LAREDO PLANT RMR EXIT STRATEGYPresentation to

Board of DirectorsMarch 16, 2004

Transmission ServicesOperations

© ERCOT 2004 3/16/2004

Fort Phantom

San Angelo

La Palma

Rio Pecos

G

G

G G

G

G

Bates

Laredo G

B. M. Davis 335 MWLa Palma 249 MWLaredo 172 MWBates 183 MWFort Phantom 202 MW San Angelo 102 MWRio Pecos 98 MWTotal: 1,341 MW

B. M. Davis

Fort Phantom

San Angelo

La Palma

Rio Pecos

G

G

G G

G

G

Bates

Laredo G

B. M. Davis 335 MWLa Palma 249 MWLaredo 172 MWBates 183 MWFort Phantom 202 MW San Angelo 102 MWRio Pecos 98 MWTotal: 1,341 MW

B. M. Davis

RMR UNITS

© ERCOT 2004 3/16/2004

Goals

• Develop RMR Exit Strategy for Laredo 1, 2 and 3• Short- and long-term plans

• Minimize RMR costs before exit implementation• 138 kV upgrades/additions underway• Additional reactive resources underway

• Maintain reliable service to customers• ERCOT Planning Criteria• NERC Planning Standards and Guidelines• Good Utility Practice• Dispatch Laredo generation when needed to maintain

security

© ERCOT 2004 3/16/2004

Open Process

• South Regional Planning Group analysis and input• Short-term alternative proposed at meeting on Sept.

15, 2003• Long-term alternative proposed at meeting on Oct. 10,

2003

• CFE/ERCOT Interconnection Study released at meeting October 24, 2003• Report finalized in December

• ERCOT Staff recommendation released at South RPG meeting February 19, 2004

• TAC review and support March 4, 2004

© ERCOT 2004 3/16/2004

South Texas

© ERCOT 2004 3/16/2004

Laredo

© ERCOT 2004 3/16/2004

Laredo Area

• Load totaling over 400 MW and growing• Small commercial and residential

• Reliability Must Run (RMR) generation• Laredo Plant 1, 2 & 3 178 MW (35, 34 & 109 MW) • Needed for thermal and voltage transmission limits

• STATCOM in service +/- 150 MVAR at Laredo• Dynamic reactive support

• Under Voltage Load Shed (UVLS) in service• 25% of load interruption in three steps to protect grid

for extreme events• No new generation development in area

© ERCOT 2004 3/16/2004

Application of ERCOT Planning Criteria

VOLTAGE COLLAPSE LIMIT WITHOUT GENERATION

LAREDO AREA PEAK DEMAND

PROJECTION

VOLTAGE COLLAPSE WITH LAREDO 1 & 2 ON-LINE LAREDO

3 OFF-LINE

VOLTAGE COLLAPSE WITH

345 kV LINE

VOLTAGE COLLAPSE WITH 150 MW CFE TIE TRANSACTION LAREDO 1 & 2 ON-LINE

OPERATING LIMITS INCLUDE 5% MARGIN

VOLTAGE COLLAPSE WITH 150 MW CFE TIE AND 345 kV LINE

© ERCOT 2004 3/16/2004

Options Considered to Maintain Reliability

• Additional static reactive additions – not viable• 138 kV Line from Corpus Christi – not viable• New generation in Laredo – not viable 300 to 500 MW

maximum due to transient stability limit• Two or three independent blocks of 100 to 150 MW each• Local transmission additions may be necessary to incorporate• Known for long time without a market solution

• CFE Tie (150 to 300 MW) – feasible • Responds to thermal limits within minutes• Operates preemptively to prevent voltage collapse• Supports to 2 to 3 years of load growth beyond 2007

• 345 kV line from San Miguel – feasible• Requires CCN and about five years to complete• Reduces MW losses (cost savings)• Facilitates proposed San Miguel to Laredo to lower Rio Grande

Valley 345 kV line which provides second source to Laredo as load grows

© ERCOT 2004 3/16/2004

Estimated Cost

• 150 MW CFE Tie at Laredo• Total Capital $50 Mill

• Includes 138 kV system integration costs• Subject to bid

• Annual TCOS $8.3 Mill

• 345 kV Project from San Miguel to Highway 59• Total Capital $150 Mill• Annual TCOS $ 24.8 Mill

• Estimated Annual Offset $13 - 19 Mill • Starting in 2010 with 345 kV addition and Laredo

plants not under RMR Agreement• Range is driven by CFE purchase assumptionsThese are functional estimates based upon typical project costs, which are

subject to change and should not be presumed to capture the exact amount or timing of projected capital expenditures.

© ERCOT 2004 3/16/2004

Recommendation

ERCOT Staff recommends that the Board approve construction of the 150 MW CFE Tie and the San Miguel to Highway 59 345 kV project as described in Attachment A of the Board materials

© ERCOT 2004 3/16/2004

Questions?