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Meeting Our Energy Goals: The Energy Superhighway Joseph L. Welch April 13, 2010

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Title: Meeting Our Energy Goals: The Energy Superhighway Joseph L. Welch April 13, 2010


1
Meeting Our Energy Goals The Energy
SuperhighwayJoseph L. WelchApril 13, 2010
2
Agenda
  • Who is ITC?
  • The Current Environment
  • What ITC Midwests Independence Means to You
  • Bringing Iowa Wind to Market
  • Summary

3
Who is ITC?
4
Who is ITC?
ITC is the first fully independent transmission
company in the U.S.
5
Who is ITC?
  • ITC is the ninth largest transmission-owning
    company in the U.S.
  • Transmission systems in Michigans lower
    peninsula and portions of Iowa, Minnesota,
    Illinois and Missouri
  • Serves combined peak load in excess of 25,000
    megawatts (MW)
  • Approximately 15,000 line miles
  • Recently announced Green Power Express designed
    to facilitate the interconnection of 12,000 MW of
    wind in the Dakotas, Iowa and Minnesota to
    eastward population centers
  • Also actively seeking opportunities to build,
    own, operate and maintain transmission in Kansas,
    Oklahoma and Texas (SPP region)
  • KETA, V-Plan, and Hugo to Valliant projects in
    advanced stages of development

6
ITCs Service Territories
ITC Transmission METC ITC Midwest
Total System Peak Load 25,000 12,700 MW 9,400 MW 3,500 MW
Service Area SE Michigan Michigans Lower Peninsula Portions of Iowa, Minnesota, Illinois and Missouri
Total Transmission Miles gt 14,900 2,805 5,465 6,800
Assets Acquired March 1, 2003 Oct. 10, 2006 Dec. 20, 2007
7
Does Independence Really Matter?
  • Lets imagine that United Airlines was
    responsible for the control tower operations at
    the Des Moines International Airport.
  • What do you think would happen?
  • Whose flights would be the first to land?
  • Whose flights would be the first to take off?
  • There is a clear reason why independence in this
    case is important
  • How does this example apply to the energy
    industry?

8
ITC Independent
  • ITC focuses on ownership, operation, maintenance,
    and construction of transmission facilities as a
    single line of business
  • There is no internal competition for capital it
    is dedicated for prudent transmission investment
  • ITC is singularly focused on transmission and
    aims to bring significant benefits to customers
  • Our Goals
  • Improve reliability
  • Reduce congestion, improve efficiency
  • Increase access to generation, including
    renewable resources
  • Lower cost of delivered energy

In other words, ITCs independence uniquely
positions it to facilitate renewable resources
like wind
9
The Current Environment
10
Growing Demand
  • Before we speak about ITC Midwest, let us first
    understand the global energy environment
  • Demand for electricity continues to grow
    expected to increase 26 by 2030
  • Increasing population
  • Shifting population centers / urban sprawl
  • Increased dependence on electricity for every-day
    lives

26
  • Sources U.S. Department of Energy, Energy
    Information Administration, Annual Energy Outlook
    2009
  • Electricity demand projections based on
    expected growth between 2006-2030

11
Aging Infrastructure
  • Yet, as shown earlier, there has been a 30-year
    trend of underinvestment
  • 70 of transmission lines are 25 years or older
  • 70 of power transformers are 25 years or older
  • 60 of circuit breakers are more than 30 years old
  • Source http//www.globalenvironmentfund.com/GEF2
    0white20paper_Electric20Power20Grid.pdf

12
Energy Is Changing
  • The energy industry has been going through
    significant changes in recent years
  • How it is bought/sold Creation of energy
    markets, volatile fuel prices
  • How it is made New forms of generation including
    renewables
  • How it is used Shifting population,
    sophisticated electronics in homes and
    businesses, smart grid, electric cars
  • How it is regulated Creation of independent
    transmission companies to bring investment to grid

13
Changes are Need-Driven
  • These changes are driven by various needs
  • Create new jobs
  • Support economic development
  • Invest in and improve nations infrastructure
  • Diversify our fuel sources / energy security
  • Protect the environment
  • Central to all of these changes is the need for a
    robust transmission grid

14
Wind Renewable But Variable
  • Wind has been made popular with this changing
    landscape, but it requires transmission and does
    not come without challenges
  • Resource rich regions vs. states without wind
  • Individual state RPS goals
  • Variability of wind
  • Significant barriers to entry

15
Other Generation Sources
  • As an independent transmission provider, ITC must
    provide equal and non-discriminatory access to
    all forms of generation
  • Each of these different generation sources
    provide a unique challenge in interconnecting
    them to the grid, but they all have one thing in
    common
  • All generation sources need access to a robust
    transmission grid
  • Mine-mouth
  • Coal
  • Geothermal
  • Solar

16
National Energy Policy
  • Given the changing energy industry and needs, we
    need a national energy policy to guide decisions
    for our future energy delivery system.
  • This vision would provide the foundation upon
    which energy policy would be based (e.g.,
    national RES, carbon pricing, etc.).
  • An energy policy vision is an important input
    specifically as it relates to building the
    necessary transmission
  • Regional transmission planning
  • Cost allocation
  • Siting

