Role Specification for ERCOT Board of Directors

Three Unaffiliated Directors

 

 

 

Please click here to listen to the Search Reimagined audio interview with Bill Magness (President and CEO) and Craven Crowell (Board Chair).  The audio interview provides depth and insight beyond this written Role Specification.

Founded in 1970, Electric Reliability Council of Texas, Inc. (ERCOT) (www.ercot.com) is an independent, not-for-profit organization responsible for overseeing the reliable and safe transmission of electricity over the power grid serving most of Texas. As the independent system operator (ISO) since 1996, ERCOT has been the broker between competitive wholesale power buyers and sellers. ERCOT ISO also provided the platform upon which Texas' electric utility industry made the transition to retail competition on January 1, 2002.

 

ERCOT manages the flow of electric power to 25 million Texas customers, representing approximately 90 percent of the state's electric load. As the ISO for the region, ERCOT schedules power on an electric grid that connects more than 46,500 miles of transmission lines and more than 650 generation units. ERCOT also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for eight million premises in competitive choice areas.

 

ERCOT is a membership-based 501(c)(4) nonprofit corporation governed by a board of directors and subject to oversight by the Public Utility Commission of Texas (PUCT) and the Texas Legislature. Its members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities, transmission and distribution providers and municipally-owned electric utilities.

Key Facts

  • The ERCOT Interconnection is a separate interconnection that is not synchronously connected with any other region.

  • The ERCOT wholesale market is regulated by the PUCT, not FERC.

  • The ERCOT Interconnection is served by a single Balancing Authority, Planning Authority, and Reliability Coordinator.

  • The ERCOT ISO is subject to oversight by the PUCT and the Texas Legislature.

 

Four Primary Responsibilities of ERCOT

The Texas Legislature restructured the Texas electric market in 1999 by unbundling the investor-owned utilities and creating retail customer choice in those areas, and assigned ERCOT four primary responsibilities:

  • System reliability – planning and operations

  • Wholesale market settlement for electricity production and delivery

  • Retail switching process for customer choice

  • Open access to transmission

THE ERCOT BOARD OF DIRECTORS

 

The Board’s primary responsibility is to ensure that ERCOT maintains reliability and operates in a fair, efficient and nondiscriminatory manner. The Board is also responsible for overseeing ERCOT’s administration of the ERCOT Protocols. The ERCOT Board of Directors currently consists of sixteen (16) members and eight (8) Segment Alternatives:

The Board of Directors is comprised of:

  • Five (5) Unaffiliated Directors

  • Six (6) stakeholder (Market Segment) Directors

  • Three (3) Consumer Segment Directors, including one ex officio voting member of the Board representing Residential and Small Commercial Consumers

  • The ERCOT Chief Executive Officer (CEO) as an ex officio voting member of the Board

  • The Chairman of the PUCT as an ex officio non-voting member of the Board

 

Additional information and definitions of terms in the sections that follow can be found in ERCOT’s Bylaws by clicking here.

 

Unaffiliated Directors

 

ERCOT is seeking three (3) Unaffiliated Directors each to fill a three-year term set to begin on January 1, 2021. The term for all Unaffiliated Directors shall be three-year terms.  An Unaffiliated Director may be reelected, subject to ERCOT Corporate Member and PUCT approval, for up to two consecutive terms for a maximum of nine years.

 

An Unaffiliated Director must have experience in one or more of these fields:

  • Senior corporate leadership

  • Professional disciplines of finance, accounting, engineering or law

  • Regulation of utilities

  • Risk management

  • Information technology

 

Independence/Conflict of Interest 

 

An Unaffiliated Director should have independence of any Market Participant in the ERCOT Region. Requirements of such independence include, but are not limited to, the following:

  1. An Unaffiliated Director or family member (any spouse, parent, spouse of a parent, child or sibling, including step and adoptive relatives and household member) shall not have the following:

    • Current or recent ties (within the last two years) as a director, or Officer of a Market Participant or its Affiliates;

    • Current or recent ties (within the last two years) as an employee of an ERCOT Member or NERC Registered Entity operating in the ERCOT Region;

    • Direct business relationships, other than retail customer relationships, with a Market Participant or its Affiliates; and

    • To the extent that an Unaffiliated Director or family member (any spouse, parent, spouse of a parent, child or sibling, including step and adoptive relatives) living in the same household or any other household member owns stocks or bonds of Market Participants, these must be divested or placed in a blind trust prior to being seated on the Board.

