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SU FERC Open Solicitation

Process

Informational WebinarApril 22, 2016

11 am – 1 pm CDT

Power Through Ideas

SU FERC, LLC

Disclaimer

Energy Strategies 2

The sole purpose of this Informational Webinar is to assist prospective Users in deciding whether to proceed with

submitting a proposal to acquire transmission capacity from SU FERC, L.L.C. (“SU FERC”) on the Southline

Transmission Project (the “Transaction”) in SU FERC’s open solicitation process.

This Informational Webinar may not be reproduced or used, in whole or in part, for any purpose other than evaluating a

potential Transaction.

SU FERC is acting solely as principal and not as advisor or fiduciary, and nothing contained in this Informational

Webinar has been endorsed by Energy Strategies, LLC (“Energy Strategies”). Users should not construe the contents

of this Informational Webinar as legal, tax, investment or other advice. Each User is expected to conduct its own

evaluation as it relates to a potential Transaction.

Neither SU FERC nor Energy Strategies guarantees the accuracy or completeness of the information set forth in this

Informational Webinar, and nothing shall imply that the information contained in this Informational Webinar is correct as

of any time subsequent to the date the Southline Transmission Project open solicitation process was initiated. SU

FERC and Energy Strategies reserve the right to modify or update the information contained in this Informational

Webinar, but are under no obligation to do so.

Certain assumptions about transmission topography, costs, pricing, and related facts were made in the development

and implementation of the Market Feasibility Tool discussed in this Informational Webinar. These assumptions may or

may not reflect the User’s own experience, costs and benefits. The User should perform its own independent review of

any potential Transaction’s costs and benefits.

Open Solicitation Process Summary

• Open Solicitation allows parties to indicate

interest in obtaining transmission capacity rights

in the Southline Transmission Project

• Goal is to identify potential transmission

customers with whom SU FERC will engage in

bilateral negotiations

• Process is designed to be fair, transparent, and

not unduly discriminatory or preferential

Energy Strategies3

Today’s Webinar Guidelines

• Length: 2 hours

• Webinar will be recorded and posted to website

• Participant lines will be muted for duration of webinar

• Participation is anonymous to other users

• Written questions may be submitted via webinar or to

[email protected] during the session

– Responses to questions may be provided during Q&A session at the

end of the webinar

– Questions not addressed live on the webinar will be compiled into FAQ

document and posted to www.southline-os.com. Posting of the FAQ

document will be noticed to registered participants via email and

announcement on the website.

Energy Strategies 4

mailto:[email protected]

http://www.southline-os.com/

Agenda1. Southline Transmission Project Overview

2. Project Value Proposition

3. Open Solicitation Process

4. Question and Answer Session

Energy Strategies 5

Introductions• SU FERC, LLC

– Affiliate of Sharyland Utilities, L.P., a Texas-based electric utility headquartered

in Dallas, Texas

– Privately owned by Hunter L. Hunt and other members of the family of Ray L.

Hunt

– Granted negotiated rate authority by FERC and will provide service under a

FERC-approved Open Access Transmission Tariff for Project capacity rights

obtained from Southline Transmission, LLC

• Southline Transmission, LLC

– Project sponsor and subsidiary of Hunt Power, who develops and invests in

entrepreneurial electric transmission opportunities

– Southline Transmission, LLC is a passive investment entity that will hold project

assets and rights, and will lease them to SU FERC, L.L.C.

– Black Forest Partners, LP originated the Project and serves as Project Manager

for Southline Transmission, LLC

• Energy Strategies, LLC

– Independent energy consulting firm founded in 1986, based out of Salt Lake

City, Utah, supporting SU FERC, LLC as solicitation manager

Energy Strategies 6

Southline Transmission is a subsidiary of Hunt Consolidated –

A Proven Energy Developer

• Founded in 1934, the Hunt Oil Company and Hunt Consolidated (a diversified holding

company managed by the Ray L. Hunt family) are actively engaged in energy and

infrastructure businesses throughout the world

• Hunt has a long history of entrepreneurial activity and a successful track record in

developing and constructing large complex projects, such as the Texas CREZ project

• Hunt has successfully partnered with large multinationals, international partners, and

governments, and has a presence in 14 countries around the world

Energy Strategies 7

SU FERC, L.L.C. is an affiliate of Sharyland Utilities, L.P. a Texas-

based electric utility

Energy Strategies 8

Transmission

► ~665 miles of transmission lines

► Transmission Operations Center

► Railroad DC Tie with Mexico

(300 MW)

Distribution

► ~12,300 miles of distribution lines

► ~53,000 electric delivery points

• Sharyland Utilities operates over $1 billion in assets and currently serves

approximately 53,000 customers in 29 counties throughout Texas.

