Citizens League Electrical Energy: Affordability and Competitive Pricing Working Team Electric Transmission

Why this presenation? At prior meeting, several transmission or MISO specific questions were brought up Request was made to learn more about MISO and transmission current events

Agenda Introduce Midwest Independent System Operator - MISO ransmission and electricity prices Current transmission topics – Renewable integration – Cost allocation – Generator retirements

Disclaimers I work at MISO. But this presentation represents my own ramblings, and should in no way be construed as an official MISO presentation. Disclaimer disclaimer. I wrote the above disclaimer. I am not an attorney. I assume no responsibility or liability for any inaccuracies, intended or unintended, contained in the above noted disclaimer.

Oversee the flow of power over the high voltage wholesale transmission system in all or parts of 13 states and the province of Manitoba Provide independent wholesale transmission system access Provide Reliability coordination Operate a day ahead and real time energy market Manage congestion on the grid Set reserve margin requirements for load serving entities Plan Regional transmission expansion Serve as independent market monitor MISO – Plan and Operate the Transmission Grid for most of the Midwest

6 MISO Fast Facts Non-profit organization Voluntary membership Regulated by the Federal Energy Regulatory Commission (FERC) $41 billion energy market 1,896 pricing nodes Governed by independent eight member board About 750 employees Main office in Indianapolis, branch office in St. Paul.

MISO, Entergy, PJM and SPP Footprints 7

8 Real Time Prices – MISO Runs an Energy Market

June 2011 Generator Interconnection Queue Map

Transmission – the Great Enabler Like an interstate highway system, transmission can enable access to lower cost electricity New transmission generally reduces wholesale prices by reducing congestion, improving access to lower cost energy. In aggregate, net benefits increase, but it can create winners and losers There are other benefits beyond lower production costs See simplified example on next slide

Apples and electricity * Imagine 2 valleys, separated by a mountain range. The apples on the west side cost $5/bushel, while the apples on the east side cost $10/bushel. A new highway goes through the mountain, allowing people on the east to buy western apples. The new market price of apples for everyone is $7. Western growers and eastern consumers are happy. Western consumers and eastern producers, not so much. Now substitute the word electricity for apples, and transmission for highway. * At this point please refer to disclaimer on slide 3

Costs and Benefits Of course building that highway or transmission lines is not free If you spend $50 million dollars to build a transmission line that isn’t needed, you don’t produce net benefits, only costs MISO engineers conduct detailed studies of transmission costs and benefits in order to justify whether a line should be built, and optimize location, size, etc

Current Events Integrating renewables into the Grid – Transmission expansion – Integration challenges Cost Allocation (who pays) Generator retirements (EPA, cheap natural gas, aging plants) and its effect on reliability and prices

Transmission Expansion to Integrate Renewable Energy Most states in the MISO footprint have Renewable Portfolio Standards (RPS’s) requiring a certain percentage of renewable energy MISO conducted 2 major studies to determine the amount of transmission needed to meet RPS’s. – Regional Generation Outlet Study (RGOS) – Regional 15 year plan to meet state RPS’s - $15 to $20 billion. – Candidate MVP Study - $5 billion. An in progress, more detailed plan to justify the first phase of new transmission projects to meet RPS standards - $5 billion.

RGOS Study

Candidate MVP Study

Integrating Renewables Renewable Energy Sources (wind, solar) are variable or intermittent To integrate renewables: – Dispatchable Intermittent Resource (DIR) – Improved Forecasting – Benefits of Scale to Smooth Level of Variation – Energy Storage – Manitoba Hydro

Cost Allocation How to pay for regional transmission? Traditionally local area paid for local transmission, or shared with immediate neighbor Hard to make traditional model work for long- distance renewable generation In response, MISO developed the concept of regional Multi-Value Projects (MVP’s) Costs of MVP’s shared across entire MISO footprint

MISO studies more than just transmission As Reliability Coordinator, MISO helps ensure the region has adequate supply of electricity For example, recently, MISO conducted an EPA Regulation Study to determine potential level of generator retirements likely under different EPA regulatory scenarios Summary – New Federal EPA Regulations will not have a dramatic impact on MISO supply, reliability, or prices