ITP10 Fuel Cost Determination

April 19, 2011ESWG Teleconference

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Team & Purpose

• Team of stakeholders formed during the March 28, 2011 ESWG meeting to determine fuel costs for use in the 2011 ITP10.– Bennie Weeks (Xcel Energy)

– Paul Dietz (Westar Energy)

– David Ried (Omaha Public Power District)

• Determining reasonable costs in 2022 for the primary fuels of interest: – Coal, Natural Gas, Uranium and Fuel Oil

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Meetings & Topics

• April 4th

– Decided on uranium & fuel oil prices in 2022

– Discussed methodologies behind the values

• April 6th

– Decided coal & natural gas prices in 2022

– Discussed market indicators and their validity

• April 19th

– Presenting the groups results to the ESWG for review

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Uranium

• Price in 2022: $1.2104 / MMBtu– Applies to the whole eastern interconnect

– Held constant throughout the year

• Reasons behind this value:– Nuclear units will provide power despite slight changes

in the fuel cost

– Experience in economic studies that any transmission development will not change the output of the nuclear plants

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Fuel Oil

• Price in 2022:– Held constant

throughout the year

• Reasons behind these values:– Fracking for gas & liquids has increased domestic oil

production and the price of mid-continent oil prices

– Baseline of Kansas City Rack Rate for crude in 2022

– Transportation cost is included

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Class Price $/MMBtu

#2 Fuel Oil 23.74

#6 Fuel Oil 0.3% Sulphur 20.28

#6 Fuel Oil 0.7% Sulphur 17.64

#6 Fuel Oil 1.0% Sulphur 14.43

#6 Fuel Oil 2.0% Sulphur 14.37

Coal

• Price in 2022: $1.20 / MMBtu– Powder River Basin as primary SPP source

– Held constant throughout the year

• Reasons behind this value:– Value matches expectations and has the appropriate

relative difference from gas price

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Coal Prices in the Eastern Interconnect

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• Importance:– Appalachian coal

competitive with gas

– Influences propensity for exports out of SPP

• Reasons for these values:– Based upon current

NYMEX trades

– 2.4% growth and discount rates applied

Mine Mouth / Type Price $/MMBtu

Powder River Basin 1.20

North Lignite 1.33

Central Interconnect? 1.88

Rocky Mountain 1.99

Gulf Lignite 2.35

Illinois 2.82

Northern Appalachian 2.88

Southern Appalachian 3.23

Central Appalachian 4.45

Imported 2.27

Delivered Price of Coal

• Delivery to individual plants through the footprint is a unique cost

• Starting value provided by Ventyx

• Verified and modified by SPP based on geographic distance from mine

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Natural Gas

• Price in 2022: $8.24– Henry Hub, no transport cost

– Varies by month

• Reasons behind this value:– Average of NYMEX futures trading for 2022 as of Apr 1st

– A dependable price that is traded in markets everyday

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Delivered Price of Natural Gas

• Five SPP regions with unique natural gas price adjustments– Nebraska, $-0.20/MMBtu

– North SPP, $-0.36/MMBtu

– Central SPP, $-0.46/MMBtu

– West SPP, $-0.36/MMBtu

– South SPP, $-0.13/MMBtu

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Fuel Input Approval – Next Steps

• Finalize the reference fuel prices the ITP10 and begin benchmarking

• Next steps– Benchmarking of data inputs

– Determine gas prices in sensitivities

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