April 15, TAC Report to the ERCOT Board April 15, 2003

2Summary PRRs 377, 379, 381, 383 and votePRRs 377, 379, 381, 383 and vote RMR updateRMR update 2003 Test Flight Dates2003 Test Flight Dates OGRRsOGRRs WMS work on PUCT # Market Design questionsWMS work on PUCT # Market Design questions Future ItemsFuture Items

April 15, PRR 377 – Canceled RMR Unit Start Allows for partial compensation of RMR units if start ordered, then cancelledAllows for partial compensation of RMR units if start ordered, then cancelled If cancelled, ERCOT to post costIf cancelled, ERCOT to post cost No computer system impact; manual processNo computer system impact; manual process May 1, 2003 Effective DateMay 1, 2003 Effective Date Approved by TAC with a 28-2 vote.Approved by TAC with a 28-2 vote.

April 15, PRR 379 – BLT Waiver Allows ERCOT to grant a waiver for Block Load Transfer point resources that, but for BLT events, do not operate in ERCOTAllows ERCOT to grant a waiver for Block Load Transfer point resources that, but for BLT events, do not operate in ERCOT Applies to submission of resource application and execution of Resource AgreementApplies to submission of resource application and execution of Resource Agreement No computer impactNo computer impact May 1, 2003 Effective DateMay 1, 2003 Effective Date

April 15, PRR 381 – Update QSE Designation Clarifies the process by which a QSE terminates its designation for an LSE or Resource entityClarifies the process by which a QSE terminates its designation for an LSE or Resource entity No computer impactNo computer impact May 1, 2003 Effective DateMay 1, 2003 Effective Date Approved by TAC with a vote.Approved by TAC with a vote.

April 15, PRR 383 – RMR Resource Maintenance Outage Approval Provides a timeline for the approval of RMR unit outage requestsProvides a timeline for the approval of RMR unit outage requests No computer impactNo computer impact May 1, 2003 Effective DateMay 1, 2003 Effective Date

April 15, PRR 387 – Mismatched Inter- QSE Schedule Statements Clarifies the settlement of Mis-matched Inter-QSE energy schedulesClarifies the settlement of Mis-matched Inter-QSE energy schedules Facilitates automationFacilitates automation Approved priority – 1.2 (already on project list)Approved priority – 1.2 (already on project list) Effective upon system implementationEffective upon system implementation

April 15, Six RMR Issues to be Resolved I.Criteria/Process II.RMR Categories III.Compensation Level IV.Cost Allocation - Set aside, for now V.Transmission Planning Process - Resolved VI.Economic Trade-Offs - Still working

April 15, Process RMR TF provided options for the six concerns to PRSRMR TF provided options for the six concerns to PRS PRS reviewed and made recommendationsPRS reviewed and made recommendations TAC considered PRS recommendations and decided on high level options for the open issues (Decision Points)TAC considered PRS recommendations and decided on high level options for the open issues (Decision Points) TAC decisions guide language finalizationTAC decisions guide language finalization PRR returns for TAC/BOD approval in MayPRR returns for TAC/BOD approval in May

April 15, II. RMR Categories Decision PointDecision Point –Short-term RMR Need (180 days during off- peak season only) –Annual RMR Need TAC DecisionTAC Decision –Accept both seasonal and annual RMR concepts and reflect in pricing

April 15, III. Compensation Level Decision Point – Short-Term ContractDecision Point – Short-Term Contract –Owner compensated for costs avoided by seasonal mothballing –Owner provides cost information to ERCOT TAC DecisionTAC Decision –Adopt short-term pricing at cost

April 15, III. Compensation Level Decision Point – Annual ContractDecision Point – Annual Contract –Proxy Price Uses existing structure with lower payment components (Standby Price at 55% of SCGT; Change in fuel heat rate calculation)Uses existing structure with lower payment components (Standby Price at 55% of SCGT; Change in fuel heat rate calculation) –“Cost Plus”

