Electricity grid operator tells Texas legislators it will fix problems
By Sudeep Reddy, The Dallas Morning News -- July 14
Facing intense criticism over their handling of a contracting scandal, officials at the state's electricity grid operator sought to reassure lawmakers Tuesday that they would fix the organization's problems and improve cooperation with the public.
ERCOT operations have come under growing scrutiny in recent months, and the
organization needs to establish greater transparency in its dealings with state
officials and the public, said state Rep. Burt Solomons, R-Carrollton.
"I think there has been a real perception of secrecy," said Mr.
Solomons, chairman of the commission, which reviews state agencies to seek cost
savings and to evaluate their need to exist.
Included in a review this year is the Texas Public Utility Commission, which
regulates the state's electricity industry and has oversight over ERCOT.
At least three high-ranking security officials have left ERCOT after the
organization learned they had had ties to consulting firms that received ERCOT
contracts.
ERCOT board members said Tuesday that they were prepared to discuss some
aspects of the scandal, but that they couldn't offer full details because of the
Texas Department of Public Safety's criminal investigation.
"We had a small number of rogue employees who took advantage of our
trust and their fellow employees' trust, but we found out what they were doing,
and their employment has been terminated," ERCOT chairman Mike Greene said
in written testimony.
Criticized for meeting behind closed doors to discuss the contracting
scandal, ERCOT said a board committee formed last month to support the various
investigations would meet in public next week.
ERCOT chief executive Tom Noel, who is retiring, didn't appear before the
panel.
Tom Schrader, who becomes CEO July 26, said in a brief statement that the
situation "provides an opportunity to provide some reassurance" in the
grid operator's ability to fulfill its market role.
ERCOT directs the state's power grid and controls other key functions of the
state's $20 billion electricity market.
The organization's $133 million annual budget is funded by all electric
customers on the grid. But ERCOT operates as a nonprofit corporation that's not
subject to state laws for open meetings or open records.
PUC officials have expressed frustration over their efforts to receive
information from ERCOT.
Chairman's view PUC Chairman Paul Hudson said that his agency's control over
ERCOT is largely undefined.
"I think part of the problem is that oversight is open to
interpretation," Mr. Hudson said.
After learning of the contracting irregularities, the PUC ordered audits of
ERCOT's security, management and financial practices. The security review is
under way, and auditors are being selected for the other reviews.
A joint House-Senate committee overseeing the utility market's restructuring
will conduct a hearing about ERCOT's problems in the next two months – once
the DPS investigation has advanced further.
With that hearing coming up, Mr. Solomons directed ERCOT officials to focus
on issues that had been raised in a report from the Sunset commission staff.
The staff report called for several structural changes at ERCOT, including
moving the organization to a fully independent board by September 2006 to
eliminate potential conflicts of interest.
ERCOT officials defended the structure of their 14-member board, which is
made up largely of industry representatives but also includes three independent
directors and three consumer representatives.
A proposal by the Sunset commission staff to eliminate the Office of Public
Utility Counsel, which represents residential consumers, caught consumer groups
and industry officials by surprise. Even the Association of Electric Companies
of Texas, the lobbying group for the state's largest utilities, has supported
keeping the office.
Consumer groups and others lined up to support the office, but Mr. Solomons
said he was frustrated by its performance over the years as it sought to
challenge rate decisions at the PUC.
He said he wanted it to be more effective by fighting different cases related
to the market or finding another approach to its role.
Electricity competition in Texas has been in effect for nearly three years.
Many legislators expected deregulation to reduce electric rates, but bills
for most customers have increased 22 percent to 34 percent since competition
started, according to Consumers Union.
More than 80 percent of residential customers are still served by their local
incumbent utility instead of other providers that offer lower rates.
PUC commissioners defended the competitive market. To take advantage of lower
prices, consumers have to "educate themselves and make that affirmative
choice," Commissioner Julie Parsley said.
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