Proposal For Tie Line Benefits Bijoy Chatt October, 2009 PSPC

Proposal For Tie Line Benefits Bijoy Chatt October, 2009 PSPC Meeting 1

Discussion Points Rationale for “As Is” Condition Proposal for a “Compromise” Position 2

Over 17,000 MW of Excess Resources from Hydro Quebec (HQ) and Maritime (MT) combined during summer Both HQ and MT are winter peaking load areas, New England is a summer peaking load area Summer Peak Load Vs. Capacity MT Summer Peak Load Vs. Capacity HQ 10,000 50,000 8,000 Over 15,000 MW Excess 30,000 MW MW 40,000 20,000 10,000 6,000 Over 2,000 MW Excess 4,000 2,000 0 2008 2010 2012 2014 2016 2018 Year Derated Resources Summer Peak Load 2020 0 2008 2010 2012 2014 2016 2018 2020 Year Derated Resource Summer Peak Load References: Resources- Hydro-Quebec Strategic Plan 2006-2008, Adjusted Version September 15, 2006 Load Forecasting- 2008 Quebec Area Comprehensive Review of Resource Adequacy (www.npcc.org/documents/reviews/Resource.aspx) Load Forecasting, 2007 NPCC Maritime Area Comprehensive Review of Resource Adequacy (www.npcc.org/documents/reviews/Resource.aspx) 3

Hydro Quebec’s Firm Sales to Neighboring Control Areas is only about 1,000 MW, leaving vast summer resources for assisting others Firm Sales of Hydro Quebec 1200 1000 MW 800 600 400 200 0 2008 2009 2010 2011 2012 New England 329 329 329 329 268 Quebec-Industrial 356 356 356 356 356 Maritimes 220 0 0 0 0 Ontario 154 154 154 154 154 Year Ontario Maritimes Quebec-Industrial New England Reference: Table A.2- 2008 Quebec Area Comprehensive Review of Resource Adequacy (www.npcc.org/documents/reviews/Resource.aspx) 4

Huge gap in Tie-line benefit between At Criteria and As Is resulting in significant increase in ICR 4,000 Tie-Line Benefit (MW) 3,500 3,000 2,500 1,890 MW Gap 2,000 3rd ARA Value 1,500 1,000 500 0 At Criteria As Is 5

Cost to Customer Continues to Increase with the Increase in ICR Cost to Customer (Million Dollars/ year) Procuring additional 1,890 MW of ICR will cost 56.7 M to 102M 120 100 80 60 40 20 0 200 700 1200 1700 2200 Additional ICR (MW) 4.5/kW month 3.0/kW month 2.5/kW month 6

Rationale for “As Is” Over 17,000 MW of excess capacity available from HQ and Maritime HQ and MT are winter peaking load areas, and New England is summer peaking load area NPCC requires that Neighboring Control Areas will provide support during emergency conditions Lower ICR value results in lower customer cost. 7

A Compromise Proposal

The compromise methodology would limit the remaining reserve to be no less than required operating reserve Calculate the Tie-line benefit using “As Is” assumption using Probabilistic Model to maintain LOLE of 0.1 Calculate Remaining Reserve by considering only Net ICR (by subtracting Tieline benefit, OP4 relief and HQICC) Compare Remaining Reserve to Operating Reserve If Remaining Reserve exceeds Operating Reserve, ICR is as calculated. If Remaining Reserve is less than Operating Reserve, ICR is increased by subtracting the difference in Remaining Reserve and Operating Reserve from the calculated tie benefits. 9

ISO is concerned that there is insufficient capacity to cover operating reserve and an allowance for forced outage when using “As Is” assumption. Example using 3rd ARA values Assumed/Qualified Installed Generation DR 5% Voltage Relief Tie line benefit 27,325 MW 2,050 MW 651 MW 3,415 MW ICR 40,000 1,215 MW Remaining Reserve (4.3%) 30,000 20,000 15,000 10,000 28,160 MW 25,000 28,160 MW M W V a lu es 35,000 5,000 0 Total Capacity (assumed) Peak Load (50/50) Net ICR Remaining Reserve at peak is calculated after deducting Tie-benefit, OP4 relief and HQICC from ICR 10

Limiting the tie-line benefits will ensure Remaining Reserve margin is adequate 4,000 Subtracted Reserve Amount: 785 MW 3,500 Added Reserve Amount: 785 MW 2,500 2,000 Remaining Reserve Operating Reserve 2,630 MW 0 2,630 MW 500 1,215 MW 1,000 3,415 MW 1,500 1,215 MW MW V alues 3,000 "As Is" Tie-benef it Compromise Tiebenef it 11

Rationale for the Compromise Proposal Limits the reliance on tie-benefit to 60% of available transfer capability Ensures the operating reserve coverage without relying on tie-benefit and Op4 relief Forced outage is already covered in probabilistic model A significant saving to customers- 60M per year on capacity payment. 12

Q &A