1. ERCOT Wholesale Market Basics Module 3 Settlement

2. 2 ERCOT Wholesale Market Basics Introduction BENA iq = -1 * (Σ (RI iz + LI iz + URC iz + MISD iz + MISR iz ) z + TCRPAY Bei + Σ CSC Bei ) * LRS iq Can you tell these apart? Module 3

3. 3 ERCOT Wholesale Market Basics Settlement Overview Settlement Calculations General Fees Topics Module 3

4. 4 ERCOT Wholesale Market Basics Overview Module 3

5. 5 ERCOT Wholesale Market Basics Bilateral transactions QSEs Load Serving Entities Resources Electricity sellers Electricity buyers QSEs Bilateral transactions ERCOT SETTLEMENTS $$ Overview Module 3

6. 6 ERCOT Wholesale Market Basics All cash flow defined from ERCOT perspective: NEGATIVE amounts –ERCOT pays Market Participant POSITIVE amounts –Market Participant pays ERCOT “VISA Bill” Rule Overview Module 3

7. 7 ERCOT Wholesale Market Basics QSE: Daily review of Settlement Statements Download of Data Extracts Shadow Settlement and Validation Research Discrepancies Register Disputes Weekly review of Invoices Settle with ERCOT Overview – Market Participant Roles Module 3

8. 8 ERCOT Wholesale Market Basics LSE / Resources: Download of Data Extracts Research Discrepancies Settle with QSE Overview – Market Participant Roles Module 3

9. 9 ERCOT Wholesale Market Basics ERCOT’s Settlement and Billing Procedures: Acquire and Validate Settlement Data Validate Market Settlement and Publish Settlement Statements Publish Weekly Invoices Process Weekly Payments Validate, Research and Resolve Disputes Provide Settlement information (ERCOT, PUCT, Market Participants) Overview – Market Participant Roles Module 3

10. 10 ERCOT Wholesale Market Basics Questions Module 3

11. 11 ERCOT Wholesale Market Basics Module 3 Settlement Calculations

12. 12 ERCOT Wholesale Market Basics ERCOT MUST REMAIN REVENUE NEUTRAL! Settlement Calculations Module 3

13. 13 ERCOT Wholesale Market Basics Revenue Neutrality All payments for Market Services will have a corresponding cost allocation. Common forms of cost allocation –Obligation –Direct Assignment –Load Allocation –Balancing Energy Neutrality Adjustment Settlement Calculations Module 3

14. 14 ERCOT Wholesale Market Basics Quantity * Price MW or MWh 24 Hours or 96 Intervals Hourly MW conversion to 15-min is MW per ¼ Hour or MWh Some Charge Types are only charges Some Charge Types are only payments Some Charge Types can be either Settlement Unit Rules Settlement Calculations Module 3

15. 15 ERCOT Wholesale Market Basics ERCOT settles for services procured to manage the Texas power grid. Capacity Settlement Settlement of What? Energy Settlement Settlement Calculations Module 3

16. 16 ERCOT Wholesale Market Basics Capacity Settlement Module 3 Settlement Calculations

17. 17 ERCOT Wholesale Market Basics Learning Objectives: Ancillary Services for Normal Operations Replacement Reserve Out-of-Merit Capacity Emergency Interruptible Module 3 Settlement Calculations - Capacity

18. 18 ERCOT Wholesale Market Basics Regulation Up Regulation Down Responsive Reserve Non-spin Ancillary Services For Normal Operation for System Reliability Module 3 Ancillary Services for Normal Operations Settlement Calculations - Capacity

19. 19 ERCOT Wholesale Market Basics There are two main components to the Ancillary Services (AS) Market. 1.Procurement of Ancillary Services. 2.Uplifting the Costs of Ancillary Services procured. Ancillary Services For Normal Operation for System Reliability Module 3 Ancillary Services for Normal Operations Settlement Calculations - Capacity

20. 20 ERCOT Wholesale Market Basics 1.Procurement of Ancillary Services. Total AS requirement Based on Day-ahead forecast. QSE obligation based on QSE Load Ratio Share of 14 days prior. Quantity procured is calculated by netting total AS requirement less sum of QSEs self-arranged MW. ERCOT will pay for AS awards at Market Clearing Price. Ancillary Services How do the QSE’s communicate their Self-arranged Quantity? Module 3 Ancillary Services for Normal Operations Settlement Calculations - Capacity

21. 21 ERCOT Wholesale Market Basics 2.Uplifting the Costs of Ancillary Services procured. Cost allocated to each QSE by their net obligation. Net Obligation = Load Ratio Share Obligation minus Self-Arranged quantity. Settled using actual metered load to calculate Net Obligation (NOT load 14 days prior). Ancillary Services Module 3 Ancillary Services for Normal Operations Settlement Calculations - Capacity What happens to the Net Obligation at the Initial Settlement?

