Revision to ISO New England Operating Procedure No. 15 ISO New England Compliance Procedure

1. Revision to ISO New England Operating Procedure No. 15ISO New England Compliance Procedure Reliability Committee October 20, 2010, Westborough, MA Richard W. Burke ISO New England, Reliability & Operations Compliance

2. Overview • ISO-NE needs to either retire/update Operating Procedure 15 to reflect fact that: • NPCC, as an ERO/FERC-approved Regional Entity, conducts compliance monitoring and enforcement with NERC Standards; • ISO-NE, as an “Area”, continues to conduct compliance reviews of NPCC Criteria. • ISO-NE would like to update OP15 on same timetable as NPCC revises its Criteria Documents to reflect the split relationship between NERC Standards & NPCC Criteria. • ISO-NE intends to continue to partner with NPCC to conduct New England-specific compliance workshops with NPCC’s bi-annual compliance workshops.

3. Background • OP 15 - ISO-NE Compliance Procedure • This Procedure applies to the ISO and Market Participants • Various documents obligate ISO and the Market Participants to comply with all NPCC Criteria and ISO compliance requirements. These include the NPCC Directories, NPCC “A” Documents, ISO Tariff, Transmission Operating Agreement, Market Participant Service Agreements, Manuals, and Operating and Planning Procedures. • Compliance Hierarchy • As a general rule, reporting and assessment are accomplished in a hierarchical manner; market participants report to the ISO, which assesses their compliance and the ISO reports to NPCC, which assess “Area” compliance.

4. Revisions • OP 15 - ISO-NE Compliance Procedure • The purpose of this Procedure is to provide the ISO and the ISO Market Participants, with an overview of and an outline for satisfying ISO and NPCC compliance requirements including provisions for non-monetary sanctions and an appeals process of ISO determinations. • This Procedure will no longer refer to Reliability Standards or to the Compliance Monitoring and Enforcement Program (“CMEP”) of the North American Electric Reliability Corporation (“NERC”) or to the CMEP of NPCC to the extent that NPCC enforces NERC and/or Regional Reliability Standards pursuant to the authority delegated to it by NERC. • This Procedure should not be relied upon for guidance in complying with NERC and/or Regional Reliability Standards, as those Standards are approved by the Commission.

5. Revisions (continued) • OP 15 - ISO-NE Compliance Procedure • The Annual ISO-NE Compliance Seminar stipulated by this procedure will be eliminated. • NPCC provides two semi-annual workshops (New England & New York locations). • ISO-NE will continue to use these forums to disseminate New England specific NPCC Criteria and ISO-NE specific requirements to our Market Participants. • The annual briefing of the RC stipulated by this procedure has not been conducted for many years and will be discontinued going forward. • This provision was in effect during the period when ISO-NE conducted all Compliance Assessments for NERC Standards and NPCC Criteria. With the formation of the ERO confidentiality provisions dictate that the ISO not reveal the identity of entities given the possible elevation of ISO findings to NERC violations.

6. Revisions (continued) • OP 15 - ISO-NE Compliance Procedure • The Procedure will reflect the pending NPCC Criteria Compliance and Enforcement Program: • This NPCC compliance program includes monitoring, assessing and enforcing compliance with: • More stringent or more prescriptive NPCC Criteria requirements, through the implementation of the NPCC Criteria Compliance and Enforcement Program (CCEP) described in the process document (CCEP-1). • The more stringent or more prescriptive NPCC Criteria requirements reflect the unique operational and planning aspects of the BPSwithin the NPCC Region and they are included in the NPCC “A” documents and their successors, the NPCC Directories.

7. NPCC Criteria Compliance and Enforcement Program (CCEP) • NPCC CCEP is near completion • By virtue of their membership with NPCC and their obligations under the NPCC Bylaws, Full Members are obligated to comply with all applicable requirements of the more stringent or more prescriptive NPCC Criteria. Furthermore, these criteria are also applicable to non-members of NPCC who own or operate facilities that connect to a Full Member’s system. • It is the responsibility of the Full Member whose system is used to connect a non-Member system to the BPS to include in its arrangements or contractual agreements with non-Members whose system could have a significant adverse impact on service reliability on the interconnected BPS, terms that are consistent with Criteria established by NPCC, NERC, or other Regional Entities established in areas in which the facilities used for such arrangements are located.

8. NPCC CCEP (continued) • Although required to comply with all applicable NPCC criteria, Full Members need to report compliance only on the subset that is actively monitored for compliance. • The NPCC Compliance Staff will develop and propose a draft annual CCEP Implementation Plan to the Compliance Committee (CC) for approval. This implementation plan will identify those NPCC Criteria that will be actively monitored and require compliance reporting in the upcoming CCEP compliance year. • The identification of these Criteria will be based on consultation between the NPCC Compliance Staff and the NPCC Task Forces. Once approved by the CC, the annual CCEP Implementation Plan will be presented to the NPCC Reliability Coordinating Committee (RCC) for approval at the November meeting prior to the designated CCEP compliance year.

9. Next Steps NPCC to finalize CCEP (expected later 4Q, 2010) ISO-NE to present Reliability Committee with redline of OP15, or new version (expected later 4Q, 2010). ISO-NE to continue to administer compliance monitoring, as an Area, with NPCC Criteria.