[1. Call General Session to Order]
[00:00:04]
WE'RE GONNA RECONVENE THIS MEETING.
UH, THE MEETING ORIGINALLY STARTED AT EIGHT 30 THIS MORNING, UH, BUT BECAUSE OF THE FACT THAT WE HAD BROADCAST ISSUES, UH, WHICH PREVENTED THE PUBLIC FROM BEING ABLE TO, TO, UH, OBSERVE THE MEETING, WE'RE GOING TO, UM, GIVE A RECAP OF WHAT WAS DONE EARLIER TODAY AND THEN WE'LL MOVE STRAIGHT TO AGENDA ITEM FOUR.
UH, TO GO THROUGH THE ERCOT 401K AUDIT.
UH, THERE WERE NO PUBLIC COMMENTERS, UH, THIS MORNING AND ITEM TWO.
[3. June 17, 2024 General Session Meeting Minutes]
IN ITEM THREE, THE MINUTES WERE APPROVED.BOB MADE THE SECOND, AND THEY WERE UNANIMOUS UNANIMOUSLY ADOPTED.
[4. Recommendation regarding Acceptance of 2023 ERCOT 401(k) Savings Plan Audit Report]
US TO AGENDA ITEM FOUR, UH, WHICH IS A RECOMMENDATION REGARDING THE ACCEPTANCE OF THE 2023 ERCOT 401K SAVINGS PLAN REPORT.DAWN, HERE, DAWN HERMS IS GOING TO INTRODUCE THIS ITEM AGAIN,
THEN DAWN WILL MAKE STAFF'S RECOMMENDATION TO THE COMMITTEE AFTER ANY DISCUSSION WILL VOTE ON A RECOMMENDATION, UH, TO THE BOARD REGARDING WHETHER TO ACCEPT THE AUDITED FINANCIAL STATEMENTS OF THE 401K SAVINGS PLAN.
SO, DAWN, WOULD YOU, UH, START AGAIN? OKAY.
DAWN HERMS, DIRECTOR OF HR OPERATIONS, KUT MAINTAINS RISA QUALIFIED 401K SAVINGS PLAN EACH YEAR.
THE DEPARTMENT OF LABOR REQUIRES US TO FILE FORM 5,500, AND ALONG WITH THAT FORM IS AN AUDITED FINANCIAL STATEMENT OF THE PLAN.
ON AUGUST 31ST, 2023, THE BOARD SELECTED BAKER TILLY TO PROVIDE THE 401K SAVINGS PLAN AUDIT SERVICES FOR THE PLAN YEAR OF 2023.
WE HAVE A DRAFT OF THE AUDITED FINANCIAL STATEMENTS IN YOUR, IN YOUR DOCUMENTS, UH, FOR YOUR REVIEW.
AND AT THE CONCLUSION OF THIS PRESENTATION, WE ASK THAT THE, UH, F AND A COMMITTEE RECOMMEND TO THE BOARD OF DIRECTORS THE ACCEPTANCE OF THE DRAFT FINANCIAL REPORT.
SO, INFORMATION ON THE PLAN, THE PLAN ASSETS AT THE END OF DECEMBER, 2022 WAS RIGHT AT $331 MILLION AT THE END OF DECEMBER, 2023 HAD GROWN TO A LITTLE OVER 396 MILLION.
PARTICIPATION FOR THE NON-HIGH COMPENSATED IS 94% WITH AN AVERAGE CONTRIBUTION RATE OF 8.5%.
HIGHLY COMPENSATED IS 98% WITH AN AVERAGE CONTRIBUTION RATE OF 8.77.
AT THIS TIME, I'LL TURN IT OVER TO FRANCIE SUITER FROM BAKER TILLY.
I AM FRANCIE SER, A PRINCIPAL AT BAKER TILLY, AND WE PERFORMED THE 2023 AUDIT OF THE ERCOT 401K PLAN.
WE HAVE SUBSTANTIALLY COMPLETED OUR AUDIT AND JUST AWAITING APPROVAL.
OUR RESPONSIBILITIES AS YOUR INDEPENDENT AUDITOR INCLUDE PLANNING, PERFORMING THE AUDIT TO OBTAIN REASONABLE ASSURANCE AND WHETHER THE FINANCIAL STATEMENTS ARE FREE FROM MATERIAL MISSTATEMENT, ASSESSING THE RISK OF MATERIAL MISSTATEMENT IN THE FINANCIAL STATEMENTS DUE TO FRAUD OR ERROR, PERFORMING APPROPRIATE PROCEDURES.
BASED ON UPON OUR RISK ASSESSMENT, EVALUATING THE APPROPRIATENESS OF THE ACCOUNTING POLICIES USED AND THE REASONABLENESS OF THE ESTIMATES MADE BY MANAGEMENT, WE DID PERFORM AN ERISA SECTION 1 0 3, A THREE C AUDIT.
THE AUDIT OF OUR FINANCIAL STATEMENTS DOES NOT RELIEVE MANAGEMENT OR THOSE CHARGED WITH GOVERNANCE OF THEIR RESPONSIBILITIES.
