Relaxed Resource Schedule Credit Requirements

December 2003

Relaxed Resource Schedule

Credit Requirements

• Incremental Collateral Calculation

• Price

• Volume

• Weekly True-Up

• Resource and Load Imbalance

• Collateral Posting

Incremental Collateral CalculationFor Resource Only QSEsFor any un-invoiced trade weeks that a QSE’s estimated resource mwhs deviation exceeds Expected Generation mwhs by 20%, ERCOT will calculate an incremental collateral requirement as follows:

(Estimated Resource MWhs Deviation x Estimated Price unbilled ) – Collateral Held for Resource Imbalance

Estimated Resource MWhs Deviation = Expected Generation unbilled - Estimated Generation unbilled + Scheduled ERCOT Market Resource Purchase

Expected Generation = Base Schedule + BES Instructions + Regulation & other Ancillary Services Deployment

Price

Price will be calculated for:

• The weeks of activity that have occurred but have not been billed (currently approximately three weeks)

• One forward week (to capture volatility)

Price

Price for Unbilled Weeks

• The seven day average or the higher of – a) The BE Up and

– b) The BE Down daily weighted average BES MCPEDaily prices found on the ERCOT website (transparent)

• Price for the Forward Week– Price will be calculated as 150% of the most recent seven (7)

day weighted average BES MCPE

Balancing Energy Summary

Weighted Average

Balancing Energy Up

Weighted Average

Balancing Energy Down Average

All Zones All Zones MCPENovember 14, 2003 $27.85 $19.44November 15, 2003 $60.97 $20.49November 16, 2003 $44.01 $16.94November 17, 2003 $40.15 $21.78November 18, 2003 $21.94 $17.89November 19, 2003 $29.97 $21.87November 20, 2003 $49.91 $22.56 $39.26November 21, 2003 $32.55 $25.73November 22, 2003 $31.66 $20.01November 23, 2003 $28.81 $14.54November 24, 2003 $38.32 $20.90November 25, 2003 $33.04 $13.34November 26, 2003 $28.53 $18.53November 27, 2003 $30.94 $13.28 $31.96November 28, 2003 $70.55 $15.80November 29, 2003 $34.28 $14.49November 30, 2003 $45.60 $11.25December 1, 2003 $36.18 $10.47December 2, 2003 $24.65 $16.42December 3, 2003 $29.61 $21.69December 4, 2003 $39.85 $26.97 $40.10December 5, 2003 $38.36 $23.69December 6, 2003 $44.75 $14.14December 7, 2003 $39.58 $17.66December 8, 2003 $36.87 $26.80December 9, 2003 $59.89 $24.80

December 10, 2003 $59.89 $24.80December 11, 2003 $59.89 $24.80 $48.47Dec 12 - 18 Price one week forward $72.70

For Presentation, some prices were extrapolated to

meet deadline. Actual price will be used for calculation.

Date

Volume

Volume will be calculated as the higher of:

• ERCOT’s estimate of the QSE’s previous seven day average estimated resource deviation or

• The QSE’s estimated average forecast of resource deviation for the next seven day period

Volume

• The ERCOT estimated resource deviation for the previous seven-day period is calculated as:

(Scheduled Generation – Preliminary Actual Generation

+ Scheduled ERCOT Market Resource Purchased)

QSE

Duns# Expected Estimated Resource SCHD ERCOT Total Percentage Resource

Generation Generation Deviation Resource Prch Deviation Deviation MCPE Deviation $$

