BAL-002-WECC-1 Technical Workshop

1. BAL-002-WECC-1 Technical Workshop Overview of proposed standard and issues raised in comments.

2. Agenda • Review of where we are and how we arrived here. • Review of issues raised in comments

3. BAL-002 Overview • Drafting team modified requirements to clarify what is expected • Included language related to exclusion/inclusion of generation and load • Also reformatting to address Quality Review concerns

4. Where are we today • FERC accepted 8 regional standards with the understanding WECC would address the issues raised related to their shortcomings • FERC states in the order that “WECC is still committed pursuant to its Expedited Process to completing the development of permanent replacement standards.” • This is the last standard still needing to be replaced.

5. FERC Order on Remand • The order included 3 directives • Justify longer reserve restoration period or keep it at 60 minutes (staying at 60 minutes) • Develop revised language to clarify use of Firm Load as contingency Reserve only if RC has declared EEA3 (more to follow) • Remove the WECC Regional Definitions for Spinning Reserve and Non-Spinning Reserve (removed WECC terms and inserted NERC terms)

6. Other issues in the FERC Order • Order told WECC to consider the issues raised by NV Energy and the QF Parties • The drafting team has considered the issues raised. • The proposed standard reflects treatment that the team believes are appropriate to address these issues while still ensuring that reliability needs are addressed.

7. Review of Draft Standard • Four proposed Requirements • R1 defines minimum Contingency Reserve Requirement • R2 requires sinks to carry additional reserve if they are purchasing energy associated with the sellers reserves. • R3 requires source to carry additional reserves if a call on energy is sold • R4 requires half of R1 to be Operating Reserves – Spinning.

8. Purpose and Effective Date • Purpose: To specify the quantity and types of Contingency Reserve required • Effective Date: On the first day of the third quarter after receipt of applicable regulatory approval.

9. Requirement R1 • R1. Except within the first 60 minutes following an event requiring the activation of Contingency Reserves, each Balancing Authority that is not a member of a Reserve Sharing Group and each Reserve Sharing Group shall maintain a minimum amount of Contingency Reserve that is: Violation Risk Factor: High] [Time Horizon: Real-time operations] • 1.1 Thegreater of the reserve amounts below: • An amount of Contingency Reserve equal to the loss of the most severe single contingency; • An amount of Contingency Reserve equal to the sum of three percent of Load plus three percent of generation.

10. Requirement R1 Cont. • 1.2 Comprised of any combination of the reserve types specified below: • Operating Reserve – Spinning • Operating Reserve - Supplemental • Interchange Transactions designated by the source Balancing Authority as Operating Reserve – Supplemental • Reserve held by other entities by agreement that is deliverable on Firm Transmission Service. • A resource that can be deployed within ten minutes. • Load, including Demand response resources, Demand-Side Management resources, Direct Control Load Management, Interruptible Load or Interruptible Demand, or any other Load made available for curtailment by the Balancing Authority or the Reserve Sharing Group via contract or agreement. • All other Load, not identified above, once the Reliability Coordinator has declared an Energy Emergency Alert 3. • 1.3 Based on real-time hourly load and generating energy values averaged over each clock hour (excluding Qualifying Facilities (18 C.F.R.§ 292.101) as addressed in FERC Order 464); • 1.4 Fully deployable within 10 minutes.

11. Measurement M1 • M1. Part 1.1 • Evidence of compliance with Requirement 1, Part 1.1 may include, but is not limited to, documentation that reserves were maintained in an amount that is the greater of the two amounts specified in Requirement 1, Part 1.1, except within the first 60 minutes following an event requiring the activation of Contingency Reserves. Attachment A is a practical illustration showing how the generation amount is calculated under Requirement R1. • For purposes of Dynamic Schedules, additional evidence of compliance with Requirement 1, Part 1.1 may include, but is not limited to, documentation showing a reciprocal acknowledgement as to which entity is carrying the reserves. This transfer may be all or some portion of the physical generator and is not limited to the entire physical capability of the generator. • For purposes of Pseudo-Ties, additional evidence of compliance with Requirement 1, Part 1.1, may include, but is not limited to, documentation accounting for the transfers included in the Pseudo-tie.

