1 Market Readiness Seminar 9 Remaining Market Trials and Cutover Activities November 10, 2010

2 Antitrust Admonition ANTITRUST ADMONITION ERCOT strictly prohibits Market Participants and their employees who are participating in ERCOT activities from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate the antitrust laws. The ERCOT Board has approved guidelines for members of ERCOT Committees, Subcommittees and Working Groups to be reviewed and followed by each Market Participant attending ERCOT meetings. If you have not received a copy of these Guidelines, copies are available at the Client Relations desk. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws. DISCLAIMER All presentations and materials submitted by Market Participants or any other Entity to ERCOT staff for this meeting are received and posted with the acknowledgement that the information will be considered public in accordance with the ERCOT Websites Content Management Operating Procedure.

3 Agenda General Updates and Reminders Cutover Schedule –Final Review of Cutover Schedule Overview –Soft Launch –Defect Review –CRR Update –Credit Update Support and Issues Management Process –Market Calls for Soft Launch, Go-Live and Post Go-Live –Issue Management Process Q&A

4 General Updates and Reminders

5 General Updates / Reminders Network Model Loads 11/01/2010 – Completed as scheduled 11/10/2010 – Completed as scheduled 11/17/ /24/2010 – Last update prior to Go-Live MPs should update Nodal Contact list for 24x7 Support prior to the week of the 28th – orm_V1.1.XLShttp://nodal.ercot.com/readiness/rq/documents/kd/nodal_contact_declaration_f orm_V1.1.XLS 24-Hour Full-System Test: –ERCOT will conduct the 24-Hour Test Nov 11 (12 pm) to Nov 12 (12 pm) –Market Notice was sent Nov 3 to confirm this test window –Additional reminder / confirmation sent on 11/9 –Final Confirmation Market Notice will be sent on 11/11 2 hours prior to the test start time –Note that all reported issues from the October LFC Test have been addressed –Refer to following 2 slides for a list of those observations

General Updates / Reminders: October 24hr LFC Test Update ObservationWhat / WhenCauseResolution SCED StoppedIntervals 12:05, 12:10, 15:55 Issue occurs when DSR telemetered Output Schedule = 0 MW and RST = ONDSR Complete Code fix released to Nodal Production 11/05 for November LFC test Updated Desired Base Points UDBPs were observed to cease updating for 5 units Problem related to SCED stopping. Complete Code fix released to Nodal Production 11/09 for November LFC test EMS Alert IssuesLarge volume of EMS alerts seen by MPs, including stale alerts and duplicates Defect found in the alert processes that caused duplicate alerts to be sent Complete Code fix released to Nodal Production 11/09 for November LFC test Incorrect Base Points, LMPs, HUB Prices, Load Zone Prices Interval impacted 13:15, 18:05, 18:55 MMS process issue with synchronizing data received from EMS. Resource Shift factors and Electrical Bus Shift factors Complete Code fix released to Nodal Production for November LFC test 6

General Updates / Reminders: October 24hr LFC Test Update ObservationWhat / WhenCauseResolution High / Low PricesThroughout peak period of the test Multiple outages (common this time of year) Resource limit constraints (AS, ONTEST) Nodal prices are not incentivized Conservative Operations Complete Improved Operator Process Post Go-Live: Payment will be linked to Nodal prices vs. Zonal prices Incorrect Real-Time Metered Prices (Note: this did not impact Base Points or other prices) Missing EPS data between 12:00 and 13:30 on 10/27 Preliminary finding is that bad data was introduced into EMS. Root cause analysis still in process Interim Fix Implemented Updated configuration and added data validation tools Improved monitoring of data transfer processes LMP differences between ICCP and MIS postings for some generators (2-3 cents) Various SCED intervalsPrecision mismatch of shift factors, shadow prices between SCED and Oracle database Complete Code fix released to NProd for November LFC test 7

