May 30, 2013 NAESB

1. DRAFTPreemption & CompetitionCounter Offer/Partial Service Challenger’s Election on Partial Service Acceptance vs. Disruption of Defender Reservations May 30, 2013 NAESB

2. Challenger Partial service acceptance vs. Disruption of Defender Reservations • Premise – Competition is a reallocation of scarce capacity where reallocation is based upon the party willing to commit to a duration at least as long as the Challenger’s duration.

3. Challenger Partial service Acceptance vs. Disruption of Defender Reservations • After reviewing FERC and NAESB: • the issue of concern is binding the Defender to its election to Match in the narrow circumstances of a Preemption and Competition process resulting in a Partial Service (Counteroffer) to the Challenger in which the Challenger may choose not to accept the Counteroffer

4. BPAT – Take necessary time to analyze prior to implementation • Advantages of Binding Defender to Match when Challenger does not confirm counteroffer: • Can easily fit within general Counteroffer Acceptance period in timing table 4-2 NAESB standard. • Actions taken on Defenders are independent of timing available to Challenger to accept Counteroffer under table 4-2 and therefore timing table does not have to be modified to ensure Queue processing is unaffected. • Challenger or Defender(s) reservation (ROFR only) increases duration • Competition ends with final actions of Defender • No need to modify software vendor applications.

5. Challenger Partial service Acceptance vs. Disruption of Defender Reservations • Disadvantages • If full offer not available, Challenger not obligated to take capacity from reservations that did not have a ROFR opportunity or Defenders that chose not to exercise ROFR. Thus Challenger disrupts reservations without having any obligation to commit to such capacity. • TSP may end up with less MW’s and MWhs of confirmed reservations • Defender transactions disrupted with no overall benefit being realized from competition.

6. Challenger Partial service Acceptance vs. Disruption of Defender Reservations • Advantages of determining impacts to Defender after Challenger elects to decline counteroffer: • If full offer not available and Challenger elects to decline Counteroffer, Defenders do not have reservations disruptions. • TSP does not necessarily end up with less MW’s and MWhs of confirmed reservations • “Bird in the Hand” Reservations • Confirmed Defender transactions disrupted without clear overall benefit being realized from competition.

7. Challenger Partial service Acceptance vs. Disruption of Defender Reservations • Disadvantages of determining impacts to Defender after Challenger elects to decline counteroffer: • Would need to clarify and add elections to Challenger • Need to modify timing table 4-2 to accommodate Challenger’s elections/acceptance of counter to enable timely completion of competition and ensure queue processing is not interrupted • Need to modify software vendor applications • No certainty that the Challenger or Defender will increase the duration of reservation