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November 9, 2012 Dear Market Participants and Interested Parties: RE: AESO Reply to Stakeholder Comments on Voltage and Reactive (“VAR”) Reliability Standard Proposed for Adoption as Alberta Reliability Standard: a) VAR-002-AB-1.1b Generator Operation for Maintaining Network Voltages (“VAR-002AB-1.1b”); and b) New Definition for incorporation into AESO Consolidated Authoritative Documents Glossary. Section 19 of the Transmission Regulation requires the Alberta Electric System Operator (“AESO”) to consult with market participants likely to be directly affected by the AESO’s adoption or making of reliability standards, and also requires the AESO to forward proposed reliability standards to the Alberta Utilities Commission (“Commission”) for review along with the AESO’s recommendation that the Commission approve or reject them. Accordingly, the AESO issued a Stakeholder Consultation Letter on June 11, 2010 providing notice and seeking comments from market participants on proposed VAR-002-AB-1.1b. During the AESO’s consultation on proposed VAR-002-AB-1.1b, the North American Electric Reliability Corporation (“NERC”) Board of Trustees approved NERC standard VAR-002-2b Generator Operation for Maintaining Network Voltage Schedules replacing NERC VAR-002-1.1b; however the AESO is continuing to proceed with the consultation of proposed VAR-002-AB-1.1b in order to implement VAR-002-AB-1.1b in Alberta with the intention of conducting a review of NERC reliability standard VAR-002-2b for adoption in Alberta at a future date. The AESO’s reply is set out in the attached AESO Replies document, and a summary of the stakeholder comments received and the AESO’s reply to these comments is included below. In addition, the final proposed VAR-002-AB-1.1b (“Final Proposed VAR-002-AB-1.1b”) is attached. Summary of proposed VAR-002-AB-1.1b Please see the AESO’s June 11, 2010 Stakeholder Consultation Letter for a summary of proposed VAR-002AB-1.1b. AESO Reply to Market Participant Comments The written comments received by the AESO in response to proposed VAR-002-AB-1.1b attached to its June 11, 2010 Stakeholder Consultation Letter and the ARC Discussion Group, and the AESO’s replies to these comments are summarized below: 1. Stakeholders were concerned that defined terms were not bolded in proposed VAR-002-AB-1.1b. In response to these comments, the AESO replied that it agreed that defined terms should be reflected in bold font and had reviewed and bolded all defined terms in Final Proposed VAR-002-AB-1.1b. 2. A stakeholder stated that it appeared that a number of changes had been made to proposed VAR-001AB-1a and VAR-002-AB-1.1b since the last time they were reviewed and approved by the working group and the ARC. Page 1 Public Information In response to this comment, the AESO replied that it agreed that there had been amendments made to these standards since being reviewed by the ARC workgroups. The AESO further replied it had gathered information from the ARC workgroup and combined this with internal AESO feedback to prepare a draft of the Alberta reliability standard that went out for broad stakeholder consultation, as was done in this case. This process was in accordance with the Alberta reliability standard development process. The AESO believed that this process allowed for sufficient opportunity for stakeholders to provide comments. Furthermore the changes were presented to the ARC Discussion Group and their comments were considered. 3. A stakeholder stated that a number of the changes appear to be the result of the AESO's proposed removal of ISO OPP 702 Voltage Control (“ISO OPP 702”) and the incorporation of portions of that ISO OPP into this and one other standard, resulting in a more specific and far reaching version than the NERC version of the standard. In response to this comment, the AESO replied that it disagrees with this observation and that the amendments made to Final Proposed VAR-002-AB-1.1b were done in accordance with the Transmission Regulation. The requirements in the NERC reliability standard correlated with the requirements in Final Proposed VAR-002-AB-1.1b, except in a few cases as explained in the Alberta variances. 4. A stakeholder stated that these standards should not be approved until such a time as the AESO can provide a complete package that would show how ISO OPP 702 was to be mapped into any of the VAR Standards and the ISO rules, which portions of the ISO OPP were to be retired, and the draft of the information document dealing with Voltage Control. This stakeholder also stated that this is especially critical when the AESO proposes to eliminate an entire document, such as ISO OPP 702. In response to this comment, the AESO replied that, with the exception of one authoritative provision relating to changing automatic voltage regulator set points, the authoritative content of ISO OPP 702 was adequately covered by the VAR reliability standards. The AESO proposed to remove ISO OPP 702 in its entirety when the VAR standards come into effect. The AESO would address changing set points in another appropriate authoritative document currently under development. The non-authoritative contents of ISO OPP 702 that provides useful information for market participants would be captured in an information document. 