1. ERCOT Wholesale Market Basics
Module 1
Overview

2. Mission and Organization Role of ERCOT Market Participants
TOPICS
Module 1
Quick facts about ERCOT
Mission and Organization
Role of ERCOT
Market Participants
Here is the agenda for Module 1.
First, some facts about ERCOT.
Then we will go into the mission and organization of ERCOT.
Third we will discuss ERCOT’s role in the electric industry.
Finally, we will take a high level look at the different Market Participants.
ERCOT Wholesale Market Basics 2

3. TOPIC 1: Quick Facts
Module 1
ERCOT Wholesale Market Basics 3

4. About ERCOT Member-based 501(c)(4) nonprofit corporation
Quick Facts
Module 1
About ERCOT
Member-based 501(c)(4) nonprofit corporation
Annual 2009 budget of ~$168 Million
Over 700 full-time employees in Taylor and Austin, Texas
Revenue neutral
Fees charged to cover expenses
Budget includes base operations, projects, and monitoring.
Does not include Nodal – budget of $263 million
ERCOT is a private, not-for-profit 501-C6 corporation in Texas. We have facilities in Taylor and Austin. In addition to reliable operations, ERCOT provides centralized registration, meter data acquisition, data aggregation, and load profiling. (Protocol Section 1)
Currently we have about 570 FTEs. The 2007 budget is around million dollars.
WE ARE REVENUE NEUTRAL. We do not take a cut of the market. However we do charge QSEs a fee (based on LRS) for ERCOT, Texas Reliability Entity, and Nodal. Other fees apply to studies, special connections (WAN), etc. This information can be found at the bottom of the protocol library page – ERCOT Fee Schedule
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5. 1995: Texas PURA enabled wholesale market deregulation
Quick Facts
Module 1
ERCOT IN TIME
1995: Texas PURA enabled wholesale market deregulation
1996: ERCOT became a non-profit ISO
1999: SB7 enabled retail market competition
2000: ERCOT Protocols developed by stakeholders
2001: Wholesale & pilot retail markets opened 7/31
2002: Full retail market opened 1/1
2003: PUCT orders wholesale market redesign
2006: NODAL Protocols approved by PUCT
2010: Texas Nodal Market Implementation
ERCOT Wholesale Market Basics

6. ERCOT is: The Texas Reliability Entity under NERC/FERC
Quick Facts
Module 1
ERCOT is:
The Texas Reliability Entity under NERC/FERC
A NERC Interconnected System
1 of 3 in USA
An Independent System Operator
1 of 7 RTO/ISO in USA
ERCOT Wholesale Market Basics

7. ERCOT Capacity and Demand
Quick Facts
Module 1
ERCOT Capacity and Demand
One of the largest single control areas in US
38,000 miles of transmission
85% of Texas load
Capacity
~73,000 MW
Reserve Margin ~16% for 2009
~70% Natural Gas
All-time Peak Demand
August 2006 – 62,339 MW
Fuel Type 2007
Natural Gas 71.7%
Coal %
Nuclear 6.4%
Wind 0.4% (capacity is reduced to 8.7% of total)
Water 0.7%
Other 0.3%
*includes installed cap * cap factors
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8. ERCOT Market Involvement:
Quick Facts
Module 1
ERCOT Market Involvement:
Bilateral Wholesale Market
95%
~ $27 billion
Balancing Energy and Ancillary Services market
Other 5%
~ $1.9 billion
Registered Market Participants: >900
Include QSE, LSE, Resources, TDSP
ERCOT Wholesale Market Basics

9. ERCOT Retail Market Involvement:
Quick Facts
Module 1
ERCOT Retail Market Involvement:
How many retail customers in ERCOT?
~21 million
How many customers with the “Power to Choose” electric service provider?
~5.9 million
How many of those have exercised the “Power”?
~50% of residential load
~76% of non-residential
~30 million retail transactions (~330,000/month)
ERCOT Wholesale Market Basics

