B i fi Briefing on Draft 2011 Budget D ft 2011 B d t Ryan - - PowerPoint PPT Presentation

B i fi D ft 2011 B d t Briefing on Draft 2011 Budget

Ryan Seghesio Treasurer & Interim Chief Financial Officer Stakeholder Meeting October 14, 2010

Timeline for 2011 budget and GMC rates e e o budget a d G C ates

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GMC Overview of FERC Filing Not B d t Board Approval B d t Request Board Board meeting Call Aug 19, 2010 Overview of GMC Process and Convergence bidding later than Nov 1, 2010 Budget Call June 23, 2010

• f GMC

Extension Sept 9, 2010 Budget meeting Oct 14, 2010 Board approval

• f

Budget Dec 13, 2010 meeting Nov 1, 2010 April 21, 2010 2010

Opportunities for Stakeholder Input

Slide 2

The budget development timeline extends from J th h D b June through December.

Previous Events Date Introduction of budget process to stakeholders June 2010 Status update of budget process to stakeholders August 2010 Internal b dgeting process J l No ember Internal budgeting process July – November Board review of preliminary budget (Executive Session) September 2010 Preliminary budget posted to website September 2010 Upcoming Events Date Board meeting November 2010 Board decision on budget (General Session) December 2010 Posting of rates / informational filing with the FERC December 2010

Slide 3

There is no change in 2011’s revenue requirement. e e s

• c a ge

s e e ue equ e e t

• Anticipate no change in the revenue

requirement of $195M

$195 $200

Revenue Requirement ($ in millions)

requirement of $195M

• Includes O&M, capital spending and debt service
• $2M under $197M rate cap

$180 $185 $190 $195 2007 2008 2009 2010 2011

• Anticipated transmission volume lower

than 2010 budget forecast, but higher than forecasted actuals for this year

Budget forecast 2010 Forecasted

240 245 250 255 260

Transmission Volume (in TWh)

$0 90

Bundled Rate (in $ per MWh)

• 2011 pro-forma bundled rate at $0.81,

a 2.5% increase from 2010, due to

Forecasted Actual

230 235 2007 2008 2009 2010 2011 $0.70 $0.75 $0.80 $0.85 $0.90

lower volumes

Slide 4

$0.65 2007 2008 2009 2010 2011

A summary of the 2011 revenue requirement d t 2010 compared to 2010.

2010 2011 Revenue Requirement Component

($ in millions)

2010

Final Budget

2011

Draft Budget

Change

Operations & Maintenance budget

$162.7 $162.5 $(0.2)

Miscellaneous revenue

(8.1) (7.6) 0.5

Debt service (including 25% reserve)

61.0 43.7 (17.3)

( g ) Out-of-pocket capital funding

15.0 27.0 12.0

Revenue credit

(35.5) (30.5) 5.0

Total Revenue Requirement

$195.1 $195.1 $ - Transmission volume in TWh 246.0 240.0 (6.0) P f b dl d GMC i $ MWh $0 793 $0 813 $0 020

Slide 5

Pro-forma bundled GMC in $ per MWh $0.793 $0.813 $0.020

The O&M budget decreased by $0.2 million, or 0 1% t $162 5 illi i 2011 0.1%, to $162.5 million in 2011.

A reconciliation of the change across the major resource components

2010 O & M budget $162.7 S l i d b fit 0 9

follows ($ in millions):

Salaries and benefits 0.9 Occupancy and equipment leases 1.1 Telecommunications and technology maintenance costs (1.0) Consultants and contract staff (0.7) Outsourced contracts and professional fees

• -

Training travel and other costs (0 5) Training, travel, and other costs (0.5) 2011 O & M preliminary budget $162.5

Slide 6

Salaries and benefit costs increased $0.9 million, 1 0% t $110 9 illi

• r 1.0%, to $110.9 million.

2010 Salaries and benefits budget ($ in millions) $110.0 Compensation adjustments and elimination of the vacancy factor 2.2 Anticipated overtime budget adjustment 0.8 Decreased staffing (budgeted headcount declined to 601 from 615) (1.7) Other staffing costs, primarily performance compensation (0.4) Other staffing costs, primarily performance compensation (0.4) 2011 Salaries and benefits budget $110.9

Slide 7

Occupancy and equipment lease costs increased b $1 1 illi 10 8% t $11 3 illi by $1.1 million, or 10.8%, to $11.3 million.

2010 Occupancy and equipment lease budget ($ in millions) $10.2 Increase in annual facility leases and operating expenses* 1.1 2011 Occupancy and equipment lease budget $11.3

* Increase is primarily related to the addition of the Iron Point building while still maintaining the leased facility on Blue Ravine Road. g y

Slide 8

Telecommunications and maintenance costs d d b $1 0 illi 6 1% t $15 9 illi decreased by $1.0 million, or 6.1%, to $15.9 million.

2010 Telecom and maintenance costs budget ($ in millions) $17.0 Decrease in software maintenance costs* (0.7) Decrease in hardware maintenance costs (0.2) Decrease in telecommunication costs (0.1) 2011 Telecom and maintenance costs budget $15.9 2011 Telecom and maintenance costs budget $15.9 * Maintenance contracts arising out of the new market software were not as high as originally anticipated high as originally anticipated.

