SD Energy Infrastructure Authority “Transmission 101” June 9, 2006 Mike Risan Senior Vice President, Transmission Basin Electric Power Cooperative Mike Risan Senior Vice President, Transmission Basin Electric Power Cooperative

Constraints of Rules of Man Nature Rules

Rules of Nature Laws of Physics Regional Characteristics Laws of Physics Regional Characteristics

Laws of Physics Power Generation Load

Power Contingencies Lightning

Contingencies Power

Overload?

Low Voltage? Power

Transient Stability? Power

Weakest Link Overload Low Voltage Transient Stability

Transfer Capability Power Limit

Natural Characteristics Coal Hydro Wind Location Load Coal Hydro Wind Location Load

Coal

Hydro Oahe Big Bend Fort Randall Gavins Point Fort Peck Garrison

Wind 50m (164ft) Power Class Wind Power (W/m2) Speed* (m/s)

Location

Load Generation Limit

Load NDEX

WNE WKS COOPERS FTCALS GRIS LNC GGS NDEX MWSI MHEX

Rules of Nature Summary Complex Regional problem Need regional solution Technically feasible Complex Regional problem Need regional solution Technically feasible

Rules of Man Regulatory Rules/Processes More Problematic In a state of flux Deregulation Regulatory Rules/Processes More Problematic In a state of flux Deregulation

Regulatory Rules/Process Federal Energy Regulatory Commission  Regulates jurisdictional utilities directly, others indirectly  Interstate transportation  Leading restructuring initiatives Federal Energy Regulatory Commission  Regulates jurisdictional utilities directly, others indirectly  Interstate transportation  Leading restructuring initiatives FERC States  Transmission line permitting & siting  Eminent Domain authority  Rate Recovery States  Transmission line permitting & siting  Eminent Domain authority  Rate Recovery PUC

FERC Restructuring Initiatives Orders 888/889 – 1996 Order 2000 – 1999 Orders 888/889 – 1996 Order 2000 – 1999

Orders 888/889 Open Access Pro-Forma Tariff Standards of Conduct Electronic reservation system (OASIS) Tariff Process (FIFO) Consider all requests sequentially Correctly assign costs Open Access Pro-Forma Tariff Standards of Conduct Electronic reservation system (OASIS) Tariff Process (FIFO) Consider all requests sequentially Correctly assign costs

Cost Provisions Rate = Expansion uses “OR” Pricing  Incremental  Average Rate = Expansion uses “OR” Pricing  Incremental  Average Cost Usage

$100,000,000+

Confirm Service Tariff Process Request Transmission Request Transmission Impact Study Facility Study Decision Period

R R T T O O

Order 2000 Regional Transmission Organizations Regional pricing to eliminate pancaking Coordinated operations for reliability improvement Regional transmission planning Regional Transmission Organizations Regional pricing to eliminate pancaking Coordinated operations for reliability improvement Regional transmission planning Same goals as the IS!

Rate Issues RTO rate  License Plate  Postage Stamp Bottom line = Who Pays? RTO rate  License Plate  Postage Stamp Bottom line = Who Pays?

No Cost/Benefit Benefits Costs

Other Impediments to New Transmission Opposition and litigation Siting across multiple jurisdictions Impacts vs. benefits? Who has responsibility to build? Uncertain cost recovery Risky – Who will invest? Opposition and litigation Siting across multiple jurisdictions Impacts vs. benefits? Who has responsibility to build? Uncertain cost recovery Risky – Who will invest?

Rules of Man Summary Regulatory arena in a state flux Process in gridlock Much uncertainty Who pays? Regulatory arena in a state flux Process in gridlock Much uncertainty Who pays?

Solution Expand Bulk Transmission System System Wide Average Rate (HV only) Common Rate Zone (IS) Cost Effective/Efficient Least Cost Planning Allow Immediate Recovery for Investments Incentives Unnecessary Expand Bulk Transmission System System Wide Average Rate (HV only) Common Rate Zone (IS) Cost Effective/Efficient Least Cost Planning Allow Immediate Recovery for Investments Incentives Unnecessary

Solution This will promote:  Economic Development  Energy Independence  Competition  Reliability This will promote:  Economic Development  Energy Independence  Competition  Reliability