1

A Conversation about MISO

Paul Spicer

November 8, 2007

2

How does the MISO Market affect you-the industrial customer

Electric Rates Capacity Transmission Energy

Market pricing index during economic interruptions Day-ahead Real-time

Delivery reliability October 06 (Weston Lightning Strike) ASM opportunity?

3

Electric Rates

Capacity Reserve margins

Currently no uniform requirement Wisconsin ~ 18% during summer months

MISO records reserves in “Module E” Resources can count if the they are “deliverable” to the market Resources can count if they are local capacity (firm tx) This has enabled more short-term capacity transactions

WPSC has gained about $1.5 million from these transactions

These revenues go through the Wisconsin Fuel Rules as a credit to Purchase Power costs

4

Electric Rates

Transmission Network Service

From Designated Network Resources (DNRs) To Network Load 12 CP Coincident Peak Zonal Price (ATC zone for us) Currently about $32.50/Kw-year for Network Charge

Schedule Charges currently about $3/Kw-year Schedule 1 (System Control) Schedule 2 (Reactive Supply) Schedule 10 (Scheduling/reliability/market planning) Schedule 26 (Network Upgrade) FERC Charges

Creates entitlement to candidates for allocated FTRs

5

Electric Rates

Transmission

6

Electric Rates Energy

Portfolio Approach

GenerationGenerationGenerationGeneration

GenerationGenerationGenerationGeneration

Fuel

Electricity(to MISO)

DistributionDistributionDistributionDistribution

Electricity(from MISO)

Dollars for

Fuel

Dollars for Generator’s Electricity(from MISO)

Dollars for Electricity

Consumed (to MISO)

Dollars for rights to use transmission

(to ATC)

Dollars for Financial

Transmission Rights (FTR)

(from MISO)

Dollars for market

administration and up-lift

(to MISO)

7

Electric Rates Energy

8

Electric Rates Energy

Importing Utility Perspective

Day-ahead LMP Comparison by MISO Region

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.00

$75.00

ILLINOIS MICHIGAN MINNESOTA WPSC WEC-South

Location

$/M

Wh

r 2005

2006

2007

9

Electric Rates Energy

Importing Utility Perspective

-600 -500 -400 -300 -200 -100 0 100 200 300 400 500 600 700 800

0

50

100

150

200

250

MW of Import (negative) or Export (positive)

Day-ahead Net Import/Export for September 2007

Sept 07 with W4

Sept 07 Actual

10

Market Pricing During Day-ahead Economic Interruptions

Ratio of Day-ahead LMP and Economic Interruption Threshold Price (EITP)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

0% 5% 10%15%

20%25%

30%35%

40%45%

50%55%

60%65%

70%75%

80%85%

90%95%

100%

Percent of Hours in 2007

Rat

io (

LM

P/E

ITP

)

Based on WPSC LMP

about 225 hours

11

Market Pricing During Day-ahead Economic Interruptions

Ratio of Day-ahead LMP and Economic Interruption Threshold Price (EITP)

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

0% 5% 10%15%

20%25%

30%35%

40%45%

50%55%

60%65%

70%75%

80%85%

90%95%

100%

Percent of Hours in 2007

Rat

io (

LM

P/E

ITP

)

Based on WPSC LMP Based on MISO Average

about 225 hours

About 70 hours

12

Market Pricing During Day-ahead Economic Interruptions

Comparison of Day-ahead and Real-time LMP During Economic Interruption

0

200

400

600

800

1000

1200

1400

100 110 120 130 140 150 160 170 180 190

Day-ahead LMP ($/MWhr)

Real-

tim

e L

MP

($/M

Wh

r)

Actual Real-time LMP Day-ahead = Real-time LMP

Average Day-ahead LMP = $135/MWhrAverage Real-time LMP = $130/MWhrReal-time was better 66% of the time, butRSG fees average $4/Mwhr making the two alternatives near equal.

October 8Scarcity

Price

13

Average of Real-time 5 minute LMPs as a Predictor of Settlement Real-time LMP

0%

50%

100%

150%

200%

250%

300%

350%

400%

0 5 10 15 20 25 30 35 40 45 50 55 60

Clock Minute Average

2 S

tan

dar

d D

evia

tio

ns

of

Per

cen

t P

rice

Example: If the average of the four 5 LMPs (20 minutes) is $100/MWhr, you can be 95% confident that the actual settlement LMP will be less than (1.9*$100/MWhr) $190/MWhr. If by 35 minutes into the hour the average of seven 5 minute LMPs continues to be $100/MWhr, then you can be 95% confident that the settlement LMP will be less than (1.5*$100/MWhr) $150/MWhr.

14

Reliability Importing Utility Perspective

Day-ahead Import/Export Since W3 Outage on October 6th, 2007

0

20

40

60

80

100

120

140

-1000 -900 -800 -700 -600 -500 -400 -300 -200 -100 0 100 200 300 400 500

Ho

urs

15

Reliability

Ancillary Service Market (ASM) Regulation

Second to second generator control and frequency response Performed today by local “Balancing Authorities”

Operating Reserve- Spinning Generators synchronized to the grid Generally used for contingency response Performed today by local “Balancing Authorities” and the Contingency

Reserve Sharing Group (CRSG) Operating Reserve- Supplemental

Fast acting (not necessarily connected) resources including load response

Generally used for contingency response Performed today by local “Balancing Authorities” and the Contingency

Reserve Sharing Group (CRSG)