April 24, 2015 VIA ELECTRONIC FILING

Transcription

1 April 24, 2015 VIA ELECTRONIC FILING The Honorable Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C Re: Southwest Power Pool, Inc., Docket No. ER Compliance Filing of Southwest Power Pool, Inc. to Amend Market-to- Market Procedures Dear Secretary Bose: Pursuant to section 206 of the Federal Power Act ( FPA ), 16 U.S.C. 824e, and the Commission s order issued on January 22, and Notice Granting Extension of Time issued on March 6, in this proceeding, Southwest Power Pool, Inc. ( SPP ) submits revisions to the Joint Operating Agreement ( JOA ) between SPP and the Midcontinent Independent System Operator, Inc. ( MISO ) 3 in compliance with the January 22 Order. With this filing, SPP submits revisions to the JOA to include language as required by the Commission. SPP requests an effective date of March 1, 2015 for the JOA revisions submitted with this filing consistent with the effective date of Market-to-Market ( M2M ) Procedures granted in the January 22 Order. SPP and MISO have worked together to develop the proposed revisions and SPP is authorized to state that MISO agrees with the JOA revisions being proposed herein and supports this filing Sw. Power Pool, Inc., 150 FERC 61,033 (2015) ( January 22 Order ). Notice Granting Extension of Time, Docket No. ER (March 6, 2015) ( Notice Granting Extension ). The formal name of the JOA is the Joint Operating Agreement between the Midwest Independent Transmission System Operator, Inc. and Southwest Power Pool, Inc. The JOA is a FERC-filed rate schedule of both MISO and SPP. The JOA is designated as MISO s Rate Schedule FERC No. 6; and as SPP s Rate Schedule FERC No. 9. MISO reserves its right to file separately comments on the JOA revisions proposed herein by SPP.

2 The Honorable Kimberly D. Bose April 24, 2015 Page 2 I. BACKGROUND In the Commission s order conditionally accepting SPP s request to implement centralized day ahead and real-time energy and operating reserve markets commonly known as the Integrated Marketplace, 5 the Commission instructed SPP to commence negotiations with MISO to develop M2M Procedures to address congestion management across the SPP-MISO seam. 6 The Commission directed SPP to file the M2M procedures as part of a Phase 2 (i.e., amended) JOA no later than June 30, In the March 21 Order, the Commission clarified that implementation of any agreed-to M2M procedures could be deferred until one year following the start-up of the Integrated Marketplace, or March 1, On June 28, 2013 SPP submitted its compliance filing. 9 The M2M Compliance Filing included new provisions to the JOA memorialized as Attachment 2- Interregional Coordination Process, in addition to revisions to the main body of the JOA. SPP and MISO modeled the procedures contained in the Phase 2 Joint Operating Agreement on similar procedures in effect between PJM Interconnection, L.L.C. ( PJM ) and MISO (the PJM-MISO JOA ). 10 The parties reached agreement on the majority of M2M Procedures proposed in the initial compliance filing. Consistent with the framework adopted in the PJM-MISO JOA, SPP s proposed M2M Procedures substantively adopt the four major components of M2M coordination: Interface Bus Price Coordination, Real-Time Energy Market Coordination, Day-Ahead Energy Market Coordination, and Auction Revenue Rights Sw. Power Pool, Inc., 141 FERC 61,048 (2012) ( Marketplace Order ), order on reh g, 142 FERC 61,205 (2013) ( March 21 Order ). Marketplace Order at P 364. Id. March 21 Order at PP 85, 88. Compliance Amendment to Joint Operating Agreement to Implement Market-to- Market Procedures in Response to Order in Docket No. ER of Southwest Power Pool, Inc., Docket No. ER (June 28, 2013) ( M2M Compliance Filing ). See M2M Compliance Filing at 4. SPP s proposed M2M Procedures are not identical to the procedures contained in the PJM-MISO JOA. As the Commission recognized in the Marketplace Order, SPP and MISO agreed to certain modifications of the template that would more accurately reflect the process being implemented between the parties. See also Marketplace Order at n. 535

3 The Honorable Kimberly D. Bose April 24, 2015 Page 3 ( ARR ) Allocation/Financial Transmission Rights ( FTR )/Transmission Congestion Rights ( TCR ) Auction Coordination. 11 On July 11, 2014, the Commission issued an order establishing a technical conference to provide an adequate record to consider issues raised in the M2M Compliance Filing. 12 The technical conference was to address three issues related to SPP s proposed M2M Procedures: (1) the implementation of Interface Bus Pricing; (2) the creation of M2M Flowgates; and (3) the deferred implementation of a Day- Ahead Firm Flow Entitlement ( FFE ) exchange process. 13 The technical conference was held on September 22, In the days following the technical conference SPP and MISO participated in multiple discussions to seek consensus on the designation process for new M2M Flowgates. These meetings resulted in negotiated language that was satisfactory to both parties. With approval and support from SPP, MISO filed the agreed-upon language (constituting new Sections through of Attachment 2 to the JOA) in its post-technical conference reply comments, 14 and requested the Commission to order SPP to include the new language in the JOA as a compliance filing. 15 On January 22, 2015, the Commission issued an order conditionally accepting in part, and rejecting in part SPP s proposed M2M Procedures, subject to a compliance filing. 16 In the January 22 Order, the Commission rejected SPP s proposed language in Attachment 2, Sections and of the JOA, and required SPP to include the SPP-MISO agreed upon language discussed above as a compliance filing 30 days from the issuance of the order. 17 In addition, the Commission required SPP to work with MISO to resolve the potential ambiguity in the language of Section of the M2M Procedures. Section relates to SPP s and MISO s respective obligations pursuant to the requirement to minimize financial harm due to less than optimal dispatch. 18 The Commission directed SPP to submit the See M2M Compliance Filing at 4-6. Sw Power Pool, Inc., 148 FERC 61,019 (2014), at P 9 ( July 11 Order ). See July 11 Order at P 1. Post-Technical Conference Reply Comments of Midcontinent Independent System Operator, Inc., Docket No. ER (October 22, 2014). See Post-Technical Conference Reply Comments of Southwest Power Pool, Inc., Docket No. ER (October 22, 2014) at 6 (providing SPP does not oppose a Commission directive that require[d] SPP to include the negotiated language in the JOA pursuant to a compliance filing. ). January 22 Order at Ordering Paragraphs (A) and (B). Id. at PP 1, 36 and Ordering Paragraphs (A) and (B). Id. at P 43.

