Protocol Revision Subcommittee Report to ERCOT Technical Advisory Committee May 8-9, 2003

Urgent Timelines PRR 400PRR 400 –Provisional LaaR Approval PRR 401PRR 401 –QSE Credit Requirements/Short-Pay PRR 403PRR 403 –URC Update for New Smoothing Algorithm PRR 406PRR 406 –Two-Year CSC & Zone Selection

PRR 362 – Load Profiling ID Type Correction Allows the load profiling ID type to be corrected in the billing system, not the registration systemAllows the load profiling ID type to be corrected in the billing system, not the registration system No computer system impactNo computer system impact Effective June 1, 2003Effective June 1, 2003

PRR 385 – DLC Implementation Provides clarification to an existing Direct Load Control projectProvides clarification to an existing Direct Load Control project Impacts ERCOT computer systemImpacts ERCOT computer system Effective upon system implementationEffective upon system implementation

PRR 386 – Scheduling Information Clarifies Protocol by indicating that not all services are deployed zonally and that zonally deployed services are reported zonallyClarifies Protocol by indicating that not all services are deployed zonally and that zonally deployed services are reported zonally No impact on ERCOT computer systemsNo impact on ERCOT computer systems Effective June 1, 2003Effective June 1, 2003

PRR 392 – Posting of Balancing Energy Forecast Removes the requirement for ERCOT (PIP 138) to post the balancing energy forecastRemoves the requirement for ERCOT (PIP 138) to post the balancing energy forecast No impact on ERCOT computer systemsNo impact on ERCOT computer systems Effective June 1, 2003Effective June 1, 2003

PRR 393 – Balancing Energy Bid Expiration Time Eliminates the expiration time for balancing energy bids (PIP 147)Eliminates the expiration time for balancing energy bids (PIP 147) No impact on ERCOT computer systemsNo impact on ERCOT computer systems Effective June 1, 2003Effective June 1, 2003

PRR 394 – Balancing Energy Ramps as Instructed Deviations Conforms Protocols to ERCOT system treatment of BE ramps outside of the target intervalConforms Protocols to ERCOT system treatment of BE ramps outside of the target interval No impact on ERCOT computer systemsNo impact on ERCOT computer systems Effective June 1, 2003Effective June 1, 2003

PRR 398 – CCGT Settlement Clarifies implementation of PRR 398, previously approved as PRR 369, so that system development is not delayedClarifies implementation of PRR 398, previously approved as PRR 369, so that system development is not delayed Impact on ERCOT computer systems integrated with PRR 369 ongoing workImpact on ERCOT computer systems integrated with PRR 369 ongoing work Priority same as PRR 369Priority same as PRR 369 Effective upon system implementationEffective upon system implementation

PRR 400 – Provisional Approval of LaaRs Allows LaaRs to obtain provisional approval once telemetry & calibration testing are complete – LaaR must still complete actual interruption testAllows LaaRs to obtain provisional approval once telemetry & calibration testing are complete – LaaR must still complete actual interruption test Impact on ERCOT computer system integrated with PIP 112Impact on ERCOT computer system integrated with PIP 112 Priority same as PIP 112Priority same as PIP 112 Effective upon system implementationEffective upon system implementation

PRR 403 – URC Update for New Smoothing Algorithm Clarifies changes to URC calculation related to HVDC tie schedules due to PRR 350.Clarifies changes to URC calculation related to HVDC tie schedules due to PRR 350. Impacts ERCOT computer systemsImpacts ERCOT computer systems Effective upon system implementationEffective upon system implementation

PRR 384 – Code of Conduct PROVIDED FOR INFORMATION ONLYPROVIDED FOR INFORMATION ONLY Provides a Preamble for Wholesale Code of Conduct in ProtocolsProvides a Preamble for Wholesale Code of Conduct in Protocols Describes expected and prohibited behaviorsDescribes expected and prohibited behaviors Developed by WMS Subcommittee & PRS reviewDeveloped by WMS Subcommittee & PRS review

PRR 384 – Code of Conduct Market Participants to conduct business with integrity, accurately disclose information and provide documentation, have management systems in place to ensure meeting Preamble objectivesMarket Participants to conduct business with integrity, accurately disclose information and provide documentation, have management systems in place to ensure meeting Preamble objectives Describes intent of Protocols and market participant responsibilitiesDescribes intent of Protocols and market participant responsibilities

PRR 384 – Code of Conduct Prohibited behaviors include no creation of artificial congestion, no unlawful withholding, no “wash” trades, no non-performance reliability transactions and no misrepresentative tradingProhibited behaviors include no creation of artificial congestion, no unlawful withholding, no “wash” trades, no non-performance reliability transactions and no misrepresentative trading Comments due prior to May 22 PRS meeting – see website for deadlinesComments due prior to May 22 PRS meeting – see website for deadlines

