SEWG R EPORT TO COPS Jim Galvin- Chair, Settlements and Extract Working Group

E XTRACT I SSUES ERCOT reported on the Extract and Report issues from the mid December and January Extract and Report Issues continue to be on the decline, only three incidents in the current period

N ODAL S ETTLEMENT A LGORITHMS SEWG was presented with a suggested document that identifies all Nodal settlement algorithms Aside from the calculations, the document identifies the bill determinants and other elements of the calculation that may be critical SEWG agrees that this is the formal means for drilling deeper into the calculations and data sources necessary for shadow settlement of Nodal SEWG will utilize this document as the means for providing a draft Nodal Settlements Operating Guide to COPS at year end

UFE S ETTLEMENT Calvin Opheim presented analysis of UFE during January 2010 Findings identify two primary issues Profiling anomalies during significant weather events Daily profile discontinuity Previous periods have seen similar results (January 2008 is the best comparison) Analysis indicated that AMS meters were higher than the consumption had those meters been profiled Initial indications are that AMS meters will reduce UFE volatility, not necessarily UFE volumes

UFE S ETTLEMENT Analysis was provided on how AMS meters will impact that allocation of UFE High-level analysis demonstrates that as NIDR meter customers move towards AMS meters, remaining NIDR customers will bear higher allocation of UFE volumes UFE allocation factors are currently at 0.1 for Transmission Level IDR, 0.5 for remaining IDR and 1.0 for NIDR To the point where there are sufficient AMS meters installed, the UFE burden to NIDR does not diminish until 3 rd quarter 2011 SEWG and PWG will continue to look at this phenomenon

UFE S ETTLEMENT PWG and SEWG members discussed the possibility of reviving the UFE Task Force The suggestion was made that PWG and SEWG work together on portions of their meetings dedicated to UFE issues and analysis Members of both groups in attendance seemed to encourage this effort Details on how this will proceed will be developed by SEWG and PWG leadership

EILS S ETTLEMENT - I NVOICE COPS forwarded to SEWG the task of evaluating ERCOT’s request for handling EILS settlement and invoicing for Nodal Two options for Nodal Invoicing Miscellaneous Debit and Credit Option Miscellaneous Invoice Option Concerns surfaced primarily around the addition of a new invoice and the ability to get the necessary bill determinants in extracts No consensus from either option from SEWG ERCOT mentioned that they would default to the Miscellaneous Invoice option and no concerns were voiced on that declaration

EILS S ETTLEMENT - U PDATE After SEWG meeting, ERCOT received more details from EILS expert P. Wattles According to PUCT Rule , language under “EILS Payment and Charges” states the following: ERCOT shall settle an EILS contract period through payments and charges on a settlement statement of a single operating day within 70 days following the completion of the EILS contract period. ERCOT believes without change to the rule making, this language indicates the only option would be Miscellaneous Debit/Credit

EILS S ETTLEMENT - L ONG T ERM S OLUTION The working group discussed possible solutions for a long term settlement strategy for EILS A desired approach would be to provide EILS as a settlement charge on a daily settlement statement Challenges to settlement daily: Time period settlements Complexity of new determinants in settlement Performance for final payments to EILS suppliers

EILS S ETTLEMENT - L ONG T ERM S OLUTION Time period settlements would require an aggregated LRS cut of data over time periods, as well as settled dollars per period for uplift This is probably doable, but does add to complexity of additional bill determinants and additional settlement responsibilities Key issue is the final payments for EILS after performance evaluation Would we consider paying EILS capacity based on estimates and charge for failure to perform? Table on next slide shows performance over Contract Periods

EILS S ETTLEMENT - L ONG T ERM S OLUTION Summary of performance over Contract Periods EILS CONTRACT PERIOD Projected cost based on procurement Final cost after availability adjustments Final % of originalNotes Feb-May 08 $ 5,340, $ 5,298, % June-Sept. 08 $ 6,587, $ 6,399, % Oct.08-Jan09 $ 8,254, $ 4,940, % Economic downturn caused numerous failures Feb-May 09 $ 4,537, $ 4,198, % June-Sept. 09 $ 6,361, $ 6,142, % Oct.09-Jan10 $ 7,789, Settlement Apr. 12, 2010 Feb-May 10 $ 6,692, Settlement ~ Aug. 9, 2010

EILS S ETTLEMENT - N EXT S TEPS SEWG recommends no preference on Miscellaneous Debit/Credit vs. Miscellaneous Invoice ERCOT would default to Miscellaneous Invoice and SEWG had no objections Will continue to evaluate potential long term solution Need to address how to handle the Transition Contract Period between Zonal and Nodal