ERCOT names Ohio utility executive Pablo Vegas new CEO

Pablo Vegas, chief operating officer of Ohio utility NiSource, was named chief executive of the Electric Reliability Council of Texas, which operates the Texas grid. He replaces Brad Jones, who led the organization as its interim-CEO following the February 2021 winter storm, when Texans across the state lost power and hundreds of people died.

Vegas will head an agency that continues to face heightened scrutiny since the deadly winter storm. The selection of Vegas, and the recent appointment of Kathleen Jackson to the PUC, brings a close to the leadership transition after the CEO of ERCOT and every member of its regulatory oversight board, the Public Utility Commission, were either fired or resigned in the early aftermath of the event. The Texas Legislature also reconstituted ERCOT’s board of directors, requiring members to live in Texas.

“We’ve got ongoing reforms that will continue to ensure reliability in Texas,” said Public Utility Commission Chairman Peter Lake. “[Vegas] is the right leader at the right time to help us address the complex grid we have, the dynamic mix of resources we have, and I’m very much looking forward to working with him.”

Lake expressed his support for the decision at a Tuesday board meeting where commissioners ratified the unanimous decision of the ERCOT board.

Vegas’ base salary will be $990,000 a year, according to his contract. He will also receive a one-time lump sum payment of $247,500 before the end of this year.

The agreement also includes an annual “short-term incentive” that would pay him as much as an entire year’s salary starting in March 2024, bumping his salary to nearly $2 million a year if he meets the goals the ERCOT board sets for him.

At NISource, Vegas earned just over $3 million in salary, stock and incentives as a company vice-president and its chief operating officer. In 2020, he earned $3.9 million and he made $2.1 million in 2019, according to a company filing with the Securities and Exchange Commission.

Interim CEO Jones had planned on leaving ERCOT earlier this year, but he stayed on during the CEO selection process and as Texas’ grid faced test after test amid a heat wave that led to multiple record breaking days on power demand this summer.

Jones will serve as the interim CEO until Oct. 1 and will help Vegas transition into his new role, ERCOT said Tuesday in a news release.

“Texas leaders have faced the challenges in the ongoing energy transition head-on and are committed to driving improvements in the energy economy for the benefit of generations to come,” Vegas said in a written statement. His experience includes serving as chief operating officer for AEP Texas.

Electricity regulators, experts and economists expressed support for the new executive, but also warned that Texas isn’t much like Ohio, and it’s critical that Vegas get it right. The state’s main grid operator continues to adapt to major structural changes in the types of power generation resources in Texas, while the PUC redesigns the state’s power market with an the goal of making the grid more stable. The PUC plans to complete and approve the final changes to the ERCOT market by the end of the year, ahead of next year’s session of the Legislature.

Alison Silverstein, an electric system reliability consultant and researcher, applauded Jones’ work as the state grid operator’s top executive.

Silverstein said Vegas has a strong track record in business management and customer service, but she added he is stepping into a market that is very different from the region he is leaving. A lot has changed since Vegas’ time in Texas.

Unlike ERCOT, Vegas is coming from a region with “slow growth, lots of vertically integrated utilities with lots of older coal and gas plants, fewer renewables, and a large region for reliability support,” Silverstein said in an email.

“The cost of electricity in ERCOT has already gone up by at least $5 billion this year, and it’s not clear that those extra charges have improved reliability at all,” Silverstein wrote. “Mr. Vegas and the ERCOT team have a big job ahead of them to get us to that reliable, affordable and clean grid over the next few years.”

Energy analyst Doug Lewin agreed that Vegas’ experience is mostly in markets that are different from the one that ERCOT operates in. He said he is eager to see how the new CEO, the utility commission and lawmakers address reliability and affordability.

“The approach of ERCOT and the PUCT to date has been reliability at any cost. But Texas will not be an attractive place for businesses to locate and more Texans won’t be able to pay their energy bills if we can’t solve the affordability crisis while we solve the reliability crisis,” Lewin said in an email. “He’s got a tough job ahead; I don’t envy him even though he’ll be paid more than $2 million per year.”

North Texas-based economist Bud Weinstein said a reputation for low electricity cost and reliability had been a major pull factor for Texas for businesses. Although business and people continue to move to the state, Weinstein said another major disruption to grid operations could significantly affect economic growth.

“We had this very positive image of our power grid, that I think is one of the factors for recruiting business to Texas and then the grid goes down in 2021,” Weinstein said. “That was a real black eye to the state of Texas.”

Vegas also will face political pressure as doubts about the grid’s stability remain a talking point for Democratic challengers to Gov. Greg Abbott and Lt. Gov. Dan Patrick. A recent poll from The Dallas Morning News and the University of Texas-Tyler showed only 15% of Texans have high confidence in the grid.

Gov. Greg Abbott said in a written statement that he looks forward to working with Vegas and thanked Jones for his “exemplary” work as interim CEO.

“ERCOT’s selection of Pablo Vegas as the new CEO to lead the commission demonstrates their commitment to providing Texans with the abundant and reliable power they deserve,” the governor said.

In a written statement Tuesday afternoon, state Sen. Kelly Hancock, a Republican from North Richland Hills, said he is glad to see ERCOT hire Vegas as CEO. Following the 2021 winter storm, Hancock authored a senate bill to increase oversight of the ERCOT Board of Directors.

“I believe he understands that grid reliability is key to a growing Texas economy,” Hancock wrote.