October 1 Report Indicates Adequate Generation Reserves and Transmission Additions

The annual Oct.1 Report on existing and potential constraints and needs within the ERCOT region indicates ample reserve margins of at least 20.5 percent until 2009, due in part to 26,000 MW of new generation added since 1995 (46 percent of total generation).  In addition, almost $2 billion in transmission additions have been added in the last six years (27 percent of the total transmission). Some $2.8 billion in transmission projects are planned for the next few years. The average level of future transmission project estimates is consistent with the past six years.  Transmission congestion costs were $390 million over one year – approximately 1.5 percent of the total market.

The full report is available at: http://oldercot.ercot.com/tmaps/login.cfm

* For more information, contact Ken Donohoo at x3003 or Bill Bojorquez at x3036.

TNT Reviewing Preliminary Drafts from Cost Benefit Study

The Texas Nodal Team is beginning its review of preliminary drafts from the Tabors Caramanis cost-benefit analysis.  One aspect reviews the market design changes associated with the Texas Nodal Market and other nodal designs, compared to ERCOT’s zonal market that would not be captured in energy price changes. The second aspect, is an implementation impact analysis which provides cost estimates for ERCOT and market participants to make the conversion to a nodal market. A third element of the cost-benefit study, will be a statistical analysis of the energy impact.  Preliminary results for this portion are expected to be available for review in early November.

As part of the review, TNT posted preliminary drafts on its website and collected comments from market participants.  The TNT Cost Benefit Concept Group is discussed that feedback in a meeting held in Austin earlier today.

* For more information, contact Jim Galvin at x3870.

ERCOT Publishes Eagle Mountain Unit # 3 Exit Strategy

ERCOT staff has completed its review for the need of Eagle Mountain Unit # 3 and has confirmed that, once certain transmission projects in the DFW area are completed, ERCOT can release the unit from further RMR consideration.  On July 1, 2004, ERCOT entered into an RMR agreement with TXU Energy for Eagle Mountain Unit #3 (375 MW).  The agreement expires on April 30, 2005.  The required transmission improvements will be completed by this time. The ERCOT Protocols require ERCOT staff to report to the board and post a list of feasible alternatives that may be more cost-effective than the continued renewal of the existing RMR Agreement.  The report is required no later than 90 days after the execution of the RMR agreement.

* For more information, contact Ken Donohoo at x3003 or Bill Bojorquez at x3036.

ERCOT Conducts NERC Functional Model Workshop

On Thursday, September 30, ERCOT conducted a workshop with market participants to discuss the North American Electric Reliability Council’s (NERC’s) Functional Model.  Under NERC’s Functional Model, each task necessary to reliably operate the Bulk Electrical System would be assigned for the purpose of determining accountability for each task.  Registration for accountability under the Functional Model will be submitted by a Regional Authority (which includes ERCOT). At the workshop, ERCOT discussed the expected roles in a forum open for discussion of those roles, and what entities must perform them.

The Functional Model has been an evolving organizational structure under development by NERC since the mid 1990’s.  Under the Functional Model, tasks necessary for operation of the electric grid are grouped together to become Functions.  Each electrical region across the United States is made up of the same core Functions.  The Functions currently being registered are Reliability Coordinator/Reliability Authority, Balancing Authority, Transmission Operator, Planning Authority, and Transmission Planner, with other Functions to be registered at a later date.

The registered organization for a Function will be the Responsible Entity for the tasks of that Function.  To ensure clear accountability from NERC’s perspective, only one organization may register as the Responsible Entity, for a given Function, in a specific area.  However, tasks under a Responsible Entity may, and will, be delegated to other organizations in the Region for performance of that task, or a portion of that task.  While performance of a task, or part of it, may be delegated, responsibility is not to be delegated.  At Thursday’s workshop, all of these relationships were discussed.  ERCOT indicated that it expects to register as the Reliability Coordinator/Reliability Authority, Balancing Authority, Transmission Operator, and Planning Authority.  Registration is expected to be completed in early 2005.

* For more information, contact Vann Weldon, x7031

ERCOT CEO and Board Chair Testify Before Legislative Committees

CEO Tom Schrader and board Chair Mike Greene, testified Sept. 29 before several committees of the Texas Legislature, addressing concerns related to ERCOT management and recent contract irregularities and employee misconduct.  Several legislators were strongly critical of ERCOT’s management controls and spending, as well as for poor communications and relations with the PUC and the Legislature, and promised more aggressive oversight.

Greene’s remarks emphasized that the employee misconduct had no impact on reliability, grid security and market operations.  He reported that the wholesale and retail markets were operating smoothly.

