Proposal For Tie Line Benefits

1. Proposal For Tie Line Benefits Bijoy Chatt October, 2009 PSPC Meeting

2. Discussion Points • Rationale for “As Is” Condition • Proposal for a “Compromise” Position

3. Over 17,000 MW of Excess Resources from Hydro Quebec (HQ) and Maritime (MT) combined during summerBoth HQ and MT are winter peaking load areas, New England is a summer peaking load area Over 15,000 MW Excess Over 2,000 MW Excess References: Resources- Hydro-Quebec Strategic Plan 2006-2008, Adjusted Version September 15, 2006 Load Forecasting- 2008 Quebec Area Comprehensive Review of Resource Adequacy (www.npcc.org/documents/reviews/Resource.aspx) Load Forecasting, 2007 NPCC Maritime Area Comprehensive Review of Resource Adequacy (www.npcc.org/documents/reviews/Resource.aspx)

4. Hydro Quebec’s Firm Sales to Neighboring Control Areas is only about 1,000 MW, leaving vast summer resources for assisting others Reference: Table A.2- 2008 Quebec Area Comprehensive Review of Resource Adequacy (www.npcc.org/documents/reviews/Resource.aspx)

5. Huge gap in Tie-line benefit between At Criteria and As Is resulting in significant increase in ICR 1,890 MW Gap 3rd ARA Value

6. Cost to Customer Continues to Increase with the Increase in ICR Procuring additional 1,890 MW of ICR will cost $56.7 M to $102M

7. Rationale for “As Is” • Over 17,000 MW of excess capacity available from HQ and Maritime • HQ and MT are winter peaking load areas, and New England is summer peaking load area • NPCC requires that Neighboring Control Areas will provide support during emergency conditions • Lower ICR value results in lower customer cost.

8. A Compromise Proposal

9. The compromise methodology would limit the remaining reserve to be no less than required operating reserve • Calculate the Tie-line benefit using “As Is” assumption using Probabilistic Model to maintain LOLE of 0.1 • Calculate Remaining Reserve by considering only Net ICR (by subtracting Tie-line benefit, OP4 relief and HQICC) • Compare Remaining Reserve to Operating Reserve • If Remaining Reserve exceeds Operating Reserve, ICR is as calculated. • If Remaining Reserve is less than Operating Reserve, ICR is increased by subtracting the difference in Remaining Reserve and Operating Reserve from the calculated tie benefits.

10. ISO is concerned that there is insufficient capacity to cover operating reserve and an allowance for forced outage when using “As Is” assumption. Example using 3rd ARA values Assumed/Qualified Installed Generation + DR + 5% Voltage Relief + Tie line benefit 27,325 MW + 2,050 MW + 651 MW + 3,415 MW = ICR 1,215 MW Remaining Reserve (4.3%) 28,160 MW 28,160 MW Remaining Reserve at peak is calculated after deducting Tie-benefit, OP4 relief and HQICC from ICR

11. Limiting the tie-line benefits will ensure Remaining Reserve margin is adequate Subtracted Reserve Amount: 785 MW Added Reserve Amount: 785 MW 3,415 MW 2,630 MW 2,630 MW 1,215 MW 1,215 MW

12. Rationale for the Compromise Proposal • Limits the reliance on tie-benefit to 60% of available transfer capability • Ensures the operating reserve coverage without relying on tie-benefit and Op4 relief • Forced outage is already covered in probabilistic model • A significant saving to customers- $60M per year on capacity payment.

13. Q &A