During 2019, revenues exceeded the organization’s budget by 13.3%, equating to a net positive budget variance of $35.4 million
At its February meeting, ERCOT’s Board of Directors received a budget report from the organization’s CEO. ERCOT is funded by a fee that is charged to market participants based off of the load they serve — in short — the fee is paid by consumers. ERCOT’s System Administration Fee currently is set at 55 cents per megawatt hour. Because Texas electric consumption varies from year to year, ERCOT’s revenues also change. Typically, however, ERCOT’s revenues have increased as the state’s load grows, even though ERCOT has not increased the System Administration Fee since 2010.
In February, ERCOT CEO Bill Magness reported that revenues during 2019 exceeded the organization’s budget by 13.3%, equating to a net positive budget variance of $35.4 million. This amount resulted from a fee-generated $28.3 million revenue increase combined with a decrease to the cost of a number of projects.
Mr. Magness reported that ERCOT’s total system load grew by 20.35% over the last decade. By comparison, between 2000 and 2009, load grew just 7.7%.
These figures largely reflect the strong state of the Texas economy. ERCOT has no control over the quantity of electricity used on the system, although its finances depend on that usage. ERCOT customers likewise benefit from healthy usage because it allows the organization to keep its System Administration Fee constant while simultaneously increasing investments in key areas.
Take, for instance, proposed “Real-Time Co-Optimization” technical changes at ERCOT. Although designed to bring new economic efficiencies to ERCOT’s wholesale energy trading systems, Real Time Co-Optimization nonetheless comes with a potential multi-million dollar price tag. ERCOT stakeholders last year elected to move forward with Real Time Co-Optimization and have apportioned a good portion of the net proceeds from this year’s windfall to fund it.
Chris Brewster, an attorney with Lloyd Gosselink, participates in in ERCOT matters on behalf of municipalities.