February 4, 2010

1. WSPP WebinarProposed Service SchedulesOperating Reserve Service (D)Intra-Hour Supplemental Power (E) February 4, 2010

2. Proposed Service Schedule DOperating Reserve Service

3. 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

4. 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)

5. 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)

6. 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

7. 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

8. 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

9. 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

10. 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

11. Proposed Service Schedule EIntra-Hour Supplemental Power

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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?

18. 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

19. I-HSP: Technical Issues • Given the product terms, are there any technical concerns?

20. 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)

21. 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

22. 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?

23. 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