Overview of Replacement Reserve Procurement

1. Overview of Replacement Reserve Procurement ERCOT Staff PRS RPRS Task Force

2. RPRS Objectives Procure capacity from which energy would be available to solve the following power system security violations: • System Capacity insufficiency • Using any RPRS bid (or Generic for units with no bids) • Zonal Congestion • Using RPRS bids by Zone in Merit Order (or Generic for units with no bids) • Local Congestion • Using Resource Category Generic Cost

3. Three Step Clearing Process Three Step Clearing Process Step 1: Local Congestion first • only thermal limits, voltage related units are OOMCed before RPRS Step 2: Zonal Congestion & System Balance simultaneously Step 3: MCPC Calculation • Marginal cost for insufficiency determines MCPC • Marginal cost to solve CSC determines Shadow Price for Capacity for CSC Congestion

4. RPRS Participation Capacity procured from: • Generation Resources Off-line. • Generation Resources expected to be Off-line in the requested hours • LaaRs not able to participate upon initiation of the RPRS functionality.

5. RPRS Capacity Procurement Regulation & Responsive RPRS Day Ahead Forecast Load Scheduled On-line Capacity

6. RPRS Inputs Inputs • Resource Plans (at time of procurement) • HSL • LSL • Day Ahead Load Forecast • QSE Schedules (at time of procurement) • Reserves • Transmission Limits

7. RPRS Clearing The goal of the RPRS Clearing Engine is 24 Hour Optimization to minimize total cost, based on: • Resource Category Generic Cost • RPRS Bid Price • Resource Shift Factors And also respect; • Lead time • Minimum Up time • Minimum Down time For the whole Operating Day while meeting security constraints for each hour.

8. Outstanding RPRS Issues being Addressed by WMS RPRS TF • Combined Cycle Combustion Turbines Procurement • Zonal RPRS Market Procurement • Consideration of Joint Owned Units in RPRS Market • Issues with Black Start Units in RPRS Market • RPRS Procurement and Non Spinning Reserves Units

9. PRR659- Reporting of ERCOT Replacement Reserve Service Procurements “ERCOT shall provide a monthly report by the 20th day of the following month showing the quantity of RPRS procured by hour for system capacity based on the Day Ahead estimate of total ERCOT Load versus the quantity of RPRS that, in hindsight, would have been the proper amount to procure based on actual average adjusted metered Load. This theoretical amount of RPRS procurement shall be calculated as the difference between the actual average adjusted metered ERCOT Load (for an hour) minus the Day Ahead Resource Plan generation On-line used before the RPRS market is run for the hours when RPRS is procured by ERCOT.”

10. Response to PRS RPRS TF Question 1 Question 1: How does ERCOT consider Load forecast and corresponding standard deviation adjustment? Answer: When procuring RPRS, ERCOT system utilizes the recent Load forecast produced by the mid-term Load forecast tools.

11. Response to PRS RPRS TF Question 2 Question 2: How are the Resource Plan inputs used in RPRS procurement? Answer: The available High Sustained Limit (HSL) as indicated in the Resource Plan is considered in the RPRS procurement process; those Off-line and available Resources are subject to RPRS procurement.

12. Response to PRS RPRS TF Question 3 Question 3: Step 1 procurement to resolve Local Congestion vs. the Resource Plan submitted Answer: When the RPRS engine requires that ERCOT procure capacity in Step 2, the step one Local Congestion procurement will be considered as On-line and available capacity. In other words, both the Resource On-line capacity and step 1 Local Congestion procurement are considered in the step 2 capacity procurement process.

13. Response to PRS RPRS TF Question 4 Question 4: RPRS procurement for additional capacity vs. the Resource Plan submitted Answer: This questions is similar to Question 3. When the RPRS engine analyzes whether to procure additional capacity, it considers all the On-line capacity as indicated in the Resource Plan and Step one Local Congestion RPRS procurement.

14. Response to PRS RPRS TF Question 5 Question 5: What is the effect of schedule mismatches on RPRS procurement? Answer: No impact, schedule mismatches are not considered in the RPRS procurement process.

15. Response to PRS RPRS TF Question 6 Question 6: What is the effect on RPRS procurement of a QSE scheduling ERCOT as a Resource? Answer: RPRS does not consider schedules during procurement, it only considers available online capacity. If there is enough online capacity scheduled from other QSEs, to cover the forecast load then there is no impact. If, however; many QSEs schedule ERCOT as a resource, it could result in a RPRS procurement.

16. RPRS CASE STUDY For market day 6/20/2006 (Day with the biggest difference between Day ahead online capacity and actual metered load)

17. 6/20/2006 Weather/Load Forecast • Due to thunderstorms and rain, the Day Ahead weather forecast was 7.5 degrees higher than the actual temperature for the coast (Houston Area), • As a result, the actual Real Time load was much lower than the Day Ahead forecasted load.

18. System Data for Those Hours with Step 2 Procurement

19. Step 1: Solving Local Congestion

20. Step 2: Solving capacity insufficiency

21. Case study: 6/20/2006 HE22:00 1: Resource Plan On-line Capacity 2: Load Forecast 3: Original Resource On-line Plan Level 4: Adjusted Resource On-line Plan Level 5: Total Procured Capacity (S1+S2) 6: URS+RRS requirement 7: RPRS Cleared MW System Capacity Constraints: 1+5 >= 2+6 System Power Balance Constraints: 4+7=2

22. Observations • System capacity constraints can be satisfied most of the time • Due to Local Congestion, Resources can not always reach maximum output. Like the case shown, On-line Resource dispatch MWs were even reduced • Thus, ERCOT must procure more Resources to satisfy system power balance constraints • Minimum up time can also cause additional RPRS procurement