1. 1 Benefits of Transmission Ownership Bob Johnston CEO of MEAG Power

2. 2 Summary MEAG Power has been an equity owner of the transmission system in Georgia for almost 30 years What are the challenges of transmission ownership? What are the benefits of transmission ownership? Conclusions

3. 3 Georgia Integrated Transmission System (ITS) MEAG Power is an equity owner of the ITS –Co-owners: MEAG Power, City of Dalton, Georgia Power (Southern Co. subsidiary) and Georgia Transmission Corp. –Investment Shares – Muni (12%), Co-op (31%), IOU (56%) –Includes virtually all of the co-owners’ facilities above 40 kV except generator step-ups –Size (all owners) Approximately 16,000 circuit miles Serves approximately 95% of Georgia’s native load Wheels approximately 8% of Florida’s native load

4. 4 Georgia ITS (continued) Owners individually selected GPC to be the system operator The ITS Agreements provide the co-owners with what we now call network service and a load ratio share of import/export rights The ITS Agreements require joint planning and expansion of the transmission system to meet co- owners’ load growth needs Ownership is divided, not joint, and access to all ITS facilities is equally available to all co-owners

5. GPC GTC MEAG Dalton Georgia Integrated Transmission System 5

6. 6 Challenges of Transmission Ownership Disputes between co-owners must be resolved Joint decisions take extra effort and patience –Regular monthly meetings that involve senior staff –Dozens of working groups and subcommittees –Procedures have to be written and approved Some of MEAG Power’s transmission investments do not qualify for tax-exempt financing Eminent domain Cost accounting issues between the co-owners are an ongoing challenge.

7. 7 Georgia Integrated Transmission System (ITS) MEAG Power’s ITS Investment –MEAG designs, constructs and maintains its ITS facilities (approximately $450 million invested) –MEAG Power owns approximately 1,330 miles of transmission, 19 transmission substations and 172 distribution substations –ITS and costs are shared on a load ratio basis –MEAG Power has an open access tariff for its share of the ITS (www.weboasis.com/OASIS/MEAG/)www.weboasis.com/OASIS/MEAG/ ITS export/import service is allocated and sold independently of the other ITS co-owners Requests for network and interconnection service must be coordinated with other ITS owners

8. 8 Benefits of Transmission Ownership Local Control and Better Service –MEAG Power determines its transmission investments –Transmission construction schedule and priority are controlled by MEAG Power –Georgia has retail competition for large, new customers and unrestricted transmission access allows MEAG cities to serve load anywhere in the state. –If southeast RTO negotiations resume, MEAG Power will participate as a transmission owner rather than a stakeholder

9. 9 Benefits of Transmission Ownership (continued) Reduced Cost - Non-profit business model, tax-exempt financing and cost controls reduce what MEAG Power municipalities pay for transmission service Market Access - MEAG Power has direct access to the systems of Alabama Electric, JEA, Santee Cooper, SEPA, Tallahassee, Duke, FP&L, Progress-Florida and SCE&G in addition to the systems of the other three ITS co-owners

10. 10 Conclusions Transmission ownership has worked for MEAG Power Transmission ownership has challenges that require capital investment and overhead cost. The benefits (local control, better service, lower cost and market access) have far exceeded the cost There may be a unique window of opportunity for Public Power entities to purchase transmission facilities to mitigate market power and enable the IOU to keep its market based rate authority?