Market Efficiency Planning Study

Market Efficiency Planning Study West SPM June 12, 2013 SPM : Market Efficiency Planning Study Update March 25, 2012

Market Efficiency Planning Study Recap Objective is to execute an annual structured process to enhance market efficiency Encompasses larger scale projects beyond flowgate specific congestion mitigation Incorporates both near-term congestion issues and longer-term economic opportunities Creates an integrated process linking transmission need and proposed solutions Preliminary analysis shows relatively modest new economic potential for transmission, largely due to 2011 MVPs, low gas prices and low load growth Ultimate deliverable project recommendations for inclusion in MTEP13 Appendix A, if justified Near-term Congested Flowgates Longer-term Economic Opportunities Energy Sources and Sinks 2

Holistic Transmission Development and Evaluation Market Efficiency Solution Ideas Near-Term Flowgate specific mitigation opportunities Integrated View Longer-Term Regional and Interregional economic opportunities An iterative process to ensure most efficient and cost effective solutions to be identified Create an integrated regional view by Creating linkage between longerterm economic opportunities and near-term transmission issues to Best fit Solution provide synergy of benefits Screening and aligning identified transmission issues/needs with solution ideas Test effectiveness against a broad set of future scenarios and develop the most robust plan Perform reliability analysis to ensure system reliability is maintained 3

Study progress Need Identification Work Efforts Flowgate Ranking Methodology Top Congested Flowgate Analysis Top down Congestion Relief Analysis Status Detailed Progress Methodology finalized with introducing Estimated Potential Benefit Concept Top congested flowgates identified for stakeholder review Economic opportunities identified on zonal/regional/interregional levels Transmission Development and Evaluation Transmission Screening Process Economic Analysis Reliability Analysis Preliminary transmission screening process developed and proposed solutions screened Economic evaluation and refinement of proposed solutions Reliability no harm tests of proposed solutions 4

44 Transmission Options Analyzed to Address Identified Market Congestion Issues across MISO Region NIPSCO and DATC Projects involve facilities within the footprint of various TOs in both MISO and PJM and therefore require coordination among all parties involved 5

Summary of Economic Analysis Results Option Project Description BAU B/C ratio HG B/C ratio Names Cost (M$) MEC1 Upgrade Franklin-Wall Lake 161KV $5.85 5.93 3.76 MEC2 Webster-Franklin 345/161kV line, upgrade Franklin-Wall Lake 161 kv $105.20 0.49 0.46 MEC3 Upgrade the Bondurant-Montezuma 345KV $1.20 3.01 - MEC4 Rebuild Bondurant-Montezuma 345KV $81.85 - - MEC5 Norwalk-Ottumwa 345KV $156.60 0.05 - MEC6 GDMEC-Barnes City 345/161KV double circuit, rebuilt DPS-Reasnor- Poweshiek 161 KV. $123.90 0.20 0.05 MEC and MTOWN Upgrade Franklin-Wall Lake and Webster-Wright-Wall Lake 161kV, Bondurant Montezuma 345kV, Marshalltown 161/115kV transformer $16.65 3.27 1.67 NAS1 Upgrade Hankinson Wahpeton 230KV, Big Stone Morris 115KV $22.20 7.87 17.99 MEC and MTOWN + NAS1 NAS2 MEC + m-town Upgrades and Upgrade Hankinson Wahpeton 230KV, Big Stone Morris 115KV Upgrade Hankinson Wahpeton, Big Stone Morris 115, new Morris Alexandria 115kV $38.85 5.83 10.84 $67.20 1.70 5.22 NAS3 Big Stone Hazel Creek 345KV $160.20 0.68 1.85 NAS4 Brookings Hampton Corners 345kV $160.00 0.45 0.96 TCFS1 Upgrade Hankinson-Wahpeton 230KV and Big Stone- Ortonville-Johnson Jct.-Morris 115KV, 2nd Big Stone xfmr $49.70 2.44 9.35 TCFS2 Big Stone Alexandria 345KV $150.60 0.95 3.14 6

Robustness Testing Summary for Selected Best Fit Plans Not eligible for cost sharing as MEP based on voltage/cost criteria Option Names Description Project Cost (M$) B/C ratio (BAU) B/C ratio (HG) B/C ratio (COMB) B/C ratio (LG) Weighted B/C ratio MEC1 Upgrade Franklin-Wall Lake 161kV $3.83 5.93 3.76 40.61 2.37 10.07 MEC3 Upgrade Bondurant-Montezuma 345kV $1.20 3.01-1.19 26.51 1.02 5.41 MEC and MTOWN NAS1 Upgrade Franklin-Wall Lake and Webster-Wright-Wall Lake 161kV, Bondurant Montezuma 345kV, Marshalltown 161/115kV transformer Upgrade Hankinson Wahpeton 230KV, Big Stone Morris 115KV $14.63 3.27 1.67 67.30 0.92 12.55 $22.20 7.87 17.99 75.66 0.42 18.55 MEC and MEC and MTOWN Upgrades and MTOWN + Upgrade Hankinson Wahpeton 230KV, NAS1 Big Stone Morris 115KV $36.83 5.83 10.84 88.32 0.75 18.56 7

