June 12, 2008 Washington, DC

1. MGA Renewable Electricity, Advanced Coal and Carbon Storage Advisory GroupTransmission Subgroup Meeting 1 Summary June 12, 2008 Washington, DC

2. Participants and Observers Present • Mike Bull, Wind on the Wires • Mike McNalley, DTE Energy • Terry Grove, CAPX 2020 and Great River Energy • Clair Moeller, Midwest ISO • David Hadley, Midwest ISO • Kristine Schmidt, Xcel Energy • Natalie McIntire, American Wind Energy Association • Nathaniel Baer, Iowa Environmental Council • Geoff Matthews, Edison Mission • Larry Johnston, Southern MN Municipal Power Agency • Mike Stuart, Wisconsin Public Power, Inc. • Beth Soholt, Wind on the Wires • Julie Voeck, American Transmission Company • Kurt Simonsen, Manitoba Department of Energy, Science and Technology • Rob Gramlich, American Wind Energy Association • Tom Stanton, Michigan Public Service Commission Staff • Wick Havens, Center for Climate Strategies • Mike Gregerson, Great Plains Institute • Brad Crabtree, Great Plains Institute • Jesse Heier, Midwestern Governors Association • Daniel Stenberg, Midwestern Governors Association

3. Introductions and Review of Agenda • Mike Gregerson of the Great Plains Institute welcome everyone and asked them to introduce themselves. Mike reviewed the meeting objectives and materials. • Brad Crabtree of Great Plains Institute provided a brief overview of the MGA Energy Security and Climate Stewardship Platform and Greenhouse Gas Accord and described the advisory group process for implementation of Summit outcomes. • Mike then introduced the resolution deliverables and invited meeting participants to begin discussing each one.

4. Transmission Resolution Deliverable 1 • RESOLVED, that the scope of work for the working group shall include, but not be limited to, recommendations regarding the following deliverables: • identified partners, methodology and timeline for conducting a state-by-state evaluation of expected new megawatts of wind power development through 2020, including interim megawatt targets, the need for that growth to meet state/provincial, Midwestern, and national RPS goals, and corresponding needed transmission infrastructure;

5. Discussion of Deliverable 1 • MISO has sent a data request to LSEs to get a better sense of how they are interpreting requirements for new generation • How much of which fuel type by when • Responses by next Thursday; projects identified within a year • Only went to states with legislative mandates (MN, IA, WI and IL). Will look regionally from a siting standpoint to include the Dakotas. 100,000 MW discussion scares some folks • Given national discussions, there is a view that the Midwest needs to produce a third of the national commitment—about a 100,000 MW • Challenge of parochialism. Can we get beyond the approach of requiring the bulk of new wind generation to be located within a given jurisdiction? Uncertainty about this, both political and legal. • MISO is addressing this through scenarios—local-local, local-regional and regional-regional. Participants expressed support for this approach. • MB hydro additions: 200 by 2012, 640 by 2017-18, 1260 by 2021, in addition to 1,000 MW of wind by 2017-2018 • Modeling challenge: The Joint Coordinated System Plan (JCSP) will help address the seams issues for modeling beyond the MISO footprint to determine impacts on transmission

6. Defining Deliverable 1 • Need to define the output: • Start with specifying the number of MWhrs, then overlay that with state-specific requirements and siting constraints (e.g. how much must be within a particular jurisdiction) • Identify the gap between jurisdictional obligations and the MGA goal. • Need to query the LSEs because their responses will provide information on what they plan to spend money on with regards to generation and transmission • Important to include LSEs outside MISO but within MGA footprint and request needs to come from governors/premier to CEOs. LSEs are reluctant to provide information, so approach through governors will help. • There are ways to scale things to reduce sensitivities about proving information. It will be important to be very clear about the use of the data. • MGA, unlike governors offices and PUC/PSCs, is not subject to data practices requirements, which will also help. • Agreed action: work through MGA steering committee of governors and premiers’ staff to survey load serving entities (LSEs) in MGA jurisdictions beyond MN, IA, WI and IL, which has already received a survey from Midwest ISO. Establish a subcommittee of this group to prepare survey instrument for Steering Committee review. • Step 1 survey for inventory deliverable • Step 2 include in the survey necessary data to expand the scope of Midwest Transmission Expansion Plan (MTEP) 09 to include the MGA footprint (MTEP 09 is national, and the MGA portion will be a regional look that accomplishes deliverable one in the resolution and part of deliverable 3) • Clair, Beth, Tom, Natalie, Julie? volunteered to work with Mike Gregerson on review of the MISO survey and finalize something • Mike to set up a conference call • Group review of survey instrument following conf call • Presentation of final survey instrument to governors/premier’s staff on July 22nd

