1. 1 ERCOT Wholesale Settlement Module 3

2. 2 BENA iq = -1 * (Σ (RI iz + LI iz + URC iz + MISD iz + MISR iz ) z + TCRPAY Bei + Σ CSC Bei ) * LRS iq Can you tell these apart? Introduction

3. 3  Definitions  Settlement Overview  Settlement Calculations Topics

4. 4 Key Definitions

5. 5  Operating Day - Date of power flow  Settlements- Process used to resolve financial obligations; Assess administrative and miscellaneous fees; Provide transmission-billing determinants  Settlement Statement- A statement issued by ERCOT reflecting a breakdown of market charges  Settlement Invoice- A notice for payment or credit due rendered by ERCOT Definitions

6. 6  Initial Statement- Posted 10 days after Operating Day  Final Statement- Posted 59 days after Operating Day  True Up Statement- Posted 6 months after Operating Day  Resettlement Statement- Ad Hoc; posted as needed Definitions

7. 7  Charge Type- Line item on settlement statement  Settlement Interval- A period of time for which market services are settled  Bill Determinants- Variables used to calculate a Charge Type Definitions

8. 8  Recorder - A sequence of alpha-numeric values to identify data Example: NMLEIOL_H04_99_MYRESOURCEID,1  Channel - Indicates the iteration of the settlement run (Initial, Final, True-Up, Resettlement) Definitions

9. 9 Overview

10. 10 Bilateral transactions QSEs Load Serving Entities Resources Electricity sellers Electricity buyers QSEs Bilateral transactions ERCOT SETTLEMENTS $$ Overview

11. 11 All cash flow defined from ERCOT perspective: NEGATIVE amounts  ERCOT pays Market Participant POSITIVE amounts  Market Participant pays ERCOT “VISA Bill” Rule Overview

12. 12 Market Participants’ Roles  QSE:  Daily review of Settlement Statements  Download of Data Extracts  Shadow Settlement and Validation  Research Discrepancies  Register Disputes  Weekly review of Invoices  Settle with ERCOT Overview

13. 13 Market Participants’ Roles  LSE / Resources:  Download of Data Extracts  Research Discrepancies  Settle with QSE Overview

14. 14  ERCOT’s Daily Settlement Procedures:  Validate Settlement Statements for publishing  Create and publish Invoices (Weekly)  Facilitate Invoice Payment Processes (Weekly)  Participate in UFE Analysis  Dispute Research and Resolution  Provide Settlement information (ERCOT, PUCT, Market Participants) ERCOT's Roles Overview

15. 15 Questions

16. 16 Settlement Calculations

17. 17 ERCOT MUST REMAIN REVENUE NEUTRAL! Settlement Calculations

18. 18  All payments for Market Services will have a corresponding cost allocation.  Common forms of cost allocation  Obligation  Direct Assignment  Load Allocation  BENA  Charge types are grouped into payments and cost recovery for market services. Settlement Calculations Revenue Neutrality

19. 19 ERCOT settles for services procured to manage the Texas power grid. Capacity Settlement Settlement Calculations Settlement of What? Energy Settlement

20. 20 Capacity Settlement

21. 21 Learning Objectives:  Ancillary Services  Replacement Reserve  OOMC Capacity Settlement

22. 22  QSE’s AS obligation quantity based on its Load Ratio Share (LRS)  QSE’s have opportunity to self-arrange their obligation  ERCOT will procure at Market Clearing Price all AS obligations not self-arranged. Ancillary Services Capacity Settlement

23. 23 Ancillary Services Capacity ERCOTERCOT Obligation per Load Ratio Share $ $ Emergency Short Supply Capacity $ Self Arrangement (reduces obligation) Ancillary Services Capacity Settlement

24. 24 Ancillary Service Example Calculation Capacity Settlement

25. 25 Procured Ancillary Service Capacity PC ASqi = -1 * (C ASqi * MCPC ASi ) Terms PC : Ancillary Service Capacity Payment C: Capacity Procured MCPC: Market Clearing Price for Capacity Protocol 6.8.1.2 Translation: The payment for Ancillary Service Capacity is equal to the Amount of Capacity procured times the Clearing price for that Service. Subscripts i: Interval q: QSE Capacity Settlement

