ITC HOLDINGS, CORP. Edison Electric Institute 9

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1 ITC HOLDINGS, CORP. Company Background: ITC Holdings, Corp. is in the business of investing in electricity transmission infrastructure as a means to improve electric reliability, connect renewable energy resources to customers and lower the overall cost of delivered energy. Subsidiaries of ITC Holdings, Corp. include its three operating companies ITC Transmission, Michigan Electric Transmission Company (METC) and ITC Midwest as well as ITC Grid Development, ITC Great Plains and ITC Panhandle. ITC Transmission has a service territory covering more than 7,600 square miles in Southeastern Michigan, comprising all or part of 13 counties, including Detroit and Ann Arbor metropolitan areas and serves a population of over 4.9 million. ITC Transmission has 2,700 circuit miles of high voltage transmission lines (overhead and underground). METC has a service territory covering more than 18,800 square miles in the Lower Peninsula of Michigan, comprising all or part of 60 counties and serves a population of approximately six million. METC has 5,400 circuit miles of high voltage transmission lines (overhead and underground). ITC Midwest connects more than 700 communities in Iowa, southern Minnesota and northwest Illinois, an area of nearly 54,000 square miles. Its service territory includes Iowa, southern Minnesota and northwest Illinois serving a population of approximately six million. ITC Midwest has 6,791 circuit miles of high voltage transmission lines (overhead and underground) operating at voltages of 34.5 kv to 345 kv. ITC Great Plains, LLC, and ITC Panhandle are subsidiaries to ITC Grid Development, LLC, a subsidiary of ITC Holdings Corp. ITC Great Plains was established to address a recognized need for investment in the transmission infrastructure in Kansas and the Great Plains region and has a service area which includes portions of Kansas and Oklahoma. ITC Panhandle does not have a service area at this time. Between 2003 and 2007 ITC Holdings, Corp. has invested approximately $748 million into the transmission system. Renewable Resource Profile: In 2008, ITC Midwest entered into contractual commitments with wind generation developers for the upgrade of an estimated $62 million in ITC Midwest transmission facilities. These upgrades are necessary to accommodate the interconnection of approximately 810 MW of new wind resources that were connected to ITC Midwest transmission in ITC Midwest has approximately 1,280 MW of wind generation connected to its transmission system at voltages 100 kv and above, and an additional approximately 250 MW connected to its 34.5 kv and 69 kv transmission system. Edison Electric Institute 9

2 Transmission Projects Supporting Renewable Resources ITC Holdings, Corp. Renewable energy resource projects in the Midwest Independent System Operator (MISO) interconnection queue total approximately 7,300 MW of wind generation proposed for connection to ITC Midwest. ITC Midwest has signed interconnection agreements representing approximately 2,165 MW of renewable resource generation. Capacity factors across the ITC Midwest footprint generally range from percent for wind resources based on location. KETA Project (ITC Great Plains) Project Description: The Kansas Electric Transmission Authority (KETA) Project, the largest transmission project in the SPP Transmission Expansion Plan (STEP), includes over 210 miles of new high-voltage transmission lines, in addition to substation and associated facilities. The KETA Project will extend from the Spearville Substation near Spearville, Kansas to a substation near Axtell, Nebraska. It includes an interconnection at the Knoll Substation near Hays, Kansas. SPP is evaluating the Spearville to Knoll portion of the KETA Project to be constructed at 765 kv while the Knoll to Axtell portion will be constructed at 345 kv. The KETA Project was identified by the KETA as a project that would produce positive benefits for Kansas and the surrounding region. The KETA Project has been approved by the SPP Board of Directors for inclusion in the 2008 STEP. Almost 3,000 MW of wind generation that is proposed for interconnection near terminals of the KETA Project will benefit from completion. Project Cost: The entire project, as currently proposed by SPP, will cost approximately $350 Million. Project Status: ITC Great Plains has a Kansas Corporation Commission Certificate to build and has the support from the KETA. Upon expedited regulatory approvals, the KETA Project would come online by May Project Investment Partners: Sunflower Electric Cooperative, Mid-Kansas Electric, Midwest Energy, and Nebraska Public Power District (NPPD). Project Benefits: The KETA Project will support renewable generation development, will provide more on and off ramps for generators to access renewable energy sources and cheaper generation sources, will move electricity to load centers, and helps to achieve energy security and independence. 10 Edison Electric Institute

