1. Weather Sensitive ERS Training Presenter: Carl Raish Weather Sensitive ERS Training Workshop April 5, 2013

2. Weather Sensitive ERS Pilot Description 4/5/2013 Weather Sensitive ERS Training 2 Pilot purpose:  Evaluate the ability of weather-sensitive Loads to provide dispatchable demand response during summer system conditions;  Evaluate the accuracy of Qualified Scheduling Entity (QSE) projections of demand response capabilities and Load growth;  Evaluate deployment impacts on end-use customers (survey);  Identify any unforeseen challenges in procuring, deploying and evaluating the performance of weather-sensitive Loads. ERCOT will procure a maximum of 30 MW for BH2, BH3 & WEH Pilot duration June – September 2013

3. 4/5/2013 Weather Sensitive ERS Training 3 Weather Sensitive ERS Pilot Participation ERIDS and Offers must be submitted by a QSE qualified to participate in ERS Fully executed Weather-Sensitive ERS Pilot Project Supplement to Market Participant Agreement is required Minimum offer is 100 kW … subject to proration as limited by Tied Offer MW Offers must include projection of the maximum number of sites during Contract Period Interval metering is required 9 months of historical interval data (when ERID form is submitted) is required for all sites in Loads using default baseline No historical data required for control group, but all sites must have interval metering prior to start of Contract Period QSE may offer the same capacity into WS ERS, 10M ERS or 30M ERS WS ERS will be awarded first Capacity may be offered / awarded into 10M ERS or 30M ERS in other time periods. If Load participates in WS ERS and another ERS program, no site changes are allowed during the Contract Period

4. 4/5/2013 Weather Sensitive ERS Training 4 Weather Sensitive ERS Pilot Participation Loads only (no ERS Generators) and Loads must be residential-only or non- residential only Load must demonstrate weather sensitivity by meeting minimum accuracy standards posted at the following link: http://www.ercot.com/mktrules/pilots/wsers/index Accuracy is evaluated for specified time periods using Regression Baseline R 2 > 90% and MAPE < 7.5%, or R 2 > 95% and MAPE < 10.0% Residential Loads on Control Group Baseline are exempt from this requirement … but must have interval metering at start of Contract Period

5. 4/5/2013 Weather Sensitive ERS Training 5 Weather Sensitive ERS Pilot Participation

6. 4/5/2013 Weather Sensitive ERS Training 6 Weather Sensitive ERS Pilot Participation Residential WS ERS Loads have two baseline options Regression baseline … same as current methodology Control Group baseline at least 600 sites assigned randomly by ERCOT to control groups 2 – 20 groups available

7. 4/5/2013 Weather Sensitive ERS Training 7 Weather Sensitive ERS Pilot Participation Non-residential WS ERS Loads have same baseline options as current ERS Regression baseline will always be available (since it’s part of qualification) ERCOT will also evaluate M810 and MDP and if sufficiently accurate, will be available for QSE selection Control group option not available for non-residential Loads

8. 4/5/2013 Weather Sensitive ERS Training 8 Modification of Load Population QSE may update list of sites once per month Submit updated offer form prior to 1 st of month … can add/remove sites Sites added must meet same historical interval data requirement as original sites Updated Load must meet minimum accuracy standards and baseline qualifications set by the original Load Sites added to Control Group Baseline Load may result in recalculation of number of control groups and control group assignments If number of sites falls below 600, Load will revert to default baseline Offers should take into consideration that 1 control group will be withheld from EEA event deployments Number of sites may increase from original, but not more than the greater of 100% of the original number (2 MW * max sites specified on offer) / MW capacity of offer (Effectively number of sites that would be expected to provide 2 MW)

9. 4/5/2013 Weather Sensitive ERS Training 9 Group Assignments for Default Baseline Loads ERCOT may, with QSE approval, split default baseline loads into two deployment groups Only one of the two groups will be deployed during a test, tests would alternate between groups ERCOT will evaluate if testing one group would provide an accurate estimate of the performance of the entire group Initial analysis indicates residential aggregations of 300 kW are likely to qualify If sufficiently accurate, ERCOT will randomly assign sites to one of the two groups and notify QSE Otherwise, all sites will be assigned to the same group If QSE modifies sites in the Load Group assignments would be subject to change Use of two groups could be disallowed if insufficiently accurate Test performance factor will be based on prorated capacity when two groups are in use

10. 4/5/2013 Weather Sensitive ERS Training 10 Events and Tests ERCOT will administer at least one and not more than two tests per month Tests will be fleet-wide deployments for the pilot Number of tests may be reduced by actual deployment events 30-minute ramp Tests will typically be long enough to include one full interval two of the tests may last for at least one hour test duration will not be announced prior to test ERCOT may deploy Loads up to 8 times for actual EEA deployments Subject to deployment in EEA 1 or higher Deployment instruction will specifically mention WS ERS ERCOT will pre-notify QSE on Control Groups to be with-held from deployment 30-minute ramp Three-hour time limit on a deployment for an event

