1. G 200 L 200 ISO NEW ENGLAND T H E P E O P L E B E H I N D N E W E N G L A N D ’ S P O W E R. COLD SNAP Overview of Proposed Options for Winter 2004/2005 NEPOOL Markets Committee September 7, 2004 Charles Ide

2. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 2 OUR GOAL Reliable operation of the power system during periods of high winter load and abnormal natural gas supply conditions -Improve exchange of information and coordination between Gas and Electric markets -Improve availability of electric resources subject to abnormal gas supply conditions -Enhance ability of market to supply necessary resources in an efficient manner

3. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 3 Presentation Overview Objectives Options Specific description of options Comparison Table Process for Declaring a Cold Event Role of Electric/Gas Operations Committee Markets Committee Schedule

4. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 4 Objectives Evaluate input from task force and working group Determine Which of the Recommendations can be Implemented for this Winter – 2004/2005 -What can/cannot be done within context of current Market Rule 1? -What can ISO and Market Participants implement?

5. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 5 Achievable Objectives for this Winter Improved electric/gas industry coordination Closer alignment of electric generation scheduling process with Gas Market Requirements Improvement of capability to utilize alternate fuels

6. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 6 Options Two options presented (A & B) Actions of both triggered by Cold Weather Event Declaration(details in later slides) ISO is able to implement either option

7. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 7 Options cont’d ISO prefers Option A because of later DA Market close - allows for Gas price discovery prior to DA Bid/Offer submittal permitting load and generation to make DA Bids and Offers that better reflect actual Gas market conditions - allows load to better forecast actual demand for the Operating Day leading to less deviation between DA and RT markets

8. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 8 Options (A & B) Details Option A (Previously Proposed) - DA Market closes at 0900 - ISO performs “unit commitment evaluation” based on DA offers and forecast RT Load - Gas Units receive RT commitment (period of run at Economic Minimum) between 0930 and 1000 - Gas Units purchase gas in DA gas market and submit nominations to pipeline companies between 0930 and 1230

9. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 9 Options (A & B) Details Option A (Cont’d) - ISO clears DA Market on normal schedule by 1600 with Gas Unit schedules as must run inputs - ISO contacts Gas Units to determine availability for RT Operation between 1700 and 1800 - Re-Offer period and RAA process on normal schedule

10. G 200 L 200 G 200 L 200 ISO NEW ENGLAND ISO New England Inc. 12:30 Daily Gas (Initial) Nominations Deadline 19:00 Evening Gas (Adjustment) Nomination Deadline 17:30 Daily Gas Confirmation to Shippers 22:00 Evening Gas Confirmation to Shippers 10:00 Nomination Effective Time (Delivery): Both Daily and Evening Nominations 11:00 Intra-day 1 (Adjustment) Gas Nomination Deadline 18:00 Intra-day 2 (Adjustment) Gas Nomination Deadline 22:00 Intra- day 2 Gas Confirmation to Shippers 18:00 Intra-day 1 Gas Effective Time (Delivery) 15:00 Intra- day 1 Gas Confirmation to Shippers 22:00 Intra- day 2 Gas Effective Time (Delivery) ------------- Gas Operating Day --------- 12:3019:0024:00 10:00 24:00 10:00 17:30 D+1 22:00 24:00 10:00 D-1 15:00 11:00 22:0018:00 --------- Power Operating Day --------- Operating Day (D) 09:00 09:00 DAM Bid and Offer Period Closes 16:00 ISO Posts DAM Results 16:0018:00 Real-time Re- Offer Period Closes 16:00 RT Re-Offer Period Opens: GAS POWER 8:00-10:00 Gas Market Activity/Trading 17:45 17:45 Intra-day Gas Closes 09:30 09:00 – 09:30 ISO FCST Prepares Early Commitment of Gas-fired Units 10:00 09:30 – 10:00 ISO Notifies Gas Units of Next Day(s) Commitments 17:45 – 18:00 ISO Notified of Results of Gas-Fired Units Nominations Option A – DAM close at 09:00

11. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 11 Options (A & B) Details Option B - DA Market closes at 0500 - ISO performs “unit commitment evaluation” based on DA offers and forecast RT Load - ISO clears DA Market with Gas Unit schedules (period of operation at eco min) from previous step as input - ISO releases DA Market results by 0900

12. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 12 Options (A & B) Details Option B (Cont’d) - Gas Units purchase gas in DA gas market and submit nominations to pipeline companies - between 0900 and 1230 - Re-Offer period begins at 0900 and ends at 1800 - ISO contacts Gas Units to determine availability for RT Operation between 1700 and 1800 - RAA process proceeds on normal schedule at 1800

