SPP-MISO M2M First Year Review. March 8, 2016

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1 SPP-MISO M2M First Year Review March 8, 2016

2 OBSERVATIONS AND M2M STATISTICS

3 Initial Observations Market-to-Market coordination has generally worked well and as designed on flowgates in which both SPP and MISO have sufficient generation available for redispatch Alternative M2M procedures are necessary to ensure effective coordination on some flowgates Communication processes between SPP and MISO staff have proven to be very effective Weekly After-the-Fact (ATF) calls ensure all M2M events are settled according to the SPP-MISO JOA. Settlement processes are working pretty well in most cases, but improvement is needed and is in progress

4 M2M Statistics SPP and MISO began market-to-market (M2M) coordination on March 1, 2015 in accordance with Attachment 2 of the SPP-MISO Joint Operating Agreement During the first year, there were 1,075 M2M events, (732 with non-zero settlements), on 294 days (As of 2/15/15) For the most part, M2M is achieving price convergence at the seams. (See tables on next slide)

5 M2M Statistics When SPP is the MRTO: When MISO is the MRTO: VRL SPP (%) AVG SP ($) MISO (%) AVG SP ($) VRL SPP (%) AVG SP ($) MISO (%) AVG SP ($)

6 M2M Statistics $1.2M in settlement adjustments have been made after the S7. Month S7 S14 S55 S105 TOTAL March 2015 $4,127,346 $179,972 $30,013 $0 $4,337,331 April 2015 $1,298,451 $493,109 $81,331 $0 $1,872,891 May 2015 $1,651,922 -$7,101 $99,490 -$99,490 $1,644,821 June $253,548 $0 $0 $0 -$253,548 July 2015 $56,516 $0 $0 $0 $56,516 August $110,028 -$106,640 $0 $0 -$216,667 September 2015 $408,283 -$29,955 $0 $0 $378,328 October $637,756 $601,264 $162,558 $16,531 $142,596 November $787,787 -$113,698 $0 $0 -$901,485 December 2015 $803,698 -$121,355 $90,715 $0 $773,059 January 2016 $1,423,155 $7,972 $0 $0 $1,431,127 February 2016 $265,586 $2 $0 $0 $265,588 Net Total $8,245,839 $903,570 $464,107 -$82,959 $9,530,556 Note: Positive values are payments to SPP from MISO; negative values are payments from SPP to MISO

7 M2M Statistics Reasons for Adjustments: Delayed or missing data exchanges Corrected MF values Corrected FFE values Corrected SP values OATI allocation errors Software issues Human error

8 MARKET-TO-MARKET SETTLEMENTS

9 $5,000,000 M2M Settlements: The 1 st Year M2M Settlements 3/1/15-2/16/16 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 -$1,000,000 -$2,000,000 March April May June July August September October November December January February SPP to MISO -$208,703 -$142,279 -$163,870 -$454,253 -$984,570 -$489,375 -$127,761 -$897,386 -$1,575,946 -$250,691 -$37,939 -$42,806 MISO to SPP $4,546,034 $2,015,170 $1,808,691 $200,705 $1,041,086 $272,707 $506,089 $1,039,982 $674,461 $1,023,750 $1,469,066 $308,394 NET $4,337,331 $1,872,891 $1,644,821 -$253,548 $56,516 -$216,667 $378,328 $142,596 -$901,485 $773,059 $1,431,127 $265,588 SPP to MISO MISO to SPP NET Note: Positive values are payments to SPP from MISO; negative values are payments from SPP to MISO

10 M2M Settlements by FG Type M2M Settlements 3/1/15-2/16/16 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 -$1,000,000 -$2,000,000 March April May June July August September October November December January February Perms $4,425,809 $973,915 $1,640,598 -$386,881 -$866,601 -$259,975 $300,970 $158,450 $466,127 $735,043 $810,889 $280,850 Temps -$88,478 $898,975 $4,223 $133,333 $923,117 $43,308 $77,358 -$15,854 -$1,367,612 $38,016 $620,237 -$15,262 Temps Perms Note: Positive values are payments to SPP from MISO; negative values are payments from SPP to MISO

