1. Capacity Forecast Model Mark Ruane Credit Work Group ERCOT Public October 15, 2014

2. Capacity Forecast Model Next Steps ERCOT Public In July ERCOT presented the results from an internally-developed model to forecast reserve capacity over a four-day horizon. The model appears promising in providing a forward-looking basis for assessing the risk of high prices However, the model utilizes outage information, which limits its use on a mandatory basis

3. Capacity Forecast Model Next Steps ERCOT Public Potential approach Rolling six day forecast of potential reserve shortfall hours; two day advisory forecast (D5-D6), published daily 2-Level forecast threshold at 3000MW and 2500MW excess capacity RTLE adjusted daily on a rolling basis for updated D1 – D4 forecasts with capacity shortfalls Reserve shortfall periods reflected in RTLE as an increased percentile parameter in the price estimate for a shortfall hour Periodic review of parameters to allow ongoing “tuning” of model

4. Capacity Forecast Model Next Steps ERCOT Public Daily forecast posts Forecast tenor D1 D2 D3 D4 D0 D5 D6 Advisory Adjust TPE as applicable Rolling six-day excess capacity forecast. TPE would be adjusted by applying a higher lookback percentile than currently used in NPRR638 calculations. TPE would not be adjusted until the day following the forecast.

5. ERCOT Public Capacity Forecast Model Threshold The negative correlation between prices and reserves is greatest at reserve levels < ~3000 MW. Advisory Watch EEA1 Cumulative Correlation

6. ERCOT Public Capacity Forecast Model Threshold Potential approach to increase collateralized price level from P84 to P90 at 3000MW, and from P90 to P95 at 2500MW Physical Responsible Capacity (PRC). Advisory Watch EEA1 ~P90 ~P95 Cumulative Correlation

7. Questions ERCOT Public Capacity Forecast Model Next Steps