John DumasDirector of Wholesale Market OperationsJeff BilloManager of Mid Term PlanningDan JonesDirector with Potomac Economics, the ERCOT IMM

Board of Directors Meeting

ERCOT PublicSeptember 18, 2012

Tab 6: ERCOT West Texas Congestion Management

2

$0 $20 $40 $60 $80 $100 $120

W_TO_N(-)

VALIMP(-)

LON_HI_NEDIN1_1(LON_HILL-NEDIN)

AIR_W_DE_1(W_DENT-JMCRSTL)

ODNTH_FMR1(ODNTH-ODNTH)

GT_MID90_A(GT-MID)

591__A(CRLNW-LKPNT)

MARION_4AT2(MARION-MARION)

SNGZEN99_A(SNG-ZEN)

NICOLE_OAKC1_1(NICOLE-OAKC)

Congestion Rent in $ million

Nam

e of

Con

stra

ints

Top 10 Constraints by Total Congestion Rent (Jan-Dec, 2011)

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

2011 Top 10 Constraints by Total RT Congestion Rent

ERCOT PublicTab 6 2

• Source: Potomac Economics, the Independent Market Monitor for the ERCOT Region

3

2012 YTD Top 10 Constraints by Total RT Congestion Rent

• Source: Potomac Economics, the Independent Market Monitor for the ERCOT Region

ERCOT PublicTab 6 3

$0 $20 $40 $60 $80 $100 $120

ODNTH_FMR1(ODNTH-ODNTH)

6215__A(BCKSW-CGRSW)

W_TO_N(W_TO_N)

2585_1(MOORE-DOWNIES)

SARC-SARC(SARC-SARC)

6475__F(ODESA-ODNTH)

590__A(LWSSW-LWVJS)

258T380_1(TURNER-BUDA)

6430__C(MOSSW-ANCTP)

269T362_1(BUTTER-WHITES)

Congestion Rent in $ million

Nam

e of

Con

stra

ints

Top 10 Constraints by Total Congestion Rent (Jan-Aug, 2012)

JAN

FEB

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

4

Frequency of Odessa-area Constraints

ERCOT PublicTab 6 4

Sum of Duration HR:MN:SCRow Labels 6865__B 6915__A ODNTH_FMR1 6475__F Grand TotalBinding: At Limit 16:00:56 18:20:18 1041:38:50 27:59:57 1104:00:01Binding: Limit Violated 18:20:03 15:29:49 206:48:29 16:54:57 257:33:18Grand Total 34:20:59 33:50:07 1248:27:19 44:54:54 1361:33:19

Percent in TimeRow Labels 6865__B 6915__A ODNTH_FMR1 6475__F Grand TotalBinding: At Limit 0.27% 0.31% 17.79% 0.48% 18.85%Binding: Limit Violated 0.31% 0.26% 3.53% 0.29% 4.40%Grand Total 0.59% 0.58% 21.32% 0.77% 23.25%

End Time September 1, 2012Start Time January 1, 2012Difference (Hrs) 5856:00:00

Jan – Aug 2012 (Binding: At Limit and Binding: Limit Violated)

• Source: Potomac Economics, the Independent Market Monitor for the ERCOT Region

5

West Texas Congestion

Source: July 2012 ERCOT System Planning Report presented at the August 16 2012 Reliability and Operations Subcommittee Meeting. The Estimated Congestion Rent is 2012 year-to-date through the end of July.

ERCOT PublicTab 6 5

Contingency Binding ElementEstimated Congestion Rent

$ (Shadow Price*Limit)

Amoco North Cowden Tap - Moss 138kV Odessa North 138/69 kV Autotransformer 73,038,421

Sacroc - Sun Switch 138 kV; or Golden Switch - Sun Switch 138 kV

China Grove - Bluff Creek 138 kV 27,183,561

BASE CASE West to North Stability Limit 26,831,248

Twin Buttes 345/138 kV AutotransformerSan Angelo Red Creek 345/138 kV

Autotransformer 218,360,051

Lewisville - Carrollton Northwest 345 kV Lewisville - Jones Street TNP 138 kV 16,918,023

Batesville 138/69 kV Autotransformer; or Batesville Switching Station - Paloduro

Substation 138 kV

Moore Switching Station - Downie Switching Station 138 kV

14,934,701

Midland East - Odessa EHV 345 kV Odessa - Odessa North 138 kV 14,524,826

*Highlighted cells represent West Texas-related congestion

6

Load Growth in Far West Texas is the Primary Driver of the Increased Congestion Costs

• Load in the Far West Load Area increased by approximately 6.7% for the month of June between 2011 and 2012– For the month of July, the increase is approximately 7.3%

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Load

(MW

)

Hour Ending

Far West Load Comparison for June and July

2011 2012

ERCOT PublicTab 6 6

7

Price Spread Between West Load Zone and West Hub

• The table below shows the average real-time price difference between the LZ_WEST and HB_WEST comparing June and July of 2012 with June and July of 2011

Month

Avg. Real-Time SPPDifference

Between LZ and HB

CRR Monthly Auction HUB-LZ

PeakWD

2012 Annual CRR Auction HUB-LZ

PeakWDHB_WEST LZ_WEST

Jun.'11 31.26 38.44 7.18 3.00 N/AJul. '11 47.03 52.21 5.18 5.78 N/AJun.'12 26.57 44.23 17.66 8.15 3.46Jul. '12 26.21 50.50 24.29 13.41 3.88