8 Cutover Update Schedule / Activity Overview

Cutover Timeline 9

MP Activities / Impacts CRRAH able to retrieve ACLs from CRR system each business day. MPs can post additional collateral until 11/08/2010 for Dec 2010 CRR Auction Dec 2010 CRR Model available on MIS Dec 2010 Monthly Auction Notice available on MIS Functional Area Network Model Outage Scheduler Congestion Revenue Rights Credit MIS MayJuneJulyAugSeptOctNovDec Cut-Over Schedule Monthly Overview - October Key Cut-Over Activities for October 2010 Complete (10/14-10/19) CRR: ERCOT begins accepting PCRR Nominations for December Monthly Auction (updated) (10/15-11/15) Model: Network Operations Model posted to TSP Citrix location and TSPs begin validation process Complete (10/26) CRR: ERCOT shall allocate PCRRs to NOIEs for the 2010 December Monthly Auction and publish to MIS Complete (10/26) CRR: ERCOT shall post CRR Network Model for the 2010 December Monthly Auction to MIS Complete (10/28-11/08) Credit: ERCOT posts ACLs daily for CRR December monthly auction to CRR Complete (10/29) CRR: ERCOT to post December 2010 Monthly Auction Notice to MIS 10

MP Activities / Impacts Available Credit Limit is locked for CRRAHs CRR Auction Invoice via the API or MIS CRRAHs can receive postings on MIS QSEs can begin DAM Bid submission (15 submission items) Market checkpoint calls begin to facilitate issues and readiness Daily Market Conference Bridge starts 11/23 Functional Area Settlements Credit Congestion Revenue Rights Disputes Market Management MayJuneJulyAugSeptOctNovDec Cut-Over Schedule Monthly Overview - November Key Cut-Over Activities for November 2010 Complete (11/8/ :00pm) Credit: Collateral Posting Deadline (Dec Auction) Complete (11/8/2010 5:00pm) CRR: Credit Lock for Dec CRR Auction (11/9/2010 – 11/11/2010) CRR: December CRR Auction Bid Open/Close (11/12/2010) CRR: December CRR Auction Executes (11/15/2010) CRR: December CRR Auction Results published (11/16/2010) Settlements: December CRR Auction Invoice published (11/19/2010) Credit: Payment Due for December CRR Auction Invoices (11/22/2010) Settlements: Payments to CRRAH (Dec Auction) (11/23/2010) Market Submission Opens (Remaining Protocol Go- Live) (11/24/2010) Model: Network Model Load (11/29/2010) Credit: ERCOT to Publish ACL for the initial Day-Ahead Market execution by ERCOT 11

MP Activities / Impacts Daily Market Calls continue for issue facilitation Settlement Calendar Extracts (See Emil for full list of postings) MPs receive 1 st Nodal Invoice for DAM and RTM via MIS MPs can submit Disputes via MIS or API Functional Area Network Model Settlements Congestion Revenue Rights Credit Market Management System MayJuneJulyAugSeptOctNovDec Cut-Over Schedule Monthly Overview - December Key Cut-Over Activities for December 2010 (12/1/2010) Nodal Program: Nodal Go-Live (Operating Day 1) (12/3/2010) Settlements: Nodal Day Ahead Market Statement & Invoice Available (12/8/2010) Credit: Nodal Payment Due for OD12/01 (12/9/2010) Credit: Nodal Payout for OD12/01 (12/15/2010) Model: Network Model Load (12/13/2010) Settlements: Nodal Real-Time Statement Available (12/16/2010) Settlements: Nodal Real-Time Invoice Available (12/27/2010) Credit: Nodal Payment Due for Real-Time Invoice 12/16 (12/28/2010) Credit: Nodal Payout for Real-Time Invoice 12/

