Mountain West Transmission Group Bob Easton - WAPA March 2017 MIC Update

What is the Mountain West Transmission Group? Mountain West is an informal collaboration of electricity providers that are working to develop strategies to adapt to a changing industry. Formed in early 2013 to evaluate a suite of options ranging from a common transmission tariff to Regional Transmission Organization (RTO) membership. Includes investor-owned utilities, municipal electricity providers, generation and transmission cooperatives, and federal power marketing administration projects.

Participating Transmission Owners* Basin Electric Power Cooperative (BEPC) Black Hills Energy’s three electric utilities in Colorado, South Dakota and Wyoming, subsidiaries of the Rapid City-based Black Hills Corp Colorado Springs Utilities (CSU) Platte River Power Authority (PRPA) Public Service Company of Colorado (PSCo) Tri‐State Generation and Transmission Association (Tri‐State) Western Area Power Administration (WAPA) Loveland Area Projects (LAP) Colorado River Storage Project (CRSP) * Others may join after initial implementation.

Mountain West Transmission Footprint Mountain West Participants are a Subset of the WestConnect Planning Region and are Members of the Colorado Coordinated Planning Group (CCPG)

What is the Scope of Mountain West’s Activities? Mountain West is evaluating the potential benefits and costs of a common transmission tariff or participation in an existing RTO with a full market. Based on evaluations to- date, the group is focusing its attention on full RTO participation. If Mountain West joins an RTO, it would be under that RTO’s existing governance, market, and tariff provisions.* * With tariff revisions to add the participants, incorporate specific enabling requirements of the parties and adapt governance to accommodate new participating states.

Mountain West 2013 Statistics Transmission Owner Gross Transmission Plant ($) Net Transmission Annual Transmission Revenue Requirement ($) Miles of Transmission Basin Electric Power Cooperative Westside 52,126,841 19,108,267 4,535,874 209 Cheyenne Light Fuel & Power 41,027,108 35,981,808 6,848,030 45 Black Hills Colorado Electric Utility 333,880,142 146,938,581 12,452,172 581 City of Colorado Springs Utilities 140,898,577 67,284,691 21,957,844 232 Common Use System (BEPC & BHC) 243,548,935 185,304,004 29,846,727 983 Platte River Power Authority 348,969,285 266,337,678 38,277,136 370 Western CRSP 651,271,471 391,945,017 58,386,041 2,325 Western LAP 550,045,450 286,761,337 61,866,058 2,508 Tri-State Generation and Transmission Association 766,276,122 431,085,996 96,781,507 4,660 Public Service Company of Colorado 1,616,197,083 1,265,799,495 208,498,664 3,782 Total $ 4,744,241,013 $ 3,096,546,874 $539,450,053 15,694 6

Significant Work to Date Strong cooperative effort Conceptual rate design and cost shift mitigation; despite multiple failed attempts at regional tariffs in the past Developed and signed a Memorandum of Understanding (MOU) and a Letter of Understanding (LOU) Developed a Request for Information (RFI) from RTOs Conducted a market study to evaluate resource-side benefits of having a common tariff or joining an RTO Ongoing outreach in various forums 7

Joint Tariff Aspect Single OASIS De-pancaking of transmission charges All load is network load Single determination of Available Transfer Capacity (ATC)/Available Flowgate Capacity (AFC) Transition away from contract-path to flow-based Improved transmission planning and interconnection to avoid duplication of facility investments One point of contact for system interconnections Additional siting opportunities for new resources 8

Wholesale Electric Market Optimizes the use of generation and transmission assets Maintains a wide-area view and real-time situational awareness of the entire footprint to monitor and manage the reliability of the system Serves as the centralized operator for a Day-2 market for auction-based electricity products to optimize efficiency and minimize costs Provides market monitoring oversight Facilitates transmission planning across multiple transmission systems and states 9

Mountain West Analyses Transmission Cost Study* Request for Information from RTOs* Market Study* 10 *Discussed in following slides.

Transmission Tariff Proposal Network customers pay the zonal rate in which their load sinks Owners in zone retain revenue for zonal network load Eliminate all internal point to points (PTP) Current conceptual Landscape – 8 zones Each transmission owner is a zone, except Tri-State Tri-State facilities are split between Western LAP and PSCo zones Single Regional Through and Out Rate (RTOR) applied to PTP RTOR = Total MWTG Annual Transmission Revenue Requirement (ATRR) divided by Total MWTG load Revenues allocated based on ATRR and MegaWatt-Mile split, after mitigation Cost shifts would be mitigated over seven years Agreement for required arrangements for WAPA Federal Service Exemption (FERC approved for WAPA-Upper Great Plains in the Southwest Power Pool) 11

Request for Information from RTOs Issued to SPP, CAISO, MISO, and PJM in May 2016 Responses received in July 2016 Requested that the RTOs provide information on a wide range of services from common transmission tariff administration to full RTO membership RFI is one of multiple sources of information to assist the group in consideration of path forward 12

Market Study Brattle Group conducted a two-phase production cost study Current Year 2016 (Phase 1) Status quo with nine tariffs Remove pancaked transmission charges to simulate a common tariff RTO market Future Year 2024 (Phase 2) Multiple scenarios 13

Market Study Phase 1 and 2 results showed encouraging production cost savings in RTO market Benefits of common-tariff-only were not significant Parties focusing on full RTO membership 14

Study Results Production Cost Savings (Mountain West) RTO Costs for Mountain West Annual Benefit 2016 2024 Single Tariff/Existing Bilateral Market $14 M Not Studied Single Tariff/RTO “Day 2” Market $53 M $71 M Start-Up Cost from RTO Annual Cost Tariff Administration only $4-7 M $3-7 M RTO Membership NA* $24-60 M * Start-up costs for an RTO to incorporate Mountain West participants into the membership are included in the annual cost. 15

Next Steps As of January 5, 2017 - Narrow discussions of potential RTO membership to SPP Discussions will focus on details to determine if Mountain West needs can be met Mountain West has NOT decided to join SPP Mountain West may pursue further discussions with MISO, PJM, or both 16

Estimated Timeline Ongoing: Customer, regulator, and stakeholder meetings January 2017: Mountain West consensus on additional discussions with SPP Early - Mid 2017: Discussions with SPP; Mountain West entities determine if SPP membership is viable Mid 2017 – Mid 2018: State and federal regulatory approvals 2019: Implementation 17

Contact Info Bob Easton VP of Transmission Services for CRSP, DSW & RMR 970-461-7272 aeaston@wapa.gov 18