Enhanced Floating Surplus Price Calculation for Efficient Power Management

This overview delves into the enhanced floating surplus price calculation method introduced by Southwest Power Pool. The hybrid approach combines GHG Threshold and Floating Surplus optimization techniques to tackle challenges in the power industry. It explains how the surplus is managed and optimized step by step to ensure correct marginal pricing and efficient power distribution.

• Power management
• Optimization methods
• Surplus pricing
• Energy industry
• Marginal pricing

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1. ENHANCED FLOATING SURPLUS PRICE CALCULATION SEPTEMBER 22ND, 2023 DREW MCGILVRAY Working together to responsibly and economically keep the lights on today and in the future. SPPorg southwest-power-pool 1 SouthwestPowerPool

2. AB) THRESHOLD ENHANCED FLOATING SURPLUS Hybrid Approach combines the GHG Threshold and Floating Surplus optimization methods Addresses mixed integer and uneconomical challenges introduced by GHG Threshold Limits re-designation challenges introduced by Floating Surplus Re-designation in the Floating Surplus solve limited to availability of lower cost MWs in the GHG Threshold solve 2

3. AB) THRESHOLD ENHANCED FLOATING SURPLUS First, apply the Resource Operator/Merit Order Surplus to the GHG Threshold optimization Results of the GHG Threshold optimization feed into the second step Floating Surplus optimization GHG Threshold obligation = surplus available in second step In this example, 10 MW surplus available in second step 0 MW 75 MW 100 MW Fixed Surplus GHG Eligible MW Range Flexible Non-GHG Dispatch Range GHG Threshold Total Dispatch = 85MW 10MW Surplus 3

4. AB) THRESHOLD ENHANCED FLOATING SURPLUS Second, apply the calculated surplus from the GHG Threshold to the Floating Surplus optimization 10 MW surplus available in second step 0 MW 75 MW 100 MW Fixed Surplus GHG Eligible MW Range 1st Step Flexible Non-GHG Dispatch Range GHG Threshold Total Dispatch = 85MW 10MW Surplus 2nd Step 4 Flexible Non-GHG Dispatch Range

5. AB) THRESHOLD ENHANCED FLOATING SURPLUS Second, apply the calculated surplus from the GHG Threshold to the Floating Surplus optimization 10 MW surplus available in second step Question: How is the remaining surplus represented in the optimization to ensure correct marginal pricing? 0 MW 75 MW 100 MW Fixed Surplus GHG Eligible MW Range 1st Step Flexible Non-GHG Dispatch Range A small amount (0.001) is added to the available GHG surplus in the 2nd Step GHG Threshold Total Dispatch = 85MW 2nd Step 10MW Surplus 5 Flexible Non-GHG Dispatch Range

6. COMMON SCENARIO FROM 8/22 MEETING ID G1 G2 G10 G11 G12 Max MW 200 250 120 340 88 89-100 200 Surplus MW N/A N/A 0 0 $/MWh $30.00 $2.00 $28.00 $15.00 $3.00 $56.00 $33.00 GHG ton/MWh 0.45($29.25/MWh) 0($0/MWh) 0.5($32.5/MWh) 0.225($14.625/MWh) 0($0/MWh) 0($0/MWh) 0.29($18.85/MWh) Threshold MW N/A N/A 120 340 72 28 G13 188 12 GHG Allowance = $65/ton WA GHG Zone WA Load Requirement: 277.2MW System Power Balance: Total generation = 990 MW G10 G1 G11 G12 G2 G13 Load = 712.8 MW Load = 277.2 MW 6

7. COMMON SCENARIO 8/22: THRESHOLD ENHANCED FLOATING SURPLUS FIRST STEP ID G1 G2 G10 G11 G12 Max MW 200 250 120 340 88 89-100 200 Surplus MW N/A N/A 0 0 $/MWh $30.00 $2.00 $28.00 $15.00 0.225($14.625/MWh) $3.00 0($0/MWh) $56.00 0($0/MWh) $33.00 0.29($18.85/MWh) GHG ton/MWh 0.45($29.25/MWh) 0($0/MWh) 0.5($32.5/MWh) Dispatch MW 0 250 112.8 340 88 0 199.2 Obligated GHG MW 0 250 0 0 Threshold MW N/A N/A 120 340 72 28 16 G13 188 12 11.201 GHG Allowance = $65/ton WA GHG Zone Small amount (0.001) G13 is not at its limit and is able to increased in response WA Load Requirement: 277.2MW System Power Balance: Total generation = 990 MW from the first step become the new surplus amount for the second step marginal pricing values G10 Obligated GHG MW carried forward with the available GHG surplus for correct to an incremental GHG load (ratio) change G1 G11 16 MW G12 G2 11.201 MW G13 Load = 712.8 MW Load = 277.2 MW 7

