Confidential

1. Integrating Wind Generation and the Impact on the Texas Power Grid October 7, 2009 Mary Anne Brelinsky Vice President, Texas Power Confidential

2. EDF Group and EDF Trading Overview • EDF Group is Europe’s largest electricity producer. • EDF Group is Europe’s largest electricity supplier, contributing to the supply of energy and related services to more than 38 million customers. • EDF Group is involved in all areas of the energy value chain including generation, transmission, distribution, supply and trading, and is increasingly active in Europe’s gas markets. • EDF operates 66 Nuclear Power Stations worldwide (including British Energy). • Investment Grade Credit, EDF shares trade on the Euronext Paris index (EDF) €64 BILLION 2008 sales €23 BILLION in shareholder’s equity €7.9 BILLION In 2008 operating profit 85% owned by the French government 164,000 Employees worldwide 126.7 GW installed generation capacity • EDF Trading is a leader in the international wholesale energy markets. • EDF Trading has a pivotal role at the heart of the worldwide EDF Group. As EDF Group’s interface to the wholesale energy markets, EDFT uses large scale arbitrage and trading to optimize the energy positions and assets owned by EDF group. • EDFT sources, supplies, transports, stores, blends and converts physical commodities as well as trade in the financial markets. • An entrepreneurial culture, strong business platform and high caliber people combine to create a powerful business model that has driven EDF Trading to its leading position in Europe today. €1 BILLION 2008 Operating profit €1.6 BILLION in shareholder’s equity 700 Employees 100% owned by EDF Group S.A. A3 Moody’s Credit Rating London Headquartered

3. Gas Asset Coal Gas Transport Power Asset Eagle Energy Partners Overview Eagle Energy, a subsidiary of EDF Trading. Wholesale Gas Trading and Supply: • One of the top gas marketers in North America, marketing 4.4 Bcf a day of natural gas • 800,000 MMBtu/d of firm transportation in 40 pipelines primarily in the Eastern US • Arrangements for storage of gas in the Mid-Con, Mid-Atlantic, Gulf Coast and West regions with 5+ year term capacity on ANR, CGT, Centerpoint, and Kern River Wholesale Power Trading and Supply: • Market approximately 10,000 MW of third-party owned power generating assets in the US, dispatching ~8% of ERCOT • Optimize the fleet via Day-ahead, intra-day, monthly, fixed and index products • Wide regional presence: SERC, VACAR, SPP, FRCC, MISO, PJM, and ERCOT Coal Offices in Denver and Baltimore 180 Employees in the United States and Canada

4. 180mw 53mw 500mw 680mw 290mw 685mw 830mw 136mw 212mw 40mw 212mw 708mw 600mw 648mw 2500mw 188mw 550mw 150mw 650mw 550mw 250mw 80mw 16mw SERC MISO PJM WEST Eagle’s Power Footprint by Fuel Mix of Clients Calgary Portland Chicago Pittsburgh San Francisco Baltimore Denver Power Regions Legend Atlanta EDFTNA HQ EDFTNA Office Wind Combined Cycle Gas 100mw 900mw Gas Peaking Zones System Optimization North Petroleum Coke Houston Coal Solar South Demand Response West Load Served

5. ERCOT Market Overview

6. Important Acronyms and Terms • CREZ – Competitive Renewable Energy Zone - an area where wind generation facilities will be installed throughout West Texas and the Panhandle and from which transmission facilities will be built to other areas of the state to deliver mostly renewable power to end-use consumers in the most beneficial and cost-effective manner. • ERCOT – Electric Reliability Council of Texas - certified by the Public Utility Commission of Texas as the Independent System Operator (ISO) • MCPC - Market Clearing Price for Capacity - highest price for a Settlement Interval for Ancillary Service capacity awarded for each of the Ancillary Services procured by ERCOT • MCPE - Market Clearing Price for Energy - highest price associated with a Congestion Zone for a Settlement Interval for Balancing Energy deployed • PGC - Power Generation Company • QSE – Qualified Scheduling Entity - Market Participant that is qualified by ERCOT to submit Balanced Schedules and Ancillary Services bids and settle payments with ERCOT • REP – Retail Electric Provider - A person or group that sells electric energy to retail Customers in ERCOT • TDSP - Transmission and Distribution Service Provider - Owns or operates for compensation in this state equipment or Facilities to transmit and/or distribute electricity, and whose rates for Transmission Service, distribution service, or both is set by a Governmental Authority • WGR - Wind-powered Generation Resource - A Generation Resource that is powered by wind.

