1. ERCOT Transmission Planning Process Overview and Recommendations November 6, 2002

2. 11-05-022 Background At the October TAC meeting, ERCOT staff outlined high-level responsibilities under the new Transmission Services organization TAC welcomed the changes and requested focus be added in three areas: 1.Ensuring the transmission planning process is well defined, documented and open to Market Participants 2.Moving transmission projects from the “needed” status to the next steps ( Board approval and assignment of providers ) 3.Approved projects are logged, tracked and built on a reasonable timeline

3. 11-05-023 ERCOT Planning Role History 1998199920002001 Sep.’97-TAC forms Committee on Transmission Adequacy Aug ‘98 – TAC approves first ERCOT Transmission Planning Process Dec ’98 – ERCOT Board endorses the first set of 345 kv upgrades Aug. ’99 – ERCOT Broad approves a more detailed “Transmission Planning Process” detailing new procedures and responsibilities May ’98 – TAC committee issues report with 18 ERCOT policy procedures and 14 PUCT / Legislative changes needed to implement the report concepts. Oct. ’98 – ERCOT publishes preliminary priority list of 5 345 kv transmission projects July ’99 – ERCOT publishes procedures for “Transmission Project Submission in ERCOT for ISO Evaluations” June ’00 – ERCOT publishes new list of Transmission Constraint Relief Projects with 8 new projects for consideration 1997 2001 – ERCOT publishes new list of Transmission Constraint 1 new projects for consideration

4. 11-05-024 NERC Compliance, Gen/Trans. Project Tracking, NERC Assessments. Gen. Int. Studies North South West Regional Planning Studies North South Work Distribution West Regional Planning Studies Public Reviews Board Approval Transmission Constraints Report (Oct 1) Annual RMR Study CCN Support and Project Tracking JanuaryDecemberJune Gen. Int. Studies POWER FLOW BASE CASE, STABILITY MODELS, TUNING CSC Determination, ATC for TCRs Special Studies (Reactive, Stability Wind, etc) REPORTS: FERC 714/715, EIA 411, CDR, D&E, ALDR Reliability Assessments RAP/SPS

5. 11-05-025 Determination of Current and Future Transmission Constraints I. TDSPs Develop Area Forecast Annually, each TDSP provides substation forecast along with updated power flow information. II. ERCOT Develops Region Forecast Review historic load and generation patterns and develop load forecast including 95% to 105% load estimates. III. ERCOT Performs Impact Studies ERCOT performs impact studies to develop specific recommendations for system additions. IV. October 1 Report ERCOT formally submits an annual report on transmission constraints to the PUCT and for public review.

6. 11-05-026 Generation Interconnection Requests – Background I. Interconnection Feasibility Request submitted to ERCOT II. ERCOT performs steady state analysis and provides rough estimate of facility additions III. Generation owner reviews information and incorporates it into its decision – making process IV. Generation owner requests a full interconnection study V. Regional Planning Group performs detail analysis and determine final estimate. VI. Generation owner signs interconnection agreement with TO VII. Transmission Projects are approved

7. 11-05-027 Regional Planning Process I. Project Identification TDSP, ERCOT or other Stakeholder recommends project II. Regional Planning Effort TDSPs, ERCOT and PUCT staff discuss and recommended system additions. Confidentiality is maintained. III. Open Review Process via TAC Subcommittee ERCOT posts all recommended projects and schedules meetings with all interested parties prior to final consideration IV. ERCOT Board Review ERCOT submits all final recommendations to the Board V. Designation of Providers ERCOT designates providers for the transmission projects from those that own end-point substations. ERCOT may need to designate a provider if TOs decline VI. Notification to PUCT ERCOT informs the PUCT of all recommendations, supports CCN and tracks project status

8. 11-05-028 Transmission Planning Process –Background (Approved by the Board in August 1999) Transmission constraints and problems will be noted when any one of the following conditions is reached in simulations: Flow of a circuit is at or above the thermal limit for post- contingency loading Voltage on a bus is at or below the minimum post- contingency limit A portion of transmission system reaches a state of voltage instability leading to voltage collapse A portion of the transmission system is not dynamically stable if a disturbance were to occur

9. 11-05-029 Determination of Need – Background (Approved by the Board in August 1999) The ISO will determine when constraints need to be addressed with transmission facility additions. This determination is somewhat subjective and will be based on the following considerations : Transmission addition will be considered when studies show that a contingency on the transmission system will result in one or more of the four conditions listed above. Transmission additions will be considered when significant excess generation is constrained inside an area where forecast load fails to materialize as anticipated or where load growth cannot be met by sufficient new generation. Transmission additions may be indicated when the studies show a disproportion in the amount of transmission capacity to load into a load area.

10. 11-05-0210 RMR Studies Anticipated to become an annual study process Initially outsourced with ‘power flow’ tools to be provided to ERCOT staff High visibility due to cost and aging plant inventory Scope is increasing to identify logical system upgrades in addition to RMR determination

11. 11-05-0211 Consolidated Planning Process ERCOT Identifies Transmission Constraints TDSPs Provide Load & Transmission Forecast (Years 1-5) 1 ERCOT Develops and posts models and combined forecast 235 4 ERCOT and Regional Groups Determine Prelim Solutions (Oct 1) TDSPs identify Local Constraints RMR costs Forecast 78 10 TDSPs Provide Transmission Upgrade and Outage Plans (Year 1) ERCOT Forecasts Local and CSC Congestion Costs Perform Economic Assessment and Refine Solutions 11121314 Planning Summit ERCOT Staff finalizes expansion recommendations ERCOT Board approves Expansion Plan Expansion Plan submitted to PUCT Denotes report is published on the Web 6 Develop Cost Estimates Region Planning Process Annual Congestion Cost Studies 9

12. 11-05-0212 Revised Planning Process Elements Establish Annual Expansion Plan Incorporate market congestion and must-run costs into transmission addition assessments Reduce subjectivity by incorporating deterministic planning criteria Transmission additions will be recommended when: –Generation additions exceed area export capability –Flows on circuits will be limited above the time and cost expected to justify a project Improve generation reports and models –Establish expirations for Generation interconnection feasibility studies –Exclude generation projects w/o interconnection agreements in near term planning cases (two years out)

13. 11-05-0213 All transmission projects will be reviewed by ERCOT All projects at or above 345 kV will go to the Board Projects under 345 kV requiring special consideration will also be reviewed by the Board. For example: –Projects interconnecting multiple market participants –Projects requiring extensive new right-of-way Review Process

14. 11-05-0214 Project Tracking Benefits Provide Quarter Status Reports to TAC and BOD Increase Openness of Information Increase Transparency Improve Project Tracking Improve Searching and Reporting Increase Accuracy of Studies and Reports

15. Questions?