WSPP Reserves Issue Educational Webinar February 26, 2008

WSPP Reserves IssueWSPP Reserves Issue

Educational WebinarEducational Webinar

February 26, 2008February 26, 2008

Our Purpose todayOur Purpose today An issue regarding reserves has An issue regarding reserves has

resulted in decreased liquidity in resulted in decreased liquidity in physical, forward markets.physical, forward markets.

It has introduced lack of clarity into the It has introduced lack of clarity into the market.market.

WSPP has devised a plan in response.WSPP has devised a plan in response. Educate membership, formulate Educate membership, formulate

options, debate, decide on action.options, debate, decide on action. Today, we are focused on education.Today, we are focused on education.

Reserves IssueReserves Issue

Task force has done significant work.Task force has done significant work. Webinar, document, call on Thursday, Webinar, document, call on Thursday,

OC meeting, possible workshop.OC meeting, possible workshop. Task Force members available to Task Force members available to

discuss.discuss. April/May, report finalized for EC.April/May, report finalized for EC. May/June, adopt action plan.May/June, adopt action plan. Work with other organizations.Work with other organizations.

Reserves IssueReserves Issue

Recent developments have now Recent developments have now forced the reserves issue to a head.forced the reserves issue to a head.

What the Agreement saysWhat the Agreement says

Service Schedule CService Schedule C• C-3.10 Seller shall be responsible for C-3.10 Seller shall be responsible for

ensuring that Service Schedule C ensuring that Service Schedule C transactions are scheduled as firm transactions are scheduled as firm power consistent with the most recent power consistent with the most recent rules adopted by the applicable NERC rules adopted by the applicable NERC regional reliability council. [WECC]regional reliability council. [WECC]

For years we’ve had tacit agreement For years we’ve had tacit agreement over what the WECC rules were. over what the WECC rules were. Now they have changed.Now they have changed.

WECC Interpretation of “Load WECC Interpretation of “Load Responsibility”Responsibility”

““Energy product definitions are Energy product definitions are determined by the entities that are determined by the entities that are parties to the transaction.parties to the transaction.• It is up to Purchasing Selling Entities to It is up to Purchasing Selling Entities to

determine their level of acceptable determine their level of acceptable deliverability risk and determine who deliverability risk and determine who has has contingency reserve responsibilitycontingency reserve responsibility.”.”

What is contingency reserve What is contingency reserve responsibility?responsibility?

CRR = “Load Responsibility”

1,000 MW CR 1,000 MW CR

AB

500 MW

965 MW CR 1,035 MW CR

A B

New WECC requirementNew WECC requirement

B. RequirementsB. Requirements• WR1. ..e-Tag Authors will identify the BA WR1. ..e-Tag Authors will identify the BA

or Reserve Sharing Group member or Reserve Sharing Group member responsible for including the transaction responsible for including the transaction in their calculation of Contingency in their calculation of Contingency Reserve requirements. This entity will Reserve requirements. This entity will be referred to as the “Responsible be referred to as the “Responsible Entity.” Only one selection will be made.Entity.” Only one selection will be made.

Are they serious?Are they serious?

C. MeasuresC. Measures• WM1. Interchange Authorities will WM1. Interchange Authorities will

provide evidence that they only accept provide evidence that they only accept e-Tags containing the Responsible e-Tags containing the Responsible Entity….Entity….

• WM2. Balancing Authorities…will provide WM2. Balancing Authorities…will provide evidence of correctly adjusting their evidence of correctly adjusting their Contingency Reserve Obligations by the Contingency Reserve Obligations by the amounts shown on the implemented e-amounts shown on the implemented e-Tag.Tag.

What’s the problem?What’s the problem?

Some believe there is no longer a Some believe there is no longer a default product.default product.

Some sellers claim they can not Some sellers claim they can not arrange to provide reserves.arrange to provide reserves.

Those without systems can not Those without systems can not legally commit.legally commit.

BPA asserts it’s merchant can not BPA asserts it’s merchant can not obligate its BA to provide reserves for obligate its BA to provide reserves for sales.sales.

Legal OpinionLegal Opinion

Can’t we just have somebody like Can’t we just have somebody like Wright and Talisman weigh in on this Wright and Talisman weigh in on this and call it good?and call it good?

