1. Overview of Texas RE Reliability Standards Process and 2008 Year in Review Judith James Manager, Reliability Standards

2. 2 Judith James, Manager, Reliability Standards ●Judith James with Texas RE since April 2008 ●Manager, Reliability Standards since August 2008 ●B.S. Chemical Engineering and J.D. ●Licensed Professional Engineer and Attorney ●18 years in utility and related industry ●Primarily demand-side and environmental issues

3. 3 Sarah Hensley, Standards Development Coordinator ●Sarah Hensley with Texas RE since October 2008 ●Standards Development Coordinator ●B.S. Business/Advertising ●5 years business process and project coordinating ●Primarily semiconductor and utility industry

4. 4 What are reliability standards? ●Planning and operating rules that electric utilities follow to ensure the most reliable system possible. ●Developed by the industry using balanced, open, fair and inclusive process. ●Just and reasonable, not unduly discriminatory or preferential, and in the public interest. ●Technically sound, ensured by industry participation. ●Facilitated by NERC staff and managed by NERC committee.

5. 5 What are regional reliability standards? ●Standards that go beyond, add detail to or implement a NERC reliability standard, or that cover matters not addressed in NERC reliability standards. ●Example: SAR-002-TRE-01 UFLS Program

6. 6 What is a regional variance? ●Provides an alternative approach to meeting the same reliability objective as a NERC standard and is typically dictated by a physical difference. ●A regional standard that modifies a NERC Reliability Standard to address a unique circumstance requiring an exception to the North American-wide standard.  TRE Examples: SAR-003-TRE-01 CPS2 Waiver and SAR-004-TRE-02 CIP Sabotage Reporting and all of the LSE SARs.

7. 7 Why do we need regional standards and variances? ●Everyone is subject to NERC continent-wide standard. ●For consistency across the nation, if you are on BPS, must adhere to the continent-wide standard. ●However, NERC recognizes that there are regional differences, and allows for those regional differences when:  We are doing something better (more stringent) than the continent-wide standard, or  It is absolutely necessary due to the fact that we are so different from other regions in how our system operates.  We wish to supplement national standard with more detail.

8. 8 Regional Standards are not just MORE standards ●Regional Standards and Variances are actually a way to make the national standard BETTER for us in our region. ●Regional Standards and Variances are not just another layer of standards on top of existing national NERC standards. Not just more rules to follow. ●The regional standards development process is YOUR empowerment to make the continent-wide standards FIT our region better—within some limits of course.

9. 9 Texas RE Standards Development Process Exhibit C of the delegation agreement is the Texas RE Reliability Standards Development Process. Locate the Texas RE standards development process (SDP) in the Reliability Standards section, under Planning and Procedures.

10. 10 Texas RE Standards Development Process ●Development Process is facilitated and overseen by Texas RE and managed by the Reliability Standards Manager with the Reliability Standards Committee.

11. 11 Key Players in the Texas RE Standard Development Process ●Originator of Standards Authorization Request (SAR) ●Reliability Standards Committee (RSC) ●Reliability Standards Manager (RSM) ●Reliability and Operations Subcommittee (ROS) is stakeholder group that addresses and focuses on reliability issues in the ERCOT Region ●Standard Drafting Team (SDT) ●Registered Ballot Body (RBB) and Ballot Pool (BP) ●Texas RE Board of Directors (BOD) ●North American Electric Reliability Corp. (NERC) ●Federal Energy Regulatory Commission (FERC)

12. 12 Texas RE Standards Development Process in Brief  SAR—Request for a regional standard—anyone impacted by BPS in ERCOT may request.  RSC approves SAR.  SDT—Drafting team (made up of subject matter experts) is nominated and then approved by ROS.  The SDT drafts the standard.  The public comments—anyone may comment.  The Ballot Pool (sub group of RBB) votes.  The Texas RE Board approves.  NERC and FERC approve, and the standard is implemented in the region.

13. 13 Texas RE Standards Development Process in Detail OriginatorRSC Process Owner ROS Subject Matter Experts SAR RSM Oversees Everything SDT

14. 14 Texas RE Standards Development Process in Detail RSC Posting for Public Comment SDT RSM Oversees Everything

15. 15 Texas RE Standards Development Process in Detail RSC Goes to RBB to form BP SDT RSM Oversees Everything

16. 16 Texas RE Standards Development Process in Detail RSC Texas RE BOD BP Votes RSM Oversees Everything

17. 17 Texas RE Standards Development Process in Detail

18. 18 Meetings in 2008 ●Reliability Standards Committee8 ●SAR-001 ERCOT ISO Voting7* ●SAR-002 UFLS3 ●SAR-003 CPS2-BAL-0018* ●SAR-004 CIP-001 Sabotage Reporting0 ●SAR-005, 006, 007 LSE1 ●Workshops (with Compliance)2 ●Total29 *Does not include meetings via phone only.

