© 2001 Utility Management Consulting, Inc. All Rights Reserved Distributed Resources Interconnection Policies: A Report to EEI Members Presentation of Proposal Edison Electric Institute DG Task Force Milwaukee, Wisconsin 20 June 2001

© 2001 Utility Management Consulting, Inc. All Rights Reserved Introduction and agenda –Introduction to UMC and its affiliates Key people and experience basis –Problem statement Excerpts - DRAFT EEI Policy on Distributed Resources –Scope definition and limitations –Objective and approach –Transmission Organizations Sorting and Filtering Pro forma deliverable –Discussion

© 2001 Utility Management Consulting, Inc. All Rights Reserved Introduction to UMC and its affiliates UMC is the strategic and operational consulting affiliate of: –Bailey, Calhoun & Associates Engineering and Design –Primary Power Corporation Construction and Maintenance Management All three companies are active in the utility as well as large energy user marketplaces

© 2001 Utility Management Consulting, Inc. All Rights Reserved Introduction to UMC and its affiliates Key People –Principals Mark Brozina Robert J. Bailey Barry A. Bailey, P.E. –Executive Consultants John R. Redmon Jack Urban plus many others with extensive industry experience

© 2001 Utility Management Consulting, Inc. All Rights Reserved Introduction to UMC and its affiliates Experience basis –UMC Principals and Executive Consultants have over 100 years’ cumulative experience in: Utility operations End-user power distribution systems Design, installation and operation of over 10,000 kW of dispersed generation –UMC: is the interconnection consultant for the merchant affiliate of an EEI member utility has supported interconnection and infrastructure for two other developers in PJM

© 2001 Utility Management Consulting, Inc. All Rights Reserved Problem statement –Interconnection standards vary from state to state, region to region and control area to control area –Standards are evolving at all levels, and are becoming an issue of concern for EEI members –Distributed resources have been identified as a potential alternative to T&D system reinforcements, as well as a capacity resource in constrained markets

© 2001 Utility Management Consulting, Inc. All Rights Reserved Problem statement Excerpts - DRAFT EEI Policy on Distributed Resources –Regulations should be neutral, neither discouraging nor encouraging D/R –State policies should provide comparable, non-discriminatory treatment of all market participants including utility distribution companies not set upper or lower limits on size of D/R when governing installation requirements –Policymakers should encourage interconnection standards that provide for safety of public and utility employees protection of current levels of reliability and cost distribution facilities upgrade cost recovery

© 2001 Utility Management Consulting, Inc. All Rights Reserved Scope definition and limitation There are three major aspects to distributed resource interconnection: Physical interconnection Communication interface Market interface In addition, there are three major issues associated with distributed resource interconnection: Technical issues Process issues Form-of-contract issues The scope of UMC’s proposal to EEI is presently limited to the electrical interconnection issues at the transmission-organization level

© 2001 Utility Management Consulting, Inc. All Rights Reserved Objective and approach Objective –Provide a baseline report on distributed resources (D/R) policies of evolving transmission organizations (RTOs, ISOs and ITCs) in the U.S. Approach –Transmission Organizations Sorting and filtering –Base Case Restructured states only –Option The entire “lower 48”

© 2001 Utility Management Consulting, Inc. All Rights Reserved Transmission organizations - Sorting EASTERN INTERCONNECTION TEXAS WESTERN INTERCONNECTION

© 2001 Utility Management Consulting, Inc. All Rights Reserved Transmission Organizations - Sorting Source: NERC

© 2001 Utility Management Consulting, Inc. All Rights Reserved Transmission Organizations - Filtering Restructured States Source: EIA

© 2001 Utility Management Consulting, Inc. All Rights Reserved Transmission Organizations –Identify markets that are under stress (e.g. California, New York, etc.) –Identify transmission organizations with D/R policies and/or pilot programs Tabulate performance in terms of results –Identify transmission organizations with interconnection standards Real costs to connect Permitting issues Protection requirements IEEE P1547 standard –Summarize in report to EEI members

© 2001 Utility Management Consulting, Inc. All Rights Reserved Pro forma deliverable Report –Consider one possible presentation format Introduction Tabular summary Trends and recent developments Highlights for current period of report (e.g. 2Q01) Individual write-ups by transmission organization This format is similar to that for the EEI Municipalization report

© 2001 Utility Management Consulting, Inc. All Rights Reserved Pro forma deliverable

© 2001 Utility Management Consulting, Inc. All Rights Reserved Transmission Organizations Scope limitation –UMC scope as proposed does not include: Market interfaces Communications interfaces Process standardization Form of contract standardization As part of today’s discussion, UMC’s scope can be expanded to include any of the above

© 2001 Utility Management Consulting, Inc. All Rights Reserved Deliverables and Discussion –Deliverables Report in format similar to EEI Municipalization Report –Discussion Is the scope adequate? Is the IEEE 1547 standard appropriate as a reference? Should there be periodic updates, and how often? Other questions and concerns