BCTC Customer Consultation on Loss Compensation Service January 15, 2007

Page 2 Agenda 9:00amWelcome & IntroductionJanet Fraser Background Process Consultation Objectives Consultation Protocol 9:30am Evaluation of Interim LC ServiceRaj Hundal Proposal for Implementation of Mandatory Self-Supply of Losses 10:30amBREAK 10:45amFacilitated DiscussionJanet Fraser, Peter Chow, Raj Hundal 11:45amWrap UpJanet Fraser

January 15, 2007Page 3 Background BCUC in its June 20, 2005 decision on BCTC’s OATT Application, directed BCTC to implement a Loss Compensation (LC) Service that requires mandatory self-supplying of losses On February 10, 2006 BCTC applied to BCUC for an interim LC Service to be effective for the period March 1, 2006 to March 1, 2007 to allow time for further consultation with customers aimed at developing solutions to implement mandatory self-supply of losses BCUC approved (Order G-18-06) the proposed Interim Tariff and directed BCTC to report at the conclusion of its customer consultation with  discussion on the identified solutions and the ultimate need to undertake the TSS upgrades, and  comment on the utilization and effectiveness of the temporary Loss Compensation Service in light of the proposed solutions for mandatory self-supply of losses

January 15, 2007Page 4 Process Implemented Interim LC Tariff and facilitated customer selection of losses compensation option – March 1, 2006 Solicited and received customer’s written comments on LC Service – October/November 2006 Developed proposed implementation solution for mandatory self supply of services – Completed December 2006 Conduct Consultation Session – January 15, 2007  Presentation and transcripts will be posted Prepare application – January/February 2007 File application with BCUC – February 2007

January 15, 2007Page 5 Consultation Session Objectives Provide an overview of the performance of the Interim LC Service Provide information on BCTC’s proposed solution for implementing mandatory self-supply of losses, including estimated cost and time required for implementation, and operational impact Solicit customer input on:  performance of the Interim LC Service  BCTC’s proposed solution for implementing self-supply of losses  potential alternatives or improvements

January 15, 2007Page 6 Consultation Session Protocol Session will be recorded and be used as input for:  developing or revising the LC Service  preparing an application to the BCUC When you speak, introduce yourself and the company you represent

January 15, 2007Page 7 Evaluation of Interim LC Service Service Attributes  Customer may elect either to self-supply losses or purchase losses from BCTC  Customer may not change its election  Customer selecting self-supply: −must submit a loss schedule with the energy schedule associated with its transmission reservation −If a customer fails to submit a valid loss schedule with the energy schedule, the customer will be charged for losses in accordance to the Tariff −If a customer fails to submit a valid loss schedule with the energy schedule 3 times, the customer will not be permitted to self supply losses Pricing  The price for purchasing losses from BCTC is determined by the energy price at Mid-C plus BPA transmission charges.

January 15, 2007Page 8 Evaluation of Interim LC Service Utilization  2 customers elected to self-supply losses  22 customers elected to purchase losses from BCTC  On average approximately 3300 MWh per month (March/06 to November/06) Performance  All customers have made their election on time  There has been no incidence of customers selecting to self- supply losses that fail to submit valid loss schedules Customer Comments  All comments received to date have been generally supportive

January 15, 2007Page 9 Proposal for Implementation of Mandatory Self-Supply of Losses Business Rules  The following would govern concurrent loss scheduling: −The loss Interchange Transaction eTag must have sufficient MW coverage in each hour and must cover the entire duration of the Parent Interchange Transaction eTag −No partial losses are allowed −Customers must self supply or have their losses supplied by a third party by submitting a valid loss eTag with sufficient quantity and duration prior to the energy delivery hour −Any Parent eTag that does not have a valid associated loss schedule, will not be IMPLEMENTED

January 15, 2007Page 10 Proposal for Implementation of Mandatory Self-Supply of Losses Industry Standards – WECC/NERC  BCTC has reviewed WECC (Western Electricity Coordinating Council) business practices, and the recently approved NERC Reliability Standards for the Bulk Electric Systems of North America and its associated Interchange Standards (INT-001 to INT -010) and their relation to the concurrent supply of losses.  Currently, interchange transaction scheduling is administered by Reliability Organizations, Balancing Authorities, Transmission Operators in the region via the use of these business practices and policies.  The approved WECC Business Practices for interchange scheduling (INT-BPS-001 to 011) were used to establish rules in relation to loss service.

January 15, 2007Page 11 Proposal for Implementation of Mandatory Self-Supply of Losses Key Assumptions  There can be only one loss (Child) Interchange Transaction eTag for every Interchange Transaction (Parent) eTag. Losses cannot be supplied via blanket or superblanket.  Supply of losses will be delivered concurrently through the scheduling of eTags, and thus all hours that have scheduled flow shall also have loss supply.  Adherence to WECC Business Practice INT-BPS-001 WR.8. Physical Losses must be tagged on a separate eTag and not combined with the Parent.  In this option the possibility of combining financial settlement with mandatory self supply of losses is not considered.  All customers must submit loss eTags in adherence with WECC Business Practices and NERC Interchange Standards.

