Conference Call Summary (DOC)

					                              Conference Call Summary
            NorthWestern Energy Transmission Advisory Committee
                              October 7, 2008

Those participating in the conference call included:

   Name                               Organization
John Leland             NorthWestern Energy (NWE)
Kathleen Bauer          NWE
Jon Williamson          PPL Energy Plus
John Cummings           PPL Energy Plus
Rose Spear              PPL Energy Plus
Troy Dahlgren           Southern Montana
Gerald Mueller          Consensus Associates
Don Quander             Large Industrials

Standards of Conduct & Anti-Trust Policy
Kathleen Bauer began the meeting by reviewing NWE’s standards of conduct and safeguards and
antitrust policy.

Call Purpose
John Leland stated that NWE must refile a revised Attachment K to its Open Access Transmission
Tariff (OATT) by October 15, 2008. Prior to this call, NWE had circulated to its TRANSAC
email list an October 3, 2008 revision of Attachment K. The purpose of this telephone conference
was to discuss comments by PPL Energy Plus on NWE’s draft Attachment K contained in Joel
Cook’s October 1, 2008 letter to Mike Cashell. A copy of the letter is available at:

PPL Energy Plus Comments
• Preparation of a Local Transmission Plan
  PPL Energy Plus commented that the October 3 draft did not explain the difference between
  Transmission Plan and the Transmission System Plan.
  John Leland agreed that references to the Local Transmission Plan and other labels including
  Transmission System Plan were confusing. All references should be to the Local Transmission
  Plan and Attachment K will be changed to this effect.
• Cost Allocation
  PPL Energy Plus had several comments regarding cost allocation including:
  - Attachment K does not adequately clarify, or define which projects fall into which
     categories and how local, sub-regional, and regional, cost allocation rules will be applied.
     John Leland stated that section 2.6.2 was intended to define the project categories. There
     are three “buckets” into which potential projects fall, network additions via the Local
     Transmission Plan, generation interconnections via FERC generation interconnection
     process, and other economic or congestion projects not covered by the OATT (including

October 7, 2008 NWE TRANSAC Phone Conference Summary                                     Page 1
         local and subregional/regional projects). Additional language may be added to Attachment
         K to provide examples of the projects that fall into the three buckets.
     -   Attachment K does not adequately clarify, or define how costs will be allocated, including
         to participants in a transmission upgrade project and nonparticipants who will benefit
         from such upgrades to the network.
     -   Attachment K does not adequately clarify upfront the cost certainty required to encourage
         transmission investment needed for reliability and economic purposes.
     -   Attachment K does not adequately clarify how costs and associated transmission rights for
         new local projects that fall outside the OATT compared to projects that are within the
         current OATT will be allocated between the requestor and other customers.
     -   Attachment K does not adequately clarify how costs for projects undertaken for economic
         relief or to relieve congestion will be determined or allocated between the requestor and
         those customers who benefit.

John Leland stated that cost allocation principles are set out in section 2.6.4. Additional detail is
provided in a document entitled, “NWE Local Cost Allocation Methodology Projects Outside
OATT’ which is included in NWE Business Practices. This document is posted on the NWE Oasis
tside_OATT_effective_5-14-08.doc. The only way to define a project’s benefits is to analyze power
flows with and without the project and identify any mitigation that would be required. To charge
native customers for a transmission project, NWE must be able to demonstrate the benefits to the
Montana Public Service Commission (MPSC).

  Comment - Any generator on the NWE system, even if it participated in an open season, would
  require a network upgrade to reach the open season point of entry.
  Response - I don’t agree that all network connections would create benefit for the system.
  Network additions will trigger a study to determine if a generator can be accepted into the system
  without mitigation. We cannot hold transmission capacity available for a network or point to
  point customer.

  Comment - Techniques exist to trace power flows. Are you proposing to adopt these techniques
  into your Attachment K?
  Answer - The tracing techniques are dependent on load and dispatch patterns that change, so we
  are not proposing to use them for cost allocation.

  Comment - In the end, you have one plan and one system/network. All components must come
  together electronically and costs must be allocated among them.
  Response - All system additions will be coordinated with the Local Transmission Plan. When
  additions are included in the Western Electricity Coordinating Council (WECC) base case, they
  are added to the Local Transmission Plan. The results of economic studies, such as the ongoing
  wind cases, are folded into the Local Transmission Plan in the next year.

  Question - When a new project is included into the Local Transmission Plan, are native
  customers responsible for funding it?
  Answer - Projects are included in native customer rates upon approval by the MPSC. The
  Business Plan includes detail on application of NWE’s cost allocation principles.

