Transcript CEO CapX Briefing - South Dakota Energy Infrastructure

CapX 2020 Transmission Expansion Plan
Realizing the CAPX2020 Vision
South Dakota Energy Infrastructure Authority
June 9, 2006
Terry Wolf, Missouri River Energy Services
Manager, Transmission Services
Today’s topics

What does CapX 2020 propose to build?
 Background
 Project Group 1
 Project participation

What is the implementation approach?
 Investment allocation and cost recovery
 Regulatory and communications
 Agreement development

Key Drivers for Generation Development
CapX Transmission Development
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Key Drivers for Generation Development – Need a Market

Coal Generation
 Transmission
• Facilities
• Tariff
 Taxes
 Rail
 Water

Wind Generation
 Transmission
• Facilities
• Tariff
 Taxes
 Wind Resources
 Ancillary Service Costs
CapX Transmission Development
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Key Drivers for Gen. Development – Benefit of MISO Mkt

Wind in MISO Market
 Market Access / Market Price
• Locational Marginal Cost
 Lower Ancillary Service Costs
 Transmission Tariff Structure – NO PANCAKE

Market Value for Wind in MISO
 High level analysis – 25-35% greater value for wind in MISO market
than outside MISO market

CapX doesn’t solve the transmission or energy market tariff
issues, it does helps with physical infrastructure
CapX Transmission Development
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CapX participation

Core members

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
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
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
Great River Energy
Midwest Municipal Transmission Group
Minnesota Power
Missouri River Energy Services
Otter Tail Power
Southern Minnesota Municipal Power Agency
Xcel Energy
Participating utilities





Basin Electric Power Cooperative
Dairyland Power Cooperative
Minnkota Power Cooperative
Rochester Public Utilities
Wisconsin Public Power Incorporated
CapX Transmission Development
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CapX 2020 – What is it?

A vision for transmission infrastructure
investments for Minnesota, currently only
facilities being proposed are under MISO
tariff.

Intent is to meet growing loads of
participating utilities with high reliability
 Geography defined by service territories,
plus
 Regional transmission facilities for capacity
and reliability that support load serving
 Generation and transmission to serve load
 Planning study with a 15-year horizon

CapX Transmission Development
It will put risk issues in focus for utilities,
regulators and other stakeholders
5
Overview – Why is CapX needed?
 Load
growth in Minnesota is continuing
 New
baseload generation is needed
 Major
transmission projects are needed
 Some
plans exist, but lack commitment
 Regulatory
and business challenges must be
addressed
CapX Transmission Development
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CapX 2020 Technical Scope
 Will
include new generation scenarios
 Will
address transmission planning requirements for
MN Renewable Energy Objective
 Will
help address issues related to the achievement of
market efficiency, congestion relief
CapX Transmission Development
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CapX 2020 Assumptions

Load Levels
 MAPP 2009 models
with loads adjusted
to 2020 levels based
on MAPP Load and
Capability Report
CapX Transmission Development

Generation Levels
 Known planned resource
additions
• Buffalo Ridge Wind, BSP II,
etc
 Resource Planners
• Identify locations where
they are studying
 Generation interconnection
queue
• MISO, IS
 Stakeholder input
8
CapX 2020 Study Analysis
Computer Modeling
Steady state
power flow
 Single contingency (ACCC)
 Voltage stability

CapX Transmission Development
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Significant analysis has confirmed the timing and critical
need for CapX transmission assets

15 year plan

Multiple planning
studies

Three scenarios

Project group
sequence driven
by need criticality

Estimated capital
cost in excess of
$3 billion over
time
CapX Transmission Development
System Modeling
Project Group 1
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CapX 2020 Coordination
Studies
 Upper Great Plains Transmission Coalition
• Northwest Exploratory Study
 Northern IA/Southern MN Exploratory Study
 Red River Valley Transmission Improvement Planning Study
(TIPS)
 Dakota Wind Studies 2004 (WAPA)
 MISO Baseline Reliability
 Groups
 MISO
 Sub-Regional Planning Groups (SPG) in MAPP area
 MN State Transmission Plan

CapX Transmission Development
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CapX 2020
CapX 2020
Specific
Project
State
Plan
CapX Transmission Development
Specific
Project
MISO
MTEP
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A message in today’s briefing … a sense of urgency

We have a transmission expansion plan
 Regional 345kV system
 Design and project sequence driven by time critical needs

These assets must be built in order to serve the region’s
customers reliably

Collaborative efforts have achieved legislative and regulatory
reform for cost recovery in Minnesota

There are high expectations that we will deliver, and
significant downside if we do not