Reliability Analysis Overview No Harm test A comparison of two power flow models to assess reliability Reliability relates to the thermal loading and voltage of monitored system elements impacted by select NERC Category B and C contingencies Both power flow models are assessed for reliability violations and the results are compared. The project passes the No Harm Test if: There is no degradation of system reliability with the addition of the project. System reliability improves or remains the same when contingency analysis of the base power flow model is compared to the power flow model containing the project. 8

Reliability Analysis Overview (Cont d) For each project, four separate No Harm tests were conducted: MTEP12 2017 Summer Peak/Shoulder Peak MTEP12 2022 Summer Peak/Shoulder Peak Reliability Analysis Results NAS1: Hankinson Wahpeton 230kV Upgrade, Big Stone Morris 115kV Upgrade No branch violations without known mitigations, no voltage violations 9

May 23 rd TRG Recap and Next Steps On May 23 rd, the 9 th TRG meeting was held to review Robustness economic analysis results of 14 best fit plans Reliability analysis results for high voltage best fit plans Afterwards, the TRG was asked to Review robustness testing and reliability analysis results of the selected best fit plans and provide feedback by Monday June 17 Provide project recommendations for MTEP13 Appendix A consideration by Monday June 17 MISO will Perform cost allocation for recommended projects based on TRG feedback as applicable Begin drafting MEPS report for TRG review Prepare for next TRG meeting, tentatively planned for June 2013 10

MEPS Timeline 2012/2013 Cycle 2012 2013 Ma Start 5/1/12 May June July Aug Sept Oct Nov Dec Scope and Project Plan 5/1/12 7/9/12 Congestion Relief Analysis PROMOD MTEP12 8/6/12 10/11/12 Jan Feb Mar Apr May June July Aug Sept Test conceptual transmission for Robustness (PROMOD) all futures 1/23/13 4/11/13 Project qualification for cost allocation 5/8/13 5/31/13 Recommend to MTEP13 for Dec BOD approval 7/51/13 Today Stakeholder followup, communication, and closeout 7/5/13 9/17/13 Finish 9/17/13 MTEP 12 Executive Summary 7/2/12 8/1/12 Top Congested Flowgate Analysis 8/6/12 10/15/12 Transmission Solution Development 10/10/12 1/23/13 Construction cost estimate revisions 4/5/13 5/8/13 MEPS Full Report 5/31/13 7/5/13 Any projects determined by MEPS to be economically justified could be added to the MTEP13 December Approval Cycle MILESTONE: Closeout project in CP and Dashboard 8/30/13 11

For more information, please contact Project Manager Lynn Hecker, lhecker@misoenergy.org, (651) 632-8450 Economic Analysis Yang Gu, ygu@misoenergy.org, (651) 632-8496 James Okullo, jokullo@misoenergy.org, (651) 632-8448 Charles Wu, cwu@misoenergy.org, (651) 632-8439 Rui Bo, rbo@misoenergy.org, (651) 632-8447 Jordan Bakke, jbakke@misoenergy.org, (651) 632-8431 Reliability Analysis William Kenney, Wkenney@Misoenergy.org, (317) 249-5755 12

Appendix: Economic Benefits of Transmission Options in the Western Area of MISO 13

IA/MO Transmission Needs/Opportunities Primary Congested Flowgates D Franklin Wall Lake 161kV F Montezuma Bondurant 345kV R Quad City-Rock Creek 345kV S Overton 345/161kV Transformer 14

MEC1: Franklin Wall Lake 161 kv Upgrade (MEC MEC) Cost: $5.85 million, Estimated ISD: 2017 Pool Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M--2013) B/C ratio BAU 0.14 3.96 7.21 41.50 5.93 MISO HG 0.64 6.02 4.39 27.53 3.76 COMB 0.82 26.23 51.93 297.72 40.61 LG 0.53 1.07 2.74 14.58 2.37 Weighted B/C 10.07 Economic analysis results Cost estimate refined from $3.83 million to $5.85 million Fully mitigated congestion on Wall Lake - Franklin 161 kv Not eligible for cost sharing as a MEP 2022 BAU/HG Results FG D (Franklin Wall Lake 161 kv) shadow price decreased from 99k$ to 0k$ (BAU) and 142k$ to 0k$ (HG) Webster Wright 161 kv shadow price decreased from 62k$ to 54k$ (BAU) and 93k$ to 81k$ (HG) 15

