ERCOT CRR Update to CMWG

1. ERCOT CRR Update to CMWG Matt Mereness ERCOT Manager Day-Ahead Market and CRR Auction ERCOT Public

2. Outline of CRR Discussion for CMWG Bid Level review - Released 2011 Annual Bids per TAC instruction Sep 7, 2012 - Historical bidding since go live - Reminder of Baseload/Owned CRRs in 2013 - Number of CRR AH 2011 vs 2012 Annual Auction progress - Timelines summary/reminder - NPRR implementations 453, 357/430 (Sep 13) , 347/400 (Nov 9) - 2012 Annual Model Build Update 2013 Roadmap Rolling Auction Transition - Project scope - Milestones and Key Dates - Transition challenges Appendix - Bid limit brainstorming from Feb 2012 of long-term solutions ERCOT Public

3. Bid review- TAC release of 2011 CRR Bid Transactions • TAC approval and release to WMS of CRR Bid Transactions Sept 7 (COMPLETE) • Data set limited to 2011 Annual Auction Year 1 (Round 1 &2) and Year 2 • CMWG CRR Subgroup meets on September 10 to discuss potential changes (COMPLETE) • CMWG meets on September 11 to discuss potential changes (IN PROGRESS) • WMS meets on September 12 to vote on any recommended changes • TAC approval of new transaction limits must proceed the CRR Auction Notice • ERCOT recommends 2-Business Days prior to the notice • The Annual Auction Notice deadline is October 3, 2012 • TAC doesn’t meet again until October 4, 2012 • Depending on the outcome, TAC may want to consider an email vote in order to effectuate any desired changes for the 2013 Annual Auction ERCOT Public

4. Bid review- Historical bids since go-live ERCOT Public

5. Bid review- Challenges with 2013 Bid Limit • Prior sales of annual model- Existing 2013 Annual CRR Ownership consumes 31,448 transaction • Limitation for 2013 auction will be 168,552 transactions (200,000 less 31,448) • CRRAH may also be offering in unknown number of sales (bids & sells in 2013) • CRR Account Holder population has grown- • 97 = Number of active bidding CRRAH in 2011 Annual • 194 =Current number of Registered CRRAH, but 40+ have never locked credit • 10% of bids low priced options, where 2013 Annual auction contained 26,158 option bids at $0.01 • Some bids may have been to create price discovery and transparency, and NPRR395 implemented this summer may help reduce with disclosure of clearing price for cleared and uncleared bids/offers • Observe that if 5,000 limit per CHHRAH applied to the 2011 Year1 Auction (with 10k limit-226k) … • 162,530 = If submission above 5,000 curtailed - 5k limit barely fits under 2013 limit of 168k • 193,263 = If CntPty registers additional CRRAH, could add back 30,733 more bids – over • Risk of more registered CRRAH and Sales of existing CRRs • No guarantee that historical bidding reflects future bidding, but… • 78% of CRRAH had less than 3,500 bids • 70% of CRRAH had less than 2,500 bids ERCOT Public

6. Annual Auction Progress- Timeline June 19, 2012 - Board Approval of NPRR453 to separate Year1/Year2 auction July 12, 2012 - CRR Calendar release for Year 1/ Year 2 separation (monthly unchanged) Aug 15, 2012 – General Market Notice Reminder of Key Dates (TSP/CRR/Credit focus) • August 22, 2012 – Last date for Transmission Service Provider (TSP) submitted Network Operations Model Change Requests (NOMCRs) to be included in the model snapshot for 2013 CRR Auction model • September 25, 2012 – ERCOT shall post the CRR Network Model for the 2013 (Year 1) Annual Auction • October 3, 2012 – ERCOT shall post the 2013 (Year 1) Auction Notice and Credit Submission Window Opens • October 12, 2012 – ERCOT deadline to receive Pre-Assigned CRR (PCRR) Nominations for 2014 (Year 2) • October 22, 2012 – CRR Auction Credit Lock Date for 2013 (Year 1) Auction • October 25, 2012 – CRR Auction Bid Window Closes for the 2013 (Year 1) Annual Auction • October 26, 2012 – ERCOT shall post the CRR Network Model for the 2014 (Year 2) Annual Auction • November 5, 2012 – ERCOT shall post the 2014 (Year 2) Auction Notice and Credit Submission Window Opens • November 12, 2012 – CRR Auction Results posted for 2013 (Year 1) (will post earlier if completed/verified) • November 26, 2012 – CRR Auction Credit Lock Date for 2014 (Year 2) Annual Auction • November 29, 2012 – CRR Auction Bid Window Closes for the 2014 (Year 2) Annual Auction • December 17, 2012 – CRR Auction Results posted for 2014 (Year 2) (will post earlier if completed/verified) ERCOT Public

