Concerns about Tag Non-Firm Option in SPP Energy Market

2. ConcernsTag Non Firm Option October 10, 2010 Bert Bressers 2

3. Concern 1. Tag Non Firm Option • SPP doesn’t think it is possible to capture all the Non Firm within the SPP Market footprint (15 BA’s) with Non Firm Tags. • SPP has an Energy Imbalance Market for 15 BA Areas in Nebraska, Kansas, Oklahoma, part of Missouri, part of Texas, part of Arkansas, part of New Mexico. • The 15 BA’s are still Tagging imports and exports and besides that each BA submits Firm Native Load schedules (not Tagged) from the DNR’s to the Native Load supported by NITS reservations.So basically all Load in the SPP Market footprint is covered with Schedules and Tags. • The SPP Market Software (SCED) runs every 5 minutes, takes the Tags and Schedules, Load and Offercurves of Resources and calculates the best possible (constrained) economic dispatch solution. The Systems sends out dispatch instructions to all resources of the Market footprint (every 5 minutes) and sends out an NSI EIS value (Energy Imbalance NSI) to the 15 BA Areas. The 15 BA’s have to add the NSI EIS to their NSI value based on Tags for AGC and ACE Control of the BA. • The Energy imbalance that flows between the 15 BA’s of the SPP EIS Market is considered Non Firm (NN6 on CF flow gates and NH2 and NN6 on RCF flow gates).And the Non Firm Energy Imbalance exchanged between the 15 BA’s is most likely Energy Imbalance between Firm DNR resources in different BA Areas. Although the DNR’s by itself are Firm, the Energy Imbalance they supply to Neighboring BA’s or absorb from Neighboring BA’s of SPP Market footprint is Non Firm.

4. Concern 1. Tag Non Firm Option Firm Resource Non Firm Resource SPP Market footptrint FirmTag tag NonFirmTag OPPD Non Firm EIS Not scheduled tag NPPD EIS EIS INDN MPS EIS LES tag EIS EIS EIS EIS KACY SECI EIS WR tag KCPL tag EIS EIS WFEC GRDA EIS EIS EIS EDE OKGE SPS tag tag tag EIS CSWS Every BA of the Market imports or exports Un-scheduled Non Firm Energy Imbalance (EIS) tag

5. Concern 2. Tag Non Firm Option • The Tag Non Firm Option doesn’t put any limitation on DNR’s within Markets (that original consisted of BA’s, now called Regulation Zones) to supply Load of other Regulation Zones within that Market footprint and qualify all of that flow as Firm flow causing Firm impacts on all flow gates. • During “low” load situations there is an excess of Firm DNR capacity within Markets (and also within Non Market BA’s). Using all Firm DNR Resources in the North as an example to serve a large part of Load in South can cause a major parallel flow on flow gates of Neighboring RC’s. All of those impacts would be considered Firm in the “Tag Non Firm option” because it is sourcing from Firm DNR, however it might not be “deliverable” without over-loading a Neighboring flow gate with Firm forcing a TLR Level 5 on that Neighbors flow gate.This is an undesired situation.The Firm rights on Neighboring flow gates should some how be limited to a “deliverable” situation, to allow the TO and BA that owns the flow gate to use at least its Firm rights. • The current CMP process limits Firm rights to more or less a “deliverable situation”. The CMP Allocation process splits up the Firm Rights on flow gates based on historical impacts. In the example above, the CMP Allocation approach would allow a certain amount of Firm on a flow gate while the remainder of the Firm flow from DNR’s in the North serving Load in South would be reported as Non Firm. The loading of the Neighboring flow gate would be most likely resolved and controlled with Non Firm curtailments in TLR Level 3.

6. Concern 2. Tag Non Firm Option Firm Resource on line Example: excess of DNR Capacity in North during low Load situation Market Area X Firm Resource off line Regulation Zone B Regulation Zone B High Firm Parallel flow From Market Regulation Zone B Neighboring flow gate Regulation Zone B X X X Regulation Zone B X X Note: A Regulation Zone was a separate BA Area pre-Market

7. Concern 3. Tag Non Firm Option • It will be difficult to measure if Markets (and maybe Non Market BA’s) are accomplishing their relief obligation in case of the Tag Non Firm option.If a Non Firm Tag is curtailed the Tag Non Firm option assumes that the resource that is the source on Non Firm Tag will be re-dispatched down to the curtailed level of the Non Firm Tag. That is not the case in Markets and maybe it is not case for Non Market BA’s either. • Markets are re-dispatching the most expensive resources first (either Firm or Non Firm) when Non Firm relief is required, they don’t re-dispatch Non Firm resources before Firm resources and they don’t dispatch a single resource down that is the source of a Non Firm Tag that is curtailed. The SCED software used by Markets don’t allow for that. • If a non Firm Tag is curtailed the Resource that is the source on that Tag might stay on same output level while other Firm and maybe Non Firm resources within the Market are accomplishing the relief obligation. If during the TLR event the Load increases and as result the Firm impact of the Native Load part on flow gates increases it will be difficult to determine if the Market is (still) accomplishing its Non Firm relief obligation with Firm re-dispatch during TLR. • Also the impact of the Tag is calculated based on GLDF from resource to weighted average load of the BA or Market area, while relief is accomplished by re-dispatching 2 or more resources within the Market or BA. So the relief accomplished by Non Firm Tag curtailment should be translated into a Non Firm re-dispatch obligation and Firm re-dispatch should be credited against Non Firm relief obligation.

8. Concern 3. Tag Non Firm Option Market or non Market BA TLR Called on flow gate. IDC curtailed Non Firm Tag to 0 Relief accomplished with Firm Re-dispatch 200150 MW 200 MW 200100 MW Tag 200100 MW 200 0 MW Load Flow gate in TLR Level 3 200250 MW Tag 200 MW 200 MW 200400 MW 200 MW Firm Resource Non Firm Resource NonFirmTag