UM, BELOW ARE ALSO THE RESPONSIBILITIES WHICH WE'LL GO OVER IN DETAIL IN SUBSEQUENT SLIDES.
THERE WERE NO SIGNIFICANT CHANGES TO THE AUDIT PLAN BASED ON OUR UNDERSTANDING OF THE PLAN AND THE ENVIRONMENT IN WHICH YOU OPERATE.
WE FOCUSED ON THE FOLLOWING KEY AREAS, INTERNAL CONTROL OVER FINANCIAL REPORTING AND RELATED TESTED CONTROLS, INCLUDING THE RISK OF MANAGEMENT, OVERRIDE OF CONTROLS, PAYROLL AND PARTICIPANT DATA PROCESSING, FAIR VALUE MEASUREMENTS AND DISCLOSURES, REVENUE RECOGNITION RELATED TO CONTRIBUTIONS AND INVESTMENT INCOME AT THE PLAN AND THE PARTICIPANT LEVEL.
NOTES RECEIVABLE FROM PARTICIPANTS INCLUDING TESTING THE APPROPRIATE DOCUMENTATION AND COMPLIANCE BENEFIT PAYMENT TESTING, INCLUDING THE APPROPRIATENESS OF THE PAYMENT TO ELIGIBLE PARTICIPANTS AND COMPLIANCE WITH PLAN DOCUMENTS, CHANGES TO PLAN PROVISIONS, ACQUISITIONS AND OR PLAN MERGERS, CHANGES TO SERVICE PROVIDERS, WHICH THERE WERE NONE OF IN OTHER AREAS AND RISKS.
BASED ON OUR DISCUSSION WITH MANAGEMENT, THE UH, SIGNIFICANT RISK IS MANAGEMENT OVERRIDE OF CONTROLS.
WE NOTED NO ISSUES DURING THE OUR AUDIT.
ANOTHER AREA OF INFO EMPHASIS WAS THE PLAN, NOT OPERATING IN ACCORDANCE WITH THE PLAN PROVISIONS AND REGULATIONS.
[00:05:02]
INTERNAL CONTROL RELATED, UH, MATTERS AND PLANNING, PERFORMING OUR AUDIT.WE CONSIDER THE PLANS INTERNAL CONTROL OVER FINANCIAL REPORTING IS THE BASIS FOR DESIGNING OUR AUDIT PROCEDURES FOR THE PURPOSES OF EXPRESSING AN OPINION ON THE FINANCIAL STATEMENTS, BUT NOT FOR THE PURPOSE OF EXPRESSING AN OPINION ON THE EFFECTIVENESS OF THE PLAN'S INTERNAL CONTROLS.
ACCORDINGLY, WE DO NOT EXPRESS AN OPINION ON THE EFFECTIVENESS OF THE PLAN'S INTERNAL CONTROLS.
DURING THE COURSE OF OUR AUDIT, WE DID NOT NOTE ANY MATERIAL WEAKNESSES AND HAVE NOTED NO SIGNIFICANT DEFICIENCIES.
THERE WERE NO CHANGES IN THE COUNT IN THE PLAN'S, ACCOUNTING POLICIES OR ESTIMATES DURING 2023.
THE MAIN ESTIMATE IS THE FAIR VALUE OF PLAN INVESTMENTS, WHICH WE EVALUATED THE KEY FACTORS AND ASSUMPTIONS USED TO DEVELOP THOSE ESTIMATES.
THERE WERE NO CHANGES TO THAT OVER THE PRIOR YEAR AS WELL.
THE FINANCIAL STATEMENT DISCLOSURES ARE NEUTRAL, CONSISTENT, AND CLEAR.
WE NOTED NO SIGNIFICANT UNUSUAL TRANSACTIONS.
WE HAD NO DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT.
WE HAD NO DISAGREEMENTS WITH MANAGEMENT.
OUR REPORT HAS NO DEPARTURES FROM THE STANDARD AUDIT REPORT AND WE ARE NOT AWARE OF ANY CO WE DID NOT CONSULT ANYONE OUTSIDE OF THE ENGAGEMENT TEAM.
THERE WERE NO OTHER AUDIT FINDINGS OR ISSUES TO BE NOTED.
WE ARE NOT AWARE OF MANAGEMENT CONSULTATION WITH ANY OTHER ACCOUNTANTS.
WE DID NOT IDENTIFY ANY NON-COMPLIANCE WITH LAWS OR REGULATIONS DURING OUR AUDIT, AND WE DID NOT IDENTIFY ANY FRAUD OR SUSPECTED FRAUD DURING OUR AUDIT.
WE ARE NOT AWARE OF ANY ONGOING CONCERN ISSUES TO THE BEST OF OUR KNOWLEDGE, WE ARE INDEPENDENT.
WE DID REVIEW A SUBSTANTIALLY COMPLETE FORM 5,500 NOTING NO MATERIAL INCONSISTENCIES BETWEEN THE 5,500 AND THE AUDITED FINANCIAL STATEMENTS.
