Midwest Independent Transmission System Operator, Inc. Duke Energy Ohio, Inc. and Duke Energy Kentucky, Inc. Docket No. ER

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1 Lori A. Spence Deputy General Counsel Direct Dial: November 2, 2011 The Honorable Kimberly D. Bose Secretary Federal Energy Regulatory Commission 888 First Street, N.E. Washington, D.C Re: Midwest Independent Transmission System Operator, Inc. Duke Energy Ohio, Inc. and Duke Energy Kentucky, Inc. Docket No. ER Dear Secretary Bose: Pursuant to Section 205 of the Federal Power Act, 1 the Midwest Independent Transmission System Operator, Inc. ( MISO ), 2 the Midwest ISO Transmission Owners, 3 Duke Energy Ohio, Inc. ( DEO ) and Duke Energy Kentucky, Inc. ( DEK ) (collectively, Applicants ) jointly submit: (1) A new Schedule 38 (MTEP Project Cost Recovery for DEO and DEK) to the MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff ( MISO Tariff ); and (2) A revised Attachment GG (Network Upgrade Charge) to the MISO Tariff U.S.C. 824d (2006). MISO joins this filing as the administrator of its Open Access Transmission, Energy and Operating Reserve Markets Tariff, but reserves the right to comment or protest. The Midwest ISO Transmission Owners for this filing consist of: Ameren Services Company, as agent for Union Electric Company d/b/a Ameren Missouri, Ameren Illinois Company d/b/a Ameren Illinois and Ameren Transmission Company of Illinois; American Transmission Company LLC; City Water, Light & Power (Springfield, IL); Dairyland Power Cooperative; Great River Energy; Hoosier Energy Rural Electric Cooperative, Inc.; Indiana Municipal Power Agency; Indianapolis Power & Light Company; International Transmission Company d/b/a ITCTransmission; ITC Midwest LLC; Michigan Electric Transmission Company, LLC; Michigan Public Power Agency; MidAmerican Energy Company; Minnesota Power (and its subsidiary Superior Water, L&P); Montana-Dakota Utilities Co.; Northern Indiana Public Service Company; Northern States Power Company, a Minnesota corporation, and Northern States Power Company, a Wisconsin corporation, subsidiaries of Xcel Energy Inc.; Northwestern Wisconsin Electric Company; Otter Tail Power Company; Southern Illinois Power Cooperative; Southern Indiana Gas & Electric Company (d/b/a Vectren Energy Delivery of Indiana); Southern Minnesota Municipal Power Agency; Wabash Valley Power Association, Inc.; and Wolverine Power Supply Cooperative, Inc. Midwest Independent Mailing Address: Overnight Deliveries: Transmission System Operator, Inc. P. O. Box City Center Drive Carmel, IN Carmel, IN 46032

2 The Honorable Kimberly D. Bose November 2, 2011 Page 2 The purpose of this filing is to address the treatment of certain MTEP Projects, as defined and discussed below. The Applicants request an effective date of January 1, 2012 for this filing. I. BACKGROUND On October 21, 2010, the Commission approved DEO s and DEK s request to withdraw from MISO and join PJM Interconnection, L.L.C. ( PJM ). 4 DEO and DEK are on track to withdraw their facilities from MISO and integrate them into PJM, effective January 1, The Duke Realignment Order conditioned the Commission s approval on the submission of a separate filing addressing DEO s and DEK s obligations under Article Five, Section II.C of the MISO Transmission Owners Agreement regarding the construction of new facilities. 5 This submission is one of the filings intended to satisfy this condition. II. DESCRIPTION OF FILING A. New Schedule 38 New Schedule 38 addresses the treatment of certain MTEP Projects, specifically transmission projects previously identified in the MISO Transmission Expansion Plan ( MTEP ) for regional cost sharing and approved by the MISO Board of Directors prior to DEO s and DEK s January 1, 2012 withdrawal from MISO. 6 The MISO Board of Directors are scheduled to approve additional MTEP Projects during their December 8, 2011 meeting, in which case Schedule 38 provides that a filing may be made with the Commission to seek authorization to add the additional projects to the list of projects subject to Schedule 38. After DEO s and DEK s 4 Duke Energy Ohio, Inc. and Duke Energy Kentucky, Inc., 133 FERC 61,058 (2010) ( Duke Realignment Order ). 5 Id. at P On December 16, 2010 in Docket No. ER , the Commission issued an order accepting the allocation of costs of a new type of MTEP project Multi Value Projects ( MVPs ) in MISO. Midwest Independent Transmission System Operator, Inc., 133 FERC 61,221 (2010). While the December 16, 2010 order is subject to further compliance filings, rehearing requests and possible appellate review, MISO already has approved MVPs. Schedule 38 does not address the recovery of MVP costs, because the term MTEP Projects as used in Schedule 38 and herein is defined to exclude MVP projects. The recovery of MVP costs, if any, from the zones of Transmission Owners that withdraw from MISO will be addressed in a future filing, and the participation of DEO and DEK in this filing is not a concession that any such recovery is appropriate, and is without prejudice to any arguments that DEO or DEK may make in response to any filing seeking such recovery. Per Appendix 1 to Schedule 38, [t]he costs associated with MTEP Projects (as defined in this Schedule 38) are allocated to each MISO Transmission Pricing Zone in accordance with the applicable provisions of Sections II and III of Attachment FF of the MISO Tariff. In accordance with MISO policy, the allocations for these MTEP Projects (as defined in this Schedule 38) become fixed percentages at the time of the project s approval by the MISO Board of Directors, and do not change over time. This language is intended to specify that the only Attachment FF provisions being referenced in Schedule 38 and its Appendix are those that apply to MTEP Projects (as defined in Schedule 38), and thus there is no implication to be drawn from Schedule 38 or Appendix 1 thereto that Attachment FF currently authorizes allocation of costs of MVPs to DEO or DEK on the same basis as the allocation of costs for MTEP Projects under Schedule 38 or Appendix 1.

