Ercot Technical Advisory Committee (Tac) Meeting

DRAFT - 12/01/06

Public–DRAFTMINUTES OF THE

ERCOT TECHNICAL ADVISORY COMMITTEE (TAC) MEETING

ERCOT Met Center – Austin

7620 Metro Center Drive

Austin, Texas78744

December1, 2006; 9:30 a.m.– 4:30 p.m.

Attendance

Members:

Armke, James / Austin Energy / Alternate Representative for M. Dreyfus
Ashley, Kristy / Exelon Generation Company, LLC
Barrow, Les / CPS Energy
Belk, Brad / Lower Colorado River Authority
Brown, Jeff / Coral Power
Clemenhagen, Barbara / Topaz Power Group
Comstock, Read / Strategic Energy
Fehrenbach, Nick / City of Dallas
Flowers, BJ / TXU Energy Company, LLC
Gedrich, Brian / BP Energy
Greer, Clayton / Constellation Energy
Gross, Blake / AEP / Alternate Representative for R. Ross
Helton, Bob / American National Power, Inc.
Johnson, Eddie / Brazos Electric Cooperative / Alternate Representative for H. Lenox
Jones, Randy / Calpine Corporation
Lewis, William / Cirro Energy
Mays, Sharon / Denton Municipal Electric
McClendon, Shannon / Residential Consumer
Moss, Steven / First Choice Power / Alternate Representative for L. LeMaster
Pappas, Laurie / OPUC
Robinson, Oscar / Austin White Lime Company
Sayuk, Steve / ExxonMobil Power & Gas / Via telephone
Sims, John / Nueces Electric Cooperative, Inc.
Walker, DeAnn / CenterPoint Energy / Alternate Representative for J. Houston
Walker, Mark / NRG Texas, LLC
Zlotnik, Marcie / StarTex Power

The following proxieswere given:

• Chris Hendrix to Shannon McClendon
• Marty Downey to Marcie Zlotnik
• Henry Wood to John Sims (afternoon only)
• Randy Jones to Barbara Clemenhagen (afternoon only)
• Clayton Greer to Kristy Ashley (morning only)

Guests:

Adib, Parviz / PUC
Bowling, Shannon / Cirro Energy
Brandt, Adrianne / PUC
Brewster, Chris / Cities
Bruce, Mark / FPL Energy
Cutrer, Michelle / GreenMountain
Daniels, Howard / CenterPoint Energy
Garcia, Jennifer / Direct Energy
Gresham, Kevin / Reliant Energy
Gurley, Larry / TXU
Hughes, Hal / R.J. Covington
Jones, Dan / IMM
Kolodziez, Eddie / Customized Energy Solutions
Munoz, Manny / CenterPoint (via telephone)
Nelson, Stuart / LCRA
Schumate, Walt / Shumate & Assoc.
Southers, Stan / TXU
Starr, Lee / Bryan Texas Utilities
Wagner, Marguerite / Reliant Energy
Wheeler, Ron / Dynegy
Zoromsky, Steve / LCRA

ERCOT Staff:

Albracht, Brittney
Anderson, Troy
Boren, Ann
Chudgar, Raj
Day, Betty
Doggett, Trip
Dumas, John
Firestone, Joel
Gallo, Andy
Grimm, Larry
Gruber, Richard
Hobbs, Kristi
Mereness, Matt
Roark, Dottie
Saathoff, Kent
Thorne, James
Vincent, Susan
Yager, Cheryl
Zake, Diana

TAC Chair Read Comstockcalled the meeting to order at 9:40 a.m.

Antitrust Admonition

Mr. Comstock directed attention to the Antitrust Admonition which was displayed. A copy of the Antitrust Guidelines was available for review.

Approval of the DraftNovember 2, 2006 TAC Meeting Minutes (see Key Documents)[1]

Oscar Robinsonmoved to approve the draftNovember 2, 2006 TAC meeting minutes assubmitted. DeAnn Walkerseconded the motion. The motion carried by unanimous voice vote. All Market Segments were represented.