4 The Honorable Kimberly D. Bose April 24, 2015 Page 4 revised provision in a compliance filing. 19 External to the required compliance filing, the Commission required SPP to continue discussions with MISO on Interface Bus Pricing methodologies and the FFE exchange process and report on those efforts every six months until the issues are resolved. 20 In response to the January 22 Order, SPP submitted its compliance filing on February 23, 2015 revising the M2M Procedures to include new Sections through of Attachment 2 of the JOA. 21 The Commission issued an order accepting the Compliance Filing with an effective date of March 1, Coincident to the Compliance Filing, SPP filed a motion for extension of time to comply with one aspect of the January 22 Order. 23 SPP, with support by MISO, requested additional time to allow the parties to negotiate revisions to Section of the M2M Procedures which would comply with the Commission s directives to reduce the potential ambiguity of the term less than optimal dispatch and to define the parties respective obligations under Attachment 2, Section As referenced above, the Commission granted SPP s request for extension of time and required SPP s additional compliance filing to revise Section no later than April 24, Both SPP and MISO have engaged in multiple discussions and negotiated in good faith to develop the agreed-upon language being filed herein. The agreed-upon language revises Section of the M2M Procedures reducing the ambiguity and more clearly defines the parties respective obligations under the section. As will be explained in more detail infra, the agreed upon language was developed utilizing language that has been previously approved by the Commission in a settlement proceeding between MISO and PJM. Additionally, the revisions to Section also leverage language proposed by the MISO Independent Market Monitor ( IMM ) in its comments in this proceeding Id. at PP 1, 43 and Ordering Paragraph (B). See id. at Sections V.A and V.C. Compliance Filing of Southwest Power Pool, Inc. to Amend Market-to-Market Procedures, Docket No. ER (February 23, 2015) ( Compliance Filing ). Sw. Power Pool, Inc., Letter Order, Docket No. ER (April 9, 2015). Motion for Limited Extension of Time to Comply of Southwest Power Pool, Inc., Docket No. ER (February 23, 2015) ( Motion for Extension ). See Motion for Extension at 2-3. See Notice Granting Extension.

5 The Honorable Kimberly D. Bose April 24, 2015 Page 5 II. DESCRIPTION OF COMPLIANCE FILING AND JUSTIFICATION FOR PROPOSED CHANGES TO SECTION OF M2M PROCEDURES In compliance with the January 22 Order, SPP submits revisions to Section of the M2M Procedures of the JOA. The proposed language complies with the Commission s directive that SPP work with MISO to revise [Section 8.1.2] to resolve the potential ambiguity and further clarify the parties respective obligations under the section. 26 Generally, the changes being proposed to Section include a section title change, deletion of current language, and addition of three new subsections to generally clarify: a) when M2M settlements may be revised; b) the parties obligations to investigate potential uneconomic production; and c) a nolimitation clause identifying other sections of M2M Procedures which are not intended to be affected by the new requirements. Specifically, SPP respectfully requests that Section of the M2M Procedures be revised as follows (reflecting blackline of new language and deletion of current provisions): Minimizing Less than Optimal Dispatch Conditions Under Which Parties may Revise M2M Settlements. The Parties agree that, as a general matter, they should minimize financial harm to one RTO that results from M2M coordination initiated by the other RTO that produces less than optimal dispatch, which can lead to revenue inadequacy for FTR/TCR and impose the burden for such revenue inadequacy on one or both RTOs. a. The Parties agree that upon reaching mutual agreement they will revise M2M settlements to minimize financial harm to either RTO that results from an error in the initiation, implementation, termination, or settlement of M2M coordination, including, but not limited to: Firm Flow Entitlements; calculated Market Flows; shadow price calculation; M2M Flowgate definition; and initiating coordination on a flowgate that does not qualify as a M2M constraint. b. Further, the Parties have an obligation to timely and reasonably investigate potential uneconomic production so as to avoid M2M settlements that should not continue. Identification of 26 January 22 Order at P 43.