12. Measurement M1 cont. • Part 1.2 • Evidence of compliance with Requirement 1, Part 1.2 may include, but is not limited to documentation that reserves were comprised of the types listed in Requirement 1, Part 1.2 for purposes of meeting the Contingency Reserve obligation of Requirement 1. • Part 1.3 • Evidence of compliance with Requirement 1, Part 1.3 may include, but is not limited to documentation that Contingency Reserve amounts are based upon load and generating data averaged over each clock hour and excludes Qualifying Facilities (18 C.F.R.§ 292.101) as addressed in FERC Order 464, • Part 1.4 • Evidence of compliance with Requirement 1 Part 1.4 may include, but is not limited to, documentation that the reserves maintained to comply with Requirement 1, Part 1.4 are fully deployable within 10 minutes.

13. Requirement R2 • Except within the first 60 minutes following an event requiring the activation of Contingency Reserves, each [Entity] shall carry an amount of Operating Reserve, in addition to the minimum Contingency Reserve amount identified in Requirement R1 above, equal to the amount of Operating Reserve–Supplemental for any Interchange Transaction designated as part of the Source Balancing Authority’s Operating Reserve–Supplemental or Source Reserve Sharing Group’s Operating Reserve–Supplemental. [Violation Risk Factor: High] [Time Horizon: Real-time operations

14. Measurement M2 • Evidence of compliance with Requirement 2 may include, but is not limited to documentation that each Sink Balancing Authority maintained additional reserves in an amount that is equal to or greater than that specified in Requirement R2, based upon data averaged over each clock hour, except within the first 60 minutes following an event requiring the activation of Contingency Reserves.

15. Requirement R3 • Each [Entity] shall carry an amount of Operating Reserve, in addition to the minimum Contingency Reserve amounts identified in Requirement R1 above, equal to the amount and type of Operating Reserves for any Operating Reserve transactions for which it is the Source Balancing Authority or Source Reserve Sharing Group. [Violation Risk Factor: High] [Time Horizon: Real-time operations]

16. Measurement M3 • Evidence of compliance with Requirement 3 may include, but is not limited to, documentation that each Source Balancing Authority and each Source Reserve Sharing Group maintained additional reserves in an amount that is equal to or greater than that specified in Requirement R1.

17. Requirement R4 • Each [Entity] shall maintain at least half of the Contingency Reserve identified in Requirement 1 as Operating Reserve–Spinning that meets both of the following reserve characteristics: [Violation Risk Factor: High] [Time Horizon: Real-time operations] • 4.1 Reserve that is immediately and automatically responsive to frequency deviations through the action of a governor or other control system, • 4.2 Reserve that is capable of fully responding within ten minutes.

18. Measurement M4 • Evidence of compliance with Requirement 4 may include, but is not limited to, documentation that each Balancing Authority that is not a member of a Reserve Sharing Group and each Reserve Sharing Group maintained at least half of the Contingency Reserve, identified in Requirement 1, as Operating Reserve–Spinning that meets both of the reserve characteristics specified in Requirement 4, Part 4.1 and Part 4.2.

19. Primary Issues Raised in Comments • Level of reserves • Utilization of non-traditional resources • Determination of Reserve Level • What generation to include for which BA • When to use Firm Load as Reserves, EEA2 or EEA3

20. Level of Reserve • WECC statement of need for all standards filed in 2007 was accepted by FERC. • In order to reduce the level of reserves required in the standard, detailed studies would be required. • The drafting team recommends the methodology previously approved by the WECC OC and WECC Board of Directors. FERC said they would accept this method.

21. Non-traditional Resources • Comments continue to raise issues related to non-traditional resources and how they can qualify as a reserve resource • The drafting team has attempted to word the requirement to allow as much flexibility as possible • There are still some issues related to the NERC definitions. • Load and generation are recognized, storage devices are not.

