COMS/Settlements/Credit

COMS/Settlements/Credit Weekly Update July 30, 2010 http://nodal.ercot.com 1

Antitrust Admonition ANTITRUST ADMONITION ERCOT strictly prohibits Market Participants and their employees who are participating in ERCOT activities from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate the antitrust laws. The ERCOT Board has approved guidelines for members of ERCOT Committees, Subcommittees and Working Groups to be reviewed and followed by each Market Participant attending ERCOT meetings. If you have not received a copy of these Guidelines, copies are available at the Client Relations desk. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws. DISCLAIMER All presentations and materials submitted by Market Participants or any other Entity to ERCOT staff for this meeting are received and posted with the acknowledgement that the information will be considered public in accordance with the ERCOT Websites Content Management Operating Procedure. http://nodal.ercot.com 2

Agenda • Anti-trust Admonition • Settlements Standing Reports and Updates • Operating Day Settlement Reports • Week in Review/General Reminders • Next Week’s Activities • Settlements Environment Report • Known Issues • Credit • Question and Answers / General Discussion ERCOT asks that Market Participants log into the WebEx session using their company name and then their name. This will allow ERCOT to take roll-call offline http://nodal.ercot.com 3

DAM Settlement Overview for July 21 Statement and Invoice Overview • 170 Statements/Invoices posted to QSEs • 58 Statements/Invoices posted to CRRAHs • 0 QSEs received Statements/Invoices for $0 CRR Overview • CRRs were not derated • There were no CRR Shortfall Charges General Reminders/Updates • Submit any questions/issues about statements, invoices, extracts or calculations to markettrials@ercot.com http://nodal.ercot.com 4

DAM Settlement Overview for July 27 Statement and Invoice Overview • 153 Statements/Invoices posted to QSEs • 58 Statements/Invoices posted to CRRAHs • 1 QSEs received Statements/Invoices for $0 CRR Overview • CRRs were not derated • There were no CRR Shortfall Charges General Reminders/Updates • Submit any questions/issues about statements, invoices, extracts or calculations to markettrials@ercot.com http://nodal.ercot.com 5

RTM Settlement Overview for July 14 Statement Overview • 203 Statements posted to QSEs • 4 Statements posted to CRRAHs • 4 QSEs received Statements for $0 General Reminders • Submit any questions/issues about statements, invoices, extracts or calculations to markettrials@ercot.com http://nodal.ercot.com 6

Charge Type Tracker • Below are the Day Ahead Market charge types that have been executed at least once during Market Trials (18 of 19 executed) http://nodal.ercot.com 11

Charge Type Tracker • All Real-Time Market charge types have been executed at least once during Market Trials (45 of 45 executed) http://nodal.ercot.com 12

Week in Review • RTM Invoices (Posted 7-29) • No Unsupported Operating Dates • Initials Included 7/9, 7/10, 7/13, 7/14, 7/15 • Finals Included 6/29, 6/30, 7/1, 7/2, 7/3 • True-Ups Included 6/1, 6/2, 6/3, 6/4, 6/5 • RTM True-Up Statements for 6-10 Operating Day • Voltage Support Payments/Charges did not show up on Final Statement because of a system defect • This means the True-Ups will not show the Billable Amount. They’ll show the total amount • CARD Final Invoices Published for month of June • 7-28 SASM will not be settled • There was an issue in MMS that caused the SASM data to be deleted. A defect has been created as well as a work around if this were to happen again • RTSPP was not calculated for settlement point UCG_COGN_CC1. A DASPP was calculated. Will be resolved with 8-2 model load http://nodal.ercot.com 13

Next Week’s Activities • Operating Days for next week that will be settled • Only Operating Days of LFC test will have DAM Settlement • All other days will be No-DAM Settlement • 8-3 (No-DAM) • 8-4 (LFC Test – DAM will be executed) • 8-5 (LFC Test – DAM will be executed) • 8-6 (No-DAM) • 8-7 (No-DAM) • Effective August 9, actual verifiable cost submissions will replace test data in the Market Trials Environment • Starting August 9 through August 15, the DAM will be executed every day and HRUC will be executed every hour • New Operational Scenarios in August – De-commitments, RUC VDIs, EILS, Miscellaneous Debit Credit, RUC Simulation, any others?? http://nodal.ercot.com 14

Environment Report-Known Issues COMS New Known Issues • When a RTMGNM record has zero values for the entire day, it is driving the REIAMT calculation even though no other drivers exist. This will create Zero dollar statements if a QSE has no other activity. • On non contiguous commitments if a resource goes off line prior to the end of the first commitment and comes on for next commitment, the resource is not being defined as start-up eligible • AABP is not calculating correctly for the first interval of an operating day in certain instances • Late Extract Postings • 7/27 SID, posted today(7/30). Late • 7/28 SID, posted today(7/30). Late • 7/29 SID, will post today (7/30). Late • 7/30, will post today (7/30). On Time http://nodal.ercot.com 15

