Reliability Deployments Task Force Update WMS Meeting WMS Chair created task force with the directive that the task force will address real-time market outcomes when reliability commitments and deployments are made by ERCOT RDTF meetings occurred on July 15 th, July 25 th, July 28 th, and August 8 th Data Review: – Reviewed generally ERCOT deployment of NSRS from December 1, 2010 – June 30, 2011 Length of deployment Amount of deployment LSL added during deployment – Reviewed RUC commitments in May/June 2011 Reason for RUC commitments Deployment quantities – Deep dive review of NSRS deployments on July 13 and July 18 th Real-time price impact due to deployments, type of NSRS units deployed (online, offline, quickstart), aggregated energy offer curves of NSRS units

RDTF Update (cont.) Consensus opinion: – Deployment of NSRS and RUC impacts real-time energy prices 0 – LSL impact LSL – HSL impact Task force has reviewed proposals to address impact of deployments on real-time energy prices ERCOT Proposal Macquarie Proposal Morgan Stanley Proposal Shams Proposal Proposals continue to evolve through discussion – Consensus has not been reached on solution to address impact of deployments on real- time energy prices – Key differentiator between proposals is whether or not an offer floor is needed for NSRS units and the level of offer floor – Proposals range from no offer floor to $3000 per MWh offer floor for NSRS units – To facilitate discussion regarding potential solution ERCOT provided SCED re-run scenarios for different offer floors during July 13 th and July 18 th NSRS deployments Offer floor scenarios – Scenario 1 = Online NSRS (18*FIP) and Offline (15*FIP + $120) – Scenario 2 = $500 – Scenario 3 = $1000 – Scenario 4 = $3000

RDTF Update (cont.) Implementation timeline for offer floor proposals: – Assumption that implementation of proposals will require NPRR approval and impact analysis Task force also is reviewing potential short term solutions (solutions that could be implemented without NPRR such as revisions to deployment procedures) – Deploy online NSRS earlier in procedure – Partial deployment of NSRS – Quickstart NSRS participation in SCED – NSRS recall procedures review – Change in RUC policy to utilize the NSRS above the largest unit prior to deploying RUC for capacity insufficiency Other issues raised for potential future discussion at RDTF – Impact of RRS deployment on real-time energy prices – EILS deployment impact on real-time energy prices – Impact of RMR deployments on real-time energy prices – RUC self-commitment/clawback

RDTF Update (cont.) Next RDTF Meeting is on August 17 th PUC Workshop on August 22 nd – Purpose is to discuss the proposals on factors affecting pricing during reliability deployments in an open meeting before both Commissioners. – Prior to the workshop, the Commission requests interested persons file comments to the following questions: Please provide proposals to address non-spinning reserve deployment procedures and describe in detail the market incentives that are derived from your proposal. How does your proposal enable the most competitive and efficient prices when non-spinning reserves are deployed? Presentations referred to in this update have been distributed to the WMS list

WMS Motion to Endorse Concepts Due to complexity, WMS is unable to make any recommendation at this time to address 0 – LSL impact but should continue to monitor Energy offer curve for RRS and Up Reg should be at system- wide offer cap Revise RUC policy to allow for delay of RUC for capacity insufficiency by using portion of NSRS capacity Review NSRS deployment and recall process Deploy online NSRS and Quick Start in SCED subject to a determined offer floor and deploy prior to offline NSRS Treat offline NSRS similar to today subject to a determined offer floor for the EOC from LSL – HSL