6 The Honorable Kimberly D. Bose April 24, 2015 Page 6 uneconomic production by itself will not automatically trigger a M2M settlement adjustment; however, if a Party fails to timely and reasonably investigate and/or fails to take appropriate corrective action promptly when there is an indication of uneconomic production, and it is subsequently found that uneconomic production occurred, M2M settlements shall be adjusted, upon mutual agreement, with respect to those M2M Flowgates impacted by the identified unit(s), subject to the limitations set forth in Section c. This section shall not limit the requirements for after-the-fact review of M2M events or limit any available remedies as contemplated in Section and Section 8.4. A. Revised Section Title and Subsection a With this filing, SPP respectfully requests the Commission approve a complete overhaul of the language of current Section of the M2M Procedures of the JOA. As the Commission recognized in the January 22 Order, the current design of Section is potentially ambiguous regarding the meaning of less than optimal dispatch and the parties respective obligations under the provision. SPP and MISO have determined that the language of Section could be substantively revised in a manner that would reduce the ambiguity and provide more concrete terms and direction to the parties. The revised language, proposes to do away with the language that is ambiguous and substitute language which articulates situations where M2M settlements will be revised and therefore will have the effect of actual reduction of financial harm to the parties. Such a complete overhaul of the construct and design of the section requires the section title to be reworked, and the addition of a Subsection (a) to take the place of the current language which is being deleted in its entirety. SPP and MISO began with the language proposed by the MISO IMM in its comments in this docket as one of the starting points of discussion. 27 The Commission had acknowledged the MISO IMM s proposed language in the January 22 Order but offered no position on its substantive value. 28 In this filing, SPP and MISO have adopted the substantive portions of the MISO IMM s comments. Such changes reflect a change to the title of the section from Minimizing Less than Optimal Dispatch to Conditions Under Which Parties May Revise M2M Resettlements. The proposed changes to the section title and the substantive Motion to Intervene and Comments of the Midcontinent ISO s Independent Market Monitor, Docket No. ER (July 19, 2013) at 9. See January 22 Order at n 87.

7 The Honorable Kimberly D. Bose April 24, 2015 Page 7 provisions of Section are consistent with, and in many regards, taken directly from the proposal by the MISO IMM that the Commission referenced in the January 22 Order. Any deviations from the language proposed by the MISO IMM were the result of negotiations between SPP and MISO and have been agreed upon by both parties. The revisions being proposed to Section herein satisfy the Commission s directives in that it takes the potential ambiguity of the meaning of less than optimal dispatch and replaces the phrase with actual situations where resettlements may be undertaken. The changes reflect the parties intentions that defining situations where financial harm will be mitigated by resettlement of M2M transactions is a clear and succinct means in which to accomplish the goal of current Section 8.1.2, which goal is to minimize the financial harm to a party caused by less than optimal dispatch of the other party, and which is a condition to any M2M resettlement. This is a corollary to the JOA s underlying purpose that the party implementing the M2M Procedures on a flowgate utilize, to the extent practicable, the more cost effective generation between the two markets to manage congestion. Under the revised Section a resettlement may be effectuated to mitigate financial harm to one party in the following situations. First, the financial harm must be a result of an error in the initiation, implementation, termination, or settlement of M2M coordination. Second, the list of issues includes, but is not limited to: FFEs; calculated Market Flows; shadow price calculation; M2M Flowgate definition; and initiating coordination on a flowgate that does not qualify as a M2M constraint. Clearly, the proposed revisions to Section will clarify the authority being delegated by the Regional Transmission Organizations ( RTOs ) to revisit M2M settlements and provide some of the express conditions under which M2M resettlements are appropriate. The intent of the proposed revisions to Section constituting Subsection (a) is to allow and define situations when express resettlement of M2M transactions may be necessary to minimize financial harm to one party. Without such definition, one party could arguably receive M2M payments, in accordance with Section 16.2 of the JOA, 29 which are mistakenly collected and distributed without a defined remedy to mitigate the financial harm that would arise from such improper billing and payment. Retention of such unwarranted payments may violate the filed-rate 29 See JOA at Section 16.2 Billing and Invoice Procedures ( [e]ach Party shall render invoices to the other Party for amounts due under this Agreement in accordance with its customary billing practices (or as otherwise agreed between the Parties) and payments shall be due in accordance with the invoicing Party s customary payment requirements ).

