1. ReliabilityFirst 3/6/08 RC Meeting 1 Reliability Standards Update ReliabilityFirst Corporation RFC Compliance Workshop Columbus, Ohio September 29 & 30, 2008 Presented By: Bob Millard

2. ReliabilityFirst 3/6/08 RC Meeting 2 What’s Up at the Board The following will be discussed at the RFC Board meeting in Chicago 10/8/08 Automatic Reserve Sharing (BAL-501-RFC-01) –Day One standard approved 12/12/05 –SAR stated “standard” no longer needed for reliability –Map to RTO documents showed complete overlap –Unanimous vote to retirement

3. ReliabilityFirst 3/6/08 RC Meeting 3 What’s Up at the Board Operating Reserve (BAL-002-RFC-02) –Day One standard approved 12/12/05 & revised 5/9/07 –Establish optional methodology per NERC BAL-002 –Submitted for NERC/FERC approval process –NERC comments focused on % of spinning fulfilled by interruptible –Recommend reclassify as regional CRITERION until NERC makes a final decision on whether revised BAL-002 needs support by regional standard

4. ReliabilityFirst 3/6/08 RC Meeting 4 What’s Up at the Board Disturbance Monitoring (PRC-002-RFC-01) –Regional standard support shown in NERC Standards Work Plan –Referenced in NERC Board approved PRC-002 (a Fill-in-the-Blank standard) –Referenced in FERC approved PRC-018 –Used as a starting point by NERC drafting team –NERC 1 st draft still to be posted –RFC standard will replace legacy documents

5. ReliabilityFirst 3/6/08 RC Meeting 5 What’s Up at the Board Disturbance Monitoring (continued) –Did not pass 1 st or 2 nd ballot after 7 comment postings –Major issue: Joint responsibility (TO and GO) for DME installations at generating facility interface –Drafting team proposes to have RFC Board remand back to team to remedy major issue –Drafting team remedy - monitoring provided by owner of monitored equipment (arrangements can still be made as to who owns DME) –Informal survey by team suggests additional posting and ballot would be successful

6. ReliabilityFirst 3/6/08 RC Meeting 6 RFC Standards Resource Adequacy (BAL-502-RFC-02) –Day Two standard approved by RFC Board 3/9/06 –ACTION PLAN to revise standard approved by RFC Board 8/9/07 Based on legal advise –Remove enforcement of requirement to secure resources –Limit enforcement to reserve requirement analysis and assignment

7. ReliabilityFirst 3/6/08 RC Meeting 7 RFC Standards Resource Adequacy (continued) –ACTION PLAN included: Addition of significant improvements from RFC experience & MRO development through MRO Board approval Modifications to conform to current RFC Standards Procedure (such as Violation Risk Factors) –Supplemental SAR approved after 1 st comment posting of proposed revision to revise applicability

8. ReliabilityFirst 3/6/08 RC Meeting 8 RFC Standards Resource Adequacy (continued) –2 nd comment posting completed 9/16/08 and included: Removal of reference to LSE or PRSG due to removal of enforcement of securing reserves Addition of PC to reflect new focus of standard toward analysis –Revised standard ready for balloting and preparation for action by RFC Board at December meeting

9. ReliabilityFirst 3/6/08 RC Meeting 9 RFC Standards Gen MW verification (MOD-024-RFC-01) –Based on 3/10/06 SAR by Day Two team –Replace legacy documents per intent of By-laws –Comply with NERC “fill-in-the-blank” NERC MOD-024-1 –FERC confirmed “warrant continued monitoring” –Provide verification for “planning reserve” analysis –NERC drafting underway but no posting yet –Fill gap until NERC complete (possible 2 years) –Used as starting point for NERC drafting team

10. ReliabilityFirst 3/6/08 RC Meeting 10 RFC Standards Gen MW verification (continued) –4 th comment posting completed 9/11/08 –Major applicability issue removed by defaulting to unit size values specifically listed in NERC Compliance Registry Guidelines –SDT reviewing comments to determine next move –Comments now range from “requirements are too detailed” to “not detailed enough” –ULTIMATELY when NERC standard is approved, RFC requirements will be retired or become a variance in the NERC standard

11. ReliabilityFirst 3/6/08 RC Meeting 11 RFC Standards Gen MVAR verification (MOD-025-RFC-01) –Based on 3/10/06 SAR by Day Two team –Replace legacy documents per intent of By-laws –Comply with NERC “fill-in-the-blank” NERC MOD-025-1 –FERC confirmed “warrant continued monitoring” –NERC drafting underway but no posting yet (scheduled behind NERC MOD-024-1) –Fill gap until NERC complete ( 2+ years) –Used as a starting point by the NERC drafting team

12. ReliabilityFirst 3/6/08 RC Meeting 12 RFC Standards Gen MVAR verification (continued) –2nd comment posting completed 8/31/08 –Variety of comments reflect the technical complexity of the standard –SDT reviewing comments to determine next move –ULTIMATELY when NERC standard is approved, RFC requirements will be retired or become a variance in the NERC standard

