Puget Sound Energy, Inc. ("PSE") Open Access

Transmission Service Procedure No. 1 - Rev. 3
(Effective August 31, 1998)

Standards of Conduct

Purpose:

The purpose of this procedure is to describe the standards of conduct to be followed by PSE employees (including employees of any affiliate engaged in wholesale merchant functions) engaged in (i) PSE's control area operation function, transmission contracting function for provision of transmission service on PSE's transmission system, transmission planning function for PSE's transmission system (collectively, "transmission operations and reliability functions") and (ii) the sale for resale, or purchase for resale, of electric energy in interstate commerce ("wholesale merchant functions"). Following this procedure will ensure that all PSE transmission service customers (including the wholesale merchant functions of PSE or any affiliate engaged in wholesale merchant functions) are treated in a comparable manner. (As the Commission notes in the AEP Order, Black Creek Hydro, Inc. has a waiver regarding the standards of conduct. AEP Order at 2, n.3 (citing Black Creek Hydro, Inc., 77 FERC ¶ 61,232 (1996)).)

Procedures:

Note: The material below in italics at the beginning of each section is a description of a requirement from the FERC standards of conduct in Order No. 889.

A. Except as provided in section B below, the employees of PSE engaged in transmission operations must function independently from the employees of PSE who engage in wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions).

1. Persons performing the transmission operations and reliability functions will not engage in the wholesale merchant functions. Personnel performing wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions) will not engage in transmission operations and reliability functions for PSE. In emergency operation conditions, exceptions may be made as described in section B below.

B. In emergency circumstances affecting system reliability, PSE may take whatever steps are necessary to keep the system in operation. PSE must report to the FERC and on the OASIS each emergency that resulted in any deviation from the standards of conduct, within 24 hours of such deviation.

1. In emergency operating conditions, transmission operations and reliability functions personnel may call on the wholesale merchant functions personnel to assist in operating the system or restoring the system to a normal operating state. For example, if the PSE system should blackout, assistance with coordination of power schedules between control areas may be necessary.

2. In emergency situations such as the loss of significant generation at resources supplying power to PSE, transmission operations and reliability functions personnel will normally rely on the wholesale merchant functions personnel to obtain or dispose of emergency energy. If necessary during an emergency, transmission operations and reliability functions personnel may contact others to obtain or dispose of emergency power.

3. Within 24 hours of any deviation from the non-emergency standards of conduct due to any emergency, such deviation must be posted on the OASIS and reported to FERC. The information posted shall remain on the OASIS for 90 days. At a minimum, the report shall include:

a. the nature of the emergency situation;

b. the names of personnel from the wholesale merchant functions who were granted access to the Control Area Operations Center ("COC") or were provided with transmission information necessary to operate restore the system;

c. the names of personnel from the transmission operations and reliability functions who engaged in obtaining or disposing of emergency power; and

d. the duration of the emergency situation.

C. Any employee of PSE engaged in wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions) is prohibited from conducting transmission operations and reliability functions for PSE's Transmission System and from having access to the system control center and similar facilities used for transmission operations and reliability functions that differs in any way from the access available to other open access transmission customers.

1. Wholesale merchant functions personnel will not have automatic access to the COC. The access cards issued to personnel engaged in the wholesale merchant functions will be programmed such that the card reader outside the COC will not open the secured door to the COC for such employees.

2. In any meeting or communication with transmission operations and reliability functions personnel at any location, the wholesale merchant functions personnel shall refrain from discussing matters related to transmission operations and reliability functions. During such encounters, transmission operations and reliability functions personnel shall take actions to assure that no information relating to the use of the transmission system is displayed, or provided verbally, to the wholesale merchant functions personnel.

D. Employees engaged in either wholesale merchant functions or transmission operations and reliability functions are not precluded from transferring between such functions as long as such transfer is not used as a means to circumvent the standards of conduct of this section. Notices of any employee transfer to or from transmission system operations and reliability functions must be posted on the OASIS.

