MWG Meeting March 7, 2016 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Overview Welcome, introductions, anti-trust Progress – MWG enhancements – FERC 789 Operating Reserves – Wheeling rates – GHG carbon pricing – CHP improvements Next Steps Next Week’s MWG Topics 2 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

FERC 789 Contingency Reserve 3 W ESTERN E LECTRICITY C OORDINATING C OUNCIL spinning reserve + non-spinning reserve 3% of net load + 3% of net generation 50% must be spinning Only spinning portion modeled in TEPPC cases – assumption = sufficient quick start units in all regions to meet non-spinning portion

FERC GridView Implementation 4 W ESTERN E LECTRICITY C OORDINATING C OUNCIL 1 st Release. Only change is split between generation and load Ancillary service is modeled by 2024 flexibility reserve shapes 2 nd Release. Enhanced calculation of ancillary services based on 2009 wind & solar and 2026 hourly loads

Wheeling / Hurdle Rates Continue to use 2024 methodology for 2026 common case – Rates based on transmission tariffs – 207 units (see RN table 58) exempt from wheeling charges At some point run sensitivity – Remove exemptions – Divide interfaces into two tiers and apply wheeling charge only to transfers > 90% of interface capability Do we know what the interface capabilities are? 5 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

GHG Policy Modeling California – Update prices – Expand modeling Alberta – Model carbon tax – Limit carbon imports British Columbia – Model carbon tax – Limit carbon imports 6 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

California GW Solutions Act (AB32) 7 W ESTERN E LECTRICITY C OORDINATING C OUNCIL Asset-Controlling Suppliers BPA Powerex Tacoma Power

Canada Coal Regulation End-of-life Coal Unit: In general, a unit that is 50 years of age. The end-of-useful-life date of a unit is determined according to the following principle: – Units commissioned before 1975 will reach their end-of- useful-life on December 31st 2019 or on December 31st of the 50thyear that follows their commissioning date, whichever comes first. – Units commissioned after 1974 but before 1986 will reach their end-of-useful-life on December 31st of 2029 or on December 31st of the 50th year that follows their commissioning date, whichever comes first. – Units commissioned in or after 1986 will reach their end-of- useful-life on December 31st of the 50th year that follows their commissioning date. 8 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Alberta Climate Leadership Plan (pending) Alberta is developing a new strategy on climate change based on recommendations put forward by the Climate Change Advisory Panel. Details of the final strategy are being developed, but there are 4 key areas that the Alberta government is moving forward on: – Phasing out coal-generated electricity and developing more renewable energy – Implementing a new carbon price on greenhouse gas pollution – A legislated oilsands emission limit – Employing a new methane emission reduction plan 9 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Alberta GHG Under existing federal regulations, 12 of Alberta’s 18 coal-fired generating plants would be retired by Under the Alberta CLP, all coal-fired generating plants would be retired by – Two-thirds of this generating capacity will be replaced by renewable energy; one-third will be replaced by natural gas. – Increase the share of renewable electricity to 30% of generation by 2030 A carbon price will be applied across all sectors, starting at $20 per tonne on January 1, 2017 and moving to $30 per tonne on January 1, This price will increase in real terms each year after that. 10 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Alberta GHG Implementation Retire the following coal-fired units before 2026: – Battle River 3, Battle River 4, HR-Milner 1, Sundance 1, Sundance 2, Sundance 3, Sundance 4 – Total of 1784 net MW – Add replacement generation as needed Add CO 2 tax of $35.15/metric ton (CAN$) to units emitting over 100,000 tonnes per year. Add hurdle rate adder(s) to import paths – Note that Colstrip exemption could still enable import 11 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

British Columbia GHG Clean Energy Act and Greenhouse Gas Reduction Targets Act – GHG emissions are to be reduced by at least 33% below 2007 levels by 2020 (80% by 2050) {need electric 2007 level to check} – Carbon tax of $30/metric ton (2016 CAD Real) – Generate at least 93% of the electricity in British Columbia from clean or renewable resources. 12 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

CHP Improvements Goal to model with appropriate parameters for: – Minimum operating characteristics – Capacity available to grid – Heat rates – Dispatchability – Emission factor for steam 13 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Next Steps Follow-up for Canadian GHG Modeling – Coal Replacement technologies (e.g. renewable mix) – CO2 Price for CA and BCH (Linked?) – Inform SWG for Gap Analysis and resource build-out – Other? Next MWG Scheduled Monday March 14 – 2026 Common Case Validation Discussion 14 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Questions or Comments 15 W ESTERN E LECTRICITY C OORDINATING C OUNCIL

Canadian GHG Alberta – Alberta Coal Retirements and Replacement to DWG and SWG for Gap analysis and renewable build-out – Convert CAD CO2 price for 2026 Common Case – Develop CO2 Hurdle Rates and associated Paths British Columbia: – BC’s carbon tax applies to all fossil fuel combustion in the province including power production. For 2026 assume it is $30 (2016 CAD Real)/metric tonne Carbon. Recommended CAD/US exchange rate: – BCH List of thermal units : Parameters and Dispatch (Co-generation must run) – BCHA (Powerex) receives similar treatment for GHG intensity as BPA does PWX/BCHA rate for 2016 imports is MT CO2e/MWh 16 W ESTERN E LECTRICITY C OORDINATING C OUNCIL