2012-08-06T10:38:07-07:00 2011-12-31 990 2011-01-01 742587416 ELECTRIC RELIABILITY COUNCIL OF TEXAS INC ELEC 5122257000 7620 Metro Center Drive Austin TX 787441613 Michael Petterson 5122257013 2012-08-07 2011 2016-02-24 21:20:13Z ERCOT HB Doggett 7620 Metro Center Drive Austin TX 787441613 280650452 0 X www.ercot.com X 1990 TX See Schedule O 15 12 693 18 0 0 49312915 51244352 219542751 229368285 -15068 -784294 3635070 17464 272475668 279845807 0 0 0 0 54949257 69754157 0 0 0 198466798 212065172 253416055 281819329 19059613 -1973522 818439371 1085348440 782566088 1044877174 35873283 40471266 X See Schedule O 0 0 237522530 0 228600531 ERCOT successfully manages the flow of electricity to approximately 23 million customers in the state of Texas, which includes the management of financial settlement for the competitive wholesale bulk power market and the administration of electric provider account switching in competitive choice areas. 0 0 0 237522530 0 0 0 0 0 0 0 1 0 1 0 0 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 130 0 1 693 1 0 0 0 0 0 0 X 15 12 0 0 0 0 1 1 1 1 1 0 0 1 1 1 1 1 1 1 1 0 X Mike Petterson- VP Finance Treasury 5122257013 7620 Metro Center Drive Austin TX 787441613 Jorge Bermudez 12 X 74133 0 0 Calvin Crowder 6 X 0 0 0 Andrew Dalton 6 X 0 0 0 Laura Doll 20 X 86600 0 0 Mark Dreyfus 5 X 0 0 0 Miguel Espinosa 14 X 81575 0 0 Nick Fehrenbach 10 X 0 0 0 Michehl Gent 14 X 81067 0 0 Sheri Givens 8 X 0 0 0 Bob Helton 15 X 0 0 0 Eric Hendrick 4 X 0 0 0 Clifton Karnei 6 X 0 0 0 Donna Nelson 10 X 0 0 0 Alton Patton 10 X 32067 0 0 Jean Ryall 15 X 0 0 0 Barry T Smitherman 15 X 0 0 0 Marcie Zlotnik 4 X 0 0 0 Shannon Bowling 8 X 0 0 0 Jeff Brown 16 X 0 0 0 Kevin Gresham 5 X 0 0 0 Michael Packard 8 X 0 0 0 Scott Prochazka 5 X 0 0 0 Ray Schwertner 8 X 0 0 0 HB Doggett 45 X X 471048 0 52762 Michael Cleary 45 X 477337 0 56466 Charles Manning 45 X 279772 0 54020 Mark Ruane 45 X 198021 0 31529 William Magness 45 X 296546 0 59082 Harold Saathoff 45 X 253355 0 56602 Richard Morgan 45 X 204715 0 29516 Jerome Dreyer 45 X 218673 0 48446 Vickie Leady 45 X 147931 0 41958 Michael Petterson 45 X 209875 0 46397 Sallie Betty Day 45 X 217832 0 52753 Cheryl Yager 45 X 191946 0 44542 Steven Grendel 45 X 193860 0 44835 David Forfia 45 X 211275 0 51715 Kenneth Ragsdale 45 X 230702 0 42660 Oladiran Obadina 45 X 227682 0 52569 Sainath Moorty 45 X 217286 0 52947 Adam Martinez 45 X 210123 0 37528 Matthew Mereness 45 X 200003 0 49560 5013424 0 905887 237 0 1 0 Allegis Group Services Inc 7301 Parkway Drive Hanover MD 21076 Contingent workforce 8152780 ABB Inc 1601 Industrial Blvd Sugarland TX 774782579 IT consulting 3992930 Potomac Economics Ltd 9990 Fairfax Blvd Suite 560 Fairfax VA 22030 Independent mkt monitor 2675003 Hitachi Data Systems Corp 750 Central Expressway Santa Clara CA 950502627 IT consulting 1309696 Navigant Consulting (PI) LLC 98 San Jacinto Suite 900 Austin TX 78701 Nodal audit services 984701 23 0 2565227 0 0 48679125 0 0 51244352 Electric reliability revenue 221000 229368285 229368285 0 0 0 0 0 0 229368285 7357 6433 0 924 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12994 0 804645 0 -791651 -791651 -791651 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Non-operating income (other) 900099 17464 17464 0 0 0 0 0 0 17464 279845807 228600531 0 924 0 0 0 0 0 0 0 0 4577189 2412965 2164224 0 0 0 0 0 45819743 38290234 7529509 0 7718913 6689547 1029366 0 6575050 5622607 952443 0 5063262 4328594 734668 0 0 0 0 0 379867 0 379867 0 256159 0 256159 0 0 0 0 0 0 0 0 0 0 0 7027537 6509524 518013 0 0 0 0 0 815316 536850 278466 0 3130686 3027077 103609 0 0 0 0 0 8072764 0 8072764 0 683955 493946 190009 0 0 0 0 0 905297 763902 141395 0 3831857 0 3831857 0 0 0 0 0 33086567 27908519 5178048 0 1797070 1797070 0 0 Amortization of regulatory asset 125669492 125669492 0 0 Hardware and software expenses 12273770 11847030 426740 0 Reliability organization assessment 11974880 0 11974880 0 Professional fees 1593065 1229532 363533 0 566890 395641 171249 0 281819329 237522530 44296799 0 867752 48722290 324286052 611965097 18352 61520 18441105 19546895 0 0 0 0 0 0 0 0 13981724 18264719 796088927 409627963 460377307 386460964 0 0 0 0 0 0 0 0 467079 326955 818439371 1085348440 23816791 18781988 0 0 3301820 3649008 0 0 65826500 