McCAMEY 345 kV TRANSMISSION PLAN Presentation to Technical Advisory Committee May 8, 2003

1. McCAMEY 345 kV TRANSMISSION PLANPresentation to Technical Advisory CommitteeMay 8, 2003 KENNETH A. DONOHOO, P.E. Manager, System Planning Transmission Services kdonohoo@ercot.com www.ercot.com

2. Senate Bill 7 Sec. 31.002 DEFINITIONS (9) "Independent system operator" means an entity supervising the collective transmission facilities of a power region that is charged with nondiscriminatory coordination of market transactions, systemwide transmission planning, and network reliability. Sec. 39.151. ESSENTIAL ORGANIZATIONS (a) A power region must establish one or more independent organizations to perform the following functions: (1) ensure access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms; (2) ensure the reliability and adequacy of the regional electrical network; (3) ensure that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information; and (4) ensure that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers in the region. (b) "Independent organization" means an independent system operator or other person that is sufficiently independent of any producer or seller of electricity that its decisions will not be unduly influenced by any producer or seller. An entity … (j) A retail electric provider, municipally owned utility, electric cooperative, power marketer, transmission and distribution utility, or power generation company shall observe all scheduling, operating, planning, reliability, and settlement policies, rules, guidelines, and procedures established by the independent system operator in ERCOT. Failure to comply with this subsection may result in the revocation, suspension, or amendment of a certificate as provided by Section 39.356 or in the imposition of an administrative penalty as provided by Section 39.357.

3. PUCT Substantive Rules §25.191 Transmission Service Requirements (a) Purpose. The purpose of Subchapter I, Division 1 of this chapter (relating to Transmission and Distribution), is to clearly state the terms and conditions that govern transmission access in order to: (1) facilitate competition in the sale of electric energy in Texas; (2) preserve the reliability of electric service; and (3) enhance economic efficiency in the production and consumption of electricity. (c) Nature of transmission service. Transmission service allows for power delivery from generation resources to serve loads, inside and outside of the ERCOT region. (d) Obligation to provide transmission service. Each TSP in ERCOT shall provide transmission service in accordance with the provisions of Division 1 of this subchapter. (3) A TSP shall interconnect its facilities with new generating sources and construct facilities needed for such an interconnection, in accordance with Division 1 of this subchapter. §25.195 Terms and Conditions for Transmission Service (c) Construction of new facilities. If additional transmission facilities or interconnections between TSPs are needed to provide transmission service pursuant to a request for such service, the TSPs where the constraint exists shall construct or acquire the facilities necessary to permit the transmission service to be provided in accordance with good utility practice, unless ERCOT identifies an alternative means of providing the transmission service that is less costly, operationally sound, and relieves the transmission constraint at least as effectively as would additional transmission facilities. §25.198 Initiating Transmission Service (d) Facilities study. (3) Pursuant to §25.195(c)(2) of this title, the TSP shall be responsible for the costs of any planning, designing, and constructing of facilities of the TSP associated with its addition of new facilities used to provide transmission service.

4. PUCT Substantive Rules §25.361 Electric Reliability Council of Texas (ERCOT) (b) Purpose. ERCOT shall perform the functions of an independent organization under the Public Utility Regulatory Act (PURA) §39.151… (f) Planning. ERCOT shall conduct transmission system planning and exercise comprehensive authority over the planning of bulk transmission projects that affect the transfer capability of the ERCOT transmission system. ERCOT shall supervise and coordinate the other planning activities of TSPs. (1) ERCOT shall evaluate and make a recommendation to the commission as to the need for any transmission facility over which it has comprehensive transmission planning authority. (2) A TSP shall coordinate its transmission planning efforts with those of other TSPs, insofar as its transmission plans affect other TSPs. (3) ERCOT shall submit to the commission any revisions or additions to the planning guidelines and procedures prior to adoption. ERCOT may seek input from the commission as to the content and implementation of its guidelines and procedures as it deems necessary. (h) Interconnection standards. In performing its functions related to the reliability and security of the ERCOT electrical network, ERCOT may prescribe reliability and security standards for the interconnection of generating facilities that use the ERCOT transmission network. Such standards shall not adversely affect or impede manufacturing or other internal process operations associated with such generating facilities, except to the minimum extent necessary to assure reliability of the ERCOT transmission network.