WE DO NOT HAVE ANY SIGNIFICANT FINDINGS OR ISSUES ARISING IN CONNECTION WITH THE PLANS RELATED PARTIES.
WE ALSO REVIEWED THE SUPPLEMENTARY INFORMATION, WHICH IS YOUR SCHEDULE OF ASSETS HELD, MADE INQUIRIES AND MANAGEMENT EVALUATED THE FORM AND DETERMINED IT IS IN COMPLIANCE WITH THE DOLS RULES AND REGULATIONS.
WE DID PROVIDE NON-ATTEST SERVICES TO THE PLAN.
WE PREPARED THE PLAN'S, FINANCIAL STATEMENTS AND THE SUPPLEMENTAL SCHEDULE.
WE PREPARED THE TRIAL BALANCE FROM THE CERTIFIED TRUST REPORTS AND PREPAR AND PREPARED ANY ADJUSTING JOURNAL ENTRIES THAT WERE NEEDED.
ALL OF THE FINANCIAL STATEMENTS THAT WE HAD DRAFTED, I BELIEVE ARE IN YOUR MATERIALS.
ARE THERE ANY FOLLOW UP QUESTIONS FOR I HAD ONE, ME OR NC JUST ON THAT LAST SLIDE.
FOR THE NON ATTEST SERVE SERVICES? YES.
I DIDN'T THINK YOU, I MEAN, HOW IS IT THAT YOU CAN DO THAT AND DO THE AUDIT OPINION AT THE SAME? I THOUGHT THAT WAS A A NO-NO, NO.
UM, FOR SOME PUBLIC COMPANIES, IF IT WAS AN 11 K, THE COMPANY WOULD HAVE TO DO IT, BUT IT IS ALLOWED UNDER THESE CIRCUMSTANCES FOR A QUALIFIED PLAN.
SO THE RECOMMENDATION IS FOR THE FINANCE AND AUDIT COMMITTEE TO ACCEPT THE AUDITED FINANCIAL REPORT AND MAKE A RECOMMENDATION TO THE BOARD OF DIRECTORS FOR ACCEPTANCE.
I'LL HONOR, EXCUSE ME, DOES ANYONE HAVE ANY FURTHER COMMENTS? OKAY.
IF NOT, I WILL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD ACCEPT THE AUDITED FINANCIAL STATEMENT OF KOTS 401K SAVINGS PLAN AS OF DECEMBER 31ST, 2023, AS PRESENTED IN THE DRAFT FORM BY BAKER TILLEY.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
WE WILL MAKE A RECOMMENDATION ON THE BOARD THAT THE ERCOT 401K SAVINGS PLAN REPORT BE APPROVED.
[5.1 Review 2024 Financial Summary]
NEXT UP IS AGENDA ITEM FIVE, COMMITTEE BRIEFS.RICHARD AND LESLIE WILL, UH, PRESENT AGENDA ITEMS ONE 5.1 THROUGH 5.3, STARTING WITH RICHARD'S PRESENTATION OF THE 2024 FINANCIAL SUMMARY.
LESLIE WILL FOLLOW WITH A PERIODIC REPORT ON INVESTMENTS AS WELL AS A PERIODIC REPORT ON DEBT COMPLIANCE.
RICHARD, WOULD YOU START WHEN YOU'RE READY? THANKS FOR HAVING ME.
I'LL PRESENT THE FINANCIAL SUMMARY.
UM, OUR COST YEAR TO DATE, 24 REVENUES NET OF EXPENDITURES WERE FAVORABLE.
53.5 MILLION TO BUDGET DRIVEN PRIMARILY BY OUR INTEREST INCOME OF 27.9 MILLION.
PROJECT EXPENDITURES, 8.9 MILLION IN STAFFING MANAGEMENT OF 8.6 MILLION YEAR END FORECAST, UH,
[00:10:01]
EXPENDITURES ARE 84.2 MILLION, FAVORABLE TO BUDGET DRIVEN BY INTEREST INCOME 61 MILLION.STAFFING MANAGEMENT EXPECTED TO BE FAVORABLE BY 10.6 MILLION.
AND THIS YEAR WE HAVE, UH, THIS TIME RATHER WE HAVE, WE'RE EXPECTING 118.5 MILLION OF OPERATING FUNDS AT JUNE 30TH, 2024 COMPARED TO 2.3 MILLION AS OF JUNE 30TH, 2023.
UH, WALK US THROUGH THE WATERFALL CHARTS.
WE HAVE, UH, NO SIGNIFICANT CHANGES HERE.
UM, IN OUR LAST BOARD MEETING, YOU WERE LOOKING AT REVENUES TO YEAR END OF 60, UM, OF FIF, I'M SORRY, WE'RE LOOKING AT 62 MILLION NOW.
UH, ACROSS THE BOARD WE'RE LOOKING AT 1.8 MILLION.
THE SYSTEM ADMIN FEES AND LAST BOARD MEETING VERSUS 0.5 NOW IS PRIMARILY DRIVEN BY THE WEATHER.
UH, FORECAST CHANGES DUE TO THE SOFT JULY DUE TO THE, THE WEATHER THERE.
