History of UFE: Allocation Discussions, Calculation, and Impact on Settlements

1. History of UFE (shortened version of presentation provided at UFE Taskforce Workshop on 9/14/2004) UFE Taskforce Meeting February 21, 2006

2. Agenda • A Primer on UFE • History of UFE Allocation Discussions • UFE References in Protocols • Example of UFE Calculation and Allocation • UFE Data Available to the Market • Profile Discontinuity Issue • PWG/ERCOT Activities with UFE Impact

3. A Primer on UFE

4. What is UFE? • Unaccounted-For-Energy is the difference between the total generation supplied to a specific physical region and the total load plus losses in that same physical region during each settlement interval • UFE may be positive or negative in any single settlement interval ( ) ( ) Generation + Gen. Metered Inflows - Gen. Metered Outflows Total Generation End-Use Load + Distribution Losses + Transmission Losses Total Load UFE • Negative UFE generally indicates load/loss overestimated

5. CALCULATION OF UFE UFE Net Load (Generation) for Settlement Interval (Includes Actual Losses in the UFE Zone) GAP - - - - - - > ERCOT Wide (Postage Stamp) Transmission Line Losses Distribution Line Losses Profiled Energy Usage Non-Interval Data Non-Metered Accounts Net Generation compared to Retail Load Build-up Interval Data Metered Accounts

6. DISTRIBUTION UTILITY • Inaccuracy of method used • to calculate distribution losses. • Unrecorded services. • ERCOT SYSTEMS • Inaccuracy of load • profiles on a settlement • interval basis. • Incorrect aggregation of • retail load or zonal • generation. • Inaccuracy in method • used to calculate • transmission losses. • Incorrect assignment of • customer to profile type. • Incorrect assignment of • customers to UFE zone. • Theft • METERING AGENT • Incorrect meter data. • Inaccuracy in calculation of • un-metered service • consumption. • Meter reading errors. • Errors in estimation of meter • readings. Contributors to UFE

7. UFE’s Effect on Settlements

8. History of UFE Allocation Discussions

9. UFE Allocation Discussion History • Utility survey performed to determine estimate of percentage of UFE by each contributing factor. • • Nine companies responded to reformatted survey • • Categorized contributing factors to customer type • • Final allocation algorithms were developed based upon the survey results

10. Allocation methodology must recognize that high voltage customers and interval data recorders contribute less to UFE on an interval by interval basis. Principle: UFE Allocation Principle

11. Utility Survey of UFE Contributing Factors

12. UFE Allocation Factors by Delivery Point Type

13. UFE Allocation Discussion History • Decision was made to accept the Allocation mechanism defined by a representative of Austin Energy as the output of the algorithm most closely matched the results of the UFE Allocation survey data • Results were incorporated into Protocols

14. January 2006 Allocation Percentages (based upon interval by interval analysis of initial settlements) TOTAL UFE RANGE MAX 801.36 MIN 500.24 AVG 26.80 AVG % 0.39% Non-IDR UFE PERCENTAGES MAX 87.15% MIN 76.37% AVG 81.56% DISTRIBUTION IDR UFE PERCENTAGES MAX 19.84% MIN 10.99% AVG 15.90% TRANSMISSION IDR UFE PERCENTAGES MAX 3.90% MIN 1.73% AVG 2.54%

15. UFE References in Protocols

16. Section 11.3.6 Unaccounted for Energy Calculation (UFE) and Allocation • The Data Aggregation System shall adjust the net loss adjusted Load for each aggregated group for Unaccounted for Energy (UFE). • The Data Aggregation process will calculate the difference between net loss adjusted Load for the entire ERCOT System, which has been adjusted for Distribution Losses and Transmission Losses, and the total system Load (generation) in order to determine the total UFE. • The calculated UFE for each Settlement Interval is then allocated to Loads. • Net flow out of ERCOT on a DC Tie will be deemed as Load, and net flow into ERCOT on a DC Tie will be deemed as a Resource

17. Section 11.3.6.1 Calculation of ERCOT-Wide UFE • The Data Aggregation System will calculate ERCOT-wide UFE as the difference between the total generation supplied to a specific physical region (ERCOT) and the total Load, adjusted for losses in that same physical region (ERCOT) during each Settlement Interval. • UFE may be positive or negative in any single Settlement Interval. • UFEi (MWh) = ERCOT Generationi Total ERCOT Net Loss Adjusted Loadi Total –

