1 Energy Storage Settlements Consistent with PUCT Project & NPRR461 ERCOT Commercial Market Operations May 8, 2012 – COPS Meeting May 9, 2012 – WMS Meeting

2 Agenda Guiding Principles –References to the preamble for Project –References to the rule language Implementation Concepts –Metering Configurations –Data Aggregation –Settlements Spreadsheet Examples –Separate file attached to meeting materials Operational Concepts – “Under Construction” –Concepts are not addressed by the rule language or the NPRR

3 Guiding Principle 1 An energy storage resource has the option of receiving wholesale storage load treatment. –Excerpt from Commission Response to question 1 in the preamble “…. the storage facility could choose not to separately meter the storage facility and treat all energy purchased from the ERCOT system as retail sales.”

4 Guiding Principle 2 ESR Generation must be “returned to the grid” for the energy storage resource “charging energy” to be considered wholesale storage load. – Excerpt from § (m) (2) “Wholesale storage occurs when electricity is used to charge a storage facility; the storage facility is separately metered from all other facilities including auxiliary facilities; and energy from the electricity is stored in the storage facility and subsequently re- generated and sold at wholesale as energy or ancillary services.”

5 Guiding Principle 3 ESR Storage load must be separately metered to be considered wholesale storage load –Excerpt from § (m) (2) “Wholesale storage occurs when electricity is used to charge a storage facility; the storage facility is separately metered from all other facilities including auxiliary facilities; and energy from the electricity is stored in the storage facility and subsequently re- generated and sold at wholesale as energy or ancillary services.”

6 Guiding Principle 4 Non storage generation may serve wholesale storage load –Excerpt from Commission Response to question 1 in the preamble “PURA § provides that a storage facility is entitled to be treated like other generation facilities in the sale of energy and ancillary services at wholesale. A key issue for the commission to resolve is how to treat a storage facility when it is acquiring energy. As explained below, the commission determines that the electricity withdrawn to charge a storage facility is a wholesale transaction. There are a number of possible scenarios where this issue arises, including the following: (1) only a storage facility and its auxiliary facilities (station power); (2) a storage facility, auxiliary facilities, and other consuming facilities, all under common ownership; (3) a storage facility, auxiliary facilities, other consuming facilities, and a non-storage generation facility, all under common ownership; and (4) a storage facility, auxiliary facilities, other consuming facilities, and a non- storage generation facility, with different ownership.” … … “In the third scenario, where there is a storage facility, auxiliary facilities, other consuming facilities, and a non-storage generation facility, all under common ownership, the energy produced by the non-storage generation facility to charge the storage facility is self-use energy and should therefore not be treated as a retail sale, like energy generated by a non-storage generation facility and used for its auxiliary facilities.”

7 Guiding Principle 5 Wholesale storage load is exempt from charges and credits based on Load Ratio Share or per MWH basis –Excerpt from § (m) (2) “… Wholesale storage is not subject to retail tariffs, rates, and charges or fees assessed in conjunction with the retail purchase of electricity. Wholesale storage shall not be subject to ERCOT charges and credits associated with ancillary service obligations, or other load ratio share or per megawatt-hour based charges and allocations....”

8 Guiding Principle 6 Wholesale storage load will not be included in the ERCOT 4CP calculations. –Excerpt from §25.192,Transmission Service Rates (b) (1) “… A TSP’s transmission rate shall be calculated as its commission- approved transmission cost of service divided by the average of ERCOT coincident peak demand for the months of June, July, August and September (4CP), excluding the portion of coincident peak demand attributable to wholesale storage load….”

9 Guiding Principle 7 Settlement for a storage facility that has more than one delivery point shall be based on the net impact of those delivery points on ERCOT system. –Excerpt from § (m) (1) “For a storage facility that has more than one delivery point, ERCOT shall net the impact of those delivery points on the ERCOT system for settlement purposes”

10 Guiding Principle 8 Wholesale storage load pricing shall be based on the LMP at the electrical bus –Excerpt from § (m) (2) “… Wholesale storage is wholesale load and ERCOT shall settle it accordingly, except that ERCOT shall settle wholesale storage using the nodal energy price at the electrical bus that connects the storage facility to the transmission system, or if the storage facility is connected at distribution voltage, the nodal price of the nearest electrical bus that connects to the transmission system. …”

11 Implementation Concepts Metering configurations –will be based on ERCOT system design and capabilities for accounting for the wholesale storage load and ESR generation be documented in the Settlement Metering Operating Guide –will NOT be allowed if they do not conform to a design that allows ERCOT to settle the site

12 Implementation Concepts Data Aggregation processes –wholesale storage load will –be included to determine total UFE will NOT –be assigned Unaccounted for Energy (UFE) –be included in Adjusted Metered Load (AML) –be included in ERCOT 4CP calculations –be included in TRE fee calculations –have transmission and/or distribution losses added

13 Implementation Concepts Settlement processes –wholesale storage load will –be settled by QSE and Settlement Point –be settled through Real-Time Energy Imbalance at a Resource Node –be settled using an energy-weighted price at the bus (ESR load is LMP weighted average by telemeter ESR load) will NOT –be included in any Load-shared charges and credits –be settled using a Load Zone Settlement Point Price

14 Energy Storage Operations ERCOT Market Operations May 8, 2012 – COPS Meeting May 9, 2012 – WMS Meeting

15 Operational Concepts for Implementation not addressed by the rule language or the NPRR

16 Operational Concepts for Implementation not addressed by the rule language or the NPRR Telemetry –A non-storage generation facility within the same storage facility site shall follow telemeter requirement and operate in the same manner as before ESR installation, COP and telemeter HSL for non-ESR shall be based on the net capacity of the non-storage unit itself, –the gross capacity offset by auxiliary load but exclude impact from the charging/withdrawal energy of ESR –ESR generator requirement –ESR Wholesale Storage Load requirements

17 Operational Concepts for Implementation not addressed by the rule language or the NPRR Registration – Registration will consist of registering a Generation Resource (GR) and a Load Resource (LR). Together the two Resources represent the energy storage. Modeling –ESR is modeled as separate generation and load in the model with individual meters to measure the generation and load of the storage facility. Resource Node –A new resource node will be created at the energy storage facility point of interconnection.

18 Operational Concepts for Implementation not addressed by the rule language or the NPRR Day-Ahead and/or Real-time energy market –ESR facility can participate in Day-Ahead and/or Real-time energy market. –The Ancillary service participation requires the same qualification as other non-ESR generation resources. Offers and Submittals –Market Participant must maintain and coordinate the offers and submittals taking into consideration the state of charge and the AS and energy responsibilities. Market Participant has the obligation to make sure that the energy and AS it has “promised” to ERCOT is indeed deliverable. ERCOT may determine that there is a “failure to provide” if the coordination is not properly maintained.

19 Questions and Discussion