Market Operations and Development (MOD) System Upgrade Project

Market Operations and Development (MOD)System Upgrade Project Customer Information SessionOctober 30, 2009

Agenda • MOD Project Overview • Short-Term Preemption and Competition • Release of Unscheduled Firm • Super Blanket and Blanket Lunch • Curtailment Process • OATT Amendments • Q&A

Purpose of the Information Session • BCTC previously indicated at our July customer meetings and in our recent communications, we would like to gather feedback from our customers on the MOD System Upgrade Project. • This meeting is one of several feedback sessions that will give customers the opportunity to provide input on the project. • As part of this session, BCTC will be presenting various topics and proposals (in Red font) for customer consideration. • BCTC considers this to be an information sharing session, where customers are welcome to provide suggestions and comments throughout the session and in writing as well.

Tentative Future Sessions • Information session on customer reports (Jan or March 2010). • Information session on web access to customer information (March or April 2010). • Customer consultation on the Business Practices related to MOD Project implementation (March or April 2010).

1. MOD Project Overview

What is the MOD Project ? • The MOD System Upgrade Project will implement a full replacement of BCTC’s existing suite of aging and disparate transmission market systems with a single and fully integrated system. • The new state-of-the-art system will enable BCTC to provide better market access and services for the benefit of its customers. The system will provide full redundancy for critical services, which will ensure a highly available system with minimal downtime. • The new system will consolidate current MOD business functions including: • Scheduling • Settlements & Billing • Pricing • Workflow and Customer Content Management • Reporting

What is the MOD Project ? • The system will be based upon industry recognized commercial-off-the-shelf products that provide flexibility and scalability, so BCTC can continue to meet changing tariff and industry requirements. • The new system is provided by Open Access Technology International (OATI), and will utilize next generation technology to meet the operational and market requirements for BCTC. • The MOD Project is a significant and large IT initiative being undertaken by BCTC and its successful implementation will provide benefits to BCTC and its customers.

Why is the MOD Project Important for Customers? • The MOD suite of applications is critical to BCTC and its customers in providing transmission and energy scheduling, tariff and contract compliance, and customer information. • The new system will introduce many operational and system improvements that will benefit our customers both directly and indirectly. • Direct Benefits of the new system: • Greater transparency of information critical to customer’s business including TTC constraint information and detailed transaction reports. • Increased consistency and frequency of scheduling related postings to OASIS. • ATC will be posted as soon as it changes instead of every 5 minutes. • Transmission curtailments/reductions will be posted on OASIS.

Why is the MOD Project Important for Customers? Direct Benefits (cont’d) • Provide customers with counteroffers whenever there is a shortage of ATC, and a varying profile can be granted. • Removal of the Preschedule transmission market hold and automate manual processes associated with the market hold. • Provide more convenient access to transaction data and the ability to retrieve data in formats that will simplify the reconciliation and settlement process for customers. • Improve curtailment procedures and notifications. • Faster processing times for energy schedules and transmission requests. Current system has bottlenecks which hinders the market.

Why is the MOD Project Important for Customers? • Indirect benefits of the new system: • A more flexible and scalable system, making it easier for MOD to respond to changing industry and tariff standards in an efficient and cost effective manner. • Enable the implementation of changes to our business practices and market rules consistent with BCTC’s Open Access Transmission Tariff (OATT). • Ensure BCTC’s continued compliance and administration of the OATT and other regulatory requirements from FERC, NERC and NAESB standards. • Enhanced workflow capabilities through new management tools that will help facilitate customer issues, customer registration, Long-Term PTP, and interconnection processes.

Project Update • CPCN Approved • July 13, 2009 – In the BCTC F10/F11 TSCP decision, BC Utilities Commission (BCUC) directed BCTC to apply for a Certificate of Public Convenience and Necessity (CPCN) for the MOD System Upgrade Project. • August 14, 2009 - BCTC submitted a CPCN to the BCUC. • October 2, 2009 – BCUC approved CPCN and MOD Project continues to move into its next phases. • Where are we in the MOD Project? • The Project is currently in its design stage (Phase I) and will be transitioning to its build stage (Phase II).

