Market Trials Congestion Revenue Rights Weekly Update August 27, 2010 http://nodal.ercot.com 1

Antitrust Admonition ANTITRUST ADMONITION ERCOT strictly prohibits Market Participants and their employees who are participating in ERCOT activities from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate the antitrust laws. The ERCOT Board has approved guidelines for members of ERCOT Committees, Subcommittees and Working Groups to be reviewed and followed by each Market Participant attending ERCOT meetings. If you have not received a copy of these Guidelines, copies are available at the Client Relations desk. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws. DISCLAIMER All presentations and materials submitted by Market Participants or any other Entity to ERCOT staff for this meeting are received and posted with the acknowledgement that the information will be considered public in accordance with the ERCOT Websites Content Management Operating Procedure. http://nodal.ercot.com 2

Anti-trust Admonition Environment Report Planned / unplanned outages Agenda Anti-trust Admonition Environment Report Planned / unplanned outages Known Issues Standing Reports and Updates Future activities Question and Answers / General Discussion FAQ ERCOT asks that Market Participants log into the WebEx session using their company name and then their name. This will allow ERCOT to take roll-call offline http://nodal.ercot.com 3

Market Trials 2010 Roadmap http://nodal.ercot.com 4

Day-to-day operations summary: Planned / Unplanned Outages of EDS Next Thursday, 9/2, from 3:00pm until 10:00pm Unplanned Outages None http://nodal.ercot.com 5

Vendor has fixed the issue in the software, and it is being tested now Known Issues Topology Processor (software that creates the PSS/E file from the Network data) does not export the outages to CRR’s PSS/E file Vendor has fixed the issue in the software, and it is being tested now CRR team has a workaround by using the TCR PSS/E file with outages and augmenting it for the CRR application

Standing Reports and Updates: General reminders / updates September Auction Market Trials Activities 2010 September Monthly Auction 2010 September Auction Market Results Posted on Friday, 8/27 by 2am 2010 September Auction Market Results visible in CRR application on Friday, 8/27 by 8am 2010 September Auction Market Invoices Posted on Monday, 8/30 2010 September Auction release of CRR Credit Exposure on Monday, 8/30 at 4:45pm October Auction Market Trials Activities – NEW Schedule being planned now Purpose is to use the outages and equipment updates provided by the TDSP’s due on 9/1 NOIE’s must have their paperwork submitted to Ercot by Wednesday, 9/8, at 5:00pm ** Market Trials Handbook has been updated with these new dates http://nodal.ercot.com 7

Q&A Q&A / Open Forum http://nodal.ercot.com 8

How will new Market Participants get Qualified for future CRR markets? Your Wholesale Client Services Representative will continue to walk you through the Registration Process after Texas Nodal Implementation, just as they have done during Market Trials. The cutoff date of 8/13 for the December 2010 auction was to allow enough time (i.e., two months) for Legal, Registration, Credit, and CRR to complete their qualification activities.  While this is the only market with a specified “cut-off” date, two months is an adequate timeframe to expect for the registration, qualification and credit approval to be completed.

The behavior of 24 Hour bids in the CRR Monthly Auctions 24 hour bids can be entered into CRR Monthly auctions The auction engine treats a 24 hour bid as a single bid across the three time of use network models (Peak WD, Peak WE, Off-peak) Single MW amount Single $/MW-hr bid price (not to exceed) If the Bid Price is higher than the weighted (by number of hours) average of the three times of use clearing prices(Peak WD, Peak WE, Off-peak) then the CRR bid will be awarded fully (assuming there is no active budget constraint). If the Bid Price is lower than the weighted average of the three times of use clearing prices then the CRR bid will not be awarded. If the Bid Price is equal to the weighted average of the three times of use clearing prices then the CRR bid will be awarded at some level between 0 and 100%, but the same in each time of use..

