[00:00:03]
START WHENEVER.[1. Call General Session to Order]
11 O'CLOCK, SO WE'RE GONNA GO AHEAD AND GET STARTED.GOOD MORNING, MEMBERS OF THE FINANCE AND AUDIT COMMITTEE AND GUEST, UH, I'M BILL FLORES, COMMITTEE CHAIR.
I HEREBY CALL TO ORDER THIS MEETING OF THE FINANCE AND AUDIT COMMITTEE.
WELCOME TO THE JUNE 23RD, 2025 FINANCE AND AUDIT COMMITTEE MEETING.
UH, THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON ERCOT WEBSITE.
I'VE CONFIRMED THAT A QUORUM OF COMMITTEE MEMBERS IS PRESENT IN PERSON.
I HAVE, UM, STEPPED BACK INTO THE ROLE AS COMMITTEE CHAIR SINCE WE'VE HAD TWO DIRECTOR RESIGNATIONS FROM OUR APRIL, UH, BOARD MEETING AND TO ENSURE A BALANCE OF DIRECTORS ON ALL COMMITTEES.
UH, BEFORE WE BEGIN, I'D LIKE TO ASK PUC MEMBER KATHLEEN JACKSON, IF SHE WOULD LIKE TO CALL IT AN OPEN MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS TO ORDER.
UH, THIS MEETING OF THE PUBLIC UTILITY COMMISSION OF TEXAS WILL COME TO ORDER TO CONSIDER MATTERS THAT HAVE BEEN DULY POSTED WITH THE SECRETARY OF STATE FOR THE STATE OF TEXAS FOR JUNE 23RD, 2025.
BEFORE MOVING ON TO TODAY'S BUSINESS, I'LL HIGHLIGHT TO COMMITTEE MEMBERS THAT THE ANTITRUST ADMONITION, AS WELL AS THE SECURITY MAP, ARE INCLUDED WITH THE POSTED MEETING MATERIALS.
THE FIRST ORDER OF BUSINESS ON TODAY'S AGENDA IS ITEM TWO.
NOTICE OF PUBLIC COMMENT, IF ANY.
TODAY'S MEETING AGENDA WAS POSTED PUBLICLY ON JUNE 16TH, 2025, AND, UH, 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.
UH, NEXT IS AGENDA ITEM THREE, THE
[3. April 7, 2025, General Session Meeting Minutes]
APRIL 7TH, 2025, GENERAL SESSION MEETING MINUTES, THERE'S A DRAFT IN THE MEETING MATERIALS.DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION? OKAY.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
THE MINUTES ARE APPROVED AS, UH, SUBMITTED.
[4. Annual Audit of 401(k) Savings Plan]
IS AGENDA ITEM FOUR, REVIEW OF, UH, REQUIREMENTS FOR ANNUAL AUDIT, FINANCIAL STATEMENTS AND ANNUAL SERVICES CERTIFICATE.UM, WE HAVE THREE SUB ITEMS. FIRST IS AGENDA ITEM 4.1, A REVIEW OF REQUIREMENTS FOR THE ANNUAL AUDIT, A 401K SAVINGS PLAN.
GOOD MORNING, DAWN HERMS, DIRECTOR OF HR OPERATIONS.
DAWN HERMS, DIRECTOR OF HR OPERATIONS.
ERCOT MAINTAINS A ISSA QUALIFIED 401K PLAN EACH YEAR.
THE DEPARTMENT OF LABOR REQUIRES EVERY QUALIFIED PLAN TO SUBMIT A FORM 5,500.
AND ALONG WITH THAT FORM IS AN AUDITED FINANCIAL REPORT BY AN INDEPENDENT AUDITOR IN 20 AUGUST 20TH, 2024.
THE BOARD APPROVED BAKER TILLY TO PERFORM THE PLAN YEAR 2024 AUDIT.
I HAVE WITH ME TODAY LORI HORVATH FROM BAKER TILLY, WHO WILL GO THROUGH HER PRESENTATION.
AT THE END OF THE PRESENTATION, IT'LL BE THE RECOMMENDATION FOR THIS COMMITTEE TO ACCEPT THE DRAFT REPORT AS PREPARED AND PRESENTED BY BAKER TILLY AND THEN PRESENT TO THE BOARD OF DIRECTORS FOR APPROVAL AND FILING WITH THE FORM 5,500.
THE PLAN ASSETS FOR THE 401K PLAN HAVE GROWN FROM 396 MILLION TO 464 MILLION, UH, 900 IN ONE YEAR.
OUR NON-DESCRIPT TESTING SHOWED THAT OUR NON-HIGH COMPENSATED PARTICIPATION RATE IS 94 POINT 15%, AND OUR HIGHLY COMPED PARTICIPATION RATE IS 98.42.
OUR AVERAGE DEFERRALS CONTINUE TO STAY AROUND EIGHT AND 5% FOR BOTH POPULATIONS.
AND I'LL TURN THE PRESENTATION OVER TO LORI HORVATH.
I'M LORI HORVATH, AND I SERVED AS THE PRINCIPAL ON YOUR EMPLOYEE BENEFIT PLAN AUDIT HERE TODAY.
TO PRESENT SOME OF THE HIGHLIGHTS OF THE PLAN AND HOW WE AUDITED OUR ENGAGEMENT TEAM IS INCLUDED HERE.
YOU HAD A ALL EBP EMPLOYEE BENEFIT PLAN TEAM THAT WORKED TOGETHER ON THIS ENGAGEMENT.
THE EXECUTIVE SUMMARY IS THAT WE'VE COMPLETED OUR AUDIT FOR THE YEAR ENDED DECEMBER 31ST, 2024.
AN AUDIT SHOULD PROVIDE THIS COMMITTEE WITH CONFIDENCE IN THE STATEMENTS.
THE AUDIT WAS PERFORMED BASED ON INFORMATION FROM MEETINGS WITH DAWN AND TEAM DATA.
FROM YOUR SYSTEMS KNOWLEDGE OF THE PLAN'S OPERATING ENVIRONMENT AND OUR TEAM'S RISK ASSESSMENT PROCEDURES.
WE ARE PLEASED TO PROVIDE YOU WITH A FINISHED AUDIT THAT'S CLEAR, CONCISE COMMUNICATION
[00:05:01]
THROUGHOUT THE AUDIT PROCESS.IN THE FINAL RESULTS, WE'VE ALSO INCLUDED INFORMATION ON RISK AREAS THAT YOU SHOULD BE AWARE OF AS YOU CONTINUE TO PLAN AND REGULATE THIS AUDIT.
AND WE'RE HAPPY TO DISCUSS ANY OF THOSE TODAY OR ANYTIME DURING THE YEAR.
THAT'S WHY OUR CONTACT INFORMATION WAS INCLUDED.
AS AN INDEPENDENT AUDITOR, WE PLAN AND PERFORM THE AUDIT TO MAKE SURE THERE'S REASONABLE ASSURANCE THAT THE FINANCIALS ARE FREE OF MATERIAL MISSTATEMENT.
REASONABLE ASSURANCE IS DEEMED BY THE AUDIT STANDARDS TO BE A HIGH LEVEL OF ASSURANCE.
THE RISK OF MATERIAL STATEMENTS ARE CONSIDERED WHETHER DUE TO FRAUD OR ERROR.
AND WHEN WE CONSIDER MATERIALITY, WE DO INCORPORATE THE INTERNAL CONTROLS OVER FINANCIAL REPORTING AND THEN PERFORM PROCEDURES IN TESTING THE RESULTS OF THE, OF THE PLAN, WE HAVE EVALUATED THE PLAN'S POLICIES AND MADE SURE THAT THEY'RE REASONABLE AND APPROPRIATE FOR A PLAN OF THIS SIZE.
