1. Texas Nodal Market Implementation TPTF Readiness Advisor November 29, 2006

2. AGENDA Overview of approach taken at MISO Contrast MISO situation with ERCOT situation Approach recommended for ERCOT readiness advisor function Schedule of readiness advisor activities over the next 12 weeks

3. Readiness Advisor Team Steve Balser Jesse Harmon Don McCormick

4. Readiness Advisor Readiness Advisor at the Midwest ISO

5. MISO engaged in a dialogue with its members and stakeholders to provide a greater degree of transparency and certainty about its commitment to successfully launch its energy markets  One common characteristic of well-run projects is that they have specific interim goals or milestones which can be identified and measured so that progress toward achievement of an ultimate objective can be transparently understood.  The Midwest ISO stakeholders requested that additional milestone reports be disseminated so that the stakeholders can better monitor the Project’s progress.  This resolution also requested that the Midwest ISO make monthly reports to the Advisory Committee regarding progress towards satisfying such performance criteria.  In an attempt to respond to stakeholders’ requests for additional milestone and metrics reports, the Midwest ISO conducted a series of stakeholder consultations to determine the milestones and related performance criteria stakeholders believe should be used to evaluate the Project’s progress in each milestones report  The MISO’s interaction with stakeholders, including especially the Transmission Owners Core Working Group (“TOCWG”), led to development of a set of Readiness Metrics  Accordingly, the Midwest ISO agreed with the TOCWG and the RA that a Metric Interpretive Guidance document (“MIG”) would be created for each metric to clarify its meaning, as well as to identify the principal pieces of information that would be considered to determine whether or not the metric had been met and the specific standards against which each piece of relevant information would be judged.  Another feature of the MISO’s metrics process is the development of a completion review process by the MISO for each metric, once the MISO believes that the metric has been completed. Input to the review process summarizes the evidence that demonstrates completion. Once the review process for each metric is completed and has passed internal MISO review, it is then provided to a Readiness Advisor for further review and verification of whether or not the metric has indeed been successfully completed.

6. Readiness Advisor at the Midwest ISO Facilitate the development of metrics with the Metric Interpretive Guidance Task Force (MIGTF) Examine the evidence for each Metric and render the decision of when the Metric has been verified as met Follow up with MISO on any outstanding questions or issues that are preventing the completion of Metric verification Provide regular periodic readiness assessments to the CEO and the MISO Board of Directors and Stakeholders Produce regular interim reports that cover all milestones and metrics, providing information such as (and not limited to), any observed issues potentially impeding progress Produce an Executive Report prior to the start of Market Trials and send the report to all stakeholders in advance of its final presentation Produce an Executive Report prior to the launch of the Markets and send the final report to all stakeholders in advance of its final presentation Provide presentations on readiness to the CEO and the Board of Directors and the Advisory Committee and the Organization of MISO States as requested The Readiness Advisor was formed as an independent advisor to the Midwest ISO (MISO) senior management, MISO Board of Directors, MISO Market Participants, and the Organization of MISO states on the status of preparation of activities leading up to and including launch of the day-ahead and real-time energy markets. Readiness Advisor Activities

7. Readiness Advisor at the Midwest ISO Organization

8.  Market Participants Representing 15 states and 1 Canadian Province  Presented Readiness Status Monthly  Met with as requested

9. Readiness Advisor at the Midwest ISO Organization  30+ member committee representing the Market Participants and Organization of MISO States  Presented Readiness Status Monthly as part of standing agenda

10. Readiness Advisor at the Midwest ISO Organization  Organization of state regulators within MISO footprint  Presented Readiness to OMS on an “as required” basis  Interacted with frequently on FERC filings

11. Readiness Advisor at the Midwest ISO Organization  MISO Board of Directors meet monthly  Presented Readiness Status Monthly as part of BOD standing agenda

12. Readiness Advisor at the Midwest ISO Organization  MISO CEO and Direct Reports  Report Readiness Project Status weekly  Met frequently

