1. Future 2 Soft Constraints Transfer Limit Hardening By the NEEM-TX Subteam SSC Meeting June 6, 2011

2. 2 2 Process of Applying Transfer Limit Hardening (TLH) Methodology For each future, SSC will decide whether to use Baseline Infrastructure transfer limits or transfer limits based on the soft constraint sensitivity results NEEM soft constraint results will be assessed with the transfer hardening method selected today for Futures 2, 3, 5, 6, 7, and 8 The approved transfer limit hardening methodology will be applied to the preferred soft constraint sensitivity flows (i.e., OL75 or OL25 where applicable) to develop new fixed transfer limits that will be used for the remaining sensitivities of that future

3. Goals of Presentation Future 2 Soft Constraint Sensitivities 1 & 2 (OL75/OL25) TLH Methodology Options – RHC Revisions – Parameter Adjustments Anomaly Treatment Considerations 3

4. 4 TLH Transfer Limit Decision Item 2 Option 1: OL75 Option 2: OL25

5. Generation Build Comparison 5 NortheastSouthSouthwestMidwestPJM_RORPJM_E/MACOntarioTotal Nuclear (2,334) (45) (2,379) CC (50) (1,967) (1,578) 1,242 (4,140) (6,493) CT (684) (175) (858) Hydro 250 On-shore Wind (4,564) 21,293 (6,789) (7,168) 2,772 Other Renew (4) 1,130 1,126 Total (4,618) (4,301) 19,031 (5,722) (11,353) 1,130 250 (5,583) OL25 Super-region Cumulative Capacity build minus OL75 Super- region Cumulative Capacity build Wind resources move from PJM and MISO to southwest Northeast wind resources displaced by HQ pseudo-generator Some increase in Southwest wind likely displacing South nuclear and CC

6. 6 Option 1: OL75 Certain stakeholder believe OL75 is likely to be a more “cost-effective” transmission expansion OL75 and OL25 produce similar level of aggregate generation build – OL25 builds 3 GW more wind, but produces 7% more wind energy (+65,331,000 MWh) – OL25 shifts wind generation to windier areas Certain stakeholders believe OL25 flows overly concentrate generation in a single region (MISO_W) producing unrealistic results – i.e. OL25 creates more anomalies

7. 7 Option 2: OL25 Certain stakeholders believe OL25 increases transmission build to a level more appropriate for a nationally-focused future – Certain stakeholders believe that without the greater increase in inter-super-region transfer limits produced by OL25, national and regional futures are unlikely to produce meaningful differences that we can learn from Certain stakeholders believe using OL25 will create a more appropriate “book-end” for the study purposes

8. 8 Cost Savings Considerations Relative to base run, increased transfer limits may reduce generation and emissions costs for eastern interconnection Cost savings could be used to evaluate some economic benefits from transfer limit expansions A comparison of cost savings, expressed in present value, from the OL75 and OL25 runs may help inform the transfer limit decision Certain stakeholders believe that cost savings information should be used only for information and not as a deciding criteria between OL75 and OL25

9. Comparison of Cost Savings Savings represent reductions in CRA’s “Total Cost” results for all NEEM regions in the Eastern Interconnection combined. See accompanying fact sheet for more explanation on the metric. Transfer limit expansions represent the sum of all suggested new capacity averaged across the three Transfer Limit Hardening (TLH) methods under both default and relaxed parameter values. Savings / MW are the quotient of reductions in “Total Cost” and expansions. 9 Sensitivity Present Value of Savings (relative to base run, in Billions) Option 1Option 2 Aggregate TX Increase (MW) Savings/MW (x$1,000) Aggregate TX Increase (MW) Savings/MW (x$1,000) OL 75$67.70 39,915$1,696 62,454$1,084 OL 25$101.90121,706$837160,356$635 Difference $34.2081,814 98, 014 (OL25 – OL75)

10. 10 Overview of the TLH Methodology Options Three proposed methodologies – Ruthven/Hadley/Chattopadhyay (RHC) Focused on pipe capacity factors and shadow prices Methodology revised from original specifications – NGO Focused on Flow Duration Curve and fraction of time the pipe is full – Johnson Focused on total energy flow and base line utilization All methodologies based on 2020-35 data

