NRG Comments/Concerns with HIP Assumptions

January 21, 2014 RPG Meeting

NRG Comments/Concerns with HIP Assumptions - January 21, 2014

2

• The Coastal region load (and Houston particularly) is likely to continue growing in the foreseeable future.

• Like the Coastal region, there are other regions in the state that are also expected to see continued load growth thanks to Texas’ growing economy (west Texas, D/FW metroplex, regions in the south and central portions of the state such as Corpus Christi, Austin/San Antonio corridor, and the Rio Grand valley.)

• There is not enough generation to meet the Planning load in 2018.

• A planning assumption of reduced load in one area of the state is electrically equivalent to adding that same amount of generation in that one area.

• The assumptions used in any planning scenario are the key drivers for the results.

Baseline – Planning Assumptions We Should all Agree On

3

Assumptions Used in ERCOT’s HIP Analysis Appear to be Pushing Towards a Particular Result

  SE Case Peak Planning

Peak SE/Planning Planning - SECOAST 26,355 26,355 100% - EAST 3,088 3,088 100% - FAR_WEST 2,775 3,176 87% 401 NORTH 1,473 1,747 84% 274 NORTH_CE 21,924 29,512 74% 7,587 SOUTH_CE 14,401 14,401 100% - SOUTHERN 7,103 7,103 100% - WEST 1,897 2,230 85% 333

Total Load 79,016 87,611    

Note: Planning Peak is the higher of SSWG load or the 90/10 load.

Table 1: Load Reduction Assumptions Utilized in HIP Analysis

4

• The data in the previous slide shows that ERCOT reduced the load by greater than 8,000 MWs in the North Central, North, West and Far West weather zones, while holding the Coastal, East, South Central and South weather zones at the planning case levels.

• Electrically, this added 7,587 MWs of generation in the North Central load zone (a 26% reduction in load), primarily in the D/FW metroplex.

• Electrically equivalent to adding X amount of “zero-cost, must run” generation at each load bus where load was reduced. The size of the generation is a percentage of the peak load at the bus. The percentage was determined by how much is needed to have a “solvable” case.

• Note: In addition to reducing load in the North Central, North, West and Far West weather zones, the HIP analysis included mothballed generation outside the Houston region, but excluded mothballed generation inside the Houston/coastal region. This is equivalent to adding 1,273 MWs in the North and removing 206 MWs of generation from Houston and the South.

What do these Assumptions Mean?

5

Load Assumptions Ensure Large Quantities of Transmission are Needed to Serve Houston

Reduced load 274 MW

Reduced load 7,587 MW - electrically equivalent to adding a 7,587 MW unit, mainly in DFW. Also added an additional 1,273 MWs of mothballed gen.

Reduced load 333 MW

Reduced load 401 MW

=2018 Planning peak load

= 2018 Planning peak load

= 2018 Planning peak load

= 2018 Planning peak load

Undoubtedly, these types of assumptions would lead to a conclusion that major transmission infrastructure is needed into Houston from the North.

6

The Assumptions Are Not Supportable

• For any type of HIP transmission expansion to work there has to be something to import!

• Is it proper to assume that generation is never added in the coastal region or the south, but approximately 10 GW is added in the North, mostly in DFW? [Load reduction plus mothballed units]

• Would an assumption of “any” level of generation (or load reduction) in the southern and coastal region significantly change the HIP results?

• The HIP assumption that load is growing in Houston and nowhere else is not supported by other Planning data. For example, ERCOT’s December 2013 Report on Existing and Potential Electric System Constraints and Needs discusses in detail the large load growth expected to continue in far west Texas and in the Denton/DFW area.

• North Central load in the HIP (SE) case is lower than the actual peak in 2013.• A review of other data elements provided by ERCOT’s Planning Group indicates

modifications to the assumptions should be made that are better supported by the data.

7

If Load Reduction is Required for Planning, What is the Proper Criteria?

