CRR Update to CMWG ERCOT CRR Team Congestion Management Working Group Aug 7, 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

Long-Term Auction Sequence Summary Sequence 1 Summary Reminder: 70% model scaling due to prior scaling in Year 2/Year1 auction for July-December 2013 Transaction bid limits 2,000/CRRAH (up to 6,000/Counterparty) Credit Lock = $489 million Number of participating CRRAH = 148 Number of bid/offer transactions = 96k Number of cleared Transactions = 18k Net Revenue of Auction = $ 32 million Delayed start of auction due to ERCOT’s removal of an erroneous contingency definition (DBNDELM8) in the market systems that could have commercially significant impacts on auction results. Auction published 1 week early CMWG August 2013

Long-Term Auction Sequence Summary Sequence 2 Summary Reminder: 45% model scaling for Jan1-June 2014 Transaction bid limits 2,000/CRRAH (up to 6,000/Counterparty) Credit Lock = $500 million Number of participating CRRAH = 142 Number of bid/offer transactions = 96k Number of cleared Transactions = 21k Net Revenue of Auction = $56 million Auction published 1 week early NPRR530/LCRA Load Zone changes and re-posting model CMWG August 2013

Long-Term Auction Sequence Summary Sequence 3 Summary Reminder: 30% model scaling for July-Dec 2014 Transaction bid limits 2,000/CRRAH (up to 6,000/Counterparty) Credit Lock = $489 million Number of participating CRRAH = 144 Number of bid/offer transactions = 101k Number of cleared Transactions = 15k Net Revenue of Auction = $43 million Auction published 1 week early NPRR530/LCRA Load Zone changes and re-posting model CMWG August 2013

Long-Term Auction Sequence Summary Sequence 4 Summary Reminder: 15% model scaling for Jan1-June 2015 Inclusive of PCRRs nominations for first half of 2015 Transaction bid limits 2,000/CRRAH (up to 6,000/Counterparty) Credit Lock = $372 million Number of participating CRRAH = 128 Number of bid/offer transactions = 83k Number of cleared Transactions = 12k Net Revenue of Auction = $33 million Auction published 1 week early CMWG August 2013

Current Inventory As discussed at June CMWG, ERCOT will try to provide graphical view of inventory stacks. CMWG August 2013

Current Inventory As discussed at June CMWG, ERCOT will try to provide graphical view of inventory stacks. CMWG August 2013

Long-Term Auction Sequence Summary Lessons learned and FAQ Regarding scaling of ownership, should ERCOT provide inventory to include scaling values (PCRR vs regular CRR inventory)? Protocols for new report to improve NPRR463 should be submitted by interested market participants Why was I not awarded for a CRR bid that was in the money Most likely due to budget constraint CMWG August 2013

Long-Term Auction Sequence Summary Lessons learned and FAQ (continued) Since ERCOT published auctions early, will ERCOT change timeline? Two reasons it is too early to revisit this timeline change: –Need to allow inventory to build-up (stacking effect of going from 3->5 auctions) and monitoring performance –Focus in implementation and performance of 300,000 bid limit, and NPRR484 Can ERCOT consider later NOMCRs and outage that come in after the model snapshot? Discuss more later in presentation Credit Lock issues (missed lock date, transposed values) Consider protocols/system changes to make credit lock and bid dates the same (so CRRAH has better visibility into Counterparty lock and can change if missed or an error) Discuss more later in presentation CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

CRR Model Build- Sample of Changes in Energization Dates CMWG August Prior to 2012 Annual Auctions there was consensus at CMWG to exclude Planning changes due to uncertainty and movement of energization dates. -August 2013: question of whether to reconsider use of Planning Model Changes in multi-month CRR Auctions

Planning Model Changes Trade-off ERCOT is open to transitioning to planning model changes, but recognizes there are benefits and risks. –Reminder- current method is current Network Operations Model plus future NOMCRs & Outages up to 12-months in advance Pros for including Planning Model Changes –Best estimate of what the model will look like more than 6 months in the future –Less constrained system since transmission improvements in place Cons when including Planning Model Changes –When projects not on-schedule, CRR oversells constraint and cascades into subsequent auctions and DAM (can also happen on approved NOMCRs) CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

Most Outages inside of 45-days for CRR Model snapshot Outages trend presented at May Board 2013 is peak of West Texas / CREZ construction and outages Outages are not all received in time for CRR model build CMWG August 2013

Network Model Posting Change Consideration ERCOT is open to reconsideration of CRR model posting timelines If market would like to reduce window of time between snapshot of the model/outages and the monthly auction, consider the following proposal to take the model snapshot later: –Pros More accurate model information by taking snapshot later in business process Studies show that up to 10% more outages would be captured (compared to current) –Cons CRRAH lose time for considering CRR monthly model for analysis prior to bids/offers. May only mean 2-3 additional business days for the monthly auctions CURRENT 7.5.3ERCOT Responsibilities (1)ERCOT shall: (i) Post CRR Network Model of the effective month of the auction on the MIS Secure Area, before each CRR Auction: (i) For the CRR Monthly Auction, the model shall be posted no later than 10 Business Days before the auction. POTENTIAL ERCOT Responsibilities (1)ERCOT shall: (i) Post CRR Network Model of the effective month of the auction on the MIS Secure Area, before each CRR Auction: (i) For the CRR Monthly Auction or for any CRR Long-Term Auction Sequence, the models shall be posted no later than 1 Business Day before the opening of the CRR credit submission window for that auction. CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

