1. Current DG Framework for Competitive Areas of ERCOT DREAM TF September 28, 2015

2. Purpose Provide a basic understanding of the current DG market framework for the competitive areas of ERCOT and clarify terminology, governance structure, and market processes related to DG Disclaimer Although every attempt has been made to ensure the accuracy of the information provided herein, due to summarization, illustration, and other factors, inexact or erroneous information may exist. This presentation is not a substitute for the applicable statutes, rules, protocols, and guides. If any conflict exists between this presentation and the governing statutory and regulatory documents, those documents shall control in all respects. 2

3. Relevant Terms * Electric Generating Facility 12 Non-Modeled Generator 3 Generation Resource 3 ERS Generator 3 Distributed Resource 2 On-site Distributed Generation 123 Distributed Natural Gas Generation Facility 12 Distributed Renewable Generation 123 Independent School District-Solar Generation 2 1 – PURA 2 – PUCT Subst. Rules 3 – ERCOT Protocols 3 *See Appendix for definitions

4. Specific DG-Related Statutes * Develops provisions for: Owners/operators to sell electric power Use of T&D Facilities to transport electric power Utilities to recover costs of facilities for used for interconnection PURA 35.036 – Distributed Natural Gas Generation Facilities Develops provisions for: Interconnection of DRG PUCT creation of rules and requirements for DRG Requirement for TDU to measure out-flow Ownership of Renewable Energy Credits Selling surplus electricity to REP PURA 39.916 – Interconnection of Distributed Renewable Generation Customers entitled to have access to on-site distributed generation PURA 39.101 – Customer Safeguards Develops provisions for: Allowing Independent School Districts to sell surplus energy form solar generation Requiring utilities to provide metering to allow sell of energy PURA 39.914 – Credit for Surplus Solar Generation by Public Schools *other statutes may be applicable to DG based on operation in the ERCOT wholesale market 4

5. Registration May require registration as Power Generation Company, if generating electricity intended to be sold at wholesale or Self-Generator, if rating is greater than or equal to 1MW and not a PGC Generally, DRG facilities are not required to register PUCT DG with installed capacity of greater than 1MW, must register If required to have an IDR Meter and want settlement, must register as Generation Resource Protocol language unclear on when registration required as Generation Resource. May be required for distributed generation if capable of providing energy or Ancillary Service ERCOT 5

6. Interconnection PUCT Detailed in PUCT Subst. Rules 25.211 & 25.212 Only applicable to facilities 10MW and less connected to the distribution system Intended to develop standard interconnection process and timeline for distributed generation TDUs may require supplemental terms and conditions ERCOT Protocols and Guides do not addresses interconnection of DG facilities 6

7. DRG Metering PURA 39.916 (f) A [TDU] … shall make available to a [DRGO] … metering required for services provided under this section, including separate meters that measure the load and generator output or a single meter capable of measuring in-flow and out-flow at the point of common coupling meter point. PUCT Subst. Rule 25.213 (b) (1) …an electric utility shall provide metering at the point of common coupling using one or two meters that separately measure both the customer’s electricity consumption from the distribution network and the out-flow that is delivered from the customer’s side of the meter to the distribution network … 7

8. Metering For registered DG, ERCOT requires IDR Meter (BUSIDRRQ Profile) ▫ Interval data submitted monthly via 867_03 transaction ▫ In-flow energy associated with ESIID ▫ Out-flow energy associated with RID Can opt to have ERCOT Polled Settlement (EPS) metering ▫ ERCOT polls daily ▫ Customer must pay differential cost for metering if not required 8

9. Wholesale Storage Load Energy that is separately metered from all other Facilities to charge a technology that is capable of storing energy and releasing that energy at a later time to generate electric energy Exempt from charges and credits based on Load Ratio Share or per MWH basis Will not be included in the ERCOT 4CP calculations Pricing shall be based on the LMP at the electrical bus 9

10. Settlement Unregistered DG Energy settled as “negative Load” QSE benefits from reduced Load and is effectively compensated at Load Zone Settlement Point Price Energy payments to customer covered in bilateral contract between customer and REP Registered DG Same QSE for Load and Generation QSE paid directly for energy out-flow at Load Zone Settlement Point Price QSE charged Load Zone Settlement Point Price for each interval of energy in-flow (Net Load) Energy payments to customer covered in bilateral contract between customer and REP/QSE Registered DG Different QSEs for Load and Generation DG QSE paid directly for energy out-flow at Load Zone Settlement Point Price REP QSE charged Load Zone Settlement Point Price for each interval of energy in-flow (Net Load) Energy payments to customer covered in bilateral contract between customer and DG QSE 10

