Update Jan 09 - Southwest Power PoolSeminole Muskogee Hitchland Finney L.E.S. LaCygne Portfolio 3-C - 2023 + Western & Central EHV 13,500 MW Wind13,500 MW Wind 4 7 Benefit Cost Results

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SPP Regional State CommitteeUpdate from CAWG

January 26, 2009Dallas, TX

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Agenda• EHV Update• Balanced Portfolio Update

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3

EHV Update

– Staged Development Results• MAPS• B/C Results

– End State Results• Transfer Results• Stakeholder Responses• CAWG Conclusions

– Next Steps

4

Iatan

Nashua

El Dorado

Longwood

Tuco

Woodward

Spearville

Comanche Co

ClevelandSooner

Anadarko XF

Swissvale – Stilwel Tap

Knoll

Axtell

Chesapeake

Substation Upgrade

New 345 kV Transmission Circuit


Reno Co

Wichita

Summit

Seminole

Muskogee

operated 345 kV

PortfolioPortfolio 33--C C -- 20122012

3,300 MW Wind3,300 MW Wind

3

5

Iatan

Nashua

El Dorado

Longwood

Tuco

Woodward

Spearville

Comanche Co

ClevelandSooner

Anadarko XF


Knoll

Axtell

Chesapeake

Substation Upgrade



Reno Co

Summit

Seminole

Muskogee

Hitchland

Finney

L.E.S.

Wichita

PortfolioPortfolio 33--C C -- 20172017+ Western EHV+ Western EHV


6

Iatan

Nashua

El Dorado

Longwood

Tuco

Woodward

Spearville

Comanche Co

ClevelandSooner

Anadarko XF


Knoll

Axtell

Chesapeake

Substation Upgrade



Reno Co

Wichita

Summit

Seminole

Muskogee

Hitchland

Finney

L.E.S.

LaCygne

PortfolioPortfolio 33--C C -- 20232023+ Western & Central EHV+ Western & Central EHV


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7

Benefit Cost Results

• B/C calculated for each part based on 10 years forward from starting date.– B/C above 1 only in last year– B/C increases with higher injections of wind

• Three parts combined over ten years– Not cost-beneficial – B/C increases over ten year period

• Total B/C to SPP B/C increases with higher wind injections.– Indicates importance of exports / Not SPP alone– Need to include revenues from exports in evaluation

Portfolio 3-C + EHV Buildout Year MW Wind Total B/C SPP B/CP3-C @ 765 2012 3,300 0.74 0.66P3-C +West EHV 2017 7,000 0.79 0.72P3-C + West & Central EHV 2022 13,500 2.43 1.45Combined Over 10 Years 2012-2022 As above 0.72 0.45Final Year 2022 13,500 1.99 1.19

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End-State Results

# ZoneAdj PB Benfits

Upgrade Costs

Transfer Allocation

Transfer Out

Transfer Net

Resulting Costs

Net Benefit B/C Original

B/C1 AEPW $121,131 $170,002 $175,487 -$224,359 -$48,872 $121,131 $0 1.00 0.712 EMDE $25,586 $19,930 $20,573 -$14,917 $5,656 $25,586 $0 1.00 1.283 GRDA $13,245 $14,794 $15,271 -$16,820 -$1,549 $13,245 $0 1.00 0.904 KCPL $16,614 $58,430 $60,315 -$102,131 -$41,816 $16,614 $0 1.00 0.285 MIDW $11,387 $5,441 $5,617 $0 $5,617 $11,058 $329 1.03 2.096 MIPU $38,468 $30,613 $31,601 -$23,746 $7,855 $38,468 $0 1.00 1.267 MKEC $25,322 $8,479 $8,753 $0 $8,753 $17,232 $8,091 1.47 2.998 OKGE $163,319 $107,231 $110,691 -$54,603 $56,088 $163,319 $0 1.00 1.529 SPRM $12,535 $11,721 $12,100 -$11,286 $814 $12,535 $0 1.00 1.07

10 SUNC $6,036 $8,079 $8,339 -$10,382 -$2,043 $6,036 $0 1.00 0.7511 SWPS $285,627 $87,318 $90,135 $0 $90,135 $177,453 $108,174 1.61 3.2712 WEFA $47,623 $23,913 $24,684 -$974 $23,710 $47,623 $0 1.00 1.9913 WRI $73,885 $87,376 $90,196 -$103,687 -$13,492 $73,885 $0 1.00 0.8514 NPPD $15,542 $60,641 $62,597 -$107,696 -$45,099 $15,542 $0 1.00 0.2615 OPPD $12,048 $47,007 $48,524 -$83,483 -$34,960 $12,048 $0 1.00 0.2616 LES $3,721 $14,520 $14,988 -$25,787 -$10,798 $3,721 $0 1.00 0.26

Total $872,089 $755,496 $779,872 -$779,872 $0 $755,496 $116,593 1.15 1.15100.00% 103.23%

Results with Transfers: Portfolio 3A + EHVAnnualized $1,000

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Stakeholder Responses

• Concern about low wind levels used in models– Particular concern about using only 7 GW of

wind in 2017 model where EHV is connected to existing SPP 345 system.

• Concern about transfers needed to support cost allocations using Balanced Portfolio– Transfers may even exceed revenue

requirements in existing zonal rates.

