1. Grabbing Balancing Up Load (BUL) by the Horns December 2006

2. Balancing Up Loads (BULs) Balancing Up Loads, or BULs, are qualified loads that contract with a REP and its QSE to formally submit offers to ERCOT to provide balancing energy by reducing their electricity consumption BUL Load Resources are paid only if they actually deploy (reduce energy use) in response to dispatch by ERCOT If a BUL is deployed they receive two separate forms of compensation: 1.Energy payment for load reduction 2.Non Spin Capacity Payment (MCPC), if applicable A BUL may be a portfolio of ESI Ids within a single company that can provide Balancing Up Service

3. BUL Requirements BUL Settlement Metering –Must have an Interval Data Recorder (IDR) capable meter BUL Telemetry –No real time data (telemetry) required by Protocols from the Load to the QSE – maybe required by REP’s contract –BUL telemetry between QSE and ERCOT required to indicate to ERCOT estimated Load Response provided in response to a deployment Deployed electronically to QSEs A BUL will not be used for Out of Merit Deployment by ERCOT (OOMC or OOME)

4. Paying the Bill For BUL, the bids consist of blocks in dollars per megawatt hour and megawatts ($/MWh, MW). If the full block cannot be deployed the bid will be skipped. Capacity Payments are paid based on the lesser of the actual deployment or the historical baseline calculation The baseline is the ratio of averaged metered QSE BUL load two hours prior to BUL instruction to the average interval metered QSE BUL from the prior ten (weekdays) or six (weekends or holidays) days for the two hours prior to the first BUL instruction –Designed to assure normal shutdowns of process Loads are not compensated BUL capacity payments will be charged to market participants via load ratio share.

5. Compensation for BUL Energy Payment for Load Reduction: An energy payment is typically paid to a provider based on the load’s overall reduction as compared to the load level prior to the deployment interval –Load Response is paid by ERCOT using the normal QSE payment for Load Imbalances Capacity Payment for Load Reduction: A capacity payment is paid by ERCOT based on the Market Clearing Price of Capacity for Non-Spinning Reserve Service (MCPCNS). The Capacity payment will be paid to the Customer only if the BUL response (reduction of load) is 100 % of the instructed value

6. BUL vs Voluntary Load Response Balancing Up Load (BUL)Short Term VLR Sponsor ERCOTREP Product Concept LoadscontractwithREP/QSEtoformallysubmit offerstoERCOTandprovidebalancingenergyby reducingtheirelectricityuse.BULsarepaidonly iftheydeploy(reduceenergyuse)inresponseto selectionbyERCOT.Ifdeployedtheyreceivetwo separateformsofcompensation:anenergy payment and a capacity payment. Deployed BULs may set the clearing price of MCPE VoluntaryLoadResponseProduct createsamechanismtocapturetheeconomic benefitofacustomer’sabilitytorespondtohigh marketprices.Thecustomervoluntarilyagreesto reduceloadconsumptionandreceivesacrediton theirnextinvoice.Thisproductcreatesaload imbalancewithERCOTwhichisthensharedwith the Customer. MCPE not effected by load reduction Load Reduction Price Customerhastheabilitytochoosewhatpriceto offer their BULMWsintheERCOTauctionupto twohourspriortorealtime.REPsactasthe Customer's agent and submits bids to ERCOT. TheCustomerhastheability(but nottheobligation) tochoosethepricetocreatea transaction. Customerhastherighttochange load response price in real time. Value to Customer ispaidtheNonSpinningReserve CapacityPaymentandanEnergyPaymentfor periods when dispatched by ERCOT. CustomerispaidonlyanEnergyPayment(based onMCPEandconsumptionpriortoevent)when transactions occur. Effect on MCPE Price Customer'soffer isplacedinERCOT'sBalancing Energybidstackfortheappropriatezone.ABUL bidcansettheMarketClearingPriceofEnergy andwillreducethevolatilityofrealtimepower prices. Customer'sloadreductioninresponsetoa VoluntaryLoadResponseTransactionwillnot effecttheMarketClearingPriceofEnergy.

7. BUL Implementation Issues ERCOT only accepts “offers” from QSEs without regard to which Load Resource is actually making the offer –For each $/Mwh, Mw offer point, ERCOT should allow the QSE to note which Load Resource is responsible for the offer –IMM should be aware offers potentially setting MCPE not necessarily being controlled by the QSE submitting them ERCOT measures performance of the QSE rather than each individual Load Resource. A small Load Resource’s response is overshadowed by a large load’s actual response in the same QSE and thus may not get paid if the large load fails to respond –Performance must be measured by individual Load Resource Baseline is almost impossible to understand and explain to retail customers –Suggest a minimum offer price to avoid collection of MCPC for normal plant shutdowns

8. Questions??