26. 26 LA ASqi = ASP i * NTO ASqi Protocol 6.9.1 Terms LA: Load Allocated Ancillary Service Charge ASP: Ancillary Service Price NTO: Ancillary Service Net Obligation per QSE Translation: The Load Allocation Charge for an ancillary service is equal to the Ancillary Service Price times the Net Obligation for the QSE. Subscripts i: Interval q: QSE Ancillary Service Cost Allocation Capacity Settlement

27. 27 Learning Objectives:  Ancillary Services  Replacement Reserve  OOMC Capacity Settlement

28. 28 Providers of Replacement Reserve (RPRS) are paid for three distinct types of service:  Capacity Insufficiency  Zonal Congestion  Local Congestion Section 6.8.1.10 and 6.8.1.11 Capacity Settlement

29. 29 Units selected for Capacity Insufficiency or Zonal Replacement are paid:  the higher of their bid or,  the highest MCPC for all Replacement Reserve procured during the procurement processes. Section 6.8.1.10 and 6.8.1.11 Capacity Settlement

30. 30 Units selected for Local Replacement are paid:  Resource Category Generic Startup Cost for starting  Resource Category Minimum Energy Cost minus MCPE for operating at the LSL. Section 6.8.1.10 and 6.8.1.11 Capacity Settlement

31. 31 Payment from the Market is collected through the following charges:  RPRS Zonal Congestion Charge  RPRS Uplift Charge Section 6.9.2.1.1 Capacity Settlement

32. 32 RPRS Zonal Congestion Charge  RPRS Zonal Congestion costs will be directly allocated to QSEs whose schedules have an impact on a congested Commercially Significant Constraint  Note that clearing RPRS for Zonal Congestion creates shadow prices for capacity and triggers corresponding TCR payments. Section 7.3.4.2 Capacity Settlement

33. 33 RPRS Uplift Charge  ERCOT nets:  The total payments for Zonal, Local and Capacity Insufficiency RPRS and  The direct assigned Congestion impact and TCR Payments  The difference is uplifted at Load Ratio Share to all QSEs. Section 6.9.2.1.2 Capacity Settlement

34. 34 Section 6.9.2.1.2 RPRS Uplift Charge Capacity Insufficiency Zonal Replacement Local Replacement TCR Payments Zonal Congestion Impact Capacity Settlement

35. 35 UC RP = -1 * [ Σ ( PC RP + LPC RP ) + TCRPAY RP + Σ CSC RP ]* LRS RPRS Uplift Charge Variables UC = RPRS Uplift Charge PC = Cost of Capacity for Zonal Congestion and Capacity Insufficiency LPC = Cost of RPRS for Local Congestion US = RPRS Under Scheduled Charge TRCRPAY = TCR Payment per Hour CSC = RPRS CSC Impact Capacity Charge LRS = Load Ratio Share Subscripts RP = Replacement Reserve Section 6.9.2.1.2 Capacity Settlement

36. 36 Learning Objectives:  Ancillary Services  Replacement Reserve  OOMC Capacity Settlement

37. 37 What is OOMC?  Replacement Reserve procured out of merit order  Looks a lot like Local Replacement Reserve  ERCOT-wide cost is uplifted to QSEs (LRS) Capacity Settlement OOMC

38. 38  Units selected for OOMC are paid:  Resource Category Generic Startup Cost minus energy revenue during ramp (back 12 intervals), plus  Resource Category Minimum Energy Cost minus MCPE for operating at the LSL or  Replacement Bid, if cheaper. Section 6.8.1.10 and 6.8.1.11 Capacity Settlement

39. 39 Energy Settlement

40. 40 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

41. 41  Represents the increase or decrease in energy dispatched by Settlement Interval in Real Time to ensure the balancing needs of ERCOT.  The energy is supplied by ERCOT through acquisition of resources (generating units and interruptible demands) to meet load variations not covered by Regulation Service. Energy Settlement Balancing Energy

