Houston Import Study Update

1. Houston Import Study Update Jeff Billo RPG Meeting

2. Houston Import Study Assumptions • Study Assumptions • Base case = 2009 5YTP 2014 Economic Case • Includes 2009 5YTP projects identified for 2014 • Includes all CREZ transmission facilities • Does not include additional CREZ generation • Analysis will focus on economic benefit of additional import capacity into Houston area per ERCOT RPG Charter and Procedures Section 3.3 • UPLAN • Assumed load can be served reliably without additional import capability, but additional import project may allow reliability criteria to be met at a lower overall cost • $2.5 M/ mile 345-kV double circuit cost RPG Meeting

3. Approach BC + $4 gas/ $10 gas BC + New Gas Gen North of Houston BC + New Gas Gen In Houston BC + Load Variation Base Case BC + CREZ Generation BC + New SGIAs BC & $3.34M/ mile 345-kV cost BC + STP 3 & 4 Bulk of analysis will focus on the base case. Options may be eliminated at this stage. Alternate scenarios will be used to quantify relative merit of options that pass first stage. Final recommendation will be selected. Sensitivity scenarios will be run for recommended option and results added to report. RPG Meeting

4. Houston Import Study Options RPG Meeting

5. Houston Import Study Options To Scurry To Brown Option 1 Option 2 Option 3/ 3A/ 22 Option 4 Option 6/ 6A Option 9 Option 12 Option 19 Option J1/ J1A Option J2 Option J3 Option DC Option DC2 Option E1 RPG Meeting

6. Houston Import Study Alternate Scenarios • Narrowed to Options 3, 9, and J1 after base case analysis • Options 1, E1, and DC2 did not pass base case analysis but were further evaluated in alternate scenarios • Alternate Scenarios • CREZ-level wind generation: to study effect of eventual CREZ generation build-out • STP 3&4: to study potential impact of additional generation south of Houston • Load variation (studied +/- 10% forecasted 2014 Coast wz load): • low load scenario run to study extreme effect of energy efficiency, wide-scale PV installation, longer than expected economic recovery, etc.; • high load scenario run to study extreme effect of quicker than expected economic recovery, long-term load growth, etc. • Gas price variation (studied +/- $3 from roughly $7 base price): to study impact of gas price on viability of various options RPG Meeting

7. Alternate Scenario Savings Results RPG Meeting

8. Houston Import Alternate Scenario Results • Observations • None of the projects would be economically justified in the STP 3&4 scenario • Option 3 was the only one that would be economically justified (based on energy revenue savings) in the other five alternate scenarios • Conclusion • Option 3 appears to be the most viable project RPG Meeting

9. CREZ discussion • Option DC2 showed significant savings in CREZ scenario • Further investigation into difference between Options 3 and DC2 in CREZ scenario • Option DC2 relieved North-Houston congestion and West export congestion • Several small projects may be implemented in north and near Kendall with Option 3 to get similar level of savings for much lower overall cost • Hicks project from 2009 5YTP not originally in base case was added • Reduced congestion in benchmark case which reduced Energy Revenue Savings for Option DC2 by $13M • Option DC2 modeling was optimistic • HVDC was originally modeled as lossless • Updated model results pending • Scurry Switch does not have adequate fault current for conventional HVDC • Morgan Creek may be nearest bus with adequate fault current RPG Meeting

10. Sensitivity Analysis for Option 3 • Additional gas generation in Harris County • Currently 2116 MW of natural gas generation in FIS in Harris County based on ERCOT System Planning March ROS report • Analysis will model 1058 MW (50%) in Harris County at sites under study • Results: • Annual PC Savings = $10.8M • Annual Energy Revenue Savings = $55.4M (still enough to justify project) • Additional gas generation north of Houston • Currently 2099 MW of natural gas generation in FIS in Madison, Navarro, and Freestone Counties based on ERCOT System Planning March ROS report • Analysis will model 1050 MW (50%) at sites under study • Results: Pending RPG Meeting

11. Sensitivity Analysis for Option 3 • Higher transmission line cost • Used CenterPoint Energy’s original cost estimate of $3.34M/ mile • Base case results: • Annual Energy Revenue Savings = $45.4M • Capital Cost ($2.5M/mile) = $175M • Capital Cost/Annual Savings Ratio = 3.85 (passes economic criteria) • Sensitivity results: • Annual Energy Revenue Savings = $45.4M • Capital Cost ($3.34M/mile) = $226M • Capital Cost/Annual Savings Ratio = 4.98 (passes economic criteria) • Additional SGIA • Las Brisas: 1300 MW pet coke in Nueces County • Coleto Creek 2: 660 MW coal in Goliad County • Panda Temple: ~1300 MW combined cycle in Bell County • Results: Pending RPG Meeting

12. Reliability Considerations for Option 3 • Too many lines into Zenith station? • Option 3 would result in eight 345-kV lines (four importing power) in Zenith station • Preliminary analysis revealed that Zenith substation contingency (Category D) would be less severe contingency than other substation contingencies in area and less severe than what is considered to be most limiting Category C contingency • Option 3 improves the import capability for these more limiting constraints • Conclusion: Option 3 does not degrade reliability for Zenith substation contingency outage • Voltage Stability • Will additional import capacity cause less local generation to run and negatively impact voltage stability? • Study underway RPG Meeting

13. Houston Import Study • Next Steps • Complete sensitivity scenario analysis for Option 3 • Complete voltage stability analysis for Option 3 • Finalize report in June pending above analysis results RPG Meeting

14. Questions? RPG Meeting