Apr 20, 2026 Finance and Audit Committee Meeting

[00:00:01]

ALL RIGHT.

GOOD MORNING EVERYONE.

MEMBERS OF THE FINANCE AND AUDIT COMMITTEE AND GUESTS.

MY NAME IS CHRIS RUMMEL, COMMITTEE CHAIR.

WELCOME TO THE APRIL 20TH, 2026 FINANCE AND AUDIT COMMITTEE MEETING.

I HEREBY CALL THIS MEETING TO ORDER.

THIS MEETING IS BEING WEBCAST LIVE TO THE PUBLIC ON ERCOT WEBSITE, AND I HAVE CONFIRMED A QUORUM IS PRESENT.

BEFORE MOVING ON TO TODAY'S BUSINESS, I'LL HIGHLIGHT TO COMMITTEE MEMBERS THAT THE ANTITRUST ADMONITION AND SECURITY MAP ARE INCLUDED WITH POSTED MEETING MATERIALS.

THE FIRST ORDER OF BUSINESS ON TODAY'S AGENDA IS ITEM TWO.

NOTICE OF PUBLIC COMMENT, IF ANY.

TODAY'S MEDIAN AGENDA WAS POSTED PUBLICLY ON APRIL 13TH, 2026, AND PROVIDED INSTRUCTIONS FOR THE PUBLIC TO COMMENT IN PERSON.

TO DATE, NO ONE HAS EXPRESSED INTEREST IN COMMENTING.

IS THAT CORRECT, CHAD? THAT IS CORRECT.

CHAIR.

[3. February 9, 2026 General Session Meeting Minutes]

FEBRUARY 9TH, 2026.

GENERAL SESSION MEETING MINUTES.

THERE IS A DRAFT OF, UH, IN THE MEETING MATERIALS.

DOES ANYONE HAVE ANY COMMENTS OR WISH TO MAKE A MOTION? SO MOVED.

JULIE, BILL SECOND.

ALL IN FAVOR? AYE.

OPPOSED? ABSTENTIONS.

GREAT.

[4.1 Review of Requirements for Annual Audit of Financial Statements and Annual Servicer’s Certificate]

LESLIE SWANSON WILL PRESENT.

LESLIE, YOU MAY TAKE THE FLOOR.

GOOD AFTERNOON.

I AM JOINED BY BAKER TILLY AND WE WILL PRESENT THE ITEMS RELATED TO THE AUDIT ON THE AGENDA.

FIRST, WE HAVE THE REQUIREMENTS, UH, TO REVIEW FOR THE ANNUAL AUDIT OF FINANCIAL STATEMENTS AND THE ANNUAL SERVICER CERTIFICATE.

WE WILL REVIEW THE REQUIREMENTS AROUND THE ANNUAL FINANCIAL STATEMENTS AUDIT AND THEN THE ANNUAL SERVICER CERTIFICATES.

THE FNA COMMITTEE CHARTER REQUIRES THAT THE COMMITTEE REVIEW AND RECOMMEND WHETHER THE BOARD SHOULD ACCEPT THE ANNUAL AUDITED FINANCIAL STATEMENTS FOR ERCOT AND SUBJECTOR M AND N.

THE VOTE WILL HAPPEN IN GENERAL SESSION DURING ITEM EIGHT AFTER THE EXECUTIVE SESSION.

WE'LL ALSO REVIEW THE ANNUAL SERVICER CERTIFICATES THIS YEAR.

WE HAVE SUBCHAPTER M AND N.

SUBCHAPTER M IS NEW AFTER THE 2025 REFINANCING.

THIS OUTLINES THE REQUIREMENTS, UM, AS STATED IN THE BYLAWS, PROTOCOLS AND COMMITTEE CHARTER.

AND THEN JUST A REMINDER THAT SUB CHAPTER M AND N, UH, ARE CONTRACTUALLY REQUIRED TO MAINTAIN AUDITED FINANCIAL STATEMENTS.

AND THEN SUBCHAPTER M AND N'S SERVICER CERTIFICATES WILL BE PRESENTED FOR REVIEW, BUT DO NOT REQUIRE A VOTE.

NEXT, I WILL TURN IT OVER TO JODY DOBSON AND SARAH SLAUGHTER OF BAKER TILLY.

JODY IS THE PRINCIPAL AND SARAH IS THE DIRECTOR ON OUR ACCOUNT.

THANK YOU VERY

[4.2 Report on December 31, 2025 Financial Audit and Annual Servicer’s Certificate]

JUST QUICK, JUST QUICK, SO THIS, WE'RE MOVING ON TO AGENDA ITEM 4.2.

UM, AND THIS IS THE REPORT ON THE DECEMBER 31ST, 2025 FINANCIAL AUDIT AND THE SURFACERS CERTIFICATE.

SO, BAKER TILLY IS GOING TO PRESENT THREE REPORTS, WHICH I UNDERSTAND ARE ALL, UM, UNMODIFIED REPORTS, CLEAN OPINIONS ON THE FINANCIAL STATEMENTS FOR ERCOT FOR TEXAS ELECTRIC MARKET STABILIZATION FUNDING, LLCS, M AND N.

SO THERE WILL BE THREE VOTING ITEMS ON ACCEPTANCE OF THE REPORTS THAT WILL BE TAKEN UP WHEN WE RETURN TO THE GENERAL SESSION LATER ON IN TODAY'S AGENDA.

ALRIGHT, SO NOW YOU, NOW YOU MAY START.

THANK YOU.

