1. ERCOT RMR Basics Ino González Supervisor, S&B Market Analysis

2. Topic Outline I.Why ERCOT deploys RMR units II.How ERCOT Contracts RMR Units III.Eligible RMR Costs IV.Non-Eligible RMR Costs V.Settlement of RMR Units VI.Deployment of RMR Units in the Adjustment Period VII.Next steps Slide 2

3. Need for RMR Units I.Why ERCOT deploys RMR units To solve local reliability constraints To provide voltage support To acquire additional system capacity under special conditions (possibly using a currently undefined type of Load Resource- LR) Slide 3

4. RMR Contract Basis II.How ERCOT Contracts RMR Units ERCOT performs analysis of needs for system capacity, or Resource submits Notice of Suspension Form ERCOT request RMR owner to submit estimated costs to run the units ERCOT evaluates costs and reliability needs and makes final procurement assessment Slide 4

5. RMR Contract Basis III.Eligible RMR Costs (Per protocol 3.14.1.10 Eligible Cost) Labor and services Materials and supplies Maintenance Fuel Property Taxes All variable costs Slide 5

6. RMR Contract Basis (con.) IV.Non-Eligible RMR Costs (Per protocol 3.14.1.10 Eligible Cost) Depreciation expenses Return on Equity Fixed property taxes Income taxes of property owner Labor costs not associated with RMR operation Any costs the RMR owner would have incurred even if the unit had been mothballed or shutdown Slide 6

7. RMR settlement Basis V.Settlement of RMR Units Initial Settlement Capacity payment ($/h) based on eligible costs plus 10% Energy Payment (based on estimated fuel) True-up Settlement Capacity payment ($/h) based on actual costs plus 10% Energy Payment (based on actual fuel) Slide 7

8. Deployment of RMR Units in the Adjustment Period VI.Deployment of RMR units in the Adjustment Period  ERCOT discovers need for RMR units in the Adjustment period If RMR unit needed for capacity service, submit an OS SCED deploys RMR based on EOC and system need at SWC Slide 8

9. Loads Providing RMR-Like Services VII.Next Steps Need to:  Define the type of capacity (RMR-Like) service an LR o types of loads o allow aggregation or not o minimum MW levels  Develop RMR-Like contracting procedures  Establish deployment guidelines  Specific payment and settlement rules and  M&V Slide 9