ERCOT Business Plan April 2001 ERCOT Market Status

ERCOT Business Plan April 2001

ERCOT Market Status • Senate Bill 7, i. e. “consumer choice”, takes effect on a pilot basis in June 2001. • All investor owned utilities must un-bundle generation (“genco”), transmission and distribution (T&D) and retail functions by January 1, 2002. • T&D providers (TDSP’s) will continue to be regulated, however meter reading functions will be open to competition after 2004. • Municipal utilities and co-ops are not required to (at their option): – opt into retail competition – they retain their existing service territories; – unbundle their t&d and genco ops – even if they opt in.

ERCOT Load Characteristics • ERCOT demand may be segmented as follows: • Generator market share is illustrated below:

Effect of Deregulation on ERCOT Suppliers • Muni’s and coop’s are taking a “wait and see” attitude. – The majority have long-term supply agreements in place; – The majority have NOT opted in; and – Therefore they have little incentive to transact given the protected status of their customer base and their ability to pass through costs. • IOU’s are focused on preserving their competitive position in the market by leveraging their hard assets: – IOU’s have been successful in lobbying the PUC to create commercially significant constraint zones that maximize the value of their generating assets; and

ERCOT Transmission

ERCOT Market Conclusions • Larger industrials (peak load > 25 Mw) present ideal customer base in short run. • Ideally, load and generation should be acquired in diverse geographic locations so that transmission opportunities may be exploited in the mid-term (2 years max). • Long term, muni’s and co-op’s will become increasingly important as they opt-in and their customers bases become accessible.

Short Term Market Strategy & Tactics Target Market: Industrials Information/Market Intelligence QSE Services Middle Market Coverage Marketing Seminars Origination