Who must provide reserves?Who must provide reserves? FERC has weighed in on the issue via Order 890 OATT, and FERC has weighed in on the issue via Order 890 OATT, and

various other orders.various other orders. What are the words in Order 890 OATTWhat are the words in Order 890 OATT The Transmission Provider is required to offer to provide (or The Transmission Provider is required to offer to provide (or

offer to arrange with the local Control Area operator as offer to arrange with the local Control Area operator as discussed below) the following Ancillary Services only to the discussed below) the following Ancillary Services only to the Transmission Customer serving load within the Transmission Customer serving load within the Transmission Provider's Control Area (i) Regulation and Transmission Provider's Control Area (i) Regulation and Frequency Response, (ii) Energy Imbalance, (iii) Operating Frequency Response, (ii) Energy Imbalance, (iii) Operating Reserve - Spinning, (iv) Operating Reserve - Supplemental, Reserve - Spinning, (iv) Operating Reserve - Supplemental, and (v) Generator Imbalance. The Transmission Customer and (v) Generator Imbalance. The Transmission Customer serving load within the Transmission Provider's Control Area serving load within the Transmission Provider's Control Area is required to acquire these Ancillary Services, whether is required to acquire these Ancillary Services, whether from the Transmission Provider, from a third party, or by from the Transmission Provider, from a third party, or by self-supply. The Transmission Customer may not decline self-supply. The Transmission Customer may not decline the Transmission Provider's offer of Ancillary Services the Transmission Provider's offer of Ancillary Services unless it demonstrates that it has acquired the Ancillary unless it demonstrates that it has acquired the Ancillary Services from another source.Services from another source.

Please…summarize.Please…summarize.

Transmission provider Transmission provider to loadto load, must , must offer reserves. offer reserves.

ICE issueICE issue

Significant quantity of preschedule Significant quantity of preschedule and term trades done on ice.and term trades done on ice.

Does not specify who carries Does not specify who carries reserves.reserves.

Do not know who your counterparty Do not know who your counterparty is until transaction is consummated.is until transaction is consummated.

ICE will follow the market.ICE will follow the market.

Actions available to WSPPActions available to WSPP

Do nothing.Do nothing. Possible solutions 1-6.Possible solutions 1-6.

Possible SolutionsPossible Solutions

Solution 1 WECC passes Bal-002Solution 1 WECC passes Bal-002 Solution 2 Agree on one product (Product 1)Solution 2 Agree on one product (Product 1) Solution 3 Develop 2 products (Products 1&2)Solution 3 Develop 2 products (Products 1&2) Solution 4 Develop 2 products (Products 1&3Solution 4 Develop 2 products (Products 1&3 Solution 5 Agree on one product (Product 3)Solution 5 Agree on one product (Product 3) Solution 6 Agree on one product (Product 2)Solution 6 Agree on one product (Product 2)

All products would be “new” products.All products would be “new” products.

What about existing contracts?What about existing contracts? Existing language of Schedule C should be left intact Existing language of Schedule C should be left intact

regardless of which solution WSPP may pursue.regardless of which solution WSPP may pursue. Preserves whatever arguments parties believe they Preserves whatever arguments parties believe they

have regarding who carries the reserve responsibility have regarding who carries the reserve responsibility under existing contracts whose terms precede, and under existing contracts whose terms precede, and may extend beyond, the adoption of any of the may extend beyond, the adoption of any of the solutions we may adopt. solutions we may adopt.

Any language describing Products 1, 2, or 3 would Any language describing Products 1, 2, or 3 would be in addition to Schedule C.be in addition to Schedule C.

Would apply after their adoption by the WSPP. Would apply after their adoption by the WSPP. Current WSPP agreement does not contain clear Current WSPP agreement does not contain clear

damages provisions for failure to supply reserves.damages provisions for failure to supply reserves. This will be addressed in any of the new products. This will be addressed in any of the new products.

New Service SchedulesNew Service Schedules Product 1Product 1 is defined as “Seller is defined as “Seller

ensures that the source Balancing ensures that the source Balancing Authority supplies reserves.”Authority supplies reserves.”

Product 2Product 2 is defined as “Firm Energy is defined as “Firm Energy sold separately from contingency sold separately from contingency reserves.”reserves.”

Product 3Product 3 is defined as ““Purchaser is defined as ““Purchaser ensures that the sink Balancing ensures that the sink Balancing Authority supplies reserves.”Authority supplies reserves.”

