NYISO’s Response to FERC’s RTO Order 2000 Presented by: John P. Buechler

1. NYISO’s Response to FERC’s RTO Order 2000 Presented by: John P. Buechler Director of Regulatory Affairs, NYISO Massachusetts Electric Restructuring Roundtable January 29, 2001

2. RTO Characteristics & Functions Characteristics 1. Independence * 2. Scope and Regional Configuration* 3. Operational Authority 4. Short-Term Reliability * Note: Bold Denotes a Major Issue

3. RTO Characteristics & Functions Functions 1. Tariff Administration and Design * 2. Congestion Management 3. Parallel Path Flow 4. Ancillary Services 5. OASIS 6. Market Monitoring 7. Planning & Expansion * 8. Interregional Coordination* Open Architecture * Note: Bold Denotes a Major Issue

4. NYISO RTO WGGeneral Approach • Filing MUST be acceptable to FERC • Focus on Major Issues • Governance • Planning • Scope & Interregional Coordination • Objective: To achieve consensus

5. RTO Working Group Process • 12 Meetings held since August • All stakeholder classes represented • Initial Meetings • Reviewed “minor issues” • General Consensus • Later Meetings • Focus on Major Issues • Governance/Planning/Scope • Review of Draft Filing

6. RTO WG - Results • Collaborative produced a joint RTO filing • Management Committee Approved - 71% • NYISO Board Approved • Filed with FERC on January 16th • “Joint Filing” of NYISO and jurisdictional TO’s (supported by LIPA and NYPA)

7. NYISO RTO Filing • “NYISO will satisfy all of Order 2000’s RTO requirements”, based on: • NYISO’s existing characteristics; bolstered by • Proposed tariff/agreement changes to clarify its governance structure and reinforce Board authority and provide for a comprehensive transmission planning process • Intensification of NYISO’s interregional coordination efforts

8. Governance Consensus • Highlights • Maintain shared governance • Maintain 205 concurrence for tariff changes • Maintain Committee responsibilities per ISO Agreement • “Exigent Circumstances” filing sunset provision extended from 120 days to 180 days, unless: • MC votes to approve the change • FERC has approved under Section 206 • “Exigent Circumstances” actions do not sunset if MC does not vote within 180 days of filing • MP’s can require a special meeting of MC to address an exigent circumstances filing

9. Governance Consensus • Highlights (cont’d) • Clarification of Staff responsibilities • Clarification that Staff authority does not extend to changes in policy • Clarification that President can act under exigent circumstances on matters other than tariff changes • President shall use best efforts to notify the major committee Chairs & Vice Chairs in advance • Such actions on matters otherwise assigned to a Committee are subject to ratification by that Committee

10. Transmission Planning Consensus • Highlights • Transmission Planning Committee: a permanent sub-committee reporting to both BIC & OC • TPC has same membership & voting as BIC & OC • Reports to both committees on policy matters and development of the Consolidated Transmission Plan • Reports to OC only on application of policies • Bring all planning functions under the TPC • TPC will develop cost allocation criteria for reliability based transmission expansion • TPC will consider incentive mechanisms for reliability based transmission expansion

11. Transmission Planning Consensus • Highlights • Consolidated Transmission Plan (CTP) will include all transmission facilities needed to ensure reliability • CTP will include all existing and planning facilities, as appropriate and will evaluate alternatives to assure reliability • CTP process to be coordinated with neighboring ISO’s and state regulatory agencies • TPC can go directly to MC with the CTP, if necessary to break a deadlock • Board has final authority to approve CTP; or can remand to the MC for modification

12. Transmission Planning Consensus • Highlights • TO’s commit to construct Reliability Projects included in the CTP, provided: • TO is assured full recovery of all reasonably incurred costs by the appropriate regulatory authority • All federal, state and local approvals are obtained • All technical requirements are met for the expansion • TO’s retain right to expand their transmission facilities subject to regulatory approval/order • TO’s will allow merchant transmission, subject to negotiation re: ownership, franchise rights, etc.

13. Scope & Interregional Coordination Consensus • Highlights • NYISO Scope is adequate for the present • Northeast is moving in the direction of establishing a “virtual” RTO • Expedited initiatives announced between NYISO & ISO-NE • MOU process is moving to resolve seams issues • Investigation of feasibility of Regional DAM is underway • NYISO participation in NPCC/NERC provides a broad regional perspective

14. Joint Board Resolution Between NYISO and ISO-NE • Executed January 16th • Boards are committed to efficient regional markets • ISO’s will work together to enhance interregional coordination • Objective is to reduce barriers to transactions between the two markets • Complements other regional efforts • Participation is open to other ISO’s

15. NYISO/ISO-NE Joint Agreement • Highlights • Establish Joint Task Force to expedite seams issues • Initial objectives include: • Uniform rules for Day-Ahead Markets • Compatible schedules for inter-ISO schedules • Reserve sharing protocols • Uniform standards for generator interconnections • Establish Joint Monitoring Committee • NYISO & ISO-NE Market Advisors • MMU’s to share information across ISOs • Review & assess markets, rules and procedures