3 The Honorable Kimberly D. Bose November 2, 2011 Page 3 integration into PJM, MISO Transmission Owners (as defined in Schedule 38) 7 and American Transmission Systems, Incorporated ( ATSI ) (pursuant to Schedule 37 of the MISO Tariff) will continue to be obligated to construct certain projects, for which DEO and DEK will continue to be obligated to pay a portion of the costs. Likewise, transmission customers serving load in the MISO Transmission Pricing Zones (as defined in Schedule 38) 8 and ATSI (pursuant to Schedule 37 of the MISO Tariff) will continue to be obligated to pay a portion of the costs of previously identified MTEP Projects that DEO or DEK has constructed or remains obligated to construct. To address cost recovery for these MTEP Projects, the Applicants are submitting Schedule 38 to the MISO Tariff. Schedule 38 sets forth the method by which transmission customers taking transmission service in MISO, as well as ATSI (pursuant to Schedule 37 of the MISO Tariff), are charged for a portion of the MTEP Projects constructed by DEO and DEK. Schedule 38 also establishes the method by which MISO will transmit the revenues received from transmission customers, as well as ATSI (pursuant to Schedule 37 of the MISO Tariff), to DEO and DEK. It also establishes the manner in which DEO and DEK will be charged a portion of the MTEP Projects of the MISO Transmission Owners and ATSI (pursuant to Schedule 37 of the MISO Tariff), as well as the method by which MISO will transmit the revenues received from DEO and DEK for the MTEP Projects of MISO Transmission Owners and ATSI (pursuant to Schedule 37 of the MISO Tariff). Schedule 38 also addresses the manner in which the annual revenue requirements will be derived for purposes of determining the aforementioned charges. Finally, Appendix 1 to Schedule 38 addresses the division of the Historic Duke Zone, which includes DEO, DEK, and the DEI Zone (as defined in Schedule 38). 9 This is necessary because costs for MTEP Projects currently are allocated to the Historic Duke Zone as a whole. Duke Energy Indiana, Inc. ( DEI ) is not withdrawing from MISO; accordingly, cost and revenue allocation to the DEI Zone needs to be separated from cost and revenue allocation to DEO and DEK. Appendix 1 to Schedule 38 sets forth the methodology for this division. Appendix 1 to Schedule 38 also recognizes that DEO and DEK have sought FERC authorization to allocate MTEP Project costs and revenues to FERC-jurisdictional transmission customers within the PJM DEOK Zone to be created in PJM following integration of DEO and DEK into PJM, 10 and provides that, solely to the extent authorized by FERC in that separate MISO Transmission Owners is defined in Schedule 38 as: for purposes of this Schedule 38, any Transmission Owner or ITC in MISO as of January 1, 2012 and responsible for the construction of MTEP Projects under the MISO Tariff, including DEI, but not including DEO, DEK or ATSI. MISO Transmission Pricing Zones is defined in Schedule 38 as: the Transmission Pricing Zones MISO uses to develop rates and allocate revenues. DEI Zone is defined in Schedule 38 as: the transmission system that will comprise the Duke Energy Indiana, Inc. Zone within MISO following the withdrawal of DEO and DEK from MISO, including the transmission facilities owned by DEI, Indiana Municipal Power Agency, Wabash Valley Power Association, Inc. and their successors and/or assigns. While this zone will be formally identified as the Duke Energy Indiana, Inc. Zone, for purposes of this Schedule 38 alone, it is referred to as the DEI Zone to distinguish it from the Cinergy Services, Inc. Zone of MISO as it existed prior to the withdrawal of DEO and DEK. See PJM Interconnection, L.L.C et al., Docket Nos. ER12-91, et al., Revisions to the PJM OATT, OA, RAA, and TOA (filed Oct. 14, 2011).

4 The Honorable Kimberly D. Bose November 2, 2011 Page 4 proceeding, allocation of costs and distribution of revenues to DEO and DEK under Appendix 1 and Schedule 38 shall instead be treated as allocations to FERC-jurisdictional transmission customers taking service in the PJM DEOK Zone, without the need to amend or modify Schedule 38 to enable such treatment. In such circumstances, allocations to customers within the PJM DEOK Zone shall be conducted pursuant to the PJM tariff, and amounts remitted between MISO and PJM pursuant to Schedule 38 shall be the aggregate amounts attributed in Schedule 38 to DEO and DEK. Similarly, Appendix 1 to Schedule 38 also provides that in such circumstances, references in Attachment GG to allocations or charges to, or payments from, DEO or DEK, shall instead be treated as references to allocations or charges to, or payments from, FERC-jurisdictional transmission customers taking service in the PJM DEOK Zone solely to the extent authorized by FERC. The purpose of this language is simply to avoid any need to revise the MISO Tariff in the event that the Commission rules in favor of DEO and DEK in the other proceeding. The Applicants emphasize that, per the express language of Appendix 1, the referenced recovery from customers would be solely to the extent authorized by FERC in that separate proceeding, and would occur under the PJM tariff, meaning that the Commission s acceptance of Schedule 38 will not authorize any such recovery from customers. 1. Support for New Schedule 38 The costs proposed for recovery under this rate schedule represent the costs of MTEP Projects allocated to transmission customers taking transmission service in MISO, ATSI (pursuant to Schedule 37 of the MISO Tariff), DEO, and DEK that would be paid under the MISO Tariff as if DEO and DEK had remained in MISO. Specifically, if DEO and DEK had remained in MISO, MISO would have performed the function of collecting the revenue requirements of MTEP Projects and distributing the revenues received to Transmission Owners accordingly. Because DEO and DEK will no longer be members of MISO, MISO can no longer solely perform this function for DEO and DEK. Consequently, the Applicants have developed Schedule 38 to act as a mechanism to collect the costs of MTEP Projects from MISO transmission customers, ATSI (pursuant to Schedule 37), DEO, and DEK, and to distribute and credit the revenues associated with those MTEP Projects properly. 2. Treatment of ATSI ATSI withdrew from MISO effective June 1, Schedule 37 of the MISO Tariff, among other things, allocates costs to ATSI for certain MTEP projects much like Schedule 38 is proposed to do for DEO and DEK. The MTEP Projects of DEO and DEK listed in Schedule 38 were included in the MTEP projects for which costs are allocated to ATSI pursuant to Schedule 37 because DEO and DEK were MISO Transmission Owners at the time of ATSI s withdrawal from MISO. Similarly, Schedule 37 provides for revenue distribution to ATSI with respect to the MTEP projects listed in Schedule 37, which includes MTEP projects of ATSI. Schedule 38 reflects these cost allocations and revenue distributions and accordingly, references cost allocations or revenue distributions to or from ATSI in Schedule 38 with the parenthetical

