[00:00:04]
[1. Call General Session to Order]
AND AUDIT COMMITTEE AND GUEST, I'M BILL FLORES, COMMITTEE CHAIR OF THE FINANCE AND AUDIT COMMITTEE.WELCOME TO THE OCTOBER 9TH, 2024 FNA COMMITTEE MEETING.
I HEREBY CALL THIS MEETING TO ORDER.
THIS MEETING IS BEING BROADCAST WI LIVE TO THE PUBLIC ON OUR COTS WEBSITE.
I HAVE CONFIRMED THAT A QUORUM IS PRESENT IN PERSON.
UH, THE MEETING OF THE, EXCUSE ME.
BEFORE MOVING ON TODAY'S BUSINESS, I'LL HIGHLIGHT TO COMMITTEE MEMBERS THAT THE ANTITRUST ADMONITION AND THE SECURITY MAP ARE POSTED WITH THE MEETING MATERIALS.
UH, THE FIRST ORDER OF BUSINESS TODAY ON TODAY'S AGENDA IS ITEM TWO.
NOTICE OF PUBLIC COMMENT, IF ANY.
TODAY'S MEETING AGENDA WAS POSTED PUBLICLY ON OCTOBER 2ND, 2024, AND PROVIDED INSTRUCTIONS FOR THE PUBLIC FOR COMMENTING IN PERSON.
AS I'M, AS FAR AS I'M AWARE, THERE'S NOBODY THAT'S, UH, EXPRESSING INTEREST IN COMMENTING.
IS THAT CORRECT, CHAD? THAT IS CORRECT.
SO THE NEXT ITEM IS AGENDA ITEM
[3. August 19, 2024 General Session Meeting Minutes]
THREE, THE AUGUST 19TH, 2024, GENERAL SESSION MEETING MINUTES.THERE'S A DRAFT IN THE MEETING MATERIALS.
DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION? OKAY, BOB MU'S APPROVAL.
ANY OPPOSED? ANY ABSTENTIONS? THE MINUTES ARE APPROVED AS WRITTEN.
[4. Notice of Annual Committee Self-Evaluation Questionnaire]
OF AGENDA ITEM FOUR, THE NOTICE OF ANNUAL COMMITTEE SELF-EVALUATION QUESTIONNAIRES IS AN OPPORTUNITY TO DISCUSS THE 2024 ANNUAL COMMITTEE SELF-EVALUATION QUESTIONNAIRE, THE COMMENTS, AND, EXCUSE ME, THE CONTENTS AND FORMAT OF WHICH THE HUMAN RESOURCES AND GOVERNANCE COMMITTEE REVIEWED DURING THEIR MEETING ON AUGUST 19TH, 2024.ERCOT STAFF IS PLANNING TO ELECTRONICALLY ADMINISTER THE QUESTIONNAIRE TO THE FINANCE AND AUDIT COMMITTEE MEMBERS FOLLOWING TODAY'S MEETING AND WILL REVIEW THE RESULTS DURING THE MEETING SCHEDULE FOR DECEMBER.
SECOND, I'D LIKE TO ASK THAT ALL COMMITTEE MEMBERS SUBMIT RESPONSES TO THE SURVEY NO LATER THAN NOVEMBER 1ST.
DOES ANYONE HAVE ANY QUE UH, FEEDBACK REGARDING THAT QUESTIONNAIRE? IF NOT, UH, AGAIN, UH, IF YOU COULD PROVIDE YOUR FEEDBACK BY NOVEMBER 1ST, THAT WOULD BE GREAT.
[5.1 Review 2024 Financial Summary]
COMMITTEE BRIEFS, UH, LATER TODAY, THE HUMAN RESOURCES AND GOVERNANCE COMMITTEE PLANS TO RECOMMEND THAT THE BOARD RATIFY RICHARD SHIELD AS SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AND CHIEF RISK OFFICER FOR ERCOT.UH, RICHARD IS GOING TO PRESENT THE FIRST COMMITTEE BRIEF AGENDA ITEM 5.1, A REVIEW OF THE, UH, 2024 FINANCIAL SUMMARY.
THANK YOU, BILL FOR THE INTRODUCTION.
ALL RIGHT, ON OUR OVERVIEW SLIDE, WE HAVE ERCOT, YEAR TO DATE AUGUST, 2024, ACTUAL REVENUES, NET OF EXPENDITURES, 74.6 MILLION FAVORABLE AS OUR KEY TAKEAWAY, UH, DRIVEN PRIMARILY BY INTEREST INCOME.
