1. Lead from the front Texas Nodal http://nodal.ercot.com 1 Texas Nodal Day-Ahead CRR Settlements Business Requirements TPTF Presentation ERCOT Settlements & Billing September 12, 2006

2. Lead from the front Texas Nodal http://nodal.ercot.com 2 Agenda Overview –CRR Settlements Overview –Structure of Day-Ahead CRR Settlements Business Requirements Requirements Sections –Highlights of Functional Requirements & Assumptions –Suggested NPRR’s

3. Lead from the front Texas Nodal http://nodal.ercot.com 3 CRR Settlements Overview

4. Lead from the front Texas Nodal http://nodal.ercot.com 4 Structure of Day-Ahead CRR Settlements DA CRR Charge Types

5. Lead from the front Texas Nodal http://nodal.ercot.com 5 Level 1 & 2: Calculate CRR Prices DA CRR Charge Types

6. Lead from the front Texas Nodal http://nodal.ercot.com 6 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.3(2) NPRR associated with Synch of Zonal PRR 640 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Minimum Resource Price (MINRESRPR) per Generation Resource (R) locating at the source Settlement Point per source Settlement Point (SRSP) for each Operating Hour of the Operating Day: –IF a Generation Resource is a RMR unit, THEN: MINRESRPR equals the sum of Fuel Index Price (FIP) and RMR Contract Estimated Fuel Adder (RMRCEFA), multiplied by RMR Contract Heat Rate at the LSL level (RMRCHRLSL); MINRESRPR_ _ = (FIP + RMRCEFA_ _ ) * RMRCHRLSL_ _ –IF a Generation Resource is not a RMR unit, and belongs to: Nuclear, Hydro, Wind, and Renewable generating units, THEN: MINRESRPR equals a Minimum Resource Price (MINRESPRVALUE) specified by Protocols; MINRESRPR_ _ = MINRESPRVALUE_ _ –IF a Generation Resource is not a RMR Unit, and belongs to: a Combined Cycle greater than 90 MW, Combined Cycle less than or equal to 90 MW, Gas – Steam Supercritical Boiler, Gas Steam Reheat Boiler, Gas Steam Non-reheat or boiler without air-preheater, Simple Cycle greater than 90 MW, Simple Cycle less than or equal to 90 MW, and Diesel generating units, THEN: MINRESRPR equals the product of FIP and a Protocol-specified Heat Rate; MINRESRPR_ _ = FIP*MINRESHR_ _ Resource Type Minimum Resource Price (MINRESPRVALUE) Nuclear-$20.00 /MWh Hydro-$20.00 /MWh Coal and Lignite$0 /MWh Wind-$35 /MWh Other Renewable-$10/MWh Resource Type Minimum Resource Price Heat Rate (MINRESHR) Combined Cycle greater than 90 MW5 MMBtu/MWh Combined Cycle less than or equal to 90 MW6 MMBtu/MWh Gas – Steam Supercritical Boiler6.5 MMBtu/MWh Gas Steam Reheat Boiler7.5 MMBtu/MWh Gas Steam Non-reheat or boiler without air- preheater 10.5 MMBtu/MWh Simple Cycle greater than 90 MW10 MMBtu/MWh Simple Cycle less than or equal to 90 MW11 MMBtu/MWh Diesel12 MMBtu/MWh Minimum Resource Price for source Settlement Point -- Functional Requirements

7. Lead from the front Texas Nodal http://nodal.ercot.com 7 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 7.9.1.1; PR7.9.1.2; PR7.9.1.4; PR7.9.1.5; PR7.9.1.6; PR7.9.2.2; PR7.9.2.3 Traceability to Sub-Process MapsWill be completed by August 31, 2006 Description Calculate Minimum Resource Price per source Settlement Point for each Operating Hour of the Operating Day: Where: R represents each Generation Resource (r1, r2…) located at the source Settlement Point. This formula is not explicitly documented by Nodal Protocols. Minimum Resource Price for source Settlement Point –Functional Requirements (cont’d.)

