Report to TAC December 2009

In Brief Working Group Reports Working Group Reports DSWG DSWG CMWG CMWG MCWG MCWG QMWG QMWG VCWG VCWG Task Forces Task Forces QSTF QSTF GATF GATF MIGTF MIGTF WCATF WCATF Other Activities Other Activities Texas Admin Texas Admin

Working Group Reports DSWG Presentation available at Presentation available at Main topics Main topics Goals about ½ done for 2009 – some items to be shifted to 2010 with nodal delay Goals about ½ done for 2009 – some items to be shifted to 2010 with nodal delay LaaRS – saw dip in participation in 2009 due mainly to economic decline. Participation is increasing, perhaps due to economic recovery. LaaRS – saw dip in participation in 2009 due mainly to economic decline. Participation is increasing, perhaps due to economic recovery. Suspension of Dynamic Scheduling requirement – discussed DSWG to bring recommendation to WMS Suspension of Dynamic Scheduling requirement – discussed DSWG to bring recommendation to WMS Advanced metering – status Advanced metering – status

Working Group Reports DSWG Main topics cont’ Main topics cont’ FERC Order 719 FERC Order 719 Key Elements include: Key Elements include: DR as a source of energy and AS, including retail demand response; DR as a source of energy and AS, including retail demand response; Scarcity pricing during reserve shortages; Scarcity pricing during reserve shortages; Support for long-term power contracting; Support for long-term power contracting; Enhanced market-monitoring policies; and Enhanced market-monitoring policies; and Increased responsiveness of ISOs to their customers. Increased responsiveness of ISOs to their customers. Performance Protocol Revision to for LaaRS Performance Protocol Revision to for LaaRS Next Meeting December 4 th Next Meeting December 4 th

Working Group Reports CMWG Presentation available at Presentation available at Main topics Main topics West Zone Issues West Zone Issues September OOMing---mainly due to outages in San Angelo—affected W-N Stability Limit September OOMing---mainly due to outages in San Angelo—affected W-N Stability Limit ERCOT committed to send market notice about implementation of Yellow Jacket Phase Shifter ERCOT committed to send market notice about implementation of Yellow Jacket Phase Shifter project is still scheduled to be completed in December 2009 including the line that ties the substation to the rest of the grid project is still scheduled to be completed in December 2009 including the line that ties the substation to the rest of the grid Pre Contingency Action Plans Pre Contingency Action Plans PCAPs can be proposed by ERCOT or market participants PCAPs can be proposed by ERCOT or market participants Has BES market implications Has BES market implications Current PCAPs include 3 CREs (Gr-LC, TPC-Temple and Lake Creek – Temple Pecan Creek) Current PCAPs include 3 CREs (Gr-LC, TPC-Temple and Lake Creek – Temple Pecan Creek)

Working Group Reports CMWG Main topics Main topics Nodal Competitive Constraint Test Nodal Competitive Constraint Test Nodal Protocols 3.19 Discusses CCT Nodal Protocols 3.19 Discusses CCT Nodal SCED is 2 step (Nodal Protocols ) Nodal SCED is 2 step (Nodal Protocols ) Step 1 solves competitive constraints, producing Reference LMPs Step 1 solves competitive constraints, producing Reference LMPs Step 2 solves all constraints and produces final LMPs Step 2 solves all constraints and produces final LMPs The CCT process is to identify the constraints that will be solved as part of Step 1 The CCT process is to identify the constraints that will be solved as part of Step 1 ERCOT has evaluated existing constraint list against current CSCs/CREs ERCOT has evaluated existing constraint list against current CSCs/CREs 87% of current constraint list of 2138 constraints when tested against current set of CSCs/CREs are competitive 87% of current constraint list of 2138 constraints when tested against current set of CSCs/CREs are competitive Test takes hours to run—could make daily test of CCT difficult---still exploring Test takes hours to run—could make daily test of CCT difficult---still exploring Met on November 30 th Met on November 30 th

Working Group Reports MCWG Presentation available at Presentation available at Main topics Main topics NPRR147, DAM Short Pay Changes NPRR147, DAM Short Pay Changes Recommended Option for Default Methodology (Vote) Recommended Option for Default Methodology (Vote) Option 4b Option 4b Max MWh based Allocation of Default Max MWh based Allocation of Default Motion to endorse Option 4b and request MCWG to draft NPRR Motion to endorse Option 4b and request MCWG to draft NPRR Motion carries – one abstention (Gen) and one opposed (IOU) Motion carries – one abstention (Gen) and one opposed (IOU)

Working Group Reports MCWG Main topics – cont’ Main topics – cont’ Short Pay Fund Options Short Pay Fund Options Working toward a compromise Working toward a compromise Discussions on different proposals for establishing a market fund to absorb short payments Discussions on different proposals for establishing a market fund to absorb short payments One proposal is to continue to short-pay the market rather than establish a market fund One proposal is to continue to short-pay the market rather than establish a market fund Issues outstanding with establishing a market fund Issues outstanding with establishing a market fund Size of the fund Size of the fund How to fund the Fund How to fund the Fund Ownership of funds in the Fund Ownership of funds in the Fund Replenishment of Fund (i.e. default or participant leaving the market orderly, etc) Replenishment of Fund (i.e. default or participant leaving the market orderly, etc)