NONE OF THIS IS A NEW STORY TO THE COMMITTEE AND PROJECT EXPENDITURES FAVORABLE BY 5.6 MILLION.
STAFFING MANAGEMENT FAVORABLE BY 10.7.
LOOKING AT OUR YEAR END FORECAST, WE'RE LOOKING AT A 94.8 MILLION FAVORABLE TO BUDGET DRIVEN BY INTEREST INCOME FORECAST TO BE FAVORABLE BY 71.9 MILLION, AND STAFFING MANAGEMENT TO BE FAVORABLE BY 11.9 MILLION.
CURRENTLY, ERCOT HAS 151.2 MILLION OF OPERATING FUNDS AS OF AUGUST 31ST, 2024, COMPARED TO 30.7 MILLION USE OF CRR FUNDS, CONGESTION REVENUE RIGHT FUNDS AS OF AUGUST 31ST, 2023.
THAT'S AN INCREASE FROM 118.5 MILLION, UH, THAT WE HAD AVAILABLE IN JUNE.
UH, LOOKING AT THE WATERFALL SLIDE, OUR NET AVAILABLE YEAR-END FORECAST VARIANCE TO BUDGET, 94.8 MILLION AT THE LAST BOARD THAT WAS REPORTED AT 84.2 MILLION.
THE 10.6 MILLION DELTA IS PRIMARILY DRIVEN BY INTEREST INCOME, UH, 10.9 MILLION FAVORABLE.
AND LOOKING AT THAT REVENUE YEAR-END FORECAST, THERE ARE, UH, SMALL MOVES BETWEEN THE LAST MEETING AT THIS MEETING, 2.2 MILLION IN SYSTEM ADMIN FEE VERSUS 0.5.
UH, IN TOTAL WE'RE AT 75.1 VERSUS 62 AT THE LAST MEETING.
OF THAT 61 MILLION WAS REPORTED IN INTEREST INCOME VERSUS A 71.9.
NOW, THAT DIFFERENCE IS PRIMARILY DRIVEN BY OUR HELD TO MATURITY ACCOUNTING ADJUSTMENT.
SO WE HAVE A 7.9 MILLION CHANGE IN THE FAIR MARKET VALUE ADJUSTMENT BETWEEN THE JUNE MEETING AND THE CURRENT MEETING.
WE ANTICIPATE THAT TO CONTINUE TO MOVE TOWARDS YEAR END.
AND ONCE AGAIN, THOSE, THOSE MOVES EITHER TOWARDS A FAIR MARKET VALUE LOSS OR GAIN, WE DON'T EXPECT TO REALIZE THOSE AS WE HOLD OUR DEBT TO MATURITY.
[00:05:01]
THE VARIANCE OF BUDGET, 19.7 MILLION FAVORABLE VERSUS 22.2 MILLION FAVORABLE AT OUR LAST MEETING.IT'S PRIMARILY DRIVEN BY OUR OTHER PROJECTS, A 2.1 MILLION CHANGE ACROSS SEVERAL PROJECTS.
THE BIG MOVER HERE IS COMMON INFRASTRUCTURE, WHICH IS A 5.2 MILLION MOVE FROM, UH, 2.4 TO 2.8 MILLION, UH, UNFAVORABLE AND COMMON INFRASTRUCTURE.
I MENTIONED THIS SHIFT PREVIOUSLY, AND I JUST WANTED TO GO OVER THE COMMON INFRASTRUCTURE CONCEPT BRIEFLY FOR THE BOARD ONCE AGAIN.
SO WE USE THE COMMON INFRASTRUCTURE BUCKET AS AN OPPORTUNITY TO BUY IN BULK AND ACHIEVE LARGE DISCOUNTS ON PURCHASES AND AVOID THE ADMINISTRATIVE PROCESS OF EACH PROJECT BUYING INDIVIDUAL, UH, HARDWARE, SOFTWARE, AND STORAGE.
SO WHAT THIS REPRESENTS, UH, IN THIS MEETING AND, AND WHY WE HAD SUCH A LARGE SHIFT, UM, IS PRIMARILY DRIVEN BY SEVERAL O AND M PROJECTS, WHICH TAKE UP, UH, 2.6 MILLION FOR SMALL PROJECTS, SMALL O AND M PROJECTS AND STORAGE RELATED TO THOSE O AND M PROJECTS.