10. For additional details about ERCOT, please go to:
Quick Facts
Module 1
For additional details about ERCOT, please go to:
For more information on the Nodal market redesign, please go to:
For more information on the Retail Market, please go to:
ERCOT Wholesale Market Basics

11. TOPIC 2: Mission and Organization
Module 1
Part Two…
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12. Mission and Organization
Module 1
The mission of ERCOT
Nurtures the development of an effective and highly reliable electricity market in Texas
To fulfill obligations established by Texas Legislature, we will…
Ensure access to transmission and distribution systems
Ensure reliability and adequacy of the regional electrical network
Ensure information relating to customer choice is conveyed in timely manner
Ensure that electricity production and delivery are accurately accounted for
ERCOT Wholesale Market Basics

13. Mission and Organization
Module 1
Governed by…
ERCOT Board of Directors
Governmental oversight by…
Texas Legislature
Establishes laws related to electricity industry
Public Utility Commission of Texas
Provides regulatory oversight
Creates substantive rules based on laws
North American Electric Reliability Corporation as the Electric Reliability Operator
Texas RE monitors and reports compliance to NERC
ERCOT Wholesale Market Basics

14. Mission and Organization
Module 1
The Board of Directors is made up of sixteen members
Nine representatives from seven market segments
One Independent Retail Electric Provider
One Independent Generator
One Independent Power Marketer
One IOU
One Municipal
One Cooperative
Three Consumers
One Office of Public Utility Counsel as an ex officio voting member
One Commercial
One Industrial
Five Unaffiliated Directors
ERCOT CEO as an ex officio voting member
Chair of the PUCT as an ex officio non-voting member
ERCOT Wholesale Market Basics

15. Mission and Organization
Module 1
ERCOT Administration
Board of Directors
Finance and Audit Committee
HR and Governance Committee
Special Nodal Program Committee
Texas Regional Entity Advisory Committee
Technical Advisory Committee
Distributed Generation Task Force
Renewable Technologies Working Group
TAC and Subcommittees Organizational Review Task Force
Training Seminar Working Group
Transition Plan Task Force
Five Subcommittees
Commercial Operations Subcommittee
Protocol Revision Subcommittee
Reliability and Operations Subcommittee
Retail Market Subcommittee
Wholesale Market Subcommittee
ERCOT Wholesale Market Basics

16. Mission and Organization
Module 1
ERCOT Stakeholders:
Retail consumers, investor- and municipal-owned electric utilities, cooperatives, river authorities, independent generators, power marketers and retail electric providers
Stakeholder Process:
Each market segment elects representatives to serve on the Board of Directors and stakeholder committees, subcommittees, working groups and task forces, which make recommendations to the board regarding ERCOT market rules and procedures
ERCOT Wholesale Market Basics

17. Mission and Organization
Module 1
Board and Committees are comprised of ERCOT stakeholders and establish the policies and procedures for ERCOT, including the Market Rules
To become involved in the stakeholder process…
Participate in the public meetings
Sign up for distribution lists
To find additional information, visit the following sites:
Committee and Subcommittee webpage:
Meeting and event calendar:
distribution lists:
ERCOT Wholesale Market Basics

18. Mission and Organization
Module 1
Market Rules
ERCOT Protocols and Guides are established, revised and approved by market participants through the stakeholder process
ERCOT Guides constitute amplifications to the ERCOT Protocols
Commercial Operations Market Guide
Competitive Metering Guide
Data Transport Guides
Load Profiling Guide
Operating Guides
Retail Market Guide
Settlement Metering Operating Guide
Texas SET Guides
RULES ARE ESTABLISHED, REVISED, AND APPROVED BY THE MARKET.
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19. Mission and Organization
Module 1
ERCOT Protocols
Protocol Revisions
Any Market Participant can submit a Protocol Revision Request
Any Market Participant can submit comments on any pending PRR
Protocol Interpretations (PIR)
Submitted to ERCOT General Counsel
ERCOT shall respond within ten (10) Business Days of receipt
For more information on Protocols, go to:
ERCOT Wholesale Market Basics

