1. WMS Meeting, October 10, 2012

2. RCWG Continuing Efforts  NPRR 747 Price Correction No consensus on this issue  RCWG needs additional guidance on the issue  Continuing Issues  Bio mass plant generic and standard cost  Load Providing Capacity

3. NPRR385, Negative Price Floor  METF is working on the Impact test. Currently there are emergency Basepoints given to keep units on line when negative prices  RCWG had general consensus that NPRR385 should continue forward

4. QSGR MITIGATED OFFER CAP PROPOSAL  Purpose of WMS-approved changes to VCM on September 12 were meant to amortize start-up costs for QSGRs across a more accurate calculation of run-times.  The calculation (75% of all online time) does not recognize the significant amount of time when a QSGR’s LSL is greater than the amount of energy needed by SCED, and the unit is not receiving a positive Base Point above LSL. In those situations, it is probable that the unit is receiving an LMP lower than its MOC (i.e., below short-run marginal costs).

5. PROPOSED SOLUTION  Modify Protocols to allow QSGRs to telemeter a zero LSL while online (NPRR 487)  This will allow SCED to dispatch the unit between zero and its physical LSL such that the LMP at the generator bus will continue to be set by the unit’s MOC.  The possible increased use of Reg-Down can be addressed and minimized through implementing NPRR 486 on calculation of Generation To Be Dispatched, which changes the calculation of GTBD from “actual generation” to “Base Points + deployed regulation.”

6. OTHER ISSUES WITH QSGR COST RECOVERY  Minimum Energy Costs  The verifiable cost calculation for QSGRs uses an incremental heat rate, which would be correct for dispatch if minimum run costs were separately paid, but that is not the case for QSGRs.  The proposed changes in the VCM manual to include the “Minimum Energy Component” are to account for these uncompensated minimum run costs.  Gas Shaping and Transportation  The VCM recognizes the appropriateness of compensating resources for their “actual cost of transporting and purchasing spot fuel.”  However, the VCM does not include gas shaping and transportation costs for calculating the QSGR MOC.  And, fuel adjustment it is not included in the cost calculation for the dispatch of any resource.  The proposed changes in the VCM manual add start-up fuel to the Variable O&M calculation and add the ability for resource owners to submit a verifiable Value of X (VOX) for QSGRs, and grey-box the ability for other resources to verify a fuel adder once application of VOX is automated.

7. MINIMUM ENERGY COMPONENT  MEC is used to adjust the incremental heat rate by the difference between the average heat rate and incremental heat rate at the midpoint of the dispatch range.  The MEC adjustment is needed because QSGRs are not separately compensated for the cost to run at LSL. Using an unadjusted incremental heat rate in the MOC calculation for QSGRs does not appropriately compensate those resources for all the fuel required to operate at or above LSL.

8. EXAMPLE MEC CALCULATION First find midpoint of dispatch range (HSL – LSL). MEC = Difference between Average Heat Rate and Incremental Heat Rate at that midpoint. Add MEC to each of the heat rate points on the Incremental Heat Rate curve to create the new adjusted curve.

9. QUICK START VOX  QSVOX is a fuel adder that compensates resources for the verified costs of transporting and purchasing spot fuel over and above an average fuel index price.  For calculating QSGRs, QSVOX is applied for both Startup Fuel and minimum energy costs.  As soon as the process can be automated, all resources should be permitted to verify a fuel adder.