42. 42  Zonal Instructed Deviation (up/down) from ERCOT to QSE  Used to solve power balance and/or congestion  Settled at zonal MCPE How is this paid? Balancing Energy Energy Settlement

43. 43 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

44. 44  Scheduled Generation - Metered Generation  Paid/charged at MCPE  Why an imbalance?  Instructed Deviations  Uninstructed Deviations (may be subject to URC) Do all Resource Imbalances result in payments to the QSE? Resource Imbalance Protocol 6.8.1.13 Energy Settlement

45. 45 Situation: SQSE has scheduled to generate at 208 MW from their resource in the South Zone for IE 1630. The Resource actually generates at 220MW. The Market Clearing Price for Energy, South CM Zone is $17.09/MWh Conditions: SQSE Resource Imbalance Example Energy Settlement

46. 46 Scheduled Generation Actual Generation 0 220MW Resource Imbalance Example Energy Settlement 208MW 55MWh52MWh SQSE

47. 47 For a given interval and zone, RI = (Scheduled Generation – Actual Generation) * MCPE Therefore, for interval 1630, SQSE’s Resource Imbalance in the South Zone is RI = (52MWh - 55MWh) * $17.09/MWh = - $51.57 Resource Imbalance Example Energy Settlement SQSE

48. 48 RI izq = (QRS izq - MR izq ) * MCPE iz Resource Imbalance Protocol 6.8.1.13 Terms RI : Resource Imbalance Amount QRS: Scheduled Resource MR: Metered Resource MCPE: Market Clearing Price for Energy Translation: Resource Imbalance is the difference between the Scheduled and Actual Resource output times the Clearing Price for Energy. Subscripts i: Interval z: Zone q: QSE Energy Settlement

49. 49 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

50. 50  Scheduled Load - Adjusted Metered Load  Paid/charged at MCPE  Why an Imbalance?  UFE  Forecast Inaccuracies  Relaxed Balanced Schedule (section 4.3.1)  LaaR’s Load Imbalance Protocol 6.9.5.2 Energy Settlement

51. 51 Situation: SQSE schedules 140 MW (35 MWh / interval) of Load in the South Zone for IE 1630 Adjusted Metered Load = 160 MW (40 MWh / interval) in the South Zone. Market Clearing Price for Energy = $17.09/MWh in the South Conditions: SQSE Load Imbalance Example Energy Settlement

52. 52 Actual Load Scheduled Load 0 140 160 South Zone Load Imbalance Example Energy Settlement 35MWh40MWh SQSE

53. 53 For a given interval and zone, LI = -1*(Scheduled Load – Actual Load) * MCPE Therefore, for interval 1630, SQSE’s Load Imbalance in the South Zone is LI = -1*(35MWh - 40MWh) * $17.09/MWh = $85.45 SQSE Load Imbalance Example Energy Settlement

54. 54 Actual Load Scheduled Load 0 200 208 SQSE North Zone Load Imbalance Example Energy Settlement 52MWh50MWh

55. 55 For a given interval and zone, LI = -1*(Scheduled Load – Actual Load) * MCPE Therefore, for interval 1630, SQSE’s Load Imbalance in the North Zone is LI = -1*(52MWh - 50MWh) * $17.09/MWh = -$34.18 SQSE Load Imbalance Example Energy Settlement

56. 56 LI izq = -1 * (SL izq - AML izq ) * MCPE iz Load Imbalance Protocol 6.9.5.2 Translation: Load Imbalance is the difference between the Scheduled and Actual Load times the Clearing Price for Energy. Terms LI : Load Imbalance Amount SL: Scheduled Load AML: Adjusted Metered Load MCPE: Market Clearing Price for Energy Subscripts i: Interval z: Zone q: QSE Energy Settlement

