Free Response to Motion [Dispositive] - District Court of Federal Claims - federal

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 1 of 95

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

PACIFIC GAS AND ELECTRIC COMPANY, SOUTHERN CALIFORNIA EDISON COMPANY, AND CALIFORNIA ELECTRICITY OVERSIGHT BOARD, Plaintiffs, v. THE UNITED STATES, Defendant. SAN DIEGO GAS & ELECTRIC COMPANY, a California corporation, Plaintiff, v. THE UNITED STATES, Defendant.

No. 1:07-cv-00157-LAS No. 1:07-cv-00167-LAS Consolidated HON. LOREN A. SMITH

PLAINTIFFS PACIFIC GAS AND ELECTRIC COMPANY, SOUTHERN CALIFORNIA EDISON COMPANY, AND SAN DIEGO GAS & ELECTRIC COMPANY'S APPENDIX TO PLAINTIFFS' OPPOSITION TO DEFENDANT'S MOTION TO DISMISS

VOLUME 1 OF 3

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 2 of 95

Index to Appendix Pages Index of Key ISO and PX Tariff Provisions................................................................................. 1-31 Order on Demurrers, Electric Refund Cases, JCCP 4512 (L.A. Sup. Ct., Dec. 4, 2007) ........................................................................................... 32-33 Minute Order, Electric Refund Cases, JCCP 4512 (L.A. Sup. Ct., Jan. 3, 2008) ............................................................................................ 34-37 U.S. Notice of Intervention, Alliant Energy v. Nebraska Pub. Power. Dist., Case No. 62-C5-00-004626 (Minn. Dist. Ct., County of Ramsey, Aug. 18, 2000)......... 38-42 Brief of Appellee S. Cal. Edison Co., S. Cal. Edison Co. v. Lynch, Case Nos. 01-56879, et al. (9th Cir. Feb. 5, 2002) .......................................................... 43-92 Plaintiffs' Memorandum in Opposition to Defendants' Demurrers (Vol. II, Detailed Argument), Electric Refund Cases, JCCP 4512 (L.A. Sup. Ct., Oct. 9, 2007).......................................................................................... 93-216 Southern Cal. Edison Co., 80 FERC ¶ 61,262 (1997) ............................................................. 217-222 Pacific Gas & Elec. Co., 81 FERC ¶ 61,122 (1997) (Excerpt) .............................................. 223-232 Portland General Elec. Co., et al., 83 FERC ¶ 61,315 (1998) ................................................ 233-237 Automated Power Exchange, Inc., 84 FERC ¶ 61,020 (1998) ................................................ 238-256 Automated Power Exchange, Inc., 85 FERC ¶ 61,232 (1998) ................................................ 257-265 Cal. Power Exch. Corp., 92 FERC ¶ 61,096 (2000)................................................................ 266-270 San Diego Gas & Elec. Co., 92 FERC ¶ 61,172 (2000) .......................................................... 271-283 San Diego Gas & Elec. Co., 93 FERC ¶ 61,121 (2000) ......................................................... 284-355 San Diego Gas & Elec. Co., 95 FERC ¶ 61,418 (2001) ......................................................... 356-407 San Diego Gas & Elec. Co., 96 FERC ¶ 61,120 (2001) ......................................................... 408-450 San Diego Gas & Elec. Co., 109 FERC ¶ 61,218 (2004) ........................................................ 451-499 San Diego Gas & Elec. Co., 121 FERC ¶ 61,067 (2007) ....................................................... 500-533 San Diego Gas & Elec. Co., 121 FERC ¶ 61,188 (2007) ....................................................... 534-539 California ex rel. Lockyer, 122 FERC ¶ 61,260 (2008) .......................................................... 540-563 App. i

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 3 of 95

Fact-Finding Investigation of Potential Manipulation of Electric and Natural Gas Prices, FERC Docket No. PA02-2-000 (Mar. 26, 2003) (Excerpt)............................. 564-595 MAPP Restated Agreement, FERC Docket No. ER96-1447-000 (Mar. 29, 1996) (Excerpt) ............................................................................................ 596-639 Letter from Clark Evans Downs on behalf of APX to David Boergers, Secretary of FERC (Aug. 14, 1998) ................................................................................................. 640-674 Power Exchange Settlement and Billing Procedures (PSABP), filed May 7, 2002, by the California PX in FERC Docket No. EL00-95.................... 675-708 WAPA Motion to Intervene, FERC Docket Nos. EL01-1-000, et al. (Oct. 23, 2000)............ 709-714 BPA Motion to Intervene, FERC Docket Nos. EL00-95-000, et al. (Nov. 22, 2000)............. 715-722 Bonneville Power Administration Request for Rehearing and Clarification, FERC Docket Nos. EL00-95, et al. (Jul. 19, 2001) ..................................................... 723-741 Plaintiffs' Amended Claim for Damages (WAPA) (Dec. 20, 2005) ...................................... 742-753 Motion by and Answer of the Bonneville Power Administration (BPA) and the Western Area Power Administration (Western) to the California Parties' Motion Related to Procedures Following Remand in Bonneville Power Administration, et al. v. FERC, FERC Docket Nos. EL00-95-000, et al. (Apr. 17, 2007) .................. 754-774 Thirty-Eighth Status Report of the California Independent System Operator Corporation on Settlement Re-Run Activity, San Diego Gas & Elec. Co., FERC Docket Nos. ER03-746-000, et al. (Sept. 6, 2007) ........................................... 775-795 16 U.S.C. § 824 (2000) ........................................................................................................... 796-798 16 U.S.C. § 824e (2000) .......................................................................................................... 799-801

App. ii

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 4 of 95

Index of Key ISO and PX Tariff Provisions

ISO TARIFF
Citation § 2.2.1 Tariff Provision 2.2.1 Scheduling Responsibilities and Obligations. . . . In contracting for Ancillary Services and Imbalance Energy the ISO will not act as principal but as agent for and on behalf of the relevant Scheduling Coordinators. 2.2.3 Scheduling Coordinator Certification. The ISO shall accept Schedules and bids for Energy and Ancillary Services only from Scheduling Coordinators which it has certified in accordance with Section 2.2.4 as having met the requirements of this Section 2.2.3 . . . . 2.2.3.1 Each Scheduling Coordinator shall: . . . (f) enter into an SC Agreement with the ISO . . . . Page Citation U.S. App. at A249

§ 2.2.3

U.S. App. at A250

§ 2.2.3.1

U.S. App. at A250-A251 U.S. App. at A251

1
§ 2.2.3.2 2.2.3.2 Each Scheduling Coordinator, UDC or MSS shall either maintain an Approved Credit Rating (which may differ for different types of transactions with the ISO) or provide in favor of the ISO one of the following forms of security for an amount to be determined by the Scheduling Coordinator, UDC or MSS and notified to the ISO under Section 2.2.7.3: (a) an irrevocable and unconditional letter for credit confirmed by a bank or financial institution reasonably acceptable to the ISO; (b) [an acceptable surety bond]; (c) [an acceptable guarantee]; (d) [an acceptable cash deposit]; (e) [an acceptable certificate of deposit]; or (f) [an acceptable payment bond certificate] . . . . Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 5 of 95