UM, FOR THE DEPARTMENT REVENUES, IT'S RELATIVELY UNCHANGED.
INTEREST INCOME, WE'RE SHOWING 61 AT THIS MEETING VERSUS 58.7 DUE TO ONGOING INTEREST RATE FAVORABILITY.
ON THE NET EXPENDITURE SIDE, UH, WE SAW A CHANGE HERE OF 6.5 MILLION, PRIMARILY DRIVEN BY THE 3.9 MILLION IN OTHER PROJECTS.
UH, THAT WAS 0.3 MILLION ON THE PROJECT EXPENDITURES.
LAST MEETING, THAT'S 3.1 MILLION.
THIS MEETING, WE HAD A CHANGE TO OUR STAFFING MANAGEMENT.
WE'RE LOOKING AT 10.6 NOW, PRIMARILY DRIVEN BY VACANCY, SAVINGS AND HEALTHCARE VERSUS 9.4 IN OUR LAST MEETING.
AND THEN, UH, THE BIGGEST CHANGES, OF COURSE UNDER OTHER EXPENDITURES.
UM, INSURANCE, COMMON INFRASTRUCTURE, PROPERTY TAX AND WAN ARE RELATIVELY STABLE.
OUR OUTSIDE SERVICES SHIFTED BY HALF MILLION.
FAVORABLE, UH, BUILDING SYSTEMS MAINTENANCE SHIFTED ABOUT A MILLION PRIMARILY DUE TO THE CHILLERS, UH, THAT WE'VE BEEN LOOKING AT.
AND THEN OUR MINOR CAP SHIFTED APPROXIMATELY A MILLION DOLLARS AND DROPPED OFF THE LIST ALTOGETHER.
SO LAST, LAST MEETING, WE HAD THAT AT A MILLION, OUR WAYS OF WORKING AS LOOKING AT CONSUMING ABOUT A MILLION DOLLARS OF THAT MINOR CAP.
ANY QUESTIONS ON THIS WATERFALL, RICHARD? JUST TALK ABOUT THE, UH, 10.6 MILLION FOR THE STAFFING FAVORABLE VARIANCE.
THE, THE FAVORABLE VARIANCE ON STAFFING.
FAVORABLE VARIANCE ON STAFFING.
THIS IS CONSISTENT WITH, WITH MOST OF THE YEAR WE'VE SEEN THIS GROWTH.
WE HAVE A SAVINGS IN OUR HEALTHCARE COST.
OUR BENEFITS COST IS IMPROVED THERE.
WE HAVE SOMEWHAT SLOWER HIRING.
WE'RE STILL ABOVE OUR ORIGINAL FORECAST.
AND AS WE'VE TALKED ABOUT BEFORE, WHEN WE LOOKED AT OUR, OUR TWO YEAR FORECAST, WE EXPECTED TO COME IN UNDER THIS YEAR ON STAFFING COSTS AND WE EXPECTED TO GO OVER SLIGHTLY.
WE HAVE THE 3% MANAGEMENT CHALLENGE AND WE'RE RUNNING AT ABOUT 6% NOW ON THE VACANCY.
I DID WANNA CALL OUT ONE THING ON THIS, THIS SLIDE RIGHT NOW WE'RE STILL SHOWING 2.4 MILLION ON COMMON INFRASTRUCTURE.
THAT'S THE SAME AS OUR LAST MEETING.
COMMON INFRASTRUCTURE HAS A HIGH LEVEL OF VOLATILITY THROUGHOUT THE YEAR AND THIS IS AN AREA WHERE WE'RE EXPECTING MORE VOLATILITY THROUGH THE END OF THE YEAR AS PROJECTS.
PROJECTS AND EFFORTS THAT WE'RE WORKING THROUGH INTERNALLY KIND OF SETTLE ON FINAL COSTS AS WE MAKE THROUGH THE PLANNING AND INITIATION STAGES OF THOSE PROJECTS.
SO IN THE NEXT MEETING, I'M EXPECTING TO COME BACK WITH A REVISED FORECAST ON, UM, THE COMMON INFRASTRUCTURE.
I THINK IT'S GONNA SHIFT AND IT'S GONNA SHIFT MATERIALLY BETWEEN NOW AND THEN.
SO AS WE, CAN YOU GIVE SOME EXAMPLES OF WHAT'S IN COMMON INFRASTRUCTURE? SURE.
SO COMMON INFRASTRUCTURE IS YOUR STORAGE SERVERS, ANY SORT OF OF INFRASTRUCTURE THAT'S NEEDED AS A PROJECT IS DEPLOYING.
SO DURING PROJECT DEPLOYMENT YOU'LL SEE THESE ADDITIONAL COSTS WHERE WE NEED ADDITIONAL INTERNAL INFRASTRUCTURE COSTS.
WE'LL ISSUE IT TO THE PROJECT.
THE PROJECT WILL TAKE ON THOSE COSTS WHILE THE PROJECT IS RUNNING.
