1. Joint PLWG/CMWG Assignment Update to ROS September 15, 2011

2. 1 Joint CMWG/PLWG Assignment May 17 Board Resolution: THEREFORE be it RESOLVED, that the ERCOT Board hereby approves the revised ERCOT Business Practice, Setting the Shadow Price Caps and Power Balance Penalties in Security Constrained Economic Dispatch, as described in Attachment A to be effective on May 25, 2011, and directs the Technical Advisory Committee (TAC) to report back to the ERCOT Board on the following: (1) a recommendation for a holistic methodology for setting appropriate Shadow Price caps for constraints not resolvable by Security Constrained Economic Dispatch (SCED) and (2) a recommendation for addressing gaps between operations and planning processes to be able to identify constraints not resolvable by SCED. Material gaps have been observed between irresolvable constraints in Operations and Planning. The PLWG has sought to understand the potential drivers of this gap and make recommendations aimed at narrowing this gap.

3. 2 How Big is the Gap? Over 1,200 Facility-Intervals were definitely SCED Irresolvable. A subset of an additional 3,800 Facility-Intervals may have been SCED Irresolvable if EEAs had not been declared. During Emergency Conditions (e.g., EEA) declared by ERCOT 1, the N-1 security testing by SCED may be suspended to give Operations access to all generation in order to maintain power balance 2. During high system stress, post contingency overloads up to 132% were present, which could potentially fall into the SCED Irresolvable category during non-EEA time periods. 1)Nodal Operating Guides, Section 2.2.2 (2) 2)Appendix lists overloaded elements not enforced during the August EEA events, presumably to maximize generation available to serve load

4. 3 What are the main drivers of Gap? 1)Load assumptions – Burden of proof to justify reasonable variations of load 6,600 MW - 4,500 MW * SSWG 11Sum1 case (Posted Aug. 30, 2007), SSWG 14Sum1 case (Posted Apr. 28, 2011) ** Capacity, Demand and Reserve Report (CDR Posted June 2011) Without pre-defining and applying “reasonable variation of load” for studies, there is potential to significantly increase amounts of SCED Irresolvability in the future due to this recent process change. Historically, the SSWG basecase loads have been higher than the ERCOT coincident peak forecast, reflecting both regional diversity of peak loads, and reasonable variations of load. Recently, this practice has been largely eliminated resulting in better align between SSWG basecases and the ERCOT-wide peak load forecast. 4,524 MW, 7.1%

5. 4 What are the main drivers of Gap? (cont.) 2)Generation unavailable for congestion relief: Derates, Forced Outages, Planned Outages “Up” Ancillary Service -7,061 MW G-1 (Maximum is STP @1,362 MW) 1 Key Risk: Generation capacity that is unavailable for congestion relief in Real Time Operations is largely seen as available in transmission planning studies. During 2011 peak load conditions, approximately 8,400 MW was unavailable for congestion relief due to the combined effect of outages, derates, and capacity committed to A/S. 1.ERCOT Planning Criteria: “With any single Generation Resource unavailable, and with other generation preemptively redispatched, ….. 2. Maximum lost capacity (de-rate, planned and forced outages) on August 4, 2011 during EEA2B per ERCOT EEA Events Report (see page 5) 2 <=

6. 5 What are the main drivers of Gap? (cont.) 3)Simultaneous Feasibility: Example: Generator “A” provides congestion relief. > 500 MW output to eliminate contingency overload “1” ------- Simultaneously -------- < 400 MW output to eliminate contingency overload “2” In Planning this could be considered feasible 1 In Operations this is “SCED Irresolvable” 2 Generator “A” ~ Currently, even though not required by the Planning Criteria, ERCOT’s 5-Year Plan studies are tested for simultaneous feasibility of constraint management. Proposed language changes in PGRR011 and NPRRR409 codify the need for this testing in ERCOT Planning studies. 1.Although not explicitly required by the Planning Criteria currently, ERCOT is testing for for simultaneous feasibility in their 5-Year Plan Study 2.Does not simultaneously satisfy network constraint requirements of Nodal Protocol Section 6.5.7.3.