THANK YOU.

THANK YOU VERY MUCH.

MY NAME IS JODY DOBSON, UM, AND I'M HAPPY TO BE HERE WITH YOU TODAY.

WHAT I WANNA DO IS JUST PROVIDE A HIGH LEVEL STATUS OF OUR AUDIT ENGAGEMENT AND OVERVIEW OF THE PROCESS, TOUCH ON INTERNAL CONTROL COMMUNICATIONS, UM, AS WELL AS HIGHLIGHT THE WORK WITH THE SERVICERS AGREEMENT, EXAMINATION ENGAGEMENT, AND THEN, UM, SHARE ABOUT THE REQUIRED COMMUNICATION TO THOSE CHARGED WITH GOVERNANCE.

[00:05:03]

UM, OUR AUDITS CONDUCTED UNDER GENERALLY ACCEPTED AUDITING STANDARDS, AND HERE WE JUST IDENTIFY SEVERAL OF THE AREAS THAT WE WORK THROUGH AS PART OF THAT AUDIT PROCESS.

AND IT, THAT OBJECTIVE OF THE AUDIT IS TO MAKE SURE THAT THE FINANCIAL STATEMENTS ARE FREE FROM MATERIAL MISSTATEMENT AND ARE A FAIR PRESENTATION OF THE FINANCIALS.

UM, WHEN IT COMES TO THE INTERNAL CONTROLS, OUR INTENT IS NOT TO GIVE AN OPINION ON INTERNAL CONTROLS, BUT TO USE THAT INFORMATION IN OUR ASSESSMENT OF THE RISKS IN VARIOUS AREAS OF THE FINANCIAL STATEMENTS AND HELP US TO DESIGN OUR TESTS THAT WE'RE GOING TO COMPLETE IN ORDER TO OBTAIN EVIDENCE TO ISSUE OUR OPINION.

THAT SAID, IF THERE WERE ANY WEAKNESSES THAT WERE IDENTIFIED, WE'D COMMUNICATE THOSE, AND I'M HAPPY TO SAY THERE WERE NO MATERIAL WEAKNESSES IDENTIFIED FOR ANY OF THE ENTITIES.

SO THE SERVICERS AGREEMENT, EXAMINATION ENGAGEMENTS, UM, I BELIEVE THIS HAS BEEN DONE IN THE PAST FOR N AND IT WAS ADDED THIS YEAR FOR SUB CHAPTER M.

UM, AND THESE ARE REALLY LOOKING TO GIVE AN OPINION ON MANAGEMENT'S ASSERTION ON COMPLIANCE WITH THAT AGREEMENT.

THOSE WERE BOTH ISSUED WITHOUT ANY, UM, CONCERNS.

SO LOOKING AT THE REQUIRED COMMUNICATIONS, THERE'S A DETAILED DOCUMENT THAT'S ISSUED WITH A LOT OF INFORMATION ON THIS.

UM, BUT WE DO LOOK AT ACCOUNTING POLICIES, ESTIMATES, DISCLOSURES.

THERE WERE NO CONCERNS IN ANY OF THESE AREAS.

IF WE ENCOUNTERED DIFFICULTIES, CONCERNS ABOUT NON-COMPLIANCE OR ANY UNUSUAL TRANSACTIONS, WE WOULD BE COMMUNICATING THOSE.

WE DON'T HAVE ANY.

UM, IF THERE WERE ANY UNCORRECTED MISSTATEMENTS OR MATERIAL CORRECTED MISSTATEMENTS, WE'D COMMUNICATE THOSE AND WE DON'T HAVE ANY, THERE WERE NO DISAGREEMENTS WITH MANAGEMENT OR ANY OTHER FINDINGS OR ISSUES TO BE COMMUNICATED.

YOU WILL RECEIVE A COPY OF THE SIGNED MANAGEMENT REPRESENTATION LETTER THAT WE RECEIVED FROM MANAGEMENT, UM, JUST REPRESENTING THAT WE'VE BEEN SHARED ALL THE INFORMATION, CONFIRMING POLICIES, THOSE KIND OF THINGS.

AND THERE WERE NO GOING CONCERN, UM, ITEMS IDENTIFIED FOR ANY OF THE THREE ENTITIES DURING THE AUDIT PROCESS.

THERE WERE NO CONSULTATIONS WITH OTHER ACCOUNTANTS, AND WE DO LIKE TO HIGHLIGHT THAT WE WORK VERY HARD TO MAKE SURE WE MAINTAIN OUR INDEPENDENCE SO THAT WE'RE ABLE TO ISSUE THE AUDIT OPINIONS.

UM, WE'RE ALSO NOT AWARE OF ANY RELATED PARTY TRANSACTIONS THAT WOULD NEED TO BE COMMUNICATED.

SO WITH THAT, I CAN ANSWER ANY QUESTIONS.

UM, AND YOU ALSO WILL RECEIVE CONTACT INFORMATION FOR ALL THREE OF US IF YOU HAVE ANY QUESTIONS THROUGHOUT THE YEAR AS WELL.

O ONE QUESTION FOR YOU.

UNDERSTAND THAT THERE WERE NO CONTROL WEAKNESSES FOUND, UM, AS PART OF YOUR AUDIT, DO YOU, DO YOU HOWEVER, ALSO PROVIDE A, UH, CONTROLS RECOMMENDATION FOR ANYTHING THAT COULD BE IMPROVED? WE WOULD, AS WE GO THROUGH THINGS, IF THERE'S AREAS THAT WE'VE SEEN, UM, OTHER ENTITIES OR WE OBSERVE THAT MAYBE THERE COULD BE AN EFFICIENCY THAT WE'LL SHARE THAT INFORMATION WITH MANAGEMENT FOR CONSIDERATION.

