1. Commodity Exchange Act Exemption Status Mark Ruane ERCOT Vice President of Credit and Enterprise Risk Management TAC January 6 th 2012 ERCOT Public

2. 2 Summary ERCOT is in the process of preparing an application for a Commodity Exchange Act exemption with the CFTC. Outstanding scope issues appear to have been settled. The draft exemption document has been updated and is expected to be filed with the CFTC shortly. ERCOT is filing an NPRR to address market participation requirements and the processes for verification of market participant risk management capabilities. In December the Board approved retaining outside consultants to give an overview of the issues associated with becoming a central counterparty. TACJanuary 6th 2012

3. 3 Expected CFTC Conditions for CEA Exemption ItemStatus Estimated Costs 1.Two-day limit to cure collateral calls No action necessary.NA 2.Elimination of unsecured credit in CRR market NPRR 400 (approved by Board in October - implementation targeted for mid- 2012) $230k - $255k 3.Disallowance of netting between CRR and non-CRR markets 4.Reduce settlement timeline NPRR 347 combines invoices for day-ahead and real time markets (approved by Board in August implementation targeted for mid-2012). Note that NPRR 347 was introduced independently of CFTC compliance requirements. NPRR 391 shortens settlement cycle by one day and eliminates Automated Clearing House (ACH) payments (approved by Board in October 2011). NPRR 457: $430k - $460k NPRR 391: NA TACJanuary 6th 2012

4. 4 Expected CFTC Conditions for CEA Exemption ItemStatusEstimated Costs 5.$50m limitation on unsecured credit Revision to Creditworthiness Standard (approved by Board in October – effective December 2011) NA 6.Criteria for market participation Baseline risk management standards developed in cooperation with other ISOs. Draft market participation NPRR in process. TBD. There will be costs associated with implementation of a verification program. 7.Become a central counterparty (CCP) IRS has reverted with a request for additional clarification with respect to qualifications for tax exemption and expected market and financial impacts of CCP status. Board has requested an independent review of issues associated with becoming a central counterparty. Minimal TACJanuary 6th 2012

5. 5 Questions TACJanuary 6th 2012