Energy Strategies 9





Project Overview

• Two Segments, approximately

360 Miles

– New Build — 345kV double-circuit

Afton-Apache, 240 Miles

– Upgrade — 230kV double-circuit

Apache-Saguaro/Tortolita, 120 Miles

• Option for Improved Regional

Coordination

– Bi-directional capability

– Multiple interconnections to existing

& planned system

Energy Strategies 10

• Minimize Environmental Impacts

– Upgrade existing lines

– Follow existing corridors

– Minimize impacts to environmental

and cultural resources

• Meet Multiple Needs

– Improve Reliability

– Relieve Congestion

– Support Growth

– Facilitate Access to Renewable

Resources

Route Overview Map

11Energy Strategies

Key Project Milestones


2015

• Received FERC authorization to commence open solicitation

• Final Federal Environmental Impact Statement published

• Granted WECC Phase 3 Path Rating

2016-17

• Federal Records of Decision issued

• Conduct open solicitation, execute transmission service agreements

• Complete state processes & land rights

• First Construction Phase initiated

2018

• First Construction Phase complete

• Initial Operations begin

2019-20

• Construction complete

• Complete scope in service

Permitting Summary

• Bureau of Land Management and

Western, jointly led the NEPA

environmental review process

• Final Environmental Impact

Statement (FEIS) for the Project

on November 6, 2015

• BLM and Western issued their

respective Records of Decision

on the environmental process

in April, 2016

Agencies Participating in EISU.S. Army Corps of Engineers

Bureau of Reclamation

Department of Defense

Clearinghouse

U.S. Environmental Protection

Agency

Fort Huachuca Army Base

National Park Service

U.S. Forest Service (Coronado

National Forest)

U.S. Fish and Wildlife Service

Arizona Game and Fish

Department

Arizona State Land Department

New Mexico Department of Game

and Fish

New Mexico State Land Office

Cochise County, Arizona

Greenlee County, Arizona

Graham County, Arizona

City of Sierra Vista, Arizona

13Energy Strategies

• The Project expects to complete state permitting by late 2016. The Project will

then initiate acquisition of remaining land rights.

FEIS Agency Preferred Alternative

14Energy Strategies

FEIS Mileage Route Summary

15

• More than 85% of FEIS Agency Preferred Route Parallels or Upgrades

Existing Corridor

• Only 8 miles (2%) of FEIS Route is a New Corridor on Private Lands

Source: Southline FEIS

Mileage By Segment

New Build Segment BLM State Private Other Total

Parallel Existing 68 66 63 0.0 196

New Corridor 32 10 7.3 0.0 49

Total 99.7 76 70 0.0 246

Upgrade Segment BLM State Private Other Total

Upgrade Existing 0.6 52.8 62 4.2 119

New Corridor 0 0.6 1 0 2

Total 0.6 53.4 63 4.2 121

Total project BLM State Private Other Total

Upgrade/Parallel Existing 68 119 124 4 315

New Corridor 32 11 8 0 51

Total 100 129 133 4 367

Energy Strategies

Technical Summary

• Project team has actively participated with regional utilities in various transmission

