City of Georgetown Presentation to TAC regarding NPRR533

1. City of Georgetown Presentation to TAC regarding NPRR533 02/27/2014 Chris Foster, CGFO Manager of Resource Planning and Integration Georgetown Utility Systems City of Georgetown TX chris.foster@georgetown.org 512-930-2584

2. Issue When a NOIE who is served by a Non-NOIE wholesale supplier from a portfolio supply, terminates its long-term contract, or opts into competition, what should happen with its PCRR’s? ERCOT recommended Language PRS Approved Language PCRRs are terminated, and Transmission elements are returned to the market. PCRRs are Reassigned to other NOIEs served by that Portfolio Georgetown Presentation TAC Feb 26, 2014

3. Undisputed Facts • PCRR’s are limited to resources, or contracts for resources in place before September 1, 1999. • NOIEs who own generation, cannot increase their PCRR holdings beyond 1999 ownership applied against the 2010 RARF. • A NOIE has a first right of refusal on a jointly owned unit, cannot increase its PCRR eligibility by exercising that right. • NOIEs loose PCRR eligibility in one of three ways: 1) termination /expiration of a Long-term pre 1999 contract, 2) Opting into Competition, or 3) retiring a pre 1999 Resource. Georgetown Presentation TAC Feb 26, 2014

4. Claims • LCRA claims not allowing their NOIEs to increase PCRR holdings is discriminatory. • We claim allowing increases in PCRR holdings is discriminatory. • LCRA claims remaining customers have to pay for those pre 1999 resources so they should get the PCRR’s. LCRA has purchased and constructed resources since 1999, those same customers have to pay for those resources as well. • They are not trying to get PCRRs for those new resources – because its against the law. Georgetown Presentation TAC Feb 26, 2014

5. LCRA asking TAC to increase PCRR allocations to Select NOIEs Georgetown Presentation TAC Feb 26, 2014

6. WPA PCRRs are a wealth transfer • ERCOT comments show a 6 month auction results in auction revenue reduction of almost $4mm by granting dead WPA PCRRs to LCRA. Resulting in a reduction of supply of hedge instruments (CRRs) for use by the market. • Supply curve shifting to the left. • What is the cost of the unhedged risk? • ~ $4mm for 6 months? • $200 to $300mm by 2041. • Is it worth the risk to themarket to forego hedging? Georgetown Presentation TAC Feb 27, 2014

7. The Loads Served are different Pre 2012 LCRA Loads with PCRRs Post 2016 LCRA Loads with PCRRs Georgetown Presentation TAC Feb 26, 2014

8. LCRA is asking TAC to: • Adopt bad policy that increases PCRR allocations to select NOIEs. Something not done for any other NOIE (except for a unique exception). • Legitimize LRS methodology which codifies a ritual by which PCRRs are brought back from the dead AKA “PCRR Zombification”. Resulting in PCRRs that can’t be killed. • Authorize a staggering wealth transfer for contracts having an indefinite term. Georgetown Presentation TAC Feb 26, 2014

9. Decision If you believe the deal struck with the NOIEs under SB7 to go to deregulated market, allowed some NOIEs to increase their allocation of PCRRs over time. Vote for the ERCOT language. If you believe that the deal included release of PCRR to the market when a NOIE exited a long-term contract or opted into competition. Vote for the PRS approved language. Georgetown Presentation TAC Feb 26, 2014