1. July 7, 2008 TPTF Texas Nodal Market Implementation: - Program Update - Market Readiness Update Jerry Sullivan

2. 2 2 Texas Nodal Program UpdateJuly 7, 2008 Agenda: Program Update System-wide Load Frequency Control Test Program Status Schedule CIM Integration ERCOT and TSP Model Validation Scope Control Cost

3. 3 3 Texas Nodal Program UpdateJuly 7, 2008 System Wide Load Frequency Control Test ERCOT system operations managed the power grid with the nodal real- time systems that will be in place when the nodal market is launched All Congestion, including Zonal Congestion, was managed by Local Congestion management techniques during the LFC Test –Process of moving QSEs to nodal operations started at 11:00 AM –All energy schedulers were transitioned to nodal control by 12:18 PM –The ERCOT market was entirely under nodal system control for 29 minutes System frequency stayed at acceptable levels during the test ERCOT successfully completed a live run of the Nodal real-time market on June 25 15 July 2008ERCOT Public

4. 4 4 Texas Nodal Program UpdateJuly 7, 2008 ` Program Status Nodal Delivery status is: ERCOT Staff Readiness status is: Market Participant Readiness status is: Cost Schedule Scope / Quality Nodal Delivery Amber status driven by the limited response to the Cycle 4 Survey (out-reach efforts are on- going) Changed due to schedule impact Primary Indicators Secondary Indicators Red Amber Green Amber Red Amber Green EDS1 Red EDS2 Amber EDS3 Red EDS4 Amber status driven primarily by E8, the staffing metric Red* RedAmberGreen ScopeProgram is not aligned to protocolsProgram is aligned to previous protocol versions Program is aligned with current protocols QualityCurrent product quality is not sufficient for Nodal launch Most Nodal products currently achieve quality standards All Nodal products currently achieve quality standards ScheduleGo-Live => 30 days+Go-Live =< 30 days+Go-Live = 12/1/2008 CostEstimate at Complete => 319M +10%Estimate at Complete =< 319M +10%Estimate at Complete =< 319M *Final cost unknown until new schedule confirmed

5. 5 5 Texas Nodal Program UpdateJuly 7, 2008 Schedule Progress –Master Schedulers completed initial reviews of all project schedules –Published project guidelines and PMs revising schedules to align with requirements –Continuing to identify all cross-project and program-level dependencies –Continuing to assess and clarify responsibilities of projects at the program layer –Revising schedules for NMMS, EMS, MMS, Infrastructure and Testing projects by July 11 that will serve as initial feeds into integrated schedule –Will continue to iterate against integrated schedule to incorporate activities from remaining projects, as well as program-level dependencies Timeline –The date for setting a new schedule date has not been finalized, but the team understands the sense of urgency as well as the importance of a realistic plan ERCOT continues aggressive development of a revised integrated Nodal program schedule that is realistic and achievable

6. 6 6 Texas Nodal Program UpdateJuly 7, 2008 Schedule Assumptions SME analysis and assessment activities –NPRRs deemed “essential for Go-Live” –Revision of EDS handbooks to align activities with schedule changes Quality control and assurance activities –Resolution of data quality issues –Quality gates to ensure code readiness and document completion Structured release and testing activities –Support of formal release process and environment entry gates –Delivery of a complete, integrated testing environment –End-to-end testing and defect resolution –Disaster recovery, security, and performance testing Market Participant activities –TSP and QSE testing activities –Validation of the network operations model for TSPs Go-Live requirement activities –SEM Go-Live activities, 168-hr Test, Go-Live Sequence –Implementation of both Real-Time Market and Day-Ahead Market, as originally planned The new integrated schedule will address sufficient time for ….

7. 7 7 Texas Nodal Program UpdateJuly 7, 2008 CIM Integration Agreement in place for provision of onsite resources at AREVA until the CIM Importer exits FAT Assigned resources are focusing on resolution and delivery –ERCOT: 11 resources –AREVA: 14 resources –ABB: 15 resources ERCOT is monitoring AREVA’s performance trends to address continuing or potential issues ERCOT is working closely with the vendors to minimize the ongoing delay and address development and data issues

8. 8 8 Texas Nodal Program UpdateJuly 7, 2008 ERCOT and TSP Model Validation NMMS Seed Model + Nodal data 1 2 Zonal EMS Nodal EMS Compare results CIM Importers Nodal MMS Data 3 4 Protocols Section 3.10 1.ERCOT validates model – this is a multi-step process that has been reviewed with Market Participants 2.Single Entry Model (SEM) Go-Live – ERCOT validated model deployed to Production environment 3.TSPs perform data validation - ERCOT will provide TSPs with guidelines and other supporting documentation prior to SEM Go-Live 4.ERCOT enables Nodal Protocol § 3 ERCOT and TSPs have identified a process for completing NMMS data validation

