Lead from the front Texas Nodal 1 Texas Nodal EDS 3 Early Delivery System Plan TPTF April 02, 2007

Lead from the front Texas Nodal 2 Agenda Nodal Timelines Nodal summary release schedule EDS Release Philosophy EDS 3 Plan Objectives and Transition Plan requirements Activities Release and testing timelines Market Participant Readiness Staffing How can the TPTF continue to help in the effort?

Lead from the front Texas Nodal 3 Texas Nodal Program Summary Release Schedule High Level Version 2.0

Lead from the front Texas Nodal 4 Release Overview EDS 1 Release 1 – Alarm Processing EDS 1 Release 2 – Point-to-Point Checkout EDS 2 Release 3 – State Estimator & Network Security Analysis EDS 2 Release 4 – Network Model Validation EDS 3 Release 5 – SCED execution and posting LMP’s EDS 3 Release 6 – Load Frequency Control EDS 3 Release 7 – Settlement Statements, CRR Allocation & Auction EDS 4 Release 8 – RT Settlements (no Shadow Settlements) EDS 4 Release 9 – DAM, RUC, SASM, Full Settlements, EDW Extracts

Lead from the front Texas Nodal 5 EDS 3 Release Quality Gates Integration 1Integration 2 Security & Performance End To End Testing EDS Input and Data Validation EDS Release Testing Registration EMS (RLC, TCM) Projects perform FAT testing... …followed by Application Integration completion... …followed by ERCOT Internal Quality Control process... MMS (SCED) NMMS Integration Testing Testing to ensure application is stable, secure and meets system performance requirements Testing of application integration and data flows between systems Testing of business functionality across systems to support EDS Build 1Build 2 Early Delivery of Stand Alone Systems will be available for Data Validation EDS Interface Testing External Facing Machine to Machine Interface Stubs Market Testing with all Participants Early Drop 1 QC Testing Release Early Drop 2 Integrated Release

Lead from the front Texas Nodal 6 Software quality during EDS testing During the ERCOT quality control process, early software versions will be used for EDS testing These systems will be available to the market for testing the processes required to run SCED, LFC and CRR Updates will be installed as new functionality becomes available System availability, quality of LMPs and other data, and support responses will improve over time but likely may not meet production standards

Lead from the front Texas Nodal 7 EDS 3 Objectives SCED Execution and Reasonable LMP’s TP 5.4.4(3) Verify SCED inputs from real time operations (Resource Limits, RTS) TP 5.4.4(2) Verify that QSEs are capable of submitting offer curves TP 5.4.4(3) Produce LMPs and Base Points calculated by SCED TP 5.4.4(3) Attain “Reasonable” LMPs Load Frequency Control TP 5.4.8(1) Verify data requirements for LFC, for each QSE qualified to provide either Reg- Up, Reg-Down or Response Reserve Services TP 5.4.8(2) Compare Area Control Error on EDS environment and existing control systems for seven days TP 5.4.8(3) Verify each QSEs ability to provide Regulation Control and Dispatch Instructions for Manual Response Reserve Deployment Dispatch CRR Allocation & Auction TP 5.4.5(1) Verify MP’s ability to submit test bids for CRRs on Transmission Elements TP 5.4.5(1) Execute Trial Auction for Monthly and Annual CRRs TP 5.4.5(1) Assign trial PCRs / CRRs to MPs for DAM and RT Operations testing of Settlement Systems during EDS4 Settlement Statements Verify MP’s ability to connect and download

Lead from the front Texas Nodal 8 Posting of LMPs The Nodal Transition Plan states: –Once QSEs are providing sufficient information, ERCOT shall begin trial operation of SCED and calculation of Resource Base Points. The LMPs calculated by SCED shall be verified for reasonability. Once general reasonability has been achieved as determined by ERCOT, ERCOT shall begin posting LMPs and other data available on the EDS if such posting is required in Nodal Protocols, Section 6.3.2, Activities for Real-Time Operations. Reasonability in this context means: 1.LMPs are generally consistent with the offers submitted by QSEs or from test offers created by ERCOT 2.When needed, test offers for Generation Resources will be created by ERCOT using typical energy prices considering the fuel type of the Resource 3.Some LMPs may be in error in given areas of the Transmission system, but the majority of LMPs appear correct. Other Data available means the Hub prices and Load Zone prices

