Proposed Refinements for ERS Rules

1. Proposed Refinements for ERS Rules QMWG June 8, 2012

2. Principles • Give ERCOT reliable dispatchable load response in emergency conditions • Minimize price depressing impacts of load shed during scarcity conditions • Maximize QSE flexibility to procure ERS loads • Provide “sunshine” reporting to ensure ERS is performing as expected

3. Reliable dispatchable load response • The Commission reiterated in its order approving P.U.C. Substantive Rule 25.507, Electric Reliability Council of Texas Emergency Response Service that: … [The] nature of this service - availability of interruptible load to forestall the need for firm load shed in an energy emergency -- makes it absolutely essential that participants in the program perform when called upon. When a program participant fails to fulfill its contracted duties, that participant has demonstrated its inability to deliver this very valuable service, and should be excluded from the program until it has demonstrated its ability to do so.* • The current rules do not actually measure whether an ERS resource responds when called upon – they measure to ensure the ERS resource was not late in performing, but do not measure whether the ERS resource “performed” before it was deployed. Rulemaking to Amend Subst. R. § 25.507, Relating to Electric Reliability Council of Texas ERCOT Emergency Interruptible Load Service (EILS), P.U.C. Project No. 39948, Order Adopting Repeal of § 25.507 and New § 25.507 as Approved at the March 22, 2012 Open Meeting at p. 18 (Mar. 23, 2012) (emphasis added).

4. August 4th Deployment Event Baseline Load Actual Load Load Reduction Obligation From ERCOT “2011 EILS Deployments,” presented at QMWG May 4, 2012

6. Minimize price depressing impacts of load shed during scarcity conditions • Proposal - Add a third criterion for evaluating ERS performance in Protocols §8.1.3.1.4 as follows (or similar): “ERCOT shall measure for each ERS Resource the pre-deployment integrated energy for the four fifteen minute settlement intervals prior to the deployment for each deployment event. The total actual energy quantity of the four settlement intervals prior must be at least 90% of the appropriate baseline quantity unless ERCOT was timely notified of an ERS Resource outage. Failure of this requirement will result in failure of all intervals for the deployment of that ERS Resource.”

7. Maximize QSE flexibility to procure ERS loads • Under the current rules, the QSE is responsible for the correct performance of the ERS Resource, without the ability to control it.   This occurs in several places: • 3.14.3.1(7)(f) – the QSE has to affirm that they are familiar with all local, state and federal environmental regulations and that the use of the resource for ERS service will not violate anything.  • 8.1.3.3 – the QSE can fail its performance metrics for bad ERS performance; however, an ERS resource can get an excuse for performance if the QSE fails in its obligation to notify of a deployment.  • 8.1.3.3.1(2) – a performance failure by the QSE results in a Protocol violation, subject to fines from the PUCT.  No similar language exists for an ERS Resource that fails to perform.

8. Maximize QSE flexibility to procure ERS loads • If the compliance obligation for deployment were more strongly on the ERS Resource, more QSEs would be willing to participate and the program could grow. • Placing more responsibility on the ERS Resource would not preclude participation by small loads because they are allowed to aggregate into an ERS Resource. • The portfolio-based performance metrics may allow a load that would respond anyway (such as a 4CP load) to receive a capacity payment for ERS even though it is not providing any additional value to the ERCOT grid.

9. Provide “sunshine” reporting to ensure ERS is performing as expected • To avoid abuses of the ERS program, it would be helpful to have minor additional reporting requirements. • Proposals - Add language in Protocols § 3.14.3.3 as follows (or similar):“Not later than 45 days after the end of the ERS Standard Contract Term, ERCOT shall report to TAC the dates and times of all material outages for each ERS Resource to ensure that entities have endeavored to avoid outages during expected peak load conditions.” • Add language in Protocols §3.14.3.4 as follows (or similar):“In addition to the review by the PDCWG after each deployment event, ERCOT shall post to the MIS Secure Area anonymous performance statistics for each QSE and ERS Resource not later than 45 days after the end of the ERS Standard Contract Term.”