Stakeholder Meeting August 7, 2015

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Today’s Agenda

Time Presentation Presenter

9:00 – 9:10 AM Welcome and Introductions Janet Kelly, PSE

9:10 – 9:45 AM PSE Decision & Need

Josh Jacobs, PSE

9:45 – 10:45 AM Introduction to CAISO Market Operator Jim Price, CAISO

10:45 – 11:00 AM Break

11:00 – 11:45 AM PSE OATT Revision Overview & Customer Impacts

Laura Hatfield & Mariah Kennedy, PSE

11:45 – 11:50 AM Stakeholder Engagement Process Janet Kelly

11:50 – 12:00 PM Q & A & Wrap Up Josh Jacobs

PSE’s Decision & Need

Josh Jacobs Director of Load Serving Operations & EIM Project Sponsor

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How did we get here?

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Grid Efficiency Opportunity in the West

Western Balancing Authorities

Existing Organized Markets

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EIM Benefits for PSE

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What else informed PSE’s Decision?

Voluntary Participation: Resources can voluntarily elect to participate in offering imbalance energy. Enhanced Reliability: The EIM will strengthen 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 renewable energy curtailments.

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What Does PSE Implementation Look Like?

• Preparing for October 1, 2016 “Go-Live”

• Project implementation – IT,

Metering, Business Process, Training and Policy, including OATT Revision

• Collaboration with BPA

• MOU • Dynamic Scheduling

• Joint PSE-CAISO Project Plan

• Network Model • Metering • Training

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Our goal for our transmission customers

Engage

Educate

Input Refine

Control

1. We want to engage with our customer regarding changes.

2. We want to provide as much education as is necessary.

3. We are looking for customer input on these changes.

4. Where we can, we will look to make refinements in our process or tariff.

5. Ultimately we want our customers to understand these changes so they can control their own destiny under this new operational model.

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CAISO Introduction • CAISO 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 NVEnergy, and PSE & APS in October 2016

• Vice President of Energy Operations,

David Mills, represents PSE on the CAISO Transitional Committee

CAISO Presentation

Jim Price – Sr Advisor, Market Development and Analysis

OATT Revision Overview & Customer Impacts

Mariah Kennedy, Regional Energy Policy Consultant & Laura Hatfield, Transmission Contracts Manager

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What’s Driving PSE’s Tariff Revision? • On March 5, 2015, PSE and CAISO filed an implementation agreement with

FERC to participate in the EIM as of October 1, 2016.

• FERC regulates transmission services offered by PSE under our Open Access Transmission Tariff (OATT).

• Transmission services and procedures will be revised to accommodate the EIM, therefore PSE’s OATT must be revised and filed with FERC.

• PSE has proposed revising the energy imbalance, generator imbalance, and losses provisions of its OATT to affect these EIM changes.

• PSE will cross reference applicable provisions of CAISO’s tariff. • A draft redline of the OATT is available on PSE’s OASIS, and comments are

due on this first draft by August 21.

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Two Key Changes

EIM Implementation Means Two Key Changes For Transmission Customers:

• Timing and content of forecasting and data requirements • Price at which imbalance and losses are settled

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Timing and Content

EIM

Load

Interchange/Intrachange

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Change in Settlements • Currently – Mid-C ICE Index

• Imbalance is settled at a day ahead index, the Mid-C ICE Index, for on and off peak hours, which is not refined to match an hourly market or specific generation or load areas.

• EIM – LMP and LAP

• Imbalance pricing in the EIM is aligned with the geographic footprint of the EIM and defined on a sub-hourly basis.

• Generation and E-tag Changes Settle at LMP • Locational Marginal Price (LMP). • The market determined marginal cost of serving the next

increment of demand at an electrical location. • Load Changes Settle at LAP

• Load Aggregation Point (LAP) • The weighted average of all LMPs in PSE’s BAA. • PSE has one LAP.

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Change in Settlements

Locational Marginal Price (LMP)

Load Aggregation Point (LAP)

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

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Recap

• PSE has proposed Tariff amendments • PSE transmission customers have defined roles in the EIM • Two key changes in PSE’s Tariff:

• Timing and content of forecasting and data requirements • Price at which imbalance and losses are settled

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Defining Key Terms

Term Definition EIM Entity Balancing Authority that represents

one or more EIM Transmission Service Providers and that enters into an EIM Entity Agreement with CAISO to enable the operation of the Real-Time Market in its Balancing Authority Area (BAA)

Participating Resources Owner, operator, or seller of energy from a resource that elects to participate in the Real-Time Market and enters into a EIM PR Agreement under which it is responsible for meeting requirements of Section 29 of CAISO’s tariff

Non-Participating Resources A resource in an EIM Entity’s BAA that is not participating resource