22. 22 ERCOT Wholesale Market Basics Ancillary Service Example Calculation Module 3 Ancillary Services for Normal Operations Settlement Calculations - Capacity

23. 23 ERCOT Wholesale Market Basics Procured Ancillary Service Capacity PC ASqi = -1 * (C ASqi * MCPC ASi ) Terms PC : Ancillary Service Capacity Payment C: Capacity Procured MCPC: Market Clearing Price for Capacity Protocol 6.8.1.2 Translation: The payment for Ancillary Service Capacity is equal to the Amount of Capacity procured times the Clearing price for that Service. Subscripts i: Interval q: QSE Module 3 Ancillary Services for Normal Operations Settlement Calculations - Capacity

24. 24 ERCOT Wholesale Market Basics LA ASqi = ASP i * NTO ASqi Protocol 6.9.1 Terms LA: Load Allocated Ancillary Service Charge ASP: Ancillary Service Price NTO: Ancillary Service Net Obligation per QSE Translation: The Load Allocation Charge for an ancillary service is equal to the Ancillary Service Price times the Net Obligation for the QSE. Subscripts i: Interval q: QSE Ancillary Service Cost Allocation Module 3 Ancillary Services for Normal Operations Settlement Calculations - Capacity

25. 25 ERCOT Wholesale Market Basics Learning Objectives: Ancillary Services for Normal Operations Replacement Reserve Out-of-Merit Capacity Emergency Interruptible Module 3 Settlement Calculations - Capacity

26. 26 ERCOT Wholesale Market Basics Providers of Replacement Reserve (RPRS) are paid for two types of service: Capacity Insufficiency Local Congestion Section 6.8.1.10 and 6.8.1.11 Module 3 Replacement Reserve Service Settlement Calculations - Capacity

27. 27 ERCOT Wholesale Market Basics Units selected for Capacity Insufficiency are paid: The higher of their bid or, The highest MCPC for all Replacement Reserve procured during the procurement processes. Their bid contains Start-up and Operating values. Section 6.8.1.10 and 6.8.1.11 Module 3 Replacement Reserve Service Settlement Calculations - Capacity

28. 28 ERCOT Wholesale Market Basics PC = -1* MAX [(PABC, MCPC) * ZC] PABC= CBP / N + HOBP Terms PC: RPPS payment to QSE MCPC: RPRS Capacity Price PABC: RPRS Capacity BID Price ZC: Amount of RPRS Capacity Awarded Translation: The RPRS Capacity payment is equal to the minimum of the bid price times the capacity awarded or the sum of startup and operating costs. Terms CBP: Startup Bid Price HOBP: Hourly Operating Bid Price N: Number of hours procured RPRS Capacity Payment Replacement Reserve Service Settlement Calculations - Capacity Module 3

29. 29 ERCOT Wholesale Market Basics Units selected for Local Replacement are paid: Resource Category Generic Startup Cost for starting. Resource Category Minimum Energy Cost minus MCPE for operating at the unit Low Sustainable Limit (LSL). Section 6.8.1.10 and 6.8.1.11 Module 3 Replacement Reserve Service Settlement Calculations - Capacity

30. 30 ERCOT Wholesale Market Basics LPC = -1* (LPS + LPO) Terms LPC: Price paid for RPRS C: Amount of RPRS Qty Awarded LPS: Startup Costs LPO: Operating Costs Translation: The RPRS Local Congestion payment is equal to the sum of startup and operating costs. RPRS Local Congestion Replacement Reserve Service Settlement Calculations - Capacity Module 3

31. 31 ERCOT Wholesale Market Basics Terms: RCGSC = Generic Startup Cost RCGMEC = Minimum Energy Cost MINCAP = Low Sustainable Limit MR = Metered Resource LPS = RCGSC / N LPO = SUM [(RCGMEC – MCPE) * MIN (MINCAP/4, MR)] RPRS Local Congestion How are RPRS Local Congestion startup and operating costs calculated? Module 3 Replacement Reserve Service Settlement Calculations - Capacity

32. 32 ERCOT Wholesale Market Basics RPRS Uplift Charge ERCOT Sums: –The total payments for Local and Capacity Insufficiency RPRS and Total is uplifted at Load Ratio Share to all QSEs. Section 6.9.2.1.2 Payment from the Market is collected through the following charge: Module 3 Replacement Reserve Service Settlement Calculations - Capacity

