Market Issues Subcommittee

1. Market Issues Subcommittee Report to the Market Interface Committee Philip Tice October 25-26, 2007 Western Electricity Coordinating Council

2. Issues MIS is Addressing • Preschedule and Market Issues • WECC ATC Methodology • WECC E-tag Energy Products • Merchant Reliability Communication • Trading Timelines • Load Responsibility Interpretation

3. Prescheduling Evaluation Task Force PETF Western Electricity Coordinating Council

4. PETF Status • Outline of paper and initial drafting accomplished • Conference call and face-to-face drafting meeting in August and September • Second draft to Task Force for comments • Some topics require further review

5. PETF Paper • Table of Contents • Introduction – Objectives – Task Force Members • Why Preschedule? • The paper starts with a foundation of what we are doing; a comprehensive evaluation of the practice of prescheduling. Information and observations. • Current WECC Prescheduling Practices • What is a preschedule? • What were we trying to accomplish? • Are there NERC and WECC standards requirements to preschedule? • Are there NAESB business practice requirements?

6. PETF Paper (Continued) • Energy Enabling Agreements – WSPP and EEI • Are there prescheduling/scheduling requirements in these enabling agreements? • What are they? • Prescheduling Practices in Other Regions of North America • How is it done in the East and why do they do it that way. • How does the East accomplish 3 or 4 day preschedules in a single day?

7. PETF Paper (Continued) • Natural Gas Nominating – Electricity Prescheduling • The interdependency of natural gas and electricity is firmly established. • How are the gas nomination and electricity scheduling misaligned? • NERC, NAESB, and FERC efforts in this area. • A report of the WECC “test” performed in 2006. • Gant chart of electric-gas timelines

8. PETF Paper (Continued) • ISO/RTO Scheduling Interface with Bi-Lateral Markets • ISOs/RTOs only do day-ahead scheduling, • How do they accommodate bi-lateral markets? • Do they have a preschedule calendar? • Are there lost efficiencies or market opportunities as a result? • Western Interchange Tool (WIT) – Scheduling Automation • The WIT is an interconnection-wide scheduling automation tool. Can the WIT be utilized in automating the preschedule process?

9. PETF Paper (Continued) • Reliability Incidents – Role of Prescheduling • Have reliability incidents occurred where prescheduling may have affected what occurred? • Events discussed to include: Pacific Northwest July 24, 2006; PSCO Disturbance February 18, 2006, others. • Prescheduling Staff – Cost Analysis • The PETF conducted a survey of entities involved in prescheduling to ascertain current staffing and business practices. • The PETF will evaluate various prescheduling scenarios, including practices outside the WECC, for staffing and reliability concerns.

10. PETF Schedule • Overview of paper to MIC in October. • PETF paper posted for comment early January. • PETF responds to comments and develops final paper. • MIS accepts paper at January meeting. • PETF paper presented to WECC Board at spring meeting.

11. PETF Support • PETF group needs active support from all MIC/MIS members! • Make time to read the paper and provide comments! • Questions: Contact Leesa Nayudu or Mike Wells

12. NERC/NAESB ATC Drafting Team WECC Efforts Western Electricity Coordinating Council

13. ATC Drafting Team Update • NERC will post ATC Standards during the week of October 29th. • This will be the second and final round of Comments. • Standards are: • MOD-1 - ATC Umbrella methodology. • MOD-04 (CBM). • MOD-08 (TRM). • MODs 28, 29,30 – TTC/TFC methodologies – MOD-29 covers the Rated System Path.

14. ATC Drafting Team Update • It’s important for WECC to present a consistent voice on MOD-29 comments. • All comments submitted are reviewed by the entire NERC ATC Team. • The West should be concerned with any attempt to alter MOD-029 which covers the Rated System Path.  • This has been a problem in the past.  

15. ATC Drafting Team Update • Drafting Team needs review by and comments from WECC membership. • Drafting Team intends to hold face-to-face meeting to develop coordinated WECC comments. • Meeting date to be announced within 3 weeks.

