2011-08-05T17:48:57-07:00 2010-12-31 990 2010-01-01 742587416 ELECTRIC RELIABILITY COUNCIL OF TEXAS INC ELEC 5122257000 7620 Metro Center Drive Austin TX 787441613 HB Doggett 5122486360 2011-08-08 2010 2016-02-24 21:20:13Z ERCOT HB Doggett 7620 Metro Center Drive Austin TX 787441613 272510154 0 X www.ercot.com X 1990 TX See Schedule O 15 12 783 16 0 0 49850905 49312915 141272898 219542751 3498131 -15068 12283313 3635070 206905247 272475668 0 0 0 0 56661323 54949257 0 0 0 121530670 198466798 178191993 253416055 28713254 19059613 667632082 818439371 652642351 782566088 14989731 35873283 X See Schedule O 0 0 211992971 0 219750159 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 211992971 0 0 0 0 0 0 0 1 0 1 0 0 0 1 0 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 1 132 0 1 783 1 0 0 0 0 0 0 X 15 12 0 1 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 X Jorge Bermudez 12 X 34267 0 0 Calvin Crowder 6 X 0 0 0 Andrew Dalton 6 X 0 0 0 Laura Doll 20 X 35167 0 0 Mark Dreyfus 5 X 0 0 0 Miguel Espinosa 6 X 83600 0 0 Nick Fehrenbach 10 X 0 0 0 Michehl Gent 14 X 88700 0 0 Sheri Givens 8 X 0 0 0 Bob Helton 15 X 0 0 0 Clifton Karnei 6 X 0 0 0 Jan Newton 35 X 53033 0 0 Alton Patton 10 X 79300 0 0 Jean Ryall 15 X 0 0 0 Barry T Smitherman 15 X 0 0 0 Marcie Zlotnik 4 X 0 0 0 Deryl Brown 1 X 0 0 0 Michael Packard 15 X 0 0 0 Scott Prochazka 2 X 0 0 0 Ray Schwertner 8 X 0 0 0 Mark Walker 5 X 0 0 0 Brandon Whittle 6 X 0 0 0 HB Doggett 45 X X 403475 0 52536 Michael Cleary 45 X 437857 0 45231 Roy Bowman 45 X 0 0 0 Michael Petterson 45 X 174808 0 39382 Nancy Capezzuti 45 X 216790 0 7932 Michael Grable 45 X 75004 0 13141 William Magness 45 X 72499 0 16860 Harold Saathoff 45 X 232618 0 54774 Larry Grimm 45 X 111388 0 22021 Charles Manning Jr 45 X 287506 0 53058 Richard Morgan 45 X 294726 0 33161 Sallie Betty Day 45 X 207811 0 51369 Estrellita Doolin 45 X 168014 0 22905 Vickie Leady 45 X 116851 0 38757 David Forfia 45 X 191356 0 37311 Steven Grendel 45 X 185563 0 44866 David Troxtell 45 X 184516 0 35002 Cheryl Yager 45 X 173424 0 41682 Jim Brenton 45 X 165379 0 37616 Jerome Dreyer 45 X 198727 0 39210 Matthew Morais 45 X 167941 0 23662 Steven Myers 45 X 161455 0 41867 Dan Woodfin 45 X 165793 0 36887 4767568 0 789230 202 0 1 0 Allegis Group Services Inc 7301 Parkway Drive Hanover MD 21076 Contingent workforce 20180146 ABB Inc 1601 Industrial Blvd Sugarland TX 774782579 IT consulting 5521697 Potomac Economics Ltd 9990 Fairfax Blvd Suite 560 Fairfax VA 22030 Independent market monitor 2158342 ALSTOM Grid Inc 10865 Willows Road NE Redmond WA 980522502 IT consulting 2068207 Utility Integration Solutions 24 Benthill Court Layfayette CA 94549 Business integration 1730204 37 0 3748111 0 0 45564804 0 0 49312915 Electric reliability revenue 221000 219542751 219542751 0 0 0 0 0 0 219542751 6544 3753 0 2791 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12874 0 34486 0 -21612 -21612 -21612 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Gain on investments 900099 3409803 0 0 3409803 Non-operating income (other) 900099 225267 225267 0 0 0 0 0 0 3635070 272475668 219750159 0 3412594 0 0 0 0 0 0 0 0 4521277 1895355 2625922 0 0 0 0 0 31083417 24234335 6849082 0 7873859 6636788 1237071 0 6667814 5684831 982983 0 4802890 4039031 763859 0 0 0 0 0 599158 0 599158 0 333147 1337 331810 0 0 0 0 0 0 0 0 0 0 0 12564657 9600804 2963853 0 0 0 0 0 695421 456591 238830 0 3384267 3085513 298754 0 0 0 0 0 5616056 0 5616056 0 621612 431123 190489 0 0 0 0 0 598820 489222 109598 0 2650167 0 2650167 0 0 0 0 0 29644760 24783019 4861741 0 1808944 0 1808944 0 Hardware and software expenses 10324445 9661647 662798 0 Professional fees 9742779 1273788 8468991 0 Amortization of regulatory asset 119717623 119717623 0 0 164942 1964 162978 0 253416055 211992971 41423084 0 419795 867752 210726682 324286052 0 18352 15398302 18441105 0 0 0 0 0 0 0 0 13040261 13981724 806454964 346077657 427395883 460377307 0 0 0 0 0 0 0 0 651159 467079 667632082 818439371 19474630 23816791 0 0 4269514 3301820 0 0 79203867 65826500 0 0 364678000 336207665 0 0 185016340 353413312 652642351 782566088 X 14989731 35873283 0 0 0 0 14989731 35873283 667632082 818439371 X 19059613 1823939 X 0 1 1 X 0 0 1 0 947096 947096 0 79713385 16188605 63524780 0 12327374 11691386 635988 0 117654047 82126334 35527713 0 595813062 236071332 359741730 460377307 0 Security deposits 255597885 Deferred rent credits 67710 Derivative liability 9831155 Deferred regulatory liability- Nodal 