Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 1 Reliability Unit Commitment (RUC) Settlements Business Requirements Settlements and Billing August 8, 2006

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 2 Agenda Relevant Charge Type & Related Calculations Highlights of Business Requirements –Calculation Maps –Calculations –Outstanding Issues or Assumptions

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 3 RUC Charge Types Charge Type Calculations: –RUC Make-Whole Payment (PR and PR (a)) –RUC Clawback Charge (PR and PR (b)) –RUC Decommitment Payment (PR and PR (c)) –RUC Capacity-Short Charge (PR and PR (d)) –RUC Make-Whole Uplift Charge (PR and PR (e)) –RUC Clawback Payment (PR and PR (f)) –RUC Decommitment Charge (PR and PR (g))

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 4 RUC Related Calculations Related Calculations: –Startup Price (PR , PR 5.7.3) –Minimum-Energy Price (PR , PR , PR 5.7.3) –RUC Guarantee (PR ) –RUC Minimum-Energy Revenue (PR ) –Revenue Less Cost Above LSL During RUC-Committed Hours (PR ) –Revenue Less Cost During QSE Clawback Intervals (PR ) –RUC Shortfall (PR ) which includes: RUC Capacity at Snapshot and Adjustment Period RUC Shortfall at Snapshot and Adjustment Period RUC Shortfall and RUC Shortfall Total RUC Shortfall Ratio Share –RUC Capacity Credit (PR )

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 5 RUC Make-Whole Payment Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 6 RUC Make-Whole Payment Highlights (2) Requirement IDFR91 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 5.7.1, PR (a) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Make-Whole Payment Amount by QSE and Resource for each Hour of the Operating Day. RUCMWAMT_ _ = (-1) * MAX(0, RUCG_ _ - RUCMEREV_ _ - RUCEXRR_ _ - RUCEXRQC_ _ ) / RUCHR_ _ Requirement IDFR92 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Make-Whole Payment Amount RUC Total by RUC Process for each Hour of the Operating Day. RUCMWAMTRUCTOT_ = RUCMWAMT_ _ Requirement IDFR93 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Make-Whole Payment Amount Total for each Hour of the Operating Day. RUCMWAMTTOT = RUCMWAMTRUCTOT_

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 7 RUC Clawback Charge Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 8 RUC Clawback Charge Highlights (2) Requirement IDFR111 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Clawback Factors by QSE and Resource for each Operating Day. If QSE submits a Three-Part Supply (SUO, MEO and Energy) into the DAM for the Resource, Then, RUCCBFR_ _ = 0.5 for the Operating Day If EECP is in effect for any hour of the Operating Day: RUCCBFR_ _ = 0.0 for the Operating Day RUCCBFC_ _ = 0.0 for the Operating Day Otherwise, RUCCBFR_ _ = 1.0 for the Operating Day If EECP is in effect for any hour of the Operating Day: RUCCBFR_ _ = 0.5 for the Operating Day RUCCBFC_ _ = for each hour of the Operating Day

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 9 RUC Clawback Charge Highlights (2) Requirement IDFR113 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Clawback Charge Amount Total for each Hour of the Operating Day. RUCCBAMTTOT = RUCCBAMT_ _ Requirement IDFR112 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR 5.7.2, PR (b) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Clawback Charge Amount by QSE and Resource for each Hour of the Operating Day. If (RUCMEREV_ _ + RUCEXRR_ _ - RUCG_ _ ) > 0, Then, RUCCBAMT_ _ = [(RUCMEREV_ _ + RUCEXRR_ _ - RUCG_ _ ) * RUCCBFR_ _ + RUCEXRQC_ _ * RUCCBFC_ _ _ Otherwise, RUCCBAMT_ _ = [Max (0, RUCMEREV_ _ + RUCEXRR_ _ + RUCEXRQC_ _ - RUCG_ _ ) * RUCCBFC_ _ ] / RUCHR_ _

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 10 RUC Clawback Charge Highlights (3) Issues: 1.The calculation in the Protocols allows for only one (1) daily Clawback factor for RUC-Committed hours per Operating Day but the paragraphs above the calculation in the Protocols imply that the Clawback factor for RUC-Committed hours can change if EECP is in effect. –Can EECP be in effect a certain time period that may not equal an entire Operating Day? –Assumption made: If EECP is in effect for any part of the Operating Day then ERCOT will use the EECP Clawback factor for the entire Operating Day. This issue may need an NPRR to clarify and state the wishes of TPTF. 2.Assumption made: The valid Three-Part Supply Offer submitted for use in the DAM will be used to determine Clawback factors.

