1. TCR-CRR Transition Plan TCR Auction Revenue Refund Process Mandy Bauld COPS August 12, 2008

2. 2 Outline Objectives Proposed Methodology Examples –Mid-Month Go-Live Refund Example –1st of the Month Go-Live Refund Example

3. 3 Objectives The TCR Auction Revenue Refund Process is intended to describe the refund method planned when transitioning from the TCR to CRR market. ERCOT will refund to TCR/PCR owners the Annual and Monthly TCR/PCR auction revenues for all remaining days of the year that follow the Texas Nodal Market Implementation date. ERCOT will make refunds to TCR/PCR owners no later than thirty (30) days following the start of the Texas Nodal Market. Implementation of this process involves the Zonal TCR/Settlements department. ERCOT seeks WMS approval of the proposed methodology, before submitting modifying comments to PRR743.

4. 4 Refund of Monthly and Annual TCR Auction Revenues The total refund of auction revenues to a TCR/PCR owner of record is calculated as follows: TCRRAMT p = -1 * (TCRMR p + TCRAR p + TCRRR p ) ERCOT shall refund each TCR owner of record of its awarded monthly TCRs that are no longer effective for the month of Texas Nodal Market Implementation, calculated as follows: TCRMR p = MAUCR p * MRP ERCOT shall refund each TCR/PCR owner of record of its awarded annual TCRs/PCRs that are no longer effective for the month of Texas Nodal Market Implementation, calculated as follows: TCRAR p = AAUCR p * (MEnergy m / (Σ All Months MEnergy n )) * MRP ERCOT shall refund each TCR owner of record of any remaining annual TCRs/PCRs for all months following the month of the Texas Nodal Market Implementation, calculated as follows: TCRRR p = AAUCR p * (Σ n>m MEnergy n / (Σ All Months MEnergy n ))

5. 5 Variable Definitions VariableDefinition TCRRAMTTCR/PCR Refund Amount per TCR/PCR owner of record TCRMRTCR Monthly Refund amount per TCR owner of record for the month of Texas Nodal Market Implementation TCRARTCR/PCR Annual Refund amount per TCR/PCR owner of record for the month of Texas Nodal Market Implementation TCRRRTCR/PCR Annual Remaining Refund amount per TCR/PCR owner of record for the months following Texas Nodal Market Implementation MRPMonthly Refund Percentage calculated as the number of days remaining in the Texas Nodal Market Implementation month divided by the total number of days in the Texas Nodal Market Implementation month MEnergyMonthly Energy Forecast MAUCRMonthly TCR Auction Revenue for the month of the Texas Nodal Market Implementation AAUCRAnnual TCR/PCR Auction Revenue for the month of the Texas Nodal Market Implementation nMonth mMonth of Texas Nodal Market Implementation yYear qQSE pTCR/PCR owner of record

6. 6 Refund of Monthly and Annual TCR Auction Revenues The total refund of auction revenues to a TCR/PCR owner of record is calculated as follows: TCRRAMT p = -1 * (TCRMR p + TCRAR p + TCRRR p ) ERCOT shall refund each TCR owner of record of its awarded monthly TCRs that are no longer effective for the month of Texas Nodal Market Implementation, calculated as follows: TCRMR p = MAUCR p * MRP ERCOT shall refund each TCR/PCR owner of record of its awarded annual TCRs/PCRs that are no longer effective for the month of Texas Nodal Market Implementation, calculated as follows: TCRAR p = AAUCR p * (MEnergy m / (Σ All Months MEnergy n )) * MRP ERCOT shall refund each TCR owner of record of any remaining annual TCRs/PCRs for all months following the month of the Texas Nodal Market Implementation, calculated as follows: TCRRR p = AAUCR p * (Σ n>m MEnergy n / (Σ All Months MEnergy n )) Example: Nodal Go-Live September 1st If Monthly Auction was run for Sept., Refunds all Monthly Auction TCRs (MRP = 30/30 = 1.0) Refunds all Annual Auction TCRs/PCRs for Sept. (MRP = 30/30 = 1.0) Refunds all Annual Auction TCRs/PCRs for Oct - Dec

