EIM AWG July 5, 2011

Guiding Principles The intent of the group is to work collaboratively to better understand the WECC EIM costs and benefits analyses. The strict focus of the EIM AWG is to:  better understand the WECC/E3/Utilicast costs and benefits analyses,  to identify and implement any modifications/enhancements or additions to the analyses,  and to parse results or determine common methods for parsing results so that the group participants can better understand the applicability of costs and benefits analyses results to their individual companies. Separately, the ColumbiaGrid members will be jointly briefing their organizations on EIM AWG results in September.

Guiding Principles The EIM AWG will not be:  analyzing or discussing EIM policy positions;  pros or cons of EIM participation;  EIM design (except as limited to understanding the current EIM proposal in order to understand the EIM modeling methodologies);  EIM development; or  ratemaking.

What is the Energy Imbalance Market? The Energy Imbalance Market (EIM) is a proposed real-time centralized energy dispatch market. It uses an algorithm to determine the least-cost way to meet the energy needs with the available generation, given the physical constraints of the system. This algorithm is often referred to as “security-constrained economic dispatch.” The output of the EIM would be nodal price (Locational Imbalance Price (LIP)) and real-time dispatch signals every five minutes for all participating locations. Does the EIM run all the time or just when there is congestion? EIM runs continually and sends out real-time dispatch signals to move generators every five minutes regardless of whether there is congestion. WECC FAQ - DRAFT

What is the difference between Locational Marginal Price (LMP) and the LIP? Both the LMP and LIP are calculated at every load and generation node identified in the model. Both LMP and LIP are also calculated as marginal values, meaning that they represent the cost of the next MW of energy. The major difference between the LMP and LIP is that the LMP is settled on all energy, whereas the LIP is only settled on the difference between scheduled (including internal schedules) and actual energy. WECC FAQ - DRAFT

How are transmission losses modeled? Transmission losses will be modeled as marginal losses, as this is the standard methodology in production cost modeling. However this is not an indication of a decision on how losses would actually be handled in the market. The issue of how transmission losses would be handled in the market is in the parking lot of questions to be answered at a later date. WECC FAQ - DRAFT

How is Available Transfer Capability (ATC) calculated for the Energy Imbalance Market? The EIM does not use ATC, and transmission availability is based on the state estimator values for actual flows on the system. The ATC for other transactions can remain the same as today. The EIM transactions would have the lowest transmission service priority, so if there is an ATC reservation (firm or non-firm) for a bilateral schedule, it will never be bumped for an EIM transaction. Does the EDT force participants to adopt a flow-based methodology for ATC calculation? No, ATC calculations can remain the same as today for bilateral schedules. WECC FAQ - DRAFT

How is tagging done for the Energy Imbalance Market? Flows for the EIM would not be tagged. However, the EIM would send a value for EIM flows in the Net Scheduled Interchange to each BA so that the dispatch can be included in the ACE calculation. WECC FAQ - DRAFT

Will the EIM affect System Operating Limit (SOL) violations? The EIM will only use transmission that is available based on actual flows from the state estimator and should therefore not create any SOL violations. Furthermore, since the EIM automatically dispatches with consideration of SOLs, it may actually prevent many SOL violations. How does re-dispatch work and what is the algorithm behind re- dispatch? The algorithm is a “security-constrained economic dispatch,” which means that it determines the least-cost way to dispatch available generation to meet the energy needs of the system, while still maintaining physical limitations such as transmission availability, generator capacity, generator ramp rates, and other characteristics. If offers are available that can relieve congestion, they would be called upon in economic order. WECC FAQ - DRAFT

How would the EIM dispatch variable generation? For purposes of the cost-benefit analysis, variable generation will be assumed to dispatch down at a to- be-determined negative value representing the value of renewable energy credits and Production Tax Credits. Actual operation may vary both in terms of allowed operation and in how variable generation operators choose to respond to price signals. Actual allowed operation is a parking lot question. WECC FAQ - DRAFT

Does the EDT allow participants to have hourly schedules? Yes, bilateral schedules – both hourly and intra- hourly – are allowed. In real-time, generators have the choice of fulfilling those schedules themselves or offering to fulfill their obligation through the EIM. The sink for the bilateral schedules will not be financially impacted by the generator’s decision unless it is contractually arranged outside of the market. WECC FAQ - DRAFT

How do generator operators respond to price signals? Generator operators have the choice of whether to offer their dispatchable range into the market. Generator operators that offer generation into the market will also receive dispatch signals that automatically move them according to the price signals, while maintaining the offered capabilities. Generators that have not been offered into the market can also move to respond to price signals, but would be deviating from their dispatch so they may be penalized (penalties are to be determined). WECC FAQ - DRAFT

Is any BA/Transmission Service Provider (TSP) required to participate in the EDT? For the ECC, yes. The methodology for curtailment responsibility calculation is proposed to be incorporated into the Unscheduled Flow Mitigation Plan, which is mandatory by reference in NERC Reliability Standards. Work is already under way for the current curtailment calculator to become more readily available to all Registered Entities in WECC. For EIM, no. A BA/TSP can opt out of market participation. WECC FAQ - DRAFT

What does it mean for a BA/TSP to opt out? If a BA/TSP opts out, the generation and loads in that BA/TSP would not settle through the market. Bilateral arrangements would remain and imbalance would be settled through the transmission tariffs. However, it should be noted that even in non- participating BA/TSPs, excess capacity on transmission may still be impacted. WECC FAQ - DRAFT

Can a Generator that is in a participating BA/TSP opt out of the Market? No, but it can choose to not submit a supply offer. A Generator that does not submit a supply offer would still see a dispatch signal, but that signal would reflect either a submitted schedule or an echo of its current output, depending on how it was identified. Regardless of whether the Generator submitted an offer, it would have to settle in the market for any deviation from schedule. Can a Load that is in a participating BA/TSP opt out of the Market? No, but a load can bilaterally schedule to reduce exposure to the market. Regardless, it will have to settle in the market for any deviation from schedule. WECC FAQ - DRAFT

Can a Generator that is in a non-participating BA/TSP opt into the Energy Imbalance Market? This participation will not be considered in the cost-benefit analysis scenarios, but it may be allowed if the market is actually implemented. This is included in the parking lot. Can a Load that is in a participating BA/TSP opt into the Energy Imbalance Market? This participation will not be considered in the cost-benefit analysis scenarios, but it may be allowed if the market is actually implemented. This is included in the parking lot. WECC FAQ - DRAFT

Modeling Methodologies  Traditional reserves benefits are embedded in economic dispatch benefits.  Flexibility reserves logic pertaining to commitment and dispatch phases, including derivation logic for the $11- $13/MWH flexibility reserves benefit (Pmin, unit commitment curves, etc.).  NREL derivation of flexibility reserves:  Flex, spin, and supplemental flexibility reserves symmetry.

Flexibility Reserve Requirements EIM Analysis Work Group - July 5,

Benefits – Flexibility Reserves EIM Analysis Work Group - July 5,

Flexibility Reserve Requirements EIM Analysis Work Group - July 5,

Modeling Methodologies  Use of transmission tariff rates, losses, and bias for hurdle rates in the model (Marv, you might already have this in your materials).  Wind penetration used in the model.  BAs retain all obligations to meet load. BAs must continue to provide sufficient resources to meet load plus traditional reserves and reliability (regulation, ramping, etc.).

Benefits - Summary EIM Analysis Work Group - July 5,

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