1. 1 Compliance Update June 2007

2. 2 Control Performance Highlights  NERC CPS1 Performance April Performance  April performance comparison April 2007: 126.92 April 2006: 143.31  12 month rolling average comparison May 2006  April 2007: 138.23 May 2005  April 2006: 129.90  PRR 525 Performance Scores for April indicate 32 QSEs passed / 2 non- wind-only QSEs failed the measure Scores posted on the ERCOT Compliance Website  SCE Performance Scores SCE Performance Scores

3. 3 ERCOT CPS1 Performance Comparison

4. 4 ERCOT’s CPS1 Monthly Trend

5. 5 ERCOT CPS1 by Interval

6. 6 QSE PRR525 10-Minute Interval Scoring

7. 7 April 2007 Resource Plan Performance Metrics

8. 8 525 Passing 10-Min Interval Percentage Trends

9. 9 ERO / RE Activities  Entity Registration Continues to be a work-in-progress ERCOT Compliance Staff working with entities to resolve concerns Any entity can challenge its listing and function with NERC Appeals heard by the NERC Board Compliance Committee  Texas Regional Entity Delegation Agreement ERCOT Board approved Texas RE Delegation Agreement on May 16 th Executed Texas RE Delegation Agreement re-filed at FERC on May 18 th FERC directives must be addressed and modifications filed within 180 days of the date of the order (mid-October)  NERC Reliability Standards Mandatory compliance began on June 4 th Regional Entities to focus on most serious Reliability Standard violations until January 1, 2008  ERCOT Bylaws ERCOT Board approved changes to the ERCOT Bylaws incorporating the Texas RE on May 16 th ERCOT Membership vote in mid to late June

10. 10 2008 Texas RE Budget Activities  First draft of Texas RE Budget and Business Plan submitted to NERC on May 11 th  Special Texas RE Budget Meeting held on May 17 th  Second draft of Texas RE Budget and final Business Plan submitted to NERC on June 1 st  ERCOT Board approval to be requested on June 19 th  Final draft of Texas RE Budget to be submitted to NERC by no later than July 12 th  NERC Board approval anticipated on August 1 st  NERC and Regional Entity budgets to be filed with FERC

11. 11 2008 Texas RE Budget Summary  Adequate staffing needed to comply with FERC mandates and NERC requirements, including ERO Rules of Procedure Process driven – very structured Audits, investigations, and analyses Tracking, reporting, and documentation Increasing number of FERC approved reliability standards Monetary penalties and non-monetary sanctions Appeals of violations and penalties/sanctions  Must maintain clear independence from all owners, operators, and users of the bulk power system  Includes compliance monitoring of reliability-based ERCOT Protocols and Operating Guides as a separate and parallel process to the NERC Program

12. 12 2008 Texas RE Budget Summary  2008 proposed budget ~25% less than 2007 - $5,514,219  $4,144,849  Additional staffing requested to keep pace with anticipated work load and regulatory requirements Positions filled only when/if needed  Projected 2007 statutory spending ~$2.6M under budget Original schedule was for mandatory standards compliance to begin January 1, 2007 – all positions were fully funded Reduction in capital project expenditures Unspent 2007 budget will be applied to the 2008 budget  Penalty money collected applied to subsequent years’ budget ERCOT ISO applied to ERO Budget All other Registered Entities’ applied to Texas RE Budget

13. 13 Reliability Compliance Monitoring & Enforcement  ERCOT Protocols & Operating Guides Texas RE – Monitors compliance and issues violation notices PUCT – Compliance enforcement (issues penalties/sanctions)  NERC & Regional Reliability Standards Texas RE – Monitors compliance and issues violation notices Texas RE – Compliance enforcement (issues sanctions/penalties)  ERCOT ISO 1 of 166 Registered Entities in ERCOT 24/7 Reliability Coordinator Function – responsible for the real-time operating reliability of the ERCOT Region  Texas RE Determines compliance and non-compliance Reports non-compliance in a timely, meaningful manner Does not monitor compliance in real-time  PUCT Texas RE Hearing Body for appeals of NERC and Regional Reliability Standards violations and penalties/sanctions

14. No TRE issues violation notice & reports to PUCT Issue Closed Yes Protocol Violation? Yes Requirement Delegated? Issue Closed ERCOT ISO owes penalty TRE issues violation notice & penalty to the ERCOT ISO & reports to NERC Issue Closed No TRE issues violation notice & reports to PUCT NERC Standards violation by the ERCOT ISO? No Yes Protocol Violation? Yes No NERC Standards Violation- Delegated Requirements