West to North CSC Location Scenario 3b WMS August 20, 2008

2 Scenario 3b Since Inception of Market in 2001 through 2008 the W-N CSC has been the double circuit 345kV Line Graham- Parker/Graham-Benbrook. Since Inception of Market in 2001 through 2008 the W-N CSC has been the double circuit 345kV Line Graham- Parker/Graham-Benbrook. Before fall of 2007, the W-N CSC experienced little or no congestion. Before fall of 2007, the W-N CSC experienced little or no congestion. Wind generation additions have altered the situation with frequent congestion expected to persist well into Nodal Market operations. Wind generation additions have altered the situation with frequent congestion expected to persist well into Nodal Market operations.

3 Scenario 3b Arguments for moving the W-N CSC to the west of Graham: Arguments for moving the W-N CSC to the west of Graham: Luminant : “The 2009 summer peak case shows a substation that is being installed between Graham and Long Creek, called the Cook Field station, … There is a new 165 MW wind facility that will connect to this station. There is a new 165 MW wind facility that will connect to this station. The station is scheduled to be completed in October 2008, thus be operational the entire 2009 calendar year. The station is scheduled to be completed in October 2008, thus be operational the entire 2009 calendar year. The possibility that the currently constraining element from Abilene Mulberry Creek to Long Creek will move to the Graham to Cook Field line section once the new station and wind generation are both installed ” The possibility that the currently constraining element from Abilene Mulberry Creek to Long Creek will move to the Graham to Cook Field line section once the new station and wind generation are both installed ”

4 Scenario 3b Arguments for moving the W-N CSC to the west of Graham: Arguments for moving the W-N CSC to the west of Graham: Luminant : “Most money spent (>47 million)” $47 million reflects contingencies on Fisher Road – Oklaunion & Bowman associated with outages for reconductoring of static wire for Graham – Long Creek and Graham – Sweetwater etc. that lasted from 2/4/2008 through 4/13/2008. $47 million reflects contingencies on Fisher Road – Oklaunion & Bowman associated with outages for reconductoring of static wire for Graham – Long Creek and Graham – Sweetwater etc. that lasted from 2/4/2008 through 4/13/2008.

5 Scenario 3b Arguments for moving the W-N CSC to the west of Graham: Arguments for moving the W-N CSC to the west of Graham: Direct Energy : “After reviewing Scenarios #3d, 3e, and 5, DE believes it might be time to look at the West in another light. We would like to consider scenarios with five zones and the following CSCs: 1) Singleton - THW/O'Brien 2) Tradinghouse / Lake Creek - Temple / Pecan Creek 3) Graham - Parker / Benbrook 4) either: Graham - Tonkawa Graham - Murray Paint Creek – Radium”

6 Scenario 3b Arguments for not changing the CSC (Scenario 3b): ERCOT : At the 8/1 CMWG meeting ERCOT endorsed the existing W-N CSC as its recommendation. When asked for supporting reasons, ERCOT representatives stated that under some circumstances, if the CSC is located west of Graham, the generation at Graham may receive the wrong price signals. When asked for supporting reasons, ERCOT representatives stated that under some circumstances, if the CSC is located west of Graham, the generation at Graham may receive the wrong price signals. ERCOT stated also that the limiting element for W-N dynamic stability remains East of Graham ERCOT stated also that the limiting element for W-N dynamic stability remains East of Graham

7 Scenario 3b Arguments for not changing the CSC (Scenario 3b): If the CSC is moved, this will displace load to the North from Jan. 1 until the implementation of the Nodal market, it will then revert to the West zone. If the CSC is moved, this will displace load to the North from Jan. 1 until the implementation of the Nodal market, it will then revert to the West zone. Nodal Protocols §3.4.1(2): The Competitive Load Zones are the four zones in effect during the 2003 ERCOT market … §3.4.2: Load Zones may be added, deleted, or changed, only when approved by the ERCOT Board ….Approved additions, deletions, or changes go into effect 36 months after the end of the month in which the addition, deletion, or change was approved.

8 Scenario 3b Arguments for not changing the CSC (Scenario 3b): Proposal 3b is based upon the same W-N CSC as 2003, thus the movement in load from the West zone to the North Zone will be minimal (estimated 9MW.) Proposal 3b is based upon the same W-N CSC as 2003, thus the movement in load from the West zone to the North Zone will be minimal (estimated 9MW.)  Proposal 3g will temporarily relocate 766 MW of load from West to North (20% of the current West zone load.)  Proposal 3h will temporarily relocate 785 MW of load from the West to North (20% of the current West zone load.)

9 Scenario 3b Arguments for not changing the CSC (Scenario 3b): Generation at Graham has historically been included in the West zone, in part because of competitiveness concerns. Generation at Graham has historically been included in the West zone, in part because of competitiveness concerns. Competition appears to have grown because of the addition of West zone wind generation. Competition appears to have grown because of the addition of West zone wind generation. However, Wind generation can compete to resolve West to North congestion, but cannot compete to resolve North to West congestion if the wind does not blow. However, Wind generation can compete to resolve West to North congestion, but cannot compete to resolve North to West congestion if the wind does not blow.