9. 9 9 Texas Nodal Program UpdateJuly 7, 2008 Scope Control ItemNbr Items* Cost Estimate** Nodal Budget** Original Budget$263.0 Baseline 1 Changes59$5.8 Baseline 2 Changes38$6.7 Post-Baseline 2 Changes Included in Latest Fee Filing52$8.4 Budget changes resulting from ABB, contingency add of $15 million, and other vendor / project costs N/A$35.6 Budget Based on Latest Nodal Fee Filing (including contingency funds)$319.5 Subsequent Post-Baseline 2 Changes Approved by Board11$0 Contingency funds committed for additional changes9$9.6 Current Budget Estimate resulting from Approved Changes$319.5 Changes up for Board Review (11 NPRRs, 1 Change Item)12$0.23-$0.40 NPRRs Currently Under Assessment10$2.0-$2.7 Future Changes to be AssessedTBD * Includes changes resulting from NPRRs, NOGRRs, White Papers, and Change Items ** in Millions $ Note Baseline 1, Baseline 2 and Post Baseline 2 changes amounted to $20.9 million $20.9 Potential scope changes continue to require analysis for Go-Live inclusion and subsequent schedule / budget impacts

10. 10 Texas Nodal Program UpdateJuly 7, 2008 Cost: Element Summary When the integrated schedule has been finalized and the financial impact determined we will incorporate this into an updated forecast

11. 11 Texas Nodal Program UpdateJuly 7, 2008 Agenda: Market Readiness Update Status Update –ERCOT Staff Readiness –Market Participants Cycle 4 Survey Update Metric Update –EDS Appendix (see separate file) Metrics Review (see separate file)

12. 12 Texas Nodal Program UpdateJuly 7, 2008 Status Update All status levels for overall readiness remain the same

13. 13 Texas Nodal Program UpdateJuly 7, 2008 ERCOT Readiness Engagement (green) new survey results came out at the end of June - ERCOT remains fully engaged Training (amber) training efforts are on-going Process (amber) one department in System Operations is behind performance levels Staffing (amber) ERCOT is currently ~95% staffed (98% required for green status) recruitment is on-going Testing (green) no recent developments ERCOT Staff Readiness status is AMBER 15 July 2008 ERCOT Public

14. 14 Texas Nodal Program UpdateJuly 7, 2008 Market Participant Readiness Market Participant Readiness status is AMBER Engagement (amber) limited survey response from QSEs and LSEs drives amber status Connectivity (green) several new entrants to the market have been successfully tested Registration and Qualification (amber) MP10 (resource mapping) has, again, improved steadily since the last meeting MP11 (RARF data) – only 5 RARFs have not been received (RARFs representing more than 99.5% of MWs have been submitted) Telemetry (green) no change Training (amber) limited survey response from QSEs drives amber status Trials Participation (green) improvement in MP15 (EDS 3 trials participation) 15 July 2008 ERCOT Public

15. 15 Texas Nodal Program UpdateJuly 7, 2008 Cycle 4 Survey Update There were varying degrees of response to the Cycle 4 Survey – QSEs with Resources and TDSPs had 100% response to the Cycle 4 Survey – 87% of QSEs have responded to the survey (up from 72%) – 81% of LSEs have responded to the survey (up from 67%) This limited response is driving several metrics to red – QSEs without Resources are red for MP1, MP12, and MP13 – LSEs are red for MP19 ERCOT Account Managers will continue their outreach efforts to MPs who were non-responsive to the Cycle 4 Survey or who reported negative answers The survey will remain open through August 15 th Updates to the Cycle 4 Survey can be submitted using the excel form found on the metrics website (same process as previous surveys) Cycle 4 Survey Data was reported on the scorecards on June 12th

16. 16 Texas Nodal Program UpdateJuly 7, 2008 Metric Updates Metrics will be updated on a weekly basis Changes will appear on the scorecard on Wednesday afternoon You will be notified Tuesday or Wednesday morning if you will be going red Contact us if you notice any inconsistencies Survey data will now be stockpiled and updated on a weekly basis There will not be a “Wall of Shame” in the Board presentation next week

17. 17 Texas Nodal Program UpdateJuly 7, 2008 Status Update: EDS EDS 1 (green) no changes EDS 2 (red) state estimator convergence values were consistently higher last week EMO12 (Network Operations Model and SE Performance) is now amber approximately 71 unobservable buses (less than 2%) EDS 3 (amber) Maintained amber status CRR5 (Trial Operation of Annual CRR Auction during Trials) expected to go green 7/11 EDS 4 (red) waiting on EMS 5 delivery to proceed with EMO3 (Verify Outage Evaluation System Functionality) site fail-over test scheduled for 7/8 EDS status remains unchanged since the last meeting

18. 18 Texas Nodal Program UpdateJuly 7, 2008 Questions ?