33. 33 ERCOT Wholesale Market Basics UC RP = -1 * [ Σ ( PC RP + LPC RP ) + TCRPAY RP + Σ CSC RP ]* LRS RPRS Uplift Charge Variables UC = RPRS Uplift Charge PC = Cost of Capacity for Capacity Insufficiency LPC = Cost of RPRS for Local Congestion US = RPRS Under Scheduled Charge TRCRPAY = TCR Payment per Hour CSC = RPRS CSC Impact Capacity Charge LRS = Load Ratio Share Subscripts RP = Replacement Reserve Section 6.9.2.1.2 Not Applied Module 3 Replacement Reserve Service Settlement Calculations - Capacity

34. 34 ERCOT Wholesale Market Basics Learning Objectives: Ancillary Services for Normal Operations Replacement Reserve Out-of-Merit Capacity Emergency Interruptible Module 3 Settlement Calculations - Capacity

35. 35 ERCOT Wholesale Market Basics What is OOMC? Replacement Reserve procured out of merit order. –Support emergency operations –provide voltage support –manage localized transmission limitations ERCOT-wide cost is uplifted to QSEs (LRS) OOMC Module 3 Out-of-Merit Capacity Settlement Calculations - Capacity

36. 36 ERCOT Wholesale Market Basics Units selected for OOMC are paid: Resource Category Generic Startup Cost minus energy revenue during ramp (back 12 intervals), plus Resource Category Minimum Energy Cost minus MCPE for operating at the LSL or Replacement Bid, if cheaper. Section 6.8.1.10 and 6.8.1.11 Module 3 Out-of-Merit Capacity Settlement Calculations - Capacity

37. 37 ERCOT Wholesale Market Basics PC = -1* MIN [(BP * C), (PS + PO)] Terms PC: Amount paid for OOM Capacity C: Qty of OOM Capacity Awarded BP: Sum of Bid Startup and Operating prices PS: Startup Costs PO: Operating Costs Translation: The OOM Capacity payment is equal to the minimum of the bid price times the capacity awarded or the sum of startup and operating costs. Protocol 6.8.2.2 OOMC Payment Module 3 Out-of-Merit Capacity Settlement Calculations - Capacity

38. 38 ERCOT Wholesale Market Basics Terms: RCGSC = Generic Startup Cost RCGMEC = Minimum Energy Cost (HR*FI) MINCAP = Low Sustainable Limit MR = Metered Resource N = Number of hours deployed s = 12 intervals prior to the OOMC period PS = [RCGSC – (SUMs (MCPE * MR))] / N PO = SUM [(RCGMEC – MCPE) * MIN (MINCAP/4, MR)] OOMC How are OOMC startup and operating costs calculated? Module 3 Out-of-Merit Capacity Settlement Calculations - Capacity

39. 39 ERCOT Wholesale Market Basics Learning Objectives: Ancillary Services for Normal Operations Replacement Reserve Out-of-Merit Capacity Emergency Interruptible Module 3 Settlement Calculations - Capacity

40. 40 ERCOT Wholesale Market Basics Emergency Interruptible Load Service Service provided by loads (customers) willing to interrupt during an electric grid emergency in exchange for capacity payment To provide ERCOT Operations with an additional emergency tool to lessen the likelihood of involuntary firm load shedding (a.k.a. rolling blackouts) Module 3 Emergency Interruptible Load Service (EILS) Settlement Calculations - Capacity

41. 41 ERCOT Wholesale Market Basics EILS EILS capacity payments are calculated as follows: BIDPrice * BIDCapacity * AvailFactor * EILFactor * TPh EILS Awarded Bid Price ($/MW) for each EILS Resource for an EILS Time Period. Capacity (MW) for an EILS Resource contracted for EILS specific to an EILS Time Period Availability factor for an EILS Time Period (Section 6.10.13.3) EILS event performance factor for an EILS Time Period (Section 6.10.13.3) Number of hours in an EILS Time Period Module 3 Emergency Interruptible Load Service (EILS) Settlement Calculations - Capacity

42. 42 ERCOT Wholesale Market Basics EILS – Uplift Costs No Self-Provision: EILS costs for an EILS Contract Period will be allocated based on the Load Ratio Share (LRS) for the EILs Contract Period. Self-Provision: EILS costs for an EILS Contract Period will be allocated based on the Load Ratio Share (LRS) less the self- Provision amount for the EILs Contract Period or zero, which ever is greater. Module 3 Emergency Interruptible Load Service (EILS) Settlement Calculations - Capacity

43. 43 ERCOT Wholesale Market Basics Energy Settlement Module 3 Settlement Calculations - Energy

44. 44 ERCOT Wholesale Market Basics Learning Objectives: Zonal Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