1. When any employee is transferred to or from the wholesale merchant functions or transmission operations and reliability functions, the following information shall be posted on the OASIS prior to implementation of the transfer:

a. the name of the transferring employee;

b. the title held and the associated function before the transfer;

c. the new title and the associated function after the transfer; and

d. the effective date of the transfer.

2. The information posted shall remain on the OASIS for 90 days.

E. Any employee of PSE engaged in wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions) shall have access to only that information available to PSE's open access transmission customers (e.g., the information posted on an OASIS) and must not have preferential access to any information about PSE's transmission system that is not available to all users of an OASIS.

1. Transmission operations and reliability functions personnel shall not grant any preferential access to information concerning PSE's transmission systems to PSE employees engaged in the wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions).

2. Transmission operations and reliability functions personnel willfully violating this procedure are subject to disciplinary action.

F. Any employee of PSE engaged in wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions) is prohibited from obtaining information concerning the PSE transmission system (including information concerning the availability of transmission capabilities, prices, curtailments, ancillary services and the like) through access to information not posted on the OASIS that is not otherwise also available to the general public without restriction, or through information on the OASIS that is not also publicly available to all OASIS users.

1. Wholesale merchant functions personnel (including the personnel of any affiliate engaged in wholesale merchant functions) will not seek to obtain any information about the PSE transmission system that is not publicly available through the OASIS or to the general public. (Information that is generally available to power marketers that join organizations such as WSCC or NRTA or that is otherwise generally available to power marketers is included in information considered for purposes of this procedure to be available to the general public.)

2. Wholesale merchant functions personnel that willfully violate this procedure shall be subject to disciplinary action.

G. Any employee of PSE engaged in transmission operations and reliability functions may not disclose to PSE employees engaged in wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions) any information concerning the transmission system of PSE or the transmission system of another (including information received from nonaffiliates or information about available transmission capability, price, curtailments, ancillary services, etc.) through non-public communications conducted off the OASIS, through access to information not posted on the OASIS that is not at the same time available to the general public without restriction or through information on the OASIS that is not at the same time publicly available to all OASIS users (such as E-mail).

1. Transmission operations and reliability functions personnel shall not disclose to wholesale merchant functions personnel any information that is not generally available to the public regarding the transmission systems of non-affiliated utilities.

2. All requests for transmission service shall be handled through the OASIS.

3. Employees engaged in transmission operations and reliability functions shall apply the restriction of not disclosing transmission-related information to wholesale merchant functions employees in non-business hours as well.

4. When receiving verbal inquiries regarding the status or availability of transmission service on PSE's transmission system over the telephone from transmission service requesters or PSE's wholesale merchant functions personnel (including the personnel of any affiliate engaged in wholesale merchant functions), transmission operations and reliability functions personnel shall only disclose information that has been posted on the OASIS.

5. Transmission operations and reliability functions personnel will not disclose to PSE wholesale merchant functions personnel (including the personnel of any affiliate engaged in wholesale merchant functions) any information concerning PSE's transmission system or the transmission system of another other than through public posting on the OASIS. To assure this rule is enforced for short-term transactions, transmission system information for such transactions must be obtained through the OASIS.

H. If an employee of PSE engaged in transmission system operations or reliability functions discloses information not posted on the OASIS in a manner contrary to the requirement of the standards of conduct, PSE or its agent must immediately post such information on the OASIS.

1. If transmission operations or reliability functions personnel disclose transmission information to PSE employees engaged in wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions), such information shall be immediately posted on the OASIS (and remain posted for 90 days).

2. Recurring mistakes in disclosing such transmission information by an employee engaged in transmission operations and reliability functions shall result in disciplinary action.

I. PSE (other than its wholesale merchant functions personnel, or the personnel of any affiliate engaged in wholesale merchant functions) may not share any market information acquired from nonaffiliated Transmission Customers or potential nonaffiliated Transmission Customers, or developed in the course of responding to requests for transmission or ancillary service from PSE on the OASIS, with PSE employees engaged in wholesale merchant functions, except by posting on the OASIS information in response to a request for transmission service or ancillary services.