11. 11 NWPP RMPA MAPP US MAPP CA NE SPP N SPP S AZ NM SNV ERCOT MISO W MISO MO IL MISO WUMS MISO MI MISO IN OH PJM Rest of RTO TVA VACA NEISO NYISO A-F NYISO GHI NYISO J & K PJM Eastern MAAC PJM Rest of MAAC SOCO FRCC ENTERGY Non RTO Midwest HQ Maritimes 10 14 6 13 11 8 12 9 4 2 1 5 3 5 BAU OL25

12. 12 NWPP RMPA MAPP US MAPP CA NE SPP N SPP S AZ NM SNV ERCOT MISO W MISO MO IL MISO WUMS MISO MI MISO IN OH PJM Rest of RTO TVA VACA NEISO NYISO A-F NYISO GHI NYISO J & K PJM Eastern MAAC PJM Rest of MAAC SOCO FRCC ENTERGY Non RTO Midwest HQ Maritimes 10 14 6 13 11 8 12 9 4 2 1 5 3 7 15 16 17 18 19 20 F2 OL75

13. 13 NWPP RMPA MAPP US MAPP CA NE SPP N SPP S AZ NM SNV ERCOT MISO W MISO MO IL MISO WUMS MISO MI MISO IN OH PJM Rest of RTO TVA VACA NEISO NYISO A-F NYISO GHI NYISO J & K PJM Eastern MAAC PJM Rest of MAAC SOCO FRCC ENTERGY Non RTO Midwest HQ Maritimes 10 14 6 13 11 8 12 9 4 2 1 5 3 7 15 16 17 18 19 20 F2 OL25

14. 14 RHC Revisions Original RHC specifications yielded desired pipe capacity factors designers thought were inappropriate Max/Min Desired Capacity Factors Installed – 85% - 40% for total flow – 35% - 15% for overload flow – Prevents extremely low desired capacity factors seen with old RCH Propose: Linear Curve based on relative shadow price – CF=(x-Shadow Price)/x; x=75% of the max future base case shadow price – Curve will self-adjust for each future relative to shadow prices Tested on F1, RHC New yields similar results to RHC Old

15. 15 Alternative THL Methodologies Top 10 Interfaces Transfer Limits (MW) Future 2 Sensitivity 1 - OL75RHC OldRHC NewJohnsonNGOAverageAverage New MISO_W_2_PJM_ROR28,15113,7769,81613,66717,21112,420 SPP_N_2_ENT20,14818,8598,61914,05214,27313,843 SPP_N_2_MISO_MO-IL9,3253,6741,1821,2003,9022,019 SPP_N_2_MISO_W10,64212488803,843337 ENT_2_SOCO4,6032741,4383,9893,3431,900 NE_2_MISO_W5,4032,9471,8412,6783,3072,489 SPP_S_2_ENT5,3763,6361,1521,1882,5721,992 NYISO_A-F_2_NYISO_G-I3,1611,5811,6041,1221,9621,436 NEISO_2_NYISO_J-K4,900265863331,940315 MISO_W_2_MISO_MO-IL4,192365001,397122 Future 2 Sensitivity 2 – OL25RHC OldRHC NewJohnsonNGOAverageAverage New MISO_W_2_PJM_ROR53,78739,91523,47730,87136,04531,421 MISO_WUMS_2_MISO_MI22,25512,54116,02417,65418,64415,406 SPP_N_2_ENT21,973 11,73815,10616,272 MISO_W_2_MISO_MO-IL21,3714,7824,4295,65110,4844,954 NE_2_MISO_W16,1705,6854,4556,6969,1075,612 MISO_W_2_MISO_WUMS18,2298,9323,7714,3928,7975,698 SPP_N_2_MISO_MO-IL15,75811,3533,7766,1248,5537,084 MISO_MI_2_MISO_IN7,6877,2887,7969,6718,3858,252 SPP_S_2_ENT10,6458,1152,6934,5895,9765,132 ENT_2_SOCO7,0253,4293,4216,6405,6954,497

