Option for an Enhanced SPP Regional Project Review Process

1. Option for an Enhanced SPPRegional Project Review Process Presentation to the Regional State Committee January 24, 2011 Lisa M. Barton SVP American Electric Power Transmission

2. Process Goals • Regional collaboration is needed to establish process for ensuring that there is: • “Transparency” with respect to projects scope and cost • “Predictability” with respect to process, decision making and reporting • While minimizing the administrative burden on SPP in terms of project oversight. Process Best Practices Reporting As the SPC task force begins its deliberations on new process objectives the following process outline is one of many which could be advanced.

3. Process Transparency Process Best Practices Reporting • New processes should recognize that: • Accurate and consistent information on project costs, project scope and in-service dates promotes greater transparency and understanding. • States have the responsibility to make determinations on siting and balancing potentially competing interests within the state with the cost of the project. • SPP provides expertise in the determination of needed transmission facilities. • TOs provide expertise on cost estimation and the ability to site, construct, own and maintain transmission assets within the region. • SPP as an independant regional transmission organization is well positioned to make determinations on: • What is “good utility practice” within the SPP region. • The feasibility of project alternatives, in consultation with TOs. • Consistent and transparent reporting requirements. • Determinations as to the appropriateness of designs and costs; based on information reported by TOs.

4. Overview of Proposal: Planning and Project Review Process Process Best Practices Reporting • Understanding the scope, challenges and costs of a given transmission project is important when the project costs are supported regionally • Facilitation of this goal can be secured by SPP establishing a more formal process • TO who are familiar with the project can then provide guidance and information on local matters such as: • Environmental issues (habitat, Tribal lands) • Geographic challenges (terrain) • Estimated project costs • With input from this consultation, SPP can make the determination as to whether the “preliminary scope” of the project is accurate • Subsequent to this review SPP would determine the “recommended” scope and size of the project and would issue an NTC pursuant to the SPP Tariff • Upon receipt of the NTC, the TO would provide information on project costs • The TO would submit an application to SPP specifying the cost of the given project to secure recovery of the project costs through the regional rate

5. SPP SPP Consult w/TOs Preliminary Benefit Analysis & Identification of Needed Projects • Vetting with • TO Committee • Is Scope Correct? • Is Cost In Line? Questions/Concerns RSC/Stakeholders TO SPP Rough Estimate of Cost (straight line) Revalidation of Benefit Analysis* Final SPP Determination NTC Issued *As Needed Overview of an Option to Increase Transparency and Accuracy of Information: Prior to Issuance of NTC Process Best Practices Reporting Understanding the scope, challenges and costs of a given transmission project is important when the project costs are supported regionally. Facilitation of this goal can be secured by SPP establishing a more formal process

6. SPP SPP Consult w/TOs Preliminary Benefit Analysis & Identification of Needed Projects • Vetting with • TO Committee • Is Scope Correct? • Is Cost In Line? Questions/Concerns RSC/Stakeholders TO SPP Rough Estimate of Cost (straight line) Revalidation of Benefit Analysis* Final SPP Determination NTC Issued *As Needed Overview of an Option to Increase Transparency and Accuracy of Information: Prior to Issuance of NTC Process Best Practices Reporting • TOs who are familiar with the project can then provide guidance and information on local matters such as: Environmental issues (habitat, Tribal lands); Geographic challenges (terrain); estimated project costs.

7. SPP SPP Consult w/TOs Preliminary Benefit Analysis & Identification of Needed Projects • Vetting with • TO Committee • Is Scope Correct? • Is Cost In Line? Questions/Concerns RSC/Stakeholders TO SPP Rough Estimate of Cost (straight line) Revalidation of Benefit Analysis* Final SPP Determination NTC Issued *As Needed Overview of an Option to Increase Transparency and Accuracy of Information: Prior to Issuance of NTC Process Best Practices Reporting With input from this consultation, SPP can make the determination as to whether the “preliminary scope” of the project is accurate and determine the final “recommended” scope/cost and issue a NTC. Transparency and Predictability require open dialogues and informational exchanges to ensure decisions are made based on the best known information.

8. Best Practices Guidelines Process Best Practices Reporting • Predictability in what constitutes good utility practice can assist transmission owners and stakeholders alike. • To assist the SPP in its review of projects, regional TOs in concert with the SPP could develop a Best Practices Guideline (BPG). • BPG could be used to provide guidance to developers within the region. • If a project is designed and constructed in a manner that is consistent with the BPG, the design is presumptively in accordance with good utility practice within the region. • If the design is outside of the BPG, the TO would submit an application detailing deviations from the BPG outlining why the deviation is appropriate. • Periodic updates could ensure that the guidelines continue to reflect “regional best practices” in the area of transmission design and engineering; while minimizing SPP administrative costs.

9. Consistent Reporting and Project Reviews Process Best Practices Reporting • TOs would submit information specifying the cost of a individual projects (>300kV). • Project costs that are consistent with good utility practice (as outlined previously) would be fully recoverable in the regional rate. • SPP could establish procedures and common templates to be used to ensure consistent reporting and adopt requirement for the TO to notify SPP in the event that costs exceed an established bandwidth (e.g.+/-25%). • Timely reporting of changes in project costs could be encouraged by adopting a mechanism which requires costs in excess of those approved to be reported to SPP prior to inclusion in the regional rate. • Obligation for reporting would be on the TO, to detail the nature of the changes to SPP. • Final report to SPP on actual costs; reported after project ISD. Transparency and Predictability can be secured by establishing a: Defined Process; Adoption and use of “Best Practices” and Consistent Reporting.