1. Text reason for Deviation from Defined High Sustained Limit/Low Sustained Limit John Adams January 5, 2010 Nodal Advisory Task Force

2. 2 What issues are we trying to address? Nodal Advisory Task ForceJanuary 5, 2010 In the zonal market design; ERCOT enforced the High Sustained Limit used for calculation of reserves would be the lower of: 1)Last capability Test 2) COP HSL 3) Registered HSL During Nodal design discussions with TPTF; the members of TPTF decided that this design resulted in inefficiency in the market because: 1) During periods of cold weather; available capability could not be made available to ERCOT because the last test did not reflect the increased capability available due to higher air density. In discussion; ERCOT was concerned that market participants were incented to exaggerate capability to collect revenue for upon the sale of reserves.

3. 3 What issues are we trying to address? Nodal Advisory Task ForceJanuary 5, 2010 TPTF agreed to addressed the market concern of withholding capacity by allowing a QSE to telemeter its high capability, which ERCOT would use. TPTF addressed ERCOT’s concern about exaggerated capability by requiring that each adjustment of High Sustained limit be accompanied by a text reason explaining why the resource is capable of additional, or less capacity. It was the stated opinion of TPTF that such a text explanation; in combination with the enforcement programs of the TRE and Market Monitor would be sufficient to dis-incentivize exaggeration of capability; and any attendant reliability risk. Protocol requirment: 6.4.5 Resource Status (1) ERCOT shall use the telemetered Resource Status for all applications requiring status of Resources during the Operating Hour, including SCED, Load Frequency Control (LFC), and Network Security Analysis processes. QSEs shall provide ERCOT with accurate telemetry of the current capability of each Resource including the Resource Status, Ramp Rates, HSL, and LSL and a text reason for any Resource where a Ramp Rate is deviating from a standard Ramp Rate curve for the Resource, or the HSL is less than, or LSL is greater than, the normal high and low limits set in Section 3.7.1, Resource Parameter Criteria.