1. DAM Self-Commitment Issues & Solutions, Part 2 Shams Siddiqi, Ph.D. shams@crescentpower.net (512) 263-0653 April 21, 2008

2. Background  Current implementation does not allow Self- Committed Resources (SCRs) to co-optimize energy and AS offers from available capacity as required by Protocols 4.4.7.2.1: (d) An Ancillary Service Offer linked to a Three-Part Supply Offer from a Resource designated to be Off-Line for the offer period in its COP may only be struck if the Three-Part Supply Offer is struck. The total capacity struck must be within limits as defined in item (4)(c)(iii) of Section 4.5.1, DAM Clearing Process. (e) An Ancillary Service Offer linked to other Ancillary Service offers or an Energy Offer Curve from a Resource designated to be On-Line for the offer period in its COP may only be struck if the total capacity struck is within limits as defined in item (4)(c)(iii) of Section 4.5.1. April 21, 20082

3. 3 Solution Pieces to Correct Problem 1.Ignore temporal constraints for Generation Resources with Online AS offers only for some or all hours of the DAM (i.e. no Three-Part Offer or Offline AS is submitted for the day). Such Resources will be allowed to enter an EOC in the adjustment period (no EOC was submitted in the DAM anyway) with a new reason code “DAM Self-Committed”. This allows SCRs to offer AS in DAM 2.Correct the co-optimization of “Inclusive” AS and Three-Part Offer to limit AS and/or energy award to the maximum quantity of the Energy Offer Curve. This is not an SCR issue but rather corrects co-optimization for all Resource offers.

4. April 21, 20084 Solution Pieces to Correct Problem 3.Ignore temporal constraints for Generation Resources with EOC-only and/or Online AS offers only for some or all hours of the DAM (i.e. no Three-Part Offer or Offline AS is submitted for the day). Such Resources will be allowed to enter an EOC in the adjustment period with the reason code “DAM Self-Committed”. This allows SCRs to take advantage of co-optimization in DAM as long as they are self-committed for the entire day. 4.Full implementation of co-optimization for all Resources including those that may be self-committed for only part of the day.

5. April 21, 20085 Implementing the Solution Pieces  May be possible to implement the relatively minor changes in items 1, 2 and 3 prior to the 168-hour test.  Items 1, 2 and 3 impact only the DAM engine and have no impact on other systems (e.g. Settlements).  TPTF approved changes to the DAM & SASM Req. doc. to implement items 1 & 2.  DAM Subgroup have redlined and highlighted changes to the DAM & SASM Req. doc to implement item 3 and had two rounds of review from TPTF.  Educational session on DAM to understand impact of item 3 provided at TPTF on April 2, 2008.  ACTION: Approve redline DAM & SASM Req. document implementing item 3 (highlighted).

6. WMS Action  WMS endorses the work and proposed solution of the TPTF Subgroup on Self- Committed Resources in the DAM, and recommends that ERCOT allocate resources to calculate the cost and effort needed to bring online proposed changes 1, 2 and 3 April 21, 20086

7. 7 Changes to Implement Item 3  Review DAM Subgroup redlined the DAM & SAMS Req. doc for implementing Item 3.

8. April 21, 20088 Action Needed for Item 3  Approve changes to the DAM and SASM Requirements document to implement Item 3  Set a high priority on resolving these issues preferably by market open (higher than any of the currently listed deferred items)  Possible Motion: approve the TPTF changes to the DAM Subgroup comments to the MMS DAM and SASM Requirements (B2) v2.0, as modified on April 21, 2008, and to assign a preliminary status to these changes of “needed for go-live” functionality and to request ERCOT to provide an impact analysis on the project schedule/cost to make these changes to the DAM and to report back to TPTF no later than May 15, 2008

9. April 21, 20089 Issue brought to DAM Subgroup  Time window for Self-Committed Resources to update their EOC: Option 1. Self-Committed Resources may update their EOC prior to DRUC but not after DRUC. Option 2. Self-Committed Resources may update their EOC prior to the end of the Adjustment Period.

10. April 21, 200810 Issue brought to DAM Subgroup  Option 1: must be enforced through behavioral rules since significant system changes likely  Pros: By limiting the time window, increases consistency between Day-Ahead offers and Real-Time offers for Self- Committed Resources awarded energy in DAM It makes the rules for Self-Committed Resources more consistent with TPO resources in the DAM  Cons: Increases Resource’s fuel cost risk even though the Resource does not receive DAM make-whole payment Imposes a limitation on Resources for which for there was no offsetting reward (i.e. make-whole payment).

11. April 21, 200811 Issue brought to DAM Subgroup  Option 2: This Option requires no system change.  Pros: Treats all Self-Committed Resources in the DAM the same as Resources self-committed in the Adjustment period SCRs do not receive any make-whole payment (i.e. are exposed to Startup Cost and Minimum Energy Cost recovery risk) and therefore should not be limited in managing their Real-Time market risks Adds consistency between Resources that use EOC-only and DAM Energy-only Offers  Cons: Decreases the potential for Day-Ahead and Real-Time LMP convergence at the Resource Node.

12. April 21, 200812 Future activities of DAM Subgroup  Subgroup would like not to work on full implementation (Item 4) – other Nodal startup issues are likely to be more important  After feedback from ERCOT/Vendors on implementing items 1, 2, and 3, Subgroup will meet again to resolve any issues/questions and draft an NPRR to reflect implementation of these items