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RTO West Proposal

RTO West Proposal. OVERVIEW OF RTO WEST STAGE 1 AND STAGE 2 PROPOSAL ELEMENTS AND FERC RESPONSES. RTO West Proposal Overview. RTO West Major Proposal Elements in Two Main Filings : “Stage 1” filing submitted to FERC October 23, 2000 “Stage 2” filing submitted to FERC March 29, 2002

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RTO West Proposal

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  1. RTO West Proposal OVERVIEW OF RTO WEST STAGE 1 AND STAGE 2 PROPOSAL ELEMENTS AND FERC RESPONSES

  2. RTO West Proposal Overview • RTO West Major Proposal Elements in Two Main Filings: • “Stage 1” filing submitted to FERC October 23, 2000 • “Stage 2” filing submitted to FERC March 29, 2002 • FERC Orders Responding to RTO West Proposal Filings • Order issued April 26, 2001 indicating that, with minor changes, the proposal for RTO West met the independence and scope and regional configuration characteristics of Order 2000 • Order issued September 18, 2002 approved most other elements of RTO West proposal • Order on rehearing issued December 20, 2002 clarified various matters 1

  3. RTO West Proposal • October 23, 2000 Stage 1 Filing • The Stage 1 filing utilities were: Avista Corporation, Bonneville Power Administration, Idaho Power Company, The Montana Power Company, Nevada Power Company, PacifiCorp, Portland General Electric Company, Puget Sound Energy, Inc., and Sierra Pacific Power Company • March 29, 2002 Stage 2 Filing • The Stage 2 filing utilities were: all of the organizations listed above, plus British Columbia Hydro and Power Authority (also, at the time of the Stage 2 filing, The Montana Power Company had become NorthWestern Energy, L.L.C.) 2

  4. RTO West Proposal • The Stage 2 filing built on Stage 1, seeking affirmation of FERC’s previous action finding that the proposal met independence and regional scope and configuration requirements • The Stage 2 filing sought FERC’s declaratory action on all of the remaining Order 2000 characteristics and functions (operational authority; short-term reliability; tariff administration and design; congestion management; parallel path flow; ancillary services; OASIS, ATC, and TTC; market monitoring; planning and expansion; and interregional coordination) 3

  5. RTO West Proposal • Independence (Order 2000 Characteristic 1) • RTO West under the management authority of a nine-member Board of Trustees; each trustee must be independent of power market participants and transmission owners • The RTO West Board of Trustees is elected by representatives of five member classes: (1) major transmitting utilities class; (2) transmission-dependent utilities class; (3) nonutility entities class; (4) retail customer class; and (5) a class made up of state and provincial energy authorities, tribal utility regulatory authorities, and unaligned entities (which could include various types of pubic interest organizations). • Stage 2 filing proposed amendments to the Bylaws consistent with FERC’s instructions on the Stage 1 proposal and to make other minor improvements 4

  6. RTO West Proposal • Scope and Regional Configuration (Order 2000 Characteristic 2) • RTO West will encompass transmission facilities of the U.S.-based filing utilities (Avista Corporation, Bonneville Power Administration, Idaho Power Company, Nevada Power Company, NorthWestern Energy, L.L.C., PacifiCorp, Portland General Electric Company, Puget Sound Energy, Inc., and Sierra Pacific Power Company) • Efforts to accommodate participation of entities that are not FERC-jurisdictional, including Canadian transmission owners and operators 5

  7. RTO West Proposal • Operational Authority (Order 2000 Characteristic 3) • Operational authority derived through the RTO West Transmission Operating Agreement • RTO West has the obligation to use all reasonable efforts to cause interconnected load and generators to respond during system emergencies • RTO West will perform the security coordinator (now call reliability coordinator) function for its control area; this is currently expected to be carried out through a contractual arrangement with the region’s existing security coordinator, Pacific Northwest Security Coordinator (“PNSC”) 6

  8. RTO West Proposal • Short-Term Reliability (Order 2000 Characteristic 4) • RTO West will operate a single control area that will encompass all of the control areas previously operated by the transmission owners participating in RTO West • RTO West will have exclusive authority for receiving, confirming, and implementing all interchange schedules • RTO West will have the authority to take actions necessary to maintain the reliability, security, and stability of the RTO West transmission system • RTO West will have authority to approve or disapprove scheduled outage requests for the facilities over which it has operational control 7