Consideration of changes in SPS and RAPs in multi-month auctions Treatment of RAPs in multi-month auctions –RAPs undergo an annual review and have “expiration dates” tied to them –Typically review is April/May for ERCOT and TSP analysis –Historically ERCOT has excluded RAPs in multi-month auctions for months auctioned after these RAPs “expire” –Issue: Market suggested including them for all future months even after “expiration.” In 2013 five RAPs were expired and two were added that would impact the CRR auction. So if ERCOT had used these RAPs in previous auctions, potentially oversold situations could arise. –Action Plan: ERCOT is open to extending RAPs indefinitely in the multi- month auctions with some risk (arguably not significant) in overselling the auction. Would like feedback from CMWG on this option. CMWG August 2013

Consideration of changes in SPS and RAPs in multi-month auctions Treatment of SPSs in multi-month auctions –SPS undergo a review process every 5 years and do not have expiration dates –SPS can be tied to a planned project in TPIT that can potentially serve as an Exit Plan. –Planned projects are typically identified as possibly providing loading relief, but not intended as full exit strategy for SPS. –Currently: SPS are included in all CRR auctions and removed only when SPS is deactivated. –Action Plan: ERCOT currently plans to continue this practice but would like feedback from CMWG. CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

Credit issue to consider Removing ERCOT from Credit Management for Counterparty –ERCOT Lessons Learned includes ongoing issues and appeals of missed credit locks by Counterparty –Protocols have flexibility in ERCOT periodically intervening when Credit Lock issues arise (eg, omission of locking credit) –ERCOT is considering the means to tighten the processes and minimize ex-post adjustments. Reminder: CRR system does not send credit limits to CMM for the auction until the auction lock date time (5:00pm CPT), so there are about 10 days from the Market Notice Date until the credit lock date and time to set auction credit limits in the CRR interface by the Counterparty. CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

Information related to CRR Calendar and NPRR551 NPRR551 adds a 6 th Year to the planning model and delays its posting from Oct 15 th to Nov 15 th Note for CRR Calendar: Protocols A calendar of key milestone dates, specifically the weeks of bid and credit windows for each CRR Auction in the CRR Long-Term Auction Sequence, must be approved in final form by the Technical Advisory Committee (TAC) no later than the earliest of May 1 (for a CRR Long-Term Auction Sequence to be held in the second half of a year), November 1 (for one being held in the first half of the following year), or 120 days prior to the planned closure of the bid window for the first CRR Auction in the CRR Long-Term Auction Sequence. CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

Oracle 11G ERCOT migration -ERCOT FAT/iTest/Prod CRR Roadmap Q3Q4Q1 Increase above 200,000 bids: Early Lab test complete, ERCOT support of more scenarios Stress testing 300,000 bid limit on Linux for Oct go-live (v13.1) CRR Linux Upgrade stabilization/Decommission NPRR463 – 6 month/Rolling Auction Parking Deck: NPRR455 Shift Factors NPRR463 Potential improvements CRR API functionality PhaseShiftTxfrmr Optimization Improved Contingency definitions Q1 SCR769 CRR Read-Only Report Access NPRR484 Phase 1a- CRR/Credit (Oct) Oracle 11G Vendor testing -Nexant testing (Summer) NPRR484 Phase 1b- CRR/Credit follow-on NPRR407 Phase 2- CRR Credit reporting Q2 Q3Q4 CMWG August 2013

Outline of Discussion CRR Auction Discussion: Summary of Completed Long-Term Auction Sequence Consideration of Planning Model changes in CRR Auction Consideration of CRR Network Model posting timing Consideration of changes in SPS and RAPs in multi-month auctions Consideration of Credit Lock issues and timing Consideration of Auction Calendar (no updates planned) –Related to posting of 6 year Model (NPRR 551) CRR Roadmap update NPRR484/554 Project update CMWG August 2013

NPRR484/554 Project Update The project for NPRR484/554 is in the planning stages and portions are planned for implementation in October 2013 Reminder of project phases: –Phase 1 includes the CRR and Credit changes to implement path-specific adders Where each CRR (bid or owned) carries a path credit adder based on historical DAM and CRR clearing prices –Phase 2 deferred invoicing in 2015 ERCOT plans to deliver Phase 1 in two deliveries across 2013 and 2014 –Phase 1a includes path-specific adders in CRR and Credit calculations –Phase 1b: FCE Detail Reports FCEOBL Detail Report (Protocol Sections ) FCEOPT Detail Report (Protocol Sections ) FCEFGR Detail Report (Protocol Sections , No FGRs active) Portion of PWA functionality; –Specific historic DAM settled prices for source – sink pairings can be excluded from the calculation if deemed no longer relevant following TAC review and ERCOT Board approval Any functionality deferred from Phase 1A (excluding Phase 2 functionality) due to system / timeline limitations CMWG August 2013

NPRR484/554 Project Update First Market Call was July 31, 2013 – Market participant training for NPRR484/544 will be available on the following dates –ERCOT is requesting that all Market Participants attend one of the sessions CMWG August 2013 Friday, September 13, am – 1pm Wednesday, September 25, 2013 (CWG meeting in AM) 1pm – 4pm Tuesday, October 8, am – 1pm

QUESTIONS? CMWG August 2013