1. Black Start Service in New England System Operator’s Perspective Robert B. Burke ISO New England Inc. July 23, 2002 IEEE - Chicago, Illinois

2. Overview of Remarks Background: –NEPOOL & ISO New England –New England Electric System Statistics Reason For Black Start Service Development of Compensation Plan Why it’s a Service not a Market

3. ISO New England NEPOOL formed in response to 1965 blackout –November 1971 ISO New England began operation in July 1997 –Independent System Operator for the New England Control Area –Private not-for-profit corporation –Operate the New England Transmission –Dispatch generation –Operate the New England Wholesale Energy Markets Regulated by the FERC –Consistent with FERC’s eleven principles for an ISO

4. New England’s Electric Power System 14 million people; 6.5 million customer meters 340+ bulk generators 8,000+ miles of transmission lines 4 satellite control centers 12 interconnections to neighboring systems 28,000 MW of installed generating capacity Peak demand: 24,967 MW ISO and satellite facilities 320 mi. 520 km 400 mi. 650 km

5. History of Black Start Service Black start service provided by franchised utilities Installed equipment included in rate base Utilities operated equipment as part of integrated generation resource planning Provided black start capability to generating station Utilities, power exchange and satellites developed plans for restarting the system

6. Preparation for Market ISO recognizes need to maintain black start capability for reliability ISO requests confirmation from black start owners that they will continue to provide service to allow market to open ISO agrees to work towards a compensation plan

7. Black Start Working Group NEPOOL begins to examine costs – July 22, 1998 Unit Availability Task Force requested to define black start related cost components Initial estimated rate ($4.58/kW-Yr) – including fuel storage - October 14, 1998 Working Group established to develop compensation plan – November 12, 1998

8. Compensation Plan August 1999 basic compensation plan developed Based upon FERC filed cost of service rate Rate to be part of NEPOOL Open Access Transmission Tariff (OATT) Proposal explained to NEPOOL committees – October 1998 –NEPOOL wants estimate of annual cost –Black start providers requested to provide cost data –Data for 25% provided by 2 companies - January 2000

9. Cost of Service - Rationale Divested generation purchased for energy market capability Resource earns ROI in energy and capacity markets Black start capability represents incremental cost to maintain beyond energy market capability Black start testing is incremental to normal energy market capability testing

10. WRITE UP OF PLANT ASSETS Assets Book Purchase Percent CompanyValue (Net) Price Over Book N.E.E.S.$1,100$1,590 44.55% B.E.Co$ 450$ 536 19.11% C.M.P.$ 240$ 846252.50% AVERAGE$ 597$ 991 66.00% Amounts in Millions ($1,000,000)

11. Service Separate From Energy Black start service is – –Willing and capable to provide service –Capability of starting without external power –Annual testing of black start capability –Annual training of operators Black start energy is – –Energy generated under actual black start conditions separate from willing and capable to provide service –Actual energy delivered to restart generating units or energize portion of grid as directed by ISO or satellite –Energy payments are subject to Energy Market Rules