3 Transmission Projects Supporting Renewable Resources ITC Holdings, Corp. Kansas V-Plan the northern half of the SPP transmission project known as the X-Plan (ITC Great Plains) Project Description: This project is part of the SPP EHV Overlay plan and is included in the STEP. The hub of the X-Plan would be located near Mooreland, Oklahoma, with connections going northerly into Spearville and Wichita, Kansas, and southerly into the Amarillo/Lubbock, Texas and Oklahoma City, Oklahoma, areas. The Kansas V-Plan represents the Spearville to Wichita portion of the X-Plan. The Kansas V-Plan will aid in the delivery of wind generation from the western half of the SPP footprint to the east. The project consists of a 180 mile 765 kv transmission line, which may be operated initially at 345 kv, from Sunflower Electric Cooperative s existing Spearville 345 kv switchyard to a point near the existing Westar Energy Wichita 345 kv switchyard, with an intermediate point in southern Comanche County, Kansas, and an intermediate point near Medicine Lodge, Kansas. The intermediate point in southern Comanche County, Kansas will be the proposed site of a future switchyard for the purpose of collecting wind resources. The intermediate point near Medicine Lodge, Kansas will consist of a 345/138 kv Substation at Flat Ridge which will serve to collect wind resources and will help alleviate an operating constraint on the Mid-Kansas Electric transmission system. Project Cost: $476 million (based on 765 kv construction). Project Status: The projected in-service date is Project Investment Partners: ITC Great Plains will construct the Sunflower Electric Cooperative and Mid-Kansas Electric (the former Aquila Kansas system) portions of the project. Westar or Prairie Wind Transmission will build the east portion of the project. Project Benefits: The X-Plan was identified in 2004 SPP long-range planning studies as the preferred expansion to support additional generation development, including the development of 2,500 MW of wind development in western Kansas, Oklahoma and the Texas panhandle. The intermediate point near Medicine Lodge, Kansas will serve to collect wind resources and will help alleviate operating constraints on the Mid-Kansas electric transmission system. Edison Electric Institute 11

4 MINNESOTA POWER Company Background: Minnesota Power, a division of ALLETE, provides electricity in a 26,000 square mile electric service territory located in northeastern Minnesota. Minnesota Power supplies retail electric service to 141,000 retail customers and wholesale electric service to 16 municipalities. Transmission and distribution components include 8,866 circuit miles of lines and 169 substations. Minnesota Power s transmission network is interconnected with the transmission grid to promote reliability and is part of a larger regional transmission organization, MISO. During the period of , Minnesota Power invested nearly $47 million for upgrades and new infrastructure to the transmission system. Renewable Resource Profile: The total connected renewable energy resource capacity is 341 MW consisting of: 23 MW Biomass, Natural Gas (Cloquet Energy Center) 30 MW Biomass, Coal (Rapids Energy Center) 48 MW Biomass, Coal, Natural Gas (Hibbard Energy Center) 115 MW Hydro (11 stations) 125 MW Wind (three wind farms added within the last five years) Total renewable energy resource projects in the interconnection queue is 275 MW of wind resources. None of these projects have executed an interconnection agreement. The following capacity factors apply to renewable resources in Minnesota Power s service area: Wind = 20% Hydro = 40-60% Biomass = 80-86% 12 Edison Electric Institute