WE FOLLOW THE AUDIT PROCEDURES THAT ARE INCORPORATION WITH ERISA AS WELL AS THE DOL TO MAKE SURE THAT ALL THE REGULATIONS HAVE BEEN CONSIDERED, AND OUR AUDIT DOES NOT RELIEVE MANAGEMENT OR THOSE CHARGED WITH GOVERNANCE OF THEIR RESPONSIBILITIES.
IN TERMS OF THE PLAN, WE'RE ALSO REQUIRED BY AUDIT STANDARDS TO COMMUNICATE MATTERS RELEVANT TO OUR AUDIT THAT ARE RELATED TO THE GOVERNANCE RESPONSIBILITIES.
WE DIDN'T HAVE ANY CONCERNS AROUND DIFFICULTIES, DISAGREEMENTS, HARD TO MAKE COMMUNICATION, ET CETERA.
WE PLAN AND PERFORM OUR AUDIT BASED ON WHAT WE KNOW AND NOTHING DEVIATED FROM THAT PLAN AS A RESULT OF THE INFORMATION WE OBTAINED OR CONVERSATIONS WITH THE TEAM.
WHEN WE LOOK AT AN AUDIT OF A BENEFIT PLAN, WE CONSIDER INTERNAL CONTROL OVER FINANCIAL REPORTING.
WE TEST CONTROLS AND THEN WE TEST THE RISK OF MANAGEMENT OVERRIDING THE DOCUMENTED CONTROLS.
WE LOOK AT PAYROLL AND PARTICIPANT TESTING.
WE LOOK AT FAIR VALUE OF THE INVESTMENTS INCLUDED IN THE PLAN AND THE DISCLOSURES RELATED TO FAIR VALUE.
WE MAKE SURE THAT THE REVENUE, WHETHER IT BE UM, INVESTMENT INCOME OR PARTICIPANT CONTRIBUTIONS IS PROPERLY RECORDED.
WE LOOK AT THE NOTES RECEIVABLE FROM THE PARTICIPANTS AND MAKING SURE THAT NOT ONLY ARE THE NOTES FAIRLY PRESENTED, BUT THE DOCUMENTATION SUPPORTING THOSE NOTES, THE ALLOWED, UM, TYPES OF NOTES AVAILABLE, SUPPORTS AND AGREES TO THE PLAN'S TERM AND DOCUMENTATION.
AS WE LOOK AT THE AUDIT AREAS AND WE THINK ABOUT OTHER THINGS WE DO, AS I MENTIONED, CONSIDER MATERIALITY.
HOWEVER, THERE'S NO MATERIALITY WHEN IT COMES TO THE DEPARTMENT OF LABOR TESTING.
ALL DOLLARS ARE CONSIDERED MATERIAL IN DOL TESTING.
WHEN WE PLANNED OUR AUDIT, WE HAD TWO KEY AREAS OF RISK.
I'VE MENTIONED THOSE MANAGEMENT OVERRIDING THE WELL DOCUMENTED CONTROLS.
WE DIDN'T IDENTIFY ANY ISSUES WHERE A MANAGEMENT OVERRIDE WAS IN PLACE AND THAT WE WANTED TO.
ANOTHER RISK IS THAT THE PLAN IS OPERATING ACCORDANCE WITH THE PLAN DOCUMENTS.
AND AGAIN, WE DIDN'T FIND ANY ISSUES RELATED TO THAT RISK.
WHEN WE LOOK AT THE AUDIT OVER FINANCIAL STA OVER YOUR FINANCIAL STATEMENTS, WE LOOK AT INTERNAL CONTROL TO DESIGN OUR AUDIT PROCEDURES, BUT WE'RE NOT OPINING ON YOUR INTERNAL CONTROL.
UNDER OUR MATERIALITY, WE COULD IDENTIFY EITHER A MATERIAL WEAKNESS OR A SIGNIFICANT DEFICIENCY DEPENDING ON A MAGNITUDE OF AN ERROR.
AND WE'RE PLEASED TO ANNOUNCE THAT WE DIDN'T HAVE ANY MATERIAL WEAKNESSES OR ANY SIGNIFICANT DEFICIENCIES.
AS I SHARED WITH DON THIS MORNING, WE DON'T HAVE EVEN RECOMMENDATIONS FOR THINGS TO CHANGE TO YOUR PLAN.
THE PROCESSES AND THE PROCEDURES SEEM TO BE WELL FOLLOWED IN EVERYTHING WE TESTED AND LOOKED AT.
WE LOOK AT THE ACCOUNTING POLICIES AND THE ACCOUNTING ESTIMATES AS WE CONSIDER THE FINANCIAL STATEMENTS AND THE RELATED DISCLOSURES.
THE MOST IMPORTANT ESTIMATE IS CERTAINLY THE FAIR VALUE OF THE INVESTMENTS.
THOSE INVESTMENTS ARE DOCUMENTED AT FAIR VALUE.
AS OF THE DATE OF THAT REPORT.
WE DIDN'T SEE ANY SIGNIFICANT OR UNUSUAL TRANSACTIONS.
DON AND TEAM WERE VERY EASY TO WORK WITH, VERY TRANSPARENT, COLLABORATIVE,
[00:10:01]
AND COMMUNICATIVE.WE DIDN'T HAVE ANY DISAGREEMENTS OR STRUGGLES WORKING WITH THE AUDIT TEAM AND NO DISAGREEMENTS OR DIFFICULTIES TO SHARE WITH THE COMMITTEE.
TODAY WE'RE ISSUING A STANDARD AUDIT REPORT.
AS I'M SURE YOU'RE AWARE, THE DOL ALLOWS US TO DO LIMITED PROCEDURES AROUND THE INVESTMENT BALANCES AND RELY ON A CERTIFICATION FROM YOUR CUSTODIAN.
AND OTHER THAN THAT DISCLAIMER, WHICH IS COMMON FOR A PLAN LIKE YOURS, WE DON'T HAVE ANY MODIFICATIONS TO THE AUDIT REPORT.
AND AS I MENTIONED EARLIER, WE DON'T HAVE ANY OTHER AUDIT FINDINGS OR ANY ISSUES RELATED TO THE AUDITED FINANCIAL STATEMENTS.
WE DIDN'T HAVE ANY MISSTATEMENTS TO SHARE WITH THE COMMITTEE EITHER UNRECORDED DUE TO MATERIALITY OR RECORDED MISSTATEMENTS.
WE DON'T BELIEVE THAT MANAGEMENT CONSULTED WITH ANY OTHER ACCOUNTANTS.
AND WE WILL SHARE IN OUR FINAL DOCUMENTS THE WRITTEN COMMUNICATIONS BETWEEN MANAGEMENT AND BAKER TILLY.
IN TERMS OF A MANAGEMENT REPRESENTATION LETTER, WE DIDN'T FIND ANY NON-COMPLIANCE WITH ANY LAWS OR REGULATIONS.
WE DIDN'T FIND ANY MISSTATEMENT OR FRAUD DURING OUR AUDIT.
AND WE AGREE WITH MAN MANAGEMENT'S ASSESSMENT THAT THE ENTITY IS A GOING CONCERN AND WE DON'T HAVE ANY CONCERNS ABOUT THE PLAN'S ABILITY TO CONTINUE INTO THE FUTURE.
