1. April 28, 2008 Constraint Competitiveness Tests, an Overview Congestion Management Working Group

2. April 28, 2008 Overview of the Competitiveness Constraints Test (CCT) Key Implementation Notes Data Structure for Inputs

3. April 28, 2008 Two test procedures are employed in the CCT: In Test Procedure 1 the effective capacity available to resolve the constraint on both the import and export side is first determined. The available effective capacity is then used to compute the Element Competitiveness Index (ECI), an index similar to the Herfindahl-Hirschman Index (HHI) on the import and export side. 1.Determine effective capacity available to resolve the constraint on the import side 2.Determine effective capacity available to resolve the constraint on the export port side 3.Determine Element Competitive Index (ECI) In Test Procedure 2, analysis is conducted to check for the existence of any pivotal player. Overview of the Competitiveness Constraints Test (CCT)

4. April 28, 2008 Ei Limit Effective load (max withdraw) Eff. Cap.> (Load +Limit) Generation Entity a b c n..... Test 1-A Import ECI

5. April 28, 2008 Ei Limit Effective loadEff. Cap. > (Load -Limit) Generation Entity a b c n..... Test 1-B Export ECI Test 2 – Pivotal Player 1.Remove Largest Entity 2.Balance System Power 3.If load can be served (PP does not exist)

6. April 28, 2008 HHI: Measuring Market Concentration Market Concentration is a function of the number of firms in a market and their respective market shares Herfindahl-Hirschman Index ("HHI") is a widely used measure of market concentration – also used by the Dept. of Justice (DOJ) The HHI is calculated by summing the squares of the individual market shares (in percentage) of all the participants HHI gives proportionately greater weight to the market shares of the larger firms, in accord with their relative importance in competitive interactions DOJ divides spectrum of market concentration as follows: –Unconcentrated (HHI below 1000) –Moderately concentrated (HHI between 1000 and 1800), and –Highly concentrated (HHI above 1800) Note: Taken from Shams Siddiqi presentation 10/16/2006

7. April 28, 2008 HHI: Examples Ex 1: Market consisting of 5 equally sized entities each controlling 10,000 MW –Each entity controls 20% of supply –HHI = 5 x (20)^2 = 2,000 Ex 2: Market consisting of one 20,000 MW entity and four 7,500 MW entities –Big entity controls 40%, others 15% each –HHI = (40)^2 + 4 x (15)^2 = 2,500 For electricity markets, some consider HHI of 2,000 as “workably competitive” Note: Taken from Shams Siddiqi presentation 10/16/2006

8. April 28, 2008 Test Procedure 1, Constraint fails the competitive test if the ECI is: Import SideExport Side Annual>2000>2500 Monthly>2500>3000 Daily>2500>3000 Overview of the Competitiveness Constraints Test (CCT)

9. April 28, 2008 CCT test is to be performed Annually Monthly Daily Annual Competitiveness Test shall determine if a constraint is competitive or not for each month of the year (This information may be used to make recommendations on the status of constraints for the Annual CRR Auction as well as inputs to the Monthly CCT) Monthly Competitiveness Test shall change the treatment of a Competitive Constraint to a non-competitive constraint for a particular month Based on the set of the Competitive Constraints as determined in the Monthly Competitive Test, the Daily Test shall change the treatment of a Competitive Constraint to a non-competitive constraint for a particular day

10. April 28, 2008 6.5.7.3. (5) The two-step SCED methodology referenced in paragraph (1) above is: (a)The first step is to execute the SCED process to determine Reference LMPs. In this step ERCOT executes SCED using the full Network Operations Model while only observing limits of Competitive Constraints. Energy Offer Curves for all On-Line Generation Resources, whether submitted by QSEs or created by ERCOT under this section are used in the SCED to determine “Reference LMPs.” (b)The second step is to execute the SCED process to produce Base Points, Shadow Prices, and LMPs, subject to security constraints (including Competitive and Non-Competitive Constraints) and other Resource constraints. The second step must: (i)Use Energy Offer Curves for all On-Line Generation Resources, whether submitted by QSEs or created by ERCOT. Each Energy Offer Curve must be capped at the greater of the Reference LMP (from Step 1) at the Resource Node or the appropriate Mitigated Offer Cap and bounded at the lesser of the Reference LMP (from Step 1) at the Resource Node or the appropriate Mitigated Offer Floor; and (ii)Observe all Competitive and Non-Competitive Constraints.

11. April 28, 2008 Contingency/limiting Transmission Element pairs 3.19 (1) Unless the Board approves changes, the “Competitive Constraints” are the contingency/limiting Transmission Element pairs that represent the Commercially Significant Constraints (CSCs) and Closely Related Elements (CREs), as those terms were defined in the ERCOT Protocols, immediately prior to Texas Nodal Market Implementation Date.