20. Mission and Organization
Module 1
ERCOT Protocol Revision and System Change Requests
Protocol Revision Request Process
Changes to ERCOT systems or processes and related protocols
Submitted for evaluation through the stakeholder governance process
System Change Request Process
Changes to ERCOT computer systems which do not require protocol revision
Submitted for consideration to appropriate TAC subcommittee, TAC, and ERCOT Board
ERCOT Wholesale Market Basics

21. Mission and Organization
Module 1
ERCOT Protocol Revision Count
Since 2001
Over 800 Zonal Market Protocol Revisions Proposed
Not all are passed for implementation
Nodal Market Transition
Approximately 170 Protocol Revisions have been issued though Nodal Market is scheduled for 2010 launch
ERCOT Wholesale Market Basics

22. Mission and Organization
Module 1
Typical Protocol Revision Lifecycle
Day 1
Comment
Period
PRR
ERCOT
Market
Rules 21
Draft
PRR
Working
Group
Stakeholder Committee
Sub
Committee
Protocol
Task
Force 30
PRS
ERCOT
BOARD 60
Single Stakeholder
TAC
120 90
ERCOT Wholesale Market Basics

23. TOPIC 3: Role of ERCOT Module 1 Part 3 of Section 1.
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24. ERCOT’s role as defined in the Protocols
Role of ERCOT
Module 1
ERCOT’s role as defined in the Protocols
Ensure system reliability
Run a competitive wholesale market
Facilitate retail registration / switching
Ensure transmission grid reliability and adequacy
Ensure access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms
Ensure that electricity production and delivery are accurately accounted for among the Generation Resources and wholesale buyers and sellers, and TDSPs in the ERCOT Region
Ensure that information relating to a Customer's choice of Retail Electric Provider in the state of Texas is conveyed in a timely manner to the persons who need that information
SUMMARY: ERCOT’s role is to keep the lights on and run a competitive wholesale market, facilitate retail switching transactions, and enforce Protocols.
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25. Core processes to fulfill role Wholesale Market Operations
Role of ERCOT
Module 1
Core processes to fulfill role
Wholesale Market Operations
Power Operations
Commercial Operations
System Planning
Operations Areas
To carry out its appointed duties, ERCOT is involved in many activities every day within its four operations areas:
Market Operations includes maintaining the intricate balance between forecasted electricity power generation schedules and actual electricity demands among all competing market participants.
Production Operations includes transmission grid security, planning, and market support.
Financial (Commercial) Operations includes client relations, meter acquisition and data aggregation, settlements, billing, business rules, registration, load profiling, and renewable energy credit program management.
Registration includes acting as a centralized registration agent for both retail premises and market participants for the entire state of Texas.
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26. Wholesale Market Operations Day-Ahead Ancillary Services Capacity
Role of ERCOT
Module 1
Wholesale Market Operations
Day-Ahead Ancillary Services Capacity
Market
Selection & Dispatch based on
competitive bids
“Balanced” schedules by QSEs
Financial Market for Hedging Congestion
ERCOT operates a day-ahead ancillary services capacity market.
These services (discussed in detail later on) are selected and dispatched based on competitive bides.
All QSEs must submit balanced schedules. The generation and load must be equal. Cannot submit a schedule of 100MW of generation and only 90MW of load.
How 'bout something like this: When we speak of Market Operations, what do we mean? For starters, we hold a day-ahead ancillary services capacity market. Here we reserve capacity that we can deploy the following day to maintain reliability of the grid. During the operating day, to ensure that generation and load are always balanced, we dispatch generation based on competitive bids. And all through this process, QSEs are submitting balanced schedules to inform us of their supplies and obligations.
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27. Power Operations Managing Reliability
Role of ERCOT
Module 1
Power Operations
Managing Reliability
Monitoring and coordinating transmission capacity
Ensuring adequate reserves (Ancillary Services), “just in case”
Issuing dispatch instructions to ancillary service and transmission service providers
Real-time congestion management
ERCOT Wholesale Market Basics

