Presented to the WECC MIC June 15, 2007 ORSTF Update Presented to the WECC MIC June 15, 2007

Board Action The Board asked the RPIC for additional information. The Board talked about issues related to making the ORSTF proposal a NERC Section 215 Regional Standard. Not the correct format, sanctions, etc

Board Motion The Operating Reserve Standards Task Force (ORSTF) proposal shall be sent to the Reliability Policy Issues Committee (RPIC) to complete the RPIC investigation. The Board requests RPIC to provide a recommendation at the July 2007 Board meeting with respect to the ORSTF standard. In its investigation RPIC will address the following issues: Definition of Load Responsibility and Load Amount of reserves carried Integration of ORSTF, FRR and the Contingency Reserve IdentificationTask Force (CRITF) Level, Quality, Deliverability and Allocation of reserves required Evaluate correlation between level (most severe single contingency, 5% and 5-7%) and justification for the reduction in required reserves

RPIC Document WECC should focus on the interpretation of reliability criteria. It should not define energy market products. Energy product definitions are determined by the entities that are parties to the transaction. It is up to each Purchasing-Selling Entity to determine their level of acceptable deliverability risk and include that desired level of risk in its purchase agreements.

RPIC Document (cont.) The minimum Contingency Reserve requirement is equivalent to the individual BA’s or Reserve Sharing Group’s Most Severe Single Contingency (MSSC). (NERC BAL-002-0 R3.1) The MSSC is a contingency which if lost, represents the interruption of the largest single source of energy supply to a balancing Authority (BA). The MSSC may be a generator, or a transmission path (that causes an instantaneous and unexpected change in ACE (TBD-review NERC interpretation of contingency) delivering energy to the importing BA.

RPIC Document (cont.) The WECC’s 5% Hydro/7% Thermal of Load Responsibility Contingency Reserve requirement is more stringent to NERC’s MSSC requirement. The greater of the 5/7% or MSSC shall be used.

RPIC Document (cont.) The current WECC Contingency Reserve requirement represents a holistic approach to carrying Contingency Reserves for the entire Western Interconnection. The Load Responsibility calculation is used to “define” Contingency Reserve responsibility amongst BAs. Energy with associated Contingency Reserve can be exported and imported between Balancing Authority Areas. However, if Contingency Reserve is associated with the energy transaction, the responsibility for the Contingency Reserve obligation will remain with the Source BA. In other words, the BA exporting energy that has associated Contingency Reserve would increase its “Load Responsibility” by the amount of the energy being exported. The BA importing the energy may reduce its “Load Responsibility” by the same amount.

RPIC Document (cont.) No WECC Minimum Operating Reliability Criteria or NERC Standard requires that energy imports be delivered over FERC defined “Firm” transmission. The only exception is the delivery of operating reserve energy between members of a Reserve Sharing Group. (MORC Section I.A.6.)

RPIC Document (cont.) Contingency Reserve attributes associated with the traded energy must be identified and tracked to assure compliance to Reliability Standards. This will be accomplished by the implementation of WECC INT-BPS-014-01. An Imported Interchange Schedule must have associated Contingency Reserve based on the information in the e-Tag in order for it to decrement the Sink BA’s Load Responsibility.

RPIC Document (cont.) All energy imports into a BA are in effect “contingent” based on the availability of the transmission path used to deliver the energy. The importing BA must be prepared to compensate for the loss of the imported energy resource just as they must be prepared to compensate for the loss of energy from a generating unit internal to the Balancing Authority. This concept eliminates the need for a “Unit Contingent” product definition for reliability purposes.

RPIC Document (cont.) WECC MORC requires that BAs must carry 100% Reserves for interchange schedules that can be interrupted within 10 minutes or less and “on demand” obligations that must be provided in 10 minutes or less. Transactions of greater time duration are not mentioned.

RPIC Definition of Load Responsibility Interpretation of Load Responsibility Assumptions: All energy received for consumption by load is indicated by a minus (-). Load Responsibility is the algebraic sum of a Balancing Authority Area’s: Minus (-) Net Generation (-) Minus (-) Net Actual Interchange (- or +) Plus (+) Interchange Schedule exports (+) for which the BA retains Contingency Reserve responsibility Plus (+) Interchange Schedule imports (-) for which another BA has Contingency Reserve responsibility Minus (-) loads (+) that can be interrupted in 10 minutes or less by contractual agreement.

PROPOSED LOAD RESPONSIBILITY INTERPRETATION Current Load Responsibility definition: A Control Area’s firm load demand plus firm sales minus those firm purchases for which reserve capacity is provided by the supplier. Proposed Load Responsibility definition: The sum of the Net Generation within the metered boundaries of the Balancing Authority Area, less the Net Actual Interchange, less interruptible loads, plus exports for which the BA retains contingency reserve responsibility minus imports for which another BA has contingency reserve responsibility. Net Generation Minus Net Actual Interchange (- or +) Minus loads that can be interrupted in 10 minutes or less by contractual agreement Plus Interchange Schedule exports for which the BA has contingency Reserve responsibility Minus Interchange Schedule imports for which another BA has contingency Reserve responsibility 13

Concerns with Definition It may clarify the definition of Load Responsibility It does not clarify issues that have been raised related to reserve requirements. Affirmative statements must be made related to the following issues: Firm without reserves and amount of CR needed by the Buyer Unit Contingent = firm without reserves Type of Transmission Service is not an issue Reliability interpretation of Interruptible and On-Demand

Other Recent Issues FERC Order 890 CAISO Order in Docket ER06-615 Rehearing is still up in the air. Statements related to firm and economy transactions Designation of Network Resources CAISO Order in Docket ER06-615

FERC Order 890 1539. The Commission generally adopts the NOPR proposal to continue to require network customers and the transmission provider’s merchant function to undesignate network resources or portions thereof in order to make certain firm, third-party sales from those resources. In particular, network customers and the transmission provider’s merchant function may only enter into a third-party power sale from a designated network resource if the third-party power purchase agreement allows the seller to interrupt power sales to the third party in order to serve the designated network load. Such interruption must be permitted without penalty, to avoid imposing financial incentives that compete with the network resource’s obligation to serve its network load.

ER06-615-001 Order To the extent that Imperial argues that exports of energy provided by RA capacity are firm, we disagree. Such exports are non-firm opportunity sales that should be subject to curtailment to prevent or alleviate a system emergency, as is consistent with NERC and WECC guidelines.4

Conclusion The RPIC clarification does little to address the real issue, determination of minimum reserve requirements.