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CAWG Conclusions• Unless evidence is provided that the existing 345 kV

system cannot handle more than 7 GW of wind, the SPP should perform higher wind scenarios starting with at least 11 GW of new wind by March 2016. The purpose of this analysis is to determine the appropriate timing for a portfolio of 765 kV upgrades associated with the SPP EHV plan. EHV on a staged basis is not cost-beneficial

• Transfers required for using Balanced Portfolio for EHV appear to be too large

• The CAWG needs to proceed with approaches different from the Balanced Portfolio for:– Economic Evaluation– Cost Allocation

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Next Steps• Continued Work on Economics of EHV

– Discussions with states• Key Driver Variables• Types of Analysis to use (scenario vs. uncertainty)• Specification of best resource strategies with and without

EHV– Implementation of Economic Study– Develop economic comparisons for range of capacity

factors for wind• Cost Allocation for EHV

– Concepts paper for cost allocation• Preliminary in April• Finalize by July

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Balanced Portfolio Update

– Documentation of Balanced Portfolio Development

– Portfolios 3-A and 3-C• MAPS• B/C Results

– Stakeholder Responses– CAWG Recommendations– Next Steps

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Documentation of Balanced Portfolio Development at CAWG

• CAWG just finished a description of the Balanced Portfolio development for inclusion in STEP 2009– Section 5.2 Balanced Portfolio

This section is a summary of the Cost Allocation Working Group’s (CAWG) efforts toward the development of a Balanced Portfolio starting in late 2007 and going through January 2009.

– Included in materials for this meeting• Provides a fairly detailed, month-by-month description of

what was discussed at the CAWG meetings– Would recommend it to anyone who wants to better understand

how we arrived at where we are today.– May also be helpful for SPP report that is required for a

recommended Balanced Portfolio.

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Iatan

Nashua

Seminole

Muskogee

El Dorado

Longwood

Tolk

Reno CoSpearvilleWichita

ClevelandSooner

Anadarko XF

Swissvale – Stilwel TapSummitKnoll

Axtell

Potter

Chesapeake

Substation Upgrade



PortfolioPortfolio33--AA

operated 345 kV

8

15

Iatan

Nashua

El Dorado

Longwood

Tuco

Woodward

Spearville

Comanche Co

ClevelandSooner

Anadarko XF


Knoll

Axtell

Chesapeake

Substation Upgrade



Reno Co

Wichita

Summit

Seminole

Muskogee

operated 345 kV

PortfolioPortfolio33--CC

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B/C Results

• 3-A has B/C>1 for 345kV and 765 kV cost• 3-C has B/C<1 for 345kV and 765 kV cost• Why the lower B/C for 3-C

– Higher cost portfolio– Benefits go up, but not enough

Portfolio 345 kV 765 kV 345 kV 765 kV3-A 1.51 1.12 $111 $1503-C 0.94 0.58 $172 $280

Annualized Costs$1,000 / Year

10 Year B/C3/12 - 2/22

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Transfer Results

# ZoneAdj PB Benfits

Upgrade Costs

Transfer Allocation

Transfer Out

Transfer Net

Resulting Costs

Net Benefit B/C Original

B/C1 AEPW $20,881 $24,940 $14,640 -$18,699 -$4,059 $20,881 $0 1.00 0.842 EMDE $5,829 $2,924 $1,716 $0 $1,716 $4,640 $1,189 1.26 1.993 GRDA $1,798 $2,170 $1,274 -$1,647 -$373 $1,798 $0 1.00 0.834 KCPL $8,337 $8,572 $5,032 -$5,266 -$234 $8,337 $0 1.00 0.975 MIDW $1,591 $798 $469 $0 $469 $1,267 $324 1.26 1.996 MIPU $1,598 $4,491 $2,636 -$5,529 -$2,893 $1,598 $0 1.00 0.367 MKEC $5,295 $1,244 $730 $0 $730 $1,974 $3,321 2.68 4.268 OKGE $44,983 $15,731 $9,235 $0 $9,235 $24,966 $20,017 1.80 2.869 SPRM -$30 $1,720 $1,009 -$2,759 -$1,749 -$30 $0 1.00 -0.02

10 SUNC $389 $1,185 $696 -$1,492 -$796 $389 $0 1.00 0.3311 SWPS $43,103 $12,810 $7,520 $0 $7,520 $20,329 $22,773 2.12 3.3612 WEFA $11,792 $3,508 $2,059 $0 $2,059 $5,567 $6,225 2.12 3.3613 WRI $23,073 $12,818 $7,525 $0 $7,525 $20,343 $2,730 1.13 1.8014 NPPD -$609 $8,896 $5,222 -$14,727 -$9,505 -$609 $0 1.00 -0.0715 OPPD -$472 $6,896 $4,048 -$11,416 -$7,368 -$472 $0 1.00 -0.0716 LES -$146 $2,130 $1,250 -$3,526 -$2,276 -$146 $0 1.00 -0.07

Total $167,411 $110,832 $65,062 -$65,062 $0 $110,832 $56,579 1.51 1.51100.00% 58.70%

Annualized $1,000 Results with Transfers - Portfolio 3A @ 345 Costs

Nebraska -$29,670 45.6%East Zones -$18,699 28.7%Others -$3,139 4.8%

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Stakeholder Responses• Transfers result in higher cost

and are too large– Benefits of 3-A not well balanced– Benefits too high for zones

where wind is located• Concern about negative benefits for Nebraska

– Should S-K-A be included in portfolios?• Concerns about modeling

– Costs used for upgrades– Use of single fixed charge rate– Details of reliability impacts– Incremental wind (700 MW) in change case

EMDE $1,716MIDW $469MKEC $730OKGE $9,235SWPS $7,520WEFA $2,059WRI $7,525Total $29,253

Increase In Costs $1,000 / Yr

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Completion Details Required Prior to Final Approvals

1. Better modeling details of power grid for Nebraska zones.2. Details of adjusted production cost savings provided to each

utility.3. Details of costs to build confirmed by each utility.4. Details of reliability impacts and costs confirmed by each utility.5. Timing of upgrade start and completion dates confirmed by each

utility.6. Other: For example:

a. Should a risk assessment be performed regarding various assumptions made in the modeling of adjusted production cost savings?

b. Should other savings related to losses or capacity margin be included, even if at a cursory level.

