COMS/Settlements/Credit

COMS/Settlements/Credit Weekly Update July 23, 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 14 Statement and Invoice Overview • 173 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

RTM Settlement Overview for July 7 Statement Overview • 213 Statements posted to QSEs • 4 Statements posted to CRRAHs • 1 QSEs received Statements for $0 (This is not due to the closed issue. There were drivers for calculations, but the outputs were zero) General Reminders • Submit any questions/issues about statements, invoices, extracts or calculations to markettrials@ercot.com http://nodal.ercot.com 8

RTM Settlement Overview for July 8 Statement Overview • 210 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 9

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 13

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 14

Week in Review • RTM Invoices (Posted 7-22) • No Unsupported Operating Dates included • Initials Included 7-2, 7-3, 7-6, 7-7, 7-8 • Finals Included 6-22, 6-23, 6-24, 6-25, 6-26 • True-Ups Included 5-25, 5-26, 5-27, 5-28, 5-29 • CRR Auction Invoices for August Auction (Posted on 7-20) http://nodal.ercot.com 15

Next Week’s Activities • Operating Days for next week that will be settled • All Operating Days will have both DAM and RTM Settlement • 7-27 • 7-28 • 7-29 • 7-30 • 7-31 http://nodal.ercot.com 16

Day Ahead Make Whole Example with Negative Prices • Basics of Day-Ahead Make-Whole • Compensates an eligible resource up to it’s generic costs • Determines payment by comparing generic cost to revenue • When the DASPP is negative at a settlement point: • Charge for Energy sales (DAESAMT) • Payment for Energy purchases (DAEPAMT) • Cleared 3P0 are paid via make-whole • In effect, the negative energy revenue (DAEREV) acts as a cost along with the generic cost (DAMGCOST) and therefore increases the make-whole amount (simple example, assume little to no AS Revenue, DAASREV) • Energy purchasers are charged for the make-whole payments • Net effect to the QSE for the resource with the cleared 3P0 is payment of guaranteed cost http://nodal.ercot.com 17

Day Ahead Make Whole Example with Negative Prices • Assumptions: • DAM Committed for 400 MW for all hours of the day • Start up and Energy Eligible • DASPP $-500 for all intervals http://nodal.ercot.com 18

Environment Report-Known Issues COMS New Known Issues • TELHSLFLAG - We've observed instances where TELHSLFLAG is inappropriately exempting generation resources from Base Pont Deviation charges. We're working on understanding the root cause of this issue and evaluating a solution. Until such time a solution is determined (effective Operating Day 7/23) resources will not receive any TELSHSLFLAG exemptions. COMS Closed Issues • No new closed issues 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 19

Settlements FAQs • Q: Where can I find the TLMP, BP and ARI bill determinants used in the calculation of AABP in the COMS extracts? • A: TLMP, BP and ARI are not found in Settlements Extracts nor are they saved in the settlements system. The expectation is that these data will be retrieved and calculated from each QSE’s real time systems http://nodal.ercot.com 20

Credit and Treasury Weekly Update July 23, 2010 http://nodal.ercot.com 21

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 22

Week in Review • Posted Credit Reports and sent ACLs each business day • ACL and TPE Summary Reports were posted around 8:30 am • Remaining Credit Reports were posted around 9:30 am • Aggregate Incremental Liability (AIL) report • No data lag at this time • ERCOT is no longer overriding ACLs • Collateral calls were sent • 90% warnings were sent • Credit exposures • Credit exposures reflect market participant activity in Market Trials • There remain a few exceptions, which are listed on the Known Issues list • Extrapolation of high historical activity forward continue to impact exposure calculations for CPs with ongoing activity in Real Time and to lesser extent in Day Ahead. http://nodal.ercot.com 23

Week in Review http://nodal.ercot.com 24

Next Week • ERCOT • Will send ACLs for DAM • 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 and any LFC test http://nodal.ercot.com 25

Next Week - Schedule of activity Meeting Title (optional)

Next Week – ADTE Adjustment • The Extrapolation of high historical activity forward continues to impact exposure calculations for CPs with ongoing activity in Real Time • It is expected to continue to be problematic as the DAM will likely be run less frequently in certain future weeks • To remove the recent impact of high RT activity and RT prices, ERCOT will adjust the ADTE component of the EAL Calculation for all Counter-Parties by Tuesday, July 27th • Will adjust to something like a recent ADTE in the zonal market • Will use “buckets” or ranges rather than a CPs actual ADTE • Adjustments will be in place at least through the end of August • A CP may request a different (or no) change to their ADTE http://nodal.ercot.com 27

Next Week – ADTE Adjustment • Adjusting the ADTE • Will, for most CPs, reduce their exposure calculation • Should establish a more moderate (but not necessarily predictive) idea of what exposure may be • In some cases, the zonal ADTE will 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 • Will allow 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) http://nodal.ercot.com 28

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. • August 2, 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 http://nodal.ercot.com 29

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 http://nodal.ercot.com 30

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 • This may be submitted any time during Market Trials; however, if you want initial e-factors effective August 6 to reflect favorable treatment, please send notification by Friday, July 30 at 5:00pm. • Next week, ERCOT will provide a template for those requesting favorable treatment to provide the required information • 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 • For this purpose, 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) http://nodal.ercot.com 31

Known Issues • No new Known Issues • Note: Known Issues can be reviewed at : http://nodal.ercot.com/readiness/markettrials/coms/index.html http://nodal.ercot.com 32

FAQs • What is “Conformed ADTE” on the AIL report? Conformed ADTE is a heading used to describe the portion of the AIL calculation noted in red below. AIL = (RTL d) – Max [0, (ADTE / 40 * N * 0.9)] http://nodal.ercot.com 33

Market Readiness Seminar #5 • Market Readiness Seminar #5 (July 28 @ the Met / Web-Ex) • Focus will be on the remaining activities of Market Trials in August and September • Although changes to the 168-Hour test have been discussed at NATF and the Board recently, ERCOT will be detailing August as well as discussing September’s activities to be discussed in upcoming Market forums • Additionally, this seminar will also cover detailed information about Nodal Cutover • Details about MRS #5 and how to attend are located at: http://www.ercot.com/calendar/2010/07/20100728-MT • Note: Cutover Plans for Credit for the initial CRR Auction will be included in this seminar http://nodal.ercot.com 34

COMS/Settlements/Credit