Transcript Slide 1

Meeting Our Energy Goals:
The Energy Superhighway
Joseph L. Welch
April 13, 2010
Agenda
 Who is ITC?
 The Current Environment
 What ITC Midwest’s
Independence Means to You
 Bringing Iowa Wind to Market
 Summary
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Who is ITC?
Who is ITC?
ITC is the first
fully independent
transmission
company in the
U.S.
4
Who is ITC?

ITC is the ninth largest transmission-owning
company in the U.S.

Transmission systems in Michigan’s lower
peninsula and portions of Iowa, Minnesota, Illinois
and Missouri
—
Serves combined peak load in excess of
25,000 megawatts (MW)
—
Approximately 15,000 line miles

Recently announced “Green Power Express”
designed to facilitate the interconnection of
12,000 MW of wind in the Dakotas, Iowa and
Minnesota to eastward population centers

Also actively seeking opportunities to build, own,
operate and maintain transmission in Kansas,
Oklahoma and Texas (SPP region)
—
5
KETA, V-Plan, and Hugo to Valliant
projects in advanced stages of
development
ITC’s Service Territories
Total
System
Peak Load
= 25,000 +
Service
Area
Total
Transmiss
ion Miles
> 14,900
Assets
Acquired
ITC
Transmission
METC
ITC
Midwest
12,700 MW
9,400 MW
3,500 MW
SE Michigan
Michigan’s
Lower
Peninsula
Portions of
Iowa,
Minnesota,
Illinois and
Missouri
2,805
5,465
~ 6,800
March 1,
2003
Oct. 10,
2006
Dec. 20,
2007
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Does Independence Really Matter?

Let’s imagine that United Airlines
was responsible for the control tower
operations at the Des Moines
International Airport.

What do you think would happen?
—
Whose flights would be the first
to land?
—

Whose flights would be the first
to take off?
There is a clear reason why
independence in this case is
important

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How does this example apply to the
energy industry?
ITC = Independent
 ITC focuses on ownership, operation, maintenance, and construction of
transmission facilities as a single line of business
 There is no internal competition for capital – it is dedicated for prudent
transmission investment
 ITC is singularly focused on transmission and aims to bring significant benefits to
customers
 Our Goals:
— Improve reliability
— Reduce congestion, improve efficiency
— Increase access to generation, including renewable resources
— Lower cost of delivered energy
In other words, ITC’s independence uniquely positions
it to facilitate renewable resources like wind
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The Current Environment
Growing Demand
 Before we speak about ITC
Midwest, let us first understand the
global energy environment
 Demand for electricity continues to
grow; expected to increase 26% by
2030
— Increasing population
— Shifting population centers /
urban sprawl
— Increased dependence on
electricity for every-day lives
Sources: U.S. Department of Energy, Energy Information Administration, Annual Energy Outlook 2009
* Electricity demand projections based on expected growth between 2006-2030
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Aging Infrastructure
 Yet, as shown earlier, there has
been a 30-year trend of
underinvestment
— 70% of transmission lines are
25 years or older
— 70% of power transformers
are 25 years or older
— 60% of circuit breakers are
more than 30 years old
Source: http://www.globalenvironmentfund.com/GEF%20white%20paper_Electric%20Power%20Grid.pdf
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Energy Is Changing
 The energy industry has been going
through significant changes in recent
years:
— How it is bought/sold: Creation of
energy markets, volatile fuel prices
— How it is made: New forms of
generation including renewables
— How it is used: Shifting population,
sophisticated electronics in homes
and businesses, smart grid, electric
cars
— How it is regulated: Creation of
independent transmission
companies to bring investment to
grid
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Changes are Need-Driven
 These changes are driven by various
needs
— Create new jobs
— Support economic development
— Invest in and improve nation’s
infrastructure
— Diversify our fuel sources /
energy security
— Protect the environment
 Central to all of these changes is the
need for a robust transmission grid
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Wind – Renewable But Variable
 Wind has been made
popular with this changing
landscape, but it requires
transmission and does not
come without challenges
— Resource rich regions vs.
states without wind
— Individual state RPS
goals
— Variability of wind
— Significant barriers to
entry
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Other Generation Sources
 As an independent
Mine-mouth
Coal
transmission provider, ITC
must provide equal and nondiscriminatory access to all
forms of generation
 Each of these different
Geothermal
generation sources provide a
unique challenge in
interconnecting them to the
grid, but they all have one
thing in common:
Solar
 All generation sources
need access to a robust
transmission grid
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National Energy Policy
 Given the changing energy
industry and needs, we need a
national energy policy to guide
decisions for our future energy
delivery system.
 This vision would provide the
foundation upon which energy
policy would be based (e.g.,
national RES, carbon pricing, etc.).
 An energy policy vision is an
important input specifically as it
relates to building the necessary
transmission
— Regional transmission planning
— Cost allocation
— Siting
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Bringing It Home:
ITC Midwest in the Past 2 Years
Current System Presents Roadblocks
 Since opening its doors in late 2007, ITC Midwest has been working
tirelessly to bring value to its customers and to the end-use consumers of
this region
ITC Midwest’s Report Card
 Investing in system

