1. Market Operations Presentation Board of Director’s Meeting November 18, 2003

2. Agenda Q3 Retail Transaction Performance Retail Market Activity Wholesale Market Activity Day-Ahead Market Design - Implementer / Operator Perspective More Credit Focus

3. Q3 Performance Measures submitted to PUCT SWITCHES

4. Q3 Performance Measures submitted to PUCT MIMO

5. Migration from Native AREP % of ESI IDs at at 09-30-02 09-30-03 Residential 5.0% 12.2% Small Non-Residential 8.1% 14.6% Large Non-Residential30.3% 53.5%

6. Migration from Native AREP % of ESI IDs / % of Load at at at 09-30-02 09-30-03 09-30-03 Residential 5.0% 12.2% 15% Small Non-Residential 8.1% 14.6% 38% Large Non-Residential30.3% 53.5% 61%

7. REPs of Record Serving ESI IDs in ERCOT as of 09-30-03

8. YTD YTD 09-30-02 09-30-03 Uplift on load ratio share: RMR $ - 226.8 RMR BENA Credit - -129.9 Net RMR - 96.9 Black Start 5.4 5.3 Local Congestion 146.3 192.3 Total Uplift $ 191.7 294.5 Obligation Services: Ancillary Services $ 40.0 103.2 Directly assigned: Zonal Congestion $ 39.8 19.8 Balancing Energy $ 52.0 336.6 (includes Regulation Service) Short Pay $.1 22.2 Reliability and Balancing Services $ in millions

9. Day-Ahead Market Design Template

10. Vision: to make the market better Day-Ahead Market Design Template

11. Vision: to make the market better Guiding Principle: fair to all market participants Day-Ahead Market Design Template

12. Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Day-Ahead Market Design Template

13. Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… Day-Ahead Market Design Template

14. Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… at an acceptable cost. Day-Ahead Market Design Template

15. Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… - PRODUCT - PRICE DISCOVERY - CLEARING - SETTLEMENT at an acceptable cost. Day-Ahead Market Design Template

16. Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… - PRODUCT - PRICE DISCOVERY - CLEARING - SETTLEMENT at an acceptable cost. - IMPLEMENTATION - UPLIFT - PROVIDER OF LAST RESORT Day-Ahead Market Design Template

17. Vision: to make the market better Guiding Principle: fair to all market participants Strategy: strive to increase market transparency and liquidity Objective: create a public market to achieve desired transaction volume… - PRODUCT - PRICE DISCOVERY - CLEARING - SETTLEMENT at an acceptable cost. - IMPLEMENTATION - UPLIFT - PROVIDER OF LAST RESORT - CREDIT UNDERWRITER Day-Ahead Market Design Template

18. Credit Underwriter Considerations: Possible Size of Underwriting (given a Texas Market ~ $15 – 20 billion): If at PJM volume of 27%, then Underwriting ~ $ 4 – 5 billion If at NYISO volume of 50%, then Underwriting ~ $ 7 – 10 billion Day-Ahead Market Design

19. Credit Underwriter Considerations: Possible Size of Underwriting (given a Texas Market ~ $15 – 20 billion): If at PJM volume of 27%, then Underwriting ~ $ 4 – 5 billion If at NYISO volume of 50%, then Underwriting ~ $ 7 – 10 billion Who will be credit underwriter for the Texas Day-Ahead Market? ERCOT LSEs? ERCOT LSEs and Generators? Commercial Bank(s)? Other Market Institution? Other? What market policies should be implemented to achieve desired result? What legislative and/or PUCT actions are needed to achieve desired result? Day-Ahead Market Design