10/03/ Report on Existing and Potential Electric System Constraints and Needs Within the ERCOT Region October 3, 2002

10/03/022 Contents Transmission system and constraints overview Cost of CSC and Local congestion Completed transmission Transmission underway Transmission under review ERCOT generation and demand outlook Transmission planning outlook

10/03/023 Transmission System Backbone for retail and wholesale competition Complex network –Not a one way system –Flows change with changing system conditions –Events on the network can have far reaching effects across the whole system Under rapid and continuous change –New generation interconnections –Generation retirements –Transmission upgrades

10/03/024 Transmission Constraints Function of the impedance and voltage of network Three types of limits: –Thermal Limits –Voltage Limits/Stability –Unit Stability Limits

10/03/025 Complicates system security management Leads to economic inefficiencies Creates captive markets Reduces liquidity of the market Creates for “Must Run” generation Reduces utilization of efficient units Creates opportunity for market power Transmission Constraints’ Impacts:

10/03/ Commercially Significant Constraints (CSCs) and Local Constraints (LCs) Wind Significant LC Areas Valley Laredo Wind North Austin San Antonio Corpus Christi West

10/03/027 Congestion Costs

10/03/028 TCRs and Direct Assignment Costs

10/03/029 Limestone-Watermill 345-kV Double-Circuit Line Monticello-Farmersville 345-kV Line Lon Hill-Rio Hondo and Lon Hill-Edinburgh 345-kV Lines Series Capacitor Compensation Military Highway STATCOM Laredo STATCOM San Miguel-Pawnee 345-kV Line and Establish Pawnee 345-kV Station Centerville Switch-McCree Switch 345-kV Line White Point 345-kV Switching Station and 138-kV Upgrades Cedar Bayou-King-North Belt-TH Wharton 345-kV Corridor Upgrades Many 138-kV and 69-kV System Additions/Upgrades including Autotransformers Completed Transmission

10/03/0210 Morgan Creek-Twin Buttes-Red Creek-Comanche Switch 345- kV Line Graham-Jacksboro 345-kV Line Farmersville-Valley Junction-Anna Switch 345-kV Line Paris-Anna 345-kV Line Venus-Liggett 345-kV Line Edinburg-Bates-McAllen 345-kV Line McAllen-Brownsville-La Palma 345-kV Line Pawnee-Coleto Creek 345-kV Line Many 138-kV and 69-kV System Additions/Upgrades including Autotransformers Transmission Underway

10/03/0211 Dallas/Fort Worth Jacksboro-West Denton 345-kV Line Jacksboro-Willow Creek-Parker 345-kV Line Upgrade West Denton-NW Carrollton 345-kV Second Circuit Watermill-Cedar Hill 345-kV Second Circuit Anna Switch-Collin-NW Carrollton 345-kV Line Upgrade South to North and South to Houston Salem-Bryan/College Station-TNP One 345-kV Line and Establish New 345/138-kV Station Clear Springs-Zorn-Harris Branch-Gabriel-Salado 345-kV Line Cuero-Holman 345-kV Line and Establish Cuero 345-kV Switch Station Coleto Creek-Cuero 345-kV Line Whitney-Concorde 345-kV Line Twin Oak-Lake Creek 345-kV Second Circuit Transmission Under Review

10/03/0212 Laredo and Valley San Miguel-Laredo 345-kV Line Laredo-Bates-Edinburg 345-kV Line West Texas to North Texas and Wind Area Red Creek-Comanche Switch 345-kV Second Circuit Twin Buttes-McCamey 345-kV Line and 345/138-kV Autotransformers Comanche Switch-Killeen Switch 345-kV Line Many 138-kV and 69-kV System Additions/Upgrades including Autotransformers Transmission Under Review (cont.)

10/03/0213 Overview of ERCOT Load Typical picture:  Load growth reflects historic “load management” efforts Demand participation opportunities: Energy price reductions Lower probability of outages

10/03/0214 ERCOT Capacity and Demand ERCOT Generation Capacity and Demand MW Total Capacity w/o units >50 years Capacity w/o units >40 years Capacity w/o units >30 years Peak Demand at 2.1% growth Demand

10/03/0215 Transmission Planning Process  Propose needed bulk transmission facility additions based on identified constraints.  TDSPs  ERCOT  Any interested party  Conduct regional planning evaluation  Conduct an open process of public review and comment on proposed facility additions through committees.  Submit all final recommended bulk/large transmission facility additions to the ERCOT Board of Directors.  Determine the designated transmission service providers of the additions.  Notify the Public Utility Commission of Texas (PUCT) of all Board supported transmission facility additions and their designated providers.

10/03/0216 Regional Planning Groups ERCOT Regional Transmission Planning Process –Includes TDSP’s and PUCT Staff –Confidentiality Major Issue Market Sensitive Information –Review by Stakeholders via Committee’s ROS, WMS, TAC Large projects reviewed by ERCOT Board of Directors –Final Authority is PUCT in the form of a CCN

10/03/0217 Key Issues in Planning OLDNEW Planning Coordination Generation and transmission planned within vertically integrated utilities Competitive generation and regulated transmission; coordination more difficult to achieve Level of Adequacy Determined by utility with approval from regulator Generation adequacy being defined; Transmission adequacy determined through public process with regulatory approval Lead Times for Planning & Construction Long lead times for new generation; shorter lead times for transmission The opposite is normally true Roles of Markets & Regulation Regulation and planning dominate adequacy decisions Markets dominate generation adequacy decisions (and operational decisions) and affect transmission adequacy decisions

10/03/0218 ERCOT’s Perspective  Focus on security of the entire control area  Take multiple needs and plans into account  Look beyond specific entities’ requests  Identify broader regional needs  Promote efficient use of transmission corridors  Promote margins on new transmission additions  Consolidate projects where practical  Ensure compliance with ERCOT planning criteria

10/03/0219 Planning Internet Links SYSTEM PLANNING – –Capacity, Demand & Reserve Reports (CDR) –Generation Project Interconnection Information DETAILED SYSTEM PLANNING DATA & TRANSMISSION MAPS – –Includes data sharing items with transmission plans of TDSP’s –Includes Power Flow Base Cases –CSC detailed data & CM zone maps –Controlled access area due to security requirements MANUALS, DOCUMENTS AND REPORTS – –Demand & Energy Reports (D&E) Includes ERCOT Load by Settlement Period for Each Month –Historical ERCOT Hourly Load (FERC 714)

10/03/0220 Questions?