1. The Midwest ISO – Platform to Meet Tomorrow’s Challenges Wisconsin Industrial Energy Group August 7, 2008

2. 2 Midwest ISO Overview The Midwest ISO is an independent, non-profit 501(C)(4) organization. We serve as the reliability coordinator for the transmission of high voltage electricity via a security constrained economic dispatch across all or parts of 15 states and Manitoba.  Control centers in Carmel, Indiana and St. Paul, Minnesota ----------------------------------------------------------  Began Reliability Operations on Dec. 15, 2001  Began Tariff Administration and Scheduling Operations on February 1, 2002  Energy Market Operations since April 1, 2005  ASM Operations as of Sept. 9, 2008 -----------------------------------------------------------  Large footprint (~947,000 square miles)  Multi-control area environment  133,000+ MW of generating capacity (by control area)  97,000 miles of transmission lines  Over $12 billion installed assets --------------------------------------------------------------  $ Cleared per year = $31 billion (2007)  Annual Budget = $250 million

3. 3 The Midwest ISO’s Role Adds Value: What We Do Provide Independent Transmission System Access Deliver Improved Reliability Coordination Perform Efficient Market Operations Coordinate Regional Planning Foster Platform for Wholesale Market Development Implications All parties have equal and non-discriminatory access Substantial regional reliability improvements Lower cost unit commitment, dispatch and congestion management Integrated system planning Encourage infrastructure investment and facilitate regulatory initiatives

4. 4 Midwest ISO Value Proposition Midwest ISO Annual Benefit by Value Driver 1 (in $ millions) 200-250 115-205 805 – 1,100135-150 Price Transparency Data / Informational Transparency Qualitative Value Drivers 230-340 140 2 (250) 555 - 850 Gross Benefits NET BENEFITS Planning Coordination Seams Management Regulatory Compliance Wholesale Platform for Demand Response Improved Reliability Dispatch of Energy Dispatch of Reserves Contingency Reserves Generation Investment Deferral Midwest ISO Cost Adders Wholesale Platform for Renewable Portfolio Standards 1 Figures shown reflect annual benefits and costs reflected in 2007 dollars 2 As of 4/30/08, the 12-month rolling average savings = $140 million

5. 5 Challenges & Opportunities Renewables (including Wind) Integration Demand Response and Smart Grid Integration Infrastructure Development and Cost Sharing

6. 6 What needs to be built? –Requires generation, transmission, demand response, environmental realities, fuel supply, reliability and economics to be analyzed together Who pays? –No consensus on the benefactors versus those that are paying The Midwest ISO is evaluating multiple planning models to help identify the most efficient system expansion plan –Cost recovery uncertainty How to complete? –Siting and equipment constraints likely –“Not in my backyard” –Timing an issue Challenges

7. 7 Renewables Integration Renewable Energy Needed by Eastern Interconnect 2027 Source: 20% by 2030 Wind Integration Study Wind Coal Natural Gas Nuclear Other 85 GW As of June 2008 10 GW 3 GW 69 GW Currently Active (GW)

8. 8 Demand Response and Smart Grid Initiative Integration Midwest ISO’s footprint of 15 states –Many with demand response legacy programs –Mixture of retail choice and traditional regulated states Retail regulatory treatment does not always encourage demand response participation Real-time pricing is not transparent at retail level Patchwork of regulatory, financial and technological obstacles challenge system and societal benefits of smart grid Must work to fully integrate demand response and smart grid initiatives into resource planning “Actions by customers that change consumption of electricity in response to signal, incentives or directives (emergency) from grid operators” “Short-term in nature” “Smart Grid – design concepts that focuses on optimizing grid operations, with much of the ‘smart’ coming from load control” “Programs encouraging a longer-term shift in consumption behaviors to reduce system demands” Demand Management Energy EfficiencyDemand Response Challenges

9. 9 Existing Opportunities for Demand Participation Midwest ISO energy market includes mechanisms to enable direct demand participation in both Day-Ahead and Real-Time markets ASM initiative will provide additional opportunities for demand participation Resource Adequacy will provide ability for demand response to qualify as both energy and capacity (as in current tariff) and demand response be fully integrated into resource planning Significant emergency demand response has been available to mitigate Real-Time supply shortages Emergency demand response, primarily in the western region, provided almost 3,000 MW of relief on August 1, 2006

10. 10 Member Expansion Update Duquesne Light Company targeted to join the Midwest ISO on October 1, 2008 Module F (Western Expansion Membership Option) opens Tariff to new members –Targeted at non-MISO MAPP members including Minnkota, – MidAmerican, Basin, WAPA, Dairyland, etc. –FERC order issued June 13 th approving Parts I and II –Details: Part I -- Reliability coordination (Effective June 1, 2008) >Replacement for the Reliability Coordination Agreement with MAPPCOR (Expires 5/31/09) Part II -- Seams coordination (Effective June 1, 2008) >Replacement for the Midwest ISO – MAPP seams agreement (Expires 12/31/08) Part III -- Market coordination (compliance filing and responses to public policy questions to be filed 8/12 and FERC Technical Conference to be scheduled) >Transmission provider integrates into the Midwest ISO market, retains its own transmission tariff

11. 11 Summary As demonstrated in the value proposition analysis, the benefits are achieved in a cost effective manner The Midwest ISO is in the best position to help address the future challenges of the electric industry in the Midwest, given the magnitude of the challenges and the regional nature of the solutions necessary to address these challenges The benefits of the Midwest ISO are readily evident in the form of improved access, enhanced reliability, market efficiencies and regional planning