CapX%202020%20Transmission%20Expansion%20Plan%20Realizing%20the%20CAPX2020%20Vision

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CapX 2020 Transmission Expansion PlanRealizing
the CAPX2020 Vision

• South Dakota Energy Infrastructure Authority
• June 9, 2006
• Terry Wolf, Missouri River Energy Services
• Manager, Transmission Services

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Todays topics

• What does CapX 2020 propose to build?
• Background
• Project Group 1
• Project participation
• What is the implementation approach?
• Investment allocation and cost recovery
• Regulatory and communications
• Agreement development
• Key Drivers for Generation Development

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Key Drivers for Generation Development Need a
Market

• Coal Generation
• Transmission
• Facilities
• Tariff
• Taxes
• Rail
• Water
• Wind Generation
• Transmission
• Facilities
• Tariff
• Taxes
• Wind Resources
• Ancillary Service Costs

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Key Drivers for Gen. Development Benefit of
MISO Mkt

• Wind in MISO Market
• Market Access / Market Price
• Locational Marginal Cost
• Lower Ancillary Service Costs
• Transmission Tariff Structure NO PANCAKE
• Market Value for Wind in MISO
• High level analysis 25-35 greater value for
  wind in MISO market than outside MISO market
• CapX doesnt solve the transmission or energy
  market tariff issues, it does helps with physical
  infrastructure

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CapX participation

• Core members
• Great River Energy
• Midwest Municipal Transmission Group
• Minnesota Power
• Missouri River Energy Services
• Otter Tail Power
• Southern Minnesota Municipal Power Agency
• Xcel Energy
• Participating utilities
• Basin Electric Power Cooperative
• Dairyland Power Cooperative
• Minnkota Power Cooperative
• Rochester Public Utilities
• Wisconsin Public Power Incorporated

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CapX 2020 What is it?

• A vision for transmission infrastructure
  investments for Minnesota, currently only
  facilities being proposed are under MISO tariff.
• Intent is to meet growing loads of participating
  utilities with high reliability
• Geography defined by service territories, plus
• Regional transmission facilities for capacity and
  reliability that support load serving
• Generation and transmission to serve load
• Planning study with a 15-year horizon
• It will put risk issues in focus for utilities,
  regulators and other stakeholders

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Overview Why is CapX needed?

• Load growth in Minnesota is continuing
• New baseload generation is needed
• Major transmission projects are needed
• Some plans exist, but lack commitment
• Regulatory and business challenges must be
  addressed

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CapX 2020 Technical Scope

• Will include new generation scenarios
• Will address transmission planning requirements
  for MN Renewable Energy Objective
• Will help address issues related to the
  achievement of market efficiency, congestion
  relief

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CapX 2020 Assumptions

• Load Levels
• MAPP 2009 models with loads adjusted to 2020
  levels based on MAPP Load and Capability Report

• Generation Levels
• Known planned resource additions
• Buffalo Ridge Wind, BSP II, etc
• Resource Planners
• Identify locations where they are studying
• Generation interconnection queue
• MISO, IS
• Stakeholder input

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CapX 2020 Study Analysis

• Computer Modeling
• Steady state power flow
• Single contingency (ACCC)
• Voltage stability

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Significant analysis has confirmed the timing and
critical need for CapX transmission assets

• 15 year plan
• Multiple planning studies
• Three scenarios
• Project group sequence driven by need criticality
• Estimated capital cost in excess of 3 billion
  over time

Project Group 1
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CapX 2020 Coordination

• Studies
• Upper Great Plains Transmission Coalition
• Northwest Exploratory Study
• Northern IA/Southern MN Exploratory Study
• Red River Valley Transmission Improvement
  Planning Study (TIPS)
• Dakota Wind Studies 2004 (WAPA)
• MISO Baseline Reliability
• Groups
• MISO
• Sub-Regional Planning Groups (SPG) in MAPP area
• MN State Transmission Plan

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CapX 2020
CapX 2020
Specific Project
Specific Project
MISO MTEP
State Plan
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A message in todays briefing a sense of urgency

• We have a transmission expansion plan
• Regional 345kV system
• Design and project sequence driven by time
  critical needs
• These assets must be built in order to serve the
  regions customers reliably
• Collaborative efforts have achieved legislative
  and regulatory reform for cost recovery in
  Minnesota
• There are high expectations that we will deliver,
  and significant downside if we do not
• An execution model has been established
• There is participant consensus to move ahead

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What does CapX 2020 propose to build?

