Protocol Revision Subcommittee

1. Protocol Revision Subcommittee Presentation to the ERCOT Technical Advisory Committee October 6, 2004

2. PRS Summary • 5 PRRs for Approval • 1 PRR Withdrawal Notice • System Prioritization Update • PRR Communications

3. PRR 523 – Revisions to Protocol Section 21 • PRR submitted by ERCOT • Updates PRR section to: • Revise Impact Analysis section • Include system project prioritization • Formalize the System Change Request process • Clarify deadlines

4. PRR 523 – Revisions to Protocol Section 21 ERCOT Posts PRR ERCOT Posts IA ERCOT Posts TAC Rec ERCOT Posts BOD Decision ERCOT Posts PRS Rec X X X X X X 21 Day Comment Period 21 Day Comment Period Nov 30 July 23 August 26 PRS Consideration October 7 TAC Consideration October 19 BOD Consideration

5. PRR 523 – Revisions to Protocol Section 21 ERCOT Posts PRR ERCOT Posts IA 25-Day IA Period ERCOT Posts TAC Rec ERCOT Posts BOD Decision ERCOT Posts PRS Rec ERCOT Updates PRS Rec 30-Day IA Period X X X X X X X X 21 Day Comment Period 21 Day Comment Period Nov 30 July 23 August 26 PRS Consideration 1st Consideration October 7 TAC Consideration November 16 BOD Consideration September 25 PRS Consideration 2nd Consideration October 19 BOD Consideration Similar process applies to System Change Requests

6. PRR 523 – Revisions to Protocol Section 21 • Unanimous recommendation to approve PRR (all market segments present) as revised by Austin Energy, CenterPoint, ERCOT, TXU and PRS • Minor staffing impact -- requires update of ERCOT internal processes • Allows ERCOT to provide a more thorough impact analysis to PRS • No credit monitoring or liability calculation changes required • Effective November 1, 2004

7. PRR 526 – OOMC Verifiable Cost Documentation • PRR submitted by AEP, IOU Segment • PRR clarifies the Protocols for OOMC verifiable costs • Defines the required documentation standards required when ERCOT cancels/delays a unit’s planned and approved maintenance outage due to an OOMC instruction

8. PRR 526 – OOMC Verifiable Cost Documentation • Unanimous recommendation to approve PRR (all market segments present) • No impacts to ERCOT systems; minor impacts to business processes but application of the PRR is predicted to be infrequent • No credit monitoring or liability calculation changes required • Effective November 1, 2004

9. PRR 531 – Load Clarification • PRR submitted by AEP, IOU Segment • BLT move a load obligation to or from another power pool into or out of ERCOT in an emergency and only under a specific ERCOT Dispatch Instruction • PRR clarifies that load points involved in Block Load Transfers (BLT) will be treated as non-competitive load and registered similarly to NOIEs • Will be responsible for UFE and transmission losses similar to NOIEs

10. PRR 531 – Load Clarification • Unanimous recommendation to approve PRR (all market segments present) as revised by PRS • ERCOT system impact consists of adding a new TDSP to Lodestar • No credit monitoring or liability calculation changes required • Effective November 1, 2004

11. PRR 532 – Implementation of Non-Transmission Alternatives to RMR • PRR submitted on behalf of WMS by ANP, Independent Generator Segment • Protocols require ERCOT to evaluate non-transmission exit strategies to RMR situations • PRR proposes a Must-Run Alternative (MRA) agreement and selection and settlement processes to support the MRA • Relies on the Regional Planning Group process to aid in the evaluation • MRA will provide a more cost-effective alternative to an RMR agreement • Effort to reduce uplifted costs to the market

12. PRR 532 – Implementation of Non-Transmission Alternatives to RMR • Relies on the Regional Planning Group process to aid in the evaluation • MRA will provide a more cost-effective alternative to an RMR agreement • MRA agreement term is limited to the time necessary for the cost-effective transmission alternative to be implemented • If the MRA forecloses another viable technical solution, the agreement shall limit the MRA’s ability to terminate MRA service or increase prices

13. PRR 532 – Implementation of Non-Transmission Alternatives to RMR • PRS recommendation to approve PRR (all market segments present) as revised by CPS, Austin Energy and PRS • 2 votes in opposition; 4 abstentions • Note: PRS previously rejected “urgent” status for this PRR • ERCOT requires 1 FTE for Legal (contact negotiation and administration); future MRAs may impact ERCOT computer systems; grid operations may be impacted by future MRAs • Effective November 1, 2004

14. PRR 532 – Implementation of Non-Transmission Alternatives to RMR • Credit Work Group submitted comments to TAC subsequent to PRS’ consideration and recommendation of PRR 532 • CWG determined that the MRA’s financial stability must be evaluated • CWG proposed language that MRAs meet ERCOT requirements for the appropriate tenor of the MRA agreement • The specific requirements will need to be developed

15. PRR 535 – Reactive Testing • PRR submitted on behalf of the Generator Reactive Testing Procedures TF by LCRA, Electric Cooperative Segment • Revises wording to reflect that “capability” is being tested (previously stated “capacity”) • Clarifies the timing of reactive testing

16. PRR 535 – Reactive Testing • Unanimous recommendation to approve PRR (all market segments present) as amended by PRS • No impacts on ERCOT systems or business processes • No credit monitoring or liability calculation changes required • Effective November 1, 2004

17. PRR 524 – Clarification of Timeline for Cost Submission • PRR submitted and withdrawn by Centrica, Independent REP Segment • PRR would revise the submission timeline for verifiable costs • Impacts settlement timeline work ongoing in COPs • PRS affirmed withdrawal

18. Recommended TAC Actions Urgent Status None Approval – PRR 523 – (Section 21 Revision) PRR 526 – (OOMC Verifiable Cost Documentation) PRR 531 – (Load Clarification for BLTs) PRR 532 – (Implementation of MRAs) PRR 535 – (Reactive Testing)

19. System Prioritization Update • ERCOT informed PRS that more information was needed to quantify system change benefits • Criteria worksheets consist of weight factors for various categories (e.g., criticality of project for Regulatory Requirement or Reliability) • Information required by October 6 for submission to BOD • ERCOT will develop information in draft form for submission to BOD and PRS review

20. “Improving PRR Communications” Or “What Was PRS/TAC Thinking?”

21. Improving Communications • Desire for more information on PRRs requested by BOD members • Insights to the deliberations at PRS and TAC • Cost-benefit analysis • Market segments impacts • PRS discussed BOD comments at its last meeting • Revised PRR Recommendation Report • Discussed the quantification of benefits

22. Communication Objectives • To better communicate more information to TAC/BOD • Clearer statement of what the PRR does • Who submitted the PRR • Who commented on the PRR • Procedural history (e.g., developed in another TAC subcommittee) • Summary of PRS discussion • Priority and ranking for system projects

23. Communication Objectives • To better communicate information related to PRR costs and benefits • ERCOT’s costs currently captured in the impact analysis • Looking for ways to quantify PRR benefits