ERCOT Board Update (see Key Documents)

Mr. Comstock provided a summary of the November 14, 2006 ERCOT Board of Directors (Board) meeting. The Board approved all TAC recommendations including PRR673, Adjust SCE Performance Charge Scale Factor, PRR675, Multiple Ramp Rates, PRR682, Emergency Electric Curtailment Plan (EECP) Event Realignment, and the 2007 Closely Related Elements (CREs). The Board also heard the Constellation NewEnergy appeal of the TAC decision on PRR692, Corrections to Replacement Reserve Service but took no action. Mr. Comstock also noted he updated the Board on the PRS feedback related to a system change moratorium on Protocol Revision Requests (PRR) with system changes and System Change Requests (SCR). The Board encouraged a vigorous review of zonal system changes taking into consideration the impact on the nodal implementation and also suggested that at some point, the market will have to declare a date certain on future changes to zonal Protocols. The Board also recommended that when considering a PRR or SCR, the following should be evaluated: benefit to zonal, cost impact to nodal, whether benefits continue into nodal and the cost allocation – that is if a project causes work to continue into nodal, the project bears those costs.

Revised ERCOT Bylaws with Regional Entity (RE) Additions– Mr. Comstock reported that the Board requested that TAC review the proposed changes to the ERCOT Bylaws (Bylaws) generated by the addition of the Texas RE. Shannon McClendon highlighted proposed changes that would impact the Consumer segment, discouraged TAC action at this time, and encouraged a timely review process that would encompass all issues in an effort to eliminate frequent changes to the Bylaws. Susan Vincent clarified that the proposed changes are a direct result of FERC orders which are required for ERCOT to be accepted as a RE and reminded participants that the proposed Bylaws changes would go before the ERCOT membership for approval (expected in the February 2007 timeframe). Members requested additional information supporting the RE budget. Ms. Vincent noted a budget was provided in the FERC filing and stakeholder input could have been made at the FERC level. Members discussed various proposed Bylaw changes, what the changes could mean to the membership, and the desire for more time to discuss the formation of the Texas RE. Mr. Comstock suggested additional time be included on the January TAC agenda to review proposed changes associated with the RE filing, a matrix of specific FERC requirements to proposed Bylaw changes, supporting budget information and a procedural update.

Texas RE Standards Development Procedure – Larry Grimm explained that the Texas RE Standards Development Procedure was created following a NERC template. The proposed procedure mentions the formation of a reliability standards committee utilizing a voting structure similar to the Protocol Revisions Subcommittee (PRS) but with no standing members. Ms. McClendon requested a copy of the template received from FERC.

Reliability Operations Subcommittee (ROS) Report (see Key Documents)

Stuart Nelson provided an overview of recent ROS activities. Mr. Nelson explained that FERC standards require a certain number of Continuing Education Hour (CEH) credits. Accreditation for participation in certain ERCOT activities (such as Storm Drills, Annual Seminar, and Black Start Training) can be obtained if entities submit hours to NERC and then apply to be qualified once the drill takes place. Mr. Nelson reported that the Operations Working Group (OWG) requested to cancel some drills due to the nodal training and implementation burden. ROS approved canceling the 2007 Hurricane Drill and the 2008 Cold Weather Drill. Bob Helton noted a concern of meeting the requirement that QSE personnel must have 40 hours of emergency training if drills are cancelled. Mr. Nelson also reported that all ROS working groups now call for membership by the Texas RE, Public Utility Commission of Texas (PUCT) and NERC.

Protocol Revisions Subcommittee (PRS) Report (see Key Documents)

Details for all Nodal Protocol Revision Requests (NPRRs) and PRRs can be found in KevinGresham’s presentation to TAC and also in his Memo to TAC.

Protocol Revision Request Rejections – Mr. Gresham notified TAC of the rejection of PRR584, Extending Black Start Service Bid Timeline.

Nodal Protocol Revision Requests –Mr. Gresham presented the following NPRR for approval:

• NPRR019, Black Start Testing Requirements
• NPRR031, Correction of Voltage Support Bill Determinants
• NPRR032, Correction of Black Start Bill Determinants
• NPRR033, Settlement of CRRs When DAM Does Not Execute

Laurie Pappas moved to approve NPRRR019, NPRR031, NPRR032, and NPRR033. Kristy Ashley seconded the motion. The motion passed with two abstentions from the Consumer segment. All Market Segments were represented.

