ERCOT SCENARIO DEVELOPMENT STAKEHOLDER WORKSHOP CNP Discussion Points for Long-Term Scenarios ( ) January 23, 2014

2 Topics Economic Growth Jobs & Population Number of Residential & Commercial Customers Load Growth Distribution Loads Appliance Standards Building Codes Energy Efficiency Transmission Loads Upstream – Metals & Fabricating Midstream – PL Pumping, Storage & LNG Downstream – Chemicals & Refining

Economic Growth 3 GUIDANCE The central tendency has been for the Houston metro area to grow at close to 2% per year ( see slide on next page ) with the area’s population growing 1% due to births minus deaths, about 0.5% due to international in-migration and another 0.5% due to domestic in-migration from other states or counties outside of the Houston area. In recent years, as Houston has emerged from the recession, it has added jobs at a rate exceeding most other major cities and was the first large metro area in the nation to replace all of the jobs it lost during the recession. In the near-term, housing and office construction remain strong and, for the next several years, the Houston area will benefit from thousands of construction jobs associated with investment in midstream and downstream energy related infrastructure. Houston’s current economic growth is unique in that upstream and downstream energy are both prospering at the same time. In the long-term, Houston is unlikely to sustain job and population growth rates much above 2% but, barring a collapse in oil prices, it likely will have robust growth close to 2% and near-term a large increase in industrial loads is a strong possibility.

The number of residential customers has grown an average of 2.2% since 1993 and varied mostly within a band of 1.5% to 3.0%. 4 Additional 20 year average growth rates for the Houston area are: Jobs 2.1% Population 2.2% Number of Commercial 2.2% Customers

Distribution Loads For an overview of past and pending energy efficiency standards visit: 5 Energy efficiency standards, building codes and utility sponsored energy efficiency programs will continue to slow the energy and peak demand growth of distribution voltage customers.

6 Transmission Loads Due to industrial growth in the area, there is a strong possibility that the TVS rate class will become a much larger share of CNP’s peak loads. The next few slides will elaborate on industrial growth.

For perspective on how UPSTREAM energy has benefited Houston’s economy – past & present - visit: 7

For perspective on how MIDSTREAM energy is expected to benefit the nation by region visit: Investment-Study.pdf 8 This report provides two long- term scenarios. In the “High” case, midstream investments peak in The report also estimates net regional economic benefits – direct, indirect and induced – but estimated benefits are only available for each of four regions. Texas is part of the “South” region.

For perspective on how DOWNSTREAM energy is expected to grow and benefit the nation visit: End-2013-Situation-and-Outlook.pdf 9 “Over 135 new chemical production projects (valued at over $90 billion altogether) have been announced and the dynamics for sustained capital investment are in place.” “Access to plentiful and affordable natural gas supplies has allowed the U.S. to capture an increasing share of global chemical industry investment since This trend will continue as the United States has become the location for investment. By 2018, global chemical industry capital investment will reach $618 billion, a level nearly two times higher than it was in 2010.”

There are numerous midstream and downstream projects either under construction or forthcoming. One example is the Freeport LNG facility that will be a very large electric load. For more information visit: 10 Other significant announced projects include: Exxon Mobil (Baytown) Chevron Phillips (Baytown) Chevron Phillips (Old Ocean) Dow Chemical (Freeport) LyondellBasell (Channelview) LyondellBasell (La Porte) INEOS (Chocolate Bayou) Celanese (Clear Lake) Linde (La Porte) Enterprise Products (HSC) and Enterprise Products (Mont Belvieu).

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