16. 16 Shadow Prices

17. 17 RHC Old Curve

18. 18 RHC New Curve

19. 19 Future 2 Sensitivity 1 - OL75 Alternative THL Methodologies with Default Parameters Top 20 Interfaces Transfer Limit (MW) RHC NewJohnsonNGOAverage SPP_N_2_ENT18,8598,61914,05213,843 MISO_W_2_PJM_ROR13,7769,81613,66712,420 NE_2_MISO_W2,9471,8412,6782,489 SPP_N_2_MISO_MO-IL3,6741,1821,2002,019 SPP_S_2_ENT3,6361,1521,1881,992 ENT_2_SOCO2741,4383,9891,900 NYISO_A-F_2_NYISO_G-I1,5811,6041,1221,435 MISO_IN_2_MISO_MI181,2121,075768 IESO_2_MISO_MI1,4268250751 MISO_WUMS_2_MISO_MI06861,379688 SPP_N_2_MISO_W1248880337 NEISO_2_NYISO_J-K26586333315 MISO_IN_2_PJM_ROR07801261 SPP_N_2_SPP_S300678236 NE_2_SPP_N00481160 MISO_W_2_MISO_MO-IL36500122 NYISO_J-K_2_PJM_E0223074 IESO_2_MISO_W92108067 MISO_W_2_MISO_WUMS1130038 MISO_MO-IL_2_MISO_IN0010

20. 20 Future 2 Sensitivity 2 – OL25 Alternative THL Methodologies with Default Parameters Top 20 Interfaces Transfer Limit (MW) RHC NewJohnsonNGOAverage MISO_W_2_PJM_ROR39,91523,47730,87131,421 SPP_N_2_ENT21,97311,73815,10616,272 MISO_WUMS_2_MISO_MI12,54116,02417,65415,406 MISO_MI_2_MISO_IN7,2887,7969,6718,251 SPP_N_2_MISO_MO-IL11,3533,7766,1247,084 MISO_W_2_MISO_WUMS8,9323,7714,3925,698 NE_2_MISO_W5,6854,4556,6965,612 SPP_S_2_ENT8,1152,6934,5895,132 MISO_W_2_MISO_MO-IL4,7824,4295,6514,954 ENT_2_SOCO3,4293,4216,6404,497 MISO_MO-IL_2_MISO_IN8163,9777,5204,104 NE_2_SPP_N3,0732,9544,0383,355 IESO_2_MISO_MI5,1771,6141,9212,904 NYISO_A-F_2_NYISO_G-I2,6562,1362,0192,271 PJM_ROR_2_PJM_ROM22,5012,8561,787 SPP_N_2_SPP_S4803,1571,069 NEISO_2_NYISO_J-K887211,666825 PJM_ROR_2_VACAR12001,259460 IESO_2_NYISO_A-F1,07500358 NYISO_G-I_2_NYISO_J-K0021170

21. Parameter Adjustments Each methodology contains adjustable input parameters – Default parameters based on developer understanding of what is “reasonable” but are arbitrary – Default parameters are not derived from actual transmission planning processes Relaxed – Parameters adjusted downward 10% points (e.g. RHC max capacity factor decreased from 85% to 75%) Constrained – Parameters adjusted upward by 10% points (e.g. RHC max capacity factor increased from 85% to 95%) 21

22. 22 Future 2 Sensitivity 1 - OL75 Average of THL Methodologies with Adjusted Parameters Top 20 Interfaces Transfer Limit (MW) DefaultConstrainedRelaxed SPP_N_2_ENT13,84311,22615,330 MISO_W_2_PJM_ROR12,4209,96516,276 NE_2_MISO_W2,4891,9443,404 SPP_N_2_MISO_MO-IL2,0196554,237 SPP_S_2_ENT1,9927983,060 ENT_2_SOCO1,9006103,577 NYISO_A-F_2_NYISO_G-I1,4357402,179 MISO_IN_2_MISO_MI7682191,708 IESO_2_MISO_MI7515261,407 MISO_WUMS_2_MISO_MI6881981,161 SPP_N_2_MISO_W337259638 NEISO_2_NYISO_J-K315156967 MISO_IN_2_PJM_ROR2611911,392 SPP_N_2_SPP_S236191,570 NE_2_SPP_N1600274 MISO_W_2_MISO_MO-IL122691,912 NYISO_J-K_2_PJM_E746686 IESO_2_MISO_W6744284 MISO_W_2_MISO_WUMS3817174 MAPP_US_2_MISO_W000