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Recommendations to RSC• The foregoing completion steps be taken for

Portfolios 3-A and 3-C before a final recommendation is made on these two portfolios.

– Note: modifications to these portfolios may occur as stakeholders review modeling assumptions

• SPP Staff has already set up a process for stakeholders to have access to data and provide input on assumptions used.

– Note: Economic Methods and Modeling Task Force (EMMTF) will be the primary SPP forum for stakeholder review.

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Next Steps

• SPP has designated the EMMTF as the group to do further modifications on the model being used.

• CAWG will get updates from the EMMTF on modeling issues, but will still discuss results related to any portfolios being considered for the Balanced Portfolio.

• CAWG will provide updates and possibly a recommendation to the RSC at its April meeting.

NTC, Project Tracking, and Unintended Consequences 1

High Priority Economic Studies

5.2 Balanced Portfolio

5.2.1 Disclaimer

This section is a summary of the Cost Allocation Working Group’s (CAWG) efforts toward the development of a Balanced Portfolio starting in late 2007 and going through January 2009. The section contains a substantial amount of detail and information that has been addressed by the CAWG during its deliberations.

Importantly, this information is only a summary of the work conducted to date, and the development of a final Balanced Portfolio remains a work in progress.

It should be noted that various modeling assumptions changed during this period, as different and new information became available. As the development of portfolios from which to choose a final Balanced Portfolio moves forward, and as stakeholder review continues, modeling assumptions will likely undergo further changes. While the results in this summary include substantial detail, they should not be considered as definitive, rather as a documentation of the work that has taken place thus far.

The CAWG has reviewed this documentation of the process and found it to be an accurate representation of the work that has taken place thus far. This Section 5.2 is posted on the

SPP website at http://www.spp.org/section.asp?pageID=115.

5.2.2 Introduction

The Balanced Portfolio is an SPP strategic initiative to develop a cohesive grouping of economic upgrades that benefit the SPP region, and to allocate the cost of those upgrades regionally. Projects in the Balanced Portfolio are transmission upgrades of 345 kV* or higher that will provide customers with potential savings that exceed the cost of the project. These economic upgrades will reduce congestion on the SPP transmission system, resulting in savings in generation production costs. Economic upgrades may provide other benefits to the power grid, increasing reliability and lowering costs such as capital costs and end-use consumer costs.

* Upgrades of voltages less than 345 kV can be included if needed to deliver the benefits of the EHV upgrade, where the

cost of the lower voltage facilities does not exceed the cost of the EHV facilities.


The CAWG, a sub-group of the Regional State Committee (RSC), has worked diligently to identify upgrades for inclusion in a portfolio that will provide a balanced benefit to customers over a ten-year payback period. “Balanced” is defined by the Tariff in Attachment O, such that for each Zone, the sum of the benefits of the potential Balanced Portfolio must equal or exceed the sum of the costs. The Tariff allows for the adjustment of revenue requirements to achieve balance for the portfolio†.

5.2.3 Economic Benefits: Adjusted Production Cost

Balanced Portfolio development begins with an economic screening of projects identified by both stakeholders and SPP staff. After receiving Stakeholder feedback, SPP engineers compile a list of potential economic projects which show potential for positive return.

The first step is to conduct economic analysis on all projects considered for the Balanced Portfolio. This process is done by determining the adjusted production cost metric for each project in the screen individually. Adjusted production cost is defined as:

Adj Prod Cost = Production Cost - Revenue from Sales + Cost of Purchases

Where:

Revenues from Sales = Net Export x Zonal LMPGen Weighted

and

Cost of Purchases = Net Import x Zonal LMPLoad Weighted Production cost for each unit is based on fuel usage, variable O&M costs, environmental costs and both scheduled and forced outages‡. Adjusted production cost savings account for the economy purchase and sale of power in the modeling footprint. This is important when benefits are being calculated for zones within the SPP as well as in differentiating overall benefits from the portfolio compared to the benefits accruing to SPP members.

To calculate adjustments to production costs due to an economic transmission project, commercial production cost analysis software is used to estimate hourly unit commitment and dispatch of modeled generators within a context of a modeled transmission system and load delivery points. The commitment and dispatch of the generators is constrained by the software to ensure that no overloads will occur on any monitored transmission element (typically referred to as the NERC book of flowgates, but can include additional congestion points of interest). The software produces a security constrained economic dispatch and unit commitment.

5.2.4 Balanced Portfolio Development The following table provides a timeline for the development of the various portfolios that were developed by the SPP staff and presented at the monthly CAWG meetings

Table: CAWG Timeline for Balanced Portfolio Development

Months/Year Key Discussions at CAWG Aug-Nov 2007 Screening of Candidate Upgrades for Portfolio Feb –Apr 2008 Initial Portfolios 1, 2, 3 and 4

† The Tariff allows for deficient zones to be balanced by transferring a portion of the Base Plan Zonal Annual Transmission

Revenue Requirement and/or the Zonal Annual transmission Revenue Requirement from the deficient Zone(s) to the Balanced Portfolio Region-wide Annual Transmission Revenue Requirement.

