April 15, 2003 1

TAC Report to the ERCOT TAC Report to the ERCOT BoardBoard

April 15, 2003April 15, 2003

April 15, 2003 2

SummarySummary• PRRs 377, 379, PRRs 377, 379, 381381, 383 and 387 - vote, 383 and 387 - vote

• RMR updateRMR update

• 2003 Test Flight Dates2003 Test Flight Dates

• OGRRsOGRRs

• WMS work on PUCT #26376 - Market Design WMS work on PUCT #26376 - Market Design questionsquestions

• Future ItemsFuture Items

April 15, 2003 3

PRR 377 – Canceled RMR Unit PRR 377 – Canceled RMR Unit StartStart• Allows for partial compensation of RMR Allows for partial compensation of RMR

units if start ordered, then cancelledunits if start ordered, then cancelled

• If cancelled, ERCOT to post costIf cancelled, ERCOT to post cost

• No computer system impact; manual No computer system impact; manual processprocess

• May 1, 2003 Effective DateMay 1, 2003 Effective Date

• Approved by TAC with a 28-2 vote.Approved by TAC with a 28-2 vote.

April 15, 2003 4

PRR 379 – BLT WaiverPRR 379 – BLT Waiver

• Allows ERCOT to grant a waiver for Block Allows ERCOT to grant a waiver for Block Load Transfer point resources that, but for Load Transfer point resources that, but for BLT events, do not operate in ERCOTBLT events, do not operate in ERCOT

• Applies to submission of resource Applies to submission of resource application and execution of Resource application and execution of Resource AgreementAgreement

• No computer impactNo computer impact• May 1, 2003 Effective DateMay 1, 2003 Effective Date

April 15, 2003 5

PRR 381 – Update QSE PRR 381 – Update QSE DesignationDesignation• Clarifies the process by which a QSE Clarifies the process by which a QSE

terminates its designation for an LSE or terminates its designation for an LSE or Resource entityResource entity

• No computer impactNo computer impact

• May 1, 2003 Effective DateMay 1, 2003 Effective Date

• Approved by TAC with a 25-3-2 vote.Approved by TAC with a 25-3-2 vote.

April 15, 2003 6

PRR 383 – RMR Resource PRR 383 – RMR Resource Maintenance Outage ApprovalMaintenance Outage Approval

• Provides a timeline for the approval of Provides a timeline for the approval of RMR unit outage requestsRMR unit outage requests

• No computer impactNo computer impact

• May 1, 2003 Effective DateMay 1, 2003 Effective Date

April 15, 2003 7

PRR 387 – Mismatched Inter-PRR 387 – Mismatched Inter-QSE Schedule StatementsQSE Schedule Statements

• Clarifies the settlement of Mis-matched Clarifies the settlement of Mis-matched Inter-QSE energy schedulesInter-QSE energy schedules

• Facilitates automationFacilitates automation

• Approved priority – 1.2 (already on project Approved priority – 1.2 (already on project list)list)

• Effective upon system implementationEffective upon system implementation

April 15, 2003 8

Six RMR Issues to be ResolvedSix RMR Issues to be Resolved

I.I. Criteria/ProcessCriteria/Process

II.II. RMR CategoriesRMR Categories

III.III. Compensation LevelCompensation Level

IV.IV. Cost Allocation - Cost Allocation - Set aside, for nowSet aside, for now

V.V. Transmission Planning Process - Transmission Planning Process - ResolvedResolved

VI.VI. Economic Trade-Offs - Economic Trade-Offs - Still workingStill working

April 15, 2003 9

ProcessProcess• RMR TF provided options for the six RMR TF provided options for the six

concerns to PRSconcerns to PRS

• PRS reviewed and made recommendationsPRS reviewed and made recommendations

• TAC considered PRS recommendations and TAC considered PRS recommendations and decided on high level options for the open decided on high level options for the open issues (Decision Points)issues (Decision Points)

• TAC decisions guide language finalizationTAC decisions guide language finalization

• PRR returns for TAC/BOD approval in PRR returns for TAC/BOD approval in MayMay

April 15, 2003 10

II. RMR CategoriesII. RMR Categories

• Decision PointDecision Point– Short-term RMR Need (Short-term RMR Need (180 days during off-180 days during off-

peak season only)peak season only)– Annual RMR NeedAnnual RMR Need

• TAC DecisionTAC Decision– Accept both seasonal and annual RMR Accept both seasonal and annual RMR

concepts and reflect in pricingconcepts and reflect in pricing

April 15, 2003 11

III. Compensation LevelIII. Compensation Level

• Decision Point – Decision Point – Short-Term ContractShort-Term Contract– Owner compensated for costs avoided by Owner compensated for costs avoided by

seasonal mothballingseasonal mothballing– Owner provides cost information to ERCOTOwner provides cost information to ERCOT

• TAC DecisionTAC Decision– Adopt short-term pricing at costAdopt short-term pricing at cost

April 15, 2003 12

III. Compensation LevelIII. Compensation Level

• Decision Point – Decision Point – Annual ContractAnnual Contract– Proxy Price Proxy Price

• Uses existing structure with lower payment Uses existing structure with lower payment components (Standby Price at 55% of SCGT; components (Standby Price at 55% of SCGT; Change in fuel heat rate calculation)Change in fuel heat rate calculation)

– ““Cost Plus”Cost Plus”