87659997 Accrued post retirement liability 256565 353413312 272475668 253416055 19059613 0 0 0 0 1823939 1823939 20883552 275377043 0 0 0 2901375 2901375 272475668 0 0 0 272475668 253416055 0 0 0 0 0 253416055 0 0 0 253416055 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_P11_S00_L08 Schedule D, Part XI, Line 8 Reconciliation of Change in Net Assets from Form 990 to F/S- Other $1,823,939 represents a derivative valuation change of $2,901,375 under FASB ASC 815 Derivatives and Hedging Topic, deferred pension costs of ($43,185), and a distribution of net assets for Texas Regional Entity of ($1,034,251). SchD_P12_S00_L02d Schedule D, Part XII, Line 2d Reconciliation of Revenue per Audited F/S with Revenue Per Return- Other represents a derivative valuation change of $2,901,375 under FASB ASC 815 Derivatives and Hedging Topic. X 1 1 X X X X X X 1 0 0 0 0 0 0 1 0 HB Doggett 380775 0 22700 0 0 0 35525 0 17011 0 456011 0 0 0 Michael Cleary 298564 0 100000 0 39293 0 28429 0 16802 0 483088 0 0 0 Michael Petterson 174808 0 0 0 0 0 22934 0 16448 0 214190 0 0 0 Nancy Capezzuti 45973 0 0 0 170817 0 6669 0 1263 0 224722 0 0 0 Harold Saathoff 232618 0 0 0 0 0 33907 0 20867 0 287392 0 0 0 Charles Manning Jr 253891 0 0 0 33615 0 33297 0 19761 0 340564 0 0 0 Richard Morgan 292007 0 2719 0 0 0 29530 0 3631 0 327887 0 0 0 Sallie Betty Day 204412 0 2719 0 680 0 30569 0 20800 0 259180 0 0 0 Estrellita Doolin 119924 0 0 0 48090 0 17495 0 5410 0 190919 0 0 0 Vickie Leady 116851 0 0 0 0 0 17311 0 21446 0 155608 0 0 0 David Forfia 191356 0 0 0 0 0 26985 0 10326 0 228667 0 0 0 Steven Grendel 182844 0 2719 0 0 0 27187 0 17679 0 230429 0 0 0 David Troxtell 130723 0 0 0 53793 0 19389 0 15613 0 219518 0 0 0 Cheryl Yager 173424 0 0 0 0 0 25238 0 16444 0 215106 0 0 0 Jim Brenton 165039 0 340 0 0 0 23825 0 13791 0 202995 0 0 0 Jerome Dreyer 189863 0 2039 0 6825 0 27841 0 11369 0 237937 0 0 0 Matthew Morais 167941 0 0 0 0 0 17715 0 5947 0 191603 0 0 0 Steven Myers 161455 0 0 0 0 0 24081 0 17786 0 203322 0 0 0 Dan Woodfin 165793 0 0 0 0 0 24294 0 12593 0 202680 0 0 0 SchJ_P01_S00_L01a Schedule J, Part I, Line 1a A housing allowance was provided to Michael Cleary through direct payment to Residence Inn. This housing allowance was approved by the Human Resources department, followed ERCOT's written expense reimbursement policy, and all payments required receipt and approval. This was not included as taxable income to Michael Cleary and is not included in Column D of Schedule J, Part II as this amount did not exceed $10,000 in 2010. SchJ_P01_S00_L04 Schedule J, Part I, Line 4 Severance Payments- 1) Pursuant to an agreement with ERCOT, Nancy Capezzuti received $170,817 severance in 2010. Under this agreement, Nancy Capezzuti's termination date was February 15, 2010, and this payment was paid in one installment in 2010. 2) Pursuant to an agreement with ERCOT, Estrellita Doolin received $47,750 severance in 2010. Under this agreement, Estrellita Doolin's termination date was October 4, 2010, and this payment was paid in one installment in 2010. 3) Pursuant to an agreement with ERCOT, David Troxtell received $53,793 severance in 2010. Under this agreement, David Troxtell's termination date was October 4, 2010, and this payment was paid in one installment in 2010. SchJ_P01_S00_L07 Schedule J, Part I, Line 7 Non-fixed payments not described in Lines 5 and 6- 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 Coop Inc See Part V below 110279081 See Part V below 0 MP2 Energy Texas LLC See Part V below 3932788 See Part V below 0 Casey Gentz and Magness LLP See Part V below 174035 See Part V below 0 Star Electricity LLC See Part V below 102000 See Part V below 0 SchL_P04_S00_L00 Schedule L, Part IV Business Transactions Involving Interested Persons- (1)(b) Clifton Karnei was a 2010 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) Ray Schwertner was a 2010 Board Member (Segment Alternate for Municipal Segment) of ERCOT, and his son is an officer of MP2 Energy Texas, LLC. (2)(d) Payment of governmentally-approved tariff and ancillary service fees (3)(b) Marcie Zlotnik was a 2010 Board Member (Independent Retail Electric Providers Segment) of ERCOT and also an officer of StarTex Power (3)(d) Payment of ancillary service fees and membership fees (4)(b) William Magness served as the ERCOT Interim Vice President, General Counsel, and Corporate Secretary from April 12, 2010 to September 20, 2010. At this same time, he was a partner at Casey, Gentz & Magness LLP, who provided legal services to ERCOT. (4)(d) Payment by ERCOT for legal services provided. To the best of ERCOT's knowledge and belief, Schedule L sets forth the business transactions with interested persons that must be disclosed pursuant to the instructions to that form. 