‡ SPP is currently using probabilistic techniques to simulate a single draw of outages to simulate forced outages


May 2008 Trapped Generation Issues Discussion Begins Jun 2008 Spearville-Knoll-Axtel Added to Portfolios 2 and 3 Jul 2008 Portfolios 2 and 3 at 2008 Wind Levels and Turk Aug 2008 Portfolios 2 and 3: Firm Wind Sensitivities Sep 2008 Introduction of Portfolios 3-A and 3-B at 345 and 765 kV costs Oct 2008 Portfolio 3 (high wind) and 3-A (current wind) Analysis Dec 2008 Portfolio 3-C (modify 3 for high wind) Jan 2008 Further Analysis of Portfolios 3-A and 3-C with Nebraska

August-November, 2007: Screening of Candidate Upgrades for Portfolios Candidate transmission upgrades for screening were gathered by SPP staff, and initially the screening analysis was performed using only the summer months. A discussion at the CAWG led to include spring-fall months in the calculations of adjusted production cost benefits. The screening analysis was then performed for the summer months and the spring-fall months starting with the spring of March 1, 2012. These estimates of annual benefits were compared to the estimates of engineering and construction cost obtained by SPP staff from transmission owners. All projects screened were ranked from highest to lowest according to their benefit-to-cost (B/C) ratios. The SPP staff then used these rankings as a basis for developing a collection of economic upgrades into alternative portfolios.

February-April, 2008: Initial Four Portfolios SPP staff developed four initial portfolios, labeled as portfolios 1, 2, 3 and 4. Each portfolio had specific criteria for determining which projects to include.

1. Portfolio 1 was simply a collection of every project from the economic project screening process that had a B/C ratio greater than 1.0.

2. Portfolio 2 was a subset of Portfolio 1 where projects that would share similar benefits were narrowed to remove upgrades that were not providing additional benefits.

3. Portfolio 3 was assembled with the intent of giving each Zone a project (projects that crossed multiple zones were considered for each) and the highest beneficial project in that zone was chosen.

4. Portfolio 4 was a collection of projects that would help benefit each other raising the overall benefit of the entire portfolio.

These four portfolios (P) along with the B/C screening ratios are shown in the following exhibits.


Screening of Proposed Economic Upgrades

ProjectScreening B/C Ratio P1 P2 P3 P4

Tolk - Potter 7.20 +El Dorado - Longwood 3.36 + + +Iatan - Nashua 2.95 + + + +SWPS - Battlefield 2.66 + +Chesapeake XF 2.26 + + +Tuco - Tolk - Potter 1.73 + + +Fairport - Sibley 1.31 + +Pittsburg - Ft Smith 1.17 + + +Spearville-Mooreland/Woodward-Tuco 1.13 + + + +Seminole - Muskogee 1.08 +Monett XF 1.04 +Redbud - Horseshoe Lake 1.01 +Cleveland - Sooner 0.91 + + + +Sunnyside XF 0.89 + +Northwest XF 0.89 + + +Swissvale - Stilwell 0.67 +Anadarko XF 0.48 +Turk - McNeil 0.46 +Mooreland/Woodward - Wichita 0.14 +Mooreland/Woodward - Northwest (0.00) +

(NOTE: “Tolk – Potter” project is a subset of the “Tuco – Tolk – Potter” project.) Balanced Portfolio screening analysis considered assumptions for generation not contained in the subsequent portfolio analysis. Of note was the inclusion of Holcomb 2, Red Rock, Hugo 2 as well as 4,600 MW of generic wind capacity


Portfolio 1

Because Portfolio 2 eliminated duplicative upgrades from Portfolio 1, Portfolio 1 was not carried forward as a possible Balanced Portfolio candidate.


Portfolio 2


Portfolio 3


Portfolio 4


May 2008: Trapped Generation The CAWG review of the four portfolios, including high wind sensitivities, discovered that the production cost analysis contained significant levels of “trapped generation” (generation that cannot leave the host Zone and impacted the modeling results) related to wind generation. The CAWG started the Trapped Generation Task Force (TGTF) to address this issue. The following graph demonstrates the trapped generation. Trapped Generation in Economic Models

Portfolio Balance

(7)

(6)

(5)

(4)

(3)

(2)

(1)

-

1

2

3

AEPWEMDE

GRDAKCPL

MIDW

MIPUOKGE

SPCIUT

SUNC

SWPSWEFA

WEPLKS

WRI

Zone

B/C

(10

yr)

Portfolio 2Portfolio 3

1.0 = Balanced

Trapped, market based generation unable to leave host zone

Portfolio Balance

(7)

(6)

(5)

(4)

(3)

(2)

(1)

-

1

2

3

AEPWEMDE

GRDAKCPL

MIDW

MIPUOKGE

SPCIUT

SUNC

SWPSWEFA

WEPLKS

WRI

Zone

B/C

(10

yr)


1.0 = Balanced

Portfolio Balance

(7)

(6)

(5)

(4)

(3)

(2)

(1)

-

1

2

3

AEPWEMDE

GRDAKCPL

MIDW

MIPUOKGE

SPCIUT

SUNC

SWPSWEFA

WEPLKS

WRI

Zone

B/C

(10

yr)


1.0 = Balanced

Trapped, market based generation unable to leave host zone

The TGTF determined guidelines for including generation in the production cost modeling, which will be reviewed by the Economic Modeling and Methods Task Force (EMMTF). The TGTF decided that the base case models should contain wind levels consistent with current data. These models contained 2,600 MW of nameplate wind,§ down from 4,600 MW of generic wind that was included in previous models. Change cases could include additional wind generation, but the TGTF recommended that the added wind above existing levels must be matched with portfolio transmission upgrades needed to deliver the added wind to the SPP energy market.