22. How to Address? • It is clear that the drafting team cannot list everything that may be used in the future for reserves • The drafting team cannot change the NERC definitions • The drafting team has attempted to state what is needed and leave as open as possible the means by which an entity could make the determination or get clarification from WECC/NERC

23. Determination of Reserve Level • Drafting team has revised the language to clarify when it is appropriate for generation or load to be excluded from a Balancing Authority’s calculation. • The drafting team recognized that, as defined in the NERC Glossary, it is appropriate to allow BAs to consider Dynamic Transfers when determining their generation and load.

24. Reserve Requirement • If a BA is utilizing a Dynamic Schedule for generation or load, both source and sink BAs must agree to treatment and document that agreement for audit purposes. • This ensures that all applicable generation and loads are included in one BA/RSG • Block schedules do not allowed transfer of reserve requirement because the schedule does not change automatically when the generator is lost.

25. QF Generation • FERC Order 464 addresses treatment of QF generators for determination of reserve requirements. • Drafting Team interpretation of FERC order – Exclusion of a QF is allowed if the QF has a contract for backup service • This exclusion has been included to ensure consistent treatment by auditors.

26. Utilization of Firm Load as Reserve • FERC Order states that an entity utilizing firm load as contingency reserve without an EEA3 being declared would be in violation of EOP Standard. • FERC ordered WECC to develop clarifying language. • The drafting team has developed appropriate language.

27. Comments on EEA issue • Comments continue to disagree with FERC that the EEA 2 would be appropriate rather than EEA3 because EEA2 says that deficient entity is carrying reserves below requirement. • The following slides will go through the issue and provide an example.

28. Attachment 1 EOP-002-2.1 • EEA1 • All available resources are in use • Concerned about sustaining reserve requirement • Non-firm wholesale sales have been curtailed • May be caused by loss of unit or other factors such as missed load forecast • Note that reserves are still maintained but there is concern about sustaining.

29. Attachment 1 EOP-002-2.1 • EEA2 – Load management procedures are in effect • Operating Reserves. Operating reserves are being utilized such that the Energy Deficient Entity is carrying reserves below the required minimum or has initiated emergency assistance through its operating reserve sharing program. • Note: This is probably a violation of the BAL-002 standard after 60 minutes.

30. Attachment 1 EOP-002-2.1 • EEA3 – Firm load interruption imminent or in progress • FERC interprets use of firm load as reserve equivalent to saying that interruption is imminent.

31. EEA Example Slide 1 • In Day-Ahead process, BA is required to plan to meet capacity and energy reserve requirements. • BA plans its system to meet all expected needs. • During the operating day, the loss of a couple of units due to forced outage and load forecast error causes BA to re-evaluate position • BA requests EEA 1 be declared.

32. EEA Example Slide 2 • Now, the BA loses another unit • Reserves are activated to respond to contingency • For 60 minutes, the level of reserve may be below what is required. • BA attempts to purchase energy. Due to transmission constraints, purchases are limited.

33. EEA Example Slide 3 • The BA asks the RC to move to EEA2 sometime after the Disturbance Recovery Period (15 minutes). • During the Reserve Restoration Period, the BA is unable to locate additional resources to serve its loads and allow it to restore reserves. • There is now 15 minutes left for the BA to restore its reserves or violate BAL-002

34. EEA Example Slide 4 • Options Available to the BA • Violate BAL-002 and not restore reserves while remaining at an EEA2 • Declare EEA3, use firm load as reserves and curtail that load as needed to respond to the next contingency if it happens • Curtail firm load so reserves can be restored (by definition, this should be an EEA3 since firm load has been interrupted)

35. Options Available • As the drafting team sees this issue, there are two choices: • Do as FERC directed and put clarifying language in the standard to require EEA3 before use of firm load as reserve • Remove the option of using firm load as a reserve • Feedback from this workshop will help direct the drafting team.

36. Discussion on EEA issue Is the drafting team missing anything? Is this a BAL-002 issue or an EOP-002 issue?

37. Other Issues • Are there other issues that need to be discussed in detail at this time? • Are there questions related to the posted standard that can be addressed here?

38. Where we go from here • Comments are due December 15 • Repost for Comment late December/early January 2012 • NERC QR in mid-February • Post for OC Approval at the March Meeting

39. Questions?