Environment Report-Known Issues COMS Closed Issues • Missing TWTG data for whole intervals (Due to missing SCADA, working on S&B integration logic to catch these instances) - We’re still confirming the business process • The MINRESPR (Minimum Resource Price) or some combined cycle phyical resource nodes is incorrectly defaulting to $-35. • EOCPRCAP (Energy Offer Curve Price Cap) does not calculate when HSL=MW quantity and there are multiple quantities equal HSL. This only affects Real Time Ahead AIEC calculation under this very distinct data scenario • When there is a RUC Decommitment with split decommitted periods from the same RUC Process, we are currently not evaluating the second RUCD period. The second RUCD period should be independently evaluated from the first. Reminder: ERCOT will post known issues every Friday to the readiness center at: http://nodal.ercot.com/readiness/markettrials/coms/index.html http://nodal.ercot.com 16

DAM Make Whole Example with Negative Offer • Energy Offer Curve with two points, 50MW at $-50 and 400MW at -$30 • AIEC = - 40 • Assume DASUO and DAMEO of 0 • DAMGCOST q, p, r = DASUO q, p, r + ∑ (DAMWENEFLAG q, p, r, h * DAMEO q, p, r, h * DALSL q, p, r, h) + ∑ (DAMWENEFLAG q, p, r, h * DAAIEC q, p, r, h * (DAESR q, p, r, h – DALSL q, p, r, h)) • DAMWAMT q, p, r, h = (-1) * Max (0, DAMGCOST q, p, r + ∑ DAEREV q, p, r, h + ∑ DAASREV q, r, h) * DAESR q, p, r, h / ∑ (DAESR q, p, r, h) + ADJDAMWq, p, r, h When DAMGCOST is “less negative” than revenue, you’ll receive a MW payment http://nodal.ercot.com 17

Settlements FAQs • Q: I don’t see the MEB or NMSAMTTOT bill determinants in my extracts. How can I shadow Real Time Energy Imbalance at a Resource Node without them? • A: NMSAMTTOT is not in COMs extracts and most likely will not be before go live. You will not see the ‘MEB’ bill determinant in your extracts, but you do have ‘MEBMP’. To calculate NMSAMTTOT, multiply MEBMP by RTRMPR and sum up the results for each Gen Site. • Q: What are the Resource Ids in the RTRMPR and MEBMP bill determinant headers and where can I find a complete list of RIDs? • A: Resource Ids are ERCOT EPS meter IDs. The complete list can be found in the Resource ID extract. This extract is currently not being populated in the Market Trials environment, but is available from the TML in Zonal Production, and will be available after go-live. http://nodal.ercot.com 18

Settlements FAQs (cont’d) • Q: Is it true that the DAM can clear an offer at a DASPP that is less than my offer? • A: Yes, fixed block offers cannot set the price and may clear at less than the offer price. This behavior is explained in detail in Appendix 7 of the DAM requirements posted here: (http://nodal.ercot.com/docs/pd/mms/pd/damsasmr/mms_dam_and_sasm_req_09q1_v4_0%20%28blackline%29.doc) • Q: What Load Data is being used for in Market Trials • A: For non-EPS meters, ERCOT is using a snapshot of Zonal Load from 10-16-2009. Non-EPS meters that are weather sensitive use proxy days, so the load in the Market Trials environment will not always be the 10-16-2009 load. For EPS meters, Nodal and Zonal load should be the same for any given operating day. http://nodal.ercot.com 19

Open Forum Any Questions??? http://nodal.ercot.com 20

Credit and Treasury Weekly Update July 30, 2010 Market Trials - Friday call

Week in Review • Posted Credit Reports and sent ACLs each business day • Credit exposures • Credit exposures reflect market participant activity in Market Trials • There remain a few exceptions, which are listed on the Known Issues list • To adjust for the impact of high RT activity and RT prices in Market Trials, ERCOT adjusted the ADTE component of the EAL Calculation forCounter-Parties in which the Zonal ADTE was lower than the Nodal ADTE • Adjustment was on the Credit Reports beginning Tuesday, July 27th • Adjustment will be in place at least through the end of August • Adjusted to something like a recent ADTE in the zonal market, although used “buckets” or ranges rather than a CP’s actual ADTE • CPs should be able to see the adjustment as a separate line in the Summary section of the EAL Detail Report • A CP may request a different (or no) change to their ADTE Market Trials - Friday call

Week in Review • Adjusting the ADTE • For most CPs, reduced their exposure calculation • Established a more moderate (but not necessarily predictive) idea of what exposure may be • In some cases, the zonal ADTE may overstate liability from what a CP may expect in Nodal (e.g. for instance, if they expect to use DAM more heavily and reduce reliance on RT market) • In other cases, the zonal ADTE may understate what a CP may expect in Nodal • Will not alleviate the impact of unusual RT activity on the AIL Component • Allowed ERCOT to exercise the adjustments function • For a CP to get a solid idea of how credit will work in Nodal, they should try to operate (as much as possible) as they intend to in Nodal (including using Energy Trades along with DAM, etc) • ERCOT will work with CPs to further adjust their ADTE to reflect projected activity as needed Market Trials - Friday call

