1. RMSUpdate November 4, 2004 Retail Market Subcommittee Update to TAC

2. RMSUpdate Voting Items Summary  RMGRR 2004-13 – Disconnect at Premium Locations  RMGRR 2004-14 – Inadvertent Gain Process  RMGRR 2004-15 – Data Extract Variance Process  Annual Validation Report to the ERCOT Board  Household Electric Use Survey

3. RMSUpdate Voting Items Retail Market Guide Revision Requests  RMGRR 2004-13 – Disconnect at Premium Locations  Incorporates the tariff charge variation among TDSP’s into the Retail Market Guide  RMGRR 2004-14 – Inadvertent Gain Process  Identifies individual TDSP processes required to resolve inadvertent switch situations  RMGRR 2004-15 – Data Extract Variance Process  Defines the Data Extract Variance Process including the utilization of FasTrak to resolve agreed differences and seeking ADR resolution for contested differences

4. RMSUpdate 4 Voting Items Annual Validation Report to the ERCOT Board SepOctNovDecJanFebMarAprMayJunJulAugSepOct 28143141511 Near Term Action Plan Timeline September 28 - PWG Near Term Action Plan Approved October 14 – Near Term Action Plan Submitted to RMS November 4 – Near Term Action Plan Submitted to TAC for ERCOT Board Review December 31- ERCOT Staff Finalizes Recommendations to PWG. Market Participants Begin Making Changes February - RMS Requested February Review March 1 -TDSPs and ERCOT Complete System Changes May 1 - TDSPs and ERCOT Complete Testing System Changes June 15 - Normal Start of 2005 Annual Validation November - Normal Completion of 2005 Annual Validation Transactions 2004 2005

5. RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 1.Do not replace a prior year non-default assignment with a default assignment  A new calculation for each ESI ID is made each year  Currently: Insufficient data requires assignment to default  Residential defaults to Residential Low Winter Ratio (RESLOWR)  Commercial defaults to Business Medium Load Factor (BUSMEDLF)  Proposed: If sufficient data was available in a previous year an assignment to default would not be made

6. RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 2.Applying dead-bands around the specified Residential Segment trigger point  Currently : If WR > 1.5 it is assigned to High Winter Ratio (HiWR)  Proposed : Create a dead-band around the 1.5 trigger point  Example – Assume dead-band (1.0 to 2.0) if current assignment is RESLOWR and new WR = 1.7, would remain RESLOWR if current assignment is RESLOWR and new WR = 2.1, would change to RESHIWR  Result - significant reduction in migration

7. RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 3. Use more than 1 month for the Residential Winter Ratio formula  Example – Change numerator to average the ADU for highest 2 months  Result - significant reduction in migration

8. RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 4. Apply a kWh minimum for Residential High Winter Ratio profile assignment  Currently: None  Proposed: Identify a reasonable minimum usage for High Winter Ratio assignment  Example – RESHIWR minimum = 10 kWh/day (300kWH/month) If WR = 3.0 and 5 kWh/day then assign RESLOWR If WR = 3.0 and 15 kWh/day then assign RESHIWR

9. RMSUpdate Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan 5.Use an ERCOT administered residential survey to determine heating system type for a sample of customers  The survey will empirically support data used to define dead- bands, minimum thresholds and revised WR calculation  40,000 surveys will be mailed to end use customers  5,000 to each weather zone  2,500 to each existing profile type current assignment

10. RMSUpdate 10 Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan  Market Participant Concerns  Customer Confusion  Call Center Impact  Statistical Relevance  Solutions Adopted  Bilingual Survey  Answering service (800 number)  Web information  ERCOT staff follow-up  Call Center Training Materials  Statistical Relevance….

11. RMSUpdate 11 Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan Statistical Relevance “ Even in the worst case scenario, response data will be sufficient to make significant improvements in profile assignments.” Survey Accuracy (95% Confidence) Return RateERCOT TotalWeather Zone 15%±1.3%± 3.7% 10%± 1.6%± 4.5% 5%± 2.2%± 6.3% 1%± 5.0%± 14.1%

12. RMSUpdate 12 Voting Items Annual Validation Report to the ERCOT Board Near Term Action Plan  RMS approved the PWG action plan  Concept of the residential survey  Implementation time line  Collaborative effort of PWG and RMS produced a simplified residential survey  Market conference call to discuss concerns  RMS email vote affirmed the survey  RMS Recommendation: TAC endorse the Residential Survey and Near Term Action Plan

13. RMSUpdate 13 ??? Questions ???