Topics For Discussion

1. 1

2. 2 Topics For Discussion Brief history leading to the ICT Model ICT Functions The Weekly Procurement Process Experience to date Contract Path/TLR Model

3. 3 The Entergy Quest to Join an RTO

4. 4

5. 5 The ICT Proposal (or Plan B, C, D)

6. 6 Underlying Rational for the ICT Proposal If it is not mandatory, why do it? Achieve greater independence, transparency and oversight over the operation of the Entergy transmission system Achieve greater efficiency in providing and pricing transmission service and the expansion of the transmission grid Develop mechanism for better incorporating merchant generation into Operating Companies’ commitment and dispatch decisions (WPP Proposal)

7. 7 A Quick Review of the Key Elements of the ICT Conditional Approval by FERC on April 24, 2006 and final approval in October, 2006 Term of Agreement: 4 years Southwest Power Pool (SPP) selected as ICT Established an Independent Coordinator of Transmission (ICT) to administer the Entergy OATT ICT performs the Tariff Administration and Reliability Coordination functions The ICT also performs regional planning New Transmission Expansion and Pricing Policy Established a new Weekly Procurement Process with ICT oversight

8. 8 ICT Functions: Tariff Administration Went “live” on November 17th, 2006 Key responsibilities: ICT accepts/denies requests for short term service based on availability of applicable AFCs ICT accepts/denies requests for long term service, based on results of SIS performed by the ICT ICT responsible for calculating and posting AFCs ICT maintains and administers the Entergy OASIS site

9. 9 ICT Functions: Reliability Coordination ICT provides Reliability Coordinator Services under NERC policies Assumed RC functions on November 1, 2006 The ICT has managed short-term reliability on the Entergy transmission system very well Coordinated with various parties to develop operating guides in the Acadiana Area The ICT has helped to coordinate long range planning Acadiana upgrades Free economic studies

10. 10 ICT Functions: Planning Base case model development Base plan development ICT Base plan used for cost allocation. ICT integrates Entergy construction plan with other Transmission Owners’ plans to identify: Potential synergies among the plans Potential economic regional upgrades Transmission Service Request Studies Interconnection Studies

11. 11 Weekly Procurement Proposal

12. 12 Weekly Procurement Process (WPP) The WPP is an integral part of our ICT proposal. The intent of the WPP is to achieve the following: Provide Entergy and its Network Customers production cost savings through optimization of short-term purchases and the use of existing resources for the next week. The ICT has been involved in the development of the WPP software, stakeholder process, and software testing The WPP operated by Entergy, with oversight provided by the ICT WPP implemented March 2009

13. 13 Weekly Procurement Process, continued The process accomplished through a simultaneous optimization of existing transmission service and new transmission service requests, subject to transmission constraints (via a SCUC algorithm using a MIPS solver) Entergy offers weekly and daily service to Network customers through the WPP Network customers submit cost information on existing DNRs and market bids from new resources All previously granted firm service will be protected in the weekly process

14. 14 Weekly Procurement Process, III The option to participate in the process is available to all network customers that wish to qualify alternative network resources on a weekly basis through the WPP All network transmission customers have equal priority in the granting of service through the weekly process. No network customer can be made worse off as a result of the WPP process (hold harmless provision)

15. 15 ICT Experience To Date

16. 16 Performance to Date Files quarterly and annual ICT reports with FERC The ICT has done a good job performing the Reliability Coordinator function The ICT successfully managed a significant increase in transmission usage across the Entergy system Has analyzed and responded to various AFC modeling issues Helped implement various tariff changes that implicate the AFC process, including various Order 890 requirements Engaged in a top-down review of the AFC software

17. 17 Performance to Date, continued Planning and Tariff Studies Actively engaged in long-term planning for the Entergy System Has performed transmission service request studies within specified time constraints Developed the ICT Strategic Transmission Expansion Plan (“ISTEP”) as a comprehensive review and report on the ICT’s long-term expansion plan for the ETR transmission system Focused consideration of both reliability and economic expansion projects with the ETR footprint.

