RCWG Update to WMS April 9, 2014

VCMRR-VC for Cancellation of RUC Committed Resources Paragraph (3) of Nodal Protocol Section regarding Cancellation of a RUC Commitment states: (3) The process for determining the verifiable actual costs for a RUC cancellation must be developed by ERCOT, approved by the appropriate TAC subcommittee, and posted to the MIS Secure Area within one Business Day after initial approval and after each approved change. The purpose of the proposed VCMRR is to document ERCOT’s process for calculating payments for RUC- Committed Resources that have received a RUC Cancellation, as required above. Vote?

Real-Time Mitigation during Exceptional Fuel Cost Events Some Resources were mitigated in real-time to below their actual cost due to large differences between FIP and the actual spot gas price during February and March 2014 – The actual spot price on certain days was significantly different than the previous day price used for FIP – West Texas spot gas prices were much higher than the Houston Ship Channel price used for FIP

Real-Time Mitigation during Exceptional Fuel Cost Events Discussed Possible Solutions – Settlement dispute process Concerns with uplift and who pays Limit to exceptional events and infrequent use – Changes to FIP Higher of HSC or Waha, or Resource specific Concerns with FIP timing May require significant system changes

Real-Time Mitigation during Exceptional Fuel Cost Events RCWG discussion narrowed to the following: Settlement solution – Use Emergency Energy Settlement approach – Requires dispute and ERCOT capability to calculate (ERCOT does something similar today for LDL overrides) – Establish threshold to limit to exceptional events and infrequent use Changes to FIP – Provides a more market-based solution – Need to address FIP timing issues – Higher of HSC or Waha may better reflect ERCOT-wide marginal gas cost under current gas market – Same-day/intraday gas purchases still an issue

General Update Handy Whitman Index – continue using average of Steam Production Plant and Other Production Plant indices to escalate VC O&M Mitigated Offer Caps for QSGRs and CCGR Power Augmentation– ERCOT working on analysis of QSGRs Verifiable Costs for New Technologies – investigate verifiable costs for CAES upon resolution of NPRR560

Appendix - Real-Time Mitigation during Exceptional Fuel Cost Events Emergency Energy Settlement Approach Emergency Energy Volume- – Min (BP, RTMG) (minimum of Base Point or metered output) Current Settlement Price- – MAX (0, EMREPR – RTSPP) (maximum of 0 or Emergency Energy Price minus Real Time Settlement Point Price) – Manual solution would replace EMREPR with the appropriate MOC price recalculated at verified FIP (spot price paid for fuel during event) Requires dispute and ERCOT capability to calculate (ERCOT does something similar today for LDL overrides)