MEC2: Webster - Franklin 345 kv and Webster - Wright - Wall Lake - Franklin 161 kv (MEC MEC) Project information Cost: $105.2 million Estimated in-service date: 2017 Group Two project based on preliminary screening Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU -0.43 4.64 11.14 62.31 0.49 HG 0.12 5.77 10.68 61.25 0.46 Preliminary economic analysis results Fully mitigated congestion on Wall Lake Franklin 161 kv, Webster Wright 161 kv Webster Wright 161 kv has a total shadow price of 206k$ compared to 177k$ for Wall Lake Franklin in 2027 BAU base case 2022 BAU/HG Results FG D (Franklin Wall Lake 161 kv) shadow price decreased from 81k$ to 0k$ (BAU) and 100k$ to 0k$ (HG) Webster Wright 161 kv shadow price decreased from 50k$ to 0k$ (BAU) and 65k$ to 0$ (HG) Marshalltown 161/115 kv transformer shadow price increased from 0k$ to 17k$ (BAU) and 0k$ to 15k$ (HG) 8% line loading on new Webster Franklin 345 kv line for BAU/HG 16

MEC3: Bondurant Montezuma 345 kv Upgrade (MEC MEC) Cost: $1.2 million, Estimated ISD: 2017 Pool Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M--2013) B/C ratio BAU 0.91 0.02 0.45 4.32 3.01 MISO HG 0.00-0.22-0.31-1.79-1.19 COMB -0.12 4.05 7.00 39.86 26.51 LG 0.00 0.41 0.24 1.46 1.02 Weighted B/C 5.41 Economic analysis results Fully mitigated congestion on Bondurant Montezuma 345 kv Minimal binding on FG F in the HG future Increased congestion on Franklin Wall Lake 161kV, Webster Wright 161kV Not eligible for cost sharing as a MEP 2022 BAU/HG Results FG F (Bondurant Montezuma 345 kv) shadow price decreased from 19k$ to 0k$ (BAU) and 13k$ to 0k$ (HG) 17

MEC4: Bondurant - Montezuma 345 kv rebuild to 1739 MVA (MEC MEC) Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU 0.09-1.42-3.94-21.84 - HG -0.63-1.63-0.67-5.49 - Project information Cost: $81.85 million Estimated in-service date: 2017 Group Two project based on preliminary screening Preliminary economic analysis results Fully mitigated congestion on Bondurant Montezuma 345 kv After mitigation, similar congestion occurred as in MEC3 Resulted in negative APC savings similar to MEC3 2022 BAU/HG Results FG F (Bondurant Montezuma 345 kv) shadow price decreased from 16k$ to 0k$ (BAU) and 7k$ to 0k$ (HG) 20% line loading on rebuilt Bondurant Montezuma 345 kv for BAU/HG 18

MEC5: Norwalk - Ottumwa 345 kv Line (MEC MEC) Project information Cost: $156.6 million Estimated in-service date: 2017 Group Three project based on preliminary screening Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU -1.08 1.69 2.11 10.00 0.05 HG -1.02 2.10-2.06-12.54 - Preliminary economic analysis results Fully mitigated congestion on Bondurant Montezuma 345 kv However, did not bind in 2017 BAU/HG base cases Relieved 40-50% of the congestion on Franklin Wall Lake 161 kv After mitigation, congestion increased on Ottumwa 345/161 kv transformer, Wapello Jeff 161 kv Especially in 2027 HG, 2017 BAU/HG 2022 BAU/HG Results FG D (Franklin Wall Lake 161 kv) shadow price decreased from 71k$ to 38k$ (BAU) and 83k$ to 51k$ (HG) FG F (Bondurant Montezuma 345 kv) shadow price decreased from 16k$ to 0k$ (BAU) and 19 7k$ to 0k$ (HG)

MEC6: GDMEC - Barnes City Double Circuit 345/161 kv Line (MEC MEC) Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU 0.13 2.93 5.31 30.29 0.20 HG -0.78 3.35 1.62 8.49 0.05 Project information New double circuit 345/161kV line with rebuilt 161 kv line sections from Des Moines - Reasnor - Poweshiek Cost: $123.9 million Estimated in-service date: 2017 Group Two project based on preliminary screening Preliminary economic analysis results Fully mitigated congestion on Bondurant Montezuma 345 kv Relieved 50-60% of the congestion on Wall Lake Franklin 161 kv 2022 BAU/HG Results FG D (Franklin Wall Lake 161 kv) shadow price decreased from 71k$ to 31k$ (BAU) and 83k$ to 42 k$ (HG) FG F (Bondurant Montezuma 345 kv) shadow price decreased from 16k$ to 0k$ (BAU) and 7k$ to 0k$ (HG) 15% line loading on GDMEC Barnes City 345 kv line for BAU/HG 20

