Addressing GHG Non-Pricing Zones Needs and Recommendations

Discussion on the needs and requirements of GHG Non-Pricing Zones, along with proposed recommendations to initiate efforts in addressing these needs. Includes central tracking and reporting, accounting rules, and market optimization considerations.

• GHG
• Non-Pricing Zones
• Recommendations
• Market Design
• Tracking

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1. MARKETS+ NON-PRICING PROGRAMS MGHGTF - JANUARY 8TH2024 SPP MARKETS Working together to responsibly and economically keep the lights on today and in the future. SPPorg southwest-power-pool 1 SouthwestPowerPool

2. OBJECTIVE Discuss GHG Non-Pricing Zones needs and requirements Propose recommendations to begin effort to address GHG Non-Pricing Zones needs 2

3. GHG NON-PRICING ZONES NEEDS GHG Tracking & Reporting Centralized accounting of CO2 produced and imported by each zone Coordinated accounting and tracking rules between entities in the Market and across the western interconnection Eliminate accounting overlap between all zones, Non-Pricing and Pricing Zones Implement centralized host application and data source for each entity s tracking and reporting needs Other Market Design Considerations Include CO2 emissions attribute in the Market Optimization 3

4. SPP PROPOSAL NON-PRICING ZONES INITIATIVES 4

5. RECOMMENDATION 1: ESTABLISH INITIATIVE AND COMMUNICATE TO FERC THE ON-GOING EFFORT Establish Initiative Action Item: The MGHGTF, in coordination with SPP Staff, will continue work in progress to develop clear and comprehensive market design elements to support compliance with non- pricing GHG Reduction Programs through dispatch (or alternative mechanisms), tracking and reporting and will work to complete this task with sufficient time before the deadline for utility commitments for Phase II M+ funding decisions Communicate to FERC In response to the action item, SPP commits that in its M+ filing with FERC, SPP will include this action item and will address and explain that the action item is necessitated by the number of participants that must comply with non-pricing state emission reduction programs. SPP will reiterate the criticality of developing and addressing the needs and requirements of these participants and note that future filings will likely be necessary to effectuate the design. 5

6. RECOMMENDATION 2: BEGIN DESIGN AND DATA SPECIFICATIONS NEEDED TO SUPPORT TRACKING AND REPORTING SPP to propose initial rules and systems needed to support tracking and reporting of GHG for all Zones. 6

7. Recommendation #2: GHG TRACKING AND REPORTING WORKFLOW Key Data Generator Output State Estimator and Meter Load MWh by Entity Imports & Exports Scheduled & Actual Interchange Gen. Emissions Factor Report CO2 emissions produced, imported and exported by each Zone (Utility or State level) 7

8. RECOMMENDATION #3:EXPLORE NON-PRICING ZONE GHG INFORMED DISPATCH OPTIONS Explore Non-Pricing Zone GHG Informed Dispatch Options Evaluate design and market policies options that may be implemented in the Market Design to allow the flexibility for entities to manage their emissions targets. 8

9. Recommendation #3: REQUIREMENTS FOR IMPLEMENTING EMISSIONS MARKET INFORMED DISPATCH Demonstrate to FERC that a GHG market design for incorporating a state- determined carbon price contained with the zone Economic Leakage Establish GHG costs, appropriate Demand Curves or VRLs in accordance with a state endorsed methodology and as approved by FERC Design cannot unduly infringe on other utilities and other states renewable portfolio Environmental Leakage Agreement from stakeholders - Economic & Environmental Leakage Specified-Source are pre-arranged Demonstrate limited or no impact to rest of participants Based on state- determined rate or methodology State-Determined Cost Impact Other external supply participates in serving the zone as an aggregate 9

10. NEXT STEPS The MGHGTF to adopt the recommended Action Item and consider the other recommendations in its scope of work. 10

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