  9. RTO West Proposal • Tariff Administration and Design (Order 2000 Function 1) • RTO West has exclusive authority to administer its own tariff • RTO West must implement the “license plate” Company Rate pricing structure during the eight-year Company Rate Period • After the end of the Company Rate Period, RTO West will have the authority (subject to fulfilling revenue-requirement obligations to its transmission owners) to determine the rate design for its tariff • FERC has previously approved (for other proposed RTOs) the use of a transitional rate structure to avoid unwarranted cost shifting 8

  10. RTO West Proposal • Congestion Management Proposal (Order 2000 Function 2) • Provides for a market-based system of managing congestion from the beginning of RTO West commercial operations; relies on voluntary bidding process open to generators and dispatchable loads • Will generate nodal prices and manage congestion based on security-constrained, least-cost redispatch • Allows customers with pre-existing rights to choose whether to convert to RTO West service • Provides for two forms of financial congestion hedges: CTRs (catalogued transmission rights, based on pre-existing transmission rights) and FTOs (financial transmission options) 9

  11. RTO West Proposal • Parallel Path Flow (Order 2000 Function 3) • Expectation that programs previously developed through the WSCC membership process (such as WSCC Unscheduled Flow Mitigation Plan and path rating methodology) will continue • Congestion management and scheduling based on actual flows and financial rights, rather than “contract paths” and physical rights, will also help reduce unscheduled flows generated from within RTO West • Work to promote greater compatibility in congestion management and scheduling practices among neighboring RTOs in the West should also help 10

  12. RTO West Proposal • Ancillary Services (Order 2000 Function 4) • Designed to complement and integrate smoothly with the RTO West congestion management system; builds on existing bilateral markets for ancillary services • RTO West will promote, to the extent feasible, a fully competitive market for the procurement of ancillary services • RTO West will act as the provider of last resort and will, at least initially, operate a real-time balancing market • Transmission customers also may opt for self-supply or self-tracking 11

  13. RTO West Proposal • OASIS, TTC, and ATC function (Order 2000 Function 5) • RTO West will maintain and administer its own OASIS site and will be responsible for calculation of Total Transmission Capability (TTC) and Available Transmission Capability (ATC) (although the concept of “ATC” does not exactly fit in an “accept-all-schedules” congestion management model with financial rights) • Work through Seams Steering Group - Western Interconnection (“SSG-WI”) to move toward a single point of access to all OASIS sites for customers that wish to schedule transactions across any of the three RTOs proposed for the West: the California ISO, RTO West, and WestConnect 12

  14. RTO West Proposal • Market Monitoring Proposal (Order 2000 Function 6) • Independent, objective monitoring of: • The performance and efficiency of RTO West markets and services (including any impediments to competition and economic efficiency) • The conduct of market participants, transmission owners, and RTO West • The effect of the operation and use of the RTO West transmission system on competitive conditions in the region • The adequacy and effectiveness of any market design, rule, procedure, or action that affects market competitiveness or efficiency 13

  15. RTO West Proposal • Market Monitoring Proposal (Order 2000 Function 6) (cont’d) • Authority to report directly to FERC; no enforcement authority • SSG-WI efforts to develop a single market monitoring unit for the West 14

  16. RTO West Proposal • Planning and Expansion Proposal (Order 2000 Function 7) • RTO West will have ultimate authority for planning its controlled transmission facilities - based on operational security and transmission adequacy standards • Planning through inclusive public process that encourages and supports market-based expansion decisions and provides for coordination with appropriate state and provincial authorities • Designed to result in market decisions about the need for system expansion that are rational and economically sound, taking into account non-transmission alternatives • RTO West has authority to arrange for transmission expansions, additions, and upgrades - based on transmission adequacy standards and other “backstop”authority under the RTO West Transmission Operating Agreement 15

  17. RTO West Proposal • Interregional Coordination (Order 2000 Function 8) • SSG-WI is the focus of RTO West’s approach to interregional coordination • Efforts underway or planned for SSG-WI: • Coordination of West-wide system expansion planning • Development of West-wide market monitoring • Exploring pricing reciprocity among western RTOs • Support for development of common and compatible systems and services and market design models 16

