Public Meeting on ERCOT’s Proposed 2004 Budget September 3, 2003 Preliminary - Subject to ERCOT...
-
Upload
willa-mcdowell -
Category
Documents
-
view
232 -
download
1
Transcript of Public Meeting on ERCOT’s Proposed 2004 Budget September 3, 2003 Preliminary - Subject to ERCOT...
Public Meeting on ERCOT’s Public Meeting on ERCOT’s Proposed 2004 BudgetProposed 2004 Budget
September 3, 2003September 3, 2003
Preliminary - Subject to ERCOT Board Approval
AgendaAgendaBackgroundBackgroundBusiness ConsiderationsBusiness ConsiderationsAssumptionsAssumptionsProposed 2004 BudgetProposed 2004 Budget
ERCOT System Administration Fee ERCOT System Administration Fee Revenue RequirementsRevenue Requirements
Operating ExpensesOperating ExpensesCapital InvestmentCapital InvestmentDebt ServiceDebt Service
MWH ForecastMWH Forecast
Q&A DiscussionQ&A DiscussionPreliminary - Subject to ERCOT Board Approval
ScheduleScheduleJune 11June 11 Kickoff meetingKickoff meetingJuly 10July 10 Budget templates due to FinanceBudget templates due to FinanceJuly 11-17July 11-17 Internal management reviewInternal management reviewJuly 18July 18 Preliminary budget to Preliminary budget to directors/mgrsdirectors/mgrsJuly 21-31July 21-31 Budget revisionsBudget revisionsAugust 1-15August 1-15 Internal management reviewInternal management reviewAugust 26August 26 Finance & Audit Committee (F&A) Finance & Audit Committee (F&A) reviewreviewSeptember 3September 3 Public meeting on proposed Public meeting on proposed budgetbudgetSeptember 11September 11 F&A reviewF&A reviewSeptember 16September 16 F&A recommendation to BoardF&A recommendation to BoardOctober 21October 21 Board approvalBoard approvalOctober 24October 24 Preliminary PUCT fee filing reviewPreliminary PUCT fee filing reviewOctober 31 October 31 PUCT fee filingPUCT fee filing
Preliminary - Subject to ERCOT Board Approval
Business ConsiderationsBusiness ConsiderationsDynamic Market Needs
Transmission/Resource Planning
RMR/Congestion Management
NERC Reliability/Compliance
Security (Physical and Cyber)
Escalating Requirements for Implementing Approved Protocol Revision Requests (PRRs)
Preliminary - Subject to ERCOT Board Approval
Business ConsiderationsBusiness Considerations
Minimal Opportunity to Analyze & Perform Process Reviews & Improvements
Manual Workarounds – Startup
Additional Manual Workarounds (new PRRs)
Recurring Market Needs (e.g., suspension of true-ups)
Limited Resources Unlimited Requirements
Preliminary - Subject to ERCOT Board Approval
Business ConsiderationsBusiness ConsiderationsTechnology constraints
Multiple System Customizations
More Complex Upgrades
Many Systems Have Limited or No Development/Test Environments
Some Single-source Providers
Preliminary - Subject to ERCOT Board Approval
AssumptionsAssumptionsOperating ExpensesOperating Expenses
Additional FTE’s required to:Additional FTE’s required to:Satisfy existing expectations of the marketSatisfy existing expectations of the marketMeet requirements of protocol revisionsMeet requirements of protocol revisions
Support capital investmentsSupport capital investments Hardware and software support costs Hardware and software support costs increase with capital spendingincrease with capital spendingConsulting costs increased in response to Consulting costs increased in response to complexity of systems in production and new complexity of systems in production and new initiatives such as the Texas Nodal project, initiatives such as the Texas Nodal project, data warehouse project, and the SAS 70 type data warehouse project, and the SAS 70 type 2 audit2 auditPreventative maintenance on ERCOT facilities Preventative maintenance on ERCOT facilities begins in 2004begins in 2004
Preliminary - Subject to ERCOT Board Approval
AssumptionsAssumptionsCapital SpendingCapital Spending
$55 million capital program $55 million capital program Possible increase at completion of project priority Possible increase at completion of project priority processprocess
80 percent funded with proceeds from 80 percent funded with proceeds from ERCOT’s short-term credit facilityERCOT’s short-term credit facility
Debt ServiceDebt Service$13.6 million principal $13.6 million principal Interest on long-term notes and borrowing Interest on long-term notes and borrowing under short-term credit facilityunder short-term credit facility
Preliminary - Subject to ERCOT Board Approval