June 2008: Wind and Spearville-Knoll-Axtel (SKA) Staff updated its models after the TGTF concluded SPP should use 2,600 MW of wind in the base case. The following table demonstrates the B/C ratios for Portfolios 2 through 4 where 2,600 MW of wind is also included in the change case. The adjusted production costs shown are changes in adjusted production costs, therefore a red parenthetical represents lower adjusted production costs after an upgrade takes place and is the estimate of overall benefit.

§ This coincides with the amount of wind in the SPP footprint at the end of 2008, as well as the transmission upgrades required to delivery wind with firm service.


Preliminary Portfolio Results, post-TGTF (June 26, 2008 CAWG Meeting)

SPP staff conducted a sensitivity to SKA on the above portfolios to determine its impact. SKA is a Kansas Electric Transmission Authority (KETA) approved and sponsored project that has also been approved by the SPP Board of Directors for inclusion in the STEP. The SPP Board of Directors requested that all 345 kV and above projects approved for inclusion in the STEP also be considered as candidates in the Balanced Portfolio analyses. It was found in the analyses that the SKA project uniformly raised the B/C ratios of all portfolios, and it appeared that the SKA project should be included for consideration, although a similar analysis was not conducted for other low B/C ratio projects not included in the original portfolios. These results are shown in the following table. Impact of Spearville – Knoll – Axtell

Because Portfolio 4 had a B/C ratio well below one, it was not included in further analysis in the Balanced Portfolio development process.

July 2008: Update Designated Resources

Portfolios 2 and 3 were updated to include the Turk Plant, a Designated Resource expected to be on line by 2012. This change lowered the benefit to cost ratios below one, as shown in the following table. These results were based on the 2008 wind levels in SPP (2,600 MW) but do not include the Spearville-Knoll-Axtel line.

Impact of Updates on Portfolios 2 and 3

August 2008: Firm Wind Sensitivities

Additional wind sensitivities were run for Portfolios 2 and 3 to determine the impact that the amount of wind assumed in the model has on the benefits. Benefits were estimated for 700 MW of firm wind in the base case and an additional 1,900 MW of market-based wind in the change case. The results showed a significant increase in production cost savings for both Portfolios 2 and 3. The changes in benefits from adding the market-based wind without transmission upgrades were calculated to show the impact of trapped generation. Stakeholders supported the inclusion of all existing wind in the portfolios even though wind without firm transmission would lower the B/C ratios.

September 2008: Introduction of Portfolio Variations 3A and 3-B

SPP staff developed two modified portfolios based on Portfolio 3. Adjustments to Portfolio 3 included an upgrade of Wichita-Reno-Summit and carried through the addition of Spearville-Knoll-Axtel. From

ProjectTotal Adjusted Production Cost SPP TIER1 Cost ($M) B/C SPP B/C

Portfolio 2 - July 08 ($38,291,000) ($28,825,000) ($9,466,000) 371$ 0.70 0.53 Portfolio 3 - July 08 ($42,033,000) ($32,281,000) ($9,751,000) 347$ 0.82 0.63

ProjectTotal Adjusted Production Cost SPP TIER1 Cost ($M) B/C

Economic Portfolio - P2_SKA_June08 ($90,215,000) ($71,327,000) ($18,889,000) 539$ 1.13Economic Portfolio - P3_SKA_June08 ($92,307,000) ($72,235,000) ($20,072,000) 515$ 1.22Economic Portfolio - P4_SKA_June08 ($84,031,000) ($64,709,000) ($19,322,000) 776$ 0.73

ProjectTotal Adjusted Production Cost SPP TIER1 Cost ($M) B/C

Economic Portfolio - P2_June08 ($50,482,000) ($41,409,000) ($9,073,000) 371$ 0.92Economic Portfolio - P3_June08 ($53,325,000) ($42,060,000) ($11,266,000) 347$ 1.04Economic Portfolio - P4_June08 ($48,429,000) ($38,581,000) ($9,848,000) 608$ 0.54


this modification of Portfolio 3 two variations were developed and labeled 3-A and 3-B. These portfolios are shown pictorially below. Since many sections of Portfolio 3 included transmission paths that are in the proposed EHV Overlay Plan, the CAWG decided to consider these common corridor projects for 765 kV construction. The following maps demonstrate this construction in purple. Portfolio 3, with Spearville–Knoll–Axtell (SKA)


Portfolio 3-A With Wichita-Reno-Summit


Portfolio 3-B With Wichita-Reno-Summit


Modeling issues for the dispatch of wind were still an issue in these results where SPP staff used a wind offer price of $20/MWh. Given this caveat, the results showed that both Portfolios 3-A and 3-B had B/C ratios greater than one for 345 kV costs, but were marginal when 765 kV costs were used in the calculations. Portfolio 3-B is a sensitivity of Portfolio 3-A used to test whether or not the Tolk-Potter upgrades increased the B/C ratio. Since they did, the SPP staff recommended going forward with Portfolio 3-A, as well as continuing to consider further variation of Portfolio 3.

Initial Results for Portfolios 3-A and 3-B

October 2008: Portfolio 3 (High Wind) and 3-A (Current Wind) Two different types of analysis were considered for Portfolios 3 and 3-A. Since Portfolio 3 has upgrades similar to those on the western portion of the proposed EHV system, the SPP staff evaluated Portfolio 3 using a high wind (7 GW) scenario with specific wind locations for wind levels above the current 2008 level of 2.6 GWs. In particular, the B/C ratio was calculated for both 345 kV and 765 kV costs to get a feel for whether or not Portfolio 3 could support a portion of the EHV upgrades in the western SPP region.

