Resource Cost Working Group December 2, 2015 WMS Update

Fuel Cost Components in the Fuel Adder VCMRR009 Calculation of Minimum Fuel Requirements Fee RCWG continued discussion of Appealing Verifiable Cost Rejections per Section 12 of the VCM. – First Level of Appeal: Review by an “ERCOT Verifiable Cost Appeals group” that is not part of the ERCOT verifiable cost team. – Second Level of Appeal: Review by the ERCOT Board (not limited to unaffiliated Directors). – Drafting a VCMRR to incorporate these changes RCWG developing list of fuel cost components that can be included in the Fuel Adder.

Fuel Cost Components in the Fuel Adder VCMRR009 Calculation of Minimum Fuel Requirements Fee Natural Gas Cost ComponentsCost TypeIncludeExclude Natural gas commodity cost Variable Pipeline fuel losses Variable Pipeline commodity charges Variable Pipeline capacity reservation demand charges ? Pipeline balancing costs Variable Pipeline minimum requirement charges ? Pipeline penalties ? Storage injection and withdrawal fuel losses Variable Storage injection and withdrawal commodity charges Variable Storage capacity reservation demand charges ? Meter Charges Hedging gains/losses

VCMRR012 - Alignment with NPRR732, Alignment of Verifiable Cost Language Within Protocols NPRR732 revised paragraph (11) of Section that describes how ERCOT will determine Resource costs in the event that a QSE or Resource Entity fails to file verifiable costs within thirty (30) days of a request to file such costs. This VCMRR012 removes language in the Verifiable Cost Manual that would be in conflict with the Protocols as modified by NPRR732 Vote?

General Update Preparing draft NPRR to remove vendor fuel names for fuel indices from protocols. – ERCOT to provide a market notice 60 days prior to the effective date of the vendor change Discussing need for a coal Index price: – Possibility of replacing the $1.50 /MMBtu for solid fuel with a delivered coal index price – May need to utilize a coal index price for exceptional fuel cost and fuel adder calculations for coal and lignite resources