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WSPP Revenue Proposal

WSPP Revenue Proposal. WSPP Executive Committee June 15, 2010. Situation Summary. WSPP has enjoyed a strong cash balance since its inception. However, recently (particularly the last 3-4 years), expenses have been exceeding income, and the cash balance is declining.

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WSPP Revenue Proposal

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  1. WSPP Revenue Proposal WSPP Executive Committee June 15, 2010

  2. Situation Summary • WSPP has enjoyed a strong cash balance since its inception. • However, recently (particularly the last 3-4 years), expenses have been exceeding income, and the cash balance is declining. • The objective of the WSPP agreement has been and always will be --- to be a cornerstone to facilitating energy commerce. • As such, to achieve this objective in a dynamic marketplace, it is important to maintain an alignment of the agreement’s commercial capabilities with the needs of its members.

  3. Situation Summary (con’t) • One of the major capabilities necessary to achieve this objective and one of our largest expenses is legal representation. Given this circumstance, we put in place a process to ensure appropriate engagement and review of legal services provided. • Here is a list of legal issues that we as an organization have addressed over the last 2 years: • Revision of Service Schedule C and related FERC submission • Service Schedules D & E • Retagging issue, analysis, task force meetings, revision of white paper • Reserves Comments • Financial Annex • Order 890, OATT Credit Policy revision/compliance • Development of pro forma REC contract and related State differences • FERC Commissioner Meetings • Analysis of contract ramifications of cancelling firm sales from variable energy source • Member Training (credit, legal updates; WSPP Agreement basics) • Legislative tracking re financial reform • Analysis of reasons for and likelihood of removing capacity posting requirement • Schedule Q filings oversight • Credit NOPR- review for WSPP impact • VER NOI- review for WSPP impact and issue workup • Mobile Sierra- analysis of Supreme Court rulings • Mediation involvement • Bylaw revision for short-fused EC matters • Research/memorandum re impact of carving out damages when cut is due to DNR requirements • New member FERC filings and related maintenance of member list • DOE filings of international sales • Draft agendas for committee meetings • Corporate: IRS correspondence, D&O insurance

  4. Situation Summary (con’t) • At Jeff’s request during 2009 Arnie reduced his rate 5%; no adjustment to any rates for 2010. • Not charged: • Non-working travel • Event arrangements • Many member telephone calls • Here is a list of potential issues that will require legal services in the future: • Service Schedule filing, if passed • REC contract initiative • Modernizing contract language (has been on hold for budget reasons) • Likely continued work responding to VER integration concerns, but difficult to predict • Other issues as dictated by FERC or in response to WSPP direction, probably including addressing contract issues as they arise in the markets either through analysis or contract refinement • Maintenance matters such as • New member filings • DOE filings • Maintaining members list at back of contract • Our next largest expenditure is communicating and collaborating with members on updating the agreement. • Operating, Executive, Contracting Committee Meetings, Conference Calls & Issues Forums and associated costs, including insurance • Another large expenditure is the cost of attracting new members and administering the contract • Operating Agent, website, consultants

  5. Situation Summary (Con’t) • Offsetting these costs, we have received over the years significant contributions from members in time, expense and expertise in managing the organization and agreement at no cost to WSPP.  • Included in these  contributions are also the reduced billing rates of W&T and the many services they have provided the organization and graciously not billed for. • Some charges for meeting venues and event insurance that are arranged by Wright & Talisman and passed through as “reimbursables” show up in the “Legal” category of WSPP expenses. • Given the organization’s objective, and even considering the cost controls put in place, the state of the wholesale marketplace and economy has impacted the certainty by which WSPP can raise revenues to ensure its financial viability if it only relies on member initiation fees. • WSPP Officers recommend creation of a Finance Subcommittee of the EC to take a proactive approach to addressing the revenue decline, rather than waiting for a cash balance deficit.

  6. WSPP Ending Balance

  7. WSPP Revenues & Expenses

  8. What does the contract say? • Bylaws, Section 3.6, “Dues and Other Charges”: “No dues or other charges shall be assessed upon Members except upon the approval of the Executive Committee. The “one time fee of $25,000” referred to in section 16.4 of the WSPP Agreement shall be paid to the Corporation and shall be applied solely in the manner and for the purposes stated in the WSPP Agreement.” • Agreement, Section 7.3:“The WSPP shall, as necessary, bill the Parties for costs incurred under this Agreement on an estimated basis reasonably in advance of when due, and such billings shall be paid by the Parties when due. . .” • Agreement, Section 16.4:“Any entity that becomes a Party to this Agreement which was not a party to the experimental Western Systems Power Pool Agreement shall pay a one time fee of $25,000 under this Agreement in recognition of prior efforts and costs incurred by the parties to the experimental Western Systems Power Pool Agreement, which efforts greatly facilitated development of this Agreement. Such fee shall be credited to future costs of the WSPP incurred hereunder.” • Agreement, Section 22A, [Addresses Default in Payment of WSPP Operating Costs]

  9. Potential Revenue Producers • Try to find member “hosts” for Executive Committee/Contract Committee Meetings to reduce out-of-pocket costs • More aggressive pursuit of sponsors for Operating Committee meetings • Delegated to Operating Agent? • Provide worthwhile training at OC Meetings & charge members and non-members • Just cover costs, or offset other meeting costs? • Charge non-members more? • More aggressive recruitment of new members nationwide • Add a non-voting affiliate membership class? • Brokers, vendors, consultants, etc. • Charge to attend Operating Committee meetings? • Charge Members less than Affiliate Members, Affiliate Members less than non-members? • Waive charge for up to [2] representatives if sponsoring that meeting? • Go after non-members who are using the agreement? • What enforcement rights do we have, if any? • Can we make them pay for membership/associate membership? Fines? • Begin assessing annual dues to ensure a “balanced” budget? • Current estimate is approximately 240 members • Based on 2009 budget overage, assessment would have been about $2k each. • Note: MEMA charges voting Members $3k/year & Associate member $1.5k/year

  10. Your Thoughts/Ideas?

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