Loads in SCED Version 2 Proxy G Proposal

1. Loads in SCED Version 2Proxy G Proposal

2. Disclaimer This is a proposal from Carl Raish as an individual … it has not been vetted internally at ERCOT and should not be construed in any way as an ERCOT proposal or endorsed by ERCOT.

3. Three Methods for LMP - G • I would recommend retaining current Bid-to-Buy method • LSE can participated but can only represent their own customers • Customers could be price responsive or not • LMP - Volumetric G • I would recommend allowing this if all ESIIDs could be accurately base-lined by ERCOT • ERCOT would disaggregate load reductions to ESIID-level and pass those to the respective LSE QSE • I would recommend requiring one or more ESIIDs in the resource to be price responsive • LMP - Proxy G • No price responsive ESIIDs allowed • OK if LSE-level load can be accurately base-lined by ERCOT • Would not require ESIID-level load reduction estimation

4. ERCOT Price Responsive Load Survey • On 2013 survey REPs identified 25,229 ESIIDs as being on price responsive products • 22,947 on Block and Index • 4,105 on Real Time Pricing • 1,877 on Peak Rebate • Residential price response participation • 1,816 customers • 5.9 million competitive residential customers • Non-residential price response participation • 23,413 customers • 51 (out of 199) Load Resource ESIIDs were reported by REP as being on price responsive rate • 863,904 competitive non-residential customers reported on fixed price rates

5. ERCOT Price Responsive Load Survey • My biggest concern with LMP-Volumetric G is estimating load reduction at the ESIID-level • This graph illustrates the concern … the average load is for 1,652 customers reported on RTP rates, the two customer loads are for randomly chosen customers for the same date

6. Comparison of Volumetric G to Proxy G Proxy G Volumetric G

7. Comparison of Volumetric G to Proxy G • DR QSE registers a resource as a third-party DR provider • Signs up customers without regard to LSE (competitive) • Sends list via NAESB or TX Set to ERCOT for validation • Invalidated ESIIDs are removed • Regularly submits updates to add/remove ESIIDs Same for both Volumetric and Proxy G

8. Comparison of Volumetric G to Proxy G • LSE QSEs provide lists of ESIIDs to ERCOT that are on price-responsive rates • Sends list via NAESB or TX Set to ERCOT for validation • Valid and active ESIID in ERCOT settlement system • LSE QSE represents the REP that owns the ESIID • ERCOT periodically validates submissions to confirm price-responsiveness • This activity is already being done by ERCOT on a periodic basis … would change to continuous update process

9. Comparison of Volumetric G to Proxy G • ERCOT validation of DR QSE lists • Applicable to Volumetric and Proxy G • Valid and active ESIID in ERCOT settlement system • Consistent profile code (Res only or Non-Res only) • Interval metering with sufficient history to support accurate base-line • Base-line analysis performed to establish that accuracy standards are met … resource is rejected if base-line fails standards • As updates are submitted, ERCOT confirms baseline is still accurate … otherwise updates are rejected • Applicable to Proxy G only • ERCOT compares DR QSE list to LSE list of price-responsive ESIIDs … if any are found, they are rejected from the resource • ERCOT periodically validates DR QSE list to confirm absence of price-responsiveness … if significant price-responsiveness is evident, ERCOT checks at LSE-level to identify compliance failures

10. Comparison of Volumetric G to Proxy G • DR QSE submits offers to sell DR capacity • Volumetric G - if offer is cleared, DR QSE is paid LMP • Proxy G - if offer is cleared, DR QSE is paid LMP – Gp • In both cases, might pay based on telemetered load reduction with claw-back if ERCOT finds discrepancy • Proxy G could be a rolling average LZ_SPP, perhaps seasonally adjusted • Average by interval / day-type or perhaps average across intervals?