7. Discussion of Transmission Studies • Annual publication of MISO transmission expansion plan • Appendix A: projects expected to go under construction within 4 years • More exploratory investigations • MTEP 06 looked at implications of RES requirements on system • MTEP 08 will be the first to look at future scenarios (four scenarios: reference future/BAU, environmental w/$25 ton CO2, wind at 20 percent in MISO, limited gas. Incorporates overlay plans such as high voltage overlay) • MTEP 09 will include changed definitions for the future scenarios, one being the JCSP that looks at implications of DOE 20 percent plan in MISO. Another is a limited transmission investment future (assumes only short term investments due to uncertainty). • Discussion of ancillary services and their costs. Agreement that as wind penetration levels increase, the costs of those ancillary services increase. However, there are a number of solutions to address this, and the grid will not be managed at these higher levels in the same way that it is managed today. Also, a robust transmission system at regional scale facilitates the ability to manage volatility/variability more effectively at less cost. • Regional Generation Outlet Study—RGOS (MN, IA, WI, IL). Purpose: identify a minimum point that we build to system-wide, regardless of the operative scenario. Also, an attempt to model the geographic dispersion of these systems to provide some sense of the cost of siting constraints. Helps get beyond the queue problem by identifying major likely areas of development—renewable energy zones--where transmission can built in a build it and they will come approach. • Will MISO have the political support to name these renewable energy zones despite lacking legal authority? • Should mesh with studies underway in CAPEX 2020 • Results for stakeholder review in April 2009, finalization in fall of 09 • If other jurisdictions make RES/REO commitments, an additional study could be done for them.

8. CAPX 2020 Discussion • 2016 Study: Effort focused on this timeframe because of MN REO commitments and need to meet them • Can take renewable zone identification by MISO to the project level. • 2025 Vision Study: Minnesota 2025 goal shifts the focus more to MISO level studies • As gaps in jurisdictional policy region-wide are filled with RES/REO commitments, CAPX-like efforts or MISO RGOS will be necessary in other parts of the region

9. DOE Study • Conducted by NREL using WIND model • 300 GW nationally, with distribution weighted toward Midwest and less for Southeast • Worked with AEP on 765kv grid overlay to accomplish the plan • Accompanied by costs and benefits analysis • Challenge for building and sustaining support for extra high voltage transmission—must extend beyond one governor’s term • Build-out needs to be region-wide to ensure effectiveness and to justify investment

10. Other Studies • Need more background on the MI transmission study from Tom. • Action: Tom to share study with Mike Gregerson.

11. Near-Term 2015 Target • Concern raised about losing sight of 2015, as we look at 2020. • Discussion that the MGA has established a 2015 target as well and that the 2020 evaluation could and ought to assess degree to which we have or do not have a 2015 gap between jurisdictional policy commitments and the regional MGA target of 10 percent. • Agreement: Evaluation for resolution deliverable 1 needs to correspond with each MGA target, beginning in 2015 (i.e. what is actually expected for MW development relative to the target and any gap and what is needed in terms of the transmission build-out).

12. MB Hydro Discussion • Grand bargain: potential partnership with Manitoba Hydro and wind. Hydro access in return for load-following to help enable the large expansions of wind contemplated under the MGA targets • DC capacity would be important in such a scenario for stability due to challenges of moving large amounts of energy between generation and load

13. Concluding Thursday Discussion • You can plan forever, but you have to start building stuff. Also, some of the smaller things need to be in place to do the bigger things. In other words, lower voltage transmission build-out at the subregional level is needed to meet earlier 2015 MGA target. However, this more robust subregional system at lower voltage is also necessary to have a reliable foundation for eventual deployment of a 500-765 kW high voltage capacity to move larger amounts of renewables from west to east between MISO subregions and, eventually, between MISO and regions to the east and southeast. • Governors do not necessarily understand transmission issues at this level, and we have a teachable moment. • We will have to build new infrastructure that will cost a lot of money (not just because of wind, but for a lot of reasons). The planning will help identify where we most efficiently build that infrastructure to minimize that expenditure. Higher level discussion and political will is important, and the governors/premier can play an important role here. • Agreement - Early direction that governors can get behind and build on: • Regionalize CAPX experience beyond Minnesota, Dakotas and SE Wisconsin by applying model to other subregions within MISO; and • Extend the Regional Geographic Outlet Study approach beyond the four participating jurisdictions (currently MN, IA, WI and IL)

14. Deliverable 4: Cost Allocation and Recovery • 4. key elements and next steps for developing a transmission cost share and cost recovery mechanism for the build-out of resource transmission. (These efforts should take a fresh look at cost-sharing methodologies, identifying beneficiaries in a broad sense – sellers/developers, buyers/loads as well as jobs and tax beneficiaries and the burdens borne by different states, in order to develop an equitable cost allocation mechanism. In addition, these efforts should ensure any major expansion plan permits equitable participating in the ownership of improvements by each state’s utilities/transmission companies, so that the load serving needs of each state are properly accounted for.)

