October, 2011 MCWG/CWG Review of Abacus Loss Allocation ERCOT Mandy Bauld

2 Summary of Allocation Request from WMS to provide details regarding the allocation of the uplift to various market segments –The appendix includes the slides presented to WMS Total Uplift amount ~ $616K Allocation of Uplift Amount to Counter-Party categories 1)Counter-Parties representing both Generation and Load  $311K, a 50% share 2)Counter-Parties representing neither Generation nor Load  $189K, a 31% share 3)Counter-Parties representing Load only  $60K, a 10% share 4)Counter-Parties representing Generation only  $56K, a 9% share February 10, 2009

3 Summary of Allocation ERCOT system totals for Jan 2011, for each input considered in the Uplift calculations (Abacus volumes were excluded) February 10, 2009 Activity CategoryMW in Mil RT QQ Sales84.62 RT QQ Purchases84.61 CRR DAM & Sales71.59 CRR Auction Purchases65.45 RT Obligations28.33 RT Adj Meter Load25.78 Generation & Imports25.75 DAM Energy Sales9.88 DAM Energy Purchases9.88

4 Allocation by Volume per Activity Category February 10, The “Gen and Load” category had the largest share of MWs and the largest share of the uplift - QQ Trades captures MMA of QtoQ Sale OR purchase - CRR captures MMA of CRR Purchase or CRR Sale/DAM Ownership -Day-Ahead Activity captures MMA of DAM Energy Purchase or Sale

5 Allocation by # of Counter-Parties per Activity Category February 10, While “Gen and Load” is not the largest segment, it did receive the largest allocation of the uplift - QQ Trades captures MMA of QtoQ Sale OR purchase - CRR captures MMA of CRR Purchase or CRR Sale/DAM Ownership -Day-Ahead Activity captures MMA of DAM Energy Purchase or Sale

6 Appendix

7 Counterparty Max Activity & Amounts for Feb2011 Default CP = Counter-Party MMA = Maximum MWh Activity CP Count by MMA CP Count as % by MMA Amount by MMA Amount as % by MMA CRR Auction Sales & CRR Ownership in DAM % $ 224, % RTM QSE to QSE Energy Sales % $ 191, % RTM QSE to QSE Energy Purchases % $ 113, % RTM PTP Obligations 64.4% $ 37, % RTM Adjusted Meter Load % $ 35, % DAM Energy Purchases 32.2% $ 5, % Generation & Imports 128.8% $ 5, % CRR Auction Purchases 10.7% $ 1, % DAM Energy Sales 10.7% $ % 137 $ 615,999.95

8 Default Uplift Allocation - Overview Refer to Protocol Section , Default Uplift Invoices NPRR 221 changed how defaults are uplifted to the market “RTM Uplift Invoice” changed to “Default Uplift Invoice” Uplifts both DAM and RTM short-pays Allocates the default to all Counterparties, not just QSEs with Load Allocation Methodology Use True-Up data from the month PRIOR to the default month For each Counterparty determine its “maximum MWh activity ratio share” (MMARS) Allocate the default to each counterparty according to its MMARS The maximum MWh activity ratio share is determined using the most recent DAM and CRR Auction data, and RTM True-Up data for the month prior to the default Further allocate the default to QSEs or CRRAHs under the counterparty according to their pro-rata share of the MWhs that contributed to the MMARS (necessary because ERCOT only settles with QSEs / CRRAHs)

9 Default Uplift Allocation – Formula ( (2)) (2) Each Counter-Party’s share of the uplift is calculated using True-Up Settlement data for each Operating Day in the month prior to the month in which the default occurred, and is calculated as follows: DURSCP cp = TSPA * MMARS cp Where: MMARS cp = MMA cp / MMATOT MMA cp = Max { ∑ mp (URTMG mp + URTDCIMP mp ),  RTM Metered Generation and DC Tie Imports ∑ mp URTAML mp,  RTM Adjusted Metered Load ∑ mp URTQQES mp,  RTM QSE to QSE Energy Sales ∑ mp URTQQEP mp,  RTM QSE to QSE Energy Purchases ∑ mp UDAES mp,  DAM Energy Sales (TPO and Energy-Only) ∑ mp UDAEP mp,  DAM Energy Purchases ∑ mp URTOBL mp,  RTM PTP Obligations ∑ mp (UDAOPT mp + UDAOBL mp + UOPTS mp + UOBLS mp ),  CRR Auction Sales & CRR Ownership in DAM ∑ mp (UOPTP mp + UOBLP mp )}  CRR Auction Purchases MMATOT = ∑ cp (MMA cp ) Where: URTMG mp = ∑ p, r, i (RTMG mp, p, r, i ), excluding RTMG for RMR Resources and RTMG in Reliability Unit Commitment (RUC)-Committed Intervals for RUC-committed Resources URTDCIMP mp = ∑ p, i (RTDCIMP mp, p, i ) / 4 URTAML mp = ∑ p, i (RTAML mp, p, i ) URTQQES mp = ∑ p, i (RTQQES mp, p, i ) / 4 URTQQEP mp = ∑ p, i (RTQQEP mp, p, i ) / 4 UDAES mp = ∑ p, h (DAES mp, p, h ) UDAEP mp = ∑ p, h (DAEP mp, p, h ) URTOBL mp = ∑ (j, k), h (RTOBL mp, (j, k), h ) UDAOPT mp = ∑ (j, k), h (DAOPT mp, (j, k), h ) UDAOBL mp = ∑ (j, k), h (DAOBL mp, (j, k), h ) UOPTS mp = ∑ (j, k), h (OPTS mp, (j, k), h ) UOBLS mp = ∑ (j, k), h (OBLS mp, (j, k), h ) UOPTP mp = ∑ (j, k), h (OPTP mp, j, h ) UOBLP mp = ∑ (j, k), h (OBLP mp, (j, k), h )