7. ERCOT in the National Picture North American Electric Reliability Council Regions ASCC - Alaska Systems Coordinating Council ERCOT - Electric Reliability Council of Texas FRCC - Florida Reliability Coordinating Council MRO - Midwest Reliability Organization NPCC - Northeast Power Coordinating Council RFC - ReliabilityFirst Corp. SERC - Southeastern Electric Reliability Council. SPP - Southwest Power Pool WSCC - Western Systems Coordinating Council

8. Texas Pre-Deregulation: 10 Control Areas Former ERCOT Control Areas HLP Houston Lighting and Power TU Texas Utilities LCRA Lower Colorado River Authority STEC South Texas Electric Coop PUB Public Utilities Board TMPP Texas Municipal Power Pool TNMP Texas New Mexico Power CPS City Public Service CSW Central South West AE Austin Energy

9. Senate Bill 7 and the Renewable Energy Mandate • On January 1, 2002, retail competition in Texas was initiated for all customers of investor-owned utilities in ERCOT • Prior to Senate Bill 7 (SB 7), all retail electric customers were served by utilities, electric cooperatives, or municipally owned utilities and few customers had a choice of where or from whom they bought their power • Prices for the production and sale of electricity to both wholesale and retail customers are now dictated by market forces • Customers with peak demand of one megawatt or less had a regulated “price to beat”, provided by the REP affiliated with the traditional utility service area until 2007 • Retail prices are not subject to Commission regulation or oversight, and customers are free to choose among the variety of options available from competitors in the marketplace • Transmission and distribution facilities remain regulated by the Commission • Renewable Energy Mandates encouraged the construction and operation of new renewable energy projects in Texas to reduce air pollution associated with the generation of electricity using fossil fuels

10. Texas Uses a Stakeholder Process • Rules are made using a “Stakeholder” process • Changes to market rules are made and implemented by elected stakeholders • Market participants fall into the following categories: • Independent Power Marketers • Independent Generators • Municipal Utilities • Electric Cooperatives and River Authorities • Consumers • Independent REPs • Investor Owned Utility

11. ERCOT’s Role In Texas ERCOT’s primary role is to ensure Reliability; they do this by: • Resource capacity planning • Real-time transmission management • Procure balancing energy • Issue deployment instructions to units, as needed • ERCOT is similar to an Air Traffic Controller • ERCOT’s main roles include: • Ensures the grid can accommodate scheduled energy transfers • Maintain grid reliability • Oversees retail transactions

12. ERCOT Market Participant Structure SCADA Data Customer Meter Reads Loss Information Balanced Schedules Ancillary Service Bids Eagle QSE Other QSEs TDSP Resource Schedules Resource Bids Load Schedules Wind Only QSE Eagle REP Other REPs Other PGCs Client Generation Client Load Resources Client Wind Resources Commercial & Industrial Customers Residential Customers

13. Qualified Scheduling Entity (QSE) QSEs are market participants that are qualified by ERCOT to: • Submit Balanced Schedules to ERCOT • Submit Ancillary Services Bids and Schedules to ERCOT • Clear all financial settlement with ERCOT • Staff a 7x24 Real Time Desk to handle operational changes • All Resources and Load Serving Entities (LSEs) must be represented by a QSE • To provide ancillary services in ERCOT a QSE must be a Level 4 certified QSE

