ERCOT Discussion Presentation

1. ERCOT Discussion Presentation Demand Side Working Group Monthly Meeting May 13, 2005

2. LaaR Prorating (current) The prorating methodology currently used for LaaR bids providing RRS is the same methodology used to prorate all Ancillary Service bids In the current A/S market clearing process the tied A/S bids are prorated in 2 steps (these are the tied bids that are at the highest price cleared) Step 1: For each tied bid: bid proration = TRUNC(overage * bidmw/∑ bidmw_of_all_tied_bids) Where overage = ∑ bidmw_of_all_tied_bids – A/S requirement Note: bid_proration can be 0 if the bidmw is relatively small (minimum unit of procurement is 1 MW

3. LaaR Prorating (current) After Step 1, ∑ bid_proration may be less than overage, therefore an additional step is needed Step 2: Calculate an adjustment as: Adjust = overage - ∑ bid_proration If Adjust > 0, then for all tied bids in ascending order of bidmw, add 1 MW to the bid_proration until the Adjust is 0.

4. LaaR Prorating (current) Example: Total Tie Bids = 245 MW MW requirement from Tie Bids = 227 MW Overage = 18 MW Amount prorated in Step 1: Amount prorated in Step 2:

5. LaaR Prorating (current)

6. LaaR Prorating (Post R4) New prorating methodology will be implemented Step 1: Use standard rounding a clear all tied bids proportionately Step 1 can create either a positive mismatch (overage) or negative mismatch (underage) and therefore an additional step is needed. Step 2: For positive mismatch; randomly reduce all tied bids by 1 MW until overage = 0 For negative mismatch; randomly increase all tied bids by 1 MW until underage = 0

7. LaaR Prorating (Post R4) Using bid structure in previous example Total Tie Bids = 245 MW MW requirement from Tie Bids = 227 MW Cleared 228 MW in Step 1 which created a 1 MW positive mismatch Step 2: Reduced 1 bid randomly by 1 MW ( happened to be the 4 MW bid

8. LaaR Prorating (Post R4)

9. Project Priority List (PPL) Update During the May 2nd meeting PRS started review of the PPL Assignments were made to a number of the subcommittees Current Funding Line: Priority 1.2 and Rank 35 Reprioritization is scheduled for the June 27 PRS meeting

10. Project Priority List (PPL) Update Projects with Direct Demand Response Impacts • Market Notice of LaaR Proration PRR558 • Priority 1.2 Rank 35.6 • Block Deployment for Responsive and Non-Spinning Reserve Services PRR496 • Priority 1.3 Rank 56 • (looks like PRR567 will accomplish the same thing) • Residential and Commercial DLC Programs PRR311 • Priority 3.3 Rank 135 • Controllable Resources PRR307 • Priority 3.3 Rank 140

11. R4 Impacts to LaaRs R4 Impacts – RPRS Loads Acting as Resource Asset Registration Form - EMMS R4 Addendum * Needed so New RPRS engine can consider temporal constraints Note: If no data provided by Resource ERCOT will populate fields in data base with the minimum value provided by LaaR Resource Type. This was approved by WMS.

12. R4 Impacts to LaaRs RPRS Bids required for LaaR to be considered in solution LaaR will need to be shown as on-line, available, not active Eligible LaaR’s Max Capacity will be set to the lesser of RPRS Bid Capacity or the difference in the Resource Plan Max and Min R4 Impacts – Resource Specific Bid Limits Up Limit = FIP * Heat Rate No down limit LaaR can select to be Non-Bid

13. New PRR for “Bid” LaaRs • A LaaR that selects to be ‘Non-Bid” will not be automatically dispatched within the Real Time Balancing Market (Cat 2,3,4 BES) • The problem is that if a LaaR does not select itself to be Non-Bid the protocols do not address how to pay a LaaR as Bid in Section 7 of the Protocols. • A new PRR will be submitted by ERCOT to correct this gap.

