1. U.S. Transmission Capacity & Reliability Are we willing to do what it takes to preserve the transmission option? David R. Nevius - NERC

2. About NERC History Members Purpose Reliability Assessment

3. Transmission Assessment Loadings increasing $$ and weather are the drivers More curtailments required Not designed for current levels and directions of transfers Most planning is short term Margins are thin

4. Few Transmission Additions Only 7,500 miles planned Most additions driven by need to connect new generators No significant improvement to long- distance transfers Less weight place on reliability in justifying transmission

5. Transmission Growth vs. Generation and Demand Growth 18% Increase 5% Increase

6. System Congestion

7. Impediments to New Transmission Opposition and litigation Uncertain cost recovery Impacts vs. benefits? Who has responsibility to build? Siting across multiple jurisdictions Federal agencies Risky Business - Who will invest?

8. Recent Delays AEP 765 kV (WV-VA) delayed from 1998 to 2004 – U.S. Forest Service Connecticut - Long Island Cable rejected by Connecticut Siting Council

9. Previous Studies and Reports Moving Power – Flexibility for the Future (NGA 1987) Electric Power Wheeling and Dealing (OTA 1989) Keystone Policy Dialog – Model Siting Code (1994)

10. Previous Recommendations Reasonable time frames and deadlines Clear decision criteria, need standards, and rules for cost recovery Early involvement of landowners, public, and regulators One-stop siting and certification process Criteria for preferred sites - corridors Regional or federal siting authority

11. ERCOT - One Model that Works! ISO responsible for transmission planning Load serving entities request Planned Transmission Service (Firm) ISO & TSPs determine upgrades to meet criteria Annualized costs charged to load (pro rata) Single jurisdiction – predictable process 90-mile 345 kV line certificated AND constructed in less than 2 years!

12. Maintaining Transmission as an Option Must change how transmission is certified and sited Recognize multi-state nature and benefits of transmission in siting and certification processes Regional siting authorities? Role for RTOs? Federal role in siting? Unless processes changed, major transmission will simply not be developed!

13. The Challenge Concerted and cooperative effort to reform siting processes All know what has to be done Unless processes are fixed, will continue to work around congestion and constraints

14. NERC www.nerc.co m

16. Electricity Resources 191,000 MWs announced over 10 years Short lead time, gas units 2003 margins over 40% $$$ are the driver

18. Generation Siting Issues Environmental rules Fuel supply Moratoria proposed in FL, IL, IN Local opposition Some projects abandoned!

19. Projected Electricity Demand 1.9% over 10 years Lower than actual More uncertainty

20. 12 % 20 % 22% Projected Margins Summer - 2004 18 % 30% 12 % 13 % 11 % 19 %