AND THEN AT THE CONCLUSION OF THE PROJECT, WHEN IT NO LONGER NEEDS THOSE ADDITIONAL ASSETS, THAT ADDITIONAL STORAGE MEMORY THAT WAS NEEDED FOR THE MULTIPLE ENVIRONMENTS TO SET THE PROJECT UP, THOSE COME BACK INTO PROJECT, UH, TO THE COMMON INFRASTRUCTURE LATER.
SO WHAT ARE WE TALKING LIKE IT'S 1% OR 10% NOW, WHAT'S THE BASE NUMBER OF THAT PARTICULAR BUDGET FOR A COMMON INFRASTRUCTURE? YEAH, THE BASE BUDGET, I DON'T HAVE RIGHT OFF THE TOP OF MY HEAD, BUT THE WHERE EXPECTING TO END THE YEAR, ABOUT 6 MILLION OVER BUDGET ON THAT PARTICULAR ITEM VERSUS THE 2.4 WE HAVE NOW.
YEAH, IT'D BE HELPFUL JUST TO KNOW THE PERCENTAGE, 'CAUSE THAT MIGHT BE VERY MINOR.
JUST TRYING TO UNDERSTAND IS IT 1% OR 10%? SURE.
I'M SORRY I DON'T HAVE THAT OFF, BUT I'LL NO WORRIES.
[00:15:01]
ANY OTHER QUESTIONS ON THIS SLIDE? OKAY.BUDGET VERSUS ACTUAL ON LOAD VERSUS SYSTEM ADMINISTRATION FEE.
UM, IF YOU'LL RECALL FROM OUR LAST MEETING, OUR JULY HAS CHANGED SIGNIFICANTLY ON OUR FORECASTING VERSUS ACTUALS.
WE'RE EXPECTING, UH, 48.4 ON THE ACTUAL FOUR FORECAST ON TERAWATT HOURS THAT CAME IN MATERIALLY LOWER AT 44.8, WHICH DROVE THROUGH, UH, THE CHANGES TO OUR SYSTEM ADMINISTRATION FEE EXPECTATIONS FOR YEAR END, BUT NO, NO SIGNIFICANT CHANGES, UH, THROUGH THE REST OF THE YEAR.
STATEMENT, FINANCIAL POSITION FOR ERCOT, MNN.
THIS IS RELATIVELY STABLE AND CONSISTENT WITH WHAT YOU'VE SEEN PREVIOUSLY.
THE ONGOING STORY OF THE CRR AUCTION LIABILITIES, YOU'LL SEE THAT THOSE CONTINUE TO SHIFT BETWEEN LONG TERM TO SHORT TERM.
SO WE'RE CONTINUING TO SEE THAT SHORT TERM BUNCHING OF THE CRR, WHICH IS OF COURSE GONNA IMPACT OUR ABILITY TO INVEST FOR LONGER TERM INCOME STATEMENT.
UM, AGAIN, A A RELATIVELY, UH, STABLE STORY HERE NOW THAT WE'VE HAD M AND N FOR FULL YEARS AND WE'RE LOOKING AT A 28.4 MILLION INCREASE IN OPERATING REVENUES, UH, AS DRIVEN BY THE SYSTEM ADMINISTRATION FEE.
10 MILLION OF THAT WAS DUE TO CHANGES IN POWER CONSUMPTION, MEGAWATT HOUR USAGE AND THEN 16.5 WAS DUE TO THE SYSTEM ADMINISTRATION FEE RATE, 18.1 MILLION IN OPERATING EXPENSES DRIVEN BY SALARIES AND BENEFITS, UH, INCREASE IN DEPRECIATION EXPENSE AS WE CONTINUE CAPITALIZING ASSETS AND DEPRECIATING THOSE 1.3 MILLION IN OTHER INCOME, PRIMARILY DRIVEN OF COURSE BY INTEREST INCOME.
AND WE ALSO HAVE THE US TREASURY OBLIGATION FAIR MARKET VALUE ADJUSTMENT.
OF COURSE, WE DON'T ANTICIPATE REALIZING THE FAIR MARKET VALUE ADJUSTMENT AS WE TYPICALLY HOLD TO MATURITY, BUT WE SAW AN IMPROVEMENT OF 2 MILLION, UM, BOARD TO BOARD.
UH, THE CRR UH, CHART, UM, OF, AGAIN, OUR KEY TAKEAWAY HERE IS OUR UNRESTRICTED CASH AND BOND INVESTMENTS EXCEEDED MARKET LIABILITIES BY 118 MILLION.
THAT'S UP FROM 83.7 MILLION IN THE JUNE BOARD.
OUR PREVIOUS HIGH WAS THE 2170 5 MILLION IN MARCH.
WE'RE CURRENTLY SITTING AT 2177 IN UH, JUNE.
SO THIS IS AGAIN, VERY, VERY FLAT, RELATIVELY STABLE CRR BALANCE THAT WE'VE BEEN HOLDING FOR SOME TIME AS EXPECTED TO MY LAST SLIDE.
ANY ADDITIONAL QUESTIONS, COMMENTS, ANY QUESTIONS FOR RICHARD? OKAY, LESLIE, GOOD
[5.2 Periodic Report on Investments]
MORNING.THE INVESTMENTS COMPARED TO THE LAST TIME YOU SAW THEM.