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 11 RUC Decommitment Payment Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 12 RUC Decommitment Payment Highlights (2) Requirement IDFR130 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 5.7.3, PR (c) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Decommitment Payment Amount by QSE and Resource for each Hour of the Operating Day. RUCDCAMT_ _ = (-1) * Max (0, (SUPR_ _ _ - (Max (0, MEPR_ _ - RTSPP_ ) * (LSL_ _ * (¼))))) / NCDCHR_ _ Requirement IDFR131 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Decommitment Payment Amount Total for each Hour of the Operating Day. RUCDCAMTTOT = RUCDCAMT_ _

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 13 RUC Decommitment Payment Highlights (3) Issues: 1.What STARTTYPE (hot, intermediate, cold) is used to pay startup costs for the RUC Decommitment Payment? –Assumption made: The STARTTYPE for RUC Decommitment Payments can be hot, intermediate or cold and is determined by the length of the Decommitment and the parameters of the Resource.

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 14 RUC Capacity-Short Charge Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 15 RUC Capacity-Short Charge Highlights (2) Requirement IDFR147 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR , PR (d) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Capacity-Short Charge Amount by QSE and RUC Process for each 15-minute Settlement Interval of the Operating Day. RUCCSAMT_ _ = (-1) * Max [(RUCSFRS_ _ * RUCMWAMTRUCTOT_ ), (2 * RUCSF_ _ * RUCMWAMTRUCTOT_ / RUCCAPTOT_ )] / 4 Where: RUCCAPTOT_ = HSL_ _>R>_ Requirement IDFR148 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Capacity-Short Charge Amount Total for each Hour of the Operating Day. RUCCSAMTTOT = RUCCBAMT_ _

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 16 RUC Make-Whole Uplift Charge Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 17 RUC Make-Whole Uplift Charge Highlights (2) Requirement IDFR194 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR , PR (e) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Make-Whole Uplift Charge Amount by QSE for each 15-minute Settlement Interval of the Operating Day. LARUCAMT_ = (-1) * ( RUCMWAMTTOT / 4 + RUCCSAMTTOT) * LRS_

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 18 RUC Clawback Payment Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 19 RUC Clawback Payment Highlights (2) Requirement IDFR203 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 5.7.5, PR (f) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Clawback Payment Amount by QSE for each 15-minute Settlement Interval of the Operating Day. LARUCCBAMT_ = (-1) * [(RUCCBAMTTOT / 4) * LRS_ ]

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 20 RUC Decommitment Charge Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 21 RUC Decommitment Charge Highlights (2) Requirement IDFR211 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR 5.7.6, PR (g) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Decommitment Charge Amount by QSE for each 15-minute Settlement Interval of the Operating Day. LARUCDCAMT_ = (-1) * [(RUCDCAMTTOT / 4) * LRS_ ]

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 22 Startup Price Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 23 Startup Price Highlights (2) Requirement IDFR211 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR , PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate the SUPR by QSE and Resource, for each Start Type, for each Resource with a RUC commitment within the Operating Day. If, SUO for the Resource exists in the settlement system for the calculated Operating Day, SUPR_ _ _ _ = SUO_ _ _ _ Else, If VERISU for the Resource is available in the settlement system for the calculated Operating Day, SUPR_ _ _ _ = VERISU_ _ _ _ Else, SUPR_ _ _ _ = RCGSC (resource category for the Resource) End

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 24 Startup Price Highlights (3) Issues: 1.Settlements requires instruction on how to settle Combined Cycle resources based on Combined Cycle configurations. More information is needed. Until more information is available: –Assumption made: When no offer is submitted and no verifiable exists, the generic value for Combined Cycle Resources will be determined using the existing table in Section (1) for calculation of Startup Price (SUPR).

