Balance of Year Auction Frequently Asked Questions Presented to WMS April 10th, 2011 Steve Reedy, Manager, CRR

Topics Term and Capacity of the Balance of Year Auction Calendar for the Balance of Year Auction Credit for the Balance of Year Auction 24 hr bids in the Balance of Year Auction Multi-month block bids in the Balance of Year Auction Questions

Term and Capacity of the Balance of Year Auction The Balance of Year Auction is for Months July 2011-December 2011 The Network will be modeled at 55% capacity (like the first year of an annual auction)

Calendar for the Balance of Year Auction Tuesday, 5/10/2011 Network files posted Friday, 5/13/2011 Auction Notice, Credit Window Opens Monday, 5/23/2011 Credit Lock at 17:00 CDT Tuesday, 5/24/2011 Bid Window Opens Thursday, 5/26/2011 Bid Window Closes at 17:00:00 CDT Thursday, 5/26/2011 Second Round Bid Window Opens, if needed, at 18:00:00 CDT Friday, 5/27/2011 Second Round Bid Window Closes, if needed, at 12:00:00 CDT

Credit for the Balance of Year Auction The Balance of Year Auction will have three separate budget constraints, one for each time of use Why? The Balance of Year Auction is broken down into three separate optimizations with three separate sets of constraints; thus three separate budget constraints need to be set

The behavior of 24 Hour bids in the CRR Balance of Year Auction 24 hour bids can be entered into the Balance of Year auction The auction engine treats a 24 hour bid as a short cut for entering three separate bids in the three time of use network models (Peak WD, Peak WE, Off-peak) If the Bid Price is higher than the clearing price in a given time of use (Peak WD, Peak WE, Off-peak) then the CRR bid will be awarded fully in that time of use (assuming there is no active budget constraint). If the Bid Price is lower than the clearing price in a given time of use then the CRR bid will be not be awarded in that time of use. If the Bid Price is equal to the clearing price in a given time of use then the CRR bid will be awarded at some level between 0 and 100% in that time of use.

24 Hour Example in Balance of Year Auction 24 hour CRR bid for August in the Balance of Year Auction For a certain path prices are as follows Off-peak 2$/MW-hr (arbitrary number for this example) PeakWE 3$/MW-hr (arbitrary number for this example) PeakWD 8$/MW-hr (arbitrary number for this example) Note that a 24 hr bid of $6/MW-hr would be fully awarded in PeakWE and Off-peak, but not awarded in PeakWD Also note that a 24 hr bid of $4/MW-hr would also be fully awarded in PeakWE and Off-peak, but not awarded in PeakWD

The behavior of Multi-month Block bids in the Balance of Year Auctions CRR Account Holders can enter Multi-month Block bids in the Balance of Year Auction. These bids are entered for any set of consecutive months by entering appropriate start and end dates. E.g. 7/1/2011-9/30/2011 is a JUL-SEP block bid The auction engine treats a multi-month block bid as a single bid across the different network models (e.g. JUL, AUG,SEP) Single MW amount Single $/MW-hr bid price (not to exceed) If the Bid Price is higher than the weighted (by number of hours) average of the appropriate monthly clearing prices(e.g. JUL, AUG,SEP) then the CRR bid will be awarded fully (assuming there is no active budget constraint). If the Bid Price is lower than the weighted average of the appropriate monthly clearing prices then the CRR bid will not be awarded. If the Bid Price is equal to the weighted average of the three times of use clearing prices then the CRR bid will be awarded at some level between 0 and 100%, but the same in each month.

Multi Month Block Bid Example in Balance of Year Auction Multi-month block bid for JUL-SEP PeakWD in Balance of Year Auction 20 x 16 = 320 JUL PeakWD hours 23 x 16 = 368 AUG PeakWD hours 21 x 16 = 336 SEP PeakWD hours 64 x 16 = 1024 total hours For a certain path prices are as follows JUL PeakWD 2$/MW-hr (arbitrary number for this example) AUG PeakWD 3$/MW-hr (arbitrary number for this example) SEP PeakWD 8$/MW-hr (arbitrary number for this example) JUL-SEP PeakWD multi-month block bid clearing price= (320x2 + 368x3 + 336x8)/1024 = $4.328125/MW-hr Note that a JUL-SEP PeakWD bid of $6/MW-hr would be fully awarded in each time of use even though it was less than the clearing price in the SEP PeakWD time of use. Also note that a JUL-SEP PeakWD bid of $4/MW-hr would not be awarded at all, even though it was more than the clearing price in the JUL PeakWD and AUG PeakWD times of use.

Questions? Are there any question about the Balance of Year Auction?