1

NIPPC’s IIBA Initiative Agenda

7 December 2007• Introduction – independent, integrated Balancing Authority (IIBA)• Overview

– Why?– What?– How?– When? – Who?

• Costs/Benefits– Tangible Assessment– Intangible Assessment

• Operations (user interface)• Optimal Generation Mix• Contractual Structure• Procedural Next Steps• Timeline

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Introduction• Pacific Northwest Independent Integrated Balancing Authority (IIBA)• Meeting Protocol• Project Participants:

– Project Lead: • CECD - Constellation Energy Control & Dispatch

– Technical, Operational and Policy Support• Energy Expert Services• NIPPC• Opatrny Consulting• The Energy Group• Versify Solutions

– Legal and Contracting Support• K&L Gates• Van Ness Feldman

– Generators• NIPPC generators• Potentially other generators

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OverviewWhy is the IIBA a good idea?

• It will enable generators to:– Get paid for what they provide now for free, e.g., frequency and voltage

support, reactive supply– Reduce operating expenses, e.g., operating reserves, generation

imbalance, integration charges• It will allow money-making opportunities and add value to

competitive markets:– Redispatch around transmission constraints– Support the integration of wind (indirectly or directly)– Pool transmission

• It will allow generators: – Greater autonomy – To play by market rules, not just BPA’s rules– New opportunities as well as new responsibilities– Last chance to operate as merchants

• These opportunities need to be prioritized and sequenced

4

OverviewWhat is the IIBA?

• CECD sets-up/implements/certifies the BA– The BA is a reliability function– The BA function requires communications links and AGC

• The participating generators separately contract with CECD in order to:– Integrates resources– Maintains interchange-generation balance– Supports interconnection frequency– Manages transmission for these purposes

• As a BA, the participating generators will be enabled to:– Sell regulation to support the integration of wind– Participate in operating reserve sharing (through the NWPP)– Self-providing or contracting with third-parties for operating

reserves

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OverviewHow is a BA Established?

– Certification Decision• Prepare Questionnaire for NERC and WECC• On-site Visit

– Address Minimum Operating Reliability Criteria• Generation Control Performance• Transmission• Interchange• System Coordination• Emergency Operations• Operations Planning• Telecommunications• Operating Personnel and Training

– This Process Takes About Six Months; there is a Six Month Probation

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OverviewWhen does this make sense to do?• Why not now?• There is a recognize lack of business opportunities in the

region• There are no plans to aggregate BAs in the PNW• The region is hamstrung by hourly block markets• Transmission constraints are being operated through BPA

federal resource redispatch and curtailment• BPA is projecting significant wind integration through 2010

(i.e., 6,000 MW)• The region is now “capacity” constrained

– Light-load hours– Heavy-load hours

• There is a need for within hour regulation• Renewable portfolio standards are drivers

7

OverviewWho could participate?

• Operating Resources– Calpine

• Hermiston, OR 630 MW gas CCCT– EPCOR

• Fredrickson/Tacoma, WA 125 MW gas CCCT– Mint Farm Energy Center LLC

• Longview, WA 286 MW gas CCCT– NESCO

• Sumas, WA N/A gas CCCT

– Sierra Pacific• Mt. Vernon, WA 28 MW biomass/cogen

– Suez Energy America• Chehalis, WA 520 MW gas CCCT

– TransAlta• Centralia, WA 1404 MW coal

248 MWgas CCCT

• Resources Under Construction– Grays Harbor Energy Center LLC 650 MW gas CCCT– NW Energy Partners (enXco) 125 MW wind

• Resources Permitted but Not Constructed– Horizon

• Ellensburg, WA 125 MW wind• Arlington, OR 125 MW wind

Source: Robert Kahn

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Costs/BenefitsWhat will this Arrangement Cost?

