WSPP WebinarProposed Service Schedules

Operating Reserve Service (D)Intra-Hour Supplemental Power (E)

February 4, 2010

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Proposed Service Schedule D

Operating Reserve Service

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Recap for Schedule D (Reserves)

Discussion and drafting revisions have focused on three areas: Product definition Avoidance of Technical Impediments Damages

Purpose of Webinar is to review the 1/20/10 draft with focus on these areas and hear remaining concerns ahead of March OC meeting

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Operating Reserve Service: Product

The product definition is left to the parties, but with reference to “Applicable Standards” (reliability standards and criteria of NERC and Designated Authority), as defined in D-2.2.1

Terms of Service D-3.1 specifies information required for Confirm

(DA, quantity, price, term, types of Reserves, Contract Path and transmission terms, communications protocols, other requirements for Confirm to be effective (e.g. agreement with DA); Damages Multiplier; performance assurance under NERC INTs)

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Operating Reserve Service: Product

D-3.2 Defines product, restricts use by DA of capacity to satisfy DA’s Operating Reserve obligation under Applicable Standards; D-3.3.2 requires Purchaser to assure DA’s compliance

D-3.3 requires Seller to deliver energy associated with Reserves upon DA request in accordance with D-3.3.2, which allows call “in good faith discretion reasonably exercised in accordance with Good Utility Practice” to respond to Contingency or other event for which Reserves may be called upon under Applicable Standards (or as otherwise stated in Confirm)

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Operating Reserve Service: Product

D-3.4 allows Purchaser to audit to assure that Seller’s provision of Reserves conforms to Applicable Standards

D-3.5 pertains to Contract Price and incorporates price cap language

D-3.6 refers to FERC filing requirement for jurisdictional entities for transactions exceeding one year

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Operating Reserve Service: Technical Impediments

Given the product terms, are there any technical concerns? Note that the Schedule anticipates that if

Purchaser is not the Designated Authority, the parties may need a separate agreement that includes the DA to address communications and other requirements

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Operating Reserve Service: Damages Issue discussed extensively in prior Webinar and OC

meeting. Concern was need for remedy with teeth: Considering the reliability significance and potential

penalties, remedy should assure that Seller would deliver energy upon call

Likewise, remedy should assure that DA would call only with good cause, and not use the capacity for its own commercial purposes

Therefore, more stringent remedies were needed than exist for existing firm product

On other hand, passing on penalties via damages was unacceptable. The associated facts would likely be ambiguous and disputed. Exposure in such circumstances would be too harsh for Seller to market the product

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Operating Reserve Service: Damages

Damages paid by Seller for Seller’s Non-Performance D-4.3, damages for Seller’s non-performance, sum of:

Capacity charge for 30 days x Damages Multiplier (if peak and off-peak are priced, higher price is used), plus

Quantity of undelivered energy x price, x Damages Multiplier, plus

Transmission charge incurred by Purchaser D-4.4, Seller failure 3 times is Event of Default under

WSPP Sec. 22. Termination payment is pv of amount remaining to be paid less pv of Replacement Cost, but Purchaser shall not owe Seller

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Operating Reserve Service: Damages

Damages paid by Purchaser for Purchaser’s non-performance D-4.5 damages for DA’s unauthorized call

Capacity charge for 30 days x Damages Multiplier (if peak and off-peak are priced, higher price is used), plus

Quantity of energy Seller was required to deliver x energy price, x Damages Multiplier

D-4.6, Purchaser (DA) non-performance 3 times is Event of Default under WSPP Sec. 22. Termination payment is pv of capacity charges and transmission charges remaining to be paid less pv of replacement capacity Cost, but Purchaser shall not owe Seller

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Proposed Service Schedule E

Intra-Hour Supplemental Power

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Recap for Schedule E (Intra-Hour)

No significant issues have arisen regarding this Schedule

Again, focus is on: Product definition Avoidance of Technical Impediments Damages

Again, Webinar is to review the 1/20/10 draft with focus on these areas and hear remaining concerns ahead of March OC meeting

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Intra-Hour SupplementalPower (“I-HSP”): Product

The product: Variable energy on call within the hour,

in increments the parties set or dynamic, up to Maximum Capacity in whatever shape

Scheduling can be manual and dynamic Dynamic can be immediate, as load

following

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I-HSP: Product Terms of Service

E-2.1.1.1 Manually Scheduled Product Energy request for each Interval, to be

communicated by electronic communication to Seller and BA

In whole megawatts up to Maximum Capacity; quantity can vary from Interval to Interval within any parameters the parties may set, including variation limits and ramp rates

Quantity for an Interval will prevail until a request to cease or for a different quantity

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I-HSP: Product (Dynamic) E-2.1.1.2 Dynamically Scheduled Product

Requests need not be in whole megawatts; variation can be subject to parameters

Communications by “dynamic electronic communication” to Seller and BA.

Response subject to equipment capability and other restraints stated in Confirm

Quantity for an Interval will prevail until a request to cease or for a different quantity

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I-HSP: Product (Dynamic) E-2.2 Purchaser bears transmission cost

and risk of unavailability E-2.3 Purchaser has an energy return

right but not obligation within 168 hours after receipt, with flow not exceeding Maximum Capacity. Parties can agree to exchange periodicity,

but if they do not specify the Schedule does not require it. Is this a good approach?

Purchaser bears transmission cost and risk for return energy

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I-HSP: Product (Dynamic) E-2.4 Warranties

Seller warrants sufficiency of communications and automated control facilities to enable timely and accurate response

Purchaser warrants sufficiency of communications and automated control facilities to convey requests and adjust for receipt of energy.

Are these drafted appropriately?

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I-HSP: Product (Manual and Dynamic)

E-2.5 Pricing Flexible, may include capacity/energy

charges and transmission charge. On/off peak pricing is presumed, which can

vary seasonally (or otherwise) Invoice shall identify each charge

separately Price cap language is incorporated

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I-HSP: Technical Issues

Given the product terms, are there any technical concerns?

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I-HSP: Damages

E-3 Damages: General agreement that because of the reliability aspect of the product (to firm a variable energy resource) and possibility of related penalties, this Schedule should use a Damages Multiplier to establish LDs (E-3.2)

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I-HSP: Damages

Damages paid by Seller for Seller Non-Performance E3.3, damages for Seller’s non-performance,

sum of: Capacity charge for 30 days x Damages

Multiplier (if peak and off-peak are priced, higher price is used), plus

Quantity of undelivered energy x price x Damages Multiplier plus

Transmission charge incurred by Purchaser

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I-HSP: Damages

Review and confirm: No damages to be paid by Purchaser for

failure to receive (none are specified) What about return energy? (We could state

that if it is provided per the schedule but not received a credit must be given

Other issues?

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Status of Proposed Schedules

Sense of the group about voting on these at the OC

Any other discussion points? Questions

Thank you for your comments and focus