Loads Acting as a Resource

Relationships with QSEs and LSEs

Keith E. EmeryTenaska Power Services Co.

Director, ERCOT

(A) Capacity Revenue (ERCOT buys RRS for 24 hours)

10 MW x $6.25 per MW/hr x 24 hours = $1,500

(B) Energy Revenue (ERCOT Deploys RRS for 4 hours)

(C) Resource-Specific Premium (ERCOT OOMs LaaR)

10 MW x $50.00 per MW/hr x 4 hours = $2,000

10 MW x $45.00 per MW/hr x 4 hours = $1,800

Revenue Example for LaaR Providing RRS

$1,500 + $2,000 + $1,800 = $5,300

Revenue available for one Operating Day:

Equivalent revenue per MWh:$5,300 ÷ 10 MW/hr ÷ 24 hrs = $22.08/MWh

The Old World – Load participation under interruptible tariffs

Loads had one “choice” (host utility)

One size fits all - no customized terms

Limited ability to switch between tariffs Compensation not matched to the benefit being provided by the load:

Discounted energy rates, not payment for services

No additional economic incentive to participate during system crisis

The New World – Load participation under the ERCOT Protocols

More Level Playing Field for Generators and Loads

ERCOT’s new “Resource” definition: Includes both Generation Resources AND Loads acting as Resources (LaaR)

Resources are represented by QSEs

Multiple service provider choices

LaaR can utilize the QSE representing their LSE

LaaR can utilize any QSE offering LaaR services

The New World – Load participation under the ERCOT Protocols

Customized terms available

LaaR can negotiate customized terms directly with a QSE or LSE

LaaR may control its participation level

Selective participation in the market

LaaR may sell AS to Third Parties (Bilateral)

LaaR may sell AS to ERCOT (Day-Ahead)

The New World – Load participation under the ERCOT Protocols

Compensation can be commensurate with system benefit provided

AS prices move with supply and demand (fluctuate with system needs)

LaaR may participate in AS market price movements (depending on contract terms)AS capacity priceResource-specific premium (OOM)Payment for deployed energy (Unused energy)

Services Provided to LaaR Communications (7x24)

QSE provides 7x24 point of contact for LaaR and ERCOT (Voice & Data)

Telemetry (varies depending on services provided to ERCOT)

Real time telemetry is required

Requires hardware at customer site

The New Service Providers (QSEs representing LaaR)

Services Provided to LaaR Data circuit / path from LaaR to QSE

Real time data path from LaaR to QSE is required

Control (automatic or manual)

Implement ERCOT directives to reduce load with 10 or 30 minute notice

Implement OOM directives

The New Service Providers (QSEs representing LaaR)

Services Provided to LaaR

Resource Plan

QSE constructs and maintains accurate Resource Plan with ERCOT

The New Service Providers (QSEs representing LaaR)

LaaR maintains accurate projection of load and availability-Can affect LaaR qualification and payment

Services Provided to LaaR Settlement

Between ERCOT and QSE

Between LaaR and QSE or LSE

The New Service Providers (QSEs representing LaaR)

• QSE collects payment from ERCOT

• QSE validates payment from ERCOT

• QSE disputes payment errors with ERCOT

• LaaR is paid under terms of its contract with the service provider

Limited market size Responsive Reserve Market

-Currently 805 MW from LaaR (35%)-Proposed increase to 1150 MW (50%)

Non-Spinning Reserve Service – infrequent procurement

Replacement Reserve Service – infrequent procurement

Regulation Service – future capability

Risks of LaaR Participation in ERCOT

Effect on LaaR from AS deployments

Deployment occurrence varies between ancillary services

QSE representing LaaR is obligated to perform if providing AS service to ERCOT

Risks of LaaR Participation in ERCOT

Changes in ERCOT market rules

Market rules continue to evolve

Technical requirements could change

A BUL is a portfolio deployment of all the loads that make up the BUL. An individual load’s response should be defined between the Load, LSE, and the QSE.

Compensation for Balancing Up Load (BUL)

Energy Payment for load reduction

Capacity Payment

An energy payment based on the QSE’s overall reduction in load as compared the the load level scheduled during the deployment interval

A capacity payment based on the Market Clearing Price of Capacity for Non-Spinning Reserve Service (MCPCNS). The Capacity payment will be paid only if the BUL response (reduction of load) is 100 % of the instructed value