1 Nodal Credit Update at WMS June 16, 2010

2 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.

MT5 – Friday call extracts Focus on a) mechanics (report posting, ACLs sent and received, etc), b) understanding Credit Reports and c) ensuring adequate credit limits Post Credit Reports daily –ACL and TPE Summary Reports early (by 9:30) –Remainder by 11am (after review) Continue to send ACLs each business day –ERCOT continues to adjust ACLs or credit limits as needed to ensure adequate credit limits while the market gets familiar with the Credit Reports 3

MT5 – Friday call extracts Large credit exposures –While the load volume estimation issue has been fixed and the generation volume estimation issue is being fixed soon, estimates with erroneous data have not fully rolled off. Expect “completed not settled” estimates used in AIL component of TPE calculation to improve daily and reflect all corrections within the next two weeks –Credit and Debit invoices continue to appear in the OIA (Outstanding Invoice Amount) of the EAL (Estimated Aggregated Liability) calculation after payment due date ERCOT staff researching the root cause of this issue –Extrapolation of high historical activity forward continue to impact exposure calculations for some CPs Will roll off or CPs may work with ERCOT staff to adjust the ADTE component of the Total Potential Exposure (TPE) for the “old” historical activity 4

MT5 – Friday call extracts Large credit exposures –Continue to see some CPs utilize the Real Time market significantly, resulting in high exposures To obtain more realistic exposure calculations, CPs should begin functioning in MT5 as you might after Go-Live –Impacted by both volume and price –For QSEs representing Load, use Energy Trades or DAM rather than RT to meet your load requirements. –For all, use more realistic estimates in your market activity (bids / offers in DAM, etc) 5

Volume by Counter-Party by Day 6

Example of impacts to exposure 7

This week ERCOT –Will continue to review exposure calculations for reasonableness –Will continue to override ACL as needed Once data stabilizes and AIL report is available, will discontinue override (tentatively the week of June 21st) Will not send collateral calls until discontinue override –Will do credit approvals of CRR Bilateral Trades as needed Have not received any bilateral trades to approve to date Counter-Parties –Continue to review the Credit Report calculations to confirm they reflect their MT5 activity to the extent possible –Ensure your ACL is adequate for the upcoming CRR auction, LFC test and normal DAM activity If CPs wish to have a higher limit, they should send “e-collateral” 8

This Week - Schedule of activity

Other topics Tentative timeline for First Priority Security Interest document –July 1, 2010 – ERCOT circulates initial draft to CPs. –July 19, 2010 – Comments back from CPs. –August 2, 2010 – ERCOT circulates second draft to CPs. –August 17, 2010 – ERCOT reviews document with F&A. –September 21, 2010 – Final review and possible approval by F&A and ERCOT Board. NPRR 206 and “e” factors –NPRR 206 with 1/0/1 – in by mid-July –“e” factors – planned - August 1 –Training on NPRR 206 and “e” factors in August 10

Known Issues 11 Reports not available at this time –FCE detail reports are not being posted due to large volume of data (several hundreds of pages per report) –AIL detail report is not being posted due to data issue on report Load Volume used in AIL Calculation – FIXED; however historical data still being corrected – Issue with Load Estimation has been fixed and high estimates are rolling off AIL. Generation Volume used in AIL Calculation – FIXED; however historical data still being corrected – Issue with Generation Estimation has been fixed and high estimates are rolling off AIL.

Known Issues OIA (Outstanding Invoice Amount) of the EAL (Estimated Aggregated Liability) calculation Credit and Debit invoices appear in OIA calculation after payment due date Issue being researched ADTE field of the EAL Details Report has a display issue; calculation is correct Note: ERCOT will post known issues on the website and beginning next week will only report new known issues and resolution of issues on the weekly call. 12