BAKER TILLEY'S INDEPENDENT AND THERE WERE NO CONSIDERATIONS THOUGHT TO BEAR ON OUR INDEPENDENCE.
WE OBTAINED THE DRAFT 5,500 BEFORE WE ISSUED OUR DRAFT FINANCIAL STATEMENT.
WE HAD A COUPLE OF JUST QUICK CORRECTIONS, BUT NOTHING THAT WAS MATERIAL OR ANY INCONSISTENCIES WITH THE PLAN, AND WE DIDN'T HAVE ANY FINDINGS OR ISSUES RELATED TO RELATED PARTY TRANSACTIONS.
THE SUPPLEMENTARY INFORMATION THAT'S REQUIRED BY THE DOL, WE OBTAINED THE INFORMATION FROM MANAGEMENT AND FROM SOME OF YOUR REPORTS.
AND THE WAY THAT WE PERFORM THAT DOL PREPARATION IS CONSISTENT WITH PRIOR YEARS.
THERE'S BEEN NO CHANGE IN THOSE REGULATIONS.
WE ALSO PUT TOGETHER THE FINANCIAL STATEMENTS BECAUSE OUR SOFTWARE MAKES IT EASY FOR US TO DO SO.
WE DO BELIEVE THAT YOUR PLAN, UM, EMPLOYEES HAVE THE ABILITY TO PUT TOGETHER FINANCIAL STATEMENTS.
SO THAT'S NOT A WEAKNESS IN THE SYSTEM.
WE PREPARED THE FINAL TRIAL BALANCE FROM THE REPORTS FROM THE TRUST, UM, THE TRUST REPORTS, AND WE HAVE THE ABILITY TO PERFORM ADJUSTING ENTRIES AND CREATE ADJUSTING ENTRIES.
BUT AS I NOTED, WE DIDN'T HAVE ANY ADJUSTING ENTRIES IN THIS AUDIT.
AND THAT'S THE END OF MY PRESENTATION UNLESS ANYONE HAS QUESTIONS FOR ME OR ANYTHING ABOUT THE AUDIT.
UH, ANY WELCOME QUESTIONS FOR LORI? YOU'RE WELCOME.
BY THE WAY, JUST WE, UH, MOVE PRETTY FAST FROM A AGENDA ITEM 4.1 TO 4.2.
SO WHAT YOU JUST HEARD WAS A AGENDA ITEM 4.20.
I APOLOGIZE IF I WASN'T CLOSE UP.
NO, IT'S, NO, IT'S NOT PROBLEM.
UH, AND WE WILL, UH, VOTE, UH, ON WHETHER TO APPROVE THIS REPORT OR TO RECOMMEND THAT THE BOARD APPROVE THE REPORT WHEN WE GET COME BACK TO GENERAL SESSION AFTER EXECUTIVE SESSION.
SO ANY QUESTIONS FOR LORI? UH, JUST AS A, AS A, TO REITERATE WHAT SHE SAID AT THE BEGINNING, THIS IS AN UNMODIFIED OR WHAT WE USED TO BE CALLED A CLEAN OPINION.
UH, LORI, THANK YOU WITH THAT.
YOU'RE WELCOME AND THANKS TO DON AND TEAM FOR MAKING THIS AN EASY PROCESS FOR US.
WE'RE GONNA ASK DAWN TO COME BACK AND, UH, GO THROUGH THE RECOMMENDATION REGARDING ACCEPTANCE OF THE 20 24 4 0 1 ERCOT 401K SAVINGS PLAN REPORT.
SO THE RECOMMENDATION TO THE COMMITTEE IS FOR ACCEPTANCE OF THE DRAFT PRESENTATION AS PRESENTED AND, UH, CREATED BY BAKER TILLY TO BE PRESENT TO THE BOARD FOR APPROVAL.
OKAY, AGAIN, WE'LL VOTE ON THIS WHEN WE COME BACK TO THE GENERAL SESSION AFTER THE EXECUTIVE SESSION.
ANY QUESTIONS FOR DAWN ON HER RECOMMEND ON THE THE ORGANIZATION'S RECOMMENDATION? OKAY.
[5. Committee Briefs]
OUR COMMITTEE BRIEFS.RICHARD SHIELD WILL PRESENT AJE ITEM FIVE, REVIEW OF 2025 FINANCIAL SUMMARY.
UH, THEN WE'LL MOVE TO 5.2 AND 5.3
[00:15:27]
UP.ALRIGHT, I'LL TAKE YOU THROUGH ITEM 5.1 REVIEW OF THE 2025 FINANCIAL SUMMARY.
UM, ACTUAL REVENUES, NET OF EXPENDITURES AS OF APRIL 20, 25 OR 47.2 MILLION, FAVORABLE TO BUDGET DRIVEN BY INTEREST INCOME BEING FAVORABLE BY 25.9 UNBUDGETED, LEGAL FEES, RECOVERY OF 7 MILLION, AND PROJECT EXPENDITURES BEING FAVORABLE BY 5.4 MILLION.
WHEN WE LOOK AT OUR YEAR END RESULTS, WE ARE LOOKING AT FORECAST REVENUES NET OF EXPENDITURES, 82.6 MILLION FAVORABLE TO BUDGET DRIVEN BY INTEREST INCOME FORECAST TO BE FAVORABLE BY 59 MILLION UNBUDGETED LEGAL FEES, RECOVERY OF 7 MILLION AND STAFFING MANAGEMENT, UH, FAVORABLE BY 2.2 MILLION.
THEY HAVE 181 MILLION OPERATING FUNDS COMPARED TO 83.7 MILLION OF OPERATING FUNDS AS OF THIS TIME, APRIL 30TH, 2024.
ALL RIGHT, I'LL TAKE YOU THROUGH THE WATERFALL QUICKLY.
THIS, UH, LOOKS VERY SIMILAR TO THE WATERFALL WE SHOWED YOU IN APRIL.
UH, THE LARGEST CHANGE IS IN THE SYSTEM ADMINISTRATION FEES.
UH, WE'RE PROJECTING A HIGHER, UM, HIGHER ENERGY USE THROUGHOUT THE REMAINDER OF THE YEAR VERSUS THE ORIGINALLY BUDGETED AMOUNT AND THE ORIGINAL FORECAST.
AS FAR AS THE INTEREST INCOME, RELATIVELY UNCHANGED AS WAS DEPARTMENT REVENUES ON THE REVENUES YEAREND FORECAST, WHEN WE'RE LOOKING AT THE EXPENDITURES, YEAREND FORECAST VARIANCE TO BUDGET, WE'RE LOOKING AT 12.5 MILLION, WHICH IS 3.3%.
UH, THERE'S A 7 MILLION, UM, LEGAL FEE RECOVERY THAT'S BURIED IN THERE.
SO OUR KPI VARIANCE TO BUDGET IS 5.5 MILLION.
WHAT'S, WHAT'S NOT EASILY DISCERNED FROM THIS WATERFALL IS THE ACCELERATION OF SOME OF OUR POSITIONS, UH, OUR CRITICAL POSITIONS FOR 2026 AND 2027.
WE'VE DISCUSSED THOSE POSITIONS BEFORE.
WE'VE PULLED SOME OF THOSE BACK IN OUR HIRING PLAN TO HIRE THEM THROUGH YEAR END 2025.
SO THOSE MOST URGENT POSITIONS THAT WE RANKED AS WE WENT THROUGH OUR BUDGETING PROCESS, WE'VE BEGUN THAT PROCESS OF LAYING OUT A HIRING PLAN AND HIRING THOSE POSITIONS.
