1. Simplified & Reorganized Tariff Docket No. ER05-1501 FERC Technical Conference December 7, 2005 Sidney M. Davies Assistant General Counsel-Tariff David Rubin Karen Kruse Troutman Sanders, LLP

2. SMD December 7, 2005 S&R Tariff-1 Tariff Vision Tariff provides rates, terms and conditions subject to FERC jurisdiction Tariff is well-organized, with single subjects addressed in the same place and separate, on- file Protocols that cover specific issues not addressed elsewhere in the Tariff Business Practice Manuals provide further Tariff detail developed through Stakeholder process

3. SMD December 7, 2005 S&R Tariff-2 MRTU Tariff Project Phase 1 - Simplify and reorganize existing Tariff and file at FERC Phase 2 – File MRTU Tariff using S&R Tariff as platform on December 16, 2005 Phase 3 – Incorporate additional changes to the Tariff that may be necessary prior to MRTU and revise S&R Tariff accordingly Phase 4 – Revise MRTU Tariff prior to effective date to reflect Phase 3 changes and any other intervening amendments

4. SMD December 7, 2005 S&R Tariff-3 Purpose of S&R Tariff/Phase 1 Merges Protocol language into Tariff Deletes duplicative language Consolidates subject matter Targets potentially unnecessary detail for removal from Tariff Establish a useful platform for MRTU Tariff in that it will allow stakeholders to separate MRTU Tariff substantive changes from S&R Tariff purely structural changes

5. SMD December 7, 2005 S&R Tariff-4 Purpose of S&R Tariff/Phase 1 -- NOT intended to make any substantive change NOT intended to alter rights and responsibilities of CAISO or any Market Participant

6. SMD December 7, 2005 S&R Tariff-5 Protests and Comments: 3 Main Categories A.S&R Process: concerns that simplification and reorganization process resulted in: (1) confusing organization, (2) duplication, or (3) errors B.Concerns that merger of protocol language altered substance of Tariff C.Deferred Maintenance: Questions as to whether existing tariff provisions are sufficiently clear and conform to current CAISO practices, to be addressed in Phase 3 of MRTU project

7. SMD December 7, 2005 S&R Tariff-6 A. The S&R Process: Confusing Organization –Stakeholders asserted S&R process created confusion in 8 sections because of (1) new section placement or (2) need for additional conforming language to capture original Protocol context –CAISO agreed to amend 7 of the 8 sections by relocating sections, adding conforming language, or deleting unnecessary and confusing language as requested –CAISO disagreed with 1 of the 8 section changes, as it stands by its decision to place SP 7.2.1, Categories of Transmission Capacity, in Article II, Transmission Services

8. SMD December 7, 2005 S&R Tariff-7 A. The S&R Process: Duplication –Stakeholders asserted that in 6 sections, S&R process created unnecessary duplication –This resulted from CAISO’s decision to err on the side of inclusion when merging Protocols so as to prevent substantive changes. –CAISO agreed to amend 5 of the 6 sections by deleting duplicative language as requested –CAISO disagreed with 1 of the 6 section changes, as did not believe that Appendix B.2, sections 9.1 and 10.1 have become redundant with the S&R Tariff combination of sections 14 and 15.

9. SMD December 7, 2005 S&R Tariff-8 A. The S&R Process: Errors –Stakeholders asserted that 12 sections contained erroneous cross references, all of which the CAISO agreed to modify as requested –Stakeholders asserted that 2 sections (and their accompanying subsections) were misnumbered. The CAISO agreed to modify both sections as requested

10. SMD December 7, 2005 S&R Tariff-9 A. The S&R Process: Errors, Cont’d Finally, stakeholders noted 4 errors, all of which CAISO agreed to correct: 1.“ISO Controlled Grid” inadvertently changed to “Balancing Authority Area” (see further explanation on later slide) 2.Accidental deletion of Section 11.4.2 3.“ISO rules and protocols” and “Scheduling Protocol” inadvertently replaced with “ISO tariff” instead of “ISO Tariff” 4.The unintentional insertion of a period and an extra space into and deletion of a parenthesis from Section 27.1.1.6.1.1(a)(1)