8. Lead from the front Texas Nodal http://nodal.ercot.com 8 Minimum Resource Price for source Settlement Point – Calculation Dependency Diagram

9. Lead from the front Texas Nodal http://nodal.ercot.com 9 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.3(3) NPRR associated with Synch of Zonal PRR 640 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Maximum Resource Price (MAXRESRPR) per Generation Resource (R) locating at the sink Settlement Point per sink Settlement Point (SKSP) for each Operating Hour of the Operating Day: - IF a Generation Resource is a RMR unit, THEN: MAXRESRPR equals the sum of Fuel Index Price (FIP) and RMR Contract Estimated Fuel Adder (RMRCEFA), multiplied by RMR Contract Heat Rate at the HSL level (RMRCHRHSL); MAXRESRPR_ _ = (FIP + RMRCEFA_ _ ) * RMRCHRHSL_ _ - IF a Generation Resource is not a RMR unit, and belongs to: Nuclear, Hydro, Wind, and Renewable generating units, THEN: MAXRESRPR equals a Minimum Resource Price (MAXRESPRVALUE) specified by Protocols; MAXRESRPR_ _ = MAXRESPRVALUE_ _ Note: Estimated Fuel Adder and Heat Rate at HSL are specified values by a RMR Contract. - IF a Generation Resource is not a RMR Unit, and belongs to: a Combined Cycle greater than 90 MW, Combined Cycle less than or equal to 90 MW, Gas – Steam Supercritical Boiler, Gas Steam Reheat Boiler, Gas Steam Non-reheat or boiler without air-preheater, Simple Cycle greater than 90 MW, Simple Cycle less than or equal to 90 MW, and Diesel generating units, THEN: MAXRESRPR equals the product of FIP and a Protocol-specified Heat Rate; MAXRESRPR_ _ = FIP*MAXRESHR_ _ Resource Type Maximum Resource Price (MAXRESPRVALUE) Nuclear$15.00 /MWh Hydro$10.00 /MWh Coal and Lignite$18 /MWh Wind$0 /MWh Other Renewable$0/MWh Resource Type Minimum Resource Price Heat Rate (MAXRESHR) Combined Cycle greater than 90 MW9 MMBtu/MWh Combined Cycle less than or equal to 90 MW10 MMBtu/MWh Gas – Steam Supercritical Boiler10.5 MMBtu/MWh Gas Steam Reheat Boiler11.5 MMBtu/MWh Gas Steam Non-reheat or boiler without air- preheater 14.5 MMBtu/MWh Simple Cycle greater than 90 MW14 MMBtu/MWh Simple Cycle less than or equal to 90 MW15 MMBtu/MWh Diesel16 MMBtu/MWh Maximum Resource Price for sink Settlement Point -- Functional Requirements

10. Lead from the front Texas Nodal http://nodal.ercot.com 10 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 7.9.1.1; PR7.9.1.2; PR7.9.1.5; PR7.9.2.2 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Maximum Price per sink Settlement Point for each Operating Hour of the Operating Day: Where: R represents each Generation Resource (r1, r2…) located at the sink Settlement Point. This formula is not explicitly documented by Nodal Protocols. Maximum Resource Price for sink Settlement Point -- Functional Requirements (cont’d.)

11. Lead from the front Texas Nodal http://nodal.ercot.com 11 Maximum Resource Price for sink Settlement Point -- Calculation Dependency Diagram

12. Lead from the front Texas Nodal http://nodal.ercot.com 12 Suggested NPRR 7.9.1.3Minimum and Maximum Resource Prices (1)The following prices specified in paragraphs (2) and (3) below are used in CRR hedge value calculation for CRRs settled in the DAM and PTP Options settled in Real-Time. (2)Minimum Resource Prices of Resource Types located at source Settlement Points are: (a)Nuclear = -$20.00/MWh; (b)Hydro = -$20.00/MWh; (c)Coal and Lignite = $0.00/MWh; (d)Combined Cycle greater than 90 MW = FIP * 5 MMBtu/MWh; (e)Combined Cycle less than or equal to 90 MW = FIP * 6 MMBtu/MWh; (f)Gas -Steam Supercritical Boiler = FIP * 6.5 MMBtu/MWh; (g)Gas Steam Reheat Boiler = FIP * 7.5 MMBtu/MWh; (h)Gas Steam Non-reheat or boiler without air-preheater = FIP * 10.5 MMBtu/MWh; (i)Simple Cycle greater than 90 MW = FIP * 10 MMBtu/MWh; (j)Simple Cycle less than or equal to 90 MW = FIP * 11 MMBtu/MWh; (k)Diesel = FIP * 12 MMBtu/MWh; (l)Wind = -$35/MWh; (m)RMR Resource = RMR contract price Energy Offer Curve at LSL; and (n)Other Renewable = -$10. (3)Maximum Resource Prices of Resource Types located at sink Settlement Points are: (a)Nuclear = $15.00/MWh; (b)Hydro = $10.00/MWh; (c)Coal and Lignite = $18.00/MWh; (d)Combined Cycle greater than 90 MW = FIP * 9 MMBtu/MWh; (e)Combined Cycle less than or equal to 90 MW = FIP * 10 MMBtu/MWh; (f)Gas -Steam Supercritical Boiler = FIP * 10.5 MMBtu/MWh; (g)Gas Steam Reheat Boiler = FIP * 11.5 MMBtu/MWh; (h)Gas Steam Non-reheat or boiler without air-preheater = FIP * 14.5 MMBtu/MWh; (i)Simple Cycle greater than 90 MW = FIP * 14 MMBtu/MWh; (j)Simple Cycle less than or equal to 90 MW = FIP * 15 MMBtu/MWh; (k)Diesel = FIP * 16 MMBtu/MWh; (l)Wind = $0/MWh; (m)RMR Resource = RMR contract price Energy Offer Curve at HSL; and (n)Other Renewable = $0. Suggestion: Add words here to address the situation where multiple resources located at the source Settlement Point. Suggestion: Add words here to address the situation where multiple resources located at the sink Settlement Point.

