Invoice Due Dates

1. Invoice Due Dates Presentation for Joint Meeting SEWG & MCWG December 7, 2009 Jack Brown Settlement Coordinator Garland

2. Invoice Due Dates Overview: • Purpose • Current Zonal Invoice Due Dates • Nodal Invoice Due Dates: • RTM Invoice Due Dates with Calendars • DAM Invoice Due Dates with Calendars • CRR Auction Invoice Due Dates with Calendars • Payment Options and Timing • Payment Breach and Late Payments • DAM Participation Example • Discussion

3. Invoice Due Dates Purpose: • Compare Areas of Zonal / Nodal Protocols • Identify Volume / Timing of Nodal Invoice Activities • Identify Payment Options and Timing • Provide Example of DAM Participation • Provide Insight into Default / Loss Implications • Initiate Meaningful Discussions Between the Joint Working Groups to Understand and Consider Impacts of Decisions Moving Forward.

4. Weekly Volume of Zonal Statements & Invoices Activity (Per QSE)Potential StatementsPotential Invoices Total Zonal Market 21 1 22 (Statements include 7 days of each Initial, Final, True-Up & more with any Resettlements) Monthly Auction (next month) 11 21 2 23

5. Weekly Volume of Nodal Statements & Invoices Activity (Per QSE)Potential StatementsPotential Invoices Total Day Ahead Market 7 7 14 Real Time Market 21 1 22 (Statements include 7 days of each Initial, Final, True-Up & more with any Resettlements) Monthly Auction (next month) 1 1 CARD (previous month) 1 1 Balancing Acct (previous month) 11 28 11 39

6. Invoice Due Dates (Current Zonal) Current Zonal Invoice Due Dates: • Current Zonal Protocol 9.3 states: The payment date will be five (5) Bank Business Days after the Settlement Invoice date. If the payment date does not fall on a Business Day, the Invoice will become due on the next Business Day.

7. Invoice Due Dates (Current Zonal) 7 Operating Days October 6 – 12 Ten (10) Days To Post Settlement Statements Invoice Posted OD 11&12 Five (5) 1 2 Due Date Bank Business Days

8. Invoice Due Dates (Nodal RTM) Nodal RTM Invoice Due Dates: • Nodal Protocol 9.7.1 (1) states: The payment due date and time for the RTM Invoice, with funds owed by an Invoice Recipient, is 1700 on the fifth Bank Business Day after the RTM Invoice date, unless the fifth Bank Business Day is not a Business Day. If the fifth Bank Business Day is not a Business Day, the payment is due by 1700 on the next Bank Business Day after the fifth Bank Business Day that is also a Business Day.

9. Invoice Due Dates (Nodal RTM) 7 Operating Days October 6 – 12 Ten (10) Days To Post Settlement Statements Invoice Posted OD 11&12 Five (5) 1 2 Due Date Bank Business Days

10. Invoice Due Dates (Nodal DAM) Nodal DAM Invoice Due Dates: • Nodal Protocol 9.4.1 (1) states: The payment due date and time for the DAM Invoice, with funds owed by an Invoice Recipient, is 1700 on the fourth Bank Business Day after the DAM Invoice date, unless that fourth Bank Business Day is not a Business Day. If the fourth Bank Business Day is not a Business Day, then the payment is due by 1700 on the next Bank Business Day after the fourth Bank Business Day that is also a Business Day.

11. Invoice Due Dates (Nodal DAM) Invoice Posted OD Four (4) Bank DAM Post Due Date Bus. Days

12. Invoice Due Dates (Nodal DAM) OD Invoice Posted Four (4) Bank Business Days DAM Post Due Date

13. Invoice Due Dates (RTM and DAM) OD OD 7 Operating Days Invoice Posted Invoice Posted OD DAM Post Four (4) Bank Business Days DAM Post OD Invoice Posted DAM Post Four (4) OD OD October 6 – 12 Invoice Posted OD OD Four (4) Bank Bus. DAM DAM Post Due Date Invoice Posted Due Date Four (4) Bank Business Days Four (4) Bank Business Days DAM Post Due Date Bank Business Days Due Date Ten (10) Days To Post Settlement Statements Due Date Invoice Posted Post Four (4) Bank Business Days Days Due Date Invoice Posted OD 11&12 Five (5) 1 2 Due Date Bank Business Days

14. Invoice Due Dates (CRR Auction) Nodal CRR Invoice Due Dates: • Nodal Protocol 9.9.1 (1) states: The payment due date and time for the CRR Auction Invoice, with funds owed by an Invoice Recipient, is 1700 on the third Bank Business Day after the CRR Auction Invoice date, unless the third Bank Business Day is not a Business Day. If the third Bank Business Day is not a Business Day, the payment is due by 1700 on the next Bank Business Day after the third Bank Business Day that is also a Business Day.

