Energy Storage Settlements Consistent with PUCT Project 39917 & NPRR461

1. Energy Storage Settlements Consistent with PUCT Project 39917 & NPRR461 ERCOT Commercial Market Operations June 27, 2012 – ETWG Meeting

2. Agenda • Guiding Principles • References to the preamble for Project 39917 • References to the rule language • Commission Staff Direction on the rule intent for self serving loads • Implementation Concepts • Metering Configurations • Data Aggregation • Settlements • Spreadsheet Examples • Separate file attached to meeting materials • Operational Concepts – “Under Construction” • Concepts are not addressed by the rule language or the NPRR

3. Guiding Principle 1 • An energy storage resource has the option of receiving wholesale storage load treatment. • Excerpt from Commission Response to question 1 in the preamble • “…. the storage facility could choose not to separately meter the storage facility and treat all energy purchased from the ERCOT system as retail sales.”

4. Guiding Principle 2 • ESR Storage load must be separately metered to be considered wholesale storage load • Excerpt from §25.501 (m) (2) • “Wholesale storage occurs when electricity is used to charge a storage facility; the storage facility is separately metered from all other facilities including auxiliary facilities; and energy from the electricity is stored in the storage facility and subsequently re-generated and sold at wholesale as energy or ancillary services.”

5. Guiding Principle 3 • Non storage generation may serve wholesale storage load • Excerpt from Commission Response to question 1 in the preamble • “PURA §35.152 provides that a storage facility is entitled to be treated like other generation facilities in the sale of energy and ancillary services at wholesale. A key issue for the commission to resolve is how to treat a storage facility when it is acquiring energy. As explained below, the commission determines that the electricity withdrawn to charge a storage facility is a wholesale transaction.There are a number of possible scenarios where this issue arises, including the following: (1) only a storage facility and its auxiliary facilities (station power); (2) a storage facility, auxiliary facilities, and other consuming facilities, all under common ownership; (3) a storage facility, auxiliary facilities, other consuming facilities, and a non-storage generation facility, all under common ownership; and (4) a storage facility, auxiliary facilities, other consuming facilities, and a non-storage generation facility, with different ownership.” … • … “In the third scenario, where there is a storage facility, auxiliary facilities, other consuming facilities, and a non-storage generation facility, all under common ownership, the energy produced by the non-storage generation facility to charge the storage facility is self-use energy and should therefore not be treated as a retail sale, like energy generated by a non-storage generation facility and used for its auxiliary facilities.”

6. Guiding Principle 4 • ESR Generation can be netted with generation site auxiliary loads and associated loads. • Commission staff direction on the intent of the rule • reference provided was an excerpt from the Commission Response to question 1 in the preamble • “PURA §35.152 provides that a storage facility is entitled to be treated like other generation facilities in the sale of energy and ancillary services at wholesale.”

7. Guiding Principle 5 • Wholesale storage load is exempt from charges and credits based on Load Ratio Share or per MWH basis • Excerpt from §25.501 (m) (2) • “… Wholesale storage is not subject to retail tariffs, rates, and charges or fees assessed in conjunction with the retail purchase of electricity. Wholesale storage shall not be subject to ERCOT charges and credits associated with ancillary service obligations, or other load ratio share or per megawatt-hour based charges and allocations. ...”

8. Guiding Principle 6 • Wholesale storage load will not be included in the ERCOT 4CP calculations. • Excerpt from §25.192,Transmission Service Rates (b) (1) • “… A TSP’s transmission rate shall be calculated as its commission-approved transmission cost of service divided by the average of ERCOT coincident peak demand for the months of June, July, August and September (4CP), excluding the portion of coincident peak demand attributable to wholesale storage load….”

9. Guiding Principle 7 • Settlement for a storage facility that has more than one delivery point shall be based on the net impact of those delivery points on ERCOT system. • Excerpt from §25.501 (m) (1) • “For a storage facility that has more than one delivery point, ERCOT shall net the impact of those delivery points on the ERCOT system for settlement purposes”

10. Guiding Principle 8 • Wholesale storage load pricing shall be based on the LMP at the electrical bus • Excerpt from §25.501 (m) (2) • “… Wholesale storage is wholesale load and ERCOT shall settle it accordingly, except that ERCOT shall settle wholesale storage using the nodal energy price at the electrical bus that connects the storage facility to the transmission system, or if the storage facility is connected at distribution voltage, the nodal price of the nearest electrical bus that connects to the transmission system. …”

11. Implementation Concepts • Metering configurations • Will • require the ESR Charging Load that is requesting treatment as Wholesale Storage Load to be metered separately from all other site loads • be based on ERCOT system design and capabilities for accounting for the wholesale storage load and ESR generation • be discussed with the Settlement Metering Working Group • Will NOT • be allowed if they do not conform to a design that allows ERCOT to settle the site based on current system design • As rules are finalized Market Participants should work with ERCOT early during the design phase of their facility

12. Implementation Concepts • Data Aggregation processes • wholesale storage load • will • be included to determine total UFE • will NOT • be assigned Unaccounted for Energy (UFE) • be included in Adjusted Metered Load (AML) • be included in ERCOT 4CP calculations • be included in TRE fee calculations • have transmission and/or distribution losses added

13. Implementation Concepts • Settlement processes • Site is net generation • Same settlements logic for all generation sites • Summation of POI metering point dollars • EPS metered energy * price at EPS meter • Generation POI’s • Settled using base point weighted price at the generation EPS meter(s) • Load POI’s, including ESR Charging Load POI’s • Settled using a time-weighted price at the Load EPS meter(s)

14. Implementation Concepts • Settlement processes • Site is net load • Conditional calculation to determine WSL & Retail Load based on: • site net load value • metered value(s) of ESR charging load • Wholesale Storage Load • Settled using an energy-weighted price at the ESR Load EPS meter(s) • ESR load is LMP weighted average by telemeter ESR load • Retail Load • Assigned to an ESI ID

15. Implementation Concepts • Wholesale storage load treatment • Wholesale storage load will • be settled by QSE and Settlement Point • be settled through Real-Time Energy Imbalance at a Resource Node • Wholesale storage load will NOT • be included in any Load-shared charges and credits • be settled using a Load Zone Settlement Point Price

16. Questions and Discussion