1. NPRR 571 ERS Weather Sensitive Loads Requirements Carl Raish, ERCOT QSE Managers Working Group November 5, 2013

2. Purpose for Revision Request Primary purpose is to establish ERS rules that facilitate participation by Loads with demand response capability that varies based on weather –Opens up ERS participation to customers willing to have their HVAC systems or other weather sensitive loads curtailed during EEA events Time Periods BH2, BH3 and 13:00 – 20:00 weekends and holidays –Attracts participation that more closely matches ERCOT system load –Creates a framework for evaluating performance and compensating participants based on the variable amount of load reduction actually provided –Establishes rules that deal more systematically for WS ERS participant churn and growth over the course of an ERS Contract Period –Establishes rules that create a disincentive for the submission of over- stated offers by imposing payment reductions ERCOT Public November 5, 2013

3. NPRR 571 Major Changes Participation contingent on qualification on a weather-sensitive baseline –Aggregations of residential sites automatically qualified –Non-residential aggregations must meet accuracy requirements for the ERCOT Default Regression baseline. All sites must have at least 9 months of historical interval data 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% –Minimum offer for a weather-sensitive load will be 0.5 MW (0.1 MW for other ERS) –Qualification will usually be based on premise load with the anticipation that a weather sensitive end-use will be curtailed Non-weather sensitive end-uses most likely will continue participating in other ERS For example, an office building using back-up generation to offset a fixed amount of load … premise load weather sensitive but load reduction fixed. ERCOT Public November 5, 2013

4. 4 Weather Sensitive ERS Pilot Participation ERCOT Public

5. NPRR 571 Major Changes QSE can modify the population of a WS ERS Load over the contract term –QSE specifies initial sites and projected number of sites on offer –Once per month update of sites allowed, number of sites can increase by the greater of: 100% of initial number Equivalent of 2 MW worth of sites … (2 MW × projected sites) / offer MW ERCOT will reject offer if the projected increase in sites exceeds both thresholds – Added sites must meet historical interval data requirements, and the modified aggregation must continue to meet weather sensitivity qualification ERCOT Public November 5, 2013

6. NPRR 571 Major Changes Baselines available –Standard ERS baselines are available – must have historical data that substantiates baseline accuracy –Control-group methodology introduced for WS ERS Residential loads with at least 600 sites only – no historical interval data required, but must be IDR to participate ERCOT determines appropriate number of control groups and randomly assigns sites During tests or EEA events, ERCOT designates a group to be withheld from deployment Average interval-by-interval load of sites in withheld group is used as the baseline and is compared to the average load of deployed sites Following each deployment, the withheld group is changed Site modifications may result in recalculation of number of control groups and control group assignments ERCOT Public November 5, 2013

7. NPRR 571 Major Changes Deployments –Maximum number of deployments is 2 times number of months in contract term –Maximum duration of a sustained response for any deployment is 3 hours –Can be 10- or 30-minute ramp with corresponding EEA-1 and EEA-2 deployment –Deployment can be at same time as other ERS or separately Self-provision –Same as other ERS –WS ERS self-provision payment offsets WS ERS charges Availability –Availability factor always set to one –Physical availability is established by monthly testing ERCOT Public November 5, 2013

8. NPRR 571 Major Changes Testing –Two times per month –Test duration up to 3 hours of sustained response –No advance notice of test or duration –Actual EEA Event can result in reduction in total number of tests –Tests do not reduce the number of actual EEA deployments Resource-level Event Performance –Calculations same as other ERS –Capacity obligations as offered, no change for actual weather or site count –Meeting the 10- or 30-minute ramp period is assessed by Comparing interval performance factor for first full interval to average of factors for remaining full intervals If average is less than 75% of remaining average, baseline is reduced to 0.75 times original baseline –This lowers imputed demand reduction and event performance factor ERCOT Public November 5, 2013

9. NPRR 571 Major Changes QSE Portfolio-level Event Performance –QSE portfolio-level Interval Performance Factor calculations same as other ERS (summed reduction / summed obligation) –Portfolio-level event performance factor is the average of the portfolio-level interval performance factors weighted by the interval fractions and sum of the prorated obligations for the interval Prorated obligation = obligation × participating sites / projected sites QSE Portfolio-level Contract Period Event Performance –Average of the portfolio-level interval performance factors weighted by the interval fractions and sum of the prorated obligations for the interval across all tests/events ERCOT Public November 5, 2013

10. 10 Accelerated Payment Reductions No further payment reduction will be imposed if: QSE Portfolio-level Contract Period Event Performance is ≥ 0.90 QSE portfolio normalized peak demand reduction is ≥ 90% of obligation Otherwise an accelerated reduction will be imposed on a Load as follows: If maximum number of sites < 80% of number projected on the offer, or If average normalized peak DR Value per site < 90% of offer (Offer MW / projected sites) If one of the above is true, baseline is reduced such that the event performance factor equals the square of the original event performance factor If both are true, baseline is reduced such that the event performance factor equals the cube of the original event performance factor If an accelerated reduction is imposed, the QSE Portfolio-level Contract Period Event Performance is recomputed using the revised baselines ERCOT Public

11. November 5, 2013 11 Accelerated Payment Reductions Example Assume Load had a normalized peak demand reduction less than 90% of obligation Initial EPF Adjusted EPF Adjusted IPF = Initial IPF 2 ERCOT Public

12. November 5, 2013 12 NPRR 571 Questions? ERCOT Public