July 13, 2012 Transmission Needs Analysis Scenario 1 Update: BAU All Technologies

2 Agenda Review Major Process Steps Review Base Case Upgrades Area Analysis 2

3 Major Process Steps Base Case Development –Develop a simplified network for study years 2022 (10yr) and 2032(20yr) based upon the most recent 5YP Case –Incorporate scenario-specific economic assumptions Load forecast Resource development / retirement –Create a workable case Identify and alleviate base case overloads Update monitored elements Identify and review congestion –Identify Conceptual Projects Work with TDSP’s to identify plausible solutions / economic alternatives to Base Case issues 3

4 Major Process Steps AC Analysis –Identify import limitations to major load regions that maintain voltage stability –Impose import constraints in a DC Model Economic and Reliability Assessment –Assess the adequacy of existing infrastructure and supplemental conceptual projects at meeting study criteria –Document scenario specific results by Area, including Significant Issues Reliability concerns Economic Opportunities 4

5 Base Case Reliability Upgrades 2022 To build a solvable 2022 model, certain upgrades were necessary to replicate what would typically be resolved in shorter term planning horizons. In certain instances (primarily near major load zones) major upgrades were necessary to build a useable case: kVMiles Approximate Cost $700M (2012) $278M (2012) Including: One upgrade of an existing 345kV Import into Houston Multiple 345kV upgrades with the Houston Urban area Several major upgrades of existing 345kV imports into Dallas / Fort Worth from east of the DFW region

6 Base Case Reliability Upgrades 2022

7 Base Case Reliability Upgrades 2032 Similar to(but more extreme than) the 2022 model, development of a 2032 model required certain upgrades necessary to replicate what would typically be resolved in shorter term planning horizons. In certain instances (primarily near major load zones) major upgrades were necessary to build a useable case: kVMiles Approximate Cost $2.1B(2012) $1.2B (2012) Including: An incremental 345kV Import into Houston Extensive 345kV upgrades from South to Houston as well as 345kV upgrades into the Houston Urban area Extensive 345kV upgrades of existing imports into Dallas / Fort Worth from east / southeast of the DFW region

8 Base Case Reliability Upgrades 2032

9 Area Analysis BAU All Tech with DR 9

10 Methodology: 10 1.Develop a base-case with irresolvable constraints upgraded. 2.Identify scenario-specific import limitations into major load zones given most severe resource and element contingencies. 3.Create binding constraints to represent AC voltage stability limits in the DC / PROMOD Model. 4.Identify must-have reliability upgrades and economic supplements / alternatives.

11 Dallas / Fort Worth Area: Base Case Upgrades 11 From BusTo BuskV Original Rating New Rating Line Length new or upg $M/Mi (2012) Total Cost ($M, 2012) Year TricornerTrinidad upg < 2022 Big BrownNavarro upg < 2022 Big BrownNavarro upg < 2022 Trading HouseSam Switch upg < 2022 Trading HouseSam Switch upg < 2022 Cedar Hill SwitchWatermill upg < 2022 Jewett 500kV Watermill 500kV new <2032 Monticello 345 Allen Switch upg <2032 Royse Switch 345 Shamburger Switch upg <2032 Farmersville 345Monticello upg <2032 NavarroWatermill new <2032 TricornerTrinidad new <2032 Venus SwitchSam Switch upg <2032 Venus SwitchSam Switch upg <2032 Wolf HollowRocky Creek upg <2032 Big BrownNavarro upg <2032 Big BrownNavarro upg <2032 Valley SESAnna Switch upg <2032 Royse Switch 345 Allen Switch upg <2032 TrinidadRichland upg <2032 West LeveeWatermill upg <2032 Cedar Hill SwitchWatermill upg <2032

12 Dallas / Fort Worth Area Significant Issues: As studied, expanded import paths will be required by 2022 to maintain voltage stability –19GW assumed DFW Load –Critical Contingency: n: Trinidad-Tricorner-Watermill g: Mountain Creek To alleviate base case overloads on the Dallas Import interface in 2032, three projects were included: –Navarro – Watermill 345kV Double Circuit –Watermill to Jewett 500kV –Trinidad to Tricorner 345kV 12

13 DFW Import Capability Issue Options tested to improve DFW Import Capability Options Dallas Interface in AC Corresponding Year in AC Analysis Corresponding Year in DC Analysis MWDelta Base Case Watermill-Jewett double circuit 500kV Navarro-Watermill double circuit 345kV Tricorner-Trinidad double circuit 345kV

