1. WMS – Nodal Credit Integration Start Up May 19, 2010 http://nodal.ercot.com 1

2. Working through Credit Integration in Nodal Have been integrated less than one week Challenging time to integrate with CRR auction, DAM and LFC test this week Glad to see a lot of CP participation, questions, etc. However, be patient and help work through start up issues http://nodal.ercot.com 2

3. Working through Credit Integration in Nodal CMM credit exposure calculations - is based on data from each CP’s activity in MT5 so far –May or may not be indicative of “normal” activity depending on what kind of Market Trial’s testing CP has been doing Some data impacted by other factors (e.g. high prices in DAM or CRR, etc) The more realistic the data, the more realistic the credit calculations –CPs should begin using more realistic estimates in their market activity to produce more realistic exposure calculations –Some reports are not available (AIL, FCE details) – working to get them out there Should have all summary reports Initially, ERCOT has “overridden” the ACLs to try to ensure adequate credit for this first week for CRR auction and DAM –Do not anticipate overrides for long; expect to follow defined “e-collateral” process http://nodal.ercot.com 3

4. Credit Integration in Nodal –DAM credit exposure calculation (see next slides) –Initially, there will be gaps in the data. Credit exposure will “fill in” over the next several week. –All processes are not running every day/week. Once they do, data will fill out –Finding and will find processing glitches and will fix http://nodal.ercot.com 4

5. http://nodal.ercot.com 5 DAM Credit Exposure Calculation in Market Trials NPRR206 not yet implemented Currently, lots of credit is being consumed when evaluating Three-Part Offers: –Existing rule: Quantity of the offer times the 95th percentile of the hourly difference between the RT SPP and the DAM SPP over the previous 30 days –In market trials, SCED has seen many intervals at the system-wide offer cap and beyond due to a lack of offer curves in the system When SCED runs out of offer curves to dispatch, it must use the proxy curves which are priced at the system-wide offer cap –Also, because ERCOT has only been running DAM 2 x week, over the previous 30 days there is not 30 days of data –This causes the 95 th percentile to be the highest price differences (more data would have diluted the effect of the high SCED prices)

6. http://nodal.ercot.com 6 DAM Credit Exposure Calculation in Market Trials Example (every Three-Part Offer will be evaluated differently depending on its settlement point and each settlement point will have a different 95th percentile number):

7. http://nodal.ercot.com 7 DAM Credit Exposure Calculation in Market Trials Please note that on 5/18 ERCOT adjusted the price difference data for DAM credit evaluation purposes. –All price differences between real-time and day-ahead greater than $20 were reduced to $20. –Note that this data is only used for purposes of calculating the credit exposure for energy offers, and the historical prices themselves are not being adjusted.

8. Next steps Counter-Parties should Access their Credit Reports –Review the calculations to confirm they reflect their MT5 activity and e-mail markettrials@ercot.com with questions markettrials@ercot.com Ensure their ACL is adequate for their intended CRR and DAM auction activity If CPs wish to have a higher limit, they should send “e-collateral” Participate on the Friday Market calls for info on issues/resolutions and plans for coming weeks http://nodal.ercot.com 8