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 25 Minimum-Energy Price Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 26 Minimum-Energy Price Highlights (2) Requirement IDFR211 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR , PR , PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate the MEPR by QSE and Resource for each Resource with a RUC commitment within the Operating Day. If, MEO for the Resource exists in the settlement system for the calculated Operating Day, MEPR_ _ _ = MEO_ _ _ Else, If VERIME for the Resource is available in the settlement system for the calculated Operating Day, MEPR_ _ _ = VERIME_ _ _ Else, MEPR_ _ _ = RCGMEC (resource category for the Resource) End

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 27 Minimum-Energy Price Highlights (3) Issues: 1.The Resource Category Generic Minimum-Energy Cap is dependant on information submitted in the Three-Part Supply Offer. Settlements will only use the cap if no offer is submitted therefore the dependency does not allow settlements to calculate the cap. –Assumption made: Settlements will only use the cap if no offer is submitted therefore Settlements shall use 100% of the minimum of FIP or FOP. 2.Settlements requires instruction on how to settle Combined Cycle resources based on Combined Cycle configurations. More information is needed. Until more information is available: –Assumption made: When no offer is submitted and no verifiable exists, the generic value for Combined Cycle Resources will be determined using the existing table in Section (2) for calculation of Minimum-Energy Price (MEPR).

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 28 RUC Guarantee Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 29 RUC Guarantee Highlights (2) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate the RUCG by QSE and Resource, for each Resource with a RUC commitment within the Operating Day. RUCG_ _ _ = (SUPR_ _ _ _ * RUCSUFLAG_ _ _ ) + (MEPR_ _ _ * Min ((LSL_ _ _ * (¼)), RTMG_ _ _ ) Note: Startup portion of the RUCG calculation For each contiguous RUC-Commitment; If startup is eligible (RUCSUFLAG = 1 in hour one of the contiguous RUC Commitment), determine the type of start (hot, intermediate, cold) based on the STARTTYPE bill determinant. STARTTYPES: Not Eligible = 0 Hot = 1 Intermediate = 2 Cold = 3 If STARTTYPE = 0 for a contiguous RUC Commitment, then use zero (0) in place of SUPR when calculating RUCG. Multiply the SUPR for the type of start indicated on the STARTTYPE bill determinant and the RUCSUFLAG (which will be one (1)). Then sum all eligible starts for the Operating Day. There can be more than one (1) contiguous RUC-Commitment within an Operating Day therefore it is possible to have more than one (1) eligible startup for an Operating Day. For each Resource, only one Startup Cost is eligible per block of contiguous RUC-Committed Hours. PR (2)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 30 RUC Minimum-Energy Revenue Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 31 RUC Minimum-Energy Revenue Highlights (2) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate the RUCMEREV by QSE and Resource, for each Resource with a RUC commitment within the Operating Day. RUCMEREV_ _ _ = (RTSPP_ * Min (RTMG_ _ _, (LSL_ _ _ * (¼))))

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 32 Revenue Less Cost Above LSL During RUC-Committed Hours Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 33 Revenue Less Cost Above LSL During RUC-Committed Hours Highlights (2) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate the RUCEXRR by QSE and Resource, for each Resource with a RUC commitment within the Operating Day. RUCEXRR_ _ _ = Max {0, [RTSPP_ * Max (0, RTMG_ _ _ – (LSL_ _ _ * (¼))) + (-1) * (VSSVARAMT_ _ _ + VSSEAMT_ _ _ ) + (-1) * EMREAMT_ _ _ – RTAIEC_ _ _ * Max (0, RTMG_ _ _ – (LSL_ _ _ * (¼)))]}

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 34 Revenue Less Cost During QSE Clawback Hours Highlights (1)

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 35 Revenue Less Cost During QSE Clawback Hours Highlights (2) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate the RUCEXRQC by QSE and Resource, for each Resource with a RUC commitment within the Operating Day. RUCEXRQC_ _ _ = Max {0, [(RTSPP_ * RTMG_ _ _ ) + (-1) * (VSSVARAMT_ _ _ + VSSEAMT_ _ _ ) + (-1) * EMREAMT_ _ _ – [MEPR_ _ _ * Min (RTMG_ _ _, (LSL_ _ _ * (¼)))] – [RTAIEC_ _ _ * Max (0, RTMG_ _ _ – (LSL_ _ _ * (¼)))]]}

