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Customer Information Session OATT Requirements & Business Practices Martin Huang VP Grid Operations March 2011. - 1 -. Overview. Recent revisions to OATT Transfer Pricing Agreement Corporate Governance. Recent Revisions to OATT. Changes due to integration

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  1. Customer Information Session OATT Requirements & Business Practices Martin Huang VP Grid Operations March 2011 - 1 -

  2. Overview Recent revisions to OATT Transfer Pricing Agreement Corporate Governance

  3. Recent Revisions to OATT • Changes due to integration • most recent amendments do not introduce significant changes • BC Hydro has adopted the OATT from BCTC, with some minor modifications such as inclusion of vertically integrated utility language from pro forma OATT • OATT continues to be consistent with pro forma OATT established by FERC Orders 890 et al • BCUC Order No. G-192-10 (Dec 2010) • Changes we are now seeing due to 2008 OATT amendments • revised OATT brought forward by BCTC in order to continue to be aligned with the FERC pro forma • amendments to OATT approved through BCUC regulatory process • BCUC Order No. G-102-09 (Sept 2009)

  4. Recent Revisions to OATT • Certain provisions and practices just now coming into effect due to timing of MODS implementation and compliance requirement of 2009 BCUC order • Examples: • Simultaneous Submission Window (SSW) • Conditional Firm Service • Curtailment methodologies

  5. Transfer Pricing Agreement (TPA) • What the TPA is not. • TPA is not a transmission service agreement • This means that the TPA: • does not grant transmission access • does not provide transmission services • does not set a transmission rate for BC Hydro and/or Powerex • What is the TPA? • TPA is an agreement between Powerex and BC Hydro • covers how energy transactions are dealt with • existing TPA has been in place since 2003 and has not been amended since then • publicly available and was filed in 2003 Heritage Contract proceeding • What transmission terms, conditions and rates apply to BC Hydro and Powerex? • BC Hydro and Powerex pay the applicable approved transmission rates and are subject to the same terms and conditions for accessing ATC via TSR submissions on OASIS • Same terms, conditions and rates applicable to all other customers • Approved OATT, including rates, subject to BCUC regulatory process 5

  6. Corporate Governance BC Hydro transmission policy decisions “One Hydro” Continue to be aligned with industry standards and FERC pro forma OATT Commitment to non-discriminatory open access, including adherence to Standards of Conduct Internal policy discussions, including issues related to disputes, subject to the SOC rules 6

  7. Corporate Governance continued…… • Standards of Conduct (SOC) • SOC define the rules related to functional separation for an integrated utility providing open access transmission services • BC Hydro’s SOC and organizational structure are fully consistent with pro formaOATT • FERC Orders 717 et al substantively revised the pro forma SOC

  8. Corporate Governance continued…… • SOC General Principles: • 1. Non-discriminatory requirements • transmission provider to treat all transmission customers on a not unduly discriminatory manner • 2. Independent functioning rule • TFEs must function independently of MFEs • 3. No conduit rule • non-public transmission function information not to be disclosed to MFEs • 4. Transparency rule • certain information must be posted on BC Hydro’s website to allow interested persons to detect the potential for acts of undue preference

  9. Corporate Governance continued…… • SOC recent changes • Driven by industry and adoption by FERC as industry standard • Key Changes: • Reinstatement of employee functional approach • Employees designated astransmission function employees (TFEs) and market function employees (MFEs) • If not a TFE or MFE, then undesignated employee • “transmission function information” (TFI) is narrowly defined - TFI is only that information relating to day-to-day transmission operations, including granting or denying transmission service requests • Implementation of SOC • Non-public TFI cannot be communicated to MFEs • Non-public TFI can be communicated to undesignated employees • All employees, including undesignated employees subject to the “no conduit” rule • TFEs and MFEs function independently, and any discussions are conducted pursuant to SOC • Granting/denying of transmission service requests only done by TFEs within T&D Market Policy & Operations • Legal and regulatory support employees generally not considered TFEs or MFEs. Can provide legal support to either group so long as employees do not provide non public TFI to MFEs. 9

  10. Implementation of SOC What is not prohibited by the SOC • Transmission policy and planning information does not fall within definition of TFI; engaging in transmission policy or planning does not make an employee a TFE • OATT decision-making as an integrated utility • Pro forma OATT and SOC were designed for vertically integrated utilities • Undesignated employees (which can include Powerex officers/employees not engaged in marketing functions on a day-to-day basis) not prohibited from being involved with OATT policy, provided that there is adherence to SOC rules

  11. Open Access and Regulation • BC Hydro provides open access consistent with industry standards • Ultimately the BCUC determines what is just and reasonable • BC Hydro conducts consultation with respect to significant OATT amendments and significant new/amended business practices • New transmission policies or changes to transmission terms/conditions subject to a BCUC process and approval • Customers can always bring issues forward to the BCUC in relation to any type of OATT decision

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