TPTF Verifiable Cost Sub-group Summary

1. TPTF Verifiable Cost Sub-group Summary Report to TPTF 1/21/2008 Jim Galvin- TPTF VC Sub-group Chair

2. Existing Issues • Verifiable Start-up and Min Energy • Capturing Costs from Breaker Close to LSL (resolved) • Including Shut-down Costs in Start-up (resolved) • Recovering Start Costs when RUC is cancelled (by ERCOT) and Cost recovery during SPS • Rare occurrences will be noted in Protocols and cost recovery through dispute process • Use of Auxiliary Equipment for Start-up (resolved) • Number of Starts outside Warranty (moved to Variable O&M)

3. Existing Issues (Cont) • Verifiable Incremental Heat Rate • Creating monotonically non-decreasing Incremental Heat Rate Curve (resolved) • Historical Data versus Test Data (resolved as either or) • Verifiable O&M Costs • 10-year requirement for data/evidence of costs • Resolved- 10-year or whatever period is available if entity does not have 10-years worth of data • Escalation rate • Resolved- Handy-Whitman index used as reasonable means • Acceptable types of documentation, invoices, other evidence • Tabled for further discussion as this does not impact systems • Is a form of Generic O&M values a potential solution?

4. Existing Issues (Cont) • FIP and FOP • Additional Transportation Costs, Imbalance Fees, Swing Contracts, and Spot Gas price diverging from Index • Resolved for discussion under “Exceptional Events” as “cost recovery” and not part of Verifiable Cost Process • Emissions Costs • General Methodology needed for addressing Emissions • Resolved for SOX using fuel, lbs/mmbtu and a $/MWh rate • Open issues • Is index appropriate for the rate for SOX or historical costs? • Other emissions to be discussed separately • NOX requirements are difficult to price on a linear basis

5. Existing Issues (Cont) • Exceptional Events • Need to define or list “Exceptional Events” (February 2003 used as frequent discussion example) • Discussion points focused on: • Costs after the close of Gas Day • Spot gas differing significantly from Index, is there an appropriate trigger • Cost recover for what are considered rare events

6. Existing Issues (Cont) • Other General Issues that need to be addressed • Including Power Purchase Agreements in the VC Process • No consensus on allowing PPA’s as part of Verifiable Costs • Resource Entity or QSE submits Verifiable Costs • Resolved- Resource Entity being the source with required affirmation from the QSE and/or Resource Entity

7. Existing Issues (Cont) • Other General Issues that need to be • Combined Cycle Units • Resolved- Resource Entities may submit Verifiable Cost information for the number of registered configurations, and will be required once a configuration is RUC’d • Jointly Owned Units • ERCOT to provide additional information on how JOU’s are registered and the role of the Master QSE with the JOU

8. Existing Issues (Cont) • Verifiable Cost Process as a voluntary process • Currently the submittal of Verifiable Costs is voluntary until a single RUC occurrence • Discussions centered around rare instances when a RUC was given to a resource that is not anticipated to be RUC’d frequently (Coal, Nuc etc) • No consensus on making the VC Process entirely voluntary (allowing Generic in lieu of VC) • However, discussions on increasing the trigger to help mitigate rare RUC’s and the time and effort to verify cost data • i.e. X number of RUC’s in a rolling 12-month period

9. Questions