ERCOT Financial SummaryFor the Month Ended September 30, 2005

Presented to ERCOT Board of Directors

October 18, 2005

2

September 2005 Financial Dashboard

($ in millions)

 

Expense category Budget Actual Var - # Var - % Employee Count: Position Budget FTE Budget Actual (A) Var - %

Labor and benefits 37.63 36.45 1.18 3% Market Operations 135 127 116 -

Contractors 7.20 6.24 0.96 13% System Operations 155 146 152 -

Hardware and software support 4.86 5.08 -0.22 -5% IT Operations 171 160 159 -

Depreciation & Amortization 38.14 35.73 2.41 6% Corporate Operations 100 94 83 -

Other expenses 12.17 10.29 1.86 15% Total 561 527 510 -

Total 100.00 93.79 6.21 6% * Staff Aug Total Total vs FTE Total vs FTE * Project

Total FTE Resource: Contractors (B) (A + B) Budget Var # Budget Var % Contractors (C)

Expense category Budget Actual Var - # Var - % Market Operations 0 116 11 8.7% 1

Market Operations 10.34 9.67 0.67 6% System Operations 0 152 -6 -4.1% 0

System Operations 11.64 12.03 -0.39 -3% IT Operations 4 163 -3 -1.9% 12

IT Operations 21.80 20.51 1.29 6% Corporate Operations 11 94 0 0.0% 14

Corporate Operations 56.22 51.58 4.64 8% Total 15 525 2 0.4% 27

Total 100.00 93.79 6.21 6% * Combined Staff Augmentation & Project Contractors (B + C)

Byone Giuliani Jones Shellman McIntire Hinsley Schrader Total

Project Expenditures Budget Actual Var - $ Var - % 22 1 0 1 1 16 1 42

Market Operations 2.26 1.04 1.22 54%

System Operations 5.87 3.48 2.39 41% Goal Goal Description Hours Percent FTE's

Retail Operations 4.06 2.11 1.95 48% 1 Reliability and congestion management 226,123 39% 199

IT Operations 5.36 1.42 3.94 74% 2 Retail transaction processing success 72,220 13% 66

Corporate Operations 3.20 1.57 1.63 51% 3 Wholesale access, settlement and billing 112,656 19% 99

Total 20.75 9.62 11.13 54% 4 Management systems & business practices 44,423 8% 39

Total Initiation Planning Execution Complete 5 Financial mgmnt & cost effectiveness 62,185 11% 54

YTD Number of projects by status 123 10 37 36 40 6 External and stakeholder affairs 37,016 6% 32

7 Organizational readiness 24,148 4% 21

Budget Actual Var -$/ # Var - %

System Administration Fee 96.06 96.85 0.79 1%

Other Revenue 1.54 1.67 0.13 8%

Total 97.60 98.52 0.92 1% Current Mo. Prior Mo. % Change

MWH volume (millions) 228.72 230.59 1.87 0.82% QSE and TCR security deposits 64.72 46.08 40%

QSE advance receipts and due to generators 43.25 17.25 151%

TCR auction receipts 9.24 14.96 -38%

Total market settlement liability 117.21 78.29 50%

Debt Type Balance Rate Balance Rate Settlement short pmts balance after uplifts 0.24 0.23 4%

Senior Notes 122.73 6.17% 122.73 6.17%

Term Notes * 50.00 3.90% 50.00 3.90%

Revolver - Borrowed 0.00 0.00% 0.00 0.00% Amount

Total / Average 172.73 5.51% 172.73 5.51% Beginning Cash (January 1, 2005) 33.49$

TCR Borrowing 0.00 0.00 Cash Provided / (Used) by Operations 51.86

Term Notes - Unused Capacity 0.00 0.00 Cash Used in Investing Activities (Projects) (18.46)

Revolver - Unused Capacity 50.00 50.00 Cash Provided / (Used) by Financing Activities (5.66)

* Term Note % was reset on 7/29 Ending Cash (September 30, 2005) 61.23$

Year-to-Date Operating Expenses Human Resources

Year-to-Date Capital Expenditures

Year-to-Date Revenue & Billing Determinants

Time Tracking - Hours Allocated to Seven Corporate Goals

Year-to-Date Cash Flow Summary

Market Settlement and Credit

DebtPrior MonthCurrent Month

Time Tracking through September 15, 2005. ERCOT employees track and record time expended on approximately 200 operational activities. The activities were mapped to seven KEY corporate goals established by the ERCOT management team.