13 Cutover Update Soft Launch Overview

Soft Launch Overview DateActionComments 11/15/2010 – 11/29/2010 ERCOT Initiates “Soft Start” to Nodal Market Go-Live ERCOT will run non-binding DAM, RUC daily per Nodal protocol timelines. RTM will remain Open Loop, but continue to publish base points and LMPs. Note that credit will be set high on 11/15 11/15/2010 Credit posts ACLs and TPEs for non- binding DAMFirst Credit Operating Day 11/16/ /17/2010 Market now able to submit transactions for first Nodal Operating Day (T-14d) 12/01/2010 Operating now available for Market submissions 11/24/2010 QSEs with Resources required to submit 7 days of rolling COPs12/01/2010 required on 11/24/ /28/2010 2:00 PM – 11/28/2010 3:00 PM Generation and Frequency Control switched to Nodal systems for final LFC test QSEs will begin following Nodal base points Settlements will continue to be Zonal 11/28/2010 2:00 PM – 11/30/ :59:59 QSEs remain on Nodal Control while settling Zonally during the LFC test 11/29/2010 Last Non- Binding DAM for operating day 11/30/ /30/2010 First Nodal Binding DAM First Nodal Binding DRUC HRUC begins at 1800 with the adjustment period 14

11/30/2010 Go-Live Sequencing Soft Launch Overview TimeActionComments up to 10:00Bids and Offer submission QSE submit bids and offers 10:00Close DAM 10:00Execute Dam Clearing Process 13:30Approve DAM resultsDay Ahead results posted to MIS Submit Post DAM COP updates 14:30Close for RUC 14:30Begin Execution of DRUC 16:00Approve DRUC Results 16:00Post DRUC Results 18:00HRUC Begins Hourly Runs 18:00 Adjustment Period Opens for 12/1 15

Cut-Over Monthly Outlook – Go-Live Sequence of Events Key Zonal Notes for 11/30/2010 and 12/01/2010 –QSEs will maintain: Balancing Energy Offers through Operating Day 12/01/2010 –Submitted on 11/30 for OD 12/1 Resource Plans through Operating Day 12/01/2010 –Maintained continuously through 12/01 to reflect actual Resource Plan Zonal Outages effective on Operating Day 12/01/2010 –Examples: Actual Start / End, Forced Outages, etc –On 11/30/2010 ERCOT will run: Zonal Ancillary Service Market –Zonal awards will be published –MPs will follow Nodal AS awards Zonal RPRS –Run as a study only –Zonal commitments will not be published –Zonal prices will not be generated for 12/01/2010 –No Zonal Submissions or Markets for Operating Day 12/02/2010 or later Note: All Zonal systems (ERCOT and MP) must remain in place until 1/1/2011 Note: ERCOT may extend Zonal submissions based on Nodal system Conditions 16

17 Cutover Update Defect Review

Priority Defects To Be Resolved By End Of Q

19 Cutover Update CRR

20 CRR December Market Update 2010 December Monthly Auction is in progress: Credit Lock Date was 5:00pm on Monday, 11/8 Bid window opened at 12:00:01 on Tuesday, 11/9 Bid window will close at 5:00pm on Thursday, 11/11 If the total number of bids exceeds 200,000, a second round of bidding will be open at 6:00pm on Thursday, 11/11 until noon on Friday, 11/12 A Market Operator message will be sent out at 5:00pm on Thursday, 11/11 regarding the second round of bidding – one way or the other

21 CRR December Market Update Auction naming convention: 2010DEC1stSixMonthAuction As per Protocol, we must hold six, separate monthly auctions prior to the multi-month (annual) auction. As such, we are delineating these first 6 monthly auctions with the tag ‘1stSixMonth’ to separate them from market trials and the future monthly auctions that will follow the annual auctions. The December auction is not a 6 month auction. Counterparty Credit Limit Editor The counterparty (CP) must log in and allocate a credit limit for each and every auction in the CRR application. Credit will not appear in the CRRAH’s credit limit editor until the CP has first entered the credit for the auction. Notifying ERCOT of your intention to participate in CRR is not sufficient to ‘lock’ credit – Counterparty must do that in the application, and by the published lock date and time.