improvements
 Preventative maintenance

 Improved reliability

 Safety

 Equal access to all forms

of generation
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Capital Investments
 Since its inception, ITC Midwest has
invested almost $300 million in capital
improvements to its transmission system
— Improve reliability
— Economic projects
— Generator interconnections
 Some examples of ITC Midwest projects
currently in progress:
— Story County Wind – NextEra:
System upgrade to allow full output
of the Story County wind farm
scheduled to be completed by June
2010
— Salem-Hazleton 345 kV line
— Beverly-Sixth Street
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Salem-Hazleton 345kV Line
 Project Overview
— New 81 mile line of 345 kV, double
circuited with existing 161 kV for
portion of line
— Completes Eastern Iowa 345 kV
“Reliability Loop”
— Addresses constrained area first
identified in Midwest ISO 2006
Eastern Iowa Reliability Study
— Project kicked off shortly after ITC
Midwest formed
 IUB Public meetings held February
2009
 95+% voluntary easements acquired
 Hearing August 3 and 4 on eminent
domain request
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Adams-Barton/Hayward-Worth
 Adams-Barton
— 27-mile line between Adams, Minn.,
and Bolan, Iowa
— Rebuild existing 161 kV line to same
voltage, higher capacity; replace
wood poles with steel structures
— Energized last week
 Hayward-Worth
— 20-mile, 50-year-old line between
Hayward, Minn., and Kensett, Iowa
— Rebuilding existing 161 kV line to
same voltage, higher capacity;
replace wood poles with steel
— Construction begins this month
 Both lines improve north-south electric
flow, support wind development
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DAEC-Washburn
 Project Overview
— 40-mile line from Duane Arnold
Energy Center to Washburn
substation south of Waterloo
— Rebuild 161 kV line to same voltage,
higher capacity, replace wood poles
with steel structures
— Improves eastern Iowa reliability,
reduces congestion
— Project completed in December 2009
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Beverly-Sixth Street
 Project Overview
— Six-mile line within Cedar Rapids city
limits
— Rebuild existing 34.5 kV line to 161 kV
— Had been in planning stages for more
than 15 years
— Industrial growth along Highway 30
corridor drove need
— Construction began this month;
completed by year end
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Efficient Preventative Maintenance
 ITC Midwest’s maintenance
methodology is simple: invest
in prevention:
— Breaker and Switcher
Inspections
— Line Inspections
— Substation Inspections
— Relay Calibration
— Battery Checks
— Transformer Inspections
— Infrared Inspection
— Vegetation Management
 Doing so is more cost-effective
and prevents costly system
outages or equipment failures
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Improved Reliability
 ITC’s goal is best in class system performance for all operating subsidiaries
— Following acquisition of a new system, ITC deploys its maintenance program and
root cause analysis methodology to reduce outages
 In 2009 ITC Midwest saw a 55% improvement over 2008 for the ≥69kV
transmission system and 45% improvement for the <69kV system
The SGS Statistical
Services Transmission
Reliability Benchmarking
program
Participants represent
over 54% of the U.S.
transmission grid miles
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Focus on Safety
 ITC’s safety program is centered around building a safety culture within all employees
and contractors and our goal is zero recordable injury and lost work day case rates
 ITC participates in Edison Electric Institute’s (EEI) Safety Benchmarking program to
gauge its performance against approximately 70 other utilities
Recordable Incident Rate
Lost Work Day Case Incident Rate
3
2.5
1
2
1.5
1
0.5
ITC Actual
Top Quartile
0.5
Average Rate
0
0
ITC was one of the top companies in the study
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Transmission as Component of Bill
Proportions by Service Category (1)
 All of this work is
accomplished while having
transmission currently
representing only
approximately 8% of the
electricity bill
Generation
66%
Transmission
8%
Distribution
26%
(1) Source: EIA Annual Energy Outlook 2009 with Projections to 2030
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Update on 34.5kV Conversion
Current Status of Transition
 As reported in ITC’s June 19, 2009, and December 22, 2009, transition status reports,
ITC Midwest expects to work with IPL to continue current operations of the 34.5kV assets
until conversion to 69kV.
— Upon conversion to 69kV standards, ITC will take over operational control.
 ITC Midwest manages IPL’s operation of the 34.5kV assets; negates any independence
and market control concerns.
— ITC Midwest specifies the maintenance and construction work and schedule for the
34.5kV system.
— IPL dispatches 34.5kV assets and administers the protective (OSHA) transactions for
ITC Midwest’s 34.5kV work.
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Rebuild/Conversion Plan Being Implemented
