Flowgate Allocation Method Examples of Proportional Curtailment of FIRM PTP and GTL Houston, December 1-2, 2010

Proportional Curtailment of Firm PTP and Firm GTL – Problem Statement Provide equal treatment of FIRM Point-to-Point (PTP) Transaction impacts and FIRM Generation-to- Load (GTL) Impacts during a TLR event – Flowgate allocation does not downgrade FIRM PTP and GTL transactions to NON-FIRM – TLR curtailment of FIRM contributions requires the issuance of a TLR-5 or higher – FIRM contributions are NOT curtailed in TLR-3a, TLR-3b and TLR-4 Allocations are based on forecasted/reserved (Expected) FIRM usage of flowgates up to but not exceeding the flowgate limit – Expected FIRM usage is determined in the Hour-Ahead impact calculation – All Expected FIRM contributions to the flow on the flowgate are included – If the total Expected FIRM contributions does not exceed the flowgate limit: BAs and TSPs are allocated FIRM limits to their contribution on the flowgate that equals its total Expected FIRM contributions – If the total Expected FIRM contributions exceeds the flowgate limit: BAs and TSPs are allocated two-tier FIRM limits to their contribution on the flowgate proportional to their contribution FIRM contributions are placed in two curtailment buckets – LAST TO CUT (LTC) and FIRST TO CUT (FTC) – Nomenclature: PTP transactions:FTC = 7-FLTC = 7-FC GTL:FTC = 7-FNLTC = 7-FCN – FIRM contributions in FTC and LTC are determined in real-time based on current system conditions – LTC: FIRM contributions in the LTC bucket are those that do NOT exceed the Expected FIRM usage of the flowgate for FIRM PTP and GTL impacts – FTC: FIRM contributions in the FTC bucket are those that exceed the Expected FIRM usage of the flowgate for FIRM PTP and GTL impacts

Proportional Curtailment of Firm PTP and Firm GTL - Example Flowgate limit:800 MW Flowgate Owner:Entity A – Entity A has seams agreements with Entities B, C, D & E – Entity A does not have a seams agreement with Entities F & G Firm allocation based on higher-of results from two DA, DA and HA allocations FTC shortfall based on difference between firm allocation and HA impacts (GTL & PTP) HA GTL impacts and HA PTP impacts used to assign RT firm allocations on a pro-rata basis. EntityFirm Allocation HA Firm GTL Impacts HA Firm PTP Impacts HA Firm Impacts FTC Shortfall GTL Imp %PTP Imp %Firm Allocation A %100%120 B %42.86%224 C %0%128 D %62.5%256 E %55.56%72 F %25%0 G %14.29%0 Total

Proportional Curtailment of Firm PTP and Firm GTL - Example Steps to Assign LTC and FTC Priorities to RT GTL Impacts and RT PTP Impacts 1.If sum of RT impacts are less than firm allocation, assign all RT impacts LTC firm. 2.If sum of RT impacts exceed firm allocation, use GTL % and PTP % to split firm allocation. If the split firm allocation exceeds RT GTL impacts or RT PTP impacts, assign remaining split firm allocation to other category. 3.If still have remaining PTP impacts, assign them to FTC (7FC). 4.If still have remaining GTL impacts, take difference between FTC shortfall and FTC (7FC) (set this value to 0 if negative number) and assign the lower of the remaining GTL impacts and the difference to FTC (7FCN). 5.If still have remaining GTL impacts, assign them to (6NN).

Proportional Curtailment of Firm PTP and Firm GTL - Example Flowgate limit:800 MW Flowgate Owner: Entity A – Entity A has seams agreements with Entities B, C, D & E – Entity A does not have a seams agreement with Entities F & G EntityFTC Shortfall Firm Allocation RT Impac GTL RT Impac Firm PTP Firm GTL LTC(7FN) Firm GTL FTC(7FCN) Non-Firm GTL (6NN) Firm PTP LTC(7F) Firm PTP FTC(7FC) A B C D E F G Total

FTC and LTC Calculations RC requests TLR 5a to achieve 400 MW of unloading (comes from a combination of firm and non- firm tag curtailments as well as GTL relief obligations). – 100 MW of non-firm tag impacts on flowgate. – Since there are 188 MW of non-firm tag and GTL impacts and 507 MW of FTC firm tag and GTL impacts, this TLR level 5a will not involve the LTC firm category. (*) Tag Cuts are impacts on flowgate that are converted to actual MW tag curtailments based on tag response factor. (*) Assumes 100 MW of non-firm tag curtailments already made. EntityFirm GTL LTC(7FN) Firm GTL FTC(7FCN) Non-Firm GTL (6NN) Firm PTP LTC(7F) Firm PTP FTC(7FC) Relief Obl LTC(7FN) Relief Obl FTC(7FCN) Relief Obl (6NN) Tag Cuts LTC(7F) Tag Cuts FTC(7FC) A B C D E F G Total

Proportional Curtailment of Firm PTP and Firm GTL – Issues To avoid downgrading firm PTP to non-firm curtailment priority, the FTC PTP impacts reported to the IDC may exceed the FTC shortfall (see Entity A). The amount of non-firm GTL (6NN) reported to the IDC is based on the amount by which the RT GTL and RT PTP impacts exceed the HA firm GTL impacts (the HA firm GTL impacts based on only the set of generators with firm transmission service while RT GTL impacts based on all generators) and the HA firm PTP impacts. The amount of non-firm GTL (6NN) reported to the IDC is reduced when the FTC PTP impacts reported to the IDC exceed the FTC shortfall (see Entity E). While the total impacts in this example (GTL and PTP) significantly exceed the flowgate rating, this is expected since we are using forward impacts in the IDC as opposed to net impacts. This analysis assumes all impacts and allocations are 5% or greater and the RT GTL flows and tag impacts are for next hour. CO 283 currently calculates GTL flows for current hour and next hour. The flowgate allocations and establishing proportional curtailment of firm PTP and firm GTL will take into account impacts down to 0% versus impacts 5% and greater. For all entities in this example, the sum of RT impacts (GTL and PTP) exceed the firm allocation. We believe this will always be the case. In the event it is not the case, we could have a situation where an entity is not fully utilizing its firm allocation. If that occurs, do we need to make that unused firm allocation available for use by other entities? Nelson has some suggestions on how unused firm allocation could be reassigned to other entities.