High Wind (7 GW) for Portfolio 3

SPP Staff used Portfolio 3-A to test the sensitivity of a carbon tax on the estimate of benefits from savings in the adjusted production costs. The results indicate that keeping wind at its current levels and imposing a carbon tax would result in a significant decrease in benefits for portfolio 3-A.

Carbon Tax Sensitivity Results for Portfolio 3-A at Current Wind (2.6 GW)

Project Cost ($M)Proj 10 Year

SPP Benefit ($M) SPP B/C

Portfolio 3-A $585 $776 1.33 Portfolio 3-B $545 $693 1.27

Portfolio 3-A $761 $776 1.02 Portfolio 3-B $721 $693 0.96

345 kV Construction

765 kV Construction

**

ProjectTotal Adjusted Production Cost SPP NON-OATT SPP OATT TIER1 Cost SPP B/C

Portfolio - P3A - Base ($119,180,000) ($2,454,920) ($111,931,080) ($4,794,000) 597$ 1.27 Portfolio - P3A - $15 Carbon Tax ($60,140,000) ($4,000) ($52,699,000) ($5,543,000) 597$ 0.60 Portfolio - P3A - $40 Carbon Tax ($17,992,000) ($317,000) ($16,926,000) ($1,630,000) 597$ 0.19


December 2008: Portfolio 3-C (Modify Portfolio 3) Portfolio 3-C was developed as a hybrid of Portfolios 3 and 3-A that removed the Tolk-Potter upgrades but added Spearville-Knoll-Axtel and Wichita-Reno-Summit. The following graph pictorially represents Portfolio 3-C.

Portfolio 3-C

It should be noted that by this time SPP Staff had resolved a problem with its application of the PROMOD that had resulted in dispatching wind on a small number of days that had resulted in what appeared to be a significant trapped generation problem. With the resolution of that issue, wind was now being dispatched from specified injection points at $0.05/MWh.

Staff used Portfolio 3-C to perform an analysis of an integration plan for the EHV Overlay. For this purpose, scenarios were conducted at 3,300 MW of wind injection in 2012, 7,000 MW of wind injection in 2017, and 13,500 MW of wind injection in 2023, with 765 kV transmission being added to the analysis corresponding to the higher levels assumed for wind. The following table shows the B/C


ratio that would apply had that year been applied over a ten-year period and compared to the ten-year E&C cost. In addition, the results are shown using ten years worth of ATRR for the EHV projects contained in the study periods 2012, 2017 and 2023.

Portfolio 3-C + EHV Build OutBenefit - Cost Total B/C SPP B/C10 yr vs E&C (P3-C) 0.74 0.6610 yr vs E&C (P3-C+West EHV) 0.79 0.7210 yr vs E&C (P-3C+West & Central EHV) 2.43 1.4510 yr vs ATRR 0.71 0.49Annual B/C (final year) 1.99 1.19 The Staff reran portfolio 3-A at 3,300 MW of wind to determine the impact of adding 700 MW of market-based wind on the benefits to this portfolio. The following table gives the results for portfolio 3-A using 765 kV costs.

Portfolio 3-ABenefit - Cost Total B/C SPP B/C10 yr vs E&C 1.46 1.3010 yr vs ATRR 1.19 1.06Annual B/C (final year) 1.46 1.29

In addition to the adjusted production cost and cost benefit analysis, SPP staff analyzed the impacts of the portfolio options on reliability.. Portfolios 3-C and 3-A were considered in this analysis. The results of the total Engineering and Construction (E&C) cost impacts on regional reliability are shown in the table below with 3-C yielding the greatest benefits by mitigating reliability needs to a net amount of $31M. More detailed impacts are shown in Appendix D.

P3-A and 3-C impact on STEP reliability assessment Project New Violations Solved Violations NetPortfolio 3-A $4,385,000 $4,004,900 -$380,100Portfolio 3-C $4,585,000 $35,265,250 $30,680,250

January 2009: Further Analysis of Portfolios 3-A and 3-C With Nebraska

At the December 2008 CAWG meeting, further analysis of Portfolios 3-A and 3-C was requested, including the addition of the three pricing zones in Nebraska. The emphasis on Portfolio 3-A was in regard to the balance of this portfolio when the Nebraska zones are added, and to compare this balance when 3-A upgrades are priced at 345 kV versus 765 kV costs. With the addition of Nebraska, the B/C ratio for portfolio 3-A at 765 kV increased from 1.06 to 1.11, and at 345 kV from 1.27 to 1.50. The higher costs at 765 kV resulted in significant levels of cost transfers to balance the portfolio as compared to the lower costs at 345 kV.