• Background
• Project Group 1
• Project participation

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Regional Transmission Constraints

• Constrained Paths

ND
MN
MI
WI
SD
WY
IA
NE
KS
MO
CO
OK
AZ
NM
TX
Constrained Paths East / West Interconnection
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Vision Study ResultsNeed for 345-kV Backbone
System by 2020
8,000 MW of new generation, including 2,400 MW
renewables, to serve 6,300 MW load, forecasted
through 2020
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Continuing work refines the plan, but the first
project group is ready for implementation
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Project Group 1 1.1 1.3 billion (planning
estimate) Further revision of Groups II and III
expected as detailed engineering proceeds
Project Group Expected In-Service
Group I White, SD to SE Twin Cities (BSP II) / 345 kV SE Twin Cities to Rochester to LaCrosse / 345kV Fargo to NW Twin Cities / 345kV Bemidji to north central MN / 230 kV 2012 2011 2012 2011
Group II Around the Twin Cities Benton County to Chisago / 345kV Benton County to Granite Falls / 345kV Benton County to St. Boni / 345kV Chisago to Prairie Island / 345kV 2014 to 2020
Group III Remote Generation Outlet Antelope Valley to Maple River / 345kV Arrowhead to Chisago / 345kV Columbia to North LaCrosse / 345kV Forbes to Arrowhead / 345kV 2014 to 2020
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Project Group 1

• White, SD to SE Twin Cities
• This project, BSP II 115 kV projects together
  provide outlet for 1000 incremental MW of wind
  and south metro reliability
• Scope 180 miles (est), 345 kV
• Expected In-Service 2012

• SE Twin Cities to Rochester to LaCrosse
• Reliability for south metro, Rochester, LaCrosse
• Scope 140 miles (est), 345 kV
• Expected In-Service 2011

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Project Group 1

• Fargo to St Cloud area
• Fargo, Central MN regional reliability and some
  outlet for ND generation
• Scope 170 miles (est), 345 kV
• Expected In-Service 2012

• Bemidji to North Central MN
• Grand Forks and surrounding region reliability
• Scope 70 miles (est), 230 kV
• Expected In-Service 2011

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Minnesota Governments Response to CapX

• 2005 Significant legislation
• Improved investment recovery
• Streamlined license process by moving siting to
  the PUC
• Enabled the TransCo business model
• February 2006, DOC meeting Were growing
  impatient Why arent you moving ahead to
  build? Deputy Commissioner Garvey, MN DOC
• June 2, 2006, Minneapolis Star and Tribune "Am I
  impatient that we don't have more transmission?
  Yes." Deputy Commissioner Garvey, MN DOC

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What is the implementation approach?

• Investment allocation and cost recovery
• Regulatory and communications
• Agreement development
• Virtual organization

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CapX has an approach to two key financial
questions

• 1. Investment Allocation
• How much does each organization invest?

• 2. Cost Recovery
• How much cost is recovered from each
  organizations customers?

• MISO has developed a regional approach (RECB) for
  recovering transmission costs key elements
  approved by FERC (02/2006)
• CapX seeks alignment between costs recovered, and
  the allocated opportunity to each participant to
  invest in the assets
• CapX members believe MISOs proposal is an
  acceptable model to allocate the investment
  opportunity among members/participants
• Non-MISO, CapX members recover costs on a basis
  defined by project agreements, not the RECB
  tariff
• RECB compatible with MN Tracker for IOU cost
  recovery

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Group 1 Project Investment Will the be there?

• Key unknown Will CapX utilities provide the
  capital to build?
• Approach in ranked order
• Investment Allocation project participants have
  1st right to invest
• Shortfall Opportunity if project participants
  choose not to fully fund, the other CapX members
  have the next opportunity
• Access capital markets if capital is
  unsubscribed, we will be forced to access the
  capital markets, including the possible formation
  of a TransCo, or special project entity

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Building Support for Group 1 Projects

• Political, regulatory and communication strategy
  must match the scale and difficulty of the
  undertaking
• Pre-regulatory filing activities
• Develop intelligence through opinion leader
  surveys, political consultants
• Develop target audiences, messages, communication
  materials
• Make intial contact with legislators, local units
  of government, important stakeholders, media
• Post-regulatory filing activities
• Public information meetings, work with local
  government to co-sponsor introductory meetings
• Pro-active media contacts
• Begin route development process in parallel with
  CON proceeding, involve the public up front

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Regulatory Plan
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Resource commitments require agreements

• Project Agreement for each project
• Defines investment commitment
• Defines investment recovery for non-MISO members
• Defines project development roles
• Details which components each member owns
• Specific operations and maintenance arrangements
• Establishes interconnection agreements
• CapX governance and operations cost sharing
  agreement
• Defines the CapX virtual organization and its
  activities
• Defines governance
• Commits members to sharing the operating costs

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Regional Grid Growth Required

• MN is an net energy importer
• New plants to address the MN generation capacity
  shortfall require generation outlet
• Push for renewable power not enough lines where
  the best wind blows
• SD is a net energy exporter now and will likely
  be into future
• As of June 2, 2006 1860 MW of generation
  interconnect in MISO and IS queues

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Realizing the CapX Vision with a sense of
urgency

• We have a transmission expansion plan
• Regional 345kV system
• Design and project sequence driven by time
  critical needs
• These assets must be built in order to serve the
  regions customers reliably
• There are high expectations that we will deliver,
  and significant downside if we do not
• There is participant consensus to move ahead
• Municipals, Cooperatives, and IOUs