5. A stakeholder recommended that in all the applicable places in proposed VAR-002-AB-1.1b that a NERC requirement not be split into a number of AESO sub-requirements and that bullets be used instead to prevent an increase of any penalty coverage, as compared to what was envisaged by NERC. In response to this this comment, the AESO replied that the Alberta reliability standards would contain requirements and sub-requirements that generally aligned with the NERC standards. Each subrequirement was to be met. Assignment of penalties for violations was beyond the scope of this initiative and is the Market Surveillance Administrator’s accountability. 6. A stakeholder requested that changes to proposed VAR-002-AB-1.1b be reviewed and vetted by the ARS Committees. In response to this comment, the AESO replied that it agreed that there had been amendments to the standard since being reviewed by the ARC workgroups. The AESO further replied that it gathered information from the ARC workgroup and combined this with internal AESO feedback to prepare a draft of the Alberta reliability standard that went out for broad stakeholder consultation, as was done in this case. This process was in accordance with the Alberta reliability standard development process. The AESO believed that this process allowed for sufficient opportunity for stakeholders to provide comment. Furthermore the changes were presented to the ARC Discussion Group and their comments were considered. 7. Some stakeholder comments were received about the lack of clarity of how requirements apply to wind aggregated generating facilities. In response to these comments, the AESO replied that Final Proposed VAR-002-AB-1.1b applied to all aggregated generating facilities including wind aggregated generating facilities, except for those that are identified as exempt. Page 2 8. A stakeholder had a concern about the increased obligation placed on Alberta market participants to obtain AESO’s consent to operate without the automatic voltage regulator in service and in voltage control mode when the NERC version only requires notification. In response to this comment, the AESO replied that it did not agree that this change is unjustified. The AESO had made the amendment from “notification” to “consent” for the reliable operation of the Alberta interconnected electric system, which was also consistent with the AESO’s interconnection requirements. The Alberta reliability standards would contain requirements and sub-requirements that generally align with the NERC standards. 9. A stakeholder asked for verification that the wind farms that are not equipped with voltage regulating systems (those built prior to applicable standards being in place) can seek an exemption from Alberta requirement R2. In response to this comment, the AESO replied that it had amended the applicability section to include exception criteria and that an information document had been created to identify the wind aggregated generating facilities that met these criteria. 10. In reference to Alberta requirement R3, a stakeholder asked for clarification of what was considered “as soon as practical”. In response to this comment, the AESO replied that it had amended Alberta requirement R3 to be completed “as soon as reasonably possible”. In the AESO’s opinion, this provided sufficient clarity. 11. A stakeholder stated that the AESO currently received information on the operational status of the automatic voltage regulator or voltage regulating system on a real-time basis, and as such, asked why there was an additional need to notify the AESO? Were there other parities in which the AESO would want the market participant to contact? And if so in what form of communication and evidence would be considered satisfactory by the AESO? The stakeholder recommended that Alberta requirement R3 be removed from the standard. In response to this comment, the AESO replied that it disagreed with this assessment. Not all plants automatically report their automatic voltage regulator status to the AESO on a real-time basis, rather through other means such as the Energy Trading System. This did not create an additional need to report status for any generating unit that reported automatic voltage regulator status through SCADA. In the AESO’s opinion, operator notification was an important step in the non-SCADA processes. 12. A stakeholder requested Alberta requirement R4.2 (now R6), that addressed not adjusting AVR, VRS or on-load taps unless instructed by the AESO, be amended to expressly exempt generating units that were off-line. In response to this comment, the AESO replied that it agreed that this requirement does not apply to offline generating units. However, the AESO was not of the opinion that it was necessary to clarify that off line generating units, or other off line equipment, were exempt from reliability standards. 