14. Retail Electric Provider (REP) • Retail Electric Power providers serve all end use consumers of electricity in ERCOT • To serve load in ERCOT a REP must know: • ESID (Electric Service Identifier of the Meter) and address of Facility • ERCOT Congestion zone • Weather zone • Meter type (scalar or IDR) • Load (historical consumption pattern) • Transmission Distribution Service Provider • Contract for the wholesale supply of electricity • Contract for the wholesale supply of Ancillary Services • Financially settle with their QSE Eagle Industrial Power Services

15. Power to Choose Website http://www.powertochoose.org/

16. ERCOT Transmission Grid • The ERCOT Grid • $30 Billion Market • 6 million customers with right to choose • 72,820 MW generation • Peak Load of 63,453 MW set on July 13, 2009 • 8,000 miles of 345 kV lines • 16,000 miles of 138 kV lines • Over 38,000 miles of total transmission lines, over 1.5 times the circumference of the earth!!!

17. 2009 ERCOT Congestion Zones • Wholesale Market: • Zonal Design • Bilateral Market • Zones are defined annually • Congestion: The situation that exists when scheduledpower flows, when netted, are projected to exceed the capabilityof a Transmission element or set of elements. • Constraint: A transmission element or group of elements ratings that limit the free flow of energy. Constraints are typically thermal, voltage stability, and angular stability limitations. These constraints are the result of defined contingencies such as the trip of a generating unit or transmission circuit. • Commercially Significant Constraint (CSC):A constraint in the ERCOT Transmission Grid that is found to limit the free flow of energy a commercially significant degree. Solutions to the congestion are solved competitively.

18. Congestion in ERCOT Two types of congestion: • Inter-zonal congestion • Determined by CSCs (commercially significant constraints determined by ERCOT annually) • Occurs between congestion zones • Resolved using Zonal Balancing Energy (Merit Order) • Intra-zonal congestion • Occurs within a congestion zone • Cannot be resolved with Zonal balancing energy • Unit-specific deployments and OOM Energy are utilized • Cost is uplifted system wide to all loads West North Houston South

19. MCPE and MCPC Prices MCPCs MCPEs

20. Three Primary ERCOT Markets ERCOT uses three primary markets to manage generation, forecasted load, and the intraday volatility in system frequency: Primarily over the counter energy hedges between generation, trading, and load counterparties ERCOT purchased capacity used to maintain system reliability Spot energy prices for the imbalance between scheduled generation and forecasted load. Day Ahead Bilateral Markets Day Ahead Ancillary Markets Balancing Energy Markets

21. Day Ahead Bilateral Markets ERCOT’s Bilateral Market In the ERCOT Bilateral Market: • Day Ahead Traders determine their position for tomorrow by evaluating load and generation resources for all participants in their Qualified Scheduling Entity (QSE) • If their aggregated portfolio position for tomorrow is long, short, or un-optimized the trader will step out into the bilateral market • Traders use ICE, Power Brokers, and direct contacts at other Power Marketers to facilitate trading • Power can be sold by Congestion Zone • Trades typically occur in 50 MW blocks: • On-peak – Monday through Friday HE 7 through HE 22 (the 5x16) • Weekend – Saturday and Sunday HE 7 through HE 22 (the 2x16) • Off-peak – Everyday HE 1-6 and HE 23-24 (the 7x8)

22. Day Ahead Ancillary Markets Day Ahead Ancillary Services Market What are Ancillary Services (“AS”)? According to ERCOT, “Ancillary Services are those services necessary to support the transmission of energy from resources to loads while maintaining reliable operation of transmission provider’s transmission systems in accordance with Good Utility Practice.” Ancillary Service Products receive a Capacity Payment! The four primary Day Ahead Ancillary Service Products are: • RegulationUp (URS): Controls the power output in response to a change in system frequency, signal is sent every 2 seconds, 24 hours a day; all signals from ERCOT cause an increase in generation from baseline • Regulation Down (DRS): Same as Regulation Up but all signals from ERCOT cause a decrease in generation from baseline • Responsive Reserve (RRS): Provided by unloaded generation facilities on line, interruptible loads controlled by high set under-frequency relays, or DC tie response that stops frequency decay; RRS is usually a short term deployment • Non-spinning Reserve (NSRS): Utilizes the portion of off-line capacity capable of being synchronized and ramped (or interrupted) to a specified output level within 30 minutes and is capable of running at specified output level for 1 hour