planning forums since 2009

• The Project completed Phase 1 of the WECC Path Rating Process in March 2012,

completed Phase 2B in January 2013, and entered Phase 3 in March 2015

WECC Phase 3 Accepted Path Ratings

East-to-West: 1,037 MW Afton to Apache

East-to-West: 1,000 MW Apache to Saguaro/Tortolita

West-to-East: 430 MW Saguaro/Tortolita to Apache*

West-to-East: 971 MW Apache to Afton

*715 MW if Tucson-Oracle re-conductered

16Energy Strategies

Project Approach

Multi-purpose project enhances reliability and accesses both rich

renewables resources and cost-effective existing generation. Project

team has worked to maximize benefits with minimizing environmental

and economic costs


Maximize Benefits Minimize Costs

• Flexibility and “fit” into regional

system meet needs of broad

customer base

• Multi-purpose project accesses

renewables, enhances reliability,

and accesses cost-effective power

• Helps to facilitate full utilization of

existing transmission and

generation assets in Southwest

• Project right-sized for foreseeable

regional and market needs

• Use of existing transmission

infrastructure lowers new build

mileage which lowers economic

costs and environmental impacts

• Avoids “all or nothing” proposition

Project Drivers

• The Project has the potential to provide

value to parties through a number of

drivers, including:

– Reliability Benefits

– Market Access

– Renewable Procurement

– Integration of Renewable Generation


Reliability Benefits• Project’s Upgrade Segment would replace decades-old wood pole

H-frame systems whose deterioration poses reliability and

maintenance concerns


• The New Build Segment would

increase the limited transmission

connections between the southern

New Mexico/El Paso area and the

rest of the western United States

transmission grid.

• Hardens system in the event of

wildfires, storms, or other events

• Provides operations and

maintenance flexibility

• Increases ability to reliably meet

future load growth

Upgraded 230 kV tower along existing WAPA 115

kV line near Tucson

Market Access

• The Project will expand opportunities for local and regional utilities

to import cost-effective power from regional markets

• Utilities may be able to take advantage of low-cost electricity

“spilling” over to these market hubs as a result of California’s build-

out of solar resources and the accompanying over-generation


0.00

10.00

20.00

30.00

40.00

50.00

60.00

$/M

Wh

On-Peak Monthly Forward Power IndexSource: OTC Global Holdings via SNL

Mead Palo Verde

Renewable Procurement

• The project will provide increased transmission capacity

to both high quality wind and solar resources


Wind Resources, Southline and Potential Existing PathsWind & Solar Resources and Southline Transmission Project

Source: NREL WREZ and Southline LLC

Source: Southline LLC, NREL Wind Data

Integration of Renewable Generation• The project will help planned and existing gas generation in the

Southwest integrate more renewable resources

• NERC 2015 Long-Term Reliability Assessment: The Southwest

Reserve Sharing Group (SRSG) within WECC has an approximately

42% reserve margin for the 2016 summer peak season, versus the

NERC reference level of 16%


Source: Most recently approved IRPs

Planned Gas-fired Generation Additions (2016-2026)

Public Service Company of New Mexico 394 MW

El Paso Electric 825 MW

Tucson Electric Power 836 MW

Arizona Public Service 3,030 MW

Regional utilities are

planning to build at least

5,085 MW of new natural

gas-fired resources in the

next 10-years

Opportunities for Potential Customers

Customer TypeCapacity Direction

East-to-West West-to-East

Local (Southwest) Utilities

Enhanced reliability Access high quality renewable

resources Better utilize existing assets Facilitate regional coordination and

participation in markets

Enhanced reliability Access energy markets Facilitate regional coordination and

participation in regional markets

Generation Developers and Owners Deliver world class, low cost

renewables to high-value markets Access transmission constrained

customers

California Utilities

Access high quality and geographically diverse renewable resources

Renewable integration opportunities

Export over-generation and reduce renewable energy curtailment

Facilitate regional coordination and participation in regional markets

Power Marketers Provide packaged products (e.g.,

firmed/shaped) to markets Sell transmission service for future

California energy exports


All customer “types” are invited to participate in the Southline Open Solicitation. These categories of

potential customers are called out to demonstrate the value the project can provide.

Value Proposition:

Local (Southwest) Utilities• The Project will help local utilities get the most out of their existing

systems – mitigating the impacts of future reliability risks, improving

access to regional markets, and providing a means to cost

effectively achieve state and federal clean energy goals


UPGRADESEGMENTREPLACESAGINGINFRASTRUCTURE

NEARMAJORLOADCENTERS,STRENGTHENINGSYSTEM

NEWBUILDSEGMENTBI-DIRECTIONALUSAGEANDMULTIPLEONANDOFFRAMPSPROVIDESBENEFITSTHROUGHOUT

THEPROJECTCORRIDOR.PROJECTSIZECONSISTENTWITHEXISTINGSYSTEMAND

PLANNEDUPGRADES

Benefits Identified in Planning Studies

Value Proposition:

Local (Southwest) Utilities (cont.)


