By Tom Kleckner

AUSTIN, Texas — When Bill Magness was named as ERCOT’s new CEO last August, ISO Chairman Craven Crowell cited his leadership skills, utility experience and commitment to “strong working relationships” with key stakeholders as the primary reasons for his elevation from legal counsel.

Asked in an interview about his networking skills, Magness laid it on thick. “I’m old,” he said. “I’ve known many people.”

His comment drew a laugh, as it was meant to, much the same way as when Magness introduced himself to ERCOT staff by flashing a picture of his younger, long-haired self on the meeting room screen.

“Some things change, some things are different,” he said, pointing to his long-ago locks. Then, touching his clean-shaven upper lip — a contrast with his mustachioed predecessors, Trip Doggett and Bob Kahn — he said, “See, no mustache. I’m different.”

Stepping before ERCOT’s Board of Directors for the first time as its CEO last week, Magness fiddled with his ear clip microphone.

“I really appreciate, No. 1, the people who gave me this fancy, Madonna microphone,” he said, pausing for a moment. “For you younger people, that would be like Lady Gaga.”

Quarter Century

Magness’ self-deprecating humor wins him friends. But ERCOT’s board also selected him because of his quarter century of experience in what he calls the “utility restructuring business.”

Before joining ERCOT in 2010 as legal counsel, Magness was a partner for about 10 years with an Austin law firm, specializing in electric and telecomm utility matters. He served as lead counsel in cases before regulatory commissions in 16 states.

He also spent several years practicing before and working at the Public Utility Commission of Texas, where he worked alongside future FERC Chairman Pat Wood, future PUCT commissioner and current ERCOT Vice Chair Judy Walsh and current PUCT Chair Donna Nelson.

“I’ve been in the mix. … The people in the industry, we’ve all been in this together for a long time,” Magness said. “We’ve been through lots of challenges over the years as we’ve implemented the restructured markets. We’re all sort of change natives, working through these issues together. I just hope I can bring the best of that to my work.”

Nelson has no doubt that he will.

“Bill is a bright visionary with great people skills,” she said. “He has shown impeccable judgment and is uniquely qualified to build on the high standards set by Trip.”

Working together with the board, Magness is focusing ERCOT on five strategic priorities: adapting to a changing resource mix; providing “thought leadership” on the market and operations; effective and transparent communication; continually strengthening cyber and physical security; and developing ERCOT’s people and technology resources.

“They are the company’s top priorities, and we need to emphasize them internally and externally,” Magness said.

Magness drove home that point during last week’s board meeting by asking members of ERCOT’s retail operations team to “come inside the horseshoe” — the conference room’s semicircle of desks — to recognize process improvements the team made that will save more than $400,000 a year.

“They made things faster and better, cheaper and better, and so much cheaper it’s got to be better,” Magness said, leading the applause for the group.

Magness sought a seamless transition from Doggett. Under his predecessor, ERCOT was named one of Austin’s best places to work last year by the Austin Business Journal. Like Doggett, Magness enjoys kibitzing with staff and takes an interest in their work. All that’s missing, aside from a mustache, is Doggett’s North Carolina accent.

No Surprises

So what has he learned from Doggett?

“We don’t want to surprise people, if we can avoid it,” Magness said, referring to ERCOT staff. “We have to rely on our ability to stay ahead of issues and let people know the good, the bad and the ugly of what we’re seeing. That’s true of everybody in this ISO/RTO business.

“We could not run markets with the level of sophistication and precision we do [and] we could not turn out the amount and quality of data we do if we didn’t have the best technology and people who understand how to use it.”

To that end, ERCOT’s board last year approved $48 million to update the Texas grid operator’s software and hardware, a “technology refresh” so “we could ensure the market we would have the latest technology and upgrade it out into the future.”

The approved budget resulted in a 9-cent increase in the ISO’s system administration fee to 55.5 cents/MWh — a fee that had remained flat for nine years until 2014, and which ERCOT hopes to maintain until at least 2020. ERCOT officials said the increase was necessary after the heavy investment to bring the nodal market live in 2011.

“Because we did a big bang with nodal go-live, a lot of those things are aging out,” Magness said. “We’re doing a better job of trying to space things out, so you don’t have these huge big bangs every five years. It’s just time. I mean, you’re not using a seven-year-old iPhone.”

The technology update is needed for other reasons. Texas already leads the nation in wind-generation capacity with more than 17,700 MW — it would rank sixth if it were a country.

ERCOT, which serves about 90% of the state’s load, has 15,764 MW of installed wind and current projections see ERCOT’s solar capacity increasing from 288 MW to more than 1,000 MW by this summer.

Wind energy’s usage surpassed that of nuclear in ERCOT’s footprint for the first time last year, accounting for 11.8% of the grid’s energy consumption. Wind met almost half of ERCOT’s load on Dec. 20 (44.7%), generating 13,057 MW. (See ERCOT Energy Use up 2.2% in 2015; Wind Surpasses Nuclear.)

Texas’ $7 billion Competitive Renewable Energy Zone initiative added 3,600 miles of transmission lines from West Texas’ wind farms to population centers.

“The day we saw [wind] at 40% of load, wind units in ERCOT were running about 90% of nameplate,” Magness said. “The increase of intermittent generation and the need to continue to integrate it is very important to us.”

Ahead of the Curve

Staff and stakeholders are also looking at how to incorporate distributed generation, storage devices and smart grid technologies. An ERCOT future ancillary services team has developed a proposal to unbundle those services based on their characteristics.

“We’re trying to stay ahead of the curve,” Magness said.

That’s where thought leadership comes in, Magness said. “We have a very active and effective stakeholder process that vets issues very thoroughly so that before an issue gets to our Board of Directors, it’s been through a whole lot of discussion and consideration.”

The board “looks to us to develop a range of options and see what makes sense to them. The balance of industry experience and ERCOT experience that stakeholder board members bring and unaffiliated board members bring get us to a solution where you don’t need further consideration.

PUCT Role

“This works most of the time,” he said. “My evidence is you seldom see a decision of the ERCOT board appealed to the Public Utility Commission. [The PUCT] is very engaged. It looks to us for analysis and understanding.”

Most of the time, but not always. Just last week, the board was asked to consider a proposal arising from a PUCT appeal regarding generators’ lost opportunity costs. (See related story, Lost Opportunity Cost Rule Sent Back to ERCOT’s Stakeholder Process.)

Magness recalled frigid February 2011, when generation outages led to rolling blackouts in the state just as the Dallas-Fort Worth area was preparing to host the Super Bowl.

“When things don’t go well, [the PUCT] gets concerned. Our legislature gets concerned,” he said. “We’ve done a lot better reaching out and explaining what we do, so that when something does happen — like it does — people … and especially the media … know, ‘Oh, yeah. It’s those guys.’”

Thus, the priority placed on “effective and transparent communication.”

“We generate, receive and send back a tremendous amount of data. One of the things that makes markets work is the transparency of that data,” Magness said. “We want to be sure all the data coming into the ISO is consistent. Most of the information we receive is not our information. We’re getting it out to folks to use in their own business. It’s not an area I think is weak, but if you don’t think about it strategically, an ISO can get way behind.”

ERCOT is located in the “Silicon Hills,” an area encompassing Austin and San Antonio that is home to tech giants Dell, IBM and Oracle and hundreds of startups. That provides fertile ground for technical expertise but also makes it a competitive environment for employers.

“We don’t have a whole lot of [physical] assets,” Magness said. “We have a lot of sophisticated hardware and software and people. We have to keep [all] of them working crisply.”