Why We Made the Decisions We Made and Where We Are in Building New Generation February 17, 2005 Prepared by Nilaksh Kothari, P.E. General Manager Manitowoc.

Why We Made the Decisions We Made

and

Where We Are in Building New Generation

February 17, 2005

Prepared by

Nilaksh Kothari, P.E.

General Manager

Manitowoc Public Utilities

February 17, 2005

2

OUTLINE OF PRESENTATION

OVERVIEW OF THE SYSTEM

THE PROBLEM/CONCERNS

POWER SUPPLY OPTIONS CONSIDERED

BENEFITS OF OWNING GENERATION

PROJECT STATUS

QUESTIONS

February 17, 2005

3

Facts in Brief-2003

Electric Utility Water Utility

Revenues $35,140,092 $4,748,813

Number of Customers

17,502 13,540

Units sold522,931 MWhs

2,917,478 kgals

Miles of Line/Mains

222.5 174.3

Average Net Investment

$54,242,542 $20,450,225

February 17, 2005

4

Sources of Capacity Sources of Capacity -122 MW Total in 2004

Steam Generating Plant 70.0 MW Diesel 11.0 MW Combustion Turbine (Gas) 21.0 MW Market Purchases 20.0 MW

Age of Facilities / Capacity Boiler #5 50 Years / 15.0 MW Boiler #6 46 Years / 17.5 MW Boiler #7 38 Years / 17.5 MW Boiler #8 12 Years / 21.0 MW Diesel 17 Years / 11.0 MW Combustion Turbine 3 Years

(Refurbished) /20.5 MW Steam Turbine Generator #2 67 Years Steam Turbine Generator #3 62 Years Steam Turbine Generator #4 51 Years Steam Turbine Generator #5 46 Years Steam Turbine Generator #6 38 Years

February 17, 2005

5

Sources of Energy

Sources of Energy – 2003 MPU Generation 292,133 MWH (55%)

– Steam 291,070– Natural Gas 36– Diesel 1,027

Market Purchases 242,392 MWH (45%)– WPPI 91,149– WPS 148,633 – WE Energies 2,588– Alliant 22

Purchased vs. Produced Energy (MWH): Purchased / Generated

2002 266,573 / 293,477 48/52 2001 292,769 / 264,189 53/47 2000 286,502 / 294,157 49/51 1999 302,768 / 255,168 54/46

February 17, 2005

6

THE PROBLEM

MPU System Demand vs. Supply

60.0

80.0

100.0

120.0

140.0

160.0

180.019

86

1990

1994

1998

2002

2006

2010

2014

2018

Year

MW

s

Total System Demand Total Supply

ProjectedHistorical

February 17, 2005

7

Concerns

Age of the existing facilities Boiler and generators > 50 years as compared to expected

life of 40-50 years Increased down time of equipment for maintenance

Boiler #5 Environmental concerns- notice of violation from DNR Requires special fuel, and is relatively expensive to

operate

Transmission constraints limit import capability Regional and Statewide Interconnect through the Shoto Substation limited to 55

MW (summer)

Wholesale purchased capacity not reasonably available MPU’s average cost of generation is higher than the

cost of purchased power

February 17, 2005

8

Energy Production Costs - Existing

Equipment Operating Cost

$20.78 $23.54 $23.54$32.08

$54.21$60.38

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

Boiler 8 Boiler 6 Boiler 7 Boiler 5 RecipGenerator

CombustionTurbine

Var

iab

le O

per

atin

g C

ost (

$/M

WH

)

Weighted Average Generation Cost = $34.94

2001 Purchased Power Cost = $30.93

February 17, 2005

9

Power Supply Options Considered (2000-2002)

Existing Generation Resources

1. MPU Steam Plant Improvements

2. MPU Steam Plant Package Boiler

3. MPU Peakers

Capacity and Energy Proposed to MPU

4. McCartin Group Manitowoc steam plant

5. Dominion Evantage peakers

6. Dynegy

7. Xcel Energy

8. Dairyland Cooperative

9. WE Energies

10. Capacity and Energy Proposals to GLU

Potential Lease Options11. Edison Mission

12. FPLE/Tenaska

13. Dominion Thermal

Potential Self Build Options14. 34 MW combustion

turbine(CT)

15. 80 MW combustion turbine(CT)

16. 80 MW combined-cycle unit

17. MPU Plant Expansion

18. Other Independent Power Producers

February 17, 2005

10

Factors Considered in Evaluation of Options

Demand and energy forecast Assessment of existing facilities Management/diversification of power supply portfolio Capital, operating and maintenance costs Minimize MPU’s generation costs/competitive electric rates Maximize use of existing site Financing feasibility Account for uncertainties/trends

Retail deregulation Environmental regulations Transmission constraints Role of Regional Transmission Organizations Wholesale market transition

February 17, 2005

11

0102030405060708090

100

$ per

Meg

awat

t-hou

r

Boiler 9 Boiler 8 Boiler 6 Boiler 7 Boiler 5 Recip C.T.

Average Purchased Power Cost (2003 $) = $38.97

Average cost of generation (2006 $) = $24.73

Projected Energy Cost Saving

February 17, 2005

12

The 63.3 MW expansion at the existing site results in the lowest rate impact to MPU’s customers of all alternatives

Reduces air emissions per megawatt produced by one-third

Utilizes existing CFB technology (same as Boiler 8): With Boiler 8, provides all of MPU’s baseload energy

requirements at an average variable cost of $15-18 per MWH Like Boiler 8, burns a wide range of fuels allowing more

options to stabilize operating costs Minimizes reliance on wholesale electricity markets that

experience price volatility due to forces outside MPU’s control

Removes reliance on transmission system for power imports

Keeps money from MPU’s ratepayers in Manitowoc Significantly increases MPU’s payment in lieu of taxes Maintains jobs in Manitowoc and provides infrastructure

for economic development

Benefits of Power Plant Expansion

PROJECT STATUS

Power Plant prior to demolition (Looking South)February 2004

Foundation for Boiler Building in progressApril 2004

Steel erection of Boiler BuildingJuly 2004

Boiler and Turbine Building (Looking Southeast)January 2005

Boiler Building(Looking

Northwest)January 2005

Turbine Building Operating DeckTurbine Foundation Preps

January 2005

QUESTIONS