1 Tab X ERCOT Confidential Credit Impact of Increased Caps The credit exposure impact of higher system-wide offer caps was estimated using an internal ERCOT model under two scenarios: 1.Approximate daily exposure during August 2012 (no peak intervals) 2.Approximate maximum exposure in August 2011 (two days with peak prices over two weeks, 12 intervals at cap)

2 Tab X ERCOT Confidential Model Assumptions The exposure model uses the following variables: “Normal” summer daily volume Volume increase on August 2011 days with peak intervals Number of peak intervals in Real-Time and Day-Ahead markets How net load requirements are filled: self-generation, bilaterals, Day-Ahead or Real-Time Market, for peak- and non-peak periods Average Real-Time and Day-Ahead Market prices System-wide offer cap The model estimates aggregate market exposure, not that of individual market participants.

3 Tab X ERCOT Confidential Results The chart below shows the modeled sensitivity of credit exposure to different price cap levels.

4 Tab X ERCOT Confidential Results In the August 2011 scenario doubling the cap increases credit exposure by a factor of approximately 1.5. In the August 2012 scenario price caps have no impact.

5 Tab X ERCOT Confidential Questions