Lead from the front Texas Nodal 1 Nodal Transitional Qualification Approach to Qualifications for the Nodal Market August 16, 2007

Lead from the front Texas Nodal 2 Agenda Nodal Transitional Qualification Objectives Entities Requiring Nodal Transitional Qualification Approach Plan / Execution Q&A

Lead from the front Texas Nodal 3 Objective – Qualification vs. Readiness ERCOT to transition and qualify Market Participants to operate in the nodal market. ERCOT will need to assure that those Market Participants requiring qualification (by the Protocols) demonstrate their ability to execute their additional responsibilities for the nodal market. QualificationReadiness Criteria Based on the ProtocolsBased on Transition Plan Required for certain Market ParticipantsDeveloped for all Market Participants including ERCOT A series of tests administered upon request by the qualifying entity Continuously assessed and reported during transition Used to determine eligibility of the qualifying entity to participate in the nodal market Used to make readiness decisions for market trials and market open Qualification determined by ERCOT based on Protocols for Market Participants Monitored through the Market Readiness Metrics. Objective Qualification vs. Readiness

Lead from the front Texas Nodal 4 Entities Requiring Transitional Qualification Entities with qualification requirements in the Nodal Market: –Congestion Revenue Rights (CRR) Account Holders –Qualified Scheduling Entities (QSE) Entities with NO qualification requirements in the Nodal Market: –Load Serving Entities (Certification of Retail Electric Providers for the retail market will continue – No changes expected ) –Renewable Energy Credit Account Holders –Resource Entities –Transmission Service Provider (TSP) –Distribution Service Provider (DSP)

Lead from the front Texas Nodal 5 Entities Requiring Transitional Qualification Breakdown of High- Level Requirements  Leverages EDS testing through a combination of controlled and uncontrolled activities  Accounts for all Market Participant types with Nodal qualification requirements  Includes two-phased approach for A/S Quals.: 1.Completion of Attestation of Qualification A/S Form. 2.Participation in the EDS 3 and 4 Testing  New resources and QSE’s that did not sign Attestations will be subject to full ancillary service qualification testing. Specific deadlines and procedures are in development  Grid extracted from “Registration and Qualification Guide for Transitioning to the Nodal Market“ V1.0 CRR = CRR Account HolderX Required Q = QSE without Resource (equivalent to zonal Level 1&2 QSEs)X* Required only for new MP QR = QSE with Resources (equivalent to zonal Level 3&4 QSEs)HR Highly Recommended

Lead from the front Texas Nodal 6 Nodal Transitional Qualification Approach Activities Aligned w/ EDS Market Testing Qualifications – EDS Map EDS 1.1  N/A EDS 1.2  Communication (Connectivity) - ICCP Telemetry Real-Time  ICCP Telemetry check-out EDS 2.3  N/A EDS 2.4  NOMCR EDS 3.5  Communication– MIS / API  Notifications  COP, TPO, OS, Inc/Dec (submit, update, cancel) EDS 3.6  Market Operations Functional Testing  LFC (Regulation Service) EDS 3.7  CRR EDS 4.8  N/A EDS 4.9  A/S  Market Ops Continued Areas of Qualification Aligned w/ EDS:  Communications: ICCP/MIS/API/CRR  Market Ops Functional  Ancillary Services  CRR

Lead from the front Texas Nodal 7 Nodal Transitional Qualification Approach Specific Scenarios to be Validated During EDS Testing QSE Draft Qualification Checklist CRR AH Draft Qualification Checklist D R A F T IN DEVELOPMENT ** New resources and QSE’s that did not sign Attestations will be subject to full ancillary service qualification testing. Specific deadlines and procedures are in development ** Resources Qualified for A/S that move to another A/S Qualified QSE will retain their qualification status per protocols section (8)

Lead from the front Texas Nodal 8 Nodal Transitional Qualification Plan / Execution Qualification Requirements Covered in EDS Tests: –Nodal transitional qualification requirements will be satisfied as part of the EDS testing (structured / unstructured testing) –Exception: “Attestation of Qualification of Ancillary Services” form required for Ancillary Service transitional qualification  New resources and QSE’s that did not sign Attestations will be subject to full ancillary service qualification testing. Specific deadlines and procedures are in development –Qualification checklist will be completed by ERCOT during EDS activities and kept on file Qualification Requirements NOT Covered in EDS Tests: –These will be scheduled and executed separately –These will be minimal (e.g. registration activities and credit evaluation) Qualification Scorecard will be published as part of the market readiness metrics (example, next slide)

Lead from the front Texas Nodal 9 Example Nodal Transitional Qualification Dashboard D R A F T

Lead from the front Texas Nodal 10 Q&A