23. Balancing Energy Markets ERCOT’s Balancing Energy Market • Balancing Energy is a “thin” pool of energy that allows ERCOT to acquire additional resources to correct imbalances between generation and load • ERCOT looks at the balance between supply and demand approximately 30 minutes prior to each 15-minute interval • ERCOT will deploy "balancing energy" on behalf of the market, ERCOT may increase or decrease generation • During the financial settlement process, ERCOT determines which REPs and generators incorrectly forecasted their schedule and charges them imbalance costs • Schedules can be changed by QSEs up to an hour before the operating hour • The Balancing Energy Market does NOT provide Capacity Payments • Balancing Energy market prices change every 15 minutes and you have different prices per zone when congestion occurs

24. How has Wind Impacted ERCOT?

25. So what happens when you add 9,000 MWs of Wind Generation to a 70,000 MW system? Challenges posed by wind power include: Forecasting of output in term, daily, and real time is complex Variability in the output of the facilities require additional ancillary services to manage fluctuations Large wind related ramp events require complimentary output from traditional generation facilities Wind generators do not currently provide primary frequency response Benefits created by wind generation include: Lower spot market costs Positive environmental impact Job creation

26. Wind Energy in Texas Wind Capacity Installed by Year System Planning Division Monthly Status Report August 2009

27. ERCOT Generation Stack by Fuel Type

28. ERCOT Generation Stack by Fuel Type

29. Long Term Impact of Wind on Spot Power Prices

30. Intraday Volatility Caused by Wind on the West Zone MCPE

31. Fuel Type During System Peak

32. How does ERCOT Forecast the Wind? Aggregate Wind Power Forecasts: Red = STWPF, Green = WGRPP Key Challenges to Reliability with Increased Wind Penetration, PUCT Project 37339 Workshop 8/20/09 Dan Woodfin, Director, System Planning and John Dumas, Manager, Operations Planning • Two forecasts are produced for each Wind Resource: • Wind Generation Resource Production Potential (WGRPP) is an 80% probability of exceedence forecast • Short-Term Wind Power Forecast (STWPF) is the most likely or 50% probability of exceedence forecast • Each hour a new forecast is created for the next 48 hours • Aggregate forecasts are also created and sent to ERCOT • Inputs into the ERCOT Wind Forecaster: • WGR site-specific MW and meteorological data • Outage scheduler data • Registration data • Other (i.e. National or regional weather service data)

33. Chart to the right shows an example of forecasted expected Wind output versus actual output On May 15, 2009 at 3:15 PM ERCOT models forecasted 6,000 MWs of wind during the off peak hours Off peak wind output topped off at 3,000 MWs during the off peak hours Large forecast error was caused by the over estimate of the power production as a cold front approached and passed through the region Weather models overestimated the southerly wind speeds ahead of the front To cover the shortage of wind output traditional generation is deployed by ERCOT Forecast Error Happens Key Challenges to Reliability with Increased Wind Penetration, PUCT Project 37339 Workshop 8/20/09 Dan Woodfin, Director, System Planning and John Dumas, Manager, Operations Planning

34. Sometimes You Can Have Too Much of a Good Thing Wind Output/Curtailments vs. Day Ahead Resource Plans for May 2009 34 Key Challenges to Reliability with Increased Wind Penetration, PUCT Project 37339 Workshop 8/20/09 Dan Woodfin, Director, System Planning and John Dumas, Manager, Operations Planning