24 Hour Example in Monthly Market 24 hour CRR bid for February 2013 Monthly Auction 28 x 8 = 224 Off-peak hours 8 x 16 = 128 PeakWE hours 20 x 16 = 320 PeakWD hours 28 x 24 = 672 total hours For a certain path prices are as follows Off-peak 2$/MW-hr (arbitrary number for this example) PeakWE 3$/MW-hr (arbitrary number for this example) PeakWD 8$/MW-hr (arbitrary number for this example) 24 hour = (224x2 + 128x3 + 320x8)/672 = $5.048/MW-hr Note that a 24 hr bid of $6/MW-hr would be fully awarded in each time of use even though it was less than the clearing price in the PeakWD time of use. Also note that a 24 hr bid of $4/MW-hr would not be awarded at all, even though it was more than the clearing price in the Off-peak and PeakWE times of use.

The behavior of 24 Hour bids in the CRR Annual Auctions 24 hour bids can be entered into CRR Annual auctions The auction engine treats a 24 hour bid as a short cut for entering three separate bids in the three time of use network models (Peak WD, Peak WE, Off-peak) If the Bid Price is higher than the clearing price in a given time of use (Peak WD, Peak WE, Off-peak) then the CRR bid will be awarded fully in that time of use (assuming there is no active budget constraint). If the Bid Price is lower than the clearing price in a given time of use then the CRR bid will be not be awarded in that time of use. If the Bid Price is equal to the clearing price in a given time of use then the CRR bid will be awarded at some level between 0 and 100% in that time of use.

24 Hour Example in Annual Market 24 hour CRR bid for February 2013 in 2012/2013 Annual Auction For a certain path prices are as follows Off-peak 2$/MW-hr (arbitrary number for this example) PeakWE 3$/MW-hr (arbitrary number for this example) PeakWD 8$/MW-hr (arbitrary number for this example) Note that a 24 hr bid of $6/MW-hr would be fully awarded in PeakWE and Off-peak, but not awarded in PeakWD Also note that a 24 hr bid of $4/MW-hr would also be fully awarded in PeakWE and Off-peak, but not awarded in PeakWD

What is the CRR Schedule of Activities from now until Go-Live? Day Date Activity Comments Wednesday 9/1/2010 ERCOT posts CRR Activity Calendar to MIS 9/8/2010 NOIE’s must have proof of ownership in to ERCOT by 5:00pm CPT Thursday 9/23/2010 ERCOT CRR Group begins validation of Generation Resource Capacity of approved ownership for Generation Resources or Long-Term Contractual Agreements Monday 10/1/2010 ERCOT initializes and validates CRR Production Database static data, Market Participant data, Time of Use data, Calendar Period data, system parameters, etc.  Wednesday 10/13/2010 ERCOT CRR team prepares contracts and entitlements for 2010 December Allocation and loads into CRR system 10/14/2010 ERCOT will start accepting PCRR Nomination at 08:00:00 CPT for the 2010 December Monthly CRR Auction 1  Tuesday 10/19/2010  PCRR Nomination for the 2010 December Monthly CRR Allocation must be received by ERCOT at 17:00:00 CPT 2 15 Business Days prior to the opening of the auction Section 7.4.2 (c)(i) Tuesday 10/26/2010 ERCOT shall allocate PCRRs to NOIEs for the 2010 December Monthly CRR Auction 3 10 Business Days prior to the opening of the auction Section 7.4.2 (c)(i) ERCOT shall post CRR Network Model for the 2010 December Monthly CRR Auction 4 Post no later than 10 Business days before the auction Section 7.5.3 (1)(i)(i) Friday 10/29/2010 ERCOT shall post the 2010 December Monthly CRR Auction Notice 5 Not less than 10 days before each monthly CRR auction Section 7.5.3.2 (1) 11/5/2010 ERCOT will start accepting PCRR Nomination at 08:00:00 CPT for the 2011 January Monthly CRR Auction 5 Days from acceptance date http://nodal.ercot.com 14

