February 4, 2008 TPTF Texas Nodal Market Implementation Program Update Jerry Sullivan

2 2 Texas Nodal Program UpdateFebruary 4, 2008 Overall program status remains amber Nodal Delivery Quality Schedule Cost ScheduleScope / Quality Legend Summary Green Revised budget approved by ERCOT BOD Preparing for revised Fee Filing Amber Most Nodal projects have now frozen changes to functionality required for the 168 hour test (9/1/2008) Red Amber Green Go-live = 12/1/08 Go-live = <30 days+ Go-live = >30 days+ Program is aligned with current protocols Program is aligned to previous protocol version Program is not aligned to protocols Amber Current product quality is not sufficient for Nodal launch Most Nodal products currently achieve quality standards All Nodal products currently achieve quality standards Single Entry Go-Live delayed – no projected impact on Go-Live Key checkpoints being put in place to ensure ongoing viability of 12/1/2008 Test results are being managed in Quality Center and results are being used to track defects for resolution. Reports being published weekly to Red Estimate at Complete = <$263m Estimate at Complete = < $263m + 10% Estimate at Complete = >$263m + 10%

3 3 Texas Nodal Program UpdateFebruary 4, 2008 Key achievements ProjectKey achievements MMS The MMS 2 release has successfully exited FAT testing. This release includes base functionality for Day-Ahead Market, Deliverability Evaluation Form, Hourly Reliability Unit Commitment (HRUC), Daily Reliability Unit Commitment (DRUC), Point-to-Point Options Derating, Simultaneous Feasibility Test, SCED Baseline 1 and 2 requirements, plus requirements associated with several NPRRs and white papers. The release exited FAT with an 89% pass rate with no Severity 1 or 2 defects. Implication: This is a major achievement in support of the nodal program schedule and enhances confidence in the last major MMS delivery in April. Vendor is taking schedule seriously. EMS State Estimator convergence is approaching its goal of 97 percent at a 15 Mw/Mvar convergence tolerance. On 1/28, convergence averaged nearly 90 percent at 30 Mw/Mvar tolerance for most of the day. The EMS team is monitoring issues and actively resolving problems to sustain this level of success. These improvements from the previous month result from higher fidelity of the input data. Pre-FAT for early EMS 3C has been completed with one high level defect. The defect is being addressed. Delivery timelines have been finalized for EMS 3 and 4. Implications: Quality is improving at a satisfactory rate. Vendor is taking schedule seriously. MIS-UI The first version of the MMS user interface was released to EDS on 1/21, after 2 months of development. ERCOT decided to bring UI development in-house in response to market participants’ concerns. UI design incorporated market participant input gathered in monthly UI Subgroup meetings since 08/07. Implications: The project team delivered this early release to allow for usability testing and MP feedback, which will result in additional releases. This demonstrates ERCOT’s commitment to providing a positive user experience for MPs. COMS The COMS team posted prototypes of Day-Ahead Market (DAM) settlements statements on the nodal website. Market participants can view the new statements on the Readiness Center. ( See EDS 4 – DAM Settlement Statements Draft Implications: MPs can start designing their systems to consume the financial information provided.

4 4 Texas Nodal Program UpdateFebruary 4, 2008 Sev 1 and 2 defects Status:  At the January 21-23, 2008 meeting, TPTF requested to review specific documentation on Severity 1 and 2 defects for all Nodal Projects in Functional Acceptance Testing (FAT) and Early Delivery System (EDS).  ERCOT is evaluating what information, if any, may be released to Market Participants.  ERCOT may need to obtain permission from various Nodal Vendors before releasing such information to Market Participants.  ERCOT will continue to evaluate TPTF's request with the hope that we may be able to share that information at a later date. Our intention is to provide this as soon as possible, and with cooperation with our vendors.  Note that there are currently 95 active Severity 1 & 2 defects across the various applications currently in FAT and EDS. Severity 1 and 2 definitions:  Severity 1 – Data Loss/Critical Error – Defects that render unavailable the critical functions of the system under test. These include errors such as system errors, application failures, loss of data, incorrect calculations, inability to transfer data, failure to access database, and inability to display information to the user  Severity 2 – Loss of functionality w/o workaround – Defects that render unavailable partial functionality of the system under test with no workaround available. These include errors such as incorrect information displayed to the user, information not updating correctly, extracts failing, and missing export files. We realize the importance of providing transparent information and we’ll work to make this happen as soon as we can

