1. A Partial Interim Report To WMS Guidance on Implementing Protocol Implementation Plan (PIP) 102 Reactive Power Task Force

2. Scope of This Report Implementation of PIP 102 in ERCOT Protocol Section 8.8.4, Capacity Payments for Voltage Support Provided to ERCOT –Consistent with the contents of the recently approved ERCOT standard, ERCOT Voltage and Reactive Requirements and Compliance Monitoring

3. PIP 102 Provisions Generators must operate to control the ERCOT supplied voltage setpoint on the high side of the unit step-up transformer Generators - –are not compensated for reactive power production that is less than the Generator’s Unit Reactive Limit (URL) –are compensated for real power production reductions, at OOME Down, that are required to comply with an ERCOT Operation’s reactive dispatch instruction –are compensated for the Megavars produced in excess of their URL when dispatched by ERCOT Operations beyond their URL Rate of compensation is determined by the avoided cost of installed reactive devices

4. PIP 102 Definition - URL The amount of reactive power produced when the generation unit operates at a 0.95 power factor (leading and or lagging) at the unit’s rated capability (MW) {PIP102} or unit’s maximum net power to be supplied to the transmission grid {RCVC Standard}.

5. Implementation Issues Amount of the “avoided cost of reactive support Resources on the transmission network” Determination of a particular unit’s URL Recording for settlement –ERCOT Operation’s reactive power dispatch instructions and –unit reactive power production from EPS metering Consistency with the “ERCOT Voltage and Reactive Requirements and Compliance Monitoring” standard

6. Task Force Recommendation 1 That WMS select a generator compensation level based on either $20/KVAR {for static devices} or $50.00/KVAR {for dynamic devices} installed. Additionally, WMS should decide a reasonable capacity factor to apply when converting the installed capacity factor to a per KVAR-hour rate.

7. Installed Cost  $/MVAR-Hr Based on reactive devices installed on the transmission network, assume: –30 year life –10% discount rate –Annual variable cost for O&M = 1% of install cost –A 50% capacity factor for leading VARS and 20% for lagging VARS $20.00/KVAR installed converts to $0.757/MVAR-hr $50.00/KVAR installed converts to $1.893/MVAR-hr

8. That WMS resolved that the ERCOT Protocols be revised to require ERCOT and each generation owner to establish a URL that is consistent with the generator capability tests described in ERCOT Protocol Section 6.10.3.5. The unit specific data that serves as the basis for such URLs shall be treated as confidential information by ERCOT. Task Force Recommendation 2

9. That WMS request ERCOT –to consider the necessary interfaces between operations and settlement necessary to implement the payment provisions of PIP 102 –to identify the changes needed to existing procedures and guidelines –to review the EPS metering impacts associated with the collection and storage of reactive power data, if any, and –to report their findings/conclusions to WMS Task force members are concerned about the cost impacts of these matters Task Force Recommendation 3

10. –That WMS resolve that the ERCOT Protocols be revised to include the requirement that QSE/generation unit operators, ERCOT Operations and TSPs, seek to achieve a routine operational goal that generation facilities operate within an established operational limit (either a 0.98 power factor (leading or lagging) or X% of the URL) by communication efforts, and generation voluntary response to ERCOT and/or TSP reactive operations requests. Task Force Recommendation 4