5 The Honorable Kimberly D. Bose November 2, 2011 Page 5 reference pursuant to Schedule 37. The Applicants intent is that (i) Schedule 38 addresses charges to DEO and DEK for costs allocated to DEO and DEK for ATSI s MTEP projects pursuant to Schedule 37; and (ii) the charges to ATSI for costs allocated to ATSI for DEO and DEK MTEP Projects, previously identified in Schedule 37, will be pursuant to the revenue requirements determined by DEO and DEK pursuant to Schedule 38. Specifically, Schedule 38 captures ATSI s and DEO and DEK s responsibilities to each other as determined pursuant to Schedule 37. In short, this filing does not seek to change the relationship between MISO and ATSI, the cost allocations to ATSI, or the revenue distributions to ATSI pursuant to Schedule 37. Rather this filing seeks to ensure that the correct amount of money is available to MISO for revenue distribution to ATSI through Schedule 37; that the cost allocation for MTEP projects identified in Schedule 37 is followed; and that distribution of monies received from ATSI via Schedule 37 occurs appropriately. As to the distribution of monies received from ATSI via Schedule 37, the Applicants recognize that ATSI has pending a variety of challenges to its Schedule 37 payment obligations. 11 This filing is intentionally designed to avoid any need for the parties and ATSI to litigate in this proceeding the issues regarding Schedule 37 in Docket No. ER In particular, Schedule 38 does not impose any additional charges or cost allocations to ATSI that are not contemplated under Schedule 37 and does not change revenue distributions pursuant to Schedule 37. Schedule 38 addresses certain obligations and revenue distributions contemplated by Schedule 37, but which require a new schedule because DEO and DEK will no longer be in MISO. B. Revisions to Attachment GG Attachment GG has been revised to acknowledge the provisions of new Schedule 38. It has also been revised to specify that, as a result of DEO s and DEK s integration into PJM, effective January 1, 2012, revenue requirements of MTEP Projects (as defined in Schedule 38) 12 of DEO and DEK will no longer be calculated under Attachment GG. However, the annual Attachment GG revenue requirement reflecting the ongoing financial obligation of DEO and DEK payable to MISO Transmission Owners and ATSI will be calculated in accordance with On May 31, 2011, the Commission conditionally accepted in Docket No. ER Schedule 37 and revisions to Attachment GG to reflect ATSI s withdrawal from MISO, effective June 1, 2011, but required MISO to revise Schedule 37 and Attachment GG to remove or modify certain language that suggests that ATSI's wholesale transmission customers bear responsibility for any remaining financial obligation for MTEP projects. Midwest Independent Transmission System Operator, Inc., 135 FERC 61,204 (2011) ( May 31 Order ). The appropriate interpretation of the May 31 Order is disputed, and MISO s compliance filing with regard to the May 31 Order, which ATSI protested, is pending Commission action. MTEP Project is defined in Schedule 38 as: a transmission project approved by the MISO Board of Directors prior to DEO and DEK s January 1, 2012 exit from MISO and listed in Section V of this Schedule. The projects listed in Section V of this Schedule include only projects listed in Appendix A of the MTEP approved by the MISO Board of Directors prior to DEO and DEK s January 1, 2012 exit from MISO. MTEP Projects of DEO and DEK are those set forth in Sections V.C and V.D., respectively. MTEP Projects of MISO Transmission Owners are those set forth in Sections V.A and V.E. MTEP Projects of ATSI are those set forth in Section V.B, which are the same ATSI projects identified in Schedule 37. For purposes of this Schedule 38 and its Appendix 1, MTEP Projects do not and will not include Multi-Value Projects.

6 The Honorable Kimberly D. Bose November 2, 2011 Page 6 Attachment GG and Schedules 37 and 38 and will be included in the calculation of the Schedule 26 Drive-through and drive-out Transmission Service rates. Attachment GG has also been revised to provide that the revenue requirement reflecting the obligations of various MISO zones and ATSI to DEO and DEK will be included in the Schedule 26 zonal rate calculations but will be excluded from the Schedule 26 Drive-through and drive-out transmission rates, and that DEO and DEK will no longer receive a pro rata share of the Schedule 26 revenues related to Drivethrough and drive-out Point-to-Point Transmission Service reservations. C. Nature of Filing This filing is in the nature of a negotiated agreement among MISO, the Midwest ISO Transmission Owners, DEO and DEK. The Applicants to this filing might have taken different positions on some issues but for the desire to avoid litigation, and under the specific circumstances presented herein, are making this filing under a negotiated approach. III. ADDITIONAL INFORMATION A. Proposed Effective Date and Request for Waiver The Applicants respectfully request that the Commission waive its sixty (60)-day notice requirement as required by Section 35.3(a) of the Commission s regulations, 18 C.F.R. 35.3(a), and make this filing effective as of January 1, 2012 to coincide with DEO s and DEK s withdrawal from MISO and integration into PJM. B. Communications Please place the names of the following persons on the official service list established by the Secretary in this proceeding: The Applicants request waiver of 18 C.F.R (i) to the extent necessary to include more than two names on the official service list.

