Texas Nodal Program ERCOT Readiness & Transition (ERT) Supplemental Information TPTF January 12, 2009 Kevin Frankeny

ERCOT Core Nodal Business Processes Level 1 and 2 Details January 12, 2008

3 Notes about this document  This presentation documents the Conceptual Level (1) and Process Identification Level (2) “Core” Nodal Business Processes  Standard “Change” and “Business Support” Business Processes are not presented here  Does not include Zonal “As-is” Business Processes  This is a working document  There is a summary display that shows all of the Conceptual and Process Identification processes on one screen  There is also a paragraph describing each Conceptual and Process Identification item

4 ERCOT Core Business Processes Plan the Power System Operate the Power System and Markets Manage Commercial Operations Provide Market Services Support Operational and Market Monitoring Conceptual Level (1)

5 ERCOT Core Business Processes Plan the Power System Plan the Transmission System Plan for Resource Adequacy Manage Power System Modeling Perform Operational Planning Operate the Power System and Markets Manage Congestion Revenue Rights Manage the Day-Ahead Market Perform Security Analysis & Reliability Unit Commitment Manage the Adjustment Period Operate the Real-Time Power System Manage Commercial Operations Meter and Aggregate Data Perform Settlements & Billing Perform Financial Transfers Provide Market Services Register and Qualify Market Participants Manage Market Information System Manage Disputes Facilitate Customer Choice Program Administer Renewable Energy Credit Program Manage Protocol Revisions Support Operational and Market Monitoring Monitor and Report Operational Performance Provide Market Monitoring Data Conceptual (1) and Process Identification (2) Levels

Plan the Power System

7 ERCOT performs numerous planning and forecasting activities, including transmission planning, resource adequacy, load forecasting, renewable generation forecasting, outage coordination, and power system modeling.  Process Identification Level (2):  Plan the Transmission System  Plan for Resource Adequacy  Manage Power System Modeling  Perform Operational Planning

8 Plan the Power System Process Identification Level (2):  Plan the Transmission System  Plan for Resource Adequacy  Manage Power System Modeling  Perform Operational Planning ERCOT is responsible for overall planning of transmission and generation projects for the ERCOT Transmission Grid. For local transmission projects, its authority is limited to supervising and coordinating the planning activities of Transmission Service Providers. ERCOT also makes recommendations to the PUCT for needed Transmission Facilities and provides Market Participants with transmission plans for each of the next 5 years.

9 Plan the Power System Process Identification Level (2):  Plan the Transmission System  Plan for Resource Adequacy  Manage Power System Modeling  Perform Operational Planning ERCOT has several long-term planning responsibilities related to resource adequacy. It analyzes and produces load, wind, generation and system reserve forecasts on a rolling 36-month basis. It contracts for Reliability Resources and EILS loads and determines the standards for determining Ancillary Service Quantities.

10 Plan the Power System Process Identification Level (2):  Plan the Transmission System  Plan for Resource Adequacy  Manage Power System Modeling  Perform Operational Planning ERCOT manages the Network Operations Model, which includes the physical characteristics, ratings, and operational limits of all Transmission Elements of the ERCOT Transmission Grid based on information obtained from the Transmission Service Providers and QSEs. The models are fully tested prior to use in ERCOT’s production systems and made available to all Market Participants on the Market Information System (MIS) Secure Area. For each of the next five years, ERCOT develops models for annual planning purposes that contain, as much as practicable, information consistent with the Network Operations Model.

11 Plan the Power System Process Identification Level (2):  Plan the Transmission System  Plan for Resource Adequacy  Manage Power System Modeling  Perform Operational Planning Operational Planning timeframes range from days to months in the future. ERCOT activities include Outage Coordination, Current Operating Plan (COP) administration, and producing 7-day hourly forecasts of loads and wind-generation.

Operate the Power System & Markets

13 Operate the Power System & Markets ERCOT operates the power system in an economical and reliable manner. ERCOT conducts CRR and Day-Ahead Markets, performs Day-Ahead Security Analysis including Reliability Unit Commitment, manages the Adjustment Period (including SASM), and controls the Real-Time Power System. Process Identification Level (2):  Manage Congestion Revenue Rights  Manage the Day-Ahead Market  Perform Security Analysis & Reliability Unit Commitment  Manage the Adjustment Period  Operate the Real-Time Power System

14 Operate the Power System & Markets Process Identification Level (2):  Manage Congestion Revenue Rights  Manage the Day-Ahead Market  Perform Security Analysis & Reliability Unit Commitment  Manage the Adjustment Period  Operate the Real-Time Power System ERCOT initiates, directs and oversees the auctions for Congestion Revenue Rights (CRRs). ERCOT also records bilateral trades of CRRs.

