* This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting. [1. Call General Session to Order] [00:00:05] FINANCE AND AUDIT COMMITTEE AND GUEST. THIS IS BILL FLORES, THE COMMITTEE CHAIR. I WANNA WELCOME EVERYONE TO THE, UH, FEBRUARY 27TH, 2023 AUDIT COMMITTEE MEETING. I HEREBY CALL THIS MEETING TO ORDER. THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON ERCOT WEBSITE. AND BEFORE WE GET GOING, I'D LIKE TO ASK P C CHAIRMAN PETER LAKE IF HE WOULD LIKE TO RESUME THE OPEN MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS THAT WAS CALLED TO ORDER EARLIER TODAY. IT LOOKS LIKE WE HAVE ANOTHER MEMBER AS WELL. THANK YOU SIR. SIR, WE'LL BE RECONVENING A NEW MEETING OF THE PUBLIC UTILITY COMMISSION THAT WILL NOW COME TO ORDER TO CONSIDER MATTERS HAVE BEEN DULY POSTED WITH THE SECRETARY OF STATE FOR FEBRUARY 27TH, 2023. FOR THE RECORD, MY NAME IS PETER LAKE AND I'M JOINED TODAY BY COMMISSIONER MCADAMS, CLAUDE FELTY AND, UH, MS. JACKSON. THANK YOU, SIR. UH, THANK YOU CHAIRMAN. UH, THIS, UH, BEFORE MOVING ON TO TODAY'S BUSINESS, I'LL HIGHLIGHT TO COMMITTEE MEMBERS THAT THE ANTITRUST AND A ADMONITION AND SECURITY MAP WERE INCLUDED WITH THE POSTED MEETING MATERIALS. THE FIRST [2. Designation of Committee Secretary] ORDER OF BUSINESS ON TODAY'S AGENDA IS ITEM TWO, DESIGNATION OF COMMITTEE SECRETARY. THE COMMITTEE CHARTER REQUIRES THAT WE DESIGNATED COMMITTEE SECRETARY, WHICH TRADITIONALLY HAS BEEN THE GENERAL COUNSEL OR THEIR DESIGNEE, UNLESS ANY COMMITTEE MEMBERS WOULD LIKE TO DISCUSS THIS FURTHER, I RECOMMEND THAT THE COMMITTEE CONTINUE THIS PRACTICE AND WILL ENTERTAIN A MOTION TO DESIGNATE CHAD SEALEY, ERCOT, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY, OR HIS DESIGNEE AS THE COMMITTEE SECRETARY FOR THE F AND A COMMITTEE. IS THERE ANY DISCUSSION OR DO WE HAVE A MOTION? SO MOVED. OKAY. PEGGY HAS MADE THE MOTION. SECOND. BOB HAS SECONDED. ARE THERE ALL IN FAVOR? SAY AYE. AYE. ANY, ANY OPPOSED? ANY ABSTENTIONS? OKAY. THIS MOTION CARRIES. AND, UH, JD WELCOME. YOU'RE THE, UH, CONTINUING SECRETARY FOR THE F AND A COMMITTEE. [3. Notice of Public Comment, if Any] NEXT IS ITEM THREE, THE NOTICE OF PUBLIC COMMENT, IF ANY. TODAY'S PUBLIC. UH, TODAY'S MEETING AGENDA WAS POSTED PUBLICLY ON FEBRUARY THE 20TH AND PROVIDED INSTRUCTIONS FOR THE PUBLIC FOR COMMENTING IN PERSON. TO DATE, NO ONE HAS EXPRESSED AN INTEREST IN COMMENTING. IS THAT STILL CORRECT, CHAD? THAT IS CORRECT. OKAY. THANK YOU. UM, NEXT [4. December 19, 2022 General Session Meeting Minutes] AGENDA. ITEM FOUR, THE DECEMBER 19TH, 2022, GENERAL SESSION MEETING MINUTES. THERE IS A DRAFT OF THE, THE, UH, MEETING MINUTES IN YOUR DILIGENT, UH, DECK. UH, WITH THAT I'LL ENTERTAIN A DISCUSSION OR A MOTION FOR APPROVAL. MOVE TO APPROVE SECTION. OKAY. SO MOTION BY CARLOS AND A SECOND BY PEGGY. ALL IN FAVOR? AYE. AYE. ANY OPPOSED? ANY ABSTENTIONS? OKAY. THE, UH, MINUTES ARE APPROVED. NEXT [5.1 Recommendation regarding Committee Charter] AGENDA. ITEM FIVE, CHARTER REVIEW AND APPROVAL. WE HAVE TWO SUB ITEMS. FIRST AGENDA ITEM 5.1, RECOMMENDATIONS REGARDING COMMITTEE CHARTER, WHICH IS AN ANNUAL REQUIREMENT. UH, THERE ARE MINOR REVISIONS THAT HAVE BEEN PROPOSED FOR 2023 AS SUMMARIZED IN THE MEMORANDUM INCLUDED WITH THE MEETING MATERIALS, WHICH ALSO INCLUDED OUR BREADLINE OF THE PROPOSED REVISIONS. UNLESS ANYONE HAS ANY COMMENTS OR QUESTIONS, I'LL ENTERTAIN A MOTION TO RECOMMEND BOARD APPROVAL OF THE REVISED FNA COMMITTEE. CHARTER IS PRESENTED. BILL, I HAD TWO MINOR QUESTIONS, COMMENTS ON THAT. ON PAGE 27, IN ATTACHMENT B, WHICH IS THE RED LINE ON ITEM NUMBER SIX, THERE'S THE COMMENT IN THE FIRST SENTENCE ON REGARDING THE, UM, PLANNING EXECUTION OF THE AUDIT SAYS AS NECESSARY BEFORE ENDURING AUDIT FIELD WORK. I DON'T THINK YOU NEED THE WORDS BEFORE ENDURING AUDIT FIELD WORK. IT SHOULD BE AT ANY TIME, BUT I THINK YOU JUST ELIMINATE THOSE WORDS. THERE WAS ONE COMMENT AND THE OTHER COMMENT IS NUMBER EIGHT, THAT TYPICALLY WHAT I'M USED TO IS THAT THE COMMITTEE WOULD REVIEW DISCLOSURES PRIOR TO THE COMPANY MAKING THE AUDIT, UM, MAKING THE, UM, RADI AGENCY PRESENTATION, NOT AFTER. OKAY. I'M NOT SURE WHAT REVEALING AFTER DOES FOR US. THAT MAKES SENSE. CAN YOU, UH, WHERE WAS THE FIRST, UH, FIRST ONE IS, IS THE TOP LINE AT THE TOP? YEAH. THAT BEFORE AND DURING AUDIT FIELD WORK. I DON'T THINK YOU NEED THOSE WORDS. OKAY. AND THEN IN NUMBER EIGHT, THERE'S THE WORD REVIEW DISCLOSURES MADE BY THE COMPANY TO THE RATING AGENCY. I WOULD THINK WE SHOULD BE REVIEWING DISCLOSURES PRIOR TO THE MEETING WITH THE RATING AGENCY. I THINK THOSE ARE APPROPRIATE CHANGES. DOES ANYONE ELSE HAVE ANY COMMENTS? THANKS BOB. CHAD, CAN WE INCORPORATE THOSE AND THEN MOVE APPROVAL OF THE UH, YEAH, YOU CAN GO AHEAD AND MOVE TO APPROVAL BASED UPON THE COMMITTEE FEEDBACK TODAY. OKAY. AND WE WILL MAKE THOSE CHANGES. BOB, WOULD YOU LIKE TO MAKE THAT MOTION? YEAH, MOTION TO APPROVE. OKAY. SECOND. SECOND. OKAY. JULIE'S GOT THE SECOND, SO THANK YOU. [00:05:01] ALL IN FAVOR? AYE. ANY OPPOSED? ANY ABSTENTIONS? OKAY. THE, UH, THESE ARE APPROVED. THE CHARTER IS APPROVED AS, UH, WITH A PROPOSED AMENDMENTS, UH, THAT, UH, BOB, UH, INTRODUCED. [5.2 