1. SD Energy Infrastructure Authority “Transmission 101” June 9, 2006 Mike Risan Senior Vice President, Transmission Basin Electric Power Cooperative Mike Risan Senior Vice President, Transmission Basin Electric Power Cooperative

3. Constraints of Rules of Man Nature Rules

4. Rules of Nature Laws of Physics Regional Characteristics Laws of Physics Regional Characteristics

5. Laws of Physics Power Generation Load

6. Power Contingencies Lightning

7. Contingencies Power

8. Overload?

9. Low Voltage? Power

10. Transient Stability? Power

11. Weakest Link Overload Low Voltage Transient Stability

12. Transfer Capability Power Limit

14. Natural Characteristics Coal Hydro Wind Location Load Coal Hydro Wind Location Load

15. Coal

16. Hydro Oahe Big Bend Fort Randall Gavins Point Fort Peck Garrison

17. Wind 50m (164ft) Power Class Wind Power (W/m2) Speed* (m/s)

18. Location

19. Load Generation Limit

20. Load NDEX

21. WNE WKS COOPERS FTCALS GRIS LNC GGS NDEX MWSI MHEX

22. Rules of Nature Summary Complex Regional problem Need regional solution Technically feasible Complex Regional problem Need regional solution Technically feasible

23. Rules of Man Regulatory Rules/Processes More Problematic In a state of flux Deregulation Regulatory Rules/Processes More Problematic In a state of flux Deregulation

24. Regulatory Rules/Process Federal Energy Regulatory Commission  Regulates jurisdictional utilities directly, others indirectly  Interstate transportation  Leading restructuring initiatives Federal Energy Regulatory Commission  Regulates jurisdictional utilities directly, others indirectly  Interstate transportation  Leading restructuring initiatives FERC States  Transmission line permitting & siting  Eminent Domain authority  Rate Recovery States  Transmission line permitting & siting  Eminent Domain authority  Rate Recovery PUC

25. FERC Restructuring Initiatives Orders 888/889 – 1996 Order 2000 – 1999 Orders 888/889 – 1996 Order 2000 – 1999

26. Orders 888/889 Open Access Pro-Forma Tariff Standards of Conduct Electronic reservation system (OASIS) Tariff Process (FIFO) Consider all requests sequentially Correctly assign costs Open Access Pro-Forma Tariff Standards of Conduct Electronic reservation system (OASIS) Tariff Process (FIFO) Consider all requests sequentially Correctly assign costs

27. Cost Provisions Rate = Expansion uses “OR” Pricing  Incremental  Average Rate = Expansion uses “OR” Pricing  Incremental  Average Cost Usage

28. $100,000,000+

30. Confirm Service Tariff Process Request Transmission Request Transmission Impact Study Facility Study Decision Period

32. R R T T O O

33. Order 2000 Regional Transmission Organizations Regional pricing to eliminate pancaking Coordinated operations for reliability improvement Regional transmission planning Regional Transmission Organizations Regional pricing to eliminate pancaking Coordinated operations for reliability improvement Regional transmission planning Same goals as the IS!

34. Rate Issues RTO rate  License Plate  Postage Stamp Bottom line = Who Pays? RTO rate  License Plate  Postage Stamp Bottom line = Who Pays?

35. No Cost/Benefit Benefits Costs

36. Other Impediments to New Transmission Opposition and litigation Siting across multiple jurisdictions Impacts vs. benefits? Who has responsibility to build? Uncertain cost recovery Risky – Who will invest? Opposition and litigation Siting across multiple jurisdictions Impacts vs. benefits? Who has responsibility to build? Uncertain cost recovery Risky – Who will invest?

37. Rules of Man Summary Regulatory arena in a state flux Process in gridlock Much uncertainty Who pays? Regulatory arena in a state flux Process in gridlock Much uncertainty Who pays?

38. Solution Expand Bulk Transmission System System Wide Average Rate (HV only) Common Rate Zone (IS) Cost Effective/Efficient Least Cost Planning Allow Immediate Recovery for Investments Incentives Unnecessary Expand Bulk Transmission System System Wide Average Rate (HV only) Common Rate Zone (IS) Cost Effective/Efficient Least Cost Planning Allow Immediate Recovery for Investments Incentives Unnecessary

39. Solution This will promote:  Economic Development  Energy Independence  Competition  Reliability This will promote:  Economic Development  Energy Independence  Competition  Reliability