17
Bringing It Home ITC Midwest in the Past 2 Years
18
Current System Presents Roadblocks
  • Since opening its doors in late 2007, ITC Midwest
    has been working tirelessly to bring value to its
    customers and to the end-use consumers of this
    region
  • ITC Midwests Report Card
  • Investing in system improvements
  • Preventative maintenance
  • Improved reliability
  • Safety
  • Equal access to all forms of generation

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19
Capital Investments
  • Since its inception, ITC Midwest has invested
    almost 300 million in capital improvements to
    its transmission system
  • Improve reliability
  • Economic projects
  • Generator interconnections
  • Some examples of ITC Midwest projects currently
    in progress
  • Story County Wind NextEra System upgrade to
    allow full output of the Story County wind farm
    scheduled to be completed by June 2010
  • Salem-Hazleton 345 kV line
  • Beverly-Sixth Street

20
Salem-Hazleton 345kV Line
  • Project Overview
  • New 81 mile line of 345 kV, double circuited with
    existing 161 kV for portion of line
  • Completes Eastern Iowa 345 kV Reliability Loop
  • Addresses constrained area first identified in
    Midwest ISO 2006 Eastern Iowa Reliability Study
  • Project kicked off shortly after ITC Midwest
    formed
  • IUB Public meetings held February 2009
  • 95 voluntary easements acquired
  • Hearing August 3 and 4 on eminent domain request

21
Adams-Barton/Hayward-Worth
  • Adams-Barton
  • 27-mile line between Adams, Minn., and Bolan,
    Iowa
  • Rebuild existing 161 kV line to same voltage,
    higher capacity replace wood poles with steel
    structures
  • Energized last week
  • Hayward-Worth
  • 20-mile, 50-year-old line between Hayward, Minn.,
    and Kensett, Iowa
  • Rebuilding existing 161 kV line to same voltage,
    higher capacity replace wood poles with steel
  • Construction begins this month
  • Both lines improve north-south electric flow,
    support wind development

22
DAEC-Washburn
  • Project Overview
  • 40-mile line from Duane Arnold Energy Center to
    Washburn substation south of Waterloo
  • Rebuild 161 kV line to same voltage, higher
    capacity, replace wood poles with steel
    structures
  • Improves eastern Iowa reliability, reduces
    congestion
  • Project completed in December 2009

23
Beverly-Sixth Street
  • Project Overview
  • Six-mile line within Cedar Rapids city limits
  • Rebuild existing 34.5 kV line to 161 kV
  • Had been in planning stages for more than 15
    years
  • Industrial growth along Highway 30 corridor drove
    need
  • Construction began this month completed by year
    end

24
Efficient Preventative Maintenance
  • ITC Midwests maintenance methodology is simple
    invest in prevention
  • Breaker and Switcher Inspections
  • Line Inspections
  • Substation Inspections
  • Relay Calibration
  • Battery Checks
  • Transformer Inspections
  • Infrared Inspection
  • Vegetation Management
  • Doing so is more cost-effective and prevents
    costly system outages or equipment failures

25
Improved Reliability
  • ITCs goal is best in class system performance
    for all operating subsidiaries
  • Following acquisition of a new system, ITC
    deploys its maintenance program and root cause
    analysis methodology to reduce outages
  • In 2009 ITC Midwest saw a 55 improvement over
    2008 for the 69kV transmission system and 45
    improvement for the lt69kV system

The SGS Statistical Services Transmission
Reliability Benchmarking program Participants
represent over 54 of the U.S. transmission grid
miles
26
Focus on Safety
  • ITCs safety program is centered around building
    a safety culture within all employees and
    contractors and our goal is zero recordable
    injury and lost work day case rates
  • ITC participates in Edison Electric Institutes
    (EEI) Safety Benchmarking program to gauge its
    performance against approximately 70 other
    utilities

Recordable Incident Rate
Lost Work Day Case Incident Rate
ITC was one of the top companies in the study
27
Transmission as Component of Bill
Proportions by Service Category (1)
  • All of this work is accomplished while having
    transmission currently representing only
    approximately 8 of the electricity bill

(1) Source EIA Annual Energy Outlook 2009 with
Projections to 2030
28
Update on 34.5kV Conversion
29
Current Status of Transition
  • As reported in ITCs June 19, 2009, and December
    22, 2009, transition status reports, ITC Midwest
    expects to work with IPL to continue current
    operations of the 34.5kV assets until conversion
    to 69kV.
  • Upon conversion to 69kV standards, ITC will take
    over operational control.
  • ITC Midwest manages IPLs operation of the 34.5kV
    assets negates any independence and market
    control concerns.
  • ITC Midwest specifies the maintenance and
    construction work and schedule for the 34.5kV
    system.
  • IPL dispatches 34.5kV assets and administers the
    protective (OSHA) transactions for ITC Midwests
    34.5kV work.