  18. RTO West Proposal • Interregional Coordination (Order 2000 Function 8) (cont’d) • Efforts underway or planned for SSG-WI (cont’d): • Coordinate development of market interface and electric business practice standards for the Western Interconnection • Inter-RTO discussions on sharing systems, procuring compatible hardware and software, and creating mutually beneficial service functions • Coordination with and support of state and provincial policies 17

  19. FERC Response to RTO West Proposal • Overview: • FERC approved most elements of the RTO West proposal • FERC required additional details and some modifications • FERC stated that “with some modification and further development of certain details, [the RTO West proposal] will satisfy not only the Order No. 2000 requirements, but also can provide a basic framework for a standard market design for the West.” 18

  20. FERC Response to RTO West Proposal • Independence (Order 2000 Characteristic 1) • FERC accepted amendments submitted with Stage 2 filing; affirmed that RTO West’s revised Bylaws and Articles of Incorporation continue to meet the Order 2000 independence requirement • FERC encouraged filing utilities to consider, with input from states, a separate state representatives committee that would allow more effective input into RTO West’s decision making process • In its December 20, 2002 order on rehearing, FERC recognized the need to balance RTO independence with other parties’ needs to protect their legal obligations and interests – deferred action on provision in RTO West Transmission Operating Agreement that would “trump” conflicting tariff provisions until FERC receives further information and comment 19

  21. FERC Response to RTO West Proposal • Scope and Regional Configuration (Order 2000 Characteristic 2) • FERC’s response to Stage 2 filing made no change from Stage 1 approval of overall scope • FERC strongly encouraged BPA and Canadian participation • FERC left facilities inclusion questions to be resolved through future action, but required (within 120 days of the order) a list of all transmission facilities, together with the proposed disposition of each facility and the reasons • In its December 20, 2002 order on rehearing, FERC gave further guidance about what information it expected in future filings on facilities inclusion and also deferred deciding related RTO West planning authority issues 20

  22. FERC Response to RTO West Proposal • Operational Authority (Order 2000 Characteristic 3) • FERC found that the RTO West proposal provided RTO West with the necessary authority to operate the facilities under its control • Because it chose to defer resolving the facilities inclusion issue, FERC indicated that it would also defer a final determination of whether the RTO West proposal fully meets the Operational Authority requirement • FERC plans to decide about Operational Authority when it addresses the facilities inclusion issue • Short-Term Reliability (Order 2000 Characteristic 4) • FERC found that the RTO West proposal satisfies the Short-Term Reliability requirement 21

  23. FERC Response to RTO West Proposal • Tariff Administration and Design (Order 2000 Function 1) • FERC approved the “license plate” load-based rate design • FERC approved Company Rate Period of eight years (but directed Market Monitor for RTO West to evaluate whether a shorter transition period could improve market efficiency) • In its December 20, 2002 order on rehearing, FERC rescinded provision directing Market Monitor review and confirmed eight-year Company Rate Period • FERC approved use of External Access Fee (export charge) but asked the filing utilities to work with other RTOs in the Western Interconnection to explore whether these charges could be replaced by inter-regional agreement • FERC accepted voluntary conversion of pre-existing transmission service agreements 22

  24. FERC Response to RTO West Proposal • Tariff Administration and Design (Order 2000 Function 1) (cont’d) • FERC required some modifications to cataloguing and conversion process (including dispute resolution provisions) • FERC rejected a provision in the RTO West Transmission Operating Agreement to automatically “trump” tariff in cases of conflict; in its December 20, 2002 order on rehearing, FERC asked for more information and committed to allow further comment • FERC required the filing utilities to submit a proposed tariff for RTO West within 120 days of the September 18 order • FERC required filing utilities, when filing their initial revenue requirement, to justify use of two-year prospective test period 23

  25. FERC Response to RTO West Proposal • Congestion Management Proposal (Order 2000 Function 2) • FERC generally approved congestion management proposal • FERC required that the filing utilities demonstrate that the proposal does not create seams with other RTOs in the West • FERC directed the filing utilities, through a stakeholder process, to develop additional details of the RTO West market design and to address some specific issues raised by FERC (such as further consideration of allowing unbalanced schedules, operation of a day-ahead energy market, and analysis of the incentive effect of congestion hedges being “use or lose” instruments) 24

