Box 19DO. Statio, "M"

110-12th Avenue S \,'V.

Calga y. Alberta

4LJ J ,'i

7 (.:;03:; 267 711!3

January 18, 2013

Mr. Kevin Wiens

Senior Technical SpecialistAlberta Electric System OperatorCalgary Place2500, 330 - 5th Ave SW

Calgary AB T2P OL4

Dear Mr. Wiens:

Re: Comments concerning Proposed New ISO Rules Section 502.5 Version 2.0,Generating Unit Technical Requirements and Section 502.6 Version 1.0 Generating

Unit Operating Requirements

Attached are the comments of TransAlta Corporation concerning ISO Rules Section 502.5 (Rule 502.5)version 2.0 published and Section 502.6 Version 1.0 Generating Unit Operating Requirements by theAESO through its November 29, 2012 Letter of Notice. In TransAlta's view, the comments have not been

adequately addressed by the AESO.

TransAlta does not agree that it is appropriate to reference the ESBI document in AESO response 68 of

its reply to stakeholder comments. As set out in its Scope, section 1.1, page 4, the ESBI document onlyspecified: 'the general technical requirements for connecting (or upgrading) a new (or previouslyisolated) generating facility to Alberta's Interconnected Electric System". The interconnection of existing

units was handled by ESBI through the Terms and Conditions of the tariff and included Article 4 (SystemSupport Services), Article 5 (Interconnection Requirements) and Appendix E (System Support Services).The Alberta Energy and Utilities Board in Decisions 2000-25 and 2000-46 severely limited the ability ofESBI as the transmission administrator to compel the provision of System Support Services as acondition of connection. The findings of the Board in these two decisions have not been challenged or

amended.

According to the AESO (response 26) Rule 502.5 is applicable to all generating units whether new,existing or modified. Comparisons between the ESBI document and Rule 502.5 would appear to beinappropriate unless the ESBI Terms and Conditions of the tariff as amended by the Board Decisions areconsidered. TransAlta's February 14, 2012 letter to the AESO, containing TransAlta's comments on thefirst draft of Rule 502.5, explained in detail how Decision 2000-46 should be reflected in Rule 502.5.

TransAIta continues to object to the Voltage Ride-Through Requirements Subsection 6 in Rule 502.5version 2.0. The continuous operation capability of the generator is 95%-105% of the generator rated

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terminal voltage as per the IEEE (Institute of Electrical and Electronics Engineers). Based on this, theremay be concerns with the continuous operation of the generator for a voltage range of 90%-110% at theHV side of the GSU. This requires study and should be included in technical consultation.

TransAIta continues to believe the impact of Rule 502.5 version 2.0 is significant and requires a technicalconsultation meeting to review, clarify and substantiate the requirements of each subsection. Ofparticular concern (highlighted in AESO response 71) is the AESO's assumption that an owner'smaintenance work is always undertaken in order to maintain original as-new capability, meeting the

original design basis. For the most part this is customary practice in the early to midlife of generators,however, this assumption is flawed when applied to equipment that is operating beyond the originaldesign life . Prudent maintenance and mitigations applied to manage the reasonable probabilities offailure may in many cases be inconsistent with what is required to restore generators to an as-newcondition. Although the standard provides for an exemption to be requested it is apparent that thisprocess is technically insufficient in that the justification merely considers stability as the issue to beaddressed and provides no tolerance in terms of equipment operating beyond the design life or

equipment found to be deficient in the original design.

TransAlta does not believe that an extension of the consultation period will compromise the integrity ofthe consultation process. While we recognize and sympathize with the AESO's sense of urgency to moveforward this particular rule, TransAlta respectfully submits that the concerns expressed with respect to

Rule 502.5 and Rule 502.6 suggest more work is required.

In May 2007 the AESO sent a letter to stakeholders addressing reactive power. TransAIta respondedJune 8, 2007 to the AESO letter. TransAIta never received a reply to its letter and therefore the issuessurrounding reactive power continue unresolved. The consultation process for ISO Rules Section 502.5is the forum to come to an acceptable outcome for all parties. In our February 14, 2012 letter to theAESO as part of our comments on the first draft Rule 502.5 we again discussed the importance ofreactive power and the requirement for a separate meeting on this issue to finally resolve it. TransAItamaintains that the AESO should arrange such a meeting prior to concluding consultations on Rule 502.5

and Rule 502.6.

As per the OEM (Original Equipment Manufacturer) - "The Sundance machines were designed and manufactured

with the 'Original Operational Design Life' given as 25 - 30 years. This considered the design aspects incorporated

and anticipated good practices, a 'base load' operating regime, and maintenance guidelines and advice being

followed by the generation utility. At the time the design life also considered past industry experience with

medium-large generators. Considering the distinction between the potentially ever changing 'Life Expectancy',

influenced by operation & maintenance practices, system events involving the connected generator, generator

faults etc., and a prescribed or even calculated 'Original Operational Design Life', the Sundance machines have

performed well. However, after a 32-37 year range of operation, these machines, as the most critical of

equipment, are now presenting an ever increasing failure risk and threat to station reliability".

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In the November 29, 2012 AESO Reply to Stakeholder Comments, the AESO summarizes the writtenstakeholder comments into the following points. TransAIta's comments on those points are as follows:

, TransAIta submits that the AESO has not adequately addressed the comments fromStakeholders regarding incentives and VARs. In its February 14, 2012 letter attached to itsprevious comments on Rule 502.5, TransAIta referred the AESO to AEUB Decision 2000-46, page23 where the Alberta Energy and Utilities Board (Board) ruled that "On and after January 1,2001, the Board has no jurisdiction to require the owner of a generating unit or a PPA Buyer toprovide System Support Services (SSS) or to do so at a particular price." On page 15 of the samedecision the Board noted that EAL considered reactive power/voltage control would becandidates for a non-hourly market competitive procurement process such as an RFP. TheDuties of the Independent System Operator as set out in the Electric Utilities Act in Section 17(f)state that the Independent System Operator has the duty: "to manage and recover the costs forthe provision of ancillary services." Compelling generators to provide reactive power for free

does not adequately address Section 17(f). Competitively procuring reactive powerrequirements through an RFP process as suggested in Decision 2000-46 does address Section

17(f).

