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RTO West Update & Stage 2 Filing Overview

WECC Board of DirectorsJune 5,2002Portland,OR

RTO WESTFrank Afranji

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Energy Policy EvolutionNational Energy Policy Act (1992)

Granted FERC explicit authority to order transmission providers to provide transmission service to third parties

FERC Orders 888 & 889 (1996)Ordered all jurisdictional utilities to file open access transmission tariffs and establish standards of conduct

FERC Order 2000 (January 2000)Established required characteristics and functions of Regional Transmission Organizations (RTOs)

Required jurisdictional utilities to file plans for participation in an RTO or describe problems with participation

X You are hereStandard Market Design, revised Open Access Transmission Tariff, “A” NOPR on generation interconnection

Time

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Order No. 2000 Basics

Independence

Scope and Regional Configuration

Operational Authority

Short-term Reliability

Tariff Administration

Congestion Management

Parallel Path Flow

Ancillary Services

OASIS, TTC and ATC

Market Monitoring

Planning and Expansion

Interregional Coordination

4 Characteristics 8 Functions

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RTO West Geographic Scope

• Includes:• Washington, Oregon,

Idaho, Montana, Utah, Nevada, small portions of California and Wyoming, and British Columbia

• Covers:• > 90% existing high

voltage facilities in proposed region

• > 51,000 line miles• ~ 580,000 square

miles

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RTO West Filing - Stage 2 OverviewBackground

What Was Filed in Stage 1

FERC’s Response to Stage 1 Filing

March 29, 2002 Stage 2 Filing

Participating Filing Utilities

Content of the Stage 2 Filing

What the Stage 2 Filing Asked FERC To Do

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RTO West Filing - Stage 2 OverviewStage 1 Filing Stage 1 Filing asked FERC for limited declaratory action; most of the filing was informational

Among the things FERC was asked to act on were Order 2000 characteristics 1 and 2: independence and scope and regional configuration

FERC issued on order on April 26, 2001 indicating that, with minor changes, the proposal for RTO West met the independence and scope and regional configuration characteristics of Order 2000

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RTO West Filing - Stage 2 OverviewStage 2 Filing

The Stage 2 Filing builds on the Stage 1 Filing, seeking affirmation of FERC’s previous action on the Stage 1 filing

The Stage 2 Filing also seeks FERC’s declaratory action on all of the remaining Order 2000 characteristics and functions (operational authority; short-term reliability; tariff administration and design; congestion management; parallel path flow; ancillary services; OASIS, ATC, and TTC; market monitoring; planning and expansion; and interregional coordination)

The goal is to receive FERC’s declaration that the RTO West proposal as completed by the Stage 2 filing satisfies all Order 2000 characteristics and functions

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RTO West Filing - Stage 2 OverviewStage 2 Filing (continued)

Elements of the Stage 2 Filing:

Revised RTO West Transmission Operating Agreement

Amended RTO West Bylaws

Lists of Transmission Facilities Proposed for Inclusion

Information about how the RTO West proposal satisfies the operation authority characteristic (Order 2000 characteristic 3)

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Potential RTO West Development Milestones

1 2

4

3

57

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Stage 3 Begins

FERC Approval of Market Design

TOA Signed

FERC Approves Seams Agreements

State Regulatory Approvals

Independence Day

Major Financing Approved

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RTO Start

4/01/02 5/02/03 10/03/03 10/06/03 10/07/03 1/20/0612/08/03

© Andersen LLP 2002

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Western Market Vision

One Seamless West-Wide MarketCommon Business PracticesNo Trade BarriersMinimum Transaction Costs

Three RTOs - a Necessary First StepRetain Regional Accountability for Capital Expenditures, Reliability and PlanningRetain Regional Operating Knowledge Share ServicesCapture Symbiotic Benefits (e.g., act as back-up control center for each other)

Potential for fewer RTOs in the Future

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One Stop Shopping

•OASIS•Ancillary Services

•Scheduling•Market Monitoring

• Inter-Regional Planning•Interregional Dispute Resolution

RegionalAccountability

• Selection of Boards of Directors• Provider of Transmission Services

• Control Area Operation• Security Coordinator

•Maintenance•Intra-regional Dispute Resolution

• Outage Coordination •Capital Expenditures

•Regional Planning•FERC Compliance

SharedServices

•Back-Up Control Centers•Employee Training

•Pooled Human Resources•Purchasing•Settlements

•Enterprise Software•IT Systems

Standards andPractices

Common• Transmission Products

• Interconnection Standards•Reliability Standards

•ADR •Protocols & Data Standards

•Scheduling Practices•Pricing

•Liability Protection•Congestion Management

(w/ regional differences)

Compatible•Information Systems

•Tariff Design

Western Market Vision

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Seams Steering Group-Western Interconnection (SSG-WI)

A functioning Seams resolution forum for western RTOsRepresentation – RTO West, WestConnect and CAISOMOU – a framework for cooperationCurrently addressing:

Market MonitoringCommon Systems Interfaces Transmission PlanningCongestion ManagementPrice Reciprocity

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How can WECC support RTO West ?

