Lead FromThe Front Texas Nodal April 27 th, 2006 – Nodal Program Charter v0.9.5 1 (incorporating Steering Board & TPTF changes) Program CharterTexas Nodal.

April 27th, 2006 – Nodal Program Charter v0.9.5 1 (incorporating Steering Board & TPTF changes)

Lead From The FrontTexas Nodal

Program Charter Texas NodalProject Number NP-60C00_01 Charter Date April 27th, 2006

Program Sponsor Ron Hinsley Program Director Kathy Hager

Program Scope Design and implement the nodal market system and transition from the current zonal market to the nodal market by <date not certain> as defined in the Protocols approved in the Order signed by the PUCT on April 5 th, 2006.

Specific exclusions are those items not yet embodied in the Protocols (e.g. Real Time Co-optimization) that have a material impact on the scope, time and cost of the program.

Objectives ERCOT is charged with delivering the capability to: Directly assign congestion costs Increase transparency of energy prices Enhance reliability and increase market efficiency (CHANGED - TPTF)

By Computing LMPs for 100% of settlement points, 100% of the time Moving from portfolio based dispatch to resource-specific dispatch Running and settling the Nodal markets to comply with 100% of the Nodal protocol requirements as measured by the accuracy of calculations and

compliance with prescribed operational timelines Creating a CRR market to adequately hedge the directly assigned congestion charges/credits (ADDED - TPTF)

While achieving agreed Program Targets of: Zonal Market continuity – as measured by adherence to existing target levels of availability Customer satisfaction – as measured by surveys of Market Participant and internal satisfaction of the Program and constituent projects (ADDED –

Steering Board) Timeliness – as measured by achievement of key Program milestones

Budget – as measured by achievement of budget goals

Current Zonal market characteristics Nodal Market Characteristics

Transmission Congestion Rights (flowgates) Congestion Revenue Rights (PTP Options, Obligations, Flowgates)

No Day-Ahead Energy Market Ancillary Services Market Day-Ahead

Day-Ahead Energy and Ancillary Services Co-optimized Market

Replacement Reserve Service (RPRS) / OOMC (CHANGED - TPTF) Daily Reliability Unit Commitment (DRUC)

Hour Ahead Studies Hourly Reliability Unit Commitment (HRUC)

Portfolio based offers by Zone (ADDED - TPTF) Resource specific offers (ADDED - TPTF)

Balancing Energy Service every 15 minutes Zonal by portfolio for CSCs Resource Specific for Local (CHANGED - TPTF)

Security Constrained Economic Dispatch typically every 5 minutes (still 15 minute settlement) (CHANGED - TPTF)

All Resource Specific (CHANGED - TPTF) Enhanced Load Frequency Control (ADDED - TPTF)

Zonal Average Shift Factors for Resources Actual Shift Factors for Resources

Zonal Market Clearing Price for Balancing Energy for Generation and Loads Nodal Locational Marginal Prices (LMP) for Generation Zonal weighted LMPs for Loads



Program Charter Texas NodalDeliverables The going-in position on high-level components is as follows.

Processes: Integration testing – substantial replacement (100% new) Training – education and training for ERCOT Staff and Operators, and Market Participants (100% new) (CHANGED - TPTF) Market Participant readiness – communication, impact assessment, Readiness Criteria, development and testing (100% new) ERCOT, Inc readiness – communication, impact assessment, business process change (all Markets), organizational preparation and testing (100% new) Market Trials – preparation, execution and Readiness Declaration (100% new) Transition to live operations – cut-over & business continuity (100%)

Systems: Registration System – minor enhancements (<10% functionality) Network Model Management System (NMMS) – replacement of Genesys (100% replacement plus significant additional functionality) Energy Management System (EMS) – substantial upgrades and enhancements (>50% of functionality, 100% technology refresh) (CHANGED - TPTF) Market Management System (MMS) – replacement (100% replacement) Congestion Revenue Rights (CRR) – new (100% new) Market Information System (MIS) – new (100% new) (ADDED - TPTF) Commercial Systems (Settlements and Billing) – substantial upgrades and enhancements (>50% of functionality) Monitoring applications for Credit, Market & Compliance – substantial upgrades and enhancements (>50% of functionality) Reporting/Analysis (Enterprise Data warehouse/Enterprise Information Services) – substantial upgrades and enhancements (>50% of functionality) Interfaces within ERCOT, and external Interfaces between ERCOT and participants – substantial enhancements (>50%) Infrastructure – substantial enhancements (>50%)

Key Risks Risk Mitigation Strategy

Ineffective engagement, mobilization of the organization

Visible leadership from the Executives down. Demonstration of the “right” behaviors through rapid decision-making, communication, signals to the organization.