13. ReliabilityFirst 3/6/08 RC Meeting 13 RFC Standards Under Frequency Load Shed (PRC-006-RFC-01) –RFC Board approved Day Two standard rescinded early 2006 due to generator requirement ambiguity carried over from legacy documents –Day Two 2/10/06 SAR initiated drafting –Replace legacy documents per intent of By-laws –Comply with NERC “fill-in-the-blank” NERC PRC-006-1 –FERC confirmed “warrant continued monitoring”

14. ReliabilityFirst 3/6/08 RC Meeting 14 RFC Standards Under Frequency Load Shed (continued) –NERC initial comment posting completed 8/15/08 stated that regional standard was required –RFC 4 th comment posting ends 10/4/08 –Major issues addressed: Applicability goes beyond Compliance Registry Criteria and issues dealing with areas of credible islanding –Direction of RFC draft agrees with NERC initial draft

15. ReliabilityFirst 3/6/08 RC Meeting 15 Waiting in the Wings RFC SARs & SDT in queue –Sub-Regional Transmission Adequacy Requirements SAR Complements RFC Resource Adequacy standard Developed with initial Resource Adequacy effort Intended to provide some level of confidence that transmission will be available for delivery Considers probability of transmission outage Establishes deliverability criteria to achieve a transmission import capability level for each sub- region to achieve an acceptable reliability level

16. ReliabilityFirst 3/6/08 RC Meeting 16 Waiting in the Wings RFC SARs & SDT in queue (continued) –Special Protection System Requirements SDT In line with NERC “fill-in-the-blank” NERC PRC-012-0 Regional standard support shown in NERC Standards Work Plan RFC has approved “procedure” today Also considers need for conditions on installation and duration (already discussed by NERC TPL SDT for consideration in draft)

17. ReliabilityFirst 3/6/08 RC Meeting 17 Waiting in the Wings RFC SARs & SDT in queue (continued) –Blackstart Capability Plan SAR Intended to detail and enhance the system Blackstart Capability Plan (BCP) requirements stated in the NERC EOP standards and RFC EOP-007-RFC-01 NERC Project 2006-03 well underway covers EOP-005 — System Restoration Plans EOP-006 — Reliability Coordination - System Restoration EOP-007 — Establish, Maintain, and Document a Regional Blackstart Capability Plan EOP-009 — Documentation of Blackstart Generating Unit Test Results

18. ReliabilityFirst 3/6/08 RC Meeting 18 Waiting in the Wings RFC SARs & SDT in queue (continued) –Sub-Regional Transmission Adequacy Requirements SAR Wait for outcome of Resource Adequacy standard and consider RTO practices –Special Protection System Requirements SDT Wait for TPL & NERC Project 2010-05 activity –Blackstart Capability Plan SAR Since NERC posted 3 rd draft Spring 2008, may need to delete & modify related RFC standard

19. ReliabilityFirst 3/6/08 RC Meeting 19 We continue to evolve Questions ON RFC “STANDARDS”? Our Goal RELIABILITY

20. ReliabilityFirst 3/6/08 RC Meeting 20 Outside RFC Standards WHAT’S UP AT NERC? WHAT’S FERC DOING? WHO’S IN CHARGE? WHAT DO I WATCH FOR? CAN I MAKE A DIFFERENCE?

21. ReliabilityFirst 3/6/08 RC Meeting 21 Understanding Standards Legal Purist Out of Box Folksy Gut feel Comfort Zone Operating Manual Planning Standards Version 0 Improvement Functional Model Reliable SystemCustomer Needs

22. ReliabilityFirst 3/6/08 RC Meeting 22 Understanding the FM Functional Model concept –Start from clean slate –Develop a group of “functions” that are needed to make the overall system work Realize that there can be more than one set of functions that can work Divorce from corporate structure but make sure they will blend –FM provided basis/guideline for Version 0

23. ReliabilityFirst 3/6/08 RC Meeting 23 Understanding the FM FM continues to evolve Version 4 completing approval process through Standing Committees and on to NERC Board Latest Version 4 as presented to Committees includes original proposed changes, i.e. LSE, DP, GOP, etc but fell back to “planning functions” as stated in Version 3 “Planning functions” will be major focus of Version 5 for next Spring “Planning functions” did not blend with structure across continent

24. ReliabilityFirst 3/6/08 RC Meeting 24 Understanding Compliance Registry Guidelines Registry created to administer technically based requirements established for applicable entities as specified in the standards using the FM as a guide Registry created to inform entities who will be monitored from a practical stand-point Registry does not list monitored facilities – but criteria can be used as default or specified in standard based on technical need Registry criteria can be driven/changed by technical needs of standards

25. ReliabilityFirst 3/6/08 RC Meeting 25 Understanding Standards SO NOW YOU KNOW Where the terms came from All the components there had to be considered in drafting How entities are earmarked for compliance initially And what you know today may change tomorrow This presents a real opportunity to test your understanding and flexibility