3

Financial Dashboard – YTD Operating Expenses

($ in millions)

_____________________________________________

Expense category Budget Actual Var - # Var - %

Labor and benefits 37.63 36.45 1.18 3%

Contractors 7.20 6.24 0.96 13%

Hardware and software support 4.86 5.08 -0.22 -5%

Depreciation & Amortization 38.14 35.73 2.41 6%

Other expenses 12.17 10.29 1.86 15%

Total 100.00 93.79 6.21 6%

Expense category Budget Actual Var - # Var - %

Market Operations 10.34 9.67 0.67 6%

System Operations 11.64 12.03 -0.39 -3%

IT Operations 21.80 20.51 1.29 6%

Corporate Operations 56.22 51.58 4.64 8%

Total 100.00 93.79 6.21 6%

4

2005 Year End Forecast vs. 2005 Budget

ACTUAL Forecast 1Q Total 2Q Total 3Q Total Oct Nov Dec 2005 Year

Forecast Total (Oct 05)

2005 Approved Budget

$ Variance

% Variance

ERCOT RevenueERCOT System Administration Fee 26,674,279 31,516,930 38,657,570 9,692,279 8,743,731 9,662,283 124,947,072 124,165,283 781,789 0.6%Wide-area Network Fees 361,638 295,387 365,245 115,000 115,000 115,000 1,367,270 1,300,000 67,270 5.2%Non-ERCOT LSE Fees 19,899 59,890 57,020 18,000 18,000 18,000 190,809 250,000 (59,191) -23.7%Membership Fees 73,750 75,512 70,370 24,290 24,290 24,290 292,502 250,000 42,502 17.0%Other Revenue 84,292 100,014 109,906 31,630 31,630 31,630 389,102 250,000 139,102 55.6%

Total - ERCOT Revenue 27,213,858 32,047,733 39,260,111 9,881,199 8,932,651 9,851,203 127,186,755 126,215,283 971,472 0.8%

ERCOT Operating ExpensesLabor & Benefits 13,210,272 13,256,822 13,927,548 4,715,241 4,735,241 4,755,241 54,600,365 54,623,577 23,212 0.0%Contra-Labor to Capital Projects (1,137,902) (1,340,537) (1,462,918) (518,677) (520,877) (523,077) (5,503,987) (4,447,440) 1,056,547 23.8%Tools, Equipment, Materials & Supplies

218,957 226,022 327,994 105,000 105,000 105,000 1,087,973 2,032,090 944,117 46.5%Hardware & Software Expenses 1,804,676 1,763,663 1,509,766 572,309 572,309 572,309 6,795,032 6,382,720 (412,312) -6.5%Consultants & Contractors 1,230,899 1,579,119 1,487,194 577,000 577,000 577,000 6,028,212 7,029,383 1,001,171 14.2%Special Audits and Audit Responses 116,904 1,051,952 772,140 270,306 270,306 270,306 2,751,914 2,495,000 (256,914) -10.3%Utilities, Maintenance & Facilities 1,550,212 1,449,205 1,619,747 550,000 550,000 550,000 6,269,164 6,598,144 328,980 5.0%Training, Travel & Other Employee Expenses

234,293 327,485 373,642 109,118 109,118 109,118 1,262,774 1,657,457 394,683 23.8%Insurance 427,494 411,646 434,276 141,594 141,594 141,594 1,698,198 1,920,000 221,802 11.6%Property Taxes 373,770 373,125 373,103 124,375 124,375 124,375 1,493,123 1,492,500 (623) 0.0%Depreciation & Amortization 11,975,137 12,056,857 11,699,159 4,070,794 4,120,794 4,270,794 48,193,535 50,853,903 2,660,368 5.2%Other 414,473 763,685 394,005 187,514 187,514 187,514 2,134,705 2,538,724 404,019 15.9%

Total - ERCOT Operating Expenses 30,419,185 31,919,044 31,455,656 10,904,574 10,972,374 11,140,174 126,811,008 133,176,058 6,365,050 4.8%

Excess (Deficiency) of Revenues over Expenses

(3,205,327) 128,689 7,804,455 (1,023,375) (2,039,723) (1,288,971) 375,747 (6,960,775) (5,393,578) 77.5%

Other income (expense)Interest income 174,623 241,340 434,050 130,500 130,500 130,500 1,241,513 250,000 991,513 396.6%Interest expense (2,260,343) (2,267,096) (2,346,701) (782,857) (786,857) (790,857) (9,234,711) (8,532,000) (702,711) 8.2%

Change in Unrestricted Assets (5,291,047) (1,897,067) 5,891,804 (1,675,732) (2,696,080) (1,949,328) (7,617,451) (15,242,775) 7,625,324 -50.0%

5

Financial Dashboard – YTD Revenue($ in millions)

