Technical Advisory Committee Presentation to the ERCOT Board of Directors September 16, 2008

TAC Summary 2 PRRs for Approval 2 PRRs for Approval 1 NPRR for Approval 1 NPRR for Approval Notice of Guide Changes Notice of Guide Changes Other Stuff Other Stuff 2009 CSC Recommendation and Appeal of FPL Energy 2009 CSC Recommendation and Appeal of FPL Energy Update on Wind Integration Issues Update on Wind Integration Issues

PRR 743 – TCR Transition to CRR Purpose(ERCOT) Details the methodology for refunding annual and monthly TCR auction revenues for the remaining days of the year post-Nodal “Go-Live”; Addresses ERCOT Board remand instructions to address how refunds are handled if the Nodal Market is not implemented 12/1/08 Benefit Transparency of TCR to CRR transition activities Market Impact N/A System Change NoN/A AssumptionsN/A TAC Vote TAC recommended approval unanimously. Effective Date October 1, 2008

PRR 743 – TCR Transition to CRR Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact

PRR 772– Description of MCPE Cap & Shadow Price Cap Methodology -- URGENT Purpose(ERCOT) Clarifies ERCOT’s authority to ensure that MCPE does not exceed the PUCT’s system-wide offer cap; provides documentation of methodology and notice to Market Participants of Shadow Price Cap changes; changes Section & titles as clarification Benefit Clarifies Protocols by establishing a clear basis for ERCOT to make price adjustments Market Impact N/A System Change Yes Minor Changes to SPD AssumptionsN/A TAC Vote TAC recommended approval unanimously; all Market Segments were present Effective Date October 1, 2008

PRR 772– Description of MCPE Cap & Shadow Price Cap Methodology -- URGENT Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact Minor impact, managed in current O&M Budget System changes already in place

NPRR 126– Section 19, Synchronization of Zonal Protocols Purpose(ERCOT) Synchronizes Texas SET Section of Nodal Protocols Benefit Completion of Nodal Protocols Market Impact N/A System Change NoN/A AssumptionsN/A TAC Vote TAC unanimously recommended approval; all Market Segments were present Effective Date Upon Texas Nodal implementation; no incremental impact to nodal budget or schedule

Guide Revisions LPGRR029—Modification of Time-of-Use Schedule Approval Process LPGRR029—Modification of Time-of-Use Schedule Approval Process OGRR211—Deletion of References to Back-to-Back Import Capacity OGRR211—Deletion of References to Back-to-Back Import Capacity RMGRR063—Mass Transition Revisions Resulting From June 2008 Lessons Learned RMGRR063—Mass Transition Revisions Resulting From June 2008 Lessons Learned RMGRR064—Correcting Retail Market Guide for Leapfrong Processes to Synch up with ERCOT’s System Logic RMGRR064—Correcting Retail Market Guide for Leapfrong Processes to Synch up with ERCOT’s System Logic

Other Stuff TAC Endorsement of Oncor Nacogdoches SE to Lufkin SS 345 kV Project TAC Endorsement of Oncor Nacogdoches SE to Lufkin SS 345 kV Project Creation of new Wind Issues Work Group Creation of new Wind Issues Work Group Board follow-up on 30 day limit for maintaining redundant systems. Board follow-up on 30 day limit for maintaining redundant systems. Systems/operations with greater than 30 day cycle times? Systems/operations with greater than 30 day cycle times? TPTF and ERCOT staff reviews conclude that no systems other than settlement systems require more than 30 day maintenance. TPTF and ERCOT staff reviews conclude that no systems other than settlement systems require more than 30 day maintenance. Board follow-up on NPRR045 Wind Power Forecasting discussion from 10/16/07. Board follow-up on NPRR045 Wind Power Forecasting discussion from 10/16/07. Future reliability or settlement issues related to switchable Wind- Powered Generation Resources. Future reliability or settlement issues related to switchable Wind- Powered Generation Resources.

NPRR 45 Follow-up: Switchable Wind-powered Generation Resources  TPTF Assessment:  ERCOT currently has no switchable WGRs. :  Day-ahead reporting: Status of units available to ERCOT should be updated in the Current Operating Plan (COP).  Week-ahead reporting: Prorated capacity available to ERCOT should be reported in the Outage Scheduler.  Annual capacity reporting (for CDR development): Annual reporting by April 1st regarding resource availability during the Peak period (July – August). If current process proves insufficient, may require adjustments.  TPTF noted that switchable WGRs need to be reflected in the Resource Asset Registration Form (RARF).  TPTF does not believe that further action is required at this time.  If the future number of switchable WGRs or frequent switching activity indicates the need for a more robust solution, ERCOT may need to revisit reporting and Reliability Unit Commitment (RUC) processes.