Phase III Phase I Phase II Phase IV Phase V Build Implement Sustain Design Test (July - Nov 09) (Oct - April 10) (April – July 10) (Aug – Nov 10) (Nov 10 & beyond) When will it be completed? The MOD Project will be implemented in five phases. Below is the anticipated roll-out schedule for the MOD Project (subject to change):

2. Short Term Preemption and Competition

Short Term Preemption and Competition • What is Preemption and Competition? • Preemption and Competition occurs when transmission reservations that are conditionally confirmed become subjected to preemption by another request for either longer duration or higher price, while ATC is constrained. • Current Process • Preemption and Competition only occurs in the Preschedule horizon (at least one day prior to service). • Closely aligns with NAESB Business Practices with minor differences (BCTC Matching and Confirmation Timelines are shorter than NAESB). • NAESB Business Practices specify which transmission reservations will receive the Right of First Refusal (ROFR), and allow the customer to submit a matching request.

Short Term Preemption and Competition • Outlined in BCTC Business Practice Section 6. • Definition of Duration in BCTC BP 6 • The number of consecutive, same MW service increments within the Start and Stop Time. Only consecutive service increments with constant MW amounts between the Start and Stop Time are counted to measure the duration of the transmission request. • Overview of the current process: • BCTC receives requests during the midnight bidding window. • Customers are notified (via phone call) by BCTC after 8 AM if their OASIS reservation (TSR) is subject to or involved in a competition. • BCTC asks customers if they wish to exercise their ROFR, and submit a match. • If customer exercises ROFR then the customer must submit a matching request within time period specified by BCTC. • All competition for requests starting the next day must be completed by 10 AM.

Short Term Preemption and Competition • Future Process • As part of adopting FERC Order 890, BCTC will continue to align with NAESB Business Practices, but will have differences in submission timelines for matching requests. • The definition of duration will be modified to better align with NAESB. BCTC’s definition of duration will be: • Overall time interval spanned from start of service to the end of service where capacity requested is non-zero • BCTC will implement: • Simultaneous submission window for matching requests; • Matching request can exceed competitor’s duration; and • Priority ordering for TSRs will be Duration, Price, and Queue Time. • BCTC will grant counteroffers to Displacee (Defender) and Displacer (Challenger) for remaining ATC, even if it is a varying profile. Previously, BCTC only offered flat profile counteroffers.

Short Term Preemption and Competition • Proposal • Start the competition process earlier than 8 AM. • Two options for customer consideration 1) Start the process immediately once a preemption or competition opportunity is identified. This may be during the time period of midnight to 6 AM. 2) Start the process at 6 AM to align with most trading shops being open • Eliminate manual steps within the competition process (i.e. BCTC would no longer be calling via phone to initiate ROFR). The process would be handled through OASIS using standard competition flags and notifications. • Customers would be required to manage their TSR portfolio and have appropriate staff trained to submit matching requests. Real Time desks may be required to handle ROFR between the hours of 12 (midnight) – 6 am

Short Term Preemption and Competition Submission of Match • Current rules associated with a single Challenger and single Defender will not change. The match must be submitted within the timelines specified under Section 6 of BCTC Business Practices • FERC Order 890 allows for multiple requests that are subject to preemption, from a single Challenger to enter simultaneous matching requests during an open window. • The matching requests would be assigned a priority order as defined in FERC Order 890 (Duration, Price, and Queue Time) • The Challenger and matching requests must be pre-confirmed. • Matching Window will start immediately after competition notification has been sent to OASIS and the recall/displacement of original capacity has occurred.

