NWPP Members’ Market Assessment and Coordination Initiative WECC Market Interface Committee October 14, 2015

Agenda Introductions Recent News Introduction to the MC Initiative MC Portfolio and Elements Next Steps 2

Agenda Introductions Recent News Introduction to the MC Initiative MC Portfolio and Elements Next Steps 3

Recent News PGE and Idaho Power announced intent to pursue CAISO EIM sub-hourly market solution BANC has announced its intent to withdraw from the NWPP MC market initiative NWPP MC participants, including PGE, expressed strong support for continuing reliability and infrastructure- focused programs that have come from this effort The NWPP MC continues to evaluate market alternatives that have been part of the initiative to inform decision- making later this year 4

Petition for Declaratory Order (PDO) was filed Friday, Sept. 4 th FERC public comment period closed Oct. 5 th Link to PDO : Order expected by end of year Petition for Declaratory Order 5

Agenda Introductions Recent News Introduction to the MC Initiative MC Portfolio and Elements Next Steps 6

Members of the Northwest Power Pool Market Assessment and Coordination Committee (NWPP MC) believe in the value of collaborating to deliver near- and long-term benefits to their customers by enhancing the reliability and efficiency of the region’s power system and maximizing the benefits of the region’s resources while preserving local decision making now and in the future. Current NWPP MC Membership NWPP MC Initiative 7 Avista Corporation Balancing Authority of Northern California Bonneville Power Administration BC Hydro, Powerex Chelan County PUD Clark County PUD (Phase 3 Tools) Eugene Water & Electric Board Grant County PUD (Phase 3 Tools) Idaho Power Company NaturEner Wind Holdings NorthWestern Energy PacifiCorp (Phase 3 Tools) Portland General Electric Puget Sound Energy Seattle City Light Snohomish County PUD Tacoma Power Turlock Irrigation District Western Area Power Administration, Upper Great Plains

Address operational and commercial challenges affecting regional power system: – Manage transmission constraints, impacts of variable energy resources – Access regional balancing diversity Respect unique attributes of NWPP MC footprint, including: – Extensive coordinated hydro-thermal systems – Multiple transmission providers, overlapping systems – Tightly correlated variable energy resources – Significant presence of non-jurisdictional entities NWPP MC Initiative Objectives 8

Agenda Introductions Recent News Introduction to the MC Initiative MC Portfolio and Elements Next Steps 9

Key elements include market-focused (automated 15-minute energy market) and operations-focused (centralized regulation reserve sharing group) initiatives: – Centrally Cleared Energy Dispatch (CCED) -- automated 15-minute market. Market operator centrally clears voluntary bids and offers from participants to inform regional energy dispatch; facilitated under existing regional transmission framework – Regulation Reserve Sharing Group (RRSG) -- centralized program; enables MC participants to manage to single Area Control Error for NWPP footprint and share in natural offsetting diversity of loads and resources NWPP MC Portfolio Solution 10

Key elements supported by: – Common resource sufficiency standard for program participants – Transmission service and operational coordination enhancements – Advanced data sharing tools implementation Intended outcome: – Reliable, efficient within-hour operating environment, with potential to enhance in future to bring additional regional benefits Framework provides wide range of benefits while: – Preserving local decision making – Protecting integrity of region's power system, which has delivered low- cost, clean, reliable power to customers for decades NWPP MC Portfolio Solution, Continued 11

MC Portfolio Implementation Plan 12 AprMayJunJulAugSepOctNovDecJanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMayJunJulAugSepOct CCED Refresh Price & Schedule Contracting w/Vendors Design specifications SOW Development and Testing Market Trials CCED Fully Implemented Resource Sufficiency 2015 Milestones2016 Milestones 2017 Milestones PDO Filed with FERC EC gives Approval to Proceed FERC declaratory order on key CCED elements CCED tariff filed at FERC RS & RRSG Pilot Projects RRSG fully implemented RS fully implemented CCED fully implemented Reserve Regulation Sharing Program Fully Implemented Development and Testing Program Testing Contracting w/ Vendors Design Specifications SOW Data Analysis Pilot FERC Approval Petition for Declaratory Order Develop Tariff FilingTariff Filed at FERC FERC Approves CCED Tariff FERC Grants PDO Regulation Reserve Sharing Group Process build RS process testing Resource Sufficiency Fully Implemented Infrastructure Build Development of RMD Hardware and Software Integration Testing SOW Contracting w/Vendors Market Testing Contracting w/ Vendors Design Processes Refine Procedures and Market Rules Finalize Req. Training Market Administration EC Approval

MC Portfolio Estimated Annual Costs 13 Years 1 & 2 $25 to 28 million (total over 2 years) $25 to 28 million (total over 2 years) Includes all anticipated start-up and implementation costs with staffing, consulting expenses, and IT costs as major drivers of the cost range On-going $10 to 11 million (per year) $10 to 11 million (per year) Staffing and consulting expenses associated with the scope of transmission and market expansion will be substantive long-term drivers of the cost range