AND DO YOU HAVE ANY THAT YOU CAN SHARE WITH US THAT, UH, IN PARTICULAR ARE, UM, RECOMMENDATIONS HERE? IT, THERE WAS NOTHING SPECIFIC IDENTIFIED THIS YEAR, SO THINGS, THINGS WENT VERY SMOOTHLY IN ALL REGARDS, RICHARD IS SMILING.

.

OKAY.

IF THERE ARE NO OTHER QUESTIONS OR COMMENTS, UH,

[4.3 Review of Audited Financial Statements and Annual Servicer’s Certificate]

OKAY, AS MENTIONED, WE HAVE UNQUALIFIED OPINIONS FOR ALL THREE ENTITIES WITH NO MATERIAL WEAKNESSES, AND WE'RE IN COMPLIANCE WITH BOTH SUBCHAPTER M AND N UH, UH, SERVICING CRITERIA.

I'M HAPPY TO REPORT THAT THERE ARE NO MATERIAL TRANSACTIONS TO DISCUSS OTHER THAN SUBCHAPTER M REFINANCE.

I'LL HIGHLIGHT THOSE CHANGES IN ANY OTHER NOTABLE ITEMS ON THE STATEMENTS.

[00:10:04]

HERE WE HAVE A SLIGHT INCREASE IN CASH AND CASH EQUIVALENCE DUE TO FAVORABLE FINANCIAL PERFORMANCE.

OUR RESTRICTED CASH SAW A DECREASE AS A RESULT OF LESS COLLATERAL HELD AT YEAR.

THIS BALANCE ALSO DECREASED AS A RESULT OF SUBCHAPTER M REFINANCE.

THE 2021 SERIES REQUIRED A 4 MILLION DEBT RESERVE THAT WAS NO LONGER REQUIRED IN THE 2025 SERIES.

THERE WAS ALSO A $1 MILLION DECREASE IN SUPPLEMENTAL CAPITAL.

THIS WAS A RESULT OF THE BALANCE, UH, DECREASE WHEN WE REFINANCED THAT WE WERE NO LONGER NEEDED AS MUCH SUPPLEMENTAL CAPITAL.

AND THEN OVERALL, OUR INVESTMENTS INCREASED DUE TO THE CRR BALANCES.

SECURITY DEPOSITS DECREASED AS A RESULT OF THAT COLLATERAL.

THE, UH, DECREASE IN RESTRICTED CASH.

OUR DEBT RESERVES NON-CURRENT DECREASED AS A RESULT OF THE M REFINANCE WITH THE SUPPLEMENTAL CAPITAL DECREASE AND THE REMOVAL OF THAT 4 MILLION DEBT RESERVE.

AND THEN OUR LONG-TERM CRR LIABILITIES INCREASED.

WE'VE SEEN A INCREASE IN THE CRR UH, BALANCES THROUGHOUT MOST OF 2025.

OUR SYSTEM ADMINISTRATION FEE INCREASED AS A RESULT OF HIGHER MEGAWATT USAGE FROM 25 TO 24.

THE RATE OF 63 CENTS WAS CONSISTENT FOR BOTH YEARS.

SALARIES AND BENEFITS INCREASED AS A RESULT OF THE CONTINUED HEADCOUNT GROWTH.

OUR OUTSIDE SERVICES DECREASED MOSTLY DUE TO THE OFFSET OF THE $7 MILLION LEGAL RECOVERY.

OUR INTEREST EXPENSE INCREASED, AND THAT'S DUE TO THE SUBCHAPTER M REFINANCE IN 2024.

OUR INTEREST RATE WAS ABOUT 2 97 AND IN 2025, IT RESET TO 6 0 5 AND THEN FINALLY LOCKED IN AT ABOUT FIVE 15 IN AUGUST.

UNDER THE FINANCING ACTIVITIES, YOU'LL SEE THE SUBCHAPTER M REFINANCE LOCATED HERE.

AND HERE WE HAVE MORE DETAIL ON THE M REFINANCE.

AND HERE'S THE DETAIL ON THE SECURITY DEPOSITS AND RESTRICTED CASH.

UM, YOU CAN SEE HERE THE DEBT RESERVE, UH, IS NO LONGER NEEDED OR NO LONGER REPORTED IN 2025.

AND YOU CAN SEE THE DECREASE IN THE SUPPLEMENTAL CAPITAL.

HERE YOU CAN SEE OUR LIQUIDITY HAS BEEN STABLE.

NOTHING TO REPORT HERE ON THE FAIR MARKET VALUE.

UH, MEASUREMENT.

I WANTED NOTE THAT THERE'S NO IMPACT TO OUR FINANCIALS.

THERE'S AN UPDATE TO THE DISCLOSURE.

SO FIRST SUBCHAPTER M AND N, THEY'RE REPORTED ON THE NET ASSET VALUE BECAUSE IT'S SOLELY MONEY MARKET VALUES OR MONEY MARKET MUTUAL FUNDS.

FOR ERCOT, WE HAVE THE BOND PORTFOLIO.

SO THEY'RE REPORTED ON THIS, UH, THREE TIER FAIR VALUE HIERARCHY.

IT'S A CHANGE FROM THE LAST YEAR'S STATEMENTS.