ISO TARIFF
Citation § 2.2.6 Tariff Provision 2.2.6 Responsibilities of a Scheduling Coordinator. Each Scheduling Coordinator shall be responsible for: 2.2.6.1 Obligation to Pay. Paying the ISO's charges in accordance with this ISO Tariff; 2.2.6.9 ISO Protocols. Complying with all ISO Protocols and ensuring compliance by each of the Market Participants which it represents with all applicable provisions of the ISO Protocols . . . . § 2.3.5 2.3.5 Assurance of Adequate Generation and Transmission to meet Applicable Operating and Planning Reserve. 2.3.5.1.5 Notwithstanding the foregoing [reserve planning rules], if the ISO concludes that it may be unable to comply with the Applicable Reliability Criteria, the ISO shall, acting in accordance with Good Utility Practice, take such steps as it considers to be necessary to ensure compliance, including the negotiation of contracts through processes other than competitive solicitations. § 2.5 2.5 [Auctions.] See, e.g., § 2.5.14 (Formula for Market Clearing Price for the ISO Regulation Auction); § 2.5.15 (Formula for Market Clearing Price for Spinning Reserves); § 2.5.16 (Formula for Market Clearing Price for NonSpinning Reserves); § 2.5.17 (Formula for Market Clearing Price for Replacement Reserve). § 11.1 11. ISO SETTLEMENTS AND BILLING. 11.1 Settlement Principles. 11.1.1 The ISO shall calculate, account for and settle transactions in accordance with the following principles: 11.1.2 The ISO shall be responsible for calculating Settlement balances for all transactions carried out by Index of Key ISO and PX Tariff Provisions U.S. App. at A312; A329; A333; A339-A343 U.S. App. at A513-A514 U.S. App. at A298-A299 Page Citation U.S. App. at A259-A260

2

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 6 of 95

ISO TARIFF
Citation Tariff Provision Scheduling Coordinators on the ISO Controlled Grid in each Settlement Period; 11.1.3 The ISO shall carry out all Settlements in accordance with Meter Data provided pursuant to the requirements of Section 10 of this ISO Tariff; 11.1.6 The ISO shall settle the following charges in accordance with Section 11.2 of this ISO Tariff: (1)Grid Management Charge; (2)Grid Operations Charge; (3)Ancillary Services charges; (4)Imbalance Energy charges; (5)Usage Charges; (6)High Voltage Access Charges and Transition Charges; (7)Wheeling Access Charges; (8)Voltage Support and Black Start charges; and (9)Reliability Must-Run Charges § 11.2 Calculation of Settlements. The ISO shall calculate, account for and settle the following charges in accordance with this ISO Tariff. 11.2.1 ­ 11.2.4 [Grid Management Charge, Grid Operations Charge, Ancillary Services, Imbalance Energy] § 11.2.9 Neutrality Adjustments. The ISO shall be authorized to levy additional charges or payments as special adjustments in regard to: (a) amounts required to round up any invoice amount expressed in dollars and cents to the nearest whole dollar amount in order to clear the ISO Clearing Account. These charges will be Index of Key ISO and PX Tariff Provisions U.S. App. at A519-A520 U.S. App. at A514 Page Citation

3

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 7 of 95

ISO TARIFF
Citation Tariff Provision allocated amongst Scheduling Coordinators over an interval determined by the ISO and pro rata based on metered Demand (including exports) during that interval; (b) amounts in regard to penalties which may be levied by the ISO in accordance with the ISO Tariff. These charges will be levied on the Market Participants liable for payment of the penalty; (c) amounts required to reach an accounting trial balance of zero in the course of the Settlement process in the event that the charges calculated as due from ISO Debtors are lower than payments calculated as due to the ISO Creditors for the same Trading Day. These charges will be allocated amongst the Scheduling Coordinators who traded on that Trading Day pro rata to their metered Demand (including exports) in MWh of Energy for that Trading Day. In the event that the charges due from ISO Debtors are higher than the payments due to ISO Creditors, the ISO shall allocate a payment to the Scheduling Coordinators who traded on that Trading Day pro rata to their metered Demand (including exports) in MWh of Energy for that Trading Day; (d) amounts required with respect to payment adjustments for regulating Energy as calculated in accordance with Section 2.5.27.1. These charges will be allocated amongst the Scheduling Coordinators who traded on that Trading Day pro rata to their metered Demand (excluding exports) in MWh for that Trading Day; and (e) awards payable by or to the ISO pursuant to good faith negotiations or ISO ADR Procedures that the ISO is not able to allocate to or to collect from a Market Participant or Market Participants in accordance with Section 13.5.3. These charges will be allocated amongst Scheduling Coordinators over an interval determined by the ISO and pro rata based on metered Demand (including exports) during that interval. § 11.3 11.3 Billing and Payment Process. 11.3.1 The billing and payment process shall be based on the issuance of Preliminary and Final Settlement Index of Key ISO and PX Tariff Provisions U.S. App. at A521 Page Citation

4

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 8 of 95

ISO TARIFF
Citation Tariff Provision Statements for each Settlement Period in each Trading Day. 11.3.2 Payment for the charges referred to in Section 11.1.6 of the ISO Tariff (except for the charges payable under long term contracts) for each Trading Day in each calendar month shall be made five (5) Business Days after issuance of the Preliminary Settlement Statement for the last day of the relevant calendar month. Payment for adjustments will be made five (5) Business Days after issuance of the Final Settlement Statement for the last day of the relevant month. § 11.6.3 U.S. App. at 11.6.3 Settlement Statement re-runs. The ISO is authorized to perform Settlement Statement re-runs following approval of the ISO Governing Board. A request to perform a Settlement Statement re-run may A525-A526 be made at any time by a Scheduling Coordinator by notice in writing to the ISO Governing Board. The ISO Governing Board shall . . . determine in its reasonable discretion, whether there is good cause to justify the performance of a Settlement Statement re-run. 11.6.3.1 If a Settlement Statement re-run is ordered by the ISO Governing Board, the ISO shall arrange to have the Settlement Statement re-run carried out as soon as is reasonably practicable following the ISO Governing Board's order, subject to the availability of staff and computer time, compatible software, appropriate data and other resources. 11.6.3.2 The cost of a Settlement Statement re-run shall be borne by the Scheduling Coordinator requesting it, unless the Settlement Statement re-run was needed due to a clerical oversight or error on the part of the ISO staff. 11.6.3.3 Where a Settlement Statement re-run indicates that the accounts of Scheduling Coordinators should be debited or credited to reflect alterations to Settlements previously made under this ISO Tariff, for those Scheduling Coordinators affected by the statement re-run, the ISO shall reflect the amounts to be debited or credited in the next Preliminary Settlement Statements that it issues following the Settlement Statement re-run to which the provisions of this Section 11 apply. The net balance of all adjustments shall go into a balancing account, on a debit or credit, to the Grid Management Charge. Page Citation