5 Transmission Projects Supporting Renewable Resources Minnesota Power CapX2020 Transmission Plan Project Description: CapX2020 is a joint initiative of 11 transmission-owning utilities, including Minnesota Power, in the Upper Midwest to expand the electric transmission grid to ensure continued reliable service to 2020 and beyond. Planning studies show that customer demand for electricity will increase by 4,000 to 6,000 MW by The first group of four proposed lines would span over 700 miles and include: A 240 mile, 345 kv transmission line between Brookings County, South Dakota, and Hampton, Minnesota, plus a related 345 kv line between Marshall and Granite Falls, Minnesota. A 250 mile, 345 kv transmission line between Fargo, North Dakota, and St. Cloud and Monticello, Minnesota. A 150 mile, 345 kv transmission line between the Hampton and Rochester, Minnesota, continuing to La Crosse, Wisconsin. A 70 mile, 230 kv transmission line between Bemidji and Grand Rapids in North Central Minnesota. Of these new transmission lines, the Hampton-Brookings County 345 kv line provides access to the wind generation resources in Southwest Minnesota and eastern South Dakota. The line is expected to increase the delivery of generation from this resource rich region by 700 MW. While the other lines are driven primarily by reliability needs, they will also facilitate future wind development by providing the necessary infrastructure underpinnings to support other wind focused transmission additions. Project Cost: The first group of four lines will cost between $1.4 billion and $1.7 billion (2007 dollars). Of this total, approximately $650 million is associated with the wind generation supporting Hampton Brookings County line. The projected in-service date is between 2013 and Project Status: Minnesota Certificate of Need applications have been filed with decisions expected in Minnesota route permit applications have been filed for two of the projects with the other two to be filed in 2009, as well as all necessary regulatory permits in North Dakota, South Dakota and Wisconsin. Project Investment Partners: Central Minnesota Municipal Power Agency, Dairyland Power Cooperative, Great River Energy, Minnesota Municipal Transmission Group, Minnesota Power, Minnesota Power Cooperative, Missouri River Energy Services, Otter Tail Power Company, Rochester Public Utilities, Southern Minnesota Municipal Power Agency, WPPI Energy and Xcel Energy. Project Benefits: The project will alleviate emerging electric reliability issues around the Upper Midwest and strengthen the regional transmission system. In addition, the Hampton Brookings County line will add capacity for an additional 700 MW of generation in Southwest Minnesota and eastern South Dakota. This project will also provide the foundation for future transmission projects from wind regions of western Minnesota and North and South Dakota. Edison Electric Institute 13

6 Transmission Projects Supporting Renewable Resources Minnesota Power Square Butte Electric Cooperative HVDC Line Purchase Project Description: Under an agreement, the company will purchase a HVDC transmission line from Square Butte Electric Cooperative for approximately $80 million. The 465 mile HVDC line with a total capacity of 500 MW, currently transports coal-generated energy from the Milton R. Young generating station in Center, North Dakota to a Minnesota Power substation in Hermantown, Minnesota. As part of the deal, Minnesota Power will gradually phase out the power it purchases from the Young station and replace it with wind generated electricity. Project Cost: Approximately $80 million. Project Status: The Minnesota Public Utilities Commission (MPUC) must grant prior approval for the purchase of the direct current (DC) line. Minnesota Power will also seek approval of related power purchase agreements and other regulatory treatment. FERC approval is necessary for Minnesota Power s purchase of the DC line and associated tariff changes. North Dakota Public Service Commission (NDPSC) approval is necessary to transfer three Route Permits and three Certificates of Corridor Compatibility issued to Square Butte for minor rerouting of the DC line in North Dakota. The transaction is subject to regulatory approvals and is anticipated to be completed in Project Investment Partners: None. Project Benefits: This project will provide access to 500 MW of wind capacity as Minnesota Power gradually phases out the power it purchases from the Young station to replace it with wind generated electricity. Minnesota Power will be reducing its carbon footprint by phasing out coal-based energy, while gaining access to vast renewable resources from wind rich North Dakota all by way of an existing transmission line. This project also provides Minnesota Power Cooperative the ability to put off the need for a new coal based generator to meet its demand. 14 Edison Electric Institute