401(k) and MPP Conversion and related amendments

Board Resolution RequestJanuary 17, 2006

What does ERCOT want to amend in the 401(k) Plan?

• Move plan from New England Financial (MetLife) to Fidelity Investments

• Merge MPP into 401(k)• Change trustee to Fidelity Management Trust

Company• Make ERCOT Plan Administrator• Change Tom Schrader and Sammy Jones to

authorized signers and add Steve Byone as authorized signer

• Increase maximum employee contribution level from 15% to 20%

Why has ERCOT decided to explore moving the 401(k) and MPP Plans?

• Current investment options have higher fee structure than other plans

• Administering two plans is more costly

• Current provider has limited web tools and back office support

How did ERCOT approach this ?

• Appointed a Plan Administrative Committee and an Employee Focus Group to review plan options

• Contracted with a Mutual Fund Consulting Firm to help with RFP process

What was the process?

• Sent RFP to 11 vendors of which 9 responded• Compiled matrix comparing the 9 vendors• Chose 4 vendors to present products and services• Narrowed the field to 2 vendors • Had 2 vendors present educational package• Conducted reference checks• Compiled matrix between 2 vendors• Fidelity rated highest among both PAC and

Employee Focus Group

What does Fidelity have to offer?

• More investment options available at lower cost

• Ability to merge MPP into 401(k) resulting in reduced costs to administer plan

• Web based tools to help with investing strategies, and automation of loan requests, and distributions

• Ranked in top ten of fund managers and plan administrators for 2005

Why does ERCOT want to add other amendments at this time?

• Would like to increase maximum employee contribution in response to employee requests, which is within the law, and could improve non-discrimination testing in future

• Other amendments are administrative changes that should be done at the same time we move to Fidelity

Recommendation

• Move to Fidelity Investments• Merge MPP Plan into the 401(k) Plan• Raise contribution max to 20% from 15%• Change trustee to Fidelity Management Trust

Company• Change Plan Administrator to ERCOT• Change Thomas F. Schrader and Sammy R.

Jones to authorized signers and add CFO Steve Byone as additional authorized signer

• Approve all of these amendments with a 04/01/2006 effective date