An execution model has been established

There is participant consensus to move ahead
CapX Transmission Development
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What does CapX 2020 propose to build?
 Background
 Project
Group 1
 Project participation
Regional Transmission Constraints
Constrained Paths
ND
MN
MI
WI
SD
WY
IA
NE
CO
AZ
KS
MO
OK
NM
TX
Constrained Paths
East / West Interconnection
CapX Transmission Development
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Vision Study Results
Need for 345-kV Backbone System by 2020
8,000 MW of new
generation, including 2,400
MW renewables,
to serve 6,300 MW load,
forecasted through 2020
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Continuing work refines the plan, but the first project
group is ready for implementation
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Project Group 1 – $1.1 – 1.3 billion (planning estimate)
* Further revision of Groups II and III expected as detailed engineering proceeds
Project Group
Group I
White, SD to SE Twin Cities (BSP II) / 345 kV
SE Twin Cities to Rochester to LaCrosse / 345kV
Fargo to NW Twin Cities / 345kV
Bemidji to north central MN / 230 kV
Group II – Around the Twin Cities *
Benton County to Chisago / 345kV
Benton County to Granite Falls / 345kV
Benton County to St. Boni / 345kV
Chisago to Prairie Island / 345kV
Group III – Remote Generation Outlet *
Antelope Valley to Maple River / 345kV
Arrowhead to Chisago / 345kV
Columbia to North LaCrosse / 345kV
Forbes to Arrowhead / 345kV
CapX Transmission Development
Expected In-Service
2012
2011
2012
2011
2014 to 2020
2014 to 2020
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Project Group 1
White, SD to SE Twin Cities
 This project, BSP II & 115 kV
projects together provide outlet for
1000 incremental MW of wind and
south metro reliability
 Scope – 180 miles (est), 345 kV
 Expected In-Service 2012
SE Twin Cities to Rochester to
LaCrosse
 Reliability for south metro,
Rochester, LaCrosse
 Scope – 140 miles (est), 345 kV
 Expected In-Service 2011
CapX Transmission Development
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Project Group 1
Fargo to St Cloud area
 Fargo, Central MN regional
reliability and some outlet for ND
generation
 Scope – 170 miles (est), 345 kV
 Expected In-Service – 2012
Bemidji to North Central MN
 Grand Forks and surrounding
region reliability
 Scope – 70 miles (est), 230 kV
 Expected In-Service – 2011
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Minnesota Government’s Response to CapX

2005: Significant legislation
 Improved investment recovery
 Streamlined license process by moving siting to the PUC
 Enabled the TransCo business model

February 2006, DOC meeting: “We’re growing
impatient – Why aren’t you moving ahead to build?”
[Deputy Commissioner Garvey, MN DOC]

June 2, 2006, Minneapolis Star and Tribune: "Am I
impatient that we don't have more transmission? Yes."
[Deputy Commissioner Garvey, MN DOC]
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What is the implementation approach?
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Investment allocation and cost recovery
Regulatory and communications
Agreement development
Virtual organization
CapX has an approach to two key financial questions
1. Investment Allocation:
How much does each
organization invest?
2. Cost Recovery:
How much cost is
recovered from each
organization’s customers?
• MISO has developed a regional approach (RECB) for recovering
transmission costs … key elements approved by FERC (02/2006)
• CapX seeks alignment between costs recovered, and the allocated
opportunity to each participant to invest in the assets
• CapX members believe MISO’s proposal is an acceptable model to
allocate the investment opportunity among members/participants
• Non-MISO, CapX members recover costs on a basis defined by
project agreements, not the RECB tariff
• RECB compatible with MN Tracker for IOU cost recovery
CapX Transmission Development
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Group 1 Project Investment … Will the $$ be there?

Key unknown – Will CapX utilities provide the capital to build?

Approach in ranked order
1. Investment Allocation – project participants have 1st right to
invest
2. Shortfall Opportunity – if project participants choose not to fully
fund, the other CapX members have the next opportunity
3. Access capital markets – if capital is unsubscribed, we will be
forced to access the capital markets, including the possible
formation of a TransCo, or special project entity
CapX Transmission Development
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Building Support for Group 1 Projects
Political, regulatory and communication strategy must match the
scale and difficulty of the undertaking
 Pre-regulatory filing activities

 Develop intelligence through opinion leader surveys, political
consultants
 Develop target audiences, messages, communication materials
 Make intial contact with legislators, local units of government,
important stakeholders, media

Post-regulatory filing activities
 Public information meetings, work with local government to co-sponsor
introductory meetings
 Pro-active media contacts
 Begin route development process in parallel with CON proceeding,
involve the public up front
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Regulatory Plan
Q2 2006
Q3 2006
Q4 2006
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Regulatory Filings – Project Group 1
File Notice Plans
Implement NPs
Prepare Group 1 CON
File Group 1 CON
Hearings
Resolution / CON Issued
Route Development (separate but coordinated efforts)
CapX Transmission Development
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Resource commitments require agreements
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Project Agreement for each project
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Defines investment commitment
Defines investment recovery for non-MISO members
Defines project development roles
Details which components each member owns
Specific operations and maintenance arrangements
Establishes interconnection agreements
CapX governance and operations cost sharing agreement
 Defines the CapX virtual organization and its activities
 Defines governance
 Commits members to sharing the operating costs
CapX Transmission Development
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Regional Grid Growth Required

MN is an net energy importer
 New plants to address the MN generation capacity shortfall
require generation outlet
 Push for renewable power … not enough lines where the best
wind blows

SD is a net energy exporter now and will likely be into future
 As of June 2, 2006 – 1860 MW of generation interconnect in
MISO and IS queues
CapX Transmission Development
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Realizing the CapX Vision … with a sense of urgency

We have a transmission expansion plan
 Regional 345kV system
 Design and project sequence driven by time critical needs

These assets must be built in order to serve the region’s
customers reliably

There are high expectations that we will deliver, and
significant downside if we do not

There is participant consensus to move ahead
 Municipals, Cooperatives, and IOUs
CapX Transmission Development
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