1 WMS Report TO TAC April 2006

2 In Brief Two Working Group reports Two Working Group reports Two Task Force Reports Two Task Force Reports BENA presentation BENA presentation Target Rich Environment for WMS Target Rich Environment for WMS

3 Working Group Reports CMWG Review of Transmission Planning Economic Criteria Review of Transmission Planning Economic Criteria

4 Working Group Reports CMWG Review of Transmission Planning Economic Criteria Review of Transmission Planning Economic Criteria Diagram 2 p S D q P CS PS

5 Working Group Report DSWG Credit Issue Associated With LaaR Bidding

6 LaaR Bidding Behavior Created Credit Issue

7 C B D A Long Term Solutions Evaluated Team reviewed eight potential long term solutions: 1.Revise settlement process and how defaults are processed 2.Revise credit provisions to require protection prior to bidding and create ability to monitor real time 3.Shift credit risk to Resources rather than QSEs 4.Create two separate markets, one for LaaRs and one for Gen 5.Maintain a single market clearing engine, but when LaaR is oversubscribed post separate clearing prices for LaaR and Gen 6.Pay all ancillary services as bid (both Gen and LaaR) 7.Modify current award mechanism for LaaRs; LaaRs offered at a price below MCPC are awarded 8.Eliminate sunset date on short term solution and modify system to reject negative offer prices

8 High Level Overview of Solutions Alternative Resolves Credit Issue Market Cost to Implement Time to Implement Market Participants Impacted LaaR Participation Impact A. Collateralization for Negative Bids Early 2007 C. Single RRS Bid Stack with Separate LaaR and Gen MCPCs if Oversubscribed Early 2007 D. LaaR RRS Offered Below MCPC is Prorated when Market Oversubscribed Late 2006 E. Eliminate Sunset Provision on Current Solution Late 2006 * Icon size represents relative impact when compared with other alternatives.

9 Emergency Load Response Program Update DSWG given assignment to develop ELR Program for a 1 in 10 year loss of load event (LOLE); a probabilistic approach used to determine reserve margins & resource adequacy DSWG given assignment to develop ELR Program for a 1 in 10 year loss of load event (LOLE); a probabilistic approach used to determine reserve margins & resource adequacy Proposed rule (resource adequacy) includes a “backstop” provision for emergency load response (ELR) contracts Proposed rule (resource adequacy) includes a “backstop” provision for emergency load response (ELR) contracts

10 Combined Cycle Task Force Understanding start-up payments Understanding start-up payments Getting RPRS to nominate correctly Getting RPRS to nominate correctly Uniformity in the Claw Back provisions Uniformity in the Claw Back provisions

11 Frequency Task Force Plethora of SCE related PRRs Plethora of SCE related PRRs Holistic look at frequency control Holistic look at frequency control Examination of SCE compliance (PRR525) Examination of SCE compliance (PRR525)

12 Frequency Task Force SCE and frequency control SCE and frequency control SCE and regulation deployment SCE and regulation deployment Load delta and regulation deployment Load delta and regulation deployment Obligations / incentives and frequency Obligations / incentives and frequency Obligations / incentives and regulation Obligations / incentives and regulation Wind Forecast and regulation Wind Forecast and regulation ERCOT RGS signals and SCE ERCOT RGS signals and SCE

13 Frequency Task Force Several PRR related to SCE Several PRR related to SCE Full participation of WMS and ROS Full participation of WMS and ROS Fast track to beat PRR525 market impacts Fast track to beat PRR525 market impacts Continued work on primary frequency Continued work on primary frequency

14 BENA Balancing Energy Neutrality Charge Balancing Energy Neutrality Charge WMS Goal to disaggregate in settlement WMS Goal to disaggregate in settlement

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16 BENA Balancing Energy Neutrality Charge Balancing Energy Neutrality Charge WMS goal to disaggregate in settlement WMS goal to disaggregate in settlement ERCOT will provide QSE data ERCOT will provide QSE data ERCOT will produce report ERCOT will produce report Intent of the WMS goal is satisfied Intent of the WMS goal is satisfied