Schrader’s testimony included discussion about some of the management and internal control changes ERCOT has made in response to the employee misconduct.  He pledged to work in a spirit of cooperation and openness with the PUC, the Legislature and within ERCOT, to encourage frank dialogue and employee initiative.

The hearing was scheduled by the joint House-Senate Electric Utility Restructuring Legislative Oversight Committee, co-chaired by Sen. Troy Fraser, R-Marble Falls, and Rep. Phil King, R-Weatherford.  Members of the House Regulated Industries Committee and the Senate Business and Commerce Committee were also invited and in attendance, as was Texas Sunset Advisory Commission Chairman Rep. Burt Solomons, R-Carrollton.

* For more information, contact Mark Walker at x7076.

Ernst & Young Performing IT Security Assessment

Ernst & Young was onsite at ERCOT throughout September and will be onsite again during October, to perform an information technology security assessment within the ERCOT enterprise. The objectives of the assessment are to:

• Review, evaluate, and assess ERCOT’s technology environments including wireless, internal server, workstation, and network infrastructures.
• Review, evaluate, and assess the security policy environment to determine its state within ERCOT and how it compares with industry standards and regulatory requirements.
• Build awareness among ERCOT and PUC executives of IT threats, vulnerabilities and gaps in protective measures.
• Assist ERCOT and PUCT executives in understanding the potential consequences and impact of these vulnerabilities on their business.
• Discover opportunities to improve internal controls and increase compliance with regulatory and industry standards.
• Communicate findings and recommendations to ERCOT and the executive director of the PUC.

* For more information, contact Lisa Petoskey at x3910.

ERCOT CEO Keynote Speaker at Gulf Coast Power Fall Conference

ERCOT CEO Tom Schrader was one of the keynote speakers at the Gulf Coast Power Association’s fall conference in Austin, September 29-30.  In addition, other ERCOT staff members sat on panels or gave presentations on: the stakeholder process; implementing market directives; embracing Texas Nodal; and transmission planning.  Approximately 250 industry professionals attended the event.

* For more information, contact Paul Wattles at x7242.

ERCOT CEO to Hold Stakeholder Breakfast in Dallas

ERCOT CEO Tom Schrader continues his series of “meet & greet” stakeholder breakfasts this week with an event in Dallas on Wednesday, Oct. 6. Over 25 market participants and stakeholders have RSVP’d for the event which will be held at the Adams Mark hotel in downtown Dallas, from 7:30-9 a.m. Schrader met with a similar group in Houston on Sept. 23, and finishes this tour with a breakfast in San Antonio on Oct. 20.

Other News

FERC Chairman PAT Wood lauds RTO development ‘hat trick’

From a FERC press release issued on October1, 2004:

Federal Energy Regulatory Commission (FERC) Chairman Pat Wood, III was in the control room at PJM Interconnection in Pennsylvania to witness first hand the integration of American Electric Power and Dayton Power and Light into PJM’s system at the stroke of midnight.

Chairman Wood (formerly the chairman of the PUC in Texas) cited the PJM expansion, along with Illinois Power joining the Midwest Independent Transmission System Operator and the implementation of new market design elements at the California Independent System Operator (CAISO), as clear signals that regional independent grid operators are “moving ahead, delivering improved reliability, transparent market monitoring and oversight, and tangible economic benefits.”

“Illinois Power’s integration at midnight with the Midwest ISO helps complete the operational ‘footprint’ of the regional transmission organization,” Chairman Wood said. The new Market Redesign and Technology Upgrade that took effect at midnight in California will allow the ISO to dispatch generation based on economic grounds rather than merit order. The California grid operator also implemented a market monitoring program with penalties for generators that fail to follow dispatch orders.

“These three developments represent a real hat trick win for customers,” Chairman Wood said.

* For more information, contact FERC at 202-502-8004

ERCOT Meetings

• Tuesday, October 5 – TNT General Session – ERCOT Austin 206 – 9:30am-3:30pm
• Thursday, October 7 – TAC – ERCOT Austin 206 – 9:30am-4pm (Two-day meeting)
• Friday, October 8 – TAC – ERCOT Austin 206 – 9am-noon
• Friday, October 8 – Finance & Audit Budget Review (Open) – ERCOT Austin 168 – 1:30-3:30pm

ERCOT at a Glance is an electronic summary of the timely and topical events going on within the organization.ERCOT at a Glance will update employees on the newsworthy and noteworthy events and accomplishments related to the business of ERCOT. We are seeking milestones, accomplishments and everyday news. If you’ve got important stories or information to share with us, please provide us with your news in electronic summary format, after first coordinating with the managers and directors in your area. We welcome your summaries (due by 5 p.m. on Thursday of each week) and look forward to hearing from you. If you have questions, please contact Heather Tindall at 512-225-7023 or htindall@ercot.com.