FROM:Paul N. Belval and Sebastian Lombardi, NEPOOL Counsel

M E M O R A N D U M

TO:NEPOOL Markets Committee

FROM:Paul N. Belval and Sebastian Lombardi, NEPOOL Counsel

DATE:July 22, 2014

RE:Proposed Changes to GIS Operating Rules

The NEPOOL Markets Committee will be asked on its July 25, 2014 teleconference to approve two sets of changes to the NEPOOL Generation Information System (“GIS”) Operating Rules (the “Rules”) relating to the use and transfer of Certificates, including in and out of the Massachusetts SREC auction accounts, beyond what is currently provided in the Rules. The changes were initially requested by the Massachusetts Department of Energy Resources (“MA DOER”)and DTE Energy Trading, Inc. (“DTE”).

Both sets of changes were discussed by the NEPOOL GIS Operating Rules Working Group (the“Working Group”) on its July 17 teleconference, and no Working Group member attending that teleconference objected to either set of changes. Neither set of changes is “Cardinal,” and therefore both sets of changes can be approved by the Markets Committee without further approval by the NEPOOL Participants Committee.

Changes Related to Massachusetts SREC Auction Account

Rule 3.10(a) currently provides that Certificates deposited in a Massachusetts SREC auction account may not be transferred out of that account, and Rules 3.7 and 3.8 currently provide that Certificates cannot be transferred into one of those SREC auction accounts after the close of the fourth quarter Trading Period, on June 15 of the following year. MA DOER has requested that the Rules be changed for Certificates that either should or should not have been deposited in one of the Massachusetts SREC auction accounts – the MA Solar Credit Clearinghouse Account and the MA SREC-II Clearinghouse Account – under Rule 3.10. The proposed revisions to Rule 3.10 included in Attachment 1 would allow an Account Holder either to deposit Certificates in one of those auction accounts after the close of the fourth quarter Trading Period or remove Certificates previously deposited in one of those auction accounts. Such movement in and out of the auction accounts would be permitted until a date prior to the auction that applies to the applicable account. This would provide Account Holders with more flexibility in managing their RPS and APS-related obligations and sales to others with those obligations. Any such transfer would require the approval of the MA DOER.

The following resolution could be used by the Markets Committee to adopt the change to the Rule 3.10 described above:

RESOLVED, that the Markets Committee adopts the changes to the NEPOOL Generation Information System (“GIS”) and the GIS Operating Rules that provide for additional flexibility relating to the movement of Certificates in and out of the Massachusetts SREC Clearinghouse Accounts, as proposed by the GIS Operating Rules Working Group and discussed at this meeting, [with such changes thereto as were discussed at this meeting and] with such non-material changes thereto as the Vice-Chair of the Markets Committee may approve.

Changes Related to Other Retirements

As stated above, the fourth quarter Trading Period for each calendar year ends on June 15 of the next calendar year and, after that date, all Unsettled Certificates are retired and are no longer eligible for transfer or for assignment to a Subaccount associated with a particular state’s renewable portfolio standard (“RPS”) or alternative energy portfolio standard (“APS”). Rule 3.8(d) currently allows for Certificates that are retired at the end of a Trading Period to be credited back to the account of the holder of those Certificates after that retirement, so long as (1) at least one New England state Energy Regulatory Agency listed in the Rules states that it will permit those Certificates to be used for compliance with its RPS or APS, and (2) the Certificates are not being credited back to the Account Holder’s account after the expiration of the fourth quarter Trading Period. DTE proposes to change this Rule to allow retired Certificates to be credited back to a Certificate holder’s account and transferred after the expiration of the fourth quarter Trading Period, so long as it occurs prior to the annual filing deadline for RPS or APS compliance in the applicable state. In addition, after discussion among the Working Group on its July 17 teleconference, it was decided that the Rule should be changed to only require approval from Energy Regulatory Agencies that affirmatively inform the GIS Administrator that they want that approval right. Finally, the Working Group proposed to add information regarding the frequency of these credits and transfers to the public reports provided under Rule 5.4. The text of the proposed changes to Rules 3.8(d) and 5.4 is included in Attachment 2.

The following resolution could be used by the Markets Committee to adopt the changes to the Rules 3.8 and 5.4 described above:

RESOLVED, that the Markets Committee adopts the changes to the NEPOOL Generation Information System (“GIS”) and the GIS Operating Rules that provide for retired Certificates to be credited back to an Account Holder and/or transferred after the close of the fourth quarter Trading Period, as proposed by the GIS Operating Rules Working Group and discussed at this meeting, [with such changes thereto as were discussed at this meeting and] with such non-material changes thereto as the Vice-Chair of the Markets Committee may approve.

Emergency Treatment

Under Rule 1.3(a), GIS Rule changes become effective on July 1 or January 1, unless the change is determined to be “of an emergency nature.” ISO New England, in its role as GIS Project Manager, makes the determination of whether a Rule change is “of an emergency nature” based on any of four criteria in Rule 1.3(a). One of those criteria is that failure to make the Rule change effective prior to the next January 1 or July 1 would “materially and adversely affect the rights or interests of an Account Holder . . . .”

The ISO has determined that these Rule changes are of an emergency nature and will become effective upon their adoption by the Markets Committee. The next Massachusetts SREC auction is scheduled for July 29, and any Certificates that would need to be moved in or out of the applicable SREC auction account would need to be moved by Monday, July 28. Parties unable to move such Certificates could lose the value of those Certificates. Moreover, DTE stated that its failure to transfer its Certificates to the purchaser of those Certificates prior to the June 15 end of the fourth quarter Trading Period resulted in it forfeiting Certificates with a value of approximately $763,000, and, with the additional cost to procure Q1 2014 RECs in the next Trading Period for 2013 Connecticut compliance, DTE estimates that its total losses could be as high as $875,000. Adoption of the changes to Rule 3.8 would permit it to avoid those costs.

cc:NEPOOL GIS Operating Rules Working Group