RTDF Overview of Data Analysis & Status of “Consesus Items” John Dumas Director Wholesale Market Operations ERCOT October 10, 2011

ERCOT Methodology To Calculate Change in PNM for Different Constant Floors Consider only the NSPIN deployment intervals in which load exceeds the load at the time of the deployment For each level of price floor, assume that floor price will set the new System Lambda during the deployment Assume FIP price = $4/MMBtu. i.e. Peaker Operating Cost = 10*FIP = $40/MWh Additional PNM is calculated for the SCED intervals where the difference between the new System Lambda and original System Lambda is positive. Reduce PNM for SCED intervals where NSPIN not deployed and Original System Lambda >=$2999/MWHr. This is based on the assumption that online (non-QSGR and QSGR) NSPIN capacity always available to SCED. October 10, 2011

ERCOT Methodology: Change in PNM for Different Constant Floors (12/1/2010 – 8/29/2011) All NSPIN deployments for capacity considered. Total NSPIN deployment hours = 257.5 hours Two scenarios considered All NSPIN deployment for capacity hours where the load exceeds load at time of deployment = 194.9 hours All NSPIN deployment for capacity EXCLUDING February 2nd event and 1st week of August = 120 hours Floor level $/MWh Additional “PNM” when NSPIN deployed Scenario 3 a) - ALL Additional “PNM” when Non-Spin deployed Scenario 3 b) – Exclude Feb 2nd & 1st week of August Reduction in PNM when Non-Spin NOT deployed 72 $2,803 $2,129 $-8,656 180 $17,149 $12,480 $-8,337 250 $27,195 $19,513 $-8,130 650 $91,852 $62,310 $-6,948 1,000 $151,299 $101,645 $-5,913 2,000 $322,323 $214,511 $-2,958 October 10, 2011

ERCOT Methodology: Change in PNM for Different Constant Floors (12/1/2010 – 8/29/2011) Theoretical additional PNM contribution calculated by taking the difference between the floor and the maximum of actual system lambda or $40. This assumes that the floor sets prices for the 194.9 hours in which Non-Spin was deployed for capacity and load was high. October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology To Calculate Change in PNM for Linearly Varying Floors Consider only the deployment intervals in which load exceeds the load at the time of the deployment. However, NSPIN capacity will not set the price for all these deployment intervals. Consider the floor to be sloped for the NSPIN capacity portion of the Energy Offer Curve: Online (non-QSGR & QSGR) : $250/MWhr to $1000/MWHr Offline: $1000/MWHr to $3000/MWHr NSPIN portion of the Energy offer curve will set price when the difference between the UPWARD room available to SCED discounting LSL injection from QSGR and offline Resources is LESS than NSPIN deployed. Based on the MW amount of NSPIN required to meet load, calculate the New System Lambda using the sloped floor. Additional PNM is calculated for the SCED intervals where the difference between the new System Lambda and original System Lambda is positive. October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology To Calculate Change in PNM for Linearly Varying Floors 2 result presented based on different assumptions SCENARIO 1: Snapshot of deployed MW at the time of deployment & LSL 30-min into the deployment  Keep constant throughout the deployment period SCENARIO 2: Data posted on RTDF meeting page BOTH uses HDL_BELOW_SWCAP rather than HDL October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology To Calculate Change in PNM for Linearly Varying Floors Clarification on Data posted to RDTF meeting page used in Scenario 2 Resource categorization by Offline, Online, and Quick Start type is done based on telemetry at the initial time of deployment. Any resources not in the Online or Quick Start categories determined at the time of Non-Spin Deployment are considered as Offline resources. Effects of telemetry error, shifting of NSRS responsibility to other resources or different Combined Cycle modes has not been taken into account. October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology ASSUMPTION SET 1 results All NSPIN deployments for capacity considered. Total NSPIN deployment hours = 257.5 hours Two scenarios considered All NSPIN deployment for capacity hours where the NSPIN capacity sets price = 84.5 hours All NSPIN deployment for capacity EXCLUDING February 2nd event and 1st week of August where the NSPIN capacity sets price = 48.3 hours Additional “PNM” when NSPIN deployed Scenario 3 a) - ALL Additional “PNM” when Non-Spin deployed Scenario 3 b) – Exclude Feb 2nd & 1st week of August $57,937 $37,521 October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology ASSUMPTION SET 1 results 84.5 hours 27.02 hours 16.25 hours October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology ASSUMPTION SET 1 results 48.3 hours 9.17 hours 8.87 hours October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology ASSUMPTION SET 2 results All NSPIN deployments for capacity considered. Total NSPIN deployment hours = 257.5 hours Two scenarios considered All NSPIN deployment for capacity hours where the NSPIN capacity sets price = 67.9 hours All NSPIN deployment for capacity EXCLUDING February 2nd event and 1st week of August where the NSPIN capacity sets price = 39.1 hours Additional “PNM” when NSPIN deployed Scenario 3 a) - ALL Additional “PNM” when Non-Spin deployed Scenario 3 b) – Exclude Feb 2nd & 1st week of August $31,671 $23,104 October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology ASSUMPTION SET 2 results 67.9 hours 19.4 hours 5.5 hours October 10, 2011