22 CRR Activity Calendar DayDateActivityComments Thursday11/11/2010 CRR Auction Bid Window Closes at 17:00:00 CPT for the 2010 December Monthly CRR Auction 8 If total bid transactions exceed 200,000, ERCOT will notify Market Participants via the CRR Application Message facility that a second round bid window has opened – 2 nd round bid window will be open from 18:00:01 CPT on Thursday, 11/11/2010 until 12:00:00 CPT on Friday, 11/12/2010 8aSection (3) (b)(c) Friday11/12/2010 ERCOT starts the Execution of the Auction Engine for the 2010 December Monthly CRR Auction 9Auction Engine Starts PCRR Nomination for the 2011 January Monthly CRR Auction must be received by ERCOT at 17:00:00 CPT 2 15 Business Days prior to the opening of the auction Section (c)(i) Monday11/15/2010 ERCOT posts 2010 December Monthly CRR Auction results to Market at 01:00:00 CPT 10Post Auction Results Section (1) ERCOT sends auction results at 01:55:00 CPT to Settlements & Billing and Credit for 2010 December Monthly CRR Auction 11 Tuesday11/16/2010 CRR releases the Locked Auction Funds for 2010 December Monthly CRR Auction at 16:30:00 CPT 12ERCOT releases locked auction funded Settlement & Billing creates a 2010 December CRR Auction Invoice and sends in out electronically prior to 23:59:59 CPT 13S&B issues invoices Section 9.8(1) Friday11/19/2010 ERCOT shall allocate PCRRs to NOIEs for the 2011 January Monthly CRR Auction3 10 Business Days prior to the opening of the auction Section (c)(i) ERCOT shall post CRR Network Model for the 2011 January Monthly CRR Auction4 Post no later than 10 Business days before the auction Section (1)(i)(i) 2010 December Monthly CRR Auction Invoices are due to ERCOT by 17:00:00 CPT 14Invoices due Section 9.9.1(1)

23 CRR Activity Calendar DayDateActivityComments Wednesda y 12/1/2010 Nodal Go Live Date Friday12/3/2010 ERCOT will start accepting PCRR Nomination at 08:00:00 CPT for the 2011 February Monthly CRR Auction Monday12/6/2010CRR Auction Lock Date for 2011 January Monthly Auction Closes at 17:00:00 CPT Lock Date Section (1) Tuesday12/7/2010 CRR Auction Bid Window Opens at 00:00:01CPT for the 2011 January Monthly Auction ERCOT shall post CRR ownership as of 11/30/2010Section Thursday12/9/2010 CRR Auction Bid Window Closes at 17:00:00 CPT for the 2011 January Monthly CRR Auction If total bid transactions exceed 200,000, ERCOT will notify Market Participants via the CRR Application Message facility that a second round bid window has opened – 2 nd round bid window will be open from 18:00:01 CPT on Thursday, 12/9/2010 until 12:00:00 CPT on Friday, 12/10/2010 Section (3) (b)(c) Friday12/10/2010 ERCOT starts the Execution of the Auction Engine for the 2011 January Monthly CRR Auction PCRR Nomination for the 2011 February Monthly CRR Auction must be received by ERCOT at 17:00:00 CPT 15 Business Days prior to the opening of the auction Section (c)(i)

24 Cutover Update Credit Transition

Cutover Update - Credit - Soft start DAM DAM credit parameters will be set for Soft Start as they will be set for Go Live DAM historical values used for credit constraints – see next slide “ e” factors were reset to 1/0/1 on Friday, November 5 th –Will be effective through Soft Start and through operating day -December 14 th –Notices went out by two methods to CP authorized rep and back up and CP Credit contact and back up is the primary communication tool Written notices went out by regular mail CPs desiring “favorable treatment” should complete and return the attached Request for Change in “e” Factor Treatment Form to See calendar of anticipated reset dates through January 25

Cutover Update - Credit - Historical prices used for credit exposure in DAM Proxy prices to be used for purposes of calculating DAM credit exposure for go-live is covered in Protocol Section (8) Implementation: –All nodal settlement points have been mapped to 2010 congestion management zones Spreadsheet with the mapping is posted as item 11 at NATF) NATF –DAM historical settlement point prices Import hourly average of zonal MCPEs over the last 30 days as a proxy –SCED historical settlement point prices Import 110% of zonal MCPEs over the last 30 days as a proxy for Real-Time SPPs (this ensures the 10% Day-Ahead/Real-Time price difference called out in (8)(b)). –Ancillary Services historical prices Import zonal MCPCs as a proxy for nodal MCPCs –As nodal data is created, the zonal data will roll off, so that 30 days after go-live, all prices used for credit exposure calculations will be nodal prices. –Imported zonal prices will be trued-up with any price corrections the next business day (timeline of zonal price correction posting). Note that this process will be used during the soft start –On Nov 15, will only have 15 days of (zonal) data loaded, not full 30 days –By go-live, as a daily automated process runs to import the zonal data, there will be a full 30 days of historical zonal pricing data available 26

