PUCT Staff Files Proposed Order on ERCOT Oversight

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February 7, 2011  

PUCT Staff have filed in Project No. 38338 a proposed order that would provide that ERCOT's annual budget is subject to Commission review, but which tweaks other aspects of an earlier draft of rules meant to clarify and codify the Commission's existing authority over ERCOT (see 8/13).

The proposed order maintains that the Commission may adopt, modify, or reject the ERCOT budget.  Additionally, ERCOT would be prohibited from incurring expenses or capital outlays in any year that exceed the amounts approved by the Commission, except in the case of an emergency that impairs its ability to conduct its functions.  

ERCOT would also be prohibited from incurring debt or deferring scheduled principal repayments of debt without Commission approval.  ERCOT would be required to seek approval of any loan or agreement to provide a line of credit from a bank or other institution, the issuance of bonds or notes, and any arrangements that would permit it to issue bonds or permit the issuance of bonds on its behalf at a later date.

Staff has recommended not adopting the original draft requirement that would have imposed staffing limits on ERCOT, as a staffing limit, "would unnecessarily restrict ERCOT in adapting to operating contingencies."

Staff also recommended eliminating the draft requirement that would have disqualified a person from serving as an unaffiliated director on the ERCOT Board if such person had been employed by a market participant, since the provision would "unnecessarily restrict the pool of otherwise qualified candidates."

Furthermore, an unaffiliated director would be prohibited from representing a market participant at ERCOT for a period of one year after the person ceases to serve as a member of the governing board, rather than two years.

Staff also found that the Commission should only approve the selection of ERCOT's chief executive officer and not the chief operating officer or vice-presidents.  The CEO, "should have the discretion to select his or her management team, and that the selection of an effective management team may require the evaluation of intangible factors that the commission would have difficulty assessing," Staff said.

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