Board Focuses On Texas Nodal Progress

The Board of Directors reviewed the progress of the Texas Nodal Team (TNT) at their half-day meeting Wednesday. TNT facilitator Jim Galvin reported that the protocol development is on schedule to be filed next month and expressed appreciation for the stakeholders involved in the complicated process. He also said the recent economists’ review has had a very effective impact on the design. The board’s next step will be to direct ERCOT staff to file the draft protocols in compliance with the PUC’s rule (Subst. R. 25.501), although the board makes no endorsement of the final TNT market design or draft protocols, or other alternatives for market design that the PUC may consider.

Other reports at the meeting including the CEO report and TAC report. Board presentations are posted each month on the ERCOT Web site Meeting Calendar by date of the board meeting.

CEO Responds To Legislators’ Call For Financial Review

Representative Trey Martinez Fischer hosted a news conference Feb. 9 to discuss trust and accountability at ERCOT and presented an open letter, signed by 30 members of the House of Representatives, to Comptroller Carole Keeton Strayhorn calling for a financial review of ERCOT. CEO Tom Schrader issued a statement in response:

“ERCOT has undergone numerous audits over the past year, including three that were initiated and directed by the Public Utility Commission. These independent audits thoroughly reviewed our internal processes. The findings of the audits were made public, and ERCOT has developed a detailed action plan for addressing the auditors’ recommendations in full cooperation with PUC Commissioners and staff.

“Ever since criminal misconduct at our organization was discovered last spring, ERCOT has been deeply committed to twin goals: We have cooperated fully with law enforcement officials and we want to see justice done; we want our internal controls and business processes to ensure such an event does not occur again in the future.

“None of the audits or investigations have uncovered any indication that electric grid security or market data integrity was compromised in any way.

“ERCOT is fully accountable to the Public Utility Commission and the Texas Legislature on all matters related to our business processes, our budget, and our revenue. And we will continue to work closely and cooperate fully with the PUC, the House Regulated Industries Committee, the Senate Business & Commerce Committee, the Electric Utility Restructuring Legislative Oversight Committee, and the Sunset Advisory Commission.”

ERCOT Testifies At House Regulated Industries Hearing

ERCOT CEO Tom Schrader presented an ERCOT update to the House Committee on Regulated Industries at its Feb. 8 meeting. Schrader summarized ERCOT’s mission and role and addressed some current issues including:

• Reserve Margins – 15-17% for 2005; no immediate crisis but a Technical Advisory Committee (TAC) task force is developing a better process for reporting the status of mothballed units to indicate which units would be likely to come back online; ERCOT staff is supporting this effort
• Fuel Diversity – 63% natural gas (percent of capacity), 10% dual fuel, 19% coal, 6% nuclear, 2% renewables; TAC subcommittee is assessing vulnerability of electric supply to natural gas curtailments
• Transmission Planning – Nearly $2 billion invested in transmission facilities since 1999 and additional $1.8 billion to be completed by 2008 based on current projections; transmission expansion facing competing priorities from West Texas (wind power), North Texas (high congestion costs in DFW area) and Rio Grande Valley
• Wind Power – Texas well on its way to meeting the SB 7 renewable mandate (2,000 MW by 2009); 1,300 MW of wind capacity now online and 500 MW set to go online in 2005; delivering power from existing wind farms in West Texas to population centers in the east presents news challenges in system design and operation
• Wholesale Market Design – Texas Nodal Team stakeholders continue working toward consensus on details of the market rules that conform to the market design elements set forth in the Commission rule; draft protocols are on schedule to be approved by the board and filed with the PUC in March
• Management Practices & Controls – Numerous actions completed or underway to improve management practices and cost effectiveness in response to recent audits and the PUC Fee settlement
• Latest Switching Numbers – 19% of residential customers, 23% small non-residential and 63% of large non-residential customers have switched to competitive suppliers. Schrader’s complete presentation is available on the ERCOT Web site as Status of the Electric Industry under Reports and Presentations 2005.

Legislation Update

Since the opening of the new Legislative session, Mark Walker, deputy general counsel, and Paul Wattles, manager of governmental relations and communications, have been tracking bill filings related to ERCOT and the electric industry. Thus far, the list includes:

• SB 408 – Sunset Commission – Continuation of PUC
• SB 409 – Office of Public Utility Counsel (related to Sunset Commission)
• SB 533 – State Goal for Renewable Energy
• HB 1083 – Open Meetings/Open Records for ERCOT
• HB 165, HB 301, HB 554, SB 103 – System Benefit Fund
• HB 412, SB 351 – Credit Scoring
• HB 555 – Customer Disconnection
• HB 989 – Utility Rates

Bill texts and status can be viewed at Texas Legislature Online by entering the bill number in the “Quick Bill Status” search block.

Texas Market Praised At Austin Conference

“Texas far outpaces all other states in terms of customers who have chosen non-utility electric power supplies and the amount of energy delivered to them,” EnergyPulse (www.energypulse.net) reported in its coverage of KEMA’s “Competition at the Crossroads” conference in Austin earlier this month. Texas alone accounts for 38% of the competitive load across the country, according to statistics presented at the conference.

Cost Comparison Shows ERCOT Lower Than Other ISO’s

KEMA Consulting, Inc., recently completed a comparison cost study comparing ERCOT to other independent system operators (ISO). The report concluded that ERCOT’s costs are lower than the estimated average costs among the ISO’s examined. The complete report is available on the ERCOT Web site as ERCOT Cost Comparison Study under Reports and Presentations 2004.

Employees Begin Moving Into Taylor Expansion Facility

The first move-in’s at the new Taylor expansion facility, TCC II, started Feb. 1. Approximately 150 people will be moving into the 75,000-square-foot facility over the next few months. All employees and contractors are expected to be out of the rented office space and temporary facilities at Taylor Plaza by the end of March.

The new building is anticipated to add greater productivity and efficiency by consolidating work groups together and reducing travel time between various facilities in Taylor and between Austin and Taylor. Cost reductions are anticipated with the cancellation of multiple leases on approximately 25,000 square feet at the Taylor Plaza (temporary buildings and converted office space formerly occupied by HEB Grocery, a card shop, dance studio and a sporting goods store), including termination of contracts and rentals for security alarm systems and monitoring. The approximate cost of the new building is $13.9 million.

Retail Market Testing Scheduled To Begin March 18

The next round of Retail Market Qualification Testing is scheduled to begin March 18. Testing is required for new market participants (CRs and TDSPs) entering the Texas Retail Market, as well as for current market participants who are entering new service territories, testing additional business functionality, or adding another entity to their business umbrella. The deadline to register to participate in Flight 0405, TX SET Version 2.0a Retail Market Testing, is March 9. The flight orientation meeting will be March 1. More information is available on the ERCOT Web site under Texas Retail Testing.

ERCOT Meeting Calendar

January 2005