page 1 program management office “pmo” steve wallace january 22, 2003

Program Management Office “PMO”

Steve Wallace

January 22, 2003

Components of ERCOT Spending – SummaryComponents of ERCOT Spending – Summary

Discretionary: “CREATING NEW VALUE”

This portion of spending is determined by market participants (as recommended by the TAC). The participants and ERCOT must decide how much “discretionary” spending is needed each year. Therefore the budget for this area is set by the participants and ERCOT, then managed by ERCOT.

These costs are variable in the short-run, but add to future non-discretionary spending to provide ongoing support for these efforts.

Examples include new development and enhancements to existing systems or assets.

Non-Discretionary: “KEEPING THINGS RUNNING”

This portion of spending is determined and managed by ERCOT. ERCOT is accountable for creating efficiencies and productivity improvements in this area.

These costs are relatively fixed in the short-run.

Examples include maintenance to existing systems or assets as well as keeping the current operations running.

Total ERCOT Spend

Non-Discretionary

Spend

Discretionary Spend

ERCOT Focus Areas: “ESTABILISHING PREDICTABILITY”

Manager and business unit accountability

Separation of baseline from investment spending

Technology management and coordination for compliance

•The PMO acts as the central control and communications point for coordinating Business and Technology initiatives as well as managing and mitigating risks. It is essential that all of the elements critical to success be considered at the beginning of a project. The six tightly connected elements noted below are key to developing and launching new initiatives and sustaining ongoing initiatives.

People need to have incentives to adopt new ways of working based on KPI’s

Program, Technology and Risk Management

People need to know how they are expected to behave and become proactive vs. reactive

People need to understand what they are working toward and how they will achieve it together: e.g. ERCOT 2005 and ROI/ROA and Risk Management

The enterprise needs to be equipped with relevant skills and to recruit and retain the best staff

Internal & External people need to know what is going on, vertically and horizontally

The organizational structure needs to be aligned with the process and technology architecture

Culture

Performance

Measures

Organization

Structure

CommunicationProgram

Office

Leadership

& Vision

Training &

Development

Idea Generation & Value Identification (High Level Analysis & Estimating)

Board Approval (Budget)

ERCOT Operating Committee

On-goingProject &Resource

Management

Investment Implementation ProcessInvestment Implementation Process

TACApprovedRequests

PUCTRequests

ERCOTRequests

Program Management& Reporting

Program Management Office

High Level View of the PMO Functions

PMO Service Delivery ModelThe Strategize process establishes tactical and strategic ERCOT Business strategies and plans, accepts input from TAC, Board, etc. aligns to the organization’s business goals and objectives and manages and mitigates risks.

In the Consult and Advise process, PMO partners with the various groups and participants to provide expertise and knowledge to help identify solutions to business problems

The Plan process develops cost estimates, resource requirements and timelines for executing the ERCOT business strategy, which is coordinated with and approved by executive management and participants.

The Manage Program oversees and reports on the projects identified and defined in the Strategize, Plan and Consult and Advise processes and reports to the operating committee.

The Manage Project process oversees the delivery of individual projects, according to specification, budget and schedule and is conducted by and is conducted by the business units, operations and IT groups at ERCOT.

The Develop and Implement process builds/configures, tests and deploys quality application and infrastructure solutions and is conducted by the business, operations and IT groups at ERCOT.

The Operate and Maintain process runs, monitors,maintains, and supports live systems and is conducted by the business, operations and IT groups at ERCOT

Strategize

Plan

Manage Program

Manage Projects

Develop and Implement

Operate and Maintain

Consult and Advise

Projects that will be managed by the PMO and Operating Committee will be identified according to two primary criteria:

• Projected impact of the project on the ERCOT organization and its ability to meetstrategic objectives

• Complexity and size of the project

IndependentProject

Team* orOutsource*

PMOManaged

Project

Independent Project

Team* orOutsource*

Decline

High Impact

Highly Complexor Requires Extensive

Resources

Low Complexityand Few Resources

Required

Low Impact

*Oversight, Financial and Contract Management by PMO

Active PMO Project Management for critical and large projects

Program & Project Management - BackupProgram & Project Management - Backup

• “Toll-gate” and milestone style of project approvals

• Simple deliverable matrix

• Project monitoring by phase & key milestone deliverables

• Development and adherence to technology and development standards

• Consistent reporting, coordination, control and financial management• Automated, web based toolset where economically feasible, including metadata, business rules/processes and technology architectures

Project-to-Date Spend: Cash spent up to now on this project

Total Estimated Spend: Total forecasted project cash spending

Current Phase: The project management or lifecycle phase of the project

Next Business Review: Next formal review with project executive sponsor

Estimated Finish Date: Estimated date the project will be complete

Financial Health: Will be over-budget Might be over-budget Will be under/on-budget

Staffing Health: Need additional staff/skills to complete Might need additional staff/skills to complete Will complete with existing staff/skills

Technical Health : Will miss delivery/next toll-gate date Might miss delivery/next toll-gate date Will make delivery/next toll-gate date

Schedule Health : Business is not devoting needed time Business may not devote needed time Business is devoting needed time

Business Health : Investment fails business requirements Investment may not meet requirements Investment meets business requirements

0.28

0.03

0.05

0.19

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

2002 Fee 2003 Fee

$ / M

WH

Equity Portion of Capital Investments

Baseline Operations

Proposed $0.33/MWH

2002 vs. 2003 System Administration Fee - Backup

• Define and utilize a standard set of project management phases and deliverables.

• Track projects based on the defined phases & key deliverables

• Have regular meetings with the project sponsors and executive committee.

• Institute a “toll-gate” approval process for projects. Projects are only approved to proceed to the next phase.

• The Program and Technology office’s main focus areas are to:

• develop the project & investment methodology & deliverables

• monitor compliance

• recruit, retain, train & assist project managers

• high-level resource planning

• financial management and control

• technology architecture coordination, selection and compliance

Project & Technology Management Guiding Principles Backup

Project & Technology Management Guiding Principles Backup

Consistent Program, Project and Technology processes:

Financial management

Project initiation, prioritization & rationalization

Project Management “toll-gates”

Overall Technology “Architecture” coordination & control

Scheduled Reviews

Standard reporting package for major projects, programs and technology:

Expense & capital update & variance

Approved project list with red-yellow-green health check

Labor breakdown between maintenance and project work

Defined documents to support the processes:

Template to allocate staff time

Database to track investment ideas & approved projects

Project health template & definitions

Governance Desired Outputs BackupGovernance Desired Outputs Backup

• Ensure business unit ownership of ERCOT investments and alignment with ERCOT short and long term business plans and strategy

• Establish a cross-functional review/approval (enterprise-wide) process to ensure the business units are involved in the rationalization and prioritization of investments. Require that investments are aligned with the business and technology plans for short and long term strategy

• Ensure only investments with the greatest business value are funded

• Provide timely approval of project investments

• Identify opportunities to leverage investments across the firm

• Ensure costs, benefits & risks are adequately captured

• Ensure business units, Operations & IT are held accountable for delivering agreed efforts

• Common investment summary and project request forms

• Consistent, enterprise-wide rationalization process

• Systems and Software Architecture Coordination and Standards

Investment Rationalization Guiding Principles BackupInvestment Rationalization Guiding Principles Backup

page 1 program management office “pmo” steve wallace january 22, 2003

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