Working Group Reports MCWG Main topics – cont’ Main topics – cont’ DAM Settlement Acceleration DAM Settlement Acceleration Protocols provide for credit at the offer quantity X (95th percentile of the hourly difference between RT and DAM SPP over the previous 30 days for that hour) Protocols provide for credit at the offer quantity X (95th percentile of the hourly difference between RT and DAM SPP over the previous 30 days for that hour) Only those positions that are at the same SPP are nettable for calculating the credit requirements (at the same SPP, then use the max) Only those positions that are at the same SPP are nettable for calculating the credit requirements (at the same SPP, then use the max) DAM Collateral Requirements DAM Collateral Requirements Next meeting December 7 th Next meeting December 7 th

Working Group Reports QMWG Presentation available at Presentation available at Main topics Main topics WMS Remands to QMWG WMS Remands to QMWG PRR811, Real-Time Production Potential PRR811, Real-Time Production Potential OGRR223, Real-Time Production Potential OGRR223, Real-Time Production Potential Wind Plant Availability Website Wind Plant Availability Website Limited users participating and availability concerns Limited users participating and availability concerns Wind Generation Forecast Accuracy Analysis Wind Generation Forecast Accuracy Analysis ERCOT is now receiving good MET data for all points from over 50 WGRs ERCOT is now receiving good MET data for all points from over 50 WGRs Still concerns regarding forecast error Still concerns regarding forecast error

Working Group Reports QMWG Main topics – cont’ Main topics – cont’ Load Forecasting Accuracy Load Forecasting Accuracy QMWG going to work with ERCOT to schedule Load Forecasting Workshop QMWG going to work with ERCOT to schedule Load Forecasting Workshop Decommitment Process for RUC Decommitment Process for RUC ERCOT is drafting NPRR language ERCOT is drafting NPRR language Met December 2 nd Met December 2 nd

Working Group Reports VCWG Presentation available at Presentation available at Main topics Main topics Options for Filing Verifiable Costs Options for Filing Verifiable Costs File Verifiable Costs. File Verifiable Costs. Once VC are accepted they may not elect for Generic. Once VC are accepted they may not elect for Generic. File with election of Generic O & M Costs. File with election of Generic O & M Costs. Generic Startup - $ per Start Generic Startup - $ per Start Generic O & M for Energy - $/MWH Generic O & M for Energy - $/MWH Will have to provide Actual fuel flows, Heat Rate Curves, emissions rates, ect. Will have to provide Actual fuel flows, Heat Rate Curves, emissions rates, ect. Proxy Heat Rate Proxy Heat Rate Will continue discussion at next meeting. Will continue discussion at next meeting.

Working Group Reports VCWG Main topics – cont’ Main topics – cont’ Treatment of Auxiliary Power Treatment of Auxiliary Power Shutdown definition for the inclusion of Auxiliary Power costs will be limited to 3 hours after breaker open. Shutdown definition for the inclusion of Auxiliary Power costs will be limited to 3 hours after breaker open. NPRR Language for allowing disputes for FOP NPRR Language for allowing disputes for FOP Limited to Replacement Costs for FOP Limited to Replacement Costs for FOP Replacement fuel made within 7 Business Days of fuel burned during the RUC Committed Interval. Replacement fuel made within 7 Business Days of fuel burned during the RUC Committed Interval. Limited to the actual gallons/barrels burned during instruction. Limited to the actual gallons/barrels burned during instruction. Ongoing discussions Ongoing discussions Treatment of O & M for new resources Treatment of O & M for new resources Treatment of New Technology Treatment of New Technology Next Meeting December 9 th Next Meeting December 9 th

Active Task Forces Generation Adequacy Task Force Generation Adequacy Task Force CDR: Thorough review will occur on December 3rd. CDR: Thorough review will occur on December 3rd. Is 5 year horizon adequate? Is 5 year horizon adequate? Does it need high and low forecasts? Does it need high and low forecasts? Flow diagram of processes Flow diagram of processes Why is county data needed? Why is county data needed? EILS methodology is still under development EILS methodology is still under development LOLP Study (Target Reserve Margin) Discussion LOLP Study (Target Reserve Margin) Discussion Inputs and assumptions were reviewed at Nov. 3rd meeting. Inputs and assumptions were reviewed at Nov. 3rd meeting. Luminant provided an overview of wind historical data – urge TAC members to review data Luminant provided an overview of wind historical data – urge TAC members to review data Met December 1 st Met December 1 st