Delays & rework due to complexity Focus on architecture, early design, development of critical components, quality assurance, phased integration releases and testing, proactive communication and interaction with the selected vendors.

Poor integration Focus on architecture, early interface definition, integrated project planning. Significant testing will happen frequently and as early in the process as practical. Additionally, testing will be considered throughout the program design. External auditors will be appointed to certify, periodically, the validity of Program Management Plans and accuracy of status reports. (CHANGED – Steering Board)

Ineffective engagement of, response from, market participants

Program Director and TPTF Chairman will take active steps to set mutual expectations and commitments, provide timely and appropriate information, in person meetings will be followed with detailed documentation; the program will actively follow up with the TPTF for responses, ensure mutual progress is highly visible, and escalate as needed.

Zonal v. Nodal Zonal projects will compete with the Nodal program for resources and focus, ERCOT Executives will be expected to make a commitment to the Nodal program. Additionally, the PUCT & TAC will be requested to rationalize and minimize Zonal PRRs. (CHANGED - TPTF)

Scope creep If an activity is not necessary for the transition to, and implementation of, nodal protocols, it will be considered out of the program scope and must be negotiated with the Program Director and, if required, the Steering Board. (CHANGED - TPTF)

Staff morale, turn-over and motivation

Job satisfaction and morale are based more on a sense of accomplishment, fairness and belonging. The program will challenge team members as much as possible and define work in achievable chunks. The program will also recognize accomplishments and superior achievement.

Core team capability Begin selecting the team that can move the program forward from its early stages. Selection of ‘super’ PMs – with project delivery accountability & authority – will be the highest staffing priority. Then we can re-introduce the rest of the organization under a more positive model and staffing plan.

Key resource bottlenecks The bottlenecks with key resources will be identified and their focus will be managed to minimize impact at critical times.

Software immaturity Implementation of “green” software – applications, infrastructure and tools – inevitably leads to substantial defects. The program will use test systems to implement green software as early as possible. When LMPs are calculated for settlement purposes, the program will limit development and deployment of unproven software as a matter of policy. (CHANGED - TPTF)



Program Charter Texas Nodal

Key Milestones The master schedule and critical path are being defined, early critical milestones are shaping up: Program Charter complete - April 14, 2006 Program Charter signed off – April 25, 2006 Critical path RFPs issued – April 14, 2006 Minimize and rationalize Zonal PRRs – June 1, 2006 (CHANGED - TPTF) Overall business and IT architecture (top level) approved – May 15, 2006 Vendors selected – June 7, 2006 Vendors on board and begin work – June 30, 2006 Project-based RUP phase gates established – July 1, 2006

Planning hierarchy

Approach Key elements of the required approach are clear: This Charter establishes the Program scope, schedule and budget baseline – any changes will be subject to formal change control. The management of the program will follow the Rational Unified Process (RUP) Methodology of iterative development. All critical documentation will go through a quality assurance process comprising Project- and independent Program-level assurance. The resource model envisages a lean core team (including “super” Project Managers and assurance functions) – ‘contracting’ with internal and

external providers for deliverables (rather than resources). RFPs will be expedited – detailed requirements will be developed together with vendors for critical applications. Project approval will be by phase – passage through each phase gate will require a detailed estimate for the subsequent phase, together with an

estimate to complete the entire project (Estimate At Completion – EAC). Project work breakdown for the impending phase will require definition and assignment of 40 hour deliverables for each resource Engagement with Market Participants will comply with the requirements of the ERCOT Nodal Transition Plan (dated November 3, 2005) Projects will be subject to periodic critical examination and health-checks

Project MilestonesMultiple Projects

SAT Complete

Integration Testing Plan Developed

Release Plan agreed

Release Start

Release Complete

Multiple Projects

SAT Complete

Integration Testing Plan Developed

Release Plan agreed

Release Start

Release Complete

Release Milestones

Q1 2009168 hour Market Trial begins

TBCGo Live

TBCMarket Readiness Declarations

Q3 2008Limited Market Trials Begin

Q4 2008Market Participant SAT begins

December 31, 2006Initial Market Participant interface specs complete

October 31, 2006Business Requirements complete

Multiple Development Releases

Q1 2009EDS 5 live

Q3 2008EDS 4 live

March 31, 2007Final Market Participant interface specs complete

Q4 2007EDS 3 live

May 21 , 2006Texas Nodal Program Organization established (TPTF)