13. Readiness Advisor at the Midwest ISO Organization  MISO personnel responsible for metric development and completion  First line of communication for Readiness Advisor during the verification process, observations and interviews

14. Readiness Advisor at the Midwest ISO Organization  Task force consisting of MISO personnel, Market Participants and OMS members acting as final authority of metric development  Provided SME expertise for MIGTF monthly and adhoc meetings

15. Readiness Advisor at the Midwest ISO Organization  Federal Energy Regulatory Commission  Available to FERC personnel for Readiness Status on an as-required basis

16. Readiness Advisor at the Midwest ISO Organization  On Site Readiness Advisor Team  Review and verify submitted metrics  Provide scheduled status reports  Provide the Verification Report  Conducted weekly “Call” inviting all parties to ask Readiness Status questions  Provide milestone reports to include a Final Report

17. A “metric” in the MISO definition is a further definition of milestones that give a more transparent view of progress being achieved. A description and achievement verification criteria for each metric was defined by the metric “owner” and final approved by a joint team of MISO staff and MPs with additional facilitation by the RA team. One hundred and twenty-six (126) “metrics” were identified for measurement representing ten (10) areas key to a successful market launch Readiness Advisor at the Midwest ISO Metric Development

18. The 126 MISO metrics were aggregated into 10 groups called metric categories. The metric categories provided the means to visibly track and report progress. The following is a list of the 10 MISO metric categories. –Business Practice Manual Readiness (7) –Market Participant Readiness (18) –Control Area Readiness (11) –Joint Operating Agreement Readiness (16) –State Estimator / LMP Readiness (17) –Financial Transaction Rights (FTR) Readiness (10) –Market Monitor Readiness (3) –Contingency Readiness (11) –Systems Readiness (14) –Participant-Side Readiness (3) Readiness Advisor at the Midwest ISO Metric Development

19. Sample of actual metrics for 3 selected metric categories: Market Participant Readiness –Ninety percent (90%) of Market Participant Applicants who have started registration and provided all required data on or before April 30, 2004 [per metric 42.1] complete asset registration. State Estimator / LMP Readiness –Real-Time Performance Criteria – For thirty (30) consecutive days a Valid State Estimator solution must be achieved for ninety-seven percent (97%) of the five (5) minute periods within that thirty (30) day period. There will be no more than three (3) consecutive five (5) minute periods without a valid solution (except when there is a planned system software migration as required by the Energy Markets project or when ICCP data is unavailable due to remote CA ICCP node errors). Valid solution is defined as one converged solution in a 5 minutes period using converge tolerance of.002 per unit voltage magnitude and/or angle and maximum power mismatch of 50MW inside the State Estimator model within the Midwest ISO Market footprint. Contingency Readiness –For failure to achieve the Real-Time solution, Midwest ISO shall have a process for evaluating and approving the future operation that manages congestion and maintains reliability. The processes shall be tested and shall include for each geographical area: Demonstration of generation dispatch.

20. Readiness Advisor at the Midwest ISO Metric Development

21. Readiness Advisor at the Midwest ISO Metric Verification

22.  Step 1 Planning - The planning step ensures that all parties agree, up front, to the way the project will be conducted. It baselines the scope, schedule, and approach of the effort and forms the basis for all subsequent steps

23. Readiness Advisor at the Midwest ISO Metric Verification  Step 2 MISO & Stakeholder Objectives, Criteria, and Metrics - This step focuses on reviewing MISO’s MMI with respect to its objectives, commitments, and requirements. It will begin immediately after the planning activity and encompass collection of pertinent objectives around MMI

24. Readiness Advisor at the Midwest ISO Metric Verification  Step 3 Infrastructure - The purpose is to institute a repeatable, defensible collection and analysis process for the MISO- defined metrics

