Technical Advisory Committee Presentation to the ERCOT Board of Directors March 21, 2007

Today’s TAC Report One PRR. One PRR. Two operating guide changes. Two operating guide changes. Hot Topics: Hot Topics: Recommended changes to RGS procurement (from the IMM). Recommended changes to RGS procurement (from the IMM). Initiation of a preliminary Standards Drafting Team. Initiation of a preliminary Standards Drafting Team. Emergency Interruptible Load Service (EILS) update. Emergency Interruptible Load Service (EILS) update. Retail transactions performance discussion. Retail transactions performance discussion.

PRR 691 – Nodal Implementation Surcharge Verifiable Costs Purpose (NRG - IGEN) Adds the nodal implementation surcharge as a verifiable cost for resources called on for reliability purposes. Benefit Allows a resource owner an opportunity to recover the surcharge if it submits verifiable cost information covering OOMC, OOME, LCRR and RMR. Market Impact May impact QSEs paying for the services listed System Change NoN/A AssumptionsN/A PRS Vote PRS unanimously recommended approval; all Market Segments were present TAC Vote TAC unanimously voted to recommend approval as revised by comments of the TAC Chair; all Market Segments were present Effective Date April 1, 2007

PRR 691 – Nodal Implementation Surcharge Verifiable Costs Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact Impact absorbed with current processes

Operating Guide Changes Adopted RMGRR050—Mass Transition Process for Events Initiated Prior to a Weekend or ERCOT Holiday and Additional Clarifications (urgent) RMGRR050—Mass Transition Process for Events Initiated Prior to a Weekend or ERCOT Holiday and Additional Clarifications (urgent) LPGRR019—Revision of Holidays Tab in Profile Model Spreadsheets (urgent) LPGRR019—Revision of Holidays Tab in Profile Model Spreadsheets (urgent)

Independent Market Monitor Report PUC Subst. R (k) requires the IMM to provide periodic updates to the ERCOT stakeholders on operations of the wholesale market. PUC Subst. R (k) requires the IMM to provide periodic updates to the ERCOT stakeholders on operations of the wholesale market. March TAC meeting—IMM presented a Review of Regulation (RGS) Procurement Quantities. March TAC meeting—IMM presented a Review of Regulation (RGS) Procurement Quantities. Note the BOD annually approves the AS methodologies guidance document Note the BOD annually approves the AS methodologies guidance document IMM demonstrated significant over-procurement of RGS. IMM demonstrated significant over-procurement of RGS. Due to procuring an average quantity rather than a quantity that varies by hour. Due to procuring an average quantity rather than a quantity that varies by hour. Back testing for November and December suggests $6.5 million savings for those two months. Back testing for November and December suggests $6.5 million savings for those two months. ERCOT operations staff is reviewing the IMM’s analysis. ERCOT operations staff is reviewing the IMM’s analysis. Hope to bring you an update to the AS methodologies document as soon as ERCOT staff and stakeholders are all comfortable with the proposed changes. Hope to bring you an update to the AS methodologies document as soon as ERCOT staff and stakeholders are all comfortable with the proposed changes.

Initiation of Standards Drafting Team Texas RE draft Delegation Agreement defines a standards drafting process, with a role for the Reliability and Operations Subcommittee (ROS). Texas RE draft Delegation Agreement defines a standards drafting process, with a role for the Reliability and Operations Subcommittee (ROS). ROS responsible for assembling a Standard Drafting Team—full process described in the Delegation Agreement. ROS responsible for assembling a Standard Drafting Team—full process described in the Delegation Agreement. In March, TAC directed ROS to set up a preliminary Standard Drafting Team—pending FERC approval of the Delegation Agreement. In March, TAC directed ROS to set up a preliminary Standard Drafting Team—pending FERC approval of the Delegation Agreement. First task—review the 83 NERC-recommended standards approved last week by FERC, which become mandatory and enforceable this summer. First task—review the 83 NERC-recommended standards approved last week by FERC, which become mandatory and enforceable this summer. Purpose—develop a common understanding of obligations for compliance by ERCOT and stakeholders with the standards. Purpose—develop a common understanding of obligations for compliance by ERCOT and stakeholders with the standards.

Emergency Interruptible Load Service (EILS)--Update Tuesday—PUC passed its new rule requiring Emergency Interruptible Load Service (effective April 11 th ). Tuesday—PUC passed its new rule requiring Emergency Interruptible Load Service (effective April 11 th ). Thursday—PRS will consider adoption of PRR 705 with ERCOT amendments to conform to the PUC Rule. Thursday—PRS will consider adoption of PRR 705 with ERCOT amendments to conform to the PUC Rule. Friday—ERCOT staff holding an EILS workshop with interested market participants. Friday—ERCOT staff holding an EILS workshop with interested market participants. April—initial EILS procurement. April—initial EILS procurement. Expected adoption of the PRR—April 17 th meeting of the BOD. Expected adoption of the PRR—April 17 th meeting of the BOD. Implementation date? Implementation date? Long-term solution—TAC has initiated a joint task force of the ROS and WMS to develop a long-term solution consistent with the Commission’s rules. Long-term solution—TAC has initiated a joint task force of the ROS and WMS to develop a long-term solution consistent with the Commission’s rules.

Retail Transactions Performance TAC Goal for 2007: Maintain focus on retail transactions processing, outages, service degradation, and communications. TAC Goal for 2007: Maintain focus on retail transactions processing, outages, service degradation, and communications. Stakeholder concerns raised: Stakeholder concerns raised: Current performance metrics for systems availability not fully representative of system performance. Current performance metrics for systems availability not fully representative of system performance. Numerous system glitches (“system degradation”) have affected some retail transactions from being processed according to timelines. Numerous system glitches (“system degradation”) have affected some retail transactions from being processed according to timelines. ERCOT not always aware of system degradation until alerted by market participants. ERCOT not always aware of system degradation until alerted by market participants. Not always clear which specific transactions affected—i.e., insufficient transparency. Not always clear which specific transactions affected—i.e., insufficient transparency. Communications to stakeholders not consistently meeting targets—especially for events occurring on weekends. Communications to stakeholders not consistently meeting targets—especially for events occurring on weekends.

Retail Transactions Performance March TAC meeting—face-to-face discussion with Ron Hinsley. March TAC meeting—face-to-face discussion with Ron Hinsley. Agreement to work with stakeholders on improving performance metrics and reporting. Agreement to work with stakeholders on improving performance metrics and reporting. Commitment to improve internal communications processes. Commitment to improve internal communications processes. RFP for independent review of all retail transactions systems. RFP for independent review of all retail transactions systems. RMS—working with ERCOT staff on new performance metrics and reports. RMS—working with ERCOT staff on new performance metrics and reports.