1. December 7, 2016

2. Heartland Snapshot 2 Hecla NSU Langford McLaughlin Groton Grove City
Miller
Bryant
Estelline
White
Volga
SDSU
Arlington
New Ulm
Wessington
Springs
Aurora
Tyler
Madison
Lake Crystal
Madelia
Howard
Colman
Truman
Plankinton
Sioux Falls
Parker
Tyndall
USD
Akron
NIMECA
Stanhope
Garden City
Auburn 2

3. Heartland Snapshot Midcontinent Independent System Operator (MISO)
Customer Diesels
Customer Diesels
LRS1
WSWEC
Customers
Customers
Midcontinent Independent System Operator (MISO)
Southwest Power Pool (SPP)
WEC2 3

4. 1. Administrative 2. Market Access 3. WAPA Position 4. Coordination

5. Administrative 5

6. Small entities must absorb additional workload and lean on outside services.
No new staff (12)
Heartland contracts for its market services
Prior to: Leaned on WAPA to administer the Joint Marketing Program for small nominal fee
Additional Outside Service costs increased by an amount equivalent to 1 FTE
Heartland wasn’t in the position size-wise to perform all functions in-house
Increased responsibility on existing staff
Maintained heavy involvement in daily operations
Operate in 2 regional marketplaces
Additional scheduling/forecasting requirements
More data required and scrutiny from market monitor
Settlement work has increased
Compliance duties have changed 6

7. Increased opportunity, interest, and scrutiny
Compliance/Regulatory
WAPA used to perform Heartland’s TP functionality
With integration, functional control of system was turned over to SPP; thus, WAPA no longer performs as don’t want to risk losing Federal Service Exemption
Continually increasing costs for Heartland = 0.5 FTE
Billing Changes
More transparency in marketplace
Unbundled transmission expense
Ongoing education process with Customer base
Legal
Formal transmission process with more interest footprint wide
SPP is a member driven organization
Many more opportunities to get involved 7

8. Market Access 8

9. Economic Dispatch has Enhanced Market Purchase Opportunities
Purchase market energy vs self generating
Substantial savings in many cases if own marginal unit
Heartland’s overall power supply cost YTD is 4% under budget
Generation costs consistently under budget 9

10. Is there a downfall to saving money?
Marginal units have likely seen lower running plant capacity factors
Pre-Integration: Heartland generation = > 90%
Post-Integration: Heartland generation = < 80%, 70%
Unit Cycling could have long term affects
Heartland’s units designed for constant load levels
Any load change causes the plant components to experience temperature, pressure, and metal stress changes.
Thermal and pressure cycles cause damage which accumulates over time and causes metal fatigue
Jointly owned unit increased offer curve 10-15% to compensate 10

11. Cycling examples 11

12. Where did the sales opportunities go?
SPP Market will consume all surplus energy, but at what cost?
Surplus is sold at each generating unit’s Locational Marginal Price
Sub $20 on average for most locations in UGP
Counter party sales are essentially non-existent
Prior to SPP IM start March 2014, Heartland was transacting daily with counter parties SPP footprint wide
Today, SPP North HUB has no liquidity
Today, SPP South HUB pricing much stronger 12

13. WAPA Position 13

14. Supplemental supplier must schedule each customer’s WAPA Contract Rate of Delivery
Heartland forecasts and schedules WAPA’s demand and energy supplies for all our customers CROD allocations month ahead
Must be individually scheduled, but can be rolled up
If not, lose 7% of CROD
Supplemental supplier responsible for all real time deviations
Vulnerable to increased transmission charges
Which are passed along to customers since Heartland implemented unbundled rates
WAPA pays for service, but only based on CROD schedule at time of system peak (Coincident Peak) 14

15. Non-Coincident vs Coincident
Non-Coincident Peak
** Maximum Demand
Wheeling Charge Basis
Heartland Demand
Coincident Peak
** Demand at System Peak
SPP Transmission Basis 15

16. Cost shift example
xxxx
xxxx
zzzz
yyyy
yyyy 16

17. Coordination 17

18. Jointly owned units demand polished communication efforts amongst owners
Heartland’s 2 baseload resources are jointly owned
Offer curves, fuel costs, economic decisions and outage schedules require extensive coordination between partners and market monitor
Outage Schedules
Timing and communication of each outage is critical cause real time market fluctuations can be costly
In the following example, unit went into outage HE17 so the Day Ahead market is 0 beyond
To meet load requirements in Day Ahead, SPP dispatches resources to make up for outage
The unit continued to generate MWhs while ramping down beyond HE17
Market uses price signals to discourage generation 18

19. Outage Example 19

20. In summary, the integration into SPP has been a positive one both operationally and financially.20

21. Thank you! 21
@HeartlandPower
Heartland Consumers Power District