5
Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 9 of 95

ISO TARIFF
Citation § 11.8.1 Tariff Provision 11.8.1 All Payments to Be Made Through the ISO. All Scheduling Coordinators shall discharge their obligations to pay the amounts owed by them and shall receive payments of all amounts owed to them under this ISO Tariff only through the ISO. 11.8.2 Accounts to be Established. The ISO shall establish and operate the following accounts: 11.8.2.1. An ISO Clearing Account to and from which all payments are made; 11.8.2.2. An ISO Reserve Account from which any debit balances on the ISO Clearing Account at the close of banking business on each Business Day shall be settled or reduced in accordance with this ISO Tariff. The ISO shall use the security provided by a Scheduling Coordinator pursuant to Section 2.2.3.2 of this ISO Tariff, if necessary, to clear any debit balances on the ISO Reserve Account that may arise as a result of that Scheduling Coordinator's failure to pay an amount due under this ISO Tariff. § 11.8.3 11.8.3 Declaration of Trust. All ISO Accounts established pursuant to Section 11.8.2 of this ISO Tariff shall be opened and operated by the ISO on trust for ISO Creditors, in accordance with this ISO Tariff . . . U.S. App. at A528 Page Citation U.S. App. at A528

§ 11.8.2

U.S. App. at A528

6
§ 11.9 § 11.10

11.9 Invoices. The ISO shall prepare and send to each Scheduling Coordinator two invoices for each U.S. App. at calendar month. The first invoice will be based on the Preliminary Settlement Statements and the second A529 invoice will be based on the Final Settlement Statement(s). Each invoice will show amounts which are to be paid by or to each Scheduling Coordinator, the Payment Date, being the date on which such amounts are to be paid or received and details to the ISO Clearing Account to which any amounts owed by Scheduling Coordinators are to be paid. 11.10 Instructions for Payment. Each Scheduling Coordinator shall remit to the ISO Clearing Account the amount shown on the invoice as payable by that Scheduling Coordinator for value not later than 10:00 a.m. on the Payment Date. U.S. App. at A529

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 10 of 95

ISO TARIFF
Citation § 11.16.1 Tariff Provision 11.16.1 Pro Rata Reduction to Payments. If it is not possible to clear the ISO Clearing Account on a Payment Date because of an insufficiency of funds available in the ISO Reserve Account or by enforcing any guarantee, letter of credit or other credit support provided by a defaulting Scheduling Coordinator, the ISO shall reduce payments to all ISO Creditors proportionately to the net amounts payable to them on the relevant Payment Date to the extent necessary to clear the ISO Clearing Account. The ISO shall account for such reduction in the ISO ledger accounts as amounts due and owing by the non-paying ISO Debtor to each ISO Creditor whose payment was so reduced. 11.18 Payment Errors. 11.18.1. Overpayments. If for any reason, including the negligence of the ISO Bank or the ISO, an ISO Creditor receives an overpayment on any Payment Date, the ISO Creditor shall within two (2) Business Days from the date of receipt of the funds into its Scheduling Coordinator Settlement Account, notify the ISO of the amount of the overpayment and shall forthwith pay the overpayment into an ISO Account specified by the ISO. 11.18.2. Repayment of Overpayment. If prior to an ISO Creditor notifying the ISO of the overpayment, the ISO receives notice (from the ISO Bank or otherwise) of the overpayment, the ISO shall within two (2) Business Days notify the recipient of the overpayment. The ISO shall be responsible for payment to those entitled to the sum which has been overpaid. 11.18.3. Underpayments. If for any reason, including the negligence of the ISO Bank or the ISO, an ISO Creditor receives on the relevant Payment Date an underpayment, the ISO Creditor shall within two (2) Business Days from receipt into its Settlement Account, notify the ISO of the amount of the underpayment, and the ISO after consultation with the ISO Bank, shall use all reasonable endeavors to identify such entity as shall have received any corresponding overpayment and promptly correct the underpayment. If, by reason of negligence, the ISO holds or has under its control after five (5) Business Days from receipt in the ISO Clearing Account amounts which it ought properly to have paid to ISO Creditors, such ISO Creditors shall be entitled to interest on such amounts at the ISO Default Interest Rate, for such period as the ISO improperly holds or has such amounts under its control. Index of Key ISO and PX Tariff Provisions Page Citation U.S. App. at A531

§ 11.18

U.S. App. at A531-532

7

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 11 of 95

ISO TARIFF
Citation § 11.19 Tariff Provision 11.19 Defaults. Each ISO Creditor shall give notice to the ISO before instituting any action or proceedings in any court against an ISO Debtor to enforce payments due to it. 11.20 Proceedings to Recover Overdue Amounts. 11.20.1 Proceedings Brought by the ISO. Without prejudice to the right of any Scheduling Coordinator to bring such proceedings as it sees fit it connection with matters related to the recovery of amounts owed to it, the ISO may bring proceedings against any Scheduling Coordinator on behalf of those Scheduling Coordinators who have indicated to the ISO their willingness for the ISO first so to act . . . . 11.20.2 Evidence of Unpaid Amount. The ISO shall, on request, certify in writing the amounts owed by an ISO Debtor that remain unpaid and the ISO Creditors to whom such amounts are owed and shall provide certified copies of the relevant Preliminary and Final Settlement Statements, invoices and other documentation on which the ISO's certificate was based to the ISO Debtor and the relevant ISO Creditors. An ISO certificate given under this Section 11.20.2 may be used as prima facie evidence of the amount due by an ISO Debtor to ISO Creditors in any legal proceedings. § 12 12. Audits. 12.6 Payments. Any payments agreed to between Market Participants and the ISO as a result of an audit, or directed by FERC, or disclosed by the ISO in reviews of its own books and records shall include interest computed at the rate calculated in accordance with the methodology specified for interest on refunds in FERC's regulations at 18 C.F.R § 35.19(a)(2)(iii) (as amended from time to time) from the due date to the date such adjustments are due. § 13.1.1 13. DISPUTE RESOLUTION. 13.1 Applicability 13.1.1 General Applicability. Except as limited below or otherwise as limited by law (including the Index of Key ISO and PX Tariff Provisions U.S. App. at A538; A540-A541 U.S. App. at A535; A538 Page Citation U.S. App. at A532 U.S. App. at A533

§ 11.20

8

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 12 of 95

ISO TARIFF
Citation Tariff Provision rights of any party to file a complaint with FERC under the relevant provisions of the FPA), the ISO ADR Procedures shall apply to all disputes between parties which arise under the ISO Documents except where the decision of the ISO is stated in the provisions of this ISO Tariff to be final . . . . 13.2.4 Mediation. The mediator and representatives of the disputing parties, with authority to settle the dispute, shall within fourteen (14) days after the mediator's date of appointment schedule a date to mediate the dispute. Matters discussed during the mediation shall be confidential and shall not be referred to in any subsequent proceeding. With the consent of all disputing parties, a resolution may include referring the dispute directly to a technical body (such as a WSCC technical advisory panel) for resolution or an advisory opinion, or referring the dispute directly to FERC. The ISO shall publish notice of the referral of the dispute in the ISO newsletter or WEnet, and any other method adopted by the ISO ADR Committee. § 14.3 U.S. App. at 14.3 Market Participant's Indemnity. Each Market Participant, to the extent permitted by law, shall A553 indemnify the ISO and hold it harmless against all losses, damages, claims, liabilities, costs or expenses (including legal expenses) arising from any act or omission of the Market Participant except to the extent that they result from the ISO's default under this ISO Tariff or negligence or intentional wrongdoing on the part of the ISO or its officers, directors or employees. 15. UNCONTROLLABLE FORCES. 15.1 An Uncontrollable Force means any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm, flood, earthquake, explosion, any curtailment, order, regulation or restriction imposed by governmental, military or lawfully established civilian authorities or any other cause beyond the reasonable control of the ISO or Market Participant which could not be avoided through the exercise of Good Utility Practice. Neither the ISO nor a Market Participant will be considered in default of any obligation under this ISO Tariff if prevented from fulfilling that obligation due to the occurrence of an Uncontrollable Force. 15.2 In the event of the occurrence of an Uncontrollable Force, which prevents the ISO or a Market Participant from performing any of its obligations under this ISO Tariff, the affected entity shall (i) if it is the ISO, immediately notify the Market Participants in writing of the occurrence of such Uncontrollable Index of Key ISO and PX Tariff Provisions U.S. App. at A554 Page Citation