13. In reference to Alberta measure MR4.2 (now MR6) a market participant expressed a concern about a possible gap in data caused by a failure of the logging system that would be indistinguishable from a gap caused by non-compliance. In response to this comment, the AESO replied that Alberta measure MR6 had been amended with the measure now identifying examples of acceptable evidence such as operator logs which could be used for evidence if the data files are unavailable. 14. A stakeholder commented that, in Decision 2009-183, issued on June 24, 2010 the Commission determined that the PPAs were considered enactments and therefore had the force of regulation. As a result, the AESO could not make ISO rules or standards that were not consistent with the PPA. The AESO must recognize that the PPAs specified the MVAR limits of the respective generating units and that these limits were not necessarily those shown on the Generator “D” curve. The AESO must respect these limits and avoid issuing directives that would cause unnecessary strain on the unit, should these limits be breached. In response to this comment, the AESO replied that it disagreed with this assessment. Under normal system operating conditions, the AESO would not issue directives or instructions that would take the units beyond the limits of the PPA. However, under abnormal or emergency conditions the AESO would Page 3 issue directives or instructions that were reasonable and appropriate for the circumstances that ensured the reliable operation of the Alberta interconnected electric system. 15. A stakeholder expressed that entity definitions must take into consideration legislative considerations along with the unique interconnection and operational characteristics of its market participants to ensure equitable treatment and reduce unreasonable amounts of interference on a participant’s facilities or operations. In response to this comment, the AESO replied that that market participants may apply for an applicability assessment under the AESO’s compliance monitoring program; however, such assessment would not exempt any market participant from its obligation under section 20.8 in the Electric Utilities Act to comply with Alberta reliability standards. 16. Stakeholders asked for verification of the applicability of these standards to Industrial Systems. In response to these comments, the AESO confirmed that Final Proposed VAR-002-AB-1.1b was applicable to industrial system designated complexes that owned or operated a generating unit, unless covered by the exemption in the applicability section. Market participants may apply for an applicability assessment as stated in 15 above. 17. A number of recommendations were made by stakeholders to revise wording of Alberta requirements and measures. In response to these comments, the AESO replied that it had taken these recommendations into consideration and had amended the Alberta requirements and measures in Final Proposed VAR-002AB-1.1b. 18. A number of stakeholders disagreed with the use of the term “confirmation” in Alberta measure MR8. In response to this comment, The AESO replied that Alberta measure MR8 had been replaced with Alberta measure MR7 in Final Proposed VAR-002-AB-1.1b and that the reference to the term confirmation had been removed. 19. A stakeholder suggested that the information referred to in Alberta requirement R8 (now R7) is generally provided to the AESO as part of the customer interconnection process. This stakeholder also recommended that the AESO should further review this requirement in relation to the AESO’s existing interconnection standards and requirements to ensure that there was no duplication of this requirement. In response to this comment, the AESO replied that it agreed that the AESO’s Customer Connection Process requires data to be provided to the AESO. While this requirement did not obligate the AESO to make a request for the data it did create the obligation for the participant to respond to an AESO request. 20. Stakeholders suggested that some requirements are specified in other ISO OPPs. It was also recommended that the AESO consider keeping the original ISO OPPs in place and modifying them as required, and / or review the duplication of standards. In response to this comment, the AESO confirmed that Alberta reliability standards would continue to be recommended to the Commission following consultation with affected stakeholders, while ISO rules, including ISO OPPs, would continue to be created, amended, consulted on and filed with the Commission in a manner that reduces duplication and overlaps between reliability standards and ISO rules. For clarity, Alberta reliability standards would continue to be represented as a separate authoritative domain from ISO rules and would continue to be drafted in a manner that, as determined to be applicable and practicable for implementation in Alberta, retained the format and wording approved by the NERC Board of Trustees. As a result, there may be some occasions where the AESO determined that it is reasonable and necessary that duplication or overlap occur. Where there were linkages between reliability standards and other authoritative and non-authoritative documents, reference would be made to those documents on the AESO website. 