11 Top 10 FGs Payment to SPP FG FG Name Description Control Zone TOTAL SWPP_5501 CBLS56ROLMAD CBLUFFS - SUB kv ftlo ROLLHILS - MADNCO 345 kv MEC, OPPD $3,273, MISO_1967 ANOPLHANOMAB Arkansas_PleasantHills500kv_ftlo_Arkansas_Mabelvale500kv EAI $2,323, SWPP_6126 SUBTEKFTCRAU S1226-Tekamah 161kV flo S3451-Raun 345kV MEC, OPPD $1,220, SWPP_20835 TMP122_20835 COOPER - ST_JOE 345 kv ftlo COOPER - FAIRPORT 345 kv MPS,NPPD $1,128, SWPP_21012 TEMP03_21012 TEMP03 Fort Smith 500/161 kv XFR (flo) Fort Smith 500/345 kv XFR OKGE $795, MISO_6723 3VI3TR7SA7EL Vienna_Trusel_Crossing_115_flo_El_Dorado_500_345_AT2_ElDorado_ Srp EAI, SPA $768, SWPP_5228 IATSTRSTJHAW Iatan-Stranger 345 kv (flo) Hawthorne-Nashua 345 kv KCPL, WR $671, SWPP_21076 TEMP10_21076 FTSMTH 500/161 kv ftlo LYDIA - VALLIANT 345 kv OKGE $622, SWPP_6009 COOPER_S COOPER - FAIRPORT 345 kv AECI, MPS, NPPD, OPPD $406, MISO_6011 MRLGLEMAYPLS Morrilton_East_Gleason_161_kv_flo_Pleasant_Hills_Mayflower_500kv EAI $397, NET TOTAL $11,608, Note: Positive values are payments to SPP from MISO; negative values are payments from SPP to MISO

12 Top 10 FGs Payment to SPP $3,500, SWPP_5501 Top 10 FGs - Payment to SPP $3,000, $2,500, MISO_1967 $2,000, $1,500, SWPP_6126 SWPP_20835 $1,000, SWPP_21012 MISO_6723 SWPP_5228 SWPP_21076 $500, SWPP_6009 MISO_6011 $0.00 TOTAL Note: Positive values are payments to SPP from MISO; negative values are payments from SPP to MISO

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14 Top 10 FGs Payment to MISO FG FG Name Description Control Zone TOTAL MISO_21262 TEMP13_21262 MCHENRY_230_115_TR_FLO_LELANDOLDS_LOGAN GRE -$1,230, MISO_6542 TUBDOBBENGRI TubularDobbin_138_ftlo_GrimesBentwater_138 EES -$913, MISO_21218 TEMP23_21218 Eau_Claire_Arpin_345kV_flo_Stone_Lake_Gardner_Park_345kV ALTE/NSP -$534, MISO_6546 TUBDOBGRIHUN Tubular - Dobbin 138kV flo Grimes-Wyntex-Huntsville 138kV EES -$193, SWPP_21263 TMP144_21263 TMP144: Charlie Creek - Rough Rider 115 kv (ftlo) Charlie Creek - Watford City 230 kv WAUE -$185, MISO_6012 PRI_NRH PR_ISLD - NROCH 345 kv NSP/SMP -$148, MISO_6323 CHEHSVARKFTS Cheetah_HotSprings_115kV_FLO_ANO_FtSmith500kV EAI, MISO -$135, MISO_20734 TMP165_20734 RINGOL 138/115 kv ftlo LONGWOO - SAREPT 345 kv EES -$126, MISO_20983 TMP129_20983 Taylor_Springhill_115kV_flo_Eldorado_500_345_AT2 EES -$125, MISO_6317 3VI3TR7SA7EL Vienna_Trusel_Crossing_115_flo_El_Dorado_500_345_AT2_ElDordo_Srp EES, LAGN -$125, NET TOTAL -$3,719, Note: Positive values are payments to SPP from MISO; negative values are payments from SPP to MISO