January 15, 2007Page 12 Proposal for Implementation of Mandatory Self-Supply of Losses Business Process (Real-time)  Customer submits Parent eTag prior to 20 minutes to schedule start.  BCTC evaluates Parent eTag and if valid sets the eTag state to PENDING/STUDY and waits for the associated loss eTag to be submitted by customer within 1 minute.  Customer must submit a loss eTag for the Parent eTag, before the energy scheduling deadline of 20 minutes prior, and within 1 minute of the Parent eTag submission. Both conditions must hold true.  BCTC evaluates loss eTag using the round and carry forward method (current practice), and if the loss sufficiently covers the Parent, BCTC approves the loss and Parent eTag by setting the both eTag states to APPROVED. If loss eTag does not cover the Parent, BCTC sets the eTag state to DENIED for the loss eTag. The Parent schedule remains in the PENDING/STUDY state. If the loss eTag is not resubmitted within 1 minute, the Parent eTag is DENIED.  If loss eTag is not received within 1 minute of Parent schedule, Parent eTag is DENIED.  At 20 minutes prior to the schedule hour, BCTC executes a check on all energy schedules to determine if all Parent eTags have sufficient loss coverage.  If any Parent eTag does not have an associated loss eTag, BCTC will CURTAIL the Parent eTag even after IMPLEMENTED.  If a customer makes an adjustment, extension, cancellation, withdrawal, or correction, then the customer must also submit the appropriate profile change to the loss schedule. In certain cases BCTC will not process the Parent eTag profile change until the loss profile change is also received by BCTC. If the associated change is not received within 1 minute, the Parent eTag profile change will be moved from the PENDING state to the DENIED state.  The loss eTag must sufficiently cover the required losses of the Parent eTag for each Hour End (HE) and also for the total duration of the entire energy schedule. Loss eTags must sufficiently cover both the energy and transmission allocation profiles of the Parent.

January 15, 2007Page 13 Proposal for Implementation of Mandatory Self-Supply of Losses Curtailments  Imposed due to a reliability restriction on an existing eTag and are approved by the Source Balancing Authority and Sink Balancing Authority.  The following describes processing logic that relates to the curtailment of Parent and loss eTags: −If the Parent eTag is curtailed, the loss eTag will also be curtailed down to the required loss percentage to sufficiently cover the Parent. −If the loss eTag is curtailed, then a check is made to ensure that it still provides sufficient loss coverage for the Parent eTag. –If the Child is curtailed and does not meet the loss coverage for the Parent, the Parent will be proportionally curtailed in order to ensure adequate coverage is maintained.

January 15, 2007Page 14 Proposal for Implementation of Mandatory Self-Supply of Losses Adjustments  Initiated by a customer, and are requests to change a tag’s profile higher or lower than originally requested. The customer can adjust the Transmission Allocation Profile or the Energy Profile, as specified on the eTag.  An extension is treated the same as an adjustment of the tag profile, with the end date being extended for the tag.  The following describes processing logic for Parent and loss eTags: −If a customer makes an adjustment to the Parent eTag, then an appropriate profile change to the loss eTag is required. If the associated change to the loss eTag is not received within 1 minute, the adjustment of the Parent eTag will be moved from the PENDING state to the DENIED state. −If a customer makes an adjustment to the loss eTag the loss eTag must still proportionally cover the losses required for the Parent eTag. If the coverage is insufficient then the adjustment of the loss eTag will be DENIED. −Customers cannot make adjustments to Parent eTags that do not have sufficient loss coverage and will be DENIED. −In the event where customers initiate extensions to Parent eTags to set the stop time later than what was originally requested, customers must also extend loss eTags within 1 minute, in order to provide sufficient loss coverage for the extended Parent profile, otherwise the extension will be DENIED.

January 15, 2007Page 15 Proposal for Implementation of Mandatory Self-Supply of Losses Cancellations and Terminations  Processing logic involving Parent and loss eTags: −Cancellations must occur prior to the scheduling deadline. −If a Parent eTag is cancelled, the associated loss eTag will also be cancelled. −If a loss eTag is cancelled, the Parent eTag will be moved to the PENDING state. The customer must resubmit an appropriate loss eTag that sufficiently covers the Parent within 1 minute, otherwise the Parent eTag will be DENIED.

January 15, 2007Page 16 Proposal for Implementation of Mandatory Self-Supply of Losses Corrections  During the assessment time of an eTag, the customer may elect to submit a tag correction to an existing eTag.  The following rules apply: −If a correction is made to either the Path, POR/POD, OASIS Reference, or the Misc. Info field on the Load line of the eTag, the eTag with the corrected values will be evaluated.

January 15, 2007Page 17 Proposal for Implementation of Mandatory Self-Supply of Losses Potential Impacts  Significant increase in energy schedules (eTag) submitted to BCTC.  Performance of integrated IT systems at BCTC and OATI must be exceptional to ensure processing of all tags within required timelines (eg. 1 minute) while avoiding volume bottlenecks.  During unplanned system outages, processing high volumes of eTags manually, may be difficult for BCTC staff to complete within the timeframe.

January 15, 2007Page 18 Proposal for Implementation of Mandatory Self-Supply of Losses Implementation Estimates  Cost: $1.5 – 2.0 Million  Completion Time: 6 – 7 months

January 15, 2007Page 19 Discussion – Other Options Two Potential Options  Customer elects to purchase or self supply losses  Mandatory self supplying losses Are there other alternatives that are conceptually different from the above?

January 15, 2007Page 20 Discussion – Proposal for Implementation of Mandatory Self-Supply of Losses If BCTC were to implement the proposal for implementation of self supplying losses described earlier  Do you anticipate −any training requirements? −any modifications to your trading practice? −any modifications to your trading (IT) system?  Will the implementation affect your utilization (increase or decrease) of BCTC’s system? Why?

January 15, 2007Page 21 Discussion – Interim LC Service If BCTC were to adopt the interim LC Service as a permanent service (to March 1, 2009), what changes would be beneficial?  Election period  3-Strike Rule −Should a loss schedule curtailed by BCTC be counted as an invalid loss schedule ?  Pricing  Others

January 15, 2007Page 22 Discussion – Other Proposals Description of new proposals

January 15, 2007Page 23 Wrap-up