were not adequate. We had a spike in demand, much of that caused by resistance heat. This was talked about a lot yesterday. There was a whole panel on advanced heat pumps. So I guess, first of all, I can ask, do you kind of agree with that diagnosis that demand and sort of wasted energy, inefficient use of energy, sort of inefficient heat in poorly insulated homes was sort of one of the main things? And if so, how do we address that?

Chair Gleeson

Yeah, so I definitely do. I'd say the other part of that that kind of encompasses everything and encircles it is poor communication. I think a lot of those issues on the residential side could have been, the situation could have been ameliorated had we communicated better about what we thought was going to happen because people could have made preparations. You know, I think what you saw, at least in the data that I've seen, is when people would get their power back on for, you know, an hour or two hours in that five day stretch, they would just crank up their heat and it set it to 90 and would just constantly run because they were afraid that their homes were going to lose power again and they wanted to heat it. And then if that didn't happen, because they never knew if it would happen, they just kept their thermostats where they were. And yes, I think it is fair to say that if we had had, if everyone was receiving electricity during that time period, the amount of load that would have been on that we've tried to estimate would have been outrageous.

I agree, you know, as with most kind of retrofitting or any discussions around that, the question, you know, to move away from resistance heating is going to be who's going to pay for that. This group may know better than me. I've seen estimates, for retrofitting a standard house that uses 1200 megawatts on average throughout the year to install pumps would cost anywhere for some models between 1500 all the way up. I've seen some systems can cost $35,000. And so, you know, as by experience and education, I have an economics background, so I think about vertical and horizontal equity and most things on the policy side that I think about. And finding ways to ensure that everyone can participate in that and receive the benefits, I think is something that the state needs to be talking about, that groups like this need to be talking about. Because, yeah, I think it would help. It helps on bills, helps on the affordability side. I think it helps on the environmental side and sustainability side and obviously would help us if you can see a reduction in heating up to 65% by switching away to pumps from resistance heating. That's obviously a benefit to the system, which is something we need because as we're seeing this expansion, that's not just an expansion when I talk about it of resources, the megawatt we're not using is just as valuable as the megawatt we're generating. And so I think it's incumbent on us to have those discussions on both sides of the equation. 

And one of the things I'm excited about recently, we've set up. And I think you all heard from Ramya Ramaswamy yesterday, you know, a Division of Energy Efficiency. And she's going to be working with Commissioner Jackson on our energy efficiency initiatives and our demand response initiatives. And so I think that will definitely help. You know, there was a bill, which I'm sure you're familiar with, Doug, last session to kind of put together an advisory council on these things. I think we probably got started a little too late in the process. And a lot of folks had a lot of ideas. So I think that just kind of died on the vine. I'm hopeful that if we start earlier going into this session, we'll have a much broader and deeper conversation about energy efficiency and demand response at the legislature.

Doug Lewin

I do think it's a really big step to have an energy efficiency division. I mean, in some ways it's disappointing it took this long, but you can only deal with what you got and deal with where you are and go forward from there. And I think setting up the division is a huge step.

Chair Gleeson

Yeah. And, you know, and I think you're right. It is unfortunate. And most of the time, I don't know if many of you have ever worked in government or state government. You know, we're resourced in a way typically where what you focus on is subject to kind of an acute onset issue that is in front of you. Right?  And so, you know, I think often to my 15, 16 years at the commission. For most of that up until Uri we focused on regulated utilities and rate cases. You know our former executive directors have gotten involved, you know, in those types of issues not really involved in market issues. If you ever saw uh one of our open meetings pre-Uri there were not constant discussions about ERCOT and market design 

Doug Lewin

They were like 30 minutes.

Chair Gleeson

Yeah and so  it took that event to really refocus us and I think as we've done a lot on the, you know, market design side on trying to incent generation. I think it's just natural that now we have to pivot to the other side of that equation and start to focus, you know, on the demand side as well. And I think we will do that.

Doug Lewin

When we were talking before we came up here, you said you wanted this to be a conversation and not just me asking you questions. So I'm going to use that license you gave me and just talk about energy efficiency for just a minute. And I'll say again, we're at the SPEER Industry Conference. There are exhibitors here from Daikin and Mitsubishi that make heat pumps. And I will say the costs are coming down. We're not seeing a cost decline like solar and batteries. It's not 90% over 10 years. But there are cost declines happening. They are happening pretty rapidly as heat pumps are scaling around the world. The International Energy Agency is putting out reports on heat pumps like this is a global phenomenon and we are starting to see those costs come down.

You know, you talked about 2011 after that Winter Storm, and I agree, I don't think the state did a lot of the things it should have done. One of the recommendations from FERC and NERC following Winter Storm Uri was to implement more energy efficiency. And I understand you guys are taking steps, there's an energy efficiency division, but that's not the same as actually getting the savings.

