NERC Unaudited Summary of Results March 31, Finance and Audit Committee Meeting May 4, 2016

Transcription

1 NERC Unaudited Summary of Results March 31, 2016 Finance and Audit Committee Meeting May 4, 2016

2 First Quarter 2016 Significant Variances NERC was $186k (1.1%) under budget, including CRISP NERC was $407k (2.7%) under budget, excluding CRISP Personnel expenses over budget $478k (5.0%) o Stabilizing workforce, lower attrition Capital expenditures under budget $613k (64.4%) o Primarily due to timing of expected expenses vs budget Contracts expenses under budget $244k (14%) Meetings Expenses under budget $54k (6.1%) 2

3 2016 Year-End Projections NERC is projecting to be $428k (0.6%) over budget at year-end, including CRISP and projected use of reserves NERC projects to be $419k (0.7%) over budget at year-end, excluding CRISP Projected use of reserves for E-ISAC (reflected in contracts expense) o Portal Improvements o Machine to Machine Communications (STIX/TAXII) pilot o Analysis tools Expected over budget variance in personnel and building maintenance Offset by under budget variances in capital expenditures and office costs 3

4 2016 Working Capital and Operating Reserves Future Obligation Reserve - $2.6M Operating Contingency Reserve - $1.8M System Operator Reserve - $769k CRISP Reserve - $500k 4

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6 Combined ERO Enterprise Unaudited Summary of Results March 31, 2016 Finance and Audit Committee Meeting May 4, 2015

7 First Quarter 2016 Significant Variances Combined ERO Enterprise was under budget 4.8% ($2.3M) NERC and all Regions except TRE are at or below budget NPCC (-14.9%) lower consulting and meeting expenses WECC (-13.6%) lower consulting and personnel expenses RF (-6.4%) lower personnel and travel expenses FRCC (-5.6%) lower consulting, personnel and meetings expenses SPP (-5.0%) lower travel and consulting expenses TRE (+2.6%) timing of personnel costs NERC, MRO, and SERC were at or slightly below budget Combined ERO Enterprise FTE budget was 4.2% under 2

8 2016 Year-End Projections Combined ERO Enterprise projects to be 0.2% under budget Most REs expect to be very close to budget FRCC projects to be 5.2% under budget due primarily to lower personnel, travel, and contractors costs SPP projects to be 4.0% under budget due primarily to reduced contractors and travel costs SERC projects to be 4.7% over budget due to personnel, office and contractors cost Combined ERO Enterprise projected year-end FTEs is 2.3% under budget 3

9 2016 Working Capital and Operating Reserves $30M Total reserves at beginning of 2016 Started $6.1M over combined budgets $56M Total reserves as of March 31, 2016 $25.8M added through operations in 2016 ($2.9M more than expected) $9.0M over combined budgets $29M Year-End Projection for 2016 Ending $6.2M more than combined budgets 4

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11 NERC 2017 Business Plan and Budget First Draft Overview Finance and Audit Committee Meeting May 4, 2016

12 Agenda 2017 Business Plan and Budget Ongoing areas of focus in preliminary budget 2017 preliminary assessments Reserves Latest Regional Entity projections Remaining schedule 2

13 Ongoing Areas of Focus Goals and activities in Strategic Plan Increasing NERC s analytical capabilities E-ISAC operations Enterprise Risk Management Employee development and training Resource allocation and efficiency of operations 3

14 2017 Preliminary Budget NERC with CRISP* 2.8% total budget increase (operating and cap-x) 2017 forecast in 2016 Business Plan and Budget was 6.4% NERC without CRISP* 2.9% total budget increase (operating and cap-x) *Excludes additional E-ISAC funding for portal development. See slide 15. 4

15 2017 Preliminary Budget 2016 Budget w/out CRISP 2017 Budget w/out CRISP Variance $ Over(Under) Variance % Over(Under) Expenses Personnel Expenses $ 36,542,135 $ 38,055,728 $ 1,513, % Meeting Expenses 3,550,831 3,328,194 (222,637) -6.3% Operating Expenses 18,535,644 18,500,201 (35,443) -0.2% Other Non-Operating Expenses 110, ,100 12, % Total Expenses $ 58,088,250 $ 59,320,370 $ 1,232, % Inc(Dec) in Fixed Assets 1,125,952 1,635, , % TOTAL BUDGET $ 59,214,202 $ 60,956,221 $ 1,742, % FTEs % Personnel expenses include salaries, at-risk incentive compensation, benefits, temporary staffing, and training. In addition to those categories, overall personnel expense is increasing in part due to lower attrition and stabilizing workforce. Change in fixed assets, excluding depreciation and allocations, is a reduction of $439,000. 5

16 NERC Budget Details Personnel Costs and Assumptions (including CRISP) 205 headcount, which is lower than 2016 budgeted headcount FTEs (1.2 FTE increase driven by change in attrition assumption) Vacancy rate 5.5%, lower than 2016 budgeted rate of 8% o Experiencing more stable workforce, lower attrition 3% average salary increase (merit, promotion and market adjustments) Incentive compensation budgeted using evaluation of past performance Medical/dental premiums budgeted at high end of range provided by advisors 6

17 NERC Budget Details Retirement and Other Benefit Assumptions No changes in benefits or employee contributions No change in 401(k) match Retirement plan funding consistent with historical practice 7

