PRR 397 – TGR Trading Piece

Requirements Discussion

For PRS Review 04/23/04

PRR 397- TGR Trading Piece

• When passed in June ’03, project cost was underestimated– Initial estimate based on leveraging existing TCR system

– Thorough analysis of requirements showed estimate should have been 4x the original estimate

– At Project Review, ERCOT Mgmt requested further analysis

– Major cost component (approximately ½ total cost) attributed to TGR Trading piece

• Further discussion between ERCOT and McCamey Area MPs indicated debate over real need for Trading piece

• Conference Call on 1/27/04 with Austin, CPS, FPL, TXU, and PUCT – Trading piece was removed from project based on call discussions

– PRR to remove Trading piece was expected from one of the MPs• Subsequent information indicated that PRR would not be submitted• Project had already been re-directed and begun without TGR Trading piece

PRR 397- TGR Trading Piece

• Why not just add this requirement back into in-flight project?– ERCOT staff needs further clarification of requirements to accurately reflect trading

piece • Need to resolve questions about how to handle trading• Trading 1MW from unit to unit might not result in 1:1 trade (shift factors/line losses, etc.)

– Main project design was already underway – Cost/schedule delay of main project while resolving issues identified above

• Conference Call 4/13/04– Between ERCOT staff and PUCT

• Confirmed PUCT presence at earlier telecon and concurrence with actions taken by project staff to proceed without Trading piece

• Need for Trading piece diminishes relative to other prospective projects and with projected Nodal Market

• Discussion of plan to re-prioritize Trading piece

• Action Plan– Bring Trading piece to PRS in April for re-prioritization

– If priority is high enough for likely completion near-term, • Request task force/work group be assigned to clearly define requirements