Market Operations Engagement Group DER Sourcing - Procurement July 26, 2016 Presentation material does not represent the views of the Joint Utilities Engagement Group as the group is still in discussion on these topics. Please do not redistribute this deck.

Agenda Time Topic 1:00 – 1:15 Introductions 1:15 – 1:45 Recap of 7/13 Stakeholder Session 1:45 – 2:30 Joint Utilities Presentation 2:30 – 2:45 Break 2:45 – 3:45 Q&A and Discussion 3:45 – 4:00 Summary & Next Steps

Engagement Group Ground Rules* All stakeholder engagement (Advisory Group and Engagement Group) meetings, webinars and information exchange are designed solely to provide an open forum or means for the expression of various points of view in compliance with antitrust laws. Under no circumstances shall stakeholder engagement activities be used as a means for competing companies to reach any understanding, expressed or implied, which tends to restrict competition, or in any way, to impair the ability of participating members to exercise independent business judgment regarding matters affecting competition or regulatory positions. Proprietary information shall not be disclosed by any participant during any stakeholder engagement meeting or its subgroups. In addition, no information of a secret or proprietary nature shall be made available to stakeholder engagement members. All proprietary information which may nonetheless be publicly disclosed by any participant during any stakeholder engagement meeting or its subgroups shall be deemed to have been disclosed on a non-confidential basis, without any restrictions on use by anyone, except that no valid copyright or patent right shall be deemed to have been waived by such disclosure. AG & EG discussions will be open forums without attribution and no public documents by the AG or EG will be produced unless publication is agreed upon by the group. *Ground Rules adapted from the JU Advisory Group

Market Ops - Near term schedule (subject to revision) 7/18 7/25 8/1 8/8 8/15 8/22 8/29 9/5 9/12 Advisory Group August 10 NYC September 7 NYC Stakeholder Engagement Technical Conferences July 27 (webinar): NWA Suitability, System Data August 18 NYC: Granular Pricing, Customer Data, Hosting Capacity, Monitoring & Control September 13 Albany: Cyber Security, ISO/DSP Roles, DER and Demand Forecasting, Load Flow Analysis, Probabilistic Planning Customer Data (Tuesday mornings) DER Sourcing (Tuesday afternoons) Granular Pricing EVSE July 26 Albany Aggregation of Usage Data August 9 NYC Additional Data Needs July 19 (By Phone*) Review 7/13 Stakeholder Comments August 2 TBD July 26 Albany Dependencies With Other REV and Related Proceedings August 9 NYC Potential Refinements to NWA Procurement Approach August 2 (By Phone*) TBD August 18 NYC (technical conference) August 16 NYC Current State; Opportunities for Utility Collaboration September 12 Albany Forecasting Methodologies August 30 Albany Principles for Utility Involvement *Additional phone sessions will be held as needed

DER Sourcing Topic Description DER Sourcing: market actions taken by the utility to increase the amount of installed DER on its system. This may be done to address specific system deficiencies (i.e. Non- Wires Alternatives), and/or to secure the environmental or other attributes of DERs. The chief mechanisms for DER Sourcing are Pricing (e.g. Net Energy Metering tariffs, TOU pricing), Programs (e.g. distribution-level Demand Response tariffs) and Procurement (e.g. bilateral contracts, RFPs/RFIs/RFOs).

Market Operations Charter – DER Sourcing Purpose: Explore the Joint Utilities' approaches for facilitating market mechanisms that effectively support and encourage the adoption of Distributed Energy Resources while meeting customers’ needs and complying with the DSIP Guidance Order. Topic & Scope: Distributed Energy Resources (DER) Sourcing DER Sourcing DER Sourcing - Describe and discuss dependencies with other REV and REV-related proceedings Share existing NWA plans and challenges/lessons learned Discuss potential refinement of the NWA Procurement approaches to improve efficiency and effectiveness and the potential for common implementation by the Joint Utilities

Recap of July 13, 2016 EG Session

Market Operations-DER Procurement SEG Recap The Joint Utilities (JU) convened a meeting with stakeholders on the topic of DER Sourcing on July 13, 2016 at Con Edison’s NYC offices The theme of the discussion was Existing NWA Plans and Challenges/Lessons Learned The following slides are intended to capture the main discussion points and note where there was agreement or a difference of opinion. These slides are not intended to serve as meeting minutes The JU would like stakeholder review and feedback on these observations, with the objective of clarifying any points or identifying anything that may have been missed.

