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2015 – Standards of Conduct & Prohibition of Energy Market Manipulation Compliance Review

Marion Lucas, Alcoa Power Generating, Inc.

APGI Chief Compliance Officer

2015

Compliance Review & Required Actions

This Compliance review must be completed annually. Understand that violation of these rules will be subject to appropriate disciplinary action, up to and including termination of employment.

In this review, we discuss how the Standards of Conduct, Market Behavior Rules & Prohibition of Energy Market Manipulation apply to you and the actions that we all are expected to adopt.

At the end of this discussion, you will be expected to attest that you either “Understand & Will Comply” or “Do Not Understand” the subject material presented.

You will be provided names & company resources to ask questions at any time and/or to report a suspected compliance violation.

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What is the

Standards of Conduct?

18 Code of Federal Regulation (CFR) Part 358

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Federal Energy Regulatory Commission (FERC)

•Regulates transmission service for power transactions•Regulates wholesale power sales•Regulates hydroelectric licensing and operations

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FERC Regulations

In 2004, the Federal Energy Regulatory Commission (FERC) issued regulations regarding Standards of Conduct for Public Utility Transmission Providers which apply to the APGI transmission divisions of Yadkin, Tapoco, Colockum & Long Sault. Since AGC Warrick division & the APMLLC/APGI marketing affiliates are subsidiaries of APGI, it’s important to understand the responsibility of the transmission groups and interactions with the other APGI divisions or subsidiaries.

FERC is trying to promote fair competition among companies that sell electricity. There is concern that some companies having both transmission providers and electricity sellers, may have allowed their sales employees access to transmission information that was not readily available to competing sellers. This could give a company’s sales staff a competitive edge over other sales groups.

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FERC Regulations

FERC’s Standards of Conduct applies to Public Utilities to govern the relationship between regulated Transmission Providers and their Energy Affiliates.

It ensures that Transmission Providers cannot extend their market power over transmission to wholesale energy markets by giving Energy Affiliates undue preferential treatment.

The next slide shows Alcoa Power Generating Inc.(APGI), a FERC regulated public utility. Alcoa created APGI to house our electric assets of generation and transmission in order to keep them separate from Alcoa Inc.

APGI has 5 divisions and 2 wholly-owned subsidiaries. Of the 5 divisions, FERC recognizes Long Sault, Tapoco, Colockum and Yadkin as transmission owners.

The slide shows that our marketing groups were outsourced to Cargill Power Marketing LLC as of 4/1/14. Cargill must be treated as a contractor on the Energy Marketer side of the Standards of Conduct. Make sure that NO transmission information flows to this contractor or the other APGI marketing arms that is not already public information.

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Alcoa Power Generating Inc - FERC Regulated Utility

SERC SERC RF NPCC WECC WECC, RF, SERC WECC,RF, SERC

Corporate Structure

Alcoa Inc.

APGI

President

Michael Padgett

Tapoco Division

Yadkin Division

AGC Division

Long Sault

Division

APMLLCWholly Owned

Subsidiary(outsourced Function to

Cargill PowerMarketing LLC)

APGI Transmission Division

Subsidiary Corporation of Alcoa Inc.

Parent Corporation

APGI dba

APGTrading

(outsourced Function to

Cargill Power Marketing LLC)

APGI Energy Affiliate

or SubsidiaryEffective 4/1/14, marketing was

Outsourced to Cargill Power Marketing LLC

AAMIWholly owned

Subsidiary

APGI Chief Compliance Officer

Marion Lucas

Colockum Division

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Definitions in the Standard of Conduct

Transmission Function

Employee -

Actively and personally

engages on a day to day basis in transmission

functions

Marketing Function

Employee -

Actively and personally

engages on a day to day basis

in marketing functions

Employee, Contractor, Consultant, Agent of Transmission Provideror Affiliate of a Transmission Provider

Employee, Contractor, Consultant & Agent of a Transmission Provider

Transmission Function means the planning, directing, organizing or carrying out of day-to-day transmission operations, including the granting and denying of transmission service requests.

Marketing Function – in the case of public utilities and their affiliates, the sale for resale in interstate commerce, or the submission of offers to sell in interstate commerce, of electric energy or capacity, demand response, virtual transactions, or financial or physical transmission rights on a day-to-day basis

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Separation of Transmission & Marketing

Transmission

Marketing

APGI Transmission Divisions:

YadkinTapoco

Long SaultColockum

Effective 4/1/14, The Marketing & Trading functions of APGTrading &

Alcoa Power Marketing LLC were outsourced to Cargill Power

Marketing LLC( now our contracted marketing

affiliate for day-to-day 24 X7 ops)

Transmission Provider’s transmission employees must function independently & be physically separated from its marketing affiliates.

Four Key Rules

to

Standards of Conduct

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1. Non-Discrimination

Transmission

Marketing

Non Public Transmission

Information cannot be released to

marketing function employees.

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Non-Discrimination Requirements

APGI must strictly enforce all Standards of Conduct/ Open Access Tariff( OATT) provisions. The Transmission Provider MUST: Show No preferential treatment – treat all

transmission customers alike in a non discriminatory manner.