UH, THIS REPORT SHOWS MAY AND JUNE AND WE WERE IN COMPLIANCE FOR THE MONTH OF JUNE.
HOWEVER, WE WERE OUT OF COMPLIANCE FOR ONE DAY IN MAY ON THE 10% THRESHOLD FOR THE MONEY MARKETS.
ONE FUND WAS 10.28 FOR ONE DAY AND THEN BROUGHT BACK INTO COMPLIANCE FOR THE NEXT DAY.
AND WE'VE BEEN IN COMPLIANCE SINCE.
UM, THE OTHER CHANGE IS THAT, UH, THE MONEY MARKETS WERE SLIGHTLY DOWN IN INTEREST, UM, IN RATES AND THE TREASURY OBLIGATIONS WERE SLIGHTLY UP.
UM, THAT'S ALL I HAD ON THE INVESTMENTS.
[5.3 Periodic Report on Debt Compliance]
GO THROUGH DEBT COMPLIANCE.ERCOT IS IN COMPLIANCE WITH ALL OF THE DEBT REQUIREMENTS.
THE CHANGE FROM LAST TIME IS THAT WE DID MAKE OUR PAYMENT ON THE SECURITIZATION DEBT FOR BOTH SUBCHAPTER M AND SUBCHAPTER N AND THEN I DID WANT TO MENTION THAT WE ISSUED AN RFP ON OUR A HUNDRED MILLION DOLLARS REVOLVER.
[00:20:01]
DECEMBER.UM, AND WE ARE REVIEWING THOSE RESPONSES AND WE'LL BRING THAT BACK TO YOU GUYS, UM, IN OCTOBER.
ANY QUESTIONS ON DEBT COMPLIANCE? SEEMS LIKE THERE ARE NO QUESTIONS.
UH, SO LET'S, THANK YOU LESLIE.
[6. Review Commission-Ordered Operating Budget Reconciliation]
LET'S MOVE TO, UH, A NEW ITEM, UH, FOR THIS, UH, MEETING.AND THAT IS, UH, AGENDA ITEM SIX, UH, TO REVIEW THE COMMISSION ORDERED OPERATING BUDGET RECONCILIATION AND RICHARD IS GOING TO PRESENT THIS.
THANK I AM RICHARD, I'M GONNA ASK YOU TO SPEAK UP JUST A LITTLE BIT IF YOU OH, FOR SURE.
THIS IS THE NEW, UH, COMMISSION ORDERED OPERATING BUDGET RECONCILIATION, UH, AS PART OF THE PEC ORDER APPROVING OUR 24 AND 25 BINNA BUDGET AND SYSTEM ADMINISTRATION FEE.
UH, THEY REQUEST THE PEC REQUESTED, UH, THIS RECONCILIATION, SO IT'S A 12 MONTH RECONCILIATION ENDING JUNE 30TH.
SO, UM, AS WE WENT THROUGH THIS, WE MET WITH THE PUC, UH, BEFORE THIS MEETING SO THAT WE WOULD GET AN IDEA OF WHETHER OR NOT THIS MET THEIR NEEDS.
AND WE'VE DIVIDED THIS IN A COUPLE OF WAYS.
SO WE'RE UTILIZING MATERIALS THAT YOU HAVE SEEN PREVIOUSLY AND WE'VE SPLIT IT INTO THE FULL YEAR.
I'M SORRY, WE HAVE, WE'RE PRESENTED AT THE FULL YEAR AND THEN IN THE SIX MONTH SPLITS, JUST BECAUSE AT THE FULL YEAR LEVEL IT, IT HID SOME OF THE DIFFERENCES THAT WE HAD IN THE TWO SIX MONTHS PERIODS INVOLVED.
OKAY, SO THERE'S NO REAL NEW MATERIAL BEING PRESENTED HERE, BUT IT IS THE FORMAT THAT I WANTED TO TALK TO Y'ALL THROUGH AND TALK TO YOU ABOUT SOME OF THE NUMBERS.
IF YOU HAD ANY QUESTIONS THERE.
THIS IS THE, THE 12 MONTH PERIOD ENDING JUNE 30TH, 2024.
SO OF COURSE THE PRIMARY STORIES HERE ARE OUR, UM, INTEREST INCOME AND OUR DEPARTMENT, UH, NET EXPENDITURE PROJECT EXPENDITURE ITEMS, WHICH WE'LL SEE IN MORE DETAIL ON THE NEXT SLIDE.
SO FOR EACH SIX SIX MONTH PERIOD FOR 2023, WE SAW THE IMPACTS AGAINST OUR DEPARTMENT.
NET EXPENDITURES WAS OUR, OUR BIG DOLLAR VARIANCE PROJECT EXPERIENCE EXPENDITURES WERE HIGH AS WELL AS WE WERE RAMPING UP INTO PROJECTS AT YEAR END FOR THE SIX MONTHS OF JUNE 30TH.
UM, THIS IS THE SAME KIND OF INFORMATION WE JUST WENT THROUGH.