 IPL’s continued operation of the 34.5kV assets is cost-effective.
— Operating the 34.5kV system requires additional labor resources due to frequent
switching needed to maintain service to customers.
— Costs incurred to incorporate a “not smart” system into ITC’s “Smart” monitoring
system would largely be wasted when the assets are converted to 69kV.
— More cost-saving synergies exist between the 34.5kV system and IPL’s distribution
system than between the 34.5kV system and ITC’s high voltage system.
— ITC Midwest does not have resources to support retail customer calls related to
34.5kV system outages.
— Current operations shorten customer outage times through use of the closest first
responder.
 Rebuild / Conversion Plan
— Rebuild Lines to 69kV Standards Over 12 Year Period: Unloaded ITC Midwest
Budget Cost = $38M Per Year Compared to $76M Per Year for 7 Year Plan
— Conversion to 69kV Operation Over 18 Year Period: Conversion over an 18 year
period would allow additional time for IPL, RECs, and Municipal substations to be
converted significantly reducing their budget and resource load.
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Bringing Iowa Wind to Market
Today’s
Energy Energy
Flow Diagram?
The Traditional
Flow Diagram
Transmission is the unrestricted, coordinated
dispatch of generation.
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Transmission as Facilitator
Wind Energy
Energy Efficiency
Demand
Response
Programs
Solar Power
Transmission
Bio-fuels
National Security
Clean Coal, MineMouth Coal
Electric Cars
An independent transmission company like ITC Midwest can
facilitate these new sources and technologies, like wind,
through a robust transmission grid
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Wind Power in the State of Iowa
 As of the end of 2009:
 Iowa has over 1100 working turbines
spread over 47 wind farms1.
 Over 3000 MW in installed capacity
provides 20% of the state’s energy2.
 National Renewable Energy Laboratory
(NREL) research has shown that roughly
three-quarters of Iowa has high enough
wind at 80 meters above the ground to
produce wind energy3.
Sources:
1. http://www.nationalwind.com/iowa_wind_facts/
2. Omaha World-Herald; Mar 3, 2010, http://www.omaha.com/article/20100303/NEWS01/703039859#wind-20-of-iowa-s-energy
3. Economic Development Impacts of Wind Energy: an Iowa Case Study, SEAC Seminar Series, Feb 12, 2009,
www.nrel.gov/analysis/seminar/docs/2009/ea_seminar_feb_12.ppt
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Economic Benefits to the State
 According to a 2009 NREL study1, every 1,000 MW of wind
development implies the following:
— 600 jobs directly involved in construction, with associated
earnings of $40 million, over a 1 year construction horizon.
 An additional 1,650 jobs with $50 million in earnings are
estimated to be created by associated peripheral activity.
— During the operations period following construction, 75
permanent jobs with an associated $5 million in earnings in
directly-related activity and multiplier effects of 195 jobs with
$7 million in earnings.
— Annual $4 million lease and $6 million property taxes
Sources:
1. http://investor.itc-holdings.com/releasedetail.cfm?ReleaseID=436644
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Benefits from ITC Interconnected Wind
 In 2008, ITC Midwest interconnected 810 MW of wind
generation, in 2009 716 MW was interconnected1.
— Using the benefit standards identified by the NREL report, the
Iowa benefits of this development are:
 900 construction jobs with $60 million in earnings for each
year of the construction period.
 2,475 peripheral jobs with $75 million in earnings.
 113 permanent positions with $7.5 million in earnings upon
the commencement of operations.
 293 jobs created as a multiplier effect of these permanent
positions, generating $10.5 million in annual earnings.
 $6 million in lease payments and $9 million in property tax
remittances annually.
Sources:
1. http://investor.itc-holdings.com/releasedetail.cfm?ReleaseID=436644
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Benefits from ITC Interconnected Wind, cont.
 The wind farms that ITC Midwest has
interconnected to the power grid will
enable the following economic benefits:
— The generation of clean electricity
sufficient to power over 60,000 homes.
— Investment of roughly $1.2 billion in
three rural counties.
— Approximately $200 million in property
taxes paid over the first 30 years of
these projects
— Estimated $110 million in landowner
royalty payments
— About 40 permanent, full time
positions created
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Summary
Summary
ITC Midwest’s Report Card
 ITC Midwest strives to be a best-
 Investing in system

improvements
in-class transmission provider
 We pledge to work tirelessly every
 Preventative maintenance

day to understand and try to meet
the needs of our stakeholders and
 Improved reliability

the states in which we operate
 Safety

 We welcome your input on what
 Equal access to all forms

of generation
we can do better to meet your
energy needs
 Understanding and
meeting the needs of
stakeholders?
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