7. Annual Auction Progress- Other NPRRs Timeline: • August 22, 2012 – Last date for Transmission Service Provider (TSP) submitted Network Operations Model Change Requests (NOMCRs) to be included in the model snapshot for 2013 CRR Auction model Sept 13- NPRR 357/430 – Implement CRR Credit screening for October monthly auction (exercise before annual) • September 25, 2012 – ERCOT shall post the CRR Network Model for the 2013 (Year 1) Annual Auction • October 3, 2012 – ERCOT shall post the 2013 (Year 1) Auction Notice and Credit Submission Window Opens • October 12, 2012 – ERCOT deadline to receive Pre-Assigned CRR (PCRR) Nominations for 2014 (Year 2) • October 22, 2012 – CRR Auction Credit Lock Date for 2013 (Year 1) Auction • October 25, 2012 – CRR Auction Bid Window Closes for the 2013 (Year 1) Annual Auction • October 26, 2012 – ERCOT shall post the CRR Network Model for the 2014 (Year 2) Annual Auction • November 5, 2012 – ERCOT shall post the 2014 (Year 2) Auction Notice and Credit Submission Window Opens Nov 9- NPRR 347/400 – Implement Credit/S&B Changes Friday, plan to release CRR Credit Tues Nov 13 at latest • November 12, 2012 – CRR Auction Results posted for 2013 (Year 1) (will post earlier if completed/verified) • November 26, 2012 – CRR Auction Credit Lock Date for 2014 (Year 2) Annual Auction • November 29, 2012 – CRR Auction Bid Window Closes for the 2014 (Year 2) Annual Auction • December 17, 2012 – CRR Auction Results posted for 2014 (Year 2) (will post earlier if completed/verified) ERCOT Public

8. Annual Auction Progress- Model update Reminder of CRR model-build process CIM snapshot from current production model Apply NOMCRs to create model for Outage Evaluation Perform Study to determine most constraining day of month (outages) That day of month becomes model build date to build: Using current CIM model Applying all approved NOMCRs leading up to that date (future model) Applying Outages Topology Processor creates model file to pre-process for CRR CRR Engineer applies all other supporting data- Forecasted Temps, LDF, etc Model uploaded into CRR system and posted to market Multi-month models are same as monthly methods repeated into future months Reminder that planning model changes not included due to date movements ERCOT Public

9. Annual Auction Progress- Model update Current Status/Statistics for 2013 Model Aug 29, 2012 = Production/CIM snapshot of network model, NOMCRs, Outages 69 = Number of outages considered for 2013 monthly models 473 = Approved NOMCRs through 2012 (builds up future model through end of year) 21 = Approved NOMCRs with dates in 2013 Monthly LDFs that were used below where CRR utilizes most recent operational values on record for Hot/Mild/Cold - Jan Cold- Jul Hot - Feb Cold- Aug Hot - Mar Mild- Sep Hot - Apr Mild - Oct Mild - May Hot - Nov Mild - Jun Hot - Dec Cold LDF reflected in model in terms of participation factors. ERCOT Public

10. CRR Roadmap 2012 2013 Q3 Q4 Q1 Q2 Q3 Q4 NPRR 357/430 Credit Q3 NPRR 453 Yr 1 / Yr 2 Execution Q3/4 CRR Upgrade to Linux Hardware Q3/4 NPRR463 – 6 month / Rolling Auction Break-up scaling PCRR/CRR Integration fixes and improvements ERCOT configuration / testing Requirements – Oct 2012, Test - Jan, Prod - Mar 2012 work in parallel on: Stress testing 200,000 bid limit on Linux PhaseShiftTxfrmr Optimization (align with DAM) On-boarding and training new employees Potential Future Changes: NPRR455 – CRR Shift Factors Refine Hub calculation for outage redistribution SCR769 – Read-only Role CRR API – Leverage new Nexant functionality? ERCOT Public

11. Rolling Auction Transition • Milestones and Key Dates • Project moves from Initiation into Planning this week (Sept12) • Sept focus on Nexant scope/requirements • Oct focus on Integration issues/scope • Internal testing Jan/Feb/Mar (FAT and iTest) • Go-Live migration in March/April • Production execution timing similar to annual • Auction notice and model posting potentially early April • Execution start in late-April/early-May (2 months before OpMonth) • Each auction to have 3-week iteration • Credit lock, Submit Bids, Execute, Post Results (4x) • CRR testing will factor into Calendar sequence • No market-facing trials are currently planned • February 2013 TAC review of CRR Calendar • FTE hired to support rolling auction to start in October • Transition challenges- • CRR calendar, Early NOIE nominations, CCT review semi-annually? ERCOT Public

12. Rolling Auction Transition - Internal Project scope excerpts (draft) ERCOT Public

13. APPENDIX Feb 2012 Brainstorming of bid limit ERCOT Public

14. Options around 200,000 Bid Limit (long-term) Options for consideration Auction for the auction- ERCOT to conduct an auction/allocation for the bid capacity Questions to consider regarding timing, involvement of money Complexity of more people, processes, timing Additional chance for “self-reduction of bids” If 200k exceeded, introduce an additional day for self-reduction by CRRAHs of known over-subscribed amount before invoking the low bid limit quantity Increase minimum Option bid price Reserve bid capacity for higher value bids, but no guarantee of <200k limit Remove credit constraint in CRR Clearing engine Allows P-Q Curves (example up to 10 segments) Curve counts as single bid, estimate would consolidate 30-50% of bids (With NPRR357/430 may be able to allow curves for some CRRAH) Forced ranking of 200,000 bids Take all option bids, rank by price, and curtail down to 200,000 limit ERCOT and Vendor will continue to test 200,000 threshold (Testing in progress on new technology stack- CRR Upgrade Project) ERCOT Public