296762366 0 0 336207665 192237333 0 0 353413312 533446479 782566088 1044877174 X 35873283 40471266 0 0 0 0 35873283 40471266 818439371 1085348440 X -1973522 6571505 X X 0 1 1 X 1 0 0 1 0 947096 947096 0 80323972 19378375 60945597 0 12327374 12327374 0 0 114263483 79508528 34754955 0 588227002 298413686 289813316 386460964 0 Security deposits 413884199 Deferred rent credits 37616 Derivative liability 3235192 Deferred regulatory liability - Nodal 115967108 Accrued post retirement benefit obligation 322364 533446479 279845807 281819329 -1973522 0 0 0 0 6571505 6571505 4597983 286441769 0 0 0 6595962 6595962 279845807 0 0 0 279845807 281819329 0 0 0 0 0 281819329 0 0 0 281819329 SchD_P04_S00_L02b Schedule D, Part IV, Line 2b Organization included amount on Form 990, Part X, Line 21 - In the exercise of any functions related to deployment of energy or Ancillary Services, ERCOT acts only as an agent on behalf of the various Market Participants in fulfilling the duties subject to the financial settlement process in accordance with ERCOT Protocols. The settlement process is used to resolve financial obligations for market services procured through ERCOT for registered Market Participants, and there is a one business day lag between the date funds are received by ERCOT and paid to the market. Additionally, as required by ERCOT Protocols, ERCOT executes auctions for Congestion Revenue Rights monthly and annually and distributes the proceeds from these auctions to Market Participants as required by ERCOT Protocols. SchD_P10_S00_L02 Schedule D, Part X, Line 2 ERCOT is exempt from Federal income tax under Section 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(4). The Company is also exempt from state income taxes. Accordingly, no provision for income taxes or uncertain tax positions has been reflected in the financial statements. SchD_P11_S00_L08 Schedule D, Part XI, Line 8 Other $6,571,505 represents a derivative valuation change of $6,595,962 under FASB ASC 815 Derivatives and Hedging Topic and deferred pension costs of ($24,457). SchD_P12_S00_L02d Schedule D, Part XII, Line 2d Other represents a derivative valuation change of $6,595,962 under FASB ASC 815 Derivatives and Hedging Topic. X X X X X X 0 0 0 0 0 0 0 1 0 HB Doggett 471048 0 0 0 0 0 35030 0 17732 0 523810 0 0 0 Michael Cleary 320539 0 150000 0 6798 0 36725 0 19741 0 533803 0 0 0 Charles Manning 260797 0 0 0 18975 0 34434 0 19586 0 333792 0 0 0 Mark Ruane 188545 0 0 0 9476 0 26851 0 4678 0 229550 0 0 0 William Magness 295526 0 1020 0 0 0 35877 0 23205 0 355628 0 0 0 Harold Saathoff 238355 0 15000 0 0 0 35650 0 20952 0 309957 0 0 0 Richard Morgan 204715 0 0 0 0 0 26288 0 3228 0 234231 0 0 0 Jerome Dreyer 208673 0 10000 0 0 0 31786 0 16660 0 267119 0 0 0 Vickie Leady 142643 0 5288 0 0 0 21553 0 20405 0 189889 0 0 0 Michael Petterson 206905 0 2970 0 0 0 29738 0 16659 0 256272 0 0 0 Sallie Betty Day 202832 0 15000 0 0 0 32246 0 20507 0 270585 0 0 0 Cheryl Yager 176946 0 15000 0 0 0 27924 0 16618 0 236488 0 0 0 Steven Grendel 188860 0 5000 0 0 0 28198 0 16637 0 238695 0 0 0 David Forfia 194048 0 17227 0 0 0 30614 0 21101 0 262990 0 0 0 Kenneth Ragsdale 154820 0 75882 0 0 0 31745 0 10915 0 273362 0 0 0 Oladiran Obadina 151872 0 75810 0 0 0 33472 0 19097 0 280251 0 0 0 Sainath Moorty 145239 0 72047 0 0 0 31708 0 21239 0 270233 0 0 0 Adam Martinez 140588 0 69535 0 0 0 30164 0 7364 0 247651 0 0 Matthew Mereness 133438 0 66565 0 0 0 29603 0 19957 0 249563 0 0 0 SchJ_P01_S00_L07 Schedule J, Part I, Line 7 ERCOT maintains an employee recognition award program whereby employees can receive one or more awards during the course of the year up to $1,000 each for exemplary performance. On rare occasions, individual performance may justify awards which exceed $1,000, and these awards require approval of the Chief Executive Officer. Brazos Electric Power Cooperative Inc See Part V Below 126685022 See Part V Below 0 Star Electricity LLC See Part V Below 123796 See Part V Below 0 SchL_P04_S00_L00 Schedule L, Part IV (1)(b) Clifton Karnei was a 2011 Board Member (Cooperative Segment) of ERCOT and also an officer of Brazos Electric Power Cooperative, Inc. (1)(d) Payment of governmentally-approved tariff, ancillary service fees, and membership fees. (2)(b) Marcie Zlotnik was a 