18. Section 11.3.6.2 Allocation of UFE • ERCOT will allocate UFE to specific categories based upon adjusted Load Ratio Share. The adjusted Load Ratio Share will be determined using the following UFE category weighting factors: (1) 0.00 - Transmission Voltage level IDR Non Opt-in Entities (2) 0.10 - Distribution Voltage level IDR Non Opt-in Entities (3) 0.10 - Transmission Voltage level IDR Premises (4) 0.50 - Distribution Voltage level IDR Premises (5) 1.00 - Distribution Voltage level Profiled Premises • The ERCOT Data Aggregation System shall provide a mechanism to change the UFE category weighting factors for specific transition periods.

19. Section 18 – Load Profiling • Section 18.2.1 Guidelines for Development of Load Profiles – (3) Minimize the Load Profiles’ contribution to UFE over all Settlement Intervals, paying particular attention to higher cost periods • Section 18.2.8.1 Samples - ERCOT will review load research sample validity (e.g. difference-of-means test) at the following times: 1) every year, and 2) when discrepancies (such as excessive UFE) or disputes warrant. • Section 18.2.8.2 Models - ERCOT shall monitor the applicability of the Load Profiling models by comparing all available actual IDR data samples with estimates generated from the profile model by interval for the same time period. Should these comparisons reveal significant discrepancies, ERCOT should take appropriate action and coordinate with the appropriate ERCOT TAC subcommittee (UFE analysis function), if necessary.

20. Example of UFE Calculation and Allocation

21. Step 1 Determine Load Per UFE Category Transmission Voltage Level IDR Non Opt-in Entities Distribution Voltage Level IDR Non Opt-in Entities Transmission Voltage Level IDR Distribution Voltage Level IDR Distribution Voltage level Profiled Calculate & Allocate UFE TDSP = NOIE and Profile ID Meter Type = IDR and DLF Code = “T” TDSP = NOIE and Profile ID Meter Type = IDR and DLF Code  “T” TDSP  NOIE and Profile ID Meter Type = IDR and DLF Code = “T” TDSP  NOIE and Profile ID Meter Type = IDR and DLF Code  “T” Profile ID Meter Type  IDR

22. Step 2 Determine Adjusted Load Per UFE Category Calculate & Allocate UFE

23. Step 3 Calculate Total UFE per UFE Zone Calculate & Allocate UFE

24. Step 4 Allocate UFE to Each UFE Load Category Calculate & Allocate UFE

25. Calculate & Allocate UFE Step 5 Allocate UFE to Loads within each UFE Load Category

26. UFE Data Available to Market UFE Data Sets Made Available to the Public • Total Load per UFE Zone • Total Generation per UFE Zone • Total UFE per UFE Zone • Total Load per UFE Category per zone • Total UFE allocated to each UFE Category per zone

31. ERCOT Generation for 12/2 and 12/3

32. ERCOT Generation & NIDR Load for 12/2 and 12/3 Note: NIDR Load includes distribution and transmission losses

33. Generation & NIDR Load for last intervals of 12/2 & the first intervals of 12/3 Note: NIDR Load includes distribution and transmission losses

34. RESHIWR_EAST profile for last intervalsof 12/2 & the first intervals of 12/3

35. Other profiles for last intervals of 12/2 & the first intervals of 12/3

36. Discontinuity of profiles Four profiles decreased significantly between the first interval of 12/3 from the last interval on 12/2 • Decreased by: • 121% for RESHIWR_EAST • 90% for RESLOWR_EAST • 88% for RESHIWR_NORTH • 77% for RESLOWR_NORTH

37. Discontinuity of profiles Seven profiles decreased by 30% to 50% • Decreased by: • 52% for BUSLOLF_WEST • 43% for RESLOWR_NCENT • 42% for RESHIWR_WEST • 40% for RESHIWR_COAST • 40% for RESLOWR_WEST • 36% for BUSMEDLF_NORTH • 34% for BUSLOLF_EAST

38. Discontinuity of profiles • Seven profiles decreased by 20% to 25% • Five profiles decreased by 10% to 19%

39. ERCOT Generation • ERCOT’s generation decreased by 2.4% during the same time frame (i.e., between the first interval on 12/3 and the last interval on 12/2).

