TAC Report to the TAC Report to the ERCOT BoardERCOT Board

November 16, 2004November 16, 2004

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SummarySummary• Notifications:Notifications:

– Operating Guide RevisionsOperating Guide Revisions– Retail Market Guide RevisionsRetail Market Guide Revisions– Annual Validation Report to the ERCOT BoardAnnual Validation Report to the ERCOT Board– Issues Related to Late Payments Under Issues Related to Late Payments Under

ProtocolsProtocols

• Closely Related ElementsClosely Related Elements• PRRs 527 and 532PRRs 527 and 532• TAC Rejection of PRR 546TAC Rejection of PRR 546• ERCOT Administrative Fee Allocation ERCOT Administrative Fee Allocation

Methodologies UpdateMethodologies Update

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Operating Guide RevisionsOperating Guide Revisions

• OGRR 153 – Reactive Capability Testing: Revision of OGRR 153 – Reactive Capability Testing: Revision of Operating Guide Section 3.1.4.3 and Section 6.2.3 Operating Guide Section 3.1.4.3 and Section 6.2.3 [Biennial Unit Reactive Limits (Lead and Lag) [Biennial Unit Reactive Limits (Lead and Lag) Verification Form] to conform to ERCOT Generator Verification Form] to conform to ERCOT Generator Reactive Testing Procedures. This OGRR is consistent Reactive Testing Procedures. This OGRR is consistent with PRR 535 – Reactive Testing.with PRR 535 – Reactive Testing.

• TAC approved OGRR 153 by unanimous TAC approved OGRR 153 by unanimous voice vote.voice vote.

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RMS UpdateRMS Update• RMGRR 2004-13 – Disconnections at Premium RMGRR 2004-13 – Disconnections at Premium

Locations: Outlines how charges for disconnections Locations: Outlines how charges for disconnections at premium locations are being appliedat premium locations are being applied..

• RMGRR 2004-14 – TDSP Process for Inadvertent RMGRR 2004-14 – TDSP Process for Inadvertent Gain: Documents the TDSP inadvertent process. Gain: Documents the TDSP inadvertent process. There is currently no information available in the There is currently no information available in the Retail Market Guide related to the Inadvertent Gain Retail Market Guide related to the Inadvertent Gain Process. Process.

• RMGRR 2004-15 – Data Extract Variance Process: RMGRR 2004-15 – Data Extract Variance Process: Modifies Section 7.2 documenting the process for Modifies Section 7.2 documenting the process for submitting Data Extract Variances.submitting Data Extract Variances.

• TAC approved RMGRR 2004-13, 2004-14, and 2004-TAC approved RMGRR 2004-13, 2004-14, and 2004-15 by unanimous voice vote.15 by unanimous voice vote.

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Annual Validation Report to the ERCOT Annual Validation Report to the ERCOT BoardBoard

• At September 21At September 21stst meeting, Board approved partial suspension meeting, Board approved partial suspension of 2004 profile ID assignment and validation process. of 2004 profile ID assignment and validation process.

• Board directed TAC to recommend a timeline and plan for Board directed TAC to recommend a timeline and plan for improvements to Annual Validation process by November improvements to Annual Validation process by November 2004.2004.

• RMS recommended TAC approval of near term action plans RMS recommended TAC approval of near term action plans that could be effective in 2005.that could be effective in 2005.

• The items in the “Near Term Action Plan” were as follows:The items in the “Near Term Action Plan” were as follows:• 1)1) Do not replace a prior year non-default assignment with a default Do not replace a prior year non-default assignment with a default

assignment;assignment;• 2)2) Applying dead-bands around the specified Residential Segment Applying dead-bands around the specified Residential Segment

trigger trigger point;point;• 3)3) Applying a kWh minimum for Residential High Winter Ratio profile Applying a kWh minimum for Residential High Winter Ratio profile

assignment;assignment;• 4)4) Use more than 1 month for the Residential Winter Ratio formula;Use more than 1 month for the Residential Winter Ratio formula;• 5)5) Use an ERCOT administered residential survey.Use an ERCOT administered residential survey.

• Due to TAC concerns with method and accuracy of residential survey, TAC Due to TAC concerns with method and accuracy of residential survey, TAC chair recommended without objection remanding the residential survey issue chair recommended without objection remanding the residential survey issue back to the RMS for further review.back to the RMS for further review.

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Issues Related to Late Payments Under Issues Related to Late Payments Under ProtocolsProtocols

• At the October Board meeting, the Board directed the TAC At the October Board meeting, the Board directed the TAC to discuss the following issues related to late payments to discuss the following issues related to late payments under the Protocols. under the Protocols.

