T&D Losses Reflecting Losses in DR within ERCOT August 22, 2012

T&D LossesReflecting Losses in DR within ERCOTAugust 22, 2012

Losses Introduction

Reflecting T & D Losses in DR 08-22-122

o Loss factors are calculated on a 15 minutes basis to estimate amount of electricity lost in the transmission and distribution system

o TDSPs create and assign loss codes (often, although not necessarily, based upon voltage level) to ESIIDs and provide the coefficients used in the calculation of loss factors

o [Metered Load * (1/(1-DLF))] * (1/(1-TLF))

Unaccounted for Energy (UFE) added after losses

Losses Introduction (continued)

Reflecting T & D Losses in DR 08-22-123

o Losses are forecasted for two days in advance with actual losses calculated the day after flow

o QSEs are charged but load typically pays for these losses, although the load never sees that electricity pass through it’s meter

o This is not about losses behind the meter, but rather describes the losses between two accepted lines of demarcation – the generation meter and the load meter

Concept

Reflecting T & D Losses in DR 08-22-124

o The grid impact of 1 MW of metered demand response is not the same as 1 MW of additional generation

o 1 MW of generation satisfies something less than 1 MW of metered load as electricity due to losses

o Conversely, 1 MW of metered load curtailment replaces something more than 1 MW of generation as losses are avoided

Losses Illustrated

Reflecting T & D Losses in DR 08-22-125

Transmission Level service

• 1.3% to 2.6%

Distribution Level service – Primary• 2.0% to 11%

Distribution Level service –

Secondary• 4.0% to 19%

9.7 MWs

30 MWs

8.9 MWs

8.1 MWs

Suggested Solution

Reflecting T & D Losses in DR 08-22-126

o Demand Response that is offered in any ERCOT related program or market should be grossed up to reflect the applicable transmission and distribution losses that would have applied to measured curtailed volumes

Benefits

Reflecting T & D Losses in DR 08-22-127

o More equitably compensates DR for grid impacto Recognizes true impact on grid including reducing stress on distribution assets o Volumes of offered demand response not curtailed are adjusted for losses by LSE for retail electricity billing

o Most beneficial for smaller customerso Untapped (and needed) DR potentialo Utilize smart meterso Inline with goals of SB1125

Benefits (continued)

Reflecting T & D Losses in DR 08-22-128

o Aligns ERCOT with other regions for DR reportingo Most other ISOs with a history of successful demand response programs incorporate this concept into their programs, including PJM, ISO-NE, and NYISO

o Facilitates LMP – G for Real Time Market dispatcho LMP – G settlement would gross up curtailed volumes to bill customer for G; curtailed volumes should also be grossed upo Should speed implementation of Loads in Real Time Market dispatch as methodologies will be defined

Issues List

Reflecting T & D Losses in DR 08-22-129

o Items to be considered:o UFEo NOIE losseso Impacts for LRo Impacts to ALRo Impacts to CLRo ERS Settlement calculationso ERS Compliance calculations

UFE

Reflecting T & D Losses in DR 08-22-1210

o Including UFE will foster consistency.o If participating in Real Time Market, and with the LMP – G concept, an LSE would be charged for the same volume as the DR QSE would be paido Customers receiving statements would see same volumes

o Including UFE will increase uncertainty, making it more difficult for:o Complianceo Reserves procurement in SCEDo Budgeting

o Recommendation: Do not adjust for UFEo Differences should be small so benefits will be limited

NOIE Losses

Reflecting T & D Losses in DR 08-22-1211

o NOIEs are not required to provide Distribution Loss Factors to ERCOT

o Providing DLFs for use only for demand response opens potential for gaming

o Recommendation: All meters behind NOIE territories are grossed up for only the Transmission Loss Factors

Impacts for LR

Reflecting T & D Losses in DR 08-22-1212

o QSEs determine volumes to schedule based upon expected load and forecasted losseso Actual loss factors not available until T+1 and therefore cannot give real time awareness

o Telemetry provided to ERCOT would be grossed up by the appropriate forecasted loss factorso [Metered Load * (1/(1-DLFForecasted))] * (1/(1-TLFForecasted))

o LR settlement is unchanged as it is based upon scheduled volumes

o LR compliance is unchanged since telemetry would be grossed up

Impacts for LR (continued)

Reflecting T & D Losses in DR 08-22-1213

o Should the telemetry be grossed up by ERCOT or by the QSE?o Implementation at ERCOT would entail a single change vs. all QSEs making changeso Implementation at QSE would ensure QSE personnel see the values used for meeting their obligations and those used for complianceo If a QSE doesn’t implement, harms only that QSE and their customers

o Recommendation: QSEs responsible for grossing up for losses

o Would introduce some (likely very small) level of loss forecast risk

ERS Compliance Calculation - Alternate

Reflecting T & D Losses in DR 08-22-1214

o Alternateo Contract Capacity (CC) offers could be maximized by QSEs based upon expected actual loss factorso Maximum Base Load (MBL) submitted based upon metered value but grossed up for losses by ERCOT for availability and performance calculationso Availability calculation to be based upon CC, grossed up metered volumes and MBL (DLF and TLF) o Performance compares grossed up metered values vs. grossed up MBL

ERS Compliance Calculation - Default

Reflecting T & D Losses in DR 08-22-1215

o Defaulto CC offers could be maximized by QSEs based upon expected actual loss factorso Availability calculation to be based upon CC and grossed up metered volumes (actual DLF and TLF) o Performance compares grossed up metered values vs. CC

ERS Compliance Calculation - Risks

Reflecting T & D Losses in DR 08-22-1216

o Riskso May increase availability risk as actual loss levels will not be known in advanceo Difference of submitting grossed up CC and metered MBL is a potential source of confusiono QSEs that offered based upon metered volumes for consistency and to avoid confusion would reduce availability risk and not be affected for performance risk

ERS Settlements Calculation - Settlements

Reflecting T & D Losses in DR 08-22-1217

o Settlements unchangedo Would continue to use the availability and performance metrics to get combined performance factoro Costs allocated based upon load ratio share

Next Steps

Reflecting T & D Losses in DR 08-22-1218

o Identify / resolve outstanding issues:o LRo ERSo ALRo CLR

o LR – change in Operating Guide?o ERS – NPRR with small changes to compliance sections

Chair Contact Information

Tim Carter713-646-5476

tim.carter@constellation.com

Reflecting T & D Losses in DR 08-22-1219