19. 19 Texas RE Standards Activities for 2008 ●Posted SARs:  SAR-001: Process Change to Give ERCOT Vote in Process  SAR-002: UFLS Regional Program  SAR-003: FERC Order to Replace ERCOT CPS2 Waiver  SAR-004: CIP-001 Sabotage Reporting  SAR-005: Remove LSE from EOP-002  SAR-006: Remove LSE from MOD-017-018  SAR-007: Remove LSE from MOD-019-021

20. 20 SAR-001: Provision to Give ERCOT a Vote in the Standards Development Processes  In the original standards process that was approved in the delegation agreement, ERCOT did not have a vote in the processes along with other impacted stakeholders.  SAR-001 addresses this process change by allowing ERCOT to vote.  RSC in December voted to accept for moving forward to RBB with ¼ vote.  SAR-001 also makes some other typographical changes and edits for clarification.  This standard is posted for voting to begin January 19, 2009.

21. 21 SAR-002: Development of a Regional Under Frequency Load Shedding Program  Fulfills a NERC directive to develop the technical details of the UFLS regional standard to support a new continent-wide standard (PRC-300-CWS-1).  In addition, this team reviewed and commented appropriately on the continent-wide standard on behalf of the region.  On hold until continent-wide decision is made on whether to proceed with continent-wide or regional.

22. 22 SAR-003: Replace ERCOT Waiver for CPS2  Addresses the FERC-directed modification to the ERCOT regional difference to Requirement 2 in Reliability Standard BAL-001-0, Real Power Balancing Control Performance, CPS2 Waiver.  The detail of the determination is found in FERC Order No. 693, paragraphs 313 through 315.  Initial work product of the SDT is posted.  Next meeting of the team is February 5, 2009.  Expect posting of draft standard for public comment in first quarter 2009.

23. 23 SAR-004: CIP-001 Sabotage Reporting  Proposed to apply to additional entities GO, TP, and TO to disallow for any possible communication gap and prevent absence of reporting in the case of such an event.  This SAR was presented twice to the RSC, but was not approved for moving forward to public comment because of claimed duplicate coverage under ERCOT Protocols and Guides. TRE disagreed.  TO issue will be addressed by planned registration of TOs as LSEs for CIP-001.  SAR-004 to be re-drafted and re-presented to the 2009 RSC with more emphasis on potential reliability gap where GOP does not own generating facility, so GO needs to be in the loop.

24. 24 SAR-005, 006, 007: Remove LSE Applicability-- Background  FERC Order requiring LSE registration: October 16, 2008 Order in the Direct/Sempra/Strategic registration cases (Docket Nos. RC07-4, 6 and 7).  NERC’s short term solution was to register DPs as LSEs.  Because, Texas State Law: “transmission and distribution utility shall not provide competitive energy services”; therefore, certain LSE requirements cannot be performed by the DP.  LSE requirements are fulfilled for these standards by other entities who are already registered and have committed to fulfilling these requirements and take complete responsibility for them e.g. ERCOT as single BA for region.

25. 25 SAR-005, 006, and 007 Remove LSE Applicability ●Therefore, Texas RE Regional Variance is proposed to remove LSE Applicability from six NERC standards, MOD-017-021 and EOP-002. ●MOD-017-018--ERCOT as the single Planning Authority (PA) and Resource Planner (RP) provides the data required by MOD-017 and 018 to NERC and the Texas RE for the entire ERCOT Interconnection. The process for ERCOT to obtain the data from the market participants is in the ERCOT Protocols and Operating Guides. ERCOT has accepted responsibility for all requirements in these standards.

26. 26 SAR-005, 006, and 007 Remove LSE Applicability ●MOD-019-021--ERCOT is the only TOP for the ERCOT Interconnection, and as such, receives information directly from the TPs through their meters and not the DPs. TPs in the ERCOT Interconnection are already registered for this standard and are currently performing the requirements of these standards and accept responsibility for them. ●EOP-002--Only ERCOT has the information available to them to initiate EEAs for the region, and accepts responsibility for these requirements. ERCOT is already registered for this standard as the single BA and RC for the region.

27. 27 Reliability Standards Tracking Site Launched in 2008

28. 28 SARs on Reliability Standards Tracking Site

29. 29 SARs on Reliability Standards Tracking Site

30. 30 Reliability Standards Informational Page Revised

31. 31 Regional Standards Information Revised

32. 32 Reliability Standards Committee Page Revised

33. 33 Standard Drafting Team Information Revised

34. 34 Standard Drafting Teams Pages Added

35. 35 Texas RE Web Site Roll-out—First Quarter 2009 ●Texas RE will have its own Website in 2009. ●Roll-out expected in the next couple of months. ●If you have suggestions of standards information that you would like to see on the new Website, please email those to rsm@texasre.org

36. 36 Future Proposed Standards – On Hold ●Disturbance Monitoring ●Special Protection Systems ●Operating Reserves ●These were put forth at the Regional Reliability Standards Working Group in 2007 as Standards that would possibly need regional counterpart (along with UFLS Program). ●On hold with continent-wide SDTs leaning in direction of continent-wide standard with a variance only.

37. 37 Other Things RSM has Planned for Standards 2009 ●Write Regional Standards Process Manual ●Hold Standards Training Workshop (separate from Compliance Workshop) ●More participation in NERC Standards Committee to stay abreast of NERC Standards Projects and Standards Under Development ●More standards presentations to industry groups and trade organizations. ●Open to suggestions.

38. Questions?