Cutover Update - Credit - “e” Factors – Request for Change in “e” Factor Treatment Form 27

Cutover Update - Credit - “e” Factors – Bi-weekly Process – Preliminary Cutover Schedule 28

Cutover Update - Credit - Soft Start CMM Soft Start – Key Dates –November 15 th - Initial CMM reports generated and published –November 16 th – First DAM run with credit constraints –November 18 th – Zonal credit requirement from CMM system CMM Soft Start - General –Total Potential Exposure (TPE) will use a) Zonal data and b) binding Nodal data. No non-binding Nodal data (e.g. practice DAM runs) will be included in the soft start TPE calculations. Collateral included will be actual collateral held. Some Zonal data will be included at a summary level only (e.g. AIL) or as adjustments (e.g. payment of Zonal invoices) –CPs participating in the DAM during the soft start will operate within a “real” ACL CPs should be working within real credit constraints preparatory to Go Live –Since the data used in the soft start TPE calculations is binding, ERCOT will use CMM exposures published beginning November 18 th as the bases for binding Zonal collateral requirements as well as Nodal “soft start” –ERCOT will produce Credit Reports and ACLs on non-business days during soft start Note: It will be key for Counter-Parties to verify accuracy of Credit Reports during the week of November 15 th 29

Cutover Update - Credit - Go Live CMM Go Live – Key Dates –Monday, November 29 th - Send ACL for initial binding DAM (afternoon) (TPE excludes zonal invoice published on November 29 th ) –Tuesday, November 30 th - Initial binding DAM - “e” factors set at 1/0/1 - Credit Report include zonal invoice published on Nov 29 th –Wednesday, December 1 st – “Go Live” CMM Go Live – General –See Appendix for detail of how exposure components will be addressed. Updates from last Readiness Seminar are in red. December “ramp up" for DALE - multiply the UDAA by a factor of five (5) each day until the first DAM invoice is published. December 4-5 (Sat/Sun) - discount DALE by 25% since the first DALE is calculated on a weekend. DALE will be calculated at 100% beginning with Credit Reports posted Monday, December 6, 2010 and ACLs sent Monday evening for Tuesday, December 7, See slide on expected impact of ACP on FMM in FCE calculation –If a Counter-Party believes that their Zonal ADTE is not representative of their anticipated Nodal RT activity, they can provide an estimate of anticipated RT activity and ERCOT will consider revising their ADTE. 30

31 Issue Management Process and Communications Plan

Summary of Support Through Go-Live Summary of Support Hours –11/15/2010 – 11/26/2010 : Soft Launch On-Site Support will be regular business hours ERCOT will maintain it on-call process during this period –11/27/2010 – 12/3/2010: LFC and Go-Live Key Departments will begin 24x7 Rotations This support rotation will be extended if necessary –12/4/2010 – 12/30/2010: Initial Stabilization 24x7 support as required On-Call personnel on heightened alert 32

MP Support – Tier 1 Issue Management Team (Market Trials) Phone 3900 Market Participants Questions / Issues Issue Management Team Help Desk Consolidating methods of receiving calls / s from Market Participants Technical issues / question (e.g. authentication, communication with ERCOT systems, etc): Phone: All other issues / questions related to Nodal Phone: It is imperative that issues are not initially reported directly to individual ERCOT employees Tier 1 Issue Management Team Comprised of Wholesale Clients Services Help Desk Tracking Team will track, measure and validate all Market questions and issues are being addressed These metrics will be reviewed daily If an MP wishes to escalate an issue, they may do so by resending the to requesting escalation Key Purpose of Issues Management Team Address Most Issues Track calls through completion Escalate calls to triage team Report on call metrics Key Purpose of Issues Management Team Address Most Issues Track calls through completion Escalate calls to triage team Report on call metrics 33

