Market Operations Presentation Board of Director’s Meeting November 18, 2003

Agenda Q3 Retail Transaction Performance Retail Market Activity Wholesale Market Activity Day-Ahead Market Design - Implementer / Operator Perspective More Credit Focus

Q3 Performance Measures submitted to PUCT SWITCHES

Q3 Performance Measures submitted to PUCT MIMO

Migration from Native AREP % of ESI IDs at at Residential 5.0% 12.2% Small Non-Residential 8.1% 14.6% Large Non-Residential30.3% 53.5%

Migration from Native AREP % of ESI IDs / % of Load at at at Residential 5.0% 12.2% 15% Small Non-Residential 8.1% 14.6% 38% Large Non-Residential30.3% 53.5% 61%

REPs of Record Serving ESI IDs in ERCOT as of

YTD YTD Uplift on load ratio share: RMR $ RMR BENA Credit Net RMR Black Start Local Congestion Total Uplift $ Obligation Services: Ancillary Services $ Directly assigned: Zonal Congestion $ Balancing Energy $ (includes Regulation Service) Short Pay $ Reliability and Balancing Services $ in millions

Day-Ahead Market Design Template

Vision: to make the market better Day-Ahead Market Design Template

Vision: to make the market better Guiding Principle: fair to all market participants Day-Ahead Market Design Template

Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Day-Ahead Market Design Template

Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… Day-Ahead Market Design Template

Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… at an acceptable cost. Day-Ahead Market Design Template

Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… - PRODUCT - PRICE DISCOVERY - CLEARING - SETTLEMENT at an acceptable cost. Day-Ahead Market Design Template

Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… - PRODUCT - PRICE DISCOVERY - CLEARING - SETTLEMENT at an acceptable cost. - IMPLEMENTATION - UPLIFT - PROVIDER OF LAST RESORT Day-Ahead Market Design Template

Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… - PRODUCT - PRICE DISCOVERY - CLEARING - SETTLEMENT at an acceptable cost. - IMPLEMENTATION - UPLIFT - PROVIDER OF LAST RESORT - CREDIT UNDERWRITER Day-Ahead Market Design Template

Credit Underwriter Considerations: Possible Size of Underwriting (given a Texas Market ~ $15 – 20 billion): If at PJM volume of 27%, then Underwriting ~ $ 4 – 5 billion If at NYISO volume of 50%, then Underwriting ~ $ 7 – 10 billion Day-Ahead Market Design

Credit Underwriter Considerations: Possible Size of Underwriting (given a Texas Market ~ $15 – 20 billion): If at PJM volume of 27%, then Underwriting ~ $ 4 – 5 billion If at NYISO volume of 50%, then Underwriting ~ $ 7 – 10 billion Who will be credit underwriter for the Texas Day-Ahead Market? ERCOT LSEs? ERCOT LSEs and Generators? Commercial Bank(s)? Other Market Institution? Other? What market policies should be implemented to achieve desired result? What legislative and/or PUCT actions are needed to achieve desired result? Day-Ahead Market Design