Enhanced Market and Operational Tools for Reserve Assistance Program

1. WECC ISAS Committee Following Reserve Assistance Program Scott Kinney Avista - Director Power Supply On behalf of MC Initiative Members August 26, 2013

2. Agenda • Background • Enhanced Market Tools • Following Reserve Assistance Program

3. Background • NW BA leadership met in March 2012 • Address renewable energy integration • Address regulatory pressure • FERC • States • Reduce operating costs • Control our own destiny

4. MC Participant Organizations • Avista Corporation • Balancing Authority of Northern California (BANC) • Bonneville Power Administration • B.C. Hydro and Power Authority • Eugene Water & Electric Board • IberdrolaRenewables • Idaho Power Company • NaturEner Wind Holding • NorthWestern Energy • PacifiCorp • Portland General Electric • Puget Sound Energy • Chelan County PUD • Clark County PUD • Cowlitz County PUD • Douglas County PUD • Grant County PUD • Snohomish County PUD • Seattle City Light • Tacoma Power • Turlock Irrigation District • WAPA, Upper Great Plains

5. Objectives from the Problem Statement Develop or identify tools or alternatives to: • better manage ramps and increasing demand for balancing capacity associated with variable energy resources; • more systematically share load and resource diversity across their systems; • better manage and use the increasingly constrained regional transmission system;

6. Objectives from the Problem Statement • contain the costs and compliance risks associated with operating Balancing Authorities; • address issues of cost causation and cost allocation; • leverage existing tools and platforms as feasible; and • preserve the value of the existing Contingency Reserve Sharing Program

7. Enhanced Market and Operational Tools (EMT) Alternatives

8. Enhanced Market and Operational Tools (EMT) Alternatives Focus was on three main areas: • Opportunities to make existing and emerging bilateral market tools (and transmission provider business practices and tariff provisions) work better to meet intra-hour trading needs • Following Reserve Assistance Program • Transmission Visibility Enhancement

9. Following Reserve Assistance Program

10. Building Blocks • Automated BA reliability tool • Leverage BA load and generation diversity • Utilize existing Contingency Reserve Sharing Program • Participating BAs must maintain sufficient regulating capacity • BAs maintain compliance obligations • Request that all NWPP BAs participate

11. General ConceptPool in-hour reserves, share point-in-time diversity, manage tail events, maintain individual compliance BA’s Receive Assistance according to request, Available pool supply of Program Reserves, and Transmission availability Pool a portion of BA’s Available Program Reserves NWPP

12. FRAP Benefits • Analysis uses actual data • Supports regional reliability • Automated assistance • Captures regional load and generation diversity • Shares non deployed intra-hour reserves and ramping capability • Assists BAs with large load and generation deviations • Reduces risk of imbalance-related curtailments • Minimal implementation cost and risk • Limited software and hardware needs • No system operator • Works within existing bilateral market • “Guard Rails” to protect participating BAs

13. FRAP Benefits • Staged implementation allows for refinement • Shadow trial Q4 2013 – 6 months • Field trial 2014 • Long-term with potential to integrate into EIM structure • Opportunity to inform other regional initiatives • EIM Resource Sufficiency requirements • NERC BAL standard changes – common reserve methodology • Potential for future reduction of individual BA reserve requirements

14. Protocols for FRAP Trials • Implement operating rules to create benefit but limit exposure • BAs must deploy their own reserves before requesting • Requests allow BAs to return to reliable operating point • BAs choose whether to make a request (not mandatory) • Rules for requesting and responding • Event driven - BAs must satisfy conditions of a Qualifying Event • No limit on number of requests or time of requests • Magnitude and duration of requests are limited • Individual BAs response is limited • Pro-rata distribution of requests based on reserves held • Requests initially limited to increases (INC) only • Automated request terminations

15. Is There Regional Diversity?

16. Diversity Analysis • 19 BAs studied • Utilized 2011 data • BPA rate case methodology

17. Analyzing FRAP Benefits

18. FRAP Analysis • Actual held Program Reserves varies per BA today • No common methodology utilized • Analysis assumed each BA held consistent Program Reserves • 95% percentile of 2011 INC reserves deployed • Incorporated Field Trial operating protocols • Request assistance upon meeting a Qualifying Event • Limited request magnitude and duration • Pro-rata response to requests • Responding BA provides up to 50% of their Program Reserves • Automatic request terminations • No transmission limitations

19. FRAP Analysis • Reduction in overall deployment of Program Reserves due to sharing • Overall 29% reduction • All BAs benefit from FRAP • 18% to 33% reduction in deployed Program Reserves

20. FRAP Analysis Percentile Distribution of the INC Program Reserves Deployed NWPP Total, a Large BA, Medium BA and a Small BA

21. BA Receiving Assistance FRAP assistance requested FRAP assistance received Reserves Deployed w/o FRAP Reserves Deployed w/ FRAP

22. Shadow Trial – Q4 2013 • Low cost, no risk evaluation • Concept validation without direct impact to operations • Evaluate benefits based on current BA operations • Requires consistent, time stamped data • Perform after-the-fact analysis • Program data provided back to each BA • Provides additional time and data to • Educate participants and system operators • Develop settlement methodology • Assess Program Reserve methodology – held and deployed • Meet with FERC to discuss concept and Tariff requirements

23. Field Trial – 2014? • Evaluate and modify operating rules after Shadow Trial • Program Reserves methodology • Settlement methodology • Evaluate actual benefits and equity • Determine impact on system operation including transmission • Integrate with other regional efforts – EIM • Meet NERC CPS requirements as a pool

24. FRAP Summary • Sharing of in-hour Reserves • Leverage Contingency Reserve Sharing Program • Share point in time diversity • Ability to meet large ramps • Reduce operating risk and curtailments • No initial reduction in held reserves • Event driven • Guard rails in place to provide benefit and limit exposure • Low cost and risk • Gather data and operating experience

25. Questions Scott Kinney Avista Corp – Merchant scott.kinney@avistacorp.com