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Resource Cost Working Group April 4, 2018 WMS Update

Resource Cost Working Group April 4, 2018 WMS Update. Long-Term Solution to Coal Index Price. VCMRR014 provided an interim solution $1.10 fuel adder for coal and lignite resources that is added to the $1.50 Solid Fuel Price

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Resource Cost Working Group April 4, 2018 WMS Update

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  1. Resource Cost Working Group April 4, 2018 WMS Update

  2. Long-Term Solution to Coal Index Price • VCMRR014 provided an interim solution • $1.10 fuel adder for coal and lignite resources that is added to the $1.50 Solid Fuel Price • Results in $2.60/MMBtu ($1.50 + $1.10) for make-whole, but MOC at FIP (gas) + $1.10 fuel adder • Sunsets 6/1/18 • Developed draft NPRR for Coal Fuel Index Price • “CFIP” Coal Fuel Index Price: “Delivered to ERCOT” index price based on PRB 8800 coal plus rail transportation • Preliminary Cost Impact of $275k to $375k, but exploring options to reduce the impact • Reviewed historical coal prices vs FIP • Lowest impact would be to continue with fuel adder for coal and lignite resources, similar to VCMRR014 • $1.10 or another value

  3. Long-Term Solution to Coal Index Price • Based on the direction given at the last WMS meeting RCWG generated VCMRR020, Delay the Fuel Adder Sunset Related to VCMRR014, Revise Fuel Adder Factor for Coal and Lignite Resources. • New sunset is June 1, 2019 • Extending the sunset date permits the development of the NPRR while ensuring coal and lignite units are not started up below their cost • RCWG will be developing the NPRR to direct ERCOT to do an annual review and plan on having the NPRR available for stakeholder consideration in the near term.

  4. RMR Items • NPRR838 Updated O&M Cost for RMR Resources • On-going discussion of using the budgeted variable O&M per the RMR contract instead of the 10 year average normally used to establish O&M costs • Impacts RMR Make-whole Payment and Real-Time Mitigation • The RCWG tended to agree that the RMR is not a typical commercial unit, therefore, the O&M should not necessarily be treated as such • Building the actual O&M costs into the mitigated offer caps could result in very high Locational Marginal Prices (LMPs) • RCWG is engaged in conversation with the IMM on potential solutions. • Potential solution is to adopt a single price (e.g., $50/MWh)

  5. Other RCWG Items • ERCOT has discovered that there are some days where there are no prices for the Houston Ship Channel (HSC) due to lack of liquidity or trading on a particular day. • In 2017, there were nine days where there was not a price available at HSC. • ERCOT pointed out that Katy has a much higher trade volume than HSC • ERCOT offered three options for stakeholder consideration: • continue to use the previous day HSC price • fill in missing days with prices from Katy • replace HSC with Katy permanently

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