Approve Agreement Executed by Tom Trauger Covering Kentucky Utilities/LG&E’s Proposed Withdrawal from Midwest Independent System Organization (MISO):

In past Board Meetings, the Board has been advised of the status of negotiations between KU/LG&E and Tom Trauger of Spiegel & McDiarmid representing KU Municipals, related to KU/LG&E’s proposal to withdraw from the Midwest Independent System Organization.

In November 2005, KU Municipals authorized Tom Trauger to proceed with an intervention in the KU/LG&E - FERC proceedings. The Municipals were seeking conditions to hold Municipals harmless from the loss of MISO protection against pancaked transmission- related rates. The Municipals were also seeking protection that KU/LG&E’s promised arrangements to prevent pancaked transmission-related charges would actually be realized.

KU/LG&E offered to negotiate an agreement with the Municipals in exchange for the withdrawal of the Municipal’s conditional protest in the FERC proceedings. It was agreed to proceed and Tom Trauger represented the KU Municipals, Owensboro Municipal Utility and the Kentucky TVA Distributors Group in the negotiations.

An agreement (C-12/3-10) was reached by both parties on February 2, 2006 and was signed by Tom Trauger as the Representative for the KU Municipals, Owensboro Municipal Utility and the Kentucky TVA Distributors Group. Tom Trauger’s summary of those negotiations are on Page C-12/1.

Staff recommends that the Board approve the agreement signed by Tom Trauger.