45. 45 ERCOT Wholesale Market Basics Represents the increase or decrease in energy dispatched by Settlement Interval in Real Time to ensure the balancing needs of ERCOT. The energy is supplied by ERCOT through acquisition of resources (generating units and interruptible demands) to meet load variations not covered by Regulation Service. Balancing Energy Module 3 Zonal Balancing Energy Settlement Calculations - Energy

46. 46 ERCOT Wholesale Market Basics Zonal Instructed Deviation (up/down) from ERCOT to QSE Used to solve power balance and/or congestion Settled at zonal MCPE How is this paid? Balancing Energy Module 3 Zonal Balancing Energy Settlement Calculations - Energy

47. 47 ERCOT Wholesale Market Basics Learning Objectives: Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

48. 48 ERCOT Wholesale Market Basics Scheduled Generation - Metered Generation Paid/charged at MCPE Why an imbalance? –Instructed Deviations –Uninstructed Deviations (may be subject to URC) Do all Resource Imbalances result in payments to the QSE? Resource Imbalance Protocol 6.8.1.13 Module 3 Resource Imbalance Settlement Calculations - Energy

49. 49 ERCOT Wholesale Market Basics Situation: AlphaQSE has scheduled to generate at 208 MW from their resource in the South Zone for IE 1630. The Resource actually generates at 220MW. The Market Clearing Price for Energy, South CM Zone is $17.09/MWh Conditions: Resource Imbalance Example Module 3 Resource Imbalance Settlement Calculations - Energy

50. 50 ERCOT Wholesale Market Basics Scheduled Generation Actual Generation 0 220MW Resource Imbalance Example 208MW 55MWh52MWh Module 3 Resource Imbalance Settlement Calculations - Energy

51. 51 ERCOT Wholesale Market Basics For a given interval and zone, RI = (Scheduled Generation – Actual Generation) * MCPE Therefore, for interval 1630, AlphaQSE’s Resource Imbalance in the South Zone is RI = (52MWh - 55MWh) * $17.09/MWh = - $51.57 Resource Imbalance Example Module 3 Resource Imbalance Settlement Calculations - Energy

52. 52 ERCOT Wholesale Market Basics RI izq = (QRS izq - MR izq ) * MCPE iz Resource Imbalance Protocol 6.8.1.13 Terms RI : Resource Imbalance Amount QRS: Scheduled Resource MR: Metered Resource MCPE: Market Clearing Price for Energy Translation: Resource Imbalance is the difference between the Scheduled and Actual Resource output times the Clearing Price for Energy. Subscripts i: Interval z: Zone q: QSE Module 3 Resource Imbalance Settlement Calculations - Energy

53. 53 ERCOT Wholesale Market Basics Learning Objectives: Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Scheduling Control Error Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

54. 54 ERCOT Wholesale Market Basics Scheduled Load - Adjusted Metered Load Paid/charged at MCPE Why an Imbalance? –UFE –Forecast Inaccuracies –Relaxed Balanced Schedule (section 4.3.1) –LaaR’s Load Imbalance Protocol 6.9.5.2 Module 3 Load Imbalance Settlement Calculations - Energy

55. 55 ERCOT Wholesale Market Basics Situation: AlphaQSE schedules 140 MW (35 MWh / interval) of Load in the South Zone for IE 1630 Adjusted Metered Load = 160 MW (40 MWh / interval) in the South Zone. Market Clearing Price for Energy = $17.09/MWh in the South Conditions: Load Imbalance Example Module 3 Load Imbalance Settlement Calculations - Energy

56. 56 ERCOT Wholesale Market Basics Actual Load Scheduled Load 0 140 160 South Zone Load Imbalance Example 35MWh40MWh Module 3 Load Imbalance Settlement Calculations - Energy

57. 57 ERCOT Wholesale Market Basics For a given interval and zone, LI = -1*(Scheduled Load – Actual Load) * MCPE Therefore, for interval 1630, AlphaQSE’s Load Imbalance in the South Zone is LI = -1*(35MWh - 40MWh) * $17.09/MWh = $85.45 Load Imbalance Example Module 3 Load Imbalance Settlement Calculations - Energy

58. 58 ERCOT Wholesale Market Basics LI izq = -1 * (SL izq - AML izq ) * MCPE iz Load Imbalance Protocol 6.9.5.2 Translation: Load Imbalance is the difference between the Scheduled and Actual Load times the Clearing Price for Energy. Terms LI : Load Imbalance Amount SL: Scheduled Load AML: Adjusted Metered Load MCPE: Market Clearing Price for Energy Subscripts i: Interval z: Zone q: QSE Module 3 Load Imbalance Settlement Calculations - Energy

59. 59 ERCOT Wholesale Market Basics Learning Objectives: Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

