TNT Commercial Operations Working Meeting Betty Day, Kenneth Ragsdale, BJ Flowers April 6&7, 2004

1/13/20152 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, please take one now and review it at this time. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws.

1/13/20153 Agenda  Review Game plan  Goals  Energy Settlements Background  Energy Settlement Formulas (handouts)  Energy Settlement Examples (handouts)

1/13/20154 Game Plan  April 6 th & 7 th :  Energy Settlement (complete)  AS Settlement (complete)  April 13 th :  DaRUC / HaRUC (complete) (examples sent out by 4/9)  CRRs  April 20 th :  Review all papers  April 21 th & 27 th :  Protocols Session

1/13/20155 Goal of Next Discussion  Understand Energy Settlement in the Nodal Market  Clarify questions and concerns  Stay focused on ENERGY settlement  Start with REAL TIME ENERGY  Identify the elements necessary for settlement  Ensure there is common understanding of: Source of the data elements Units Time Interval

1/13/20156 Examples & Formulas for:  Energy Pay/Charge (ADAM & EHDAM)  Deviation Penalty Pay/Charge  Ancillary Services Pay/Charge (including ESS)  DA/HA RUC Pay/Charge  CRR Pay/Charge (includes “claw” & “40%” for PCRRs)  CRR Balancing Account  BENA  BUL (not sure what changes) Deliverables to TNT

1/13/20157 REAL TIME ENERGY Settlement Inputs for Settling Real Time Energy Metered Energy Price Calculated for the Load Zones Price Calculated for the Resource Nodes Identification of RT energy owner Identification of the settlement point ??? Outputs from Settling Real Time Energy Charges by Owner by settlement point Payments by Owner by settlement point

04/06/20048 Node A Node B Node D Load Node 1 Load Node 2 Load Node 3 Zone B Lode nodes Serve Defined Zones (5 minute LMP observable) Transmission Network Resource Nodes Serve All Load Nodes thru Xmission Network Load Node 4 Load Node 5 Zones are served by assigned Lode Nodes (15 min settlement) Zone A QSE A Doggett QSE A Flores QSE B Cuddy QSE B Galvin Resources serve Specific Nodes Breaking Down the Complexity of the Electrical Grid Node E QSE B Mickey

1/13/20159 Background: Option 1 & 2  Option 1(pre-EHDAM) Settle by activity type:  Physical Resource  Physical Load  Bilateral Obligations  Bilateral Resources Net all activity types by location  Option 2 (pre-EHDAM) Consider Bilaterals to be “Commitments” Use the formula (RT – “Commitments”)

1/13/ Background: LMPs Load Zone A: ($30 x 300 MWh) + ($23.53 x 300 MWh) = $16,059 / 600 MWh = $26.76 Load Zone B: ($21.17 x 300 MWh) = $6,351 / 300 = $21.17 Hub X: ($ $30 + $23.53) = $74.70 / 3 = $24.90

1/13/ Settlement Calculation Categories Energy Settlements Congestion Settlements Loss Settlements Operating Reserve or Make Whole Settlements Ancillary Service Settlements (Reg, Spin, Non-spin, OR, Replacement) BENA & Other Uplifts  Capacity Settlements (ICAP)  Black Start/RMR  CRR Settlements  Deviation Penalty Background: Texas Nodal Settlements

1/13/ Day Ahead Adj. Net Interchange (DA ANI) Offers Bids Cleared Supply Cleared Demand Supply – Demand (per location) Day Ahead Settlement Qty x Auction Clearing Price Day Ahead Market Metered Gen Metered Load Exports Actual Supply Actual Demand Real-Time Settlement Qty x LMP at Location Imports Supply – Demand (per location) RT ANI – Com ANI Real-Time Adj. Net Interchange (RT ANI) Post Day Ahead & Real-Time Market Make Whole Other Deviation Penalty Bilateral Purc Bilateral Sale Energy Settlement: ADAM Option 2 AS Energy Supply – Demand (per location) Commitment Adj. Net Interchange (Com ANI)

1/13/ Energy Settlement: E-HDAM Option 2 Day Ahead Adj. Net Interchange (DA NI) Self Schedule Gen Awd Imports Virtual Supp Demand Bids Virtual Demd Exports Bilateral Purc Bilateral Sale Day Ahead Market Metered Gen Metered Load Exports Imports RT NI – DA NI Real-Time Adj. Net Interchange (RT NI) Post Day Ahead & Real-Time Market Supply – Demand (per location) Cleared Supply Cleared Demand Actual Supply Actual Demand Day Ahead Settlement Qty x LMP at location Real-Time Settlement Qty x LMP at location Make Whole Other Make Whole Other Deviation Penalty AS Energy

1/13/ Nodal Settlements  Scheduling  ADAM – Energy and $’s  Real Time Energy – Energy and $’s  EH DAM – Energy and $’s  Ancillary Services – Capacity and $’s  CRR - $’s  DaRUC – Capacity, Min. Energy and $’s  Track manual commitments  Make Whole payments  HaRUC – Capacity and $’s  DC Tie