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ERS Procurement Methodology

ERS Procurement Methodology. Why Change Procurement Methodology?. Remove as much of the subjectivity as possible from the current ERCOT procurement process Create a methodology that aligns expenditure limits with risk Establish known procurement parameters for ERS Providers

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ERS Procurement Methodology

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  1. ERS Procurement Methodology ERS Workshop Presented By: ERCOT Staff

  2. Why Change Procurement Methodology? • Remove as much of the subjectivity as possible from the current ERCOT procurement process • Create a methodology that aligns expenditure limits with risk • Establish known procurement parameters for ERS Providers • Use value established in PUC rule as the offer cap benchmark DSWG/QMWG Meeting

  3. Change Control Process ERCOT Staff will provide a period for stakeholder review and comment for proposed revisions to this document as follows: ERCOT shall post proposed revisions to the Emergency Response Service Procurement Methodology to the ERCOT website. ERCOT shall also electronically notify stakeholders of the proposed revisions via the TAC and Others distribution list and define the comment period which shall conclude no less than 14 days after initial posting. To receive consideration, comments should be submitted via email to ERS@ercot.com by the deadline set forth in the notification. Upon Market Participant written request, ERCOT will conduct a conference call and online review of the submitted comments. ERCOT will review proposed document revisions with the Technical Advisory Committee (TAC). ERCOT will submit proposed document revisions for ERCOT Board approval. Within three Business Days of ERCOT Board approval, ERCOT shall post the revised document to the ERCOT website. ERS Workshop

  4. ERS Time Period Capacity Demand Curve ERS Workshop

  5. ERS Time Period Offer Cap The ERS offer cap establishes a maximum possible procurement price of $80/MW/hr for every ERS Time Period during the ERS budget year. ERCOT will automatically reject any offers above the offer cap. This cap is consistent with the prices historically paid to Loads participating in TDSP Standard Offer Load Management Programs. ERS Workshop

  6. Expenditure Limit and Capacity Inflection Point Calculations ERS Workshop

  7. Offers Exceed Offer Cap $/MW/Hr Expenditure Limit ERS Offers Offer Cap ERS Procurement Price MW Capacity Inflection Point Procured Capacity ERS Workshop

  8. Offers Exceed Expenditure Limit $/MW/Hr Expenditure Limit ERS Offers Offer Cap ERS Procurement Price MW Capacity Inflection Point Procured Capacity ERS Workshop

  9. Other • Clearing Price • The highest offer accepted for a time-period will set the clearing price for all ERS Resources cleared in that time-period. • ERS Capacity provided through ERS Self Provision • For any ERS self-provision, ERCOT will reduce the Time Period expenditure limit for any offers to self-provide part or all of a QSE’s ERS Obligation by the clearing price for ERS. ERS Workshop

  10. Stakeholder Comments to ERS Procurement Methodology DSWG/QMWG Meeting

  11. Stakeholder Comments • Section B. Change Control Process • All comments favorable • Section D. ERS Offer Cap • Using a fixed cap of $80/MWh allocates too much of the $50 million annual budget to low risk periods. • Recommendation to use some variation of historical Responsive Reserve Service prices corresponding to ERS contract time periods. • Another alternative is to expand the possible range of the risk weighting factors DSWG/QMWG Meeting

  12. Stakeholder Comments • ERCOT’s Response: • ERCOT chose to use a single fixed offer cap to simplify one aspect of this procurement methodology. This eliminates any confusion of the cap in relation to the Standard Contract Terms and time periods. In addition varying offer caps are not necessary with the introduction of the risk weighting factors. These factors are time period specific and are used to allocate the annual budget across time periods. • ERCOT believes the range of 1-10 for the risk weighting factors is appropriate to begin with. If we start to observe unintended results the methodology can be amended with Board approval. DSWG/QMWG Meeting

  13. Stakeholder Comments • Section E. ERS Expenditure Limit • Support the use of a risk weighting factor as a mechanism to allocate the annual ERS budget • Section G. Clearing Price • Overall support moving to a market clearing price for ERS • Section H. ERS Capacity provided through ERS Self Provision • Recommendation to eliminate the clause that the value of self-provided ERS resources reduce the expenditure limit. ERCOT ‘s Response: 1) There is a cost to those that elect to self provide their ERS obligation. 2) Loads are charged for all ERS capacity based on their LRS and receive the equivalent of a payment for capacity self provided therefore the cost of this capacity should be charged against the expenditure limit. DSWG/QMWG Meeting

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