Mead

Palo

Verde

California’s over-generation could suppress

spot and forward power at key markets

Southline transmission capacity can serve

as a cost-effective means for eastern utilities

to access this market

West-to-east transmission rights on the

Project will allow local and regional

utilities to purchase cost-effective

energy, offsetting or deferring the need to

construct resources in their footprint to

meet growing loads

Value Proposition:

Generation Developers and Owners• The Project has several key competitive advantages that generation developers

should consider:

– Project provides access to world-class wind and solar resources

– The Project gives resource developers access to potential customers with whom they can seek PPAs

– Project is highly versatile and efficient


Source: NREL and NREL Wind Toolkit

Value Proposition: California Utilities


• Renewable resources from the Southwest may provide low procurement and

integration cost solutions to meet SB 350 requirements

• Initial SB 350 studies model solar and wind resources imported in CA, with

wind busbar costs at $21/MWh and capacity factors of 46%

Source: E3 and CAISO SB-350 Study

Value Proposition: California Utilities (cont.)

• Renewable resources sourced from New Mexico and southern Arizona have

decreased coincidence with the existing and planned renewable generation

already making up the bulk of California’s RPS portfolio


California Overgeneration Demonstration

Source: E3, “Western Interconnection Flexibility Assessment”

A diverse resource portfolio, relying on

renewable generation from areas (such as New Mexico)

that generate at times other than the mid-day peak, can help avoid or

mitigate the threat of over-generation.

Market Feasibility Tool – Overview & Key

Assumptions

• The tool was created to help demonstrate flexibility and utility of the line,

and to provide a quick cost analysis for a variety of “use” configurations

– Available on confidential portion of website; informational


Incorporates transmission rate

data from local or regional

Transmission Service Provider’s

(TSP’s) Open-Access Transmission

Tariffs (OATTs). Differentiates

between “wheel only” and “wheel

plus ancillary services”

Does not specifically account for

Available Transfer Capability

(ATC) for contract paths from the

generator to the Project and from

the Project to the identified market

hubs

Assumes that transmission

capacity is procured in an amount

equal to the total capacity of the

generation

Key Assumptions

Tool does not consider:

• Possibility that procured capacity may be sold as non-firm transmission when it is not being used by the

generator;

• Possibility that an entity may already own transmission rights on a required 3rd party system wheel

Market Feasibility Tool – Screen Shots

31Energy Strategies

Input Assumptions: User defines generation location and cost

attributes, selects transmission contract path to deliver to market

Review Results: Tool calculates costs ($/MWh) to deliver

generation to market hub; includes generation cost, third-party

wheels, and project service charges

User inputs project service charge(s) for capacity on

SU FERC portion of Southline Project

Map shows project and key transmission

Cost breakdown

• Case Study A: New Mexico Wind delivered to Palo

Verde

• Case Study B: Southwest solar delivered to regional

Utility

• Screen shots of the Market Feasibility Tool case studies

are available in the Appendix

• Transmission Wheel Rate Summary also included in

Appendix

Market Feasibility Tool – Live

Demonstration

Energy Strategies32

Open Solicitation Process Overview

• The Open Solicitation allows parties to express interest in obtaining

transmission capacity rights in the Project

• The goal of the process is to identify potential transmission

customers with whom SU FERC will engage in bilateral

negotiations


Segment East-to-West (MW) West-to-East (MW)

Afton to Apache 882 825

Apache to Saguaro/Tortolita 748 186

SU FERC’s Capacity Rights on Southline Transmission Project

Capacity rights are available in both directions, and

parties are not required to request transmission

capacity across entire length of line

Open Solicitation Process Schedule

March 31, 2016 Open Solicitation commences

April 22, 2016 Informational Webinar (11:00 am - 1:00 pm CDT)

June 30, 2016Open Solicitation window closes and Expression of Interest Forms are due

July 11, 2016 Parties identified for Bilateral Negotiations

July 12, 2016Begin Precedent Agreement discussions then initiate Transmission Service Agreement negotiations.

