Houston Import Study Update Jeff Billo RPG Meeting April 16, 2010

Houston Import Study Assumptions Base case = 2009 5YTP 2014 Economic Case Includes 2009 5YTP projects identified for 2014 Includes all CREZ transmission facilities Does not include additional CREZ generation Analysis will focus on economic benefit of additional import capacity into Houston area per ERCOT RPG Charter and Procedures Section 3.3 UPLAN Assumed load can be served reliably without additional import capability, but additional import project may allow reliability criteria to be met at a lower overall cost $2.5 M/ mile 345-kV double circuit cost April 16, 2010 RPG Meeting

Approach Base Case BC + New Gas Gen North of Houston BC + New Gas Gen In Houston BC + Load Variation Base Case BC + CREZ Generation BC + $4 gas/ $10 gas BC & $3.34M/ mile 345-kV cost BC + STP 3 & 4 Bulk of analysis will focus on the base case. Options may be eliminated at this stage. Alternate scenarios will be used to quantify relative merit of options that pass first stage. Final recommendation will be selected. Sensitivity scenarios will be run for recommended option and results added to report. April 16, 2010 RPG Meeting

Houston Import Study Options 1 Lufkin-Canal 345-kV double circuit 2 Salem-Zenith 345-kV double circuit 3 Fayetteville-Zenith 345-kV double circuit 3A Fayetteville-Zenith 345-kV double circuit w/ 30% series comp 4 Gibbons Creek-Zenith 345-kV double circuit 6 Fayetteville-Obrien 345-kV double circuit 6A Fayetteville-Obrien 345-kV double circuit w/ 30% series comp 9 Gibbons Creek-Salem-Zenith 345-kV double circuit 12 Gibbons Creek-Salem/ Fayetteville-Zenith 345-kV double circuit 19 Add series comp to existing Hillje-WAP and Hillje-Holman 345-kV 22 Fayetteville-Zenith 345-kV double circuit w/ 50% series comp 24 Option 19 + Option 22 J1 Sandow-Zenith 345-kV double circuit J1A Sandow-Zenith 345-kV double circuit w/ 30% series comp J2 Marion-Holman-Obrien 345-kV double circuit J3 Hillje-Obrien 345-kV double circuit DC Brown-Zenith 3000 MW HVDC line DC2 Scurry-Zenith 2000 MW HVDC line E1 Twin Oaks-Salem-Zenith 345-kV double circuit April 16, 2010 RPG Meeting

Houston Import Study Options To Scurry To Brown Option 1 Option 2 Option 3/ 3A/ 22 Option 4 Option 6/ 6A Option 9 Option 12 Option 19 Option J1/ J1A Option J2 Option J3 Option DC Option DC2 Option E1 April 16, 2010 RPG Meeting

Houston Import Study Update Updated modeling for identified cogeneration plants to better reflect operation of those units in recent history Reran analysis with updated model Revised study costs based on new $/mile estimate Optimized each study option to remove congestion and lower production costs Added some upgrades to original projects Results on next slide = Does not pass and will not be evaluated further = Passes and will be evaluated in next step = May be evaluated in future steps but most likely will not be recommended April 16, 2010 RPG Meeting

Annual Savings Needed ($M) Annual Energy Revenue Savings ($M) Savings Results Options Total Cost ($M) Annual Savings Needed ($M) Annual PC Savings ($M) Annual Energy Revenue Savings ($M) 1 333 55.5 18.9 50.7 2 222 37.0 13.2 19.2 3 175 29.2 13.3 45.4 3A 225 37.5 11.4 58.3 4 173 28.8 11.0 -2.5 6 189 31.5 7.8 49.0 6A 239 39.8 12.1 43.3 9 278 46.3 11.8 52.3 12 306 51.0 12.3 46.5 19 62 10.3 3.1 6.4 22 226 37.7 46.1 24 315 52.5 11.7 43.9 J1 275 45.8 12.0 51.3 J1A 326 54.3 13.6 52.7 J2 420 70.0 10.8 41.1 J3 174 29.0 7.9 -10.7 E1 379 63.2 19.1 56.5 DC1 980 163.3 5.3 DC2 1108 184.7 17.7 April 16, 2010 RPG Meeting

Houston Import Study Results Observations 2014 benchmark case showed heavy congestion on Singleton-Zenith 345-kV line for the contingency loss of Roans Prairie-Kuykendahl/ Singleton-Tomball 345-kV double circuit Congestion also observed on Jewett-Singleton and Twin Oak-Jack Creek 345-kV lines Upgraded cases generally showed lower average LMPs for Houston area None of the upgrade projects completely eliminated Singleton-Zenith congestion Production cost savings (societal benefit) were not high enough to justify any of the projects, but energy revenue savings (consumer benefit) were sufficient for several projects April 16, 2010 RPG Meeting

The following three sample price maps all have the same color scale LMP maps The following three sample price maps all have the same color scale Maps show relative annual average LMP for all buses Red = high/ Blue = low April 16, 2010 RPG Meeting

Benchmark case April 16, 2010 RPG Meeting

Option 3 April 16, 2010 RPG Meeting

Option J1 April 16, 2010 RPG Meeting

Houston Import Study – Phase 2 Evaluate options that passed base case analysis in alternative scenarios CREZ Evaluate performance of each option with CREZ-level wind generation Created benchmark case by increasing wind generation in each CREZ zone until each zone had its respective Scenario 2 level generation Results in 18873 MW total wind generation capacity in case Modified case by adjusting PSTs and opening some 69-kV lines in Wichita Falls area to reduce congestion Options Total Cost ($M) Annual PC Savings ($M) Annual Energy Revenue Savings ($M) 1 333 12.8 148.4 3 175 17.1 87.5 9 278 11.2 98.7 J1 275 24.9 91.9 E1 379 31.6 115.4 DC2 1108 77.0 171.3 April 16, 2010 RPG Meeting

CREZ Scenario Results Discussion HVDC (Option DC2) Resulted in highest annual production cost savings and annual energy revenue savings Savings in CREZ scenario still would not be enough to justify high cost Did not pass base case analysis Will not be evaluated further Southeast Loop (Option 1) Results showed high annual energy revenue savings, but lower annual production cost savings Will continue to be evaluated Option E1 Did not show enough benefit to be recommended at this time Option 3 could be expanded to Option E1 if future studies indicate justifiable benefit Will continue to be evaluated, but only as possible future expansion of Option 3 Options 3, 9, and J1 continue to show good performance The following four sample LMP maps all have the same color scale April 16, 2010 RPG Meeting

CREZ Benchmark case April 16, 2010 RPG Meeting

CREZ with Option 1 April 16, 2010 RPG Meeting

CREZ with Option 3 April 16, 2010 RPG Meeting

CREZ with Option DC2 April 16, 2010 RPG Meeting

Complete alternative scenario analysis Houston Import Study Next Steps Complete alternative scenario analysis May have project recommendation by May RPG meeting Finalize report in June April 16, 2010 RPG Meeting

Questions? April 16, 2010 RPG Meeting