Review and Approval of Internal Audit Department Charter] NEXT IS A AGENDA ITEM 5.2 REVIEW AND APPROVAL OF THE INTERNAL AUDIT DEPARTMENT CHARTER. SO PENNY CHEKI WILL TAKE US THROUGH THE PROPOSED PROPOSED REVISIONS TO THE CHARTER. THIS IS A VOTING, VOTING ITEM FOR THE COMMITTEE, BUT DOES NOT REQUIRE BOARD APPROVAL. SO PENNY, WOULD YOU WALK US THROUGH THE PROPOSED CHANGES TO THE INTERNAL AUDIT DEPARTMENT? CHARTER? CERTAINLY WILL. THANK YOU. UM, IT HAS BEEN UPDATED TO REFLECT THE CHANGES RELATED TO THE ADMINIS NEW ADMINISTRATIVE REPORTING LINES TO THE SENIOR VICE PRESIDENT AND GENERAL COUNSEL. UM, THE CHARTERS IN ALIGNMENT WITH THE STANDARDS FOR THE PROFESSIONAL PRACTICE OF INTERNAL AUDITING AND AS REQUIRED BY THE STANDARDS. THE CHARTER INCLUDES INFORMATION ON INDEPENDENCE, OBJECTIVITY, AUTHORITY, AND ACCOUNTABILITY. AND YOU'LL SEE THE CHANGES IN RED. ANY QUESTIONS FOR PENNY? ANY CHANGES? YOU'RE MY, YEAH. ANY QUESTIONS FOR PENNY? I THINK MOST OF THE CHANGES WERE MINOR. ANYONE HAVE AND ALSO BRINGING 'EM UP TO CURRENT STANDARDS. ANY OTHER QUESTIONS, COMMENTS? MY ONLY COMMENT, PENNY, IS DO YOU THINK CYBERSECURITY IS ADEQUATELY ADDRESSED IN THE SCOPE? UM, THE SCOPE GIVES US THE, UM, OPPORTUNITY TO AUDIT ANY AREA IN THE AGENCY AND WE'VE GOT GOOD COMMUNICATION AND OPEN LINES WITH CYBERSECURITY. SO WE'RE IN THERE EVERY YEAR. THANK YOU. OKAY. IF THERE ARE NO OTHER QUESTIONS, I'LL ENTERTAIN A MOTION FOR APPROVAL OF THE REVISED INTERNAL AUDIT DEPARTMENT CHARTER. OKAY. I HAVE A MOTION FOR PEGGY A SECOND FROM CARLOS. ALL IN FAVOR? AYE. ANY OPPOSED? ANY ABSTENTIONS? THE REVISED INTERNAL AUDIT DEPARTMENT CHARTER IS APPROVED. THANK YOU, PENNY. THANK YOU. ALL RIGHT. UH, [6.1 Recommendation regarding Financial Corporate Standard] NEXT IS THE AGENDA ITEM SIX OF POLICY REVIEW AND APPROVAL. UH, WE'RE GONNA HAVE TWO VOTING ITEMS THAT LESLIE WILEY WILL PRESENT. THE FIRST IS AGENDA ITEM 6.1, WHICH IS A RECOMMENDATION REGARDING THE FINANCIAL CORPORATE STANDARD. AND THEN, UH, I THINK LESLIE'S GONNA STAY UP THERE FOR THE NEXT STANDARD AS WELL. SO, LESLIE, GOOD MORNING. I'M LESLIE WILEY AND WE DO HAVE THE FINANCIAL CORPORATE STANDARD. UM, THIS IS A VOTING ITEM, UM, AND THE FINANCE AND AUDIT COMMITTEE WILL RECOMMEND APPROVAL TO THE BOARD. UM, OKAY. UM, AS REQUESTED, THE CHANGES MADE WERE TO MODIFY THE LIQUIDITY CALCULATIONS AND THAT IS DONE, UH, TO ENSURE THAT ERCOT HAS UNDRAWN BORROWING CAPACITY TO, UM, REPAY ANY OF THE CONGESTION REVENUE, RIGHT. AUCTION RECEIPTS THAT WE MAY USE TO FUND OPERATIONS. THAT WAS THE CHANGE MADE FOR THE FINANCIAL CORPORATE STANDARD. ANY QUESTIONS? OKAY. IF EVERYONE ON THE COMMITTEE REMEMBERS, THIS IS A DISCUSSION WE HAD A COUPLE OF TIMES, UH, LAST YEAR REGARDING THE USE OF CONGESTION REVENUE RIGHTS AND THE WAY THAT WE SET LIMITATIONS ON THE USE OF THOSE, UH, AS COMPARED TO OUR UNDRAWN OR IN CONNECTION AS MEASURED BY OUR UNDRAWN REVOLVER CAPACITY. ARE THERE ANY QUESTIONS? OKAY, IF THAT, IF DON I'LL ENTERTAIN A MOTION FOR APPROVAL. MOVE IT. OKAY. SO BOB'S MOVING. UH, WHO'S THE SECOND? OKAY, CARLOS IS SECOND. I'LL, UH, ALL IN FAVOR? AYE. ANY OPPOSED? ANY ABSTENTIONS? OKAY. THE REVISED, UM, CORPORATE FINANCIAL STANDARD IS APPROVED. [6.2 Recommendation regarding Investment Corporate Standard] NEXT, WE'RE GONNA, UH, LESLIE'S GONNA CONTINUE WITH A RECOMMENDATION REGARDING INVESTMENT CORPORATE STANDARD. LESLIE, WOULD YOU WALK US THROUGH THIS PLEASE? YES. THIS IS ANOTHER VOTING ITEM, UM, FOR A RECOMMENDATION TO THE BOARD. UH, THE INVESTMENT CORPORATE STANDARD OUTLINES OUR OBJECT OBJECTIVES FOR INVESTING. THOSE OBJECTIVES [00:10:01] INCLUDE PRESERVATION OF PRINCIPLE, LIQUIDITY, AND FINALLY RETURN ON INVESTMENT. THE CHANGES IN THE STANDARD INCLUDE ADDING THE TEXAS GOVERNMENT CODE 8 0 9 ANALYSIS. THIS ANALYSIS IS DONE TO MAKE SURE THAT ERCOT ISN'T INVESTING IN ANY OF THE INSTITUTIONS IDENTIFIED IN THE DIVESTMENT PROVISIONS. WE HAVE BEEN CHECKING THE PROVISIONS AND REPORTING COMPLIANCE TO YOU SINCE OCTOBER OF LAST YEAR. UH, THE CHANGES TO THE STANDARD WILL ALIGN THE INVESTMENT STANDARD WITH THE STATE'S REQUIREMENTS. THE OTHER CHANGES MADE TO THE STANDARD WERE TO ALIGN, UH, DEFINITIONS AROUND QUALIFIED FINANCIAL INSTITUTIONS AND THAT WILL MATCH THE CHARTER AND THE BOARD ETHICS. ANY QUESTIONS ON THE INVESTMENT CORPORATE STANDARD? ANY QU OH, CARLOS? NO, BUT WE WERE COMPLAINED ANYWAY, RIGHT? EXCUSE ME? WE WERE COMPLIANT ANYWAY. YES, WE WERE. OKAY. OKAY. ANY QUESTIONS OR, UH, COMMENTS? IF NOT, I'LL ENTERTAIN A MOTION. UH, IT'S ACTUALLY THE MOTION ON PAGE 54 OF YOUR DECK, UH, FOR APPROVAL OF THE INVESTMENT CORPORATE STANDARD AS MODIFIED. SO MOVED. OKAY, CARLOS IS MOVING. SECOND. UH, JULIA. BOB OR SECONDING ANY? ALL IN FAVOR? AYE. AYE. ANY OPPOSED? ANY, UM, ABSTENTIONS? OKAY. THE, UH, REVISED INVESTMENT CORPORATE STANDARD HAS BEEN APPROVED. THE [Items 6.3 - 6.5] NEXT THREE ITEMS ARE NON-VOTING ITEMS THAT SEAN TAYLOR WILL WALK US THROUGH. UH, GEN ITEM 6.3 IS THE HANDLING OF COMPLAINTS REGARDING FINANCIAL MATTERS. I AGENDA ITEM 6.4 IS A POLICY ON HIRING FORMER EMPLOYEES OF THE INDEPENDENT AUDITOR. AND AGENDA ITEM 6.5 POLICY ON THE INDEPENDENT