1. ERCOT IT Update Ken Shoquist VP, CIO Information Technology Board Meeting November 2003

2. Page 2 Agenda  Metrics and Projects  Commercial Systems Review Project  Jim Galvin, Kevin Judice, Rich Gruber  727 Project  Summary

3. Page 3 Metrics  EMMS Vendor management progress Successful failover without incident  Transaction Production Retail processing steady Settlement volume continues to be high  EMMS 6 intervals missed  Transaction Processing Seasonal decrease in total txns Processing times steady  Settlements 7093 in October 24x7 monitoring of settlement runs  Project Management 4 projects deployed in October 25 in process 22 in planning

4. Page 4 Project Deployments  The BUL/LAAR Project was delayed to verify the Market User Interface (MUI) Deployed on November 11  Hardware and code failure for the retail API required an emergency rewrite of the functionality Redeployed to market on November 11  New Portal Deployment; now scheduled for December 3 Updated migration process has been verified Hardware has been added to improve reliability Texas Market Link (TML) being tested with market this week

5. Page 5  Vendor management impacting EMMS and PUCT Vendor/ERCOT management review held October 29 with next meeting scheduled December 10, 2003 Vendor meetings resulted in two-week recovery of PUCT MMS implementation New vendor program manager focused on ERCOT projects. Vendor to increase on-site presence going forward Current schedule is to implement Market Needs Release 3 projects by end of May 2004 EMMS Project

6. Page 6 Agenda  Metrics and Projects  Commercial Systems Review Project  Jim Galvin, Kevin Judice, Rich Gruber  727 Project  Summary

7. Commercial Application Systems Review PR-30082 Project Update Project Sponsors Jim Galvin Kevin Judice Rich Gruber

8. Page 8 Project History  At the end of 2002, approval was received on four projects PR-30058 Siebel 7.0 Upgrade/Replacement PR-30082 Commercial Application Systems Upgrade Upgrades began on PaperFree and all SeeBeyond components as a result of their clear upgrade paths (PR-30082) PR-30083 LODESTAR Upgrade/Replacement Conducted a functional review between LODESTAR version 2.25 and 3.5 PR-30110 Replace TCH  These same projects were approved for carry-over to 2004 CASR Update

9. Page 9 Project Drivers  Our recent history indicates our commercial systems: Met current business needs but not as efficiently as possible Able to meet market-design changes but are expensive to implement Require significant IT support to consistently meet market needs in the area of processing times Most upgrade options are ‘re-implementation’ with new versions and upgrade path may not be straight forward and will carry risk that needs careful management Significant data manipulation and calculation functionality written outside of major systems  Without action, our outlook for our existing applications: May continue to incur a high total cost of ownership and risk of failure Continued challenges to accommodate market-driven changes Lifecycle of these systems is coming to an end. With a resolution coming in a year+, we will be in a position with: SeeBeyond, Seibel, Paper Free, LODESTAR– Multiple releases behind vendor Tech support for old products is expensive and high risk CASR Update

10. Page 10 Approach  The core systems that comprise and integrate commercial applications are all under evaluation  ERCOT is developing a holistic set of functional and technical requirements The requirement process includes representatives from both business and IT to promote the discovery of similar cross functionalities and dependencies  During this process, ERCOT will be evaluating any existing applications that better meet ERCOT’s functional and cost-of- ownership requirements. The possible outcome might be: Modify existing Replace Upgrade Build Most likely a combination of these CASR Update

11. Page 11 Project Timeline  A vital element of this project is determining other options available and the cost of those options Current focus is on requirements By year-end, ERCOT will send a request for information to software vendors Organize database of potential vendors and service providers ERCOT expects to have a course of action defined early to mid-2004 Determine when and how to integrate TNT requirements CASR Update

12. Page 12 Summary of Project Vision Remain obligated to support the ERCOT market with the right solution and best cost option to meet near-term needs and long-term considerations CASR Update

13. Page 13 Agenda  Metrics and Projects  Commercial Systems Review Project  Jim Galvin, Kevin Judice, Rich Gruber  727 Project  Summary

14. Page 14 SCR 727 Extract Status  SCR 727 extracts provide market participants (MP) with the ESIID-level data ERCOT used for settlements Discrepancies can occur in the exchange of transactions between MPs and ERCOT These discrepancies cannot be mitigated within the extract or data archive  Summary of Events: In July 2003, MPs identified extract issues and ERCOT determined the cause was data discrepancies with 1 to 3% of the records in the data archive Certification of data archive tables was successfully completed by October 2003 Historical extracts for over two years of data were completed from LODESTAR production MPs identified issues with less than.01% of the records in the historical extracts In October 2003, ERCOT conducted a code review and commenced extract re- design New application code should produce extracts against the data archive with an error rate approaching 0%  ERCOT fully understands that even an error rate of less than.01% could have significant impact for an individual MP

15. Page 15 SCR 727 Extract Status (cont.)  What went wrong? At start of project in January 2003, feasibility study to determine potential architectural limitations was not performed Due to perceived simplicity and MP urgency, ERCOT developed the extracts outside the standard development methodology Limited requirements No detailed system design documentation No formalized test plan  What we learned? The data-archive snapshot architecture caused issues with extract record quality. The SCR-727 logic is highly complex and demands extensive code review and testing. Defensive code adds to support complexity. There is no substitute for strong software development methodology for business and IT.  If the complexity and architectural limitations had not existed, then the hard work of the cross-functional team would have been uneventful.

16. Page 16 SCR 727 Extract Status (cont.)  December 19, 2003 Release: Extract re-design combined with auditing procedures will allow us to move forward with an error rate approaching 0% Collaborative design and testing by the business and IT teams is making this level of accuracy possible Defensive code developed to reconcile source systems and archive navigates around an architectural short coming but adds a layer of cost and complexity to business and IT  Phase II: Development of the EDW RSS and ODS scheduled in the first half of 2004 will eliminate the snapshot-related issues Ongoing MP involvement with business and IT teaming will enable ERCOT to provide MPs with 100% of the data used for settlements

17. Page 17 Summary  Good progress in EMMS vendor scheduling and delivery New staffing measures taken by vendor are positive  Metrics and monitoring continue to increase efficiencies Reached maximum capacity for settlements products without major investment  ERCOT, as a company, is maturing in production and project processes and responsibilities.  Commercial Systems Architecture Project is an opportunity for ERCOT to resolve: Key commercial systems reliability issues Inefficiencies in operations and support processes Data integrity issues relieving need for defensive code Accommodate early requirements from TNT where appropriate