TAC July 2, 2003 Market Design Implementation Process Recommendation

Guiding Principles –Designed through an open, stakeholder process similar to the “RUG” process used in 1999/2000. –Process organized and managed by stakeholders. –Inclusive—all participants/ideas welcome. –Facilitator of RUG-type organization for design & protocols phases will be independent of individual stakeholders (assisted by ERCOT Staff and TAC Chair). –Design & protocols developed with active input from MOD. –Design & protocols developed with advice, logistics, and staff support provided by ERCOT staff.

Guiding Principles –Fair voting structure on all contested issues. –Clearly defined appeals process. –RUG-like process sunsets at end of protocol development phase; ERCOT staff lead implementation effort. –Standing committees—through the TAC— provide advice to ERCOT during the implementation phase. –ERCOT Board oversight of process, progress, and design.

Roles and Responsibilities ERCOT Board: ERCOT Board: –Approval of design and protocols. –Approve and/or select facilitators/experts if needed. –Rule on disputes and appeals. –Provide guidance to MPs and ERCOT Staff on financial parameters.

Roles and Responsibilities Technical Advisory Committee: Technical Advisory Committee: –Sponsor of RUG-like process. –Direct oversight of design and protocols development phases. –Advisor to ERCOT Staff in implementation phase. –Sponsor stakeholder design proposals to Board for approval. –Sponsor stakeholder protocols language to Board for approval. –Resolve disputes arising from RUG-type organization. –Prepare briefing materials for ERCOT Board on disputes and appeals.

Roles and Responsibilities Independent leadership with ERCOT Staff sponsor: Independent leadership with ERCOT Staff sponsor: –Lead meetings of RUG-type organization. –Coordinate development of work plans and schedules. –Plan/coordinate stakeholder educational activities about nodal markets (early in the design process). –Organize flow of issues consideration and discussion. –Post agendas and provide notice of meetings. –Oversight of communications with stakeholders, e.g., website.

Roles and Responsibilities Independent leadership with ERCOT Staff sponsor Con’t: Independent leadership with ERCOT Staff sponsor Con’t: –Delegate assignments to ad hoc working groups and ERCOT staff. –Coordinate development of strawdogs. –Track and follow up on schedules, issues, and assignments. –Coordinate with standing subcommittees as needed. –Administer votes on disputed issues. –Report to TAC and PUC on progress. –TAC Chair or designee will advise independent leader and ERCOT sponsor on all the above.

Roles and Responsibilities (con’t) Standing TAC subcommittees: Standing TAC subcommittees: –Primary focus on on-going market operations during design and protocol development phases. –Provide advice as necessary during market design and protocol development phases. –Coordinate with ERCOT during implementation phase.

Roles and Responsibilities (con’t) ERCOT Staff: ERCOT Staff: –Continue to operate and fine tune existing market. –Provide staff sponsors to work with RUG-type organization and each ad hoc working group. –Maintain website with agendas, strawdogs, minutes, issue resolutions, etc. –Provide advice on market design and protocol development issues.

Roles and Responsibilities (con’t) ERCOT Staff Con’t: ERCOT Staff Con’t: –Provide logistical and staff support to RUG- type organization and each ad hoc working group. –Develop cost estimates (or estimated ranges) of alternatives when requested by the Independent Leader, TAC or the Board. –Prepare design and protocols filings for Commission consideration. –Lead responsibility for implementation phase.

Roles and Responsibilities (con’t) Market participants: Market participants: –Development of strawdogs. –Participate actively. –Deliberation and voting. –Right to appeal decisions to TAC, Board, and/or Commission.

Roles and Responsibilities (con’t) Market Oversight Division: Market Oversight Division: –Actively participate in RUG-type organization and ad hoc working groups during market design and protocol development phases. –Advise Commission on design and protocols developments. –Ensure compliance with Commission rules and orders.

Roles and Responsibilities (con’t) Public Utility Commission: Public Utility Commission: –Resolve appeals from the Board and disputes arising from Board decisions. –Monitor progress and provide feedback. –Final approval of protocols.

