1. ERS Procurement Methodology
Mark Patterson, ERCOT
Wholesale Market Subcommittee
October 9, 2013

2. ERS Time Period Capacity Demand CurveMW
$/MW/Hr
Offer Cap
Expenditure Limit
Capacity
Demand
Curve
Inflection
Point
ERS Time Period Capacity Demand Curve
October 9, 2013
ERCOT Public

3. Benefits of Proposed Procurement Methodology
Primary goal of the methodology is to provide transparency into how offers are procured or rejected
Procurement Parameters will be published as part of the RFP for a Contract Term
Capacity demand curve creates liquidity in the ERS Market and encourages offers based perceived cost of providing the service
Meets the recommendation of the PUCT to move to a clearing price as opposed to pay-as-offered
October 9, 2013
ERCOT Public

4. Definitions
Time Period Risk Weighting Factor – A value from 0-10 that represents the relative risk of entering into an EEA during each ERS time period. These factors are assigned by ERCOT ahead of each ERS procurement using the most current information available (i.e.; load forecast, available operating reserves, outage information, etc.)
Time Period Expenditure Limit – An allocation of the $50 Million ERS budget that sets the maximum dollars that can be spent on all ERS products in each ERS time period
Capacity Inflection Point – The point on the capacity demand curve at which capacity = spend limit / (offer cap × hours)
Capacity less than inflection will result in procurement < spend limit
Capacity greater than inflection will result in clearing price < offer cap
October 9, 2013
ERCOT Public

5. Expenditure Limit and Capacity Inflection Point Calculations
Risk Weighting Factor (a)
Time Period Hours (b)
Offer Cap (c)
(a)*(b)*(c)
Expenditure Limit Allocation Factor
ERS Time Period Expenditure Limit
Capacity Inflection Point
FebMay
bh1 1
430 $
34,400
3.05%
$ ,527,423
44.4
bh2
258
20,640
1.83%
$ ,454
bh3
344
27,520
2.44%
$ ,221,938
nbh
1,871
149,680
13.29%
$ ,646,064
JunSep
420
33,600
2.98%
$ ,491,901 10
252
201,600
17.90%
$ ,951,407
444.0
336
268,800
23.87%
$ ,935,209
1,920
153,600
13.64%
$ ,820,119
OctJan
20,160
1.79%
$ ,141
26,880
2.39%
$ ,193,521
1,945
155,600
13.82%
$ ,908,923
October 9, 2013
ERCOT Public

6. Estimated Clearing Prices per Capacity Procured
Risk Weighting Factor (a)
Max Clearing Price Allowed to Procure a MW Level
100 MW
250 MW
500 MW
750 MW
1000 MW
FebMay
bh1 1 $ $ $ $ $
bh2
bh3
nbh
JunSep 10 $ $ $
OctJan
October 9, 2013
ERCOT Public

7. Assigning Risk Factors
Need to Redefine ERS Standard Contract Terms and Time Periods
% hrs in
# Hrs
% Tot Hrs
SCT
Feb-May13
BH1
425
0.05
0.15
BH2
255
0.03
0.09
BH3
340
0.04
0.12
NBH
1859
0.21
0.65
Jun-Sep13
420
0.14
252
336
0.11
1920
0.22
0.66
Oct13-Jan14
1945
Issue:
Typical winter peak hours ~ 5-8 a.m. in late Dec through Feb
ERCOT’s approach is to assign conservative risk weighting factors for the winter peak until SCT and TP issues are resolved.
October 9, 2013
ERCOT Public

8. ERS Time Period Offer Cap
The ERS time period offer cap is a constraint on the demand curve to identify unreasonable offers. The offer cap will apply to all ERS types in each time period during the ERS budget year and will be established at $80/MW/Hr. This cap is consistent with the prices historically paid to loads participating under the TDSP Energy Efficiency Rule pertaining to the Standard Offer Load Management Programs. Any offers above the offer cap will be rejected and not considered for procurement.
Based on the historical levels of participation, the proposed methodology makes it highly unlikely that ERS will clear at the offer cap in any time period and most likely will clear significantly below the cap
October 9, 2013
ERCOT Public

9. ERS Capacity provided through ERS Self Provision
Other
Clearing Price
The highest offer accepted for a time-period from will set the clearing price for all ERS Resources cleared in that time-period.
Each ERS type as different characteristics
ERS-10 has shorter ramp but deployed in EEA L2
ERS-30 deployed in EEA L1and potentially more often
ERCOT believes 10-Minute and 30-Minute ERS are deployed for the same purposes
Help recover operating reserves
Reduce or prevent firm load shed
ERS Capacity provided through ERS Self Provision
For any ERS self-provision, ERCOT will reduce the Time Period expenditure limit for any offers to self-provide part or all of a QSE’s ERS Obligation by the clearing price for ERS.
October 9, 2013
ERCOT Public