Interchange Authority Recommendations Board of Directors Meeting December 7, 2007

Interchange Authority (IA) Entity Registration Will Be Required Soon IA Performs Functions for Many Functional Entities

Creation of Functional Entities In 1990s, NERC Unbundled Control Area Functions Primary Drivers: Changing Operating Configurations: ISOs Control Area Advantages over Merchant Plants for Sourcing and Sinking and Schedule Balancing Costs Identify Operating Tasks and Assign Them To Entities

NERC Reliability Functional Model Function Definitions and Responsible Entities - Version 3 NERC Standards List Functional Entities in Applicability Standards Functional Entities = Registered Entities Registered Entities Become Sanctionable for Non-Compliance

Function - Interchange Definition: Ensures communication of interchange transactions for reliability evaluation purposes and coordinates implementation of valid and balanced interchange schedules between Balancing Authority Areas.

Interchange Tasks Coordinate (i.e., collect, consolidate, and disseminate) interchange approvals, changes, and denials. Receive confirmations of Balancing Authorities for requested interchange schedules. Consolidate evaluations of valid, balanced, interchange schedules (validation of sources and sinks, transmission arrangements, reliability-related services, etc.).

Interchange Tasks Communicate interchange transaction approval for implementation. Communicate interchange transaction information to Reliability Assessment Systems (e.g., the interchange distribution calculator in the Eastern Interconnection). Maintain record of individual interchange schedules.

Interaction with Other Entities – Ahead of Time Receives requests from PSE to implement interchange transactions. Receives confirmation from Transmission Service Providers of transmission arrangement(s). Receives confirmation from Balancing Authorities of the ability to meet ramping requirements for submitted interchange transactions.

Interaction with Other Entities – Ahead of Time Submits all interchange transaction requests to the Reliability Coordinators, Balancing Authorities, and Transmission Service Providers for approvals. Communicates final approval or denial of Interchange transactions to the Balancing Authorities, Transmission Service Providers, Reliability Coordinators, and Purchase Selling Entities for implementation.

Interaction with Other Entities – Ahead of Time Receives curtailments and redispatch implementation from Reliability Coordinators. Receives information on interchange schedule interruptions from the Balancing Authorities and communicates the interchange schedule status to Balancing Authorities, Transmission Service Providers, Reliability Coordinators, and Purchase-Selling Entities.

Interaction with Other Entities – Ahead of Time Informs Transmission Service Providers, Purchasing-Selling Entities, Reliability Coordinators, and Balancing Authorities of interchange schedule curtailments. Receives reliability alerts from Reliability Coordinators.

Interaction with Other Entities – After the hour Maintains and provides records of individual interchange transactions for the Balancing Authorities. Confirms interchange schedules with Balancing Authorities after the hour for checkout.

INT R1.1. When a Balancing Authority or Reliability Coordinator initiates a Curtailment to Confirmed or Implemented Interchange for reliability, the Interchange Authority shall distribute the Arranged Interchange information for reliability assessment only to the Source Balancing Authority and the Sink Balancing Authority.

INT R1. The Interchange Authority shall verify that Arranged Interchange is balanced and valid prior to transitioning Arranged Interchange to Confirmed Interchange by verifying the following: R1.1. Source Balancing Authority megawatts equal sink Balancing Authority megawatts (adjusted for losses, if appropriate).

INT R1.2. All reliability entities involved in the Arranged Interchange are currently in the NERC registry. R1.3. The following are defined: R Generation source and load sink. R Megawatt profile. R Ramp start and stop times. R Interchange duration. R1.4. Each Balancing Authority and Transmission Service Provider that received the Arranged Interchange information from the Interchange Authority for reliability assessment has provided approval.

INT R1. Prior to the expiration of the time period defined in the Timing Table, Column C, the Interchange Authority shall distribute to all Balancing Authorities (including Balancing Authorities on both sides of a direct current tie), Transmission Service Providers and Purchasing- Selling Entities involved in the Arranged Interchange whether or not the Arranged Interchange has transitioned to a Confirmed Interchange. R1.1. For Confirmed Interchange, the Interchange Authority shall also communicate: R Start and stop times, ramps, and megawatt profile to Balancing Authorities. R Necessary Interchange information to NERC-identified reliability analysis services.

ISAS IA Analysis 4 Options Were Investigated to Perform IA Function: Balancing Authorities (BA) Reliability Coordinators (RC) Western Electricity Coordinating Council (WECC) Establish a new INT Standard that would require each Balancing Authority to verify that it has arranged for an Interchange Authority.

ISAS Recommendations The WECC is currently the administrator for the WIT contract. The WIT currently performs all functions required by the IA function. This makes the WECC the logical IA entity. With the WECC acting as the IA, any sanctions levied for non-compliance with NERC Standards would be borne by the Load Serving Entities within the Western Interconnection via the WECCs statutory budget process.

ISAS Recommendations However, NERC Standards are only applicable to users, owners, and operators of the Bulk Electric System (BES). WECC is not currently considered as one of these entities. This would appear to make the WECC ineligible to be the Western Interconnections IA. The ISAS recommends that the WECC Operating Committee and WECC Staff begin a dialog with NERC Staff to determine how this issue can be resolved.