EBA Mid-Year Energy Forum October 30, 2018

Recognized Clean Energy Leader Xcel Energy Serves 3.5 Million Electricity and 2 Million Natural Gas Customers in Eight States Recognized Clean Energy Leader National wind leader for more than a decade (AWEA) No. 4 renewable energy sales, No. 1 outside California (Ceres) 2016 Climate Leadership Award for GHG reductions (EPA) Leader in pursuit of new technologies and voluntary emission reductions

Renewable Energy Leadership Generation investment 3,380 MW of new wind by 2021 Flexible natural gas Transmission Investment $4.12 billion investments from 2016-2020 Operational experience >60% of PSCo load served by wind in limited hours

Our Changing Energy Mix 2005 2017 2022 Hydro 5% Biomass 1% Hydro 3.5% Biomass 1.3% Solar 2% Other .1% Hydro 3% Biomass 1% Solar 4% 21% Carbon Free 40% Carbon Free 61% Carbon Free Coal Natural Gas Nuclear Wind Other Renewable

Xcel Energy Residential Bill 3% Reduction in the Average Bill Clean Energy at an Affordable Cost Steel for Fuel Competitive wind prices and ownership Universal solar at half the price of rooftop Renewables procured through RFPs Low-cost natural gas alternatives Xcel Energy Residential Bill 3% Reduction in the Average Bill

Jurisdictional Touchpoints State Resource Planning and PURPA State Right of First Refusal Statutes

State Resource Planning Minnesota Wind procured through competitive process All-Source Integrated Resource Plan Requirement In its next resource plan filing, Xcel shall evaluate combinations of supply-side (distributed and centralized), demand-side, and transmission solutions that could in the aggregate meet post-retirement energy and capacity needs as well as contribute to grid support. Colorado All-Source RFP Approach Two-phase regulatory process Note the number of bidders to show robust nature of process

State Resource Planning Colorado Electric Resource Plan Litigated modeling assumptions 2016 All-Source Solicitation 417 bids; 238 distinct projects 14 different generation types 350+ renewable bids 100 bids with storage Median Pricing Wind: 19.30 $/MWh Solar: 30.96 $/MWh Solar + Storage: 38.30 $/MWh

Resource Planning and PURPA Colorado Public Utilities Commission Rule 3902(c): “A utility shall use a bid or an auction or a combination procedure to establish its avoided costs for facilities with a design capacity of greater than 100 KW. The utility is obligated to purchase capacity or energy from a qualifying facility only if the qualifying facility is awarded a contract under the bid or auction or combination process.” We have an All-Source Solicitation in 2013 and 2016

PURPA Qualified Facilities Recent LEO applications Filed October 2, 2018 17 QFs (wind and solar); almost 1400 MW 20 year contract term Pricing based on 2013 PSCo All-Source Solicitation Solar: $58 – 63 / MWh Wind: $29 – 34 / MWh In Colorado, you have to win a competitive solicitation in order for an LEO to arise. Spower wants a forward looking rule to govern when a LEO arises (i.e., live in a world where Rule 3092 doesn’t exist); but they want to look backwards to capture avoided cost pricing from PSCo’s last all-source solicitiation

Jurisdictional Touchpoints State Resource Planning and PURPA State Right of First Refusal Statutes

Transmission FERC Order 1000 Minnesota FERC eliminates federal rights of first refusal FERC acknowledges the “longstanding state authority” over transmission planning and expansion and declares that “nothing in this Final Rule is intended to limit, preempt, or otherwise affect” that authority Minnesota Enacts law to preserve its regulatory authority over transmission lines

The Minnesota ROFR Matched set of rights and obligations Incumbency right triggered by physical connection MPUC can require an incumbent to build the transmission line even if it doesn’t want to “Incumbent Electric Transmission Owner” Not limited to in-state entities, includes all current owners and operators regardless of state of incorporation or principle place of business Incumbent electric transmission owners are given “the right to construct, own, and maintain an electric transmission line that has been approved for construction in a federally registered planning authority transmission plan”— IF the line will connect to facilities owned by that incumbent transmission owner

The Minnesota ROFR Procedural History FERC rejected LSP challenge Concluded “it is appropriate for MISO to recognize state or local laws or regulations as a threshold matter in the regional transmission planning process.” Explained that Order 1000 “struck an important balance between removing barriers” and “ensuring the nonincumbent transmission developer reforms do not result in the regulation of matters reserved to the states.” Seventh Circuit rejected LSP judicial challenge of FERC’s ruling Concluded it was a “proper goal” for FERC “to avoid intrusion on the traditional role of the States’ in regulating the siting and construction of transmission facilities.” Emphasized that Order 1000 terminated the federal, not any state, right of first refusal and

The Minnesota ROFR Dormant Commerce Clause Challenge LSP brings lawsuit against MN state agencies NSP and ITC intervene Department of Justice Antitrust Division files Statement of Interest Court grants Defendants’ Motion to Dismiss Relied on General Motors Corp. v. Tracy, 519 U.S. 278 (1997) and Allco Fin. Ltd. V. Klee, 816 F.3d 82 (2d Cir. 2017) Found no overt discrimination—“statute draws a neutral distinction between existing electric transmission owners whose facilities will connect to a new line and all other entities, regardless of whether they are in-state or out-of-state.” LSP has appealed (8th Circuit) The third bite at the apple For us, the question is not what policy choice is best--competition, partial competition, regulation, preference for the owner of the physical assets where the lines is being connected. The question is who gets to make that choice and under what body of law? We believe Congress and FERC have been active in this space. Both bodies have shown their ability and willingness to act. FERC Order 1000 struck a careful balance between federal and state rights and—even more remarkably, FERC has acted in the context of this particular MN—having upheld it against a challenge by LSP. For all of those reasons, it would be unprecedented to have the federal judiciary wade into the space and essentially force a policy choice on Minnesota using perhaps the most blunt instrument possible – the Dormant Commerce Clause of the Federal Constitution.