1. Commercial Operations Subcommittee Meeting April 13, 2010 Update to RMS April 14, 2010

2. Voting Items One voting item. Guiding Principles of the Nodal Market Approved with AEP comments and minor changes from COPs.

3. Guiding Principles of the Nodal Market Does the proposed Nodal Protocol Revision Request (NPRR) or market change proposal do one or more of the following:  Improve price signals – Provide or enhance more granular pricing to encourage additional generation and/or transmission invest­ment in the proper locations.  Improve dispatch efficiencies – Enhance or increase efficiency of dispatch to yield a lower overall cost of power supply.  Directly assign local congestion – Enhance or improve settlements and related systems for pricing based on locational marginal costs.  Improve or enhance key components of the Nodal Market:  Congestion revenue rights (CRR)  Day-ahead energy and ancillary services co-optimized market (DAM)  Day-ahead reliability unit commitment (DRUC)  Hourly reliability unit commitment (HRUC)

4. Cont. - Guiding Principles of the Nodal Market  Resource-specific offers  Security constrained economic dispatch (SCED) generally every five minutes –All congestion management will be resource-specific –Enhanced load frequency control –Actual shift factors for resources  Nodal locational marginal pricing (LMP) for generation  Improve reliability – Provide or enhance reliability of grid operations, information technology infrastructure or commercial settlement.  Improve the Retail Market – Enhance or increase efficiency of systems or processes to support retail customer choice.  Compliance with rules - Directly address new legislation, Public Utility Commission of Texas (PUCT) rules or North American Electric Reliability Corporation (NERC) standards.  Address recommendations of the Independent Market Monitor (IMM), PUCT or ERCOT Board

5. Nodal Update – Key Items  Jim Galvin, Chair of SEWG presented the Nodal update  Market Trials Phase 4 – Very successful!  Basic Nodal Training has been scheduled and can be found at the following link for updated available training http://nodal.ercot.com/training/courses/index.html  Market Trails 5.0 is back on schedule. –Integrated Credit Management targeted for May-June timeframe  No new Risk or Issue items added to the Nodal Program Risks and Issues list

6. NODAL PROGRAM STATUS  Qualification of Market Participants- 95% of MPs qualified: –81 of 84 QSEs with resources qualified –181 of 192 QSEs without resources qualified  Full Functionality testing to begin in May will result in push to get remaining QSEs qualified  Market Trials: –2-CRR Auctions now completed –Three DAM markets simulated with two additional this week –Strong participation in DAM trials (over 150 QSEs)

7. CCWG Working Group Update –RSS Feeds on ERCOT.com – in place on www.ercot.com – select “ feeds” www.ercot.com –CCWG Completed modifications to COPMG Section 5 and Appendix A for Market Participants Notifications – currently in 21 day comment period –Continued development of Creating Section 8.1 Settlement Statements and Invoices (currently tabled at CCWG)

8. SEWG Update   SEWG  Focused on Nodal  Reviewing Extract issues  Completed review of UFE analysis as requested by MP. Additional analysis will be completed as ongoing work.  Nodal Settlement Algorithms – guide to be created

9. NODAL SETTLEMENT ALGORITHMS- SAMPLE VariableUnitDescription Interv al Freque ncy Source Shado w-able DAESAMT q, p $ Day-Ahead Energy Amount per QSE per Settlement Point  The payment to QSE q for the cleared energy offers at Settlement Point p for the hour. 1 / hour Yes DASPP p $/M Wh Day-Ahead Settlement Point Price per Settlement Point  The DAM SPP at Settlement Point p for the hour. 1 / hour DAES q, p MW Day-Ahead Energy per QSE per Settlement Point  The total amount of energy represented by QSE q’s cleared Three-Part Supply Offers in the DAM and cleared DAM Energy-Only Offer Curves at Settlement Point p, excluding the offers submitted for RMR Units at the same Settlement Point, for the hour. 1 / hour Yes DAESAMTQ SETOT q $ Day-Ahead Energy Amount QSE Total per QSE  The total of the payments to QSE q for its cleared energy offers at all Settlement Points for the hour. 1 / hour Yes Calculate Day-Ahead Energy Sale Amount QSE Total per QSE by QSE for each Operating Hour of the Operating Day. Calculations Calculate Day-Ahead Energy Sale Amount by QSE and Settlement Point for each Operating Hour of the Operating Day. Description The Day-Ahead Energy Payment is made for all cleared offers (excluding offers submitted for the RMR Units) to sell energy in the DAM, whether through three part supply offers or DAM Energy-Only Offer Curves. The payment to each QSE for each settlement point is calculated on an hourly interval.

10. SEWG – UFE, UPCOMING DISCUSSIONS  Significant cold weather events in February with high prices as well –Average temperature 42.00 compared to 55.71 in 2009 and 50.10 30-year average  Cost and percentage statistics will be provided in April SEWG meeting  SEWG and PWG will continue to discuss and analyze UFE as part of joint sessions in the SEWG meetings  Discussions may continue on the allocation factors for UFE, however, it does not appear that consensus from one particular group (SEWG or PWG) will bring the issue to a PRR

11. PWG Update  As part of PWG Goals for 2010, PWG has removed “Review Weather Sensitivity Correlation and Proxy Day Method in Lieu of AMS” – ERCOT resources, system changes needed to complete. –Cannot be completed until after Nodal.

12. 12 PWG Update – New Load Profile Model implementation  PWG needs feedback from REPs on incremental cost of updating round 2 models vs. benefits; a.No model updates at all are needed, or b.Re-estimate existing load profiling model coefficients, or c.Build models with new structures to address weather transitions per UFE presentation “profile discontinuity”, or d.New round 3 samples in TDSP areas that are not installing AMS or have later timelines, and e.Profile model transition likely to be needed due to difference in round 2 sample population mean to current profile models just like the last model implementation? f.Is ERCOT forecast of load profiles needed after AMS implementation? No feedback was provided by MPs prior to the 3/24 PWG Mtg. Further discussions for next PWG Mtg.

13. 13 A draft PRR was presented by Direct Energy proposing that both IDR and NIDR distribution metered premises have an equal allocation factor of 0.5 A draft PRR was presented by Direct Energy proposing that both IDR and NIDR distribution metered premises have an equal allocation factor of 0.5 a. No consensus b. Discuss about the relative allocation of transmission vs. distribution c. AMIT stakeholders discussed and decided no action d. PWG and SEWG discussions continue. PWG Update - UFE Allocation – Status!

14. Other Business  Calvin and Don Tucker, transitioning roles…  2011 PPL – ERCOT is now accepting non-nodal projects for consideration on the 2011 PPL to heather.day@ercot.com. These projects will be presented for review and discussion at upcoming COPs (and other subcommittee) meetings heather.day@ercot.com  API File Size Constraints – 3 megabyte limit for any attachment submitted (see “API Specs for Nodal” on Nodal.com)  AMS data – samples being analyzed for Board presentation

15. Questions ?