2011 Board Member (Independent Retail Electric Providers Segment) of ERCOT and also an officer of StarTex Power. (2)(d) Payment of ancillary service fees and membership fees. Similar to the disclosures above, certain Board Members (particularly the directors representing Corporate Member Segments) have relationships with Market Participants which may have affiliates that also may have been parties to business transactions with ERCOT that are not reportable on Schedule L. Market Participants are those entities that engage in any activity that is in whole or in part the subject of the ERCOT Protocols which are used for the orderly functioning of the ERCOT market. F990_P01_S00_L01 Form 990, Part I, Line 1 Electric Reliability Council of Texas, Inc. (ERCOT) lessens the burdens of government, serves the public interest by, and fulfills its statutory obligation by: (i) ensuring open access to transmission and distribution systems; (ii) maintaining system reliability and operations; (iii) enabling retail choice; operating fair and competitive wholesale markets; (iv) maintaining the renewable energy credits registry; and (v) providing leadership and independent expertise to improve system reliability and market efficiency. As an independent system operator of reliable, open and non-discriminatory electric markets in the State of Texas, ERCOT manages the reliable flow of electric power to 23 million Texans - representing 85 percent of the state's retail customers and 75 percent of the Texas land area. ERCOT schedules power on an electric grid that connects 40,500 miles of transmission lines and more than 550 generation units. ERCOT also manages financial settlement for the $34 billion competitive wholesale bulk-power market and administers customer switching for 6.7 million premises in competitive choice areas. F990_P03_S00_L01 Form 990, Part III, Line 1 Effective during 2011: ERCOT serves the public interest by: ensuring open access to transmission and distribution systems; maintaining system reliability and operations; enabling retail choice; operating fair and competitive wholesale markets; maintaining the renewable energy credits registry; and providing leadership and independent expertise to improve system reliability and market efficiency. Effective January 1, 2012: We serve the public by ensuring a reliable grid, efficient electricity markets, open access and retail choice. F990_P06_S0A_L01a Form 990, Part VI, Section A, Line 1a Pursuant to Section 39.151 of the Texas Public Utility Regulatory Act, the ERCOT Board of Directors is composed of sixteen members. Fifteen of the members have voting rights; the chair of the Public Utility Commission of Texas is an ex-officio non-voting member. Six of the voting directors represent segments of participants in the ERCOT electricity market; each such "market participant director" has an elected alternate (segment alternate) who can attend meetings in the absence of the market participant director and vote on the absent market participant director's behalf in the event that such market participant director cannot attend a board meeting. F990_P06_S0A_L06 Form 990, Part VI, Section A, Line 6 As of December 31, 2011, ERCOT's membership included 302 voting and non-voting members. ERCOT members may be Corporate Members, Associate Members, or Adjunct Members. Corporate Members have the right to vote on all matters submitted to the general Membership (such as election of Directors, election of Technical Advisory Committee (TAC) Representatives, and amendments to the Articles of Incorporation and Bylaws). Corporate Members qualify in one of seven segments: Cooperative; Independent Generator; Independent Power Marketer; Independent Retail Electric Provider; Investor Owned Utility; Municipal (i.e. a municipal-owned utility or a River Authority); or Consumer (which has three subsegments - Commercial, Industrial and Residential). Associate and Adjunct Members do not have the right to vote on any matter submitted to the general Membership, and Adjunct Members do not have the right to be elected or appointed to the ERCOT Board, TAC, or any subcommittee of the Board or TAC. F990_P06_S0A_L07a Form 990, Part VI, Section A, Line 7a Thirteen of the fifteen voting members of the ERCOT Board