Reliable Power Reliable Markets Reliable People Losses and Ancillary Services: Volume Analysis 2007 Budget Review Process August 28, 2007 Operations Planning

GTA, Losses and Ancillary Services Presentation and Agenda: Overview Forecast the volumes and costs of losses in 2008 Forecast the volumes ancillary services in 2008 Year-to-date Actual vs. Forecast Comparison Methodology of forecasting Losses and AS – evolving process Summary Discussion

3 Overview – 2008 Business Review Process Costs for Losses and Ancillary Services (AS) are based on a volume forecast using: Latest 2008 Alberta Internal Load forecast (includes behind the fence loads (BTF) and new DTS contracts) 2008 grid facility profile (existing, new, decommissioned) Latest TMR forecast as per OPP’s Updated generation stacking order based on latest 12 months actual dispatch behavior of generators, and Import/Export A north/south model includes export ATC based on SOK transfer limit

Forecast of Losses – Cost and Volume Analysis Hourly forecasted loss volumes calculated based on: –Historical actual loss volumes from the AESO settlement system –A forecasting model using the historical data The losses volumes are re-calculated three additional times per year (to fulfill the calibration factor process) Annual forecasted loss volume can be computed by summing hourly forecasted loss volumes Hourly forecasted loss cost is: Σ (forecasted loss volume X forecasted pool price) hourly Estimated cost for 2008 = $251.4 M, based on TWH –2007 Forecast: $ TWH

5 Based on the 2007 GTA losses forecast submission Actual data is settled as: Initial, Interim, and Final 2007 YTD – Loss Comparison

YTD – Loss Comparison (…2) 2008 F/C 2007 (F/C and Updated F/C) Variance Under (Over) 2006 Actual 2006 Approved F/C Variance Under (Over) Total Losses Costs ($M) /208.5 (Q3 CF) Total Volumes (GWh) 2,910 2,897/2,840 (Q3 CF) 702,8433,180(337) Average Hourly Volume (MWh) / The overall summary is estimated below (losses update in June 2007, price forecast from August ):

Forecast of AS (Operating Reserves and TMR) – Volume Analysis AESO carries operating reserves to ensure reliability during loss of generation. Requirements set by WECC and NWPP Operating reserves include regulating, spinning and supplemental reserve Described in OPP-401 and OPP-402, AESO procures each type of operating reserve in two portfolios: Active (normal), Standby (used when Active portfolio is insufficient due to forecast accuracy issues/forced outages) Not included in the forecast: –Frequency Responsive Reserves –Wind Variability

Forecast of AS – Volume Analysis (…2) Volume of reserves procured based on load forecast, with no consideration given to resource mix Transmission Must Run (TMR) based on hourly load forecast (Rainbow and northwest) and OPP 501, 510 (Calgary Operation) AS cost analysis by Commercial Services

9 Ancillary Services: Forecast vs. Historical ASType 2008 Forecast (MW) 2007 January – July (Actual) (MW) 2006 (Actual) (MW) 2005 (Actual) (MW) RegActive SRActive SUPActive RegStandby SRStandby SUPStandby RegActivation SRActivation SUPActivation

10 Methodology of Forecasting Losses and Ancillary Services The AESO reviews it’s tools and data sources continuously and makes improvements to achieve better forecasts and more efficient use of time –More data for historical analysis is utilized –Improved database techniques In 2007, the Losses and Ancillary Service volume forecast appears on track to be within 1-2% of actual levels The AESO will use the same process in the 2008 GTA submission – better data and tools will be used where warranted

11 Summary: Losses The 2007 forecast and 2007 actual loss results (YTD) are similar The loss volumes from 2007 to 2008 are similar (2.897 TWH vs TWH). The result makes sense because there are no major system changes expected The major cause of the change from ~$196M to ~$251M is the pool price (beginning of year forecast average moves from ~$66 in 2007 to ~$84/MWH in 2008)

12 Summary: Ancillary Services The forecast for 2008 is similar to actual levels from the past several years The slightly higher values in the active market in 2007 is likely the result of a mid-year view. FRR has not yet been determined. Regulation Reserve implementation for wind has not yet been decided. AS will be modified as these items are addressed and implemented