7. 6 What are the main drivers of Gap? (cont.) Promotes further consistency of facility rating assumptions between Planning and Operations for Dynamic Line Ratings and Generic Constraints 4)Transmission Facility Ratings: A.Dynamic Line Ratings – Planning studies that have loads levels corresponding to high-temperature driven load levels, should have the same temperature assumption applied to the Dynamic Line ratings. B.Generic Constraints Ratings – the rating of defined interfaces in Operations should be reflected with the same rating in Planning studies.

8. Language addressing an Autotransformer outage, as an initial condition, is crafted similar to proposed NERC TPL-001; while utilizing a 12 week exposure window threshold. 7 What are the main drivers of Gap? (cont.) 5)Study Long-Term outage as an initial condition A.Generation – Historical ERCOT planning criteria of studying an initial condition with a single generator out is expanded to include all feasible operating configurations of a Combined-Cycle Train due to the potential long-lead time for restoration to service. B.Autotransformer – Apply as initial condition similar to generator outage, due to the potential long-lead time for replacement. This applies if spare equipment strategy does not allow replacement within 12 weeks. Significant disagreement concerning “5B. Unacceptable study results can be resolved by transmission projects, RAPs, SPSs, or other means as appropriate.

9. 8 What are the proposed solutions to close Gap? These items represent modifications to the planning process to help close the gap between Planning and Operations.

10. 9 What are the proposed solutions to close Gap? (cont) Four Revision Request documents that are integral to closing the gap: 1.Transmission Planning – PGRR011: Pre-approve “reasonable variations” of assumptions Expand G-1 to include outage of all CCCT feasible configurations Study “initial state” with Autotransformer outaged (i.e., accounts for potential failure of long-lead time equipment) 2.Outage Planning – NPRR409: Consistent “reasonable variation” approach as PGRR011 (i.e., Transmission Planning and Outage Planning assumptions match) 3.Real Time Security Analysis – NOGRR078 Clarifies language so that Real-Time security studies are consistent with current Nodal operating practices. 4.Reporting of SCED Irresolvable to ROS – NPRR385 (Section 6.5.7.1.10 (6)) 1 Report monthly SCED Irresolvable episodes, perform root cause analysis, and recommend solutions to avoid repeating. 1)This NPRR is in the Revision Request process, currently being reviewed by PRS. This NPRR is mentioned here as it may be relevant to ROS for consideration of a monitoring process. This has not been discussed in the Joint CMWG/PLWG meetings.

11. 10 Could this lead to a “Gold Plated” System? Current State – the Board recognized that there is currently a material gap between Planning and Operations as outlined within Proposal to Close Gap – provides the tools to use, as needed, to close the Gap. Does not require projects as the only solution. Potential Process - to monitor Gap closure and avoid overshoot: 1.Threshold: ROS develop target range of acceptable SCED irresolvable performance. 2.Monitor: Report SCED irresolvable performance in monthly ERCOT System Planning Report (as described in NPRR385) 3.Assess: Determine Root Cause? (as described in NPRR385): Outage Planning, Transmission Planning, Unanticipated system conditions, etc… 4.Modify Process As Needed: Opportunity exists to modify (e.g., further enhance or reduce ) these proposals as needed to achieve desired target ranges of acceptable SCED irresolvable performance.

12. 11 What Could a Monitoring System Look Like? Monitor and Provide Feedback of SCED Irresolvable Performance 1.Monitor: ROS could recommend a “target” range of acceptable SCED Irresolvable performance. 2.Report: ERCOT report SCED Irresolvable in monthly System Planning Report (as described in NPRR385) 3.Assess: ERCOT determine Root Cause (as described in NPRR385) A. Outage Planning? B.Transmission Planning? C.Unanticipated system conditions? 4.Adjust as Needed : Have appropriate TAC Subcommittee (e.g.ROS) recommend solutions to further reduce SCED Irresolvable episodes

13. 12 Appendix

14. 13 August EEA Events - Inactive Constraint Loading 1 Provides supporting details for page 2 1.Excludes all overloaded facilities that are protected by RAPs, PCAPs and Mitigation Plans

15. 14 August EEA Events - Inactive Contingency Loading (cont.) Provides supporting details for page 2

16. 15 August EEA Events - Inactive Contingency Loading (cont.) Provides supporting details for page 2