April 30, 2013 - RC/MC Meeting

1. April 30, 2013 - RC/MC Meeting ISO New England Staff Winter 2013/2014 Issues and Proposed Solutions Fuel Dependence Risk

2. Presentation Overview • Review the problem to be solved and the objective • Consolidation of submitted proposals • ISO took feedback provided by the Participants and developed a proposal in four parts • Procurement of Oil • Procurement of Dual Fuel • Procurement of Demand Response • Market Solutions

3. Review of the Problem Statement Key issues affecting near- and long-term risks to power system reliability and efficiency have introduced fundamental challenges that must be addressed. These challenges are dominated by the risks associated with the region’s steadily increasing dependence on natural gas supply and transportation infrastructure for power system operations. Risks are further amplified by the diminished operating performance of a portion of the fleet that, while infrequently operated, makes up over 20% of the installed capacity and provides critical fuel diversity required to respond to natural gas supply contingencies. Infrequently used oil-fired generation fleet held only a portion (less than a third) of potential oil storage capacity last winter.

4. Objective • Winter 2012/13 system conditions could have been much worse. • Weather conditions were not as severe as must be assumed for winter operations (it was not particularly cold, and load was well below historic system peak). • The ISO’s objective is to obtain the incremental energy needs to secure reliable system conditions this winter if severe weather occurs, target timeframe is December, January and February. • Based on ISO Studies, the identified gap ranges from 1.9 to 2.6 million barrels of oil (1.1 GWh to 1.5 GWh)

5. Consolidation of Proposed Solutions • 20 Proposals were originally submitted by Participants, including 1 from the ISO • Participant led teams, generally reduced these into: • RFP/Procurement Proposals for • Increase Fuel Oil Inventory • Demand Response • Dual Fuel Capabilities • Market Enhancement Proposals

6. Current Proposal in Four Parts • In consideration of Participant feedback, ISO has developed four unique elements of the current proposal and will present each in detail in the following order • Procurement For Single Fuel Oil Generators • Procurement For Dual Fuel Generators • Procurement For Demand Response • Market Solutions

7. Winter 2013/2014 Additional Review of the Needs Assessment

8. Gas Availability vs. Temperature ~ 3000 MW Gas-Capable Dual-Fueled Monday Tuesday Wednesday ~ 9700 MW Gas Only Friday Thursday

9. Data for Week of 1/20 – 1/26

10. April 17th Follow Up • 2003/2004 Temperature Assumption • Coldest winter in last 10 years • Correlates to 90/10 assumption • Assumptions for natural gas generator reductions • Based on ICF created spreadsheet design gas day assumptions • Entry conditions based on operational observations • Linear interpolation based on simplistic approach

11. Scenario 1 Gas Analysis Scenario 1 assumptions: Distrigas – 50% Canaport – 50% Sable Island -150,000 Dth/d Deep Panuke – 200,000 Dth/d TGP,AGT,IROQUOIS-100% PNGTS – 200,000 Dth/

12. Scenario 2 Gas Analysis Scenario 2 assumptions Distrigas – 35% Deep Panuke – 0% Sable island – 200,000 Dth/d Canaport-0% TGP,AGT,IROQUOIS-100% PNGTS-200,000 Dth/d

13. April 17th Follow Up • Why Oil? • Provides a strategic fuel reserve in the event of an abnormally cold winter • Least market impact • Effect of market initiatives • Timely implementation for 2013-2014 • Reserve initiatives address different concerns • Procuring low end of 1.9 - 2.6 million bbl scale • Methodology two review • Focused on incremental procurement based on additional gas reductions due to temperature differential between 2003/2004 and 2012/2013 • All non - gas supply resources assumed unchanged from 2012/2013