Executive Compensation at ERCOT

Most people outside of Texas had not heard of ERCOT (Electrical Reliability Council of Texas) until this past week when the company was slammed for the massive loss of power across the state.

Although ERCOT is considered an independent system operator, the organization is a membership-based tax-exempt, non-profit 501 (c) (4) governed by a  board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature (who decided decades ago not to allow power to come from outside the state to avoid having to comply with federal regulations that kick in with interstate transactions). In other words, the responsibility to provide power falls upon the management of ERCOT and Texas state officials – not the federal government.

ERCOT’s members (303 as of 12/31/2018) include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned public utilities, transmission and distribution providers, and municipally-owned electric utilities.

ERCOT operates the electric grid that supplies power to more than 26 million Texas customers (representing about 90% of the state’s electric load). With the freezing temperatures that went on for days causing consumers to turn up their thermostats, ERCOT simply did not have enough power to meet the demand, leaving about 4 million Texans in the cold.   Pipes froze and burst leading to even more problems.  Without a doubt, the disaster will be blamed on inadequate supply, frozen hardware, and mechanical failures, all of which leads back to the people managing ERCOT and state officials.

There will be a lot of finger pointing (it’s rarely ever the fault of one person/entity) but at the end of the day, it is ERCOT’s responsibility to plan for peak demand and the Public Utility Commission of Texas (and the Texas Legislature) to ensure ERCOT is doing its job.  But, let’s focus on ERCOT for the moment.

There are 15 voting members of the governing board of ERCOT, 14 of whom are independent.  The Form 990 (2018) lists 16 board members; 15 of whom have voting rights;  12 (75%) of whom are male while 4 (25%) are female.

The most recent Form 990 (2018) submitted by ERCOT to the IRS reports the organization posted $245 million in revenue in 2018, most of which came from service (program and municipal). Expenses totaled $209 million (including $28 million in depreciation) which means ERCOT reported $36 million (15%) in net income (note:  earnings before depreciation totaled $64 million – all of which suggests ERCOT has been making a lot of money maximizing short term profits over long-term reliability of service) with the five largest expenses being:

• Compensation ($107 million)
• Hardware and Software:  $26 million
• Reliability Organization:  $16 million
• Fees for Services (appears to be for a contingent workforce):  $14 million
• Office Expenses:  $13 million

811 employees received $107 million in compensation, which equates to an average compensation of $132,000. However, only 459 employees received more than $100,000 in compensation. The 21 most highly compensated employees were reported to be:

• $883,264:  William Magness, Board Member, President and CEO
• $500,834:  Cheryl Mele, SVP and COO
• $468,394:  Jerry Dreyer, SVP and CIO
• $452,865:  Chad Seely, SVP, General Counsel and Governance
• $395,669:  Michael Petterson, VP and CFO
• $370,906:  Dwayne Rickerson, VP, Grid Planning and Operations
• $370,622:  Diane M Williams, VP, Human Resources
• $358,095:  Theresa Gage, VP, External Affairs and Corp Comm
• $350,934:  Sallie Betty Day, VP, Gov’t, Risk, and Compliance
• $349,982:  Kenan Ogleman, VP, Commercial Operations
• $317,839:  Steve Daniels, VP, Application Services and IT Ops
• $290,373:  David Forfia, Director, IT Architecture
• $289,296:  Nathan Bigbee, Asst General Counsel, Regulator
• $288,202:  Mark Ruane, Director, Settlements, Retail, and CRE
• $287,753:  Bryan Hanley, Director, IT Infrastructure
• $286,358:  Joel Mickey, Senior Director, Wholesale Market Design
• $284,403:  Dan Woodfin, Sr. Director, System Operations
• $264,925:  Warren Lasher, Senior Director, System Planning
• $261,252:  Vickie Leady, Asst GC and Asst Corp Sec’y
• $254,291:  John Messer, Director, IT Application Development
• $235,538:  Amanda Bauld, Director, Project Management Office

The 21 most highly compensated employees received nearly $8 million.

15 of the 21 (71%) most highly compensated employees are male while 6 of the 21 (29%) are female.

There were business transactions with interested persons (primarily board members who were also officers in electric cooperatives), the details of which are outlined in Schedule L, Part IV of the Form 990.

In summary, ERCOT, in conjunction with the Public Utility Commission of Texas and the Texas Legislature, failed the people of Texas in not planning for adequate supply during high demand.  The board members of ERCOT, the 21 most highly compensated employees who received nearly $8 million in compensation, and the members of the Public Utility Commission of Texas and the Texas Legislature should all be held accountable. How ironic is it that the largest electric supplier in Texas has the word “reliability” in its name?