• Estimated Cost of Arrangement– Start-up/Implementation/Certification

• $175,000 first entrant• $35,000 for each additional

– Communications and hardware

– Balancing Authority Service Operations• $60,000/month first entrant• $12,000/month for each additional

• The CECD Balancing Authority Services Agreement is an instrument already in operation

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Cost/BenefitsExperience of Other BAs

• Value of Load-only or Gen-only BA– Greater control over future commodities

purchasing, risk and price management– Eliminate exposure to Generation Imbalance

charges– Become a front runner rather than a follower– Take active role in Business Management and

Regulatory and Compliance Issues– Actively involved in managing Transmission

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Cost/BenefitsWhat will this Arrangement Save?

• The BA will result in direct savings– Generation Imbalance Charges – Integration Charges ($3.10 – $4.80/MWh)– Operating Reserves (BPA’s rate is $7.93/MWh)

• The BA will enable intangible benefits– Provide needed in-hour services – Enhance redispatch opportunities

• Reliability• Planning

– Pool transmission– Avoid/reduce regulatory interface costs– Improve output profile (wind farm diversity)– Enhance Renewable Portfolio Standard Opportunities

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Costs/BenefitsHow can benefits be analyzed?

• Evaluate BPA Tariff– Generation Imbalance– Avoid Generation Imbalance (BPA)

• Band 1: +2 MW or +1.5% of scheduled energy– No charge if returned– Charged, if not returned, at diurnally-differentiated incremental cost

• Band 2: Greater than +2 MW or +1.5% of scheduled energy– Charged 110% incremental cost– Credited 90% of incremental cost

• Band 3: Greater than +10 MW or +7.5% of scheduled energy– Charged 125% incremental cost; – Credited 75% of incremental cost

– Operating Reserves (quantity and price)– Integration Charge (if applicable)

• Intangible Benefits– Identify which benefits need further evaluation

• Case-by-case, e.g., pooled transmission• Generic analysis using existing data sets

TMTM Company Overview

• Headquartered in Chadds Ford, PA (Philadelphia)

• Focused on software applications and tools in two areas of the power

industry

– Generation asset performance management (V-PerformanceTM)

– Trading – LMP and market data analysis (V-TraderTM)

• Advanced web-based software architecture with robust and secure data

management capabilities and unique user interface

• 15 customers and growing

• Partnership with Constellation Energy Control and Dispatch

TMTM Sample Tariff

TMTM Versify Product Overview

V-Enterprise

q LMP Price Analysisq DA/RT ISO Pricingq ISO Footprint –

Load, Outageq Chart Analysisq FTR Analysisq Lookback -

Forecasting

V-Trader

Trading Mgmt - Accounting

q Outage Planningq Generator Forecastq Unit Attributesq Contact Mgmt.

V-Planner

Planning

q Dispatch Logq Unit Statusq Day Ahead Energy Schedulingq Portfolio Statusq Alerts

q Wind Availabilityq Manages Outage and Deratingq Wind Schedulingq Combined Energy Scheduling –

Wind, Reserves, AGC

Dispatch - Operations

V-Dispatch V-Renew

q Dash Boards (MW, Avail, Accounting)

q Real-Time Monitoringq Unit Performanceq Operational Reportingq Energy Accountingq Workflow

V-Performance

TMTM Key Functionality

• Real time monitoring and full range of asset performance dashboard reports

– Operational and performance dashboards

– Unit performance reports

– Daily operational reports

• Key functionality enabled through web-based architecture

– Integrates data from CECD PI, dispatch and other systems

• Complete visualization of asset performance

• Common view of operational status

– Summary/graphical reporting with drill down capability

– Simplifies data intensive collection and analysis

– Security manager allows user-based report access

TMTM V-Enterprise

textV-Dispatch V-PlannerVersifyDatabase

Versify Integration Services

PIISO

PricingISO

FootprintUnit

CharacteristicsContractTerms

Others

Data Sources and Inputs

Generation ForecastPlan Generator Outage

Supply Availability

Performance ReportingGeneration or Dispatch Events

Settlement/Shadow Invoice

Versify Reports and Tools (Numerous)

V-Trader

Versify Hosted Facilities

API

Web Serv I ces

DataExport

Fuels System

ISOPortals

ETRM

Users

Planners

Back OfficeAccountants

Senior Management

Dispatchers

Plant Personnel

Traders

Internet

DataWarehouse

EMS

Excel

Nerc eGads

TMTM Applications

• Dashboard Reports

• Unit Status

• Event Log

• Real-Time Monitor

• SCADA Query Tool

• Daily Reports

• Unit Performance

Full range of software applications to analyze, monitor and report on plant operations

TMTM Dashboards

The Operations Dashboard summarizes weather, energy, emissions data and reports KPI type data, such as availability and capacity factor.