60. 60 ERCOT Wholesale Market Basics What is OOME? Out-of-merit order, unit-specific energy deployment to address intra-zonal congestion Procured by ERCOT when no market solution Paid according to a generic cost structure (Protocol Section 6.8.1.1) ERCOT-wide cost is uplifted to QSEs based on Load-Ratio-Share (LRS) OOME Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

61. 61 ERCOT Wholesale Market Basics The OOME Up and OOME Down payments are intended to cover only the amount above the billable quantity times MCPE. MCPE times billable quantity is paid in Resource Imbalance. If the calculated OOM Up payment is insufficient - -- additional verifiable costs may be paid if submitted in a timely manner. OOME Payment Methodology OOME Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

62. 62 ERCOT Wholesale Market Basics Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy What is LBES? Unit-specific energy deployment of balancing energy when intra-zonal congestion occurs Procured by ERCOT SPD to solve Local congestion Paid the incremental bid premium specified (Protocol Section 7.4.3.1) ERCOT-wide cost is uplifted to QSEs based on Load-Ratio-Share (LRS ) Module 3

63. 63 ERCOT Wholesale Market Basics LBES Up and Down payments are the difference between the MCPE of the Congestion Zone in which the specific Resource is located and the incremental bid premium specified. MCPE times billable quantity is paid in Resource Imbalance. LBES Payment Methodology LBES Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

64. 64 ERCOT Wholesale Market Basics Situation: AlphaQSE receives a UNIT-SPECIFIC instruction for IE 1600 to move the output of Unit 1 to 150 MW Data for AQSE for IE 1600: RP_Unit1 = 100 MW (25 MWh per 15 minute interval) Metered Generation by Unit1 = 36 MWh Instructed Output Level= 150MW (37.5 MWh per interval) OOME price = Unit 1 is a Gas-Steam Reheat Boiler unit Generic Cost (Per Protocol 6.8.2.1) = $61.41 per MWh LBES price = Bid premium submitted = $75.80 MCPE = $15.80 per MWh OOME/LBES Example Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

65. 65 ERCOT Wholesale Market Basics OOME/LBES Example As with all settlement equations, OOME/LBES Payment = -1 * Quantity * Price Price is fairly easy: Price = (OOME/LBES Price – MCPE) or 0, whichever is greater. Example, OOME Price = $61.41- 15.80 = $45.61 per MWh Example, LBES Price = $75.80- 15.80 = $60.00 per MWh Why do we subtract the MCPE from the Generic Cost/Bid Premium? Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

66. 66 ERCOT Wholesale Market Basics OOME/LBES Example Quantity is a little more difficult: Quantity = The change in energy output in response to the instruction with a maximum of the instruction itself. Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

67. 67 ERCOT Wholesale Market Basics Instructed Output 0 144 150 Metered Output Resource Plan and Generation Schedule 100 OOME/LBES Example 37.5MWh36MWh25MWh Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

68. 68 ERCOT Wholesale Market Basics OOME/LBES Example The unit’s response = Metered Output – Resource Plan = 36 MWh – 25 MWh = 11 MWh The unit’s instruction = Instructed Output – Resource Plan = 37.5 MWh – 25 MWh = 12.5 MWh Since the response does not exceed the instruction, ERCOT will pay AlphaQSE for the unit’s response of 11 MWh. Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

69. 69 ERCOT Wholesale Market Basics OOME/LBES Example Putting it all together, OOME/LBES Payment = -1 * Quantity * Price = -1 * 11 MWh * $45.61/MWh OOME Payment = -$501.71 = -1 * 11 MWh * $60.00/MWh LBES Payment = -$660.00 Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

70. 70 ERCOT Wholesale Market Basics where E OOMUPiuq = Max (0, Min ((MR iuq – OL iuq ), I OOMUPiuq )) Terms: MR = Metered Resource OL = Resource Plan Output Level I = OOME Instruction RCGFC = Resource Category price PE OOMUPiuq = -1 * E OOMUPiuq * [Max (RCGFC c – MCPE iz ),0] Subscripts i: Interval z: Zone q: QSE c: resource category u: generation unit OOME Protocol 6.8.2.3 Translation: The OOM Energy premium payment is equal to the Energy provided times the difference between MCPE and the Generic cost for the OOME service. Module 3 Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

71. 71 ERCOT Wholesale Market Basics where E LBEiuq = Max (0, Min ((MR iuq – OL iuq ), I LBEiuq )) Terms: MR = Metered Resource OL = Resource Plan Output Level I = LBES Instruction PM = Bid premium submitted LPC RSUiuq = -1 * E LBEiuq * [Max (PM c – MCPE iz ),0] Subscripts i: Interval z: Zone q: QSE c: bid premium u: generation unit LBES Protocol 6.8.2.3 Module 3 Translation: The LBES Energy premium payment is equal to the Energy provided times the difference between MCPE and the Bid Premium price submitted for the LBES service. Out-of-Merit Energy / Local Balancing Energy Service Settlement Calculations - Energy

