1. Protocol Revision Subcommittee Report to ERCOT Technical Advisory Committee December 5, 2002

2. PRS Report Overview 5 Protocol Revisions for TAC approval5 Protocol Revisions for TAC approval 1 PRR for Urgent Status1 PRR for Urgent Status 2 PRRs rejected2 PRRs rejected 3 System changes placed “at risk”3 System changes placed “at risk” RMR Task Force ReportRMR Task Force Report

3. PRR 342 – AS Simultaneous Selection Procedural HistoryProcedural History –Originally recommended to TAC for approval at July, 2002 meeting –PUC MOD requested that no action be taken in order to address new issues –New issues were discussed with WMS –PUC MOD now requests submittal of original PRR for approval

4. PRR 342 – AS Simultaneous Selection Requires ERCOT to procure RegUp, Responsive and Non-Spinning Reserves using a simultaneous selection process to minimize overall costsRequires ERCOT to procure RegUp, Responsive and Non-Spinning Reserves using a simultaneous selection process to minimize overall costs Complies with PUC Protocol OrderComplies with PUC Protocol Order Effective Date based on project scheduling—Needs PriorityEffective Date based on project scheduling—Needs Priority

5. PRR 357 – Revision to Market Solution Definition PRR attempts to clarify the Market Solution definitionPRR attempts to clarify the Market Solution definition –Requires independent bidding –Adds examples of where a market solution does not exist –Includes ERCOT process for applying the Market Solution definition to local congestion Market Participant affiliate relationships will continue to be manually verifiedMarket Participant affiliate relationships will continue to be manually verified

6. PRR 359 – Improve Resource Plan Requires QSEs to submit High and Low Operating Limits in Resource PlanRequires QSEs to submit High and Low Operating Limits in Resource Plan Requires QSEs to update Resource Plans to show Resource status changesRequires QSEs to update Resource Plans to show Resource status changes Priority 2.2Priority 2.2 Effective Date pending project start dateEffective Date pending project start date

7. PRR 372 – QSE Back-Up Plan Requirement Changes Protocols to require QSEs and TDSPs to comply with back-up plan requirements in the ERCOT Operating GuidesChanges Protocols to require QSEs and TDSPs to comply with back-up plan requirements in the ERCOT Operating Guides –OGRRs 119 & 120 detail the back-up plan requirements No System Impact to ERCOTNo System Impact to ERCOT Effective Date—January 1, 2002Effective Date—January 1, 2002

8. PRR 373 – Define OOME as an Instructed Deviation Applies to OOME instructions issued prior to BES clearingApplies to OOME instructions issued prior to BES clearing –Still uninstructed after BES clearing ERCOT must honor unit ramp rates shown on QSE’s Resource PlanERCOT must honor unit ramp rates shown on QSE’s Resource Plan Priority 2.1Priority 2.1 Effective Date pending analysis and project startEffective Date pending analysis and project start

9. Urgent PRR PRR 371 –Minimum Energy OOME When an OOMC Instruction is IssuedPRR 371 –Minimum Energy OOME When an OOMC Instruction is Issued –PRS requested data from ERCOT regarding the number of disputes by generators –PRS also received comments to be considered by QSEPMWG prior to next PRS meeting –Urgent status maintains same timeline as the PRR was on but allows time for more analysis

10. Rejected PRRs PRR 364 – RPRS Payment & Charge CalculationPRR 364 – RPRS Payment & Charge Calculation –Was not reviewed by WMS PRR 365 – Replace “Resource Specific Premium Bid” with “Price Bid”PRR 365 – Replace “Resource Specific Premium Bid” with “Price Bid” –Proposed revisions made to subsequently amended language –Require resubmittal to ensure no conflicts with current language

11. “At Risk” System Changes Adoption of PRRs 342, 359 and 373 may “bump” the following projects to lower priorityAdoption of PRRs 342, 359 and 373 may “bump” the following projects to lower priority –Implement GISB 1.6 Transport (SCR717) –Modify AS Performance and Frequency Control Algorithms –XML Data for QSEs (SCR 721) PRS and ERCOT must assess Market/ERCOT projects to make final determinationPRS and ERCOT must assess Market/ERCOT projects to make final determination

12. TAC Action Consider PRRs for approvalConsider PRRs for approval Approve “Urgent Status” for PRR 371Approve “Urgent Status” for PRR 371

13. Reliability Must-Run (RMR) Task Force Report to ERCOT Technical Advisory Committee December 5, 2002

14. Housekeeping Reliability Must-Run exploder is:Reliability Must-Run exploder is: ‘1 RMR TF@ERCOT.com’ ‘1 RMR TF@ERCOT.com’TF@ERCOT.com –Email Isabel Flores to be added to the list (iflores@ercot.com)

15. RMR TF Objectives Review Existing OOM and RMR ProtocolsReview Existing OOM and RMR Protocols Determine Issues that Need to be AddressedDetermine Issues that Need to be Addressed Evaluate Alternatives to Existing OOM and RMR ProtocolsEvaluate Alternatives to Existing OOM and RMR Protocols Recommend Protocol Revisions to PRSRecommend Protocol Revisions to PRS Complete Task Prior to 2Q03 RMR Contract SigningsComplete Task Prior to 2Q03 RMR Contract Signings

16. WHY OOM & RMR? Units In Market MarketLocalCongestion Solved Solved Units NOT NOT In Market In Market RMR Integrated ERCOT Tools To Resolve Local Congestion

17. Externalities To Date Outstanding Protocol Revision RequestsOutstanding Protocol Revision Requests –Board Task Force on PRR 370 (RMR Issues) –Changes to OOM compensation (e.g., 371) PUC Docket appealing prior Protocol RevisionsPUC Docket appealing prior Protocol Revisions

18. Meeting Results Two meetings held since TAC assignmentTwo meetings held since TAC assignment –ERCOT provided background on OOM and RMR use and pricing –Determined six RMR issues to be resolved –Determined and discussed, at length, three global questions concerning RMR –Developed general work plan

19. Six Issues to be Resolved Economic Trade-OffsEconomic Trade-Offs (RMR v. OOM v. BENA v. Transmission)(RMR v. OOM v. BENA v. Transmission) Transmission Planning ProcessTransmission Planning Process Cost AllocationCost Allocation Criteria/ProcessCriteria/Process RMR CategoriesRMR Categories Compensation LevelCompensation Level (Actual v. Proxy)(Actual v. Proxy)

20. Global Issues Does ERCOT have the right reliability tools in OOM and RMR?Does ERCOT have the right reliability tools in OOM and RMR? How should ERCOT separate economic and uneconomic units for RMR?How should ERCOT separate economic and uneconomic units for RMR? What is the “exit strategy” to RMR?What is the “exit strategy” to RMR?

21. RMR TF Work Plan Next Meeting – December 13, 2002Next Meeting – December 13, 2002 –Solicited strawdogs that apply to the six issues to be resolved based on discussion of global questions January, 2003 --Discuss and develop conceptsJanuary, 2003 --Discuss and develop concepts February, 2003 – Finalize recommendations for PRS/TACFebruary, 2003 – Finalize recommendations for PRS/TAC