Overview of Governing Document for Weather-Sensitive ERS Pilot Project

1. Overview of Governing Document for Weather-Sensitive ERS Pilot Project

2. Draft Governing Document This presentation is intended to highlight significant details noted in the Governing Document for Weather-Sensitive ERS Pilot Project and may not cover every aspect of the document. It is the responsibility of participants in the Weather-Sensitive ERS Pilot Project to familiarize themselves with all aspects of the Governing Document.

3. Purpose Stated objectives for requesting Weather-Sensitive ERS Pilot Project are: • Evaluate the ability of Weather-Sensitive Loads to provide dispatchable demand response during summer system conditions; • Evaluate the accuracy of Qualified Scheduling Entity (QSE) projections of demand response capabilities and Load growth; • Evaluate deployment impacts on end-use customers; • Identify any unforeseen challenges in procuring, deploying and evaluating the performance of Weather-Sensitive Loads.

4. Project Timeline • Pilot Timeline: • June through September 2013 ERS Contract Period • Other important dates: • April 1, 2013: ERS Resource Identification (ERID) submission window opens • May 10, 2013: Offer submission deadline • May 24, 2013: Award Notifications go out to QSEs • May 31, 2013: ERCOT publishes procurement results • June 1, 2013: Contract Period for Pilot Project begins • September 30, 2013: Contract Period for Pilot Project ends

5. Eligibility and Qualification To be eligible to participate: (a) The Load must consist exclusively of residential sites and must qualify for performance evaluation under either the regression baseline methodology or the control group baseline methodology; or • The Load must consist exclusively of non-residential sites and must qualify as Weather-Sensitive under the regression baseline evaluation methodology. Note: 1) Regression baseline requires all sites in an ERS load must have at least 9 months of interval meter data. 2) Control Group baseline must have interval metering but not historical meter data.

6. QSE Requirements to Participate • Must have capability to receive both Extensible Markup Language (XML) messaging and Verbal Dispatch Instruction (VDI) • Must submit a fully executed Weather-Sensitive ERS Pilot Project Supplement to Market Participant Agreement (this is an attachment to the Governing Document) • Must agree to participate in a post pilot survey (if applicable)

7. Procurement • Maximum pilot size of 30 MWs • Procure for June through September 2013 pilot project term, BH2, BH3, and Weekend/Holiday Peak Time Period only • (Weekend/Holiday Peak Time Period - 1 p.m. to 8 p.m. on Saturdays, Sundays, and Holidays) • Minimum Offer size – 100 KW • Payment • QSEs representing Weather-Sensitive ERS Loads participating in the BH2 and BH3 ERS Time Periods will be paid the clearing price for the corresponding Time Periods in the 30-Minute ERS pilot project • For the Weekend/Holiday Peak Time Period will be paid the time-weighted average of the clearing price for BH2 and BH3

8. Procurement (Cont’) • Offers must include projection of the maximum number of sites in the aggregation for the ERS Contract Period • ERCOT will reject offers that violate the following: • (a) 100% of the Load’s initial size; or • (b) Two MW times the QSE’s projection of the maximum number of sites in the aggregation during the pilot project term, divided by the MW capacity offered for the aggregation. • QSE’s may modify the population of an aggregation once per month (same limits above apply) • Not eligible for renewal opt-in • QSEs may not self-provide Weather-Sensitive ERS

9. Deployment Requirements • Deployment instructions: • BH2 and BH3 deployments use both XML and VDI • Weekend/Holiday Peak use VDI only • ERCOT will modify operator dispatch instruction to explicitly state Weather-Sensitive ERS in the instruction • 30-Minute Ramp period applies • Must remain deployed until recalled by ERCOT, but no single deployment will last longer than 3 hours • Unannounced testing at least once but no more than twice per month. • Test deployments may be reduced by EEA deployments but they do not reduce number of allowed EEA deployments

10. EEA Deployment • Actual (non-test) deployments may only occur in Energy Emergency Alert (EEA) • Deployment of 10-Minute ERS or 30-Minute ERS shall not be considered a deployment of Weather-Sensitive ERS unless VDI explicitly states Weather-Sensitive ERS • Maximum of 8 EEA Deployments during 4 month pilot period

11. Performance Evaluation • Event and Test Performance Analysis • For each test and EEA deployment event ERCOT to calculate Load and QSE portfolio-level ERS Event Performance Factors • For test deployments capacity obligations will be prorated based on number of sites dispatched during test • Availability factor set to 1.0

12. Other • Loads participating in pilot will not be subject to suspensions • Payments and charges associated with Weather-Sensitive ERS Pilot Project will be separate from other ERS charges on Settlements Statements • Estimated cost of Pilot - $19,500 • No additional ERCOT personnel impacts for pilot • Procurement cost will be managed under the $50 million annual cap for ERS

13. Questions? ON OFF mpatterson@ercot.com 512/248-3912