6/11/126/25/12 7/12/12-

7/15/12

ERCOT PublicTab 6 7

8

Real-time Price Comparison Between Load Zones

• The table below shows the average real-time SPPs for the major Load Zones comparing June and July of 2012 with June and July of 2011

• West Load Zone prices in 2012 remain relatively unchanged from last year while other Load Zone prices have decreased

MonthAvg. Real-Time SPP

LZ_HOUSTON LZ_NORTH LZ_SOUTH LZ_WEST

Jun.'11 42.21 42.54 39.83 38.44

Jul. '11 43.21 46.52 41.73 52.21

Jun.'12 28.82 29.09 31.68 44.23

Jul. '12 26.09 26.91 26.58 50.50

6/26/12

ERCOT PublicTab 6 8

9

History of Shadow Price Caps for West Congestion

• The shadow price cap was changed for the Odessa North 138/69 kV Autotransformer constraint on 1/1/12 to $2,274.64– This constraint was changed with the approval of the

new methodology for setting the caps– The limit was lowered starting 8/6/12 to $2,000 after

the net margin of $95,000 was met• The shadow price cap was also changed for Bluff

Creek Switch – China Grove Switch 138 kV on 5/3/12 to $2,000

ERCOT PublicTab 6 9

10 ERCOT PublicTab 6 10

Odessa North Area History

391 MW

480 MW

453 MW

465 MW

2009 2010 2011 2012

Five-Year Transmission Plan (5YTP) Peak Load for 2012 Actual Peak Load

2009 5YTP first identifies Odessa North-North Cowden upgrade (superseded in 2010 5YTP)

ERCOT 5YTP recommends convert part of Odessa 69 kV system to 138 kV serviceOncor plans

project

Oncor modifies plan to rebuild line as double circuit (2013, 2014: see next slide)

Oil = $53.48/

bbl

Oil = $71.21/

bbl

Oil = $87.04/

bbl

Oil = $93.02/

bbl

Permian Basin Units 5 and 6 RMR

Permian Basin Units 5 and 6 Mothball

375 MW

11

Odessa North Area Planned Improvements

• Fall 2012 – Convert ~10-12 MW load from 69 kV to 138 kV service

• December 2013 – Rebuild Holt to Goldsmith South 69 kV line as double circuit 138/ 69 kV line; transfer 20-30 MW of load from 69 kV to 138 kV system (plan initiated in 2010)

• November 2014 – Rebuild Goldsmith South to Odessa North 69 kV line as double circuit 138/ 69 kV line (plan initiated in 2010)

• November 2014 – Rebuild Odessa to Odessa North 138 kV line (plan initiated in 2010)

• ~$20.3M cost estimate for above upgrades• Planned improvements solve Odessa North area reliability

problems in near term• ERCOT and Oncor are continuing to evaluate with latest load

projections

ERCOT PublicTab 6 11

12

Other West Texas Planned Improvements

• China Grove-Bluff Creek Planned Improvements– Located northeast of Midland

• Similar load growth to Odessa North Area

– June 2013 - Faraday/ Willow Valley Switch Station with 345/138 kV autotransformer will solve reliability issue

• Connects CREZ 345 kV line to existing 138 kV system• Planned in 2011 as economic project• ~$14.5M cost estimate

• San Angelo Red Creek Improvements– 2012 Congestion caused by forced outage of San Angelo Red Creek

Autotransformer 1– Autotransformer 1 placed back in service in July

• Solves reliability and congestion problem for 2012

– 2011 Five-Year Transmission Plan identified need for additional autotransformer capacity at San Angelo Red Creek by 2014

– December 2014 – Replace both San Angelo Red Creek 345/138 kV autotransformers; ~$18.2M cost estimate

ERCOT PublicTab 6 12

13

Moore-Downie Area Planned Improvements

• Located southwest of San Antonio• New Uvalde to Castroville 138 kV line will solve

reliability problem• Approved by ERCOT Board of Directors in August

2006• Original planned in-service date was June 2010• Current in-service date projection is December 2012• ~$76.8M cost estimate

ERCOT PublicTab 6 13

14

Reliability – Congestion Cost Relationship

ERCOT PublicTab 6 14

Production cost impact of congestion

Price of congestion

Rel

iabi

lity

Lim

it

Constraint Loading

$

*Note: Curves are hypothetical and cost/price curves of a given constraint may differ

ReliabilityEconomic

15

Summary

• West Load Zone prices in 2012 remain relatively unchanged from last year while other Load Zone prices have decreased– Load in West Texas has increased due to oil field activity– Prices in the rest of the system reflect lower loads due to lower

temperatures• The average real-time price difference between the LZ_WEST

and HB_WEST has increased in 2012 versus 2011 due to the management of overloaded elements.

• ERCOT has applied the “Holistic Solution” that was adopted by TAC & the Board in 2011 for the following Irresolvable by SCED constraints – Odessa North 138/69 kV Autotransformer– Bluff Creek Switch – China Grove Switch 138kV

• There are a number of Transmission upgrade initiatives that should improve the West Texas area

ERCOT PublicTab 6 15