WEBVTT
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Hi, well, it's 10:32.
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So I'm gonna call this meeting to order.
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Good morning, everyone.
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My name is Kasey Feldman-Thomason.
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I'll be presiding over this hearing
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for the Public Utility Commission.
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Thank you for coming.
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I want to convene this hearing
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and project 38533 the PUC review
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for ERCOT budget for 2022, 2023.
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The agenda for this morning
is that ERCOT has presentation
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that they'd like to make
after that we'll open the floor
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for any questions that
anyone might have,
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but I don't see anyone
who might have questions.
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I may have a couple
of follow-up questions
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and then we'll take it from
there and close the workshop
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once any questions are answered
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and I'll go ahead
and turn it over to y'all
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Brad and Sean.
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Great, thank you.
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I appreciate that.
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Good morning, this is Brad Jones,
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interim president and CEO of ERCOT
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sitting with me here is Sean Taylor,
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vice president and
chief financial officer,
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ERCOT submitted its
2022, 2023 biennium report
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on September 21st of 2021.
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The highlight of that
submission is that we intend
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to maintain our system
admin fee at a rate of $0.555,
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per megawatt hour, which
is where it stands today
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which is where it has stood since 2016.
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At the time of our 2016,
2017 biennium budget request.
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We indicated at that time
that we would be able to hold
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that rate for a period
of four to six years.
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It is currently anticipated
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that there is no fee
increase for this year.
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So that would make the 2022
and 2023 cycle the eighth year
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that we have held our
admin fee at the same level.
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ERCOT management
and the board of directors
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have supported the
reasonableness of this budget request
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to provide for our operations
for the next two years.
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At the outset, I'd like to
thank the Commission's staff
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for their collaboration in the
budget development process,
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because it ensures that
we prepare a budget request
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for the board's consideration
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that also includes the
Commission's priorities.
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At a high level, the budget includes
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a spinning authorization
of 322 million for 2022
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and 287 billion for 2023.
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Also included in this
budget request is funding
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for the NERC ERO Electric
Reliability Organization.
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This is a pass through.
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These are funds that
are not used by ERCOT
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for ERCOT operations,
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and is a total of $40.5
million for a period of two years
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for the entire two year biennium.
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In terms of revenue,
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the system admin fee remains
our primary funding source.
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And as I said, it is
projected under this request
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to be $0.555 per megawatt hour.
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The system admin fee will
generate 233 million for 2022
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and 241 million for 2023.
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In addition to the system admin fee,
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we also have user fees
pursuant to Commission rules.
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The user fees do not
cover a significant portion
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of our revenues.
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We expect approximately
20 million in 2022
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and 20 million, again in
2023, from those user fees.
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In regard to budget drivers
for this biennium budget,
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there are three primary drivers.
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First, the drivers to maintain
a flat system admin fee,
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which is really what
we're requesting today.
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Second it's to incorporate key
initiatives and new demands,
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and third to comply
with the board of directors
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debt strategy guidance.
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Let me start with the first driver.
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The system admin fee
as we have indicated,
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we intend to hold flat at 0.555
for the next two year cycle.
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A relative to 2022 amounts projected
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in the approved 2020
and 2021 by any amount.
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We expect a decrease in
system admin fee revenues
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due to lower than expected load growth,
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particularly associated with COVID.
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We also expect department
net expenditures to increase,
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and that's due to the cost
of inflation, Winter Storm Uri,
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legislative requirements,
and other due demands,
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partially offset by our cost savings.
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We expect project
expenditures to increase as well,
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and we'll maintain a
consistent multi-year approach
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that takes into account
the major refreshes
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we need to do, system refreshes.
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The budget request includes a revised
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real-time quantization
project expenditures
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to reflect the current project forecast.
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It also adds the met
center replacement project
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with an expected purchase of the office
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and meeting facility in 2022.
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Lastly, in regard to this first driver,
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we expect a significant
decrease in interest income
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due to much lower interest rates.
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For the second budget driver.
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We incorporated strategic
objectives and new demands,
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but we expect to
recognize efficiency savings
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to help offset some of the
costs of these new demands.
