1. Technical Advisory Committee Presentation to the ERCOT Board of Directors October 17, 2006

2. TAC Summary 8 NPRRs for Approval 8 NPRRs for Approval 3 PRRs for Approval 3 PRRs for Approval All No System Changes – IA only All No System Changes – IA only 1 Urgent 1 Urgent Emergency Load Response Update Emergency Load Response Update Nodal Market Budget Review Nodal Market Budget Review

3. Nodal PRRs TAC unanimously recommended approval of: TAC unanimously recommended approval of: NPRR017 – Discontinuation of Interest Charge for Defaulting Entities at Time of Uplift NPRR017 – Discontinuation of Interest Charge for Defaulting Entities at Time of Uplift Companion to PRR 681 Companion to PRR 681 NPRR022 – MIS Posting Area for Trades NPRR022 – MIS Posting Area for Trades Changes area from Secure to Certified Changes area from Secure to Certified NPRR023 – Correction to Formatting of Section 8.1.2.2.1 NPRR023 – Correction to Formatting of Section 8.1.2.2.1 It is what it says It is what it says NPRR025 – Definition of Annual Planning Model NPRR025 – Definition of Annual Planning Model Provides the definition in Section 3, Management Activities for the ERCOT System Provides the definition in Section 3, Management Activities for the ERCOT System NPRR029 – Network Model Testing Clarification NPRR029 – Network Model Testing Clarification Differentiates between RT and simulation testing process and requirements Differentiates between RT and simulation testing process and requirements NPRR030 – Addition to CRR Account Holder Qualification Criteria NPRR030 – Addition to CRR Account Holder Qualification Criteria Adds description of an entity not eligible to own CRRs (e.g., TSPs) Adds description of an entity not eligible to own CRRs (e.g., TSPs) ERCOT believes these changes can be absorbed into the initial requirements/design/schedule ERCOT believes these changes can be absorbed into the initial requirements/design/schedule

4. More Nodal PRRs TAC unanimously recommended approval of: TAC unanimously recommended approval of: NPRR027 – Block Offers in CRR Auction NPRR027 – Block Offers in CRR Auction Revises how CRRs may be offered in CRR Auction Revises how CRRs may be offered in CRR Auction Awarded monthly 7X24 strips may only be re-auctioned or sold as 3-part strips (3 8-hour periods) Awarded monthly 7X24 strips may only be re-auctioned or sold as 3-part strips (3 8-hour periods) NPRR028 – CRR Trading in Blocks Only NPRR028 – CRR Trading in Blocks Only Revises how CRRs traded in bilateral and CRR Auction Revises how CRRs traded in bilateral and CRR Auction CRR trading limited to time-of-use blocks for a certain date CRR trading limited to time-of-use blocks for a certain date CRR holders would not be able to trade the CRR for an hour or block of hours that is not one of the hours defined CRR holders would not be able to trade the CRR for an hour or block of hours that is not one of the hours defined Value Engineering Outcomes: Based on vendor input, ERCOT believes these changes can be absorbed into the initial requirements/design/schedule and will each reduce overall package costs by approximately $300K. Value Engineering Outcomes: Based on vendor input, ERCOT believes these changes can be absorbed into the initial requirements/design/schedule and will each reduce overall package costs by approximately $300K.

5. PRR 653 – OOME Ramp Rate Adherence Purpose Instructs ERCOT to grant a dispute when a QSE can demonstrate that an OOM undeployment instruction exceeds a resource’s ramp rate. Benefit Corrects payments to generators providing reliability services and eliminates a disincentive to providing OOME service. Market Impact Some minor uplift due to OOME un-deployment System Change NoN/A AssumptionsN/A TAC Vote TAC unanimously recommended approval; all market segments were present Effective Date November 1, 2006

6. PRR 653 – OOME Ramp Rate Adherence Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact

7. PRR 671 – Remove Sunset Date on Floor for Responsive Reserve Service Bids Purpose (Reliant for DSWG, IPM) Removes the 1/1/07 sunset date while maintaining the requirement that offers not be submitted for less than $0. Benefit Continues current practice. Market Impact N/A System Change NoN/A AssumptionsN/A TAC Vote Approved by TAC with one opposed (consumer) and four abstentions (IOU, independent REP, and independent power marketer) Effective Date November 1, 2006

8. PRR 671 – Remove Sunset Date on Floor for Responsive Reserve Service Bids Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact

9. PRR 685 – TCRs and PCRs Payment Due Date - URGENT Purpose (Suez, IGEN) Documents the requirements for both TCR and PCR payment due dates to five Bank business Days after being invoiced. Benefit Clarify payment schedules for TCRs and PCRs. Market Impact Processing of invoices in the required timeframe (consistent with current practice). System Change NoN/A AssumptionsN/A TAC Vote TAC unanimously recommended approval; all market segments were present Effective Date November 1, 2006

10. PRR 685 – TCRs and PCRs Payment Due Date - URGENT Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact Minor revisions to ERCOT business practices.

