Real Time Mitigation During Real Time Mitigation During Exceptional Fuel Cost EventsExceptional Fuel Cost Events

Challenges/OutlineChallenges/Outline

Allowing for cost recovery during “exceptional fuel cost events

Defining “Exceptional Event”Verifying CostsInterim Settlement Solutions

discussed◦RUC vs Emergency Energy◦Who Pays?

Questions and other discussion

Fuel Cost EventsFuel Cost Events

February and March 2014 movements in spot gas prices created significant change from Day Ahead FIP to spot price

Generators dispatched at MOC versus EOC were settled at Day Ahead FIP resulting in losses based on the gas price move

Current protocols do not allow for cost recovery unless during a RUC

RCWG has discussed ways to allow for cost recovery during such events

Defining Exceptional EventDefining Exceptional Event

Exceptional event will be defined as some deviation from Day Ahead FIP to spot price ranging from:◦ Spot prices are greater than DA FIP + Fuel Adder ◦ Spot prices as a factor of DA FIP

Factors to consider:◦ Frequency of occurrences◦ Interim versus long term solutions◦ Impact of manual settlement process through

disputes and cost verification (Interim)◦ System Changes (Long-term solution)

Verifying CostsVerifying Costs

Cannot simply settle on differences between DA FIP and spot price

Entities must provide proof of purchased fuel

Other costs to be considered?TransportationReal Time fees ImbalancesSwing fees

Building a process that settles these types of conditions forward would be challenging

Interim Settlement SolutionsInterim Settlement Solutions

RCWG discussed the option of treating mitigated resources during such events similar to RUC units that do not recover their costsRUC committed resources not recovering costs

can dispute and recover their true costs RUC costs are paid by entities that are short

in the market up to 2X their short fall and then uplifted to Load on a ratio share basis

RUC costs are defined by protocol for capacity concerns, not transmission constraints

Interim Settlement SolutionsInterim Settlement Solutions

Resources mitigated during real time and settled on their MOC are utilized for transmission constraints not capacity concernsTherefore, is a RUC Settlement solution appropriate?

Transmission issues settle in imbalances through Real Time Energy, CRRs and Revenue NeutralityDoes this set precedent for uplift of costs during an

exceptional event?Interim approach could utilize Emergency

Energy Payment method for settlement of cost recovery

Emergency Energy Settlement Emergency Energy Settlement ApproachApproach

Emergency Energy Volume-Min (BP, RTMG) (minimum of Base Point or

metered output)Current Settlement Price-

MAX (0, EMREPR – RTSPP) (maximum of 0 or Emergency Energy Price minus Real Time Settlement Point Price)

Manual solution would replace EMREPR with the appropriate MOC price recalculated at verified FIP (spot price paid for fuel during event)

Requires dispute and ERCOT capability to calculate (ERCOT does something similar today for LDL overrides)

Questions/DiscussionQuestions/Discussion