Update: 30-Minute Emergency Response Service (ERS) Pilot Project Mark Patterson, ERCOT October 7, 2013

Background ERCOT Board approved 30-Minute ERS Pilot Project in June 2012 to test an ERS product with a 30-minute ramp capability. 30-Minute ERS Features: –Dispatched as early as EEA Level 1 –Procured via market clearing price mechanism –Fleet-wide testing of Pilot Resources –Maximum of 8 hours of obligation –Only financial consequences for non-compliance; no suspensions Procured through 5 Contract Periods –July15, 2012 through September 2012 –October 2012 through January 2013 –February 2013 through May 2013 –June 2013 through September 2013 –October 2013 through January 2014 ERCOT Public October 7, 2013

Growth in Participation 1597 unique sites offered in to 30-Minute ERS –1363 sites with no previous ERS-10 participation –118 sites with more than12 months since last ERS-10 participation Some sites that were unable to comply with ramp requirement of standard 10-Minute ERS product have migrated to 30-Minute ERS Pilot. First ever ERS Residential Aggregations QSEs have indicated that more sites would be willing to participate if 30-minute product was made permanent. ERCOT Public October 7, 2013

Performance and Testing No EEA events during pilot period to-date 8 fleet-wide test deployments: –3 test deployments during 1st Contract Period –2 test deployments during 2nd Contract Period –2 test deployments during 3rd Contract Period –1 test deployment during 4 th Contract Period Generally, fleet-wide performance exceeds obligation: ERCOT Public October 7, 2013 Test DateContract PeriodTime PeriodFleet Obligation (MW) Fleet Load Reduction (MW) Test 1September 5, 2012JulSep12BH Test 2September 13, 2012JulSep12BH Test 3September 26, 2012JulSep12BH Test 4October 30, 2012OctJan13BH Test 5November 20, 2012OctJan13BH Test 6February 28, 2013FebMay13BH Test 7May 23, 2013FebMay13BH Test 8September 19, 2013JunSep13BH287.65N/A

Overall Interest in 30-Minute Ramp Product BH1 - HE M-F except holidays BH2 - HE M-F except holidays BH3 - HE M-F except holidays NBH All Other Hours Jul 15-Sep MW16.25 MW15.80 MW9.5 MW Oct12-Jan MW95.58 MW89.01 MW75.15 MW Feb-May MW MW95.28 MW82.61 MW Jun-Sep MW87.65 MW76.19 MW MW Oct13-Jan MW MW MW MW ERCOT Public October 7, 2013 Total Offers

Cost Comparison to 10-Minute ERS Contract Period BH1 HE M-F except holidays BH2 HE M-F except holidays BH3 HE M-F except holidays NBH All Other Hours 10 -Minute ERS Jun-Sep12 Highest Offer Accepted$16.00 $12.75 Average Price$8.70$9.67$9.97$ Minute ERS Pilot Jul 15-Sep12Clearing Price$11.00$16.00 $ Minute ERS Oct12-Jan13 Highest Offer Accepted$8.75$9.75 $8.75 Average Price$8.22$8.77$9.06$ Minute ERS Pilot Oct12-Jan13Clearing Price$8.10$9.20$9.50$ Minute ERS Feb-May13 Highest Offer Accepted$8.75$9.75 $8.75 Average Price$8.10$8.71$8.82$ Minute ERS Pilot Feb-May13Clearing Price$7.81$8.60$8.90$ Minute ERS Jun-Sep 13 Highest Offer Accepted$12.15$15.12$12.60$12.15 Average Price$10.21$12.07$12.60$ Minute ERS Pilot Jun-Sep 13Clearing Price$11.00$12.00$14.00$ Minute ERS Oct13-Jan14 Highest Offer Accepted$9.21$9.25$9.35$9.13 Average Price$8.01$8.37$8.44$ Minute ERS Pilot Oct13-Jan14Clearing Price$8.00$8.50$8.80$8.00 ERCOT Public October 7, 2013

