Handling Appeals of PRRs and other Contested Issues ERCOT Board Retreat February 21, 2007

Two Basic Types of Decisions Matters related to ERCOT as a business organization –Traditional role of a corporate Board using principles such as business judgment rule Matters related to the electric markets that ERCOT administers –Not a role typically played by corporate Boards –Decisions based on public interest and ratemaking principles

Board Decisions Related to Market Rules Mostly in the form of Protocol Revision Requests that are either being accepted or rejected by TAC Most PRRs come to the Board with fairly broad stakeholder support It is the exceptional cases that create decision-making challenges for the Board

Focus of Today’s Session Are there changes we should make to the way the Board handles contested PPRs to enhance the quality of the Board’s decision-making process?

Format for the Discussion What should be the guiding principles for the Board’s decision-making process? Outline of the existing PRR appeal procedures Discussion/critique of new appeal process concepts

Guiding Principles The process should assist the Board in making an informed decision on contested market design issues

Guiding Principles The process should encourage stakeholders to resolve issues at the TAC level The process should insure that contentious issues are fully vetted at the TAC level and that the Board understands what transpired at TAC and the key elements of the debate

Guiding Principles The time frames should be short to ensure timely review by the Board Stakeholders and Board members should have adequate advance notice of the nature of the appeal prior to the Board meeting

Guiding Principles The Board’s handling of appeals should show due respect for and deference to the stakeholder process... But recognize that there are issues for which a majority vote, stakeholder process may not produce an optimal decision from a public interest perspective

Current Process for PRRs Recommended by TAC ERCOT prepares a TAC Recommendation Report –Proposed language –Authorship of comments –PRS Recommendation –TAC Recommendation ERCOT prepares an Impact Analysis Report TAC Chair presents a summary during the Board Meeting

Current PRR Appeal Process For an appeal of a TAC rejection, the Protocols do not specify the content of the appeal Timely filed appeals are placed on the agenda of the next scheduled Board meeting There is no detailed procedure in the Protocols regarding how the appeal is presented to the Board

Possible Appeal Process Changes Prior to appealing to the Board, should a market participant be required to seek re-hearing or reconsideration at TAC?

Possible Appeal Process Changes In order to ensure a balanced debate of the issues, should TAC appoint a TAC member to make the counterargument, i.e., to serve as the advocate for TAC’s decision?

Possible Appeal Process Changes Should the market participant appealing a TAC decision be required to submit a detailed description of the nature of the appeal and arguments supporting the appeal? If so, should ERCOT staff perform a review of the detailed description with the objective of identifying any factually incorrect assertions?

Possible Appeal Process Changes Should ERCOT Staff be a required to develop its own position with respect to the issues being appealed and advocate its position before TAC and/or the Board?