1. NGEIR Technical Conference Presentation May 16, 2006

2. 2 Overview The NGEIR process is an opportunity for gas-fired generators to work with the LDCs to develop services that will improve the interface between gas and electricity and in doing so will enhance: –the wholesale gas market, which will benefit all gas users; and –the reliability of the electricity system, which will benefit all electricity users. The APPrO evidence represents the coordinated efforts of gas- fired generators to define their needs and how those needs can be met.

3. 3 Need for More Services There will be an increased role for dispatchable gas-fired generation in the Ontario electricity market. The proposed electricity day ahead market will not resolve the intra-day variability in the real time electricity market that results from: –variation of actual load from forecast load –variation of actual wind and hydroelectric generation from forecast –failures of import and export transactions –contingency events Gas-fired generators require more flexibility in gas delivery services to allow them to manage that intra-day variability.

4. 4 New Gas-fired Generation

5. 5 APPrO overarching principles Utility services for generators should contribute to the economic efficiency of both the gas and electricity markets Such services should contribute to the reliability of Ontario’s power system Fully unbundled services should be available to those generators who wish to contract for them Utility services for generators should contribute to the further development of a robust, competitive and transparent wholesale gas market in Ontario.

6. 6 Proposed new services 1.Utilities should provide transmission-level services to customers who do not use the utility’s distribution mains. 2.Utility should be allowed to negotiate rates and terms of service to reflect specific circumstances, provided that there are no negative effects on existing utility customers. 3.Utilities should continue to make a base level of storage available to in-franchise customers at rolled-in cost-based rates. Additional storage deliverability should be made available to customers at a cost-based rate that reflects the incremental cost of developing or acquiring storage with higher deliverability.

7. 7 Proposed new services (cont.) 4.Utilities should allow nomination changes to be submitted each hour, with changes effective within two hours after the nomination deadline, or at the start of any later hour that the customer may specify. 5.Utilities should allow customers to nominate non-uniform hourly rates of flow for all services. 6.Customers should have access to alternate receipt and delivery points, both day-ahead and intra-day, through the nomination process. 7.Firm customers should have the option to reserve transportation capacity or storage deliverability throughout the day.

8. 8 Proposed new services (cont.) 8.Union Gas should eliminate the Obligated DCQ requirement for all customers. 9.Utilities should provide additional services to allow customers to avoid imbalances, including imbalance trading, in-storage title transfers, combined nominations for multiple plants, and greater ability to move gas between utilities. 10.The procedures by which utilities offer transportation and storage capacity and the prices charged for market-based service must be made more transparent and predictable. 11.A review process is needed to determine how well the services provided by the utilities meet the needs of gas-fired generators.

9. 9 In-Franchise Storage Proposal 1.Utilities should continue to make a base level of storage space available at rolled-in rates, but recognize that generator needs are different from industrial customers. The aggregate excess methodology is not appropriate for all generators. 2.Generators need access to high deliverability storage service (HDS). Generators recognize that the cost for higher deliverability is greater than baseload storage deliverability and that rates for HDS should be set on an incremental cost basis. 3.Existing generators should be able to choose the new methodology (described below) or the existing methodology to set their base storage entitlement. They should also be able to choose to continue with existing service arrangements.

10. 10 In-Franchise Storage Proposal (cont.) 4.Base storage entitlement for generators should be based on its operational needs to help ensure the reliability of the power system. 5.HDS is needed to cover the situations where actual dispatch signals are different than pre-dispatch signals. This would provide for: –The plant having to run longer than had been expected and the need to withdraw gas from storage to ensure reliability of the power system. –The plant having to shut down early and the need to inject gas already purchased into storage to maintain integrity of the gas distribution system.

11. 11 In-Franchise Storage Proposal (cont.) 6.Under the APPrO proposal, a generator would be entitled to contract for the following storage space and 1.2% deliverability, per 100 MW of plant capacity Space 1.2% Del –Combined Cycle 126,480 GJ1,518 GJ/d –Single Cycle 177,360 GJ2,218 GJ/d 7.This storage space would be priced under the current rolled-in cost based methodology. The generator could purchase additional deliverability at incremental cost-based rates.

12. 12 Derivation of Space & Deliverability Entitlement/100 MW Combined Cycle 16 hours 7,500 mmbtu/KWh (7,912* GJ/KWh) 791 GJ/h 791 GJ/h*16h/24h= 527 GJ/h 791 GJ/h-527 GJ/h= 264 GJ/h 264 GJ/h*24h/10%= 63,360 GJ 527 GJ/h*24/10%= 126,480 GJ 1,518 GJ/d Single Cycle 8 hours 10,500 mmbtu/KWh (11,077* GJ/KWh) 1,108 GJ/h 1,108 GJ/h*8h/24h= 369 GJ/h 1,108 GJ/h-369 GJ/h = 739 GJ/h 739 GJ/h*24/10%= 177,360 GJ 369 GJ/hr*24/10%= 88,560 GJ 177,360 GJ 2,128 GJ/d Typical Run Time Average Heat Rate Hourly Plant Consumption Average Hourly Gas Purchases in the Day Additional Hourly Gas Req’d if Run Time Extended HDS Space Required** to Meet Plant Needs HDS Space Required** to Provide Injection if Plant Shuts Down Early Base Storage Space Entitlement/100 MW Associated 1.2% Deliverability * 1 mmbtu=1.055 GJ ** Assumes 10% deliverability HDS available

13. 13 Example 500 MW CC Generator Base Storage Entitlement* 126,480GJ*500MW/100MW = 632,400 GJ Base 1.2% Deliverability* 1.2%*632,400 GJ = 7,589 GJ/d Additional Optional Deliverability Purchased** 8.8%*632,400GJ = 55,651GJ/d TOTAL Deliverability63,240 GJ/d * Base storage and deliverability at existing cost based rates ** Additional deliverability purchased at incremental cost based rates

14. 14 APPrO is a non-profit organization representing more than 100 companies involved in the generation of electricity in Ontario, including generators and suppliers of services, equipment and consulting services. APPrO members produce power from co-generation, hydro-electric, gas, coal, nuclear, wind energy, waste wood and other sources. APPrO’s members currently produce over 95% of the electricity made in Ontario. www.appro.org 416 322-6549 www.appro.org