COPS conference call PRR 638 Implementation

COPSJanuary 30th 2006

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

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

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Invoice Payment Periods after PRR 638

Invoice Payment Periods

3/23

/200

6

3/27

/200

6

3/30

/200

6

4/03

/200

6

4/06

/200

6

4/10

/200

6

4/13

/200

6

4/17

/200

6

4/20

/200

6

4/24

/200

6

4/27

/200

6

5/01

/200

6

5/04

/200

6

5/08

/200

6

5/11

/200

6

5/15

/200

6

3/20

/200

6

3/16

/200

6

Invoice Payment Periods Before PRR 638

Th M M M M M M M M MTh Th ThTh Th ThThTh

EAL Calculation on Friday

EAL Calculation on Friday

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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

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