Economic Transmission Case Study: Champlain Wind Link Vermont System Planning Committee March 10, 2010

Champlain Wind Link (“CWL”) Potential project expanding PV-20 path  230kV into Vermont  Capital intensive, across control areas  Scoped/developed by VELCO and Anbaric Transmission, LLC Value proposition: several potential components Power supply working group  Initial thoughts on benefits/risks  Research & findings

Potential Value Components Power supply value to project owners/subscribers  Cost-effective power source, vs. New England alternatives Regional reliability benefits  NY Central-East interface  New England single-import limit Local (?) reliability benefits  Address needs that Vermont reliability projects would otherwise need to address Multiple facets  Each one complex  Multiple beneficiaries  Some winners & losers

Power Supply Working Group DU power supply staff, VELCO, Anbaric December 2009 to February 2010 Review the CWL from the perspective of a potential power supply resource  Not other considerations like system reliability, return on invested capital  Confidential Gather information about potential sources of power over the CWL Identify principal elements of the power supply value proposition, and associated risks

Working Group Goals Inventory benefits / risks unique to imported power over the proposed CWL Solicit indicative proposals from potential NY suppliers  Gauge types of available resources, approximate pricing & terms Conduct preliminary research on primary risks related to imports Screening-level assessment of potential viability & cost-effectiveness of purchasing new power supply resources over the CWL

Initial Thoughts: Potential Power Supply Benefits New York renewable resources  Perceived cost advantage of NY wind vs. equivalent New England wind  Access to additional renewable resources Access to lower-cost market power (energy & capacity) from northern NY  Price “spread” between the NY and NE markets Negotiating leverage vs. other potential suppliers

Initial Thoughts: Potential Power Supply Risks Uncertainty regarding permitting / timing of CWL versus capacity market and supplier contract timelines Complexity of the potential transactions (i.e., intermittent wind “firmed” by other resources) Issues related to imports & intermittent wind  Capacity market penalties applicable only to imports  Requirements for external resources to sell Renewable Energy Credits in New England  Potential scheduling penalties related to imports Future changes in market rules / rule differences between New York & New England

Request for Proposals Distributed to potential suppliers December 2009  Mix of generation owners and other market participants On behalf of the Vermont DUs, up to 150 MW Seeking long-term resources  Wind and “firming” power  Individually or together  Indicative proposals

Concept of Wind & “Firming” Power via the CWL

RFP Findings & Observations on Power Supply via CWL Didn’t find compelling power supply benefits  Not enough “spread” vs. New England options Other basis for expecting CWL power supply value?  Historical data & consultant projections indicate a wholesale price “spread” from northern NY to Vermont  But probably not enough to cover full CWL transmission costs The transaction concept (wind + firming from NY) is quite complex to evaluate and implement  Combination of intermittent resource & imports  A unique combination of transactions; outside the experience of Vermont DUs (and most market participants)

A Few Observations on Economic Transmission Importing power entails incremental risks (compared to resources internal to New England)  Capacity market, scheduling, REC eligibility  Many of these would not apply for an economic transmission project within New England If power supply value derives from proposed projects, timelines can present extra challenges  Proposed power plant, output to be transmitted via proposed CWL Substantial time & cost to evaluate  Project scoping & initial design  Transmission reliability/planning impacts  Power supply impacts for participants, non-participants  LMP effects  Multiple areas of expertise