1. Lead from the front Texas Nodal http://nodal.ercot.com 1 Integrated ERCOT Readiness and Transition (IRT) TPTF - November 6 th, 2006

2. Lead from the front Texas Nodal http://nodal.ercot.com 2 Purpose of today's presentation Share QSE & CRR Qualification Approach Share EDS 3 Approach Confirm Delivery Dates of IRT’s Key Deliverables Seek direction concerning a sub-group for IRT related activities

3. Lead from the front Texas Nodal http://nodal.ercot.com 3 IRT Scope Business readiness & transition plan for each ERCOT department by Director Updated ERCOT Operating Guides based on Nodal Protocols and placed under change control Updated Control Room Desk Procedures based on Nodal Protocols and place under change control Market Participant Qualification Plan, execution and tracking (including entry and exit criteria) EDS 3 and 4 plans and daily schedule and execution Readiness Criteria, tracking, and reporting Readiness declarations ERCOT Nodal Go Live Plan Zonal “closure” strategy and implementation

4. Lead from the front Texas Nodal http://nodal.ercot.com 4 Project Status Summary Business readiness & transition plan –ERCOT employees mapped to Nodal Training Course Curriculum –Working with Vendors to define software package curriculums –Detailed Process Inventory and Impact Assessment underway Updated ERCOT Operating Guides –7 of 8 under change control –Participating in OGRTF review sessions Updated Control Room Desk Procedures –Scheduled for 2007; dependent on operating guides and CSDs Market Participant Qualification Plan –Approach to be reviewed today EDS 3 Approach –Internal review ongoing ERCOT Readiness Criteria –Final stages of contracting for third-party ERCOT Nodal Go Live Plan –Scheduled for late 2007 Zonal “closure” strategy and implementation –Scheduled for Q2 2008

5. Lead from the front Texas Nodal http://nodal.ercot.com 5  Why is qualification required?  ERCOT protocols  Each Market Participant must “demonstrate to ERCOT’s reasonable satisfaction that it is capable of performing the functions” required of the Market Participant under the protocols.  Transition to the nodal market introduce  Change in protocols  Changes in transactions between ERCOT and Market Participants  Changes in systems at ERCOT and market Participants  Changes in personnel  To assure MPs are capable of performing their functions, ERCOT will:  Define and communicate readiness activities for all MPs  Perform qualification tests required by protocols  QSEs  CRR Account Holders Qualification for the nodal market

6. Lead from the front Texas Nodal http://nodal.ercot.com 6  CRR Account Holder Qualification Requirements  R egistration  Agreements  Satisfaction of credit requirements  Training  QSE qualification steps (Existing)  Registration  Agreements  Communication  Functional Testing  Market Operations  System Operations (Ancillary Services)  Credit Requirements  Training  Others… Qualification for the nodal market

7. Lead from the front Texas Nodal http://nodal.ercot.com 7  QSEs without Resources  Registration- No changes  Agreements – No changes  Communication  Portal (TML) or API  Functional Testing  Market Operations functional testing  Credit Requirements  Refined classification of counter-parties with new requirements  Training Qualification for the nodal market

8. Lead from the front Texas Nodal http://nodal.ercot.com 8  QSEs with Resources (Ancillary Services)  QSE Qualification tied to Resource qualification  “Each QSE and the Resource providing Ancillary Service must meet qualification criteria to operate satisfactorily with ERCOT”  Registration  No changes to QSE Registration  Resource Registration (“Each QSE that represents a Resource must submit parameters to ERCOT for that Resource “  Agreements – No changes  Communication (Voice and Data Circuits between control centers)-No change  Communication  Portal (TML) or API  Telemetry, Redundant Data communication (* Example)  Functional Testing  Market Operations functional testing (Offers, Schedules, COPs)  System Operations (Ancillary Services)  QSE system qualification  Resource qualification  Credit Requirements  Refined classification of counter-parties with new requirements  Training Qualification for the nodal market

9. Lead from the front Texas Nodal http://nodal.ercot.com 9  Qualification Timeline  Resource Registration  Q4 ‘07  Communication (Telemetry)  Q2-Q3 ‘07  Market Operations  Q4 ‘07  System Operations  Ancillary Services qualification  Performed at the beginning of EDS-3  Q1 ‘08 Qualification for the nodal market Resource Registration Communication Q3Q4Q1Q2 Market Operations Functional Testing AS Qualification Training, Credit Requirements 20072008 EDS-3 EDS-1,2 Majority of QSEs would have to complete each activity in the time periods shown to meet EDS criteria. Qualification activities may continue past dates shown above.