June 7 , 2006Vendors selected

April 14 , 2006Program Charter Complete

June 30, 2006Vendors on board and begin work

May 15 , 2006Overall business and IT architecture (top level) approved Vendors

April 14 , 2006Critical path RFPs issued

DateMilestone

Q1 2009168 hour Market Trial begins

TBCGo Live

TBCMarket Readiness Declarations

Q3 2008Limited Market Trials Begin

Q4 2008Market Participant SAT begins

December 31, 2006Initial Market Participant interface specs complete

October 31, 2006Business Requirements complete

Multiple Development Releases

Q1 2009EDS 5 live

Q3 2008EDS 4 live

March 31, 2007Final Market Participant interface specs complete

Q4 2007EDS 3 live

May 21 , 2006Texas Nodal Program Organization established (TPTF)

June 7 , 2006Vendors selected

April 14 , 2006Program Charter Complete

June 30, 2006Vendors on board and begin work

May 15 , 2006Overall business and IT architecture (top level) approved Vendors

April 14 , 2006Critical path RFPs issued

DateMilestone

Program-Level Milestones

Project-specific Transition milestones

Project-specific Construction milestones

Project-specific Elaboration milestones

Project-specific inception milestones

Construction phase start

Construction quality gate

Inception phase start

Inception quality gate

Elaboration phase start

Elaboration quality gate

Transition phase start

Transition quality gate

Project-specific Transition milestones

Project-specific Construction milestones

Project-specific Elaboration milestones

Project-specific inception milestones

Construction phase start

Construction quality gate

Inception phase start

Inception quality gate

Elaboration phase start

Elaboration quality gate

Transition phase start

Transition quality gate



Program Charter Texas NodalOrganizational model

Core Program Organization

Nodal Program

Integration & Design Authority

(Business & technical

architecture, standards &

RFPs)

Integrated ERCOT Readiness &

Transition Project

Infrastructure Project

ERCOT Development

Project #2

Integration Testing Project

ERCOT Development

Project #n

ERCOT Development

Project #1

Go Live2

Business & IT

Operations

FAT1

Market Participant Engagement & Readiness Project

Note – this is a simplified diagram:1. Projects will deliver in accordance with the

Release Strategy – and will provide support for existing releases as they prepare for subsequent releases.

2. Business & IT Operations will have substantial involvement prior to “go Live” in readiness preparations, business trials etc and will, for example, provide support for Early Delivery Systems (EDS) as they are established.

Program Control

Rob Connell

Nodal Program Sponsor

Ron Hinsley

Nodal ProgramDirector

Kathy Hager

Nodal Steering

Board

CommercialSystems Project

Raj Chudgar

EMS Project

Carlos Gonzales-

Perez

MMS Project

Al Hirsch

CRR Project

Beth Garza

Market Participant

Engagement & Readiness

Project

Trip Doggett

Integration Testing Project

Glen Wingerd

Integrated ERCOT

Readiness & Transition

Project

Steve Grendel

NMMS Project

Raj Chudgar

Integration & Design

Authority

Jeyant Tamby

EDW Project

TBC

Infrastructure Project

Ron Hinsley

Implications• Those with delivery accountability are core Program

Team members.• Each needs to produce a Charter, including team &

resource requirements.



Program Charter Texas NodalBudget The budget process envisions at least 3 cycles leading to the PUCT cost recovery plan

Initial submission – Mid March Detailed Work-Product Plan – +2 months Post-Procurement Strategy – +3 months

Resourcing and facilities

Next Steps This Program Charter will be expanded into a broader Program Management Plan (the “how” at a program level). Additionally, the Program Charter is intended to be a requirements document for the more detailed Project Charters and detailed plans to follow.

Sponsoring Operation AreaLabor (Blended

Rate $100/hr) Vendor Labor ($)Hardware and Software

Cost ($) TOTAL COST ($)EMS $3,400,800 $1,962,000 $1,962,000 $7,324,800MMS $14,304,000 $4,520,000 $4,520,000 $23,344,001Comm Ops $12,791,040 $0 $0 $12,791,040EIS $3,520,280 $0 $0 $3,520,280Market Services Training $7,590,000 $0 $0 $7,590,000Market Services Apps $612,480 $0 $0 $612,480Market Services Simulation/Pilot $6,752,000 $0 $0 $6,752,000SOA and Portal $1,121,120 $0 $312,000 $1,433,120Hardware $2,416,000 $0 $30,487,455 $32,903,455Sub-TOTAL $52,507,720 $6,482,000 $37,281,455 $96,271,175Contingency (20%) $24,067,794Finance Charges $5,313,468TOTAL $125,652,437

