1 COMS/Settlements/Credit Weekly Update August 20, 2010

2 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.

3 Agenda Anti-trust Admonition Settlements Standing Reports and Updates –Operating Day Settlement Reports –Week in Review/General Reminders –Next Week’s Activities Settlements Environment Report –Known Issues Credit Question and Answers / General Discussion 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

4 DAM Settlement Overview for August 12 Statement and Invoice Overview 172 Statements/Invoices posted to QSEs 62 Statements/Invoices posted to CRRAHs 0 QSEs received Statements/Invoices for $0 CRR Overview CRRs were not derated There were no CRR Shortfall Charges General Reminders/Updates Submit any questions/issues about statements, invoices, extracts or calculations to

5 DAM Settlement Overview for August 13 Statement and Invoice Overview 163 Statements/Invoices posted to QSEs 62 Statements/Invoices posted to CRRAHs 0 QSEs received Statements/Invoices for $0 CRR Overview CRRs were not derated There were no CRR Shortfall Charges General Reminders/Updates Submit any questions/issues about statements, invoices, extracts or calculations to

6 DAM Settlement Overview for August 14 Statement and Invoice Overview 167 Statements/Invoices posted to QSEs 42 Statements/Invoices posted to CRRAHs 3 QSEs received Statements/Invoices for $0 CRR Overview CRRs were not derated There were CRR Shortfall Charges General Reminders/Updates Submit any questions/issues about statements, invoices, extracts or calculations to

7 DAM Settlement Overview for August 15 Statement and Invoice Overview 147 Statements/Invoices posted to QSEs 43 Statements/Invoices posted to CRRAHs 1 QSEs received Statements/Invoices for $0 CRR Overview CRRs were derated There were no CRR Shortfall Charges General Reminders/Updates Submit any questions/issues about statements, invoices, extracts or calculations to

8 DAM Settlement Overview for August 16 Statement and Invoice Overview 135 Statements/Invoices posted to QSEs 62 Statements/Invoices posted to CRRAHs 2 QSEs received Statements/Invoices for $0 CRR Overview CRRs were not derated There were no CRR Shortfall Charges General Reminders/Updates Submit any questions/issues about statements, invoices, extracts or calculations to

9 DAM Settlement Overview for August 17 Statement and Invoice Overview 151 Statements/Invoices posted to QSEs 62 Statements/Invoices posted to CRRAHs 0 QSEs received Statements/Invoices for $0 CRR Overview CRRs were derated There were no CRR Shortfall Charges General Reminders/Updates Submit any questions/issues about statements, invoices, extracts or calculations to

10 RTM Settlement Overview for August 4 Statement Overview 205 Statements posted to QSEs 4 Statements posted to CRRAHs 5 QSEs received Statements for $0 General Reminders Submit any questions/issues about statements, invoices, extracts or calculations to

11 RTM Settlement Overview for August 5 Statement Overview 202 Statements posted to QSEs 4 Statements posted to CRRAHs 2 QSEs received Statements for $0 General Reminders Submit any questions/issues about statements, invoices, extracts or calculations to

12 RTM Settlement Overview for August 6 Statement Overview 183 Statements posted to QSEs 62 Statements posted to CRRAHs 2 QSEs received Statements for $0 General Reminders Submit any questions/issues about statements, invoices, extracts or calculations to

13 RTM Settlement Overview for August 7 Statement Overview 179 Statements posted to QSEs 43 Statements posted to CRRAHs 3 QSEs received Statements for $0 General Reminders Submit any questions/issues about statements, invoices, extracts or calculations to

14 RTM Settlement Overview for August 10 Statement Overview 196 Statements posted to QSEs 0 Statements posted to CRRAHs 2 QSEs received Statements for $0 General Reminders Submit any questions/issues about statements, invoices, extracts or calculations to

Charge Type Tracker Below are the Day Ahead Market charge types that have been executed at least once during Market Trials (18 of 19 executed) 15

Charge Type Tracker 16 All Real-Time Market charge types have been executed at least once during Market Trials (45 of 45 executed)

Week in Review RTM Invoices (Posted 8-19) –RTM Initials 7/30, 7/31, 8/1, 8/2, 8/3, 8/4, 8/5 –RTM Finals 7/20, 7/21, 7/22, 7/23, 7/24 –RTM True-ups 6/22, 6/23, 6/24, 6/25, 6/26 EILS Settlement completed with the 7-31 Final 8-18 RTSPPs for Interval Ending 01:00 are all zero. Once the price corrections are posted, we’ll be performing a DAM Resettlement before we run the 8-18 Initial 17

18 Next Week’s Activities Operating Days for next week that will be settled –8-24 though 8-28 (DAM and RTM) 40 hour LFC Test will take place on 8-26 through 8-28 RUC Simulation –If you want to receive a RUC Commitment or Decommitment to coincide with a Zonal self commitment or RPRS commitment, send the request to 6-17 Re-Settlement (So EMRE bill determinant will be published)

