FERC has approved the release of up to $2 million from NERC’s financial reserves, allowing the ERO to move ahead with its plans to leave its current office space in Atlanta (RR20-6).
NERC will use the $2 million, to be paid from its Operating Contingency Reserve (OCR), to exercise the early termination clause in the lease for its office in the Atlanta Financial Center. The organization requested FERC’s permission for the expenditure on Sept. 15 because approval is required to spend more than $500,000 from the OCR. (See NERC Seeks FERC Approval to Fund Office Move.)
The lease on NERC’s office in the Atlanta Financial Center is set to expire in 2025. The early termination clause, which must be exercised by Oct. 31, would allow it to exit the lease by October 2022. In its September filing, NERC asked the commission to limit the comment period on its proposal to 14 days, which would allow FERC to deliberate and render a decision by Oct. 15, allowing NERC more time to execute the termination.
NERC also told FERC in September that it has negotiated a lease for a new office space; the location of the new office has not been publicly revealed, but the organization said it expects to save more than $900,000 per year in “budgeted rent and facility expense” after the move. Total out-of-pocket costs for the move to be funded by NERC in 2021 are about $2.7 million, including the early termination fee.
Last month NERC’s Board of Trustees authorized management to execute the lease for the new office and to draw another $773,000 from its reserves in 2022 to fund the move. (See NERC Board Approves Atlanta Office Move.) From that total, $64,000 will be spent from the OCR and the remainder will come from NERC’s Future Obligations Reserve, a fund that CFO Andy Sharp said was set aside by the organization earlier to “subsidize the remaining term of the Atlanta lease.”
NERC’s new landlord has also agreed to pay the majority of the construction, furnishing and move costs, which will allow a “reasonable payback” of the early termination charge, Sharp said.
The use of the reserves means that NERC will not have to change the assessments on regional entities in its 2022 budget. In addition, the ending balance of the OCR in 2022 is projected to be 5.5% of the revised budget, even considering the new expenditures; this is well within the policy target range of 3.5 to 7.5%.
In addition to the financial benefits, the new office space is 40% smaller than the current space. Because NERC plans to allow more employees to work remotely in the future, building on its experience with the COVID-19 pandemic, a smaller footprint will ensure its space does not sit empty. The new space also offers free parking to NERC employees — another benefit to the ERO’s budget — more transportation options, including nearby rail and bus stops, and an adjacent hotel and conference center.
