1. Overview of Governing Document for Weather-Sensitive ERS Pilot Project Stakeholder Workshop Mark Patterson, ERCOT Staff March 1, 2013

2. 2 Draft Governing Document This presentation is intended to highlight significant details noted in the Governing Document for Weather-Sensitive ERS Pilot Project and may not cover every aspect of the document. It is the responsibility of participants in the Weather-Sensitive ERS Pilot Project to familiarize themselves with all aspects of the Governing Document.

3. 3 Stated objectives for requesting Weather-Sensitive ERS Pilot Project are: 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; Identify any unforeseen challenges in procuring, deploying and evaluating the performance of Weather-Sensitive Loads. Purpose

4. 4 Project Timeline Pilot Timeline: –June through September 2013 ERS Contract Period Other important dates: –April 1, 2013: ERS Resource Identification (ERID) submission window opens –May 10, 2013: Offer submission deadline –May 24, 2013: Award Notifications go out to QSEs –May 31, 2013: ERCOT publishes procurement results –June 1, 2013: Contract Period for Pilot Project begins –September 30, 2013: Contract Period for Pilot Project ends

5. 5 Eligibility and Qualification To be eligible to participate: (a)The Load must consist exclusively of residential sites and must qualify for performance evaluation under either the regression baseline methodology or the control group baseline methodology; or (b)The Load must consist exclusively of non-residential sites and must qualify as Weather-Sensitive under the regression baseline evaluation methodology. Note: 1) Regression baseline requires all sites in an ERS load must have at least 9 months of interval meter data. 2) Control Group baseline must have interval metering but not historical meter data.

6. 6 QSE Requirements to Participate Must have capability to receive both Extensible Markup Language (XML) messaging and Verbal Dispatch Instruction (VDI) Must submit a fully executed Weather-Sensitive ERS Pilot Project Supplement to Market Participant Agreement (this is an attachment to the Governing Document) Must agree to participate in a post pilot survey (if applicable)

7. 7 Procurement Maximum pilot size of 30 MWs Procure for June through September 2013 pilot project term, BH2, BH3, and Weekend/Holiday Peak Time Period only –(Weekend/Holiday Peak Time Period - 1 p.m. to 8 p.m. on Saturdays, Sundays, and Holidays) Minimum Offer size – 100 KW Payment –QSEs representing Weather-Sensitive ERS Loads participating in the BH2 and BH3 ERS Time Periods will be paid the clearing price for the corresponding Time Periods in the 30-Minute ERS pilot project –For the Weekend/Holiday Peak Time Period will be paid the time-weighted average of the clearing price for BH2 and BH3

8. 8 Offers must include projection of the maximum number of sites in the aggregation for the ERS Contract Period ERCOT will reject offers that violate the following: –(a) 100% of the Load’s initial size; or –(b) Two MW times the QSE’s projection of the maximum number of sites in the aggregation during the pilot project term, divided by the MW capacity offered for the aggregation. QSE’s may modify the population of an aggregation once per month (same limits above apply) Not eligible for renewal opt-in QSEs may not self-provide Weather-Sensitive ERS Procurement (Cont’)

9. 9 Deployment Requirements Deployment instructions: –BH2 and BH3 deployments use both XML and VDI –Weekend/Holiday Peak use VDI only ERCOT will modify operator dispatch instruction to explicitly state Weather-Sensitive ERS in the instruction 30-Minute Ramp period applies Must remain deployed until recalled by ERCOT, but no single deployment will last longer than 3 hours Unannounced testing at least once but no more than twice per month. Test deployments may be reduced by EEA deployments but they do not reduce number of allowed EEA deployments

10. 10 EEA Deployment Actual (non-test) deployments may only occur in Energy Emergency Alert (EEA) Deployment of 10-Minute ERS or 30-Minute ERS shall not be considered a deployment of Weather-Sensitive ERS unless VDI explicitly states Weather-Sensitive ERS Maximum of 8 EEA Deployments during 4 month pilot period

11. 11 Performance Evaluation Event and Test Performance Analysis –For each test and EEA deployment event ERCOT to calculate Load and QSE portfolio-level ERS Event Performance Factors –For test deployments capacity obligations will be prorated based on number of sites dispatched during test Availability factor set to 1.0

12. 12 Other Loads participating in pilot will not be subject to suspensions Payments and charges associated with Weather-Sensitive ERS Pilot Project will be separate from other ERS charges on Settlements Statements Estimated cost of Pilot - $19,500 No additional ERCOT personnel impacts for pilot Procurement cost will be managed under the $50 million annual cap for ERS

13. 13 ON OFF Questions? mpatterson@ercot.com 512/248-3912