Ancillary Service Products LSI - Electric Transmission in the West

1. Ancillary Service ProductsLSI - Electric Transmissionin the West Carol Opatrny Opatrny Consulting, Inc. May 19-20, 2014

2. Ancillary Service Products • Review of FERC Orders that have impacted Ancillary Services • Focus on Balancing Services • Review examples of how balancing is being enhanced where Ancillary Services are involved and are not. • Discuss how balancing and ancillary services will be further enhanced with microgrids. • Please ask questions/make comments as we go.

3. Order 888 • Services that the TP is required to provide: • Scheduling, System Control and Dispatch • Reactive Supply and Voltage Control from Generation • Services that may be self-provided or secured from 3rd parties: • Regulation and Frequency Response • Energy Imbalance • Operating Reserves – Spinning • Operating Reserves – Supplemental • Generator Imbalance

4. Since Order 888 • Avista Policy (1999) • Order 697 (2007) • Order 719 (2008 and 2009) • Order 745 (2011) • Order 755 (2011) • Order 764 (2012) • NOPR to narrow the Avista Policy (2012) • Order 784 (2013) • 784 (2014)

5. Ancillary Services Market • Growing need for ancillary services. • Ensure that TPs have ability and flexibility. • Better enable third-parties to provide services. • Increase number of service providers. • Transparency into ability to provide services. • Acknowledge disparate treatment for general marketplaceand for organized markets.

6. Focus on Balancing • In particular, PNW market. • How is the balancing obligation being accomplished with and without ancillary services? • ACE Diversity Interchange (ADI) • Customer-supplied Generation Imbalance (CSGI) • Certified Generation-only Balancing Authorities • Ancillary Services and microgrids.

7. Review Terms • Area Control Error (ACE) - the instantaneous difference between a Balancing Authority's net actual and scheduled interchange, taking into account the effects of Frequency Bias and correction for meter error. • Generation Imbalance (GI) - the gap between forecast and actual generation. • Energy Imbalance (EI) - the gap between forecast and actual loads. • AGC – automatic generation control.

8. Balancing - ADI • Operating in the WECC since 2007 • Balancing Authorities share Area Control Errors • Current participation • NWPP (BPA; BC Hydro; GWA; IPC; NWE; WWA) • SWRSG (APS; SRP) • Active efforts to add new participants • WACM (Rocky Mountain) • WALC (Lower Colorado) • Xcel (Rocky Mountain)

9. ADI Attributes • Not an Ancillary Service but balances ACEs • Transmission Function • No transmission or energy services involved • Not a commercial activity • ADI Interchange is reported (WIT) • Value Proposition • Avoid changing output in order to reduce ACE • Relaxes control of generators; reduces O&M costs • Dampens ramps for intermittent generation • Improves Control Performance • Operational benefit derived from aggregation

10. Balancing – IberdrolaRenewables • Operating since 2010 • Host BA sells Regulation and Following reserve services • Host BAA sets INC and DEC bands (as of April 2014) • 1-minute (299.9/-235.4) • 30-minute (104.1/-125.7) • 60-minute (75.5/-74.9) • Iberdrolasecures own Generation Imbalance • Transmission supports Dynamic and Static schedules • Balancing Generation Imbalance for 1400 MW of wind fleet • AGC with Klamath Falls Cogeneration/Peaking • AGC and Static schedules with other Resources (INCs and DECs) • Located in Host BAA • Imported (INCs) and exported (DECs) to contiguous BAAs

11. Balancing – Iberdrola Renewables • Value proposition • Pilot opportunity • Relieves Host BAA’s balancing requirements • Consistent with FERC policy • Self-supply Generation Imbalance • 3rd-party Generation Imbalance • Cost minimization • New technologies • Installation of required communications, forecasting; signaling equipment, performance parameters, energy accounting, settlement systems, etc.

12. Balancing – Generation-only BA • Satisfy all NERC/WECC standards applicable to a BAA • Western Interconnection (WECC) • CSTO BA • Calpine Hermiston • Mid-C Slice awards • Self-registered BAs • GWA (wind) • WWA (wind) • Arlington (generation) • Gila (generation) • Griffith (generation) • Harquahala (generation)

13. Balancing – Generation-only BA • Value Proposition • Viability; NWE prohibited by law to provide ancillary services • Cost-effective • GWA Certified (Project 1) in 2008 • With the addition of Project 2, GWA capacity 210 MW • Hardware/software technology necessary for monitoring, controlling and optimizing performance (EMS and SCADA) • AGC to calculate ACE and deploy regulating reserves • Transmission supports Dynamic and Static schedules • Purchase ancillary services • In order to balance • Transmission services

14. Balancing – Generation-only BA • Satisfy Balancing Authority Tasks: • Resource Adequacy • Operational Plan for reliability evaluation and communication • Accounting for and approval mechanism for interchange • Calculate and report ACE • ACE: (NIA-NIS) - 10B (FA-FS) – IME • Operate BA to maintain load-interchange-generation balance • Administer interchange payback (ATEC) • Contribution to interconnection frequency • Deploy reliability services (operating reserves) • Implement emergency services • Monitor and report control performance and disturbance control services • Perform energy accounting • Maintain operating procedures and communications equipment • Employ NERC-certified operating personnel • Maintain a training program

15. Balancing – Microgrid • Typically part of a Host BAA; can be a stand-alone BA. • Definition: locally-controlled, generating assets balanced to load, using a combination of resources, load management and smartgrid technologies, defined by a value proposition, and connected to main grid (macrogrid) but able to operate independently. • Navigant’s Microgrid tracker: • 4,400 MW (Q2 2014); 66% in North America • Value Proposition or defining metric • Pilot technologies • Enhance reliability (failing distribution equipment; weather; security) • Encourage renewable resources • Interface with macrogrid • Transmission system – can sell ancillary services • Distribution • Save costs (avoid or minimize tariff charges, e.g., CA, HI, NY)

16. Balancing - Microgrid • U.S. Examples: • Communities: • Co-op City, N.Y.; Naperville, Ill.; Hoboken, N.J. • Data and Research Facilities (FDA; server farms) • Isolated loads (Santa Rita jail, California) • Military (Ft. Bragg; Marine Corps; Naval Station) • Universities (Princeton; Harvard; UCSD; IIT) • Ancillary Services supplied by microgrids • Regulation • Energy for Imbalance • Operating Reserves • Storage

17. Microgrids – next steps • The technology exists • Interconnection standards exist • Legal/regulatory framework needs attention • Transmission or distribution interface • Wholesale or retail treatment • Integration with franchise utility – friend or foe? • Cost shifts due to Distributed Generation • Stand-by Charges vs. Demand Charge and Emergency Energy • Cost savings due to Distributed Generation • Recognition of avoided or delayed T&D investment • Net billing for Ancillary Services or energy

18. Ancillary Service Products Any remaining questions/comments? Thank you. Carol Opatrny Opatrny Consulting, Inc. ccopat@e-z.net 360.666.8510