THE REMAINDER OF THE UNFAVORABLE CHANGE, UH, FOR THIS BOARD MEETING IS 2 MILLION OF HARDWARE BEING DEVOTED TO RTC PLUS B.
AS EVERYONE'S AWARE, THE TIMELINES ON RTC PLUS B AREN'T MOVING QUICKLY, AND WE NEED TO MOVE THINGS FROM 2025 INTO 2024.
AND AS WELL, WE HAD A 1.4 MILLION DELTA WITHIN COMMON INFRASTRUCTURE ON NEEDS FOR SERVICENOW.
WE HAD A SOFTWARE AS A SOLUTION PLATFORM, AND WE NEEDED TO BRING PART OF THAT INTO, UH, ONSITE.
ANY QUESTIONS THERE? ANY OTHER QUESTIONS ON THIS SLIDE? 24 BUDGET VERSUS ACTUAL MONTHLY LOAD AND CUMULATIVE SYSTEM ADMINISTRATION FEE REVENUE.
WE SAW THAT IN THE WATERFALL ON THE PREVIOUS PAGE.
WE HAD THE, UH, CHANGE FROM 0.5 TO 2.2 MILLION I STATEMENTS OF FINANCIAL POSITION.
UH, WHEN WE'RE LOOKING AT THIS, THE ENTIRE PAGE IS RELATIVELY STABLE, UH, BOARD TO BOARD.
THE CHANGE YOU WILL SEE IS BETWEEN CRR AUCTION LIABILITIES, CURRENT AND LONG TERM.
WE HAVE OUR ANNUAL UPS AND DOWN AND THE LONG TERM VERSUS SHORT TERM CRR FUNDS.
AND SO WE'RE APPROACHING THAT, THAT OCTOBER ZENITH FOR LONG-TERM CRR AUCTION FUNDS.
THIS, UH, AS YOU SEE, THEY INCREASED HERE BY 40.3 MILLION AND YOU SEE A DECLINE OF 75.2 MILLION IN THE CURRENT.
AND THEN I JUST WANTED TO CALL OUT, UH, OTHER MARKET LIABILITIES.
WE HAD A LARGE DELTA THIS MONTH, THIS, THIS BOARD, 891.8 MILLION IN 2023, AND THAT WAS DUE TO HIGHER MARKET PREPAYMENTS AT THE END OF AUGUST, 2023.
ANY OTHER QUESTIONS ON THIS? SO OVER THE LONGER TERM, WHAT'S THE EXPECTED AMOUNT OF OTHER MARKET LIABILITIES? SOUNDS LIKE THERE'S SOME VOLATILITY TO THAT NUMBER.
TO WHICH NUMBER TO OTHER MARKET LIABILITIES.
YEAH, THIS, THIS WAS DRIVEN BY THE, THE LAST WEEKEND IN AUGUST OF 2023.
SO NORMALLY WE DON'T SEE THIS KIND OF, OF SHIFT, BUT WE HAD A LARGE NUMBER OF P PAYMENTS AND MOVES IN THE AUGUST PERIOD RELATED, I BELIEVE, TO WEATHER.
BUT YES, THERE, THERE IS SOME VOLATILITY IN THIS NUMBER, NORMALLY NOT OF THIS MAGNITUDE.
STATEMENTS OF ACTIVITIES AND NET ASSETS, UH, EVERYTHING'S RELATIVELY STABLE ON THIS PAGE.
UH, WE HAVE 33.9 MILLION INCREASE IN OPERATING REVENUES DRIVEN BY THE SYSTEM ADMINISTRATION FEE REVENUE YEAR OVER YEAR, 26.4 MILLION, INCREASE IN OPERATING EXPENSES, UH, DRIVEN BY SALARIES AND RELATED BENEFITS DUE TO OUR INCREASE STAFFING OVER THIS YEAR.
THE REMAINDER OF THOSE ARE RELATIVELY STABLE.
AND THEN THE 9.3 MILLION INCREASE IN OTHER INCOME INTEREST INCOME, UH, WE HAVE THE 12.4 MILLION INCREASE IN INTEREST INCOME FROM YEAR OVER YEAR LAST YEAR.
AND THEN THE 3.1 MILLION INCREASE IN US TREASURY OBLIGATIONS.
