Reliability Must Run Resources for Summer 2011

Slide 2 RMR for Summer 2011 RMR Contracts for Mothballed Units ERCOT has signed RMR Agreements with two Resource Entities to return Mothballed Generation Resources to service to mitigate capacity shortages during the extreme heat and drought conditions impacting the ERCOT Region. Outcome Contracts RMR

Slide 3 RMR for Summer 2011 RMR Contracts for Mothballed Units Garland Power & Light –Spencer 4 –Spencer 5 NRG Texas Power, LLC –SR Bertron 1 –SR Bertron 2 Spencer to begin week of August 22 Bertron to begin first week of September Contracts terminate October 31, 2011 Outcome Contracts RMR 122 MW 292 MW

Slide 4 RMR for Summer 2011 Operation for these RMR Units will be as follows: No Three Part Supply Offers Not offered into DAM Committed only by Hourly RUC Resources will come On-Line with no Energy Offer Curve Outcome Operations RMR Committed based on system conditions and ability to meet demand.

Slide 5 RMR for Summer 2011 What happens when an On-Line Resource has no Energy Offer Curve? –ERCOT creates proxy Offer Curve Outcome Operations RMR MW $/MWh Proxy Energy Offer Curve 0 $ LSL+1MW -$250 $3000 LSL HSL

Slide 6 RMR for Summer 2011 What happens when an On-Line Resource has no Energy Offer Curve? –Resource is Price-taker at Low Sustained Limit (LSL) Outcome Operations RMR MW $/MWh Proxy Energy Offer Curve 0 $ LSL+1MW -$250 $3000 LSL HSL

Slide 7 RMR for Summer 2011 What happens when an On-Line Resource has no Energy Offer Curve? –Resource is very expensive to dispatch above LSL Outcome Operations RMR MW $/MWh Proxy Energy Offer Curve 0 $ LSL+1MW -$250 $3000 LSL HSL

Slide 8 RMR for Summer 2011 What happens when an On-Line Resource has no Energy Offer Curve? –ERCOT will not dispatch Resource above LSL until market prices reach $3000. Outcome Operations RMR MW $/MWh Proxy Energy Offer Curve 0 $ LSL+1MW -$250 $3000 LSL HSL

Slide 9 RMR for Summer 2011 Payment process for RMR units Outcome Settlements The Settlement process for these RMR Resources follows standard RMR Settlement practices per Protocol section 6.6.6, Reliability Must-Run Settlement

Slide 10 RMR for Summer 2011 Payment process for RMR units ERCOT ultimately provides two types of payments to the QSE for an RMR Resource –Standby Payment ◦Includes costs to return to operational status ◦Ongoing operation and maintenance costs –Energy Payment ◦Actual Fuel costs to start and produce energy Outcome Settlements

Slide 11 RMR for Summer 2011 Payment process can be complex Lots of other Moving Parts for RMR Settlement –Real-Time Energy Imbalance Payment –Emergency Energy Payment –RUC Make-Whole Payment –RUC Clawback Charge Outcome Settlements ? ? ? QSE is exposed to the usual Payments and Charges for a Resource

Slide 12 RMR for Summer 2011 Outcome Settlements ERCOT then Reverses these Charges and payments through the RMR Adjustment Charge ? ? ? Payment process can be complex Lots of other Moving Parts for RMR Settlement –Real-Time Energy Imbalance Payment –Emergency Energy Payment –RUC Make-Whole Payment –RUC Clawback Charge

Slide 13 RMR for Summer 2011 Costs Uplifted to QSEs with Load Net of all RMR charges and payments –Standby Payment –Energy Payment –RMR Adjustment Charge –RMR Non-Performance Charge ◦$10,000 per event of Unexcused Misconduct ◦Would reduce charge to QSEs with Load Outcome Settlements ? ? ?

Slide 14 RMR for Summer 2011 A few notes about Capacity Short Charges QSEs who are capacity short pay a portion of the RUC Make Whole Costs The RUC Capacity Short Charges are not affected by the RMR Adjustment Charge Outcome Settlements ? ? ? QSEs who are capacity short will still pay RUC Capacity Short Charge, even if RUC Make-Whole payments were calculated only for these RMR units

Slide 15 RMR for Summer 2011 RMR Reports Available through MIS* Outcome MIS Posting * – Requires a Digital Certificate