13. Lead from the front Texas Nodal http://nodal.ercot.com 13 VariableUnitDefinitionOriginal Source MINRESPR$/MWhMinimum Resource Price for source—The lowest Minimum Resource Price for the types of Resources located at the source Settlement Point. Settlement System Interval Frequency: 1/hour Additional Comments:  This Intermediate Bill Determinant is not in the protocols but is necessary. NPRR Suggested: Remove “the types of” from the Protocol Definition because a Type of Resource could have many different Minimum Resource Prices. For instances, Minimum Resource Price for RMR resources could be different depending on the contract data. VariableUnitDefinitionOriginal Source MAXRESPR$/MWhMaximum Resource Price for sink—The highest Maximum Resource Price for the types of Resources located at the sink Settlement Point. Settlement System Interval Frequency: 1/hour Additional Comments:  This Intermediate Bill Determinant is not in the protocols but is necessary. NPRR suggested: Remove “the types of” from the Protocol Definition because a Type of Resource could have different Maximum Resource Prices. For instances, Maximum Resource Price for RMR resources could be different depending on the contract data. Suggested NPRR (cont’d) Suggestion: Revise Protocol Definition in PR 7.9.1.1; PR7.9.1.2; PR7.9.1.4; PR7.9.1.5; PR7.9.1.6; PR7.9.2.2; PR7.9.2.3

14. Lead from the front Texas Nodal http://nodal.ercot.com 14 Day-Ahead Obligation Price Requirement ID TN.COMS.63C01.DAMENERGY.REQUIREMENTS.A Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1, PR 7.9.1.5, PR 4.6.3 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Price per Source and Sink pair for each Operating Hour of the Operating Day: DAOBLPR_ _ =DASPP_ – DASPP_

15. Lead from the front Texas Nodal http://nodal.ercot.com 15 Obligation Deration Price Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1, PR 7.9.1.5 (3) Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Obligation Deration Price per Source and Sink pair for each Operating Hour of the Operating Day : OBLDRPR_ _ ={Max (0, DAWASF_ _ – DAWASF_ _ ) * DASP_ * DRF_ }

16. Lead from the front Texas Nodal http://nodal.ercot.com 16 Obligation Hedge Value Price Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1, PR 7.9.1.5 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Hedge Value Price per Source and Sink pair for each Operating Hour of the Operating Day: 1.IF SRSP is a Load Zone or Hub and SKSP is a Resource Node THEN: DAOBLHVPR_ _ =Max (0, MAXRESPR_ – DASPP_ ) 1.IF SRSP is a Resource Node and SKSP is a Load Zone or Hub THEN: DAOBLHVPR_ _ =Max (0, DASPP_ – MINRESPR_ ) 1.IF both SRSP and SKSP are Resource Nodes THEN DAOBLHVPR_ _ = Max (0, MAXRESPR_ – MINRESPR_ )

17. Lead from the front Texas Nodal http://nodal.ercot.com 17 Day-Ahead Option Price Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.2, PR 7.9.1.6 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Option Price per Source and Sink pair for each Operating Hour of the Operating Day: DAOPTPR_ _ =Max (0, DASPP_ – DASPP_ )

18. Lead from the front Texas Nodal http://nodal.ercot.com 18 Day-Ahead Option Informational Price --- MIS Posting Only Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.2 (5) Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Option Informational Price to be posted in MIS Public Area per Source and Sink pair for each Operating Hour of the Operating Day: DAOPTPRINFO_ _ = {DASP_ * Max [0, (DAWASF_ _ – DAWASF_ _ )]}