UH, THIS WAS SHOWING, UH, 0.8 0.7, UH, DURING OUR LAST MEETING, AND NOW IT'S, UH, 0.8 MILLION LOSS.
ONCE AGAIN, THAT WAS, WE DON'T ANTICIPATE REALIZING.
THAT BRINGS US TO OUR CRR FUNDS CHART.
UM, RELATIVELY STABLE, SMALL DECLINE, UH, CURRENTLY AND, UH, UNDER RESTRICTED CASH.
AGAIN, 1 51 0.2 MILLION AVAILABLE NOW VERSUS ONE 18.5 AT, UH, THE JUNE,
[00:10:01]
UM, A MONTH END PRESENTED AT THE LAST BOARD.ANY QUESTIONS? ANY QUESTIONS FOR RICHARD? SO, OKAY, I THINK THAT WE'LL MOVE ON.
[5.2 Periodic Report on Investments]
NEXT UPPER OF THE LET'S THE COMPANY'S TREASURER AND NEWLY DESIGNATED CONTROLLER IS GOING TO PRESENT AGENDA ITEMS 5.1 AND 5.2 RESPECTIVELY, THE PERIODIC REPORT ON INVESTMENTS AND THE PERIODIC REPORT ON DEBT COMPLIANCE.LESLIE, PLEASE PROCEED WHEN YOU'RE READY.
WE ARE IN COMPLIANCE WITH THE INVESTMENT CORPORATE STANDARD, ALTHOUGH THE RATES ARE SLIGHTLY LOWER THAN WHAT YOU SAW LAST MEETING.
UM, THE NEXT UPDATE WILL SHOW THE, UH, SEPTEMBER FED RATE CUT, SO THE RATES WILL BE LOWER.
UM, A FEW TAKEAWAYS FROM THAT.
LESLIE, CAN YOU PULL THE MICROPHONE A LITTLE CLOSER PLEASE? THANK YOU.
IT WAS THE FIRST RATE CUT SINCE 2020.
THE RATE CUT WAS 50 BASIS POINTS.
UM, OUR REPRESENTATIVES ARE PROJECTING ABOUT TWO MORE RATE CUTS IN 2024, UM, PROJECTING ABOUT 25 BASIS POINTS EACH TIME, AND THEY'RE SUGGESTING ABOUT AN ADDITIONAL 100 BASIS POINTS OF CUTS NEXT YEAR.
UH, ANY QUESTIONS ON THE INVESTMENT CORPORATE STANDARD? OKAY.
HOW MUCH OF YOUR INTEREST INCOME BUDGET IS LOCKED IN NOW? YOU KNOW, YOU'VE, ERCOT HAS DONE A PRETTY GOOD JOB OF LADDERING IN ITS INVESTMENTS IN THE PAST, SO DO YOU HAVE A FEEL FOR THAT? YES.
ON THIS SLIDE, UH, YOU CAN SEE HOW MUCH WE'VE LOCKED IN ON OUR INVESTMENTS.
UM, SO IN 2025, UH, WE'VE ALREADY LOCKED IN 38 MILLION.
SO YOU'VE GOT VIRTUALLY ALL OF THE, UH, 2025 INTEREST INCOME BUDGET LOCKED IN.
BY THE WAY, THE INVESTMENTS HAVE BEEN LADDERED.
ANY OTHER QUESTIONS ON THE INVESTMENTS? OKAY, LET'S GO TO
[5.3 Periodic Report on Debt Compliance]
DEBT COMPLIANCE.OKAY, SO WE ARE IN COMPLIANCE WITH OUR DEBT REQUIREMENTS.
THE UPDATES SINCE OUR LAST MEETING IS THAT OUR SEPTEMBER PAYMENT WAS MADE AND OUR SECOND QUARTER COMPLIANCE WAS DONE FOR OUR ERCOT DEBT.
THE OTHER ITEM I WANTED TO DRAW YOUR ATTENTION TO IS ON SLIDE 15.
SO ON THIS SLIDE WE HAVE SHOWN THAT THE RESET RATE FOR THE M BONDS WAS 6.226.
THAT'S WHAT WE'VE CALCULATED IN THOSE AMORTIZATION SCHEDULES.
THE TRUEUP THAT WE DID, THAT WE FILED ON SEPTEMBER 13TH, WE USED THE MOST RECENT RATE THAT WE GOT FROM THE STATE, WHICH WAS 5.76%.
