ERCOT, the ratepayer-supported organization that operates the Texas power grid, announced on Tuesday the elimination of 37 positions — or about 5.5 percent of its staff. The layoffs follow the issuance of a highly critical report in June that called for even steeper cuts and that found ERCOT overstaffed with “dead wood.”
Also known as the Electric Reliability Council of Texas, the organization is important to Texans because it manages the flow of electricity to homes and oversees a key segment of the wholesale electricity market. The multi-million dollar cost of operating ERCOT eventually trickles down into residential electric bills.
ERCOT President Trip Doggett said the staff reductions announced on Tuesday are part of the expected transition to a “nodal” market, which is also being overseen by the organization. The years-in-the-making overhaul was originally expected to be complete in 2006, but now is scheduled to go live Dec. 1. Doggett said the layoffs won’t cause further delays.
“I want to ensure employees and market participants that these actions will not jeopardize the launch of the nodal market,” he said in a prepared statement. “The affected employees will be provided with a severance package, outplacement services, and extended health and counseling benefits. In addition, managers will be providing letters of reference to emphasize these actions were due to the organizational transformation – not performance.”
ERCOT has come under fire in recent years for mismanagement. For instance, the consultant’s report in June found evidence of “poor corporate governance, leadership and culture,” which in turn led “to an overall below-average quality of people.” The consultants recommended cutting staff from 700 to 534, which would mark steeper reductions than those announced on Tuesday.
ERCOT also has faced criticism for mismanaging the nodal project. Besides the delays, the project is now so over-budget that it’s expected to cost more than twice as much as a similar system in California. Initial cost estimates seven years ago put the nodal price tag at less than $100 million. It’s now budgeted for more than $600 million.
Recharge Texas and other consumer groups have urged lawmakers to protect ratepayers by increasing the regulatory oversight of ERCOT’s spending and borrowing. Consumer groups also have recommended the removal of industry representatives from ERCOT’s board of directors.
State lawmakers are expected to consider those proposals during the upcoming legislative session, which begins in January.