9
§ 15

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 13 of 95

ISO TARIFF
Citation Tariff Provision Force and, if it is a Market Participant, immediately notify the ISO in writing of the occurrence of such Uncontrollable Force, (ii) not be entitled to suspend performance of its obligations under this ISO Tariff in any greater scope or for any longer duration than is required by the Uncontrollable Force, (iii) use its best efforts to mitigate the effects of such Uncontrollable Force, remedy its inability to perform and resume full performance of its obligations hereunder, (iv) in the case of the ISO, keep the Market Participants apprised of such efforts, and in the case of the Market Participants, keep the ISO apprised of such efforts, in each case on a continual basis and (v) provide written notice of the resumption of its performance of its obligations hereunder . . . . § 16 16 ISO GRID OPERATIONS COMMITTEE; CHANGES TO ISO PROTOCOLS. 16.2 ISO Protocol Amendment Process. The ISO Governing Board shall establish an ISO Protocol amendment process in order to ensure that all affected parties have an opportunity to participate. Under that process, the ISO shall file for acceptance at the FERC any amendment to an ISO Protocol that is on file with the FERC. § 17 U.S. App. at 17. ASSIGNMENT. Obligations and liabilities under this ISO Tariff and any SC Agreement or other agreements giving contractual effect to this ISO Tariff shall be binding on the successors and assigns of the A556 parties to such agreements. No assignment of any SC Agreement or other agreements giving contractual effect to this ISO Tariff shall relieve the original party from its obligations or liabilities to the ISO under this ISO Tariff or any such agreement arising or accruing due prior to the date of assignment. 18. TERM AND TERMINATION. 18.1 This ISO Tariff, shall become effective on the date it is permitted to become effective by the FERC. 18.2 This ISO Tariff shall terminate upon approval of termination by the ISO Governing Board in accordance with the bylaws of the ISO and receipt of any necessary regulatory approval from FERC. U.S. App. at A556 U.S. App. at A555 Page Citation

10
§ 18

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 14 of 95

ISO TARIFF
Citation § 19 Tariff Provision Page Citation

U.S. App. at 19. Regulatory Filings. Any amendment or other modification of any provision of this ISO Tariff must A556-A557 be in writing and approved by the ISO Governing Board in accordance with the bylaws of the ISO. Any such amendment or modification shall be effective upon the date it is permitted to become effective by FERC. Nothing contained herein shall be construed as affecting, in any way, the right of the ISO to furnish its services in accordance with this ISO Tariff, or any tariff, rate schedule or SC Agreement which results from or incorporates this ISO Tariff, unilaterally to make an application to FERC for a change in rates, terms, conditions, charges, classifications of service, SC Agreement, rule or regulation under FPA Section 205 and pursuant to the FERC's rules and regulations promulgated thereunder. Nothing contained in this ISO Tariff or any SC Agreement shall be construed as affecting the ability of any Market Participant receiving service under this ISO Tariff to exercise its rights under Section 206 of the FPA and FERC's rules and regulations thereunder. 20.7 Applicable Law and Forum. This ISO Tariff shall be governed by and construed in accordance with the laws of the State of California, except its conflict of laws provisions. Market Participants irrevocably consent that any legal action or proceeding arising under or relating to this ISO Tariff to which the ISO ADR Procedures do not apply, shall be brought in any court of the State of California or any federal court of the United States of America located in the State of California. Market Participants irrevocably waive any objection that they may have now or in the future to said courts in the State of California as the proper and exclusive forum for any legal action or proceeding arising under or related to this ISO Tariff. 20.8 Consistency with Federal Laws and Regulations. U.S. App. at A561-A562

§ 20.7

11

§ 20.8

U.S. App. at A562

(a) Nothing in the Tariff shall compel any person or federal entity to: (1) violate federal statutes or regulations; or (2) in the case of a federal agency, to exceed its statutory authority, as defined by any applicable federal statutes, regulations, or orders lawfully promulgated thereunder. If any provision of this Tariff is inconsistent with any obligation imposed on any person or federal entity by federal law or regulation to that extent, it shall be inapplicable to that person or federal entity. No person or federal entity shall incur any liability by failing to comply with a Tariff provision that is inapplicable to it by reason of being inconsistent with any federal statutes, regulations, or orders lawfully promulgated thereunder; provided, Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 15 of 95

ISO TARIFF
Citation Tariff Provision however, that such person or federal entity shall use its best efforts to comply with the Tariff to the extent that applicable federal laws, regulations, and orders lawfully promulgated thereunder permit it to do so. APPENDIX A Master Definitions Supplement ISO TARIFF APPENDIX A, MASTER DEFINITIONS SUPPLEMENT ISO Creditor. (i) A Scheduling Coordinator to which amounts are payable pursuant to the terms of the ISO Tariff with respect to the amounts standing to the credit of its account; or amounts owing to it by another Scheduling Coordinator . . . . ISO Debtor. A Scheduling Coordinator or a Participating TO that is required to make a payment to the ISO under the ISO Tariff. ISO Tariff. The California Independent System Operator Corporation Operating Agreement and Tariff, dated March 31, 1997, as it may be modified from time to time. Market Clearing Price. The price in a market at which supply equals Demand. All Demand prepared to pay at least this price has been satisfied and all supply prepared to operate at or below this price has been purchased. Market Participant. An entity, including a Scheduling Coordinator, who participates in the Energy marketplace through the buying, selling, transmission, or distribution of Energy or Ancillary Services into, out of, or through the ISO Controlled Grid. SC Agreement. An agreement between a Scheduling Coordinator and the ISO whereby the Scheduling Coordinator agrees to comply with all ISO rules, protocols and instructions, as those rules, protocols and instructions may be amended from time to time. U.S. App. at A598 Page Citation

Master Definitions Supplement

U.S. App. at A598 U.S. App. at A600 U.S. App. at A603

12

Master Definitions Supplement Master Definitions Supplement

Master Definitions Supplement

U.S. App. at A604

Master Definitions Supplement

U.S. App. at A618

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 16 of 95

ISO TARIFF
Citation Master Definitions Supplement APPENDIX B Scheduling Coordinator Agreement Tariff Provision Scheduling Coordinator. An entity certified by the ISO for the purposes of undertaking the functions specified in Section 2.2.6 of the ISO Tariff. ISO TARIFF APPENDIX B, SCHEDULING COORDINATOR AGREEMENT [Preamble] Whereas: A. The Scheduling Coordinator has applied for certification by the ISO under the certification procedure referred to in Section 2.2.3 of the ISO Tariff. B. The Scheduling Coordinator wishes to schedule Energy and Ancillary Services on the ISO Controlled Grid under the terms and conditions set forth in the ISO Tariff. U.S. App. at A632 Page Citation U.S. App. at A619

