RMATS Economics Economic Comparisons Preliminary: Distribution of Gains and Losses

1. RMATS Economics Economic Comparisons Preliminary: Distribution of Gains and Losses RMATS Steering Committee July 15, 2004

2. Modeling since Steering Committee call • Refined the resource assumptions used in project-specific economics • Removed wind resources associated with MT Upgrades and WY/CO Expansion projects when valuing stand-alone projects • Modified interface capacities for Bridger West, West of Naughton, Path C and TOT 4A • Preliminary analysis: Distribution of economic gains and losses • Preliminary analysis: Implications for state tax revenues RMATS Recommendations

3. Comparative Economics Insert First Excel Spreadsheet RMATS Recommendations

4. Comparative Economics Insert Second Excel Spreadsheet RMATS Recommendations

5. Distribution of gains and losses • A first look at spatial distribution of net savings/costs • Key driver: LMPs. Also loads, generation, and fuel/other VOM • As modeled in ABB MS for 2013 test year • Results: geographic, by load and generator category • Substantially greater net benefits for Rocky Mountain states RMATS Recommendations

6. Background info . . .Locational Marginal Prices (LMP) • LMP:Represents the cost or savings from supplying the next MW at a given node (bus) on the grid • If there were no transmission losses or constraints (perfect liquidity), all LMP’s would be equal and they would be the same as the cost of the unit on margin • In the case of a low cost generator with no available transmission (bottled up), the LMP would be that generator’s marginal cost • LMPs are transitory, arguably insufficient for predicting where benefits will fall • Driven by congestion, loads, generation, gas and other fuel prices RMATS Recommendations

7. Why areLoad Savings and Generator Gross Margin so different? For a given area, excludes import/exports: • In concept, if there were no losses or congestion (perfect transmission liquidity), then LMPs at any given hour would be the same across the Western Interconnect • Load costs and generator revenues would be the same for the system as a whole, but different by area because load and generation quantities would be different • Load costs: the sum of hourly loads X hourly LMP • Generator revenues: the sum of hourly generation X hourly LMP • Generator gross margin: generator revenues less annual fuel & other VOM • Congestion leads to changes in the type and location of plants that are dispatched • Changes generation (MWh) • Changes fuel costs • This in turn affects LMPs - the price paid by load and the price received by generators q Load (MW) Generation (MW) No Constraints t p LMP t For a given area, excludes import/exports: q Load (MW) Generation (MW) With Constraints t p LMP t Assumes that load is not sensitive to price (LMP), no price elasticity RMATS Recommendations

8. Distribution of Economic Gains & LossesRecommendation 1Reflects the changes in load cost and generator gross margin between the Reference Case and Recommendation 1. This distribution assumes that pricing is on an hourly, LMP basis. Reflects fuel and other VOM modeling, and does not include capital & fixed O&M costs Load Cost is hourly demand (MWh) at each load node x hourly LMP ($), summed for 2013 Generator Gross Margin is hourly generation (MWh) at generation node x hourly LMP, summed for 2013 (generator revenue), less annual fuel & other VOM costs NOTE: Idaho & Montana state totals do no include areas covered in the Northwest Power Pool RMATS Recommendations

9. Distribution of Economic Gains & LossesRecommendation 2Reflects the changes in load cost and generator gross margin between the Reference Case and Recommendation 2. This distribution assumes that pricing is on an hourly, LMP basis. Reflects fuel and other VOM modeling, and does not include capital & fixed O&M costs Load Cost is hourly demand (MWh) at each load node x hourly LMP ($), summed for 2013 Generator Gross Margin is hourly generation (MWh) at generation node x hourly LMP, summed for 2013, less annual fuel and other VOM costs NOTE: Idaho & Montana state totals do no include areas covered in the Northwest Power Pool RMATS Recommendations

10. Distribution of Economic Gains & LossesState summary NOTE: Idaho & Montana state totals do no include areas covered in the Northwest Power Pool RMATS Recommendations