11. SMD December 7, 2005 S&R Tariff-10 A. The S&R Process: Errors, Cont’d Since filing S&R Tariff, CAISO has found two additional errors: one in S&R Tariff and one in Mapping Table in the Order of the S&R Tariff. S&R Tariff Section 37.2.1.2 Current Language: "The Sanction for a violation of this Section shall be the greater of the quantity of Energy non-performance multiplied by the applicable Dispatch/Settlement Internal Locational Marginal Price or the following: for the first violation in...“ The S&R Tariff will be corrected as follows: “…the applicable Hourly Ex Post Price or the following: for the first violation in...“ The MRTU Tariff blackline will read as follows: “…the applicable Dispatch/Settlement Interval Locational Marginal Price or the following: for the first violation in..." Mapping Table (page 42): In the left column, fifth row down from the top, Section 27.5.1.4.2 should read "27.1.1.4.2."

12. SMD December 7, 2005 S&R Tariff-11 A. The S&R Process: Errors, Cont’d The MRTU-related errors (i.e., “ISO Controlled Grid” to “Balancing Authority Area” and Section 37.2.1.2) resulted from separate but parallel construction process of S&R Tariff and MRTU Tariff: Starting point for creating both the MRTU Tariff and the S&R Tariff was the February 2005 Conformed Tariff In April 2005, the February 2005 Conformed Tariff broken down and reorganized (Posted April 29, 2005) Pieces of this simplified and reorganized draft used for creating both the MRTU Tariff and the S&R Tariff As a result, impurities introduced into S&R Tariff that were not caught in preparing S&R Tariff for filing

13. SMD December 7, 2005 S&R Tariff-12 A. The S&R Process: Resolution CAISO agrees to make all corrections in a supplemental filing CAISO will use corrected S&R Tariff as MRTU platform in December MRTU Tariff filing as a new proceeding with a new docket number

14. SMD December 7, 2005 S&R Tariff-13 B. Unintended Substantive Changes Resulting from Merger of Protocol Language Stakeholders asserted that in 3 sections, S&R process resulted in a substantive change. The CAISO agreed to amend 2 of the 3 sections as requested CAISO disagreed with 1 of 3 section changes, as it does not believe that Section 16.2.3.1 conflicts with Section 16.2.3.1.1 in its treatment of submission of operating instructions to CAISO or process of designating Responsible Participating TO

15. SMD December 7, 2005 S&R Tariff-14 B. Unintended Substantive Changes: Resolution FERC Order/Offer of Settlement should reflect that interpretation questions during interim period will be resolved as if S&R process had not taken place, unless future substantive modification to relevant provision. Order would also apply to any subsequently discovered errors in the S&R process Such an Order would ensure that S&R Tariff has same legal effect of existing ISO Tariff

16. SMD December 7, 2005 S&R Tariff-15 C. Deferred Maintenance: Sufficient Clarity and Conforming to Current Practices Unclear Sections: stakeholders generally requested: new definitions (e.g., “Interconnection Schedules”); additional detail (e.g., specific website links); or clarifying language (e.g., change “To the extent that the MW amount…” to “To the extent that the MW amount in a schedule…”) –Majority not within limited scope of S&R Tariff- often language taken directly and without modification from existing Tariff. –Agreed to non-substantive changes- obvious errors or outdated provision from existing Tariff (e.g., replace past date references with general language). Conforming to Current Practices: Beyond limited scope of S&R Tariff

17. SMD December 7, 2005 S&R Tariff-16 C. Deferred Maintenance: 2006 Phase 3 Resolution CAISO to develop a plan for systematic review of Tariff in 2006 –Conforming S&R Tariff to reflect all relevant FERC decisions –Conforming S&R Tariff to reflect current CAISO practices –All filings to be made as new proceedings separate and apart from S&R Tariff docket

18. SMD December 7, 2005 S&R Tariff-17 Scope of S&R Tariff limited to simplification and reorganization Should permit early effective date Avoids pain and suffering associated with maintaining three different versions of Tariff Synchronizes S&R Tariff with MRTU Tariff platform Allows for subsequent targeted amendments to address “deferred maintenance” issues in 2006 prior to effective date of MRTU Tariff

19. SMD December 7, 2005 S&R Tariff-18 FERC Order suspends S&R Tariff until April 2006 or sooner Shorter suspension period appropriate if S&R Tariff leaves rights and responsibilities of CAISO and market participants unchanged This can be achieved through a stipulation or offer of settlement to that effect CAISO proposes February 1, 2006 effective date for S&R Tariff without being “subject to refund”