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Defining Key Terms

Term Definition Load Aggregation Point (LAP) A set of pricing nodes (Pnodes)

that are used for the submission of Bids and Settlement of Demand

Locational Marginal Price (LMP) The marginal cost ($/MWh) of serving the next increment of Demand at that Pnode consistent with existing Transmission Constraints and performance characteristics of resources

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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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Here’s What It Means To You

• Need for Tariff Changes to enable PSE to participate in the CAISO EIM Regulatory

• Forecasts and importance of Base Schedules in the EIM

Scheduling & Forecasting

• Planned Outages • Unplanned Outages and Derates

Outage Coordination

• Comprehensive review of metering to meet CAISO metering requirements

Metering Compatibility

• Parallel operations includes simulation and extensive testing prior to the Go Live

Parallel Operations & Go Live

• New EIM related charges • We will likely send two separate bills for current

transmission charges and EIM related charges

Billing & Settlements

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Regulatory & the Need for OATT Revisions

Open Access Transmission Tariff (OATT) changes

• References to CAISO Tariff and Business Practices Section 29.4 of the CAISO Tariff requires an EIM Entity such as PSE to have provisions in its OATT to enable operation of the EIM in its Balancing Authority Area.

• Limited changes to the Base OATT • Attachment O to PSE’s OATT – Provides for participation in the

EIM and includes: Roles and responsibilities Operations Settlements (Schedules 1a, 4, 4R, 9, 12, and 12a) CAISO Charge codes & Dispute Resolution

PSE’s Tariff framework will minimize changes and be flexible, collaborative and responsive

to stakeholder input.

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Scheduling & Forecasting Precision EIM Base Schedule

• Submitted by or for all transmission customers to PSE (EIM Entity). • An EIM base schedule is a forward looking energy schedule. • Represents a financially binding starting point in the real-time market. • Real time: is 77 & 57 minutes prior to the start of the operating hour. • Base schedules are used to balance load and generation in PSE’s Balancing

Authority (BA). • It includes hourly forecasts of load, hourly generation schedules, and hourly

interchange schedules. • Base Schedules are also used as a baseline for settlements. • Will require a seven-day horizon beginning of each Operating Day.

Opportunity to control imbalance charges with scheduling best practices.

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Outage Coordination Planned Outages • Planned outages (transmission and

resources) will need to be communicated to CAISO

• Outages will be reflected in market results for congestion, EIM dispatches, and settlements

• Increased modeling and outage details for modeling purposes lead to increased situational awareness

Unplanned Outages & Derates • Communicate as soon as possible • No later than 30 minutes after outage or

derate commences • Lasting longer than 15 minutes • Reduction in availability

Quality outage reporting will ensure reliability through timely

communication between PSE and CAISO.

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Metering Compatibility

• CAISO Technical requirements for metering and technical data, as set forth in the business practice manual, may be different.

Quality metering and telemetry equipment will ensure the accuracy of settlement data.

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Parallel Operations & Go Live

Parallel Operations & Market Simulation Allows for testing of systems and interfaces Coordinated test plan with CAISO Provides a more accurate view of the actual market operating conditions Ensures training & customer readiness (scheduling, bidding and non-binding

settlement processes) PSE will meet readiness criteria prior to Go Live

Go Live October 2016

Dispatch instructions Scheduled flows for EIM Transfers Base schedule, forecast and outage data submission Financially binding settlements

Following Go-live of EIM in October, the CAISO will quantify EIM benefits

using real market data.

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Billing & Settlements

PSE Transmission Billing to Customers will include:

• Non Imbalance related charges

• EIM Related billings CAISO will bill PSE (EIM Entity), which will then allocate charges to transmission customers Will include:

Schedule 1-A EIM Administrative Services Schedule 4 & 4R Energy Imbalance Schedule 9 Generation Imbalance Schedule 12 Losses EIM Miscellaneous charges

EIM pricing reflects competitive, real-time energy market costs.

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Here’s What You Need To Do

Familiarize yourself with PSE’s OASIS site

Review PSE’s proposed tariff changes

Provide comments on PSE’s proposed tariff changes by August 21.

Review CAISO Trainings on PSE’s OASIS site

Coordinate directly with your scheduling agent

Mark your calendar: Next meeting is scheduled for November 17th

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Available Resources

• OASIS & PSE Contact Info: http://www.oasis.oati.com/psei/

• CAISO EIM Resources:

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

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

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PSE’s OASIS

EIM Information can be found here

Stakeholder Engagement

Janet Kelly, EIM Stakeholder Outreach

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Value of the Stakeholder Process

• Collaborative and transparent process

• 200 + pages of tariff that will need many eyes on it • Let’s walk down this road together

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PSE Stakeholder Timeline

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Submitting Feedback

• Submit written comments to eim@pse.com

• Form available on OASIS in EIM/Stakeholder Process/8.7.15 folder • Feedback is appreciated

• Deadline is Friday, August 21st

• Next meeting: November 17, 2015

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Thank you!