1. Ancillary Services and SCED Jeff Gilbertson Market Analyst Congestion Management Working Group 9/4/2013

2. 2 Background “Real-Time Mitigation Rules and Creation of a Real-Time Constraint Competitiveness Test” (NPRR 520) was approved by the ERCOT Board on 3/19/2013 The following slides explain the use of Ancillary Service in Security Constrained Economic Dispatch (SCED) as directed by NPRR 520

3. Ancillary Services and SCED 9/4/2013 3 Ancillary Service use in SCED Regulation Up/Down Deployed outside of SCED by Load Frequency Control (LFC) Energy Offer Curve (EOC) required to have price floor of System-Wide Offer Cap (SWCAP) for Reg-Up Responsive Reserve Service Generation Resources deployed by Energy and Market Management System (EMMS) SCED immediately triggered by EMMS after deployment Responsive Reserve Service (RRS) MW available to SCED after Resources update Responsive Reserve Schedule (RRSC) telemetry which raises High Ancillary Service Limit (HASL) EOC required to have price floor of SWCAP Non-Spinning Reserve Service Online Non-Spin is always available to SCED for economic deployment (i.e. HASL is always raised above Non-Spin MW) Online Non-Spin EOC required to have price floor of $120 Offline Non-Spin EOC required to have price floor of $180

4. Ancillary Services and SCED 9/4/2013 4 SCED Review SCED Step One Only competitive constraints are observed No Energy Offer Curves are mitigated “Reference Locational Marginal Prices (LMPs)” are output and provide price signals to Resources to serve load and solve competitive constraints – based on unmitigated offers SCED Step Two Competitive and non-competitive constraints are observed Energy Offer Curves are mitigated only when: A non-competitive constraint is present, and Decision Making Entity of resource has a high % of Element Competitiveness Index (ECI) Effective Capacity or is a pivotal player; and Resource has a significant shift factor against constraint EOC is mitigated to higher of the Reference LMP from Step One or Verifiable/Generic cost curve (Mitigated Offer Cap)

5. Ancillary Services and SCED 9/4/2013 5 Energy Offer Curve – normal conditions Low “Reference LMP” indicates that resource is not needed to meet system demand (Ancillary Service (AS) deployment not needed) LMP only has to be at or above Mitigated Offer Cap when Resource is fully needed to resolve Congestion Mitigation prevents Qualified Scheduling Entity (QSE) from exercising market power (force a high LMP) AS Floor Price HSLLSL Reference LMP Mitigated Offer Cap LMP AS MW BP

6. Ancillary Services and SCED 9/4/2013 6 Energy Offer Curve – scarcity conditions High “Reference LMP” indicates that the Resource may be needed to meet system demand Resource is not mitigated; LMP will be at or above AS floor price if Resource AS deployment is needed to meet system demand AS Floor Price HSLLSL Reference LMP Mitigated Offer Cap LMP AS MW BP

7. Ancillary Services and SCED 9/4/2013 7 Ancillary Services use in SCED Summary LMP of Resource will be consistent with Mitigated Offer Curve when Resource is needed to resolve a non- competitive constraint and could otherwise be used to exercise market power LMP of Resource will be at AS Floor or higher when AS deployment is needed to meet system demand