Overview of ERS Workshop

1. Overview of ERS Workshop Wholesale Market Subcommittee

2. ERS Workshop Overview WMS

3. NPRR564 Comments WMS • Support of moving from Pay-As-Offer to a market clearing price for all ERS types. • Support firm limits on the duration of ERS deployments • Include language to require ERS settlement data included in extracts ERCOT Response: ERCOT supports the requirement that ERS settlements data be included in extracts. ERCOT will work with the submitter to draft a separate NPRR for this requirement.

4. NPRR564 Comments WMS • Some, but not all, comments suggest separate auctions for ERS-10 and ERS-30. ERCOT Response: Separate auctions would introduce unnecessary complications in the procurement methodology. It is true that the two services have different characteristics, but both services are deployed for the same purpose; to avert or reduce a firm load shedding event. ERCOT’s position is that the value of the two services is equivalent. ERS-30 provides value by allowing deployment in EEA Level 1 while ERS-10 has value by having a shorter ramp period. • If a single auction is used and an ERS resource submits the same offer for both ERS-10 and ERS-30 which service is awarded if the offer is cleared? ERCOT Response: The service with the shortest ramp (ERS-10). This will be clarified in either the procurement methodology or as comments to the NPRR.

5. NPRR564 Comments WMS • Request clarification under what circumstances ERCOT may suspend QSE’s and resources providing ERS. ERCOT Response: The language provides flexibility to both ERCOT and the ERS providers during compliance discussions . The intent is that suspensions should be a possible outcome for circumstances such as a pattern of poor performance, egregious underperformance during events, unacceptable mitigation plans, etc. Bright line language for suspensions may result in unintended consequences.

6. NPRR564 Comments WMS • Concern pertaining to ERS sites associated with Dynamically Scheduled Resource. Request some assurance that there is no penalty/compliance issues beyond the replacement of ERS capacity. ERCOT Response: It will be the responsibility of the ERS provider to get confirmation from the NOIE that it will not be dynamically scheduling resources during the terms of the ERS Standard Contract Term.

7. NPRR564 Comments WMS • Deletion of ERCOT’s obligation to provide the QSE with historical data used to develop it default baseline ERCOT Response: • ERCOT Legal has determined that the historical data being addressed should be treated as ‘proprietary customer information’ as defined in PUC Rule is Substantive Rule 25.272(g)(1). • A mechanism already exists to obtain this data from TDSPs using their defined Letter of Authorization (LOA) process. ERCOT does not agree, based on resource limitations, that a parallel process should be set up requiring ERCOT to provide such data.

8. NPRR564 Comments WMS • Request the requirements of NPRR505 ERS Weather-Sensitive Loads to be included in NPRR564 ERCOT Response: The concepts of NPRR505 are currently being tested through the Weather-Sensitive ERS Pilot Project. This pilot project is scheduled to conclude at the end of September 2013 and a final report available before the end of the year. NPRR564 is currently on a schedule for consideration at the November BOD meeting. ERCOT does not support the inclusion of Weather-Sensitive ERS in NPRR564 due to its potential impact on the schedule.

9. Schedule for NPRR564 WMS Next Steps for NPRR564 • Sept 19, 2013: PRS vote on Urgent status & language if ready • If PRS recommends approval, NPRR can proceed to 10/3 TAC if desired by stakeholders, • Oct 3, 2013: Possible TAC vote • Nov 7, 2013: Last chance for TAC vote on NPRR prior to BOD meeting • Nov 19, 2013: Board vote on NPRR ERCOT is requesting WMS endorsement of NPRR564 today

10. ERS Procurement Methodology Comments WMS • Section B. Change Control Process • All comments favorable • Section D. ERS Offer Cap • Using a fixed cap of $80/MWh allocates too much of the $50 million annual budget to low risk periods. • Recommendation to use some variation of historical Responsive Reserve Service prices corresponding to ERS contract time periods. • Another alternative is to expand the possible range of the risk weighting factors

11. ERS Procurement Methodology Comments WMS Section D. ERS Offer Cap (Cont’) ERCOT’s Response: • ERCOT chose to use a single fixed offer cap to simplify one aspect of this procurement methodology. This eliminates any confusion of the cap in relation to the Standard Contract Terms and time periods. In addition varying offer caps are not necessary with the introduction of the risk weighting factors. These factors are time period specific and are used to allocate the annual budget across time periods. • ERCOT believes the range of 1-10 for the risk weighting factors is appropriate to begin with. If we start to observe unintended results the methodology can be amended with Board approval.

12. ERS Procurement Methodology Comments WMS • Section E. ERS Expenditure Limit • Support the use of a risk weighting factor as a mechanism to allocate the annual ERS budget • Section G. Clearing Price • Overall support moving to a market clearing price for ERS

13. ERS Procurement Methodology Comments WMS • Section H. ERS Capacity provided through ERS Self Provision • Recommendation to eliminate the clause that the value of self-provided ERS resources reduce the expenditure limit. ERCOT ‘s Response: 1) There is a cost to those that elect to self provide their ERS obligation. 2) Loads are charged for all ERS capacity based on their LRS and receive the equivalent of a payment for capacity self provided therefore the cost of this capacity should be charged against the expenditure limit.

14. Schedule for ERS Procurement Methodology WMS Oct 9, 2013: WMS review Nov 7, 2013: TAC review Nov 19, 2013: Board vote on OBD