79 th Texas Legislative Session 2005 – Summary of ERCOT Impacts

1. 79th Texas Legislative Session2005 – Summary of ERCOT Impacts ERCOT Board of Directors June 21, 2005 Mark Walker

2. ERCOT Direct Impact - Senate Bill 408 • Consistent with Sunset Commission Recommendations • PUC Reauthorized to 2011 • OPUC reauthorized in SB 409 (to 2011) • PUC clear authority to oversee ERCOT • Board Governance • Independent Market Monitor ERCOT Board

3. Bills and Amendments that did NOT pass • Open records law for ERCOT • State Agency Task Force over ERCOT • Renewable Energy (yes, all wind bills died) • Broadband over Powerline ERCOT Board

4. Senate Bill 408(eff. September 1, 2005) • Oversight Authority – PUC may: • Oversee and investigate finances, budget, operations, cost efficiencies, salaries & benefits, use of debt • Prescribe a system of accounts • Require reports • Conduct audits • Inspect ERCOT facilities, records & accounts • Assess administrative penalties • Resolve disputes ERCOT Board

5. Senate Bill 408 - cont. • Board Governance • Add 2 new unaffiliated members (effective Sept. 2006) • Board chairman to be one of the 5 independent members • Clarification of public meetings policy for Board, including 7-day notice, public comment, special provisions • Board member disclosure of “direct interest” in matters before the board, recusal from voting or participation • PUC approval of governance changes ERCOT Board

6. Senate Bill 408 - cont. • Independent Market Monitor • ERCOT to support and fund the independent market monitor selected by the PUC • PUC to supervise the Monitor • PUC to retain enforcement role • Consultation with ERCOT Board Committee • Ethical Standards for Monitor • Annual Reports ERCOT Board

7. Action Plan - Oversight • Cost Effectiveness • Highly detailed fee filing in by Oct. 1 • Resource justification, time tracking, process improvement, activity based costing, workforce analysis, salary survey, internal controls development • Accountability • Complete audit responses • Follow up audits to test internal controls and security enhancements (2006) • Full cooperation with the Commission ERCOT Board

8. Action Plan - Governance • Bylaws Review and PUC Rules • Board membership, conflicts of interest, public meetings • Ethics Agreement • Refinement of current re-draft • Board Processes • Conform procedures and practices ERCOT Board

9. Action Plan – Independent Market Monitor • PUC Rulemaking – Definition of IMM, selection, ethical standards • PUC Detail of ERCOT Support • Contract with IMM, workflow, staffing, systems, budgeting • Board Committee • Input on resource commitment • Input on annual reports ERCOT Board

10. Other Significant Legislation - Metering • Metering & Energy Efficiency (HB 2129) • Future competitive metering services limited to customers required by ERCOT to have IDR meters • Surcharge to allow TDSPs to recover costs of deploying advanced meters or meter networks for non-IDR customers • REPs may request that non-IDR customers receive advanced metering if the REP pays the difference in cost • Clarifies that customers own their meter data ERCOT Board

11. Energy Efficiency • Energy Efficiency (SB 712) • Clarifies that TDU efficiency programs may address reductions in peak demand as well as energy consumption and costs • Standard offer programs must be technology-neutral • Requires PUC to expand market transformation programs to include energy-smart schools, appliance recycling, A/C system tune-ups, trees for energy efficiency • Allows the TDUs to spend up to 10% of their efficiency funds on R&D for efficiency technologies • Restores the low-income weatherization programs previously funded by the System Benefit Fund ERCOT Board

12. Entergy Area (SE Texas) • Competition formally delayed until PUC certifies an independent power region for the area (HB 1567) • Lifts the rate freeze imposed by SB7 ERCOT Board

13. Credit Scoring • Prohibits REPs from denying electric service to or setting prices for residential customers based on their credit history (HB 412) ERCOT Board