Programs/Products that ERCOT Does Not Presently Offer ERCOT Demand Side Working Group New DR Product Options Subgroup Jay Zarnikau Frontier Associates LLC 4/13/2012

ERCOT’s Formal DR Products and Programs Load Resources providing RRS – Day-ahead Ancillary Service market clearing prices – 181 Load Resources with 2382 MW of registered DR capacity – Participation in Responsive Reserves capped at 1150 MW Load Resources providing Non Spin – Day-ahead Ancillary Service market clearing prices – 30 minute ramp up time, must operate for at least 1 hour – Little or no participation, presently Controllable Load Resources Providing Regulation – Day-ahead Ancillary Service market clearing prices – Instantaneous response time 2

ERCOT’s Formal DR Products ERS (formerly EILS) – Mandatory response from loads selected to provide the service; ERCOT dispatch – Maximum 8 cumulative hours in contract period (but could be longer, if recall instructions extend longer), can be renewed by ERCOT upon exhaustion – Will soon include non-market generation – Minimum offer size 100 kW – 10 minutes notice – 475 MW from ~900 Load sites 3

ERCOT’s Formal DR Products TDSP Load Management SOP – TDSP instruction – ~150 MW enrolled in TDSP SOPs, size may be doubled for this summer – Requirements depend upon TDSP Typical minimum offer size: approx. 100 kW (varies by TDSP) Typical commitment of 4 hours of unscheduled curtailment + 2 hours of scheduled curtailment (varies by TDSP) Penalty depends upon TDSP Typical notice is 30 minutes to 1 hour, depending on TDSP rules Incentives range from $15/kW to $60/kW depending on TDSP Summer peak hours only, presently 4

Alberta Demand Opportunity Service (DOS) – Mandatory response (like ERCOT’s formal programs) – No minimum size Different from ERS, which requires 100 kW minimum – AESO dispatch (like ERCOT) – Three service types, 7 minute, 1 hour, and standard: DOS 1 Hour, curtail in 1 hour, availability is limited due to system constraints – Similar ramping period to TDSP SOP—some TDSP SOPs offer 1 hour ramping periods – Currently has about 100 MW in participation 5

Alberta Voluntary Load Curtailment Program (VLCP) A minimum 1-hour notice Similar to TDSP SOP—some TDSP SOPs offer a 1 hour ramping period Program is voluntary, participants can decline to curtail load, no minimum size – Different from ERCOT’s formal program in these two respects AESO has identified need for up to 400 MW of voluntary load curtailment Current level of participation is negligible 6

PJM Economic Load Response Program (ELRP) Voluntary program – Perhaps similar to ERCOT’s future Loads in SCED program Participants specify minimum reduction price, shutdown costs, and the minimum duration of the load reduction – Perhaps similar to ERCOT’s future Loads in SCED program Price Mechanism: – Submit a sell offer into the Day-Ahead Market or Real-Time Market, or self schedule that clears – Perhaps similar to ERCOT’s future Loads in SCED program ELRP participation decreased by 57,288 MWh in 2011, compared to the same period in 2010 – Participation levels have been lower due to a number of factors: Lower price levels Lower load levels Improved measurement and verification On 2011’s peak load day, 2,042 MW was registered for ELRP 7

PJM Emergency Load Management Three types of Load Management – Energy Only (Voluntary), Capacity Only (Mandatory), Full Emergency (Mandatory) Interruptible for 10 times from June through September, up to 6 consecutive hours from 12:00 to 20:00 on non-holiday weekdays – Similar to TDSP SOP, where the time period is summer peak hours only, hours committed set by program rules Implement within 2 hours – Participant can specify 1 hour or 2 hour ramping period – Different from ERCOT: ERS specifies 10 minutes and TDSP SOPs have a specific ramping period Curtailment Service Provider (CSP) must have registrations that total >=100 kW – Same as ERS and TDSP SOP Two price mechanisms: – If a participant in the PJM capacity market, participant will make an offer into the auction and receive a Resource Clearing Price – If a participant outside of the PJM capacity market, participant is certified 3 months prior to the Delivery Year and receives a price tied to the zonal capacity charge This option will be eliminated beginning June 1,

PJM Load Management Program Cont’d 9 Table: 2011 Load Management Events Summary for PJM Total registered MW in the Load Management Program – 11,523 MW in 2011/2012 Total zonal monthly capacity credits for CY 2011 – $487,161,575 Underperformance penalties of $5.6 million in 2011

MISO Emergency Demand Response (EDR) Resource-specific ramping offer The participant can specify: – The minimum and maximum amounts of demand reduction – The minimum and maximum number of contiguous hours to be curtailed – The number of hours of advance notice needed to curtail load – Perhaps similar to ERCOT’s future Loads in SCED Participants submit daily offers, receive either the higher of the offer or the locational marginal price (LMP), but offers capped at $3,500/MWh Different from ERCOT – ERS sets price through a pay as bid mechanism 4 months in advance – The TDSP SOP sets the price in advance Approximately 900 MW registered in

CAISO Proxy Demand Resource (PDR) Implemented May 1, 2010 Minimum size is 100 kW, loads may aggregate to achieve threshold – Similar to ERS and TDSP SOP Minimum load reduction and response times based on the bid submitted and the award received – Different from ERCOT ERS and TDSP SOPs set the response times Participants submit bids into the wholesale Day Ahead and/or Real Time market – Perhaps similar to ERCOT’s future Loads in SCED program 11

Conclusion Not much in these programs that ERCOT doesn’t already offer or will offer in the future ERCOT’s Loads in SCED programs will allow loads to respond to prices in the market similar to many of the DR products explored in this presentation ERCOT does not offer DR products that: – Allow for ramping times longer than 1 hour – Allow participants to set their own ramping times – Accommodate aggregated residential (small, temperature-sensitive loads) to the degree they are accommodated in some other markets. 12