1. 1 NPRR 484/554 – Revisions to Congestion Revenue Rights Credit Calculations and Payments Market Call ERCOT Public July 31, 2013

2. 2 NPRR 484/554 – Overview NPRR 484/554 substantially changes the exposure calculations and payment processes for CRRs.  Highlights:  CRR Auction Credit Requirement (ACR) for obligations valued at maximum of bid price, most recent auction price, or path-specific P99 adder  FCE for PTP Obligations based on net portfolio obligation MWs at the minimum of P100 portfolio-weighted adders or most recent portfolio- weighted auction clearing price  FCE for PTP Options and FGRs based on net portfolio options/FGRs at P99 path-specific adder  Invoice exposures beyond current and prompt months will be collateralized rather than invoiced until operating month becomes prompt month  Provision for “State Change Adder” adjustment for both auction and future exposures to reflect changes in path conditions ERCOT Public

3. 3 NPRR 484/554 – Calculations Summary ERCOT Public FCE o = FCEOBL o + FCEOPT o + FCEFGR o + DIEOBL o + DIEOPT o + DIEFGR o  FCE = Future Credit Exposure based on Mark to Market valuation  FCEOBL = Future Credit Exposure for PTP Obligations  FCEOPT = Future Credit Exposure for PTP Options  FCEFGR = Future Credit Exposure for Flowgate Rights  DIE = Deferred Invoice Exposure to cover exposure due to deferred invoicing of purchased or sold CRR Awards DIEOBL = Deferred Invoice Exposure for PTP Obligations DIEOPT = Deferred Invoice Exposure for PTP Options DIEFGR = Deferred Invoice Exposure for Flowgate Rights

4. 4 NPRR 484/554 – Calculations Summary continued.. ERCOT Public  FCEOBL  Based on monthly portfolios of PTP Obligations (group of PTP Obligation awards owned for the operating month)  Each PTP Obligation award is valued based on 30-day historical rolling average DAM Settlement Point prices.  Portfolio value for a given operating day is the aggregated value of its PTP Obligation awards.  Portfolio-Weighted Adder (PWA)  Percentile of volume-weighted value of portfolio per MWh based on historical DAM prices  Portfolio-Weighted Auction Clearing Price (PWACP)  Volume-weighted value of portfolio per MWH based on most recent Auction Clearing Prices  Portfolio exposure is highest risk (highest negative value) of PWA and PWACP.

5. 5 NPRR 484/554 – Calculations Summary continued… ERCOT Public  FCEOPT / FCEFGR  Based on monthly portfolios of PTP Options (group of PTP Option awards owned for the operating month)  Exposure calculated only for remaining days of current and prompt operating months  Path-Specific Adder (Aci99)  Value per MWh is calculated based on 99 th percentile confidence interval of 30-day historical rolling average DAM Settlement Point prices  Each PTP Option award value is Aci99 * MWH  Portfolio value is aggregated value of its PTP Option awards  Currently there are no active FGRs

6. 6 NPRR 484/554 – Credit Reports  Report Templates  Sample report templates for FCE Summary and FCE Detail reports posted as part of meeting materials for this call.  Any queries regarding them can be sent to ercotcredit@ercot.com.ercotcredit@ercot.com ERCOT Public

7. 7 NPRR 484/554 – Implementation Plan Implementation is planned to occur in phases  to bring potential benefits to the market as soon as feasible  to avoid conflicts with other major initiatives (e.g. settlements system rewrite)  PHASE 1A:  Path-specific adders (Aci99) in CRR credit lock calculations (Protocol Sections 7.5.3, 7.5.5.3)  FCEOBL calculations based on PWA and PWACP (Protocol Section, 16.11.4.5)  FCEOPT / FCEFGR calculations based on Path Specific Adder (Aci99) (Protocol Section, 16.11.4.5, No FGRs active)  FCEOBL Summary Report (Protocol Sections 16.11.4.7)  FCEOPT Summary Report (Protocol Sections 16.11.4.7)  FCEFGR Summary Report (Protocol Sections 16.11.4.7, No FGRs active) Note: Any functionality that cannot be implemented due to system / timeline limitations will be deferred to later phases; ERCOT will provide updates on the progress of implementation. ERCOT Public

8. 8 NPRR 484/554 Implementation Plan continued..  PHASE 1B: FCE Detail Reports  FCEOBL Detail Report (Protocol Sections 16.11.4.7)  FCEOPT Detail Report (Protocol Sections 16.11.4.7)  FCEFGR Detail Report (Protocol Sections 16.11.4.7, No FGRs active).  Portion of PWA functionality;  Specific historic DAM settled prices for source – sink pairings can be excluded from the calculation if deemed no longer relevant following TAC review and ERCOT Board approval  Any functionality deferred from Phase 1A (excluding PHASE 2 functionality) due to system / timeline limitations.  PHASE 2:  Deferred Invoice Responsibility (Protocol Sections 7.8, 9.8, 9.9, 9.9.1, 9.9.2)  Deferred Invoice Exposure Calculations (Protocol Section 16.11.4.5) ERCOT Public

9. 9 NPRR 484/554 – Transition / Go-Live Plan  Participation  ERCOT needs about 5 volunteer Market Participants who can fully shadow the calculations and have resources to verify ERCOT’s calculation results.  Soft Go-Live and Market Testing  Planned for week of September 30, 2013 or October 7, 2013.  ERCOT runs existing and new NPRR 484/554 FCE calculations in parallel with the active CRR ownership as of the business date.  NPRR 484/554 FCE Summary reports generated and provided to volunteer Market Participants offline by email (reports cannot be accessed using digital certificates during the transition period).  Existing FCE Summary Reports will continue to be available on the MIS Certified area during transition period.  Volunteer Market Participants perform these calculations and verify if they match with those of ERCOT. ERCOT Public

10. 10 NPRR 484/554 – Transition / Go-Live Plan continued..  Cut-Over and Hard Go-Live  Cutover planned on Sunday, October 20, 2013.  Existing FCE Calculations and FCE Summary Reports are effective until the business date of October 20, 2013.  NPRR 484/554-based FCE Calculations and FCE Summary Reports are effective starting with the business date of Monday, October 21, 2013.  Existing FCE Summary Reports will be turned off and NPRR 484/554 based FCE Summary reports are available on MIS Certified area starting from October 21, 2013.  Market Participants should note that NPRR 484/554 calculations exposure may have an effect on the ACLs for CRR and DAM ERCOT Public

11. 11 NPRR 484/554 – Milestones and Timeline ERCOT Public MilestoneSchedule DateStatus CMM Development MilestoneThu 7/11/13√ Integration Development MilestoneThu 7/11/13√ CRR Development MilestoneWed 7/31/13 CMM Development MilestoneThu 8/15/13 CRR Development MilestoneFri 8/30/13 Business Interface testing CompleteFri 8/30/13 CRR Development MilestoneMon 9/16/13 CMM Business Testing CompleteMon 9/30/13 Credit Soft Launch Begins Mon 9/30/13 or Mon 10/7/13 CRR Business Testing CompleteFri 10/11/13 Go Live: Phase 1AMon 10/21/13

12. 12 NPRR 484/554 – Market Training ERCOT will be holding three market training sessions on NPRR484/554 as per the following schedule ERCOT Public Friday, September 13, 201310am – 1pm Wednesday, September 25, 2013 (CWG meeting in AM) 1pm – 4pm Tuesday, October 8, 201310am – 1pm Note: ERCOT requests all the Market Participants to attend this training.

13. 13 NPRR 484/554 Questions ? ERCOT Public