BCTC Open Access Transmission Tariff (OATT)

1. BCTC Open Access Transmission Tariff (OATT) Transmission Re-dispatch Options January, 2006

2. Overview of Presentation • Background • Design Principles • Design Parameters • Options for Discussion • Overview of Options • Comparison • Discussion/Comments

3. Background • Issue of re-dispatch Tariff was discussed at the OATT Hearing • In the OATT decision, BCUC ordered BCTC to develop and submit a re-dispatch tariff as soon as possible extending the deferral credit to existing customers • BCTC wants to consult to determine interest in a more general “Re-dispatch option” in light of the most recent Capital Plan decision directing BCTC to look at other “non-wires” opportunities

4. Design Principles • New service should increase utilization of transmission assets • Increase availability of short term service • Increase long term access • Revenues from the new service should cover incremental costs. This assures the service is fully self-supporting • Service should avoid shifting of embedded transmission costs among customers • The service should be voluntary If these four principles are met, the rate produces net benefits and has no losers. It is a self-supporting rate option

5. Design Parameters • Re-dispatch Market • Can be limited to only those customers wanting to buy or sell transmission reservations (facilitate trading on secondary market) • Can include existing and new generators (“Incremental” and “Decremental”) • Different Time Frame of Products • Very Short Term (1 day to 1 hour ahead of Real Time) • Short Term (1 day to 1 year ahead of Real Time) • Long Term (greater than 1 year)

6. Role of BCTC BCTC cannot: • Become a market maker in an “accept all schedules” market design • BCTC can: • Match buyers and sellers for transmission product through OASIS • Could include a reconfiguration of transmission products • Use generation re-dispatch (a paired Inc and Dec) to provide additional transmission service • The Re-dispatch option is voluntary

7. Options for Discussion Option 1 • Expand the Deferral Credit (75%) eligibility to include existing generators. The goal of this option is to increase availability and decrease the costs of long term service Option 2 • Facilitate secondary trading of transmission service through additional OASIS postings. Since hourly service is already released if not used, the goal of this option is to increase the liquidity of intermediate term service between 1 day to 1 year • Two Options • Option 2(A) Facilitate secondary sales • Option 2(B) Promoting secondary transmission

8. Options for Discussion Option 3 • Facilitate additional transmission use by contracting with market participants for counterflows. Since existing rights holders become more likely to release transmission or produce a counterflow nearer to real time, the goal of this service is to increase very short term use between 1 hour and one day • BCTC contracts with generators to submit a counterflow schedule Option 4 • Facilitate additional long term use by allowing Customer to self-dispatch through congestion

9. Option 1: Extend Deferral Credit to Existing Generators How does this option work? • Participating existing generators would receive a credit against future transmission bills in exchange for signing a re-dispatch contract that allows BCTC to defer planned upgrades • A critical requirement is that the generator’s transmission use is a modification from their assumed base case use. The base case use will be established in BCTC’s long term plan • Per Commission Decision, the deferral credit would not be made available to end-use customers of BC Hydro to avoid the possibility of double compensation • Prior to any upgrade, all existing generators that had the potential to contribute to the ATC needed to fulfill the long term request would be notified • Could be notified through OASIS • Could be part of Long Term Planning Process • Could be part of Open Season • The participating generator would then enter into a “re-dispatch agreement” with BCTC in exchange for a credit against future transmission service

10. Option 2 (a) : Facilitate Secondary Transmission Sales How does this option work? • This service would be similar to the sales or assignment of transmission service under Section 23.1 of OATT • When a customer has a service request rejected due to insufficient ATC, the customer can then post OASIS request with bid price, path, quantity and time to all transmission customers • Likewise, a transmission customer with unused PTP service can post OASIS offer • If a match is found, notification is sent to BCTC of the service transfer • All restrictions in Section 23.1 of OATT applies • The role BCTC could be that of a clearing house, making availability and requirements of services transparent. Note that BCTC only facilitates communication and recording of the transaction, but plays no role in matching, negotiation and financial settlement

11. Option 2 (b) : Promoting Secondary Transmission Sales How does this option work? • Similar to Option 2(a) • BCTC would take the unused service on consignment and actively promote the sales of such service • BCTC would charge a service fee • The risk of stranded unused transmission rests with Transmission Customer

12. Option 3: Counterflow How does this option work? [Assume that BCTC is purchasing generator redispatch] • This would occur in the hourly market after general flow patterns are known • Customers would submit voluntary incremental and decremental energy offers (“incs” and “decs”) along with their energy schedules • BCTC would match incs and decs and post additional ATC • Pricing could take a number of forms: • Each block of incremental transmission is priced separately at the inc/dec cost (cost-based supply curve of incremental transmission) • All transmission is priced at the applicable ST rate (implies that BCTC would only accept inc/dec pairs that cost less than the ST rate) • All incremental transmission is priced at an inc/dec clearing price

13. Option 4: Customer Self-dispatch How does this option work? • This service would be initiated by a customer having their service rejected due to insufficient ATC • Instead of taking shaped service, the customer would take block service and the customer’s service in the months where ATC is insufficient becomes recallable • If the customer’s service got recalled, it would have to arrange for its own dispatch to meet its energy delivery obligations • Customer would pay Long-term Firm Point To Point rate and get refund for service curtailed at the Short term, Non-firm rate

14. Comparison of Alternatives Option 1: Extend Deferral Credit to Existing Generators • Relatively easy to implement • May be infrequently used • Could create perverse incentives for existing generators to create congestion and then get paid to redispatch • The generators would not have an incentive to increase their own transmission costs and then receive 75 percent of the deferral cost savings • Relatively low value, because participants only get paid a 75 percent of cost savings from deferral cost savings rather than market value • May not increase use of the system

15. Comparison of Alternatives Option 2 : Facilitate Secondary Transmission Sales • No need for new service (just modification of OASIS and business practice/customer training) • Much more flexible than Option 1 • Potential for increased use of the interties on a firm and non-firm basis • Small Potential for BCTC to lose revenue because it sells less hourly • Does not create possible use of generation to create ATC • Can create export ATC only if transmission is released in same constrained direction

16. Comparison of Alternatives Option 3 : BCTC Purchases Counterflow • Option 3 is a new service that is more difficult to implement than either Options 1 or 2 • Option 3 is more flexible than the other options and would probably be used more frequently • Costs to implement, depend on number of participants, number of products and how much BCTC has to implement • Can only be implemented on internal paths due to WECC rules

17. Comparison of Alternatives Option 3 : BCTC Purchases Counterflow (con’t) • Potential for customers to hold back beneficial flows to create congestion, then get paid to relieve it. This problem is present in Options 1 and 2, but since problem is proportional to the benefits, the problem is magnified in this option • Is this a real problem? Beneficial flows do have value that are not recognized under current system • Can create firm export ATC only if transmission is released in same constrained direction or re-dispatch relieves internal path constraint

18. Comparison of Alternatives Option 4 : Customer Self-dispatch • Option 4 provides an alternative to shaped service where a customer can arrange for alternative delivery at times of congestion • It is relatively simple to implement • It would make full use of the system • It may reduce ST PTP opportunities • May also crowd out shaped service • May not fit well with customer financing and contracting needs

19. Questions for Discussion • Which option would you be most interested in? • Are we missing anything?