K E M A, I N C. TCA/KEMA ERCOT Cost Benefit Analysis Implementation Impacts Assessment KEMA Assumptions ERCOT CBCG June 2, 2004

K E M A, I N C. 2 Agenda n Progress Update n Scope Review n KEMA Assumptions Review

K E M A, I N C. 3 Progress Update n ERCOT contacts for Inventory and Impacts review identified by CBCG n KEMA started to ask these contacts for possible date for meetings over the next 3- 4 weeks n Impacts assessment at the process level in progress n Market Participant Surveys ready for distribution later this week

K E M A, I N C. 4 Implementation Impacts Assessment Scope n Quantitative and qualitative treatment of:  Systems Costs  Staffing  Risk Transition  Training  On-going Maintenance & Support

K E M A, I N C. 5 KEMA Assumptions Review n Assumptions:  Classification of Market Participants  Change Case Description/Definition  Confidentiality  Data Gathering  Impacts Assessment

K E M A, I N C. 6 Classification of Market Participants n Market Entities:  ERCOT  Qualified Scheduling Entity (QSE)  Resource Owners (PGCs)  Load Serving Entity (LSE)  Transmission and/or Distribution Service Provider (TDSP) n Why not the 9-segments?  An IOU or Municipal can play multiple Market Entity roles  No simple way to separate by segment and avoid “double counting” n The Implementation Impacts Analysis will provide detailed cost estimates

K E M A, I N C. 7 Market Participant Relationships

K E M A, I N C. 8 Study Market Segments n Nine Market Segments  Investor Owned Utilities (IOU)  Municipally Owned Utilities (MOU)  Electric Cooperatives (EC)  Independent Power Producers (IPP)  Power Marketer (PM)  Retail Electric Provider (REP)  Retail Customer  ERCOT ISO  Public Utility Commission of Texas (PUCT) n Market Segments Costs based on Entity costs

K E M A, I N C. 9 Change Case Description / Definition n Three Change Cases Considered:  1) Texas Nodal Team (TNT)  Defined in Concept (White) Papers  Detailed in Draft TNT Protocols  CBCG to identify SMEs and Contact Information  2) Nodal Light  Defined in Change Case Summary  Additional information may be needed  CBCG to identify SMEs and Contact Information  3) NE-ISO Replication  Defined in Change Case Summary  Additional information may be needed  CBCG to identify SMEs and Contact Information

K E M A, I N C. 10 Confidentially n Information may be available in the public domain n KEMA will:  Maintain strict confidentiality of any identified competitive information  Remove identity for use in the corresponding generic Entities results n Review and Sharing of Information with:  Cost Benefit Concept Group (CBCG)  Texas Nodal Team (TNT)

K E M A, I N C. 11 Data Gathering n Data Collection for:  Existing and planned (~1yr) Hardware expansions  Existing and planned (~1yr) Applications expansions  Staffing, Training, and Support Cost Data n KEMA will use other sources of data such as:  Historical organization experience  Current costs from surveys and inventories  Vendor estimates  Market research and publications  Analyst judgement

K E M A, I N C. 12 Data Gathering n Market Participant Survey (See handout) n Market Segment Representative Roles/Responsibilities:  Act as key liaison/contact for other Market Participants  Assist KEMA in monitoring progress of responses n Individual Market Participants  Separate survey completed for each “Role”  Questions on Survey through KEMA/CBCG  TWO weeks allotted for responses – due by June 18

K E M A, I N C. 13 Data Gathering n ERCOT Information  Existing Systems, Applications, and Staffing  Planned expansions or changes prior to Nodal Market 2007  Clearly identify Nodal Drivers for Nodal Market 2007 n KEMA will analyze, sort and compile the surveys  Generic Market Entities systems  No substitutes or proxies for missing data responses

K E M A, I N C. 14 Data Gathering – Process Summary

K E M A, I N C. 15 Impacts Assessment n Implementation Impacts Assessment  By Market Process Timeline n New Nodal Business Process Derived from Change Change Cases description:  Pre-Day Ahead Activities  Day-Ahead Activities  Adjustment Period and Operating Period Activities  Real Time  Post-Operating Day Activities

K E M A, I N C. 16 Impacts Assessment - Process Summary

K E M A, I N C. 17 Deliverables – Implementation Impacts n Preliminary outline and results (~summer) n Summary of Impacts  Summary of costs  Major cost drivers and cost risks  Treatment of other major risks  Qualitative impacts n Detailed cost spread sheets (Excel workbook format)  For ERCOT  For Market Participants, based on reasonable categorization of market participants

K E M A, I N C. 18 Questions?