TOPICS:

• Board Approves 2008 Budget Recommendation
• 2008 Congestion Zones
• Nodal Market Update
• Market Operations Report
• 185 Generation Requests Under Review
• August Energy Use Down Slightly
• General Counsel Announces Resignation

BOARD APPROVES 2008 BUDGET RECOMMENDATION

The ERCOT Board of Directors unanimously approved the 2008 budget that holds flat all approved fees at yesterday’s monthly board meeting.  The budget includes a base operations budget of $123.9 million, a capital project budget of $27.5 million, and $1.8 million for market monitoring activities. 

The 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.

2008 Congestion Zones

In other action, the board designated the 2008 congestion zones and commercially significant constraints (CSC).  The four congestion zones (West, North, South and Houston) were maintained, but the South to Houston CSC was removed due to transmission improvements and a North to South CSC was added. 

The board also voted to approve an update of the Creditworthiness Standards, as recommended by the board’s Finance and Audit Committee and the market participants’ Credit Working Group.  The revisions to the standards (Section 16.8.1.5.2 of the ERCOT protocols) will:

• Lower the maximum unsecured credit allowed for a market participant from $125 million to $100 million
• Allow use of Fitch ratings to evaluate creditworthiness (along with S&P and Moody’s)
• Use tangible net worth rather than straight shareholders equity when setting maximum unsecured credit limits
• Establish modified rules limiting the amount of maximum unsecured credit allowed under foreign guarantees when quarterly financials are not provided.

Nodal Market Update

Nodal Program Director Jerry Sullivan presented a status report on the Texas Nodal Market Implementation. The program scope is fully aligned with protocols, and all early delivery systems (EDS) are on track.  The nodal team is currently finishing the first EDS and just starting EDS2 and EDS3.  Spending to date is running slightly over budget, and the current cost estimate at completion is over the $263 million amount approved by the board. The board is still holding the team to the $263 budget, and efforts are underway to bring the projections back in line.   

Key successes include:

• 53,567 of 67,986 point-to-point connections tested to date through efforts of nodal team members and market participants
• Interactions between energy schedulers and ERCOT’s nodal market management systems enabled August 24
• All 30 energy schedulers signed up for testing, and testing progressing as scheduled
• The state estimator software successfully tested and migrated for market trials
• First account holder for congestion revenue rights registered (Eagle Energy Partners)
• First market participant completion of security-constrained economic dispatch upload (Austin Energy).  

An external review of the nodal program was also presented by IBM Global Business Services.  The timeline for the December 2008 go-live date is “tight but achievable,” the presenter told the board members.

Market Operations Report

The market operations monthly summary in the board materials noted: 

• Retail switching activity was slightly lower for July (413,047 transactions compared to 414,198 in 2006)
• Percentage of residential customers served by a provider other than native retail electric provider was at 39 percent July 31, this year, compared to 32 percent July 31, 2006.  

All board meeting documents are posted on the ERCOT Web site under the September 18 board meeting. 

185 GENERATION REQUESTS UNDER REVIEW

The system planning division is currently tracking 185 active generation interconnection requests totaling over 74,000 MW, including more than 34,000 MW of wind generation, according to the August System Planning Report.  Nuclear projects in the interconnection queue total 12,386 MW; natural gas is at 17,390 MW, and coal is at 9,949 MW.  In addition, the regional planning group is reviewing proposed transmission improvements with a total cost of $20.4 million. 

New generation which began operations in July and August included:

• Sweetwater Wind 4 in Nolan County, 300 MW
• Capricorn Ridge Wind Farm 1 in Coke County, 200 MW
• Capricorn Ridge Wind Farm 2 in Coke County, 150 MW.  

The full report is posted with the meeting documents from the September 13 Reliability and Operations Subcommittee meeting.  

AUGUST ENERGY USE DOWN SLIGHTLY 

Preliminary ERCOT settlement data for demand and energy indicates energy consumption through August was down 1.6 percent from last year at this time and 4.8 percent below the forecasted demand (based on normal weather). 

The unofficial peak demand during August was 62,174 MW on August 13, representing 2.5 percent below the forecasted peak demand, and 0.3 percent below last year’s peak demand of 62,339 MW, currently the all-time high for the ERCOT region. 

By fuel type, the year-to-date energy consumption breakdown is 47.1 percent from natural gas, 36.7 percent from coal, 12.8 percent from nuclear, 2.5 percent from wind, 0.5 percent from water, and 0.4 percent from biomass and other. 

GENERAL COUNSEL ANNOUNCES RESIGNATION

Vice President and General Counsel James L. Thorne announced his resignation, effective September 30, 2007.  James Thorne joined the ERCOT staff in June 2006.  CEO Bob Kahn expressed his appreciation for Thorne’s work.