28. Role of ERCOT
Module 1
Power Operations
The ERCOT power operations system monitors and analyzes all grid components every 2-4 seconds for status, loading and output
ERCOT directs the safe and reliable operation of the power system in conjunction with transmission control centers of the TDSPs
ERCOT monitors the grid and every 4 seconds and works in conjunction with each TDSP control center to direct the safe and reliable operation of the power system. ERCOT is the “big picture” control center – and makes the system decisions.
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29. Commercial Operations
Role of ERCOT
Module 1
Commercial Operations
Operation of the retail transactions and financial settlement of the wholesale market
Registration
Retail premises
Market participants
Retail Transactions
Data Acquisition
Load Profiling
Data Aggregation
Settlement and billing
Commercial operations – everything behind the scenes as well as the important stuff – the MONEY.
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30. ERCOT Client Services Contact us… Wholesale Client Services
Role of ERCOT
Module 1
ERCOT Client Services
Wholesale Client Services
Retail Client Services
Market Rules
Market Education
Contact us…
Send an to
Call us at
The best way to ask questions about ERCOT’s role (or anything else about ERCOT) is to go to your account manager. Also, you can or call Client Services – either Wholesale or retail – by phone or .
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31. Wholesale Client Services
Role of ERCOT
Module 1
Wholesale Client Services
Account Management Services
Market Participant Education Support
Market Participant Registration Support
Market Participant Qualification Support
Market and Operations Interfaces
Market and Operations Support
Protocol Assistance
Market Participant Settlement Support
ERCOT Wholesale Market Basics

32. Wholesale Client Services
Role of ERCOT
Module 1
Wholesale Client Services
Market Support Services
Market Participant Communications
Market Education Support
Market Participant Registration Management
Market Participant Settlement Forensics
Market Participant Identity Management
3900 Line
ERCOT.com services content
Market Notices
Freq. Asked Questions
ERCOT Wholesale Market Basics

33. Retail Client Services
Role of ERCOT
Module 1
Retail Client Services
Address needs of Market Participants during the certification process
Actively participate in the Stakeholder process to communicate and resolve issues, and monitor the rules of the Market to assist MPs with any questions/issues
Provide education as needed for Retail Issues
Liaison between ERCOT and MPs for all Retail Market Operation functions
Retail Market Call Bi-weekly Mondays and Wednesdays
ERCOT Wholesale Market Basics

34. Account Managers Act as the liaison between ERCOT and MPs as the
Role of ERCOT
Module 1
Account Managers
Act as the liaison between ERCOT and MPs as the
primary contact for all Market questions and issues
Maintain business relationships with all MPs to facilitate
issue resolution
Analyze issues as they arise to provide support to MPs in their business functions with ERCOT and between other MPs
Advocate MP issues within ERCOT and provide communication back to Market
SME
Account Manager
Account
ERCOT chose this Account Management model b/c it;
Provides a single point of contact for account
Builds personal relationships between account staff and account manager
Places the accountability on the account manager – not the account – to find the appropriate resource to resolve the issue
Serves operations staff by allowing them to focus on their task at hand (system operations)
Supports service continuity by dealing with a primary and/or secondary account manager
ERCOT Wholesale Market Basics

35. Role of ERCOT
Module 1
Market Education
Learning Management System
Market Operations
NERC Compliance
Texas Nodal Training
ERCOT Wholesale Market Basics

