Discussion of Market Participant Choice for Transmission Connections Stakeholder Session October 14, 2011

2 Agenda Purpose Overview - what and why? Background AESO Connection Process Eligibility Own model TFO requirements and obligations Legislative framework Next steps

3 Purpose AESO issued a discussion paper September 29, 2011 –Sets out concepts for discussion on market participant choice Purpose of today’s session –Present the concepts –Provide additional clarification –Identify next steps –Facilitate discussion –Respond to questions

4 Overview What? –The possibility of enabling a market participant who requests system access service to design, build, own and operate the transmission facilities dedicated to connecting its facilities to the AIES –Market participant would become a transmission facility owner (TFO) in addition to taking system access service Why? –Some market participant concerns with cost & schedule for connections –AESO supports practices that foster efficiencies and are in the public interest Next Steps –Requesting open discussion and written comments by October 31

Current Connection Example Incumbent TFO assigned the transmission line connection 5

Proposed Connection Example Participant owns transmission connection to the grid TFO facilities connection 6

7 Background Investigation –Obtained input from functional areas within the AESO: project managers, planning, operations, standards, legal, etc. –Sought input from market participants - TFOs, AUC, DOE & customer associations –Legal review Considered several options –Design, build, own and / or operate Initial determination –“Own” model –Transfer is an option between TFOs (AUC approval required) –ISO Rule 9.1 may need to be revised (AUC approval required)

8 Current Process Participant files application for service (Stage 0) Incumbent TFO part of process, e.g. PPS (Stage 1 & 2) Project assigned to incumbent TFO (Stage 3)

9 Current Process - Authority Section 35(1)(a) of the EUA: 35(1) On receipt of Board approval of a needs identification document the Independent System Operator, in accordance with that approval, may (a) direct the owner of a transmission facility to submit, for Board approval under the Hydro and Electric Energy Act, a transmission facility proposal to meet the need identified AESO assigns all participant connections to the incumbent TFO during Stage 3 of the Connection Process Incumbent TFO prepares and files facility application Joint NID and Facility applications filed for some projects

10 Proposed Process Participant files application for service (Stage 0) and declares intention to be a TFO (accepts obligations & responsibilities) Incumbent TFO assists with connection (Stages 1 & 2) AESO requests “proposal” from participant (Stage 3)

11 Proposed Process - Authority Section 35(1)(b) of the EUA: 35(1) On receipt of Board approval of a needs identification document the Independent System Operator, in accordance with that approval, may (b) request market participants to submit, for approval by the Independent System Operator, a proposal to meet the need identified AESO asks participant for proposal If proposal is accepted by the AESO, participant files facility application Commission still approves NID and facility applications

Connection queue administration Market participant may changes its election part way after Stage 0 Connection project is cancelled and queue position revoked Market participant must submit a new system access service request and receive a new queue position

13 Eligibility - Participants The following are categories of Market Participants that connect directly to the AIES: –Generators –Loads –Dual use –Industrial system designations (ISD) –Distribution facility owners (DFO) Which of these should be eligible to provide their own connections, and why or why not?

14 Eligibility – Connections The following are connection types that may be eligible: –T-taps –Switching stations –In / Out arrangements –Others? The following are connection types that are non-eligible: –System lines –System upgrades –Connections serving multiple customers

15 Own Model Market Participant would assume responsibility for entire transmission asset life cycle –Legal ownership of transmission facilities –Design, construct, maintain, replace, upgrade, retire asset –File a tariff –Operate asset –May be required to upgrade to allow other participants to use the asset –Transfer of transmission facilities to another party after energization can occur provided all legal, legislative and regulatory requirements are met AESO can not initiate transfer of assets

16 TFO Requirements and Obligations TFOs (new and incumbent) are responsible to comply with requirements and obligations including: –Electric Utilities Act (e.g. provide access) –Hydro Electric and Energy Act (e.g. permit and license) –Public Utilities Act –Surface Rights Act (e.g. rights of way) –Transmission Regulation –Alberta Utilities Commission rules –ISO Rules –ISO Tariff –Alberta Reliability Standards (e.g. all TFO related standards) –Transmission TFO Terms and Conditions (e.g. agreements) –TFO capital and operating cost recovery through Transmission Tariff applications to the AUC, as applicable TFOs (new and incumbent) are treated the same AESO may direct TFOs to undertake certain activities

17 Legislative Framework Market Participant Choice is supported by legislation: –Electric Utilities Act, s. 35(1)(b) the AESO may “request market participant(s) to submit, for approval by the Independent System Operator, a proposal to meet the need identified” –Hydro and Electric Energy Act references not limited to TFOs but to “persons’’ in respect of transmission facilities Legislated obligations to make transmission facilities available include: –Electric Utilities Act, s. 39(3)(e): each owner of a transmission facility must provide the AESO the use of such facilities –Transmission Regulation, s. 28(3):generators may not prohibit access to the transmission interconnection facilities

18 AESO Rules Section 24(1) of the Transmission Regulation sets out assignment to incumbent TFOs based on service areas –AESO Rule 9.1 codifies the T-Reg s. 24(1) assignments Section 24(2) of the Transmission Regulation allows for alternate arrangements –Market Participant Choice could be an alternate arrangement –AESO Rule 9.1 may need to be revised to allow for s. 24(2) arrangements Facility and NID applications could allow for compliance with section 24 of the Transmission Regulation

19 Next Steps Stakeholders provide written comments on the Discussion Paper –Comments due October 28, 2011 AESO posts stakeholder comments received –November / December 2011 AESO replies to stakeholder comments received Stakeholder information session held (if required) AESO prepares and posts a Recommendation Paper Stakeholder information session held (if required) Stakeholders provide written comments on the Recommendation Paper Implementation –May include items such as: ISO rules changes, as required Connection process changes, as required

Thank you