CFO Reports Cost Savings Progress To Commission

Approximately $290,000 was identified in savings last month and an additional $200,000 is targeted, CFO Roy Bowman reported in a financial update to the Public Utility Commission last week. The savings identified in January included:

• Custodial services – $101,000
• Interest expense – $84,000
• Insurance premiums – $75,000
• Media services (HR) – $30,000

Areas targeted for additional cost savings include timing of new hires, cell phone and telecommuting expenses, audiovisual equipment services, electrical and cabling services, and coffee and vending services.

The budget cuts are related to the recent adjustment of the ERCOT administration fee from $.44 to $.42 in a PUC-led settlement process. A total reduction of $8 million is needed, including $6 million represented by the 2-cent fee reduction plus $2 million set aside for additional responsibilities associated with the recently completed security and management audits – including new finance, security and human resources staff. Thus far, the budget cuts have included a cut of $4.56 million in operations and $3.08 million in projects (equity portion), which also reduced planned debt by $4.64 million, for a total $7.72 million reduction in project expenditures).

Solutions For TXU Mothball Requests Determined; Additional RMR Exit Plans Estimated To Save $79 Million

Final remedial operational solutions have now determined that three TXU units requested for mothball status will not be required for reliability-must-run (RMR) service. The preliminary 18-day response to the recent TXU mothball announcement indicated that some units might be required for reliability, but after the full review, ERCOT’s system operations and transmission services divisions determined that North Lake 2 and 3 and Valley 1 are not required for RMR. The resulting savings to market participants is estimated at between $35 million and $42 million per year for these three units.

Other recent RMR exit schedules developed by ERCOT are listed below. Once these units are no longer under an RMR agreement, uplifted costs to market participants will be reduced by $79 million annually:

General Counsel Resigns After Eight Years Of Service

ERCOT General Counsel Margaret Pemberton submitted her resignation February 23 but has agreed to stay on until early April while a search is conducted for her successor.

“Margaret has been a vital contributor to ERCOT for over eight years, serving as outside counsel before joining ERCOT’s executive team in 2001,” CEO Tom Schrader said. “She helped guide the organization through the challenges of implementing SB 7 and has played a critical role in ERCOT’s immediate efforts to investigate and take corrective action following the ethics violations last year.”

Board Chairman Mike Greene and other board members expressed their deep appreciation for the selfless dedication, thoroughness and commitment that Margaret has shown in all her work on behalf of ERCOT.

Legislation Update

Recent legislative bill filings with direct impact on ERCOT operations include:

• SB 408, SB 743 – Functions of the Public Utility Commission (PUC’s Oversight of ERCOT):

  Consistent with the Sunset Commission recommendations, these bills would 1) clarify the PUC’s authority to oversee and investigate ERCOT’s finances, budget and operations; 2) add two additional ERCOT board members unaffiliated with any market segment; 3) specify that the board chairman be one of the five unaffiliated members; 4) specify that ERCOT Board meetings be open to the public and that meeting notices and agendas be posted seven days in advance; 5) require Board members to disclose any conflicts of interest and recuse themselves from deliberations and actions; 6) provide that ERCOT pay for a wholesale market monitor to be selected and supervised by the PUC.

• HB 1083, HB 1127 – Open Meetings/Open Records for ERCOT:

  Applying the Texas Open Meetings Act (OMA) to ERCOT would require public notice and public access for meetings of the ERCOT Board, similar to that required of state agencies. The Sunset Commission last year recommended instead an ERCOT-specific public meeting requirement that allows exceptions for emergency Board actions, and clarifies the Board’s ability to conduct executive session review of litigation, contract and personnel issues (similar to current practice). (The Sunset approach is embodied in the Senate bills described above).

  Applying the Texas Public Information Act (PIA) to ERCOT would make ERCOT information subject to public disclosure requirements. Market participants have voiced concern over applying the PIA to ERCOT, which handles a large amount of market-sensitive data and grid security-related and other confidential information. The Sunset Commission did not address the open records issue.

Other bills related to the electric industry introduced in this session of the Legislature include:

• HB 165, HB 301, HB 554, SB 102 – System Benefit Fund
• HB 412, SB 351 – Credit Scoring
• HB 555, HB 1369 – Consumer Choice and Customer Disconnection
• HB 1565, SB 710 – State Goal for Emerging Generation Technologies
• HB 1567, SB 735 – Delay in Deregulation for Investor Owned Utilities in Southeastern Electric Reliability Council (outside of ERCOT)
• HB 989 – Utility Rates
• SB 409 – Office of Public Utility Counsel (related to Sunset Commission)
• SB 533 – State Goal for Renewable Energy
• SB 711 – Metering Services
• SB 712 – State Goal for Energy Efficiency
• SCR 6 – Urging Congress to Establish a Domestic Energy Policy

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

ERCOT Meeting Calendar