15 Top 10 FGs Payment to MISO $0.00 Top 10 FGs - Payment to MISO TOTAL -$200, MISO_6546 SWPP_21263 MISO_6012 MISO_6323 MISO_20734 MISO_20983 MISO_6317 -$400, $600, MISO_ $800, $1,000, MISO_6542 -$1,200, MISO_ $1,400, Note: Positive values are payments to SPP from MISO; negative values are payments from SPP to MISO

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17 M2M PROCESS IMPROVEMENTS UNDER DEVELOPMENT

18 MOU Development Currently drafting a Memorandum of Understanding (MOU) with MISO relating to agreed upon M2M Principles Principles are primarily targeted at addressing specific concerns and issues observed during the 1 st year of M2M coordination Ineffective real-time coordination on certain flowgates Errors in calculation of data used in settlements Improving settlement rules that don t make sense

19 M2M Objectives Cost Effective Congestion Management for Both Markets Fair Compensation Consistent Pricing Across Both Markets Maintain Reliability Effective M2M Coordination Minimize Total Production Costs Between Both Markets

20 Principles for Improving M2M 1. Excluding M2M Flowgates based on threshold test 2. Market Flow Control Mode during M2M Event 3. Switching to Total Flow Control 4. Recalculating Erroneous FFEs 5. After the fact FFE Recalculation Due to Facility Ratings 6. Hold Harmless M2M Settlement Adjustments 7. Capping FFE to the SOL for M2M Flowgates

21 # 1 Excluding M2M Flowgates Based on Threshold Test JOA allows for a Reciprocal Coordinated Flowgate to be excluded from the M2M process upon mutual agreement (Section of Attachment 2) Provides criteria to be used to consider excluding a flowgate from the M2M process Apply to flowgates that pass the coordination test but the generators that impact those flowgates at or above the 5% threshold test do not consistently clear either the Day-Ahead or Real-Time Market resulting in ineffective real-time control M2M flowgate does not pass the coordination tests for the NMRTO if the normally off line generator(s) are not included in the coordination tests Generators referenced above did not clear the NMRTO Day-Ahead or Real- Time market in the previous month, current month, or anticipated next month for reasons other than incidental testing The M2M flowgate does not pass the 25% test for NMRTO

22 #2 Market Flow Control Mode During M2M Event May be instances when the M2M process does not solve the reliability concern, or aggravates reliability concerns (i.e. flowgate power swings) Allows the MRTO to switch to market flow control mode during an M2M event in limited circumstances when it is necessary to maintain reliability of the BES due to power swings caused by M2M coordination Alternative procedure has been developed that temporarily changes the standard M2M procedure used to mitigate certain flowgate bind/no-bind power swing reliability concerns Procedure on next slide

23 #2 Continued Alternative Procedure MRTO initiates M2M & TLR at the same time and each RTO will honor the IDC Target Net Market Flow for the effective time of the TLR MRTO will bind market flow using a Market Flow Relief Target from the IDC applied to an M2M Market Flow Effective Limit and the NMRTO will bind using a combination of Shadow Price Over-ride ($300) and Relief Request Over-ride derived from the NMRTO s IDC Market Flow Relief Target This procedure may not find the lowest cost generation to manage congestion. It is intended to be used only after all other M2M options have been exhausted. MISO has also proposed software changes that would allow a more gradual release of MISO s generation once SPP stops binding. SPP already has similar functionality within the SPP market.

