News Release
July 22, 2005

ERCOT at a Glance: News Update - July 22, 2005

Topics:

Carolyn Shellman Joins ERCOT as General Counsel

Carolyn Shellman is joining ERCOT as General Counsel, August 1, CEO Tom Schrader announced Thursday.

Shellman brings 30 years of experience in the practice of utility and regulatory law. An Oklahoma native, Carolyn began her career in Texas as a hearing examiner at the Public Utility Commission, later moving up to director of the hearing division. Most recently, Shellman was a partner at Hunton & Williams, a multinational law firm with an extensive energy and regulatory practice. She has been listed in Best Lawyers in America for utility law since 1991 and was named to "Texas Super Lawyers" by Texas Monthly in 2003 and 2004 for utilities law.

Shellman replaces Margaret Pemberton, who resigned in April after over eight years with ERCOT. Schrader thanked deputy general counsel Mark Walker for his work as interim general counsel during the search process.

Jim Galvin Resigns as Market Operations Director

Jim Galvin has resigned his position as director of market operations and will be leaving ERCOT in mid-August to join Tenaska Power Services in Dallas. Chief Market Officer Ray Giuliani commended Galvin for his hard work and diligence through the years, including his role in the implementation of Senate Bill 7 and as manager of the day to day Texas Nodal Team (TNT) activities.

Bill Bojorquez, director of transmission services, will assume Galvin''s TNT responsibilities and Giuliani will assume Galvin''s other responsibilities until a successor is found.

Board of Directors Meeting Highlights

The ERCOT Board of Directors meeting on Tuesday, July 19, included a CEO report and updates from finance, system operations and market operations, and a report on the 2006 budget process.

DFW Area Improvements to Reduce Congestion

COO Sam Jones reported on the progress of transmission system improvements in the Dallas-Fort Worth area to reduce congestion. The improvements include the addition of two 345 kV circuits, 14 138kV circuits, two 345/138 kV autotransformers, one new 138 kV substation, nine reactive capacitors projects, and two 138/69 kV autotransformers.

North Planning Group, McCamey and Corpus Christi Studies

Jones gave an overview of the 2006 study initiated by the North Regional Planning Group in 2004. Of the 26 projects recommended by various stakeholders, nine were selected based on reliability and economic criteria. One project was approved for both reliability and economic reasons.

Jones also presented the results of the McCamey area study which indicate that 755 MW (total McCamey generation) can be exported with minor modifications to AEP''s reactive plan and temperature-adjusted line ratings proposal. Physical improvements to the network in the area are expected to be completed by early 2006, enabling full export capability.

Jones said a transient voltage stability analysis of the Corpus Christi region, requested by an industrial customer, shows that parts of the Corpus Christi area remain a concern. ERCOT has elected to keep the Barney Davis units as Reliability-Must-Run (RMR) units and is discussing possible Must-Run-Alternative agreements with market participants, Jones said.

Balancing Energy Prices Presentation

In a presentation on balancing energy service prices, Jones presented a graph of the market clearing price since January 2002 overlaid with the average published natural gas price at the Houston Ship Channel. Both show a steady increase, running almost parallel.

He also presented a graph converting the two prices into a virtual heat rate. That heat rate remains consistently between 6 and 8 MMBTU/MWh with some spikes above 8 MMBTU/MWh in July/August 2002, February 2003, August 2003, September/October/November 2004 and June/July 2005.

Another chart Jones presented showed the number of intervals per month in which ERCOT depleted the "Balancing Energy Up" bid stack. In June and July of this year, the stack was depleted in approximately 27 intervals, out of a total of 5,856 intervals (96 per day).

Market Operations Report on QSE Default

Ray Giuliani, ERCOT''s Chief of Market Operations, reported that Azor Energy, LP, had defaulted on its agreements with ERCOT. As a result, the process of dropping Azor''s ESI IDs to the Providers Of Last Resort (POLRs) began on July 13.

A joint task force was created to look at issues surrounding market participant defaults to limit the financial exposure of other market participants. The task force has formed two groups – one will look at pre-triggering events and the other at post-triggering events. They will focus on short-term and long-term revisions to the protocols and market guides.

Almost $1.5 Million in Savings Achieved Since January

Interim CFO Roy Bowman reported that ERCOT achieved $250,000 in cost savings during June and anticipates an additional $385,000 in savings through year-end. Since January, ERCOT has cut almost $1.5 million from its expenses.