Lead from the front Texas Nodal 9 EDS 3 – SCED Testing Approach PhaseActivitiesIncremental System / Features / Artifacts Early Drop 1 Validate SCED input data Validate MP Digital Certificates access rights QSE Output Schedule submittal QSE Inc/Dec Energy Offer Curves (DSR) QSE Offer Curve submittal, modification, withdrawal RMR Energy Offer Curve & Output Schedule submission Stand Alone Accelerated SCED System Digital Certificate Security Enabled External User Interface available Initial EDS 3 MP Handbook complete Early Drop 2 (Above activities continued) SCED Execution ERCOT LMP evaluation Publish LMPs Initial Integration of MMS – Registration – Machine to Machine Interface (API) – EMS (SE, RLC, TCM) – Network Model Integrated Release Evaluate LMPs Continue Publishing LMP’s & other RT data Fully Integrated MMS Release – MIS / EDW Registration complete MPs ready QC Process All QSE’s Participating Declare LMPs reasonable to TPTF Begin 6 month LMP Posting Scenario based Offers uploaded by MPs ERCOT Quality Control process Training Complete Final EDS 3 MP Handbook

Lead from the front Texas Nodal 10 EDS 3 – Release 5 System Configuration - SCED Objectives TPTF Activities Mapping (3) Verify Base Points and associated LMPs calculated by SCED for reasonability and Post LMPs and other data available as required in the Network Protocols Verify SCED inputs from real time operations (look in TP) Verify that QSEs are capable of submitting offer curves. Produce LMPs and Base Points calculated by SCED Attain “Reasonable” LMPs

Lead from the front Texas Nodal 11 EDS 3 – LFC PhaseActivitiesIncremental System / Features / ??? Preliminary Testing Software and communications testing Calculation of ACE & comparison with existing control system Validate EMS Ability of QSE to receive Regulation Signal QSE internal system / processing validation EMS System w/ LFC upgrade (Not integrated with SCED) QC Process Complete communication and resource dispatch control response capability Individual resource performance evaluation with AS-monitor ACE calculations EMS Integrated with SCED

Lead from the front Texas Nodal 12 EDS 3 – Release 6 System Configuration - LFC Objectives TPTF Activities Mapping Verify data requirements for LFC, for each QSE qualified to provide either Reg-Up, Reg-Down or Response Reserve Services Compare Area Control Error on EDS environment and existing control systems for seven days Verify QSEs ability to provide Regulation Control and Dispatch Instructions for Manual Response Reserve Deployment Dispatch (1) - ERCOT shall verify the proper operation of the Load Frequency Control functions (2) – The calculation of Area Control Error on the Nodal system and the existing control systems shall be continuously compared for accuracy for seven days ERCOT shall begin testing of individual QSEs to provide Regulation control and Dispatch Instructions for manual Responsive Reserve deployment dispatch through actual deployment of regulation energy (3) - ERCOT shall test one QSE at a time verifying proper operation of each QSE. ERCOT shall also verify the QSE’s ability to operate on constant frequency required by Protocols

Lead from the front Texas Nodal 13 EDS 3 – CRR Allocation & Auction Approach PhaseActivitiesIncremental System / Features / Artifacts Early Drop 1 Validate CRR input data QSE Register as CRR Account holders Validate MP Digital Certificates access rights Validate MP bids Mock CRR auction Stand Alone CRR System CRR Handbook Complete Integrated Release ERCOT issues test PCRs/CRRs QSEs use CRRs issued to test Secondary Trading QSEs test bidding strategy QSEs enter monthly and annual bids View CRRs Trial Settlement of CRRs Fully Integrated Release

Lead from the front Texas Nodal 14 EDS 3 – Release 7 System Configuration - CRR Objectives TPTF Activities Mapping (1) Execute a trial auction of monthly and annual CRRs Assigned test CRRs/PCRs to be used for trial operation of DAM and trial operations testing of the settlement systems Verify MP’s ability to submit test bids for CRRs on Transmission Elements Execute Trial Auction for Monthly and Annual CRRs Assign trial PCRs / CRRs to MPs for DAM and RT Operations testing of Settlement Systems during EDS4

