1. 1 Energy Storage Settlements Consistent with PUCT Project 39917 & NPRR461 ERCOT Commercial Market Operations November 2, 2012 – RCWG Meeting

2. 2 Agenda Guiding Principles –References to the preamble for Project 39917 –References to the rule language –Commission Staff direction on the rule intent Implementation Concepts –Metering Configurations –Data Aggregation –Settlements Spreadsheet Examples –Separate file attached to meeting materials

3. 3 Guiding Principle 1 An energy storage resource has the option of receiving wholesale storage load treatment. –Excerpt from Commission Response to question 1 in the preamble “…. the storage facility could choose not to separately meter the storage facility and treat all energy purchased from the ERCOT system as retail sales.”

4. 4 Guiding Principle 2 Wholesale Storage Load is defined in NPRR461 as – “Energy that is separately metered from all other Facilities to charge a technology that is capable of storing energy and releasing that energy at a later time to generate electric energy”. –Excerpt from §25.501 (m) (2) “Wholesale storage occurs when electricity is used to charge a storage facility; the storage facility is separately metered from all other facilities including auxiliary facilities; and energy from the electricity is stored in the storage facility and subsequently re- generated and sold at wholesale as energy or ancillary services.” –Storage facility energy that is re-generated is treated as a wholesale sale in the same manner as non-storage generation. The re-generated energy can self-serve associated Load behind the same POI at the generation site and/or be valued as an injection to the ERCOT system.

5. 5 Guiding Principle 3 Load for an energy storage Load Resource must be separately metered to be considered wholesale storage load –Excerpt from §25.501 (m) (2) “Wholesale storage occurs when electricity is used to charge a storage facility; the storage facility is separately metered from all other facilities including auxiliary facilities; and energy from the electricity is stored in the storage facility and subsequently re- generated and sold at wholesale as energy or ancillary services.”

6. 6 Guiding Principle 4 All generation output can be netted with generation site auxiliary loads and associated loads. –Commission staff direction on the intent of the rule the preamble reference provided was an excerpt from the Commission Response to question 1 in the preamble –“PURA §35.152 provides that a storage facility is entitled to be treated like other generation facilities in the sale of energy and ancillary services at wholesale.” –Wholesale Storage Load is not considered generation site auxiliary load or associated load. –Storage facility energy that is re-generated is treated as a wholesale sale in the same manner as non-storage generation. The re-generated energy can self-serve associated Load behind the same POI at the generation site and/or be valued as an injection to the ERCOT system.

7. 7 Guiding Principle 5 Wholesale storage load is exempt from charges and credits based on Load Ratio Share or per MWH basis –Excerpt from §25.501 (m) (2) “… Wholesale storage is not subject to retail tariffs, rates, and charges or fees assessed in conjunction with the retail purchase of electricity. Wholesale storage shall not be subject to ERCOT charges and credits associated with ancillary service obligations, or other load ratio share or per megawatt-hour based charges and allocations....”

8. 8 Guiding Principle 6 Wholesale storage load will not be included in the ERCOT 4CP calculations. –Excerpt from §25.192,Transmission Service Rates (b) (1) “… A TSP’s transmission rate shall be calculated as its commission- approved transmission cost of service divided by the average of ERCOT coincident peak demand for the months of June, July, August and September (4CP), excluding the portion of coincident peak demand attributable to wholesale storage load….”

9. 9 Guiding Principle 7 Settlement for a storage facility that has more than one delivery point shall be based on the net impact of those delivery points on ERCOT system. –Excerpt from §25.501 (m) (1) “For a storage facility that has more than one delivery point, ERCOT shall net the impact of those delivery points on the ERCOT system for settlement purposes”

10. 10 Guiding Principle 8 Wholesale storage load pricing shall be based on the LMP at the electrical bus –Excerpt from §25.501 (m) (2) “… Wholesale storage is wholesale load and ERCOT shall settle it accordingly, except that ERCOT shall settle wholesale storage using the nodal energy price at the electrical bus that connects the storage facility to the transmission system, or if the storage facility is connected at distribution voltage, the nodal price of the nearest electrical bus that connects to the transmission system. …”

11. 11 Implementation Concepts Metering configurations –will be based on ERCOT system design and capabilities for accounting for the wholesale storage load and site generation have separate wholesale storage load metering for each energy storage Load Resource –will NOT be allowed if they do not conform to a design that allows ERCOT to settle the site

12. 12 Implementation Concepts Data Aggregation processes –wholesale storage load will –be included to determine total UFE will NOT –be assigned Unaccounted for Energy (UFE) –be included in Adjusted Metered Load (AML) –be included in ERCOT 4CP calculations –be included in TRE fee calculations –have transmission and/or distribution losses added

13. 13 Implementation Concepts Settlement processes –wholesale storage load will –be settled by QSE and Settlement Point –be settled through Real-Time Energy Imbalance at a Resource Node –be settled using an energy-weighted price at the bus (ESR load is LMP weighted average by telemeter ESR load) will NOT –be included in any Load-shared charges and credits –be settled using a Load Zone Settlement Point Price

14. 14 Questions and Discussion