MISO Response to Stakeholder Feedback on Benefit Metrics - LRTP Workshop Summary

1. MISO Response to Feedback LRTP Workshop –Mar 15, 2024: Avoided Capacity Cost Capacity Savings From Reduced Losses Reduced Transmission Outage Costs April 24, 2024

2. Purpose MISO’s response to stakeholder feedback on Avoided Capacity Cost (ACC), Capacity Savings from Reduced Losses (CSRL), Reduced Transmission Outage Costs (RTOC) Purpose & Key Takeaways Key Takeaways • MISO received feedback from the following entities: AEP, Environmental Sector, ITC, MS PSC, End Use Sector, TDU Sector • MISO appreciates the feedback and questions submitted by stakeholders and has revised the Capacity Savings from Losses metric to reflect adjustments in calculation method • MISO will proceed to adopt this revised approach and the existing methods for other metrics discussed at the March 15 Workshop 2

3. MISO response to stakeholder comments on proposed benefit metrics Stakeholder comments MISO response AEP –Supportive of multi-value approach and recommend 5 benefits that include reduction in PRM and capacity investments, adjusted production cost savings, savings from avoided reliability needs, net load payment savings, and wheeling revenues measured at the portfolio level MISO staff appreciates these comments and support of the LRTP process for the Tranche 2 portfolio. LRTP benefit metrics have been developed to capture value streams that are distinct and recognize broad sharing of benefits to customers in the MISO Midwest subregion. 3

4. MISO response to stakeholder comments on proposed benefit metrics Stakeholder comments MISO response Environmental –supportive of proposed methodologies that will produce sound estimates of benefits. Incremental transmission outage savings address the limitations of adjusted production cost savings metric that assume no outages beyond N-1 constraints. Regional backbone including 765kV lines will yield considerable and diverse economic benefits and expanding the list of benefit metrics and refining metrics will produce more meaningful results. MISO staff appreciates these comments and support of the LRTP process for the Tranche 2 portfolio. The inclusion of outage impacts better reflects actual system conditions that are not represented in the Congestion and Fuel Savings benefit metric, which captures the additional value transmission provides. 4

5. MISO response to stakeholder comments on proposed benefit metrics Stakeholder comments MISO response ITC –supports use of proposed metrics to capture all known benefits to identify and approve cost effective solutions. Production cost modeling is conservative and operational benefits are much higher than studies reflect. Reduced Transmission Outage Costs recognizes real impact of outages and approach is practical, effective way that will not result in double counting. MISO staff appreciates these comments and support of the LRTP process for the Tranche 2 portfolio. The inclusion of outage impacts better reflects actual system conditions that are not represented in the Congestion and Fuel Savings benefit metric, which captures the additional value transmission provides. One improvement might be to use the outage draw with the highest impact. Another improvement would be to review research on increasing frequency and severity of extreme weather events. 5

6. MISO response to stakeholder comments on proposed benefit metrics Stakeholder comments MISO response ITC –cont’d MISO staff appreciates these comments and support of the LRTP process for Tranche 2 portfolio. The Avoided Capacity Cost benefit metric relies on established analytical methods that assess the impact of transmission on reducing future capacity requirements. Supportive of Avoided Capacity Cost metric that leverages existing work streams and uses LOLE/PRM with EGEAS analysis to determine benefits that do not double count benefits of other metrics. The Capacity Savings from Reduced Losses metric captures incremental savings by examining the reduction in losses from the addition of new transmission that is not reflected in the Avoided Capacity Cost benefit metric. Supportive of including Capacity Savings from Reduced Losses that is simple/straightforward approach that does not double-count other benefits. 6

7. MISO response to stakeholder comments on proposed benefit metrics: RTOC Stakeholder comments MISO response MPSC –MISO’s proposed methodologies have highly uncertain statistical validity and doubtful value. Level of effort and resources dedicated to development of these methods that measure marginal benefits is concerning. MISO has not explained degree of confidence in benefit estimates and rely on simplified approaches/tools with know limited accuracy. MISO is confident in the robustness of the proposed metrics to capture the multiple types of benefits transmission can provide over its 40+ year in-service life. Specifically on the Reduced Transmission Outage Costs metric the proposed method builds off MISO’s current stakeholder vetted Adjusted Production Cost (APC) methodology by applying more realistic conditions that include transmission outage sample sets created from historical transmission outage data. Multiple transmission outage sets are randomly drawn, and results are averaged to produce a representative savings that account for impacts of transmission outages that may occur day-to-day in real-time operations. Reduced Transmission Outage Costs rely on multiple randomly drawn outage sets but MISO has not explained how many sets provide a statistically representative number to produce reliable estimate of savings MISO is testing how many outage sets are practical and necessary to produce and simulate. Initially, we are using 10 sets, which should adequately demonstrate the range and precision of measured values. 7

