Load Settlement Issues

1. Load Settlement Issues Floyd Trefny Amtec Updated Following Discussion 5/21/2012 DSWG Subgroup Meeting

2. Disclaimer The content of this presentation does not represent the typical actions or inactions of the Texas Steel Companies and is presented from the experience of the author when discussing load response products the consumers

3. How Do Price Sensitive Loads React to Price Changes • Most Industrial and Commercial Loads look at ERCOT postings of Load Zone LMP as the primary indicator of eventual settlement point price • Prices are posted on the MIS every time SCED runs • Consumers see the prices about 20-40 seconds later; take variable amount of time to react • Dispatch of an interruption is managed in several different ways • A Load Entity has a central control center that tells individual loads within its facilities when to turn off or back on • A Load Entity has a relationship with its REP or NOIE that tells the load when to take actions • REP may keep any energy settlement proceeds from the load interruption • Load Entity may be only paid a capacity credit on its charge for energy for giving the right to interrupt to the REP • Load Entities may share value provided with the REP for each interruption • A Load Entity has multiple sub-processes within its plant that several supervisors independently determine if the ERCOT posted prices meet management directives of when and under what conditions they may interrupt • Usually each independent process must judge the need for interruption based on its current operating state of its process • Results in different timing and different strike prices to interrupt given operating conditions • Highly variable Time Delays from when the price is posted to when the load actually shuts down

4. How Do Price Sensitive Loads React to Price Changes • Dispatch of an interruption is managed in several different ways (continued) • Large Commercial facilities each represented by a single contract for service from an REP, individually determine if actions should be taken • Many facilities (over 100) are under contract across multiple load zones • Not all the facilities in a contract are price sensitive and significant diversity will exist across different Load Zone • Special hedging methods are used to manage these loads • Residential Loads who are price sensitive are usually managed by automated processes at each home • Input from the REP central dispatch • Homeowner override issues

5. How Do Price Sensitive Loads React to Price Changes • When to return to service after an interruption is usually a more complex decision that when to interrupt • Loads usually always have some minimum time following an interruption that it must for safety reasons stay off regardless of current LMP prices • Must-Down times can run from 10 minutes to several hours • Most loads that are controlled by individual supervisors, do not have access to ERCOT reserve postings or have the training necessary to accurately predict prices

6. Diversity in Load Response to Prices • Typically, the largest individual plant loads in a large industrial facility are no more than 20-40 Mw with many less than 5 Mw. A large plant may have six or more large loads where each is individually controlled • Interruption of these individual loads is quite diverse with all having many different LMP strike prices to interrupt and many different re-start constraints to come back on • This phenomenon provides for smooth interruptions of small individual amounts of load as prices increase provided the load zone price does not just blow through from moderate prices to high prices in one or two SCED intervals • Price acceleration controls in penalty factor curves may be useful in providing moderation in responses

7. Load Response Effect on Regulation • When ERCOT system load increases; so typically do LMP prices • Increases in ERCOT system load are managed by Reg-Up and then reset with issuance of new Base Points • As individual load’s price thresholds are reached, loads respond thus reducing further Reg-Up requirements • Provided the price increase from one SCED to another is moderate, then the diversity in load response has the effect of reducing Reg-Up • When ERCOT system load decreases, so typically do prices • Decreases in ERCOT system Load are managed by Reg-Down • The diversity in load response to decreases in price are significant due to the large variations in minimum time to return to service and other constraints on the load facility

8. Load Response Effect on Regulation • ERCOT determines the amount of Reg-Up and Reg-Down needed for each hour • See section 3.16 Standards for Determining Ancillary Service Quantities • ERCOT Posts engineering studies representing specific Ancillary Service requirements on an annual basis • Reg-Up and Reg-Down requirements are based on system load change that historically occurs at the hour studied; amount of Reg actually deployed • Load Changes for many reasons • Scattered Rain storms decrease load ; Hot sun after small rain showers • Air Conditioning saturation • Large industrial facilities increase or decrease consumption • Life patterns of residential and small commercial consumption • Passive Load Response • 4 CP response • Others • The composite result of actual load changes is used to establish parameters for setting Reg-Up and Reg-Down • Any Load Response due to price change is already accounted for in the Engineering studies performed