16. ATC Drafting Team Update • MIC members need to continue supporting this Drafting Team by providing comments! • Take time to review the proposed NERC Standards and provide comments. • Thank the Drafting Team members and their support group for their dedication to seeing WECC requirements included in NERC Standards!

17. Energy Product Code Drafting Team

18. Drafting Team Status • Business Practice posted for comment in early August (45 days). • Posted replies to comments early October. • Business Practice second and final posting in early October (30 day). • Drafting Team facilitated CRITF EPC through NERC IS process.

19. Energy Product Codes • Definitions for all Energy Product codes, including NERC codes. • Capacity codes (BP 9 & 11) included for completeness in BP. • Codes describe a category of energy transaction, not a specific product. • Energy Product codes do not address contingency reserve responsibility.

20. Energy Product Codes • G-F: Firm Energy. This product may be curtailed only in the event of a reliability condition or to meet Seller’s public utility or statutory obligations for reliability of service to native load. A G-F product cannot be interrupted for economic reasons. • G-NF: Non-firm energy. This product may be interrupted for any reason or no reason, without liability on the part of either the buyer or seller.

21. Energy Product Codes • G-FC: Firm Contingent. The energy is from a designated generating unit or source. This product may be interrupted only to the extent the output capability of the designated unit or source has been reduced due to a deration or outage of the designated unit or source. A G-FC product cannot be interrupted for economic reasons. • G-FP: Firm Provisional Energy. This product may be interrupted only if the interruption is within the recall time and for conditions allowed by applicable provisions governing interruption of service, as mutually agreed to by the parties. A G-FP product cannot be interrupted for economic reasons.

22. Energy Product Codes • G-F1: Hourly firm energy. This product may be interrupted, consistent with the provisions of the transaction, provided the PSE or LSE receives notification of the interruption 40 minutes or more prior to the start of the operating hour. A G-F1 product cannot be interrupted for economic reasons. • G-EX: Exchange of Firm Energy. An exchange of firm energy where by one entity delivers energy to another entity at one point on the grid and receives an agreed upon amount of energy from that entity at another point on the grid.

23. Energy Product Codes • C-SP: Capacity for spinning reserve. On-Demand spinning reserve obligation/resource is a spinning reserve product that can be activated through the adjustment of a capacity e-tag. • C-NS: Capacity for non-spinning reserve. On-Demand non-spinning reserve obligation/resource is a non-spinning reserve product that can be activated through the adjustment of a capacity e-tag. • C-RE: Capacity associated with energy recallable for reserves. This product is energy which is recallable within ten minutes of activation of reserves and has been included in the Source Balancing Authorities reserve resources.

24. Energy Product Codes • So what’s next? • MIC e-mail ballot to approve Business Practice. • Business Practice to WECC Board for approval in December. • Disband Drafting Team at MIS meeting in December, hopefully!

25. Trading Timelines

26. Trading Timelines • Preschedule trading had historically begun at 6:00am Pacific time. • This was an understanding among Utilities and Marketers for years past. • Trading has now been seen beginning as early as 5:10am Pacific time. • Should WECC MIC or MIS get involved?

27. Trading Timelines Update • Anti-trust issue for WECC? • Informal survey of traders in the West. • Conversations at Fall WSPP OC meeting. • Conversation with ICE • Appears to be broad support for addressing this issue. • MIS formed a Task Force at August meeting to pursue this issue.

28. Trading Timelines Update • Task Force will post a Trading Timelines issue paper on WECC web site under general comments. • John Hughes to Chair the Task Force. • Task Force has three other participants. • There’s plenty of room for other participants! • Contact John Hughes or Phil Tice to participate.

29. Merchant Reliability Communication NWPP MCTF

30. Merchant Communication Task Force Update • Issues Identified • Merchants are concerned that current protocols may be insufficient for ensuring that generation can be discovered and delivered to meet firm obligations in some real time conditions, such as loss of generating units or significant forecast errors. • Concern that data and forecast methodologies used in daily assessments may need to be improved.