1.1. What happens when the defaulting Invoice Recipient does What happens when the defaulting Invoice Recipient does not pay late fees due to a court-ordered Reorganization not pay late fees due to a court-ordered Reorganization Plan?Plan?

2.2. What to do about late fees “accrued” (through short-pays) What to do about late fees “accrued” (through short-pays) but not paid?but not paid?

3.3. How to handle market participant payment of less than the How to handle market participant payment of less than the full amount required by a payment plan.full amount required by a payment plan.

• The TAC remanded these issues for discussion The TAC remanded these issues for discussion at the PRS as part of PRR 550 – Pace of Short at the PRS as part of PRR 550 – Pace of Short Pay Uplift to LSEs.Pay Uplift to LSEs.

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Closely Related ElementsClosely Related Elements

• By November 1By November 1stst of each year, Protocols of each year, Protocols require designation of Closely Related require designation of Closely Related Elements (CREs) in the ERCOT transmission Elements (CREs) in the ERCOT transmission system as they relate to Commercially system as they relate to Commercially Significant Constraints and Congestion Zones.Significant Constraints and Congestion Zones.

• ERCOT staff has performed analysis to ERCOT staff has performed analysis to identify appropriate CREs as part of the CSC identify appropriate CREs as part of the CSC designation process.designation process.

• Most of the 2005 recommended CREs are the Most of the 2005 recommended CREs are the same as 2004.same as 2004.

• The TAC by unanimous voice vote The TAC by unanimous voice vote recommended approval of the 2005 CREs.recommended approval of the 2005 CREs.

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PRR 527 – Revision to Ancillary Service Performance PRR 527 – Revision to Ancillary Service Performance

Conditions (formerly “OOME Definition”)Conditions (formerly “OOME Definition”) • This PRR modifies the Protocols to require This PRR modifies the Protocols to require

ERCOT to issue a verbal dispatch instruction ERCOT to issue a verbal dispatch instruction to the QSE to relieve the QSE from having to to the QSE to relieve the QSE from having to provide the Ancillary Service for the interval provide the Ancillary Service for the interval or retract the Resource-specific Dispatch or retract the Resource-specific Dispatch instruction if a unit specific OOME or instruction if a unit specific OOME or balancing energy dispatch instruction issued balancing energy dispatch instruction issued by ERCOT causes a QSE to be unable to by ERCOT causes a QSE to be unable to provide Ancillary Services that it is obligated provide Ancillary Services that it is obligated to provide.to provide.

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PRR 527 – Revision to Ancillary Service Performance PRR 527 – Revision to Ancillary Service Performance Conditions (formerly “OOME Definition”) (cont.)Conditions (formerly “OOME Definition”) (cont.)

• Market Oversight Division (MOD) raised concerns about PRR Market Oversight Division (MOD) raised concerns about PRR 527.527.

• MOD concerned that PRR 527 would create an incentive for a MOD concerned that PRR 527 would create an incentive for a market participant to receive a double capacity payment.market participant to receive a double capacity payment.

• There have been 23 occasions since September 1There have been 23 occasions since September 1stst where where market participants have been paid for two different services market participants have been paid for two different services when they can only deliver on one of the services.when they can only deliver on one of the services.

• MOD believes market participants should be paid the higher of MOD believes market participants should be paid the higher of the two capacity payments but not be paid twice. the two capacity payments but not be paid twice.

• TAC discussed that the original intent of PRR 527 was to protect TAC discussed that the original intent of PRR 527 was to protect QSEs that receive unit specific instructions from ERCOT that QSEs that receive unit specific instructions from ERCOT that cause them to violate their Ancillary Service obligation.cause them to violate their Ancillary Service obligation.

• In this scenario, the QSE will still receive the capacity payment In this scenario, the QSE will still receive the capacity payment for the Ancillary Service, as well as the associated energy for the Ancillary Service, as well as the associated energy payment. Staff agreed with this scenario.payment. Staff agreed with this scenario.

• To address the double capacity payment concerns expressed by To address the double capacity payment concerns expressed by Staff, TAC by unanimous voice vote instructed WMS to address Staff, TAC by unanimous voice vote instructed WMS to address the payment issue raise by the PUC and bring forward a the payment issue raise by the PUC and bring forward a proposed solution by the January 6, 2005 TAC Meeting. proposed solution by the January 6, 2005 TAC Meeting.

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PRR 527 – Revision to Ancillary Service Performance PRR 527 – Revision to Ancillary Service Performance Conditions (formerly “OOME Definition”) (cont.)Conditions (formerly “OOME Definition”) (cont.)