AND THEN ON OUR NOTE SEVEN, YOU CAN SEE THE SUBCHAPTER M REFINANCE AGAIN FROM 2021 BEING PAID OFF TO THE NEW SERIES OF 2025.

I WANNA POINT OUT THAT THIS 1.8 MILLION, UH, CHARGE IS AN ACCOUNTING TREATMENT THAT'S REQUIRED WHEN WE REFINANCED, UH, THE 2021 BONDS.

IT REPRESENTS THE REMAINING ISSUANCE COSTS FROM THE OLD BONDS THAT HAD TO BE EXPENSED WHEN THE DEBT WAS PAID OFF.

[00:15:01]

I CAN MOVE FORWARD TO MM.

WE HAVE THE CLEAN OPINION HERE.

WE HAVE THE DEBT RESERVES NON-CURRENT DECREASE THAT I SPOKE ABOUT EARLIER WITH THE 4 MILLION AND THE SUPPLEMENTAL CAPITAL DECREASE.

HERE'S THE 1.8 MILLION THAT WE, UH, HAD FROM THE ACCOUNTING TREATMENT AND THEN THE FINANCING ACTIVITIES THAT STATE ABOUT THE M BEING PAID OFF AND RE REFINANCED.

I DID WANNA TAKE A MOMENT TO POINT OUT HERE THAT WE, UH, KNEW THIS YEAR WE CLASSIFIED RESTRICTED CASH INTO CURRENT AND NON-CURRENT.

OUR NON-CURRENT RESTRICTED CASH IS THAT SUPPLEMENTAL CAPITAL, AND THAT IS BECAUSE WE DON'T INTEND TO USE IT.

THAT'S THERE FOR THE REMAINDER OF THE LOAN JUST IN CASE.

UM, AND THE REST HERE IS ALL RELATED TO THE M REFINANCE THAT I'VE PREVIOUSLY SPOKEN ABOUT.

AND MOVING ON TO SUBCHAPTER N MOST IMPORTANTLY, WE HAVE A CLEAN OPINION ON SUBCHAPTER N AS WELL.

I HAVE NO MATERIAL HIGHLIGHTS FOR SUBCHAPTER N UM, ON THESE STATEMENTS.

THEY ARE PRETTY SIMILAR TO 2024, AND THAT'S WHAT WE EXPECT TO SEE MOVING FORWARD.

AND THEN LASTLY, WE HAVE THE SERVICERS CERTIFICATES, UH, THAT WE ARE IN COMPLIANCE WITH ALL CRITERIA FOR M AND N.

AND AS A REMINDER, M IS NEW THIS YEAR BECAUSE OF THE REFINANCE.

UM, AS YOU'RE PAGING THROUGH THESE CERTIFICATES, THEY'RE VERY SIMILAR.

THERE, THERE IS NOT, UH, NOTHING MAJOR TO DIFFERENCE TO REPORT FROM SUB CHAPTER M AND SUB CHAPTER N AND SUB CHAPTER N SERVICING CERTIFICATE.

UH, OUR REQUIREMENTS ARE IN COMPLIANCE AS WELL.

ANY QUESTIONS ON THE STATEMENTS OR THE SERVICERS CERTIFICATES? ANY COMMENTS OR QUESTIONS TO THE FINANCIAL STATEMENTS? UH, ONE ONE QUICK COMMENT IS, UM, UH, I HAVE TO SAY THE FINANCIAL STATEMENT FOOTNOTES ARE, ARE VERY THOROUGH.

SO IT'S, UM, IMPRESSIVE.

I THINK IT WAS, THERE'S A TREMENDOUS AMOUNT OF DESCRIPTION AND DETAIL IN THE STATEMENTS AND IT MAKES ME, UH, WANT TO ASK THE QUESTION, ARE WE USING A DISCLOSURE CHECKLIST PROVIDED BY BAKER TILLY? IS IT OUR OWN LONG-TERM DEVELOPED LIST? BUT WE, WE'VE DONE A VERY THOROUGH JOB HERE, SO, UH, DO WE, WHAT, WHAT IS THE TOOL THAT WE'RE USING? WE DO HAVE ONE FOR OURSELVES THAT WE USE, BUT WE DO WORK WITH BAKER TILLY AS WELL.

THEY REVIEW IT BEFORE WE ISSUE.

EXCELLENT.

WELL, CONGRATULATIONS ON, UH, GREAT OUTCOMES.

THANK YOU.

THANK YOU.

AND IF I, IF I CAN TAKE JUST A MOMENT TO THANK BAKER TILLY AND THE ACCOUNTING AND, UH, FINANCE TEAM FOR ALL THE WORK THEY DID THIS YEAR.

IT WAS REALLY TREMENDOUS EFFORT, TREMENDOUS EFFORT ALL THE WAY AROUND.

WE REALLY APPRECIATE THE WORK BAKER TILLY DID.

THEY'VE BEEN A GREAT PARTNER.

GREAT.

WELL THAT'S GREAT TO HEAR.

IT'S NOT EASY TO PRES PRESENT FINANCIAL STATEMENT FOOTNOTES.

SO I THINK THIS WAS, UH, .

THIS WAS, THIS WAS WELL DONE.

THANK YOU, LESLIE.

[5.1 Review 2026 Financial Summary]

RICHARD SHIELD WILL PRESENT AGENDA ITEMS 5 1 20 26 FINANCIAL SUMMARY.

RICHARD, YOU CAN PROCEED.