Energy Strategies35

All requests for capacity on the Project must be

submitted through the Open Solicitation window and

the Expression of Interest Form provided on the

solicitation website

Screening and Ranking Criteria

• Parties that are interested in obtaining capacity rights must register

and complete an Expression of Interest Form

– Executing a Confidentiality Agreement is not required

• Energy Strategies will review and screen all parties that submit an

Expression of Interest

• Customers that pass the initial screening are then ranked for the

purposes of phasing negotiations

• Screening criteria:

1. First mover status;

2. Creditworthiness;

3. Firm transmission service request for at least 10 years; and

4. Transmission service request for at least 50 MW of capacity (on any

segment, in either direction).

Energy Strategies36

Screening and Ranking Criteria (cont.)

• Interested parties that satisfy the screening criteria move into a pool

of qualified customers that will be ranked according to the following

criteria:

1. Price terms contained in the customer’s offer;

2. Level of creditworthiness (or financial strength);

3. Early commitment in the Project’s development cycle (i.e., first mover

status);

4. Project risk sharing through phased deposits or financial commitments

during the Project’s development cycle;

5. Ability of customer to assist with Project development needs, including

necessary siting approvals and government authorizations;

6. Longer term of service;

7. Larger capacity reservation; and

8. Ability to access the Project to deliver or receive power (e.g., proximity

of generation resource to the line; transmission queue position on

adjacent systems).Energy Strategies

37

Website and Communications

• The Open Solicitation website is the primary means of

communication during the process

– www.southline-os.com

• Changes or updates to the process or project will be posted to the

website, and online FAQ documents are updated to respond to

submitted questions

– Notifications will go out to those that have registered with website

• Website registration is required for:

– Expression of Interest Form

– “Ask a Question” page

– “Request a Meeting” page

– Accessing confidential information (after execution of mutual NDA)

Energy Strategies38


Website Overview

• Connect – Registered parties can submit questions to the solicitation manager (Energy

Strategies) and SU FERC. They can also request a meeting to discuss the Project. The

Expression of Interest Form is also submitted here. Parties need not execute Confidentiality

Agreements to express interest in obtaining capacity in the Project, although registration is

required.

• News and Announcements – New materials, updates, or other developments during the Open

Solicitation process will be available here. Parties that have registered will be notified via email

when new materials are posted.

• Calendar – List of the critical dates related to Open Solicitation process.

• Documents – Series of documents that describe the Open Solicitation process and the Project.

Includes public-facing FAQs. Also includes this Information Memo, which should be reviewed by

all interested parties that plan to participate in the process.

• Registration – Allows interested parties to ask questions, submit the Expression of Interest Form,

participate in the Informational Webinar, request a meeting, and receive email announcements

related to the Open Solicitation and the Project. Also facilitates the execution of a Confidentiality

Agreement, which would give the interested party access to the confidential portion of the website.

• Confidential – Contains documents that are not publicly available. This password protected

portion of website is only accessible if interested parties register and execute the Confidentiality

Agreement.


www.southline-os.com


Expression of Interest Form

• Expression of Interest Form is used to identify interested parties that would

like to engage in bilateral negotiations with SU FERC for transmission rights

on the Southline Transmission Project– Non-binding indication of interest

– Must be submitted through Open Solicitation website (www.southline-os.com) on the

“Connect” tab, or through email to [email protected]

– Interested parties must register through website before submitting form

– The form must be submitted by June 30, 2016

• Form will be collected and reviewed by Energy Strategies, and evaluated

against screening and ranking criteria.

• Form consists of five sections, all of which must be completed to constitute

a valid submission:– Part A: Contact Information

– Part B: Credit and Financial Information

– Part C: Transmission Request

– Part D: Bidder Value Proposition

– Part E: Certifications

Energy Strategies40



Expression of Interest Form (cont.)

41Energy Strategies

Expression of Interest Form (cont.)