19. Lead from the front Texas Nodal http://nodal.ercot.com 19 Option Deration Price Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.2, PR 7.9.1.6 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Option Deration Price per Source and Sink pair for each Operating Hour of the Operating Day: OPTDRPR_ _ ={Max (0, DAWASF_ _ – DAWASF_ _ ) * DASP_ * DRF_ }

20. Lead from the front Texas Nodal http://nodal.ercot.com 20 Option Hedge Value Price Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.2, PR 7.9.1.6 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead PTP Option Hedge Value Price per Source and Sink pair for each Operating Hour of the Operating Day: 1. IF the SRSP is a Load Zone or Hub AND SKSP is a Resource Node, THEN: DAOPTHVPR_ _ =Max (0, MAXRESPR_ – DASPP_ ) 2. IF SRSP is a Resource Node AND SKSP is a Load Zone or Hub, THEN: DAOPTHVPR_ _ =Max (0, DASPP_ – MINRESPR_ ) 3. IF SRSP Is a Resource Node AND SKSP is also a Resource Node, THEN: DAOPTHVPR_ _ = Max (0, MAXRESPR_ – MINRESPR_ )

21. Lead from the front Texas Nodal http://nodal.ercot.com 21 Next Level: Charge Type Calculations DA CRR Charge Types

22. Lead from the front Texas Nodal http://nodal.ercot.com 22 Payments and Charges for PTP Obligations in DAM -- Functional Requirements Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Target Payment per CRR Owner per Source and Sink pair for each Operating Hour of the Operating Day: DAOBLTP_ _ _ = DAOBLPR_ _ * DAOBL_ _ _ Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Amount per CRR Owner per Source and Sink pair for each Operating Hour of the Operating Day: IF (DAOBLPR_ _ is Non-Positive ( ≤ 0 ) OR Both SRSP and SKSP locate at a Load Zone or Hub) THEN: DAOBLAMT_ _ _ = (-1) * DAOBLTP_ _ _ ELSE IF (DAOBLPR_ _ is Positive (>0) AND Either SRSP or SKSP is a Resource Node) THEN: DAOBLAMT_ _ _ = (-1) * Max {(DAOBLTP_ _ _ – DAOBLDA_ _ _ ), Min (DAOBLTP_ _ _, DAOBLHV_ _ _ )}

23. Lead from the front Texas Nodal http://nodal.ercot.com 23 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Derated Amount per CRR Owner per Source and Sink pair for each Operating Hour of the Operating Day: DAOBLDA_ _ _ = OBLDRPR_ _ * DAOBL_ _ _ Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Hedge Value per CRR Owner per Source and Sink pair for each Operating Hour of the Operating Day: DAOBLHV_ _ _ = DAOBLHVPR_ _ * DAOBL_ _ _ Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 7.9.3.3 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Credit Owner Total per CRR Owner for each Operating Hour of the Operating Day: DAOBLCROTOT_ =Min (0, DAOBLAMT_ _ _ ) Payments and Charges for PTP Obligations in DAM -- Functional Requirements (cont’d.)

24. Lead from the front Texas Nodal http://nodal.ercot.com 24 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 7.9.3.3 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Charge Owner Total per CRR Owner for each Operating Hour of the Operating Day DAOBLCHOTOT_ =Max (0, DAOBLAMT_ _ _ ) Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.1 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Amount Owner Total per CRR Owner for each Operating Hour of the Operating Day: DAOBLAMTOTOT_ =DAOBLCROTOT_ + DAOBLCHOTOT_ Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.3.2 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Credit Total for each Operating Hour of the Operating Day: DAOBLCRTOT =DAOBLCROTOT_ Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.3.2 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation Charge Total for each Operating Hour of the Operating Day:: DAOBLCHTOT=DAOBLCHOTOT_ Payments and Charges for PTP Obligations in DAM -- Functional Requirements (cont’d.)

