Protocol Revision Subcommittee Presentation to the ERCOT Technical Advisory Committee May 4, 2006

PRS Summary 4 PRR for Approval 4 PRR for Approval 3 Non-System Changes – IA only 3 Non-System Changes – IA only 1 System Change – CBA/IA 1 System Change – CBA/IA 3 Urgent 3 Urgent Review 2007 Budget Process & PRR Prioritization Review 2007 Budget Process & PRR Prioritization

PRR 650 – Balancing Energy Price Adjustment Due to Non-Spinning Reserve Service Energy Deployment Purpose (TXU Wholesale, IOU) Requires ERCOT to notify market of NSRS deployments (start/stop); requires ex-post manual recalculation of MCPE to reflect MCPE without NSRS energy deployment and subject to MCSM Benefit Accurate price signals of depleted UBES stacks will encourage additional generation to come on-line; should also improve reliability Market Impact Minor impact due to infrequency of NSRS deployments; may increase MCPE during some of the few intervals when NSRS is deployed System Change NoN/A AssumptionsN/A PRS Vote PRS recommended approval 9-3-4; all market segments were present Effective Date July 1, 2006

PRR 650 – Balancing Energy Price Adjustment Due to Non-Spinning Reserve Service Energy Deployment Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact Existing staff will perform manual recalculations, notice and settlement

PRR 657 – Process for Protocol Revisions During the Transition to a Nodal Market -- URGENT Purpose(ERCOT) Provides a streamlined process to revise the Nodal Protocols; shortens the comment period and limits Impact Analysis to items affecting a Requirements Document; applies until Nodal effective date; Urgent due to pending NPRRs from TPTF Benefit Provides a process for the timely processing of Nodal PRRs (NPRR) Market Impact N/A System Change NoN/A AssumptionsN/A PRS Vote PRS recommended approval unanimously; all market segments were present Effective Date June 1, 2006

PRR 657 – Process for Protocol Revisions During the Transition to a Nodal Market -- URGENT Comments received: Comments received: Amend Section Technical Advisory Committee Vote Amend Section Technical Advisory Committee Vote Item (3) refers to “PRS” but should be amended as “TAC” Item (3) refers to “PRS” but should be amended as “TAC”

PRR 657 – Process for Protocol Revisions During the Transition to a Nodal Market -- URGENT Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact

PRR 659 – Reporting of ERCOT Replacement Reserve Service Procurements -- URGENT Purpose (TXU Wholesale, IOU) Requires ERCOT reporting on the classification of and amounts of RPRS procured; comparison of actual RPRS procurement to “theoretical” RPRS amount; Urgent due to RPRS already in effect Benefit Provides market the ability to evaluate timing of and need for RPRS Market Impact Improves RPRS transparency System Change Yes Project to automate manual work-around and provide information to market Assumptions Improves ERCOT DA forecast which may reduce overall market costs PRS Vote PRS recommended approval unanimously; all market segments were present Effective Date June 1, 2006 – manual work-around

PRR 659 – Reporting of ERCOT Replacement Reserve Service Procurements -- URGENT Prioritization & Rank Prioritization & Rank PRR recommended for approval but did not have Impact Analysis PRR recommended for approval but did not have Impact Analysis Impact Analysis now complete and a priority/rank has been prepared consistent with PRS’ recommendation (Priority 1.1/Rank 20.5) Impact Analysis now complete and a priority/rank has been prepared consistent with PRS’ recommendation (Priority 1.1/Rank 20.5) TAC may recommend today to BOD with priority & rank; or TAC may recommend today to BOD with priority & rank; or TAC may allow PRS to meet 5/9, recommend priority & rank and then address through an vote prior to the BOD meeting TAC may allow PRS to meet 5/9, recommend priority & rank and then address through an vote prior to the BOD meeting

PRR 659 – Reporting of ERCOT Replacement Reserve Service Procurements -- URGENT Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact Existing staff will produce manually until system changes can be made <$100K