MP Support – Tier 2, 3 and Escalation Triage Team / IT Incident Managers Triage Team / IT Incident Managers Issue Management Team Monitoring Production Support Production Support Dev Support Security (Physical & Cyber) Day Ahead Market IT Infra- structure IT Infra- structure Release Mgmt Executive / Directors Escalation / Internal Communications Team DBAs (Market Trials) Phone 3900 Market Participants Questions / Issues Help Desk Real-Time Market / LFC Reliability Unit Commitment Congestion Revenue Rights Settlements Registration / Client Services Market Information System Reports / Extracts Metering / Data Agg Network Modeling Outage Coordination Credit Management 34

35 Market Communications Plan Note that a calendar of Market Calls has been posted to Full Market WebEx Calls These calls are designed for all Market Participants Review of progress Review of issues and progress to resolution Open forum for Market Participants 11/15/2010 – 11/22/2010 Market call on Monday 11/15/2010 Market call on Friday 11/19/ /23/2010 – 12/7/2010 Daily Calls 10:30 AM call 4:30 PM Call Note that for urgent issues the existing Market Notice and Control Room Hotline process will be leveraged in addition to these Market Calls

36 Market Communications Plan LFC Specific Calls for Cutover These calls are designed for QSEs with Resources and TSPs Discuss issues specific to generation and frequency control Communicate logistics and changes in cutover logistics as it applies to generation and frequency control Provide open forum for Market Participants to raise issues / ask questions Call will open at 11:00 AM on 11/28/2010 Call will remain open through 12/1/2010 until 11:59 PM After 12/1/2010 Issues will be fielded through the issues management process or during the twice daily market calls

NOVEMBER 2010 SUNDAYMONDAYTUESDAYWEDNESDAYTHURSDAYFRIDAYSATURDAY :00AM – Market Call :00PM – TSP Market Call :00AM –Market Call :00AM – Market Call 23 10:30AM / 4:30PM – Daily Market Call 24 10:30AM / 4:30PM – Daily Market Call 25 ERCOT HOLIDAY 26 ERCOT HOLIDAY 27 10:30AM / 4:30PM – Daily Market Call 28 10:30AM / 4:30PM – Daily Market Call *LFC Market Call 29 10:30AM / 4:30PM – Daily Market Call *LFC Market Call 30 10:30AM / 4:30PM – Daily Market Call *LFC Market Call * LFC Market Call – Beginning at 11:00AM on 11/28 and continuing through 12:00AM on 12/1 37

DECEMBER 2010 SUNDAYMONDAYTUESDAYWEDNESDAYTHURSDAYFRIDAYSATURDAY * LFC Market Call – Beginning at 11:00AM on 11/28 and continuing through 12:00AM on 12/1 1 10:30AM / 4:30PM – Daily Market Call *LFC Market Call 2 10:30AM / 4:30PM – Daily Market Call 3 9:00AM –Market Call 4:30PM – Market Call 4 10:30AM / 4:30PM – Daily Market Call 5 10:30AM / 4:30PM – Daily Market Call 6 10:30AM / 4:30PM – Daily Market Call 7 10:30AM / 4:30PM – Daily Market Call :00AM –Market Call :00AM – Market Call :00PM – TSP Market Call :00AM –Market Call :00AM – Market Call ERCOT HOLIDAY 24 ERCOT HOLIDAY :00AM – Market Call :00PM – TSP Market Call :00AM –Market Call 38

39 Questions

40 Appendix

Approach for establishing the initial exposure in CMM Market Readiness Seminar November 10, 2010

Approach for establishing the initial exposure in CMM Market Readiness Seminar November 10, 2010

Approach for establishing the initial exposure in CMM Market Readiness Seminar November 10, 2010

Go Live – FMM calculation Market Readiness Seminar November 10, 2010