The Alliance RTO Rate Plan Presented to SPP RTWG Meeting at DFW Airport Hyatt

1. The Alliance RTO Rate PlanPresented to SPP RTWG Meetingat DFW Airport Hyatt February 1, 2001 Dennis W. Bethel AEP Service Corporation ALLIANCE RTO

2. September 2000 Filing Goals • Comply with Alliance Order II • Satisfy Order 2000 Requirements • Accommodate State Restructuring • Support a Viable Independent Transmission Business ALLIANCE RTO

3. Why a TRANSCo? The Alliance RTO Partners Conclude that the Independent Transmission Company or TRANSCo Model Provides the Best Opportunity to Create a Regional Transmission Organization to Best Serve the Interests of All Stakeholders: Customers, Investors, Employees and Regulators. • Owner/Operator:It’s the American Way! • Appropriately Aligns Risk and Reward • Consistent with Limited RTO Roll in Markets ALLIANCE RTO

4. Topics Covered • Transmission Pricing Plan • Real Power Losses • Ancillary Services Schedules 1 - 6 • RTO Administrative Fee • Congestion Management • Inter- RTO Cooperation ALLIANCE RTO

5. Transmission Pricing Plan • Zonal License Plate Rates Inside • Initial Zones Based on Present Transmission Provider Areas • Same Alliance Charge for all generators to reach any load • Zonal Rate Includes Revenue Neutral Transition Charge • Region-Wide Through & Out Rate • Revenue Neutral Design Mitigates Cost Shifting, and Revenue Loss from Eliminating Pancakes • Level Playing Field: Same Alliance Charge for all generators to reach any Interface ALLIANCE RTO

6. Real Power Losses • Seasonal Time-of-Day Network Losses • Summer,Winter and Shoulder Seasons, On & Off-Peak Periods • e-Scheduling System will Identify Losses for Each Schedule • Recognizes Flows on all Alliance Control Areas from POR to POD • Power Flow Distribution Factors Updated Seasonally, as needed • Zonal Loss Rate Only if Source & Sink are in One Zone • Preserves Customer’s Option to Provide Energy for Losses • Can be Cash Settled via Energy Markets ALLIANCE RTO

7. Ancillary Services: Schedule 1 • Scheduling System Control and Load Dispatch • Zonal License Plate Rates for Delivery Zone • Single Rate for Through & Out Transactions • Same Charge for any Generator to any Load or Interface • Charge Assessed per Schedule, i.e.,# of e-Tags. • Charges Apply to all ALLIANCE RTO

8. Ancillary Services: Schedule 2 • Reactive Supply & Voltage Control From Generation Sources Service • Charges Assessed Per MWh, based on Scheduled Energy Flows • Recognizes Flows on all Alliance Control Areas from POR to POD • Zonal Charge Only if Source & Sink are in One Zone • Power Flow Distribution Factors Updated Seasonally, as needed • e-Scheduling System Shows Charge for Each Schedule ALLIANCE RTO

9. Ancillary Services: Schedule 4 • Energy Imbalance Service • Alliance RTO will Ensure that Imbalance Market is Developed in the Alliance Region for Day-One, per Order 2000 • RTO will Specify the Overall Market Structure and Protocols • Independent Market Operator (IMO) will Accept Bids and Post Prices for Short Time Intervals, e.g., 5 or 10 Minute • Imbalance Prices can also be used to Settle for Losses • Alliance Market Monitor will Review Market Performance • Alliance Interested in Super-Regional Markets and Monitoring ALLIANCE RTO

10. Ancillary Services: Schedules 3, 5 & 6 • Regulation and Operating Reserves • Control Area Specific Services & Cost-Based Rates, Day-One • RTO Will Facilitate Supply by All Willing Generators that Meet Certification and Performance Standards • Alliance will Facilitate and, if Necessary, Take Action to Develop Markets for these Add’l Services, per Order 2000 • Alliance Will Seek Widest Possible Market Participation to Ensure Workable Competition and Adequate Supplies ALLIANCE RTO

11. RTO Administrative Fee • Alliance Administrative Fee Charged to All • Two-Part Charge: • Per Schedule Charge for Scheduling-Related Costs that tend to vary with transaction volumes (number of delivery schedules evaluated, coordinated, etc.). • Per MW Charge on PTP Reservations and Network Load for Other “Fixed” Costs that do not vary with transaction volumes (probably majority of costs). ALLIANCE RTO

12. Congestion Management • Alliance is proceeding to define and expects to implement a hybrid approach to congestion management that combines Flow-Gate Transmission Rights (to help insure that congestion does not hinder forward market development), and nodal/zonal location-based differential transmission pricing to deal with congestion in the real-time/spot-market arena. • If the hybrid approach is not available on Day-One, Alliance will employ Re-dispatch and TLR to maintain Firm Transmission, and assist customers making “New” requests to arrange “Firming” transactions. ALLIANCE RTO

13. Inter- RTO Cooperation • Alliance Has Been Working With Other Regions • Pro-Forma Inter-RTO Cooperation Agreement 2B Filed • Cooperating RTOs Commit to Coordinate Super-Regional Operations and Seasonal and Longer Transmission and Operational Planning • Take Leadership to Develop Protocols and Formats for Data Exchange to Coordinate Planning, Security, Operations, ATC, Loop Flows, etc.. • Improve Infrastructure and Share Savings (e.g., Load Flow Models for Planning and ATC, Integration of OASIS, Tagging and EM Systems) • Develop Capability to Recognize and Manage Loop Flow Impacts on Reservation, Scheduling, Congestion Clearing and Cost Responsibility ALLIANCE RTO

14. Inter- RTO Cooperation (Cont.) • Pro-Forma Inter-RTO Cooperation Agreement (Cont.) • Develop Protocols to Facilitate Reserve Sharing In & Between RTOs • Multi-Faceted Short-Run Approach to Congestion Management, With Support for Industry Initiatives, NERC MIC, LEER, MRD and TLR • Commitment to Develop Comprehensive Market-Oriented Congestion Management Solution That Minimizes Effects of RTO Boundaries • Development of Common Generation Interconnection Agreement • Super-Regional Market Monitoring Framework • One-Stop Shopping and Coordinated Discounting (or Reciprocity) • ADR and Whatever Else Makes Sense ALLIANCE RTO

15. Questions? ALLIANCE RTO

16. Thank You!! ALLIANCE RTO