72. 72 ERCOT Wholesale Market Basics Learning Objectives: Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

73. 73 ERCOT Wholesale Market Basics Uninstructed Resource Charge (URC) A QSE who schedules resources will be paid the full Market Clearing Price for Energy Up to the amount of instructed deviations An Uninstructed Deviation Charge Back will be calculated at a factor of the MCPE. The Uninstructed Deviation Charge Back will be applied to each Congestion Zone in which a QSE has a deviation from schedule plus instructions. Module 3 Uninstructed Resource Charge Settlement Calculations - Energy

74. 74 ERCOT Wholesale Market Basics Integrated Amount of ERCOT Regulation is less than -25 MWhrs Uninstructed Resource Charge Over Generation in a zone where MCPE is positive Metered Resource is greater than larger of 101.5% of (or 5MWh over) total schedule plus Instruction Uncontrollable Renewable Resource is not subject to URC. Price Chasing Module 3 Uninstructed Resource Charge Settlement Calculations - Energy

75. 75 ERCOT Wholesale Market Basics Integrated Amount of ERCOT Regulation is greater than 25 MWhrs Uninstructed Resource Charge Under Generation in a zone where MCPE is negative Metered Resource is less than lesser of 98.5% of (or 5MWh under) total schedule plus Instruction Uncontrollable Renewable Resource is not subject to URC. Cost Optimization Module 3 Uninstructed Resource Charge Settlement Calculations - Energy

76. 76 ERCOT Wholesale Market Basics Learning Objectives: Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

77. 77 ERCOT Wholesale Market Basics Settlement of Zonal Congestion QSE impact is determined by the bilateral schedule The net Resource schedule (Resource – Obligation) for each zone is multiplied by the zonal shift factor for each Commercially Significant Constraint (CSC). The CSC impacts are added together The QSE is charged the Impact on the CSC multiplied by the Shadow Price on the CSC. Module 3 Congestion Settlement Calculations - Energy

78. 78 ERCOT Wholesale Market Basics Congestion Management - Example South Zone North Zone South to North CSC West to North CSC South to West CSC West Zone Module 3 Congestion Settlement Calculations - Energy

79. 79 ERCOT Wholesale Market Basics Shift Factors CM Zone names Average Weighted Shift Factor West to North Average Weighted Shift Factor South to North Average Weighted Shift Factor South to West West20090.489911548-0.004425342-0.016725781 North2009-0.008056712-0.120276952-0.003225342 South20090.0023022360.5032578310.104328870 CSC Zonal Average Weighted Shift Factors Module 3 Congestion Settlement Calculations - Energy

80. 80 ERCOT Wholesale Market Basics https:tcr.ercot.com Where do you find the real shift factors? Module 3 Congestion Settlement Calculations - Energy

81. 81 ERCOT Wholesale Market Basics Situation: AlphaQSE schedules 548 MW of Resource from the South Zone and delivers 140 MW to the South Zone and 408 MW to the North Zone. The South to North congestion Path is constrained. MCPE_North = $28.84 MCPE_South = $17.09 MCPESPC_SN = $32.91 Congestion Management - Example Module 3 Congestion Settlement Calculations - Energy

82. 82 ERCOT Wholesale Market Basics Congestion Management - Example South WestNorth Res = 548MW Load = 140MW Res = 0MW Load = 408MW Module 3 Congestion Settlement Calculations - Energy

83. 83 ERCOT Wholesale Market Basics AlphaQSE’s South Zone Schedule impacts the South to North constraint as follows: Impact = (Resource – Obligation)(1/4 hr) * SF SN = (548 MW – 140MW)(1/4 hr) * 0.503257831 = 51.33 MWh Congestion Management - Example AlphaQSE’s North Zone Schedule impacts the South to North constraint as follows: Impact = (Resource – Obligation)(1/4 hr) * SF SN = (0 MW – 408MW)(1/4 hr) * -0.120276952 = 12.27 MWh Module 3 Congestion Settlement Calculations - Energy

84. 84 ERCOT Wholesale Market Basics Now the Congestion Charge for a particular CSC is simply a quantity times a price: Congestion Charge = (Sum of Impacts) * Shadow Price = (51.33 MWh + 12.27 MWh)*($32.91/MWh) = $2093.08 Congestion Management - Example Module 3 Congestion Settlement Calculations - Energy

85. 85 ERCOT Wholesale Market Basics I CSCiq = Σ((QSS iqz – SO iqz ) * SF ZCSC ) z Protocol 7.3.4.1 CSC Schedule Impact Terms I: Scheduled MW Impact per CSC QSS: QSE Supply Schedule SO: Scheduled Obligation SF: Shift Factor Subscripts i: Interval q: QSE z: zone CSC: Commercially Significant Constraint Module 3 Congestion Settlement Calculations - Energy Translation: Your Zonal Impact on each CSC is your net position in each zone multiplied by the zonal CSC shift factor.