57. 57 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

58. 58 What is OOME?  Out of merit order, unit-specific energy deployment  Procured by ERCOT when no market solution  Paid according to a generic cost structure (Protocol Section 6.8.1.1)  ERCOT-wide cost is uplifted to QSEs based on Load- Ratio-Share (LRS) Energy Settlement OOME

59. 59  The OOME Up and OOME Down payments are intended to cover only the amount above the billable quantity times MCPE. MCPE times billable quantity is paid in Resource Imbalance.  If the calculated OOM Up payment is insufficient --- additional verifiable costs may be paid if submitted in a timely manner. OOME Payment Methodology Energy Settlement OOME

60. 60 Situation: SQSE receives an OOME instruction for IE 1600 to move the output of Unit 1 to 150 MW SQSE Data for SQSE for IE 1600: RP_Unit1 = 100 MW (25 MWh per 15 minute interval) Metered Generation by Unit1 = 36 MWh Instructed Output Level= 150MW (37.5 MWh per interval) Unit 1 is a Gas-Steam Reheat Boiler unit Generic Cost (Per Protocol 6.8.2.1) = $61.41 per MWh MCPE = $15.80 per MWh Energy Settlement OOME Example

61. 61 SQSE Instructed Output 0 144 150 Metered Output Resource Plan and Generation Schedule 100 OOME Example Energy Settlement 37.5MWh36MWh25MWh

62. 62 OOME Example Energy Settlement As with all settlement equations, OOME Payment = -1 * Quantity * Price Price is fairly easy: Price = (Generic Cost – MCPE) or 0, whichever is greater. In this example, Price = $61.41- 15.80 = $45.61 per MWh Why do we subtract the MCPE from the Generic Cost? SQSE

63. 63 OOME Example Energy Settlement Quantity is a little more difficult: Quantity = The change in energy output in response to the instruction with a maximum of the instruction itself. SQSE

64. 64 OOME Example Energy Settlement The unit’s response = Metered Output – Resource Plan = 36 MWh – 25 MWh = 11 MWh The unit’s instruction= Instructed Output – Resource Plan = 37.5 MWh – 25 MWh = 12.5 MWh Since the response does not exceed the instruction, ERCOT will pay SQSE for the unit’s response of 11 MWh. SQSE

65. 65 OOME Example Energy Settlement Putting it all together, OOME Payment = -1 * Quantity * Price = -1 * 11 MWh * $45.61/MWh = -$501.71 SQSE

66. 66 PE OOMUPiuq = -1 * E OOMUPiuq * Max [(RCGFC c – MCPE iz ),0] Terms PE: Price paid for OOM Energy E: Amount of OOME Energy Provided RCGFC: Resource Category Generic Fuel Cost MCPE: Market Clearing Price for Energy Translation: The OOM Energy premium payment is equal to the Energy provided times the difference between MCPE and the Generic cost for the OOME service. Protocol 6.8.2.3 Subscripts i: Interval z: Zone q: QSE c: resource category u: generation unit Energy Settlement OOME

67. 67 where E OOMUPiuq = Max (0, Min ((MR iuq – OL iuq ), I OOMUPiuq )) Terms: MR = Metered Resource OL = Resource Plan Output Level I = OOME Instruction PE OOMUPiuq = -1 * E OOMUPiuq * [Max (RCGFC c – MCPE iz ),0] Subscripts i: Interval z: Zone q: QSE c: resource category u: generation unit Energy Settlement OOME Protocol 6.8.2.3

68. 68 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

69. 69 Uninstructed Resource Charge (URC)  A QSE who schedules resources will be paid the full Market Clearing Price for Energy Up to the amount of instructed deviations  An Uninstructed Deviation Charge Back will be calculated at a factor of the MCPE. The Uninstructed Deviation Charge Back will be applied to each Congestion Zone in which a QSE has a deviation from schedule plus instructions. Uninstructed Resource Charge

70. 70 Integrated Amount of ERCOT Regulation is less than -25 MWhrs Uninstructed Resource Charge Over Generation in a zone where MCPE is positive Metered Resource is greater than larger of 101.5% of (or 5MWh over) total schedule plus Instruction Uncontrollable Renewable Resource has generated more than 150% of its Schedule Price Chasing Uninstructed Resource Charge

