Topics:

• Board Reviews 2008 Budget Recommendation
• Mexico DC Ties Begin Testing for Commercial Transactions
• July Energy Use Down 8.3% from Last Year
• 182 Generation Requests Under Review
• NERC Workshop Reviews Long-Term Reliability Issues

Board Reviews 2008 Budget Recommendation

The Finance and Audit Committee of the ERCOT Board of Directors recommended approval of a proposed 2008 budget  that holds flat all approved fees at today’s monthly board meeting. The board is expected to vote on the final budget at the September meeting.

The preliminary 2008 budget maintains existing approved fees at current levels:

• System Administrative Fee -- $0.4171 per megawatt-hour (MWh)
• Nodal Surcharge -- $0.127 per MWh (will cease to be collected after recovery of nodal costs)
• Texas Regional Entity Fee -- $0.016 per MWh.

ERCOT has maintained a flat or declining system administrative fee for the last five years. The budget presentation is posted with the August 21 board meeting key documents, item 14.

Transmission Projects Endorsed

Other board activity included review and endorsement of three transmission projects:

• CenterPoint Singleton and Zenith 345 kV substations project
• CPS Energy Spruce to Skyline Second 345 kV circuit project
• Oncor Parkdale dynamic reactive project.

Additional information on the projects is posted under item 7 of the August 21 board meeting.

Nodal Update

CEO Bob Kahn presented a review and assessment of the Texas Nodal Market Implementation . He reviewed current accomplishments and program risks and concluded the go-live date of December 2008 remains achievable, but significant obstacles must be addressed. Nodal Program Director Jerry Sullivan presented a more detailed status report. Both presentations are posted under key documents for the August 21 board meeting.

Market Operations Report

The market operations monthly summary in the board materials noted:

• Retail switching activity slowed in June (406,604 transactions compared to 533,975 from June last year)
• Residential load served by provider other than native retail electric provider is at 43 percent
• Wholesale market volume was down slightly from prior year, and a significant increase in “balancing energy – down” was noted, primarily due to unusual intra-day rain and cloud cover weather conditions.

The full report is posted under item 6 of the August 21 board meeting.

Mexico DC Ties Begin Testing for Commercial Transactions

ERCOT recently began testing the scheduling systems for commercial transactions on three asynchronous connections with Mexico’s government utility Comisión Federal de Electricidad (CFE): Eagle Pass (36 MW) and McAllen (150 MW) – both direct current (DC) ties – and Laredo (100 MW), a variable-frequency transformer connection.

The ties have been used for mutual emergency assistance between ERCOT and CFE but have not been previously available for commercial transactions. After all required agreements, tests and procedures are in place, ERCOT will notify the electric market that these ties are commercially available.

Other existing ties to neighboring grids include a DC tie in North Texas (220 MW) and one in Northeast Texas (600 MW), both with Southwest Power Pool.

Mexico has assisted ERCOT through the DC ties and the Laredo connection during several recent capacity-shortfall events. ERCOT has also assisted CFE on emergency occasions, such as following the May tornado outages in the Piedras Negras and Acuña areas.

July Energy Use Down 8.3% from Last Year

The July preliminary demand and energy report shows energy consumption down 8.3 percent for the month of July, compared to 2006. The year-to-date energy usage is down 1.4 percent, compared to last year. The peak demand for July was down 8 percent from the all-time peak demand for the month.

An unofficial peak demand of 62,101 MW was recorded on August 13, just under the all-time peak demand record of 62,339 MW (Aug 17, 2006).

182 Generation Requests Under Review

The system planning division is currently tracking 182 active generation interconnection requests totaling over 69,000 MW, including more than 31,000 MW of wind generation, according to the July System Planning Report . Nuclear projects in the interconnection queue total 12,386 MW; natural gas totals 16,183 MW, and coal totals 8,331 MW. In addition, proposed transmission improvements ranging from $142-$196 million are under review in the regional planning group.

The full report  is posted with the meeting documents from the August 16 Reliability and Operations Subcommittee meeting.

NERC Workshop Reviews Long-Term Reliability Issues

Vice President of System Planning Bill Bojorquez made a presentation on intermittent resources and demand response integration  at the North American Electric Reliability Corporation’s (NERC) workshop on 2007-2016 long-term reliability assessment, August 16.

Key findings from the workshop included:

• Over-dependency on natural gas may lead to regional reliability concerns
• Integration of intermittent renewables, large nuclear plants and demand response will require long-term grid investment and modernization
• Proposals and approvals of coal plants have declined as concerns about emissions increase; this concern is also a driver for renewable energy resource state mandates and demand response
• Significant amounts of nuclear power capacity are proposed by generator owners in the 2015-2016 timeframe
• The aging workforce will require coordinated industry action to increase recruits.

The workshop findings report and presentations are posted on the NERC site  under the Reliability Assessment Subcommittee section .