Economic Studies Working Group MEETING

Minutes No. [28] Southwest Power Pool ECONOMIC STUDIES WORKING GROUP MEETING March 29th, 2010 AEP Offices Renaissance Towers 1201 Elm Street, Dallas, TX • Summary of Action Items •

1. SPP Staff will send an email to the ESWG exploder for nominations for the Vice Chairman of the ESWG. If there are further nominations, then an email vote will be held. If Kip Fox is the only nomination for Vice Chairman, then he will be seated as the Vice Chairman of ESWG. 2. The ESWG would like to provide further guidance about the unit capital costs and fuel prices (Basis and offsets) used to develop the future resource plan. Therefore, SPP Staff will setup a conference call for April 1st and also send out an email with the fuel price information being used in the model. 3. Kip Fox will work with SPP Staff to develop a presentation and recommendation for the MOPC to approve the MTF metrics. 4. SPP Staff will develop a strawman economic analysis manual to be reviewed by the ESWG at the next Face-to-Face meeting. Minutes No. [28] Southwest Power Pool ECONOMIC STUDIES WORKING GROUP MEETING March 29th, 2010 AEP Offices Renaissance Towers 1201 Elm Street, Dallas, TX

• M I N U T E S •

Agenda Item 1 – Administrative Items SPP Chairman Alan Myers called the meeting to order at 10:02 a.m. The following members were in attendance:

Alan Myers ITC Great Plains David Hudson Xcel Energy Blake Elliott Board of Public Utilities-Kansas City, KS Kip Fox American Electric Power Leon Howell Oklahoma Gas and Electric Co. Bruce Walkup Arkansas Electric Cooperative Co Bruce Merrill Lincoln Electric System Doug Kallesen Nebraska Public Power District Paul Dietz Westar Energy, Inc. Greg Sweet Empire District Electric Co. Al Tamimi Sunflower Electric Power Corp.

Jim Sanderson Kansas Corporation Commission

Motion: After the meeting agenda was updated, Kip Fox made a motion for the ESWG to approve the agenda. David Hudson seconded the motion and it passed unanimously without objection or abstention.

Motion: After a correction was made to the attendee information in the minutes from the ESWG conference call meeting on February 19th, 2010, Kip Fox made a motion for the ESWG to approve the minutes. Al Tamimi seconded the motion and it passed unanimously without objection or abstention.

Alan Myers asked for nominations for the Vice Chair of the ESWG. David Hudson nominated Kip Fox for this position. SPP Staff will send an email to the ESWG exploder for further nominations. If there are further nominations, then an email vote will be held. If Kip Fox is the only nomination for Vice Chairman, then he will be seated as the Vice Chairman of ESWG.

Agenda Item 2 – Priority Projects Update Brett Hooton gave a brief update on the SPP Priority Projects Phase II analysis. He said that SPP Staff plans to publish the final report on April 2nd, 2010. During this update, Brett answered the questions that ESWG members and other stakeholders had about the upcoming report. For example, he said the report would contain the analysis with 11 GW of wind. Also, he said the powerflow model used in the updated analysis was done with the latest 2009 STEP projects that have been approved by the SPP Board of Directors. Minutes No. [28] Agenda Item 3 – ITP20 – Prototype/Front Loading Design Charles Cates gave his presentation “ITP20 – Prototype Designs and Front Loading”. During his presentation, he said that SPP would issue an initial rough draft report for the Integrated Transmission Planning Year 20 Assessment (ITP20) as early as April or May. This report would contain some prototype designs. Jim Sanderson asked what the purpose of the prototype designs was. Charles answered that the prototype designs will serve as a collection of solutions that could be pulled from as we work toward the final transmission plan for ITP20. Also during the presentation, Alan Myers asked what wind scenario would be used in the prototype analysis. Charles said the high wind case would be used for this initial analysis. Later, Bruce Merrill asked if the prototype design concept would be at 345 kV or 765 kV. Charles confirmed that this 345 kV versus 765 kV question might be answered early in the process if possible.