• PRS approved urgent status through an e-mail vote. PRS approved urgent status through an e-mail vote. • PRS unanimously approved PRR without abstentions.PRS unanimously approved PRR without abstentions.• No budgetary impactNo budgetary impact• No impact to ERCOT staffing; no impact to ERCOT No impact to ERCOT staffing; no impact to ERCOT

computer systemscomputer systems• No impact to ERCOT business functions; no impact to No impact to ERCOT business functions; no impact to

grid operationsgrid operations• No credit monitoring or liability calculation changes No credit monitoring or liability calculation changes

requiredrequired• TAC voted to approve as submitted by PRS with 23 votes TAC voted to approve as submitted by PRS with 23 votes

in favor and 5 votes opposing (Consumer and in favor and 5 votes opposing (Consumer and Independent REP segment).Independent REP segment).

• Proposed effective date is December 1, 2004Proposed effective date is December 1, 2004

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PRR 532 – Implementation of Non-PRR 532 – Implementation of Non-Transmission Alternatives to RMRTransmission Alternatives to RMR

• PRR submitted on behalf of WMS by ANP, PRR submitted on behalf of WMS by ANP, Independent Generator SegmentIndependent Generator Segment

• Protocols require ERCOT to evaluate non-Protocols require ERCOT to evaluate non-transmission exit strategies to RMR situationstransmission exit strategies to RMR situations

• PRR proposes a Must-Run Alternative (MRA) PRR proposes a Must-Run Alternative (MRA) agreement and selection and settlement processes to agreement and selection and settlement processes to support the MRAsupport the MRA– Relies on the Regional Planning Group process to aid in Relies on the Regional Planning Group process to aid in

the evaluationthe evaluation– MRA will provide a more cost-effective alternative to an MRA will provide a more cost-effective alternative to an

RMR agreementRMR agreement– Effort to reduce uplifted costs to the marketEffort to reduce uplifted costs to the market

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PRR 532 – Implementation of Non-PRR 532 – Implementation of Non-Transmission Alternatives to RMRTransmission Alternatives to RMR

• On 10/19/04, the Board remanded PRR532 to TAC for On 10/19/04, the Board remanded PRR532 to TAC for consideration of legal issues and concerns about the consideration of legal issues and concerns about the lack of definition of the amount of benefit that must be lack of definition of the amount of benefit that must be shown to merit an MRA. shown to merit an MRA.

• On 11/04/04, TAC recommended approval of PRR532 On 11/04/04, TAC recommended approval of PRR532 as revised by ERCOT comments and TAC.as revised by ERCOT comments and TAC.

• TAC primarily made two changes to the PRR to address TAC primarily made two changes to the PRR to address the Board’s concerns the Board’s concerns 1)1) MRA service must provide at least a projected $1 MRA service must provide at least a projected $1

million annualized savings over RMR alternative ; andmillion annualized savings over RMR alternative ; and2)2) Board delegate authority to approve MRA contract to Board delegate authority to approve MRA contract to

subcommittee of the Board.subcommittee of the Board.

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PRR 532 – Implementation of Non-PRR 532 – Implementation of Non-Transmission Alternatives to RMRTransmission Alternatives to RMR

• Impact to staffing resources is dependent on the Impact to staffing resources is dependent on the number and type of MRA agreementsnumber and type of MRA agreements

• Impact to ERCOT systems will be evaluated on a Impact to ERCOT systems will be evaluated on a per-contract basisper-contract basis

• Impact to grid operations will be evaluated on a per-Impact to grid operations will be evaluated on a per-contract basiscontract basis

• TAC approved the revised PRR with all segments TAC approved the revised PRR with all segments present and one member from the Independent present and one member from the Independent Power Marketers Segment abstainedPower Marketers Segment abstained

• Proposed effective date of December 1, 2004Proposed effective date of December 1, 2004

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Recommended Board ActionsRecommended Board Actions

Approval – PRR 527 – Revision to Ancillary Service Performance Conditions PRR 527 – Revision to Ancillary Service Performance Conditions PRR 532 – Implementation of Non-Transmission Alternatives to RMR

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PRR 546 – PCR Treatment for Federal PRR 546 – PCR Treatment for Federal Hydropower ResourcesHydropower Resources

• This PRR revises Section 7.5.6 to provide that long-term This PRR revises Section 7.5.6 to provide that long-term power purchase agreements for federal hydropower are power purchase agreements for federal hydropower are eligible for PCR treatment if a long-term allocation was eligible for PCR treatment if a long-term allocation was in place prior to September 1, 1999.in place prior to September 1, 1999.

• The PRS approved urgent status for PRR 546 through an The PRS approved urgent status for PRR 546 through an email vote.email vote.