This question is better answered after FERC responds to the RTO/ISO filings in the West by the end of July 2002.

We would have better information from FERC to assist us in building the support and cooperation roles.

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RTO West Filing - Stage 2

© Andersen LLP 2002

Questions?

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RTO West Filing - Stage 2

© Andersen LLP 2002

Additional Filing details

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RTO West Filing - Stage 2RTO West Transmission Operating Agreement

The RTO West Transmission Operating Agreement is a bilateral agreement through which a transmission owner authorizes RTO West to perform certain operational functions and provide transmission services across the transmission owner’s facilities

The RTO West Transmission Operating Agreement imposes specific obligations on RTO West, such as complying with applicable laws and regulations and taking actions and providing rights and services that enable the transmission owner to fulfill all of its pre-existing transmission service obligations

The RTO West Transmission Operating Agreement has been significantly revised from the version filed in Stage 1 to reflect changes in pricing, congestion management, and other areas

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RTO West Filing - Stage 2Lists of Transmission Facilities Proposed for Inclusion

There are individual lists for each of the Filing Utilities that participated in the Stage 2 filing

The lists reflect the provisions in the RTO West Transmission Operating Agreement, which has a three-category approach:

Facilities that must be included for pricing and operational control because they are part of the “backbone” system or affect its transfer capability

Transmission facilities that do not affect the “backbone” system and may be included for pricing but without operational control

“Certain Distribution Facilities” - primary function is distribution but can affect “backbone” system transfer capability

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RTO West Filing - Stage 2Operation Authority (Order 2000 characteristic 3)

Operational authority derived through the RTO West Transmission Operating Agreement

RTO West has the obligation to use all reasonable efforts to cause interconnected load and generators to respond during system emergencies

RTO West will perform the security coordinator (now call reliability coordinator) function for its control area; this is currently expected to be carried out through a contractual arrangement with the region’s existing security coordinator, Pacific Northwest Security Coordinator (“PNSC”)

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RTO West Filing - Stage 2Short-Term Reliability (Order 2000 characteristic 4)

RTO West will operate a single control area that will encompass all of the control areas previously operated by the transmission owners participating in RTO West

RTO West will have exclusive authority for receiving, confirming, and implementing all interchange schedules

RTO West will have the authority to take actions necessary to maintain the reliability, security, and stability of the RTO West transmission system

RTO West will have authority to approve or disapprove scheduled outage requests for the facilities over which it has operational control

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RTO West Filing - Stage 2Pricing Proposal

Objectives:

Avoid price increases

Minimize cost shifts

Eliminate transmission rate pancaking

Honor existing contracts

All users contribute to fixed costs

Minimize use of volumetric rates

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RTO West Filing - Stage 2The pricing challenge: create a reasonable balance among competing objectives

The solution: a minimum transition period (the “Company Rate Period”), a general “license-plate” rate structure (“Company Rates”), and an “External Interface Access Fee”

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RTO West Filing - Stage 2Congestion Management Proposal (Order 2000 function 2)

Provides for a market-based system of managing congestion from the beginning of RTO West commercial operations

Relies on a voluntary bidding process open to generators and dispatchable loads

RTO West will use the bids to compute locational prices and manage congestion based on security-constrained, least-cost redispatch

Will provide RTO West transmission customers with efficient price signals that show the consequences of their transmission usage decisions

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RTO West Filing - Stage 2OASIS, TTC, and ATC function (Order 2000 function 5)

RTO West will maintain and administer its own OASIS site and will be responsible for calculation of Total Transmission Capability (TTC) and Available Transmission Capability (ATC) (although the concept of “ATC” does not exactly fit in an “accept-all-schedules” congestion management model with financial rights)

Work through the Seams Steering Group - Western Interconnection (“SSG-WI”) to move toward a single point access to all OASIS sites for customers that wish to schedule transactions across any of the three RTOs proposed for the West: the California ISO, RTO West, and WestConnect

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RTO West Filing - Stage 2Planning and Expansion Proposal (Order 2000 function 7)

RTO West will have ultimate authority for planning its controlled transmission facilities - based on operational security and transmission adequacy standards

Planning through inclusive public process that encourages and supports market-based expansion decisions and provides for coordination with appropriate state and provincial authorities

Designed to result in market decisions about the need for system expansion that are rational and economically sound, taking into account non-transmission alternatives

RTO West has authority to arrange for transmission expansions, additions, and upgrades - based on transmission adequacy standards and other “backstop”authority under the RTO West Transmission Operating Agreement

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RTO West Filing - Stage 2Interregional Coordination (Order 2000 function 8)

SSG-WI is the focus of RTO West’s approach to interregional coordination

Efforts underway or planned for SSG-WI:

Coordination of West-wide system expansion planning Development of West-wide market monitoring Exploring pricing reciprocity among western RTOs Support for development of common and compatible

systems and services and market design models Coordinating development of market interface and electric

business practice standards for the Western Interconnection Inter-RTO discussions on sharing systems, procuring

compatible hardware and software, and creating mutually beneficial service functions

Coordination with and support of state and provincial policies