AND YOU'LL SEE THAT REFLECTED AS WE WALK THROUGH THE BUDGET MATERIALS, UM, IN JUST A FEW, JUST A FEW SESSIONS.
ANY QUESTION ON THIS SLIDE? ALL RIGHT.
THIS SLIDE IS SHOWING OUR MONTHLY TERAWATT HOUR LOAD AND CUMULATIVE SYSTEM ADMINISTRATION FEE REVENUES, UH, SLIGHTLY, SLIGHTLY UPDATED FOR THE INCREASE, UH, FORECAST.
UM, ENERGIES, UM, FINANCIAL SUMMARY, STATEMENTS OF FINANCIAL POSITION, UH, NOTHING UH, SIGNIFICANT HERE.
UH, NET ASSETS THAT DONOR RESTRICTIONS INCREASED 104.7 YEAR OVER YEAR DRIVEN BY FAVORABLE INTEREST INCOME.
WHEN WE'RE LOOKING AT THE STATEMENTS OF ACTIVITIES AND NET ASSETS, JUST WANTED TO CALL OUT AGAIN, THAT, UH, THAT 9.3 MILLION INCREASE IN OTHER INCOME IS DRIVEN BY THAT 13.6 MILLION INCREASE IN US TREASURY OBLIGATIONS.
WE HAD THE 10.7 MILLION, UH, RECOGNIZED, BUT UNREALIZED LOSS IN 2024, AND WE HAD A 2.9 MILLION GAIN TO DATE IN 2025, AND THAT WAS OFFSET TO 13.6.
AND OF COURSE, WE HOLD OUR TREASURY OBLIGATIONS TO MATURITY SO THAT THAT WILL NOT BE REALIZED.
CRR FUNDS HAVE, UH, WE HAVE AN UPTICK IN OUR CR AUCTION RECEIPT FUNDS.
WE'RE CURRENTLY STANDING AT 2.199 AS OF I BELIEVE THAT'S MARCH.
UH, WE HAVE A SMALL, SMALL DECLINE IN APRIL.
WE'RE CONTINUING TO WATCH THIS AS RTC PLUS B MOVES THROUGH THE PROCESS AND GETS TO COMPLETION.
WE'LL BE INTERESTED IN SEEING THIS BALANCE IN THE FUTURE AFTER WE GO LIVE.
CAN YOU MODEL IT? BEG YOUR PARDON? CAN YOU MODEL WHAT YOU THINK'S GONNA HAPPEN? WE, WE HAVE EXAMINED THIS, BUT WE'RE UNSURE OF THE NET IMPACT AS, AS LOW GROWTH CONTINUES AND RTC PLUS B MOVES FORWARD.
THAT, THAT NET PIECE, I DON'T HAVE THAT NUMBER FOR YOU.
I COULD CERTAINLY GET IT FOR YOU.
MAYBE WE COULD TALK ABOUT THAT IN THE NEXT COMMITTEE MEETING.
THAT TAKES ME TO THE APPENDICES AND CONCLUDES TO MY PRESENTATION.
[00:20:03]
THANK YOU, RICHARD.ANY QUESTIONS FOR RICHARD? I, I HAVE ONE.
IF YOU CAN GO BACK TO SLIDE FOUR AND LOOK AT THE LOAD FORECAST.
THERE WAS ONLY ONE MONTH THAT LOOKED A LITTLE ODD TO ME AND THAT WAS OCTOBER.
IS THERE ANYTHING BEHIND THE, UH, DIFFERENCE IN THE LOAD FORECAST THAT, THAT LOAD FORECASTING? I, I WOULD HAVE TO CHECK WITH OUR LOAD FORECASTING TEAM TO SEE WHAT, WHAT'S DRIVING THAT PARTICULAR DELTA.
THEY JUST REVISED THAT AS WE'RE GOING INTO THIS MEETING PREP, SO I'LL GET AN ANSWER BACK FOR YOU.
I WAS THINKING THAT THAT MAY HAVE AN IMPACT ON, UH, WHAT WE CAN DO FOR SCHEDULE OUTAGES AND SO FORTH, JUST BECAUSE OF THE SIZE OF THAT 12% VARIANCE.
UH, IF THERE ARE NO QUESTIONS FOR RICHARD, WE'LL MOVE ON TO AGENDA ITEM 5.2, PERIODIC REPORT ON INVESTMENTS, UH, FOLLOWED BY AGENDA ITEM 5.3, PERIODIC REPORT ON DEBT COMPLIANCE.
LESLIE IS CAN PROVIDE BOTH OF THESE REPORTS FOR US.
I HAVE THE, UH, PERIODIC REPORT ON INVESTMENTS.
WE ARE IN COMPLIANCE WITH THE INVESTMENT CORPORATE STANDARD, AND THE UPDATE THAT I HAVE FOR Y'ALL TODAY IS, UM, JUST AN UPDATE ON THE FED MEETING LAST WEEK THEY DID NOT RAISE INTEREST RATES, AND THEN THE NEXT MEETING IS THE END OF JULY, SO WE'RE KEEPING AN EYE ON THAT AS WELL.
ANY QUESTIONS ON THE INVESTMENTS? DOESN'T SOUND LIKE IT.
SO WE CAN MOVE ON TO DEBT COMPLIANCE.
NEXT, I HAVE THE PERIODIC REPORT ON DEBT COMPLIANCE AND WE ARE ALSO IN COMPLIANCE WITH OUR FINANCIAL CORPORATE STANDARD.
THE ONLY CHANGES THAT YOU WILL SEE ON THIS REPORT FROM LAST TIME ARE THAT WE PROVIDED THE ANNUAL, UH, 2024 STATEMENTS AND THE FIRST QUARTER OF 2025 TO OUR DEBT HOLDERS.
SO, UM, AND I THINK WE HAVE SOME PRESENTATIONS ON M COMING UP AS WELL.
SO ANY QUESTIONS ON DEBT COMPLIANCE? SEE LESLIE, ANY QUESTIONS FOR LESLIE? OKAY, WITH THAT WE'LL
[6. Subchapter M Refinancing]
MOVE ON TO AGENDA ITEM SIX.SUB CHAPTER M REFINANCING A VOTE RELATED TO THIS TOPIC WILL BE TAKEN UP WHEN WE RETURN TO GENERAL SESSION AFTER OUR, UH, EXECUTIVE SESSION, UH, DISCUSSION LATER TODAY.
RICHARD IS GOING TO COME BACK TO THE PODIUM TO PRESENT, UM, HIS PRESENTATION OR TO, UH, PRESENT HIS RECOMMENDATIONS.
ITEM SIX, SUBCHAPTER M REFINANCING.
JUST WANTED TO WALK US THROUGH THE TIMELINE OF ACTIVITIES THAT ARE UNDERWAY WITH THE REFINANCING OF THE SUBCHAPTER M BONDS.
THE SERIES 2021 M BONDS WERE ISSUED TO THE TEXAS TREASURY SAFEKEEPING TRUST COMPANY ON NOVEMBER 12TH, 2021.
SUBSEQUENT TO THAT ISSUANCE, THE ORIGINAL AMOUNT WAS 800 MILLION.
UH, THERE WERE PAY DOWNS TO THAT BOND AND RESULTING IN APPROXIMATELY 390 MILLION AT THE INBOND THREE YEAR ANNIVERSARY IN NOVEMBER, 2024.
THE INBOND ARE DEEMABLE WITHOUT PENALTY OR PREMIUM UNTIL THIS DATE OR THEREAFTER, SO LONG AS OWNED BY THE T-T-S-T-C.