Lead from the front Texas Nodal 15 What should QSE’s have in place? Release 5 - SCED Personnel have attended Nodal Training Courses Provided new and updated Registration data to ERCOT QSE ability to create and submit offer curves to ERCOT QSE Interactions with Interface Testing –Obtained digital certificates –Connectivity and ID Authentication –Offer submissions capability demonstrated QSE ability to receive Base Points and other data Market Participant operators available 8 to 5 Release 6 - LFC QSE EMS Nodal system changes complete to support LFC QSE Ancillary Service Qualification complete Release 7 - CRR CRR Digital Certificate access requested CRR Account Holder: Completed Registration with ERCOT and Application Process CRR Account Test Credit Limit established

Lead from the front Texas Nodal 16 EDS 3 – Early Delivery System – SCED Testing All QSEs ready Oct 1, 2007 QSEs enter offer curves Evaluate LMPs with QSEs Declare “Reasonable LMPs” QSEs continue to provide offers 8-5 Post LMPs on MIS portal EDS Input & Data ValidationEDS SCED Integrated Release 6 Month LMP Posting Build and Maintain EDS Release 7 - CRR EDS Release 6 - LFC EDS LFC Data Validation EDS CRR Data Validation OctNovDecJanFebMarAprMayJunJulAugJulAugSep Testing with selected QSEs Test for validity of offers and other input data from QSEs ERCOT enters test offers as needed

Lead from the front Texas Nodal 17 EDS 3 – Early Delivery System – LFC Testing All QSEs (One QSE at a time) Performed by system operators Test the process for regulation Test process for AS qualification of Generator & Load resources Issue draft report to QSEs and ERCOT and evaluate process making adjustments as necessary All QSEs Performed by system operators Evaluate each generator and load resource Qualify each resource Issue report to ERCOT QSEs Report presented at TPTF EDS Input & Data ValidationEDS SCED Integrated Release 6 Month LMP Posting Build and Maintain OctNovDecJanFebMarAprMayJunJulAugJulAugSep EDS Release 7 - CRR EDS Release 6 - LFC EDS LFC Data Validation EDS CRR Data Validation

Lead from the front Texas Nodal 18 EDS 3 – Early Delivery System – CRR Testing Selected QSEs Mock CRR auction Detailed methodology for allocating PCRs to MPs QSEs register as CRR Account Holders Mock statements All QSEs ERCOT issues test PCRs/CRRs Testing stages range from scripted to non scripted testing QSEs use CRRs issued to test Secondary Trading QSEs test bidding strategy QSEs enter monthly and annual bids View CRRs Trial Settlement of CRRs EDS Input & Data ValidationEDS SCED Integrated Release 6 Month LMP Posting Build and Maintain OctNovDecJanFebMarAprMayJunJulAugJulAugSep EDS Release 7 - CRR EDS Release 6 - LFC EDS LFC Data Validation EDS CRR Data Validation

Lead from the front Texas Nodal 19 Staffing EDS 3 Execution –Staffed by ERCOT employees from the departments responsible for operations ERCOT Operators, End Users, and IT Support ERCOT Account Managers EDS 3 Hours of Operation –Execution and support will be 8x5 M-F (Calendar in process) –Systems may continue to run 24x7 EDS 3 Analysis & Support –Performed by Business SME’s responsible for the functions and support post Go-Live, some contractor support where required –Extended support by ERCOT business departments Market Participants –Nodal EDS preparation and execution team expected to be in place

Lead from the front Texas Nodal 20 Next Steps EDS 3 Transition Plan Details Develop a method for Market Participants to create and provide individual Resource offer curves to SCED Identify MIS reporting requirements – “posting LMPs and other data available on the EDS…” if required, in NP Define LMP posting requirements – “at least six months” –What is needed & How much Analysis Requirements Define details of Load Frequency Control Testing Create a CRR detailed test plan describing each step of trial allocation & auction Define PCR / CRR allocation process for testing Finalization and signoff of Entry / Exit criteria Other items as needed

