PMO Update to TAC Troy Anderson Program Management Office November 2, 2006

2 Zonal PPL Review  Discussion Points (addressed in the following order)  Funding of Zonal Portion of Nodal Projects — During 2007 several projects were added to the Nodal program due to efficiencies and critical path dependencies — Nodal surcharge created scenario where different stakeholder groups were funding Nodal and Zonal projects — ERCOT reviewed the Nodal project list for efforts that would have been incurred by Zonal (regardless of Nodal) — Result: $37M was identified as the Zonal portion of five Nodal projects NMMS, State Estimator, EMS Upgrade, Unix End-of-Life, TCC Virtualization  Zonal budget reduction from $36M to $30M — Supported leaving 2007 admin fee flat

3 Nodal budget big picture From 10/06 Board Presentation

4 Zonal Portion of Nodal Projects  Several Funding Options Are Being Considered  See item #7 on 10/17 Board of Directors meeting agenda  Proposed Strategy to Fund $37M  2006 — IO CART Reprioritization = $ 1.0M — Additional Board-approved Funds = $ 9.3M  2007 — IO CART Reprioritization = $ 7.5M — Additional Debt = $14.0M  2008 — Funded by 2008 Zonal PPL = $ 5.2M $37M

5 Zonal Portion of Nodal Projects $14M reduction in debt incurred offsets additional 2007 debt  Impact on Yearly Zonal Project Budgets Initial Critical Path Year Budget Zonal for Nodal Total 2006 $25.0M $25.0M $ 9.3M $34.3M 2007 $30.0M $30.0M $14.0M $44.0M 2008 $35.0M $15.8M $ 5.2M $21.0M Subtotal $28.5M + IO Reprioritization $ 8.5M Total $37.0M

6 Zonal PPL Review  Impact on Yearly CART Project Budgets CART (projected) CO $ 2.5M $ 4.5M $ 2.0M IO $ 8.1M $12.5M $ 8.0M MO $ 2.5M $ 1.5M $ 0.3M RO $ 6.7M $ 7.0M $ 5.0M SO $ 5.2M $ 4.5M $ 0.5M Totals $25.0M $30.0M $15.8M $ 9.3M $14.0M $ 5.2M Totals $34.3M $44.0M $21.0M Zonal Totals Critical Path Items For Nodal

7 Zonal Portion of Nodal Projects  Impact Summary  IO PPL Restructured in 2006 and 2007  Temporarily change debt ratio in 2007 — Recovered in 2008  Reduced Zonal budget in 2008  Questions?

Project Budget Update Program AreaInitial Budget RequestRevised Budget Request CO$ 5,750,000$ 4,250,000 IO$ 16,000,000$ 12,750,000 MO$ 2,058,000$ 1,500,000 RO$ 7,659,000$ 7,000,000 SO$ 4,908,000$ 4,500,000 Totals$ 36,375,000$ 30,000,000 Program AreaCarryoverBaseline MaintenanceEnhancementsPUCT/NERC/Market CO$ 900,000$ 850,000$ 2,500,000$ 0 IO$ 3,100,000$ 4,350,000$ 5,300,000$ 0 MO$ 400,000$ 100,000$ 800,000$ 200,000 RO$ 4,700,000$ 0$ 975,000$ 1,325,000 SO$ 2,350,000$ 0$ 600,000$ 1,550,000 Totals$ 11,450,000$ 5,300,000$ 10,175,000$ 3,075,000 Modified budget request to meet target Breakout of project budget by project type From 9/06 PRS Presentation

9 Summary of 2007 PPL Changes  2007 CART Project Budget Changes CART Original Revised Reasons CO $ 5.75M $ 4.25M Acceleration of $0.25M from 2007, 2 deferrals to 2008, 1 merge with IO IO $16.00M $12.75M Acceleration of $2.50M from 2007, reduction in estimate for Info Lifecycle MO $ 2.06M $ 1.50M TML Phase 3 reduction RO $ 7.66M $ 7.00M Deferral of portions of low ranked ERCOT projects to 2008 SO $ 4.91M $ 4.50M Acceleration of $0.25M from 2007, reduction in Operations Support Study est. $36.38M $30.00M Subtotal (initial Zonal budget reduction) Nodal $ 0.00M $14.00M Critical path items for Nodal Total $36.38M $44.00M

10 Zonal PPL Review  Questions?

Supporting Information

12 Finance & Audit Committee Report From 10/06 Board Presentation

13 Finance & Audit Committee Report From 10/06 Board Presentation