MEC and MTOWN Cost: $16.65 million, Estimated ISD: 2017 Pool Future Annual APC savings ($M) 2017 2022 2027 20* year NPV ($M--2013) B/C ratio BAU 0.61 5.56 15.01 86.12 3.27 MISO HG -0.06 7.12 7.89 45.94 1.67 COMB 1.26 106.57 328.56 1856.10 67.30 Project description: Upgrade Webster - Wright Wall Lake - Franklin 161 kv (MEC MEC), Bondurant Montezuma 345 kv Upgrade (MEC MEC), Marshalltown 161/115 kv transformer Upgrade (ALTW) Economic analysis results Fully mitigated congestion on Franklin Wall Lake 161 kv, Bondurant Montezuma 345 kv, Marshalltown 161/115 kv transformer Very high APC Savings in 2027 COMB Not eligible for cost sharing as a MEP 2022 BAU Results FG D (Franklin Wall Lake 161 kv) shadow price decreased from 99k$ to 0k$ (BAU) and 142k$ to 0k$ (HG) Webster Wright 161 kv shadow price decreased from 62k$ to 0k$ (BAU) and 93k$ to 0k$ (HG) FG F (Bondurant Montezuma 345 kv) shadow price decreased from 19k$ to 0k$ (BAU) and 13k$ to 0k$ (HG) LG 0.23 2.18 4.18 24.33 0.92 Weighted B/C 12.55 21

DK/MN Transmission Needs/Opportunities Primary Congested Flowgates B Hankinson-Wahpeton 230kV I Johnson Jct-Ortonville 115kV U Lakefield Junction-Lakefield Gen Station 345 kv 22

NAS1: Hankinson Wahpeton 230kV Upgrade (OTP OTP), Big Stone Morris 115kV Upgrade (OTP WAPA) Cost: $22.2 million, Estimated ISD: 2022 Pool Future Annual APC savings ($M) 2017 2022 2027 20* year NPV ($M--2013) B/C ratio BAU -- 3.37 29.56 173.15 7.87 MISO HG -- 12.74 75.69 438.74 17.99 COMB -- 215.28 324.55 1987.21 75.66 LG -- -0.02 1.55 9.33 0.42 Weighted B/C 18.55 Preliminary economic analysis results 2027 shows large increase in savings due to additional wind and load growth COMB includes high energy growth rate and significantly more wind energy in DK-MN Not eligible for cost sharing as a MEP (Results from Market Efficiency Planning Study will not affect Northern Area Study conclusions) *20 year NPVs include benefits for the first 20 years of project life after the projected in-service date, with a maximum planning horizon of 25 years from the approval year 2022 BAU/HG Results FG B (Hankinson - Wahpeton 231 kv) shadow price decreased from 61k$ to 1k$ (BAU) and 162k$ to 20k$ (HG) FG I (Johnson Jct - Ortonville 115kV) shadow price decreased from 76k$ to 0k$ (BAU) and 342k$ to 0k$ (HG) 23

MEC and MTOWN + NAS1 Cost: $36.85 million, Estimated ISD: 2022 (Results from Market Efficiency Planning Study will not affect Northern Area Study conclusions) Pool Future Annual APC savings ($M) 2017 2022 2027 20* year NPV ($M--2013) B/C ratio BAU -- 9.52 42.97 246.44 5.83 MISO HG -- 19.85 88.55 507.58 10.84 COMB -- 334.82 680.00 4442.65 88.32 Project description: Upgrades on Webster - Wright - Wall Lake - Franklin 161 kv, Bondurant Montezuma 345 kv, Marshalltown 161/115 kv transformer, Hankinson Wahpeton 230 kv, Big Stone Morris 115 kv Economic analysis results Fully mitigated congestion on Franklin Wall Lake 161 kv, Bondurant Montezuma 345 kv, Marshalltown 161/115 kv transformer Synergy of benefits seen in all futures Not eligible for cost sharing as a MEP 2022 BAU Results FG D (Franklin Wall Lake 161 kv) shadow price decreased from 99k$ to 0k$ (BAU) and 142k$ to 0k$ (HG) Webster Wright 161 kv shadow price decreased from 62k$ to 0k$ (BAU) and 93k$ to 0k$ (HG) FG F (Bondurant Montezuma 345 kv) shadow price decreased from 19k$ to 0k$ (BAU) and 13k$ to 0k$ (HG) FG B (Hankinson - Wahpeton 231 kv) shadow price decreased from 61k$ to 1k$ (BAU) and 162k$ to 20k$ (HG) FG I (Johnson Jct - Ortonville 115kV) shadow price decreased from 76k$ to 0k$ (BAU) and 342k$ to 0k$ (HG) 24 LG -- 2.30 5.72 31.66 0.75 Weighted B/C 18.56