T-C-S-T-C HAS AGREED TO HOLD THOSE BONDS UNTIL SEPTEMBER 1ST, 2025.
THE IN BOND CONVERSION DATE OCCURRED JANUARY 31ST, 2025 WHEN THE INTEREST RATE RESET TO 6.07% FROM 2.9699999999999998%.
WE'RE LOOKING FOR, UM, ALTHOUGH WE'LL, WE'LL DISCUSS THAT IN EXECUTIVE SESSION.
SO WE'RE REFINANCING, REFINANCING THE IN BONDS THROUGH A 1 44 A OFFERING.
UH, IT'S LIKELY GONNA RESULT IN A LOWER INTEREST RATE THAN THE CURRENT 6.07.
UH, SO ERCOT STAFF WITH THE ADVICE OF ITS OUTSIDE COUNSEL IS RECOMMENDING REFINANCING BEFORE SEPTEMBER 1ST, 2025.
IT'S THE END OF MY PRESENTATION.
WE'LL TALK ABOUT THIS MORE IN EXECUTIVE SESSION.
UM, JUST FOR A FRAME OF REFERENCE, WHAT WOULD THE, WITH INTEREST RATES OF WHERE THEY ARE TODAY, WHAT WOULD THE NEW INTEREST RATE BE IF WE WERE FINANCED
[00:25:01]
IT TODAY WITH A 1 44 A OFFERING IN, IN THE 5.8 RANGE? OKAY.INTEREST RATES ARE RELATIVELY VOLATILE, SO I HA HATE TO PUT AN EXACT NUMBER ON IT.
ANY QUESTIONS FOR RICHARD ON THIS? OKAY.
[7. Recommendation regarding 2026 - 2027 Budget and Fee]
WILL, UH, STAY WHERE HE IS AND HE WILL MAKE THE PRESENTATION ON AGENDA.ITEM SEVEN, RECOMMENDATION REGARDING THE 20 26 20 27, UH, BUDGET AND FEE FOR ERCOT.
UH, A VOTE WILL FOLLOW THIS PROPOSAL DURING THE COMMITTEE'S.
UM, EXCUSE ME, THIS VOTE FOLLOWS A REVIEW OF THE PROPOSAL THAT WAS MADE DURING THE COMMITTEE'S MEETING IN APRIL.
UM, COMING OFF THE APRIL BOARD MEETING, WE HAD A COUPLE OF ITEMS THAT WE, WE INCLUDED IN THE CURRENT BOARD DECK, AND I'LL WALK YOU THROUGH THOSE CHANGES AND I'LL WALK YOU THROUGH THE CHANGES WE'VE MADE BETWEEN APRIL AND THE CURRENT, THE CURRENT VIEW OF THIS MATERIALS.
SO IN THE FINAL BUDGET PRESENTATION THAT WE'RE GIVING, IN THE FINAL RECOMMENDATION, WE'RE LOOKING FOR TOTAL USES OF FUNDS OF 485.9 MILLION IN 20 26, 580 5 MILLION IN 2027.
WHEN I BROUGHT THIS PRESENTATION TO YOU IN APRIL, THAT WAS 474 MILLION FOR 2026 VERSUS 556.9 MILLION IN 2027.
WE HAVEN'T CHANGED ANY OF THE SIGNIFICANT ASSUMPTIONS, CONSERVATIVE ENERGY FORECAST VERSUS THE ADJUSTED LOAD FORECAST USED ELSEWHERE BY ERCOT.
AND OF COURSE, I WANTED TO CALL OUT THE REDUCED SYSTEM ADMINISTRATION FEE RATE.
WE ARE PROPOSING REDUCTION IN THE SYSTEM ADMINISTRATION FEE RATE FROM 63 CENTS PER MEGAWATT HOUR TO 61 CENTS PER MEGAWATT HOUR.
AND THEN WE'RE EXPECTING INTEREST INCOME OF 66.3 MILLION IN 20 26, 42 0.7 MILLION IN 2027.
THERE'S BEEN A SMALL CHANGE TO THAT FIGURE SINCE THE LAST BOARD MEETING.
SO TO WALK US THROUGH THE OPTIONS, SO OUR, OUR RECOMMENDED OPTION IS OPTION ONE, WE'RE PROPOSING THE REDUCTION FROM 63 CENTS TO 61 CENTS.
SO FOR THE 2026 AND 2027, THAT'LL LEAVE US AN ENDING CASH BALANCE OF 68 MILLION IN 2027, 40 MILLION IN 20 29, 53 0.1 MILLION IN 2031.
UH, AND ANTICIPATING KEEPING THAT SYSTEM ADMINISTRATION FEE RATE LEVEL, UH, ALL THINGS BEING EQUAL, IF THE LOAD FORECAST THAT WE USED FOR THE SYSTEM ADMINISTRATION FEE RATE WERE TO, UM, TO BE DEFICIENT, AND WE WERE GONNA SEE HIGHER THAN EXPECTED, UH, LOAD FORECASTS THAT WERE MORE IN LINE WITH THAT ADJUSTED LOAD FORECAST FORECAST USED THROUGHOUT ERCOT, WE WOULD EXPECT TO, UH, ADJUST THIS, THIS FORWARD VIEW OF THE PROPOSED SYSTEM ADMINISTRATION FEE RATES IN THE OUT YEARS.
ANY QUESTIONS ON THIS SLIDE? OKAY.
WALK US THROUGH THE BUDGET SUMMARY FOR OPTION ONE AS WELL AS THE SOURCES AND USES AND OTHER, OTHER SLIDES.
SO WHERE FOR DEPARTMENT OF EXPENDITURES, AS MENTIONED EARLIER, WE'RE LOOKING AT A 356.6 MILLION, UM, EXPENDITURE IN 2026.
THAT'S ON LINE 4 387 0.3 MILLION IN 2027.
THAT'S A 24.1% GROWTH RATE BETWEEN 2025 FORECAST AND THE 2026 BUDGET REQUEST, WHICH, UM, WHICH IS A, IS A LARGE PERCENT, UM, INITIALLY, BUT WHEN WE LOOK AT WHAT, WHAT ERCOT ISS DELIVERING AS WE'RE REDUCING THE SYSTEM ADMINISTRATION FEE RATE, YOU KNOW, WE'RE, WE'RE DELIVERING SOME SIGNIFICANT VALUE.
I WANTED TO TALK ABOUT A FEW OF THE ITEMS THAT ARE IMPACTING THAT VIEW FROM 2025 FORECAST TO 2026.
WE DISCUSSED MOST OF THESE DURING THE APRIL BOARD MEETING, SO I WON'T GO TOO DEEPLY INTO THEM, BUT I DID WANNA CALL THEM OUT HERE AS WE'RE GOING THROUGH THIS.
UM, WE HAVE SEVERAL ONE-TIME ITEMS THAT ARE AFFECTING THAT AT THE CONCLUSION OF THE RTC PLUS B PROJECT.
THERE WILL BE SOME COMMON INFRASTRUCTURE THAT WILL NOT ROLL INTO, WILL NOT ROLL BACK INTO A USEFUL STATE.
SO WE'RE GONNA LOSE 5.5 MILLION AS WE'RE GOING INTO DC SIX.
THE DATA CENTER REFRESH IN 26 AND 27.
SO WE HAVE SOME OLDER, UM, INFRASTRUCTURE THAT WON'T ROLL OVER.
WE HAVE SOME ADDITIONAL VIRTUALIZATION COSTS, WHICH IS A ONE TIME CHANGE.
