Titles Line Up with the Starmark

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TXU Load Schedule Performance- August 2001
May 1, 2002
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Summary and Key Points

• August 2001
• First month new market settlement systems were
  used
• Initial estimates of load imbalance were
  significantly overstated
• TXUs load forecast performance was appropriate,
  given conditions known at the time
• The magnitude of load energy imbalance does not
  correlate with the magnitude of the Balancing
  Energy Neutrality Adjustment (BENA)
• TXU Electric was regulated, and therefore costs
  and credits incurred in ERCOT settlements were
  reflected in TXU Electrics fuel balance
• The method of allocating congestion costs that
  led to BENA charges in August has now been
  changed

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Reliability is Job 1

• Some things dont change In the new competitive
  market, as in the former regulated environment,
  reliability is the No. 1 concern
• Utilities in Texas have a long history and
  tradition of providing reliable service TXU
  Electric was a regulated utility in August 2001
• In the summer of 2001, the ability to keep the
  lights on was the first priority
• Because of tight supplies in 1999-2000, the PUC
  sought repeated assurances
• California blackouts raised the issue in the
  public mind
• Pilot project, move to single control area
  highlighted concerns
• TXU scheduled its power needs appropriately to
  ensure adequate supplies to meet summer peak
  loads, based on the best information available at
  the time

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August 2001 First Month of New Era

• Step change in market operation rather than
  incremental change
• Load forecasting became more difficult
• Change in control area operators. TXU Electric
  no longer managed supply and demand in real time
• Customer load scheduled for 96 intervals and by
  congestion zones for first time
• Communication of deemed actual customer meter
  data is delayed by 45 days
• New data systems were developed and implemented
  at pilot opening to estimate total customer load
• Historically, day-ahead peak load forecasting
  variance has been about 3. The variance in
  August for all hours averaged 5

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Initial estimates of load scheduling
imbalance were significantly overstated and were
ultimately corrected in the true-up settlement
TXUs load schedules averaged only about 5 over
actual load
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TXU Electric August Daily Load Schedule Energy
Variance
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TXU Electric August 11 - High Load Schedule
Energy Variance
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TXU Electric August 17 - High Load Schedule
Energy Variance
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TXU Electric August 27 - High Load Schedule
Energy Variance
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TXU Electric August Daily Settlements for BENA,
Resource and Load Imbalance
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August 14 - TXU Electric BENA Charges
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August 15 - TXU Electric BENA Charges
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August 22 - TXU Electric BENA Charges
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TXU Electric was a regulated utility in August
and therefore 90 of the profits from off-system
sales impacted regulated fuel expenses Customer
fuel expense for August 2001 was reduced by 14.2
due to the net impact of BENA payments and
credits from load imbalances and resource
imbalances

• BENA charges from ERCOT (expense). 34.0
  million
• Load Imbalance (credit). - 22.0
  million
• Resource Imbalance (credit).... - 26.2
  million
• NET REDUCTION IN RECONCILABLE FUEL 14.2
  million

PUC rules allow utilities to share in profits
from off-system sales (resource imbalances
payments) with customers receiving 90 of the
proceeds. TXU received 2.9 million in August.
However, at ERCOT true-up settlement completed in
March 2002, changes in BENA, load imbalance and
resource imbalance resulted in an additional
charge of 3.0 million.
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Congestion Cost Allocation Protocol Has Changed

• In August 2001, congestion costs were allocated
  on a pro rata share of customer load
• This allocation method was adopted as an interim
  solution
• Allowed all participants to purchase supplies in
  ERCOT without regard to congestion
• Costs of clearing congestion were primarily paid
  through BENA charges
• Allocation methodology changed in February 2002
• Market participants began work on new rules in
  September 2001.
• Participants are now directly assigned the
  congestion costs they create
• BENA, although still used as a charge type, no
  longer covers congestion costs and is quite small
  

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Summary and Key Points

• August 2001 was the first month of the new
  competitive market and the first month that new
  market settlement systems were used.
• Although load forecasting was more difficult in
  the new market, TXUs performance was appropriate
  to ensure reliability and the lowest reasonable
  cost.
• During August, TXU Electric did not believe that
  the initial ERCOT settlement data provided a
  basis for changing load forecasts
• TXU Electric was regulated, and therefore did not
  earn excess profits in August 2001.
• The method of allocating congestion costs in
  August has now been changed to ensure that only
  participants who create congestion pay the costs.
  
• The market was not harmed by the actions of TXU
  Electric TXU Electrics generators would likely
  have received market clearing prices as a
  resource imbalance, in lieu of load imbalance
  payments, if actual load had equaled forecasted
  load.

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