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Explanation of Changesto Draft “Firming” Schedule,

Service Schedule E

Contact:Arnie PodgorskyMike Thompson

Wright & Talisman PC202-393-1200

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The Proposed Schedule - general  Product: intra-hour capacity and energy, on

either scheduled or dynamic basis, as/when feasible under applicable NERC etc. criteria.

Purchaser may be intermittent generator, BA, or other market participant capable of deploying intra-hour capacity/energy.

Price may have capacity (demand) and energy components

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August Revisions to Proposed Schedule E

To better relate nature of product, this draft renames it “Intra-Hour Supplemental Power.”

Name remains subject to discussion/other suggestions. Scheduled and dynamic service options are retained.

Section E-2 – Terms of Serviceo Terms are generally the same as in initial draft, but this version

includes some terminology changes and some reorganization to create more logical flow and to clarify certain terms in accordance with Subcommittee comments:

o Terminology is changed to refer to rate of flow of energy, per Subcommittee comments.

o Section E-2.1 describes Scheduled and Dynamic service options.o Section E-2.2 places on Purchaser all risk (as between Seller and

Purchaser) of availability of transmission as needed to utilize Intra-Hour Supplemental Power.

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August Revisions to Proposed Schedule E (cont’d)

о Section E-2.3 provides Purchaser an option to return energy to Seller within 168 hours.

о Issues to be considered:о How to define when return period starts, e.g., separate return period

for each hour Purchaser takes energy? Must energy taken in on-peak hours be returned in on-peak hours? If not, must return larger quantity?

о Whether/how to adjust billing and payment to reflect possibility that energy could be returned in the month following month of delivery to Purchaser?

о Section E-2.4 states that each Party warrants to the other that its communications and control systems are capable of executing instructions for dispatch, delivery and receipt of Intra-Hour Supplemental Power in accordance with Service Schedule E and in conformance with applicable RRO and/or BA communications protocols.

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August Revisions to Proposed Schedule E (cont’d) Section E-2.5 – Pricing о Provisions are substantively unchanged, but are reorganized to

reflect Subcommittee comments, including clarification of when and to whom FERC-imposed price caps apply. Generally applicable energy charge term (E-2.5.2) now incorporates

peak/off-peak pricing per Subcommittee’s discussion, subject to Parties’ ability to apply a different pricing scheme in Confirmation.

The new terms “On-Peak” and “Off-Peak” are NERC-defined terms. Confirmations will have to identify applicable price indices or other

means of establishing hourly and peak/off-peak prices. Section E-2.5.3 describes the elements of monthly charges for Intra-

Hour Supplemental Power and states that Purchaser shall pay capacity charge and any applicable transmission charge except to the extent excused in event of Seller non-performance (in which case damages will be owed under Section E-3, discussed later).

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August Revisions to Proposed Schedule E (cont’d) Section E-2.5 – Pricing (cont’d)о Section E-2.5.3.3 now provides that monthly energy charge will be

determined by value of energy delivered by Seller netted against value of any energy returned by Purchaser.

о Consider issue noted above concerning potentially adjusting billing and payment to reflect possibility that energy could be returned in the month following month of delivery to Purchaser.

о FERC Price caps are incorporated in Section E-2.5.4; substance is the same as in draft Service Schedule D (and other WSPP Service Schedules), but language is revised to try to make clearer, per Subcommittee comments, when and to whom the price caps will apply.

о Note revised language here is the same as in the August draft of Service Schedule D.

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August Revisions to Proposed Schedule E (cont’d)

 Section E-3 - Damages o Damages provisions are modified from the previous draft to reflect

Subcommittee’s direction to develop objective damages measures while avoiding penalties.

o Section E-3.2 provides prefatory legal language stating that damages calculated in accordance with the service schedule are not a penalty.

o Section E-3.3 provides that damages imposed under the service schedule will not exceed three times the agreed monthly capacity charge.

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August Revisions to Proposed Schedule E (cont’d) Section E-3 - Damages (cont’d)

o Section E-3.4 provides that damages for Seller’s non-performance will be a pro rata share of the capacity charge and any transmission reservation charge based on duration of non-performance, plus the smallest of the following three alternative amounts (but not less than zero):o The quantity of energy Seller failed to deliver multiplied by an

Hourly Index Price (which is yet to be determined/defined), ORo Replacement Price less Contract Price, plus any net increase in

transmission charges incurred to acquire replacement energy, OR

o Quantity Seller failed to deliver multiplied by 120% of Parties’ agreed energy charge.

o In addition, Seller will be liable to Purchaser for any NERC or other penalties or fines imposed on Purchaser to the extent such amounts are attributable to Seller’s failure to perform.o Consider whether this is appropriate for this service/product?

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August Revisions to Proposed Schedule E (cont’d)

о Previous draft’s Section 3.3, stating Parties’ mutual duty to use commercially reasonable efforts to mitigate damages is removed because it is redundant of WSPP Agreement Section 21.3(c).

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