11/14/03 1700 1500 -200 -100 -300 -19% 39.26$ 11,778.00$

11/15/03 1600 1300 -300 -150 -450 -31% 39.26$ 17,667.00$

11/16/03 1500 1450 -50 -25 -75 -5% 39.26$ 2,944.50$

11/17/03 1700 1500 -200 -150 -350 -23% 39.26$ 13,741.00$

11/18/03 1750 1699 -51 -25 -76 -4% 39.26$ 2,983.76$

11/19/03 1820 1800 -20 -10 -30 -2% 39.26$ 1,177.80$

11/20/03 1820 1750 -70 -35 -105 -6% 39.26$ 4,122.30$

11,890 10,999 (891) (495) (1,386) -13% 274.82$ 54,414.36$

EST Resource Imbalance

11/21/03 1700 1500 -200 -25 -225 -13% 31.96$ 7,191.00$

11/22/03 2000 1800 -200 -50 -250 -13% 31.96$ 7,990.00$

11/23/03 1800 1700 -100 -25 -125 -7% 31.96$ 3,995.00$

11/24/03 1800 1750 -50 -25 -75 -4% 31.96$ 2,397.00$

11/25/03 1500 1450 -50 -25 -75 -5% 31.96$ 2,397.00$

11/26/03 1700 1600 -100 -10 -110 -7% 31.96$ 3,515.60$

11/27/03 1600 1500 -100 -25 -125 -8% 31.96$ 3,995.00$

12,100 11,300 (800) (185) (985) -8% 223.72$ 31,480.60$

11/28/03 1700 1400 -300 -25 -325 -19% 40.10$ 13,032.50$

11/29/03 2000 1350 -650 -25 -675 -34% 40.10$ 27,067.50$

11/30/03 1800 1400 -400 -25 -425 -24% 40.10$ 17,042.50$

12/01/03 1800 1300 -500 -25 -525 -30% 40.10$ 21,052.50$

12/02/03 1500 1250 -250 -25 -275 -19% 40.10$ 11,027.50$

12/03/03 1700 1350 -350 -25 -375 -22% 40.10$ 15,037.50$

12/04/03 1600 1300 -300 -25 -325 -21% 40.10$ 13,032.50$

12,100 9,350 (2,750) (175.00) (2,925.00) -24% 280.70$ 117,292.50$

12/05/03 2000 1900 -100 -25 -125 -6% 48.47$ 6,058.75$

12/06/03 2000 1450 -550 -25 -575 -29% 48.47$ 27,870.25$

12/07/03 2000 1500 -500 -25 -525 -27% 48.47$ 25,446.75$

12/08/03 1500 1000 -500 -25 -525 -36% 48.47$ 25,446.75$

12/09/03 1500 1450 -50 -25 -75 -5% 48.47$ 3,635.25$

12/10/03 1300 1000 -300 -25 -325 -25% 48.47$ 15,752.75$

12/11/03 1200 900 -300 -25 -325 -28% 48.47$ 15,752.75$

11,500 9,200 (2,300) (175.00) (2,475.00) -22% 339.29$ 119,963.25$

12/12/03 2000 1900 -100 -25 -125 -6% 72.71$ 9,088.75$

12/13/03 2000 1450 -550 -25 -575 -29% 72.71$ 41,808.25$

12/14/03 2000 1500 -500 -25 -525 -27% 72.71$ 38,172.75$

12/15/03 1500 1000 -500 -25 -525 -36% 72.71$ 38,172.75$

12/16/03 1500 1450 -50 -25 -75 -5% 72.71$ 5,453.25$

12/17/03 1300 1000 -300 -25 -325 -25% 72.71$ 23,630.75$

12/18/03 1200 900 -300 -25 -325 -28% 72.71$ 23,630.75$

Estimated Resource Imbalance

Collateral Held for Resource ImbalanceVolume - MWHs Resource Deviation 1386

MCP $39.26

Total $54,414.36

For 4 Weeks $217,657.44

Total Collateral $217,657.44

Sample Resource Deviation CalculationInvoice Date Pymt Date Imbal Vol Price RRS Liability

Nov 21 - 27, 2003 EIT 12/18/2003 1/5/2004 985 $31.96 31,480.60

Nov 28 - Dec 4, 2003 EIT 12/29/2003 1/14/2004 2925 $40.10 117,292.50

Dec 5 - 11, 2003 EIT 1/2/2004 1/20/2004 2475 $48.47 119,963.25

Dec 12 - 18, 2003 EST 1/8/2004 1/26/2004 2475 $72.71 183,592.75

RRS estimated liability 8,860.00 452,329.10

Collateral held for Resource Imbalance (217,657.44)

RRS collateral required 234,671.66

Forward Week Price

Prior week price $48.47Multiplier $1.50Forward week price 72.71

Daily Monitoring and Weekly True-Up

• ERCOT will monitor daily and calculate weekly an incremental Resource Imbalance liability.

• Each week, ERCOT will apply the seven-day period’s updated estimated resource deviation and weighted average MCP and increase or reduce the QSE’s amount of incremental collateral posted.

Resource and Load Imbalance• Collateral requirements for Resource and Load Imbalance:

• If the sum of

– 1. The percentage by which a QSE’s total estimated Load MWHs differs from its scheduled Load MWHs and

– 2. The percentage by which a QSE’s total estimated Resource MWHs differs from its scheduled Resource MWHs

– exceed 20%,

ERCOT will monitor daily and calculate weekly an incremental net Resource and Load Imbalance liability.

Resource and Load Imbalance(based on the example listed below collateral would be calculated for both Resource and Load Imbalance)

Scheduled Total MWh Imbalance

Load 1,600 2,000 400 25%

Resource (2,200) (1,999) 201 9%

Total (600) 1 601 34%

Collateral Posting

• All collateral, for NBEL, NRIL, TEL and EAL is due within two banking days.

Relaxed Resource ScheduleCredit Requirements

Questions