1. COPS conference call PRR 638 Implementation COPS January 30 th 2006

2. 2 PRR 638 Implementation  PRR 638 changes the Settlement Invoice payment period from 16 Calendar days to 5 Bank Business Days.  PRR 638 is schedules to be on the February agenda for the ERCOT Board  COPS discussions on PRR 638  PRR 638 should be implemented after the transition for PRR 568 is completed ( Change in initial settlements from 17 to 10 days)  The transition to PRR 638 will involve two weeks during which there will be two invoices due each week (on both Monday and Thursday, assuming no holidays)  Concern over this temporary increase in cash flow requirements to QSEs who are net-payers  A phase-in period could “ease the pain” of implementing this PRR  Conference call to identify issues with transition, consider impacts and recommend a plan to COPS

3. 3 PRR 638 Implementation  Conference call agenda  Understand current PRR 638 transition timelines — Potential increase in cash flow requirement - Two weeks during which two invoices are due each week (Monday and Thursday) — Potential decrease in cash flow requirement – Related changes to collateral calculations  Identify issues with transition  Discuss transition plan  Recommendation to COPS

4. 4 Invoice Payment Periods after PRR 638 Invoice Payment Periods 3/23/2006 3/27/20063/30/20064/03/20064/06/20064/10/20064/13/20064/17/20064/20/20064/24/20064/27/20065/01/20065/04/20065/08/20065/11/20065/15/2006 3/20/20063/16/2006 Invoice Payment Periods Before PRR 638 ThMMMMMMMMM EAL Calculation on Friday

5. 5 Summary  Currently, each QSE can have up to three invoices outstanding.  A QSE’s Estimated Aggregate Liability (EAL) will include all outstanding invoices.  During PRR 638 implementation,  After week 1, each QSE will have only two invoices outstanding  After week 2, each QSE will have only one invoice outstanding  All else being equal, A QSE’s EAL will decrease as the number of outstanding invoices decrease (by the amount of the invoice)  After week 1, EAL will reflect only two outstanding invoices  After week 2, EAL will reflect only one outstanding invoice

6. 6 Summary  A QSE may request a refund of this portion of their posted credit.  The refund may be wired to the QSE or  Held by ERCOT to apply toward the next invoice(s) due.  Going forward, QSE’s EAL will include only one invoice outstanding  Remaining agenda items  Identify remaining issues with transition  Discuss need for transition plan  Recommendation to COPS