21. A stakeholder stated that only the operator of a generating unit would be able to ensure that the generating unit was compliant with Alberta requirement R9 (now R8). In response to this comment, the AESO replied that it disagreed and that it was the AESO’s opinion that the legal owner of a generating unit or aggregated generating facility was ultimately responsible for Page 4 ensuring that transformer tap positions were changed according to the specifications provided by the AESO. 22. A stakeholder commented that by adding an “acceptable explanation” in Alberta measure MR10 that this added an additional requirement in the measure. In response to this comment, the AESO replied that it agreed and had revised Alberta measure MR10 (now MR9) in Final Proposed VAR-002-AB-1.1b. 23. A stakeholder asked what was an appropriate retention period for compliance related documentation and/or data? In response to this comment, the AESO replied that it recommended that all stakeholders reference their own organization’s internal record retention policy with respect to applicable retention periods for compliance-related documentation. While retention periods for various records may be prescribed by applicable law, there may also be reasons specific to an organization and its circumstances which caused it to designate a particular retention period for certain records. 24. The ARC Discussion Group (ARCDG) stated that a large amount of documentation would be required to show compliance with Alberta requirement R4.2, which required entities not to adjust their AVR or VRS set point unless instructed by the AESO. ARCDG members were also concerned about possible data gaps if computer systems are not recording data 100% of the time and that it is difficult to retain information for a non-action. ARCDG members were not concerned about the policy and were satisfied if Alberta requirement R4.2 was captured in an ISO rule instead. In response to this comment, the AESO replied that it agreed to remove Alberta requirement R4.2 from Final Proposed VAR-002-AB-1.1b and would relocate this requirement to another authoritative document. Currently ISO OPP 702 contains a requirement for generation facility owners to “not adjust their generator voltage without first advising the SC”. The AESO would ensure that this requirement only appears in one authoritative document. 25. ARCDG members stated that new Alberta requirement R4(b) (refer to the latest version of this reliability standard) is not necessary because ISO rules Section 301.2 ISO Directives (“ISO Rules Section 301.2”) applied and requested the AESO to consider removing Alberta requirement R4(b) from the reliability standard. In response to this comment, the AESO replied that it disagreed and had retained new Alberta requirement R4(b) in Final Proposed VAR-002-AB-1.1b to remain more closely aligned with NERC. 26. ARCDG members recommended relocating Alberta requirement R5 into Alberta requirement R4.1(c), and suggested the following wording for R4.1(c): “using an alternative method to control voltage and reactive power output when the automatic voltage regulator or voltage regulating system is out of service”. In response to this comment, the AESO replied that it disagreed and had not relocated Alberta requirement R5 into Alberta requirement R4.1(c), as Alberta requirement R4 was applicable when the automatic voltage regulator or the voltage regulating system was in service while Alberta requirement R5 applied when the automatic voltage regulator or the voltage regulating system was out-of-service 27. ARCDG members stated that Alberta requirement R6 is not necessary because ISO Rules Section 301.2applied and requested removing Alberta requirement R6 from proposed VAR-002-AB-1.1b. In response to this comment, the AESO replied that it agreed to remove the thirty (30) minute requirement specified in Alberta requirement R6 but would retain the rest of the requirement which was now specified in Alberta requirement R4 in Final Proposed VAR-002-AB-1.1b, to align with NERC. 28. ARCDG members requested to add to the applicability section the interpretation provided by NERC in Appendix 2 of VAR-002-1.1b that proposed VAR-002-AB-1.1b did not require generating units to have an automatic voltage regulator. In response to this comment, the AESO disagreed was of the opinion that it was not necessary to include the interpretation provided by NERC in Final Proposed VAR-002-AB-1.1b. The requirement for Page 5 generating units and aggregated generating facilities to have automatic voltage regulators or voltage regulating systems was covered in other authoritative documents or interconnection standards. 29. ARCDG members recommended replacing Alberta requirement R7 with the NERC language in NERC requirement R3 to remove the threshold level in Alberta requirements R7.1 and R7.2 that was used to identify when a capability change in reactive power as to be reported to the AESO. Support for this recommendation included the concern of having operators of generating units to be aware this 1% value (subsequently proposed to the ARC Discussion Group as a 10% value) for each unit and to take appropriate action accordingly. It would be preferable to adopt a policy for operators to report all changes in reactive power resource capability or status in accordance with the NERC requirement. In response to this comment, the AESO replied that it agreed as the AESO had no issue with this recommendation and had adopted wording in Final Proposed VAR-002-AB-1.1b that was aligned with NERC requirement R3. 