Cost Comparison to NSRS & TDSP SOP Comparisons to other services: –TDSP Load Management Program $79.36/MW/hr applies to BH2 and BH3 during Jun-Sep Contract Period only Actual Pilot cost (through May 2013) - $2,973, Estimated cost June – September 2013 CP: $3,341, Estimated cost October 2013-January 2014 CP: $2,843, ERCOT Public October 7, 2013 JulSep12Oct12Jan13FebMay13JunSep13 ERS-30Non SpinERS-30Non SpinERS-30Non SpinERS-30Non Spin BH1$11.00$1.03$8.10$1.10$7.81$3.05$8.00$1.21 BH2$16.00$19.76$9.20$2.34$8.60$5.21$8.50$9.05 BH3$16.00$21.41$9.50$3.12$8.90$6.84$8.80$13.07 NBH$11.00$1.44$8.20$1.22$7.80$3.99$8.00$1.89

Offer Behavior: Clearing Price -vs- Pay-as-Offer ERCOT Public October 7, 2013 BH3 NBH BH1 BH2

ERCOT Public October 7, 2013 ERS Procurement Methodology

ERS Time Period Capacity Demand Curve 10 08/13/2013

Expenditure Limit and Capacity Inflection Point Calculations ERCOT Public October 7, 2013 Risk Weighting Factor (a) Time Period Hours (b) Offer Cap (c) (a)*(b)*(c) Expenditure Limit Allocation Factor ERS Time Period Expenditure Limit Capacity Inflection Point FebMaybh $ 80 34, % $ 1,527, bh $ 80 20, % $ 916, bh $ 80 27, % $ 1,221, nbh1 1,871 $ , % $ 6,646, JunSepbh $ 80 33, % $ 1,491, bh $ , % $ 8,951, bh $ , % $ 11,935, nbh1 1,920 $ , % $ 6,820, OctJanbh $ 80 33, % $ 1,491, bh $ 80 20, % $ 895, bh $ 80 26, % $ 1,193, nbh1 1,945 $ , % $ 6,908,

Estimated Clearing Prices per Capacity Procured ERCOT Public October 7, 2013 Risk Weighting Factor (a) Max Clearing Price Allowed to Procure a MW Level 100 MW250 MW500 MW750 MW1000 MW FebMaybh11 $ $ $ 7.10 $ 4.74 $ 3.55 bh21 $ $ $ 7.10 $ 4.74 $ 3.55 bh31 $ $ $ 7.10 $ 4.74 $ 3.55 nbh1 $ $ $ 7.10 $ 4.74 $ 3.55 JunSepbh11 $ $ $ 7.10 $ 4.74 $ 3.55 bh210 $ $ $ $ bh310 $ $ $ $ nbh1 $ $ $ 7.10 $ 4.74 $ 3.55 OctJanbh11 $ $ $ 7.10 $ 4.74 $ 3.55 bh21 $ $ $ 7.10 $ 4.74 $ 3.55 bh31 $ $ $ 7.10 $ 4.74 $ 3.55 nbh1 $ $ $ 7.10 $ 4.74 $ 3.55

Assigning Risk Factors % hrs in # Hrs% Tot HrsSCT Feb-May13BH BH BH NBH Jun-Sep13BH BH BH NBH Oct13-Jan14BH BH BH NBH ERCOT Public October 7, 2013 Issue: Typical winter peak hours ~ 5-8 a.m. in late Dec through Feb ERCOT’s approach is to assign conservative risk weighting factors for the winter peak until SCT and TP issues are resolved. Need to Redefine ERS Standard Contract Terms and Time Periods

ERS Time Period Offer Cap The ERS time period offer cap is a constraint on the demand curve to identify unreasonable offers. The offer cap will apply to all ERS types in each time period during the ERS budget year and will be established at $80/MW/Hr. This cap is consistent with the prices historically paid to loads participating under the TDSP Energy Efficiency Rule pertaining to the Standard Offer Load Management Programs. Any offers above the offer cap will be rejected and not considered for procurement. 14 DSWG Meeting08/13/2013

Other Clearing Price –The highest offer accepted for a time-period from will set the clearing price for all ERS Resources cleared in that time-period. Each ERS type as different characteristics –ERS-10 has shorter ramp but deployed in EEA L2 –ERS-30 deployed in EEA L1and potentially more often ERCOT believes 10-Minute and 30-Minute ERS are deployed for the same purposes –Help recover operating reserves –Reduce or prevent firm load shed ERS Capacity provided through ERS Self Provision –For any ERS self-provision, ERCOT will reduce the Time Period expenditure limit for any offers to self-provide part or all of a QSE’s ERS Obligation by the clearing price for ERS.