October 29,

Organizational role of Short-Term Planning and Hydro Duty Scheduling Relationship to other groups in BPA Planning and analysis job functions Policy support The Role of Power Marketing at BPA Energy needed to meet FCRPS operational objectives The role of flexibility/uncertainty Flexibility and Uncertainty Definitions Growing importance Relationship between flexibility and uncertainty 2

Short-Term Planning is responsible for planning and implementing processes related to short-term planning of the FCRPS. Coordinates prudent operational plans and outages for the FCRPS with the Corps and Bureau Performs analysis which assesses flexibility for power marketing while meeting operational objectives from the current day through the end of the planning horizon Coordinates Non-Treaty Storage Agreement Operations Implements procedures required for the Pacific Northwest Coordination Agreement Develops procedures for providing balancing reserves for intermittent generation and transmission system limitations Provides FCRPS operational perspectives for policy decisions 3

Hydro Duty Scheduling is responsible for the 7x24 operation of the FCRPS. Sets the hourly hydraulic operation of the FCRPS to meet power and non-power use of the system including ESA requirements, flood control and reliability needs. Coordinate hourly FCRPS generation plan through Transmission Dispatch and spill plans with Corps and Bureau Dams. Performs analysis which assesses flexibility for power marketing while meeting operational objectives for the current day Ensures that sufficient capacity is set aside to provide balancing reserves for intermittent generation and contingency reserves for forced outages Implements the Slice power sales contract Provides FCRPS operational perspectives for policy decisions 4

In order to meet the hydraulic objectives of the FCRPS, energy is bought and sold Long Term: 20-year contracts Some are simple and predictable (flat, load-following) Some are very complex and uncertain (Slice) Mid Term: within the fiscal year Term markets generally transact in monthly HLH/LLH blocks Critical tool for managing uncertainty in volume forecasts Short-Term within the month Balance of month Day-Ahead market – generally in HLH/LLH blocks, but California ISO market allows for hourly bids Real Time market – hourly, but sub-hourly markets are evolving Critical tool for managing uncertainty in loads and streamflows 5

Hydro power has a significant role in integrating wind resources into the region Hydro power is a dispatchable, low cost, CO2-free resource used to “balance” load and the intermittent output of wind resources in real-time Flexibility set aside to manage within hour variation in load and variable generation is called “Balancing Reserves” Regulation: responds instantly Following: meets within-hour trends Imbalance: responds to schedule error (largest component) Balancing Reserves are set aside to either increase or decrease FCRPS generation Incremental (INC) reserves: capacity that is reserved for when wind generation falls below the schedule or load increases within an hour Decremental (DEC) reserves: generation above minimum that is reserved for when wind generation is above the schedule or load drops within an hour Currently, the FCRPS is providing 900 MW of INC reserves and 900 MW of DEC reserves Aggregating balancing reserve needs of the wind fleet along with load in the balancing authority is critical in keeping the reserve amounts as low as possible

With about 120 generating units that range in size from 40 MW to 825 MW on the six main projects where reserves are carried, the FCRPS can provide a significant amount of Balancing Reserves Units can ramp very quickly – over 1000 MW up or down within an hour However, there are times when there is limited within hour flexibility due to the need to meet “High Priority” objectives which may result in reserves being reduced or implementing the Overgeneration Management Protocol Deployment of balancing reserves that results in energy storage or use of energy over time may limited the amount of FCRPS flexibility available to provide reserves. Impacts to the FCRPS include efficiency losses, unit cycling losses, spill and energy shift from peak load hours to light load hours Costs incurred as a result of these impacts are recovered by rates paid for by the generator owners and Preference Power Customers based on cost causation The allocation of cost is driven by how the inherent uncertainty in the individual balancing needs of load and generation affects the aggregated balancing signal Intent is for Preference Power Customers to incur costs only related balancing loads and not to incur costs related to integrating resources owned by other parties

The ability of resources to respond to changing conditions  Load  Fuel supply (i.e. streamflow)  Resource availability  Balancing reserves  Hydro “balances” variable generation More than just “capacity” 8

Why is Flexibility Important? Growing need for the integration of variable resources: Reliability Potential to share flexibility between areas Meet FCRPS operational objectives Federal hydro at limit New challenges on the horizon New wind and solar will change CAISO net load shape (load minus wind & solar) 9

BPA Uncertainty and Flexibility Uncertainty Loads: 20 year contracts for power customers; Slice Market Depth: Economic cycles result in periods where there is very thin reserve margin in the market = little ability to absorb mistakes New Resources additions: Expect more variable resources which will require additional regulation and imbalance FCRPS Operations: New BiOp requirements may reduce FCRPS flexibility Non-Federal reservoir operations: Canada (new Treaty?) Streamflows: Long term impact of climate change? Flexibility It is likely that more operational constraints will exist in the future Aging system = more extended forced outages are possible New flexible resources New market constructs may provide greater access to flexibility (NWPP MC Initiatives) The Balance It is possible that future will have more uncertainty with less flexibility New sources of flexibility will be needed that can manage uncertainty 10

Planning and Operations Importance of non-power objectives Multi-Agency coordination with Corps, Bureau and NOAA Complex analytical problem The Role of Power Marketing at BPA BPA needs to buy/sell energy to meet FCRPS operational objectives Mid-term and short-term energy markets are critical tools in managing uncertainty Assessment of uncertainty and flexibility is critical in planning and marketing at BPA Flexibility and Uncertainty Flexibility is needed to deal with uncertainty & variability Demand for flexibility is growing Flexibility of the FCRPS is limited with a risk that it could be decreasing 11