11. PUC Reporting Per PUC Subst. Rule 25.211 (n), utilities must file annual report identifying each interconnected DG facility by March 30 th Reports for 2014 are filed under PUC Project #44023 Report includes: New DG Facilities since previous report Change in ownership or cessation of operations that has been reported to the utility Capacity of each facility and whether it’s a renewable energy resource Feeder or other point of connection to distribution system All applications for interconnections received for previous 1-yr period and the disposition of those applications 11

12. ERCOT Reporting TDSPs in competitive areas submit DG information to ERCOT for each unregistered DG facility (<=1MW) Currently, ERCOT produces report of unregistered DG greater than 50kW DG Information submitted: ESI ID Generation type Interconnection Agreement effective date Total inverter capacity The inverter's published peak efficiency rating Total PV generation capacity in kW Total wind generation capacity in kW For other generation types, total generation capacity in kW 12

13. NPRR719 & COPMGRR040 Removes threshold for unregistered DG in single load zone NRG comments remove reporting threshold of 50kW and modifies reporting requirements NPRR currently tabled at PRS & COPMGRR currently at COPS awaiting approval 13

14. Appendix 14

15. References 15

16. References (cont.) 16

17. References (cont.) 17

18. References (cont.) 18

19. PURA Definitions Distributed natural gas generation facility – a facility installed on the customer's side of the meter that uses natural gas to generate not more than 2,000 kilowatts of electricity Distributed renewable generation – electric generation with a capacity of not more than 2,000 kilowatts provided by a renewable energy technology, as defined by [PURA] Section 39.904, that is installed on a retail electric customer's side of the meter Electric generating facility – a facility that generates electric energy for compensation and is owned or operated by a person in this state, including a municipal corporation, electric cooperative, or river authority 19

20. PUCT Definitions Distributed natural gas generation facility – a facility installed on the customer’s side of the meter that uses natural gas to generate not more than 2,000 kilowatts of electricity Distributed renewable generation (DRG) – electric generation equipment with a capacity of not more than 2,000 kilowatts provided by a renewable energy technology, as defined by Public Utility Regulatory Act §39.904(d), installed on a retail electric customer’s side of the meter Distributed resource – A generation, energy storage, or targeted demand-side resource, generally between one kilowatt and ten megawatts, located at a customer's site or near a load center, which may be connected at the distribution voltage level (below 60,000 volts), that provides advantages to the system, such as deferring the need for upgrading local distribution facilities. Electric generating facility – a facility that generates electric energy for compensation and that is owned or operated by a person in this state, including a municipal corporation, electric cooperative, or river authority. ERS resource – a resource contracted to provide ERS that meets one of the following descriptions: (A) A load or aggregation of loads; or (B) A dispatchable generator that is not registered with ERCOT as a Generation Resource, or an aggregation of such generators Independent school district solar generation (ISD-SG) – solar electric generation equipment installed on the customer’s side of the meter at a building or other facility owned or operated by an independent school district, irrespective of the level of generation capacity On-site distributed generation (or distributed generation) – an electrical generating facility located at a customer’s point of delivery (point of common coupling) of ten megawatts (MW) or less and connected at a voltage less than 60 kilovolts (kV) which may be connected in parallel operation to the utility system. Resource – a generation resource, or a load capable of complying with ERCOT instructions to reduce or increase the need for electrical energy or to provide an ancillary service (i.e., a “load acting as a resource”). Resource – Facilities capable of providing electrical energy or load capable of reducing or increasing the need for electrical energy or providing short-term reserves into the ERCOT system. This includes generation resources and loads acting as resources (LaaRs) 20

21. ERCOT Definitions Distributed Generation (DG) – An electrical generating facility located at a Customer’s point of delivery (point of common coupling) ten megawatts (MW) or less and connected at a voltage less than or equal to 60 kilovolts (kV) which may be connected in parallel operation to the utility system. Distributed Renewable Generation (DRG) – Electric generation with a capacity of not more than 2,000 kW provided by a renewable energy technology that is installed on a retail electric Customer’s side of the meter. Emergency Response Service (ERS) Generator – Either (1) an individual generator contracted to provide ERS which is not a Generation Resource or a source of intermittent renewable generation and which provides ERS by injecting energy to the ERCOT System, or (2) an aggregation of such generators. Generation Resource – A generator capable of providing energy or Ancillary Service to the ERCOT System and is registered with ERCOT as a Generation Resource. The term “Generation Resource” used by itself in [the ERCOT] Protocols does not include a Non-Modeled Generator. Non-Modeled Generator – A generator that is: ▫ (a) Capable of providing net output of energy to the ERCOT System; ▫ (b) Ten MW or less in size; or greater than ten MW and registered with the PUCT according to P.U.C. SUBST. R. 25.109, Registration of Power Generation Companies and Self-Generators, as a self-generator; and ▫ (c) Registered with ERCOT as a Non-Modeled Generator, which means that the generator may not participate in the Ancillary Service or energy markets, RUC, or SCED. 21