1. Contingency Reserve Standard Drafting Team Presentation before the WECC Board Technical Conference David Lemmons Standard Drafting Team Chair December 5, 2007

2. Drafting Team David Lemmons – Chair David Lemmons – Chair Brenda Anderson TC Brenda Anderson TC Jeffrey Ackerman TC Jeffrey Ackerman TC Ali Amirali TC Ali Amirali TC David Frederick TP David Frederick TP Steve Heidt TP Steve Heidt TP Duane Helderlein TC Duane Helderlein TC Robert Johnson TP Robert Johnson TP Steve Johnson TP Steve Johnson TP Clyde Loutan TP Clyde Loutan TP John Marusenko TP John Marusenko TP Bart McManus TP Bart McManus TP Joe Medina TP Joe Medina TP Phil Tice TC Phil Tice TC John Tolo TP John Tolo TP Greg Van Pelt TP Greg Van Pelt TP Ben Williams TP Ben Williams TP Ken Wilson – WECC Staff Ken Wilson – WECC Staff

3. Existing Standard Pros Pros –Comfortable, tried and true –Credits reserves held by seller on energy transactions Cons Cons –Reserves held by seller on energy transactions are not available to the load serving entity –Outdated due to separation of reliability and marketing entities –Does not address alternative sources of energy –60 minute reserve restoration requirement is too stringent –Support is marginal for this standard –Assumption that Firm transactions will be delivered regardless of any event

4. Proposed Standard Pros Pros –Provides a clear reliability standard –Addresses the market issues discussed above –Addresses all generation types –It addresses issues raised in comments as ordered by FERC Cons Cons –Marginal support at the standing committee level –It is a change to the existing rules –The level of reserves still varies based on uncontrollable forces

5. Future Steps Work to increase support for the proposal Work to increase support for the proposal –Including WECC leadership support for the drafting team efforts –Discussions with each RSG –Try to talk to stand-alone BAs –Offer Workshop open to all to discuss standards –Attempt to get more participation in drafting team meetings?

6. Future Steps (cont.) Standard currently posted for second round of comments through Jan. 2 Standard currently posted for second round of comments through Jan. 2 Respond to comments by Jan. 31 Respond to comments by Jan. 31 Post for OC approval by February 4 Post for OC approval by February 4 Vote at the March OC Meeting Vote at the March OC Meeting If approved by the OC, it will be at the April Board meeting for approval If approved by the OC, it will be at the April Board meeting for approval This schedule meets the one year deadline. This schedule meets the one year deadline.

7. Issues Raised in Comments Penalty Allocation (13) Penalty Allocation (13) Change in Reserve Recovery Period (4 positive, 2 negative) Change in Reserve Recovery Period (4 positive, 2 negative) Keep Load Responsibility (7 for, most wanting FRR implemented instead of a change, 3 against) Keep Load Responsibility (7 for, most wanting FRR implemented instead of a change, 3 against) Clarification Questions Clarification Questions Drafting team has posted a response to all comments Drafting team has posted a response to all comments

8. New Issue Identified by the CRSDT Not all entities are reporting compliance based on real time data. Not all entities are reporting compliance based on real time data. –Came about due to clean-up of language in the measurement section –Not sure how this might impact support of either existing or proposed standard

10. Questions for Discussion Is every generator inside a BA? (BAL- 005 R1) Is every generator inside a BA? (BAL- 005 R1) Is every BA required to have reserves? (BAL-002) Is every BA required to have reserves? (BAL-002) If so, is it possible to make a sale without reserves being carried by the source BA? Sink BA? If so, is it possible to make a sale without reserves being carried by the source BA? Sink BA?

11. Salt River Project Tariff Salt River Project Open Access Transmission Tariff Revised Sheet No. 85 Effective November 1, 2005 SCHEDULE 5 Page 1 of 1 Operating Reserve - Spinning Reserve Service Spinning Reserve Service is needed to serve load immediately in the event of a system contingency. Spinning Reserve Service may be provided by generating units that are on-line and loaded at less than maximum output. SRP must offer this service when the transmission service is used to serve load within its Control Area. The Transmission Customer must either purchase this service from SRP or make alternative comparable arrangements to satisfy its Spinning Reserve Service obligation. The amount of and charges for Spinning Reserve Service are set forth below. To the extent the Control Area operator performs this service for SRP, charges to the Transmission Customer are to reflect only a pass-through of the costs charged to SRP by that Control Area operator.

