Austin — The Electric Reliability Council of Texas (ERCOT) announced today that it is actively working with the Public Utility Commission to implement ahead of the legal schedule the new oversight law passed by the Texas Legislature. ERCOT will work to ensure that the new processes are in place quickly—ahead of the legislated schedule where possible—for the benefit of the Texas electric market.

"ERCOT welcomes the new law," said ERCOT Chief Executive Officer Thomas F. Schrader. "It clarifies the framework for PUC oversight of ERCOT and lays the groundwork for a more productive long-term working relationship."

Senate Bill 408 approved by the 79th Texas Legislature contains the Sunset Advisory Commission's recommendations codifying the PUC's oversight authority over ERCOT's operations and finances, modifying the structure of the ERCOT Board, and requiring ERCOT to fund and support an independent market monitor selected by the PUC. The bill also reauthorized the PUC for six years. With the signature by Gov. Rick Perry last Friday, SB 408 will take effect beginning Sept. 1, with a phase-in of requirements after that.

PUC Chairman Paul Hudson said of ERCOT: "We've seen substantial and tangible progress over the last 12 months. Senate Bill 408 continues to build on themes of cooperation, mutual understanding and trust which ultimately strengthen Texas's underlying electric infrastructure."

Schrader said ERCOT has already taken significant actions to improve its working relationship with the PUC in its oversight role, and has been reporting its progress in monthly detailed reports. "We have dramatically strengthened our contracting procedures and are putting strong internal controls in place throughout our business processes," he said. "We are also aggressively looking for opportunities to cut costs and improve our overall financial efficiency."

Schrader said ERCOT is committed to working with PUC Commissioners and staff to adopt rules or bylaws to achieve full compliance with SB 408 requirements. Actions are being planned in the following three major areas:

Oversight, Cost Effectiveness And Accountability

• Affirm requirements for materials needed by the PUC to review ERCOT finances and Administration Fee.
• Begin developing the scope of follow-up audits or reviews of ERCOT, to be conducted in 2006, to confirm that ERCOT's internal controls and business practices have been successfully implemented.

Governance

• Identify and propose two additional unaffiliated (independent) board members by year end 2005 for PUC approval;
• Install an independent director as Board Chair by September 1, 2006;
• Clarify public meeting policy, and affirm Board members' disclosure and recusal requirements.

Independent Market Monitor (IMM)

• Work together to:
  • Define the roles of the PUC, ERCOT, and the IMM;
  • Set budgets for the IMM for the balance of 2005 and all of 2006;
  • Determine the selection process and criteria for the IMM;
  • Establish confidentiality and other ethics requirements.
• Begin implementation of the new IMM structure by September 1, 2005.