1. Verifiable Cost Escalation Cost Factors ERCOT WMS 11/13/2013

2. WMS 11/13/2013 2 QSEs and Resource Entities which submit verifiable O&M cost data are allowed to “present value” historical O&M Costs. The cost indices are derived from the July update of the Handy-Whitman Index. ERCOT utilizes Table E-4, “Cost Trends of Electric Utility Construction,” line 6, “Total Steam Production Plant” and line 28, “Total Other Production Plant” for the South Central Region. The escalation rate is calculated by dividing the Handy-Whitman cost value in the base year by the Handy-Whitman cost value in each preceding year. The two indices for the year are averaged to obtain the final escalation rate used in the Verifiable Cost Analysis. The Escalation Cost Factors are updated in July and the new factors will be effective on December 1 of each year. Update on Verifiable Cost Escalation Cost Factors

3. WMS 11/13/2013 3 Effective December 1, 2013 http://www.ercot.com/mktinfo/settlements/ Update on Verifiable Cost Escalation Cost Factors