15. Invoice Due Dates (CRR Auction) Nodal CRR Auction Process: • Bid Submission – 3 Days • Optimization – 5 Days • Validation and Invoice Posting – 1 Day • Payment Deadline – 3 Days • Post To Accounts – 1 Day (must post before the last day of the month – DAM for 1st day of next month happens on last day of month) 13 Days Required For Auction Process

16. Invoice Due Dates (CRR Auction) 5 Days Bid Submission 3 Days Invoice Posted Optimization 3 Bank Bus. Days Due Date Post

17. Invoice Due Dates Credit Implications: • RTM Invoice Due Dates • Exposure Remains All MPs, 7 ODs, 22 to 28 Calendar Days • DAM Invoice Due Dates • Exposure 9 - 12 Days • Exposure Only Opting MPs, 1 OD • Exposure Still Considerably Less Than RTM 22 to 28 Days • CRR Invoice Due Dates • Exposure 6 - 7 Days • Exposure Only Opting MPs, Monthly • CRRs will only be allocated when payment is received • Exposure Still Considerably Less Than RTM 22 to 28 Days

18. Invoice Payments (Nodal DAM) Nodal DAM Invoice Payments: • Nodal Protocol 9.4.1 (2) states: All DAM Invoices due, with funds owed by an Invoice Recipient, must be paid to ERCOT in U.S. Dollars by either of the following: (a) On or before the payment due date if the payment is made by Electronic Funds Transfer (EFT) in immediately available or good funds (i.e., not subject to reversal); or (b) On or before two Bank Business Days before the payment due date if the payment is made by Automated Clearing House (ACH) funds.

19. Invoice Payment Timing & Activities Nodal DAM Invoice Payments: • Observations: • ERCOT does need some RTM data to settle the DAM (CRRs) • ERCOT has until 23:59 on the second Business Day after OD to post DAM Statements, Invoices and Extracts • MPs most likely would not begin validation / approval / shadowing processes until the morning of the third Business Day after the OD • ACH payments would have to be initiated that morning of the third Business Day after the OD in order to abide by the current (4 day) Protocol deadline “on or before two Bank Business Days before the payment due date” • Wires must be initiated by 1500 to arrive by 1700 on the payment due date

20. Payment Breach and Late Payments Payment Breach and Late Payments by MPs: • Nodal Protocol 16.11.6 can be summarized: (1) MP responsible to pay full amount when due (2) MP cannot net separate invoice payments together (3) MP failure to pay is “Payment Breach” and ERCOT will attempt to contact AR and Credit Contact by phone and written notices demanding payment (4) ERCOT may waive the Payment Breach if ERCOT receives full payment within two Bank Business Days after the due date. ERCOT will track number of Late Payments. Upon a Payment Breach, ERCOT may impose the following remedies:

21. Payment Breach ERCOT Payment Breach Remedies: • Nodal Protocol 16.11.6.1 can be summarized: .1 No Payments by ERCOT to MP .2 ERCOT May Draw On, Hold or Distribute Funds .3 ERCOT Shall Aggregate Amount Owed by Breaching MP Immediately Due .4 ERCOT May Repossess CRRs .5 ERCOT May Declare Forfeit of CRRs & Auction Off .6 ERCOT May Revoke MPs Rights and Terminate Agreements

22. Late Payments ERCOT Remedies for Late Payments by MPs: • Nodal Protocol 16.11.6 .2 can be summarized: .1 First Late Payment in rolling 12-month period: written notice (ERCOT determines if Level I Enforcement action necessary) .2 Second Late Payment in rolling 12-month period: written notice (Level I action taken or Level II Enforcement action taken if Level I taken on first) .3 Third Late Payment in rolling 12-month period: written notice (Level II action taken or Level III action taken if Level II taken on second) .4 Fourth+ Late Payment in rolling 12-month period: advise of / or termination (Level III action taken)

23. Available Credit Example (due 4 days) Available Credit Limit DAM Transaction Invoice Paid Amount Day 1 $16,000 Day 2 $14,000 $2,000 Day 3 $12,000 $2,000 Day 4 $10,000 $2,000 $2,000 Day 5 $8,000 $2,000 $2,000 Day 6 $6,000 $2,000 $2,000 Day 7 $4,000 $2,000 $2,000 Day 8 $4,000 $2,000 $2,000 $2,000 Day 9 $4,000 $2,000 $2,000 $2,000 Day 10 $2,000 $2,000 $2,000 $ - Day 11 $ - $2,000 $2,000 $ - Day 12 $ - $ - $2,000 $ - Day 13 $ - $ - $2,000 $ - Day 14 $ - $ - $ - $ - Day 15 $ - $ - $ - $ - Day 16 $ - $ - $ - $ - Day 17 $ - $ - $ - $ -

24. Available Credit Example (due 2 days) Available Credit Limit DAM Transaction Invoice Paid Amount Day 1 $16,000 Day 2 $14,000 $2,000 Day 3 $12,000 $2,000 Day 4 $10,000 $2,000 $2,000 Day 5 $8,000 $2,000 $2,000 Day 6 $8,000 $2,000 $2,000 $2,000 Day 7 $8,000 $2,000 $2,000 $2,000 Day 8 $6,000 $2,000 $2,000 $ - Day 9 $4,000 $2,000 $2,000 $ - Day 10 $2,000 $2,000 $2,000 $ - Day 11 $ - $2,000 $2,000 $ - Day 12 $ - $ - $2,000 $ - Day 13 $ - $ - $2,000 $ - Day 14 $ - $ - $ - $ - Day 15 $ - $ - $ - $ -

25. Invoice Due Dates Summary: • Compared Areas of Zonal / Nodal Protocols • Identified Volume / Timing of Nodal Invoice Activities • Identified Payment Options and Timing • Provided Insight into Payment Breach and Late Payment • Provided Example of DAM Participation • Initiated Meaningful Discussions Between the Joint Working Groups to Understand and Consider Impacts of Decisions Moving Forward.

26. Invoice Due Dates Questions / Comments / Discussion ?