30
Rebuild/Conversion Plan Being Implemented
  • IPLs continued operation of the 34.5kV assets is
    cost-effective.
  • Operating the 34.5kV system requires additional
    labor resources due to frequent switching needed
    to maintain service to customers.
  • Costs incurred to incorporate a not smart
    system into ITCs Smart monitoring system would
    largely be wasted when the assets are converted
    to 69kV.
  • More cost-saving synergies exist between the
    34.5kV system and IPLs distribution system than
    between the 34.5kV system and ITCs high voltage
    system.
  • ITC Midwest does not have resources to support
    retail customer calls related to 34.5kV system
    outages.
  • Current operations shorten customer outage times
    through use of the closest first responder.
  • Rebuild / Conversion Plan
  • Rebuild Lines to 69kV Standards Over 12 Year
    Period Unloaded ITC Midwest Budget Cost 38M
    Per Year Compared to 76M Per Year for 7 Year
    Plan
  • Conversion to 69kV Operation Over 18 Year Period
    Conversion over an 18 year period would allow
    additional time for IPL, RECs, and Municipal
    substations to be converted significantly
    reducing their budget and resource load.

31
Bringing Iowa Wind to Market
32
The Traditional Energy Flow Diagram
Todays Energy Flow Diagram?
  • Transmission is the unrestricted, coordinated
    dispatch of generation.

33
Transmission as Facilitator
Wind Energy
Energy Efficiency
Solar Power
Demand Response Programs
Transmission
Bio-fuels
National Security
Clean Coal, Mine-Mouth Coal
Electric Cars
An independent transmission company like ITC
Midwest can facilitate these new sources and
technologies, like wind, through a robust
transmission grid
34
Wind Power in the State of Iowa
  • As of the end of 2009
  • Iowa has over 1100 working turbines spread over
    47 wind farms1.
  • Over 3000 MW in installed capacity provides 20
    of the states energy2.
  • National Renewable Energy Laboratory (NREL)
    research has shown that roughly three-quarters of
    Iowa has high enough wind at 80 meters above the
    ground to produce wind energy3.
  • Sources
  • http//www.nationalwind.com/iowa_wind_facts/
  • Omaha World-Herald Mar 3, 2010,
    http//www.omaha.com/article/20100303/NEWS01/70303
    9859wind-20-of-iowa-s-energy
  • Economic Development Impacts of Wind Energy an
    Iowa Case Study, SEAC Seminar Series, Feb 12,
    2009, www.nrel.gov/analysis/seminar/docs/2009/ea_s
    eminar_feb_12.ppt

35
Economic Benefits to the State
  • According to a 2009 NREL study1, every 1,000 MW
    of wind development implies the following
  • 600 jobs directly involved in construction, with
    associated earnings of 40 million, over a 1 year
    construction horizon.
  • An additional 1,650 jobs with 50 million in
    earnings are estimated to be created by
    associated peripheral activity.
  • During the operations period following
    construction, 75 permanent jobs with an
    associated 5 million in earnings in
    directly-related activity and multiplier effects
    of 195 jobs with 7 million in earnings.
  • Annual 4 million lease and 6 million property
    taxes
  • Sources
  • http//investor.itc-holdings.com/releasedetail.cfm
    ?ReleaseID436644

36
Benefits from ITC Interconnected Wind
  • In 2008, ITC Midwest interconnected 810 MW of
    wind generation, in 2009 716 MW was
    interconnected1.
  • Using the benefit standards identified by the
    NREL report, the Iowa benefits of this
    development are
  • 900 construction jobs with 60 million in
    earnings for each year of the construction
    period.
  • 2,475 peripheral jobs with 75 million in
    earnings.
  • 113 permanent positions with 7.5 million in
    earnings upon the commencement of operations.
  • 293 jobs created as a multiplier effect of these
    permanent positions, generating 10.5 million in
    annual earnings.
  • 6 million in lease payments and 9 million in
    property tax remittances annually.
  • Sources
  • http//investor.itc-holdings.com/releasedetail.cfm
    ?ReleaseID436644

37
Benefits from ITC Interconnected Wind, cont.
  • The wind farms that ITC Midwest has
    interconnected to the power grid will enable the
    following economic benefits
  • The generation of clean electricity sufficient to
    power over 60,000 homes.
  • Investment of roughly 1.2 billion in three rural
    counties.
  • Approximately 200 million in property taxes paid
    over the first 30 years of these projects
  • Estimated 110 million in landowner royalty
    payments
  • About 40 permanent, full time positions created

38
Summary
39
Summary
  • ITC Midwest strives to be a best-in-class
    transmission provider
  • We pledge to work tirelessly every day to
    understand and try to meet the needs of our
    stakeholders and the states in which we operate
  • We welcome your input on what we can do better to
    meet your energy needs
  • ITC Midwests Report Card
  • Investing in system improvements
  • Preventative maintenance
  • Improved reliability
  • Safety
  • Equal access to all forms of generation
  • Understanding and meeting the needs of
    stakeholders?

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