8 The Honorable Kimberly D. Bose April 24, 2015 Page 8 doctrine 30 and require refund of all improperly billed amounts. 31 An express provision to provide specific circumstances where a resettlement of improperly billed M2M transactions may be warranted is transparent, not unduly discriminatory, and is in the interest of the members of each RTO that are all impacted by M2M coordination. B. Subsection b With this compliance filing, a new Subsection (b) to Section is proposed to directly address the Commission s directives in the January 22 Order. Both SPP and MISO have agreed upon this language as an appropriate means to satisfy the further clarification of Section sought by the Commission. The language proposed for inclusion in the JOA as Section b effectually revis[es] the provision to resolve the potential ambiguity and therefore satisfies the Commission s requirement. Further, the Commission should find the language just and reasonable because it is consistent with language approved by the Commission in a settlement proceeding between MISO and PJM and which was intended to address similar ambiguities in Section of the MISO-PJM JOA. Although the Commission did not require this provision to be included in the MISO-PJM JOA, SPP and MISO have agreed that it would be appropriate to include this provision in the JOA to comply with the Commission s directives in the January 22 Order. The language accepted in the MISO-PJM Settlement, and proposed herein, clarifies that since there are instances where uneconomic production may not be improper, for example, generation units deemed uneconomic in the short run may The filed rate doctrine forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority. " Oxy USA, Inc., v. FERC, 64 F.3d 679, 699 (1995), quoting, Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 69 L. Ed. 2d 856, 101 S. Ct (1981); see also Cargill Power Markets, LLC., 112 FERC P 61,025 at P 27, reh'g denied, 113 FERC P 61,233 (2005) (under the filed rate doctrine, a regulated entity must charge the rate that is on file with the Commission). See, e.g., Arkansas Elec. Coop. Corp. v. Entergy Arkansas, Inc., 130 FERC 61,020, at P 11 (2009) ( [B]ecause Entergy failed to charge its filed rate,... Opinion No. 488 requires Entergy to refund all excess amounts improperly billed, with interest in accordance with the Commission s regulations. Thus, to remedy Entergy s failure to charge the filed rate, and to comply with Opinion No. 488, Entergy must provide additional refunds for the amounts it collected in excess of its filed rate, with interest pursuant to section 35.19a of the Commission's regulation.... ); DTE Energy Trading, Inc. v. Midwest Indep. Transmission Sys. Operator, Inc., 119 FERC 61,109, at P 19 (2007) (return of amounts collected in excess of the filed rate was necessary because the violation was not technical and the excess charges violated MISO s filed rate and the tariff provisions were clear).

9 The Honorable Kimberly D. Bose April 24, 2015 Page 9 nevertheless be part of a valid commitment of resources due to factors such as the operating characteristics of the units in question, SPP and MISO will not immediately be required to resettle the M2M transactions under such scenarios. The proposed language meets the Commission s requirement by clarifying that while the goal is to minimize the financial harm of one party due to the actions of another party as stated in new a, there are situations where uneconomic production occurs and the Parties should not be faulted. However, notwithstanding the clarification that uneconomic production does not automatically result in resettlement, the proposed language provides additional clarification that SPP and MISO have an obligation to timely and reasonably investigate uneconomic production so as to avoid M2M settlements that should not continue. This language further meets the Commission s directive by clarifying the Parties obligation under Section Finally, the proposed language provides for a remedy in the event that one Party is harmed via M2M settlement payments due to the failure of one Party to meet their obligation to timely and reasonably investigate uneconomic production so as to avoid M2M settlements that should not continue. The remedy is outlined by stating M2M settlements shall be adjusted with respect to units that were determined to have been uneconomically committed or dispatched This language further meets the Commission s directive to resolve the potential ambiguity by outlining the remedy which was not previously outlined. It is clear that the proposal to include the new Subsection b, as explained supra, meets the Commission s requirements that SPP and MISO agree to language to reduce the ambiguity of Section of the M2M Procedures. By stipulating situations when resettlement may occur together with the obligation to investigate uneconomic production, SPP has fully complied with the Commission s directives to articulate the parties respective obligations under Section of the M2M Procedures. Further, the proposed revisions contemplate a remedy of potential M2M settlement adjustments if one party fails to investigate potential uneconomic production, and if subsequently such ongoing production is found to be uneconomic and results in avoidable financial harm via improper M2M settlements. C. Subsection c A new Subsection (c) is proposed to be added to simply clarify that the new provisions in Sections a and b do not limit or otherwise impact the parties respective obligations and rights related to the after-the fact review pursuant to Sections and 8.4, as well as the available remedies in those sections.. As the after-the-fact review is already part of the M2M Procedures, SPP and MISO have agreed that a no-limitation clause articulating the relationship between Section and these other sections would be appropriate and transparent.

10 The Honorable Kimberly D. Bose April 24, 2015 Page 10 D. Requested Action SPP respectfully requests the Commission accept the JOA revisions being proposed herein without modification and in total. SPP s filing reflects the language to which SPP and MISO have negotiated in good faith and reached mutual agreement. Additionally, the proposed revisions to Attachment 2, Section contains terms and conditions that are dependent on each other to satisfy the Commission s compliance requirements. In other words, Subsections a through c work in concert to reduce the ambiguity of the current Section 8.1.2, and as a whole they define the parties respective obligations under the term. Further, read together, the terms provide opportunities where resettlement may be agreed to by the parties and prescribes an obligation to investigate potential issues of uneconomic productions. These two provisions work together to reduce the financial harm that could result from improper M2M settlements. Agreement by SPP and MISO is contingent on the language being accepted in its entirety. Rejection of one section results in disagreement on the entirety of the revisions to As such, SPP requests that the substantive portions of Sections a, b, and c be accepted without modification or rejected as a whole. III. EFFECTIVE DATE As the revision to Section of the M2M Procedures of the JOA complies fully with the requirements of the January 22 Order, SPP respectfully requests the Commission accept the revisions to the JOA without modification for filing with an effective date of March 1, 2015, consistent with the date granted by the Commission in the January 22 Order. IV. ADDITIONAL INFORMATION A. Documents submitted with this filing: In addition to this transmittal letter, the following documents are included with this filing: Clean and Redline revisions to Attachment 2 of the JOA. B. Service: SPP has served a copy of this filing on all individuals listed on the service list compiled by the Commission s Secretary in this proceeding, as well as SPP Members, Customers, Market Participants, and all affected state commissions. A complete copy of this filing will be posted on the SPP website,

11 The Honorable Kimberly D. Bose April 24, 2015 Page 11 V. CONCLUSION SPP requests that the Commission accept the revision to Section of the M2M Procedures contained in the JOA as compliant with the requirements of the January 22 Order and grant an effective date of March 1, 2015 for the proposed revisions. Respectfully submitted, /s/ Matthew Harward Matthew Harward Erin Cullum Marcussen Southwest Power Pool, Inc. 201 Worthen Drive Little Rock, AR Telephone: (501) Attorneys for Southwest Power Pool, Inc.

