Discussion of Transmission Cost Allocation OSC Meeting June

Discussion of Transmission Cost Allocation OSC Meeting June 20, 2007 1/3/2022 1

FERC Order 890 - Transmission Cost Allocation • Does not modify the existing process for which projects to be built by a single TO would be billed under its existing rate structures • Applies only to regional projects that do not ft under existing structures. • Each regional transmission planning process can develop its own cost allocation solution 1/3/2022 2

FERC Order 890 - Transmission Cost Allocation Commission's Three General Principles are: 1. Fairly assign costs to those who caused the problem as well as to those who will benefit from the solution. 2. Provide adequate incentives to the Transmission Providers to construct. 3. Generally supported by the states and participants across the planning region. 1/3/2022 3

Scope of Project - Discuss Purpose and Allocation Philosophy Base Reliability Project Transmission facilities required for maintaining system reliability – Transmission Owner Responsibility Economic Enhancement Project Transmission facilities for improving economic power transfers – Allocated to Beneficiaries 1/3/2022 4

Generation Interconnection Project Transmission facilities required to reliably connect a new generating plant to the transmission network – Developer Attachment Facility Requirements • Facilities Required for Direct Connection • Costs Allocated to Developer • Developer receives Transmission Service Credits – Network Upgrade Requirements • Network Facilities Required to Accommodate Project • Costs Allocated On A “But For” Basis • Cost Allocation Among Multiple Developers If They Collectively Cause the Need For A Network Upgrade • Developer receives Transmission Service Credits 1/3/2022 5

Scope of Project - Discuss Geographic Nature • "Local" Project (Duke or Progress) • NCTPC "Sub-regional" Project (NC Participants) • SERC "Regional" Project (NC Participants and at least one other SERC TO) • "Super-regional" Project (Multiple SERC TOs and other neighboring TOs) 1/3/2022 6

Scope of Project - Discuss Number of TO Systems and Voltage Level • Single TO Project • Two TOs - Tie Line Project • In / Out / Through - Single TO Project • Through Two (or more) TOs Project Regional Transmission • Voltage Level - 230 kv and above? 1/3/2022 7

Discuss 10 Different Scenarios 1. Reliability Project in a single TO service territory 2. Reliability Project between TOs service territories (new tie line) 3. Reliability Project into or out of a TOs service territory from a neighboring system 4. Reliability Project from a neighboring system through a TOs service territory into a neighboring system 5. Reliability Project from a neighboring system through both TOs service territories into a neighboring system 1/3/2022 8

Discuss 10 Different Scenarios - Continued 6. Economic Enhancement Project in a single TO service territory 7. Economic Enhancement Project between TOs service territories (new tie line) 8. Economic Enhancement Project into or out of a TOs service territory from a neighboring system 9. Economic Enhancement Project from a neighboring system through a TOs service territory into a neighboring system 10. Economic Enhancement Project from a neighboring system through both TOs service territories into a neighboring system 1/3/2022 9

Scenario # 1 - Transmission Reliability Project in a single TO service territory DUKE PROGRESS B A D C Cost Allocation to those that caused the problem - Reliability projects to be built by a single TO would be billed under its existing rate structures 1/3/2022 10

Scenario # 2 - Transmission Reliability Project between TOs service territories (new tie line) DUKE PROGRESS D A Cost Allocation to those that caused the problem - Reliability projects to be built between Duke and Progress could be based on the relative contribution to criteria violation. 1/3/2022 11

Scenario # 3 - Transmission Reliability Project into or out of a TOs service territory from a neighboring system DUKE PROGRESS D A Cost Allocation to those that caused the problem - Reliability projects to be built between Duke or Progress and a neighboring TO system allocation could be based on the relative contribution to criteria violation. 1/3/2022 12

Scenario # 4 - Transmission Reliability Project from a neighboring system through a TOs service territory into a neighboring system territory from a neighboring system DUKE PROGRESS Cost Allocation to those that caused the problem - Reliability projects to be built through Duke 'or' Progress and between two neighboring TOs systems - allocation could be based on the relative contribution to criteria violation. 1/3/2022 13

Scenario # 5 - Transmission Reliability Project from a neighboring system through both TOs service territories into a neighboring system DUKE PROGRESS Cost Allocation to those that caused the problem - Reliability projects to be built through Duke 'and' Progress and between two neighboring TOs systems - allocation could be based on the relative contribution to criteria violation. 1/3/2022 14

Scenario # 6 - Transmission Economic Enhancement Project in a single TO service territory DUKE PROGRESS B A D C Cost Allocation to those that benefit from the solution - Economic Enhancement Projects to be built by a single TO could be allocated among all the LSE beneficiaries whether internal or external to the TOs service territory. 1/3/2022 15

Scenario # 7 - Transmission Economic Enhancement Project between TOs service territories (new tie line) DUKE PROGRESS D A Cost Allocation to those that benefit from the solution - Economic Enhancement Projects to be built between Duke and Progress could be allocated among all the LSE beneficiaries whether internal or external to the TOs service territory. 1/3/2022 16

Scenario # 8 - Transmission Economic Enhancement Project into or out of a TOs service territory from a neighboring system DUKE PROGRESS D A Cost Allocation to those that benefit from the solution - Economic Enhancement Projects to be built between Duke or Progress and a neighboring TO system could be allocated among all the LSE beneficiaries whether internal or external to the TOs service territory. 1/3/2022 17

Scenario # 9 - Transmission Economic Enhancement Project from a neighboring system through a TOs service territory into a neighboring system DUKE PROGRESS Cost Allocation to those that benefit from the solution - Economic Enhancement Projects to be built through Duke 'or' Progress and between two neighboring TOs systems could be allocated among all the LSE beneficiaries whether internal or external to the TOs service territory. 1/3/2022 18

Scenario # 10 - Transmission Economic Enhancement Project from a neighboring system through both TOs service territories into a neighboring system DUKE PROGRESS Cost Allocation to those that benefit from the solution - Economic Enhancement Projects to be built through Duke 'and' Progress and between two neighboring TOs systems could be allocated among all the LSE beneficiaries whether internal or external to the TOs service territory. 1/3/2022 19

Discuss Other Cost Allocation Related Issues 1. Transmission Project - lumpy solutions • • 2. Translating allocation philosophy into results • • 3. How is the reliability analysis performed? How is the economic analysis performed? Cost Allocation with neighboring systems • 4. Single regional solution versus different solution with each neighbor Capital contributions by entities other than the TOs • 5. Who pays? Who gets to use? Under what circumstances could this occur? Other Issues? 1/3/2022 20

NEXT STEPS ACTION ITEMS SCHEDULE 1/3/2022 21