1. CEO Report Thomas F. Schrader ERCOT Board of Directors July 19, 2005

2. 2 CEO Report Budget Preparation QSE/REP Default Management Dashboard Legislation Annual Report

3. 3 ERCOT’s Mission is to direct and ensure reliable and cost-effective operation of the electric grid and to enable fair and efficient market-driven solutions to meet customers’ electric service needs. For the benefit of Texas, we will… Operate the high-voltage electric grid reliably, efficiently, and securely Provide open and non-discriminatory access to electric transmission services and the competitive electricity market Enable robust and efficient wholesale and retail electricity markets Plan a reliable and efficient electric transmission system for the future Mission Statement

4. 4 ISO Cost Comparisons 2004 Normalized Expenditures Basis for ComparisonERCOT Rank% of Median Population ($/person)  With Retail $  Without Retail $ 5353 108 97 Peak Load ($/Gw) 256 Electric Use ($/Gwh) 158 Generator ($/Unit) 4100 Transmission Mile ($/mile) 250 Daily Schedule 120 Market Participant 290 Source: ERCOT Cost Comparison Study, KEMA, December 2004

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15. 15 REP Default ERCOT and Market Participant working to  Transition customers to the new REP or POLR  Minimize the impact to the market Identifying issues  Timeline for QSE notice of termination of LSE  Clarity of responsibility of transition tasks  Clarity of timeline, including the trigger point  Need cooperation of losing REP for customer name and billing address