April 2, 2008 CRR Team Update PCRRs 101

2 2 CRR Team UpdateApril 2, 2008 Table of contents 1.What is a PCRR? 2.Which NOIEs are eligible for PCRRs? 3.What must a NOIE do to register for PCRRs? 4.What information must be provided on the Allocation Eligibility Form for owned Generation Resources? 5.What information must be provided on the Allocation Eligibility form for contractual commitments that were entered into before September 1, 1999? 6.How is the information on the Allocation Eligibility Form verified? 7.How does ERCOT use the Allocation Eligibility Form? 8.When do NOIEs submit PCRR nominations? 9.What choices do NOIEs make when submitting PCRR nominations? 10.How does ERCOT run PCRR allocations? 11.What happens after ERCOT runs the PCRR allocation?

3 3 CRR Team UpdateApril 2, 2008 What is a PCRR? A PCRR (Preassigned Congestion Revenue Right) is a type of CRR (Congestion Revenue Right) that is allocated to eligible NOIEs (Non-Opt In Entities). Who are NOIEs? NOIEs comprise of: Municipally Owned Utilities (such as Austin Energy and CPS Energy), Electric Cooperatives (such as South Texas Electric Cooperative and Brazos Electric Power Cooperative Inc) and River Authorities (such as LCRA)

4 4 CRR Team UpdateApril 2, 2008 Which NOIEs are eligible for PCRRs? NOIEs who… 1.Own a Generation Resource or 2.Have a long-term (greater than 5 years) contractual commitment that was entered into before September 1, 1999 for annual capacity and energy from specific Generation Resources; or 3.Have a long-term (greater than 5 years) allocation from the federal government for annual capacity and energy produced at a federally-owned hydroelectric Generation Resource, and that allocation was in place prior to September 1, … can choose to register for PCRRs PCRR Allocation Eligibility (1)PCRRs are available to be allocated to Non-Opt In Entities (NOIEs) that choose to apply for those rights and that: (a)own or have a long-term (greater than five years) contractual commitment that was entered into before September 1, 1999 for annual capacity and energy from specific Generation Resources; or (b)have a long-term (greater than five years) allocation from the federal government for annual capacity and energy produced at a federally-owned hydroelectric Generation Resource, and that allocation was in place prior to September 1, 1999.

5 5 CRR Team UpdateApril 2, 2008 What must a NOIE do to register for PCRRs? NOIEs must submit to ERCOT: 1.The Standard Form Market Participant (MP) Agreement 2.The CRR Account Holder Application for Registration, and 3.The Allocation Eligibility Form (see next slide) Note: check the “CRR Account Holder” box Note: check the “PCRR Allocations” box

6 6 CRR Team UpdateApril 2, 2008 What information must be provided on the Allocation Eligibility Form for owned Generation Resources? Name of Non-Opt In Entity (NOIE) DUNS number Name of Generation Resource Name of Load Zone For owned generation resource Description of proof of generation resource ownership submitted to ERCOT Net unit capacity owned per Generation Resource [Name as shown on Standard Form Agreement and CRR Account Holder Application] [9 digit numbe r] [Name as shown on Resource Asset Registration Form (RARF)] [NOIE or Comp etitive] [Property tax statement, financial statement, etc.] [in MWs]

7 7 CRR Team UpdateApril 2, 2008 What information must be provided on the Allocation Eligibility Form for contractual commitments that were entered into before September 1, 1999? Name of Non-Opt In Entity (NOIE) DUNS number Name of Generation Resource Name of Load Zone For contractual agreement Executed copies of contracts entered into before September 1, 1999 submitted to ERCOT (Yes/No) Date of Contract Expiration Contractual amount per Generation Resource [Name as shown on Standard Form Agreement and CRR Account Holder Application] [9 digit number] [Name as shown on Resource Asset Registration Form (RARF)] [NOIE or Competitive] [Yes/No][mm/dd/yyyy][in MWs]