OKAY, THIS IS OUR FIRST LOOK AT THE 2026 YEAR, UM, HAVING WRAPPED UP 2025 DURING OUR FEBRUARY BOARD MEETING.

YEAR TO DATE, UH, ACTUAL REVENUES TO EXPENDITURES, 9.8 MILLION FAVORABLE TO BUDGET DRIVEN BY INTEREST INCOME BEING FAVORABLE BY 3.3 MILLION, PROJECT BY 2.9 MILLION OUTSIDE SERVICES FAVORABLE BY 2.9 MILLION ON OUR YEAR TO DATE.

YEAR END FORECASTING, UH, WE'RE LOOKING AT REVENUES

[00:20:01]

FAVORABLE TO BUDGET, UH, DRIVEN BY THE INTEREST INCOME FORECAST TO BE FAVORABLE BY 22.4 MILLION PARTIAL OFFSETS, 6.8 MILLION FOR INTERCONNECTION REVENUE AND 3.6 MILLION UNFAVORABLE FOR INSPECTION REVENUE.

WE HAD 230 MILLION OF OPERATING FUNDS AS OF FEBRUARY 28TH, 2026, COMPARED TO 158 MILLION IN FEBRUARY 28TH, 2025.

WALKING THROUGH THE, UH, FINANCIAL SUMMARY WATERFALL, WHAT WE'RE LOOKING AT HERE ON THE LEFT IS OUR REVENUES, UH, YEAR END FORECAST.

THE BIG ITEM THAT I WANTED TO CALL OUT ON THE REVENUE SIDE IS OUR INTERCONNECTION REVENUES.

UH, RIGHT NOW AS WE'RE WORKING THROUGH THE BATCH PROCESS AND HOW WE INTEGRATE LARGE LOADS, IF YOU'LL RECALL, LAST YEAR WE APPROVED A INTERNALLY WE WORKED THROUGH AS PART OF PART OF OUR BUDGET, A LARGE LOAD INTERCONNECTION FEE.

WE HAVE NOT BEGUN COLLECTING THAT FEE.

IT'S UNCERTAIN AT THIS TIME HOW THAT'S GOING TO BE DONE.

SO AT THE MOMENT, WHAT WE'VE ENTERED A, UM, UNFAVORABLE, UH, FORECAST THROUGH YEAR END UNTIL WE HAVE MORE CERTAINTY THERE.

SO THIS IS, UH, I BELIEVE ALL INCLUSIVE OF THE COMPLETE IMPACT OF WHAT THAT LOOKS LIKE.

SHOULD WE NOT DO THAT OTHERWISE? GENERATION INTERCONNECTION FEES CONTINUE TO BE, UM, BROUGHT IN AS NORMAL.

SO I JUST WANTED TO CALL, CALL THAT PARTICULAR ITEM OUT BECAUSE IT IS LABELED THE INTERCONNECTION REVENUE AND I WANTED TO MAKE SURE THAT THAT LARGE LOADS YOU UNDERSTOOD WERE, WERE WITHIN THAT ITEM.

INTEREST INCOME, 22.4 MILLION FAVORABLE.

THAT'S BEING DRIVEN, UH, PARTIALLY BY INTEREST RATES AND PARTIALLY BY THE, UM, BALANCE WITHIN THE CONGESTION REVENUE.

RIGHT.

AUCTION RECEIPT FUNDS, UH, LESLIE CALLED THAT OUT AT THE END OF 2025.

VERY HIGH.

WE'RE REACHING ALL TIME HIGH AT THE END OF FEBRUARY AND SIGNIFICANTLY IN EXCESS OF THE BUDGETED AMOUNT FOR 2020, UH, 2026 ON THE REVENUE.

ON THE EXPENDITURE SIDE, WE HAVE, WE HAVE SEVERAL ITEMS, AND I WANT, JUST WANNA MAKE SURE THAT EVERYONE'S CLEAR ON THIS PIECE.

RIGHT NOW, WE'RE FORECASTING 2.5 MILLION UNFAVORABLE ACROSS MULTIPLE PROJECTS.

WE'RE AWARE OF THE SUPPLY CHAIN, UH, RISKS THAT WE'RE FACING NOW, INCREASED COSTS FOR COMPUTE.

SO, AND, AND ALSO TIMELINE, TIMELINE CHALLENGES THAT WE'RE FACING.

SO THIS IS AN ITEM WE'LL CONTINUE TO UPDATE THE BOARD ON THROUGHOUT THE YEAR.

UH, LOOKING AT RISKS HERE TO BUDGET AND TO COMPLETION, UM, WE TRADITIONALLY MANAGE OUR YEAR END PROJECT BUDGET AS CLOSELY AS WE CAN.

UH, THIS, THIS YEAR THOUGH, WE HAVE PARTICULAR CHALLENGES AROUND, UM, SHIPPING, SHIPPING, LEAD TIMES, AND, UH, TECHNOLOGY LEAD TIMES.

SO THIS IS AN AREA WHERE WE COULD SEE CHANGES THROUGHOUT THE YEAR, AND I WANT TO, WANTED TO MAKE SURE THAT WE IDENTIFIED THAT EARLY ON THE BUILDING AND FURNITURE IMPROVEMENT.

UH, MINIMAL ITEM THERE.

STAFFING MANAGEMENT, WE'RE EXPECTING A YEAR END FAVORABLE, 1.6 MILLION, UM, AROUND THE STAFFING MANAGEMENT AND ALSO PROJECT FUNDED WORK.