Oct `17Oct `18Oct `19Oct `20Future… Illustrative Evolution Path CCED Go-Live – Foundational 1.Central clearing of displacement energy 2.Simple feasibility assessment 3.“Phase A” transmission policy 4.Create initial “Market Zone” centroid Category 3 Bug fixes and “experience” enhancements (examples: application programming interface updates, enhanced reporting, portal features) Category 1 Near-Term Value Adds Examples: 1.Allow offer curves OR separate INC/DEC bids 2.Feasibility test for market Transmission Service Providers using 0-NX 3.Phase B Step 1 – reduce transmission barriers Category 2 Bug fixes and “experience” enhancements Additional Value Adds Examples: 1.Phase B Step 2 – further reduce transmission barriers 2.Use RS data to introduce demand signal 3.Shorten dispatch interval lead-time to 7.5 minutes Additional Market Evolution Examples: 1.Full network model and LIPs 2.Meter & settle imbalance energy 3.Model generator constraints 4.Ancillary services 5.Loss optimization SCED-like Features Examples: 1.Resolve load balance constraints 2.Optimize transmission 3.Zonal prices 4.15 => 5 minute dispatch Bug fixes and “experience” enhancements CCED is a foundation upon which near and long-term enhancements can be developed Initial opportunities have been identified in Phase 4 These will be further developed and evaluated going forward 14

Regional Flow Forecast (RFF) and Resource Monitoring & Deliverability (RMD) Beta Version 1.3 is in production; 4th release since first release (Mar. 31, 2015) MC members working through deployment process of RFF tool to merchant function employees and OATT customers Software enhancements to RMD and RFF continue and will be finalized in Q Data quality issues are a key activity for 2015; team deployed additional resources and developed tools to monitor, measure improvements, and provide feedback to MC members and Peak Reliability for correction Regional Tools Update 15

Centrally Cleared Energy Dispatch (CCED) 16 CCED is a 15-minute economy energy market that is predicated upon all market participants being resource sufficient prior to participating in the market – Allows resources already committed to run to meet energy and flexible capacity needs, or quick responding resources, to be incremented (INC’ed) or decremented (DEC’ed) based on economics, resource flexibility and market flow feasibility – Not a market to plan on prior to the hour for meeting requirements – Market Resources can represent a single generator/plant all the way to entire system or portfolio of resources CCED removes major barriers to sub-hourly trading economics – Simple execution, transparent pricing, single interchange update

CCED (continued) 17 Design objectives are simplicity and compatibility with existing systems and processes, allowing full participation at go-live – Accepts bids/offers in merit order; produces single transparent price – Awards checked for physical feasibility by Market Administrator (MA) so Market Flows will not exceed Market Available Transmission (MAT)* – Awarded/scheduled CCED transactions treated as normal schedules – Individual TSPs perform congestion management as normal – MA central counterparty to all transactions; performs financial settlement directly with market participants * If schedules must be reduced to meet MAT limits, the User Group supports a method that maximizes the overall economic value of feasible transactions.

RRSG Objectives 18 Capture geographic generation and load diversity Reduce individual regulating reserve obligation Opportunity to monetize capacity reduction Reduce machine movement Coordinated BAL compliance

ACE Diversity Interchange (ADI) – Avista, BANC, TID, PGE, Tacoma will participate by year end – Consider operating limit expansion in 2016 – Rocky Mountain utilities (WAPA, Xcel) evaluating participation BAL Compliance – Individual compliance July 1, 2016 – WECC guidance to designate compliance entity per NERC Bulletin – Requires delegation letter and participant agreement – Draft documents in October RRSG Program Update 19

Operates in parallel with ADI program Participants allocated BAL-001 Reserve Obligation (BRO) – Continuously held until deployed by RRSG program – Fully deployable in 10 minutes BRO deployed if compliance level exceeded – Majority ACE participants deploy first – All participants (Majority and Minority) deploy if needed – Additional deployment as backstop Participants compensated for energy deployed Expect actual deployment to be limited (< 1 event per day) RRSG implementation planned for Q RRSG Functional Design Highlights 20

RRSG Deployment Example 21

The NWPP MC Resource Sufficiency Metric designed to ensure that BAs have sufficient resources to meet obligations prior to the operating hour – All BAs are assumed sufficient today, therefore, the RS Metric is not intended to increase the amount of reserves required – RS Metric provides a common methodology to assurance sufficiency and relies on standard utility practice – One-year, non-binding pilot will test these objectives and allow for adjustments – RS Metric to be fully implemented and binding in October 2017 Resource Sufficiency (RS) 22

RS Design 23 Completed Work VERs and DERs: capacity credit, forecasting and source Timing of binding RS check Load forecasting methodology Deliverability Transaction scheduling clarity Administration Enforcement Ongoing Work Finish Balancing Reserve Obligation (BRO) determination Completed 2 of 3 elements Data from 15 BAs Data Quality improvements Results provided Oct. 5 Treatment of exports from the footprint

Objective: Define opportunities for regional efficiencies, improvements to providing transmission service and managing operations Opportunities identified: – Constraint and congestion relief coordination – Communication regarding dynamic changes in SOLs from TOPs to TSPs that may result in changes to TTC updates on key flowgates – Coordination of models between WECC, Peak and individual TSPs/TOPs – Open Access Transmission Tariffs and business practices alignment – Real-time coordinated TOP operations TSP / TOP Coordination Update 24

Continue TSP/TOP design work Work with vendors on costing Expand Regional Flow Forecast (RFF) and Resource Monitoring and Deliverability (RMD) in concert with TSP/TOP activities TSP / TOP Coordination Next Steps 25

Agenda Introductions Recent News Introduction to the MC Initiative MC Portfolio and Elements Next Steps 26

NWPP MC Executive Committee will meet in October and November to determine plans Staff continue to work on evaluating MC portfolio and what options exist given recent events Stakeholder updates will be provided Next Steps 27

Questions 28