1. NPRR-574 Raiden Commodities LP Patrick de Man WMS 11/13/2013

2. GenXYZ Modifying Offer Curves Strategically executed for self-benefit Appears random to the market At least on 15 days during the summer Without any economic rationale Generally, conditions are: High load days SCED tight ~2,000

3. Offer Curve Modification Example SCEDLSLHSLOutputMW8P8MW9P9MW10P10MW11P11MW12P12 15:00 185320 311254.0023.86269.0023.87311.0023.88312.00350.00323.00350.01 16:00 184320 311232.0022.12233.004,900.00319.004,900.01320.004,999.99321.005,000.00 17:00 184320 232233.0022.12234.004,900.00317.004,900.01318.004,999.99319.005,000.00 18:00 185320 232256.0023.86271.0023.87311.0023.88312.00350.00323.00350.01 All available units of this QSE (including Lignite): similar modifications What market conditions changed to warrant this modification? Pricing out of the market: down-balancing when LMP<$4900 In normal world this would be called Economic Withholding 1) However, this QSE is in the clear because of the “Small Fish Swim Free” rule Impacts: Pushing LMP clear higher ICE HB_NORTH BalDay and Next Day contract (HE7-22) trading higher Forward contracts: e.g. Summer 2014 trading up 1) In ERCOT it was too, at least up to 2007: Report on Investigation of the Wholesale Market Activities of TXU from June 1 to September 30, 2005, Potomac Economics, Ltd., ERCOT Independent Market Monitor, March 2007

4. Examples July 12, 2013 (7 units) GenXYZ bought several thousand MW HB_HOUSTON in DAM for HE16 – H18 Offer curve changes for HE16 – HE18 $77 print in attempt to gain on DAM position August 12, 2013 (11 units) Curve change at 15:00 = price spike $889 Look-Ahead holds at $4900 for the hour Confusion in futures market. Trading up to $130 only to settle $48 September 3, 2013 (6 units) Jack County tripped (615MW 3:30pm + 615MW 4.30pm) Curve Change 16:00 = price spike $365 GenXYZ set the LMP clearing price for 4 intervals: $4900; HE7-22 cleared $199 Also on: 6/12 (5), 6/13 (7), 6/20 (5), 6/27 (5), 6/28 (7), 6/29 (9), 7/3 (5), 7/16 (6), 7/18 (7), 7/23 (12), 7/31 (4), 8/7 (12), 8/13 (12), 8/23 (10) How is this a competitive and efficient market? Obviously, assumptions underlying “Small Fish” rule are flawed

5. Summary After witnessing summer’s horror show: something is broken here Clearing firms: Spooked by ERCOT (fake) volatility: looking to exit ERCOT products Increasing margins significantly in all power markets, pushing small traders out of the market; liquidity drying up Calpine proposed NPRR-321: identical language as NPRR-574 But now: Big generators prefer status quo. Why? Like in NEISO there should be some limitations and benchmarking When are offer curve modifications acceptable? Offer curve modification to reflect forward grid conditions is anti-competitive “Small Fish” Rule flaw: if SCED is 2000, moving 1000MW is 50% of available capacity: you can control pricing