• PRS recommended approval of the PRR with seven PRS recommended approval of the PRR with seven abstentions from the independent power marketers, abstentions from the independent power marketers, investor owned utilities, and consumer segments. investor owned utilities, and consumer segments.

• MOD raised concerns about PRR 546 and supports MOD raised concerns about PRR 546 and supports rejection of PRR 546.rejection of PRR 546.

• Current protocols require that a contract be in place by Current protocols require that a contract be in place by September 1, 1999; but, Protocols don’t specifically September 1, 1999; but, Protocols don’t specifically address contracts with renewal clauses.address contracts with renewal clauses.

• MOD believes PRR 546 is is not consistent with the intent MOD believes PRR 546 is is not consistent with the intent of the PCR eligibility provisions in the current Protocols. of the PCR eligibility provisions in the current Protocols.

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PRR 546 – PCR Treatment for Federal PRR 546 – PCR Treatment for Federal Hydropower Resources (cont.)Hydropower Resources (cont.)

• No budgetary impact; no impact to ERCOT staffing; No budgetary impact; no impact to ERCOT staffing; no impacts to ERCOT computer systems, minor no impacts to ERCOT computer systems, minor changes to TCR calculation spreadsheet; no impact changes to TCR calculation spreadsheet; no impact to ERCOT business functions; no impact to grid to ERCOT business functions; no impact to grid operations.operations.

• ERCOT Credit Staff and the CWG have reviewed ERCOT Credit Staff and the CWG have reviewed PRR 546 and do not believe that it requires changes PRR 546 and do not believe that it requires changes to credit monitoring activity or the calculation of to credit monitoring activity or the calculation of liability.liability.

• A motion to approve PRR 546 failed 13 to 2 with 13 A motion to approve PRR 546 failed 13 to 2 with 13 abstentions. The motion failed due to lack of abstentions. The motion failed due to lack of adequate total affirmative votes.adequate total affirmative votes.

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Administrative Fee Allocation Administrative Fee Allocation UpdateUpdate

• Board requested TAC to present Board, Board requested TAC to present Board, before March 2005, a fee allocation before March 2005, a fee allocation methodology or methodologies that methodology or methodologies that would focus on the four elements set would focus on the four elements set forth in Senate Bill 7. As part of that forth in Senate Bill 7. As part of that analysis, ERCOT should hire a third-analysis, ERCOT should hire a third-party to conduct a cost-allocation study, party to conduct a cost-allocation study, at a cost no more than $100,000.at a cost no more than $100,000.

• TAC has not hired a third party TAC has not hired a third party consultant at this time.consultant at this time.

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Administrative Fee Update Administrative Fee Update (cont.)(cont.)

• TAC discussions have primarily focused on cost TAC discussions have primarily focused on cost allocation, categorization and tracking.allocation, categorization and tracking.

• TAC has not discussed market segment allocation TAC has not discussed market segment allocation in detail.in detail.

• At Open Meeting on October 28At Open Meeting on October 28thth, Commission , Commission decided to initiate a Rulemaking within next few decided to initiate a Rulemaking within next few months to discuss fee allocation methodologies.months to discuss fee allocation methodologies.

• Commission Staff has indicated desire for ERCOT Commission Staff has indicated desire for ERCOT and TAC to continue pursuit of better cost and TAC to continue pursuit of better cost tracking data by activity in preparation for tracking data by activity in preparation for Rulemaking.Rulemaking.

• Some TAC members are concerned that Some TAC members are concerned that continuation of fee allocation methodology continuation of fee allocation methodology discussions at TAC would be duplicative of discussions at TAC would be duplicative of Commission Rulemaking.Commission Rulemaking.

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Administrative Fee Update Administrative Fee Update (cont.)(cont.)

• TAC did not vote on any specific recommendation for the TAC did not vote on any specific recommendation for the Board to act upon today.Board to act upon today.

• TAC decided to pursue additional information from TAC decided to pursue additional information from Commission regarding upcoming Rulemaking and seek Commission regarding upcoming Rulemaking and seek guidance from Board as to next steps.guidance from Board as to next steps.

• Alternatives:Alternatives:

1)1) Direct TAC to continue development of fee Direct TAC to continue development of fee allocation methodologies by March 2005 per the Board’s allocation methodologies by March 2005 per the Board’s directive;directive;

2)2) Direct TAC to cease all fee allocation methodology Direct TAC to cease all fee allocation methodology discussions; discussions;

3)3) Direct TAC to provide further guidance to ERCOT Direct TAC to provide further guidance to ERCOT regarding cost tracking by activity; orregarding cost tracking by activity; or

4)4) Direct TAC to provide input to the PUC Rulemaking Direct TAC to provide input to the PUC Rulemaking process regarding fee allocation methodology.process regarding fee allocation methodology.