12 CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing document upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Little Rock, Arkansas, this 24 th day of April, /s/ Michelle Harris Michelle Harris

13 8 Appropriate Use of the Market-to-Market Process A subset of flowgates that meet the criteria as described in Section 1.1, impacted by market flows from the two RTOs energy markets, will be subject to the M2M process and called M2M Flowgates. This subset will be controlled using M2M tools for coordinated redispatch and additionally will be eligible for M2M settlements. In principle and as much as practicable, Parties agree that the goal is to control to the most limiting Flowgate using the actual Flowgate limit. The RTOs will record and exchange actual M2M Flowgate limits, the limit used to bind, and a reason for significant deviation. There are times when either Party, acting as the Monitoring RTO, will bind a M2M Flowgate different from its actual limit. The Parties have agreed in subsections 8.1 through 8.4 of this Section 8 to the conditions under which M2M settlement will occur even though a limit to which the Monitoring RTO is binding (limit control) is less than its actual limit. 8.1 Qualifying Conditions for Market-to-Market Settlement: Purpose of Market-to-Market. M2M was established to address regional, not local issues. The intent is to implement M2M coordination and settle on such coordination where both Parties have significant impact Conditions Under Which Parties may Revise M2M Settlements. a. The Parties agree that upon reaching mutual agreement they will revise M2M settlements to minimize financial harm to either RTO that results from an error in the initiation, implementation, termination, or settlement of M2M coordination, including, but not limited to: Firm Flow Entitlements; calculated Market Flows; shadow price calculation; M2M Flowgate definition; and initiating coordination on a flowgate that does not qualify as a M2M constraint. b. Further, the Parties have an obligation to timely and reasonably investigate potential uneconomic production so as to avoid M2M settlements that should not continue. Identification of uneconomic production by itself will not automatically trigger a M2M settlement adjustment; however, if a Party fails to timely and reasonably investigate and/or fails to take appropriate corrective action promptly when there is an indication of uneconomic production, and it is subsequently found that uneconomic production occurred, M2M settlements shall be adjusted, upon mutual agreement, with respect to those M2M Flowgates impacted by the identified unit(s), subject to the limitations set forth in Section c. This section shall not limit the requirements for after-the-fact review of M2M events or limit any available remedies as contemplated in Section and Section 8.4.

14 8.1.3 Use Market-to-Market Whenever Binding a M2M Flowgate. The M2M process will be initiated by the Monitoring RTO whenever an M2M Flowgate is constrained and therefore binding in its dispatch Most Limiting Flowgate. Generally, controlling to the most limiting Flowgate provides the preferable operational and financial outcome. In principle and as much as practicable, M2M coordination will take place on the most limiting Flowgate, and to that Flowgate s actual limit (thermal, reactive, stability). a. M2M events that involve the use of a limit control that is below 95% of the actual limit will be subject to an after-the-fact review, unless the lower limit was agreed to by the RTOs prior to the market-to- market binding event. The review will determine if normal market-to- market settlements are appropriate. If M2M settlements are determined by the Parties not to be appropriate, then settlements will not occur on the M2M Flowgate. Sufficient real-time and after-the-fact data will be exchanged to enable these reviews. The Parties may agree to change the trigger for review to a lower number for specific Flowgates, however, either Party may request review of specific instances that are bound above the established binding percentage Substitute Flowgates. The Parties agree that, if the use of substitute Flowgates is minimized and the ability to coordinate on the most limiting Flowgate in the very near term is enabled, there should be very few instances where M2M coordination occurs without resulting settlement. a. Generally, M2M coordination without the normal market-to- market settlement will be limited to times when: (1) a substitute is used for a period in excess of that defined in Section (b) (ii) below, or (2) a substitute Flowgate (whether M2M or non-m2m) is used and the most limiting Flowgate is later determined to fail the M2M tests. b. Where the most limiting constraint (monitored/contingent element pair) is not a defined M2M Flowgate: i. Parties will add the Flowgate definition and activate market-tomarket coordination on that Flowgate (as opposed to a substitute) as soon as reasonably practicable; or ii. A substitute Flowgate may be used for a short time (generally less than an hour) until it is possible to coordinate using the most limiting Flowgate. Parties will attempt to use either: (i) the most limiting M2M Flowgate or (ii) the most limiting Flowgate that is modeled by both Parties, in that order of preference. If possible,

