Loads Acting as a Resource Relationships with QSEs and LSEs Keith E. Emery Tenaska Power Services Co. Director, ERCOT

Revenue Example for LaaR Providing RRS (A) Capacity Revenue (ERCOT buys RRS for 24 hours) 10 MW x $6.25 per MW/hr x 24 hours = $1,500 (B) Energy Revenue (ERCOT Deploys RRS for 4 hours) 10 MW x $50.00 per MW/hr x 4 hours = $2,000 (C) Resource-Specific Premium (ERCOT OOMs LaaR) 10 MW x $45.00 per MW/hr x 4 hours = $1,800 Revenue available for one Operating Day: $1,500 + $2,000 + $1,800 = $5,300 Equivalent revenue per MWh: $5,300 ÷ 10 MW/hr ÷ 24 hrs = $22.08/MWh

The Old World – Load participation under interruptible tariffs  Loads had one “choice” (host utility)  One size fits all - no customized terms  Limited ability to switch between tariffs  Compensation not matched to the benefit being provided by the load:  Discounted energy rates, not payment for services  No additional economic incentive to participate during system crisis

The New World – Load participation under the ERCOT Protocols  More Level Playing Field for Generators and Loads  ERCOT’s new “Resource” definition: Includes both Generation Resources AND Loads acting as Resources (LaaR)  Resources are represented by QSEs  Multiple service provider choices  LaaR can utilize the QSE representing their LSE  LaaR can utilize any QSE offering LaaR services

The New World – Load participation under the ERCOT Protocols  Customized terms available  LaaR can negotiate customized terms directly with a QSE or LSE  LaaR may control its participation level  Selective participation in the market  LaaR may sell AS to Third Parties (Bilateral)  LaaR may sell AS to ERCOT (Day-Ahead)

The New World – Load participation under the ERCOT Protocols  Compensation can be commensurate with system benefit provided  AS prices move with supply and demand (fluctuate with system needs) LaaR may participate in AS market price movements (depending on contract terms) AS capacity price Resource-specific premium (OOM) Payment for deployed energy (Unused energy)

The New Service Providers (QSEs representing LaaR)  Services Provided to LaaR  Communications (7x24) ­ QSE provides 7x24 point of contact for LaaR and ERCOT (Voice & Data)  Telemetry (varies depending on services provided to ERCOT) ­ Real time telemetry is required ­ Requires hardware at customer site

The New Service Providers (QSEs representing LaaR)  Services Provided to LaaR  Data circuit / path from LaaR to QSE ­ Real time data path from LaaR to QSE is required  Control (automatic or manual) ­ Implement ERCOT directives to reduce load with 10 or 30 minute notice ­ Implement OOM directives

The New Service Providers (QSEs representing LaaR)  Services Provided to LaaR  Resource Plan ­ QSE constructs and maintains accurate Resource Plan with ERCOT ­ LaaR maintains accurate projection of load and availability -Can affect LaaR qualification and payment

The New Service Providers (QSEs representing LaaR)  Services Provided to LaaR  Settlement ­ Between ERCOT and QSE • QSE collects payment from ERCOT • QSE validates payment from ERCOT • QSE disputes payment errors with ERCOT ­ Between LaaR and QSE or LSE • LaaR is paid under terms of its contract with the service provider

Risks of LaaR Participation in ERCOT  Limited market size Responsive Reserve Market -Currently 805 MW from LaaR (35%) -Proposed increase to 1150 MW (50%)  Non-Spinning Reserve Service – infrequent procurement  Replacement Reserve Service – infrequent procurement  Regulation Service – future capability

Risks of LaaR Participation in ERCOT  Effect on LaaR from AS deployments  Deployment occurrence varies between ancillary services  QSE representing LaaR is obligated to perform if providing AS service to ERCOT  Changes in ERCOT market rules  Market rules continue to evolve  Technical requirements could change

Compensation for Balancing Up Load (BUL) A BUL is a portfolio deployment of all the loads that make up the BUL. An individual load’s response should be defined between the Load, LSE, and the QSE.  Energy Payment for load reduction  An energy payment based on the QSE’s overall reduction in load as compared the the load level scheduled during the deployment interval  Capacity Payment  A capacity payment based on the Market Clearing Price of Capacity for Non-Spinning Reserve Service (MCPCNS). The Capacity payment will be paid only if the BUL response (reduction of load) is 100 % of the instructed value