  2. An Unaffiliated Director shall not have any relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of an ERCOT board member, including the Delegated Authority pursuant to these Bylaws.

 

Board of Directors Roles and Responsibilities

 

Annual Goals and Objectives

In keeping with its fiduciary duties to ERCOT, the Board shall establish the overall direction and affirm the annual goals and objectives developed by ERCOT staff. The Board shall review such goals and objectives on an ongoing basis and may issue policies and resolutions setting forth direction of ERCOT management actions to attain such goals and objectives. The Board’s primary responsibility is to ensure that ERCOT maintains reliability and operates in a fair, efficient and non-discriminatory manner. The Board is also responsible for overseeing ERCOT’s administration of the ERCOT Protocols.

 

Duties

The Board shall faithfully discharge its duties by conducting its affairs in a highly ethical and sound business manner. The Board, collectively and severally, will not direct the policies and actions of ERCOT from perspectives of private gain or personal advantage.

 

Chief Executive Officer and Management

Subject to applicable approval by the PUCT, the Board shall retain a Chief Executive Officer (CEO) with the capabilities to execute Board policies. The Board delegates to the CEO all general powers and duties necessary to accomplish ERCOT’s purpose, goals, and objectives as established by the Board, except for those specifically reserved to the Board by the Bylaws or Board Policies and Procedures (BPP). The CEO and management are required to supply Directors with sufficient information to keep Directors properly informed about the business and affairs of ERCOT.

 

Matters Reserved for Board Approval

Except for and subject to those matters which require PUCT approval or are mandated by the PUCT without Board approval, the Board expressly reserves the following matters for Board approval:

  1. Those matters reserved by the Bylaws.

  2. Approval of the initiation of any non-routine filing that seeks regulatory action by a regulatory agency; provided that emergency situations may require immediate regulatory filings to protect the interests of ERCOT and may be filed by the General Counsel in its reasonable discretion without prior approval of the Board if there is concurrence of the CEO General Counsel, the Chair and Vice Chair of the Board for such filing, and provided that the Board is notified as soon as practicable.

  3. Initiation of any lawsuit; provided that emergency situations may require immediate legal action including the initiation of a lawsuit to protect the interests of ERCOT. Such a lawsuit may be initiated by the General Counsel without prior approval of the Board if there is concurrence of the CEO, General Counsel, the Chair and Vice Chair of the Board for such filing, and provided that the Board is notified as soon as practicable and the Board subsequently ratifies the filing.

  4. Approval of the purchase of goods or services for ERCOT’s use, or of a contract for such purchase, with a value of over one million dollars ($1,000,000.00) if such purchase or contract is not contemplated in ERCOT’s Board-approved Budget. With regard to this section, exceptions for such approval are as follows:

    • PUCT-Directed Goods or Services. If ERCOT is directed, required or ordered to purchase goods or services by contract or otherwise by the PUCT, no Board approval is required.

    • Emergency Business-Continuity Purchases. If ERCOT needs to make emergency purchases up to $5,000,000.00 which are necessary to meet business continuity or other immediate needs that, if not met, may result in an interruption to ERCOT’s normal business, such purchases may be made according to ERCOT’s procedures without seeking prior approval; however, ratification of such purchases must be sought at the next Board meeting.

  5. Approval of the sale or pledge of any ERCOT assets valued in excess of one million dollars ($1,000,000.00).

  6. Establishment of any line of credit, loans, or other forms of indebtedness in the name of ERCOT exceeding one million dollars ($1,000,000.00).

