Discussion of Market Participant Choice for Transmission Connections

1. Discussion of Market Participant Choicefor Transmission Connections Stakeholder Session October 14, 2011

2. Agenda • Purpose • Overview - what and why? • Background • AESO Connection Process • Eligibility • Own model • TFO requirements and obligations • Legislative framework • Next steps

3. Purpose • AESO issued a discussion paper September 29, 2011 • Sets out concepts for discussion on market participant choice • Purpose of today’s session • Present the concepts • Provide additional clarification • Identify next steps • Facilitate discussion • Respond to questions

4. Overview What? • The possibility of enabling a market participant who requests system access service to design, build, own and operate the transmission facilities dedicated to connecting its facilities to the AIES • Market participant would become a transmission facility owner (TFO) in addition to taking system access service Why? • Some market participant concerns with cost & schedule for connections • AESO supports practices that foster efficiencies and are in the public interest Next Steps • Requesting open discussion and written comments by October 31

5. Current Connection Example • Incumbent TFO assigned the transmission line connection

6. Proposed Connection Example • Participant owns transmission connection to the grid • TFO facilities connection

7. Background • Investigation • Obtained input from functional areas within the AESO: project managers, planning, operations, standards, legal, etc. • Sought input from market participants - TFOs, AUC, DOE & customer associations • Legal review • Considered several options • Design, build, own and / or operate • Initial determination • “Own” model • Transfer is an option between TFOs (AUC approval required) • ISO Rule 9.1 may need to be revised (AUC approval required)

8. Current Process • Participant files application for service (Stage 0) • Incumbent TFO part of process, e.g. PPS (Stage 1 & 2) • Project assigned to incumbent TFO (Stage 3)

9. Current Process - Authority • Section 35(1)(a) of the EUA: 35(1) On receipt of Board approval of a needs identification document the Independent System Operator, in accordance with that approval, may (a) direct the owner of a transmission facility to submit, for Board approval under the Hydro and Electric Energy Act, a transmission facility proposal to meet the need identified • AESO assigns all participant connections to the incumbent TFO during Stage 3 of the Connection Process • Incumbent TFO prepares and files facility application • Joint NID and Facility applications filed for some projects

10. Proposed Process • Participant files application for service (Stage 0) and declares intention to be a TFO (accepts obligations & responsibilities) • Incumbent TFO assists with connection (Stages 1 & 2) • AESO requests “proposal” from participant (Stage 3)

11. Proposed Process - Authority • Section 35(1)(b) of the EUA: 35(1) On receipt of Board approval of a needs identification document the Independent System Operator, in accordance with that approval, may (b) request market participants to submit, for approval by the Independent System Operator, a proposal to meet the need identified • AESO asks participant for proposal • If proposal is accepted by the AESO, participant files facility application • Commission still approves NID and facility applications

12. Connection queue administration • Market participant may changes its election part way after Stage 0 • Connection project is cancelled and queue position revoked • Market participant must submit a new system access service request and receive a new queue position

13. Eligibility - Participants • The following are categories of Market Participants that connect directly to the AIES: • Generators • Loads • Dual use • Industrial system designations (ISD) • Distribution facility owners (DFO) • Which of these should be eligible to provide their own connections, and why or why not?

14. Eligibility – Connections • The following are connection types that may be eligible: • T-taps • Switching stations • In / Out arrangements • Others? • The following are connection types that are non-eligible: • System lines • System upgrades • Connections serving multiple customers

15. Own Model • Market Participant would assume responsibility for entire transmission asset life cycle • Legal ownership of transmission facilities • Design, construct, maintain, replace, upgrade, retire asset • File a tariff • Operate asset • May be required to upgrade to allow other participants to use the asset • Transfer of transmission facilities to another party after energization can occur provided all legal, legislative and regulatory requirements are met • AESO can not initiate transfer of assets

16. TFO Requirements and Obligations • TFOs (new and incumbent) are responsible to comply with requirements and obligations including: • Electric Utilities Act (e.g. provide access) • Hydro Electric and Energy Act (e.g. permit and license) • Public Utilities Act • Surface Rights Act (e.g. rights of way) • Transmission Regulation • Alberta Utilities Commission rules • ISO Rules • ISO Tariff • Alberta Reliability Standards (e.g. all TFO related standards) • Transmission TFO Terms and Conditions (e.g. agreements) • TFO capital and operating cost recovery through Transmission Tariff applications to the AUC , as applicable • TFOs (new and incumbent) are treated the same • AESO may direct TFOs to undertake certain activities

17. Legislative Framework • Market Participant Choice is supported by legislation: • Electric Utilities Act, s. 35(1)(b) the AESO may “request market participant(s) to submit, for approval by the Independent System Operator, a proposal to meet the need identified” • Hydro and Electric Energy Act references not limited to TFOs but to “persons’’ in respect of transmission facilities • Legislated obligations to make transmission facilities available include: • Electric Utilities Act, s. 39(3)(e): each owner of a transmission facility must provide the AESO the use of such facilities • Transmission Regulation, s. 28(3):generators may not prohibit access to the transmission interconnection facilities

18. AESO Rules • Section 24(1) of the Transmission Regulation sets out assignment to incumbent TFOs based on service areas • AESO Rule 9.1 codifies the T-Reg s. 24(1) assignments • Section 24(2) of the Transmission Regulation allows for alternate arrangements • Market Participant Choice could be an alternate arrangement • AESO Rule 9.1 may need to be revised to allow for s. 24(2) arrangements • Facility and NID applications could allow for compliance with section 24 of the Transmission Regulation

19. Next Steps • Stakeholders provide written comments on the Discussion Paper • Comments due October 28, 2011 • AESO posts stakeholder comments received • November / December 2011 • AESO replies to stakeholder comments received • Stakeholder information session held (if required) • AESO prepares and posts a Recommendation Paper • Stakeholder information session held (if required) • Stakeholders provide written comments on the Recommendation Paper • Implementation • May include items such as: • ISO rules changes, as required • Connection process changes, as required

20. Thank you