2013 ITC Midwest Spring Partners In Business Meeting. Welcome. Mike Dabney Manager, Stakeholder Relations

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1 2013 ITC Midwest Spring Partners In Business Meeting Welcome Mike Dabney Manager, Stakeholder Relations

2 Facility and Meeting Accommodations Registration for meeting: Sign in Chance to Win a PRIZE Rest Room Locations Lunch Partners in Business: Web Site located at Introductions 2

3 Spring Partners in Business Agenda 3 Morning: Kick-off, ITC Milestones Mike Dabney Legislative Update Todd Schulz Economic Impacts of Transmission Investments Don Morrow Lunch Afternoon: Economic Impacts of Transmission Investments Don Morrow State & Federal Regulatory Update Lisa Stump Operations Update for Summer Readiness Darrel Yohnk Wrap-up

4 Safe Harbor Language & Legal Disclosure This presentation contains certain statements that describe our management s beliefs concerning future business conditions and prospects, growth opportunities and the outlook for our business and the electricity transmission industry based upon information currently available. Such statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Wherever possible, we have identified these forward-looking statements by words such as anticipates, believes, intends, estimates, expects, projects and similar phrases. These forward-looking statements are based upon assumptions our management believes are reasonable. Such forward-looking statements are subject to risks and uncertainties which could cause our actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements, including, among other things, the risks and uncertainties disclosed in our annual report on Form 10-K and our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Because our forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different and any or all of our forward-looking statements may turn out to be wrong. They speak only as of the date made and can be affected by assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this presentation and in our annual and quarterly reports will be important in determining future results. Consequently, we cannot assure you that our expectations or forecasts expressed in such forward-looking statements will be achieved. Actual future results may vary materially. Except as required by law, we undertake no obligation to publicly update any of our forward-looking or other statements, whether as a result of new information, future events, or otherwise. 4

5 Marking 10 Years of ITC and Five Years of ITC Midwest 5 Status of regulatory commitments made at the time of ITC Midwest transaction Rebuilt Arnold-Vinton-Dysart-Washburn line by year-end 2009 Completed construction of Salem-Hazleton Line (80 miles of 345kV transmission) on April 25, 2013 Rebuild 34.5 kv System Work under way on revised schedule; approximately 173 miles rebuilt Support generator interconnection requests Approximately 2,460 MW of wind generation connected Improve Reliability Significant progress underway

6 Marking 10 Years of ITC and Five Years of ITC Midwest Proud of our record of accomplishments, working to accomplish even more in the years ahead! 6

7 2013 ITC Midwest Spring Partners In Business Operations Excellence Meeting Legislative Review Todd Schulz, Manager, State Government Affairs

8 Iowa Legislative Review 8 Introduction Makeup of Iowa s General Assembly Major issues of the 2013 legislative session No transmission issues passed during this years session Issues to be aware of in future legislative sessions

9 2013 ITC Midwest Spring Partners In Business Operations Excellence Meeting Regulatory Update Lisa Stump, Manager, Regulatory Affairs Iowa

10 Recent Regulatory Developments (FERC and MISO) ITC Responds to IPL s 206 Complaint Against ITC Generator Interconnection Policy EL (November 2012) ITC Midwest Attachment FF MISO policy: 100% reimbursement of network upgrade costs for generator interconnections Decision pending at FERC 10

11 Recent Regulatory Developments (FERC and MISO) 11 Revisions to MISO Appendix K ER (January 2013) MISO TOs file a settlement agreement with MISO to amend Appendix K of the TOA Revisions allow the Organization of MISO States (OMS) Section 205 filing rights with respect to cost allocation of transmission upgrades and new transmission within MISO FERC Approves NERC Revisions to Definition of the Bulk Electric System RM12-6 (February 2013) Establishes a bright-line threshold that includes all facilities operated at or above 100 kv

