The Northwest Power Pool Members ’ Market Assessment and Coordination Committee (MC) Initiative

1. WECC MIS/SIS Update The Northwest Power Pool Members’ Market Assessment and Coordination Committee (MC) Initiative Dan Williams Portland General Electric NWPP MC Phase 2 Policy Workgroup Co-Chair October 10, 2013

2. Agenda • Background • Problem Statement Overview • Phase 1 • Overview of Outcomes • Phase 2 • Assessing Paths Forward

3. Background • NW BA leadership met in March 2012 • Address renewable energy integration • Address regulatory pressure • FERC • States • Reduce operating costs • Control our own destiny

4. NWPP MC Phase 1

5. Bilateral Market Enhancement Opportunities • I-TAP/webExchange, • The Dynamic Scheduling Service, • Implementation activities related to FERC Order 764, • Encourage FERC to clarify and limit scope of the “Avista Rule” restrictions on ancillary services to allow a market for capacity products with sub-hourly dispatch to develop, and

6. Bilateral Market Enhancement Opportunities cont’d • Develop clear, workable policies and practices to enable the region to meet its near-term and long-term capacity needs (including ramping or “flexible” capacity) equitably and with fair compensation to those who supply capacity to meet the region’s needs. • Following Reserve Assistance Program

7. Energy Imbalance Market (EIM) • Market Participants voluntarily submit availability of resources, min/max of resources, ramp rates and price curves of Resources (hourly submission). • Market Operator Market System runs a security constrained (i.e. transmission) economic dispatch every 5 minutes to obtain the optimal economic and reliable solution that results in an Energy Imbalance (EIM Flow) within Market Operator market footprint.

8. EIM Market Operator Role • Market Operator provides asset owners the infrastructure necessary to offer their resources into the marketplace for use in providing Energy Imbalance. • Market Operator owns the responsibility of accounting for and financially settling all EIM amounts (revenue neutral).

9. EIM Transmission Usage • EIM provides more complete transmission usage; dispatch factors in transmission congestion; does not proactively manage transmission congestion to increase ATC or replace OATT construct. • The Energy Imbalance Market will use only the transmission system capability available in real-time after recognizing all flows resulting from scheduled uses, inadvertent interchange, and loop flow. • Transmission flows resulting from EIM redispatch are assigned “priority zero” (last on, first off).

10. NWPP Footprint Benefits ContinuumRelative Value of Single Year Benefits BAU v. EIM (Millions $ in 2020) • Conservative, annual benefits are clustering in the $70 to $80 million range Note: Each case is presented with a $42.00 per MWh and $57.50 per MWh (A1) value for excess hydro generation.

11. Phase 1 Market Operator Costs • Market Operator (MO) start-up costs and variable costs:

12. NW EIM Participant Costs Ranges(Estimates assume incremental EIM costs above Order 764 implementation costs. Low and High ranges reflect uncertainty associated with implementing Order 764.) $26,321,650 Notes:Data submissions represent 91% of participating load (MWH) modeled in 2020 E3 EIM case; Costs were estimated for Participants who did not submit cost estimates.

13. MC Phase 1 Summary Observations • Opportunity to reduce costs through market design considerations • Market Participant costs are bigger driver than Market Operator costs • Focus on ways to make foundational pieces valuable to as many participants as possible • Leverage foundational pieces and assets to gain multiple types of benefits, including reliability and other purposes

14. NWPP MC Phase 2

15. Phase 2 Overview • Aug – Oct 2013 (Nov report release) • Accelerated efforts to further assess path forward for NWPP Members • Retained Organizational Structure • Updated funding agreements • Recruited subject matter experts and PM • Identified near- and long-term benefits • Found leverage opportunities

16. Phase 2 Deliverables • Address outstanding qualitative questions • FERC Jurisdiction and Market Governance • Transmission treatment and visibility upgrades • Resource Sufficiency standards • Tailoring EIM to NWPP member realities • Produce actionable market fundamentals report • Foundational bilateral market improvements • EIM scoping and roadmap

17. Transmission Compensation Principles (example) • The goals of an EIM transmission usage policy are: • accord with Open Access Transmission Tariff cost-causation and undue discrimination principles, including protections for other transmission service classes; • avoid disrupting bilateral market activity, and; • ensure that incentives are not inadvertently created that may push load-resource and market optimization into the EIM time horizon simply to avoid day-ahead and hour-ahead transmission charges.

18. Resource Sufficiency Requirements (example) • The EIM does not reduce a participant’s need to carry sufficient flexible resources to balance its own system, but instead will improve the efficiency of dispatch for those carried reserves in real time. • Participants must enter each EIM operating day/hour “sufficient” in terms of quantity and quality of balancing reserves (aka, load following, or non-contingency reserves), respecting transmission constraints. • Associated EIM rules will need to be developed to provide sufficient incentive, visibility, and accountability to address resource sufficiency ahead of the operating day/hour.

19. Revisiting NWPP MC Objectives • Provide real-world benefits to NWPP footprint • Increased reliability for customers • More efficient management of power costs • Positive cost-benefit balance • Retain NWPP member self-determination • Create roadmap that allows for optionality • Assess EIM end-state for NWPP footprint • Navigate FERC Jurisdiction concerns

20. QuestionsDan Williamsdan.williams@pgn.com