Briefing on 2017 CAISO Policy Initiatives Roadmap Presentation to WECC Market Interface Committee March 22, 2017 Jim Price, Senior Advisor, Market & Integration Studies, CAISO

Stakeholder Initiatives Roadmap process includes stakeholder participation ISO receives potential initiatives through stakeholder input, among other sources (ISO analysis, FERC decisions, etc.) Stakeholder web conferences 11/3/2016 & 12/22/2016 Stakeholder Initiatives Catalog process updates descriptions, categorization and status of all identified policy initiatives Revised draft catalog published 11/4/2016 Policy Initiatives Roadmap ranks discretionary initiatives Briefing to EIM Governing Body 2/1/2017 & ISO Board of Governors 2/16/2017 Final documents (posted 3/6/2017) available: www.caiso.com/informed/Pages/StakeholderProcesses/StakeholderInitiativesCatalogProcess.aspx

Discretionary initiatives are ranked using a high level cost/benefit analysis Criteria High (10) Medium (7) Low (3) None (0) Benefit Grid Reliability Significant improvement Moderate improvement Minimal improvement No improvement Improving Overall Market Efficiency Desired by Stakeholders Universally desired by stakeholders Desired by majority of stakeholders Desired by a small subset of stakeholders No apparent desire Feasibility Market Participant Implementation Impact ($ and resources) No impact Minimal impact Moderate impact Significant impact ISO Implementation Impact ($ and resources)

Ranking results prioritize the top discretionary initiatives Grid reliability Improving overall market efficiency Desired by stakeholders Market participant implementation impact ISO implementation impact Total score Real-time market enhancement 7 3 31 Management of EIM imbalance settlement for bilateral schedule changes Risk-of-retirement process enhancement 10 29 CRR auction efficiency 28 Donation by third party for transmission capacity available for EIM transfers 27 EIM wheeling charge (narrow issue) 23

2017 Policy Initiative Roadmap shows ongoing, non-discretionary, and 6 discretionary initiatives (and some in initiative analysis phase)

Policy Initiatives Roadmap and Stakeholder Initiatives Catalog provide details of potential enhancements Real-time market enhancement: Enable 5-minute dispatch to perform functions of 15-minute unit commitment, ancillary services procurement, local market power mitigation, and shorten lead time for intertie scheduling Management of EIM imbalance settlement for bilateral schedule changes: Following Oct. 2016 FERC technical conference on EIM intertie bidding, use wheel-through function to manage bilateral schedule changes, with bid price for schedule change Risk-of-retirement process enhancement: Extend current “risk-of-retirement” backstop procurement beyond single year to keep capacity in operation for future reliability CRR auction efficiency: Address persistent shortfall of CRR auction revenue relative to payments to CRR purchasers, potentially by replacing auction with market for sale of CRRs Donation by third party for transmission capacity available for EIM transfers: Extend allocation of congestion revenue among EIM entities to compensate third parties who would make transmission available to support EIM transfers EIM wheeling charge: Address narrow issue of compensation for wheels between BAAs within EIM footprint