of Directors are elected by the Corporate Members or a portion of such Corporate Members. With respect to each of the six Market Participant Directors, only the Corporate Members of the Membership Segment represented by the Market Participant Director are allowed to elect the Director and the Segment Alternate for that seat. There are three Consumer Directors, of which: (i) one is the Public Counsel, an ex officio voting member of the Board representing residential consumers and small commercial consumers; (ii) one is selected by the Large Commercial Consumer Corporate Members; and (iii) one is elected by the Corporate Members of the Industrial Consumer subsegment. The Membership votes by segment to elect the five unaffiliated voting Directors. The remaining voting Director is the Chief Executive Officer of ERCOT, who is an ex officio voting member of the Board. F990_P06_S0A_L07b Form 990, Part VI, Section A, Line 7b As a matter of state law or its governing documents, certain material matters must be submitted to the voting members of ERCOT for their approval, including amendments to the Articles of Incorporation and the Bylaws. Decisions of the ERCOT Board are generally appealable to the Public Utility Commission of Texas, an agency of the State of Texas. F990_P06_S0B_L11b Form 990, Part VI, Section B, Line 11b The 2011 Form 990 was prepared initially by the Finance Department of ERCOT. It was reviewed by ERCOT officers as well as internal legal counsel, and then submitted for review by ERCOT's independent auditors. The Form 990 was provided to the Board of Directors in advance of, and for its consideration and input at, a meeting on July 17, 2012. The final version of the 2011 Form 990, incorporating the comments of all of the foregoing, was then filed with the Internal Revenue Service. F990_P06_S0B_L12c Form 990, Part VI, Section B, Line 12c Each Director and Segment Alternate annually must execute an Ethics Agreement for Directors and Segment Alternates, and each employee annually must attend internal training sessions and execute an Employee Ethics Agreement. Pursuant to each Ethics Agreement, a signatory has an affirmative duty to disclose any actual or potential conflicts of interest of the signatory (and his or her employer, in the case of Director or Segment Alternates), and also must disclose all personal relationships with ERCOT vendors, including business or direct or indirect ownership interests. Any conflict of interest issue involving a Director or Segment Alternate is referred to the ERCOT General Counsel who, in consultation with the Board Chair and outside legal counsel, if and when necessary, makes a legal determination as to whether a conflict exists and, if so, a recommendation as to how it may be resolved. Any conflict and its resolution are reported to both the Human Resource & Governance (HR&G) Committee of the Board and the full Board of Directors. Any objection to the recommendation is resolved by the HR&G Committee or the full Board. Any ERCOT employee conflicts are evaluated by the ERCOT legal staff, and the legal staff makes a recommendation to resolve the conflict of interest. If the ERCOT legal staff recommends a resolution that is objectionable to the manager/director/officer of the conflicted employee, the legal decision is referred to the Chief Executive Officer and ultimately to the Board's HR&G Committee. F990_P06_S0B_L15 Form 990, Part VI, Section B, Line 15 1) In determining compensation for the Chief Executive Officer, ERCOT follows a procedure which ensures that (i) compensation is approved in advance by the HR&G Committee of the Board of Directors and the Board itself, (ii) the Board and the HR&G Committee obtains and relies upon appropriate data for comparability, (iii) the Board and the HR&G Committee each adequately documents the basis for its respective determination, and (iv) the Public Utility Commission of Texas reviews and approves of any compensation to be paid to the Chief Executive Officer. In practice, the HR&G Committee of the Board of Directors reviews proposed changes to Chief Executive Officer compensation and submits recommendations to the Board for its approval by all uninterested members of the Board of Directors (that is, all Board members except