40. UFE • Seeing that the profiles resulted in a significantly lower kwh value between the first interval on 12/3 as compared to the last interval on 12/2, the amount of UFE in the early morning hours increased significantly. • The total NIDR transmission adjusted load decreased by 16% while ERCOT’s generation decreased by only 2% during the same timeframe.

41. PWG/ERCOT Activities with UFE Impact • IDR Requirement Threshold • Load Research Project • Profile ID Assignments • Annual Validation Responsibility Change to ERCOT • Residential Profile ID Assignment Algorithm

42. IDR Requirement Threshold • Effective October 1 the IDR Requirement Threshold was lowered from 1,000 kW to 700 kW • Recommendation was based on ERCOT analysis of all ESIIDs with IDRs having demands less than 1,000 kW • To date 1,376 ESIIDs have met the IDR threshold since October • As of the February report 653 IDRs had been installed since October • TDSPs/CRs appear to be on schedule with completing the required installations by the April 30 deadline in Protocols • As of April 30 ERCOT will have approximately 10,400 IDRs (9,400 on competitive ESIIDs) in use for settlement • About 3,900 GWH moved from settlement with profiles to settlement with IDRs • Next Steps • Evaluate improvements in settlement accuracy associated with the lower threshold • Use ERCOT load research data to evaluate further lowering of the threshold

43. Load Research Project • Load Research sample data has been (and continues to be) collected from a sample of about 4,000 ESI IDs • The samples are stratified by Profile Type, Weather Zone and Annualized kWh consumption; for Business Profile Types an additional level of stratification by service voltage level has been incorporated • ERCOT has been focused on sample point maintenance and data validation issues since these are a prerequisite to beginning data analysis • The first phase of analysis will target comparing current model performance … a comparison of profiles estimated by the load research sample vs. profiles generated by the current ERCOT models … scheduled to be complete next month • The second phase of the Load Research Project will target development, as indicated, of new models and an assessment of supplemental sampling needs … additional sample points are expected to be selected in April and IDRs installed by November • A prerequisite to this analysis is resolution of Profile ID assignment issues currently being addressed by PWG • The third phase will target an assessment of profiling methodology … a comparison of the adjusted static models with other methodologies, notably lagged-dynamic profiling and perhaps others as they are identified • New Profile Request for Oil and Gas • Ercot is analyzing a subset of the load research data along with a small supplemental sample to evaluate the merits of establishing a new Profile for ESI IDs involved with Oil and Gas Extraction • The expected outcome of the analysis is approval of a new profile type and model • Initial examination indicates that oil and gas ESI IDs load shapes are significantly different than the profiles they’re being settled on and thus contribute to settlement inaccuracy

44. Profile ID Assignment • Since market open, during the Annual Validation process, high levels of ESI IDs migrating between Profile ID assignments have been occurring • PWG has made changes in the Profile ID assignment methodology each year in an attempt to reduce migration • Migration reductions have been realized, but the rates remain high • Beyond the obvious transaction processing issues the migrations have indicated a continuing high level of inaccurate Profile ID assignments, which results in settlement error • The Annual Validation process looks back at historical usage to make the Profile ID assignment and applies the Profile ID prospectively • Thus for a substantial number of ESI IDs, the assignment is “out of phase” with the usage • The ERCOT Residential Customer Survey has revealed that there is a substantial amount of error in the Residential Profile ID Assignment methodology that has been in use • ESI IDs with electric heating systems assigned to RESLOWR, and • ESI IDs with non-electric heating systems assigned to RESHIWR • Many of the erroneous assignments are caused by occupancy changes • Very little heating system conversion is occurring • ERCOT has developed an improved Residential Profile ID Assignment algorithm, which is expected to result in more accurate assignments • The principle way the algorithm achieves this accuracy improvement is by using multiple years of historical usage … thus reducing the impact of year-to-year occupancy changes • TDSPs will not be able to support use of multiple years of history in the Profile ID assignment process, for this reason and others, PWG is recommending shifting the Annual Validation calculation responsibility to ERCOT • An LPGRR to change Annual Validation Calculation Responsibility will be submitted by PWG in the near future

45. Questions