Possible SolutionsPossible Solutions

Solution 1 WECC passes Bal-002Solution 1 WECC passes Bal-002 Solution 2 Agree on one product (Product 1)Solution 2 Agree on one product (Product 1) Solution 3 Develop 2 products (Products 1&2)Solution 3 Develop 2 products (Products 1&2) Solution 4 Develop 2 products (Products 1&3Solution 4 Develop 2 products (Products 1&3 Solution 5 Agree on one product (Product 3)Solution 5 Agree on one product (Product 3) Solution 6 Agree on one product (Product 2)Solution 6 Agree on one product (Product 2)

Solution 1: WECC passes Bal-002Solution 1: WECC passes Bal-002

Bal 002 removes the ability to alter load Bal 002 removes the ability to alter load responsibility through standard, WSPP responsibility through standard, WSPP schedule C transactions.schedule C transactions.

CRR = “Load Responsibility”

1,000 MW CR 1,000 MW CR

AB

500 MW

965 MW CR 1,035 MW CR

A B

Solution 1: WECC passes Bal-002Solution 1: WECC passes Bal-002

Bal 002 removes the ability to alter load Bal 002 removes the ability to alter load responsibility through standard, WSPP responsibility through standard, WSPP schedule C transactions.schedule C transactions.

Reserves can still be transferred via Reserves can still be transferred via interchange schedules using new interchange schedules using new WECC product codes.WECC product codes.

1,000 MW CR Requirement (Carry

960)

1,040 MW CR Requirement (1,000 MW CR plus 40 MW CR Sale)40 MW, tagged as spinning or non-

spinning reserves using WECC product codes

Evaluation of Solution 1Evaluation of Solution 1 StrengthsStrengths

• May substantially resolve the issue without WSPP action.May substantially resolve the issue without WSPP action.• The solution, like the problem, will be limited to the WECC Region. The solution, like the problem, will be limited to the WECC Region. • PSEs with or without systems can buy reserves and, subject to FERC PSEs with or without systems can buy reserves and, subject to FERC

requirements (have cost-based or market-based rate authority), requirements (have cost-based or market-based rate authority), schedule reserves under new WECC product codes. schedule reserves under new WECC product codes.

• Separates reliability world from commercial world, which is consistent Separates reliability world from commercial world, which is consistent with direction of FERC and the rest of the U.S.with direction of FERC and the rest of the U.S.

WeaknessesWeaknesses• May not receive sufficient support at March WECC OC meeting to May not receive sufficient support at March WECC OC meeting to

advanceadvance• Market dysfunction may continue until Bal-002-WECC-1 is Market dysfunction may continue until Bal-002-WECC-1 is

implemented, which most likely won’t be until early 2009. implemented, which most likely won’t be until early 2009. • Deficit BAs need a way to meet their new reserve requirement. Deficit BAs need a way to meet their new reserve requirement. • Because of the requirement to transfer reserves over firm transmission, Because of the requirement to transfer reserves over firm transmission,

the potential pool of reserve providers may be reduced.the potential pool of reserve providers may be reduced.• Slight chance of continued disagreement over what Schedule C means Slight chance of continued disagreement over what Schedule C means

since some people believe you must have access to reserves in order since some people believe you must have access to reserves in order to sell Schedule C firm energy. to sell Schedule C firm energy.

Evaluation of Solution 1 (cont.)Evaluation of Solution 1 (cont.) Value shiftsValue shifts

• Whereas under the existing standard BAs can rely on WSPP Whereas under the existing standard BAs can rely on WSPP transactions utilizing non-firm transmission to reduce their reserve transactions utilizing non-firm transmission to reduce their reserve requirement, if Bal 002 passes they would have to purchase firm requirement, if Bal 002 passes they would have to purchase firm transmission for delivery of reserves.transmission for delivery of reserves.

Functional fix requiredFunctional fix required• WECC will most likely remove requirement to specify party responsible WECC will most likely remove requirement to specify party responsible

for reserves on the tag.for reserves on the tag. Regulatory/agency fix requiredRegulatory/agency fix required

• Approval required by:Approval required by:• WECC OC, WECC OC, • WECC Board, WECC Board, • NERC Board, and NERC Board, and • FERC.FERC.

Probability of 90% vote at WSPP Etc.Probability of 90% vote at WSPP Etc.• NA. Probability of passage at WECC - 50%NA. Probability of passage at WECC - 50%• No action required at WSPP No action required at WSPP

Solution 2: Agree on one product Solution 2: Agree on one product (Product 1) (Product 1)

Seller ensures that the source BA Seller ensures that the source BA supplies reserves.supplies reserves.