PRR 382 – Settlement Statement Suspension Originally rejected by PRS but appealed by ERCOT with remand to PRS to reconsider.Originally rejected by PRS but appealed by ERCOT with remand to PRS to reconsider. PRS recommends approval of the modified languagePRS recommends approval of the modified language No impact on ERCOT computer systemsNo impact on ERCOT computer systems Effective June 1, 2003Effective June 1, 2003

PRR 381 – Update QSE Designation (The Sequel) TAC approved process for QSE notice to ERCOT that it will no longer schedule for a Resource or LSETAC approved process for QSE notice to ERCOT that it will no longer schedule for a Resource or LSE Board remanded to TAC to reconsider initially approved 30-day period from QSE notice to time when scheduling for the resource or LSE endsBoard remanded to TAC to reconsider initially approved 30-day period from QSE notice to time when scheduling for the resource or LSE ends

PRR 381 – Update QSE Designation (The Sequel) PRS recommends shortened timeframe to 7 days from 30 daysPRS recommends shortened timeframe to 7 days from 30 days PRS notes that the current Default QSE contract does not recognize a transfer of a resource or an LSE without the QSE being in default; also does not address the situation where an LSE fails to choose a new LSEPRS notes that the current Default QSE contract does not recognize a transfer of a resource or an LSE without the QSE being in default; also does not address the situation where an LSE fails to choose a new LSE Effective June 1, 2003Effective June 1, 2003

PRR 396 – Reliability Must- Run Units PRS incorporated the TAC-approved decision points from April into the RMR textPRS incorporated the TAC-approved decision points from April into the RMR text PRS requests RMR TF to examine the issue of how RMRs are selected-by the resource or by ERCOT upon notice of retirement/mothballingPRS requests RMR TF to examine the issue of how RMRs are selected-by the resource or by ERCOT upon notice of retirement/mothballing

PRR 396 – Reliability Must- Run Units RMR TF should also consider the event where a resource owner retires the unit when ERCOT needs the unitRMR TF should also consider the event where a resource owner retires the unit when ERCOT needs the unit RMR TF will meet on these and other issues raised related to OOMCRMR TF will meet on these and other issues raised related to OOMC

PRR 396 – Reliability Must- Run Units Allow rejected applicants to continue market operations; applicants must still attest; exit strategy development and provide for multi-year contractsAllow rejected applicants to continue market operations; applicants must still attest; exit strategy development and provide for multi-year contracts Accept both seasonal and annual RMR concepts and reflect in pricingAccept both seasonal and annual RMR concepts and reflect in pricing Adopt “cost plus” methodology for both and reflect differences in risk (8%/2%)Adopt “cost plus” methodology for both and reflect differences in risk (8%/2%)

PRR 396 – Reliability Must- Run Units AEP CommentsAEP Comments –Change annual incentive factor to 10% from 8% –Modify eligible costs to specifically include labor associated expense and maintenance expense –Include specific criteria describing budgeting categories: Base Cost, Outage Maintenance, Non- Outage Maintenance, and Other. Concept is to give ERCOT options that determine RMR availability –Documentation criteria –RMR Units paid second to ERCOT in partial payment situations

PRR 396 – Reliability Must- Run Units RMR TF CommentsRMR TF Comments –Section (7) & (8) should include the following sentence: “Incentive Factor payments shall be prorated over the Agreement term based on the expected ERCOT RMR usage pattern for each month.”

PRR 371 – OOMC Update Review of OOMC completed in order to ensure proper economic tradeoff between RMR and OOM and to integrate PRR 371’s recognition of minimum energyReview of OOMC completed in order to ensure proper economic tradeoff between RMR and OOM and to integrate PRR 371’s recognition of minimum energy Likely to impact ERCOT computer systemsLikely to impact ERCOT computer systems Effective with system implementationEffective with system implementation

PRR 371 – OOMC: Addition of Resource Categories Combined Cycle, the largest CT in the train is:Combined Cycle, the largest CT in the train is: –Less than 90 MW –Greater than or equal to 90 MW Gas SteamGas Steam –Supercritical boiler –Reheat boiler –Non-reheat or boiler without air pre-heater Simple CycleSimple Cycle –Less than 90 MW –Greater than or equal to 90 MW

PRR 371 – OOMC: Modified/Added/Deleted Costs for Some Resource Categories Resource Category Generic Fuel CostsResource Category Generic Fuel Costs –Upward instructions –Downward instructions Resource Category Generic Startup CostsResource Category Generic Startup Costs Resource Category Generic Minimum Energy Costs – AddedResource Category Generic Minimum Energy Costs – Added Resource Category Generic Operational Costs – DeletedResource Category Generic Operational Costs – Deleted