7 The Honorable Kimberly D. Bose November 2, 2011 Page 7 For MISO Lori A. Spence Deputy General Counsel Corrie Bilke* Attorney Midwest Independent Transmission System Operator, Inc. P.O. Box 4202 Carmel, IN (317) lspence@misoenergy.org cbilke@misoenergy.org For the Midwest ISO Transmission Owners Wendy N. Reed* Deborah C. Brentani* Wright & Talisman, P.C G Street, N.W. Suite 600 Washington, D.C (202) reed@wrightlaw.com brentani@wrightlaw.com

8 The Honorable Kimberly D. Bose November 2, 2011 Page 8 For DEO and DEK James B. Gainer* Paul R. Kinny* Vice President Associate General Counsel Federal Regulatory Policy Duke Energy Corporation Duke Energy Corporation 550 S. Tryon Street 526 South Church Street Mail Code DEC45A P.O. Box 1006 Charlotte, NC Charlotte, NC (980) (704) paul.kinny@duke-energy.com James.gainer@duke-energy.com Noel Symons* Cameron Prell McGuire Woods LLP Washington Square 1050 Connecticut Avenue, NW Suite 1200 Washington, D.C (202) nsymons@mcguirewoods.com cprell@mcguirewoods.com * Persons designated to receive service. C. List of Documents Submitted with Filing 1. This Transmittal Letter; 2. A new Schedule 38 (MTEP Project Cost Recovery for DEO and DEK); and 3. Proposed revisions to Attachment GG (Network Upgrade Charge) (in both clean and redlined copies). Because it is entirely new, Schedule 38 is being provided in a clean version only, rather than in both clean and redlined versions. D. Additional Filing Requirements Information Required Under 18 C.F.R and Requests for Waiver Because, as demonstrated herein, this filing does not result in a rate increase, the filing requirements of 18 C.F.R (b) and 35.13(c) apply See 18 C.F.R (a)(2)(iii).

9 The Honorable Kimberly D. Bose November 2, 2011 Page 9 18 C.F.R (b) Requirements 1. A list of documents submitted with the filing: See Section III.C. 2. The date on which the utility proposes to make the rate change effective: January 1, The names and addresses of persons to whom a copy of this filing has been posted: Copies of this filing, including all attachments, have been served electronically on DEO s and DEK s transmission customers, regulators in Ohio and Kentucky. In addition, MISO has served a copy of this filing electronically on all MISO Members, as well as all state utility regulatory commissions in the MISO Region, and posted this filing on its website at 4. A brief description of the rate change: See Section II. 5. A statement of the reasons for the rate change: See Sections I and II. 6. Consistent with the Agreement of Transmission Facilities Owners to Organize the Midwest Independent Transmission System Operator, Inc., A Delaware Non- Stock Corporation ( Transmission Owners Agreement ), a majority of the Midwest ISO Transmission Owners voted in favor of this filing A statement showing any expenses or costs that have been alleged or judged in any administrative or judicial proceedings to be illegal, duplicative, or unnecessary costs that are demonstrably the product of discriminatory employment practices: No such expenses or costs exist. 18 C.F.R (c) Requirements 1. A table or statement comparing sales and services and revenues: Not applicable. 2. A comparison of the rate change and the utility s other rates for similar wholesale for resale and transmission services: Not applicable. The Applicants have no other rates for similar service. 3. If any specifically assignable facilities have been or will be installed or modified in order to supply service under the rate change, an appropriate map or sketch and single line diagram showing the additions or changes to be made: Not applicable. 15 See Transmission Owners Agreement, Appendix K, Section II.B.

10 The Honorable Kimberly D. Bose November 2, 2011 Page 10 No assignable facilities have been or will be installed or modified in order to supply service under the rate change. Finally, the information submitted with this filing substantially complies with the requirements of Part 35 of the Commission s rules and regulations applicable to filings of this type. The Applicants request a waiver of any applicable requirement of Part 35 for which a waiver is not specifically requested, if necessary, in order to permit this filing to become effective as proposed. Please contact the undersigned if you have any questions. Attachments Respectfully submitted, /s/ Lori A. Spence Lori A. Spence On behalf of the Midwest Independent Transmission System Operator, Inc., the Midwest ISO Transmission Owners, Duke Energy Ohio, Inc. and Duke Energy Kentucky, Inc.

11 Table Of Contents SCHEDULE 38 MTEP Project Cost Recovery for DEO and DEK Version: 0.02

12 SCHEDULE 38 MTEP Project Cost Recovery for DEO and DEK Version: Effective: 1/1/2012 SCHEDULE 38 MTEP Project Cost Recovery for DEO and DEK I. Definitions Any capitalized terms not defined in this Schedule 38 shall have the meaning as defined in Module A of the Tariff. Definitions for this Schedule 38 are as follows: A. ATSI American Transmission Systems, Incorporated, which exited MISO effective June 1, B. DEI Duke Energy Indiana, Inc. C. DEI Zone the transmission system that will comprise the Duke Energy Indiana, Inc. Zone within MISO following the withdrawal of DEO and DEK from MISO, including the transmission facilities owned by DEI, Indiana Municipal Power Agency, Wabash Valley Power Association, and their successors and/or assigns. While this zone will be formally identified as the Duke Energy Indiana, Inc. Zone, for purposes of this Schedule 38 alone, it is referred to as the DEI Zone, to distinguish it from the Cinergy Services, Inc. Zone of MISO as it existed prior to the withdrawal of DEO and DEK. D. DEK Duke Energy Kentucky, Inc. E. DEO Duke Energy Ohio, Inc. F. Duke MTEP Project Cost Allocator Percentage has the meaning given to it in Section II.A in Appendix 1 to this Schedule 38. G. Historic Duke Zone the Cinergy Services, Inc. pricing zone within MISO as it