Slide 9

Consultants and contract staff costs decreased by $0 7 illi 7 1% t $9 2 illi $0.7 million, or 7.1%, to $9.2 million.

2010 Consultants and contract staff budget ($ in millions) $9.9 Decreases in contract staff among MID, HR, Ops, and Ext Affairs di isions (1 1) divisions (1.1) Increase in contract staff in Technology division 0.4 2011 Consultants and contract staff budget $9.2

Slide 10

Outsourced contracts and professional fees i d fl t t $8 5 illi remained flat at $8.5 million.

2010 Outsourcing and professional fees budget ($ in millions) $8.5 Increases in outsourced contracts (security certificate management, locational marginal price alidation eather and ind forecasting locational marginal price validation, weather and wind forecasting, and credit rating services) 0.4 Decreases in professional fees (lower outside legal fees) (0.3) 2011 O i d f i l f b d $8 2011 Outsourcing and professional fees budget $8.5

Slide 11

Training, travel and other costs decreased $0.5 illi 6 8% t $6 7 illi million, or 6.8%, to $6.7 million.

2010 Training, travel, and other costs budget ($ in millions) $7.2 Decreases in transportation and travel costs (0.3) Decreases in training fees and supplies (0.2) Decreases in office and meeting costs (0.1) Increases in insurance premiums 0.1 Increases in insurance premiums 0.1 2011 Training, travel, and other costs budget $6.7

Slide 12

The divisional changes are largely driven by i t l d t l l t internal and external personnel costs.

2010 2011

$ in millions

Division Final Budget Draft Budget

$

Change

%

Change Chief Executive Officer Division

5.6 5.0 (0.6) (10.7)%

Human Resources

6.1 5.8 (0.3) (4.9)%

Market and Infrastructure Development

14.1 13.3 (0.8) (5.7)%

Technology

50 1 50 1

• -
• -

Technology

50.1 50.1

• -
• -

Operations

57.2 58.5 1.3 2.3%

Legal & Administrative

20.6 21.3 0.7 3.4%

Policy and Client Services

9.0 8.6 (0.4) (4.4)%

Totals

162.7 162.5 (0.2) (0.1)%

Slide 13

We are moving towards an activity based costing t t t f th l th b d t structure to further analyze the budget.

• Activity based costing (ABC)

Plan & manage Support customers &

A ti iti

Activity based costing (ABC) commenced third quarter of 2009

• Six summary activities were

id tifi d t th fi t l l

manage business $12.8 Operate markets & stake- holders $7.6

Activities

($ in millions)

identified at the first level

• Level II activities are being rolled
• ut to the organization in 2010

Support business grid $50.4

• ut to the organization in 2010
• ABC will provide further insight

into resource utilization

services $70.3 Manage h Develop markets & infra- structure human capabilities $5.9 structure $15.6

Slide 14

Debt service component of revenue requirement d li b $17 3 illi i 2011 declines by $17.3 million in 2011.

Net Debt Service with 25% Reserve ($ in millions)

$60.0 $70.0 $40.0 $50.0

Reserve

$20.0 $30.0

2009 Bonds 2008 Bonds

$0.0 $10.0

2009 2010 2011 2012 2013 2014 2015 There Slide 15 2009 2010 2011 2012 2013 2014 2015 There- after

The planned 2011 capital will be financed through GMC GMC.

• Total non-facility spending targeted at $27M for further market

Total non-facility spending targeted at $27M for further market enhancements and regular capital

• Detailed draft of capital project list contained within the budget
• document. Areas of focus include:

Renewable integration and smart grid technology projects Renewable integration and smart grid technology projects FERC mandated items (within 3 years of new market launch) Other operational improvements to market systems Hardware/software upgrades and office equipment Hardware/software upgrades and office equipment

• Capital budgeting process continues through November

Slide 16

Key GMC rates are projected to change based on l l lower volumes.

2010

Budget Current Actual

2011

Budget

$ % Service Component

Budget Rate Actual Rate Budget Rate

$

Change

%

Change

Comments

Core reliability service – demand on peak $78.51 $94.71 $84.34 $5.83 7.4% Lower volumes estimated for 2011 Energy transmission $0 31 $0 35 $0 30 $(0 01) (3 2)% Minimal change from 2010 Energy transmission service – net energy $0.31 $0.35 $0.30 $(0.01) (3.2)% Minimal change from 2010 Energy transmission service – deviations $1.16 $1.98 $1.28 $0.12 10.3% Lower volumes estimated for 2011 Forward scheduling $1.71 $2.53 $1.51 $(0.20) (11.7)% Under collection in 2009 increased g $ $ $ $( ) ( ) revenue requirement for 2010. Condition did not occur in 2010 leading to lower revenue requirement in 2011. Market usage - A/S & real time energy $0.23 $0.23 $0.44 $0.21 91.3% Over collection in 2009 decreased revenue requirement for 2010. Condition did not occur in 2010 leading to higher revenue requirement in 2011. Market usage – forward energy $0.06 $0.06 $0.05 $(0.01) (16.7)% Structure changed in 2010 as result of FERC settlement

Slide 17

Rates shown for those that individually are more than 5% and in the aggregate make up 92% of revenue requirement