1 UFE Workshop Sponsored by COPS October 19, 2004

2 Agenda Antitrust Admonition Morning Session - Ed Echols 1. Review of meeting and minutes from September 2. Discuss the Protocol timelines regarding UFE 3. Update on ERCOT staff and PWG work on protocol revision to calculate Distribution Losses based on actual load for the operating day 4. Determine if there is general consensus on a problem statement 5. Group development of solutions list to resolve the stated problem (Dependent on consensus around problem statement – no solutions are needed if a problem is not definable)  Prioritize the list  Build out high level requirements needed to accomplish the solution Afternoon Session - Carl Raish 6. Develop a market participant consensus on a how to measure and make UFE monitoring available to the market  List items desired for analysis What data is needed to perform that monitoring/analysis What data is available  Is it important to update previous UFE reports from Schedule next meeting

3 Interval Data Metered Accounts Profiled Energy Usage Non-Interval Data Non-Metered Accounts Distribution Line Losses ERCOT Wide Transmission Line Losses UFE +/- Net Load (Generation) for Settlement Interval (Includes Actual Losses in the UFE Zone) GAP > CALCULATION OF UFE Net Generation compared to Retail Load Build-up

4 DISTRIBUTION UTILITY Inaccuracy of method used to calculate distribution losses. Unrecorded services. METERING AGENT Incorrect meter data. Inaccuracy in calculation of un-metered service consumption. Meter reading errors (gen. or end use meters) Errors in estimation of meter readings. ERCOT SYSTEMS Inaccuracy of load profiles on a settlement interval basis. Incorrect aggregation of retail load or zonal generation. Inaccuracy in method used to calculate transmission losses. Incorrect assignment of customer to profile type. Incorrect assignment of customers to UFE zone. Theft Contributors to UFE

5 Utility Survey of UFE Contributing Factors

6 Discussion began in Settlement Technical group in October 1999 and continued into March 2000 with a “UFE sub-team” formed in late December February 3rd and 10 th, 2000 Settlement Technical Meetings focused on narrowing zone options and refining allocation data. Also started analysis of old control zone metering points to determine option feasibility for market open. February 24, 2000 Settlement Technical Meeting - Group developed alternative hybrid recommendation for individuals to present to their respective companies for future decision making. March 03, Settlement Technical group detailed two options to be forwarded to the Retail Users Group for voting. History of UFE Decisions

7 What work has already been done that improved settlement accuracy? Modifications have been made to aggregation algorithms to improve load estimations ADU vs Usage Factor Extended look-back period for IDR estimation PRRs to extend NIDR data available for estimation to 12 months (currently 6 months) Adjusted BUSIDRRQ profile Removed gap validation for usage data loading Analysis of 2002 UFE presented to BOD & available on website

8 Is there a consensus problem statement the market wishes to address in the UFE Task Force

9 What is needed to assist the market in Monitoring Measuring and Analyzing UFE

10 Some ERCOT Suggestions Update ERCOT report currently on the website to include results for calendar year 2003 … determine where we are now with changes already implemented Consider improvements for ESIID-to-substation assignment Potential impact to current settlements if incorrect ERCOT test settlements at substation level have shown problems … mismatch of load with substation telemetry ERCOT validations based on zip code continue to show many suspect assignments Suggest geo-coding service address into latitude and longitude and perform validations on location/distance measures

11 Some ERCOT Suggestions (continued) Evaluate loss calculations and profiling error Compare settlement version of annual kWh to substation telemetry at TDSP level … removes profiling error and substation assignment error from comparison Substations are metered (~50%), observable (~40%) and unobservable (~10%) Drill down are there systematic differences by time-of- use? By voltage level? Are substations primarily serving business load or residential load more accurate (profile related issues)? Are substations in some weather zones more accurate than other zones (also profile related issues)?

12 Some ERCOT Suggestions (continued) Compare UFE at the substation level If previous comparisons are good enough, compare UFE across substations. If UFE is uniform across all substations, we probably do not need UFE zones. If UFE is not uniform, can we identify zones where it is uniform? Is there enough benefit in terms of settlement accuracy to justify the metering investment to implement UFE zones? Could we consider continuing with current method of UFE calculation allocate to substations by their telemetered UFE share?

13 Some ERCOT Suggestions (continued) Improved settlement estimates of load at the substation level would be beneficial to ERCOT operations Could produce better estimates at unobservable substations Improved transmission planning Improved congestion management TNT / State Estimator more accurate

14 NEGATIVE UFE does not result in Money Changing Hands … it is the means to balance what Resources brought to the market with who should pay for that service. Negative UFE is an accounting treatment to balance what actually was delivered by reducing what Aggregation processes over calculate – ie Negative energy was never there in the first place and cannot be charged to any entity Absolute value analysis of UFE dollars will be overstated if Negative UFE is not excluded.