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ERCOT will incorporate
its strategic plan objectives
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by enhancing our operating
capabilities to maintain
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the reliability of an
increasingly complex system,
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improving our information exchange
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to facilitate collaborative interaction
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and advancing competitive
solutions for changing industry
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while optimizing the
use of ERCOT resources
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to provide high value
services continuously.
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Those are the key strategic objectives
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that were identified
in our strategic plan
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that was adopted in 2018
and runs through 2023.
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In addition to those
strategic objectives,
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there are many new demands
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that arose from winter
storm Uri and particular,
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the generation transmission
weatherization inspections,
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which have been required by legislation
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signed into law this year.
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The budget requests also
includes significant increases
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in company insurance,
external legal services,
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an additional
communication service costs
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across our industry.
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We have taken exceptional
measures to control
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and cut these costs
across the organization
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to offset those significant costs.
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However, not all costs could be offset.
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One last comment on
the topic of new demands,
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and that is in the 2020 to 2023 budget.
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We contemplate full
recovery of the generation
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and transmission inspection costs
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through additional user fees.
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The third and primary
budget driver is compliance
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with the board's debt strategy guidance.
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To do that, we will maintain or improve
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or cuts the longterm financial integrity
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by managing outstanding
debt and liquidity requirements,
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maintaining a fair, stable
and predictable fees
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by using debt matching
to the extent possible
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and providing the lowest cost matching
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lowest cost of system
administration fee payers
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by using the lowest cost debt
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that is available inappropriate.
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We continue to improve
operational efficiency
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to help keep the current
system admin fee rate level low
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and streamlined processes
and use technology
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where available to create
additional efficiencies.
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Those are my comments and we would both
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be happy to answer your questions.
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Great, thank you.
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And as there are no
members of the public here
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to ask questions, I'll just go ahead
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and no staff members except myself
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I will go ahead and ask my questions.
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So I heard you say in your presentation,
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and this also echoes the
filing and project 38533,
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that the budget request
contemplates full recovery
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of the Senate Bill 3 generation
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and transmission inspection costs.
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Does that cover all costs associated
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with the weatherization
mandates, for example,
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would it cover the cost
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of developing weatherization standards?
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So it is not contemplated to
cover that as it contemplate,
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just to cover the cost of inspections.
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Okay.
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We have already filed a notice
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of protocol revision requests,
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which includes an outlines those costs
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and is currently being discussed
among market participant.
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Okay, and so the
other costs besides
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those directly attributable
to the inspections,
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where do we find those in the budget?
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Those will be absorbed
within our normal budget.
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Okay, just operating
cost basically.
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Yes.
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Okay, and
additionally, in your filing,
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you state in the statement
of the ERCOT CEO,
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you state that ERCOT may
recommend other user fee changes
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to the board while this 2020
to 2023 budget is in effect.
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Other than the fee to
cover the inspections
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that we've just talked about.
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Are there any other
specific potential changes
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that are anticipated
or is that just something
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that could happen?
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It's just something
that could happen.
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Our normal process is trying
to minimize additional fees
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to capture most everything
within the system admin fee.
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And that's what we've done
here in this filing as well.
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We do have a fee for
wide area network use
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and that's one of our
larger fees that we have.
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Sean, are there others
that you'd like to highlight?
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There's nothing specifically
that I need to highlight,
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but there's also a times
we probably might remember
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from cybersecurity monitor
where there's PUC mandated things
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that come into play that we also
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would have develop fees for potentially.
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Okay, all right.
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Well, those are all of my questions.
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And thank you for answering them.
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We've appreciated working with you all.
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The process for
year is that I anticipate
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having a draft order
presented to the Commission
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at the December 2nd open meeting.
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If for some reason that's not possible,
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it'll be at the December
16th open meeting.
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The Commission will consider
your 2020 to 2023 budget
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and also provide some directives
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for the 2024, 2025 budget.
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So look for a draft order
next week and we'll keep,
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like I said, I anticipate
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it being on the December 2nd meeting,
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but if for some reason
this is what happens,
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we'll get it on the following one
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or have a budget next year.
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That's all I have to cover.
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And since there's no one else to speak,
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this meeting is closed.
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Thank you.
Thank you