Discussion of Fuel Oil Price (FOP)

1. Discussion of Fuel Oil Price (FOP) Bill Barnes TPTF 2/5/2008

2. FOP Definition • Nodal Protocol section 2.1 states: Fuel Oil Price (FOP) - The sum of five cents plus the average of the Platts Oilgram Price Report for U.S. Gulf Coast, pipeline No. 2 oil, converted to dollars per million British thermal units ($/MMBtu). The conversion is 0.1385 MMBtu per gallon. The Platts Oilgram Price Report indicates which Operating Days the prices are effective. For Saturdays, Sundays, holidays, and other days for which Platts Oilgram Price Report does not publish an effective price, the effective price shall be the effective price for the Operating Day following the holiday or day without a published price. In the event, at the time of settlement or calculation of generic costs, that the effective price for a particular Operating Day is not available, the effective price for the most recent preceding Operating Day shall be used.

3. FOP Observation #1 It may be possible to interpret the calculation of FOP in two different ways. Which is preferred? • The Protocol definition of FOP is -- The sum of five cents plus the average of the Platts Oilgram Price Report for U.S. Gulf Coast, pipeline No. 2 oil, converted to dollars per million British thermal units ($/MMBtu). The conversion is 0.1385 MMBtu per gallon • Option 1 – Add five cents to the average price, then convert to $/MMBtu • {( 5 + (FOPH + FOPL) / 2) * (1/100) * (1 / 0.1385)} Where: FOPH = High Published Price FOPL = Low Published Price • Option 2 – Convert average price to $/MMBtu and then add .05 $/MMBtu • .05 + {((FOPH + FOPL) / 2) * (1/100) * (1 / 0.1385)} Result is: Option 1 will always be .31 $/MMBtu higher than Option 2

4. FOP Observation #2 Platts does not publish Oil Prices for Weekends and Holidays. • For Saturdays, Sundays, holidays, and other days for which Platts Oilgram Price Report does not publish an effective price, the effective price shall be the effective price for the Operating Day following the holiday or day without a published price. • In the event, at the time of settlement or calculation of generic costs, that the effective price for a particular Operating Day is not available, the effective price for the most recent preceding Operating Day shall be used. • This assures that the FOP used for a DAM settlement will be different than the FOP used for a DAM resettlement or any RTM settlement of the same operating day. Why? • We expect to receive Monday FOP from Platts by 7:15PM CPT • DAM settlement timeline requirements can’t be met