26. ReliabilityFirst 3/6/08 RC Meeting 26 What’s Up at NERC What is NERC’s GRAND SCHEME ? –Reliability Standards Development Plan alias Three year (???) Work Plan: 2009-2011 –Updated annually –Presented by usual e-mail, at Standing Committees, at Standards Workshop –Presented by WEBEX 8/28/08 slides at NERC website under “About Standards: Development Plan” –Industry comments and suggestions solicited for gaps, priorities, improvement, new items

27. ReliabilityFirst 3/6/08 RC Meeting 27 “Work Plan” What is NERC’s GRAND SCHEME ? –Volume I: Overview Plan Description – high level list of “Projects” Modifications since last revision FERC 15 point review list for approving standards General information on the how, why & what of standards Industry comments that helped create latest version

28. ReliabilityFirst 3/6/08 RC Meeting 28 “Work Plan” What is NERC’s GRAND SCHEME ? –Volume II: List of “Projects” Tabulation listing each standard and indicating what Project it is part of Tabulation listing each Project and indicating which standards are included A selection is allocated to each Project giving its description, status, schedule and issues to be considered

29. ReliabilityFirst 3/6/08 RC Meeting 29 “Work Plan” What is NERC’s GRAND SCHEME ? –Volume III: Regional Reliability Standards Projects Identifies 4 NERC standards anticipated to be supported by regional standards –Project 2007-01 — Underfrequency Load Shedding (PRC-006) –Project 2007-05 — Balancing Authority Controls (BAL-002) –Project 2007-11 — Disturbance Monitoring (PRC-002) –Project 2010-05 — Protection Systems {SPS} (PRC-003)

30. ReliabilityFirst 3/6/08 RC Meeting 30 “Work Plan” What is NERC’s GRAND SCHEME ? –Volume III: Regional Reliability Standards Projects Identifies, by region, the regional reliability standards being developed NOTE: The term “standard” means that the requirements being developed are expected to be submitted for the regional/NERC/FERC approval process to received enforcement under law The term “criterion” means that the requirements only apply to members of the region or other contract agreed to membership

31. ReliabilityFirst 3/6/08 RC Meeting 31 “Work Plan” What is NERC’s GRAND SCHEME ? –How can I find the latest status of any one Project knowing that there are 39 active teams working right now? –NERC website under “Standards” then under “Standards Under Development” –Dave Taylor, Manager of Standards, prepares a monthly XCEL worksheet “Project Summary” for the NERC Standards Committee –Part of NERC SC minutes (soon to have separate link????)

32. ReliabilityFirst 3/6/08 RC Meeting 32 Voluntary to Mandate What’s FERC’s involvement ? –Another layer of approval and commenting has been added. –FERC approval process is fairly obvious & related to legal and ERO processes –INDUSTRY PARTICIPANTS MUST BE WATCHFUL FOR COMMENTING ON FERC ORDERS RELATED TO STANDARDS –IF INDUSTRY DOES NOT FILE WITHIN 30 DAYS NOTICE on Directives in Orders to change “standards” or provide for the same intent are considered, IT IS ASSUMED INDUSTRY AGREES.

33. ReliabilityFirst 3/6/08 RC Meeting 33 Variance NERC Rules of Procedure and Standards Development Procedure sites “Variance” Note: The term “difference” was changed August 2006 A different or alternative way to meet the intent of a NERC standard requirement –If it is the same, then there is no variance –If it is needed not for meeting a NERC requirement, then it’s a local requirement

34. ReliabilityFirst 3/6/08 RC Meeting 34 Variance Who may ask for Variances? –An Interconnection (e.g. WECC in FAC standard) –A Region (Regional Entity, not the RRO) –A sub-region –Any entity that does things differently (e.g. MISO, PJM and SPP in the TLR standard) Variance can be added while drafting is underway If no drafting in progress, a SAR is needed

35. ReliabilityFirst 3/6/08 RC Meeting 35 Variance Example of a Variance? –NERC standard requires at least 5% of “X” to be compliant –An entity, let’s say an RE, requires at least 2% of “X” –Since they both want a % of “X”, the 2% is a Variance If RFC drafts a standard on Resource Adequacy that is not covered by a NERC standard, it is a regional standard and not a Variance Request for Variance is a routine question for posting

36. ReliabilityFirst 3/6/08 RC Meeting 36 NERC Summary So keep an eye on the NERC Work Plan Keep an eye on the FERC Orders Keep an eye on postings for comment Participate on SDTs to help steer the team Submit comments, before the ballot, even if you agree, otherwise the draft will go a different way The opportunities are endless and challenging but once we get over first pass, we will know what we need to do to keep the lights on.

37. ReliabilityFirst 3/6/08 RC Meeting 37 We continue to evolve Questions? Our Goal RELIABILITY