January 8, 2014 | Holyoke, ma

1. January 8, 2014 | Holyoke, ma Abimael Santana engineer DRWG Qualified Capacity Determination for Reconfiguration Auctions and Bilateral Periods

2. Overview • Background • Timeline • General Questions • Significant decrease and ISO mandatory Demand Bids • Commercial • Non-commercial • Partially Commercial

3. Background • Recently, the ISO has received questions regarding how a resource’s performance is used in the determination of its qualified capacity • Qualified capacity calculation for Demand Resources participating in reconfiguration auctions (RA) and bilateral periods (BP) is described in sections III.13.4 and III.13.5 of the Tariff • All references to resources and Qualified Capacity are applicable to Demand Resources and RA/BP only

4. Timeline Significant decrease notification • There are 3 annual bilateral windows and 3 reconfiguration auctions for each Capacity Commitment Period • There is a monthly bilateral widow and reconfiguration auction for each month of each Capacity Commitment Period • t refers to the commitment period the month is in Feb t-4 Apr t-3 Jun t-2 May t-2 Aug t-1 Dec t-1 Mar t-1 CCP (t)

5. General questions

6. Can a resource participate in a RA/BP with capacity that has not achieved commercial operation? • Any amount of capacity that has not yet achieved commercial operation may qualify in annual RA/BP provided that: • It is being monitored by the ISO • Has an approved commercial operation date that is prior to the start of the relevant Capacity Commitment Period; and • The Lead Market Participant or Project Sponsor has met all relevant financial assurance requirements (III.13.1.9 and ISO New England Financial Assurance Policy) • Only capacity that has qualified in the applicable ARA 3 AND has achieved commercial operation is qualified to participate in monthly RA/BP

7. Why is my resource’s Qualified Capacity different than its most recent performance? • Qualification of Demand Resources may not be directly connected to current DRV performance • Qualified capacity is a combination of commercial and non-commercial capacity • In order to affect the capacity value deemed as commercial, the Lead Participant must request a Seasonal DR Audit or a Demand Resource Commercial Operation Audit

8. Why is my resource’s Qualified Capacity different than its most recent performance? (Cont.) • Resource audits are used in the CPS monitoring process to determine if any portion of the non-commercial capacity has been demonstrated • Audit results in combination with the remaining undelivered capacity on CPS monitoring are used in the determination of Qualified Capacity for ARA 3

9. When will my resource audit be used to determine its Qualified Capacity? • Resource audit results (including results updated with new asset audits) are used in the calculation of Qualified Capacity as follows: Audit results available as of the 5th Business Day in June for winter, and as of the 5th Business Day in October for summer • Through critical path schedule monitoring, a resource audit may determine that a project has been completed and is then added to the resource’s commercial capacity

10. Ara 3 – significant decrease and ISO Mandatory demand bids

11. Fully Commercial Resource (no portion on CPS monitoring) • Significant Decrease determined by either a decrease in performance (as reflected in the latest audit results) or an increase in CSO for the relevant Capacity Commitment Period (through previous bilateral acquisitions or RA supply offers) • If after the ARA3 Bilateral Period the resource still has a significant decrease in capacity, the ISO will enter a Demand Bid in ARA3, at the Forward Capacity Auction Starting Price for the excess CSO • Significant decrease determinations are communicated via FCTS, it is the responsibility of the Lead Participant to address a significant decrease determination

12. Fully Non-Commercial Resource(on CPS monitoring with no commercial MW) • Significant Decrease flag is set if the project’s proposed commercial operation date on record is after the start of the relevant Capacity Commitment Period for which it originally qualified • If after the end of the ARA3 Bilateral Period the resource still has a significant decrease in capacity, the ISO will enter a Demand Bid in ARA3 at the Forward Capacity Auction Starting Price for the portion of the CSO that will not be delivered by June 1st of the Capacity Commitment Period • An ISO mandatory Demand Bid may be entered even if COD is not changed, but CPS reports and relevant data show the resource will not meet its CSO, as determined by the ISO through the CPS monitoring process

13. Partially Commercial Resource(on CPS monitoring with partial commercial MW) • Significant decrease flag may be triggered by either the commercial or the non-commercial portion of the resource • Total Qualified Capacity is based on the Commercial (adjusted by latest audit results) + Non-Commercial (subject to latest approved COD) • An ISO mandatory Demand Bid may be entered even if COD is not changed, but CPS reports and relevant data show the resource will not meet its CSO, as determined by the ISO through the CPS monitoring process

14. Summary • Qualified Capacity for annual RA/BP • Qualified Capacity for monthly RA/BP

15. Related Training Materials • Additional details on annual/monthly reconfiguration auctions and bilateral periods available in the training materials at the web address below http://www.iso-ne.com/support/training/courses/fcm/index.html