1. AN INTRODUCTION TO THE MIDWEST ISO By Bill Malcolm Manager-State Regulatory Affairs Pierre, South Dakota June 9, 2006

2. 2 Overview Midwest ISO is an independent, non-profit reliability coordinator for the transmission of high voltage electricity via a security constrained economic dispatch across all or parts of 15 states and Manitoba Began Reliability Operations on December 15, 2001 Market Operations since April 1, 2005 Multi-control area environment (35 Control Areas; 26 in the market) Peak Loads: - Summer 2005--131,434 MW set on August 3, 2005 - Winter 2005/2006: 106,900 set on December 19, 2005

3. 3 RTO Services Monitor flow of power over the high voltage transmission system Schedule transmission service Manage power congestion through locational marginal pricing (LMP) energy market Long term regional transmission planning Operate real-time and day-ahead energy markets Five minute security-constrained dispatch of the market (maintaining reliability in most economic manner)

4. 4 South Dakota and Midwest ISO Otter Tail, MDU, Xcel are transmission owning members Basin, Missouri River and WAPA are non- transmission owning members. MidAmerican is a member in the power market sector PUC is one of the lead states on the MISO Advisory Committee

5. 5 Midwest ISO Market Operations Locational Marginal Pricing (LMP) based upon Security Constrained Economic Dispatch (SCED) SCED minimizes cost to serve load while maintaining reliability of electrical system 1,435 Commercial Pricing Nodes Generator instructions calculated and sent every 5-minutes 5

6. 6 Centralize Generation Dispatch and Outage Management

7. 7 New Power Plants in South Dakota Big Stone #2 (600 MW coal) Brookings County 100 MW wind project: interconnection agreement signed Two other 100.5 MW wind projects and one 138 MW wind plant being studied in Deuel County SD/IA/MN area of concern: amount of proposed generation exceeds reliable outlet transmission capacity

8. 8

9. 9 Transmission Service Requests Approved 114 transmission service requests 136 requests under study (Big Stone Unit 2, group study involving constrained facilities in southwest Minnesota, plus one new study)

10. 10 Big Stone #2 Proposed Upgrade

11. 11 West Study Group Upgrades

12. 12 Seams Coordination SPP TVA MAPP IESO PJM

13. 13 MISO-MAPPCOR Seams Operating Agreement (SOA) Data exchange Planning Coordination Outage Coordination Transmission Service Request Evaluation Coordination Congestion Management Process (TLR Avoidance)

14. 14 Current Issues/Recent Developments Summer assessment: 18% reserve margin Ancillary service markets June 5 resource adequacy FERC filing Single dispatch MISO-PJM: Savings less than.2% of total production costs

15. 15 Upcoming Events 6/14 Advisory Committee meeting, state of the market report presented 6/29 Regional expansion criteria benefits task force meeting (economic upgrades to the grid) 7/10 Ancillary services task force 9/1 RECB filing expected: economic upgrades to the grid 9/20 Advisory Committee meeting, St. Paul

16. 16 To get involved in the Midwest ISO Sign up for West study group, RECB, and planning advisory committee on the extranet Participate in our stakeholder meetings Tour our control centers in St. Paul or Carmel Contact Bill Malcolm (317) 249-5426 or bmalcolm@midwestiso.org bmalcolm@midwestiso.org Visit our website: www.midwestmarket.orgwww.midwestmarket.org