1. Day-Ahead Market Discussion/Clarification TPTF April 24, 2006

2. 1.DAM delay due to A/S Offer Insufficiency 2.Derating PTP Options declared to be settled in RT 3.Ancillary Service Procurement and Unit Commitment 4.Evaluation of A/S Capacity Insufficiency 5.Load Forecast Distribution Factor ISSUES

3. Protocol Requirements (4.5.2): 1)ERCOT shall determine if there is an insufficiency in A/S offers before executing the DAM; 2)ERCOT shall declare an A/S insufficiency and issue an Alert; 3)ERCOT shall request additional A/S offers; 4)QSE resubmit offers or submit additional offers; 5)ERCOT must reduce the A/S Plan for DAM purpose if A/S offer insufficiency continues. Issue 1: DAM delay due to insuff. A/S offers

4. ERCOT Determines A/S Insufficiency ERCOT Declares A/S Insufficiency and Issue Alert QSE Starts to Resubmit A/S Offers ERCOT Reduce A/S Plan for DAM Purpose Execute DAM ERCOT Requests add’l A/S offers 30 min? 10:00? x min? Note: Normally x shouldn’t be more than 10 minutes

5. Issue 1: DAM delay due to insuff. A/S offers Execute DAM 10:00 Execute DRUC 14:30 ?  Should DRUC be delayed too if DAM (including communicating DAM awards, QSE updating COP, etc) is delayed?  If yes, what’s the new timeline?

6. Protocol Requirements (4.5.1(8)): The directional network element flows for PTP Options declared for settlement in Real-Time must be properly accounted for in determining available transmission network capacity in the DAM. In the event the available transmission capability in the DAM cannot accommodate all PTP Options declared for settlement in Real-Time, any PTP Option declared for settlement in Real-Time that impacts overloaded directional network elements must be appropriately derated for DAM modeling purposes only, in proportion to that impact. Issue 2: Derate PTP Options

7. In which market should the amount of PTP options derated be settled? One option is: –settle in DAM those derated MWs with offer price lower than DAM market clearing price –settle in RTM those derated MWs with offer price higher than DAM market clearing price Issue 2: Derate PTP Options

8. Derating in proportion to impact is easy to do when there is only there is only one network element involved. Derating in proportion to impact cannot be accurately done when more than one network elements are involved. Issue 2: Derate PTP Options

9. Issue 3: A/S Procurement and Unit Commitment 4.4.6.2.1Ancillary Service Offer Criteria (1)Each Ancillary Service Offer must be submitted by a QSE and must include the following information: (a)The selling QSE; (b)The Resource represented by the QSE from which the offer would be supplied; (c)The quantity in MW from that Resource for this specific offer and the specific quantity in MW of any other Ancillary Service offered from this same capacity; (d)The first and last hour of the offer; (e)A fixed quantity block, or variable quantity block indicator for the offer; (f)The expiration time and date of the offer. There is no reference to the Resource’s online/offline status.

10. Issue 3: A/S Procurement and Unit Commitment Is UC required to clear A/S offers from an offline Resource? Y N w 3-part Offerw/o 3-part Offerw 3-part Offer: ( As the QSE doesn’t know whether its Resource will be committed or not, it will have difficulties to decide whether it’s A/S offer should include startup and min energy costs. ) w/o 3-part Offer Make-Whole? Deduct A/S Revenue from Make-Whole Payment? Y N End A/S offer still considered valid? N End Y Create generic 3-part offer for the Resource Make-Whole? Deduct A/S Revenue from Make-Whole Payment? Y N End 3-part Offer cleared? N No Make- Whole Y Make-Whole; No A/S revenue deduction from Make-Whole payment A/S offer validation: No DRS offers will be allowed; only URS and RRS offers allowed. Self-commitment if A/S offer cleared; No Make- Whole payment

11. NSRS offers can be cleared with or without unit- commitment If both NSRS offer and 3-part supply offer are cleared, there may be a make-whole payment. If NSRS offer is cleared but not 3-part supply offer, there will be no make-whole payment. For NSRS, the QSE will have difficulties deciding whether it should include Start-Up and Min Energy costs in its NSRS offer. Issue 3: A/S Procurement and Unit Commitment NSRS

12. Issue 4: Evaluation of A/S Capacity Insufficiency During AP and RT 6.4.8.1 Evaluation and Maintenance of Ancillary Service Capacity Insufficiency (1) ERCOT shall evaluate Ancillary Service requirements and capacity insufficiency using the Ancillary Service Capacity Monitor, described in Section 6.5.7.5, Ancillary Services Capacity Monitor, throughout the Adjustment Period and Operating Period and may procure Ancillary Service in the Adjustment Period for: (a)Increased need of Ancillary Services capacity above that specified in the Day-Ahead; (b)Replacement of Ancillary Services capacity that is undeliverable due to transmission constraints; or (c)Replacement of Ancillary Services capacity due to failure to provide. 6.5.7.5 Ancillary Services Capacity Monitor (1) ERCOT shall calculate the following every 10 seconds and provide Real- Time summaries to ERCOT operators and all Market Participants using the MIS Secure Area and ICCP, giving updates of calculations every 10 seconds, which shows the Real-Time total system amount of…

13. Issue 4: Evaluation of A/S Capacity Insufficiency During AP and RT A/S Capacity Monitor provides system capacity information based on real-time telemetry, not on COP. COP should be given more weight when ERCOT evaluates A/S sufficiency to open a supplement A/S market for future hours. Should ERCOT also consider other factors such as sudden weather changes and observed binding transmission constraints?

14. Issue 5: Load Forecast Distribution Factor 4.5.1(5) ERCOT shall determine the appropriate Load distributions to allocate offers, bids, and source and sink of CRRs at a Load Zone across the Electrical Buses that are modeled with Load in that Load Zone. The default distribution is the State Estimator hourly distribution for the seven days before the Operating Day. If ERCOT decides, in its sole discretion, to change this distribution for reasons such as anticipated weather events or holidays, ERCOT shall select a State Estimator distribution from a proxy day reasonably reflecting the anticipated distribution in the Operating Day.

15. What if there is a planned bus outage? The original distribution factors may allocate offers/bids to that bus anyway. Can ERCOT adjust the distribution factors? Issue 5: Load Forecast Distribution Factor

16. Dynamic rating Outage schedules Network model Network topology builder Load distribution factor Generic constraints (voltage limit & stability limit) AS requirement RMR offers DAM Clearing RAPs & SPSs DAM QSE: Energy offers/bids, A/S offers, CRR offers declared to settle at RT PTP obligation bids, COPs, etc Network topology & limits AS sufficiency check QSE: AS self-arrangements AS offers QSE AS obligations Notify awards to QSE Post market information Notify AS insufficiency to DRUC CRR Day-ahead Feasibility Test De-rate: CRR options declared to settle in RT DAM Information to settlement Price validation & correction ?

17. State Estimator runs every five minutes. Should the hourly distribution be the average of the 12 five-minutes or any of those 12 five-minutes? Issue 5: Load Forecast Distribution Factor