8 8 CRR Team UpdateApril 2, 2008 How is the information on the Allocation Eligibility Form verified? For NOIEs owning their own Generation Resources: ERCOT reviews the Annual Reports, Official Statements, Plant Insurance policies, etc. provided by the NOIEs for confirmation. For NOIEs that have long-term contractual commitments before Sep 1st 1999: ERCOT reviews the purchase contracts, sales agreements, wholesale power agreements, etc. provided by the NOIEs for confirmation. The MWs are confirmed by ERCOT through the RARF and the contracts provided by the NOIEs.

9 9 CRR Team UpdateApril 2, 2008 How does ERCOT use the Allocation Eligibility Form? The Allocation Eligibility Forms serves two purposes: 1.It contains the PCRR eligibility information that was agreed on between ERCOT and relevant NOIE 2.It is used to populate the PCRR eligibility information file that is uploaded into the CRR system. This PCRR eligibility information includes: Maximum eligible MWs Relevant sources and sinks

10 CRR Team UpdateApril 2, 2008 When do NOIEs submit PCRR nominations? During the first six monthly CRR auctions (only): NOIEs must submit PCRR nominations (for the month) no later than 15 Business Days prior to the commencement of the CRR monthly auction for the one-month term which the CRRs being auctioned are effective. During the balance-of-year CRR auction (only): Protocols do not specify. Propose to continue with monthly auction timing. After which, during every annual CRR Auction*: NOIEs must submit PCRR nominations (for the 24-month or 12-month duration) no later than 30 Business Days prior to the commencement of the annual auction. What if PCRR nominations were not fully allocated during annual CRR Auction? If at the time of the annual PCRR allocation, ERCOT determines that PCRR nominations are not feasible, resulting in proportionally reduced PCRR allocations, then prior to each subsequent monthly CRR Auction, ERCOT shall re-evaluate the full nomination and allocate additional PCRRs, if feasible.

11 CRR Team UpdateApril 2, 2008 What choices do NOIEs make when submitting PCRR nominations? For NOIEs eligible for Baseload PCRRs, they can choose: –Ratio of Option vs. Obligation (“100%” means all Options; “0%” means all Obligations) –Nomination MW (equal to or less than “Eligible MW”) For NOIEs eligible for Capacity or Refund PCRRs, they can choose: –EITHER Capacity or Refund type (per PCRR, per auction period) –Ratio of Option vs Obligation (“100%” means all Options; “0%” means all Obligations) –Nomination MW (equal to or less than “Eligible MW”) Note: if “Capacity” type is chosen, Nomination MW <= 40% capacity factor per year

12 CRR Team UpdateApril 2, 2008 How does ERCOT run PCRR allocations? ERCOT intends to use the same CRR Network Model for each month’s PCRR allocation, MCFRI allocation and CRR Auction. –This means that any outages, contingencies, binding constraints, etc. included in the PCRR allocation will also be included in the subsequent MCFRI allocation and CRR auction. ERCOT shall conduct a simultaneous feasibility test (SFT) to determine whether the nominated PCRRs comply with network model constraints. PCRR allocations are evaluated using 100% of network capacity If the SFT evaluation indicates that the nominated PCRR amounts are not feasible, then ERCOT shall proportionately reduce the requested PCRRs by their Impact Ratio on violated constraints.

13 CRR Team UpdateApril 2, 2008 What happens after ERCOT runs the PCRR allocation? PCRR allocation results must be available as part of the Auction Notice posting. –No less than 10 days before the monthly CRR Auction (20 days before the annual). Once allocated, NOIEs may offer their PCRRs in the subsequent CRR Auction (even before paying for those PCRRs). After CRR Auction has cleared, PCRRs are priced (according to auction clearing price and type of PCRR) and NOIEs will receive an invoice for those PCRRs. Only after payment is made, can NOIEs bilaterally trade those PCRRs.