NOTICE DATE:  July 7, 2010
NOTICE TYPE:  M-A070710-01 Legal
SHORT DESCRIPTION:  Distribution of Collateral from Adversary Proceeding Related to TCE Bankruptcy
INTENDED AUDIENCE:  QSE Financial Personnel
DAY AFFECTED:  July 7, 2010
LONG DESCRIPTION:  On May 13, 2010, the United States Court of Appeals for the Fifth Circuit (Fifth Circuit Court) issued its opinion in the matter styled Cause No. 08-40890, Electric Reliability Council of Texas, Inc. v. Leo Leonard May. This appeal was a result of an Adversary Proceeding in the Texas Commercial Energy (TCE) bankruptcy.

In short, the Fifth Circuit Court concluded that Electric Reliability Council of Texas, Inc. (ERCOT) was legally authorized to draw down on a $900,000 Letter of Credit (LOC) that was posted as collateral under the ERCOT Protocols on behalf of TCE when TCE defaulted on its Plan Debt after bankruptcy reorganization. As such, the Fifth Circuit Court reversed and rendered judgment in favor of ERCOT. Attached is a copy of the Fifth Circuit Opinion.

Since this matter is officially closed, ERCOT is now prepared to distribute the collateral plus accumulated interest ($900,000 collateral plus interest of $317,534.07 for a total amount of $1,217,534.07) to certain Qualified Scheduling Entities (QSEs) representing Load Serving Entities, on a Load Ratio Share (LRS) basis, using the LRS for February 2005 to reimburse previously uplifted amounts.

ADDITIONAL INFORMATION:  The money will be paid to QSEs if they had a non-zero LRS as stated above. Backup information will be provided to those entities receiving payment in the "MISCELLANEOUS" folder on Texas Market Link (TML).

CONTACT:  If you have any questions regarding resolution of this matter, please contact the ERCOT Legal Department, Chad V. Seely, Senior Corporate Counsel, at 512-225-7035 or via email at [log in to unmask]<mailto:[log in to unmask]>.

For further questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Relations phone number at (512) 248-3900 or contact ERCOT Client Relations via email at [log in to unmask]<mailto:[log in to unmask]>.

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