Annual CSC & Zone Designation Process (Protocols §7.2) November 1: Recommended CSCs, zone designations, and resulting CREs due to the Board. November 1: Recommended CSCs, zone designations, and resulting CREs due to the Board. Steps in development of recommendations: Steps in development of recommendations: ERCOT Staff originates the set of CSC candidates based on: ERCOT Staff originates the set of CSC candidates based on: Steady State Working Group summer peak load flow data. Steady State Working Group summer peak load flow data. Prior year and projected congestion costs. Prior year and projected congestion costs. “ERCOT’s operational experience.” “ERCOT’s operational experience.” ERCOT Staff develops Shift Factors and performs cluster analyses for each candidate CSC. ERCOT Staff develops Shift Factors and performs cluster analyses for each candidate CSC. ERCOT Staff forwards candidate CSCs to the appropriate TAC subcommittee to develop a recommendation to the TAC and the Board of Directors. ERCOT Staff forwards candidate CSCs to the appropriate TAC subcommittee to develop a recommendation to the TAC and the Board of Directors.

Congestion Management Working Group Review ERCOT staff presented its 2009 CSC Study in early July: ERCOT staff presented its 2009 CSC Study in early July: Included five scenarios. Included five scenarios. Examined cases with three, four, and five zones. Examined cases with three, four, and five zones. CMWG met four times in July and August. CMWG met four times in July and August. ERCOT examined one new scenario arising from the CMWG discussions. ERCOT examined one new scenario arising from the CMWG discussions. CMWG—which is not a voting body— forwarded three scenarios to the WMS. CMWG—which is not a voting body— forwarded three scenarios to the WMS.

Wholesale Market Subcommittee Review and Recommendation WMS considered three options, creatively named 3(b), 3(g), and 3(h). WMS considered three options, creatively named 3(b), 3(g), and 3(h). ERCOT Staff recommended 3(b). ERCOT Staff recommended 3(b). After discussion, a motion for option 3(b) failed by a vote of 43.2% in favor to 56.8% opposed. After discussion, a motion for option 3(b) failed by a vote of 43.2% in favor to 56.8% opposed. A motion to approve option 3(g) failed to receive a second. A motion to approve option 3(g) failed to receive a second. A motion to approve option 3(h) passed by a vote of 61.1% in favor to 38.9% opposed. A motion to approve option 3(h) passed by a vote of 61.1% in favor to 38.9% opposed.

Technical Advisory Committee Review and Recommendation ERCOT Staff presented three scenarios forwarded from CMWG and a new scenario, 3(i). ERCOT Staff presented three scenarios forwarded from CMWG and a new scenario, 3(i). ERCOT Staff expressed favor for scenario 3(i). ERCOT Staff expressed favor for scenario 3(i). Following lengthy discussion, TAC approved a motion to recommend scenario 3(i), with 21 in favor, 5 opposed, and 4 abstentions: Following lengthy discussion, TAC approved a motion to recommend scenario 3(i), with 21 in favor, 5 opposed, and 4 abstentions: Opposed--IOU, Independent Generator (2), Commercial Consumer (2) Opposed--IOU, Independent Generator (2), Commercial Consumer (2) Abstentions--Municipal, Independent Generator, Industrial Consumer, and Independent Power Marketer. Abstentions--Municipal, Independent Generator, Industrial Consumer, and Independent Power Marketer.

CSC Scenario 3b Scenario 3g Scenario 3h Scenario 3i N_H* Singleton- Obrien/ Singleton-TH Wharton 345-kV double circuit N_S & S_N Lake Creek- Temple/ Tradinghouse- Temple Pecan Creek 345-kV double circuit W_N & N_W Graham- Benbrook/ Graham-Parker 345-kV double circuit Graham-Long Creek/ Graham- Cook Field Road 345-kV double circuit Sweetwater- Long Creek/ Abilene Mulberry Creek- Long Creek 345- kV double circuit 2009 CSC Alternatives

CSC 4 – West to North Sweetwater; Abilene Mulberry Creek – Long Creek CSC 5 – North to West Long Creek – Sweetwater; Abilene Mulberry Creek CSC 3 – South to North Temple - Lake Creek & Temple Pecan - Creek Tradinghouse CSC 2 – North to South Lake Creek – Temple & Tradinghouse – Temple Pecan Creek CSC 1 – North to Houston Singleton - O’Brien 5 Singleton – T. H. Wharton Recommended 2009 CSCs and Zones

Graham-area Transmission Network and Alternative CSCs

CSC Analysis – load moving zones Scenario 3b Scenario 3g Scenario 3h Scenario 3i North to South South to Houston West to North West to South North to West total

CSC Analysis – generation moving zones Scenario 3b Scenario 3g Scenario 3h Scenario 3i North to South 0000 South to Houston 0000 West to North West to South 0000 North to West 0000 total