SO DEPARTMENT NET EXPENDITURES, 17 MILLION, PRIMARILY DRIVEN BY UM, SAVINGS ON VACANCY SAVINGS.
INTEREST AGAIN IS HIGH AND I'LL POINT OUT SOMETHING THAT WE DISCUSSED, UH, WITH THE PC AS WELL, WHICH IS LINE NINE INTEREST INCOME.
WE HAD THAT BUDGETED AT ZERO, WHICH CREATED THE VERY LARGE VARIANCE AND THAT WAS DUE TO THE TIMING OF WHEN WE MADE THOSE INTEREST RATE PROJECTIONS.
SO AT THE TIME THAT WE WERE AT A ZERO INTEREST RATE ENVIRONMENT, WE WEREN'T PREDICTING THE LARGE INCREASE WE'VE HAD, UH, WHEN THE FED BEGAN THEIR FUND FUND RATE INCREASES.
UM, RICHARD, COULD YOU ADDRESS MARKET DESIGN PROJECT, UM, SIGNIFICANTLY ON 2024? YEAH.
YEAH, 2024 IS A TIMING, SO WE'RE EXPECTING TO, TO SPEND I THINK 14.6 IS WHAT WE'RE ANTICIPATING THROUGH YEAR.
AND SO THIS IS A TIMING, A TIMING ISSUE EXCLUSIVELY, NOT A, NOT AN ANTICIPATED REDUCTION IN SPEND.
WHAT'S INCLUDED IN THAT MARKET DESIGN? MARKET DESIGN IS THE RTC PLUS P UM, ITEMS. SORRY, I DON'T HAVE THAT LIST OF PROJECTS RIGHT IN FRONT OF ME.
SO THAT'S GOING TO INCLUDE THE RTC PLUS B GRIDDED MARKETS, THE PROGRAM CONTROL, COMMERCIAL APPLICATIONS, INTEGRATION INFORMATION, ALL FOR THE RTC PLUS B AND THEN THE DISPATCHABLE RELIABILITY RESERVE SERVICE ARE ALL INCLUDED IN THAT MARKET DESIGN PROJECT BUCKET.
ANY OTHER QUESTIONS ON THIS SLIDE? OKAY.
WATERFALLS, Y'ALL ARE USED TO SEEING THESE WATERFALLS AS FORECASTS.
SO I JUST WANNA CALL YOUR ATTENTION THAT THESE ARE NOT FORECAST WATERFALLS, THESE ARE ACTUALS.
SO THEY'RE ACTUALS THROUGH YEAR END AND THEN IT'S ACTUALS YEAR TO DATE, UH, JUNE.
SO AGAIN, OUR DRIVER STAFFING MANAGEMENT AND, UH, INTEREST INCOME BROKEN OUT FOR THE TWO SIX MONTH PERIODS.
RESOURCE MANAGEMENT, STAFFING MANAGEMENT BEING THE BIG DRIVER IN BOTH YEARS, SO NEGATIVELY, UH, UNFAVORABLY IN 2023,
[00:25:01]
FAVORABLY IN 2024.ON THE EXPENDITURE SIDE, ON THE REVENUE SIDE, INTEREST INCOME BEING THE PREDOMINANT STORIES THAT WE'RE TELLING THERE.
SO FULL YEAR SOURCES AND USES.
ONCE AGAIN, UH, WE HAVE THE INTEREST INCOME AS THE LARGE STORY THERE AND THE INCREASE IN CASH BALANCE BROKEN UP INTO THE TWO SIX MONTH PERIODS.
THAT'S THE END OF MY SLIDE PRESENTATION ON THIS.
AND WHAT'S THE PROCESS AT THE PUC ON THIS RECONCILIATION? SURE.
WE PREPARED THIS RECONCILIATION.
WE HAD A COUPLE OF DIFFERENT FORMATS WE CONSIDERED AND THIS ONE SEEMED THE MOST CLEAR CUT IN TO EVERYONE SINCE WE'RE VERY FAMILIAR WITH THESE MATERIALS.
UH, MONTH OVER, I MEAN MEETING OVER MEETING FOR THE F AND A COMMITTEE, WE BROUGHT THAT TO THE PC.
WE MET WITH THOMAS AND HIS SENIOR STAFF.
MADE SURE IT MET WHAT THEY WERE EXPECTING FOR THIS PROCESS.
AND CAN YOU ADDRESS, UM, I BELIEVE THERE WAS SOME ADDITIONAL REQUIREMENTS THAT THEY ASKED WHEN THEY APPROVE THE BUDGET FOR US TO START TRACKING, UH, LIKE CERTAIN THAT'S, MAYBE I CAN ADDRESS THAT.
SO THERE IS ADDITIONAL REQUIREMENT AROUND FERC, UH, KEY PERFORMANCE INDICATORS THAT, UH, NOT EVERY KEY PERFORMANCE INDICATOR.
WE INITIALLY MADE A, A FILING WITH THE COMMISSION TRYING TO MAP OUT ONES THAT WE DEEMED THAT WERE MORE APPLICABLE TO ERCOT AS THE SYSTEM OPERATOR MADE THAT FILING WITH THE COMMISSION.
