Reserves…Where are we???

1. Reserves…Where are we??? • Service Schedule C • C-3.10 Seller shall be responsible for ensuring that Service Schedule C transactions are scheduled as firm power consistent with the most recent rules adopted by [WECC]. • WECC rules, or at least their interpretations, have changed. • “It is up to Purchasing Selling Entities to determine their level of acceptable deliverability risk and determine who has contingency reserve responsibility.” • Contingency Reserve Responsibility = CRR

2. Reserves Task Force Report • Identified 6 possible solutions. • Passage of Bal 002 was identified as one that would go a long way toward resolution. • Bal 002 passed WECC OC. • Must be approved by WECC Board, NERC, FERC. • Effective date: Possibly January 2009 (early), more likely mid-2009.

3. What does Bal 002 mean? • CRR depends on larger of MSSC or 3% generation plus 3% load. • Interchange transactions only affect CRR to the extent they affect generation or load. No longer a direct link between WSPP Schedule C interchange transactions and reserves beginning with implementation of Bal 002. • RTF recommends leaving existing language of Schedule C alone.

4. X 500 MW Gen 500 MW load Balancing Authorites A and B both have Contingency Reserve Requirements of 30 MW, which is 3% of net generation and 3% of net load. Y 500 MW Gen 500 MW load (.03 x 500) + (.03 x 500) = 30 (.03 x 500) + (.03 x 500) = 30

5. X 600 MW Gen 500 MW load Assume there is a sale from BA x to BA y of 100 MW. Y 400 MW Gen 500 MW load 100 MW G-F

6. X 600 MW Gen 500 MW load Assume there is a sale from BA x to BA y of 100 MW. If BA x increases its generation to supply the sale, its CRR will increase to 33 MW. Y 400 MW Gen 500 MW load 100 MW G-F (.03 x 600) + (.03 x 500) = 33

7. X 600 MW Gen 500 MW load Assume there is a sale from BA x to BA y of 100 MW. If BA x increases its generation to supply the sale, its CRR will increase to 33 MW. If BA y reduces its generation because of the import, its CRR will decrease to 27 MW. Y 400 MW Gen 500 MW load 100 MW G-F (.03 x 600) + (.03 x 500) = 33 (.03 x 400) + (.03 x 500) = 27

8. X 500 MW Gen 500 MW load Assume there is a sale from BA x to BA y of 100 MW. If BA x imports power to supply the sale, its CRR will not change since its generation will not change. 100 MW import Y 400 MW Gen 500 MW load 100 MW G-F (.03 x 500) + (.03 x 500) = 30 (.03 x 400) + (.03 x 500) = 27

9. Notice that the transaction was tagged as G-F. • Does not imply “schedule C Firm with reserves” • Schedule C defers to WECC, WECC definition of firm power exists in product codes. • More than one product considered “firm.”

10. WECC Product Codes • Energy • G-F: Firm Energy • G-FC: Firm Contingent. • G-FP: Firm Provisional Energy. • G-F1: Hourly firm energy. • G-EX: Exchange of Firm Energy. • G-NF: Non-firm energy • Reserves • C-SP: Capacity for spinning reserve. • C-NS: Capacity for non-spinning reserve. • C-RE: Capacity associated with energy recallable for reserves.

11. WECC Definition of Firm Energy • G-F: Firm Energy • This product may be curtailed only in the event of a reliability condition or to meet Seller’s public utility or statutory obligations for reliability of service to native load. A G-F product cannot be interrupted for economic reasons.

12. Brief WECC Explanations • Energy • G-FC: Firm Contingent. Tied to specific unit or source. Interruptible only if source is de-rated or down. Cannot be interrupted for economic reasons. • G-FP: Firm Provisional Energy. Buyer and seller determine allowable conditions for interruption. A G-FP product cannot be interrupted for economic reasons. • G-F1: Hourly firm energy. Buyer and seller determine allowable conditions for interruption providedthe PSE or LSE receives notification of the interruption at least 40 minutes prior to start of the operating hour. A G-F1 product cannot be interrupted for economic reasons.

13. Brief WECC Explanations Energy G-EX: Exchange of Firm Energy. An exchange of firm energy where by one entity delivers energy to another entity at one point on the grid and receives an agreed upon amount of energy from that entity at another point on the grid. G-NF: Non-firm energy - This product may be interrupted for any reason or no reason, without liability on the part of either the buyer or seller.

14. Brief WECC Explanations Reserves C-SP: Capacity for spinning reserve. On-Demand spinning reserve obligation/resource is a spinning reserve product that can be activated through the adjustment of a capacity e-tag. C-NS: Capacity for non-spinning reserve. On-Demand non-spinning reserve obligation/resource is a non-spinning reserve product that can be activated through the adjustment of a capacity e-tag. C-RE: Capacity associated with energy recallable within ten minutes of reserves activation. Source BA can claim it as a reserve resource.

15. WECC/WSPP Cross Reference

16. X 600 MW Gen 500 MW load Assume there is an IPP inside BA x that is making a sale to BA y of 50 MW. Depending on the relationship between IPP and BA x, the IPP generation may affect the CRR. Y 350 MW Gen 500 MW load 100 MW G-F IPP 50 MW G-FC (.03 x 650) + (.03 x 500) = 34.5 (.03 x 350) + (.03 x 500) = 25.5

17. WECC Product Code G-FC • Neither Source nor Sink BA’s Contingency Reserve obligation depends on the type of transaction. • Seller may or may not call upon own reserve group to cover lost generation for the period of the reserve group response. • Seller is not obligated to re-establish the schedule until the unit returns

18. Sale of source specific power • A sale of power from a single source is allowable under Schedule C. • Loss of the source unit does not remove the obligation to provide the power. • It is up to the parties to determine the level of performance risk they are willing to take. • Probability of performance may depend on the relationship between the generator and its Balancing Authority or Reserve Sharing Group. • Tagging issue associated with FC under WSPP Schedule C.

19. Upshot • Task Force believes Bal 002 will not require a change to Schedule C language. • Bal 002 provides clarity that energy is uncoupled from reserves. • WECC reserves products can be traded under WSPP Schedule C. • There continues to be concerns over within-hour interruptions, and damages associated with them.

20. Next Steps • WECC to revisit eTag 1.8 • Reserves Market • Educational effort continues • WECC ISAS • NWPP ATF • WSPP Workshop?

21. Reserves Market(Different Models) • Merchants buy and sell capacity used to satisfy reserve criteria under Schedule C, using WECC product codes. • WSPP develops ancillary service product approved by FERC. Like other products, market-based rate tariff specifically for ancillary services likely to be required. • WSPP develops standard language to be included in utilities OATTs.