With this product, the sink Balancing With this product, the sink Balancing Authority can decrement their load Authority can decrement their load responsibility (and therefore the responsibility (and therefore the contingency reserve requirement), and contingency reserve requirement), and the source BA is obligated to increase the source BA is obligated to increase their load responsibility by the same their load responsibility by the same amount.amount.


• Changes to the WSPP agreement can be done within WSPP. Changes to the WSPP agreement can be done within WSPP. • May allow some BAs to count on WSPP imports to reduce May allow some BAs to count on WSPP imports to reduce

operating reserve requirement.operating reserve requirement.• A single standard product improves the chances of consistent A single standard product improves the chances of consistent

application and increased liquidity in the marketplace.application and increased liquidity in the marketplace. WeaknessesWeaknesses

• Parties who can not obtain reserves from their Balancing Parties who can not obtain reserves from their Balancing Authority can not provide this product.*Authority can not provide this product.*

• Some believe there would be antitrust concerns with this Some believe there would be antitrust concerns with this product.product.

• This is a bundled product that links firm energy and contingency This is a bundled product that links firm energy and contingency reserves, which is an ancillary service. If the product is reserves, which is an ancillary service. If the product is exported, the seller appears to need to assure it has requisite exported, the seller appears to need to assure it has requisite market-based authority to sell the AS together with the firm market-based authority to sell the AS together with the firm energy, or may be required to demonstrate that it is selling the energy, or may be required to demonstrate that it is selling the bundled product at cost-based rates. bundled product at cost-based rates.

• This product is not the same product that is trading in the rest of This product is not the same product that is trading in the rest of the continent. the continent.


• Parties who can not obtain reserves from their Balancing Authority can not Parties who can not obtain reserves from their Balancing Authority can not provide this product.provide this product.

Functional fix requiredFunctional fix required• Requires new or modified WSPP language (e.g., creation of a new service Requires new or modified WSPP language (e.g., creation of a new service

schedule, clarification of remedies for not performing on reserves provisions).schedule, clarification of remedies for not performing on reserves provisions).• WECC could remove requirement to specify party responsible for reserves on the WECC could remove requirement to specify party responsible for reserves on the

tag.tag. Regulatory fix requiredRegulatory fix required

• Requires FERC approval of new WSPP filing.Requires FERC approval of new WSPP filing.

• *A FERC action requiring BAs to provide reserves (not imbalance energy) to *A FERC action requiring BAs to provide reserves (not imbalance energy) to sellers delivering out of the BA would significantly alleviate this weakness. sellers delivering out of the BA would significantly alleviate this weakness. However, filings have been made by parties asking FERC to do just this. FERC However, filings have been made by parties asking FERC to do just this. FERC has chosen to decline to order this, and has reiterated that it is the responsibility has chosen to decline to order this, and has reiterated that it is the responsibility of the transmission provider to load to offer reserves. of the transmission provider to load to offer reserves.

Probability of 90% approvalProbability of 90% approval• This has been proposed to the EC as an interim measure, and only applicable to This has been proposed to the EC as an interim measure, and only applicable to

ICE trades. It failed, and in fact only achieved a 50% approval.ICE trades. It failed, and in fact only achieved a 50% approval.

Solution 3: Develop two products Solution 3: Develop two products (Products 1&2)(Products 1&2)

Rather than attempting to agree on a Rather than attempting to agree on a default product, develop two default product, develop two products as follows: products as follows:

Product 1Product 1 - Seller ensures that the - Seller ensures that the source BA supplies reserves.source BA supplies reserves.

Product 2Product 2 – Firm energy sold – Firm energy sold separately from reserves.separately from reserves.

New Service SchedulesNew Service Schedules Product 2Product 2 is defined as “Firm Energy sold is defined as “Firm Energy sold

separately from contingency reserves.” separately from contingency reserves.” This product can be consistent with the This product can be consistent with the WECC product code, which states WECC product code, which states “This “This product may be curtailed only in the product may be curtailed only in the event of a reliability condition or to event of a reliability condition or to meet Seller’s public utility or meet Seller’s public utility or statutory obligations for reliability of statutory obligations for reliability of service to native load. [This] product service to native load. [This] product cannot be interrupted for economic cannot be interrupted for economic reasons.”reasons.”