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 36 RUC Shortfall Highlights (1) RUC Capacity at Snapshot / RUC Capacity at Adjustment Period / RUC Capacity Total

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 37 RUC Shortfall Highlights (2) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Capacity at Snapshot by QSE, for each RUC Process, for each 15-minute Settlement Interval of the Operating Day. RUCCAPSNAP_ _ = HASLSNAP_ _ _ _ + (RUCCPSNAP_ _ – RUCCSSNAP_ _ ) + ( DAEP_ _ – DAES_ _ )+ ( RTQQEPSNAP_ _ _ – RTQQESSNAP_ _ _ ) Requirement IDFR3 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Capacity Total for each RUC Process of the Operating Day. RUCCAPTOT_ = HSL_ _>R>_ _ Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Capacity at Adjustment Period by QSE, for each RUC Process, for each 15-minute Settlement Interval of the Operating Day. RUCCAPADJ_ = HASLADJ_ _ _ + (RUCCPADJ_ – RUCCSADJ_ ) + ( DAEP_ _ – DAES_ _ ) + ( RTQQEPADJ_ _ – RTQQESADJ_ _ )

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 38 RUC Shortfall Highlights (3) RUC Shortfall at Snapshot / RUC Shortfall at Adjustment Period

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 39 RUC Shortfall Highlights (4) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Shortfall at Snapshot by QSE, for each RUC Process, for each 15-minute Settlement Interval of the Operating Day. RUCSFSNAP_ _ = Max (0, (( RTAML_ _ ) *4) – RUCCAPSNAP_ _ )) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Shortfall at Adjustment Period by QSE, for each RUC Process, for each 15-minute Settlement Interval of the Operating Day. RUCSFADJ_ = Max (0, (( RTAML_ _ ) *4) – RUCCAPADJ_ ))

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 40 RUC Shortfall Highlights (5) RUC Shortfall / RUC Shortfall Total / RUC Shortfall Ratio Share

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 41 RUC Shortfall Highlights (6) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Shortfall by QSE, for each RUC Process, for each 15-minute Settlement Interval of the Operating Day. RUCSF_ _ = Max (0, Max (RUCSFSNAP_ _, RUCSFADJ_ ) – RUCCAPCREDIT_ z ) This calculation must be calculated for each RUC Process. The RUCCAPCREDIT used for the QSE must be the sum of all RUCCAPCREDIT, for that QSE, from all previous RUC Processes calculated for the Operating Day. Requirement IDFR3 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #)PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Shortfall Ratio Share by QSE, for each RUC Process, for each 15-minute Settlement Interval of the Operating Day. RUCSFRS_ _ = RUCSF_ _ / RUCSFTOT_ Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Shortfall Total for each RUC Process, for each 15-minute Settlement Interval of the Operating Day. RUCSFTOT_ = RUCSF_ _

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 42 RUC Shortfall Highlights (7) RUC Capacity Credit

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 43 RUC Shortfall Highlights (8) Requirement IDFR1 Source Mapping (Protocol/NERC/FERC and other binding documents Ref #) PR (1), PR (a) Traceability to Sub-Process MapsWill be completed August 31, 2006 Description: Calculate RUC Capacity Credit by QSE for each RUC Process of the Operating Day. RUCCAPCREDIT_ _ = Min [RUCSF_ _, (RUCCAPTOT_ * RUCSFRS_ _ )] This calculation must be calculated for each RUC Process. The value calculated will be used in the RUCSF calculation of all future RUC Processes for the Operating Day if the shortfall of that RUC Process resulted in a RUC Capacity-Short Charge for the QSE.

Texas Nodal © Electric Reliability Council of Texas, Inc. All rights reserved. 44 Summary The following Protocol versions were used as the basis of Reliability Unit Commitment (RUC) Settlements requirements: –Section 4 (006NPRR as approved by BOD on 07/18/2006) –Section 5 (003NPRR as approved by PRS on 06/22/2006) –Section 6 (009NPRR as approved by PRS on 07/20/2006) –Section 9 (007NPRR as approved by BOD on 07/18/2006)