11. 120 Day Rolling Average LZ_SPP

12. Comparison of Volumetric G to Proxy G • Settlement – Volumetric G • DR QSE provides ESIID-level load reduction to ECOT • ERCOT validates DR QSE telemetry against aggregated interval data • ERCOT validates ESIID-level load reduction against ESIID-level interval data • ERCOT passes ESIID-level load reductions to respective LSE QSEs • ERCOT settles LSE QSE with load reductions added on to its load • LSE QSE bills customers for unused energy … presumably for the energy only does not bill for TDSP charges or ERCOT fee • ERCOT includes cost of load reduction in RTM settlement • Since customer has to pay for unused energy, they are not over-paid for reduction • Since LSE QSE is settled for the unused energy, they do not profit by being long in RTM

13. Comparison of Volumetric G to Proxy G • Settlement – Proxy G • DR QSE provides ESIID -level load reduction to ECOT • ERCOT validates DR QSE telemetry against aggregated interval data and disaggregates load reductions to the LSE QSE-level • ERCOT validates ESIID-level load reduction against ESIID-level interval data • ERCOT passes ESIID-level load reductions to respective LSE QSEs • ERCOT settles LSE QSE with load reductions added on to its load • LSE QSE bills customers for unused energy … presumably for the energy only does not bill for TDSP charges or ERCOT fee • ERCOT includes cost of load reduction in RTM settlement • Since ERCOT withheld Proxy G × load reduction from DR QSE customer has to pay for unused energy, they and their customers are not over-paid for reduction • Since LSE QSE is settled for the unused energy, they do not profit by being long in RTM • ERCOT pays LSE for their share of load reduction at Proxy G × load reduction (so they don’t have to bill their customer for that energy)

14. Proxy G Example Scenario: Generator A producing 96 MW and selling into RTM Generator B producing 10 MW and selling 6 MW into RTM CSP B producing 4 MW of load reduction and selling into RTM Load A (owned by REP A) consuming 100 MW from RTM (96 from A 4 from B) Load B (owned by REP B) consuming 6 MW from RTM (0 from A 6 from B) has a contract with Generator B for 4 MW at $60/MWh typically consumes 10 MW … 6 MW from RTM and 4 MW from generator B deployed by CSP B down to 6 MW LMP = $3000/MWh Proxy G = $70/MWh REP A pays ERCOT $300,000. ([load(100) + curtailed load(0)] * 3000 LMP) REP B pays ERCOT $18,240. [load(6) * 3000 LMP] + [curtailed load(4) * 60 contracted price] ERCOT pays Generator A $288,000.00 (3000 LMP * 96 Gen) ERCOT pays Generator B $18,240. [RTM(6) * 3000 LMP] + [contracted(4) * 60 contracted price] ERCOT Pays CSP B (the CSP representing load B) $11,720 (4 curtailed load * [2930 LMP- Proxy G]) Presumably the CSP would then relay the $11,720 (less any fee) to the customer associated with load B. ERCOT pays REP B $280 (4 curtailed load * 70 G proxy) ERCOT receives $318,240 and pays $318,240

15. Volumetric G Example Scenario: Generator A producing 96 MW and selling into RTM Generator B producing 10 MW and selling 6 MW into RTM CSP B producing 4 MW of load reduction and selling into RTM Load A (owned by REP A) consuming 100 MW from RTM (96 from A 4 from B) Load B (owned by REP B) consuming 6 MW from RTM (0 from A 6 from B) has a contract with Generator B for 4 MW at $60/MWh typically consumes 10 MW … 6 MW from RTM and 4 MW from generator B deployed by CSP B down to 6 MW LMP = $3000/MWh Proxy G = $70/MWh REP A pays ERCOT $300,000. ([load(100) + curtailed load(0)] * 3000 LMP) REP B pays ERCOT $18,240. [load(6) * 3000 LMP] + [curtailed load(4) * 60 contracted price] ERCOT pays Generator A $288,000.00 (3000 LMP * 96 Gen) ERCOT pays Generator B $18,240. [RTM(6) * 3000 LMP] + [contracted(4) * 60 contracted price] ERCOT Pays CSP B (the CSP representing load B) $12,000 (4 curtailed load * [30000 LMP]) Presumably the CSP would then relay the $12,000 (less any fee) to the customer associated with load B. ERCOT reports 4 MW reduction for Load B to LSE QSE … REP B bills customer for unused energy ERCOT receives $318,240 and pays $318,240