The Texas Nodal Market

Trip DoggettERCOT Interim President and Chief Executive Officer

Mike Cleary

ERCOT Chief Technology Officer

Executive Briefing

28 January 2010

2 NATF - Executive Briefing

Agenda

• Program Status

• 2010 Market Trials

• Market Readiness

• Market Trial Engagement

• Questions

28 January 2010

3 NATF - Executive Briefing

Objectives For This Session

• Dec 1st is Go-Live

• Risk of discrepancies between protocols and systems & processes- Functionality is in place- Risk always exists between how the system works in the

market and the written protocols

• Expect various reactions from your people

• Transparency

28 January 2010

4

307 Days to Go-Live0 Items Impacting Go-Live Date

• Market Trials 2.1: Market Connectivity– On Schedule

• 160 of 292 QSEs Qualified for MMS transaction submittal– 64 / 114 QSEs w/ Resources

• 79 % of Generation Qualified• Window Closes for Qualification on Aug 13th

• Market Trials 3.0: Congestion Revenue Rights (CRR )

– Started Jan 4th • 41 of 78 CRRAH Qualified to date• First Monthly Auction for March begins on February 12th

– CRR allocation starts on Feb 1st

• Market Trials 3.0: Real Time Markets / Outage Scheduler

– Starting Feb 1st

• Metrics:

– Outage Scheduler Qualification Tracking to be added 2/5/2010

– LMP Trending and Reasonableness to be added 2/10/2010

• Outage Scheduler Qualifications will continue through March 30th

NATF - Executive Briefing28 January 2010

5

307 Days to Go-Live0 Items Impacting Go-Live Date

• Market Trials 4.0: DAM/RUC

– Starting Thursday Apr 1st, for Operating Day Friday April 2nd • On Schedule

– Submission Qualifications underway in Market Trials 2.1

• Market Trials 5.0: Full Functionality

– Starting May 17th

• 2 Week Slippage– Mitigation plan in place to pull back on track

» Overtime and budget monitoring

• Market Readiness

– 26 of 36 outreach sessions completed

NATF - Executive Briefing28 January 2010

6

Integrated Nodal Timeline

NATF - Executive Briefing28 January 2010

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Nodal Defects Trends - High Priority (Must Fix Before Go-Live)

NATF - Executive Briefing28 January 2010

1Q2010

Real-Time Telemetry(1-day response time)

Real-Time Submissions(across the 7 day week)

Network Model Confirmation

Quality/realistic data(daily offers)

2Q2010

Load Frequency Control (2-hour nodal grid

frequency control May)

24x7 monitoring

Day-Ahead Market& Reliability Unit

Commitment(2-5 days a week)

Settlement Trials

Improved Data Quality(bids/offers)

3Q2010

Proving Readiness

Final system tests and scenarios

48-hr LFC Test(48-hour grid control)

168-hour Test(Board approval)

Final Market Participant Qualification

(Window closes Aug 13th)

4Q2010

Go-Live Sequence

Board Approved Go-Live Sequence

Parallel Operations:Network Modeling and

Outages

Execute/Settle CRR Auction for

December

November-Operational production

activities sequencing into go-live

(eg Load Forecasting and Resource Offers)

Dec 1 Go-Live

Parallel zonal/nodal30-days

8

Market Trials Participation

• Qualification is mandatory• Qualification window closes on Aug 13th

• Market Participants will provide all Nodal ICCP data feeds on a continuous basis and will provide all SCED-specific market submission items on a daily basis

• Three-Part Supply Offers, Output Schedules, and Incremental/Decremental (Inc/Dec) Offers

• Quality Bid/Offer submissions are a necessity• ERCOT will not be scripting bid and offers for each QSE

• High Participation in the DAM market will help test the system• Errors will be found

• Critical errors will be fixed before Go-Live

• Non-Critical errors will be moved to the parking deck

NATF - Executive Briefing28 January 2010

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Next Steps

• Continue to review metric status online: http://scorecard.ercot.com/

• Feel free to reach out to Trip or Mike with questions or issues

NATF - Executive Briefing28 January 2010

10

Received Questions

1. How about the proposal to do only 2-week updates of NMMS? Why would it be workable? What is a pseudo-switch and how would it operate?

2. How about that unscheduled outage of NMMS last Friday? Cause? Any data lost? Lessons learned?

3. Have we determined any workarounds necessary for scheduled go-live? Will we have the opportunity to weigh in on feasibility and side-effects of workarounds prior to use of them?

NATF - Executive Briefing12 November 2009

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Question Topics

• Service Level Agreements• Defect Status• Credit Management• Data Quality• System Performance• Robustness of Functionality• Outages and Testing Support Windows• Others?

NATF - Executive Briefing28 January 2010

12

Nodal Program Risks & Issues

NATF - Executive Briefing18 January 2010

Risk/Issue Impacted Milestone

Target Category Probability Severity Status

Integration Testing - RiskContinued risk around technology delivery of business systems integration due to complexity and continuing maturing of application and data dependencies.

Program May 2010 Scope / Schedule /

Budget

Low Med • Phase 3 On track; planning complete, execution in progress.

• Execution of work plan, with specific focus on January Market Trials functionality, under way.

• Later phase schedules have slipped due to environment issues and focus on Phase 2.1, Phase 3 delivery.

• Post Phase 3 Market Trials delivery mitigated by two weeks.

Market Interaction Operating Level Agreements (OLAs)

Need to determine operating level agreements associated with market interactions to assist ERCOT in establishing operational thresholds. ERCOT is responsible for ensuring any market thresholds required before Go-Live are defined, managed through the appropriate stakeholder processes and communicated in a timely fashion. Examples are Network Model Load Frequency; DAM Sizing; CRR sizing

Program April/May 2010

Scope / Budget

High Low • On track.• Phase 2.1 OLAs established and

communicated to the market during Oct. 8 Market Readiness Seminar.

• Phase 3 complete.• Phase 4 and 5 OLA definitions in process.

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Nodal Program Risks & Issues

NATF - Executive Briefing18 January 2010

Risk/Issue Impacted Milestone

Target Category Probability Severity Status

Reconciling Protocols, Systems and Market Expectations

Experience by other ISOs in deploying nodal markets has shown that expectations of the market participants are often missed, despite best efforts at defining tariffs or protocol requirements. ERCOT needs to assume such a risk exists for this nodal implementation as well.

Phase 3 Feb 2010

(Change control

submitted)

Scope / Schedule /

Budget

Med Low • Work underway to trace protocols, requirements and business processes alignment analyses are in progress.

• SMEs added to the team in May.

Credit Management – Business & Technical ExposureCredit Management rules and exposure calculations will change significantly with the implementation of the Nodal Program. During the requirements and design phase of the program stakeholder concerns have been expressed that may result in requested system changes as the program moves into Market Testing of Credit Management.

Phase 5 July 2010 Scope / Schedule /

Budget

High Med • ERCOT business and Nodal Program reviewing Credit concerns and next steps.