Year East South South Central Far West West North North Central2011 97% 98% 96% 94% 84% 68% 93%2012 96% 96% 96% 93% 93% 79% 86%2013 77% 99% 97% 96% 78% 91% 89%

Average 90% 97% 97% 94% 85% 79% 89%Max 97% 99% 97% 96% 93% 91% 93%Min 77% 96% 96% 93% 78% 68% 86%

Average % of peak load of each weather zone during the top ten hourly peak load conditions at the Coast Weather Zone

• At 10/22/13 RPG meeting, ERCOT stated that “Decreasing the loads in North, North Central, West and Far West Weather zones is reasonable because they are geographically & electrically far from the Coast Weather zone, and historical data … indicates the loads in the weather zones do not experience peaks load at the same time as the Coast weather zone.

• Questions: Should peak loads in other regions be based on “average” coincident peaks? A closer review shows maximum coincident peaks are closely aligned. Isn’t the HIP analysis supposed to be a “peak” case?

• How can an assumption of a 26% reduction of load in the North Central weather zone be justified based on the above numbers?

Table 2: ERCOT Data from October 22, 2013 RPG

8

ERCOT’s SGIA Data Doesn’t Support the Load Reduction Assumptions

Source: ERCOT System Planning Monthly Status Report – December, 2013, Renewables Removed.

Total by Region MW %

Coastal 2340 31.4

West 570 7.6

North 1079 14.5

North Central 3226 43.3

Far West 240 3.2Total 7455 100

Table 3

Table 4: IAs by Region

Generation Interconnection Agreements as of December 31, 2013

INR Site Name County COD Fuel MW For GridChange

from Last Report

Zone

14INR0016 Channel Energy Center 138/345kV CT Harris 14-Jun Gas 190 Coastal

14INR0015 Deer Park Energy Center Harris 14-Jul Gas 190 MW for Grid Coastal

13INR0021 Ferguson Replacement Project Llano 14-Jul Gas 570 West

13INR0040 Rentech Project Harris 14-Aug Gas 15 Coastal10INR0021 Panda Sherman Power Grayson 14-Aug Gas 720 North10INR0020a Panda Temple Power Bell 14-Aug Gas 717 North Central

10INR0020b Panda Temple Power Bell 15-Aug Gas 717 North Central

13INR0049 Friendswood Energy Generation Harris 15-Sep Gas 316 Coastal

13INR0023 Texas Clean Energy Project Ector 16-Jan Coal 240 Far West

13INR0028 Antelope Station Hale 16-Jun Gas 359 North

06INR0006 Cobisa-Greenville Hunt 16-Dec Gas 1792 Projected COD North Central

10INR0022 Pondera King Power Project Harris 16-Dec Gas 1629

MW for Grid,Proj. COD

Coastal

9Source: ERCOT System Planning Monthly Status Report – December, 2013, Renewables Removed.

ERCOT’s Full Interconnect Study Data Doesn’t Support the Load Reduction Assumptions

Table 5

1.1      Generation Projects Undergoing Full Interconnection Studies

Interconnection Database Reference Number

County Fuel Capacity to Grid (MW)

Commercial Operation

(from resource

developer)

Zone

14INR0069 Milam Coal 30 14-Mar South Central

14INR0040 Hidalgo Gas 225 14-Jun South

14INR0059 Kaufman Gas 52 14-Aug North Central14INR0066 Lamar Gas 130 14-Nov North 13INR0054 Bee Gas 25 14-Dec South14INR0039 Ector Gas 450 15-Mar Far West14INR0038 Galveston Gas 390 15-Apr Coastal15INR0053 Winkler Gas 123 15-May Far West15INR0054 Reeves Gas 123 15-May Far West15INR0055 Austin Gas 142 15-May South Central

15INR0027 Hidalgo Gas 79 15-Jun South

15INR0028 Freestone Gas 160 15-Jun East15INR0042 Hood Gas 460 15-Jun North Central

10Source: ERCOT System Planning Monthly Status Report – December, 2013, Renewables Removed.

ERCOT’s Full Interconnect Study Data Doesn’t Support the Load Reduction Assumptions, Cont.

