1. ISO Proposed Flexible Capacity Requirements Stephen Keehn Senior Advisor California ISO CPUC Workshop January 26, 2012

2. The ISO proposes adding flexible capacity requirements to the existing RA program The requirements: –Three flexible capacity categories based on system needs from Renewable Integration Studies Maximum ramping Load following Regulation –Applies system-wide to the entire RA fleet The ISO proposes for 2013 that the requirements be based on the capabilities of the 2012 RA fleet For subsequent years, the requirements will be calculated from historical analysis of system net load data

3. LSEs have the first opportunity to satisfy the requirement and cure any deficiencies The ISO will determine the amount of flexible capacity it requires in each category After LSEs make their 2013 RA showings, the ISO will determine if the 2013 RA showings in aggregate satisfy the requirements in the three flexible capacity categories If there is a deficit in any of the flexible capacity requirements, LSEs have the opportunity to cure the deficiency If the deficit remains, the ISO will exercise its backstop procurement authority to cure the deficiency

4. The cost of ISO backstop procurement will be assigned first to the deficient LSEs Backstop procurement costs will be allocated to those LSEs that did not satisfy the flexible capacity requirements –Example of how this could work: Assume RA requirement is 50,000 MW and load following flexible requirement is 10,000 MW Percentage is 20% Cost of backstop would be allocated to LSEs with less than 20% of their RA portfolio as load following in proportion to their shortage relative to all LSE shortages Exact mechanism will be developed in ISO stakeholder process Page 4

5. Flexible capacity procurement will require other changes to RA program Flexible capacity requirements will be assessed on a monthly basis –Allows resources to have different flexible capacity amounts in different months of the year –Flexible needs may not correspond directly to total RA needs Year-ahead RA showings will be for the entire year, not just the 5 summer months –Ramping needs are a concern in the shoulder months when renewable output is high but load is low

6. The CAISO proposes three flexible capacity categories, and, therefore, requirements Maximum Ramping –To meet maximum expected continuous ramp need Load Following –To meet dispatch needs Regulation –To ensure sufficient regulation capacity

7. Resources can have flexible capacity that fulfills requirements in the different categories

8. Flexible Capacity Requirements for the 2013 RA Compliance Year For 2013 ISO proposes basing requirements on capabilities of 2012 RA Fleet –Simple basis for 2013 needs determination –ISO believes that maintaining the same flexibility as the 2012 RA fleet will ensure reliability in 2013 –Allows time for further analysis and stakeholder discussions to refine requirements for 2014 and beyond For 2013, to calculate flexible capacity requirements: –Calculate annual fleet flexibility capability for peak summer month –Apply factor for each month Factor is ratio of monthly load level to peak summer month load level Page 8

9. ISO 2013 RA Flexible Capacity Requirements Based on the 2012 RA Fleet Capabilities Maximum Ramping22,055 MW –Includes steam and gas turbines, excludes hydro 30,955 MW (if incl. hydro) Load Following 9,696 MW –Includes steam and gas turbines, excludes hydro Regulation 1,380 MW –Includes hydro Page 9 These values are illustrative and based on August 2012 annual showings

10. Requirements will be refined for 2014 and beyond To be determined by analysis of load (net of solar and wind) system variability –ISO is still studying and validating approach –Not just ramping need for the time period, but must account for: Units on forced outages Forecast errors Use limited resources Units on line vs. off-line –The load following and regulation requirement must account for both up and down capability –Flexibility requirements must link to obligations of units For example, resource may not self-schedule to qualify as a flexible capacity resource Page 10

11. Description- Maximum Ramping Units must be able to respond to ISO dispatch instructions –Intermittent generation, baseload units, and units that self-schedule do not count Requirement determined by largest continuous ramp –Total MW of ramp –Continuous ramp for 5 minute dispatch For 2013 propose to set requirement based on ramping capability from resources that are dispatchable and not use limited

12. Description- Maximum Ramping ( cont.) Each resource’s contribution to maximum ramping capacity over the time period is: –NQC - Pmin if the unit cannot start fast enough –NQC if the unit can start and get to its NQC in the ramp interval This may overstate the ramping capability of the fleet –Units requiring the full time to ramp their capacity can only provide their maximum ramp capacity if started ramping at the beginning of the ramp period –this must be accounted for in calculating the max ramping requirement in subsequent years Page 12

13. Description- Load Following For 2014 and beyond, requirement is the 15 minute ramping capacity need based on the ISO’s largest 15 minute net load ramp expected for the month For 2013 this value will be based on the amount of 15 minute ramp capability of the dispatchable 2012 RA fleet Each resource’s contribution is the minimum of NQC – Pmin RampRate * 15 minutes Where: RampRate is the unit’s MW/min weighted average ramp rate

14. Description- Regulation The regulation requirement is expressed in MW/min Units must be regulation certified by the ISO Ramp rate is based on a unit’s MW weighted average ramp rate as certified by the ISO

15. A unit may fulfill requirements in several flexible capacity categories- Example 1 Example 1: –NQC = 500 MW, Pmin = 300 MW –Ramp rate =10MW/min, regulation certified –3 hour start-up –Not self-scheduled Provides the following RA capacity: Generic:500 MW (NQC) Maximum Ramping500 MW (NQC, start < Max Ramp Time) Load Following150 MW (10 MW/min * 15 min) Regulation 10 MW/min Page 15

16. A unit may fulfill requirements in several flexible capacity categories- Example 2 Example 2: –NQC = 500 MW, Pmin = 200 MW –ramp rate =5 MW/min, not regulation certified –18 hour start-up –not self-scheduled Provides the following RA capacity: Generic:500 MW (NQC) Maximum Ramping300 MW (NQC - Pmin, start > Max Ramp Time) Load Following150 MW (10 MW/min * 15 min) Regulation 10 MW/min (not regulation certified) Page 16

17. Use limited resources need further consideration in the context of flexible capacity The ISO has not fully determined the potential impacts of Use Limited Resources (ULRs) on the flexible capacity requirements For this year, the ISO believes that the Energy Division proposal for revised MCC buckets that incorporate dispatchability may have potential to address ULRs –May require refinements to the definitions of some of the buckets Excluding hydro for 2013 should also be considered Page 17

18. ISO Proposed Flexibility Requirements and Potential Relationship to Energy Division Proposed Buckets Page 18 CurrentProposedISO Recommended Flexibility Requirements Bucket Name Monthly hours of operatio n Maximum cumulativ e percentag e of resources Operatio nal Characte ristics Hours of operation Maximum Cumulative percentage of resources Operation Characteristi cs Capacity (MW) Ramp Duration -15 minute ramp -Longest Duration (minutes) Average Speed (MW/min) Comment Bucket 4 All hours 100%NoneAll hours100%Dispatchable 7,736 20,044 15 660 516 30 Steam Turbines Bucket 341530.1%NoneAll hours>60% Non- dispatchable Bucket 217118.6%None Limited hours <50%Dispatchable 1,960 2,011 ~8,899 15 67 131 30 GT Hydro Bucket 18713.6%None Limited hours <25% Non- dispatchable 1515 1,830 7,403 Regulation These values are illustrative and based on August 2012 annual showings