13

Scheduling Coordinator Agreement

2. Covenant of the Scheduling Coordinator The Scheduling Coordinator agrees that: A. the ISO Tariff governs all aspects of scheduling of Energy and Ancillary Services on the ISO Controlled Grid, including (without limitation), the financial and technical criteria for Scheduling Coordinators bidding, settlement, information reporting requirements and confidentiality restrictions; B. it will abide by, and will perform all of the obligations under the ISO Tariff placed on Scheduling Coordinators in respect of all matters set forth therein including, without limitation, all matters relating to the scheduling of Energy and Ancillary Services on the ISO Controlled Grid, ongoing obligations in respect of scheduling, Settlement, system security policy and procedures to be developed by the ISO from time to time, billing and payments, confidentiality and dispute resolution;

U.S. App. at A632-A633

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 17 of 95

ISO TARIFF
Citation Tariff Provision F. its status as a Scheduling Coordinator is at all times subject to the ISO Tariff. Page Citation

Scheduling Coordinator Agreement

3. Term and Termination 3.2. This Agreement shall terminate upon acceptance by FERC of a notice of termination. The ISO Shall timely file any notice of Termination with FERC.

U.S. App. at A633

Scheduling Coordinator Agreement

8. Agreement to be bound by ISO Tariff The ISO Tariff is incorporated herein and made a part hereof. In the event of a conflict between the terms and conditions of this Agreement and any other terms and conditions set forth in the ISO Tariff, the terms and conditions of the ISO Tariff shall prevail.

U.S. App. at A634

14

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 18 of 95

PX TARIFF
Citation INTRODUCTORY STATEMENT Tariff Provision INTRODUCTORY STATEMENT. The California Power Exchange Corporation . . . is a nonprofit corporation, incorporated under the laws of the state of California, for the primary purpose of providing an efficient, competitive Energy auction open on a non-discriminatory basis to all suppliers and purchasers, that meets the loads of exchange customers at market prices, and for such other purposes as are provided for in its bylaws. This [Tariff] sets forth the specific FERC-jurisdictional services provided by the PX and the terms, conditions and charges for such services. No party will be provided services by the PX which are subject to the jurisdiction of the FERC except on the terms in this Tariff. 1.3 In this Tariff, unless the context otherwise requires: . . . (f) references to any section of the ISO Tariff shall be deemed to refer to that section and any applicable successor section or provision that the ISO may lawfully make effective from time to time pursuant to applicable FPA and FERC procedures. 1.4 In this Tariff, the term "PX Operating Manual" means the compilation of detailed operating procedures, practices and activity rules issued by the PX, as modified from time to time by the PX and posted on the PX's Home Page in accordance with the provisions of the PX Operating Manual. Participation in the PX Markets pursuant to this Tariff shall obligate the PX Participant to conform to all applicable provisions of the PX Operating Manual. Page Citation U.S. App. at A7

DEFINITIONS AND INTERPRETATIONS, §1.3(f) DEFINITIONS AND INTERPRETATIONS, §1.4

U.S. App. at A7-A8

U.S. App. at A8

15

REQUIREMENTS FOR 2.6.2 Procedure. U.S. App. at PARTIES TO A14 PARTICIPATE IN PX (f) The PX Applicant shall become a PX Participant when, following acceptance of its application, it has MARKETS, § 2.6.2 entered into a participation agreement with the PX and has met the PX creditworthiness requirements set out in Section 2.4. RESPONSIBILITIES OF THE PX AND PX PARTICIPANTS, § 3.1 3.1 Responsibilities of the PX. U.S. App. at A15-A16

The PX shall be the Scheduling Coordinator under the ISO Tariff for those Eligible Customers for which a PX Participant has appointed it to act as the Scheduling Coordinator responsible for their meters or any other Eligible Customers for which the PX is required by tariff, regulation, or law to act as Scheduling Coordinator. The PX shall (1) calculate the prices at which trades in Energy are transacted in the PX Markets, (2) settle trades in Energy between PX Participants, (3) receive Meter Data from the Scheduling Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 19 of 95

PX TARIFF
Citation Tariff Provision Coordinator Metered Entities represented by the PX Participants in order to allocate to PX Participants costs incurred by the PX under this Tariff and the ISO Tariff in acting as the Scheduling Coordinator and/or in buying or selling Energy to non-PX Scheduling Coordinators, (4) prepare and distribute to PX Participants invoices reflecting the amounts payable and receivable by them in connection with their trading through the PX, and (5) operate the funds transfer system described in this Tariff to facilitate the payment of such invoices. In carrying out its responsibilities under this Tariff, the PX shall at all times exercise due care and shall operate in a non-discriminatory manner. The PX will not be, and shall not be deemed to be, a counterparty to any trade transacted through the PX Markets. RESPONSIBILITIES OF THE PX AND PX PARTICIPANTS, § 3.8 3.8 Market Clearing Price Determination. For each of the Settlement Periods in the Trading Day, the PX shall create an aggregate Energy Supply curve by combining all Supply Bids and an aggregate Energy Demand curve by combining all Demand Bids. For each Settlement Period, the Market Clearing Price is determined by the point at which the Supply and Demand Curves intersect. The hourly schedule for each Demand, Generation or portfolio is then calculated as the MW bid at the Market Clearing Price on the bid curve. The methodology for determining the Market Clearing Price is set forth in Schedule 3 ("Determination of Market Clearing Price"). 6.2 Settlements Process. The PX shall settle with each PX Participant for Energy traded in the PX Markets in the manner set forth in Schedule 6 ("PX Market Settlements"). 13 REGULATORY FILINGS. Any amendment or other modification of any provision of this Tariff must be in writing and approved by the PX Governing Board in accordance with the bylaws of the PX. Any such amendment or modification shall be effective upon the date it is permitted to become effective by FERC. Nothing contained herein shall be construed as affecting, in any way, the right of the PX to unilaterally make application to FERC for a change in this Tariff or any rates, term and conditions, charges, classification of service, service agreement, participation agreement, or rate schedule, rule or regulation under Section 205 of the FPA and pursuant to the FERC's rules and regulations promulgated thereunder. Nothing contained in this Tariff or any service or participation agreement shall be construed as affecting, in any way, the ability of any PX Participant receiving service under this Tariff to exercise its rights under Section 206 of the FPA and pursuant to FERC's rules and regulations promulgated thereunder. U.S. App. at A21 Page Citation

16
SETTLEMENTS AND BILLING, § 6.2 REGULATORY FILINGS, § 13

U.S. App. at A25 U.S. App. at A29-A30

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 20 of 95

PX TARIFF
Citation LIABILITY AND INDEMNIFICATION, § 14.3 Tariff Provision Page Citation

