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1 NPRR638 Back-casting Updated Results CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. ERCOT Public May 01, 2015

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2 Updated Prototype - Fixes CWG/MCWG asked ERCOT to evaluate the NPRR638 back-casting model to better understand the resulting values and volatilities. ERCOT staff evaluated the model and determined that: Certain Operating Days prices had been dropped from the input data, thereby causing excess volatility. The model code included an incorrect statement type for DAM, which resulted in an incorrect calculation of DAM ancillary service and other non-energy amounts. Updated results are corrected for these errors. ERCOT Public

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3 Updated Prototype - Scenarios The following scenarios were run: For RTLE, 1-, 3-, 5-, 7- and 10-day lookbacks Historical price horizons of one and three years Price confidence levels of P50, P60, P70, P80 and P84 Selection for traders-only, load-only, generation-only and both generation and load ERCOT Public

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4 Updated Prototype - Observations Observations on updated results Modelled DALE value is similar to current DALE Modelled RTLE is highly sensitive to lookback days Modelled RTLE is more variable than current RTLE Higher lookback values result in RTLE amounts that are significantly higher than under the current methodology As expected, RTLE and DAM increase with confidence levels The RTLE volatility impacts are greatest for Counter-Parties with both load and generation This appears to result from greater volatility of Resource Node settlement point prices This causes generators to receive materially greater credits than load is charged ERCOT Public

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5 Options for consideration Options to moderate volatility of RTLE Reduce overall confidence level to P50 Assign different confidence level to Resource Node settlement point prices Reduce lookback days ERCOT Public

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6 Updated Prototype - Results ERCOT Public Price Analysis

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7 Updated Prototype - Results ERCOT Public

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8 Updated Prototype - Results ERCOT Public

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9 Updated Prototype - Results ERCOT Public

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10 Updated Prototype - Results ERCOT Public

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11 Updated Prototype - Results ERCOT Public

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12 Updated Prototype - Results ERCOT Public

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13 Updated Prototype - Results ERCOT Public

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14 Updated Prototype - Results ERCOT Public

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15 Updated Prototype - Results ERCOT Public Volume Analysis

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16 Updated Prototype - Results ERCOT Public No Load or Generation

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17 Updated Prototype - Results ERCOT Public Generation Only

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18 Updated Prototype - Results ERCOT Public Load Only

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19 Updated Prototype - Results ERCOT Public Load + Generation

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20 Updated Prototype - Results ERCOT Public No Load or Generation Generation Only Load Only Load + Generation

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21 Updated Prototype - Results ERCOT Public Exposure Analysis 3 years price lookback

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22 Updated Prototype - Results ERCOT Public

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23 Updated Prototype - Results ERCOT Public

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24 Updated Prototype - Results ERCOT Public

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25 Updated Prototype - Results ERCOT Public

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26 Updated Prototype - Results ERCOT Public No Load or Generation

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27 Updated Prototype - Results ERCOT Public Generation Only

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28 Updated Prototype - Results ERCOT Public Load Only

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29 Updated Prototype - Results ERCOT Public Load + Generation

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30 Updated Prototype - Results ERCOT Public No Load or Generation Generation Only Load Only Load + Generation

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31 Updated Prototype - Results ERCOT Public Exposure Analysis 1 year price lookback

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32 Updated Prototype - Results ERCOT Public

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33 Updated Prototype - Results ERCOT Public

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34 Updated Prototype - Results ERCOT Public

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35 Updated Prototype - Results ERCOT Public

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36 Updated Prototype - Results ERCOT Public No Load or Generation

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37 Updated Prototype - Results ERCOT Public Generation Only

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38 Updated Prototype - Results ERCOT Public Load Only

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39 Updated Prototype - Results ERCOT Public Load + Generation

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40 Updated Prototype - Results ERCOT Public No Load or Generation Generation Only Load Only Load + Generation

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41 Questions ERCOT Public