Active Task Forces Quick Start Task Force Quick Start Task Force REMOVAL OF RUC CLAWBACK REMOVAL OF RUC CLAWBACK OPTION A – REMOVES CLAWBACK FOR ALL HOUR START UNITS OPTION A – REMOVES CLAWBACK FOR ALL HOUR START UNITS OPTION B – 50 PERCENT CLAWBACK FOR RUC-COMMITED HOURS THAT QSE DID NOT PARTICIPATE IN DAM AND NO EEA IN EFFECT OPTION B – 50 PERCENT CLAWBACK FOR RUC-COMMITED HOURS THAT QSE DID NOT PARTICIPATE IN DAM AND NO EEA IN EFFECT HOUR START UNIT = RESOURCE CAPABLE OF PRODUCING ENERGY AT ITS HSL IN 60 MINUTES OR LESS FROM AN OFF-LINE STATE HOUR START UNIT = RESOURCE CAPABLE OF PRODUCING ENERGY AT ITS HSL IN 60 MINUTES OR LESS FROM AN OFF-LINE STATE REAL TIME ECONOMIC UNIT COMMITMENT REAL TIME ECONOMIC UNIT COMMITMENT NEW 10 MINUTE NSRS NEW 10 MINUTE NSRS SHOULD QSTF ADDRESS CO-OPTIMIZATION? NO SHOULD QSTF ADDRESS CO-OPTIMIZATION? NO Next Meeting December 7 th Next Meeting December 7 th

Active Task Forces Joint ROS/WMS Multiple Interconnection of Generation Task Force (MIG TF) Joint ROS/WMS Multiple Interconnection of Generation Task Force (MIG TF) WMS Approved Charter and Goals: WMS Approved Charter and Goals: Charter: Examine and investigate the reliability, and market, impacts as well as the interconnection processes/procedures for Generation Units with more than one interconnection in the ERCOT Market. MIG will issue a whitepaper to WMS/ROS at their December meetings Charter: Examine and investigate the reliability, and market, impacts as well as the interconnection processes/procedures for Generation Units with more than one interconnection in the ERCOT Market. MIG will issue a whitepaper to WMS/ROS at their December meetings Goal: MIG will issue a whitepaper to ROS/WMS containing a list of: Goal: MIG will issue a whitepaper to ROS/WMS containing a list of: Reliability concerns and mitigation actions Reliability concerns and mitigation actions Market pros and cons Market pros and cons Policy/Planning issues related to the interconnection process for generation units with multiple interconnections in ERCOT. Policy/Planning issues related to the interconnection process for generation units with multiple interconnections in ERCOT. Next Meeting? Next Meeting?

Active Task Forces Wind Cost Allocation Task Force (WCATF) Wind Cost Allocation Task Force (WCATF) WMS Approved Charter and Goals: WMS Approved Charter and Goals: Charter: A WMS Task Force formed to address the allocation of the cost of Ancillary Services to Wind Generation Resources. Charter: A WMS Task Force formed to address the allocation of the cost of Ancillary Services to Wind Generation Resources. Goals: Goals: Primary goal is to develop one or more methodologies with supporting rationales for allocating the cost of Ancillary Services to Intermittent Renewable Resources, specifically, Wind Generation Resources. Primary goal is to develop one or more methodologies with supporting rationales for allocating the cost of Ancillary Services to Intermittent Renewable Resources, specifically, Wind Generation Resources. Secondary goal is to consider and potentially develop additional methodologies for the allocation of Ancillary Services to other Intermittent Renewable Resources (e.g. solar resources). Secondary goal is to consider and potentially develop additional methodologies for the allocation of Ancillary Services to other Intermittent Renewable Resources (e.g. solar resources). Develop and present to WMS a whitepaper that summarizes the discussion and development of proposed methodologies. Develop and present to WMS a whitepaper that summarizes the discussion and development of proposed methodologies. Goals will not include debating the appropriateness of utilizing one or more of the methodologies being considered. Similarly, our goals will not include a full analysis for assigning costs of Ancillary Services to all Market Participants. Goals will not include debating the appropriateness of utilizing one or more of the methodologies being considered. Similarly, our goals will not include a full analysis for assigning costs of Ancillary Services to all Market Participants. NEXT MEETING December 4 th NEXT MEETING December 4 th

Other Issues Texas Admin Texas Admin Issue before PUCT in DOCKET Internet Broadcasting of ERCOT Meetings Issue before PUCT in DOCKET Internet Broadcasting of ERCOT Meetings WMS has concerns regarding open communications if archived meetings are available. WMS has concerns regarding open communications if archived meetings are available.

WMS 2009 Goals Item WMS input/direction needed by Nodal Market Transition On-going Nodal Verifiable Cost Methodology On-going (VCWG) Approved Zonal PRRs – Analysis and Prioritization Q1-Q2 Consideration of timely, economic improvements to Zonal Market Before Q4 Determine CSCs for 2010 Q3 (CMWG) Market Issues Related to: Credit issues On-going (MCWG) EILS and AS Markets On-going Integrating advanced meters & other demand response into Ancillary Service Markets On-going (DSWG) Wind & related renewable technology integration On-going (QMWG/RTWG)