1 Nodal Day Ahead Invoice Taskforce March 13, 2007 Presentation to COPS

2 Nodal Day Ahead Invoice Taskforce Met on Wednesday, March 7 th Participation around 26 (3 ERCOT employees) Taskforce charge was to discuss pros and cons of the Nodal DAM Invoices – Daily versus Weekly Produced Draft NPRR: Weekly DAM Invoicing for consideration

3 Daily Invoice Pros Day Ahead clearing is known as soon as market is closed Shortens credit window for Day Ahead market Cash will flow more timely Currently in protocols Payment due in 4 days Minimize credit risk comparatively to weekly invoices Does not create barrier to competition Cons Risk that an accidental late payment will be made (Administration Breakdown) Barrier to Day Ahead market entry Companies will not have time to receive approvals for payments Increased operational costs for MP’s

4 Weekly Invoice Pros Prepay option available instead of making higher collateral payments Mirrors what MPs and ERCOT do today Collateral calls are due in two business days – quicker collection Credit exposure is equally manageable as Day Ahead Relieves good credit MPs from burden of daily processing of payments Other ISO markets are currently or moving towards weekly invoices Cons  Increased Market Risk

5 Discussion Items Invoice Due Date  ERCOT Credit suggested publication of Weekly DAM Invoice on Wednesday with payment due on the following Tuesday To avoid excessive workload if DAM and RT invoice receipts and payments occurred on the same days If collateral call was issued on Thursday, the defaulting entity could potentially be prohibited from participating within the weekend Day Ahead Market activities

6 Discussion Items Timing of Wire Receipt  ERCOT Credit suggested Market Participants timing of wire receipt required by 15:00 instead of 17:00 (deadline) Ability to issue default notices on the same day

7 Discussion Items Number of days for invoice payment  Currently DAM invoice due in four days, RT invoice due in five days, CRR invoice due in three days  Additional discussion needed Weekly DAM invoice due in 3 days? RT invoice due in 3 days? Leave CRR invoice due in 3 days? Have different due dates for all Markets?

8 Discussion Items Strategies to help mitigate Risk  Ability for pre-payments  Collateral calls are due within two days  ERCOT’s systems will lock out potential MPs from the DAM if they do not have sufficient collateral  Timing of Invoice due date

9 Direction From COPS Question for COPS: Does the Taskforce need to meet again to finalize the draft NPRR and bring back for an endorsement vote at the April COPS meeting?