1. Settlement of Mothballed RMR Resources for System Capacity November 15, 2011 RDTF Meeting Ino González ERCOT November 14, 2011

2. Slide 2 RMR for Summer 2011 RMR Contracts for Mothballed Units ERCOT signed RMR Agreements with three Resource Entities to return Mothballed Generation Resources to service to mitigate capacity shortages during the extreme heat and drought conditions impacting the ERCOT Region. Outcome Contracts RMR

3. Slide 3 RMR for Summer 2011 RMR Contracts for Mothballed Units Garland Power & Light –Spencer 4 –Spencer 5 NRG Texas Power, LLC –SR Bertron 1 –SR Bertron 2 Contracts terminated October 31, 2011 Outcome Contracts RMR 122 MW 292 MW

4. Slide 4 RMR for Summer 2011 Operation for these RMR Units was as follows: No Three Part Supply Offers Not offered into DAM Committed only by Hourly RUC Resources came on-line with no Energy Offer Curve Outcome Operations RMR

5. Slide 5 RMR for Summer 2011 What happens when an on-line Resource has no Energy Offer Curve? –ERCOT creates proxy Offer Curve Outcome Operations RMR MW $/MWh Proxy Energy Offer Curve 0 $2999.99 LSL+1MW -$250 $3000 LSL HSL

6. Slide 6 RMR for Summer 2011 What happens when an on-line Resource has no Energy Offer Curve? –Resource is very expensive to dispatch above LSL Outcome Operations RMR MW $/MWh Proxy Energy Offer Curve 0 $2999.99 LSL+1MW -$250 $3000 LSL HSL

7. Slide 7 RMR for Summer 2011 Payment process for RMR units Outcome Settlements The Settlement process for these RMR Resources followed standard RMR Settlement practices per Protocol section 6.6.6 & Reliability Must-Run Settlement

8. Slide 8 RMR for Summer 2011 Payment process for RMR units ERCOT ultimately provides two types of payments to the QSE for an RMR Resource –Standby Payment ◦Includes costs to return to operational status ◦Ongoing operation and maintenance costs –Energy Payment ◦Fuel costs »Incremental Heat Rate »Fuel Index Price and Fuel adder »Startup fuel Outcome Settlements

9. Slide 9 RMR for Summer 2011 Payment process can be complex Lots of other Moving Parts for RMR Settlement –Real-Time Energy Imbalance Payment –RUC Make-Whole Payment –RUC Clawback Charge Outcome Settlements ? ? ? QSE is exposed to the usual Payments and Charges for a Resource

10. Slide 10 RMR for Summer 2011 Outcome Settlements ERCOT then Reverses these Charges and payments through the RMR Adjustment Charge ? ? ? Payment process can be complex Lots of other Moving Parts for RMR Settlement –Real-Time Energy Imbalance Payment –RUC Make-Whole Payment –RUC Clawback Charge

11. Slide 11 RMR for Summer 2011 Costs Uplifted to QSEs with Load Net of all RMR charges and payments –Standby payment –Energy Payment –RMR Adjustment Charge –RMR Non-Performance Charge ◦$10,000 per event of Unexcused Misconduct ◦Would reduce charge to QSEs with Load Outcome Settlements ? ? ?

12. Slide 12 RMR for Summer 2011 A few notes about Capacity Short Charges QSEs who are capacity short pay a portion of the RUC Make Whole Costs The RUC Capacity Short Charges are not affected by the RMR Adjustment Charge Outcome Settlements ? ? ? QSEs who are capacity short will still pay RUC Capacity Short Charge, even if RUC Make-Whole payments were calculated only for these RMR units

13. Slide 13 RMR for Summer 2011 Intervals of RUC deployment for SPNCE_4 RMR Unit Operating Day RUC Make Whole $ Number of Intervals TWTG ≤ LSL 1 Number of Intervals TWTG > LSL 1 8/23/11 8/24/11 8/28/11 8/29/11 8/31/11 0 2,834.76 7265472654 19 22 24 21 18 Total in period = Percent in period = 24 19 104 81 1 Where TWTG (MW) = TWTG (MWh) *4

14. Slide 14 RMR for Summer 2011 Intervals of RUC deployment for SPNCE_5 RMR Unit Operating Day RUC Make Whole $ Number of Intervals TWTG ≤ LSL 1 Number of Intervals TWTG > LSL 1 8/23/11 8/24/11 8/28/11 8/29/11 8/31/11 0 4,805.36 5 10 8 11 6 16 20 21 15 16 Total in period = Percent in period = 40 31 88 69 1 Where TWTG (MW) = TWTG (MWh) *4

15. Slide 15 RMR for Summer 2011 Intervals of RUC deployment for SRG_G2 RMR Unit Operating Day RUC Make Whole $ Number of Intervals TWTG ≤ LSL 1 Number of Intervals TWTG > LSL 1 8/28/11 8/29/11 8/31/11 10/10/11 0 18,647.2 Total in period = 7 11 14 39 18 13 4 48 Percent in period =4555 1 Where TWTG (MW) = TWTG (MWh) *4

16. Slide 16 RMR for Summer 2011 Relevant Charge Types Impacted by Capacity RMR Units Charge Type by Name Bill Determinant Code Description RMR Standby Payment RMRSBAMT RMRSBPR RMRMNFC RMR Standby Payment RMR Standby Price RMR Monthly Non-Fuel Cost RMR Payment for Energy RMREAMT RMRSUFQ RMRCEFA RMRHR RMRMFCOST RTMG RMR Energy Amount RMR Startup Fuel Quantity RMR Contracted Fuel Adder RMR Incremental Heat Rate RMR Monthly Actual Fuel Cost Real-Time Metered Generation

17. Slide 17 RMR for Summer 2011 Relevant Charge Types Impacted by Capacity RMR Units - Cont. Charge Type by Name Bill Determinant Code Description RMR Adjustment Charge RMRAAMT RTEIAMT RUCMWAMT RUCDAMT RMR Adjustment Charge Real-Time Imbalance Amount RUC Make-Whole Amount RUC Decommitment Amount RMR Service Charge LARMRAMT RMRSBAMTTOT RMREAMTTOT RMRAAMTTOT HLRS Load-Allocated RMR Amount RMR Standby Amount Total RMR Energy Amount Total RMR Adjustment Amount Hourly LRS

18. Slide 18 RMR for Summer 2011 RMR Reports Available through MIS* Outcome MIS Posting * https://mis.ercot.com – Requires a Digital Certificate