Transmission As Enabler Delivering Benefits to Customers Janet Gail Besser, Vice President Transmission Regulation and Commercial Services Massachusetts Electricity Restructuring Roundtable Boston, MA February 9, 2007

Transmission’s Role Transmission is the critical link for enabling competitive electricity markets Transmission is a market facilitator, not a market product Increased transmission investment is required to deliver customer benefits both in market and non market regions Policies that recognize role of transmission as market enabler must be implemented to ensure reliable and economic system for customers

Roadblocks to Adequate Transmission… Planning and pricing policies that view transmission as a market product vs. market enabling infrastructure Ignore the “Commons” nature of transmission Inappropriately distinguish reliability v. economic upgrades Accompanied by cost allocation/recovery policies that Rely on voluntary participant funding Attempt to identify specific beneficiaries Fail to recognize network benefits

…Become Roadblocks to Public Policies Promoting fuel diversity, renewable energy, distributed generation Misunderstanding transmission (and distribution’s) role in connecting customers to resources Historical origin of transmission Economic interconnection of remote groups of customers, and customers to generation Evolving role today Economic interconnection of remote resources

E.g., Transmission and Wind Energy National Grid’s objective with the recent wind paper To recognize the increasing public and regulatory attention on new cleaner sources of energy, such as wind energy, and to explain how transmission system changes will be required to accommodate these new technologies Regulatory and policy desire for cleaner, diversified sources of energy Reliability and economic consequences of over-reliance on certain fuel types State Renewable Portfolio Standards (RPS) and renewable energy funding mechanisms

Need for Effective Regional Planning Critical components of effective planning Sufficient geographic scope Open and transparent process Independent entity Comprehensive planning criteria, addressing both reliability and economic needs Including consideration of energy efficiency, distributed resources, location-specific remote resources Authorization for construction Cost allocation and recovery methods that recognize broad benefits of transmission Coordinated with other market rules and processes

Benefits for Customers Fully value the benefits of transmission Enhanced reliability Reduced market power Lower overall electricity prices Access to lower cost remote resources Support for distributed resources Environmental improvements Access to cleaner, more efficient resources Facilitating energy policy Renewable portfolio standards Fuel diversity

Upfront Cost Allocation Should be clear, well-defined, repeatable Avoid case-by-case allocation that invites endless debate and litigation Costs should be allocated broadly to reflect: Transmission’s widespread benefits That transmission’s beneficiaries change over time

Conclusion Transmission is market enabler, not market product Inadequate transmission investment is key obstacle to delivery of benefits to customers in both market and non-market regions Policies must recognize role and importance of robust transmission infrastructure To ensure reliability and long-term resource adequacy To reduce customer costs To advance public policy To support and facilitate diverse resource mix

Questions? Find Transmission: The Critical Link at: http://www.nationalgridus.com/non_html/transmission_critical_link.pdf Find Transmission and Wind Energy: Capturing the Prevailing Winds for the Benefit of Customers at: http://www.nationalgridus.com/non_html/c3-3_NG_wind_policy.pdf