8. MISO response to stakeholder comments on proposed benefit metrics: ACC, CSRL Stakeholder comments MISO response MPSC cont’d - With Avoided Capacity Costs metric MISO has not addressed what impacts the simplified zonal representation has on the accuracy of the estimates. Furthermore, shortcomings of EGEAS to account for energy adequacy needs require addition of Flex units that may overwhelm capacity savings resulting from the smaller PRM LRTP is designed to provide transmission capacity to more broadly facilitate regional energy delivery and is not optimized specifically to improve zonal import/export capability. The simplified zonal constraint modeling does not consider the impact of LRTP transmission in relieving other transmission limitations within the zones and tends to produce a more conservative estimate of the improved transfer capability. Methodology for Capacity Savings from Reduced Losses relies on use of EGEAS to determine expansion plan which will likely underestimate the need for Flex units for energy adequacy negating the relatively small capacity cost savings The metrics methodology includes assessment of changing Flex resource requirements resulting from the incremental expansion, and which is factored into the calculation of Avoided Capacity Cost benefits. 8

9. MISO response to stakeholder comments on proposed benefit metrics: ACC Stakeholder comments MISO response End Use Sector –For Avoided Capacity Cost metric generation siting would be more localized with suitable technologies that avoid expensive upgrades. Each utility siting and generation mix would be maximized to their needs within the local resource zone as opposed to the MISO siting and generation mix associated with Future 2A and benefit calculations should be modified to reflect the more localized siting and generation mix optimized for each local resource zone. The Avoided Capacity Cost metric applies a methodology that produces a MISO-wide expansion model to assess costs of additional capacity and does not assign resources to particular utilities or zones. MISO Futures scenarios have been developed in collaboration with stakeholders and the Avoided Capacity Cost metric process and does not attempt produce alternate expansion and siting strategies that would otherwise occur without LRTP. 9

10. MISO response to Stakeholder comments on proposed benefit metrics: CSRL Stakeholder comments MISO response End Use Sector –Capacity Savings from Reduced Losses uses similar methodology to the Avoided Capacity metric that has same limitations with the reference case and it is not clear that this benefit is distinct. MISO must clearly demonstrate that this benefit is incremental and does not duplicate the other metric. The Avoided Capacity Cost metric uses a PRM adjustment that is the result of changes in LOLE, and assumes losses are same in both the reference and change case. Capacity Savings from Reduced Losses uses PRM adjustment as a way to represent the reduction in losses, which is not reflected in the Avoided Capacity Cost metric. 10

11. MISO response to Stakeholder comments on proposed benefit metrics: CSRL Stakeholder comments MISO response 1) Capacity Savings from Reduced Losses are savings in resource investment due to lower capacity requirements when losses are reduced by added transmission. The losses are calculated based on dispatch applied for the hour of highest capacity requirement represented by the relevant power flow case and do not depend on hourly dispatch reflected in the Congestion and Fuel Savings metric. TDU Sector –1) Capacity Savings from Reduced Losses will overestimate benefits because it fails to account for dispatch changes. It is better to estimate this benefit in the context of Congestion and Fuel Savings that accounts for dispatch differences. 2) MISO should more fully explain how flex capacity added to Future F2A is treated in alternate resource expansion (Avoided Capacity Cost benefit) 3) Avoided Capacity Cost is inconsistent with Congestion and Fuel Savings benefits due to use of different reference cases. 2) Energy adequacy needs are evaluated for the additional expansion without Tranche 2 to determine appropriate flex capacity needs and will be included in the Avoided Capacity Cost calculation to identify the capacity savings benefit. 3) For the Avoided Capacity Cost metric MISO is capturing the additional capacity that is needed to support the MISO Futures resource expansion absent the LRTP transmission. Whereas the Congestion and Fuel Savings benefit metric captures the value of the LRTP transmission that reflects resource expansion scenarios that have been developed though the Futures process. 11

12. Contact Information MISO LRTP Team: lrtp@misoenergy.org 12