1 Texas Regional Entity Compliance Update July 2007

2 Control Performance Highlights  NERC CPS1 Performance May Performance  May performance comparison May 2007: May 2006:  12 month rolling average comparison June 2006  May 2007: June 2005  May 2006:  PRR 525 Performance Scores for May indicate 32 QSEs passed / 3 non- wind-only QSEs failed the measure Scores posted on the ERCOT Compliance Website  SCE Performance Scores SCE Performance Scores

3 ERCOT CPS1 Performance Comparison

4 ERCOT’s CPS1 Monthly Performance

5 ERCOT CPS1 by Interval

6 QSE PRR Minute Interval Scoring

7 525 Passing 10-Min Interval Percentage Trends

8 May 2007 Resource Plan Performance Metrics

9 ERO / RE Activities  Entity Registration Continues to be a work-in-progress ERCOT Compliance Staff working with entities to resolve registration questions Any entity can challenge its listing and function with NERC Appeals heard by the NERC Board Compliance Committee  Texas Regional Entity Delegation Agreement ERCOT Board approved Texas RE Delegation Agreement on May 16 th Executed Texas RE Delegation Agreement re-filed at FERC on May 18 th FERC approved re-filed executed Delegation Agreement on June 5 th, subject to a limited 30-day comment period restricted to minor revisions FERC directives must be addressed and modifications filed within 180 days of the date of the order (mid-October)  NERC Reliability Standards Mandatory compliance began on June 18 th Upon initial review, received 228 self-reported violations prior to June 18 th Regional Entities to focus on most serious Reliability Standard violations until January 1, 2008  ERCOT Bylaws ERCOT Board approved changes to the ERCOT Bylaws incorporating the Texas RE on May 16 th ERCOT Membership voted to approve changes

Texas RE Budget Stats  Texas RE Budget and Business Plan was approved by the ERCOT Board on June 19 th 2008  $4.1 million  Statutory requirement – $3.3 million  Non-statutory requirement – $0.8 million 2007  $5.5 million  Statutory requirement – $4.9 million  Non-statutory requirement – $0.6 million

Statutory Funding & Fee Collection  Texas RE Fee funds Texas RE and NERC regulatory compliance activities  Texas RE Fee revenue exceeds Texas RE expenditures in Texas RE Fee is $0.016 per MWh Excess of Texas RE Fee income over expenditures is projected to be $2.6 Million in 2007  Over collections from 2007 are netted against 2008 requirements Estimated 2008 net funding requirement for statutory is $0.7 Million ($3.3 Million less $2.6 Million) Estimated Texas RE fee is $ per MWh ($0.7 Million divided by 318 Million MWhs) Estimated NERC funding fee is $0.005 per MWh ($1.6 Million divided by 318 Million MWhs)  PRR 720 – Texas Regional Entity Fee Methodology Revision Outstanding proposal to modify the basis for assessing and collecting the Texas RE Fee