1. Transmission Barriers to Wind Energy in the West Presented by: Pamela Jacklin Stoel Rives LLP POWER-GEN Renewable Energy & Fuels 2007 Conference Mandalay Bay Convention Center - Las Vegas, Nevada March 6-8, 2007

2. What are the Transmission Barriers to Wind Energy in the West? Five Key Barriers Lack of investment in transmission over the last 20 or more years Inefficient Use of Available Transmission Ownership Structures and Balkanization of the Transmission System Lack of understanding or experience with wind resource Transmission Policies and Commercial Practices that do not facilitate increased wind penetration

3. Poorly Understood Transmission Barriers to Wind Energy Lack of understanding or experience with wind resource by engineers, operators and regulators Wind doesn’t behave like a typical capacity or energy resource The hydro-thermal system in the West has been designed to integrate base load thermal generation and once-plentiful hydro power Wind integration requires new approaches and imposes new costs

4. Poorly Understood Transmission Barriers to Wind Energy Transmission Policies and Commercial Practices that do not facilitate increased wind penetration Transmission Planning Methodologies driven by capacity needs Transmission Financing Models that fail to consider Wind’s value proposition Generator Interconnection policies or rules that fail to take into account the nature of wind generation or generators Commercial Practices that penalize wind unnecessarily

5. Transmission Barriers to Wind Energy in the West—What’s Being Done There are Activities on Many Fronts EPAct 2005 and FERC Implementation Western Governors-Providing a Policy Framework State Initiatives CAISO Northwest and Southwest Initiatives Transco and other Tie Line Proposals

6. Transmission Barriers-- What’s Being Done to Improve Understanding & Planning More meaningful efforts to bring wind industry and transmission operators together to address issues FERC OATT Reform on planning Models for Transmission Studies (SSG-WI, RMATS, Frontier) Northwest Wind Integration Forum— call for new planning methodology to evaluate cost-effective transmission for wind Transmission Initiatives focused on Wind Rich Areas

7. Transmission Barriers-- What’s Being Done to Encourage Investment FERC Pricing Reform--Incentive-based rate treatments National Electric Transmission Corridors and FERC siting authority FERC Standardization of the Generator Interconnection process California Examples –Transmission Cost Recovery under Section 399.25, Cal. Pub. Utility Code –CAISO proposal to FERC for Gen-Tie Recovery for Location-Constrained Generation

8. Transmission Barriers-- What’s Being Done to Improve Efficient Use of Transmission FERC’s Focus on Improvements in Organized RTO Markets Continues FERC OATT Reform –Energy Imbalance Penalty—Carve out for Wind –New Transmission Service Conditional Firm Redispatch Small Steps in the Northwest and Southwest –Northern Tier ACE Diversity Exchange –WestConnect and WestTrans Common OASIS format

9. Transmission Barriers to Wind in the West-- What’s Left to Do? Continued Efforts to Create More Efficient Use of Transmission Capacity Develop New Approaches to Cost-Effective Transmission Expansion Find Creative Solutions to Transmission Issues that Impede Project Financing

10. Transmission Barriers to Wind in the West-- What’s Left to Do? Continued Efforts to Create More Efficient Use of Transmission Capacity Develop effective Redispatch Service Consolidate Control Areas Develop Ancillary Services markets Reduce Rate Pancaking

11. Transmission Barriers to Wind in the West-- What’s Left to Do? Transmission Expansion Improve regional resource planning Keep the focus on efforts to streamline the siting process Find better ways to allocate costs for tie lines in areas outside the CAISO

12. Moving Forward: Always Remember Wind’s Value Proposition Wind is primarily an energy resource, but a variable one with unique benefits: The fundamental value of Wind Power to a utility portfolio is its ability to: Displace fossil fuel consumption Limit exposure to volatile fossil fuel prices Hedge against possible greenhouse gas control costs Match resource additions to timing and scale of load growth

13. For More Information, Please Contact: Stoel Rives LLP 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204 www.stoel.com Pamela Jacklin(direct: 503.294.9406) Marcus Wood(direct: 503.294.9434) Steve Hall(direct: 503.294.9625) Jennifer Martin(direct: 503.294.9852) Seth Hilton(direct: 415.617.8943) Kevin Fox(direct: 415.617.8904)