Protocol Revision Requests–Mr. Gresham presented the following PRRs for TAC approval:

• PRR647, Gross and Net MW/Mvar Data Reporting
• PRR679, Revision to NLRI Formula and Other Credit Requirements
• PRR686, Black Start Testing Requirements (see NPRR019)
• PRR693,Update Transactions for Texas SET 3.0 Implementation and Timing for Processing Priority/Standard Move- In Transactions
• PRR698, Remove Default QSE Provisions – URGENT
• PRR699, Removal of the Northeast Congestion Zone in Trading Hub Transaction Conversions – URGENT
• PRR700, Creation of Interim Measure for Collecting the ERO/TRE Fee – URGENT

Ms. McClendon moved to approve PRR679, PRR686, PRR693 and PRR698. BJ Flowers seconded the motion. The motion passed by unanimous voice vote. All Market Segments were represented.

Regarding PRR647, Ms. Flowers raised concerns about the proposed 18-month implementation timeline and whether nuclear base-load plants will be able to comply since these plants operate under stricter regulations and may only make changes during pre-arranged periods. John Dumas noted that ERCOT agreed to the 18-month timeframe but realizes that it might not be practical to shut down a large base unit to only implement the proposed telemetry. Ms. Flowers moved to approve PRR647 as soon as practical within 18 months, but if necessary to accommodate a nuclear facility, no later than January 1, 2009. Randy Jones seconded the motion. The motion passed by unanimous voice vote. All Market Segments were represented.

Sharon Mays noted she did not have a problem with PRR699; however, she emphasized the need to revisit the meaning of retirement versus mothballed and related confidentiality issues at a later date. Ms Mays provided an example of ERCOT being made aware confidentially that a unit is coming back online while market discussions are proceeding as if the unit would not be available. Ms. Mays contemplated that if the confidentiality request becomes material to a market decision, can ERCOT notify someone? Ms. Mays moved to approve PRR699. Ms. Pappas seconded the motion. The motion passed with one abstention form the Consumer segment. All Market Segments were represented.

Ms. Pappas noted her concern that PRR700 was rushed through PRS without discussion of alternative funding mechanisms for the Texas RE fee. Ms. Pappas moved that PRR700 be remanded to PRS for further discussion of alternatives to comply with the order and statutes. William Lewis seconded the motion. Members discussed the allocation of the Electric Reliability Organization/Texas RE fee on a Load ratio share basis, the federal requirement to do so, and the possibility of an alternative funding mechanism to relieve the burden on Load while still complying with the FERC order. The motion to remand PRR700 to PRS for further discussion of alternatives to comply with the order and statutes failed with eight in favor (Independent REP (3) and Consumers (5)), 20 nays, and one abstention (Independent REP).

Ms. Walker moved to approve PRR700. Les Barrow seconded the motion. The motion failed by roll call vote with six nays (Consumer (3) and Independent REP (3)) and three abstentions (Consumer (2) and Independent REP). All Market Segments were represented. The roll call results can be found with the Key Documents for this meeting.

Nick Fehrenbach moved to approve PRR700 and direct PRS to research and develop alternative funding mechanisms to relieve the burden on Load which comply with federal and state regulations. Ms. Pappas seconded the motion. The motion passed with two nays from the Independent Power Marketer and Investor Owned Utility segments and one abstention from the Independent Power Marketer segment. All Market Segments were represented.

Texas Nodal Market Implementation (see Key Documents)

ERCOT Report – Raj Chudgar reviewed the format of the first bi-monthly nodal program status report. Participants expressed a desire to see more detailed information in the report such as why people are leaving the project and the impact to implementation deadlines from delays. Mr. Helton moved for ERCOT to display a more detailed dashboard display for TAC than the current presentation. Ms. McClendon seconded the motion. Mr. Comstock noted that this item was not noticed for a vote. Mr. Helton moved to waive notice on the proposed motion. Ms. McClendon seconded the motion. The motion passed unanimously by voice vote. All Market Segments were represented.

Mr. Fehrenbach proposed a friendly amendment to Mr. Helton’s original motion to send the update to the TAC distribution list. Mr. Helton and Ms. McClendon agreed to the amendment. The motion passed unanimously by voice vote. All Market Segments were represented.