Week in Review Market Trials - Friday call

Next Week • ERCOT • Will send ACLs for DAM and CRR Auction • Will not override ACLs • Will send collateral calls if exposure exceeds credit limit • If ERCOT sends a collateral call, the CP will likely not be able to bid in DAM until additional e-collateral is received • Counter-Parties • Since ERCOT no longer overrides ACLs, CPs should review Credit Reports and consider • a) their exposure and • b) upcoming DAM, CRR Auction and any LFC test Market Trials - Friday call

Next Week - Schedule of activity Market Trials - Friday call

Other topics • Tentative timeline for First Priority Security Interest document • July 1, 2010 – ERCOT circulated initial draft to CPs. • July 19, 2010 – Comments back from CPs. • Update > August 6, 2010 – ERCOT circulates second draft to CPs. • August 17, 2010 – ERCOT reviews document with F&A. • September 21, 2010 – Final review and possible approval by F&A and ERCOT Board. • NPRR 206 and “e” factors • Training on NPRR 206 and “e” factors – August • August 10 @ Austin Met Center • 9am – 12 noon • Web-ex available Market Trials - Friday call

Other topics – “e” factors • Bi-weekly “e” factor updates • For bi-weekly updates, ERCOT plans to review “e” factors on Tuesdays, with notices to go out before 9:00 am on Wednesday mornings to be effective beginning with the Friday morning DAM • Initial notice is planned for Tuesday evening/Wednesday morning, August 3 or 4th to be effective on Friday, August 6 • For Market Trials, notices will initially only go out by one method – e-mail • Initial data will include DAM activity from the most recent 30 days of data available from July and August Market Trials • DAM was not run every day in the 30 day window that will be considered. • To ensure there are 30 days of data to evaluate, ERCOT will use prior day(s) data to “fill in” missing days data Market Trials - Friday call

Other topics – “e” factors • Alternative or Favorable treatment • CPs should notify ERCOT of their desire to receive the “alternative” or “favorable” treatment in Market Trials • by sending an e-mail to markettrials@ercot.com with “Nodal Credit - e factor – favorable treatment requested” in the subject line • Finally, if CPs do not believe their DAM activity in Market Trials in July and August is indicative of their projected activity after “Go Live”, they may request ERCOT to set their “e-factors” to reflect their anticipated activity • By sending an e-mail to markettrials@ercot.com with “Nodal Credit – e factor – specific e factors requested” in the subject line and the e factors requested in the body of the e-mail • Any “override” will be effective until the next bi-weekly reset (e.g. must be requested again or factors will be reset based on data) Market Trials - Friday call

Other topics – “e” factors • Requests for favorable treatment or for specific e-factors may be submitted any time during Market Trials; however, • Time sensitive - if you want initial e-factors effective August 6 to reflect favorable treatment, please send notification no later than Monday, August 2 at 5:00pm. • NOTE: in conjunction with “e” factors being set on August 6, other variables will be set consistent with how variables will be set after the initial 60 days of the market. That is: d = 0.85 z = 0.50 a = 0.50 u = 0.95 b = 0.45 t = 0.50 y = 0.45 Market Trials - Friday call

Preliminary Cutover Timeline • Thursday, November 18th • Zonal invoice published • last Zonal EAL credit calculation from which a collateral call will be made (system will be maintained through Go Live and will be available for a period beyond Go Live) • Friday, November 19th • Nodal CRR auction invoice payments due • Tuesday, November 23rd • Post first Nodal Credit Reports and send ACL to CRR and DAM • No collateral calls sent based on these reports • Wednesday, November 24nd • Last Zonal NLRI credit calculation from which a collateral call will be made (system will be maintained through Go Live and will be available for a period beyond Go Live) • Thursday / Friday, November 25th / 26th – Thanksgiving holiday Market Trials - Friday call

Preliminary Cutover Timeline • Monday, November 29th – • Zonal invoice published • First Nodal credit calculation from which a collateral call will be made • For example, collateral may be required based on AIL activity (e.g. Zonal NLRI data) • Will exclude Zonal invoice from November 29th from the calculation • send ACL for initial DAM (afternoon) • Tuesday, November 30th • initial DAM • “e” factors set at 1/0/1 • Second Nodal credit calculation • Will include Zonal invoice from November 29th in the calculation • Wednesday, December 1st – “Go Live” Market Trials - Friday call

Known Issues • No new Known Issues • Note: Known Issues can be reviewed at : http://nodal.ercot.com/readiness/markettrials/coms/index.html Market Trials - Friday call

COMS/Settlements/Credit