Weather Sensitive ERS Loads (NPRR 505) Overview

1. Weather Sensitive ERS Loads(NPRR 505) Overview

2. Background • Since 2008, Emergency Response Service (ERS) has been procured three times a year for 4-month Standard Contract Terms • Feb. thru May • June thru Sept. • Oct. thru Jan. • ERS Resources are awarded and obligated based on a static MW capacity offer, by Time Period • They are expected to meet performance requirements based on that static obligation across all hours, regardless of weather conditions • This has worked OK for commercial & industrial loads with DR based on business processes unaffected by weather • Does not work well for Loads with DR provided by HVAC control

3. Weather impacts on load by customer type • Customer class breakdown is for competitive choice areas; percentages are extrapolated for munis and co-ops to achieve region-wide estimate • Large C&I are IDR Meter Required (>700kW) Wed., Aug. 3, 2011 5:00 PM ERCOT Load: 68,416 MW Temperature in Dallas: 109° Wednesday March 9, 2011 5:15 PM ERCOT Load: 31,262 MW Temperature in Dallas: 64° Residential 51.2% (~35,000 MW) Approximately 37,000 MW of ERCOT peak demand is weather-sensitive Residential 27.4% (~8,500 MW) Small Commercial 25.2% Small Commercial 28.9% Large C&I 23.7% Large C&I 43.7%

4. Average residential summer day load curve July 23 to July 29, 2012 Source: Pecan Street Project Inc. Used with permission.

5. Background • Typical weather-sensitive Loads: • Aggregation of residential premises with direct load control on the AC units (thermostat or compressor switch) • Commercial office buildings • Retail stores • If such ERS Load is offered into the June-September Contract Period, its offer must reflect the demand response it will have available on the mildest weather day of the Contract Term • It might have 2 MW to give on Aug. 24, but only 1 MW to give on June 1 • It must limit its offer to 1 MW – because if deployed on June 1, it will not be able to deliver any more than that • The static obligation also does not allow the DR provider to add members to its aggregation, and therefore capacity to its obligation, over the course of the Contract Term

6. NPRR 505 • ERCOT Staff worked with DSWG stakeholders throughout 2012 to identify ways to make ERS friendlier to weather-sensitive Loads • NPRR 505 is the result of those discussions • Now tabled indefinitely at PRS in favor of the Pilot project approach

7. NPRR main features • Creates a new category of ERS Resource — Weather Sensitive ERS Load • Eligible to participate as ERS Weather Sensitive Loads only during ERS Time Periods that correlate to peak weather conditions • Business Hours 2 and Business Hours 3 during the summer term • ERCOT establishing a new Time Period to accommodate summer peak hours on weekends & holidays • QSE payments for Weather Sensitive Loads based solely on their performance during deployment events and unannounced testing

8. NPRR main features (continued) • Weather Sensitive ERS Loads subject to: • A maximum of eight deployment events of up to three hours per event during an ERS Contract Period, plus • Up to eight ERCOT-administered unannounced tests per ERS Standard Contract Term • Weather Sensitive Loads evaluated and settled separately from the other (conventional) resources in the QSE’s portfolio • Because aggregations of small customer Loads may be subject to growth and/or churn, QSEs allowed to adjust the population of their aggregations on a monthly basis during an ERS Standard Contract Term • QSEs must project maximum number of sites at time of offer submission

9. Payment reductions for over-projection of DR capability • To avoid ERCOT procurement of ‘phantom Megawatts,’ QSEs are subject to reduced payments if the following occurs: • If the maximum number of actual sites fails to reach 90% of the number projected at the time of offer submission, the factor determining QSE payment for that Resource (a number between 0 and 1) is squared • If the actual average DR value per site falls short of 90% of the (weather-normalized) average DR value per site as calculated by ERCOT based on the QSE’s offer, the factor determining QSE payment for that Resource (a number between 0 and 1) is squared • However, if either of the above occurs but the total weather-normalized DR value provided by the Weather-Sensitive ERS Load equals or exceeds 90% of its contracted capacity value, squaring provisions are waived • If the QSE over-projects both its maximum number of sites and its DR value per site (as described above), the factor determining QSE payment for that Resource (a number between 0 and 1) is cubed

10. Questions? ON OFF pwattles@ercot.com 512/248-6578