35. Managing the Wind Ramp • ERCOT utilizes an “ERCOT Large Ramp Alert System” (ELRAS) that employs the same data that is provided for the wind power forecasts. • ELRAS includes the following: • An estimation of the probability of a defined ramp event (i.e. 1000 MW up ramp in a hour) beginning in a particular interval • Information regarding the weather event which is most likely to cause the ramping event (i.e. a cold front) • Additional attributes for each predicted ramp event including most likely start time, duration and maximum ramp rate • Time variant graphics to provide additional situational awareness • ELRAS focuses on the next 6 hours into the future Key Challenges to Reliability with Increased Wind Penetration, PUCT Project 37339 Workshop 8/20/09 Dan Woodfin, Director, System Planning and John Dumas, Manager, Operations Planning

36. Managing the Wind Ramp (cont.) Ramp events have different meteorological causes which makes tracking and predicting them complex Key Challenges to Reliability with Increased Wind Penetration, PUCT Project 37339 Workshop 8/20/09 Dan Woodfin, Director, System Planning and John Dumas, Manager, Operations Planning

37. Can we have our cake and eat it too?

38. Interconnection Requests for Generation

39. Wind Installed Capacity and Interconnection Requests • ERCOT is currently tracking 230 active generation interconnection requests totaling over 83,000 MW • ERCOT is currently managing almost 48,000 MWs of wind generation interconnection requests • Transmission Projects energized in 2009 total about $416 million • To find the list of projects go to the ERCOT web at: www.ercot.com/content/meetings/ros/keydocs/2009/0910/10._August_2009__ROS_final.pdf

40. Ancillary Service Methodology Wind Ancillary Services study was performed by General Electric consulting group with input from ERCOT staff Study looked at the need for additional or modified ancillary services to meet reliability requirements given the large increase in wind generation in ERCOT Study found that ERCOT needed to implement state-of-the-art wind power production forecast to protect against variability of the wind The study predicted that with 15,000 MWs of wind installed, the amount of Regulation would go up by 23%. ERCOT experience has shown that the incremental Regulation required is greater. ERCOT procures Regulation to ensure that reserves are sufficient to cover 98.8% of the intervals Calculated based on previous 30 days and same month last year Accounts for the expected increase in installed Wind Generation for the upcoming month Provision to increase regulation requirements if the last 30 day average CPS1 score falls below 100

41. CREZ Transmission Solution The Public Utility Commission of Texas (PUCT), under Docket 33672, designed five zones as the Competitive Renewable Energy Zones (CREZs). The PUCT asked ERCOT to develop transmission plans that would cost-effectively collect wind from the five CREZ areas and move it to load centers. ERCOT evaluated four scenarios and in January of 2009 the PUC approved Scenario 2. 5,600 MWs DFW 10,300 MW SA/AUS 2,600 MW

42. Competitive Renewable Energy Zones (CREZ)

43. Actual Summer Week Generation by Fuel Type

44. Actual Spring Week Generation by Fuel Type

45. Forecasted 2013 High Wind Week Generation by Fuel Type

46. The Costs and Benefits of CREZ • Estimated cost of the CREZ project is over $4.93 B • Cost to average rate payer in Texas is $4/month • Economic and environmental benefits are significant • Roughly $1.2 B in royalty payments to landowners • Estimated $3.32 B in tax payments to state and local governments over 10 years • Creation of construction & permanent jobs ($900 MM) • Reduction of 193 MM tons of CO2 per year • Reduction of 93 k tons of NOx per year • Reduction of 17 B gallons of H2O usage per year • CREZ will add 2,334 miles of new 345-kV transmission lines capable of handling 18,456 MWs (11,553 MWs of incremental capacity above the 6,900 MWs of base case generation) • Utilities participating include AEP Texas Central, AEP Texas North, Electric Transmission Texas, LCRA, Oncor, Sharyland Utilities, South Texas Electric Cooperative, and Texas-New Mexico Power Company • As a fast track project, completion is targeted for 2013

47. Questions?