Nodal Staff Analysis

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Major issues with space until this point




The release strategy and critical path are built around the Early Delivery System sequence agreed with TPTF

Implement all data and telemetry requirements from Section 5.4.1 in the TPTF Transition Plan (CHANGED - TPTF)

EDS 1

Implement all data and telemetry requirements from Section 5.4.1 in the TPTF Transition Plan (CHANGED - TPTF)

EDS 1

168 Hour test complete MP financial & operational qualification

complete Market Readiness Declarations met All interfaces validated CM, FT complete Training complete

EDS 5 outcomes

168 Hour test complete MP financial & operational qualification

complete Market Readiness Declarations met All interfaces validated CM, FT complete Training complete

EDS 5 outcomes

Must haves: EMS upgrade Network security analysis Topology consistency analyzer Forced outage detection SCED 15 min point price calculations Outage scheduler LFC Load/RPP Forecasting NMMS CIM

Model functionality Transmission constraints manager 8*5 support

EDS 3 enablers

Must haves: EMS upgrade Network security analysis Topology consistency analyzer Forced outage detection SCED 15 min point price calculations Outage scheduler LFC Load/RPP Forecasting NMMS CIM

Model functionality Transmission constraints manager 8*5 support

EDS 3 enablers

Validate receipt of data required for SCED

EDS 3 initial outcomes

Validate receipt of data required for SCED

EDS 3 initial outcomes

Must haves: DAM RUC CRR auction SASM EMS/MMS interface OTS Settlement & billing 8*5 support (24*7 for MP SAT) ERCOT & Market Readiness

Criteria approved EDW & MIS components

EDS 4 enablers

Must haves: DAM RUC CRR auction SASM EMS/MMS interface OTS Settlement & billing 8*5 support (24*7 for MP SAT) ERCOT & Market Readiness

Criteria approved EDW & MIS components

EDS 4 enablers

All MP Registration complete for Go Live

OTS complete All market facing interfaces

complete Testing of all markets complete

EDS 4 outcomes

All MP Registration complete for Go Live

OTS complete All market facing interfaces

complete Testing of all markets complete

EDS 4 outcomes

Q2 2009Q1 2009 Q3 2009Q2 2008Q1 2008Q4 2007Q3 2007 Q4 2008Q3 2008

Must haves: NMMS UI in production Training complete EDW & MIS components 24*7 support Final configurationNice to haves: Credit Monitoring Financial Transfer (CRR)

EDS 5 enablers

Must haves: NMMS UI in production Training complete EDW & MIS components 24*7 support Final configurationNice to haves: Credit Monitoring Financial Transfer (CRR)

EDS 5 enablers

Must haves: Final EDW & MIS components Credit Monitoring Financial Transfer Production Environment NMMS in production 90 days in

advance Outage Scheduler in production

45 days in advance

EDS 6 (TXMACS 1.0) enablers

Must haves: Final EDW & MIS components Credit Monitoring Financial Transfer Production Environment NMMS in production 90 days in

advance Outage Scheduler in production

45 days in advance

EDS 6 (TXMACS 1.0) enablers

EDS 3 (TXMACS 0.3)SCED; MP Offers

EDS 4 TXMACS 0.4)with selected MPs EDS 5 (TXMACS 0.5)EDS 4

MP SATTXMACS 1.0

Live operationsEDS 3 (TXMACS 0.3)

Data validation

6 month SCED test completed SCADA/ICCP enhancement

requirements EMS enhancements complete MP offers Publish LMPs LFC, OS, RPP complete

EDS 3 outcomes

6 month SCED test completed SCADA/ICCP enhancement

requirements EMS enhancements complete MP offers Publish LMPs LFC, OS, RPP complete

EDS 3 outcomes




Going-in critical path analysis – 1/1/09 is not feasible. This revised timeline is unconstrained and needs validating through resourced project schedules.

