At an abbreviated open meeting on Tuesday, NERC’s Board of Trustees approved a request from management that will allow the organization to go forward with plans to move its Atlanta headquarters.

The meeting had a single agenda item, split into two parts. First, the board authorized NERC management to execute the lease for the new Atlanta office that they have negotiated with the future landlord. Next, the trustees approved an amendment to NERC’s 2022 Business Plan and Budget allowing the organization to draw about $773,000 from its reserves in 2022 to pay for moving to the new office.

NERC’s current lease is set to expire in 2025, but an early termination clause would allow the organization to exit the lease by October of next year. That clause must be exercised by Oct. 31 and will require a payment of up to $2 million this year; earlier this month the organization requested permission from FERC to pay the early termination charge from its Operating Contingency Reserve (OCR). (See NERC Seeks FERC Approval to Fund Office Move.)

CFO Andy Sharp explained that NERC’s moving costs are also to be partly funded from the OCR, with about $64,000 to be spent in 2022 on top of the earlier charge. Another $709,000 will be paid from the Future Obligations Reserve, a fund that Sharp said was set aside by NERC to “subsidize the remaining term of the Atlanta lease.”

The use of the reserves means NERC will not have to change the assessments on regional entities in its 2022 budget, while the ending balance of the OCR in 2022, even with the new expenditures, is projected to be 5.5% of the revised budget. This is well within the policy target range of 3.5 to 7.5%.

NERC has shared few details about its new lease because of ongoing negotiations, but during Tuesday’s board meeting and the open meeting of the Finance and Audit Committee that preceded it, Sharp provided more information about the “attractive financial offer” that the organization received from the new landlord.

In addition to saving $900,000 per year on lease and facility costs, the new landlord has agreed to pay a majority of NERC’s construction, furnishing and move costs. These benefits “will result in a reasonable payback” of the early termination charge and the moving costs.

Along with the financial savings, Sharp highlighted several other advantages of the new location, such as a 40% smaller footprint that will accommodate a reduced staff presence in the office as NERC continues the hybrid work posture it began last year because of the COVID-19 pandemic. The new space also offers amenities such as free employee parking that are not available at NERC’s current office.

With the board having approved both proposals, NERC plans to submit the amended budget to FERC by Thursday. Board Chair Kenneth DeFontes thanked management for working quickly to finalize the new lease and take advantage of the early termination opportunity, saying the deal was “excellent timing.”

“It really coincides extremely well with the plans we’re making for a return to work, post-COVID world, not only in terms of saving costs, but also in terms of how we’re going to restructure the way in which we will use our offices,” DeFontes said. “So it really has been remarkable, and I want to thank the team for their creativity and their opportunistic approach that will [allow] a 30 to 40% reduction in our fixed costs going forward.”