15 Operate the Power System & Markets Process Identification Level (2):  Manage Congestion Revenue Rights  Manage the Day-Ahead Market  Perform Security Analysis & Reliability Unit Commitment  Manage the Adjustment Period  Operate the Real-Time Power System ERCOT manages the Day-Ahead Market (DAM). The DAM is a daily, co- optimized market for buyers and sellers of energy, Ancillary Service capacity, and certain Congestion Revenue Rights. ERCOT maintains records of financial energy transactions between Market Participants.

16 Operate the Power System & Markets Process Identification Level (2):  Manage Congestion Revenue Rights  Manage the Day-Ahead Market  Perform Security Analysis & Reliability Unit Commitment  Manage the Adjustment Period  Operate the Real-Time Power System ERCOT performs security analysis including Reliability Unit Commitment (RUC) to ensure Transmission System reliability and sufficient Resource capacity to serve the forecasted hourly load. ERCOT conducts at least one Day-Ahead RUC (DRUC) and at least one Hourly RUC (HRUC) before each hour of the Operating Day.

17 Operate the Power System & Markets Process Identification Level (2):  Manage Congestion Revenue Rights  Manage the Day-Ahead Market  Perform Security Analysis & Reliability Unit Commitment  Manage the Adjustment Period  Operate the Real-Time Power System During the Adjustment Period, ERCOT continues to evaluate system sufficiency and security and produces reports of resource adequacy to the market. In addition to operating and Hour Ahead Security analysis including HRUC, ERCOT may elect to open one or more Supplemental Ancillary Service Markets (SASMs).

18 Operate the Power System & Markets Process Identification Level (2):  Manage Congestion Revenue Rights  Manage the Day-Ahead Market  Perform Security Analysis & Reliability Unit Commitment  Manage the Adjustment Period  Operate the Real-Time Power System During Real-Time operations, ERCOT controls Generation Resources based on economics and reliability to match system Load with on-line generation while observing Resource and transmission constraints. The Security Constrained Economic Dispatch (SCED) process produces Base Points for all Generation Resources. ERCOT uses Load Frequency Control functions, Base Points from the SCED process and deployments of Ancillary Service capacity to control system frequency and solve potential reliability issues by providing instructions to TSPs and QSEs controlling Generation and Load Resources. ERCOT provides information to the Market Participants concerning current operating conditions. Under Emergency Conditions, ERCOT may implement manual procedures as provided for in the protocols and notifies Market Participants of system conditions. ERCOT also maintains real-time telemetry with the TSPs and QSEs and the State Estimator as required by protocol.

Manage Commercial Operations

20 Manage Commercial Operations Following Real-Time Operations, ERCOT must collect and aggregate metering data and pricing information to create settlement statements, and manage the resultant financial transactions. Process Identification Level (2):  Meter and Aggregate Data  Perform Settlements & Billing  Perform Financial Transfers

21 Manage Commercial Operations Process Identification Level (2):  Meter and Aggregate Data  Perform Settlements & Billing  Perform Financial Transfers ERCOT uses the Meter Data Acquisition System (MDAS) to collect generation and consumption energy data for settlement purposes. This data is validated, edited, estimated, adjusted, netted, loss corrected, split, aggregated and profiled as necessary to provide the Settlement inputs. ERCOT also computes Transmission and Distribution Loss Factors and calculates and allocates Unaccounted For Energy (UFE). Aggregated meter data is used in settlement calculations.

22 Manage Commercial Operations Process Identification Level (2):  Meter and Aggregate Data  Perform Settlements & Billing  Perform Financial Transfers Settlement resolves financial obligations between a Market Participant and ERCOT, including administrative and miscellaneous charges. Settlement also provides Transmission Billing Determinants to Transmission and Distribution Service Providers. There are separate Settlement and billing processes for Congestion Revenue Rights, the Day-Ahead Market (DAM), and the Real-Time Market, which encompasses Day-Ahead Reliability Unit Commitment, the Adjustment Period, and Real-Time Operations.