25. Readiness Advisor at the Midwest ISO Metric Verification  Step 4 Performance and Progress Analysis - The goal is to aggregate, relate to the critical path for tariff implementation, and document the selected MISO MMI metrics, analyze development performance, and project progress against the success criteria and critical path for MMI. This goal includes observation of MISO testing and validation of the network model, the LMP calculation, and other key calculation tools like load forecasting and the commercial model underlying FTR allocations and markets

26. Readiness Advisor at the Midwest ISO Metric Verification  Step 5 Trends - This step will synthesize the information of the Analysis step, develop trend functions that provide additional information about performance and progress often of predictive value, and identify metrics that (during specific periods) may provide forward-looking cues of emerging critical issues

27. Readiness Advisor at the Midwest ISO Metric Verification Step 6 State of Readiness - This step will synthesize the information of the metrics and trends steps to enable a valuation of the state of readiness of the MMI systems and processes, including key models and calculation tools

28. Readiness Advisor at the Midwest ISO Metric Verification  Step 7 Executive Reports and Presentation - This step will develop the reports and presentations necessary to properly communicate the state of readiness, performance and progress metrics, and performance and progress trends

29. Readiness Advisor at the Midwest ISO Metric Verification Completion Review Diagram (CRD)  Summarizes the evidence that demonstrates completion. Once the CRD for each metric is completed and has passed internal MISO review, it is then provided to the RA as part of the RA’s review and verification of whether or not the metric has indeed been successfully completed.

30. Readiness Advisor at the Midwest ISO Metric Verification Completion Review Document verification process:

31. Verification Report  The Verification Plan document sets forth, on a metric-by-metric basis, the approach that the RA will take to verify that each metric has been completed or achieved.  The Verification Plan indicates the types of approaches that will be applied by the RA to verify different metrics and establishes the minimum set of activities that will reasonably establish that the metric has been met. Readiness Advisor at the Midwest ISO Metric Verification

32. Readiness Advisor at the Midwest ISO Reporting Reported market status directly to the MISO Chief Executive Officer and his direct reports weekly. Presentation to the Board Of Directors monthly. Presentation to the Market Participants and Stakeholder Advisory Committee monthly. Presentation to the Organization of MISO States, an organization represented state regulators for the 15 states residing within the MISO footprint. These sessions were scheduled on an as-requested basis. In person presentations were performed on 3 occasions. Readiness Advisor formal reports evaluating market readiness was delivered prior to Day-In-The-Life, Market Trials, Parallel Operations I & II and for the MISO filing to FERC requesting approval for subsequent market launch on April 1, 2005.

33. Readiness Advisor at the Midwest ISO Reporting

43. Readiness Advisor Readiness Advisor at ERCOT

44. ERCOT Metric Category Framework as derived from the ERCOT Business Process Architecture (appendix) and the known MISO Metric Categories: –Power System Readiness –Power System Operation Readiness –Wholesale Market Operation Readiness –Wholesale Market Settlement Readiness –Wholesale Market Services Readiness –Compliance Readiness –Market Monitor Readiness –Market Participant Readiness –Participation-Side Readiness –External Business Readiness –Management Readiness –Contingency Operation Readiness ERCOT Metric Category Framework

45. Readiness Advisor at ERCOT ERCOT Readiness Advisor Project Plan

46. Readiness Advisor at ERCOT Proposed Project Plan Overview - Approach to Establishing a Readiness Advisor at ERCOT –Aligning the organization Metric Task Force (MTF) – Subgroup of TPTF responsible for assisting the RA in developing the Metric Category Framework and for oversight in providing the detailed Metrics associated with each category Metric Category Managers (MCM) – Person in charge of a particular category of Metric.; Metric Owners report to the Metric Category Managers. Metric Owner (MO) – Person responsible for developing the criteria and executing the measurements associated with a particular Metric. Metric Owner is responsible for developing the measurement system, ensuring the measurements are completed, and the determination the status of the Metric. Readiness Advisor (RA) – Entity responsible for facilitating the development and execution of the Readiness Program –Establishing the infrastructure Metric Category Framework – List of activity/process/calculation categories that require Metric definitions Metric Category – A grouping of metrics associated by business function, the responsibility of a Metric Category Manager. ERCOT Metrics – Measurable criteria that is used to determine whether a particular activity/process/calculation is being correctly performed ERCOT Metric Landscape - Collection of Metrics used to determine whether the Nodal implementation is ready to go live. –Preparing for “Verification” Ongoing Process

