Load Participation in Real-Time Market: LMP Minus G

Efforts to Allow More Load Participation in Energy Market

• State law calls for ERCOT to permit demand response to participate in markets

• Significant potential resource in residential and commercial air conditioning load

• REP and third-party demand response providers have sought broader opportunities– Third-party DR providers could bring focus and

expertise, could invest in DR equipment at customers’ premises

TAC Deliberations

• TAC in 2011 voted to endorse “LMP-G” rather than “Full LMP” as settlement mechanism– TAC decision based on a conceptual discussion, rather

than detailed examination of LMP-G• Presentation to TAC emphasized avoiding double

payment: LMP to DR provider plus customer’s avoided cost of energy

• TAC endorsed “volumetric” LMP-VG, in which energy curtailed would be added back to the LSE’s settlement at the individual customer (ESI ID) level

Recent Stakeholder Efforts

• DSWG’s Loads in SCED subgroup has worked on details of how LMP-G could be implemented

• Volumetric LMP-G is not workable for residential and small commercial, because ERCOT believes it cannot estimate load reductions for individual residential and small commercial sites with sufficient accuracy

• New approach, LMP-Proxy $G, can work for customers or aggregations of customers in all classes if capable of being accurately baselined by ERCOT

• This approach has broad support in DSWG

LMP-Proxy $G Settlement

• LMP-G would be implemented at the wholesale market (QSE settlement) level – ERCOT would pay DR QSEs for load reduction at LMP-

Proxy $G– ERCOT would add each LSE’s portfolio-level load

reduction to the LSE’s settlement– ERCOT would credit LSE at Proxy $G for the load

reduction – Proxy $G would be based on POLR rates

• No new market uplifts under this approach

LiSCED Consensus Principles

• Loads should be permitted to actively participate in Real Time Market

• Loads participating in Real Time Market would contribute to wholesale price formation

• Loads should not receive financial benefit more than once for providing demand response

• The existing ORDC and Loads in SCED “bid to buy” market structures should be preserved

• There are other issues that will need to be resolved in stakeholder process

LiSCED Consensus Customer Policies • Customer has the right to select or change a DR QSE• REP would be notified if customer agrees to have his load

response managed by a DR QSE• Rules should preclude DR-blocker strategies by REPs• Rules should ensure an adequate transition period for REPs

to manage existing customer relationships– For the transition period, rules should define a REP’s rights with

respect to a customer’s legacy rate plan when customer joins a DR QSE, if the current rate plan includes an incentive tied to DR capability

• Customer engagement rules will be needed, so that REPs and DR QSEs compete on equitable term

LiSCED Consensus Implementation Mechanisms

• New concept of demand response provider of record (DR-POR)

• System to notify ERCOT and current REP or DR provider of customer enrollment in DR program and other key events

• System needed to resolve competing claims to be customer’s DR-POR

Areas of Particular PUC Interest

• Can REP charge customer for energy not consumed or for risks related to customer’s participation in 3d party DR?

• What are REP’s options when customer joins a DR QSE, if the current rate plan includes an incentive tied to DR capability

• Transition period for REPs to manage existing customer relationships

• Prohibition of DR-blocker strategies by REPs• Customer engagement rules: REPs and DR QSEs to compete

on equitable term• System to resolve competing claims to be customer’s DR-POR

Questions for TAC

• Should the PUC be brought into the deliberations on Loads in SCED? If so, when and how?• DSWG recommendation is consistent with

the LMP-G concept discussed at 2011 TAC meeting, but different in implementation approach. Is TAC OK with the approach outlined in this presentation?