13. G 200 L 200 G 200 L 200 ISO NEW ENGLAND ISO New England Inc. 12:30 Daily Gas (Initial) Nominations Deadline 19:00 Evening Gas (Adjustment) Nomination Deadline 17:30 Daily Gas Confirmation to Shippers 22:00 Evening Gas Confirmation to Shippers 10:00 Nomination Effective Time (Delivery): Both Daily and Evening Nominations 11:00 Intra-day 1 (Adjustment) Gas Nomination Deadline 18:00 Intra-day 2 (Adjustment) Gas Nomination Deadline 22:00 Intra- day 2 Gas Confirmation to Shippers 18:00 Intra-day 1 Gas Effective Time (Delivery) 15:00 Intra- day 1 Gas Confirmation to Shippers 22:00 Intra- day 2 Gas Effective Time (Delivery) ------------- Gas Operating Day --------- 12:3019:0024:00 10:00 24:00 10:00 17:30 D+1 22:00 24:00 10:00 D-1 15:00 11:00 22:0018:00 --------- Power Operating Day --------- Operating Day (D) 05:00 05:00 DAM Bid and Offer Period Closes 18:00 Real-time Re- Offer Period Closes GAS POWER 8:00-10:00 Gas Market Activity/Trading 17:45 17:45 Intra-day Gas Closes 05:30 05:00 – 05:30 ISO FCST Prepares Early Commitment of Gas-fired Units Option B – DAM close at 05:00 18:00 17:45 – 18:00 ISO Notified of Results of Gas-Fired Units Nominations 09:00 ISO Posts DAM Results 09:00 09:00 RT Re-Offer Period Opens:

14. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 14 Options A and B Comparison Option AFeatureOption B 0900 on second day prior to Operating Day Minimum Advance Notice time 0500 on second day prior to Operating Day 0900DA Market Close0500 Commitment period at Eco Min Gas units only Schedule info available - quantity Day Ahead Market Obligation All resources 0930Schedule info available - time 0900 YesDA Gas Market price discovery prior to offer No

15. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 15 Options A and B Comparison Option AFeatureOption B 1600DA Market Results Published 0900 1600-1800Re offer period0900-1800 1700-1800ISO confirmation of unit gas availability 1700-1800 1800-2200RAA Process period 1800-2200

16. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 16 Potential Implementation Limitations Option A All of these issues are still being investigated Option B NoMarket Rule 1 change required Yes 0001-0900DA Market Data Submittal Window – Software issue 0001-0500 2 hours 1600-1800 Length of Re-offer period – Software issue 9 hours 0900-1800

17. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 17 Criteria and Process for Cold Weather Declarations Weekly Process Industry Coordination - Thursday - Weekly calls on Thursdays with Natural Gas pipeline operators to review conditions for the coming week - Upcoming Weather and Temperature forecasts - Posted notices issued by the pipeline operators -Frequency of calls may be increased as conditions warrant

18. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 18 Criteria and Process for Cold Weather Declarations Weekly Process cont’d Develop 7-Day Capacity Margin Forecast - Friday - Prepared each Friday by 1100 - Includes review of notices issued by pipeline operators and assessment of unit availability impact - Includes review of forecasted weather conditions to determine if Cold Weather Event weather conditions are forecast and assessment of unit availability impact - Effective temperatures <= 0 degrees F (on peak hours) - Effective Heating Degree Days >= 65 Note:Effective Temperature = dry bulb temp. + (windspeed X (65 – dry bulb temp)/100) Effective Heating Degree Days = 68 – (average of max and min effective temp for the day)

19. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 19 Criteria and Process for Cold Weather Declarations Weekly Process cont’d Evaluate Capacity Margin Forecast by 1200 - Friday - If forecast margin >= 1000, declare Cold Weather Watch for specific day(s) in coming week - Cold Weather conditions forecasted to exist, ISO-NE forecasts sufficient capacity available - If forecast margin < 1000, declare Cold Weather Warning for specific day(s) in coming week - Cold Weather conditions forecasted to exist, ISO-NE forecasts tight capacity conditions Note:Value of 1000 MW chosen to approximate margin needed to avoid OP4 implementation on loss of typical large generation contingency

20. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 20 Criteria and Process for Cold Weather Declarations Daily Process Reassess each Operating Day utilizing updated information from all sources (pipeline notices, weather forecasts, generator outage updates etc.) Confirm/revise capacity margin forecasts and previous declarations

21. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 21 Criteria and Process for Cold Weather Declarations Daily Process cont’d If forecast margin < 0 MW for an Operating Day, declare Cold Weather Event no later than 0900 on the second day prior to that Operating Day - Cold weather conditions forecasted to exist, ISO-NE forecasts OP4 Actions Cold Weather Event Declaration triggers implementation of Option A or B.

22. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 22 Criteria and Process for Cold Weather Declarations General Cold Weather Event Declarations will be made closer in as opposed to a week in as are Watch and Warning Declarations Sample Declaration = “ISO-NE has issued a Cold Weather Watch for January 10-12, 2005. Extreme cold weather conditions are forecast. ISO-NE has sufficient capacity to meet the projected demand and reserve requirements. ISO-NE will update the Watch condition daily by 0900.

23. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 23 Possible Role of Electric/Gas Operations Committee Periodic meetings - To identify changes in respective market processes/procedures Specific relationship and functions still being worked out

24. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 24 Markets Committee Schedule Choose Option A or B today Vote on Market Rule 1 changes (if required) on September 20 Place topic on Participant Committee agenda for October 1 (MR-1 vote or briefing) Consider Operating Procedure and Manual changes in October Place Operating Procedure and Manual changes on Participant Committee agenda for November

25. G 200 L 200 G 200 L 200 ISO NEW ENGLAND 25 Questions/Issues