1. Navarro to Houston Presentation to ERCOT RPG August 27, 2013

2. 2 Need for Houston Import North to Houston (N-H) flows increased to 3,100 MW –Summer 2012, 75% quartile for N-H, 3,102.9 MW Current grid –G-1 case results in more constrained conditions in terms of Houston load deliverability prior to running into thermal/voltage stability concerns –Singleton – Zenith double circuit line overload observed as most limiting element Additional overloads observed along the existing N-H corridor –Thermal constraints observed to be more limiting than voltage stability constraints Independent studies by three TSPs identify a need for additional North to Houston injection In Summer 2012, North to Houston flows exceeded the ERCOT expected 2018 flows 27% of the time

3. 3 Need for Comprehensive Analysis With 3 proposals for Houston import, ERCOT has the unique opportunity to: –perform a comprehensive, comparative analysis of the various options –identify a solution that will provide lasting reliability benefits for the fast-growing Houston area –coordinate major studies in development related to oil and gas load and Panhandle wind with Houston import to achieve benefits both to Houston and to the larger grid ERCOT should endeavor to provide long-lasting benefits for Houston that also strengthen the larger grid

4. 4 Screening Criteria Lone Star analyzed the Houston area and ERCOT grid with the goal of identifying projects that would provide the following: –Increased incremental import capability into Houston –Route diversity and grid security –Access to North Zone generation –Strong link to CREZ renewable generation Evaluation Methodology Navarro projects meet each of the above criteria

5. 5 Navarro Substation Benefits Navarro options provide higher incremental import capacity to Houston Navarro is strongly connected to over 10 GW of existing North Zone generators Navarro connects nine existing 345 kV lines and would create routing diversity versus existing Houston connections Navarro is the eastern terminus of CREZ and offers the most direct path for CREZ wind to reach Houston Navarro is state-of-the-art and readily expandable Navarro Substation should be considered for the northern terminus of any Houston Import Project

6. 6 Recommended Houston Import Solutions Navarro to King 345 kV with 50% Series Compensation –High incremental transfer, 3,238 MW –Strong Alternate Routing –Strong link to CREZ and North Zone generators Navarro to King 500 kV –Highest incremental transfer, 3,558 MW –Strong Alternate Routing –Strong link to CREZ and North Zone generators –Start of 500 kV backbone –Requires the fewest upgrades to obtain >3,500 MW of incremental transfer –Can initially operate at 345 kV Navarro to Gibbons to Zenith 345 kV –2,700 MW of incremental transfer –Strong link to CREZ and North Zone generators Three Navarro options merit careful consideration for their benefits

7. 7 500 kV Advantages Highest incremental Houston import capability Lower line losses Lower impedance: can divert bulk power to unload and relieve constraints on underlying lower voltage systems Expandable backbone connecting two major load centers (Dallas and Houston) to renewable and thermal generation Lone Star’s Navarro substation has room for expansion and uses 500 kV breakers on the existing lines at Navarro, Sam Switch, and West Shackelford Lone Star’s affiliate has expertise building and operating over 1,100 miles of 500 kV A 500 kV line would provide strong benefits to Houston and the entire ERCOT grid

8. Appendix

9. 9 Navarro Substation is a strong connection point to multiple North Zone generators and CREZ Navarro Big Brown Trading House Sandy Creek Limestone Twin Oak Freestone Midlothian CREZ Bosque County Jewett STP TNP One Gibbons Crk Jack Crk Singleton Zenith King Hillje WA Parish O’BrienHolman Fayette Lost Pines Temple Sandow

10. 10 Historical North to Houston Flow

11. 11 Study Model Development Included WA Parish Addition (NG): 90 MW Included Channel Energy Center (NG): 190 MW Removed Pondera King (NG): 1,380 MW Removed Deepwater Energy Storage: 40 MW Removed Deer Park Energy Center (NG): 192 MW Removed Agrifos Steam Unit (NG): 0 MW Removed Tenaska’s switchable Frontier units (NG): 885 MW The studied base case reflects ERCOT existing generation and load projections

12. 12 Reliability Criteria ERCOT Criteria per Planning Guide 4.1.1.2 (1) (b) “With any single generating unit unavailable, followed by Manual System Adjustments, followed by a common tower outage or the contingency loss of a transmission circuit or transformer, all Facilities shall be within their applicable Ratings, the ERCOT System shall remain stable with no cascading or uncontrolled Islanding, and there shall be no non- consequential Load loss. “ Thermal Analysis used the loss of the largest unit inside Houston – Cedar Bayou 2: 745 MW Voltage Stability Analysis used the loss of the Gibbons Creek unit: 470 MW The studied base case reflects ERCOT existing generation and load projections

13. 13 Voltage Stability Evaluation N-1 and N-1+G-1 analysis with loss of Gibbons Creek unit Houston Import Capability limited to 1,810 MW Voltage Stability Limit was not observed to be the binding constraint on North to Houston import in comparison to thermal constraints Thermal analysis was used as the primary gauge of evaluation of the studied transmission options The studied base case reflects ERCOT existing generation and load projections

14. 14 Houston Import Projects sorted by Incremental Import Capability Proposer - Option Number Option DescriptionIncremental Houston Import Capability (G-1) (MW) Transmission Option Length (miles) Cost Estimate ($ MM)* MW/$MM LST-17Navarro - King (500 kV)35581666745.28 LST-7Navarro - King (50% SC)32381665525.87 LST-13Navarro - Tomball (345 kV)29461624746.22 LST-5Navarro - King (345 kV)27391665125.35 LST-10Navarro - Gibbons Creek - Zenith 345 kV27171654176.51 CNP-15Twin Oak - Zenith 345 kV27011174625.85 CNP-25Limestone -Ragan Creek - Zenith 345 kV2532935324.76 GP&L/CTT-9Limestone - Gibbons Creek - Zenith 345 kV25171223337.56 GP&L/CTT-4Gibbons Creek - Tomball 345 kV22045020310.86 GP&L/CTT-1Gibbons Creek - Zenith 345 kV2010602179.26 CNP-24Ragan Creek - Zenith 345 kV1960693056.60 All Preferred Options from CNP, GP&L/CTT, and Lone Star *Cost Estimates include substation costs and required upgrades. *Cost estimates submitted by CNP, GP&L/CTT, and Lone Star are not made on the same basis.

15. 15 Detailed Cost Estimates of Lone Star’s Preferred Options