Common use of Budget and Funding for Texas Clause in Contracts

Budget and Funding for Texas. RE’s Non-Statutory Activities In addition to its delegated functions and related activities, as specified in Sections 5, 6 and 7 of the Agreement and in Section 1 of this Exhibit E (such delegated functions and activities referred to in this Section 6 as “statutory activities”), Texas RE performs the following other functions and activities (such other functions and activities being referred to in this Section 6 as "non-statutory activities"): Texas RE performs non-statutory activities as the ERCOT region Reliability Monitor on behalf of the Public Utility Commission of Texas (“PUCT”). As the Reliability Monitor, Texas RE audits and investigates market participants’ compliance with ERCOT Protocols and Operating Guides (ERCOT regional rules), reports possible non-compliance with reliability-related regional rules to the PUCT, and provides testimony and support to the PUCT in enforcement cases prosecuted by the PUCT. These non-statutory activities are funded through the ERCOT ISO system administration fee and payment to Texas RE is authorized by the PUCT. Texas RE shall employ the following methods and procedures to (i) keep its funding mechanisms for its statutory activities separate from its funding mechanisms for its non-statutory activities, and (ii) record the costs it incurs in the performance of its non-statutory functions separately from the costs it incurs in the performance of its statutory functions: A. Texas RE segregates the funding for its statutory activities and non-statutory activities by recording transactions in separate and distinct general ledger accounts, in accordance with Generally Accepted Accounting Principles. B. Texas RE has adopted a detailed system to record expenses to the proper fund, department, and expense type. Operating fund 000 has been set up for statutory activities, and operating fund 500 has been set up for non-statutory activities. Texas RE uses department codes to record all costs and expenses incurred by Texas RE and appropriately tracks its costs for statutory activities separately from its costs for non-statutory activities. C. Texas RE utilizes and maintains a time recording and expense management system under which employee time and expenses incurred in the conduct of non- statutory activities will be tracked to ensure that they are not funded by NERC remittances intended for the funding of statutory activities. D. Where employee time or an expense affects multiple activities, Texas RE will use an accurate basis of allocation of the time or expense between the activities being performed based on specific metrics, such as time tracking, data observations or total cost input. Total cost input relates the portion of the expense to the total expense to establish an appropriate method to allocate. Texas RE shall provide its budget for such non-statutory activities to NERC at the same time that Texas RE submits its proposed annual business plan and budget for statutory activities to NERC pursuant to Section 9 of the Agreement. Texas RE’s budget for non- statutory activities that is provided to NERC shall contain a detailed list of Texas RE’s non- statutory activities and a description of the funding sources for the non-statutory activities. Texas RE agrees that no costs (which shall include a reasonable allocation of Texas RE’s general and administrative costs) of non-statutory activities are to be included in the calculation of Texas RE’s assessments, dues, fees, and other charges for its statutory activities.

Budget and Funding for Texas. RE’s Non-Statutory Activities In addition to its delegated functions and related activities, as specified in Sections 5, 6 and 7 of the Agreement and in Section 1 of this Exhibit E (such delegated functions and activities referred to in this Section 6 as “statutory activities”), Texas RE performs the following other functions and activities (such other functions and activities being referred to in this Section 6 as "non-statutory activities"): Texas RE performs non-statutory activities as the ERCOT region Reliability Monitor on behalf of the Public Utility Commission of Texas (“PUCT”). As the Reliability Monitor, Texas RE audits and investigates market participants’ compliance with ERCOT Protocols and Operating Guides (ERCOT regional rules), reports possible non-compliance with reliability-related regional rules to the PUCT, and provides testimony and support to the PUCT in enforcement cases prosecuted by the PUCT. These non-statutory activities are funded through the ERCOT ISO system administration fee and payment to Texas RE is authorized by the PUCT. Texas RE shall employ the following methods and procedures to (i) keep its funding mechanisms for its statutory activities separate from its funding mechanisms for its non-statutory activities, and (ii) record the costs it incurs in the performance of its non-statutory functions separately from the costs it incurs in the performance of its statutory functions: A. Texas RE segregates the funding for its statutory activities and non-statutory activities by recording the funding transactions in separate and distinct general ledger accounts, in accordance with Generally Accepted Accounting Principles. B. Texas RE has adopted a detailed system to record expenses to the proper fund, department, and expense type. Operating fund 000 has been set up for statutory activities, and operating fund 500 has been set up for non-statutory activities. Texas RE uses department codes to record all costs and expenses incurred by Texas RE and appropriately tracks its costs for statutory activities separately from its costs for non-statutory activities. C. Texas RE utilizes and maintains must maintain a time recording and expense management system under which employee time and expenses incurred in the conduct of non- statutory activities will be tracked to ensure that they are not funded by NERC remittances intended for the funding of statutory activities. C. Texas RE has adopted a detailed system of Account Codes, Department Codes and Activity Codes which are used in recording expenses. The Activity Codes are specific to statutory activities and non-statutory activities. The Texas RE Activity Codes are modeled on the NERC Functional Categories. Texas RE shall use Department Codes that are unique to Texas RE to record all costs and expenses incurred by Texas RE for statutory activities and non-statutory activities. D. Texas RE shall use Activity Codes to appropriately track its costs for statutory activities separately from its costs for non-statutory activities. E. Where employee time or an expense affects multiple activities, Texas RE will use an accurate basis of allocation of the time or expense between the activities being performed based on specific metrics, such as time tracking, data observations or total cost input. Total cost input relates the portion of the expense to the total expense to establish an appropriate method to allocate. Texas RE shall provide its budget for such non-statutory activities to NERC at the same time that Texas RE submits its proposed annual business plan and budget for statutory activities to NERC pursuant to Section 9 of the Agreement. Texas RE’s budget for non- statutory activities that is provided to NERC shall contain a detailed list of Texas RE’s non- statutory activities and a description of the funding sources for the non-statutory activities. Texas RE agrees that no costs (which shall include a reasonable allocation of Texas RE’s general and administrative costs) of non-statutory activities are to be included in the calculation of Texas RE’s assessments, dues, fees, and other charges for its statutory activities.