14 DFW Economic Project Options Watermill-Navarro double circuit 345 kV option was evaluated for economy after demonstrating benefit in import analysis. While the option does not meet current economic criteria, it does increase import capability into Dallas and relieve nearby 345kV overloads. Project Options Tested for 2022 Length (mile) Estimated Capital cost (million in 2022) Production Cost Savings (million) Reliability benefit (cost realized by addressing or causing other overload issues) (million) Economic? New Watermill-Navarro 345 kV line (67.0)No

15 DFW Economic Project Options Projectlength Estimated Capital cost (million in 2032) Yearly prod cost saving Reliability benefit (cost realized by addressing or causing other overload issues) (million) Economic? 345 kV Venus- Tricorner-Royse 79 miles No Dallas east import365 miles1, ,342.20No Dallas east import project solved significant overloads, and was very close meeting economic criteria (siting- specific solution.) The reliability / economic implications of these projects are dependent upon siting assumptions.

16 DFW: Special Issues Increasingly urban areas present limited ROW to access loads from remote resources East to Dallas transmission projects are only necessary under scenario specific siting assumptions 16

17 Houston Area: Base Case Upgrades 17 FromBusToBuskV Original Rating New Rating Line Length new or upg $M/Mi (2012) Total Cost ($M, 2012) Year South Texas ProjectWA Parish upg < 2022 SmithersBelaire upg < 2022 WA ParishBelaire upg < 2022 WA ParishObrien upg < 2022 WA ParishObrien upg < 2022 CanalLufkin345NA new < 2032 South Texas ProjectWA Parish upg < 2032 South Texas ProjectDow Chemical upg < 2032 SmithersBellaire upg < 2032 WA ParishBellaire upg < 2032 South Texas ProjectHillje upg < 2032 Lufkin SwitchBerea REA upg < 2032

18 Houston Metropolitan Area Significant Issues: Increased dependence on imported power and limited opportunities for resource development internal to Houston metro region highlights the need for additional import paths. The dependence on the north-to-Houston import path limits opportunities to improve economic efficiency absent geographic diversity. 18

19 Houston Metropolitan Area Significant Issues: As studied, expanded import paths will be required by 2022 to maintain voltage stability –20GW assumed Coast Weather Zone Load –Critical Contingency: n-1: Roan-Kuykendahl & Singleton – Tomball g-1: Cedar Bayou #2 Significant congestion on the North to Houston constraint Lufkin to Jordan 345kV* was added to alleviate base case import constraint overloads *(scenario specific least cost option) 19

20 Houston Area Import Capability Issue Options (double circuit 345 kV) Houston Interface Limit (AC) Corresponding Year in AC Analysis Corresponding Year in DC Analysis MWDelta Base Case* Fayette-O’Brien 345 kV Lufkin-Jordan 345 kV Beyond 2032 (no overload in 2032) TNP One-Salem-Zenith 345 kV Beyond 2032 (no overload in 2032) SO Texas-Hillje-O’Brien 345 kV Beyond 2032 (no overload in 2032) Note: * The Fayette-Zenith 345 kV line has been removed from the study model

21 Houston Area Economic Project Options Upgrading Green Bayou transformer is expected to provide economic benefit. Although Fayette-O’Brien, TNP One-Salem- Zenith, South Texas-Hillje-O’Brien 345 kV line are not economical, the options address potential overload issue on the W.A. Parish- O’Brien 345 kV line in the area. Project Options Tested for 2022 (all options are double circuit options) Length (mile) Estimated Capital cost (million in 2022) Production Cost Savings (million) Reliability benefit (cost realized by addressing or causing other overload issues) (million) Economic? New Fayette-O Brien 345 kV line (108.8)No New Lufkin-Jordan 345 kV line No New TNP One-Salem-Zenith 345 kV line (105.3)No Upgrade Gibbons Creek-Singleton 345 kV n/aNo Upgrade Green Bayou 345/138 kVn/a n/aYes Upgrade S. Texas-Hillje, and new Hillje- O’Brien 345 kV line (54.1)No