Table 6

Table 7: Total FIS’s by Region

1.1      Generation Projects Undergoing Full Interconnection Studies

Interconnection Database Reference Number

County Fuel Capacity to Grid (MW)

Commercial Operation

(from resource developer)

Zone

15INR0023 Wharton Gas 700 15-Jun Coastal

16INR0010 Mitchell Gas 799 16-Feb West

16INR0009 Calhoun Gas 510 16-Apr Coastal

16INR0006 Angelina Gas 785 16-Jun East

16INR0003 Brazoria Gas 11 16-Jun Coastal

16INR0004 Cameron Gas 730 16-Jun South

16INR0005 Cameron Gas 871 16-Jun South

16INR0007 Hidalgo Gas 95 16-Jun South

17INR0004 Hale Gas 202 16-Jun North

15INR0032 Hale Gas 197 16-Jul North

15INR0033 Hale Gas 197 16-Jul North

16INR0013 Nacogdoches Gas 215 16-Jul East

17INR0002 Henderson Gas 489 17-Jun North Central

17INR0003 Jackson Gas 965 17-Jun Coastal

17INR0007 Wharton Gas 1177 17-Jul Coastal

11INR0040 Freestone Gas 640 18-Mar East

Total by Region MW % C + S +

SC + EW + N + NC + FW

Coastal 3753 34.2 3753 West 799 7.3 799North 726 6.6 726North Central 1001 9.1 1001

Far West 696 6.3 696South 2025 18.5 2025 South Central 172 1.6 172 East 1800 16.4 1800 Total 10972 100 7,750 3,222

11

If There Isn’t Enough Generation, Aren’t These Load Reductions More Supportable Based on FIS Data (Table 7)?

Reduce 6.6%

Reduce 9.1%

Reduced 7.3%

Reduce 6.3%

= Reduce 16.4%

Reduce 34.2%

Reduce 1.6%

Reduce 18.5%

12

If FIS Data Isn’t Considered, Then Shouldn’t Load Reductions be Closer Aligned with Actual SGIA Data (Table 4)?

Reduce 14.5%

Reduce 43.3%

Reduced 7.6%

Reduce 3.2%

= Reduce 9.1%

Reduce 31.4%

No Change

No Change

13

• ERCOT’s December 17, 2013 Update on the HIP Project to the RPG included an evaluation of the impact of retirement of older than 50 year old generation “inside Houston area”.

• 11 units (total 1939 MW) are more than 50 year old by 2018 Sam Bertron G1, G2, G3, G4 and GT2; T.H. Warton GT1; W.A. Parish G1, G2, G3, G4, and GT1

• However, if the HIP projects are dependent on imports from the north, why ignore units that will be greater than 50 years old in the North zone?

• The North zone contains 17 units more than 50 years old by 2018 for a total of 2,857 MW.

• Handley 3, Mountain Creek 6, Mountain Creek 7, Mountain Creek 8, Powerlane Plant 2, Ray Olinger 1, Spencer 4, Stryker Creek 1, Stryker Creek 2, Atkins G3, Atkins G4, Atkins G5, North Texas 1, North Texas 2, North Texas 3, Valley Unit 1, Valley Unit 2.

• What is basis for assumption that only >50 year old units in the Houston area will retire and others outside of Houston won’t?

Other Questionable Assumptions

14

• The load reduction (generation addition) assumptions used to make the HIP analysis “solvable” are questionable, not supported by other available data, and can only lead to one conclusion – build major transmission infrastructure from the North into the Houston area.• Approximately 10,000 MWs of new, low cost generation added in the North, primarily in the DFW metroplex.

• No generation added in the Coastal weather zone or in the South.

• Older units retire only in the Houston area, nowhere else.

• Mothballed generation is only available if it’s outside of Houston.

• Building a major transmission corridor with nothing to import could lead to stranded, costly transmission investments placed on the backs of consumers.

• NRG believes that more supportable assumptions would significantly alter the HIP results and likely result in a more cost-effective utilization of consumer dollars.

Conclusions