PUC Audits to be Completed November 15; ERCOT Action Plan Underway

Two major ERCOT audits ordered by the Public Utility Commission (PUC) will be completed and submitted to the PUC next Monday, Nov. 15: a management and internal controls audit by Deloitte & Touche and an internal IT security assessment by Ernst & Young.  ERCOT expects the reports to be critical of numerous past and current ERCOT practices and procedures.

PUC Chairman Paul Hudson has requested that ERCOT:

• Prepare a detailed plan for implementing the auditor’s recommendations
• Provide monthly progress reports at PUC open meetings
• Discuss plans for necessary follow-up audits with the PUC and the ERCOT Board of Directors.

“ERCOT intends to comply fully with all three of the chairman’s requests,” CEO Tom Schrader said.  “We welcome this scrutiny, and I remain confident that ERCOT will emerge a stronger organization as a result of the audits.  I believe we have already made a good start in addressing some of the issues identified in the audits, particularly, in three areas: tightening management practices and controls, strengthening accountability, and improving efficiency in use of resources.  ERCOT is fully committed to making the changes necessary to regain public confidence and trust.”

Summary of Management Action Plan

Some highlights of the changes already underway are listed below.

Tightening Management Practices and Controls

• Strengthened numerous accounting controls over contractors
• Requiring competitive bids for contractors and outside services
• Requiring more extensive background checks on employees and contractors
• Completed initial rounds of mandatory management training on contractor policies and procedures
• Implemented an anonymous reporting service for employees to report suspected activity

Strengthening Accountability

• Expanded 2005 budget dialogue with PUC staff and public, including more detailed budget information and more public meetings
• Increased resources dedicated to communication with the PUC and Legislature

Improving Efficiency in Use of Resources

• Freezing the administration fee at $.44 in the proposed 2005 budget
• Reducing debt by $5 million per year in both 2005 and 2006
• Reducing reliance on outside services by $5.6 million, from 25% to 14% of company labor for 2005
• Filed initial insurance claim for recovery of funds lost due to employee misconduct

The more-detailed, 43-item list is posted on the ERCOT Web site as ERCOT Management Action Summary under Reports and Presentations 2004.

Submissions for ERCOT at a Glance are due by 5 pm on Thursday of each week.  If you have questions, please contact Dottie Roark, 512-225-7024 or droark@ercot.com.