22 Houston Area Economic Project Options A new import path into the Houston Region was needed for stability in the 2032 case Study option Lufkin to Jordan was selected as a reliability fix for 2032 Lufkin to Jordan was tested and demonstrated economy in 2030 Projects tested for 2032Length(mile) Project cost ($M in 2032) Reliability benefit (upg cost avoided) ($M in 2032) adjusted cost/6 ($M in 2032) prod cost saving in 2032($M) economic? 500kV Zenith-TNP, 345kV TNP-Thouse 59(345kV)+133(500k V) No 500kV Limest-Zenith No Congestion upgrade Houston No Project tested for 2030Length(mile) Project cost ($M in 2030) Reliability benefit (cost avoided) (million in 2030) Adjusted cost/ ($M in 2030) prod cost saving in 2030($M) economic? Lufkin-Jordan 345kV Yes

23 Houston Area Special Issues: Demand Response The BAU / All Technology Study introduces demand response to the planning model: 23 City Capacity (MW) IndustrialResidential/Commercial Austin60275 Dallas Houston San Antonio80458 Absent Demand Response in this model: The Houston Area Import constraint would be overloaded one year sooner (2030) The Lufkin to Jordan line would no longer maintain voltage stability in the Houston region up to the year 2032

24 Austin / San Antonio Area Base Case Upgrades (2032) 24 FromBusToBusLine or XfmrkV Original Rating New RatingLine Length new or upg $M / Mi Total cost ($M 2012) Hill CountrySkylineLine upg Marion 345Marion 138Transformer new 7.98 Cagnon 345Cagnon 138Transformer new 7.98 Cagnon 138VLSILine upg Cedar ValleyCopperAS CoveLine upg McNeilMarshall FordLine upg GarfieldHicrossLine upg Howard LaneJollyvilleLine upg LeanderNamelessLine upg

25 Austin/San Antonio Areas Significant Issues: As studied, expanded import paths will be required by 2027 to maintain voltage stability (San Antonio) –13GW peak load assumed for Austin / SA –Critical Contingency: n-1: Hill Country – Marion & Skyline – Marion g-1: Deely unit retired in

26 Austin/San Antonio Areas 26 Significant Issues: Increased dependence on imported power and limited opportunities for resource development internal to San Antonio 345kV Loop highlights the need for additional import paths. Limited strong sources from the West places increasing dependence upon 138kV transmission in Austin.

27 Austin/San Antonio Areas Import Capability Map of Options to Improve San Antonio/Austin Import Capability

28 Austin/San Antonio Areas Import Capability San Antonio Area Import Capability from Voltage Stability Perspective 13,209 MW at San Antonio/Austin Critical contingency: Hill Country-Marion & Skyline-Marion under G-1 Options San Antonio Interface Limit Corresponding Year in AC Analysis Corresponding Year in DC Analysis MWDelta Base Case Beyond 2032 (no overload in 2032 Base Scenario) Elm Creek – Spruce 345 kV double circuit line Kendall – Hill Country 345 kV double circuit line Lon Hill – Pawnee – Spruce Line upgrade kV double circuit line from Cagnon – Miguel kV double circuit line from Comanche peak – Edinburg > kV circuit from Newton – Miguel- Lon Hill > kV circuit from Kendall – Miguel – Lon hill >2030

29 Austin/San Antonio Areas : Special Issues Hill Country to Skyline, absent incremental import capacity, will be overloaded by Congestion on to the SA loop is observed prior to A new western 345kV source may be difficult to terminate at existing switchyards on the 345kV loop. Western source needs for the Austin area merits further study. 29

30 Austin/San Antonio Area Economic Project Options Project Options Tested for 2022 (all new 345 kV lines are double circuit options) Length (mile) Estimated Capital cost (million in 2022) Production Cost Savings (million) Reliability benefit (cost realized by addressing or causing other overload issues) (million) Economic? Cagnon-Miguel 345 kV No Cagnon-Miguel 345 kV & Cagnon 345/138 kV n/aNo Cagnon-Pawnee 345 kV No Cagnon-Pawnee 345 kV & Cagnon 345/138 kV n/aNo Kendall-Hill Country 345 kV (8.2)n/aNo Upgrade Elgin-Taylor 138 kV n/aNo Upgrade Hill Country-Skyline 345 kV n/aNo Additional path(s) from the South into the San Antonio area will significantly relieve the loading on the Hill Country- Skyline and Spruce-Pawnee (assumes incremental generators sited South of S.A.)