12. April 28, 2008 This phrase was added to CCT requirements document and approved by TPTF. 2. Constraint Competitiveness Test (CCT) TAC shall consider on an annual basis the results of the Constraint Competitiveness Tests (CCT) performed on each candidate constraint to determine if the constraint is “Competitive” or ”Non-Competitive”. For the first year of the Nodal Market, these constraints are the contingency/limiting Transmission Element pairs that represent the Commercially Significant Constraints (CSCs) and Closely Related Elements (CREs) and will be defined immediately prior to the Texas Nodal Market Implementation date. Overview of the Competitiveness Constraints Test (CCT)

13. April 28, 2008 If the CSCs are used as the initial constraints 1.ERCOT proposes that the CSC’s be disaggregated into individual line segments (constraints) for the CSC 2.The CSC limits will also need to be allocated to each constraint 3.Use contingencies out of TCM

14. April 28, 2008 Constraints to be Tested in CCT Protocol: each transmission constraint Each constraint is a contingency/limiting transmission element pair Contingency = Closely Related Element (CRE) Limiting Transmission Element = Commercially Significant Constraint (CSC)

15. April 28, 2008 Number of Transmission Lines: 5000 Number of Contingencies: 2500 Brute Force Setup –Number of transmission constraints to be tested = 5000 * (2500+1) = 12,505,000 Note: “1” represents base case Impractical due to the large number of transmission constraints to be tested

16. April 28, 2008 Practical Data Setup Contingencies must be closely related to monitored element A contingency, which is far away from a transmission line, will not cause violation on that transmission line. Consequently, every transmission line does not have to be tested against all contingencies

17. April 28, 2008 Example ContingencyOutage Element 1A-B ckt 1 2A-B ckt 2 3C-A 4D-E 5F-G A BC ckt 1 ckt 2 D E F G

18. April 28, 2008 CCT Constraint Data Setup ContingenciesMonitored Element (constraint) Base CaseA-B ckt 2 Contingency 1A-B ckt 2 Contingency 3A-B ckt 2 To test A-B ckt 2

19. April 28, 2008 Input Files for Annual CCT CCT001.PSE ~ CCT012.PSE (PSS/E Version 30) CCT001.CTG ~ CCT012.CTG CCT001.CNT ~ CCT012.CNT CCT001.RMP ~ CCT012.RMP Input Files for Monthly CCT CCT001.PSE (PSS/E Version) CCT001.CTG CCT001.CNT CCT001.RMP PSE – Planning model for monthly peak case used to auction on-peak CRRs CTG – Contingency list CNT – Constraint list RMP – Resource mapping to Decision Making Entity

20. April 28, 2008 Format Definition of CCT00X.CTG 1 'SL_35_34_1 ' 1 'BRA' 1 0 ' ' 36 35 '1 ' 0 0 0.00 -999 First Line: FORMAT (I5, 1X, A32, 1X, I2) 1.Contingency Sequence # 2.Contingency Name 3.No Use Second Line: FORMAT (A5,1X,I2,1X, I5,1X,A3,1X, I5,1X,I5,1X,A4,1X,I5,1X,I5,1X,F8.2) 1.Contingency Type: “BRA”, “GEN”, “LOA” 2.Contingency Operating Type: 1 = Outage 3.Generator or Load Bus # (PSS/E column 1 of Generator or Load Section) 4.Generator or Load ID (PSSE/E column 2 of Generator or Load Section) 5.From Bus # (Branch Only) 6.To Bus # (Branch Only) 7.Circuit ID 8.No use 9.No use 10.No use Third Line: FORMAT (I5) 1.End of Individual data (or separator) Fourth Line: FORMAT (I5) 1.End of Contingency section Fifth Line: FORMAT (I5) 1.End of Flow Gate section Sixth Line: FORMAT (I5) 1.End of Generic Constraint section Seventh Line: FORMAT (I5) 1.End of SPS section 1. 2. 3. 4. 5. 6. 7.

21. April 28, 2008 Format Definition of CCT00X.CNT 0 'BASE CASE : STATION A - STATION B ' 10.0 1 2 1 0 18 'SL_1063_175_1 : CRLNW__PTENN__LN01 ' 1185.0 1072 183 0 -9999 First Line: FORMAT ( 1X, I5, 1X, A67, 1X, F7.1 ) 1.Contingency Sequence # in NDPXXX.CTG ( BASE CASE = 0 ) 2.Contingency Name (A32) and Constraint ID (A32) Note: A67 = A32 “Contingency Name” + A3 “ : “ + A32 “Constraint ID” 3.Constraint Limit Second Line: FORMAT ( 1X, I5, 1X, I5, 1X, A2 ) 1.From (Export) Bus # 2.To (Import) Bus # 3.Circuit ID Third Line: FORMAT (1X, I5) 1.End of Individual data (or separator) Fourth Line: FORMAT (1X, I5) 1.End of Constraint Mapping File 1. 2. 3. 1. 2. 3. 4.

22. April 28, 2008 Format Definition of CCT00X.RMP 1 'N' ‘ABC ' 0.5000 ‘LMN ' 0.4000 ‘XYZ ' 0.1000 -9999 First Line: FORMAT (1X, I5, 4X, A1) 1.Generator Sequence # in PSSE 2.Generator Type: N = Nuclear, C = Coal, L = Lignite, Other = blank Second Line: FORMAT (7X, A32, 1X, F7.4) – repeated for each decision making entities 1.Entity Name 2.portion of the entity Third Line: blank line 1.End of Individual data (or separator) Fourth Line: FORMAT (1X, I5) 1.End of Resource Mapping File 1. 2. 3. 4.