Environment Report-Known Issues COMS New Known Issues If a QSE self-commits more than one combined cycle configuration for the same hour and then a later RUC process runs to commit the configuration with the lower HSL, the self commit flag will not be generated correctly (Incorrect SELFCOMMITFLAG) If a resource comes online at exactly 1 minute before the end of an hour (XX:59:00) the flag that determines Energy Eligibility in the DAM Make-Whole payment will not be generated correctly (Incorrect DAMWENEFLAG) COMS Closed Issues No new closed issues Reminder: ERCOT will post known issues every Friday to the readiness center at:

EILS Settlements 20 Utilized EILS Feb 2010 – May 2010 contract QSEs 7/31 RTM Final Statements contain EILS Payment and Charge line items (in the Real-Time Energy section) QSEs should verify that charge types are displayed on their statement and that data elements defined below are in their RTM settlement extracts. Data ProvidedProtocol EquivalentZonal EquivalentComment EILPAMT q(tp) QSE_EIL qc(tp) MISC_CREDIT_EILS_B1_061010_PAYMENT_TO_CREDIT_CH4 MISC_CREDIT_EILS_B2_061010_PAYMENT_TO_CREDIT_CH4 MISC_CREDIT_EILS_B3_061010_PAYMENT_TO_CREDIT_CH4 MISC_CREDIT_EILS_NB_061010_PAYMENT_TO_CREDIT_CH4 EILS Capacity Payment By QSE and Time Period Scalar (no interval breakdown) In RTM CODE EILCAMT q(tp) LAEIL qc(tp) MISC_DEBIT_EILS_B1_061010_PAYMENT_TO_DEBIT_CH4 MISC_DEBIT_EILS_B2_061010_PAYMENT_TO_DEBIT_CH4 MISC_DEBIT_EILS_B3_061010_PAYMENT_TO_DEBIT_CH4 MISC_DEBIT_EILS_NB_061010_PAYMENT_TO_DEBIT_CH4 EILS Capacity Charge By QSE and Time Period Scalar (no interval breakdown) In RTM CODE EILPAMTQSETOT q n/a (∑ c(tp) QSE_EIL qc(tp) )n/a EILS Payment Amount per QSE Value on Statement Scalar In RTM CODE EILPAMTTOTn/a (∑ qc(tp) QSE_EIL qc(tp) )n/a EILS Payments Total by Time Period Scalar In RTM MODE EILSLTOT (tp) n/a Total Load by Time Period Scalar In RTM MODE EILCAMTQSETOT q n/a (∑ c(tp) LAEIL qc(tp) )n/a EILS Charge Amount per QSE Value on Statement Scalar In RTM CODE

Settlements FAQs 21 Q: How is ERCOT going to handle intervals where TWTG is missing A: ERCOT has put into place a process to flag intervals where TWTG is missing for all resources for a settlement interval. A manual correction will be made to replace the data. Q: When will the Settlements Disputes API be available? A: The Nodal Disputes API will be available next week for QSEs to submit disputes. If you’d like to test the Disputes API, please send a message to your ERCOT Client Manager with the request to test. A Market Notice will be sent out next week with additional details. Please continue, however, to send any issues to Nodal disputes will NOT be used for Market Trials issue

Open Forum Any Questions??? 22

Market Trials - Friday call Credit and Treasury Weekly Update August 20, 2010

Week in Review Core credit – CMM Posted Credit Reports and sent ACLs each business day –AIL Report Data lags occurred on 8/17 and 8/18 as a result of the weekend failover (the lag is now cleared) Market Trials - Friday call

Week in Review Core credit – CMM Credit exposures –Credit exposures reflect market participant activity in Market Trials There remain a few exceptions, which are listed on the Known Issues list Several adjustments continue to be made for Market Trials as a result of extreme data experienced –The ADTE component of the EAL continues to be adjusted to reflect recent Zonal activity »While this establishes a more moderate level of exposure, it may not be predictive and will not alleviate the impact of unusual RT activity on the AIL Component »The adjustment will remain in effect through September 3rd unless a CP requests a different ADTE –AIL exposures continue to be adjusted as follows: »For completed and not settled days, exposure is reduced by 50% »For forward days, exposure was reduced by 80% »The adjustment will remain in effect through September 3rd unless a CP requests a different ADTE 25

Week in Review –For a CP to get a good idea of how credit will work in Nodal, they should try to operate (as much as possible) as they intend to in Nodal (including using Energy Trades along with DAM, etc) –ERCOT will work with CPs to further adjust their ADTE to reflect projected activity as needed 26

Week in Review DAM Credit Constraint “e” Factors –“e” Factor changes went into effect on Friday, August 20 th for the DAM run for operating day Saturday, August 21 th notification sent one day late on August 19 Only one entity requested specific ‘e1’ and ‘e2’ The biweekly reset was based on CP data –New known issue – ERCOT has identified an error in the “e2” Factor calculation. The “e2” factor calculation is using energy only offer volumes when it should use energy bid volumes. Issue is fixed and pending migration. The “e1” calculation is correct. –NPRR 206 and “e” factors training materials are Market Trials - Friday call

