General Overview Of

Resource Costs By

Ino González

Nov 8, 2010

Resource Costs

Resource Costs• Proxy for marginal operating costs

• Fuel Costs• Operation and Maintenance (“O&M”) costs.

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How are Resource Costs Used

Resource Costs • Used in the three stages of the power generation cycle:

• Startup to LSL◦ Startup Fuel and Incremental O&M

• Operation at LSL◦ Fuel at LSL and Incremental O&M

• Operation above LSL◦ Mitigated Offer Curve for Incremental Cost Above LSL

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Use of Resource Costs in Three-Part Supply Offers

Three Part Supply Offer

• Startup Offer

• Minimum-Energy Offer

• Energy Offer Curve

$/MWh to operate at sustained

level

$ to Startup

$/MWh to operate at given MW

quantities above sustained level

Offer Caps – DAM and RUC

Cap Supply Offers

• Startup Offer

• Minimum-Energy Offer

$/MWh to operate at sustained

level

$ to Startup

Real Time Mitigation

Cap Supply Offer

• Energy Offer Curve in SCED

$/MWh to operate at given MW

quantities above sustained level

Startup Offer Cap ($/Start)

Startup Offer Cap = Fuel Costs + O&M

• O&M = Operation & Maintenance Costs

• Calculated for each Startup Type• Cold Start• Hot Start• Intermediate Start

How are Startup Offer Caps Calculated

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Minimum Energy Offer Cap ($/MWh)

Minimum Offer Cap = Fuel Costs + O&M

• Costs at LSL

How are Min Energy Offer Caps Calculated

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Startup Offer and Min Offer CapsUsing

Generic Costs

How are Startup Offer Caps Calculated

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Generic Startup Offer Cap ($/Start) for CCP > 90MW

Startup Offer Cap = $6,800/Start

• Startup Offer Cap applies to all configurations

• Same value for each start type• Cold Start• Hot Start• Intermediate Star• Use as default value by ERCOT if no other costs are

filed Note: CCP = Combined Cycle Plant

How are Startup Offer Caps Calculated

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How are Min Energy Offer Caps Calculated

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Generic Min Energy Offer Cap ($/MWh) for CCP > 90MW

Minimum Offer Cap = 10 MMBtu/MWh * FIP

• Costs at LSL

• Fuel costs based on generic heat rate

• Use as default value by ERCOT if no other costs are filed

How are Min Energy Offer Caps Calculated

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Startup Offer and Min Offer CapsUsing

Verifiable Costs

Verifiable Costs include:• Fuel consumption rates (actual)• Incremental Operation & Maintenance (O&M) costs

• Variable O&M• Emission credit costs• Nodal Surcharge Factor

Permissible Verifiable Cost

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Startup Fuel and Incremental O&M• Verifiable Startup Offer costs

• Replace generic caps on Startup Offers• Are calculated using

◦ FIP/FOP◦ Verifiable fuel rates◦ Incremental O&M

How Verifiable Costs are Used

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QSE’s Startup Offer

_ Startup Offer Cap calculated using verifiable costs

<

Minimum-Energy Fuel and Incremental O&M• Minimum Operating Costs

• Replace generic caps on Minimum Energy Offers• Are calculated using

◦ FIP/FOP◦ Verifiable fuel rates at LSL◦ Incremental O&M

How Verifiable Costs are Used

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QSE’s Minimum

Energy Offer_

Minimum Energy Offer cap calculated using verifiable

costs<

Verifiable Startup Costs ($/Start)

Startup Offer Cap = Fuel Costs + O&M

• O&M = Verifiable Operation & Maintenance Costs

• Calculated for each Startup Type• Cold Start• Hot Start• Intermediate Start

How are Verifiable Costs used

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How are Verifiable Costs used

Verifiable Fuel Cost to Start ($)

• Fuel Quantity = MMBtu• Fuel Quantity Price = $/MMBtu

Fuel Cost = Fuel Quantity x Fuel Price x Fuel Percentage

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How are Verifiable Costs used

Verifiable O&M to Start ($)

O&M Cost = O&M costs + Emissions Costs + Nodal Surcharge

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Verifiable Minimum Energy Costs ($/MWh)

Minimum Offer Cap = Fuel Costs + O&M

• Costs at LSL

How are Verifiable Costs used

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How are Verifiable Costs used

Verifiable Minimum Energy Fuel Cost at LSL ($/MWh)

• Fuel Quantity = MMBtu/MWh

Fuel Cost = Fuel Quantity x Fuel Price x Fuel Percentage

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How are Verifiable Costs used

• Energy Offer Curves may be subject to mitigation in Real-Time operations using a Mitigated Offer Cap

• ERCOT will construct an incremental Mitigated Offer Cap Curve

• Generating Resources online after January 1, 2004 the Mitigated Offer Cap Curve will be the greater of (point by point):

14.5 MMBtu/MWh x minimum of FIP or FOP

OR

Resource’s IHR Curve x ((percentage of FIP x FIP) + (percentage of FOP x FOP))/100 + verifiable variable O&M costs times a multiplier

• For Resources online before January 1, 2004 the Mitigated Offer Curve will be the greater of (point by point)10.5 MMBTU/MWh or the IHR curve

Mitigated Offer Curve

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Where Verifiable Costs are Used

Protocol Requirements for Calculating Make-Whole Payments

• Price used for Make-Whole payments is as follows:

Before ERCOT Approval After ERCOT Approval

• Generic Startup Offer Cap for the Resource Category; and

• Startup Offer Cap based on

approved verifiable unit-

specific costs; and

• Generic Minimum-Energy Offer Cap for the Resource Category

• Minimum-Energy Offer Cap

based on approved

verifiable unit-specific costs

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Standard Costs

Standard Costs Include:• Fuel consumption rates (actual)• Operation & Maintenance (O&M) costs

• As defined in the Protocols

Permissible Standard Costs

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Differences Between Generic Costs

Verifiable CostsStandard Costs

Differences in Cost Categories

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Type of Cost Filing with ERCOT

Generic Not required

Verifiable Required*

Standard Required**

* For Resources receiving 5 RUC deployments in a year** May substitute Standard Costs (O&M) in lieu of actual verifiable O&M** Only valid through 12/31/2011 unless Board approves changes/extensionNote: Cannot mix costs, part generic, part verifiable or part Standard

Differences in Cost Categories

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Start Up Cost Startup Fuel Rate(MMBtu)

O& M($)

Generic None Protocol value(4.4.9.2.3.1)

Verifiable Resource actual Resource actual

Standard Resource actual Protocol value(5.6.1.6)

Differences in Cost Categories

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Min Energy Cost Heat Rate(MMBtu/MWh)

O& M($/MWh)

Generic Protocol value(4.4.9.2.3.2)

None

Verifiable Resource actual Resource actual

Standard Resource actual Protocol value(5.6.1.6)

Differences in Cost Categories

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RT Mitigation Fuel Rate(MMBtu/MWh)

O& M($/MWh)

Generic Generic Heat Rate(4.4.9.4.1)

None

Verifiable Resource actual Resource actual

Standard None None

Any Questions?

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Module Summary

Related Links• Verifiable Costs template

• http://nodal.ercot.com/readiness/golive/kd/Verifiable_Costs_Submission_Template_v9.xls

• Verifiable Costs Manual• http://nodal.ercot.com/readiness/golive/

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