DER Sourcing – Key Takeaways from 7/13 Session NWA Opportunity – Traditional Solution Cost Transparency Stakeholders requested that the utility include the cost of the “traditional solution” in the NWA opportunity solicitation: The traditional solution cost establishes the “price to beat” for respondents The JU commented that providing the solution cost could influence respondents’ bids, and that perhaps an auction approach would provide a more competitive outcome Stakeholders stated that respondents would be competing with each other for the opportunity, thus competition would drive the bid to a competitive market result The JU appreciates this suggestion and will take it under consideration

DER Sourcing – Key Takeaways from 7/13 Session NWA Non-Distribution System Benefits Some stakeholders commented that non-system benefits such as air quality, economic development and LMI should be considered in the NWA DER procurement evaluation process; if not as primary evaluation criteria, then perhaps as potential “tie-breaker” evaluation factors The JU commented that the BCA Handbook establishes the methodology and requires respondents to submit their total costs in order to be considered Other evaluation factors may be considered but would need to be incorporated into the BCA handbook following the applicable update/revision processes The JU appreciates this point of view but believes this issue is outside the scope of the DER NWA Procurement engagement charter and would be addressed in other proceedings (i.e. BCA Handbook)

DER Sourcing – Key Takeaways from 7/13 Session NWA Procurement Processes Stakeholders commented that the procurement process should be as streamlined and transparent as possible. Comments included: Recent NWA procurement RFPs contained detailed demographic information that were very helpful from a developer perspective Solicitation, evaluation, selection and deployment process should be streamlined with the goal of being able to run multiple procurements and shorten timelines when possible The JU should provide a single “portal” where NWA opportunities would be posted, in addition to the existing practice of using the individual utility websites Stakeholders expressed concern that sometimes RFIs require developers to disclose too much sensitive information Stakeholders commented that some NWA solicitations have what are perceived as unnecessarily high entry fees/deposit requirements. The JU are not aware of any such fees, and would like further clarification from stakeholders The JU appreciates these points of view and looks forward to additional discussion on August 9th regarding these and other stakeholder-identified opportunities for refinement of NWA Procurement approaches that may improve efficiency, effectiveness and the potential for common implementation by the JU

DER Sourcing – Key Takeaways from 7/13 Session Other DER Sourcing Mechanisms Stakeholders offered comments and suggestions related to the overall DER Sourcing process Some Stakeholders stated that an open enrollment tariff mechanism can be used to incent DER development over a long period. Could benefit both DER developers and the utilities by allowing the developer to deploy onto the system DER projects that might not have otherwise deployed, while allowing utility to operate the DER based on the utility need/ requirements prescribed by the tariff Bilateral contracts could provide flexibility for developers to offer and the utility to procure non-standard products and services without having to wait for "open windows“ or provide a solution for a specific location Stakeholders commented that the utilities might consider expanding NWA opportunities to include low-to-medium need projects and "park" these resources for later The JU appreciates these viewpoints and will take these suggestions under consideration. The JU notes that sourcing mechanisms and processes other than NWA procurement (i.e. Programs and Pricing) are outside the scope of the DER Procurement Engagement Group Charter and are largely dependent on outcomes of other current proceedings

DER Sourcing – Key Takeaways from 7/13 Session NWA Procurement Contract Time Horizons Stakeholders expressed a need for considering longer-term (i.e. 10-15 year) NWA contracts Support for vendor to finance technologies (e.g. storage) that are not usually cost- competitive within the shorter time horizons currently used in utility procurements Stakeholders stated that initial NWA needs and suitability seemed to focus more on near-term issues (i.e. short term deferral) versus longer-term solutions (i.e. anticipated growth, need to adopt DER to address longer term goals like 50/2030, replacement of existing assets v. deferral). Stakeholders expressed a concern that utilities should consider a portfolio approach of near-term and longer-term procurement contracts Stakeholders also noted that applying commonplace risk management practices from other industries (i.e. a staggered maturity strategy) could make long-term contracts more viable from the utility's perspective The JU appreciates stakeholder interest in longer-term NWA procurement contracts and will take these concerns under consideration. The JU also noted that some aspects of these concerns are addressed in the Distribution Planning working group

DER Sourcing – Key Takeaways from 7/13 Session NWA Suitability Several Stakeholders had questions about and expressed interest in gaining more insight into the utilities’ evolving process for identification and solicitation of NWA opportunities. Stakeholders expressed concern about: NWA suitability criteria for cost floors, project type (i.e. load relief, reliability, resiliency, etc.), project size, applicable technology, etc. may be too prescriptive and restrict opportunities for NWA solutions. Stakeholders were interested in more visibility into the identification and decision processes associated with developing the NWA opportunity Identifying all NWA opportunities, unconstrained by deferral size or cost assumptions, and letting the market respond with proposals that the utility can evaluate and use to build a portfolio of solutions that best meets the need Minimum size constraints that may preclude small yet scalable NWA solutions, which could ultimately prove cost-effective to the utility and the supplier if the solution is replicable The JU noted that some of these issues are being addressed within the Distribution System Planning working group by the NWA Suitability team. The JU have invited members from this team to make a presentation to the DER Procurement engagement group on these issues

