Page 1

Cam-Plex Electrical Service Powder River Energy Corporation City of Gillette August 9, 2012

Purpose • Inform the Campbell County Public Land Board of concerns shared by PRECorp and the City of Gillette regarding electrical service to the Cam-Plex. • Provide information sufficient for the Land Board to express a preference regarding who should provide electrical service to the CamPlex facilities.

Situation • PRECorp has questioned the City’s right to provide electrical service to the Cam-Plex. – The Agreement for Joint and Cooperative Action executed in 1983 permitted annexation by 1990. PRECorp was not a party to that Agreement. – The 1983 Agreement does not state that annexation was a precondition of serving Cam-Plex with utilities. – PRECorp’s decision to allow City of Gillette to serve was given based upon the understanding that the property would be annexed. – Annexation has yet to occur and seems uncertain for the near future.

• Gillette believes its ownership interest and contractual relationship is a basis of its ability to continue serving Cam-Plex. – City of Gillette expects recovery of any investment that becomes stranded by virtue of a Cam-Plex change in power supply.

Electrical Service • Rates – Electric service price does not appear to be an issue. – Billing History for past 12 months: • City of Gillette (actual): $253,246.77 for 27 accounts • PRECorp (estimated): $257,351 for 27 accounts – 2 large power accounts were slightly more under PRECorp rates. – 25 general service accounts were slightly less under PRECorp rates.

– Utility rates will likely vary with both entities over time.

Electrical Service • Facilities and Infrastructure – Both PRECorp and City of Gillette have facilities in the area. – In some cases the main feeder lines are on the same pole in a double circuit configuration. – There is one common circuit line shared by the two utilities, it is on Fox Park Road and is owned by the City of Gillette. The City has 4 feeders in and around Cam-Plex from 2 different substations that are capable of serving power to the Cam-Plex. – City of Gillette facilities have been developed on Cam-Plex property with the expansion of the Cam-Plex incorporated in the design.

Electric Service • Regulatory Considerations – PRECorp’s rates are set at cost of service and are approved by its Board and then by the Wyoming Public Service Commission. – The City of Gillette’s rates are set by the City Council and not approved by the Wyoming Public Service Commission. – Retail customer choice does not exist in Wyoming; however, situations where customers could be readily served by two utilities do occur and customer preference is helpful in resolving these situations. – The City of Gillette has a right to serve within its City limits. It can also serve outside the city limits if approved by the Public Service Commission. – PRECorp has an obligation to serve within its certificated territory. – The Cam-Plex is not within City limits, but is within PRECorp’s certificated territory.

• The City of Gillette believes it has the right to serve load it owns, and as one of two funding agencies for Cam-Plex the City feels that it is a part owner with the right to serve this load.

Possible Scenarios •

#1 Status Quo:

– Problematic due to concerns with service territory rights and obligations. – The City of Gillette sees no issues with the status quo, the arrangement has been in place for nearly 30 years. As per the original agreement the City provides all utilities to Cam-Plex. The city has not heard of any dissatisfaction with the status quo until this year.

#2 PRECorp serves Cam-Plex until such time as City annexes area:

– Would likely require an agreement acceptable to the parties that would facilitate the transfer of electrical system to PRECorp and then back to City upon annexation. – The City would need to be compensated for any transfer of service to PRECorp for infrastructure investment and power system continuity for our other customers. – Transferring Cam-Plex back and forth would be inefficient and wasteful economically.

#3 The City of Gillette serves Cam-Plex with PRECorp’s permission until such time as area is annexed: – Would require an agreement with terms acceptable to the parties. – Annexation now would make this a non issue.

#4 The City of Gillette could pursue Public Service Commission certification to serve Cam-Plex.