86. 86 ERCOT Wholesale Market Basics CSC BECSCiq = SPC CSCi * MAX(0, I CSCiq ) Congestion: CSCBE Charge What happens if my impact is negative? Terms I: Scheduled MW Impact per CSC CSC BE : Energy Related Congestion Charge SPC: Shadow Price Subscripts i: Interval q: QSE CSC: Commercially Significant Constraint Protocol 7.3.4.1 Module 3 Congestion Settlement Calculations - Energy Translation: Your Congestion Charge per CSC is your SCS Impact multiplied by the Shadow Price.

87. 87 ERCOT Wholesale Market Basics CSC BECSCiq = SPC CSCi * I CSCiq Congestion: CSC Counterflow Terms I: Scheduled MW Impact per CSC CSC BE : Energy Related Congestion Charge SPC: Shadow Price Subscripts i: Interval q: QSE CSC: Commercially Significant Constraint Protocol 7.3.4.1 Module 3 Congestion Settlement Calculations - Energy Translation: If your impact opposes the congestion, or helps relieve the CSC, there is a payment for Counterflow.

88. 88 ERCOT Wholesale Market Basics Situation: If AlphaQSE had bid for and purchased 100 TCRs for this month at $3 a piece, then the impact is as follows: Cost of congestion from IE 1630 = $2,093.08 Payment from TCR = TCR/4 * MCPESPC_SN = (100/4) * $32.91 = $822.75 AlphaQSE cost for Congestion = $2,093.08 – $822.75 = $1270.33 (minus the monthly amortized cost of the TCR of $100) Congestion Management – TCR Example Module 3 Congestion Settlement Calculations - Energy Cost of TCRs = (100 MW * $4) / 4 = $100 for one interval

89. 89 ERCOT Wholesale Market Basics Learning Objectives: Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

90. 90 ERCOT Wholesale Market Basics QSE A R O QSE A 100MW (South) 100MW QSE B (South) QSE B R O QSE A 120MW (South) 120MW QSE B (South) Mismatch Mismatched Schedules What happens if the following schedule is not resolved? Module 3 Mismatched Schedules Settlement Calculations - Energy

91. 91 ERCOT Wholesale Market Basics QSE A R O QSE A 100MW (South) 100MW QSE B (South) QSE B R O QSE A 120MW (South) 120MW QSE B (South) Mismatch QSE A 100MW (South) ERCOT 20MW (South) Resolved in Settlement Mismatched Schedules Module 3 Mismatched Schedules Settlement Calculations - Energy

92. 92 ERCOT Wholesale Market Basics Translation: The mismatch payment or charge is equal to the mismatch amount delivered to or received from ERCOT times the MCPE. Terms: MISD: Payment for mismatched amount delivered to ERCOT MISR: Charge for mismatched amount received from ERCOT MISAMTD: Mismatched amount delivered to ERCOT MISAMTR: Mismatched amount received from ERCOT MCPE: Market Clearing Price for Energy MISD iqz = -1 * MISAMTD iqz * MCPE iz MISR iqz = MISAMTR iqz * MCPE iz Subscripts i: Interval z: Zone q: QSE Mismatched Schedules Module 3 Mismatched Schedules Settlement Calculations - Energy

93. 93 ERCOT Wholesale Market Basics Learning Objectives: Balancing Energy Resource Imbalance Load Imbalance OOME/LBES Uninstructed Resource Charge Congestion Mismatched Schedules BENA Module 3 Settlement Calculations - Energy

94. 94 ERCOT Wholesale Market Basics BENABENA Resource Imbalance Load Imbalance Mismatch Energy Delivered TCR Payments $ $ $ $ Uninstructe d Resource Charge $ Mismatch Energy Received $ Balancing Energy CSC Charges $ Balancing Energy Neutrality Adjustment Module 3 Balancing Energy Neutrality Adjustment Settlement Calculations - Energy

