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Customer Information SessionOATT Requirements & Business PracticesMartin HuangVP Grid Operations

March 2011

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Overview

• Recent revisions to OATT• Transfer Pricing Agreement• Corporate Governance

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Recent Revisions to OATTChanges due to integration • most recent amendments do not introduce significant changes • BC Hydro has adopted the OATT from BCTC, with some minor modifications

such as inclusion of vertically integrated utility language from pro forma OATT

• OATT continues to be consistent with pro forma OATT established by FERC Orders 890 et al

• BCUC Order No. G-192-10 (Dec 2010) Changes we are now seeing due to 2008 OATT amendments • revised OATT brought forward by BCTC in order to continue to be aligned

with the FERC pro forma • amendments to OATT approved through BCUC regulatory process • BCUC Order No. G-102-09 (Sept 2009)

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Certain provisions and practices just now coming into effect due to timing of MODS implementation and compliance requirement of 2009 BCUC order

Examples: • Simultaneous Submission Window (SSW)• Conditional Firm Service • Curtailment methodologies

Recent Revisions to OATT

Transfer Pricing Agreement (TPA)

What the TPA is not.TPA is not a transmission service agreement This means that the TPA:

– does not grant transmission access– does not provide transmission

services – does not set a transmission rate for

BC Hydro and/or Powerex

What is the TPA?•TPA is an agreement between Powerex and BC Hydro •covers how energy transactions are dealt with•existing TPA has been in place since 2003 and has not been amended since then •publicly available and was filed in 2003 Heritage Contract proceeding

What transmission terms, conditions and rates apply to BC Hydro and Powerex?• BC Hydro and Powerex pay the applicable approved transmission rates and are subject to the same terms and conditions for accessing ATC via TSR submissions on OASIS• Same terms, conditions and rates applicable to all other customers• Approved OATT, including rates, subject to BCUC regulatory process

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Corporate Governance

BC Hydro transmission policy decisions– “One Hydro”– Continue to be aligned with industry standards and FERC pro forma

OATT– Commitment to non-discriminatory open access, including adherence

to Standards of Conduct– Internal policy discussions, including issues related to disputes,

subject to the SOC rules

  

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Corporate Governance continued……

Standards of Conduct (SOC) – SOC define the rules related to functional separation for an

integrated utility providing open access transmission services – BC Hydro’s SOC and organizational structure are fully consistent

with pro forma OATT – FERC Orders 717 et al substantively revised the pro forma SOC

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Corporate Governance continued……SOC General Principles:1. Non-discriminatory requirements

– transmission provider to treat all transmission customers on a not unduly discriminatory manner

2. Independent functioning rule – TFEs must function independently of MFEs

3. No conduit rule – non-public transmission function information not to be disclosed to

MFEs 4. Transparency rule

– certain information must be posted on BC Hydro’s website to allow interested persons to detect the potential for acts of undue preference

Corporate Governance continued……

SOC recent changes• Driven by industry and adoption by FERC as industry standard• Key Changes:

– Reinstatement of employee functional approach

•Employees designated as transmission function employees (TFEs) and market function employees (MFEs) If not a TFE or MFE, then undesignated employee

– “transmission function information” (TFI) is narrowly defined

- TFI is only that information relating to day-to-day transmission operations, including granting or denying transmission service requests

Implementation of SOC• Non-public TFI cannot be communicated to MFEs• Non-public TFI can be communicated to undesignated employees• All employees, including undesignated employees subject to the “no conduit” rule• TFEs and MFEs function independently, and any discussions are conducted pursuant to SOC

– Granting/denying of transmission service requests only done by TFEs within T&D Market Policy & Operations

• Legal and regulatory support employees generally not considered TFEs or MFEs. Can provide legal support to either group so long as employees do not provide non public TFI to MFEs.

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Implementation of SOC

What is not prohibited by the SOC Transmission policy and planning information does not fall within

definition of TFI; engaging in transmission policy or planning does not make an employee a TFE

OATT decision-making as an integrated utility Pro forma OATT and SOC were designed for vertically integrated utilities Undesignated employees (which can include Powerex officers/employees not engaged in marketing functions on a day-to-day basis) not prohibited from being involved with OATT policy, provided that there is adherence to SOC rules

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Open Access and Regulation• BC Hydro provides open access consistent with industry standards• Ultimately the BCUC determines what is just and reasonable

– BC Hydro conducts consultation with respect to significant OATT amendments and significant new/amended business practices

– New transmission policies or changes to transmission terms/conditions subject to a BCUC process and approval

– Customers can always bring issues forward to the BCUC in relation to any type of OATT decision