18. 18 Performance to Date, III Weekly Procurement Process Was actively engaged in the design and testing of the software and in Market Trials Facilitated the participation of Independent Generators in market trials, providing IPPs with an opportunity to gain valuable experience with the WPP systems and processes Has identified modeling and process errors that have been corrected, leading to an installation of various safeguards to facilitate the successful launch of the WPP Formed a WPP Issues Working Group (WPPIWG) expressly focused on the WPP to provide stakeholders with regular information on the development and progress of the WPP

19. 19 Contract Path/TLR Model

20. 20 The Pro Forma Tariff; Unbundled Services Provides for the following types of services: Network Integration Service (NITS) Point-to-Point (PTP) Transmission Service Defines and provides for Ancillary Services Prescribes the terms and conditions of these services Prescribes the methodology for charges associated for these services Charges Are Based On Embedded Costs Attachment C is Transmission Provider specific, and details the procedures for determining Available Transfer Capability

21. 21 Network Integration Transmission Service Network Service is the delivery of capacity and energy from designated network resources to serve network loads on a comparable basis with the Transmission Provider’s use of the transmission system to serve native load. Network Service is firm service, and the minimum term is one year. The designation of NITS resources can be done on a more frequent basis (up to day-ahead at Entergy)

22. 22 Network Service Example

23. 23 Network Service, continued Secondary Network service also available Non-firm service used to deliver economy energy to network loads from resources that have not been designated as Network Resources Network customers pay a monthly demand charge based upon its Load Ratio Share times one-twelfth of the Network Transmission Revenue Requirement (NTRR) Load Ratio Share (LRS) is based on coincident peak at time of system peak

24. 24 Point-to-Point Service PTP Service is the reservation and transmission of capacity and energy from specific Point(s) of Receipt to the Point(s) of Delivery under Part II of the OATT Customers can reserve the capacity, pay PTP charges, and not use the service PTP charge based on stated rate and MW reserved (not a LRS), and charge incurred regardless of whether energy actually scheduled

25. 25 PTP Service Examples

26. 26 Types of PTP Service Firm Service Yearly Monthly Weekly Daily

27. 27 Ancillary Services Ancillary Services are services that are necessary to maintain system security, organization, and reliability They are broken down into 6 different schedules Schedule 1 : Scheduling, System Control and Dispatch Service Schedule 2 : Reactive Supply and Voltage Control from Generation Sources Service Schedule 3 : Regulation and Frequency Response Service Schedule 4 : Energy Imbalance Service Schedule 5 : Operating Reserve – Spinning Reserve Service Schedule 6 : Operating Reserve – Supplemental Reserve Service

28. 28 Mechanism for Requesting PTP or Network Service Transmission customers reserve transmission service via a Transmission Provider’s OASIS web site Open Access Same-time Information System Per the pro forma OATT, Transmission Service is subject to availability of capacity, and is reserved on a first-come, first-served basis Transmission Providers post the available transmission capacity (ATC) on the OASIS for various source-sink pairs Long-term requests require a System Impact Study Studies performed in queue order

29. 29 Available Transfer Capability Defined: A measure of the transfer capability remaining in the physical transmission network for further commercial activity over and above already committed uses. Entergy view on ATC shortcomings: Contract path based Control area-to-control area calculations Does not accurately reflect the ability of a particular generator to deliver its output over local facilities Non-simultaneous calculations True ATC is highly specific to time and source-sink locational pairs

30. 30 Contract Path Example

31. 31 Available Flowgate Capability AFC is a flow-based methodology that takes into account local constraints by calculating transfer capability with increased granularity AFC also resolve simultaneity problems by decrementing impacted flowgates when transactions are approved Applies to short-term transmission service requests Long-term transmission service requests still processed via System Impact Study (SIS) process

32. 32 Available Flowgate Capability, II In place at SPP, MISO, PJM, Entergy et al Different implementations Assumptions define balance between granting more or less service and congestion. Granularity determined by market structure LMP market for intra-RTO transactions at MISO and PJM Entergy must use unit specific AFCs

33. 33 Managing Transmission System Congestion All methods used to calculate system transfer capability are forecasts System conditions frequently differ in real-time versus what was predicted with the ex ante transfer capability forecasts These changes may cause transmission congestion Often the only remedy in a non-LMP world is to use the NERC Transmission Loading Relief (TLR) process to unwind transactions Reliability redispatch used for “local” problems, but not as effective for regional problems on flowgates TLRs neglect economics Share-the-pain philosophy based on the type of service

34. 34 Summary Transmission access is determined by the available transfer capability There are multiple methods for calculating transfer capability, all of which are based on ex ante forecasts of future system conditions The pro forma tariff is a physical rights model that creates certain challenges for real-time congestion management The ICT has provided an additional level of independence, transparency and oversight to ensure non-discriminatory access to the grid Entergy has also taken a number of steps to increase transmission access under the current physical rights transmission model, including: Implemented the AFC process to overcome the inherent shortcomings of the ATC calculations The new Weekly Procurement Process, enabled Entergy to establish an additional mechanism for granting short-term firm transmission service based on the redispatch of all network resources and other resources included in the WPP

35. 35 Questions?