1. Governance and Legal Issues Margaret Uhlig Pemberton General Counsel and Corporate Secretary Media Day Austin, Texas September 13, 2001

2. ERCOT Non Profit Corporation organized under Texas Law –Tex. Civ. Stats. Ann. Art. 1396-1.01 et seq. –Governing Corporate Documents: Articles of Incorporation Bylaws

3. Senate Bill 7 Lays out architecture for “Electric Utility Restructuring” Codified in the Public Utility Regulatory Act, Texas Utilities Code

4. The Independent Organization Section 39.151 Describes functions Describes duties Describes governance

5. ERCOT Functions Open retail market January 1, 2002 Provide open access to transmission and distribution systems (municipal systems and coops may choose to not “opt in”) Ensure continued system reliability Maintain information database Establish settlement system to account for production and delivery

6. ERCOT Duties Establish and enforce procedures subject to PUCT oversight –“ERCOT PROTOCOLS” Rules governing the operation and reliability of the ERCOT Region grid and ERCOT Market Rules relating to the accounting of the production and delivery of electricity Rules relating to support of customer choice

7. ERCOT Governance

8. ERCOT BYLAWS Effective 12/19/00

9. MEMBERS –Members by Sector: Generation Transmission & Distribution Sales Retail (Consumers)

10. Members by Segment Independent Retail Electric Provider Independent Generator Independent Power Marketer Investor-Owned Utility Municipal Cooperative Consumer

11. Board of Directors GeneratorsIOUMuni Indep. Generator Indep. Generator Indep. Generator T&DIOUMuniCoop SalesIOUMuniIndep. REP/PM Indep. REP/PM At Large ConsumerOPUC 1.25 Resid 1.25 Commercial 1.25 Industrial 1.25 OtherERCOT CEO PUCT Chair

12. TECHNICAL ADVISORY COMMITTEE Seven Segments – 30 members –Four from each segment except consumer –Consumers have six (2 industrial, 1 small commercial, 1 large commercial, one residential and OPUC).

13. Membership Types and Fees Corporate Members = $2000 –Full voting membership Associate Members = $500 –Non-voting membership but may be elected to committee Adjunct Members = $500 –Requires approval of the Board

14. Participation of Members –Limitation on affiliates on Board –Membership in more than 1 Sector Obligations of Members –Comply with ERCOT protocols and share information

15. Participation of Non-Members ERCOT posts its meetings on its website All interested persons are invited to attend ERCOT posts non- confidential information

16. ERCOT Protocols “Rules of the Road” in the ERCOT Region Approved by the PUCT

17. ERCOT Protocols Began transition to single control area June 1, 2001 –Simplifies settlement of retail access market –Eliminates control area disparities Perform all grid operations beginning July 31, 2001 Supports Retail Market