Portfolio Balance With Transfers for Portfolio 3-A at 345 KV Costs

# Zone Benefits CostsTransfer

Allocation Transfer Out Transfer Net Net Benefit B/COriginal

B/C1 AEPW $20,880,672 $24,939,597 $14,640,350 -$18,699,275 -$4,058,925 $0 1.00 0.842 EMDE $5,828,820 $2,923,755 $1,716,339 $0 $1,716,339 $1,188,726 1.26 1.993 GRDA $1,797,527 $2,170,293 $1,274,032 -$1,646,798 -$372,766 $0 1.00 0.834 KCPL $8,337,354 $8,571,771 $5,031,907 -$5,266,324 -$234,417 $0 1.00 0.975 MIDW $1,590,879 $798,241 $468,593 $0 $468,593 $324,045 1.26 1.996 MIPU $1,598,074 $4,491,010 $2,636,368 -$5,529,303 -$2,892,935 $0 1.00 0.367 MKEC $5,294,897 $1,243,893 $730,206 $0 $730,206 $3,320,798 2.68 4.268 OKGE $44,982,968 $15,731,003 $9,234,607 $0 $9,234,607 $20,017,358 1.80 2.869 SPRM -$29,773 $1,719,556 $1,009,435 -$2,758,764 -$1,749,329 $0 1.00 -0.0210 SUNC $389,069 $1,185,151 $695,722 -$1,491,804 -$796,082 $0 1.00 0.3311 SWPS $43,102,775 $12,809,661 $7,519,685 $0 $7,519,685 $22,773,429 2.12 3.3612 WEFA $11,792,345 $3,508,023 $2,059,323 $0 $2,059,323 $6,224,999 2.12 3.3613 WRI $23,072,688 $12,818,241 $7,524,722 $0 $7,524,722 $2,729,725 1.13 1.8014 NPPD -$608,956 $8,896,109 $5,222,303 -$14,727,368 -$9,505,065 $0 1.00 -0.0715 OPPD -$472,047 $6,896,029 $4,048,192 -$11,416,267 -$7,368,075 $0 1.00 -0.0716 LES -$145,808 $2,130,072 $1,250,421 -$3,526,301 -$2,275,880 $0 1.00 -0.07

Total $167,411,485 $110,832,404 $65,062,205 -$65,062,205 $0 $56,579,080 1.51 1.51 All numbers in the above table represent annualized costs over a ten-year period.

Transfers out of a zone represent the dollars that must be moved from the zonal rates to a region-wide rate in order to achieve a balance. Two measures of the degree of balance of a portfolio include: a) the number of zones with positive net benefits after the transfers (in this case: 7 of 16 total zones); and b) the ratio of the transfers out to the costs of the upgrades (in this case: 58.7%).

Additional analysis of the EHV upgrades in Portfolio 3-C were performed with and without portfolio 3-A to determine whether or not portfolio 3-A added more benefits than costs to a system that includes the EHV (765 kV) overlay. The results indicated that Portfolio 3-A did add more benefits than costs.

Analysis of Portfolio 3-C showed a B/C ratio of 0.58 using 765kV costs and a ratio of 0.94 using 345 kV costs.

5.2.5 Balanced Portfolio Stakeholder Process to Date

The SPP Regional State Committee (RSC) requested its Cost Allocation Working Group (CAWG) to consider alternative cost allocations for economic upgrades. Cost Allocation Working Group The CAWG has been the primary stakeholder group overseeing development of the Balanced Portfolio. The CAWG created the Economic Concepts whitepaper. Many representatives from other SPP stakeholder groups attend the CAWG’s monthly meetings. Trapped Generation Task Force This CAWG task force determined wind assumptions in the Adjusted Production Cost (APC) models. Economic Modeling and Methods Task Force The EMMTF focused on the planning process and development of additional economic benefit metrics. It initially worked to acquire detailed data on generation units in the model. The EMMTF addressed confidential issues. Regional Tariff Working Group The RTWG facilitated acquiring FERC approval of Attachment O language for the Balanced Portfolio process. Markets and Operations Policy Committee, Board of Directors, Regional State Committee


These groups will review and approve the Balanced Portfolio. Planning Summits Proposed Balanced Portfolios and related concepts were shared at planning summits in May and August. Posting Portfolios and associated information are posted on SPP.org: http://www.spp.org/section.asp?group=381&pageID=27 2009 Next Steps The CAWG was unable to conclude a recommended Balanced Portfolio based on 2008 work but will continue to investigate various portfolio options before endorsing a Balanced Portfolio to the RSC. Further review by stakeholders will include ongoing analysis of adjusted production cost savings, costs for upgrades and impacts of the portfolios on reliability including third-party impacts

Transmission Expansion Report

January 26, 2009

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DRAFT SPP 2008 EHV Overlay Study

• SPP’s Extra High Voltage (EHV) Overlay plan establishes a long range, vision for transmission expansion for SPP and beyond that will provide a blueprint for transmission development in and around the region beyond the traditional 10 year planning horizon.

• Under the direction of the Transmission Working Group in 2006, SPP began to develop this EHV Overlay concept and published its first plan in 2007 that was updated in early 2008 due to GI queue growth.

• The current study looks at the economics of EHV Overlay development in 4 phases for 3-26 GW of wind in SPP

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Tariff Studies

• Generation Interconnection and Transmission Delivery are separate and distinct services under the SPP Tariff.

• Process improvements needed and being finalized. Task Force recommendations must be converted to Tariff language and approved by FERC prior to implementation.

• Generation Queueing Task Force Recommendations • 3 Year suspension period is problematic• 15,000 MW GI Cluster Feasibility Study posted in December• Tariff changes forthcoming with stricter milestones and commitments

• Transmission Service Studies are improving• AG3-2006 and AG1-2007 studies complete, agreements being finalized• Pairing AG studies now to allow studies to catch up

www.spp.org

Aggregate Transmission Study Improvement Steps

• Aggregate Study Improvement Task Force (ASITF) recommendations approved by MOPC in April to expedite and improve the Aggregate Study (AG) process.

• FERC filing accepted in October 2008 to pair the Aggregate Studies beginning with 2008-AG1 and AG2 (2008-AGP1) and ending in 2010.

