RCWG Update to WMS May 6,

Real-Time Mitigation During Exceptional Fuel Events Option 3 – Increase MOC’s during Cold Weather Events When ERCOT issues a cold weather event and is allowed to procure more reserves through a SASM, increase the mitigated offer cap (MOC’s) multipliers in (e) by Retain manual make-whole process if higher MOC’s are not adequate to compensate for Resource fuel costs Rationale: Increase MOC’s during periods when the risk of gas price spikes is higher and provide headroom to reflect exceptional fuel costs in LMPs. Keep manual make-whole process as a backstop. May be an overly broad solution 2

Real-Time Mitigation During Exceptional Fuel Events Option 3 proposed multipliers: During ERCOT cold weather event, increase the mitigated offer cap multipliers in (e) by (e)The multipliers for paragraphs (b)(ii) and (c)(ii) above are as follows: (i)1.60 for Resources running at a ≥ 50% capacity factor for the previous 12 months; (ii)1.65 for Resources running at a ≥ 30 and < 50% capacity factor for the previous 12 months; (iii)1.70 for Resources running at a ≥ 20 and < 30% capacity factor for the previous 12 months; (iv)1.75 for Resources running at a ≥ 10 and < 20% capacity factor for the previous 12 months; (v)1.80 for Resources running at a ≥ 5 and < 10% capacity factor for the previous 12 months; (vi)1.90 for Resources running at a ≥ 1 and < 5% capacity factor for the previous 12 months; and (vii)2.00 for Resources running at a less than 1% capacity factor for the previous 12 months 3

NPRR/VCMRR - Utilizing Actual Fuel Costs in Startup Offer Caps Background: At Nodal implementation, realized that RUC make-whole didn’t consider revenues from breaker close to LSL To correct, reduced startup costs by approximating revenues using Proxy Heat Rate Problem – Startup offers caps are artificially low for DAM and RUC procurement Proposed NPRR/VCMRR: Use actual fuel costs in startup offer caps (i.e. remove PHR adjustment) Continue to use PHR adjustment in RUC Make-Whole Payment calculations (implement with NPRR617 Energy Offer Flexibility) Vote? 4

NPRR/VCMRR - EOC Caps for Make- Whole for “Other” Resources Background: NPRR560 established caps for Energy Storage Resources (ESRs), such as Compressed Air Energy Storage To reduce system impact, ESRs are classified as “Other” In protocols, “Other” resources have a $0/MWh EOC cap for Make-Whole Calculation In VCM, ESRs do not have a cap, as approved Proposed NPRR/VCMRR: Sets EOC Cap for Make-Whole Calculation for “Other” resources to the SWCap Creates “Wind” resource category with $0/MWh cap (aligns with current practice) PhotoVoltaic (PVGR) with $0/MWh cap (per NPRR588) ERCOT will report annually to WMS the % of DAM and RUC Make-Whole Payments calculated for “Other” resources Vote? 5

Minimum Fuel Requirement Cost in Fuel Adder Calculation ERCOT seeking clarification on allocating minimum gas transportation costs in the fuel adder calculation Background: Resource can elect to submit an “actual” fuel adder instead of the default $0.50/MMBtu Resource must submit documentation to ERCOT for verification Costs must be “clearly attributable to the resource” Options to allocate minimum requirement costs 1.Allocate to resource usage only, excluding third-party and storage 2.Allocate to resource and third-party usage, excluding storage 3.Allocate across all activity on transportation contract Vote? 6

General Update Methodology for verifying exceptional fuel costs for coal EMR End of Life Cycle Verifiable Costs

APPENDIX 8

Real-Time Mitigation During Exceptional Fuel Events Overview of NPRR664 Resource can designate a Fuel Index Price (FIPR) of HSC, Waha or weighted-average Includes Real-Time Make-Whole Payment provision for exceptional fuel cost events – Exceptional event: Actual price paid for delivered fuel must be greater than the FIPR plus the fuel adder plus a threshold fuel price of $2/MMBtu – Uplift allocated by LRS NPRR664 Approval – Authorized manual workaround to implement Make-Whole Payment for this winter, to be discontinued on May 1, 2015 – ERCOT to revisit the rank and priority with TAC before project initiation 9

Real-Time Mitigation During Exceptional Fuel Events Option 1 - Continue with manual implementation of NPRR 664 Rationale: Number of exceptional fuel events may be too small to justify significant system changes at this time Continue with manual calculation of make-whole payments Lower the priority for implementation of Index Fuel Prices Revisit if manual process becomes too burdensome 10

Real-Time Mitigation During Exceptional Fuel Events Option 2 - Pursue “Exceptional Fuel Cost flag” concept Resource will not be mitigated if it sets an exceptional fuel cost “flag”, submitted with its Energy Offer Curve (EOC) If set, Resource will be subject to verification of the exceptional fuel costs used in its EOC Rationale: Exceptional fuel costs would be reflected in LMP’s, possibly eliminating need for make-whole and new index fuel prices (i.e. NPRR664) 11