36. TOPIC 4: Market Participants
Module 1
Yippee…I’m almost done. Part 4 of Section 1.
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37. Qualified Scheduling Entities (QSE) Resource Entities (RE)
Market Participants
Module 1
Qualified Scheduling Entities (QSE)
Resource Entities (RE)
Load Serving Entities (LSE)
Transmission and Distribution Service
Providers (TSP, DSP, TDSP)
Others
Power Marketers
Aggregators
Types of MPs:
QSE – only ones ercot financially settles with
RES – make the power
TDSPs deliver the power
LSE – distribute the power via NOIE or CRs
In between (independent of ERCOT) are the power marketers and aggregators.
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38. TDSP QSEs QSEs Market Participants Bilateral Power delivery
Module 1
Electricity sellers
Electricity buyers
Bilateral
Load
Power delivery
TDSP
Resources
Serving
transactions
Entities
Bilateral
QSEs
QSEs
transactions
EMPHASIZE THE QSE ACKNOWLEDGEMENT FORM!!!!!!!!!!!!!!!!!!!
Power reliability
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39. Qualified Scheduling Entities (QSE)
Market Participants
Module 1
Qualified Scheduling Entities (QSE)
Only QSEs can schedule, bid and financially settle with ERCOT for energy and capacity
Typical Functions
Schedule Load and Generation
Bid into the Ancillary Service market
Provide Ancillary Services
Power Marketing
Power marketers do not have to be QSEs, but have to work with one.
ONLY MP ERCOT FINANCIALLY SETTLES WITH.
QSE
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40. All Resource Entities must be represented by a QSE.
Market Participants
Module 1
Resource Entities
Generation Facilities capable of providing energy
Loads capable of decreasing demand (LaaR)
Can provide reserve capacity
All Resource Entities must be represented by a QSE.
Loads acting as Resources (LAAR)
Load acting as a Resource (LAAAR)
DG and small generators – may not need QSE – depends on situation.
Renewable – must register with ERCOT and have meter information for REC
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41. All LSEs must be represented by a QSE.
Market Participants
Module 1
Load Serving Entities (LSE)
Provide electric service to Retail and Wholesale customers
LSE Types CR
REP: Any entity that sells electricity to customers in Texas in a competitive area
Opt-in Entity: Municipality or Cooperative that offers Customer Choice
NOIE
Municipality or Cooperative that does NOT offer Customer Choice
All LSEs must be represented by a QSE.
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42. * ERCOT polls certain meters; some entities use a MRE
Market Participants
Module 1
Transmission & Distribution Service Providers
(TSP, DSP, TDSP)
Local distribution / electric delivery company (DSP)
Own, operate, and maintain transmission and distribution lines (TSP, TDSP)
Work with ERCOT in retail switching process
Provide meter data to ERCOT for Settlement*
Rates for service remain regulated by PUCT
Collaborate with ERCOT for transmission system planning and reliability
Transmission Reservations are not required in ERCOT.
* ERCOT polls certain meters; some entities use a MRE
MRE: Meter Reading Entity. Part of ERCOT-registered TDSP. Responsible for meter reads that are not polled by ERCOT.
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43. Other Market Players – Power Marketer
Market Participants
Module 1
Other Market Players – Power Marketer
Buy and sell electricity at wholesale
No certificated service area
Either…authorized by FERC to sell electricity at market-based rates
Or…is registered with PUCT as a power marketer*
Wholesale Power Marketers don’t have to be a QSE but have to work with one.
* PUCT Substantive Rule , Registration and Reporting
by Power Marketers
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44. Other Market Players – Aggregators An Aggregator is a Buyer’s Agent
Market Participants
Module 1
Other Market Players – Aggregators
An Aggregator is a Buyer’s Agent
Represents a group of customers who have banded together to buy electricity
For example, groups may form from religious group, neighborhood association, or employer
Can recruit members from competitive areas
Must be registered with the PUCT
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45. ERCOT is overseen by the PUCT and is revenue-neutral
Summary
Module 1
ERCOT is overseen by the PUCT and is revenue-neutral
Market Rules are established & revised by the market
ERCOT’s role is:
To keep the lights on
To run a competitive wholesale market
To facilitate retail switching transactions
To enforce Protocols
QSEs submit schedules & bids to ERCOT
ERCOT settles financially only with QSEs
All participants play a significant role
ERCOT Wholesale Market Basics 45