the Chief Executive Officer who is required to abstain from such vote). In its review, the HR&G Committee can request information from independent compensation consultants, and they receive information annually in regards to the compensation levels of similar companies from Forms 990 and other sources. Additionally, compensation surveys/studies are performed, as needed, to provide insight into the elements of compensation. The compensation-related information and HR&G Committee recommendations are submitted to the Board of Directors for its consideration and approval. A review of the Chief Executive Officer's compensation is performed annually except in those limited instances in which the compensation has been determined pursuant to the provisions of an employment agreement for a term exceeding a year between ERCOT and the Chief Executive Officer, which has been approved by the Board of Directors, and all decisions regarding the Chief Executive Officer's compensation are documented and maintained. Furthermore, the Public Utilities Commission of Texas Substantive Rules related to ERCOT Governance require that the Public Utilitiy Commission of Texas review and approve all compensation to be paid to the Chief Executive Officer. 2) In determining compensation for officers other than the Chief Executive Officer, ERCOT follows a procedure which ensures that (i) compensation is fully disclosed in advance to the HR&G Committee of the Board of Directors, (ii) the HR&G Committee obtains and relies upon appropriate data for comparability, and (iii) the HR&G Committee adequately documents the basis for its determination. The Chief Executive Officer reports proposed officer pay amounts to the HR&G Committee for review and comment before any merit increase is finalized. Key employee compensation is reviewed and determined by their appropriate officer. For review of officer and key employee compensation, ERCOT uses merit ratings and data obtained relating to comparable compensation of similarly qualified persons in comparable positions at comparable organizations, including compensation surveys and Forms 990. The HR&G Committee can request information from independent compensation consultants. Officer and key employee compensation is reviewed annually, and all decisions regarding officer and key employee compensation are documented and maintained. F990_P06_S0C_L19 Form 990, Part VI, Section C, Line 19 ERCOT's governing documents, conflict of interest policy, and audited financial statements are available to the public through the ERCOT website (www.ERCOT.com). F990_P08_S00_L01e Form 990, Part VIII, Line 1e Included on Line 1e are payments from governmental units, the primary purpose of which are to enable ERCOT to provide a service to the direct benefit of the public rather than to serve the direct and immediate needs of the governmental units. Also included on Line 1e are grant payments received from the U.S. Department of Energy (DOE). In 2010 under the American Recovery and Reinvestment Act, ERCOT was awarded two grants totaling $3.5 million, to be paid over a three year period. In 2011, ERCOT recorded $596,488 of revenue from the DOE. Of this, $61,520 was a receivable for funds expended in 2011 but not yet reimbursed. These governmental payments were received in connection with the exercise of ERCOT's exempt function. As these payments are from governmental units, they are not reported on Part I of Schedule B, Schedule of Contributors. F990_P11_S00_L05 Form 990, Part XI, Line 5 Other changes in net assets of $6,571,505 represents a derivative valuation change of $6,595,962 under FASB ASC 815 Derivatives and Hedging Topic and deferred pension costs of ($24,457). F990_P12_S00_L03b Form 990, Part XII, Line 3b In 2010, under the American Recovery and Reinvestment Act, ERCOT was awarded two grants totaling $3.5 million, to be paid over a three year period. In 2011, ERCOT expended more than $500,000 under the grants. Therefore, ERCOT was required to undergo an audit as set forth in the Single Audit Act and OMB Circular A-133. Per the OMB Circular A-133, the audit must be completed within nine months after the end of the audit period. For the 2011 expenditures, an audit was performed and the report was filed by July 31, 2012.