PRR 660 – TX SET Transactional Solution for a Mass Transition Event -- URGENT Purpose (CNP, IOU – TX SET) Reduces mass transition timelines and documents the process for market participants involved in mass transitions; Urgent due to efforts to reduce implementation timeline Benefit Minimizes the unbalanced energy that is currently uplifted to the market by reducing time and costs to implement mass transitions Market Impact Impact varies based on current functionality; end- use customers will be transitioned more quickly to POLR System Change Yes CBA applies to Phase 1 & 2; Requires changes to various retail systems; CBA 1.66 Assumptions Reduces timeline 8 business days; market losses - $2-$20 MM; defaults – 3 small/1 medium PRS Vote PRS recommended approval unanimously; all market segments were present Effective Date Upon System Implementation; new prioritization -- Priority 1.1; Rank 7.5

PRR 660 – TX SET Transactional Solution for a Mass Transition Event -- URGENT Item Reviewed Description NoImpact Credit Monitoring/ Liability Budget Staffing Computer Systems Business Functions Grid Operations Impact $3-$5 MM Positive credit implications through reduced credit risk Impact dependent on systems design Impacts several retail systems

Recommended TAC Actions Approval Approval PRR 650 – Balancing Energy Price Adjustment Due to Non-Spinning Reserve Service Energy Deployment PRR 650 – Balancing Energy Price Adjustment Due to Non-Spinning Reserve Service Energy Deployment PRR 657 – Process for Protocol Revisions During the Transition to a Nodal Market -- URGENT PRR 657 – Process for Protocol Revisions During the Transition to a Nodal Market -- URGENT PRR 659 – Reporting of ERCOT RPRS Procurements -- URGENT PRR 659 – Reporting of ERCOT RPRS Procurements -- URGENT PRR TX SET Transactional Solution for a Mass Transition Event -- URGENT PRR TX SET Transactional Solution for a Mass Transition Event -- URGENT

2007 Budget & Project Prioritization Process

2006: The Way We Were High(1.X) 1.1 High 1.2 Medium 1.3 Low ForcedRank Medium(2.X) 2.1 High 2.2 Medium 2.3 Low ForcedRank Low(3.X) 3.1 High 3.2 Medium 3.3 Low ForcedRank System Changes From PRRs, SCRs, PUC Staff & ERCOT All System Projects reviewed in the context of a single list Process Concerns Meaningful projects may not rise to top of the list because of they did not affect “reliability” Ranking system may not fit an ongoing system prioritization Single list did not match ERCOT resource planning & deployment

2007: A Prioritization Odyssey System Changes From PRRs, SCRs, PUC Staff & ERCOT System Projects reviewed in the context of their application area Process Concerns Addressed Projects will be contrasted with other similar projects Ranking system overhauled to provide better guidelines Multiple lists match ERCOT resource planning & deployment COIOROMOSO Project Prioritization

2007: A Prioritization Odyssey System Changes From PRRs, SCRs, PUC Staff & ERCOT Assumptions ERCOT Staff will assist each subcommittee Process starts with list as it currently exists – reevaluates & prioritized with new guidelines Allows for new projects to be added & analyzed (i.e., Impact Analysis/Cost-Benefit Analysis) CBAs only required for additions Placeholders are not encouraged COIOROMOSO Project Prioritization

2007: A Prioritization Odyssey System Changes From PRRs, SCRs, PUC Staff & ERCOT Process & Timeline May/Early-JuneSubcommittees/ERCOT/PUC Staff begin review current projects in their carts and add new projects using revised prioritization guidelines Provide recommendations to PRS (also communicated to TAC) including reasons for new projects by June PRS meeting ERCOT also uses new prioritization guidelines and communicates need for new projects to subcommittees COIOROMOSO Project Prioritization WMSROS COPSRMSPRS Cart assignments are primary but Subcommittees may have interest in other carts (e.g., WMS & MO)

2007: A Prioritization Odyssey System Changes From PRRs, SCRs, PUC Staff & ERCOT Process & Timeline Late June PRS reviews recommendations To ensure carts are “balanced” ERCOT reviews cart resource levels Communicates results to TAC July PRS presents recommendation to TAC TAC reviews PRS recommendation & forwards results to BOD COIOROMOSO Project Prioritization COPSRMSPRS WMSROS

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