UH, WE'RE EXPECTING THAT TO DRIVE A FAVORABLE VARIANCE WITHIN THE RESOURCE MANAGEMENT THAT WILL PICK UP, AS YOU'RE AWARE ON THE PROJECT, UH, SIDE.

SO THAT'S, THAT'S A SWIZZLE BETWEEN, UH, RESOURCE MANAGEMENT AND PROJECT EXPENDITURES, UH, HARDWARE, SOFTWARE, RENEWALS AND MAINTENANCE.

WE'RE EXPECTING THAT TO COME IN FAVORABLE AT 1.7 MILLION.

THAT'S OUR PRIMARY DRIVER ON THE 3.2, AS WELL AS POTENTIAL, UM, SAVINGS AND LEGAL SERVICES.

WE'RE LOOKING AT A 1.4 MILLION FAVORABLE THERE, OFFSET BY COMMON INFRASTRUCTURE AND ADDITIONALLY AUGMENTED BY OTHER MISCELLANEOUS EXPENDITURES.

BUDGET VERSUS ACTUAL, WE'RE LOOKING AT MONTHLY TERAWATT HOUR LOAD AND CUMULATIVE REVENUES.

UH, WE'RE ON TARGET HERE.

FINANCIAL SUMMARY AND STATEMENT FINANCIAL POSITIONS.

UM, NOTHING TREMENDOUS TO CALL OUT ON THIS PAGE.

OUR LONG-TERM LIABILITIES THROUGH DECREASED 10.7 MILLION FOR, UH, SUBCHAPTER M DRIVEN BY THE LOWER BALANCE OF LONG-TERM DEBT PAYABLE LIABILITIES.

AND OF COURSE, UH, N DECLINED AS WELL FOR THE SAME, THE SAME EXPLANATION.

PRIMARY DRIVER ON ERCOT IS OF COURSE, INTEREST INCOME.

LOOKING AT, UH, THIS SHEET, WHEN WE'RE LOOKING AT THE OPERATING REVENUES FOR SUB-CHAPTER M, YOU'LL SEE IT'S 3.3 MILLION IN 2026 VERSUS 2025.

AGAIN, LESLIE CALLED THIS OUT DURING HER PRESENTATION.

UH, DURING JANUARY, WE HAD THE LOWER, UM, INTEREST RATE AVAILABLE ON THE SUBCHAPTER M FOR 2025.

THAT RESET IN JANUARY.

AND YOU'LL SEE, YOU'LL SEE THIS, UM, THIS ITEM SWITCH AS WE MOVE FORWARDS WHEN WE'RE LOOKING AT MONTH OVER MONTH CHANGES.

THAT 2025 BALANCE WILL GROW RELATIVE TO 2026 ON OUR OTHER, UH, INCOME.

AGAIN, WE EXPECT VOLATILITY THIS YEAR WITH THE TREASURY OBLIGATION.

FAIR VALUE ADJUSTMENTS DEPENDING ON THE RESOLUTION OF CONFLICTS, UH, GLOBALLY,

[00:25:01]

AGAIN, WE HOLD ALL OF OUR SECURITIES TO MATURITY ABSENT, UM, CRISIS LEVEL ACTIVITY.

SO WE, WE DO NOT ANTICIPATE ANY RECOGNITION OF THAT FAIR VALUE ADJUSTMENT OF 1.1 MILLION LOSS, BUT IN TOTAL, THAT'S A 1.7 MILLION SWIZZLE BETWEEN 2025 AND 2026 VALUE STREAMS. LOOKING BACK AT 2025, THIS IS AN RICHARD.

JUST A SECOND.

YES, SIR.

BEFORE WE MOVE ON PAST THE FINANCIAL STATEMENTS HERE, QUICK, UM, UH, CAN YOU MAKE A COMMENT ABOUT WORKING CAPITAL AND LIQUIDITY AND YOUR OUTLOOK? I MEAN, I, I SEE THAT THE FINANCIAL STATEMENTS ARE, YOU KNOW, WE HAVE, WE DON'T HAVE A SIGNIFICANT VARIATION FROM YOUR BUDGET, UH, BUT STILL, UH, WOULD APPRECIATE A COMMENT.

SURE.

WE'RE, WE'RE EXPECTING, UH, ADEQUATE WORKING CAPITAL AND LIQUIDITY THROUGHOUT THE REMAINDER OF THE YEAR.

WE COULD SEE SOME ADDITIONAL GROWTH.

WE HAVE THE 22, UM, THE 22.4 MILLION, UH, ADDITIONAL INTEREST INCOME, AND WE ENDED 2025 WITH HIGHER THAN EXPECTED CASH.

SO AS WE'RE THINKING ABOUT THE 28 AND 29 BUDGET RESPECTIVELY, AS WE'RE MOVING, UH, FORWARD WITH THAT PROCESS LATER THIS YEAR AND INTO, UH, 2027, UH, WE'LL HAVE ADDITIONAL UPDATES DEPENDING ON INTEREST RATE VARIABILITY, BUT GENERALLY A VERY, VERY LIQUID POSITION FOR ECON.

AND SOMETHING THAT WILL FEED INTO OUR, OUR DECISION ON SYSTEM ADMINISTRATION, UH, FEE RATE THAT WE'LL ANTICIPATE FOR 28 AND 29.

AT THIS, AT THIS TIME, WE DON'T HAVE ANY, UM, ANY PROPOSED CHANGES, UM, TO THAT OUTLOOK, UH, BASED ON CURRENT CURRENT EXPECTATIONS.

VERY GOOD.