15 the Parties should use another Flowgate that is limiting. Optimal choices are Flowgates with the same or very similar Market Flow impacts (sensitivities) resulting in a very similar redispatch and M2M settlement. c. A substitute Flowgate can be used in the M2M process pending the outcome of the coordinated Flowgate tests. The substitute Flowgate will be utilized only until the actual constraint can be entered in both the Monitoring and Non-Monitoring RTO systems as an M2M Flowgate. M2M settlement is dependent on the outcome of the coordinated Flowgate tests on the actual constraint and the RTO requesting the use of a substitute Flowgate will do so at its own risk that M2M settlement may not occur. d. A substitute M2M Flowgate will not be used to control for another constrained M2M Flowgate except in very limited circumstances and only where there is prior mutual agreement between MISO and SPP to do so. Mutual agreement is established only when it has been communicated and logged by the control center operators that the coordinated Flowgate is not the most limiting (i.e., it is a substitute Flowgate). e. A substitute M2M Flowgate will not be used to control for a non-m2m Flowgate that has failed the Flowgate study or has not been entered into the study process. f. Ay use of substitute Flowgate should be clearly logged by both RTO operators with the actual start time, the actual end time and the reason for using a substitute Flowgate. g. If the Monitoring RTO requests TLR on an M2M Flowgate but has not initiated the M2M process and is not binding its market for that Flowgate, the Non-Monitoring RTO is not required to bind its market for that Flowgate in order to meet the Non-Monitoring RTO s TLR relief obligation. It will be assumed that the Monitoring RTO is binding its market for the actual constraint and that the actual constraint is already active in the M2M process (if the actual constraint is an M2M Flowgate) Operating Guides that refer to M2M operation do so under the assumption that the Flowgates for which M2M operations take place are, or are expected to be, constrained. Operating Guides are written by operators and are not intended to result in settlement not otherwise contemplated by the JOA or this ICP. Safe Operating Mode (SOM) is reserved for abnormal conditions when existing operating guides and normal tool sets are not sufficient to manage abnormal operating conditions. After declaring SOM, operator actions may include using market-to- market tools in addition to direct dispatch. Operators may choose to use substitute M2M Flowgates with the dispatch tools to maintain reliable

16 operations. Settlement determination will occur during the After-the-Fact Review set forth in Section 8.4 below. Generally, settlement for M2M coordination that takes place after SOM is declared will apply if the settlement would apply under normal conditions. 8.2 Specific Conditions Applicable to Section (Most Limiting Flowgate) Market-to-Market Events Not Requiring an After-the-Fact Review The MISO and SPP operators will model all M2M Flowgates facilities with actual limits in their respective EMSs. The MISO EMS model uses design thermal limits of equipment. The MISO limits are updated in UDS/RTBM following contacts with Transmission Owners prior to binding. The MISO and SPP operators will control the flows on these M2M Flowgates in their respective UDS/RTBM at a binding percentage that is 95% or greater of the M2M Flowgate actual limit Market-to-Market Events Requiring an After-the-Fact Review All M2M events that involve the use of a limit control that is below 95% of the actual limit will be subject to an after-the-fact review to determine whether this was an appropriate use of the M2M process as determined by this Agreement and is subject to normal M2M settlement. The following criteria will be used in making such a determination: Reducing the UDS/RTBM Binding Percentage to Provide Necessary Constraint Control: a. A reduced UDS/RTBM binding percentage below 95% of the actual facility limit can be applied to an M2M Flowgate by the Monitoring RTO provided the monitored element (for the defined contingency condition) of the M2M Flowgate meets the following conditions: i. The monitored element is, or is expected to be, over its actual limit (post contingency if applicable) and the UDS/RTBMs are not providing the desired relief. ii. iii. Transient system behavior necessitates controlling the M2M Flowgate to a target between 95% and 100% and providing some margin. To achieve this, in some instances, the UDS/RTBM percentage may need to be below 95%. The limit for the monitored element changes due to equipment switching out of service. For instance the actual limit of a line is reduced when one of the breakers in a breaker-and-half configuration is out of service, or only one

17 parallel transformer remains in service at one of the line end terminals. iv. A constraint with a very high loading volatility such that loading is expected to exceed 100% of the actual limit, even when the UDS/RTBM binding percentage is significantly below that value. b. The reduced UDS/RTBM binding percentage should only be applied for the time duration necessary to manage the initiating condition and shall be returned to normal as soon as possible. c. Each time the Monitoring RTO reduces the binding limit control of an M2M Flowgate below 95% for an actual or relevant post contingency overload, the Monitoring RTO operator will make a best effort to notify the Non- Monitoring RTO operator of the new limit control, the reason for the change, and when the limit control is expected to be returned to normal (if known). Both RTO operators will log the event. This notification only applies to an operating condition causing a limit control change; it does not apply to the use of temperature adjusted limits, voltage limits or stability limits implemented as flow limits. i. A limit reported by a Transmission Owner on the operating day shall require an accompanying reason. If the limit is set to control for underlying facilities, this shall be called out specifically. Any reason other than those specifically called out herein shall be reported. d. The Monitoring RTO will operate to the most conservative limit when there are conflicting results between two different EMSs (either another RTO EMS or a Transmission Owner EMS) unless the reason for the difference is known Reducing the UDS/RTBM Binding Percentage of a M2M Flowgate for Prepositioning a. In some conditions system flows are expected to change quickly due to load pick-up, planned, and emergency outages, and the UDS/RTBM may not be accurately predicting a resulting overload on the M2M Flowgate in the near future. When a reduction in binding percentage is initiated by the operator to mitigate expected impacts on an M2M Flowgate from a planned outage, that action shall be taken to prepare the system consistent with the time submitted on the outage ticket or as revised by the