PRR 371 – OOMC: Generic OOMC Payment OOMC Payment =OOMC Payment =  Price for unit start, provided the unit is not connected to the grid PLUS PLUS  Price for operating a unit to provide “minimum” energy at its Low Sustainable Limit

PRR 371 – OOMC: Generic OOMC Startup Cost Each Resource Category has an associated startup cost which includes:Each Resource Category has an associated startup cost which includes: –Startup fuel cost –Ramp fuel cost (for Combined Cycle only) –These fuel costs are based on the Resource’s capacity MPCE paid/charged for ramp energy is credited back to ERCOT via the formula for startup costMPCE paid/charged for ramp energy is credited back to ERCOT via the formula for startup cost

PRR 371 – OOMC: Generic OOMC Min Energy Cost Each Resource Category has an associated minimum energy cost per MWEach Resource Category has an associated minimum energy cost per MW During the instruction interval:During the instruction interval: –The cost per MW is multiplied by the lesser of the Low Sustainable Limit or the metered output of the Resource –MPCE paid/charged for the minimum energy is credited back to ERCOT via the formula for minimum energy cost

PRR 371 – OOMC: OOMC Instruction –Clarification ERCOT will not issue an OOME Up instruction for energy associated with the Low Sustainable LimitERCOT will not issue an OOME Up instruction for energy associated with the Low Sustainable Limit The QSE may maintain a Balanced Schedule during instruction interval by:The QSE may maintain a Balanced Schedule during instruction interval by: –Scheduling energy –Being selected to provide Balancing Energy Service Issue: QSE cannot maintain a Balanced Schedule if OOMC instruction received less than 1.5 to 2 hours in advance of instruction intervalIssue: QSE cannot maintain a Balanced Schedule if OOMC instruction received less than 1.5 to 2 hours in advance of instruction interval

PRR 371 – OOMC: Verifiable Incremental Costs Deleted requirement that ERCOT BOD review and approve compensation for cost types except for fuelDeleted requirement that ERCOT BOD review and approve compensation for cost types except for fuel Future Action Item: Describe other verifiable cost types and documentation requiredFuture Action Item: Describe other verifiable cost types and documentation required

PRR 371 – OOMC: Fallout for RMR Task Force Disclosure of unit specific OOMC dataDisclosure of unit specific OOMC data Verifiable incremental costs – Section (5)(b)Verifiable incremental costs – Section (5)(b) Optimization of OOMC instructionsOptimization of OOMC instructions –Economic optimization –Honor physical characteristics of OOM Resource QSE Resource Plan – Section QSE Resource Plan – Section –Need to require additional data in plan Review definition of Low Sustainable LimitReview definition of Low Sustainable Limit Determine other verifiable costs/documentationDetermine other verifiable costs/documentation

PRR 401 – Partial Payments & QSE Credit Requirements Addresses timing of the uplift to loads where there is a partial payment (short-pay) that is not collectedAddresses timing of the uplift to loads where there is a partial payment (short-pay) that is not collected –Uplifted to loads on LRS basis if not collected within 120 days and the QSE is not in compliance with payment plan Modifies Estimated Aggregate Liability (EAL) calculationModifies Estimated Aggregate Liability (EAL) calculation Allows ERCOT to offset against amounts owed by short-pay QSEAllows ERCOT to offset against amounts owed by short-pay QSE

PRR 401 – Partial Payments & QSE Credit Requirements Proposed EAL CalculationProposed EAL Calculation –Reduces EAL ratchet from 90 days to 60 days –Uses average of 2 initial invoices to calculate ADT – smooths collateral spikes –Includes TCR credits for ownership and auction revenues –Formalizes terms of “early pay”

PRR 401 – Partial Payments & QSE Credit Requirements Proposed EAL CalculationProposed EAL Calculation –Changes calculation to include OUT Outstanding invoices plus estimated unbilled itemsOutstanding invoices plus estimated unbilled items –Allows ERCOT to make downward adjustments in EAL outside ratchet period –Fixes SAF at factor of 1 until ERCOT gains more history on seasonal credit requirements

PRR 401 – Partial Payments & QSE Credit Requirements Proposed EAL CalculationProposed EAL Calculation –Allows estimation of balancing energy and ancillary service usage –Estimation of finals and true-ups based on three week average Mulitply final average by 9 weeksMulitply final average by 9 weeks Multiply true-up average by 48 weeksMultiply true-up average by 48 weeks

PRR 401 – Partial Payments & QSE Credit Requirements No impact on ERCOT computer systems; manual processesNo impact on ERCOT computer systems; manual processes Effective June 1, 2003Effective June 1, 2003

Rejected PRRs PRR 390 – Transmission Interconnection RequirementPRR 390 – Transmission Interconnection Requirement PRR 407 – Removal of RBS Sunset DatePRR 407 – Removal of RBS Sunset Date