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