Overview of CAISO Stakeholder Process for FERC Order 764 Compliance Implementation of 15 minute scheduling and settleme

1. Overview of CAISO Stakeholder Processfor FERC Order 764 ComplianceImplementation of 15 minute scheduling and settlement Jim Price, CAISO Presentation to WECC Interchange Scheduling and Accounting Subcommittee January 16, 2013

2. Proposed Implementation of Renewable Integration Market Design Changes • Fall 2013 • Order 764 compliance filing • May 2013 CAISO Board decision, • Spring 2014 • Dynamic Transfers: Add transmission reservation bid component & look-ahead forecast of VER availability • Implement 15-minute market • Fall 2014 • Flexible ramping product in DA and RT markets • Integrated DA market & residual unit commitment

3. Executive Summary of 15-Minute Market • Adapt existing functionality to allow 15 minute schedule updates consistent with regional practices • Use three-settlement market by making Real-Time Unit Commitment (RTUC) financially binding • 15-minute market replaces Hour-Ahead Scheduling Process (HASP) settlement for energy & ancillary services • Leverage Dynamic Transfers transmission reservation functionality to address hourly or sub-hourly intertie transmission for VERs? • Allow intertie Convergence Bidding if day-ahead pricing issue resolved

4. Hourly Process for Real Time Market (Straw Proposal) T-75: Real-Time Bid Submission Deadline T-45: Awards for Intertie Hourly Transmission Reservations T-37.5: Start of Market 1 Optimization T-20: E-Tag Deadline for Hourly Intertie Transmission Profiles and Market 1 Energy Schedules T Market 1 Market 2 Market 3 Market 4 T = Start of the Hour Market transmission reservations in DA, HASP, & RTUCwould be financially binding. HASP energy schedules would not be financially binding.

5. 15-minute Process for Real Time Market T-22.5: Start of Market 2 Optimization T-7.5: Awards for Market 2 Energy Schedules T-5: E-Tag deadline for Market 2 Energy Schedules Financially Binding 20 Minutes T Market 2 T-22.5: Self Schedule Changes for Market 2 37.5 Minutes T = Start of the Hour Second interval of RTUC optimization (currently “advisory”) becomes the binding interval in new 15-minute market, to allow e-tagging 20 minutes before start of interval

6. 5-minute Process for Real Time Market T+7.5: Start of RTD 4 Optimization T+12.5: Awards of RTD 4 Dispatch, Start of RTD 5 Optimization Financially Binding T+15 RTD 2 RTD 3 RTD 4 RTD 5 RTD 6 Market 2 Market 1 T+15 T = Start of the Hour No changes to Real-Time Dispatch (RTD) RTD provides operational instruction to all resources

7. All Real Time Market bids would be submitted in HASP, at T-75 • Bids to economically schedule resources in 15-minute market and 5-minute economic dispatch • Energy self-schedule and/or energy bid, same as now • Ancillary services bids, same as now • No Load bids in RTUC 15-minute market or in RTD • Dynamic transfer design allows optional intertie transmission reservation bid for VERs, in excess of expected energy, to accommodate variability. • In straw proposal: Hourly transmission awards, priced at the shadow cost of intertie congestion in HASP • Use of capacity awarded in HASP is exempt from intertie congestion cost in RTUC and RTD

8. Real time self schedules may change at T-37.5 for every 15-minute interval • Self schedule can change in 15-minute market, e.g., due to physical or operational characteristics • VERs can update using rolling 5-minute or 15-minute granularity forecast to establish real-time schedule • Intertie changes 20 minutes before 15-minute intervals, due to physical or operational characteristics (including e-tag curtailments and reloads in other BAAs), would be limited by ISO’s transmission reservations • Changes from day-ahead to RTUC settle at RTUC price • RTUC to RTD deviations settle at the RTD price • Intertie operational adjustments to 15-minute schedule settle at RTD

9. Transmission Reservation Overview • Explicit TR bid only available to VERs with self-schedules (SS) and no ancillary services bids • Ensures ISO receives accurate expected energy so resources are not committed using inflated SS, since HASP energy not binding • Allows VERs to ensure intertie capacity is available in real-time and not allocated to hourly block schedules • For hourly block schedules, • TR bid is imbedded in energy bid • Enforce HASP constraint for same MW in each 15-min interval • For conventional 15-minute intertie or non-VER dynamics, • TR bid is embedded in energy bid • Intertie scheduling limit enforced every 15-minute interval, but advisory energy schedule can differ by 15-minute interval • TR award in HASP = avg of 15-minute advisory energy schedules

10. HASP transmission award would define priority for energy schedules and basis for congestion settlement • HASP would award financially binding hourly transmission capacity, which is then used forfinancially binding energy schedules and AS awards within operating hour: • Intra-hour energy schedules: 15-minute intervals • Dynamic transfer energy: dispatch by 5-minute interval • Ancillary service awards: 15-minute intervals • Unused intertie capacity would be released in each interval • Self-schedules would have higher priority within HASP transmission award • Resources using released capacity would be charged the relevant real-time intertie shadow price

11. Issue: Settlement of Transmission Reservation (TR) in multiple markets would have increased complexity • TR has separate limits for import and export directions, and considers advisory energy counterflows (e.g., 3500 MW import & 500 MW export on 3000 MW intertie) • TR would be separated into Import Right, Import Obligation, Export Right and Export Obligation • TR is unidirectional for an hour. Market participant would receive a “right” or “obligation” for each direction. • Right: For energy at or below TR, settle at original TR price. For energy exceeding TR, settle at subsequent market’s price • Obligation: Settlement principles would balance those of a “right” • Stakeholder concerns include uplift from TR settlement

12. 15-minute market may allow scheduling alternatives for reliably managing the grid • Perform market optimization based upon intertie bids • Hourly Blocks • Enforce constraint that T = T+15 = T+30 = T+45 • If economic bid is not cleared, hourly block schedule is 0 MW • 15-minute schedules and dynamic transfers • 15 minute intervals can have different MW level • If not accepted, option to not allow economic bid in RT market • VER forecast over intertie, to allow delivery to exceed hourly avg. • How to create the VER forecast to account for variability? • Publish awarded hourly block schedules at T-45 • May be able to further streamline timing • Hourly block schedules are price takers in 15-min market • Even if an economic bid submitted for hourly block schedule

13. ISO is looking for opportunities to improve timeline while remaining consistent with WECC • Accepted hourly block schedules posted by T-45 • Note: binding optimization for each 15-minute interval is started afterwards • 2.5 minutes is tight for updating tags for 15-minute energy schedules, after awarding intra-hour schedules • ISO investigating if solution times can be reduced • Continue to work with WECC task force and ISO stakeholders • But, tagging timeline not expected to change in near term

14. Next steps • More info: http://www.caiso.com/informed/Pages/StakeholderProcesses/FERCOrderNo764MarketChanges.aspx • Comments on revised straw proposal may be submitted by February 26 to Order764@caiso.com.