Budget Actual Var -$/ # Var - %

System Administration Fee 96.06 96.85 0.79 1%

Other Revenue 1.54 1.67 0.13 8%

Total 97.60 98.52 0.92 1%

MWH volume (millions) 228.72 230.59 1.87 0.82%

Total Revenue Trend Analysis - CumulativeBudget vs Actual / Forecast

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05

$ in

Mill

ion

s

Buget Actual Forecast

Annual Budget $126.2M

Annual Forecast $127.2M

6

ERCOT Operating Expenses

2005 Budget vs. 2005 Forecast$ in Millions

Increase / (Decrease)

2005 Budgeted Operating Expenses 133.2$

Depreciation (2.7) • Lower depreciation as a result of fully depreciated assets and lower project capital expenditures in the current year.

Facilities Expense, Tools, Equipment, Materials, and Supplies (1.3) • Lower than expected equipment maintenance ($0.6)• Reduced Office supply purchases ($0.4)• lower-than-budgeted expenses for telecommunications ($0.2)• lower-than-budgeted expenses for office rental expense ($0.1)

Net Labor & Benefits (1.1) • Lower than expected staff hiring• Greater use of employee staff for contract projects

Outside Services (0.7) • Lower-than-expected use of consultants and contractors ($1.0)• offset by Higher Special Audits $0.3

Employee Expenses (0.4) • greater use of less expensive in-house web based training with lower travel related expenses and deferred non-critical training

Other (0.4) • Lower sponsored meeting expenses ($0.3)• Lower recruitment costs ($0.1)

Insurance (0.2) • Lower-than-expected premium increases, primarily in directors and officers coverage.

Hardware & Software Maintenance 0.4 • Greater costs due to efforts to ensure ERCOT is fully licensed and supported for applications and hardware used.

Net Operating Expense Variance - Increase/(Decrease) (6.4)

2005 October Year-End Operating Expense Forecast 126.8$

7

Financial Dashboard – YTD Capital Expenditures

($ in millions)Project Expenditures Budget Actual Var - $ Var - %

Market Operations 2.26 1.04 1.22 54%

System Operations 5.87 3.48 2.39 41%

Retail Operations 4.06 2.11 1.95 48%

IT Operations 5.36 1.42 3.94 74%

Corporate Operations 3.20 1.57 1.63 51%

Total 20.75 9.62 11.13 54%

Capital Expenditure Trend Analysis - CumulativeBudget vs Actual / Forecast

0.0

3.0

6.0

9.0

12.0

15.0

18.0

21.0

24.0

27.0

30.0

Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05

$ i

n M

illi

on

s

Budget ActualForecast Forecast -Worst Case

$18.2M

$27.2M

$15.7M

Total Initiation Planning Execution Complete

YTD Number of projects by status 123 10 37 36 40

______________________________________________

8

Financial Dashboard - Debt($ in millions)

Maturity Profile for Existing Senior and Term Notes

$0

$3,000

$6,000

$9,000

$12,000

$15,000

$18,000

$21,000

$24,000

$27,000

$30,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

$ in T

hous

ands

Senior Notes (due May) Term Notes (due Nov)

PAID

Debt Type Balance Rate Balance Rate

Senior Notes 122.73 6.17% 122.73 6.17%

Term Notes * 50.00 3.90% 50.00 3.90%

Revolver - Borrowed 0.00 0.00% 0.00 0.00%

Total / Average 172.73 5.51% 172.73 5.51%

TCR Borrowing 0.00 0.00

Term Notes - Unused Capacity 0.00 0.00

Revolver - Unused Capacity 50.00 50.00

* Term Note % was reset on 7/29

Prior MonthCurrent Month

Term Loan Interest Rate Trend w/ Loan Principal

4.370%

3.900%

3.410%3.105%

2.505%2.105%

1.645%

0.000%

0.500%

1.000%

1.500%

2.000%

2.500%

3.000%

3.500%

4.000%

4.500%

5.000%

2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 *Interest Reset Date

Inte

rest

Rat

e %

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

Term

Loa

n Pr

incip

al Ba

lance

Term Loan Principal Interes t Rate

*Anticipated 4Q term loan renewal rate at

end of Oct-05

9

Financial Dashboard – Human Resources

Employee Count: Position Budget FTE Budget Actual (A)

Market Operations 135 127 116

System Operations 155 146 152

IT Operations 171 160 159

Corporate Operations 100 94 83

Total 561 527 510

* Staff Aug Total Total vs FTE Total vs FTE * Project

Total FTE Resource: Contractors (B) (A + B) Budget Var # Budget Var % Contractors (C)