Agenda Item 4 – Metrics Task Force Report Before the Metrics Task Force’s report was presented, David Hudson requested a sensitivity run using the Priority Projects models. He proposed splitting Southwest Public Service Company (SPS) into northern and southern pricing zones to better depict the different in LIP prices in those two places. He felt that using a single load-weighted average zonal LIP for wind generation is a modeling issue that the ESWG needs to discuss. David said that even though most of the wind generation is concentrated in the vicinity of Hitchland, SPS is paying the wind generators the same as the gas generators that are concentrated in the southern half of SPS. Though the ESWG came to the consensus that this modeling change could not be done in time for the pending Priority Projects report, SPP Staff will discuss making a sensitivity run using two SPS zones after the report is issued. The required changes to the PROMOD models and the post-processing tools should be investigated. Another option is to create a new pricing zone that contains only wind generators. Kip Fox gave his presentation “Metrics Task Force Report”. Kip said 22 metrics were developed by the MTF for the ITP20 Study. To summarize and group these metrics, he said that there were two core metrics, additional metrics for added value not captured in the core metrics, and additional metrics for a “Robust” grid. He said that Cost-Effective Planning would be the form of economic analysis utilized in the ITP. Kip went on to point out that there are to be two weightings aspects used in the ITP. For the Multiple Futures Analysis, he said some futures may have higher likelihood so they would have higher weighting. The projects that appear in more futures will also have higher weighting. He noted this project weighting takes into account if a project can be modified to work in additional futures. Kip answered it would be a weighting process and not probability process when asked about this by Charles. Paul Dietz said that the ESWG should vote for the future weighting. He felt this was important because the futures drive the resource plans. The Metrics Matrix was also reviewed by the ESWG. Kip said the two core metrics were only in the report (APC and comparative costs) but that all the extra or possible metrics are in the Metrics Matrix. Kip said the ESWG could lower the number of metrics if necessary. However, the goal was to develop a complete list of metrics but that not every metric should be used in every step of the ITP20 Analysis. After Kip’s presentation, Alan Myers referred to the direction that the Synergistic Planning Project Team (SPPT) developed for the ITP process. Alan felt that the MTF’s report met the direction that the SPPT provided. The ESWG reviewed each of these six points provided by the SPPT: 1. Cost effectiveness standards would be applicable 2. Ability to deliver reserves under everyday economic uses 3. Transmission adequate to support a 20% renewable portfolio 4. System load growth that is 10% above long-term projected growth 5. Transmission system margins based upon emergency rating capacities at 95% v. 100% 6. Targeted LMP prices averaging within 20% Minutes No. [28] Motion: After the MTF report was presented and discussed, Kip Fox made a motion to approve the document. This motion was seconded by Paul Dietz and it passed unanimously without objection or abstention.

Kip Fox will work with SPP Staff to develop a presentation and recommendation for the MOPC to approve the MTF metrics.

Agenda Item 5 – Proxy Generation Information Representatives from Black & Veatch (B&V), Gary Wilmes and Sam Scupham, gave their presentation about the prototype (candidate) units that would form the pool of units that might be part of the final resource plan. Gary gave an overview of what prototypes were and Sam said he is the one who develops the characteristics for the different type of units that would be applicable to the SPP region. During the presentation, they answered questions about their processes and input data. Bruce Merrill asked if all the candidate generators were at new sites. Sam confirmed that every generator was a “greenfield” site. Also, Jim Sanderson asked what kind of data the completed resource plan would contain. Sam said that the final result would include the number of each type of generator and location of each generator. Sam added that they obtained their proprietary data from historical sources and new projects. Charles Cates asked the ESWG to provide as much data to Black and Veatch as the group decided necessary. Paul Dietz said that coal prices should be different per each ITP20 Future based on coal being used less based on the federal carbon legislation. Also, Bennie Weeks pointed out to the other ESWG members that Ventyx’s Strategist tool focuses primarily on cost data (capital and dispatch cost) and does not provide a lot of operational type data. Sam said he would like the ESWG to endorse the list of candidates and the other input data that B&V presented. Steve Gaw said that he would like a review of the B&V capital cost data, especially for wind generation. The consensus of the ESWG was that they would like to provide further guidance about the unit capital costs and fuel prices (Basis and offsets) used to develop the future resource plan. Therefore, SPP Staff will setup a conference call for April 1st and also send out an email with the fuel price information being used in the model.

Agenda Item 6 – Future Work Items In regard to future agenda items and action items for the ESWG and SPP Staff, it was mentioned that the Regional Tariff Working Group (RTWG) may require some assistance from the ESWG in developing the tariff language related to the Integrated Transmission Planning (ITP) Year 20 Assessment. Kip Fox reported the consensus at the RTWG seemed to be that they plan on putting specific metrics into the tariff or may refer to a specific manual for those metrics. Therefore, the RTWG may expect the ESWG to develop and approve an economic analysis manual before they write the ITP language into the tariff. To help develop this manual quickly, Kip Fox said that he would like the ESWG to have monthly meetings, rather than quarterly. Alan Myers said that a working manual can be posted that contains the information available today. Updates to this manual could then be added as they are developed. Kip Fox added that SPP Staff should develop the table of contents for this manual and add text from the Metrics Task Force report. Alan Myers requested that SPP Staff will develop a strawman economic analysis manual to be reviewed by the ESWG at the next Face-to-Face meeting. Minutes No. [28] Agenda Item 6 – Closing Items These upcoming meetings were planned:  ESWG Conference Call to determine Fuel Prices and Capital Cost data for use by Black & Veatch – April 1st from 1-2pm  ESWG Face-to-Face Meeing – April 28th and 29th from 1-5pm and 8am-noon.

The meeting was adjourned at 4:00 pm.

Respectfully Submitted,

Charles Cates Secretary Minutes No. [28] Minutes No. [28]

Phone Attendees Blake Elliott Board of Public Utilities-Kansas City, KS

Tony Gott Associated Electric Cooperative, Inc. Brenda Harris Occidental Petroleum Corporation Chris Jones Duke Energy Christian Rodriguez Wind Coalition Mitch Williams Western Farmers Electric Cooperative

Charles Cates Southwest Power Pool, Inc. Brett Hooton Southwest Power Pool, Inc. Tim McGinnis Southwest Power Pool, Inc. Tim Miller Southwest Power Pool, Inc. Ben Roubique Southwest Power Pool, Inc. Keith Tynes Southwest Power Pool, Inc.