What is the CRR Schedule of Activities from now until Go-Live? Day Date Activity Comments Monday 11/8/2010 CRR Auction Lock Date for 2010 December Monthly CRR Auction at 17:00:00 CPT 6 Lock Date Section 16.11.4.6.1 (1) Tuesday 11/9/2010 CRR Auction Bid Window Opens at 00:00:01 CPT for the 2010 December Monthly CRR Auction 7 Thursday 11/11/2010 CRR Auction Bid Window Closes at 23:59:59 CPT for the 2010 December Monthly CRR Auction 8 Friday 11/12/2010 ERCOT starts the Execution of the Auction Engine for the 2010 December Monthly CRR Auction 9 Auction Engine Starts PCRR Nomination for the 2011 January Monthly CRR Auction must be received by ERCOT at 17:00:00 CPT 2 15 Business Days prior to the opening of the auction Section 7.4.2 (c)(i) 11/15/2010 ERCOT posts 2010 December Monthly CRR Auction results to Market at 01:00:00 CPT ERCOT creates Common Download files for CRR Auction Results by 8:00am CPT 10 Post Auction Results Section 7.5.3.1 (1) ERCOT sends auction results at 01:55:00 CPT to Settlements & Billing and Credit for 2010 December Monthly CRR Auction 11 11/16/2010 CRR releases the Locked Auction Funds for 2010 December Monthly CRR Auction at 17:15:00 CPT 12 ERCOT releases locked auction funded Settlement & Billing creates a 2011 January CRR Auction Invoice and sends in out electronically prior to 23:59:59 CPT 13 S&B issues invoices Section 9.8(1) 11/19/2010 2010 December Monthly CRR Auction Invoices are due to ERCOT by 17:00:00 CPT 14 Invoices due Section 9.9.1(1) ERCOT shall allocate PCRRs to NOIEs for the 2011 January Monthly CRR Auction 3 10 Business Days prior to the opening of the auction Section 7.4.2 (c)(i) ERCOT shall post CRR Network Model for the 2011 January Monthly CRR Auction 4 Post no later than 10 Business days before the auction Section 7.5.3 (1)(i)(i) 11/22/2010 ERCOT due to pay out to CRR Account Holders that are owed from 2010 December Monthly CRR Auction 15 Money owed to CRR AH paid Section 9.9.2(1) http://nodal.ercot.com 15

What is the CRR Schedule of Activities from now until Go-Live? Day Date Activity Comments Friday 11/19/2010 2010 December Monthly CRR Auction Invoices are due to ERCOT by 17:00:00 CPT 14 Invoices due Section 9.9.1(1) Wednesday 11/24/2010 ERCOT shall post the 2011 January Monthly CRR Auction Notice 5 Not less than 10 days before each monthly CRR auction Section 7.5.3.2 (1) Tuesday 11/30/2010 CRR sends Daily Ownership Data to MMS at 1:55am for 12/1//2010 Day Ahead Market 12/1/2010 Go Live Date 12/3/2010 ERCOT will start accepting PCRR Nomination at 08:00:00 CPT for the 2011 February Monthly CRR Auction 1 Monday 12/6/2010 CRR Auction Lock Date for 2011 January Monthly Auction Closes at 17:00:00 CPT 6 Lock Date Section 16.11.4.6.1 (1) 12/7/2010 CRR Auction Bid Window Opens at 00:00:01CPT for the 2011 January Monthly Auction 7 ERCOT shall post CRR ownership as of 11/30/2010   Section 7.5.5.2 Thursday 12/9/2010 CRR Auction Bid Window Closes at 23:59:59 CPT for the 2011 January Monthly CRR Auction 8 12/10/2010 ERCOT starts the Execution of the Auction Engine for the 2011 January Monthly CRR Auction 9 PCRR Nomination for the 2011 February Monthly CRR Auction must be received by ERCOT at 17:00:00 CPT 2 15 Business Days prior to the opening of the auction Section 7.4.2 (c)(i) http://nodal.ercot.com 16