NAS3: Big Stone Hazel Creek 345kV (OTP OTP) Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU -- 2.84 19.08 109.70 0.68 HG -- 10.69 56.35 325.22 1.85 Project information Cost: $160.2 million Estimated in-service date: 2022 Group Two project based on preliminary screening (Results from Market Efficiency Planning Study will not affect Northern Area Study conclusions) Preliminary economic analysis results Almost fully mitigated congestion on Johnson Jct. - Ortonville 115kV Reduced most of congestion on Hankinson - Wahpeton 230 kv Provided slightly less APC savings than lower cost NAS projects 2022 BAU/HG Results FG B (Hankinson - Wahpeton 231 kv) shadow price decreased from 61k$ to 12k$ (BAU) and 182k$ to 35k$ (HG) FG I (Johnson Jct - Ortonville 115kV) shadow price decreased from 82k$ to 0k$ (BAU) and 326 k$ to 27 k$ (HG) 25

NAS4: Brookings Hampton Corners 345kV (XCEL XCEL) Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU -- 2.33 12.64 72.16 0.45 HG -- 7.19 29.54 168.70 0.96 Project information Double circuits a planned MVP line Cost: $160 million Estimated in-service date: 2022 Group Two project based on preliminary screening (Results from Market Efficiency Planning Study will not affect Northern Area Study conclusions) Preliminary economic analysis results Reduced less than half of congestion on Johnson Jct. - Ortonville 115kV Reduced less than half of congestion on Hankinson - Wahpeton 230 kv Provided less APC savings than NAS1-NAS3 2022 BAU/HG Results FG B (Hankinson - Wahpeton 231 kv) shadow price decreased from 61k$ to 36k$ (BAU) and 182k$ to 132k$ (HG) FG I (Johnson Jct - Ortonville 115kV) shadow price decreased from 82k$ to 32k$ (BAU) and 326k$ to 195k$ (HG) 26

TCFS1: Upgrade Hankinson-Wahpeton 230 kv (OTP OTP) and Big Stone - Ortonville-Johnson Jct.-Morris 115 kv (OTP WAPA), 2nd Big Stone xfmr (OTP) Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU -- 2.90 21.27 122.59 2.44 HG -- 11.78 87.46 510.28 9.35 Project information Cost: $49.7 million Estimated in-service date: 2022 Group One project based on preliminary screening Preliminary economic analysis results Fully mitigated congestion on Johnson Jct. - Ortonville 115kV Fully mitigated congestion on Hankinson - Wahpeton 230 kv After mitigation, congestion increased on Franklin Wall Lake 161 kv Provided similar APC savings to NAS1 2022 BAU/HG Results FG B (Hankinson - Wahpeton 231 kv) shadow price decreased from 61k$ to 0k$ (BAU) and 182k$ to 0k$ (HG) FG I (Johnson Jct - Ortonville 115kV) shadow price decreased from 82k$ to 0k$ (BAU) and 326k$ to 0k$ (HG) 27

TCFS2: Big Stone Alexandria 345 kv (OTP OTP) Pool MISO Future Annual APC savings ($M) 2017 2022 2027 20 year NPV ($M) B/C ratio BAU -- 3.79 25.15 144.54 0.95 HG -- 14.37 89.49 519.50 3.14 Project information Cost: $160 million Estimated in-service date: 2022 Group Two project based on preliminary screening Preliminary economic analysis results Fully mitigated congestion on Johnson Jct. - Ortonville 115kV Fully mitigated congestion on Hankinson - Wahpeton 230 kv Provided slightly more APC savings than TCFS1 2022 BAU/HG Results FG B (Hankinson - Wahpeton 231 kv) shadow price decreased from 61k$ to 0k$ (BAU) and 182k$ to 0k$ (HG) FG I (Johnson Jct - Ortonville 115kV) shadow price decreased from 82k$ to 0k$ (BAU) and 326k$ to 0k$ (HG) Average line loading on Big Stone Alexandria 345 kv was 25% in BAU and 28% in HG 28