Jay Zarnikau Frontier Associates March 2002

1. Measuring the Quantity of the Resource Provided by a Load Acting as a Resource in the Responsive Reserve Market Jay Zarnikau Frontier Associates March 2002

2. Summary of Issues • How should we measure the quantity of the Resource provided by a Load Acting as a Resource (LaaR)? • If the load cannot precisely predict its next-day load level, what quantity should it offer? • What are the penalties for under-performance, and how is performance measured? • Aggregation • Over-Provision

3. Issue 1: Measuring Resource Quantities • How should we measure the quantity of the Resource provided by a LaaR in the Responsive Reserve market? Is it: • The average load level during the hour (assuming no interruptions)? • The load level at the beginning of the hour? • Minimum load level during the hour • Maximum load level during the hour • The energy consumer’s historical average load level for similar types of days (a baseline)? • Whatever quantity the LaaR offered in the next-day offers it prepared the previous day?

4. Example 1 Offer prepared on the previous day: 100 MW Historical Load Level: 120 MW Average load level during hour: 150 MW Load level at beginning of hour: 200 MW Minimum Value: 100 MW Maximum Value: 200 MW ERCOT counts this as: ? MW Payment based on: ? MW

5. Example 2 Offer prepared on the previous day: 200 MW Historical Load Level: 150 MW Average load level during hour: 135 MW ERCOT counts this as: ? MW Load level at beginning of hour: 100 MW Payment based on: ? MW Minimum Value: 100 MW Maximum Value: 200 MW

6. Offer prepared on the previous day: 200 MW Historical Load Level: 150 MW Interruption at 1:15 p.m. Example 3 Average load level during hour: 40 MW Load level at beginning of hour: 145 MW Minimum Value: 0 MW Maximum Value: 150 MW ERCOT counts this as: ? MW Payment based on: ? MW

7. Issue 2: Prediction • If the LaaR cannot precisely predict its next-day load level, what quantity should the LaaR offer? • “Bid conservatively” (e.g., some percentage of the load’s predicted level)? • Bid the load’s average historical load level for similar previous days? • Provide the load’s best prediction?

8. Issue 3: Performance Penalties • If a load provides less than it offers in its day-ahead offer, what happens? • Treat it the same way as a generation resource that under-performs (but, how are they penalized)? • Establish the bidding rules so that there is a “safe harbor”. As long as the rules are followed, there should be no performance penalties. • Throw them out if they provide less than they offer X number of times? • Reduce the amount they can offer (i.e., “derate” the Resource)?

9. Issue 4: Aggregation • Should we measure quantities and performance: • For each Laar? • Or at the QSE level? • Or at the ERCOT system level? • Does the ability to aggregate provide an advantage for larger QSE’s, if its done at the QSE level? • Even if we permit aggregation, we still need to measure Quantities.

10. Issue 5: Over-Provision • If “bidding conservatively” causes more responsive reserves with under-frequency relays to be on the system than expected, is this a problem? • Some are concerned about over-frequency problems, if all the instantaneous interruptible loads trip off at the same time. • But we’ve traditionally had up to twice as much instantaneous interruptible load on the system as ERCOT would count, and never had such problems.