11. 4/5/2013 Weather Sensitive ERS Training 11 Event / Test Performance Load-level Interval performance factors calculated same as regular ERS (baseline – actual) / (int_frac * obligation) … but not capped at one Obligation is directly from offer (or 0.5 * offer if 2 deployment groups used) Demand reduction value (baseline – actual) normalized for normal peak weather is used for weighting interval performance factors Timeliness of deployment at Load level is assessed for tests/events with two or more full intervals If EIPF for first full interval is less than 75% of average EIPF for remaining intervals, a financial penalty is imposed (baseline lowered to reduce event performance factor by 25%) QSE-level Interval performance factors Normalized DR Value and obligations summed across deployed Loads Weighted average interval fraction (by DR Value) across deployed Loads (DR Value) / (int_frac * obligation)

12. 4/5/2013 Weather Sensitive ERS Training 12 Event / Test Performance Event performance factors (QSE and Load) Weighted average of interval performance factors for the event Weighted by normalized DR Value and interval fraction QSE Contract Period Event performance Factor Weighted average of interval performance factors for all tests and events during Contract Period Weighted by QSE-level normalized DR Value and interval fraction

13. 4/5/2013 Weather Sensitive ERS Training 13 Performance Penalties Financial Performance Penalties will be imposed (no suspensions) for the following: If maximum number of sites for a Load during Contract Period is less than 90% of number projected on the offer If average normalized DR Value per site for a Load is less than 90% of (Offer MW / projected maximum sites) If one of the above conditions is true the baseline is reduced to result in the Load’s event performance factor to be equal to the square of the original event performance factor If both of the above conditions are true the baseline is reduced to result in the Load’s event performance factor to be equal to the cube of the original event performance factor However, the penalties are waived if: The DR Value provided by the Load is greater than or equal to 90% of the offered MW, or The ERS Load’s obligation is exhausted during the Contract Period

14. ERS Submission Form Changes 4/5/2013 Weather Sensitive ERS Training 14 This portion of the ID page must be filled out. Submittal Type Options: Preliminary Review Procurement ERID 10M Procurement Offer 30M Procurement Offer WS Procurement Offer 10M Reinstatement ERID 10M Reinstatement Offer 30M Reinstatement Offer 10M Substitution 30M Substitution WS Site Update

15. ERS Submission Form Changes 4/5/2013 Weather Sensitive ERS Training 15 Hours for 10 Minute ERS & 30 Minute ERS Pilot Business Hours 1 (BH1) are the Hours Ending 0900 through 1300, Monday thru Friday, except ERCOT holidays. Business Hours 2 (BH2) are the Hours Ending 1400 through 1600, Monday thru Friday, except ERCOT holidays. Business Hours 3 (BH3) are the Hours Ending 1700 through 2000, Monday thru Friday, except ERCOT holidays. Non-Business Hours (NBH) are all other hours. Hours for Weather Sensitive ERS Pilot Business Hours 2 (BH2) are the Hours Ending 1400 through 1600, Monday thru Friday, except ERCOT holidays. Business Hours 3 (BH3) are the Hours Ending 1700 through 2000, Monday thru Friday, except ERCOT holidays. WeekEnd Holidays (WEH) are the Hours Ending 1400-2000, Saturday, Sundays & Holidays New tab added, Contract Hours

16. ERS Submission Form Changes 4/5/2013 Weather Sensitive ERS Training 16 Several changes to this section of the ERS Submission Form: 1.Cell B2 – added Weather Sensitive Load as an option 2.Cell C2 – Projected # of Sites for Weather Sensitive ERS 3.Baseline – WS Control Group added as an option 4.ERS Time Period – WeekEnd Holidays added for Weather Sensitive 12 3 4

17. Major Program Differences 4/5/2013 Weather Sensitive ERS Training 17 Program Characteristics 10 Minute ERS30 Minute ERSWeather Sensitive ERS StatusProductionPilot Ramp Rate10 Minutes30 Minutes How PaidPaid As BidClearing Price DeployedEEA Level 2 or higherEEA Level 1 or higher Deployments Durations 8 hours max per CP, remain deployed until recall Max 8 cum hours, up to 4 events Max 3 hours per event, up to 8 events ERS GeneratorsYesNo Opt-In RenewalYesNo Self ProvisionYes No Number of Tests Must have passed a test in the last 365 days At least 1, max of 4 per Contract Period At least 1, max of 2 per month (event offset) Testing / Event Event – XML & All QSE Hotline Test - XML & call on OPX XML & All QSE Hotline Call No XML during WEH SuspensionsAvailability & Load Test FailuresNo Suspensions * Suspended Resources can offer in WS ERS / ERS 30 without serving suspension but must successfully complete the reinstatement process.

18. Questions 4/5/2013 Weather Sensitive ERS Training 18