NPRR Proposed Changes TPTF Meeting 26 Aug 2008

2 2 Summary of Changes 1.90% was mentioned twice, once in Available Credit Limit (ACL) definition and once in CRR auction credit limit. The intention is to apply 90% to ACL only once. Hence the 90% is removed from the ACL definition 2.Eliminate “two day” requirement for prepays. Remove Invoices from the exposure calculation the day after they are paid 3.Congestion Revenue Right’s (CRR’s) future exposure is represented by Future Credit Exposure (FCE) calculations. Including the CRR Invoices in Daily DA Liability Extrapolated (DALE) and Average Daily Transaction Extrapolated (ADTE) calculations result in calculating the future exposure more than once for CRR activity. Hence the CRR activity needs to be excluded from DALE and ADTE calculations. 4.If the Day Ahead Market (DAM) is executed but specific DAM Settlement Point Prices are not available, ERCOT may use the appropriate Auction Clearing Price instead of Hub Settlement Point Price.

Exclusion of DALE and ADTE Calculation for CRRAH DALE is designed to capture the Day Ahead future exposure ADTE and RTL(forecast for the next seven days) is designed to capture the Real Time future exposure For a CRR Account Holder, the future exposure is already being captured in FCE (Future Credit Exposure) related components For a QSE, there is no significant future exposure for CRR activity. Existing protocol language ( ) calculates DALE, ADTE and RTL(forecast for the next seven days) for both QSE and CRR AH Applying DALE, ADTE and RTL(forecast for the next seven days) in addition to FCE for a CRR AH results in projecting future exposure more than once Hence ERCOT proposes a change to exclude the calculation of DALE, ADTE and RTL(forecast for the next seven days) for CRR Account Holders.

4 4 CRR Award Types – CMM Current and Future Exposure Matrix The following matrix details the various types of CRR’s and how their exposure is captured

Use ACP instead of Hub Settlement Point Prices in FCE Calculation Current protocol language suggests using Hub Settlement Point Prices when Day Ahead (DA) or Real Time (RT) Settlement Point Prices (SPP) are missing for a given Settlement Point in the calculation of Todays, Five Days and Previous Month values of FCE calculation. CWG approved the following weight factors to be used for FCE valuation. TimelineW1 (ACP)W2 (Todays Value) W3 (Five Days Value) W4 (Previous Month Value) CM, CM + 125%10%20%45% CM + 2 and beyond68%4%8%20%

6 6 Reasons to use ACP instead of Hub Settlement Point Prices ERCOT expects to have DA or RT SPPs available for all settlement points for CRRs included in monthly auctions –A Settlement Point can be included in a CRR monthly auction only if that point is energized at the time of the auction In annual and bi-annual auctions, it is possible to auction a CRR path including a Settlement Point that is not energized at the time of auction and for which a forward value cannot therefore be derived using DA or RT SPP. A price substitute is required until that Settlement Point is energized. –Hub to Settlement Point mapping is not readily available in any of the ERCOT systems –Creating the Hub to Settlement Point mapping and interfacing this information with CMM is expected to be costly and to have schedule impact –The ACP is readily available for all SPPs –The FCE valuation is already reasonably weighted toward ACP for CM and CM+1 (W1 = 25%) and heavily weighted toward ACP for CM+2 and beyond (W1 = 68%).