And what we see with resistance heat, and this is in the FERC and NERC report, there was a UT study on this, a home that has resistance heat, They have a scatter plot, right? So there's a range, but we'll use two to four times as much power at 14 degrees. And of course, Uri was far colder than 14 degrees. Then that same home at 100 degrees, two to four times as much. So you're talking about an extra 5, 10 kW per home. And there's 4 million homes in Texas.

So ERCOT had estimated during Uri 77 gigawatts of demand. There's an A&M research team that had 82 as their estimate. There's a UT estimate that's somewhere between the range of 87 to 92 gigawatts of load during Winter Storm Uri driven by resistance heat. You don't have to respond to all that. I just think it's really important and I hope that you'll have a chance to talk to the Daikin and Mitsubishi and all these companies that are, I've left some out Carrier, Trane, I love them all i'm not trying to play favorites here there's but the technology is advancing very fast there's a lot of options in the market

And I just want to – just one last thing, and then I'm going to turn it back to you because I think your point about equity is very important. We have to make sure that as we have these incentive programs, it's not only people that are making 6 figures that can access them. Of course, the PUC has low-income programs. Maybe that's an area where we could really look at talking about an energy expansion, expanding what we're doing for folks that are, according to the Federal Reserve Bank of Dallas, 57% of Texans are choosing between food, medicine, and paying their power bill. 57. That's just a shocking number. So maybe that's an area to look at is really kind of expanding those low-income programs. 

Commissioner Gleeson

Yeah, no, I think so. If you'll remember back, the low-income discount and the system benefit fund that funded that kind of always became kind of a political issue because that was a dedicated fund in the Treasury, which in lean times in the state budget, the corpus of that fund was used to balance the budget. And so I think that was one of the kind of failures of that ultimately was the legislature had an incentive to not spend all that money and for the purposes it was being collected for. So as I've had conversations about this, I've talked about, you know, the way you would want to do it is set it up outside the treasury so there's no incentive from on the state side if we ever run into budget issues again to not spend all that money for what's being collected on.

The other thing is, you know, in this environment, the chances of a new assessment being tacked on the bills, as we're talking about affordability, is probably not one that's realistic. But we do have surpluses. We run surpluses. We have a lot of money in the economic stabilization fund. This is a direct way for the state to get behind affordability is to allocate some of that money to a fund outside the treasury that we can then look at how to best spend it. And I think obviously bill credits is one. You know, one of the big impediments I hear often from the retail electric providers is we have to get smart thermostats in everyone's home. They're not excited about doing that because they don't want to put in that cost on the front end just to have someone leave them. Well if the state funded that we wouldn't have to worry about that. And everyone benefits from having  low income customers be able to participate in programs like that. And so, yeah, I think you're right. A broadening in all senses. 

You know, as far as resistance heating, I think it's something we need to deal with. I would say from the commission side. And this is why I'm hopeful that we'll get a broader coalition to support an advisory committee on this. We have just our small slice of that policy. We don't deal with building codes on energy efficiency. We don't deal with the litany of other issues. So I think it's important to get buy-in for something that I think is this important from a broad coalition of folks from a lot of different industries and a lot of different regulatory partners that have different regulatory oversight of the areas around energy efficiency that can be most beneficial.

Doug Lewin

Yeah, and yesterday, this audience heard from EddyTrevino from the State Energy Conservation Office. They're about to have some dollars through the HOMES and HEAR program to spend on low-income energy efficiency. So yeah, coordination is key. There's obviously, though, some that could be done through the efficiency programs that you guys have right now, right?

Chair Gleeson

Absolutely, yeah. We have existing programs, and you can always increase those. I would say, though, similar to what my feelings are on market design a lot of times, we look at kind of one knob and either dial it up or dial it down without really looking at what the total impact could be if we looked at all the different knobs together and how the interplay between those would most effectively and efficiently be utilized.

So I would argue just from a policy standpoint, it's probably better to get a comprehensive view and then funnel down into which knob you need to turn based on the full litany of options in front of you, as opposed to just focusing on what one regulatory body can do in a vacuum.

Doug Lewin

That makes a lot of sense. I'm all for the bigger view. You were talking about planning earlier. You have to have that view if you're going to have effective planning. 

Just on this vein, I do want to shift gears and ask you about some other things, but Texas is one of a minority of states that does not track utility shut offs. Well, maybe tracks, doesn't report utility shut offs. I wonder if that's not a you know, when I hear numbers like the 57% from the Federal Reserve, I think the census puts the number at 45%. But like, somewhere around half fail to pay their bills. And yet we don't know how many are being shut up. I wonder if that's a way to connect those dots to solve multiple problems. You're dealing with the reliability piece. If you're switching out resistance heat, you're dealing with the affordability piece if yes, sometimes people just need a bill credit just to get to the next month. But then they're going to be back in that position a couple months down the road unless there's some energy efficiency done. I wonder if a first step isn't simply tracking and reporting the shutoffs and then trying to connect people before they're shut off to some kind of aid, both short term and longer term in terms of energy efficiency.