Provide EQUAL access to NON-Public transmission information to all transmission customers at the same time and in the same manner for affiliates and non-affiliates.

Remember that Marketing employees can ask any type of question but a transmission employee Cannot release NON-public transmission information to their marketing affiliate.

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2. Independent Functioning

Transmission

Marketing

Planning, directing, organizing transmission operations including

granting and denying of transmission service requests.

Sale for resale or offers to sell electric energy or capacity, demand response, virtual

transactions, transmission rights

Meetings Between Marketing and Transmission

Employees are required to inform the Chief Compliance Officer when a meeting will be held where transmission function employees and marketing function employees will be present to ensure compliance with the Standards of Conduct.

A note taker shall be designated for any such meeting and detailed notes shall be maintained of any such meeting.

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3. No Third Party Conduit

Transmission

Marketing

Non Public Transmission

Information Cannot be passed through a

third party

Third Party

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4. Transparency

Transmission

Marketing

Job Titles , Descriptions & Shared facility company addresses

are posted on the transmission provider’s public website

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Suspected Breach of theStandards of Conduct

“The Company and its employees are in the best position to detect and correct any violations of FERC regulations and policies in the Company, whether intentional or inadvertent.”

“Any employee found to have known of information concerning a suspected violation of any FERC regulation or requirement, yet failing to report such information will be subject to appropriate disciplinary action, up to and including termination of employment.”

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Suspected Breach of the Standards of Conduct

The information, in whatever form it may be in, must be reported to the Chief Compliance Officer and posted on the OASIS immediately.

The time, date, violation description & any other relevant files or information regarding the violation must be reported verbally and with email follow-up without delay.

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Compliance Reporting Contacts

Marion Lucas

APGI Chief Compliance Officer

865-621-0256

marion.lucas@alcoa.com

Alcoa’s Compliance Integrity Line

Report suspected FERC Standards of Conduct or Market Manipulation violations

1-800-346-7319

Federal Energy Regulatory Commission (FERC)

Prohibition of Energy Market

Manipulation

18 Code of Federal Regulation (CFR) Part 1C

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PROHIBITION OF ENERGY MARKET MANIPULATION

What is

Energy Market Manipulation?

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Prohibition of Energy Market Manipulation

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Prohibition of Energy Market Manipulation

It is unlawful for any entity, directly or indirectly, in connection with the purchase or sale of energy or natural gas or the purchase or sale of transmission or transportation services subject to FERC jurisdiction: 1. To defraud using any device, scheme or artifice

(i.e. intentional or reckless conduct) 2. To make any untrue statement of material fact

or omit a material fact; or 3. To engage in any act, practice or course of

business that operates or would operate as fraud or deceit.

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Prohibition of Energy Market Manipulation

APGI will not use manipulative or deceptive devices in connection with US electric or natural gas transactions including: Fraudulent devices, Material Misrepresentation Material Omissions Unit Operation Communications Reporting Record Retention

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Market Behavior Rules

Unit Operation. Where a Seller participates in a Commission-approved organized market, Seller must operate and schedule generating facilities, undertake maintenance, declare outages, and commit or otherwise bid supply in a manner that complies with the Commission-approved rules and regulations of the applicable market.

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Market Behavior Rules

Communications. A Seller must provide accurate and factual information and not submit false or misleading information, or omit material information, in any communication with the Commission, Commission-approved market monitors, Commission-approved regional transmission organizations, Commission- approved independent system operators, or jurisdictional transmission providers.

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Market Behavior Rules

Price reporting. To the extent a Seller engages in reporting of

transactions to publishers of electric or natural gas price indices, Seller must provide accurate and factual information and not knowingly submit false or misleading information or omit material information to any publisher, by reporting its transactions in a manner consistent with procedures defined by the Commission.

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Market Behavior Rules

Price reporting. Seller must identify as part of its Electric Quarterly Report filing requirement any of the publishers of electricity and natural gas indices to which it reports transactions. Seller must adhere to any other standards and requirements for price reporting the Commission may order.

Records retention. A Seller must retain, for a period of five years, all data and information upon which it billed the prices it charged for the electric energy or electric energy products it sold pursuant to Seller’s market-based rate tariff, and the prices it reported for use in price indices.

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Breach or Suspected Energy Market Manipulation

“The Company and its employees are in the best position to detect and correct any violations of FERC regulations and policies a the Company, whether intentional or inadvertent.”

“Any employee found to have known of information concerning a suspected violation of any FERC regulation or requirement, yet failing to report such information will be subject to appropriate disciplinary action, up to and including termination of employment.”

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Suspected Market Manipulation

The information, in whatever form it may be in, must be reported immediately to the Chief Compliance Officer.

The time, date, violation description & any other relevant files or information regarding the suspected violation must be reported verbally and with email follow-up without delay.

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Compliance Reporting Contacts

Marion Lucas

APGI Chief Compliance Officer

865-621-0256

marion.lucas@alcoa.com

Alcoa’s Compliance Integrity Line

Report suspected FERC Standards of Conduct or Market Manipulation violations

1-800-346-7319

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SOC Attestation

□ I Understand & Will Comply

□ I Do Not Understand

Name:____________________

Date:___________

Alcoa. Advancing each generation.