Joint Utilities Presentations

NWA Suitability Criteria discussion

NWA Suitability Criteria Discussion Topics Contract time horizons: stakeholders expressed a need for considering longer-term (i.e. 10- 15 year) NWA contracts Cost floors - NWA suitability criteria for cost floors, project type, project size, applicable technology, etc. may be too prescriptive and restrict opportunities for NWA solutions Deferral size and cost assumptions: stakeholders wanted the utilities to identify all NWA opportunities, unconstrained by deferral size or cost assumptions Minimum size constraints: may preclude small yet scalable NWA solutions that could ultimately prove cost-effective to the utility and the supplier if the solution is replicable

Suitability Criteria for NWAs Identify System Needs Competitive Solicitation BCA Evaluation & Procurement NWA Suitability Identify system needs (load relief, reliability enhancement, asset aging, damage failure etc.) suitable for NWA solutions Assess timing of need Assess cost and size of project Evolving criteria

Goals and Benefits of NWA Suitability Criteria Well-structured suitability criteria will have material benefits for DERs Ensures developers can work with customers to identify the best projects with the greatest chance for success Provides greater clarity, certainty and long term visibility to the market Avoids misallocation of time and resources for both developers and utilities Line of sight toward a broader, more flexible and efficient approach Makes NWA solicitation a more routine process that is central to planning and transitions away from ad hoc approaches Leverages lessons learned as experience with NWAs deepens Ensures that mechanisms are flexible and adaptive to allow criteria to evolve and incorporates new data and insights over time Creates a regular schedule to update and improve suitability criteria over time NWA suitability criteria will increase transparency of grid needs and planned investment to stakeholders and ensure equity in identifying opportunities for DER solutions to defer or replace traditional infrastructure investments

Upcoming webinar: NWA Suitability & System Data WHEN: Wednesday, July 27th 9:00a – 11:30a EDT WHAT: Joint Utilities of New York Stakeholder Engagement Session on NWA Suitability & System Data HOW: Register for the webinar through our website at jointutilitiesofny.org Agenda for July 27th 9:00 – 9:20                  Introductions & Stakeholder Engagement Process Overview* 9:20 – 9:50                  Overview of NWA Suitability 9:50 – 10:20                NWA Suitability Q/A* 10:20 – 10:50              Overview of System Data 10:50 – 11:20              System Data Q/A* 11:20 – 11:30              Wrap-up Please address questions to Annie Howley at annie.howley@icfi.com

DER Sourcing: Dependencies With Other REV and Related Elements

DER Sourcing: the Three P's The Supplemental DSIP will advance DER Sourcing through enhancements to the process for utility procurement of Non-Wires Alternatives (NWAs) Pricing Programs Procurement Successor to Net Metering Time-of-Use (TOU) rates New Tariffs NWAs Distribution-level Demand Response (DR) Energy Efficiency (EE) Other clean energy initiatives

Phased Evolution of DER procurement The utilities are in the early stages of procuring DERs to help meet system needs and serve as NWAs to traditional utility infrastructure solutions The utilities will use current (and any upcoming) NWA solicitations to learn lessons from the market and begin gradually enhancing and standardizing the procurement process.

Evolution of DER Sourcing Pricing and Program mechanisms are evolving based on forthcoming DER valuation and compensation principles from other REV activities that are outside of the DSIP process The DSIP will therefore focus DER Sourcing efforts on advancing NWA Procurement DER Sourcing Value of DER & Granular Pricing REV demo projects BCA Handbook Clean Energy Advisory Council Upcoming NYISO Initiatives

Scope and Objectives of Related REV Elements Value of DER Aims to clearly articulate the full value of DER to various market participants Two major applications: Valuing NWAs and other alternatives to traditional utility investment "Compensation mechanisms, which includes rate design, LMP+D payments, as the basis for the transition from NEM." Granular Pricing NYISO now calculates subzonal LMPs at 15 locations, on both Day-Ahead and Real-Time bases. These have been published to the NYISO website since late June NYISO calculates these prices by simulating additional "dummy" generators at each bus Aims to expand to 15 more locations by the end of the year Next step is for NYISO to work out a budget and timeline for developing the remaining ~500 points with its stakeholder group Source: Value of DER Proceeding Attachment A, 12/23/15, Case 15-E-0751

Scope and Objectives of Related REV Elements Upcoming NYISO initiatives: DER Roadmap Provides plan for integrating DERs at the wholesale level and evolving current Demand Response programs over the next 3-5 years Key Objectives Integrate DERs into energy markets – ability for real-time scheduling, minimizing out-of-market actions Align with REV goals M&V Align payments with performance Focus on wholesale market Development and Input Stakeholder discussions: Summer 2016 Initial draft published: Summer/Fall 2016 Publish DER Roadmap (living document): 2016 Follow Roadmap and Execute Projects: 2017-2021 Source: adapted from NYISO "DER Roadmap Kickoff" presentation, 5/24/16

Scope and Objectives of Related REV Elements Benefit-Cost Analysis Important foundation for DER valuation Scope Utility investments in distributed system platform capabilities Procurements of DER through selected processes Procurements of DER via tariffs Energy efficiency programs Cost effectiveness is determined by the Societal Cost Test (SCT), which quantifies the impacts of a DER or other measure on society as a whole.

