**Optimizing Resource Costs: QSEs vs. Resources Filing Verifiable Costs**

1. Verifiable Costs Submission QSEs vs Resources WMS November 19, 2008 Ino Gonzalez

2. QSEs filing Verifiable Costs (VC) • Pro’s • Per protocols, QSEs are the entity responsible for all financial arrangements with ERCOT • QSE defined as the entity to dispute any settlement issues, including any settlement related to make-whole credits calculated from verifiable costs • Eliminates any confusion by ERCOT as to which entity to discuss resource cost issues • There are fewer number of QSEs than Resources, reducing the number of entities involved in dealing with ERCOT directly • Single point of contact for ERCOT staff for all Resources under the QSE for VC discussions • Some Resources may not have the expertise to file VC • QSEs will know what costs are filed with ERCOT so that Offer Caps can be calculated • Con’s • QSE’s do not always have decision making authority for resource • QSE’s may represent multiple unaffiliated resources and thus should not have access to confidential resource cost data required by the ERCOT Verifiable Cost Process (I.e. water contracts, service contracts etc) • Resource Owners have access to and can provide most accurate information regarding costs • Verifiable Cost process must be re-initiated every time resource switches QSE

3. Resources filing VC • Pro’s • Verifiable costs are directly associated with Resources, not QSE’s • Data directly submitted from Resources (No middle agent). • Reduces probability of error as Resource Owner has all the information pertaining to resource costs • Accountability of accuracy of data resides with owner of data • Faster response time for inquiries by ERCOT on questions raised on data. • More consistent information between RARF and verifiable costs • If resource switches QSE’s, costs can move to new QSE without re-initiating Verifiable Cost Process again • Reduce time requirements for data flow from Resources to ERCOT, bypassing the time required for QSEs to collect, review and submit data to ERCOT. • Addresses confidentiality issues raised by some Resources. • Con’s • Creates confusion within ERCOT in which entity to discuss resource costs or disputed items involving resource costs (I.e. RUC make-whole credits calculated based on verifiable costs) • Creates an additional entity that ERCOT must interact for specific purposes

4. VCWG Proposed Solution – Allow either Resources or QSEs to file Verifiable Costs • Provides best solution to address issues inherent with requiring only a single entity (either Resource Owner or QSE) to submit costs • ERCOT will create defined procedures to ensure data integrity, accountability and confidentiality • Defined procedures will address: • Which entity will be responsible for data after submittal • Which entity must attest to the accuracy of the data • What information will be shared with each entity • Which entity is responsible for addressing ERCOT’s issues with the verifiable costs • Documentation, attestations or other forms required for verifiable costs when multiple entities have the ability to submit verifiable costs • Supports various business models and services that are provided in the market (I.e. QSE Services, future Tolling Agreement/PPA’s etc) • Identifies the entity responsible for a resources data without giving up issues of confidentiality • Reduces overhead work from ERCOT by allowing resource costs to remain with the Resource Owner and not the QSE