January 2019

1. Presentation by Sharon K. Segner Vice President www.lspower.com Contact: ssegner@lspower.com January 2019

2. Project Portfolio Extensive development and operating experience across multiple regions, markets and technologies

3. Commissioner LaFleur’s Concurrence on FERC’s Denial of PSE&G Complaint on Artificial Island (June 2015) • “Order No. 1000’s competitive solicitation processes – and in some cases, the mere prospect of competitive solicitation processes – have already led to a host of innovative rate structures and cost containment proposals that, if properly designed, could provide significant benefits for customers. I believe that these efforts should be encouraged, both by the Commission and in the regional transmission planning processes, to foster a dynamic environment for new transmission development.”

4. Examples of FERC-Approved Tariffs and Policy on Cost Containment Proposals California ISO • All forms of “Binding Cost Containment Commitments” and “Binding Cost Control Measures” are considered in its evaluation process and selection reports specifically including binding capital cost caps, ROE and incentive proposals, and capital equity structures SPP • From SPP Tariff: “Criteria considered in this evaluation category shall include, but not be limited to: estimated total cost of project, financing costs, FERC incentives, revenue requirements, lifetime cost of project to customers, ROE,…, cost certainty guarantee.” (SPP, Attachment Y, Section III.2(f)(iii)(4)) MISO • ROE and annual revenue requirements are part of evaluation process (MISO, Attachment FF, 35.0.0(E)(3))

5. Competition Delivering Ratepayer Benefits • Incentive to Reduce Project Cost • Technical and Commercial Innovation • Cost Containment (Even With Lower Cost) Lowest capital cost with cap identified by SPP, however this bid was not selected

6. Recent MISO Window: Hartsburg- Sabine Bid (From MISO Selection Report) • 11 out of 12 bids bid some form of a capital cost cap   • 4 out of 12 bids forego AFUDC • 9 out of 12 bids forego CWIP • 4 out of 12 bids took routing change risk in their capital cost cap • Consistent with other Order 1000 windows, the capped ROE bids for the winners • came in around 9.8 percent (with a range of ROE caps from 9.75 percent to 10.7 percent) • 11 out of 12 bids provided a capital structure guarantee • 7 out of 12 bids bid an O&M cap (for 5, 10 or 40 year durations) • 5 out of 12 bid an Annual Revenue Requirement Cap (for 10 or 40 year durations)

7. Competition Brings Commercial Innovation • Overall shift of cost risk from ratepayers to developer occurring in Order No. 1000 bids • Order No. 1000 Market moving to cost containment bids 10 of 11 Duff-Coleman Bids (summary table below)

8. Brattle Group Study on Results of Order No. 1000 • U.S. transmission investments have grown from $2 billion per year in the 1990s to over $20 billion per year in the last five years, 85% of which is located in ISO/RTO regions. • Five years after FERC Order No. 1000 mandated competition in regional transmission planning, an estimated 98% of ISO/RTO transmission investments are still made outside competitive planning processes. • ISO/RTO-planned transmission projects not subject to competition have experienced cost-escalations, with final project costs (including inflation) exceeding the projects’ initial cost estimates by 34% on average. • Winning bids of competitive transmission projects have been priced on average 40% below initial project cost estimates and have been accompanied with cost caps or other cost-control mechanisms. • If the scope of competition could be expanded from 2% to 33% of total transmission investments, estimated customer benefits would be approximately $8 billion over just five years

9. PJM Examples: More Robust Cost Analysis Framework and Transparency Would Have Been Useful in Past PJM Windows

10. Lessons Learned: Practical Approaches and Templates to Analyzing Cost Containment Proposals Could Be Helpful • Cost Containment Analysis should be an Important Part of the Overall Selection Process. The selection process should properly value all types of cost containment. • Cost Containment Proposals should not be standardized, but rather, the templates used to evaluate Cost Containment Proposals could be developed • Cost Estimate vs. Cost Cap Evaluation • ROE Evaluation • Risk Adjustment of Non-Capped Cost Estimates Compared to Cost Caps • Legal Language Surrounding Cost Caps • Revenue Requirement Caps vs. Construction Cost Caps • Stakeholder process could develop and/or review and approve the Analytical Framework Templates for the Cost Containment Analysis • Cost Cap Policy and Process Underway in PJM and NYISO in 2019

11. Highlights of LS Power / DC Office of People’s Counsel’s PJM Main Motion • Proposed PJM Operating Agreement changes were endorsed in May MRC Vote (3.79). 84% Support of Members Committee. • Operating Agreement changes to be filed at FERC in Mid-2019 • PJM, working with Market Monitor, will develop templates. Templates go through stakeholder approval process in mid-2019. • Adds PJM Operating Agreement language that the quality and effectiveness of any voluntarily-submitted binding cost containment proposals related to construction cost caps (either in whole or in part), project total return on equity (including incentive adders), and/or capital structure shall be considered by PJM in the evaluation process. • Caps on O&M costs will not be part of the selection process • These additional factors are in addition to current PJM OA selection factors of: • The extent to which the project addresses and solves the posted violation, system condition or economic constraint; • The benefit/cost ratio of the market efficiency project; • The other secondary benefits associated with the project, including system reliability, operational performance, economic efficiency issues, or public policy drivers; • The ability to timely complete the project and project development feasibility; and • Other factors such as cost-effectiveness.

12. Highlights of LS Power / DC Office of People’s Counsel’s PJM Main Motion • Adds PJM Operating Agreement language that the Office of Interconnection shall determine for each project finalist proposal, the comparative risks to be to borne by ratepayers as a result of the proposal’s binding cost containment proposal or the use of non-binding cost estimates. • Adds PJM Operating Agreement language that the materials provided to the TEAC shall describe in a clear and transparent manner, the method by which the Office of Interconnection scrutinized the cost aspects of each finalist proposal, including any binding cost commitments. • Adds PJM Operating Agreement language that PJM is not making a determination of just and reasonable rates in its evaluation, and no party is waiving any of its respective Federal Power Act 205 or 206 rights through process.