Budget and Funding for Texas. RE’s Non-Statutory Activities In addition to its delegated functions and related activities, as specified in Sections 5, 6 and 7 of the Agreement and in Section 1 of this Exhibit E (such delegated functions and activities referred to in this Section 6 as “statutory activities”), Texas RE performs the following other functions and activities (such other functions and activities being referred to in this Section 6 as "non-statutory activities"): Texas RE performs non-statutory activities as the ERCOT region Reliability Monitor on behalf of the Public Utility Commission of Texas (“PUCT”). As the Reliability Monitor, Texas RE audits will audit and investigates investigate market participants’ compliance with ERCOT Protocols and Operating Guides (ERCOT regional rules), reports as the ERCOT region Reliability Monitor, through a continuation of its contract with the Public Utility Commission of Texas (the “PUCT”, which directs the work) and ERCOT (the independent system operator, which makes the required contractual payment from its system administration fee), for at least an additional three-year period ending December 31, 2013. Under this contract, Texas RE will continue to report possible non-compliance with reliability-related regional rules to the PUCT, PUCT and provides will respond to subpoenas and provide testimony and support to the PUCT in regarding contested enforcement cases prosecuted by the PUCT. These non-statutory activities are funded through subject to continuation at the ERCOT ISO system administration fee and payment to end of the contract term by mutual agreement by Texas RE is authorized by and the PUCT. If the decision is made to terminate or not renew this contract in the future, Texas RE would perform reduced non-statutory activities for a period of time, under a modified contract, to transition these activities to a third party. Texas RE shall employ the following methods and procedures to to (i) keep its funding mechanisms for its statutory activities separate from its funding mechanisms for its non-non- statutory activities, and (ii) record the costs it incurs in the performance of its non-statutory functions separately from the costs it incurs in the performance of its statutory functions: A. Texas RE segregates the funding for its statutory activities and non-statutory activities by recording the funding transactions in separate and distinct general ledger accounts, in accordance with Generally Accepted Accounting Principles. B. Texas RE has adopted a detailed system to record expenses to the proper fund, department, and expense type. Operating fund 000 has been set up for statutory activities, and operating fund 500 has been set up for non-statutory activities. Texas RE uses department codes to record all costs and expenses incurred by Texas RE and appropriately tracks its costs for statutory activities separately from its costs for non-statutory activities. C. Texas RE utilizes and maintains must maintain a time recording and expense management system under which employee time and expenses incurred in the conduct of non- statutory activities will be tracked to ensure that they are not funded by NERC remittances intended for the funding of statutory activities. C. Texas RE has adopted a detailed system of Account Codes, Department Codes and Activity Codes which are used in recording expenses. The Activity Codes are specific to statutory activities and non-statutory activities. The Texas RE Activity Codes are modeled on the NERC Functional Categories. Texas RE shall use Department Codes that are unique to Texas RE to record all costs and expenses incurred by Texas RE for statutory activities and non-statutory activities. D. Texas RE shall use Activity Codes to appropriately track its costs for statutory activities separately from its costs for non-statutory activities. E. Where employee time or an expense affects multiple activities, Texas RE will use an accurate basis of allocation of the time or expense between the activities being performed based on specific metrics, such as time tracking, data observations or total cost input. Total cost input relates the portion of the expense to the total expense to establish an appropriate method to allocate. Texas RE shall provide its budget for such non-statutory activities to NERC at the same time that Texas RE submits its proposed annual business plan and budget for statutory activities to NERC pursuant to Section 9 of the Agreement. Texas RE’s budget for non- statutory activities that is provided to NERC shall contain a detailed list of Texas RE’s non- statutory activities and a description of the funding sources for the non-statutory activities. Texas RE agrees that no costs (which shall include a reasonable allocation of Texas RE’s general and administrative costs) of non-statutory activities are to be included in the calculation of Texas RE’s assessments, dues, fees, and other charges for its statutory activities.