  August 21, 2008 NWE TRANSAC Meeting Summary                                              Page 2
Question - How do you determine the system reliability component of proposed projects?
Answer - While reliability increases can be determined, allocating their costs is hard.

Question - Does section preclude a second look to identify benefits?
Answer - No, it would not preclude a second look.

Question - Can costs be reduced by the benefits that others would receive?
Answer - Yes. See the second bullet in the reference in section, the Local Cost Allocation
Methodology Projects Outside OATT.

• Economic Planning Studies
PPL Energy Plus commented that Attachment K does not clarify the methodology that NWE will
use to conduct cluster or economic studies, what common transmission problems will be included
and/or excluded, and which regions/sub-regions/systems will apply.
John Leland stated that additional language has been added to section 2.7.4 to address this

• Dispute Resolution
PPL Energy Plus commented that Attachment K does not adequately preserve a party’s Section
206 rights as required by FERC.
John Leland responded that NWE is aware that nothing in Attachment K can affect a party’s 206
rights. Section 2.8.5 states this point.

• Business Practices
PPL Energy Plus commented that NWE has not adequately clarified how applicable Business
Practices will be linked in the Attachment K document, or included in its OATT.
Kathleen Bauer stated that NWE has created and posted on its OASIS a document entitled,
“Attachment K Business Practice Links”. It contains links to current and past documents included
in the Business Practices.

Comment - This document appears to be helpful.

Question - What is NWE’s conclusion about the legal status of its Business Planning Document?
Answer - I have been told two stories by the staff of the Federal Energy Regulatory Commission
(FERC). One story is that if the Business Planning Document is linked to Attachment K, then it is
legally binding since we must follow our Business Practices. The other, from the FERC Order, is
that we needed to add some more details in Attachment K, itself. I don’t know what the line
between the two approaches is.

Comment - NWE is at a new frontier. It is running a transmission system when it does not own
the generation attached to it. To understand Attachment K, we need a detailed understanding of
the Business Planning Document. Specific links between Attachment K and sections of the
Business Planning Document would be helpful.
Response - We will try to include specific links in the language of Attachment K.

August 21, 2008 NWE TRANSAC Meeting Summary                                               Page 3
Comment - We do not believe that the Business Planning Document is legally enforceable as is
Attachment K. The former is more fluid and can be changed without using the process required
to change Attachment K. We ask that details be included directly in Attachment K rather than
included by reference to the Business Planning Document.
Response - I have to rely on our legal department to decide what must be in Attachment K and
what can be included via reference to the Business Planning Document. Members of the Northern
Tier Transmission Group (NTTG) did disagree about this, which prompted some of them to travel
to FERC offices to discuss this with FERC staff. We were told that the Attachment K was to be a
legally binding document and that the more detailed process documents should be in Business
Practices. Some want to include details in Attachment K. I was in this group. Others want to
include only the level of detail legally required.

• TRANSAC Membership
PPL Energy Plus commented that it is concerned that NWE has not actively solicited and
encouraged involvement of all stakeholder groups in the TRANSAC process.
Kathleen Bauer explained the methods that NWE has and continues to use to invite all stakeholder
groups to participate in TRANSAC. She noted that NWE cannot compel participation.

Comment - We are not criticizing your past efforts. We ask that you continue reaching out to all
of the stakeholder groups and encourage their participation in TRANSAC.

Comment - NWE needs participation by its system operator and load serving groups.
Response - We do have their input. Data are shared between these groups. We have to respect
FERC mandated MOD standards.

Comment - You could send out information about TRANSAC and invitations to participate in it in
the data requests which you send to your customers.
Response - This is a good idea, and we will look into doing so.

Comment - If system operators are looking at the Local Transmission Plan, you will get a
different perspective on reliability than provided by generators or planners. You could have a
panel of operators score the Local Transmission Plan.

Question - Does any group look at the four types of projects, network additions, generation
interconnects, other projects not included in the OATT, and regional/subregional projects?
Answer - TRANSAC comes the closest to considering them all through the Local Transmission
Plan. All four project types become a part of the Local Transmission Plan via the WECC base

Comment - 90% of the transmission studies are not addressed by TRANSAC because they are
generation interconnect studies.
Response - TRANSAC does consider economic studies and local load service.

Comment – TRANSAC is not a part of the generation interconnection process.
Response - FERC created the separate processes.

Question - Will you share with us the revised draft of Attachment K before you file it?

August 21, 2008 NWE TRANSAC Meeting Summary                                               Page 4
Answer - I may be able to do so, but I will not have time to incorporate additional comments on
the revised draft.

Committee members provide advice to NWE as individual professionals; the advice they provide
does not bind the agencies or organizations that the members serve.

August 21, 2008 NWE TRANSAC Meeting Summary                                              Page 5

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