11. Distribution of Economic Gains & LossesRecommendation 1 & 2 RMATS Recommendations

12. Appendix

13. Production Cost (VOM) Comparison avg RMATS Recommendations

14. Recommendation 1 Transmission Projects Montana to NW Taft Modified Interface West of Broadview 280 Wind Townsend West of Colstrip Montana Upgrades Broadview Garrison Added Resource 50 Wind Colstrip 250 Coal Added 345 kV Line 359 Coal Added Series Compensation Only 250 Wind Borah West 125 Wind Midpoint 700 Coal Antelope Mine Path C Black Hills to C. Wyoming West of Bridger Bridger Expansion Dave Johnston Treasureton 575 Coal C Wyoming to LRS Bridger E LRS 100 Wind Jim Bridger Miners 500 Wind Ben Lomond Naughton West of Naughton Cheyenne Tap 1150 Wind TOT 4A TOT 3 New WY- CO lines Ault 575 Coal TOT 7 Green Valley 140 Gas 210 Gas 500 Coal 500 Wind RMATS Recommendations

15. Recommendation 1 Transmission Projects Montana Upgrades (less gray) Montana to NW Taft Modified Interface West of Broadview 280 Wind Townsend West of Colstrip Montana Upgrades Broadview Garrison Added Resource 50 Wind Colstrip 250 Coal Added 345 kV Line 359 Coal Added Series Compensation Only 250 Wind Borah West 125 Wind Midpoint 700 Coal Antelope Mine Path C Black Hills to C. Wyoming West of Bridger Bridger Expansion Dave Johnston 575 Coal Treasureton C Wyoming to LRS Jim Bridger LRS 100 Wind Miners 500 Wind Ben Lomond Naughton West of Naughton Cheyenne Tap 1150 Wind TOT 4A TOT 3 New WY- CO lines Ault 575 Coal TOT 7 Green Valley 140 Gas 210 Gas 500 Coal 500 Wind Existing Ben Lomond to Borah 345kV is now looped in at Treasureton Amps phase shifter, Flaming Gorge transformer, Midpoint to Boise 230kV are included in all runs RMATS Recommendations

16. Recommendation 1 Transmission Projects Bridger Expansion (less gray) Montana to NW Taft Modified Interface West of Broadview 280 Wind Townsend West of Colstrip Montana Upgrades Broadview Garrison Added Resource 50 Wind Colstrip 250 Coal Added 345 kV Line 359 Coal Added Series Compensation Only 250 Wind Borah West 125 Wind Midpoint 700 Coal Antelope Mine Path C Black Hills to C. Wyoming West of Bridger Bridger Expansion Dave Johnston 575 Coal Treasureton C Wyoming to LRS Jim Bridger LRS 100 Wind Miners 500 Wind Ben Lomond Naughton West of Naughton Cheyenne Tap 1150 Wind TOT 4A TOT 3 New WY- CO lines Ault 575 Coal TOT 7 Green Valley 140 Gas 210 Gas 500 Coal 500 Wind Existing Ben Lomond to Borah 345kV is now looped in at Treasureton Amps phase shifter, Flaming Gorge transformer, Midpoint to Boise 230kV are included in all runs RMATS Recommendations

17. Recommendation 1 Transmission Projects WY-CO Expansion (less gray) Montana to NW Taft Modified Interface West of Broadview 280 Wind Townsend West of Colstrip Montana Upgrades Broadview Garrison Added Resource 50 Wind Colstrip 250 Coal Added 345 kV Line 359 Coal Added Series Compensation Only 250 Wind Borah West 125 Wind Midpoint 700 Coal Antelope Mine Path C Black Hills to C. Wyoming West of Bridger Bridger Expansion Dave Johnston 575 Coal Treasureton C Wyoming to LRS Jim Bridger LRS 100 Wind Miners 500 Wind Ben Lomond Naughton West of Naughton Cheyenne Tap 1150 Wind TOT 4A TOT 3 New WY- CO lines Ault 575 Coal TOT 7 Green Valley 140 Gas 210 Gas 500 Coal 500 Wind Existing Ben Lomond to Borah 345kV is now looped in at Treasureton Amps phase shifter, Flaming Gorge transformer, Midpoint to Boise 230kV are included in all runs RMATS Recommendations

18. Area Production Costs (VOM) Recommendation 1 RMATS Recommendations

19. Interface Performance Recommendation 1 RMATS Recommendations

20. Capacity Factors Recommendation 1 RMATS Recommendations