TAC Report to the ERCOT Board

1. TAC Report to the ERCOT Board January 17, 2006

2. TAC Summary • 4 PRRs (2 Unanimous and 1 Urgent) • TAC Discussion Regarding System Outage

3. PRR 625 – Clarification of Emergency QSE

4. PRR 625 – Clarification of Emergency QSE • This PRR is a product of the Mass Default Joint Task Force • What is the appropriate amount of credit risk for ERCOT v. bilateral market • This PRR primarily does two things: • clarifies that an LSE whose QSE has provided notice of its intent to terminate its relationship with the LSE must either select a new QSE; qualify as an emergency QSE; or become designated as a virtual QSE; and • Changes notice period a QSE must provide ERCOT before terminating relationship with an LSE or Resource • Vote Results at PRS and TAC • PRS: Change current notice period to 20 days from 5 days; Approved with 3 Against and 9 Abstentions; all market segments present • TAC: • Motion to change QSE notice to ERCOT to terminate a relationship with a LSE or Resource back to 5 days from 20 days in PRR as presented to TAC; Failed with 8 in favor; 19 opposed; and 2 abstentions; • Motion to approve as submitted with 20 days as notice period for a QSE to terminate a relationship with a LSE or Resource; Failed with 16 in favor; 7 opposed; and 5 abstentions; • Motion to change notice period to 12 business days before termination date; Approved with 17 in favor; 7 opposed; and 5 abstentions.

5. PRR 625 – Clarification of Emergency QSE Impact Analysis No Impact Impact Description Item Reviewed Budget Staffing Occasional increase in workload Computer Systems Business Functions Grid Operations Credit Monitoring/Liability

6. PRR 633 – Transmission Service Provider Data Information Requirements

7. PRR 633 – TSP Data Information Requirements Impact Analysis No Impact Impact Description Item Reviewed Budget Staffing Computer Systems Business Functions Grid Operations Credit Monitoring/Liability

8. PRR 634 – ESI IDs Inadvertently Placed Into Inactive Status

9. PRR 634 – ESI IDs Inadvertently Placed Into Inactive Status Impact Analysis No Impact Impact Description Item Reviewed Budget Staffing Computer Systems Business Functions Grid Operations Credit Monitoring/Liability

10. PRR 646 – Establish a Floor for Responsive Reserve Service -- URGENT

11. PRR 646 – Establish a Floor for Responsive Reserve Service -- URGENT • Credit Working Group believes current LaaR bidding activity has large credit implications. • Due to cap on LaaRs providing Responsive Reserve some LaaRs have been submitting negative bids in order to avoid pro-rata award of bid. • Credit Working Group proposed a floor of $0. • PRS recommended a floor of negative $1000 as a compromise. • This is a short term solution as the PRR as proposed is only effective until January 1, 2007. • Demand Side Working Group is investigating long term solutions

12. Recommended Board Actions • Approval • PRR 625 – Clarification of Emergency QSE • PRR 633 – Transmission Service Provider Data Information Requirements (unanimous) • PRR 634 – ESIDs Inadvertently Placed Into Inactive Status (unanimous) • Urgent PRR 646 – Establish a Floor for Responsive Reserve Service

13. TAC Discussion Regarding System Outage • Lively discussion regarding scope and impact of outage, as well as action items to eliminate or help minimize similar outages in the future. • ERCOT and Market Participants worked tirelessly to minimize impact of outage. • Examples of TDSP and Competitive Retailer efforts: • TDSP Impact: • Manage Field Service Work Manually • All field work for switches, move ins, move outs was manually managed throughout the duration of the outage. This caused significant delays in getting work to the field rep or field tech in a time efficient manner. Backlog of work also was produced as a result of manual process. Field services has to work throughout the night on multiple occurrences and many orders were not processed within the timeframes established by the market and as expected by customers. • Safety net order increased by 10 times what is considered normal. TDSP service order management hours were nearly round the clock in order to make the best attempt possible at ensuring service for customers. • Move-out orders were not executed because it was not possible to determine if a move-in was needed to restore service, and more importantly, to avoid interruption of service for customers.

14. TAC Discussion Regarding System Outage • Competitive Retailer Impacts: • Manage Transactional Work Manually • No move-in transactions were processed to avoid service interruptions for customers. Instead, CRs performed “safety net” move-ins and this process is manual and tedious requiring significant overtime hours. Also, in order to limit lost revenue some CRs requested priority move-ins to avoid delayed move-ins. • 98 switches that avoided “first available date” could impact terms and conditions of agreement between CR and customer. • Move-outs and drops to AREP or POLR were limited during this period requiring some CRs to remain REP of record for longer than desired. • Load extracts unavailable to help manage portfolio by providing visibility into ERCOT’s data aggregation process.

15. TAC Discussion Regarding System Outage • TAC discussion focused on communications between ERCOT and market participants during outage and identifying source of outage. • “Lesson Learned” meeting has been scheduled to review occurrence and begin discussing ways to eliminate or limit similar outages. • TAC action items: • Assigned communications issue to RMS; Can the communications in instances such as this improve? • ERCOT to report to TAC in February regarding source of outage; whether any current or pending projects could have prevented the outage; what changes/projects are necessary to avoid future outages, if any.