TMTM SCADA Query Tool

Ad hoc charting and reporting of SCADA/historical data to assist back office and settlement activities.

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Optimal Generation Mix

• Define Optimal Mix of Generators– Diversity in Fuel Mix

• Anchor tenant resources• Sequencing additional resources

– Diversity among same Fuel type, e.g., wind– Geographic Diversity in terms of Resource Location– Geographic Diversity in terms of Location of Loads– Various Renewable Portfolio Standards– Transmission Access

• Constraints can further enable redispatch• Opportunities (e.g., counter-flows)

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IIBA Transmission Area

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Natural GasCT/CCCT

Wind Energy System

IIBA Participants

Goodnoe Hills125 MW

Horizon 125 MW

Calpine Hermiston630 MW

Mint Farm286 MW

Suez Chehalis520 MW

TransAlta1404 MW Coal248 MW CCCT

EPCOR 125 MW

Sierra Pacific28 MW Biomass

Grays Harbor650 MW

Baseload Coal

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Load Centers - Interties

Puget Sound EnergySnohomish PUDSeattle City Light

Tacoma Power5,000 MW est.

AvistaSpokane, WA

PacifiCorpPGE

Portland, OR

John Day (PACI)Big Eddy (PDCI)

BC Hydro

IdahoPowerNWE

PacifiCorpWalla Walla,

WA

BPA Public PowerCustomers

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Wind Energy Systems

Hydroelectric Projects

BC Hydro

ThermalPowerplants

Constrained Flowgates

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Proposed Wind Project Interconnections

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Wind + CCCT

CCCT Generation Schedule

0

50

100

150

200

250

300

350

400

450

500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Hour

Ou

tpu

t

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Wind Ramp

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Wind Ramp + CCCT shaping

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BPA Creation of Flat Block Product

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Operational Configuration

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Who are the Anchor Tenants?

• Any resource can be the anchor tenant– Needed to initiate the BA certification process– Realize cost savings

• Fossil fuel resource can support wind integration– In-hour shaping– Between hour shaping– Back-off generation during off-peak hours

• Wind can provide other opportunities– Enable RPS opportunities– Further cost savings through avoidance of integration charges– Potential wind farm diversity to improve capacity factor

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Contractual Structure

• Contractual Arrangement– The Balancing Authority

• Execute BA Services Agreement• The BA will not engage in commercial transactions• The BA will offer services to enhance the value of member generators• The BA generators can be “interconnected” through transmission and

dynamic schedules– The Generators

• Execute the BA Services Agreement (cross contracts)• The Generators will sell to end-users• The Generators will address pooling opportunities• Advise was to not limit participants

– No “Anti-trust” issues identified• The purpose is to facilitate commerce – enhance competition• A bid structure will need to be designed for services• Information sharing as long as such doesn’t impact competition

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Procedural Next Steps

• Simple Start– Stage this Concept– Arrange Policy Representation (NIPPC)– Allow for full Expansion

• NERC certification– Process requirements

• WECC recognition– Process requirements

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Procedural Next Steps

• The IIBA would need to– Become a member of the WECC– Become a member of the PNSC– Become a member of the NWPP

• Reserve Sharing Group

– Consider signing the Western Interconnection Agreement (release of liability)

– Consider joining ACE Diversity Interchange

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Timeline

• Other questions? • Define policy/PR needs for this effort.• Execute Balancing Services Agreement

(December 2007)• Initiate certification process

(January 2008)• Engage in BPA’s wind integration pilot

(Q1 or Q2 2008)• Other “next steps”?