Retail Mechanics Overview Bill Bojorquez Director, Settlements and Customer Service

1. Retail Mechanics Overview Bill Bojorquez Director, Settlements and Customer Service

2. What is Retail Competition? Customer Switch to New Competitive Retailer (Retailer) How Does a Customer’s Bill Get Calculated? Status of Switches Questions and Answers Agenda

3. What is Retail Competition? • Reorganization of traditional monopoly electric service to allow utility operations and charges to be separated into generation, transmission, distribution and other services • Sale of electricity by a utility or other supplier to a customer in another utility’s retail service territory • Third party’s use of the local utility’s transmission and distribution lines to deliver power from a wholesale supplier to a retail customer • Allows customers to choose between competitive retail electric providers (Retailers) who will buy power from competing power generation companies (PGCs)

4. What is Retail Competition? (cont’d) • Provides small customers the option of staying with the Retailer affiliate of their current electric utility with the guaranteed six percent rate reduction, called the “price to beat” • Requires designation of a “provider of last resort” that is obligated to serve any customers in its service area with a basic, standard retail electric service package • Removal of state regulatory agency setting prices for energy • Also known as “open access,” “retail access,” or “retail wheeling”

5. What Does It Really Mean? • The steps in this process remain the same, however the players change • Competition allows the choice of who generates the power • How power actually gets to the end-user does not change

6. Customer Switch Scenario Retailer Retailer sends switch request & ERCOT acknowledges Customer signs with Retailer ERCOT sends switch notification to customer Customer can cancel the switch within 3 business days Customer

7. Customer Switch Completion Retailer 4. ERCOT forwards final meter read to Retailers Utility 2. Utility sends meter data Customer 1. Utility reads meter 3. Completes switch

8. How Does A Customer’s Bill Get Calculated? 1. Utility sends monthly usage information to ERCOT 6. TDSP sends transmission & distribution charges to Retailer Utility 2. ERCOT forwards monthly usage information to Retailer 3. ERCOT sends balancing energy and ancillary services charges to QSE 4. QSE forwards ancillary services charges to Retailer 5. PGC sends energy charges to Retailer Retailer PGC QSE

9. Charges to Retail Customer Monthly Usage Trans. & Dist. Charges Retailer Energy Charges from PGC Balanced Energy & AS Charges from QSE Retail Customer Bill

10. Switch Ramp-up Projections Goal As of 9/21: 58,500 Number of ESI IDs

11. Status of Switches in Process • Over 50,000 switches have been added over the last 3 weeks • It takes between 15 and 45 days for new CR to start flowing power (completed) • 15 days allowed for customer review and cancellation • Total in chart: 58,500

12. Definitions and Acronyms • Competitive Retailer (Retailer) – a municipally-owned utility, generation and transmission cooperative (G & T cooperative), or distribution cooperation that offers customer choice in the restructured competitive electric power market in Texas or a Retail Electric Provider (REP). • Customer – a person or entity who purchases and ultimately consumes electricity at a single premise.

13. Definitions and Acronyms (cont’d) • Customer Choice - the freedom of a retail customer to purchase electric services, either individually or on an aggregated basis with other retail customers, from the provider or providers of the customer’s choice and to choose among various fuel types, energy efficiency programs, and renewable power suppliers. • Electric service identifier (ESI ID) – a unique and permanent identifier assigned to a premise. • Electric Reliability Council of Texas, Inc. (ERCOT) - a Texas nonprofit corporation that has been certified by the PUCT as the Independent Organization, as defined in §39.151 of PURA, for the ERCOT Region. • Power generation company (PGC) – a company, registered by the PUC, which generates electricity that is intended to be resold.

14. Definitions and Acronyms (cont’d) • Premise – a service delivery point or combination of service delivery points that are assigned a single Electric Service Identifier (ESI ID) for purposes of registration, switching and settlement. • Provider of last resort (POLR) –a REP certified in Texas that has been designated by the PUC to provide a basic, standard retail electric package to requesting or default customers. • Retail Electric Provider (REP) – a certified person or company that sells electric energy to retail customers in Texas. • Service delivery point (SDP) – the specific point on the utility’s electric system where electricity flows from the utility to an end-use load. Service delivery points may be metered or unmetered. • Settlement - the reconciliation by ERCOT of administrative, miscellaneous, and market charges for the applicable market services.

15. Questions and Answers