10. Lead from the front Texas Nodal http://nodal.ercot.com 10 EDS 3 – Market Trials Timeline Mar 08Feb 08 Jan 08 May 08 Jun 08 Dec 07 Apr 08 LMP Market Readiness Criteria MET Cycle 10 Nov 07 Market Trials Start AS Qualification ALL QSEs Weekly Cycle Cycle 1 LMP w. Controls Single Entry Model GO LIVE Resource Registration MP Sandbox, Pre-EDS validation  LMP w Controls:  ERCOT will submit all market data covering various scenarios to validate the system and begin the LMP publishing 1/2/08 to 1/15/08  Initial:  Duration two weeks (1/21/08 to 2/1/08)  2 QSEs willing to work through probable process and system issues to resolution  Cycle 2 to 9:  Duration one week each (2/4/08 to 3/28/08)  5-10 QSEs each  Cycle 10:  Duration two weeks (3/31/08 to 4/11/08)  Makeup & contingency testing window for all remaining QSEs which could not successfully complete a cycle during Cycles 1 to 9  Real-time Parallel Ops:  All QSEs in live EDS mode. 4/14/08 to 6/27/08 Cycle 2-9 Real-time Parallel Ops …

11. Lead from the front Texas Nodal http://nodal.ercot.com 11 EDS 3 Scope EDS 1/2 – Single Entry Model  Basic Network Model & SE Criteria  NMMS (UI internal only)  ICCP (RTU migration)  Nodal EMS (non-live) EDS 3 – Real Time Operations  NMMS (without Planning model)  Nodal EMS  Outage Scheduler  SCED  RUC  SASM  COP  Emergency Operations  Trades, Schedules  Offers (3 part)  CRR (settled in RT)  CMM (part)  MIS (part)  Commercial operations (for RT)  EDW (for RT)  Integration (part)  LMPs published  8*5 support EDS 4 – Day Ahead Market/CRR  NMMS (full)  DAM  CRR (full)  CMM (full)  MIS (full)  Full back-end (x4)  8*5 support (24*7 for MP ITEST)  ERCOT & Market Readiness Criteria approved EDS 4 Trial outcomes  All MP Registration complete for Go Live  All market facing interfaces complete  Testing of all markets complete  168 Hour test complete  All interfaces validated  Training complete  MP financial & operational qualification complete  Market Readiness Declarations met  “Home Team” transitioned (as needed) Production GO/NO GO EDS 3 Trial outcomes  6 month SCED test completed  EMS enhancements complete  MP offers  LFC, OS, RPP complete  All MP Registration complete for Go Live  “Home Team” transitioned (as needed) LMP Market Readiness Criteria- MET EDS4 - GO/NO GO Q2 2008Q4 2008Q3 2008Q2 2007Q1 2007Q4 2007Q1 2008Q1 2009Q3 2007 EDS 3 EDS 4 Go-live Trans. EDS 3 Mote and ERCOT UAT EDS 1/2 EDS 1/2 Trial outcomes  SE Criteria achieved  Telemetry criteria achieved Single Entry Model (with stable and capable SE) GO/NO GO EDS3 Training

12. Lead from the front Texas Nodal http://nodal.ercot.com 12 Deliverable Timeline Covers Next ~90 days –EDS EDS 3 Approach………………………………………….11/28 Market Operations Sandbox Approach………………...Jan ‘07 –Readiness Criteria Initial review……………………………………………….Mid-Jan ‘07 Final review………………………………………………..Early Feb ‘07 –Registration & Qualification QSE Qualification Approach……………………………..12/4/06 QSE Qualification Guide………………………………….Jan ‘07 Registration Approach…………………………………….Jan ‘07 Registration Guide…………………………………………Feb ‘07

13. Lead from the front Texas Nodal http://nodal.ercot.com 13 IRT / Market Participant Sub-group ERCOT Desires a forum to collaboratively develop: –Qualification Plans –Readiness Criteria –Market Trials –Go-live Transition Immediate Need: –Weekly meetings from November 13 th through January 31 st to develop readiness criteria Need participation from TOs, QSEs, Resource Entities

14. Lead from the front Texas Nodal http://nodal.ercot.com 14 Summary & next steps QSE & CRR Qualification Approach EDS 3 Approach Key Dates & Deliverables Market Trials Forum Next steps