RMSUpdate November 4, 2004 Retail Market Subcommittee Update to TAC

RMSUpdate Voting Items Summary  RMGRR – Disconnect at Premium Locations  RMGRR – Inadvertent Gain Process  RMGRR – Data Extract Variance Process  Annual Validation Report to the ERCOT Board  Household Electric Use Survey

RMSUpdate Voting Items Retail Market Guide Revision Requests  RMGRR – Disconnect at Premium Locations  Incorporates the tariff charge variation among TDSP’s into the Retail Market Guide  RMGRR – Inadvertent Gain Process  Identifies individual TDSP processes required to resolve inadvertent switch situations  RMGRR – Data Extract Variance Process  Defines the Data Extract Variance Process including the utilization of FasTrak to resolve agreed differences and seeking ADR resolution for contested differences

RMSUpdate 4 Voting Items Annual Validation Report to the ERCOT Board SepOctNovDecJanFebMarAprMayJunJulAugSepOct Near Term Action Plan Timeline September 28 - PWG Near Term Action Plan Approved October 14 – Near Term Action Plan Submitted to RMS November 4 – Near Term Action Plan Submitted to TAC for ERCOT Board Review December 31- ERCOT Staff Finalizes Recommendations to PWG. Market Participants Begin Making Changes February - RMS Requested February Review March 1 -TDSPs and ERCOT Complete System Changes May 1 - TDSPs and ERCOT Complete Testing System Changes June 15 - Normal Start of 2005 Annual Validation November - Normal Completion of 2005 Annual Validation Transactions

RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 1.Do not replace a prior year non-default assignment with a default assignment  A new calculation for each ESI ID is made each year  Currently: Insufficient data requires assignment to default  Residential defaults to Residential Low Winter Ratio (RESLOWR)  Commercial defaults to Business Medium Load Factor (BUSMEDLF)  Proposed: If sufficient data was available in a previous year an assignment to default would not be made

RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 2.Applying dead-bands around the specified Residential Segment trigger point  Currently : If WR > 1.5 it is assigned to High Winter Ratio (HiWR)  Proposed : Create a dead-band around the 1.5 trigger point  Example – Assume dead-band (1.0 to 2.0) if current assignment is RESLOWR and new WR = 1.7, would remain RESLOWR if current assignment is RESLOWR and new WR = 2.1, would change to RESHIWR  Result - significant reduction in migration

RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 3. Use more than 1 month for the Residential Winter Ratio formula  Example – Change numerator to average the ADU for highest 2 months  Result - significant reduction in migration

RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 4. Apply a kWh minimum for Residential High Winter Ratio profile assignment  Currently: None  Proposed: Identify a reasonable minimum usage for High Winter Ratio assignment  Example – RESHIWR minimum = 10 kWh/day (300kWH/month) If WR = 3.0 and 5 kWh/day then assign RESLOWR If WR = 3.0 and 15 kWh/day then assign RESHIWR

RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 5.Use an ERCOT administered residential survey to determine heating system type for a sample of customers  The survey will empirically support data used to define dead- bands, minimum thresholds and revised WR calculation  40,000 surveys will be mailed to end use customers  5,000 to each weather zone  2,500 to each existing profile type current assignment

RMSUpdate 10 Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan  Market Participant Concerns  Customer Confusion  Call Center Impact  Statistical Relevance  Solutions Adopted  Bilingual Survey  Answering service (800 number)  Web information  ERCOT staff follow-up  Call Center Training Materials  Statistical Relevance….

RMSUpdate 11 Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan Statistical Relevance “ Even in the worst case scenario, response data will be sufficient to make significant improvements in profile assignments.” Survey Accuracy (95% Confidence) Return RateERCOT TotalWeather Zone 15%±1.3%± 3.7% 10%± 1.6%± 4.5% 5%± 2.2%± 6.3% 1%± 5.0%± 14.1%

RMSUpdate 12 Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan  RMS approved the PWG action plan  Concept of the residential survey  Implementation time line  Collaborative effort of PWG and RMS produced a simplified residential survey  Market conference call to discuss concerns  RMS vote affirmed the survey  RMS Recommendation: TAC endorse the Residential Survey and Near Term Action Plan

RMSUpdate 13 ??? Questions ???