Marcie Zlotnik expressed a desire for more detailed information from ERCOT Human Resources as to the numbers of new employees hired versus those lost and the top four reasons that employees leave ERCOT. Clayton Greer noted that some related information is presented to the HR and Governance Committee of the Board and Brad Belk questioned whether this was information that was more appropriately discussed at the Board level. Proponents of the obtaining the information at TAC suggested that loss of ERCOT employees impacts project deadlines which can directly impact their own operations. Mr. Comstock noted he would work with ERCOT Human Resources to see what information was available to the public.

In response to inquiries at the November TAC meeting, Mr. Chudgar provided an update on the nodal Network Operations Modeling and Telemetry project. Mr. Chudgar reviewed network model data issues – specifically the process to determine model data issues, the automated data query results by Market Participant, and a summary of issues and Market Participant progress to date. Mr. Chudgar also provided a critical measurements telemetry analysis update, the critical measurement counts by Market Participant, and critical measurement definitions. Mr. Chudgar reported that ERCOT began a “road show” in August 2006 to work with Transmission and Distribution Service Providers (TDSPs) to assist with beginning their nodal efforts. At the time of the report, ERCOT had met with seven of the 18 TDSPs and was attempting to schedule time with the all remaining TDSPs by first quarter 2007.

TPTF Report –Trip Doggett reviewed activity from the November 6-7, 2006 TPTF meetings and the schedule of future meetings. Mr. Doggett highlighted the TPTF discussions related to NPRR024, Synchronization of PRRs 627 and 640.While TPTF agreed that Barbara Clemenhagen’s comments to NPRR024 seemed to be consistent with the language of PRR640, Update Provisions for Capacity and Energy Payments for RMR Service and Add a New Standard Form Agreement for Synchronous Service, some Market Participants suggested that the synchronization of the language in NPRR024 with the language in PRR640 might ultimately weaken the Nodal Protocols. It was recommended by TPTF that any possible weaknesses should be discussed by TAC before approving NPRR024. A motion for TPTF to approve the Topaz comments on NPRR024 as submitted failed.

Ms. Clemenhagen argued that the suggested language for NPRR024 is Board approved language from previous PRRs, NPRR024 is to synchronize the Nodal Protocols with the approved PRRs, and that TPTF agreed that the proposed language is consistent with those previously approved PRRs. Mr. Fehrenbach opined that the Nodal Protocols were not in synch with the Zonal Protocols and that by synchronizing the Nodal to Zonal Protocols that the Nodal Protocols may actually be weakened in some areas. Mr. Fehrenbach suggested that the TPTF rejected Ms. Clemenhagen’s proposed changes for this reason and that not all revisions will need to be synchronized because the market has created two different systems. Mr. Comstock noted that there was not an Impact Analysis (IA) for NPRR024 and his desire to take up NPRR024 at the January 2007 TAC meeting. Ms. Pappas suggested tabling NPR024 until January. Ms. Clemenhagen requested that the IA represent both the TPTF recommendation and Ms. Clemenhagen’s recommendation so that NPRR024 would not be further delayed.

Mr. Doggett presented the following Commercial Operations business requirements documents to TAC:

• Average Incremental Energy Cost (AIEC)
• Verifiable Costs
• Market Data Transparency (“Extracts”)
• Data Aggregation

Mr. Robinson moved to approve the four business requirements (AIEC, Verifiable Costs, Market Data Transparency and Data Aggregation) as completion of TPTF milestones. Ms. Walker seconded the motion. The motion passed unanimously by voice vote. All Market Segments were represented.

Commercial Operations Subcommittee (COPS) Report (see Key Documents)

Ms. Flowers reviewed recent activities of the COPS working groups. Ms. Flowers highlighted that the COPS Communications Working Group is planning a joint meeting with the Texas Data Transport Working Group to discuss unplanned outage communications. COPS agreed with the draft NPRR for Section 13, Transmission and Distribution Losses, created by the Unaccounted for Energy (UFE) Task Force and forwarded the draft for TPTF review. Ms. Flowers also reported that the City of Garland presented a review of Nodal invoice payment timelines to COPSs and that COPS agreed that the timing could create issues for Market Participants. COPS suggested that the same timeline material be presented to TPTF and the Credit Working Group to work on a consensus timeline.