1. Why We Made the Decisions We Made and Where We Are in Building New Generation February 17, 2005 Prepared by Nilaksh Kothari, P.E. General Manager Manitowoc Public Utilities

2. February 17, 2005 2 OUTLINE OF PRESENTATION  OVERVIEW OF THE SYSTEM  THE PROBLEM/CONCERNS  POWER SUPPLY OPTIONS CONSIDERED  BENEFITS OF OWNING GENERATION  PROJECT STATUS  QUESTIONS

3. February 17, 2005 3 Facts in Brief-2003 Electric UtilityWater Utility Revenues$35,140,092$4,748,813 Number of Customers 17,50213,540 Units sold522,931 MWhs2,917,478 kgals Miles of Line/Mains 222.5174.3 Average Net Investment $54,242,542$20,450,225

4. February 17, 2005 4 Sources of Capacity l Sources of Capacity -122 MW Total in 2004  Steam Generating Plant70.0 MW  Diesel11.0 MW  Combustion Turbine (Gas)21.0 MW  Market Purchases20.0 MW l Age of Facilities / Capacity  Boiler #550 Years / 15.0 MW  Boiler #646 Years / 17.5 MW  Boiler #738 Years / 17.5 MW  Boiler #812 Years / 21.0 MW  Diesel17 Years / 11.0 MW  Combustion Turbine 3 Years (Refurbished) /20.5 MW  Steam Turbine Generator #267 Years  Steam Turbine Generator #362 Years  Steam Turbine Generator #451 Years  Steam Turbine Generator #546 Years  Steam Turbine Generator #638 Years

5. February 17, 2005 5 Sources of Energy l Sources of Energy – 2003  MPU Generation292,133 MWH (55%) – Steam291,070 – Natural Gas 36 – Diesel 1,027  Market Purchases242,392 MWH (45%) – WPPI 91,149 – WPS148,633 – WE Energies 2,588 – Alliant 22 l Purchased vs. Produced Energy (MWH): Purchased / Generated  2002 266,573 / 293,47748/52  2001 292,769 / 264,18953/47  2000 286,502 / 294,15749/51  1999 302,768 / 255,16854/46

6. February 17, 2005 6 THE PROBLEM Projected Historical

7. February 17, 2005 7 Concerns l Age of the existing facilities  Boiler and generators > 50 years as compared to expected life of 40-50 years  Increased down time of equipment for maintenance l Boiler #5  Environmental concerns- notice of violation from DNR  Requires special fuel, and is relatively expensive to operate l Transmission constraints limit import capability  Regional and Statewide  Interconnect through the Shoto Substation limited to 55 MW (summer) l Wholesale purchased capacity not reasonably available l MPU’s average cost of generation is higher than the cost of purchased power

8. February 17, 2005 8 Energy Production Costs - Existing

9. February 17, 2005 9 Power Supply Options Considered (2000-2002) l Existing Generation Resources 1. MPU Steam Plant Improvements 2.MPU Steam Plant Package Boiler 3. MPU Peakers l Capacity and Energy Proposed to MPU 4. McCartin Group Manitowoc steam plant 5. Dominion Evantage peakers 6. Dynegy 7. Xcel Energy 8. Dairyland Cooperative 9. WE Energies 10. Capacity and Energy Proposals to GLU l Potential Lease Options 11. Edison Mission 12. FPLE/Tenaska 13. Dominion Thermal l Potential Self Build Options 14. 34 MW combustion turbine(CT) 15. 80 MW combustion turbine(CT) 16. 80 MW combined-cycle unit 17. MPU Plant Expansion 18. Other Independent Power Producers

10. February 17, 2005 10 Factors Considered in Evaluation of Options lDemand and energy forecast lAssessment of existing facilities lManagement/diversification of power supply portfolio lCapital, operating and maintenance costs lMinimize MPU’s generation costs/competitive electric rates lMaximize use of existing site lFinancing feasibility lAccount for uncertainties/trends  Retail deregulation  Environmental regulations  Transmission constraints  Role of Regional Transmission Organizations  Wholesale market transition

11. February 17, 2005 11 Average Purchased Power Cost (2003 $) = $38.97 Average cost of generation (2006 $) = $24.73 Projected Energy Cost Saving

12. February 17, 2005 12 l The 63.3 MW expansion at the existing site results in the lowest rate impact to MPU’s customers of all alternatives l Reduces air emissions per megawatt produced by one-third l Utilizes existing CFB technology (same as Boiler 8):  With Boiler 8, provides all of MPU’s baseload energy requirements at an average variable cost of $15-18 per MWH  Like Boiler 8, burns a wide range of fuels allowing more options to stabilize operating costs l Minimizes reliance on wholesale electricity markets that experience price volatility due to forces outside MPU’s control l Removes reliance on transmission system for power imports l Keeps money from MPU’s ratepayers in Manitowoc l Significantly increases MPU’s payment in lieu of taxes l Maintains jobs in Manitowoc and provides infrastructure for economic development Benefits of Power Plant Expansion

13. PROJECT STATUS

14. Power Plant prior to demolition (Looking South) February 2004

15. Foundation for Boiler Building in progress April 2004

16. Steel erection of Boiler Building July 2004

17. Boiler and Turbine Building (Looking Southeast) January 2005

18. Boiler Building (Looking Northwest) January 2005

19. Turbine Building Operating Deck Turbine Foundation Preps January 2005

20. QUESTIONS