13 existed on December 31, 2011, which includes the transmission facilities of the DEI Zone, DEO and DEK. H. MISO The Midwest Independent Transmission System Operator, Inc. I. MISO Tariff or Tariff the Open Access Transmission, Energy and Operating Reserve Markets Tariff, including all schedules or attachments thereto, of the Transmission Provider as amended from time to time. The term Tariff shall endure to include any successor tariff or rate schedule approved by the Commission. J. MISO Transmission Owner for purposes of this Schedule 38, any Transmission Owner or ITC in MISO as of January 1, 2012 and responsible for the construction of MTEP Projects under the MISO Tariff, including DEI, but not including DEO, DEK or ATSI. K. MISO Transmission Pricing Zones the Transmission Pricing Zones MISO uses to develop transmission rates and allocate revenues. L. MTEP the MISO Transmission Expansion Plan established pursuant to the ISO Agreement and MISO Tariff. M. MTEP Project a transmission project approved by the MISO Board of Directors prior to DEO and DEK s January 1, 2012 exit from MISO and listed in Section V of this Schedule. The projects listed in Section V of this Schedule include only projects listed in Appendix A of the MTEP approved by the MISO Board of Directors prior to DEO and DEK s January 1, 2012 exit from MISO. MTEP Projects of DEO and DEK are those set forth in Sections V.C and V.D., respectively. MTEP Projects of MISO Transmission Owners are those set forth in Sections V.A and V.E. MTEP Projects of ATSI are those set forth in Section V.B, which are the same ATSI projects identified in Schedule 37. For purposes of this Schedule 38 and its Appendix 1, MTEP Projects do not and will not include Multi-Value Projects.

14 II. Introduction and Purpose A. Transmission Customers taking transmission service in MISO, as well as ATSI (pursuant to Schedule 37), shall pay for a portion of the MTEP Projects of DEO and DEK listed in Sections V.C and V.D of this Schedule 38, effective January 1, Likewise, effective January 1, 2012, DEO and DEK shall pay for, or cause to be paid, a portion of the MTEP Projects of MISO Transmission Owners and ATSI listed in Sections V.A, V.B and V.E of this Schedule 38. B. This Schedule 38 sets forth: (i) the method by which Transmission Customers taking transmission service in MISO, as well as ATSI (pursuant to Schedule 37), will be charged for a portion of the MTEP Projects of DEO and DEK; (ii) the method by which MISO will transmit the revenues received from Transmission Customers, as well as ATSI (pursuant to Schedule 37), for the MTEP Projects of DEO and DEK; (iii) the method by which DEO and DEK shall be charged a portion of the MTEP Projects of MISO Transmission Owners and ATSI (pursuant to Schedule 37); and (iv) the method by which MISO will transmit the revenues received from DEO and DEK for the MTEP Projects of MISO Transmission Owners and ATSI (pursuant to Schedule 37). C. This Schedule 38 also addresses the manner in which the annual revenue requirements will be derived for purposes of determining the charges described in Section II.B. D. Finally, Appendix 1 to this Schedule 38 addresses the division of the Historic Duke Zone, which includes the DEI Zone, DEO and DEK. This is needed because costs for MTEP Projects currently are allocated to the Historic Duke Zone as a whole. DEI is not withdrawing from MISO. Consequently, cost and revenue allocation to the DEI Zone needs to be separated from cost and revenue allocation to DEO and DEK. Appendix 1 sets forth the

15 methodology for this division. III. MTEP Project Revenue Requirements Allocated to DEO and DEK A. Derivation of MISO Transmission Owner Annual Revenue Requirements MISO Transmission Owners shall periodically update the annual revenue requirements, using the methodology provided under Attachment GG of the MISO Tariff, for MTEP Projects of the MISO Transmission Owners having a portion of revenue requirements allocated to DEO and DEK. These updates will follow the timing of the MISO annual rate updates that are effective January 1 and June 1 of each year, or as needed. The list of MTEP Projects for purposes of this Section III.A is provided in Sections V.A and V.E. B. Derivation of ATSI Annual Revenue Requirement As a result of ATSI s withdrawal from MISO, effective June 1, 2011, the portion of the revenue requirements of MTEP Projects of ATSI is calculated pursuant to Schedule 37. The list of MTEP Projects for purposes of this Section III.B is provided in Section V.B. C. Allocation of Annual Revenue Requirements to DEO and DEK For each MTEP Project, MISO shall calculate the monthly portion of the annual revenue requirements under Section III.A and Section III.B separately attributable to each of DEO and DEK. This will be calculated as: (A+B) times C divided by D, where A = The portion of each MTEP Project s revenue requirement derived pursuant to Section III.A allocated to the Historic Duke Zone in accordance with the cost allocation methodology specified in Sections II and III of Attachment FF of the MISO Tariff;

16 B = The portion of each MTEP Project s revenue requirement derived pursuant to Section III.B allocated to the Historic Duke Zone in accordance with Schedule 37; C = the Duke MTEP Project Cost Allocator Percentage of DEO or DEK (as applicable) set forth in Section II.A of Appendix 1; and D = 12. D. Monthly Revenue Requirements Owed from DEO and DEK MISO shall bill PJM, as the designated agent of DEO and DEK solely for purposes of this Schedule 38, the monthly amount of the annual revenue requirements as calculated in Section III.C of this Schedule 38 and in accordance with, and subject to, the billing and payment provisions described in Section 7 of the MISO Tariff. In the event that PJM cannot or does not remit the required amounts, MISO shall bill DEO and DEK directly. E. Revenue Distribution from Payments Made by DEO and DEK Upon PJM s (or DEO and DEK s) remittance to MISO of amounts billed in Section III.D of this Schedule 38 pursuant to agreed upon settlement procedures, MISO shall distribute the remitted amounts in accordance with the billing and payment provisions of the Tariff to: 1. MISO Transmission Owners in proportion to their pro-rata share of the total Network Upgrade Charge revenue requirements as called for in Schedule 26 of the MISO Tariff; 2. PJM as the designated agent of DEO and DEK under this Schedule 38 in accordance with Appendix 1 of this Schedule 38; and 3. PJM as the designated agent of ATSI in accordance with the terms of Schedule 37. IV. DEO and DEK MTEP Project Revenue Requirements Allocated to MISO