Chair Gleeson

No, I think that's absolutely right. I think data around that needs to be measured so you can see what the actual impact is. One of the things we hear quite often, obviously in our rules, we have moratoriums on disconnect during certain extreme weather periods. We'll hear from customers and get complaints that they weren't disconnected. They continue to rack up bills, and then they can't afford now this giant bill that they have on the back end of that.

And so I think you're right. Simply not disconnecting people is not the answer because it doesn't address the affordability aspect of that. 

Doug Lewin

The bill is still there. 

Chair Gleeson

That's right. And they won't be able to switch, and it can become a problem, and you're just digging a hole you can't get out of more and more. And so, no, I think you're right. I think as we look at affordability, whether it's bill credits, whether it's weatherization of residential homes for low-income folks or for all folks, in all honesty, I mean, I think, you know, like I said, my heart is focusing on low-income folks because I cut my teeth in a lot of these programs on the low income side.

But I think in order for the system to benefit to the maximum extent it can, we have to make those types of programs something that everyone is focused on. So just because low income folks may be able to get a discount doesn't solve the problem that I don't know that a lot of folks in different socioeconomic situations think about the benefit of upgrading their windows so that they keep more heat or air conditioning in. Think about the seals around their windows, their doors. Think about the insulation in their attics. I don't know that there's necessarily always a direct connection in people's minds that they see in the summer, a $600 bill, and they go, I need to use less energy. And they think about turning their thermostat up and down as opposed to saying, I'm using too much energy. How can I keep my house where I'm comfortable but – 

Doug Lewin

Or be more comfortable.

Chair Gleeson

– and not pay the bill that I'm paying. And I think, you know, a lot of that's around education. As you know, we've started a division of public outreach at the commission. And that's one of the things that Mike Hoke, who used to be our governmental relations director, does when he goes out into communities is talk to folks about these kind of issues that I don't think are front of mind. You know, we're in the industry. I talk about this all the time. We probably talk about it all the time. I don't think communities out there, especially the smaller ones, really think about the benefits that are out there to making changes to their homes. And so I think that's one of our goals is to just educate folks on what they can do on the affordability side anywhere that the state can help out. I think it should.

Doug Lewin

Yeah, you guys have an important role there. I'm glad to hear that's part of the mission. And I'll just say before, I do want to shift gears a little bit, but you're right. There's a lot of energy efficiency potential in some of the higher socioeconomic strata as well. There are tax credits available there, and I believe it's capped at, you know, this is not tax advice. Please check with your tax attorney or your accountant, whatever. But you can get, I believe, $2,000 per year. So, you know, we're recording here in September. People hear this in the fall. You can do 2000 this calendar year, another 2000 beginning of next year, whether it's windows or a heat pump or insulation. But of course, you have to have a tax burden for that to be meaningful. So the low income programs are very important. 

I do want to shift gears a little bit. Obviously, Hurricane Beryl happened a couple of months ago. It’s had a whole lot of attention. There's a lot of different things we could talk about related to that. And I'm happy for you to say whatever you want to say on that. But the question I want to ask you, you had a really interesting exchange with the, I believe it was I believe it was actually the special committee. I was going to say it was Business and Commerce, but there was a special committee on hurricane response and preparedness. And Senator Kolkhorst was talking to you about this. She said, looking at incentives, do the incentives of utilities align with their customers? And she added, “I'm just going to tell you, it does not. I don't really feel like we have a performance-based system.” You responded, “I don't either. While there is statutory language that says we can reduce return based on their performance,” you said, “that power has only been used once.” 

So obviously, I heard this quote recently. I'll give credit where it comes from. It was the Volts podcast. Dave Roberts with Charles Hua was talking about utility regulation. And I think it was Charles that had said something like the regulatory system might be even more outdated than the infrastructure we're trying to update. But that was a great quote. I mean, it's a regulatory model that comes from 100 years ago that was at a time where they were trying to attract capital just to electrify. And so you have this sort of guaranteed return on equity. So my question for you is, does that need to change? Do we need to be looking at some system that is more geared towards the outcomes we want to see on the distribution grid? Or can that old model actually kind of work? And we don't need to look at that as much.