Week in Review DAM Credit Constraint - Adjustment of ACL on Non-Business days –On Non-Business days, MMS reduces the latest ACL by the following each day until a new ACL is received from credit. Energy-only offers –ACL is reduced by the product of the cleared quantity of the offer times the 95 th percentile of the hourly difference of the Real-Time Settlement Point Price and Day-Ahead Settlement Point Price over the previous 30 days for the hour. Energy bids –ACL is reduced by the product of the cleared bid quantity multiplied by the cleared bid price. Three part energy offers –ACL is reduced by the product of the cleared quantity of the offer times the 95 th percentile of the hourly difference of the Real-Time Settlement Point Price and Day- Ahead Settlement Point Price over the previous 30 days for the hour. PTP Obligation bids –For each cleared PTP Obligation Bid, the ACL is reduced by the cleared bid quantity multiplied by the sum of the cleared bid price, if positive, plus the 95th percentile of the hourly positive price difference between the source Real-Time Settlement Point Price minus the sink Real-Time Settlement Point Price over the previous 30 days for the hour. Procured AS –For procured Ancillary Services, the ACL is reduced by the product of the cleared quantity of Ancillary Service not self-arranged times the hourly MCPC for that Ancillary Service for that hour. NOTE: Above slide is from the DAM slide deck 28

Week in Review Market Trials - Friday call

Next Week ERCOT –Will send ACLs for DAM and CRR Auction –Will not override ACLs Will send collateral calls if exposure exceeds credit limit If ERCOT sends a collateral call, the CP will likely not be able to bid in DAM until additional e-collateral is received Counter-Parties –Since ERCOT no longer overrides ACLs, CPs should review Credit Reports and consider a) their exposure and b) upcoming DAM, CRR Auction and any LFC test c) that the ACL report indicates the total ACL and does not reflect any credit limit held for the CRR auction –ERCOT has not seen many bilateral trades for CRRs. CPs are requested to initiate a few trades to test this functionality. Market Trials - Friday call

Next Week - Schedule of activity Market Trials - Friday call

Next week – schedule of activity CRR Credit Constraint – Time Sensitive –On the CRR Friday call, a problem with the implementation of the A and M factors in the credit constraint in prior auctions was noted. Treatment will be fixed for the September CRR Auction occurring next week The corrected treatment will increase how much credit is consumed in the auction –(e.g. where $5.50 was consumed in prior auctions, $9.50 will be consumed in the September auction) –See CRR slides for more information CPs participating in the September auction should post additional e-collateral as needed no later than Monday noon. NOTE: The Market Credit Work Group has been reviewing how the A and M factors interact. 32

Other topics Tentative timeline for First Priority Security Interest document –July 1, 2010 – ERCOT circulated initial draft to CPs. –July 19, 2010 – Comments back from CPs. –August 6, 2010 – ERCOT circulated second draft to CPs. –August 17, 2010 – ERCOT reviewed document with F&A. –August 23, 2010 – Final comments due back from CPs. –September 21, 2010 – Final review and possible approval by F&A and ERCOT Board. “e” Factors –Current biweekly “e” factor reset will be effective for the DAM run on Friday, August 20 th for operating day Saturday, August 21 st –Next biweekly “e” factor reset is planned for the DAM run on Friday, September 3 rd for operating day Saturday, September 4 th with notices sent by 9:00 am on Wednesday, September 1 th Market Trials - Friday call

Other topics – “e” factors –Alternative or Favorable treatment CPs should notify ERCOT of their desire to receive the “alternative” or “favorable” treatment in Market Trials –by sending an to with “Credit – “e” factors – favorable treatment requested” in the subject –Finally, if CPs do not believe their DAM activity in Market Trials in July and August is indicative of their projected activity after “Go Live”, they may request ERCOT to set their “e” - factors to reflect their anticipated activity »By sending an to with “Credit – “e” factor – specific “e” factors requested” in the subject line and the e factors requested in the body of the »Any “override” will be effective until the next bi-weekly reset (e.g. must be requested again or factors will be reset based on data) Note: Request for favorable or specific treatment should be sent by Monday, August 30 th for the Wednesday, September 1 st reset. Market Trials - Friday call

“e” Factors – Bi-weekly Process - Market Trials

New Known Issues New known issue – ERCOT has identified an error in the “e2” Factor calculation. The “e2” factor calculation is using energy only offer volumes when it should use energy bid volumes. Issue is fixed and pending migration. The “e1” calculation is correct. –Note: Known Issues can be reviewed at :

FAQs When the ADTE has been adjusted, how is it incorporated into the AIL calculation? –The AIL report displays both the unadjusted AIL and the Adjusted AIL. If the ADTE has been adjusted, the AIL report reflects only the Adjusted ADTE in the conformed ADTE. If you wish to shadow the calculation of the unadjusted AIL for some reason, you will need to look to the EAL or EAL Detail Report to obtain the unadjusted ADTE and calculate the Conformed ADTE. 37