EIM Stakeholder Meeting November 17, 2015

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Today’s Meeting Meeting Objective: Provide education about how the EIM will impact you and what you need to do. Introduction and welcome

EIM Basics Stakeholder feedback and examples Key tariff revisions & CAISO market context

Customer next steps

EIM performance update

Wrap up

EIM Basics Josh Jacobs

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Review – What is an EIM?

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PSE Benefits of Participating in the CAISO EIM

• Enhanced Reliability: The EIM will benefit reliability through improved real-time grid visibility and hour ahead tests.

• More renewables: Sets the stage for a reduced carbon footprint

for PSE and Washington State by helping ease the wind integration challenges and a reduction of renewable energy curtailments.

• Efficiency: More efficient dispatch of resources.

• Voluntary: Resources can voluntarily elect to participate in offering imbalance energy.

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PSE Fits Into An Expanding CAISO EIM Footprint

• California Independent System Operator (CAISO) is non-profit, independent market operator that opened its doors in 1998 and presently manages power flow for about 80% of California.

• Launched a new Energy Imbalance

Market with PacifiCorp in November 2014 that leverages existing tools.

• CAISO EIM entities include

PacifiCorp and NV Energy, and PSE & Arizona Public Service (APS) in October 2016

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PSE Preparations for EIM Participation • Regulatory Revisions in 2016

• Open Access Transmission Tariff (FERC) • Market Based Rate Authority (FERC) • Schedule 448/449 Tariff (UTC)

• IT Systems Integration for market participation

• Resource Data Templates (operational characteristics) • Forecast Data and Outage submission • New CAISO Settlements

• Coordination of PSE’s Existing Transmission Rights with BPA

• Customer workshops

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PSE EIM Transfer Plan - Long Term Redirects

PACWPSEI 300 MW import

PSEIPACW 300 MW export

EIM export: no incremental impact to BPA flowgates Utilize PSEI-->JohnDay TSR Six long-term redirects, totaling 300 MW Redirect term: 10/1/16-10/1/17 EIM import: no incremental impact to BPA flowgates Utilize Mid-C-->PSEI TSRs Three long-term redirects, totaling 300 MW Redirect term: 10/1/16-10/1/17

Stakeholder Feedback and Examples Zach Gill Sanford & Chelsey Neil

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Getting Clear: What Does Being in the EIM Mean?

• Roles in the EIM • Generating Customers • Load & 449 Customers • Wheeling Customers

• What’s Changing for Customers

• Scheduling • Settlement

• Losses Example

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Roles in the EIM

EIM

Load

Interchange/Intrachange

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Generating Customers

• MID-C • Wild Horse • Colstrip • Mint Farm • Goldendale • System generation (internal PSEM generation) • Vantage Wind • Puget Sound Refinery Co-Gen (March Point) • Sawmill (Sierra Pacific) • New generators 5 MW and greater

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EIM Roles Impacting our Generating Customers

Generating customers have a choice: Participating Resource (PR) • Generators either internal or pseudo-tied to PSE’s

Balancing Authority Area (BAA). • They bid into the market and can be dispatched by the

CAISO EIM to provide imbalance energy on a five minute basis.

Non-Participating Resource (NPR) • Generators in PSE’s BAA that will not bid into the EIM. • These generators will still be impacted by changes to

metering, scheduling and settlement.

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Participating Resource Example

Participating Resource customers will have a direct relationship with both CAISO and PSE.

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Non-Participating Resource Example

Non-Participating Resource Customers will maintain their relationship with PSE.

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What does it mean to become a PR or a NPR?

Today EIM Participating

Resource (PR)

EIM Non-Participating Resource (NPR)

Metering 15-minute metering capability

5-minute metering capability

5-minute metering capability

Scheduling E-tag Base Schedule & E-tag Base Schedule & E-tag

Outage Coordination - Generation

Contact load office outage desk at least 7 days in

advance.

Contact load office outage desk 7 - 30 days in advance. Additional information will be

required.

Contact load office outage desk 7 - 30 days in

advance. Additional information will be

required.

Settlements Calculations

PSE sends settlements statements at Mid-C index

day-ahead prices.

CAISO will settle directly with PRs at Locational Marginal Prices (LMP)

prices.

