December 7, 2012 Transmission Needs Analysis Scenario 5/7 Update

2 Agenda Review Scenario Characteristics –Review Incremental Resources –Review Base Case Upgrades –Economic Analysis Key Lessons (S5/S7) LTSA Previews 2

3 Scenario Characteristics Scenario 5: Drought –Characterized by extended drought –Summer capabilities of existing water-consuming resources de- rated –New water-consuming resources sited primarily in the East –Water costs are assigned to water-intensive resources –Increased peak load Scenario 7: BAU – Hi Natural Gas –Characterized by a high natural gas price ($9.55 by 2016, $13.70 by 2022) –Resources retire in 2018 and 2022 for competitive reasons 3

4 Resource Build: Scenario 5 4

5 Scenario 5 Resources 5

6 Base Case Thermal Reliability Upgrades – Scenario 5 (2022) Water availability and higher LMP’s drive thermal/gas expansion units to areas East/South of Dallas and North of Houston. New resources East and South of the Dallas Metro area caused base- case overloads New resources North of Houston created increased congestion and overloads on the 345 kV imports North – Houston. Lines Voltage (kV)MilesCost ($M) Transformers Voltage (kV)MVACost ($M) 345/ Total Cost ($M) 1193

7 Scenario 5: Base Case Reliability Upgrades 7 *Note: Houston imports were upgraded in preparation of the base case, though “backed out” in reliability analysis. The upgrade of the existing North to Houston imports is likely unfeasible.

8 Scenario 5: AC Stability Limitations 8 Drought Scenario 5 Incremental Reactive support (MVAR)Limit (MW) Year of Violation Austin Dallas Houston San Antonio LRGV * Panhandle*--- *Assumes no incremental gas units are built in the LRGV

9 Scenario 5: Most congested elements 9 Most Congested Elements in S5: Twin Oak-Jack Creek, Jack Creek-Gibbons Creek, Gibbons Creek-Singleton, Jewett-Singleton (north of Houston region) Hill Country-Skyline (San Antonio region) Dallas interface congestion

10 Scenario 5: Economic Analysis 10 Options Studied capital cost (2022$M) Reliability benefit(2022$M) Capital Cost Adjusted for Reliability Benefit (2022$M) 1/6 of adjusted Capital Cost (2022$M) Production Cost Savings (2022$M) Meet ERCOT Economic Criteria ? Limestone-Singleton Yes Watermill-Bigbrown No Bigbrown-Venus No LakeCreek-Navaro No Lake Creek-Watermill No Clear Spring-Hill Country No Hays-Kendall No Sandow-Garfield No

11 Scenario 5: Key Lessons Water availability and higher LMPs draw new resources East / Southeast of Dallas and North / Northwest of Houston Increased peak loads increase stress on the 138kV systems in and around Houston / Dallas Base case overloads are more prevalent on existing urban import paths Heavy congestion North – Houston supports economic transmission expansion for expanded import capacity into Houston 11

12 Scenario 7: Resource Build 12

13 Scenario 7: Resources / Retirements 13

14 Scenario 7: Base Case Thermal Reliability Upgrades Large amount of wind generation at Panhandle area, load forecasted for 2022 and other incremental resources assumed in the scenario result in: Major 345 kV line upgrades in Panhandle area to accommodate large amount of wind generation, Some 345 kV line upgrades around Houston area and other transmission upgrades needed for urban areas primarily driven by load serving issue Lines Voltage (kV)MilesCost ($M) Transformers Voltage (kV)MVACost ($M) 345/ Total Cost ($M) 1737

15 Scenario 7: AC Stability Limitations 15 * Need for analysis in Scenario 7 because of massive build-out of wind in the Panhandle region Hi Nat Gas Scenario 7 Incrementa l Reactive support (MVAR)Limit (MW) Year of Violation Austin-4579 beyond 2032 Dallas Houston San Antonio LRGV Panhandle*-6015n/a

16 Scenario 7: Base Case Reliability Upgrades 16

17 Scenario 7: Most congested elements 17 Most Congested Elements in S7: Panhandle interface limit Singleton-Zenith and other 345 kV lines around Singleton area (north of Houston region) Parker-Benbrook 345 kV line (west of DFW region)

18 Scenario 7: Economic Analysis 18

19 Scenario 7: Economic Analysis 19 Options StudiedCapital cost (2022 $ M) Reliability benefit (2022 $ M) Adjusted capital cost (Capital Cost-Reliability Benefit, 2022 $ M) 1/6 of Adjusted Capital Cost (2022 $ M) Production Cost Savings ($ Million, Base - Option) Meet Economic Criteria ? Bowman-Benbrook $ $ (188.9) $ $ $ 15No Clear Crossing-Benbrook $ $ (145.3) $ $ $ 30No Parker-Benbrook $ 80.5 $ (145.3) $ $ 37.6 $ 37Yes Wolf Hollow-Benbrook $ $ (145.3) $ $ 51.3 $ 28No Fayette-O'Brien $ $ (52.33) $ $ 49.0 $ 37 No TNP One-Salem-Zenith $ $ (73.15) $ $ 86.3 $ 232 Yes Limestone-Gibbons Creek-Zenith $ $ (20.87) $ $ 68.7 $ 274 Yes Brown-Zenith $ $ $ $ $ 236 Yes Lufkin-Jordan $ $ $ $ 70.9 $ 190 Yes Navarro-Zenith $ $ (57.6) $ $ $ 208 Yes Cagnon-Pawnee $ $ $ $ 36.4 $ 4 No Kendall-Hill Country-Haysen $ $ $ $ 46.4 $ 26 No Brown-Hill Country $ $ 4.57 $ $ 83.8 $ 125 Yes Bakersfield-Rio Bravo $ $ $ $ $ 94 No Cottonwood-Clear Crossing, Tesla- Graham 500 kV $ $ $ $ $ 117No

20 Scenario 7: Key Lessons An increase in NG price favors renewable expansion Favorable wind profiles drive interconnected wind on the CREZ system beyond full-build out design capability Stability limitations for increasing transfers from the Panhandle to load require further study, new infrastructure Increased congestion (due to urban retirements) supports economic transmission expansion for imports into Houston, Dallas, and San Antonio 20

21 Questions? 21

LTS Preview / Summary Data

23 Renewable Resource Integration 23 Retirement BAU -New WindDrought Hi Nat Gas Environmental

24 Upgrade Summaries Scenario 1 - BAUScenario 2 - RetirementsScenario 3 – BAU / Updated Wind Scenario 5a - DroughtScenario 7 – Hi Nat Gas LinesVoltage (kV)MilesCost ($M)MilesCost ($M)MilesCost ($M)MilesCost ($M)MilesCost ($M) , TransformersVoltage (kV)MVACost ($M)MVACost ($M)MVACost ($M)MVACost ($M)MVACost ($M) 345/ Total Cost ($M)

25 Upgrade Summaries 1 – BAU 2 - Retirement 3- BAU / New Wind 5a –Drought 7 - Hi Nat Gas