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• NOTES:– The following examples assume there are no

congestion costs– The LSE is fully hedged– “G” is a negotiated price between the LSE and the

customer

DR QSEDR QSE

DR DR Service Service

ProviderProvider

LSE QSELSE QSE

LSELSE

CustomerCustomer

ERCOTERCOT

Wholesale Wholesale Counterparty Counterparty

/ DAM/ DAM

All RTM All RTM CustomersCustomers

$700$700 (“G” = $70/M

W)

(“G” = $70/MW)

10 MWs10 MWs

10 MWs10 MWs

$30,000$30,000

$30,000 - Fee

$30,000 - Fee

10 MWs10 MWs

$650$650(WhlsleP=$65/MW)(WhlsleP=$65/MW)

10 MWs10 MWs

10 MWs10 MWs

10 M

Ws

10 M

Ws

$30,

000

LRIS Settlement Examples

“LMP – G”

• The LSE sells power to a retail customer.

• In this example, this is for a block of 10 MWs at a retail price of $70/MW.

• The LSE hedges that power in the bilateral market or Day Ahead market, locking in a profit of $5/MW.

• The customer contracts with a DR Service Provider to curtail 10 MWs when LMPs hit $3,000 and pays a fee for the enabling technology and services.

• The LMP hits $3,000. The DR Service Provider curtails 10 MWs of usage from the retail customer and provides to ERCOT.

• ERCOT pays the DR Service Provider LMP.

• The 10 MWs are consumed by all customers taking power in the Real Time Market and pay ERCOT the LMP.

• ERCOT is revenue-neutral.

At this point, absent the LMP-G adjustment, the LSE would not bill the retail Customer for the 10 MWs as the usage is not measured by the TDSP meter.

To ensure the LSE is kept whole, usage for the curtailed volumes will be sent to the LSE to bill the customer.(If this had been a RT index-based contract, the customer avoids the LMP for a small fee).

To facilitate contracting options and provide information to the LSE and customer, this curtailed usage (representing energy that would have been consumed) will be sent to the LSE QSE.

Benefits of this approach:1. Avoids double payment to

Customer (collecting both DR payment and avoiding energy cost)

2. LSE is not impacted; they are made whole

3. ERCOT not involved in retail pricing (volumetric flow)

DR QSEDR QSE

DR DR Service Service

ProviderProvider

LSE QSELSE QSE

LSELSE

CustomerCustomer

ERCOTERCOT

Wholesale Wholesale Counterparty Counterparty

/ DAM/ DAM

All RTM All RTM CustomersCustomers

$700 $700 (“G” = $70/M

W)

(“G” = $70/MW)

10 MWs10 MWs

10 MWs10 MWs

$30,000$30,000

$30,000 - Fee

$30,000 - Fee

10 MWs

10 MWs

$650$650(WhlsleP=$65/MW)(WhlsleP=$65/MW)

10 MWs10 MWs

10 M

Ws

10 M

Ws

$30,

000

LRIS Settlement Examples

“Full LMP”

• The LSE sells power to a retail customer.

• In this example, this is for 10 MWs at a retail price of $70/MW.

• The LSE hedges that power in the bilateral market or Day Ahead market, locking in a profit of $5/MW.

• The customer contracts with a DR Service Provider to curtail 10 MWs when LMPs hit $3,000 and pays a fee for the enabling technology and services.

• The LMP hits $3,000. The DR Service Provider curtails 10 MWs of usage from the retail customer and provides to ERCOT.

• ERCOT pays the DR Service Provider LMP.

• The 10 MWs are consumed by all customers taking power in the Real Time Market and pay ERCOT the LMP.

• ERCOT is revenue-neutral.

• At this point, the LSE would not bill the retail Customer for the 10 MWs as the usage is not measured by the TDSP meter.

The LSE still pays for the wholesale power, but delivers to ERCOT instead. In this case, the LSE is rewarded with high LMP (which doesn’t always have to be the case), but the market sees an uplift to Revenue Neutrality to cover the payment.

10 MWs10 MWs$30,000

$30,000

All CustomersAll Customers(Revenue (Revenue

Neutrality Adj.)Neutrality Adj.)

10 M

Ws

10 M

Ws

$30,

000

$30,

000

Benefits to this approach:1.Encourage more DR2.Customer not billed for MWs not used3.ERCOT is not involved in retail pricing