Proposed North – South Congestion Mitigation Plan Luminant Energy July 2008

1  During the first six months of 2008, ERCOT has experienced over $135 million in North to South CSC Congestion Primary drivers of this congestion appear to be: 1. Significant growth in the amount of installed wind farms primarily in the West Zone where a large portion of the energy output flows through the North Zone to both the South and Houston Zones.  More than 2,200 MW of wind were added in the past 12 months  Almost 3,000 MW of wind capacity is scheduled to be installed in the remainder of Heavily loaded underlying 138 kV and 69 kV transmission in the Waco / Temple / Killeen area, as well as the Bryan / College Station area that has limited ability to support large amounts of post contingency North to South Transfers. 3. Generation availability assumptions, both thermal and hydro, that have been materially different in Real Time operations than in the SSWG planning cases. 4. ERCOT Operation’s utilization of North to South CSC Zonal Balancing to resolve congestion on some elements where it had limited benefit.

2 Summary of Indicative N-S CSC Congestion Constraints  Watson Chapel – Robertson 138 kV line experienced significant congestion  After June 9, 2008 PRR764 resolved this constraint with Local Congestion

3 Summary of Local Congestion Days By Constraint

4 What recent projects help reduce these problems During the past six months, these noteworthy area upgrades have been placed in- service: 1.Lake Creek – Temple Pecan Creek 138 kV Line upgrade from 186 MVA to 326 MVA (May 2008) 2.Temple Pecan Creek – Temple Sw. 138 kV Line upgrade from 326 MVA to 492 MVA (June 2008) 3.Lampasas – Adamsville – Evant 138 kV Line upgrade from 84 MVA to 220 MVA (June 2008) 4.Goldthwaite 138/69 kV Auto upgrade from 25 MVA to 45 MVA (June 2008) 5.Copperas Cove – Ding Dong 138 kV Line – new construction (June 2008) 6.Austrop – Decker 138 kV Line upgrade from 480 MVA to 710 MVA (June 2008) Projects in TPIT that will help reduce this problem? Projects scheduled by June 2009 should provide relief to the existing constraints. 7.Jack Creek Sw. Station and 600 MVA Auto and associated lines (Sept 2008) 8.Waco West – Lorena 69 kV Line upgrade from 36 MVA to 107 MVA (Dec 2008) 9.Brownwood – Goldthwaite 138 kV Line upgrade from 124 MVA to 266 MVA (Dec 2008) 10.Sandow – Salty – N. Thorndale 138 kV Line upgrade from 214 MVA to 326 MVA (Dec 2008) 11.N. Thorndale – Taylor 138 kV Line upgrade from 214 MVA to 326 MVA (May 2009) 12.Poage–Temple Taylors Valley–Bell County 69 kV Line upgrade from 36 MVA to 107 MVA (May 2009) 13.Temple Elm Creek – N. Temple 138 kV Line upgraded to 394 MVA (May 2009) 14.Killeen Sw. – S. Harker Heights 138 kV Line upgrade from 214 MVA to 326 MVA (May 2009)

5 What’s included in this project proposal?  Two 138 kV line upgrade accelerations  Accelerate projects already identified in TPIT by 1 year  Acceleration cost estimated at $1.8 million  Totals 29.8 miles of line  Three 138 kV line upgrades that have not previously been proposed  Totals 49.0 miles  Estimated total cost of $20.1 million  Six switchable series reactor installations  Located at a total of 4 to 5 sites  Estimated total cost of $9.0 million  One Terminal Equipment upgrade  Estimated cost of $0.03 to $0.20 million

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7 What were the UPLAN results?  The UPLAN analysis identified 6 upgrades that were economically justified based on production cost savings.  The capital cost of these projects is estimated at $25 million  This includes four series reactors, one 138 kV line upgrade acceleration, and two newly proposed 138 kV line upgrades.  Production cost savings are $21M for Jun-Dec 2009, and $12M for 2010; for a total of $33M.  The Salado-Hutto 345 kV Line and Auto are important upgrades to the N- S limits. A delay in this project provides the proposed projects with an additional $18M in production cost savings.  The potential lack of available hydro generation in the Austin area results in another $16M in production cost savings.  The production cost savings economically justifies these projects in less than 12 months.

8 What were the PowerWorld results? The proposed projects, in combination with projects already scheduled in TPIT, provide a N-S CSC increase of approx. 380 MW This translates to a TTC increase of approx MW. Items highlighted in yellow were also identified in UPLAN studies

9 Conclusion The severe amount of N-S congestion experienced in the past six months necessitates a concentrated effort to quickly mitigate with cost effective transmission If this type of accelerated upgrade schedule is not possible in all cases, then a focused effort should be pursued by ERCOT, the associated TDSPs, and/or interested Market Participants to look for other interim solutions such as:  Feasible Remedial Action Plans (RAPs) or Special Protection Schemes (SPSs)  Elevated temperature operation options that provide some increase in the thermal rating of these lines while further upgrades are being pursued  These types of interim measures (i.e. RAPs and SPSs) are recommended by Section of the ERCOT Operating Guides while more permanent upgrades are being Feasible Remedial Action Plans (RAPs) or Special Protection Schemes (SPSs)