11. Emergency Load Response Update Outstanding issue since Feb. 2003 natural gas curtailment. Outstanding issue since Feb. 2003 natural gas curtailment. ERCOT Staff has requested new reliability service in place for Spring of 2007. ERCOT Staff has requested new reliability service in place for Spring of 2007. PUC is opening a rulemaking on an emergency load response service. PUC is opening a rulemaking on an emergency load response service. WMS will develop a PRR on a parallel track to the PUC project. WMS will develop a PRR on a parallel track to the PUC project.

12. Nodal Market Budget Review Board Assignment from September: Board Assignment from September: Review the proposed nodal budget for alignment with intended scope of Nodal Protocols; and Review the proposed nodal budget for alignment with intended scope of Nodal Protocols; and Consider whether any changes to scope can reduce the budget within the approved Texas Nodal structure. Consider whether any changes to scope can reduce the budget within the approved Texas Nodal structure. TPTF held a two-day review session with the nodal implementation team TPTF held a two-day review session with the nodal implementation team TPTF discussed value engineering and budget drivers presented by ERCOT staff. TPTF discussed value engineering and budget drivers presented by ERCOT staff. Items identified for further review: Items identified for further review: Auditors’ review of MP readiness—replaced by self-reporting of accountable executives ($1.3 mm); Auditors’ review of MP readiness—replaced by self-reporting of accountable executives ($1.3 mm); Minimize zonal enhancements—assigned to PRS for follow- up ($2.5 mm); and Minimize zonal enhancements—assigned to PRS for follow- up ($2.5 mm); and Latency in the data warehouse. Latency in the data warehouse.

13. Nodal Market Budget Review TPTF passed the following resolution (89.6% to 10.4% with 7 abstentions): TPTF passed the following resolution (89.6% to 10.4% with 7 abstentions):   During its September 27-28, 2006 meeting, the TPTF reviewed the draft “Texas Nodal Market Implementation Budget Rationale” to be presented by the ERCOT Nodal Project Director to the ERCOT Board and TAC. During this review options for value engineering changes to the project scope were considered. TPTF believes the materials presented by ERCOT meet the scope of the requirements of the Nodal Protocols approved by the PUCT in Docket No. 31540, the timeline for implementation approved by TPTF and TAC, and the requirements of the TAC approved Nodal Transition Plan but makes no finding with regard to the total amount of the proposed budget.

14. Nodal Market Budget Review TAC discussed the nodal budget at its October meeting and at a full day workshop. Key issues: TAC discussed the nodal budget at its October meeting and at a full day workshop. Key issues: Network Model Management System (NMMS): CNP to present an alternate requirements document ($12.3 mm project). Network Model Management System (NMMS): CNP to present an alternate requirements document ($12.3 mm project). ERCOT to confirm that dynamic reactive is a requirement for NMMS. ERCOT to confirm that dynamic reactive is a requirement for NMMS. Fork lifting deemed unworkable—inconsistent with scope of Texas Nodal. Fork lifting deemed unworkable—inconsistent with scope of Texas Nodal. ERCOT to produce a Service Level Agreement for the nodal market. ERCOT to produce a Service Level Agreement for the nodal market. No formal actions on the Nodal budget were taken by the TAC. No formal actions on the Nodal budget were taken by the TAC.

15. Stakeholder Comments on Nodal Market Budget Some stakeholders comfortable: Budget estimate seems appropriate for a project of this scale. Some stakeholders comfortable: Budget estimate seems appropriate for a project of this scale. Lingering concerns from some stakeholders: Lingering concerns from some stakeholders: Insufficient time to review budget thoroughly. Insufficient time to review budget thoroughly. Stakeholder review incapable of really getting behind the details (e.g., detailed project plan; labor breakdown; vendor proposals). Stakeholder review incapable of really getting behind the details (e.g., detailed project plan; labor breakdown; vendor proposals). Relationship between costs and delivery risks is unclear. Relationship between costs and delivery risks is unclear. A new cost benefit analysis should be performed. A new cost benefit analysis should be performed. Reconsideration of the scope of the ERCOT Nodal design cannot be undertaken without a new TNT-style effort. Reconsideration of the scope of the ERCOT Nodal design cannot be undertaken without a new TNT-style effort.