Lead from the front Texas Nodal 21 EDS 3 Transition Plan Details Development Step 1 – Meet with Nodal project teams, ERCOT business owners and MP volunteers to define and document a recommended approach Step 2 – Send 1-2 page recommended approach to TPTF for review Step 3 – Discuss the recommended approach at TPTF for feedback and consensus Step 4 – TPTF approval Step 5 – Document recommended approach into the EDS3 Detailed Plan

Lead from the front Texas Nodal 22 Transition Plan Details Development Schedule Transition Plan RequirementTPTF VolunteerPresentation to TPTF Approval by TPTF Develop a method for Market Participants to create and provide individual Resource offer curves to SCED May 07, 2007May 22, 2007 Identify MIS reporting requirements – “posting LMPs and other data available on the EDS…” if required in NP May 07, 2007May 22, 2007 Define LMP posting requirements – what does “at least six months” mean? May 07, 2007May 22, 2007 Define a method for Load Frequency Control Testing, including the plan for settlement of nodal testing periods (if required) May 07, 2007May 22, 2007 Create a CRR detailed test plan describing each step of trial allocation & auction May 22, 2007Jun 12, 2007 Define PCR / CRR allocation process for testingMay 22, 2007Jun 12, 2007 Draft of Entry / Exit criteriaMay 22, 2007Jun 12, 2007 We are seeking volunteers to work with ERCOT personnel for resolution of these issues by Friday Apr 13, 2007

Lead from the front Texas Nodal 23 Questions Questions?

Lead from the front Texas Nodal 24 EDS 3 Draft - QSE Testing Details 1. Validation of additional input data to SCED other than resource limits - not the same as EDS1 or EDS2: a. Resource Output schedule b. Resource Energy offer curve (Inc/Dec for DSR) c. Resource Proxy offer curve d. Resource A/S Responsibilities e. Regulation deployment signal – by EDS3 f. Responsive deployment signal – by EDS3 g. Non-Spin deployment signal – by EDS3 MMS 2. Validation of SCED calculated input data a. HASL, LASL b. HDL, LDL c. SURAMP, SDRAMP 3. Validation of SCED solutions - for QSE - not algorithmic since only ERCOT and their consultants can do it: a. Mapping from Resource Node (Settlement point) to resource b. Received 5-min LMP c. Received 5-min BP d. Relationship between LMP vs BP (for resources with output schedule/offer curve/RMR – or proxy curve) e. Combined Cycle – valid LMP and BP 4. Validation of LFC 4-sec base point a. ramp from BP (t) to BP (t+1) b. Ramp rate validation c. Stop ramp validation (BP = actual gen) d. Operating Limit checks 5. Testing of SCED failure (or emergency declaration) a. 5-min Emergency base point (MW) b. 5-min Emergency base point INDICATOR (STATUS) The following will demonstrate to QSEs, EDS3’s capabilities to send data and provide instructions to Resources, building confidence to dispatch on nodal systems.

Lead from the front Texas Nodal 25 EDS 3 Draft - QSE Testing Details (continued) To test SCED and A/S deployment, the following phases can be used, for each QSE at a time, and one unit at a time where applicable: 1. Preparation for test: a. Notification of ERCOT Compliance and Settlement of test b. For whole QSE test, ERCOT Zonal should not deploy A/S to the QSE being tested. ERCOT can deploy A/S to other QSEs, or ask them to be on Constant Frequency – case by case. 2. Testing of SCED base point deployment – one unit at a time, 1 or 2 units for each case below: a. For unit with Energy Offer Curve b. For unit with Output Schedule c. For Unit requiring Proxy Curves (including RMR) 3. Testing of SCED failure – Emergency Base point – one unit at a time, 1 or 2 units. 4. Testing of Non-Spin deployment – one unit at a time, 1 on-line and 1 off-line. 5. Testing of Responsive deployment – at least 2 units at a time if possible, to verify allocation logic. 6. Testing of Regulation Deployment – at least 2 units at a time if possible, to verify allocation logic. 7. Portfolio test for QSE.

Lead from the front Texas Nodal 26 Quality and application maturity Software Maturity / Stability / Time Quality (no of errors) Early Drop New software versions New software version Final version Trend