71. 71 Integrated Amount of ERCOT Regulation is greater than 25 MWhrs Uninstructed Resource Charge Under Generation in a zone where MCPE is negative Metered Resource is less than lesser of 98.5% of (or 5MWh under) total schedule plus Instruction Uncontrollable Renewable Resource generates less than 50% of Schedule. Cost Optimization Uninstructed Resource Charge

72. 72 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

73. 73 Settlement of Zonal Congestion  QSE impact is determined by the bilateral schedule  The net Resource schedule (Resource – Obligation) for each zone is multiplied by the zonal shift factor for each Commercially Significant Constraint (CSC).  The CSC impacts are added together  The QSE is charged the Impact on the CSC multiplied by the Shadow Price on the CSC. Congestion Management - Zonal

74. 74 Congestion Management - Example Congestion Management - Zonal South Zone North Zone South to North CSC West to North CSC South to West CSC West Zone

75. 75 Shift Factors CM Zone names Average Weighted Shift Factor West to North Average Weighted Shift Factor South to North Average Weighted Shift Factor South to West West20040.489911548-0.004425342-0.016725781 North2004-0.008056712-0.120276952-0.003225342 South20040.0023022360.5032578310.104328870 CSC Zonal Average Weighted Shift Factors Congestion Management - Zonal

76. 76 https:tcr.ercot.com Congestion Management - Zonal Where do you find the real shift factors?

77. 77 Situation: SQSE schedules 548 MW of Resource from the South Zone and delivers 140 MW to the South Zone and 408 MW to the North Zone. The South to North congestion Path is constrained. MCPE_North = $28.84 MCPE_South = $17.09 MCPESPC_SN = $32.91 Congestion Management - Zonal SQSE Congestion Management - Example

78. 78 Congestion Management - Example Congestion Management - Zonal South WestNorth Res = 548MW Load = 140MW Res = 0MW Load = 408MW SQSE

79. 79 SQSE’s South Zone Schedule impacts the South to North constraint as follows: Impact = (Resource – Obligation)(1/4 hr) * SF SN = (548 MW – 140MW)(1/4 hr) * 0.503257831 = 51.33 MWh SQSE Congestion Management - Example SQSE’s North Zone Schedule impacts the South to North constraint as follows: Impact = (Resource – Obligation)(1/4 hr) * SF SN = (0 MW – 408MW)(1/4 hr) * -0.120276952 = 12.27 MWh Congestion Management - Zonal

80. 80 Now the Congestion Charge for a particular CSC is simply a quantity times a price: Congestion Charge = (Sum of Impacts) * Shadow Price = (51.33 MWh + 12.27 MWh)($32.91/MWh) = $2093.08 SQSE Congestion Management - Example Congestion Management - Zonal

81. 81 I CSCiq = Σ((QSS iqz – SO iqz ) * SF ZCSC ) z Protocol 7.3.4.1 CSC Schedule Impact Terms I: Scheduled MW Impact per CSC QSS: QSE Supply Schedule SO: Scheduled Obligation SF: Shift Factor Subscripts i: Interval q: QSE z: zone CSC: Commercially Significant Constraint Congestion Management - Zonal

82. 82 CSC BECSCiq = SPC CSCi * MAX(0, I CSCiq ) Congestion: CSC Impact What happens if my impact is negative? Terms I: Scheduled MW Impact per CSC CSC BE : Energy Related Congestion Charge SPC: Shadow Price Subscripts i: Interval q: QSE CSC: Commercially Significant Constraint Congestion Management - Zonal Protocol 7.3.4.1

83. 83 CSC BECSCiq = SPC CSCi * I CSCiq Congestion: CSC Counterflow Terms I: Scheduled MW Impact per CSC CSC BE : Energy Related Congestion Charge SPC: Shadow Price Subscripts i: Interval q: QSE CSC: Commercially Significant Constraint Congestion Management - Zonal Protocol 7.3.4.1