 

Individual Director Duties

 

  1. Each Director shall, individually, have the following duties: Attend all regular, special and urgent meetings of the Board when notified, unless circumstances prevent the Director from attending. If attendance is not possible, Bylaws procedures for Segment Alternates, Proxies and Alternate Representatives shall be followed.

  2. Participate in the selection of the members of all committees and subcommittees of the Board represented by his or her particular Market Segment.

  3. Not disclose the confidential information of ERCOT to unauthorized people.

  4. Handle any actual or potential conflict of interest in accordance with Bylaws Section 9.2.

  5. Consistent with the fiduciary duty of care in overseeing, monitoring, and supervising the affairs of ERCOT, prepare for and participate to the best of his or her ability in determination of policy and other matters coming before the Board.

  6. Set policy and make decisions in the best interest of the ERCOT organization and the ERCOT market.

  7. Upon joining the Board and annually thereafter, sign the ERCOT Director Ethics Agreement.

 

Committees

 

The Board of Directors has one standing committee, the Nominating Committee for the purposes of selecting Unaffiliated Director candidates pursuant to the Bylaws, and oversees two standing chartered Board committees:

  1. Finance and Audit Committee - The Finance and Audit Committee of the ERCOT Board of Directors oversees ERCOT's budget process and adherence to budget and provides recommendations to the board for establishing levels of financing and setting ERCOT's fees, including its administrative fee. The committee also reviews ERCOT's credit policies and makes recommendations to the board; ensures that ERCOT's financial statements are properly and effectively audited by qualified independent accountants; evaluates the adequacy and effectiveness of ERCOT’s risk assessment and mitigation policies and practices; assists the board in fulfilling its oversight responsibility with respect to ERCOT’s maintenance of an effective internal audit function; and performs related duties. Click here to view the Finance and Audit Committee Charter.

  2. Human Resources and Governance Committee - The Human Resources and Governance Committee (the "Committee") of the Board of Directors ("Board") of Electric Reliability Council of Texas, Inc. ("ERCOT") shall be responsible for review and oversight of:

    1. Human resource matters, including:

      • Compensation of ERCOT’s Chief Executive Officer ("CEO"), all other ERCOT officers and employees;

      • Performance of the CEO and all other ERCOT officers;

      • Organizational planning, including succession planning;

      • Employment agreements;

      • Staffing-level risks; and

      • Key performance indicators;

    2. Governance matters, including:

      • All matters pertaining to the Unaffiliated Directors except those reserved by the Nominating Committee;

      • ERCOT’s governing documents and Board policies and procedures;

      • Board-training opportunities;

      • Organizational strategic planning;

      • Ethics policies;

      • Overall governance structure of ERCOT;

    3. External affairs matters, including:

      • Development of policy messages for ERCOT; and

      • Governmental relations.

 

Click here to view the Human Resources and Governance Committee Charter.

 

The Board may form other committees for delegation of its duties at any time.

 

Compensation

 

Each Unaffiliated Director will receive the following:

  • Annual Retainer. The Annual Retainer shall be $87,000 and shall cover a full calendar year (January to December) and shall be paid to each Unaffiliated Director in equal monthly installments of $7,250.

  • Board Committee Chair Compensation. Each Unaffiliated Director who serves as the Chair of a Committee of the Board shall be paid $5,600 in additional to the Annual Retainer.

  • Board Vice Chair Compensation. Each Unaffiliated Director who serves as the Vice Chair of the Board shall be paid $7,500 in addition to the Annual Retainer.

  • Board Chair Compensation. Each Unaffiliated Director who serves as the Chair of the Board shall be paid $12,800 per year, in addition to the Annual Retainer.

 

Nomination and Approval Process

 

  • The Nominating Committee or its subcommittee shall interview the qualified candidates; and the Nominating Committee shall select, by at least a two-thirds majority, an Unaffiliated Director(s) (as such seat is vacant) to present to ERCOT Membership for its approval.