AUDIT AUDITOR SELECTION. SEAN, THANK YOU. AS NOTED, THESE ARE NON-VOTING ITEMS. THESE ARE PURELY THE REVIEW THAT'S REQUIRED AS AN ANNUAL REQUIREMENT FROM THE COMMITTEE CHARTER. NOTHING HAS CHANGED IN THESE SINCE LAST YEAR. THEY'RE ALL CONSISTENT. SO I WILL BRIEFLY TOUCH ON THEM AND SEE IF ANYBODY HAS ANY ADDITIONAL QUESTIONS. THE FIRST ABOUT HANDLING COMPLAINTS FROM A FINANCIAL MATTER. THESE ARE STILL RECEIVED, UH, DIRECTLY, INDIRECTLY, AND ANONYMOUSLY THROUGH ETHIC POINT, ETHICS POINT. ADDITIONALLY, ALL OF THESE WERE REPORTED TO FINANCE AND AUDIT COMMITTEE OR THE BOARD OF DIRECTORS UNTIL RESOLVED AS APPROPRIATE. THE SECOND IS THE HIRING OF EMPLOYEES THAT USED TO WORK FOR THE INDEPENDENT AUDITOR. THIS POLICY ALSO DID NOT CHANGE SINCE LAST YEAR, AND THE LANGUAGE IS CONSISTENT WITH WHAT YOU WOULD EXPECT TO SEE THAT IF THERE IS AN EMPLOYEE THAT MEETS A POTENTIAL EMPLOYEE THAT MEETS THESE REQUIREMENTS, THAT THAT IS VETTED WITH THE FINANCE AND AUDIT COMMITTEE BEFORE THE OFFER IS EXTENDED TO THE EMPLOYEE. AND THE FINAL ONE IS THE INDEPENDENT AUDITOR SELECTION. THIS IS CONSISTENT WITH THE POLICY THAT WE PUT IN PLACE SEVERAL YEARS AGO. AND INSTEAD OF DOING REQUIRED AUDITOR ROTATION, WE DO COMPETITIVE BID PROCESS TO SELECT THE AUDITOR THAT WAS LAST DONE IN 2020 IS REQUIRED EVERY SIX YEARS. SO THE NEXT REQUIREMENT IS IN 2026. ADDITIONALLY, AUDIT PARTNER ROTATION IS REQUIRED FOR THE FINANCIAL STATEMENTS AUDITS. THAT'S EVERY FIVE YEARS THAT WAS LAST DONE FOR THE 2020 FINANCIAL STATEMENT AUDIT. SO THE 2025 FINANCIAL STATEMENT AUDIT WILL BE THE NEXT TIME THAT THAT IS REQUIRED. SO NEXT REQUIRED ACTION ON THESE THREE ITEMS WILL BE IN 2026. OKAY, THANK YOU SEAN. ANY QUESTIONS FOR SEAN ON THESE THREE, UH, AGENDA ITEMS? THANK YOU. I'VE GOT A QUESTION ON THE COMPLAINTS. UH, IS THERE A PROCESS, SO IF THERE'S A MATTER A COMPLAINTANT ABOUT A FINANCIAL MATTER MATTER THAT IT, YOU IMMEDIATELY GIVE THE CHAIR WITHOUT A COMMITTEE NOTICE OF THAT? OR DO YOU WAIT UNTIL THE NEXT MEETING? OH, WE WOULD, IF IT'S A SIGNIFICANT ONE, WE WOULD IMMEDIATELY NOTIFY YOU. THANK YOU. ANY OTHER QUESTIONS FOR SEAN? IF NOT, WE'RE [7. Forecast Adequacy of the Budgeted System Administration Fee Rate] GOING TO MOVE TO AGENDA ITEM SEVEN. UH, SEAN IS ALSO GOING TO, UH, BE THE PRESENTER. IT HAS TO DO WITH THE FORECAST ADEQUACY OF THE BUDGETED SYSTEM ADMINISTRATION FEE. AS ALL OF YOU RECALL, THIS WAS, UH, SUBJECT OF MANY MEETINGS, UH, THIS PAST YEAR. AND, UH, WE WILL, WILL BE LOOKING FOR MODIFICATIONS POSSIBLY FOR 2024. SO SEAN, UH, CORRECT IT SAYS IT'S NOT A VOTING ITEM. NOT A VOTING ITEM. WE MADE A COMMITMENT TO THE MARKET PARTICIPANTS [00:15:01] AT THE FIRST MEETING OF EACH YEAR TO LET THEM KNOW WHETHER OR NOT THE BUDGETED SYSTEM ADMINISTRATION FEE RATE FOR THE FOLLOWING YEAR WAS AS ADEQUATE TO GIVE THEM AS MUCH NOTICE AS POSSIBLE OF A POTENTIAL CHANGE. WE'VE PROVIDED A SIMILAR UPDATE TO THIS UPDATE TO TACK EARLIER LAST, OR CORRECTION LAST WEEK. AND WE DO RIGHT NOW ANTICIPATE AS PREVIOUSLY DISCUSSED IN EXECUTIVE SESSION MEETINGS, A SYSTEM ADMINISTRATION FEE RATE INCREASE IN 2024. IN THE 2223 BUDGET FILING THAT WAS APPROVED, WE FORECASTED A SYSTEM ADMINISTRATION FEE RATE OF 66 AND A HALF CENTS. WE STILL ANTICIPATE A FEE RATE INCREASE IN 2024. WE DO NOT HAVE A FINALIZED NUMBER YET. WE WILL BRING THAT TO REVIEW AT THE NEXT MEETING IN APRIL TO THIS COMMITTEE FOR A FULL REVIEW OF THAT 24 25 BUDGET REQUEST. ANY QUESTIONS FOR SEAN? I'M SURE WE'LL HAVE SOME ROBUST DISCUSSIONS LATER THIS YEAR. AS SEAN INDICATED, LET'S [8.1 Review 2022 Financial Summary] MOVE TO AGENDA ITEM EIGHT OR AGENDA ITEMS EIGHT, WHICH ARE THE COMMITTEE BRIEF. UH, SEAN IS GOING TO PRESENT THE REVIEW OF THE 2022 FINANCIAL SUMMARY, WHICH IS AGENDA ITEM 8.1. SEAN, THANK YOU. STARTING WITH EIGHT ONE FOR THE REVIEW OF THE FINANCIAL SUMMARY. WHAT YOU'RE SEEING TODAY IS CONSISTENT WITH WHAT WE HAVE PREVIOUSLY PRESENTED. THERE WILL BE A FEW ITEMS THAT HAVE CHANGED THAT I WANT TO HIGHLIGHT FOR YOU AND A COUPLE OF UNUSUAL NUMBERS THAT YOU'LL SEE. AND HERE AND IN THE FI AUDITED FINANCIAL STATEMENTS, WHICH WE'LL BRING BACK IN APRIL, WE'RE CURRENTLY IN THAT AUDIT PROCESS. SO THESE ARE ALL PRELIMINARY UNAUDITED RESULTS. STARTING WITH OUR BUDGET TO ACTUAL VARIANCE, WE LOOK AT THE NET AVAILABLE YEAR END VARIANCE TO BUDGET. IT'S AT 29 MILLION. IT WAS AT 28.1 MILLION THE LAST TIME YOU SAW IT. WE HAVE A COUPLE OF THINGS THAT DROVE THAT CHANGE. AND AS A REMINDER, WE HAD BUDGETED A NET LOSS AND WE HAD BUDGETED A NET LOSS ABOUT 45 MILLION. AND WITH THIS 29 MILLION VARIANCE, WERE COMING IN AT A NET LOSS OF 16 MILLION FROM THIS BUDGET PERSPECTIVE, WE START AT THE REVENUE SIDE ON THE LEFT THAT IS INCREASED OR DECREASED RATHER ABOUT $600,000 VERSUS THE LAST TIME YOU SAW IT AS DRIVEN BY A DECREASE IN THE INTEREST INCOME. AND SO THAT IS A LITTLE CONFUSING POTENTIALLY BECAUSE OUR INTEREST INCOME HAS BEEN GOING UP. AND SO THE FORECAST WOULD RUN UP. WHAT THIS HAS IN IT IS A FAIR MARKET VALUE ADJUSTMENT THAT WE PUT IN AT THE END OF THE YEAR FOR THE BONDS THAT WE ARE HOLDING, EVEN THOUGH IT DOESN'T IMPACT US NECESSARILY BECAUSE WE'LL HOLD THESE