25. Lead from the front Texas Nodal http://nodal.ercot.com 25 Payments and Charges for PTP Obligations in DAM -- Calculation Dependency Diagram

26. Lead from the front Texas Nodal http://nodal.ercot.com 26 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.2 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Option Target Payment per CRR Owner per Source and Sink pair for each Operating Hour of the Operating Day: DAOPTTP_ _ _ = DAOPTPR_ _ * DAOPT_ _ _ VariableUnitDefinitionOriginal Source DAOPTMWDay-Ahead Option per CRR Owner per source and sink pair—The number of CRR Owner’s PTP Options with the source and sink pair settled in the DAM for the hour. CRR System & MMS DAM Interval Frequency: 1/ hour Additional Comments:  DAOPT equals the difference between (a) and (b): (a) The amount of PTP Options acquired through PCRR Allocations, CRR Auctions, and CRR Bilateral Trades, prior to DAM execution (b) The amount of PTP Options that are declared before DAM execution by NOIE to be settled in Real-Time and not cleared in the DAM.  DAOPT shall always be equal to or greater than zero (0).  Calculation of DAOPT occurs in the Settlement Interface. Assumptions Assumptions of upstream systems:  Determination of whether or not PTP Options owned by NOIE are eligible for Real-Time Settlements is made by the original source (MMS DAM). Payments for PTP Options in DAM -- Highlights of Functional Requirements

27. Lead from the front Texas Nodal http://nodal.ercot.com 27 Payments for PTP Options in DAM -- Calculation Dependency Diagram

28. Lead from the front Texas Nodal http://nodal.ercot.com 28 Payments for FGRs in DAM --- Highlights of Functional Requirements Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.4 (1) Traceability to Sub-Process Maps CSWM.P03SettleBillTransfer Description If all directional network elements associated with the FGR are Competitive Constraints, i.e. No DRF exists for any constraints to one or more network elements associated with FGR for the Operating Day,the payment to each CRR Owner for its FGRs determined by the principle network element of each flowgate for a given hour is calculated as follows: Calculate Day-Ahead FGR Price per Flowgate for each Operating Hour of the Operating Day: DAFGRPR_ =(INF_ _ * DASP_ _ ) 1.Calculate Day-Ahead FGR Amount per CRR Owner per Flowgate for each Operating Hour of the Operating Day: DAFGRAMT_ _ =(-1) * DAFGRTP_ _ 3.Calculate Day-Ahead FGR Target Payment per CRR Owner per Flowgate for each Operating Hour of the Operating Day: DAFGRTP_ _ =DAFGRPR_ * DAFGR_ _ Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.4 (2) Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description If one or more directional network elements associated with the FGR are Non-Competitive Constraints, the FGR payment may be reduced. The payment for other FGR when it is non-competitive will be specified by Protocols upon introduction of the FGR, with the exception of MCFRI. Assumptions: Settlement methodology of payment for a new FGR when it’s not a competitive constraint will be specified upon the FGR introduction.

29. Lead from the front Texas Nodal http://nodal.ercot.com 29 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.4 (3) Traceability to Sub-Process Maps CSWM.P03SettleBillTransfer Description If one or more directional network elements associated with MCFRI are Non-Competitive, i.e. DRF exists with a positive value for at least one constraint to one or more network elements associated with MCFRI for at least one Hour of the Operating Day, the payment to each CRR Owner for its MCFRI for a given hour, when MCFRI is NOT designated as a Competitive Constraint, is calculated as follows: Calculate Day-Ahead FGR Price for MCFRI for each Operating Hour of the Operating Day: DAFGRPR_ = (INF_ _ * DASP_ _ )  Calculate Day-Ahead FGR Target Payment per CRR Owner for MCFRI for each Operating Hour of the Operating Day: DAFGRTP_ _ =DAFGRPR_ * DAFGR_ _  Calculate Day-Ahead FGR Deration Price for MCFRI for each Operating Hour of the Operating Day: FGRDRPR_ =(INF_ _ * (DASP_ _ * DRF_ _ ))  Calculate Day-Ahead FGR Derated Amount per CRR Owner for MCFRI for each Operating Hour of the Operating Day: DAFGRDA_ _ =FGRDRPR_ * DAFGR_ _  Calculate Day-Ahead FGR Hedge Value Price for MCFRI for each Operating Hour of the Operating Day: DAFGRHVPR_ = Max {0, [DAWALBEP – MINRESPR_ _ – (DASP_ _ * (DASFMCWGRS_ _ – DAWASFLB_ _ ))] / (DASFMCWGRS_ _ – DAWASFLB_ _ )}  Calculate Day-Ahead FGR Hedge Value per CRR Owner for MCFRI for each Operating Hour of the Operating Day: DAFGRHV_ _ =DAFGRHVPR_ * DAFGR_ _  Calculate Day-Ahead FGR Amount per CRR Owner for MCFRI for each Operating Hour of the Operating Day: DAFGRAMT_ _ =(-1) * Max {(DAFGRTP_ _ – DRFRGDA_ _ ), Min (DAFGRTP_ _, DRFRGHV_ _ )} Payments for FGRs in DAM --- Highlights of Functional Requirements (cont’d.) Assumptions:  McCamey Area WGR is the designated source of MCFRI unless specified otherwise by TPTF.