  • The Membership shall vote by Segment as described in Bylaws Section 13.1(d) in favor or against the proposed Unaffiliated Director(s) as needed to fill Unaffiliated Director positions. A proposed Unaffiliated Director(s) that is approved by at least four out of seven Segments shall be elected as an Unaffiliated Director(s). Upon election by the Membership, ERCOT staff shall file a petition for approval of the Unaffiliated Director(s) with the PUCT.

  • The Membership-elected Unaffiliated Director(s) shall be seated only upon approval by the PUCT. If elected by the Membership, an Unaffiliated ERCOT Public Director shall not begin service for his initial term and be seated on the Board until the PUCT approves such election. An Unaffiliated Director who has been elected by the Membership for any renewal term shall cease service on the Board upon expiration of the Unaffiliated Director’s current term and shall not be re-seated on the Board for a renewal term until the PUCT approves such election of the Unaffiliated Director for a renewal term. If the PUCT does not approve of the Unaffiliated Director for any of the initial or renewal terms, then the Nominating Committee shall recommend another Unaffiliated Director candidate to the Membership for election and, if elected by the Membership, for approval by the PUCT as soon as reasonably possible.

 

Meeting Schedule

 

Board meetings are normally held on the second Tuesday of the month when the Board is scheduled to meet but may be moved or held by agreement of the Board, provided that the Board shall meet at least quarterly consistent with the Bylaws. In current practice, the Board currently meets regularly six times a year on the second Tuesday and the preceding Monday of each even-numbered month. For the most updated schedule of meetings, see below or visit the Board of Directors meeting calendar.

TIMELINE OF MEMBER SELECTION PROCESS

The goal is to have three final nominees to the PUCT for final approval no later than September 2020 with official seating to occur on January 1, 2021. The key dates and timeline of steps leading up to this decision are expected to be as follows:

THE CANDIDATE

 

Qualified candidates will have expertise in one or more of the following areas:

 

  • Senior Corporate Leadership Expertise

    • Such as present or former service industry executives or management consultants; present or former chief executives, chief financial officers; present or former senior executives of financial institutions, investment banking or financial accounting/auditing organizations.

 

  • Financial and Risk Management Expertise

    • Such as present or former financial exchange executives; present or former commodity trading company executives; executives or attorneys with extensive anti-trust background; present or former executives in recently deregulated industries; former state or federal regulators with deregulation experience; or academics or consultants with relevant market experience.

 

  • Legal Expertise and Regulatory Matters

    • Chief legal officers or general counsels of for-profit companies or present or former national law firm partners, former state or federal (non-energy) regulators; present or former executives of environmental or consumer organizations; former attorneys general or consumer affairs officials; former legislators, academics or economics experts with relevant public interest background; individuals with a demonstrated reputation and record of commitment to consumer issues; energy office officials (state or federal ALJs, judges, etc.); or strategic planners or public policy experts.

 

  • Technical Electric Operations and Reliability Expertise

    • Such as retired former electric utility senior executives; present or former executives of electric power reliability councils; present or former executives from power pools; retired military officers with relevant experience; or present or former professional utilities services firm executives.

 

  • Information Technology

    • Such as present or former CIOs or CTOs with IT experience or other executives with experience in leading IT groups.

 

  • Familiarity with Regional System Operation Issues in the ERCOT Interconnection

 

All potential candidates must possess a proven reputation for excellence in their areas of expertise, and optimally should reflect a diverse background (e.g., ethnicity, gender).

SECTORS SERVED

  • Power

  • Utilities

  • Industrial Mfg. & Services

  • Construction, EPC, and Infrastructure

  • Associations and Nonprofits

CONNECT WITH US ON SOCIAL MEDIA

  • LinkedIn Social Icon
  • Twitter Social Icon
  • Facebook Social Icon

Subscribe to our Podcast:

A CEO's Virtual Mentor

Spotify_Logo_RGB_Green_edited.png

The Leadership Lyceum LLC, 332 S. Michigan Ave, Ste 9000, Chicago, IL 60604

info@leadershiplyceum.com