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 Organization's Mission- 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 $32 billion competitive wholesale bulk-power market and administers customer switching for 6.6 million Texans in competitive choice areas; ERCOT has processed more than 5 million retail transactions since the retail market opened in 2001. F990_P03_S00_L01 Form 990, Part III, Line 1 Organization's Approved Mission Statement- 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. F990_P04_S00_L32 Form 990, Part IV, Line 32 Transfer of Net Assets- For part of the 2010 tax year, ERCOT was organized with a functionally independent division known as Texas Regional Entity (TRE). TRE was formed on April 19, 2007, for two primary reasons: (1) to become a regional entity under Part II of the Federal Power Act (16 U.S.C. 824, et seq.) through a delegation agreement with North American Electric Reliability Corporation (NERC) which was approved by the Federal Energy Regulatory Commission (FERC), pursuant to Section 215 of the Federal Power Act; and (2) to perform certain reliability compliance monitoring and reporting duties for the Public Utility Commission of Texas (PUCT), an agency of the State of Texas. On January 1, 2010, Texas Reliability Entity, Inc. (Texas RE), a Section 501(c)(3) tax-exempt, Texas non-profit corporation, was formed to become the successor regional entity for the ERCOT region. ERCOT and Texas RE entered into an assignment and assumption agreement, effective as of June 30, 2010, to allow Texas RE to take over all of the activities and responsibilities which were then performed by TRE. Effective July 1, 2010, NERC entered into an Amended and Restated Delegation Agreement with Texas RE, designating Texas RE the new regional entity for the ERCOT region. Texas RE is a separate, unaffiliated legal entity from ERCOT. From July 1, 2010, through December 31, 2010, at the PUCT's direction, ERCOT, Texas RE and the PUCT entered into a tri-party professional services agreement and statement of work for ERCOT region reliability monitor services (Reliability Monitor Agreement) subject to the PUCT's supervision and oversight in the total amount of $413,730. In this role, Texas RE was responsible for monitoring, investigating, auditing and reporting to the PUCT regarding compliance with the reliability-related ERCOT Protocols and Operating Guides, and the reliability-related provisions of the Public Utility Regulatory Act by ERCOT and ERCOT market participants. The parties entered into this Reliability Monitor Agreement pursuant to the PUCT's directive that a third-party entity independent of ERCOT and ERCOT market participants assist the PUCT in ensuring compliance and enforcement of the reliability-related rules arising from state law and ERCOT Protocols and Operating Guides. In addition, Texas RE provided other reliability-related subject matter expert advice, expertise, and assistance to the PUCT in the conduct of the PUCT's oversight and enforcement activities. The parties have renewed the Reliability Monitor Agreement for a three-year extension from January 1, 2011 through December 31, 2013 for a total not-to-exceed amount of $3.975 million. The services provided by Texas RE under the Reliability Monitor Agreement are separate and in addition to the services performed by Texas RE as a regional entity pursuant to its Amended and Restated Delegation Agreement with NERC. From January 1, 2010, through June 30, 2010, Larry Grimm served as Chief Executive Officer (CEO) and Chief Compliance Officer of TRE while TRE was an independent division of ERCOT. Mr. Grimm served as President and CEO of Texas RE from January 18, 2010, through December 31, 2010. During the 2010 tax year, Sheri Givens, Public Counsel with the Texas Office of Public Utility Counsel (OPUC), served as an ex officio voting director, representing residential and small commercial electricity consumers, on the ERCOT Board of Directors. During this time, Ms. Givens as Public Counsel with the Texas OPUC (or another employee as designated by Ms. Givens) also concurrently served as an ex officio non-voting