TWO MATURITY, BUT THIS IS A POINT IN TIME TO ALIGN WITH THE AUDITED FINANCIAL STATEMENTS. THAT LOSS IS $2.3 MILLION. SO WITHOUT THAT RECORDED LOSS ON HERE, WHICH IS A PAPER LOSS, THIS INCOME WOULD'VE BEEN 2.3 MILLION HIGHER THAN THAT. ON THE EXPENDITURE SIDE, THE EXPENDITURES ARE ACTUALLY ONE AND A HALF MILLION DOLLARS MORE FAVORABLE THAN THE LAST TIME YOU SAW IT. THAT ONE AND A HALF MILLION DOLLARS IS DRIVEN BY THE PROJECT SPEND, WHICH IS $1.2 MILLION MORE FAVORABLE. AND THAT IS BECAUSE SOME PURCHASES GOT PUSHED FROM DECEMBER TO THIS JANUARY, FEBRUARY TIME PERIOD. SO IT'S PURELY A TIMING DIFFERENCE OF WHEN THOSE MAJOR PURCHASES TOOK PLACE. THOSE ARE THE ONLY ITEMS I HAVE TO HIGHLIGHT ON THIS PAGE. AND THOSE ARE ADDITIONAL QUESTIONS. SO SEAN, THAT, UH, MARK TO MARKET ON THE BONDS, THIS IS JUST SOMETHING THAT'S GOING TO, THAT HAPPENS JUST EVERY MONTH. WE REALLY ONLY REPORTED ON AN ANNUAL BASIS WHEN WE'RE DOING IT JUST FOR CLARITY PURPOSES CUZ IT WILL HAVE REVERSED. AND SO WE'LL BE GOING BACK OUT BECAUSE WE ONLY, IT HAPPENS THEORETICALLY IT COULD HAPPEN EVERY DAY, BUT WE ONLY DO IT ON ANNUAL BASIS HERE. SO THE ONLY TIME THAT YOU'RE GONNA INCLUDE THIS IN YOUR FORECAST IS JUST WHEN WE GET TO YEAR END, CORRECT. MARKET AT THAT POINT. CORRECT. BECAUSE WE DO HOLD EVERYTHING TOO MATURITY. YEAH. AND IF WE DON'T HOLD IT TOO MATURITY, WE'LL LET YOU KNOW WHY. WE'VE ONLY DONE THAT ONCE AND IT WAS VERY, IT WAS ALMOST AT MATURITY WHEN WE SOLD IT. SO IT REALLY DOESN'T IMPACT OUR OPERATIONS, BUT IT IS IN HERE AND OUR CASH FLOW, BUT IT'S IN HERE JUST FOR, TO TIE TO THE AUDIT. OKAY. NOW, SEAN, IF YOU LOOK AT THAT ON AN INTRO YEAR BASIS, IS IT, IS THAT A DIFFICULT METRIC TO CALCULATE? I MEAN, IT'S NOT TOO DIFFICULT. IT'S GOING BACK AND WHATEVER THE MARKET VALUE IS VERSUS WHAT THE BOOK VALUE IS OF THOSE BONDS AT THAT TIME. AND SO IN A PRIOR TO THIS YEAR, IT USUALLY HASN'T BEEN A MATERIAL AMOUNT EVEN CLOSE. IT'S JUST WE'RE TALKING ABOUT SUCH HIGH RISING INTEREST RATE ENVIRONMENT THAT WE'RE IN. SO AS THE INTEREST RATE ENVIRONMENT NORMALIZES, THERE'D BE NO VARIANCES. OUR DURATION IS, YOU'LL SEE WHEN LESLIE GIVES HER PRESENTATION IS LESS THAN 0.5. SO WE ONLY STARTED INVESTING IN BONDS AGAIN, UM, IN THE LAST FEW MONTHS OF THE YEAR. SO THERE'S NOT THAT MUCH IMPACTED, USUALLY IT'S JUST THAT THOSE INTEREST RATES HAVE WENT UP SO MUCH IN THE LAST [00:20:01] FEW MONTHS. THAT'S WHAT'S DRIVING THE IMPACT, IS THE INTEREST RATES INCREASE THE FACE OR THE BOND PRICES DECREASE. AND SO THAT'S WHAT THAT ADJUSTMENT'S FOR. I THINK IT WOULD BE HELPFUL FOR THE COMMITTEE TO KNOW, UM, WHEN WE HAVE FUTURE FINANCIAL PRESENTATIONS, IF YOU SEE A, UH, UNEX UNEXPECTEDLY LARGE CHANGE, IF WE COULD BE INFORMED OF THAT BEFORE WAITING TILL THE END OF THE YEAR. SO IF SOMETHING COMES UP THAT THIS MATERIAL, UH, WE CAN, WE CAN PROVIDE THAT, WE CAN ADD THAT TO THE INVESTMENT REPORT AND PUT WHAT THAT IS. IF YOU LOOK AT IT IN THERE, YOU'LL SEE WHAT, ONE OF THE THINGS YOU'LL SEE IN THAT INVESTMENT REPORT IS THE MARKET YIELD VERSUS THE PURCHASE YIELD. AND YOU'LL SEE THAT THAT PURCHASE YIELDS IN UNDER 4%, BUT THAT MARKET YIELD'S OVER 4%. RIGHT? SO THAT OBVIOUSLY WHEN YOU'RE TALKING ABOUT THAT TYPE OF A DIFFERENCE, THEN IN ORDER TO MAKE THOSE BONDS WITH THOSE LOWER COUPON RATES EQUAL THE CURRENT BONDS, THE PRICE GOES DOWN. BUT WE CAN INCLUDE THAT IN THAT REPORT AS WELL IF IT'S USEFUL. AND THEN YOU'LL HAVE VISIBILITY TO IT EVERY, EVERY TIME WE MEET. SEAN, WHAT, I'M SORRY, GO AHEAD. UM, SEAN, WHAT SCENARIO WOULD YOU SEE WHERE WE WOULD EVER HAVE TO SELL A BOMB BEFORE MATURITY? THE ONLY TIME WE'VE HAD TO DO THAT IN THE PAST IS WHEN WE USED THE $800 MILLION FOR MARKET LIQUIDITY. BEYOND THAT NORMAL COURSE OF OPERATIONS, WE NEVER NEED TO DO IT. YEAH, I MEAN, GIVEN THAT WE WILL ALWAYS HAVE I GUESS, UNUSED REVOLVER TO THE EXTENT THAT WE HAVE UTILIZED CR COULD THERE BE A SITUATION WHERE YOU WOULD HAVE TO DO IT UNDER THIS NEW KIND OF SAFETY MEASURE OF ENSURING THAT WE HAVE THE LIQUIDITY TO PAY BACK THE CRS COULD, COULD THAT FORCE THE SALE? NO, THERE SHOULD NOT BE. AND WE'RE GOING THROUGH THE PROCESS AND LO'S GOING THROUGH THE PROCESS OF LOOKING AT WHETHER AND WHAT THE INVESTMENT STRATEGY LOOKS LIKE AS WE MOVE FORWARD. THERE'S ONLY A HALF A, I SAY ONLY THERE'S A HALF A BILLION DOLLARS IN THAT BOND LADDER. THAT BOND LADDER ROLLS OFF. GENERALLY SPEAKING, EVERY MONTH THERE'S APPROXIMATELY $50 MILLION THAT ROLLS OFF IT AND MATURES. AND WE'RE ONLY WOULD THAT DURATION AND THE MATURITIES ARE UNDER A YEAR OR AT A YEAR AT MAX. AND WOULD THE AMOUNT OF CONGESTION, REVENUE RIGHTS, AUCTION RECEIPTS THAT WE'RE HOLDING THAT ARE DUE TO BE PAID OUT AFTER 12 MONTHS, WE DON'T HAVE THAT ISSUE UNLESS WE CHOSE TO USE THEM FOR SOMETHING LIKE FUNDING MARKET LIQUIDITY. THAT WOULD BE THE ONLY, ONLY TIME THAT I WOULD FORESEE IT BEING A POSSIBILITY. YEAH, WE'D HAVE TO HAVE ANOTHER URI TYPE OF EVENT. CORRECT. LET'S HOPE THAT NOTHING LIKE THAT EVER HAPPENS AGAIN. AND SHAWN, I WOULD ASK YOU IF YOU CAN KEEP THE MICROPHONE CLOSE TO YOU, CARLOS. OH, SORRY, TWO, TWO POINTS. UH, FIRST ONE IS, UM, WELL IT TOOK TWO YEARS TO GET BACK TO REPLENISHING