April 15, 2003 13

– ““Cost Plus”Cost Plus”• Initial monthly payments based on estimate of eligible costs Initial monthly payments based on estimate of eligible costs

then adjusted to actualthen adjusted to actual• Incentive Factor (x% or flat rate?) applied to non-fuel eligible Incentive Factor (x% or flat rate?) applied to non-fuel eligible

costscosts• Eligible Costs include labor, materials and supplies to operate Eligible Costs include labor, materials and supplies to operate

the unitthe unit• Eligible Costs do not include return on equity, G&A, Eligible Costs do not include return on equity, G&A,

allocated general plant, taxes, interest expense, etc.allocated general plant, taxes, interest expense, etc.• Fuel also based on estimate of cost with true-upFuel also based on estimate of cost with true-up• Eliminates start-up paymentEliminates start-up payment

• TAC DecisionTAC Decision– Adopt “cost plus” methodologyAdopt “cost plus” methodology

April 15, 2003 14

I. Criteria / ProcessI. Criteria / Process• Allows for multi-year contracts if Allows for multi-year contracts if

significant capital expenditures requiredsignificant capital expenditures required

• CCGTs treated as a single unit unless CCGTs treated as a single unit unless separate operation possibleseparate operation possible

• Qualification for RMR ApplicantQualification for RMR Applicant– Applicant attestation that resource is Applicant attestation that resource is

uneconomic to remain in serviceuneconomic to remain in service– Unavailable at least 180 daysUnavailable at least 180 days

April 15, 2003 15

I. Criteria/ProcessI. Criteria/Process• RMR Replacement OptionsRMR Replacement Options

– ERCOT to report on cost-effective replacement ERCOT to report on cost-effective replacement options 90 days after executionoptions 90 days after execution

– If a cost-effective replacement option exists, If a cost-effective replacement option exists, ERCOT will establish an implementation ERCOT will establish an implementation timelinetimeline

April 15, 2003 16

I. Criteria/Process I. Criteria/Process • Treatment of RMR ApplicantTreatment of RMR Applicant

– Non-selected applicant prohibited from Non-selected applicant prohibited from future use unless reinstated during future use unless reinstated during suspension periodsuspension period• ERCOT not accept schedules or bids during ERCOT not accept schedules or bids during

suspension periodsuspension period• ERCOT may reinstate under certain ERCOT may reinstate under certain

circumstancescircumstances• Owner may petition PUC for reinstatementOwner may petition PUC for reinstatement

April 15, 2003 17

PRS RecommendationPRS Recommendation

• TAC DecisionTAC Decision– Non-selected RMR applicant would not be Non-selected RMR applicant would not be

prohibited from operating in the market after prohibited from operating in the market after ERCOT rejects the applicationERCOT rejects the application

• Fits with the “Cost Plus” methodologyFits with the “Cost Plus” methodology

– Accept other provisionsAccept other provisions

April 15, 2003 18

Test Plan Flight DatesTest Plan Flight Dates• RMS approves the dates for future testing flights. RMS approves the dates for future testing flights.

This enables new market entries, TDSPs and This enables new market entries, TDSPs and ERCOT to plan when key deliverables are ERCOT to plan when key deliverables are required and the key testing dates.required and the key testing dates.

• Failure to supply required documentation for a Failure to supply required documentation for a new test flight can result in a market participant new test flight can result in a market participant being delayed until the next test flight before being delayed until the next test flight before entering the retail market.entering the retail market.

April 15, 2003 19

New 2003 Test Plan FlightsNew 2003 Test Plan FlightsAffirmed by TACAffirmed by TAC

• Flight 0703 for New Market Participants testing under TX SET Version 1.5Flight 0703 for New Market Participants testing under TX SET Version 1.5

– Flight will begin pre-test activities on April 8, 2003Flight will begin pre-test activities on April 8, 2003

– Deadline to Join Flight Deadline to Join Flight May 22, 2003May 22, 2003

– First transactions July 14, 2003First transactions July 14, 2003

– Flight Scheduled to End September 5, 2003Flight Scheduled to End September 5, 2003

• Flight 1003 for New Market Participants testing under TX SET Version 1.5 Flight 1003 for New Market Participants testing under TX SET Version 1.5 and Possible Transaction Changes from COMET WGand Possible Transaction Changes from COMET WG

– Flight will begin pre-test activities on July 23, 2003Flight will begin pre-test activities on July 23, 2003

– Deadline to Join Flight Deadline to Join Flight September 4, 2003September 4, 2003

– First transactions October 13, 2003First transactions October 13, 2003

– Flight Scheduled to End December 5, 2003Flight Scheduled to End December 5, 2003

• Another Flight is possible because of anticipated functionality changes from Another Flight is possible because of anticipated functionality changes from MIMO task force.MIMO task force.

April 15, 2003 20

Operating GuidesOperating Guides

• TAC approved OGRRs - 127 and 128TAC approved OGRRs - 127 and 128– OGRR127 keeps Operating Guides language OGRR127 keeps Operating Guides language

consistent with Protocolsconsistent with Protocols– OGRR128 amends the change control process OGRR128 amends the change control process

to allow Protocol / OG consistency changes to to allow Protocol / OG consistency changes to be handled administrativelybe handled administratively

April 15, 2003 21

Advance NoticeAdvance Notice

• WMS has accelerated the process to WMS has accelerated the process to determine 2004 CSCs and resulting zonal determine 2004 CSCs and resulting zonal definitions.definitions.– Recommendation to the Board for approval in Recommendation to the Board for approval in

June.June.

• ROS finalizing work on new Reactive ROS finalizing work on new Reactive Power StandardPower Standard

April 15, 2003 22