McCAMEY 345 kV TRANSMISSION PLAN

Presentation to Technical Advisory CommitteeMay 8, 2003

KENNETH A. DONOHOO, P.E.Manager, System Planning

Transmission Serviceskdonohoo@ercot.com

www.ercot.com

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Senate Bill 7

Sec. 31.002 DEFINITIONS(9) "Independent system operator" means an entity supervising the collective transmission facilities of a power region that is charged with nondiscriminatory coordination of market transactions, systemwide transmission planning, and network reliability.

Sec. 39.151. ESSENTIAL ORGANIZATIONS(a) A power region must establish one or more independent organizations to perform the following functions:

(1) ensure access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms;(2) ensure the reliability and adequacy of the regional electrical network;(3) ensure that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information; and(4) ensure that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers in the region.

(b) "Independent organization" means an independent system operator or other person that is sufficiently independent of any producer or seller of electricity that its decisions will not be unduly influenced by any producer or seller. An entity … (j) A retail electric provider, municipally owned utility, electric cooperative, power marketer, transmission and distribution utility, or power generation company shall observe all scheduling, operating, planning, reliability, and settlement policies, rules, guidelines, and procedures established by the independent system operator in ERCOT. Failure to comply with this subsection may result in the revocation, suspension, or amendment of a certificate as provided by Section 39.356 or in the imposition of an administrative penalty as provided by Section 39.357.

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PUCT Substantive Rules

§25.191 Transmission Service Requirements(a) Purpose. The purpose of Subchapter I, Division 1 of this chapter (relating to Transmission and Distribution), is to clearly state the terms and conditions that govern transmission access in order to:

(1) facilitate competition in the sale of electric energy in Texas; (2) preserve the reliability of electric service; and(3) enhance economic efficiency in the production and consumption of electricity.

(c) Nature of transmission service. Transmission service allows for power delivery from generation resources to serve loads, inside and outside of the ERCOT region.(d) Obligation to provide transmission service. Each TSP in ERCOT shall provide transmission service in accordance with the provisions of Division 1 of this subchapter.

(3) A TSP shall interconnect its facilities with new generating sources and construct facilities needed for such an interconnection, in accordance with Division 1 of this subchapter.

§25.195 Terms and Conditions for Transmission Service(c) Construction of new facilities. If additional transmission facilities or interconnections between TSPs are needed to provide transmission service pursuant to a request for such service, the TSPs where the constraint exists shall construct or acquire the facilities necessary to permit the transmission service to be provided in accordance with good utility practice, unless ERCOT identifies an alternative means of providing the transmission service that is less costly, operationally sound, and relieves the transmission constraint at least as effectively as would additional transmission facilities.

§25.198 Initiating Transmission Service(d) Facilities study.

(3) Pursuant to §25.195(c)(2) of this title, the TSP shall be responsible for the costs of any planning, designing, and constructing of facilities of the TSP associated with its addition of new facilities used to provide transmission service.

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PUCT Substantive Rules

§25.361 Electric Reliability Council of Texas (ERCOT)(b) Purpose. ERCOT shall perform the functions of an independent organization under the Public Utility Regulatory Act (PURA) §39.151…(f) Planning. ERCOT shall conduct transmission system planning and exercise comprehensive authority over the planning of bulk transmission projects that affect the transfer capability of the ERCOT transmission system. ERCOT shall supervise and coordinate the other planning activities of TSPs.

(1) ERCOT shall evaluate and make a recommendation to the commission as to the need for any transmission facility over which it has comprehensive transmission planning authority.(2) A TSP shall coordinate its transmission planning efforts with those of other TSPs, insofar as its transmission plans affect other TSPs.(3) ERCOT shall submit to the commission any revisions or additions to the planning guidelines and procedures prior to adoption. ERCOT may seek input from the commission as to the content and implementation of its guidelines and procedures as it deems necessary.

(h) Interconnection standards. In performing its functions related to the reliability and security of the ERCOT electrical network, ERCOT may prescribe reliability and security standards for the interconnection of generating facilities that use the ERCOT transmission network. Such standards shall not adversely affect or impede manufacturing or other internal process operations associated with such generating facilities, except to the minimum extent necessary to assure reliability of the ERCOT transmission network.

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Reliability• Transmission major purposes are to:

• Deliver electric power to areas of customer demand• Allow economic and competitive exchange of electric power• Provide flexibility for changing system conditions

• Interconnected transmission systems are principal means for achieving a reliable electric supply

• The NERC Planning Standards define the reliability of the interconnected electric systems using the following two terms: • Adequacy — The ability of the electric systems to supply the

aggregate electrical demand and energy requirements of their customers at all times, taking into account scheduled and reasonably expected unscheduled outages of system elements.