15. Cost Allocation and Recovery Discussion • Midwest ISO tariff began in 1998. A license plate tariff was set up in the absence of agreement over cost allocation. Lost revenue was recaptured through captive network customers. • Decision to revisit in six years with hint that there might be a move to postage stamp approach. Subsequent discussions failed to reach agreement. • Current cost sharing for reliability projects is 20 percent postage stamp, with 80 percent premised on a power flow model. Four MISO members have indicated that they may withdraw as a result. • Big problem of whose investment, when some firms have to share costs and pass them on to their customers but their shareholders do not get a return on their investment. Joint ownership of assets in this case would help. Barriers are primarily political. • The tariff is voluntary, so there is an effective no-losers test. The threat of opt-out is real. Concerns on the part of some members have increased as discussions have expanded from 345 kV to 765 kV and potential costs have increased. • FERC has limited jurisdiction, and the states are responsible here. Benefits of keeping firms in the ISO are large for building out the transmission system. Governors can help through this advisory group process.

16. Cost Allocation Discussion Continued • Challenge that some ways to meet governors/premier’s targets might preclude system choices for meeting national targets. You need to site and permit 345 kV 8x to get to 765 kV equivalent. • Need ability to take longer view of benefits—longer than Regional Expansion Criteria Benefits allows. • Issue that needs to be explored: can a state commission take into consideration the question of public interest beyond their borders? Some are precluded by statute from doing this. • Questions about feasibility came up and question as to whether it is not just easier to negotiate the really big projects across jurisdictions. Proposal to circumscribe more narrowly the criteria for projects that would me the regional benefits test. • At minimum, where jurisdictional impediments to regional benefits consideration, we ought to change that. • Agreed Action: Develop agreed model legislation that would expand commission authorities, where necessary, to enable them to consider public benefits at regional scale. • Next step: survey jurisdictional authorities. Nathaniel, Tom and Beth will help GPI staff to craft an info request of commissions. • Subsequent step: draft model legislation for steering committee review based survey results and subgroup discussion • Agreed Action: try to secure cost sharing agreement at subregional level first (e.g. MN, WI, IA), where greater commonality of need and circumstances exist. This could then be expanded to other subregions. • Feasible and helpful for meeting jurisdictional policy requirements, but does not get us to the inter-RTO 765 kV capacity expansion (e.g. moving large amounts of wind from Midwest to New England). • Joint ownership needs to be part of such a package at the subregional level (CAPX model). This may not be an option in some jurisdictions like MI with ITC. • Questions to consider: What does eastern portion of the region look like? Who is the champion?

17. Cost Allocation Discussion • Agreed Action: Framework or architecture of subgroup’s final recommended work product should tie together deliverables 1, 3 and 4 into single package recommendation to the governors and premier. • 1) Evaluation of new generation and transmission needed to accommodate that new generation; 2) the regional transmission plan focused on required high-voltage interstate network additions to accomplish that transmission; and 3) proposed cost recovery mechanism/ownership structure to facilitate financing it. • This generation is not just wind, but the whole suite of new generation resources and technologies needed to meet the MGA energy and climate targets. There is tremendous value in a robust transmission system to have the capacity and flexibility to deploy generation and manage cost-effective integration to meet the MGA goals.

18. Draft Letter to FERC Re: MISO Transmission Queue Reform • Subgroup participants and observers reviewed, edited and agreed on a draft letter to the U.S. Federal Energy Regulatory Commission for consideration by governors and premiers. • The letter is included separately from this meeting summary.

19. Scheduling and Adjournment • Transmission subgroup members agreed to have a group conference call on Tue, July 8th from 10-noon Eastern/9-11 Central. • Subgroup members also agreed to have an in-person transmission breakout discussion on Wed, July 30th in Dearborn, MI (Detroit airport). The breakout session will be part of the day-long MGA Renewable Electricity, Advanced Coal and Carbon Capture Advisory Group meeting, and the breakout will be held in the afternoon. • The meeting was adjourned.