Day Ahead Market Working Group March 31, 2003

Agenda Review minutes - March 24 Coral Proposal - Working Group Discussion Loads/LDCs and DAM

DAM Design Requirements Design requirements - at a high level what we want the DAM to look like Lead to development of detailed design and how the DAM will be built DAM from the perspective of different classes of MPs ● Financial Market Participants - March 24 ● Loads/LDCs - March 31 ● Generators - April 7 ● Importers/Exporters - April 14

Buy/Sell in DAM - Close out position in RT DA MCP and MCQ set based on DA generation offers and load bid Two Settlement System equation: Q DA (P DA -P RT ) + Q RT P RT can also be expressed as Q DA P DA + P RT (Q RT- Q DA ) If Q DA = Q RT then P RT is not relevant Loads/LDC’s

Non-Dispatchable Load with no Physical Bilateral Contract Bids DAM $100 and $75 DA MCP = $90 Q DA scheduled P DA $90 = Profit of $10/MW If 100MW consumed then load pays: Q DA P DA + P RT (Q RT- Q DA ) = 100MW x $90 + P RT (100MW-100MW) = $ 9,000 Note: when Q RT = Q DA, P RT is not relevant

Non-Dispatchable Load with no Physical Bilateral Contract If 175MW consumed and P RT is $120 then load pays: 100MW x $90 + $120(175MW-100MW) = $18,000 If 175MW consumed and P RT is $60 then load pays: 100MW x $90 + $60(175MW-100MW) = $13,500 If 80MW consumed and P RT is $120 then load pays: 100MW x $90 + $120(80MW- 100MW)) = $6,600 If 0MW consumed and P RT is $120 then load pays: 100MW x $90 + $120(0MW- 100MW)) = -$3,000 that is, the load receives +$3000

Dispatchable Load Submits bids into DAM and RTM (for this example, they submit the same bid curve into both markets) Dispatched according to bid curve in RT market Q RT can be responsive to and consistent with P RT drivers Examples: Bids DAM $40 and additional 50 $30; say DA MCP = $35 and Q DA = 100 MW Say RT MCP = $38, Q RT = 100 MW 100MW x $35 + $38(100MW - 100MW) = pays $3500 Say RT MCP = $50, Q RT = 100 MW (dispatched off) 100MW x $35 + $50(0MW - 100MW) = receives $1500 Say RT MCP = $20, Q RT = 150 MW 100MW x $35 + $20(150MW - 100MW) = pays $4500

Non-dispatchable load with a Physical Bilateral Contract Load has 2 production lines - each consumes 100 MW Load has PBC with another participant to buy $100 Typically operates production line 1: Can stop production line 1 and consume 0 MW Can start production line 2 and consume 200 MW Submits to DAM: Offer to sell $200 Bid to buy $50

Physical Bilateral Contracts Example 1 DA MCP = $250; load is accepted to sell 100MW and chooses to consume 0 MW based upon the DAM result Load pays: Q DA P DA Q RT Q DA -100MW x $250 + P RT ((0MW-100MW PBC ) - (-100MW)) = -$25,000 Load actually receives $25,000 from IMO Load pays $10,000 to PBC counter-party Load receives net $15,000 for not running production line 1

Physical Bilateral Contracts Example 2 Say, DA MCP = $40; Q DA = 100 MW based upon DAM bid In RT load consumes 200MW to run production line 2 based upon PBC and DAM result Q DA P DA Q RT Q DA (100MW)($40) + P RT ((200MW-100MW PBC ) - (100MW)) = $4,000 Load pays IMO $4,000 Load pays PBC $10,000 to PBC counter-party Load pays net $14,000 to run production lines 1& 2 (200 MW)

Discussion Points LDCs Bill 210 Multi-part - Bid/Offer Structure Energy, OR, Intertie trading Ramp Rate impact Positions closed out next day - 5 minute/HOEP Prudentials - Exposure due to P RT not known until next day Settlement - Financial vs. Physical schedule Other Markets - i.e., NYISO

Next Meetings Generators - April 7 Importers/Exporters - April 14