director, representing residential and small commercial electricity consumers, on the TRE and Texas RE Boards of Directors. During the 2010 tax year, Barry T. Smitherman, the Chairman of the PUCT, served as an ex officio non-voting director on the ERCOT Board of Directors. During this time, Mr. Smitherman as the Chairman of the PUCT or another PUCT Commissioner designated by the Chairman could serve on as an ex-officio non-voting member; and Donna Nelson, PUCT Commissioner, routinely served on the TRE and Texas RE Boards of Directors in this capacity. In addition, from April 2007 through April 2010, the members of the ERCOT Board of Directors also concurrently served on the TRE Board of Directors. From January 2010 until June 30, 2010, five ERCOT Directors served on the Texas RE Board of Directors with Mr. Grimm as formation directors - specifically, Jan Newton as Chair, Michehl Gent as Vice-Chair, and Miguel Espinosa, PUCT Chairman Smitherman and Ms. Givens as the remaining formation directors. F990_P06_S0A_L01a Form 990, Part VI, Section A, Line 1a Voting Directors- Pursuant to Section 39.151 of the Texas Public Utility Regulatory Act, ERCOT has sixteen members of its Board of Directors. 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 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_L03 Form 990, Part VI, Section A, Line 3 Management Duties- Roy Bowman served as the ERCOT Interim Chief Financial Officer for a portion of 2010, that is, through May 14, 2010. Beginning in September 2009, ERCOT contracted these services directly through Tatum LLC, where Roy Bowman serves as a partner. In 2010, ERCOT paid Tatum, pursuant to contract, $166,333 for the services provided by Roy Bowman. As this was not W-2 reportable compensation from ERCOT and was paid directly to a management company, this amount is not included in Part VII, Line 1a, Schedule J-2, Part I, Column D, or Schedule J, Part II, Column B. Prior to the 2010 tax year, ERCOT engaged the law firm of Casey, Gentz and Magness, LLP (CGM), for legal services related to various regulatory matters, including rate case matters. From January 1, 2010 through April 12, 2010, CGM provided legal services to ERCOT related to various legal regulatory matters for which ERCOT paid CGM a total of $103,458 in legal fees. Due to the voluntary departure of Michael G. Grable as ERCOT Vice President, General Counsel and Corporate Secretary, effective on April 12, 2010, ERCOT entered into a professional services agreement and statement of work with CGM for the part-time services of Bill Magness, a named partner of CGM, to serve as ERCOT Interim Vice President, General Counsel and Corporate Secretary for an initial term of April 12, 2010 through July 4, 2010. On April 12, 2010, the ERCOT Board of Directors ratified Mr. Magness as an ERCOT officer with the title of Interim Vice President, General Counsel and Corporate Secretary pursuant to ERCOT's agreement with CGM for Mr. Magness' services to avoid any disruption in the operations of ERCOT. Such ratification was expressly in effect until the earlier of the filling of this officer position by ERCOT or the termination of ERCOT's agreement with CGM for Mr. Magness' services. On June 14, 2010, ERCOT and CGM amended the initial statement of work to convert the fee structure from a flat fee to an hourly rate and to amend the end date of the term to June 30, 2010. ERCOT paid a total of $48,701 in legal fees to CGM for Mr. Magness' interim General Counsel services pursuant to this first statement of work for the period of April 12, 2010 through June 30, 2010, and a total of $6,320 in legal fees to CGM for other regulatory matters, including legal services performed by Mr. Magness, for the same time period. ERCOT and CGM entered into a second statement of work for an increased hourly rate and for a new term of July 1, 2010 through September 30, 2010. ERCOT paid a total of $117,829 in legal fees to CGM for Mr. Magness' interim General Counsel services pursuant to this second statement of work for the period of July 1, 2010 through September 20, 2010, and a total of $1,185 in legal fees to CGM for other regulatory matters, including legal services performed by Mr. Magness, for the same time period. On September 21, 2010, Mr. Magness resigned from CGM and accepted employment with ERCOT. On the same date, the ERCOT Board of Directors ratified Mr. Magness as an ERCOT officer with the title of Vice President, General