THANK YOU FOR THE QUESTION.

APPRECIATE THAT.

VALUE STREAM INVESTMENTS, UH, WHEN WE'RE LOOKING AT OUR BUDGET FOR 2025, THIS IS, THIS IS A REPRESENTATION OF WHERE ERCOT IS SPENDING TIME AND WHERE WE'RE SPENDING OUR RESOURCES.

SO FROM A FINANCIAL PERSPECTIVE, WE'RE LOOKING AT ALMOST 50% OF OUR RESOURCES BEING, UM, DEDICATED TO COMMERCIAL OPERATIONS AND GRID OPERATIONS.

AND THEN FOLLOWING THROUGH WITH, UM, WHILE STILL VERY SIGNIFICANT VALUE STREAMS, UH, LOWER PERCENTAGE, MY NETWORKS TOPOLOGY MODELS AT 7%, MANAGING EXTERNAL RELATIONSHIPS AT 7%.

AND THAT, THAT'S ALMOST A MISNOMER IN ITS NAME.

IT, IT, IT'S WELL IDENTIFIED INTERNALLY, BUT IF YOU TAKE A LOOK AT THE APPENDICES, YOU'LL SEE WHAT, WHAT THAT INVOLVES.

SO IT'S ALL OF OUR COTS COMMUNICATIONS, UH, EXTERNALLY.

SO IT'S TITLED MANAGING EXTERNAL RELATIONSHIPS.

WHAT THAT'S NOT IN THE SENSE OF LOBBYING.

SO THIS IS IN THE SENSE OF, UH, ALL OF THE COMMITTEE WORK THAT WE DO, ALL THE BOARD WORK THAT WE WE'RE DOING, ALL THE OUTREACH THAT ARE COST PERFORMING.

SO A LARGE AMOUNT OF OUR COMMUNICATIONS BUDGET IS SET IN THIS AREA.

I'VE HAD SEVERAL QUESTIONS ABOUT THIS PARTICULAR TITLE AND I JUST WANTED TO MAKE SURE THAT WAS ELEVATED HERE SO WE UNDERSTOOD WHAT, WHAT THAT WAS AND CONTINUE MATURING THIS AS, UH, WE MOVE FORWARD THROUGHOUT 2026.

LOOKING INTO GETTING MORE OF THE DETAILED APP DEPENDENCY REPORTING AT THIS LEVEL OF THE VALUE STREAMS AS WE PROCEED THROUGH THE YEAR.

LOOKING AT CRR FUNDS, THIS WAS AN AREA THAT WE DISCUSSED, UH, LAST YEAR AND HALF FOR SEVERAL YEARS, WHICH IS WHAT, WHAT WOULD BE THE IMPACT OF RTC PLUS B? WOULD WE SEE, UM, ABOUT LEVEL ON THE CONGESTION, REVENUE RIGHTS, AUCTION RECEIPTS, OR WOULD WE SEE INCREASES? WE'RE SEEING SOME INCREASES HERE.

WE'RE LOOKING FORWARD TO EXPLORING MORE THE DRIVERS ON THIS BALANCE AND SEEING IF THIS LEVEL'S OUT OR IF IT BECOMES A NEW, A NEW MODEST INCREASE THROUGHOUT THE YEAR.

AGAIN, OUR CONGESTION REVENUE, RIGHT? AUCTION RECEIPTS ARE THE BASIS FOR MUCH OF OUR INTEREST INCOME.

AND AS WE'RE MOVING THROUGH THE YEAR, A HIGHER BALANCE HERE, WE'LL SEE ADDITIONAL LIQUIDITY INTRODUCED AS A RESULT OF ERCOT.

UM, RETAINING THE INTEREST EARNED ON THOSE AUCTION RECEIPTS.

TAKES ME THROUGH THE END OF MY REMARKS IN THE PRESENTATION.

DOES ANYONE HAVE ANY QUESTIONS OR COMMENTS FOR RICHARD? THANK YOU, RICHARD.

THE NEXT ITEM,

[Items 5.2 & 5.3]

UH, IN AN EFFORT TO STREAMLINE THE MEETINGS WHEN THE PRESENTATIONS ARE NOT NECESSARY, THESE REPORTS HAVE BEEN INCLUDED IN THE MEETING MATERIALS FOR THE COMMITTEE'S INFORMATION.

UH, SO IF THERE IS NO DISCUSSION, WE CAN MOVE ON TO THE NEXT ITEM, ANYONE.

GREAT.

NEXT UP

[6. Future Agenda Items]

SURE.

UM, DURING THIS MEETING, WE HAVE LOOKED AT THE FINANCIAL PERFORMANCE STANDARD.

UM, FINANCE AND RISK ITEMS INTERNAL AUDIT WILL BE PRESENTED TODAY AS FAR AS INTERNAL AUDIT ACTIVITY, UM, UH, DURING EXECUTIVE SESSION AND AS WELL TODAY YOU'VE HAD THE PERIODIC MEETING WITH FINANCIAL

[00:30:01]

UH, IN THE NEXT MEETING WE'LL LOOK FORWARD TO MUCH OF THE SAME.

IN ADDITION, WE'LL HAVE THE, UH, REVIEWING THE INSURANCE RENEWALS AND THE IRS FORM NINE 90 WILL BE PART OF THE JUNE BOARD MEETING AND APPROVING PROPOSED BUDGETS.

WE HAVE THE, UM, HMM, THAT'S AN ERROR.

