Market Trials Congestion Revenue Rights Weekly Update May 14, 2010 http://nodal.ercot.com 1

Antitrust Admonition ANTITRUST ADMONITION ERCOT strictly prohibits Market Participants and their employees who are participating in ERCOT activities from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate the antitrust laws. The ERCOT Board has approved guidelines for members of ERCOT Committees, Subcommittees and Working Groups to be reviewed and followed by each Market Participant attending ERCOT meetings. If you have not received a copy of these Guidelines, copies are available at the Client Relations desk. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws. DISCLAIMER All presentations and materials submitted by Market Participants or any other Entity to ERCOT staff for this meeting are received and posted with the acknowledgement that the information will be considered public in accordance with the ERCOT Websites Content Management Operating Procedure. http://nodal.ercot.com 2

Anti-trust Admonition Environment Report Planned / unplanned outages Agenda Anti-trust Admonition Environment Report Planned / unplanned outages Known Issues Standing Reports and Updates Future activities Qualification Update Question and Answers / General Discussion FAQ Credit Constraints ERCOT asks that Market Participants log into the WebEx session using their company name and then their name. This will allow ERCOT to take roll-call offline http://nodal.ercot.com 3

Market Trials 2010 Roadmap http://nodal.ercot.com 4

Day-to-day operations summary: Planned / Unplanned Outages of EDS No Planned Outages this coming week Unplanned Outages There were no unplanned CRR outages this week http://nodal.ercot.com 5

Delayed running allocation until fix delivered/tested/implemented Known Issues Query that produces nominations for monthly “true-up” allocation was flawed Delayed running allocation until fix delivered/tested/implemented Allocation delay in turn delayed auction notice

Standing Reports and Updates: General reminders / updates Next week’s activities Credit (ACL) integrates with CRR/DAM today To view credit extracts on MIS you (or someone in your organization) will need to have a Counter Party digital certificate with a CRR_EXTRACTS role (even to view QSE related credit information) Your credit will no longer be defaulted to $10M, but rather to an amount that reflects your current zonal market activity. (You can send an email to have it raised – details in the COMS/Credit call presentation from 7 May) If you have locked credit above your new credit limit, the credit lock amount will automatically be reduced to the new credit limit at the time of locking. Your activities in the CRR Market will affect your ability to participate in the DAM and vice versa. Bilateral trade verification will not integrate next week Please continue to contact us at Markettrials@ercot.com to report bilateral trades June Auction window 17-20 May June Credit Locks 18 May http://nodal.ercot.com 7

Q&A FAQ/Follow Up http://nodal.ercot.com 8

Q) Last week on the market call, you mentioned that NOIEs will need to resubmit their information to Legal to ensure they meet requirements. What is the deadline for this submission A) I still need to hash this out with legal, but we will post the new dates soon. Alas, last week was more exciting than we had planned for. http://nodal.ercot.com 9

Q) The BoY auction has ended Q) The BoY auction has ended. When can a CRRAH expect to see their awarded BoY CRRs loaded into the CRR Bilateral Market Portal for trading? A) The Payment Confirmation process was simulated Thursday afternoon. All BoY awards should now be tradeable. http://nodal.ercot.com 10

Q) The CMM system is going to integrate with CRR on May 14; thus, the ACL is showing as now is not the true ACL. For example if my ACL shows $10M as now and I submit my bids and offers for $6M and my remaining unsecured credit will go to DAM. When the CMM system kicks in on May 14, if it shows I only have $5M ACL available, does that mean I will need to reset my credit limit for my CRR and DAM, and if I assign $5M to my CRR then I will need to post collateral for my DAM activity; my other options is to request an increase in my ACL but I may still need to post collateral through the E-cash process. A) That is correct. Your “real” ACL is visible today in the CRR system and in MIS. If you use all of your credit in the CRR, you will have severe credit contraints in the DAM until you post additional (not real money) credit via an email. http://nodal.ercot.com 11

I noticed several instances in the attached spreadsheet where we were either not awarded any CRR quantities or the CRR bid was not fully awarded.  In all instances, the bid was above the clearing price.  Can you offer some insight into this? A) This was due to a budget constraint. While it is correct that if the binding constraint is a transmission element of some sort partially awarded bids clearing prices would equal their bid prices, that is not the case with binding budget constraints.  We do not include budget constraints in the list of binding constraints available to market participants.  It is our feeling that this is fairly confidential information that you would not want published.  To check that your budget was properly binding you could… Multiply all the awarded option bids by bid price by time of use hours, Multiply all the awarded obligation bids (by absolute value of bid price + $1.5) then by time of use hours Multiply all awarded sales with negative offer prices by bid price by time of use hours by negative 1. Add above together and see if it equals your auction budget. http://nodal.ercot.com 12

Q) I performed the math as you indicated below regarding the budget constraint and I agree that with what was awarded we did run up against this constraint if calculated in this manner. However, why would the process be to multiply the bid price by the awarded MW instead of multiplying it by the shadow price to determine whether I exceeded my credit allocation? I had approximately $X.X million allocated for this auction and yet I was only awarded $XXX thousand in CRRs. I am puzzled as to why I could not purchase any more CRRs although the value of the CRRs was well below my credit limit. A) While it would be a more efficient use of credit to do what you suggest, it really just isn't possible with the current set of optimization tools that exist. The basic problem is that the clearing price (what you wish to use) is a result of the auction, whereas the bid price is an input to the auction. Using a result of the auction as a constraint that affects the result of an auction can throw you into an endless loop scenario http://nodal.ercot.com 13

Q&A Q&A / Open Forum http://nodal.ercot.com 14

Appendix Appendix http://nodal.ercot.com 15