AND THEN OF COURSE WE HAVE THE LEGAL RECOVERY, WHICH IS REDUCING THE DEPARTMENT NET EXPENDITURES IN 2025 FOR 7 MILLION.
SO THE INITIAL STARTING POINT, 15.5 MILLION, UH, HIGHER WHEN WE THINK ABOUT THOSE, THOSE INITIAL ITEMS. AND THEN WHEN WE LOOK AT DEPARTMENT NET EXPENDITURES THEMSELVES, WHAT'S HAPPENING INSIDE OF THAT? WE'LL GO THROUGH THAT IN A COUPLE OF SLIDES.
[00:30:01]
ON HERE DIDN'T HAVE SIGNIFICANT CHANGES FOR 2026.OF COURSE, WE HAVE THE INTEREST INCOME, WHICH DID CHANGE SLIGHTLY BASED ON FORECASTS.
AND THEN WE HAD A SLIGHT DECREASE IN 2027 TO OFFSET.
AS I MENTIONED DURING THE PRESENTATION 5.1, THE ACCELERATION OF HIRING FOR THOSE POSITIONS THAT ARE MOST CRITICAL FOR OUR ERCOT ARE AFFECTING THE 2026 DEPARTMENT NET EXPENDITURES AND OF COURSE, FLOWING INTO 2027 AND ALL YEARS OUT.
ANY QUESTIONS ON THIS SLIDE? SOURCES AND USES, THIS IS ONE OF, UH, TWO ITEMS THAT WE'LL BE SUBMITTING TO THE PUBLIC UTILITY COMMISSION ALONG WITH OUR SUPPORTING DOCUMENTATION FOR THEIR APPROVAL OF OUR BUDGET.
WE'RE LOOKING AT TOTAL USES OF FUNDS OF 485.9 MILLION IN 26 AND THE 58.5 MILLION IN 2027.
I INCLUDED THE RECOMMENDED REVENUE TRENDS I WANTED TO CALL OUT BETWEEN THE APRIL MEETING AND THIS MEETING.
WE COMBINED ALL OF OUR INTERCONNECTION RELATED REVENUES INTO ONE LINE ITEM, THE INTERCONNECTION LINE THAT INCLUDES THE GENERATION INTERCONNECTION REQUEST, THE FULL INTERCONNECTION STUDIES.
AND THE NEW ITEM IN THAT LINE IS THE LARGE LOAD INTEGRATION STUDIES.
SO CARRYING FORWARD THAT WILL BE IN, IN THAT, UM, THAT LINE ITEM.
AND SO THESE, THESE USER FEES, THE INTERCONNECTION, WEATHERIZATION INSPECTION FEES, WIDE AREA NETWORK, ALL, ALL OFFSET OR CUT COSTS SPECIFIC TO THESE ACTIVITIES.
THIS, UH, SHOWING OUR LONG-TERM CASH BALANCE SYSTEM ADMINISTRATION FEE REVENUE, EXPECTED DEPARTMENT NET EXPENDITURES.
SO BY REDUCING THE RATE FOR 26 AND 27, WE EXPECT TO UTILIZE THE CURRENT CASH BALANCE AND UNDER COLLECT THOSE YEARS.
AND BASED ON THE ENERGY FORECAST OR CODE EXPECTS TO MAINTAIN THE SAF, THE SYSTEM ADMINISTRATION FEE RATE BEYOND 2027 FINANCIAL RATIOS RELATIVELY UNCHANGED.
OUR DEBT SERVICE COVERAGE RATIOS PROJECTED TO BE ADEQUATE TO MEET OUR TARGETED RATIO AND THE LIQUIDITY RATIOS PROJECTED TO BE ADEQUATE.
I HAD A COUPLE OF NEW SLIDES I WANTED TO INTRODUCE TO THE COMMITTEE.
UM, SINCE WE LAUNCHED THE VALUE STREAM INITIATIVE AT ERCOT, WE HAVE BEGUN ALIGNING OUR FINANCIAL REPORTING ALONG THE LINES OF THE VALUE STREAM ENGAGEMENT THAT WE UNDERTOOK ABOUT A YEAR AND A HALF AGO.
AND WHAT WE WANTED TO GIVE YOU WAS A VISUAL OF ULTIMATELY WHERE ALL OF THE EXPENDITURES OF ERCOT ARE GOING.
WHERE, WHAT DO OUR EFFORTS LEAD TO WHEN WE LOOK AT THIS? UM, THIS IS AN ALL PART OF THIS IS AN ALLOCATIONS, THIS IS AN ALL, ALL DIRECT COST.
SO WE HAVE THE ADMINISTRATIVE COSTS THAT ARE ALLOCATED HERE.
OUR DATA CENTER HAS MANY COMPONENTS THAT LINE UP WITH INDIVIDUAL PORTIONS OF THIS VALUE STREAM.
SOME OF THEM ARE OVERHEAD, BUT WITHOUT GETTING INTO TOO MUCH DETAIL ON THE ALLOCATION STUDY ITSELF, UH, WHAT WE'RE LOOKING AT AT THE END OF THE DAY IS WE'RE CONTINUING TO DEDICATE THE BULK OF OUR TIME AND RESOURCES TO GRID AND COMMERCIAL OPERATIONS WITH A HEAVY EMPHASIS ON PLANNING, MODELING AND EXTERNAL DATA REPORTING AND RELATIONSHIP MANAGEMENT.
SO THOSE GRID OPERATIONS ARE TAKING ABOUT 20% OF OUR EXPENDITURES PERFORMING COMMERCIAL OPERATIONS JUST BEHIND THAT AT 19% GRID PLANNING AT 9%.
AND OF COURSE, UH, SKIPPING A LITTLE BIT, WE HAVE THE NETWORK TOPOLOGY MODELS FOR 8%.
WE HAVE THE EXTERNAL DATA REPORTING THAT WE'RE PROVIDING OUT TO MARKET PARTICIPANTS, P-C-I-M-M FOR 9%.
AND THEN WE HAVE, UH, THE NEXT ITEM DOWN WOULD BE MANAGING EXTERNAL RELATIONSHIPS.
AND THAT WOULD INCLUDE ALL OF OUR OUTREACH, OUR RELATIONSHIPS WITH THE PC LEGISLATURE AND OTHERS.
AND THEN WE HAVE INTER INTEGRATION OF RESOURCES INTO THE ERCOT SYSTEM, AND THEN WE GET INTO SOME SMALLER PERCENTAGES.
RICHARD, I, I APPRECIATE YOU ADDING THIS SLIDE.
UM, AND THIS ISN'T REALLY A COMMENT WITH RESPECT TO THE EXISTING BUDGET THAT'S BEING PROPOSED, BUT IT IS INTERESTING, UH, HOW MUCH IS BEING SPENT ON NON-CORE OPERATIONS AND IN MANAGING THE DATA REPORTING, THE REGULATORY, THE IMM, UH, TRAINING, ALL THAT.
AND, UH, COMING OUTTA URI, WE HAD A REAL NEED TO UP THAT.
AND WE HAVE, I THINK IT'S JUST SOMETHING TO KEEP OUR EYES ON TO MAKE SURE, YOU KNOW, WE, WE FOCUS ON THE CORE OPERATIONS AND
[00:35:01]
WE JUST DON'T KEEP ADDING TO, TO SOME OF THAT STUFF.UH, SO THIS IS JUST A THOUGHT GOING FORWARD.
I THINK THE QUALITY OF THE DATA COMING OUT OF ERCOT OVER THE LAST THREE YEARS HAS SIGNIFICANTLY IMPROVED AND INCREASED THE VOL.
