TPTF Verifiable Cost Sub-group Summary Report to TPTF 1/21/2008 Jim Galvin- TPTF VC Sub-group Chair

Existing Issues  Verifiable Start-up and Min Energy Capturing Costs from Breaker Close to LSL (resolved) Including Shut-down Costs in Start-up (resolved) Recovering Start Costs when RUC is cancelled (by ERCOT) and Cost recovery during SPS  Rare occurrences will be noted in Protocols and cost recovery through dispute process Use of Auxiliary Equipment for Start-up (resolved) Number of Starts outside Warranty (moved to Variable O&M)

Existing Issues (Cont)  Verifiable Incremental Heat Rate Creating monotonically non-decreasing Incremental Heat Rate Curve (resolved) Historical Data versus Test Data (resolved as either or)  Verifiable O&M Costs 10-year requirement for data/evidence of costs  Resolved- 10-year or whatever period is available if entity does not have 10-years worth of data Escalation rate  Resolved- Handy-Whitman index used as reasonable means Acceptable types of documentation, invoices, other evidence  Tabled for further discussion as this does not impact systems Is a form of Generic O&M values a potential solution?

Existing Issues (Cont)  FIP and FOP Additional Transportation Costs, Imbalance Fees, Swing Contracts, and Spot Gas price diverging from Index  Resolved for discussion under “Exceptional Events” as “cost recovery” and not part of Verifiable Cost Process  Emissions Costs General Methodology needed for addressing Emissions  Resolved for SOX using fuel, lbs/mmbtu and a $/MWh rate  Open issues Is index appropriate for the rate for SOX or historical costs? Other emissions to be discussed separately  NOX requirements are difficult to price on a linear basis

Existing Issues (Cont)  Exceptional Events Need to define or list “Exceptional Events” (February 2003 used as frequent discussion example) Discussion points focused on:  Costs after the close of Gas Day  Spot gas differing significantly from Index, is there an appropriate trigger  Cost recover for what are considered rare events

Existing Issues (Cont)  Other General Issues that need to be addressed Including Power Purchase Agreements in the VC Process  No consensus on allowing PPA’s as part of Verifiable Costs Resource Entity or QSE submits Verifiable Costs  Resolved- Resource Entity being the source with required affirmation from the QSE and/or Resource Entity

Existing Issues (Cont)  Other General Issues that need to be Combined Cycle Units  Resolved- Resource Entities may submit Verifiable Cost information for the number of registered configurations, and will be required once a configuration is RUC’d Jointly Owned Units  ERCOT to provide additional information on how JOU’s are registered and the role of the Master QSE with the JOU

Existing Issues (Cont)  Verifiable Cost Process as a voluntary process Currently the submittal of Verifiable Costs is voluntary until a single RUC occurrence Discussions centered around rare instances when a RUC was given to a resource that is not anticipated to be RUC’d frequently (Coal, Nuc etc) No consensus on making the VC Process entirely voluntary (allowing Generic in lieu of VC) However, discussions on increasing the trigger to help mitigate rare RUC’s and the time and effort to verify cost data  i.e. X number of RUC’s in a rolling 12-month period

Questions