Administrative Fee ComparisonAdministrative Fee Comparison 2002 - 20042002 - 2004
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
2002 Fee 2003 Fee 2004 Fee
$ / M
WH
Texas Nodal Project
SAS 70 Type 2
PUC MOD Support
Cml Apps Project
New FTE's - 2004
Principal Payments
Interest Payments
Revenue-funded Capital
Baseline Operations
$0.33 / MWH
$0.22 / MWH
$0.44 / MWH
Preliminary - Subject to ERCOT Board Approval
Revenue Requirement ComparisonRevenue Requirement Comparison2002 - 20042002 - 2004
2004 Revenue 2004 Revenue Requirements - $133.7 Requirements - $133.7 millionmillion
$99.5 million operating $99.5 million operating expenseexpense
LaborLaborSW licenses & SW licenses & maintenancemaintenanceConsultants & Consultants & contractorscontractors
$55 million capital expense$55 million capital expense$44 million debt funded$44 million debt funded$11 million revenue $11 million revenue fundedfunded
$23.2 million debt service$23.2 million debt service$9.6 million interest$9.6 million interest$13.6 million principal$13.6 million principal
2% MWH growth2% MWH growth
$-
$25
$50
$75
$100
$125
$150
FY 2002 FY 2003 FY 2004
($ M
illio
ns)
O&M Debt Service Rev Funded CIP
$0.22 / MWH
$0.33 / MWH
$0.44 / MWH
Preliminary - Subject to ERCOT Board Approval
Revenue Requirement ComparisonRevenue Requirement Comparison2002 - 20082002 - 2008
$-
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
$275
$300
FY2002
FY2003
FY2004
FY2005
FY2006
FY2007
FY2008
($ M
illio
ns
)
O&M Debt Service Rev Funded CIP
$0.22/
MWH
$0.33/
MWH
$0.44/
MWH
$0.58/
MWH
$0.67/
MWH
$0.74/
MWH
$0.77/
MWH
Preliminary - Subject to ERCOT Board Approval
Revenue Requirement ComparisonRevenue Requirement Comparison2009 - 20132009 - 2013
$-
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
$275
$300
FY 2009 FY 2010 FY 2011 FY 2012
($ M
illio
ns
)
O&M Debt Service Rev Funded CIP
$0.75/
MWH$0.71/
MWH
$0.72/
MWH
$0.69/
MWH
Preliminary - Subject to ERCOT Board Approval
Administrative Fee SensitivityAdministrative Fee Sensitivity
$0.01of Administrative Fee equals:
$3 million of operating expense$3 million / 294,000,000 MWH = $0.01 / MWH
$15 million of capital spending 80% leverage (20% equity funding * $15 million = $3 million)
6.8 GWH 2.3 percent deviation from MWH expected in 2004
Calculations ($3 million / $0.44 per MWH = 6.8 GWH. 6.8 GWH / 294 GWH = 2.3%)
Preliminary - Subject to ERCOT Board Approval
Operating ExpensesOperating ExpensesFY 2004 FY 2003
ERCOT Operating Expenses Budget Budget $ Var % VarLabor & Benefits 57,480,367 40,868,132 16,612,235 40.6%Labor for Capital Projects (7,367,613) (2,640,000) (4,727,613) -179.1%Material, Supplies , Tools & Equipment 1,647,370 1,107,910 539,460 48.7%Outside Services 22,337,469 13,250,120 9,087,349 68.6%Utilities , Maintenance & Facilities 7,586,798 5,742,436 1,844,362 32.1%HW Maintenance & SW Support 9,092,753 6,675,635 2,417,118 36.2%Insurance 1,750,000 1,500,000 250,000 16.7%Employee Expenses 2,812,957 1,645,500 1,167,457 70.9%Other 4,174,119 7,033,411 (2,859,292) -40.7%
Total 99,514,220 75,183,144 24,331,076 32.4%
Increase/<Decrease>
Preliminary - Subject to ERCOT Board Approval
Equity-Funded CapitalEquity-Funded CapitalPrioritized Capital Projects 40,000,000$ Building Projects 13,900,000 Minor Capital 1,100,000 Total 55,000,000$
Percent Equity Funded 20%
Equity Funded Capital 11,000,000$ Preliminary - Subject to ERCOT Board Approval
Debt ServiceDebt Service
Debt Outstanding - 12/31/2004 193,000,000$
Interest Expense 9,600,000 Principal Payments 13,600,000 Total 23,200,000$
Preliminary - Subject to ERCOT Board Approval
Revenue Requirement SummaryRevenue Requirement Summary
Operations Expense 99,514,000$ Equity-funded Capital Investment 11,000,000 Debt Service 23,200,000 Total Revenue Requirements 133,714,000$
MWH's 294,396,000
Proposed Fee per MWH 0.44$
Preliminary - Subject to ERCOT Board Approval
2004 Revenue Requirements2004 Revenue RequirementsUtilization of the System Administration FeeUtilization of the System Administration Fee
Insurance, Employee Expenses and Other
7%
Facilities and Supplies7%
Debt Service17%
SW Licenses and Maintenance
7%
Revenue Funded Capital
8%
Labor37%
Outside Services17%
Preliminary - Subject to ERCOT Board Approval
2003 Revenue Requirements2003 Revenue RequirementsUtilization of the System Administration FeeUtilization of the System Administration Fee
Insurance, Employee Expenses and Other
10%
