DRAFT Recommendation Preemption & Competition CHALLENGER COUNTEROFFER June 25, 2013 NAESB OS

2 Recommendation No Harm No Foul If capacity must be taken from a Defender to accommodate a Challenger and/or a Match, that capacity will only be taken away from Defenders once the Challenger has reached a final state. Charge Timing/Flowchart Lead to Develop Process Flows

3 Justification FERC 890 Orders do not address COUNTEROFFER to Challenger in the context of Preemption and Competition Existing NAESB Standards /1 do not address COUNTEROFFER to Challenger in the context of Preemption and Competition NAESB Motions to date are ambiguous/incomplete maybe even contradictory(?) on the process flow /2 /1 WEQ to 4.27 & WEQ & /2 Motion 20, 22, 35

4 FERC Pro-Forma OATT & 890 Orders FERC Pro-Forma OATT Provides General Guidance No specific recognition of COUNTEROFFER in the context of Preemption & ST Competition Pro forma OATT Section 13.2(iii) …Before the conditional reservation deadline, if available transfer capability is insufficient to satisfy all requests and reservations, an Eligible Customer with a reservation for shorter term service or equal duration service and lower price has the right of first refusal to match any longer term request or equal duration service with a higher price before losing its reservation priority…

5 NAESB Guidance NAESB standards are further ambiguous WEQ to 4.13 Negotiations w/out Competing Bids Describes COUNTEROFFER related processes WEQ to 4.27 Negotiations with Competing Bids Describes Preemption & Competition with no instructions on COUNTEROFFER WEQ Displacement No ROFR Silent on Counteroffer to Challenger WEQ Displacement with ROFR /2 Directs TSP to REFUSE Challenger if Defender confirms MATCHING Request Provides no guidance on alternative OASIS states to offer to Challenger other than REFUSED /1 Pro Forma OATT section 13.2(iii) /2 WEQ …if the Primary Provider accepts and the Transmission Customer confirms the MATCHING request, the Primary Provider shall set the competing request to REFUSED…

6 Process Flow from NAESB OS Motions to date Ambiguous ???? No Motion to Bind Defender to Match if Challenger Declines COUNTEROFFER Motion 20 – If capacity must be taken from Defenders in order to accommodate Challenger, that capacity will only be taken from Defenders once Challenger has reached a final state. Motion 22 – All Matching requests must be submitted pre- confirmed. Motion 35 - When final action is to be taken on the Challenger, and one or more defenders with ROFR have successfully exercised their ROFR, the challenger will be extended a counteroffer for service based on the remaining capacity based on the remaining available capacity, including the benefit from defenders that do not have or have not exercised their ROFR, on the transmission system according to the TPs business practices for granting of partial service based on the challenger's service requests.

7 Conclusion 1.FERC/Existing NAESB Standards are ambiguous or do not even address… 2.Motions to date are ambiguous on the process flow (e.g. no motion to bind defender) 3.NAESB OS free to develop process flows that take a No Harm No Foul approach 4.Charge Timing/Flowchart Lead (Matt Schingle) to develop process flows that can be incorporated into standards