1. www.spp.org 1

2. ***Confidential*** Concerns Tag Non Firm Option October 10, 2010 Bert Bressers 2

3. www.spp.org ***Confidential*** Concern 1. Tag Non Firm Option SPP doesnt think it is possible to capture all the Non Firm within the SPP Market footprint (15 BAs) with Non Firm Tags. SPP has an Energy Imbalance Market for 15 BA Areas in Nebraska, Kansas, Oklahoma, part of Missouri, part of Texas, part of Arkansas, part of New Mexico. The 15 BAs are still Tagging imports and exports and besides that each BA submits Firm Native Load schedules (not Tagged) from the DNRs to the Native Load supported by NITS reservations. So basically all Load in the SPP Market footprint is covered with Schedules and Tags. The SPP Market Software (SCED) runs every 5 minutes, takes the Tags and Schedules, Load and Offercurves of Resources and calculates the best possible (constrained) economic dispatch solution. The Systems sends out dispatch instructions to all resources of the Market footprint (every 5 minutes) and sends out an NSI EIS value (Energy Imbalance NSI) to the 15 BA Areas. The 15 BAs have to add the NSI EIS to their NSI value based on Tags for AGC and ACE Control of the BA. The Energy imbalance that flows between the 15 BAs of the SPP EIS Market is considered Non Firm (NN6 on CF flow gates and NH2 and NN6 on RCF flow gates). And the Non Firm Energy Imbalance exchanged between the 15 BAs is most likely Energy Imbalance between Firm DNR resources in different BA Areas. Although the DNRs by itself are Firm, the Energy Imbalance they supply to Neighboring BAs or absorb from Neighboring BAs of SPP Market footprint is Non Firm.

4. www.spp.org ***Confidential*** SPP Market footptrint NPPD SECI OPPD LES KACY INDN KCPL WR MPS SPS WFEC OKGE CSWS GRDA EDE Non Firm Resource Firm Resource FirmTag NonFirmTag Non Firm EIS Not scheduled Every BA of the Market imports or exports Un-scheduled Non Firm Energy Imbalance (EIS) Concern 1. Tag Non Firm Option tag EIS

5. www.spp.org ***Confidential*** Concern 2. Tag Non Firm Option The Tag Non Firm Option doesnt put any limitation on DNRs within Markets (that original consisted of BAs, now called Regulation Zones) to supply Load of other Regulation Zones within that Market footprint and qualify all of that flow as Firm flow causing Firm impacts on all flow gates. During low load situations there is an excess of Firm DNR capacity within Markets (and also within Non Market BAs). Using all Firm DNR Resources in the North as an example to serve a large part of Load in South can cause a major parallel flow on flow gates of Neighboring RCs. All of those impacts would be considered Firm in the Tag Non Firm option because it is sourcing from Firm DNR, however it might not be deliverable without over-loading a Neighboring flow gate with Firm forcing a TLR Level 5 on that Neighbors flow gate. This is an undesired situation. The Firm rights on Neighboring flow gates should some how be limited to a deliverable situation, to allow the TO and BA that owns the flow gate to use at least its Firm rights. The current CMP process limits Firm rights to more or less a deliverable situation. The CMP Allocation process splits up the Firm Rights on flow gates based on historical impacts. In the example above, the CMP Allocation approach would allow a certain amount of Firm on a flow gate while the remainder of the Firm flow from DNRs in the North serving Load in South would be reported as Non Firm. The loading of the Neighboring flow gate would be most likely resolved and controlled with Non Firm curtailments in TLR Level 3.

6. www.spp.org ***Confidential*** Concern 2. Tag Non Firm Option Neighboring flow gate Firm Resource on line Regulation Zone B Note: A Regulation Zone was a separate BA Area pre-Market Market Area Firm Resource off line X X X X X X High Firm Parallel flow From Market Example: excess of DNR Capacity in North during low Load situation

7. www.spp.org ***Confidential*** Concern 3. Tag Non Firm Option It will be difficult to measure if Markets (and maybe Non Market BAs) are accomplishing their relief obligation in case of the Tag Non Firm option. If a Non Firm Tag is curtailed the Tag Non Firm option assumes that the resource that is the source on Non Firm Tag will be re-dispatched down to the curtailed level of the Non Firm Tag. That is not the case in Markets and maybe it is not case for Non Market BAs either. Markets are re-dispatching the most expensive resources first (either Firm or Non Firm) when Non Firm relief is required, they dont re-dispatch Non Firm resources before Firm resources and they dont dispatch a single resource down that is the source of a Non Firm Tag that is curtailed. The SCED software used by Markets dont allow for that. If a non Firm Tag is curtailed the Resource that is the source on that Tag might stay on same output level while other Firm and maybe Non Firm resources within the Market are accomplishing the relief obligation. If during the TLR event the Load increases and as result the Firm impact of the Native Load part on flow gates increases it will be difficult to determine if the Market is (still) accomplishing its Non Firm relief obligation with Firm re-dispatch during TLR. Also the impact of the Tag is calculated based on GLDF from resource to weighted average load of the BA or Market area, while relief is accomplished by re-dispatching 2 or more resources within the Market or BA. So the relief accomplished by Non Firm Tag curtailment should be translated into a Non Firm re-dispatch obligation and Firm re-dispatch should be credited against Non Firm relief obligation.

8. www.spp.org ***Confidential*** Concern 3. Tag Non Firm Option Market or non Market BA Non Firm Resource Firm Resource NonFirmTag Load Flow gate in TLR Level 3 200 MW 200 150 MW 200 100 MW 200 400 MW200 MW 200 0 MW Tag TLR Called on flow gate. IDC curtailed Non Firm Tag to 0 Relief accomplished with Firm Re-dispatch 200 MW 200 250 MW 200 MW

9. www.spp.org 9