1. Transmission operations and reliability functions personnel shall not disclose any market information acquired from potential or existing transmission customers to wholesale merchant functions personnel. (Market information relates to power transactions being contemplated, and any other information, to the extent it could be used by wholesale power merchants to pursue sale or purchase opportunities in their wholesale merchant functions.)

2. Wholesale merchant functions personnel can access public information and information available on OASIS to determine the availability and usage of transmission service on the transmission systems of PSE and other transmission providers and draw from such information any inferences that may assist them in pursuing sale or purchase opportunities.

J. In implementing the Tariff:

1. Employees of PSE engaged in transmission system operations and reliability functions must strictly enforce all Tariff provisions relating to the sale or purchase of open access transmission service, if these provisions do not provide for the use of discretion.

2. Employees of PSE engaged in transmission system operations and reliability functions must apply all Tariff provisions relating to the sale or purchase of open access transmission service in a fair and impartial manner that treats all customers (including PSE or any affiliate engaged in wholesale merchant functions) in a nondiscriminatory manner, if these provisions involve discretion.

3. PSE's transmission operations and reliability functions personnel must enter in a log, available for FERC audit, detailing the circumstances and manner in which PSE exercised its discretion under any terms of the Tariff. The information contained in this log will be posted on the OASIS. Such log will be maintained under the supervision of the Manager Transmission.

4. PSE's transmission operations and reliability functions personnel may not, through its Tariff or otherwise, give preference to wholesale purchases or wholesale sales made on behalf of PSE's own power customers, or those of an affiliate, over the interests of any other wholesale customer in matters relating to the sale or purchase of transmission service (including issues of price, curtailment, scheduling, priority, ancillary services, etc.).

5. If PSE's transmission operations and reliability functions personnel offers a discount on purchases of transmission service made on behalf of PSE's own power customers or those of any affiliate, then, at the same time, PSE must post on the OASIS an offer to provide the same discount to all transmission customers on the same path and on all unconstrained transmission paths.

6. If PSE's transmission operations and reliability functions personnel offer a rate discount on ancillary services to an affiliate, or attributes a discounted ancillary service rate to its own transactions, PSE must, at the same time, post on the OASIS an offer to provide the same discount to all eligible customers.

K. PSE, as a transmission provider, must maintain its books of account and records separately from those of its affiliates and these must be available for FERC inspection. The books of account and records are those prescribed under Parts 101 and 125 of the Commission's regulations, 18 C.F.R. Parts 101 and 105 (1997).

L. PSE (or any affiliate engaged in wholesale merchant functions) must maintain in a public place, and file with FERC, current written procedures implementing the standards of conduct in such detail to enable transmission customers and FERC to determine that PSE is in compliance with the requirements of the Standards of Conduct in FERC Order 889.

1. This Open Access Transmission Service Procedure No. 1 shall be accessible on the Internet through the PSE OASIS home page (http://oasis.puget.com).

2. This procedure shall be filed at FERC. An informational filing will be made at FERC when the procedure is revised.

3. Each revision of the procedure shall indicate the revision number and the effective date.

4. A list of PSE employees engaged in transmission operations and reliability functions and in the wholesale merchant functions (including employees of any affiliate engaged in wholesale merchant functions) shall be maintained at the Company's offices.

5. PSE (or any affiliate engaged in wholesale merchant functions) will distribute and explain the Standards of Conduct to those employees for whom this procedure is likely to be pertinent and will conduct training sessions. Any PSE employee (including employees of any affiliate engaged in wholesale merchant functions, other than custodians, building maintenance and other persons performing ministerial functions) who has direct access to the COC or the offices or work area of PSE's wholesale merchant functions personnel (including employees of any affiliate engaged in wholesale merchant functions) will be required to read this procedure. Any willful violation of these rules of conduct can be grounds for disciplinary action.