5. Reliability • Transmission major purposes are to: • Deliver electric power to areas of customer demand • Allow economic and competitive exchange of electric power • Provide flexibility for changing system conditions • Interconnected transmission systems are principal means for achieving a reliable electric supply • The NERC Planning Standards define the reliability of the interconnected electric systems using the following two terms: • Adequacy — The ability of the electric systems to supply the aggregate electrical demand and energy requirements of their customers at all times, taking into account scheduled and reasonably expected unscheduled outages of system elements. • Security — The ability of the electric systems to withstand sudden disturbances such as electric short circuits or unanticipated loss of system elements. • Guides in NERC Planning Standards describe good planning practices and considerations

6. Planning Criteria • Due to its very nature, transmission planning is a continuous process and is constantly changing due to the addition (or elimination) of plans for new generation, transmission facilities, equipment, or loads • Electric system reliability begins with good long term planning • ERCOT Planning Criteria state the fundamental minimum requirements for planning and constructing reliable interconnected electric systems under: • Normal conditions • First contingency conditions • Includes some double-circuit outages over 0.5 mile that result in collapse or uncontrolled outages, instability of generating units or interruption of service to firm demand or generation other than that isolated by the double-circuit loss, following the execution of all automatic operating actions such as relaying and special protection systems. Loss should result in no damage to or failure of equipment. • Single faults resulting in multiple elements out • Second contingency conditions, with adjustment

7. Open Process • Developed, reviewed and approved by Regional Planning Group as part of the Generation Interconnection Processes • Plan posting • Direct discussion with many developers • April 2002 original 138 kV plan posted • December 2002 updated to include 345 kV lines • Presented in meeting January 30, 2003 • Comments provided February 21, 2003 • ERCOT Staff support document March 28, 2003 • Comments provided April 17, 2003

8. West Texas

9. McCamey Wind Generation Interconnection A high level of interest in siting additional wind generation in this area has been documented and discussed. Several of the existing sites indicate they can expand at their current locations.

10. Wind Resource Wind speed increases with height Small increases in wind speed result in large increases in power

11. McCamey Area138 kV System

12. Plan Capability – 138 kV • Current Limit is 400 MW • Operations currently limiting output everyday • Reactive compensation (voltage control) is problematic • Up to 650 MW in 2005 without SPS • Reactive compensation (voltage control) is problematic • Up to 900 MW in 2006 without SPS • All 138 kV spokes and 138 kV lines in service • Reactive compensation (voltage control) is problematic • Up to 1,200~1,300 MW in 2006 with SPS • All 138 kV spokes and 138 kV lines in service • Will require sufficient dynamic reactive support • SPS presentation at West RPG Meeting May 28

13. Plan Capability – 345 kV • Up to 1,500 MW in 2008+ without SPS • All 138 kV spokes and 138 kV lines in service • 345 kV radial line Twin Buttes to McCamey in-service • SPS will be required during outage of this line • Up to 2,000 MW in 2008+ without SPS • All 138 kV spokes and 138 kV lines in service • 345 kV line Twin Buttes to McCamey in service • 345 kV line McCamey to Odessa in service

14. McCamey – Twin Buttes 345 kV 1,500 MW

15. McCamey – Odessa345 kV 2,000 MW

16. Estimated Cost • 138 kV construction up to 900 MW • Based upon current interconnection agreements (755 MW) • RPG approved, ERCOT endorsed and under construction • $157,095,000 • 345 kV radial line construction up to 1,500 MW • Twin Buttes to McCamey • Incremental cost $90,300,000 (total $247,395,000) • Generation would be limited during outage of this line • 345 kV line construction up to 2,000 MW • McCamey to Odessa • Incremental cost $65,400,000 (total $312,795,000) These are functional estimates based upon typical project costs, which are subject to change and should not be presumed to capture the exact amount or timing of projected capital expenditures.

17. Recommendation • Encourage wind generators to site appropriately where transmission capacity is available • Continue 138 kV construction to incorporate current wind generation interconnections • Preserve the ability to shift to the 345 kV additions, if needed • Do not build unnecessary 138 kV transmission facilities • Perform routing analysis and conduct open houses to prepare for a new McCamey-Twin Buttes 345 kV line • Cost to be covered by generation developers in area • Executed interconnect agreements of 1,500 MW will be needed to proceed with line certification and construction • Following start of construction, transmission providers should perform routing analysis and conduct open houses to prepare for a new McCamey-Odessa 345 kV line • When generation interconnection agreements are greater than 2,000 MW, construct McCamey-Odessa 345 kV line

18. Comments Received

19. Comments (cont’d)2

20. Comments (cont’d)3

21. Comments (cont’d)4

22. Comments (cont’d)5

23. Resolution • TAC Support for 345 kV McCamey Area Transmission Plan and routing studies subject to interconnection agreements • 345 kV radial line construction for 1,500 MW once interconnection agreements for this level are executed • Twin Buttes to McCamey • Incremental cost $90,300,000 (total $247,395,000) • Generation would be limited during outage of this line • 345 kV line construction for 2,000 MW once interconnection agreements for this level are executed • McCamey to Odessa • Incremental cost $65,400,000 (total $312,795,000)

24. QUESTIONS, DISCUSSION & DETERMINATION Due to its very nature, transmission planning is a continuous process and is constantly changing due to the addition (or elimination) of plans for new generation, transmission facilities, equipment, or loads. Benefits of good planning are not realized until transmission projects are completed and placed in service.