FERC NOI on Incentive Rates May 25, 2011 1

Background FERC seeks comment on the scope and implementation of its transmission incentives regulations and policies under Order No. 679 (Docket RM11-26-000) 75 requests for Transmission Incentives from FERC since 2005 Application of Order 679 is becoming inconsistent in different regions of the country RSC concerns with incentive rates with Highway Byway cost allocation FERC has 74 question related to incentive rates for comment. A Brief Review of the NOI and emphasis on Communications 2

Order 679 – Transmission Investment through Pricing Reform Section 219(a) – requires FERC develop incentive based rate treatments for transmission development. Section 219(b) – requires: Promote reliability and efficient transmission regardless of ownership. Provide an ROE to attract ownership and new technology. Allow recovery of prudently incurred costs. Section 219(c) – requires incentives for RTO membership Section 219(d) – requires rates cannot be unduly discriminate but just and reasonable. 3

NOI Content 74 Questions relate to the following areas Overall impact of the incentive policy Adequacy of thresholds of Section 219(b) Application of advanced transmission technology Nexus Test for meeting qualifications to get incentive rates Effects of incentives Role of cost estimates Risks/Challenges for appropriate incentive rates Development of Transco’s Right level of ROE CWIP and Abandonment Other incentives 4

Options for CAWG Consideration Everyone file separately. File jointly with RTO. File jointly with Utilities. Not File at this time. Avoid Different RSC and FERC Policies 5

Additional Information CAWG Incentive Chart.doc FERC Docket RM11-26-000 6