THE CR, BUT YOU KNOW, IT'S A GREAT RESULT. SO THANKS TO YOU AND THANKS FOR TO THE WHOLE TEAM FOR THE, THE WAY THAT WAS MANAGED. I MEAN, WE'VE HAD MANY EVENTS IN THE MIDDLE, IT'S NOT BEEN JUST AN EASY RIDE AND STILL THE, THE GOALS WERE ACHIEVED. SO THAT, I THINK THAT'S A GREAT POINT TO, UH, TO NOTE. THE SECOND IS WITH RESPECT TO OTHER, OTHER REVENUE, OTHER SERVICES REVENUE, UM, DOES THAT ACCOUNT FOR THE WE WEATHERIZATION FOR EXAMPLE? UH, ARE WE GONNA PUT THAT AS PART OF THE ADMINISTRATION FEE GOING FORWARD OR ARE WE GONNA KEEP, KEEP THOSE ITEMS SEPARATE? SO THE LAST DECISION THAT WAS MADE THIS LAST FALL WAS TO KEEP THE INSPECTION, THE WEATHERIZATION INSPECTIONS AS A SEPARATE FEE. IF THE BOARD WANTS TO CHANGE THAT AS WE MOVE FORWARD, WE CAN, RIGHT NOW, WHEN WE'RE GOING THROUGH THE PROCESS OF CALCULATING A 24 25 BUDGET FOR THAT PROCESS, WE CURRENTLY HAVE IT LISTED AS A SEPARATE FEE. OKAY. AND, UH, I JUST SEE SOME, I DON'T UNDERSTAND WHY THE, THE FIGURES ARE A LITTLE DIFFERENT. YOU KNOW, THE, THE WEATHERIZATION REVENUE IS ABOUT 9.1 AND THEN ON PAGE, WHAT IS THIS, 84? IT'S UH, OTHER SERVICES REVENUE IS 8.5. SO, BUT THE OTHER, SO THERE'S A VARIETY. SO THE OTHER SERVICES REVENUE INCLUDES INSPECTIONS, INCLUDES GENERATION AND IN CONNECTION IT INCLUDES THE WIDE AREA OF THE NETWORK, IT INCLUDES OTHER COSTS, THE GENERATION, THE BUDGET FOR BUDGET PURPOSES. AND WHAT YOU'RE SEEING ON THIS PAGE IS BUDGET TO ACTUAL VARIANCE. GOT IT. AS OPPOSED TO ACTUAL RESULTS. AND ON HERE YOU'LL NOTICE THAT THE, BECAUSE IT IS A PASS THROUGH ON BOTH THE LEFTS REVENUE SIDE AND THE RIGHT EXPENDITURE SIDE, THEY'RE BOTH 9.1 FOR INSPECTION SITE VISITS FOR EXPENSE AND REVENUES, CUZ THOSE WAS DIRECTLY OFFSET. THANK YOU CARLOS. ANY OTHER QUESTIONS FOR SEAN? WELL, SEAN, MY QUESTION IS RELATED TO THE INTEREST RATES [00:25:01] DO FOR EACH BUDGET. DO YOU MAKE CERTAIN ASSUMPTIONS ABOUT THE INTEREST RATES? WE DO, YES. AND YOU, YOU'LL SEE THAT WHEN WE COME BACK IN APRIL, WE MAKE ASSUMPTIONS ABOUT THE INTEREST RATES. WE MAKE ASSUMPTIONS ABOUT THE CASH BALANCE, WHICH IS BASED OFF OF THE, PRIMARILY THE CONGESTION, REVENUE RIGHTS, AUCTION RECEIPTS WE'RE HOLDING. AND THEN WE PUT IT TOGETHER A SENSITIVITY THAT SHOWS THAT IF INTEREST RATES ARE INSTEAD OF 3%, THEY'RE 2 1 0 OR 4, 5, 6, AND IF BALANCES INSTEAD OF 1.6 BILLION ARE 2 BILLION OR 1 BILLION, WHAT THAT IMPACT WOULD BE SO THAT THE BOARD HAS THE VISIBILITY TO THAT INFORMATION, THEN WE CAN CHOOSE WHICH RATE TO USE. SO I DON'T REMEMBER WHAT YOU ASSUMED IN APRIL. CAN YOU REMIND US IN APRIL 22 WHAT YOUR ASSUMPTION WAS, OH, FOR THIS 2223 BUDGET CYCLE, WHEN WE PUT THIS TOGETHER BACK IN 2021 AND FILED IT, THEN THE ASSUMPTION WAS FOR BASICALLY ZERO INTEREST BECAUSE THAT'S WHAT THE RATE WAS AT AT THAT TIME. SO THIS VARIANCE THAT YOU'RE SEEING ON HERE IS, AND YOU'LL NOTICE THAT WHEN WE LOOK AT THE INCOME STATEMENT PAGE, IS THAT THAT AMOUNT IS ALMOST A DIRECT OFFSET TO OTHER INCOME AND EXPENSE BECAUSE IT IS ALL INTEREST INCOME NET OF THE INTEREST EXPENSE. AND SEAN, I ASSUME, I ASSUME YOU'LL SHOW US WHAT IT LOOKS LIKE IF YOU JUST FOLLOW THE FORWARD RATE CURVE. AND YES, WE CAN DO THAT AS WELL IF THAT'S WHAT YOU WANNA SEE. I MEAN, THAT'S WHAT THE MARKET SAYS THE RATES ARE GONNA BE AND WHO, WHO THE HELL KNOWS, BUT RIGHT. AND THEN WE DO HAVE, WE DO MAKE, WE TEND TO TRY TO MAKE A CONSERVATIVE APPROACH. WE CAN, DEPENDING AGAIN ON HOW MUCH YOU WANT TO BUILD INTO WHAT THAT SYSTEM ADMINISTRATION FEE RATE WOULD BE. SO A PENNY ON THE SYSTEM ADMINISTRATION FEE RATE IS BETWEEN FOUR AND $5 MILLION A YEAR. AND DEPENDING ON WHAT THE BALANCE IS ON THIS, ON THE CR R BALANCE IS, IF YOU'RE LOOKING AT A BILLION AND A HALF DOLLARS, THEN A PERCENT ON THAT'S $15 MILLION. SO THERE'S A LOT OF MOVEMENT BASED ON WHILE THOSE CHANGE, IF WE WENT INTO THERE AND ASSUMED AN INTEREST RATE THAT WAS SIGNIFICANTLY HIGHER THAN WHAT ACTUALLY HAPPENS, THEN WE'RE GONNA HAVE A MAJOR CASH SHORTFALL POTENTIALLY DEPENDING ON HOW HIGH IT IS THAT WE CHOOSE. AND SO THAT'S SOMETHING TO GUARD AGAINST WHEN WE'RE GOING THROUGH IT. BUT WE REALIZE AT THIS POINT THAT OVER THE NEXT 24, 25 CYCLE, IT DOESN'T LOOK LIKE WE WOULD EXPECT INTEREST RATES TO GO BACK TO ZERO. SO SHOULD WE SHOULD BUDGET FOR SOMETHING AND THEN IT'S CHOOSING WHAT THAT IS. IF WE GO WITH THE, AS YOU SAID, THE FORWARD CURVE, WE COULD DO THAT. BUT THEN IF IT FALLS SHORT OF THAT, THEN WE HAVE A POTENTIAL CASH FLOW ISSUE. WELL LOOK, YOU'RE GONNA BE GUESSING ANYWAY, BUT AT LEAST THE FORWARD RATE CURVE IS THE RESULT OF MILLIONS OF MARKET PARTICIPANTS GUESSING AS OPPOSED TO JUST US. CORRECT. AND SO THEN IT'S JUST A MATTER OF HOW COMFORTABLE YOU ARE BUILDING THAT INTO IT AND WHETHER YOU WANT TO GO ALL IN ON THAT OR TAKE, GIVE IT A HAIRCUT OR NOT. SO WE'LL DEFINITELY HAVE THAT CONVERSATION EXTENSIVELY SO WE CAN PROVIDE WHAT THAT FORWARD RATE CURVE NUMBER IS WHEN WE LOOK AT IT IN APRIL AS WELL, AND SHOW YOU WHAT THAT WILL BE. THANK YOU, JOHN. ANY OTHER QUESTIONS FOR SEAN? WITH THAT, WE WILL, UH, MOVE TO, UH, GEN ITEMS. UH OH, I'M, I'M SORRY. I'M SORRY SEAN. I HAVE A COUPLE MORE ITEMS IF YOU DON'T MIND. OH, OKAY, GO AHEAD. I'M