Updated 1/28/2011

Cost Allocations and Affordability of Tariffs March 8, 2011 Jay Caspary ·

61 SPP Members 3

Members in 9 states 4 Provide services to Entergy on contract basis (ICT) Arkansas Kansas Louisiana Mississippi Missouri Nebraska New Mexico Oklahoma Texas

5 Regulatory Environment Incorporated in Arkansas as 501(c)(6) non-profit corporation FERC - Federal Energy Regulatory Commission – Regulated public utility – Regional Transmission Organization NERC - North American Electric Reliability Corporation – Founding member – Regional Entity

Regional State Committee Retail regulatory commissioners: Louisiana maintains active observer status Functions ⁻ Cost allocation ⁻ Ensure adequate supply ⁻ Market cost/benefit analyses 6 ArkansasMissouriOklahoma KansasNebraskaTexas MississippiNew Mexico

7 7 VoltagePaid for by Region Paid for by Local Zone 300 kV and above100%0% above 100 kV and below 300 kV33%67% 100 kV and below0%100% Highway/Byway Who pays for transmission? Type Reliability “Base Plan Funding” Economic “Balanced Portfolio” Sponsored Highway/ Byway Funded 33% Postage Stamp / 67% MW-MI Postage Stamp for 345 kV projects with balancing transfers Directly assigned w/ revenue credits Postage Stamp / License Plate Reason Criteria or Designated Resource Aggregate and Individual Transmission Owner Benefits / Cost ≥ 1 Sponsor(s) nominate projects ITP; Fair & Simple VoltageTransmission345 kV and above Effective

How does SPP impact you? SPP cost = 37¢ of $100 residential utility bill Cost to typical residential customer for $1 billion of incremental transmission is ~$1.34 per month 2005 independent analysis by Charles River Associates: –$500,000 cost-benefit study –On behalf of state regulatory commissions –270% ROI for SPP services over the next 10 years 8

Rate Impacts Going Forward Approved SPP transmission plans represent in excess of $5B of new investment in new and upgraded facilities through SPP’s Integrated Marketplace will cost $80M+ but its benefits have been shown to exceed the costs due to consolidated balancing authorities, as well as day ahead and ancillary services markets. Its very important to look at the benefits of transmission plans and market developments and not just the cost. 9