BAL-002-WECC-1 Contingency Reserves

1. BAL-002-WECC-1 Contingency Reserves David Lemmons BAL-002 Drafting Team Chair March 6, 2008 Albuquerque, NM

2. Acronyms • ACE – Area Control Error • BA – Balancing Authority • CR – Contingency Reserves • CRR Contingency Reserve Requirement • DCS – Disturbance Control Standard • LR – Load Responsibility • MSSC – Most Severe Single Contingency • RSG – Reserve Sharing Group

3. Overview of Presentation • What is and is not covered • Discuss Existing Rules for CR • Contrast Proposed Rules for CR • Provide Reasoning behind Drafting Team Recommendations

4. Proposed BAL-002: • Is a permanent replacement for the existing, FERC-approved WECC-regional standard, BAL-002-WECC-0 (Operating Reserves) • Responds to FERC and NERC request for re-write • Addresses comments provided to FERC and NERC by WECC entities during approval process of BAL-002-WECC-0 • Maintains level of CR similar to existing standard

5. What is/is not in the Standard • Deals with: • minimum level of Contingency Reserves • what qualifies as Contingency Reserves • Does not deal with: • Who activates reserves • Why activate reserves • When to activate reserves • How to activate reserves

6. Current WECC CR Requirements (BAL-STD-002-0 DCS) • Requires a Minimum Level of CR equal to MSSC for BA/RSG • If MSSC is less than 5% of LR served by Hydro plus 7% of LR served by Thermal, required to carry this amount of reserves • Additional Reserves for Certain Market Transactions • Restore Reserves within 60 Minutes after Event

7. Proposed Contingency Reserves BAL-002-WECC-1 • Changes CR requirement to greater of MSSC or 3% Load plus 3% Generation • Specifies rules for reserve transactions • Reserve requirements are not increased or decreased due to energy transactions. • Requires CR to be deliverable to count as meeting requirement • Aligns reserve restoration period with NERC at 105 minutes from event

8. Reasoning Behind Changes • FERC Order approving Tier 1 standards require WECC to address issues raised in some way. • Drafting Team discussed multiple options including no changes to the standard. • When issues were discussed by the drafting team, proposed solutions were adopted into the standard.

9. Reasoning Behind Changes (cont) • Remove market issues from the reliability standard • 1. WECC should focus on the interpretation of reliability criteria. It should not define energy market products. (WECC Board of Directors Approved Definition of Load Responsibility) • Change to NERC format • Only include Requirements, not philosophy • Not a training document • No duplication of other standards

10. Load Responsibility • Discussion Points • It has been documented that there is no technical basis for the current 5/7 requirement. • Definition of LR is impacting efficient market operations in the Western Interconnection. • Reliability entities and market entities may not be on the same page when discussing LR and Firm Products. • The WECC Board determined that WECC should not be defining market products in its LR interpretation. • Unclear treatment of non-hydro, non-thermal generation

11. Drafting Team Recommendation • Remove LR from Reserve Requirement without significantly reducing the reserves required in the WECC. • Since Contingencies happen due to generation and transmission, the drafting team voted to support the proposed requirement that is calculated based on a split of load and generation for each BA/RSG.

12. Reasons for Decision • Proposal ensures there is not a significant reduction in existing WECC total requirement • Proposal does not cause a significant shift of responsibility based on data available • i.e. reserves in each RSG stayed basically the same • COMPROMISE! • Required to meet the time line given to the drafting teams

13. Impacts to the CR Levels • The next few slides show the impact of the proposal to the WECC as a whole and each responsible entity. • Summer Peak Load Data is from July 24, 2006.

14. Total Reserves Required in WECC

15. Reduction to CRR – Summer Peak Load

16. Reserve Requirement by Entity

17. Reserve Transactions • Specific tag codes (INT-BPS-018-0) must be used so all “parties” to the transaction are aware of expectations/requirements. • Requirement R1.2 dictates that if a transaction is utilized by the source BA as part of its non-spinning reserve, the sink must increase the amount of reserve it carries equal to the transaction. • This replaces the old language referring to “interruptible transactions”

18. Reserve Transactions (cont.) • Requirement R1.3 requires that the source BA increase its reserve requirement by an amount equal to transactions in which it will respond to an event in the sink BA. The delivery must be on “Firm” Priority 7 Transmission Service. • This is comparable to the language related to “on-demand obligations” • It should be noted that this does not impact how RSGs operate.

19. Spinning Reserve • At least one-half of the Contingency Reserve must be Spinning Reserve • To qualify, it must be automatically responsive to frequency deviations

20. Types of Reserves • Requirement R3 sets out what qualifies as meeting the reserve requirements • Limits have been put on when Load (other than Interruptible Loads) can be used to meet the Requirement • Reliability Coordinator must have issued an EEA for the BA

21. Other Changes to Standard • Removed language requiring other NERC standards be met since it is duplicative • Adopted NERC required violation and time horizon items since the WECC has agreed to abide by NERC Standards requirement • Changed Reserve Restoration Period to match NERC requirement since WECC PWG study shows no impact to reliability

22. Questions?