February 26, 2013 Board of Directors Meeting 2012 ERCOT Region Reliability Update

2 NERC became aware of discrepancies between the design and actual field conditions of transmission facilities and issued a Level 2 Alert, the Recommendation to Industry Consideration of Actual Field Conditions in Determination of Facility Ratings, in Oct Periodic assessments began July 2011 with reports due every 6 months, with the final report due Jan NERC Alert includes a temporary amnesty for possible violations of FAC-009, as these types of discrepancies would normally result in violations. Priority# miles % Miles Assessed # of Circuits % Circuits with Discrepancies # of Discrepancies % Remediation Complete High671699%3518%14755% Medium %8277%11845% Low908413%7944%27935% ERCOT Region Data NERC Facility Ratings Alert

3 For the ERCOT Region: ●Most prominent discrepancy found is Clearance to Underbuild (~76% of total discrepancies), followed by Ground to Structure Clearance (~10% of total). ●A total of 544 discrepancies have been reported to date, or approximately 1 discrepancy every 31 miles of line inspected. ●Most entities have chosen to remediate the discrepancies as they are found or temporarily de-rate lines until the remediation is complete, rather than permanently de-rate the lines.

4 ERCOT Region Lessons Learned Received from entities (since start of EA process) 95 (70 from Feb 2011 Winter Event) Published on NERC web14 Submitted to EAS for approval5 Top 3 event causes continue to be Equipment Failure, Weather, and Relaying Issues. Generation trips >450 MW average 18 per quarter. Texas RE receives, prepares and shares lessons learned from events. Events

5 Frequency Control and Primary Frequency Response ●Frequency Control Performance continues to improve (managed by ERCOT Load Frequency Control). CPS1 scores have shown continuous improvement since start of Nodal market. ●Primary Frequency Response provided by generating units during loss of generation events is showing a gradual decline. ERCOT target is 420 MW per 0.1 Hz. NERC minimum is 286 MW per 0.1 Hz. Efforts are targeting improved governor response from all units, especially those providing Responsive Reserve Service (RRS).  Leader lines show min/max for the quarter  Boxes indicate 25%/75% quartiles  Red/black lines in each box show the average and median values for the quarter

6 Since start of Nodal market, the system frequency profile has seen a shift to the right to a band center of Hz. This is attributed to the impact of recurring Time Error corrections. The frequency profile is also showing a slightly narrower shape, in part due to the percentage of generation units that have reduced turbine governor deadband settings from Hz to Hz. ERCOT has averaged about 10 Time Error Corrections each month, always for slow Time Error. Time Error average is about second per day time accumulation. Frequency Control and Primary Frequency Response

7 Protection System Misoperations Data ●Texas RE’s analysis of misoperation data is shared with ERCOT System Protection Working Group (SPWG) each quarter. ●ERCOT region trends are similar to other regions based on NERC Protection System Misoperation Task Force information. ●Focus continues to be on working with entities to reduce misoperations due to human error (e.g. relay setting errors, wiring errors, etc.)

8 Protection System Misoperations Data ●>94% of total misoperations are dependability-based (vs. security-based). ●Incorrect settings, relay failures, and communication failures comprise 75% of the total misoperations. ●Misoperations from microprocessor-based relays continue to be the dominant type, in part due to the large installed base of microprocessor relays as well as the complexity in applying and setting these devices.

9 Protection System Misoperations Data ●Registered entities are taking an aggressive approach in addressing protection system misoperations when they occur. Average time to complete corrective actions is 36 days. ●This far exceeds the time frames proposed in the NERC PRC standard, which will allow 180 days for an entity to develop a corrective action plan.

10 Texas RE continues to monitor and track incidents of substation intrusion, copper theft, possible sabotage, and cyber threats Infrastructure Protection Reports

11 Generation Availability Data System (GADS) ●Mandatory GADS quarterly reporting began Jan 2012 for units >50 MW, not including wind. Reporting for units rated greater than 20 MW begins in 2013 (not including wind). ●A limited data set is available at this point, with only 12 months of unit- specific information available for approximately 360 ERCOT-region units. ●Texas RE’s analysis of GADS data is shared with the Performance Disturbance Compliance Working Group (PDCWG) each quarter. ●Analysis of GADS data will continue to evolve as the process matures. Ultimately, ERCOT-region GADS metric data may be used as input into the Long-Term Reliability Assessment (LTRA) process.

12 Most common immediate de-rate cause was due to low Btu coal (26% of total). Most common immediate forced outage causes were gas combustor issues, transmission problems, gas fuel issues, and waterwall issues Immed. De-Rates Immed. Forced Outages # of Events Total Duration hours hours Total Capacity MW Generation Availability Data System (GADS)

13 TADS reports are submitted annually by March 1 each year for circuits >200kV, for both automatic and non-automatic outages. Review and analysis of 2012 TADS will be completed by March 15. NERC Section 1600 data request changes are in process to include circuits between kV as well as change the reporting interval to quarterly. Texas RE’s analysis of TADS data is shared with the annually OWG. Similar to GADS, analysis of TADS data will continue to evolve as the process matures. Voltage Class Name Metric AC Circuit kV Outages per Circuit AC Circuit kV Outages per 100 miles per year Transmission Availability Data System (TADS)