23. 23 Future 2 Sensitivity 2 – OL25 Average of THL Methodologies with Adjusted Parameters Top 20 Interfaces Transfer Limit (MW) DefaultConstrainedRelaxed MISO_W_2_PJM_ROR31,42126,89934,830 SPP_N_2_ENT16,27214,57018,010 MISO_WUMS_2_MISO_MI15,40614,12718,935 MISO_MI_2_MISO_IN8,2517,0169,858 SPP_N_2_MISO_MO-IL7,0843,5029,262 MISO_W_2_MISO_WUMS5,6983,5598,778 NE_2_MISO_W5,6124,2647,106 SPP_S_2_ENT5,1323,4415,955 MISO_W_2_MISO_MO-IL4,9541,6399,438 ENT_2_SOCO4,4972,9415,645 MISO_MO-IL_2_MISO_IN4,1042,4478,346 NE_2_SPP_N3,3552,5054,366 IESO_2_MISO_MI2,9041,4174,282 NYISO_A-F_2_NYISO_G-I2,2711,3983,168 PJM_ROR_2_PJM_ROM1,7874893,586 SPP_N_2_SPP_S1,0693712,305 NEISO_2_NYISO_J-K8253041,359 PJM_ROR_2_VACAR4601631,963 IESO_2_NYISO_A-F3582261,024 NYISO_G-I_2_NYISO_J-K7001,019

24. 24 Adjusted Parameters’ Aggregate Transfer Limit Increase (MW) Using Average of THL Methodologies Alternative Parameters Sensitivity 1 OL75 Sensitivity 2 OL25 Default 39,915 121,706 Constrained (+10%) 27,702 91,392 Relaxed (-10%) 62,454 160,356

25. 25 TLH Transfer Limit Decision Item 1 Subteam has consensus in supporting the average of the three methodologies but not consensus around appropriate parameters Option 1 – Use default parameters Option 2 – Use relaxed parameters

26. 26 Option Values Sensitivity 2 - OL25 Option 1 Default Option 2 Relaxed MISO_W_2_PJM_ROR31,42134,830 SPP_N_2_ENT16,27218,010 MISO_WUMS_2_MISO_MI15,40618,935 MISO_MI_2_MISO_IN8,2519,858 SPP_N_2_MISO_MO-IL7,0849,262 MISO_W_2_MISO_WUMS5,6988,778 NE_2_MISO_W5,6127,106 SPP_S_2_ENT5,1325,955 MISO_W_2_MISO_MO-IL4,9549,438 ENT_2_SOCO4,4975,645 MISO_MO-IL_2_MISO_IN4,1048,346 NE_2_SPP_N3,3554,366 IESO_2_MISO_MI2,9044,282 NYISO_A-F_2_NYISO_G-I2,2713,168 PJM_ROR_2_PJM_ROM1,7873,586 SPP_N_2_SPP_S1,0692,305 NEISO_2_NYISO_J-K8251,359 PJM_ROR_2_VACAR4601,963 IESO_2_NYISO_A-F3581,024 NYISO_G-I_2_NYISO_J-K701,019 Sensitivity 1 - OL75 Option 1 Default Option 2 Relaxed SPP_N_2_ENT13,84315,330 MISO_W_2_PJM_ROR12,42016,276 NE_2_MISO_W2,4893,404 SPP_N_2_MISO_MO-IL2,0194,237 SPP_S_2_ENT1,9923,060 ENT_2_SOCO1,9003,577 NYISO_A-F_2_NYISO_G-I1,4352,179 MISO_IN_2_MISO_MI7681,708 IESO_2_MISO_MI7511,407 MISO_WUMS_2_MISO_MI6881,161 SPP_N_2_MISO_W337638 NEISO_2_NYISO_J-K315967 MISO_IN_2_PJM_ROR2611,392 SPP_N_2_SPP_S2361,570 NE_2_SPP_N160274 MISO_W_2_MISO_MO-IL1221,912 NYISO_J-K_2_PJM_E7486 IESO_2_MISO_W67284 MISO_W_2_MISO_WUMS38174 MAPP_US_2_MISO_W00

27. Option Parameters Option 1 Parameters RHC – Total Flow Min/Max CF: 40%- 85% – OL Flow Min/Max CF: 15%- 35% Johnson – Utilization Threshold: 90% – Average CF: 75% NGO – Flow Duration Curve Threshold: 20% Option 2 Parameters RHC – Total Flow Min/Max CF: 30%- 75% – OL Flow Min/Max CF: 5%-25% Johnson – Utilization Threshold: 80% – Average CF: 65% NGO – Flow Duration Curve Threshold: 10% 27

28. 28 Anomaly Treatment Considerations Make no adjustments for anomalies “Reality” check on large transfer limit expansions will be applied when SSC decides on Phase II build-outs – “Reality” check will require use of a sensitivity – OL25 more likely to need more adjustments for anomalous results than OL75 – Some anomalies will likely persist throughout all futures e.g. MISO will always direct as much gas build as possible to MISO_WUMS – Changes for anomalies could lead to lower high-level transmission cost estimate

29. Bi-Directional Flows 29