Operating Reserves --- Again A Discussion Primer Steve Ashbaker Director, Operations Mike Wells Director, Market-Operations Interface

WESTERN ELECTRICITY COORDINATING COUNCIL Regional Reserve Standard Decisions made for the Future Today – What we Have Tomorrow – What is Proposed Available Choices for WECC

WECC Board Technical Session December 5, 2007 The BOD believes a Frequency Response Reserve (FRR) standard is needed in WECC. This standard must meet the following criteria: Meet or exceed the reserve level necessary to cover WECC/North American Reliability Corporation (NERC) Category C events (events resulting in the loss of two or more system elements). Achieve an equitable distribution of FRR in accordance with WECC and NERC principles and prevent further degradation of FRR response rates. Provide a clear, unambiguous basis for assigning reserve carrying responsibilities. Create no adverse effect of existing path ratings or Operational Transfer Capabilities. Provide for a daily assessment by Reliability Coordinators of FRR impacts on transmission path flows. The Board requests that the proposed FRR field test be undertaken as soon as possible and concluded no later than Spring 2008. A standard meeting these objectives should be developed and put in place as soon as possible after the close of the proposed FRR field test, but no later than Fall of 2009.

WECC Board Technical Session December 5, 2007 Decisions Made for the Future WECC FRR Standard Arrest Frequency to prevent loss of load due to Under Frequency Load Shed caused by common generation outages (59.5 Hz) System break-up/loss of load) due to transmission overloads caused by unbalanced governor response NERC Standard – MSSC NERC Standard – DCS

WECC Board Technical Session December 5, 2007 Today – What we Have Existing Tier 1 Standard to be Replaced with permanent standard Reserves Based on the Greater of: Most Severe Single Contingency (MSSC) 7% “Load Responsibility” served from Thermal Resources + 5% Load Responsibility served from Hydro Resources

WECC Board Technical Session December 5, 2007 Today – What we Have Amount of Contingency Reserves is based on “Load Responsibility” which includes transfer of required reserve allocation between Balancing Areas. Board approved an “Interpretation of Load Responsibility” on September 7, 2007 in conjunction with BPS-014, Identification of Contingency Reserve Responsibility in the e-Tag 6

WECC Board Technical Session December 5, 2007 Today – What we Have Additional reserve requirement for interruptible and recallable transactions Contingency Reserves must be restored within 60 minutes of the event 7

WECC Board Technical Session December 5, 2007 Tomorrow Proposed Replacement Standard for Existing Reserves Standard

WECC Board Technical Session December 5, 2007 Proposed Standard Completed one round of comments Responses posted, revisions made to the draft standard and posted for a second round of comments due January 2, 2007

WECC Board Technical Session December 5, 2007 Proposed Standard The proposed draft is the Greater of: Most Severe Single Contingency 3% of the BA Load plus 3% of the BA Generation Not Load Responsibility – no shifting of reserve requirement between BAs at this stage Additional requirements for transactions specifically dealing with reserves including reserve capacity transactions

WECC Board Technical Session December 5, 2007 Proposed Standard “Load” can only count as non-spinning reserve if the entity has declared a capacity or energy emergency Includes FERCifying Sanction Table Violation Risk Factors Addresses FERC comments on ambiguity

WECC Board Technical Session December 5, 2007 Available Choices for WECC Consider the Proposal if OC approves FERCify existing standard FERCify existing standard, update Do Nothing Request withdrawal of existing standard and fall back to RMS

WECC Board Technical Session December 5, 2007 Consider OC Recommendation If the OC approves a “permanent” standard the Board will be asked to consider it in April FRR continues through field test and standard drafting

WECC Board Technical Session December 5, 2007 FERCify Existing Standard Sometimes called “status quo” On track to meet the 1-Year Goal Business concerns not addressed, FERC But “the lights won’t go out” FRR continues through field test and standard drafting

WECC Board Technical Session December 5, 2007 FERCify Existing Standard, Update Sometimes called “status quo” plus! Possibly on track to meet 1-Year Goal Incorporate ILR, perhaps requirements for intermittent generation Business concerns not addressed, FERC But “the lights won’t go out” FRR continues through field test and standard drafting

WECC Board Technical Session December 5, 2007 Do Nothing FERC ordered changes not done – historically not a good idea Credibility of the Council Business concerns not addressed, FERC But “the lights won’t go out” FRR continues through field test and standard drafting

WECC Board Technical Session December 5, 2007 Withdraw Existing Standard, RMS Take our toys and go home! FERC ordered changes not done – historically not a good idea RMS Sanction Table instead of NERC’s Credibility of the Council Business concerns not addressed, FERC But “the lights won’t go out” FRR continues through field test and standard drafting