30. Lead from the front Texas Nodal http://nodal.ercot.com 30 Payments for FGRs in DAM --- Calculation Dependency Diagram

31. Lead from the front Texas Nodal http://nodal.ercot.com 31 Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.5 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Obligation with Refund Target Payment per CRR Owner per Source and Sink pair for each Operating Hour of the Operating Day: DAOBLRTP_ _ _ = DAOBLPR_ _ * Min (DAOBLR_ _ _, OBLRACT_ _ _ ) Payments and Charges for PTP Obligations with Refund in DAM --- Highlights of Functional Requirements NPRR Suggested: Same variable (bill determinant) name for PTP Obligation price and PTP Obligation with Refund price as they are equivalent. DAOBLPR_ _ = DASPP_ – DASPP_ Assumptions:  Calculation of Obligation with Refund Actual Usage (OBLRACT) as described in the formula below will be addressed by a separate set of Requirements: OBLRACT o, (j, k)=((OBLROF o, r, (j, k) * RESACT r, (j, k), y) * TLMP y) / (TLMP y) * OBLRF o, (j, k)  Calculation of Resource Actual (RESACT) as described in the formula below will be addressed by a separate set of Requirements: If (OS r, y exists) RESACT r, (j, k), y=OS r, y Otherwise If (EBP r, y exists) RESACT r, (j, k), y=EBP r, y Otherwise RESACT r, (j, k), y=BP r, y

32. Lead from the front Texas Nodal http://nodal.ercot.com 32 Payments and Charges for PTP Obligations with Refund in DAM --- Calculation Dependency Diagram

33. Lead from the front Texas Nodal http://nodal.ercot.com 33 Payments for PTP Options with Refund in DAM --- Highlights of Functional Requirements Requirement ID Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 7.9.1.6 Traceability to Sub-Process MapsCSWM.P03SettleBillTransfer Description Calculate Day-Ahead Option with Refund Target Payment per CRR Owner per Source and Sink pair for each Operating Hour of the Operating Day: DAOPTRTP_ _ _ = DAOPTPR_ _ * Min (DAOPTR_ _ _, OPTRACT_ _ _ * DAOPTR_ _ _ / (DAOPTR_ _ _ + RTOPTR_ _ _ )) NPRR Suggested: Same variable (bill determinant) name for PTP Option price and PTP Option with Refund price as they are equivalent. DAOPTPR_ _ = Max( 0, DASPP_ – DASPP_ ) VariableUnitDefinitionOriginal Source RTOPTRMWReal-Time Option with Refund per pair of source and sink—The number of the NOIE CRR Owner’s PTP Options with Refund with the source and sink pair, settled in Real-Time, for the hour. MMS DAM Interval Frequency: 1/Hour Comments:  RTOPTR is the amount of PTP Options with Refund that are declared before DAM execution by NOIE CRR Owners to be settled in Real-Time and not cleared in the DAM.  Reference to TN.COMS.63C01.RTCRR.REQUIREMENTS.A DAOPTRMWDay-Ahead Option with Refund per CRR Owner per pair of source and sink  The number of CRR Owner’s PTP Options with Refund with the pair of source and sink, settled in DAM, for the hour. CRR System & MMS DAM Interval Frequency: 1/ hour Additional Comments:  DAOPTR is a result of PCRR Allocation. The owner of DAOPTR shall be a designated NOIE.  DAOPTR equals the difference between (a) and (b): (a) The amount of PTP Options with Refund acquired through PCRR Allocations by NOIEs. (b) The amount of PTP Options with Refund that is declared before DAM execution by NOIEs to be settled in Real-Time and not cleared in the DAM.  DAOPTR shall always be equal to or greater than zero (0).

34. Lead from the front Texas Nodal http://nodal.ercot.com 34 Payments for PTP Options with Refund in DAM --- Calculation Dependency Diagram

35. Lead from the front Texas Nodal http://nodal.ercot.com 35 Summary Nodal Protocols Section 7 –005NPRR-05_BOD_Action_Report_071806 Nodal Protocols Section 9 –007NPRR-05_BOD_Action_Report_071806 NPRR (xxxx) –[approved by TPTF and scheduled to be at the 9-21-06 PRS meeting] aimed to synchronize PRR640.