June 16, 2009

Board of Directors Meeting

Update on 2009 Operating Plan

Mike PettersonController

2 ERCOT LimitedJune 16, 2009

Update on 2009 Operating Plan – Commitment to Cost Control

Achieving a $0.4171 System Administration Fee for 2009 was accomplished by taking the following steps:

– Relative to previous 2009 approved budget, reduced staffing projections for base operations from 753 to 739

– Reduced budget for employee benefit cost estimates based on recent years’ spending

– Reduced budget for employee training, development and reimbursable business expenses based on recent years’ spending

– Reduced utilization of outside services

3 ERCOT LimitedJune 16, 2009

Update on 2009 Operating Plan – Sample Cost Control Initiatives

Automation– Implemented a procurement card program – Implemented a web-based expense reimbursement program – Implemented video conference capability between ERCOT’s Austin and Taylor facilities – Implemented web-based learning management system for on-line training of staff and contractor/consultants– Instituted periodic asset inventories based on barcodes to improve speed, accuracy, and efficiency– Automated performance review processes– Increased usage of electronic invoices– Converted to electronic employee communications rather than printed newsletters and other communication

Benchmarking– Use Gartner Group and other experts to benchmark and otherwise ensure competitive rates for hardware and

software support and maintenance costs– Implemented a contingent workforce management system– Employ services of tax professionals to ensure lowest possible property tax liability – Maintain consolidated banking relationships to control bank fees– Ensure market-based compensation

Audit/Controls– Instituted continuous fraud audit program relating to employee expense reimbursement requests – Adopted standards for personal computer features and functionality

Process Improvement/Efficiencies– Hired contractors/consultants to be employees were appropriate– Shared increased cost of employee health insurance benefits with employees – Instituted lump-sum merit award option to help control salary expense increases– Prepare ERCOT’s annual report with in-house resources– Streamlined and standardized interoffice mail delivery– Prepare tax returns in-house– Seek technology rebates and in-kind exchange credits

4 ERCOT LimitedJune 16, 2009

Update on 2009 Operating Plan – Financial Performance Overview

• Year-to-date financial performance is slightly favorable– Operating expenses breaking even due to interest income– Project expenditures temporary favorable timing difference of

$3.9 million– Revenue $3.8 million below budget

• Without appropriate management action, year-end projections suggest financial performance could deteriorate– Operating expenses $1.8 million above budget– Project expenditures on budget– Revenue $3.3 million below budget– Net $5.1 million potential unfavorable financial variance

• Management is taking appropriate action to address the potential shortfall

5 ERCOT LimitedJune 16, 2009

Update on 2009 Operating Plan – Management Action Plans

• Maintain reliability and core services

• May 2009 committed to cost reductions of approximately $0.8 million– Credit insurance

– Hardware and software support and maintenance

– Employee travel

• Remainder of 2009 committed to cost reductions that address the shortfall– All cost categories and all operational areas expected to contribute

– Specific cost saving details can be shared in executive session