18 equipment operator. This reduction should be for as short a time as practicable but may be extended if the outage is delayed. If possible, initiating the reduction in binding percentage shall be delayed until the outage begins. b. M2M Flowgates may be de-rated for a short period of time to preposition the system for an expected change. These expected changes can include: i. Change in unit status (anticipated as part of an upcoming outage, reacting to an imminent emergency outage, or change in commitment if the unit for which the commitment was changed cannot be adequately ramped to allow normal redispatch to manage any resulting constraints). ii. iii. Transmission system topology change (either anticipated event or as part of an upcoming planned outage). In this case, every effort shall be made to add the expected constraint to the systems and bind on the expected constraint instead of using a substitute Flowgate. Increase or decrease in wind generation output. c. Reducing the limit to pre-position the system will be considered an appropriate use of M2M tools but subject to settlement adjustment for substitute M2M Flowgates applying a hold harmless approach discussed in the After the Fact Review process set forth in Section 8.4 below. The time duration of such events shall be limited to that necessary to pre-position to avoid excessive impacts on market prices. 8.3 Specific Conditions Applicable to Section (Operating Guides) All op guides are subject to review by MISO and SPP through which either RTO can request removal of a reference to the M2M process. Where reference to the M2M process has been removed and not replaced by alternate congestion management actions, the use of SOM will be added to the op guide if it is not already included in the op guide. Before modifying existing op guides, MISO and SPP will agree to a mechanism to manage congestion that will avoid the need for repeated SOM declarations on the same constraint In the event of severe abnormal system conditions, such as storm damage to critical facilities, the Parties shall meet as soon as practicable to agree upon the response, which shall be incorporated into a temporary operating guide.

19 8.4 After-the-Fact Review to Determine Market-to-Market Settlement Based on the communication and data exchange that has occurred in real-time between the Monitoring RTO operator and the Non-Monitoring RTO operator, there will be an opportunity to review the limit change and the use of the M2M process to verify it was an appropriate use of the M2M process per this Agreement and good utility practice and subject to M2M settlement. The Monitoring RTO will initiate the review as necessary to apply these conditions and settlements adjustments. a. A review will verify that the limit used in the M2M coordination represented the actual limit of the monitored element of the original Flowgate that has passed one of the M2M Flowgate Studies. The Monitoring RTO will archive and make available data (including all UDS/RTBM solutions) that supports the decision to change the M2M Flowgate limit. The Parties will mutually agree upon, and document in writing and post on the Parties websites, the data that should be exchanged and/or archived to meet this requirement, and shall retain the data for the period applicable to other data used to audit settlements inputs and market flow calculations under this agreement. b. A review will verify the outcome of the M2M Flowgate Studies and whether the potential Flowgate passed one of the M2M Flowgate Studies by both the Monitoring RTO and the Non-Monitoring RTO. The Monitoring RTO uses M2M tools before a M2M Flowgate is approved at its own risk regarding M2M settlement. After the M2M Flowgate Studies are complete, if the Flowgate did not pass at least one of the studies conducted by the Monitoring RTO and at least one of the studies conducted by the Non- Monitoring RTO, then settlements will be adjusted as follows. i. If the Non-Monitoring RTO s integrated market flows are below its Firm Flow Entitlement for the hour, there will be a normal M2M settlement with a payment from the Monitoring RTO to the Non- Monitoring RTO for the hour. ii. iii. If the Non-Monitoring RTO s integrated market flows exceed its Firm Flow Entitlement for the hour, there will be no M2M settlement for the hour. If the Monitoring RTO was requested to initiate the M2M process on the Monitoring RTO s Flowgate to assist the Non-Monitoring RTO, the Monitoring RTO will be held harmless as follows.

20 a. If the Non-Monitoring RTO s integrated market flows are below its Firm Flow Entitlement for the hour, there will be no market-to- market settlement for the hour. b. If the Non-Monitoring RTO s integrated market flows exceed its Firm Flow Entitlement for the hour, there will be a normal market- to-market settlement with a payment from the Non-Monitoring RTO to the Monitoring RTO for the hour The Non-Monitoring RTO may request the Monitoring RTO to implement the M2M process on its behalf. There will be an after the fact review performed to determine whether this M2M event should be subject to settlement. If the review finds it is subject to settlement, the usual criteria will be applied. If the review finds it is not subject to settlement, the usual criteria will be applied except that the Monitoring RTO shall be held harmless. a. If the Non-Monitoring RTO s integrated market flows are below its Firm Flow Entitlement for the hour, there will be no M2M settlement for the hour. b. If the Non-Monitoring RTO s integrated market flows exceed its Firm Flow Entitlement for the hour, there will be a normal M2M settlement with a payment from the Non-Monitoring RTO to the Monitoring RTO for the hour A new M2M Flowgate shall be subject to a hold-harmless provision for the balance of the current operating day in which the M2M Flowgate is submitted for coordination by the Monitoring RTO as a result of a planned outage in the Monitoring RTO s system as provided below: a) If the Non-Monitoring RTO s integrated market flows are below its Firm Flow Entitlement for the hour, there will be a market-to-market settlement with a payment from the Monitoring RTO to the Non-Monitoring RTO for the hour. b) If the Non-Monitoring RTO s integrated market flows exceed its Firm Flow Entitlement for the hour, there will be no market-to-market settlement for the hour. c) Notwithstanding the above provisions, these hold-harmless provisions shall not apply (i.e., a market-to-market settlement will occur) if the new M2M Flowgate was necessitated by an unplanned outage (forced, emergency, or urgent) that could not meet normal outage scheduling timeframes.