12 Recent Regulatory Developments (FERC and MISO) 12 ITCTransmission and METC file voluntary refund reports on tax effects of goodwill for consistent treatment as directed under ITC Midwest audit dockets ER & ER (February 2013) Refunds calculated will be implemented through the next trueup following a Commission Order. FERC Approves Revised Reliability Standard for Transmission Vegetation Management RM12-4 (March 2013) Expands applicability of the standard to include certain transmission lines below 200 kv Incorporates new Minimum Vegetation Clearance Distances and, into the text of the standard, adopts new Right of Way definition

13 Recent Regulatory Developments (FERC and MISO) FERC rules on Order 1000 Compliance ER (March 2013) Accepts changes to MISO regional cost allocation methods with some conditions Determines that MISO complied in part with requirements to eliminate ROFR but must clarify certain issues FERC Form 1 filed on April 15,

14 MISO s Order 1000 Filing Cost Allocation for future Baseline Reliability Projects will be 100% zonal, effective June 1, 2013 MISO has to submit informational filings after completion of MTEP 15 outlining the numbers of MEPs, MVPs and BRPs approved during the MTEP 14 and MTEP 15 cycles and an analysis of the BRPs approved in these two cycles 14

15 MISO s Order 1000 Filing Established a process to choose developers for future MEPs and MVPs, subject to a compliance filing in 4 months (July 2013) to address several details Eliminate consideration of State ROFRs and provisions for States to choose developers Weighting of cost in bid evaluations Qualification requirements to bid Definition of upgrades that will retain ROFR and how projects with a combination of upgrades and new facilities will be handled in the process Use of existing right-of-way How implementation schedules are handled in bids 15

16 State Regulatory Update Iowa State Regulatory Update (Iowa) Salem-Hazleton 345 kv Line 34.5 kv to 69 kv Upgrades Other key Iowa projects Hawkeye Complaint 16

17 Regulatory Update Salem-Hazleton 345 kv Line Description: New 80-mile line of 345 kv, double circuited with existing 161 kv for portion of line. Status: CONSTRUCTION COMPLETE 17

18 Regulatory Update Hiawatha to Coffey Description: New 10-mile 161 kv line between the proposed Coffey Substation and the existing Hiawatha substation. Drivers: Needed to ensure reliability in the fast growing area north of Cedar Rapids. Status: 1) IUB Franchise Received 2) Design Complete 3) Under Construction 18

19 Regulatory Update Nuthatch to Marshalltown Description: Rebuild approximately 50 miles of 115 kv line to 161 kv standards. Drivers: Existing 115 kv lines are old and in poor condition. Existing capacity is insufficient to transport energy from new generation. Status: CONSTRUCTION COMPLETE 19

20 MVPs 345kV Projects 3 and 4 (Iowa Update) Project 3: Joint ITC/MEC Project 345kV ~145 miles in Iowa ~70 miles in MN Project 4: Joint ITC/MEC Project 345kV ~190 miles in Iowa 20 Public informational meetings have been held in Black Hawk, Buchanan, Kossuth, and Cerro Gordo Counties. Public informational meetings are scheduled this year in the remaining counties. Franchise amendments have been filed for the Black Hawk to Hazleton Project.

21 Regulatory Update Hawkeye Land Complaint 21 TIMELINE August 7, 2009 Hawkeye files complaint against ITCMW with IUB October 14, 2010 ALJ s proposed decision upholds ITCMW s use of the crossing statute October 28, 2010 Hawkeye Land appeals ALJ decision to IUB September 30, 2011 IUB affirms ALJ s proposed decision October 30, 2011 Hawkeye appeals IUB decision to district court December 31, 2012 District Court of Linn County affirms IUB decision Hawkeye appeals district court decision to Iowa Supreme Court

22 2013 ITC Midwest Spring Partners In Business Operations Excellence Meeting Operational Excellence and Summer Readiness Darrel Yohnk Director-Real Time Operations, Department

23 ITC Operations Functional Organization Operations Ops Policy & Strategy Ops Engineering Operation Planning Compliance Network Application Engr. Real Time Ops Shutdown Coordination Training

24 ITC System Operations From our Operations Control Room in Novi, Michigan, ITC monitors and operates the high voltage electrical transmission system throughout the ITC system footprint ITC controls over 12,000 miles of transmission lines and hundreds of substations serving a combined peak load of 26,000 megawatts ITC Midwest 34.5 kv system is contractually operated by Alliant Energy in Cedar Rapids 24 New pictures here.