Short Term Preemption and Competition Submission of Match (cont’d) • Matching Window will conclude based on matching submission timelines specified under Section 6 of BCTC Business Practices. • Are the timelines sufficient for customer response ? • All matches received on OASIS during the Matching Window will not be masked as they will be for the Simultaneous Submission Window (SSW) at midnight. • Are customers ok with matches not being masked in the Matching Window ? • If not, this would require a change to OASIS and has not been contemplated by any TP. • Customers will be allowed to submit only one match during the window. • Matching request must contain the original capacity profile and then extend duration appropriately based on ATC. • A match will be invalid if the extension is greater than ATC.

Short Term Preemption and Competition • Example of Current Process • Request #400 is a valid competing request. • CONFIRMED reservation #300 and subsequently CONFIRMED reservation #200 says Yes to Match and cannot Match due to ATC limitations and are DISPLACED. • Reservation #100 can match as all ATC has been freed up. • BCTC offers a MATCH as ATC may become available during the displacement process. (i.e. counterflow transmission)

Short Term Preemption and Competition • Example of Simultaneous Submission of Matches

3. Release of Unscheduled Firm

Release of Unscheduled Firm as Non-Firm • What is Release of Unscheduled Firm? • Any transmission capacity that has not been scheduled or allocated to be scheduled on via eTag is released to the market as hourly Non-Firm service. • Current Process • Outlined in BCTC Business Practice Section 2.4. • BCTC releases unscheduled Firm capacity for use in Network Economy ATC and Non-Firm ATC. • BCTC also releases unscheduled Non-Firm capacity for use in Non-Firm ATC. • All unscheduled capacity is released each hour at xx:10 for the next delivery hour. In other words, unscheduled capacity is released 50 minutes prior to start of service. • The xx:10 release time has been historically considered as the best time to release unscheduled capacity. Generally, customers have supported xx:10 as the most appropriate time.

Release of Unscheduled Firm as Non-Firm • Future Process • BCTC has been following NERC ATC Standards development and will align with industry standards once approved. • Release of Unscheduled Capacity is known as Postbacks in the ATC Standards. • BCTC proposes to release only unscheduled Firm to Non-Firm ATC and will no longer release unscheduled Non-Firm to be consistent with NAESB Business Practices. • Network Economy unused is no longer required to be released, because unscheduled Network Economy is curtailed prior to Non-Firm (refer to BCUC Order G-127-06 NE Settlement Agreement). • BCTC now has the ability to configure the time when unscheduled Firm shall be released. • BCTC proposes to change the release time of the unscheduled capacity to be the top of an hour. • BCTC requests customer feedback on the best time for this release. Options could include: • One hour prior to the delivery hour • Two hours prior to the delivery hour • Other recommendations?

4. SuperBlanket and Blanket

SuperBlanket and Blanket Scheduling • What is SuperBlanket and Blanket Scheduling? • SuperBlanket Scheduling allows a customer the ability to schedule a single eTag across all of their Firm and Non-Firm (including Network Economy) transmission reservations for a path. • Blanket Scheduling allows a customer the ability to schedule a single eTag across a single type of transmission class (Firm, Network Economy, Non-Firm) for a path. For example, a single eTag may be scheduled on all Firm transmission reservations. • Current Process • Outlined in BCTC Business Practice Section 10.3.2 and 10.3.3. • SuperBlanket allows the Customer the option of using a single valid, OASIS number (current or expired) to use all of its transmission reservations on a particular path and POR/POD combination, regardless of class (firmness), in one eTag by specifying one OASIS reservation with an appended “s”. • Blanket allows the Customer the option of using a single valid, OASIS number (current or expired) to use all of its transmission reservations on a particular path and POR/POD combination, for a transmission class, in one eTag by specifying one OASIS reservation with an appended “b”.

SuperBlanket and Blanket Scheduling • Future Process • BCTC believes that other mechanisms exist in the industry that provide increased transparency for scheduling on multiple transmission reservations at the same time. • Customers may choose to enter multiple transmission reservations on the eTag, which can overlap for an extended period of time or pancake on top of one another. This is known as horizontal or vertical stacking of transmission reservations. • Customers may also choose, under NAESB Business Practices, to aggregate transmission reservations through resale to themselves. • Please see NAESB BP 001-11.3.2 • With the exception of reservations subject to a Conditional Curtailment Option, the Reseller shall have the right to aggregate multiple reservations into a single Resale provided that each reservation being aggregated is of exactly the same service attribute, priority, product and point of receipt/point of delivery. Long term Firm Point-to-Point reservations or any other reservations subject to the terms of a Conditional Curtailment Option may not be aggregated to support a Resale.

