1. California ISO – Internal Use Only Flexible Capacity Requirement CPUC RA Workshop March 30, 2012 Mark Rothleder Executive Director Market Analysis and Development

2. California ISO – Internal Use Only What is a flexible resource? The degree of flexibility each resource has is determined by: How fast the resource can ramp up or down; How long the resource can sustain an upward or downward ramp; How quickly the resource can change its ramp direction; How far the resource can reduce output and not encounter emission limitations; How quickly the resource can start; and How frequently the resource can be cycled on and off Slide 2

3. California ISO – Internal Use Only Flexible capacity must support ISO operational needs and align with existing market structures. Three Categories of Flexible Capacity: ► Maximum continuous ramping –The megawatt amount and duration by which the net load (load minus wind and solar) is expected to change continuously in a given direction within a month ► Load Following (≤ 60 minutes) –The maximum megawatts the net load is expected to change in a given hour of a given month ► Regulation (≤ 5 minutes) –The maximum megawatts the net load is expected to change between intra 5-minute dispatch intervals Slide 3

4. California ISO – Internal Use Only How maximum continuous ramping is determined. For 2011, the maximum continuous upward-load ramp occurred in August and reached 18,181 megawatts over approximately 11 hours (ramp rate of 27 MW/min)

5. California ISO – Internal Use Only For resources that have a startup time ≥ longest ramp duration: min((NQC-Pmin), ramp duration*RRavg) For resources that have a startup time < longest ramp duration: min(Pmin + (longest ramp duration-SUT)*RRavg, NQC) Where: SUT is the start-up time; and RRavg is the weighted average ramp-rate, where the MW/min weighting is based on a resources ramp-rate segments. How maximum continuous ramping is calculated.

6. California ISO – Internal Use Only Maximum continuous Load Ramps- 2006, 2010 & 2011 Slide 6

7. California ISO – Internal Use Only Max continuous load ramp rates- 2006, 2010 & 2011 Slide 7

8. California ISO – Internal Use Only For resources that have a startup time ≥ 60-minutes: min((NQC-Pmin), 60-minutes * RRavg) For resources that have a startup time < 60-minutes: min(Pmin + (60-SUT)*RRavg, NQC) Where: SUT is the start-up time; and RRavg is the weighted average ramp-rate, where the MW/min weighting is based on a resources ramp-rate segments. How load following is determined.

9. California ISO – Internal Use Only Max 1-hour change comparison- 2006, 2010 & 2011 Slide 9

10. California ISO – Internal Use Only 5-minute ramp comparison- 2006, 2010 & 2011 Slide 10

11. California ISO – Internal Use Only 2011 flexible RA resource ramping capability Slide 11

12. California ISO – Internal Use Only Summary of flexible capacity needs based on 2011 1-minute net load data. Slide 12

13. California ISO – Internal Use Only Flexible Capacity Requirement CPUC RA Workshop March 30, 2012 John Goodin Regulatory Policy Lead Market and Infrastructure Policy

14. California ISO – Internal Use Only Path Forward: 2013 RA Compliance Year No express flexible capacity requirement in 2013; Agreement on the three flexible capacity categories and the calculation methodology; 12-month RA showing to assess procurement relative to flexible capacity categories; Risk of retirement backstop procurement authority (CAISO stakeholder process); and Support for a new RA proceeding (or track) to establish a flexible capacity requirement in 2014 and advance discussion on multi-year RA procurement. Page 14

15. California ISO – Internal Use Only Path Forward: 2014 Compliance Year CPUC RA flexible capacity requirement established against the three flexible capacity categories; CAISO flexible capacity backstop procurement authority (CAISO stakeholder process); and Advance discussion on multi-year RA. Page 15