14. GATF Update • On Tuesday May 10 Final Draft Report of the GAFT to TAC went out for comments • Comments are due back by May 16 • To be included in the meeting materials for the June 2 TAC Meeting

15. GATF Update In summary: “Load Participation – Include the amount of Loads Acting as Resources (LaaRs), Balancing Up Loads (BULs) and loads providing other Ancillary Services (e.g., Responsive Reserves, Non-Spin and Replacement). For 2005, this amount will be the LaaR amount procured by ERCOT (i.e., 1,150 MW). For future forecasts, the amount will be based on the average of historical amount of loads offered into these markets during peak load hours.”

16. GATF Update Firm Load = Forecasted total summer peak demand - LaaRs - BULs For 2005: LaaRs providing RRS = 1150 LaaRs providing NSRS = 0 LaaRs providing RPRS = 0 BULs = 0 Energy Efficiency Programs = 0 Load Management Standard Offer Programs = 0

17. GATF Update After 2005: Reserve contribution from LaaRs providing RRS = Self-Arranged + (MW offers of RRS by LaaRs) x Z, but no greater than the ERCOT-established participation level (i.e., 1,150 MW), where Z is a constant to be determined by ERCOT once historical summer data is collected that will provide a 95% confidence level that the resources will be available during the summer peak load periods. Reserve contribution from LaaRs providing NSRS = Self Arranged + (MW offers of NSRS by LaaRs) x Z, but no greater than the ERCOT-established requirement for NSRS, where Z is a constant to be determined by ERCOT once historical summer data is collected that will provide a 95% confidence level that the resources will be available during the peak summer periods.

18. GATF Update Reserve contribution from LaaRs providing RPRS = (MW Offers of RPRS by LaaRs)x Z, where Z is a constant to be determined by ERCOT once historical summer data is collected that will provide a 95% confidence level that the resources will be available during the peak summer periods. Reserve contribution from BUL = (BUL BES Offers) x Z, where Z is a constant to be determined by ERCOT once historical summer data is collected that will provide a 95% confidence level that the resources will be available during the peak summer periods

19. GATF Update Data to be used in the calculations will be average quantities provided for the hours of 16:00 through 18:00, weekdays only, for the months of July and August. For 2006 reserve margin calculations, the amount of contribution will be based on actual self-arranged quantities and RRS offers for the calendar year 2005. For 2007, the contribution will be based on actual self-arranged quantities and RRS offers for the calendar years 2005 and 2006. Then, in all following years, the contribution will be based on actual self-arranged quantities and RRS offers for the previous three years of data on a rolling average basis.

20. GATF Update Energy Efficiency Programs should not be used because they are already reflected in the ERCOT summer peak load forecast. Load Management Standard Offer Programs can be considered as a demand side resource in the reserve calculation as long as it meets the 7 point criteria the DSWG defined. • Contractual with obligation to perform • Dispatchable or controllable by ERCOT (e.g., either directly dispatchable or initiated by ERCOT through an EECP) • Load availability needs to coincide with system peak • Need measurement and verification (M&V) for deployments (responsibility of host) • Long-term (contract or installed control equipment investment) • Subject to review by ERCOT • Annual reporting of subscription

21. New DR Inititives Must Run Alternatives (RFP) Fuel Shortages New (Assignment from WMS)

22. New DR Inititives Laredo Must Run Alternatives (RFP) • Sent out on April 29 • Intent to bid notices due May 13 (today) • Additional power injection or Load Reduction Solutions needed from 2005 to 2009 ranging from 92 to 174 MWs • Minimum solution 35 MWs

23. New DR Inititives PRR578 Emergency Fuel Supply Resource Service PRS voted this down during the 4/21/05 meeting Where do we go from here? Is there any interest in DSWG to propose our own demand side solution? What happens during a fuel curtailment (this is not a comprehensive evaluation) • ERCOT issue an emergency notice • Start implementing steps of Emergency Electric Curtailment Plan (EECP) • Step 2, deployed all LaaRs providing RRS • Step 3, media appeal for voluntary load curtailment • Step 4, TDSP firm load shed Would the Market be willing to pay for emergency load curtailment prior to Step 4? If so this could be on a contract basis with ERCOT each year.