NOTES ON MAY 17 IMPLEMENTATION MEETING

DOWNEY, BRAND, SEYMOUR & ROHWER

M E M O R A N D U M

TO: D.A.W.G.

IMPLEMENTATION TEAM MEMBERS (TEAM A)

FROM: DAN L. CARROLL

DATE: May 21, 1996

RE: COMMUNICATIONS BETWEEN UDC AND ISO REGARDING SETTLEMENT AND ANCILLARY SERVICES

This Memorandum will summarize our discussions at the May 17 DAWG Team A meeting concerning the above-referenced subject. Attached to the original Memorandum will be a chart representing the subject; unfortunately, that chart is in a software called & quot;Chartist", and will not be available in the Word Perfect format document which I will E-mail to Sean Casey. Therefore, the first thing I will do is try to verbally describe the chart itself, after which I will summarize our discussions in narrative form.

CHART:

The chart has four segments. The first segment, on the far left, contains the letters "ISO" with an arrow pointing to a box on the right, about the middle of the chart. Below the arrow is the following entry: Imbalance Information:
  1. Load
  2. Generation
  3. Ancillary Services

In the box to which the arrow points are two entries for " UDC" and "SC", with a line separating them. "UDC" stands for Utility Distribution Company, and "SC" stands for scheduling coordinator. Emanating from that box to the right are three arrows. The first arrow points to the word "customer". The second arrow points to the following words: " parties involved in bilateral contracts (e.g., customer, generator, marketer, power broker)". The final arrow points to the word" aggregator" If this word picture does not suffice, please feel free to contact me and I will fax a copy of the chart to you. I may be reached by telephone at (916) 441-0131; by fax at (916) 441-4021; and by E-mail at "dcarroll@dbsr.com"

NARRATIVE SUMMARY

Before beginning the discussion memorialized in this Memorandum, we had spent a substantial amount of time discussing the ISO interaction protocols with retail customers concerning communications between the UDC and ISO, as well as the Power Exchange, as they dealt with nominations and scheduling. Randy Britt will be memorializing those discussions. We then moved into the discussion of settlement and ancillary services, which discussion generated the chart previously described. As co-chairperson, I did not take notes other than to copy down the chart, but the following is my recollection of the discussion. Obviously, if matters are left out or should be added, they can be submitted via comments. The issue for both settlement and ancillary services is billing the ISO to the appropriate "middle person", who will then in turn, presumably, bill the appropriate end user for imbalances associated with load, generation, and ancillary services. Such communications need to be addressed to the appropriate "middle person" within the time which will eventually be set through the WEPEX/FERC process. In the case of the UDC, the UDC will need to determine whether the imbalance is as a result of its actions or the actions of its customer. If the latter, the UDC will bill the customer for such imbalances through appropriate tariffs. If the middle person is a Scheduling Coordinator ("SC"), again the SC will have to determine whether the imbalances are a result of its own actions or that of the parties for whom it is scheduling. The SC will then appropriately bill either the aggregator who placed the order with the Scheduling Coordinator which eventually resulted in the imbalance, or the appropriate parties involved in a bilateral contract, such as a customer receiving electricity, or a generator, marketer, or power broker selling electricity. These charges would be rendered either subject to tariff or subject to contractual agreement among the parties. It is recognized that imbalances can occur on either side of the ISO. In other words, imbalances can occur because of the actions of a generator putting power into the grid, or the actions of an end user or end-use middle person (such as a customer, aggregator, marketer, or power broker). Rather than having an arrow go backwards from the ISO toward the generator, however, it was decided that the inclusion of the generator as a potential party involved in a bilateral contract would be appropriate.

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