8. COMMON SCENARIO 8/22: THRESHOLD ENHANCED FLOATING SURPLUS SECOND STEP ID G1 G2 G10 G11 G12 Max MW 200 250 120 340 88 89-100 200 GHG Allowance = $65/ton Surplus MW N/A N/A 0 0 $/MWh $30.00 $2.00 $28.00 $15.00 $3.00 $56.00 $33.00 GHG ton/MWh 0.45($29.25/MWh) 0($0/MWh) 0.5($32.5/MWh) 0.225($14.625/MWh) 0($0/MWh) 0($0/MWh) 0.29($18.85/MWh) 16 G13 11.201 WA GHG Zone WA Load Requirement: 277.2MW System Power Balance: Total generation = 990 MW Small amount (0.001 MW) included in the available GHG surplus G10 G1 G11 G12 G2 G13 Load = 712.8 MW Load = 277.2 MW 8

9. COMMON SCENARIO 8/22: THRESHOLD ENHANCED FLOATING SURPLUS SECOND STEP ID G1 G2 G10 G11 G12 Max MW 200 250 120 340 88 89-100 200 Surplus MW N/A N/A 0 0 $/MWh $30.00 $2.00 $28.00 $15.00 $3.00 $56.00 $33.00 GHG ton/MWh 0.45($29.25/MWh) 0($0/MWh) 0.5($32.5/MWh) 0.225($14.625/MWh) 0($0/MWh) 0($0/MWh) 0.29($18.85/MWh) Dispatch MW 0 250 120 340 88 0 192 Obligated GHG MW 0 250 0 0 16 16 G13 11.201 GHG Allowance = $65/ton 11.2 WA GHG Zone WA Load Requirement: 277.2MW System Power Balance: Total generation = 990 MW 0.001 MW GHG surplus remaining on G13 available for marginal GHG price formation G10 G1 G11 16 MW G12 G2 11.2 MW G13 Load = 712.8 MW Load = 277.2 MW 9

10. COMMON SCENARIO 8/22: THRESHOLD ENHANCED FLOATING SURPLUS SECOND STEP ID G1 G2 G10 G11 G12 Max MW 200 250 120 340 88 89-100 200 Surplus MW N/A N/A 0 0 $/MWh $30.00 $2.00 $28.00 $15.00 $3.00 $56.00 $33.00 GHG ton/MWh 0.45($29.25/MWh) 0($0/MWh) 0.5($32.5/MWh) 0.225($14.625/MWh) 0($0/MWh) 0($0/MWh) 0.29($18.85/MWh) Dispatch MW 0 250 120 340 88 0 192 Obligated GHG MW 0 250 0 0 16 16 G13 11.201 GHG Allowance = $65/ton 11.2 WA GHG Zone An incremental increase WA Load Requirement: 277.2MW System Power Balance: Total generation = 990 MW in the ratio of the GHG Load would be served by G13 (-$33 + ($33+$18.85) = $18.85 Marginal GHG) G10 G1 G11 16 MW G12 G2 11.2 MW G13 Load = 712.8 MW Load = 277.2 MW 10

11. COMMON SCENARIO 8/22: THRESHOLD ENHANCED FLOATING SURPLUS SETTLEMENTS ID Dispatch MW LMP $/MWh Settled Energy $ Obligated GHG MW Zone GHG $/MWh Settled Zone GHG $ Total Payment $ G1 G2 G10 G11 G12 G13 WA Ld Sys Ld 0 $33.00 $33.00 $33.00 $33.00 $33.00 $33.00 $33.00 $33.00 $0 0 $18.85 $18.85 $18.85 $18.85 $18.85 $18.85 $18.85 $18.85 $0.00 $4,712.50 $0.00 $0.00 $301.60 $211.12 -$5,225.22 $0.00 $0.00 250 120 340 88 192 -277.2 -712.8 $8,250 $3,960 $11,220 $2,904 $6,336 -$9,148 -$23,522 250 0 0 16 11.2 -277.2 0 $12,962.50 $3,960.00 $11,220.00 $3,205.60 $6,547.12 -$14,372.82 -$23,522.40 11

12. COMMON SCENARIO 8/22: THRESHOLD ENHANCED FLOATING SURPLUS FLOATING SURPLUS RESOURCE COST WITH GHG ID Dispatch MW Offer $/MWh Energy Offer $ GHG Dispatch MW WA GHG CHG $/MWh GHG WA CHG $ Total Cost $ G1 G2 G10 G11 G12 G13 0 -$30.00 -$2.00 -$28.00 -$15.00 -$3.00 -$33.00 $0.00 -$500.00 -$3,360.00 -$5,100.00 -$264.00 -$6,336.00 0 -$29.25 $0.00 -$32.50 -$14.63 $0.00 -$18.85 $0.00 $0.00 $0.00 $0.00 $0.00 -$211.12 $0.00 -$500.00 -$3,360.00 -$5,100.00 -$264.00 -$6,547.12 250 120 340 88 192 250 0 0 16 11.2 12

