years Vamsi Chadalavada '30 new england Executive Vice President Chief Operating Officer June 23, 2017 Thomas P. Wohlfarth Senior Vice President Regulatory Affairs 120 Tredegar Street Richmond, VA 23219 Dear Mr. Wohlfarth, Thank you for your letter dated June 13, 2017 in which you state that Dominion Energy is undergoing a strategic assessment of Millstone Power Station in Connecticut. As part ofthis assessment, you seek to confirm Dominion?s understanding ofthe options available to a generator seeking to exit New England?s wholesale electricity markets. Similar to the strategic assessment that Dominion is undertaking, the ISO is evaluating a strategic risk in New England?the fuel security of the region under a broad range of scenarios. Recognizing the signi?cant contributions of Millstone to fuel security in the region, we look forward to a continued dialogue with Dominion regarding its plans for the station. In response to your request, I have indicated below what options are available to resources see king to exit New England?s wholesale electricity markets. Participation in the Forward Capacity Market As you know, ISO New England administers the Forward Capacity Market to ensure that the New England power system will have sufficient resources to meet the future demand for electricity. Resources that bid successfully or ?clear? the auction acquire a Capacity Supply Obligation (CSO) for a one-year Capacity Commitment Period beginning June 1 and ending May 31 of the following year. This one-year commitment is made in exchange for a market?based capacity payment. Resources with (305 agree to provide energy when needed during the commitment period, and if a resource fails to perform during critical periods on the power system, it is subject to penalties.1 Dominion Energy acquired CSOs for Millstone Station Units 2 and 3 in recent Forward Capacity Auctions (FCA #8 FCA which means the plant is obligated to supply power to the regional electric grid through May 31, 2021. While the plant is obligated to be available to the ISO during this time, Dominion has the option to seek to transfer these obligations through bilateral agreements or through demand bids bids to shed a C50) in recon?guration auctions held by the ISO in advance of the relevant Capacity Commitment Periods.2 1 See Section of the ISO Tariff, specifically Section on ?Availability Penalties.? 2 See Section of the ISO Tariff on ?Capacity Supply Obligation Bilaterals? and Section on ?Reconfiguration Auctions.? ISO New England Inc. iso-ne.com One Sullivan Road isonewswire.com Holyoke, MA 01040-2841 @isonewengland 4136404405 ISO-NE PUBLIC Thomas P. Wohifarth June 23, 2017 Page 2 of 3 Reliability Review for Capacity Supply Obligation Bilaterals and Recon?guration Auction Demand Bids it is important to note that ISO New England will perform a reliability review of CSOs that a resource owner seeks to transfer through bilateral agreements or recon?guration auctions. If a resource seeks to shed an upcoming obligation through a bilateral agreement or recon?guration auction, resulting in a violation of any North American Electric Reliability Corporation (NERC) or Northeast Power Coordinating Council (N PCC) criteria, or ISO New England System Rule, the SO has the authority under the ISO New England Inc. Transmission, Markets, and Services Tarijj? (ISO Tariff) to reject the bilateral agreement or demand bid.3 The reliability review by the ISO seeks to ensure the regional and local system security achieved through the primary auction, and other reliability needs, are maintained through the transfer of obligations. The review will consider the location and operating and rating limitations of resources associated with the bilateral agreement or demand bid to ensure NERC, NPCC, and ISO New England reliability standards will remain satis?ed if the committed capacity is withdrawn. Process for Retirement Should Dominion seek to shed its forward obligations and ultimately retire Millstone Station, it must do so in accordance with the requirements for retirement de?list bids under the ?50 Tariff.4 Each year, during a two-week period in March, existing capacity resources seeking to retire in the upcoming auction must submit a retirement de-iist bid to the ISO for review and approval. The retirement de-Iist hid window for FCA #12 opened on March 10 and closed on March 24, 2017 for resources seeking to retire at the start of the 2021?2022 Capacity Commitment Period. The retirement de-Iist bid window for FCA #13 will open in March 2018 for resources seeking to retire at the start of the 2022?2023 Capacity Commitment Period. Review by Internal Market Monitor Retirement de?Iist bids are reviewed by the iSO?s Internal Market Monitor (IMM) to ensure the bid is appropriate considering the remaining economic life of the resource. The IMM has 90 days to review the bid and provide the resource owner with a retirement determination noti?cation, which informs the resource owner whether the bid has been accepted as submitted or mitigated to another price. All retirement determination notifications and supporting documentation will be ?led with the Federal Energy Regulatory Commission (FERC) for review and approval. Resource Proceeds to Auction with Retirement De?List Bid Existing capacity resources with an lMM/FERC-approved retirement ole-list bid will proceed to the primary auction and retire depending on the clearing price in the auction. if the clearing price in the auction is at or below the resource owner?s retirement de-iist bid, the resource will retire. ifthe clearing price in the auction is above the resource owner? 5 retirement de?Iist bid, the resource will take on a C50 for the relevant Capacity Commitment Period. The following year, the resource owner may submit updated information and documentation to support a new retirement de-list bid price for the resource. The 3 See Section of the ISO Tariff on Review? of Capacity Supply Obligation Bilaterals and Section lli.13.4.2.2. on ?Demand Bids in Reconfiguration Auctions.? 4 See Section il.13.1.2.3.1.5. of the SO Tariff and all other relevant sections pertaining to retirement de-list bids. A retirement de-Iist bid is a price at or below which the resource would retire all or part of its capacity. ISO New England Inc. iso-ne.eom One Sullivan Road isonewswire.com Holyoke, MA 010402841 @isonewengland 413-540-4405 Thomas P. Wohlfarth June 23, 2017 Page 3 of 3 updated information may include a request to discontinue the retirement de-list bid such that it will not be entered into the Forward Capacity Auction, in which case the update must include sufficient supporting information on the nature of resource investments that were undertaken, or other materially changed circumstances, to allow the IMM to determine whether discontinuation is appropriate. Conditional and Unconditional Retirement If the IMM mitigates the resources retirement de-list bid to a price the resource owner finds unacceptable, the resource owner may choose between conditional and unconditional retirement. If the resource owner selects unconditional retirement, the resource will retire no matter the price in the upcoming auction. If the resource owner selects conditional retirement, the resource will proceed to the auction but only take on an obligation if the clearing price in the auction is above its originally submitted retirement de-Iist bid price. In both cases, a pronyaid may be entered into the auction to protect the clearing price from the exercise of market power. Reliability Review for Resources that Submit Retirement De-List Bids When a resource located within New England submits a retirement de?list bid, ISO New England conducts a study to assess the impact of the retirement on the overall reliability of the region?s bulk power system. If the study reveals that power system reliability will be adversely affected, ISO New England can request that the resource defer its retirement and enter into a special reliability agreement. Through this arrangement, the resource defers retirement for the relevant Capacity Commitment Period and is compensated on the basis of its IMM/FERC?approved retirement de-list bid or underthe terms ofa cost- of?service agreement approved by FERC. Regardless ofthe outcome of the reliability study, the ISO does not have the authority to prevent a resource from retiring. I hope this information is helpful to you as you undertake the strategic assessment of Millstone Power Station. I look forward to discussing your assessment and plans for the station going forward. Sincerely, 6 . Vamsi Chadalavada Executive Vice President Chief Operating Of?cer ISO New England Inc. iso?ne.com One Sullivan Road isonewswire.com Holyoke, MA 01040?2841 @isonewengland 413-540-4405 50?? PUBLIC iso?ne.com?soexpress