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September 29, 2004     (512) 463-0300

Senate Committee Examines Criminal Investigation at Electric Council

AUSTIN - The Senate Committee on Business and Commerce met jointly with the House Committee on Regulated Industries and the Electric Utility Restructuring Legislative Oversight Committee today to discuss matters pertaining to possible changes in the Electric Utility Regulatory Commission of Texas (ERCOT).

Senate Committee Chairman Troy Fraser began the hearing by cautioning members not to ask questions that might "compromise the ongoing investigation" and said that "There appears to have been some serious breakdowns of internal controls and management practices at ERCOT as it relates to the awarding of contracts". He also said that "The problems at ERCOT also raise a number of questions about it's hiring procedures and the adequacy of background checks on prospective employees who were later placed in management positions... I'm increasingly troubled by the perceived cavalier corporate culture at ERCOT and its perception of complete and total independence from the PUC (Public Utility Commission) and legislative oversight".

Texas media have reported that three former managers of ERCOT are targets of an investigation into an alleged kickback scheme. Allegedly, they were in charge of overseeing contracts with businesses in which they had financial interests.

Mike Greene, ERCOT chairman, told the committee, "It's very disappointing. We had a handful of employees who took advantage of the trust that ERCOT had placed in them and frankly, in the trust that their fellow employees had placed in them. The fortunate part was we found out what these folks were up to, and they were terminated." He also said ERCOT was making every effort to be more communicative with the PUC and the legislature and assured the committee that the employee misconduct did not impact the reliability or security of the state's electrical system. Greene reported that a number of internal audits are being conducted at ERCOT to ensure it has not been compromised.

Other witnesses on this panel included Tom Schrader, CEO of ERCOT, Paul O'Malley, CEO of TXU Energy, and Paul Hudson, Chairman of the PUC.

However, money was, apparently, lost. The witnesses told the committee "These guys set up a shell corporation, subcontracted some work out and scammed some dollars. That's what it was." Committee members told the witnesses that ERCOT needed a more strict code of conduct. The witnesses, in turn, told the committee that stringent background checks were now in place to help ensure that this doesn't happen again.

Other topics discussed included ERCOT's relationship to the PUC, how ERCOT develops its budget, and how much debt the organization has.

The Senate Business and Commerce Committee is Chaired by Senator Troy Fraser. Members include vice-chair Senator Kip Averitt, along with Senators Ken Armbrister, Kim Brimer, Craig Estes, Mike Jackson, Eddie Lucio Jr., Leticia Van de Putte and Tommy Williams. The committee recessed subject to call of the chair.

Veterans' Committee Issues Final Report

In other committee action today, the Senate Committee on Veteran Affairs and Military Installations approved its final report to the 79th Texas Senate, due to meet in January of 2005. In its report, the committee recommended no new legislation in regard to protecting the privacy of veterans' discharge records, saying that the effectiveness of current legislation should be monitored.

It also recommended establishing a database to track veteran usage of the state-sponsored programs that give veterans free or reduced tuition at state universities, and continue to monitor and encourage the Texas Education Agency's work on reciprocity agreements between states concerning admissions of military personnel, and instate tuition levels for military personnel and fine-tune current law so that the agency can encourage veterans to take advantage of the benefits.

A further report from the Veteran Affairs Subcommittee on Base Realignment and Closure will be submitted to the full Senate at a later date.

The Senate Committee on Veteran Affairs and Military Installations is chaired by Senator Leticia Van de Putte. Members include Senators Craig Estes, Troy Fraser, Kel Seliger, and Eliot Shapleigh. The Committee recessed subject to call of the chair.

An archive copy of the meeting may be seen at the audio and video archive pages.

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