This product would also include liquidated This product would also include liquidated damages unless agreed otherwise.damages unless agreed otherwise.


• Changes to the WSPP agreement can be done within WSPP. Changes to the WSPP agreement can be done within WSPP. • May allow some BAs to count on WSPP imports via Product 1 to reduce their May allow some BAs to count on WSPP imports via Product 1 to reduce their

operating reserve obligations.operating reserve obligations.• Allows market participants to determine their preferred products.Allows market participants to determine their preferred products.• If both products end up with sufficient liquidity, this provides an alternative to If both products end up with sufficient liquidity, this provides an alternative to

those who can’t supply Product 1.those who can’t supply Product 1.• WECC has already developed a means to separate the two products using the e-WECC has already developed a means to separate the two products using the e-

tag form.tag form. WeaknessesWeaknesses

• Scheduling/tagging issues.Scheduling/tagging issues.• The Intercontinental Exchange has claimed that bifurcating products usually The Intercontinental Exchange has claimed that bifurcating products usually

results in a reduction in liquidity. results in a reduction in liquidity. • Potential for market confusion. Requires education on product distinctions.Potential for market confusion. Requires education on product distinctions.• Parties who can not obtain reserves from their Balancing Authority can not Parties who can not obtain reserves from their Balancing Authority can not

provide Product 1, which would limit them to Product 2.provide Product 1, which would limit them to Product 2.• If some market participants are limited to selling Product 2, some believe there If some market participants are limited to selling Product 2, some believe there

would be antitrust concerns with this solution.would be antitrust concerns with this solution.• Broker markets and electronic trading platforms would have to identify which Broker markets and electronic trading platforms would have to identify which

product is being transacted.product is being transacted.• Product 1 is a bundled product that links firm energy and contingency reserves, Product 1 is a bundled product that links firm energy and contingency reserves,

which is an ancillary service. If Product 1 is exported, the Seller appears to need which is an ancillary service. If Product 1 is exported, the Seller appears to need to assure it has requisite market-based authority to sell the AS together with the to assure it has requisite market-based authority to sell the AS together with the firm energy, or may be required to demonstrate that it is selling the bundled firm energy, or may be required to demonstrate that it is selling the bundled product at cost-based rates.product at cost-based rates.

• Product 1 is not the same product that is trading in the rest of the continentProduct 1 is not the same product that is trading in the rest of the continent


• Parties who can not obtain reserves from their Parties who can not obtain reserves from their Balancing Authority can not provide Product 1, Balancing Authority can not provide Product 1, which would limit them to Product 2.which would limit them to Product 2.

Functional fix requiredFunctional fix required• Product differentiation would be required in the Product differentiation would be required in the

broker markets and on electronic trading broker markets and on electronic trading platforms.platforms.

• Requires creation of two new WSPP service Requires creation of two new WSPP service schedulesschedules

Regulatory fix requiredRegulatory fix required• Requires FERC approval of WSPP filing.Requires FERC approval of WSPP filing.

Probability of 90% voteProbability of 90% vote• Not clear - Some entities will not support Not clear - Some entities will not support

bifurcating the market in this manner.bifurcating the market in this manner.

Solution 4: Develop two products Solution 4: Develop two products (Products 1&3)(Products 1&3)

Develop two products as follows: Develop two products as follows: Product 1Product 1 - Seller ensures that the - Seller ensures that the

source Balancing Authority supplies source Balancing Authority supplies reservesreserves

Product 3Product 3 – Purchaser ensures that – Purchaser ensures that the sink Balancing Authority supplies the sink Balancing Authority supplies reserves.reserves.


• Changes to the WSPP agreement can be done within WSPP. Changes to the WSPP agreement can be done within WSPP. • May allow some BAs to count on WSPP imports via Product 1 to reduce their May allow some BAs to count on WSPP imports via Product 1 to reduce their

operating reserve obligations.operating reserve obligations.• Allows market participants to determine their preferred products.Allows market participants to determine their preferred products.• If both products end up with sufficient liquidity, this provides an alternative to If both products end up with sufficient liquidity, this provides an alternative to

those who can’t supply Product 1.those who can’t supply Product 1.• Product 3 is consistent with FERC having designated the sink transmission Product 3 is consistent with FERC having designated the sink transmission

provider to load as having to offer reserves. provider to load as having to offer reserves. • WECC has already developed a means to separate the two products using the e-WECC has already developed a means to separate the two products using the e-