5 5 Texas Nodal Program UpdateFebruary 4, 2008 Elaboration of “pens down” for additional changes for 168 Hour Test functionality Status:  NMMS, EMS, CRR, COMS and MMS are already “pens down” on additional changes  There is some tolerance for changes relating to reports i.e. EDW (within certain constraints affecting source systems) Deferred items – following slides describe proposed treatment of known items that cannot make the 168 Hour Test window, including  Items to be implemented before go–live, but after 168 hour test  Items to be developed by Nodal before go–live, ready for subsequent production release  Items to be deferred to business as usual prioritization (PPL process) Implications on additional NPRRs  Only changes with a systems impact deemed absolutely essential for the correct operation of the Nodal market can be considered (in the knowledge that their introduction may delay Go- Live)  The process of impact analysis of all new NPRRs (including those with no system impacts) diverts Nodal Subject Matter Experts from other critical tasks  Non-essential changes should be tabled or will be boxed in the Protocols We seek TPTF’s guidance in validating our position on these items

6 6 Texas Nodal Program UpdateFebruary 4, 2008 Deferred items – proposed treatment (1 of 2) Items to be implemented before go–live, but after 168 hour test SourceChange ItemSummary DescriptionWorkaround?Binding Document MMSMMS Multiple Network ModelsWe do not have the ability to provide separate models for DAM & RUC. In Progress – workaround for major changes only Protocol (not explicit) MMSS&B Information Only CalculationsS&B information only calculations DAOPTPRINFO & RTOPTPRINFO will not be available until after go-live. NoProtocol (NPRR needed) MMSMMS Resource parameter automated interface Automated interface for QSEs with resources to update resource parameters (e.g. ramp rates) in MMS. In progress – workaround and inclusion in MMS4 options being considered Requirements Document MMSDynamically scheduled resource incremental and decremental energy offer curves. Interpretation issue NOTE: No protocol change will be required although this is addressed in the protocols; ERCOT implemented functionality based on their original interpretation; further discussion yielded a new interpretation for ERCOT that will require a change to the requirements and design Yes – but extremely labor intensive Requirements Document Items to be developed by Nodal before go–live, ready for subsequent production release SourceChange ItemSummary DescriptionWorkaround?Binding Document PUCTMultiple EDW reports arising from draft NPRRs Impact assessment underwayNoProtocol (draft NPRR)

7 7 Texas Nodal Program UpdateFebruary 4, 2008 Deferred items – proposed treatment (2 of 2) Items to be deferred to business as usual prioritization (PPL process) SourceChange ItemSummary DescriptionWorkaround?Binding Document TPTFAdd API to CRRSupplement existing CRR system file upload/download capabilities with an API Existing approach No COMSWeb-enabled RegistrationWeb-enabling registration forms (including RARF, NOI, interconnect, etc.) - total of around 50 forms ManualNo NMMSNMMS API UpgradeUpgrade NMMS product suite to add SOA technology and interfacing with MPs Partially manual Requirements Document COMSMPIM integration with SiebelEliminate manual workaround (necessary due to Siebel freeze) Dual entryNo MMSCo-optimizing energy and AS for self- committed resources in DAM Protocol/requirements interpretation issueNo? MIS/User experience team Internal-facing UI’s – Control Room/EMSUser experience team has established prototypes but no requirements, design documentation exists Use base product UIs No MIS/User experience team Internal-facing UI’s – OS OUI, MMS MOIUser experience team has established prototypes but no requirements, design documentation exists Use base product UIs No

8 8 Texas Nodal Program UpdateFebruary 4, 2008 ERCOT remains AMBER Overall due primarily Engagement and Training scores ERCOT Engagement Results Remain amber. Summary of results:  Finance improves from amber to green and is the only division currently with green status  Human Resources was green in last survey and has fallen to amber sighting concerns over staffing  Core Divisions – Information Technology, Systems Operations, and Market Operations - have not completed their transition plans  Both Market Operations and Systems Operations highlighted concerned over processes and procedures and test planning  Market Operations has not completed their training plan nor allocated their training budget ERCOT Staffing is Yellow. Summary of Status:  Staffing and organizational sizing models have been completed.  Approval of staff funding not complete - targeted for Q1.  Staffing to plan is progressing more slowly than expected. ERCOT Training  Finance, Information Technology, and Market Operations are behind in execution of their training plans Note: ERCOT (and EDS) summary scores are now visible to anyone – even without a password This version in ITest

9 9 Texas Nodal Program UpdateFebruary 4, 2008 Resource Asset Registrations Quality and Completeness Issues November and December RARF submissions did not meet expectations. The MP Registration Activities metric (MP11) is pulling Market Participant Readiness RED

10 Texas Nodal Program UpdateFebruary 4, 2008 Resource Asset Registration Form Grading Explained RED –No November or December submittals received OR –November 9 submittals received but No planning data included with December 31 submittal OR No December 31 submittal at all –Sent s and called these entities –Indicates lack of engagement/follow-through AMBER –All November 9 submittal received AND –Some attempt at submitting planning data for December 31 submittal Requested rest of information from these entities –Indicates effort but needs follow-through GREEN –All data appears complete –Indicates good effort and engagement