Notification To Construct Business Practice (NTC BP) Overview Terri Gallup, PCWG Chair Paul Suskie, SPP

Members of Project Cost Task Force (PCTF) Terri Gallup, Chair (American Electric Power) Al Ackland (Kansas City Power & Light Company) Peter Day (Oklahoma Gas and Electric Co.) Jason Fortik (Lincoln Electric System) Ray Harold (Midwest Energy) Tom Hestermann (Sunflower Electric Power Corp.) David Kimball (Nebraska Public Power District) Tom Littleton (Oklahoma Municipal Power Authority) Sam McGarrah (Empire District Electric Company) Brian Slocum (ITC Great Plains, LLC) Others that participated: Westar, SPS, WFEC, OPPD & KCC staff

Members of Project Cost PCWG Terri Gallup, Chair (AEP) Jeff Stebbins, Vice Chair (SPS) Brent Carr (AECC) Lloyd Kolb (GSEC) Al Ackland (KCPL) Larry Holloway (KPP) Peter Day (OGE) Leland Jacobsen (OPPD) Brian Gedrich (NextEra) Tom Hestermann (SEPC) David Kimball (NPPD) Tom Littleton (OMPA) Brian Slocum (ITC)Scott Benortham (Westar) John Krajewski (CAWG liaison)

MOPC January 2012 Meeting Directed PCWG to finalize new proposed NTC BP Desired the BP to be approved prior to issuance of NTCs and NTC-Cs from projects reviewed and approved by SPP BOD in its Jan 31 meeting (ATPs another process) Provide BPWG, RTWG, ORWG, TWG opportunity to review per BP process Requested the above processes be completed to allow for a MOPC vote prior to Feb 15 GOAL: Have an approved NTC BP incorporating new cost estimating principles in place for new projects by Feb 15

Status of New Proposed NTC BP Approved by PCWG on 1/20 Approved by BPWG on 1/23 RTWG will review on Jan 26 TWG will review on Feb 3 ORWG determining if they need to review

TWG Review To assess impacts to the SPP planning and modeling processes associated with new or modified business practices being proposed BASIC QUESTION: Does the modified NTC BP impact the Planning and/or Modeling processes?

PCWG Development of NTC BP Started with the existing NTC BP Labeled the existing BP for use prior to July 2011 Labeled the new proposed BP for use July 2011 forward Inserted the PCTF principles into the existing BP Used MOPC approved PCTF White Paper that was developed from BOD approved SPC Principles Added BOD approved SPC Assignment & Novation Principles Added a NTC-C Appendix B - Sample NTC-C Letter

Stakeholder Expressed Concerns –Stakeholders Expressed Two Concerns for NTC BP to be Approved Prior to Issuance of NTCs from Jan 31 BOD approved projects: (1)Cost Recovery of NTC with Condition expenses (2) Status of incorporating the PCTF White Paper into SPP Business Practices 8

LEGAL REVIEW SPP Legal and SPP FERC Counsel reviewed the new proposed NTC BP for OATT compliance Legal Counsel suggested changes to incorporate existing OATT NTC language thus eliminating any need for OATT changes Existing SPP OATT already addresses a revoked NTC cost recovery PCWG modified NTC BP to incorporate suggestions

Existing Cost Recovery for Revoking a NTC SPP OATT, Attachment O, V. (5) Removal of an Upgrade from the SPP Transmission Expansion Plan. –The Transmission Provider, in consultation with the stakeholders in accordance with Section V of this Attachment O, may remove an upgrade from an approved SPP Transmission Expansion Plan. A Transmission Owner that has incurred costs related to the removed upgrade shall be reimbursed for any expenditure pursuant to Section VIII of Attachment J to the Tariff. 10

Attachment J, VIII: Uncompleted Network Upgrades The costs of Network Upgrades that are not completed through no fault of the Transmission Owner charged with construction of the upgrades shall be handled as follows: If a proposed Network Upgrade was accepted and approved by the Transmission Provider, the Transmission Provider shall develop a mechanism to recover such costs and distribute such revenue on a case by case basis. Such recovery and distribution mechanism shall be filed with the Commission. The Transmission Owner(s) that incurred the costs shall be reimbursed for those costs by the Transmission Provider. These costs shall include, but are not limited to: the costs associated with attempting to obtain all necessary approvals for the project, study costs, and any construction costs. 11

Implementing MOPC and BOD Approved New Processes SPCTF Recommendations on RSC motions (PCTF White Paper, Study Estimate Design Guide & Assignment and Novation principles) were approved by MOPC and the SPP BOD in July 2011 PCWG completed new NTC Business Practice to implement the above Predicament Discussed in MOPC Jan 2012 Meeting: How to handle NTCs pending before the SPP BOD in January 2012 before the NTC BP incorporating the above is approved? 12

Options Considered By MOPC Option 1: SPP BOD could approve the issuance of NTCs contingent upon changes to SPP’s Business Practices that incorporate the Project Cost Task Force (PCTF) project cost estimation recommendations. Option 2: SPP BOD could approve issuance NTCs with a condition that the Designated Transmission Owner (DTO) not order materials or begin construction until: (1) the DTO submits a refined project cost estimate to SPP staff that has a variance bandwidth of -20% to +20% that does not exceed the study estimate variance bandwidth of -30% to +30%, or (2) the SPP BOD considers SPP Staff’s re-evaluation of a project that has a refined project cost estimate from the DTO that exceeds the study estimate variance bandwidth of -30% to +30%. MOPC APPROVED OPTION 1 in its January 2012 Meeting 13

TWG Review Today To assess impacts to the SPP planning and modeling processes associated with new or modified business practices being proposed BASIC QUESTION: Does the modified NTC BP impact the Planning and/or Modeling processes?