95. 95 ERCOT Wholesale Market Basics BENA iq = -1 * (Σ (RI iz + LI iz + URC iz + MISD iz + MISR iz ) z + TCRPAY Bei + Σ CSC Bei ) * LRS iq Terms BENA: Balancing Energy Neutrality Adjustment RI: Resource Imbalance LI: Load Imbalance URC: Uninstructed Resource Charge MISD: Mismatched Energy Delivered MISR: Mismatched Energy Received TCRPAY: Transmission Congestion Right Payments CSC: Direct Assigned Congestion Cost LRS: Load Ratio Share Protocol 9.6.1 Balancing Energy Neutrality Adjustment Module 3 Balancing Energy Neutrality Adjustment Settlement Calculations - Energy

96. 96 ERCOT Wholesale Market Basics BENA iq = -1 * (Σ (RI iz + LI iz + URC iz + MISD iz + MISR iz ) z + TCRPAY Bei + Σ CSC Bei ) * LRS iq Translation: The Balancing Energy Neutrality Adjustment is equal to the Sum of the Load Imbalances, Resource Imbalances, Uninstructed Resource Charges, Mismatch Charges, TCR Payments and Direct Assigned Congestion costs allocated at Load Ratio Share. Balancing Energy Neutrality Adjustment Protocol 9.6.1 Module 3 Balancing Energy Neutrality Adjustment Settlement Calculations - Energy

97. 97 ERCOT Wholesale Market Basics Module 3 General Fees

98. 98 ERCOT Wholesale Market Basics General Fees: ERCOT Admin Fee Registration Fee ERCOT Regional Entity Fee Nodal Surcharge Module 3 General Fees

99. 99 ERCOT Wholesale Market Basics $0.4171 per MWh to fund ERCOT activities subject to Public Utility Commission of Texas (PUCT) oversight. This fee is charged to all Qualified Scheduling Entities (QSEs) based on Load represented. (Protocol Section 9.7.1) ERCOT System Administration Fee Module 3 General Fees

100. 100 ERCOT Wholesale Market Basics The ERCOT Registration Fee for a QSE is $500 to be paid by check submitted with the Application for Registration form. (Protocol Section 9.7.4) The ERCOT Registration Fee for a Competitive Retailer is $500 to be paid by check submitted with the Application for Registration form. (Protocol Section 9.7.4) ERCOT Registration Fee Module 3 General Fees

101. 101 ERCOT Wholesale Market Basics NERC Fee authorized by FERC. ERCOT collects the fee based on each LSEs Adjusted Metered Load (AML) AML is posted by August 1 for previous Calendar Year. LSEs must dispute AML by September 15. 2009 Invoice based on 2007 load data. Electric Reliability Organization (ERO) Fee Module 3 2007 AML 2008 Calculated and Posted AML Quarterly Invoices 2009 General Fees

102. 102 ERCOT Wholesale Market Basics EROF q = (LOAD q / LOAD t ) * (NERCC + NERCC ADJ) EROFq = The QSE’s quarterly share of the next fiscal year’s NERC charges. NERCC = The total NERC charges for the appropriate quarter of the next fiscal year. LOADq = The total Adjusted Metered Load (AML) of all LSEs represented by the QSE for the calendar year (or part thereof) prior to the year in which ERCOT performs the calculation. LOADt = The total Adjusted Metered Load (AML) in the ERCOT Region for the calendar year prior to the year in which ERCOT performs the calculation. q = A QSE representing an LSE in the year during which ERCOT assesses the EROFq. NERCCADJ = When necessary, unpaid EROF amounts from a previous period. ERO Module 3 General Fees

103. 103 ERCOT Wholesale Market Basics Invoice calculated for each QSE two months prior to start of quarter. AML will not change from original AML established in August, but LSE to QSE relationship might. Invoice based on relationship of QSE to LSE / Rep based on the time the invoice is calculated. ERO Module 3 General Fees

104. 104 ERCOT Wholesale Market Basics ERCOT shall calculate the nodal implementation surcharge (“NIS”) by multiplying total net metered generation by a nodal surcharge factor. ( Protocol Section 9.7.6) QNSiq=NODSF * MRiq Where: QNSiqQSE NIS per interval ($) MRiqReal-Time net metered generation in MWh per interval for the given QSE NODSFNodal surcharge factor ($/MWh) i15 minute Settlement Interval being calculated qQSE ERCOT Nodal Implementation Surcharge Module 3 General Fees

105. 105 ERCOT Wholesale Market Basics To see a complete list of ERCOT Fees, go to the Current PROTCOLS under the Market Rules of ercot.com. http://www.ercot.com/content/mktrules/protocols/current/ 53-ERCOT%20Fee%20Schedule%20-%20012009.doc ERCOT Registration Fee Module 3 General Fees

106. 106 ERCOT Wholesale Market Basics Questions Module 3