PSE will settle with NPRs at LMP prices.

Bill Frequency Monthly (around the 4th of the

month for the prior month).

Weekly.

Monthly (around the 25th of the month for prior month).

*Preliminary weekly data

reports for added transparency.*

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Load Customers

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What Does EIM mean to Load Customers?

Today EIM

Metering 15 or 60-minute metering No change.

Scheduling E-tag No change.

Settlements Calculations Mid-C index day-ahead prices. LAP hourly prices.

Bill Frequency

Monthly (around the 4th of the month).

Monthly (around the 25th of the month).

*Preliminary weekly data

reports for added transparency.*

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Wheeling Customers (w/out load or generation in PSE’s BAA)

• Customers wheeling through PSE’s BAA on its Washington Area paths will be affected by the EIM and subject to EIM charges. This includes all scheduling points in the blue circle below.

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What Does EIM mean for Wheeling Customers? (w/out load or generation in PSE’s BAA)

Today EIM

Scheduling E-tag E-tag

Settlements No imbalance charges. Subject to EIM charges if E-tags are submitted or adjusted after

T-57.

Bill Frequency No imbalance charges on monthly invoice.

Monthly (around the 25th of the month

for prior month).

*Preliminary weekly data reports for added

transparency.*

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Scheduling Timelines

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Scheduling – 4 bites at the apple

• “Base Schedule” (Forecast Data on all resources, Interchange and Intrachange) submission timeline: • 7 days before each operating day. • 10:00 AM on the day before the operating day. • 77 minutes before each operating hour. • 57 minutes before the operating hour, which is when it

becomes financially binding.

• Variable Energy Resources (VERs) choose meteorological forecast source, providing 5 minute forecasts

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More Precise Imbalance Settlement

Today: Imbalance is settled at day-ahead Mid-C ICE Index prices. In the EIM: Generation and E-tag Changes Settle at a 5 and 15 minute Locational Marginal Price (LMP). Load Changes Settle at an hourly Load Aggregation Point (LAP).

Locational Marginal Price (LMP)

Load Aggregation Point (LAP)

These examples are not meant to reflect actual resource or load locations

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Components of Locational Marginal Pricing

Energy Locational + Congestion = Marginal + Losses Price (LMP) Note: A Greenhouse Gas Component applies to Participating Resources.

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Transmission Losses in the EIM

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Loss Compensation on S. Intertie and Colstrip

• PSE provides loss compensation over the PSE-owned portion of the Southern Intertie and Colstrip transmission systems.

• Therefore, the use of the LAP (EIM pricing) as the cost of energy for loss compensation over these facilities is accurate.

• FERC directed PacifiCorp to financially settle losses for transmission customers at EIM prices.

• Losses on Southern Intertie & Colstrip = Final E-tag MWh * 2.7% * Hourly LAP

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Changed Settlements Components • Schedule 1A – EIM Administrative Costs

• Schedule 4 – Energy Imbalance

• Schedule 4R – Energy Imbalance for 449 customers

• Schedule 9 – Generator Imbalance

• Schedule 12 – Losses on WA area

• Currently a component of imbalance charge to 449 customers

• Schedule 12A – Losses on Southern Intertie and Colstrip

• Attachment O, Section 8 – Other EIM Charges

Tariff Revisions Mariah Kennedy

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Tariff Principles

• Listen to our customers: Many customers provided valuable input that informed this round of tariff revisions.

• Meet Regulatory Requirements: Ensure just and reasonable treatment for all customers.

• Rely on Precedent and Improve Where Necessary: Tariff policies generally follow PacifiCorp and NV Energy; changes were included to meet CAISO and FERC requirements and bring further clarification for the benefit of our customers.