14.3 PX Participant's Indemnity. Each PX Participant shall, to the extent permitted by law, indemnify U.S. App. at A30-A31 the PX and hold it harmless against all losses, damages, claims, liability, costs or expenses (including legal expenses) arising from any act or omission of the PX Participant, except to the extent that they result from the PX's default under this Tariff or negligence or intentional wrongdoing on the part of the PX or of its officers, directors or employees. 15.6 Payments. Any payment agreed to be made by the PX to PX Participants or by PX Participants to the PX as a result of an audit, or directed by FERC, or disclosed by the PX in reviews of its own books and records shall include interest, from the due date to the date on which such adjustments are due, computed at the rate calculated in accordance with the methodology specified for interest on refunds in FERC's regulations at 18 CFR § 35.19a(2). U.S. App. at A33

AUDITS, § 15.6

UNCONTROLLABLE FORCES, § 16.1

U.S. App. at 16.1 Consequences of Uncontrollable Force. An Uncontrollable Force means any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm, flood, earthquake, explosion, any A34 curtailment, order, regulation or restriction imposed by governmental, military or lawfully established civilian authorities or any other cause beyond the reasonable control of the PX or a PX Participant which could not be avoided through the exercise of Good Utility Practice. Neither the PX nor a PX Participant will be considered in default of any obligation under this Tariff if prevented from fulfilling that obligation due to the occurrence of an Uncontrollable Force. 16.2 Duty to Mitigate. In the event of the occurrence of an Uncontrollable Force, which prevents the PX or a PX Participant from performing any of its obligations under this Tariff, the affected entity shall [give written notice of Uncontrollable Force, not be entitled to suspend performance any longer than is required], use its best efforts to mitigate the effects of such Uncontrollable force, remedy its inability to perform and resume full performance of its obligations hereunder . . . . U.S. App. at A34

17
UNCONTROLLABLE FORCES, § 16.2 ASSIGNMENT, § 17

17 ASSIGNMENT. Obligations and liabilities under this Tariff and any service or participation U.S. App. at agreement relating to this Tariff shall be binding on the successors and assigns of the parties to the A35 service or participation agreement. No assignment of any service or participation agreement shall relieve the original PX Participant from its obligations or liabilities to the PX under this Tariff or any such service or participation agreement arising or accruing due prior to the date of assignment. Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 21 of 95

PX TARIFF
Citation Tariff Provision Page Citation U.S. App. at A35

TERM AND 18.1 Effective Date. This Tariff shall become effective on the date it is permitted to become effective TERMINATION, § 18.1 by FERC.

TERM AND 18.2 Termination of Tariff. This Tariff shall terminate upon approval of termination by the PX TERMINATION, § 18.2 Governing Board in accordance with the bylaws of the PX and receipt of any necessary regulatory approval from FERC. MISCELLANEOUS, § 19.1.3

U.S. App. at A35

U.S. App. at 19.1.3 Notice of Changes in Operating Rules and Procedures. The PX shall give all PX Participants notice of at least thirty (30) days of any changes or proposed changes in the PX Operating Manual, unless A36-A37 (1) a different notice period is specified by state or Federal law or (2) the change is reasonably required to address the PX's operating needs, including emergency conditions, a change in the rules, procedures or practices of the ISO, and any software limitation of the PX, in which case the PX shall give PX Participants as much notice as is reasonably practicable. The PX Operating manual [sic] shall set forth procedures for amending its contents and for consideration of input regarding such amendments from interested PX Participants. 19.6 Applicable Law and Forum. This Tariff shall be governed by and construed in accordance with the law of the State of California, except its conflict of laws provisions; provided however, that if a party is a federal entity that party shall be governed by applicable federal law. PX Participants irrevocably consent that any legal action or proceeding arising under or relating to this Tariff to which the PX ADR Procedures do not apply shall be brought either in any court of the State of California, a federal court of the United States of America located in the State of California, or, with respect to federal entities, a federal court of competent jurisdiction. PX Participants irrevocably waive any objection that they may have now or in the future to courts located in the State of California, or in the case of a federal entity, such other courts consistent with applicable federal law, as the proper and exclusive forum for any legal action or proceeding arising under or relating to this Tariff. U.S. App. at A39

18
MISCELLANEOUS, § 19.6

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 22 of 95

PX TARIFF
Citation SCHEDULE 2 SCHEDULE 2, § 1.1 Tariff Provision Page Citation

SCHEDULE 2, PX CLEARINGHOUSE CREDIT POLICIES, BUSINESS PRACTICES AND BANKING 1.1 Initial Financial Requirements. Each Core Market Participant must meet each of the following minimum financial requirements in order to become certified to trade in the Core Market: · · · Provide the PX with its latest annual audited financial statements or other equivalent evidence of solvency and creditworthiness; Not be in default of any of its obligations to the PX; and Make a collateral deposit, as described in Section 2 of this Schedule, to cover expected collateral requirements resulting from expected Core Market activities. U.S. App. at A55 U.S. App. at A51

SCHEDULE 2, § 2

2. PX Participant Collateral. Each PX Participant shall post collateral for 100% of its requirements in excess of the unsecured line of credit in order to participate in the CTS and Core Markets. PX Participants are expected to maintain sufficient collateral so that, in most instances, additional daily collateral collections will not be required. If a Core Market PX Participant is also a CTS Participant, then the collateral shall be applied to the aggregate collateral requirement for both the Core and CTS Markets. 4.1 The Monthly Day-Ahead / Day-Of and Real Time Invoice. The PX shall prepare and send to each PX Participant an invoice which reflects all payments and charges related to PX services or market involvement for the market and timeframe indicated on the invoice. 4.3 PX Payment Procedures. . . . . All PX Participants shall honor their obligations to pay all of the amounts owed to the PX in a timely manner. 4.3.3 Overpayments. If for any reason a PX Creditor receives on any Payment Date more than the amount to which it is entitled under the PX Tariff, it shall notify the PX within two (2) Business Days from the date of receipt of the funds into its Participant Settlement Account of the overpayment and shall forthwith pay the excess amount into a PX Account specified by the PX.

19
SCHEDULE 2, § 4.1 SCHEDULE 2, § 4.3 SCHEDULE 2, § 4.3.3

U.S. App. at A59

U.S. App. at A59 U.S. App. at A60

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 23 of 95

PX TARIFF
Citation SCHEDULE 2, § 4.3.4 Tariff Provision 4.3.4. Repayment of Overpayments. If prior to a PX Creditor notifying the PX of the overpayment pursuant to Section 4.3.3 above, PX receives notice (from the PX Bank or otherwise) of the overpayment, the PX shall within two (2) Business Days notify the recipient of the overpayment. The PX shall be responsible for ascertaining the identity of those Participants entitled to receive amounts overpaid to another PX Participant and for disbursing those funds to the persons entitled to them promptly after they are returned in accordance with Section 4.3.3 above. 5.2.4 Defaults in Excess of PX Participant Collateral and Pool Performance Bond. Any PX debtor's residual liabilities that are not remedied through the mitigation process described above shall be allocated to each non-defaulting PX Participant according to the proportional charge-back methodology described in 5.2 [sic. 5.3] of this Schedule. For the purpose of calculating the proportional charge-back, one PX Participant defaulting on one payment obligation constitutes a single event of default. Page Citation U.S. App. at A60

SCHEDULE 2, § 5.2.4

U.S. App. at A63

SCHEDULE 2, § 5.3

5.3 PX Core Market Proportional Charge-Back Methodology. In the event that amounts owed to the U.S. App. at PX Participants on a payout date cannot be fully paid due to an insufficiency of funds in the PX clearing A63 accounts, the PX will allocate the shortage to the PX Participants using the proportional charge-back methodology described below. If payments are recovered, they will be remitted to the relevant PX Participants on the same basis using the same ratio as the original charge-back. Default charge-back to PX CORE MARKET participants shall be assessed using the following methodology: The PX Participant's outstanding default amount will be charged back to all current PX Participants based upon the percentage of its gross sales in MWhs to the total gross MWhs sales in the Core Market during the three calendar months preceding the event plus the current month-to-date.