47. ERCOT Readiness Advisor Schedule

48. Project PlanTexas Nodal – Readiness Advisor Project Number Charter DateNovember 29, 2006 Program Director IRT Project Manager Readiness Advisor Scope This Phase of the Texas Nodal Readiness Advisor Program will entail the establishment of the organization and infrastructure necessary to support the ongoing readiness activities as the ERCOT transitions from a zonal to nodal market. Four major activities will be accomplished during this timeframe: Establishment of the readiness organizational responsibilities: –the Metric Task Force; –the Metric Category Managers and –the Metric Owners Development of the Metric Category Framework Identification of Metrics Development of the Metric Landscape –Verification Report which includes high level metric description –Metric Map The Readiness Advisor Project team will participate, facilitate and, when required, lead the successful achievement of the above activities. Readiness Advisor Objectives Provide an ERCOT Metric Landscape that will serve as a baseline for the Readiness Advisor activity to provide an accurate, timely, ongoing and transparent representation of key activities and milestones as the market transitions from a zonal based market to a nodal based market Specific objectives are to: Provide and facilitate an organizational infrastructure and associated processes to develop: The ERCOT Metric Framework The ERCOT Metrics The ERCOT Metrics landscape ERCOT Readiness Advisor Project Plan

49. Project Plan Texas Nodal – Readiness Advisor Readiness Advisor Processes As shown below:  Develop Project Plan encompassing Readiness Advisor Step 2 Activities  Present the Project Plan to the TPTF for comment and approval. The Project Plan will detail the proposed ERCOT approach to the Readiness Advisor activity to include a detailed schedule outlining Stakeholder and ERCOT project participation. Also included with the Project Plan is an overview of the readiness activity as practiced at the Midwest ISO.  Approve the Project Plan  Establish the Metric Task Force (MTF) ~ A subgroup of the TPTF assigned to specifically oversee the Readiness Advisor Project, to facilitate Market Participant participation and to provide final approval for all Metrics  Develop the Metric Category Framework which defines the highest level of categorical areas as defined within the scope of the Readiness Advisor Program. The Metric Category Framework is derived from the ERCOT Process Model (level 1 & 2) and the MISO Category List  Establish Metric Category Managers (MCM) for each Metric Category. The MCM is responsible for a specific metric category and the development of metrics applicable to that category  Establish Metric Owners (MO) for each metric as identified within the Readiness Program. MCMs may also be MOs and the relationship of MOs to Metrics can be one-to-one or one-to-many  Develop the ERCOT readiness metrics to include a brief description of each Metric and a proposed method of measurement. The ERCOT metrics will be derived from the ERCOT Process Model (level 2) and the MISO Metric List  Approve the ERCOT Metrics creating the Approved ERCOT Readiness Metrics  Develop the ERCOT Metric Landscape which is a presentation depicting the ERCOT Metric Category Framework with all associated ERCOT Metrics and the ERCOT Metric Verification Report  Approve ERCOT Metric Landscape for final delivery ERCOT Readiness Advisor Project Plan

