H.B. “Trip” DoggettPresident & Chief Executive Officer

Board of Directors MeetingERCOT PublicSeptember 18, 2012

Tab 4: CEO UPDATE

2

FINANCIAL PERFORMANCE (UPDATED THROUGH AUGUST)

YTD BUDGET VS. ACTUAL PERFORMANCE: $5.2 MILLION FAVORABLE

Tab 4

EXPENSES

REVENUES $5.1 Million favorable 2011 carry forward$0.5 Million favorable other revenues$0.4 Million unfavorable system administration fees

$3.4 Million unfavorable outside services$1.7 Million favorable salary & related benefits$0.7 Million favorable facility & equipment costs$1.2 Million favorable hardware & software maintenance or

licensing

ERCOT PUBLIC

3

FINANCIAL PERFORMANCE (UPDATED THROUGH AUGUST)

YEAR-END PERFORMANCE FORECAST: $3.0 MILLION FAVORABLE

Tab 4

EXPENSES

REVENUES $5.1 Million favorable 2011 carry forward

$4.6 Million unfavorable outside services$2.7 Million favorable salaries & related benefits$0.8 Million favorable facility & equipment costs

ERCOT PUBLIC

4

IMPACTS OF ECONOMY & WEATHER – 2012

ERCOT PUBLIC

Economy Impact

Weather Impact

Model Error

2012 YTD

Forecast Energy 225.7 TWhActual Energy 224.9 TWhError: (-0.3%)

August 2012:

Forecast Energy 35.0 TWhActual Energy 35.4 TWh

Tab 4

5

SUMMER 2012 REVIEW

• As expected, weather was hotter than normal (15 year average), but not as extreme as summer 2011

• The peak demand of 66,626 MW was set June 26, unusually early in the summer, 1,753 MW less than the August 2011 peak of 68,379 MW

• The summer 2012 SARA forecasted a peak of 67,492 MW• No significant challenges serving load

– Generation forced outages were lower than last year possibly due to temperatures and load not sustained at extreme levels

– ERCOT region experienced more rain during the summer of 2012, so drought was not a broad concern

– One watch for Physical Responsive Reserve below 2500 MW due to the tripping of two large generating units on July 30

– No Energy Emergency Alert events• Four Transmission Watches issued for areas of South and West Texas

due to high loads and some transmission outages– Load growth in West Texas due to gas and oil development led to more

transmission congestion in the area

ERCOT PUBLICTab 4

6

SARA RELEASES – SEP 4TH 2012

Fall 2012 (Final) & Winter 2012-13 (Preliminary)

•Sufficient installed generating capacity to serve forecasted peak demands with historical typical generation outages

•Persistent drought conditions in ERCOT do not pose a threat to generation operations

•Extreme load and extreme generation outage conditions can be accommodated in the Fall•Extreme load and extreme generation outage conditions could lead to rotating outages in the Winter

ERCOT PUBLICTab 4

7

NON-BINDING FORWARD PRICE PROJECTION (EVALUATION PHASE)

Analyzed error between 6/28/12 and 8/27/12 looking at the Generation-to-be-Dispatched (GTBD) and Load Zone LMPs

Per NPRR 351, ERCOT must post projected non-binding prices for at least 15 minutes into the future

ERCOT PUBLIC

Mean Absolute Error for GTBD and Load Zone LMPs

Tab 4

8

NON-BINDING FORWARD PRICE PROJECTION (EVALUATION PHASE)

• Observations during the first two months include– Forward Price Projection is reasonable for the first 30 minutes

except in the West Zone– Short-term load and wind forecast errors get amplified by the

shape of the aggregated offer curve resulting in higher errors in Forward Price Projection

– False price spikes have occurred near the top of the hour due to• Timing & modeling of generator start-ups & shut-downs• Handling of differences between COP & telemetered

generator status– Updated logic was implemented on 8/29/12 to mitigate the above

two issues• ERCOT and Stakeholders are continuing to evaluate further

improvements

ERCOT PUBLICTab 4

9

DEPARTMENTAL HIGHLIGHTS

Compliance•Jim Brenton was appointed by the NERC Board of Trustees to the newly created Reliability Issues Steering Committee (RISC).

•RISC is an advisory committee that reports directly to the NERC Board of Trustees and triages and provides front-end, high-level leadership and accountability for nominated issues of strategic importance to Bulk Power System (BPS) reliability. In some cases, that includes solutions other than new or revised standards.

•Jim Brenton represents ERCOT and the NERC CIPC (Critical Infrastructure Protection Committee) on this new steering committee.

ERCOT PUBLICTab 4

Jim BrentonPrincipal, Regional Security CoordinationHired: August 1, 2005

10

DEPARTMENTAL HIGHLIGHTS

Information Technology•Several members of the IT organization have completed a comprehensive draft of a Technology Roadmap forecasting technology needs over the next 2 to 5 years.

•This effort required cross-functional collaboration across IT organizations including IT Strategic Services & Asset Management, Enterprise Architecture, Application Services, Infrastructure, and IT Operations, as well as with Business Integration, Security, and other business stakeholders.

•A high-level presentation was given to the ERCOT Board in March. A more detailed IT Deep Dive, along with a Security Deep Dive, was provided to two Board members in August. An overview will be presented to the November Finance & Audit Committee.

ERCOT PUBLICTab 4

11

IEEE PES GENERAL MEETING, SAN DIEGO, JULY 2012

ERCOT PUBLIC

Topics Included

•Extreme Weather•Phasor Measurements•Situational Awareness•High Wind Penetration•Demand Response•Real-Time Contingency Analysis•State Estimation•Sub-Synchronous Control Interaction•Topology Control•Wide Area Damping Control•Impact of Wind Resource on Prices•Modeling of Wind Parks•Load Modeling

Presentations by 14 ERCOT StaffKent Saathoff Jose Conto David Maggio

Bill Blevins Resmi Surendran Tejaswi Potluri

John Adams Sandip Sharma Jian Chen

Diran Obadina Hong Xiao Mike Legatt

Sarma (NDR) Nuthalapati

Shun-Hsien (Fred) Huang

Tab 4

12

TOP COMMUNITY PARTNER – TAYLOR ISD

Award from Texas Afterschool Centers on Education (ACE), a Texas Education Agency program

ERCOT PUBLIC

ERCOT outreach to Taylor ISD•47 ERCOT employees

•600+ volunteer hours

Programs included•MAPS – Mentors for 2nd grade students•MUNCH – Mentors for 3rd through 12th grade•BLADE – Beginners Learning Alternative Designs for Energy•Duck University – Official Afterschool Center on Education (ACE)

Tab 4