Nodal Market Settlement and Invoicing Timeline ERCOT COPS Meeting January 9, 2006 Eric Woelfel, Formosa Utility Ventures Jim Galvin, Tenaska Power Services Co

Agenda  Impact on Market Participant Processing  Cost Burden  Synchronizing DAM with RTM Settlement Process  Benefits and Credit

Impact on MP Processing  Processing daily invoices will create significant increase in workload for Accounting, Credit and other Back Office functions, up to 800% increase in work load for some job functions.  Typical invoicing process for Market Participants includes the following 1 hour for review and approval of invoice 2 hours for Accounting verification, ledger postings and other record keeping 2 hours set-up, tracking and verification of wire transfers

Increased Cost Burden  Five additional hours per day of processing time for invoices alone will require MPs to adjust workload or hire new staff  Typical wire charge from banks will increase, typical wire charges range between $20 to $25 per wire.  Will increase in costs and workload discourage some MPs from participating in the DAM?

Synchronizing DAM with RTM Settlement  Settlement Timeline can be created to provide a weekly invoice that includes DAM Settlements and RTM Settlements, published on the same day every week (except for adjustments due to holidays)  DAM Settlement statements should still go out 1 day after operating day  Operating Days for DAM settlements and RTM settlements will differ on the weekly invoice (see example next slide)

Planned Invoice Due Dates (Nodal DAM) SundayMondayTuesdayWednesdayThursdayFridaySaturday OD DAM Post Invoice Posted Four (4) Bank Bus. Days Due Date

Planned Invoice Due Dates (Nodal DAM) SundayMondayTuesdayWednesdayThursdayFridaySaturday OD DAM Post Invoice Posted Four (4) Bank Business Days Due Date 4 Days Credit Exposure Credit Exposure

Current RTM Market Settlement Timeline SundayMondayTuesdayWednesdayThursdayFridaySaturday Operating Days October 6 – 12, 2006 Ten (10) Days To Post Settlement Statements OD 11&12 Invoice Posted Five (5) Bank Business Days Due Date 12

Example of Synching DAM and RTM SundayMondayTuesdayWednesdayThursdayFridaySaturday Market Start DAM (18-24) and RT(6- 12) Invoice 12 DAM Invoice Day 6-10 DAM Invoice DAM SettlementRTM Settlement DAM (25-31) and RT(13- 19) Invoice

Benefits of Synchronized Timeline  Consistency!  Less processing time and reduced costs to MPs  Single Invoice is consistent with other Nodal Markets MISO Nodal Market invoices DAM weekly PJM Nodal Market invoices DAM monthly, but is expected to change to weekly invoices.

Alleviating Credit Concerns  DAM settlement activity is known the day after the operating day This will make monitoring credit impact from the DAM more certain  Require pre-payments or additional collateral for MPs that do not have sufficient collateral or guarantee  Keep the due date of invoice between 3-5 Business Days

Nodal Market Protocols Affected by Change  For the Nodal Market Protocols, Settlements Sections 9.3, and along with the Financial Section will need revision. There may be other sections affected so further review by ERCOT necessary.