Real Time Mitigation During Exceptional Fuel Cost Events

Challenges/Outline Allowing for cost recovery during “exceptional fuel cost events Defining “Exceptional Event” Verifying Costs Interim Settlement Solutions discussed ◦ RUC vs Emergency Energy ◦ Who Pays? Questions and other discussion

Fuel Cost Events February and March 2014 movements in spot gas prices created significant change from Day Ahead FIP to spot price Generators dispatched at MOC versus EOC were settled at Day Ahead FIP resulting in losses based on the gas price move Current protocols do not allow for cost recovery unless during a RUC RCWG has discussed ways to allow for cost recovery during such events

Defining Exceptional Event Exceptional event will be defined as some deviation from Day Ahead FIP to spot price ranging from: ◦ Spot prices are greater than DA FIP + Fuel Adder ◦ Spot prices as a factor of DA FIP Factors to consider: ◦ Frequency of occurrences ◦ Interim versus long term solutions ◦ Impact of manual settlement process through disputes and cost verification (Interim) ◦ System Changes (Long-term solution)

Verifying Costs Cannot simply settle on differences between DA FIP and spot price Entities must provide proof of purchased fuel Other costs to be considered? Transportation Real Time fees Imbalances Swing fees Building a process that settles these types of conditions forward would be challenging

Interim Settlement Solutions RCWG discussed the option of treating mitigated resources during such events similar to RUC units that do not recover their costs RUC committed resources not recovering costs can dispute and recover their true costs RUC costs are paid by entities that are short in the market up to 2X their short fall and then uplifted to Load on a ratio share basis RUC costs are defined by protocol for capacity concerns, not transmission constraints

Interim Settlement Solutions Resources mitigated during real time and settled on their MOC are utilized for transmission constraints not capacity concerns Therefore, is a RUC Settlement solution appropriate? Transmission issues settle in imbalances through Real Time Energy, CRRs and Revenue Neutrality Does this set precedent for uplift of costs during an exceptional event? Interim approach could utilize Emergency Energy Payment method for settlement of cost recovery

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)

Questions/Discussion