12. Questions for Salt River Does SRP BA provide reserves (i.e. take load responsibility) for sales its merchant makes to parties outside of the SRP BA Area? Does SRP BA provide reserves (i.e. take load responsibility) for sales its merchant makes to parties outside of the SRP BA Area? Does SRP provide reserves to other generators that do not serve load inside the SRP BA Area? Does SRP provide reserves to other generators that do not serve load inside the SRP BA Area? If so, what quantity and price? If not, why not? If so, what quantity and price? If not, why not?

13. Scenario 1 David Lemmons wins a really big Powerball Lottery and decides to build Generators David Lemmons wins a really big Powerball Lottery and decides to build Generators A new technology for generation, IOD is used for these generators. A new technology for generation, IOD is used for these generators. Typical Size of IOD Generator is 1,500 MWs. Typical Size of IOD Generator is 1,500 MWs.

14. WIRED WEIRD INC Opening Soon at a location near you!

15. Scenario Detail Wired Weird Inc builds a 1,500 MW unit in the SRP Balancing Authority Area Wired Weird Inc builds a 1,500 MW unit in the SRP Balancing Authority Area WWI Does Not Join the SRSG WWI Does Not Join the SRSG WWI sells to BPA 1,500 MWs Firm Energy under WSPP Schedule C WWI sells to BPA 1,500 MWs Firm Energy under WSPP Schedule C WWI agrees with BPA to take Load Responsibility WWI agrees with BPA to take Load Responsibility Can SRP deny the tags? Can SRP deny the tags?

16. Scenario Follow-up Do all generators have access to BA reserves? If not, is this a reliability issue or commercial issue? Do all generators have access to BA reserves? If not, is this a reliability issue or commercial issue? Should SRP deny the tags and if so why, Reliability or Commercial? Should SRP deny the tags and if so why, Reliability or Commercial? What impacts are there on SRP and/or SRSG? What impacts are there on SRP and/or SRSG? –Increase in the SRSG MSSC? –Increase in the SRSG Load Responsibility?

17. Actual Events as Presented to David Lemmons 500 MW Generator built in the SRSG footprint 500 MW Generator built in the SRSG footprint Generator was told the host BA would not provide reserves because the generator sold all energy and capacity outside of BA Generator was told the host BA would not provide reserves because the generator sold all energy and capacity outside of BA Generator was told SRSG membership would provide 100 MWs of reserves due to deliverability issue, anything above that could not be sold firm Generator was told SRSG membership would provide 100 MWs of reserves due to deliverability issue, anything above that could not be sold firm

18. Actual Events as Presented to David Lemmons 10 MW Wind Generator built in NWRSG footprint. 10 MW Wind Generator built in NWRSG footprint. Host BA did not want the energy, so a neighboring BA entity bought the energy firm Host BA did not want the energy, so a neighboring BA entity bought the energy firm Buyer said that the seller had to provide reserves to make it firm Buyer said that the seller had to provide reserves to make it firm Host BA said they would not provide reserves or take load responsibility. Host BA said they would not provide reserves or take load responsibility.

19. There is a market issue! Can we all agree on this statement? Can we all agree on this statement? If so what is the market issue? Is it Load Responsibility, the lack of reserves to ensure reliable grid operation or something else? If so what is the market issue? Is it Load Responsibility, the lack of reserves to ensure reliable grid operation or something else? Can a level of reserves be determined that ensures reliability but does not require changes to the host BA reserve requirement due to transactions? Can a level of reserves be determined that ensures reliability but does not require changes to the host BA reserve requirement due to transactions?

20. Conclusion The drafting team believes that it is possible to separate the reliability issue of reserve requirements and the market issue of access to reserves The drafting team believes that it is possible to separate the reliability issue of reserve requirements and the market issue of access to reserves More importantly, it is needed More importantly, it is needed The drafting team asks for your support on this important issue The drafting team asks for your support on this important issue

21. Questions?