20
SCHEDULE 2, § 5.5

5.5 Identification of Defaulting Participant. When default charge-backs are allocated to PX Participants under Section 5 of this Schedule, the PX will identify the defaulting Participant to all other affected PX Participants by the most expeditious means available.

U.S. App. at A64

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 24 of 95

PX TARIFF
Citation SCHEDULE 2, § 6.1 Tariff Provision 6.1 Declaration of Trust. All PX Accounts established pursuant [sic] this section shall be opened and operated by the PX in trust for the PX Participants. Each such account shall be maintained at a bank or other financial institution residing in the United States. 6.5 PX Authorization to Operate Bank Accounts. The PX shall establish and operate the following accounts: 1. Clearing Account. The account in which all payments from and to PX Participants are made during cash clearing cycles. 2. Adjustment Account. Where, in the course of the Settlement and Billing process referred to in the PSABP, the PX determines that the Charges calculated as due from PX Debtors are higher or lower than the Payments calculated as due to PX Creditors in relation to the same Trading Day, the PX shall on the Payment Date credit or debit the Adjustment Account and transfer such funds from or to the Clearing Account to balance the Clearing Account to zero. . . . In the event that there are accumulated funds standing in credit of the Adjustment Account in excess of an amount to be determined by the PX Governing Board, such excess shall be distributed to PX Participants in a manner to be determined by the PX Governing Board. . . . Any amounts paid to the PX in respect of acts or defaults giving rise to default interest, penalties, damages, fines, losses, reimbursement of costs or expenses, or other similar payments by PX Participants, shall be first applied to reimburse the PX the expense, loss or cost the PX has incurred or will incur as a result of such act or default. The excess shall then be credited to the Adjustment Account. All amounts standing to the credit or debit of the Adjustment Account shall be held at all times in trust for PX Creditors. 3. Suspense Account. If, in the course of the Settlement and Billing process, the PX determines that the charges or payments referred to in the ISO Settlements file contain insufficient information to settle with PX Participants, the PX will, on the Payment Date, credit or debit the Suspense Account and transfer Index of Key ISO and PX Tariff Provisions Page Citation U.S. App. at A64

SCHEDULE 2, § 6.5

U.S. App. at A64-A67

21

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 25 of 95

PX TARIFF
Citation such funds from or to the Clearing Account. The Suspense Account shall only be used for the credits or debits described above in the event that the amount to be credited, or debited, for one or more charges or payments does not exceed a certain amount, the level of which will be determined by the PX Governing Board from time to time. If such amount exceeds the maximum level, the PX will take further actions with the ISO to obtain the information necessary to settle the charges. If, at some point, the PX Governing Board determines that it is necessary to allocate the payments and charges held in this account, the PX will do so in a manner approved by the PX Governing Board and post notice of the action on its Home Page. 4. Liquidity Credit Line. The proceeds of drawings under this credit line shall primarily be used as a means to temporarily bridge any gap in the cash clearing timeline to PX Creditors and the ISO to the extent funds are available in the PX Liquidity Credit Line. Possible causes for timing gaps in the clearing cycle include but are not limited to the following: defaults, bankruptcies, late payments and system malfunctions. Once all outstanding obligations have been collected, the Liquidity Credit Line shall be promptly paid-off. The cost of funding and operating the PX (net of default interest paid by PX Debtors on Default Amounts advanced from the PX Credit Line) shall be recoverable through the PX Administration Charge. 5. Other accounts. The PX may maintain any other accounts that it deems necessary or convenient. Each such account shall be maintained at a bank or other financial institution selected by the PX in its sole discretion. No PX Participant shall have any beneficial or other right to any funds in any PX accounts except in accordance with this Tariff. The PX is authorized to establish and maintain bank accounts and obtain lines of credit and other banking facilities it deems necessary or convenient for the operation of its billing and payment systems. The PX shall keep funds standing to the credit of a PX Participant for the PX market completely separate from funds for the CTS markets. Tariff Provision Page Citation

22

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 26 of 95

PX TARIFF
Citation SCHEDULE 3 Tariff Provision SCHEDULE 3, DETERMINING MARKET CLEARING PRICE U.S. App. at A70 Page Citation

Schedule 3, 1.0 Methodology. On each Trading Day, the PX shall, for each Settlement Period in that Trading Day, Determination of Market create an aggregate Energy Supply curve by combining all Supply Bids and an aggregate Energy Clearing Price Demand curve by combining all Demand Bids. 1.1 Identifying the Point of Intersection In Certain Cases. [T]he point of intersection will be determined by a direct calculation. The initial Market Clearing Price will then be set at the intersection price, so that all PX Sellers, with a portion of their output priced at or below the initial Market Clearing Price will be selected . . ., and all Demand priced at or above the Market Clearing Price will be selected . ...

23

SCHEDULE 6 Schedule 6, PX Market Settlement, § 1

SCHEDULE 6, PX MARKET SETTLEMENTS 1.0 Settlements for Day-Ahead Commitments. 1.1 Energy. The PX shall settle with each PX Participant for Energy traded in the Day-Ahead Market in each Settlement Period on the basis of the PX Participant's Day-Ahead commitment and the corresponding Day-Ahead Market Clearing Price in the relevant Zone or at the relevant Scheduling Point, as applicable, for that Settlement period, as follows: 1.1.1 PX Sellers. Each PX Seller shall be credited with an amount equal to its scheduled sales of Energy multiplied by the Generation Meter Multiplier in each Settlement Period multiplied by the DayAhead Market Clearing Price applicable to the relevant Zone or Scheduling Point for that Settlement Period. 1.1.2 PX Buyers. Each PX Buyer shall be debited by the PX with an amount equal to its scheduled purchase of Energy in each Settlement Period multiplied by the Day-Ahead Market Clearing Price applicable to the relevant Zone or Scheduling Point for that Settlement Period. Index of Key ISO and PX Tariff Provisions U.S. App. at A119

