April 9-10, 2013 MARKETS Committee

1. April 9-10, 2013 MARKETS Committee Christopher Parent Market Development | cparent@iso-ne.COM |413.540.4599 Additional revisions to ensure changes are consistent with the recent FERC Order and to further clarify previously presented items PRD Full Integration Changes

2. PRD Full Integration Changes are being brought back to the Markets Committee • This topic was presented to the committee in the second half of 2012 and modified the demand response capacity market, energy market and baseline rules applicable for the capacity commitment period starting June 1, 2017 and beyond • MC and PC action taken on changes in December 2012 and January 2013 • ISO is making further clarifications to the package of changes before filing • Redlined changes with: • No highlighting were previously approved by the NPC • Yellow highlighting reflect new changes • Blue highlighting reflect removal of change previously approved • Gray highlighting reflect edits from the Obsolete Terms project

3. Additional Proposed Changes • Clarifications to Rules and Definitions • Demand Response Resource Offer Requirements • Adjustment for RTEG Asset Output • RTEG Meter Configuration and Demand Reduction Value

4. Clarifications to Rules and Definitions • Removed remaining references to Critical Peak Resource, Critical Peak or Critical Peak Hours • Ensured proper usage of defined terms: • Demand Response Resource Start-Up Time, Demand Response Resource Notification Time, Re-Offer Period and Audited Full Reduction Time • Removed duplicate paragraph from auditing provisions in Section III.13.6.1.5.4.3.3.1 • Corrected reference in Section III.8B.4 from “III.13.6” to “III.13” to align with the language that refers to audit and dispatch of RTEG Resources • Changed “interrupt” to “reduce” in Section III.13.7.1.5.10.2 for consistency

5. Clarifications to Rules and Definitions (cont.)

6. Clarifications to Rules and Definitions (cont.)

7. Demand Response Resource Offer Requirements • Existing tariff language did not allow Demand Response Resources to offer on ISO settlement holidays • In cases when a shortage event were to occur, these resources would be considered unavailable to meet their Capacity Supply Obligation • Modifications to Appendix E2 remove the holiday offer restriction for Demand Response Resources • Modifications to Section III.8B include Demand Response Holidays within the Sunday day type for baseline calculations • Proposed changes shift holidays used from ISO settlement holidays to Demand Response Holidays

8. Adjustment for RTEG Asset Output • Section III.E2.7.2 provided rules to adjust the Demand Response Asset’s baseline and real-time demand reduction by the output of a Real-Time Emergency Generation Asset at the same location • Language in Section III.E2.7.2 is removed and replaced with specific language in the baseline (III.8B) and performance (III.E2.7.1) sections • With these changes, the reference to “III.E2.7.2” in Section III.13.7.2.5.4 Energy Settlement for Real-Time Emergency Generation Resources and Section III.8B.5.2 are unnecessary so they are also removed • Modifications to Section III.E2.7.1 explain how the output of the Real-Time Emergency Generation Asset impacts the real-time demand reduction of the Demand Response Asset • Modifications to III.8B explain how the output of the Real-Time Emergency Generation Asset impacts the baseline and baseline adjustment

9. RTEG Meter Configuration and Demand Reduction Values • Section III.13.1.4.3.2. explains the metering requirements for a Real-Time Emergency Asset, but did not explain how Demand Reduction Values were calculated based upon the metering configuration of the underlying assets • The proposed changes: • Clarified meter configuration rules to have a parallel construct and state that they are effective only for periods beyond June 1, 2017 • Added language that explains that any Real-Time Emergency Generation Resources that have assets which are metered at the generator have their Demand Reduction Value calculated based upon the Average Hourly Output • Added language that explains that any Real-Time Emergency Generation Resource that has assets which are not metered at the generator have their Demand Reduction Value calculated based upon the Average Hourly Load Reduction

10. Schedule and Timing • These changes are expected to go into effect for August-2013

11. Appendix: PRD Full Integration Changes Summary of previously presented items

12. PRD Full Integration ChangesPreviously Presented Items • Modified the baseline (III.8) and demand response energy market (III.E) rules to allow the transition period and full integration rules to be in effect at the same time • Modified definitions to: • Make full integration defined terms effective now (e.g., Demand Response Resource) • Add full integration concepts to existing defined terms (e.g., Day-Ahead Energy Market, Demand Designated Entity) • Allow for defined terms used in both the transition period and full integration concepts to be in effect at the same time (e.g., Demand Reduction Offer) • Remove definitions (or portions of definitions) that are no longer applicable (e.g., Customer Baseline) • Further clarify existing defined term (e.g., Asset)

13. PRD Full Integration ChangesPreviously Presented Items • Carried changes made to the transition period Demand Response Threshold Price into the calculation of the full integration Demand Response Threshold Price • These changes were required when the Forward Reserve Market Threshold Price was changed to a daily calculation to maintain the monthly Demand Response Threshold Price calculation construct consistent with the original proposed design under Order 745 • Added language describing meter configuration requirements for RTEG Assets and that an RTEG Resource’s Demand Reduction Value can be calculated using metered output (i.e., Average Hourly Output) or baseline approach (i.e., Average Hourly Load Reduction) • These included adding calculations to the baseline and baseline adjustment rules for RTEG Assets

14. PRD Full Integration ChangesPreviously Presented Items • Clarified the energy compensation for RTEG Resources starting on June 1, 2017 • Clarified the baseline rules starting on June 1, 2017 to better explain: • Prior day, present day and next day • When current day meter data is excluded from the baseline calculation • When the meter data from current day is included in the next day per the 7 of the prior 10 day baseline refreshment criteria