SORRY. THIS, THE NEXT SLIDE IS A SLIDE THAT WAS REQUESTED ABOUT THE MONTHLY LOAD AND AS WAS NOTED EARLIER, I BELIEVE WHEN WE TALKED ABOUT THIS, THE LAST QUARTER HAD A COUPLE OF THE LARGEST VARIANCES, UH, FOR THE YEAR FROM BUDGET TO ACTUAL IN OCTOBER IN DECEMBER FOR NEGATIVE VARIANCES. AND SO IN THE LAST QUARTER WE DROPPED FROM THE 7.1 MILLION OF REVENUE ABOVE BUDGET TO 4% DOWN TO THE 6.3, WHICH IS 2.7%. THIS STATEMENT OF FINANCIAL POSITIONS ARE OUR BALANCE SHEET. SO WE'RE LOOKING AT THIS TO GIVE YOU A PREVIEW OF SOME OF THE UNIQUE THINGS THAT HAPPENED IN DECEMBER THIS YEAR THAT YOU WON'T NORMALLY SEE. THEN START WITH THE ERCOT INC AMOUNT AND OUR, WHEN YOU LOOK AT THIS AT FACE VALUE AND YOU SEE THE TOTAL ASSETS UP APPROXIMATELY 2 BILLION, SO ALMOST A DOUBLE WHAT IT WAS THE PREVIOUS YEAR. THERE'S A FEW GOOD REASONS FOR THAT. WE START WITH THE TOTAL UNRESTRICTED CASH AND BOND INVESTMENTS OF BEING UP 1.2 BILLION FROM LITTLE OVER A BILLION TO 2.3 BILLION. AND THAT IS DRIVEN BY THE CONGESTION REVENUE RIGHTS AUCTION RECEIPTS THAT WE'RE HOLDING AS WE LOOK DOWN INTO THE TOTAL MARKET SETTLEMENT LIABILITIES AND LIABILITIES IN NET ASSETS, YOU SEE A VERY SIMILAR AMOUNT THERE. WE DID GET THE BRAZOS MONEY IN IN DECEMBER. THERE WERE TWO RESULTS OF THAT 600 MILLION THAT WE RECEIVED. THAT 600 MILLION MADE THAT USE OF CR FOR MARKET LIQUIDITY OF 275 MILLION GO TO ZERO. SO THAT'S APPROXIMATELY JUST UNDER $300 MILLION OF THE INCREASE YEAR OVER YEAR. IT WAS ALSO USED, THE REMAINDER OF THAT AMOUNT [00:30:01] IS USED TO PAY DOWN SUB-CHAPTER M SECURITIZATION DEBT, WHICH I'LL TALK ABOUT IN A SECOND. ALSO ON HERE, SOMETHING THAT'S UNUSUAL IS OTHER MARKET LIABILITIES THAT INCREASED FROM THE $105 MILLION NUMBER TO THE 375 MILLION NUMBER. THE 375 MILLION, VERY, VERY HIGH FOR US. AND IT HAS TO DO WITH THE WAY THAT THE MARKET WAS SETTLING AT THE END OF THE YEAR WITH THE TIMING OF WHEN OUR PAYMENTS COME IN AND WHEN THEY GO OUT. SO WE'RE HOLDING A LOT MORE AT THE END OF THE YEAR THAN WE NORMALLY WOULD IN ANY GIVEN YEAR BECAUSE OF THE WAY THAT THE HOLIDAY CYCLE WORKED AND AS WELL AS THE PRICING AT THAT TIME. BUT WE WOULD NORMALLY NEVER JUST SEE THAT NUMBER THAT HIGH. SO THAT'S ANOTHER LARGE REASON FOR THE INCREASE AND THE REMAINDER IS THE INCREASE IN THE ACTUAL CONGESTION REVENUE RIGHTS THAT WE'RE HOLDING THEMSELVES. AND SO THAT INCREASED FOR THOSE AUCTION, THOSE LIABILITIES THAT INCREASED BY ABOUT $700 MILLION YEAR OVER YEAR AS I MENTIONED, WE GOT THAT BRAZOS MONEY IN IT FULLY REPLENISHED THOSE CRS. ADDITIONALLY, YOU'LL SEE A MISMATCH ON HERE, WHICH YOU WOULD NORMALLY NEVER SEE BETWEEN RESTRICTED CASH AND INTEREST RECEIVABLE UP AT THE TOP OF ABOUT 1.878 BILLION TO SECURITY DEPOSITS AT THE BOTTOM OF 1.4 BILLION. YOU'LL ALSO NOTICE OTHER CURRENT LIABILITIES, WHICH ARE OVER 400 MILLION, UP FROM ONLY 47 MILLION. THAT'S WHAT'S HOLDING THAT 380 MILLION THAT WE USE TO PAY DOWN SUB-CHAPTER M. AND SO THAT WAS RESTRICTED CASH BECAUSE WE HAD TO APPLY IT THERE, BUT IT'S NOT A SECURITY DEPOSIT. IT WAS LISTED UNDER CURRENT LILIA, OTHER CURRENT LIABILITIES. SO THOSE ARE THE BIG ITEMS AND WHEN YOU SEE THAT FLOW OVER INTO THE SPECIAL PURPOSE REPRESENTATIVE M IN THE MIDDLE SET OF COLUMNS, YOU'LL SEE THAT AS WELL IN THAT OTHER CURRENT ASSETS WENT FROM 17 MILLION UP TO 392 MILLION. THAT IS A DIRECT MOVEMENT FROM BEING OTHER LONG-TERM ASSETS TO OTHER CURRENT ASSETS. CURRENT ASSETS IN THIS CASE REPRESENTS MONIES AND THE LIABILITIES ARE THE SAME. YOU'LL SEE THAT DOWN AT THE BOTTOM. THOSE ARE THE AMOUNT OF BOND PAYMENTS THAT ARE TO BE MADE IN THE NEXT 12 MONTHS. IN THIS CASE, WE KNEW WE WERE GOING TO PAY DOWN M SO WE MOVED IT FROM THE LONG TERM TO A SHORT TERM SINCE IT'S ONLY TWO MONTHS OUT. AND SINCE THEN ON FEBRUARY 1ST, WE DID PAY THOSE DOWN. THAT RESULTED IN THE NEW BALANCE OF 400, 3.8 MILLION DOWN FROM THE ORIGINAL 800 MILLION. YOU'LL SEE THAT IN LESLIE'S DEBT APPENDIX WHERE IT SHOWS THAT NEW BALANCE. THE OTHER ITEM ON HERE THAT WAS MATERIAL FROM A SUB CHAPTER M M PERSPECTIVE, IS RESTRICTED CASH AND INTEREST RECEIVABLE THAT DROPPED FROM 60 MILLION DOWN TO 18 MILLION. YOU CAN SEE THE SAME THING DOWN UNDER SECURITY DEPOSITS AND INTEREST PAYABLE. THAT'S BECAUSE THAT 60 MILLION INCLUDED THE $50 MILLION THAT WAS HELD IN CASE WE HAD TO, UH, RETIRED EXISTING ERCOT DEBT THAT WAS ENDED UP BEING USED TO MOVE INTO C R R MONEY AND THEN WAS REPAID BY BRAZOS. SO A FEW UNUSUAL ITEMS THAT WE'LL SEE THIS YEAR, BUT WE UNDERSTAND WHY IT ALL IS AND IT'S ALL ASSOCIATED WITH THE ONE PRIMARY ITEM. SEAN. AND GOING OFF MEMORY, THE SUN SETTING OF UNSECURED CREDIT TAKES EFFECT. WAS IT OCTOBER THAT WE AGREED UPON? CORRECT. SO SHOULD WE EXPECT TO SEE THE RESTRICTED CASH GO POTENTIALLY SIGNIFICANTLY HIGHER, NOT NECESSARILY POST OCTOBER? AND IF SO, THE THE INTEREST BENEFITS OF THAT CASH, WHERE, WHERE, WHERE DOES THAT GO? SO THE SECURITY DEPOSITS COLLATERAL THAT WE'RE HOLDING THAT INTEREST GOES BACK TO THE MARKET PARTICIPANTS FOR THE CASH THAT WE'RE HOLDING. AS FAR AS THE ELIMINATION OF THE UNSECURED CREDITS, IT IS STILL UP TO THE MARKET PARTICIPANT ON HOW THEY PROVIDE THAT CREDIT. SO IT'S NOT NECESSARILY GONNA BE