ERCOT’s Interpretation of Luminant’s Methodology ASSUMPTION SET 2 results 39.1 hours 7.3 hours 3.3 hours October 10, 2011

Estimate Effect Of Different Constant Floors On System Lambda for Non-Spin Deployments (12/1/2010 – 8/29/2011) Corresponding to the PNM additional revenue based on ERCOT methodology for the different floors, calculate the impact on System Lambda for 7 X 24 and 5 X 16 time blocks. All NSPIN deployments for capacity considered – NO EXCLUSIONS. Calculate the time-weighted ( by SCED interval duration ) average of system lambda from 12/1/2010 to 8/29/2011. This is the original price (system lambda) for the 7 X 24. Calculate the change in system lambda for each SCED interval during non-spin deployment for each floor . Note : Similar to the PNM change we are only looking at SCED intervals where the GTBD >= Initial GTBD at time of Non-Spin deployment and applicable floor would have set price. October 10, 2011

Non-Spin Deployments (12/1/2010 – 8/29/2011) Estimate Effect Of Different Constant Floors On System Lambda Original System Lambda ($/MWHr) and corresponding increase in System Lambda for different floors Increase to System Lambda for Various Floors Original System Lambda October 10, 2011

Non-Spin Deployments (12/1/2010 – 8/29/2011) Estimate Effect Of Different Constant Floors On Heat Rate (5X16) Original Heat Rate (MMBTU/MWHr) and corresponding increase in Heat Rate for different floors (5X16). Assume FIP=4 Original Heat Rate Increase to Heat Rate for Various Floors October 10, 2011

RTDF Status on “Consensus Items” Based on RTDF understanding of “consensus items”, developed draft NPRRs: Offers should be at system wide offer cap (SWCAP) for Responsive Reserve & Regulation Up service portion of the Energy Offer Curve. Draft NPRR: “EOC Requirements for Generation Resources Assigned Regulation Up and Responsive Reserve Services”. No ERCOT system change Implemented via QSE submission of Energy Offer Curve. October 10, 2011

RTDF Status on “Consensus Items” Deploy RUC units for capacity insufficiency at the offer cap; RUC for system capacity should be offered liked mothballed RMR. Draft NPRR: “Requirement That Energy From Generation Resources Committed by the DRUC or HRUC Processes be Dispatched by SCED at the SWCAP”.  Requires ERCOT system change. This NPRR conflicts with NPRR 416 “Removal of the RUC Clawback Charge for Resources Other than RMR Units” October 10, 2011

RTDF Status on “Consensus Items” Online non-spin units and quick start units should always be offered in SCED and deployed by SCED. Draft NPRR: “Standing Non-Spin AS Deployment in the Operating Hour for Generation Resources Providing Online Non-Spin AS in the Operating Hour”. No ERCOT system change Implemented via QSE telemetry. ERCOT should deploy non-spin in increments smaller than a thousand MW. No draft NPRR provided. ERCOT already complies.  Plan to review current procedure to determine improvements (if any). October 10, 2011

RTDF Status on “Consensus Items” Prices should be at system wide offer cap when ERCOT deploys load resources or EILS – re-price Energy after Load deployments. No draft NPRR provided. ERCOT provided “Dynamic Price Adder” concept. Requires ERCOT system change. Some market participants have proposed including a “Make Whole” Payment provision to this concept. Morgan Stanley has proposed extending the “Dynamic Price Adder” concept with “Make Whole” payment for ALL Reliability deployments. October 10, 2011