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

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

3. 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. 4 Resource Build: Scenario 5 4

5. 5 Scenario 5 Resources 5

6. 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 ($M) 345163457 138375451 Transformers Voltage (kV)MVACost ($M) 345/13818808285 Total Cost ($M) 1193

7. 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. 8 Scenario 5: AC Stability Limitations 8 Drought Scenario 5 Incremental Reactive support (MVAR)Limit (MW) Year of Violation Austin-38392028 Dallas-188902022 Houston340088272024 San Antonio-30332028 LRGV-25122021* Panhandle*--- *Assumes no incremental gas units are built in the LRGV

9. 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. 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-Singleton163.69.7153.925.626.1Yes Watermill-Bigbrown208.2153.055.29.20.6No Bigbrown-Venus223.10.0223.137.20.2No LakeCreek-Navaro104.19.794.415.70.3No Lake Creek-Watermill297.419.5278.046.31.3No Clear Spring-Hill Country104.10.0104.117.43.1No Hays-Kendall41.80.041.87.04.0No Sandow-Garfield133.89.7124.120.75.1No

11. 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. 12 Scenario 7: Resource Build 12

13. 13 Scenario 7: Resources / Retirements 13

14. 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 ($M) 3455631052 138400438 Transformers Voltage (kV)MVACost ($M) 345/13819437247 Total Cost ($M) 1737

15. 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 Dallas600199142025 Houston180092672028 San Antonio-38032031 LRGV-25122021 Panhandle*-6015n/a

16. 16 Scenario 7: Base Case Reliability Upgrades 16

17. 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. 18 Scenario 7: Economic Analysis 18

19. 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 $ 435.0 $ (188.9) $ 623.9 $ 104.0 $ 15No Clear Crossing-Benbrook $ 531.6 $ (145.3) $ 676.9 $ 112.8 $ 30No Parker-Benbrook $ 80.5 $ (145.3) $ 225.8 $ 37.6 $ 37Yes Wolf Hollow-Benbrook $ 162.6 $ (145.3) $ 307.8 $ 51.3 $ 28No Fayette-O'Brien $ 241.7 $ (52.33) $ 294.0 $ 49.0 $ 37 No TNP One-Salem-Zenith $ 444.6 $ (73.15) $ 517.8 $ 86.3 $ 232 Yes Limestone-Gibbons Creek-Zenith $ 391.4 $ (20.87) $ 412.3 $ 68.7 $ 274 Yes Brown-Zenith $ 860.3 $ 25.99 $ 834.3 $ 139.0 $ 236 Yes Lufkin-Jordan $ 439.1 $ 13.72 $ 425.4 $ 70.9 $ 190 Yes Navarro-Zenith $ 597.8 $ (57.6) $ 655.5 $ 109.2 $ 208 Yes Cagnon-Pawnee $ 241.7 $ 23.12 $ 218.5 $ 36.4 $ 4 No Kendall-Hill Country-Haysen $ 338.3 $ 60.03 $ 278.3 $ 46.4 $ 26 No Brown-Hill Country $ 507.5 $ 4.57 $ 502.9 $ 83.8 $ 125 Yes Bakersfield-Rio Bravo $ 978.7 $ 27.40 $ 951.3 $ 158.5 $ 94 No Cottonwood-Clear Crossing, Tesla- Graham 500 kV $ 970.7 $ 15.82 $ 954.9 $ 159.1 $ 117No

20. 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. 21 Questions? 21

22. LTS Preview / Summary Data

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

24. 24 Upgrade Summaries 24 2022Scenario 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 ($M) 345376 853411 1,102971731634575631052 138360 339376 464204187375451400438 TransformersVoltage (kV)MVACost ($M)MVACost ($M)MVACost ($M)MVACost ($M)MVACost ($M) 345/13810363 21315000 235115211731880828519437247 Total Cost ($M)1406180253311931737

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