Scope and Objectives of Related REV Elements Clean Energy Advisory Council Established by PSC order on January 21, 2016. Charter formally adopted at April 27, 2016 CEAC meeting "Primary objective is to support innovation and collaboration for an effective transition from current program offerings to post-2015 clean energy activities and on-going delivery thereafter" Focuses on EE, other DERs and NWAs Steering Team is co-chaired by DPS and NYSERDA. Working groups include key stakeholders Demonstration Projects Goal is to test the potential of new business models and revenue stream opportunities for utilities and third parties Will measure customer response to REV market pricing and programs Examples include: O&R: Online Marketplace National Grid: Buffalo Niagara Medical Campus Con Edison: Virtual Power Plant Source: CEAC Charter, 6/9/16, Case 14-M-0094

Evolution of DER Sourcing Dependencies Current Near and medium-term Long term Fully integrated DER Sourcing Transactive marketplace? LMP+D+E Market-based Solutions DER Portfolio Optimization Value of DER Granular Pricing BCA Handbook REV demo projects NYISO initiatives Pricing Pricing Programs Procurement Programs Clean Energy Standard (CES) CEAC BCA Handbook Distribution-level DR and EE NWA Procurement

DER Sourcing: Long Term Programs Operational Distribution Portfolio DER Sourcing will ultimately become fully integrated with the Distribution Planning (upstream) and Operations (downstream) areas

Q&A - Discussion

Summary and Next Steps

Thank you for joining us! Please contact info@jointutilitiesofny.org or visit our website www.jointutilitiesofny.org for more information

Appendix

Advisory Group Members Contact Organization Title NY DPS Tammy Mitchell Dept. of Public Service Chief, Electric Distribution Systems DER Provider Carlos Gonzalez SolarCity Director, Grid Engineering Solutions Pete Fuller NRG VP, Market & Regulatory Affairs Bill Acker NY-BEST Executive Director Greg Geller EnerNoc Director, Regulatory & Government Affairs Large Customer Mike Mager Couch White, LLP Partner Anthony Fiore City of NY Director, Office of Energy Small Customers & Consumer Groups Erin Hogan Dept. of State Utility Intervention Unit (UIU) Senior Project Manager at NYSERDA State/Public power Maryam Sharif NYPA Program Manager, Clean Energy Technology Environmental Miles Farmer NRDC Legal Fellow Rory Christian EDF Director, NY Clean Energy Marketers Chris Kallaher Direct Energy Director, Government & Regulatory Affairs Wholesale market Mike DeSocio NYISO Senior Manager, Market Design at NYISO NYSERDA John Saintcross Assistant Director, Smart Grid Research IPPNY Chris Wentlent Exelon VP, Energy Policy Joint Utilities Tom Mimnagh ConEdison Department Manager Damian Sciano Director, Distributed Resource Integration John Leana National Grid Director, Strategy Lori Cole AVANGRID Manager, Regulatory & Tariffs John Borchert Central Hudson Senior Director of Energy Policy and Transmission Development Facilitator Paul De Martini ICF International AG Facilitator

Engagement Process Overview Stakeholder Engagement Schedule Jan 2016 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2017 DSIP Final Guidance Initial DSIP Filings Supplemental DSIP Filing Advisory Group Mtgs Initial DSIP Stakeholder Engagement* Supplemental DSIP Engagement Groups Distribution Planning** Grid Operations Market Operations Stakeholder Technical Confs*** *Initial DSIP engagements dates based on individual JU workshop schedule during this period. **ITWG beginning in March, EG begins in May. *** Stakeholder technical conferences to engage a wider set of participants to inform technical discussions and share Engagement Group results, as needed and in consultation with the Advisory Group Source: Plan for stakeholder engagement process as reflected in May 5th DSIP filing

Supplemental DSIP Topics—Based on Final Order Engagement Groups Distribution System Planning Grid Operations Market Operations Interconnection Hosting Capacity System Data Monitoring & Control Granular Pricing Customer Data Demand Forecasting NWA Suitability Cyber Security ISO/DSP Roles, Responsibilities, Interaction DER Sourcing - Procurement Electric Vehicle Supply Equipment Topics DER Forecasting Load Flow Analysis Probabilistic Planning Interconnection Technical Working Group Currently scheduled Engagement Group topics Currently scheduled Advisory Group topics