1. March 6, 2012 ERCOT Public ERCOT CRR Update Matt Mereness ERCOT Manager Day-Ahead Market and CRR Auction

2. 2 CRR Model Build Process CRR Team will support the CRR Model Build Process as an “Other Binding Document” Current draft for market consideration posted with this presentation Summary of process CIM snapshot from current production model Apply NOMCRs to create model for Outage Evaluation Perform Study to determine most constraining day of month (outages) That day of month becomes model build date to build: Using current CIM model Applying all approved NOMCRs leading up to that date (future model) Applying Outages Topology Processor creates model file to pre-process for CRR CRR Engineer applies all other supporting data- Forecasted Temps, LDF, etc Model uploaded into CRR system and posted to market Multi-month models are same as monthly methods repeated into future months March 2012ERCOT Public

3. 3 CRR Model Build Process (continued) Update- comments received over the weekend but have not completed feedback and analysis yet (update in April CMWG). - ERCOT pleased that no significant model building issues identified - ERCOT interest in whether long-term planning model changes are to be considered - LDF used by CRR Team: Cold- Jan, Feb Mild- Mar, Apr Hot- May, June, July, August, Sept Mild- Oct, Nov, Dec - LDF implemented by System Operations in weekly model load sequence Operations chooses week to switch based on weather trending March, 2012ERCOT Public

4. 4 PCRR and CRR Offer Explanation High level annual auction example: 100MW line with 80MW PCRR ownership for Year1- 55% Auction Offer from CRRAH NOIE to sell 80MW PCRR Bid from CRRAH X at high price to buy 100MW March, 2012ERCOT Public Bus ABus B 55MW capacity = 100 MW rating (100x55%) less 44MW CRR baseload (80x55%) 11 MW for sale from ERCOT 100 MW bid 100MW line 80 MW offer Assuming high bid price from CRRAH X : CRRAH X = Clears the 80MW (offer) + 11MW (system) = 91MW CRRAH NOIE = Sells all 80MW, 0 Remaining Note in monthly auction, the 91MW ownership is not scaled down (kept at 100%) to become CRR baseload, just as PCRR was. When going from Y1->Y2 prior ownership would be scaled down with model.

5. 5 PCRR Update on Eligibility Questions from previous CMWG meeting on how PCRRs managed Switching between units at same site (old unit for new unit to serve load) allowed? Answer is ‘No’. Section 7.4.1 (1) (a), Own or have a long-term (greater than five years) contractual commitment that was entered into before September 1, 1999 for annual capacity and energy from a specific Generation Resources …… Contract renewal allowed? No, but depends on contract. Contract can have automatic renewal and they are maintained, but an amendment cannot override a contract with a fixed end date. If contracted load leaves NOIE would they keep PCRRs for that load? No What are examples of evidence provided to ERCOT Legal Contractual commitment? Examples- Signed copies of the contract; Copies of the Long-term bond issues which state the operational date of the specific Generation Resource; PUCT filings which state the operational date of the unit; Insurance policies for that Resources; etc. Does mothball status void PCRR? No, not at this point. March, 2012ERCOT Public

6. 6 TSAT Update for CRR TSAT planned to commence March 7 April CRR Model used W-N Stability Limit table (similar to prior auctions) CRR Team to closely study implementation and run study to consider TSAT impacts for May auction March, 2012ERCOT Public

7. 7 Separate 2-year Annual Auction Annual Auction processes and systems are already separated in terms of: Credit lock, Modeling, Bid window, Auction solutions ERCOT proposal to consider separating credit/bid/auction windows for each year to relieve market credit and improve analysis of results. Draft NPRR already in Exec Review and having Impact Analysis work. March, 2012ERCOT Public Year 1 Year 2 Oct/Nov All credit/bids/auctions in flight simultaneously Year 1 Year 2 Oct/Nov Year 2 credit/ bids/auctions Nov/Dec Year 1 credit/ bids/auctions Current Proposed

8. 8 Options around 200,000 Bid Limit Bid trending of all auctions since go live Exceeded 200,000 bid limit two times resulting in Round 2 March, 2012ERCOT Public

9. 9 March, 2012 Options for consideration Auction for the auction- ERCOT to conduct an auction/allocation for the bid capacity Questions to consider regarding timing, involvement of money Complexity of more people, processes, timing Additional chance for “self-reduction of bids” If 200k exceeded, introduce an additional day for self-reduction by CRRAHs of known over-subscribed amount before invoking the low bid limit quantity Remove credit constraint in CRR Clearing engine Allows P-Q Curves (example up to 10 segments) Curve counts as single bid, estimate would consolidate 30-50% of bids Reduce Max Numbers of Bids from 10k to 5k for multi-month Auctions Quickly implementable process with simple change in protocols For 2012 Year1 Annual would have reduced initial submissions from 226k to 169k (rather oversubscribed and reduced to 90k) DRAFT NPRR ATTACHED WITH MATERIALS ERCOT and Vendor will continue to test 200,000 threshold Options around 200,000 Bid Limit

10. 10 ERCOT PublicMarch, 2012 Open discussion to gather options and priorities for market rolling auction Tenor/horizon of auctions (shorter/longer) Percentage of capacity auctioned each annual, month, or other period Potentially minimize model builds with transition from monthly to seasonal periods Example, utilize seasons for Annual and Quarterly Monthly would only be offered at granularity in prompt month Is there a target to sell every period in year at monthly frequency, or quarterly? CRR Rolling Auction Concepts Execute monthly for each month (once)? Execute 3 future quarters/seasons, on quarterly basis? Release up to X% per season?

11. 11 ERCOT PublicMarch, 2012 Option 1- Forward quarterly or seasonal market - Continue annual and monthly auctions - Run once every 3-4 month to capture position between annual and monthly - Perhaps 75% of system - Lowest impact to CRR Team - Forward look is adjustable - Each day sold 4 times (2 annual, one quarterly, one monthly) CRR Rolling Auction Concepts Example, April execution for June, July, August

12. 12 ERCOT PublicMarch, 2012 Option 2- Rolling 3 month auction - Continue annuals but convert monthly to rolling 3-month - Run every month for 3 months - Perhaps graduated system availability 70, 80, 90% of system - Potentially absorbed by CRR team - Only 3-months into future - Each day sold 5 times (2 annual, 3 rolling) CRR Rolling Auction Concepts Example, May execution for June, July, August