25 ITC Holdings 25

26 ITC Midwest System Highlights Service Area Approx. Total System Peak Load 26 ITC Midwest 3740 MW Approx. Total Transmission Miles 4733 RTO Membership Midcontinent ISO (MISO) RE Membership Midwest Reliability Organization (MRO)

27 ITC Midwest Interconnections NSP WAPA GRE MEC Alliant ITC Midwest Muni, Co-ops and IPPs AMMO AMIL DPC MPW 27 CE

28 Operational Excellence 28

29 Proactive Maintenance As the result of our singular focus on transmission, ITC s commitment to preventive maintenance has helped maximize the availability of critical equipment and the transmission system. ITC spends three times more on preventive maintenance than reactive, unplanned activities Capital investment and maintenance programs result in improved reliability and overall system performance Our maintenance programs are the key drivers of system performance, compliance with NERC reliability standards and maintaining a fully operable transmission system 29

30 Systematic Approach to Outage Reduction Root cause analysis and feedback into both the maintenance plan Example: It was realized through the outage and capital improvements Identify and document cause of each sustained outage < 5% of outages are recorded as unknown cause Committee of operations, engineering, planning and stakeholder relations reviews each outage Identification of system planning/maintenance/operating improvements or larger scale projects Initiate additional inspections, special maintenance or study projects Track performance trends Circuits with repeat outages are identified and given extra attention Separate committee performs an after action review for all human performance events 30 tracking process a line with multiple operations occurring during the fall season, a project was initiated to place animal guards around the structures to prevent future operations

31 Reliability 5 Year Momentary Outage Performance Since 2008 ITCM momentary outages have been reduced by 64% ITCM has averaged a 15% reduction in momentary outages from year to year over this period MOMENTARY OUTAGES 69KV Outages

32 Reliability 5 Year Sustained Outage Performance Sustained outages have been reduced by 55% since 2008 ITCM has averaged a 10% reduction in sustained outages from year to year over this period SUSTAINED OUTAGES 69KV Outages

33 Reliability 5 Year 34.5 kv Performance Over 1000 total outages experienced during 2008, less than 500 during 2012 ITCM has averaged nearly an 8% reduction in sustained outages and 4% reduction in momentaries since 2008 SUSTAINED OUTAGES MOMENTARY OUTAGES Outages Outages

34 Reliability 34.5 kv Performance Continuous downward trend in outage statistics that impact end use customers Projections indicate the trend will continue System Average Interruption Frequency Index (SAIFI) Transmission Only System Average Interruption Duration Index (SAIDI) Transmission Only Source: Alliant R² = R² = ITCMW Outages Minutes Source: Alliant ITCMW

35 Reliability 34.5 kv Performance Customer Average Interruption Duration Index (CAIDI) Transmission Only Source: Alliant Minutes R² = ITCMW

36 Operations Updates 36

37 NERC Facilities Ratings Alert Assessment and Remediation In Progress ITC s corrective actions include: What is it? - In October 2010, NERC issued an advisory Alert to all transmission owners to review their facility ratings and confirm that they meet the actual field conditions. 37 Reducing circuit rating by implementing Sag Ratings. Installing new poles or structures. Raising or Modifying existing poles or structures. Lowering distribution circuits. Reducing grade of soil (grading). Removing objects near circuit. Incorporating work with identified rebuild or new construction projects. Priority High Medium Low Assessment Completion Target Date Remediation Completion Target Date

