1. Real Time Settlement Timeline Workshop Evaluation and consideration of reducing the RT Settlement Timeline Harika Basaran- COPS Chair Jim Galvin- CSWG Chair

2. 2 In response to Commissioner Anderson’s comments on the Open Meeting of 9/28/2012 under Project No. 40000 –Instituting a settlement timeline that meets the requirements of FERC order 741 and recommendations from CFTC –Consideration of existing changes to Protocols (NPRR 347) ERCOT Stakeholders have and continue to review changes that would allow for shorter settlement cycle that would exceed the requirements under FERC 741 This workshop will revive some of those past discussions and discuss benefits and concerns from the perspectives of stakeholders and ERCOT staff Our goal for this workshop will be to identify the challenges, benefits and concerns to shortening further the RT Settlement Timeline as well as other alternatives for consideration Workshop Introduction

3. 3 FERC Order #741 FERC Order #741 emphasizes a 7+7 proposal: –No more than seven days for each ISO/RTO market billing period, and –No more than seven calendar days for settlement How will the ISO/RTOs comply –California- Weekly cycle with invoices every Wednesday due in 4-days –ISO NE- Implemented bi-weekly billing for hourly charges –MISO- In compliance with S7 settlement cycle –NYISO- 99% transactions weekly settlement cycle –PJM- 1 week for most products invoice due in 3 days –SPP- Weekly billing –ERCOT- NPRR 347 with settlement at T+9 gets 90% of RT days settled and paid within 15-days Meeting Title (optional)Date

4. 4 The workshop will consist of the following: –Input from ERCOT Staff on the data aggregation and acquisition process and settlement data availability –Representatives from TDSPs that will provide some insight on their data submission processes –Discussion on the benefits to credit exposure –Discussion from stakeholder segments on impacts of reducing the settlement timeline Input from these discussions will be gathered to provide input that includes but is not limited to –Cost/Benefit –Challenges –System/Process limitations –Lessons learned Workshop Format

5. 5 August 2000 to March 2002- Initial Settlement at T+3 March 2002 to January 2006- T+17 –Improvements recognized in the availability of more actual data and more time for ERCOT to validate data integrity, leading to better accounting results for changes from Initial to Final settlement January 2006 to November 2011- T+10 –Reduction by one week does not impact significantly data accuracy or the changes from Initial to Final settlement –ERCOT still has time to validate data –Reduction improves the outstanding credit liability under default conditions December 2011 to present- T+9 –One day reduction maintains data accuracy and reduces credit exposure with some impacts on ERCOT’s timing to review results Settlement Timeline History

6. 6 All ISO/RTOs have evolved settlement timelines to “clear cash” as soon as practicable Markets that began and traditionally settled on monthly basis or even longer have gradually ramped their cycles closer to the Trade day with transitions to weekly and even daily settlement All FERC jurisdictional markets will comply with FERC order 741 Challenges still exist in maintaining the desired objective function: –Settle transactions and clear cash in the shortest timeframe available to reduce potential default exposure to the market –Settle transactions with the most accurate available market data –Close the books with a reasonable re-settlement strategy Evolution of Settlement Cycles at Other ISO/RTOs

7. 7 As we explore the impacts of reducing the Real Time Settlement timeline, stakeholders and ERCOT Staff should consider the following topics in our efforts to provide feedback to the market: –Impact on systems, staff and processes –Data integrity and availability –Benefits to credit metrics for reducing the timeline –Dispute resolution and timely resettlement –Consideration for data errors and/or anomalies Likewise are there other alternatives or additions to the settlement timeline that could be made to reach the objective of settling more timely and/or providing better information for monitoring credit exposure Workshop Considerations

8. 8 Deliverable to TAC In summary, our deliverable to TAC should input categorized in the following: –Benefits- some tangible metrics of the impact on reducing default risk by clearing sooner –Costs- high level observations by ERCOT and stakeholders on the level of cost –Impacts on staff and processes- cost side covered in bullet two, but discuss other impacts that are less quantifiable –Alternatives- will just shortening the timeline due or are there other alternatives for consideration Meeting Title (optional)Date

9. 9 Questions? Meeting Title (optional)Date