1. WSPP MIC UPDATE • The WSPP OC approved the REC Service Schedule, and so it now will be presented to the EC for approval and if approved will proceed for filing with the FERC.Service Schedule “R” (rENEWABLEENERGY CERTIFICATE transactions WITH AND WITHOUT ENERGY) • WSPP is discussing and informally addressing facilitating the EIM, particularly if WECC will not be doing so. • Service Schedules D & E not approved at FERC but an NOI was issued

2. Why A WSPP Administered EIM? • WSPP’s Unique Position in the West • Focused on markets • Right footprint • WSPP successfully fosters robust markets and competition, consistent with reliability • WSPP has diverse membership, from all market segments; WSPP operates without bias toward or against any segment • WSPP has a proven track record of collaborative, facilitated decision-making • WSPP has no conflict of interest

3. EIM Initial Steps Forward • WSPP (Chair, legal counsel, other willing officers) working with EIM driving entities to flesh out details of a mutual acceptable approach, covering process for developing corporate structure, governance, seed financing, and tentative capitalization/financing approach • Routine updates to, and guidance sought from, the WSPP EC • No WSPP money spent on effort unless and until an affirmative vote from the EC. • Development Agreement between WSPP and EIM Principal Entities • Covering operations up to permanent financing • Seed financing to cover development costs including likely further cost studies, market structuring, transmission arrangements, and tariff development • Seed financing to cover above • Non-recourse • Identify initial Board Members • Milestones and outs • Novation (assignment of Agreement) to WSPP-A upon execution by critical mass of EIM Principal Entities • Organize WSPP-A, appoint Board of Directors • Development operations begin

4. WSPP SERVICE SCHEDULE D AND E • As reported at the last meeting, the FERC rejected Schedules D&E because the filing relied on a waiver of the “Avista” restrictions -Avista precludes sale of reserves, directly or indirectly to a transmission provider for resale to its customers, i.e. ancillary services without a special ancillary services market based tariff - WSPP sought FERC waiver of the Avista special MBR tariff requirement

5. Notice of Inquiry • FERC declined to revise Avista, and held that WSPP had not proven that sellers to transmission providers would lack market power • On June 16, 2011, FERC issued NOI, seeking comments on the issue Docket RM 11-24-000 - A national inquiry, not just WSPP; not a rulemaking

6. Notice of Inquiry • FERC sought comments on -Difficulty in preforming market power studies for reserves -A de minimis threshold, allowing sales of small quantities of reserves with an Avista tariff -Allowing sales of reserves to TP at the TP’s cost of providing the reserves plus a possible adder -Competitive solicitations • The Problem? -Ancillary services are sold under the OATT at TP’s cost; -Concern that the TP would just pass through unduly high costs to the transmission customers, and would not impose discipline on the market

7. WSPP Comments to FERC • Relying in part on a report WSPP engaged Navigant Consulting to prepare WSPP urges: -Market power studies for ancillary services are not feasible and the Commission’s Electronic Quarterly Reports (EQR) data shows that the market has been stifled by this requirement -Allow a free market, but if not then allow transactions under two alternative approaches

8. WSPP Comments to FERC • First, a cost-cap equal to the higher of • The highest OATT rate of a transmission provider in the region (or sub region) (because there are very significant rate variations throughout the region); or • The sellers lost opportunity costs, to reflect the fact that reserves are capacity and capacity seller forgoes the opportunity to sell energy from that capacity (often peak energy less fuel cost) • Second, a competitive solicitation process without a cost cap • Also, a reserves seller should be permitted flexibility to undesignate a resource that was a DNR under Order 890

9. What Will The FERC Do? • Don’t know what or when • WSPP expects to speak with FERC staff sometime this month.