Resales, Aggregations & Redirects of Resales

1. Resales, Aggregations & Redirects of Resales NAESB OS July 22-24, 2014 BPA Presenting

2. Resale Presentation - Overview • Recap of Last Two Meetings • Shift From Option 2 to Option 1 • Reviewed Mechanics of a Possible Option 1 • Motion 113 • Assignment • Show Business Functionality Impacts of Proposed Option 1 • Develop Options for Recalling Scheduling Rights if the Conditional Parent of a Resale was Preempted. • Show how Conditionality is Passed • Better Define the Two Capacity Buckets • Next Steps

3. Recap of the June OS Meeting Ian Hunter presented customer’s preference for Option 2. Marie Pompel presented BPA’s preference for Option 2 over Option 1 and Option 3. The OS surveyed the OS participants to determine Option preference. Survey results of the three options were: Option 1 - 11, Option 2 - 7, and Option 3 - 6. Due to the survey results, the OS decided to focus on option 1 and what it would take to make it work.

4. Option 1 Concepts Change the implementation to match the current definition and functionality of a Resale. The Resale is scheduling rights only and thus exempt from having to defend capacity to Preemption and Competition. For the purpose of Preemption and Competition, the resold capacity stays on the conditional parent. The conditional parent’s capacity can be preempted or challenged. If challenged, the parent has ROFR. Downstream transactions (e.g., Resales) from the parent can lose the supporting capacity enabling their scheduling rights and might be annulled or have the scheduling rights recalled. Aligns with existing citations and standards.

5. Recap of the July 10th Meeting • Bob Zerfing talked the OS through the mechanics of how option 1 might work with the least amount of disruption to the existing secondary market. • The only functionality in the secondary market that will be restricted is the redirect of a resale where the upstream transactions include aggregated reservations that are still conditional. Most if not all other secondary market functionality should continue as it does today. • Motion 113 was passed by a balanced vote. A redirect on a firm basis will not be permitted if the redirect's parent (a) is an aggregated reservation with a conditional parent or (b) is a descendent of an aggregated reservation with a conditional parent.

6. Motion 113 Illustration Unconditional Monthly TSR01 Original 100 MW Start 8/1 Safe 7/1 Conditional Monthly TSR03 Original 100 MW Start 10/1, Safe 9/1 Conditional Monthly TSR02 Original 100 MW Start 9/1 Safe 8/1 Which Conditional Parent is Reduced? Resale Resale Resale TSR13 25 MW Safe 8/1 TSR12 25 MW Safe 7/1 TSR14 25 MW Safe 9/1 Redirect of a Resale with an Aggregation with a Conditional Parent upstream. TSR20 75 MW Aggregated Resale Safe 9/1 Resale Redirect of an Aggregation with a Conditional Parent TSR31 25 MW TSR32 25 MW Safe 9/1 TSR32 25 MW YES NO NO On 9/1 the final Parent becomes safe, so this restriction will no longer apply.

7. The Secondary Market under Option 1 • What transactions are ‘do-able’ under Option 1? • Conditional and Unconditional Original • Full or Partial Resale of a Conditional or Unconditional Original • Full or Partial Redirect of a Conditional or Unconditional Original • Full or Partial Resale of a Resale of a Conditional or Unconditional parent. • Full or Partial Redirect of Resale of a Conditional or Unconditional parent. • Full or Partial Resale of a Conditional or Unconditional Redirect • Full or Partial Redirect of a Conditional or Unconditional Redirect • Full or Partial Resale of an aggregated resale of Conditional or Unconditional parents • Full or Partial Redirect of an aggregated resale of all Unconditional parents • Etc. • What transaction(s) is not viable under Option 1? • Redirect of an aggregated resale where somewhere upstream there remains a conditional parent. (Motion 113)

8. Possible Recall Options Proposed by the OS Ultimately it is the customer’s business decision to exercise ROFR or not, and if they are preempted, which capacity (scheduling rights) they prefer to deduct the lost capacity from. However, for reliability and timing reasons, the TP has a responsibility to make sure the process is done quickly and correctly. Who controls the recall/annul process if a conditional reservation with resold scheduling rights loses capacity to preemption?

9. Possible Recall Options Proposed by the OS • Customer Controlled Recall • All parties are notified and they must work it out. They will be issued a UIC (Unauthorized Increase Charge) if they are over scheduled. • All parties are notified and there is a process established where the TP can recall/annul if the customers don’t take action within a certain time. • The original reseller who lost capacity decides which of his resales (if any) should be recalled/annulled, then either notifies each assignee and the TP, or is given the ability to take action himself. Each Assignee who is losing capacity and who has further resold part of the original resale decides which resales (if any) should be recalled/annulled, then either notifies each assignee and the TP, or is given the ability to take action himself. and so forth down the daisy chain in a cascading fashion until the needed capacity has been reached.