• Security — The ability of the electric systems to withstand sudden disturbances such as electric short circuits or unanticipated loss of system elements.

• Guides in NERC Planning Standards describe good planning practices and considerations

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Planning Criteria• Due to its very nature, transmission planning is a

continuous process and is constantly changing due to the addition (or elimination) of plans for new generation, transmission facilities, equipment, or loads

• Electric system reliability begins with good long term planning

• ERCOT Planning Criteria state the fundamental minimum requirements for planning and constructing reliable interconnected electric systems under:• Normal conditions• First contingency conditions

• Includes some double-circuit outages over 0.5 mile that result in collapse or uncontrolled outages, instability of generating units or interruption of service to firm demand or generation other than that isolated by the double-circuit loss, following the execution of all automatic operating actions such as relaying and special protection systems. Loss should result in no damage to or failure of equipment.

• Single faults resulting in multiple elements out• Second contingency conditions, with adjustment

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Open Process

• Developed, reviewed and approved by Regional Planning Group as part of the Generation Interconnection Processes

• Plan posting• Direct discussion with many developers• April 2002 original 138 kV plan posted• December 2002 updated to include 345 kV lines

• Presented in meeting January 30, 2003• Comments provided February 21, 2003

• ERCOT Staff support document March 28, 2003• Comments provided April 17, 2003

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West Texas

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McCamey Wind Generation

Interconnection

Southwest Mesa 1999 75 MWIndian Mesa 2001 80 MWWoodward Mountain

2001 160 MW

King Mountain 2001 280 MWDesert Sky 2001 160 MW

TOTAL 2003 755 MW

A high level of interest in siting additional wind generation in this area has been documented and discussed. Several of the existing sites indicate they can expand at their current locations.

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Wind Resource

Wind speed increases with height Small increases in wind speed result in large increases in power

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McCamey Area138 kV System

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Plan Capability – 138 kV

• Current Limit is 400 MW• Operations currently limiting output everyday• Reactive compensation (voltage control) is problematic

• Up to 650 MW in 2005 without SPS• Reactive compensation (voltage control) is problematic

• Up to 900 MW in 2006 without SPS • All 138 kV spokes and 138 kV lines in service• Reactive compensation (voltage control) is problematic

• Up to 1,200~1,300 MW in 2006 with SPS• All 138 kV spokes and 138 kV lines in service• Will require sufficient dynamic reactive support• SPS presentation at West RPG Meeting May 28

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Plan Capability – 345 kV

• Up to 1,500 MW in 2008+ without SPS• All 138 kV spokes and 138 kV lines in service• 345 kV radial line Twin Buttes to McCamey in-service• SPS will be required during outage of this line

• Up to 2,000 MW in 2008+ without SPS• All 138 kV spokes and 138 kV lines in service• 345 kV line Twin Buttes to McCamey in service• 345 kV line McCamey to Odessa in service

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McCamey – Twin Buttes 345 kV

1,500 MW

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McCamey – Odessa345 kV

2,000 MW

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Estimated Cost

• 138 kV construction up to 900 MW• Based upon current interconnection agreements (755

MW)• RPG approved, ERCOT endorsed and under construction• $157,095,000

• 345 kV radial line construction up to 1,500 MW• Twin Buttes to McCamey• Incremental cost $90,300,000 (total $247,395,000)• Generation would be limited during outage of this line

• 345 kV line construction up to 2,000 MW• McCamey to Odessa• Incremental cost $65,400,000 (total $312,795,000)

These 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.

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Recommendation

• Encourage wind generators to site appropriately where transmission capacity is available

• Continue 138 kV construction to incorporate current wind generation interconnections• Preserve the ability to shift to the 345 kV additions, if needed• Do not build unnecessary 138 kV transmission facilities

• Perform routing analysis and conduct open houses to prepare for a new McCamey-Twin Buttes 345 kV line• Cost to be covered by generation developers in area

• Executed interconnect agreements of 1,500 MW will be needed to proceed with line certification and construction

• Following start of construction, transmission providers should perform routing analysis and conduct open houses to prepare for a new McCamey-Odessa 345 kV line

• When generation interconnection agreements are greater than 2,000 MW, construct McCamey-Odessa 345 kV line

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Comments Received

COMMENT ERCOT RESPONSE

Appreciate the open transmission planning process and ability to provide comments

Agree

McCamey area lacks transmission capacity needed to get existing wind generation output to customers

Agree

Support ERCOT recommendation to upgrade 138kV system

Agree

Support ERCOT recommendation to proceed with the routing analysis for a new 345kV line between Twin Buttes and McCamey

Agree

Enough justification for the 345 kV line exists now

Disagree, signed interconnection agreements total 755 MW

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Comments (cont’d)2

COMMENT ERCOT RESPONSE

Disagree on establishing a threshold of 110% subscriptions to trigger the next 345 kV project. One believes 110% should be used on an experimental basis and adjusted as appropriate. Another suggest studies be performed after reaching 100% capacity with signed interconnection agreements and select the most economically efficient solution for each increment rather than embarking in construction immediately.

