Reliability Deployments Task Force Update WMS Meeting - 08.10.11

1. Reliability Deployments Task Force Update WMS Meeting - 08.10.11 • WMS Chair created task force with the directive that the task force will address real-time market outcomes when reliability commitments and deployments are made by ERCOT • RDTF meetings occurred on July 15th, July 25th, July 28th, and August 8th • Data Review: • Reviewed generally ERCOT deployment of NSRS from December 1, 2010 – June 30, 2011 • Length of deployment • Amount of deployment • LSL added during deployment • Reviewed RUC commitments in May/June 2011 • Reason for RUC commitments • Deployment quantities • Deep dive review of NSRS deployments on July 13 and July 18th • Real-time price impact due to deployments, type of NSRS units deployed (online, offline, quickstart), aggregated energy offer curves of NSRS units

2. RDTF Update (cont.) • Consensus opinion: • Deployment of NSRS and RUC impacts real-time energy prices • 0 – LSL impact • LSL – HSL impact • Task force has reviewed proposals to address impact of deployments on real-time energy prices • ERCOT Proposal • Macquarie Proposal • Morgan Stanley Proposal • Shams Proposal • Proposals continue to evolve through discussion • Consensus has not been reached on solution to address impact of deployments on real-time energy prices • Key differentiator between proposals is whether or not an offer floor is needed for NSRS units and the level of offer floor • Proposals range from no offer floor to $3000 per MWh offer floor for NSRS units • To facilitate discussion regarding potential solution ERCOT provided SCED re-run scenarios for different offer floors during July 13th and July 18th NSRS deployments • Offer floor scenarios • Scenario 1 = Online NSRS (18*FIP) and Offline (15*FIP + $120) • Scenario 2 = $500 • Scenario 3 = $1000 • Scenario 4 = $3000

3. RDTF Update (cont.) • Implementation timeline for offer floor proposals: • Assumption that implementation of proposals will require NPRR approval and impact analysis • Task force also is reviewing potential short term solutions (solutions that could be implemented without NPRR such as revisions to deployment procedures) • Deploy online NSRS earlier in procedure • Partial deployment of NSRS • Quickstart NSRS participation in SCED • NSRS recall procedures review • Change in RUC policy to utilize the NSRS above the largest unit prior to deploying RUC for capacity insufficiency • Other issues raised for potential future discussion at RDTF • Impact of RRS deployment on real-time energy prices • EILS deployment impact on real-time energy prices • Impact of RMR deployments on real-time energy prices • RUC self-commitment/clawback

4. RDTF Update (cont.) • Next RDTF Meeting is on August 17th • PUC Workshop on August 22nd • Purpose is to discuss the proposals on factors affecting pricing during reliability deployments in an open meeting before both Commissioners. • Prior to the workshop, the Commission requests interested persons file comments to the following questions: • Please provide proposals to address non-spinning reserve deployment procedures and describe in detail the market incentives that are derived from your proposal. • How does your proposal enable the most competitive and efficient prices when non-spinning reserves are deployed? • Presentations referred to in this update have been distributed to the WMS e-mail list

5. WMS Motion to Endorse Concepts • Due to complexity, WMS is unable to make any recommendation at this time to address 0 – LSL impact but should continue to monitor • Energy offer curve for RRS and Up Reg should be at system-wide offer cap • Revise RUC policy to allow for delay of RUC for capacity insufficiency by using portion of NSRS capacity • Review NSRS deployment and recall process • Deploy online NSRS and Quick Start in SCED subject to a determined offer floor and deploy prior to offline NSRS • Treat offline NSRS similar to today subject to a determined offer floor for the EOC from LSL – HSL