NOTICE DATE: September 4, 2009

NOTICE TYPE: W-A090409-01 – Operations

SHORT DESCRIPTION: Procurement issue with Non-Spinning Reserve Service (NSRS) Resources in Replacement Reserve Service (RPRS) clearing

INTENDED AUDIENCE: QSEs and Resource Entities

DAY AFFECTED: See below

LONG DESCRIPTION: On June 12, 2007, ERCOT implemented modified software code enabling the Replacement Reserve Service (RPRS) engine to include consideration of Resources with Non-Spinning Reserve Service (NSRS) capacity commitments. To accomplish this, the code designates any Resource identified in its Resource Plan as committed for NSRS as “On-line.” This On-line indication prevents the RPRS engine from procuring the Resource for the NSRS-indicated intervals.

ERCOT has identified an issue with the code that causes Resources transitioning from an NSRS-committed interval to an interval with unit status of “Off-line” and “available” to be considered RPRS-eligible. Rather than recognizing the Resource as Off-line, the RPRS engine assumes the Resource is On-line and that it can extend the run time of the Resource without incurring the Resource’s start-up cost, therefore not considering the start-up portion of the bid in RPRS clearing. This could potentially result in under-pricing the RPRS Market Clearing Price for Capacity (MCPC) by artificially displacing more economic alternate bids.

Off-line Resources procured for RPRS are kept whole to their start-up bids in settlement. The ERCOT Settlement system identifies their Off-line status via breaker status and makes an ex-post payment adjustment to the QSE for Resource start-up and actual run time.

ERCOT is investigating a solution to this issue and will update this Notice as more information becomes available.

CONTACT: If you have any questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Services phone number at (512) 248-3900 or contact ERCOT Client Services via e-mail at [log in to unmask].

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