21 Nothing in this section is intended to restrict either Party s ability to submit new M2M Flowgates for coordination using the real-time market-to-market coordination procedures The settlement provisions, including exceptions, contained in Section shall also apply for the next operating day when a new M2M Flowgate is submitted for coordination by the Monitoring RTO, as a result of a planned outage in the Monitoring RTO s system, subsequent to the cutoff for data submission of (i.e., the close of) the Non-Monitoring RTO s Day-Ahead market A new M2M Flowgate shall be subject to a hold-harmless provision for the balance of the current operating day in which the M2M Flowgate is submitted for coordination by the Monitoring RTO as a result of a planned outage in the Non- Monitoring RTO s system as provided below: a) If the Non-Monitoring RTO s integrated market flows exceed its Firm Flow Entitlement for the hour, there will be a market-to-market settlement with a payment from the Non-Monitoring RTO to the Monitoring RTO for the hour. b) If the Non-Monitoring RTO s integrated market flows are below its Firm Flow Entitlement for the hour, there will be no market-to-market settlement for the hour. c) Notwithstanding the above provisions, these hold-harmless provisions shall not apply (i.e., a market-to-market settlement will occur) if the new M2M Flowgate was necessitated by an unplanned outage (forced, emergency, or urgent) that could not meet normal outage scheduling timeframes. d) Notwithstanding the above provisions, these hold-harmless provisions shall not apply (i.e., a market-to-market settlement will occur) if the planned outage had been previously coordinated with the Monitoring RTO but the M2M Flowgate was submitted after the beginning of the current operating day by the Monitoring RTO. Nothing in this section is intended to restrict either Party s ability to submit new M2M Flowgates for coordination using the real-time M2M coordination procedures The settlement provisions, including exceptions, contained in Section shall also apply for the next operating day when a new M2M Flowgate is submitted for coordination by the Monitoring RTO as a result of a planned outage on the Non- Monitoring RTO s system, subsequent to the cutoff for data submission of (i.e., the close of) the Monitoring RTO s Day-Ahead market.

22 8.5 M2M Data Exchange A data exchange will be established. Parties shall mutually agree upon data, format and frequency of exchanges. The data exchange must be updated to include, but not be limited to, the following data as soon as practicable if requested by either Party. a. actual Flowgate SE/SA flow from the approved case, b. UDS/RTBM solution %, c. operator entered binding %, d. actual Flowgate limit, and e. shadow price.

23 8 Appropriate Use of the Market-to-Market Process A subset of flowgates that meet the criteria as described in Section 1.1, impacted by market flows from the two RTOs energy markets, will be subject to the M2M process and called M2M Flowgates. This subset will be controlled using M2M tools for coordinated redispatch and additionally will be eligible for M2M settlements. In principle and as much as practicable, Parties agree that the goal is to control to the most limiting Flowgate using the actual Flowgate limit. The RTOs will record and exchange actual M2M Flowgate limits, the limit used to bind, and a reason for significant deviation. There are times when either Party, acting as the Monitoring RTO, will bind a M2M Flowgate different from its actual limit. The Parties have agreed in subsections 8.1 through 8.4 of this Section 8 to the conditions under which M2M settlement will occur even though a limit to which the Monitoring RTO is binding (limit control) is less than its actual limit. 8.1 Qualifying Conditions for Market-to-Market Settlement: Purpose of Market-to-Market. M2M was established to address regional, not local issues. The intent is to implement M2M coordination and settle on such coordination where both Parties have significant impact Minimizing Less than Optimal DispatchConditions Under Which Parties may Revise M2M Settlements. The Parties agree that, as a general matter, they should minimize financial harm to one RTO that results from M2M coordination initiated by the other RTO that produces less than optimal dispatch, which can lead to revenue inadequacy for FTR/TCR and impose the burden for such revenue inadequacy on one or both RTOs. a. The Parties agree that upon reaching mutual agreement they will revise M2M settlements to minimize financial harm to either RTO that results from an error in the initiation, implementation, termination, or settlement of M2M coordination, including, but not limited to: Firm Flow Entitlements; calculated Market Flows; shadow price calculation; M2M Flowgate definition; and initiating coordination on a flowgate that does not qualify as a M2M constraint. b. Further, the Parties have an obligation to timely and reasonably investigate potential uneconomic production so as to avoid M2M settlements that should not continue. Identification of uneconomic production by itself will not automatically trigger a M2M settlement adjustment; however, if a Party fails to timely and reasonably investigate and/or fails to take appropriate corrective action promptly when there is an indication of uneconomic production, and it is subsequently found that uneconomic production occurred, M2M settlements shall be adjusted, upon mutual agreement, with respect to those M2M Flowgates impacted by the