17 Transmission Pricing Zones and ATSI A. Derivation of Annual Revenue Requirements By May 1 of each year, DEO and DEK shall provide to MISO the annual revenue requirements for MTEP Projects of DEO and DEK listed in Sections V.C and V.D of this Schedule 38, for the upcoming June 1 through May 31 rate year. B. Allocation of Annual Revenue Requirements to MISO Transmission Pricing Zones, DEO and DEK MISO shall calculate the allocation of the annual revenue requirements for the MTEP Projects of DEO and DEK to MISO Transmission Pricing Zones and ATSI by multiplying each MTEP Project s revenue requirements derived in Section IV.A of this Schedule 38 by the percentage assigned to each applicable MISO Transmission Pricing Zone and ATSI in accordance with the cost allocation methodology identified in Sections II and III of Attachment FF of the MISO Tariff in effect at the time the MTEP Project was approved by the MISO Board of Directors. Allocations to the Historic Duke Zone will be further subdivided between DEO, DEK, and the DEI Zone in accordance with Appendix 1. C. Recovery of Annual Revenue Requirements for DEO and DEK MTEP Projects MISO shall include the portion of the annual revenue requirements for MTEP Projects of DEO and DEK listed in Sections V.C and V.D as calculated in Section IV.B in the development of the Schedule 26 transmission rates for each applicable MISO Transmission Pricing Zone and charges to ATSI pursuant to Schedule 37. The portion of this revenue requirement (as determined in Section IV.A) that would have been allocated to DEO or DEK (as determined in

18 accordance with Section IV.B) will be removed from the Schedule 26 rate calculation. D. Revenue Distribution from Payments Made by ATSI and Transmission Customers in MISO Each month, and pursuant to agreed upon settlement procedures, MISO shall remit an amount to PJM, for and on behalf of DEO and DEK, (or DEO and DEK as appropriate) from payments made by ATSI and Transmission Customers in MISO, as described in Section II.C of Appendix 1 to this Schedule 38. V. MTEP Projects A. MTEP Projects of MISO Transmission Owners (excluding DEI) To the extent that additional qualifying MTEP Projects are approved by the MISO Board of Directors prior to January 1, 2012, the list below may be amended. Any such amendment shall be subject to FERC approval. Project ID MTEP Year Project Name Construction Owner Latham - Oreana 345 kv line Ameren Illinois South Bloomington - Install new Ameren Illinois 560 MVA 345 / 138 Xfmr New 345kV Supply at Fargo Ameren Illinois Coffeen Plant-Coffeen, North - Ameren Illinois 2nd. Bus tie Morgan - Werner West 345 kv American line (includes Clintonville- Transmission Werner West 138) Company LLC Rockdale-West Middleton 345 kv American Transmission Company LLC

19 G883/4 Uprate Point Beach- American Sheboygan EC 345 kv Transmission Company LLC Uprate Cypress-Arcadian 345 kv American line Transmission Company LLC Straits Power Flow Control American Transmission Company LLC G514 Heartland Wind Great River Energy Fargo, ND - St. Cloud/Monticello Great River Energy, MN area 345 kv project Northern States Power Company, Otter Tail Power Company, Minnesota Power & Missouri River Energy Services G172 Mitchell County Substation ITC Midwest Majestic 345/120 kv switching International station Transmission Company Placid 345/120 kv transformer #2 International Transmission Company Conventry Station upgrade International Transmission Company Tallmadge 345/138 kv TB3 Michigan Electric transformer #3 Transmission Company, LLC Midland Michigan Electric Transmission Company, LLC Argenta-Palisades 345 kv Michigan Electric

20 ckt. 1 & 2 Transmission Company, LLC Hiple-Add 2nd kv Northern Indiana Transformer Public Service Company G MW wind generation, Northern States Power Nobles County, MN Company G349, Upgrades for Northern States G349 Power Company SE Twin Cities - Rochester, MN Northern States Power LaCrosse, WI 345 kv project Company New Transmission Line Gibson Vectren Energy (Cinergy) to AB Brown (Vectren) to Reid (BREC) New 345/138 kv Substation at Vectren Energy Francisco Simpson-Batavia 138 kv Line Michigan Electric Transmission Company, LLC New 138 kv transmission line, Vectren Energy Dubois to Newtonville G439-Benton County Wind Northern Indiana Public Service Company Sidney-Paxton 138 kv Ameren Illinois New 345/138 kv Substation Vectren Energy at AB Brown Petersburg 345/138 kv Indianapolis Power West Autotransformers & Light and 138 kv breaker

21 B. MTEP Projects of ATSI Project ID MTEP Year Project Name Constructing Owner North Medina 345/138 kv American Transmission Substation Systems, Inc Add Capacitor Banks American Transmission at Harding and Juniper Systems, Inc. 345 kv substations C. MTEP Project of DEO Project ID MTEP Year Project Name Constructing Owner Hillcrest 345/138 Duke Energy Ohio D. MTEP Projects of DEK None E. MTEP Projects of DEI Project ID MTEP Year Project Name Constructing Owner G431-Edwardsport Duke Energy Indiana Crawfordsville to Tipmont Duke Energy Indiana Concord to Lafayette SE 138 Reconductor Dresser 345/138 kv Bank 3 Duke Energy Indiana addition VI. Dispute Resolution Any controversy, claim or dispute of whatsoever nature or kind arising out of or in connection with this Schedule 38 or its interpretation shall be resolved pursuant to the dispute resolution procedures outlined in Attachment HH of the MISO Tariff.