THE VOLUME OF IT HAS INCREASED, THE QUALITY OF IT HAS IMPROVED, AND I THINK THAT CONTINUES TO BE ONE OF OUR MOST VALUABLE, UM, ASSETS ACTUALLY, OR PRODUCTS THAT WE DELIVER, IS THE INFORMATION THAT'S USED TO ANALYZE THE EFFICIENCY OF THE MARKET, THE RELIABILITY OF THE MARKET, THE RESILIENCY OF IT.
AND SO WE NEED TO TRY TO FIND, I MEAN, WE'RE, WHILE THE TRANSITION OVER THE LAST FEW YEARS HAS REQUIRED A LOT OF INVESTMENT TO GET THERE, WHAT I EXPECT OVER TIME IS THAT THESE INVESTMENT PLATFORMS WILL THEN BE ABLE TO BE LEVERAGED TO BE ABLE TO DELIVER THAT INCREASED LEVEL OF SERVICE WITHOUT THE COMMENSURATE INCREASES EACH CYCLE TO GET THAT.
AND SO THAT'S, RIGHT NOW WE'RE AT THE, WE'RE SEEING THE BENEFIT OF THAT INVESTMENT AND THAT BUILD AND, UM, AND BEYOND THE NEXT BUDGET CYCLE, I WOULD EXPECT THAT THOSE TYPES OF INVESTMENTS SHOULD MODERATE.
SO WHEN WE THINK ABOUT WHAT, WHAT IS HAPPENING, UH, AS FAR AS OUTCOMES GO FROM THIS BUDGET.
SO WE'RE, WE'RE CUTTING THE SYSTEM ADMINISTRATION FEE RATE, AND AT THE SAME TIME, WE'RE MAKING SIGNIFICANT IMPROVEMENTS WITHIN ERCOT AND FOR THE ERCOT MARKET.
SO WE'RE INCREASING SUPPORT FOR RELIABLE GROWTH.
WE'RE INVESTING A GRID TRANSFORMATION, RELIABILITY, INTERCONNECTION AND MARKET SYSTEMS. UM, MORE TIMELY ANALYSIS AND INSIGHTS.
WE'RE ENHANCING DECISION MAKING FOR ERCOT STAKEHOLDERS.
WE'RE ENHANCING MARKET PARTICIPANT COMMUNICATION AND SUPPORT ACROSS THE ORGANIZATION.
AND THAT STARTS WITH MAJOR INVESTMENTS THAT WE'RE MAKING IN THE REGISTRATION SIDE OF THE BUSINESS AND THE INTERCONNECTION PIECE TO IMPLEMENTING REVISION REQUEST AND RELIABILITY STANDARDS, UH, OR MANAGING THE RELIABLE ADDITION AND OPERATION OF LARGE LOADS.
AS WE CONTINUE TO SEE MORE LARGE LOADS COMING ONLINE, THAT'S, THAT'S AN ABSOLUTE FOCUS FOR ERCOT.
AND OF COURSE, WE'RE ENHANCING MARKET FACING OPERATIONS, INCLUDING EXPANDED RELIABILITY, MONITORING FUNCTIONS, COMPLIANCE AND MONITORING, INTEGRATING SUPPORTING HIGH VOLUME OF NEW SMALL GENERATION DATA ENHANCED COMMUNICATIONS, AS WELL AS IMPROVEMENTS IN INVESTMENTS IN DEMAND RESPONSE FORECASTING AND PRICE RESPONSE OF DEMAND.
WE'RE ACCELERATING OUR PATCHING CADENCE AND EXPANDING OUR THREAT OPERATIONS TO IMPROVE OUR SECURITY POSTURE AS WELL AS ONGOING AND EXPANDED HARDWARE AND SOFTWARE BASED COSTS, CLOUDS DATA ANALYTICS AND AI TECHNOLOGY ENABLING OUR OPERATIONS.
I'LL TALK A LITTLE BIT ABOUT THE RISKS TO MEETING THE RECOMMENDED BUDGET SENSITIVITY ANALYSIS.
THIS SENSITIVITY ANALYSIS TO ORIENT YOU, AND I KNOW WE WENT THROUGH THIS IN APRIL, BUT I'LL, I'LL ORIENT EVERYONE.
THE CENTER POINT AT 68 MILLION THERE IN THE DARK BLUE, THAT'S OUR ENDING CASH BALANCE FOR 2027.
THE CAGR, THE COMPOUND ANNUAL GROWTH RATE FOR THE TWO YEAR ENERGY GROWTH FOR 26 AND 27 IS CENTERED ABOVE AT 9.08.
AND OUR AVERAGE ANNUAL INTEREST RATE TO THE LEFT AT 2.66 ON THE SAME LINE.
SO SHOULD WE EXPERIENCE, UH, SLOWER THAN EXPECTED ENERGY GROWTH AT THE 4.5% LEVEL, FOR INSTANCE, AND OUR INTEREST RATE THAT WE ARE EXPERIENCING WERE TO DROP TO 1%, WE WOULD EXPECT TO GO FROM A 68 MILLION FAVORABLE CASH BALANCE TO A 46.4 MILLION USE OF OUR CONGESTION REVENUE RIGHTS FUNDS AS A SOURCE OF FUNDING FOR ERCOT.
AND WHAT I WANTED TO POINT OUT HERE IS THAT OUR, OUR CURRENT LIMITATION IS AROUND 125 MILLION FOR THAT CON CONGESTION REVENUE, RIGHT? FUNDS USAGE.
SO EVEN IN A VERY DIRE SITUATION WHERE WE WOULD SEE SIGNIFICANT MARKET CHANGES, UM, BOTH A LOWER ENERGY GROWTH AND LOWER INTEREST RATES, OR HOW WOULD STILL BE SUFFICIENTLY FUNDED THROUGH THE END OF THE 27 CYCLE.
SOME OTHER SENSITIVITY ANALYSIS, UM, DEPARTMENT NET EXPENDITURE, IF THOSE WERE TO GROW VERSUS ENERGY GROWTH.
AGAIN, CAGR VERSUS INTEREST RATES.
IF A DEPARTMENT NET EXPENDITURES WERE TO GROW OR SHRINK, THEN OUR AVERAGE ANNUAL CRR FUNDING BALANCE VERSUS AVERAGE ANNUAL INTEREST RATES.
SO WHEN WE HAD THAT COMMENT EARLIER ON THE BALANCE OF THE CONGESTION REVENUE RIGHTS FUNDS AND WHAT THAT MIGHT LOOK LIKE IN THE FUTURE, WHAT, WHAT WE'VE MODELED HERE IS A SENSITIVITY DOWN TO 1.8 BILLION.
SO IF WE'RE TO DROP FROM OUR 2.1, NEARLY 2.2 BILLION BALANCE NOW DOWN TO THE 1.8 BILLION LEVEL, THEN WE WOULD, WE WOULD SEE A DROP FROM 68 MILLION TO 52.1.
WHEN YOU FOLLOW THAT 2.66 LINE ACROSS, ACROSS, IF WE WERE TO SEE THE 1.8 BILLION WITH 1%, UH, WITHOUT ANY OTHER CHANGES, WE WOULD SEE A CASH BALANCE CHANGE FROM THE 68 MILLION DOWN TO, UM, THE BORROWINGS OF 7.7 MILLION.
[00:40:01]
EVEN A, A REASONABLE OUTCOME THERE.RISK SUMMARY AND MITIGATION POTENTIAL RISKS, OF COURSE, WE WALK THROUGH THESE IN THE SENSITIVITY ANALYSIS.