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Key Tariff Revisions Since August Draft

1. Penalty Bands: Removed (Schedules 4, 4R and 9)

2. Pseudo-Ties: PSE’s EIM Business Practice will clarify that Pseudo-Ties are excluded from Measured Demand

3. Operating Reserves: PSE will allocate payments and charges of Operating Reserves (Attachment O, Section 8.12)

4. Clarifying Terminology: • “Contingency vs. Corrective Action”: PSE revised “contingency

action” to “corrective action” in Attachment O, Section 4.1.1.5 of its tariff as not to be confused with use of the term “contingency” in other contexts

• Clarified calculation of Real Power Losses (Schedule 12A)

5. Response to FERC Orders: PSE proposed modifications necessary to implement revisions to CAISO’s markets

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FERC Developments • EIM Year One Enhancements, Phase 1

• Conditionally approved by FERC (Oct. 26, 2015, Effective Nov. 4, 2015)

• Available Balancing Capacity (ABC) Proposal • Gives CAISO visibility into balancing reserves • No FERC approval yet; FERC issued deficiency letter (Sept 24,

2015)

• Transitional Period • FERC conditionally approved a six month transition period not

subject to pricing parameters (Oct. 20, 2015)

• Readiness Criteria • No FERC approval yet

Customer Next Steps Laura Hatfield

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EIM Implementation Milestones

Key Implementation Milestones:

• Stakeholder Process and Input

• Tariff Changes

• Data Requirements, Operational Systems & Business Practices

• Parallel Operation & Simulation, Go Live

• Settlement

Stakeholder Process,

FERC Review

Announcement &

Implementation Agreement

Implementation & Tariff

Development

FERC Review Go Live

System Testing

and Simulation

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Next Steps to Enable EIM Transition 1. Decision: Decide whether you want to become a participating resource

(PR) or a non-participating resource (NPR). The draft Business Practice Manual (BPM) on PSE’s OASIS site provides more about how to apply to become a participating resource, (more information can be found in the BPM, pages 2 - 3, 23-28).

2. Review Business Practice Manual (BPM) on PSE’s OASIS site to learn more about specific changes for transmission and interconnection customers). Review Business Practice Manual Draft and provide comments by January 1, 2016.

3. 449 Customers – Contact your energy supplier to ensure they understand these upcoming changes.

4. Generators & Data Requirements: Both PRs and NPRs to submit resource data templates by January 1, 2016. These are included in PSE’s draft Business Practice Manual (BPM) posted on the OASIS EIM folder.

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NPR Data Requirements Template

• Data template is basic generator information that allows PSE and CAISO to maintain reliability and coordinate market function.

• Due to PSE by January 1, 2016

• Available on OASIS/EIM/Business Practice/Resource Data Template

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PSE’s Transmission Website (OASIS)

http://www.oasis.oati.com/psei/index.html

EIM Information can be found here

EIM Information can be found here

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Available Resources

• OASIS & PSE Contact Info (Link includes information on our draft EIM tariff and Business Practice Manual) http://www.oasis.oati.com/psei/

• CAISO EIM Resources:

http://www.caiso.com/informed/Pages/EIMOverview/Default.aspx

• CAISO Business Practice Manual: http://bpmcm.caiso.com/Pages/BPMDetails.aspx?BPM=Energy Imbalance Market

Wrap Up Janet Kelly

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It’s Working

• EIM Gross Total Benefits since November 2014: $33 Million

• Q3 Benefits from the PAC and CAISO EIM: $12 million

• Increased benefits due to five-minute market transfers, increased real-time demand and added resources.

• Reduced renewable curtailment

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We’re in this together

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PSE Stakeholder Timeline

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Submitting Tariff and BPM Feedback

• Submit written comments to eim@pse.com • Form available on OASIS in EIM/Stakeholder Process/11.17.15 folder • Feedback is appreciated

• Deadline is Tuesday, December 1

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Appendix

Tariff Provision / Issue Tariff Reference

Base Schedule Attachment O, Section 4.2.4

Variable Energy Resources (VERs) Forecasting

Attachment O, Section 4.2.4.2

Penalty Bands Removed Schedule 4, Schedule 4R, Schedule 9, Attachment O, Sections 10.4.1-3

Pseudo-Ties excluded from Measured Demand

Future draft of PSE EIM BP

Operating Reserves Attachment O, Section 8.12

Contingency / Corrective Action Attachment O, Section 4.1.1.5

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Appendix FERC Issue FERC Docket

Year One Enhancements, Phase 1 ER15-1919

Available Balancing Capacity ER15-861-003

Transitional Period ER15-2565

Readiness Criteria

ER15-861-004