Agree, ERCOT has removed the 110% threshold in its final recommendation.

How much capacity can be supported in the McCamey area without relying on Special Protection Schemes?

See “Plan Capability” Slide

Is it really a $90 Million incremental cost to get from a plan that supports 1,000 MW of generation to one that supports 1,500 MW?

Yes (approximately)

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Comments (cont’d)3

COMMENT ERCOT RESPONSE

Request ERCOT supports timely recovery associated with planning studies, pre-engineering work, environmental and cultural surveys, obtaining public input, and title work prior to the CCN process.

Agree, PUCT SR §25.195(c)(1)(A) already allows transmission service customer to cover the costs of planning, licensing, and constructing any new transmission facilities that will be required in order to provide the requested service.

Propose the ERCOT Board approves each phase of the plan prior to that phase being implemented. In addition encourages ERCOT to seek Commission endorsement of the overall approach.

ERCOT will discuss with the Board. Staff preference is one approval for entire plan.

Request support for a bidding process that would enable the wind developers to reserve priority rights to the export capacity provided by new transmission project.

Market design issue and should be introduced at WMS, could potentially relieve the current catch 22 for financing by securing transmission rights

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Comments (cont’d)4

COMMENT ERCOT RESPONSE

TSPs would estimate the cost to complete routing studies for 345 kV options and, once the threshold for the study is met, developers provide security to cover the cost of the detail studies and routing analysis equal to their pro-rata share of the total additional MW of wind generation. If interconnection agreements are signed, the security amounts would be returned to the developers. Extend this security to include the amount estimated to litigate and acquire the CCN.

ERCOT is neutral on this proposal. PUCT SR §25.195(c)(1)(A) already allows transmission service customer to cover the costs of planning, licensing, and constructing any new transmission facilities that will be required in order to provide the requested service.

Rather than 1,000, and 1,500 implementation levels, believes the criteria should be based on actual installed facilities’ capacity plus full implementation of SPS multiplied by 110%.

Agree except for the 110% criteria. The number would be 100%.

ERCOT should ensure that prior to starting incremental project, sufficient interconnection exist to support each project independently. The cancellation of Noelke Hill (160 MW) may trigger delaying or deferring 138 kV components.

ERCOT has reviewed each transmission addition to determine if it is justified independently, and as a result, has already endorsed the existing 138 kV plan based on the existing 755 MW of interconnected wind generation.

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Comments (cont’d)5

COMMENT ERCOT RESPONSE

ERCOT must continue to coordinate activities to ensure planning and wind generation development occur in a coordinate and sensible manner.

Agree

Construction of transmission projects for reliability purposes should be based on a demonstrated need to improve the reliability of service to an area, not just to increase the power transfer capability from an area.

Studies are based on improvements necessary to support ERCOT system reliability in accordance with the planning criteria. See “Planning Criteria” slide.

Has ERCOT/TDSPs considered using the second 138 kV circuits where provided under the 1,000 MW plan to provide for a second phase prior to building 345 kV lines?

Yes, available second circuit positions are all within the immediate McCamey area to allow for future collection of additional wind generation to the hub, and do not extend to Twin Buttes or to Odessa.

Plan to build a 345 kV transmission line into the McCamey area does not provide the proper price signal to wind developers.

Transmission availability is only one of several factors considered by developers. The decision by wind developers to build will have to be made prior to ERCOT support for transmission lines. ERCOT encourages wind generators to site appropriately where transmission capacity is available.

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Resolution

• TAC Support for 345 kV McCamey Area Transmission Plan and routing studies subject to interconnection agreements• 345 kV radial line construction for 1,500 MW

once interconnection agreements for this level are executed

• Twin Buttes to McCamey• Incremental cost $90,300,000 (total $247,395,000)• Generation would be limited during outage of this line

• 345 kV line construction for 2,000 MW once interconnection agreements for this level are executed

• McCamey to Odessa• Incremental cost $65,400,000 (total $312,795,000)

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QUESTIONS, DISCUSSION & DETERMINATION

Due to its very nature, transmission planning is a continuous process and is constantly changing due to the addition (or elimination) of plans for new generation, transmission facilities, equipment, or loads.

Benefits of good planning are not realized until transmission projects are completed and placed in service.