10. Possible Recall Options Proposed by the OS • Customer Controlled Recall • Pro’s • Allows the customer to make their decision on preempted capacity based upon dynamic circumstances and business needs. • Allows tags to remain intact until tags adjustments are made. Offers opportunity for minimum schedule and tag disruptions. • It does not force the TP to make arbitrary curtailments • Con’s • Could require too much time for downstream Assignees to respond. • The TP won’t know if the customers fully complied which could lead to: • Reliability issues • Curtailment of “innocent” tags • It would take a very elaborate OASIS enhancement to support it. • Ability to notify and recall • Tracking time and capacity recalled and reinstated

11. Possible Recall Options Proposed by the OS • Provider Controlled Recall. Surgical Recall – Recall by time and capacity only what needs to be returned to the parent. • TP will (may) annul or recall from all downstream resales that have not been redirected. Could be used in combination with a customer notification and action (or lack there of). Tags will be revalidated. • Pro’s • Guarantees schedules have supporting reservations. • Consistent with WEQ001 – 11.7 (may annul) • Con’s • Can annul more capacity than what was lost to preemption. • Harsh, big hammer for small issue. • Devalues the secondary market. • It moves responsibility for reservation and tag management from the TC to the TP. • It removes the control/decision from the TC.

12. Possible Recall Options Proposed by the OS • Provider Controlled Recall (Continued) • Do a pro rata recall from all downstream resales that have not been redirected, then revalidate tags associated with that resale. • Pro’s • Seems impartial in that all share in the loss. • Recalls only what is lost. • Con’s • Customers have no say • A higher number of reservations and TCs are impacted • No economic in the decision process • It moves responsibility for reservation and tag management from the TC to the TP. • It removes the control/decision from the TC.

13. Possible Recall Options Proposed by the OS • Provider Controlled Recall (Continued) • Recall/Annul the last Resale entered first, then the one just prior to it, and so forth up the chain until all lost capacity has been retrieved. • Pro’s • Follows the principle of queue order and reservation priority (last in-first out). • Annul only what is lost • Fairly easy for current systems. • Con’s • Customer has no say • It moves responsibility for reservation and tag management from the TC to the TP. • It removes the control/decision from the TC. • If the TP curtails a tag (totally) the TC may have to resubmit the tag • No economic in the decision process

14. Possible Recall Options Proposed by the OS • Remain Silent The NAESB Business Practices should remain silent on how to Recall capacity a conditional parent with resales loses to preemption. • Pro’s • Ends debate and we move on. • Con’s • Inconsistencies between TPs • Passes the buck

15. New Definition of Terms • "Preemptable Capacity" bucket is a new concept and is used solely to provide the capacity available for P&C on that reservation. • On an Original Reservation (includes Redirects and Transfers), this bucket is reduced via a new Reduction Template when there is a redirect or transfer against it or one of its downstream Resales • It is not reduced on the parent for a Resale. • It is zero on a Resale or when a reservation is unconditional. • It should be visible on OASIS. • The "Scheduling Capacity" bucket is what is currently known as "capacity" and is used for supporting scheduling rights and for calculating ATC. • On an Original Reservation (includes Redirects and Transfers), it is reduced via the Reduction Template when there is a Resale. Transfer, or Redirect. • The "Safe" Date/Time is when a firm or non firm reservation will become safe from losing capacity to a preemption. • On an Original, Redirect, or Transfer it is set based upon its Service Increment (M,W,D) and its Start Date. • On a Resale it is based upon the “Safe” Date/Time of its parent. • For an aggregated Resale, this will be the “Safe” Date/Time of the latest reservation being aggregated. • The “Safe” Date/Time must be visible on OASIS.

16. Illustration of an Aggregate’s Safe Time How do you Recall from an Aggregated Reservation that has already started? When does it become “safe”? Assume today is 8/24/2014 Unconditional Monthly TSR01 Original 100 MW Start 8/1 Safe 7/1 Conditional Monthly TSR03 Original 100 MW Start 10/1, Safe 9/1 Unconditional Monthly TSR02 Original 100 MW Start 9/1 Safe 8/1 Resale Resale Resale TSR12 25 MW Safe 7/1 TSR14 25 MW Safe 9/1 TSR13 25 MW Safe 8/1 The Start Date of the Aggregated Resale is 8/1, but its last conditional parent doesn’t become unconditional until 9/1. Is the aggregation and everything below it safe before 9/1 even though it has started? If TSR03 loses 25 MW and needs to recall 25 MW back from the secondary market, the lost capacity will be 10/1 or later. The fact that the aggregated resale has already started should not be a problem. TSR20 3month 25MW 75 MW Aggregated Resale Starts on 8/1 but isn’t safe until 9/1 Resale Resale TSR31 2540MW Safe on 9/1? TSR32 20 MW Safe on 9/1?

17. Illustration of Definition of Terms

18. Mechanics of a Resale

19. Mechanics of a Redirect

20. Mechanics of a Redirect of a Resale

21. More Illustrations of How Option 1 Could Work are Found in the Attrached Resales Option 1 Illustrated V2 Spreadsheet

22. Questions and Next Steps