1. NAESB Time and Inadvertent Management Business Practice (TIMBP) February 3, 2009 Terry Bilke

2. Introduction Targeted business practice to address multiple concerns in Order No. 693 Originally submitted to NERC, NERC Staff and Standards Committee rejected the SAR saying Time Error Corrections (TEC) and Inadvertent Payback are NAESB’s purview Relies on proven Time and Inadvertent management practices, comparable to the WECC automatic TEC No ERCOT/WECC impact unless they so choose

3. FERC’s Order No. 693 Concerns Address number and efficiency of TECs Concerned with frequency excursions (nearly half of reported frequency excursions occurred during TEC even though the East is in TEC 15% of the time) Wants NERC to reduce and penalize large Inadvertent balances Asks NERC to investigate alternatives to present TEC practices

4. Targeted Business Practice Draw on past practice –Allow unilateral payback (greater of 5MW or 20% of bias) when Inadvertent balance has same sign as Time Error, –Financial Settlement (MWs disclosed to NERC, terms left to BAs) Uses Europe’s clock-day approach to TEC –Wider window (30 seconds) will further reduce the # of corrections and therefore excursions –Better participation/effectiveness due to improved awareness of TEC starts/stops

5. Option 2 Unilateral Payback is the Cornerstone Unilateral Payback Option 2 > Average Frequency closer to 60 Hz > Less Inadvertent passing around > Smaller Inadvertent Balances Average Frequency closer to 60 Hz > Fewer TECs> Fewer Frequency Excursions

6. NERC BAC Drafting Team Concern Identical Comments (potential small change in calculated CPS1) were filed with WECC WATEC The FERC dismissed these concerns in Docket No. RM08-12-000 and agreed with WECC When balancing the slight loss of precision in CPS1 scores with the benefit of fewer manual time error corrections, WECC does not believe the ultimate impact of using the ATEC procedure is a threat to reliability.

7. Key Points Under NERC’s old payback approach, 93 TECs / year Under current NERC payback method (since 1997) 223 TECs/year NERC BAC proposed alternative actually reduces today’s payback ability by about 75% for a typical balancing authority

8. TIMTF Recommendation Coordinated 6 month field trial Include a provision that only Balancing Authorities with CPS1>120% may participate in method 2 payback Field trial immediately stopped on any reliability issues Report published by NERC Resources Subcommittee

9. Month 1/2 –Training Month 3 –Allow financial settlement & unilateral payback (method 2) –Widen window to 20 seconds Month 4 –Widen window to 30 seconds –Longer corrections Month 5 –Clock-day Corrections Month 6 –Draft Report Proposed Implementation Plan *NERC BAC team may want to test smaller offset