WSPP Inc. wspp.org 20 years of enabling competitive power markets … Federal Energy Regulatory Commission December 18, 2006

WSPP 20 years of enabling competitive power markets … 2 Mission Statement To provide a catalyst for an efficient and robust wholesale electric power market that allows WSPP members to effectively manage their power deliverability and price risk

WSPP 20 years of enabling competitive power markets … 3 An organization made up members from all walks of the power industry An organization with a diverse membership –Buyers and sellers –Private, public and governmental entities –Financial institutions and aggregators –Regional, national and international –Wholesale and retail Who are we? The most widely used wholesale electric power sales contract in the country … Just to name a few …

WSPP 20 years of enabling competitive power markets … 4 What are we? Established by FERC in 1987 as a multi-state bulk power marketing experiment. The experiment was meant to test whether broader pricing flexibility for coordination and transmission services would promote increased efficiency, competition, and closer coordination of economy sales Accepted by FERC on a non-experimental basis in 1991 Governed by a board of directors of all members comprising the Executive Committee (EC) A 20 year old organization that has facilitated market evolution … Executive Committee (Board of Directors) Administrative Committee Operating Agent Legal Counsel Operating Committee Contracting Sub-Committee (OC) Audit Committee

WSPP 20 years of enabling competitive power markets … 5 Membership composition Over 300 members from diverse market sectors …

WSPP 20 years of enabling competitive power markets … 6 Membership changes with the market Over 300 members and growing … 16 New Members in 2006 (so far…) Mirant Energy Trading, LLC Clark County Public Utilities (Clark County PUD #1) Cinergy Marketing & Trading, LLP Old Lane Commodities, LP Alcoa Power Marketing, Inc. Safeway, Inc. Midwest Energy, Inc. Credit Suisse Energy, LLC City of Alma, KS City of Iola, KS City of Scranton, KS City of Wathena, KS Klickitat PUD (Klickitat County PUD #1) Central Arizona Water Conservation District City of Moreno Valley, CA Power and Water Resources

WSPP 20 years of enabling competitive power markets … 7 Geographical reach changes with membership We cut across almost all NERC Regions … CA > 45 WA > 15 OR > 10 DC = 2 14 CT = 6 DE = MA = NJ = 1 9 > 35 9 MD=2 9

WSPP 20 years of enabling competitive power markets … 8 WSPP promotes open membership Membership requirements create ease of market entry … All market participants are eligible Designate a member to the Executive and Operating committees Be a signatory to the WSPP Power Sales Agreement Obtain FERC approval if jurisdictional Maintain or contract for 24 hour scheduling coverage Minimal membership fee The organization conducts at least three meetings annually of all members and more frequently to address contractual matters One member equals one vote regardless of size A 90% approval vote of the Executive Committee is required to amend the contract Organizational requirements are minimal …

WSPP 20 years of enabling competitive power markets … 9 WSPP adds value … A proven industry standard …. To the member: Access to over 300 contractual parties and growing Reduced transactional costs and improved risk management Standardized and widely accepted throughout the western markets Used in all active mediums – brokers, bilateral, electronic exchanges Not entity or geographically limited Body of case law supporting the contract Comfort – developed by members for members

WSPP 20 years of enabling competitive power markets … 10 WSPP adds value … A proven industry standard …. To the market: Facilitates market liquidity Price discovery –Multiple buyers and sellers –Daily published indices Contributes to market efficiencies Increases system reliability through greater availability of generation Reduces end-user costs Can be used by centralized market participants to transact in the forward markets which enables greater risk management

WSPP 20 years of enabling competitive power markets … 11 Elements of the agreement The product descriptions and contract provisions have already been agreed to... Major components of the agreement: Products –Schedule A – Economy Energy Service –Schedule B – Unit Commitment Service –Schedule C – Firm Sales or Exchange Service Pricing –Market based –Cost based Credit worthiness and assurances Forced majeure Non performance/damages Dispute resolution process Default/termination

WSPP 20 years of enabling competitive power markets … 12 Agreement usage Transacting with simplicity … Executing a transaction is streamlined down to agreement on: Number of megawatts Point of delivery Delivery hours (on-peak or off-peak) Delivery timeframe (e.g. “July – September 2007”) Schedule (e.g. “WSPP Schedule C”) Price Used to transact in various delivery periods: Real-time Pre-schedule Balance of month Prompt month Term

WSPP 20 years of enabling competitive power markets … 13 Strategic efforts Meeting the needs of its members … Improving communications with members: Website redevelopment Positioning the organization for broader membership: Changing the organizational name from: Western System Power Pool, Inc., to WSPP Inc. to reflect national market presence and increase the appeal to eastern markets Holding committee meetings in non-western locations Maintaining the usability of the contract for its members: Continue to evolve the contract to keep pace with changes in the energy marketplace

WSPP 20 years of enabling competitive power markets … 14 WSPP Power Sales Agreement Price Discovery Market Liquidity Risk Management Standard Terms WSPP looking forward to the next 20 years of enabling wholesale power markets …

WSPP 20 years of enabling competitive power markets … 15 Attendees Jeff Atkinson (incoming Chairman) Public Utility District of Grant County (509) William Gaines (Vice Chairman) Superintendent / COO Tacoma Power (253) Duane Farmer (current Chairman) Director of Fuels and Wholesale Market Policy Public Service Company of New Mexico (505) Jim Lobdell (Secretary/Treasurer) VP Power Operations & Resource Strategy Portland General Electric (503) Bobby Campo (Operating Committee Chairman) Operating Agent WSPP (707) Arnie Podgorsky WSPP Counsel Wright & Talisman, P.C. (202)