Real-time Ratings Application Implemented At ERCOT; Estimated To Save $33 Million In Congestion Costs

The first known deployment of real-time dynamic ratings in an ISO was completed by ERCOT staff March 3 and is estimated to save up to $33 million per year in congestion costs. The realtime dynamic ratings application and the related components were implemented on the EMMS, Market, MOMS, Data Archival and Portal systems.

ERCOT Reviewing Options To Avoid RMR For Genco Units

Some of 15 generating units which Texas Genco said it planned to decommission may be needed for reliability services, ERCOT staff has concluded. During the next 30 days, ERCOT staff will continue to review options to avoid entering into reliability-must run (RMR) agreements for one or more of the Houston-area units at PH Robinson and/or Webster unit 3. Cedar Bayou unit 3, Deepwater unit 7, T.H. Wharton unit 2, Webster unit 21, and the H.O. Clarke units are not required for RMR service, ERCOT said in its 60-day response to Texas Genco’s January request.

Board Reviews Financial, Nodal, Generation Issues

CFO Roy Bowman updated the ERCOT Board of Directors Tuesday on audit items, cost savings and the project plan internal control management. Bowman reported completion of 136 of the 265 audit points which ERCOT is tracking. The audit items were compiled from three PUCordered audits (CAN, Deloitte & Touche, Ernst & Young), ERCOT’s annual financial audit (PricewaterhouseCoopers) and ERCOT’s internal audits.

• Cost Savings

  Cost savings identified in January totaled $290,000, and $110,000 in savings were identified in February, including $62,000 saved in electrical and cabling services and $50,000 in audiovisual equipment services (related to control room projectors). Bowman is targeting an additional cost savings of $400,000 through timing of new hires, reduction of cell phone and telecommuting expenses, renegotiating banking terms, consolidating computer configurations, and renegotiating coffee and vending services, the office supply contract, and other items. Public Utility Commissioner Barry Smitherman praised the efforts to consolidate and eliminate extra expenses.

• Internal Control Management Plan

  Bowman presented the timeline for the internal control management project plan which was initiated on Monday. The process will cover 10 areas: project management, treasury, revenue, information system management, financial reporting, expenditure, payroll, human resources, corporate governance, and fixed asset management.

• Texas Nodal Draft Protocols

  Board members voted to approve the filing of the draft protocols for Texas Nodal with the Public Utility Commission in a resolution specifically noting that the action was not an endorsement of the final market design. The protocols were developed through a stakeholder process initiated in August 2003 to comply with a PUC rule to develop a wholesale market redesign. The rule requires more specific assignments of transmission congestion costs through a nodal market, rather than zonal, a day-ahead energy market, and other market enhancements. The protocols are to be filed in keeping with the PUC rule deadline, but the Texas Nodal Team (TNT) will continue meeting to address some outstanding issues while the PUC reviews and evaluates the proposed wholesale market design changes. Board Chairman Mike Greene and Commissioner Smitherman both praised the TNT facilitators – contractors Trip Doggett and Vikki Gates Cuddy and ERCOT Director of Market Operations Jim Galvin – for their exemplary efforts in shepherding the drafting of the protocols.

• New Generation Adequacy Task Force

  Board members also heard a presentation on the new Generation Adequacy Task Force. The market participant group was assembled in February to address issues surrounding the ERCOT reserve margin, especially with regard to recent announcements for “mothballed” and retired generating units. The scope of the group is to reexamine the method of calculating the reserve margin.

• KEMA Cost Comparison Study

  Al Galiunas, a representative from KEMA, Inc., presented the results of a study completed last December comparing ERCOT’s costs to other ISOs. The report concludes that ERCOT’s overall costs are lower than average among the ISO’s examined and are lower than average in most cost categories. ERCOT’s costs are higher than average in two areas: relating to its unique role as operator of a retail market and wholesale metering services and in association with market evolution where the stakeholder process apparently drives somewhat higher costs, the report finds. “ERCOT is very cost effective,” Galiunas said. “The costs are not out of control as we have seen in other markets.”

• Houston Area Constraint Mitigation Project

  The board voted to endorse the need for the Houston Area Constraint Mitigation Project as a solution to economic congestion in the Houston area. The project’s objective is to construct long-term upgrades to relieve congestion, increase reliability, and provide operational flexibility for maintenance outages in the Houston area. CenterPoint Energy submitted the proposal in September 2004, and ERCOT staff reviewed and refined it, and presented it to the South Regional Planning Group. CenterPoint estimates costs of the capital improvements at $121.9 million (resulting in an annual carrying cost of $20.1 million). ERCOT estimates annual production cost savings resulting from the completion of the project at $63 million per year.

• NERC Board Visitors

  Tom Berry, vice chairman of the North American Electric Reliability Council (NERC) and new NERC trustee Paul Barber, who were visiting ERCOT on Tuesday, made brief presentations during the board meeting.

  Board presentations are posted each month on the ERCOT Web site Meeting Calendar by date of the board meeting.

Vice President Of Human Resources Joins Staff

Nancy McIntire has joined ERCOT to fill the newly created position of Vice President of Human Resources and Organization Development, CEO Tom Schrader announced at the ERCOT board meeting. McIntire has extensive experience in change management and establishment of human resource processes. Most recently, she was part of the “turnaround team” at MCI/WorldCom, responsible for human resource programs as vice president of human resources. Her experience also includes previous assignments in Texas with IBM and Landmark Graphics/Halliburton. She holds BBA and MBA degrees from the University of Texas.

With the addition of this VP position, the current director of HR position has been eliminated, and Gary Stroud will be leaving ERCOT to pursue his aspiration of teaching at the college level. “Gary has been a valuable member of the management team through a challenging time of growth and change,” Schrader said. “We wish him well.”

ERCOT Meeting Calendar

March 2005