Market Operations 0 116 11 8.7% 1

System Operations 0 152 -6 -4.1% 0

IT Operations 4 163 -3 -1.9% 12

Corporate Operations 11 94 0 0.0% 14

Total 15 525 2 0.4% 27

Combined Staff Augmentation & Project Contractors (B +C)

Byone Giuliani Jones Shellman McIntire Hinsley Schrader Total

22 1 0 1 1 16 1 42

10

Staff and Contractor Summary

-

100

200

300

400

500

600

# F

TE

Project Support 82 16 21 20 18 10 11 15 25 27

Staff Augmentation 60 28 22 16 16 18 19 13 11 15

ERCOT Staff 385 484 488 493 493 505 510 505 509 510

Jan-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05

527 528 531 529 527 533 540 533 545 552

11

Financial Dashboard – Time Tracking *

* Phase 1 of time tracking manual time card submission process.

Equivalent

510

___

Goal Goal Description Hours Percent FTE's

1 Reliability and congestion management 226,123 39% 199

2 Retail transaction processing success 72,220 13% 66

3 Wholesale access, settlement and billing 112,656 19% 99

4 Management systems & business practices 44,423 8% 39

5 Financial mgmnt & cost effectiveness 62,185 11% 54

6 External and stakeholder affairs 37,016 6% 32

7 Organizational readiness 24,148 4% 21

Time Tracking through September 15, 2005. ERCOT employees track and record time expended on approximately 200 operational activities. The activities were mapped to seven KEY corporate goals established by the ERCOT management team.

____

12

Financial Dashboard – Market Settlement

($ in millions)

Current Mo. Prior Mo. % Change

QSE and TCR security deposits 64.72 46.08 40%

QSE advance receipts and due to generators 43.25 17.25 151%

TCR auction receipts 9.24 14.96 -38%

Total market settlement liability 117.21 78.29 50%

Settlement short pmts balance after uplifts 0.24 0.23 4%

13

Financial Dashboard – Cash Flow

($ in millions)

September Ending Cash Primary Components:

•Prepayments from Market = $42.8

•Available Cash to use = $18.4

August 05 September-05 $ Change % Change

Beginning Cash (January 1, 2005) 33.49$ 33.49$ -$ 0%

Cash Provided / (Used) by Operations 25.33 51.86$ 26.53 105%

Cash Used in Investing Activities (Projects) (16.80) (18.46)$ (1.66) 10%

Cash Provided / (Used) by Financing Activities (5.66) (5.66)$ - 0%

Ending Cash 36.36$ 61.23$ 24.87$ 68%

14

Annual Cost Savings

$ 907,000 cost savings identified in 1st Qtr 2005

$ 512,000 cost savings identified in 2nd Qtr 2005

$ 115,000 cost savings identified in July $ 300,000 cost savings identified in August $ 350,000 cost savings identified in September

• Greater use of less expensive in-house and web based training with a related benefit of lower employee travel expenses

_____________________

$2,184,000 Sept YTD Realized Cost Savings Identified

$ 66,000 Additional Targeted Cost Savings ____________________

$2,250,000 Total Cost Savings Estimated for 2005

15

Completion Status By Audit

0

25

50

75

100

125

150

175

200

225

250

275

300

Feb 8 Feb 21 Mar 30 Apr-30 May 31 Jun 30 Jul 18 Aug 15 Sep 14 Oct 10Reporting Date

# of

Aud

its

CAN Audit D&T Internal Controls Internal Audits Ernst & YoungPwC D&T Lawson/Fixed Assets Remaining Verified

288

61 to complete

16

Projected Audit Point Progress

0

10

20

30

40

50

60

70

Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06

# of

Rem

aini

ng A

udit

Poi

nts

# Rem aining 61 60 57 10 10 10 9 9 6 4 4 3 2 1 0

Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06

17

ICMP Update for D&T Actionable Gaps

Status of 217 D&T Actionable Internal Control Gapsby Business Process as of 10/17/05

0

10

20

30

40

50

60

70

80

# o

f Act

ion

able

Gap

s

Planning - Key Planning - Non Key Execution - Key Execution - Non Key Complete - Key Complete - Non Key

Complete - Non Key 3

Complete - Key 1

Execution - Non Key 1 5 7

Execution - Key 2 5 5 4 17 28

Planning - Non Key 1 13 13 3 3

Planning - Key 2 6 1 1 1 3 18 30 44

Treasury RevenueCorp

GovernanceFinancial Reporting

Capital Projects

IT Payroll HRContract

MgmtFixed Assets

Accounts Payable

Procurement

1%2%

6% 7%10%

35%

3%1%

3%5%

11%

15%

% = % of Total