I REGRET, UH, THAT ITEM, THE APPROVED PROPOSED BUDGETS WILL NOT BE INTRODUCED DURING THE JUNE MEETING.

WE'LL REVIEW THE ETHICS POINT ACTIVITY, INTERNAL AUDIT ACTIVITY, AND, UH, INTERNAL AUDIT WORK, AS WELL AS 4 0 1 SAVINGS PLAN, AUDITOR SELECTION AND REVIEWING THAT AUDIT REPORT.

BUT, BUT AS I UNDERSTAND IT, WE WILL REVIEW, UH, AN EARLY DRAFT OF THE BUDGET IN THE NEXT MEETING.

WE WILL NOT, CHRIS, I, I REGRET THAT THAT WILL BE A, UM, FOUR 20.

THIS IS AN ITEM THAT WE WOULD BE LOOKING AT IN 2027.

SO THIS IS A CONCLUSION ITEM TO OUR, OUR PROCESS IN 2027.

I SEE.

YEP.

ANYONE ELSE HAVE ANY COMMENTS, SUGGESTIONS FOR EDIT? I THINK THAT IT'S RELATIVELY WELL BALANCED THROUGHOUT THE YEAR.

, THANKS, BILL.

OKAY, THE LAST ITEM BEFORE WE MOVE INTO EXECUTIVE SESSION.

UM, THANKS RICHARD.

APPRECIATE IT.

UM, OTHER BUSINESS.

SO IF THERE IS ANY OTHER BUSINESS THAT ANY COMMITTEE MEMBER WISHES TO RAISE, PLEASE DO SO.

[Convene Executive Session]

AT THIS TIME THE COMMITTEE WILL RECESS GENERAL SESSION AND CONVENE AN EXECUTIVE SESSION.

SEVEN.

VOTING.

VOTING ITEMS ARE ANTICIPATED FROM EXECUTIVE SESSION, SO GENERAL SESSION WILL RECONVENE AFTER THE CONCLUSION OF THE EXECUTIVE SESSION.

GENERAL SESSION IS NOW RECESSED AND THE WEBCAST WILL BE CONCLUDED.

[8. Vote on Matters from Executive Session]

THE GENERAL SESSION OF THIS MEETING IS NOW RECONVENED.

FIRST I'LL ENTERTAIN, I WILL ENTERTAIN A MOTION REGARDING THE COMMITTEE APPROVAL OF AGENDA ITEMS. ES 2.3 0.1 BILL FIRST.

I HAVE A SECOND.

JULIE.

ALL IN FAVOR? AYE.

AYE.

ANY OPPOSED? ANY ABSTENTIONS? MOTION PASSES.

[8.1 2025 Financial Statements Audit Reports]

FINANCIAL STATEMENT, AUDIT AND ANNUAL SERVICES CERTIFICATE AND VOTE.

AND ON ACCEPTANCE IN AGENDA ITEM 8.1 2025, FINANCIAL STATEMENTS, AUDIT REPORTS.

WE HAVE THREE VOTING ITEMS FOR AGENDA ITEMS. 8.1 THROUGH 8.3.

ACCORDINGLY, I'LL ENTERTAIN A MOTION THAT THE COMMITTEE RECOMMEND THAT THE BOARD ACCEPT THE AUDITED FINANCIALS AND FINANCIAL STATEMENTS.

AUDIT REPORTS FOR ONE, THE AUDITED FINANCIALS AND FINANCIAL STATEMENT AUDIT REPORTS FOR ERCOT INC.

TWO.

TEXAS ELECTRIC MARKET STABILIZATION FUNDING, MLLC AND THREE, TEXAS ELECTRIC MARKET STABILIZATION FUNDING.

AND LLC AS PRESENTED, SAL MOVED.

SECOND.

JULIE, BEN.

ALL IN FAVOR? OPPOSED ABSTENTIONS

[8.2 Selection of Independent Financial Auditor]

NEXT AGENDA.

ITEM 8.2, SELECTION OF INDEPENDENT FINANCIAL AUDITOR.

WE HAVE THREE VOTING ITEMS FOR AGENDA ITEMS. 8.2 0.1 THROUGH EIGHT.

POINT TWO 0.3.

ACCORDINGLY, I'LL ENTERTAIN A MOTION TO RECOMMEND THAT THE BOARD SELECT THE AUDITOR DISCUSSED DURING EXECUTIVE SESSION UNDER AGENDA ITEM ES 2.3 AS THE INDEPENDENT FINANCIAL AUDITOR TO PERFORM THE FOLLOWING FOR THE YEAR ENDING DECEMBER 31ST, 2026.

ONE.

THE FINANCIAL STATEMENTS AUDIT, SERVICER CERTIFICATE REPORT, AND FORM NINE 90 REVIEW FOR ERCOT INC.

TWO, THE FINANCIAL STATEMENTS AUDIT AND CONSOLIDATION PROCEDURES FOR TEXAS ELECTRIC MARKET STABILIZATION FUNDING, MLLC AND THREE, THE FINANCIAL STATEMENTS, AUDIT AND CONSOLIDATION PROCEDURES FOR TEXAS ELECTRIC MARKET STABILIZATION FUNDING.

NLLC.

CAN I HAVE A MOTION TO BEN JULIE? SECOND.

ALL IN FAVOR? OPPOSED? ABSTENTIONS.

GREAT MOTION'S PASSED.

THANK YOU.

THE MEDIA OF THE FINANCE AND AUDIT COMMITTEE IS NOW ADJOURNED AND THE WEBCAST WILL BE CONCLUDED.