13. COMMON SCENARIO 8/22: THRESHOLD ENHANCED FLOATING SURPLUS SETTLEMENT V RESOURCE COST ID Settled Energy $ Energy Offer $ Net Energy $ Settled Zone GHG $ GHG WA CHG $ Net GHG $ Net Energy + Net GHG $ G1 G2 G10 G11 $11,220.00 -$5,100.00 $6,120.00 G12 $2,904.00 -$264.00 G13 $6,336.00 -$6,336.00 $0.00 $8,250.00 $3,960.00 -$3,360.00 $0.00 -$500.00 $0.00 $7,750.00 $600.00 $0.00 $4,712.50 $0.00 $0.00 $301.60 $211.12 $0.00 $0.00 $0.00 $0.00 $0.00 -$211.12 $0.00 $4,712.50 $0.00 $0.00 $301.60 $0.00 $0.00 $12,462.50 $600.00 $6,120.00 $2,941.60 $0.00 $2,640.00 $0.00 13

14. THRESHOLD ENHANCED FLOATING SURPLUS SETTLEMENT EXAMPLE INCORRECT MARGINAL GHG PRICE 14

15. SCENARIO: THRESHOLD ENHANCED FLOATING SURPLUS SECOND STEP ID G1 G2 G10 G11 G12 Max MW 200 250 120 340 88 89-100 200 Surplus MW N/A N/A 0 0 $/MWh $30.00 $2.00 $28.00 $15.00 $3.00 $56.00 $33.00 GHG ton/MWh 0.45($29.25/MWh) 0($0/MWh) 0.5($32.5/MWh) 0.225($14.625/MWh) 0($0/MWh) 0($0/MWh) 0.29($18.85/MWh) Dispatch MW 0 250 120 340 88 0 192 Obligated GHG MW 0 250 0 0 16 0 11.2 16 G13 11.2 GHG Allowance = $65/ton G13 is limited in the WA GHG Zone An incremental increase in WA Load Requirement: 277.2MW 1st Step to 11.2MW and is unavailable to serve an incremental increase in the ratio of GHG Load System Power Balance: Total generation = 990 MW the ratio of the GHG Load would increment G13 down and G1 up. (-$33 + $59.25 = $26.25 Marginal GHG) G10 G1 G11 16 MW G12 G2 11.2 MW G13 Load = 712.8 MW Load = 277.2 MW 15 example with incorrect Zone GHG $/MWh (marginal GHG pricing)

16. SCENARIO: THRESHOLD ENHANCED FLOATING SURPLUS SETTLEMENTS ID Dispatch MW LMP $/MWh Settled Energy $ Obligated GHG MW Zone GHG $/MWh Settled Zone GHG $ Total Payment $ G1 G2 G10 G11 G12 G13 WA Ld Sys Ld 0 $33.00 $33.00 $33.00 $33.00 $33.00 $33.00 $33.00 $33.00 $0 0 $26.25 $26.25 $26.25 $26.25 $26.25 $26.25 $26.25 $26.25 $0.00 $6,562.50 $0.00 $0.00 $420.00 $294.00 -$7,276.50 $0.00 $0.00 250 120 340 88 192 -277.2 -712.8 $8,250 $3,960 $11,220 $2,904 $6,336 -$9,148 -$23,522 250 0 0 16 11.2 -277.2 0 $14,812.50 $3,960.00 $11,220.00 $3,324.00 $6,630.00 -$16,424.10 -$23,522.40 16 example with incorrect Zone GHG $/MWh (marginal GHG pricing)

17. SCENARIO: THRESHOLD ENHANCED FLOATING SURPLUS FLOATING SURPLUS RESOURCE COST WITH GHG ID Dispatch MW Offer $/MWh Energy Offer $ GHG Dispatch MW WA GHG CHG $/MWh GHG WA CHG $ Total Cost $ G1 G2 G10 G11 G12 G13 0 -$30.00 -$2.00 -$28.00 -$15.00 -$3.00 -$33.00 $0.00 -$500.00 -$3,360.00 -$5,100.00 -$264.00 -$6,336.00 0 -$29.25 $0.00 -$32.50 -$14.63 $0.00 -$18.85 $0.00 $0.00 $0.00 $0.00 $0.00 -$211.12 $0.00 -$500.00 -$3,360.00 -$5,100.00 -$264.00 -$6,547.12 250 120 340 88 192 250 0 0 16 11.2 17 example with incorrect Zone GHG $/MWh (marginal GHG pricing)

18. SCENARIO: THRESHOLD ENHANCED FLOATING SURPLUS SETTLEMENT V RESOURCE COST ID Settled Energy $ Energy Offer $ Net Energy $ Settled Zone GHG $ GHG WA CHG $ Net GHG $ Net Energy + Net GHG $ G1 G2 G10 G11 $11,220.00 -$5,100.00 $6,120.00 G12 $2,904.00 -$264.00 G13 $6,336.00 -$6,336.00 $0.00 $8,250.00 $3,960.00 -$3,360.00 $0.00 -$500.00 $0.00 $7,750.00 $600.00 $0.00 $6,562.50 $0.00 $0.00 $420.00 $294.00 $0.00 $0.00 $0.00 $0.00 $0.00 -$211.12 $0.00 $6,562.50 $0.00 $0.00 $420.00 $82.88 $0.00 $14,312.50 $600.00 $6,120.00 $3,060.00 $82.88 $2,640.00 $0.00 18 example with incorrect Zone GHG $/MWh (marginal GHG pricing)