Bowman also updated the board on responses to the 288 audit items: 121 of the items have been completed and verified, 186 completed, and 102 are in execution phase.

First Public Meeting on 2006 Budget Scheduled

The 2006 ERCOT budget was presented to the Board of Directors'' finance and audit (F&A) committee Monday. A public meeting for comments on the budget is scheduled for August 3, 1:30 p.m. The F&A committee will meet August 8 and 15 to finalize the budget.

F&A Chair Clifton Karnei said the proposed base budget holds the administration fee at $0.42/MW (does not include funding for new market monitoring functions or market design), but doing so will mean ERCOT can accomplish only $25 million of capital projects out of a total of $69 million needed for identified projects. The Technical Advisory Committee (TAC) has developed a list of questions to consider for re-prioritizing the projects.

Five Protocol Revision Requests Approved by Board

Read Comstock, TAC co-chair, presented the following Protocol Revision Requests (PRR) which were approved unanimously by the board:

PRR564 – OOME Definition
PRR577 – Availability of Aggregated Load Data by TDSP
PRR581 – Update RMR Language due to PUC Rule 25.502
PRR583 – Responsive Reserve Deployment
PRR585 – Settlement Obligation Formula for Balancing Energy Service

Board presentations are posted each month on the ERCOT Web site Meeting Calendar by date of the board meeting.

Search Process for Additional Board Members Begins

The process to secure a search firm to locate candidates for two additional independent board members (unaffiliated with market participant organizations) has begun, said Nancy McIntire, vice president of human resources and organization development. The addition of two unaffiliated board members is one of the items required in Senate Bill 408 approved by the 79th Texas Legislature. The law requires the new board members to be seated by September 2006. ERCOT has committed to submitting candidates to the PUC for review by the end of 2005. The addition will increase the board size from 14 to 16 members to include five unaffiliated members, three consumer representatives, six market participant representatives (one from each market segment), the ERCOT CEO and the PUC chairman (non-voting).

EMMS Operational Data Store Implemented

ERCOT''s EMMS ODS Production Implementation Team has successfully implemented EMMS Operational Data Store (ODS), replicating all existing EMMS source schemas to the ODS environment. In the first four days following the implementation, more than 77 million transactions were posted in the ODS database – an average rate of nearly a million transactions per hour or 260 transactions per second – until the maximum global file limit was reached causing a system crash. A recovery process was implemented and coordination was done to double the global file limit parameter. The affected databases were back up and operating normally without any recorded data or transaction loss in under 2 hours.

Ray Chase, manager of Enterprise Information Services, recognized several individuals for assistance in the ODS implementation and in the database recovery: Randy Jones, Shawn Lai, Anita Chandiramani, Nirmal Harshah, Bryan Hanley, Steven Hargus and Rudy Torres.

ERCOT Market Design Presentations Posted to Web Site

Proposed Changes to Improve ERCOT System Operations, a presentation by ERCOT''s Joel Mickey and John Adams at the PUC Market Design Workshop, June 8, is posted on the ERCOT Web site under Reports and Presentations 2005.

Transmission Expansion in ERCOT, (Bill Bojorquez) and Impact of Planned Transmission Projects on Marginal Costs in ERCOT, (Dan Woodfin), presented at the PUC Market Design Workshop, July 12, are also posted there.

ERCOT Meeting Calendar

July 2005

The Electric Reliability Council of Texas (ERCOT) manages the flow of electric power to 24 million Texas customers -- representing 85 percent of the state's electric load. As the independent system operator for the region, ERCOT schedules power on an electric grid that connects 40,500 miles of transmission lines and more than 550 generation units. ERCOT also performs financial settlement for the competitive wholesale bulk-power market and administers retail switching for 6.7 million premises in competitive choice areas. ERCOT is a membership-based 501(c)(4) nonprofit corporation, governed by a board of directors and subject to oversight by the Public Utility Commission of Texas and the Texas Legislature. ERCOT's members include consumers, cooperatives, generators, power marketers, retail electric providers, investor-owned electric utilities (transmission and distribution providers), and municipal-owned electric utilities.

Contact
Robbie Searcy (512) 225-7213
rsearcy@ercot.com