7. 7 Refund of Monthly and Annual TCR Auction Revenues The total refund of auction revenues to a TCR/PCR owner of record is calculated as follows: TCRRAMT p = -1 * (TCRMR p + TCRAR p + TCRRR p ) ERCOT shall refund each TCR owner of record of its awarded monthly TCRs that are no longer effective for the month of Texas Nodal Market Implementation, calculated as follows: TCRMR p = MAUCR p * MRP ERCOT shall refund each TCR/PCR owner of record of its awarded annual TCRs/PCRs that are no longer effective for the month of Texas Nodal Market Implementation, calculated as follows: TCRAR p = AAUCR p * (MEnergy m / (Σ All Months MEnergy n )) * MRP ERCOT shall refund each TCR owner of record of any remaining annual TCRs/PCRs for all months following the month of the Texas Nodal Market Implementation, calculated as follows: TCRRR p = AAUCR p * (Σ n>m MEnergy n / (Σ All Months MEnergy n )) Example: Nodal Go-Live September 19th If Monthly Auction was run for Sept., Refunds Monthly Auction TCRs for days 9/19 through 9/30 (MRP = 12/30 = 0.4) Refunds Annual Auction TCRs/PCRs for days 9/19 through 9/30 (MRP = 12/30 = 0.4) Refunds all Annual Auction TCRs/PCRs for Oct - Dec

8. 8 1st of the Month Go-Live Refund Example 1st of the month refund (September 1 st ) for a TCR owner of record with the following information: $100,000 Annual Auction Obligation $20,000 September Monthly Auction Obligation September days to Refund are 30 out of 30 September’s Annual Energy Forecast = 20,000 GWh October - December’s Annual Energy Forecast = 70,000 GWh Annual Energy Forecast = 320,000 GWh The total refund of auction revenues to a TCR/PCR owner of record is calculated as follows: TCRMR p = MAUCR p * MRP TCRMR p = $20,000 * (1) = $20,000 TCRAR p = AAUCR p * (MEnergy m / (Σ All Months MEnergy n )) * MRP TCRAR p = $100,000 * (20,000 GWh / 320,000 GWh) * (1) = $6,250.00 TCRRR p = AAUCR p * ( Σ n>m MEnergy n / (Σ All Months MEnergy n )) TCRRR p = $100,000 * (70,000 GWh / 320,000 GWh) = $21,875.00 TCRRAMT p = -1 * ($20,000 + $6,250.00 + $21,875.00) = ($48,125)

9. 9 Mid-Month Go-Live Refund Example Mid-month refund (September 19 th ) for a TCR owner of record with the following information: $100,000 Annual Auction Obligation $20,000 September Monthly Auction Obligation September days to Refund are 12 out of 30 September’s Annual Energy Forecast = 20,000 GWh October - December’s Annual Energy Forecast = 70,000 GWh Annual Energy Forecast = 320,000 GWh The total refund of auction revenues to a TCR/PCR owner of record is calculated as follows: TCRMR p = MAUCR p * MRP TCRMR p = $20,000 * (12/30) = $8,000 TCRAR p = AAUCR p * (MEnergy m / (Σ All Months MEnergy n )) * MRP TCRAR p = $100,000 * (20,000 GWh / 320,000 GWh) * (12/30) = $2,500.00 TCRRR p = AAUCR p * ( Σ n>m MEnergy n / (Σ All Months MEnergy n )) TCRRR p = $100,000 * (70,000 GWh / 320,000 GWh) = $21,875.00 TCRRAMT p = -1 * ($8,000 + $2,500.00 + $21,875.00) = ($32,375)

10. 10 Questions?