22 APPENDIX 1 TO SCHEDULE 38 DIVISION OF THE HISTORIC DUKE ZONE I. Status of DEI; Purpose of this Appendix; Scope and Limitations DEI is a MISO Transmission Owner, and shall remain so after the withdrawal of DEO and DEK. Consequently, all references in Schedule 38 to MISO Transmission Owners include DEI unless otherwise noted. The costs associated with MTEP Projects (as defined in this Schedule 38) are allocated to each MISO Transmission Pricing Zone in accordance with the applicable provisions of Sections II and III of Attachment FF of the MISO Tariff. In accordance with MISO policy, the allocations for these MTEP Projects (as defined in this Schedule 38) become fixed percentages at the time of the project s approval by the MISO Board of Directors, and do not change over time. Because a fixed allocation percentage for each MTEP Project was assigned for the Historic Duke Zone, a method must be established to subdivide this allocation percentage between the DEI Zone, DEO and DEK after DEO and DEK withdraw from MISO, effective January 1, This Appendix sets forth the methodology for subdividing the historic allocation percentages assigned to the Historic Duke Zone among the DEI Zone, DEO and DEK. This subdivision of allocation percentages shall occur on a one-time basis and is applicable only to the MTEP Projects identified in Schedule 38, Section V. The allocations in this Appendix 1 and in Schedule 38 are intended to appropriately divide the responsibilities of the Historic Duke Zone. Thus, for the DEI Zone, the subdivision of historic allocation percentages set forth here shall establish new allocation percentages, for each MTEP Project, to be used in establishing Schedule 26 rates for customers taking service in the DEI Zone. Such revised rates shall become applicable for transmission service in the DEI Zone

23 starting January 1, Allocations in this Appendix 1 and in Schedule 38 to DEO and DEK are direct allocations to each of DEO and DEK, and DEO and DEK shall themselves be responsible, at the wholesale level, for paying the costs identified in such allocations in accordance with the methodology established in Schedule 38. Provided, however, that DEO and DEK have indicated that they have sought authorization from FERC to allocate MTEP Project costs and revenues to FERC-jurisdictional transmission customers within the Duke zone to be created in PJM following integration of DEO and DEK into PJM ( PJM s DEOK Zone ), and nothing in this Appendix or Schedule 38 is intended to limit their ability to do so. Accordingly it is expressly contemplated that, solely to the extent authorized by FERC, allocations of costs and revenues to DEO and DEK under this Appendix 1 and Schedule 38 shall instead be treated as allocations to FERC-jurisdictional transmission customers taking service in PJM s DEOK Zone, without the need to amend or modify Schedule 38 to enable such treatment, and that in such circumstances PJM will act as agent to DEO and DEK, solely for purposes of effectuating such allocations via the PJM tariff and for purposes of transmitting the appropriate revenues between PJM and MISO. In such circumstances, allocations to customers within the Duke PJM Zone shall be conducted pursuant to the PJM tariff, and amounts remitted between MISO and PJM pursuant to Schedule 38 shall be the aggregate amounts attributed in Schedule 38 to DEO and DEK. Similarly, in such circumstances, references in Attachment GG to allocations or charges to, or payments from, DEO or DEK, shall instead be treated as references to allocations or charges to, or payments from, FERC-jurisdictional transmission customers taking service in PJM s DEOK Zone solely to the extent authorized by FERC. The applicability of this Appendix and of Schedule 38 is expressly limited to the subject

24 matter identified in each. Nothing in this Appendix or in Schedule 38 is intended to, or does, preempt or limit any applicable retail rate settlement. II. Cost and Revenue Allocation among DEI, DEO and DEK A. Duke MTEP Project Cost Allocator Percentages The Duke MTEP Project Cost Allocator Percentages have been determined using calendar year 2010 load data from the DEI Zone, DEO, DEK and total Historic Duke Zone Attachment Os. For the DEI Zone, DEO and DEK the Duke MTEP Project Cost Allocator Percentage is the relative percentage of the 2010 Attachment O load of DEI Zone, DEO, and DEK to the 2010 Attachment O load of the Historic Duke Zone. The Duke MTEP Project Cost Allocator Percentages are as follows: DEI Zone 57.9% DEO 35% DEK 7.1% B. Application of MTEP Project Cost Allocator Percentages Section III.B of Schedule 38 uses a formula for allocation of revenue requirements to DEO and DEK that includes, as one variable, the Duke MTEP Project Cost Allocator Percentage. On and after January 1, 2012, the percentages allocated to the Historic Duke Zone for projects identified in Schedule 38, Section V will be subdivided between the DEI Zone, DEO and DEK by applying the Duke MTEP Project Cost Allocator Percentage. For example, assume that 5% of the cost responsibility for a hypothetical MTEP Project

25 was assigned to the Historic Duke Zone. For this hypothetical MTEP Project, revenue requirement allocations would be as follows: 1. DEI Zone = 57.9% of 5% = 2.90% 2. DEO = 35.0% of 5% = 1.75% 3. DEK = 7.1% of 5% = 0.35% The percentages thus derived for each MTEP Project shall be, for DEO and DEK, the percentages used in the calculation to be performed under Section III.C of Schedule 38. The percentages thus derived for each MTEP Project shall, for the DEI Zone, become the fixed percentages used in calculating the revenue requirement allocated to the DEI Zone in determining the rate for the DEI Zone under Schedule 26 of the MISO Tariff (including with respect to projects listed in Sections V.B and V.C of Schedule 38 and allocated pursuant to Section IV of Schedule 38). C. Revenue Distributions The Duke MTEP Project Cost Allocator Percentages shall not be employed for determining revenue distributions to the DEI Zone, DEO or DEK with respect to revenues collected under Schedules 26, 37, and 38 for the MTEP Projects identified in Sections V.C, V.D, and V.E of Schedule 38. Rather: 1. Revenue distribution for MTEP Projects of DEI identified in Section V.E of Schedule 38 shall be performed in accordance with Schedule Revenue requirements for the MTEP Project of DEO identified in Section V.C of

26 Schedule 38 shall be determined in accordance with Schedule 38, Section IV.A. For revenue distribution purposes, this revenue requirement will be reduced by the portion of revenue requirement that would have been allocated to DEO and DEK under Schedule 38, Section IV.B. MISO will use this reduced amount to calculate DEO s pro-rata share of the total Network Upgrade Charge revenues determined under Schedule 26, Section 8. Revenues for the MTEP Project of DEO that historically would have been distributed to the Historic Duke Zone shall, as of January 1, 2012, be distributed entirely to DEO. 3. There shall be no revenue distributions for MTEP Projects of DEK because, as set forth in Section V.D of Schedule 38, there are no MTEP Projects of DEK.