24 Power swing caused by M2M outside of SPP-MISO seams

25 Power swing caused by M2M outside of SPP-MISO seams (cont)

26 Power swing on SPP-MISO M2M FG

27 #3 NMRTO Switching to Total Flow Control This principle addresses the power & price swing issue when the NMRTO has the predominant impact on an M2M flowgate During an M2M event, the JOA generally requires the MRTO to control to total flow and the NMRTO to control its market flows on a M2M flowgate If the NMRTO has the predominant impacts on a flowgate, the MRTO and the NMRTO can agree to have the NMRTO switch to total flow control while the MRTO uses market flow control By having the NMRTO bind its market to maintain total flow while the MRTO binds its market to control market flow at a lower cost, this should reduce the number of price spikes that occur when the MRTO does not have enough generation to manage the congestion Prior to implementing this price swing procedure, software changes are required as well as filing amendments to the existing SPP-MISO JOA

28 #4 Recalculating Erroneous FFEs Criteria describing when Firm Flow Entitlement (FFE) should be recalculated to adjust M2M settlements Providing guidelines for FFE recalculation for common errors, data and process failure to request a settlement adjustment Recalculation of FFE will generally be limited to either a software error that produced bad results or a data error Recalculation of FFE will be permitted if the total estimated resettlement is greater than $10,000

29 #5 After the Fact FEE Recalculation Due to Changes in Facility Ratings RTOs can agree to recalculate FFE of the NMRTO after-the-fact if the TOP of the MRTO allowed a temporary facility rating in real-time that was substantially higher than the Total Flowgate Capability used for FFE calculations, involving the following scenarios: temporary system reconfiguration, a temporary operating guide or temporary real time adjustment for lower ambient temperatures or higher wind speeds recalculation of FFE based on the new temporary SOL will be considered if the SOL change lasts at least a full operating day if the higher SOL limit will exist for an ongoing period the RTOs will discuss whether Historic Allocation recalculations are warranted incorrect rating input in Historic Allocation/FFE calculation may qualify for after-the-fact FFE recalculation transitory limit reduction or de-rating will not qualify for adjustments to the Historic Allocations Continued on next slide

30 #5 Continued appropriate application of Voltage or Stability Limited Flowgates If a flowgate is limited due to voltage or stability concerns, a MW proxy will be determined to ensure adequate voltage and stability conditions and reflected in the limits used in the historic allocation process consistent with the limits that will be used in Day-Ahead and Real-Time Market Operations Voltage and stability limited flowgates will have operating guides in place that define the condition being protected If the operating guide does not define unacceptable voltage levels or transfer levels, M2M will be available in real-time but subject to holdharmless settlement provisions An after-the-fact review can be performed to demonstrate the existence of unacceptable voltage or stability limits

31 #6 Hold Harmless M2M Settlement Adjustments The RTOs can agree to apply hold harmless M2M settlement adjustments based on after-the-fact analysis and discussions that demonstrate the system was operated too conservatively Application if the MRTO deviates from normal M2M practices because of reliability concerns, the MRTO will provide a detailed explanation of what criteria was applied to deviate from normal M2M practices Some event examples subject to after-the-fact analysis: MRTO switch to market flow control mode during an M2M event MRTO implementing a lower voltage or stability limit than specified in applicable operating guides MRTO not implementing an operating guide that could have mitigated the loading without a M2M event, and without justification, or the reasons for not doing so reflect unacceptably conservative operating practices

32 #7 Capping FFE Principle The FFL of all Reciprocal Entities and the FFE of the NMRTO should always be lower than the SOL and the TFC of the flowgate Current process allows for a Reciprocal Entity to have an FFL greater than the flowgate rating on an RCF and an FFE greater than the flowgate rating on a M2M flowgate This is an undesirable outcome and the RTOs will work to address this issue through CMP and JOA changes Parallel efforts will be made to implement this change both in the CMPC/CMPWG as well as in M2M settlement processes between SPP/MISO and MISO/PJM

33 FFE greater than SOL

34 LOOKING AHEAD TO YEAR 2

35 What s Next? SPP and MISO will work to finalize the MOU currently under negotiation Some provisions will require SPP-MISO JOA changes to be filed at FERC Software development and testing will be required to implement some provisions SPP and MISO will continue to look for other ways to improve the real-time M2M process and settlements Completion of first biennial review expected by 2 nd quarter 2016 pursuant to Article XX of SPP-MISO JOA Continue evaluation of day-ahead FFE exchange and settlements with status reports filed at FERC every six months