ERCOT Demand Side Working Group New DR Product Options Subgroup

1. ERCOT Demand Side Working Group New DR Product Options Subgroup Jay ZarnikauFrontier Associates LLC 4/13/2012

2. ERCOT’s Formal DR Products and Programs • Load Resources providing RRS • Day-ahead Ancillary Service market clearing prices • 181 Load Resources with 2382 MW of registered DR capacity • Participation in Responsive Reserves capped at 1150 MW • Load Resources providing Non Spin • Day-ahead Ancillary Service market clearing prices • 30 minute ramp up time, must operate for at least 1 hour • Little or no participation, presently • Controllable Load Resources Providing Regulation • Day-ahead Ancillary Service market clearing prices • Instantaneous response time

3. ERCOT’s Formal DR Products • ERS (formerly EILS) • Mandatory response from loads selected to provide the service; ERCOT dispatch • Maximum 8 cumulative hours in contract period (but could be longer, if recall instructions extend longer), can be renewed by ERCOT upon exhaustion • Will soon include non-market generation • Minimum offer size 100 kW • 10 minutes notice • 475 MW from ~900 Load sites

4. ERCOT’s Formal DR Products • TDSP Load Management SOP • TDSP instruction • ~150 MW enrolled in TDSP SOPs, size may be doubled for this summer • Requirements depend upon TDSP • Typical minimum offer size: approx. 100 kW (varies by TDSP) • Typical commitment of 4 hours of unscheduled curtailment + 2 hours of scheduled curtailment (varies by TDSP) • Penalty depends upon TDSP • Typical notice is 30 minutes to 1 hour, depending on TDSP rules • Incentives range from $15/kW to $60/kW depending on TDSP • Summer peak hours only, presently

5. Alberta Demand Opportunity Service (DOS) • Mandatory response (like ERCOT’s formal programs) • No minimum size • Different from ERS, which requires 100 kW minimum • AESO dispatch (like ERCOT) • Three service types, 7 minute, 1 hour, and standard: • DOS 1 Hour, curtail in 1 hour, availability is limited due to system constraints • Similar ramping period to TDSP SOP—some TDSP SOPs offer 1 hour ramping periods • Currently has about 100 MW in participation

6. Alberta Voluntary Load Curtailment Program (VLCP) • A minimum 1-hour notice • Similar to TDSP SOP—some TDSP SOPs offer a 1 hour ramping period • Program is voluntary, participants can decline to curtail load, no minimum size • Different from ERCOT’s formal program in these two respects • AESO has identified need for up to 400 MW of voluntary load curtailment • Current level of participation is negligible

7. PJM Economic Load Response Program (ELRP) • Voluntary program • Perhaps similar to ERCOT’s future Loads in SCED program • Participants specify minimum reduction price, shutdown costs, and the minimum duration of the load reduction • Perhaps similar to ERCOT’s future Loads in SCED program • Price Mechanism: • Submit a sell offer into the Day-Ahead Market or Real-Time Market, or self schedule that clears • Perhaps similar to ERCOT’s future Loads in SCED program • ELRP participation decreased by 57,288 MWh in 2011, compared to the same period in 2010 • Participation levels have been lower due to a number of factors: • Lower price levels • Lower load levels • Improved measurement and verification • On 2011’s peak load day, 2,042 MW was registered for ELRP

8. PJM Emergency Load Management • Three types of Load Management • Energy Only (Voluntary), Capacity Only (Mandatory), Full Emergency (Mandatory) • Interruptible for 10 times from June through September, up to 6 consecutive hours from 12:00 to 20:00 on non-holiday weekdays • Similar to TDSP SOP, where the time period is summer peak hours only, hours committed set by program rules • Implement within 2 hours • Participant can specify 1 hour or 2 hour ramping period • Different from ERCOT: ERS specifies 10 minutes and TDSP SOPs have a specific ramping period • Curtailment Service Provider (CSP) must have registrations that total >=100 kW • Same as ERS and TDSP SOP • Two price mechanisms: • If a participant in the PJM capacity market, participant will make an offer into the auction and receive a Resource Clearing Price • If a participant outside of the PJM capacity market, participant is certified 3 months prior to the Delivery Year and receives a price tied to the zonal capacity charge • This option will be eliminated beginning June 1, 2012

9. PJM Load Management Program Cont’d • Total registered MW in the Load Management Program • 11,523 MW in 2011/2012 • Total zonal monthly capacity credits for CY 2011 • $487,161,575 • Underperformance penalties of $5.6 million in 2011 Table: 2011 Load Management Events Summary for PJM

10. MISO Emergency Demand Response (EDR) • Resource-specific ramping offer • The participant can specify: • The minimum and maximum amounts of demand reduction • The minimum and maximum number of contiguous hours to be curtailed • The number of hours of advance notice needed to curtail load • Perhaps similar to ERCOT’s future Loads in SCED • Participants submit daily offers, receive either the higher of the offer or the locational marginal price (LMP), but offers capped at $3,500/MWh • Different from ERCOT • ERS sets price through a pay as bid mechanism 4 months in advance • The TDSP SOP sets the price in advance • Approximately 900 MW registered in 2011

11. CAISO Proxy Demand Resource (PDR) • Implemented May 1, 2010 • Minimum size is 100 kW, loads may aggregate to achieve threshold • Similar to ERS and TDSP SOP • Minimum load reduction and response times based on the bid submitted and the award received • Different from ERCOT • ERS and TDSP SOPs set the response times • Participants submit bids into the wholesale Day Ahead and/or Real Time market • Perhaps similar to ERCOT’s future Loads in SCED program

12. Conclusion • Not much in these programs that ERCOT doesn’t already offer or will offer in the future • ERCOT’s Loads in SCED programs will allow loads to respond to prices in the market similar to many of the DR products explored in this presentation • ERCOT does not offer DR products that: • Allow for ramping times longer than 1 hour • Allow participants to set their own ramping times • Accommodate aggregated residential (small, temperature-sensitive loads) to the degree they are accommodated in some other markets.