1. Special Protection Systems - Market Rule Amendment Submission Presentation to: Market Operations Standing Committee Barbara Reuber, Regulatory Affairs January 14, 2004

2. 2  To provide OPG’s rationale for its market rule amendment submission: – Problems with the current market rules – Proposed solutions Purpose of Presentation:

3. 3  Special Protection Systems (SPS) allow the IMO to increase the utilization of the grid while maintaining system integrity.  Typical SPS control actions are generation and load rejection.  A more expensive alternative to SPS is transmission upgrades  OPG has generation rejection and runback schemes at quick- start (hydroelectric) and non quick-start (nuclear and fossil) facilities.  Hydro One owns the SPS equipment.  IMO directs the operation of the SPS with no obligation for direct communication to facility impacted by the SPS.  No compensation currently provided under the market rules. Background

4. 4 Operational Issues  Facility operators need to be aware of status of SPS on an ongoing basis to assess risk to their facilities.  Under some conditions, facilities will reject an arming request (for reasons of safety, environment, equipment damage). Rules allow facilities to reject a dispatch instruction for the same reasons – need comparable allowance for SPS.  There are no requirements or standards in current market rules for a status signal informing a facility when an SPS is armed/ activated. For comparison, Market Rules (Appendix 4.15) require generators to provide equipment status indication to IMO, e.g., AVR and Stabilizer status.  Accountability for providing an SPS monitoring signal is not defined.

5. 5 Proposed Solution:  MP/ owner of facility connected to SPS needs to agree to changes to SPS arming/ activation criteria  Where a market participant requires it, the owner/ operator of the SPS shall provide a mechanism to inform the market participant when the SPS is armed and activated. The mechanism shall be satisfactory to market participant (acting reasonably).  A market participant may reject a request to arm an SPS due to concerns regarding safety, equipment or environmental damage or legal requirements. Operational Issues

6. 6 Compensation Issue  There are two categories of costs to a facility impacted by an SPS:  Operations and maintenance costs: Wear and tear costs each time a generation rejection scheme is activated (significant costs) plus incremental maintenance/ verification costs (minor incremental costs).  Lost revenue: Non-quick start facilities do not receive CMSC payments for the time they are not connected to the grid as a direct result of SPS activation.  Benefits of SPSs accrue to many market participants; risks are faced solely by facility impacted by the SPS.

7. 7 Proposed Solution:  Non quick-start facilities receive CMSC payment for two hours after generation rejection based on offers already submitted.  This proposal is a compromise solution that likely does not address costs of wear and tear. Compensation