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 27 of 95

PX TARIFF
Citation Schedule 6, PX Market Settlement, § 2 Tariff Provision 2.0 Settlements for Hour-Ahead Commitments. 2.1 Energy. The PX shall settle with each PX Participant for Energy traded in the Hour-Ahead Market in each Settlement Period on the basis of that PX Participant's purchases or sales and the corresponding Hour-Ahead Market Clearing Price in the relevant Zone for that Settlement Period. 2.1.1 PX Sellers. Each PX Seller that is a Generator shall be credited by the PX with an amount equal to any increase (or shall be debited by the PX an amount equal to any decrease) in its scheduled Generation compared with its scheduled Generation in the Day-Ahead Market multiplied by the HourAhead Market Clearing Price applicable to the relevant Zone or Scheduling Point for that Settlement Period. 2.1.2 PX Buyers. Each PX Buyer that is a Demand shall be debited by the PX with an amount equal to any increase (or shall be credited by the PX with an amount equal to any decrease) in its scheduled Energy compared with its scheduled Energy in the Day-Ahead Market multiplied by the Hour-Ahead Market Clearing Price applicable to the relevant Zone or Scheduling Point for that Settlement Period. APPENDIX A PX PARTICIPATION AGREEMENT, § I PX PARTICIPATION AGREEMENT I. Definitions A. Terms and expressions used in this Agreement shall have the same meanings as those contained in the Master Definitions Supplement to the PX Tariff. B. The "PX Tariff" shall mean the PX FERC Electric Service Tariff as amended from time to time, together with any Schedules, Appendices or attachments thereto. PX PARTICIPATION AGREEMENT, § II II. Covenant of the PX Participant The PX Participant agrees that: U.S. App. at A167 U.S. App. at A167 Page Citation U.S. App. at A120-A121

24

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 28 of 95

PX TARIFF
Citation Tariff Provision A. the PX Tariff governs all aspects of trading in and administration of the PX Market, including (without limitation), the financial and technical criteria for PX Participants, bidding, Settlement, information reporting requirements and confidentiality restrictions; B. it will abide by, and will perform all of the obligations under the PX Tariff in respect of all matters set forth therein including, without limitation, all matters relating to the trading of Energy by it through the PX Markets, ongoing obligations in respect of bidding, Settlement, security requirements, billing and payments, confidentiality and dispute resolution; and C. its status as a PX Participant is at all times subject to the PX Tariff . . . . PX PARTICIPATION AGREEMENT 3. Term and Termination This Agreement shall commence on the later of (a) [date of agreement] or (b) the date the PX Participant is certified by the PX as a PX Participant and shall terminate upon acceptance by FERC of the Notice of Termination. The PX shall timely file a Notice of Termination. 4. Assignment Either party may assign its obligations under this Agreement with the other party's prior consent, not to be unreasonably withheld. 8. Incorporation of Tariff. The PX Tariff is incorporated herein and made a part hereof. In the event of a conflict between the terms and conditions of this Agreement and any other terms and conditions set forth in the PX Tariff, the terms and conditions of the PX Tariff shall prevail. 10. Payment Obligations. All obligations to pay amounts or perform obligations due with respect to the PX Tariff and any other Index of Key ISO and PX Tariff Provisions U.S. App. at A168-A169 Page Citation

25

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 29 of 95

PX TARIFF
Citation Tariff Provision charges, taxes or other expenses related to this Agreement (including, without limitation, expenses pursuant to the Meter Service Agreement) or the PX Participant's trading in the PX Markets generally shall be the sole responsibility of the PX Participant. APPENDIX B Appendix B, Master Definitions Supplement PX TARIFF APPENDIX B, MASTER DEFINITIONS SUPPLEMENT Market Clearing Price. The price in a market at which supply equals Demand. All Demand prepared to pay at least this price has been satisfied and all supply prepared to operate at or below this price has been purchased. Market Participant. An entity, including a Scheduling Coordinator, who participates in the Energy marketplace through the buying, selling, transmission, or distribution of Energy or Ancillary Services into, out of, or through the ISO Controlled Grid. U.S. App. at A187 Page Citation

Appendix B, Master Definitions Supplement

U.S. App. at A187

Appendix B, Master Definitions Supplement

PX Creditor. Each PX Participant to whom monies are payable pursuant to the terms of the PX Tariff in U.S. App. at respect of: (i) the amounts standing to the credit of its account with the PX Reserve Account; or (ii) A191 amounts owing to it by another PX Participant. PX Debtor. Each PX Participant that is required to make a payment to the PX under the PX Tariff. U.S. App. at A191 U.S. App. at A192

26

Appendix B, Master Definitions Supplement Appendix B, Master Definitions Supplement

PX Participant. An entity that is authorized to buy or sell Energy or Ancillary Services through the PX, and any agent authorized to act on behalf of such entity.

Index of Key ISO and PX Tariff Provisions

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 30 of 95

PX OPERATING MANUAL / POWER EXCHANGE SETTLEMENT AND BILLING PROCEDURES (PSABP)
Citation § 1.2.5, Financial Transactions Involving the ISO Tariff Provision §1.2.5. Financial Transactions Involving the ISO In this PSABP, three different types of financial transactions involving the ISO have been identified. These are described below. (a) For some transactions the ISO (acting as agent for the Market Participants) makes payments to or receives payments from the PX (acting as agent for the PX Participants) and identifies to which Resource ID this payment applies. The PX shall make a Payment to, or require a Charge from, the relevant PX Participant equal to this amount. (b) For some transactions the ISO (acting as agent for the Market Participants) makes payments to or receives payments from the PX (acting as agent for the PX Participants) and the PX shall share out the Payment or Charge from the ISO across the PX Participants. Page Citation App. at 678679

27
§ 2.1, PX Accounts

(c) In the case of the ISO's Payments in respect of the ISO's Monthly Grid Management Payment, the ISO is a principal and the monies paid by the PX are to the ISO's Account. In the transaction types identified in PSABP Sections 1.2.5(a) and (b) and above, a payment from the ISO to either the PX or the PX Participants is identified as a Charge on the ISO and a payment from the PX or PX Participants to the ISO is identified as a Payment to the ISO. In each case the ISO's Payment and Charge is with the ISO acting as an Agent for the Market Participants and not as a principal in the transaction. Such transaction types are characterized by the inclusion of the words "the PX and ISO both acting as Agents". 2.1 PX Accounts. The following PX Accounts have been established pursuant to the provisions of the PX Tariff (Schedule 7): 2.1.1 The PX Clearing Account. The PX Clearing Account is an account to and from which all payments are made. Details of the PX Clearing Account will appear in the invoices sent by the PX to PX Participants. 2.1.2 The PX Reserve Account. The PX Reserve Account is an account from which any debit Index of Key ISO and PX Tariff Provisions App. at 686

Case 1:07-cv-00184-LAS

Document 47-3

Filed 05/20/2008

Page 31 of 95

PX OPERATING MANUAL / POWER EXCHANGE SETTLEMENT AND BILLING PROCEDURES (PSABP)
Citation Tariff Provision balances on the PX Clearing Account are settled in accordance with the PX Tariff. (a) The proceeds of drawings under any line of credit or other banking facility of the PX Reserve Account shall be held in trust for PX Creditors; (b) If the Reserve Account is replenished as provided for in PSABP Section 5.9, any credits shall be held in trust for all PX Creditors. 2.1.3 The PX Adjustment Account. The PX Adjustment Account is used for the purposes described in PSABP Section 2.2. 2.1.4 The PX Suspense Account. The PX Suspense Account is used for the purposes described in PSABP Section 2.4. § 5.2, Resolution of Disputes Relating to Preliminary Settlement Statements 5.2 Resolution of Disputes Relating to Pre