Texas Nodal Market Implementation Program Update

1. Texas Nodal Market ImplementationProgram Update Jerry Sullivan TPTF

2. AGENDA • Program Status • Key Risks • IBM Report • “Health Checks” • Cost Texas Nodal Program Update

3. Program Status: Nodal Delivery Nodal Delivery status remains amber; key checkpoints approaching Nodal Delivery Cost Scope / Quality Schedule Green Amber Amber Red • Number of defects discovered in EDS too high • Applying increased efforts to identify and resolve defects in pre-FAT and FAT • Key checkpoints being put in place to ensure ongoing viability of 12/1/2008. Compliance with business processes to be added as well. • Planning for the “168 Hour Test” less than 200 days away • EDS 2 is RED until probably the end of February • Need to decide on grayboxing and/or handling of future NPRRs • Revised budget approved by ERCOT BOD, however we will be RED until fee filing approved. • Preparing for revised Fee Filing with the PUC. Probable submittal next week. Legend Current product quality is not sufficient for Nodal launch Program not aligned to protocols Estimate at Complete = >$263m + 10% Red Go-live = >30 days+ Most Nodal products currently achieve quality standards Program aligned to previous protocol version Amber Estimate at Complete = < $263m + 10% Go-live = <30 days+ Program aligned with current protocols All Nodal products currently achieve quality standards Green Estimate at Complete = <$263m Go-live = 12/1/08 Texas Nodal Program Update

4. Program Status: ERCOT Readiness ERCOT Readiness status remains amber, but a renewed awareness of the need for preparation is apparent • Organization, Processes and Procedures, and Trainingshow progress • Organization • Completed review of Deep Dive presentations including staffing/ sizing department models for Post-Nodal implementation (2009). • Draft Vision, Mission, Core Values and Strategic Plan completed. Transition sponsors are assigned. • January Executive Readiness Survey overall indicates Amber. Key Focus Areas to work on: adequate staffing, procedures, transition planning. • Transition plans being documented for all key departments. • Processes and Procedures • Business Process Model completed to procedure level and ready to leverage for testing and validation during EDS and training. • Increased focus on the creation of procedures. • Training • Training tracking and tailoring at the department/individual level. • Validation of current individual training plans • Concerns Remain • Adequate staffing and resources for transition from project teams to employees • Procedures still in flux until delivery of systems • Completion of training in time for EDS Texas Nodal Program Update

5. Program Status: Market Participants Overall status* isred due to Registration and Qualification status • Registration and Qualification[red] -Resource Asset Registration as measured by metric MP11 not occurring as planned. The following QSEs represent resources that are not current with submittals for resource registration: • Barton Chapel Wind, Austin Energy • Engagement[amber] - Based on December results of Market Participant NODAL Engagement Survey • QSEs with Resources Engagement [green] • TDSP, QSEs without Resources and LSEs [amber] - due to Engagement, meaning that MPs in these segments have identified critical program areas where they feel they are behind. • QSEs without Resources category improved from [red] to [amber]. • 15 QSEs [red] - due to Engagement. Most are new entities being ramped into the program, but the following provided no Survey response or did not answer all questions on the questionnaire: • Alcoa, Citadel, Clearview, Duke Energy Ohio, Econnergy, Energyco, JPMorgan Ventures Energy, Juice Energy, Kansas City Power and Light, Liberty Power, LPT, Merrill Lynch Commodities Inc, Mirant, Texpo, WCW International • Training [green] - First pass of self-reported Training is [green] for all segments except LSEs • Connectivity and Telemetry [green] - Connectivity metrics complete for most MPs. Outliers are new to the program and need to go through EDS process. * Status current as of 2.18.08 Texas Nodal Program Update

6. Market Readiness Six month posting of LMPs initiated on February 15 • Required by: ERCOT Nodal Transition Plan (5.4.4 (3)) • Purpose: Provide an opportunity for market participants to measure and improve the accuracy and stability of the Real Time Sequence (RTS). • Accuracy: LMPs are reasonable given the input data, but the input data needs improvement. These are not “settlement grade” LMPs. ERCOT is limited in its capacity to handle all MP questions based on the quality and complexity of the data. • Use: Should be used for trends and to assist the EDS team to improve the accuracy of the input data, but not for financial analysis. • Actions: ERCOT is continuing to resolve a number of problems known to impact the SCED results: Working with QSE’s to resolve a number of SCED data input issues; similar exercise is in progress with TSP’s to improve the quality of the tele-metered data feeding the State Estimator. Texas Nodal Program Update

7. Key Risks Risks are still manageable Risk Description Likelihood Impact on Go Live Mitigation • Lack of source systems and infrastructure limits ability to validate integration points, impacts re- factoring cycle times and costs • Building interfaces in advance of applications delivery based on available information expecting re-factoring • Testing application and integration in available, sub-optimal hardware / software environments EIP (Enterprise Integration Project) M M • Uncertainty over ability to integrate CIM models may impact data and system quality and testing CIM (Common Information Model) M H • Working with 3 main vendors on multiple iterations of development and validation of CIM import/export • Investigating contingency plan to preserve April 1st start of DAM / RUC EDS trials • Prioritizing build out of environments and applications based on EDS schedule • Planning active / standby EDS environment (Austin / Taylor) to eliminate short-term ITest need • Building test environment in Blue Building server room • Removing all non-essential equipment from Austin data center • Compressing Nodal deployment footprint as much as possible Infrastructureconstraints (power, space, cooling) • Limits speed and scale of environment build outs, impacts development projects, integration and EDS trials H L • ERCOT working with vendor to rectify defects/outstanding. issues • Single entry model must be in place by July to verify go-live model NMMS • Single entry model H L Texas Nodal Program Update

8. IBM Review - Dec 07 – Jan 08 Texas Nodal Program Update

9. “Health Checks” Jan Jun Feb Jul Aug Mar Apr Sep Oct May Nov Dec Still targeting a 12/1/08 Go-Live date; critical pathruns through EDS activities 1 EDS 1 E1 R2 ICCP / P2P EDS 2 E2 R3 SE Tuning E2 R4 MP Trials & NM Verification EDS 3 E3 R5 SCED & LMP Posting for 6 months E3 R6 LFC Testing E3 R7 CRR Testing EDS 4 E4 R8 CMM, DAM & RT Settlements, Verifiable Costs & Disputes E4 R9 DAM, SASM & RUC execution, DAM Stability Test, EECP, DST, Compliance Business Processes Today Go-Live (Go/No-Go) Performance 2 CIM Defect Integration Health Checks – measure of schedule viability EDS 4 168 Hr Test Go Live Sequence Dictated by PRR 727: Market Readiness Certification 3 32 Days to complete Test ERCOT BoD: 10/21 Sept Oct Nov 168 Hr Test Start TAC Meeting: 10/2 First Market Notice: 10/31 Second Market Notice: 11/21 Texas Nodal Program Update

10. Cost: Element Summary EAC Revised Budget and Forecast remain constant; spending in January expected to be lower and should reverse much of the overrun through Dec. Texas Nodal Program Update

11. Cost: Project Summary EAC Revised Budget and Forecast remain constant; spending in January expected to be lower and should reverse much of the overrun through Dec. Texas Nodal Program Update

12. Cost: Project Expenditure Trend Nodal program costs reflect concentrated activity through mid-year, then trending downward toward transition $ millions (budgeted) Note: Costs exclude contingency and financing charges; spike in December expenditures reflects vendor payments (~$4 million); total spending in 2009 is $2.4 million of which $2.3 million occurs in January Texas Nodal Program Update