38 Accomplishments Completed 173 rebuild miles and 73 conversion miles Salem Hazleton 345kV Wyoming - Massillon 81 miles of 345kV line, improved reliability by providing a second source to the Dubuque area Allows for increased transmission flows providing access to less expensive generation sources Walker REC Troy Mills Rebuild Conversion of 34.5 to 69kV Conversion of 34.5 to 69kV plan for the Vinton Hazleton area Downtown Industrial 161kV Allows ITC to retire several 34.5kV lines and is part of the Cedar Rapids area transmission system improvements Heron Lake - Lakefield 161kV Rebuild Decreases line losses Increases system reliability Palo Shellsburg Rebuild Marion CKT kV Partial Rebuild Marshalltown-Franklin 115 to 161 Conv. 38 Increases reliability and line capacity by replacing aged equipment Conversion of 34.5 to 69kV plan for the Vinton Hazleton area Numerous reliability issues due to unshielded design and poor physical condition Partial rebuild will improved reliability in the near term

39 Generation Additions Approximately 2500 MW of wind generation 39 G426/538 IA G164 MN G358 Faribault County, MN G798 IA G298 Dickenson County, IA H078 IA G735 IA H007 Delaware County, IA G604 Steele County, MN G540 Worth County, IA G612 Story County, IA G548 Worth County, IA H008 Tama County, IA G595 IA H009 Tama County, IA G172 IA H096 Greene County, IA G573 IA G870 MN J112 MN G947 IA

40 Summer Readiness 40

41 Summer Assessments ITC participated in various regional assessments, including ERAG 2013 Summer Assessment and MISO 2013 Coordinated Summer Assessment ITC performed its own individual system assessments Not anticipating any problems meeting the needs of load serving entities in Southern Minnesota or Iowa for summer purchases that must be transported into and/or across the ITCMW system to meet summer 2013 demand The ITCMW system is expected to perform well for a wide range of operating conditions 41

42 2012 Summer Assessment Load (MW) This year s summer peak is expected to exceed last year s load Two cases are run: Normal system bias and high SouthNorth bias NERC Alert Sag Ratings Incorporated Long term outages included 20% of wind generation capacity online Baseload units online near max output ITCM Peak Loads Year

43 Operational Challenges Midwest Challenges Various 345kV and 161kV contingencies have heightened awareness Operating guides are in place to mitigate overloads or voltage violations should contingency occur Peaking generation and system reconfiguration will help to alleviate violations Coordination process with MISO on re-dispatching generation or using Market-to-Market tool to reduce through-flows is in place Midwest Solutions 43 The new Salem-Hazleton line will resolve many issues along with generation redispatch NERC Alert sag limit ratings are in effect on a number of line sections, permanent fixes will help to reduce loading

44 Summer Preparations In addition to our normal preventive maintenance, ITC performs special activities to get ready for the peak load: Summer readiness equipment inspections of substations, transformers, capacitors Aerial inspection of lines Operational preparations include: Operation Engineering Summer Assessment presentation and training class to all ITC system operators Summer Readiness coordination meetings with LDCs, Neighboring utilities and Regional Reliability Committees. Review emergency procedures Implementation of conservative maintenance policy 44

45 Summary With many system improvement projects in place and maintenance up to date, ITCMW is expected: To meet summer peak demands Perform well for a wide range of operating conditions ITC continues to work to achieve and maintain Operational Excellence to provide you with best in class service and reliability 45

46 Questions? 46

47 Thank you! We appreciate your time and effort to participate in today s Partners in Business meeting For copies of today s ITC presentations please visit our web-site at: click on ITC Midwest, click on Partners in Business, click on Meeting and Events A link to our meeting evaluation will be ed to you. We appreciate your feedback on our meetings, to continue to bring you value Mike Dabney mdabney@itctransco.com Keith Eyler keyler@itctransco.com 47

48 Coming up 48

49 Coming up Watch for the dates of our Planning Partners in Business Meetings and Attachment O Meeting this Fall Buckle Up and Travel Safely! 49