Counsel and Corporate Secretary for a term not to exceed one year. During the 2010 tax year, ERCOT paid a total of $277,493 in legal fees (exclusive of expense reimbursements) to CGM, specifically, $166,530 for Mr. Magness' services as interim General Counsel from April 12, 2010, through September 20, 2010, and $110,963 for other legal fees for which Mr. Magness provided legal services from January 1, 2010 through September 20, 2010. F990_P06_S0A_L06 Form 990, Part VI, Section A, Line 6 Membership- As of December 31, 2010, ERCOT's membership included 314 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 Director Election Rights- 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 Approval of Decisions- 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_L11a Form 990, Part VI, Section B, Line 11a Review of Form 990- The 2010 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 subsequently reviewed and commented on by the Finance and Audit Committee of the Board of Directors before being submitted to the full Board in advance of, and for its consideration and input at, a meeting on July 19, 2011. The final version of the 2010 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 Process to monitor and enforce conflicts of interest- 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) Process for determining compensation of the Chief Executive Officer- In determining compensation for the Chief Executive Officer, ERCOT follows a procedure which ensures that (i) compensation is approved in advance by the independent members of the Board of Directors and its HR&G Committee, (ii) the Board and the HR&G Committee obtains and relies upon appropriate data for comparability, and (iii) the Board and the HR&G Committee each adequately documents the basis for its respective determination. 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. 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 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, and all decisions regarding the Chief Executive Officer's compensation are documented and maintained. 2) Process for determining compensation of officers- 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 independent members of the Board's HR&G Committee, (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. 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 Documents available to the public- 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_P07_S0A_L01a Form 990, Part VII, Section A, Line 1a Officer Titles- In 2010, Sallie Betty Day served as the ERCOT Director of Markets. When H.B. Doggett, previously the Chief Operating Officer (COO), assumed the role of Interim President and CEO in October 2009, Sallie Betty Day moved into the role of Acting COO. While no official title change was made, she was given signature authority of the COO and assumed many of the roles and responsibilities. Sallie Betty Day maintained these roles and responsibilities until May 26, 2010. Therefore, for the purposes of the 2010 Form 990, ERCOT has listed Sallie Betty Day as an officer. In 2010, Michael Petterson served as the ERCOT Controller. Upon the departure of Roy Bowman, previously the Interim Chief Financial Officer (CFO), on June 1, 2010 Mike Petterson moved into the role of Acting CFO. While no official title change was made, he was given signature authority of the CFO and assumed many of the roles and responsibilities. Therefore, for the purposes of the 2010 Form 990, ERCOT has listed Michael Petterson as an officer. F990_P08_S00_L01e Form 990, Part VIII, Line 1e Government Grants- 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 2010, ERCOT received $251,553 from the DOE and recognized a receivable of $18,352 for funds expended 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_P08_S00_L11a Form 990, Part VIII, Line 11a 11b 11c Miscellaneous Revenue- In 2010, ERCOT received distributions totaling $3,409,803 from The Reserve for the recovery of investment funds from a previously recognized unrealized loss in 2008. This amount is considered non-operating income and is presented on Part VIII in line 11a, column D. F990_P11_S00_L05 Form 990, Part XI, Line 5 Other Changes in Net Assets- Other changes in net assets of $1,823,939 represents a derivative valuation change of $2,901,375 under FASB ASC 815 Derivatives and Hedging Topic, deferred pension costs of ($43,185), and a distribution of net assets for Texas Regional Entity of ($1,034,251).