CASH. THEY COULD USE IT DIFFERENT. THEY COULD USE THE LETTER OF CREDIT, THEY COULD USE THE CHARITY BOND, THEY COULD DO THOSE OTHER ITEMS AS WELL. SO IT'S NOT NECESSARILY A, A DIRECT ONE-TO-ONE. BUT YES, THAT INTEREST GETS PAID AND THIS IS WHERE WE START BE PREVIOUSLY TO THESE INTEREST RATES GOING UP. IT WILL USUALLY WASN'T A LARGE AMOUNT, BUT THAT'S ANOTHER REASON WHY THIS NAME HAS CHANGED ON THIS PAGE WHERE IT SHOWS RESTRICTED CASH AND INTEREST RECEIVABLE BECAUSE THERE IS INTEREST IN THERE AS WELL. THAT GOES BACK TO THOSE MARKET PARTICIPANTS. THE SLIGHT OVERSIMPLIFICATION OF HOW IT'S ACTUALLY DONE FOR ACCOUNTING PURPOSES ON THAT MANAGEMENT PRESENTATION, THIS IS THE INCOME STATEMENT SHEET THAT WAS, THAT SHOWS THE YEAR OVER YEAR PERFORMANCE FOR OPERATING REVENUES FOR ERCOT. THEY'RE UP 18 MILLION, ABOUT 8% YEAR OVER YEAR. THE SYSTEM ADMINISTRATION FEE PORTION OF THAT WAS ABOUT 21 MILLION OR ABOUT A 10% INCREASE. WE ALSO HAD [00:35:01] A INCREASE IN THE SPECIAL PURPOSE ENTITY REVENUES YEAR OVER YEAR. AND THEN A DECREASE IN A LOT OF THE OTHER ITEMS THAT ARE SHOWING UP SUCH AS THE INSPECTIONS AND WAN AND GIN. OPERATING EXPENSES INCREASED ABOUT ABOUT 14 MILLION YEAR OVER YEAR AND THAT IS OUR PRIMARY DRIVERS OF SALARIES AND BENEFITS AND HARDWARE SOFTWARE, BUT ALSO A LARGE INCREASE OF OVER 5 MILLION FOR INSURANCE. AND WE'LL BE COMING BACK WITH THE INITIAL VIEW OF THEIR NEXT INSURANCE REVIEW AND REVIEW IN APRIL AS RENEWAL IN APRIL AS WELL. AND THE FINAL SLIDE FOR THIS SECTION IS OUR USE OF CR R FUNDS. SO A COUPLE OF THINGS AS WE MOVE FORWARD ON THIS. AS NOTED BEFORE, WE DID HAVE BETTER PERFORMANCE THAN EXPECTED FOR THIS YEAR, BUT WE ARE STILL AT A POINT NOW, AND YOU CAN SEE IT IN THE LITTLE YELLOW AT THE BOTTOM WHERE IT'S STARTING TO GROW UP TO ABOUT 24 MILLION OF CRS WE USE FOR OPERATIONAL PURPOSES AT THE END OF DECEMBER. THAT'S VERSUS 20 MILLION OF CASH THAT WE HELD AT THE END OF 2021. SO A 44 MILLION DIFFERENCE BETWEEN THOSE TWO NUMBERS GOING FORWARD. THIS RED AREA FOR THE USE OF CR MARK FOR MARKET LIQUIDITY, SINCE THAT HAS BEEN FULLY REPLENISHED, THAT WILL BE ZERO GOING AS WE MOVE FORWARD. SO YOU WON'T SEE THAT, YOU'LL SEE IT ON HERE FOR THE HISTORICAL MONTHS, BUT IN THE FUTURE MONTHS THERE WON'T BE ANY. ADDITIONALLY, THIS 50% OF CR AUCTION RECEIPTS HELD LINE THAT GOES THROUGH THE MIDDLE OF THE PAGE, THAT WAS OUR PREVIOUS LIMIT OF USE PER THE CORPORATE STANDARD. THE THE FINANCIAL CORPORATE STANDARD THAT YOU JUST APPROVED, CHANGES THAT LIMIT TO ONLY A HUNDRED MILLION DOLLARS, WHICH IS THE LIMIT, CURRENT LIMIT OF OUR REVOLVER UNRE BORROWING CAPACITY. SO INSTEAD OF SEEING THE LINE THAT'S ON THERE NOW, WE'LL REPLACE THAT WITH A, A STRAIGHT LINE AT A HUNDRED MILLION DOLLARS UNLESS WE ARE USING THE REVOLVER, WHICH POINT WILL CHANGE IT TO WHATEVER IS AVAILABLE ON THE REVOLVER. AND THAT'S ALL I HAVE FOR THIS ITEM. ANY ADDITIONAL QUESTIONS FOR SEAN? OKAY, THANK YOU SEAN. [Items 8.2 - 8.4] THANK YOU. WE'RE GONNA INVITE, UH, LESLIE TO COME BACK TO THE PODIUM AND WE'RE GOING TO, UH, DISCUSS AGENDA ITEMS 8.2, 8.3 AND 8.4. UH, 8.2 IS A PERIODIC REPORT ON INVESTMENTS. 8.3 IS A PERIODIC REPORT ON DEBT COMPLIANCE AND 8.4 IS FINANCIAL INSTITUTIONS, WHICH ARE MARKET PARTICIPANTS. BEFORE WE DO THAT, I'D LIKE TO RECOGNIZE THAT UH, COURTNEY ALTMAN HAS, UH, REJOINED US AND SHE IS OFFICIALLY CONFIRMED AS, UH, NOT, NOT QUITE YET. OKAY. , YOU HAD A SUCCESSFUL CONFIRMATION. HERE YOU GO. OKAY, THAT'S GREAT. SO WE'RE COUNTING ON THE SUCCESSFUL CONFIRMATION ANYWAY. LESLIE, LET'S WALK THROUGH 8.2, 8.3 AND 8.1. YES. SO FOR OUR INVESTMENT BRIEF, WE ARE IN COMPLIANCE WITH THE INVESTMENT CORPORATE STANDARD. I DID WANNA POINT OUT, UM, ONE ITEM THAT SEAN HAS ALREADY DISCUSSED, BUT IN THIS TOP BOX HERE, YOU CAN SEE THAT THE INTEREST OR THE INVESTMENT INCOME FOR THE UNRESTRICTED AND RESTRICTED IS, IS VERY CLOSE TO ONE ANOTHER. BUT I WANTED TO REMIND YOU THAT THAT BALANCE YOU SEE IN THE FIRST COLUMN IS END OF MONTH. SO IN THE END OF DECEMBER FOR THE UNRESTRICTED, WE GOT A TON OF MONEY IN ON THE MARKET SIDE BECAUSE OF THAT WEATHER. SO WE DIDN'T EARN INTEREST ON THAT FOR THE ENTIRE MONTH. UM, JUST WANTED TO POINT THAT OUT. UM, DO YOU GUYS HAVE ANY QUESTIONS ON THIS ONE? ALL RIGHT, LET'S KEEP GOING. OKAY, SO THE DEBT COMPLIANCE, WE ARE ALSO IN COMPLIANCE WITH OUR DEBT REQUIREMENTS. UM, A COUPLE OF THINGS ON THIS ONE, AS SEAN PREVIOUSLY MENTIONED, UM, WE DID PAY DOWN A SIGNIFICANT AMOUNT ON SUB CHAPTER M. UM, THE APPENDIX WILL SHOW THE NEW AMORTIZATION SCHEDULE FOR THAT. UM, AND THE RE REDUCTION IN THE NEW AMOUNT. UM, THE APPENDIX FOR THE FINANCIAL, UH, NUMBERS, THESE NUMBERS ARE PRELIMINARY JUST UNTIL OUR AUDIT IS COMPLETED. UM, AND THEN LAST TIME WE DID PUT IN THE, UH, SCHEDULES TO MAKE SURE THAT WE HAD ENOUGH MONEY COMING UP FOR THE BOND PAYMENTS. ANY QUESTIONS ON THE DEBT COMPLIANCE? ANY QUESTIONS FOR LESLIE? LESLIE? I MEAN I'M LOOKING AT THE COM, THE DEBT COMPLIANCE ITEMS. IS THERE ANY THAT YOU WATCHED CLOSER THAN THE OTHERS? ANY ONES THAT YOU THINK COULD POTENTIALLY EVER BE AN ISSUE? WE, [00:40:01] WE HAVE A, I HAVE A, A LIST OF QUESTIONS THAT I'VE BROKEN OUT FROM THE DEBT