GOT SOME INITIAL FEEDBACK AS WE'VE BEEN WORKING THROUGH THE INTERNAL PROCESS.
WE'LL ALSO BE MAKING A FILING FOR THE FIRST TIME AROUND THOSE FERC KEEP KPIS.
UM, THERE ARE SOME ADDITIONAL ONES AS WE'VE GONE THROUGH THE INTERNAL EFFORT THAT WE STILL DON'T THINK MAKES SENSE FOR US AND WE'VE HAD DISCUSSIONS WITH COMMISSION STAFF AROUND THAT AS WELL.
BUT ULTIMATELY BY SEPTEMBER 1ST WE'LL MAKE OUR FIRST FILING ON THE FOR KPIS AS WE'RE WRAPPING UP THAT INTERNAL EFFORT.
AND WE'LL, WE'LL OBVIOUSLY SEND AROUND A, A VERSION FOR THE BOARD'S, UM, REVIEW AS WELL AS WE GET TOWARD THE END OF THE MONTH HERE.
AND THEN WE'LL MAKE THIS FILING AS WELL THIS RECONCILIATION FILING.
AND THEN WE STILL HAVE UNDER THAT BUDGET ORDER WHERE THERE WERE SOME KEY ITEMS THAT THE COMMISSION WAS INTERESTED IN VALUE OF LOSS LOAD, DRRS, REALTIME COOPERATION THAT WE MAKE THOSE FILINGS ON A REGULAR BASIS AS WELL.
SO THAT'LL BE PART OF THOSE ADDITIONAL FILINGS.
ANY OTHER QUESTIONS? RICHARD? THANK YOU.
UH, I THINK WE'RE AT THE END OF YOUR PRESENTATION.
AND, UH, ANY COMMENTS FROM PUC? OKAY, THANKS.
[7. Future Agenda Items]
TO AGENDA ITEM SEVEN, WHICH IS FUTURE AGENDA ITEMS GONNA BE PRESENTED BY SEAN MORNING EVERYONE.VERY QUICKLY, AS WE LOOK FORWARD TOWARDS OCTOBER AND THE REMAINDER OF THE YEAR, OCTOBER, THERE'S TWO ITEMS I'D LIKE TO IDENTIFY THAT ARE NON-STANDARD RECURRING ITEMS. NUM LINE NUMBER NINE IS THE UNDERTAKE ANNUAL SELF-EVALUATIONS.
SO THE COMMITTEE WILL KICK OFF THAT PROCESS.
AND UNDER ITEM 29 WE HAVE THE REVIEW THE DRAFT ANNUAL INTERNAL AUDIT PLAN.
SO PENNY WILL BE BRINGING THAT TO THE COMMITTEE IN OCTOBER AS WELL TO REVIEW AND SIDE NOTE, NOT LISTED ON HERE SPECIFICALLY, BUT INTERNALLY WE'LL ALSO BE STARTING THE DEVELOPMENT OF OUR 26 27 BI-ANNUAL BUDGET PROCESS.
WE'LL BE ABLE TO GIVE THE COMMITTEE AN UPDATE ON THAT AS WE MAKE PROGRESS IN THAT FRONT, WHICH WE'LL THEN BRING TO THE COMMITTEE FOR APPROVAL NEXT YEAR.
UH, THE LAST ITEM BEFORE WE MOVE INTO EXECUTIVE SESSION IS AGENDA ITEM EIGHT, WHICH IS OTHER BUSINESS.
IS THERE ANY OTHER BUSINESS THAT ANY COMMITTEE MEMBER WISHES TO RAISE? OKAY, AT THIS TIME THE COMMITTEE
[Convene Executive Session]
IS GONNA ADJOURN GENERAL SESSION AND CONVENE AN EXECUTIVE SESSION.WE HAVE ONE VOTING ITEM THAT WE ANTICIPATE FROM THE EXECUTIVE SESSION.
SO THE GENERAL SESSION WILL RECONVENE AT THE CONCLUSION OF THE EXECUTIVE SESSION.
THE GENERAL SESSION IS NOW RE UH, RECESSED AND THE WEBCAST WILL BE CONCLUDED.
[Reconvene General Session]
THE FINANCING AUDIT COMMITTEE, UH, MEETING IS RECONVENED IN GENERAL SESSION.[9. Vote on Matters from Executive Session]
FROM EXECUTIVE SESSION.ACCORDINGLY, I'LL ENTERTAIN A MOTION
[00:30:01]
ON THE SELECTION OF THE 2024 401K UH, SAVINGS PLAN.AUDITOR DISCUSSED AN EXECUTIVE SESSION UNDER AGENDA ITEM ES 2.3.
ANY OPPOSED? ANY ABSTENTIONS? OKAY, WE ARE GOING TO MAKE THAT RECOMMENDATION TO THE BOARD TOMORROW.
THIS MEETING OF THE FINANCE AND AUDIT COMMITTEE IS NOW ADJOURNED AND THE WEST CA THE WEBCAST WILL BE CONCLUDED.