SPP.org 1

Status Update for Reliability and Economic Assessments Stakeholder Meeting June 20 th, 2008 Austin, TX

SPP.org 3 Activities Completed Since Last Meeting Reliability Assessment  2012 Summer and Winter model posted on SPP Trueshare site  Conference call was held on May 8 to answer stakeholders questions regarding models  Preliminary Load Flow Analysis completed Economic Assessment  SPP/Entergy Model created in PROMOD IV  Preliminary Screening Study completed

SPP.org 4 Reliability Assessment : Key Assumptions Modeling Changes  Cottonwood unit considered in Eastern Interconnect  600 MW of Transaction from Cottonwood to LAGN  New Industrial customer in Port Arthur area is included Power Flow (N-1) analysis  100 kV and above contingencies and monitored facilities  Known operating guides considered  Thermal Overloads (Rate B> 100%)  Voltage violations ( 1.05 p.u)

SPP.org 5 Reliability Assessment : Preliminary Findings Performed Contingency analysis (N-1) for SPP-ETI system Several potential thermal and voltage violations found SPP examined a set of reliability upgrades to mitigate these violations  Western Region Phase 3 improvement plan  New transformer at Cypress with 230 kV line from Hartburg to Sabine  Reconductor few 138 kV lines in ETI area High level planning estimate of these projects is approximately $220 Million  $120 Million identified as ETI proposed projects in 2012

SPP.org 6 Economic Assessment Ventyx was tasked to perform an economic assessment of Energy Texas participating in the SPP Market for the years 2012 and 2013  Preliminary results available for 2012 PROMOD IV® Full Transmission Nodal Market simulation software was used to evaluate Entergy Texas as a member of the SPP Market.  Hourly chronological module that simulates the generation, load and transmission constraints of a system  The module performs a security constrained commitment and dispatch every hour to meet the load.  Outputs from the module are used to calculate the cost metrics for SPP and Entergy Texas

SPP.org 7 Cost Metrics Cost to serve Demand at Market (LMP) Generation Revenue at Market (LMP) Adjusted Production Cost  Production Cost + Purchase Cost at Load-Hub Rate – Sales Revenue at Generation-Hub Rate Net Cost at Market  Load Cost + Variable Generation Cost - Generation Revenue

SPP.org 8 Transmission Congestion Metric Identify each binding transmission constraint which had a major impact on the SPP Load Hub Price, SPP Generation Hub Price, Entergy-TX Load Hub Price, and Entergy-TX Generation Hub Price, Each binding constraint contributes to the price difference between two nodes/hubs on the system. These components represent how a transmission constraint impacts the LMP. Transmission constraint may have a positive or a negative price impact in each hour.

SPP.org 9 Hub Definition Example – 5 Nodes Load = 100 MWh LMP=$30/MWh Load = 50 MWh Gen = 50 MWh LMP=$25/MWh Load = 50 MWh LMP=$30/MWh Gen = 100 MWh LMP=$20/MWh Gen = 50 MWh LMP=$25/MWh Load Hub LMP (100 * *30 +50*25)/200=$28.75 Generation Hub LMP (50*25+50*25+100*20)/200=$22.50

SPP.org 10 Key Assumptions for 2012 Gas and Oil Price Forecast Effluent Prices SPP Capacity (including Entergy Texas)

SPP.org 11 Key Assumptions Model Setup SPP modeled as Day 2 Market (system wide unit commitment) No Ancillary Services Market but reserves can be shared Markets modeled : SPP-ETI, MISO, MRO, Entergy, TVA, PJM (NICA and Western region only) Hurdle rates between SPP-ETI and other ISO/ Regions  Dispatch hurdle 5 $/MWh  Commitment hurdle 15 $/MWh All MRO joins MISO Planned transmission upgrades from STEP 2008 Reliability projects and Entergy

SPP.org Preliminary Results SPP and Entergy-TX Hub Prices ($/MWh) Note: All values in all reports labeled “SPP” include Entergy-TX.

SPP.org Preliminary Results Transmission Congestion ($/MWh)

SPP.org Preliminary Results Cost Metrics (millions of $) SPP includes ETI Millions of $

SPP.org 15 Next Steps Identify Transmission upgrades based on Preliminary Economic Assessment that would reduce Adjusted Production Cost for SPP-ETI Coordinate these upgrades with Market Power (MP) Mitigation track Identify Transmission projects to meet Market Power Mitigation objective Perform Production Cost comparison for each Reliability, MP and Economic Portfolio with Base Case Verify overall reliability impacts as a result of proposed portfolios  Reliability Must Run Requirement  Voltage Stability analysis Any Sensitivity Run

SPP.org 16 Summary of Cases and Comparison Upgrades Cases Reliability Upgrades MP Mitigation Upgrades Economic Upgrades Production Cost Comparison Status Quo X Reliability (Modified Base Case) XX MP Mitigation XXX Economic XXXX

SPP.org 17 Questions?

SPP.org 18 Mak Nagle Manager, Technical Studies and Modeling (501)