April 15, –“Cost Plus” Initial monthly payments based on estimate of eligible costs then adjusted to actualInitial monthly payments based on estimate of eligible costs then adjusted to actual Incentive Factor (x% or flat rate?) applied to non-fuel eligible costsIncentive Factor (x% or flat rate?) applied to non-fuel eligible costs Eligible Costs include labor, materials and supplies to operate the unitEligible Costs include labor, materials and supplies to operate the unit Eligible Costs do not include return on equity, G&A, allocated general plant, taxes, interest expense, etc.Eligible Costs do not include return on equity, G&A, allocated general plant, taxes, interest expense, etc. Fuel also based on estimate of cost with true-upFuel also based on estimate of cost with true-up Eliminates start-up paymentEliminates start-up payment TAC DecisionTAC Decision –Adopt “cost plus” methodology

April 15, I. Criteria / Process Allows for multi-year contracts if significant capital expenditures requiredAllows for multi-year contracts if significant capital expenditures required CCGTs treated as a single unit unless separate operation possibleCCGTs treated as a single unit unless separate operation possible Qualification for RMR ApplicantQualification for RMR Applicant –Applicant attestation that resource is uneconomic to remain in service –Unavailable at least 180 days

April 15, I. Criteria/Process RMR Replacement OptionsRMR Replacement Options –ERCOT to report on cost-effective replacement options 90 days after execution –If a cost-effective replacement option exists, ERCOT will establish an implementation timeline

April 15, I. Criteria/Process Treatment of RMR ApplicantTreatment of RMR Applicant –Non-selected applicant prohibited from future use unless reinstated during suspension period ERCOT not accept schedules or bids during suspension periodERCOT not accept schedules or bids during suspension period ERCOT may reinstate under certain circumstancesERCOT may reinstate under certain circumstances Owner may petition PUC for reinstatementOwner may petition PUC for reinstatement

April 15, PRS Recommendation TAC DecisionTAC Decision –Non-selected RMR applicant would not be prohibited from operating in the market after ERCOT rejects the application Fits with the “Cost Plus” methodologyFits with the “Cost Plus” methodology –Accept other provisions

April 15, Test Plan Flight Dates RMS approves the dates for future testing flights. This enables new market entries, TDSPs and ERCOT to plan when key deliverables are required and the key testing dates.RMS approves the dates for future testing flights. This enables new market entries, TDSPs and ERCOT to plan when key deliverables are required and the key testing dates. Failure to supply required documentation for a new test flight can result in a market participant being delayed until the next test flight before entering the retail market.Failure to supply required documentation for a new test flight can result in a market participant being delayed until the next test flight before entering the retail market.

April 15, New 2003 Test Plan Flights Affirmed by TAC Flight 0703 for New Market Participants testing under TX SET Version 1.5Flight 0703 for New Market Participants testing under TX SET Version 1.5 –Flight will begin pre-test activities on April 8, 2003 –Deadline to Join Flight May 22, 2003 –First transactions July 14, 2003 –Flight Scheduled to End September 5, 2003 Flight 1003 for New Market Participants testing under TX SET Version 1.5 and Possible Transaction Changes from COMET WGFlight 1003 for New Market Participants testing under TX SET Version 1.5 and Possible Transaction Changes from COMET WG –Flight will begin pre-test activities on July 23, 2003 –Deadline to Join Flight September 4, 2003 –First transactions October 13, 2003 –Flight Scheduled to End December 5, 2003 Another Flight is possible because of anticipated functionality changes from MIMO task force.Another Flight is possible because of anticipated functionality changes from MIMO task force.

April 15, Operating Guides TAC approved OGRRs and 128TAC approved OGRRs and 128 –OGRR127 keeps Operating Guides language consistent with Protocols –OGRR128 amends the change control process to allow Protocol / OG consistency changes to be handled administratively

April 15, Advance Notice WMS has accelerated the process to determine 2004 CSCs and resulting zonal definitions.WMS has accelerated the process to determine 2004 CSCs and resulting zonal definitions. –Recommendation to the Board for approval in June. ROS finalizing work on new Reactive Power StandardROS finalizing work on new Reactive Power Standard

April 15,