REQUIREMENTS, UM, THAT I ROUTE TO CHAD, SEAN AND PABLO, UM, QUARTERLY JUST TO MAKE SURE THAT WE ARE IN COMPLIANCE. THOSE ARE THE ONES THAT MAY, YOU KNOW, COME UP, BUT WE HAVEN'T HAD ANY ISSUES. THE ONLY ONES THAT HAVE COME UP IS, YOU KNOW, MATERIAL ADVERSE EFFECT WITH POTENTIALLY, YOU KNOW, PANDA OR YURI. BUT WE HAVEN'T HAD ANY ISSUES. LESLIE, THIS IS MINOR, BUT BACK IN OUR PAGE 1 0 5 IT SAYS SUB CHAPTER M WAS PAID ON FEBRUARY 1ST AND THEN UNDER SUBCHAPTER N IT SAYS INITIAL PAYMENT DUE. WAS IT ALSO PAID? IT WAS PAID, YES. OKAY. UM, BOTH OF 'EM. SO YEAH, THE SUBCHAPTER N THAT WAS THE FIRST PAYMENT AND IT WAS PAID ON FEBRUARY 1ST. WHAT WAS THE MAGNITUDE OF THAT PAYMENT? UM, LET'S SEE. IS IT THAT IN THE AMORTIZATION SCHEDULE? YOU SHOULD SEE IT. IS IT 64? I DON'T HAVE A TOTAL. YEAH, IF YOU WANT TO GO THROUGH IT DOWN HERE. OKAY. WE BROKE IT OUT PER, IT'S IN THE APPENDIX. YEAH, WE, WE BROKE IT OUT PER TRANCHE. IT'S JUST THE TOTAL OF EACH FOUR OF THESE TRACHES, WHICH WHICH I THINK IS AROUND 64. YEAH. YEAH, THIS FIRST, THE FIRST ONE IS, IS THE HIGHER PAYMENT. THAT WAS THE ONE THAT WAS ABOUT 76 MILLION. AND THEN AFTER THAT IT DROPS DOWN TO THE 72 BECAUSE OF THE ADDITIONAL MONTHS. ANY OTHER QUESTIONS FOR LAST THING? LET'S, LET'S TALK ABOUT MARKET PARTICIPANTS. OKAY, LAST ONE. SO THIS ITEM IS AN ANNUAL, UM, DISCLOSURE ITEM FOR YOU AND IT IS LISTING OUT ANY FINANCIAL INSTITUTIONS THAT ERCOT DOES BUSINESS WITH THAT ARE ALSO MARKET PARTICIPANTS. IF THEY ARE MARKET PARTICIPANTS, THEY HAVE TO HAVE, WE HAVE TO HAVE A CONFIDENTIALITY AGREEMENT IN PLACE SO THAT THERE ARE NO UM, UH, COMPETITIVE ADVANTAGES BETWEEN THE TWO, TWO COMPANIES. SO THESE ARE THE ONES THAT ERCOT USES THAT ARE ALSO MARKET PARTICIPANTS. AND THEN FOR TRANSPARENCY, WE LIST ALL OF OUR QUALIFIED FINANCIAL INSTITUTIONS AND THIS ONE IS AN ANNUAL DISCLOSURE FOR YOU GUYS. ANY QUESTIONS ON THIS ONE? ANY QUESTIONS FOR LESLIE? OKAY, [9. Future Agenda Items] THANK YOU. WE'LL MOVE ON TO AGENDA ITEM NINE, UH, FUTURE AGENDA ITEMS FOR THE COMMITTEE. AND SEAN IS GOING TO, UH, PRESENT US WITH THOSE AND WE'LL GO AHEAD AND ADD A CONSOLIDATED AMORTIZATION SCHEDULE FOR THE SUBCHAPTER N BONDS AS WELL. THAT ADDS THE FOUR TRANCHES TOGETHER. SO YOU CAN SEE THAT AND SEE THE, THAT WOULD BE OPEN. THE, THAT INITIAL PAYMENT WAS HIGHER THAN WHAT YOU'LL SEE. NORMALLY IT'D BE THAT 72 MILLION. CAUSE THE WAY THAT THESE BONDS WERE BOTH ISSUED WAS TO USE A PER THE, OR THAT OBLIGATION ORDER FROM THE PUC WAS TO HAVE SUBSTANTIALLY EVEN PAYMENT EQUAL PAYMENTS ACROSS THE LIVES. AND THE ONLY TWEAK TO THAT REALLY FOR SUBJECTOR N WAS BECAUSE OF THE ADDITIONAL PERIOD OF EXPENSES AND INTEREST PRIOR TO THAT FIRST PAYMENT DATE AND TO GET ON THAT SIX MONTH CYCLE. SO THAT'S WHY THAT WAS SLIGHTLY HIGHER THAN THE 72 MILLION YOU'RE SEEING NOW. UH, AS WE LOOK TOWARD THE FUTURE OF THIS YEAR, YOU CAN SEE ON OUR PLANNER WE ACCOMPLISHED A LOT OF ADMINISTRATIVE STUFF TODAY AND THAT FIRST SECTION, FORTUNATELY THOSE ARE THINGS WE ONLY NEED TO DO ONCE A YEAR AS WE LOOK FORWARD TOWARD APRIL. COUPLE OF THINGS I WILL HIGHLIGHT. I ALREADY MENTIONED ROW 17 WHERE WE'LL REVIEW THE INSURANCE RENEWAL PROCESS, GIVE THE BOARD THE FIRST VIEW OF THAT, THE FNA COMMITTEE, THE FIRST VIEW OF THAT AS WE LOOK TO PUT THAT IN PLACE FOR THIS NEXT YEAR. WE ALSO ALREADY DISCUSSED ITEM 19, WHICH IS REVIEWING THE PROPOSED BUDGET. WE'LL DO THAT IN APRIL AS WELL DOWN IN ROW 26. WE HAVE INTERNAL AUDIT PLAN DEVELOPMENT PROCESS. WE'LL GET UNDERWAY FOR THE BOARD REVIEW. AND THEN ITEMS 29 THROUGH 32 ARE ASSOCIATED WITH THE FINANCIAL AUDITORS. WE'LL HAVE THE FINANCIAL AUDITORS COME ON SITE WITH THE AUDITS FOR ERCOT AND CONSOLIDATED AND THEN THE TWO SPECIAL PURPOSE ENTITIES AS WELL AS UH, SELECTION PROCESS FOR THE FINANCIAL STATEMENT AUDITORS FOR THE FOLLOWING YEAR. ANY QUESTIONS ON APRIL OR THE REST OF THE YEAR AS WE LOOK FORWARD? OKAY, I THINK THAT DOES A GOOD JOB OF HELPING US MAP OUT, [00:45:01] UH, THE ACTIVITIES FOR FUTURE MEETINGS. THERE ARE NO QUESTIONS. WE WILL, [10. Other Business] UM, MOVE ON TO AGENDA ITEM 10. THANKS SEAN. THANK YOU. AGENDA ITEM 10, UH, WHICH IS THE LAST ITEM BEFORE WE MOVE TO EXECUTIVE SESSION IS OTHER BUSINESS. IS THERE ANY OTHER BUSINESS THAT ANY COMMITTEE MEMBER WISHES TO RAISE AT THIS TIME? OKAY, I'M NOT SEEING ANYTHING. SO THE COMMITTEE [Convene Executive Session] WILL ADJOURN AT THIS POINT IN TIME. UH, ADJOURNED GENERAL SESSION AND WE WILL CONVENE AN EXECUTIVE SESSION. THERE ARE NO VOTING ITEMS BEING DISCUSSED IN EXECUTIVE SESSION. SO THE GENERAL SESSION WILL NOT RECONVENE AT THE CONCLUSION OF THE EXECUTIVE SESSION. THE GENERAL SESSION IS NOW ADJOURNED AND THE WEBCAST WILL BE CONCLUDED. CHAIRMAN LAKE. UM, WOULD YOU LIKE TO, UH, RECESS THE P PUC OPEN MEETING? UH UH, THANK YOU SIR. BECAUSE THIS COMMITTEE WILL NOT RECONVENE THE GENERAL SESSION, WE'LL GO AHEAD AND ADJOURN THE MEETING OF THE PUBLIC UTILITY COMMISSION. THANK YOU. UH, THANK YOU CHAIRMAN LAKE. * This transcript was created by voice-to-text technology. The transcript has not been edited for errors or omissions, it is for reference only and is not the official minutes of the meeting.