Facilities and Supplies7%
Debt Service10%
SW Licenses and Maintenance
7%
Revenue Funded Capital
14%
Labor39%
Outside Services13%
Preliminary - Subject to ERCOT Board Approval
Monthly MWHMonthly MWH
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
GW
H's
FY 2004 Budget GWH's FY 2003 Actual & Projected GWH's
FY 2002 Actual GWH's FY 2001 Actual GWH's
FY 2000 Actual GWH's
294 million MWH budgeted for 2004294 million MWH budgeted for 20042 percent growth over 2003 budget2 percent growth over 2003 budget
2.1 percent year-to-date growth in MWH 2003 vs. 2.1 percent year-to-date growth in MWH 2003 vs. 20022002Preliminary - Subject to ERCOT Board Approval
Organizational ChartOrganizational ChartERCOT
Corporate Information Market SystemAdministration Technology Operations Operations
* Executive Organization * CIO Administration * COO Administration * CMO Administration* Finance * Technology Services Administration * Market Operations Support * Galvin PM* General Counsel * System Engineering and Administration * Operations Support * Settlement Metering* Human Resources * IT Operations * System Operations * Load Profiling and Data Aggregation* NERC Compliance * Facilities * System Planning * Settlements and Billing* Stakeholder Services * Network * Resource Planning * REP/ESI-ID Of Record* Corporate Communications * EMMS Development * Renewables and TCR* Market Rules * Project Management * Gruber PM
* Market Technology Service * Retail Documentation and Reporting * Data Warehousing * Retail Testing and Quality Control* Development & Architecture * Retail Client Services* Transaction Services * Wholesale Client Services* Corporate Applications* Web and Data Services* Settlement and Billing* Data Management* Cyber Security* Physical Security* IT Delivery* IT Operations 2* EMMS Production
Preliminary - Subject to ERCOT Board Approval
Staffing Increases - 2004Staffing Increases - 2004
0
25
50
75
100
125
150
175
200
ER
CO
T E
mp
lo
ye
es
SAS 70 Audit
Cml AppsEnhancement
Texas NodalProject
2004 BaseAddition
2003 Base
Total increase proposed for 2004 - 130 Total increase proposed for 2004 - 130 employeesemployees
Corporate Administration – 12 employeesCorporate Administration – 12 employeesInformation Technology – 35 employeesInformation Technology – 35 employeesSystem Operations – 32 employeesSystem Operations – 32 employeesMarket Operations – 51 employeesMarket Operations – 51 employeesPreliminary - Subject to ERCOT Board Approval
Corporate AdministrationCorporate AdministrationStaffing Increases - 2004Staffing Increases - 2004
0
25
50
75
100
125
150
175
200
Corporate Administration
ER
CO
T E
mpl
oyee
s
SAS 70 Audit
Cml Apps Enhancement
Texas Nodal Project
2004 Base Addition
2003 Base
Proposed increase of 12 Proposed increase of 12 employeesemployeesIncreased NERC and protocols Increased NERC and protocols compliance workcompliance workIncreased number of protocols Increased number of protocols revision requestsrevision requestsSupport provided to TAC and Support provided to TAC and other committee and other committee and subcommittee meetingssubcommittee meetingsTexas Nodal project – Texas Nodal project – program management, legal program management, legal and financial analysis and financial analysis
Preliminary - Subject to ERCOT Board Approval
Information TechnologyInformation TechnologyStaffing Increases - 2004Staffing Increases - 2004
0
25
50
75
100
125
150
175
200
Information Technology
ER
CO
T E
mpl
oyee
s
SAS 70 Audit
Cml Apps Enhancement
Texas Nodal Project
2004 Base Addition
2003 Base
Proposed increase of 35 Proposed increase of 35 employeesemployeesStrengthen support of existing Strengthen support of existing applications and hardwareapplications and hardwareProvide production support of Provide production support of new applications such as data new applications such as data warehousewarehouseEnhance cyber and physical Enhance cyber and physical securitysecurityBolster architecture, Bolster architecture, development and project development and project management staff management staff Nodal impact larger in 2005 and Nodal impact larger in 2005 and 20062006Develop and maintain Develop and maintain procedures necessary for procedures necessary for internal control (SAS 70 audit)internal control (SAS 70 audit)
Preliminary - Subject to ERCOT Board Approval
System OperationsSystem OperationsStaffing Increases - 2004Staffing Increases - 2004
