1. Draft NPRR Weather Sensitive ERS Loads December 2012

2. 2 Background Since 2008, Emergency Response Service (ERS) has been procured three times a year for 4-month Standard Contract Terms –Feb. thru May –June thru Sept. –Oct. thru Jan. ERS Resources are awarded and obligated based on a static MW capacity offer, by Time Period –They are expected to meet performance requirements based on that static obligation across all hours, regardless of weather conditions This has worked OK for commercial & industrial loads with DR based on business processes unaffected by weather For weather-sensitive Loads, not so much

3. 3 Weather impacts on load by customer type Customer class breakdown is for competitive choice areas; percentages are extrapolated for munis and co-ops to achieve region-wide estimate Large C&I are IDR Meter Required (>700kW) Large C&I 23.7% Residential 51.2% (~35,000 MW) Residential 27.4% (~8,500 MW) Small Commercial 25.2% Small Commercial 28.9% Large C&I 43.7% Wed., Aug. 3, 2011 5:00 PM ERCOT Load: 68,416 MW Temperature in Dallas: 109° Wednesday March 9, 2011 5:15 PM ERCOT Load: 31,262 MW Temperature in Dallas: 64°

4. 4 July 23 to July 29, 2012 Average residential summer day load curve Source: Pecan Street Project Inc. Used with permission.

5. 5 Background (continued) Typical weather-sensitive Load: –Aggregation of residential premises with direct load control on the AC units (thermostat or compressor switch) If this ERS Load is offered into the June-September Contract Period, its offer must reflect the demand response it will have available on the mildest weather day of the Contract Term –It might have 2 MW to give on Aug. 24, but only 1 MW to give on June 1 –It must limit its offer to 1 MW – because if deployed on June 1, it will not be able to deliver any more than that The static obligation also does not allow the DR provider to add members to its aggregation, and therefore capacity to its obligation, over the course of the Contract Term

6. 6 NPRR Overview ERCOT Staff worked with DSWG stakeholders throughout 2012 to identify ways to make ERS friendlier to weather-sensitive Loads This ERCOT NPRR is the result of those discussions Proposed schedule (normal timeline): –December: WMS, COPS, ROS review –December 13: PRS consideration of NPRR language –January: WMS, COPS, ROS further review (if requested) –January 17: PRS consideration of Impact Analysis –February 7: TAC consideration –March 19: Board consideration –April 1: Language gray-boxed into Nodal Protocols Gives DR providers certainty on market rules prior to summer Contract Term –June 1: Effective date

7. 7 NPRR main features Creates a new category of ERS Resource — Weather Sensitive ERS Load — and provides for their participation in ERS under the following conditions: –Eligible to participate as ERS Weather Sensitive Loads only during ERS Time Periods that correlate to peak weather conditions (e.g., Business Hours 2 and Business Hours 3 during the summer term) ERCOT may establish new Time Periods to accommodate weekends/holidays and winter peaks –Weather Sensitive Loads’ compensation would be based solely on their performance during deployment events and unannounced testing

8. 8 NPRR main features (continued) –Because aggregations of small customer Loads may be subject to growth and/or churn, QSEs would be allowed to adjust the population of their aggregations on a monthly basis during an ERS Standard Contract Term –Accelerated payment reductions protect against overly aggressive offers or overly aggressive projected program growth Continued overstatement of available DR is a Protocol violation subject to PUCT administrative action –Weather Sensitive Loads subject to: A maximum of eight deployment events of up to three hours per event during an ERS Contract Period, plus Up to eight ERCOT-administered unannounced tests per ERS Standard Contract Term –Weather Sensitive Loads evaluated and settled separately from the other (conventional) resources in the QSE’s portfolio

9. 9 ON OFF Questions? pwattles@ercot.com 512/248-6578