18 NERC Budget Details Contracts and Consultants - $515k increase $250k for GridEx IV $100k for potential replacement for SAFNR $100k additional Regional audit support $100k for additional CRISP security support (funded by CRISP participants) $35k net decrease from various changes in other departments 8

19 Total NERC Capital Budget NERC CAPITAL BUDGET ERO Application Development $ 1,500,000 $ 800,000 Document Management 465, ,000 Hardware (Storage, servers, laptops) 955, ,000 Other Equipment 535, ,000 Disaster Recovery 200, ,000 NERC Software licenses 256, ,000 Total Capital Budget $ 3,911,000 $ 3,472,000 9

20 2017 Preliminary Assessments Before Considering Assessment Stabilization Reserve: 7.0% assessment requirements increase for total NERC 6.9% assessment requirements increase for NERC without CRISP Using Assessment Stabilization Reserve (w/o CRISP): Available Balance $2,271,000 Releasing $500, % increase in billed assessments Releasing $1,000, % Releasing $1,500, % *Above items exclude impact of E-ISAC portal project. For details, see slide

21 2017 Preliminary Assessments Historically, billed assessments were lower than otherwise required due to policy governing use of penalty funds Release of penalty funds in prior years to lower billed assessments contributed to larger increases in future periods Other factors, like debt service and replenishing reserves, also impact consistency of assessment requirements In 2016, Assessment Stabilization Reserve was established as a tool to mitigate impacts 11

22 2017 Preliminary Assessments Assessment Stabilization Reserve balance is almost $2.3M Using entire balance for the 2017 budget reduces billed assessments to around 3% Leaves no stabilization reserves for future periods, forces billed assessments up significantly the following year 12

23 2017 Preliminary Assessments Recommend multi-year strategy to better align budget increases, assessment requirements, and billed assessments Phased release of Assessment Stabilization Reserves to achieve target increases* 2017 assessment increase below 6% 2018 assessment increase below 5% 2019 assessment increase below 4% 2020 and beyond targeting low 3% *Assumed 3% budget increase for modeling purposes. 13

24 Projected Reserve Balances Future Obligation Reserve - $2.8M Operating Contingency Reserve - $2.0M System Operator Certification Reserve - $1.0M CRISP Reserve - $500k* Assessment Stabilization Reserve - to be determined Current balance is $2,271,000 *Subject to refinement based on negotiations with participants; funded by participants. 14

25 2017 Preliminary Budget with E-ISAC Portal Project Current estimates on E-ISAC portal project are $1M in 2017 Current budget includes $250k placeholder, additional $750k needed High priority recommendation by ESCC / MEC Improves physical and cyber threat analysis Enhances data sharing capabilities among registered users NERC budget increases from 2.8 to 4.0% NERC assessment increases 0.3% Impact on assessments is lower, assuming project is debt-funded Assumes no additional release of stabilization reserves 15

26 ERO Enterprise Budget Comparison Budget % Change Year Average Preliminary 2017 NERC 3.9% 18.2% 0.8% 7.6% 2.8% FRCC 4.6% 5.4% 1.4% 3.8% -0.8% MRO 4.3% 6.0% 9.9% 6.7% -1.1% NPCC 2.2% 4.6% 2.0% 2.9% -0.3% RF 3.7% 3.8% 3.3% 3.6% 2.8% SERC 6.1% -5.2% -0.8% 0.0% 8.5% SPP RE 2.6% -0.1% -14.5% -4.0% 7.6% TRE 7.6% 1.8% -1.7% 2.6% 3.3% WECC -49.8% 2.6% 4.1% -14.4% -2.1% Weighted Average Budget Increase 2.23% 16

27 ERO Enterprise Assessment Comparison Assessments % Change Year Average Preliminary 2017 NERC 8.0% 7.6% 3.2% 6.3% 5.5% FRCC -8.3% 10.5% 9.3% 3.8% -7.0% MRO -3.3% 7.8% 15.5% 6.7% -3.7% NPCC 9.7% 3.4% 2.0% 5.0% -0.3% RF 7.0% 23.4% 3.5% 11.3% 1.0% SERC -0.7% 0.0% 0.0% -0.2% 13.2% SPP RE 8.2% 5.0% -10.9% 0.8% 4.0% TRE 28.0% -0.1% -8.5% 6.5% 0.4% WECC -62.1% 60.1% 0.0% -0.7% 1.0% Weighted Average Assessment Increase 2.95% 17

28 Remaining Schedule May 19 Post NERC, Regional Entity BP&Bs, and Consolidated Budget and Assessment Projection for comment May 26 FAC Webinar to review 1st drafts June 30 Comments due on NERC 1st draft July 6 Closed FAC call to review proposed final budget and assessments July 15 Post and distribute final NERC and Regional Entity BP&Bs and assessments to FAC 18

29 Remaining Schedule July 21 FAC Webinar to review final drafts August 10 FAC meeting to recommend approval of final NERC and Regional Entity BP&Bs and assessments August 11 Board of Trustees meeting to approve final NERC and Regional Entity BP&Bs and assessments August 24 Submit NERC and Regional Entity BP&Bs and assessments to FERC for approval, with subsequent filings with Canadian authorities 19

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