EMS

Early Delivery Systems

MMS

CRR

MIS

NMMS

Commercial Systems

ERCOT & MP Readiness

Q2 2008 Q3 2009Q4 2008Q3 2008Q2 2007Q1 2007Q4 2006 Q4 2007Q3 2007 Q1 2008Q3 2006 Q1 2009

Outage Scheduler

EDW

“UI in production”

Q2 2009

Qualification Freeze

EDS 3 (TXMACS 0.3)

SCED; MP SCED Offers

EDS 4 TXMACS 0.4)

with selected MPsEDS 5 (TXMACS 0.5)

MMS FAT MMS SAT

CRR Design, Build, Pre-FAT CRR FAT CRR SAT

Final MP Interface

Specs 3/31

MP Registration complete

MIS FAT MIS SAT

168 hour market trial

FAT SATNaming Convention; Requirements, Concept Design CIM-compliant Model (flat file)

FAT SATNMMS User Interface & business processes

Zonal Genesys Operational

Common model update process

NODAL GO LIVE

MIS (EMS/MMS/CRR) Design, Build, Pre-FAT

EDW FAT EDW SAT

StatementsLayout

Script test Credit Monitoring

End of Trials

MP Nodal Registration MP Financial & Operational Qualification

EMS SATEMS EMS FATEMS Requirements, Conceptual Design

MIS SATMIS (SCED) Design, Build, Pre-FAT MIS FAT

MMS Design, Build, Pre-FATMMS Requirements, Conceptual Design

OS SATOS Build OS FATOS Requirements, Conceptual Design

CRR Requirements, Conceptual Design

Commercial Systems Design, Build, Pre-FAT CS FAT CS SAT

EDW Requirements, Conceptual Design

SCED SATSCED Build SCED FATSCED Requirements, Conceptual Design

Registration ready

MPSCED Offers

Business Requirements

complete 10/30

Preliminary MP Interface Specs 12/31

CS FAT CS SAT

EDW FAT EDW SAT EDW FAT EDW SAT

CS Requirements, Conceptual Design

EDW Design, Build, Pre-FAT

MIS FAT MIS SAT

Begin MP trial participation

“Non-binding settlements”

Financial Transfer

CS FAT CS SAT

EDS 4 MP SAT

TXMACS 1.0

Live operations

MIS FAT MIS SAT

“CRR Auction for Go Live”

Vendors will share detailed design documents with other vendors for interface definitions

Vendors selection will be done by Mid-June

TPTF will hold review meetings as required for approval of requirements and conceptual design documents

All systems have to conform with the integrated Data Dictionary

Areva’s EMS will handle CIM models

ERCOT would need 6 months of integration testing on applications such as MMS, CRR and NMMS

To satisfy section 17.3 of the Nodal protocols, ERCOT will deploy COGNOS and SAS to provide PUCT with the ability to generate reports

To allow for interface definitions, detailed design documents of individual projects can be completed 80 hours after one another. The order of completion will be NMMS – MMS/EMS/SE – CRR/Outage Schedule –Commercial Systems – MIS/EDW

The current State Estimator will meet the necessary criteria

TDSPs will be trained on new NMMS and there will dual entry of models – into the new NMMS and into GENESYS. ERCOT will have enough staff to handle this work

Assumptions affecting the critical path

Vendors will share detailed design documents with other vendors for interface definitions

Vendors selection will be done by Mid-June

TPTF will hold review meetings as required for approval of requirements and conceptual design documents

All systems have to conform with the integrated Data Dictionary

Areva’s EMS will handle CIM models

ERCOT would need 6 months of integration testing on applications such as MMS, CRR and NMMS

To satisfy section 17.3 of the Nodal protocols, ERCOT will deploy COGNOS and SAS to provide PUCT with the ability to generate reports

To allow for interface definitions, detailed design documents of individual projects can be completed 80 hours after one another. The order of completion will be NMMS – MMS/EMS/SE – CRR/Outage Schedule –Commercial Systems – MIS/EDW

The current State Estimator will meet the necessary criteria

TDSPs will be trained on new NMMS and there will dual entry of models – into the new NMMS and into GENESYS. ERCOT will have enough staff to handle this work

Assumptions affecting the critical pathOTS SAT

OTS FAT

OTS SAT

OTS FAT

EDS 3 Data Validation

NoteOver the next few weeks we will be reviewing the schedule to ensure it is based on correct assumptions. ERCOT will also ask for legal advice concerning the implementation date the PUCT established in the protocols order and whether a motion for a rehearing of that order should be filed. ERCOT estimates this review will be completed by June 30.



Program Charter Texas NodalApprover(s) Signature attests that the Charter is an accurate and true reflection of the program requirements at the

current level of definition.

Kathy Hager (Program Director)

Approver(s) Signature attests that the Charter has been reviewed and approved from the signatory’s perspective.

Ron Hinsley (Program Sponsor)

Tom Schrader

Steve Byone

Sam Jones

Ray Giuliani

Carolyn Shellman

Pam Fisher

Lead FromThe Front Texas Nodal April 27 th, 2006 – Nodal Program Charter v0.9.5 1 (incorporating Steering Board & TPTF changes) Program CharterTexas Nodal.

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