• 2008-AGP1-ASIS posted August 15, 2008• 2008-AGP1-AFS-2 posted January 9, with

responses due January 24th

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ASITF Approved Recommendations

• Require all necessary documents for AG study during the 4 month open season. (Provides more study time)

• Strive to limit process to 3 facility studies. • Eliminate the System Impact Study • Development of a “cost causer” methodology for allocation of

facility study costs. RTWG has reviewed and approved these tariff changes. The MOPC approved the changes in January to be recommended for approval by the Board of Directors in their January meeting.

www.spp.org

Generation Interconnection in SPP

• Current Status (as of December 31, 2008)

• 197 Active* Requests totaling 51,115 MW• 174 are for Wind totaling 45,755 MW• 23 are for Fossil or Other totaling 5,360 MW *Active Requests do not include requests with an IA that have not yet

been built (suspension or construction pending )

• Generation Queueing Task Force (GQTF) initiated in March, 2008.

www.spp.org

GQTF Recommendations

• Establish preliminary queue (separate from Impact Study queue) for Customers that require information about certain interconnection locations

• Increasing milestones to enter the queue, to stay in the queue, and to sign Interconnection Agreement

• Increased deposits to enter Impact Study queue• Begin studying interconnection requests in

clusters

www.spp.org

Feasibility Cluster Study Results

• To immediately start clearing interconnection queue backlog before BOD and FERC approval, Staff asked for a tariff waiver from FERC to study backlogged requests in clusters.

• Filing made in November, 2008• 1st Cluster Study (FCS-2008-001) posted in December, 2008

• Prior queued requests 7,410 MW• Almost 15 GW of new GI requests in 7 geographic

clusters• Clusters ranging from 660 MW to 3,013 MW studied;

Woodward, Hitchland, Spearville, Mingo/NW KS, Amarillo, S Texas/NM, SW OK

• Identified $2.4B of projects including 765 kV collector loop in KS and OK from EHV Overlay Study, and other 345 kV transmission lines as least cost solution to tie western SPP to the existing 345 kV system

• 2nd Cluster Study in process

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What’s a 20% National RPS mean to SPP?

• Eastern Wind Integration and Transmission Study (EWITS) sponsored by DOE/NREL is refining Joint Coordinated System Plan 2008 (JCSP’08) models to investigate transmission needs and operational impacts for a 20% National RPS

• Latest projections show 91 GW of incremental wind development in SPP with 66 GW in the traditional SPP footprint and another 25 GW in Nebraska

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* included in STEP

XBeyond SPP

XEHV Overlay in SPP

XBalanced Porfolio *

XGeneration Interconnection *

XXRegional Reliability *

XXAggregate Studies (Transmission Service)

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PostageStamp33% / 67%BPFDirect

Assigned

FUNDINGPROJECT TYPE

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2008 STEP Report

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’08 STEP1.Tariff Studies2.Regional Reliability

Planning3.Sub-Regional (Local Area)

Planning4.High Priority Economic

Studies5.Inter-Regional

Coordination6.Project Tracking

Appendix A - G

1.Reliability2.Economic Screening of

Network UpgradesAppendix A & B

’07 STEP

What is different?

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Executive Summary – 2008 STEP vs. 2007 STEP

Filed Serviced Agreement or BOD Approved

Appendix A - TOTAL$2.2B$2.7B

Inter-Regional Coordinated Upgrades$90 $60

Economic Upgrades$460 $620

Reliability - Other$640 $800

Reliability - Base Plan$720 $880

TSR & GI Service Agreements$290 $320

Upgrade Type2007 STEP(Nearest 10

Million)

2008 STEP(Nearest 10

Million)

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Improvements

• Comprehensive• More accurately reflects “STEP”• Follows Order 890 and new Attach. “O”• Good summary of ’08 SPP transmission

development collaborative efforts.• More independent RTO planning report.

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TWG, CAWG & MOPC Endorsements

• TWG, 1/5/2009• Sections 3, 4 and 7, excluding Section 3.6 of the 2008

Annual STEP Report• Endorsed Appendices A and B as part of Section 3• TWG agreed the report is “a fair representation of the

2008 expansion planning activities SPP Staff was involved in.”

• MOPC, 1/14/2009• CAWG - section 5.2 (approved 1/22)

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STAFF RECOMMENDATION

• The SPP RTO Staff recommends the SPP BOD accept the “2008 SPP Transmission Expansion Plan” report as the documentation of SPP Staff completing the SPP OATT processes including the Attachment O transmission planning process.

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STEP Appendix B1st Qtr 2009

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Appendix B

• $285M - Total• $240M – Network Upgrades needing NTCs• $45M – Projects with previously issued NTCs

needing modifications• Change in project timing• Project scope adjustment

Physical location limits, i.e. substation too small

www.spp.org

Appendix B

… also includes withdrawn projects• $130 million of transmission projects need to be withdrawn

• Alternative solution through stakeholder process, e.g., Southwest #2 displaced need for Brookline – Summit 345 kV line and Summit 345/161 kV autotransformer ($29M)

• Project deferred beyond study time horizon• Change in T.O. criteria

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MW/mile/Unintended Consequences Next Steps

• Staff has provided MW/mile impact with the proposed Appendix B reliability upgrades

• RTWG reviewed data during 1/8 meeting• Positive response

• Schedule for Unintended Consequences review:• CAWG – early February• RTWG – February-March• RSC/MOPC – April

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Staff Recommendation:

“The SPP RTO staff recommends that the SPP BOD approve and direct the start of construction of the proposed network upgrades and cancel the construction of those network upgrades displaced or deferred. These modifications are recommended by SPP Staff for the appropriate projects as listed in 2009, 1st Qtr Appendix ‘B’.”

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Questions?

Les Dillahunty Jay CasparyVP, Regulatory Policy Director, Engineering

[email protected] [email protected] 501.614.3220

Documents

Update Jan 09 - Southwest Power PoolSeminole Muskogee Hitchland Finney L.E.S. LaCygne Portfolio 3-C - 2023 + Western & Central EHV 13,500 MW Wind13,500 MW Wind 4 7 Benefit Cost Results