1. System Operations Report To The Board Of Directors September 21, 2004 Sam Jones, COO

2. Grid Operations Peak Loads New peak observed in 2004, only it was for 2003 and was determined during true up settlement –60,095 MW on August 7, 2003 in place of 59,992 MW 2004 peak load to date – 58,590 MW on 8/3 During cooler than normal days peak loads have been about 10-12,000 MW below normally observed peaks Load Reductions Maintenance outages at Sandow resulted in the need to reduce load in the immediate area on order to prevent overloading an autotransformer

3. Grid Operations The Northeast Special Protection Scheme has experienced “incidents” since its inception that resulted in the trip or reduction of generation Maintenance tone injection event on microwave channel Breaker auxiliary contact incident Alarm indication event This is the newest and most complex SPS in ERCOT. These incidents have not resulted in reliability concerns for overall grid operations

4. Transmission Services RMR Activity – AEP has informed ERCOT of some transmission project schedule slippages that will delay previously announced RMR exit dates PlantOriginal DateNew Date Fort PhantomDec. 2004Mar. 2005 La PalmaDec. 2005June 2006 B M DavisDec. 2004Dec. 2005

5. Technology Services Security Activity Rebuild Dyonyx, an electric utility industry recognized security consulting firm, has been working with ERCOT Security for a month and the rebuild project is on schedule –Organization design – the rollout process for the new organization is underway –Security employee recruiting - the positions are advertised and recruiting firms are assisting in locating the needed employees –Staff Augmentation – Dyonyx is providing support where needed until ERCOT staffing is in place and trained –Support with ongoing audits and assessments - underway –Identification and execution of required projects - underway