Updates on Energy Imbalance Market in the West

Updates on Energy Imbalance Market in the West, and CAISO Outage Management System Presentation to WECC Market Interface Committee March 24, 2015 Jim Price, Senior Advisor, Market Development & Analysis, CAISO

Update on Outage Management System (OMS) • Affects entities with reporting obligations to CAISO • Purposes include management of increasing numbers of outage requests, management of complex outages, process efficiency, detailed reporting – For more detail: http: //www. caiso. com/market/Pages/Outage. Management/ Default. aspx • Effective date 2/26/2014 for market participants – ISO completed the migration of all users – Historical data remained in SLIC on read-only basis Page 2

Update on Energy Imbalance Market • Previous MIC briefings presented details of Energy Imbalance Market: 7/2013, 10/2013, 3/2014, 7/2014, 10/2014 • Status of Energy Imbalance Market Implementation: – Full operation with Pacifi. Corp: 11/1/2014 • Benefits analysis confirms pre-implementation study – NV Energy operational 10/1/2015 • NVE filed their OATT revisions 3/6/2015 – Puget Sound Energy operational 10/1/2016 – Phase 1 EIM Enhancements proposal to Board: 3/26/2015 – EIM Transitional Committee stakeholder process on EIM governance • Issued issue paper 1/5/2015 and straw proposal 3/19 • Next meeting: 3/31 Page 3

Energy Imbalance Market offers real-time market functions to broader region • Builds on existing market: automated dispatch resolves imbalance & avoids congestion • Situational awareness enhances reliability • No critical mass required, and no exit fees • Easily scalable, low-cost, low risk option for new participants • Preserves BAA autonomy, including compliance, balancing, and reserve obligations Page 4

15 -minute transfers between Pacifi. Corp and ISO Page 5

EIM is projected to provide significant net benefits ISO/ Pacifi. Corp study (in millions) NV Energy study on incremental benefits (in millions) Puget Sound Energy study on incremental benefits (in millions) Annual benefits $21. 4 - $129. 0 $9. 0 - $18. 0 (2017) $15. 0 - $29. 0 (2022) $21. 8 - $24. 3 (sub-hourly dispatch & flexibility reserve) Start-up costs approx. $20. 0 ($2. 5 to ISO) approx. $11. 20 ($1. 10 to ISO) approx. $14. 2 Annual on-going costs approx. $3. 00 ($1. 35 to ISO) approx. $2. 60 ($0. 75 to ISO) approx. $3. 5 Benefits tracking will include savings from: • Reduced flexibility reserves • Re-optimization in real-time with least cost generation • Reduced renewable energy curtailment by leveraging geographical diversity of loads and resources in the market footprint Page 6

Method of calculating actual benefits COMPARE: Cost of the EIM optimized dispatch • Transfers in 15 minute market • Excludes benefits from 5 min. market and flexible ramping TO: Counterfactual cost of dispatch without EIM optimization • Without intra-hour transfers between Pacifi. Corp and ISO that would not occur but for the EIM. Page 7

Results for 4 th Quarter 2014 are consistent with preimplementation benefit analysis and are reasonable BAA November December Total ISO $0. 65 $0. 59 $1. 24 PACE $1. 05 $1. 26 $2. 31 PACW $1. 39 $1. 03 $2. 42 Total $3. 09 $2. 88 $5. 97 • Benefits reflect: o More efficient dispatch, both inter and intra-regional in the 15 -minute market o Reduced renewable energy economic or manual curtailment • Subsequent reports will quantify the reduced flexibility reserves needed by both BAAs and 5 -minute dispatch benefits Page 8

EIM prices stabilized after November 14 15 -minute Market Aggregate Price, PAC West Waiver effective 15 -minute Market Aggregate Price, PAC East Waiver effective Page 9

Main causes for MW undersupply infeasibilities • Outages, derates/rerates management • Timely informing the market about out-of-market actions impacting energy balance • Wind forecast accuracy and managing wind deviations • Data and software issues • Within the hour interchange schedule variations • Load forecast variation and load biasing coordination • Network and resources model discrepancies • 5 minute rate of change constraint on some BPA transmission interfaces Waiver of pricing rules lets prices be set by economic bids rather than constraint violations – effective 11/14/2014 through refund date for continuing FERC process to examine these transitional issues Page 10

EIM year one enhancements are proposed for Board approval March 26 • • Management of EIM Transfers and Intertie Scheduling Limits GHG flag and cost based bid adder EIM administrative charge redesign Administrative pricing rules Flexible ramping constraint BAA combinations Settlement rules for non-participating resources Phase 2 effort will consider transmission usage charges plus other enhancements Page 11

Governance proposal is designed to give regional entities a voice in decision-making 2014 Q 1 Q 2 2015 Q 3 Q 4 Organize sectors nomination/ranking Board decision & committee start-up ü Transitional Committee is an advisory committee to ISO Board ü 11 -12 members ü Open meeting policy Q 1 Q 2 Q 3 Q 4 Issue paper issued 1/5/2015, Straw Proposal issued 3/19, Next meeting 3/31 Advise on early operational phase of EIM Develop long-term EIM governance proposal Stakeholder process Long term governance structure Board approval of governance proposal Page 12

Resources available for EIM • CBT - Introduction to the Energy Imbalance Market This Computer Based Training provides a high level overview of the Energy Imbalance Market http: //content. caiso. com/training/Introduction%20 to%20 EIM/My%20 Articulate%20 Projects/Introduction% 20 to%20 the%20 Energy%20 Imbalance%20 Market/player. html • CBT - How the Energy Imbalance Market Works – This Computer Based Training describes the roles and responsibilities of the key players in EIM and the business processes that will take place. http: //content. caiso. com/training/How. EIMWorks/player. html • EIM Stakeholder processes http: //www. caiso. com/informed/Pages/Stakeholder. Processes/Energy. Imbalance. Market. aspx • EIM Business Process Manual http: //bpmcm. caiso. com/Pages/BPMDetails. aspx? BPM=Energy Imbalance Market Page 13

EIM is operational and producing intended benefits for customers Page 14