SO I WANTED TO JUST, UH, LET EVERYONE KNOW THAT, UH, WE DID NOT USE THE 6.226 IN THAT CALCULATION.
IT'S NOTED IN THAT KEY TAKEAWAY.
UM, THOSE TRUE-UPS ARE, UH, FILED ON ERCOT.COM.
UM, IS THAT THE TRIP THAT YOU FILED AT THE PUC? CORRECT.
UM, THOSE RATES WILL GO INTO EFFECT NOVEMBER 1ST.
UH, THE AMORTIZATION SCHEDULES STILL SHOW THE 6.226 BECAUSE THOSE ARE CALCULATED BY A THIRD PARTY, AND WE'LL GET THOSE UPDATED ONCE WE GET A CLEAR RESET RATE.
WHEN IS THE FIRST, UM, BOND PAYMENT? AFTER THE RESET RATE? WHEN WHEN'S THAT DUE?
[00:15:01]
UH, SO THE FIRST ONE WILL BE AUGUST.SO THE RESET RATE IS FEBRUARY 1ST, AND THAT IS WHEN THE BOND PAYMENT IS DUE.
CONGRATULATIONS ON YOUR, YOUR DESIGNATION AS CONTROLLER AND THANK YOU.
[6. Future Agenda Items]
SIX FUTURE AGENDA ITEMS. RICHARD IS GOING TO, UH, WALK US THROUGH THAT.ALL RIGHT, RICHARD SHIELD FUTURE AGENDA ITEMS. UH, DECEMBER IS GONNA BE A CARRYOVER OF CURRENT ACTIVITIES.
SO YOU'LL HAVE THE COMPLETION OF THE SELF-EVALUATION THAT WAS MENTIONED EARLIER.
AND THEN THE NEW ITEMS FOR DECEMBER WILL BE THE REVIEW AND APPROVAL OF THE ANNUAL INTERNAL AUDIT PLAN, AS WELL AS THE, UH, SOC AUDIT ACTIVITIES RELATED TO RECEIVING THEIR REPORT, SELECTING THE AUDITOR FOR THE COMING YEAR, AND REVIEWING AND ACCEPTING THE AUDIT REPORT.
ANY QUESTIONS ON FUTURE AGENDA ITEMS? OKAY, ANY QUESTIONS FOR RICHARD? OKAY, THANK YOU, RICHARD.
UH, THE LAST ITEM BEFORE WE MOVE INTO EXECUTIVE SESSION IS AGENDA ITEM SEVEN, OTHER BUSINESSES.
IS THERE ANY OTHER BUSINESS THAT ANY COMMITTEE MEMBER WISHES TO RAISE AT THIS POINT? OKAY.
UH, WE'RE GONNA TRANSITION TO EXECUTIVE SESSION NOW.
UH, SO WE'RE GOING TO AURN, UH, GENERAL SESSION CONVENE EXECUTIVE
[Convene Executive Session]
SESSION.VOTING ITEMS ARE ANTICIPATED FROM EXECUTIVE SESSION.
SO THE GENERAL SESSION WILL RECONVENE AFTER THE CONCLUSION.
THE EXECUTIVE SESSION, THE GENERAL SESSION IS NOW RECESSED AND THE WEBCAST WILL BE CONCLUDED.
[Reconvene General Session]
TRANSITIONING, TRANSITIONING FROM EXECUTIVE SESSION BACK INTO GENERAL SESSION AND THE GENERAL SESSION.THIS MEETING IS NOW RECONVENED.
[8. Vote on Matters from Executive Session]
FROM THE EXECUTIVE SESSION.I'LL ENTERTAIN A MOTION ON THE CONTRACT MATTER, DISCUSS AN EXECUTIVE SESSION UNDER AGENDA ITEM ES 2.2.
WE'LL NOW CONSIDER A MOTION THAT, SO ANY, UH, OPPOSED? ANY ABSTENTIONS? OKAY.
UH, I'LL UNDERSTAND A MOTION ON THE CONTRACT MATTER.
DISCUSS AN EXECUTIVE SESSION UNDER AGENDA ITEM ES 2.3.
ANY OPPOSED? ANY ABSTENTIONS? OKAY, THAT ITEM IS APPROVED AS WELL.
THIS, UH, MEETING OF THE FINANCE AND AUDIT COMMITTEE IS NOW ADJOURNED AND THE WEBCAST WILL BE CONCLUDED.