1. MCWG Update to WMS 6/15/2011 1

2. Exposure / Collateral Update Nodal Total Potential Exposure reported by ERCOT as of 4/30/11 remains less than Zonal Estimated Aggregate Liability (TPE = ↓15% since 10/31) Collateral Posted has increased since 10/31 Cash/LOCs ↑302% @ $1,575MM Guarantees ↑30% @ $866MM Net Impact – Secured MPs are posting 5.74xTPE vs. 2.0xEAL Unsecured Credit Limits have increased Dollar % ∆ = ↑228% @ $866MM [Dollar / CPTY] ∆ = ↑18.8MM from $13.2MM # MPs ↑+7 from 20 Note – Exposure (“TPE”) reported does not include DAM Credit Exposure nor CRR Auction Credit Exposure as calculated in Section 4 and 7 of the Protocols Source: Finance And Audit Committee Meeting Materials, ERCOT Market Credit Status, Sept 2010 – June 2011 2 Collateral = $ 3.3 Billion

3. 2011 Status Update Action ItemDeliverable Target Date Status ERCOT unsecured credit policiesReview of the unsecured credit capQ1 Reviewing- $50MM cap & eliminate use for satisfying CRR posting obligations Pre-DAM Credit Validation Determine if PTP Obligations can be offset with CRRs Q2 In Progress – Board Approved and July 2011 Implementation Goal (Ahead of Schedule – Previously Sept 2011) CMM Core Systems Tighten invoice timelines and collateral requirements In Progress – NPRR 347 revises RT invoicing to OD+10; CWG has delayed voting until June 16 CMM Core Systems Examine adequacy of collateral held for forward risk In Progress – NPRR 347 (1) ERCOT and Luminant proposed Minimum Collateral Exposure calculations (2) Luminant proposed decreasing the default timeline and revising the EAL/AIL equations ERCOT unsecured credit policiesExamine Form of LCs and guarantees In Progress – Chad Seely to circulate comments (See F&A Minutes)(See F&A Minutes) Netting/Mutuality Determine alternatives to First Priority Secured Interest agreements In time for balance of year or annual auction Reviewing –ERCOT Credit/Legal evaluating the creation of a central counterparty & NASDAQ-OMX proposal to act as 3rd party CMM Core SystemsExamine FCE calculations In Progress – NPRR 357 filed by Luminant CRR Auction Credit Validation Examine Initial Margin (A&M) and Collateralization of purchase price In Progress – NPRR 357 filed by Luminant Pre-DAM Credit Validation Review e-factors or replacement for e-factors Q3 TBD ERCOT unsecured credit policiesComparison to best practices TBD Review Investment Practices Recommend changes to current investment practices TBD ERCOT unsecured credit policies Comprehensive review of unsecured credit assignment Q4 TBD 3

4. CFTC Update NASDAQ-OMX and ERCOT staff have met to discuss NASDAQ’s proposal to act as a third party central counterparty CFTC Workshop scheduled for 6/16/2011 from 1:00 PM to 3:00 PM – Agenda Items Dodd-Frank provisions affecting ERCOT transactions Process for obtaining exemption Issues to be addressed in exemption petition Timeline for issues to be addressed by ERCOT 4

5. NPRR 347 - Possible Vote Protocol SectionRevision TopicERCOT’s Proposal ERCOT’s Comments to Luminants ProposalLuminant’s Proposal Section 9Revise RTM invoicing to 10 th BD rather than Thur. following the 10 th BD Same Proposal 16.11.4Require Minimum Collateral (1) Conditional – required for CPTYs that do not meet a rating standard or Equity/Asset metric (2) MRTFL = Sum[ {Max RT Imbalance in 30days} {Max Load in 30 days], {20% * Max Gen in 30days}] *1.2 * 2 * Derived Average Price per MWh (1) Reduce the collateral requirements below Luminat’s proposal by : (a) decreasing posting requirements for LSE, (b) remove volatility price adjustments (“SAF”), (c) remove price multiplier on entities that made late payments (2) Remove ERCOT’s discretion to revise Net Unit Contingent Adjustment (1) Applies to all CPTYs (2) Minimum Collateral Exposure is a max of : (a)generation outage risk plus bilateral replacement plus Day Ahead risk (b)mass transition risk of load less probable generation plus bilateral replacement plus Day Ahead risk 16.11.4Combine EAL & AIL into a single equation that separates unbilled risk from forward exposure N/A Remove CRRs that offset PTPs from the DALE equation because the CMM System does not have the relevant Settlement information (1)Separate ADTE into unbilled risk (URTA) and forward risk (RTLE)] (2)Unbilled & FWD Multiples TBD (3)DALE multiple = RTLE multiple = RTLF multiple (4)Eliminate AIL and combine AIL inputs into EAL calculation that separates forward risk from unbilled risk 16.11.4.7MCE Reporting N/ANo Change Requires ERCOT to publish MCE Summary Report 16.11.5.2 & Security Agreement Reduce Margin Cure Period ERCOT is requesting this be addressed separately (1)Reduce Cure Period, (2) Provide ERCOT discretion to extend to 4 th BD 5 NPRR Summary – (1) Reduce RT invoicing cycle to the 10 th BD following the operating day, (2) Revise forward exposure calculations Status Update 4/18 – SEWG filed comments to revise invoicing back to the MP level rather than Counter-Partycomments 4/21 - Passed by PRSPassed by PRS 5/04 - Tabled by CWG 6/09 – CWG deferred voting until 6/16/2011

6. NPRR 357 - Possible Vote Luminant filed NPRR 357 and presented key concepts to MCWG/CWG Key Concepts Settlement Revise the CRR settlement terms from payment being required post the auction clears to prior to the delivery month Auction Attributes Increase the frequency of multi-month auctions from once per year to monthly Temporarily reduce the term of the auction Revise the amount of capacity made available in the auction Revise the collateral requirements by: – Recognizing max bid exposure (i.e. similar to DAM Bid Exposure calculation included in NPR 323) – Path/Term/Product specific adders (i.e. revise values A and M) – Not requiring collateralization of the entire bid value since settlement terms have been revised Forward Exposure Revise the Forward Credit Exposure calculations by incorporating an initial margin requirement that is path/term/product specific and a mark-to-market value that is derived from the difference between the latest ACP and CPTY’s award price for Forward Months not settled Incorporate into the Forward Credit Exposure calculation an estimate for CRR Balancing Account Revenue 6

7. DAM Collateral Parameters - Possible Vote – Hyperlinks to DAM Collateral Parameters Process Current ERCOT Proposal – Revisions 1.“ERCOT may adjust DAM credit parameters up or down at ERCOT’s sole discretion with at least two Bank Business Day’s notice. ERCOT may loosen credit parameters with less notice, if needed.” 1.ERCOT previously only had the discretion to adjust the “e” factors and the “u” percentile 2.Revision will enable ERCOT to use discretion to revise percentile values “d”, “a”, “b”, “y”, “z”, “t” 2.Removed parameters related to nodal market inception 7