23 Manage Commercial Operations Process Identification Level (2):  Meter and Aggregate Data  Perform Settlements & Billing  Perform Financial Transfers ERCOT collects and disperses funds based on the invoices generated for Congestion Revenue Rights, the Day-Ahead Market (DAM), and the Real-Time Market. The payment schedule varies, depending on the settlement type.

Provide Market Services

25 Provide Market Services ERCOT provides all services required to enable participation in the markets and the other mandated programs it administers. These services include registration activities, provision of information necessary to meet market and regulatory requirements, and dispute management. Process Identification Level (2):  Register and Qualify Market Participants  Manage Market Information System  Manage Disputes  Facilitate Customer Choice Program  Administer Renewable Energy Credit Program  Manage Protocol Revisions

26 Provide Market Services Process Identification Level (2):  Register and Qualify Market Participants  Manage Market Information System  Manage Disputes  Facilitate Customer Choice Program  Administer Renewable Energy Credit Program  Manage Protocol Revisions ERCOT registers and qualifies Market Participants prior to and during participation in the ERCOT markets. This activity includes registration as a type of market participant / account holder, qualifying all entities operational and commercial capabilities, performing initial and ongoing qualification testing of resources, and contracting for non-market services.

27 Provide Market Services Process Identification Level (2):  Register and Qualify Market Participants  Manage Market Information System  Manage Disputes  Facilitate Customer Choice Program  Administer Renewable Energy Credit Program  Manage Protocol Revisions ERCOT has the responsibility to provide to Market Participants all data required by governing documents such as the Nodal Protocols and Nodal Market and Operating Guides.

28 Provide Market Services Process Identification Level (2):  Register and Qualify Market Participants  Manage Market Information System  Manage Disputes  Facilitate Customer Choice Program  Administer Renewable Energy Credit Program  Manage Protocol Revisions ERCOT provides a process to resolve with Market Participants any issues with the various market settlement statements produced as a result of Commercial Operations. If the result an initial resolution is not reached, a binding Alternative Resolution Dispute Resolution Procedure may be implemented.

29 Provide Market Services Process Identification Level (2):  Register and Qualify Market Participants  Manage Market Information System  Manage Disputes  Facilitate Customer Choice Program  Administer Renewable Energy Credit Program  Manage Protocol Revisions ERCOT, by legislative mandate, facilitates the Texas Customer Choice Program (retail competition). Responsibilities include customer registration, communications and systems for the tracking of choice of competitive retail electric provider.

30 Provide Market Services Process Identification Level (2):  Register and Qualify Market Participants  Manage Market Information System  Manage Disputes  Facilitate Customer Choice Program  Administer Renewable Energy Credit Program  Manage Protocol Revisions ERCOT, by legislative mandate, is charged with administering the Texas Renewable Energy Credit Program. Responsibilities include the creation of REC accounts and registration of participants, the awarding and tracking of credits and offsets and the submission of required reports to the appropriate regulatory agencies.

31 Provide Market Services Process Identification Level (2):  Register and Qualify Market Participants  Manage Market Information System  Manage Disputes  Facilitate Customer Choice Program  Administer Renewable Energy Credit Program  Manage Protocol Revisions The protocols specify the procedures and processes used by ERCOT and market participants for the orderly functioning of the ERCOT system and nodal market. ERCOT is responsible for administering the stakeholder process for the additions, edits, deletions, revisions, or clarifications to these Protocols.

Support Operational & Market Monitoring

33 Support Operational & Market Monitoring ERCOT monitors, collects and reports the operational and market performance data required for the appropriate regulatory agencies to adequately perform their oversight responsibilities. Process Identification Level (2):  Monitor and Report Operational Performance  Provide Market Monitoring Data

34 Support Operational & Market Monitoring Process Identification Level (2):  Monitor and Report Operational Performance  Provide Market Monitoring Data ERCOT monitors and collects data regarding the operational performance of itself and Market Participants and provides reports and data as required to the Market Participants, Public Utilities Commission, the Independent Market Monitor, and/or the Texas Regional Entity as required.

35 Support Operational & Market Monitoring Process Identification Level (2):  Monitor and Report Operational Performance  Provide Market Monitoring Data ERCOT monitors and collects data regarding the Market behavior of Market Participants and provides reports and data as required to the Public Utilities Commission, and the Independent Market Monitor as required.

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