tag form.tag form. WeaknessesWeaknesses

• Scheduling/tagging issues.Scheduling/tagging issues.• The Intercontinental Exchange has claimed that bifurcating products usually The Intercontinental Exchange has claimed that bifurcating products usually

results in a reduction in liquidity. results in a reduction in liquidity. • Potential for market confusion. Requires education on product distinctions.Potential for market confusion. Requires education on product distinctions.• Parties who can not obtain reserves from their Balancing Authority can not Parties who can not obtain reserves from their Balancing Authority can not

provide Product 1, which would limit them to Product 3.provide Product 1, which would limit them to Product 3.• If some market participants are limited to selling Product 3, some believe there If some market participants are limited to selling Product 3, some believe there

would be antitrust concerns with this solution.would be antitrust concerns with this solution.• Broker markets and electronic trading platforms would have to identify which Broker markets and electronic trading platforms would have to identify which

product is being transacted.product is being transacted.• Product 1 is a bundled product that links firm energy and contingency reserves, Product 1 is a bundled product that links firm energy and contingency reserves,

which is an ancillary service. If Product 1 is exported, the Seller appears to need which is an ancillary service. If Product 1 is exported, the Seller appears to need to assure it has requisite market-based authority to sell the AS together with the to assure it has requisite market-based authority to sell the AS together with the firm energy, or may be required to demonstrate that it is selling the bundled firm energy, or may be required to demonstrate that it is selling the bundled product at cost-based rates.product at cost-based rates.

• Product 1 is not the same product that is trading in the rest of the continent. It is Product 1 is not the same product that is trading in the rest of the continent. It is debatable whether Product 3 is.debatable whether Product 3 is.


• If the market moves toward Product 3 as a default, some BAs If the market moves toward Product 3 as a default, some BAs claim their costs to satisfy reserve requirements will go up claim their costs to satisfy reserve requirements will go up (may be at least partially offset by potential reduction in price (may be at least partially offset by potential reduction in price for firm energy). for firm energy).

• Parties who can not obtain reserves from their Balancing Parties who can not obtain reserves from their Balancing Authority can not provide Product 1, which would limit them to Authority can not provide Product 1, which would limit them to Product 3.Product 3.

Functional fix requiredFunctional fix required• Product differentiation would be required in the broker markets Product differentiation would be required in the broker markets

and on electronic trading platforms.and on electronic trading platforms.• Requires creation of two new WSPP service schedulesRequires creation of two new WSPP service schedules

Regulatory fix requiredRegulatory fix required• Requires FERC approval of WSPP filing.Requires FERC approval of WSPP filing.

Probability of 90% voteProbability of 90% vote• Unclear. Some entities have indicated they would not vote for Unclear. Some entities have indicated they would not vote for

this.this.

Solution 5: Agree on one product Solution 5: Agree on one product (Product 3)(Product 3)

Product 3Product 3 – Purchaser ensures that – Purchaser ensures that the sink Balancing Authority supplies the sink Balancing Authority supplies reserves. This essentially removes reserves. This essentially removes reserves from being transferred via reserves from being transferred via WSPP Schedule C transactions.WSPP Schedule C transactions.


• Changes to the WSPP agreement can be done within WSPP. Changes to the WSPP agreement can be done within WSPP. • A single product improves the chances of consistent A single product improves the chances of consistent

application and increased liquidity in the marketplace.application and increased liquidity in the marketplace.• Allows all market participants equal opportunity to transact in Allows all market participants equal opportunity to transact in

a non-discriminatory manner (reduces anti-trust risk)a non-discriminatory manner (reduces anti-trust risk)• Product 3 is consistent with FERC having designated the sink Product 3 is consistent with FERC having designated the sink

transmission provider to load as having to offer reserves. transmission provider to load as having to offer reserves. WeaknessesWeaknesses

• Relies on FERC Orders regarding reserves supplied by sink BA.Relies on FERC Orders regarding reserves supplied by sink BA.• BAs that have relied on WSPP Schedule C imports to satisfy BAs that have relied on WSPP Schedule C imports to satisfy

reserve obligations will need to rely on their own generation reserve obligations will need to rely on their own generation or get reserves elsewhere.or get reserves elsewhere.

• Applicability may be limited to the WECC (may not make Applicability may be limited to the WECC (may not make sense elsewhere).sense elsewhere).


