ISO Compliance Filing on FERC April 25, 2003 Order in Devon Power LLC, et al. (ER03-563-00)

1. ISO Compliance Filing onFERC April 25, 2003 OrderinDevon Power LLC, et al.(ER03-563-00) Robert Ethier Director, Market Monitoring ISO New England Inc. May 23, 2003

2. FERC Action on April 25, 2003 • Denied NRG’s request for RMR arrangements for full cost of service recovery • Allowed guaranteed recovery of only certain maintenance costs required for reliability • New agreements required within 30 days reflecting this ruling Discussion Draft Only

3. FERC Action (cont’d) • FERC rejected the Proxy CT (combustion turbine) proposal it had previously accepted • ISO to modify Market Rule 1 by June 1 with temporary measure – ‘Peaking Unit Safe Harbor’ offer • Allows fixed cost component in offers of certain units • ISO-NE required to file Locational ICAP plan by March 1 ,2004. Discussion Draft Only

4. FERC Action (cont’d) • Directed ISO-NE to establish temporary bidding rules: • Permit selected peaking units to raise their offers to reflect fixed and variable costs (PUSH) Peaking Unit Safe Harbor • Peaking unit defined as capacity factor less than 10%, resident in identified DCAs • Allow peaking units to set price • Offers would be allowed to reflect total fixed costs, levelized over 2002 MWh’s of generation Discussion Draft Only

5. Rule Development Plan • ISO-NE intends extensive discussions with stakeholders on rules changes • Regular and special Markets Committee meetings in May to develop rules • ISO-NE to make compliance filing by May 30 • ISO-NE to implement temporary rules changes on June 1 • Rule changes in effect until introduction of Locational ICAP Discussion Draft Only

6. Rule Development Overview • Appendix A modified to allow PUSH reference prices for applicable units. • OCA Thresholds apply during all congestion events in all locations. • Draft list of PUSH units posted on ISO website. • Procedures established for ISO calculation of interim PUSH reference prices. • ISO preparing to establish interim PUSH offers by June 1. Discussion Draft Only

7. Overview of Today’s Discussion • Changes to Appendix A. • Additional modifications to Appendix A: • Clarify that $1000 cap applies to PUSH offers. • Non-confidential filing of PUSH support data by generators. • Capacity factor calculation methodology. • PUSH calculation procedure. • Data submittal, review, and filing. • Timeline. • UCAP methodology. Discussion Draft Only

8. Changes to Appendix A • Definitions added. • DCA identification provisions streamlined to reflect temporary nature of current DCA’s. • OCA thresholds ($25/MWh or 50%) apply during constrained events everywhere. • Section 5.6.1.5.iv – Reference levels for PUSH units will be calculated differently from other units. • Exhibit 2 notes that they will be variable plus levelized fixed costs Discussion Draft Only

9. Changes to Appendix A continued • Unit owners/bidders must submit unit cost data to ISO for PUSH treatment. • No change to Ref. Price if data not submitted. • Unit owners/bidders must file cost data with Commission within 15 calendar days. • Appendix A will be modified to say non-confidential filing is required. • PUSH levels will by modified upon receipt of Commission order. • If not submitted to Commission, PUSH Reference Prices will be suspended. Discussion Draft Only

10. Changes to Appendix A continued • Details on PUSH calculation. • PUSH Ref. Price = (Net fixed costs/2002 MWh) + variable costs • Variable cost numbers required for each unit. • Forecast UCAP value is only generic revenue netting. • Start-Up and No-Load reference levels unaffected by PUSH methodology. • PUSH methodology will be re-evaluated upon implementation of Locational ICAP Discussion Draft Only

11. Additional Changes to Appendix A • Statement to be added clarifying that PUSH Reference Levels not to exceed $1000 offer cap. • Statement to be added requiring filing of fixed costs with Commission on a non-confidential basis. • ISO will file its cost calculations with the Commission with comments on participant filing. • Clarification of handling of UCAP revenue. • Interim value based on to-date auction results. Discussion Draft Only

12. Capacity Factor Calculations • Note: Only relevant for getting “on the list” • Very few units close to 10% threshold. • Capacity Factor = Total MWhs produced in 2002 divided by Sum of Seasonal Claimed Capability by season in 2002 • Adjustments: • Units commercial only portion of year would have reduced sum of SCC to reflect partial year • Units under RMR contracts were excluded. • No adjustment was made for environmentally limited units or forced outages. Discussion Draft Only

13. PUSH Calculation Procedure • Data submittal and filing • Provide to ISO in specified format available on website • ISO will review and do calculations within 5 business days • Calculations available to participant • PUSH Reference Prices in effect on 6th day • Fixed cost numbers must be filed with Commission within 15 days • PUSH status suspended if no filiing • ISO will file its fixed cost calculations with Commission, but not Reference Prices Discussion Draft Only

14. PUSH Calculation Procedure • Questions about calculation details? Contact: • Donald C. Ryan • Manager, Contract Services • ISO New England Inc. • One Sullivan Road • Holyoke, MA 01040-2841 • (413) 540-4205 Discussion Draft Only

15. PUSH Calculation Procedure • Where to submit data? • Please email the completed worksheet, along with any electronic supporting information, to dryan@iso-ne.com with copies to gprice23@aol.com and smisiaszek@iso-ne.com. Discussion Draft Only

16. Projection of UCAP Revenues • UCAP netted from annual fixed costs. • ISO proposes to use March through June Supply Auction average clearing price as estimate of monthly UCAP value to be netted for PUSH calculation. • This value to be netted from 2002 fixed costs. Discussion Draft Only

17. Discussion