50. Project PlanTexas Nodal – Readiness Advisor Key MilestonesKey Dependencies  Acceptance of the Readiness Advisor Project Plan  Metric Task Force Established  Metric Category Framework Established  Metric Category Managers Identified and Staffed  Metric Owners Identified and Staffed  ERCOT Readiness Metrics Identified  ERCOT Metric Landscape Complete and Delivered Input Dependencies:  ERCOT Business Process Architecture Map Levels 1 & 2  MISO Metric Category List Output Dependencies:  ERCOT Metric Landscape External Dependencies:  TPTF  Approve Project Plan and Approach  Approve ERCOT Metric Categories  Approve ERCOT Metrics  Approve ERCOT Metric Landscape Assumptions  TPTF has appropriate participation, resources, and time available.  The Metrics Task Force Team is represented by all Stakeholder sectors  The Metric Task Force Team (MTF), the Metric Category Managers (MCM) and the Metric Owners (MO) are staffed by personnel with domain expertise pertaining to their responsible area.  In an ongoing fashion, key ERCOT and Stakeholder personnel will be available to RA team members for such activities as scheduled interviews, metric clarification and work process and system observation.  RA team will work in a work area to insure confidentiality of metric information and resulting information ERCOT Readiness Advisor Project Plan

51. Project Plan Texas Nodal – Readiness Advisor Readiness Advisor Deliverables As shown below:.  ERCOT Metric Category Framework - List of high level activity/process/calculation categories that require Metric definitions  ERCOT Metrics - Full set of Metrics including a description and criteria necessary to test readiness. Specific acceptance criteria will be addressed in the Readiness Project’s next phase  ERCOT Metrics Landscape - Collection of Metrics, by Metric category, used to scope the next phase of the ongoing Readiness Project and to status the ongoing progress of the Nodal implementation once underway. To be presented in as the ERCOT Metric Verification Report and the ERCOT Metric Map. ERCOT Readiness Advisor Project Plan

52. Project Plan Texas Nodal – Readiness Advisor Key RisksRisk Mitigation Strategy Identification and participation of Metric Task Force (MTF) members that represent a cross-section of business sectors representing ERCOT stakeholders 1.The TPTF will select MTF members to represent as many business sectors within the ERCOT stakeholder community as possible Identification and Participation of Metric Category Managers (MCMS) and Metric Owners (MOS) that possess the in-depth domain expertise an knowledge necessary to define metrics and metric criteria 1.MCM and MO team members will be selected based on pertinent domain expertise and domain responsibilities All team members, Metric Task Force (MTF), Metric Category Managers (MCM) and Metric Owners (MO) and associated resources will be available to participate as scheduled in support of, and for the duration of, the Readiness Advisor activities 1.Team members will be assigned that have a desire to participate and who will be available to the effort on an ongoing basis 2.The Readiness Advisor project schedule will provide the information required for all team members to plan for their participation in advance of the time requirement ERCOT Readiness Advisor Project Plan

53. Project PlanTexas Nodal – Readiness Advisor Approach Key elements of the required approach are clear:  This project plan establishes the metric baseline for going forward with the Readiness Advisor Program – Future changes to this scope will be subject to formal change control as employed by the Metric Task Force (MTF)  The ERCOT Metric Category Framework will be approved prior to moving forward with the definitions of the ERCOT Metrics  All ERCOT Metrics will be approved by the Metric Task Force (MTF)  Descriptions and metric acceptance criteria will be established by the Metric Owners (MO) Organization Model The readiness project team consists of:  Metric Task Force  Metric Category Managers  Metric Owners  ERCOT Management  ERCOT Employees  Readiness Advisor Team Next Steps Establish the Metric Task Force Establish the ERCOT Metric Category Framework Establish the Metric Category Managers ERCOT Readiness Advisor Project Plan

54. Readiness Advisor ERCOT Readiness Advisor Schedule and Resource Requirements

55. Readiness Advisor MISO Market Launch Progress as Seen Through the Monthly Metric Maps

56. Readiness Advisor End of October

57. Readiness Advisor End of November

58. Readiness Advisor End of December

59. Readiness Advisor End of January

60. Readiness Advisor End of February

61. Readiness Advisor End of March

62. ERCOT Metric Category Framework APPENDIX

63. ERCOT Metric Category Framework