27 ATTACHMENT GG Network Upgrade Charge Version: Effective: 1/1/2012 ATTACHMENT GG NETWORK UPGRADE CHARGE 1. Network Upgrade Cost Allocation: This Attachment GG sets forth the method for calculating and collecting the charges associated with Network Upgrades and for distributing the revenues associated with such charges. This Attachment applies to those Network Upgrades that are determined under Attachment FF to be subject to this Attachment GG that are not subject to the cost recovery provisions of Attachment N. The charges under this Attachment GG shall be in addition to any charges under Schedules 7, 8 and Determination of Network Upgrade Charge ( NUC ): (a) The Transmission Provider shall identify in this Attachment GG all Network Upgrades eligible under Attachment FF that form the basis of the NUC. Such designations shall be the same as those made for the relevant Network Upgrades in the MTEP. The NUC for each eligible project shall be its adjusted annual revenue requirement as computed in Section 3 below. In conjunction with providing its annual Attachment O, each Transmission Owner and/or ITC shall furnish to the Transmission Provider: (1) its NUC for each Network Upgrade subject to this Attachment GG as calculated below; and (2) its twelve (12) monthly transmission system peaks determined in accordance with Attachment O.

28 (b) The Transmission Provider shall apportion the NUC from (a) above in accordance with the applicable Attachment FF. (c) For purposes of preparing Attachment GG, each Transmission Owner and/or ITC must utilize the same test period that is utilized in the preparation of its Attachment O. (d) Projects included in Attachment GG must be in-service prior to or during the test period indicated in (c) above. If the Transmission Owner and/or ITC receives FERC approval to include specific Network Upgrades that are recorded in construction work in progress (CWIP) but not yet in-service in the annual revenue requirement calculation, and the Transmission Provider includes such Network Upgrades on Appendix A of the Midwest ISO Transmission Expansion Plan, those projects may be included in Attachment GG provided the Transmission Owner and/or ITC supplies the Transmission Provider with evidence of FERC approval. (e) In order to prevent over recovery of Attachment O revenue, the revenue requirement calculated pursuant to Attachment GG (Attachment GG template, Page 2, Line 3, Column 10) will be subtracted by each Transmission Owner and ITC from their respective Attachment O revenue requirement. (f) The Network Upgrade annual revenue requirement apportioned to a pricing zone shall be the sum of all Transmission Owner and/or ITC s NUCs for the pricing zone including those NUCs allocated on a system-wide basis to all pricing zones as provided under Attachment FF. The Transmission Provider shall calculate rates to be collected pursuant to Schedule 26 for each pricing zone by taking the sum of the NUCs from the previous sentence and dividing by the current rate divisor 1 from Attachment O, Page 1, Line 15 in kw multiplied by 1000 to calculate an annual rate per MW.

29 The per-unit rates will be calculated as: The monthly rate per MW will be the annual rate divided by 12 The weekly rate per MW will be the annual rate divided by 52 The On-Peak daily rate per MW will be the annual rate divided by 260 (capped at weekly rate) The On-Peak hourly rate per MW will be the annual Rate divided by 4160 (capped at weekly and daily rates) The Off-Peak daily rate per MW will be the annual rate divided by 365 The Off-Peak hourly per MW will be annual rate divided by 8760 (g) Drive-through and drive-out Transmission Service shall be charged a rate that is (1) the sum of all Transmission Owner and/or ITC NUCs apportioned to pricing zones divided by (2) the sum of the twelve (12) monthly transmission system peaks from Section 2(a)(2) above for all pricing zones. (h) American Transmission Systems, Incorporated (ATSI) has withdrawn from the Transmission Provider and integrated into PJM Interconnection, L.L.C. effective June 1, (1) Under Schedule 26, upon ATSI s integration into PJM Interconnection, L.L.C. effective June 1, 2011, Transmission Customers taking Transmission Service pay a portion of the revenue requirements of MTEP Projects (as defined in Schedule 37) approved by the Transmission Provider Board for construction by ATSI. Under Schedule 38, Duke Energy Ohio, Inc. (DEO) and Duke Energy Kentucky, Inc. (DEK) (or transmission customers in PJM's DEOK Zone as more fully described in

30 Appendix 1 to Schedule 38) make comparable payments. As a result of ATSI s withdrawal from the Transmission Provider, effective June 1, 2011, this portion of the revenue requirements of MTEP Projects (as defined in Schedule 37) approved by the Transmission Provider Board for construction by ATSI, will no longer be calculated under this Attachment GG, and will be calculated under Schedule 37. This revenue requirement (as determined in Schedule 37, Section IV) will be included in the determination of the NUC under this Attachment GG for charges and revenue distributions under Schedules 26, 37 and 38. (2) Likewise, under Schedule 37, effective June 1, 2011, ATSI (as defined in Schedule 37) is responsible for paying a portion of the revenue requirements of MTEP Projects (as defined in Schedule 37) approved by the Transmission Provider Board for construction by Midwest ISO Transmission Owners (as defined in Schedule 37). As a result of ATSI s withdrawal from the Transmission Provider, effective June 1, 2011, rates for ATSI (as defined in Schedule 37) will no longer be calculated under this Attachment GG or Schedule 26. (3) The annual revenue requirement reflecting the ongoing financial obligation of ATSI (as defined in Schedule 37) payable to the Midwest ISO Transmission Owners (as defined in Schedule 37) will be calculated in accordance with this Attachment GG and Schedule 26 and included in the calculation of the Schedule 26 Drive-through and drive-out Transmission Service rates described in 2(g) above.