• Some BAs claim their costs to satisfy reserve Some BAs claim their costs to satisfy reserve requirements will increase (may be at least partially requirements will increase (may be at least partially offset by potential reduction in price for firm energy).offset by potential reduction in price for firm energy).

Functional fix requiredFunctional fix required• Requires a reserves market (which may exist already via Requires a reserves market (which may exist already via

WECC new product codes being traded under existing WECC new product codes being traded under existing WSPP).WSPP).

Regulatory fix requiredRegulatory fix required• Requires creation of a new service schedule, and FERC Requires creation of a new service schedule, and FERC

approval of WSPP filing.approval of WSPP filing. Probability of 90% voteProbability of 90% vote

• Unclear. Some entities have indicated they would not Unclear. Some entities have indicated they would not vote for this.vote for this.

Solution 6: Agree on one product Solution 6: Agree on one product (Product 2)(Product 2)

Product 2Product 2 - Energy without - Energy without reserves. reserves.


• Changes to the WSPP agreement can be done within WSPP. Changes to the WSPP agreement can be done within WSPP. • A single product improves the chances of consistent application and A single product improves the chances of consistent application and

increased liquidity in the marketplace.increased liquidity in the marketplace.• Product 2 is consistent with products traded in the CAISO and other Product 2 is consistent with products traded in the CAISO and other

markets throughout North America, which might facilitate broader use markets throughout North America, which might facilitate broader use of the WSPP Agreement.of the WSPP Agreement.

• Allows all market participants equal opportunity to transact in a non-Allows all market participants equal opportunity to transact in a non-discriminatory manner (reduces anti-trust risk). discriminatory manner (reduces anti-trust risk).

• WECC has already developed a definition of firm power (without WECC has already developed a definition of firm power (without reserves) that we can use for Product 2.reserves) that we can use for Product 2.

WeaknessesWeaknesses• BAs that have relied on WSPP Schedule C imports to reduce reserve BAs that have relied on WSPP Schedule C imports to reduce reserve

requirements will need to rely on their own generation or get reserves requirements will need to rely on their own generation or get reserves elsewhere.elsewhere.

• Firm transmission must be used to deliver operating reserves when Firm transmission must be used to deliver operating reserves when purchased from out purchased from out side of side of the BAthe BA


• Some LSEs claim their costs to satisfy reserve Some LSEs claim their costs to satisfy reserve requirements will go up (may be at least partially offset requirements will go up (may be at least partially offset by potential reduction in price for firm energy).by potential reduction in price for firm energy).

Functional fix requiredFunctional fix required• Requires a reserves market (which may exist already via Requires a reserves market (which may exist already via

WECC new product codes being traded under existing WECC new product codes being traded under existing WSPP).WSPP).

Regulatory fix requiredRegulatory fix required• Requires creation of a new service schedule, and FERC Requires creation of a new service schedule, and FERC

approval of WSPP filing.approval of WSPP filing. Probability of 90% voteProbability of 90% vote

• Unclear. Some entities have indicated they would not Unclear. Some entities have indicated they would not vote for this.vote for this.

Reserves MarketsReserves Markets Reserves Market 1 – WSPP Capacity ProductReserves Market 1 – WSPP Capacity Product

• BAs and other market participants, would trade contingency BAs and other market participants, would trade contingency reserves as capacity with “on call” energy under current reserves as capacity with “on call” energy under current Schedule C product definition.Schedule C product definition.

Reserves Market 2 – New WSPP Market based TariffReserves Market 2 – New WSPP Market based Tariff• BAs and market participants could trade contingency reserves BAs and market participants could trade contingency reserves

under new WSPP filed tariff.under new WSPP filed tariff.

Reserves Market 3 – New WSPP Cost based Tariff for Reserves Market 3 – New WSPP Cost based Tariff for reserves used within a BA and Market based Tariff for reserves used within a BA and Market based Tariff for reserves used for exportreserves used for export• BAs, merchants, generators and others trade contingency BAs, merchants, generators and others trade contingency

reserves under new WSPP service schedule.reserves under new WSPP service schedule.

Next StepsNext Steps

Keep an open mindKeep an open mind Read interim reportRead interim report Participate in call on ThursdayParticipate in call on Thursday Be ready to discuss in SunriverBe ready to discuss in Sunriver Possible workshopPossible workshop EC representatives will agree on EC representatives will agree on

course of action mid-yearcourse of action mid-year

Documents

WSPP Reserves Issue Educational Webinar February 26, 2008