1. 1 Market Participant Default Joint Taskforce Update and Report on Recent Customer Transition Activity Report to WMS August 17, 2005

2. 2 Taskforce Purpose TAC created RMS/WMS joint taskforce to: – review current procedures for Market Participant default –determine whether improvements can be made Objective of taskforce is to minimize or eliminate uplift exposure From the initial Joint TF meeting: –Pre-triggering event issues to be addressed by WMS –Post-triggering event issues to be addressed by RMS Joint meetings will be scheduled as needed

3. 3 RMS Short-Term Recommendation 1.If LSE does not cure, defaulting LSE must provide ERCOT customer information. –ERCOT is to send best available information to POLRs (either ESI ID list or customer information that has been obtained from defaulting REP) –In the event the defaulting LSE cannot provide ERCOT with customer information, POLR is to work with TDSP to obtain existing customer information. 2.POLR is to submit off-cycle, unprotected switch based on the first available switch date (currently, six Retail Business days). These switches must be submitted within five Retail Business days of receipt of ESI ID information. –This ensures a maximum effective date for the transition (less than or equal to 11 Retail Business Days) within these guidelines. 3. Educational seminar for POLRs, TDSPs, ERCOT, and PUCT Staff.

4. 4 RMS Items for Further Consideration Additional short-term recommendation –Mass update of customer information using either csv or 814_PC (accomplish by September 1, 2005). Remanded back to RMS TF to address concerns noted at RMS Long-term recommendation –All customer update maintenance through 814_PC –Transactional/automated solution –TDSP Mass Meter Estimates

5. 5 WMS TF Meetings Conference call on Monday 7/18/05 –Reviewed pre-triggering event issues –Identified issues for discussion for 07/22/05 meeting Meetings on Friday 07/22/05 and Thursday 07/28/05 Emergency QSE designation –Market rules for Emergency QSE designation –Settlement of load of a defaulting LSE –Trigger point for mass transition of customers Review of timelines surrounding a Market Participant default –Notification by QSE to terminate relationship with LSE –Timeline for LSE to meet credit requirements or find another QSE –Timeline in Market Participant agreements Review whether the scheduling rights of defaulting QSEs should be terminated or not

6. 6 WMS TF Meetings Outcomes of WMS TF Meetings: –Creating PRRs to address the following: In a default situation where an LSE is no longer represented by a QSE, use of a virtual QSE for tracking and scheduling purposes of the LSE’s load at ERCOT. In the situation where a QSE defaults, LSEs are dropped to the Default QSE (16.2.12.2). Propose providing LSEs the additional option of becoming an Emergency (EQSE). QSEs should be allowed to continue to schedule any bilateral contracts they may have to lessen the impact to the Market. Language clean-up and clarity

7. 7 WMS TF Meetings: Continued PRRs Two options regarding timelines for QSE terminating relationship with LSE: Option 1: Extend timeline for notification of a QSE to terminate relationship with LSE to 7 Business Days. –By noon on the 4 th Business Day, LSE must either name a new QSE or qualify as EQSE. If LSE does not meet either, then LSE is in breech of contract. Notice provided on afternoon of 4 th Business Day and cure period begins on 5 th Business Day. At end of 7 th Business Day (which coincides with end of cure period), current QSE/LSE relationship is terminated and LSE is assigned to a virtual QSE for tracking purposes. Option 2: Maintain current timeline of 5 Business Days for notification of a QSE to terminate relationship with LSE. –Modify timeline for LSE to name a new QSE or qualify as EQSE by noon on the 4 th Business Day. If LSE does not meet either, then LSE is in breech of contract. Notice provided on afternoon of 4 th Business Day and cure period begins on 5 th Business Day. At end of 5 th Business Day, current QSE/LSE relationship is terminated and LSE is assigned to a virtual QSE for tracking purposes.

8. 8 Review of Recent Customer Transition Activity

9. 9 Recent Customer Transition Activity Last ESI ID transitioned W 07/13 ERCOT begins daily checkpoints with impacted TDSPs, POLRs, & PUCT W 07/20 5 th Business Day – 91% of Initiating Transactions sent Th 07/21 ESI IDs begin switching away from defaulting REP Fr 07/22 Last switches submitted for transition M 08/01 MP defaults under Agreements with ERCOT ERCOT provides ESI ID list and available customer info to POLRs & TDSPs Customer transition completed in 13 Business or 19 Calendar Days Customer transition in progress Compared to previous transition which lasted 16 Business or 23 Calendar Days Current customer transition should have completed in 11 Business or 15 Calendar Days

10. 10 Recent Customer Transition Activity Wednesday, July 13, 2005 –A QSE in the ERCOT Region, AZOR Energy, LP, defaulted under its QSE Agreement with ERCOT, Inc. –AZOR is also a REP representing approximately 500 ESI IDS and 50 MWh of load per day. –ERCOT began facilitating daily calls and checkpoints with PUCT and impacted TDSPs and POLRs. –ERCOT provided TDSPs and POLRs transition ESI ID lists and customer information available (on approximately 90% of ESI IDs) from REP by 2pm.

11. 11 Recent Customer Transition Activity Thursday, July 14, 2005 –ERCOT provided POLRs additional customer information on remaining ESI IDs. Wednesday, July 20, 2005 –Fifth business day since distribution of ESI ID list. Per RMS short-term recommendation, POLRs to have submitted initiating transactions for transition. –91% of Initiating transactions submitted by POLRs. Thursday, July 21, 2005 –ESI IDs begin switching away from defaulting REP as result of transition. Friday, July 22, 2005 –Last switches submitted for transition. Monday, August 1, 2005 –Last ESI ID transitioned away from defaulting REP.

12. 12 Recent Customer Transition Activity: Current Status Current Status: As of August 1, 2005: –100 % of ESI IDs complete in transitioning away from defaulting REP. POLRs submitted off-cycle Switches to gain ESI IDs. –POLR submission times: One POLR submitted same or next day as receipt of lists. One POLR submitted within 2 business days. One POLR submitted within 2-7 business days.

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