0
25
50
75
100
125
150
175
200
System Operations
ER
CO
T E
mpl
oyee
s
SAS 70 Audit
Cml Apps Enhancement
Texas Nodal Project
2004 Base Addition
2003 Base
Proposed increase of 32 Proposed increase of 32 employeesemployeesAdd a system operator training Add a system operator training shift and additional training staffshift and additional training staffProvide real time evaluation of Provide real time evaluation of system operator performancesystem operator performanceIncreased responsibilities and Increased responsibilities and expectations regarding expectations regarding transmission project planning transmission project planning and approval, generation and approval, generation requirements, congestion requirements, congestion managementmanagementSupport protocol required tasks Support protocol required tasks such as performance distribution such as performance distribution reports, voltage stability studies, reports, voltage stability studies, black start studies, transient black start studies, transient studies, outage coordination studies, outage coordination support and ancillary service support and ancillary service calculationscalculations
Preliminary - Subject to ERCOT Board Approval
Market OperationsMarket OperationsStaffing Increases - 2004Staffing Increases - 2004
0
25
50
75
100
125
150
175
200
Market Operations
ER
CO
T E
mpl
oyee
s
SAS 70 Audit
Cml Apps Enhancement
Texas Nodal Project
2004 Base Addition
2003 Base
Proposed increase of 51 Proposed increase of 51 employeesemployeesValidation of retail customer Validation of retail customer switching (Replace switching (Replace contractors and consultants contractors and consultants currently performing tasks currently performing tasks relating to the ESI-ID of relating to the ESI-ID of record)record)Support direct load control Support direct load control and other new load research and other new load research workworkPerform metering site audits Perform metering site audits required by protocols and required by protocols and support introduction of support introduction of competitive meteringcompetitive meteringProvide test support for Provide test support for ERCOT projects, maintenance ERCOT projects, maintenance efforts, and more frequent efforts, and more frequent Texas Set test flightsTexas Set test flightsAdd “business” project Add “business” project management staffmanagement staffPreliminary - Subject to ERCOT Board Approval
Staffing ProjectionsStaffing Projections
0
100
200
300
400
500
600
700
2000 2001 2002 2003 2004 2005 2006 2007 2008
Actual or projected in 2000 through 2003Actual or projected in 2000 through 2003Budgeted in 2004Budgeted in 200410 percent growth in 2005 and 200610 percent growth in 2005 and 20065 percent growth in 20075 percent growth in 2007No growth in 2008 and future yearsNo growth in 2008 and future years
ER
CO
T E
mpl
oyee
s
Preliminary - Subject to ERCOT Board Approval
2004 Consulting Services2004 Consulting Services
Consulting Category $ Millions PercentTexas Nodal Project 5.781 26%Information Technology Production Consulting 4.838 22%SAS 70 Audit 1.883 8%Legal 1.712 8%Other Corporate Adminis tration Consulting 1.520 7%System Operations Consulting 1.284 6%Other Capital Projects 1.119 5%Retail Switch Notification 0.999 4%Data Warehouse Support to PUCT 0.737 3%Default QSE Retainer 0.720 3%Security Consulting 0.691 3%Financial, Operational and Other Audits 0.656 3%Market Operations Consulting 0.397 2%
Total 22.337 100%
2004 Budget
Preliminary - Subject to ERCOT Board Approval
2004 Consulting Services2004 Consulting Services
IT22%
Texas Nodal26%
SAS 708% Legal
8%
Other Corp7%
Sys Ops6%
Support Capital5%
Retail Switch4%
PUC Data Warehouse3%
Default QSE3%
Security3%
Mrkt Ops2%
Financial, Operational and Other Audit
3%
Preliminary - Subject to ERCOT Board Approval
Debt and Capital Spending AnalysisDebt and Capital Spending Analysis
$-
$50
$100
$150
$200
$250
$300
2000 2001 2002 2003 2004 2005 2006 2007 2008
$ M
illio
ns
Annual Capital Spending Debt Needed
Existing Borrowing Capacity
Debt Needed
Preliminary - Subject to ERCOT Board Approval
Revenue Requirement SummaryRevenue Requirement Summary
Operations Expense 99,514,000$ Equity-funded Capital Investment 11,000,000 Debt Service 23,200,000 Total Revenue Requirements 133,714,000$
MWH's 294,396,000
Proposed Fee per MWH 0.44$
Preliminary - Subject to ERCOT Board Approval
Questions?Questions?