84. 84 Situation: If SQSE had bid for and purchased 100 TCRs for this month at $3 a piece, then the impact is as follows: SQSE Cost of TCRs = 100 * $3 = $300 (covers entire month) Cost of congestion from IE 1630 = $2,093.08 Payment from TCR = TCR/4 * MCPESPC_SN = (100/4) * $32.91 = $822.75 SQSE cost for Congestion = $2,093.08 – $822.75 = $1270.33 (minus the monthly amortized cost of the TCR) Congestion Management – TCR Example Congestion Management - Zonal

85. 85 Limit = 500 MW 200 MW 300 MW 100 MWOVERLOAD “Generate at 200” 200 MW Question: How does ERCOT select the unit? Congestion Management - Local

86. 86  In real time, ERCOT manages Local Congestion using unit specific deployments.  Units selected are paid by their Bid Premiums if a Market Solution is used.  Units selected are paid as OOM if no Market Solution exists.  Charge uplifted to QSEs on a Load Ratio Share Basis. Congestion Management - Local Congestion Management – Unit Selection

87. 87 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

88. 88 QSE A R O QSE A 100MW (South) 100MW QSE B (South) QSE B R O QSE A 120MW (South) 120MW QSE B (South) Mismatch Mismatched Schedules Energy Settlement What happens if the following schedule is not resolved?

89. 89 QSE A R O QSE A 100MW (South) 100MW QSE B (South) QSE B R O QSE A 120MW (South) 120MW QSE B (South) Mismatch Energy Settlement QSE A 100MW (South) ERCOT 20MW (South) Resolved in Settlement Mismatched Schedules

90. 90 Translation: The mismatch payment or charge is equal to the mismatch amount delivered to or received from ERCOT times the MCPE. Terms: MISD: Payment for mismatched amount delivered to ERCOT MISR: Charge for mismatched amount received from ERCOT MISAMTD: Mismatched amount delivered to ERCOT MISAMTR: Mismatched amount received from ERCOT MCPE: Market Clearing Price for Energy Energy Settlement MISD iqz = -1 * MISAMTD iqz * MCPE iz MISR iqz = MISAMTR iqz * MCPE iz Subscripts i: Interval z: Zone q: QSE Mismatched Schedules

91. 91 Learning Objectives:  Balancing Energy  Resource Imbalance  Load Imbalance  OOME  Uninstructed Resource Charge  Congestion  Mismatched Schedules  BENA Energy Settlement

92. 92 BENABENA Resource Imbalance Load Imbalance Mismatch Energy Delivered TCR Payments $ $ $ $ Uninstructed Resource Charge $ Mismatch Energy Received $ Balancing Energy CSC Charges $ Balancing Energy Neutrality Adjustment Energy Settlement

93. 93 BENA iq = -1 * (Σ (RI iz + LI iz + URC iz + MISD iz + MISR iz ) z + TCRPAY Bei + Σ CSC Bei ) * LRS iq Terms BENA: Balancing Energy Neutrality Adjustment RI: Resource Imbalance LI: Load Imbalance URC: Uninstructed Resource Charge MISD: Mismatched Energy Delivered MISR: Mismatched Energy Received TCRPAY: Transmission Congestion Right Payments CSC: Direct Assigned Congestion Cost LRS: Load Ratio Share Protocol 9.6.1 Energy Settlement Balancing Energy Neutrality Adjustment

94. 94 BENA iq = -1 * (Σ (RI iz + LI iz + URC iz + MISD iz + MISR iz ) z + TCRPAY Bei + Σ CSC Bei ) * LRS iq Translation: The Balancing Energy Neutrality Adjustment is equal to the Sum of the Load Imbalances, Resource Imbalances, Uninstructed Resource Charges, Mismatch Charges, TCR Payments and Direct Assigned Congestion costs allocated at Load Ratio Share. Energy Settlement Balancing Energy Neutrality Adjustment Protocol 9.6.1

95. 95 Questions