Market Design and Protocol Development Implementation Structure Technical Advisory Committee RUG-type Org. Leadership: Independent leader supported by an ERCOT Sponsor and TAC Chair or designee Participation: MPs & MOD with ERCOT staff support Process Sponsor & Oversight Coordination of design and protocol development; formal voting as necessary MOD Ad hoc Working Groups Leadership: Independent leader with ERCOT Sponsor or ERCOT lead Participation: MPs & MOD with ERCOT staff support ERCOT Board Supervision, Approvals & Disputes PUC White papers and protocol development Assignments Reports ERCOT Staff

Protocols Implementation ERCOT Board Contracts Approval & Progress Tracking Public Utility Commission Progress Tracking Technical, Contracts Management, Scheduling & Oversight ERCOT Staff TAC and Subcommittees Design/Protocols Interpretation & Advice to ERCOT Staff Progress reports. Interpretation inquiries. Notice of variances between design and implementation. Interpretations & clarifications

Reporting Relationships RUG-type organization to TAC: RUG-type organization to TAC: –All white papers circulated to TAC. –Leader reports on all major design decisions, including minority positions. –Leader reports on all votes taken. –Leader elevates issues and disputes that are not resolved.

Reporting Relationships TAC to ERCOT Board: TAC to ERCOT Board: –TAC regularly briefs Board on process, milestones, major decisions and votes, and other issues of concern/interest. Presentations to provide all viewpoints on policy issue disputes and resolutions. Presentations to provide all viewpoints on policy issue disputes and resolutions. –TAC elevates issues and disputes that are not resolved by TAC.

Reporting Relationships (con’t) ERCOT to PUC: ERCOT to PUC: –TAC, leader of RUG-type organization, and ERCOT Staff provide regular updates to PUC during design & protocol development phases. –ERCOT Staff provides regular updates to PUC during implementation phase. –ERCOT Board elevates issues and disputes to PUC for resolution. –ERCOT Board approves filings prepared by ERCOT Staff: Informational filing on design. Informational filing on design. Filing on protocols for final approval. Filing on protocols for final approval.

Reporting Relationships (con’t) ERCOT Staff to RUG-type organization: ERCOT Staff to RUG-type organization: –Coordination with leader of RUG-type organization and ad hoc working group leaders on schedules and time line feasibility. ERCOT Staff to TAC: ERCOT Staff to TAC: –Regular progress updates and tracking reports on schedules. –Regular reporting to TAC on ERCOT staff resources and constraints in support of RUG-type organization, its ad hoc working groups, and the TAC standing subcommittees. –Questions regarding interpretation of new protocols (during implementation phase). –Reporting on compliance of systems to protocols (implementation phase).

Reporting Relationships (con’t) ERCOT Staff to Board: ERCOT Staff to Board: –Regular progress reporting. –Financial projections and tracking. ERCOT Staff to PUC: ERCOT Staff to PUC: –Regular progress reporting. ERCOT Staff to the Market ERCOT Staff to the Market –Expand website...

ERCOT Website Agenda posted in advance of meeting. Meeting notes/minutes posted by COB next day. Future meeting schedules and timeline. Current strawdogs. Recorded votes, with summary of issues and minority positions. Rules for: design process; meeting notice; and voting procedures. Contact information for leadership team. Other?

Voting Structure – –It is not necessary for an entity to be an ERCOT member, except in the Consumer Segment, to participate and vote. – –Entities will be grouped into the seven segments as defined in the ERCOT Bylaws. – –Entities must have a business interest in the segment selected. – –Each segment will have one (1) vote. – –Five of seven segments are required for a quorum. – –Entities must designate the segment from which they will vote. – –This designation shall be in force throughout the process. – –Entities or their affiliates may not belong to more than one segment. – –One person present can only cast one vote. – –An entity or its affiliate may not have more than one (1) vote in any vote taken. – –Entities must be present to vote. – –Proper controls will be developed to allow entities participating by phone to be considered present. – –Two-thirds of all fractional votes cast from all segments are required to pass a motion.

Dispute and Appeals Process Design and protocols phases: Design and protocols phases: –Leadership may elevate unresolved issues to next level. –Any party may appeal a decision to the next level. –TAC hears appeals from RUG-type organization. –ERCOT Board hears appeals from TAC. –PUC hears appeals from ERCOT Board. Implementation phase: Implementation phase: –Disputes between ERCOT Staff and Stakeholders on design/protocols interpretations appealed to TAC/Board.