  26. FERC Response to RTO West Proposal • Parallel Path Flow (Order 2000 Function 3) • FERC found that the RTO West proposal satisfies the Order 2000 requirement for addressing parallel path flows within the transmission system RTO West will operate • FERC directed filing utilities, with other participants in the Seams Steering Group - Western Interconnection (“SSG-WI”), to include, in an upcoming filing, recommendations for how to address parallel path flows between RTOs in the West. • More on FERC’s requirements related to SSG-WI below 25

  27. FERC Response to RTO West Proposal • Ancillary Services Proposal (Order 2000 Function 4) • FERC recognized that “as part of its conceptual plan,”there was a commitment for RTO West to provide all of the elements necessary to satisfy the ancillary services requirements of Order 2000 • FERC directed the filing utilities to file a detailed ancillary services proposal as part of the RTO West tariff filing (for which the deadline is 120 days after FERC’s September 18, 2002 order) 26

  28. FERC Response to RTO West Proposal • OASIS, TTC, and ATC function (Order 2000 Function 5) • FERC found that the filing utilities’ proposal in the Stage 2 filing satisfied the Order 2000 requirements for OASIS, TTC, and ATC calculations • FERC indicated that it looked to the filing utilities’ participation in SSG-WI to continue discussions related to development of a common OASIS • FERC directed filing utilities to include recommendations related to common OASIS in an upcoming filing related to SSG-WI issues and progress 27

  29. FERC Response to RTO West Proposal • Market Monitoring Proposal (Order 2000 Function 6) • FERC accepted, subject to certain modifications, the market monitoring proposal as a reasonable “interim measure” • FERC encouraged continued efforts to develop a single market monitoring unit for the Western Interconnection • FERC required the filing utilities to propose in a future filing (under section 205 of the Federal Power Act) what information the market monitor should collect • FERC directed the filing utilities to revise the market monitoring proposal to: (1) include a requirement that the market monitoring unit report directly to FERC if it identifies certain types of significant market problems, and (2) include how information will be reported and the types and frequency of reports 28

  30. FERC Response to RTO West Proposal • Planning and Expansion Proposal (Order 2000 Function 7) • FERC directed the filing utilities to revise the RTO West Transmission Operating Agreement and the planning and expansion proposal to clarify that RTO West has “ultimate responsibility for both transmission planning and expansion within its region” • FERC directed the filing utilities to clarify that RTO West has planning authority over all facilities necessary to provide wholesale transmission service • FERC directed the filing utilities to discuss with regulators their participation in the RTO West planning and expansion process through SSG-WI • FERC encouraged continued work through SSG-WI to develop an appropriate planning process for the entire Western Interconnection 29

  31. FERC Response to RTO West Proposal • Interregional Coordination (Order 2000 Function 8) • FERC approved the filing utilities’ proposal for the consensus-building forum of SSG-WI • FERC directed the filing utilities to work with WestConnect and the California ISO to formalize SSG-WI as the seams resolution group for RTOs in the West • FERC directed the filing utilities (originally within 90 days of September 18, 2002 order, but later extended to January 7, 2003) to: (1) complete a Memorandum of Understanding among RTO West, WestConnect, and the California ISO; (2) provide a list of pending issues before SSG-WI and a timeline for resolution of those issues; and (3) a report on progress on developing common practices and eliminating seams 30

  32. FERC Response to RTO West Proposal • Other FERC Instructions in September 18, 2002 Order: • Continue public stakeholder process through the Regional Representatives Group (“RRG”) • Encouraged the filing utilities to consider developing an appropriate resource adequacy plan • Subsequent FERC Action: • FERC agreed in an order responding to the filing utilities’ request for expedited procedural clarification that requiring a compliance filing was premature • FERC responded to various requests for rehearing of its September 18 order on December 20, 2002 (Order Granting in Part and Denying in Part Rehearing) • The complete Stage 2 filing is posted on the RTO West Website - http://www.rtowest.com/Stage2FERCFiling.htm 31

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