Chair Gleeson

Yeah, you know, I think it can work. I don't know if it can work well. And so, you know, one of the things I talked to through that special committee, we ended up interacting, particularly on the health side, with a number of members who we normally don't interact with. And, you know, I actually went through the exercise with one house member of this is how a rate is made. We spent probably 90 minutes in the PUC offices going through this, and that member was surprised at kind of how revenues flowed to transmission distribution utilities. You know, one of the eye-opening things in particular was, we talk a lot about vegetation management coming out of Beryl. I think that has proven, will continue to prove, to be the major issue that we had was vegetation management was just suboptimal. The utility has an incentive post-rate case to reduce O&M costs because they earn a recovery of those costs but not a return on those costs. So if they're looking to maximize the amount of money that they spend on the capital, you know, the capital side of the rate equation so that their shareholders can earn a return on that, they're going to cut from O&M expense, which is where, in a rate case, vegetation management is. But, and if you've seen any of the discussion about this or any of the articles. What we'll now see is a contested case go through the commission where those costs related to Beryl can be securitized and paid out over 30 years for the restoration costs. The vegetation management through that case, it's considered capital. So you have this odd incentive of to decrease your vegetation management on the front end in the rate case, because if you have to do restoration on the back end that includes vegetation management, you earn a return on that. And so that's just one example.

I don't think anyone you know, I don't think that was done on purpose, I'm sure those things were done, you know, not synchronously. And so one statute was done and then another one. But, you know, that's just one of those areas where I think about that's probably not the incentive that we want. We want the incentives to line up, do everything you need to do on the front end. So you don't have to do it on the back end because the ratepayers are paying for it one way or another. And they're paying for it a lot more on the back end. So we need to provide incentives and set up an incentive framework that gives them the, that sets forth what our goal is, which is do this on the front end so we're not having to do restoration and the economic incentives need to be lined up that way. 

Doug Lewin

Yeah, there's a great paper I'll put in the show notes and for anybody in the room I can I can help you find it later if you can't find it, but it's RMI does this. It's called like their four pillars, I think, of utility regulation or performance-based regulation reform. And one of those is what they call TotEx, that like instead of earning a return on CapEx, you're earning a return on the combined CapEx and O&M. So you remove that disincentive. Vegetation management is one of them, and it's a really big one, obviously, in terms of Hurricane Beryl. But I also think there's some misaligned incentive for helping customers to get their own generation, whether that's solar or storage or a gas generator, be more energy efficient, all that stuff. Just like you said, I don't think it's like utilities sitting around saying, we don't want people to get that. It's more, how do you make the incentive so they wake up every day saying, my customer's interest is my interest?

Chair Gleeson

Yeah, right. Because I mean, those transmission and distribution companies make money by customers taking power off the grid. So yeah, there's definitely not the incentive to, you know, on the utility side to have customers, you know, need less energy. And so, you know, I think you're right, I think, and that takes a broad discussion, I'm not going to claim to be well versed enough or smart enough to know what what changes, whether they're, you know, very big changes, or maybe they're just marginal changes that that we can look at. One of the unfortunate parts about this is the resiliency plans that are getting filed after the legislation from last session were not filed and nothing had been really decided prior to Beryl. 

I'll say the other thing that we kind of have to change is, I think if any of you have participated in a rate case at the commission, you typically at the beginning, you're trying to decide how big the pie is, right? What the revenue requirement is then and you typically have everyone against the utility, right? All of the people that are going to pay the rates want to shrink that pie. The utility wants to make it as big as possible. Then the second part of that is the allocation. The utility at that point doesn't care, right? They know they're going to get their revenue. It's everyone else now fighting to lessen their share of that pie. I think what this has shown is constantly having parties in these cases take the stance of ‘we have to reduce rates’ is also probably not pragmatic because one of the things that gets cut a lot in those rate cases is O&M expense related to vegetation management. And again, if you take a city, for instance, who may argue that we need to reduce rates, well, this is an outflow of that stance sometimes that proper vegetation management isn't done. And I think if you could go back now, you know, in any of these restoration cases, not just Beryl, and ask customers, would we have been willing to pay a little more through O&M on vegetation management to not deal with these long outages? I think they would say yes. And so I think that's another area that there needs to be a pivot on. Not everyone just trying to shrink that pie to the lowest number it can be.

Doug Lewin

Yeah, and that probably to come back to where we started, we were talking about planning. You were talking about planning at the very beginning. Do we need some different kind of a distribution resource planning? You know, a lot of states have what are called integrated resource plans. We don't have those here because we have a competitive generation market. So you as a regulator aren't picking what kind of generation goes where. Competitive forces determine that. The distribution system still very much centrally planned with a regulator overseeing it. Do we need to do planning differently on the distribution side?

Chair Gleeson

I think we do. I think we need to look at a broader horizon more than anything. I think there's a, you know, in every kind of plan and rate case, there's a focus just on the ki