Finance & Audit Committee Meeting

1. Finance & Audit Committee Meeting December 13, 2005

2. Audit Report Acceptance - Sean Barry

3. ICMP – Cheryl Moseley Audit Point Status – Cheryl Moseley Credit Stats – Cheryl Yager PMO Update – (included here but not on this month’s agenda) Committee Briefs

4. ICMP & Audit Point Status – Cheryl Moseley

5. Completion Status By Audit 53 to complete

6. Projected Audit Point Progress

7. Actionable Internal Control Gaps - Status

8. Credit Stats – Cheryl Yager

9. PMO Update

10. 2005 YTD Project Performance Fourth Quarter Results (to 11/30) Project Process Improvements In 2005 • 7 completed, 47 YTD • 5 in Initiation • 20 in Planning • 43 in Execution • PM Staff Completing PMP Certification • Reviewing Prioritization Criteria with PRS & TAC • Planning 2006 Program Portfolios • PMO Process Improvements Being Implemented Project Performance Project Activity

11. Projected Completions to Year End

12. Scope EMMS Release 4 Execution Budget Approved Budget $ 8,138,453 Actual/Forecast $ 8,135,075 2003 Actual $ 37,815 2004 Actual $ 4,942,983 2005 Actual/Forecast $ 3,053,122 2006 Forecast $ 101,155 Market Deliverables Delivered on October 05, 2005 RPRS Market Redesign (Currently in Monitor Mode) AS Simultaneous Procurement Fleet Deployment of OOM and VDI Resource Plan Improvement (R3 carryover) Unit Specific Bid Limits MOMS Sync with Release 4 OOME Participation in providing AS EMS Deliverables Migrated to production on June 14, 2005 Improvements to VSA/DSA EMS Archive comparison tool Special Protection Schemes Schedule Project end being extended to June 30, 2006 Large Project Update- PR-30183 (EMMS Release 4)

13. Project changes to timeline Extend Task Order 22 term to June 30, 2006 in support of Replacement Reserve System (RPRS) “Go Live” schedule for Q1/Q2 2006 with no additional funding required Extend project end date to June 30, 2006 to support the 90 day warranty period associated with RPRS PR-30183 (EMMS Release 4) Status

14. Projects Completed 4th Quarter • Projects Completed in October • PR-40093 RMR Automation • PR-50010 Lodestar Enhancements PRR420 Modified Competitive Solution for Settlements • PR-40075 Lodestar Enhancements PRR 488 and PRR 572 Weather Responsiveness Determination and Reporting • PR-50143 IPC Line Networking Upgrade • Projects Completed in November • PR-40090_01 OTS Center • PR-40108 Disclosure of Local Congestion • PR-50121_03 Market Information Distribution

15. PR-40090_01 Operator Training Simulator (OTS) Center • Scope of OTS Center included : • Remodel the TCC Blue Building to create a Training Center • Furniture and classroom PCs (moved planned deliverable from 2006 to 2005) • Audio Visual Subsystem (moved planned deliverable from 2006 to 2005) • Features and Deliverables: • Training Center to house the Operator Training Simulator (OTS) System, Classroom, Engineers, Instructors, Training team and Admin. • A glassed-in area behind the consoles in the control room for role players and instructors • OTS furniture, Power Monuments, whiteboards, guest chairs • PCs for classroom instruction (10 students and 2 instructors) • Current Activity • Punch List Fixes • Delivery and installation of Audio-Visual Subsystem Planning 10 Months Execution 4 Months September – December 2005 December 2004 - September 2005

16. PR-40108 Disclosure of Local Congestion • Scope of Disclosure of Local Congestion Project included : • Automation of the process to post OOMC, OOME, and RMR information to help mitigate local congestion costs. • Features and Deliverables: • The objective of the project is to automate posting of the report to disclose OOMC, OOME, and RMR information both 2 days after the trade day for instructions and 17 days after the trade day with instructions and energy. • Project initiated due to Market driven PRR515 in 2Q2005 • Solution designed in new Enterprise Data Warehouse and Reporting Application • Solution uses Portal to post information on ERCOT.com • Information is available to public • Current Activity • Lessons Learned • Closing out project. Planning 5 Months Execution 4 Months July – November 2005 February-June 2005

17. Scope of PR-50121_03 Market Information Distribution: This project will deliver the infrastructure to replace existing SeeBeyond EAI components within Report Explorer functionality with TIBCO EAI components. The completion of this project will establish the infrastructure and configuration tools to allow ERCOT to complete a full migration of existing RMC reports to MID in the future. Features and Deliverables: Deployed the MID system as a replacement to RMC system within Report Explorer functionality that delivers reports to the Market Implemented a mechanism to migrate the reports published to RMC into the MID system. This is used to transfer existing reports and to keep the two systems in sync during the cut over period. Developed a Delivery Strategy plan for the migration of all remaining reports in Report Explorer Converted the display of Report Explorer content from I-frame solution to direct display via TIBCO integration Delivered an SOA infrastructure that provides future options to place information on the Portal and how the portal publishes the information Implemented a new infrastructure with minimal impact to the Market Current Activity Lessons learned Subsequent phase under O&M will be implemented in Retail Releases to facilitate a phased approach to migrating all existing RMC reports Currently in the Closing Phase of the project. PR-50121_03 Market Information Distribution Planning 18 weeks Execution 20.5 weeks February 2005 – June 2005 June 2005 – November 2005

18. Background on activity-based costing (ABC) at ERCOT ABC defined ERCOT management thoughts on ABC Expected benefits Striking a balance Starting small Next steps Goals and expectations Cross-functional team Competent external assistance Sustainable, relevant, updateable, and actionable system ABC Project Overview – Mike Petterson

19. Establish a standing enterprise risk management program with supporting governance structure Achieve steady-state internal control management program Complete the following audits with un-qualified/clean opinions: financial statements internal controls benefits Support Texas nodal implementation Update management information reporting package and host quarterly business review session with officers Complete 2007 budget and fee filing process within agreed schedule Institute BOD compliance reporting framework 2006 Finance Division Priorities – Steve Byone • Enhance effectiveness of F&A Committee oversight via improved reporting of key information • Develop and communicate credit risk mitigation alternatives to ERCOT stakeholders • Implement quick hit PMO improvements and develop plan to implement long-term improvements from KEMA report • Organize business continuity planning effort • Maintain access to capital markets and liquidity funding sources and prepare for Nodal financing • Restructure procurement and contract administration to eliminate inefficient processes while maintaining desired controls • Review and streamline key policies and approval authorities

20. Overview of Corporate Policy Framework (Jan or Feb mtg?) Quarterly Investment performance Review Preliminary 2005 Budget Variance Future Agenda Items - Steve Byone Next FA meeting: January 17, 2005

21. Adjourn to Executive Session