31. Daily Assessment Data • Task Force now includes reliability entities. • Data reliability and merchant entities exchange. • NERC Standards IRO-004, TOP-002,005,006, and others. • Accurate assessment of DA and RT adequacy. • Common understanding of what data is required and what it means.

32. Daily Assessment Data Update • Data issues being discussed: • Accurate communication of generating capacity between merchant and BA. • Time elements of power (5 min? 6 hrs?). • Assumed ability to purchase energy. • Forecast risk assumptions. • Frequency of data updates.

33. Communication Protocol Update • MCTF submitted a Communication Protocol Request for to WECC in early October. • Request is “Communications to preempt or aid in mitigating Capacity and Energy Emergencies.” • Assigned to MIC. • MIS forming a Drafting Team in November. • Contact Phil Tice to participate!

34. Load Responsibility Interpretation (LRI)

35. Implementing the LRI • Background information: • Load Responsibility Interpretation approved by WECC Board on September 7, 2007. • WECC Business Practice INT-BPS-014-0 approved by the WECC Board in April, 2007. • NWPP Response to WECC LRI, approved by NWPP OC on October 11, 2007. • Responses from other reserve sharing groups? • Will not debate merits of documents above.

36. LRI Key Points • PSE/LSE to determine who has contingency reserve responsibility. • WECC MORC and NERC Standards do not require energy imports to be delivered over “Firm” transmission (except reserves). • A BA must be prepared to compensate for loss of an import as it would for loss of internal generation. • Imports contingent upon specific generating units may be treated the same as transactions from units within the BA. • Contingency reserve location identification addressed in INT-BPS-014-0.

37. INT-BPS-014-0 Key Points • E-tag Author to identify BA or RSG member who has contingency reserve responsibility. • E-tag Author to identify reserve obligation multiplier if contingency reserve responsibility is not in Source BA.

38. NWPP Key Points • “Firm For The Hour” definition as it pertains to the Participating Balancing Authority Areas within the NWPP RSG members (when source) will not retain Contingency Reserve responsibility for exports out of the NWPP area, unless the etag indicates otherwise. • NWPP RSG members agree with the WECC assumption that unit contingent (firm contingent energy code) transactions between BAs will be treated the same as transactions with generating units residing inside the sink BA for Contingency Reserve purposes.

39. NWPP Key Points • NWPP RSG members (when sink) retain Contingency Reserve responsibility for all NWPP area imports, unless the etag indicates otherwise. • Within operating hour schedule cuts of non-interruptible energy imports or exports, NWPP area, will not be initiated nor accepted by NWPP RSG members, except: 1) For reliability purposes or 2) if mutually agreed to by the source and sink balancing authorities or 3) a unit contingent (firm contingent energy code) transaction. A single generator contingency is not an acceptable reason for cutting a firm transaction, unless it is a unit contingent (firm contingent energy code).

40. Are there Market issues that must be addressed prior to implementation of the Load Responsibility Interpretation?

41. Market Issue Questions • Are entities (merchant & reliability) actively preparing for implementation of LRI? • Are merchants talking with counterparties about LRI and existing agreements? • Are merchants talking with BA and TSP about LRI implementation? • How do merchants intend to identify which party has contingency reserve responsibilities in preschedule and real time transactions?

42. Market Issue Questions (continued) • Do merchants entities believe implementing LRI could disrupt markets? • How? • What are they doing to address concerns? • How will WSPP Service Schedule C be viewed with the implementation of LRI? • What actions can be taken to minimize market disruption? • WSPP Service Schedules? • ICE trades? • Brokers? • What role, if any, should the MIC play to facilitate minimizing market disruptions during LRI implementation?

43. MIS Meetings • Dec 12-13, 2007   San Diego

44. Market Issues Subcommittee QUESTIONS????