SuperBlanket and Blanket Scheduling • Future Process (cont’d…) • NAESB is also considering the following standard change request to allow for aggregation of multiple transmission requests. This change request is in NAESB process and is pending further review. • Transmission Customers may from time-to-time may have a portfolio of transmission service reservations from a single provider on a single path. For ease of tracking and efficiency, the customers desire to combine or merge like reservations (i.e., firm, non-firm, etc) into a single reservation. Under existing OASIS business practices and protocols, customers must use the Resale mechanisms to merge two or more like reservation under a single assignment reference number. In other words, customers sell their reservations back to themselves. • While use of the resale mechanism gives the customer a single reservation to manage, it is not desirable because: 1) the use of Resale to merge reservations presents a false picture of what is really happening, and 2) Transmission Providers must report all resales to FERC and establish transmission reassignments agreements with the assignee. • This request is for a new OASIS mechanism (a combination of business practices and protocols) that allows for the merger of like reservations without the use of the resale mechanism and resulting the additional contracting and administrative requirements (for additional details refer to FERC Order 890) • BCTC proposes and requests customer feedback on SuperBlanket and Blanket functionality being phased out, and transitioning to a more industry recognized mechanism be used for scheduling.

5. Curtailment Process

Curtailment Process • Current Process • Outlined in BCTC Business Practice Section 12 • Curtailment is initiated at xx:40 for paths where the Non-Firm ATC is negative. • All service is subject to curtailment and is subject to the following rules: • Curtail transmission and energy schedules appropriately until ATC is no longer negative for the specific path. • Non‐Firm Point‐to‐Point Transmission Service will be curtailed before Firm Point‐to‐Point Transmission Service according to the following transmission cutting order: • Unscheduled Network Economy • Secondary: Last in first out (LIFO) • Non‐Firm: Shortest service increments first on a LIFO basis • Network Economy: LIFO • Firm Transmission Service are curtailed pro‐rata

Curtailment Process • Current Process (cont’d) • Current Process also uses the duration within service increments to determine cutting order prior to LIFO. • If transmission is curtailed and it does result in an energy curtailment, the transmission allocation and energy profile values for the affected energy schedules will be curtailed to match the transmission curtailment. • Curtailments, if required, will be done in real‐time at XX:40. • The current process and current system will always cut transmission first to relieve the negative ATC constraint, regardless if there is energy scheduled on the transmission. • As a resultant effect of the current system, energy may be cut even if the energy levels are below tieline TTC levels. • All curtailments that are deemed to be a result of BCTC constraints or economic factors are refunded to the customer. • All curtailments that are deemed to be a result of External constraints are not refunded.

Curtailment Process • Future Process • BCTC will continue to follow NERC curtailment priority codes from (0-7) and will not order using duration in each service increment. • 0NX – Next Hour Market • 1NS – Non-Firm Secondary • 2NH – Non-Firm Hourly • 3ND – Non-Firm Daily • 4NW – Non-Firm Weekly • 5NM – Non-Firm Monthly • 6NN – Network • 7F – Firm • BCTC proposes to use System Operating Limit of the path which is essentially the TTC – TRM. • BCTC proposes a modification to the current curtailment methodology to incorporate the System Operating Limit (SOL) of the path, instead of Negative ATC, as the primary determinant on whether or not curtailments are required. BCTC also proposes a new curtailment methodology.

