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Resource Cost Working Group January 10, 2018 WMS Update

This update provides information on the long-term solution for the coal index price, including the Coal Fuel Index Price (CFIP) and revisions to the RMR process and agreement. It also discusses the possibility of a fuel adder for non-gas units and the need for volunteers for RCWG leadership positions.

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Resource Cost Working Group January 10, 2018 WMS Update

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  1. Resource Cost Working Group January 10, 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. NPRR847-Exceptional Fuel Cost Included in the Mitigated Offer Cap • Overview • During an exceptional fuel event, a QSE can submit a weighted average fuel price (WAFP)1 to ERCOT. • WAFP must exceed FIP + Fuel Adder + $2, and applicable to at least 10% of the total fuel burned in the applicable Operating Hour • WAFP can only be submitted during the adjustment period for each Operating Hour (i.e. 1 hour at a time) • ERCOT would use the WAFP in the MOC calculation in place of FIP & FA • After the event, QSE must provide documentation of the WAFP to ERCOT for validation, including attestation by an officer • Failure to provide sufficient, timely and supportable documentation may result in ERCOT limiting ability to submit exceptional fuel cost for up to 12 months • RCWG discussed Luminant comments • Reduce $2 threshold to $1 • Provide initial documentation in 15 days and final in 60 days • Remove 12 month limitation for failure to comply 1 Applicable only to intraday or same-day gas purchases

  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 • Discussed an “RMR O&M Adder” that would reflect the budgeted variable O&M cost over the projected generation • NPRR845 RMR Process and Agreement Revisions • Discussed impact of reclassification of RMR CAPEX to expense • Primary issue of company accounting practices vs RMR incentive factor and book value impacts

  5. Other RCWG Items • Non-Gas Units Fuel Adder • Discussed on the appropriateness of having a Fuel Adder (gas) applied to the Fuel Oil Price in verifiable cost calculations • Need volunteers for 2018 Chair and Vice-Chair of RCWG

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