30. ARCDG members asked why proposed VAR-002-AB-1.1b applied to generating units below the NERC threshold and requested the reliability reason for doing this. In response to this comment, the AESO replied that it was applying Final Proposed VAR-002-AB-1.1b to generating units and aggregated generating facilities directly connected to the transmission system in order to have these generating resources operate with their automatic voltage regulators and voltage regulating systems in the automatic voltage control mode. In Alberta, there were in excess of eight hundred (800) MWs of generating capacity that fall below the NERC threshold. These generating resources must still provide dynamic reactive capability and be controlled by the automatic voltage control systems for the reliable operation of the Alberta interconnected electric system. In addition, this also allowed for the removal of these requirements from ISO OPP 702 which eliminated duplication with ISO rules. 31. An ARCDG member requested limiting the application of proposed VAR-002-AB-1.1b to generators 5 MVA and above. In response to this comment, the AESO replied that it agreed and has amended Final Proposed VAR002-AB-1.1b such that it applied to generating units that have a maximum authorized real power rating greater than 4.5 MW. Definitions The AESO did not receive any comments on the definitions of “aggregated generating facility” and “voltage regulating system”, which were proposed in the consultation on June 11, 2010. Following the June 11, 2010 consultation, the AESO determined that it was necessary to use these definitions in other Alberta reliability standards. Therefore, the AESO removed the definitions from the proposed VAR reliability standards consultation and conducted a separate consultation process. These definitions have subsequently been finalized and currently reside in the AESO’s Consolidated Authoritative Document Glossary. Information Document An Information Document was developed to provide information relevant to Final Proposed VAR-002-AB1.1b. A description of the information document and a link to the same is attached to this Reply Letter. Additional Changes to the Final Proposed VAR-002-AB-1.1b The following summarizes additional amendments made to the Final Proposed VAR-002-AB-1.1b as a result of further AESO Review: 1. Amended the applicability of Final Proposed VAR-002-AB-1.1b to use the terms adopted through the AESO’s Transition of Authoritative Documents (“TOAD”) project and applied Final Proposed VAR-002AB-1.1b to generating units and aggregated generating facilities with a real power rating greater than 4.5 MWs; 2. Amended the effective date to be the first day of the calendar quarter that follows three full calendar quarters after approval by the Commission; Page 6 3. Bolded all defined terms ; 4. Amended Alberta requirement R3 to notify the AESO “as soon as reasonably possible” rather than “as soon as practical”; 5. Removed the reference to “confirmation” from Alberta measure MR7; 6. Amended Alberta requirements R7 and R9 to make it clear that they apply to aggregated generating facilities; 7. Removed “acceptable explanation” from Alberta measure MR9; 8. Removed Alberta requirement R4.2 in the previous version of Final Proposed VAR-002-AB-1.1b in regards to not adjusting the automatic voltage regulator or voltage regulating system set point unless instructed by the AESO. This requirement will be transferred to an ISO rule; 9. Removed the thirty (30) minute requirement in Alberta requirement R4b; 10. Removed the threshold level in Alberta requirements R6.1 and R6.2 that is used to identify when a capability change in reactive power is to be reported to the AESO. Forwarding Final Proposed VAR-002-AB-1.1b to the Commission Pursuant to section 19 of the Transmission Regulation, the AESO intends to forward Final Proposed VAR002-AB-1.1b to the Commission on November 23, 2012, with the AESO’s recommendation that the Commission approve Final Proposed VAR-002-AB-1.1b as an Alberta Reliability Standard. Final Proposed VAR-002-AB-1.1b is proposed to be effective on the first day of the calendar quarter (January 1, April 1, July 1 or October 1) that follows three full calendar quarters after approval by the Commission. Attachments to AESO Reply 1. AESO Replies to the June 11, 2010 Stakeholder Consultation Letter, including stakeholder comments; 2. Blacklined and clean copy of Final Proposed VAR-002-AB-1.1b Generator Operation for Maintaining Network Voltages; and 3. Copy and description of the draft information document providing information relevant to Final Proposed VAR-002-AB-1.1b. Yours sincerely, Original Signed By Paul Glatthor Manager, Authoritative Documents Process Ph: (403) 539-2464 E-mail: [email protected] Attachments Page 7