Market Interface Committee Recent Regulatory Activities Philip Tice October 14, 2011

2 Ancillary Services Firm Exchanges Severe Weather Inquiry Topics for this Report

3 FERC Ancillary Services NOI RM June 16, 2011 Third-Party Provision of Ancillary Services Accounting and Financial Reporting for New Electric Storage Technologies Frequency Regulation NOPR

4 FERC NOI Comment period ended August 22, 2011 Comments from 50+ entities. Support for adjustments to expand Ancillary Service markets. Broad range of approaches suggested. No issuance by FERC yet.

5 FERC Locational Exchange NOI EL Petition for Declaratory Order Locational exchanges are not transmission transactions that must be conducted under authority of an OATT, but rather are wholesale power sales transactions. NOI - RM – February 2011 –Comments due by April 25, 2011 –About 20 commenters.

6 FERC NOI Comments generally supportive. Suggest NOI be used to provide guidance for use of exchanges. No issuance by FERC yet

7 Southwest Cold Weather Event February 1-5, 2011 Widespread electricity outages and natural gas curtailments in Texas and other Western states. Approximately 4.4 million electric customers in ERCOT and WECC affected. Service curtailed to over 50,000 gas customers in New Mexico, Arizona and Texas.

8 Southwest Cold Weather Event FERC, NERC and State Commission inquiries. FERC & NERC joint inquiry and report. –AD Identify the causes of the disruptions and identify any appropriate actions for preventing their recurrence. Report issued August 16, 2011.

9 Cold Weather Event Longest sustained cold spell in 25 years. Temperatures at least 15 F below normal. Extreme in terms of temperature, wind and duration of event. Storm extreme not without precedent.

10 Cold Weather Event

11 Electric System Issues Loss or unavailability of generation. –67% attributable to weather. –12% indirectly weather related. –Winterization. Over 250 unit outages in ERCOT, WECC and SPP. 1.2 million MWh of energy unavailable. Some transmission limitations.

12 Electric System Issues Southwest - Number of Units Tripped, Derated, and Failed to Start - Feb , 2011

13 Gas System Issues Production declines. –Freeze-offs. –Icy roads. –Rolling blackouts. –Winterization. Processing plant impacted by wellhead problems and volumes. Time consuming chore of manually shedding some customers.

14 Gas System Issues

15 Gas System Issues

16 Key Findings & Recommendations Electric Entities should consider preparation for winter season as critical as summer peak season. Take steps to assure black start units can be utilized during severe weather events. Real output capability forecast should consider severe weather forecasts. –TOP R15

17 Key Findings & Recommendations Electric States should consider rules requiring winterization plans. Communication processes should be improved between reliability and market participants during severe weather events.

18 Key Findings & Recommendations Electric NERC has committed to submit a Standards Action Request to require generators to develop, maintain and implement plans for winterization of their units.

19 Key Findings & Recommendations Gas States should consider whether adoption of weatherization standards is warranted for the gas industry. States should be approached concerning exemption critical gas production and processing facilities from rolling blackouts.

20 Cold Weather Event Report Resources Materials and graphics in presentation from The Report on Outages and Curtailments During the Southwest Cold Weather Event on February 1-5, 2011.

21 Links to FERC-NERC Report A-4-presentation.pdfhttp:// A-4-presentation.pdf report.pdf

22 FERC Meeting Agenda October 2011 RM /AD Frequency Regulation Compensation in the Organized Wholesale Power Markets.

Philip Tice Deseret Power Electric Cooperative