IF WE HAD LOWER THAN PROJECTED ENERGY GROWTH OR LOWER INTEREST INCOME RATE, LOWER CRR FUNDING BALANCE OR HIGHER THAN PROJECTED INFLATION, THOSE COULD ALL, THOSE COULD ALL IMPACT THE ERCOT FINANCIAL POSITION, OUR MITIGATION RESPONSES.
WE COULD INCREASE DEBT AND OR, OR COD'S USE OF CRR FUNDS.
OUR CURRENT BUDGET DOESN'T ANTICIPATE ANY USE OF THE CRR FUNDS.
IN FACT, WE HAVE DISCUSSED THE CASH BALANCE.
WE COULD REDUCE DEPARTMENT NET EXPENDITURE, UH, WITH OPERATIONAL EFFICIENCIES AMONG OTHER ITEMS, REDUCE PROJECT EXPENDITURES IF NEEDED.
AND AS A, A FINAL OPTION, WE COULD INCREASE FEES.
AT THE CURRENT MOMENT, WE DON'T ANTICIPATE THAT BASED ON THE SENSITIVITY ANALYSIS WE RAN THROUGH, IT TAKES ME TO THE APPENDICES AND THE CONCLUSION OF OUR PRESENTATION.
ANY QUESTIONS FOR RICHARD AS AGAIN, FOR THE PUBLIC'S BENEFIT, WE DID A VERY DEEP DIVE AT THIS AT THE APRIL, UH, F AND A COMMITTEE MEETING.
AND SO THIS RECAP WITH, UH, JUST THREE OR FOUR UPDATES TO FINE TUNE THE NUMBERS FROM WHERE WE WERE BEFORE.
I'D ALSO POINT OUT, UH, TO REITERATE WHAT YOU SAID, RICHARD, THIS DOES INVOLVE A REDUCTION OF FEE FROM 63 CENTS TO 61 CENTS AND IT LOOKS LIKE IT'S, YOU KNOW, ASSUMING ALL THE ASSUMPTIONS COME TRUE, THAT THAT WOULD BE A FOUR YEAR FEE.
WE'RE ONLY LOOKING AT TWO YEARS FOR, FOR THIS, UH, APPROVAL, UH, FOR, FOR THIS DECISION.
BUT IT COULD BE UP TO FOUR YEARS IF EVERYTHING ELSE CAME TRUE.
UH, ANY FURTHER DISCUSSION QUESTIONS? I WILL, UH, SINCE I'M NOT HEARING ANY FURTHER DISCUSSION ON ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD ACCEPT, ADOPT AND APPROVE THE 20 26 20 27 BIANNUAL BUDGET AND SYSTEM ADMINISTRATION FEE AS PRESENTED AND AUTHORIZED ERCOT TO FILE THE BUDGET FOR WITH THE COMMISSION FOR FURTHER APPROVAL, UH, PURSUANT TO COMMISSION RULES.
I THINK BENJAMIN MAY HAVE BEAT YOU.
DID YOU? WAS THAT APPROVAL? OKAY.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
THE, UH, PROPOSAL HAS BEEN APPROVED AND IT WILL MOVE TO THE, UH, BOARD TOMORROW.
UH, THE NEXT UH, AGENDA ITEM IS A
[8. Future Agenda Items]
GEN ITEM EIGHT FUTURE AGENDA ITEMS. FUTURE AGENDA ITEMS ARE, UM, IN LINE WITH PREVIOUS, SO WE'LL AT THE SEPTEMBER MEETING WE'LL BE LOOKING AT THE UNDERTAKING THE ANNUAL SELF-EVALUATION.UH, OF COURSE THE STANDARD COMMITTEE REPORTS.
UH, WE'LL BE LOOKING AT THE INSURANCE RENEWALS AFTER WE HAVE BOUND THOSE, THOSE INSURANCE AMOUNTS.
AND THEN OF COURSE WE HAVE THE REVIEW AND THE INTERNAL AUDIT PLAN DEVELOPMENTS AS WELL AS PERIODIC MEETING WITH OUR FINANCIAL AUDITORS.
ANY QUESTIONS? THANK YOU, RICHARD.
UH, THE UH, NEXT AGENDA ITEM IS, UH, BEFORE WE MOVE INTO EXECUTIVE SESSION, IS A AGENDA ITEM NINE, OTHER BUSINESS.
IS THERE ANY OTHER BUSINESS ANY COMMITTEE MEMBER WISHES TO RAISE? I'M NOT HEARING ANYTHING.
[Convene Executive Session]
COMMITTEE WILL RECESS, GENERAL SESSION.WE'LL TAKE A SHORT BREAK BEFORE CONVENING AN EXECUTIVE SESSION.
UH, THREE VOTING ITEMS ARE ANTICIPATED FOLLOWING EXECUTIVE SESSIONS.
SO GENERAL SESSION WILL RECONVENE AFTER THE CONCLUSION OF THE EXECUTIVE SESSION.
UH, GENERAL SESSION IS NOW RECESSED AND THE WEBCAST WILL BE CONCLUDED.
THIS MEETING OF THE PUBLIC UTILITY COMMISSION WILL STAND IN RECESS.
ALRIGHT, THIS IS BILL FLORES COMMITTEE CHAIR AND THE GENERAL SESSION OF THIS MEETING IS NOW RECONVENED.
UH, WE'RE GONNA MOVE TO AGENDA ITEM 10.1.
[10. Vote on Matters from Executive Session]
TO RECOMMEND THAT THE BOARD ACCEPT THE 2024 ERCOT 401K SAVINGS PLAN AUDIT REPORT THAT WAS DISCUSSED IN AGENDA ITEMS FOUR TO 4.3.BENJAMIN'S MADE THE MOTION SECOND.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
THAT RECOMMENDATION HAS BEEN ADOPTED.
UH, IN AGENDA ITEM 10.2, I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD AUTHORIZE AND APPROVE ERCOT TO ENGAGE THE AUDITOR DISCUSSED DURING AGENDA ITEM ES 2.31 TO PERFORM ERCOT 401K SAVINGS PLAN AUDIT FOR THE YEAR ENDED DECEMBER 31ST, 2025.
[00:45:02]
SO MOVED.THEN HAS MADE THE MOTION SECOND.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
AGENDA ITEM E ES, UH, EXCUSE ME, 10.3.
AND CONSISTENT WITH OUR DISCUSSION ON AGENDA ITEM SIX.
AND AGENDA ITEM E ES 2.2, I'LL ENTERTAIN A MOTION THAT THE BOARD APPROVE THE CONTINUING EN ENGAGEMENT OF ERCOT MANAGEMENT AND EFFORTS TO PREPARE, DOCUMENT AND CONSUMMATE AN EARLY REDEMPTION OF THE CURRENT SERIES OF SUBCHAPTER M BONDS AND THE REFINANCING PURSUANT TO SEC RULE 1 44 A OF A 2025 SERIES OF THE SUBCHAPTER M BONDS SUB SUCH EFFORTS WILL INCLUDE THE ENGAGEMENT OF AN UNDERWRITER.
JULIE HAS MADE THE MOTION SECOND.
ANY OPPOSED? ANY ABSTENTIONS? OKAY.
THAT MOTION HAS BEEN MOVED, HAS BEEN APPROVED FOR THE, UH, REFINANCING OF THE SUBCHAPTER M SECURITIZATION BONDS.
THIS MEETING OF THE FINANCE AND AUDIT COMMITTEE IS NOW ADJOURNED AND THE WEBCAST WILL BE CONCLUDED.