31 Austin/San Antonio Area Economic Project Options ProjectLength Estimated Capital cost (million in 2032) yearly prod cost saving Reliability benefit (cost realized by addressing or causing other overload issues) (million) economic? 500kV Lnhill-Migel-Cagnon1911, No Congestion upgrade San Antonio No

32 Lower Rio Grande Valley Base Case Upgrades 32 FromBusToBus Line or Xfmr kV Original Rating New Rating Mi new or upg $M/Mi Total Cost ($M, 2012) Year WeslacoStewartLine upg <2022 AbileneCallahanLine upg <2032 WormserRio BravoLine upg <2032 AderholdDukeLine upg <2032 ElsaAderholdLine upg <2032 Barney DavisRodd FieldLine upg <2032 Celanese BishopKlebergLine upg <2032 South McAllenLas MilpasLine upg <2032 HollyRodd FieldLine upg <2032 AirlineCabanissLine upg <2032

33 Reliability/Congestion Issues –LRGV for 2022 and 2032 The Lower Rio Grande Valley (LRGV) was studied with the following scenario specific assumptions: 1400 MW of thermal generation sited in the LRGV RPG approved projects in service Largest CCGT in service / outaged Given these assumptions, no congestion or reliability issues were observed for the selected study years. The following sensitivities were tested: Maximum MW Flow on LRGV Interface Observed in PROMOD During 2032 Peak Load Condition Under Different Generation Assumption Sensitivity ScenarioMaximum Flow (MW) Violated Interface Limit (2512 MW) ? With new expansion unit sited in LRGV918No With new expansion units sited outside LRGV2048No With new expansion units sited outside LRGV and With the major existing combined cycle units in LRGV offline 2691Yes

34 LRGV: Study Assumption Sensitivities Absent resource development in the LRGV, for the most severe generation contingency, incremental import capacity is needed in 2028 for voltage stability. 34 Without Expansion units modeled inside LRGV And With Major Existing Combined Cycle Unit offline MonthYearFlow (MW) Interface Limit Applied (MW) Violated Interface Limit? Maximum MW Flow in 2028, 2029, 2030 and 2032 on LRGV Interface Yes Yes Yes No

35 Preview of Scenario 2 – BAU with NG Retirements Scenario 2 assumes retirement of NG fired resources after 50 years 35 TH Wharton – All units (1022 MW) Greens Bayou – All units (354 MW) Cedar Bayou -1,2 (1494 MW) Sam Bertron -1,2 (348 MW) W A Parish -1,2,3,4,T1 (1191 MW) Sam Rayburn – GT1,GT2,3 (52 MW) B M Davis 1 (335 MW) Silas Ray 5 (17 MW) Pearsall -1,2,3 (74 MW) VH Braunig – 1,2,3 (862 MW) O W Sommers - 1,2 (810 MW) Dansby 1 (110 MW) Atkins 7 (20 MW) Sim Gideon - 1,2,3 (620 MW) Decker- 1,2 (748 MW) Trinidad 6 (226 MW) Stryker Creek -1,2 (673 MW) Graham - 1,2 (615 MW) Handley – 3,4,5 (1266 MW) R W Miller - 1,2,3 (403 MW) Mountain Creek -6,7,8 (808 MW) Ray Olinger -1,2,3 (331 MW) Powerlane Plant -1,2,3 (88 MW) Lake Hubbard -1,2 (916 MW) Ferguson (425 MW)

36 Summary: 2022/ Dallas / Fort Worth: Incremental import paths will be needed by 2022 Scenario-specific assumptions place most incremental resources South and Southeast of the DFW area. Future scenarios will be studied to determine the impact to import path needs. Dynamic and static reactive solutions may maintain voltage stability / delay the need for incremental import paths. Houston Metropolitan Area: Incremental import paths will be needed by 2022 Scenario-specific assumptions place most incremental resources South and North of the Houston Metro region. Certain import path upgrades demonstrate economy before a reliability required in-service year.

37 Summary: 2022/ Austin / San Antonio: Strong sources west of the Austin / San Antonio region aide economy and voltage stability Increased dependence on imported power in the Austin / San Antonio Area merits further study. Congestion and base-case overloads on the 345kV connections to the San Antonio ring support the need for incremental 345kV import paths. Increased imports to support voltage stability in the San Antonio are needed by 2028 (assuming limited or no development of incremental resources within the 345kV loop) Lower Rio Grande Valley: Limited congestion, overloads, or voltage stability issues are seen with incremental resources developed in the LRGV Scenario-specific assumptions site incremental resources in the South and LRGV. Absent resource development local to the area, incremental imports are needed by 2028 for voltage stability.

38 Questions? 38