Al McBride Project Manager – System Planning

1. Tariff Language Clarification regarding the Establishment of Resource Capability for Existing Generators Al McBride Project Manager – System Planning

2. Background • The October 31, 2008 Filing of FCM/Queue Amendments,* established a mechanism to identify the Capacity Network Resource (“CNR”) Capability for existing generators • On July 9, 2010, the Federal Energy Regulatory Commission (“FERC”) issued an order** granting a complaint filed by PSEG Power Connecticut LLC (“PSEG”), challenging the justness and reasonableness of the ISO’s determinations with respect to the CNR Capability values for PSEG’s Bridgeport Harbor Unit Nos. 3 and 4 (“BH3” and “BH4”) *FERC Docket ER09-237 **FERC Docket EL10-58-000

3. Background • In its FERC Complaint, PSEG challenged the ISO’s determination to set the CNRC ratings for BH3 and BH4 to the megawatt values specified in the grandfathered interconnection agreement for these units pursuant to Section 5.2.3 of the Large Generator Interconnection Procedures (“LGIP”), which the ISO argued set forth a hierarchy • PSEG argued that the CNRC ratings for BH3 and BH4 should be based on the historical capability of the units and not the values specified in the grandfathered interconnection agreement

4. CNR Capability • Defines the Capacity Network Resource Interconnection Service rights that must be maintained for the generator • Defines whether an Interconnection Request is required for a proposed increase in Capacity Network Resource Capability in accordance with the L/SGIP • Defines whether an initial interconnection analysis is required under FCM qualification for a proposed increase in output from an Existing Generating Capacity Resource

5. CNR Capability (cont.) • For Existing Generating Capacity Resources was identified in accordance with the FCM/Queue filing grandfathering provisions • For New Generating Capacity Resource is obtained by completing all of the associated interconnection milestones, including obtaining a Capacity Supply Obligation in the FCM • Is captured in the Interconnection Agreement for New Generating Capacity Resources • Is maintained in the Forward Capacity Tracking System (“FCTS”)

6. Resource Capability

7. Proposed Tariff Language Clarifications • Tariff clarifications (Section I (Definitions), Large Generator Interconnection Procedures and Small Generator Interconnection Procedures (“L/SGIP”)) are proposed in order to: • Make clear the hierarchy of documents relied upon by the ISO to establish a generating facilities' megawatt output for Capacity Network Resource Interconnection Service (“CNRIS”) and Network Resource Interconnection Service (“NRIS”), and • Revise the definition of “Interconnection Agreement” to include interconnection agreements entered into prior to the implementation of the L/SGIP

8. Hierarchy to determine Resource Capability • The interconnection capability of the generator shall be: • The summer and winter MW quantities expressed in the Interconnection Agreement (“IA”), where available • If there is no expression of MW quantities in an IA then the interconnection capability will be the summer and winter MW quantities expressed in the I.3.9 or 18.4 or 10.4 approval for the generator • If both IA and I.3.9 exist and differ then the lower will govern • If the above quantities do not exist, the interconnection capability will be the higher of the following: • The highest recorded summer and winter Claimed Capability Audit – Establish test result for the generator; or • The maximum claimed capability for the generator as recorded in a CELT report.

9. Hierarchy to determine Resource Capability • The proposed hierarchy language is consistent with earlier ISO presentations and committee discussion regarding the appropriate hierarchy • The proposed hierarchy language is consistent with the ISO implementation of the grandfathering provision

10. Appropriate Hierarchy: Tariff Consistency • The material modification provisions of L/SGIP rules in place before and after the FCM/Queue filing state that any increase above approved levels requires an interconnection request • Section 5.2 (the grandfathering provisions) do not override those rules or any other sections of the Tariff procedures • Operating above approved levels in that past does not translate into an interconnection service right • Similarly, I.3.9 approvals have been, and still are, required under the Tariff for increases above a certain threshold

11. Appropriate Hierarchy: Open Access • New generation (including increases to existing generation) seeking to interconnect to the New England System must make an Interconnection Request and enter the bottom of the interconnection queue • Increases to incumbent generation are not provided advantage over new generation with regard to access to the transmission system

12. Appropriate Hierarchy: Cost Allocation & Transmission Asset Management • Cost allocation for transmission upgrades • Upgrades to interconnect new generation • Upgrades to accommodate increases in existing generation • Upgrades to serve increases and changes in load • The Transmission Operator and Transmission Owners are managing a set of transmission assets based on (among other things) an approved set of generation interconnection levels

13. Appropriate Hierarchy: Reliability/Compliance • The identification and observation of system limitations is fundamental to the reliable planning and operation of the power system and to meaningful compliance with industry oversight standards

14. Questions