The Electric Utilities Act has defined system support services (EUA 1995, 1998 and 2000) andancillary services (EUA 2003 onwards) as encompassing reactive power/voltage support. ThePPAs in Article 2 and Schedule G, System Support Services specifically identify reactive power asa system support service that the Buyer of the PPA would be entitled to sell. The previous ISO,ESBI stated before the Board that reactive power/voltage control would be a candidate for anRFP. The current ISO, the AESO stated before the Board in 2007 that the AESO does notconsider reactive power as an ancillary service but rather a condition of system access serviceand therefore no VAR market initiative is necessary. TransAIta submits this approach is

inconsistent with Alberta's electricity market.

. The Stakeholders expressed concerns about the potential time it could take to assess whethergenerating units can meet the requirements of Rule 502.5 and therefore an effective date onlysix months out from the completion of the Commission process would not be sufficient. TheAESO responded that Rule 502.5 is consistent with the existing "Technical Standard" andtherefore no effort should be required to meet the requirement of Rule 502.5. TransAltasubmits that the AESO should accept the position of those generator owners who state six

months is insufficient.

, The Stakeholders suggested that the operating requirements be set out in a separate rule andthe AESO responded that it agreed with the suggestion and relocated the operatingrequirements into proposed New ISO Rules Section 502.6. TransAIta appreciates the responseof the AESO to the Stakeholders suggestion as there is now improved delineation between

design requirements and operating requirements.

. The Stakeholders found the references to new, existing and modifications to generating units

confusing. The AESO has replied that they have amended the language in Rule 502.5 such that itwas essentially applicable to all generating units. TransAIta believes there may be a disconnectin the provisions set out in the PPAs, Alberta Regulation 275/2000 and the AESO Rule 502.5version 2.0. It is unclear how the existing AESO "Application Guideline for GeneratorInterconnection Requirements - Reactive Power" has been treated in Rules 502.5 and 502.6.

. The Stakeholders raised concerns that some existing generating units do not have functionalspecifications and whether the AESO would be developing functional specifications for thoseunits. The AESO replied it would not be developing functional specifications but would workwith owners to develop a functional document setting out key attributes. TransAIta suggeststhere remains significant uncertainty surrounding the words "develop a functional document

setting out key attributes".

, The AESO response number 68 on reactive power requirements in other jurisdictions appears tobe incomplete and does not cover a number of important issues including the following:

o Treatment of the existing generators upon introduction of new requirements such as

0.95 pf lead/0.9 pf lag at MCR, voltage ride through etc. including any compliance costs.PJM recognizes grandfathered Mvar capability in Section 5.2.1 of its Manual 14A:Generation and Transmission Interconnection Process. ERCOT recognizes different

reactive power requirements for existing generators in operation before ERCOT's

current standard in Nodal Protocol Section 3.15(5) and (6) Voltage Support.o Treatment of generator design restrictions/design capability changes.o Treatment of the application of limiter margins required to protect the generator based

on the individual unit's design/risk considerations.o Treatment of the requirement of system VARs (from both the grid and from the

generator owner).TransAIta requests the AESO to provide the above details for information and review by the

stakeholders, as a part of the on-going stakeholder engagement, in order to arrive at a mutuallyacceptable and equitable set of requirements which would address the stakeholder concerns.

. The AESO noted that stakeholders provided a number of clarifying suggestions. The AESOstated they have responded to the suggestions in the comment matrix but disagreed with the

Stakeholder comments 1, 2, 3, 4, 7, 33, 35, 36, 55, 57, 63, 64, 68, 69, 72, 74, 78, 200, 104, 105,216, 128, 125, 236, 237, 142, 145, 146, 192, 196, 201 and 202 as well as a large number ofcomments (5, 6 and 8 for example) referencing the comments of disagreement listed. Thereappears to TransAIta to be significant disagreement with the AESO approach that would warrant

additional consultation.

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TransAlta strives to achieve full compliance with AESO Rules and Standards but TransAlta must alsooperate its generators in accordance with good operating practice (GOP)2 standards. Therefore theAESO Rules and Standards applicable to generators designed and built in the seventies and eighties mustbe consistent with the applicable GOP standards. Otherwise, the reliability of these older generatorscould be adversely affected. In TransAlta's view, this requires that the AESO Rules and Standardsrecognize that older generators face unique technical and design challenges as it pertains to reliably

providing reactive power in the Alberta system.

TransAlta appreciates the AESO's consideration of our request in the interest of due process and ameaningful consultation process. Enclosed is the Stakeholder Comment and Rationale Form withcomments of TransAlta concerning Rule 502.5 version 2.0. and 502.6 Version 1. This letter is to be

considered forming part of TransAlta's comments.

Sincerely

Robert g.

Chief EngineerTransAIta CorporationPh.: 403-267-7636

Cc. Mr. Paul Glatthor, AESO

2The GOP concept in Alberta is captured specifically in the PPA definition by the words: "... any of the range of

practices, methods and acts engaged in or approved by a significant proportion of the industry in North Americainvolved in the supply of electricity from and the operation of generating units similar to the Units, or any otherpractices, methods and acts which, in the exercise of reasonable judgement in light of the facts known at the time

the decision was made, could have been expected to accomplish the desired result"....