Proposal for calculating the Variable O&M Rate in the Mitigated Offer Cap for QSGRs

1. Proposal for calculating the Variable O&M Rate in the Mitigated Offer Cap for QSGRs Ino González WMS

2. Background: Mitigated Offer Cap for QSGRs • Paragraph (c) of NP 4.4.9.4.1 Mitigated Offer Cap states: • …the Mitigated Offer Cap verifiable variable O&M cost ($/MWh) for Quick Start Generation Resources (QSGRs) shall incorporate the generic or verifiable O&M cost to start the Resource from first fire to LSL as described in Verifiable Cost Manual. • Section 2, page 19, of the Verifiable Cost Manual states: • Startup cost values are based on either Generic or approved O&M costs from a cold start position. WMS

3. Mitigated Offer Cap Calculation for QSGRs The Mitigated Offer Cap for QSGRs is calculated as follow: Mitigated Offer Cap ($/MWh)= { IHR * Fuel Price + O&M }* multiplier(a) Where, • IHR(b) = Incremental Heat Rate (MMBtu/MWh) • O&M(b) = Variable Operations and maintenance cost ($/MWh) (a) = Multiplier based on applicable capacity factor for the previous 12 months (see Section (d), NP 4.4.9.4.1 Mitigated Offer Cap) (b) = Based on Generic or verifiable Startup cost values WMS

4. Variable O&M Rate for QSGRs The Mitigated Offer Cap Variable O&M rate for QSGRs is calculated as follow: Variable O&M rate ($/MWh) = Startup Costs ($) / G (MWh) Where G = average generation during Minimum up time (MWh) Startup Costs (a) = Approved Cold Startup O&M Costs (Verified or Standard) or Resource Specific Generic Startup O&M Costs and G (MWh) = P * HSL (MW) * L (Hr) Where P = 75%; HSL = High Sustained Limit (MW); L = Minimum Up Time (hr) (a) = Verified startup cost based on Resources starting under normal, not QSGR mode WMS

5. Operational Options for QSGRs QSGRs can operate under the following conditions(a): • Offer into DAM • Self Schedule • RUC – normally not available • RT as a QSGR (LSL = 0, telemetry = online) (a) Note: - Mitigated Offer Cap is the same regardless of mode of operation. - Startup cost used to calculate the O&M is based on normal operating conditions. WMS

6. Ways of Calculating the Variable O&M Rate • Options considered: • 1. Registration of two Resources for each QSGR (one real and one logical). • This option not recommended and not supported by ERCOT. It can create confusion and would affect multiple internal procedures and systems. • 2. Change Lodestar and MMS to allow for two sets of Mitigated Offer Caps for a QSGR (normal and QSGR mode). • This option requires significant changes to the MMS. WMS

7. Ways of Calculating the Variable O&M Rate • Options considered (continue): • 3. Allow QSGRs to submit the Startup cost reflective of: • QSGR mode – used in Mitigated Offer Cap • Normal mode – used in Three-Part Offer Caps • Note: Under Option 3, QSGRs will always have an increased Mitigated Offer Cap due to the higher Startup Cost (QSGR Startup cost) WMS

8. Reasons why RCWG Recommends Option 3 • The Startup cost under QSGR mode is used in the calculation of Variable O&M for mitigated offer curves in Real Time. • QSGRs are normally shown as ON and available to SCED or OFFNS which makes them unavailable for RUC. • When self-committed in normal Startup mode, QSGRs EOCs will likely be lower than the Mitigated Offer Cap calculated using the QSGR mode Startup cost. • The normal mode Startup cost will be used for calculating the Three-Part Supply Offers and for RUC and DAM Make-Whole Payment calculations. WMS

9. Proposed Revisions to Verifiable Cost Manual Additional Rules for Establishing the Mitigated Cap Variable O&M Cost for Quick Start Generation Resources (QSGRs) • ERCOT will calculate a variable O&M value for each QSGR as described herein and in Appendix 7. • Startup cost values used for Real Time Mitigation are based on either Generic or approved O&M costs from a cold start position in Quick Start mode. • The expected minimum online time used to calculate the variable O&M term is equal to the minimum online time value shown in the Resource Asset Registration (RARF), unless the QSE has notified ERCOT that the expected minimum online time should be different than the minimum online time in the RARF. However, if the QSE request an expected minimum online time less than 1 hour, the QSGR must first have been approved for verifiable costs, otherwise, the expected minimum online time may not be less than one (1) hour. Following approval of verifiable costs for the Resource, the expected minimum online time may not be less than 30 minutes. • ERCOT will only calculate a new variable O&M seasonally whenever the expected minimum online time changes. • The HSL used in the variable O&M rate calculation shall be based on the average of all the seasonal HSLs as shown on the unit’s RARF. • QSEs must notify ERCOT seasonally, via the verifiable cost process, when there is a change to the RARF HSLs or minimum online time (or expected minimum online time). Notices must be given to ERCOT at least 15 days prior to the effective date for the new O&M value, which is the first day of the month for a particular season.