42Energy Strategies

Additional Information and Contacts

Open Solicitation Website: www.southline-os.com

Project Website: www.southlinetransmissionproject.com

Energy Strategies43

Open Solicitation Contact: Keegan Moyer, [email protected], 801-355-4365


http://www.southlinetransmissionproject.com/


Questions and Answers

Thank You for Attending the Informational Webinar

Further questions may be submitted via email to [email protected] or

through the “Ask a Question” form on www.southline-os.com.



http://www.soutline-os.com/

APPENDIX

Additional Materials for Reference


Case Study A:

New Mexico Wind to

Palo Verde

Energy Strategies47

Case Study B:

New Mexico solar to

Southwestern Utility

Energy Strategies48

SB-350 Resource Assumptions

• Link to slides used in April 14, 2016

stakeholder meeting:

– https://www.caiso.com/Documents/PortfolioDe

velopment-DataInputs.pdf

• Cost and capacity factor values used to

populate Market Feasibility Tool in case

studies

Energy Strategies49

https://www.caiso.com/Documents/PortfolioDevelopment-DataInputs.pdf

WECC Transmission Capital Cost Tool

• Link to publically available tool:

– https://www.wecc.biz/Reliability/2014_TEPPC_Trans

CapCostCalculator.xlsx

• Used default IPP financing assumptions to

populate transmission service fee in case

studies

– Assumed $800 M project cost and 60/40 spit for New

Build and Upgrade Segments

– Varied subscription between 1000 MW and 1200 MW

Energy Strategies50

https://www.wecc.biz/Reliability/2014_TEPPC_TransCapCostCalculator.xlsx

2015 Achievements


Final EIS IssuedOctober 2015

FERC Granted

Declaratory Order

September 2015

WECC Phase 3 Accepted Path Rating

March 2015

Opportunities for Generation

Developers: RFP & IRP OverviewUtility RFP Size & Type

Southern California

Edison Co. (SCE)

Size not specified

For RFP

Arizona Public

Service Co. (APS)

400 – 600 MW

All sources

San Diego Gas and

Electric (SDG&E)

140 MW

Preferred resources

NV Energy 135 MW

Renewable energy

NV Energy 400 – 700 MW

Open resources


Utility IRP Highlights

Arizona Public

Service Co.

(APS)

Preliminary IRP shows a

supply-demand gap of more

than 5,000 MW at peak in

2032.

Tucson Electric

Power (TEP)


supply-demand gap in 2032

of 541 MW.

UNS Electric,

Inc. (UNS)


supply-demand gap in 2030

of 120 MW.

LADWP 2015 IRP Preferred Case

shows more than 4,000 MW

of renewable energy being

added by 2035.

Market Feasibility Tool – Transmission Wheel Rate

Summary


Transmission Service Provider Service TypeCapacity Costs

($/MW-year)Losses (%)

Arizona Public Service Wheel & Ancillary Services $38,807 2.50%

Arizona Public Service Wheel $36,130 2.50%

El Paso Electric Wheel & Ancillary Services $30,531 4.23%

El Paso Electric Wheel (internal) $29,091 4.23%

El Paso Electric Wheel (PV-WW external) $4,903 3.90%

El Paso Electric Wheel (PV-JOJOBA-KYRENE external) $11,243 3.90%

Public Service Company of New Mexico Wheel & Ancillary Services $35,896 3.50%

Public Service Company of New Mexico Wheel $30,980 3.50%

Salt River Project Wheel & Ancillary Services $21,780 3.24%

Salt River Project Wheel $21,780 3.24%

Southwest Transmission Cooperative Wheel & Ancillary Services $51,436 2.97%

Southwest Transmission Cooperative Wheel $33,780 2.97%

Tucson Electric Power Wheel & Ancillary Services $37,315 3.30%

Tucson Electric Power Wheel $29,535 3.30%

WALC (Intertie Project) Wheel & Ancillary Services $23,351 3.00%

WALC (Intertie Project) Wheel $21,412 3.00%

WALC (Parker Davis Project) Wheel & Ancillary Services $20,111 3.00%

WALC (Parker Davis Project) Wheel $18,172 3.00%

[1] Non-loss energy cost ($/MWh) of $0.80 are not shown.

Every TSP has different wheeling rates and rate structures. The rates included in this table were

taken from each TSP’s posted tariff rates and do not reflect any discounts or individual path

pricing that might be available via the Open Access Same-Time Information System.