Curtailment Process • Future Process (cont’d) • BCTC will go through the transmission requests in the same order as described previously (Unscheduled Network Economy, Non-Firm, Network Economy, Firm), and use LIFO or Pro-Rata for the appropriate Transmission Service • The new methodology would continue to limit transmission as it has done in the past, but will now post limits to transmission on OASIS. • Reliability limits on Transmission Reservations will be updated on OASIS and will essentially set the scheduling limit for energy on that transmission reservation.

Curtailment Process • New Curtailment Methodology • The methodology will evaluate whether or not the energy scheduled creates an SOL violation. • An SOL Violation can occur when the amount of energy is greater than the SOL for a path plus the Counterflow energy. • If an SOL violation exists and counterflow energy will not alleviate the SOL violation, then BCTC will proceed with issuing curtailments to eTags with reliability limits to transmission. • All Non-Firm transmission and energy will be curtailed in LIFO. If SOL violation is not alleviated after all Non-Firm and Network cuts, then proceed to Pro-Rata Firm curtailment. • The Firm transmission service on a Pro-Rata basis will have reliability limits placed on TSRs, and the sum of the TSRs with reliability limits shall be equal to the SOL. • Energy associated with the transmission shall be limited to the new reliability limit, but if the energy total is below the SOL, BCTC will reallocate on a Pro-Rata basis, the unused capacity to energy schedules that were to be curtailed. Essentially allowing energy schedules to equal the SOL limit.

Curtailment Process • New Curtailment Methodology (cont’d) • Tag Priority Order: • By major tag type categories: • Normal tags using Interruptible energy and all Recallable tags. • Normal tags using Non-interruptible energy, and all other unspecified types. • Capacity tags. • Dynamic tags. • Within each of those major categories, order by: • PSE supplied relative priority (lowest to highest). • For tagged transactions with no supplied PSE priority order, or for tags of like PSE priority order, order by tag submission time on last-in-first-out basis.

Example of Curtailment (Current vs. Future) • For the following example assume that TTC – TRM = SOL = 100 MW • ATC = TTC – TRM – Transmission + Counterflow + Unused = -230 • In this case the amount of transmission sold is 500 MW (375 MW Firm and 125 MW Non-Firm) • The energy scheduled on the transmission is 330 • Counterflow Energy = 0.

Curtailment Process • Curtailment Charges • Current practice • BCTC refunds customers for internal constraints, and no refunds for external constraints. • Under the OATT, there is no provision for refunds due internal constraints. • Under the OATT, there is no provision to distinguish between internal or external curtailment. • The OATT does specify that curtailments may be required to alleviate operational and reliability constraints. • Many jurisdictions in the WECC treat their contracts as take-or-pay, and may not charge (or refund) for economic interruptions of Non-Firm service. • BCTC’s current rate design practice assumes that all service contracts be considered as take-or-pay.

Curtailment Process • Curtailment Charges • In BCTC’s approved OATT Amendment Application 2008, refunds would not be provided for curtailments of Conditional Firm Service customers. • High level of reliability exists with minimal impacts to customers due to BCTC constraints. The amount of curtailments attributed to BCTC constraints are negligible (BCTC constraints only account for less than 1.0 % overall for Alberta, and less than 1.0 % overall for US). • The current process requires significant administration and after-the-fact determination of curtailment reason codes. • Customers in the past have objected to reason codes being changed from external to internal or vice versa after-the-fact, and the effects of that on their trading books. • The proposed mechanism will be cleaner and more simplified for customer’s reconciliation. BCTC will still provide details on OASIS of the constraining party. • BCTC proposes that segregation of curtailments between internal and external constraints be eliminated, and all contracts be considered as take-or-pay with no internal constraint refunds.

6. OATT Amendments

OATT Amendment Implementation • MOD Project will also implement the following OATT Amendments that were approved in the recent OATT decision by BCUC: • Capacity Reassignment (Resales) • Conditional Firm Service (CFS) • Reservation Priority • Five minute simultaneous submission window for midnight bidding • Pre-confirmed requests • Price as a tiebreaker • Designation of Network Resource - Qualification

7. Questions ?

Market Operations and Development (MOD) System Upgrade Project